UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
File No. 002-97889
File No. 811-04304
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 | /X/ | |||
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| Pre-Effective Amendment No. |
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| Post-Effective Amendment No. | 69 |
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 | /X/ | |||
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| Amendment No. | 69 |
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DELAWARE GROUP GOVERNMENT FUND | ||||
(Exact Name of Registrant as Specified in Charter) | ||||
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100 Independence, 610 Market Street, Philadelphia, PA | 19106-2354 | |||
(Address of Principal Executive Offices) | (Zip Code) | |||
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Registrant’s Telephone Number, including Area Code: | (800) 523-1918 | |||
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David F. Connor, Esq., 100 Independence, 610 Market Street, Philadelphia, PA 19106-2354 | ||||
(Name and Address of Agent for Service) | ||||
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Please send copies of all communications to:
Jonathan M. Kopcsik, Esq. Taylor Brody, Esq. Stradley, Ronon, Stevens & Young, LLP 2005 Market Street, Suite 2600, Philadelphia, PA 19103-7018 (215) 564-8099 (215) 564-8071 | ||||
Approximate Date of Proposed Public Offering: | November 28, 2022 | |||
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It is proposed that this filing will become effective (check appropriate box): | ||||
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/X/ | immediately upon filing pursuant to paragraph (b) | |||
/ / | on November 28, 2022 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. | |||
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If appropriate, check the following box: | ||||
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/ / | this post-effective amendment designates a new effective date for a previously filed post-effective amendment. |
--- C O N T E N T S ---
This Post-Effective Amendment No. 69 to Registration File No. 002-97889 includes the following:
| 1. | Facing Page |
| 2. | Contents Page |
| 3. | Part A – Prospectuses (2) |
| 4. | Part B - Statement of Additional Information (1) |
| 5. | Part C - Other Information |
| 6. | Signatures |
| 7. | Exhibits |
Delaware Emerging Markets Debt Corporate Fund
Fixed income mutual fund
Nasdaq ticker symbols | |
Class A | |
Class C | |
Class R | |
Institutional Class |
The US Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this Prospectus.
Any representation to the contrary is a criminal offense.
Get shareholder reports and prospectuses online instead of in the mail.
Visit delawarefunds.com/edelivery.
Table of contents
Fund summary | 1 |
Delaware Emerging Markets Debt Corporate Fund | 1 |
How we manage the Fund | 6 |
Our principal investment strategies | 6 |
The securities in which the Fund typically invests | 6 |
Other investment strategies | 9 |
The risks of investing in the Fund | 9 |
Disclosure of portfolio holdings information | 15 |
Who manages the Fund | 16 |
Investment manager | 16 |
Sub-advisors | 16 |
Portfolio managers | 16 |
Manager of managers structure | 17 |
Who’s who | 17 |
About your account | 19 |
Investing in the Fund | 19 |
Choosing a share class | 19 |
Dealer compensation | 21 |
Payments to intermediaries | 22 |
How to reduce your sales charge | 22 |
Buying Class A shares at net asset value | 23 |
Waivers of contingent deferred sales charges | 24 |
How to buy shares | 25 |
Calculating share price | 26 |
Fair valuation | 26 |
Retirement plans | 26 |
Document delivery | 27 |
Inactive accounts | 27 |
How to redeem shares | 27 |
Low balance accounts | 28 |
Investor services | 28 |
Frequent trading of Fund shares (market timing and disruptive trading) | 30 |
Dividends, distributions, and taxes | 31 |
Certain management considerations | 33 |
Financial highlights | 34 |
Additional information | 45 |
Fund summary
Delaware Emerging Markets Debt Corporate Fund, a series of Delaware Group® Government Fund
Delaware Emerging Markets Debt Corporate Fund primarily seeks current income and, secondarily, capital appreciation.
The table below describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the tables and examples below.
The Fund’s distributor, Delaware Distributors, L.P. (Distributor), has voluntarily agreed to waive 12b-1 fees for the Fund’s Class R shares from November 29, 2019 until such time as the voluntary expense cap is discontinued. The Distributor’s waivers and/or reimbursements may be discontinued at any time because they are voluntary.
Class | A | C | R | Inst. |
Maximum sales charge (load) imposed on purchases as a percentage of offering price | ||||
Maximum contingent deferred sales charge (load) as a percentage of original purchase price or redemption price, whichever is lower |
Class | A | C | R | Inst. | |
Management fees | |||||
Distribution and service (12b-1) fees | |||||
Other expenses | |||||
Total annual fund operating expenses | |||||
Fee waivers and expense reimbursements | ( | ( | ( | ( | |
Total annual fund operating expenses after fee waivers and expense reimbursements | |||||
1 | |||||
2 |
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. In addition, the example shows expenses for Class C shares, assuming those shares were not redeemed 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:
Class | A | (if not | C | R | Inst. |
1 year | $ | $ | $ | $ | $ |
3 years | $ | $ | $ | $ | $ |
5 years | $ | $ | $ | $ | $ |
10 years | $ | $ | $ | $ | $ |
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Fund summary
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 the 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
Under normal circumstances, the Fund will invest at least 80% of its net assets, plus borrowings for investment purposes, in emerging markets corporate debt securities (80% policy). For purposes of the 80% policy, emerging markets corporate debt securities include those that are (1) economically tied to an emerging market country or countries, (2) issued or guaranteed by a company domiciled or conducting significant business activities in an emerging market country, or (3) derivatives or pooled structures (such as exchange-traded funds (ETFs)) that are linked to emerging markets corporate debt securities. Emerging market countries include those currently considered to be developing or emerging countries by the World Bank, the United Nations, the countries’ governments, or in the judgment of the Fund’s investment manager, Delaware Management Company (Manager). These debt instruments will be denominated primarily in the currencies of members of the Organization for Economic Cooperation and Development (OECD) and in other emerging markets’ currencies and may include a significant percentage of high yield (junk) corporate bonds. While there is no percentage limit on the amount of the Fund’s assets that may be invested in high yield (junk) corporate bonds, the Manager generally expects that 50% of the Fund’s assets will be invested in high yield corporate bonds.
The Fund may also use a wide variety of derivatives instruments, including credit linked notes, interest rate, index and credit default swaps, forward foreign currency contracts, futures, and options. The Fund will use derivatives for both hedging and nonhedging purposes. For example, the Fund may invest in: futures and options to manage duration and for defensive purposes, such as to protect gains or hedge against potential losses in the Fund without actually selling a security, or to stay fully invested; forward foreign currency contracts to manage foreign currency exposure; interest rate swaps to neutralize the impact of interest rate changes; credit default swaps to hedge against a credit event, to gain exposure to certain securities or markets, or to enhance total return; and index swaps to enhance return or to effect diversification. The Manager may also establish short positions through derivatives in an attempt to isolate, manage, or reduce the risk of individual positions, or positions in the aggregate, or to take advantage of an anticipated deterioration in the creditworthiness of an issuer. The Fund may employ leverage, such as by entering into reverse repurchase transactions, to attempt to take advantage of or increase the total return of attractive investment opportunities.
In addition, the Manager may seek investment advice and recommendations from its affiliates: Macquarie Investment Management Austria Kapitalanlage AG (MIMAK), Macquarie Investment Management Europe Limited (MIMEL), and Macquarie Investment Management Global Limited (MIMGL) (together, the “Affiliated Sub-Advisors”). The Manager may also permit these Affiliated Sub-Advisors to execute Fund security trades on behalf of the Manager and exercise investment discretion for securities in certain markets where the Manager believes it will be beneficial to utilize an Affiliated Sub-Advisor's specialized market knowledge.
The 80% policy is nonfundamental and may be changed without shareholder approval. Fund shareholders would be given at least 60 days notice prior to any such change.
Market risk — The risk that all or a majority of the securities in a certain market — such as the stock or bond market — will decline in value because of factors such as adverse political or economic conditions, future expectations, investor confidence, or heavy institutional selling.
Interest rate risk — The risk that the prices of bonds and other fixed income securities will increase as interest rates fall and decrease as interest rates rise. Interest rate changes are influenced by a number of factors, such as government policy, monetary policy, inflation expectations, and the supply and demand of bonds. Bonds and other fixed income securities with longer maturities or duration generally are more sensitive to interest rate changes. A fund may be subject to a greater risk of rising interest rates when interest rates are low or inflation rates are high or rising.
Credit risk — The risk that an issuer of a debt security, including a governmental issuer or an entity that insures a bond, may be unable to make interest payments and/or repay principal in a timely manner.
High yield (junk bond) risk — The risk that high yield securities, commonly known as “junk bonds,” are subject to reduced creditworthiness of issuers, increased risk of default, and a more limited and less liquid secondary market. High yield securities may also be subject to greater price volatility and risk of loss of income and principal than are higher-rated securities.
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Foreign and emerging markets risk — The risk that international investing (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; the imposition of economic or trade sanctions; or inadequate or different regulatory and accounting standards. The risk 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, there often is substantially less publicly available information about issuers and such information tends to be of a lesser quality. Economic markets and structures tend to be less mature and diverse and the securities markets may also be smaller, less liquid, and subject to greater price volatility.
Geographic focus risk — The risk that local political and economic conditions could adversely affect the performance of a fund investing a substantial amount of assets in securities of issuers located in a single country or a limited number of countries.
Industry and sector risk — The risk that the value of securities in a particular industry or sector (such as banking or energy) will decline because of changing expectations for the performance of that industry or sector.
IBOR risk — The risk that changes related to the use of the London Interbank Offered Rate (LIBOR) or similar interbank offered rates (“IBORs,” such as the Euro Overnight Index Average (EONIA)) could have adverse impacts on financial instruments that reference LIBOR or a similar rate. While some instruments may contemplate a scenario where LIBOR or a similar rate is no longer available by providing for an alternative rate setting methodology, not all instruments have such fallback provisions and the effectiveness of replacement rates is uncertain. The abandonment of LIBOR and similar rates could affect the value and liquidity of instruments that reference such rates, especially those that do not have fallback provisions. The use of alternative reference rate products may impact investment strategy performance.
Derivatives risk — Derivatives contracts, such as futures, forward foreign currency contracts, options, and swaps, may involve additional expenses (such as the payment of premiums) and are subject to significant loss if a security, index, reference rate, or other asset or market factor to which a derivatives contract is associated, moves in the opposite direction from what the portfolio manager anticipated. When used for hedging, the change in value of the derivatives instrument may also not correlate specifically with the currency, rate, or other risk being hedged, in which case a fund may not realize the intended benefits. Derivatives contracts are also subject to the risk that the counterparty may fail to perform its obligations under the contract due to, among other reasons, financial difficulties (such as a bankruptcy or reorganization).
Leveraging risk — The risk that certain fund transactions, such as reverse repurchase agreements, short sales, loans of portfolio securities, and the use of when-issued, delayed delivery or forward commitment transactions, or derivatives instruments, may give rise to leverage, causing a fund to be more volatile than if it had not been leveraged, which may result in increased losses to the fund.
Portfolio turnover risk — High portfolio turnover rates may increase a fund’s transaction costs and lower returns.
Liquidity risk — The possibility that investments cannot be readily sold within seven calendar days at approximately the price at which a fund has valued them.
Active management and selection risk — The risk that the securities selected by a fund’s management will underperform the markets, the relevant indices, or the securities selected by other funds with similar investment objectives and investment strategies. The securities and sectors selected may vary from the securities and sectors included in the relevant index.
None of the entities noted in this document is an authorized deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia) and the obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (Macquarie Bank). Macquarie Bank does not guarantee or otherwise provide assurance in respect of the obligations of these entities. In addition, if this document relates to an investment (a) each investor is subject to investment risk including possible delays in repayment and loss of income and principal invested and (b) none of Macquarie Bank or any other Macquarie Group company guarantees any particular rate of return on or the performance of the investment, nor do they guarantee repayment of capital in respect of the investment.
A privately offered fund was reorganized into the Fund and the Fund commenced operations on September 30, 2013. This privately offered fund commenced operations on November 3, 2010 and had an investment objective and strategies that were, in all material respects, the same as those of the Fund, and was managed in a manner that, in all material respects, complied with the investment guidelines and restrictions of the Fund. However, the privately offered fund was not registered as an investment company under the Investment Company Act of 1940 (1940 Act). As a result, the privately offered fund was not subject to certain investment limitations, diversification requirements, liquidity requirements, and other restrictions imposed by the
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Fund summary
1940 Act and the Internal Revenue Code of 1986, as amended, which, if applicable, may have adversely affected its performance. The Fund’s performance for the periods prior to its commencement of operations on September 30, 2013 is that of the privately offered fund. Because the privately offered fund was a master fund that did not charge any management or other asset-based fees, the privately offered fund’s performance shown below has been restated, on a one-time basis, to reflect the fees, expenses, and waivers and reimbursements for each class of the Fund at the commencement of the Fund’s operations. If the performance of the privately offered fund had not been restated, the performance for such classes may have been higher than the performance shown in the bar chart and average annual total returns table below.
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 total returns for the 1-year, 5-year and lifetime periods compare with those of a broad measure of market performance.
Year | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 |
Year total Return | - | - |
As of
1 year | 5 years | 10 years | |
Class A return before taxes | - | ||
Class A return after taxes on distributions | - | ||
Class A return after taxes on distributions and sale of Fund shares | - | ||
Class C return before taxes | - | ||
Class R return before taxes | |||
Institutional Class return before taxes | |||
J.P. Morgan Corporate Emerging Markets Bond Index Broad Diversified |
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Who manages the Fund?
Investment manager
Delaware Management Company, a series of Macquarie Investment Management Business Trust (a Delaware statutory trust)
Portfolio manager | Title with Delaware Management Company | Start date on the Fund |
Alex Kozhemiakin, CFA | Managing Director, Head of Emerging Markets Debt | September 2019 |
Mansur Z. Rasul | Senior Vice President, Senior Portfolio Manager | July 2016 |
Sean M. Simmons, CFA, CMT | Vice President, Foreign Exchange Strategist and Trader | July 2016 |
Sub-advisors
Macquarie Investment Management Austria Kapitalanlage AG
Macquarie Investment Management Europe Limited
Macquarie Investment Management Global Limited
Purchase and redemption of Fund shares
You may purchase or redeem shares of the Fund on any day that the New York Stock Exchange (NYSE) is open for business (Business Day). Shares may be purchased or redeemed: through your financial intermediary; through the Fund’s website at delawarefunds.com/account-access; by calling 800 523-1918; by regular mail (c/o Delaware Funds by Macquarie®, P.O. Box 9876, Providence, RI 02940-8076); by overnight courier service (c/o Delaware Funds by Macquarie Service Center, 4400 Computer Drive, Westborough, MA 01581-1722); or by wire.
For Class A and Class C shares, the minimum initial investment is generally $1,000 and subsequent investments can be made for as little as $100. The minimum initial investment for IRAs, Uniform Gifts/Transfers to Minors Act accounts, direct deposit purchase plans, and automatic investment plans is $250 and through Coverdell Education Savings Accounts is $500, and subsequent investments in these accounts can be made for as little as $25. For Class R and Institutional Class shares (except those shares purchased through an automatic investment plan), there is no minimum initial purchase requirement, but certain eligibility requirements must be met. The eligibility requirements are described in this Prospectus under “Choosing a share class” and on the Fund’s website. We may reduce or waive the minimums or eligibility requirements in certain cases.
Tax information
The Fund’s distributions generally are taxable to you as ordinary income, capital gains, or some combination of both, unless you are investing through a tax-advantaged arrangement, such as a 401(k) plan or an IRA, in which case your distributions may be taxed as ordinary income when withdrawn from the tax-advantaged account.
Payments to broker/dealers and other financial intermediaries
If you purchase shares of the Fund through a broker/dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker/dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
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How we manage the Fund
The Manager takes a disciplined approach to investing, combining investment strategies and risk-management techniques that it believes can help shareholders meet their goals.
Our principal investment strategies
The Fund will invest in a wide variety of emerging markets corporate debt. The Fund generally does not intend to invest directly in equities, although it may purchase convertible bonds and debt instruments with warrants on equities.
The Manager analyzes economic and market conditions, seeking to identify the securities or market sectors that it thinks are the best investments for the portfolio. The Manager may establish positions based on the opportunistic individual risk/reward characteristics of the investment, as determined by the Manager, based on the perception that the asset has relative value, an intrinsic dynamic, or another reason that suggests that the asset will be accretive to total return. Before selecting bonds, the Manager carefully evaluates each bond, including its income potential and the size of the bond issuance. The Manager carries out a thorough credit analysis of the obligor to determine whether the obligor has the financial ability to meet the bond's repayments.
The Manager intends to maintain a reasonably fully invested position consistent with the Fund's investment policies, however, the Fund may at times, for temporary defensive purposes, invest in cash, cash equivalents, or short-term obligations. The Fund may also establish long or short positions through the use of derivatives, which have implicit leverage and increase total exposure to issuers relative to the Fund's net asset value (NAV).
In addition, the Manager may seek investment advice and recommendations from its Affiliated Sub-Advisors. The Manager may also permit these Affiliated Sub-Advisors to execute Fund security trades on behalf of the Manager and exercise investment discretion for securities in certain markets where the Manager believes it will be beneficial to utilize an Affiliated Sub-Advisor's specialized market knowledge.
The Fund will engage in an active trading strategy which may result in higher portfolio turnover rates. The Fund generally invests for the long term but also may take advantage of short-term opportunities to acquire and dispose of assets and realize capital gains.
The Fund will generally limit its investments to: a maximum allocation to a single region of 50% of the Fund's net assets; a maximum aggregate allocation to investments within a single country (excluding the US) of 25% of the Fund's net assets; a maximum allocation to a single industry of 25% of the Fund's net assets; a maximum allocation to a single corporate or private obligor of 10% of the Fund's net assets; a maximum exposure of 15% of the Fund's net assets to a single emerging markets currency; and a maximum aggregate exposure of 30% of the Fund's net assets to emerging markets currencies. For purposes of the single industry guideline, the securities issued or guaranteed as to principal and interest by any single foreign government alone, and not combined with the securities of the government of any other country, are considered securities of issuers in the same industry.
The Fund's investment objectives and 80% policy are nonfundamental. This means that the Fund's Board of Trustees (Board) may change the objectives without obtaining shareholder approval. If the objectives or the 80% policy were changed, the Fund would notify shareholders at least 60 days before the change 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 SAI for additional information about certain of the securities described below as well as other securities in which the Fund may invest.
Asset-backed securities (ABS) |
ABS are bonds or notes backed by accounts receivable, including home equity, automobile, or credit loans.
How the Fund uses them: The fixed income securities in which the Fund may invest include ABS.
Bank loans and other indebtedness |
A bank loan represents an interest in a loan or other direct indebtedness, such as an assignment, that entitles the acquiror of such interest to payments of interest, principal, and/or other amounts due under the structure of the loan or other direct indebtedness. In addition to being structured as secured or unsecured loans, such investments could be structured as novations or assignments or represent trade or other claims owed by a company to a supplier.
How the Fund uses them: The Fund may invest without restriction in bank loans that meet the credit standards established by the Manager. The Manager performs its own independent credit analysis on each borrower and on the collateral securing each loan. The Manager considers the nature of the industry in which the borrower operates, the nature of the borrower's assets, and the general quality and creditworthiness of the borrower. The Fund may invest in bank loans in order to enhance total return, to effect diversification, or to earn additional income. The Fund will not use bank loans for reasons inconsistent with the Fund's investment objective.
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Corporate notes and bonds |
Corporate notes and bonds are debt obligations issued by a corporation.
How the Fund uses them: The Fund may invest in corporate bonds rated BBB- or higher by Standard & Poor's Financial Services LLC (S&P), Baa3 by Moody's Investors Service, Inc. (Moody's), or similarly rated by another nationally recognized statistical rating organization (NRSRO), or those that are deemed to be of comparable quality by the Manager.
Foreign corporate and government and supranational securities |
Foreign corporate and government securities are securities issued by a non-US company or a government or by an agency, instrumentality, or political subdivision of such government.
A supranational security is a security issued by a supranational entity established or financially supported by the national governments of one or more countries. The International Bank for Reconstruction and Development (more commonly known as the World Bank) is one example of a supranational entity.
How the Fund uses them: The Fund may invest in securities of foreign companies or governments or supranational entities to achieve its investment objectives and consistent with its 80% policy.
Forward foreign currency contracts |
A fund may invest in securities of foreign issuers and may hold foreign currency. In addition, a fund may enter into contracts to purchase or sell foreign currencies at a future date (a “forward foreign currency” contract or “forward” contract). A forward contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract, agreed upon by the parties, at a price set at the time of the contract.
How the Fund uses them: Although the Manager values the Fund's assets daily in terms of US dollars, it does not intend to convert the Fund's holdings of foreign currencies into US dollars on a daily basis. The Fund is permitted to, however, from time to time, purchase or sell foreign currencies and/or engage in forward foreign currency contracts in order to facilitate or expedite settlement of Fund transactions and to minimize currency value fluctuations.
Futures and options |
Futures contracts are agreements for the purchase or sale of a security or a group of securities at a specified price, on a specified date. Unlike purchasing an option, a futures contract must be executed unless it is sold before the settlement date.
Options represent a right to buy or sell a swap agreement, a futures contract, or a security or a group of securities at an agreed-upon price at a future date. The purchaser of an option may or may not choose to go through with the transaction. The seller of an option, however, must go through with the transaction if the purchaser exercises the option.
Certain options and futures may be considered illiquid.
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 the Fund's assets are not fully invested. The Fund may only enter into these transactions for hedging purposes if they are consistent with its investment objective and policies. In addition, the Fund 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 their 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. The Fund intends to limit its investments in futures contracts such that (a) no more than 5% of the Fund's net assets are required as initial margin deposits on all such contracts in the aggregate and (b) the obligations and/or notional values under such contracts do not at any time represent more than 40% of the Fund's net assets.
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How we manage the Fund
Use of these strategies can increase the operating costs of the Fund and can lead to loss of principal.
High yield corporate bonds (junk bonds) |
High yield corporate bonds are debt obligations issued by a corporation and rated below investment grade (lower than BBB- by S&P and lower than Baa3 by Moody's, or similarly rated by another NRSRO). High yield bonds, also known as “junk bonds,” are issued by corporations that have lower credit quality and may have difficulty repaying principal and interest.
How the Fund uses them: The Fund may invest a significant portion of its net assets in high yield corporate bonds.
The Manager carefully evaluates an individual company's financial situation, its management, the prospects for its industry, and the technical factors related to its bond offering. The Manager's goal is to identify those companies that it believes will be able to repay their debt obligations in spite of poor ratings. The Manager may invest in unrated bonds if it believes their credit quality is comparable to the rated bonds the Fund is permitted to invest in. Unrated bonds may be more speculative in nature than rated bonds.
Illiquid investments |
Illiquid investments are any investment that a fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment.
How the Fund uses them: The Fund may invest up to 15% of its net assets in illiquid investments.
Interest rate swap, index swap, and credit default swap agreements |
In an interest rate swap, a fund receives payments from another party based on a variable or floating interest rate, in return for making payments based on a fixed interest rate. An interest rate swap can also work in reverse with a fund receiving payments based on a fixed interest rate and making payments based on a variable or floating interest rate.
In an index swap, a fund receives gains or incurs losses based on the total return of a specified index, in exchange for making interest payments to another party. An index swap can also work in reverse with a fund receiving interest payments from another party in exchange for movements in the total return of a specified index.
In a credit default swap, a fund may transfer the financial risk of a credit event occurring (a bond default, bankruptcy, or restructuring, for example) on a particular security or basket of securities to another party by paying that party a periodic premium; likewise, a fund may assume the financial risk of a credit event occurring on a particular security or basket of securities in exchange for receiving premium payments from another party.
Interest rate swaps, index swaps, and credit default swaps may be considered illiquid.
How the Fund uses them: The Fund may use interest rate swaps to adjust its sensitivity to interest rates or to hedge against changes in interest rates. Index swaps may be used to gain exposure to markets that the Fund invests in, such as the corporate bond market. The Fund may also use index swaps as a substitute for futures or options contracts if such contracts are not directly available to the Fund on favorable terms. The Fund may enter into credit default swaps in order to hedge against a credit event, to enhance total return, or to gain exposure to certain securities or markets.
At times when the Manager anticipates adverse conditions, the Manager may want to protect gains on securities without actually selling them. The Manager might use swaps to neutralize the effect of any price declines without selling a bond or bonds. Use of these strategies can increase the operating costs of the Fund and can lead to loss of principal.
Repurchase and reverse 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
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agreements in which the collateral is composed of US government securities. In the Manager's discretion, the Fund may invest overnight cash balances in short-term discount notes issued or guaranteed by the US government, its agencies or instrumentalities, or government-sponsored corporations.
The Fund is also authorized to enter into reverse repurchase agreements. In a reverse repurchase transaction, the Fund will sell a security and will agree to repurchase the security at a specified time and price.
Restricted securities |
Restricted securities are privately placed securities whose resale is restricted under US 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 investments.
Short-term debt investments |
These instruments include: (1) time deposits, certificates of deposit, and banker's acceptances issued by US banks; (2) time deposits and certificates of deposit issued by foreign banks; (3) commercial paper with the highest quality rating; (4) short-term debt obligations with the highest quality rating; (5) US government securities; and (6) repurchase agreements collateralized by those instruments.
How the Fund uses them: The Fund may invest in these instruments either as a means of achieving its investment objective or, more commonly, as temporary defensive investments or pending investment in the Fund's principal investment securities. When investing all or a significant portion of the Fund's assets in these instruments, the Fund may not be able to achieve its investment objective.
Other investment strategies
Borrowing from banks |
The Fund may borrow money from banks as a temporary measure for extraordinary or emergency purposes or to facilitate redemptions. The Fund will be required to pay interest to the lending banks on the amount borrowed. As a result, borrowing money could result in the Fund being unable to meet its investment objective. The Fund will not borrow money in excess of one-third of the value of its total assets.
Temporary defensive positions |
In response to unfavorable market conditions, the Fund may make temporary investments in cash or cash equivalents or other high-quality, short-term instruments. These investments may not be consistent with the Fund's investment objective. To the extent that the Fund holds such instruments, it may be unable to achieve its investment objective.
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may receive little or no return on your investment, and the risk that you may lose part or all of the money you invest. Before you invest in the Fund, you should carefully evaluate the risks. Because of the nature of the Fund, you should consider your investment to be a long-term investment that typically provides the best results when held for a number of years. The information below describes the principal risks you assume when investing in the Fund. Please see the SAI for a further discussion of these risks and other risks not discussed here.
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How we manage the Fund
Market risk |
Market risk is the risk that all or a majority of the securities in a certain market — such as the stock or bond market — will decline in value because of factors such as adverse political or economic conditions, future expectations, investor confidence, or heavy institutional selling.
Index swaps are subject to the same market risks as the investment market or sector that the index represents. Depending on the actual movements of the index and how well the portfolio manager forecasts those movements, a fund could experience a higher or lower return than anticipated.
How the Fund strives to manage it: The Manager generally invests for the long-term, focusing on securities that it believes can continue to provide returns over an extended time frame, but may also take advantage of short-term opportunities to acquire and dispose of assets and realize capital gains. Generally, the Manager does not try to predict overall market movements.
In evaluating the use of an index swap for the Fund, the Manager carefully considers how market changes could affect the swap and how that compares to investing directly in the market the swap is intended to represent. When selecting counterparties with whom the Manager would make interest rate or index swap agreements for the Fund, the Manager does careful credit analysis on the counterparty before engaging in the transaction.
Interest rate risk |
Interest rate risk is the risk that the prices of bonds and other fixed income securities will increase as interest rates fall and decrease as interest rates rise. Interest rate changes are influenced by a number of factors, such as government policy, monetary policy, inflation expectations, and the supply and demand of bonds. Bonds and other fixed income securities with longer maturities or duration generally are more sensitive to interest rate changes. A fund may be subject to a greater risk of rising interest rates when interest rates are low or inflation rates are high or rising.
Swaps may be particularly sensitive to interest rate changes. Depending on the actual movements of interest rates and how well the portfolio manager anticipates them, a fund could experience a higher or lower return than anticipated. For example, if a fund holds interest rate swaps and is required to make payments based on variable interest rates, it will have to make interest payments if interest rates rise, which will not necessarily be offset by the fixed-rate payments it is entitled to receive under the swap agreement.
How the Fund strives to manage it: The Manager limits the amount of the Fund's assets invested in any one industry and in any individual security.
The Manager cannot eliminate this risk, but tries to address it by monitoring economic conditions, especially interest rate trends and their potential impact on the Fund. The Manager does 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.
Prepayment risk |
Prepayment risk is the risk that the principal on a bond that is held by a fund will be prepaid prior to maturity at a time when interest rates are lower than what the bond was paying. A fund may then have to reinvest that money at a lower interest rate.
How the Fund strives to manage it: In order to manage this risk, when the Manager thinks interest rates are low, or that rates will be declining, the Manager will typically look for securities that it believes are less likely to be prepaid. The Fund will be more or less subject to this risk depending on how much it has allocated to fixed income securities.
Credit risk |
Credit risk is the risk that an issuer of a debt security, including a governmental issuer or an entity that insures the bond, may be unable to make interest payments and/or repay principal in a timely manner. Changes in an issuer's financial strength or in a security's credit rating may affect a security's value, which would impact fund performance.
Investing in so-called “junk” or “high yield” bonds entails the risk of principal loss because they are rated below investment grade, which may be greater than the risk involved in investment grade bonds. High yield bonds are sometimes issued by companies whose earnings at the time the bond is issued are less than the projected debt payments on the bonds. A protracted economic downturn may severely disrupt the market for high yield bonds, adversely affect the value of outstanding bonds, and adversely affect the ability of high yield issuers to repay principal and interest. Investment by a fund in defaulted securities poses additional risk of loss should nonpayment of principal and interest continue in respect of such securities. Even if such securities are held to maturity, recovery by a fund of its initial investment and any anticipated income or appreciation may be uncertain. A fund also may incur additional expenses in seeking recovery on defaulted securities. Defaulted securities may be considered illiquid.
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How the Fund strives to manage it: Any portion of the Fund that is invested in junk bonds is subject to greater credit risk. The Manager strives to manage that risk through careful bond selection, and by maintaining a diversified portfolio of bonds representing a variety of industries and issuers.
When selecting dealers with whom the Manager would make interest rate or index swap agreements, the Manager focuses on those with high quality ratings and does careful credit analysis before investing.
High yield corporate (junk) bond risk |
High yield corporate bonds (commonly known as “junk” bonds), while generally having higher yields, are subject to reduced creditworthiness of issuers, increased risks of default, and a more limited and less liquid secondary market than higher rated securities. These securities are subject to greater price volatility and risk of loss of income and principal than are higher rated securities because they are rated below investment grade. Lower rated and unrated fixed income securities tend to reflect short-term corporate and market developments to a greater extent than higher rated fixed income securities, which react primarily to fluctuations in the general level of interest rates. Fixed income securities of this type are considered to be of poor standing and primarily speculative. Such securities are subject to a substantial degree of credit risk.
How the Fund strives to manage it: The Manager attempts to reduce the risk associated with investment in high yield debt securities through credit analysis and attention to trends in the economy, industries, and financial markets.
Loans and other indebtedness risk |
Loans and other indebtedness risk is the risk that a fund will not receive payment of principal, interest, and other amounts due in connection with these investments and will depend primarily on the financial condition of the borrower. Loans that are fully secured offer a fund more protection than unsecured loans in the event of nonpayment of scheduled interest or principal, although there is no assurance that the liquidation of collateral from a secured loan would satisfy the corporate borrower's obligation, or that the collateral can be liquidated. Some loans or claims may be in default at the time of purchase. Certain of the loans and the other indebtedness acquired by a fund may involve revolving credit facilities or other standby financing commitments that obligate a fund to pay additional cash on a certain date or on demand. These commitments may require a fund to increase its investment in a company at a time when that fund might not otherwise decide to do so (including at a time when the company's financial condition makes it unlikely that such amounts will be repaid).
As a fund may be required to rely upon another lending institution to collect and pass on to the fund amounts payable with respect to the loan and to enforce the fund's rights under the loan and other 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 indebtedness may make them especially vulnerable to adverse changes in economic or market conditions. Investments in such loans and other indebtedness may involve additional risk to the fund.
A fund's ability to sell its loans or to realize their full value upon sale may also be impaired due to the lack of an active trading market, irregular trading activity, wide bid/ask spreads, contractual restrictions, and extended trade settlement periods. Extended trade settlement periods may result in cash not being immediately available to a fund. As a result of these factors, a fund may have to sell other investments or engage in borrowing transactions to raise cash to meet its obligations.
Federal securities laws provide protections against fraud and misrepresentation in connection with the offering and sale of a “security.” Loans in which a fund may invest may not be deemed to be “securities” for purposes of such anti-fraud protections. A fund may therefore not have the protection of the anti-fraud provisions of the federal securities laws in the event of fraud or misrepresentation by a borrower. However, a fund in such a scenario may be able to rely on contractual provisions in the loan documents for alternative protections, or use common-law fraud protections under applicable state law.
How the Fund strives to manage it: These risks may not be completely eliminated, but the Manager will attempt to reduce them through portfolio diversification, credit analysis, and attention to trends in the economy, industries, and financial markets. Should the Manager determine that any of these securities are illiquid, they would be subject to the Fund's restriction on illiquid investments.
Foreign risk |
As described in more detail below, 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, the imposition of economic or trade sanctions, increased transaction costs, inadequate regulatory and accounting standards, and the possibility that significant events in foreign markets, including broad market moves, may affect the value of fund shares. In addition, there is the possibility of expropriation, nationalization, or confiscatory taxation, taxation of income earned in foreign nations, or other taxes imposed with respect to investments in foreign nations, foreign exchange controls, which may include suspension of the ability to transfer currency from a given country, and default in foreign government securities. As a result of these factors, foreign securities markets may be less liquid and more volatile than US markets and a portfolio may experience difficulties and delays in converting foreign currencies back into US dollars. Such events may cause the value of certain foreign securities to fluctuate widely and may make it difficult to accurately value foreign securities.
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How we manage the Fund
Foreign investment risk includes these specific risks:
As a result of the military action by Russia in Ukraine, the US and many other countries have imposed sanctions on Russia and certain Russian individuals, banks and corporations. The ongoing hostilities and resulting sanctions are expected to have a severe adverse effect on the region's economies and more globally, including significant negative impact on markets for certain securities and commodities, such as oil and natural gas. Any cessation of trading on the Russian securities markets will impact the value and liquidity of certain portfolio holdings. The extent and duration of military action, sanctions, and resulting market disruptions are impossible to predict, but could be substantial and prolonged and impact your Fund's performance.
How the Fund strives to manage it: The Manager attempts to reduce the risks presented by such investments by conducting worldwide fundamental research. 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 Manager may hedge exposure to those currencies for defensive purposes. In addition, the Fund may frequently value many foreign equity securities using fair value prices based on third-party vendor modeling tools, to the extent available, to account for significant market events that may occur after the close of a foreign market but before the Fund's shares are priced.
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 Manager 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.
Geographic focus risk |
Geographic focus risk is the risk that local political and economic conditions could adversely affect the performance of a fund investing a substantial amount of assets in securities of issuers located in a single country or a limited number of countries.
How the Fund strives to manage it: The Manager will attempt to reduce this risk by diversifying portfolios by country and sector.
Asia-Pacific region risk |
Investments in companies located or operating in the Asia-Pacific region (which consists of Hong Kong, the People's Republic of China, Republic of Korea, and Taiwan, among other countries) may involve risks and considerations not typically associated with investments in the U.S. and other Western nations. These risks include, among others: the inability of the Public Company Accounting Oversight Board (“PCAOB”) to inspect audit work and practices of PCAOB-registered public accounting firms in China; the use of variable interest equity (“VIE”) organizational structures; political, legal and regulatory uncertainty; differing shareholder rights based on company structure and/or location of operations; or the institution of additional tariffs, prohibitions or other trade barriers (or the threat thereof) as a result of trade tensions between China and the United States.
How the Fund strives to manage it: The Manager evaluates the political situations in the Asia-Pacific region and take into account any potential risks before they select securities for the Fund. However, there is no way to eliminate risk when investing in China-based issuers or in the Asia-Pacific region.
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Foreign government securities risk |
Foreign government securities risk relates to the ability of a foreign government or government-related issuer to make timely principal and interest payments on its external debt obligations. This ability to make payments will be strongly influenced by the issuer's balance of payments, including export performance, its access to international credits and investments, fluctuations in interest rates, and the extent of its foreign reserves.
How the Fund strives to manage it: The Manager attempts to reduce the risks associated with investing in foreign governments by limiting the portion of portfolio assets that may be invested in such securities.
Derivatives risk |
Derivatives risk is the possibility that a fund may experience a significant loss if it employs a derivatives strategy (including a strategy involving equity-linked securities, futures, options, forward foreign currency contracts, or swaps such as interest rate swaps, index swaps, or credit default swaps) related to a security, index, reference rate, or other asset or market factor (collectively, a “reference instrument”) and that reference instrument moves in the opposite direction from what the portfolio manager had anticipated. If a market or markets, or prices of particular classes of investments, move in an unexpected manner, a fund may not achieve the anticipated benefits of the transaction and it may realize losses. Derivatives also involve additional expenses, which could reduce any benefit or increase any loss to a fund from using the strategy. In addition, changes in government regulation of derivatives could affect the character, timing, and amount of a fund's taxable income or gains. A fund's transactions in derivatives may be subject to one or more special tax rules. These rules may: (i) affect whether gains and losses recognized by a fund are treated as ordinary or capital or as short-term or long-term, (ii) accelerate the recognition of income or gains to the fund, (iii) defer losses to the fund, and (iv) cause adjustments in the holding periods of the fund's securities. A fund's use of derivatives may be limited by the requirements for taxation of the fund as a regulated investment company.
Investing in derivatives may subject a fund to counterparty risk. Please refer to “Counterparty risk” for more information. Other risks include illiquidity, mispricing or improper valuation of the derivatives contract, and imperfect correlation between the value of the derivatives instrument and the underlying reference instrument so that the fund may not realize the intended benefits. In addition, since there can be no assurance that a liquid secondary market will exist for any derivatives instrument purchased or sold, a fund may be required to hold a derivatives instrument to maturity and take or make delivery of an underlying reference instrument that the Manager would have otherwise attempted to avoid, which could result in losses. When used for hedging, the change in value of the derivatives instrument may also not correlate specifically with the currency, rate, or other risk being hedged, in which case a fund may not realize the intended benefits.
How the Fund strives to manage it: The Fund 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 effect diversification, or to earn additional income.
The Manager has claimed an exclusion from the definition of the term “commodity pool operator” with respect to the Fund under the Commodity Exchange Act (CEA) and, therefore, is not subject to registration or regulation as a commodity pool operator under the CEA.
Counterparty risk |
Counterparty risk is the risk that if a fund enters into a derivatives contract (such as a futures, options, or swap contract) or a repurchase agreement, the counterparty to such a contract or agreement may fail to perform its obligations under the contract or agreement due to, among other reasons, financial difficulties (such as a bankruptcy or reorganization). As a result, a fund may experience significant delays in obtaining any recovery, may obtain only a limited recovery, or may obtain no recovery at all.
How the Fund strives to manage it: The Manager seeks to minimize this risk by considering the creditworthiness of all counterparties before the Fund enters into transactions with them. The Fund will hold collateral from counterparties consistent with applicable regulations. Other than transactions settling in less than seven Business Days, the Fund's exposure to a single counterparty will not exceed 25% of its net assets. For purposes of this policy, an exchange, clearinghouse, clearing broker for exchange-traded derivatives contracts, and the Fund's custodian will not be considered counterparties.
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How we manage the Fund
Leveraging risk |
Leveraging risk is the risk that certain fund transactions, such as reverse repurchase agreements, short sales, loans of portfolio securities, and the use of when-issued, delayed delivery or forward commitment transactions, or derivatives instruments, may give rise to leverage, causing a fund to be more volatile than if it had not been leveraged. While it is anticipated that leverage may increase profitability, it may also accentuate the consequences of adverse price movements, resulting in increased losses.
How the Fund strives to manage it: The Fund will, consistent with industry practice, designate and mark-to-market daily cash or other liquid assets having an aggregate market value at least equal to the exposure created by these transactions.
IBOR risk |
The risk that changes related to the use of the London Interbank Offered Rate (LIBOR) or similar interbank offered rates (“IBORs,” such as the Euro Overnight Index Average (EONIA)) could have adverse impacts on financial instruments that reference such rates. While some instruments may contemplate a scenario where LIBOR or a similar rate is no longer available by providing for an alternative rate setting methodology, not all instruments have such fallback provisions and the effectiveness of replacement rates is uncertain. The abandonment of LIBOR and similar rates could affect the value and liquidity of instruments that reference such rates, especially those that do not have fallback provisions. The use of alternative reference rate products may impact investment strategy performance.
How the Fund strives to manage it: Due to uncertainty regarding the future use of LIBOR or similar rates (such as the EONIA), the impact of the abandonment of such rates on the Fund or the financial instruments in which the Fund invests cannot yet be determined. However, the Fund tries to address such risk by monitoring the economic, political and regulatory climate in jurisdictions relevant to the Fund and the financial instruments in which the Fund invests in order to minimize any potential impact on the Fund. In addition, the Fund typically invests in a number of different securities in a variety of sectors in order to minimize the impact to the Fund of any legislative or regulatory development affecting particular countries, issuers, or market sectors.
Liquidity risk |
Liquidity risk is the possibility that investments cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. Illiquid investments may trade at a discount from comparable, more liquid investments, and may be subject to wide fluctuations in market value. A fund also may not be able to dispose of illiquid investments at a favorable time or price during periods of infrequent trading of an illiquid investment.
There is generally no established retail secondary market for high yield securities. As a result, the secondary market for high yield securities is more limited and less liquid than other secondary securities markets. The high yield secondary market is particularly susceptible to liquidity problems when institutional investors, such as mutual funds, and certain other financial institutions, temporarily stop buying bonds for regulatory, financial, or other reasons.
Adverse publicity and investor perceptions may also disrupt the secondary market for high yield securities.
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How the Fund strives to manage it: The Fund limits its exposure to illiquid investments to no more than 15% of its net assets.
Portfolio turnover risk |
High portfolio turnover rates may increase a fund's transaction costs which may lower returns. Higher portfolio turnover rates could result in corresponding increases in brokerage commissions, may generate short-term capital gains taxable as ordinary income, and cause dividends received on portfolio securities to not be qualified dividends eligible for reduced federal income tax rates under the Internal Revenue Code.
How the Fund strives to manage it: The Fund will not attempt to achieve or be limited to a predetermined rate of portfolio turnover. Such turnover always will be incidental to transactions undertaken with a view to achieving the Fund's investment objective.
Government and regulatory risks |
Governments or regulatory authorities may take actions that could adversely affect various sectors of the securities markets and affect fund performance. Government involvement in the private sector may, in some cases, include government investment in, or ownership of, companies in certain commercial business sectors; wage and price controls; or imposition of trade barriers and other protectionist measures. For example, an economic or political crisis may lead to price controls, forced mergers of companies, expropriation, the creation of government monopolies, foreign exchange controls, the introduction of new currencies (and the redenomination of financial obligations into those currencies), or other measures that could be detrimental to the investments of a fund.
How the Fund strives to manage them: The Manager evaluates the economic and political climate in the relevant jurisdictions before selecting securities for the Fund. The Manager typically diversifies the Fund's assets among a number of different securities in a variety of sectors in order to minimize the impact to the Fund of any legislative or regulatory development affecting particular countries, issuers, or market sectors.
Valuation risk |
A less liquid secondary market as described above can make it more difficult to obtain precise valuations of certain securities. During periods of reduced liquidity, judgment plays a greater role in valuing less liquid investments.
How the Fund strives to manage it: The Manager 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 difficult-to-value securities.
Natural disaster and epidemic risk |
Natural disaster and epidemic risk is the risk that the value of a fund's investments may be negatively affected by natural disasters, epidemics, or similar events. Natural or environmental disasters, such as earthquakes, fires, floods, hurricanes, tsunamis, and other severe weather-related phenomena generally, and widespread disease, including pandemics and epidemics, have been and can be highly disruptive to economies and markets, adversely impacting individual companies, sectors, industries, markets, currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of a fund's investments. Given the increasing interdependence among global economies and markets, conditions in one country, market, or region are increasingly likely to adversely affect markets, issuers, and/or foreign exchange rates in other countries. These disruptions could prevent a fund from executing advantageous investment decisions in a timely manner and could negatively impact the fund's ability to achieve its investment objective.
How the Fund strives to manage it: The Fund maintains a long-term investment approach. Generally, the portfolio managers do not try to predict overall market movements, but the portfolio managers do note trends in the economy, industries, and financial markets. Although the Fund may hold securities for any amount of time, it generally does not trade for short-term purposes.
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.
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Who manages the Fund
Investment manager
The Manager, located at 100 Independence, 610 Market Street, Philadelphia, PA 19106-2354, is the Fund's investment manager. Together, the Manager and the other subsidiaries of Macquarie Management Holdings, Inc. (MMHI) manage, as of September 30, 2022, approximately $192.2 billion in assets, including mutual funds, separate accounts, and other investment vehicles. The Manager and its predecessors have been managing Delaware Funds since 1938. The Manager is a series of Macquarie Investment Management Business Trust (a Delaware statutory trust), which is a subsidiary of MMHI. MMHI is a wholly owned subsidiary of Macquarie Group Limited. 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 (if applicable), of 0.36% of average daily net assets during the last fiscal year.
A discussion of the basis for the Board's approval of the Fund's investment advisory contract is available in the Fund's semiannual report to shareholders for the period ended January 31, 2022.
Sub-advisors
MIMAK, located at Kaerntner Strasse 28, 1010 Vienna, Austria, is an affiliate of the Manager and a part of Macquarie Asset Management (MAM). MAM is the marketing name for certain companies comprising the asset management division of Macquarie Group Limited. As of September 30, 2022, MAM managed more than $333.0 billion in assets for institutional and individual clients. Although the Manager has principal responsibility for the Manager's portion of the Fund, the Manager may seek investment advice and recommendations from MIMAK and the Manager may also permit MIMAK to execute Fund security trades on behalf of the Manager and exercise investment discretion for securities in certain markets where the Manager believes it will be beneficial to utilize MIMAK's specialized market knowledge.
MIMEL, located at 28 Ropemaker Street, London, England, is an affiliate of the Manager and a part of MAM. Although the Manager has principal responsibility for the Manager's portion of the Fund, the Manager may seek investment advice and recommendations from MIMEL and the Manager may also permit MIMEL to execute Fund security trades on behalf of the Manager and exercise investment discretion for securities in certain markets where the Manager believes it will be beneficial to utilize MIMEL's specialized market knowledge.
MIMGL, located at 50 Martin Place, Sydney, Australia, is an affiliate of the Manager and a part of MAM. Although the Manager has principal responsibility for the Manager's portion of the Fund, the Manager may seek investment advice and recommendations from MIMGL and the Manager may also permit MIMGL to execute Fund security trades on behalf of the Manager and exercise investment discretion for securities in certain markets where the Manager believes it will be beneficial to utilize MIMGL's specialized market knowledge.
A discussion of the basis for the Board's approval of the sub-advisory contracts with MIMEL, MIMGL and MIMAK is available in the Fund's semiannual report to shareholders for the period ended January 31, 2022.
Portfolio managers
Alex Kozhemiakin and Mansur Z. Rasul have primary responsibility for making day-to-day investment decisions for the Fund. In making investment decisions for the Fund, Messrs. Kozhemiakin and Rasul regularly consult with Sean M. Simmons.
Alex Kozhemiakin, CFA Managing Director, Head of Emerging Markets Debt
Alex Kozhemiakin is head of the Macquarie Asset Management Fixed Income (MFI) Emerging Markets Debt team. He has overall responsibility for the team, which manages the full spectrum of emerging markets debt solutions including sovereign, local currency, and corporate. Prior to joining Macquarie Asset Management in December 2018, Kozhemiakin was the head of emerging markets debt at Standish Mellon Asset Management from 2007 to 2016. Before that, he also worked as an emerging markets debt portfolio manager at Putnam Investments and as a sovereign analyst at Citibank. Kozhemiakin's research on fixed income has been published in leading finance journals. He has had a postdoctoral fellowship in International Relations and National Security Studies at Harvard University, and he holds a Ph.D. in political science from the University of Illinois.
Mansur Z. Rasul, Senior Vice President, Senior Portfolio Manager
Mansur Z. Rasul is a senior portfolio manager for the emerging markets credit strategy within Macquarie Asset Management Fixed Income (MFI), a role he assumed in July 2016. He rejoined the firm in April 2012 as head of emerging markets trading for MFI. During his previous time at Macquarie Asset Management from 2004 to 2007, he was an analyst for MFI. From May 2011 to December 2011, Rasul worked with ING Financial Markets, where he was responsible for emerging markets credit trading and structuring. Prior to that, he worked for Daiwa Capital Markets America as director of the firm's fixed income syndicate, responsible for the placement of all fixed income products to US-based accounts from 2009 to 2011. Previously, he worked with Merrill Lynch as an associate responsible for Asian credit trading from 2007 to 2009. Rasul received his bachelor's degree in economics, with a minor in political science, from Northwestern University.
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Sean M. Simmons, CFA, CMT Vice President, Foreign Exchange Strategist and Trader
Sean M. Simmons is a foreign exchange strategist and trader for the Emerging Markets Debt team. He has been with Macquarie Asset Management Fixed Income (MFI) since 2007, and is responsible for trading across all Emerging Markets Debt strategies. Previously, Simmons worked as a derivatives strategist for Susquehanna International Group and as a proprietary derivatives trader for Wolverine Trading. Simmons received a Master's in Finance from London Business School and Bachelor of Economics from Rutgers University. He also holds the CFA designation and is a member of the CFA Society of Philadelphia.
The SAI provides additional information about each portfolio manager's compensation, other accounts managed by each portfolio manager, and each portfolio manager's ownership of Fund shares.
Manager of managers structure
The Fund and the Manager have received an exemptive order from the US Securities and Exchange Commission (SEC) to operate under a manager of managers structure that permits the Manager, with the approval of the Fund's Board, to appoint and replace both affiliated and unaffiliated sub-advisors, and to enter into and make material amendments to the related sub-advisory contracts on behalf of the Fund without shareholder approval (Manager of Managers Structure). Under the Manager of Managers Structure, the Manager has ultimate responsibility, subject to oversight by the Board, for overseeing the Fund's sub-advisors and recommending to the Board their hiring, termination, or replacement.
The 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 the hiring of any new sub-advisor within 90 days of the hiring.
The Fund and the Manager also have an exemptive order from the SEC that allows the approval of a new sub-advisor to be taken at a Board of Trustees meeting held via any means of communication that allows the Trustees to hear each other simultaneously during the meeting. If a new unaffiliated sub-adviser is hired for the Fund, shareholders will receive information about the new sub-advisor within 90 days of the change.
Who's who
Board of trustees: A mutual fund is governed by a board of trustees, which has oversight responsibility for the management of the fund's business affairs. Trustees establish procedures and oversee and review the performance of the fund's service providers.
Investment manager: An investment manager is a company responsible for selecting portfolio investments consistent with the objective and policies stated in the mutual fund's prospectus. A written contract between a mutual fund and its investment manager specifies the services the investment manager performs and the fee the manager is entitled to receive.
Portfolio managers: Portfolio managers make investment decisions for individual portfolios.
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Who manages the Fund
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 administrative services to a fund and oversight of other fund service providers.
Custodian/Fund accountant: 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. The fund accountant provides services such as calculating a fund's net asset value (NAV) and providing financial reporting information for the fund.
Financial intermediary: Financial professionals 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 professionals 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.
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About your account
Investing in the Fund
You can choose from a number of share classes for the Fund. Because each share class has a different combination of sales charges, fees, and other features, you should consult your financial intermediary or your financial professional (hereinafter collectively referred to as the “financial intermediary”) to determine which share class best suits your investment goals and time frame. It is the responsibility of your financial intermediary to assist you in determining the most appropriate share class and to communicate such determination to us.
Information about existing sales charges and sales charge reductions and waivers is available in this Prospectus below and free of charge on the Delaware Funds website at delawarefunds.com. Additional information on sales charges can be found in the SAI, which is available upon request.
Please also see the “Broker-defined sales charge waiver policies” section in this Prospectus for information provided to the Fund by certain financial intermediaries on sales charge discounts and waivers that may be available to you through your financial intermediary. Shareholders purchasing Fund shares through a financial intermediary may also be eligible for sales charge discounts or waivers which may differ from those disclosed elsewhere in this Prospectus or SAI. The availability of certain initial or deferred sales charge waivers and discounts may depend on the particular financial intermediary or type of account through which you purchase or hold Fund shares. It is the responsibility of the financial intermediary to implement any of its proprietary sales charge discounts or waivers listed in “Broker-defined sales charge waiver policies” or otherwise offered by the financial intermediary. Accordingly, you should consult with your financial intermediary to determine whether you qualify for any sales charge discounts or waivers.
Choosing a share class
Each share class may be eligible for purchase through programs sponsored by financial intermediaries that require the purchase of a specific class of shares.
Class A, Class C, and Class R shares of the Fund have each adopted a separate 12b-1 plan that allows them to pay distribution fees for the sale and distribution of their shares. Because these fees are paid out of the Fund's assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.
Class A |
Class A sales charges
The table below details your sales charges on purchases of Class A shares. The offering price for Class A shares includes the front-end sales charge. The offering price is determined by dividing the NAV per share by an amount equal to 1 minus the sales charge (expressed in decimals) applicable to the purchase, calculated to two decimal places using standard rounding criteria. 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. The number of Fund shares you will be issued will equal the amount invested divided by the applicable offering price for those shares, calculated to three decimal places using standard rounding criteria. Sales charges do not apply to shares purchased through dividend reinvestment.
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% |
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$1 million or more
|
none* |
none* |
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About your account
* There is no front-end sales charge when you purchase $1 million or more of Class A shares. However, if Delaware Distributors, L.P. (Distributor) paid your financial intermediary a commission on your purchase of $1 million or more of Class A shares, for shares purchased prior to July 1, 2020, 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 these shares within the second year; and for shares purchased on or after July 1, 2020, you will have to pay a Limited CDSC of 1.00% if you redeem these shares within the 18 months after your purchase, unless a specific waiver of the Limited CDSC applies. The Limited CDSC will be paid to the Distributor and will be assessed on an amount equal to the lesser of: (1) the NAV at the time the Class A shares being redeemed were purchased; or (2) the NAV of such Class A shares at the time of redemption. For purposes of this formula, the “NAV at the time of purchase” will be the NAV at purchase of the Class A shares even if those shares are later exchanged for shares of another Delaware Fund and, in the event of an exchange of Class A shares, the “NAV of such shares at the time of redemption” will be the NAV of the shares acquired in the exchange. In determining whether a Limited CDSC is payable, it will be assumed that shares not subject to the Limited CDSC are the first redeemed followed by other shares held for the longest period of time. See “Dealer compensation” below for a description of the dealer commission that is paid.
Class C |
Calculation of contingent deferred sales charges — Class C
CDSCs are charged as a percentage of the dollar amount subject to the CDSC. The charge will be assessed on an amount equal to the lesser of the NAV at the time the shares being redeemed were purchased or the NAV of those shares at the time of redemption. No CDSC will be imposed on increases in NAV above the initial purchase price, nor will a CDSC be assessed on redemptions of shares acquired through reinvestment of dividends or capital gains distributions. For purposes of this formula, the “NAV at the time of purchase” will be the NAV at purchase of Class C shares of the Fund, even if those shares are later exchanged for shares of another Delaware 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.
Class R |
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Institutional Class |
A shareholder transacting in Institutional Class shares through a broker or other financial intermediary may be required to pay a commission and/or other forms of compensation to the financial intermediary.
The Fund reserves the right to modify or waive the above policies at any time without prior notice to shareholders.
Dealer compensation
The financial intermediary who sells you shares of the Fund may be eligible to receive the following amounts as compensation for your investment in the Fund. These amounts are paid by the Distributor to the securities dealer with whom your financial advisor is associated. Institutional Class shares do not have a 12b-1 fee or sales charge so they are not included in the table below.
|
Class A1 |
Class C2 |
Class R3 |
||||||
Commission (%)
|
— |
1.00% |
— |
||||||
Investment less than $100,000
|
4.00% |
— |
— |
||||||
$100,000 but less than $250,000
|
3.00% |
— |
— |
||||||
$250,000 but less than $500,000
|
2.00% |
— |
— |
||||||
$500,000 but less than $1 million
|
1.60% |
— |
— |
||||||
$1 million but less than $5 million
|
1.00% |
— |
— |
||||||
$5 million but less than $25 million
|
0.50% |
— |
— |
||||||
$25 million or more
|
0.25% |
— |
— |
||||||
12b-1 fee to dealer
|
0.25% |
1.00% |
0.50% |
1 On sales of Class A shares, the Distributor reallows to your securities dealer a portion of the front-end sales charge depending upon the amount you invested. Your securities dealer may be eligible to receive a 12b-1 fee of up to 0.25% from the date of purchase. On sales of Class A shares where there is no front-end sales charge, the Distributor may pay your securities dealer an upfront commission of up to 1.00%. The upfront commission includes an advance of the first year's 12b-1 fee of up to 0.25%. During the first 12 months, the Distributor will retain the 12b-1 fee to partially offset the upfront commission advanced at the time of purchase. Starting in the 13th month, your securities dealer may be eligible to receive the full 12b-1 fee applicable to Class A shares.
2 On sales of Class C shares, the Distributor may pay your securities dealer an upfront commission of 1.00%. The upfront 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 upfront 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 shares. Alternatively, certain intermediaries may not be eligible to receive the upfront commission of 1.00%, but may receive the 12b-1 fee for sales of Class C shares from the date of purchase. After approximately eight years, Class C shares are eligible to automatically convert to Class A shares and dealers may then be eligible to receive the 12b-1 fee applicable to Class A shares.
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About your account
3 On sales of Class R shares, the Distributor does not pay your securities dealer an upfront commission. Your securities dealer may be eligible to receive a 12b-1 fee of up to 0.50% from the date of purchase.
Payments to intermediaries
The Distributor and its affiliates may pay additional compensation at their own expense and not as an expense of the Fund to certain affiliated or unaffiliated brokers, dealers, or other financial intermediaries (Financial Intermediaries) in connection with the sale or retention of Fund shares and/or shareholder servicing, including providing the Fund with “shelf space” or a higher profile with the Financial Intermediaries' consultants, salespersons, and customers (distribution assistance). For example, the Distributor or its affiliates may pay additional compensation to Financial Intermediaries for various purposes, including, but not limited to, promoting the sale of Fund shares, maintaining share balances and/or for subaccounting, administrative, or shareholder processing services, marketing, educational support, data, and ticket charges. Such payments are in addition to any distribution fees, service fees, subaccounting fees, and/or transfer agency fees that may be payable by the Fund. The additional payments may be based on factors, including level of sales (based on gross or net sales or some specified minimum sales or some other similar criteria related to sales of the Fund and/or some or all other Delaware Funds), amount of assets invested by the Financial Intermediary's customers (which could include current or aged assets of the Fund and/or some or all other Delaware Funds), the Fund's advisory fees, some other agreed-upon amount, or other measures as determined from time to time by the Distributor. The level of payments made to a qualifying Financial Intermediary in any given year may vary. To the extent permitted by SEC and FINRA rules and other applicable laws and regulations, the Distributor may pay, or allow its affiliates to pay, other promotional incentives or payments to Financial Intermediaries.
Sub-transfer agent/recordkeeping payments may be made to third parties (including affiliates of the Manager) that provide sub-transfer agent, recordkeeping, and/or shareholder services with respect to certain shareholder accounts (including omnibus accounts), or to the shareholder account directly to offset the costs of these services, in lieu of the transfer agent providing such services.
If a mutual fund sponsor or distributor makes greater payments for distribution assistance to your Financial Intermediary with respect to distribution of shares of that particular mutual fund than sponsors or distributors of other mutual funds make to your Financial Intermediary with respect to the distribution of the shares of their mutual funds, your Financial Intermediary and its salespersons may have a financial incentive to favor sales of shares of the mutual fund making the higher payments over shares of other mutual funds or over other investment options. In addition, depending on the arrangements in place at any particular time, a Financial Intermediary may also have a financial incentive for recommending a particular share class over other share classes. You should consult with your Financial Intermediary and review carefully any disclosure provided by such Financial Intermediary as to compensation it receives in connection with investment products it recommends or sells to you. A significant purpose of these payments is to increase sales of the Fund's shares. The Manager or its affiliates may benefit from the Distributor's or its affiliates' payment of compensation to Financial Intermediaries through increased fees resulting from additional assets acquired through the sale of Fund shares through Financial Intermediaries. In certain instances, the payments could be significant and may cause a conflict of interest for your Financial Intermediary. Any such payments will not change the NAV or the price of the Fund's shares.
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the front-end sales charge on Class A shares, which may depend on the ability of your financial intermediary or the Fund's transfer agent to support the various ways. Please refer to the “Broker-defined sales charge waiver policies” in this Prospectus and to the SAI for detailed information and eligibility requirements. You can also get additional information from your financial intermediary. You or your financial intermediary 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 intermediary or the Fund in order to qualify for a reduction in sales charges. Such information may include your Delaware 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. If you participate in a direct deposit purchase plan or an automatic investment program for an account held directly with the Fund's transfer agent and also hold shares of Delaware Funds other than directly with us, generally those holdings will not be aggregated with the assets held with us for purposes of determining rights of accumulation in connection with direct deposit purchase plans and automatic investment program purchases. We reserve the right to determine whether any purchase is entitled, by virtue of the foregoing, to the reduced sales charge. Class R and Institutional Class shares (if applicable) have no upfront sales charge or CDSC so they are not included in the table below.
Letter of intent and rights of accumulation
Through a letter of intent, you agree to invest a certain amount in Delaware Funds over a 13-month period to qualify for reduced front-end sales charges (as set forth in the SAI). Delaware Funds no longer accept retroactive letters of intent.
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Upon your request, you can combine your holdings or purchases of Class A and all other classes of Delaware Funds, excluding any money market funds (unless you acquired those shares through an exchange from a Fund that did carry a front-end sales charge, CDSC, or Limited CDSC), as well as the holdings and purchases of your spouse — or equivalent, if recognized under local law — and children under the age of 21 to qualify for reduced front-end sales charges. When submitting the letter of intent or requesting rights of accumulation, you must identify which holdings or purchases you are requesting to be combined to your dealer, the Distributor or BNY Mellon at the time of purchase. You can add the value of any share class that you already own to new share purchases in order to qualify for a reduced sales charge. Please note that depending on the financial intermediary holding your account, this policy may differ from those described in this Prospectus.
Class A |
Class C |
Available. |
Although the letter of intent does not apply to the purchase of Class C shares, you can combine your purchase of Class C shares with your purchase of Class A shares to fulfill your letter of intent. Although the rights of accumulation do not apply to the purchase of Class C shares, you can combine the value of your Class C shares with the value of your Class A shares to receive a reduced sales charge. |
Reinvestment of redeemed shares
Up to 90 days after you redeem shares, you can reinvest the proceeds without paying a sales charge. For purposes of this “right of reinvestment policy,” automatic transactions (including, for example, automatic purchases, withdrawals and payroll deductions) and ongoing retirement plan contributions are not eligible for investment without a sales charge. Investors should consult their financial intermediary for further information.
Class A |
Class C |
Available. |
Not available. |
SIMPLE IRA, SEP, SARSEP, 401(k), SIMPLE 401(k), Profit Sharing, Money Purchase, 403(b)(7), and 457 Retirement Plans
These investment plans may qualify for reduced sales charges by combining the purchases of all members of the group. Members of these groups may also qualify to purchase shares without a front-end sales charge and may qualify for a waiver of any CDSCs on Class A shares.
Class A |
Class C |
Available. |
Although the letter of intent does not apply to the purchase of Class C shares, you can combine your purchase of Class C shares with your purchase of Class A shares to fulfill your letter of intent. Although the rights of accumulation do not apply to the purchase of Class C shares, you can combine the value of your Class C shares with the value of your Class A shares to receive a reduced sales charge. |
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. Certain existing investors or programs sponsored by certain intermediaries that were eligible to purchase Class A shares of a Fund at NAV may continue to be eligible to purchase Class A shares at NAV. The Fund reserves the right to modify or terminate these arrangements at any time.
23
About your account
Waivers of contingent deferred sales charges
Certain sales charges may be based on historical cost. Therefore, you should maintain any records that substantiate these costs because the Fund, its transfer agent, and financial intermediaries may not maintain this information. Please note that you or your financial intermediary will have to notify us at the time of redemption that the trade qualifies for such waiver. Class R and Institutional Class shares do not have CDSCs so they are not included in the list below. Please also see the “Shareholder fees” table in the Fund summary and “Choosing a share class” for more information about applicable CDSCs. Your financial intermediary may offer waivers for certain account types or programs that may be different than what is noted below. See the “Broker-defined sales charge waiver policies” section or contact your financial intermediary for information on program availability.
CDSCs for Class A and Class C shares may be waived under the following circumstances, except as noted otherwise:
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1 Qualified plans that are fully redeemed at the direction of the plan's fiduciary may be subject to any applicable CDSC or Limited CDSC, unless the redemption is due to the termination of the plan.
Certain existing investors or programs sponsored by certain intermediaries that were eligible for waivers of CDSCs may continue to be eligible for those waivers of CDSCs.
How to buy shares
Through your financial intermediary |
Your financial intermediary (if applicable) can handle all the details of purchasing shares, including opening an account. Your financial intermediary may charge you a separate fee for this service.
Through the Delaware Funds by Macquarie® Service Center |
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 Funds by Macquarie at P.O. Box 9876, Providence, RI 02940-8076 for investments by regular mail or Delaware Funds by Macquarie Service Center at 4400 Computer Drive, Westborough, MA 01581-1722 for investments by overnight courier service. If you are making an initial purchase by mail, you must include a completed investment application (or an appropriate retirement plan application if you are opening a retirement account) with your check. Purchase orders will not be accepted at any other address.
Please note that purchase orders submitted by mail will not be considered received until such purchase orders arrive at Delaware Funds by Macquarie® Service Center at 4400 Computer Drive, Westborough, MA 01581-1722 and are determined to be in good order. For a purchase request to be in “good order,” you must provide the name of the Delaware Fund in which you are investing, your account registration/number (if you are an existing shareholder), and the total number of shares or dollar amount of the shares to be purchased, along with meeting any requirements set forth in applicable forms, this Prospectus, or the SAI. The Fund does not consider the US Postal Service or other independent delivery services to be its agent. Therefore, deposits in the mail or with such services or receipt at the Fund's post office box, of purchase orders, do not constitute receipt by the Fund or its agent. Please note that the Fund reserves the right to reject any purchase.
By wire
Ask your bank to wire the amount you want to invest to The Bank of New York Mellon, ABA #011001234, bank account #000073-6910. Include your account number, the name of the fund, registered account name, and class of shares in which you want to invest. If you are making an initial purchase by wire, you must first call the Delaware Funds by Macquarie Service Center at 800 523-1918 so we can assign you an account number.
By exchange
You may exchange all or part of your investment in one or more Delaware Funds for shares of other Delaware Funds. Please keep in mind, however, that under most circumstances you may exchange between like classes of shares only. To open an account by exchange, call the Delaware Funds by Macquarie Service Center at 800 523-1918.
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About your account
Through automated shareholder services |
You may purchase or exchange shares through our automated telephone service (for Class A, Class C, and Class R shares only), or through our website, delawarefunds.com (for Class A and Class C shares only). For more information about how to sign up for these services, call our Delaware Funds by Macquarie Service Center at 800 523-1918.
Calculating share price
The price you pay for shares will depend on when we receive your purchase order. If your order is received by an authorized agent or us before the close of regular trading on the New York Stock Exchange (NYSE) (normally 4:00pm ET), you will pay that day's closing Fund share price, which is based on the Fund's NAV. If the NYSE has an unscheduled early close, we will continue to accept your order until that day's scheduled close of the NYSE and you will pay that day's closing Fund share price. If your order is received after the scheduled close of regular trading on the NYSE, you will pay the next Business Day's closing Fund share price. We reserve the right to reject any purchase order.
We determine the NAV per share for each class of a Delaware Fund at the close of regular trading on the NYSE on each Business Day (normally 4:00pm ET). The Fund does not calculate its NAV on days the NYSE is closed for trading. If the NYSE has an unscheduled early close, the Fund's closing share price would still be determined as of that day's regularly scheduled close of the NYSE. The NAV per share for each class of a fund is calculated by subtracting the liabilities of each class from its total assets and dividing the resulting number by the number of shares outstanding for that class. We generally price securities and other assets for which market quotations are readily available at their market value. The value of foreign securities 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 US markets are not. We price fixed income securities on the basis of valuations provided to us by an independent pricing service that uses methods approved by the Board. For all other securities, we use methods approved by the Board that are designed to price securities at their fair market values.
Fair valuation
When the Fund uses fair value pricing, it may take into account any factors it deems appropriate. The Fund may determine fair value based upon developments related to a specific security, current valuations of foreign stock indices (as reflected in US futures markets), and/or US sector or broad stock market indices. In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures or suspension of trading in a security. The prices of securities used by the Fund to calculate its NAV may differ from quoted or published prices for the same securities. Fair value pricing may involve subjective judgments and it is possible that the fair value determined for a security could be 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 US 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-US markets because, among other things, most foreign markets close well before the Fund values its securities, normally at 4:00pm ET or the close of the NYSE. 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 designated the Manager as the valuation designee, and delegated responsibility for valuing the Fund's assets to the Manager and its Pricing Committee, which operates under the policies and procedures approved by the Board and is subject to the Board's oversight. The Manager, as the valuation designee, is responsible for periodically assessing any material risks associated with the determination of the fair value of the Fund's investments; establishing and applying fair value methodologies; testing the appropriateness of fair value methodologies; and overseeing and evaluating third-party pricing vendors and services. The Manager has a Pricing Committee to assist with its designated responsibilities as valuation designee.
Retirement plans
In addition to being an appropriate investment for your IRA, Roth IRA, and Coverdell Education Savings Account, the Fund may be suitable for group retirement plans. You may establish your IRA account even if you are already a participant in an employer-sponsored retirement plan. For more information on how the Fund can play an important role in your retirement planning or for details about group plans, please consult your financial intermediary, or call the Delaware Funds by Macquarie® Service Center at 800 523-1918.
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Document delivery
To reduce fund expenses, we try to identify related shareholders in a household and send only one copy of a fund's financial reports and prospectus. This process, called “householding,” will continue indefinitely unless you instruct us otherwise. If you prefer not to have these documents householded, please call the Delaware Funds by Macquarie Service Center at 800 523-1918. At any time you may view current prospectuses and financial reports on our website.
Inactive accounts
Please note that your account may be required to transfer to the appropriate state if no activity occurs in the account within the time period specified by state law.
How to redeem shares
Under normal circumstances, the Fund typically meets redemption requests through its holdings of cash or cash equivalents, the sale of portfolio assets, and/or its ability to redeem in kind (when applicable). During stressed market conditions, the Fund may use lines of credit to meet redemption requests.
Availability of these services may be limited by your financial intermediary and by the way your account is registered with Delaware Funds.
When you send us a completed request in good order to redeem or exchange shares and the request is received by an authorized agent or us before the close of regular trading on the NYSE (normally 4:00pm ET), 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. If the NYSE has an unscheduled early close, we will continue to accept your order until that day's scheduled close of the NYSE and you will receive that day's closing Fund share price. We will deduct any applicable CDSCs. You may also have to pay taxes on the proceeds from your sale of shares. If you purchased your shares by check, those shares are subject to a 15-day hold to ensure your check has cleared. Redemption requests for shares still subject to the hold may be rejected with instructions to resubmit at the conclusion of the holding period.
If you are required to pay a CDSC when you redeem your shares, the amount subject to the fee will be based on the shares' NAV when you purchased them or their NAV when you redeem them, whichever is less. This arrangement ensures that you will not pay a CDSC on any increase in the value of your shares. You also will not pay the charge on any shares acquired by reinvesting dividends or capital gains. If you exchange shares of one fund for shares of another, you do not pay a CDSC at the time of the exchange. If you later redeem those shares, the purchase price for purposes of the CDSC formula will be the price you paid for the original shares, not the exchange price. The redemption price for purposes of this formula will be the NAV of the shares you are actually redeeming.
If you hold your shares in certificates, you must submit the certificates with your request to sell the shares. We recommend that you send your certificates by certified mail.
Redemption proceeds will be distributed promptly, but not later than seven days after receipt of a redemption request (except as noted above). For direct transactions, redemption proceeds are typically paid the next Business Day after receipt of the redemption request. Redemptions submitted by financial intermediaries typically settle between one and three Business Days after receipt, depending on the settlement cycle requested by the financial intermediary. Settlement could be extended as a result of various factors, including but not limited to redemption amount or other market conditions. Please see the SAI for additional information.
Through your financial intermediary |
Your financial intermediary (if applicable) can handle all the details of redeeming your shares (selling them back to the Fund). Your financial intermediary may charge you a separate fee for this service.
Through the Delaware Funds by Macquarie® Service Center |
By mail
You may redeem your shares by mail by writing to: Delaware Funds by Macquarie at P.O. Box 9876, Providence, RI 02940-8076 for redemption requests by regular mail or Delaware Funds by Macquarie Service Center at 4400 Computer Drive, Westborough, MA 01581-1722 for redemption requests by overnight courier service. Redemption requests will not be accepted at any other address. All owners of the account must sign the request. For redemptions of more than $100,000, you must include a medallion signature guarantee for each owner. Medallion signature guarantees are also required when redemption proceeds are going to an address other than the address of record on the account. Please contact the Delaware Funds by Macquarie Service Center at 800 523-1918 for more information about the medallion signature guarantee requirements.
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About your account
Please note that redemption orders submitted by mail will not be considered received until such redemption orders arrive at Delaware Funds by Macquarie Service Center at 4400 Computer Drive, Westborough, MA 01581-1722 and are determined to be in good order. For a redemption request to be in “good order,” you must provide the name of the Delaware Fund whose shares you are redeeming, your account number, account registration, and the total number of shares or dollar amount of the transaction. Redemption requests must be signed by the record owner(s) exactly as the shares are registered, along with meeting any requirements set forth in applicable forms, this Prospectus, or the SAI. The Fund does not consider the US Postal Service or other independent delivery services to be its agent. Therefore, redemption requests placed in the mail or with such services or receipt at the Fund's post office box, of redemption requests, do not constitute receipt by the Fund or the transfer agent.
By telephone
You may redeem up to $100,000 of your shares by telephone. You may have the proceeds sent to you in the following ways:
Bank information must be on file before you request a wire or ACH redemption. Your bank may charge a fee for these services.
Through automated shareholder services |
You may redeem shares through our automated telephone service or through our website, delawarefunds.com. For more information about how to sign up for these services, call our Delaware Funds by Macquarie Service Center at 800 523-1918.
Redemptions-in-kind |
The Fund has reserved the right to pay for redemptions with portfolio securities under certain conditions. Subsequent sale by an investor receiving a distribution in kind could result in the payment of brokerage commissions and taxable gains (if such investment was held in a taxable account). Investors bear market risks until securities are sold for cash. See the SAI for more information on redemptions-in-kind.
Low balance accounts
For Class A and Class C shares, if you redeem shares and your account balance falls below the required account minimum of $1,000 ($250 for IRAs, Roth IRAs, Uniform Gifts to Minors Act and Uniform Transfers to Minors Act accounts, or accounts with automatic investment 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.
For Class R and Institutional Class shares, if you redeem shares and your account balance falls below $500, your shares may be redeemed after 60 days' written notice to you.
If your account is not at the minimum for low balance purposes 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, or it may be redeemed after 60 days' written notice to you. Any CDSC that would otherwise be applicable will not apply to such a redemption.
Certain accounts held in omnibus, advisory, or asset-allocation programs or programs offered by certain intermediaries may be opened below the minimum stated account balance and may maintain balances that are below the minimum stated account balance without incurring a service fee or being subject to involuntary redemption.
If the applicable account falls below the minimum due to market fluctuation, the Fund still reserves the right to liquidate the account.
Investor services
To help make investing with us as easy as possible, and to help you build your investments, we offer the investor services described below. Information about the investor services we offer is available free of charge on the Delaware Funds website at delawarefunds.com, including hyperlinks to relevant information in fund offering documents. Availability of these services may be limited by the way your account is registered with Delaware Funds.
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Online account access |
Online account access is a password-protected area of the Delaware Funds website that gives you access to your account information and allows you to perform transactions in a secure Internet environment.
Electronic delivery |
With Delaware Funds eDelivery, you can receive your fund documents electronically instead of via US 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.
Automatic investment plan |
The automatic investment plan allows you to make regular monthly or quarterly investments directly from your bank 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.
Systematic exchange option |
With the systematic exchange option, you can arrange automatic monthly exchanges between your shares in one or more Delaware 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 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.
Exchange of shares |
You may generally exchange all or part of your shares for shares of the same class of another Delaware Fund without paying a front-end sales charge or a CDSC at the time of the exchange. However, if you exchange shares from a fund that does not have a sales charge, you will pay any applicable sales charge 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. 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. Please note that depending on the financial intermediary holding your account, this policy may be unavailable or differ from those described in this Prospectus.
On demand service |
The on demand service allows you or your financial advisor to 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. Macquarie Asset Management does not charge a fee for this service; however, your bank may assess one.
Direct deposit service |
Through the direct deposit service, you can have $25 or more in dividends and distributions deposited directly into your bank account. Macquarie Asset Management 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 |
You can arrange a regular monthly or quarterly payment from your account made to you or someone you designate. If the value of your account is $5,000 or more, you can make withdrawals of at least $25 monthly, or $75 quarterly. You may also have your withdrawals deposited directly to your bank account through the direct deposit service.
The applicable Limited CDSC for Class A shares and the CDSC for Class C shares redeemed via a systematic withdrawal plan will be waived if the annual amount withdrawn in each year is less than 12% of the account balance on the date that the plan is established. If the annual amount withdrawn in any year exceeds 12% of the account balance on the date that the systematic withdrawal plan is established, all redemptions under the plan will be subject to the applicable CDSC, including an assessment for previously redeemed amounts under the plan.
29
About your account
Right to discontinue offering shares and/or to merge or liquidate a share class |
To the extent authorized by law, the Fund reserves the right to discontinue offering shares at any time and/or to merge or liquidate a share class, such as in response to shareholder redemptions of substantially or all shares in a class. For any blocked accounts involving a liquidating fund, a shareholder's account may be moved into Delaware Investments Ultrashort Fund if no instruction is given upon receipt of a fund's pending liquidation.
Frequent trading of Fund shares (market timing and disruptive trading)
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 and disruptive trading. The Fund will consider anyone who follows a pattern of market timing in any Delaware Fund or the Optimum Fund Trust to be a market timer and may consider anyone who has followed a similar pattern of market timing at an unaffiliated fund family to be a market timer.
Market timing of a fund occurs when investors make consecutive, rapid, short-term “round trips” — that is, purchases into a fund followed quickly by redemptions out of that fund. A short-term round trip is considered 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 round trip in a fund within 90 rolling calendar days of a previous short-term round trip in that fund, you may be considered a market timer. In determining whether market timing has occurred, the Fund considers short-term round trips to include rapid purchases and sales of Fund shares through the exchange privilege. The Fund reserves the right to consider other trading patterns to be market timing.
Your ability to use the Fund's exchange privilege may be limited if you are identified as a market timer. If you are identified as a market timer, the Fund will execute the redemption side of your exchange order but may refuse the purchase side of your exchange order. The Fund reserves the right to restrict or reject, without prior notice, any purchase order or exchange order for any reason, including any purchase order or exchange order accepted by any shareholder's financial intermediary or in any omnibus-type account. Transactions placed in violation of the Fund's market timing policy are not necessarily deemed accepted by the Fund and may be rejected by the Fund on the next Business Day following receipt by the Fund.
Redemptions will continue to be permitted in accordance with the Fund's then-current prospectus. A redemption of shares under these circumstances could be costly to a shareholder if, for example, the shares have declined in value, the shareholder recently paid a front-end sales charge, the shares are subject to a CDSC, or the sale results in adverse tax consequences. To avoid this risk, a shareholder should carefully monitor the purchases, sales, and exchanges of Fund shares and avoid frequent trading in Fund shares.
The Fund reserves the right to modify this policy at any time without notice, including modifications to the Fund's monitoring procedures and the procedures to close accounts to new purchases. Although the implementation of this policy involves certain judgments that are inherently subjective and may be selectively applied, the Fund seeks to make judgments and applications that are consistent with the interests of the Fund's shareholders. While the Fund 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 who 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.
Any fund may be subject to disruptive trading activity. However, 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 4:00pm Eastern time or the close of the NYSE). 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
30
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 help 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; US 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, the Fund's ability to detect frequent trading activities by investors that hold shares through financial intermediaries may be limited by the ability and/or willingness of such intermediaries to monitor for these activities. 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's transfer agent may work with certain intermediaries (such as investment dealers holding shareholder accounts in street name, retirement plan recordkeepers, insurance company separate accounts, and bank trust companies) to apply their own procedures, provided that the Fund's transfer agent believes the intermediary's procedures are reasonably designed to enforce the Fund's frequent trading policies. You should refer to disclosures provided by the intermediaries with which you have an account to determine the specific trading restrictions that apply to you. If the Fund's transfer agent identifies any activity that may constitute frequent trading, it reserves the right to contact the intermediary and request that the intermediary either provide information regarding an account owner's transactions or restrict the account owner's trading. There is no assurance that the information received by the Fund from a financial intermediary will be sufficient to effectively detect or deter excessive trading in omnibus accounts. If the Fund's transfer agent is not satisfied that the intermediary has taken appropriate action, the transfer agent may terminate the intermediary's ability to transact in Fund shares, or restrict individual trading activity as applicable.
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 Internal Revenue 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 monthly. The Fund will distribute net realized capital gains, if any, at least annually. The Fund may distribute such income dividends and capital gains more frequently, if necessary, in order to reduce or eliminate federal excise or income taxes on the Fund. The amount of any distribution will vary, and there is no guarantee the Fund will pay either an income dividend or a capital gains distribution. We automatically reinvest all dividends and any capital gains, unless you direct us to do otherwise.
Annual statements
Each year, the Fund will send you an annual statement (Form 1099) of your account activity to assist you in completing your federal, state, and local tax returns. Distributions declared in December to shareholders of record in such month, but paid in January, are taxable as if they were paid in December. Prior to issuing your statement, the Fund makes every effort to reduce the number of corrected forms mailed to you. However, if the Fund finds it necessary to reclassify its distributions or adjust the cost basis of any covered shares (defined below) sold or exchanged after you receive your tax statement, the Fund will send you a corrected Form 1099.
31
About your account
Avoid “buying a dividend”
At the time you purchase your Fund shares, the Fund's NAV may reflect undistributed income, undistributed capital gains, or net unrealized appreciation in value of portfolio securities held by the Fund. For taxable investors, a subsequent distribution to you of such amounts, although constituting a return of your investment, would be taxable. Buying shares in the Fund just before it declares an income dividend or capital gains distribution is sometimes known as “buying a dividend.”
Tax considerations
Fund distributions. The Fund expects, based on its investment objective and strategies, that its distributions, if any, will be taxable as ordinary income, capital gains, or some combination of both. This is true whether you reinvest your distributions in additional Fund shares or receive them in cash.
For federal income tax purposes, Fund distributions of short-term capital gains are taxable to you as ordinary income. Fund distributions of long-term capital gains are taxable to you as long-term capital gains no matter how long you have owned your shares. Because the income of the Fund is primarily derived from investments earning interest rather than dividend income, generally none or only a small portion of the income dividends paid to you by the Fund is anticipated to be qualified dividend income eligible for taxation by individuals at long-term capital gain tax rates.
The use of derivatives by the Fund may cause the Fund to realize higher amounts of ordinary income or short-term capital gain, distributions from which are taxable to individual shareholders at ordinary income tax rates rather than at the more favorable tax rates for long-term capital gain. Additionally, other rules applicable to derivative contracts may accelerate the recognition of income or gains to the Fund, defer losses to the Fund, and cause adjustments in the holding periods of the Fund's securities. These rules, therefore, could affect the amount, timing and/or character of distributions to shareholders.
If the Fund qualifies to pass through to you the tax benefits from foreign taxes it pays on its investments, and elects to do so, then any foreign taxes it pays on these investments may be passed through to you as a foreign tax credit.
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 Fund is the same as a sale. The Fund is required to report to you and the Internal Revenue Service (IRS) annually on Form 1099-B not only the gross proceeds of Fund shares you sell or redeem but also the cost basis of Fund shares you sell or redeem that were purchased or acquired on or after January 1, 2012 (“covered shares”). Cost basis will be calculated using the Fund's default method, unless you instruct the Fund to use a different calculation method. Shareholders should carefully review the cost basis information provided by the Fund and make any additional basis, holding period or other adjustments that are required when reporting these amounts on their federal income tax returns. If your account is held by your investment representative (financial intermediary or other broker), please contact that representative with respect to reporting of cost basis and available elections for your account. Tax-advantaged retirement accounts will not be affected. Additional information and updates regarding cost basis reporting and available shareholder elections will be on the Delaware Funds website at delawarefunds.com as the information becomes available.
Medicare tax. An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gain distributions received from the Fund and net gains from redemptions or other taxable dispositions of Fund shares) of US individuals, estates and trusts to the extent that such person's “modified adjusted gross income” (in the case of an individual) or “adjusted gross income” (in the case of an estate or trust) exceeds a threshold amount. This Medicare tax, if applicable, is reported by you on, and paid with, your federal income tax return.
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 IRS instructs it to do so. When withholding is required, the amount will be 24% of any distributions or proceeds paid.
State and local taxes. Fund distributions and gains from the sale or exchange of your Fund shares generally are subject to state and local taxes.
Non-US investors. Non-US investors may be subject to US withholding tax at a 30% or lower treaty rate and US estate tax and are subject to special US tax certification requirements to avoid backup withholding and claim any treaty benefits. Exemptions from US withholding tax are provided for certain capital gain dividends paid by the Fund from net long-term capital gains, if any, interest-related dividends paid by the Fund from its qualified net interest income from US sources and short-term capital gain dividends, if such amounts are reported by the Fund. However, notwithstanding such exemptions from US withholding at the source, any such dividends and distributions of income and capital gains will be subject to backup withholding at a rate of 24% if you fail to properly certify that you are not a US person.
Other reporting and withholding requirements. Under the Foreign Account Tax Compliance Act (FATCA), the Fund will be required to withhold a 30% tax on income dividends made by the Fund to certain foreign entities, referred to as foreign financial institutions or nonfinancial foreign entities, that fail to comply (or be deemed compliant) with extensive reporting and withholding requirements designed to inform the US Department of the Treasury of US-owned foreign investment accounts. After December 31, 2018, FATCA withholding would have applied to certain capital gain distributions, return of capital distributions and the proceeds arising from the sale of Fund shares; however, based on proposed regulations issued by the IRS, which can be relied upon
32
currently, such withholding is no longer required unless final regulations provide otherwise (which is not expected). The Fund may disclose the information that it receives from its shareholders to the IRS, non-US taxing authorities or other parties as necessary to comply with FATCA or similar laws. Withholding also may be required if a foreign entity that is a shareholder of the Fund fails to provide the Fund with appropriate certifications or other documentation concerning its status under FATCA.
This discussion of “Dividends, distributions, and taxes” is not intended or written to be used as tax advice. Because everyone's tax situation is unique, you should consult your tax professional about federal, state, local, or foreign tax consequences before making an investment in the Fund.
Certain management considerations
Investments by fund 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 and asset allocation models. A “529 Plan” is a college savings program that operates under Section 529 of the Code. Asset allocation models include the Delaware Funds by Macquarie® Premier Advisor Platform, which offers asset allocation models using a mix of Delaware Funds. 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.
33
Financial highlights
Delaware Emerging Markets Debt Corporate Fund
The financial highlights tables are intended to help you understand the Fund's financial performance for the past five 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 fiscal period presented below has been audited by PricewaterhouseCoopers LLP, independent registered public accounting firm, whose report, along with the Fund's financial statements, is included in the Fund's annual report, which is available upon request by calling 800 523-1918.
|
Year ended |
||||||||||||||
Class A shares |
7/31/22 |
7/31/21 |
7/31/20 |
7/31/19 |
7/31/18 |
||||||||||
Net asset value, beginning of period
|
$8.91 |
$8.48 |
$8.67 |
$8.26 |
$8.77 |
||||||||||
Income (loss) from investment operations: |
|||||||||||||||
Net investment income1
|
0.32 |
0.33 |
0.32 |
0.40 |
0.39 |
||||||||||
Net realized and unrealized gain (loss)
|
(1.52 |
) |
0.42 |
(0.18 |
) |
0.41 |
(0.39 |
) |
|||||||
Total from investment operations
|
(1.20 |
) |
0.75 |
0.14 |
0.81 |
— |
|||||||||
Less dividends and distributions from: |
|||||||||||||||
Net investment income
|
(0.31 |
) |
(0.32 |
) |
(0.32 |
) |
(0.35 |
) |
(0.38 |
) |
|||||
Net realized gain
|
(0.05 |
) |
— |
— |
(0.05 |
) |
(0.13 |
) |
|||||||
Return of capital
|
— |
— |
(0.01 |
) |
— |
— |
|||||||||
Total dividends and distributions
|
(0.36 |
) |
(0.32 |
) |
(0.33 |
) |
(0.40 |
) |
(0.51 |
) |
|||||
Net asset value, end of period
|
$7.35 |
$8.91 |
$8.48 |
$8.67 |
$8.26 |
||||||||||
Total return2
|
(13.83% |
) |
8.99% |
1.73% |
10.21% |
(0.10% |
) |
||||||||
Ratios and supplemental data: |
|||||||||||||||
Net assets, end of period (000 omitted)
|
$767 |
$817 |
$281 |
$93 |
$57 |
||||||||||
Ratio of expenses to average net assets3
|
1.04% |
1.04% |
1.04% |
1.04% |
1.16% |
||||||||||
Ratio of expenses to average net assets
prior to fees waived3
|
1.43% |
1.42% |
1.48% |
1.90% |
1.90% |
||||||||||
Ratio of net investment income to average net assets
|
3.87% |
3.69% |
3.77% |
4.88% |
4.57% |
||||||||||
Ratio of net investment income to average net assets prior to fees waived
|
3.48% |
3.31% |
3.33% |
4.02% |
3.83% |
||||||||||
Portfolio turnover
|
55% |
99% |
93% |
74% |
108% |
1 |
Calculated using average shares outstanding. |
2 |
Total 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 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. |
3 |
Expense ratios do not include expenses of the investment companies (Underlying Funds) in which the Fund invests. |
34
Delaware Emerging Markets Debt Corporate Fund
|
Year ended |
||||||||||||||
Class C shares |
7/31/22 |
7/31/21 |
7/31/20 |
7/31/19 |
7/31/18 |
||||||||||
Net asset value, beginning of period
|
$8.90 |
$8.47 |
$8.66 |
$8.26 |
$8.77 |
||||||||||
Income (loss) from investment operations: |
|||||||||||||||
Net investment income1
|
0.25 |
0.26 |
0.25 |
0.34 |
0.33 |
||||||||||
Net realized and unrealized gain (loss)
|
(1.51 |
) |
0.43 |
(0.17 |
) |
0.40 |
(0.39 |
) |
|||||||
Total from investment operations
|
(1.26 |
) |
0.69 |
0.08 |
0.74 |
(0.06 |
) |
||||||||
Less dividends and distributions from: |
|||||||||||||||
Net investment income
|
(0.25 |
) |
(0.26 |
) |
(0.26 |
) |
(0.29 |
) |
(0.32 |
) |
|||||
Net realized gain
|
(0.05 |
) |
— |
— |
(0.05 |
) |
(0.13 |
) |
|||||||
Return of capital
|
— |
— |
(0.01 |
) |
— |
— |
|||||||||
Total dividends and distributions
|
(0.30 |
) |
(0.26 |
) |
(0.27 |
) |
(0.34 |
) |
(0.45 |
) |
|||||
Net asset value, end of period
|
$7.34 |
$8.90 |
$8.47 |
$8.66 |
$8.26 |
||||||||||
Total return2
|
(14.46% |
) |
8.19% |
0.99% |
9.27% |
(0.84% |
) |
||||||||
Ratios and supplemental data: |
|||||||||||||||
Net assets, end of period (000 omitted)
|
$210 |
$99 |
$84 |
$61 |
$82 |
||||||||||
Ratio of expenses to average net assets3
|
1.79% |
1.79% |
1.79% |
1.79% |
1.91% |
||||||||||
Ratio of expenses to average net assets
prior to fees waived3
|
2.18% |
2.17% |
2.23% |
2.65% |
2.65% |
||||||||||
Ratio of net investment income to average net assets
|
3.12% |
2.94% |
3.02% |
4.13% |
3.82% |
||||||||||
Ratio of net investment income to average net assets prior to fees waived
|
2.73% |
2.56% |
2.58% |
3.27% |
3.08% |
||||||||||
Portfolio turnover
|
55% |
99% |
93% |
74% |
108% |
1 |
Calculated using average shares outstanding. |
2 |
Total 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 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. |
3 |
Expense ratios do not include expenses of the Underlying Funds in which the Fund invests. |
35
Financial highlights
Delaware Emerging Markets Debt Corporate Fund
|
Year ended |
||||||||||||||
Class R shares |
7/31/22 |
7/31/21 |
7/31/20 |
7/31/19 |
7/31/18 |
||||||||||
Net asset value, beginning of period
|
$8.90 |
$8.47 |
$8.66 |
$8.26 |
$8.77 |
||||||||||
Income (loss) from investment operations: |
|||||||||||||||
Net investment income1
|
0.34 |
0.35 |
0.34 |
0.42 |
0.42 |
||||||||||
Net realized and unrealized gain (loss)
|
(1.51 |
) |
0.43 |
(0.18 |
) |
0.40 |
(0.39 |
) |
|||||||
Total from investment operations
|
(1.17 |
) |
0.78 |
0.16 |
0.82 |
0.03 |
|||||||||
Less dividends and distributions from: |
|||||||||||||||
Net investment income
|
(0.34 |
) |
(0.35 |
) |
(0.34 |
) |
(0.37 |
) |
(0.41 |
) |
|||||
Net realized gain
|
(0.05 |
) |
— |
— |
(0.05 |
) |
(0.13 |
) |
|||||||
Return of capital
|
— |
— |
(0.01 |
) |
— |
— |
|||||||||
Total dividends and distributions
|
(0.39 |
) |
(0.35 |
) |
(0.35 |
) |
(0.42 |
) |
(0.54 |
) |
|||||
Net asset value, end of period
|
$7.34 |
$8.90 |
$8.47 |
$8.66 |
$8.26 |
||||||||||
Total return2
|
(13.60% |
) |
9.30% |
2.00% |
10.42% |
0.16% |
|||||||||
Ratios and supplemental data: |
|||||||||||||||
Net assets, end of period (000 omitted)
|
$3 |
$3 |
$3 |
$3 |
$2 |
||||||||||
Ratio of expenses to average net assets3
|
0.79% |
0.79% |
0.79% |
0.79% |
0.91% |
||||||||||
Ratio of expenses to average net assets
prior to fees waived3
|
1.68% |
1.68% |
1.73% |
2.15% |
2.13% |
||||||||||
Ratio of net investment income to average net assets
|
4.12% |
3.94% |
4.02% |
5.13% |
4.82% |
||||||||||
Ratio of net investment income to average net assets prior to fees waived
|
3.23% |
3.05% |
3.08% |
3.77% |
3.60% |
||||||||||
Portfolio turnover
|
55% |
99% |
93% |
74% |
108% |
1 |
Calculated using average shares outstanding. |
2 |
Total 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 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. |
3 |
Expense ratios do not include expenses of the Underlying Funds in which the Fund invests. |
36
Delaware Emerging Markets Debt Corporate Fund
|
Year ended |
||||||||||||||
Institutional Class shares |
7/31/22 |
7/31/21 |
7/31/20 |
7/31/19 |
7/31/18 |
||||||||||
Net asset value, beginning of period
|
$8.90 |
$8.47 |
$8.67 |
$8.27 |
$8.78 |
||||||||||
Income (loss) from investment operations: |
|||||||||||||||
Net investment income1
|
0.34 |
0.35 |
0.34 |
0.42 |
0.42 |
||||||||||
Net realized and unrealized gain (loss)
|
(1.51 |
) |
0.43 |
(0.19 |
) |
0.40 |
(0.39 |
) |
|||||||
Total from investment operations
|
(1.17 |
) |
0.78 |
0.15 |
0.82 |
0.03 |
|||||||||
Less dividends and distributions from: |
|||||||||||||||
Net investment income
|
(0.34 |
) |
(0.35 |
) |
(0.34 |
) |
(0.37 |
) |
(0.41 |
) |
|||||
Net realized gain
|
(0.05 |
) |
— |
— |
(0.05 |
) |
(0.13 |
) |
|||||||
Return of capital
|
— |
— |
(0.01 |
) |
— |
— |
|||||||||
Total dividends and distributions
|
(0.39 |
) |
(0.35 |
) |
(0.35 |
) |
(0.42 |
) |
(0.54 |
) |
|||||
Net asset value, end of period
|
$7.34 |
$8.90 |
$8.47 |
$8.67 |
$8.27 |
||||||||||
Total return2
|
(13.60% |
) |
9.30% |
1.88% |
10.41% |
0.16% |
|||||||||
Ratios and supplemental data: |
|||||||||||||||
Net assets, end of period (000 omitted)
|
$96,027 |
$86,511 |
$69,600 |
$51,784 |
$21,683 |
||||||||||
Ratio of expenses to average net assets3
|
0.79% |
0.79% |
0.79% |
0.79% |
0.91% |
||||||||||
Ratio of expenses to average net assets
prior to fees waived3
|
1.18% |
1.17% |
1.23% |
1.65% |
1.65% |
||||||||||
Ratio of net investment income to average net assets
|
4.12% |
3.94% |
4.02% |
5.13% |
4.82% |
||||||||||
Ratio of net investment income to average net assets prior to fees waived
|
3.73% |
3.56% |
3.58% |
4.27% |
4.08% |
||||||||||
Portfolio turnover
|
55% |
99% |
93% |
74% |
108% |
1 |
Calculated using average shares outstanding. |
2 |
Total 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 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. |
3 |
Expense ratios do not include expenses of the Underlying Funds in which the Fund invests. |
37
Financial highlights
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.”
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.
38
Broker-defined sales charge waiver policies
From time to time, shareholders purchasing fund shares through a brokerage platform or account may be eligible for sales charge waivers (front-end sales load or CDSC) and discounts, which may differ from those disclosed elsewhere in this Prospectus or the SAI. In all instances, it is the purchaser's responsibility to notify the Fund or the purchaser's financial intermediary at the time of purchase of any relationship or other facts qualifying the purchaser for sales charge waivers or discounts. For waivers and discounts not available through a particular intermediary, shareholders will have to purchase the Fund's shares directly from the Fund or through another intermediary to receive such waivers or discounts. Please see the section entitled About Your Account — Choosing a Share Class for more information on sales charges and waivers available for different classes.
CDSC waivers on Class C shares
Merrill Lynch:
Shareholders purchasing Fund shares through a Merrill Lynch platform or account will be eligible only for the following sales charge waivers (front-end sales charge waivers and CDSC waivers) and discounts, which may differ from those disclosed elsewhere in this Prospectus or the SAI.
Front-end sales charge waivers for Class A shares available at Merrill Lynch
CDSC waivers on Class A and C shares available at Merrill Lynch
39
Front-end sales charge discounts available at Merrill Lynch: Breakpoints, rights of accumulation, and letters of intent
Morgan Stanley Wealth Management:
Shareholders purchasing Fund shares through a Morgan Stanley Wealth Management transactional brokerage account will be eligible only for the following front-end sales charge waivers with respect to Class A shares, which may differ from and may be more limited than those disclosed elsewhere in this Prospectus or the SAI.
Front-end Sales Charge Waivers on Class A Shares available at Morgan Stanley Wealth Management
Ameriprise Financial:
Class A Shares Front-End Sales Charge Waivers Available at Ameriprise Financial:
The following information applies to Class A shares purchases if you have an account with or otherwise purchase Fund shares through Ameriprise Financial:
Shareholders purchasing Fund shares through an Ameriprise Financial retail brokerage account are eligible for the following front-end sales charge waivers, which may differ from those disclosed elsewhere in this Prospectus or the SAI:
Raymond James & Associates, Inc., Raymond James Financial Services & Raymond James Affiliates (“Raymond James”):
Shareholders purchasing Fund shares through a Raymond James platform or account will be eligible only for the following load waivers (front-end sales charge waivers and CDSC waivers) and discounts, which may differ from those disclosed elsewhere in this Prospectus or the SAI.
40
Front-end sales load waivers on Class A shares available at Raymond James
CDSC waivers on Class A and C shares available at Raymond James
Front-end load discounts available at Raymond James: Breakpoints, and/or rights of accumulation
Edward D. Jones & Co., L.P. (“Edward Jones”):
Policies Regarding Transactions Through Edward Jones
The following information has been provided by Edward Jones:
The following information supersedes prior information with respect to transactions and positions held in fund shares through an Edward Jones system. Shareholders purchasing fund shares on the Edward Jones commission and fee-based platforms are eligible only for the following sales charge discounts (also referred to as “breakpoints”) and waivers, which can differ from discounts and waivers described elsewhere in this Prospectus or the SAI or through another broker-dealer. In all instances, it is the shareholder's responsibility to inform Edward Jones at the time of purchase of any relationship, holdings of the Delaware Funds, or other facts qualifying the purchaser for discounts or waivers. Edward Jones can ask for documentation of such circumstance. Shareholders should contact Edward Jones if they have questions regarding their eligibility for these discounts and waivers.
Breakpoints
Rights of Accumulation (“ROA”)
Letter of Intent (“LOI”)
41
Jones of such assets at the time of calculation. Purchases made before the LOI is received by Edward Jones are not adjusted under the LOI and will not reduce the sales charge previously paid. Sales charges will be adjusted if LOI is not met.
Sales Charge Waivers:
Sales charges are waived for the following shareholders and in the following situations:
Contingent Deferred Sales Charge (“CDSC”) Waivers:
If the shareholder purchases shares that are subject to a CDSC and those shares are redeemed before the CDSC is expired, the shareholder is responsible to pay the CDSC except in the following conditions:
Other Important Information Regarding Transactions Through Edward Jones
Minimum Purchase Amounts
Minimum Balances
Edward Jones has the right to redeem at its discretion fund holdings with a balance of $250 or less. The following are examples of accounts that are not included in this policy:
Exchanging Share Classes
Janney Montgomery Scott, LLC (“Janney”):
If you purchase fund shares through a Janney brokerage account, you will be eligible for the following load waivers (front-end sales charge waivers and contingent deferred sales charge (“CDSC”), or back-end sales charge, waivers) and discounts, which may differ from those disclosed elsewhere in this Prospectus or the SAI.
42
Front-end sales charge* waivers on Class A shares available at Janney
CDSC waivers on Class A and C shares available at Janney
Front-end sales charge* discounts available at Janney: breakpoints, rights of accumulation, and/or letters of intent
*Also referred to as an “initial sales charge.”
Oppenheimer & Co. Inc. (“OPCO”)
Shareholders purchasing Fund shares through an OPCO platform or account are eligible only for the following load waivers (front-end sales charge waivers and contingent deferred, or back-end, sales charge waivers) and discounts, which may differ from those disclosed elsewhere in this Prospectus or the SAI.
Front-end Sales Load Waivers on Class A Shares available at OPCO
43
CDSC Waivers on A, B and C Shares available at OPCO
Front-end load Discounts Available at OPCO: Breakpoints, Rights of Accumulation & Letters of Intent
Robert W. Baird & Co. Incorporated (“Baird”):
Shareholders purchasing fund shares through a Baird platform or account will only be eligible for the following sales charge waivers (front-end sales charge waivers and CDSC waivers) and discounts, which may differ from those disclosed elsewhere in this Prospectus or the SAI.
Front-End Sales Charge Waivers on Class A Shares Available at Baird
CDSC Waivers on Class A and C Shares Available at Baird
Front-End Sales Charge Discounts Available at Baird: Breakpoints and/or Rights of Accumulations
44
Additional information
Contact information
45
Additional information about the Fund's investments is available in its annual and semiannual shareholder reports. In the Fund's annual shareholder report, you will find a discussion of the market conditions and investment strategies that significantly affected the Fund's performance during the period covered by the report. You can find more information about the Fund in its current SAI, which is filed electronically with the SEC, and which is legally a part of this Prospectus (it is incorporated by reference). To receive a free copy of the SAI, or the annual or semiannual report, or if you have any questions about investing in the Fund, write to us at P.O. Box 9876, Providence, RI 02940-8076 by regular mail or 4400 Computer Drive, Westborough, MA 01581-1722 by overnight courier service, or call toll-free 800 523-1918. The SAI and shareholder reports are available, free of charge, through the Fund's website at delawarefunds.com/literature. You may also obtain additional information about the Fund from your financial advisor.
You can find reports and other information about the Fund on the EDGAR database on the SEC website at sec.gov. You may obtain copies of this information, after paying a duplication fee, by emailing the SEC at publicinfo@sec.gov.
Investment Company Act number: 811-04304
PR-227 11/22
Delaware Strategic Income Fund
Fixed income mutual fund
Nasdaq ticker symbols | |
Class A | |
Class C | |
Class R | |
Institutional Class |
The US Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this Prospectus.
Any representation to the contrary is a criminal offense.
Get shareholder reports and prospectuses online instead of in the mail.
Visit delawarefunds.com/edelivery.
Table of contents
Fund summary | 1 |
Delaware Strategic Income Fund | 1 |
How we manage the Fund | 6 |
Our principal investment strategies | 6 |
The securities in which the Fund typically invests | 7 |
Other investment strategies | 10 |
The risks of investing in the Fund | 11 |
Disclosure of portfolio holdings information | 17 |
Who manages the Fund | 18 |
Investment manager | 18 |
Sub-advisors | 18 |
Portfolio managers | 18 |
Manager of managers structure | 19 |
Who’s who | 19 |
About your account | 21 |
Investing in the Fund | 21 |
Choosing a share class | 21 |
Dealer compensation | 23 |
Payments to intermediaries | 24 |
How to reduce your sales charge | 24 |
Buying Class A shares at net asset value | 25 |
Waivers of contingent deferred sales charges | 26 |
How to buy shares | 28 |
Calculating share price | 28 |
Fair valuation | 29 |
Retirement plans | 29 |
Document delivery | 29 |
Inactive accounts | 29 |
How to redeem shares | 29 |
Low balance accounts | 31 |
Investor services | 31 |
Frequent trading of Fund shares (market timing and disruptive trading) | 32 |
Dividends, distributions, and taxes | 34 |
Certain management considerations | 36 |
Financial highlights | 37 |
Additional information | 49 |
Fund summary
Delaware Strategic Income Fund, a series of Delaware Group® Government Fund
Delaware Strategic Income Fund seeks high current income and, secondarily, long-term total return.
The table below describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the tables and examples below.
Class | A | C | R | Inst. |
Maximum sales charge (load) imposed on purchases as a percentage of offering price | ||||
Maximum contingent deferred sales charge (load) as a percentage of original purchase price or redemption price, whichever is lower |
Class | A | C | R | Inst. | |
Management fees | |||||
Distribution and service (12b-1) fees | |||||
Other expenses | |||||
Total annual fund operating expenses | |||||
Fee waivers and expense reimbursements | ( | ( | ( | ( | |
Total annual fund operating expenses after fee waivers and expense reimbursements | |||||
1 | |||||
2 |
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. In addition, the example shows expenses for Class C shares, assuming those shares were not redeemed 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:
Class | A | (if not | C | R | Inst. |
1 year | $ | $ | $ | $ | $ |
3 years | $ | $ | $ | $ | $ |
5 years | $ | $ | $ | $ | $ |
10 years | $ | $ | $ | $ | $ |
1
Fund summary
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 the 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
In addition, the Manager may seek investment advice and recommendations from its affiliates: Macquarie Investment Management Austria Kapitalanlage AG (MIMAK), Macquarie Investment Management Europe Limited (MIMEL), and Macquarie Investment Management Global Limited (MIMGL) (together, the “Affiliated Sub-Advisors”). The Manager may also permit these Affiliated Sub-Advisors to execute Fund security trades on behalf of the Manager and exercise investment discretion for securities in certain markets where the Manager believes it will be beneficial to utilize an Affiliated Sub-Advisor's specialized market knowledge.
The Fund may invest up to 100% of its net assets in high yield, lower-quality debt securities (also known as “junk bonds”).
The Fund may invest up to 100% of its net assets in foreign securities, including emerging markets securities. The Fund’s total non-US dollar currency exposure may reach 100% of net assets. Due to the manner in which the Fund is managed, it may be subject to a high rate of portfolio turnover.
The Fund may hold a substantial portion of its assets in cash or short-term fixed income obligations in unusual market conditions to meet redemption requests, for temporary defensive purposes, and pending investment. The Fund may also use a wide range of derivatives instruments, typically including forward foreign currency contracts, options, futures contracts, options on futures contracts, and swaps. The Fund may use derivatives for both hedging and nonhedging purposes. For example, the Fund may invest in: futures and options to manage duration and for defensive purposes, such as to protect gains or hedge against potential losses in the portfolio without actually selling a security, or to stay fully invested; forward foreign currency contracts to manage foreign currency exposure; interest rate swaps to neutralize the impact of interest rate changes; credit default swaps to hedge against a credit event, to gain exposure to certain securities or markets, or to enhance total return; and index swaps to enhance return or to affect diversification.
The 80% policy is nonfundamental and may be changed without shareholder approval. Fund shareholders would be given at least 60 days notice prior to any such change.
Market risk — The risk that all or a majority of the securities in a certain market — such as the stock or bond market — will decline in value because of factors such as adverse political or economic conditions, future expectations, investor confidence, or heavy institutional selling.
Interest rate risk — The risk that the prices of bonds and other fixed income securities will increase as interest rates fall and decrease as interest rates rise. Interest rate changes are influenced by a number of factors, such as government policy, monetary policy, inflation expectations, and the supply and demand of bonds. Bonds and other fixed income securities with longer maturities or duration generally are more sensitive to interest rate changes. A fund may be subject to a greater risk of rising interest rates when interest rates are low or inflation rates are high or rising.
High yield (junk bond) risk — The risk that high yield securities, commonly known as “junk bonds,” are subject to reduced creditworthiness of issuers, increased risk of default, and a more limited and less liquid secondary market. High yield securities may also be subject to greater price volatility and risk of loss of income and principal than are higher-rated securities. High yield bonds are sometimes issued by municipalities that have less financial strength and therefore have less ability to make projected debt payments on the bonds.
IBOR risk — The risk that changes related to the use of the London Interbank Offered Rate (LIBOR) or similar interbank offered rates (“IBORs,” such as the Euro Overnight Index Average (EONIA)) could have adverse impacts on financial instruments that reference LIBOR or a similar rate. While some instruments may contemplate a scenario where LIBOR or a similar rate is no longer available by providing for an alternative rate setting methodology, not
2
all instruments have such fallback provisions and the effectiveness of replacement rates is uncertain. The abandonment of LIBOR and similar rates could affect the value and liquidity of instruments that reference such rates, especially those that do not have fallback provisions. The use of alternative reference rate products may impact investment strategy performance.
Liquidity risk — The possibility that investments cannot be readily sold within seven calendar days at approximately the price at which a fund has valued them.
Credit risk — The risk that an issuer of a debt security, including a governmental issuer or an entity that insures a bond, may be unable to make interest payments and/or repay principal in a timely manner.
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 and the lending institution. A fund’s ability to sell its loans or to realize their full value upon sale may also be impaired due to the lack of an active trading market, irregular trading activity, wide bid/ask spreads, contractual restrictions, and extended trade settlement periods. In addition, certain loans in which a fund invests may not be considered securities. A fund therefore may not be able to rely upon the anti-fraud provisions of the federal securities laws with respect to these investments.
Adjustable rate securities risk — During periods of rising interest rates, because changes in interest rates on adjustable rate securities may lag behind changes in market rates, the value of such securities may decline until their interest rates reset to market rates. During periods of declining interest rates, because the interest rates on adjustable rate securities generally reset downward, their market value is unlikely to rise to the same extent as the value of comparable fixed rate securities.
Foreign and emerging markets risk — The risk that international investing (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; the imposition of economic or trade sanctions; or inadequate or different regulatory and accounting standards. The risk 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, there often is substantially less publicly available information about issuers and such information tends to be of a lesser quality. Economic markets and structures tend to be less mature and diverse and the securities markets may also be smaller, less liquid, and subject to greater price volatility.
Currency risk — The risk that fluctuations in exchange rates between the US dollar and foreign currencies and between various foreign currencies may cause the value of an investment to decline.
Derivatives risk — Derivatives contracts, such as futures, forward foreign currency contracts, options, and swaps, may involve additional expenses (such as the payment of premiums) and are subject to significant loss if a security, index, reference rate, or other asset or market factor to which a derivatives contract is associated, moves in the opposite direction from what the portfolio manager anticipated. When used for hedging, the change in value of the derivatives instrument may also not correlate specifically with the currency, rate, or other risk being hedged, in which case a fund may not realize the intended benefits. Derivatives contracts are also subject to the risk that the counterparty may fail to perform its obligations under the contract due to, among other reasons, financial difficulties (such as a bankruptcy or reorganization).
Leveraging risk — The risk that certain fund transactions, such as reverse repurchase agreements, short sales, loans of portfolio securities, and the use of when-issued, delayed delivery or forward commitment transactions, or derivatives instruments, may give rise to leverage, causing a fund to be more volatile than if it had not been leveraged, which may result in increased losses to the fund.
Mortgage-backed and asset-backed securities risk — The risk that the principal on mortgage-backed or asset-backed securities may be prepaid at any time, which will reduce the yield and market value.
Prepayment risk — The risk that the principal on a bond that is held by a fund will be prepaid prior to maturity at a time when interest rates are lower than what that bond was paying. A fund may then have to reinvest that money at a lower interest rate.
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.
Portfolio turnover risk — High portfolio turnover rates may increase a fund’s transaction costs and lower returns.
US government securities risk — he risk that certain US government securities, such as securities issued by Fannie Mae, Freddie Mac and the FHLB, are not backed by the “full faith and credit” of the US government and, instead, may be supported only by the credit of the issuer or by the right of the issuer to borrow from the US Treasury.
Government and regulatory risk — The risk that governments or regulatory authorities may take actions that could adversely affect various sectors of the securities markets and affect fund performance.
Active management and selection risk — The risk that the securities selected by a fund’s management will underperform the markets, the relevant indices, or the securities selected by other funds with similar investment objectives and investment strategies. The securities and sectors selected may vary from the securities and sectors included in the relevant index.
3
Fund summary
None of the entities noted in this document is an authorized deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia) and the obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (Macquarie Bank). Macquarie Bank does not guarantee or otherwise provide assurance in respect of the obligations of these entities. In addition, if this document relates to an investment (a) each investor is subject to investment risk including possible delays in repayment and loss of income and principal invested and (b) none of Macquarie Bank or any other Macquarie Group company guarantees any particular rate of return on or the performance of the investment, nor do they guarantee repayment of capital in respect of the investment.
On January 31, 2017, the Fund was repositioned as an income-oriented fund. The returns prior to January 31, 2017 do not reflect this change and accordingly, the performance shown in the bar chart and average annual total return table prior to that date may not be indicative of future returns.
Year | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 |
Year Total Return | - | - | - |
As of
1 year | 5 years | 10 years | |
Class A return before taxes | - | ||
Class A return after taxes on distributions | - | ||
Class A return after taxes on distributions and sale of Fund shares | - | ||
Class C return before taxes | - | ||
Class R return before taxes | |||
Institutional Class return before taxes | |||
Bloomberg US Aggregate Index | - |
4
Who manages the Fund?
Investment manager
Delaware Management Company, a series of Macquarie Investment Management Business Trust (a Delaware statutory trust)
Portfolio managers | Title with Delaware Management Company | Start date on the Fund |
J. David Hillmeyer, CFA | Senior Managing Director, Co-Head of US Multisector Fixed Income | November 2011 |
Daniela Mardarovici, CFA | Managing Director, Co-Head of US Multisector Fixed Income | March 2019 |
Sub-advisors
Macquarie Investment Management Austria Kapitalanlage AG
Macquarie Investment Management Europe Limited
Macquarie Investment Management Global Limited
Purchase and redemption of Fund shares
You may purchase or redeem shares of the Fund on any day that the New York Stock Exchange (NYSE) is open for business (Business Day). Shares may be purchased or redeemed: through your financial intermediary; through the Fund’s website at delawarefunds.com/account-access; by calling 800 523-1918; by regular mail (c/o Delaware Funds by Macquarie®, P.O. Box 9876, Providence, RI 02940-8076); by overnight courier service (c/o Delaware Funds by Macquarie Service Center, 4400 Computer Drive, Westborough, MA 01581-1722); or by wire.
For Class A and Class C shares, the minimum initial investment is generally $1,000 and subsequent investments can be made for as little as $100. The minimum initial investment for IRAs, Uniform Gifts/Transfers to Minors Act accounts, direct deposit purchase plans, and automatic investment plans is $250 and through Coverdell Education Savings Accounts is $500, and subsequent investments in these accounts can be made for as little as $25. For Class R and Institutional Class shares (except those shares purchased through an automatic investment plan), there is no minimum initial purchase requirement, but certain eligibility requirements must be met. The eligibility requirements are described in this Prospectus under “Choosing a share class” and on the Fund’s website. We may reduce or waive the minimums or eligibility requirements in certain cases.
Tax information
The Fund’s distributions primarily are taxable to you as ordinary income, unless you are investing through a tax-advantaged arrangement, such as a 401(k) plan or an IRA, in which case your distributions may be taxed when withdrawn from the tax-advantaged account.
Payments to broker/dealers and other financial intermediaries
If you purchase shares of the Fund through a broker/dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker/dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
5
How we manage the Fund
The Manager takes a disciplined approach to investing, combining investment strategies and risk-management techniques that it believes can help shareholders meet their goals.
Our principal investment strategies
The Manager analyzes economic and market conditions, seeking to identify the securities or market sectors that it thinks are the best investments for the Fund. Following are descriptions of how the portfolio managers pursue the Fund's investment objectives.
To meet its investment objectives, the Fund invests in domestic (US) investment grade debt securities, high yield, and international fixed income securities, including those of issuers in emerging markets. Under normal circumstances, the Fund will invest at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in US and foreign debt securities, including those in emerging markets. The Manager will determine how much of the Fund's assets to allocate to each of the various sectors based on its evaluation of economic and market conditions and its assessment of the yields and potential for appreciation that can be achieved from investments in each of the sectors. The Manager will periodically reallocate the Fund's assets, as deemed appropriate. The relative proportion of the Fund's assets to be allocated among the sectors is described below. The Fund may invest up to 100% of its assets in any one sector at any time.
In addition, the Manager may seek investment advice and recommendations from its Affiliated Sub-Advisors. The Manager may also permit these Affiliated Sub-Advisors to execute Fund security trades on behalf of the Manager and exercise investment discretion for securities in certain markets where the Manager believes it will be beneficial to utilize an Affiliated Sub-Advisor's specialized market knowledge.
The Funds investment objective and 80% policy are nonfundamental. This means that the Funds Board may change the objective without obtaining shareholder approval. If the objective or the 80% policy were changed, the Fund would notify shareholders at least 60 days before the change became effective.
6
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 SAI for additional information about certain of the securities described below as well as other securities in which the Fund may invest.
High yield corporate bonds (junk bonds) |
High yield corporate bonds are debt obligations issued by a corporation and rated below investment grade (lower than BBB- by S&P and lower than Baa3 by Moody's or similarly rated by another NRSRO). High yield bonds, also known as “junk bonds,” are issued by corporations that have lower credit quality and may have difficulty repaying principal and interest.
How the Fund uses them: The Manager carefully evaluates an individual company's financial situation, its management, the prospects for its industry and the technical factors related to its bond offering. The Manager's goal is to identify those companies that it believes will be able to repay their debt obligations in spite of poor ratings. The Fund invests in unrated bonds if the Manager believes their credit quality is comparable to the rated bonds the Fund is permitted to invest in. Unrated bonds may be more speculative in nature than rated bonds.
US government securities |
US government securities are direct US obligations that include bills, notes, and bonds, as well as other debt securities, issued by the US Treasury, and securities of US government agencies or instrumentalities. US Treasury securities are backed by the “full faith and credit” of the United States. Securities issued or guaranteed by federal agencies and US government-sponsored instrumentalities may or may not be backed by the “full faith and credit” of the US. In the case of securities not backed by the “full faith and credit” of the US, investors in such securities look principally to the agency or instrumentality issuing or guaranteeing the obligation for ultimate repayment.
How the Fund uses them: The Fund may invest in US government securities as part of its principal investment strategies and for temporary purposes.
Mortgage-backed securities (MBS) |
MBS 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 US government or its agencies or instrumentalities, such as Freddie Mac, Fannie Mae, and Ginnie Mae. Others are issued by private financial institutions, with some fully collateralized by certificates issued or guaranteed by the US government or its agencies or instrumentalities.
How the Fund uses them: The Fund may invest in MBS issued or guaranteed by the US government, its agencies or instrumentalities, or by government-sponsored corporations. The Fund may also invest in mortgage-backed securities issued by certain private, nongovernment entities.
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 US government agencies and private issuers. REMICs are privately issued mortgage-backed bonds whose underlying value is a fixed pool of mortgages secured by an interest in real property. Like CMOs, REMICs offer different pools according to the underlying mortgages' maturities.
How the Fund uses them: The Fund may invest in CMOs and REMICs. Certain CMOs and REMICs may have variable or floating interest rates and others may be stripped. Stripped mortgage securities are generally considered illiquid and to such extent, together with any other illiquid investments, will not exceed the Fund's limit on illiquid investments. In addition, subject to certain quality and collateral limitations, the Fund may invest up to 20% of its net assets in CMOs and REMICs issued by private entities which are not collateralized by securities issued or guaranteed by the US government, its agencies or instrumentalities, so called nonagency mortgage-backed securities.
Asset-backed securities (ABS) |
ABS are bonds or notes backed by accounts receivable, including home equity, automobile, or credit loans.
How the Fund uses them: The fixed income securities in which the Fund may invest include ABS.
Corporate notes and bonds |
Corporate notes and bonds are debt obligations issued by a corporation.
How the Fund uses them: The Fund may invest in investment grade corporate notes and bonds (rated BBB- or higher by S&P and above Baa3 or higher by Moody's or similarly rated by another NRSRO). The Fund may also invest in bonds rated lower than BBB- by S&P and Baa3 or lower by Moody's or similarly rated by another NRSRO.
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How we manage the Fund
Certificates of deposit and obligations of US and foreign banks |
Certificates of deposit and obligations of both US and foreign banks are debt instruments issued by banks that pay interest.
How the Fund uses them: The Fund may invest in certificates of deposit and obligations from banks that have assets of at least $1 billion.
Investments in foreign banks and overseas branches of US banks may be subject to less stringent regulations and different risks than US domestic banks.
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 uses repurchase agreements as short-term investments for its 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 composed of US government securities. At the Manager's discretion, the Fund may invest overnight cash balances in short-term discount notes issued or guaranteed by the US government, its agencies or instrumentalities, or government-sponsored corporations.
Futures and options |
Futures contracts are agreements for the purchase or sale of a security or a group of securities at a specified price, on a specified date. Unlike purchasing an option, a futures contract must be executed unless it is sold before the settlement date.
Options represent a right to buy or sell a swap agreement, a futures contract, or a security or a group of securities at an agreed-upon price at a future date. The purchaser of an option may or may not choose to go through with the transaction. The seller of an option, however, must go through with the transaction if the purchaser exercises the option.
Certain options and futures may be considered illiquid.
How the Fund uses them: The Manager may use options to seek to neutralize the effect of any price declines, without selling a security or swap agreement, or as a hedge against changes in interest rates. The Manager may also sell an options contact (often referred to as “writing” an option) to earn additional income for the Funds. The Fund may purchase and write call and put options and may engage in option strategies for hedging and/or speculative purposes.
The Fund may invest in futures, options on futures, and closing transactions thereto. These activities will be entered into for hedging purposes and to facilitate the ability to quickly deploy into the market its cash, short-term debt securities, and other money market instruments at times when its assets are not fully invested. The Fund may only enter into futures transactions for hedging purposes if they are consistent with its respective investment objective and policies. In addition, it may enter into futures contracts, purchase or sell options on futures contracts, and trade in options on futures related to foreign currencies, and may enter into closing transactions with respect to such activities to hedge or “cross hedge” the currency risks associated with its investments. Generally, futures contracts on foreign currencies operate similarly to futures contracts concerning securities, and options on futures related to foreign currencies operate similar to options on securities.
Use of these strategies can increase the operating costs of the Fund and can lead to loss of principal.
Restricted securities |
Restricted securities are privately placed securities whose resale is restricted under US 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 investments.
Foreign government securities |
Foreign government securities are debts issued by a government 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.
Interest rate swap, index swap, and credit default swap agreements |
In an interest rate swap, a fund receives payments from another party based on a variable or floating interest rate, in return for making payments based on a fixed interest rate. An interest rate swap can also work in reverse with a fund receiving payments based on a fixed interest rate and making payments based on a variable or floating interest rate.
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In an index swap, a fund receives gains or incurs losses based on the total return of a specified index, in exchange for making interest payments to another party. An index swap can also work in reverse with a fund receiving interest payments from another party in exchange for movements in the total return of a specified index.
In a credit default swap, a fund may transfer the financial risk of a credit event occurring (a bond default, bankruptcy, or restructuring, for example) on a particular security or basket of securities to another party by paying that party a periodic premium; likewise, a fund may assume the financial risk of a credit event occurring on a particular security or basket of securities in exchange for receiving premium payments from another party.
Interest rate swaps, index swaps, and credit default swaps may be considered illiquid.
How the Fund uses them: The Fund may use interest rate swaps to adjust its sensitivity to interest rates or to hedge against changes in interest rates. Index swaps may be used to gain exposure to markets that the Fund invests in, such as the corporate bond market. The Fund may also use index swaps as a substitute for futures or options contracts if such contracts are not directly available to the Fund on favorable terms. The Fund may enter into credit default swaps in order to hedge against a credit event, to enhance total return, or to gain exposure to certain securities or markets.
At times when the Manager anticipates adverse conditions, the Manager may want to protect gains on securities without actually selling them. The Manager might use swaps to neutralize the effect of any price declines without selling a bond or bonds. Use of these strategies can increase the operating costs of the Fund and can lead to loss of principal.
Illiquid investments |
Illiquid investments are any investment that a fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment.
How the Fund uses them: The Fund may invest up to 15% of its net assets in illiquid investments.
Zero coupon and payment-in-kind (PIK) bonds |
Zero coupon bonds are debt obligations that do not entitle the holder to any periodic payments of interest prior to maturity or a specified date when the securities begin paying current interest, and therefore are issued and traded at a discount from their face amounts or par values. 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.
Forward foreign currency contracts |
A fund may invest in securities of foreign issuers and may hold foreign currency. In addition, a fund may enter into contracts to purchase or sell foreign currencies at a future date (a “forward foreign currency” contract or “forward” contract). A forward contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract, agreed upon by the parties, at a price set at the time of the contract.
How the Fund uses them: Although the Manager values the Fund's assets daily in terms of US dollars, it does not intend to convert the Fund's holdings of foreign currencies into US dollars on a daily basis. The Fund is permitted to, however, from time to time, purchase or sell foreign currencies and/or engage in forward foreign currency contracts in order to facilitate or expedite settlement of Fund transactions and to minimize currency value fluctuations.
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How we manage the Fund
Short-term debt investments |
These instruments include: (1) time deposits, certificates of deposit, and banker's acceptances issued by US banks; (2) time deposits and certificates of deposit issued by foreign banks; (3) commercial paper with the highest quality rating; (4) short-term debt obligations with the highest quality rating; (5) US 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 investments in the Fund's principal investment securities. The Fund may invest in commercial paper that is rated P-1 by Moody's and/or A-1 by S&P. The Fund may invest in certificates of deposit and obligations from banks that have assets of at least $1 billion. Time deposits maturing in more than seven calendar days will not be purchased by the Fund, and time deposits maturing from two Business Days through seven calendar days will not exceed 15% of the total assets of the Fund. When investing all or a significant portion of its assets in these instruments, it may not be able to achieve its investment objective.
Foreign securities |
Foreign securities are securities of issuers which are classified by index providers, or by the investment manager applying internally consistent guidelines, as being assigned to countries outside the United States. Investments in foreign securities include investments in American depositary receipts (ADRs), European depositary receipts (EDRs), and global depositary receipts (GDRs). ADRs are receipts issued by a depositary (usually a US bank) and EDRs and GDRs are receipts issued by a depositary outside of the US (usually a non-US bank or trust company or a foreign branch of a US 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 US 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 ADRs in which the Fund may invest will be those that are actively traded in the US.
In conjunction with its investments in foreign securities, the Fund may also invest in sponsored and unsponsored EDRs and GDRs.
Bank loans and other indebtedness |
A bank loan represents an interest in a loan or other direct indebtedness, such as an assignment, that entitles the acquiror of such interest to payments of interest, principal, and/or other amounts due under the structure of the loan or other direct indebtedness. In addition to being structured as secured or unsecured loans, such investments could be structured as novations or assignments or represent trade or other claims owed by a company to a supplier.
How the Fund uses them: The Fund may invest without restriction in bank loans that meet the credit standards established by the Manager. The Manager performs its own independent credit analysis on each borrower and on the collateral securing each loan. The Manager considers the nature of the industry in which the borrower operates, the nature of the borrower's assets, and the general quality and creditworthiness of the borrower. The Fund may invest in bank loans in order to enhance total return, to affect diversification, or to earn additional income. It will not use bank loans for reasons inconsistent with its investment objective.
Other investment strategies
Borrowing from banks |
The Fund may borrow money from banks as a temporary measure for extraordinary or emergency purposes or to facilitate redemptions. The Fund will be required to pay interest to the lending banks on the amount borrowed. As a result, borrowing money could result in the Fund being unable to meet its investment objective. The Fund will not borrow money in excess of one-third of the value of its total assets.
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.
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The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may receive little or no return on your investment, and the risk that you may lose part or all of the money you invest. Before you invest in the Fund, you should carefully evaluate the risks. Because of the nature of the Fund, you should consider your investment to be a long-term investment that typically provides the best results when held for a number of years. The information below describes the principal risks you assume when investing in the Fund. Please see the SAI for a further discussion of these risks and other risks not discussed here.
Interest rate risk |
Interest rate risk is the risk that the prices of bonds and other fixed income securities will increase as interest rates fall and decrease as interest rates rise. Interest rate changes are influenced by a number of factors, such as government policy, monetary policy, inflation expectations, and the supply and demand of bonds. Bonds and other fixed income securities with longer maturities or duration generally are more sensitive to interest rate changes. A fund may be subject to a greater risk of rising interest rates when interest rates are low or inflation rates are high or rising.
Swaps may be particularly sensitive to interest rate changes. Depending on the actual movements of interest rates and how well the portfolio manager anticipates them, a fund could experience a higher or lower return than anticipated. For example, if a fund holds interest rate swaps and is required to make payments based on variable interest rates, it will have to make interest payments if interest rates rise, which will not necessarily be offset by the fixed-rate payments it is entitled to receive under the swap agreement.
How the Fund strives to manage it: The Manager limits 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. The Manager cannot eliminate this risk, but tries to address it by monitoring economic conditions, especially interest rate trends and their potential impact on the Fund. The Manager does 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.
High yield corporate (junk) bond risk |
High yield corporate bonds (commonly known as “junk” bonds), while generally having higher yields, are subject to reduced creditworthiness of issuers, increased risks of default, and a more limited and less liquid secondary market than higher rated securities. These securities are subject to greater price volatility and risk of loss of income and principal than are higher rated securities because they are rated below investment grade. Lower rated and unrated fixed income securities tend to reflect short-term corporate and market developments to a greater extent than higher rated fixed income securities, which react primarily to fluctuations in the general level of interest rates. Fixed income securities of this type are considered to be of poor standing and primarily speculative. Such securities are subject to a substantial degree of credit risk.
How the Fund strives to manage it: The Manager attempts to reduce the risk associated with investment in high yield debt securities through portfolio diversification, credit analysis, and attention to trends in the economy, industries, and financial markets.
Market risk |
Market risk is the risk that all or a majority of the securities in a certain market — such as the stock or bond market — will decline in value because of factors such as adverse political or economic conditions, future expectations, investor confidence, or heavy institutional selling.
Index swaps are subject to the same market risks as the investment market or sector that the index represents. Depending on the actual movements of the index and how well the portfolio manager forecasts those movements, a fund could experience a higher or lower return than anticipated.
How the Fund strives to manage it: The Manager maintains a long-term investment approach and focuses on securities that it believes can continue to provide returns over an extended time frame regardless of interim market fluctuations. Generally, the Manager does not try to predict overall market movements. The Fund does not buy and sell securities for short-term purposes.
In evaluating the use of an index swap for the Fund, the Manager carefully considers how market changes could affect the swap and how that compares to investing directly in the market the swap is intended to represent. When selecting counterparties with whom the Manager would make interest rate or index swap agreements for the Fund, the Manager does careful credit analysis on the counterparty before engaging in the transaction.
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How we manage the Fund
Credit risk |
Credit risk is the risk that an issuer of a debt security, including a governmental issuer or an entity that insures the bond, may be unable to make interest payments and/or repay principal in a timely manner. Changes in an issuer's financial strength or in a security's credit rating may affect a security's value, which would impact fund performance.
Investing in so-called “junk” or “high yield” bonds entails the risk of principal loss because they are rated below investment grade, which may be greater than the risk involved in investment grade bonds. High yield bonds are sometimes issued by companies whose earnings at the time the bond is issued are less than the projected debt payments on the bonds. A protracted economic downturn may severely disrupt the market for high yield bonds, adversely affect the value of outstanding bonds, and adversely affect the ability of high yield issuers to repay principal and interest. Investment by a fund in defaulted securities poses additional risk of loss should nonpayment of principal and interest continue in respect of such securities. Even if such securities are held to maturity, recovery by a fund of its initial investment and any anticipated income or appreciation may be uncertain. A fund also may incur additional expenses in seeking recovery on defaulted securities. Defaulted securities may be considered illiquid.
How the Fund strives to manage it: The Manager's careful, credit-oriented bond selection and its commitment to hold a diversified selection of high yield bonds are designed to manage this risk. It is likely that protracted periods of economic uncertainty would cause increased volatility in the market prices of high yield bonds, an increase in the number of high yield bond defaults and corresponding volatility in the Fund's NAV. The Fund's holdings of high-quality investment grade bonds are less subject to credit risk and may help to balance any credit problems experienced by individual high yield bond issuers or foreign issuers. When selecting dealers with whom the Manager would make swap agreements, the Manager focuses on those with high quality ratings and does careful credit analysis before investing.
IBOR risk |
The risk that changes related to the use of the London Interbank Offered Rate (LIBOR) or similar interbank offered rates (“IBORs,” such as the Euro Overnight Index Average (EONIA)) could have adverse impacts on financial instruments that reference such rates. While some instruments may contemplate a scenario where LIBOR or a similar rate is no longer available by providing for an alternative rate setting methodology, not all instruments have such fallback provisions and the effectiveness of replacement rates is uncertain. The abandonment of LIBOR and similar rates could affect the value and liquidity of instruments that reference such rates, especially those that do not have fallback provisions. The use of alternative reference rate products may impact investment strategy performance.
How the Fund strives to manage it: Due to uncertainty regarding the future use of LIBOR or similar rates (such as the EONIA), the impact of the abandonment of such rates on the Fund or the financial instruments in which the Fund invests cannot yet be determined. However, the Fund tries to address such risk by monitoring the economic, political and regulatory climate in jurisdictions relevant to the Fund and the financial instruments in which the Fund invests in order to minimize any potential impact on the Fund. In addition, the Fund typically invests in a number of different securities in a variety of sectors in order to minimize the impact to the Fund of any legislative or regulatory development affecting particular countries, issuers, or market sectors.
Liquidity risk |
Liquidity risk is the possibility that investments cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. Illiquid investments may trade at a discount from comparable, more liquid investments, and may be subject to wide fluctuations in market value. A fund also may not be able to dispose of illiquid investments at a favorable time or price during periods of infrequent trading of an illiquid investment.
There is generally no established retail secondary market for high yield securities. As a result, the secondary market for high yield securities is more limited and less liquid than other secondary securities markets. The high yield secondary market is particularly susceptible to liquidity problems when institutional investors, such as mutual funds, and certain other financial institutions, temporarily stop buying bonds for regulatory, financial, or other reasons.
Adverse publicity and investor perceptions may also disrupt the secondary market for high yield securities.
How the Fund strives to manage it: The Fund limits exposure to illiquid investments to no more than 15% of its net assets.
Loans and other indebtedness risk |
Loans and other indebtedness risk is the risk that a fund will not receive payment of principal, interest, and other amounts due in connection with these investments and will depend primarily on the financial condition of the borrower. Loans that are fully secured offer a fund more protection than unsecured loans in the event of nonpayment of scheduled interest or principal, although there is no assurance that the liquidation of collateral from a secured loan would satisfy the corporate borrower's obligation, or that the collateral can be liquidated. Some loans or claims may be in default at the time of purchase. Certain of the loans and the other indebtedness acquired by a fund may involve revolving credit facilities or other standby financing commitments that
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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).
As a fund may be required to rely upon another lending institution to collect and pass on to the fund amounts payable with respect to the loan and to enforce the fund's rights under the loan and other 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 indebtedness may make them especially vulnerable to adverse changes in economic or market conditions. Investments in such loans and other indebtedness may involve additional risk to the fund.
A fund's ability to sell its loans or to realize their full value upon sale may also be impaired due to the lack of an active trading market, irregular trading activity, wide bid/ask spreads, contractual restrictions, and extended trade settlement periods. Extended trade settlement periods may result in cash not being immediately available to a fund. As a result of these factors, a fund may have to sell other investments or engage in borrowing transactions to raise cash to meet its obligations.
Federal securities laws provide protections against fraud and misrepresentation in connection with the offering and sale of a “security.” Loans in which a fund may invest may not be deemed to be “securities” for purposes of such anti-fraud protections. A fund may therefore not have the protection of the anti-fraud provisions of the federal securities laws in the event of fraud or misrepresentation by a borrower. However, a fund in such a scenario may be able to rely on contractual provisions in the loan documents for alternative protections, or use common-law fraud protections under applicable state law.
How the Fund strives to manage it: This risk may not be completely eliminated, but the Manager will attempt to reduce this risk through portfolio diversification, credit analysis, and attention to trends in the economy, industries, and financial markets. Should the Manager determine that any of these securities are illiquid, they would be subject to the Fund's restriction on illiquid investments.
Adjustable rate securities risk |
The value of any collateral securing an adjustable rate security may decline, be insufficient to meet the obligations of the borrower, or be difficult or costly to liquidate. In the event of a default, it may be difficult to collect on any collateral, it would not be possible to collect on any collateral for an uncollateralized loan, and the value of an adjustable rate security can decline significantly. Access to collateral may also be limited by bankruptcy or other insolvency laws. If an adjustable rate security is acquired through an assignment, the acquirer may not be able to unilaterally enforce all rights and remedies under the loan and with regard to the associated collateral.
Although senior loans may be senior to equity and other debt securities in the borrower's capital structure, the loans may be subordinated to other obligations of the borrower or its subsidiaries. Difficulty in selling an adjustable rate loan can result in a loss. Loans trade in an over-the-counter market, and confirmation and settlement may take significantly longer than 7 days to complete. Extended trade settlement periods may present a risk regarding the Fund's ability to timely honor redemptions. Due to the lack of a regular trading market for loans, loans are subject to irregular trading activity and wide bid/ask spreads and may be difficult to value.
High yield adjustable rate loans, like high-yield debt securities, or junk bonds, usually are more credit sensitive, although the value of these instruments may be affected by interest rate swings in the overall fixed income market. Generally, there is less readily available, reliable public information about the loans. Therefore, the Fund may be required to rely on its own evaluation and judgment of a borrower's credit quality in addition to any available independent sources to value loans. Adjustable rate loans may not be considered “securities” for certain purposes of the federal securities laws and purchasers therefore may not be entitled to rely on the anti-fraud protections of the federal securities laws.
How the Fund strives to manage it: This risk may not be completely eliminated, but the Manager will attempt to reduce this risk through portfolio diversification, credit analysis, and attention to trends in the economy, industries, and financial markets. Should the Manager determine that any of these securities are illiquid, they would be subject to the Fund's restriction on illiquid investments.
Emerging markets risk |
Emerging markets risk is the possibility that the risks associated with international investing will be greater in emerging markets than in more developed foreign markets because, among other things, emerging markets may have less stable political and economic environments. In addition, in many emerging markets there is substantially less publicly available information about issuers and the information that is available tends to be of a lesser quality. Economic markets and structures tend to be less mature and diverse and the securities markets, which are subject to less government regulation or supervision, may also be smaller, less liquid, and subject to greater price volatility.
How the Fund strives to manage it: The Fund may invest a portion of its assets in securities of issuers located in emerging markets. The Fund cannot eliminate these risks but the Manager will attempt to reduce these risks through portfolio diversification, credit analysis, and attention to trends in the economy, industries and financial markets, and other relevant factors.
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How we manage the Fund
Foreign risk |
Foreign risk is 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 or government conditions, the imposition of economic and/or trade sanctions, inadequate or different regulatory and accounting standards, and the possibility that significant events in foreign markets, including broad market moves, may affect the value of fund shares.
As a result of the military action by Russia in Ukraine, the US and many other countries have imposed sanctions on Russia and certain Russian individuals, banks and corporations. The ongoing hostilities and resulting sanctions are expected to have a severe adverse effect on the region's economies and more globally, including significant negative impact on markets for certain securities and commodities, such as oil and natural gas. Any cessation of trading on the Russian securities markets will impact the value and liquidity of certain portfolio holdings. The extent and duration of military action, sanctions, and resulting market disruptions are impossible to predict, but could be substantial and prolonged and impact your Fund's performance.
How the Fund strives to manage it: The Manager attempts to reduce the risks presented by such investments by conducting world-wide 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. The Fund may frequently value many foreign equity securities using fair value prices based on third-party vendor modeling tools, to the extent available, to account for significant market events that may occur after the close of a foreign market but before the Fund's shares are priced.
Foreign government securities risk |
Foreign government securities risk relates to the ability of a foreign government or government-related issuer to make timely principal and interest payments on its external debt obligations. This ability to make payments will be strongly influenced by the issuer's balance of payments, including export performance, its access to international credits and investments, fluctuations in interest rates, and the extent of its foreign reserves.
How the Fund strives to manage it: The Manager attempts to reduce the risks associated with investing in foreign governments by limiting the portion of portfolio assets that may be invested in such securities.
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-US dollar denominated securities, it may invest in forward foreign currency contracts, and foreign currency options and futures transactions. These activities pose special risks that do not typically arise in connection with investments in US securities.
Derivatives risk |
Derivatives risk is the possibility that a fund may experience a significant loss if it employs a derivatives strategy (including a strategy involving equity-linked securities, futures, options, forward foreign currency contracts, or swaps such as interest rate swaps, index swaps, or credit default swaps) related to a security, index, reference rate, or other asset or market factor (collectively, a “reference instrument”) and that reference instrument moves in the opposite direction from what the portfolio manager had anticipated. If a market or markets, or prices of particular classes of investments, move in an unexpected manner, a fund may not achieve the anticipated benefits of the transaction and it may realize losses. Derivatives also involve additional expenses, which could reduce any benefit or increase any loss to a fund from using the strategy. In addition, changes in government regulation of derivatives could affect the character, timing, and amount of a fund's taxable income or gains. A fund's transactions in derivatives may be subject to one or more special tax rules. These rules may: (i) affect whether gains and losses recognized by a fund are treated as ordinary or capital or as short-term or long-term, (ii) accelerate the recognition of income or gains to the fund, (iii) defer losses to the fund, and (iv) cause adjustments in the holding periods of the fund's securities. A fund's use of derivatives may be limited by the requirements for taxation of the fund as a regulated investment company.
Investing in derivatives may subject a fund to counterparty risk. Please refer to “Counterparty risk” for more information. Other risks include illiquidity, mispricing or improper valuation of the derivatives contract, and imperfect correlation between the value of the derivatives instrument and the underlying reference instrument so that the fund may not realize the intended benefits. In addition, since there can be no assurance that a liquid secondary market will exist for any derivatives instrument purchased or sold, a fund may be required to hold a derivatives instrument to maturity and take or make delivery of an
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underlying reference instrument that the Manager would have otherwise attempted to avoid, which could result in losses. When used for hedging, the change in value of the derivatives instrument may also not correlate specifically with the currency, rate, or other risk being hedged, in which case a fund may not realize the intended benefits.
How the Fund strives to manage it: The Fund 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 effect diversification, or to earn additional income. It will not use derivatives for reasons inconsistent with its investment objective. The Manager also researches and continually monitors the creditworthiness of current or potential counterparties. The Fund will limit its investments in derivatives instruments such that the aggregate notional amount of these investments does not exceed 100% of the Fund's net assets and initial margin for these transactions is less than 5% of the Fund's net assets.
The Manager has claimed an exclusion from the definition of the term “commodity pool operator” with respect to the Fund under the Commodity Exchange Act (CEA) and, therefore, is not subject to registration or regulation as a commodity pool operator under the CEA.
Counterparty risk |
Counterparty risk is the risk that if a fund enters into a derivatives contract (such as a futures, options, or swap contract) or a repurchase agreement, the counterparty to such a contract or agreement may fail to perform its obligations under the contract or agreement due to, among other reasons, financial difficulties (such as a bankruptcy or reorganization). As a result, a fund may experience significant delays in obtaining any recovery, may obtain only a limited recovery, or may obtain no recovery at all.
How the Fund strives to manage it: The Manager seeks to minimize this risk by considering the creditworthiness of all counterparties before the Fund enters into transactions with them. The Fund will hold collateral from counterparties consistent with applicable regulations.
Mortgage-backed and asset-backed securities risk |
Mortgage-backed and asset-backed securities risk is the risk that the principal on mortgage-backed or asset-backed securities may be prepaid at any time, which will reduce the yield and market value. If interest rates fall, the rate of prepayments tends to increase as borrowers are motivated to pay off debt and refinance at new lower rates. Rising interest rates tend to extend the duration of mortgage-related securities, making them more sensitive to changes in interest rates. As a result, in a period of rising interest rates, a fund that holds mortgage-related securities may exhibit additional volatility.
How the Fund strives to manage it: The Fund may invest in mortgage-backed and asset-backed securities. The Manager will attempt to reduce this risk by investing in a broad range of fixed income securities.
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: The Fund may invest in MBS, CMOs and REMICs. The Manager takes into consideration the likelihood of prepayment when mortgages are selected. The Manager 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.
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How we manage the Fund
Leveraging risk |
Leveraging risk is the risk that certain fund transactions, such as reverse repurchase agreements, short sales, loans of portfolio securities, and the use of when-issued, delayed delivery or forward commitment transactions, or derivatives instruments, may give rise to leverage, causing a fund to be more volatile than if it had not been leveraged. While it is anticipated that leverage may increase profitability, it may also accentuate the consequences of adverse price movements, resulting in increased losses.
How the Fund strives to manage it: The Fund will, consistent with industry practice, designate and mark-to-market daily cash or other liquid assets having an aggregate market value at least equal to the exposure created by these transactions.
Zero coupon and payment-in-kind (PIK) bonds risk |
Zero coupon and PIK bonds involve certain risks. They are generally considered more interest sensitive than income-bearing bonds, more speculative than interest-bearing bonds, and have certain tax consequences that could, under certain circumstances, be adverse to a fund. For example, a fund accrues, and is required to distribute to shareholders, income on its zero coupon bonds. However, a fund may not receive the cash associated with this income until the bonds are sold or mature. If a fund does not have sufficient cash to make the required distribution of accrued income, the fund could be required to sell other securities in its portfolio or to borrow to generate the cash required.
How the Fund strives to manage the risk: The Fund may invest in zero coupon and PIK bonds to the extent consistent with its investment objective. The Fund cannot eliminate the risks of zero coupon bonds, but the Manager does try to address them by monitoring economic conditions, especially interest rate trends and their potential impact on the Fund.
Valuation risk |
A less liquid secondary market as described above can make it more difficult to obtain precise valuations of certain securities. During periods of reduced liquidity, judgment plays a greater role in valuing less liquid investments.
How the Fund strives to manage it: The Manager will strive to manage this risk by carefully evaluating individual bonds. In addition, to the extent that the Fund invests in foreign securities, it may frequently value them using fair value prices based on third-party vendor modeling tools, to the extent available, to account for significant market events that may occur after the close of a foreign market but before the Fund's shares are priced.
Government and regulatory risks |
Governments or regulatory authorities may take actions that could adversely affect various sectors of the securities markets and affect fund performance. Government involvement in the private sector may, in some cases, include government investment in, or ownership of, companies in certain commercial business sectors; wage and price controls; or imposition of trade barriers and other protectionist measures. For example, an economic or political crisis may lead to price controls, forced mergers of companies, expropriation, the creation of government monopolies, foreign exchange controls, the introduction of new currencies (and the redenomination of financial obligations into those currencies), or other measures that could be detrimental to the investments of a fund.
How the Fund strives to manage them: The Manager evaluates the economic and political climate in the relevant jurisdictions before selecting securities for the Fund. The Manager typically diversifies the Fund's assets among a number of different securities in a variety of sectors in order to minimize the impact to the Fund of any legislative or regulatory development affecting particular countries, issuers, or market sectors.
Portfolio turnover risk |
High portfolio turnover rates may increase a fund's transaction costs which may lower returns. Higher portfolio turnover rates could result in corresponding increases in brokerage commissions, may generate short-term capital gains taxable as ordinary income, and cause dividends received on portfolio securities to not be qualified dividends eligible for reduced federal income tax rates under the Internal Revenue Code.
How the Fund strives to manage it: The Fund will not attempt to achieve or be limited to a predetermined rate of portfolio turnover. Such turnover always will be incidental to transactions undertaken with a view to achieving the Fund's investment objective.
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US government securities risk |
Certain US government securities, such as US Treasury securities and securities issued by Ginnie Mae, are backed by the “full faith and credit” of the US government. Other securities that are issued or guaranteed by federal agencies or authorities or by US government-sponsored instrumentalities or enterprises may or may not be backed by the full faith and credit of the US government. For example, securities issued by Fannie Mae, Freddie Mac and the FHLB are not backed by the full faith and credit of the US government and, instead, may be supported only by the right of the issuer to borrow from the US Treasury or by the credit of the issuer. As a result, such securities are subject to greater credit risk than securities backed by the full faith and credit of the US government.
Natural disaster and epidemic risk |
Natural disaster and epidemic risk is the risk that the value of a fund's investments may be negatively affected by natural disasters, epidemics, or similar events. Natural or environmental disasters, such as earthquakes, fires, floods, hurricanes, tsunamis, and other severe weather-related phenomena generally, and widespread disease, including pandemics and epidemics, have been and can be highly disruptive to economies and markets, adversely impacting individual companies, sectors, industries, markets, currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of a fund's investments. Given the increasing interdependence among global economies and markets, conditions in one country, market, or region are increasingly likely to adversely affect markets, issuers, and/or foreign exchange rates in other countries. These disruptions could prevent a fund from executing advantageous investment decisions in a timely manner and could negatively impact the fund's ability to achieve its investment objective.
How the Fund strives to manage it: The Fund maintains a long-term investment approach. Generally, the portfolio managers do not try to predict overall market movements, but the portfolio managers do note trends in the economy, industries, and financial markets. Although the Fund may hold securities for any amount of time, it generally does not trade for short-term purposes.
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.
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Who manages the Fund
Investment manager
The Manager, located at 100 Independence, 610 Market Street, Philadelphia, PA 19106-2354, is the Fund's investment manager. Together, the Manager and the other subsidiaries of Macquarie Management Holdings, Inc. (MMHI) manage, as of September 30, 2022, approximately $192.2 billion in assets, including mutual funds, separate accounts, and other investment vehicles. The Manager and its predecessors have been managing Delaware Funds since 1938. The Manager is a series of Macquarie Investment Management Business Trust (a Delaware statutory trust), which is a subsidiary of MMHI. MMHI is a wholly owned subsidiary of Macquarie Group Limited. 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 (if applicable), of 0.21% of average daily net assets during the last fiscal year.
A discussion of the basis for the Board's approval of the Fund's investment advisory contract is available in the Fund's semiannual report to shareholders for the period ended January 31, 2022.
Sub-advisors
MIMAK, located at Kaerntner Strasse 28, 1010 Vienna, Austria, is an affiliate of the Manager and a part of Macquarie Asset Management (MAM). MAM is the marketing name for certain companies comprising the asset management division of Macquarie Group Limited. As of September 30, 2022, MAM managed more than $333.0 billion in assets for institutional and individual clients. Although the Manager has principal responsibility for the Manager's portion of the Fund, the Manager may seek investment advice and recommendations from MIMAK and the Manager may also permit MIMAK to execute Fund security trades on behalf of the Manager and exercise investment discretion for securities in certain markets where the Manager believes it will be beneficial to utilize MIMAK's specialized market knowledge.
MIMEL, located at 28 Ropemaker Street, London, England, is an affiliate of the Manager and a part of MAM. Although the Manager has principal responsibility for the Manager's portion of the Fund, the Manager may seek investment advice and recommendations from MIMEL and the Manager may also permit MIMEL to execute Fund security trades on behalf of the Manager and exercise investment discretion for securities in certain markets where the Manager believes it will be beneficial to utilize MIMEL's specialized market knowledge.
MIMGL, located at 50 Martin Place, Sydney, Australia, is an affiliate of the Manager and a part of MAM. Although the Manager has principal responsibility for the Manager's portion of the Fund, the Manager may seek investment advice and recommendations from MIMGL and the Manager may also permit MIMGL to execute Fund security trades on behalf of the Manager and exercise investment discretion for securities in certain markets where the Manager believes it will be beneficial to utilize MIMGL's specialized market knowledge.
A discussion of the basis for the Board's approval of the sub-advisory contracts with MIMEL, MIMGL and MIMAK is available in the Fund's semiannual report to shareholders for the period ended January 31, 2022.
Portfolio managers
J. David Hillmeyer and Daniela Mardarovici are the lead portfolio managers primarily responsible for the overall day-to-day management of the Fund. When making decisions for the Fund, Mr. Hillmeyer and Ms. Mardarovici regularly consult with other investment professionals.
J. David Hillmeyer, CFA Senior Managing Director, Co-Head of US Multisector Fixed Income
J. David Hillmeyer co-leads the firm's US Multisector Fixed Income team for Macquarie Asset Management Fixed Income (MFI) with responsibility for investment strategy and business development across the full suite of US multisector strategies. In addition, Hillmeyer has responsibility for our global credit strategies. Hillmeyer is also a member of MFI's Global Leadership Group which is responsible for the overall management of MFI including setting and executing on the team's strategic vision. Prior to joining Macquarie Asset Management (MAM) in August 2007 as a vice president and corporate bond trader, he worked for more than 11 years in various roles at Hartford Investment Management Company, including senior corporate bond trader, high yield portfolio manager / trader, and quantitative analyst. He began his career as an investment advisor in January 1989 at Shawmut Bank, leaving the firm as an investment officer in November 1995. Hillmeyer earned his bachelor's degree from Colorado State University, and he is a member of the CFA Society of Philadelphia and the Philadelphia Council for Business Economics.
Daniela Mardarovici, CFA Managing Director, Co-Head of US Multisector Fixed Income
Daniela Mardarovici co-leads the firm's US Multisector Fixed Income efforts for Macquarie Asset Management Fixed Income (MFI) with responsibility for investment and business strategy for the full suite of US multisector solutions. Mardarovici is also a member of MFI's Global Leadership Group which is responsible for the overall management of MFI including setting and executing the team's strategic vision. Prior to joining Macquarie Asset Management (MAM) in March 2019, she spent more than 13 years at BMO Global Asset Management as a senior investment leader. Since 2014, she was a member of the management committee of Taplin, Canida & Habacht (TCH), BMO's US fixed income group, and helped lead business strategy and development efforts. In addition, Mardarovici was responsible for driving investment strategy and managing institutional portfolios and mutual funds across a wide
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spectrum of strategies, including core, core plus, credit, multisector, and liability-driven investing (LDI). Previously, she managed taxable fixed income strategies and led investment management efforts for mortgage-backed securities at Harris Investment Management. She started her career in 2000 as a proprietary trader at Gelber Group. In 2018, Mardarovici was named one of the top 20 female portfolio managers by CityWire. She graduated magna cum laude with a major in economics and finance/banking from the University of Nebraska at Omaha. She is a member of the CFA Society New York and the CFA Institute.
The SAI provides additional information about each portfolio manager's compensation, other accounts managed by each portfolio manager, and each portfolio manager's ownership of Fund shares.
Manager of managers structure
The Fund and the Manager have received an exemptive order from the US Securities and Exchange Commission (SEC) to operate under a manager of managers structure that permits the Manager, with the approval of the Fund's Board, to appoint and replace both affiliated and unaffiliated sub-advisors, and to enter into and make material amendments to the related sub-advisory contracts on behalf of the Fund without shareholder approval (Manager of Managers Structure). Under the Manager of Managers Structure, the Manager has ultimate responsibility, subject to oversight by the Board, for overseeing the Fund's sub-advisors and recommending to the Board their hiring, termination, or replacement.
The 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 the hiring of any new sub-advisor within 90 days of the hiring.
The Fund and the Manager also have an exemptive order from the SEC that allows the approval of a new sub-advisor to be taken at a Board of Trustees meeting held via any means of communication that allows the Trustees to hear each other simultaneously during the meeting. If a new unaffiliated sub-adviser is hired for the Fund, shareholders will receive information about the new sub-advisor within 90 days of the change.
Who's who
Board of trustees: A mutual fund is governed by a board of trustees, which has oversight responsibility for the management of the fund's business affairs. Trustees establish procedures and oversee and review the performance of the fund's service providers.
Investment manager: An investment manager is a company responsible for selecting portfolio investments consistent with the objective and policies stated in the mutual fund's prospectus. A written contract between a mutual fund and its investment manager specifies the services the investment manager performs and the fee the manager is entitled to receive.
Portfolio managers: Portfolio managers make investment decisions for individual portfolios.
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Who manages the Fund
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 administrative services to a fund and oversight of other fund service providers.
Custodian/Fund accountant: 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. The fund accountant provides services such as calculating a fund's net asset value (NAV) and providing financial reporting information for the fund.
Financial intermediary: Financial professionals 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 professionals 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.
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About your account
Investing in the Fund
You can choose from a number of share classes for the Fund. Because each share class has a different combination of sales charges, fees, and other features, you should consult your financial intermediary or your financial professional (hereinafter collectively referred to as the “financial intermediary”) to determine which share class best suits your investment goals and time frame. It is the responsibility of your financial intermediary to assist you in determining the most appropriate share class and to communicate such determination to us.
Information about existing sales charges and sales charge reductions and waivers is available in this Prospectus below and free of charge on the Delaware Funds website at delawarefunds.com. Additional information on sales charges can be found in the SAI, which is available upon request.
Please also see the “Broker-defined sales charge waiver policies” section in this Prospectus for information provided to the Fund by certain financial intermediaries on sales charge discounts and waivers that may be available to you through your financial intermediary. Shareholders purchasing Fund shares through a financial intermediary may also be eligible for sales charge discounts or waivers which may differ from those disclosed elsewhere in this Prospectus or SAI. The availability of certain initial or deferred sales charge waivers and discounts may depend on the particular financial intermediary or type of account through which you purchase or hold Fund shares. It is the responsibility of the financial intermediary to implement any of its proprietary sales charge discounts or waivers listed in “Broker-defined sales charge waiver policies” or otherwise offered by the financial intermediary. Accordingly, you should consult with your financial intermediary to determine whether you qualify for any sales charge discounts or waivers.
Choosing a share class
Each share class may be eligible for purchase through programs sponsored by financial intermediaries that require the purchase of a specific class of shares.
Class A, Class C, and Class R shares of the Fund have each adopted a separate 12b-1 plan that allows them to pay distribution fees for the sale and distribution of their shares. Because these fees are paid out of the Fund's assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.
Class A |
Class A sales charges
The table below details your sales charges on purchases of Class A shares. The offering price for Class A shares includes the front-end sales charge. The offering price is determined by dividing the NAV per share by an amount equal to 1 minus the sales charge (expressed in decimals) applicable to the purchase, calculated to two decimal places using standard rounding criteria. 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. The number of Fund shares you will be issued will equal the amount invested divided by the applicable offering price for those shares, calculated to three decimal places using standard rounding criteria. Sales charges do not apply to shares purchased through dividend reinvestment.
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About your account
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 Delaware Distributors, L.P. (Distributor) paid your financial intermediary a commission on your purchase of $1 million or more of Class A shares, for shares purchased prior to July 1, 2020, 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 these shares within the second year; and for shares purchased on or after July 1, 2020, you will have to pay a Limited CDSC of 1.00% if you redeem these shares within the 18 months after your purchase, unless a specific waiver of the Limited CDSC applies. The Limited CDSC will be paid to the Distributor and will be assessed on an amount equal to the lesser of: (1) the NAV at the time the Class A shares being redeemed were purchased; or (2) the NAV of such Class A shares at the time of redemption. For purposes of this formula, the “NAV at the time of purchase” will be the NAV at purchase of the Class A shares even if those shares are later exchanged for shares of another Delaware Fund and, in the event of an exchange of Class A shares, the “NAV of such shares at the time of redemption” will be the NAV of the shares acquired in the exchange. In determining whether a Limited CDSC is payable, it will be assumed that shares not subject to the Limited CDSC are the first redeemed followed by other shares held for the longest period of time. See “Dealer compensation” below for a description of the dealer commission that is paid.
Class C |
Calculation of contingent deferred sales charges — Class C
CDSCs are charged as a percentage of the dollar amount subject to the CDSC. The charge will be assessed on an amount equal to the lesser of the NAV at the time the shares being redeemed were purchased or the NAV of those shares at the time of redemption. No CDSC will be imposed on increases in NAV above the initial purchase price, nor will a CDSC be assessed on redemptions of shares acquired through reinvestment of dividends or capital gains distributions. For purposes of this formula, the “NAV at the time of purchase” will be the NAV at purchase of Class C shares of the Fund, even if those shares are later exchanged for shares of another Delaware 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.
Class R |
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Institutional Class |
A shareholder transacting in Institutional Class shares through a broker or other financial intermediary may be required to pay a commission and/or other forms of compensation to the financial intermediary.
The Fund reserves the right to modify or waive the above policies at any time without prior notice to shareholders.
Dealer compensation
The financial intermediary who sells you shares of the Fund may be eligible to receive the following amounts as compensation for your investment in the Fund. These amounts are paid by the Distributor to the securities dealer with whom your financial advisor is associated. Institutional Class shares do not have a 12b-1 fee or sales charge so they are not included in the table below.
|
Class A1 |
Class C2 |
Class R3 |
||||||
Commission (%)
|
— |
1.00% |
— |
||||||
Investment less than $100,000
|
4.00% |
— |
— |
||||||
$100,000 but less than $250,000
|
3.00% |
— |
— |
||||||
$250,000 but less than $500,000
|
2.00% |
— |
— |
||||||
$500,000 but less than $1 million
|
1.60% |
— |
— |
||||||
$1 million but less than $5 million
|
1.00% |
— |
— |
||||||
$5 million but less than $25 million
|
0.50% |
— |
— |
||||||
$25 million or more
|
0.25% |
— |
— |
||||||
12b-1 fee to dealer
|
0.25% |
1.00% |
0.50% |
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About your account
1 On sales of Class A shares, the Distributor reallows to your securities dealer a portion of the front-end sales charge depending upon the amount you invested. Your securities dealer may be eligible to receive a 12b-1 fee of up to 0.25% from the date of purchase. Additionally, the Fund's Class A shares are subject to a blended 12b-1 fee of 0.10% on all shares acquired prior to June 1, 1992, and 0.25% on all shares acquired on or after June 1, 1992. On sales of Class A shares where there is no front-end sales charge, the Distributor may pay your securities dealer an upfront commission of up to 1.00%. The upfront commission includes an advance of the first year's 12b-1 fee of up to 0.25%. During the first 12 months, the Distributor will retain the 12b-1 fee to partially offset the upfront commission advanced at the time of purchase. Starting in the 13th month, your securities dealer may be eligible to receive the full 12b-1 fee applicable to Class A shares.
2 On sales of Class C shares, the Distributor may pay your securities dealer an upfront commission of 1.00%. The upfront 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 upfront 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 shares. Alternatively, certain intermediaries may not be eligible to receive the upfront commission of 1.00%, but may receive the 12b-1 fee for sales of Class C shares from the date of purchase. After approximately eight years, Class C shares are eligible to 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 R shares, the Distributor does not pay your securities dealer an upfront commission. Your securities dealer may be eligible to receive a 12b-1 fee of up to 0.50% from the date of purchase.
Payments to intermediaries
The Distributor and its affiliates may pay additional compensation at their own expense and not as an expense of the Fund to certain affiliated or unaffiliated brokers, dealers, or other financial intermediaries (Financial Intermediaries) in connection with the sale or retention of Fund shares and/or shareholder servicing, including providing the Fund with “shelf space” or a higher profile with the Financial Intermediaries' consultants, salespersons, and customers (distribution assistance). For example, the Distributor or its affiliates may pay additional compensation to Financial Intermediaries for various purposes, including, but not limited to, promoting the sale of Fund shares, maintaining share balances and/or for subaccounting, administrative, or shareholder processing services, marketing, educational support, data, and ticket charges. Such payments are in addition to any distribution fees, service fees, subaccounting fees, and/or transfer agency fees that may be payable by the Fund. The additional payments may be based on factors, including level of sales (based on gross or net sales or some specified minimum sales or some other similar criteria related to sales of the Fund and/or some or all other Delaware Funds), amount of assets invested by the Financial Intermediary's customers (which could include current or aged assets of the Fund and/or some or all other Delaware Funds), the Fund's advisory fees, some other agreed-upon amount, or other measures as determined from time to time by the Distributor. The level of payments made to a qualifying Financial Intermediary in any given year may vary. To the extent permitted by SEC and FINRA rules and other applicable laws and regulations, the Distributor may pay, or allow its affiliates to pay, other promotional incentives or payments to Financial Intermediaries.
Sub-transfer agent/recordkeeping payments may be made to third parties (including affiliates of the Manager) that provide sub-transfer agent, recordkeeping, and/or shareholder services with respect to certain shareholder accounts (including omnibus accounts), or to the shareholder account directly to offset the costs of these services, in lieu of the transfer agent providing such services.
If a mutual fund sponsor or distributor makes greater payments for distribution assistance to your Financial Intermediary with respect to distribution of shares of that particular mutual fund than sponsors or distributors of other mutual funds make to your Financial Intermediary with respect to the distribution of the shares of their mutual funds, your Financial Intermediary and its salespersons may have a financial incentive to favor sales of shares of the mutual fund making the higher payments over shares of other mutual funds or over other investment options. In addition, depending on the arrangements in place at any particular time, a Financial Intermediary may also have a financial incentive for recommending a particular share class over other share classes. You should consult with your Financial Intermediary and review carefully any disclosure provided by such Financial Intermediary as to compensation it receives in connection with investment products it recommends or sells to you. A significant purpose of these payments is to increase sales of the Fund's shares. The Manager or its affiliates may benefit from the Distributor's or its affiliates' payment of compensation to Financial Intermediaries through increased fees resulting from additional assets acquired through the sale of Fund shares through Financial Intermediaries. In certain instances, the payments could be significant and may cause a conflict of interest for your Financial Intermediary. Any such payments will not change the NAV or the price of the Fund's shares.
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the front-end sales charge on Class A shares, which may depend on the ability of your financial intermediary or the Fund's transfer agent to support the various ways. Please refer to the “Broker-defined sales charge waiver policies” in this Prospectus and to the SAI for detailed information and eligibility requirements. You can also get additional information from your financial intermediary. You or your financial intermediary 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 intermediary or the Fund in order to qualify for a reduction in sales charges. Such information may include your Delaware 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. If you participate in a direct deposit purchase plan or an automatic investment program for an account held directly with the Fund's transfer agent
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and also hold shares of Delaware Funds other than directly with us, generally those holdings will not be aggregated with the assets held with us for purposes of determining rights of accumulation in connection with direct deposit purchase plans and automatic investment program purchases. We reserve the right to determine whether any purchase is entitled, by virtue of the foregoing, to the reduced sales charge. Class R and Institutional Class shares (if applicable) have no upfront sales charge or CDSC so they are not included in the table below.
Letter of intent and rights of accumulation
Through a letter of intent, you agree to invest a certain amount in Delaware Funds over a 13-month period to qualify for reduced front-end sales charges (as set forth in the SAI). Delaware Funds no longer accept retroactive letters of intent.
Upon your request, you can combine your holdings or purchases of Class A and all other classes of Delaware Funds, excluding any money market funds (unless you acquired those shares through an exchange from a Fund that did carry a front-end sales charge, CDSC, or Limited CDSC), as well as the holdings and purchases of your spouse — or equivalent, if recognized under local law — and children under the age of 21 to qualify for reduced front-end sales charges. When submitting the letter of intent or requesting rights of accumulation, you must identify which holdings or purchases you are requesting to be combined to your dealer, the Distributor or BNY Mellon at the time of purchase. You can add the value of any share class that you already own to new share purchases in order to qualify for a reduced sales charge. Please note that depending on the financial intermediary holding your account, this policy may differ from those described in this Prospectus.
Class A |
Class C |
Available. |
Although the letter of intent does not apply to the purchase of Class C shares, you can combine your purchase of Class C shares with your purchase of Class A shares to fulfill your letter of intent. Although the rights of accumulation do not apply to the purchase of Class C shares, you can combine the value of your Class C shares with the value of your Class A shares to receive a reduced sales charge. |
Reinvestment of redeemed shares
Up to 90 days after you redeem shares, you can reinvest the proceeds without paying a sales charge. For purposes of this “right of reinvestment policy,” automatic transactions (including, for example, automatic purchases, withdrawals and payroll deductions) and ongoing retirement plan contributions are not eligible for investment without a sales charge. Investors should consult their financial intermediary for further information.
Class A |
Class C |
Available. |
Not available. |
SIMPLE IRA, SEP, SARSEP, 401(k), SIMPLE 401(k), Profit Sharing, Money Purchase, 403(b)(7), and 457 Retirement Plans
These investment plans may qualify for reduced sales charges by combining the purchases of all members of the group. Members of these groups may also qualify to purchase shares without a front-end sales charge and may qualify for a waiver of any CDSCs on Class A shares.
Class A |
Class C |
Available. |
Although the letter of intent does not apply to the purchase of Class C shares, you can combine your purchase of Class C shares with your purchase of Class A shares to fulfill your letter of intent. Although the rights of accumulation do not apply to the purchase of Class C shares, you can combine the value of your Class C shares with the value of your Class A shares to receive a reduced sales charge. |
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. Certain existing investors or programs sponsored by certain intermediaries that were eligible to purchase Class A shares of a Fund at NAV may continue to be eligible to purchase Class A shares at NAV. The Fund reserves the right to modify or terminate these arrangements at any time.
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About your account
Delaware Funds; (ii) current employees of legal counsel to Delaware Funds; and (iii) registered representatives, employees, officers, and directors 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, trust, or other entity directly owned by, controlled by, or established by any of the foregoing may also purchase shares at NAV.
Waivers of contingent deferred sales charges
Certain sales charges may be based on historical cost. Therefore, you should maintain any records that substantiate these costs because the Fund, its transfer agent, and financial intermediaries may not maintain this information. Please note that you or your financial intermediary will have to notify us at the time of redemption that the trade qualifies for such waiver. Class R and Institutional Class shares do not have CDSCs so they are not included in the list below. Please also see the “Shareholder fees” table in the Fund summary and “Choosing a share class” for more information about applicable CDSCs. Your financial intermediary may offer waivers for certain account types or programs that may be different than what is noted below. See the “Broker-defined sales charge waiver policies” section or contact your financial intermediary for information on program availability.
CDSCs for Class A and Class C shares may be waived under the following circumstances, except as noted otherwise:
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1 Qualified plans that are fully redeemed at the direction of the plan's fiduciary may be subject to any applicable CDSC or Limited CDSC, unless the redemption is due to the termination of the plan.
Certain existing investors or programs sponsored by certain intermediaries that were eligible for waivers of CDSCs may continue to be eligible for those waivers of CDSCs.
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About your account
How to buy shares
Through your financial intermediary |
Your financial intermediary (if applicable) can handle all the details of purchasing shares, including opening an account. Your financial intermediary may charge you a separate fee for this service.
Through the Delaware Funds by Macquarie® Service Center |
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 Funds by Macquarie at P.O. Box 9876, Providence, RI 02940-8076 for investments by regular mail or Delaware Funds by Macquarie Service Center at 4400 Computer Drive, Westborough, MA 01581-1722 for investments by overnight courier service. If you are making an initial purchase by mail, you must include a completed investment application (or an appropriate retirement plan application if you are opening a retirement account) with your check. Purchase orders will not be accepted at any other address.
Please note that purchase orders submitted by mail will not be considered received until such purchase orders arrive at Delaware Funds by Macquarie® Service Center at 4400 Computer Drive, Westborough, MA 01581-1722 and are determined to be in good order. For a purchase request to be in “good order,” you must provide the name of the Delaware Fund in which you are investing, your account registration/number (if you are an existing shareholder), and the total number of shares or dollar amount of the shares to be purchased, along with meeting any requirements set forth in applicable forms, this Prospectus, or the SAI. The Fund does not consider the US Postal Service or other independent delivery services to be its agent. Therefore, deposits in the mail or with such services or receipt at the Fund's post office box, of purchase orders, do not constitute receipt by the Fund or its agent. Please note that the Fund reserves the right to reject any purchase.
By wire
Ask your bank to wire the amount you want to invest to The Bank of New York Mellon, ABA #011001234, bank account #000073-6910. Include your account number, the name of the fund, registered account name, and class of shares in which you want to invest. If you are making an initial purchase by wire, you must first call the Delaware Funds by Macquarie Service Center at 800 523-1918 so we can assign you an account number.
By exchange
You may exchange all or part of your investment in one or more Delaware Funds for shares of other Delaware Funds. Please keep in mind, however, that under most circumstances you may exchange between like classes of shares only. To open an account by exchange, call the Delaware Funds by Macquarie Service Center at 800 523-1918.
Through automated shareholder services |
You may purchase or exchange shares through our automated telephone service (for Class A, Class C, and Class R shares only), or through our website, delawarefunds.com (for Class A and Class C shares only). For more information about how to sign up for these services, call our Delaware Funds by Macquarie Service Center at 800 523-1918.
Calculating share price
The price you pay for shares will depend on when we receive your purchase order. If your order is received by an authorized agent or us before the close of regular trading on the New York Stock Exchange (NYSE) (normally 4:00pm ET), you will pay that day's closing Fund share price, which is based on the Fund's NAV. If the NYSE has an unscheduled early close, we will continue to accept your order until that day's scheduled close of the NYSE and you will pay that day's closing Fund share price. If your order is received after the scheduled close of regular trading on the NYSE, you will pay the next Business Day's closing Fund share price. We reserve the right to reject any purchase order.
We determine the NAV per share for each class of a Delaware Fund at the close of regular trading on the NYSE on each Business Day (normally 4:00pm ET). The Fund does not calculate its NAV on days the NYSE is closed for trading. If the NYSE has an unscheduled early close, the Fund's closing share price would still be determined as of that day's regularly scheduled close of the NYSE. The NAV per share for each class of a fund is calculated by subtracting the liabilities of each class from its total assets and dividing the resulting number by the number of shares outstanding for that class. We generally price securities and other assets for which market quotations are readily available at their market value. The value of foreign securities 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 US
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markets are not. We price fixed income securities on the basis of valuations provided to us by an independent pricing service that uses methods approved by the Board. For all other securities, we use methods approved by the Board that are designed to price securities at their fair market values.
Fair valuation
When the Fund uses fair value pricing, it may take into account any factors it deems appropriate. The Fund may determine fair value based upon developments related to a specific security, current valuations of foreign stock indices (as reflected in US futures markets), and/or US sector or broad stock market indices. In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures or suspension of trading in a security. The prices of securities used by the Fund to calculate its NAV may differ from quoted or published prices for the same securities. Fair value pricing may involve subjective judgments and it is possible that the fair value determined for a security could be 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 US 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-US markets because, among other things, most foreign markets close well before the Fund values its securities, normally at 4:00pm ET or the close of the NYSE. 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 designated the Manager as the valuation designee, and delegated responsibility for valuing the Fund's assets to the Manager and its Pricing Committee, which operates under the policies and procedures approved by the Board and is subject to the Board's oversight. The Manager, as the valuation designee, is responsible for periodically assessing any material risks associated with the determination of the fair value of the Fund's investments; establishing and applying fair value methodologies; testing the appropriateness of fair value methodologies; and overseeing and evaluating third-party pricing vendors and services. The Manager has a Pricing Committee to assist with its designated responsibilities as valuation designee.
Retirement plans
In addition to being an appropriate investment for your IRA, Roth IRA, and Coverdell Education Savings Account, the Fund may be suitable for group retirement plans. You may establish your IRA account even if you are already a participant in an employer-sponsored retirement plan. For more information on how the Fund can play an important role in your retirement planning or for details about group plans, please consult your financial intermediary, or call the Delaware Funds by Macquarie® Service Center at 800 523-1918.
Document delivery
To reduce fund expenses, we try to identify related shareholders in a household and send only one copy of a fund's financial reports and prospectus. This process, called “householding,” will continue indefinitely unless you instruct us otherwise. If you prefer not to have these documents householded, please call the Delaware Funds by Macquarie Service Center at 800 523-1918. At any time you may view current prospectuses and financial reports on our website.
Inactive accounts
Please note that your account may be required to transfer to the appropriate state if no activity occurs in the account within the time period specified by state law.
How to redeem shares
Under normal circumstances, the Fund typically meets redemption requests through its holdings of cash or cash equivalents, the sale of portfolio assets, and/or its ability to redeem in kind (when applicable). During stressed market conditions, the Fund may use lines of credit to meet redemption requests.
Availability of these services may be limited by your financial intermediary and by the way your account is registered with Delaware Funds.
When you send us a completed request in good order to redeem or exchange shares and the request is received by an authorized agent or us before the close of regular trading on the NYSE (normally 4:00pm ET), 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. If the NYSE has an unscheduled early close, we will continue to accept your order until that day's scheduled close of the NYSE and you will receive that day's closing Fund
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About your account
share price. We will deduct any applicable CDSCs. You may also have to pay taxes on the proceeds from your sale of shares. If you purchased your shares by check, those shares are subject to a 15-day hold to ensure your check has cleared. Redemption requests for shares still subject to the hold may be rejected with instructions to resubmit at the conclusion of the holding period.
If you are required to pay a CDSC when you redeem your shares, the amount subject to the fee will be based on the shares' NAV when you purchased them or their NAV when you redeem them, whichever is less. This arrangement ensures that you will not pay a CDSC on any increase in the value of your shares. You also will not pay the charge on any shares acquired by reinvesting dividends or capital gains. If you exchange shares of one fund for shares of another, you do not pay a CDSC at the time of the exchange. If you later redeem those shares, the purchase price for purposes of the CDSC formula will be the price you paid for the original shares, not the exchange price. The redemption price for purposes of this formula will be the NAV of the shares you are actually redeeming.
If you hold your shares in certificates, you must submit the certificates with your request to sell the shares. We recommend that you send your certificates by certified mail.
Redemption proceeds will be distributed promptly, but not later than seven days after receipt of a redemption request (except as noted above). For direct transactions, redemption proceeds are typically paid the next Business Day after receipt of the redemption request. Redemptions submitted by financial intermediaries typically settle between one and three Business Days after receipt, depending on the settlement cycle requested by the financial intermediary. Settlement could be extended as a result of various factors, including but not limited to redemption amount or other market conditions. Please see the SAI for additional information.
Through your financial intermediary |
Your financial intermediary (if applicable) can handle all the details of redeeming your shares (selling them back to the Fund). Your financial intermediary may charge you a separate fee for this service.
Through the Delaware Funds by Macquarie® Service Center |
By mail
You may redeem your shares by mail by writing to: Delaware Funds by Macquarie at P.O. Box 9876, Providence, RI 02940-8076 for redemption requests by regular mail or Delaware Funds by Macquarie Service Center at 4400 Computer Drive, Westborough, MA 01581-1722 for redemption requests by overnight courier service. Redemption requests will not be accepted at any other address. All owners of the account must sign the request. For redemptions of more than $100,000, you must include a medallion signature guarantee for each owner. Medallion signature guarantees are also required when redemption proceeds are going to an address other than the address of record on the account. Please contact the Delaware Funds by Macquarie Service Center at 800 523-1918 for more information about the medallion signature guarantee requirements.
Please note that redemption orders submitted by mail will not be considered received until such redemption orders arrive at Delaware Funds by Macquarie Service Center at 4400 Computer Drive, Westborough, MA 01581-1722 and are determined to be in good order. For a redemption request to be in “good order,” you must provide the name of the Delaware Fund whose shares you are redeeming, your account number, account registration, and the total number of shares or dollar amount of the transaction. Redemption requests must be signed by the record owner(s) exactly as the shares are registered, along with meeting any requirements set forth in applicable forms, this Prospectus, or the SAI. The Fund does not consider the US Postal Service or other independent delivery services to be its agent. Therefore, redemption requests placed in the mail or with such services or receipt at the Fund's post office box, of redemption requests, do not constitute receipt by the Fund or the transfer agent.
By telephone
You may redeem up to $100,000 of your shares by telephone. You may have the proceeds sent to you in the following ways:
Bank information must be on file before you request a wire or ACH redemption. Your bank may charge a fee for these services.
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Through automated shareholder services |
You may redeem shares through our automated telephone service or through our website, delawarefunds.com. For more information about how to sign up for these services, call our Delaware Funds by Macquarie Service Center at 800 523-1918.
Redemptions-in-kind |
The Fund has reserved the right to pay for redemptions with portfolio securities under certain conditions. Subsequent sale by an investor receiving a distribution in kind could result in the payment of brokerage commissions and taxable gains (if such investment was held in a taxable account). Investors bear market risks until securities are sold for cash. See the SAI for more information on redemptions-in-kind.
Low balance accounts
For Class A and Class C shares, if you redeem shares and your account balance falls below the required account minimum of $1,000 ($250 for IRAs, Roth IRAs, Uniform Gifts to Minors Act and Uniform Transfers to Minors Act accounts, or accounts with automatic investment 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.
For Class R and Institutional Class shares, if you redeem shares and your account balance falls below $500, your shares may be redeemed after 60 days' written notice to you.
If your account is not at the minimum for low balance purposes 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, or it may be redeemed after 60 days' written notice to you. Any CDSC that would otherwise be applicable will not apply to such a redemption.
Certain accounts held in omnibus, advisory, or asset-allocation programs or programs offered by certain intermediaries may be opened below the minimum stated account balance and may maintain balances that are below the minimum stated account balance without incurring a service fee or being subject to involuntary redemption.
If the applicable account falls below the minimum due to market fluctuation, the Fund still reserves the right to liquidate the account.
Investor services
To help make investing with us as easy as possible, and to help you build your investments, we offer the investor services described below. Information about the investor services we offer is available free of charge on the Delaware Funds website at delawarefunds.com, including hyperlinks to relevant information in fund offering documents. Availability of these services may be limited by the way your account is registered with Delaware Funds.
Online account access |
Online account access is a password-protected area of the Delaware Funds website that gives you access to your account information and allows you to perform transactions in a secure Internet environment.
Electronic delivery |
With Delaware Funds eDelivery, you can receive your fund documents electronically instead of via US 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.
Automatic investment plan |
The automatic investment plan allows you to make regular monthly or quarterly investments directly from your bank 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.
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About your account
Systematic exchange option |
With the systematic exchange option, you can arrange automatic monthly exchanges between your shares in one or more Delaware 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 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.
Exchange of shares |
You may generally exchange all or part of your shares for shares of the same class of another Delaware Fund without paying a front-end sales charge or a CDSC at the time of the exchange. However, if you exchange shares from a fund that does not have a sales charge, you will pay any applicable sales charge 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. 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. Please note that depending on the financial intermediary holding your account, this policy may be unavailable or differ from those described in this Prospectus.
On demand service |
The on demand service allows you or your financial advisor to 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. Macquarie Asset Management does not charge a fee for this service; however, your bank may assess one.
Direct deposit service |
Through the direct deposit service, you can have $25 or more in dividends and distributions deposited directly into your bank account. Macquarie Asset Management 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 |
You can arrange a regular monthly or quarterly payment from your account made to you or someone you designate. If the value of your account is $5,000 or more, you can make withdrawals of at least $25 monthly, or $75 quarterly. You may also have your withdrawals deposited directly to your bank account through the direct deposit service.
The applicable Limited CDSC for Class A shares and the CDSC for Class C shares redeemed via a systematic withdrawal plan will be waived if the annual amount withdrawn in each year is less than 12% of the account balance on the date that the plan is established. If the annual amount withdrawn in any year exceeds 12% of the account balance on the date that the systematic withdrawal plan is established, all redemptions under the plan will be subject to the applicable CDSC, including an assessment for previously redeemed amounts under the plan.
Right to discontinue offering shares and/or to merge or liquidate a share class |
To the extent authorized by law, the Fund reserves the right to discontinue offering shares at any time and/or to merge or liquidate a share class, such as in response to shareholder redemptions of substantially or all shares in a class. For any blocked accounts involving a liquidating fund, a shareholder's account may be moved into Delaware Investments Ultrashort Fund if no instruction is given upon receipt of a fund's pending liquidation.
Frequent trading of Fund shares (market timing and disruptive trading)
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 and disruptive trading. The Fund will consider anyone who follows a pattern of market timing in any Delaware 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.
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Market timing of a fund occurs when investors make consecutive, rapid, short-term “round trips” — that is, purchases into a fund followed quickly by redemptions out of that fund. A short-term round trip is considered 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 round trip in a fund within 90 rolling calendar days of a previous short-term round trip in that fund, you may be considered a market timer. In determining whether market timing has occurred, the Fund considers short-term round trips to include rapid purchases and sales of Fund shares through the exchange privilege. The Fund reserves the right to consider other trading patterns to be market timing.
Your ability to use the Fund's exchange privilege may be limited if you are identified as a market timer. If you are identified as a market timer, the Fund will execute the redemption side of your exchange order but may refuse the purchase side of your exchange order. The Fund reserves the right to restrict or reject, without prior notice, any purchase order or exchange order for any reason, including any purchase order or exchange order accepted by any shareholder's financial intermediary or in any omnibus-type account. Transactions placed in violation of the Fund's market timing policy are not necessarily deemed accepted by the Fund and may be rejected by the Fund on the next Business Day following receipt by the Fund.
Redemptions will continue to be permitted in accordance with the Fund's then-current prospectus. A redemption of shares under these circumstances could be costly to a shareholder if, for example, the shares have declined in value, the shareholder recently paid a front-end sales charge, the shares are subject to a CDSC, or the sale results in adverse tax consequences. To avoid this risk, a shareholder should carefully monitor the purchases, sales, and exchanges of Fund shares and avoid frequent trading in Fund shares.
The Fund reserves the right to modify this policy at any time without notice, including modifications to the Fund's monitoring procedures and the procedures to close accounts to new purchases. Although the implementation of this policy involves certain judgments that are inherently subjective and may be selectively applied, the Fund seeks to make judgments and applications that are consistent with the interests of the Fund's shareholders. While the Fund 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 who 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.
Any fund may be subject to disruptive trading activity. However, 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 4:00pm Eastern time or the close of the NYSE). 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 help 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; US Department of Labor regulations; certain automated or pre-established exchange, asset-allocation, or dollar-cost-averaging programs; or omnibus account arrangements.
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About your account
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, the Fund's ability to detect frequent trading activities by investors that hold shares through financial intermediaries may be limited by the ability and/or willingness of such intermediaries to monitor for these activities. 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's transfer agent may work with certain intermediaries (such as investment dealers holding shareholder accounts in street name, retirement plan recordkeepers, insurance company separate accounts, and bank trust companies) to apply their own procedures, provided that the Fund's transfer agent believes the intermediary's procedures are reasonably designed to enforce the Fund's frequent trading policies. You should refer to disclosures provided by the intermediaries with which you have an account to determine the specific trading restrictions that apply to you. If the Fund's transfer agent identifies any activity that may constitute frequent trading, it reserves the right to contact the intermediary and request that the intermediary either provide information regarding an account owner's transactions or restrict the account owner's trading. There is no assurance that the information received by the Fund from a financial intermediary will be sufficient to effectively detect or deter excessive trading in omnibus accounts. If the Fund's transfer agent is not satisfied that the intermediary has taken appropriate action, the transfer agent may terminate the intermediary's ability to transact in Fund shares, or restrict individual trading activity as applicable.
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 Internal Revenue 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. The Fund may distribute such income dividends and capital gains more frequently, if necessary, in order to reduce or eliminate federal excise or income taxes on the Fund. The amount of any distribution will vary, and there is no guarantee the Fund will pay either an income dividend or a capital gains distribution. We automatically reinvest all dividends and any capital gains, unless you direct us to do otherwise.
Annual statements
Each year, the Fund will send you an annual statement (Form 1099) of your account activity to assist you in completing your federal, state, and local tax returns. Distributions declared in December to shareholders of record in such month, but paid in January, are taxable as if they were paid in December. Prior to issuing your statement, the Fund makes every effort to reduce the number of corrected forms mailed to you. However, if the Fund finds it necessary to reclassify its distributions or adjust the cost basis of any covered shares (defined below) sold or exchanged after you receive your tax statement, the Fund will send you a corrected Form 1099.
Avoid “buying a dividend”
At the time you purchase your Fund shares, the Fund's NAV may reflect undistributed income, undistributed capital gains, or net unrealized appreciation in value of portfolio securities held by the Fund. For taxable investors, a subsequent distribution to you of such amounts, although constituting a return of your investment, would be taxable. Buying shares in the Fund just before it declares an income dividend or capital gains distribution is sometimes known as “buying a dividend.”
Tax considerations
Fund distributions. The Fund expects, based on its investment objective and strategies, that its distributions, if any, primarily will be taxable as ordinary income. This is true whether you reinvest your distributions in additional Fund shares or receive them in cash.
For federal income tax purposes, Fund distributions of short-term capital gains are taxable to you as ordinary income. Fund distributions of long-term capital gains are taxable to you as long-term capital gains no matter how long you have owned your shares. Because the income of the Fund is primarily derived
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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.
The use of derivatives by the Fund may cause the Fund to realize higher amounts of ordinary income or short-term capital gain, distributions from which are taxable to individual shareholders at ordinary income tax rates rather than at the more favorable tax rates for long-term capital gain. Additionally, other rules applicable to derivative contracts may accelerate the recognition of income or gains to the Fund, defer losses to the Fund, and cause adjustments in the holding periods of the Fund's securities. These rules, therefore, could affect the amount, timing and/or character of distributions to shareholders.
If the Fund qualifies to pass through to you the tax benefits from foreign taxes it pays on its investments, and elects to do so, then any foreign taxes it pays on these investments may be passed through to you as a foreign tax credit.
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 Fund is the same as a sale. The Fund is required to report to you and the Internal Revenue Service (IRS) annually on Form 1099-B not only the gross proceeds of Fund shares you sell or redeem but also the cost basis of Fund shares you sell or redeem that were purchased or acquired on or after January 1, 2012 (“covered shares”). Cost basis will be calculated using the Fund's default method, unless you instruct the Fund to use a different calculation method. Shareholders should carefully review the cost basis information provided by the Fund and make any additional basis, holding period or other adjustments that are required when reporting these amounts on their federal income tax returns. If your account is held by your investment representative (financial intermediary or other broker), please contact that representative with respect to reporting of cost basis and available elections for your account. Tax-advantaged retirement accounts will not be affected. Additional information and updates regarding cost basis reporting and available shareholder elections will be on the Delaware Funds website at delawarefunds.com as the information becomes available.
Medicare tax. An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gain distributions received from the Fund and net gains from redemptions or other taxable dispositions of Fund shares) of US individuals, estates and trusts to the extent that such person's “modified adjusted gross income” (in the case of an individual) or “adjusted gross income” (in the case of an estate or trust) exceeds a threshold amount. This Medicare tax, if applicable, is reported by you on, and paid with, your federal income tax return.
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 IRS instructs it to do so. When withholding is required, the amount will be 24% of any distributions or proceeds paid.
State and local taxes. Fund distributions and gains from the sale or exchange of your Fund shares generally are subject to state and local taxes.
Non-US investors. Non-US investors may be subject to US withholding tax at a 30% or lower treaty rate and US estate tax and are subject to special US tax certification requirements to avoid backup withholding and claim any treaty benefits. Exemptions from US withholding tax are provided for certain capital gain dividends paid by the Fund from net long-term capital gains, if any, interest-related dividends paid by the Fund from its qualified net interest income from US sources and short-term capital gain dividends, if such amounts are reported by the Fund. However, notwithstanding such exemptions from US withholding at the source, any such dividends and distributions of income and capital gains will be subject to backup withholding at a rate of 24% if you fail to properly certify that you are not a US person.
Other reporting and withholding requirements. Under the Foreign Account Tax Compliance Act (FATCA), the Fund will be required to withhold a 30% tax on income dividends made by the Fund to certain foreign entities, referred to as foreign financial institutions or nonfinancial foreign entities, that fail to comply (or be deemed compliant) with extensive reporting and withholding requirements designed to inform the US Department of the Treasury of US-owned foreign investment accounts. After December 31, 2018, FATCA withholding would have applied to certain capital gain distributions, return of capital distributions and the proceeds arising from the sale of Fund shares; however, based on proposed regulations issued by the IRS, which can be relied upon currently, such withholding is no longer required unless final regulations provide otherwise (which is not expected). The Fund may disclose the information that it receives from its shareholders to the IRS, non-US taxing authorities or other parties as necessary to comply with FATCA or similar laws. Withholding also may be required if a foreign entity that is a shareholder of the Fund fails to provide the Fund with appropriate certifications or other documentation concerning its status under FATCA.
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.
35
About your account
Certain management considerations
Investments by fund 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 and asset allocation models. A “529 Plan” is a college savings program that operates under Section 529 of the Code. Asset allocation models include the Delaware Funds by Macquarie® Premier Advisor Platform, which offers asset allocation models using a mix of Delaware Funds. 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.
36
Financial highlights
Delaware Strategic Income Fund
The financial highlights tables are intended to help you understand the Fund's financial performance for the past five 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 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 Fund's annual report, which is available upon request by calling 800 523-1918.
|
Year ended |
||||||||||||||
Class A shares |
7/31/22 |
7/31/21 |
7/31/20 |
7/31/19 |
7/31/18 |
||||||||||
Net asset value, beginning of period
|
$8.57 |
$8.24 |
$8.07 |
$8.01 |
$8.41 |
||||||||||
Income (loss) from investment operations: |
|||||||||||||||
Net investment income1
|
0.29 |
0.30 |
0.29 |
0.32 |
0.32 |
||||||||||
Net realized and unrealized gain (loss)
|
(1.17 |
) |
0.35 |
0.20 |
0.08 |
(0.37 |
) |
||||||||
Total from investment operations
|
(0.88 |
) |
0.65 |
0.49 |
0.40 |
(0.05 |
) |
||||||||
Less dividends and distributions from: |
|||||||||||||||
Net investment income
|
(0.31 |
) |
(0.32 |
) |
(0.32 |
) |
(0.27 |
) |
(0.32 |
) |
|||||
Net realized gain
|
— |
— |
— |
— |
— |
||||||||||
Return of capital
|
— |
— |
2 |
— |
2 |
(0.07 |
) |
(0.03 |
) |
||||||
Total dividends and distributions
|
(0.31 |
) |
(0.32 |
) |
(0.32 |
) |
(0.34 |
) |
(0.35 |
) |
|||||
Net asset value, end of period
|
$7.38 |
$8.57 |
$8.24 |
$8.07 |
$8.01 |
||||||||||
Total return3
|
(10.45% |
) |
8.02% |
6.27% |
5.20% |
(0.62% |
) |
||||||||
Ratios and supplemental data: |
|||||||||||||||
Net assets, end of period (000 omitted)
|
$79,273 |
$31,690 |
$29,793 |
$31,032 |
$33,912 |
||||||||||
Ratio of expenses to average net assets4
|
0.90% |
5 |
0.84% |
0.84% |
0.84% |
0.88% |
|||||||||
Ratio of expenses to average net assets
prior to fees waived4
|
1.24% |
1.53% |
1.52% |
1.50% |
1.35% |
||||||||||
Ratio of net investment income to average net assets
|
3.62% |
3.54% |
3.66% |
4.09% |
3.83% |
||||||||||
Ratio of net investment income to average net assets prior to fees waived
|
3.28% |
2.85% |
2.98% |
3.43% |
3.36% |
||||||||||
Portfolio turnover
|
65% |
89% |
130% |
106% |
125% |
1 |
Calculated using average shares outstanding. |
2 |
Amount is less than $0.005 per share. |
3 |
Total 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 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. |
4 |
Expense ratios do not include expenses of the investment companies (Underlying Funds) in which the Fund invests. |
5 |
Net expense ratio includes extraordinary expenses. |
37
Financial highlights
Delaware Strategic Income Fund
|
Year ended |
||||||||||||||
Class C shares |
7/31/22 |
7/31/21 |
7/31/20 |
7/31/19 |
7/31/18 |
||||||||||
Net asset value, beginning of period
|
$8.58 |
$8.25 |
$8.08 |
$8.02 |
$8.42 |
||||||||||
Income (loss) from investment operations: |
|||||||||||||||
Net investment income1
|
0.23 |
0.24 |
0.23 |
0.26 |
0.25 |
||||||||||
Net realized and unrealized gain (loss)
|
(1.18 |
) |
0.35 |
0.20 |
0.08 |
(0.36 |
) |
||||||||
Total from investment operations
|
(0.95 |
) |
0.59 |
0.43 |
0.34 |
(0.11 |
) |
||||||||
Less dividends and distributions from: |
|||||||||||||||
Net investment income
|
(0.25 |
) |
(0.26 |
) |
(0.26 |
) |
(0.21 |
) |
(0.26 |
) |
|||||
Net realized gain
|
— |
— |
— |
— |
— |
||||||||||
Return of capital
|
— |
— |
2 |
— |
2 |
(0.07 |
) |
(0.03 |
) |
||||||
Total dividends and distributions
|
(0.25 |
) |
(0.26 |
) |
(0.26 |
) |
(0.28 |
) |
(0.29 |
) |
|||||
Net asset value, end of period
|
$7.38 |
$8.58 |
$8.25 |
$8.08 |
$8.02 |
||||||||||
Total return3
|
(11.22% |
) |
7.21% |
5.47% |
4.42% |
(1.35% |
) |
||||||||
Ratios and supplemental data: |
|||||||||||||||
Net assets, end of period (000 omitted)
|
$1,110 |
$1,451 |
$1,846 |
$2,793 |
$3,450 |
||||||||||
Ratio of expenses to average net assets4
|
1.65% |
5 |
1.59% |
1.59% |
1.59% |
1.63% |
|||||||||
Ratio of expenses to average net assets
prior to fees waived4
|
1.99% |
2.28% |
2.27% |
2.25% |
2.10% |
||||||||||
Ratio of net investment income to average net assets
|
2.87% |
2.79% |
2.91% |
3.34% |
3.08% |
||||||||||
Ratio of net investment income to average net assets prior to fees waived
|
2.53% |
2.10% |
2.23% |
2.68% |
2.61% |
||||||||||
Portfolio turnover
|
65% |
89% |
130% |
106% |
125% |
1 |
Calculated using average shares outstanding. |
2 |
Amount is less than $0.005 per share. |
3 |
Total 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 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. |
4 |
Expense ratios do not include expenses of the Underlying Funds in which the Fund invests. |
5 |
Net expense ratio includes extraordinary expenses. |
38
Delaware Strategic Income Fund
|
Year ended |
||||||||||||||
Class R shares |
7/31/22 |
7/31/21 |
7/31/20 |
7/31/19 |
7/31/18 |
||||||||||
Net asset value, beginning of period
|
$8.60 |
$8.27 |
$8.10 |
$8.03 |
$8.44 |
||||||||||
Income (loss) from investment operations: |
|||||||||||||||
Net investment income1
|
0.27 |
0.28 |
0.27 |
0.30 |
0.30 |
||||||||||
Net realized and unrealized gain (loss)
|
(1.19 |
) |
0.35 |
0.20 |
0.09 |
(0.38 |
) |
||||||||
Total from investment operations
|
(0.92 |
) |
0.63 |
0.47 |
0.39 |
(0.08 |
) |
||||||||
Less dividends and distributions from: |
|||||||||||||||
Net investment income
|
(0.29 |
) |
(0.30 |
) |
(0.30 |
) |
(0.25 |
) |
(0.30 |
) |
|||||
Net realized gain
|
— |
— |
— |
— |
— |
||||||||||
Return of capital
|
— |
— |
2 |
— |
2 |
(0.07 |
) |
(0.03 |
) |
||||||
Total dividends and distributions
|
(0.29 |
) |
(0.30 |
) |
(0.30 |
) |
(0.32 |
) |
(0.33 |
) |
|||||
Net asset value, end of period
|
$7.39 |
$8.60 |
$8.27 |
$8.10 |
$8.03 |
||||||||||
Total return3
|
(10.86% |
) |
7.74% |
5.99% |
5.07% |
(0.97% |
) |
||||||||
Ratios and supplemental data: |
|||||||||||||||
Net assets, end of period (000 omitted)
|
$148 |
$171 |
$431 |
$738 |
$4,259 |
||||||||||
Ratio of expenses to average net assets4
|
1.15% |
5 |
1.09% |
1.09% |
1.09% |
1.13% |
|||||||||
Ratio of expenses to average net assets
prior to fees waived4
|
1.49% |
1.78% |
1.77% |
1.75% |
1.60% |
||||||||||
Ratio of net investment income to average net assets
|
3.37% |
3.29% |
3.41% |
3.84% |
3.58% |
||||||||||
Ratio of net investment income to average net assets prior to fees waived
|
3.03% |
2.60% |
2.73% |
3.18% |
3.11% |
||||||||||
Portfolio turnover
|
65% |
89% |
130% |
106% |
125% |
1 |
Calculated using average shares outstanding. |
2 |
Amount is less than $0.005 per share. |
3 |
Total 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 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. |
4 |
Expense ratios do not include expenses of the Underlying Funds in which the Fund invests. |
5 |
Net expense ratio includes extraordinary expenses. |
39
Financial highlights
Delaware Strategic Income Fund
|
Year ended |
||||||||||||||
Institutional Class shares |
7/31/22 |
7/31/21 |
7/31/20 |
7/31/19 |
7/31/18 |
||||||||||
Net asset value, beginning of period
|
$8.58 |
$8.25 |
$8.08 |
$8.02 |
$8.42 |
||||||||||
Income (loss) from investment operations: |
|||||||||||||||
Net investment income1
|
0.31 |
0.32 |
0.31 |
0.34 |
0.34 |
||||||||||
Net realized and unrealized gain (loss)
|
(1.18 |
) |
0.35 |
0.20 |
0.08 |
(0.37 |
) |
||||||||
Total from investment operations
|
(0.87 |
) |
0.67 |
0.51 |
0.42 |
(0.03 |
) |
||||||||
Less dividends and distributions from: |
|||||||||||||||
Net investment income
|
(0.33 |
) |
(0.34 |
) |
(0.34 |
) |
(0.29 |
) |
(0.34 |
) |
|||||
Net realized gain
|
— |
— |
— |
— |
— |
||||||||||
Return of capital
|
— |
— |
2 |
— |
2 |
(0.07 |
) |
(0.03 |
) |
||||||
Total dividends and distributions
|
(0.33 |
) |
(0.34 |
) |
(0.34 |
) |
(0.36 |
) |
(0.37 |
) |
|||||
Net asset value, end of period
|
$7.38 |
$8.58 |
$8.25 |
$8.08 |
$8.02 |
||||||||||
Total return3
|
(10.33% |
) |
8.29% |
6.53% |
5.47% |
(0.36% |
) |
||||||||
Ratios and supplemental data: |
|||||||||||||||
Net assets, end of period (000 omitted)
|
$15,126 |
$16,258 |
$9,845 |
$16,457 |
$28,366 |
||||||||||
Ratio of expenses to average net assets4
|
0.65% |
5 |
0.59% |
0.59% |
0.59% |
0.63% |
|||||||||
Ratio of expenses to average net assets
prior to fees waived4
|
0.99% |
1.28% |
1.27% |
1.25% |
1.10% |
||||||||||
Ratio of net investment income to average net assets
|
3.87% |
3.79% |
3.91% |
4.34% |
4.08% |
||||||||||
Ratio of net investment income to average net assets prior to fees waived
|
3.53% |
3.10% |
3.23% |
3.68% |
3.61% |
||||||||||
Portfolio turnover
|
65% |
89% |
130% |
106% |
125% |
1 |
Calculated using average shares outstanding. |
2 |
Amount is less than $0.005 per share. |
3 |
Total 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 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. |
4 |
Expense ratios do not include expenses of the Underlying Funds in which the Fund invests. |
5 |
Net expense ratio includes extraordinary expenses. |
40
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.”
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.
41
Broker-defined sales charge waiver policies
From time to time, shareholders purchasing fund shares through a brokerage platform or account may be eligible for sales charge waivers (front-end sales load or CDSC) and discounts, which may differ from those disclosed elsewhere in this Prospectus or the SAI. In all instances, it is the purchaser's responsibility to notify the Fund or the purchaser's financial intermediary at the time of purchase of any relationship or other facts qualifying the purchaser for sales charge waivers or discounts. For waivers and discounts not available through a particular intermediary, shareholders will have to purchase the Fund's shares directly from the Fund or through another intermediary to receive such waivers or discounts. Please see the section entitled About Your Account — Choosing a Share Class for more information on sales charges and waivers available for different classes.
CDSC waivers on Class C shares
Merrill Lynch:
Shareholders purchasing Fund shares through a Merrill Lynch platform or account will be eligible only for the following sales charge waivers (front-end sales charge waivers and CDSC waivers) and discounts, which may differ from those disclosed elsewhere in this Prospectus or the SAI.
Front-end sales charge waivers for Class A shares available at Merrill Lynch
CDSC waivers on Class A and C shares available at Merrill Lynch
42
Front-end sales charge discounts available at Merrill Lynch: Breakpoints, rights of accumulation, and letters of intent
Morgan Stanley Wealth Management:
Shareholders purchasing Fund shares through a Morgan Stanley Wealth Management transactional brokerage account will be eligible only for the following front-end sales charge waivers with respect to Class A shares, which may differ from and may be more limited than those disclosed elsewhere in this Prospectus or the SAI.
Front-end Sales Charge Waivers on Class A Shares available at Morgan Stanley Wealth Management
Ameriprise Financial:
Class A Shares Front-End Sales Charge Waivers Available at Ameriprise Financial:
The following information applies to Class A shares purchases if you have an account with or otherwise purchase Fund shares through Ameriprise Financial:
Shareholders purchasing Fund shares through an Ameriprise Financial retail brokerage account are eligible for the following front-end sales charge waivers, which may differ from those disclosed elsewhere in this Prospectus or the SAI:
Raymond James & Associates, Inc., Raymond James Financial Services & Raymond James Affiliates (“Raymond James”):
Shareholders purchasing Fund shares through a Raymond James platform or account will be eligible only for the following load waivers (front-end sales charge waivers and CDSC waivers) and discounts, which may differ from those disclosed elsewhere in this Prospectus or the SAI.
43
Front-end sales load waivers on Class A shares available at Raymond James
CDSC waivers on Class A and C shares available at Raymond James
Front-end load discounts available at Raymond James: Breakpoints, and/or rights of accumulation
Edward D. Jones & Co., L.P. (“Edward Jones”):
Policies Regarding Transactions Through Edward Jones
The following information has been provided by Edward Jones:
The following information supersedes prior information with respect to transactions and positions held in fund shares through an Edward Jones system. Shareholders purchasing fund shares on the Edward Jones commission and fee-based platforms are eligible only for the following sales charge discounts (also referred to as “breakpoints”) and waivers, which can differ from discounts and waivers described elsewhere in this Prospectus or the SAI or through another broker-dealer. In all instances, it is the shareholder's responsibility to inform Edward Jones at the time of purchase of any relationship, holdings of the Delaware Funds, or other facts qualifying the purchaser for discounts or waivers. Edward Jones can ask for documentation of such circumstance. Shareholders should contact Edward Jones if they have questions regarding their eligibility for these discounts and waivers.
Breakpoints
Rights of Accumulation (“ROA”)
Letter of Intent (“LOI”)
44
Jones of such assets at the time of calculation. Purchases made before the LOI is received by Edward Jones are not adjusted under the LOI and will not reduce the sales charge previously paid. Sales charges will be adjusted if LOI is not met.
Sales Charge Waivers:
Sales charges are waived for the following shareholders and in the following situations:
Contingent Deferred Sales Charge (“CDSC”) Waivers:
If the shareholder purchases shares that are subject to a CDSC and those shares are redeemed before the CDSC is expired, the shareholder is responsible to pay the CDSC except in the following conditions:
Other Important Information Regarding Transactions Through Edward Jones
Minimum Purchase Amounts
Minimum Balances
Edward Jones has the right to redeem at its discretion fund holdings with a balance of $250 or less. The following are examples of accounts that are not included in this policy:
Exchanging Share Classes
Janney Montgomery Scott, LLC (“Janney”):
If you purchase fund shares through a Janney brokerage account, you will be eligible for the following load waivers (front-end sales charge waivers and contingent deferred sales charge (“CDSC”), or back-end sales charge, waivers) and discounts, which may differ from those disclosed elsewhere in this Prospectus or the SAI.
45
Front-end sales charge* waivers on Class A shares available at Janney
CDSC waivers on Class A and C shares available at Janney
Front-end sales charge* discounts available at Janney: breakpoints, rights of accumulation, and/or letters of intent
*Also referred to as an “initial sales charge.”
Oppenheimer & Co. Inc. (“OPCO”)
Shareholders purchasing Fund shares through an OPCO platform or account are eligible only for the following load waivers (front-end sales charge waivers and contingent deferred, or back-end, sales charge waivers) and discounts, which may differ from those disclosed elsewhere in this Prospectus or the SAI.
Front-end Sales Load Waivers on Class A Shares available at OPCO
46
CDSC Waivers on A, B and C Shares available at OPCO
Front-end load Discounts Available at OPCO: Breakpoints, Rights of Accumulation & Letters of Intent
Robert W. Baird & Co. Incorporated (“Baird”):
Shareholders purchasing fund shares through a Baird platform or account will only be eligible for the following sales charge waivers (front-end sales charge waivers and CDSC waivers) and discounts, which may differ from those disclosed elsewhere in this Prospectus or the SAI.
Front-End Sales Charge Waivers on Class A Shares Available at Baird
CDSC Waivers on Class A and C Shares Available at Baird
Front-End Sales Charge Discounts Available at Baird: Breakpoints and/or Rights of Accumulations
47
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Additional information
Contact information
49
Additional information about the Fund's investments is available in its annual and semiannual shareholder reports. In the Fund's annual shareholder report, you will find a discussion of the market conditions and investment strategies that significantly affected the Fund's performance during the period covered by the report. You can find more information about the Fund in its current SAI, which is filed electronically with the SEC, and which is legally a part of this Prospectus (it is incorporated by reference). To receive a free copy of the SAI, or the annual or semiannual report, or if you have any questions about investing in the Fund, write to us at P.O. Box 9876, Providence, RI 02940-8076 by regular mail or 4400 Computer Drive, Westborough, MA 01581-1722 by overnight courier service, or call toll-free 800 523-1918. The SAI and shareholder reports are available, free of charge, through the Fund's website at delawarefunds.com/literature. You may also obtain additional information about the Fund from your financial advisor.
You can find reports and other information about the Fund on the EDGAR database on the SEC website at sec.gov. You may obtain copies of this information, after paying a duplication fee, by emailing the SEC at publicinfo@sec.gov.
Investment Company Act number: 811-04304
PR-023 11/22
Delaware Group® Government Fund
|
Nasdaq ticker symbols |
Delaware Strategic Income Fund |
|
Class A |
DEGGX |
Class C |
DUGCX |
Class R |
DUGRX |
Institutional Class |
DUGIX |
Delaware Emerging Markets Debt Corporate Fund |
|
Class A |
DEDAX |
Class C |
DEDCX |
Class R |
DEDRX |
Institutional Class |
DEDIX |
November 28, 2022
P.O. Box 9876, Providence, RI 02940-8076 (regular mail)
4400 Computer Drive, Westborough, MA 01581-1722 (overnight courier service)
For a Prospectus, Performance, and Information on Existing Accounts: 800 523-1918
For Dealer Services (Broker/Dealers only): 800 362-7500
This Statement of Additional Information (“SAI”) supplements the information contained in the current prospectuses (each a “Prospectus” and collectively, the “Prospectuses”), dated November 28, 2022, as they may be amended from time to time, for Delaware Strategic Income Fund and Delaware Emerging Markets Debt Corporate Fund (each a “Fund” and collectively, the “Funds”).
This SAI should be read in conjunction with the Prospectuses. This SAI is not itself a prospectus but is, in its entirety, incorporated by reference into the Prospectuses.
The Prospectuses may be obtained through our website at delawarefunds.com/literature; by writing or calling your financial advisor; or by contacting the Funds' distributor, Delaware Distributors, L.P. (the “Distributor”), at the above addresses, or by calling the above phone numbers. Please do not send any correspondence to 100 Independence, 610 Market Street, Philadelphia, PA 19106-2354. The Funds' financial statements, the notes relating thereto, the financial highlights, and the report of the independent registered public accounting firm are incorporated by reference from each Fund's annual report (“Annual Report”) into this SAI. An Annual Report will accompany any request for this SAI. An Annual Report can be obtained, without charge, by calling 800 523-1918.
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Table of contents
|
Page |
Organization and Classification |
3 |
Investment Objectives, Restrictions, and Policies |
3 |
Investment Strategies and Risks |
4 |
Disclosure of Portfolio Holdings Information |
28 |
Management of the Trust |
29 |
Code of Ethics |
37 |
Proxy Voting Policy |
37 |
Investment Manager and Other Service Providers |
38 |
Portfolio Managers |
41 |
Trading Practices and Brokerage |
43 |
Capital Structure |
44 |
Purchasing Shares |
45 |
Investment Plans |
52 |
Determining Offering Price and Net Asset Value |
54 |
Redemption and Exchange |
55 |
Distributions and Taxes |
59 |
Performance Information |
68 |
Financial Statements |
69 |
Principal Holders |
69 |
Appendix A — Description of Ratings |
72 |
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Organization and Classification
This SAI describes the Funds, which are a series of Delaware Group® Government Fund (the “Trust”). The Funds offer Class A, Class C, and Class R shares (collectively, the “Retail Classes”). The Funds also offer an Institutional Class (together with the Retail Classes, the “Classes”). All references to “shares” in this SAI refer to all classes of shares (each share class, the “Class”) of the Funds, except where noted. The Funds' investment manager is Delaware Management Company (the “Manager” or “DMC”), a series of Macquarie Investment Management Business Trust (a Delaware statutory trust).
Organization
The Trust was originally organized as a Maryland corporation in 1985 and reorganized as a Delaware statutory trust on September 29, 1999.
Effective as of the close of business on September 17, 2021, Delaware Strategic Income II Fund, a series of Delaware Group Equity Funds IV, merged into Delaware Strategic Income Fund.
Classification
The Trust is an open-end management investment company.
Each Fund's portfolio of assets is diversified as defined by the Investment Company Act of 1940, as amended (the “1940 Act”). The 1940 Act requires a “diversified” fund, with respect to 75% of the value of its total assets, to invest (1) no more than 5% of the value of the Fund's total assets in the securities of any one issuer and (2) in no more than 10% of the outstanding voting securities of such issuer. This limitation generally requires a diversified fund to invest in securities issued by a minimum of 16 issuers. This limitation cannot be changed without approval by the holders of a “majority” of a Fund's outstanding shares as described below.
Investment Objectives, Restrictions, and Policies
Investment Objectives
Each Fund's investment objective is described in its Prospectus. Each Fund's investment objective is nonfundamental, and may be changed without shareholder approval. However, the Trust's Board of Trustees (“Board”) must approve any changes to nonfundamental investment objectives, and a Fund will notify shareholders at least 60 days prior to a material change in the Fund's investment objective.
Fundamental Investment Restrictions
Each Fund has adopted the following restrictions that cannot be changed without approval by the holders of a “majority” of the Fund's outstanding shares, which is a vote by the holders of the lesser of: (i) 67% or more of the voting securities present in person or by proxy at a meeting, if the holders of more than 50% of the outstanding voting securities are present or represented by proxy; or (ii) more than 50% of the outstanding voting securities. Except for the limitation on borrowing, the percentage limitations contained in the restrictions and policies set forth herein apply at the time of purchase of securities.
Each Fund shall not:
1. Make investments that will result in the concentration (as that term may be defined in the 1940 Act, any rule or order thereunder, or U.S. Securities and Exchange Commission (“SEC”) staff interpretation thereof) of its investments in the securities of issuers primarily engaged in the same industry, provided that this restriction does not limit the Fund from investing in obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities, or in tax-exempt obligations.
2. Borrow money or issue senior securities, except as the 1940 Act, any rule or order thereunder, or SEC staff interpretation thereof, may permit.
3. Underwrite the securities of other issuers, except that the Fund may engage in transactions involving the acquisition, disposition, or resale of its portfolio securities under circumstances where it may be considered to be an underwriter under the Securities Act of 1933, as amended (the “1933 Act”).
4. Purchase or sell real estate, unless acquired as a result of ownership of securities or other instruments and provided that this restriction does not prevent the Fund from investing in issuers which invest, deal, or otherwise engage in transactions in real estate or interests therein, or investing in securities that are secured by real estate or interests therein.
5. Purchase or sell physical commodities, unless acquired as a result of ownership of securities or other instruments and provided that this restriction does not prevent the Fund from engaging in transactions involving futures contracts and options thereon or investing in securities that are secured by physical commodities.
6. Make personal loans or loans of its assets to persons who control or are under common control with the Fund, except as the 1940 Act, any rule or order thereunder, or SEC staff interpretation thereof, may permit. This restriction does not prevent the Fund from, among other things, purchasing debt obligations, entering into repurchase agreements, loaning its assets to broker/dealers or institutional investors, or investing in loans, including assignments and participation interests.
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Investment Objectives, Restrictions, and Policies
Nonfundamental Investment Restrictions
In addition to the fundamental investment policies and investment restrictions described above, and the various general investment policies described in the Prospectus, each Fund will be subject to the following investment restriction, which is considered nonfundamental and may be changed by the Trust's Board of Trustees (“Board”) without shareholder approval: Each Fund may not invest more than 15% of its net assets in securities that it cannot sell or dispose of in the ordinary course of business within seven days at approximately the value that the Fund has valued the investment.
The Funds have been advised by the staff of the SEC that it is the staff's position, under the 1940 Act, that a Fund may invest (a) no more than 10% of its assets in the aggregate in certain collateralized mortgage obligations (“CMOs”) and real estate mortgage investment conduits (“REMICs”) which are deemed to be investment companies under the 1940 Act and issue their securities pursuant to an exemptive order from the SEC and (b) no more than 5% of its assets in any single issue of such CMOs or REMICs.
For purposes of each Fund's concentration policy (i.e., investing more than 25% of its net assets in the securities of issuers primarily engaged in the same industry), each Fund intends to comply with the SEC staff position that securities issued or guaranteed as to principal and interest by any single foreign government are considered to be securities of issuers in the same industry. In applying each Fund's policy on concentration: (i) utility companies will be divided according to their services, for example, gas, gas transmission, electric, and telephone will each be considered a separate industry; (ii) financial service companies will be classified according to the end users of their services, for example, automobile finance, bank finance, and diversified finance will each be considered a separate industry; and (iii) asset-backed securities will be classified according to the underlying assets securing such securities.
The exemption from the fundamental investment limitation on concentration described above does not apply to private activity bonds that generate taxable income for alternative minimum tax purposes.
Except for the Funds' policy with respect to borrowing, any investment restriction or limitation that involves a maximum percentage of securities or assets shall not be considered to be violated unless an excess over the percentage occurs immediately after an acquisition of securities or a utilization of assets and such excess results therefrom.
Portfolio Turnover
Portfolio trading will be undertaken principally to accomplish each Fund's investment objective. The Funds are free to dispose of portfolio securities at any time, subject to complying with the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), and the 1940 Act, when changes in circumstances or conditions make such a move desirable in light of each Fund's investment objective. The Funds will not attempt to achieve or be limited to a predetermined rate of portfolio turnover. Such turnover always will be incidental to transactions undertaken with a view to achieving each Fund's respective investment objective.
The portfolio turnover rate tells you the amount of trading activity in a Fund's portfolio. A turnover rate of 100% would occur, for example, if all of a Fund's investments held at the beginning of a year were replaced by the end of the year, or if a single investment was frequently traded. The turnover rate also may be affected by cash requirements from redemptions and repurchases of a Fund's shares. A high rate of portfolio turnover in any year may increase brokerage commissions paid and could generate taxes for shareholders on realized investment gains. In investing to achieve its investment objective, a Fund may hold securities for any period of time.
The Funds may engage in active and frequent trading of portfolio securities, which means that portfolio turnover can be expected to exceed 100%. The Funds have, in the past, experienced portfolio turnover rates that were significantly in excess of 100%.
For the past two fiscal years, the Funds' portfolio turnover rates were as follows:
Fund |
7/31/21 |
7/31/22 |
||
Delaware Strategic Income Fund |
89% |
65% |
||
Delaware Emerging Markets Debt Corporate Fund |
99% |
55% |
Investment Strategies and Risks
The Funds' strategies and risks are described in the Prospectuses. Certain additional information is provided below. The following discussion supplements the description of the Funds' investment strategies and risks that are included in the Prospectuses. The Funds' investment strategies are nonfundamental and may be changed without shareholder approval.
Asset-Backed Securities (“ABS”)
The Funds may invest a portion of their assets in securities that are backed by assets such as receivables on home equity and credit loans; receivables regarding automobile, mobile home and recreational vehicle loans; wholesale dealer floor plans; and leases, or other loans or financial receivables currently available or that may be developed in the future.
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Asset-backed receivables are securitized in either a pass-through or a pay-through structure. Pass-through securities provide investors with an income stream consisting of both principal and interest payments in respect of the receivables in the underlying pool. Pay-through ABS are debt obligations issued usually by a special purpose entity. The securities are collateralized by the various receivables and the payments on the underlying receivables provide the proceeds to pay the debt service on the debt obligations issued.
The rate of principal payment on ABS generally depends on the rate of principal payments received on the underlying assets. Such rate of payments may be affected by economic and various other factors such as changes in interest rates or the concentration of collateral in a particular geographic area. Therefore, the yield may be difficult to predict and actual yield to maturity may be more or less than the anticipated yield to maturity. The credit quality of most ABS depends primarily on the credit quality of the assets underlying such securities, how well the entities issuing the securities are insulated from the credit risk of the originator or affiliated entities, and the amount of credit support provided to the securities. Due to the shorter maturity of the collateral backing such securities, there tends to be less of a risk of substantial prepayment than with mortgage-backed securities (“MBS”) but the risk of such a prepayment does exist. Such ABS do, however, involve certain risks not associated with MBS, including the risk that security interests cannot be adequately, or in many cases ever, established, and other risks that may be peculiar to particular classes of collateral. For example, with respect to credit card receivables, a number of state and federal consumer credit laws give debtors the right to set off certain amounts owed on the credit cards, thereby reducing the outstanding balance. In the case of automobile receivables, there is a risk that the holders may not have either a proper or first security interest in all of the obligations backing such receivables due to the large number of vehicles involved in a typical issuance and technical requirements under state laws; therefore, recoveries on repossessed collateral may not always be available to support payments on the securities.
ABS are often backed by a pool of assets representing the obligations of a number of different parties. To lessen the effect of failures by obligors on underlying assets to make payments, such securities may contain elements of credit support. Such credit support falls into two categories: (i) liquidity protection, and (ii) protection against losses resulting from ultimate default by an obligor on the underlying assets. Liquidity protection refers to the provision of advances, generally by the entity administering the pool of assets, to ensure that the receipt of payments due on the underlying pool is timely. Protection against losses resulting from ultimate default enhances the likelihood of payments of the obligations on at least some of the assets in the pool. Such protection may be provided through guarantees, insurance policies, or letters of credit obtained by the issuer or sponsor from third parties, through various means of structuring the transaction, or through a combination of such approaches. The Funds will not pay any additional fees for such credit support, although the existence of credit support may increase the price of a security.
Examples of credit support arising out of the structure of the transaction include “senior-subordinated securities” (multiple-class securities with one or more classes subordinate to other classes as to the payment of principal thereof and interest thereon, with the result that defaults on the underlying assets are borne first by the holders of the subordinated class), creation of “reserve funds” (where cash or investments, sometimes funded from a portion of the payments on the underlying assets, are held in reserve against future losses), and “over collateralization” (where the scheduled payments on, or the principal amount of, the underlying assets exceed that required to make payments of the securities and pay any servicing or other fees). The degree of credit support provided for each issue is generally based on historical information respecting the level of credit risk associated with the underlying assets. Delinquencies or losses in excess of those anticipated could adversely affect the return on an investment in such issue.
Borrowing
Each Fund may borrow money from banks, including its custodian, as a temporary measure for extraordinary or emergency purposes to facilitate redemptions. Each Fund may also obtain such short-term borrowing from banks as may be necessary from time to time due, but not limited, to such events as: large dividend payments, failed trades, the clearance of purchases and sales of portfolio securities, and securities on loan. Each Fund will be required to pay interest to the lending banks on amounts borrowed. As a result, borrowing money could result in a Fund being unable to meet its investment objective.
The 1940 Act and the SEC's current rules, exemptions, and interpretations thereunder, permit a Fund to borrow up to one-third of the value of its total assets (including the amount borrowed, but less all liabilities and indebtedness not represented by senior securities) from banks. A Fund is required to maintain continuous asset coverage of at least 300% with respect to such borrowings and to reduce the amount of its borrowings (within three days excluding Sundays and holidays) to restore such coverage if it should decline to less than 300% due to market fluctuations or otherwise. In the event that a Fund is required to reduce its borrowings, it may have to sell portfolio holdings, even if such sale of the Fund's holdings would be disadvantageous from an investment standpoint. Investment securities will not be purchased while a Fund has an outstanding borrowing.
In addition to borrowings that are subject to 300% asset coverage and are considered by the SEC to be permitted “senior securities,” a Fund is also permitted under the 1940 Act to borrow for temporary purposes an amount not exceeding 5% of the value of its total assets at the time when the loan is made. A loan will be presumed to be for temporary purposes if it is repaid within 60 days and is not extended or renewed.
Brady Bonds
Delaware Strategic Income Fund may invest in Brady Bonds.
Brady Bonds are securities created through the exchange of existing commercial bank loans to public and private entities in certain emerging markets for new bonds in connection with debt restructurings under a debt restructuring plan introduced by former US Secretary of the Treasury, Nicholas F. Brady (the “Brady Plan”). Brady Plan debt restructurings have been implemented in a number of countries including Argentina, Brazil, Bulgaria, Costa Rica, Croatia, Dominican Republic, Ecuador, Jordan, Mexico, Morocco, Nigeria, Panama, Peru, the Philippines, Poland, Slovenia, Uruguay, and Venezuela. Brady Bonds may be collateralized or uncollateralized, are issued in various currencies (but primarily the US dollar), and are actively traded in over-the-counter secondary
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Investment Strategies and Risks
markets. US dollar-denominated, collateralized Brady Bonds, which may be fixed-rate bonds or floating-rate bonds, are generally collateralized in full as to principal by US Treasury zero coupon bonds having the same maturity as the bonds. Brady Bonds are often viewed as having three or four valuation components: the collateralized repayment of principal at final maturity, the collateralized interest payments, the uncollateralized interest payments, and any uncollateralized repayment of principal at maturity (these uncollateralized amounts constituting the “residual risk”). In light of the residual risk of Brady Bonds and the history of defaults of countries issuing Brady Bonds with respect to commercial bank loans by public and private entities, investments in Brady Bonds may be viewed as speculative.
Depositary Receipts
Many securities of foreign issuers are represented by ADRs, GDRs, and EDRs (collectively, “depositary receipts”). Generally, depositary receipts in registered form are designed for use in the US securities market and depositary receipts in bearer form are designed for use in securities markets outside the US. ADRs evidence ownership of, and represent the right to receive, securities of foreign issuers deposited in a domestic bank or trust company or a foreign correspondent bank. Prices of ADRs are quoted in US dollars, and ADRs are traded in the US on exchanges or over-the-counter. While ADRs do not eliminate all the risks associated with foreign investments, by investing in ADRs rather than directly in the stock of foreign issuers, a Fund will avoid currency and certain foreign market trading risks during the settlement period for either purchases or sales. In general, there is a large, liquid market in the US for ADRs quoted on a national securities exchange. The information available for ADRs is subject to the accounting, auditing, and financial reporting standards of the US market or exchange on which they are traded, which standards are generally more uniform and more exacting than those to which many foreign issuers may be subject.
EDRs and GDRs are typically issued by foreign banks or trust companies and evidence ownership of underlying securities issued by either a foreign or a US corporation. EDRs and GDRs may not necessarily be denominated in the same currency as the underlying securities into which they may be converted. The underlying shares are held in trust by a custodian bank or similar financial institution in the issuer's home country. If the issuer's home country does not have developed financial markets, a Fund could be exposed to the credit risk of the custodian or financial institution and greater market risk. The depository bank may not have physical custody of the underlying securities at all times and may charge fees for various services, including forwarding dividends and interest and corporate actions. The Fund would be expected to pay a share of the additional fees, which it would not pay if investing directly in the foreign securities. The Fund may experience delays in receiving its dividend and interest payments or exercising rights as a shareholder.
Depositary receipts may reduce some but not eliminate all the risks inherent in investing in the securities of foreign issuers. Depositary receipts are still subject to the political and economic risks of the underlying issuer's country and are still subject to foreign currency exchange risk. Depositary receipts will be issued under sponsored or unsponsored programs. In sponsored programs, an issuer has made arrangements to have its securities traded in the form of depositary receipts. In unsponsored programs, the issuer may not be directly involved in the creation of the program. Although regulatory requirements with respect to sponsored and unsponsored programs are generally similar, in some cases it may be easier to obtain financial information about an issuer that has participated in the creation of a sponsored program. There may be an increased possibility of untimely responses to certain corporate actions of the issuer, such as stock splits and rights offerings, in an unsponsored program. Accordingly, there may be less information available regarding issuers of securities underlying unsponsored programs and there may not be a correlation between this information and the market value of the depositary receipts. If a Fund's investment depends on obligations being met by the arranger as well as the issuer of an unsponsored program, the Fund will be exposed to additional credit risk.
Derivatives Instruments
The Funds may invest in some or all of the following types of derivatives instruments: forward foreign currency contracts, futures, options, options on futures contracts, and swaps, all of which are described in more detail in this section of the SAI.
Generally, derivatives are financial instruments whose values depend on or are derived from the value of one or more underlying assets, reference rates, indices, or other market factors (a “reference instrument”) and may relate to stocks, bonds, interest rates, currencies, commodities, or related indices. Derivatives instruments allow a Fund to gain or reduce exposure to the value of a reference instrument without actually owning or selling the instrument.
A Fund may value derivatives instruments at market value, notional value, or full exposure value (i.e., the sum of the notional amount for the contract plus the market value). The manner in which certain securities or other instruments are valued by a Fund may differ from the manner in which those investments are valued by other types of investors.
Exclusion from commodity pool operator definition. The Manager has claimed an exclusion from the definition of “commodity pool operator” (“CPO”) with respect to the Funds under the Commodity Exchange Act (“CEA”) and the rules of the Commodity Futures Trading Commission (“CFTC”) and, therefore, is not subject to CFTC registration or regulation as a CPO. In addition, the Manager, although registered as a commodity trading advisor (“CTA”) with the CFTC, provides commodity interest trading advice to the Funds as if the Manager was exempt from CTA registration in reliance on applicable rules of the CFTC.
The terms of the CPO exclusion require a Fund, among other things, to adhere to certain limits on its investments in “commodity interests.” Commodity interests include commodity futures, commodity options, and certain swaps, which in turn include nondeliverable currency forwards, as further described below. Because the Manager intends to comply with the terms of the CPO exclusion with respect to the Funds, a Fund may, in the future, need to adjust its investment strategies, consistent with its investment goal, to limit its investments in these types of instruments. The Funds are not intended as a vehicle for
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trading in the commodity futures, commodity options, or swaps markets. The CFTC has neither reviewed nor approved the Manager's reliance on the CPO exclusion, the Manager's provision of services as an exempt CTA, or the Funds, their respective investment strategies, or this SAI.
Generally, the exclusion from CPO definition and regulation on which the Manager relies requires each Fund to meet one of the following tests for its commodity interest positions, other than positions entered into for bona fide hedging purposes (as defined in the rules of the CFTC): either (1) the aggregate initial margin and premiums required to establish the Fund's positions in commodity interests may not exceed 5% of the liquidation value of the Fund's portfolio (after taking into account unrealized profits and unrealized losses on any such positions); or (2) the aggregate net notional value of the Fund's commodity interest positions, determined at the time the most recent such position was established, may not exceed 100% of the liquidation value of the Fund's portfolio (after taking into account unrealized profits and unrealized losses on any such positions). In addition to meeting one of these trading limitations, a Fund may not be marketed as a commodity pool or otherwise as a vehicle for trading in the commodity futures, commodity options, or swaps markets. If, in the future, a Fund can no longer satisfy these requirements, the Manager would withdraw the notice claiming an exclusion from the definition of a CPO for the Fund, and the Manager would be subject to registration and regulation as a CPO with respect to the Fund, in accordance with CFTC rules that apply to CPOs of registered investment companies. Generally, these rules allow for substituted compliance with CFTC disclosure and shareholder reporting requirements, based on the Manager's compliance with comparable SEC requirements. However, as a result of CFTC regulation, the Fund may incur additional compliance and other expenses.
Developing government regulation of derivatives. The regulation of cleared and uncleared swaps, as well as other derivatives, is a rapidly changing area of law and is subject to modification by government and judicial action. In addition, the SEC, CFTC, and the exchanges are authorized to take extraordinary actions in the event of a market emergency, including, for example, the implementation or reduction of speculative position limits, the implementation of higher margin requirements, the establishment of daily price limits, and the suspension of trading.
It is not possible to predict fully the effects of current or future regulation. However, it is possible that developments in government regulation of various types of derivatives instruments may prevent the Fund from using or limit the Fund's use of these instruments effectively as a part of its investment strategy, and could adversely affect the Fund's ability to achieve its investment goal(s). The Manager will continue to monitor developments in this area. New requirements, even if not directly applicable to a Fund, may increase the cost of the Fund's investments and cost of doing business.
Duration
Most debt obligations provide interest (coupon) payments in addition to a final (par) payment at maturity. Some obligations also have call provisions. Depending on the relative magnitude of these payments and the nature of the call provisions, the market values of debt obligations may respond differently to changes in the level and structure of interest rates. Traditionally, a debt security's term-to-maturity has been used as a proxy for the sensitivity of the security's price to changes in interest rates (which is the interest rate risk or volatility of the security). However, term-to-maturity measures only the time until a debt security provides its final payment, taking no account of the pattern of the security's payments prior to maturity.
Duration is a measure of the expected life of a fixed income security on a present value basis that was developed as a more precise alternative to the concept of term-to-maturity. Duration incorporates a bond's yield, coupon interest payments, final maturity, and call features into one measure. Duration is one of the fundamental tools used by the Manager in the selection of fixed income securities. Duration takes the length of the time intervals between the present time and the time that the interest and principal payments are scheduled or, in the case of a callable bond, expected to be received, and weights them by the present values of the cash to be received at each future point in time. For any fixed income security with interest payments occurring prior to the payment of principal, duration is always less than maturity. In general, all other factors being the same, the lower the stated or coupon rate of interest of a fixed income security, the longer the duration of the security; conversely, the higher the stated or coupon rate of interest of a fixed income security, the shorter the duration of the security.
There are some situations where even the standard duration calculation does not properly reflect the interest rate exposure of a security. For example, floating and variable rate securities often have final maturities of 10 or more years; however, their interest rate exposure corresponds to the frequency of the coupon reset. Another example where the interest rate exposure is not properly captured by duration is the case of mortgage pass-through securities. The stated final maturity of such securities is generally 30 years, but current prepayment rates are more critical in determining the securities' interest rate exposure. In these and other similar situations, the Manager will use sophisticated analytical techniques that incorporate the economic life of a security into the determination of its interest rate exposure.
Foreign Investments
The Funds may invest in foreign securities. Foreign securities may include American Depositary Receipts (“ADRs”), Global Depositary Receipts (“GDRs”), and European Depositary Receipts (“EDRs”). Delaware Emerging Markets Debt Corporate Fund will invest in a wide variety of performing interest bearing debt instruments issued by borrowers in emerging markets.
Overview. Investors should consider carefully the substantial risks associated with investing in the securities of certain governments and companies located in, or having substantial operations in, foreign countries, which are in addition to the usual risks inherent in domestic investments. As with US securities, the value of foreign securities is affected by general economic conditions and individual issuer and industry earnings prospects. Investments in depositary receipts also involve some or all of the risks described below.
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Investment Strategies and Risks
There is the possibility of cessation of trading on foreign exchanges, expropriation, nationalization of assets, confiscatory or punitive taxation, withholding and other foreign taxes on income or other amounts, foreign exchange controls (which may include suspension of the ability to transfer currency from a given country), restrictions on removal of assets, political or social instability, military action or unrest, or diplomatic developments that could affect investments in securities of issuers in foreign nations. There is no assurance that the Manager will be able to anticipate these potential events. In addition, the value of securities denominated in foreign currencies and of dividends and interest paid with respect to such securities will fluctuate based on the relative strength of the US dollar compared to such foreign currencies.
There may be less publicly available information about foreign issuers that is comparable to the reports and ratings published about issuers in the US. Foreign issuers generally are not subject to uniform accounting or financial reporting standards. Auditing practices and requirements may not be comparable to those applicable to US issuers. Certain countries' legal institutions, financial markets, and services are less developed than those in the US or other major economies. The Funds may have greater difficulty voting proxies, exercising shareholder rights, securing dividends and obtaining information regarding corporate actions on a timely basis, pursuing legal remedies, and obtaining judgments with respect to foreign investments in foreign courts than with respect to domestic issuers in US courts. The costs associated with foreign investments, including withholding taxes, brokerage commissions, and custodial costs, are generally higher than with US investments.
Certain countries require governmental approval prior to investments by foreign persons, or limit the amount of investment by foreign persons in a particular company. Some countries limit the investment of foreign persons to only a specific class of securities of an issuer that may have less advantageous terms than securities of the issuer available for purchase by nationals. Although securities subject to such restrictions may be marketable abroad, they may be less liquid than foreign securities of the same class that are not subject to such restrictions. In some countries the repatriation of investment income, capital, and proceeds of sales by foreign investors may require governmental registration and/or approval. The Funds could be adversely affected by delays in or a refusal to grant any required governmental registration or approval for repatriation.
From time to time, trading in a foreign market may be interrupted. Foreign markets also have substantially less volume than the US markets and securities of some foreign issuers are less liquid and more volatile than securities of comparable US issuers. The Funds, therefore, may encounter difficulty in obtaining market quotations for purposes of valuing their portfolio and calculating their net asset value (“NAV”).
In many foreign countries, there is less government supervision and regulation of stock exchanges, brokers, and listed companies than in the US, which may result in greater potential for fraud or market manipulation. Foreign over-the-counter markets tend to be less regulated than foreign stock exchange markets and, in certain countries, may be totally unregulated. Brokerage commission rates in foreign countries, which generally are fixed rather than subject to negotiation as in the US, are likely to be higher. Foreign security trading, settlement, and custodial practices (including those involving securities settlement where assets may be released prior to receipt of payment) are often less developed than those in US markets, may be cumbersome, and may result in increased risk or substantial delays. This could occur in the event of a failed trade or the insolvency of, or breach of duty by, a foreign broker/dealer, securities depository, or foreign subcustodian.
To the extent that a Fund invests a significant portion of its assets in a specific geographic region or country, the Fund will have more exposure to economic risks related to such region or country than a fund whose investments are more geographically diversified. Adverse conditions or changes in policies in a certain region or country can affect securities of other countries whose economies appear to be unrelated but are otherwise connected. In the event of economic or political turmoil, a deterioration of diplomatic relations or a natural or man-made disaster in a region or country where a substantial portion of a Fund's assets are invested, the Fund may have difficulty meeting a large number of shareholder redemption requests.
The holding of foreign securities may be limited by a Fund to avoid investment in certain Passive Foreign Investment Companies (“PFICs”).
Developing markets or emerging markets. Investments in companies domiciled or with significant operations in developing market or emerging market countries may be subject to potentially higher risks than investments in developed countries. These risks include, among others (i) less social, political, and economic stability; (ii) smaller securities markets with low or nonexistent trading volume, which result in greater illiquidity and greater price volatility; (iii) certain national policies which may restrict a Fund's investment opportunities, including restrictions on investment in issuers or industries deemed sensitive to national interests; (iv) foreign taxation, including less transparent and established taxation policies; (v) less developed regulatory or legal structures governing private or foreign investment or allowing for judicial redress for injury to private property; (vi) the absence, until recently in many developing market countries, of a capital market structure or market-oriented economy; (vii) more widespread corruption and fraud; (viii) the financial institutions with which a Fund may trade may not possess the same degree of financial sophistication, creditworthiness, or resources as those in developed markets; and (ix) the possibility that recent favorable economic developments in some developing market countries may be slowed or reversed by unanticipated economic, political, or social events in such countries.
In addition, many developing market countries have experienced substantial, and during some periods, extremely high rates of inflation, for many years. Inflation and rapid fluctuations in inflation rates have had, and may continue to have, negative effects on the economies and securities markets of certain countries. Moreover, the economies of some developing market countries may differ unfavorably from the US economy in such respects as growth of gross domestic product, rate of inflation, currency depreciation, debt burden, capital reinvestment, resource self-sufficiency, and balance of payments position. The economies of some developing market countries may be based on only a few industries, and may be highly vulnerable to changes in local or global trade conditions.
Settlement systems in developing market countries may be less organized than in developed countries. Supervisory authorities may also be unable to apply standards which are comparable with those in more developed countries. There may be risks that settlement may be delayed and that cash or securities
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belonging to a Fund may be in jeopardy because of failures of or defects in the settlement systems. Market practice may require that payment be made prior to receipt of the security which is being purchased or that delivery of a security must be made before payment is received. In such cases, default by a broker or bank (the “counterparty”) through whom the relevant transaction is effected might result in a loss being suffered by a Fund. The Funds seek, where possible, to use counterparties whose financial status reduces this risk. However, there can be no certainty that the Funds will be successful in eliminating or reducing this risk, particularly as counterparties operating in developing market countries frequently lack the substance, capitalization, and/or financial resources of those in developed countries. Uncertainties in the operation of settlement systems in individual markets may increase the risk of competing claims to securities held by or to be transferred to a Fund. Legal compensation schemes may be nonexistent, limited, or inadequate to meet the Fund's claims in any of these events.
Securities trading in developing markets present additional credit and financial risks. A Fund may have limited access to, or there may be a limited number of, potential counterparties that trade in the securities of developing market issuers. Governmental regulations may restrict potential counterparties to certain financial institutions located or operating in the particular developing market. Potential counterparties may not possess, adopt, or implement creditworthiness standards, financial reporting standards, or legal and contractual protections similar to those in developed markets. Currency and other hedging techniques may not be available or may be limited.
The local taxation of income and capital gains accruing to nonresidents varies among developing market countries and may be comparatively high. Developing market countries typically have less well-defined tax laws and procedures and such laws may permit retroactive taxation so that a Fund could in the future become subject to local tax liabilities that had not been anticipated in conducting its investment activities or valuing its assets.
Many developing market countries suffer from uncertainty and corruption in their legal frameworks. Legislation may be difficult to interpret and laws may be too new to provide any precedential value. Laws regarding foreign investment and private property may be weak or nonexistent. Investments in developing market countries may involve risks of nationalization, expropriation, and confiscatory taxation. For example, the Communist governments of a number of Eastern European countries expropriated large amounts of private property in the past, in many cases without adequate compensation, and there can be no assurance that similar expropriation will not occur in the future. In the event of expropriation, a Fund could lose all or a substantial portion of any investments it has made in the affected countries. Accounting, auditing, and reporting standards in certain countries in which the Fund may invest may not provide the same degree of investor protection or information to investors as would generally apply in major securities markets. In addition, it is possible that purported securities in which a Fund invested may subsequently be found to be fraudulent and as a consequence the Fund could suffer losses.
Finally, currencies of developing market countries are subject to significantly greater risks than currencies of developed countries. Some developing market currencies may not be internationally traded or may be subject to strict controls by local governments, resulting in undervalued or overvalued currencies and associated difficulties with the valuation of assets, including a Fund's securities, denominated in that currency. Some developing market countries have experienced balance of payment deficits and shortages in foreign exchange reserves. Governments have responded by restricting currency conversions. Future restrictive exchange controls could prevent or restrict a company's ability to make dividend or interest payments in the original currency of the obligation (usually US dollars). In addition, even though the currencies of some developing market countries, such as certain Eastern European countries, may be convertible into US dollars, the conversion rates may be artificial to the actual market values and may be adverse to a Fund's shareholders.
Foreign governmental and supranational debt securities. Investments in debt securities of foreign governmental or supranational issuers are subject to all the risks associated with investments in US and foreign securities and certain additional risks.
Foreign government debt securities, sometimes known as sovereign debt securities, include debt securities issued, sponsored, or guaranteed by: governments or governmental agencies, instrumentalities, or political subdivisions located in emerging or developed market countries; government owned, controlled, or sponsored entities located in emerging or developed market countries; and entities organized and operated for the purpose of restructuring the investment characteristics of instruments issued by any of the above issuers.
A supranational entity is a bank, commission, or company established or financially supported by the national governments of one or more countries to promote reconstruction, trade, harmonization of standards or laws; economic development; and humanitarian, political, or environmental initiatives. Supranational debt obligations include: Brady Bonds (which are debt securities issued under the framework of the Brady Plan as a means for debtor nations to restructure their outstanding external indebtedness); participations in loans between emerging market governments and financial institutions; and debt securities issued by supranational entities such as the World Bank, Asia Development Bank, European Investment Bank, and the European Economic Community.
Foreign government debt securities are subject to risks in addition to those relating to debt securities generally. Governmental issuers of foreign debt securities may be unwilling or unable to pay interest and repay principal, or otherwise meet obligations, when due and may require that the conditions for payment be renegotiated. As a sovereign entity, the issuing government may be immune from lawsuits in the event of its failure or refusal to pay the obligations when due. The debtor's willingness or ability to repay in a timely manner may be affected by, among other factors, its cash flow situation, the extent of its non-US reserves, the availability of sufficient non-US exchange on the date a payment is due, the relative size of the debt service burden to the issuing country's economy as a whole, the sovereign debtor's policy toward principal international lenders, such as the International Monetary Fund or the World Bank, and the political considerations or constraints to which the sovereign debtor may be subject. Governmental debtors also will be dependent on expected disbursements from foreign governments or multinational agencies and the country's access to, or balance of, trade. Some governmental debtors
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Investment Strategies and Risks
have in the past been able to reschedule or restructure their debt payments without the approval of debt holders or declare moratoria on payments, and similar occurrences may happen in the future. There is no bankruptcy proceeding by which the Fund may collect in whole or in part on debt subject to default by a government.
Foreign currency exchange rates. Changes in foreign currency exchange rates will affect the US dollar market value of securities denominated in such foreign currencies and any income received or expenses paid by a Fund in that foreign currency. This may affect a Fund's share price, income, and distributions to shareholders. Some countries may have fixed or managed currencies that are not free-floating against the US dollar. It will be more difficult for the Manager to value securities denominated in currencies that are fixed or managed. Certain currencies may not be internationally traded, which could cause illiquidity with respect to a Fund's investments in that currency and any securities denominated in that currency. Currency markets generally are not as regulated as securities markets. Each Fund endeavors to buy and sell foreign currencies on as favorable a basis as practicable. Some price spread in currency exchanges (to cover service charges) may be incurred, particularly when a Fund changes investments from one country to another or when proceeds of the sale of securities in US dollars are used for the purchase of securities denominated in foreign currencies. Some countries may adopt policies that would prevent a Fund from transferring cash out of the country or withhold portions of interest and dividends at the source.
Certain currencies have experienced a steady devaluation relative to the US dollar. Any devaluations in the currencies in which a Fund's portfolio securities are denominated may have a detrimental impact on the Fund. Where the exchange rate for a currency declines materially after a Fund's income has been accrued and translated into US dollars, the Fund may need to redeem portfolio securities to make required distributions. Similarly, if an exchange rate declines between the time a Fund incurs expenses in US dollars and the time such expenses are paid, the Fund will have to convert a greater amount of the currency into US dollars in order to pay the expenses.
Investing in foreign currencies for purposes of gaining from projected changes in exchange rates further increases a Fund's exposure to foreign securities losses.
The Funds do not consider currencies or other financial commodities or contracts and financial instruments to be physical commodities (which include, for example, oil, precious metals, and grains). Accordingly, the Funds interpret the fundamental restriction related to commodities to permit them (subject to their investment goals and general investment policies) to invest directly in foreign currencies and other financial commodities and to purchase, sell, or enter into foreign currency futures contracts and options thereon, forward foreign currency contracts, foreign currency options, currency, commodity- and financial instrument-related swap agreements, hybrid instruments, interest rate, securities-related or foreign currency-related futures contracts or other currency-, commodity- or financial instrument-related derivatives, subject to compliance with any applicable provisions of the federal securities or commodities laws. Each Fund also interprets its fundamental restriction regarding purchasing and selling physical commodities to permit the Fund to invest in exchange-traded funds (“ETFs”) or other entities that invest in physical and/or financial commodities.
Variable Interest Entities. Delaware Emerging Markets Debt Corporate Fund may invest in securities issued by variable interest entities ("VIEs"). A VIE is a special structure that is designed to provide foreign investors with exposure to Chinese companies that operate in certain sectors in which China restricts or prohibits foreign investment. Investments in VIEs may pose additional risks because the investment is made through an intermediary shell company that has entered into service and other contracts with the underlying Chinese operating company to provide investors with exposure to the operating company, but may not represent a security issued by the operating company. As a result, such investment may limit the rights of an investor with respect to the underlying Chinese operating company. VIEs allow foreign shareholders to exert a degree of control over, and obtain economic benefits arising from, the operating company without formal legal ownership. However, the contractual arrangements between the shell company and the operating company may not be as effective in providing operational control as direct ownership, and a foreign investor's rights may be limited by, for example, actions of the Chinese government which could determine that the underlying contractual arrangements on which control of the VIE is based are invalid. The contractual arrangement on which the VIE structure is based would likely be subject to Chinese law and jurisdiction, which could raise questions about how recourse is sought.
Investments in VIEs may pose additional risks because investors hold securities issued by the shell company, rather than directly in the China-based operating company, and are therefore subject to the credit risk and related risks of investment in the shell company. Investments through VIEs may be affected by conflicts of interest and duties between the legal owners of the VIE and the stockholders of the listed holding company, which could adversely impact the value of investments. VIEs are not formally recognized under Chinese law and investors face uncertainty about future actions by the Chinese government that could significantly affect the operating company's financial performance and the enforceability of the contractual arrangements underlying the VIE structure. Prohibitions of these structures by the Chinese government, or the inability to enforce such contracts, from which the shell company derives its value, would likely cause the VIE-structured holding(s) to suffer significant losses, and in turn, adversely affect the funds' returns and net asset value.
Forward Foreign Currency Contracts
Each Fund values its assets daily in US dollars, but does not intend to convert the value of its foreign holdings into US dollars on a daily basis. Each Fund will, however, from time to time, purchase or sell foreign currencies and/or engage in forward foreign currency contracts in order to facilitate or expedite settlement of Fund transactions and to minimize currency value fluctuations. Each Fund may conduct its forward foreign currency contracts on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market or through entering into contracts to purchase or sell foreign currencies at a future date (i.e., a “forward foreign currency” contract or “forward” contract), and investors should be aware of the costs of currency conversion.
When a Fund enters into a contract for the purchase or sale of a security denominated in a foreign currency, or when it anticipates the receipt in a foreign currency of dividends or interest payments on a security that it holds, the Fund may desire to “lock in” the US dollar price of the security or the US dollar equivalent of such dividend or interest payment as the case may be. By entering into a forward contract for a fixed amount of dollars for the purchase or sale of the amount of foreign currency involved in the underlying transactions, a Fund will be able to protect itself against a possible loss resulting from an adverse change in the relationship between the US dollar and the subject foreign currency during the period between the date on which the security is purchased or sold, or on which the dividend or interest payment is declared, and the date on which such payments are made or received.
Additionally, when the Manager believes that the currency of a particular foreign country may suffer a substantial decline against the US dollar, a Fund may enter into a forward foreign currency contract for a fixed amount of dollars, to sell the amount of foreign currency approximating the value of some or all of the securities of the Fund denominated in such foreign currency.
Each Fund may use forward foreign currency contracts to manage currency risks and to facilitate transactions in foreign securities. The following discussion summarizes the principal currency management strategies involving forward foreign currency contracts that could be used by a Fund.
In connection with purchases and sales of securities denominated in foreign currencies, each Fund may enter into forward foreign currency contracts to fix a definite price for the purchase or sale in advance of the trade's settlement date. This technique is sometimes referred to as a “settlement hedge” or “transaction hedge.” The Manager expects to enter into settlement hedges in the normal course of managing a Fund's foreign investments. A Fund could also enter into forward foreign currency contracts to purchase or sell a foreign currency in anticipation of future purchases or sales of securities denominated in a foreign currency, even if the specific investments have not yet been selected by the Manager.
Each Fund may also use forward foreign currency contracts to hedge against a decline in the value of existing investments denominated in a foreign currency. For example, if a Fund owned securities denominated in pounds sterling, it could enter into a forward foreign currency contract to sell pounds
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sterling in return for US dollars to hedge against possible declines in the pound's value. Such a hedge (sometimes referred to as a “position hedge”) would tend to offset both positive and negative currency fluctuations, but would not offset changes in security values caused by other factors. A Fund could also hedge the position by selling another currency expected to perform similarly to the pound sterling — for example, by entering into a forward foreign currency contract to sell euros in return for US dollars. This type of hedge, sometimes referred to as a “proxy hedge,” could offer advantages in terms of cost, yield, or efficiency, but generally will not hedge currency exposure as effectively as a simple hedge into US dollars. Proxy hedges may result in losses if the currency used to hedge does not perform similarly to the currency in which the hedged securities are denominated.
Under definitions adopted by the CFTC and the SEC, nondeliverable forwards are considered swaps, and therefore are included in the definition of “commodity interests.” A nondeliverable forward is a cash-settled, short-term forward foreign currency contract on a thinly traded or nonconvertible foreign currency, where the profit or loss at the time of the settlement date is calculated by taking the difference between the agreed upon exchange rate and the spot rate at the time of settlement, for an agreed upon notional amount of funds. Although nondeliverable forwards have historically been traded in the over-the-counter (“OTC”) market, as swaps they may in the future be required to be centrally cleared and traded on public facilities. Currency and cross currency forwards that qualify as deliverable forwards are not regulated as swaps for most purposes, and are not included in the definition of “commodity interests.” However these forwards are subject to some requirements applicable to swaps, including reporting to swap data repositories, documentation requirements, and business conduct rules applicable to swap dealers.
Risks of forward foreign currency contracts. The successful use of these transactions will usually depend on the Manager's ability to accurately forecast currency exchange rate movements. Should exchange rates move in an unexpected manner, a Fund may not achieve the anticipated benefits of the transaction, or it may realize losses. In addition, these techniques could result in a loss if the counterparty to the transaction does not perform as promised, for example, due to bankruptcy or insolvency of the counterparty. While a Fund uses only counterparties that meet its credit quality standards, in unusual or extreme market conditions, a counterparty's creditworthiness and ability to perform may deteriorate rapidly, and the availability of suitable replacement counterparties may become limited. Moreover, investors should bear in mind that a Fund is not obligated to actively engage in hedging or other currency transactions. For example, a Fund may not attempt to hedge its exposure to a particular foreign currency at a time when doing so might avoid a loss.
Forward foreign currency contracts may limit potential gain from a positive change in the relationship between the US dollar and foreign currencies. Unanticipated changes in currency prices may result in poorer overall performance for a Fund than if it had not engaged in such contracts. Moreover, there may be an imperfect correlation between a Fund's portfolio holdings of securities denominated in a particular currency and the currencies bought or sold in the forward foreign currency contracts entered into by the Fund. This imperfect correlation may cause a Fund to sustain losses that will prevent the Fund from achieving a complete hedge or expose the Fund to risk of foreign exchange loss.
Futures and Options on Futures
Each Fund may invest (buy and sell) in futures contracts and options on such futures contracts. Delaware Strategic Income Fund will not enter into futures contracts and options thereon to the extent that more than 5% of its total assets are required as futures contract margin deposits and premiums on options. Delaware Emerging Markets Debt Corporate Fund currently intends to limit its investments in futures contracts such that (a) no more than 5% of the Fund's net assets are required as initial margin deposits on all such contracts in the aggregate and (b) the obligations and/or notional values under such contracts do not represent more than 40% of the Fund's net assets. The Fund may purchase or sell a futures contract on foreign currency to “lock in” exchange rates.
Futures contracts. Generally, a futures contract is a standard binding agreement to buy or sell a specified quantity of an underlying reference instrument, such as a specific security, currency or commodity, at a specified price at a specified later date. A “sale” of a futures contract means the acquisition of a contractual obligation to deliver the underlying reference instrument called for by the contract at a specified price on a specified date. A “purchase” of a futures contract means the acquisition of a contractual obligation to acquire the underlying reference instrument called for by the contract at a specified price on a specified date. The purchase or sale of a futures contract will allow a Fund to increase or decrease its exposure to the underlying reference instrument without having to buy the actual instrument.
The underlying reference instruments to which futures contracts may relate include non-US currencies, interest rates, stock and bond indices, and debt securities, including US government debt obligations. In most cases the contractual obligation under a futures contract may be offset, or “closed out,” before the settlement date so that the parties do not have to make or take delivery. The closing out of a contractual obligation is usually accomplished by buying or selling, as the case may be, an identical, offsetting futures contract. This transaction, which is effected through a member of an exchange, cancels the obligation to make or take delivery of the underlying instrument or asset. Although some futures contracts by their terms require the actual delivery or acquisition of the underlying instrument or asset, some require cash settlement.
Futures contracts may be bought and sold on US and non-US exchanges. Futures contracts in the US have been designed by exchanges that have been designated “contract markets” by the CFTC and must be executed through a futures commission merchant (“FCM”), which is a brokerage firm that is a member of the relevant contract market. Each exchange guarantees performance of the contracts as between the clearing members of the exchange, thereby reducing the risk of counterparty default. Futures contracts may also be entered into on certain exempt markets, including exempt boards of trade and electronic trading facilities, available to certain market participants. Because all transactions in the futures market are made, offset, or fulfilled by an FCM through a clearinghouse associated with the exchange on which the contracts are traded, a Fund will incur brokerage fees when it buys or sells futures contracts.
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Investment Strategies and Risks
A Fund generally buys and sells futures contracts only on contract markets (including exchanges or boards of trade) where there appears to be an active market for the futures contracts, but there is no assurance that an active market will exist for any particular contract or at any particular time. An active market makes it more likely that futures contracts will be liquid and bought and sold at competitive market prices. In addition, many of the futures contracts available may be relatively new instruments without a significant trading history. As a result, there can be no assurance that an active market will develop or continue to exist.
When a Fund enters into a futures contract, it must deliver to an account controlled by the FCM (that has been selected by the Fund), an amount referred to as “initial margin” that is typically calculated as an amount equal to the volatility in the market value of a contract over a fixed period. Initial margin requirements are determined by the respective exchanges on which the futures contracts are traded and the FCM. Thereafter, a “variation margin” amount may be required to be paid by a Fund or received by the Fund in accordance with margin controls set for such accounts, depending upon changes in the marked-to-market value of the futures contract. The account is marked-to-market daily and the variation margin is monitored by the Manager and a Fund's custodian on a daily basis. When the futures contract is closed out, if a Fund has a loss equal to or greater than the margin amount, the margin amount is paid to the FCM along with any loss in excess of the margin amount. If a Fund has a loss of less than the margin amount, the excess margin is returned to the Fund. If a Fund has a gain, the full margin amount and the amount of the gain are paid to the Fund.
Some futures contracts provide for the delivery of securities that are different than those that are specified in the contract. For a futures contract for delivery of debt securities, on the settlement date of the contract, adjustments to the contract can be made to recognize differences in value arising from the delivery of debt securities with a different interest rate from that of the particular debt securities that were specified in the contract. In some cases, securities called for by a futures contract may not have been issued when the contract was written.
Risks of futures contracts. A Fund's use of futures contracts is subject to the risks associated with derivatives instruments generally. In addition, a purchase or sale of a futures contract may result in losses to a Fund in excess of the amount that the Fund delivered as initial margin. Because of the relatively low margin deposits required, futures trading involves a high degree of leverage; as a result, a relatively small price movement in a futures contract may result in immediate and substantial loss, or gain, to a Fund. In addition, if a Fund has insufficient cash to meet daily variation margin requirements or close out a futures position, it may have to sell securities from its portfolio at a time when it may be disadvantageous to do so. Adverse market movements could cause a Fund to experience substantial losses on an investment in a futures contract.
There is a risk of loss by a Fund of the initial and variation margin deposits in the event of bankruptcy of the FCM with which the Fund has an open position in a futures contract. The assets of a Fund may not be fully protected in the event of the bankruptcy of the FCM or central counterparty because the Fund might be limited to recovering only a pro rata share of all available funds and margin segregated on behalf of an FCM's customers. If the FCM does not provide accurate reporting, a Fund is also subject to the risk that the FCM could use the Fund's assets, which are held in an omnibus account with assets belonging to the FCM's other customers, to satisfy its own financial obligations or the payment obligations of another customer to the central counterparty.
A Fund may not be able to properly hedge or effect its strategy when a liquid market is unavailable for the futures contract the Fund wishes to close, which may at times occur. In addition, when futures contracts are used for hedging, there may be an imperfect correlation between movements in the prices of the underlying reference instrument on which the futures contract is based and movements in the prices of the assets sought to be hedged.
If the Manager's investment judgment about the general direction of market prices or interest or currency exchange rates is incorrect, a Fund's overall performance will be poorer than if it had not entered into a futures contract. For example, if a Fund has purchased futures to hedge against the possibility of an increase in interest rates that would adversely affect the price of bonds held in its portfolio and interest rates instead decrease, a Fund will lose part or all of the benefit of the increased value of the bonds which it has hedged. This is because its losses in its futures positions will offset some or all of its gains from the increased value of the bonds.
The difference (called the “spread”) between prices in the cash market for the purchase and sale of the underlying reference instrument and the prices in the futures market is subject to fluctuations and distortions due to differences in the nature of those two markets. First, all participants in the futures market are subject to initial deposit and variation margin requirements. Rather than meeting additional variation margin requirements, investors may close futures contracts through offsetting transactions that could distort the normal pricing spread between the cash and futures markets. Second, the liquidity of the futures markets depends on participants entering into offsetting transactions rather than making or taking delivery of the underlying instrument. To the extent participants decide to make or take delivery, liquidity in the futures market could be reduced, resulting in pricing distortion. Third, from the point of view of speculators, the margin deposit requirements that apply in the futures market are less onerous than similar margin requirements in the securities market. Therefore, increased participation by speculators in the futures market may cause temporary price distortions. When such distortions occur, a correct forecast of general trends in the price of an underlying reference instrument by the Manager may still not necessarily result in a profitable transaction.
Futures contracts that are traded on non-US exchanges may not be as liquid as those purchased on CFTC-designated contract markets. In addition, non-US futures contracts may be subject to varied regulatory oversight. The price of any non-US futures contract and, therefore, the potential profit and loss thereon, may be affected by any change in the non-US exchange rate between the time a particular order is placed and the time it is liquidated, offset or exercised.
The CFTC and the various exchanges have established limits referred to as “speculative position limits” on the maximum net long or net short position that any person, such as a Fund, may hold or control in a particular futures contract. Trading limits are also imposed on the maximum number of contracts that any person may trade on a particular trading day. An exchange may order the liquidation of positions found to be in violation of these limits and it may impose other sanctions or restrictions. The regulation of futures, as well as other derivatives, is a rapidly changing area of law.
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Futures exchanges may also limit the amount of fluctuation permitted in certain futures contract prices during a single trading day. This daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day's settlement price. Once the daily limit has been reached in a futures contract subject to the limit, no more trades may be made on that day at a price beyond that limit. The daily limit governs only price movements during a particular trading day and does not limit potential losses because the limit may prevent the liquidation of unfavorable positions. For example, futures prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of positions and subjecting some holders of futures contracts to substantial losses.
Options on futures contracts. Options on futures contracts trade on the same contract markets as the underlying futures contract. When a fund buys an option, it pays a premium for the right, but does not have the obligation, to purchase (call) or sell (put) a futures contract at a set price (called the exercise price). The purchase of a call or put option on a futures contract, whereby a Fund has the right to purchase or sell, respectively, a particular futures contract, is similar in some respects to the purchase of a call or put option on an individual security or currency. Depending on the premium paid for the option compared to either the price of the futures contract upon which it is based or the price of the underlying reference instrument, the option may be less risky than direct ownership of the futures contract or the underlying reference instrument. For example, a fund could purchase a call option on a long futures contract when seeking to hedge against an increase in the market value of the underlying reference instrument, such as appreciation in the value of a non-US currency against the US dollar.
The seller (writer) of an option becomes contractually obligated to take the opposite futures position if the buyer of the option exercises its rights to the futures position specified in the option. In return for the premium paid by the buyer, the seller assumes the risk of taking a possibly adverse futures position. In addition, the seller will be required to post and maintain initial and variation margin with the FCM. One goal of selling (writing) options on futures may be to receive the premium paid by the option buyer.
For more general information about the mechanics of purchasing and writing options, see “Options” below.
Risks of options on futures contracts. A Fund's use of options on futures contracts is subject to the risks related to derivatives instruments generally. In addition, the amount of risk a Fund assumes when it purchases an option on a futures contract is the premium paid for the option plus related transaction costs. The purchase of an option also entails the risk that changes in the value of the underlying futures contract will not be fully reflected in the value of the option purchased. The seller (writer) of an option on a futures contract is subject to the risk of having to take a possibly adverse futures position if the purchaser of the option exercises its rights. If the seller were required to take such a position, it could bear substantial losses. An option writer has potentially unlimited economic risk because its potential loss, except to the extent offset by the premium received, is equal to the amount the option is “in-the-money” at the expiration date. A call option is in-the-money if the value of the underlying futures contract exceeds the exercise price of the option. A put option is in-the-money if the exercise price of the option exceeds the value of the underlying futures contract.
High Yield Securities (“Junk bonds”)
Each Fund may invest in high yield, high-risk securities, rated lower than BBB- by Standard & Poor's Financial Services LLC (“S&P”) and Baa3 by Moody's Investors Service, Inc. (“Moody's”) or similarly rated by another nationally recognized statistical rating organization (“NRSRO”). These securities are commonly known as “junk bonds.”
Junk bonds are often considered to be speculative and involve significantly higher risk of default on the payment of principal and interest or are more likely to experience significant price fluctuation due to changes in the issuer's creditworthiness. Market prices of these securities may fluctuate more than higher-rated debt securities and may decline significantly in periods of general economic difficulty which may follow periods of rising interest rates. Although the market for high yield corporate debt securities has been in existence for many years and has weathered previous economic downturns, the market in recent years has experienced a dramatic increase in the large-scale use of such securities to fund highly leveraged corporate acquisitions and restructurings. Accordingly, past experience may not provide an accurate indication of future performance of the high yield bond market, especially during periods of economic recession. See “Appendix A — Description of Ratings.”
The market for lower-rated securities and debt securities of distressed companies may be less active than that for higher-rated securities, which can adversely affect the prices at which these securities can be sold. If market quotations are not available, these securities will be valued in accordance with procedures established by the Board, including the use of outside pricing services. Judgment plays a greater role in valuing high yield corporate debt securities than is the case for securities for which more external sources for quotations and last-sale information are available. Adverse publicity and changing investor perceptions may affect the ability of outside pricing services used by a Fund to value its portfolio securities and the Fund's ability to dispose of these lower-rated debt securities.
Since the risk of default is higher for lower-quality securities, the Manager's research and credit analysis are an integral part of managing any securities of this type. In considering junk bond investments, the Manager will attempt to identify those issuers of high yielding securities whose financial conditions are adequate to meet future obligations, have improved, or are expected to improve in the future. The Manager's analysis focuses on relative values based on such factors as interest or dividend coverage, asset coverage, earnings prospects, and the experience and managerial strength of the issuer. There can be no assurance that such analysis will prove accurate.
The Fund may choose, at its expense or in conjunction with others, to pursue litigation or otherwise exercise its rights as security holder to seek to protect the interests of security holders if it determines this to be in the best interest of shareholders.
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Investment Strategies and Risks
Illiquid and Restricted Investments
Each Fund is permitted to invest up to 15% of its respective net assets in illiquid investments. For purposes of a Fund's 15% limitation, illiquid investment means any investment that the Fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment, as determined pursuant to the 1940 Act and applicable rules and regulations thereunder. Illiquid investments, for purposes of this policy, include repurchase agreements maturing in more than seven calendar days.
A Fund may purchase privately placed debt and other securities whose resale is restricted under applicable securities laws. Such restricted securities generally offer a higher return than comparable registered securities but involve some additional risk since they can be resold only in privately negotiated transactions or after registration under applicable securities laws. The registration process may involve delays which could result in a Fund obtaining a less favorable price on a resale.
A Fund may invest in restricted securities, including securities eligible for resale without registration pursuant to Rule 144A (“Rule 144A Securities”) under the 1933 Act. Rule 144A exempts many privately placed and legally restricted securities from the registration requirements of the 1933 Act and permits such securities to be freely traded among certain institutional buyers such as a Fund. Restricted securities generally offer a higher return potential than comparable registered securities but involve some additional risk since they can be resold only in privately negotiated transactions or after registration under applicable securities laws. The registration process may involve delays which would result in the Fund obtaining a less favorable price on a resale.
The Manager is responsible for the day-to-day functions of determining whether or not individual Rule 144A Securities are liquid for purposes of a Fund's limitation on investments in illiquid investments. The Manager considers the following factors in determining the liquidity of a Rule 144A Security: (i) the frequency of trades and trading volume for the security; (ii) whether at least three dealers are willing to purchase or sell the security and the number of potential purchasers; (iii) whether at least two dealers are making a market in the security; and (iv) the nature of the security and the nature of the marketplace trades (e.g., the time needed to dispose of the security, the method of soliciting offers, and the mechanics of transfer).
If the Manager determines that a Rule 144A Security which was previously determined to be liquid is no longer liquid and, as a result, a Fund's holdings of illiquid investments exceed its limit on investment in such investments, the Manager will determine what action shall be taken to ensure that a Fund continues to adhere to such limitation.
Investment Companies
Each Fund may invest in other investment companies, including exchange-traded funds (“ETFs”), to the extent permitted by the 1940 Act, SEC rules thereunder and exemptions thereto.
With respect to unaffiliated funds in which a Fund may invest, Section 12(d)(1)(A) of the 1940 Act requires that, as determined immediately after a purchase is made, (i) not more than 5% of the value of the Fund's total assets will be invested in the securities of any one investment company, (ii) not more than 10% of the value of the Fund's total assets will be invested in securities of investment companies as a group, and (iii) not more than 3% of the outstanding voting stock of any one investment company will be owned by the Fund. A Fund will limit its investments in unaffiliated funds in accordance with the Section 12(d)(1)(A) limitations set forth above, except to the extent that any rules, regulations or no-action or exemptive relief under the 1940 Act permit the Fund's investments to exceed such limits in unaffiliated underlying funds. To the extent that a Fund invests in another investment company, because other investment companies pay advisory, administrative and service fees that are borne indirectly by investors, such as the Fund, there may be duplication of investment management and other fees.
Each Fund may invest in securities issued by closed-end funds, subject to any of its investment policies. If a Fund invests in shares issued by leveraged closed-end funds, it will face certain risks associated with leveraged investments. Investments in closed-end funds are subject to additional risks. For example, the price of the closed-end fund's shares quoted on an exchange may not reflect the NAV of the securities held by the closed-end fund, and the premium or discount the share prices represent versus NAV may change over time based on a variety of factors, including supply of and demand for the closed-end fund's shares, that are outside the closed-end fund's control or unrelated to the value of the underlying portfolio securities. If a Fund invests in the closed-end fund to gain exposure to the closed-end fund's investments, the lack of correlation between the performance of the closed-end fund's investments and the closed-end fund's share price may compromise or eliminate any such exposure.
To the extent that a Fund invests in an ETF, the market value of the ETF shares may differ from their NAV because the supply and demand in the market for ETF shares at any point in time is not always identical to the supply and demand in the market for the underlying securities. Also, ETFs that track particular indices typically will be unable to match the performance of the index exactly due to the ETFs' operating expenses and transaction costs.
Loans and Other Indebtedness
Each Fund may purchase loans and other indebtedness.
In purchasing a loan, a Fund acquires some or all of the interest of a bank or other lending institution in a loan to a corporate, governmental or other borrower. Many such loans are secured, although some may be unsecured. Such loans may be in default at the time of purchase. Loans that are fully secured offer a Fund more protection than an unsecured loan in the event of nonpayment of scheduled interest or principal. However, 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. These loans are made generally to finance internal growth, mergers, acquisitions, stock repurchases, leveraged buy-outs, and other corporate activities. Such loans are typically
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made by a syndicate of lending institutions, represented by an agent lending institution that has negotiated and structured the loan and is responsible for collecting interest, principal, and other amounts due on its own behalf and on behalf of the others in the syndicate, and for enforcing its and their other rights against the borrower. Alternatively, such loans may be structured as a novation, pursuant to which a Fund would assume all of the rights of the lending institution in a loan or as an assignment, pursuant to which the Fund would purchase an assignment of a portion of a lender's interest in a loan either directly from the lender or through an intermediary.
A Fund may also purchase trade or other claims against companies, which generally represent money owed by the company to a supplier of goods or services. These claims may also be purchased at a time when the company is in default.
Certain of the loans and the other indebtedness acquired by a Fund may involve revolving credit facilities or other standby financing commitments which obligate the 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 the 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). A Fund's ability to receive payment of principal, interest, and other amounts due in connection with these investments will depend primarily on the financial condition of the borrower. In selecting the loans and other indebtedness that a Fund will purchase, the Manager will rely upon its own (and not the original lending institution's) credit analysis of the borrower. 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 indebtedness, an insolvency, bankruptcy, or reorganization of the lending institution may delay or prevent the Fund from receiving such amounts. In such cases, a Fund will evaluate as well the creditworthiness of the lending institution and will treat both the borrower and the lending institution as an “issuer” of the loan for purposes of compliance with applicable law pertaining to the diversification of the Fund's portfolio investments. The highly leveraged nature of many such loans and other indebtedness may make such loans and other indebtedness especially vulnerable to adverse changes in economic or market conditions. Investments in such loans and other indebtedness may involve additional risk to a Fund.
Mortgage-Backed Securities (“MBS”)
Each Fund may invest in mortgage-backed securities (“MBS”) issued or guaranteed by the US government, its agencies or instrumentalities, or by government-sponsored corporations. Delaware Strategic Income Fund may also invest up to 20% of its net assets in privately issued CMOs and REMICs that are not collateralized by securities issued or guaranteed by the US government, its agencies or instrumentalities. For Delaware Emerging Markets Debt Corporate Fund, there are no ratings restrictions on these investments.
Overview. MBS, also referred to as mortgage securities or mortgage-related securities, represent an ownership interest in a pool of mortgage loans, usually originated by mortgage bankers, commercial banks, savings and loan associations, savings banks, and credit unions to finance purchases of homes, commercial buildings, or other real estate. The individual mortgage loans are packaged or “pooled” together for sale to investors. These mortgage loans may have either fixed or adjustable interest rates. A guarantee or other form of credit support may be attached to an MBS to protect against default on obligations.
As the underlying mortgage loans are paid off, investors receive principal and interest payments, which “pass-through” when received from individual borrowers, net of any fees owed to the administrator, guarantor, or other service providers. Some MBS make payments of both principal and interest at a range of specified intervals; others make semiannual interest payments at a predetermined rate and repay principal at maturity (like a typical bond).
MBS are based on different types of mortgages, including those on commercial real estate or residential properties. The primary issuers or guarantors of MBS have historically been Ginnie Mae, Fannie Mae, and Freddie Mac. Other issuers of MBS include commercial banks and other private lenders.
Ginnie Mae is a wholly owned US government corporation within the Department of Housing and Urban Development. Ginnie Mae guarantees the principal and interest on securities issued by institutions approved by Ginnie Mae (such as savings and loan institutions, commercial banks and mortgage bankers). Ginnie Mae also guarantees the principal and interest on securities backed by pools of mortgages insured by the Federal Housing Administration (the “FHA”), or guaranteed by the Department of Veterans Affairs (the “VA”). Ginnie Mae's guarantees are backed by the full faith and credit of the US government. Guarantees as to the timely payment of principal and interest do not extend to the value or yield of MBS nor do they extend to the value of the Fund's shares which will fluctuate daily with market conditions.
Fannie Mae is a government-sponsored corporation, but its common stock is owned by private stockholders. Fannie Mae purchases conventional (i.e., not insured or guaranteed by any government agency) residential mortgages from a list of approved seller/servicers which include state and federally chartered savings and loan associations, mutual savings banks, commercial banks and credit unions, and mortgage bankers. Pass-through securities issued by Fannie Mae are guaranteed as to timely payment of principal and interest by Fannie Mae, but are not backed by the full faith and credit of the US government.
Freddie Mac was created by Congress in 1970 for the purpose of increasing the availability of mortgage credit for residential housing. It is a government-sponsored corporation formerly owned by the 12 Federal Home Loan Banks but now its common stock is owned entirely by private stockholders. Freddie Mac issues Participation Certificates (“PCs”), which are pass-through securities, each representing an undivided interest in a pool of residential mortgages. Freddie Mac guarantees the timely payment of interest and ultimate collection of principal, but PCs are not backed by the full faith and credit of the US government.
Although the MBS of Fannie Mae and Freddie Mac are not backed by the full faith and credit of the US government, the Secretary of the Treasury has the authority to support Fannie Mae and Freddie Mac by purchasing limited amounts of their respective obligations. The yields on these MBS have historically
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Investment Strategies and Risks
exceeded the yields on other types of US government securities with comparable maturities due largely to their prepayment risk. The US government, in the past, provided financial support to Fannie Mae and Freddie Mac, but no assurance can be given that the US government will continue to do so.
On September 6, 2008, the Federal Housing Finance Agency (“FHFA”) placed Fannie Mae and Freddie Mac into conservatorship. As the conservator, FHFA succeeded to all rights, titles, powers, and privileges of Fannie Mae and Freddie Mac and of any stockholder, officer, or director of Fannie Mae and Freddie Mac. FHFA selected a new chief executive officer and chairman of the board of directors for each of Fannie Mae and Freddie Mac. Also, the US Treasury entered into a Senior Preferred Stock Purchase Agreement imposing various covenants that severely limit each enterprise's operations.
Fannie Mae and Freddie Mac continue to operate as going concerns while in conservatorship and each remains liable for all of its obligations, including its guaranty obligations associated with its MBS. The FHFA has the power to repudiate any contract entered into by Fannie Mae and Freddie Mac prior to FHFA's appointment as conservator or receiver, including the guaranty obligations of Fannie Mae and Freddie Mac. Accordingly, securities issued by Fannie Mae and Freddie Mac will involve a risk of nonpayment of principal and interest.
MBS that are issued or guaranteed by the US government, its agencies or instrumentalities, are not subject to a Fund's industry concentration restrictions, set forth under “Fundamental Investment Policies,” by virtue of the exclusion from that test available to securities issued or guaranteed by the US government or any of its agencies or instrumentalities. In the case of privately issued MBS, a Fund categorizes, where possible, the securities by the issuer's industry for purposes of the Fund's industry concentration restrictions.
Private MBS. Issuers of private MBS, such as commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers, and other secondary market issuers, are not US government agencies and may be both the originators of the underlying mortgage loans as well as the guarantors of the MBS, or they may partner with a government entity by issuing mortgage loans guaranteed or sponsored by the US government or a US government agency or sponsored enterprise. Pools of mortgage loans created by private issuers generally offer a higher rate of interest than government and government-related pools because there are no direct or indirect government or government agency guarantees of payment. The risk of loss due to default on private MBS is historically higher because neither the US government nor an agency or instrumentality has guaranteed them. Timely payment of interest and principal is, however, generally supported by various forms of insurance or guarantees, including individual loan, title, pool, and hazard insurance. Government entities, private insurance companies or the private mortgage poolers issue the insurance and guarantees. The insurance and guarantees and the creditworthiness of their issuers will be considered when determining whether an MBS meets a Fund's quality standards. A Fund may buy MBS without insurance or guarantees if, through an examination of the loan experience and practices of the poolers, the Manager determines that the securities meet the Fund's quality standards. Private MBS whose underlying assets are neither US government securities nor US government-insured mortgages, to the extent that real properties securing such assets may be located in the same geographical region, may also be subject to a greater risk of default than other comparable securities in the event of adverse economic, political, or business developments that may affect such region and, ultimately, the ability of property owners to make payments of principal and interest on the underlying mortgages. Nongovernment MBS are generally subject to greater price volatility than those issued, guaranteed or sponsored by government entities because of the greater risk of default in adverse market conditions. Where a guarantee is provided by a private guarantor, the Fund is subject to the credit risk of such guarantor, especially when the guarantor doubles as the originator.
CMOs and REMICs. Some MBS known as collateralized mortgage obligations (“CMOs”) are divided into multiple classes. Each of the classes is allocated a different share of the principal and/or interest payments received from the pool according to a different payment schedule depending on, among other factors, the seniority of a class relative to their classes. Other MBS such as real estate mortgage investment conduits (REMICs) are also divided into multiple classes with different rights to the interest and/or principal payments received on the pool of mortgages. A CMO or REMIC may designate the most junior of the securities it issues as a “residual” which will be entitled to any amounts remaining after all classes of shareholders (and any fees or expenses) have been paid in full. Some of the different rights may include different maturities, interest rates, payment schedules, and allocations of interest and/or principal payments on the underlying mortgage loans. Multi-class pass-through securities are equity interests in a trust composed of mortgage loans or other MBS. Payments of principal and interest on the underlying collateral provide the resources to pay the debt service on CMOs or REMICs or to make scheduled distributions on the multi-class pass-through securities. Unless the context indicates otherwise, the discussion of CMOs below also applies to REMICs and multi-class pass-through securities.
All the risks applicable to a traditional MBS also apply to the CMO or REMIC taken as a whole, even though certain classes of the CMO or REMIC will be protected against a particular risk by subordinated classes. The risks associated with an investment in a particular CMO or REMIC class vary substantially depending on the combination of rights associated with that class. An investment in the most subordinated classes of a CMO or REMIC bears a disproportionate share of the risks associated with MBS generally, be it credit risk, prepayment or extension risk (the risk of a security's expected maturity being reduced or lengthened in duration due to a change of the timing of payment), interest rate risk, income risk, market risk, liquidity risk or any other risk associated with a debt or equity instrument with similar features to the relevant class. As a result, an investment in the most subordinated classes of a CMO or REMIC is often riskier than an investment in other types of MBS.
CMOs are generally required to maintain more collateral than REMICs to collateralize the CMOs being issued. Most REMICs are not subject to the same minimum collateralization requirements and may be permitted to issue the full value of their assets as securities, without reserving any amount as collateral. As a result, an investment in the subordinated classes of a REMIC may be riskier than an investment in equivalent classes of a CMO.
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CMOs may be issued, guaranteed or sponsored by governmental entities or by private entities. Consequently, they involve risks similar to those of traditional MBS that have been issued, guaranteed, or sponsored by such government and/or private entities. For example, a Fund is generally exposed to a greater risk of loss due to default when investing in CMOs that have not been issued, guaranteed, or sponsored by a government entity.
CMOs are typically issued in multiple classes. Each class, often referred to as a “tranche,” is issued at a specified coupon rate or adjustable rate and has a stated maturity or final distribution date. Principal prepayments on collateral underlying CMOs may cause the CMOs to be retired substantially earlier than their stated maturities or final distribution dates. Interest is paid or accrues on most classes of a CMO on a monthly, quarterly or semiannual basis. The principal and interest on the mortgages underlying CMOs may be allocated among the several classes in many ways. In a common structure, payments of principal on the underlying mortgages, including any principal prepayments, are applied to the classes of a series of a CMO in the order of their respective stated maturities or final distribution dates, so that no payment of principal will be made on any class until all other classes having an earlier stated maturity or final distribution date have been paid in full.
One or more classes of a CMO may have interest rates that reset periodically as adjustable-rate mortgage loans (“ARMs”) do. These adjustable rate classes are known as “floating-rate CMOs” and are subject to most risks associated with ARMs. Floating-rate CMOs may be backed by fixed- or adjustable-rate mortgages. To date, fixed-rate mortgages have been more commonly used for this purpose. Floating-rate CMOs are typically issued with lifetime “caps” on the interest rate. These caps, similar to the caps on ARMs, limit a Fund's potential to gain from rising interest rates and increase the sensitivity of the CMO's price to interest rate changes while rates remain above the cap.
Timely payment of interest and principal (but not the market value and yield) of some of these pools is supported by various forms of insurance or guarantees issued by private issuers, those who pool the mortgage assets and, in some cases, by US government agencies.
CMOs involve risks including the uncertainty of the timing of cash flows that results from the rate of prepayments on the underlying mortgages serving as collateral, and risks resulting from the structure of the particular CMO transaction and the priority of the individual tranches. The prices of some CMOs, depending on their structure and the rate of prepayments, can be volatile. Some CMOs may be less liquid than other types of MBS. As a result, it may be difficult or impossible to sell the securities at an advantageous price or time under certain circumstances. Yields on privately issued CMOs have been historically higher than the yields on CMOs issued and guaranteed by US government agencies or instrumentalities. The risk of loss due to default on privately issued CMOs, however, is historically higher since the US government has not guaranteed them.
To the extent any privately issued CMOs in which a Fund invests are considered by the SEC to be an investment company, the Fund will limit its investments in such securities in a manner consistent with the provisions of the 1940 Act.
Commercial mortgage-backed securities (“CMBS”). CMBS are issued by special purpose entities that represent an undivided interest in a portfolio of mortgage loans backed by commercial properties. The loans are collateralized by various types of commercial property, which include, but are not limited to, multifamily housing, retail shopping centers, office space, hotels, and healthcare facilities. Private lenders, such as banks or insurance companies, originate these loans and then sell the loans directly into a CMBS trust or other entity. CMBS are subject to credit risk, prepayment risk, and extension risk. The Manager, through its careful credit analysis, attempts to address the risk of an issuer being unable to make timely payments of interest and principal. Although prepayment risk is present, it is of a lesser degree in CMBS than in the residential mortgage market.
Stripped mortgage securities. Some MBS referred to as stripped MBS are divided into classes which receive different proportions of the principal and interest payments or, in some cases, only payments of principal or interest (but not both). Other MBS referred to as net interest margin (“NIM”) securities give the investor the right to receive any excess interest earned on a pool of mortgage loans remaining after all classes and service providers have been paid in full. Stripped MBS may be issued by government or private entities. Stripped MBS issued or guaranteed by agencies or instrumentalities of the US government are typically more liquid than privately issued stripped MBS.
Stripped MBS are usually structured with two classes, each receiving different proportions of the interest and principal distributions on a pool of mortgage assets. In most cases, one class receives all of the interest (the interest-only or “IO” class), while the other class receives all of the principal (the principal-only or “PO” class). The return on an IO class is extremely sensitive not only to changes in prevailing interest rates but also to the rate of principal payments (including prepayments) on the underlying mortgage assets. A rapid rate of principal payments may have a material adverse effect on any IO class held by a Fund. If the underlying mortgage assets experience greater than anticipated prepayments of principal, a Fund may fail to recoup its initial investment fully, even if the securities are rated in the highest rating categories, AAA or Aaa, by S&P or Moody's, respectively.
NIM securities represent a right to receive any “excess” interest computed after paying coupon costs, servicing costs and fees and any credit losses associated with the underlying pool of home equity loans. Like traditional stripped MBS, the return on a NIM security is sensitive not only to changes in prevailing interest rates but also to the rate of principal payments (including prepayments) on the underlying home equity loans. NIM securities are highly sensitive to credit losses on the underlying collateral and the timing in which those losses are taken.
Stripped MBS and NIM securities tend to exhibit greater market volatility in response to changes in interest rates than other types of MBS and are purchased and sold by institutional investors, such as a Fund, through investment banking firms acting as brokers or dealers. Some of these securities may be deemed “illiquid” and therefore subject to a Fund's limitation on investment in illiquid investments and the risks associated with illiquidity.
Mortgage loan and home equity loan pools offering pass-through investments in addition to those described above may be created in the future. The mortgages underlying these securities may be alternative mortgage instruments, that is, mortgage instruments whose principal or interest payments may
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Investment Strategies and Risks
vary or whose terms to maturity may differ from customary long-term, fixed-rate mortgages. As new types of mortgage and home equity loan securities are developed and offered to investors, the Fund may invest in them if they are consistent with the Fund's goals, policies and quality standards.
Additional risks. In addition to the special risks described below, MBS are subject to many of the same risks as other types of debt securities. The market value of MBS, like other debt securities, will generally vary inversely with changes in market interest rates, declining when interest rates rise and rising when interest rates decline. MBS differ from conventional debt securities in that most MBS are pass-through securities. This means that they typically provide investors with periodic payments (typically monthly) consisting of a pro rata share of both regular interest and principal payments, as well as unscheduled early prepayments, on the underlying mortgage pool (net of any fees paid to the issuer or guarantor of such securities and any applicable loan servicing fees). As a result, the holder of the MBS (i.e., a Fund) receives scheduled payments of principal and interest and may receive unscheduled principal payments representing prepayments on the underlying mortgages. The rate of prepayments on the underlying mortgages generally increases as interest rates decline, and when a Fund reinvests the payments and any unscheduled prepayments of principal it receives, it may receive a rate of interest that is lower than the rate on the existing MBS. For this reason, pass-through MBS may have less potential for capital appreciation as interest rates decline and may be less effective than other types of US government or other debt securities as a means of “locking in” long-term interest rates. In general, fixed rate MBS have greater exposure to this “prepayment risk” than variable rate securities.
An unexpected rise in interest rates could extend the average life of an MBS because of a lower than expected level of prepayments or higher than expected amounts of late payments or defaults. In addition, to the extent MBS are purchased at a premium, mortgage foreclosures and unscheduled principal prepayments may result in some loss of the holder's principal investment to the extent of the premium paid. On the other hand, if MBS are purchased at a discount, both a scheduled payment of principal and an unscheduled prepayment of principal will increase current and total returns and will accelerate the recognition of income that, when distributed to shareholders, will generally be treated as ordinary income. Regulatory or tax changes may also adversely affect the MBS market as a whole.
Guarantees. The existence of a guarantee or other form of credit support on an MBS usually increases the price that a Fund pays for the security. There is always the risk that the guarantor will default on its obligations. When the guarantor is the US government, there is minimal risk of guarantor default. However, the risk remains if the credit support or guarantee is provided by a private party or a US government agency or sponsored enterprise. Even if the guarantor meets its obligations, there can be no assurance that the type of guarantee or credit support provided will be effective at reducing losses or delays to investors, given the nature of the default. A guarantee only assures timely payment of interest and principal, not a particular rate of return on a Fund's investment or protection against prepayment or other risks. The market price and yield of the MBS at any given time are not guaranteed and are likely to fluctuate.
Options
Each Fund may invest (buy and write) in options that are either exchange listed or traded over-the-counter. Certain over-the-counter options may be illiquid. Thus, it may not be possible to close option positions and this may have an adverse impact on a Fund's ability to effectively hedge its securities. A Fund will not, however, invest more than 15% of its net assets in illiquid investments. Delaware Emerging Markets Debt Corporate Fund may invest in put options on securities indices. Delaware Emerging Markets Debt Corporate Fund will not engage in transactions in options on securities indices for speculative purposes but only to protect appreciation attained, to offset capital losses and to take advantage of the liquidity available in the option markets. Accordingly, Delaware Emerging Markets Debt Corporate Fund will not engage in put options on securities indices that have unmanaged loss exposure. Delaware Strategic Income Fund may purchase and write call and put options and may engage in option strategies for hedging and/or speculative purposes.
Overview. An option is a contract that gives the purchaser of the option, in return for the premium paid, the right to buy an underlying reference instrument, such as a specified security, currency, index, or other instrument, from the writer of the option (in the case of a call option), or to sell a specified reference instrument to the writer of the option (in the case of a put option) at a designated price during the term of the option. The premium paid by the buyer of an option will reflect, among other things, the relationship of the exercise price to the market price and the volatility of the underlying reference instrument; the remaining term of the option, supply, demand, or interest rates; and/or currency exchange rates. An American style put or call option may be exercised at any time during the option period while a European style put or call option may be exercised only upon expiration or during a fixed period prior thereto. Put and call options are traded on national securities exchanges and in the OTC market.
Options traded on national securities exchanges are within the jurisdiction of the SEC or other appropriate national securities regulator, as are securities traded on such exchanges. As a result, many of the protections provided to traders on organized exchanges will be available with respect to such transactions. In particular, all option positions entered into on a national securities exchange in the US are cleared and guaranteed by the Options Clearing Corporation, thereby reducing the risk of counterparty default. Furthermore, a liquid secondary market in options traded on a national securities exchange may be more readily available than in the OTC market, potentially permitting a Fund to liquidate open positions at a profit prior to exercise or expiration, or to limit losses in the event of adverse market movements. There is no assurance, however, that higher than anticipated trading activity or other unforeseen events might not temporarily render the capabilities of the Options Clearing Corporation inadequate, and thereby result in the exchange instituting special procedures which may interfere with the timely execution of a Fund's orders to close out open options positions.
Purchasing call and put options. As the buyer of a call option, a Fund has a right to buy the underlying reference instrument (e.g., a currency or security) at the exercise price at any time during the option period (for American style options). A Fund may enter into closing sale transactions with respect to call options, exercise them, or permit them to expire. For example, a Fund may buy call options on underlying reference instruments that it intends to buy with the goal of
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limiting the risk of a substantial increase in their market price before the purchase is effected. Unless the price of the underlying reference instrument changes sufficiently, a call option purchased by a Fund may expire without any value to the Fund, in which case the Fund would experience a loss to the extent of the premium paid for the option plus related transaction costs.
As the buyer of a put option, a Fund has the right to sell the underlying reference instrument at the exercise price at any time during the option period (for American style options). As with a call option, a Fund may enter into closing sale transactions with respect to put options, exercise them or permit them to expire. A Fund may buy a put option on an underlying reference instrument owned by the Fund (a protective put) as a hedging technique in an attempt to protect against an anticipated decline in the market value of the underlying reference instrument. Such hedge protection is provided only during the life of the put option when a Fund, as the buyer of the put option, is able to sell the underlying reference instrument at the put exercise price, regardless of any decline in the underlying instrument's market price. A Fund may also seek to offset a decline in the value of the underlying reference instrument through appreciation in the value of the put option. A put option may also be purchased with the intent of protecting unrealized appreciation of an instrument when the Manager deems it desirable to continue to hold the instrument because of tax or other considerations. The premium paid for the put option and any transaction costs would reduce any short-term capital gain that may be available for distribution when the instrument is eventually sold. Buying put options at a time when the buyer does not own the underlying reference instrument allows the buyer to benefit from a decline in the market price of the underlying reference instrument, which generally increases the value of the put option.
If a put option were not terminated in a closing sale transaction when it has remaining value, and if the market price of the underlying reference instrument remains equal to or greater than the exercise price during the life of the put option, the buyer would not make any gain upon exercise of the option and would experience a loss to the extent of the premium paid for the option plus related transaction costs. In order for the purchase of a put option to be profitable, the market price of the underlying reference instrument must decline sufficiently below the exercise price to cover the premium and transaction costs.
Writing call and put options. Writing options may permit the writer to generate additional income in the form of the premium received for writing the option. The writer of an option may have no control over when the underlying reference instruments must be sold (in the case of a call option) or purchased (in the case of a put option) because the writer may be notified of exercise at any time prior to the expiration of the option (for American style options). Whether or not an option expires unexercised, the writer retains the amount of the premium. Writing “covered” call options means that the writer owns the underlying reference instrument that is subject to the call option. Delaware Emerging Markets Debt Corporate Fund will write call options on a covered basis only.
If a Fund writes a covered call option, any underlying reference instruments that are held by the Fund and subject to the call option will be earmarked on the books of the Fund as segregated to satisfy its obligations under the option. A Fund will be unable to sell the underlying reference instruments that are subject to the written call option until the Fund either effects a closing transaction with respect to the written call, or otherwise satisfies the conditions for release of the underlying reference instruments from segregation. As the writer of a covered call option, a Fund gives up the potential for capital appreciation above the exercise price of the option should the underlying reference instrument rise in value. If the value of the underlying reference instrument rises above the exercise price of the call option, the reference instrument will likely be “called away,” requiring a Fund to sell the underlying instrument at the exercise price. In that case, a Fund will sell the underlying reference instrument to the option buyer for less than its market value, and the Fund will experience a loss (which will be offset by the premium received by the Fund as the writer of such option). If a call option expires unexercised, a Fund will realize a gain in the amount of the premium received. If the market price of the underlying reference instrument decreases, the call option will not be exercised and the Fund will be able to use the amount of the premium received to hedge against the loss in value of the underlying reference instrument. The exercise price of a call option will be chosen based upon the expected price movement of the underlying reference instrument. The exercise price of a call option may be below, equal to (at-the-money), or above the current value of the underlying reference instrument at the time the option is written.
As the writer of a put option, a Fund has a risk of loss should the underlying reference instrument decline in value. If the value of the underlying reference instrument declines below the exercise price of the put option and the put option is exercised, a Fund, as the writer of the put option, will be required to buy the instrument at the exercise price, which will exceed the market value of the underlying reference instrument at that time. A Fund will incur a loss to the extent that the current market value of the underlying reference instrument is less than the exercise price of the put option. However, the loss will be offset in part by the premium received from the buyer of the put. If a put option written by a Fund expires unexercised, the Fund will realize a gain in the amount of the premium received.
Closing out options (exchange-traded options). As the writer of an option, if a Fund wants to terminate its obligation, the Fund may effect a “closing purchase transaction” by buying an option of the same series as the option previously written. The effect of the purchase is that the clearing corporation will cancel a Fund's position. However, a writer may not effect a closing purchase transaction after being notified of the exercise of an option. Likewise, the buyer of an option may recover all or a portion of the premium that it paid by effecting a “closing sale transaction” by selling an option of the same series as the option previously purchased and receiving a premium on the sale. There is no guarantee that either a closing purchase or a closing sale transaction may be made at a time desired by a Fund. Closing transactions allow a Fund to terminate its positions in written and purchased options. A Fund will realize a profit from a closing transaction if the price of the transaction is less than the premium received from writing the original option (in the case of written options) or is more than the premium paid by the Fund to buy the option (in the case of purchased options). For example, increases in the market price of a call option sold by a Fund will generally reflect increases in the market price of the underlying reference instrument. As a result, any loss resulting from a closing transaction on a written call option is likely to be offset in whole or in part by appreciation of the underlying instrument owned by a Fund.
Over-the-counter (“OTC”) options. Like exchange-traded options, OTC options give the holder the right to buy from the writer, in the case of OTC call options, or sell to the writer, in the case of OTC put options, an underlying reference instrument at a stated exercise price. OTC options, however, differ from exchange-traded options in certain material respects.
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Investment Strategies and Risks
OTC options are arranged directly with dealers and not with a clearing corporation or exchange. Consequently, there is a risk of nonperformance by the dealer, including because of the dealer's bankruptcy or insolvency. While a Fund uses only counterparties, such as dealers, that meet its credit quality standards, in unusual or extreme market conditions, a counterparty's creditworthiness and ability to perform may deteriorate rapidly, and the availability of suitable replacement counterparties may become limited. Because there is no exchange, pricing is typically done based on information from market makers or other dealers. OTC options are available for a greater variety of underlying reference instruments and in a wider range of expiration dates and exercise prices than exchange-traded options.
There can be no assurance that a continuous liquid secondary market will exist for any particular OTC option at any specific time. A Fund may be able to realize the value of an OTC option it has purchased only by exercising it or entering into a closing sale transaction with the dealer that issued it. When a Fund writes an OTC option, it generally can close out that option prior to its expiration only by entering into a closing purchase transaction with the dealer with which the Fund originally wrote the option. A Fund may suffer a loss if it is not able to exercise the option (in the case of a purchased option) or enter into a closing sale transaction on a timely basis.
Risks of options. A Fund's options investments involve certain risks, including general risks related to derivatives instruments. There can be no assurance that a liquid secondary market on an exchange will exist for any particular option, or at any particular time, and a Fund may have difficulty effecting closing transactions in particular options. Therefore, a Fund would have to exercise the options it purchased in order to realize any profit, thus taking or making delivery of the underlying reference instrument when not desired. A Fund could then incur transaction costs upon the sale of the underlying reference instruments. Similarly, when a Fund cannot effect a closing transaction with respect to a put option it wrote, and the buyer exercises, the Fund would be required to take delivery and would incur transaction costs upon the sale of the underlying reference instruments purchased. If a Fund, as a covered call option writer, is unable to effect a closing purchase transaction in a secondary market, it will not be able to sell the underlying reference instrument until the option expires, it delivers the underlying instrument upon exercise, or it segregates enough liquid assets to purchase the underlying reference instrument at the marked-to-market price during the term of the option. When trading options on non-US exchanges or in the OTC market, many of the protections afforded to exchange participants will not be available. For example, there may be no daily price fluctuation limits, and adverse market movements could therefore continue to an unlimited extent over an indefinite period of time.
The effectiveness of an options strategy for hedging depends on the degree to which price movements in the underlying reference instruments correlate with price movements in the relevant portion of a Fund's portfolio that is being hedged. In addition, a Fund bears the risk that the prices of its portfolio investments will not move in the same amount as the option it has purchased or sold for hedging purposes, or that there may be a negative correlation that would result in a loss on both the investments and the option. If the Manager is not successful in using options in managing a Fund's investments, the Fund's performance will be worse than if the Manager did not employ such strategies.
Repurchase Agreements
Each Fund may, from time to time, enter into repurchase agreement transactions.
Under a repurchase agreement, a Fund agrees to buy securities guaranteed as to payment of principal and interest by the US government or its agencies or instrumentalities from a qualified bank or broker/dealer and then to sell the securities back to the bank or broker/dealer on an agreed upon date (generally less than seven days) at a higher price, which reflects currently prevailing short-term interest rates. Entering into repurchase agreements allows a Fund to earn a return on cash in the Fund's portfolio that would otherwise remain uninvested. The bank or broker/dealer must transfer to a Fund's custodian, as collateral, securities with an initial market value of at least 102% of the dollar amount paid by the Fund to the counterparty. The Manager will monitor the value of such collateral daily to determine that the value of the collateral equals or exceeds the repurchase price.
Repurchase agreements may involve risks in the event of default or insolvency of the bank or broker/dealer, including possible delays or restrictions upon a Fund's ability to sell the underlying securities and additional expenses in seeking to enforce the Fund's rights and recover any losses. A Fund will enter into repurchase agreements only with parties who meet certain creditworthiness standards, i.e., banks or broker/dealers that the Manager has determined, based on the information available at the time, present no serious risk of becoming involved in bankruptcy proceedings within the time frame contemplated by the repurchase agreement. Although a Fund seeks to limit the credit risk under a repurchase agreement by carefully selecting counterparties and accepting only high-quality collateral, some credit risk remains. The counterparty could default, which may make it necessary for a Fund to incur expenses to liquidate the collateral. In addition, the collateral may decline in value before it can be liquidated by a Fund. A repurchase agreement with more than seven days to maturity may be considered an illiquid investment and may be subject to a Fund's investment restriction on illiquid investments.
Delaware Funds by Macquarie® (each a “Delaware Fund” and collectively, “Delaware Funds”) have obtained an exemption (the “Order”) from the joint-transaction prohibitions of Section 17(d) of the 1940 Act to allow Delaware Funds jointly to invest cash balances. A Fund may invest cash balances in a joint repurchase agreement in accordance with the terms of the Order and subject generally to the conditions described above.
Reverse Repurchase Agreements
Delaware Emerging Markets Debt Corporate Fund is authorized to enter into reverse repurchase agreements.
A reverse repurchase agreement is the sale of a security by the Fund and its agreement to repurchase the security at a specified time and price. Under the 1940 Act, reverse repurchase agreements may be considered borrowings by the Fund; accordingly, the Fund will limit its investments in reverse repurchase agreements, together with any other borrowings, to no more than one-third of its total assets. The use of reverse repurchase agreements by the Fund
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creates leverage which increases the Fund's investment risk. If the income and gains on securities purchased with the proceeds of reverse repurchase agreements exceed the costs of the agreements, the Fund's earnings or NAV will increase faster than otherwise would be the case; conversely, if the income and gains fail to exceed the costs, earnings or NAV would decline faster than otherwise would be the case.
Securities Lending
Each Fund may loan up to 25% of its assets to qualified broker/dealers or institutional investors for their use relating to short sales or other security transactions.
A Fund, along with other funds in the Delaware Funds, may lend its securities pursuant to a security lending agreement (“Lending Agreement”) with The Bank of New York Mellon (“BNY Mellon”). At the time a security is loaned, the borrower must post collateral equal to the required percentage of the market value of the loaned security, including any accrued interest. The required percentage is: (i) 102% with respect to US securities and foreign securities that are denominated and payable in US dollars; and (ii) 105% with respect to foreign securities. With respect to each loan if, on any business day, the aggregate market value of securities collateral plus cash collateral held is less than the aggregate market value of the securities which are the subject of such loan, the borrower will be notified to provide additional collateral by the end of the following business day which, together with the collateral already held, will be not less than the applicable initial collateral requirements for such security loan. If the aggregate market value of securities collateral and cash collateral held with respect to a security loan exceeds the applicable initial collateral requirement, upon the request of the borrower, BNY Mellon must return enough collateral to the borrower by the end of the following business day to reduce the value of the remaining collateral to the applicable initial collateral requirement for such security loan. As a result of the foregoing, the value of the collateral held with respect to a loaned security on any particular day may be more or less than the value of the security on loan.
The investment guidelines permit each separate account to hold certain securities that would be considered eligible securities for a money market fund. Cash collateral received is generally invested in government securities; certain obligations issued by government sponsored enterprises; repurchase agreements collateralized by US Treasury securities; obligations issued by the central government of any Organization for Economic Cooperation and Development (OECD) country or its agencies, instrumentalities or establishments; certain obligations of supranational organizations, commercial paper, notes, bonds and other debt obligations; certificates of deposit, time deposits and other bank obligations; and asset-backed securities.
A Fund can also accept US government securities and letters of credit (non-cash collateral) in connection with securities loans. In the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to a Fund or, at the discretion of the lending agent, replace the loaned securities. A Fund continues to record dividends or interest, as applicable, on the securities loaned and is subject to changes in value of the securities loaned that may occur during the term of the loan. A Fund has the right under the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized by non-cash collateral, a Fund receives loan premiums paid by the borrower. With respect to security loans collateralized by cash collateral, the earnings from the collateral investments are shared among the Fund, the security lending agent, and the borrower. A Fund records security lending income net of allocations to the security lending agent and the borrower.
Short Sales
Delaware Strategic Income Fund may make short sales on exchange-traded funds in an attempt to isolate, manage, or reduce the risk of individual securities positions held by the Fund, of a decline in a particular market sector to which the Fund has significant exposure, or of the exposure to securities owned by the Fund in the aggregate. Such short sales may also be implemented in an attempt to manage the duration of the Fund's holdings. There is no assurance that any such short sales will achieve their intended objective(s). The Manager will not engage in short sales for speculative purposes for this Fund. The Fund's total investments in exchange-traded funds will not exceed 5% of net assets in any one exchange-traded fund and 10% in all positions in investment companies, including exchange-traded funds, in the aggregate.
Delaware Emerging Markets Debt Corporate Fund may make short sales in an attempt to protect against declines in an individual security or the overall market, to manage duration, or for such other purposes consistent with the Fund's investment objectives and strategies.
Typically, short sales are transactions in which a Fund sells a security that the Fund has borrowed, but that it does not own and, at the time a short sale is effected, the Fund incurs an obligation to replace the security borrowed. The price at the time of replacement may be more or less than the price at which the security was sold by a Fund. When a short sale transaction is closed out by delivery of the security, any gain or loss on the transaction generally is taxable as short-term capital gain or loss. Until the security is replaced, a Fund is required to pay to the lender amounts equal to any dividends or interest that accrue during the period of the loan. To borrow the security, the Fund also may be required to pay a premium, which would increase the cost of the security sold. The proceeds of the short sale, and potentially additional margin, will be retained by the broker from whom the security is borrowed, to the extent necessary to meet margin requirements, until the short position is closed out.
A Fund will incur a loss as a result of a short sale if the price of the security sold short increases between the date of the short sale and the date on which the Fund replaces the borrowed security; conversely, the Fund will realize a gain if the security declines in price between those dates. This result is the opposite of what one would expect from a cash purchase of a long position in a security. The amount of any gain will be decreased, and the amount of any loss increased, by the amount of any premium or amounts in lieu of interest that a Fund may be required to pay in connection with a short sale.
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Investment Strategies and Risks
The ability of a Fund to effect short sales may be limited because of certain requirements the Fund must satisfy to maintain its status as a regulated investment company.
Short-Term Debt Instruments and Temporary Investments
Each Fund may invest in money market securities (the types of which are discussed below) for liquidity and cash management purposes or if the Manager determines that securities meeting a Fund's investment objective and policies are not otherwise readily available for purchase. For temporary defensive purposes during periods when the Manager determines that conditions warrant, a Fund may increase this percentage up to 100%. For purposes of these policies, money market securities include (i) short-term US government securities, including custodial receipts evidencing separately traded interest and principal components of securities issued by the US Treasury; (ii) commercial paper rated in the highest short-term rating category by a NRSRO, such as S&P or Moody's, or determined by the Manager to be of comparable quality at the time of purchase; (iii) short-term bank obligations (certificates of deposit, time deposits, and bankers' acceptances) of US domestic banks, foreign banks and foreign branches of domestic banks, and commercial banks with assets of at least $1 billion as of the end of their most recent fiscal year; and (iv) repurchase agreements involving such securities. Each of these types of money market securities is discussed in more detail below.
US Government Securities. Examples of types of US government obligations in which a Fund may invest include US Treasury obligations and the obligations of US government agencies such as Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the US, Small Business Administration, Fannie Mae, Ginnie Mae, General Services Administration, Student Loan Marketing Association, Central Bank for Cooperatives, Freddie Mac, Federal Intermediate Credit Banks, Maritime Administration, and other similar agencies. Whether backed by the full faith and credit of the US Treasury or not, US government securities are not guaranteed against price movements due to fluctuating interest rates.
Commercial Paper. Commercial paper is the term used to designate unsecured short-term promissory notes issued by corporations and other entities. Maturities on these issues vary from a few to 270 days. A Fund may invest in short-term promissory notes issued by corporations that, at the time of purchase, are rated P-1 and/or A-1. Commercial paper ratings P-1 by Moody's and A-1 by S&P are the highest investment grade category.
Obligations of Domestic Banks, Foreign Banks and Foreign Branches of US Banks. A Fund may invest in obligations issued by banks and other savings institutions. Investments in bank obligations include obligations of domestic branches of foreign banks and foreign branches of domestic banks. Such investments in domestic branches of foreign banks and foreign branches of domestic banks are not covered by the Federal Deposit Insurance Corporation (“FDIC”) and may involve risks that are different from investments in securities of domestic branches of US banks. These risks may include future unfavorable political and economic developments, possible withholding taxes on interest income, seizure or nationalization of foreign deposits, currency controls, interest limitations, or other governmental restrictions that might affect the payment of principal or interest on the securities held by a Fund. Additionally, these institutions may be subject to less stringent reserve requirements and to different accounting, auditing, reporting, and recordkeeping requirements than those applicable to domestic branches of US banks. Bank obligations include the following:
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Swaps
Each Fund may enter into credit default swap (“CDS”) contracts to the extent consistent with its investment objectives and strategies. The aggregate notional amount (typically, the principal amount of the reference security or securities) of a Fund's investments in CDS contracts will be limited to 15% of the Fund's total net assets. Each Fund may invest in inflation, interest rate and total return swaps to the extent consistent with its investment objectives and strategies. A Fund will only invest in these types of swap transactions when all the reference rates are related to or derived from instruments or markets in which the Fund is otherwise eligible to invest, and subject to the investment limitations on the instruments to which the purchased reference rate relates. Delaware Emerging Markets Debt Corporate Fund may invest up to 15% of its assets in interest rate swaps.
A Fund will not be permitted to enter into any swap transaction unless, at the time of entering into such transaction, the unsecured long-term debt of the actual counterparty, combined with any credit enhancements, is rated at least BBB- by S&P or Baa3 by Moody's or is determined to be of equivalent credit quality by the Manager. In addition, the Manager will monitor the ongoing creditworthiness of swap counterparties in order to seek to minimize the risk of swaps.
Comprehensive swaps regulation. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act) and related regulatory developments have imposed comprehensive regulatory requirements on swaps and swap market participants. This regulatory framework includes: (1) registration and regulation of swap dealers and major swap participants; (2) requiring central clearing and execution of standardized swaps; (3) imposing margin requirements on swap transactions; (4) regulating and monitoring swap transactions through position limits and large trader reporting requirements; and (5) imposing record keeping and centralized and public reporting requirements, on an anonymous basis. The CFTC is responsible for the regulation of most swaps. The SEC has jurisdiction over a small segment of the market referred to as “security-based swaps,” which includes swaps on single securities or credits, or narrow-based indices of securities or credits.
Uncleared swaps. In an uncleared swap, the swap counterparty is typically a brokerage firm, bank, or other financial institution. A Fund customarily enters into uncleared swaps based on the standard terms and conditions of an International Swaps and Derivatives Association (“ISDA”) Master Agreement. ISDA is a voluntary industry association of participants in the over-the-counter derivatives markets that has developed standardized contracts used by such participants that have agreed to be bound by such standardized contracts.
In the event that one party to a swap transaction defaults and the transaction is terminated prior to its scheduled termination date, one of the parties may be required to make an early termination payment to the other. An early termination payment may be payable by either the defaulting or nondefaulting party, depending upon which of them is “in-the-money” with respect to the swap at the time of its termination. Early termination payments may be calculated in various ways, but are intended to approximate the amount the “in-the-money” party would have to pay to replace the swap as of the date of its termination.
During the term of an uncleared swap, the Fund is required to pledge to the swap counterparty, from time to time, an amount of cash and/or other assets, referred to as “variation margin”, that is equal to the total net amount (if any) that would be payable by the Fund to the counterparty if all outstanding swaps between the parties were terminated on the date in question, including any early termination payments. Periodically, changes in the variation margin amount are made to recognize changes in value of the contract resulting from, among other things, interest on the notional value of the contract, market value changes in the underlying investment, and/or dividends paid by the issuer of the underlying instrument. Likewise, the counterparty will be required to pledge cash or other assets to cover its obligations to a Fund. However, the amount pledged may not always be equal to or more than the amount due to the other party. Therefore, if a counterparty defaults on its obligations to a Fund, the amount pledged by the counterparty and available to the Fund may not be sufficient to cover all the amounts due to the Fund and the Fund may sustain a loss.
Currently, the Funds do not typically provide initial margin in connection with uncleared swaps. However, rules requiring initial margin to be posted by certain market participants for uncleared swaps have been adopted and are being phased in over time. When these rules take effect with respect to the Funds, if a Fund is deemed to have material swaps exposure under applicable swaps regulation, it will be required to post initial margin in addition to variation margin.
Cleared swaps. Certain standardized swaps are subject to mandatory central clearing and exchange trading. The Dodd-Frank Act and implementing rules will ultimately require the clearing and exchange-trading of many swaps. Mandatory exchange-trading and clearing will occur on a phased-in basis based on the type of market participant, CFTC approval of contracts for central clearing, and public trading facilities making such cleared swaps available to trade. To date, the CFTC has designated only certain of the most common types of credit default index swaps and interest rate swaps as subject to mandatory clearing and certain public trading facilities have made certain of those cleared swaps available to trade, but it is expected that additional categories of swaps will in the future be designated as subject to mandatory clearing and trade execution requirements. Central clearing is intended to reduce counterparty credit risk and increase liquidity, but central clearing does not eliminate these risks and may involve additional costs and risks not involved with uncleared swaps. For more information, see “Risks of cleared swaps” below.
In a cleared swap, a Fund's ultimate counterparty is a central clearinghouse rather than a brokerage firm, bank, or other financial institution. Cleared swaps are submitted for clearing through each party's FCM, which must be a member of the clearinghouse that serves as the central counterparty.
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Investment Strategies and Risks
When a Fund enters into a cleared swap, it must deliver to the central counterparty (via the FCM) an amount referred to as “initial margin.” Initial margin requirements are determined by the central counterparty, but an FCM may require additional initial margin above the amount required by the central counterparty. During the term of the swap agreement, a “variation margin” amount may also be required to be paid by the Fund or may be received by the Fund in accordance with margin controls set for such accounts, depending upon changes in the marked-to-market value of the swap agreement. At the conclusion of the term of the swap agreement, if a Fund has a loss equal to or greater than the margin amount, the margin amount is paid to the FCM along with any loss in excess of the margin amount. If a Fund has a loss of less than the margin amount, the excess margin is returned to the Fund. If a Fund has a gain, the full margin amount and the amount of the gain are paid to the Fund.
Recently adopted CFTC rules require the trading and execution of certain cleared swaps on public trading facilities. Trading on an exchange-type system may increase market transparency and liquidity but may require the Fund to incur increased expenses to access the same types of swaps that it has used in the past.
Credit default swaps. The “buyer” of protection in a credit default swap agreement is obligated to pay the “seller” a periodic stream of payments over the term of the agreement in return for a payment by the “seller” that is contingent upon the occurrence of a credit event with respect to a specific underlying reference debt obligation (whether as a single debt instrument or as part of an index of debt instruments). The contingent payment by the seller generally is the face amount of the debt obligation, in return for the buyer's obligation to make periodic cash payments and deliver in physical form the reference debt obligation or a cash payment equal to the then-current market value of that debt obligation at the time of the credit event. If no credit event occurs, the seller would receive a fixed rate of income throughout the term of the contract, while the buyer would lose the amount of its payments and recover nothing. The buyer is also subject to the risk that the seller will not satisfy its contingent payment obligation, if and when due.
Purchasing protection through a credit default swap may be used to attempt to hedge against a decline in the value of debt security or securities due to a credit event. The seller of protection under a credit default swap receives periodic payments from the buyer but is exposed to the risk that the value of the reference debt obligation declines due to a credit event and that it will have to pay the face amount of the reference obligation to the buyer. Selling protection under a credit default swap may also permit the seller to gain exposure that is similar to owning the reference debt obligation directly. As the seller of protection, a Fund would effectively add leverage to its portfolio because, in addition to its total assets, the Fund would be subject to the risk that there would be a credit event and the Fund would have to make a substantial payment in the future.
Generally, a credit event means bankruptcy, failure to timely pay interest or principal, obligation acceleration default, or repudiation or restructuring of the reference debt obligation. There may be disputes between the buyer or seller of a credit default swap agreement or within the swaps market as a whole as to whether or not a credit event has occurred or what the payout should be which could result in litigation. In some instances where there is a dispute in the credit default swap market, a regional Determinations Committee set up by ISDA may make an official binding determination regarding the existence of credit events with respect to the reference debt obligation of a credit default swap agreement or, in the case of a credit default swap on an index, with respect to a component of the index underlying the credit default swap agreement. In the case of a credit default swap on an index, the existence of a credit event is determined according to the index methodology, which may in turn refer to determinations made by ISDA's Determinations Committees with respect to particular components of the index.
ISDA's Determinations Committees are comprised principally of dealers in the OTC derivatives markets which may have a conflicting interest in the determination regarding the existence of a particular credit event. In addition, in the sovereign debt market, a credit default swap agreement may not provide the protection generally anticipated because the government issuer of the sovereign debt instruments may be able to restructure or renegotiate the debt in such a manner as to avoid triggering a credit event. Moreover, (1) sovereign debt obligations may not incorporate common, commercially acceptable provisions, such as collective action clauses, or (2) the negotiated restructuring of the sovereign debt may be deemed non-mandatory on all holders. As a result, the Determinations Committees might then not be able to determine, or may be able to avoid having to determine, that a credit event under the credit default agreement has occurred. For these and other reasons, the buyer of protection in a credit default swap agreement is subject to the risk that certain occurrences, such as particular restructuring events affecting the value of the underlying reference debt obligation, or the restructuring of sovereign debt, may not be deemed credit events under the credit default swap agreement. Therefore, if the credit default swap was purchased as a hedge or to take advantage of an anticipated increase in the value of credit protection for the underlying reference obligation, it may not provide any hedging benefit or otherwise increase in value as anticipated. Similarly, the seller of protection in a credit default swap agreement is subject to the risk that certain occurrences may be deemed to be credit events under the credit default swap agreement, even if these occurrences do not adversely impact the value or creditworthiness of the underlying reference debt obligation.
Interest rate swaps. An interest rate swap is an agreement between two parties to exchange interest rate payment obligations. Each party's payment obligation under an interest rate swap is determined by reference to a specified “notional” amount of money. Therefore, interest rate swaps generally do not involve the delivery of securities, other underlying instruments, or principal amounts; rather they entail the exchange of cash payments based on the application of the designated interest rates to the notional amount. Accordingly, barring swap counterparty or FCM default, the risk of loss in an interest rate swap is limited to the net amount of interest payments that a Fund is obligated to make or receive (as applicable), as well as any early termination payment payable by or to the Fund upon early termination of the swap.
By swapping fixed interest rate payments for floating interest rate payments, an interest rate swap can be used to increase or decrease a Fund's exposure to various interest rates, including to hedge interest rate risk. Interest rate swaps are generally used to permit the party seeking a floating-rate obligation the opportunity to acquire such obligation at a rate lower than is directly available in the credit markets, while permitting the party desiring a fixed-rate obligation the opportunity to acquire such a fixed-rate obligation, also frequently at a rate lower than is directly available in the credit markets. The success of such a
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transaction depends in large part on the availability of fixed-rate obligations at interest (or coupon) rates low enough to cover the costs involved. An interest rate swap transaction is affected by changes in interest rates, which, in turn, may affect the prepayment rate of any underlying debt obligations upon which the interest rate swap is based.
Inflation index swaps. An inflation index swap is a contract between two parties, whereby one party makes payments based on the cumulative percentage increase in an index that serves as a measure of inflation (typically, the Consumer Price Index) and the other party makes a regular payment based on a compounded fixed rate. Each party's payment obligation under the swap is determined by reference to a specified “notional” amount of money. Typically, an inflation index swap has payment obligations netted and exchanged upon maturity. The value of an inflation index swap is expected to change in response to changes in the rate of inflation. If inflation increases at a faster rate than anticipated at the time the swap is entered into, the swap will increase in value. Similarly, if inflation increases at a rate slower than anticipated at the time the swap is entered into, the swap will decrease in value.
Total return swaps. A total return swap (also sometimes referred to as a synthetic equity swap or “contract for difference”) is an agreement between two parties under which the parties agree to make payments to each other so as to replicate the economic consequences that would apply had a purchase or short sale of the underlying reference instrument taken place. For example, one party agrees to pay the other party the total return earned or realized on the notional amount of an underlying equity security and any dividends declared with respect to that equity security. In return the other party makes payments, typically at a floating rate, calculated based on the notional amount.
Risks of swaps generally. The use of swap transactions is a highly specialized activity, which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. Whether a Fund will be successful in using swap agreements to achieve its investment goal depends on the ability of the Manager to predict correctly which types of investments are likely to produce greater returns. If the Manager, in using swap agreements, is incorrect in its forecasts of market values, interest rates, inflation, currency exchange rates, or other applicable factors, the investment performance of the Fund will be less than its performance would have been if it had not used the swap agreements.
The risk of loss to the Fund for swap transactions that are entered into on a net basis depends on which party is obligated to pay the net amount to the other party. If the counterparty is obligated to pay the net amount to a Fund, the risk of loss to the Fund is loss of the entire amount that the Fund is entitled to receive. If a Fund is obligated to pay the net amount, the Fund's risk of loss is generally limited to that net amount. If the swap agreement involves the exchange of the entire principal value of a security, the entire principal value of that security is subject to the risk that the other party to the swap will default on its contractual delivery obligations. In addition, a Fund's risk of loss also includes any margin at risk in the event of default by the counterparty (in an uncleared swap) or the central counterparty or FCM (in a cleared swap), plus any transaction costs.
Because bilateral swap agreements are structured as two-party contracts and may have terms of greater than seven days, these swaps may be considered to be illiquid and, therefore, subject to a Fund's limitation on investments in illiquid investments. If a swap transaction is particularly large or if the relevant market is illiquid, a Fund may not be able to establish or liquidate a position at an advantageous time or price, which may result in significant losses. Participants in the swap markets are not required to make continuous markets in the swap contracts they trade. Participants could refuse to quote prices for swap contracts or quote prices with an unusually wide spread between the price at which they are prepared to buy and the price at which they are prepared to sell. Some swap agreements entail complex terms and may require a greater degree of subjectivity in their valuation. However, the swap markets have grown substantially in recent years, with a large number of financial institutions acting both as principals and agents, utilizing standardized swap documentation. As a result, the swap markets have become increasingly liquid. In addition, central clearing and the trading of cleared swaps on public facilities are intended to increase liquidity. The Manager, under the supervision of the Board, is responsible for determining and monitoring the liquidity of a Fund's swap transactions.
Rules adopted under the Dodd-Frank Act require centralized reporting of detailed information about many swaps, whether cleared or uncleared. This information is available to regulators and also, to a more limited extent and on an anonymous basis, to the public. Reporting of swap data is intended to result in greater market transparency. This may be beneficial to funds that use swaps in their trading strategies. However, public reporting imposes additional recordkeeping burdens on these funds, and the safeguards established to protect anonymity are not yet tested and may not provide protection of funds' identities as intended.
Certain Internal Revenue Service (“IRS”) positions may limit the Fund's ability to use swap agreements in a desired tax strategy. It is possible that developments in the swap markets and/or the laws relating to swap agreements, including potential government regulation, could adversely affect the Fund's ability to benefit from using swap agreements, or could have adverse tax consequences. For more information about potentially changing regulation, see “Developing government regulation of derivatives” above.
Risks of uncleared swaps. Uncleared swaps are not traded on exchanges. As a result, swap participants may not be as protected as participants on organized exchanges. Performance of a swap agreement is the responsibility only of the swap counterparty and not of any exchange or clearinghouse. As a result, a Fund is subject to the risk that a counterparty will be unable or will refuse to perform under such agreement, including because of the counterparty's bankruptcy or insolvency. A Fund risks the loss of the accrued but unpaid amounts under a swap agreement, which could be substantial, in the event of a default, insolvency, or bankruptcy by a swap counterparty. In such an event, a Fund will have contractual remedies pursuant to the swap agreements, but bankruptcy and insolvency laws could affect the Fund's rights as a creditor. If the counterparty's creditworthiness declines, the value of a swap agreement would likely decline, potentially resulting in losses. The Manager will only approve a swap agreement counterparty for a Fund if the Manager deems the counterparty to be creditworthy under the Fund's counterparty review process. However, in unusual or extreme market conditions, a counterparty's creditworthiness and ability to perform may deteriorate rapidly, and the availability of suitable replacement counterparties may become limited.
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Investment Strategies and Risks
Risks of cleared swaps. As noted above, under recent financial reforms, certain types of swaps are, and others eventually are expected to be, required to be cleared through a central counterparty, which may affect counterparty risk and other risks faced by a Fund.
Central clearing is designed to reduce counterparty credit risk and increase liquidity compared to uncleared swaps because central clearing interposes the central clearinghouse as the counterparty to each participant's swap, but it does not eliminate those risks completely. There is also a risk of loss by a Fund of the initial and variation margin deposits in the event of bankruptcy of the FCM with which the Fund has an open position in a swap contract. The assets of a Fund may not be fully protected in the event of the bankruptcy of the FCM or central counterparty because the Fund might be limited to recovering only a pro rata share of all available funds and margin segregated on behalf of an FCM's customers. If the FCM does not provide accurate reporting, a Fund is also subject to the risk that the FCM could use the Fund's assets, which are held in an omnibus account with assets belonging to the FCM's other customers, to satisfy its own financial obligations or the payment obligations of another customer to the central counterparty. Credit risk of cleared swap participants is concentrated in a few clearinghouses, and the consequences of insolvency of a clearinghouse are not clear.
With cleared swaps, a Fund may not be able to obtain as favorable terms as it would be able to negotiate for a bilateral, uncleared swap. In addition, an FCM may unilaterally amend the terms of its agreement with the Fund, which may include the imposition of position limits or additional margin requirements with respect to the Fund's investment in certain types of swaps. Central counterparties and FCMs can require termination of existing cleared swap transactions upon the occurrence of certain events, and can also require increases in margin above the margin that is required at the initiation of the swap agreement. Currently, depending on a number of factors, the margin required under the rules of the clearinghouse and FCM may be in excess of the collateral required to be posted by a Fund to support its obligations under a similar uncleared swap. However, regulators have adopted rules imposing margin requirements on uncleared swaps, which will become effective as to various market participants over time.
Finally, a Fund is subject to the risk that, after entering into a cleared swap, no FCM or central counterparty is willing or able to clear the transaction. In such an event, the Fund may be required to break the trade and make an early termination payment.
US Government Securities
US government securities include obligations of, or guaranteed by, the US federal government, its agencies, instrumentalities, or sponsored enterprises. Some US government securities are supported by the full faith and credit of the US government. These include US Treasury obligations and securities issued by Ginnie Mae. A second category of US government securities is those supported by the right of the agency, instrumentality or sponsored enterprise to borrow from the US government to meet its obligations. These include securities issued by Federal Home Loan Banks.
A third category of US government securities is those supported by only the credit of the issuing agency, instrumentality, or sponsored enterprise. These include securities issued by Fannie Mae and Freddie Mac. In the event of a default, an investor like a Fund would only have legal recourse to the issuer, not the US government. Although the US government has provided support for these securities in the past, there can be no assurance that it will do so in the future. The US government has also made available additional guarantees for limited periods to stabilize or restore a market in the wake of an economic, political, or natural crisis. Such guarantees, and the economic opportunities they present, are likely to be temporary and cannot be relied upon by a Fund. Any downgrade of the credit rating of the securities issued by the US government may result in a downgrade of securities issued by its agencies or instrumentalities, including government-sponsored entities.
Zero Coupon and Payment-In-Kind Bonds
The Funds may invest in zero-coupon bonds or payment-in-kind bonds.
The credit risk factors pertaining to lower-rated securities also apply to lower-rated zero coupon, deferred interest, and payment-in-kind bonds. These bonds carry an additional risk in that, unlike bonds that pay interest throughout the period to maturity, a Fund will realize no cash until the cash payment date and, if the issuer defaults, the Fund may obtain no return at all on its investment.
Zero coupon, deferred interest, and payment-in-kind bonds involve additional special considerations. Zero coupon or deferred interest securities are debt obligations that do not entitle the holder to any periodic payments of interest prior to maturity or a specified date when the securities begin paying current interest (the “cash payment date”) and therefore are generally issued and traded at a discount from their face amounts or par values. The discount varies depending on the time remaining until maturity or cash payment date, prevailing interest rates, liquidity of the security, and the perceived credit quality of the issuer. The discount, in the absence of financial difficulties of the issuer, typically decreases as the final maturity or cash payment date of the security approaches. The market prices of zero coupon securities are generally more volatile than the market prices of securities that pay interest periodically and are likely to respond to changes in interest rates to a greater degree than do non-zero coupon or deferred interest securities having similar maturities and credit quality. Current federal income tax law requires that a holder of a zero coupon security report as income each year the portion of the original issue discount on the security that accrues that year, even though the holder receives no cash payments of interest during the year.
Payment-in-kind bonds are securities that pay interest through the issuance of additional bonds. A Fund will be deemed to receive interest over the life of these bonds and be treated as if interest were paid on a current basis for federal income tax purposes, although no cash interest payments are received by the Fund until the cash payment date or until the bonds mature. Accordingly, during periods when a Fund receives no cash interest payments on its zero coupon securities or deferred interest or payment-in-kind bonds, it may be required to dispose of portfolio securities to meet the distribution requirements and these sales may be subject to the risk factors discussed above. A Fund is not limited in the amount of its assets that may be invested in these types of securities.
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Cybersecurity Risk
With the increased use of technologies such as the internet and the dependence on computer systems to perform necessary business functions, the Funds and their service providers may have become more susceptible to operational and related risks through breaches in cybersecurity. A cybersecurity incident may refer to intentional or unintentional events that allow an unauthorized party to gain access to Fund assets, customer data, or proprietary information, or cause a Fund or Fund service providers (including, but not limited to, the Manager, distributor, fund accountants, custodian, transfer agent, and financial intermediaries) to suffer data corruption or lose operational functionality. A cybersecurity incident could, among other things, result in the loss or theft of customer data or funds, customers or employees being unable to access electronic systems (denial of services), loss or theft of proprietary information or corporate data, physical damage to a computer or network system, or remediation costs associated with system repairs.
Any of these results could have a substantial adverse impact on a Fund and its shareholders. For example, if a cybersecurity incident results in a denial of service, Fund shareholders could lose access to their electronic accounts and be unable to buy or sell Fund shares for an unknown period of time, and employees could be unable to access electronic systems to perform critical duties for the Fund, such as trading, NAV calculation, shareholder accounting or fulfillment of Fund share purchases and redemptions. Cybersecurity incidents could cause a Fund or Fund service provider to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures, or financial loss of a significant magnitude and could result in allegations that a Fund or Fund service provider violated privacy and other laws.
Similar adverse consequences could result from cybersecurity incidents affecting issuers of securities in which the Fund invests, counterparties with which a Fund engages in transactions, governmental and other regulatory authorities, exchange and other financial market operators, banks, brokers, dealers, insurance companies, and other financial institutions and other parties. Risk management systems and business continuity plans seek to reduce the risks associated with cybersecurity in the event there is a cybersecurity breach, but there are inherent limitations in these systems and plans, including the possibility that certain risks may not have been identified, in large part because different or unknown threats may emerge in the future. Furthermore, the Funds do not control the cybersecurity systems and plans of the issuers of securities in which the Funds invest or the Funds' third party service providers or trading counterparties or any other service providers whose operations may affect the Funds or their shareholders.
As an open-end management investment company, the Trust has delegated its operational activities to third-party service providers, subject to the oversight of the Board. Because the Trust operates its business through third-party service providers, it does not itself have any operational or security systems or infrastructure that are potentially subject to cyber attacks. The third-party service providers that facilitate the Trust's business activities, including, but not limited to, fund management, custody of Trust assets, fund accounting and financial administration, and transfer agent services, could be sources of operational and informational security risk to the Trust and its shareholders, including from breakdowns or failures of the third-party service providers' own systems or capacity constraints. A failure or breach of the operational or security systems or infrastructure of the Trust's third-party service providers could disrupt the Trust's operations, result in the disclosure or misuse of confidential or proprietary information, and cause losses. Although the Trust and its third-party service providers have business continuity plans and other safeguards in place, the operations of the Trust's third-party service providers may be adversely affected by significant disruption of the service providers' operating systems or physical infrastructure that support the Trust and its shareholders.
The proliferation of new technologies, the use of the Internet and telecommunications technologies to conduct business, as well as the increased sophistication and activities of organized crime, hackers, terrorists, activists, and others, have significantly increased the information security risks to which the Trust's third-party service providers are subject. The third-party service providers rely on digital technologies, computer and email systems, software, and networks to conduct their business and the business of the Trust. The Trust's third-party service providers have robust information security procedures; however, their technologies may become the target of cyber attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss, or destruction of the Trust's or its shareholders' confidential and other information, or otherwise disrupt the business operations of the Trust or its third-party service providers. Although to date the Trust has not experienced any material losses relating to cyber attacks or other information security breaches, there can be no assurance that the Trust or its third-party service providers will not suffer such losses in the future.
Disruptions or failures in the physical infrastructure or operating systems that support the Trust's third-party service providers, or cyber attacks or security breaches of the networks, systems, or devices that the Trust's third-party service providers use to service the Trust's operations, could result in financial losses, the inability of Trust shareholders to transact business, violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, and/or additional compliance costs. The business continuity policies and procedures that the Trust and its third-party service providers have established seek to identify and mitigate the types of risk to which the Trust and its third-party service providers are subject. As with any risk-management system, there are inherent limitations to these business continuity policies and procedures as there may exist, or develop in the future, risks that have not been anticipated or identified.
IBOR Transition Risk
The London Interbank Offered Rate (“LIBOR”) is the average offered rate for various maturities of short-term loans between major international banks who are members of the British Bankers Association (“BBA”). LIBOR was a common benchmark interest rate index used to make adjustments to variable-rate loans and was used throughout global banking and financial industries to determine interest rates for a variety of borrowing arrangements and financial instruments (such as debt instruments and derivatives). Regulators in the United States and the United Kingdom alleged that certain banks engaged in manipulative acts in connection with their submissions to the BBA. LIBOR manipulation would raise the risk of a fund of being adversely impacted if a fund received a payment based upon LIBOR and such manipulation of LIBOR resulted in lower resets than would have occurred had there been no manipulation.
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Investment Strategies and Risks
In addition to LIBOR, a fund may have investments linked to other interbank offered rates (“IBORs”). Other IBORs, such as the Euro Overnight Index Average (EONIA), are also the subject of regulatory reform or discontinuation. Over the past several years, various regulators and industry bodies have worked together to identify alternative reference rates (“ARRs”) to replace LIBOR and assist with the transition to the new ARRs. The majority of LIBOR rates were phased out at the end of 2021. The most common tenors of USD LIBOR (overnight and 1-, 3-, 6- and 12- month) will cease publication as of June 30, 2023.
There remains uncertainty and risks related to converting certain longer-term securities and transactions to a new ARR. For example, there can be no assurance that the composition or characteristics of any ARRs or financial instruments in which a fund invests that utilize ARRs will be similar to or produce the same value or economic equivalence as LIBOR or that these instruments will have the same volume or liquidity. While some instruments tied to LIBOR or a similar rate may include a replacement rate in the event these rates are discontinued, not all instruments have such fallback provisions and the effectiveness of such replacement rates remains uncertain. The cessation of LIBOR or similar rates could affect the value and liquidity of investments tied to these rates, especially those that do not include fallback provisions. The effect of a transition away from the IBORs may also result in a reduction in the effectiveness of certain hedging transactions and increased volatility in markets that currently rely on an IBOR to determine interest rates. The use of alternative reference rate products may also impact investment strategy performance. Due to the uncertainty regarding the future utilization of LIBOR and similar rates and the nature of any replacement rate, the potential effect of a transition away from these rates on a fund or the financial instruments in which the fund invests cannot yet be determined.
Natural Disaster/Epidemic Risk
Natural or environmental disasters, such as earthquakes, fires, floods, hurricanes, tsunamis, and other severe weather-related phenomena generally, and widespread disease, including pandemics and epidemics, have been and can be highly disruptive to economies and markets, adversely impacting individual companies, sectors, industries, markets, currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of a fund's investments. Given the increasing interdependence among global economies and markets, conditions in one country, market, or region are increasingly likely to adversely affect markets, issuers, and/or foreign exchange rates in other countries. These disruptions could prevent a fund from executing advantageous investment decisions in a timely manner and could negatively impact the fund's ability to achieve its investment objective. Any such event(s) could have a significant adverse impact on the value and risk profile of a fund.
Disclosure of Portfolio Holdings Information
The Funds have adopted a policy generally prohibiting the disclosure of portfolio holdings information to any person until after 30 calendar days have passed. The Trust posts a list of each Fund's portfolio holdings monthly, with a 30-day lag, on each Fund's website, delawarefunds.com. In addition, on a 10-day lag, we also make available on the website a month-end summary listing of the number of the Funds' securities, country and asset allocations, and top 10 securities and sectors by percentage of holdings for the Funds. This information is available publicly to any and all shareholders free of charge once posted on the website or by calling 800 523-1918.
Other entities, including institutional investors and intermediaries that distribute the Funds' shares, are generally treated similarly and are not provided with the Funds' portfolio holdings in advance of when they are generally available to the public.
The Funds may, from time to time, provide statistical data derived from publicly available information to third parties, such as shareholders, prospective shareholders, financial intermediaries, consultants, and ratings and ranking organizations.
Third-party service providers and affiliated persons of the Funds are provided with the Funds' portfolio holdings only to the extent necessary to perform services under agreements relating to the Funds. In accordance with the policy, third-party service providers who receive nonpublic portfolio holdings information on an ongoing basis are: the Manager's affiliates (Macquarie Investment Management Business Trust, Delaware Investments Fund Services Company, and the Distributor), the Funds' independent registered public accounting firm, the Funds' custodian, the Funds' legal counsel, the Funds' financial printer (DG3), and the Funds' proxy voting service. These entities are obligated to keep such information confidential.
Third-party rating and ranking organizations and consultants who have signed agreements (“Nondisclosure Agreements”) with the Funds or the Manager may receive portfolio holdings information more quickly than the 30-day lag. The Nondisclosure Agreements require that the receiving entity hold the information in the strictest confidence and prohibit the receiving entity from disclosing the information or trading on the information (either in Fund shares or in shares of the Funds' portfolio securities). In addition, the receiving party must agree to provide copies of any research or reports generated using the portfolio holdings information in order to allow for monitoring of use of the information. Neither the Funds, nor the Manager, nor any affiliate, receives any compensation or consideration with respect to these agreements.
To protect the shareholders' interests and to avoid conflicts of interest, Nondisclosure Agreements must be approved by a member of the Manager's Legal Department and Compliance Department and any deviation in the use of the portfolio holdings information by the receiving party must be approved in writing by the Funds' Chief Compliance Officer prior to such use.
The Board will be notified of any substantial changes to the foregoing procedures. The Board also receives an annual report from the Trust's Chief Compliance Officer that, among other things, addresses the operation of the Trust's procedures concerning the disclosure of portfolio holdings information.
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Management of the Trust
Trustees and officers
The business and affairs of the Trust are managed under the direction of its Board of Trustees. Certain officers and Trustees of the Trust hold identical positions in Delaware Funds. The Trust's Trustees and principal officers are noted below along with their birthdates and their business experience for the past five years. The Trustees serve for indefinite terms until their resignation, death, or removal.
As of October 31, 2022, the officers and Trustees of the Trust directly owned less than 1% of the outstanding shares of each Class of each Fund.
Name, Address, |
Position(s) Held with the Trust |
Length of Time |
Number of Funds in Fund Complex Overseen by Trustee |
Principal Occupation(s) |
Other Directorships Held by Trustee During the Past Five Years |
Interested Trustee |
|||||
Shawn K. Lytle2 February 1970 |
President, Chief Executive Officer, and Trustee |
President and Chief Executive Officer since August 2015 Trustee since September 2015 |
128 |
Macquarie Asset Management3 (2015-Present)—Global Head of Public Investments (2019-Present); Head of Americas of Macquarie Group (2017-Present) |
None |
Independent Trustees |
|||||
Jerome D. Abernathy July 1959 |
Trustee |
Since January 2019 |
128 |
Stonebrook Capital Management, LLC (financial technology: macro factors and databases)—Managing Member (1993-Present) |
None |
Thomas L. Bennett October 1947 |
Trustee |
Trustee since March 2005 Chair from March 2015 to August 2022 |
128 |
Private Investor (2004-Present) |
None |
Ann D. Borowiec November 1958 |
Trustee |
Since March 2015 |
128 |
J.P. Morgan Chase & Co. (1987-2013)—Chief Executive Officer, Private Wealth Management (2011-2013) |
Banco Santander International (2016-2019) Santander Bank, N.A. (2016-2019) |
Joseph W. Chow January 1953 |
Trustee |
Since January 2013 |
128 |
Private Investor (2011-Present) |
None |
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Management of the Trust
Name, Address, |
Position(s) Held with the Trust |
Length of Time |
Number of Funds in Fund Complex Overseen by Trustee |
Principal Occupation(s) |
Other Directorships Held by Trustee During the Past Five Years |
H. Jeffrey Dobbs May 1955 |
Trustee |
Since April 20194 |
128 |
KPMG LLP (2002-2015)—Global Sector Chairman, Industrial Manufacturing (2010-2015) |
TechAccel LLC (2015-Present) PatientsVoices, Inc. (2018-Present) Valparaiso University Board (2012-Present) Ivy Funds Complex (2019-2021) |
John A. Fry May 1960 |
Trustee |
Since January 2001 |
128 |
Drexel University—President (2010-Present) |
Federal Reserve Bank of Philadelphia (2020-Present) FS Credit Real Estate Income Trust, Inc. (2018-Present) vTv Therapeutics Inc. (2017-Present) Community Health Systems (2004-Present) Drexel Morgan & Co. (2015-2019) |
Joseph Harroz, Jr. January 1967 |
Trustee |
Since November 19984 |
128 |
University of Oklahoma—President (2020-Present); Interim President (2019-2020); Vice President and Dean, College of Law (2010-2019) Brookhaven Investments LLC (commercial enterprises) —Managing Member (2019-Present) St. Clair, LLC (commercial enterprises) —Managing Member (2019-Present) |
OU Medicine, Inc. (2020-Present) Big 12 Athletic Conference (2019-Present) Valliance Bank (2007-Present) Ivy Funds Complex (1998-2021) |
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Name, Address, |
Position(s) Held with the Trust |
Length of Time |
Number of Funds in Fund Complex Overseen by Trustee |
Principal Occupation(s) |
Other Directorships Held by Trustee During the Past Five Years |
Sandra A.J. Lawrence September 1957 |
Trustee |
Since April 20194 |
128 |
Children's Mercy Hospitals and Clinics (2005-2019) —Chief Administrative Officer (2016-2019) |
Brixmor Property Group Inc. (2021-Present) Sera Prognostics Inc. (biotechnology) (2021-Present) Recology (resource recovery) (2021-Present) Evergy, Inc., Kansas City Power & Light Company, KCP&L Greater Missouri Operations Company, Westar Energy, Inc. and Kansas Gas and Electric Company (related utility companies) (2018-Present) National Association of Corporate Directors (2017-Present) Ivy Funds Complex (2019-2021) American Shared Hospital Services (medical device) (2017-2021) Westar Energy (utility) (2004-2018) |
Frances A. Sevilla-Sacasa January 1956 |
Trustee |
Since September 2011 |
128 |
Banco Itaú International—Chief Executive Officer (2012-2016) |
Florida Chapter of National Association of Corporate Directors (2021-Present) Callon Petroleum Company (2019-Present) Camden Property Trust (2011-Present) New Senior Investment Group Inc. (2021) Carrizo Oil & Gas, Inc. (2018-2019) |
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Management of the Trust
Name, Address, |
Position(s) Held with the Trust |
Length of Time |
Number of Funds in Fund Complex Overseen by Trustee |
Principal Occupation(s) |
Other Directorships Held by Trustee During the Past Five Years |
Thomas K. Whitford March 1956 |
Chair and Trustee |
Trustee since January 2013 Chair since August 2022 |
128 |
PNC Financial Services Group (1983-2013)—Vice Chairman (2009-2013) |
HSBC USA Inc. (2014-2022) HSBC North America Holdings Inc. (2013-2022) HSBC Finance Corporation (2013-2018) |
Christianna Wood August 1959 |
Trustee |
Since January 2019 |
128 |
Gore Creek Capital, Ltd.—Chief Executive Officer and President (2009-Present) |
The Merger Fund (2013-2021), The Merger Fund VL (2013-2021), WCM Alternatives: Event-Driven Fund (2013-2021), and WCM Alternatives: Credit Event Fund (2017-2021) Grange Insurance (2013-Present) H&R Block Corporation (2008-Present) |
Janet L. Yeomans July 1948 |
Trustee |
Since April 1999 |
128 |
3M Company (1995-2012)—Vice President and Treasurer (2006-2012) |
Okabena Company (2009-2017) |
Officers |
Position(s) Held with the Trust |
Length of Time Served1 |
Principal Occupation(s) |
David F. Connor5 December 1963 |
Senior Vice President, General Counsel, and Secretary |
Senior Vice President since May 2013; General Counsel since May 2015; Secretary since October 2005 |
David F. Connor has served in various capacities at different times at MAM. |
Daniel V. Geatens5 October 1972 |
Senior Vice President and Treasurer |
Senior Vice President since December 2020; Treasurer since October 2007 |
Daniel V. Geatens has served in various capacities at different times at MAM. |
Richard Salus October 1963 |
Senior Vice President and Chief Financial Officer |
Senior Vice President and Chief Financial Officer since November 2006 |
Richard Salus has served in various capacities at different times at MAM. |
1 |
“Length of Time Served” refers to the time since the Trustee or officer began serving one or more of the Trusts in the Delaware Funds complex. |
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2 |
Shawn K. Lytle is considered to be an “Interested Trustee” because he is an executive officer of the Manager. |
3 |
Macquarie Asset Management is the marketing name for certain companies comprising the asset management division of Macquarie Group, including the Funds' Manager, principal underwriter, and transfer agent. |
4 |
Includes time served on the Board of Ivy Funds prior to the date when Ivy Funds joined the Delaware Funds complex. |
5 |
David F. Connor and Daniel V. Geatens serve in similar capacities for the six portfolios of the Optimum Fund Trust, which have the same investment manager, principal underwriter, and transfer agent as the Funds. Mr. Geatens also serves as the Chief Financial Officer of the Optimum Fund Trust, and he is the Chief Financial Officer and Treasurer for Macquarie Global Infrastructure Total Return Fund Inc., which has the same investment manager as the Funds. |
The following table shows each Trustee's ownership of shares of the Funds and of shares of all Delaware Funds as of December 31, 2021, unless otherwise noted.
Name |
Dollar Range of Equity Securities in the Funds |
Aggregate Dollar Range of Equity Securities* in All Registered Investment Companies Overseen by Trustee in Family of Investment Companies |
Interested Trustee |
||
Shawn K. Lytle |
None |
Over $100,000 |
Independent Trustees |
||
Jerome D. Abernathy |
None |
$50,001-$100,000 |
Thomas L. Bennett |
None |
Over $100,000 |
Ann D. Borowiec |
None |
Over $100,000 |
Joseph W. Chow |
None |
Over $100,000 |
H. Jeffrey Dobbs |
None |
Over $100,000 |
John A. Fry |
None |
Over $100,000 |
Joseph Harroz, Jr. |
None |
Over $100,000 |
Sandra A.J. Lawrence |
None |
Over $100,000 |
Frances A. Sevilla-Sacasa |
None |
Over $100,000 |
Thomas K. Whitford |
None |
Over $100,000 |
Christianna Wood |
None |
Over $100,000 |
Janet L. Yeomans |
None |
Over $100,000 |
* |
The ranges for equity securities ownership by each Trustee are: none; $1-$10,000; $10,001-$50,000; $50,001-$100,000; or over $100,000. |
The following table describes the aggregate compensation received by each Trustee from the Trust and the total compensation received from Delaware Funds for which he or she served as a Trustee for the Trust's last fiscal year. Only the Trustees of the Trust who are not “interested persons” as defined by the 1940 Act (the “Independent Trustees”) receive compensation from the Trust.
Trustee |
Aggregate Compensation from the Trust |
Pension or Retirement Benefits Accrued as Part of Fund Expenses |
Total Compensation from the Investment Companies in the Delaware Funds Complex1 |
Jerome Abernathy |
$595 |
None |
$402,083 |
Thomas L. Bennett2 |
$837 |
None |
$563,083 |
Ann D. Borowiec |
$575 |
None |
$382,583 |
Joseph W. Chow |
$568 |
None |
$384,083 |
H. Jeffrey Dobbs |
$317 |
None |
$190,500 |
John A. Fry |
$589 |
None |
$398,083 |
Joseph Harroz, Jr. |
$293 |
None |
$175,500 |
Sandra A.J. Lawrence |
$350 |
None |
$210,500 |
Frances A. Sevilla-Sacasa |
$560 |
None |
$377,083 |
Thomas K. Whitford (Chair)3 |
$755 |
None |
$497,917 |
Christianna Wood |
$570 |
None |
$387,083 |
Janet L. Yeomans |
$595 |
None |
$402,512 |
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Management of the Trust
1 |
Each Independent Trustee/Director receives: (i) an annual retainer fee of $265,000 for serving as a Trustee/Director for the investment companies in the Delaware Funds by Macquarie family of funds (128 funds in the complex) for which they serve, plus $14,000 per meeting for attending each Board Meeting in person held on behalf of all investment companies in the complex; and (ii) a $5,000 fee for attending each telephonic board meeting. The committee members and committee/board chairs also receive the following fees: (i) members of the Nominating and Corporate Governance Committee, Audit Committee, and Investments Committees will receive additional compensation of up to $6,000 for each Committee meeting attended; (ii) the Chair for each of the Audit Committee, the Investments Committees, and the Nominating and Corporate Governance Committee receives an annual retainer of $30,000; and (iii) the Board Chair will receive an additional annual retainer of $130,000. |
2 |
Thomas L. Bennett served as Board Chair until August 2022. |
3 |
Thomas K. Whitford has been Board Chair since August 2022. |
Board Leadership Structure
Common Board of Trustees/Directors: The business of the Trust is managed under the direction of its Board. The Trustees also serve on the Boards of all the other investment companies that comprise Delaware Funds. The Trustees believe that having a common Board for all funds in the complex is efficient and enhances the ability of the Board to address its responsibilities to each fund in the complex. The Trustees believe that the common board structure allows the Trustees to leverage their individual expertise and that their judgment is enhanced by being Trustees of all of the funds in the complex.
Board Chair: Mr. Whitford is the Board's Chair. As fund governance best practices have evolved, more and more fund boards have opted to have an independent trustee serve as chair. Among other reasons, the Board selected Mr. Whitford as Chair due to his substantial financial industry experience and his tenure on the Board. As the Chair, Mr. Whitford, in consultation with Fund management, legal counsel, and the other Trustees, proposes Board agenda topics, actively participates in developing Board meeting agendas, and ensures that appropriate and timely information is provided to the Board in connection with Board meetings. Mr. Whitford also conducts meetings of the Independent Trustees. He also generally serves as a liaison among outside Trustees, Fund officers, and legal counsel, and is an ex officio member of each Board committee.
Size and composition of Board: The Board is currently comprised of thirteen Trustees. Twelve of the thirteen Trustees are independent. The Trustees believe that the current size of the Board is conducive to Board interaction, dialogue, and debate, resulting in an effective decision-making body. The Board comprises Trustees with a variety of professional backgrounds. The Board believes that the skill sets of its members are complementary and add to the overall effectiveness of the Board. The Trustees regard diversity as an important consideration in the present composition of the Board and the selection of qualified candidates to fill vacancies on the Board. In order to ensure that Board membership will be refreshed from time to time, the Board has adopted a mandatory retirement age of 75 for Trustees. As a result, a Trustee may serve until December 31 of the calendar year in which such Trustee reaches the age of 75. At the discretion of the other Trustees, active service for a particular Trustee may be extended for a limited period of time beyond a Trustee's normal retirement date.
Committees: The Board has established several committees, each of which focuses on a particular substantive area and provides reports and recommendations to the full Board. The committee structure enables the Board to manage efficiently and effectively the large volume of information relevant to the Board's oversight of the Trust. The committees benefit from the professional expertise of their members. At the same time, membership on a committee enhances the expertise of its members and benefits the overall effectiveness of the Board.
The Board has the following committees:
Audit Committee: This committee monitors accounting and financial reporting policies, practices, and internal controls for the Trust. It also oversees the quality and objectivity of the Trust's financial statements and the independent audit thereof, and acts as a liaison between the Trust's independent registered public accounting firm and the full Board. The Trust's Audit Committee consists of the following Independent Trustees: Frances Sevilla-Sacasa, Chair; Thomas K. Whitford (ex officio); H. Jeffrey Dobbs; John A. Fry; Sandra A. J. Lawrence; and Thomas L. Bennett (ex officio). The Audit Committee held four meetings and two telephonic meetings during the Trust's last fiscal year.
Nominating and Corporate Governance Committee: This committee recommends Board nominees, fills Board vacancies that arise in between meetings of shareholders, and considers the qualifications and independence of Board members. The committee also monitors the performance of counsel for the Independent Trustees. The committee will consider shareholder recommendations for nomination to the Board only in the event that there is a vacancy on the Board. Shareholders who wish to submit recommendations for nominations to the Board to fill a vacancy must submit their recommendations in writing to the Nominating and Corporate Governance Committee, Attention: General Counsel, c/o Delaware Funds at 100 Independence, 610 Market Street, Philadelphia, PA 19106-2354. Shareholders should include appropriate information on the background and qualifications of any persons recommended (e.g., a resume), as well as the candidate's contact information and a written consent from the candidate to serve if nominated and elected. Shareholder recommendations for nominations to the Board will be accepted on an ongoing basis and such recommendations will be kept on file for consideration when there is a vacancy on the Board. The committee consists of the following Independent Trustees: Ann D. Borowiec, Chair; Jerome D. Abernathy; John A. Fry; Thomas L. Bennett (ex officio); and Thomas K. Whitford (ex officio). The Nominating and Corporate Governance Committee held four meetings and one telephonic meeting during the Trust's last fiscal year.
In reaching its determination that an individual should serve or continue to serve as a Trustee of the Trust, the committee considers, in light of the Trust's business and structure, the individual's experience, qualifications, attributes, and skills (the “Selection Factors”). No one Selection Factor is determinative, but some of the relevant factors that have been considered include: (i) the Trustee's business and professional experience and accomplishments, including prior experience in the financial services industry or on other boards; (ii) the ability to work effectively and collegially with other people; and (iii) how the Trustee's background and attributes contribute to the overall mix of skills and experience on the Board as a whole. Below is a brief summary of the Selection Factors that relate to each Trustee as of the date of this SAI.
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Jerome D. Abernathy — Mr. Abernathy has over 30 years of experience in the investment management industry. In selecting him to serve on the Board, the Independent Trustees noted and valued his extensive experience as a chief investment officer, director of research, trader, and analytical proprietary trading researcher. Mr. Abernathy received a B.S. in electrical engineering from Howard University and a Ph.D. in electrical engineering and computer science from Massachusetts Institute of Technology. Mr. Abernathy has served on the Board since January 2019.
Thomas L. Bennett — Mr. Bennett has over 30 years of experience in the investment management industry, particularly with fixed income portfolio management and credit analysis. He has served in senior management for a number of money management firms. Mr. Bennett has also served as a board member of another investment company, an educational institution, nonprofit organizations, and for-profit companies. He has an M.B.A. from the University of Cincinnati. Mr. Bennett has served on the Board since March 2005 and previously served as the Board's Chair from March 2015 to August 2022.
Ann D. Borowiec — Ms. Borowiec has over 25 years of experience in the banking and wealth management industry. Ms. Borowiec also serves as a board member on several nonprofit organizations. In nominating her to the Board in 2015, the Independent Trustees found that her experience as a Chief Executive Officer in the private wealth management business at a leading global asset manager and private bank, including the restructuring of business lines and defining client recruitment strategies, complemented the skills of existing board members. The Independent Trustees also found that her experience would provide additional oversight skill in the area of fund distribution. Ms. Borowiec holds a B.B.A. from Texas Christian University and an M.B.A. from Harvard University. Ms. Borowiec has served on the Board since March 2015.
Joseph W. Chow — Mr. Chow has over 30 years of experience in the banking and financial services industry. In electing him in 2013, the Independent Trustees found that his extensive experience in business strategy in non-US markets complemented the skills of existing Board members and also reflected the increasing importance of global financial markets in investment management. The Independent Trustees also found that Mr. Chow's management responsibilities as a former Executive Vice President of a leading global asset servicing and investment management firm as well as his experience as Chief Risk and Corporate Administration Officer would add helpful oversight skills to the Board's expertise. Mr. Chow holds a B.A. degree from Brandeis University and M.C.P. and M.S. in Management degrees from MIT. Mr. Chow has served on the Board since January 2013.
H. Jeffrey Dobbs — Mr. Dobbs has more than 35 years of experience in the automotive, industrial manufacturing, financial services and consumer sectors. He also has served as a partner in a public accounting firm. Mr. Dobbs also has multiple years of service as a Trustee on the Board of Ivy Funds prior to the time Ivy Funds joined the Delaware Funds complex. Mr. Dobbs holds a degree in accounting from Valparaiso University. The Independent Trustees concluded that Mr. Dobbs is suitable to act as Trustee because of his extensive work in the global professional services industry, as well as his educational background.
John A. Fry — Mr. Fry has over 30 years of experience in higher education. He has served in senior management for three major institutions of higher learning including serving as president of a leading research university. Mr. Fry has also served as a board member of many nonprofit organizations and several for-profit companies. Mr. Fry has extensive experience in overseeing areas such as finance, investments, risk-management, internal audit, and information technology. He holds a B.A. degree in American Civilization from Lafayette College and an M.B.A. from New York University. Mr. Fry has served on the Board since January 2001.
Joseph Harroz, Jr. — Mr. Harroz serves as the President of a state university, and also serves as a Director of a bank. He also has served as President and Director of a publicly-traded company, as Interim President and General Counsel to a state university system and as Dean of the College of Law of that state university. Mr. Harroz holds a B.A. degree from the University of Oklahoma and a J.D. from Georgetown University Law Center. Mr. Harroz has multiple years of service as a Trustee on the Board of Ivy Funds prior to the time Ivy Funds joined the Delaware Funds complex. The Independent Trustees concluded that Mr. Harroz is suitable to serve as Trustee because of his educational background, his work experience and the length of his service as a Trustee on the Board of Ivy Funds.
Sandra A.J. Lawrence — Ms. Lawrence has been a member and chair of the boards of several public corporations, closely-held corporations and charitable organizations. She also has more than 16 years of experience serving on the boards of public companies, including as Audit Committee Chair and Nominating/Governance Committee Chair, and has served as a chief financial officer and on investment and finance committees. She served as President of Stern Brothers, a municipal bond house, where she held NASD Series licenses 7, 24 and 63. Ms. Lawrence also has multiple years of service as a Trustee on the Board of Ivy Funds prior to the time Ivy Funds joined the Delaware Funds complex. Ms. Lawrence holds an A.B. from Vassar College, as well as master's degrees from the Massachusetts Institute of Technology and Harvard Business School. The Independent Trustees concluded that Ms. Lawrence is suitable to serve as Trustee because of her work experience, financial background, academic background and service on corporate and charitable boards.
Frances A. Sevilla-Sacasa — Ms. Sevilla-Sacasa has over 30 years of experience in banking and wealth management. In electing her in 2011, the Independent Trustees found that her extensive international wealth management experience, in particular, complemented the skills of existing Board members and also reflected the increasing importance of international investment management not only for dollar-denominated investors but also for investors outside the US. The Independent Trustees also found that Ms. Sevilla-Sacasa's management responsibilities as the former President and Chief Executive Officer of a major trust and wealth management company would add a helpful oversight skill to the Board's expertise, and her extensive nonprofit Board experience gave them confidence that she would make a meaningful, experienced contribution to the Board of Trustees. Finally, in electing Ms. Sevilla-Sacasa to the Board, the Independent Trustees valued her perceived dedication to client service as a result of her overall career experience. Ms. Sevilla-Sacasa holds B.A. and M.B.A. degrees from the University of Miami and Thunderbird School of Global Management, respectively. Ms. Sevilla-Sacasa has served on the Board since September 2011.
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Management of the Trust
Thomas K. Whitford — Currently the Board's Chair, Mr. Whitford has over 35 years of experience in the banking and financial services industry, and served as Vice Chairman of a major banking, asset management, and residential mortgage banking institution. In electing him in 2013, the Independent Trustees found that Mr. Whitford's senior management role in wealth management and experience in the mutual fund servicing business would provide valuable current management and financial industry insight, in particular, and complemented the skills of existing Board members. The Independent Trustees also found that his senior management role in integrating company acquisitions, technology, and operations and his past role as Chief Risk Officer would add a helpful oversight skill to the Board's expertise. Mr. Whitford holds a B.S. degree from the University of Massachusetts and an M.B.A. degree from The Wharton School of the University of Pennsylvania. Mr. Whitford has served on the Board since January 2013.
Christianna Wood — Ms. Wood has over 35 years of experience in the investment management industry. In selecting her to serve on the Board, the Independent Trustees noted and valued her significant portfolio management, corporate governance and audit committee experience. Ms. Wood received a B.A. in economics from Vassar College and an M.B.A. in finance from New York University. Ms. Wood has served on the Board since January 2019.
Janet L. Yeomans — Ms. Yeomans has over 28 years of business experience with a large global diversified manufacturing company, including service as Treasurer for this company. In this role, Ms. Yeomans had significant broad-based financial experience, including global financial risk-management, investments, and mergers and acquisitions. She served as a board member of a for-profit company and also is a current board member of a hospital and a public university system. She holds degrees in mathematics and physics from Connecticut College, an M.S. in mathematics from Illinois Institute of Technology, and an M.B.A. from the University of Chicago. Ms. Yeomans has served on the Board since April 1999.
Shawn K. Lytle — Mr. Lytle has over 20 years of experience in the investment management industry. He has been the Global Head of Macquarie Asset Management since January 2019 and Head of Americas - Macquarie Group since December 2017 and he is responsible for all aspects of the firm's business. He joined the firm as President of Macquarie Asset Management - Americas in 2015. Prior to that time, Mr. Lytle served in various executive management, investment management, and distribution positions at two major banking institutions. He holds a B.A. degree from The McDonough School of Business at Georgetown University. Mr. Lytle has served on the Board since September 2015. Mr. Lytle serves on the board of directors of the National Association of Securities Professionals (NASP), the Sustainability Accounting Standards Board, and he is a member of the board of governors for the Investment Company Institute (ICI). In November 2017, Mr. Lytle was named to the Black Enterprise list of “Most Powerful Executives in Corporate America.”
Committee of Independent Trustees: This committee develops and recommends to the Board a set of corporate governance principles and oversees the evaluation of the Board, its committees, and its activities. The committee comprises all of the Trust's Independent Trustees. The Committee of Independent Trustees held four meetings during the Trust's last fiscal year.
Investments Committees: The primary purposes of the Investments Committees are to: (i) assist the Board at its request in its oversight of the investment advisory services provided to the Trust by the Manager as well as any sub-advisors; (ii) review all proposed advisory and sub-advisory agreements for new funds or proposed amendments to existing agreements and to recommend what action the full Board and the Independent Trustees should take regarding the approval of all such proposed agreements; and (iii) review reports supplied by the Manager regarding investment performance, portfolio risk and expenses and to suggest changes to such reports. Investments Committee A consists of the following Independent Trustees: Joseph W. Chow, Chair; Jerome D. Abernathy; Joseph Harroz, Jr.; Christianna Wood; Thomas L. Bennett (ex officio); and Thomas K. Whitford (ex officio). Investments Committee B consists of the following Independent Trustees: Janet L. Yeomans, Chair; Christianna Wood; Sandra A.J. Lawrence; H. Jeffrey Dobbs; Thomas L. Bennett (ex officio), and Thomas K. Whitford (ex officio). Investments Committee A held five meetings during the Trust's last fiscal year. Investments Committee B held five meetings and one telephonic meeting during the Trust’s last fiscal year.
Board role in risk oversight: The Board performs a risk oversight function for the Trust consisting, among other things, of the following activities:
(1) receiving and reviewing reports related to the performance and operations of the Trust; (2) reviewing, approving, or modifying as applicable, the compliance policies and procedures of the Trust; (3) meeting with portfolio management teams to review investment strategies, techniques and the processes used to manage related risks; (4) addressing security valuation risk in connection with its review of fair valuation decisions made by Fund management pursuant to Board-approved procedures; (5) meeting with representatives of key service providers, including the Manager, the Distributor, the Funds' transfer agent, the custodian and the independent public accounting firm of the Trust, to review and discuss the activities of the Trust's series, and to provide direction with respect thereto; (6) engaging the services of the Trust's Chief Compliance Officer to test the compliance procedures of the Trust and its service providers; and (7) requiring management's periodic presentations on specified risk topics.
The Trustees perform this risk oversight function throughout the year in connection with each quarterly Board meeting. The Trustees routinely discuss certain risk-management topics with Fund management at the Board level and also through the standing committees of the Board. In addition to these recurring risk-management discussions, Fund management raises other specific risk-management issues relating to the Funds with the Trustees at Board and committee meetings. When discussing new product initiatives with the Board, Fund management also discusses risk — either the risks associated with the new proposals or the risks that the proposals are designed to mitigate. Fund management also provides periodic presentations to the Board to give the Trustees a general overview of how the Manager and its affiliates identify and manage risks pertinent to the Trust.
The Audit Committee looks at specific risk-management issues on an ongoing basis. The Audit Committee is responsible for certain aspects of risk oversight relating to financial statements, the valuation of the Trust's assets, and certain compliance matters. In addition, the Audit Committee meets with the Manager's internal audit and risk-management personnel on a quarterly basis to review the reports on their examinations of functions and processes affecting the Trust.
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The Board's other committees also play a role in assessing and managing risk. The Nominating and Corporate Governance Committee and the Committee of Independent Trustees play a role in managing governance risk by developing and recommending to the Board corporate governance principles and, in the case of the Committee of Independent Trustees, by overseeing the evaluation of the Board, its committees, and its activities. The Investments Committees play a significant role in assessing and managing risk through their oversight of investment performance, investment process, investment risk controls, and fund expenses.
Because risk is inherent in the operation of any business endeavor, and particularly in connection with the making of financial investments, there can be no assurance that the Board's approach to risk oversight will be able to minimize or even mitigate any particular risk. The Funds are designed for investors that are prepared to accept investment risk, including the possibility that as yet unforeseen risks may emerge in the future.
Code of Ethics
The Trust, the Manager, and the Distributor have adopted Codes of Ethics in compliance with the requirements of Rule 17j-1 under the 1940 Act, which govern personal securities transactions. Under the Codes of Ethics, persons subject to the Codes are permitted to engage in personal securities transactions, including securities that may be purchased or held by the Funds, subject to the requirements set forth in Rule 17j-1 under the 1940 Act and certain other procedures set forth in the applicable Code of Ethics. The Codes of Ethics are on public file with, and are available from, the SEC.
Proxy Voting Policy
The Trust has formally delegated to the Manager the responsibility for making all proxy voting decisions in relation to portfolio securities held by the Funds. If and when proxies need to be voted on behalf of the Funds, the Manager and any Macquarie affiliates advising the Funds (collectively, “Macquarie Asset Management Public Investments”) will vote such proxies pursuant to Macquarie Asset Management Public Investments' (“MPI”) Proxy Voting Policies and Procedures (the “Procedures”). MPI has established a Proxy Voting Committee (the “Committee”), which is responsible for overseeing MPI's proxy voting process for the Funds. One of the main responsibilities of the Committee is to review and approve the Procedures to ensure that the Procedures are designed to allow MPI to vote proxies in a manner consistent with the goal of voting in the best interests of the Funds.
In order to facilitate the actual process of voting proxies, MPI has contracted with proxy advisory firms to analyze proxy statements on behalf of the Funds and MPI's other clients and provide MPI with research recommendations on upcoming proxy votes in accordance with the Procedures. The Committee is responsible for overseeing the proxy advisory firms' services. If a proxy has been voted for the Funds, the proxy advisory firm will create a record of the vote. By no later than August 31 of each year, information (if any) regarding how the Funds voted proxies relating to portfolio securities during the most recently
disclosed 12-month period ended June 30 is available without charge (i) through the Funds' website at http://www.delawarefunds.com/proxy; and (ii) on the
Commission's website at http://www.sec.gov.
When determining whether to invest in a particular company, one of the factors MPI may consider is the quality and depth of the company's management. As a result, MPI believes that recommendations of management on any issue (particularly routine issues) should be given a fair amount of weight in determining how proxy issues should be voted. Thus, on many issues, MPI's votes are cast in accordance with the recommendations of the company's management. However, MPI may vote against management's position when it runs counter to MPI's specific Proxy Voting Guidelines (the “Guidelines”), and MPI will also vote against management's recommendation when MPI believes such position is not in the best interests of the Funds.
As stated above, the Procedures also list specific Guidelines on how to vote proxies on behalf of the Funds. Some examples of the Guidelines are as follows: (i) generally vote for shareholder proposals asking that a majority or more of directors be independent; (ii) generally vote for management or shareholder proposals to reduce supermajority vote requirements, taking into account: ownership structure; quorum requirements; and vote requirements; (iii) votes on mergers and acquisitions should be considered on a case-by-case basis; (iv) generally vote re-incorporation proposals on a case-by-case basis; (v) votes with respect to equity-based compensation plans are generally determined on a case-by-case basis; (vi) generally vote for proposals requesting that a company report on its policies, initiatives, oversight mechanisms, and ethical standards related to social, economic, and environmental sustainability, unless company already provides similar reports through other means or the company has formally committed to the implementation of a reporting program based on Global Reporting Initiative guidelines or a similar standard; and (vii) generally vote for management proposals to institute open market share repurchase plans in which all shareholders may participate on equal terms.
Because the Trust has delegated proxy voting to MPI, the Funds are not expected to encounter any conflict of interest issues regarding proxy voting and therefore does not have procedures regarding this matter. However, MPI does have a section in its Procedures that addresses the possibility of conflicts of interest. Most of the proxies which MPI receives on behalf of its clients are voted in accordance with the Procedures. Since the Procedures are pre-determined by the Committee, application of the Procedures by MPI's portfolio management teams when voting proxies after reviewing the proxy and research provided by the proxy advisory firms should in most instances adequately address any potential conflicts of interest. If MPI becomes aware of a conflict of interest in an upcoming proxy vote, the proxy vote will generally be referred to the Committee or the Committee's delegates for review. If the portfolio management team for such proxy intends to vote in accordance with the proxy advisory firm's recommendation pursuant to our Procedures, then no further action is needed to be taken by the Committee. If MPI's portfolio management team is considering voting a proxy contrary to the proxy advisory firm's research recommendation under the Procedures, the Committee or its delegates will assess the proposed vote to determine if it is reasonable. The Committee or its delegates will also assess whether any business or other material relationships between MPI and a portfolio company (unrelated to the
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Proxy Voting Policy
ownership of the portfolio company's securities) could have influenced an inconsistent vote on that company's proxy. If the Committee or its delegates determines that the proposed proxy vote is unreasonable or unduly influenced by a conflict, the portfolio management team will be required to vote the proxy in accordance with the proxy advisory firm's research recommendation or abstain from voting.
Investment Manager and Other Service Providers
Investment Manager
The Manager, located at 100 Independence, 610 Market Street, Philadelphia, PA 19106-2354, furnishes investment management services to the Funds, subject to the supervision and direction of the Board. The Manager also provides investment management services to all of the other Delaware Funds. Affiliates of the Manager also manage other investment accounts. While investment decisions for the Funds are made independently from those of the other funds and accounts, investment decisions for such other funds and accounts may be made at the same time as investment decisions for the Funds. The Manager pays the salaries of all Trustees, officers, and employees who are affiliated with both the Manager and the Trust. In the course of discharging its non-portfolio management duties under the advisory contract, the Manager may delegate to affiliates.
Together, the Manager and the other subsidiaries of Macquarie Management Holdings, Inc. (“MMHI”) manage, as of September 30, 2022, approximately $192.2 billion in assets, including mutual funds, separate accounts, and other investment vehicles. The Manager is a series of Macquarie Investment Management Business Trust (a Delaware statutory trust), which is a subsidiary of MMHI. MMHI is a subsidiary, and subject to the ultimate control, of Macquarie Group Limited (“Macquarie”). Macquarie is a Sydney, Australia-headquartered global provider of banking, financial, advisory, investment and funds management services. “Macquarie Asset Management” is the marketing name for certain companies comprising the asset management division of Macquarie Group Limited.
The Manager and its affiliates own the name “Delaware Group®.” Under certain circumstances, including the termination of the Trust's advisory relationship with the Manager or its distribution relationship with the Distributor, the Manager, and its affiliates could cause the Trust to remove the words “Delaware Group” from its name.
The Funds' Investment Management Agreement (“Investment Management Agreement”) may be renewed each year only so long as such renewal and continuance are specifically approved at least annually by the Board or by vote of a majority of the outstanding voting securities of each Fund, and only if the terms of, and the renewal thereof, have been approved by the vote of a majority of the Independent Trustees of the Trust who are not parties thereto or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval. The Investment Management Agreement is terminable without penalty on 60 days' notice by the Trustees of the Trust or by the Manager. The Investment Management Agreement will terminate automatically in the event of its assignment.
As compensation for the services rendered under the Investment Management Agreement, each Fund shall pay the Manager an annual management fee as a percentage of average daily net assets equal to:
Fund Name |
Management Fee (annual rate as a percentage of average daily net assets) |
Delaware Strategic Income Fund |
0.55% on the first $500 million |
Delaware Emerging Markets Debt Corporate Fund |
0.75% on the first $500 million |
During the last three fiscal years, each Fund paid the following investment management fees to the Manager:
Fund |
July 31, 2022 |
July 31, 2021 |
July 31, 2020 |
Delaware Strategic Income |
$562,541 earned |
$251,241 earned |
$243,026 earned |
Delaware Emerging Markets |
$644,613 earned |
$553,262 earned |
$521,289 earned |
Except for those expenses borne by the Manager under the Investment Management Agreement, and the Distributor under the Distribution Agreement, each Fund is responsible for all of its own expenses. Among others, such expenses include each Fund's proportionate share of certain administrative expenses; investment management fees; transfer and dividend disbursing fees and costs; accounting services; custodian expenses; federal and state securities registration fees; proxy costs; and the costs of preparing prospectuses and reports sent to shareholders.
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Sub-Advisors
The Manager has also entered into Sub-Advisory Agreements on behalf of the Funds with Macquarie Investment Management Austria Kapitalanlage AG (MIMAK), Macquarie Investment Management Global Limited (MIMGL), and Macquarie Investment Management Europe Limited (MIMEL), each of which is an affiliate of the Manager (“Affiliated Sub-Advisor”). Pursuant to the terms of the relevant Sub-Advisory Agreement, the investment sub-advisory fee is paid by the Manager to each Affiliated Sub-Advisor based on the extent to which an Affiliated Sub-Advisor provides services to the Funds.
The Manager has paid MIMAK the following investment sub-advisory fees (shown on an aggregated basis):
|
July 31, 2022 |
July 31, 2021 |
Delaware Strategic Income Fund |
$1,557 |
$0 |
Delaware Emerging Markets Debt Corporate Fund |
$7,763 |
$0 |
The investment sub-advisory fees (shown on an aggregated basis) paid to MIMAK as a percentage of the Fund's average daily net assets were as follows:
|
July 31, 2022 |
July 31, 2021 |
Delaware Strategic Income Fund |
0.00% |
0.00% |
Delaware Emerging Markets Debt Corporate Fund |
0.01% |
0.00% |
The annualized investment sub-advisory fee for each Fund is calculated as a percentage of the average daily net assets of the Fund managed by the sub-advisor.
The Manager has paid MIMEL the following investment sub-advisory fees (shown on an aggregated basis):
|
July 31, 2022 |
July 31, 2021 |
Delaware Strategic Income Fund |
$2,338 |
$0 |
Delaware Emerging Markets Debt Corporate Fund |
$12,064 |
$0 |
The investment sub-advisory fees (shown on an aggregated basis) paid to MIMEL as a percentage of the Fund's average daily net assets were as follows:
|
July 31, 2022 |
July 31, 2021 |
Delaware Strategic Income Fund |
0.00% |
0.00% |
Delaware Emerging Markets Debt Corporate Fund |
0.01% |
0.00% |
The annualized investment sub-advisory fee for each Fund is calculated as a percentage of the average daily net assets of the Fund managed by the sub-advisor.
Distributor
The Distributor, Delaware Distributors, L.P., located at 100 Independence, 610 Market Street, Philadelphia, PA 19106-2354, serves as the national distributor of the Funds' shares under a Distribution Agreement dated May 15, 2003, as amended and restated January 4, 2010, and further amended and restated on February 25, 2016. The Distributor is an affiliate of the Manager and bears all of the costs of promotion and distribution, except for payments by the Retail Classes under their respective Rule 12b-1 Plans. The Distributor is an indirect subsidiary of MMHI and, therefore, of Macquarie. The Distributor has agreed to use its best efforts to sell shares of the Funds. See the Prospectuses for information on how to invest. Shares of the Funds are offered on a continuous basis by the Distributor and may be purchased through authorized investment dealers or directly by contacting the Distributor or the Trust. The Distributor also serves as the national distributor for the Delaware Funds. The Board annually reviews fees paid to the Distributor.
During the Funds' last three fiscal years, the Distributor received net commissions from each Fund on behalf of its respective Class A shares, after reallowances to dealers, as follows:
Delaware Strategic Income Fund Class A Shares |
|||
Fiscal Year Ended |
Total Amount of Underwriting Commissions |
Amounts Reallowed to Dealers |
Net Commission to Distributor |
7/31/22 |
$24,035 |
$20,729 |
$3,306 |
7/31/21 |
$9,706 |
$8,343 |
$1,363 |
7/31/20 |
$16,348 |
$14,203 |
$2,145 |
Delaware Emerging Markets Debt Corporate Fund Class A Shares |
|||
Fiscal Year Ended |
Total Amount of Underwriting Commissions |
Amounts Reallowed to Dealers |
Net Commission to Distributor |
7/31/22 |
$1,170 |
$977 |
$193 |
7/31/21 |
$3,954 |
$3,386 |
$568 |
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Investment Manager and Other Service Providers
Delaware Strategic Income Fund Class A Shares |
|||
7/31/20 |
$120 |
$107 |
$13 |
During the Funds' last three fiscal years, the Distributor received, in the aggregate, limited contingent deferred sales charge (“Limited CDSC”) payments with respect to each Fund's Class A shares and contingent deferred sales charge (“CDSC”) payments with respect to Class C shares as follows:
Fund/Fiscal Year Ended |
Class A |
Class C |
Delaware Strategic Income Fund |
|
|
7/31/22 |
$123 |
$0 |
7/31/21 |
$60 |
$9 |
7/31/20 |
$0 |
$11 |
Delaware Emerging Markets Debt Corporate Fund |
|
|
7/31/22 |
$0 |
$9 |
7/31/21 |
$0 |
$2 |
7/31/20 |
$0 |
$0 |
Transfer Agent
Delaware Investments Fund Services Company (“DIFSC”), an affiliate of the Manager, is located at 100 Independence, 610 Market Street, Philadelphia, PA 19106-2354, and serves as the Funds' shareholder servicing, dividend disbursing, and transfer agent (the “Transfer Agent”) pursuant to a Shareholder Services Agreement. The Transfer Agent is an indirect subsidiary of MMHI and, therefore, of Macquarie. The Transfer Agent also acts as shareholder servicing, dividend disbursing, and transfer agent for the other Delaware Funds. The Transfer Agent is paid a fee by the Funds for providing these services consisting of an asset-based fee and certain out-of-pocket expenses. The Transfer Agent will bill, and the Funds will pay, such compensation monthly. Omnibus and networking fees charged by financial intermediaries and subtransfer agency fees are passed on to and paid directly by the Funds. The Transfer Agent's compensation is fixed each year and approved by the Board, including a majority of the Independent Trustees.
The Funds have authorized, in addition to the Transfer Agent, one or more brokers to accept purchase and redemption orders on its behalf. Such brokers are authorized to designate other intermediaries to accept purchase and redemption orders on behalf of the Funds. For purposes of pricing, the Funds will be deemed to have received a purchase or redemption order when an authorized broker or, if applicable, a broker's authorized designee, accepts the order.
BNY Mellon Investment Servicing (US) Inc. (“BNYMIS”) provides subtransfer agency services to the Funds. In connection with these services, BNYMIS administers the overnight investment of cash pending investment in the Funds or payment of redemptions. The proceeds of this investment program are used to offset the Funds' transfer agency expenses.
Fund Accountants
The Bank of New York Mellon (“BNY Mellon”), 240 Greenwich Street, New York, NY 10286-0001, provides fund accounting and financial administration services to the Funds. Those services include performing functions related to calculating the Funds' NAVs and providing financial reporting information, regulatory compliance testing, and other related accounting services. For these services, the Funds pay BNY Mellon an asset-based fee, subject to certain fee minimums plus certain out-of-pocket expenses and transactional charges. DIFSC provides fund accounting and financial administration oversight services to the Funds. Those services include overseeing the Funds' pricing process, the calculation and payment of fund expenses, and financial reporting in shareholder reports, registration statements, and other regulatory filings. DIFSC also manages the process for the payment of dividends and distributions and the dissemination of Fund NAVs and performance data. For these services, the Funds pay DIFSC an asset-based fee, subject to certain fee minimums, plus certain out-of-pocket expenses, and transactional charges. The fees payable to BNY Mellon and DIFSC under the service agreements described above will be allocated among all funds in the Delaware Funds on a relative NAV basis.
During the fiscal years ended July 31, 2020, 2021, and 2022, the Funds paid the following amounts to BNY Mellon for fund accounting and financial administration services: $91,349, $88,921, and $96,451, respectively.
During the fiscal years ended July 31, 2020, 2021, and 2022, the Funds paid the following amounts to DIFSC for fund accounting and financial administration oversight services: $11,950, $12,055, and $15,505, respectively.
Securities Lending Agent
The Board has approved each Fund's participation in a securities lending program. Under the securities lending program, BNY Mellon serves as the Funds' securities lending agent (“Securities Lending Agent”).
For the fiscal year ended July 31, 2022, the income earned by the Funds as well as the fees and/or compensation paid by the Funds pursuant to the Lending Agreement between the Trust with respect to the Funds and the Securities Lending Agent were as follows:
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|
Delaware Strategic Income Fund |
Delaware Emerging Markets |
Gross income earned by a Fund from securities lending activities |
$0 |
$0 |
Fees and/or compensation paid by a Fund for securities lending activities and related services |
|
|
Fees paid to Securities Lending Agent from revenue split |
$0 |
$0 |
Fees paid for any cash collateral management service (including fees deducted from a pooled cash collateral reinvestment vehicle) not included in revenue split |
$0 |
$0 |
Administrative fees not included in revenue split |
$0 |
$0 |
Indemnification fees not included in revenue split |
$0 |
$0 |
Rebate (paid to borrower) |
$0 |
$0 |
Other fees not included above |
$0 |
$0 |
Aggregate fees/compensation paid by a Fund for securities lending activities |
$0 |
$0 |
Net income from securities lending activities |
$0 |
$0 |
For the fiscal year ended July 31, 2022, the Securities Lending Agent provided the following services to the Funds in connection with their securities lending activities: (i) entering into loans subject to guidelines or restrictions provided by the Funds; (ii) establishing and maintaining collateral accounts; (iii) monitoring daily the value of the loaned securities and collateral; (iv) seeking additional collateral as necessary from borrowers, and returning collateral to borrowers; (v) receiving and holding collateral from borrowers, and facilitating the investment and reinvestment of cash collateral in accordance with the Funds' guidelines; (vi) negotiating loan terms; (vii) selecting securities to be loaned subject to guidelines or restrictions provided by the Funds; (viii) recordkeeping and account servicing; (ix) monitoring dividend and proxy activity relating to loaned securities; and (x) arranging for return of loaned securities to the Funds at loan termination.
Custodian
BNY Mellon is the custodian of the Funds' securities and cash. As custodian for the Funds, BNY Mellon maintains a separate account or accounts for the Funds; receives, holds, and releases portfolio securities on account of the Funds; receives and disburses money on behalf of the Funds; and collects and receives income and other payments and distributions on account of the Funds' portfolio securities. BNY Mellon also serves as the Funds' custodian for their investments in foreign securities.
Legal Counsel
Stradley Ronon Stevens & Young, LLP serves as the Trust's legal counsel.
Portfolio Managers
Other Accounts Managed
The following chart lists certain information about types of other accounts for which each portfolio manager is primarily responsible as of July 31, 2022 unless otherwise noted. Any accounts managed in a personal capacity appear under “Other Accounts” along with the other accounts managed on a professional basis.
|
No. of Accounts |
Total Assets Managed |
No. of Accounts with Performance-Based Fees |
Total Assets in Accounts with Performance-Based Fees |
J. David Hillmeyer |
13 |
$19.1 billion |
0 |
$0 |
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Portfolio Managers
|
No. of Accounts |
Total Assets Managed |
No. of Accounts with Performance-Based Fees |
Total Assets in Accounts with Performance-Based Fees |
Alex Kozhemiakin |
2 |
$121.7 million |
0 |
$0 |
Daniela Mardarovici |
13 |
$19.1 billion |
0 |
$0 |
Mansur Z. Rasul |
2 |
$121.7 million |
0 |
$0 |
Sean M. Simmons |
1 |
$97.0 million |
0 |
$0 |
Description of Material Conflicts of Interest
Individual portfolio managers may perform investment management services for other funds or accounts similar to those provided to the Funds and the investment action for each such other fund or account and the Funds may differ. For example, an account or fund may be selling a security, while another account or fund may be purchasing or holding the same security. As a result, transactions executed for one fund or account may adversely affect the value of securities held by another fund, account, or the Funds. Additionally, the management of multiple funds or accounts and the Funds may give rise to potential conflicts of interest, as a portfolio manager must allocate time and effort to multiple funds or accounts and the Funds. A portfolio manager may discover an investment opportunity that may be suitable for more than one account or fund. The investment opportunity may be limited, however, so that all funds or accounts for which the investment would be suitable may not be able to participate. The Manager has adopted procedures designed to allocate investments fairly across multiple funds and accounts.
Certain of the accounts managed by the portfolio managers as set forth in the table above have performance-based fees. This compensation structure presents a potential conflict of interest because the portfolio managers have an incentive to manage these accounts so as to enhance performance, to the possible detriment of other accounts for which the Manager does not receive a performance-based fee.
A portfolio manager's management of personal accounts also may present certain conflicts of interest. While the Manager's Code of Ethics is designed to address these potential conflicts, there is no guarantee that it will do so.
Compensation Structure
Each portfolio manager's compensation consists of the following:
Base Salary — Each named portfolio manager receives a fixed base salary. Salaries are determined by a comparison to industry data prepared by third parties to ensure that portfolio manager salaries are in line with salaries paid at peer investment advisory firms.
Bonus — An objective component is added to the bonus for each manager that is reflective of account performance relative to an appropriate peer group or database. The following paragraph describes the structure of the non-guaranteed bonus.
Each portfolio manager is eligible to receive an annual cash bonus, which is based on quantitative and qualitative factors. There is one pool for bonus payments for the fixed income department. The pool is allotted based on subjective factors and objective factors. The amount of the pool for bonus payments is determined by assets managed (including investment companies, insurance product-related accounts and other separate accounts), management fees and related expenses (including fund waiver expenses) for registered investment companies, pooled vehicles, and managed separate accounts. For investment companies, each manager is compensated according to the Funds' Broadridge Financial Solutions, Inc. (formerly, Lipper Inc.) (“Broadridge”) or Morningstar peer group percentile ranking on a 1-, 3-, and 5-year basis, with longer term performance more heavily weighted. For managed separate accounts, the portfolio managers are compensated according to the composite percentile ranking against the eVestment Alliance database (or similar sources of relative performance data) on a one-, three-, and five-year basis, with longer term performance more heavily weighted; composite performance relative to the benchmark is also evaluated for the same time periods. Incentives reach maximum potential at the top 25th-30th percentile. The remaining portion of the bonus is discretionary as determined by Macquarie Asset Management and takes into account subjective factors.
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For new and recently transitioned portfolio managers, the compensation may be weighted more heavily towards a portfolio manager's actual contribution and ability to influence performance, rather than longer-term performance. Management intends to move the compensation structure towards longer-term performance for these portfolio managers over time.
Portfolio managers participate in retention programs, including the Macquarie Asset Management Notional Investment Plan and the Macquarie Group Employee Retained Equity Plan, for alignment of interest purposes.
Macquarie Asset Management Public Investments Notional Investment Plan — A portion of a portfolio manager's retained profit share may be notionally exposed to the return of certain funds within MAM Funds pursuant to the terms of the Macquarie Asset Management Public Investments Notional Investment Plan. The retained amount will vest in equal tranches over a period ranging from four to five years after the date of investment (depending on the level of the employee).
Macquarie Group Employee Retained Equity Plan — A portion of a portfolio manager's retained profit share may be invested in the Macquarie Group Employee Retained Equity Plan (“MEREP”), which is used to deliver remuneration in the form of Macquarie equity. The main type of award currently being offered under the MEREP is units comprising a beneficial interest in a Macquarie share held in a trust for the employee, subject to the vesting and forfeiture provisions of the MEREP. Subject to vesting conditions, vesting and release of the shares occurs in a period ranging from four to five years after the date of investment (depending on the level of the employee).
Other Compensation — Portfolio managers may also participate in benefit plans and programs available generally to all similarly situated employees.
Ownership of Fund Shares
As of July 31, 2022, the portfolio managers beneficially owned shares of the Funds, as described below. If no information is shown below for a portfolio manager, the portfolio manager did not beneficially own shares of any Fund.
Portfolio Manager |
Fund |
Dollar Range of Fund Shares Owned1,2 |
J. David Hillmeyer |
Delaware Strategic Income Fund |
$10,001-$50,000 |
1 |
The ranges for Fund share ownership by portfolio managers are: None; $1-$10,000; $10,001-$50,000; $50,001-$100,000; $100,001-$500,000; $500,001-$1 million; or over $1 million. |
2 |
Includes Fund shares beneficially owned by portfolio manager and immediate family members sharing the same household. |
The compensation of certain of the portfolio managers under the Macquarie Asset Management Public Investments Notional Investment Plan (as described above) may include amounts that correspond to a hypothetical investment that directly tracks the return of a Fund that the portfolio manager manages. This indirect exposure to a Fund's returns is referred to as shares owned notionally. A portfolio manager that is compensated in this manner will experience the same investment returns that are experienced by shareholders of such Fund. As of July 31, 2022, the portfolio managers had notional exposure to an investment in the applicable Fund through the Macquarie Asset Management Public Investments Notional Investment Plan, as described below. If no information is shown below for a portfolio a manager, the portfolio manager did not have notional exposure to an investment in the Fund through the Macquarie Asset Management Public Investments Notional Investment Plan.
Portfolio Manager |
Fund |
Dollar Range of Notional |
Alex Kozhemiakin |
Delaware Emerging Markets Debt Corporate Fund |
$100,001 - $500,000 |
Mansur Z. Rasul |
Delaware Emerging Markets Debt Corporate Fund |
$10,001 - $50,000 |
Sean M. Simmons |
Delaware Emerging Markets Debt Corporate Fund |
$10,001 - $50,000 |
1 |
The ranges are: None; $1-$10,000; $10,001-$50,000; $50,001-$100,000; $100,001-$500,000; $500,001-$1 million; or over $1 million. |
Trading Practices and Brokerage
The Manager selects broker/dealers to execute transactions on behalf of the Funds for the purchase or sale of portfolio securities on the basis of its judgment of their professional capability to provide the service. The primary consideration in selecting broker/dealers is to seek those broker/dealers who will provide best execution for the Funds. Best execution refers to many factors, including the price paid or received for a security, the commission charged, the promptness and reliability of execution, the confidentiality and placement accorded the order, and other factors affecting the overall benefit obtained by the account on the transaction. Some trades are made on a net basis where the Funds either buy securities directly from the dealer or sell them to the dealer. In these instances, there is no direct commission charged but there is a spread (the difference between the buy and sell price), which is the economic equivalent of a commission. When a commission is paid, the Funds pay reasonable brokerage commission rates based upon the professional knowledge of the Manager's trading department as to rates paid and charged for similar transactions throughout the securities industry. In some instances, the Funds pay a minimal share transaction cost when the transaction presents no difficulty.
During the last three fiscal years, the aggregate dollar amounts of brokerage commissions paid by the Funds were as follows:
|
July 31, 2022 |
July 31, 2021 |
July 31, 2020 |
Delaware Strategic Income Fund |
$781 |
$537 |
$0 |
Delaware Emerging Markets Debt Corporate Fund |
$317 |
$210 |
$304 |
Subject to applicable requirements, such as seeking best execution and Rule 12b-1(h) under the 1940 Act, the Manager may allocate out of all commission business generated by all of the funds and accounts under its management, brokerage business to broker/dealers who provide brokerage and research services. These services may include providing advice, either directly or through publications or writings, as to the value of securities, the advisability of
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Trading Practices and Brokerage
investing in, purchasing, or selling securities, and the availability of securities or purchasers or sellers of securities; furnishing of analyses and reports concerning issuers, securities, or industries; providing information on economic factors and trends; assisting in determining portfolio strategy; providing computer software used in security analysis; and providing portfolio performance evaluation and technical market analyses. Such services are used by the Manager in connection with its investment decision-making process with respect to one or more mutual funds and separate accounts managed by it, and may not be used, or used exclusively, with respect to the mutual fund or separate account generating the brokerage.
As provided in the Securities Exchange Act of 1934, as amended, and the Funds' Investment Management Agreement, higher commissions are permitted to be paid to broker/dealers who provide brokerage and research services than to broker/dealers who do not provide such services, if such higher commissions are deemed reasonable in relation to the value of the brokerage and research services provided. Although transactions directed to broker/dealers who provide such brokerage and research services may result in a Fund paying higher commissions, the Manager believes that such commissions are reasonable in relation to the value of the brokerage and research services provided. In some instances, services may be provided to the Manager that constitute in some part brokerage and research services used by the Manager in connection with its investment decision-making process and constitute in some part services used by the Manager in connection with administrative or other functions not related to its investment decision-making process. In such cases, the Manager will make a good faith allocation of brokerage and research services and will pay out of its own resources for services used by the Manager in connection with administrative or other functions not related to its investment decision-making process. In addition, so long as a Fund is not disadvantaged, other than the potential for additional commissions/equivalents, portfolio transactions that generate commissions or their equivalent can be allocated to broker/dealers that provide services directly or indirectly to a Fund and/or to other Delaware Funds. Subject to best execution, commissions/equivalents allocated to brokers providing such services may or may not be generated by the funds receiving the service. In such instances, the commissions/equivalents would be used for the advantage of the Funds or other funds and not for the advantage of the Manager.
During the fiscal year ended July 31, 2022, the Funds did not engage in soft dollar transactions.
As of July 31, 2022, the Funds held the following amounts of securities of their regular broker/dealers, as defined in Rule 10b-1 under the 1940 Act, or such broker/dealers' parents. If no information is shown for a Fund, the Fund did not hold securities of its regular broker/dealers as of the end of its fiscal year.
Fund |
Regular Broker/Dealer |
Market Value of the Fund's Aggregate Holdings |
Delaware Strategic Income Fund |
WELLS FARGO & COMPANY |
$129,443.19 |
The Manager may place a combined order for two or more accounts or funds engaged in the purchase or sale of the same security if, in its judgment, joint execution is in the best interest of each participant and will meet the requirement to seek best execution. Transactions involving commingled orders are allocated in a manner deemed equitable to each account or fund. When a combined order is executed in a series of transactions at different prices, each account participating in the order may be allocated an average price obtained from the executing broker. It is believed that the ability of the accounts to participate in volume transactions will generally be beneficial to the accounts and funds. Although it is recognized that, in some cases, the joint execution of orders could adversely affect the price or volume of the security that a particular account or fund may obtain, it is the opinion of the Manager and the Board that the advantages of combined orders outweigh the possible disadvantages of separate transactions.
Consistent with the Financial Industry Regulatory Authority (“FINRA”) rules, and subject to seeking best execution, the Manager may place orders with broker/dealers that have agreed to defray certain Fund expenses, such as custodian fees.
Each Fund has the authority to participate in a commission recapture program. Under the program and subject to seeking best execution (as described in the first paragraph of this section), a Fund may direct certain security trades to brokers who have agreed to rebate a portion of the related brokerage commission to the Fund in cash. Any such commission rebates will be included as a realized gain on securities in the appropriate financial statements of a Fund. The Manager and its affiliates have previously acted, and may in the future act, as an investment manager to mutual funds or separate accounts affiliated with the administrator of the commission recapture program. In addition, affiliates of the administrator act as consultants in helping institutional clients choose investment managers and may also participate in other types of businesses and provide other services in the investment management industry.
Capital Structure
Capitalization
The Trust currently has authorized, and allocated to each Class of each Fund, an unlimited number of shares of beneficial interest with no par value. All shares are, when issued in accordance with the Trust's registration statement (as amended from time to time), governing instruments and applicable law, fully paid, and nonassessable. Shareholders do not have preemptive rights. All shares of a Fund represent an undivided proportionate interest in the assets of the Fund. Shareholders of a Fund's Institutional Class may not vote on any matter that affects the Retail Classes' distribution plans under Rule 12b-1. Similarly, as a general matter, shareholders of the Retail Classes may vote only on matters affecting their respective Class, including the Retail Classes' Rule 12b-1 Plans that relate to the Class of shares that they hold. However, a Fund's Class C shares may vote on any proposal to increase materially the fees to be paid by such Fund under the Rule 12b-1 Plan relating to its Class A shares. Except for the foregoing, each share Class has the same voting and other rights and
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preferences as the other Classes of a Fund. General expenses of a Fund will be allocated on a pro rata basis to the classes according to asset size, except that expenses of the Retail Classes' Rule 12b-1 Plans will be allocated solely to those classes.
Until May 31, 1992, Delaware Strategic Income Fund offered two retail classes of shares, Government Income Series I class and Government Income Series II class (now, Class A). Shares of Government Income Series I class were offered with a higher sales charge than that applicable to Government Income Series II class, but without the imposition of a Rule 12b-1 fee. Effective June 1, 1992, following shareholder approval of a plan of recapitalization on May 8, 1992, shareholders of Government Income Series I class had their shares converted to shares of Government Income Series II class and became subject to the latter class' Rule 12b-1 charges. Effective at the same time, following approval by shareholders, the name of Government Income Series II class was changed to US Government Fund class. Effective May 2, 1994, US Government Fund class became known as US Government Fund A Class and US Government Fund (Institutional) class became known as US Government Fund Institutional Class. Effective as of August 16, 1999, the name of Government Income Series (known as US Government Fund) was changed to Delaware American Government Bond Fund.
Effective as of September 29, 1999, the Trust changed its name from Delaware Group Government Fund, Inc. to Delaware Group Government Fund. Class R shares of Delaware Core Plus Bond Fund were first offered on June 2, 2003.
On January 31, 2007, the name of Delaware American Government Bond Fund changed to Delaware Core Plus Bond Fund.
In connection with the reorganization of a private fund, Delaware Emerging Markets Debt Corporate Fund began offering shares on September 30, 2013.
On September 25, 2014, all remaining Class B shares of the Delaware Core Plus Bond Fund were converted to Class A shares of the Fund.
On January 31, 2017, Delaware Core Plus Bond Fund changed its name to Delaware Strategic Income Fund and modified its investment objective and strategies.
On January 28, 2020, Delaware Emerging Markets Debt Fund changed its name to Delaware Emerging Markets Debt Corporate Fund.
Effective as of the close of business on September 17, 2021, Delaware Strategic Income II Fund, a series of Delaware Group Equity Funds IV, merged into Delaware Strategic Income Fund.
Noncumulative Voting
The Trust's shares have noncumulative voting rights, meaning that the holders of more than 50% of the shares of the Trust voting for the election of Trustees can elect all of the Trustees if they choose to do so, and, in such event, the holders of the remaining shares will not be able to elect any Trustees.
Purchasing Shares
General Information
Shares of the Funds are offered on a continuous basis by the Distributor and may be purchased through authorized financial intermediaries or directly by contacting the Trust. The Trust reserves the right to suspend sales of Fund shares, and reject any order for the purchase of Fund shares if, in the opinion of management, such rejection is in a Fund's best interest. The minimum initial investment generally is $1,000 for Class A shares and Class C shares. Subsequent purchases of such Classes generally must be at least $100. The initial and subsequent investment minimums for Class A shares will be waived for purchases by officers, Trustees, and employees of any Delaware Fund, the Manager, or any of the Manager's affiliates if the purchases are made pursuant to a payroll deduction program. There are no minimum purchase requirements for Class R and Institutional Class shares (except those purchased through an automatic investment plan), but certain eligibility requirements must be met.
You may purchase only up to $1 million of Class C shares of the Fund at one time. Orders that exceed $1 million or more will be rejected. See “Investment Plans” below for purchase limitations applicable to retirement accounts. An investor should keep in mind that reduced front-end sales charges apply to investments of $100,000 or more in Class A shares, and that Class A shares are subject to lower annual Rule 12b-1 Plan expenses than Class C shares and generally are not subject to a CDSC.
Financial intermediaries are responsible for transmitting orders promptly. The Fund reserves the right to reject any order for the purchase of its shares if in the opinion of management such rejection is in a Fund's best interest. If a purchase is canceled because your check is returned unpaid, you are responsible for any loss incurred. A Fund can redeem shares from your account(s) to reimburse itself for any loss, and you may be restricted from making future purchases in any Delaware Fund. The Funds reserve the right to reject purchase orders paid by third-party checks or checks that are not drawn on a domestic branch of a US financial institution. If a check drawn on a foreign financial institution is accepted, you may be subject to additional bank charges for clearance and currency conversion.
The Funds also reserve the right, following shareholder notification, to charge a service fee on nonretirement accounts that, as a result of redemption, have remained below the minimum stated account balance for a period of three or more consecutive months. Holders of such accounts may be notified of their insufficient account balance and advised that they have until the end of the current calendar quarter to raise their balance to the stated minimum. If the account has not reached the minimum balance requirement by that time, the Funds may charge a $9 fee for that quarter and each subsequent calendar quarter until the account is brought up to the minimum balance. No fees will be charged without proper notice, and no CDSC will apply to such assessments.
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Purchasing Shares
In addition, the Funds reserve the right, upon 60 days' written notice, to involuntarily redeem accounts that remain under the minimum initial purchase amount as a result of redemptions. An investor making the minimum initial investment may be subject to involuntary redemption without the imposition of a CDSC or Limited CDSC if he or she redeems any portion of his or her account.
Minimum purchase and minimum balance requirements do not apply to accounts participating in advisory or asset-allocation programs covered by financial intermediaries. Certain accounts held in omnibus or programs covered by certain intermediaries may be opened with less than the minimum stated account balance and may maintain balances that are below the minimum stated account balance without incurring a service fee or being subject to involuntary redemption.
FINRA has adopted amendments to its Conduct Rules, relating to investment company sales charges. The Trust and the Distributor intend to operate in compliance with these rules.
Certificates representing shares purchased are not ordinarily issued. However, purchases not involving the issuance of certificates are confirmed to the investor and credited to the shareholder's account on the books maintained by the Transfer Agent. The investor will have the same rights of ownership with respect to such shares as if certificates had been issued. An investor will be permitted to obtain a certificate in certain limited circumstances that are approved by an appropriate officer of the Funds. No charge is assessed by the Trust for any certificate issued. The Funds do not intend to issue replacement certificates for lost or stolen certificates, except in certain limited circumstances that are approved by an appropriate officer of the Funds. In those circumstances, a shareholder may be subject to fees for replacement of a lost or stolen certificate, under certain conditions, including the cost of obtaining a bond covering the lost or stolen certificate. Please contact the Trust for further information. Investors who hold certificates representing any of their shares may only redeem those shares by written request. The investor's certificate(s) must accompany such request.
Contact your financial intermediary for specific information regarding the availability and suitability of various account options described throughout this SAI. Contact your financial intermediary for specific information with respect to the financial intermediary's policies regarding minimum purchase and minimum balance requirements and involuntary redemption, which may differ from what is described throughout this SAI.
Comparison of Share Classes
The alternative purchase arrangements of Class A shares and Class C shares permit investors to choose the method of purchasing shares that is most suitable for their needs given the amount of their purchase, the length of time they expect to hold their shares and other relevant circumstances. Investors should determine whether, given their particular circumstances, it is more advantageous to purchase Class A shares and incur a front-end sales charge and annual Rule 12b-1 Plan expenses of up to a maximum of 0.25% of the average daily net assets of Class A shares of each Fund, or to purchase Class C shares and have the entire initial purchase amount invested in a Fund with the investment thereafter subject to a CDSC and annual Rule 12b-1 Plan expenses. Class C shares are subject to a CDSC if the shares are redeemed within 12 months of purchase. Class C shares are subject to annual Rule 12b-1 Plan expenses of up to a maximum of 1.00% of average daily net assets of the Class, 0.25% of which is a service fee to be paid to the Distributor, dealers, or others for providing personal service and/or maintaining shareholder accounts. Class C shares that automatically convert to Class A shares at the end of approximately 8 years after purchase will be subject to Class A shares' annual Rule 12b-1 Plan expenses.
The higher Rule 12b-1 Plan expenses on Class C shares will be offset to the extent a return is realized on the additional money initially invested upon the purchase of such shares. However, there can be no assurance as to the return, if any, that will be realized on such additional money. In addition, the effect of any return earned on such additional money will diminish over time.
Class R shares have no front-end sales charge and are not subject to a CDSC, but incur annual Rule 12b-1 expenses of up to a maximum of 0.50%. Class A shares generally are not available for purchase by anyone qualified to purchase Class R shares.
In comparing Class C shares to Class R shares, investors should consider the higher Rule 12b-1 Plan expenses on Class C shares. Investors also should consider the fact that Class R shares do not have a front-end sales charge and, unlike Class C shares, are not subject to a CDSC.
For the distribution and related services provided to, and the expenses borne on behalf of, a Fund, the Distributor and others will be paid, in the case of Class A shares, from the proceeds of the front-end sales charge and Rule 12b-1 Plan fees; in the case of Class C shares, from the proceeds of the Rule 12b-1 Plan fees and, if applicable, the CDSC incurred upon redemption; and in the case of Class R shares, from the proceeds of the Rule 12b-1 Plan fees. Financial intermediaries may receive different compensation for selling the Retail Classes. Investors should understand that the purpose and function of the respective Rule 12b-1 Plans (including for Class R shares) and the CDSC applicable to Class C shares are the same as those of the Rule 12b-1 Plan and the front-end sales charge applicable to Class A shares in that such fees and charges are used to finance the distribution of the respective Classes. See “Plans under Rule 12b-1 for the Retail Classes” below.
Dividends, if any, paid on the Retail Classes and Institutional Class shares will be calculated in the same manner, at the same time and on the same day and will be in the same amount, except that the additional amount of Rule 12b-1 Plan expenses relating to the Retail Classes will be borne exclusively by such shares. See “Determining Offering Price and Net Asset Value” for more information.
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Class A Shares: Purchases of $100,000 or more of Class A shares at the offering price carry reduced front-end sales charges as shown in the table in the Prospectuses, and may include a series of purchases over a 13-month period under a letter of intent signed by the purchaser. See “Special Purchase Features — Class A shares” below for more information on ways in which investors can avail themselves of reduced front-end sales charges and other purchase features.
From time to time, upon written notice to dealers, the Distributor may hold special promotions for specified periods during which the Distributor may re-allow to dealers up to the full amount of the front-end sales charge. The Distributor should be contacted for further information on these requirements as well as the basis and circumstances upon which the additional commission will be paid.
Share Class Exchanges
If you wish to transfer your investment between share classes (within the same Fund or between different funds), we generally will process your request as an exchange of the shares you currently hold for shares in the new class or fund. Below is more information about how sales charges are handled for various scenarios.
Exchanges of shares for the same Fund generally will be tax-free for federal income tax purposes. You should consult with your tax advisor regarding the state and local tax consequences of such an exchange of Fund shares.
Each of these exchange privileges is subject to termination and may be amended from time to time.
Exchanging Class A shares for Institutional Class shares
Class A shares purchased by accounts participating (or intending to participate) in certain programs sponsored by and/or controlled by financial intermediaries (“Programs”) may be exchanged by the financial intermediary on behalf of the shareholder for Institutional Class shares of another fund under certain circumstances, depending on such Program's eligibility to purchase Institutional Class shares of that fund. Such exchange will be on the basis of the NAVs per share, without the imposition of any sales load, fee, or other charge.
Holders of Class A shares that were sold without a front-end sales load but for which the Distributor has paid a commission to a financial intermediary are generally not eligible for this exchange privilege until the applicable CDSC period has expired. The applicable CDSC period is generally two years after the purchase of such Class A shares purchased prior to July 1, 2020 and is generally 18 months after the purchase of such Class A shares purchased on or after July 1, 2020.
Exchanging Class C shares for Class A shares or Institutional Class shares
Class C shares purchased by accounts participating (or intending to participate) in certain Programs may be exchanged by the financial intermediary on behalf of the shareholder for either Class A shares or Institutional Class shares of a Fund under certain circumstances, depending on such Program's eligibility to purchase either Class A shares or Institutional Class shares of a Fund. Such exchange will be on the basis of the NAVs per share, without the imposition of any sales load, fee, or other charge.
Holders of Class C shares that are subject to a CDSC are generally not eligible for this exchange privilege until the applicable CDSC period has expired. The applicable CDSC period is generally one year after the purchase of such Class C shares.
Exchanging Institutional Class shares for Class A shares
If a shareholder of Institutional Class shares has ceased his or her participation in a Program, or the financial intermediary has determined to utilize Class A shares in the Program or the shareholder transfers to a Program that utilizes Class A shares, the financial intermediary may exchange all such Institutional Class shares for Class A shares of a Fund. Such exchange will be on the basis of the relative NAVs of the shares, without imposition of any sales load, fee, or other charge.
Dealer's Commission
For initial purchases of Class A shares of $1 million or more, a dealer's commission may be paid by the Distributor to financial intermediaries through whom such purchases are effected.
In determining a financial intermediary's eligibility for the dealer's commission, purchases of Class A shares of other Delaware Funds to which a Limited CDSC applies (see “Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased at Net Asset Value” under “Redemption and Exchange” below) may be aggregated with those of the Class A shares of another Fund. Financial intermediaries also may be eligible for a dealer's commission in connection with certain purchases made under a letter of intent or pursuant to an investor's right of accumulation. Financial intermediaries should contact the Distributor concerning the applicability and calculation of the dealer's commission in the case of combined purchases.
An exchange from other Delaware Funds will not qualify for payment of the dealer's commission, unless a dealer's commission or similar payment has not been previously paid on the assets being exchanged. The schedule and program for payment of the dealer's commission are subject to change or termination at any time by the Distributor at its discretion.
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Purchasing Shares
Delaware Funds no longer offer a dealer's commission to financial intermediaries on sales eligible for purchase at NAV in Class A shares for retirement plan accounts as described in the Prospectuses.
Contingent Deferred Sales Charge — Class C shares
Class C shares are purchased without a front-end sales charge. Class C shares redeemed within 12 months of purchase may be subject to a CDSC of 1.00%. CDSCs are charged as a percentage of the dollar amount subject to the CDSC. The charge will be assessed on an amount equal to the lesser of the NAV at the time of purchase of the shares being redeemed or the NAV of those shares at the time of redemption. No CDSC will be imposed on increases in NAV above the initial purchase price, nor will a CDSC be assessed on redemptions of shares acquired through reinvestment of dividends or capital gains distributions. For purposes of this formula, the “net asset value at the time of purchase” will be the NAV at purchase of Class C shares, even if those shares are later exchanged for shares of another Delaware Fund. In the event of an exchange of the shares, the “net asset value of such shares at the time of redemption” will be the NAV of the shares that were acquired in the exchange. See the Prospectuses for a list of the instances in which the CDSC is waived.
Approximately 8 years after purchase, the investor's Class C shares will be eligible to automatically convert to Class A shares of the same Fund. See “Automatic Conversion of Class C Shares” below. Such conversion will constitute a tax-free exchange for federal income tax purposes. Investors are reminded that the Class A shares to which Class C shares will convert are subject to Class A shares' ongoing annual Rule 12b-1 Plan expenses.
In determining whether a CDSC applies to a redemption of Class 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.
Automatic Conversion of Class C shares
Class C shares held for eight years after purchase are eligible for automatic conversion into Class A shares of the same Fund. Conversions of Class C shares into Class A shares will generally occur monthly during the calendar year, on the 18th day or next business day of each month (each, a “Conversion Date”). If the eighth anniversary after a purchase of Class C shares falls on a Conversion Date, an investor's Class C shares will be converted on that date. If the eighth anniversary occurs between Conversion Dates, an investor's Class C shares will be converted on the next Conversion Date after such anniversary.
The automatic conversion of Class C to Class A shares will be on the basis of the NAV per share, without the imposition of any sales load, fee or other charge. Class C shares of a Fund acquired through a reinvestment of dividends will convert to Class A shares of the Fund pro rata with Class C shares of that Fund not acquired through dividend reinvestment. All such automatic conversions of Class C shares will constitute tax-free exchanges for federal income tax purposes.
For shareholders investing in Class C shares through retirement plans, omnibus accounts, and in certain other instances, a Fund and its agents may not have transparency into how long a shareholder has held Class C shares for purposes of determining whether such Class C shares are eligible for automatic conversion into Class A shares. In these circumstances, a Fund will not be able to automatically convert Class C shares into Class A shares as described above. In order to determine eligibility for conversion in these circumstances, it is the responsibility of the shareholder or their financial intermediary to notify the Fund that the shareholder is eligible for the conversion of Class C shares to Class A shares, and the shareholder or their financial intermediary may be required to maintain and provide the Fund with records that substantiate the holding period of Class C shares.
In addition, a financial intermediary may sponsor and/or control accounts, programs or platforms that impose a different conversion schedule or eligibility requirements in regards to the conversion of Class C shares into Class A shares. In these cases, certain Class C shareholders may not be eligible to convert to Class A shares as described above. However, these Class C shareholders may be permitted to exchange their Class C shares for Class A shares pursuant to the terms of the financial intermediary's conversion policy. Financial intermediaries will be responsible for making such exchanges in those circumstances. Please consult with your financial intermediary if you have any questions regarding the conversion of Class C shares to Class A shares.
Level Sales Charges Alternative — Class C shares
Class C shares may be purchased at NAV without a front-end sales charge and, as a result, the full amount of the investor's purchase payment will be invested in Fund shares. The Distributor currently compensates financial intermediaries for selling Class C shares at the time of purchase from its own assets in an amount equal to no more than 1.00% of the dollar amount purchased. As discussed below, Class C shares are subject to annual Rule 12b-1 Plan expenses and, as discussed above, if redeemed within 12 months of purchase, a CDSC.
Proceeds from the CDSC and the annual Rule 12b-1 Plan fees are paid to the Distributor and others for providing distribution and related services, and bearing related expenses, in connection with the sale of Class C shares. These payments support the compensation paid to financial intermediaries for selling Class C shares. Payments to the Distributor and others under the Class C Rule 12b-1 Plan may be in an amount equal to no more than 1.00% annually.
Holders of Class C shares who exercise the exchange privilege described below will continue to be subject to the CDSC schedule for Class C shares as described in this SAI. See “Redemption and Exchange” below.
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Plans under Rule 12b-1 for the Retail Classes
Pursuant to Rule 12b-1 under the 1940 Act, the Trust has adopted a plan for each of the Retail Classes (the “Plans”). Each Plan permits the relevant Fund to pay for certain distribution, promotional, and related expenses involved in the marketing of only the class of shares to which the Plan applies. The Plans do not apply to the Institutional Class shares. Such shares are not included in calculating the Plans' fees, and the Plans are not used to assist in the distribution and marketing of the Fund's Institutional Class shares. Shareholders of the Institutional Class may not vote on matters affecting the Plans.
The Plans permit each Fund, pursuant to its Distribution Agreement, to pay out of the assets of the Retail Classes monthly fees to the Distributor for its services and expenses in distributing and promoting sales of shares of such classes. These expenses include, among other things: preparing and distributing advertisements, sales literature, and prospectuses and reports used for sales purposes; compensating sales and marketing personnel; holding special promotions for specified periods of time; and paying distribution and maintenance fees to financial intermediaries and others. In connection with the promotion of shares of the Retail Classes, the Distributor may, from time to time, pay to participate in dealer-sponsored seminars and conferences, and reimburse dealers for expenses incurred in connection with preapproved seminars, conferences, and advertising. The Distributor may pay or allow additional promotional incentives to dealers as part of preapproved sales contests and/or to dealers who provide extra training and information concerning the Retail Classes and increase sales of the Retail Classes.
The Plans do not limit fees to amounts actually expended by the Distributor. It is therefore possible that the Distributor may realize a profit in any particular year. However, the Distributor currently expects that its distribution expenses will likely equal or exceed payments to it under the Plans. The Distributor may, however, incur such additional expenses and make additional payments to dealers from its own resources to promote the distribution of shares of the Retail Classes. The monthly fees paid to the Distributor under the Plans are subject to the review and approval of the Trust's Independent Trustees, who may reduce the fees or terminate the Plans at any time.
All of the distribution expenses incurred by the Distributor and others, such as financial intermediaries, in excess of the amount paid on behalf of the Retail Classes would be borne by such persons without any reimbursement from such Retail Classes. Consistent with the requirements of Rule 12b-1(h) under the 1940 Act and subject to seeking best execution, the Funds may, from time to time, buy or sell portfolio securities from, or to, firms that receive payments under the Plans.
From time to time, the Distributor may pay additional amounts from its own resources to dealers for aid in distribution or for aid in providing administrative services to shareholders.
The Plans and the Distribution Agreement, as amended, have all been approved by the Board, including a majority of the Independent Trustees, who have no direct or indirect financial interest in the Plans and the Distribution Agreement, by a vote cast in person at a meeting duly called for the purpose of voting on the Plans and such Distribution Agreement. Continuation of the Plans and the Distribution Agreement, as amended, must be approved annually by the Board in the same manner as specified above.
Each year, the Board must determine that continuation of the Plans is in the best interest of shareholders of the Retail Classes and that there is a reasonable likelihood of each Plan providing a benefit to its respective Retail Class. The Plans and the Distribution Agreement, as amended, may be terminated with respect to a Retail Class at any time without penalty by a majority of Independent Trustees who have no direct or indirect financial interest in the Plans and the Distribution Agreement, or by a majority vote of the relevant Retail Class's outstanding voting securities. Any amendment materially increasing the percentage payable under the Plans must likewise be approved by a majority vote of the relevant Fund Class's outstanding voting securities, as well as by a majority vote of Independent Trustees who have no direct or indirect financial interest in the Plans or Distribution Agreement. With respect to a Fund's Class A Plan, any material increase in the maximum percentage payable thereunder must also be approved by a majority of the outstanding voting securities of the Fund's Class C shares. Also, any other material amendment to the Plans must be approved by a majority vote of the Board, including a majority of Independent Trustees who have no direct or indirect financial interest in the Plans or Distribution Agreement. In addition, in order for the Plans to remain effective, the selection and nomination of Independent Trustees must be effected by the Trustees who are Independent Trustees and who have no direct or indirect financial interest in the Plans or Distribution Agreement. Persons authorized to make payments under the Plans must provide written reports at least quarterly to the Board for its review.
On July 21, 1988, the Board set the fee for Delaware Strategic Income Fund's Class A shares, pursuant to the Plan relating to that Class, at 0.25% of average daily net assets. This fee was effective until May 31, 1992. Effective June 1, 1992, the Board has determined that the annual fee, payable on a monthly basis, under the Plan relating to the Class A shares, will be equal to the sum of: (i) the amount obtained by multiplying 0.10% by the average daily net assets represented by the Class A shares that were originally purchased prior to June 1, 1992 in the Government Income Series I Class (which was converted into what is now referred to as the Fund's Class A shares) on June 1, 1992 pursuant to a Plan of Recapitalization approved by shareholders of the Government Income Series I Class, and (ii) the amount obtained by multiplying a specified rate (up to 0.30% until October 1, 2013 and up to 0.25% after October 1, 2013) by the average daily net assets represented by all other Class A shares. While this is the method to be used to calculate the 12b-1 fees to be paid by the Fund's Class A shares under its Plan, the fee is a Class A share expense so that all shareholders of the Class A shares, regardless of whether they originally purchased or received shares in the Government Income Series I Class, or in one of the other classes that is now known as Class A shares, will bear Rule 12b-1 expenses at the same rate. While this describes the current formula for calculating the fees that will be payable under the Class A shares' Plan, the Plan permits a full 0.25% on all Class A share assets to be paid at any time following appropriate Board approval.
For the fiscal year ended July 31, 2022, the Rule 12b-1 payments for Delaware Strategic Income Fund's Class A shares, Class C shares, and Class R shares were: $205,279, $12,228, and $790, respectively.
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Purchasing Shares
Delaware Strategic Income Fund |
Class A shares |
Class C shares |
Class R shares |
Advertising |
$36 |
$- |
$- |
Annual/Semiannual Reports |
$- |
$- |
$- |
Broker Sales Charge |
$- |
$1,975 |
$- |
Broker Trails* |
$11,278 |
$6,414 |
$653 |
Salaries & Commissions to Wholesalers |
$39,179 |
$2,294 |
$137 |
Interest on Broker Sales Charge |
$- |
$37 |
$- |
Promotion-Other |
$- |
$- |
$- |
Prospectus Printing |
$- |
$- |
$- |
Wholesaler Expenses |
$154,786 |
$1,508 |
$- |
Total Expenses |
$205,279 |
$12,228 |
$790 |
For the fiscal year ended July 31, 2022, the Rule 12b-1 payments for Delaware Emerging Markets Debt Corporate Fund's Class A shares, Class C shares, and Class R shares were: $2,187, $1,313, and $0, respectively. Such amounts were used for the following purposes:
Delaware Emerging Markets Debt Corporate Fund |
Class A shares |
Class C shares |
Class R shares |
Advertising |
$- |
$- |
$- |
Annual/Semiannual Reports |
$- |
$- |
$- |
Broker Sales Charge |
$- |
$277 |
$- |
Broker Trails* |
$1,475 |
$153 |
$- |
Salaries & Commissions to Wholesalers |
$62 |
$659 |
$- |
Interest on Broker Sales Charge |
$- |
$5 |
$- |
Promotion-Other |
$- |
$- |
$- |
Prospectus Printing |
$- |
$- |
$- |
Wholesaler Expenses |
$650 |
$219 |
$- |
Total Expenses |
$2,187 |
$1,313 |
$- |
* The broker trail amounts listed in this row are principally based on payments made to financial intermediaries monthly. However, certain financial intermediaries receive trail payments quarterly. The quarterly payments are based on estimates, and the estimates may be reflected in the amounts in this row.
Special Purchase Features — Class A shares
Buying Class A Shares at Net Asset Value: As disclosed in the Prospectuses, participants of certain group retirement plans and members of their households may make purchases of Class A shares at NAV. The requirements are as follows: (i) the purchases must be made in a Delaware Funds Individual Retirement Account (“Foundation IRA®”) established by a participant from a group retirement plan or a member of their household distributed by an affiliate of the Manager; and (ii) purchases in a Foundation IRA require a minimum initial investment of $5,000 per Fund. Delaware Funds reserve the right to modify or terminate these arrangements at any time.
Additional Class A shares of a Fund may be purchased at NAV by existing shareholders or certain participants who were in a certain legacy group plan as of June 30, 2014 and who were transferred to a certain legacy group plan as of July 1, 2014, where participants of such legacy group plan were eligible for purchasing shares at NAV under a predecessor fund's eligibility requirements set by the predecessor fund's company.
Letter of Intent: The reduced front-end sales charges described above with respect to Class A shares are also applicable to the aggregate amount of purchases made by any such purchaser within a 13-month period pursuant to a written letter of intent signed by the purchaser, and not legally binding on the signer or the Trust, which provides for the holding in escrow by the Transfer Agent or financial intermediary of 5.00% of the total amount of Class A shares intended to be purchased until such purchase is completed within the 13-month period. The minimum initial purchase amount to establish a letter of intent is $1,000. The Funds will no longer accept retroactive letters of intent. The 13-month period begins on the date of the earliest purchase. If the intended investment is not completed, the Transfer Agent or financial intermediary may surrender an appropriate number of the escrowed shares for redemption in order to realize the difference between the front-end sales charge on Class A shares purchased at the reduced rate and the front-end sales charges otherwise applicable. Such purchasers may include the values (at offering price at the level designated in their letter of intent) of all their shares of a Fund and of any class of any of the other Delaware Funds previously purchased and still held as of the date of their letter of intent toward the completion of such letter, except as described below. Those purchasers cannot include shares that did not carry a front-end sales charge, CDSC, or Limited CDSC, unless the purchaser acquired those shares through an exchange from a Delaware Fund that did carry a front-end sales charge, CDSC, or Limited CDSC. For
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purposes of satisfying an investor's obligation under a letter of intent, Class C shares of the Funds and the corresponding classes of shares of other Delaware Funds that offer such shares may be aggregated with Class A shares of the Funds. Your financial intermediary may have different procedures for administering this feature.
Combined Purchases Privilege: When you determine the availability of the reduced front-end sales charges on Class A shares, you can combine your holdings or purchases of Class A and all other classes of Delaware Funds, excluding any money market funds (unless you acquired those shares through an exchange from a fund that did carry a front-end sales charge, CDSC, or Limited CDSC). Your financial intermediary may have different procedures for administering this feature.
The privilege also extends to all purchases made at one time by any of the following:
To ensure that you receive available reduced front-end sales charges, you must advise your broker-dealer or your financial intermediary of all eligible accounts and shares that can be aggregated with your own accounts for right of accumulation purposes as well as your desire to enter into a letter of intent (if applicable). If you or your broker dealer or financial intermediary do not let the Funds know that you are eligible for a waiver or reduction, you may not receive a reduction to the front-end sales charges to which you may be eligible. The Fund or your broker-dealer or financial intermediary may also ask you to provide account records, statements or other information related to all eligible accounts.
Right of Accumulation: In determining the availability of the reduced front-end sales charge on Class A shares, you can combine your holdings or purchases of Class A and all other classes of Delaware Funds and any money market funds (unless you acquired those shares through an exchange from a Fund that did carry a front-end sales charge, CDSC, or Limited CDSC). If, for example, any such purchaser has previously purchased and still holds Class A shares of a Fund and/or shares of any other of the classes described in the previous sentence with a value of $90,000 and subsequently purchases $10,000 at offering price of additional Class A shares of a Fund, the charge applicable to the $10,000 purchase would currently be 3.50%. For the purpose of this calculation, the shares presently held shall be valued at the public offering price that would have been in effect had the shares been purchased simultaneously with the current purchase. Investors should refer to the table of sales charges for Class A shares in the Prospectuses to determine the applicability of the right of accumulation to their particular circumstances. Your financial intermediary may have different procedures for administering this feature.
Right of Reinvestment Privilege: Holders of Class A shares of a Fund (and of the Institutional Class shares of the Fund holding shares that were acquired through an exchange from one of the other Delaware Funds offered with a front-end sales charge) who redeem such shares have one year from the date of redemption to reinvest all or part of their redemption proceeds in the same Class of the Fund or in the same Class of any of the other Delaware Funds. In the case of Class A shares, the reinvestment will not be assessed a front-end sales charge. The reinvestment will be subject to applicable eligibility and minimum purchase requirements and must be in states where shares of such other funds may be sold. This reinvestment privilege does not extend to Class A shares where the redemption of the shares triggered the payment of a Limited CDSC. Persons investing redemption proceeds from direct investments in Delaware Funds offered without a front-end sales charge will be required to pay the applicable sales charge when purchasing Class A shares. The reinvestment privilege does not extend to a redemption of Class C shares. You or your financial intermediary must notify us at the time you purchase shares if you are eligible for any of these programs.
Any such reinvestment cannot exceed the redemption proceeds (plus any amount necessary to purchase a full share). The reinvestment will be made at the NAV next determined after receipt of remittance.
Any reinvestment directed to a Delaware Fund in which the investor does not then have an account will be treated like all other initial purchases of such Fund's shares. Consequently, an investor should obtain and read carefully the prospectus for the Delaware Fund in which the investment is intended to be made before investing or sending money. The prospectus contains more complete information about the Delaware Fund, including charges and expenses.
Investors should consult their financial intermediaries or the Transfer Agent, which also serves as the Funds' shareholder servicing agent, about the applicability of the Class A Limited CDSC in connection with the features described above.
Up to 90 days after you redeem shares, you can reinvest the proceeds without paying a sales charge. For purposes of this “right of reinvestment policy,” automatic transactions (including, for example, automatic purchases, withdrawals and payroll deductions) and ongoing retirement plan contributions are not eligible for investment without a sales charge. Investors should consult their financial intermediary for further information.
Group Investment Plans: Group Investment Plans (e.g., SEP/IRA, SAR/SEP, Profit Sharing, Pension, and 401(k) Defined Contribution Plans) that are not eligible to purchase shares of the Institutional Class may also benefit from the reduced front-end sales charges for investments in Class A shares set forth in the table in the Prospectuses, based on total plan assets. If a company has more than one plan investing in Delaware Funds, then the total amount invested in all plans would be used in determining the applicable front-end sales charge reduction upon each purchase, both initial and subsequent, upon notification to a Fund at the time of each such purchase. Employees participating in such Group Investment Plans may also combine the investments made in their plan account when determining the applicable front-end sales charge on purchases to nonretirement Delaware Funds investment accounts if they so notify a
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Purchasing Shares
Fund or financial intermediary in which they are investing in connection with each purchase. See “Retirement Plans for the Retail Classes” under “Investment Plans” below for information about retirement plans. This feature is dependent on your financial intermediary's right of accumulation policies.
The Limited CDSC may be generally applicable to any redemptions of NAV purchases made on behalf of a group investment plan on which a dealer's commission has been paid only if such redemption is made pursuant to a withdrawal of the entire plan from a Delaware Fund. See “Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased at Net Asset Value” under “Redemption and Exchange” below.
Investment Plans
Reinvestment Plan
Unless otherwise designated by shareholders in writing, dividends and distributions, if any, will be automatically reinvested in additional shares of the respective Fund Class in which an investor has an account (based on the NAV in effect on the reinvestment date) and will be credited to the shareholder's account on that date.
Reinvestment of Dividends in other Delaware Funds
Subject to applicable eligibility and minimum initial purchase requirements and the limitations set forth below, shareholders may be able to automatically reinvest dividends and/or distributions in any of the other Delaware Funds, including the Funds, in states where their shares may be sold. However, if you received shares as the result of a transaction involving a predecessor fund, you may not be able to reinvest your dividends at the current time. Such investments will be at NAV at the close of business on the reinvestment date without any front-end sales charge or service fee. The shareholder must notify the Transfer Agent in writing and must have established an account in the fund into which the dividends and/or distributions are to be invested. Any reinvestment directed to a fund in which the investor does not then have an account will be treated like all other initial purchases of the fund's shares. Consequently, an investor should obtain and read carefully the prospectus for the fund in which the investment is intended to be made before investing or sending money. The prospectus contains more complete information about the fund, including charges and expenses.
Subject to the following limitations, dividends and/or distributions from other Delaware Funds may be invested in shares of a Fund, provided an account has been established. Dividends from Class A shares may only be directed to other Class A shares, dividends from Class C shares may only be directed to other Class C shares, dividends from Class R shares may only be directed to other Class R shares, and dividends from Institutional Class shares may only be directed to other Institutional Class shares.
Compensation to Financial Intermediaries — Dividend and Capital Gains
Dividends and capital gains on Class C shares may be reinvested at NAV, however the Distributor will not compensate the financial intermediaries on the shares resulting from the dividends or capital gains at the time of reinvestment. Shares resulting from dividends and capital gains must age 12 months following the reinvestment date, and Rule 12b-1 Plan fees will be paid to the financial intermediary in the 13th month following the reinvestment date.
Investing by Exchange
If you have an investment in another Delaware Fund, you may be able to exchange part or all of your investment into shares of the Funds. If you received shares as the result of a transaction involving a predecessor fund, you may not be able to exchange shares of the predecessor fund into other Delaware Funds at the current time. If you wish to open an account by exchange, call the Delaware Funds by Macquarie Service Center at 800 523-1918 for more information. All exchanges are subject to the eligibility and minimum purchase requirements and any additional limitations set forth in the Funds' Prospectuses. See “Redemption and Exchange” below for more complete information concerning your exchange privileges.
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan: Investors may arrange for the Funds to accept direct deposits for investment through an agent bank, preauthorized government, or private recurring payments. This method of investment assures the timely credit to the shareholder's account of payments such as social security, veterans' pension or compensation benefits, federal salaries, railroad retirement benefits, private payroll checks, dividends, and disability or pension fund benefits. It also eliminates the possibility and inconvenience of lost, stolen, and delayed checks. If you participate in a direct deposit purchase plan for an account held directly with the Funds' transfer agent and also hold shares of Delaware Funds other than directly with us, generally those holdings will not be aggregated with the assets held with us for purposes of determining rights of accumulation in connection with direct deposit purchases.
Automatic Investing Plan: Shareholders may make automatic investments by authorizing, in advance, monthly or quarterly payments directly from their checking accounts for deposit into their Fund accounts. This type of investment will be handled in either of the following ways: (i) if the shareholder's bank is a member of the National Automated Clearing House Association (“NACHA”), the amount of the periodic investment will be electronically deducted from his or her checking account by Electronic Fund Transfer (“EFT”) and such checking account will reflect a debit although no check is required to initiate the transaction; or (ii) if the shareholder's bank is not a member of NACHA, deductions will be made by preauthorized checks, known as Depository Transfer Checks. Should the shareholder's bank become a member of NACHA in the future, his or her investments would be handled electronically through EFT. If
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you participate in an automatic investment program for an account held directly with the Funds' transfer agent and also hold shares of Delaware Funds other than directly with us, generally those holdings will not be aggregated with the assets held with us for purposes of determining rights of accumulation in connection with automatic investment program purchases.
Minimum Initial/Subsequent Investments by Electronic Fund Transfer: Initial investments under the direct deposit purchase plan and the automatic investing plan must be for $250 or more and subsequent investments under such plans must be for $25 or more. An investor wishing to take advantage of either service must complete an authorization form. Either service can be discontinued by the shareholder at any time without penalty by giving written notice.
Direct Deposit Purchase by Mail
Shareholders may authorize a third party, such as a bank or employer, to make investments directly to their Fund accounts. The Funds will accept these investments, such as bank-by-phone, annuity payments, and payroll allotments, by mail directly from the third party. Investors should contact their employers or financial institutions who in turn should contact the Trust for proper instructions.
On Demand Service
You or your financial intermediary may request purchases of Fund shares by phone using the on demand service. When you authorize the Funds to accept such requests from you or your financial intermediary, funds will be withdrawn (for share purchases) from your predesignated bank account. Your request will be processed the same day if you call prior to 4:00pm Eastern time. There is a $25 minimum and $100,000 maximum limit for on demand service transactions.
It may take up to four Business Days for the transactions to be completed. You can initiate this service by completing an Account Services form. If your name and address are not identical to the name and address on your Fund account, you must have your signature guaranteed. The Funds do not charge a fee for this service; however, your bank may charge a fee.
Systematic Exchange Option
Shareholders can use the systematic exchange option to invest in the Funds through regular liquidations of shares in their accounts in other Delaware Funds, subject to certain limitations. Shareholders may elect to invest in one or more of the other Delaware Funds through the systematic exchange option. If, in connection with the election of the systematic exchange option, you wish to open a new account to receive the automatic investment, such new account must meet the minimum initial purchase requirements described in the prospectus of the fund that you select. All investments under this option are exchanges and are therefore subject to the same conditions and limitations as other exchanges noted above.
Under this automatic exchange program, shareholders can authorize regular monthly investments (minimum of $100 per fund, unless you received shares as the result of a transaction involving a predecessor fund, in which case there will be no minimum) to be liquidated from their account and invested automatically into other Delaware Funds, subject to the conditions and limitations set forth in the Prospectuses. The investment will be made on the 20th day of each month (or, if the fund selected is not open that day, the next Business Day) at the public offering price or NAV, as applicable, of the fund selected on the date of investment. No investment will be made for any month if the value of the shareholder's account is less than the amount specified for investment.
Periodic investment through the systematic exchange option does not ensure profits or protect against losses in a declining market. The price of the fund into which investments are made could fluctuate. Since this program involves continuous investment regardless of such fluctuating value, investors selecting this option should consider their financial ability to continue to participate in the program through periods of low fund share prices. This program involves automatic exchanges between two or more fund accounts and is treated as a purchase of shares of the fund into which investments are made through the program. Shareholders can terminate their participation in the systematic exchange option at any time by giving written notice to the fund from which exchanges are made.
Retirement Plans for the Retail Classes
An investment in the Funds may be suitable for tax-deferred retirement plans, such as: traditional IRA, SIMPLE IRA, SEP, SARSEP, 401(k), SIMPLE 401(k), Profit Sharing, Money Purchase, or 457 Retirement Plans. In addition, the Funds may be suitable for use in Roth IRAs and Coverdell ESAs. For further details concerning these plans and accounts, including applications, contact your financial intermediary. To determine whether the benefits of a tax-sheltered retirement plan, Roth IRA, or Coverdell ESA are available and/or appropriate, you should consult with a tax advisor.
The CDSC may be waived on certain redemptions of Class C shares. See the Prospectuses for a list of the instances in which the CDSC is waived.
Minimum investment limitations generally applicable to other investors do not apply to retirement plans other than IRAs, for which there is a minimum initial purchase of $250 and a minimum subsequent purchase of $25, regardless of which Class is selected. Retirement plans may be subject to plan establishment fees, annual maintenance fees and/or other administrative or trustee fees. Additional information about fees is included in retirement plan materials. Fees are quoted upon request. Annual maintenance fees may be shared by the Custodian, the Transfer Agent, other affiliates of the Manager, and others that provide services to such Plans.
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Investment Plans
Certain shareholder investment services available to nonretirement plan shareholders may not be available to retirement plan shareholders. Certain retirement plans may qualify to purchase Institutional Class shares. For additional information, call the Delaware Funds by Macquarie Service Center at 800 523-1918.
Determining Offering Price and Net Asset Value
Orders for purchases and redemptions of Class A shares are effected at the offering price next calculated after receipt of the order by a Fund, its agent, or certain other authorized persons. Orders for purchases and redemptions of all of a Fund's other share classes are effected at the NAV per share next calculated after receipt of the order by the Fund, its agent, or certain other authorized persons. See “Distributor” under “Investment Manager and Other Service Providers” above. Financial intermediaries are responsible for transmitting orders promptly.
The offering price for Class A shares consists of the NAV per share plus any applicable sales charges. Offering price and NAV are computed as of the close of regular trading on the NYSE, which is normally 4:00pm, Eastern time, on days when the NYSE is open for business. The NYSE is scheduled to be open Monday through Friday throughout the year except for days when the following holidays are observed: New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Juneteenth National Independence Day, Independence Day, Labor Day, Thanksgiving, and Christmas. The time by which purchase and redemption orders must be effected in order to receive a Business Day's NAV and the time at which such orders are processed and shares are priced may change in case of an emergency declared by the SEC or, if regular trading on the NYSE is stopped, at a time other than the regularly scheduled close of the NYSE. When the NYSE is closed, the Funds will generally be closed, pricing calculations will not be made, and purchase and redemption orders will not be processed until the Funds' next Business Day. See “Calculating share price” and “How to redeem shares” in the Prospectuses.
The NAV per share for each share class of a Fund is calculated by subtracting the liabilities of each class from its total assets and dividing the resulting number by the number of shares outstanding for that class. In determining a Fund's total net assets, equity securities, except those traded on the Nasdaq Stock Market, Inc. (Nasdaq), are valued at the last quoted sales price as of the time of the regular close of the NYSE on the valuation date. Securities traded on the Nasdaq are valued in accordance with the Nasdaq Official Closing Price, which may not be the last sales price. If, on a particular day, an equity security does not trade, then the mean between the bid and ask prices will be used, which approximates fair value. Debt securities and credit default swap (“CDS”) contracts are valued based upon valuations provided by an independent pricing service or broker/ counterparty and reviewed by management. To the extent current market prices are not available, the pricing service may take into account developments related to the specific security, as well as transactions in comparable securities. US government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. Valuations for fixed income securities utilize matrix systems, which reflect such factors as security prices, yields, maturities, and ratings, and are supplemented by dealer and exchange quotations. For asset-backed securities, collateralized mortgage obligations, CMBS, and US government agency MBS, pricing vendors utilize matrix pricing which considers prepayment speed, attributes of the collateral, yield or price of bonds of comparable quality, coupon, maturity, and type as well as broker/dealer-supplied prices. Swap prices are derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows, trades, and values of the underlying reference instruments. Open-end investment company securities are valued at net asset value per share, as reported by the underlying investment company. Forward foreign currency contracts and foreign cross currency exchange contracts are valued at the mean between the bid and ask prices, which approximates fair value. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available. Futures contracts and options on futures contracts are valued at the daily quoted settlement prices. Exchange-traded options are valued at the last reported sale price or, if no sales are reported, at the mean between the last reported bid and ask prices, which approximates fair value. Generally, other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith by the Manager under the oversight of the Board. In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures or suspension of trading in a security. On behalf of a Fund, the Manager may use fair value pricing more frequently for securities traded primarily in non-US markets because, among other things, most foreign markets close well before the Fund values its securities, generally as of 4:00pm Eastern time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, government actions or pronouncements, aftermarket trading, or news events may have occurred in the interim. To account for this, the Manager (on behalf of a Fund) may frequently value foreign securities using fair value prices based on third-party vendor modeling tools (international fair value pricing). Foreign securities and the prices of foreign securities denominated in foreign currencies are translated to US dollars at the mean between the bid and offer quotations of such currencies based on rates in effect as of the close of the NYSE.
Use of a pricing service has been approved by the Board. Prices provided by a pricing service take into account appropriate factors such as institutional trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. Subject to the foregoing, securities for which market quotations are not readily available and other assets are valued at fair value by the Manager as determined in good faith and pursuant to procedures approved by the Board.
Each Class of a Fund will bear, pro rata, all of the common expenses of that Fund. The NAVs of all outstanding shares of each Class of a Fund will be computed on a pro rata basis for each outstanding share based on the proportionate participation in that Fund represented by the value of shares of that Class. All income earned and expenses incurred by a Fund, will be borne on a pro rata basis by each outstanding share of a Class, based on each Class's percentage in that Fund represented by the value of shares of such Classes, except that Institutional Class shares will not incur any of the expenses under the Trust's Rule 12b-1 Plans, while the Retail Classes will bear the Rule 12b-1 Plan expenses payable under their respective Plans. Due to the specific distribution expenses and other costs that will be allocable to each Class, the NAV of each Class of a Fund will vary.
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Redemption and Exchange
General Information
You can redeem or exchange your shares in a number of different ways that are described below. Your shares will be redeemed or exchanged at a price based on the NAV next determined after a Fund receives your request in good order, subject, in the case of a redemption, to any applicable CDSC or Limited CDSC. For example, redemption or exchange requests received in good order after the time the offering price and NAV of shares are determined will be processed on the next Business Day. See “How to redeem shares” in the Prospectuses. A shareholder submitting a redemption request may indicate that he or she wishes to receive redemption proceeds of a specific dollar amount. In the case of such a request, and in the case of certain redemptions from retirement plan accounts, a Fund will redeem the number of shares necessary to deduct the applicable CDSC in the case of Class C shares, and, if applicable, the Limited CDSC in the case of Class A shares and tender to the shareholder the requested amount, assuming the shareholder holds enough shares in his or her account for the redemption to be processed in this manner. Otherwise, the amount tendered to the shareholder upon redemption will be reduced by the amount of the applicable CDSC or Limited CDSC. Redemption proceeds will be distributed promptly, as described below, but not later than seven days after receipt of a redemption request.
Except as noted below, for a redemption request to be in “good order,” you must provide the name of the Delaware Fund, your account number, account registration, and the total number of shares or dollar amount of the transaction. For exchange requests, you must also provide the name of the Delaware Fund in which you want to invest the proceeds. Exchange instructions and redemption requests must be signed by the record owner(s) exactly as the shares are registered. You may request a redemption or an exchange by calling the Delaware Funds by Macquarie Service Center at 800 523-1918. The Funds may suspend, terminate, or amend the terms of the exchange privilege upon 60 days' written notice to shareholders.
Orders for the repurchase of Fund shares that are submitted to the Delaware Fund prior to the close of its Business Day will be executed at the NAV per share computed that day (subject to the applicable CDSC or Limited CDSC), if the repurchase order was received by the financial intermediary from the shareholder prior to the time the offering price and NAV are determined on such day. The financial intermediary has the responsibility of transmitting orders to the Delaware Fund promptly. Such repurchase is then settled as an ordinary transaction with the financial intermediary (who may make a charge to the shareholder for this service) delivering the shares repurchased.
Payment for shares redeemed will ordinarily be mailed the next Business Day, but in no case later than seven days, after receipt of a redemption request in good order by either a Fund or certain other authorized persons (see “Distributor” under “Investment Manager and Other Service Providers”); provided, however, that each commitment to mail or wire redemption proceeds by a certain time, as described below, is modified by the qualifications described in the next paragraph.
Each Fund will process written and telephone redemption requests to the extent that the purchase orders for the shares being redeemed have already settled. Each Fund will honor redemption requests as to shares for which a check was tendered as payment, but the Funds will not mail or wire the proceeds until it is reasonably satisfied that the purchase check has cleared, which may take up to 15 calendar days from the purchase date. You can avoid this potential delay if you purchase shares by wiring Federal Funds. Each Fund reserves the right to reject a written or telephone redemption request or delay payment of redemption proceeds if there has been a recent change to the shareholder's address of record.
If a shareholder has been credited with a purchase by a check that is subsequently returned unpaid for insufficient funds or for any other reason, a Fund will automatically redeem from the shareholder's account the shares purchased by the check plus any dividends earned thereon. Shareholders may be responsible for any losses to a Fund or to the Distributor.
In case of a suspension of the determination of the NAV because the NYSE is closed for reasons other than weekends or holidays, or trading thereon is restricted or an emergency exists as a result of which disposal by the Fund of securities owned by it is not reasonably practical, or it is not reasonably practical for a Fund to fairly value its assets, or in the event that the SEC has provided for such suspension for the protection of shareholders, the Fund may postpone payment or suspend the right of redemption or repurchase. In such cases, the shareholder may withdraw the request for redemption or leave it standing as a request for redemption at the NAV next determined after the suspension has been terminated.
Payment for shares redeemed or repurchased may be made either in cash or in kind, or partly in cash and partly in kind. Any portfolio securities paid or distributed in kind would be valued as described in “Determining Offering Price and Net Asset Value” above. Subsequent sale by an investor receiving a distribution in kind could result in the payment of brokerage commissions. However, the Trust has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which each Fund is obligated to redeem shares solely in cash up to the lesser of $250,000 or 1.00% of the NAV of such Fund during any 90-day period for any one shareholder.
The value of each Fund's investments is subject to changing market prices. Thus, a shareholder redeeming shares of a Fund may sustain either a gain or loss, depending upon the price paid and the price received for such shares.
Certain redemptions of Class A shares purchased at NAV may result in the imposition of a Limited CDSC. See “Contingent Deferred Sales Charge for Certain Redemptions of Class A shares Purchased at Net Asset Value” below. Class C shares are subject to CDSCs as described under “Contingent Deferred Sales Charge — Class C shares” under “Purchasing Shares” above and in the Prospectuses. Except for the applicable CDSC or Limited CDSC and, with respect to the expedited payment by wire described below for which, in the case of the Retail Classes, there may be a bank wiring cost, neither a Fund nor the Distributor charge a fee for redemptions or repurchases, but such fees could be charged at any time in the future.
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Redemption and Exchange
Holders of Class C shares that exchange their shares (“Original Shares”) for shares of other Delaware Funds (in each case, “New Shares”) in a permitted exchange will not be subject to a CDSC that might otherwise be due upon redemption of the Original Shares. However, such shareholders will continue to be subject to the CDSC and any CDSC assessed upon redemption of the New Shares will be charged by a Fund from which the Original Shares were exchanged. In the case of Class C shares, shareholders will also continue to be subject to the automatic conversion schedule of the Original Shares as described in this SAI. In an exchange of Class C shares, a Fund's CDSC schedule may be higher than the CDSC schedule relating to the New Shares acquired as a result of the exchange. For purposes of computing the CDSC that may be payable upon a disposition of the New Shares, the period of time that an investor held the Original Shares is added to the period of time that an investor held the New Shares. With respect to Class C shares, the automatic conversion schedule of the Original Shares may be longer than that of the New Shares. Consequently, an investment in New Shares by exchange may subject an investor to the higher Rule 12b-1 fees applicable to Class C shares for a longer period of time than if the investment in New Shares were made directly.
You may exchange all or part of your investment in one or more Delaware Funds for shares of other Delaware Funds. Please keep in mind, however, that under most circumstances you may exchange between like classes of shares only. Class C shares acquired by exchange will continue to carry the automatic conversion schedule of the fund from which the exchange is made. The holding period of Class C shares acquired by exchange will be added to that of the shares that were exchanged for purposes of determining the time of the automatic conversion to Class A shares of a Fund. Holders of Class R shares of a Fund are permitted to exchange all or part of their Class R shares only for Class R shares of other Delaware Funds or, if Class R shares are not available for a particular fund, for the Class A shares of such fund. You will pay any applicable sales charge on your new shares unless eligible to purchase shares at NAV. To open an account by exchange, call your financial intermediary or the Delaware Funds by Macquarie Service Center at 800 523-1918.
Permissible exchanges into Class A shares of a Fund will be made without a front-end sales charge, except for exchanges of shares that were not previously subject to a front-end sales charge (unless such shares were acquired through the reinvestment of dividends). Permissible exchanges into Class C shares will be made without the imposition of a CDSC by the Delaware Fund from which the exchange is being made at the time of the exchange.
Each Fund also reserves the right to refuse the purchase side of an exchange request by any person, or group if, in the Manager's judgment, the Fund would be unable to invest effectively in accordance with its investment objectives and policies, or would otherwise potentially be adversely affected. A shareholder's purchase exchanges may be restricted or refused if a Fund receives or anticipates simultaneous orders affecting significant portions of the Fund's assets.
The Funds discourage purchases by market timers and purchase orders (including the purchase side of exchange orders) by shareholders identified as market timers may be rejected. Each Fund will consider anyone who follows a pattern deemed market timing in any Delaware Fund to be a market timer. Your ability to use a 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. See the Funds' Prospectuses for more information on its market timing policies.
Contact your financial intermediary for specific information regarding the availability and suitability of various account options described throughout this SAI.
Written Redemption
You can write to the Funds (at P.O. Box 9876, Providence, RI 02940-8076 by regular mail or 4400 Computer Drive, Westborough, MA 01581-1722 by overnight courier service) to redeem some or all of your shares. The request must be signed by all owners of the account. For redemptions of more than $100,000, or when the proceeds are not sent to the shareholder(s) at the address of record, the Funds require a signature by all owners of the account and a Medallion Signature Guarantee for each owner. A Medallion Signature Guarantee can be obtained from a commercial bank, a trust company, or a member of a Securities Transfer Association Medallion Program (“STAMP”). The Funds reserve the right to reject a signature guarantee supplied by an eligible institution based on its creditworthiness. The Funds may require further documentation from corporations, executors, retirement plans, administrators, trustees, or guardians.
Payment is normally mailed the next Business Day after receipt of your redemption request. If your Class A or Institutional Class shares are in certificate form, the certificate(s) must accompany your request and also be in good order. Certificates generally are no longer issued.
Written Exchange
You may also write to the Funds (at P.O. Box 9876, Providence, RI 02940-8076 by regular mail or 4400 Computer Drive, Westborough, MA 01581-1722 by overnight courier service) to request an exchange of any or all of your shares into another Delaware Fund, subject to the same conditions and limitations as other exchanges noted above.
Telephonic Redemption and Exchange
To get the added convenience of the telephone redemption and exchange methods, you must have the Transfer Agent hold your shares (without charge) for you. If you hold your Class A or Institutional Class shares in certificate form, you may redeem or exchange only by written request and you must return your certificates.
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Telephone Redemption: The “Check to Your Address of Record” service and the “Telephone Exchange” service, both of which are described below, are automatically provided unless you notify the Fund in which you have your account in writing that you do not wish to have such services available with respect to your account. The Funds reserve the right to modify, terminate, or suspend these procedures upon 60 days' written notice to shareholders. It may be difficult to reach the Funds by telephone during periods when market or economic conditions lead to an unusually large volume of telephone requests.
The Funds and their Transfer Agent are not responsible for any shareholder loss incurred in acting upon written or telephone instructions for redemption or exchange of Fund shares that are reasonably believed to be genuine. With respect to such telephone transactions, the Funds will follow reasonable procedures to confirm that instructions communicated by telephone are genuine (including verification of personal identification). Also, shareholders should verify their trade confirmations immediately upon receipt. Telephone instructions received by the Funds are generally recorded, and a written confirmation will be provided for all purchase, exchange, and redemption transactions initiated by telephone. By exchanging shares by telephone, you are acknowledging prior receipt of a prospectus for the Delaware Fund into which your shares are being exchanged.
Telephone Redemption — Check to Your Address of Record: The Telephone Redemption feature is a quick and easy method to redeem shares. You or your financial intermediary (where applicable) can have redemption proceeds of $100,000 or less mailed to you at your address of record. Checks will be payable to the shareholder(s) of record. Payment is normally mailed the next Business Day after receipt of the redemption request. This service is only available to individual, joint, and individual fiduciary-type accounts.
Telephone Redemption — Proceeds to Your Bank: Redemption proceeds of $1,000 or more can be transferred to your predesignated bank account by wire or by check. You should authorize this service when you open your account. If you change your predesignated bank account, you must complete an authorization form and have your signature guaranteed. For your protection, your authorization must be on file. If you request a wire, your funds will normally be sent the next Business Day. If the proceeds are wired to the shareholder's account at a bank that is not a member of the Federal Reserve System, there could be a delay in the crediting of the funds to the shareholder's bank account. A bank wire fee may be deducted from Fund Class redemption proceeds. If you ask for a check, it will normally be mailed the next Business Day after receipt of your redemption request to your predesignated bank account. There are no separate fees for this redemption method, but mailing a check may delay the time it takes to have your redemption proceeds credited to your predesignated bank account. Call the Delaware Funds by Macquarie Service Center at 800 523-1918 prior to the time the offering price and NAV are determined, as noted above.
Telephone Exchange: The telephone exchange feature is a convenient and efficient way to adjust your investment holdings as your liquidity requirements and investment objectives change. You or your financial intermediary can exchange your shares into other Delaware Funds under the same registration, subject to the same conditions and limitations as other exchanges noted above. As with the written exchange service, telephone exchanges are subject to the requirements of the Fund, as described above. Telephone exchanges may be subject to limitations as to amount or frequency.
The telephone exchange privilege is intended as a convenience to shareholders and is not intended to be a vehicle to speculate on short-term swings in the securities market through frequent transactions into and out of the Delaware Funds. Telephone exchanges may be subject to limitations as to amount or frequency. The Transfer Agent and the Fund reserve the right to record exchange instructions received by telephone and to reject exchange requests at any time in the future.
On Demand Service
You or your financial intermediary may request redemptions of Fund Class shares by phone using the on demand service. When you authorize the Funds to accept such requests from you or your financial intermediary, funds will be deposited to your predesignated bank account. Your request will be processed the same day if you call prior to 4:00pm Eastern time. There is a $25 minimum and $100,000 maximum limit for on demand service transactions. For more information, see “On Demand Service” under “Investment Plans” above.
Systematic Withdrawal Plans
Shareholders who own or purchase $5,000 or more of shares at the offering price, or NAV, as applicable, for which certificates have not been issued may establish a systematic withdrawal plan for monthly withdrawals of $25 or more, or quarterly withdrawals of $75 or more, although the Funds do not recommend any specific amount of withdrawal. This is particularly useful to shareholders living on fixed incomes, since it can provide them with a stable supplemental amount. This $5,000 minimum does not apply to investments made through qualified retirement plans. Shares purchased with the initial investment and through reinvestment of cash dividends and realized securities profits distributions will be credited to the shareholder's account and sufficient full and fractional shares will be redeemed at the NAV calculated on the third Business Day preceding the mailing date.
Checks are dated either the 1st or the 15th of the month, as selected by the shareholder (unless such date falls on a holiday or a weekend), and are normally mailed within two Business Days. Both ordinary income dividends and realized securities profits distributions will be automatically reinvested in additional shares of the Class at NAV. This plan is not recommended for all investors and should be started only after careful consideration of its operation and effect upon the investor's savings and investment program. To the extent that withdrawal payments from the plan exceed any dividends and/or realized securities profits distributions paid on shares held under the plan, the withdrawal payments will represent a return of capital, and the share balance may in time be depleted, particularly in a declining market. Shareholders should not purchase additional shares while participating in a systematic withdrawal plan.
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Redemption and Exchange
The sale of shares for withdrawal payments constitutes a taxable event and a shareholder may incur a capital gain or loss for federal income tax purposes. This gain or loss may be long term or short term depending on the holding period for the specific shares liquidated. Premature withdrawals from retirement plans may have adverse tax consequences.
Withdrawals under this plan made concurrently with the purchases of additional shares may be disadvantageous to the shareholder. Purchases of Class A shares through a periodic investment program in a Fund must be terminated before a systematic withdrawal plan with respect to such shares can take effect, except if the shareholder is a participant in a retirement plan offering Delaware Funds or is investing in Delaware Funds that do not carry a sales charge. Redemptions of Class A shares pursuant to a systematic withdrawal plan may be subject to a Limited CDSC if the purchase was made at NAV and a dealer's commission has been paid on that purchase. The applicable Limited CDSC for Class A shares and CDSC for Class C shares redeemed via a systematic withdrawal plan will be waived if the annual amount withdrawn in each year is less than 12% of the account balance on the date that the plan was established. If the annual amount withdrawn in any year exceeds 12% of the account balance on the date that the systematic withdrawal plan was established, all redemptions under the plan will be subject to the applicable CDSC, including an assessment for previously redeemed amounts under the plan. Whether a waiver of the CDSC is available or not, the first shares to be redeemed for each systematic withdrawal plan payment will be those not subject to a CDSC because they have either satisfied the required holding period or were acquired through the reinvestment of distributions. See the Prospectuses for more information about the waiver of CDSCs.
An investor wishing to start a systematic withdrawal plan must complete an authorization form. If the recipient of systematic withdrawal plan payments is other than the registered shareholder, the shareholder's signature on this authorization must be guaranteed. Each signature guarantee must be supplied by an eligible guarantor institution. The Funds reserve the right to reject a signature guarantee supplied by an eligible institution based on its creditworthiness. This plan may be terminated by the shareholder or the Transfer Agent at any time by giving written notice.
Systematic withdrawal plan payments are normally made by check. In the alternative, you may elect to have your payments transferred from your Fund account to your predesignated bank account through the on demand service. Your funds will normally be credited to your bank account up to four Business Days after the payment date. There are no separate fees for this redemption method. It may take up to four Business Days for the transactions to be completed. You can initiate this service by completing an Account Services form. If your name and address are not identical to the name and address on your Fund account, you must have your signature guaranteed. The Funds do not charge a fee for this service; however, your bank may charge a fee.
Contingent Deferred Sales Charges for Certain Redemptions of Class A shares Purchased at Net Asset Value
For purchases of $1 million or more, a Limited CDSC will be imposed on certain redemptions of Class A shares (or shares into which such Class A shares are exchanged) according to the following schedule: (i) for shares purchased prior to July 1, 2020, 1.00% if such shares are redeemed during the first year after the purchase; and 0.50% if such shares are redeemed during the second year after the purchase; and (ii) for shares purchased on or after July 1, 2020, 1.00% if such shares are redeemed during the first 18 months after the purchase, if such purchases were made at NAV and triggered the payment by the Distributor of the dealer's commission described above in “Dealer's Commission” under “Purchasing Shares.”
The Limited CDSC will be paid to the Distributor and will be assessed on an amount equal to the lesser of: (i) the NAV at the time of purchase of the Class A shares being redeemed; or (ii) the NAV of such Class A shares at the time of redemption. For purposes of this formula, the “NAV at the time of purchase” will be the NAV at purchase of the Class A shares even if those shares are later exchanged for shares of another Delaware Fund and, in the event of an exchange of Class A shares, the “NAV of such shares at the time of redemption” will be the NAV of the shares acquired in the exchange.
Redemptions of such Class A shares held for more than the holding period, as set forth in the Prospectuses, will not be subject to the Limited CDSC and an exchange of such Class A shares into another Delaware Fund will not trigger the imposition of the Limited CDSC at the time of such exchange. The period a shareholder owns shares into which Class A shares are exchanged will count toward satisfying the holding period. The Limited CDSC is assessed if such holding period is not satisfied irrespective of whether the redemption triggering its payment is of Class A shares of a Fund or Class A shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed that shares not subject to the Limited CDSC are the first redeemed followed by other shares held for the longest period of time. The Limited CDSC will not be imposed upon shares representing reinvested dividends or capital gains distributions, or upon amounts representing share appreciation.
Waivers of Contingent Deferred Sales Charges
Please see the Prospectuses for instances in which the Limited CDSC applicable to Class A shares and the CDSC applicable to Class C shares may be waived. The Limited CDSC applicable to Class A shares and the CDSC applicable to Class C shares are waived in instances such as a qualified distribution or due to death of the account holder/joint account holder. The qualified distribution waiver age is 70.5 and there is no CDSC death waiver time period. However, the CDSC death waiver only applies to shares purchased prior to the death of the account owner/joint account owner.
As disclosed in the Prospectuses, certain retirement plans that contain certain legacy assets may redeem shares without paying a CDSC. The following plans may redeem shares without paying a CDSC:
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Distributions and Taxes
Distributions
The following supplements the information in the Prospectuses.
The policy of the Trust is to distribute substantially all of each Fund's net investment income and net realized capital gains, if any, in the amount and at the times that will allow a Fund to avoid incurring any material amounts of federal income or excise taxes.
Each Class of shares of a Fund will share proportionately in its investment income and expenses, except that each Retail Class alone will incur distribution fees under its respective Rule 12b-1 Plan.
All dividends and any capital gains distributions will be automatically reinvested in additional shares of the same Class of a Fund at NAV, unless otherwise designated in writing that such dividends and/or distributions be paid in cash.
Any check in payment of dividends or other distributions that cannot be delivered by the US Postal Service or that remains uncashed for a period of more than one year may be reinvested in the shareholder's account at the then-current NAV and the dividend option may be changed from cash to reinvest. A Fund may deduct from a shareholder's account the costs of the Fund's efforts to locate the shareholder if the shareholder's mail is returned by the US Postal Service or the Fund is otherwise unable to locate the shareholder or verify the shareholder's mailing address. These costs may include a percentage of the account when a search company charges a percentage fee in exchange for their location services.
Taxes
The following is a summary of certain additional tax considerations generally affecting a Fund (sometimes referred to as “the Fund”) and its shareholders that are not described in the Prospectus. No attempt is made to present a detailed explanation of the tax treatment of the Fund or its shareholders, and the discussion here and in the Prospectuses is not intended as a substitute for careful tax planning.
This “Distributions and Taxes” section is based on the Internal Revenue Code and applicable regulations in effect on the date of this SAI. Future legislative, regulatory or administrative changes, including provisions of current law that sunset and thereafter no longer apply, or court decisions may significantly change the tax rules applicable to the Fund and its shareholders. Any of these changes or court decisions may have a retroactive effect.
This is for general information only and not tax advice. All investors should consult their own tax advisors as to the federal, state, local, and foreign tax provisions applicable to them.
Taxation of the Fund. The Fund has elected and intends to qualify each year as a regulated investment company (sometimes referred to as a “regulated investment company,” “RIC” or “fund”) under Subchapter M of the Internal Revenue Code. If the Fund so qualifies, the Fund will not be subject to federal income tax on the portion of its investment company taxable income (that is, generally, taxable interest, dividends, net short-term capital gains, and other taxable ordinary income, net of expenses, without regard to the deduction for dividends paid) and net capital gain (that is, the excess of net long-term capital gains over net short-term capital losses) that it distributes to shareholders.
In order to qualify for treatment as a regulated investment company, the Fund must satisfy the following requirements:
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Distributions and Taxes
the Fund's total assets may be invested in the securities of any one issuer (other than US government securities or securities of other regulated investment companies) or of two or more issuers which the Fund controls and which are engaged in the same or similar trades or businesses, or, in the securities of one or more QPTPs.
In some circumstances, the character and timing of income realized by the Fund for purposes of the Income Requirement or the identification of the issuer for purposes of the Asset Diversification Test is uncertain under current law with respect to a particular investment, and an adverse determination or future guidance by the IRS with respect to such type of investment may adversely affect the Fund's ability to satisfy these requirements. See, “Tax Treatment of Fund Transactions” below with respect to the application of these requirements to certain types of investments. In other circumstances, the Fund may be required to sell portfolio holdings in order to meet the Income Requirement, Distribution Requirement, or Asset Diversification Test, which may have a negative impact on the Fund's income and performance.
The Fund may use “equalization accounting” (in lieu of making some cash distributions) in determining the portion of its income and gains that has been distributed. If the Fund uses equalization accounting, it will allocate a portion of its undistributed investment company taxable income and net capital gain to redemptions of Fund shares and will correspondingly reduce the amount of such income and gains that it distributes in cash. If the IRS determines that the Fund's allocation is improper and that the Fund has under-distributed its income and gain for any taxable year, the Fund may be liable for federal income and/or excise tax. If, as a result of such adjustment, the Fund fails to satisfy the Distribution Requirement, the Fund will not qualify that year as a regulated investment company the effect of which is described in the following paragraph.
If for any taxable year the Fund does not qualify as a regulated investment company, all of its taxable income (including its net capital gain) would be subject to tax at the corporate income tax rate without any deduction for dividends paid to shareholders, and the dividends would be taxable to the shareholders as ordinary income (or possibly as qualified dividend income) to the extent of the Fund's current and accumulated earnings and profits. Failure to qualify as a regulated investment company would thus have a negative impact on the Fund's income and performance. Subject to savings provisions for certain failures to satisfy the Income Requirement or Asset Diversification Test, which, in general, are limited to those due to reasonable cause and not willful neglect, it is possible that the Fund will not qualify as a regulated investment company in any given tax year. Even if such savings provisions apply, the Fund may be subject to a monetary sanction of $50,000 or more. Moreover, the Board reserves the right not to maintain the qualification of the Fund as a regulated investment company if it determines such a course of action to be beneficial to shareholders.
Portfolio turnover. For investors that hold their Fund shares in a taxable account, a high portfolio turnover rate may result in higher taxes. This is because a fund with a high turnover rate is likely to accelerate the recognition of capital gains and more of such gains are likely to be taxable as short-term rather than long-term capital gains in contrast to a comparable fund with a low turnover rate. Any such higher taxes would reduce the Fund's after-tax performance. See, “Taxation of Fund Distributions - Distributions of capital gains” below. For non-US investors, any such acceleration of the recognition of capital gains that results in more short-term and less long-term capital gains being recognized by the Fund may cause such investors to be subject to increased US withholding taxes. See, “Non-US Investors — Capital gain dividends” and “— Interest-related dividends and short-term capital gain dividends” below.
Capital loss carryovers. The capital losses of the Fund, if any, do not flow through to shareholders. Rather, the Fund may use its capital losses, subject to applicable limitations, to offset its capital gains without being required to pay taxes on or distribute to shareholders such gains that are offset by the losses. If the Fund has a “net capital loss” (that is, capital losses in excess of capital gains), the excess (if any) of the Fund's net short-term capital losses over its net long-term capital gains is treated as a short-term capital loss arising on the first day of the Fund's next taxable year, and the excess (if any) of the Fund's net long-term capital losses over its net short-term capital gains is treated as a long-term capital loss arising on the first day of the Fund's next taxable year. Any such net capital losses of the Fund that are not used to offset capital gains may be carried forward indefinitely to reduce any future capital gains realized by the Fund in succeeding taxable years.
The amount of capital losses that can be carried forward and used in any single year is subject to an annual limitation if there is a more than 50% “change in ownership” of the Fund. An ownership change generally results when shareholders owning 5% or more of the Fund increase their aggregate holdings by more than 50% over a 3-year look-back period. An ownership change could result in capital loss carryovers being used at a slower rate, thereby reducing the Fund's ability to offset capital gains with those losses. An increase in the amount of taxable gains distributed to the Fund's shareholders could result from an ownership change. The Fund undertakes no obligation to avoid or prevent an ownership change, which can occur in the normal course of shareholder purchases and redemptions or as a result of engaging in a tax-free reorganization with another fund. Moreover, because of circumstances beyond the Fund's control, there can be no assurance that the Fund will not experience, or has not already experienced, an ownership change. Additionally, if the Fund engages in a tax-free reorganization with another fund, the effect of these and other rules not discussed herein may be to disallow or postpone the use by the Fund of its capital loss carryovers (including any current year losses and built-in losses when realized) to offset its own gains or those of the other fund, or vice versa, thereby reducing the tax benefits Fund shareholders would otherwise have enjoyed from use of such capital loss carryovers.
Deferral of late year losses. The Fund may elect to treat part or all of any “qualified late year loss” as if it had been incurred in the succeeding taxable year in determining the Fund's taxable income, net capital gain, net short-term capital gain, and earnings and profits. The effect of this election is to treat any such “qualified late year loss” as if it had been incurred in the succeeding taxable year in characterizing Fund distributions for any calendar year (see, “Taxation of Fund Distributions — Distributions of capital gains” below). A “qualified late year loss” includes:
(i) |
any net capital loss incurred after October 31 of the current taxable year, or, if there is no such loss, any net long-term capital loss or any net short-term capital loss incurred after October 31 of the current taxable year (“post-October capital losses”), and |
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(ii) |
the sum of (1) the excess, if any, of (a) specified losses incurred after October 31 of the current taxable year, over (b) specified gains incurred after October 31 of the current taxable year and (2) the excess, if any, of (a) ordinary losses incurred after December 31 of the current taxable year, over (b) the ordinary income incurred after December 31 of the current taxable year. |
The terms “specified losses” and “specified gains” mean ordinary losses and gains from the sale, exchange, or other disposition of property (including the termination of a position with respect to such property), foreign currency losses and gains, and losses and gains resulting from holding stock in a passive foreign investment company (“PFIC”) for which a mark-to-market election is in effect. The terms “ordinary losses” and “ordinary income” mean other ordinary losses and income that are not described in the preceding sentence.
Undistributed capital gains. The Fund may retain or distribute to shareholders its net capital gain for each taxable year. The Fund currently intends to distribute net capital gains. If the Fund elects to retain its net capital gain, the Fund will be taxed thereon (except to the extent of any available capital loss carryovers) at the corporate income tax rate. If the Fund elects to retain its net capital gain, it is expected that the Fund also will elect to have shareholders treated as if each received a distribution of its pro rata share of such gain, with the result that each shareholder will be required to report its pro rata share of such gain on its tax return as long-term capital gain, will receive a refundable tax credit for its pro rata share of tax paid by the Fund on the gain, and will increase the tax basis for its shares by an amount equal to the deemed distribution less the tax credit.
Federal excise tax. To avoid a 4% nondeductible excise tax, the Fund must distribute by December 31 of each year an amount equal to at least: (1) 98% of its ordinary income for the calendar year, (2) 98.2% of capital gain net income (that is, the excess of the gains from sales or exchanges of capital assets over the losses from such sales or exchanges) for the one-year period ended on October 31 of such calendar year, and (3) any prior year undistributed ordinary income and capital gain net income. The Fund may elect to defer to the following year any net ordinary loss incurred for the portion of the calendar year that is after the beginning of the Fund's taxable year. Also, the Fund will defer any “specified gain” or “specified loss” that would be properly taken into account for the portion of the calendar year after October 31. Any net ordinary loss, specified gain, or specified loss deferred shall be treated as arising on January 1 of the following calendar year. Generally, the Fund intends to make sufficient distributions prior to the end of each calendar year to avoid any material liability for federal income and excise tax, but can give no assurances that all or a portion of such liability will be avoided. In addition, under certain circumstances, temporary timing or permanent differences in the realization of income and expense for book and tax purposes can result in the Fund having to pay an excise tax.
Foreign income tax. Investment income received by the Fund from sources within foreign countries may be subject to foreign income tax withheld at the source and the amount of tax withheld generally will be treated as an expense of the Fund. The US has entered into tax treaties with many foreign countries that entitle the Fund to a reduced rate of, or exemption from, tax on such income. Some countries require the filing of a tax reclaim or other forms to receive the benefit of the reduced tax rate; whether or when the Fund will receive the tax reclaim is within the control of the individual country. Information required on these forms may not be available such as shareholder information; therefore, the Fund may not receive the reduced treaty rates or potential reclaims. Other countries have conflicting and changing instructions and restrictive timing requirements which may cause the Fund not to receive the reduced treaty rates or potential reclaims. Other countries may subject capital gains realized by the Fund on sale or disposition of securities of that country to taxation. It is impossible to determine the effective rate of foreign tax in advance since the amount of the Fund's assets to be invested in various countries is not known. Under certain circumstances, the Fund may elect to pass-through foreign taxes paid by the Fund to shareholders, although it reserves the right not to do so. If the Fund makes such an election and obtains a refund of foreign taxes paid by the Fund in a prior year, the Fund may be eligible to reduce the amount of foreign taxes reported by the Fund to its shareholders, generally by the amount of the foreign taxes refunded, for the year in which the refund is received.
Taxation of Fund Distributions. The Fund anticipates distributing substantially all of its investment company taxable income and net capital gain for each taxable year. Distributions by the Fund will be treated in the manner described below regardless of whether such distributions are paid in cash or reinvested in additional shares of the Fund (or of another fund). The Fund will send you information annually as to the federal income tax consequences of distributions made (or deemed made) during the year.
Distributions of net investment income. The Fund receives ordinary income generally in the form of dividends and/or interest on its investments. The Fund may also recognize ordinary income from other sources, including, but not limited to, certain gains on foreign currency-related transactions. This income, less expenses incurred in the operation of the Fund, constitutes the Fund's net investment income from which dividends may be paid to you. If you are a taxable investor, distributions of net investment income generally are taxable as ordinary income to the extent of the Fund's earnings and profits. In the case of the Fund whose strategy includes investing in stocks of corporations, a portion of the income dividends paid to you may be qualified dividends eligible to be taxed at reduced rates. See the discussion below under the headings, “— Qualified dividend income for individuals” and “— Dividends-received deduction for corporations.”
Distributions of capital gains. The Fund may derive capital gain and loss in connection with sales or other dispositions of its portfolio securities. Distributions derived from the excess of net short-term capital gain over net long-term capital loss will be taxable to you as ordinary income. Distributions paid from the excess of net long-term capital gain over net short-term capital loss will be taxable to you as long-term capital gain, regardless of how long you have held your shares in the Fund. Any net short-term or long-term capital gain realized by the Fund (net of any capital loss carryovers) generally will be distributed once each year and may be distributed more frequently, if necessary, in order to reduce or eliminate federal excise or income taxes on the Fund.
Returns of capital. Distributions by the Fund that are not paid from earnings and profits will be treated as a return of capital to the extent of (and in reduction of) the shareholder's tax basis in his shares; any excess will be treated as gain from the sale of his shares. Thus, the portion of a distribution that constitutes a
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return of capital will decrease the shareholder's tax basis in his Fund shares (but not below zero), and will result in an increase in the amount of gain (or decrease in the amount of loss) that will be recognized by the shareholder for tax purposes on the later sale of such Fund shares. Return of capital distributions can occur for a number of reasons including, among others, the Fund over-estimates the income to be received from certain investments such as those classified as partnerships or equity real estate investment trusts (“REITs”) (see, “Tax Treatment of Fund Transactions — Investments in US REITs” below).
Qualified dividend income for individuals. Ordinary income dividends reported by the Fund to shareholders as derived from qualified dividend income will be taxed in the hands of individuals and other noncorporate shareholders at the rates applicable to long-term capital gain. “Qualified dividend income” means dividends paid to the Fund (a) by domestic corporations, (b) by foreign corporations that are either (i) incorporated in a possession of the US, or (ii) are eligible for benefits under certain income tax treaties with the US that include an exchange of information program, or (c) with respect to stock of a foreign corporation that is readily tradable on an established securities market in the US. Both the Fund and the investor must meet certain holding period requirements to qualify Fund dividends for this treatment. Specifically, the Fund must hold the stock for at least 61 days during the 121-day period beginning 60 days before the stock becomes ex-dividend. Similarly, investors must hold their Fund shares for at least 61 days during the 121-day period beginning 60 days before the Fund distribution goes ex-dividend. Income derived from investments in derivatives, fixed income securities, US REITs, PFICs, and income received “in lieu of” dividends in a securities lending transaction generally is not eligible for treatment as qualified dividend income. If the qualifying dividend income received by the Fund is equal to or greater than 95% of the Fund's gross income (exclusive of net capital gain) in any taxable year, all of the ordinary income dividends paid by the Fund will be qualifying dividend income.
Dividends-received deduction for corporations. For corporate shareholders, a portion of the dividends paid by the Fund may qualify for the 50% corporate dividends-received deduction. The portion of dividends paid by the Fund that so qualifies will be reported by the Fund to shareholders each year and cannot exceed the gross amount of dividends received by the Fund from domestic (US) corporations. The availability of the dividends-received deduction is subject to certain holding period and debt financing restrictions that apply to both the Fund and the investor. Specifically, the amount that the Fund may report as eligible for the dividends-received deduction will be reduced or eliminated if the shares on which the dividends earned by the Fund were debt-financed or held by the Fund for less than a minimum period of time, generally 46 days during a 91-day period beginning 45 days before the stock becomes ex-dividend. Similarly, if your Fund shares are debt-financed or held by you for less than a 46-day period then the dividends-received deduction for Fund dividends on your shares may also be reduced or eliminated. Income derived by the Fund from investments in derivatives, fixed income and foreign securities generally is not eligible for this treatment.
Impact of realized but undistributed income and gains, and net unrealized appreciation of portfolio securities. At the time of your purchase of shares, the Fund's NAV may reflect undistributed income, undistributed capital gains, or net unrealized appreciation of portfolio securities held by the Fund. A subsequent distribution to you of such amounts, although constituting a return of your investment, would be taxable, and would be taxed as ordinary income (some portion of which may be taxed as qualified dividend income), capital gains, or some combination of both, unless you are investing through a tax-advantaged arrangement, such as a 401(k) plan or an individual retirement account. The Fund may be able to reduce the amount of such distributions from capital gains by utilizing its capital loss carryovers, if any.
Pass-through of foreign tax credits. If more than 50% of the Fund's total assets at the end of a fiscal year is invested in foreign securities, the Fund may elect to pass through to you your pro rata share of foreign taxes paid by the Fund. If this election is made, the Fund may report more taxable income to you than it actually distributes. You will then be entitled either to deduct your share of these taxes in computing your taxable income, or to claim a foreign tax credit for these taxes against your US federal income tax (subject to limitations for certain shareholders). The Fund will provide you with the information necessary to claim this deduction or credit on your personal income tax return if it makes this election. No deduction for foreign tax may be claimed by a noncorporate shareholder who does not itemize deductions or who is subject to the alternative minimum tax. Shareholders may be unable to claim a credit for the full amount of their proportionate shares of the foreign income tax paid by the Fund due to certain limitations that may apply. The Fund reserves the right not to pass through to its shareholders the amount of foreign income taxes paid by the Fund. Additionally, any foreign tax withheld on payments made “in lieu of” dividends or interest will not qualify for the pass through of foreign tax credits to shareholders. See, “Tax Treatment of Fund Transactions — Securities lending” below.
Tax credit bonds. If the Fund holds, directly or indirectly, one or more “tax credit bonds” (including build America bonds, clean renewable energy bonds and qualified tax credit bonds) on one or more applicable dates during a taxable year, the Fund may elect to permit its shareholders to claim a tax credit on their income tax returns equal to each shareholder's proportionate share of tax credits from the applicable bonds that otherwise would be allowed to the Fund. In such a case, shareholders must include in gross income (as interest) their proportionate share of the income attributable to their proportionate share of those offsetting tax credits. A shareholder's ability to claim a tax credit associated with one or more tax credit bonds may be subject to certain limitations imposed by the Internal Revenue Code. Under 2017 legislation commonly known as the Tax Cuts and Jobs Act, the build America bonds, clean renewable energy bonds and certain other qualified bonds may no longer be issued after December 31, 2017. Even if the Fund is eligible to pass through tax credits to shareholders, the Fund may choose not to do so.
US government securities. Income earned on certain US government obligations is exempt from state and local personal income taxes if earned directly by you. States also grant tax-free status to dividends paid to you from interest earned on direct obligations of the US government, subject in some states to minimum investment or reporting requirements that must be met by the Fund. Income on investments by the Fund in certain other obligations, such as repurchase agreements collateralized by US government obligations, commercial paper and federal agency-backed obligations (e.g., Ginnie Mae or Fannie Mae obligations), generally does not qualify for tax-free treatment. The rules on exclusion of this income are different for corporations.
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Dividends declared in December and paid in January. Ordinarily, shareholders are required to take distributions by the Fund into account in the year in which the distributions are made. However, dividends declared in October, November, or December of any year and payable to shareholders of record on a specified date in such a month will be deemed to have been received by the shareholders (and made by the Fund) on December 31 of such calendar year if such dividends are actually paid in January of the following year. Shareholders will be advised annually as to the US federal income tax consequences of distributions made (or deemed made) during the year in accordance with the guidance that has been provided by the IRS.
Medicare tax. A 3.8% Medicare tax is imposed on net investment income earned by certain individuals, estates and trusts. “Net investment income,” for these purposes, means investment income, including ordinary dividends and capital gain distributions received from the Fund and net gains from redemptions or other taxable dispositions of Fund shares, reduced by the deductions properly allocable to such income. In the case of an individual, the tax will be imposed on the lesser of (1) the shareholder's net investment income or (2) the amount by which the shareholder's modified adjusted gross income exceeds $250,000 (if the shareholder is married and filing jointly or a surviving spouse), $125,000 (if the shareholder is married and filing separately) or $200,000 (in any other case). This Medicare tax, if applicable, is reported by you on, and paid with, your federal income tax return.
Sales, Exchanges, and Redemptions of Fund Shares. Sales, exchanges and redemptions (including redemptions in kind) of Fund shares are taxable transactions for federal and state income tax purposes. If you redeem your Fund shares, the IRS requires you to report any gain or loss on your redemption. If you held your shares as a capital asset, the gain or loss that you realize will be a capital gain or loss and will be long-term or short-term, generally depending on how long you have held your shares. Any redemption fees you incur on shares redeemed will decrease the amount of any capital gain (or increase any capital loss) you realize on the sale. Capital losses in any year are deductible only to the extent of capital gains plus, in the case of a noncorporate taxpayer, $3,000 of ordinary income.
Tax basis information. The Fund is required to report to you and the IRS annually on Form 1099-B the cost basis of shares purchased or acquired on or after January 1, 2012 where the cost basis of the shares is known by the Fund (referred to as “covered shares”) and that are disposed of after that date. However, cost basis reporting is not required for certain shareholders, including shareholders investing in the Fund through a tax-advantaged retirement account, such as a 401(k) plan or an individual retirement account.
When required to report cost basis, the Fund will calculate it using the Fund's default method, unless you instruct the Fund to use a different calculation method. For additional information regarding the Fund's available cost basis reporting methods, including its default method, please contact the Fund. If you hold your Fund shares through a broker (or other nominee), please contact that broker (nominee) with respect to reporting of cost basis and available elections for your account.
The IRS permits the use of several methods to determine the cost basis of mutual fund shares. The method used will determine which specific shares are deemed to be sold when there are multiple purchases on different dates at differing share prices, and the entire position is not sold at one time. The Fund does not recommend any particular method of determining cost basis, and the use of other methods may result in more favorable tax consequences for some shareholders. It is important that you consult with your tax advisor to determine which method is best for you and then notify the Fund if you intend to utilize a method other than the Fund's default method for covered shares. If you do not notify the Fund of your elected cost basis method upon the initial purchase into your account, the default method will be applied to your covered shares.
The Fund will compute and report the cost basis of your Fund shares sold or exchanged by taking into account all of the applicable adjustments to cost basis and holding periods as required by the Internal Revenue Code and Treasury regulations for purposes of reporting these amounts to you and the IRS. However the Fund is not required to, and in many cases the Fund does not possess the information to, take all possible basis, holding period or other adjustments into account in reporting cost basis information to you. Therefore, shareholders should carefully review the cost basis information provided by the Fund.
Please refer to the Fund's website at delawarefunds.com for additional information.
Wash sales. All or a portion of any loss that you realize on a redemption of your Fund shares will be disallowed to the extent that you buy other shares in the Fund (through reinvestment of dividends or otherwise) within 30 days before or after your share redemption. Any loss disallowed under these rules will be added to your tax basis in the new shares.
Redemptions at a loss within six months of purchase. Any loss incurred on a redemption or exchange of shares held for six months or less will be treated as long-term capital loss to the extent of any long-term capital gain distributed to you by the Fund on those shares.
Deferral of basis. If a shareholder (a) incurs a sales load in acquiring shares of the Fund, (b) disposes of such shares less than 91 days after they are acquired, and (c) subsequently acquires shares of the Fund or another fund by January 31 of the calendar year following the calendar year in which the disposition of the original shares occurred at a reduced sales load pursuant to a right to reinvest at such reduced sales load acquired in connection with the acquisition of the shares disposed of, then the sales load on the shares disposed of (to the extent of the reduction in the sales load on the shares subsequently acquired) shall not be taken into account in determining gain or loss on the shares disposed of, but shall be treated as incurred on the acquisition of the shares subsequently acquired. The wash sale rules may also limit the amount of loss that may be taken into account on disposition after such adjustment.
Conversion of shares into shares of the same Fund. The conversion or exchange of shares of one class into another class of the same Fund is not taxable for federal income tax purposes. Thus, the following transactions generally will be tax-free for federal income tax purposes:
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However, shareholders should consult their tax advisors regarding the state and local tax consequences of a conversion or exchange of shares.
Reportable transactions. Under Treasury regulations, if a shareholder recognizes a loss with respect to the Fund's shares of $2 million or more for an individual shareholder or $10 million or more for a corporate shareholder (or certain greater amounts over a combination of years), the shareholder must file with the IRS a disclosure statement on Form 8886. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer's treatment of the loss is proper. Shareholders should consult their tax advisors to determine the applicability of these regulations in light of their individual circumstances.
Tax Treatment of Fund Transactions. Set forth below is a general description of the tax treatment of certain types of securities, investment techniques and transactions that may apply to a fund and, in turn, affect the amount, character and timing of dividends and distributions payable by the fund to its shareholders. This section should be read in conjunction with the discussion above under “Investment Strategies and Risks” for a detailed description of the various types of securities and investment techniques that apply to the Fund.
In general. In general, gain or loss recognized by a fund on the sale or other disposition of portfolio investments will be a capital gain or loss. Such capital gain and loss may be long-term or short-term depending, in general, upon the length of time a particular investment position is maintained and, in some cases, upon the nature of the transaction. Property held for more than one year generally will be eligible for long-term capital gain or loss treatment. The application of certain rules described below may serve to alter the manner in which the holding period for a security is determined or may otherwise affect the characterization as long-term or short-term, and also the timing of the realization and/or character, of certain gains or losses.
Certain fixed income investments. Gain recognized on the disposition of a debt obligation purchased by a fund at a market discount (generally, at a price less than its principal amount) will be treated as ordinary income to the extent of the portion of the market discount that accrued during the period of time the fund held the debt obligation unless the fund made a current inclusion election to accrue market discount into income as it accrues. If a fund purchases a debt obligation (such as a zero coupon security or payment-in-kind security) that was originally issued at a discount, the fund generally is required to include in gross income each year the portion of the original issue discount that accrues during such year. Therefore, a fund's investment in such securities may cause the fund to recognize income and make distributions to shareholders before it receives any cash payments on the securities. To generate cash to satisfy those distribution requirements, a fund may have to sell portfolio securities that it otherwise might have continued to hold or to use cash flows from other sources such as the sale of fund shares.
Investments in debt obligations that are at risk of or in default present tax issues for a fund. Tax rules are not entirely clear about issues such as whether and to what extent a fund should recognize market discount on a debt obligation, when a fund may cease to accrue interest, original issue discount or market discount, when and to what extent a fund may take deductions for bad debts or worthless securities and how a fund should allocate payments received on obligations in default between principal and income. These and other related issues will be addressed by a fund in order to ensure that it distributes sufficient income to preserve its status as a regulated investment company.
Options, futures, forward contracts, swap agreements, and hedging transactions. In general, option premiums received by a fund are not immediately included in the income of the fund. Instead, the premiums are recognized when the option contract expires, the option is exercised by the holder, or the fund transfers or otherwise terminates the option (e.g., through a closing transaction). If an option written by a fund is exercised and the fund sells or delivers the underlying stock, the fund generally will recognize capital gain or loss equal to (a) the sum of the strike price and the option premium received by the fund minus (b) the fund's basis in the stock. Such gain or loss generally will be short-term or long-term depending upon the holding period of the underlying stock. If securities are purchased by a fund pursuant to the exercise of a put option written by it, the fund generally will subtract the premium received from its cost basis in the securities purchased. The gain or loss with respect to any termination of a fund's obligation under an option other than through the exercise of the option and related sale or delivery of the underlying stock generally will be short-term gain or loss depending on whether the premium income received by the fund is greater or less than the amount paid by the fund (if any) in terminating the transaction. Thus, for example, if an option written by a fund expires unexercised, the fund generally will recognize short-term gain equal to the premium received.
The tax treatment of certain futures contracts entered into by a fund as well as listed non-equity options written or purchased by the fund on US exchanges (including options on futures contracts, broad-based equity indices and debt securities) may be governed by section 1256 of the Internal Revenue Code (“section 1256 contracts”). Gains or losses on section 1256 contracts generally are considered 60% long-term and 40% short-term capital gains or losses (“60/40”), although certain foreign currency gains and losses from such contracts may be treated as ordinary in character. Also, any section 1256 contracts held by a fund at the end of each taxable year (and, for purposes of the 4% excise tax, on certain other dates as prescribed under the Internal Revenue Code) are “marked to market” with the result that unrealized gains or losses are treated as though they were realized and the resulting gain or loss is treated as ordinary or 60/40 gain or loss, as applicable. Section 1256 contracts do not include any interest rate swap, currency swap, basis swap, interest rate cap, interest rate floor, commodity swap, equity swap, equity index swap, credit default swap, or similar agreement.
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In addition to the special rules described above in respect of options and futures transactions, a fund's transactions in other derivatives instruments (including options, forward contracts and swap agreements) as well as its other hedging, short sale, or similar transactions, may be subject to one or more special tax rules (including the constructive sale, notional principal contract, straddle, wash sale and short sale rules). These rules may affect whether gains and losses recognized by a fund are treated as ordinary or capital or as short-term or long-term, accelerate the recognition of income or gains to the fund, defer losses to the fund, and cause adjustments in the holding periods of the fund's securities. These rules, therefore, could affect the amount, timing and/or character of distributions to shareholders. Moreover, because the tax rules applicable to derivatives instruments are in some cases uncertain under current law, an adverse determination or future guidance by the IRS with respect to these rules (which determination or guidance could be retroactive) may affect whether a fund has made sufficient distributions, and otherwise satisfied the relevant requirements, to maintain its qualification as a regulated investment company and avoid a fund-level tax.
Certain of a fund's investments in derivatives and foreign currency-denominated instruments, and the fund's transactions in foreign currencies and hedging activities, may produce a difference between its book income and its taxable income. If a fund's book income is less than the sum of its taxable income and net tax-exempt income (if any), the fund could be required to make distributions exceeding book income to qualify as a regulated investment company. If a fund's book income exceeds the sum of its taxable income and net tax-exempt income (if any), the distribution of any such excess will be treated as (i) a dividend to the extent of the fund's remaining earnings and profits (including current earnings and profits arising from tax-exempt income, reduced by related deductions), (ii) thereafter, as a return of capital to the extent of the recipient's basis in the shares, and (iii) thereafter, as gain from the sale or exchange of a capital asset.
Foreign currency transactions. A fund's transactions in foreign currencies, foreign currency-denominated debt obligations and certain foreign currency options, futures contracts and forward contracts (and similar instruments) may give rise to ordinary income or loss to the extent such income or loss results from fluctuations in the value of the foreign currency concerned. This treatment could increase or decrease a fund's ordinary income distributions to you, and may cause some or all of the fund's previously distributed income to be classified as a return of capital. In certain cases, a fund may make an election to treat such gain or loss as capital.
PFIC investments. A fund may invest in securities of foreign companies that may be classified under the Internal Revenue Code as PFICs. In general, a foreign company is classified as a PFIC if at least one-half of its assets constitute investment-type assets or 75% or more of its gross income is investment-type income. When investing in PFIC securities, a fund intends to mark-to-market these securities under certain provisions of the Internal Revenue Code and recognize any unrealized gains as ordinary income at the end of the fund's fiscal and excise tax years. Deductions for losses are allowable only to the extent of any current or previously recognized gains. These gains (reduced by allowable losses) are treated as ordinary income that a fund is required to distribute, even though it has not sold or received dividends from these securities. You should also be aware that the designation of a foreign security as a PFIC security will cause its income dividends to fall outside of the definition of qualified foreign corporation dividends. These dividends generally will not qualify for the reduced rate of taxation on qualified dividends when distributed to you by a fund. Foreign companies are not required to identify themselves as PFICs. Due to various complexities in identifying PFICs, a fund can give no assurances that it will be able to identify portfolio securities in foreign corporations that are PFICs in time for the fund to make a mark-to-market election. If a fund is unable to identify an investment as a PFIC and thus does not make a mark-to-market election, the fund may be subject to US federal income tax on a portion of any “excess distribution” or gain from the disposition of such shares even if such income is distributed as a taxable dividend by the fund to its shareholders. Additional charges in the nature of interest may be imposed on a fund in respect of deferred taxes arising from such distributions or gains.
Investments in US REITs. A US REIT is not subject to federal income tax on the income and gains it distributes to shareholders. Dividends paid by a US REIT, other than capital gain distributions, will be taxable as ordinary income up to the amount of the US REIT's current and accumulated earnings and profits. Capital gain dividends paid by a US REIT to a fund will be treated as long-term capital gains by the fund and, in turn, may be distributed by the fund to its shareholders as a capital gain distribution. Because of certain noncash expenses, such as property depreciation, an equity US REIT's cash flow may exceed its taxable income. The equity US REIT, and in turn a fund, may distribute this excess cash to shareholders in the form of a return of capital distribution. However, if a US REIT is operated in a manner that fails to qualify as a REIT, an investment in the US REIT would become subject to double taxation, meaning the taxable income of the US REIT would be subject to federal income tax at the corporate income tax rate without any deduction for dividends paid to shareholders and the dividends would be taxable to shareholders as ordinary income (or possibly as qualified dividend income) to the extent of the US REIT's current and accumulated earnings and profits. Also, see, “Tax Treatment of Fund Transactions — Investment in taxable mortgage pools (excess inclusion income)” and “Non-US Investors — Investment in US real property” below with respect to certain other tax aspects of investing in US REITs.
Investment in non-US REITs. While non-US REITs often use complex acquisition structures that seek to minimize taxation in the source country, an investment by a fund in a non-US REIT may subject the fund, directly or indirectly, to corporate taxes, withholding taxes, transfer taxes and other indirect taxes in the country in which the real estate acquired by the non-US REIT is located. A fund's pro rata share of any such taxes will reduce the fund's return on its investment. A fund's investment in a non-US REIT may be considered an investment in a PFIC, as discussed above in “PFIC investments.” Additionally, foreign withholding taxes on distributions from the non-US REIT may be reduced or eliminated under certain tax treaties, as discussed above in “Taxation of the Fund — Foreign income tax.” Also, a fund in certain limited circumstances may be required to file an income tax return in the source country and pay tax on any gain realized from its investment in the non-US REIT under rules similar to those in the US, which tax foreign persons on gain realized from dispositions of interests in US real estate.
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Distributions and Taxes
Investment in taxable mortgage pools (excess inclusion income). Under a Notice issued by the IRS, the Internal Revenue Code and Treasury regulations to be issued, a portion of a fund's income from a US REIT that is attributable to the REIT's residual interest in a real estate mortgage investment conduit (“REMIC”) or equity interests in a “taxable mortgage pool” (referred to in the Internal Revenue Code as an excess inclusion) will be subject to federal income tax in all events. The excess inclusion income of a regulated investment company, such as a fund, will be allocated to shareholders of the regulated investment company in proportion to the dividends received by such shareholders, with the same consequences as if the shareholders held the related REMIC residual interest or, if applicable, taxable mortgage pool directly. In general, excess inclusion income allocated to shareholders (i) cannot be offset by net operating losses (subject to a limited exception for certain thrift institutions), (ii) will constitute unrelated business taxable income (“UBTI”) to entities (including qualified pension plans, individual retirement accounts, 401(k) plans, Keogh plans or other tax-exempt entities) subject to tax on UBTI, thereby potentially requiring such an entity that is allocated excess inclusion income, and otherwise might not be required to file a tax return, to file a tax return and pay tax on such income, and (iii) in the case of a foreign stockholder, will not qualify for any reduction in US federal withholding tax. In addition, if at any time during any taxable year a “disqualified organization” (which generally includes certain cooperatives, governmental entities, and tax-exempt organizations not subject to UBTI) is a record holder of a share in a regulated investment company, then the regulated investment company will be subject to a tax equal to that portion of its excess inclusion income for the taxable year that is allocable to the disqualified organization, multiplied by the corporate income tax rate. The Notice imposes certain reporting requirements upon regulated investment companies that have excess inclusion income. There can be no assurance that a fund will not allocate to shareholders excess inclusion income.
These rules are potentially applicable to a fund with respect to any income it receives from the equity interests of certain mortgage pooling vehicles, either directly or, as is more likely, through an investment in a US REIT. It is unlikely that these rules will apply to a fund that has a non-REIT strategy.
Investments in partnerships and QPTPs. For purposes of the Income Requirement, income derived by a fund from a partnership that is not a QPTP will be treated as qualifying income only to the extent such income is attributable to items of income of the partnership that would be qualifying income if realized directly by the fund. While the rules are not entirely clear with respect to a fund investing in a partnership outside a master feeder structure, for purposes of testing whether a fund satisfies the Asset Diversification Test, the fund generally is treated as owning a pro rata share of the underlying assets of a partnership. See, “Taxation of the Fund.” In contrast, different rules apply to a partnership that is a QPTP. A QPTP is a partnership (a) the interests in which are traded on an established securities market, (b) that is treated as a partnership for federal income tax purposes, and (c) that derives less than 90% of its income from sources that satisfy the Income Requirement (e.g., because it invests in commodities). All of the net income derived by a fund from an interest in a QPTP will be treated as qualifying income but the fund may not invest more than 25% of its total assets in one or more QPTPs. However, there can be no assurance that a partnership classified as a QPTP in one year will qualify as a QPTP in the next year. Any such failure to annually qualify as a QPTP might, in turn, cause a fund to fail to qualify as a regulated investment company. Although, in general, the passive loss rules of the Internal Revenue Code do not apply to RICs, such rules do apply to a fund with respect to items attributable to an interest in a QPTP. Fund investments in partnerships, including in QPTPs, may result in the fund being subject to state, local or foreign income, franchise, or withholding tax liabilities.
Securities lending. While securities are loaned out by a fund, the fund generally will receive from the borrower amounts equal to any dividends or interest paid on the borrowed securities. For federal income tax purposes, payments made “in lieu of” dividends are not considered dividend income. These distributions will neither qualify for the reduced rate of taxation for individuals on qualified dividends nor the 50% dividends-received deduction for corporations. Also, any foreign tax withheld on payments made “in lieu of” dividends or interest will not qualify for the pass-through of foreign tax credits to shareholders.
Investments in convertible securities. Convertible debt is ordinarily treated as a “single property” consisting of a pure debt interest until conversion, after which the investment becomes an equity interest. If the security is issued at a premium (i.e., for cash in excess of the face amount payable on retirement), the creditor-holder may amortize the premium over the life of the bond. If the security is issued for cash at a price below its face amount, the creditor-holder must accrue original issue discount in income over the life of the debt. The creditor-holder's exercise of the conversion privilege is treated as a nontaxable event. Mandatorily convertible debt (e.g., an exchange-traded note or ETN issued in the form of an unsecured obligation that pays a return based on the performance of a specified market index, exchange currency, or commodity) is often, but not always, treated as a contract to buy or sell the reference property rather than debt. Similarly, convertible preferred stock with a mandatory conversion feature is ordinarily, but not always, treated as equity rather than debt. Dividends received generally are qualified dividend income and eligible for the corporate dividends-received deduction. In general, conversion of preferred stock for common stock of the same corporation is tax-free. Conversion of preferred stock for cash is a taxable redemption. Any redemption premium for preferred stock that is redeemable by the issuing company might be required to be amortized under original issue discount principles.
Investments in securities of uncertain tax character. A fund may invest in securities the US federal income tax treatment of which may not be clear or may be subject to recharacterization by the IRS. To the extent the tax treatment of such securities or the income from such securities differs from the tax treatment expected by a fund, it could affect the timing or character of income recognized by the fund, requiring the fund to purchase or sell securities, or otherwise change its portfolio, in order to comply with the tax rules applicable to regulated investment companies under the Internal Revenue Code.
Backup Withholding. By law, the Fund may be required to withhold a portion of your taxable dividends and sales proceeds unless you:
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The Fund also must withhold if the IRS instructs it to do so. When withholding is required, the amount will be 24% of any distributions or proceeds paid. Backup withholding is not an additional tax. Any amounts withheld may be credited against the shareholder's US federal income tax liability, provided the appropriate information is furnished to the IRS. Certain payees and payments are exempt from backup withholding and information reporting. The special US tax certification requirements applicable to non-US investors to avoid backup withholding are described under the “Non-US Investors” heading below.
Non-US Investors. Non-US investors (shareholders who, as to the US, are nonresident alien individuals, foreign trusts or estates, foreign corporations, or foreign partnerships) may be subject to US withholding and estate tax and are subject to special US tax certification requirements. Non-US investors should consult their tax advisors about the applicability of US tax withholding and the use of the appropriate forms to certify their status.
In general. The US imposes a flat 30% withholding tax (or a withholding tax at a lower treaty rate) on US source dividends, including on income dividends paid to you by the Fund, subject to certain exemptions described below. However, notwithstanding such exemptions from US withholding at the source, any dividends and distributions of income and capital gains, including the proceeds from the sale of your Fund shares, will be subject to backup withholding at a rate of 24% if you fail to properly certify that you are not a US person.
Capital gain dividends. In general, capital gain dividends reported by the Fund to shareholders as paid from its net long-term capital gains, other than long-term capital gains realized on disposition of US real property interests (see the discussion below), are not subject to US withholding tax unless you are a nonresident alien individual present in the US for a period or periods aggregating 183 days or more during the calendar year.
Interest-related dividends and short-term capital gain dividends. Generally, dividends reported by the Fund to shareholders as interest-related dividends and paid from its qualified net interest income from US sources are not subject to US withholding tax. “Qualified interest income” includes, in general, US source (1) bank deposit interest, (2) short-term original discount, (3) interest (including original issue discount, market discount, or acquisition discount) on an obligation that is in registered form, unless it is earned on an obligation issued by a corporation or partnership in which the Fund is a 10-percent shareholder or is contingent interest, and (4) any interest-related dividend from another regulated investment company. Similarly, short-term capital gain dividends reported by the Fund to shareholders as paid from its net short-term capital gains, other than short-term capital gains realized on the disposition of certain US real property interests (see the discussion below), are not subject to US withholding tax unless you were a nonresident alien individual present in the US for a period or periods aggregating 183 days or more during the calendar year. The Fund reserves the right to not report interest-related dividends or short-term capital gain dividends. Additionally, the Fund's reporting of interest-related dividends or short-term capital gain dividends may not be passed through to shareholders by intermediaries who have assumed tax reporting responsibilities for this income in managed or omnibus accounts due to systems limitations or operational constraints.
Net investment income from dividends on stock and foreign source interest income continue to be subject to withholding tax; foreign tax credits. Ordinary dividends paid by the Fund to non-US investors on the income earned on portfolio investments in (i) the stock of domestic and foreign corporations and (ii) the debt of foreign issuers continue to be subject to US withholding tax. Foreign shareholders may be subject to US withholding tax at a rate of 30% on the income resulting from an election to pass through foreign tax credits to shareholders, but may not be able to claim a credit or deduction with respect to the withholding tax for the foreign tax treated as having been paid by them.
Income effectively connected with a US trade or business. If the income from the Fund is effectively connected with a US trade or business carried on by a foreign shareholder, then ordinary income dividends, capital gain dividends and any gains realized upon the sale or redemption of shares of the Fund will be subject to US federal income tax at the rates applicable to US citizens or domestic corporations and require the filing of a nonresident US income tax return.
Investment in US real property. The Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”) makes non-US persons subject to US tax on the disposition of a US real property interest (“USRPI”) as if he or she were a US person. Such gain is sometimes referred to as FIRPTA gain. The Fund may invest in equity securities of corporations that invest in USRPI, including US REITs, which may trigger FIRPTA gain to the Fund's non-US shareholders.
The Internal Revenue Code provides a look-through rule for distributions of FIRPTA gain when a RIC is classified as a qualified investment entity. A RIC will be classified as a qualified investment entity if, in general, 50% or more of the RIC's assets consist of interests in US REITs and other US real property holding corporations (“USRPHC”). If a RIC is a qualified investment entity and the non-US shareholder owns more than 5% of a class of Fund shares at any time during the one-year period ending on the date of the FIRPTA distribution, the FIRPTA distribution to the non-US shareholder is treated as gain from the disposition of a USRPI, causing the distribution to be subject to US withholding tax at the corporate income tax rate (unless reduced by future regulations), and requiring the non-US shareholder to file a nonresident US income tax return. In addition, even if the non-US shareholder does not own more than 5% of a class of Fund shares, but the Fund is a qualified investment entity, the FIRPTA distribution will be taxable as ordinary dividends (rather than as a capital gain or short-term capital gain dividend) subject to withholding at 30% or lower treaty rate.
Because the Fund expects to invest less than 50% of its assets at all times, directly or indirectly, in US real property interests, the Fund expects that neither gain on the sale or redemption of Fund shares nor Fund dividends and distributions would be subject to FIRPTA reporting and tax withholding.
US estate tax. Transfers by gift of shares of the Fund by a foreign shareholder who is a nonresident alien individual will not be subject to US federal gift tax. An individual who, at the time of death, is a non-US shareholder will nevertheless be subject to US federal estate tax with respect to Fund shares at the graduated rates applicable to US citizens and residents, unless a treaty exemption applies. If a treaty exemption is available, a decedent's estate may nonetheless need to file a US estate tax return to claim the exemption in order to obtain a US federal transfer certificate. The transfer certificate will identify the property (i.e., Fund shares) as to which the US federal estate tax lien has been released. In the absence of a treaty, there is a $13,000 statutory estate tax
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Distributions and Taxes
credit (equivalent to US situs assets with a value of $60,000). For estates with US situs assets of not more than $60,000, the Fund may accept, in lieu of a transfer certificate, an affidavit from an appropriate individual evidencing that decedent's US situs assets are below this threshold amount.
US tax certification rules. Special US tax certification requirements may apply to non-US shareholders both to avoid US backup withholding imposed at a rate of 24% and to obtain the benefits of any treaty between the US and the shareholder's country of residence. In general, if you are a non-US shareholder, you must provide a Form W-8 BEN (or other applicable Form W-8) to establish that you are not a US person, to claim that you are the beneficial owner of the income and, if applicable, to claim a reduced rate of, or exemption from, withholding as a resident of a country with which the US has an income tax treaty. A Form W-8 BEN provided without a US taxpayer identification number will remain in effect for a period beginning on the date signed and ending on the last day of the third succeeding calendar year unless an earlier change of circumstances makes the information on the form incorrect. Certain payees and payments are exempt from backup withholding.
The tax consequences to a non-US shareholder entitled to claim the benefits of an applicable tax treaty may be different from those described herein. Non-US shareholders are urged to consult their own tax advisors with respect to the particular tax consequences to them of an investment in the Fund, including the applicability of foreign tax.
Foreign Account Tax Compliance Act (“FATCA”). Under FATCA, the Fund will be required to withhold a 30% tax on income dividends made by the Fund to certain foreign entities, referred to as foreign financial institutions (“FFI”) or nonfinancial foreign entities (“NFFE”). After December 31, 2018, FATCA withholding also would have applied to certain capital gain distributions, return of capital distributions and the proceeds arising from the sale of Fund shares; however, based on proposed regulations issued by the IRS, which can be relied upon currently, such withholding is no longer required unless final regulations provide otherwise (which is not expected). The FATCA withholding tax generally can be avoided: (a) by an FFI, if it reports certain direct and indirect ownership of foreign financial accounts held by US persons with the FFI and (b) by an NFFE, if it: (i) certifies that it has no substantial US persons as owners or (ii) if it does have such owners, reporting information relating to them. The US Treasury has negotiated intergovernmental agreements (“IGA”) with certain countries and is in various stages of negotiations with a number of other foreign countries with respect to one or more alternative approaches to implement FATCA; an entity in one of those countries may be required to comply with the terms of an IGA instead of US Treasury regulations.
An FFI can avoid FATCA withholding if it is deemed compliant or by becoming a “participating FFI,” which requires the FFI to enter into a US tax compliance agreement with the IRS under section 1471(b) of the Internal Revenue Code (“FFI agreement”) under which it agrees to verify, report and disclose certain of its US accountholders and meet certain other specified requirements. The FFI will either report the specified information about the US accounts to the IRS, or, to the government of the FFI's country of residence (pursuant to the terms and conditions of applicable law and an applicable IGA entered into between the US and the FFI's country of residence), which will, in turn, report the specified information to the IRS. An FFI that is resident in a country that has entered into an IGA with the US to implement FATCA will be exempt from FATCA withholding provided that the FFI shareholder and the applicable foreign government comply with the terms of such agreement.
An NFFE that is the beneficial owner of a payment from the Fund can avoid the FATCA withholding tax generally by certifying that it does not have any substantial US owners or by providing the name, address and taxpayer identification number of each substantial US owner. The NFFE will report the information to the Fund or other applicable withholding agent, which will, in turn, report the information to the IRS.
Such foreign shareholders also may fall into certain exempt, excepted or deemed compliant categories as established by US Treasury regulations, IGAs, and other guidance regarding FATCA. An FFI or NFFE that invests in the Fund will need to provide the Fund with documentation properly certifying the entity's status under FATCA in order to avoid FATCA withholding. Non-US investors should consult their own tax advisors regarding the impact of these requirements on their investment in the Fund. The requirements imposed by FATCA are different from, and in addition to, the US tax certification rules to avoid backup withholding described above. Shareholders are urged to consult their tax advisors regarding the application of these requirements to their own situation.
Effect of Future Legislation; Local Tax Considerations. The foregoing general discussion of US federal income tax consequences is based on the Internal Revenue Code and the regulations issued thereunder as in effect on the date of this SAI. Future legislative or administrative changes, including provisions of current law that sunset and thereafter no longer apply, or court decisions may significantly change the conclusions expressed herein, and any such changes or decisions may have a retroactive effect with respect to the transactions contemplated herein. Rules of state and local taxation of ordinary income, qualified dividend income, and capital gain dividends may differ from the rules for US federal income taxation described above. Distributions may also be subject to additional state, local, and foreign taxes depending on each shareholder's particular situation. Non-US shareholders may be subject to US tax rules that differ significantly from those summarized above. Shareholders are urged to consult their tax advisors as to the consequences of these and other state and local tax rules affecting investment in the Fund.
Performance Information
To obtain a Fund's most current performance information, please call 800 523-1918 or visit our website at delawarefunds.com/performance.
Performance quotations represent a Fund's past performance and should not be considered as representative of future results. The Funds will calculate their performance in accordance with the requirements of the rules and regulations under the 1940 Act, or any other applicable US securities laws, as they may be revised from time to time by the SEC.
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Financial Statements
PricewaterhouseCoopers LLP (“PwC”), which is located at 2001 Market Street, Philadelphia, PA 19103, serves as the independent registered public accounting firm for the Trust and, in its capacity as such, audits the annual financial statements contained in the Funds' Annual Reports. The Funds' Statements of Assets and Liabilities, Schedules of Investments, Statements of Operations, Statements of Changes in Net Assets, Financial Highlights, and Notes to Financial Statements, as well as the reports of PwC, the independent registered public accounting firm, for the fiscal year ended July 31, 2022, are included in the Funds' Annual Reports to shareholders. The financial statements and Financial Highlights, the notes relating thereto and the reports of PwC listed above are incorporated by reference from the Annual Reports into this SAI.
Principal Holders
As of October 31, 2022, management believes the following shareholders held of record 5% or more of the outstanding shares of each class of each Fund. Management does not have knowledge of beneficial owners.
Class |
Name and Address of Account |
Percentage |
Delaware Strategic Income Fund |
|
|
|
CHARLES SCHWAB & CO INC |
5.56% |
|
MATRIX TRUST COMPANY CUST. FBO |
10.32% |
Class C |
|
|
|
AMERICAN ENTERPRISE |
12.33% |
|
ASCENSUS TRUST COMPANY FBO |
5.04% |
|
LPL FINANCIAL |
23.49% |
|
PERSHING LLC |
11.60% |
|
RAYMOND JAMES |
24.00% |
|
WELLS FARGO CLEARING SVCS LLC |
12.82% |
Class R |
|
|
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Principal Holders
Class |
Name and Address of Account |
Percentage |
|
MATRIX TRUST COMPANY CUST. FBO |
59.73% |
|
MG TRUST COMPANY CUST. FBO |
19.40% |
|
ASCENSUS TRUST COMPANY FBO |
5.53% |
|
ASCENSUS TRUST COMPANY FBO |
5.59% |
Institutional Class |
|
|
|
SEI PRIVATE TRUST COMPANY |
50.39% |
|
AMERICAN ENTERPRISE |
7.23% |
|
NATIONAL FINANCIAL SERVICES LLC |
12.51% |
|
LINCOLN RETIREMENT SERVICES CO |
9.27% |
Delaware Emerging Markets Debt Corporate Fund |
|
|
|
AMERICAN ENTERPRISE INVESTMENT SVC |
7.33% |
|
LPL FINANCIAL |
29.25% |
Class C |
|
|
|
LPL FINANCIAL |
32.24% |
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Class |
Name and Address of Account |
Percentage |
|
AMERICAN ENTERPRISE INVESTMENT SVC |
23.80% |
|
BNYM I S TRUST CO CUST CESA FBO |
6.82% |
|
PERSHING LLC |
35.40% |
Class R |
|
|
|
MACQUARIE MANAGEMENT HOLDINGS INC |
98.74% |
Institutional Class |
|
|
|
CHARLES SCHWAB & CO INC |
16.22% |
|
MACQUARIE MANAGEMENT HOLDINGS INC |
29.27% |
|
NATIONAL FINANCIAL SERVICES LLC |
6.41% |
|
AMERICAN ENTERPRISE INVESTMENT SVC |
11.85% |
|
LPL FINANCIAL |
5.45% |
|
UBS WM USA |
25.15% |
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Appendix A — Description of Ratings
Corporate Obligation Ratings
Moody's Investment Grade
Aaa: Bonds rated Aaa are judged to be of the highest quality, with minimal credit risk.
Aa: Bonds rated Aa are judged to be high quality and are subject to very low credit risk.
A: Bonds rated A are considered upper medium-grade obligations and are subject to low credit risk.
Baa: Bonds rated Baa are subject to moderate credit risk and are considered medium-grade obligations. As such they may have certain speculative characteristics.
Moody's Below Investment Grade
Ba: Bonds rated Ba are judged to have speculative elements and are subject to substantial credit risk.
B: Bonds rated B are considered speculative and are subject to high credit risk.
Caa: Bonds rated Caa are judged to be of poor standing and are subject to very high credit risk.
Ca: Bonds rated Ca are considered highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.
C: Bonds rated C are the lowest rated class of bonds and are typically in default. They have little prospect for recovery of principal or interest.
Note: Moody's appends numerical modifiers 1, 2 and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; modifier 2 indicates a mid-range ranking; and modifier 3 indicates a ranking in the lower end of that generic rating category.
S&P®
The issue rating definitions are expressions in terms of default risk. As such, they pertain to senior obligations of an entity. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy. (Such differentiation applies when an entity has both senior and subordinated obligations, secured and unsecured obligations, or operating company and holding company obligations.) Accordingly, in the case of junior debt, the rating may not conform exactly with the category definition.
Investment Grade
AAA: This is the highest rating assigned by S&P to a debt obligation. The obligor's capacity to meet its financial commitment on the obligation is extremely strong.
AA: Obligations rated AA differ from AAA issues only in a small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong.
A: Obligations rated A are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in the higher ratings categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong.
BBB: Obligations rated BBB exhibit adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
Below Investment Grade
BB, B, CCC, CC, C: Obligations rated BB, B, CCC, CC and C are regarded as having significant speculative characteristics. BB indicates the least degree of speculation and C the highest degree of speculation. While these obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
BB: An obligation rated BB is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation.
B: An obligation rated B is more vulnerable to nonpayment than obligations rated BB, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation.
CCC: An obligation rated CCC is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
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C: A subordinated debt or preferred stock obligation rated C is currently highly vulnerable to nonpayment. The C rating may be used to cover a situation where a bankruptcy petition has been filed or similar action taken, but payments on this obligation are being continued. The C rating is also assigned to a preferred stock issue in arrears on dividends or sinking fund payments, but that is still making payments.
D: Obligations rated D are in payment default. The D rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The D rating is also used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.
Plus (+) or minus (-): The ratings from “AA” to “CCC” may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.
r: This symbol is attached to the ratings of instruments with significant noncredit risks and highlights risks to principal or volatility of expected returns that are not addressed in the credit rating.
Short-Term Debt Ratings
Moody's
Moody's short-term debt ratings are opinions of the ability of issuers to honor short-term financial obligations. Ratings may be assigned to issuers, short-term programs and to individual short-term debt instruments. These obligations generally have an original maturity not exceeding 13 months, unless explicitly noted. Moody's employs the following designations to indicate the relative repayment capacity of rated issuers:
P-1 (Prime-1): Issuers (or supporting institutions) so rated have a superior ability to repay short-term debt obligations.
P-2 (Prime-2): Issuers (or supporting institutions) so rated have a strong ability to repay short-term debt obligations.
P-3 (Prime-3): Issuers (or supporting institutions) so rated have an acceptable ability to repay short-term debt obligations.
NP: Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.
S&P®
S&P's ratings are a current opinion of the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program. Short-term ratings are generally assigned to those obligations considered short-term in the relevant market. In the US, for example, that means obligations with an original maturity of no more than 365 days — including commercial paper. Short-term ratings are also used to indicate the creditworthiness of an obligor with respect to put features on long-term obligations. The result is a dual rating, in which the short-term rating addresses the put feature, in addition to the usual long-term rating.
A-1: This designation indicates that the obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitment on these obligations is extremely strong.
A-2: Issues carrying this designation are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations carrying the higher designations. However, the obligor's capacity to meet its financial commitments on the obligation is satisfactory.
A-3: Issues carrying this designation exhibit adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
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PART C
(Delaware Group® Government Fund)
File Nos. 002-97889/811-04304
Post-Effective Amendment No. 69
OTHER INFORMATION
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. 21 filed July 29, 1999. | |
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| (i) | Executed Certificate of Amendment (November 15, 2006) to the Agreement and Declaration of Trust incorporated into this filing by reference to Post-Effective Amendment No. 35 filed November 28, 2007. |
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| (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. 37 filed November 25, 2009. |
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| (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. 37 filed November 25, 2009. |
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| (iv) | Executed Certificate of Amendment (May 21, 2015) to the Agreement and Declaration of Trust incorporated into this filing by reference to Post-Effective Amendment No. 52 filed November 25, 2015. |
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| (2) | Executed Certificate of Trust (December 17, 1998) incorporated into this filing by reference to Post-Effective Amendment No. 21 filed July 29, 1999. | |
| (b) | By-Laws. Amended and Restated By-Laws (April 1, 2015) incorporated into this filing by reference to Post-Effective Amendment No. 52 filed November 25, 2015. | ||
| (c) | Instruments Defining Rights of Security Holders. None other than those contained in Exhibits (a) and (b). | ||
| (d) | Investment Advisory Contracts. | ||
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| (1) | Executed Investment Management Agreement (January 4, 2010) between Delaware Management Company (a series of Macquarie Investment Management Business Trust) and the Registrant incorporated into this filing by reference to Post-Effective Amendment No. 38 filed September 30, 2010. | |
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| (i) | Executed Amendment No. 3 (January 31, 2017) to Exhibit A of the Investment Management Agreement incorporated into this filing by reference to Post-Effective Amendment No. 62 filed November 27, 2018. |
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| (2) | Executed Investment Advisory Expense Limitation Letter (November 2022) between Delaware Management Company (a series of Macquarie Investment Management Business Trust) and the Registrant attached as Exhibit No. EX-99.d.2. | |
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| (3) | Executed Sub-Advisory Agreement (Delaware Fixed Income Funds) (May 30, 2019) between Delaware Management Company (a series of Macquarie Investment Management Business Trust) and Macquarie Investment Management Global Limited attached as Exhibit No. EX-99.d.3. | |
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| (i) | Form of Amendment No. 3 to Schedule I of the Sub-Advisory Agreement (Delaware Fixed Income Funds) attached as Exhibit No. EX-99.d.3.i. |
| (e) | Underwriting Contracts. | ||
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| (1) | Distribution Agreements. | |
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| (i) | Executed Amended and Restated Distribution Agreement (February 25, 2016) between Delaware Distributors, L.P. and the Registrant incorporated into this filing by reference to Post-Effective Amendment No. 60 filed November 28, 2017. |
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| (ii) | Executed Amendment No. 1 (January 31, 2017) to Schedule I to the Amended and Restated Distribution Agreement incorporated into this filing by reference to Post-Effective Amendment No. 60 filed November 28, 2017. |
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| (2) | Form of Dealer's Agreement incorporated into this filing by reference to Post-Effective Amendment No. 62 filed November 27, 2018. | |
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| (3) | Form of Registered Investment Advisers Agreement incorporated into this filing by reference to Post-Effective Amendment No. 62 filed November 27, 2018. | |
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| (4) | Form of Bank/Trust Agreement incorporated into this filing by reference to Post-Effective Amendment No. 62 filed November 27, 2018. | |
| (f) | Bonus or Profit Sharing Contracts. Not applicable. |
| (g) | Custodian Agreements. | ||
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| (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. 36 filed November 26, 2008. | |
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| (i) | Executed Amendment (January 1, 2014) to Mutual Fund Custody and Services Agreement incorporated into this filing by reference to Post-Effective Amendment No. 50 filed November 26, 2014. |
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| (ii) | Executed Amendment No. 2 (July 1, 2017) to Mutual Fund Custody and Services Agreement incorporated into this filing by reference to Post-Effective Amendment No. 60 filed November 28, 2017. |
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| (iii) | Executed Amendment No. 4 (July 19, 2019) to Mutual Fund Custody and Services Agreement attached as Exhibit No. EX-99.g.1.iii. |
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| (iv) | Executed Amendment No. 5 (December 31, 2021) to Mutual Fund Custody and Services Agreement attached as Exhibit No. EX-99.g.1.iv. |
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| (v) | Executed Amendment No. 6 (December 31, 2021) to Mutual Fund Custody and Services Agreement attached as Exhibit No. EX-99.g.1.v. |
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| (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. 35 filed November 28, 2007. | |
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| (i) | Executed Amendment (September 22, 2009) to the Securities Lending Authorization Agreement incorporated into this filing by reference to Post-Effective Amendment No. 38 filed September 30, 2010. |
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| (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. 38 filed September 30, 2010. |
| (h) | Other Material Contracts. | ||
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| (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. 34 filed November 28, 2006. | |
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| (i) | Executed Letter Amendment (August 23, 2002) to the Shareholder Services Agreement incorporated into this filing by reference to Post-Effective Amendment No. 27 filed September 30, 2003. |
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| (ii) | Executed Amendment No. 4 (January 31, 2017) to Schedule A to the Shareholder Services Agreement incorporated into this filing by reference to Post-Effective Amendment No. 62 filed November 27, 2018. |
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| (iii) | Executed Amended and Restated Schedule B (June 25, 2022) to the Shareholder Services Agreement attached as Exhibit No. EX-99.h.1.iii. |
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| (iv) | Executed Assignment and Assumption Agreement (November 1, 2014) between Delaware Service Company, Inc. and Delaware Investments Fund Services Company relating to the Shareholder Services Agreement incorporated into this filing by reference to Post-Effective Amendment No. 50 filed November 26, 2014. |
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| (2) | Executed Amended and Restated Fund Accounting and Financial Administration Services Agreement (January 1, 2014) between The Bank of New York Mellon and the Registrant incorporated into this filing by reference to Post-Effective Amendment No. 50 filed November 26, 2014. | |
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| (i) | Executed Amendment No. 1 (July 1, 2017) to Amended and Restated Fund Accounting and Financial Administration Services Agreement incorporated into this filing by reference to Post-Effective Amendment No. 60 filed November 28, 2017. |
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| (3) | Executed Amended and Restated Fund Accounting and Financial Administration Oversight Agreement (January 1, 2014) between Delaware Service Company, Inc. and the Registrant incorporated into this filing by reference to Post-Effective Amendment No. 50 filed November 26, 2014. | |
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| (i) | Executed Assignment and Assumption Agreement (November 1, 2014) between Delaware Service Company, Inc. and Delaware Investments Fund Services Company relating to the Oversight Agreement incorporated into this filing by reference to Post-Effective Amendment No. 50 filed November 26, 2014. |
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| (ii) | Executed Amendment No. 1 (September 1, 2017) to Amended and Restated Fund Accounting and Financial Administration Oversight Agreement incorporated into this filing by reference to Post-Effective Amendment No. 60 filed November 28, 2017. |
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| (iii) | Executed Amendment No. 2 (October 11, 2021) to Amended and Restated Fund Accounting and Financial Administration Oversight Agreement attached as Exhibit No. EX-99.h.3.iii. |
| (i) | Legal Opinion. | ||
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| (1) | Opinion and Consent of Counsel (November 24, 2004) with respect to Delaware Strategic Income Fund (formerly, Delaware American Government Bond Fund) incorporated into this filing by reference to Post-Effective Amendment No. 30 filed November 29, 2004. | |
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| (2) | Opinion and Consent of Counsel (September 27, 2013) with respect to Delaware Emerging Markets Debt Corporate Fund (formerly, Delaware Emerging Markets Debt Fund) incorporated into this filing by reference to Post-Effective Amendment No. 46 filed September 27, 2013. | |
| (j) | Other Opinions. Consent of Independent Registered Public Accounting Firm (November 2022) attached as Exhibit No. EX-99.j. | ||
| (k) | Omitted Financial Statements. Not applicable. | ||
| (l) | Initial Capital Agreements. Not applicable. | ||
| (m) | Rule 12b-1 Plan. | ||
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| (1) | Plan under Rule 12b-1 for Class A (April 19, 2001) incorporated into this filing by reference to Post-Effective Amendment No. 24 filed September 28, 2001. | |
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| (2) | Plan under Rule 12b-1 for Class C (April 19, 2001) incorporated into this filing by reference to Post-Effective Amendment No. 24 filed September 28, 2001. | |
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| (3) | Plan under Rule 12b-1 for Class R (May 15, 2003) incorporated into this filing by reference to Post-Effective Amendment No. 42 filed November 28, 2012. | |
| (n) | Rule 18f-3 Plan. | ||
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| (1) | Amended and Restated Multiple Class Plan Pursuant to Rule 18f-3 (November 18, 2020) incorporated into this filing by reference to Post-Effective Amendment No. 67 filed November 27, 2020. | |
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| (i) | Updated Appendix A (October 31, 2022) to the Amended and Restated Multiple Class Plan Pursuant to Rule 18f-3 attached as Exhibit No. EX-99.n.1.i. |
| (o) | Reserved. | |
| (p) | Codes of Ethics. | |
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| (1) | Code of Ethics for Macquarie Investment Management, Delaware Funds® by Macquarie and Optimum Fund Trust (September 8, 2020) incorporated into this filing by reference to the Registration Statement on Form N-14 (File No. 333-257449) filed June 28, 2021. |
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| (2) | Code of Ethics for Macquarie Investment Management Austria Kapitalanlage AG (June 2021) attached as Exhibit No. EX-99.p.2. |
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| (3) | Code of Ethics for Macquarie Investment Management Europe Limited (March 2021) attached as Exhibit No. EX-99.p.3. |
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| (4) | Code of Ethics for Macquarie Investment Management Global Limited (February 18, 2021) attached as Exhibit No. EX-99.p.4. |
| (q) | Other. | |
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| (1) | Powers of Attorney (January 20, 2022) attached as Exhibit No. EX-99.q.1. |
Item 29. | Persons Controlled by or Under Common Control with the Registrant. None. | ||
Item 30. | Indemnification. Article VII, Section 2 (November 15, 2006) to the Agreement and Declaration of Trust incorporated into this filing by reference to Post-Effective Amendment No. 35 filed November 28, 2007. Article VI of the Amended and Restated By-Laws (April 1, 2015) incorporated into this filing by reference to Post-Effective Amendment No. 52 filed November 25, 2015. | ||
Item 31. | Business and Other Connections of the Investment Adviser. | ||
| Delaware Management Company (the “Manager”), a series of Macquarie Investment 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 Funds® by Macquarie (the “Delaware Funds”) (Delaware Group® Adviser Funds, Delaware Group Cash Reserve, Delaware Group Equity Funds I, Delaware Group Equity Funds II, Delaware Group Equity Funds IV, Delaware Group Equity Funds V, Delaware Group Foundation Funds, Delaware Group Global & International Funds, Delaware Group Income Funds, Delaware Group Limited-Term Government Funds, Delaware Group State Tax-Free Income Trust, Delaware Group Tax-Free 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 National Municipal Income Fund, Delaware Enhanced Global Dividend and Income Fund, Ivy Funds, Ivy Variable Insurance Portfolios and Delaware Ivy High Income Opportunities 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 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 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 Funds. | ||
| The Manager, located at 100 Independence, 610 Market Street, Philadelphia, PA 19106-2354, is a series of Macquarie Investment Management Business Trust (a Delaware statutory trust), which is a subsidiary of MMHI. MMHI is a wholly owned subsidiary of Macquarie Group Limited. Information on the directors and officers of the Manager set forth in its Form ADV filed with the U.S. Securities and Exchange Commission (File No. 801-32108) is incorporated into this filing by reference. The Manager, with the approval of the Registrant’s board of trustees, selects sub-advisors for the series of the Registrant. The following companies, all of which are registered investment advisers, serve as sub-advisors for the specified series of the Registrant. | ||
| Macquarie Investment Management Austria Kapitalanlage AG (MIMAK), located at Kaerntner Strasse 28, 1010 Vienna, Austria, serves as a sub-advisor to Delaware Emerging Markets Debt Corporate Fund and Delaware Strategic Income Fund. MIMAK is an affiliate of the Manager and a part of Macquarie Asset Management (MAM). MAM is the marketing name for certain companies comprising the asset management division of Macquarie Group Limited. Information on the directors and officers of MIMAK set forth in its Form ADV filed with the U.S. Securities and Exchange Commission (File No. 801-113118) is incorporated into this filing by reference. | ||
| Macquarie Investment Management Europe Limited (MIMEL), located at 28 Ropemaker Street, London, England, serves as a sub-advisor to Delaware Emerging Markets Debt Corporate Fund and Delaware Strategic Income Fund. MIMEL is an affiliate of the Manager and a part of MAM. Information on the directors and officers of MIMEL set forth in its Form ADV filed with the U.S. Securities and Exchange Commission (File No. 801-111954) is incorporated into this filing by reference | ||
| Macquarie Investment Management Global Limited (MIMGL), located at located at 50 Martin Place, Sydney, Australia, serves as a sub-advisor to Delaware Emerging Markets Debt Corporate Fund and Delaware Strategic Income Fund. MIMGL is an affiliate of the Manager and a part of MAM. Information on the directors and officers of MIMGL set forth in its Form ADV filed with the U.S. Securities and Exchange Commission (File No. 801-106854) is incorporated into this filing by reference. | ||
Item 32. | Principal Underwriters. | ||
| (a) | Delaware Distributors, L.P. serves as principal underwriter for all the mutual funds in the Delaware Funds® by Macquarie 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 100 Independence, 610 Market Street, Philadelphia, PA 19106-2354. |
Name and Principal Business Address | Positions and Offices with Underwriter | Positions and Offices with Registrant |
Delaware Distributors, Inc. | General Partner | None |
Delaware Capital Management | Limited Partner | None |
Delaware Investments Distribution Partner, Inc. | Limited Partner | None |
Brett D. Wright | President/ Head of Client Solutions Group Americas/Executive Director | None |
David Brenner | Executive Vice President/Global Head of Digital, Data and Platforms/Chief Strategy Officer/Executive Director | Executive Vice President/Global Head of Digital, Data and Platforms/Chief Strategy Officer/Executive Director |
Neil Siegel | Executive Vice President/Global Head of Marketing and Product/Executive Director | Executive Vice President/Global Head of Marketing and Product/Executive Director |
Christopher Calhoun | Senior Vice President/Head of Retail Client Experience/Division Director | Senior Vice President/Head of Retail Client Experience/Division Director |
Anthony G. Ciavarelli | Senior Vice President/Associate General Counsel/Assistant Secretary/Division Director | Senior Vice President/Associate General Counsel/Assistant Secretary/Division Director |
David F. Connor | Senior Vice President/General Counsel/Secretary/Division Director | Senior Vice President/ General Counsel/Secretary |
Michael E. Dresnin | Senior Vice President/Associate General Counsel/Assistant Secretary/Division Director | Senior Vice President/Associate General Counsel/Assistant Secretary/Division Director |
Jamie Fox | Senior Vice President/ Divisional Sales Manager, CSG Americas/Division Director | None |
Daniel V. Geatens | Senior Vice President/Head of US Fund Administration/Division Director | Senior Vice President/Head of US Fund Administration/Division Director |
Robert T. Haenn | Senior Vice President/Channel Head-Strategic Relationship, CSG Americas/Division Director | Senior Vice President/Channel Head-Strategic Relationship, CSG Americas/Division Director |
Jerel A. Hopkins | Senior Vice President/Assistant Secretary/Division Director | Senior Vice President/Assistant Secretary/Division Director |
Rachel Jacobs | Senior Vice President/Head of Intermediary Distribution, CSG Americas/Executive Director | Senior Vice President/Head of Intermediary Distribution, CSG Americas/Executive Director |
Eric S. Kleppe | Senior Vice President/Head of Public Markets Relationship Management, CSG Americas/Division Director | None |
Michael Q. Mahoney | Senior Vice President/DD, TA & Intermediary Services/Division Director | Senior Vice President/DD, TA & Intermediary Services/Division Director |
Brian L. Murray, Jr. | Senior Vice President/Chief Compliance Officer/Division Director | Senior Vice President/Chief Compliance Officer |
Susan L. Natalini | Senior Vice President/ Chief Operating Officer Equity and Fixed Income/Division Director | Senior Vice President/Chief Operations Officer – Equity and Fixed Income Investments |
Richard Salus | Senior Vice President/ Global Head of Fund Services/Division Director | Senior Vice President/Chief Financial Officer |
William Speacht | Senior Vice President/Deputy Chief Compliance Officer/Division Director | Senior Vice President/Deputy Chief Compliance Officer/Division Director |
Emilia P. Wang | Senior Vice President/Associate General Counsel /Assistant Secretary/Division Director | Senior Vice President/Associate General Counsel /Assistant Secretary/Division Director |
Kathryn R. Williams | Senior Vice President/Deputy General Counsel/Assistant Secretary/Division Director | Senior Vice President/Associate General Counsel/Assistant Secretary |
Joel A. Ettinger | Vice President/Associate Director | Vice President/Taxation |
Stephen Hoban | Vice President/Controller/Chief Financial Officer/Treasurer/ Associate Director | None |
Earthen Johnson | Vice President/Associate General Counsel/Assistant Secretary/Associate Director | Vice President/Associate General Counsel/Assistant Secretary |
Konstantine C. Mylonas | Vice President/Senior Relationship Manager, CSG Americas/Associate Director | None |
Stephen R. Shamet | Vice President/Channel Head-Strategic Relationship, CSG Americas/Associate Director | None |
Barry J. Slawter | Vice President/Retail Marketing & Content Strategy/Senior Manager | None |
Augustas Baliulis | Assistant Vice President/Associate General Counsel/Senior Manager
| Assistant Vice President/Associate General Counsel/Senior Manager
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Aaron Buser | Assistant Vice President/Attorney/Associate Director | Assistant Vice President/Attorney/Associate Director |
Debra J. Lenzner | Assistant Vice President/Head of Legal Administration | Assistant Vice President/Head of Legal Administration |
Ross Oklewicz | Assistant Vice President/Associate Director | Assistant Vice President/Associate Director |
Antoinette C. Robbins | Senior Compliance Officer/Assistant Anti-Money Laundering Officer/Senior Manager | None |
Alexander Lenoir | Anti-Money Laundering Officer/Division Director | Anti-Money Laundering Officer |
| (c) | Not applicable. |
Item 33. | Location of Accounts and Records. All accounts and records required to be maintained by Section 31 (a) of the Investment Company Act of 1940 and the rules under that section are maintained by the following entities: Delaware Management Company, Delaware Investments Fund Services Company and Delaware Distributors, L.P. (100 Independence, 610 Market Street, Philadelphia, PA 19106-2354); BNY Mellon Investment Servicing (US) Inc. (4400 Computer Drive, Westborough, MA 01581-1722); and The Bank of New York Mellon (240 Greenwich Street, New York, NY 10286-0001). | |
Item 34. | Management Services. None. | |
Item 35. | Undertakings. Not applicable. |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this Registration Statement under Rule 485(b) under the Securities Act of 1933 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Philadelphia and Commonwealth of Pennsylvania on this 28th day of November, 2022.
DELAWARE GROUP GOVERNMENT FUND | |
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By: | /s/ Shawn K. Lytle |
| Shawn K. Lytle |
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated:
Signature | Title | Date | ||
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/s/ Shawn K. Lytle |
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| President/Chief Executive Officer | November 28, 2022 |
Shawn K. Lytle |
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| (Principal Executive Officer) and Trustee |
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Jerome D. Abernathy | * |
| Trustee | November 28, 2022 |
Jerome D. Abernathy |
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Thomas L. Bennett | * |
| Trustee | November 28, 2022 |
Thomas L. Bennett |
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Ann D. Borowiec | * |
| Trustee | November 28, 2022 |
Ann D. Borowiec |
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Joseph W. Chow | * |
| Trustee | November 28, 2022 |
Joseph W. Chow |
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H. Jeffrey Dobbs | * |
| Trustee | November 28, 2022 |
H. Jeffrey Dobbs |
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John A. Fry | * |
| Trustee | November 28, 2022 |
John A. Fry |
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Joseph Harroz, Jr. | * |
| Trustee | November 28, 2022 |
Joseph Harroz, Jr. |
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Sandra A.J. Lawrence | * |
| Trustee | November 28, 2022 |
Sandra A.J. Lawrence |
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Frances A. Sevilla-Sacasa | * |
| Trustee | November 28, 2022 |
Frances A. Sevilla-Sacasa |
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Thomas K. Whitford | * |
| Chair and Trustee | November 28, 2022 |
Thomas K. Whitford |
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Christianna Wood | * |
| Trustee | November 28, 2022 |
Christianna Wood |
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Janet L. Yeomans | * |
| Trustee | November 28, 2022 |
Janet L. Yeomans |
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Richard Salus | * |
| Senior Vice President/Chief Financial Officer | November 28, 2022 |
Richard Salus |
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| (Principal Financial Officer) |
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*By: /s/ Shawn K. Lytle
Shawn K. Lytle
as Attorney-in-Fact for each of the persons indicated
(Pursuant to Powers of Attorney filed herewith)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
EXHIBITS
TO
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
INDEX TO EXHIBITS
Delaware Group® Government Fund N-1A)
Exhibit No. | Exhibit | |
Executed Investment Advisory Expense Limitation Letter (November 2022) between Delaware Management Company (a series of Macquarie Investment Management Business Trust) and the Registrant | ||
Executed Sub-Advisory Agreement (Delaware Fixed Income Funds) (May 30, 2019) between Delaware Management Company (a series of Macquarie Investment Management Business Trust) and Macquarie Investment Management Global Limited | ||
Form of Amendment No. 3 to Schedule I of the Sub-Advisory Agreement (Delaware Fixed Income Funds) | ||
Executed Amendment No. 4 (July 19, 2019) to Mutual Fund Custody and Services Agreement | ||
Executed Amendment No. 5 (December 31, 2021) to Mutual Fund Custody and Services Agreement | ||
Executed Amendment No. 6 (December 31, 2021) to Mutual Fund Custody and Services Agreement | ||
Executed Amended and Restated Schedule B (June 25, 2022) to the Shareholder Services Agreement | ||
Executed Amendment No. 2 (October 11, 2021) to Amended and Restated Fund Accounting and Financial Administration Oversight Agreement | ||
Consent of Independent Registered Public Accounting Firm (November 2022) | ||
Updated Appendix A (October 31, 2022) to the Amended and Restated Multiple Class Plan Pursuant to Rule 18f-3 | ||
Code of Ethics for Macquarie Investment Management Austria Kapitalanlage AG (June 2021) | ||
Code of Ethics for Macquarie Investment Management Europe Limited (March 2021) | ||
Code of Ethics for Macquarie Investment Management Global Limited (February 18, 2021) | ||
Powers of Attorney (January 20, 2022) |
EX-99.d.2
Delaware Management Company
100 Independence, 610 Market Street
Philadelphia, PA 19106-2354
November 21, 2022
Delaware Group Government Fund
100 Independence, 610 Market Street
Philadelphia, PA 19106-2354
Re: Expense Limitations
Ladies and Gentlemen:
By our execution of this letter agreement (the “Agreement”), intending to be legally bound hereby, Delaware Management Company, a series of Macquarie Investment Management Business Trust (the “Manager”), agrees that in order to improve the performance of the series of Delaware Group Government Fund set forth below (each a “Fund” ), the Manager shall waive all or a portion of its investment advisory fees and/or pay/reimburse expenses (excluding any 12b-1 fees, acquired fund fees and expenses, taxes, interest, short sale dividend and 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 (collectively, the “Excluded Expenses”)) in an aggregate amount equal to the amount by which a Fund’s total annual fund operating expenses (excluding any Excluded Expenses) exceed the percentages set forth below for the periods set forth below. For purposes of this Agreement, Excluded Expenses may also include such additional costs and expenses as may be agreed upon from time to time by the Funds’ Board of Trustees and the Manager.
Fund | Expense Cap | Period | ||
Delaware Emerging Markets Debt Corporate Fund | 0.79% | November 28, 2022 through | ||
November 28, 2023 | ||||
Delaware Strategic Income Fund | 0.59% | November 28, 2022 through | ||
November 28, 2023 |
The Manager acknowledges that it (1) shall not be entitled to collect on, or make a claim for, waived fees at any time in the future, and (2) shall not be entitled to collect on, or make a claim for, reimbursed Fund expenses at any time in the future.
Delaware Management Company, a series of
Macquarie Investment Management Business Trust
By: | /s/ Richard Salus | ||
Name: | Richard Salus | ||
Title: | Senior Vice President |
Your signature below acknowledges acceptance of this Agreement:
Delaware Group Government Fund
By: | /s/ Shawn K. Lytle | ||
Name: | Shawn K. Lytle | ||
Title: | President & Chief Executive Officer | ||
Date: November 21, 2022 |
EX-99.d.3
SUB-ADVISORY AGREEMENT
AGREEMENT made by and between DELAWARE MANAGEMENT COMPANY, a series of Macquarie Investment Management Business Trust, a Delaware statutory trust (the “Investment Manager”), and MACQUARIE INVESTMENT MANAGEMENT GLOBAL LIMITED (the “Sub-Adviser’’).
WITNESSETH:
WHEREAS, each Trust on Schedule 1 hereto (each a “Trust” and collectively the “Trusts”) are registered under the Investment Company Act of 1940, as amended (the “1940 Act”), and are organized as statutory trusts under the laws of the State of Delaware;
WHEREAS, the Investment Manager and the relevant Trust, on behalf of each Fund listed on Schedule 1 (each, a “Fund” and collectively, the “Funds”), have entered into an investment management agreement (the “Investment Management Agreement”) whereby the Investment Manager will provide investment advisory services to the Trust with respect to the Fund;
WHEREAS, the Investment Manager has the authority under the Investment Management Agreement to retain one or more sub-advisers to assist the Investment Manager in providing investment advisory services to the Trust with respect to the Fund;
WHEREAS, the Investment Manager and the Sub-Adviser are registered investment advisers under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), and engage in the business of providing investment advisory services; and
WHEREAS, the Board of Trustees (the “Board”) of the Trust and the Investment Manager desire that the Investment Manager retain the Sub-Adviser to render investment advisory and other services with respect to the Fund in the manner, for the period, and on the terms hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, and each of the parties hereto intending to be legally bound, it is agreed as follows:
1. (a) The Sub-Adviser will supervise and direct the investments of the assets of the Fund in accordance with the Fund’s investment objectives, policies, and restrictions as provided in its Prospectus (“Prospectus”) and Statement of Additional Information (“SAI”), as currently in effect and as amended or supplemented from time to time, and such other limitations as the Fund may impose by notice in writing to the Sub-Adviser in accordance with the clause 1(c), subject always to the supervision and control of the Investment Manager and the Board.
(b) As part of the services it will provide hereunder, the Sub-Adviser is authorized, in its discretion and without prior consultation with the Fund or the Investment Manager to:
(i) |
obtain and evaluate information relating to investment recommendations, asset allocation advice, industries, businesses, securities markets, research, economic analysis, and other investment services with respect to the securities that are included in the Fund or that are under consideration for inclusion in the Fund and invest the Fund in accordance with the Investment Manager’s and the Board’s written direction as more fully set forth herein and as otherwise directed; |
1
(ii) |
regularly make decisions as to what securities to purchase and sell on behalf of the Fund, effect the purchase and sale of such investments in furtherance of the Fund’s objectives and policies, and furnish the Board with such information and reports within the Sub-Adviser’s possession and control regarding the Sub-Adviser’s activities in the performance of its duties and obligations under this Agreement as the Investment Manager reasonably deems appropriate or as the Board may reasonably request, including such reports, information, and certifications as the officers of the Trust may reasonably require in order to comply with applicable international, federal and state laws and regulations and Trust policies and procedures; |
(iii) |
provide any and all material composite or other performance information, records and supporting documentation about accounts or funds the Sub-Adviser manages, if appropriate and subject to any obligation of confidentiality, that are relevant to the Fund and that have investment objectives, policies, and strategies substantially similar to those employed by the Sub-Adviser in managing the Fund that may be reasonably necessary, under applicable laws, to allow the Fund or its agent to present information concerning the Sub-Adviser’s prior performance in similar strategies in the Fund’s currently effective Prospectus, as the same may be hereafter modified, amended, and/or supplemented from time to time, and in any permissible reports and materials prepared by the Fund or its agent to which the Sub-Adviser has consented; |
(iv) |
provide information as reasonably requested by the Investment Manager or the Board to assist them or their agents in the determination of the fair value of certain portfolio securities held in the Fund when market quotations are not readily available for the purpose of calculating the Fund’s net asset value in accordance with procedures and methods established by the Board; |
(v) |
vote proxies, exercise conversion or subscription rights, and respond to tender offers and other consent solicitations (“Corporate Actions”) with respect to the issuers of securities held in the Fund, provided materials relating to such Corporate Actions have been timely received by the Sub-Adviser, and to submit reports regarding such Corporate Actions, including a copy of any policies regarding such Corporate Actions, in a form reasonably satisfactory to the Investment Manager and the Fund in order to comply with any applicable federal or state reporting requirements; |
(vi) |
provide performance and other information as reasonably requested by the Investment Manager or the Board to assist them or their agents in conducting ongoing due diligence and performance monitoring, subject to any obligation of confidentiality; and |
2
(vii) |
maintain all accounts, books, and records with respect to the Fund as are required of an investment adviser of a registered investment company pursuant to the 1940 Act and the Advisers Act and the rules thereunder and preserve for the periods prescribed by Rule 31a-2 under the 1940 Act any accounts, books and records that it maintains for the Fund and that are required to be maintained by Rule 31a-l under the 1940 Act. The Sub-Adviser shall furnish to the Investment Manager copies of all such accounts, books, and records as the Investment Manager may reasonably request. The Sub-Adviser agrees that such accounts, books, and records are the property of the Trust, and will be surrendered to the Trust promptly upon request, with the understanding that the Sub-Adviser may retain its own copy of all records. |
(c) Subject to sub-clause 1(d), in furnishing services hereunder, the Sub-Adviser shall be subject to, and shall perform in accordance with, the following: (i) provisions of the Trust’s Agreement and Declaration of Trust, as the same may be hereafter modified, amended, and/or supplemented from time to time, that are applicable to the Fund and notified to the Sub-Adviser; (ii) provisions of the Trust’s By-Laws, as the same may be hereafter modified, amended, and/or supplemented from time to time that are applicable to the Fund and notified to the Sub-Adviser; (iii) the Fund’s Prospectus; (iv) the 1940 Act and the Advisers Act and the rules under each and all other international, federal and state securities laws or regulations applicable to the Trust and the Fund; (v) the Trust’s compliance policies and procedures and other policies and procedures adopted from time to time by the Board applicable to the Fund and notified to the Sub-Adviser; and (vi) the written instructions of the Investment Manager. The Sub-Adviser will promptly inform the Investment Manager if it is unable to comply with the notified modification, amendment, supplement, policy procedure or written instruction (together, “Instruction”), and the Sub-Adviser must promptly seek to clarify such Instruction with the Investment Manager. If an Instruction is inconsistent with the Fund’s Prospectus or, in the Sub-Adviser’s opinion, ambiguous or unclear in any respect, the Sub-Adviser must promptly clarify the Instruction with the Investment Manager and the Instruction will not operate until it has been clarified.
(d) The Investment Manager agrees to provide the Sub-Adviser with current copies of the documents mentioned in paragraph l(c)(i), (ii), (iii) and (v) above and all changes made to such documents at, or if practicable, before the time such changes become effective, and the Investment Manager acknowledges and agrees that the Sub-Adviser shall not be responsible for compliance with such documents or amendments unless and until a reasonable time after they are received by the Sub-Adviser. The Sub-Adviser shall be fully protected in acting upon any proper instructions reasonably believed by it to be genuine and signed or communicated by or on behalf of the Investment Manager or the Fund.
(e) In order to assist the Trust and the Trust’s chief compliance officer (the “Trust CCO”) and the Investment Manager and the Investment Manager’s Chief Compliance Officer (the “IM CCO”) in satisfying the requirements contained in Rule 38a-1 under the 1940 Act and Rule 206(4)-7 under the Advisers Act, respectively, the Sub-Adviser shall provide to the Trust CCO and/or IM CCO: (i) direct access to the Sub-Adviser’s chief compliance officer (the “Sub-Adviser CCO”) and its officers and employees, as reasonably requested by the Trust CCO and/or IM CCO; (ii) quarterly reports reasonably required by the Investment Manager confirming that the Sub-Adviser has complied with the Trust’s Compliance Procedures in managing the Fund to the extent those Compliance Procedures directly relate to the Sub-Adviser’s services under this Agreement; and (iii) quarterly certifications with respect to Material Compliance Matters (as that term is defined in Rule 38a-1(e)(2) under the 1940 Act) related to the Sub-Adviser’s management of the Fund.
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The Sub-Adviser shall promptly provide the Trust CCO and IM CCO with copies and summaries of: (i) the Sub-Adviser’s policies and procedures for compliance by the Sub-Adviser with the federal securities laws and to prevent violation of the Advisers Act (together, the “Sub-Adviser Compliance Procedures”); and (ii) any material changes to the Sub-Adviser Compliance Procedures. The Sub-Adviser shall cooperate fully with the Trust CCO and IM CCO so as to facilitate the Trust CCO’s and IM CCO’s performance of their respective responsibilities under Rule 38a-1 and Rule 206(4)-7, including to review, evaluate and report to the Board on the operation of the Sub-Adviser Compliance Procedures, and shall promptly report to the Trust CCO and IM CCO any Material Compliance Matter arising under the Sub-Adviser Compliance Procedures involving the Fund. The Sub-Adviser shall allow the Trust CCO and/or the IM CCO, as reasonably requested from time to time, access to examine and review the Sub-Adviser’s Compliance Procedures and the Sub-Adviser’s adherence thereto. The Sub-Adviser shall provide to the Trust CCO and IM CCO: (i) quarterly reports confirming the Sub-Adviser’s compliance with the Sub-Adviser Compliance Procedures in managing the Fund; and (ii) certifications that there were no Material Compliance Matters involving the Sub-Adviser that arose under the Sub-Adviser Compliance Procedures that affected the Fund. At least annually, the Sub-Adviser shall provide a certification to the Trust CCO and IM CCO to the effect that the Sub-Adviser has in place and has implemented policies and procedures that are reasonably designed to ensure compliance by the Sub-Adviser with the federal securities laws, including the conduct and results of our annual review for adequacy and effectiveness.
(f) The Sub-Adviser shall provide reasonable assistance to the Fund in the preparation of the Trust’s registration statements, the Prospectuses and SAIs, shareholder reports and other regulatory filings, or any amendment or supplement thereto (collectively, “Regulatory Filings”) as may relate to the Fund, and shall provide the Fund with information in its possession and control and reasonably requested by the Investment Manager for use in the Fund’s Regulatory Filings, including, without limitation, information related to the Sub-Adviser’s investment management personnel, portfolio manager compensation, investment management strategies and techniques, and proxy voting policies. The Sub-Adviser shall provide such certifications regarding the Fund as the Trust’s officers may reasonably request for purposes of the preparation of any Regulatory Filings.
(g) The Sub-Adviser hereby agrees during the period hereinafter set forth to render the services and assume the obligations herein set forth for the compensation herein provided. The Sub-Adviser shall for all purposes herein be deemed to be an independent contractor, and shall, unless otherwise expressly provided and authorized herein or otherwise, have no authority to act for or represent the Trust, the Fund or the Investment Manager in any way, or in any way be deemed an agent of the Trust, the Fund or the Investment Manager. Notwithstanding the foregoing, the Investment Manager appoints the Sub-Adviser as agent of the Fund to provide investment advisory services to Fund on the terms contained in this Agreement and the Sub-Adviser accepts this appointment. For the avoidance of doubt, Sub-Adviser may, as agent, instruct and place trades, respond to corporate actions, execute Fund documentation, agreements, contracts and other documents requested by brokers, dealers, counterparties and other persons in connection with providing advisory services to the Fund; provided that Sub-Adviser must seek prior written approval from the Investment Manager before entering into any derivatives agreements for the Fund.
(h) The Sub-Adviser may perform its services through its employees, officers or agents, and the Investment Manager shall not be entitled to the advice, recommendation or judgment of any specific person; provided, however, that the persons identified in the Fund’s Prospectus shall perform the portfolio management duties described therein until the Sub-Adviser notifies the Investment Manager that one or more other affiliates, employees, officers or agents identified in such notice shall assume such duties as of a specific date.
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(i) The Investment Manager shall provide (or use its reasonable endeavors to cause to be provided) timely information to the Sub-Adviser regarding such matters as the cash requirements and cash available for investment in the Fund, and all other information as may be reasonably necessary for the Sub-Adviser to perform its responsibilities under this Agreement.
2. (a) Under the terms of the Investment Management Agreement, the Trust shall conduct its own business and affairs and shall bear the expenses and salaries necessary and incidental thereto including, but not in limitation of the foregoing, the costs incurred in: the maintenance of its existence as a statutory trust organized under the laws of the State of Delaware; the maintenance of its own books, records, and procedures; dealing with its own shareholders; the payment of dividends; transfer of shares, including issuance and repurchase of shares; preparation of share certificates, if any; reports and notices to shareholders; calling and holding of shareholders’ meetings; miscellaneous office expenses; transfer agency expenses; pricing service expenses; expenses relating to tax services; brokerage commissions; custodian fees; legal and accounting fees; taxes; interest; federal securities law filing expenses; and federal and state registration fees. The Sub-Adviser shall not be obligated to pay any expenses of the Investment Manager, the Trust or the Fund unless expressly assumed by the Sub-Adviser pursuant to this Agreement or otherwise agreed to in writing.
(b) Directors, members, officers and employees of the Sub-Adviser may be directors, officers and employees of other funds that have employed the Sub-Adviser as sub-adviser or investment manager. Directors, members, officers and employees of the Sub-Adviser who are Trustees, officers and/or employees of the Trust, shall not receive any compensation from the Trust for acting in such dual capacity.
3. (a) The Sub-Adviser will select brokers and dealers to effect all Fund transactions subject to the conditions set forth herein. The Sub-Adviser may combine orders for the Fund with orders for other accounts or funds under management. Transactions involving combined orders are allocated in a manner deemed equitable to each account. The Sub-Adviser will place all necessary orders with brokers, dealers, or issuers, and will negotiate brokerage commissions, if applicable. The Sub-Adviser is directed at all times to seek to execute transactions for the Fund (i) in accordance with any written policies, practices or procedures that may be established by the Board or the Investment Manager from time to time and provided to the Sub-Adviser, and (ii) as described in the Fund’s Prospectus and SAI. In placing any orders for the purchase or sale of investments for the Fund the Sub-Adviser shall use its reasonable endeavors to obtain for the Fund “best execution,” considering all of the circumstances, and shall maintain records adequate to demonstrate compliance with this requirement.
(b) Subject to the appropriate policies and procedures approved by the Board and provided to the Sub-Adviser in writing, the Sub-Adviser may, to the extent authorized by Section 28(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), cause the Fund to pay a broker or dealer that provides brokerage or research services to any of the Investment Manager, the Sub-Adviser or the Fund an amount of commission for effecting a Fund transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if the Sub-Adviser determines, in good faith, that such amount of commission is reasonable in relation to the value of such brokerage and research services provided viewed in terms of that particular transaction or the Sub-Adviser’s overall responsibilities to its clients for which the Investment Manager or the Sub-Adviser exercises investment discretion. To the extent authorized by Section 28(e) and the Board, the Sub-Adviser shall not be deemed to have acted unlawfully or to have breached any duty created by this Agreement or otherwise solely by reason of such action.
5
Subject to applicable law and regulations, including Section 17(e) of the 1940 Act and Rule 17e-l thereunder, the Sub-Adviser is authorized to place orders for the purchase and sale of securities for the Fund with brokers or dealers that are affiliated with the Sub-Adviser. Any entity or person associated with the Investment Manager or the Sub-Adviser that is a member of a national securities exchange is authorized to effect any transaction on such exchange for the account of the Fund to the extent and as permitted by Section 11(a)(1)(H) of the Exchange Act and Rule 11a2-2(T) thereunder.
4. As compensation for the services to be rendered to the Trust for the benefit of the Fund by the Sub-Adviser under the provisions of this Agreement, the Investment Manager shall pay to the Sub-Adviser the fees calculated in accordance with Exhibit A attached hereto. The compensation payable to the Sub- Adviser, along with the compensation paid any other affiliated sub-advisor providing fixed income investment management and trading services to the Fund, shall not exceed 25% of the Investment Manager’s retained advisory fee payable from the Fund under the investment management agreement (after Investment Manager has paid any unaffiliated Fund sub-advisers, paid the Fund’s investment consultant, and paid any amounts towards the Fund’s expense waivers).
5. The services to be rendered by the Sub-Adviser to the Trust for the benefit of the Fund under the provisions of this Agreement are not exclusive, and the Sub-Adviser shall be free to render similar or different services to others so long as its ability to render the services provided for in this Agreement shall not be materially impaired thereby.
6. (a) Subject to the limitation set forth in Paragraph 5, the Sub-Adviser, its directors, officers, employees, agents, and shareholders may engage in other businesses, may render investment advisory services to other investment companies, or to any other corporation, association, firm or individual, and may render underwriting services to the Trust or to any other investment company, corporation, association, firm or individual.
(b) Neither the Investment Manager, the Trust nor the Fund shall use the Sub-Adviser’s actual or fictitious name(s), mark(s), derivative(s) and/or logo(s) or otherwise refer to the Sub-Adviser in any materials related to the Trust or the Fund distributed to third parties, including the Fund’s shareholders, without prior review and written approval by the Sub-Adviser, which may not be unreasonably withheld or delayed. Upon termination of this Agreement, the Investment Manager, the Trust and the Fund, shall, to the extent applicable and as soon as is reasonably possible, cease to use the Sub- Adviser’s actual or fictitious name(s), mark(s), derivative(s) and/or logo(s) in materials related to the Fund.
(c) The Sub-Adviser shall not use the Investment Manager’s name (or that of any subsidiary of Macquarie Management Holdings, Inc. (“MMHI”)) or otherwise refer to the Investment Manager or any subsidiary of MMHI in any materials related to the Trust or the Fund distributed to third parties, including the Fund’s shareholders, without prior review and written approval by the Investment Manager, which may not be unreasonably withheld or delayed. Upon termination of this Agreement, the Sub-Adviser, shall, to the extent applicable and as soon as is reasonably possible, cease to use the actual or fictitious name(s), mark(s), derivative(s) and/or logo(s) of the Trust and the Fund, except for the purpose of describing prior clients or prior performance of the Sub-Adviser, as permitted by the Advisers Act or other applicable requirements.
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(d) This Section 6 applies solely to materials related to the Fund and the Trust only, and not to other products or relationships between the Sub-Adviser and the Investment Manager.
7. (a) In the absence of willful misfeasance, bad faith, gross negligence, or reckless disregard in the performance of its duties as Sub-Adviser to the Trust on behalf of the Fund, neither the Sub-Adviser nor any of its affiliates nor any of its or their controlling persons, members, officers, directors, employees or agents (collectively, “Sub-Adviser Related Persons”) shall be liable to the Trust, the Fund, the Investment Manager or any shareholder of the Trust for any action or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security, or otherwise. The Sub-Adviser makes no representation or warranty, express or implied, that any level of performance or investment results will be achieved by the Fund, or that the Fund will perform comparably with any standard or index, including other clients of the Sub-Adviser, whether public or private. Subject to the first sentence of this Section 7(a), the Sub-Adviser shall not be responsible for any loss incurred by any reason of any act or omission of any bank, broker, the custodian bank or any administrator or trustee whether appointed on behalf of the Investment Manager, the Fund or the Trust. Nothing contained herein shall be deemed to waive any liability which cannot be waived under applicable law, including applicable U.S. state and federal securities laws, ERISA or any rules or regulations adopted under any of those laws.
(b) Investment Manager will indemnify Sub-Adviser and Sub-Adviser Related Persons against any expense, cost, charge, loss or liability incurred by Sub-Adviser or Sub-Adviser Related Persons arising out of, or in connection with: (i) Sub-Adviser or Sub-Adviser Related Persons acting under this Agreement; or (ii) any negligence, fraud, dishonesty or breach of this Agreement or any law or regulation by Investment Manager and its affiliates and its or their controlling persons, officers, directors, employees, agents, legal representatives and persons controlled by it (collectively “Investment Manager Related Persons”), relating to Investment Manager’s or Investment Manager Related Persons’ performance of this Agreement (for the purposes of this Section 7 indemnification, Sub-Adviser shall not be considered an agent of Investment Manager), except insofar as any loss, liability, cost, charge or expense is caused by the breach of fiduciary duty, willful misfeasance, bad faith, gross negligence, or from reckless disregard of its duties under this Agreement by Sub-Adviser or any Sub-Adviser Related Persons. This obligation continues after the termination of this Agreement.
(c) Notwithstanding anything to the contrary in this Agreement, neither party is liable to the other party for consequential loss. For the purposes of this Agreement, ‘consequential loss’ includes loss or profits, loss of revenue, loss or denial of opportunity, loss of or damage to access to markets, loss of anticipated savings, loss of or damage to goodwill, loss of or damage to business reputation, future reputation, and publicity, any indirect, remote abnormal or unforeseeable loss or any similar loss whether or not in the reasonable contemplation of the parties at the time of execution of this Agreement.
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8. (a) This Agreement shall be executed and become effective as of the date written below; provided, however, that this Agreement shall not become effective with respect to the Fund unless it has first been approved with respect to the Fund in the manner required by the 1940 Act and the rules thereunder or in accordance with exemptive or other relief granted by the U.S. Securities and Exchange Commission (the “SEC”) or its staff. This Agreement shall continue in effect with respect to the Fund for a period of two (2) years and may be renewed thereafter with respect to the Fund only so long as such renewal and continuance with respect to the Fund is specifically approved at least annually by the applicable Board or by the vote of a majority of the outstanding voting securities of the Fund and only if the terms and the renewal hereof have been approved by the vote of a majority of those Trustees of the Trust who are not parties hereto or “interested persons” of the Trust, the Fund, or any party hereto, cast in person at a meeting called for the purpose of voting on such approval.
(b) This Agreement may be amended only by written agreement of the Investment Manager and the Sub-Adviser and only in accordance with the provisions of the 1940 Act and the rules and regulations promulgated thereunder or any applicable exemptive order.
(c) This Agreement may be terminated with respect to a the Fund (i) by the Investment Manager at any time, without the payment of a penalty, on 60 days’ written notice to the Sub-Adviser of the Investment Manager’s intention to do so and (ii) by the Trust with respect to the Fund in the Trust at any time, without the payment of a penalty, on 60 days’ written notice to the Sub- Adviser of the Trust’s intention to do so pursuant to action by the Board or pursuant to the vote of a majority of the outstanding voting securities of the Fund. The Sub-Adviser may terminate this Agreement with respect to the Fund at any time, without the payment of a penalty, on 60 days’ written notice to the Investment Manager and the Trust of its intention to do so. Upon termination of this Agreement, the obligations of all the parties hereunder shall cease and terminate as of the date of such termination, except for (i) any obligation arising out of or relating to a breach of this Agreement committed prior to such termination, (ii) the obligation of the Investment Manager to pay to the Sub-Adviser the fee provided in Paragraph 4 hereof prorated to the date of termination, and (iii) any indemnification obligation provided in Paragraph 7 hereof. This Agreement shall automatically terminate in the event of its assignment (as such term is defined in the 1940 Act) or upon the termination of an Investment Management Agreement.
9. Any information and advice furnished by either party to this Agreement to the other party shall be treated as confidential and shall not be disclosed to third parties without the consent of the other party hereto. Notwithstanding the foregoing, information shall not be subject to such confidentiality obligations if it:
(i) |
is already known to the receiving party at the time it is obtained (other than through previous disclosure by the protected party or by a party known by the receiving party to be bound by a confidentiality obligation to the protected party); |
(ii) |
is or becomes publicly known or available through no wrongful act of the receiving party; |
(iii) |
is rightfully received from a third party who, to the best of the receiving party’s knowledge, is not under a duty of confidentiality; |
(iv) |
is required to be disclosed by the receiving party pursuant to a requirement of a court order, subpoena, governmental or regulatory agency or law (provided the receiving party provides the protected party written notice of such requirement, to the extent such notice is permitted and reasonably practicable in the circumstances); |
(v) |
is relevant to the defense of any claim or cause of action asserted against the receiving party (provided the receiving party provides the protected party with sixty (60) days’ written notice of any disclosure if practicable or such lesser amount as may be necessary and provided such notice does not prejudice the receiving party); or |
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(vi) |
has been or is independently developed or obtained by the receiving party. |
The Sub-Adviser shall not disclose any “nonpublic personal information” (as such term is defined in Regulation S-P, including any amendments thereto) pertaining to the customers (as such term is defined in Regulation S-P, including any amendments thereto) of the Trust to any third party or use such information other than for the purpose of providing the services contemplated by this Agreement.
10. The Sub-Adviser represents, warrants and agrees that:
(a) The Sub-Adviser: (i) is registered as an investment adviser under the Advisers Act and will continue to be so registered for so long as this Agreement remains in effect; (ii) is not prohibited by the 1940 Act, the Advisers Act or other law, regulation or order from performing the services contemplated by this Agreement (iii) to the best of its knowledge, has met and will seek to continue to meet for so long as this Agreement remains in effect, any other applicable federal or state requirements, or the applicable requirements of any regulatory or industry self-regulatory agency necessary to be met in order to perform the services contemplated by this Agreement; (iv) has the authority to enter into and perform the services contemplated by this Agreement; and (v) will promptly notify the Investment Manager of the occurrence of any event that would disqualify the Sub-Adviser from serving as an investment adviser of an investment company pursuant to Section 9(a) of the 1940 Act or otherwise. The Sub-Adviser will also promptly notify the Fund and the Investment Manager if it is served or otherwise receives notice of any action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, involving the affairs of the Fund, provided, however, that routine regulatory examinations that do not specifically relate to the Fund or the Trust shall not be required to be reported by this provision.
(b) The Sub-Adviser has adopted policies and procedures and a written code of ethics complying with the requirements of Rule 17j-l under the 1940 Act and 204A-1 under the Advisers Act and will provide the Investment Manager and the Board with a copy of such policies and procedures and code of ethics, together with evidence of its adoption. In accordance with the requirements of Rule 17j-l, the Sub-Adviser shall certify to the Investment Manager that the Sub-Adviser has complied in all material respects with the requirements of Rule 17j-l during the previous year and that there has been no material violation of the Sub-Adviser’s code of ethics relating to the services the Sub-Adviser performs under this Agreement or, if such a material violation has occurred, that appropriate action was taken in response to such violation. Upon the written request of the Investment Manager, the Sub-Adviser shall provide to the Investment Manager, its employees or its agents all information required by Rule 17j-l(c)(l) relating to the approval by the Board of the Sub-Adviser’s code of ethics relating to the services the Sub-Adviser performs under this Agreement.
(c) The Sub-Adviser has provided the Trust and the Investment Manager with a copy of its Form ADV at least forty-eight (48) hours prior to execution of this Agreement, which as of the date of this Agreement is its Form ADV as most recently filed with the SEC, and promptly will furnish a copy of all amendments to the Trust and the Investment Manager at least annually. Such amendments shall reflect all changes in the Sub-Adviser’s organizational structure, professional staff or other significant developments affecting the Sub-Adviser, as required by the Advisers Act.
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(d) The Sub-Adviser will notify the Trust and the Investment Manager of any event that would be deemed an assignment of this Agreement, with the exception of any assignment by or with respect to the Investment Manager, or change of control of the Sub-Adviser, as applicable, and any changes in the key personnel who are the portfolio manager(s) of the Fund prior to or promptly after such change.
(e) The Sub-Adviser agrees to maintain an appropriate level of errors and omissions or professional liability insurance coverage as shall be reasonably necessary in light of its obligations under this Agreement.
11. The Investment Manager will notify the Sub-Adviser of any event that would be deemed an assignment of this Agreement, with the exception of any assignment by or with respect to the Sub-Adviser, or change of control of the Investment Manager, as applicable.
12. The Sub-Adviser has implemented policies and procedures designed to prevent the disclosure by the Sub-Adviser, its employees or agents of the Fund’s portfolio holdings to any person or entity other than the Investment Manager, the Trust’s custodian, or other persons expressly designated by the Investment Manager.
13. This Agreement shall extend to and bind the successors of the parties hereto. Nothing in this Agreement, express or implied, is intended to or shall (a) confer on any person other than the parties hereto and their respective successors or permitted assigns any rights (including third party beneficiary rights), remedies, obligations or liabilities under or by reason of this Agreement, or (b) constitute the parties hereto as partners or as participants in a joint venture.
14. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
15. All written notices, requests or other communications to any party hereunder shall be given to the following addresses and telecopy numbers, or such other address and telecopy number communicated to the other parties from time to time:
If to the Sub Adviser: | Attention: | MFI Investment Solutions and Strategy |
Address: | Level 9, 50 Martin Place | |
Sydney, New South Wales, Australia | ||
Fascimile: | +61282324168 | |
Email: | sarah.scanlon@macquarie.com and MAMMIMFIISSAustralia@macquarie.com | |
Copy: | MIM Legal Sydney | |
Address: | Same as above | |
Fascimile: | +61282324168 | |
Email: | MFGLegalMIM@macquarie.com | |
If to the Investment | Delaware Management Company, a series of Macquarie | |
Manager or the Fund: | Investment Management Business Trust | |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
Attention: General Counsel |
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16. For the purposes of this Agreement, the terms “vote of a majority of the outstanding voting securities,” “interested person,” “affiliated person,” and “assignment” shall have the meanings given them in the 1940 Act, subject, however to such exemptions as may be granted by the SEC and its staff under the 1940 Act.
17. If by reason of (a) market movements; (b) contributions to or withdrawals from the Portfolio; (c) a change in the nature of any investment (whether through change in business activity or credit rating); or (d) circumstances beyond the reasonable control of the Sub-Adviser, the Fund ceases to comply with any document or instruction referred to in clause 1(d), the Sub-Adviser must remedy the non-compliance as soon as practicable after the Sub-Adviser becomes aware of the non-compliance. If remedied in accordance with this clause, the non-compliance will not constitute a breach of the Agreement.
18. The Investment Manager and Trust acknowledge that the Sub-Adviser will manage the Fund on a pre-tax basis and is not required to take into account the Fund’s tax position in managing the Fund.
19. A party will not be liable to the other for any failure, interruption or delay in performance of their respective obligations to the extent such failure, interruption or delay is caused by (a) a breakdown, failure or malfunction of any telecommunications or computer service or system which has been set up and maintained by a party in accordance with the requirements of this Agreement; (b) the closure or suspension of any market relevant to a party’s obligations under this Agreement; or (c) any fire, explosion, flood, earthquake, peril of the sea, strike or lockout, embargo, civil commotions, riots, wars, weather, governmental laws, orders or restrictions, national or regional emergencies, strikes, labour stoppages or slowdowns or other industrial disturbances, shortage of adequate power, materials or transportation facilities or any similar cause beyond a party's reasonable control.
20. The Investment Manager acknowledges that the Sub-Adviser is a member of the Macquarie Group Limited group of companies (“Macquarie Group”) and that such group is a diversified provider of financial and investment services, engaging in a broad range of activities including securities underwriting, sales and trading, investment banking, lending, financial advisory services, investment research, asset management and other activities. The Sub-Adviser generally has no control over these activities. As a result, the Investment Manager acknowledges that from time to time the Sub-Adviser’s investment activities may be restricted, for example due to regulatory constraints applicable to the Macquarie Group, and/or its internal policies designed to comply with such constraints. Without limitation, this includes circumstances where an acquisition of securities would cause the Macquarie Group’s aggregated holdings in a company to exceed applicable takeover thresholds. In addition, where, due to such restrictions, there is limited capacity to acquire particular securities, the Fund will not have priority over any member of, or any other fund or clients associated with, the Macquarie Group to acquire those securities, however the Sub-Adviser will allocate available securities amongst funds and clients (including the Fund) in a fair and equitable manner.
11
21. Subject to the Investment Company Act of 1940, as amended, and its rules and regulations and in accordance with the Fund’s compliance policies and procedures, the Sub-Adviser may 'cross securities' where one or more of the client accounts or pooled funds managed by the Sub-Adviser or a related body corporate of the Sub-Adviser (“Sub-Adviser Accounts”) either (a) have demand for assets contained in the Fund; or (b) have available for sale assets which the Sub-Adviser wishes to be contained in the Fund. A ‘crossing of securities’ may occur by the Sub-Adviser making an offer to purchase specific assets from the Fund or making an offer to sell to the Fund specific assets. Neither the Sub-Adviser nor its related body corporate may charge transaction fees with respect to the trade between the Fund and a Manager Account pursuant to this clause.
12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their duly authorized officers effective as of May 30, 2019.
DELAWARE MANAGEMENT | |||||
COMPANY, a series of Macquarie Investment | |||||
Management Business Trust | |||||
By: | /s/ Susan Natalini | ||||
Name: | Susan Natalini | ||||
Title: | Senior Vice President | ||||
EXECUTED by MACQUARIE | ) | ||||
INVESTMENT MANAGEMENT | ) | ||||
GLOBAL LIMITED | ) | ||||
) | |||||
) | 16 October 2019 | ||||
) | Date | ||||
/s/ Lorraine Yoo | |||||
Signature of attorney | |||||
/s/ Matthew Mulcahy | |||||
Signature of attorney | |||||
Lorraine Yoo | |||||
Name of attorney | |||||
Matthew Mulcahy | |||||
Name of attorney | |||||
Agreed to and accepted as of the day and year first above written: | |||||
On behalf of each Fund identified on | |||||
Schedule 1 hereto | |||||
By | /s/ Daniel V. Geatens | ||||
Name: | Daniel V. Geatens | ||||
Title: | Vice President |
13
EXHIBIT A
FEE SCHEDULE
For the Fund’s assets within Investment Manager’s portion of the Fund and denominated in Australian dollars and New Zealand dollars and any other assets managed by the Sub-Adviser, the Sub-Adviser shall receive 25% of the Investment Manager’s retained investment management fee (expressed in dollars) x the percentage of Investment Manager’s Fund assets in such currency or managed by the Sub-Adviser.
Fees received by the Sub-Adviser are not to exceed 25% of the Investment Manager’s retained investment management fee (expressed in dollars & after Investment Manager has paid any unaffiliated Fund sub-advisers, paid the Fund’s investment consultant, and paid any amounts towards the Fund’s expense waivers) in the aggregate with other affiliated sub-advisers providing fixed income investment services, including portfolio management and trading.
14
SCHEDULE 1
LIST OF TRUSTS AND FUNDS
Delaware Group® Adviser Funds |
Delaware Diversified Income Fund |
Delaware Group® Cash Reserve |
Delaware Investments Ultrashort Fund |
Delaware Group® Equity Funds V |
Delaware Wealth Builder Fund |
Delaware Group Foundation Funds |
Delaware Strategic Allocation Fund (formerly Delaware Foundation Moderate Allocation Fund |
Delaware Group Government Funds |
Delaware Emerging Markets Debt Fund |
Delaware Strategic Income Fund |
Delaware Group Income Funds |
Delaware Corporate Bond Fund |
Delaware Extended Duration Bond Fund |
Delaware Floating Rate Fund |
Delaware High Yield Opportunities Fund |
Delaware Group Limited Term Government Funds |
Delaware Limited Term Diversified Income Fund |
Delaware Pooled Trust |
Macquarie Core Plus Bond Portfolio |
Macquarie High Yield Bond Portfolio |
Delaware VIP Trust |
Delaware VIP Diversified Income Series |
Delaware VIP High Yield Series |
Delaware VIP Limited Term Diversified Income Series |
15
EX-99.d.3.i
[FORM OF] AMENDMENT NO. 3
TO
SCHEDULE 1
OF THE SUB-ADVISORY AGREEMENT
THIS AMENDMENT NO. 3 to SCHEDULE 1 dated _________________, 2022 to the Sub-Advisory Agreement (the “Agreement”) dated May 30, 2019, between DELAWARE MANAGEMENT COMPANY, a series of Macquarie Investment Management Business Trust (the “Investment Manager”), and MACQUARIE INVESTMENT MANAGEMENT GLOBAL LIMITED (the “Sub-Adviser”), amends the list the Funds for which the Sub-Adviser provides investment sub-advisory services pursuant to the Agreement.
FUND | EFFECTIVE DATE | |
Delaware Group® Adviser Funds | ||
Delaware Diversified Income Fund | May 30, 2019 | |
Delaware Group® Cash Reserve | ||
Delaware Investments Ultrashort Fund | May 30, 2019 | |
Delaware Group® Equity Funds IV | ||
Delaware Special Situations Fund | October 4, 2019 | |
Delaware Floating Rate II Fund | October 4, 2019 | |
Delaware Fund for Income | October 4, 2019 | |
Delaware International Opportunities Bond Fund | October 4, 2019 | |
Delaware Investment Grade Bond Fund | October 4, 2019 | |
Delaware Limited Duration Bond Fund | October 4, 2019 | |
Delaware Strategic Income II Fund | October 4, 2019 | |
Delaware Group® Equity Funds V | ||
Delaware Wealth Builder Fund | May 30, 2019 | |
Delaware Group Foundation Funds | ||
Delaware Strategic Allocation Fund (formerly | May 30, 2019 | |
Delaware Foundation Moderate Allocation Fund) | ||
Delaware Group Government Funds | ||
Delaware Emerging Markets Debt Fund | May 30, 2019 | |
Delaware Strategic Income Fund | May 30, 2019 | |
Delaware Group Income Funds | ||
Delaware Corporate Bond Fund | May 30, 2019 | |
Delaware Extended Duration Bond Fund | May 30, 2019 | |
Delaware Floating Rate Fund | May 30, 2019 | |
Delaware High Yield Opportunities Fund | May 30, 2019 |
Delaware Group Limited Term Government Funds | ||
Delaware Limited Term Diversified Income Fund | May 30, 2019 | |
Delaware Pooled Trust | ||
Macquarie Core Plus Bond Portfolio | May 30, 2019 | |
Macquarie High Yield Bond Portfolio | May 30, 2019 | |
Ivy Funds | ||
Delaware Ivy Balanced Fund | April 30, 2021 | |
Delaware Ivy Core Bond Fund | March __, 2022 | |
Delaware Ivy Corporate Bond Fund | April 30, 2021 | |
Delaware Ivy Crossover Credit Fund | April 30, 2021 | |
Delaware Ivy Global Bond Fund | April 30, 2021 | |
Delaware Ivy Government Securities Fund | April 30, 2021 | |
Delaware Ivy High Income Fund | April 30, 2021 | |
Delaware Ivy Limited-Term Bond Fund | April 30, 2021 | |
Delaware Ivy ProShares Interest Rate Hedged High | April 30, 2021 | |
Yield Index Fund | ||
Delaware Ivy ProShares S&P 500 Bond Index Fund | April 30, 2021 | |
Delaware Ivy Apollo Strategic Income Fund | November 15, 2021 | |
Delaware Ivy Apollo Multi-Asset Income Fund | November 15, 2021 | |
Delaware Ivy Pictet Emerging Markets Local Currency | November 15, 2021 | |
Debt Fund | ||
Delaware Ivy Pictet Targeted Return Bond Fund | November 15, 2021 | |
Delaware Ivy Pinebridge High Yield | November 15, 2021 | |
Ivy Variable Insurance Portfolios | ||
Delaware Ivy VIP Asset Strategy | April 30, 2021 | |
Delaware Ivy VIP Balanced | April 30, 2021 | |
Delaware Ivy VIP Corporate Bond | April 30, 2021 | |
Delaware Ivy VIP Global Bond | April 30, 2021 | |
Delaware Ivy VIP High Income | April 30, 2021 | |
Delaware Ivy VIP Limited-Term Bond | April 30, 2021 |
Except as provided herein, the terms and conditions contained in the Agreement shall remain in full force and effect.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment No. 3 as of the dates set forth above.
DELAWARE MANAGEMENT COMPANY, | MACQUARIE INVESTMENT | |
A series of Macquarie Investment Management | MANAGEMENT GLOBAL LIMITED | |
Business Trust |
By: | By: | |||
Name: | Name: | |||
Title: | ||||
By: | ||||
Name: | ||||
Title: |
Agreed to and accepted as of the day and year first above written:
DELAWARE GROUP® ADVISER FUNDS | ||
By | ||
Name: | Daniel Geatens | |
Title: | Head, US Fund Administration | |
DELAWARE GROUP® CASH RESERVE | ||
By | ||
Name: | Daniel Geatens | |
Title: | Head, US Fund Administration |
DELAWARE GROUP® EQUITY FUNDS IV |
||
By | ||
Name: | Daniel Geatens | |
Title: | Head, US Fund Administration | |
DELAWARE GROUP® EQUITY FUNDS V | ||
By | ||
Name: | Daniel Geatens | |
Title: | Head, US Fund Administration | |
DELAWARE GROUP® FOUNDATION FUNDS |
||
By | ||
Name: | Daniel Geatens | |
Title: | Head, US Fund Administration | |
DELAWARE GROUP® GOVERNMENT FUNDS |
||
By | ||
Name: | Daniel Geatens | |
Title: | Head, US Fund Administration | |
DELAWARE GROUP® INCOME FUNDS | ||
By | ||
Name: | Daniel Geatens | |
Title: | Head, US Fund Administration |
DELAWARE GROUP® LIMITED TERM GOVERNMENT FUNDS |
||
By | ||
Name: | Daniel Geatens | |
Title: | Head, US Fund Administration | |
DELAWARE POOLED TRUST | ||
By | ||
Name: | Daniel Geatens | |
Title: | Head, US Fund Administration | |
IVY FUNDS | ||
By | ||
Name: | Daniel Geatens | |
Title: | Head, US Fund Administration | |
IVY VARIABLE INSURANCE PORTFOLIOS |
||
By | ||
Name: | Daniel Geatens | |
Title: | Head, US Fund Administration |
EX-99.g.1.iii
AMENDMENT NO. 4 TO MUTUAL FUND CUSTODY AND SERVICES AGREEMENT
This Amendment No. 4 (“Amendment”) is made as of the 19th day of July, 2019, by and between each investment company listed on the signature page hereto (each referred to herein as the “Fund”) and THE BANK OF NEW YORK MELLON (formerly, Mellon Bank, N.A.) (“Custodian” or “BNY Mellon”).
BACKGROUND:
A. Each Fund and Custodian are parties to a Mutual Fund Custody and Services Agreement dated as of July 20, 2007, as amended (the “Agreement”), relating to Custodian’s provision of custody services to each Fund and the Fund’s respective series (“Series”). This Amendment is an amendment to the Agreement.
B. The parties desire to amend the Agreement as set forth herein.
TERMS:
The parties hereby agree that:
1. A new Article IV Section 10 of the Agreement is added as follows:
10. Sanctions.
a. Throughout the term of this Agreement, each Fund: (i) will maintain, and comply with, policies and procedures designed to prevent violations of Sanctions, including measures to accomplish effective and timely scanning of all relevant data with respect to incoming or outgoing assets or transactions relating to this Agreement; (ii) will ensure that neither the Fund, nor any of its directors, officers or employees is an individual or entity that is, or is owned or controlled by an individual or entity that is: (A) the target of Sanctions or (B) located, organized or resident in a country or territory that is, or whose government is, the target of Sanctions; (iii) will ensure that neither Delaware Management Company, a series of Macquarie Investment Management Business Trust (“DMC”), Delaware Distributors, L.P. (“DDLP”), Delaware Investments Fund Services Company (“DIFSC”), or any entity affiliated with DMC, DDLP or DIFSC by being under common control with DMC, DDLP or DIFSC (together, the “Macquarie Entities”) nor any of the directors, officers or employees of the Macquarie Entities is an individual or entity that is, or is owned or controlled by an individual or entity that is the target of Sanctions, (iv) will ensure that neither DMC, DDLP or DIFSC, or any subsidiary of DMC, DDLP or DIFSC (together, the “Delaware Entities”) nor any of the directors, officers or employees of the Delaware Entities is an individual or entity that is located, organized or resident in a country or territory that is, or whose government is, the target of Sanctions, and (v) will not, directly or indirectly, use the accounts under this Agreement in any manner that would result in a violation by the Fund or Custodian of Sanctions.
1
b. Throughout the term of this Agreement, Custodian: (i) will maintain, and comply with, policies and procedures designed to prevent violations of Sanctions, including measures to accomplish effective and timely scanning of all relevant data with respect to incoming or outgoing assets or transactions relating to this Agreement; (ii) will ensure that neither the Custodian nor any of its affiliates, directors, officers or employees is an individual or entity that is, or is owned or controlled by an individual or entity that is the target of Sanctions; and (iii) will not, directly or indirectly, use the accounts under this Agreement in any manner that would result in a violation by a Fund or Custodian of Sanctions.
c. To the extent reasonably practicable, each Fund will promptly provide, or if BNY Mellon Investment Servicing (US) Inc. serves as the Fund’s transfer agent or sub-transfer agent will cause BNY Mellon Investment Servicing (US) Inc. in its role as transfer agent or sub-transfer agent to promptly provide, to Custodian such information as Custodian reasonably requests in connection with the matters referenced in this Section 10, including information regarding (i) the accounts under this Agreement, (ii) the Assets and the source thereof, (iii) the identity of any individual or entity having or claiming an interest therein, including any investor and (iv) the Fund’s Sanctions compliance programs and any related records and/or transaction information, including with respect to any investor. Each Fund will cooperate with Custodian and provide assistance reasonably requested by Custodian in connection with any Sanctions inquiries.
d. Custodian may, by following procedures determined by the Custodian to be reasonable, decline to act or provide services in respect of any Series, and take such other actions as it, in its reasonable discretion, deems necessary or advisable, in connection with the matters referenced in this Section 10. If Custodian declines to act or provide services as provided in the preceding sentence, except as otherwise prohibited by applicable law or official request, Custodian will promptly inform the relevant Fund.
e. For purposes of this Section 10, “Sanctions” means all economic sanctions laws, rules, regulations, executive orders and requirements administered by any governmental authority of the United States (including the United States Office of Foreign Assets Control) or any other applicable domestic or foreign authority.
2. Miscellaneous.
(a) |
As hereby amended and supplemented, the Agreement, as well as capitalized terms not defined in this Amendment, shall remain in full force and effect. In the event of a conflict between the terms of this Amendment and the terms of the Agreement, the terms of this Amendment shall control. |
(b) |
The Agreement, as amended hereby, constitutes the complete understanding and agreement of the parties with respect to the subject matter hereof and supersedes all prior communications with respect thereto. |
2
(c) |
This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. The facsimile signature of any party to this Amendment shall constitute the valid and binding execution hereof by such party. |
(d) |
To the extent required by applicable law, the terms of this Amendment and the fees and expenses associated with this Amendment have been disclosed to and approved by the Board of Trustees/Directors of each Fund. |
(e) |
This Amendment shall be governed by the laws of The Commonwealth of Pennsylvania, without regard to its principles of conflicts of laws. |
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their duly authorized officers designated below on the date and year first above written.
DELAWARE GROUP ADVISER FUNDS, on | |
behalf of its Series identified on Schedule A | |
DELAWARE GROUP CASH RESERVE, on | |
behalf of its Series identified on Schedule A | |
DELAWARE GROUP EQUITY FUNDS I, on | |
behalf of its Series identified on Schedule A | |
DELAWARE GROUP EQUITY FUNDS II, | |
on behalf of its Series identified on Schedule A | |
DELAWARE GROUP EQUITY FUNDS IV, | |
on behalf of its Series identified on Schedule A | |
DELAWARE GROUP EQUITY FUNDS V, | |
on behalf of its Series identified on Schedule A | |
DELAWARE GROUP FOUNDATION | |
FUNDS, on behalf of its Series identified on | |
Schedule A | |
DELAWARE GROUP INCOME FUNDS, on | |
behalf of its Series identified on Schedule A |
3
DELAWARE GROUP STATE TAX-FREE | |
INCOME TRUST, on behalf of its Series | |
identified on Schedule A | |
DELAWARE GROUP TAX-FREE FUND, on | |
behalf of its Series identified on Schedule A | |
DELAWARE GROUP GLOBAL & | |
INTERNATIONAL FUNDS, on behalf of its | |
Series identified on Schedule A | |
VOYAGEUR INSURED FUNDS, on behalf | |
of its Series identified on Schedule A | |
VOYAGEUR INTERMEDIATE TAX FREE | |
FUNDS, on behalf of its Series identified on | |
Schedule A | |
VOYAGEUR MUTUAL FUNDS, on behalf | |
of its Series identified on Schedule A | |
VOYAGEUR MUTUAL FUNDS II, on behalf | |
of its Series identified on Schedule A | |
DELAWARE GROUP GOVERNMENT | |
FUND, on behalf of its Series identified on | |
Schedule A | |
DELAWARE GROUP LIMITED-TERM | |
GOVERNMENT FUNDS, on behalf of its | |
Series identified on Schedule A | |
DELAWARE POOLED TRUST, on behalf of | |
its Series identified on Schedule A | |
VOYAGEUR MUTUAL FUNDS III, on | |
behalf of its Series identified on Schedule A | |
VOYAGEUR TAX FREE FUNDS, on behalf | |
of its Series identified on Schedule A | |
DELAWARE VIP TRUST, on behalf of its | |
Series identified on Schedule A | |
DELAWARE INVESTMENTS COLORADO | |
MUNICIPAL INCOME FUND, INC. |
4
DELAWARE INVESTMENTS NATIONAL | ||
MUNICIPAL INCOME FUND | ||
DELAWARE INVESTMENTS | ||
MINNESOTA MUNICIPAL INCOME FUND | ||
II, INC. | ||
DELAWARE INVESTMENTS DIVIDEND | ||
AND INCOME FUND, INC. | ||
DELAWARE ENHANCED GLOBAL | ||
DIVIDEND AND INCOME FUND | ||
By: | /s/ Daniel V. Geatens | |
Name: | Daniel V. Geatens | |
Title: | Vice President |
THE BANK OF NEW YORK MELLON | |
By: | /s/ Mauricio Sandoval |
Name: | Mauricio Sandoval |
Title: | Director |
5
Schedule A
The following Registrants and Series are covered by, and made parties to, the Amendment as of the date first written above:
Registrants and Series |
Delaware Group® Adviser Funds |
Delaware Diversified Income Fund |
Delaware Global Real Estate Opportunities Fund |
Delaware U.S. Growth Fund |
Delaware Group® Cash Reserve |
Delaware Investments Ultrashort Fund |
Delaware Group® Equity Funds I |
Delaware Mid Cap Value Fund |
Delaware Group® Equity Funds II |
Delaware Value® Fund |
Delaware Group® Equity Funds IV |
Delaware Healthcare Fund |
Delaware Small Cap Growth Fund |
Delaware Smid Cap Growth Fund |
Delaware Group® Equity Funds V |
Delaware Small Cap Core Fund |
Delaware Small Cap Value Fund |
Delaware Wealth Builder Fund |
Delaware Group® Foundation Funds |
(Delaware Foundation Funds®) |
Delaware Strategic Allocation Fund (formerly Delaware Foundation® Moderate Allocation Fund) |
Delaware Group® Global & International Funds |
Delaware Emerging Markets Fund |
Delaware Global Value Fund |
Delaware International Small Cap Fund |
Delaware International Value Equity Fund |
Delaware Group® Government Fund |
Delaware Emerging Markets Debt Fund |
Delaware Strategic Income Fund |
Delaware Group® Income Funds |
Delaware Corporate Bond Fund |
Delaware Extended Duration Bond Fund |
Delaware Floating Rate Fund |
Delaware High-Yield Opportunities Fund |
6
Registrants and Series |
Delaware Group® Limited-Term Government Funds |
Delaware Limited-Term Diversified Income Fund |
Delaware Group® State Tax-Free Income Trust |
Delaware Tax-Free Pennsylvania Fund |
Delaware Group® Tax-Free Fund |
Delaware Tax-Free USA Fund |
Delaware Tax-Free USA Intermediate Fund |
Delaware Pooled® Trust |
Macquarie Core Plus Bond Portfolio |
Macquarie Emerging Markets Portfolio |
Macquarie Emerging Markets Portfolio II |
Macquarie High Yield Bond Portfolio |
Macquarie Labor Select International Equity Portfolio |
Macquarie Large Cap Value Portfolio |
Delaware REIT Fund |
Delaware VIP® Trust |
Delaware VIP® Diversified Income Series |
Delaware VIP® Emerging Markets Series |
Delaware VIP® High Yield Series |
Delaware VIP® International Value Equity Series |
Delaware VIP® Limited-Term Diversified Income Series |
Delaware VIP® REIT Series |
Delaware VIP® Small Cap Value Series |
Delaware VIP® Smid Cap Core Series |
Delaware VIP® U.S. Growth Series |
Delaware VIP® Value Series |
Voyageur Insured Funds |
Delaware Tax-Free Arizona Fund |
Voyageur Intermediate Tax Free Funds |
Delaware Tax-Free Minnesota Intermediate Fund |
Voyageur Mutual Funds |
Delaware Minnesota High-Yield Municipal Bond Fund |
Delaware National High-Yield Municipal Bond Fund |
Delaware Tax-Free California Fund |
Delaware Tax-Free Idaho Fund |
Delaware Tax-Free New York Fund |
Voyageur Mutual Funds II |
Delaware Tax-Free Colorado Fund |
Voyageur Mutual Funds III |
Delaware Select Growth Fund |
Voyageur Tax Free Funds |
Delaware Tax-Free Minnesota Fund |
Delaware Enhanced Global Dividend and Income Fund |
Delaware Investments Dividend and Income Fund, Inc. |
7
Registrants and Series |
Delaware Investments Colorado Municipal Income Fund, Inc. |
Delaware Investments Minnesota Municipal Income Fund II, Inc. |
Delaware Investments National Municipal Income Fund |
8
EX-99.g.1.iv
Execution Version
AMENDMENT NO. 5 TO MUTUAL FUND CUSTODY AND SERVICES AGREEMENT
This Amendment (“Amendment”) is made as of December 31, 2021 (“Effective Date”), by and between each investment company listed on Appendix D attached hereto (referred to herein, each separately, as the “Fund”) and The Bank of New York Mellon (referred to herein as the “Custodian”).
BACKGROUND:
A. |
The Fund and the Custodian are parties to a Mutual Fund Custody and Services Agreement dated as of July 20, 2007 (the “Agreement”), relating to the Custodian’s provision of custody services described in the Agreement to the Fund. This Amendment is an amendment to the Agreement. |
B. |
The parties desire to amend the Agreement as set forth herein. |
TERMS:
The parties hereby agree that:
1. |
A new Article I Section 6.h of the Agreement is hereby added as follows: h. Third Party Data. In performing its services under this Agreement, the Custodian is entitled to rely without inquiry on (1) data provided by the Fund, (2) data provided by market utilities and (3) data provided by other providers of data where such data is required by the Custodian in order for the Custodian to perform its services under this Agreement. The Custodian is not responsible for losses incurred by the Fund in relation to any such data being inaccurate or incomplete. For clarity, if data is provided to the Custodian by an affiliate of the Custodian pursuant to an agreement relating to the Fund to which such affiliate is a party, the foregoing sentence is not intended to affect any liability such affiliate may have pursuant to such agreement. |
2. |
Article IV Section 5.b of the Agreement is hereby deleted in its entirety and replaced with the following: b. The Custodian shall indemnify and hold the Fund harmless from all liabilities and costs and expenses, including reasonable counsel fees and expenses, resulting from the negligence or willful misconduct of the Custodian, any agent or subcustodian appointed by the Custodian or any of its or their directors, officers, agents, nominees or employees, in the performance of any functions hereunder, or any other failure to comply with the standard of care required by this Agreement. This provision shall survive the termination of this Agreement. |
3. |
The first sentence of Article IV Section 7.a of the Agreement is hereby deleted in its entirety and replaced with the following: The term of this Agreement shall continue until December 31, 2025 (the “Initial Term”). |
4. |
The following is added to Article IV Section 7.h of the Agreement: For the avoidance of doubt, the Custodian shall be permitted to retain all or any portion of the records and data and retain any digital backup copies created through automated system processes, in accordance with the confidentiality obligations specified in this Agreement for as long as the information is retained, to the extent required by any applicable law, regulation, supervisory or regulatory body or the Custodian’s internal compliance requirements. |
5. |
Article IV Section 9.e of the Agreement is hereby deleted in its entirety and replaced with the following: e. This Agreement shall extend to and shall be binding upon the parties hereto, and their respective successors and assigns; provided, however, that this Agreement shall not be assignable by the Fund without the written consent of the Custodian, or by the Custodian without the written consent of the Fund, authorized or approved by a vote of the Board, provided, however, that a Fund merger or reorganization where the fund surviving from such merger or reorganization assumes the duties and obligations of such Fund under this Agreement shall not require the Custodian’s consent; provided further, however, that the Custodian may not assign or subcontract the rights or delegate the duties or outsource or offshore any services pursuant to this Agreement (“Services”), without the written consent of the Fund, and any other attempted assignment without written consent shall be null and void. Notwithstanding the foregoing, (1) no consent shall be required for the Custodian to assign this Agreement or to assign or subcontract the rights or delegate the duties or outsource or offshore the Services contemplated hereunder to an affiliate of the Custodian, provided the Custodian provides thirty (30) days advance written notice to the other parties hereto, (2) no consent shall be required for the Custodian to assign this Agreement to any successor to the business of the Custodian to which this Agreement relates, provided the Custodian provides thirty (30) days advance written notice (or such shorter notice reasonably necessitated by the circumstances) to the other parties hereto and provided further that such assignee satisfies the requirements for serving as a custodian for an investment company registered under the Investment Company Act of 1940, as amended, and (3) no consent shall be required for the Custodian to utilize a subcustodian in connection with the provision of the Services. |
6. |
A new final sentence of Article IV Section 9.i of the Agreement is hereby added as follows: Each of the parties to this Agreement expressly and irrevocably waives, to the fullest extent permitted by applicable law, any right to a jury trial with respect to all suits and proceedings arising out of or relating to this Agreement. |
7. |
A new Article IV Section 9.m of the Agreement is hereby added as follows: m. In connection with this Agreement, the Fund may enter into foreign exchange transactions (including foreign exchange hedging transactions) with the Custodian or an affiliate of the Custodian acting as a principal or otherwise through customary channels. With respect to such foreign exchange transactions, the Custodian or such affiliate of the Custodian is acting as a principal counterparty on its own behalf and is not acting as a fiduciary or agent for, or on behalf of, the Fund, a Series, any investment manager or any account. |
8. |
A new Article IV Section 9.n of the Agreement is hereby added as follows: n. For clarity, the Custodian may (1) use information regarding the Fund in connection with certain functions performed on a centralized basis by the Custodian, its affiliates and joint ventures and their service providers (including audit, accounting, risk, legal, compliance, sales, administration, product communication, relationship management, compilation and analysis of customer-related data and storage); (2) disclose such information to its affiliates and joint ventures and to its and their service providers who are subject to reasonable confidentiality obligations in accordance with applicable laws and regulations; (3) securely store in a manner consistent with applicable laws and regulations the names and business contact information of the Fund’s employees and representatives relating to this Agreement on the systems or in the records of the Custodian’s affiliates and joint ventures and its and their service providers; and (4) aggregate information regarding the Fund on an anonymized basis with other similar client data for the Custodian’s and its affiliates’ reporting, research, product development and distribution, and marketing purposes (for clarity, the Fund will not be charged by the Custodian for such aggregation or use by the Custodian or the Custodian’s affiliates, unless agreed to in writing by the Fund). For clarity, the foregoing provisions of this Section 9(n) do not relate to nonpublic personal information or authorize the Custodian to utilize nonpublic personal information in a way that would violate any applicable federal and state privacy laws and regulations. |
9. |
A new Article IV Section 9.o of the Agreement is hereby added as follows: o. At the Fund’s request and subject to the Custodian’s approval, as an accommodation to the Fund, the Custodian will provide consolidated recordkeeping services reflecting on statements provided to the Fund assets not held by the Custodian (“Non-Custody Assets”). Non-Custody Assets will be designated on the Custodian’s books as “assets not held in custody” or by other similar designation and are not considered assets maintained by the Custodian under this Agreement. The Fund acknowledges and agrees that, notwithstanding anything contained elsewhere in this Agreement, (1) the Fund will have no security entitlement against the Custodian with respect to Non-Custody Assets; (2) the Custodian will rely without inquiry on information provided by the Fund or its designee regarding Non-Custody Assets (including positions) and (3) the Custodian will have no responsibility with respect to Non-Custody Assets or the accuracy of any information maintained on the Custodian’s books or set forth on account statements concerning Non-Custody Assets. |
10. |
Section 4 of Amendment No. 2 to the Agreement (dated July 1, 2017) is hereby deleted in its entirety and replaced with the following: BNYM shall perform penetration testing activities on its systems related to the Services provided hereunder, at least annually, as part of its information security policies and procedures. The Fund agrees and understands that BNYM does not guarantee that the penetration testing activities will detect all security weaknesses, potential security problems or potential breaches. BNYM will provide the Fund with a certification confirming the completion of the testing promptly after it is complete. The Custodian will at its own cost remediate identified security vulnerabilities in accordance with its information security program. |
11. |
Section 7 of Amendment No. 2 to the Agreement (dated July 1, 2017) is hereby deleted in its entirety and replaced with the following: Annually, upon the Fund’s request, BNYM will confirm in writing completion of its ISO 27001 certification, and will provide a SOC 1 Type II Report covering BNYM’s internal control over financial reporting applicable to the processing of Fund information. | |
12. |
Section 9 of Amendment No. 2 to the Agreement (dated July 1, 2017) is hereby deleted in its entirety and replaced with the following: In performing the Services, BNYM shall comply with all laws, rules and regulations in connection with this Agreement to which BNYM is subject and with such standards as may be imposed on BNYM by law and by the requirements of all regulatory authorities. | |
13. |
For clarity, as of the Effective Date of this Amendment the Agreement shall be deemed to be in its “Initial Term” (as defined in Section 3 above). | |
14. |
Appendix D of the Agreement is hereby deleted in its entirety and replaced with Appendix D attached hereto. | |
15. |
Appendix E of the Agreement is hereby deleted in its entirety. The first sentence of Article IV Section 1.a of the Agreement is hereby deleted in its entirety and replaced with the following: The Fund will compensate the Custodian for its services rendered under this Agreement in accordance with the fees set forth in a fee schedule agreed in writing between the Fund and the Custodian (the “Fees”). | |
16. |
Miscellaneous. | |
(a) |
As hereby amended and supplemented, the Agreement, as well as capitalized terms not defined in this Amendment, shall remain in full force and effect. In the event of a conflict between the terms of this Amendment and the terms of the Agreement, the terms of this Amendment shall control. | |
(b) |
The Agreement, as amended hereby, constitutes the complete understanding and agreement of the parties with respect to the subject matter thereof and supersedes all prior communications with respect thereto. |
(c) |
To the extent required by applicable law, the terms of this Amendment and the fees and expenses associated with this Amendment have been disclosed to and approved by the governing body of the Fund. | |
(d) |
This Amendment shall be governed by the laws of the Commonwealth of Pennsylvania, without regard to its principles of conflicts of laws. | |
(e) |
The parties expressly agree that this Amendment may be executed in one or more counterparts and expressly agree that such execution may occur by manual signature on a physically delivered copy of this Amendment, by a manual signature on a copy of this Amendment transmitted by facsimile transmission, by a manual signature on a copy of this Amendment transmitted as an imaged document attached to an email, or by "Electronic Signature", which is hereby defined to mean inserting an image, representation or symbol of a signature into an electronic copy of this Amendment by electronic, digital or other technological methods. Each counterpart executed in accordance with the foregoing shall be deemed an original, with all such counterparts together constituting one and the same instrument. The exchange of executed counterparts of this Amendment or of executed signature pages to counterparts of this Amendment, in either case by facsimile transmission or as an imaged document attached to an email transmission, shall constitute effective execution and delivery of this Amendment and may be used for all purposes in lieu of a manually executed and physically delivered copy of this Amendment. |
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be executed as of the Effective Date by its duly authorized representative indicated below. An authorized representative, if executing this Amendment by Electronic Signature, affirms authorization to execute this Amendment by Electronic Signature and that the Electronic Signature represents an intent to enter into this Amendment and an agreement with its terms.
The Bank of New York Mellon | ||
By: | /s/ Chris Healy | |
Name: | Christopher Healy | |
Title: | Managing Director | |
DELAWARE GROUP | ||
ADVISER FUNDS, on behalf of | ||
its Portfolios identified on | ||
Appendix D | ||
DELAWARE GROUP CASH | ||
RESERVE, on behalf of its | ||
Portfolios identified on Appendix | ||
D | ||
DELAWARE GROUP EQUITY | ||
FUNDS I, on behalf of its | ||
Portfolios identified on Appendix | ||
D | ||
DELAWARE GROUP EQUITY | ||
FUNDS II, on behalf of its | ||
Portfolios identified on Appendix | ||
D | ||
DELAWARE GROUP EQUITY | ||
FUNDS IV, on behalf of its | ||
Portfolios identified on Appendix | ||
D | ||
DELAWARE GROUP EQUITY | ||
FUNDS V, on behalf of its | ||
Portfolios identified on Appendix | ||
D |
DELAWARE GROUP |
FOUNDATION FUNDS, on |
behalf of its Portfolios identified |
on Appendix D |
DELAWARE GROUP INCOME |
FUNDS, on behalf of its |
Portfolios identified on Appendix |
D |
DELAWARE GROUP STATE |
TAX-FREE INCOME TRUST, |
on behalf of its Portfolios |
identified on Appendix D |
DELAWARE GROUP TAX- |
FREE FUND, on behalf of its |
Portfolios identified on Appendix |
D |
DELAWARE GROUP |
GLOBAL & INTERNATIONAL |
FUNDS, on behalf of its |
Portfolios identified on Appendix |
D |
VOYAGEUR INSURED |
FUNDS, on behalf of its |
Portfolios identified on Appendix |
D |
VOYAGEUR INTERMEDIATE |
TAX FREE FUNDS, on behalf |
of its Portfolios identified on |
Appendix D |
VOYAGEUR MUTUAL |
FUNDS, on behalf of its |
Portfolios identified on Appendix |
D |
VOYAGEUR MUTUAL |
FUNDS II, on behalf of its |
Portfolios identified on Appendix |
D |
DELAWARE GROUP |
GOVERNMENT FUND, on |
behalf of its Portfolios identified |
on Appendix D |
DELAWARE GROUP |
LIMITED-TERM |
GOVERNMENT FUNDS, on |
behalf of its Portfolios identified |
on Appendix D |
DELAWARE POOLED TRUST, |
on behalf of its Portfolios |
identified on Appendix D |
VOYAGEUR MUTUAL |
FUNDS III, on behalf of its |
Portfolios identified on Appendix |
D |
VOYAGEUR TAX FREE |
FUNDS, on behalf of its |
Portfolios identified on appendix |
D |
DELAWARE VIP TRUST, on |
behalf of its Portfolios identified |
on Appendix D |
IVY FUNDS, on behalf of its |
Portfolios identified on Appendix |
D |
IVY VARIABLE INSURANCE |
PORTFOLIOS, on behalf of its |
Portfolios identified on Appendix |
D |
INVESTED PORTFOLIOS, on |
behalf of its Portfolios identified |
on Appendix D |
DELAWARE INVESTMENTS | ||
COLORADO MUNICIPAL | ||
INCOME FUND, INC. | ||
DELAWARE INVESTMENTS | ||
NATIONAL MUNICIPAL | ||
INCOME FUND | ||
DELAWARE INVESTMENTS | ||
MINNESOTA MUNICIPAL | ||
INCOME FUND II, INC. | ||
DELAWARE INVESTMENTS | ||
DIVIDEND AND INCOME | ||
FUND, INC. | ||
DELAWARE IVY HIGH | ||
INCOME OPPORTUNITIES | ||
FUND | ||
DELAWARE ENHANCED | ||
GLOBAL DIVIDEND AND | ||
INCOME FUND | ||
By: | ||
By: | /s/ Daniel V. Geatens | |
Name: | Daniel V Geatens | |
Title: | Senior Vice President |
Appendix D
The following Registrants and Series are covered by, and made parties to, the Agreement as of the date first written above.
Registrants and Series |
Delaware Group® Adviser Funds |
Delaware Diversified Income Fund |
Delaware Group® Cash Reserve |
Delaware Investments Ultrashort Fund |
Delaware Group® Equity Funds I |
Delaware Mid Cap Value Fund |
Delaware Group® Equity Funds II |
Delaware Value® Fund |
Delaware Group® Equity Funds IV |
Delaware Healthcare Fund |
Delaware Small Cap Growth Fund |
Delaware Smid Cap Growth Fund |
Delaware Covered Call Strategy Fund |
Delaware Equity Income Fund |
Delaware Global Equity Fund |
Delaware Growth and Income Fund |
Delaware Growth Equity Fund |
Delaware Hedged U.S. Equity Opportunities Fund |
Delaware Opportunity Fund |
Delaware Premium Income Fund |
Delaware Total Return Fund |
Delaware Group® Equity Funds V |
Delaware Small Cap Core Fund |
Delaware Small Cap Value Fund |
Delaware Wealth Builder Fund |
Delaware Group® Foundation Funds |
Delaware Strategic Allocation Fund |
Delaware Group® Global & International Funds |
Delaware Emerging Markets Fund |
Delaware International Small Cap Fund |
Delaware International Value Equity Fund |
Delaware Group® Government Fund |
Delaware Emerging Markets Debt Corporate Fund |
Delaware Strategic Income Fund |
Registrants and Series |
Delaware Group® Income Funds |
Delaware Corporate Bond Fund |
Delaware Extended Duration Bond Fund |
Delaware Floating Rate Fund |
Delaware High-Yield Opportunities Fund |
Delaware Group® Limited-Term Government Funds |
Delaware Limited-Term Diversified Income Fund |
Delaware Tax-Free New Jersey Fund |
Delaware Tax-Free Oregon Fund |
Delaware Group® State Tax-Free Income Trust |
Delaware Tax-Free Pennsylvania Fund |
Delaware Group® Tax-Free Fund |
Delaware Tax-Free USA Fund |
Delaware Tax-Free USA Intermediate Fund |
Delaware Pooled® Trust |
Macquarie Emerging Markets Portfolio |
Macquarie Emerging Markets Portfolio II |
Macquarie Labor Select International Equity Portfolio |
Delaware Global Listed Real Assets Fund (formerly, Delaware REIT Fund) |
Delaware VIP® Trust |
Delaware VIP® Emerging Markets Series |
Delaware VIP® Small Cap Value Series |
Delaware VIP® Equity Income Series |
Delaware VIP® Fund for Income Series |
Delaware VIP® Growth and Income Series |
Delaware VIP® Growth Equity Series |
Delaware VIP® International Series |
Delaware VIP® Investment Grade Series |
Delaware VIP® Limited Duration Bond Series |
Delaware VIP® Opportunity Series |
Delaware VIP® Special Situations Series |
Delaware VIP® Total Return Series |
InvestEd Portfolios |
InvestEd 90 Portfolio |
InvestEd 80 Portfolio |
InvestEd 70 Portfolio |
InvestEd 60 Portfolio |
InvestEd 50 Portfolio |
InvestEd 40 Portfolio |
InvestEd 30 Portfolio |
InvestEd 20 Portfolio |
InvestEd 10 Portfolio |
InvestEd 0 Portfolio |
Registrants and Series |
Ivy Funds |
Delaware Ivy Accumulative Fund |
Delaware Ivy Multi-Asset Income Fund |
Delaware Ivy Strategic Income Fund |
Delaware Ivy Asset Strategy Fund |
Delaware Ivy Balanced Fund |
Delaware Ivy California Municipal High Income Fund |
Delaware Ivy Cash Management Fund |
Delaware Ivy Core Equity Fund |
Delaware Ivy Corporate Bond Fund |
Delaware Ivy Crossover Credit Fund |
Delaware Ivy Systematic Emerging Markets Equity Fund |
Delaware Ivy Energy Fund |
Delaware Ivy Global Bond Fund |
Delaware Ivy Global Equity Income Fund |
Delaware Ivy Global Growth Fund |
Delaware Ivy Government Money Market Fund |
Delaware Ivy Government Securities Fund |
Delaware Ivy High Income Fund |
Delaware Ivy International Core Equity Fund |
Delaware Ivy International Small Cap Fund |
Delaware Ivy Large Cap Growth Fund |
Delaware Ivy LaSalle Global Real Estate Fund |
Delaware Ivy Limited-Term Bond Fund |
Delaware Ivy Managed International Opportunities Fund |
Delaware Ivy Mid Cap Growth Fund |
Delaware Ivy Mid Cap Income Opportunities Fund |
Delaware Ivy Municipal Bond Fund |
Delaware Ivy Municipal High Income Fund |
Delaware Ivy Natural Resources Fund |
Delaware Ivy Emerging Markets Local Currency Debt Fund |
Delaware Ivy Total Return Bond Fund |
Delaware Ivy High Yield Fund |
Delaware Ivy ProShares Interest Rate Hedged High Yield Index Fund |
Delaware Ivy ProShares MSCI ACWI Index Fund |
Delaware Ivy ProShares Russell 2000 Dividend Growers Index Fund |
Delaware Ivy ProShares S&P 500 Bond Index Fund |
Delaware Ivy S&P 500 Dividend Aristocrats Index Fund |
Delaware Ivy International Value Fund |
Registrants and Series |
Ivy Funds (continued) |
Delaware Ivy Science and Technology Fund |
Delaware Ivy Securian Core Bond Fund |
Delaware Ivy Securian Real Estate Securities Fund |
Delaware Ivy Smid Cap Core Fund |
Delaware Ivy Small Cap Growth Fund |
Delaware Ivy Value Fund |
Delaware Ivy Wilshire Global Allocation Fund |
Ivy Variable Insurance Portfolios |
Delaware Ivy VIP Asset Strategy |
Delaware Ivy VIP Balanced |
Delaware Ivy VIP Core Equity |
Delaware Ivy VIP Corporate Bond |
Delaware Ivy VIP Energy |
Delaware Ivy VIP Global Bond |
Delaware Ivy VIP Global Equity Income |
Delaware Ivy VIP Global Growth |
Delaware Ivy VIP Government Money Market |
Delaware Ivy VIP Growth |
Delaware Ivy VIP High Income |
Delaware Ivy VIP International Core Equity |
Delaware Ivy VIP Limited-Term Bond |
Delaware Ivy VIP Mid Cap Growth |
Delaware Ivy VIP Natural Resources |
Delaware Ivy VIP Pathfinder Aggressive |
Delaware Ivy VIP Pathfinder Conservative |
Delaware Ivy VIP Pathfinder Moderate |
Delaware Ivy VIP Pathfinder Moderate - Managed Volatility |
Delaware Ivy VIP Pathfinder Moderately Aggressive |
Delaware Ivy VIP Pathfinder Moderately Aggressive - Managed Volatility |
Delaware Ivy VIP Pathfinder Moderately Conservative |
Delaware Ivy VIP Pathfinder Moderately Conservative - Managed Volatility |
Delaware Ivy VIP Science and Technology |
Delaware Ivy VIP Securian Real Estate Securities |
Delaware Ivy VIP Smid Cap Core |
Delaware Ivy VIP Small Cap Growth |
Delaware Ivy VIP Value |
Voyageur Insured Funds |
Delaware Tax-Free Arizona Fund |
Voyageur Intermediate Tax Free Funds |
Delaware Tax-Free Minnesota Intermediate Fund |
Voyageur Mutual Funds |
Delaware Minnesota High-Yield Municipal Bond Fund |
Delaware National High-Yield Municipal Bond Fund |
Delaware Tax-Free California Fund |
Delaware Tax-Free Idaho Fund |
Delaware Tax-Free New York Fund |
Voyageur Mutual Funds II |
Delaware Tax-Free Colorado Fund |
Voyageur Mutual Funds III |
Delaware Select Growth Fund |
Voyageur Tax Free Funds |
Delaware Tax-Free Minnesota Fund |
Delaware Enhanced Global Dividend and Income Fund |
Delaware Investments Dividend and Income Fund, Inc. |
Delaware Investments Colorado Municipal Income Fund, Inc. |
Delaware Investments Minnesota Municipal Income Fund II, Inc. |
Delaware Investments National Municipal Income Fund |
Delaware Ivy High Income Opportunities Fund |
EX-99.g.1.v
AMENDMENT NO. 6
TO
MUTUAL FUND CUSTODY AND SERVICES AGREEMENT
THIS AMENDMENT (“Amendment”) is made as of December 31, 2021 (the “Effective Date”) to that certain Mutual Fund Custody and Services Agreement dated as of July 20, 2007 (as amended, restated, supplemented or otherwise modified, the “Agreement”) by and between each investment company set forth on Appendix D thereto (each an “Existing Fund” and collectively, the “Existing Funds”), on behalf of its respective Series, and The Bank of New York Mellon (formerly Mellon Bank, N.A.) (the “Custodian”).
BACKGROUND:
A. |
Custodian serves as custodian and performs certain services for the Existing Funds pursuant to the Agreement. |
B. |
Each New Fund (defined below, and collectively with the Existing Funds, the “Funds”) is not a registered investment company and desires to retain the Custodian to act as custodian of its assets and to perform the services described in the Agreement as amended hereby. |
C. |
The parties desire to amend the Agreement as set forth herein. |
D. |
This Background section is incorporated by reference into and made part of this Amendment |
TERMS:
In consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each party, and intending to be legally bound, the parties agree as follows:
1. The Agreement is hereby amended as of the Effective Date by adding each of the following Funds (each a “New Fund”) to Appendix D of the Agreement:
Ivy ASF II, Ltd.
Ivy VIP ASF II, Ltd.
Ivy ASF III, LLC
Ivy VIP ASF III (SBP), LLC
Ivy WGA III (SBP), LLC
Ivy EME, Ltd.
2. The Agreement is hereby amended as of the Effective Date by inserting the following at the end of Article IV of the Agreement:
“10. Adding Additional Funds to the Agreement. One or more additional investment funds or vehicles which are advised by a Fund’s investment adviser but which are organized as separate legal entities from the Funds may be added as a party to the Agreement from time to time (“Additional Funds”) through the execution of an amendment to the Agreement including, without limitation, an instrument of accession among each Fund party to the Agreement, such Additional Fund and Custodian whereby each such Additional Fund(s) and Custodian will agree to be bound by the terms of this Agreement. The addition of Additional Fund(s) to the Agreement will not affect the rights or obligations of the Funds under the terms of the Agreement. The obligations of the Funds and any Additional Fund(s) to Custodian under the Agreement shall be several and not joint or joint and several.
11. Applicability of Agreement to Non-Registered Investment Companies. Except as noted in the next sentence, the terms and provisions of this Agreement shall be construed to apply to any investment fund or investment vehicle which is not organized as a registered investment company (“non-RIC”) and which is added as a party to the Agreement as an Additional Fund or Series and its Shares. If a term or provision is inapplicable to a non-RIC or its Shares because it (i) applies to a regulatory provision not applicable to non-RICs (e.g., the 1940 Act), (ii) applies to a structural feature either not present in a non-RIC or not applicable to a non-RIC’s shares or (iii) is unambiguously not applicable to a non-RIC based on its context, then such term or provision shall not apply to such non-RIC or its Shares. Subject to this Section 11, the term “Fund” as used throughout this Agreement shall be construed to include any non-RIC that is an Additional Fund, as applicable.”
3. Miscellaneous.
(a) Capitalized terms used in this Amendment not otherwise defined herein shall have the meanings set forth in the Agreement.
(b) As hereby amended and supplemented, the Agreement shall remain in full force and effect. In the event of a conflict between the terms of this Amendment and the terms of the Agreement, the terms of this Amendment shall control with respect to the matters described herein.
(c) The parties expressly agree that this Amendment may be executed in one or more counterparts and expressly agree that such execution may occur by manual signature on a physically delivered copy of this Amendment, by a manual signature on a copy of this Amendment transmitted by facsimile transmission, by a manual signature on a copy of this Amendment transmitted as an imaged document attached to an email, or by “Electronic Signature”, which is hereby defined to mean inserting an image, representation or symbol of a signature into an electronic copy of this Amendment by electronic, digital or other technological methods. Each counterpart executed in accordance with the foregoing shall be deemed an original, with all such counterparts together constituting one and the same instrument. The exchange of executed counterparts of this Amendment or of executed signature pages to counterparts of this Amendment, in either case by facsimile transmission or as an imaged document attached to an email transmission, shall constitute effective execution and delivery of this Amendment and may be used for all purposes in lieu of a manually executed and physically delivered copy of this Amendment.
2
(d) If any provision or provisions of this Amendment shall be held to be invalid, unlawful or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired.
[Remainder of page intentionally left blank]
[Signature pages follow]
3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their duly authorized officers designated below on the date and year first above written. An authorized representative, if executing this Amendment by Electronic Signature, affirms authorization to execute this Amendment by Electronic Signature and that the Electronic Signature represents an intent to enter into this Amendment and an agreement with its terms.
THE BANK OF NEW YORK MELLON | |
By: |
/s/ Chris Healy |
Name: |
Christopher Healy |
Title: |
Managing Director |
IVY ASF II, LTD.
By: Macquarie Alternative Strategies, a
series of Macquarie Investment
Management Business Trust, solely in its
capacity of investment adviser
By signing below Macquarie Alternative
Strategies in its individual capacity covenants
to the Custodian that Ivy ASF II, Ltd. has the
power to authorize and direct, and has duly
authorized and directed, Macquarie
Alternative Strategies to bind it to the terms
of this Amendment
By: |
/s/ Daniel V. Geatens |
| |
Name: |
Daniel V Geatens |
| |
Title: |
Senior Vice President |
IVY VIP ASF II, LTD.
By: Macquarie Alternative Strategies, a
series of Macquarie Investment
Management Business Trust, solely in its
capacity of investment adviser
By signing below Macquarie Alternative
Strategies in its individual capacity covenants
to the Custodian that Ivy VIP ASF II, Ltd. has
the power to authorize and direct, and has
duly authorized and directed, Macquarie
4
Alternative Strategies to bind it to the terms
of this Amendment
By: |
/s/ Daniel V. Geatens |
| |
Name: |
Daniel V Geatens |
| |
Title: |
Senior Vice President |
IVY ASF III, LLC
By: Macquarie Alternative Strategies, a
series of Macquarie Investment
Management Business Trust, solely in its
capacity of investment adviser
By signing below Macquarie Alternative
Strategies in its individual capacity covenants
to the Custodian that Ivy ASF III, LLC has
the power to authorize and direct, and has
duly authorized and directed, Macquarie
Alternative Strategies to bind it to the terms
of this Amendment
By: |
/s/ Daniel V. Geatens |
| |
Name: |
Daniel V Geatens |
| |
Title: |
Senior Vice President |
IVY VIP ASF III (SBP), LLC
By: Macquarie Alternative Strategies, a
series of Macquarie Investment
Management Business Trust, solely in its
capacity of investment adviser
By signing below Macquarie Alternative
Strategies in its individual capacity covenants
to the Custodian that Ivy VIP ASF III (SBP),
LLC has the power to authorize and direct,
and has duly authorized and directed,
Macquarie Alternative Strategies to bind it to
the terms of this Amendment
5
By: |
/s/ Daniel V. Geatens |
| |
Name: |
Daniel V Geatens |
| |
Title: |
Senior Vice President |
IVY WGA III (SBP), LLC
By: Macquarie Alternative Strategies, a
series of Macquarie Investment
Management Business Trust, solely in its
capacity of investment adviser
By signing below Macquarie Alternative
Strategies in its individual capacity covenants
to the Custodian that Ivy WGA III (SBP),
LLC has the power to authorize and direct,
and has duly authorized and directed,
Macquarie Alternative Strategies to bind it to
the terms of this Amendment
By: |
/s/ Daniel V. Geatens |
| |
Name: |
Daniel V Geatens |
| |
Title: |
Senior Vice President |
IVY EME, LTD.
By: Macquarie Alternative Strategies, a
series of Macquarie Investment
Management Business Trust, solely in its
capacity of investment adviser
By signing below Macquarie Alternative
Strategies in its individual capacity covenants
to the Custodian that Ivy EME, Ltd. has the
power to authorize and direct, and has duly
authorized and directed, Macquarie
Alternative Strategies to bind it to the terms
of this Amendment
By: |
/s/ Daniel V. Geatens |
| |
Name: |
Daniel V Geatens |
Title: |
Senior Vice President |
6
DELAWARE GROUP ADVISER FUNDS,
on behalf of its Series identified on Schedule
A to Amendment No. 5 to the Agreement
DELAWARE GROUP CASH RESERVE,
on behalf of its Series identified on Schedule
A to Amendment No. 5 to the Agreement
DELAWARE GROUP EQUITY FUNDS I,
on behalf of its Series identified on Schedule
A to Amendment No. 5 to the Agreement
DELAWARE GROUP EQUITY FUNDS II,
on behalf of its Series identified Schedule
A to Amendment No. 5 to the Agreement
DELAWARE GROUP EQUITY FUNDS
IV, on behalf of its Series identified on
Schedule A to Amendment No. 5 to the
Agreement
DELAWARE GROUP EQUITY FUNDS
V, on behalf of its Series identified on
Schedule A to Amendment No. 5 to the
Agreement
DELAWARE GROUP FOUNDATION
FUNDS, on behalf of its Series identified on
Schedule A to Amendment No. 5 to the
Agreement
DELAWARE GROUP INCOME FUNDS,
on behalf of its Series identified on Schedule
A to Amendment No. 5 to the Agreement
DELAWARE GROUP STATE TAX-
FREE INCOME TRUST, on behalf of its
Series identified on Schedule A to
Amendment No. 5 to the Agreement
7
DELAWARE GROUP TAX-FREE FUND,
on behalf of its Series identified on Schedule
A to Amendment No. 5 to the Agreement
DELAWARE GROUP TAX-FREE
MONEY FUND, on behalf of its Series
identified on Schedule A to Amendment No.
5 to the Agreement
DELAWARE GROUP GLOBAL &
INTERNATIONAL FUNDS, on behalf of
its Series identified on Schedule A to
Amendment No. 5 to the Agreement
VOYAGEUR INSURED FUNDS, on behalf
of its Series identified on Schedule A to
Amendment No. 5 to the Agreement
VOYAGEUR INTERMEDIATE TAX-
FREE FUNDS, on behalf of its Series
identified on Schedule A to Amendment No.
5 to the Agreement
VOYAGEUR MUTUAL FUNDS, on behalf
of its Series identified on Schedule A to
Amendment No. 5 to the Agreement
VOYAGEUR MUTUAL FUNDS II, on
behalf of its Series identified on Schedule A
to Amendment No. 5 to the Agreement
DELAWARE GROUP GOVERNMENT
FUND, on behalf of its Series identified on
Schedule A to Amendment No. 5 to the
Agreement
DELAWARE GROUP LIMITED-TERM
GOVERNMENT FUNDS, on behalf of its
Series identified on Schedule A to
Amendment No. 5 to the Agreement
DELAWARE POOLED TRUST, on behalf
of its Series identified on Schedule A to
Amendment No. 5 to the Agreement
8
VOYAGEUR MUTUAL FUNDS III, on
behalf of its Series identified on Schedule A
to Amendment No. 5 to the Agreement
VOYAGEUR TAX FREE FUNDS, on
behalf of its Series identified on Schedule A
to Amendment No. 5 to the Agreement
DELAWARE VIP TRUST, on behalf of its
Series identified on Schedule A to
Amendment No. 5 to the Agreement
IVY FUNDS, on behalf of its Series
identified on Schedule A to Amendment No.
5 to the Agreement
IVY VARIABLE INSURANCE
PORTFOLIOS, on behalf of its Series
identified on Schedule A to Amendment No.
5 to the Agreement
INVESTED, on behalf of its Series identified
on Schedule A to Amendment No. 5 to the
Agreement
DELAWARE INVESTMENTS
COLORADO INSURED MUNICIPAL
FUND, INC.
DELAWARE INVESTMENTS
NATIONAL INSURED MUNICIPAL
INCOME FUND
DELAWARE INVESTMENTS
MINNESOTA MUNICIPAL INCOME
FUND II, INC.
DELAWARE INVESTMENTS
DIVIDEND AND INCOME FUND, INC.
DELAWARE ENHANCED GLOBAL
DIVIDEND AND INCOME FUND
DELAWARE IVY HIGH INCOME
OPPORTUNITIES FUND
By: |
/s/ Daniel V. Geatens |
Name: |
Daniel V Geatens |
| |
Title: |
Senior Vice President |
9
EX-99.h.1.iii
AMENDED AND RESTATED SCHEDULE B TO SHAREHOLDER SERVICES AGREEMENT
(the Shareholder Services Agreement is the “Agreement”)
COMPENSATION SCHEDULE
EFFECTIVE JUNE 25, 2022
DELAWARE FUNDS BY MACQUARIE
1. | All retail Series (the “Retail Series”) (includes the Delaware Global Listed Real Assets Fund of Delaware Pooled Trust (“DPT”), but does not include the other Series of DPT or any Series of Delaware VIP Trust (“VIP”) or Ivy Variable Insurance Portfolios (“Ivy VIP”)). The compensation payable to Delaware Investments Fund Services Company (“DIFSC”) for providing services to each Series of the Trust will be at the annual rates set forth in the table below based on the average daily net assets of each Series: |
Aggregate Assets of the Retail Series | DIFSC Transfer Agency Fee |
Up to $20 billion | 0.0140% |
From $20 - $25 billion | 0.0110% |
From $25 - $30 billion | 0.0070% |
From $30 - $50 billion | 0.0040% |
From $50 - $75 billion | 0.0020% |
Over $75 billion | 0.0015% |
DIFSC will bill, and the Trust will pay, such compensation monthly. In addition, DIFSC shall be entitled to reimbursement of out-of-pocket expenses paid on behalf of the Trust. | ||
2. | DPT, VIP and Ivy VIP (except the Delaware REIT Fund of DPT). DIFSC’s compensation for providing services to the Series will be 0.0075% of average daily net assets per Series annually. DIFSC will bill, and the Trust will pay, such compensation monthly. In addition, DIFSC shall be entitled to reimbursement of out-of-pocket expenses paid on behalf of the Trust. | |
3. | All Trusts. The Trust will bear its allocable portion of all third party transfer agent fees and expenses, including expenses related to sub-transfer agency services provided by BNY Mellon Investment Servicing (US) Inc. (“BNY Mellon”) and omnibus fees and networking fees that are charged by third party financial intermediaries. DIFSC is the Trust’s operational interface with a variety of third party administrators, banks, trust companies, and other organizations that provide retirement administration, trust or other collective services to the Trust’s shareholders. Sub-transfer agency fees (or similar fees) related to such relationships on a retirement processing system will be passed on to the Trust at cost, without markup, and such fees will be allocated among all share classes except Class R6 (which does not pay sub-transfer agency or similar fees outside of the Sub-TA Agreement with BNY Mellon noted below) and Class E (which is used exclusively for 529 plans) in accordance with the Trust’s then-current Multiple Class Plan pursuant to Rule 18f-3 of the Investment Company Act of 1940, as amended. |
4. | If during the term of the Sub-Transfer Agency and Shareholder Services Agreement between DIFSC and BNY Mellon (the “Sub-TA Agreement”) the Trust (i) terminates the Agreement other than “for cause” (defined herein as a termination based on DIFSC’s material and systemic failure to provide (or arrange for the provision of) the services under the Agreement in a commercially reasonable manner as determined by reference to quarterly performance reports); and (ii) enters into a new transfer agency service agreement with a transfer agency service provider other than BNY Mellon, then the Trust shall bear: (a) its deconversion expenses associated with the transmittal of Series data to the successor service provider; and (b) the portion of the liquidated damages relating to the Trust that are payable to BNY Mellon in connection with a wrongful termination of the Sub-TA Agreement by the Trust. |
AGREED AND ACCEPTED: | ||
DELAWARE INVESTMENTS FUND SERVICES COMPANY | DELAWARE FUNDS BY MACQUARIE, on behalf of the registered investment companies listed on Attachment A | |
By: /s/ Richard Salus | By: /s/ Shawn K. Lytle | |
Name: Richard Salus | Name: Shawn K. Lytle | |
Title: Senior Vice President | Title: President and Chief Executive Officer |
ATTACHMENT A
TO
AMENDED AND RESTATED SCHEDULE B TO SHAREHOLDER SERVICES AGREEMENT
COMPENSATION SCHEDULE
INVESTMENT COMPANY PARTIES TO AGREEMENT*
Delaware Group Adviser Funds | Delaware Pooled Trust |
Delaware Group Cash Reserve | Delaware VIP Trust |
Delaware Group Equity Funds I | Voyageur Insured Funds |
Delaware Group Equity Funds II | Voyageur Intermediate Tax Free Funds |
Delaware Group Equity Funds IV | Voyageur Mutual Funds |
Delaware Group Equity Funds V | Voyageur Mutual Funds II |
Delaware Group Foundation Funds | Voyageur Mutual Funds III |
Delaware Group Global & International Funds | Voyageur Tax Free Funds |
Delaware Group Government Fund | Ivy Funds |
Delaware Group Income Funds | Ivy Variable Insurance Portfolios |
Delaware Group Limited-Term Government Funds | |
Delaware Group State Tax-Free Income Trust | |
Delaware Group Tax-Free Fund |
EX-99.h.3.iii
AMENDMENT NO. 2 TO AMENDED AND RESTATED FUND ACCOUNTING AND
FINANCIAL ADMINISTRATION OVERSIGHT AGREEMENT
This Amendment (“Amendment”) is made as of the 11th day of October, 2021, by and between each fund in Delaware Funds® by Macquarie (formerly Delaware Investments Family of Funds) listed on Schedule A (each, a “Fund” and collectively, the “Funds”) having their principal place of business at 100 Independence, 610 Market Street, Philadelphia, PA 19106-2354 and Delaware Investments Fund Services Company (“DIFSC”), a Delaware statutory trust having its principal place of business at 100 Independence, 610 Market Street, Philadelphia, PA 19106-2354.
BACKGROUND:
A. | The Funds and Delaware Service Company, Inc. (“DSC”) are parties to an Amended and Restated Fund Accounting and Financial Administration Oversight Agreement dated as of January 1, 2014 (the “Agreement”) relating to DSC’s provision to the Funds of certain fund accounting, financial administration and related services, and oversight services described in the Agreement. | |
B. | DIFSC and DSC entered into an Assignment and Assumption Agreement as of November 1, 2014 whereby DSC contributed and assigned to DIFSC all of DSC’s rights, title, and interest in the Agreement, and DIFSC assumed all of DSC’s obligations under the Agreement. | |
C. | DIFSC and the Funds entered into Amendment No. 1 to Amended and Restated Fund Accounting and Financial Administration Oversight Agreement as of September 1, 2017. | |
D. | DIFSC is a majority-owned affiliate of Macquarie Group Limited. | |
E. | This Amendment is an amendment to the Agreement. | |
F. | The parties desire to amend the Agreement as set forth herein. |
TERMS:
The parties hereby agree that:
1. | Section 3A of the Agreement is hereby deleted in its entirety and replaced with the following Section 3A: |
A. | For each Fund other than Delaware Ivy Pictet Targeted Return Bond Fund and Delaware Ivy Pictet Emerging Markets Local Currency Debt Fund (together, the “2021 Funds”), the revised term of this Agreement shall commence on January 1, 2022 and continue for a term expiring on December 31, 2025 (“Term”). The term of this Agreement for the 2021 Funds shall begin on October 11, 2021 and continue for a term expiring on December 31, 2025. For the avoidance of doubt, the 2021 Funds will receive the Services (as defined in the Agreement) at no cost for the period from October 11, 2021 through December 31, 2021. |
2. | The Funds hereby represent and warrant to DIFSC that, as of January 1, 2022 (and as of October 11, 2021 for the 2021 Funds), each of the statements about the Funds contained in Section 6 of the Agreement is true and correct. | |
3. | DIFSC hereby represents and warrants to the Funds that, as of January 1, 2022 (and as of October 11, 2021 for the 2021 Funds), each of the statements about DIFSC contained in Section 7 of the Agreement is true and correct. | |
4. | Section 12 of the Agreement is hereby deleted in its entirety and replaced with the following Section 12: |
Section 12 - Notices
Any communication, notice, or demand made or given pursuant to this Agreement shall be properly addressed, in writing and delivered by personal service (including express or courier service), registered or certified mail, or by facsimile with proof of proper transmission and a means for confirmation of delivery to recipient, as follows:
If to DIFSC:
Delaware Investments Fund Services Company
100 Independence, 610 Market Street
Philadelphia, PA 19106-2354
Attention: General Counsel
Telephone: (215) 255-8864
Facsimile: (215) 255-1640
If to the Funds:
Delaware Funds® by Macquarie)
100 Independence, 610 Market Street
Philadelphia, PA 19106-2354
Attention: Chairman of the Board
Telephone: (610) 940-5320
Facsimile: (610) 941-5009
5. | Schedule A of the Agreement is hereby deleted in its entirety and replaced with Schedule A attached hereto. | |
6. |
Section C.3 of Schedule B hereby replaced in its entirety and replaced with the following: Review reports on regulatory forms (including, but not limited to, Form N-CSR, Form N-MFP, Form N-PORT and Form N-CEN) for accuracy, completeness, and proper financial disclosures in conjunction with BNY Mellon. Participate in review by, and resolution of comments from, external auditors when necessary or appropriate. | |
7. | Section C.5 in Schedule B is hereby replaced in its entirety and replaced with the following: Support regulatory reporting for filings (including, but not limited to, Form N-PORT and Form N-CEN) by completing and reviewing responses to financial questions. | |
8. | Miscellaneous. |
(a) | As hereby amended and supplemented, the Agreement shall remain in full force and effect. In the event of a conflict between the terms of this Amendment and the terms of the Agreement, the terms of this Amendment shall control. | |
(b) | The Agreement, as amended hereby, constitutes the complete understanding and agreement of the parties with respect to the subject matter hereof and supersedes all prior communications with respect thereto. | |
(c) | This Amendment may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. The facsimile or electronic signature of any party to this Amendment shall constitute the valid and binding execution hereof by such party. | |
(d) | To the extent required by applicable law, the terms of this Amendment and the fees and expenses associated with this Amendment have been disclosed to and approved by the Board of Trustees/Directors of the Funds. | ||||
(e) | This Amendment shall be governed by the laws of The Commonwealth of Pennsylvania, without regard to its principles of conflicts of laws. |
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their duly authorized officers designated below as of the date and year first above written.
DELAWARE FUNDS® BY MACQUARIE, as listed on Schedule A | ||
By: | /s/ Shawn K. Lytle | |
Name: | Shawn K. Lytle | |
Title: | President | |
DELAWARE INVESTMENTS FUND SERVICES COMPANY | ||
By: | /s/ Richard Salus | |
Name: | Richard Salus | |
Title: | Senior Vice President | |
SCHEDULE A TO AMENDMENT NO. 2
TO THE AMENDED AND RESTATED FUND ACCOUNTING AND
FINANCIAL ADMINISTRATION OVERSIGHT AGREEMENT BETWEEN
DELAWARE SERVICE COMPANY, INC. AND
DELAWARE FUNDS® BY MACQUARIE
DATED JANUARY 1ST, 2014
AS ASSIGNED TO DELAWARE INVESTMENTS FUND SERVICES COMPANY ON
NOVEMBER 1ST, 2014
As of January 1, 2022
Series, Portfolio and Share Class | |
Delaware Group® Adviser Funds | |
Delaware Diversified Income Fund – Class A, Class C, Class R, Class R6, and Institutional Class Shares | |
Delaware Group® Cash Reserve | |
Delaware Investments Ultrashort Fund – Class A, Class C, Class L, and Institutional Class Shares | |
Delaware Group® Equity Funds I | |
Delaware Mid Cap Value Fund – Class A, Class C, Class R, and Institutional Class Shares | |
Delaware Group® Equity Funds II | |
Delaware Value® Fund – Class A, Class C, Class R, Class R6, Class T, and Institutional Class Shares | |
Delaware Group® Equity Funds IV | |
Delaware Healthcare Fund – Class A, Class C, Class R, and Institutional Class Shares | |
Delaware Small Cap Growth Fund – Class A, Class C, Class R, and Institutional Class Shares | |
Delaware Smid Cap Growth Fund – Class A, Class C, Class R, Class R6, and Institutional Class Shares | |
Delaware Covered Call Strategy Fund – Class A, Class R6, and Institutional Class Shares | |
Delaware Equity Income Fund – Class A, Class R6, and Institutional Class Shares | |
Delaware Global Equity Fund – Class A, Class R6, and Institutional Class Shares | |
Delaware Growth and Income Fund – Class A, Class R6, and Institutional Class Shares | |
Delaware Growth Equity Fund – Class A, Class R6, and Institutional Class Shares | |
Delaware Hedged U.S. Equity Opportunities Fund – Class A, Class R6, and Institutional Class Shares | |
Delaware Opportunity Fund – Class A, Class R6, and Institutional Class Shares | |
Delaware Premium Income Fund – Class A, Class R6, and Institutional Class Shares | |
Delaware Total Return Fund – Class A, Class R6, and Institutional Class Shares | |
Delaware Group® Equity Funds V | |
Delaware Small Cap Core Fund – Class A, Class C, Class R, Class R6, and Institutional Class Shares | |
Delaware Small Cap Value Fund – Class A, Class C, Class R, Class R6, and Institutional Class Shares | |
Delaware Wealth Builder Fund – Class A, Class C, Class R, and Institutional Class Shares | |
Delaware Group® Foundation Funds | |
Delaware Strategic Allocation Fund – Class A, Class C, Class R, and Institutional Class Shares | |
Delaware Group® Global & International Funds | |
Delaware Emerging Markets Fund – Class A, Class C, Class R, Class R6, and Institutional Class Shares | |
Delaware International Small Cap Fund – Class A, Class C, Class R, Class R6, and Institutional Class Shares | |
Delaware International Value Equity Fund – Class A, Class C, Class R, and Institutional Class Shares | |
Delaware Group® Government Fund | |
Delaware Emerging Markets Debt Corporate Fund – Class A, Class C, Class R, and Institutional Class Shares | |
Delaware Strategic Income Fund – Class A, Class C, Class R, and Institutional Class Shares | |
Delaware Group® Income Funds | |
Delaware Corporate Bond Fund – Class A, Class C, Class R, and Institutional Class Shares | |
Delaware Extended Duration Bond Fund – Class A, Class C, Class R, Class R6, and Institutional Class Shares | |
Delaware Floating Rate Fund – Class A, Class C, Class R, Class R6, and Institutional Class Shares | |
Delaware High-Yield Opportunities Fund – Class A, Class C, Class R, Class R6, and Institutional Class Shares | |
Delaware Group® Limited-Term Government Funds | ||
Delaware Limited-Term Diversified Income Fund – Class A, Class C, Class R, Class R6, and Institutional Class Shares | ||
Delaware Tax-Free New Jersey Fund – Class A and Institutional Class | ||
Delaware Tax-Free Oregon Fund – Class A and Institutional Class | ||
Delaware Group® State Tax-Free Income Trust | ||
Delaware Tax-Free Pennsylvania Fund – Class A, Class C, and Institutional Class Shares | ||
Delaware Group® Tax-Free Fund | ||
Delaware Tax-Free USA Fund – Class A, Class C, and Institutional Class Shares | ||
Delaware Tax-Free USA Intermediate Fund – Class A, Class C, and Institutional Class Shares | ||
Delaware Pooled® Trust | ||
Macquarie Emerging Markets Portfolio – DPT Class | ||
Macquarie Emerging Markets Portfolio II – DPT Class | ||
Macquarie Labor Select International Equity Portfolio – DPT Class | ||
Delaware Global Listed Real Assets Fund – Class A, Class C, Class R, Class R6, and Institutional Class Shares | ||
(formerly, Delaware REIT Fund) | ||
Delaware VIP® Trust | ||
Delaware VIP® Emerging Markets Series – Standard Class Shares and Service Class Shares | ||
Delaware VIP® Small Cap Value Series – Standard Class Shares and Service Class Shares | ||
Delaware VIP® Equity Income Series – Standard Class Shares | ||
Delaware VIP® Fund for Income Series – Standard Class Shares | ||
Delaware VIP® Growth and Income Series – Standard Class Shares | ||
Delaware VIP® Growth Equity Series – Standard Class Shares | ||
Delaware VIP® International Series – Standard Class Shares and Service Class Shares | ||
Delaware VIP® Investment Grade Series – Standard Class Shares and Service Class Shares | ||
Delaware VIP® Limited Duration Bond Series – Standard Class Shares | ||
Delaware VIP® Opportunity Series – Standard Class Shares | ||
Delaware VIP® Special Situations Series – Standard Class Shares | ||
Delaware VIP® Total Return Series – Standard Class Shares and Service Class Shares | ||
Ivy Funds | |
Delaware Ivy Accumulative Fund – Class A, Class B, Class C, Institutional Class, Class R6 | |
Delaware Ivy Multi-Asset Income Fund – Class A, Class C, Institutional Class, Class R6, and Class Y | |
Delaware Ivy Strategic Income Fund – Class A, Class C, Institutional Class, Class R6, and Class Y | |
Delaware Ivy Asset Strategy Fund – Class A, Class B, Class C, Class E, Institutional Class, Class R6, Class R, and Class Y | |
Delaware Ivy Balanced Fund – Class A, Class B, Class C, Institutional Class, Class R6, Class R, and Class Y | |
Delaware Ivy California Municipal High Income Fund – Class A, Class C, Institutional Class, Class R6, and Class Y | |
Delaware Ivy Core Equity Fund – Class A, Class B, Class C, Class E, Institutional Class, Class R6, Class R, and Class Y | |
Delaware Ivy Corporate Bond Fund – Class A, Class B, Class C, Institutional Class, Class R6, and Class Y | |
Delaware Ivy Crossover Credit Fund – Class A, Institutional Class, Class R6, and Class Y | |
Delaware Ivy Systematic Emerging Markets Equity Fund – Class A, Class B, Class C, Institutional Class, Class R6, Class R, and Class Y | |
Delaware Ivy Energy Fund – Class A, Class B, Class C, Institutional Class, Class R6, Class R, and Class Y | |
Delaware Ivy Global Bond Fund – Class A, Class B, Class C, Institutional Class, Class R6, Class R, and Class Y | |
Delaware Ivy Global Equity Income Fund – Class A, Class B, Class C, Class E, Institutional Class, Class R6, Class R, and Class Y | |
Delaware Ivy Global Growth Fund – Class A, Class B, Class C, Institutional Class, Class R6, Class R, and Class Y | |
Delaware Ivy Government Securities Fund – Class A, Class B, Class C, Institutional Class, and Class R6 | |
Delaware Ivy High Income Fund – Class A, Class B, Class C, Class E, Institutional Class, Class R6, Class R, and Class Y | |
Delaware Ivy International Core Equity Fund – Class A, Class B, Class C, Class E, Institutional Class, Class R6, Class R, and Class Y | |
Delaware Ivy International Small Cap Fund – Class A, Class C, Institutional Class, Class R6, and Class Y | |
Delaware Ivy Large Cap Growth Fund – Class A, Class B, Class C, Class E, Institutional Class, Class R6, Class R, and Class Y | |
Delaware Ivy LaSalle Global Real Estate Fund – Class A, Class B, Class C, Institutional Class, Class R6, Class R, and Class Y | |
Delaware Ivy Limited-Term Bond Fund – Class A, Class B, Class C, Class E, Institutional Class, Class R6, Class R, and Class Y | |
Delaware Ivy Managed International Opportunities Fund – Class A, Class B, Class C, Institutional Class, Class R6, Class R, and Class Y | |
Delaware Ivy Mid Cap Growth Fund – Class A, Class B, Class C, Class E, Institutional Class, Class R6, Class R, and Class Y | |
Delaware Ivy Mid Cap Income Opportunities Fund – Class A, Class C, Institutional Class, Class R6, Class R, and Class Y | |
Delaware Ivy Municipal Bond Fund – Class A, Class B, Class C, Institutional Class, Class R6, and Class Y | |
Delaware Ivy Municipal High Income Fund – Class A, Class B, Class C, Institutional Class, Class R6, and Class Y | |
Delaware Ivy Natural Resources Fund – Class A, Class B, Class C, Class E, Institutional Class, Class R6, Class R, and Class Y | |
Ivy Funds (continued) |
Delaware Ivy Emerging Markets Local Currency Debt Fund – Class A, Class C, Institutional Class, Class R6, and Class Y |
Delaware Ivy Total Return Bond Fund – Class A, Class C, Institutional Class, Class R6, and Class Y |
Delaware Ivy High Yield Fund – Class A, Institutional Class, and Class R6 |
Delaware Ivy ProShares Interest Rate Hedged High Yield Index Fund – Class A, Class E, Institutional Class, and Class R |
Delaware Ivy ProShares MSCI ACWI Index Fund – Class A, Class E, and Institutional Class |
Delaware Ivy ProShares Russell 2000 Dividend Growers Index Fund – Class A, Class E, Institutional Class, and Class R6 |
Delaware Ivy ProShares S&P 500 Bond Index Fund – Class A, Class E, Institutional Class, and Class R |
Delaware Ivy S&P 500 Dividend Aristocrats Index Fund – Class A, Class E, Institutional Class, Class R6, and Class R |
Delaware Ivy International Value Fund – Class A, Class B, Class C, Institutional Class, Class R6, Class R, and Class Y |
Delaware Ivy Science and Technology Fund – Class A, Class B, Class C, Class E, Institutional Class, Class R6, Class R, and Class Y |
Delaware Ivy Securian Core Bond Fund – Class A, Class B, Class C, Class E, Institutional Class, Class R6, Class R, and Class Y |
Delaware Ivy Smid Cap Core Fund – Class A, Class B, Class C, Institutional Class, Class R6, Class R, and Class Y |
Delaware Ivy Small Cap Growth Fund – Class A, Class B, Class C, Class E, Institutional Class, Class R6, Class R, and Class Y |
Delaware Ivy Value Fund – Class A, Class B, Class C, Institutional Class, Class R6, Class R, and Class Y |
Delaware Ivy Wilshire Global Allocation Fund – Class A, Class B, Class C, Institutional Class, Class R6 |
Delaware Ivy Cash Management Fund – Class A, Class B, and Class C |
Delaware Ivy Government Money Market Fund – Class A, Class B, Class C, Class E, and Class R6 |
Ivy Variable Insurance Portfolios |
Delaware Ivy VIP Asset Strategy – Class I and Class II Shares |
Delaware Ivy VIP Balanced – Class II Shares |
Delaware Ivy VIP Core Equity – Class II Shares |
Delaware Ivy VIP Corporate Bond – Class II Shares |
Delaware Ivy VIP Energy – Class I and Class II Shares |
Delaware Ivy VIP Global Bond – Class II Shares |
Delaware Ivy VIP Global Equity Income – Class II Shares |
Delaware Ivy VIP Global Growth – Class II Shares |
Delaware Ivy VIP Growth – Class II Shares |
Delaware Ivy VIP High Income – Class I and Class II Shares |
Delaware Ivy VIP International Core Equity – Class II Shares |
Delaware Ivy VIP Limited-Term Bond – Class II Shares |
Delaware Ivy VIP Mid Cap Growth – Class I and Class II Shares |
Delaware Ivy VIP Natural Resources – Class II Shares |
Delaware Ivy VIP Pathfinder Aggressive – Class II Shares |
Delaware Ivy VIP Pathfinder Conservative – Class II Shares |
Delaware Ivy VIP Pathfinder Moderately Aggressive – Managed Volatility – Class II Shares |
Delaware Ivy VIP Pathfinder Moderately Conservative – Managed Volatility – Class II Shares |
Delaware Ivy VIP Pathfinder Moderate – Class II Shares |
Delaware Ivy VIP Pathfinder Moderate – Managed Volatility – Class II Shares |
Delaware Ivy VIP Pathfinder Moderately Aggressive – Class II Shares |
Delaware Ivy VIP Pathfinder Moderately Conservative – Class II Shares |
Delaware Ivy VIP Science and Technology – Class I and Class II Shares |
Delaware Ivy VIP Securian Real Estate Securities – Class II Shares |
Delaware Ivy VIP Smid Cap Core – Class II Shares |
Delaware Ivy VIP Small Cap Growth – Class I and Class II Shares |
Delaware Ivy VIP Value – Class II Shares |
Delaware Ivy VIP Government Money Market – Class II Shares |
InvestEd Portfolios |
InvestEd 90 Portfolio |
InvestEd 80 Portfolio |
InvestEd 70 Portfolio |
InvestEd 60 Portfolio |
InvestEd 50 Portfolio |
InvestEd 40 Portfolio |
InvestEd 30 Portfolio |
InvestEd 20 Portfolio |
InvestEd 10 Portfolio |
InvestEd 0 Portfolio |
Voyageur Insured Funds |
Delaware Tax-Free Arizona Fund – Class A, Class C, and Institutional Class Shares |
Voyageur Intermediate Tax Free Funds |
Delaware Tax-Free Minnesota Intermediate Fund – Class A, Class C, and Institutional Class Shares |
Voyageur Mutual Funds |
Delaware Minnesota High-Yield Municipal Bond Fund – Class A, Class C, and Institutional Class Shares |
Delaware National High-Yield Municipal Bond Fund – Class A, Class C, and Institutional Class Shares |
Delaware Tax-Free California Fund – Class A, Class C, and Institutional Class Shares |
Delaware Tax-Free Idaho Fund – Class A, Class C, and Institutional Class Shares |
Delaware Tax-Free New York Fund – Class A, Class C, and Institutional Class Shares |
Voyageur Mutual Funds II |
Delaware Tax-Free Colorado Fund – Class A, Class C, and Institutional Class Shares |
Voyageur Mutual Funds III |
Delaware Select Growth Fund – Class A, Class C, Class R, and Institutional Class Shares |
Voyageur Tax Free Funds |
Delaware Tax-Free Minnesota Fund – Class A, Class C, and Institutional Class Shares |
Delaware Enhanced Global Dividend and Income Fund – Common Shares |
Delaware Investments Dividend and Income Fund, Inc. – Common Shares |
Delaware Investments Colorado Municipal Income Fund, Inc. – Common Shares and Preferred Shares |
Delaware Investments Minnesota Municipal Income Fund II, Inc. – Common Shares and Preferred Shares |
Delaware Investments National Municipal Income Fund – Common Shares and Preferred Shares |
Delaware Ivy High Income Opportunities Fund – Common Shares and Preferred Shares |
Schedule C
Annual Fee
Each Fund will be charged an annual fee equal to the sum of (a) a base fee of $4,000 (“Flat Fee”) plus (b) a Pro Rata AUM Fee calculated as follows:
First, a total annual fee will be calculated by multiplying the average daily net assets of all Funds during the year by the applicable fee rates in the following table to calculate the “Total Fee.”
Average Daily Net Assets | Annual Fees |
First $35 billion of average daily net assets | .00475% |
Next $10 billion of average daily net assets | .00400% |
Next $45 billion of average daily net assets | .00250% |
Over $90 billion of average daily net assets | .0015% |
Second, the Flat Fee will be multiplied by the number of Funds in the complex to calculate the “Aggregate Flat Fee.”
Third, the Aggregate Flat Fee will be subtracted from the Total Fee to calculate the “Total AUM Allocation Fee.”
Fourth, the Pro Rata AUM Fee for each Fund will be equal to the product of the Total AUM Allocation Fee multiplied by a fraction, the numerator of which is such Fund’s average daily net assets in the year of calculation and the denominator of which is the average daily net assets of all Funds during such year.
Example:
Assume that the complex has 60 Funds and $35,000,000,000 in AUM. The annual fee would be calculated as follows:
- | The Funds, as a complex, would be charged $1,662,500 ($35,000,000,000 * .00475% = $1,662,500) | |
- | Each of the 60 Funds would be allocated a flat fee of $4,000 (60 * $4,000 = $240,000) | |
- | Each of the 60 Funds would be charged an asset based fee on the remaining $1,422,500 ($1,662,500 - $240,000 = $1,422,500) | |
- | The asset based fee on the $1,422,500 would be allocated pro rata to each of the 60 Funds based on AUM per Fund |
Assume that the complex launches a new Fund and has 61 Funds, but assets remain at $35,000,000,000 in AUM. The annual fee would be calculated as follows:
- | The Funds, as a complex, would still be charged $1,662,500 ($35,000,000,000 * .00475% = $1,662,500) | |
- | Each of the 61 Funds would be allocated a flat fee of $4,000 (61 * $4,000 = $244,000) | |
- | Each of the 61 Funds would be charged an asset based fee on the remaining $1,418,500 ($1,662,500 - $244,000 = $1,418,500) | |
- | The asset based fee on the $1,418,500 would be allocated pro rata to each of the 61 Funds based on AUM per Fund |
The complex would be charged the same total amount. The difference would be that the pro rata calculation would be based on a smaller amount because there are more funds in the complex.
Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in this Registration Statement on Form N-1A of Delaware Group® Government Funds of our reports dated September 16, 2022, relating to the financial statements and financial highlights, which appears in Delaware Strategic Income Fund and Delaware Emerging Markets Debt Corporate Fund’s Annual Reports on Form N-CSR for the year ended July 31, 2022. We also consent to the references to us under the headings “Financial Highlights” and “Financial Statements” in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
November 28, 2022
PricewaterhouseCoopers LLP, Two Commerce Square, Suite 1800, 2001 Market Street, Philadelphia, PA 19103-7042
T: (267) 330 3000, www.pwc.com/us
EX-99.n.1.i
APPENDIX A,
updated as of October 31, 2022
Maximum Annual | Maximum Annual | ||
Distribution Fee (as a | Shareholder Servicing | Years | |
Fund/Class | percentage of | Fee (as a percentage of | To |
average daily net | average daily net assets | Conversion | |
assets of class) | of class) | ||
Delaware Group® Equity Funds I | |||
Delaware Mid Cap Value Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R | .50% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Group® Cash Reserve | |||
Delaware Investments Ultrashort Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class L | N/A | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Group® Equity Funds II | |||
Delaware Value® Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R | .50% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Group® Equity Funds IV | |||
Delaware Healthcare Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R | .50% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Small Cap Growth Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R | .50% | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Smid Cap Growth Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R | .50% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Covered Call Strategy Fund | |||
Class A | .25% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Equity Income Fund | |||
Class A | .25% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Global Equity Fund | |||
Class A | .25% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Maximum Annual | Maximum Annual | ||
Distribution Fee (as a | Shareholder Servicing | Years | |
Fund/Class | percentage of | Fee (as a percentage of | To |
average daily net | average daily net assets | Conversion | |
assets of class) | of class) | ||
Delaware Group® Equity Funds IV (continued) | |||
Delaware Growth and Income Fund | |||
Class A | .25% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Hedged U.S. Equity Opportunities Fund | |||
Class A | .25% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Opportunity Fund | |||
Class A | .25% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Premium Income Fund | |||
Class A | .25% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Total Return Fund | |||
Class A | .25% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
A-2
Maximum Annual | Maximum Annual | ||
Distribution Fee | Shareholder Servicing | Years | |
Fund/Class | (as a percentage of | Fee (as a percentage | To |
average daily net | of average daily net | Conversion | |
assets of class) | assets of class) | ||
Delaware Group® Equity Funds V | |||
Delaware Small Cap Core Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R | .50% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Small Cap Value Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R | .50% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Wealth Builder Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R | .50% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Group® Income Funds | |||
Delaware Corporate Bond Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R | .50% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Extended Duration Bond Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R | .50% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Floating Rate Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R | .50% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware High-Yield Opportunities Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R | .50% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
A-3
Maximum Annual | Maximum Annual | ||
Distribution Fee | Shareholder Servicing | Years | |
Fund/Class | (as a percentage of | Fee (as a percentage | To |
average daily net | of average daily net | Conversion | |
assets of class) | assets of class) | ||
Delaware Group® Limited-Term Government Funds | |||
Delaware Limited-Term Diversified Income Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R | .50% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Tax-Free New Jersey Fund | |||
Class A | .25% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Tax-Free Oregon Fund | |||
Class A | .25% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Group® Government Fund | |||
Delaware Emerging Markets Debt Corporate Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R | .50% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Strategic Income Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R | .50% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Group® State Tax-Free Income Trust | |||
Delaware Tax-Free Pennsylvania Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Group® Tax Free Fund | |||
Delaware Tax-Free USA Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Tax-Free USA Intermediate Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
A-4
Maximum Annual | Maximum Annual | ||
Distribution Fee | Shareholder Servicing | Years | |
Fund/Class | (as a percentage of | Fee (as a percentage | To |
average daily net | of average daily net | Conversion | |
assets of class) | assets of class) | ||
Delaware Group® Global & International Funds | |||
Delaware Emerging Markets Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R | .50% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware International Small Cap Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R | .50% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware International Value Equity Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R | .50% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Group® Adviser Funds | |||
Delaware Diversified Income Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R | .50% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Group® Foundation Funds | |||
Delaware Strategic Allocation Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R | .50% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
A-5
Maximum Annual | Maximum Annual | ||
Distribution Fee | Shareholder Servicing | Years | |
Fund/Class | (as a percentage of | Fee (as a percentage | To |
average daily net | of average daily net | Conversion | |
assets of class) | assets of class) | ||
Delaware Pooled® Trust | |||
Delaware Global Listed Real Assets Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R | .50% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Voyageur Insured Funds | |||
Delaware Tax-Free Arizona Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Voyageur Intermediate Tax Free Funds | |||
Delaware Tax-Free Minnesota Intermediate Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Voyageur Mutual Funds | |||
Delaware Minnesota High-Yield Municipal Bond Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware National High-Yield Municipal Bond Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Tax-Free California Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Tax-Free Idaho Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Delaware Tax-Free New York Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
A-6
Maximum Annual | Maximum Annual | ||
Distribution Fee | Shareholder Servicing | Years | |
Fund/Class | (as a percentage of | Fee (as a percentage | To |
average daily net | of average daily net | Conversion | |
assets of class) | assets of class) | ||
Voyageur Mutual Funds II | |||
Delaware Tax-Free Colorado Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Voyageur Mutual Funds III | |||
Delaware Select Growth Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R | .50% | N/A | N/A |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
Voyageur Tax Free Funds | |||
Delaware Tax-Free Minnesota Fund | |||
Class A | .25% | N/A | N/A |
Class C | .75% | .25% | 8 |
Class R6 | N/A | N/A | N/A |
Institutional Class | N/A | N/A | N/A |
A-7
EX-99.p.2
SECTION 14 |
MIMAK EMPLOYEE INFORMATION, DOCUMENTS AND CONTINUING EDUCATION |
Macquarie Investment Management Austria Kapitalanlage AG
Code of Ethics
I. Persons Subject to the Code of Ethics
This Code of Ethics (the Code) has been adopted by the Directors of Macquarie Investment Management Austria Kapitalanlage AG (MIMAK) to provide regulations and procedures consistent with the Advisers Act Rule 204A-1 and Rule 17j-1 of The Investment Company Act of 1940, as amended (the “1940 Act”), thereunder, as well as other securities law and sound business practices.
The procedures in the Code are designed to prevent Access Persons, in connection with the purchase or sale, directly or indirectly, of a security held or to be acquired by any client of MIMAK, from:
1. |
employing any device, scheme or artifice to defraud any other client of MIMAK; |
2. |
making any untrue statement of a material fact to any other client of MIMAK or omit to state a material fact necessary in order to make the statements made to any other client of MIMAK, in light of the circumstances under which they are made, not misleading; |
3. |
engaging in any act, practice or course of business that operates or would operate as a fraud or deceit on any other client of MIMAK; or |
4. |
engaging in any manipulative practice with respect to any other client of MIMAK. |
An Access Person within the meaning of this Code, is a person who has been designated as such by the MIMAK CCO or his or her designee(s). Generally, an Access Person is any person defined in the Definitions section that follows as an “Access Person”.
Immediate family members sharing the same household with any MMAK Access Person are also deemed, by law, to be Access Persons for purposes of this Code. In addition, Rule 17j-1 under the 1940 Act and Rule 204A-1 under the Investment Advisers Act of 1940, as amended, contain a presumption that, if the investment adviser’s primary business is providing investment advice to Funds or other advisory clients, then all of its directors, officers and partners are presumed to be Access Persons of any Fund advised by the Adviser.
II. Fiduciary Duties of Access Persons Under Federal Securities Laws
MIMAK Access Persons owe a fiduciary duty to MIMAK’s clients. These duties include a duty at all times to place the interests of each entity’s respective clients first. Above all, this means all MIMAK Access Persons owe an undivided duty of loyalty to MIMAK’s clients. Further, MIMAK demands the highest degree of personal and professional integrity and ethical behavior from their Access Persons.
Accordingly, all MIMAK Access Persons must conduct themselves in an ethical manner and in such a way as to avoid not only actual conflicts of interest with MIMAK’s clients the appearance of a conflict that could compromise the trust such clients have placed in MIMAK.
All Access Persons must comply fully with all applicable laws, including applicable federal securities laws.
III. Personal Trading and Reporting
Access Persons should consider trading in stocks, bonds, and closed-end mutual funds for their personal accounts a privilege while working at MIMAK.
Failure to comply with MIMAK’s pre-clearance and reporting procedures, as described below, may result in the loss of personal trading privileges and may lead to additional disciplinary action, up to and including termination of employment.
In addition, because MIMAK is a wholly-owned subsidiary of MGL, an Australian-based investment bank, MIMAK Access Persons are subject to MGL’s pre-clearance requirements. Failure to comply with MGL’s pre-clearance requirements will also result in the loss of personal trading privileges and may also lead to additional disciplinary action, up to and including termination of employment.
A. Personal Holdings Reports
Every Access Person of MIMAK must provide to the CCO:
● | no later than 10 (ten) calendar days after becoming an Access Person, a personal holding statement in the form prescribed by the CCO, which contains all the information required under Rule 17j-1(d)(i) and covers not only the personal holdings of the Access Person but certain of their family members and dependants (“Associated Persons”); and |
● | annually certain information concerning their and their Associated Persons’ personal holdings in the form prescribed by the CCO, which contains all the information required under Rule 17j-1(d)(iii). |
B. MGL Pre-Clearance Requirements
The most recent version of MGL’s pre-clearance requirements can be found at the below link. MGL policies are updated from time to time and Access Persons are required to periodically check for these updates:
http://macnet.internal.macquarie.com/central/employment/ppc/compliance/personal-deal
C. MIMAK Pre-Clearance Requirements
MIMAK’s pre-clearance requirements help to protect Access Persons and MIMAK against the following critical transgressions:
● | Access Persons taking advantage of opportunities more properly belonging to MIMAK clients; |
● | Access Persons violating MIMAK’s Code of Ethics requirements as established by the Securities and Exchange Commission (SEC); |
● | Access Persons violating insider trading laws; and |
● | Access Persons engaging in front running. |
The MIMAK pre-clearance requirements are dictated by the Macquarie Group Personal Dealing Policy.
You are not required to pre-clear transactions in any of the securities on the Exempt from Pre-Clearance list, above. Transactions in all other securities must be pre-cleared.
Please note, you must always pre-clear the direct or indirect acquisition of any beneficial ownership interest in any security in an initial public offering (IPO) and private placement of securities. Also, you must always pre-clear trades in the shares of any Funds managed by MIMAK.
Typically, accounts that contain securities that need to be pre-cleared are held in the name(s) of the Access Persons themselves. However, if you, as an Access Person, advise anyone who is not an Access Person (other than clients of MIMAK) on trading in any securities that are not on the Exempt from Pre-Clearance list, these transactions may need to be pre-cleared. You must advise the MIMAK CCO or designee before rendering this investment advice.
Independent directors of any Fund are expressly excluded from the definition of Access Person under Rule 17j-1(d)(2)(ii) for purposes of providing initial or annual reports of their holdings, or quarterly reports of their trading activity in Covered Securities covered by this Code and for pre-clearing their trades, except for the direct or indirect acquisition of any beneficial ownership interest in any security in an initial public offering (IPO) and private placements of securities.
The decision to approve a pre-clearance request lies solely in the discretion of MIMAK’s CCO or designee.
All Access Persons and their Immediate Family Members are prohibited from trading a security in their personal brokerage accounts for seven (7) calendar days before and after Macquarie executes a buy or sell transaction in that same security.
The MIMAK CCO is subject to the above requirements.
(3) Buying and Selling Shares in MIMAKs Client Accounts
Because MIMAKs Client Accounts may be listed and trading on a national securities exchange, they are freely tradable. However, as an Access Person has access to material, non-public information regarding such Client Accounts, trading in these Client Accounts is severely limited. The CCO will make a determination on such trading on a case by case basis.
(4) Your Trading Window
MIMAK pre-clearance is valid for the day of request only and shall be deemed to expire at the close of regular trading on the principal trading market for the security involved. Any unfilled or partially filled orders will require MIMAK pre-clearance on each subsequent day that the order remains open.
(5) Minimum Holding Period
There is a minimum holding period of thirty calendar days before you may sell, dispose, close out or otherwise vary an interest in a financial instrument subject to Macquaries Personal Investment Policy.
D. MIMAK Access Person Reporting and Certifications
(1) New Access Persons
All new Access Persons must trade through a Macquarie broker-dealer. Certain exemptions to this requirement may be approved by RMG and activity statements must be made available to RMG.
If the Access Person, as a part of his or her employment compensation with MGL or any of its subsidiaries or affiliates, received MGL options, the holding of these options is not reportable; however, once these options are exercised, they are reportable in the Access Persons quarterly transaction reports, as discussed in Paragraph C.(2) below.
Typically, accounts that contain Reportable Securities and/or Covered Securities are held in the name(s) of the Access Persons themselves. However, if you, as an Access Person, are advising one or more persons or entities who are not themselves Access Persons (other than MIMAK clients) on their securities trading or have control of such account(s), please advise the MIMAK CCO or designee at the time you start advising as such. These accounts may be subject to pre-clearance and reporting obligations as well.
(2) Ongoing Quarterly Transactions Monitoring
The SEC requires MIMAK to collect from its Access Persons on a calendar quarterly basis reports that reflect all transactions that took place during the prior quarter:
● | in reportable securities beneficially owned, directly or indirectly, by its Access Persons; and/or |
● | over which the Access Person had control. |
RMG will have access to trading activity statements for all staff and enabling them to surveil for improper trades and other trades that could create the perception of any improprieties. The CCO may request trading activity statement for all staff directly from RMG.
The following information may be reviewed for all Access Persons:
● | The date of the transaction; |
● | The security description, and as applicable, the exchange ticker or CUSIP number; |
● | Number of shares or par value; |
● | Principal amount of the securities; |
● | Whether the transaction was a purchase or sale or any other type of acquisition/disposition; |
● | The price at which the transaction was effected; |
● | Interest rate and maturity rate; |
● | The name of the broker, dealer or bank with or through which the transaction was effected; and |
● | The date the report is submitted. |
IV. Gifts and Entertainment1
Generally, Access Persons may not give or receive any gifts in connection with any business of MIMAK because it may appear improper or raise a potential conflict of interest. However, gifts may be allowed providing they fall within the Macquarie Gifts and Entertainment Policy. This includes normal and customary business entertainment, the cost of which would be paid for by MIMAK as a reasonable expense if not paid for by the other party. While “nominal value” is susceptible to interpretation, a gift or entertainment is not acceptable if an independent third party may believe that the Access Person would be influenced by receiving such gift or entertainment in conducting business. Gifts of an extraordinary or extravagant nature to an Access Person should be declined or returned in order to avoid compromising the reputation of the Access Person or MIMAK.
1 |
This section does not apply to any clients’ Independent Directors. |
When an access person gives or receives a gift or entertainment, he/she must ensure that this is recorded in the EMEA Gifts Register and that pre-approval is sought where required as per the Macquarie Gifts and Entertainment Policy.
Access Persons must comply with the MGL Dealing with Public Officials’ policy.
If you have any questions about the propriety of a gift you may be offered or may wish to offer to another or any other arrangement, please consult MIMAK’s CCO.
V. Service on a Board of Directors
An Access Person may serve on the Board of Directors of a publicly traded company (the “Board”) only if:
1. |
The CCO, or designate, determines that serving on the Board would be consistent with the interests of MIMAK; |
2. |
Appropriate “information barrier” procedures are established; and |
3. |
The CCO, or designate, provides written authorization that the Access Person can serve on the Board. |
VI. OUTSIDE BUSINESS ACTIVITIES
All employees are required to devote their full time and efforts to the Macquarie Group’s business. In addition, no person may make use of either his or her position as an employee or information acquired during employment, or make personal investments in a manner that may create a conflict, or the appearance of a conflict, between the employee’s personal interests and MIMAK' interests.
An employee must complete the Notice of Outside Business Activity disclosure form attached and obtain the written approval of the employee’s supervisor and the Chief Compliance Officer prior to participating in any outside business activities, including, but not limited to:
● | Serving as a director, officer, general partner or trustee of, or as a consultant to, any business, corporation or partnership. |
● | Serving as a registered representative of any broker-dealer. |
● | Making any monetary investment in any non-publicly traded business, corporation or partnership, including passive investments in private companies. (Investments in publicly traded companies may require prior approval of the Compliance Officer, in accordance with personal securities trading procedures described above). |
● | Accepting a second job or part-time job of any kind or engaging in any other business outside of the firm. |
● | Forming or participating in any bank group in connection with a bankruptcy or distressed situation. |
● | Forming or participating in any committee in making demands for changes in the management or policies of any company, or becoming actively involved in a proxy contest. |
● | Receiving compensation of any nature, directly or indirectly, from any person, firm, corporation, estate, trust or association, other than MIMAK, whether as a fee, commission, bonus or other consideration such as stock, options or warrants. |
VII. Continuing Education
As an employee of MIMAK you will be required to participate in a program of continuing education. The purpose of this requirement is to provide all MIMAK staff members with consistent information on relevant topics relating specifically to investment advisors and/or general information on topics of heightened focus of the US regulators. In some instances, the training may result from regulatory requirements, such as mandatory training on Anti-Money Laundering, as required under local regulations.
COMPLIANCE and SANCTIONS
If you become aware of or suspect any violations of this Code, you must report them to the MIMAK CCO as soon as practicable. Reports may be made anonymously. MIMAK has zero tolerance for reprisals against employees making reports, in good faith, of perceived wrongdoing.
The CCO, or designate, shall review the records obtained pursuant to this Code to ensure that all MIMAK Access Persons are complying with its provisions. All records shall be maintained in accordance with Rules 204-2 under the Investment Advisers Act of 1940 and 17j-1(f) under the 1940 Act, as further described in MIMAKs compliance manuals.
MIMAK may, as they deem appropriate, impose sanctions, including, inter alia, a fine, letter of censure, revoking personal securities trading privileges, suspension or termination of employment of any Access Person who violates any provision of this Code.
DEFINITIONS
For Purposes of this Code of Ethics:
1) |
“Access Person” means: | |
a) |
any director, partner, officer, Advisory Person or employee of MIMAK; and/or | |
b) |
Any person who has access to nonpublic information regarding any clients’ purchase or sale of securities, or nonpublic information regarding the portfolio holdings of any other of MIMAK’s clients; and/or | |
c) |
Any person who is involved in making securities recommendations to clients, or who has access to such recommendations that are nonpublic. | |
For the purposes of this manual “Access Person” does not include non-executive directors of MIMAK. | ||
2) |
“Advisory Person” means any director, officer, general partner or employee of MIMAK who, in connection with his or her regular functions or duties makes, participates in or obtains information regarding the purchase or sale of Covered Securities by any other MIMAK client, or whose functions relate to the making of any recommendation with respect to such purchases or sales; and any natural person in a control relationship to MIMAK who obtains information concerning recommendations made to any other of MIMAK’s clients with regard to the purchase or sale of Covered Securities by any other of MIMAK’s clients. | |
3) |
“Automatic Investment Plan” means a program in which regular periodic purchases (or withdrawals) are made automatically in (or from) investment accounts in accordance with a predetermined schedule and allocation. An automatic investment plan includes a dividend reinvestment plan. | |
4) |
“Beneficial Ownership Interest” means any direct or indirect interest in the name of the MIMAK employee as well as any direct or indirect interest in the name of the MIMAK employee’s spouse, child, all persons residing with or financially dependent upon the MIMAK employee, any person to whom the MIMAK employee contributes material financial support and any account over which the MIMAK employee exercises control. | |
5) |
“CCO” means the Chief Compliance Officer or their designee. | |
6) |
“Control” means the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company. | |
7) |
“COO” means the Chief Operating Officer or their designee. |
8) |
“Covered Security” means a security as defined in section 2(a)(36) of the 1940 Act, except that it does not include: | |
a) |
Direct obligations of the Government of the United States; | |
b) |
Bankers’ acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements; and | |
c) |
Shares issued by open-end Funds. | |
9) |
“Federal Securities Laws” means the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002, the Investment Company Act of 1940, the Investment Advisers Act of 1940, Title V of the Gramm-Leach-Bliley Act, any rules adopted by the Commission under any of these statutes, the Bank Secrecy Act as it applies to funds and investment advisers, and any rules adopted thereunder by the Commission or the Department of the Treasury. | |
10) |
“Fund” means an investment company registered under the 1940 Act. | |
11) |
“Initial Public Offering” (“IPO”) means an offering of securities registered under the Securities Act of 1933, as amended (the “1933 Act”), the issuer of which, immediately before the registration, was not subject to the reporting requirements of sections 13 or 15(d) of the Securities Exchange Act of 1934. | |
12) |
“Investment Personnel” means any employee of MIMAK (or of any company in a control relationship to MIMAK) who, in connection with his or her regular functions or duties, makes or participates in making recommendations regarding the purchase or sale of securities by MIMAK; or any person who controls MIMAK and who obtains information concerning recommendations made to MIMAK regarding the purchase or sale of securities by any client. | |
13) |
“Limited Offering” or “Private Placement” means an offering of securities that is exempt from registration under the 1933 Act pursuant to section 4(2) or 4(6) or pursuant to rule 504, 505, or 506 under the 1933 Act. | |
14) |
“MIMAK Client Accounts” means any account to which MIMAK acts as an investment adviser or a sub-investment adviser. | |
15) |
“PM” means the relevant Portfolio Manager or their designee and may include a member of the investment management team. | |
16) |
“Purchase or sale of a Covered Security” includes, among other things, the writing of an option to purchase or sell a Covered Security. | |
17) |
“Reportable Fund” means (i) any Fund for which MIMAK serves as an investment adviser; and/or (ii) any Fund whose investment adviser or principal underwriter controls, is controlled by, or is under common control with MIMAK. |
18) | “Reportable Security” means a security as defined in section 202(a)(18) of the Act (15 U.S.C. 80b-2(a)(18)), except that it does not include: | |||
a) |
Direct obligations of the Government of the United States; | |||
b) |
Bankers’ acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements; | |||
c) |
Shares issued by money market funds; | |||
d) |
Shares issued by open-end funds other than reportable funds; and | |||
e) |
Shares issued by unit investment trusts that are invested exclusively in one or more open-end funds, none of which are reportable funds. | |||
19) |
“Security Held or to be Acquired” by a Fund means: | |||
(i) |
Any Covered Security which, within the most recent 15 days: | |||
(1) |
Is or has been held by the Fund; or | |||
(2) |
Is being or has been considered by the Fund or its investment adviser for purchase by the Fund; and | |||
(ii) |
Any option to purchase or sell, and any security convertible into or exchangeable for, a Covered Security described above in 12(i). |
EX-99.p.3
SECTION 14 MIMEL EMPLOYEE INFORMATION: PERSONAL CONFLICTS OF INTEREST
Macquarie Investment Management Europe Limited
Code of Ethics
I. Persons Subject to the Code of Ethics
This Code of Ethics (the Code) has been adopted by the Directors of Macquarie Investment Management Europe Limited (MIMEL) to provide regulations and procedures consistent with the Advisers Act Rule 204A-1 and Rule 17j-1 of The Investment Company Act of 1940, as amended (the “1940 Act”), thereunder, as well as other securities law and sound business practices.
The procedures in the Code are designed to prevent Access Persons, in connection with the purchase or sale, directly or indirectly, of a security held or to be acquired by any client of MIMEL, from:
1. | employing any device, scheme or artifice to defraud any other client of MIMEL; |
2. | making any untrue statement of a material fact to any other client of MIMEL or omit to state a material fact necessary in order to make the statements made to any other client of MIMEL, in light of the circumstances under which they are made, not misleading; |
3. | engaging in any act, practice or course of business that operates or would operate as a fraud or deceit on any other client of MIMEL; or |
4. | engaging in any manipulative practice with respect to any other client of MIMEL. |
An Access Person within the meaning of this Code, is a person who has been designated as such by the MIMEL CCO or his or her designee(s). Generally, an Access Person is any person defined in the Definitions section that follows as an “Access Person”.
Immediate family members sharing the same household with any MIMEL Access Person are also deemed, by law, to be Access Persons for purposes of this Code. In addition, Rule 17j-1 under the 1940 Act and Rule 204A-1 under the Investment Advisers Act of 1940, as amended, contain a presumption that, if the investment adviser’s primary business is providing investment advice to Funds or other advisory clients, then all of its directors, officers and partners are presumed to be Access Persons of any Fund advised by the Adviser.
II. Fiduciary Duties of Access Persons Under Federal Securities Laws
MIMEL Access Persons owe a fiduciary duty to MIMEL’s clients. These duties include a duty at all times to place the interests of each entity’s respective clients first. Above all, this means all MIMEL Access Persons owe an undivided duty of loyalty to MIMEL’s clients. Further, MIMEL demands the highest degree of personal and professional integrity and ethical behavior from their Access Persons.
Accordingly, all MIMEL Access Persons must conduct themselves in an ethical manner and in such a way as to avoid not only actual conflicts of interest with MIMEL’s clients the appearance of a conflict that could compromise the trust such clients have placed in MIMEL.
All Access Persons must comply fully with all applicable laws, including applicable federal securities laws.
III. Personal Trading and Reporting
Access Persons should consider trading in stocks, bonds, and closed-end mutual funds for their personal accounts a privilege while working at MIMEL.
Failure to comply with MIMEL’s pre-clearance and reporting procedures, as described below, may result in the loss of personal trading privileges and may lead to additional disciplinary action, up to and including termination of employment.
In addition, because MIMEL is a wholly-owned subsidiary of MGL, an Australian-based investment bank, MIMEL Access Persons are subject to MGL’s pre-clearance requirements. Failure to comply with MGL’s pre-clearance requirements will also result in the loss of personal trading privileges and may also lead to additional disciplinary action, up to and including termination of employment.
A. Personal Holdings Reports
Every Access Person of MIMEL must provide to the CCO:
● | no later than 10 (ten) calendar days after becoming an Access Person, a personal holding statement in the form prescribed by the CCO, which contains all the information required under Rule 17j-1(d)(i) and covers not only the personal holdings of the Access Person but certain of their family members and dependants (“Associated Persons”); and |
● | annually certain information concerning their and their Associated Persons’ personal holdings in the form prescribed by the CCO, which contains all the information required under Rule 17j-1(d)(iii). |
B. MGL Pre-Clearance Requirements
The most recent version of MGL’s pre-clearance requirements can be found at the below link. MGL policies are updated from time to time and Access Persons are required to periodically check for these updates:
http://macnet.internal.macquarie.com/central/employment/ppc/compliance/personal-deal
C. MIMEL Pre-Clearance Requirements
MIMEL’s pre-clearance requirements help to protect Access Persons and MIMEL against the following critical transgressions:
● | Access Persons taking advantage of opportunities more properly belonging to MIMEL clients; |
● | Access Persons violating MIMEL’s Code of Ethics requirements as established by the Securities and Exchange Commission (SEC); |
● | Access Persons violating insider trading laws; and |
● | Access Persons engaging in front running. |
The MIMEL pre-clearance requirements are dictated by the Macquarie Group Personal Dealing Policy.
Please note, you must always pre-clear the direct or indirect acquisition of any beneficial ownership interest in any security in an initial public offering (IPO) and private placement of securities. Also, you must always pre-clear trades in the shares of any Funds managed by MIMEL.
Typically, accounts that contain securities that need to be pre-cleared are held in the name(s) of the Access Persons themselves. However, if you, as an Access Person, advise anyone who is not an Access Person (other than clients of MIMEL) on trading in any securities that are not on the Exempt from Pre-Clearance list, these transactions may need to be pre-cleared. You must advise the MIMEL CCO or designee before rendering this investment advice.
Independent directors of any Fund are expressly excluded from the definition of Access Person under Rule 17j-1(d)(2)(ii) for purposes of providing initial or annual reports of their holdings, or quarterly reports of their trading activity in Covered Securities covered by this Code and for pre-clearing their trades, except for the direct or indirect acquisition of any beneficial ownership interest in any security in an initial public offering (IPO) and private placements of securities.
The decision to approve a pre-clearance request lies solely in the discretion of MIMEL’s CCO or designee.
All Access Persons and their Immediate Family Members are prohibited from trading a security in their personal brokerage accounts for seven (7) calendar days before and after Macquarie executes a buy or sell transaction in that same security.
The MIMEL CCO is subject to the above requirements.
(3) Buying and Selling Shares in MIMEL’s Client Accounts
Because MIMEL’s Client Accounts may be listed and trading on a national securities exchange, they are freely tradable. However, as an Access Person has access to material, non-public information regarding such Client Accounts, trading in these Client Accounts is severely limited. The CCO will make a determination on such trading on a case by case basis.
(4) Your Trading Window
MIMEL pre-clearance is valid for the day of request only and shall be deemed to expire at the close of regular trading on the principal trading market for the security involved. Any unfilled or partially filled orders will require MIMEL pre-clearance on each subsequent day that the order remains open.
(5) Minimum Holding Period
There is a minimum holding period of thirty calendar days before you may sell, dispose, close out or otherwise vary an interest in a financial instrument subject to Macquarie’s Personal Investment Policy.
D. MIMEL Access Person Reporting and Certifications
(1) New Access Persons
All new Access Persons must trade through a Macquarie broker-dealer. Certain exemptions to this requirement may be approved by RMG and activity statements must be made available to RMG.
If the Access Person, as a part of his or her employment compensation with MGL or any of its subsidiaries or affiliates, received MGL options, the holding of these options is not reportable; however, once these options are exercised, they are reportable in the Access Person’s quarterly transaction reports, as discussed in Paragraph C.(2) below.
Typically, accounts that contain Reportable Securities and/or Covered Securities are held in the name(s) of the Access Persons themselves. However, if you, as an Access Person, are advising one or more persons or entities who are not themselves Access Persons (other than MIMEL clients) on their securities trading or have control of such account(s), please advise the MIMEL CCO or designee at the time you start advising as such. These accounts may be subject to pre-clearance and reporting obligations as well.
(2) Ongoing Quarterly Transactions Monitoring
The SEC requires MIMEL to collect from its Access Persons on a calendar quarterly basis reports that reflect all transactions that took place during the prior quarter:
● | in reportable securities beneficially owned, directly or indirectly, by its Access Persons; and/or |
● | over which the Access Person had control. |
RMG will have access to trading activity statements for all staff and enabling them to surveil for improper trades and other trades that could create the perception of any improprieties. The CCO may request trading activity statement for all staff directly from RMG.
The following information may be reviewed for all Access Persons:
● | The date of the transaction; |
● | The security description, and as applicable, the exchange ticker or CUSIP number; |
● | Number of shares or par value; |
● | Principal amount of the securities; |
● | Whether the transaction was a purchase or sale or any other type of acquisition/disposition; |
● | The price at which the transaction was effected; |
● | Interest rate and maturity rate; |
● | The name of the broker, dealer or bank with or through which the transaction was effected; and |
● | The date the report is submitted. |
IV. Gifts and Entertainment1
Generally, Access Persons may not give or receive any gifts in connection with any business of MIMEL because it may appear improper or raise a potential conflict of interest. However, gifts may be allowed providing they fall within the Macquarie Gifts and Entertainment Policy. This includes normal and customary business entertainment, the cost of which would be paid for by MIMEL as a reasonable expense if not paid for by the other party. While “nominal value” is susceptible to interpretation, a gift or entertainment is not acceptable if an independent third party may believe that the Access Person would be influenced by receiving such gift or entertainment in conducting business. Gifts of an extraordinary or extravagant nature to an Access Person should be declined or returned in order to avoid compromising the reputation of the Access Person or MIMEL.
1 This section does not apply to any clients’ Independent Directors.
When an access person gives or receives a gift or entertainment, he/she must ensure that this is recorded in the EMEA Gifts Register and that pre-approval is sought where required as per the Macquarie Gifts and Entertainment Policy.
Access Persons must comply with the MGL Dealing with Public Officials’ policy.
If you have any questions about the propriety of a gift you may be offered or may wish to offer to another or any other arrangement, please consult MIMEL’s CCO.
V. Service on a Board of Directors
An Access Person may serve on the Board of Directors of a publicly traded company (the “Board”) only if:
1. | The CCO, or designate, determines that serving on the Board would be consistent with the interests of MIMEL; |
2. | Appropriate “” “information barrier” procedures are established; and |
3. | The CCO, or designate, provides written authorization that the Access Person can serve on the Board. |
VI. OUTSIDE BUSINESS ACTIVITIES
All employees are required to devote their full time and efforts to the Macquarie Group’s business. In addition, no person may make use of either his or her position as an employee or information acquired during employment, or make personal investments in a manner that may create a conflict, or the appearance of a conflict, between the employee’s personal interests and MIMEL' interests.
An employee must complete the Notice of Outside Business Activity disclosure form attached and obtain the written approval of the employee’s supervisor. prior to participating in any outside business activities, including, but not limited to:
● | Serving as a director, officer, general partner or trustee of, or as a consultant to, any business, corporation or partnership. |
● | Serving as a registered representative of any broker-dealer. |
● | Making any monetary investment in any non-publicly traded business, corporation or partnership, including passive investments in private companies. (Investments in publicly traded companies may require prior approval of the Compliance Officer, in accordance with personal securities trading procedures described above). |
● | Accepting a second job or part-time job of any kind or engaging in any other business outside of the firm. |
● | Forming or participating in any bank group in connection with a bankruptcy or distressed situation. |
● | Forming or participating in any committee in making demands for changes in the management or policies of any company, or becoming actively involved in a proxy contest. |
● | Receiving compensation of any nature, directly or indirectly, from any person, firm, corporation, estate, trust or association, other than MIMEL, whether as a fee, commission, bonus or other consideration such as stock, options or warrants. |
COMPLIANCE and SANCTIONS
If you become aware of or suspect any violations of this Code, you must report them to the MIMEL CCO as soon as practicable. Reports may be made anonymously. MIMEL has zero tolerance for reprisals against employees making reports, in good faith, of perceived wrongdoing.
The CCO, or designate, shall review the records obtained pursuant to this Code to ensure that all MIMEL Access Persons are complying with its provisions. All records shall be maintained in accordance with Rules 204-2 under the Investment Advisers Act of 1940 and 17j-1(f) under the 1940 Act, as further described in MIMEL’s compliance manuals.
MIMEL may, as they deem appropriate, impose sanctions, including, inter alia, a fine, letter of censure, revoking personal securities trading privileges, suspension or termination of employment of any Access Person who violates any provision of this Code.
EX-99.p.4
Code of Ethics
● | the adviser’s fiduciary duty to its clients; |
● | compliance with all applicable Federal Securities Laws; |
● | reporting and review of personal Securities transactions and holdings; |
● | reporting of violations of the Code; and, |
● | the provision of the Code to all Access Persons. |
I. Persons Subject to the Code of Ethics
The Code has been adopted by Macquarie Investment Management Global Limited (MIMGL), an investment adviser registered with the Securities and Exchange Commission (SEC) effective as of 25 November 2015 to comply with Rule 204A-1 under the Advisers Act, as well as other securities laws and sound business practices. Certain undefined capitalized terms used herein have the meanings ascribed thereto in the attached “Definitions” schedule.
● | employing any device, scheme or artifice to defraud any other client of MIMGL; |
● | making any untrue statement of a material fact to any other client of MIMGL or omitting to state a material fact necessary in order to make the statements made to any other client of MIMGL, in light of the circumstances under which they are made, not misleading; |
● | engaging in any act, practice or course of business that operates or would operate as a fraud or deceit on any other client of MIMGL; or |
● | engaging in any manipulative practice with respect to any other client of MIMGL. |
An Access Person within the meaning of this Code, is a person who has been designated as such by the Chief Compliance Officer or their designee(s) (herein collectively referred to as CCO). Generally, an Access Person is any person defined in the Definitions section that follows as an “Access Person”.
Immediate family members sharing the same household with any MIMGL Access Person are also deemed, by law, to be Access Persons for purposes of this Code. In addition, Rule 204A-1 under the Advisers Act contains a presumption that, if the investment adviser’s primary business is providing investment advice to Accounts or other advisory clients, then all of its directors, officers and partners are presumed to be Access Persons of any account advised by the adviser.
II. Fiduciary Duties of Access Persons Under Federal Securities Laws
Access Persons owe a fiduciary duty to MIMGL’s Clients. These This includes a duty at all times to place the interests of each Client first. Above all, this means all Access Persons owe an undivided duty of loyalty to MIMGL’s Clients. Further, MIMGL demand the highest degree of personal and professional integrity and ethical behavior from their Access Persons.
Accordingly, all Access Persons must conduct themselves in an ethical manner and in such a way as to avoid or mitigate not only actual conflicts of interest with MIMGL’s Clients, but also the appearance of a conflict that could compromise the trust such clients have placed in MIMGL.
All Access Persons must comply fully with all applicable laws, including applicable U.S. State and Federal Securities Laws.
III. Conflicts of Interest
Conflicts of interest may exist between various individuals and entities, including MIMGL, Access Persons, and current or prospective Clients and Investors. Any failure to identify or properly address a conflict can have severe negative repercussions for MIMGL, its Access Persons, and/or Clients and Investors. In some cases the improper handling of a conflict could result in litigation and/or disciplinary action.
MIMGL’s policies and procedures have been designed to identify and properly disclose, mitigate, or eliminate applicable conflicts of interest. However, written policies and procedures cannot address every potential conflict, therefore Access Persons must use good judgment in identifying and responding appropriately to actual or apparent conflicts. Conflicts of interest that involve MIMGL and/or its Access Person on one hand, and Clients and/or Investors on the other hand, will generally be fully disclosed and/or resolved in a way that favors the interests of Clients and/or Investors over the interests of MIMGL and its Access Persons. If an Access Person believes that a conflict of interest has not been identified or appropriately addressed, that Access Person should promptly bring the issue to the CCO’s attention.
In some instances conflicts of interest may arise between Clients and/or Investors. Responding appropriately to these types of conflicts can be challenging, and may require robust disclosures if there is any appearance that one or more Clients or Investors have been unfairly disadvantaged. Access Persons should notify the CCO promptly if it appears that any actual or apparent conflict of interest between Clients and/or Investors has not been appropriately addressed.
All Access Persons are subject to the restrictions and disclosure requirements outlined in Macquarie Group’s Conflicts of Interest Policy.
IV. Personal Investments Policies and Procedures
Access Persons trades should be executed in a manner consistent with our fiduciary obligations to our Clients. Trades should avoid actual improprieties, as well as the appearance of impropriety. Employee trades must not be timed to precede orders placed for any Client, nor should trading activity be so excessive as to conflict with the Access Person’s ability to fulfil daily job responsibilities.
Accounts covered by the Personal Investments Policies and Procedures
Macquarie Group’s Personal Investments Policy and the procedures outlined therein apply to all accounts holding any securities over which Access Persons have any Beneficial Ownership Interest, which typically include accounts held by immediate family members sharing the same household. Immediate family members include children, step-children, grandchildren, parents, step- parents, grandparents, spouses, domestic partners, siblings, parents-in-law, and children-in-law, as well as adoptive relationships that meet the above criteria.
Failure to comply with Macquarie Group’s Personal Investments Policy and the procedures outlined therein may result in the loss of personal trading privileges and may lead to additional disciplinary action, up to and including termination of employment.
When the duty to pre-clear arises
● | You are the person exercising investment discretion over the trade; and |
● | The security to be traded is not on the “Exempt from Pre-Clearance” list. |
● | shares issued by money market funds and open-ended mutual funds that are not Reportable Funds; |
● | transactions in accounts for which the Access Person has no direct or indirect Control (e.g., such as an account managed by an investment adviser on a discretionary basis or purchases that are part of an automatic investment plan); |
● | 529 Plan interests – must be a government- sponsored plan; |
● | fixed annuities and variable annuities (unable to hold individual stocks or bond investments); |
● | government securities; and, |
● | bankers’ acceptances, bank certificates of deposit, commercial paper, and high-quality short-term debt instruments, including repurchase agreements. |
You are not required to pre-clear transactions in any of the securities on the Exempt from Pre-Clearance list above. Transactions in all other securities, including initial public offerings, limited offerings or private placements must be pre-cleared.
Typically, accounts that contain securities that need to be pre-cleared are held in the name(s) of the Access Persons themselves. However, if you, as an Access Person, advise anyone who is not an Access Person (other than clients of MIMGL) on trading in any securities these transactions may need to be pre- cleared. You must advise the CCO or designee before rendering this investment advice.
MIMGL may disapprove any proposed transaction, particularly if the transaction appears to pose a conflict of interest or otherwise appears improper.
Macquarie Group may also maintain a “Restricted List” of securities that are determined to be inappropriate for trading by Access Persons. Compliance will not approve any personal transactions in securities that are associated with any issuers on the Restricted List. The Restricted List may be comprised of, among other things:
● | Issuers that have outstanding publicly traded securities and with whom MIMGL has entered into a confidentiality agreement; |
● | any publicly-traded Portfolio Companies owned by managed funds of MIMGL; and, |
● | securities that MIMGL is actively evaluating for purchase or sale in Client accounts, or about which MIMGL might have received material non-public information. |
The placement of an issuer on the Restricted List does not necessarily mean that MIMGL has material non- public information about the issuer. At times, an issuer will be added in an abundance of caution to prevent even the appearance of front running or other inappropriate trading.
Trading Window
Pre-clearance is valid until the end of the business day on which approval was granted. Any part of the order that is not executed within this time period must be pre- cleared again or cancelled. It is the responsibility of the Access Person to take the appropriate action.
Trading approval may be extended for transactions executed in overseas markets where differences in time zones would prevent an Access Person from executing a transaction before the end of the business day on which approval was granted.
Minimum Holding Period
There is a minimum holding period of 30 calendar days before you can sell any securities of an issuer whose securities you just purchased.
Waivers from Trading Restrictions
Compliance may, at its sole discretion, provide a waiver to any of the aforementioned trading restrictions. Waivers are rare and Access Persons must demonstrate that a case of undue hardship exists, the waiver will not adversely impact clients, result in the violation of any securities laws, and will not present a conflict of interest.
If Compliance is satisfied that there is a prima facie case, it will provide a written exemption to the Access Person. If approval is granted, the written approval of the waiver will stipulate the duration and conditions of the approval.
V. Access Person Reporting and Certifications
New Access Person Reporting
When an employee is identified as an Access Person by the CCO or designee, the Access Person must declare, as applicable, within 10 calendar days of being advised of the Access Person designation, an initial holdings report that lists all Reportable Securities and any account that has the ability to hold any non-exempt securities. The information in this report cannot be more than 45 days old as measured by the date the employee becomes an Access Person.
Unless otherwise advised and approved by Compliance, each Access Person shall only be permitted to open a Macquarie MOT brokerage account, and to demonstrate cancellation of any other external brokerage accounts. All reportable accounts must be recorded in PTA.
If an exception is granted by Compliance and/or CCO to allow a brokerage account with a non-designated broker, then unless otherwise agreed by Compliance and/or CCO, the Access Person must provide duplicate copies of periodic (at least quarterly) statements for all securities accounts to Compliance, within 30 days of the statement period. All Access Persons are responsible for ensuring that duplicate statements are provided to Compliance.
If the Access Person, as a part of their employment compensation with the Macquarie Group, received Macquarie Group Limited options, the holding of these options is not reportable in initial or annual holdings reports; however, once these options are exercised and the Access Person acquires common stock, any sale must be pre cleared and all subsequent transactions are reportable in the Access Person’s quarterly transaction reports.
● | title, type of security; |
● | as applicable, exchange ticker or CUSIP, number of shares, and principal amount; |
● | the name of any broker, dealer or bank with which the Access Person holds an account in which any Reportable Securities are held for the Access Person’s direct or indirect benefit; and, |
● | the date the report is submitted. |
Access Persons are presumed to be beneficial owners of securities held by immediate family members sharing the same household. As such, their holdings reports, as described in this section, must also be provided to MIMGL.
● | to certify their understanding and their willingness to comply with MIMGL’s compliance programs; and, |
● | to confirm that the personal securities holdings information that they have provided is complete and accurate. |
Ongoing Quarterly Reporting
● | in Reportable Securities beneficially owned, directly or indirectly, by its Access Persons; and/or |
● | over which the Access Person had Control. |
These reports must be submitted within 30 days after each calendar quarter end. Each transaction report must contain the following information, where applicable:
● | the date of the transaction; |
● | the security description, and as applicable, the exchange ticker or CUSIP number; |
● | number of shares or par value; |
● | principal amount of the securities; |
● | whether the transaction was a purchase or sale or any other type of acquisition/disposition; |
● | the price at which the transaction was effected; |
● | interest rate and maturity rate; |
● | the name of the broker, dealer or bank with or through which the transaction was effected; and |
● | the date the report is submitted. |
If the Access Person has directed all financial institutions where they have accounts that hold Reportable Securities to send copies of their account statements and trade activity to Compliance, the Access Person does not have to submit a quarterly transaction report to the CCO as long as Compliance receives the trade activity and account statements within 30 days of the end of the quarter in which the trades were executed. For any new accounts opened Access Persons must instruct the institution hosting their accounts to send to Compliance duplicate trade confirmations and account statements as described above.
Access Persons do not have to submit a quarterly transaction report to the CCO for investments in unlisted securities that have been approved by Compliance
The CCO or designee will require each Access Person to confirm that the transactions effected during the period were in accordance with the Code and that the information reported is complete and accurate. This confirmation will also include a certification for each Access Person to sign with respect to compliance with MIMGL’s Political Contributions Policy and Macquarie Group’s Gift and Entertainment, Conflicts of Interest, and Outside Business Activities Policies.
Annual Reporting
Every Access Person must submit an updated holdings report (“Annual Report”) each calendar year. The information in the Annual Report cannot be more than 45 days old prior to the date it was submitted.
If the Access Person has directed all financial institutions where they have accounts that hold Reportable Securities to send copies of their account statements and trade activity to Compliance, then the Access Person does not have to submit an Annual Report to the CCO.
Access Persons who have reportable holdings that are not set up for duplicate reporting may submit copies of account statements that contain all of the same information that would be required by the Annual Report and that is current as of the dates noted above. Access Persons should sign and date each such statement before submitting it to the CCO or a designee. Any Reportable Securities not appearing on an attached account statement or duplicate reporting (e.g., private placements or hedge fund interests) must be reported directly to the CCO or a designee as part of the Access Person’s annual certification.
In addition, on an annual basis, the CCO will require each Access Person to certify that they have complied with the terms of the Code and MIMGL’s Compliance Manual.
Exceptions to Reporting Requirements
● | Quarterly reports for any transactions effected pursuant to an automatic investment plan; or, |
● | any reports with respect to securities held in accounts over which the Access Person had no direct or indirect Control, such as an account managed by an investment adviser on a discretionary basis or a trust account. |
Any investment plans or accounts that may be eligible for either of these exceptions should be brought to the attention of the CCO or a designee who will, on a case-by-case basis, determine whether the plan or account qualifies for an exception. In making this determination, the CCO or designee may ask for supporting documentation, such as a copy of the automatic investment plan, a copy of the discretionary account management agreement, and/or a written certification from an unaffiliated investment adviser.
VI. Gifts and Entertainment
Generally, Access Persons may not give or receive any gifts in connection with any business of MIMGL because it may appear improper or raise a potential conflict of interest. However, gifts may be allowed providing they fall within the Macquarie Gifts and Entertainment Policy. This includes normal and customary business entertainment, the cost of which would be paid for by MIMGL as a reasonable expense if not paid for by the other party. While “nominal value” is susceptible to interpretation, a gift or entertainment is not acceptable if an independent third party may believe that the Access Person would be influenced by receiving such gift or entertainment in conducting business. Gifts of an extraordinary or extravagant nature to an Access Person should be declined or returned in order to avoid compromising the reputation of the Access Person or MIMGL.
All Access Persons are subject to the restrictions and disclosure requirements outlined in Macquarie Group’s Gifts and Entertainment Policy.
When an Access Person gives or receives a gifts or entertainment, they must disclose the gift or entertainment in accordance with Macquarie’s Gift and Entertainment Policy.
If you have any questions about the propriety of a gift you may be offered or may wish to offer to another or any other arrangement, please consult the CCO.
VII. Political Contributions
Introduction
Rule 206(4)-5 of the Advisers Act (commonly referred to as the “Pay-to-Play” rule) addresses the various arrangements by which a U.S.-registered investment adviser may seek to influence the award of advisory business by making or soliciting political contributions to U.S. government officials charged with awarding such business. Under Rule 206(4)-5, Access Persons are prohibited from making contributions in excess of applicable federal, state, or local limitations.
The Pay-to-Play rule includes a provision that makes it unlawful for an adviser or any of its covered associates to do anything indirectly which, if done directly, would result in a violation of the rule. As a result, an adviser and its covered associates could not funnel payments through third parties (including, for example, consultants, attorneys, family members, friends or companies affiliated with the adviser) as a means to circumvent the rule.
If violated, the Pay-to-Play Rule prohibits the receipt of compensation from a government entity for advisory services for two years following a Contribution to any official of that “government entity”. This prohibition also applies to “covered associates” of the adviser.
● | any general partner, managing member or executive officer, or other individual with a similar status or function; |
● | any employee that solicits a government entity for the adviser, as well as any direct or indirect supervisor of that employee; and |
● | any political action committee controlled by the adviser or by any person that meets the definition of a “covered associate.” |
Each potential contribution must be assessed for compliance with all applicable federal, state, and local restrictions. Generally, contributions to any incumbent, candidate, or successful candidate for any state or local office may be approved if the contribution does not exceed,
● | US$350 or less per election, in any state or local election in which that Access Person is entitled to vote; |
● | US$350 to a current state or municipal official seeking the U.S. Presidency; or |
● | US$150 or less per election, for any election in which that Access Person is not entitled to vote. |
However, from time to time, applicable state and local law or contractual provisions with current government entity clients may require a denial of a contribution below these limits.
Pre-clearance requirements
To prevent contraventions of the Pay-to-Play Rule, current Access Persons are required to pre-clear all political contributions - state, local and federal with Compliance using the format prescribed by Compliance.
Pre-clearance is required for any fundraising activities reasonably expected to solicit contributions from other persons or otherwise facilitate such contributions through coordination or solicitation.
Certain volunteering activities for a political campaign may be deemed, for purposes of the Pay-to-Play Rule, as either a contribution or fundraising activity. Accordingly, all volunteer activities are required to be pre-cleared.
● | Using the Company’s name; |
● | During work hours; |
● | On Company premises; and/or, |
● | With the use of any Company equipment, property, funds or personnel. |
General Prohibitions
All staff are prohibited from performing any act that would directly or indirectly result in a violation of the Pay-to-Play Rule. Staff may not use other persons (including family members), entities, Company affiliates, third party solicitors, and/or, political action committees (PACs) to circumvent the Pay-to-Play Rule.
All staff are prohibited from establishing, controlling, or being involved with a PAC or any other entity that makes, solicits, or coordinates political contributions to a government entity other than any PAC established by Macquarie.
Restrictions on payments for the solicitation of clients or investors
The Pay-to-Play Rule prohibits the compensation of any person to solicit a government entity unless the solicitor is an officer or employee of the adviser, or unless the recipient of the compensation (i.e., solicitation fee) is another registered investment adviser or a registered broker/dealer.
However, a registered investment adviser will be ineligible to receive compensation for soliciting government entities if the adviser or its covered associates made, coordinated, or solicited Contributions or payments to the government entity during the prior two years in excess of the de minimis exceptions noted above.
MIMGL will only compensate third parties for referrals of Clients or Investors that are affiliated with government entities if the solicitor is an eligible “regulated person,” as defined by Rule 206(4)-5 under the Advisers Act, and if the solicitor and its covered associates have not made any disqualifying Contributions during the past two years.
Restrictions on the coordination or solicitation of contributions
The Pay-to-Play Rule prohibits an adviser and its covered associates from coordinating or soliciting any Contribution or payment to an Official of the government entity, or a related local or state political party where the adviser is providing or seeking to provide investment advisory services to the government entity.
Charitable Donations
Charitable donations to legitimate not-for-profit organizations, even at the request of an official of a government entity, do not implicate Rule 206(4)-5. Donations by MIMGL or Access Persons to charities with the intention of influencing such charities to become Clients or Investors are strictly prohibited.
Access Persons should notify the CCO about any actual or apparent conflict of interest in connection with any charitable contribution, or about any contribution that could give an appearance of impropriety.
Approval Process
Once a pre-clearance request is received, the Compliance team will review the request for compliance with the Pay-to-Play Rule, applicable law, and internal policy.
Access Persons will be notified in writing (hard copy and/or electronic notification) of the Compliance team’s final determination.
No contribution may be made prior to written approval by Compliance. Staff may not make contributions or engage in activities in excess of what was precleared and approved by Compliance.
Any contribution approved by the Compliance team shall be made within thirty (30) calendar days of the date of approval.
Approved contributions that have not been made within thirty (30) calendar days of approval must be resubmitted to the Compliance team to be reviewed and approved again.
Reporting
New Access Person Reporting
When an individual is first designated as an Access Person, the individual must disclose any political contributions made up to two years prior to their Access Person designation date along with their new Access Person paperwork due within 10 days of hire.
Quarterly Certification
On a quarterly basis, Access Persons are required to submit a certification that they have complied with the Pay-to-Play Rule and provide a list of contributions made during the preceding calendar quarter. This certification is maintained by the Chief Compliance Officer, or their designate, and updated from time to time.
Penalty for non-compliance
Any Access Person who violates MIMGL’s political contribution policy shall immediately report the violation to the MAM Compliance team. Upon notification of a violation, the MAM Compliance team shall, in consultation with the Chief Legal Officer, be responsible for taking the appropriate steps necessary to avoid violations of the Pay-to-Play Rule or other applicable laws, or any other steps as necessary and appropriate under the circumstances, including determining whether MIMGL is subject to a “two-year time out” under Rule 206(4)-5.
An Access Person who fails to pre-clear a contribution or otherwise violates the Political Contribution Policy may be required to clawback the contribution and will be subject to disciplinary action up to and including termination.
Recordkeeping
● | A list of all “covered associates” (unless otherwise noted, all Access Persons are covered associates for this purpose); |
● | A list of all third-party solicitors it pays, directly or indirectly, to solicit potential government Clients or Fund Investors; |
● | A list of all of MIMGL’s direct or indirect political contributions and those made by its Access Persons to officials of a government entity as well as payments to political parties or political action committees; |
● | Each government entity that invests in a Covered Investment Pool (as defined in Rule 206(4)-5) whose account can reasonably be identified as being held in the name of or for the benefit of such government entity on the records of the Covered Investment Pool or its transfer agent; |
● | Each account that was identified as belonging to or existing for the benefit of a government entity – at or around the time of the initial investment – to the adviser or one of its client servicing employees, regulated persons or covered associates; |
● | Each government entity that sponsors or establishes a 529 Plan and has selected a specific Covered Investment Pool as an option to be offered by such 529 Plan; and |
● | Each government entity that has been solicited to invest in a Covered Investment Pool either (i) by a covered associate or regulated person of MIMGL; or (ii) by an intermediary or affiliate of the Covered Investment Pool if a covered associate, regulated person, or client servicing employee of MIMGL participated in or was involved in such solicitation, regardless of whether such government entity invested in the Covered Investment Pool. |
Lobbying activities
Certain jurisdictions require registration and reporting by anyone who engages in a lobbying activity. Generally, lobbying includes:
(1) communicating with any member or employee of a legislative branch of government for the purpose of influencing legislation;
(2) communicating with certain government officials for the purpose of influencing government action (e.g., awarding of a government mandate or contract, investment by a government pension plan in a managed fund, etc.); or,
(3) engaging in research or other activities to support or prepare for such communication.
Certain meetings with, or solicitation of, public employees or officials may constitute lobbying in certain jurisdictions.
In order to ensure that MIMGL complies with applicable lobbying laws, Access Persons must notify the Chief Compliance Officer (or delegate) before engaging in any activity on behalf of MIMGL that might be considered lobbying. The Chief Compliance Officer, or their designate, will determine whether MIMGL or its Access Persons need to make any federal, state or local filings pursuant to applicable lobbying laws.
VIII. Service on a Board of Directors
● | the CCO determines that serving on the Board would be consistent with the interests of MIMGL or, where applicable, MIMGL’s clients; |
● | appropriate information barrier procedures are established; |
● | the CCO provides written authorization that the Access Person can serve on the Board; and, |
● | the Access Person agrees to excuse himself or herself from any decisions regarding that entity’s investment activities. |
IX. Outside Business Activities
All MIMGL Access Persons are subject to the restrictions and disclosure requirements of Macquarie’s Outside Business Activities Policy.
● | serving as a director, officer, general partner or trustee of, or as a consultant to, any business, corporation or partnership; |
● | making any monetary investment in any non-publicly traded business, corporation or partnership, including passive investments in private companies (investments in publicly traded companies may require prior approval of the CCO or designee, in accordance with personal securities trading procedures described above); |
● | accepting a second job or part-time job of any kind or engaging in any other business outside of MIMGL or other positions within the Macquarie Group; |
● | forming or participating in any bank group in connection with a bankruptcy or distressed situation; |
● | forming or participating in any committee in making demands for changes in the management or policies of any company, or becoming actively involved in a proxy contest; and |
● | receiving compensation of any nature, directly or indirectly, from any person, firm, corporation, estate, trust or association, other than the Macquarie Group, whether as a fee, commission, bonus or other consideration such as stock, options or warrants. |
Approval will be granted on a case-by-case basis, subject to careful consideration of potential conflicts of interest, disclosure obligations, and any other relevant regulatory issues.
No Access Person may utilize property of MIMGL or utilize the services of MIMGL or their employees, for their personal benefit or the benefit of another person or entity, without approval of the CCO. For this purpose, “property” means both tangible and intangible property, including funds, premises, equipment, supplies, information, business plans, business opportunities, confidential research, intellectual property, proprietary processes, and ideas for new research or services.
● | disclosing in writing all necessary facts to the CCO; |
● | offering the particular opportunity to MIMGL; and |
● | obtaining written authorization to participate from the CCO. |
An Access Person who is granted approval to engage in an outside business activity must not transmit material non-public information between MIMGL and the outside entity. If participation in the outside business activity results in the Access Person’s receipt of material non-public information that could reasonably be viewed as relevant to MIMGL’s business activities, the Access Person must discuss the scope and nature of the information flow with the CCO. Similarly, if an Access Person receives approval to engage in an outside business activity and subsequently becomes aware of a material conflict of interest that was not disclosed when the approval was granted, the conflict must be promptly brought to the attention of the CCO.
X. Compliance and Sanctions
If you become aware of or suspect any violations of the Code, you must report them to the CCO as soon as practicable. Reports may be made anonymously as detailed in the Whistleblower Policy. MIMGL has zero tolerance for reprisals against employees making reports, in good faith, of perceived wrongdoing.
The CCO will review the records obtained pursuant to the Code to ensure that all Access Persons are complying with its provisions. All records shall be maintained in accordance with Rule 204-2 under the Advisers Act, as further described in MIMGL’s Compliance Manual.
MIMGL may, as deemed appropriate, impose sanctions, including, a fine, letter of censure, revoking personal securities trading privileges, or suspension or termination of employment of any Access Person who violates any provision of the Code.
DEFINITIONS
For Purposes of this Code of Ethics:
1) | “Access Person” means: | |
a) | any director, partner, officer, Advisory Person or employee of MIMGL; and/or | |
b) | Any person who has access to nonpublic information regarding any clients’ purchase or sale of securities, or nonpublic information regarding the portfolio holdings of any other of MIMEL’s clients; and/or | |
c) | Any person who is involved in making securities recommendations to clients, or who has access to such recommendations that are nonpublic. | |
For the purposes of this manual “Access Person” does generally not include non-executive directors of MIMGL | ||
2) | “Advisory Person” means any director, officer, general partner or employee of MIMGL who, in connection with his or her regular functions or duties makes, participates in or obtains information regarding the purchase or sale of Covered Securities by any other MIMGL client, or whose functions relate to the making of any recommendation with respect to such purchases or sales; and any natural person in a control relationship to MIMGL who obtains information concerning recommendations made to any other of MIMGL’s clients with regard to the purchase or sale of Covered Securities by any other of MIMGL’s clients. | |
3) | “Automatic Investment Plan” means a program in which regular periodic purchases (or withdrawals) are made automatically in (or from) investment accounts in accordance with a predetermined schedule and allocation. An automatic investment plan includes a dividend reinvestment plan. | |
4) | “Beneficial Ownership Interest” means any direct or indirect interest in the name of the MIMGL employee as well as any direct or indirect interest in the name of the MIMGL employee’s spouse, child, all persons residing with or financially dependent upon the MIMGL employee, any person to whom the MIMGL employee contributes material financial support and any account over which the MIMGL employee exercises control. | |
5) | “CCO” means the Chief Compliance Officer or their designee. | |
6) | “Control” means the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company. | |
7) | “COO” means the Chief Operating Officer or their designee. | |
8) | “Covered Security” means a security as defined in section 2(a)(36) of the 1940 Act, except that it does not include: | |
a) | Direct obligations of the Government of the United States; |
b) | Bankers’ acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements; and | |
c) | Shares issued by open-end Funds. | |
9) | “Federal Securities Laws” means the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002, the Investment Company Act of 1940, the Investment Advisers Act of 1940, Title V of the Gramm-Leach-Bliley Act, any rules adopted by the Commission under any of these statutes, the Bank Secrecy Act as it applies to funds and investment advisers, and any rules adopted thereunder by the Commission or the Department of the Treasury. | |
10) | “Fund” means an investment company registered under the 1940 Act. | |
11) | “Initial Public Offering” (“IPO”) means an offering of securities registered under the Securities Act of 1933, as amended (the “1933 Act”), the issuer of which, immediately before the registration, was not subject to the reporting requirements of sections 13 or 15(d) of the Securities Exchange Act of 1934. | |
12) | “Investment Personnel” means any employee of MIMGL (or of any company in a control relationship to MIMGL) who, in connection with his or her regular functions or duties, makes or participates in making recommendations regarding the purchase or sale of securities by MIMGL; or any person who controls MIMGL and who obtains information concerning recommendations made to MIMGL regarding the purchase or sale of securities by any client. | |
13) | “Limited Offering” or “Private Placement” means an offering of securities that is exempt from registration under the 1933 Act pursuant to section 4(2) or 4(6) or pursuant to rule 504, 505, or 506 under the 1933 Act. | |
14) | “MIMGL Client Accounts” means any account to which MIMGL acts as an investment adviser or a sub-investment adviser. | |
15) | “PM” means the relevant Portfolio Manager or their designee and may include a member of the investment management team. | |
16) | “Purchase or sale of a Covered Security” includes, among other things, the writing of an option to purchase or sell a Covered Security. | |
17) | “Reportable Fund” means (i) any Fund for which MIMGL serves as an investment adviser; and/or (ii) any Fund whose investment adviser or principal underwriter controls, is controlled by, or is under common control with MIMGL. | |
18) | “Reportable Security” means a security as defined in section 202(a)(18) of the Act (15 U.S.C. 80b-2(a)(18)), except that it does not include: | |
a) | Direct obligations of the Government of the United States; | |
b) | Bankers’ acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements; | |
c) | Shares issued by money market funds; | |
d) | Shares issued by open-end funds other than reportable funds; and |
e) | Shares issued by unit investment trusts that are invested exclusively in one or more open-end funds, none of which are reportable funds. | |||
19) | “Security Held or to be Acquired” by a Fund means: | |||
(i) | Any Covered Security which, within the most recent 15 days: | |||
(1) | Is or has been held by the Fund; or | |||
(2) | Is being or has been considered by the Fund or its investment adviser for purchase by the Fund; and | |||
(ii) | Any option to purchase or sell, and any security convertible into or exchangeable for, a Covered Security described above in 12(i). |
EX-99.q.1
POWER OF ATTORNEY
I, the undersigned, President/Chief Executive Officer and member of the Boards of Trustees/Directors of Delaware Funds by Macquarie® listed below (the "Trusts"), hereby constitute and appoint David F. Connor, Brian L. Murray, Jr. and Richard Salus, and each of them singly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacity, all Registration Statements of the Trusts including Form N-1A, Form N-2, Form N-8A or any successor thereto, any and all subsequent Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said Registration Statements on Form N-1A or any successor thereto, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all related requirements of the Securities and Exchange Commission. I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of this 20th day of January, 2022.
/s/ Shawn K. Lytle |
Shawn K. Lytle |
Delaware Funds by Macquarie | |
Delaware Group Adviser Funds | InvestEd Portfolios |
Delaware Group Cash Reserve | Ivy Funds |
Delaware Group Equity Funds I | Ivy Variable Insurance Portfolios |
Delaware Group Equity Funds II | Voyageur Insured Funds |
Delaware Group Equity Funds IV | Voyageur Intermediate Tax-Free Funds |
Delaware Group Equity Funds V | Voyageur Mutual Funds |
Delaware Group Foundation Funds | Voyageur Mutual Funds II |
Delaware Group Global & International Funds | Voyageur Mutual Funds III |
Delaware Group Government Fund | Voyageur Tax Free Funds |
Delaware Group Income Funds | Delaware Enhanced Global Dividend and Income Fund |
Delaware Group Limited-Term Government Funds | Delaware Investments Dividend and Income Fund, Inc. |
Delaware Group State Tax-Free Income Trust | Delaware Investments Colorado Insured Municipal Income Fund, Inc. |
Delaware Group Tax-Free Fund | Delaware Investments Minnesota Municipal Income Fund II, Inc. |
Delaware Pooled Trust | Delaware Investments National Municipal Income Fund |
Delaware VIP Trust | Delaware Ivy High Income Opportunities Fund |
POWER OF ATTORNEY
I, the undersigned, Chief Financial Officer of the Delaware Funds by Macquarie® listed below (the "Trusts"), hereby constitute and appoint David F. Connor, Shawn K. Lytle and Brian L. Murray, Jr., and each of them singly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacity, all Registration Statements of the Trusts including Form N-1A, Form N-2, Form N-8A or any successor thereto, any and all subsequent Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said Registration Statements on Form N-1A or any successor thereto, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all related requirements of the Securities and Exchange Commission. I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of this 20th day of January, 2022.
/s/ Richard Salus |
Richard Salus |
Delaware Funds by Macquarie | |
Delaware Group Adviser Funds | InvestEd Portfolios |
Delaware Group Cash Reserve | Ivy Funds |
Delaware Group Equity Funds I | Ivy Variable Insurance Portfolios |
Delaware Group Equity Funds II | Voyageur Insured Funds |
Delaware Group Equity Funds IV | Voyageur Intermediate Tax-Free Funds |
Delaware Group Equity Funds V | Voyageur Mutual Funds |
Delaware Group Foundation Funds | Voyageur Mutual Funds II |
Delaware Group Global & International Funds | Voyageur Mutual Funds III |
Delaware Group Government Fund | Voyageur Tax Free Funds |
Delaware Group Income Funds | Delaware Enhanced Global Dividend and Income Fund |
Delaware Group Limited-Term Government Funds | Delaware Investments Dividend and Income Fund, Inc. |
Delaware Group State Tax-Free Income Trust | Delaware Investments Colorado Insured Municipal Income Fund, Inc. |
Delaware Group Tax-Free Fund | Delaware Investments Minnesota Municipal Income Fund II, Inc. |
Delaware Pooled Trust | Delaware Investments National Municipal Income Fund |
Delaware VIP Trust | Delaware Ivy High Income Opportunities Fund |
POWER OF ATTORNEY
I, the undersigned member of the Boards of Trustees/Directors of Delaware Funds by Macquarie® listed below (the "Trusts"), hereby constitute and appoint David F. Connor, Shawn K. Lytle, Brian L. Murray, Jr. and Richard Salus, and each of them singly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacity, all Registration Statements of the Trusts including Form N-1A, Form N-2, Form N-8A or any successor thereto, any and all subsequent Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said Registration Statements on Form N-1A or any successor thereto, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all related requirements of the Securities and Exchange Commission. I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of this 20th day of January, 2022.
/s/ Jerome D. Abernathy |
Jerome D. Abernathy |
Delaware Funds by Macquarie | |
Delaware Group Adviser Funds | InvestEd Portfolios |
Delaware Group Cash Reserve | Ivy Funds |
Delaware Group Equity Funds I | Ivy Variable Insurance Portfolios |
Delaware Group Equity Funds II | Voyageur Insured Funds |
Delaware Group Equity Funds IV | Voyageur Intermediate Tax-Free Funds |
Delaware Group Equity Funds V | Voyageur Mutual Funds |
Delaware Group Foundation Funds | Voyageur Mutual Funds II |
Delaware Group Global & International Funds | Voyageur Mutual Funds III |
Delaware Group Government Fund | Voyageur Tax Free Funds |
Delaware Group Income Funds | Delaware Enhanced Global Dividend and Income Fund |
Delaware Group Limited-Term Government Funds | Delaware Investments Dividend and Income Fund, Inc. |
Delaware Group State Tax-Free Income Trust | Delaware Investments Colorado Insured Municipal Income Fund, Inc. |
Delaware Group Tax-Free Fund | Delaware Investments Minnesota Municipal Income Fund II, Inc. |
Delaware Pooled Trust | Delaware Investments National Municipal Income Fund |
Delaware VIP Trust | Delaware Ivy High Income Opportunities Fund |
POWER OF ATTORNEY
I, the undersigned member of the Boards of Trustees/Directors of Delaware Funds by Macquarie® listed below (the "Trusts"), hereby constitute and appoint David F. Connor, Shawn K. Lytle, Brian L. Murray, Jr. and Richard Salus, and each of them singly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacity, all Registration Statements of the Trusts including Form N-1A, Form N-2, Form N-8A or any successor thereto, any and all subsequent Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said Registration Statements on Form N-1A or any successor thereto, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all related requirements of the Securities and Exchange Commission. I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of this 20th day of January, 2022.
/s/ Thomas L. Bennett |
Thomas L. Bennett |
Delaware Funds by Macquarie | |
Delaware Group Adviser Funds | InvestEd Portfolios |
Delaware Group Cash Reserve | Ivy Funds |
Delaware Group Equity Funds I | Ivy Variable Insurance Portfolios |
Delaware Group Equity Funds II | Voyageur Insured Funds |
Delaware Group Equity Funds IV | Voyageur Intermediate Tax-Free Funds |
Delaware Group Equity Funds V | Voyageur Mutual Funds |
Delaware Group Foundation Funds | Voyageur Mutual Funds II |
Delaware Group Global & International Funds | Voyageur Mutual Funds III |
Delaware Group Government Fund | Voyageur Tax Free Funds |
Delaware Group Income Funds | Delaware Enhanced Global Dividend and Income Fund |
Delaware Group Limited-Term Government Funds | Delaware Investments Dividend and Income Fund, Inc. |
Delaware Group State Tax-Free Income Trust | Delaware Investments Colorado Insured Municipal Income Fund, Inc. |
Delaware Group Tax-Free Fund | Delaware Investments Minnesota Municipal Income Fund II, Inc. |
Delaware Pooled Trust | Delaware Investments National Municipal Income Fund |
Delaware VIP Trust | Delaware Ivy High Income Opportunities Fund |
POWER OF ATTORNEY
I, the undersigned member of the Boards of Trustees/Directors of Delaware Funds by Macquarie® listed below (the "Trusts"), hereby constitute and appoint David F. Connor, Shawn K. Lytle, Brian L. Murray, Jr. and Richard Salus, and each of them singly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacity, all Registration Statements of the Trusts including Form N-1A, Form N-2, Form N-8A or any successor thereto, any and all subsequent Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said Registration Statements on Form N-1A or any successor thereto, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all related requirements of the Securities and Exchange Commission. I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of this 20th day of January, 2022.
/s/ Ann D. Borowiec |
Ann D. Borowiec |
Delaware Funds by Macquarie | |
Delaware Group Adviser Funds | InvestEd Portfolios |
Delaware Group Cash Reserve | Ivy Funds |
Delaware Group Equity Funds I | Ivy Variable Insurance Portfolios |
Delaware Group Equity Funds II | Voyageur Insured Funds |
Delaware Group Equity Funds IV | Voyageur Intermediate Tax-Free Funds |
Delaware Group Equity Funds V | Voyageur Mutual Funds |
Delaware Group Foundation Funds | Voyageur Mutual Funds II |
Delaware Group Global & International Funds | Voyageur Mutual Funds III |
Delaware Group Government Fund | Voyageur Tax Free Funds |
Delaware Group Income Funds | Delaware Enhanced Global Dividend and Income Fund |
Delaware Group Limited-Term Government Funds | Delaware Investments Dividend and Income Fund, Inc. |
Delaware Group State Tax-Free Income Trust | Delaware Investments Colorado Insured Municipal Income Fund, Inc. |
Delaware Group Tax-Free Fund | Delaware Investments Minnesota Municipal Income Fund II, Inc. |
Delaware Pooled Trust | Delaware Investments National Municipal Income Fund |
Delaware VIP Trust | Delaware Ivy High Income Opportunities Fund |
POWER OF ATTORNEY
I, the undersigned member of the Boards of Trustees/Directors of Delaware Funds by Macquarie® listed below (the "Trusts"), hereby constitute and appoint David F. Connor, Shawn K. Lytle, Brian L. Murray, Jr. and Richard Salus, and each of them singly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacity, all Registration Statements of the Trusts including Form N-1A, Form N-2, Form N-8A or any successor thereto, any and all subsequent Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said Registration Statements on Form N-1A or any successor thereto, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all related requirements of the Securities and Exchange Commission. I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of this 20th day of January, 2022.
/s/ Joseph W. Chow |
Joseph W. Chow |
Delaware Funds by Macquarie | |
Delaware Group Adviser Funds | InvestEd Portfolios |
Delaware Group Cash Reserve | Ivy Funds |
Delaware Group Equity Funds I | Ivy Variable Insurance Portfolios |
Delaware Group Equity Funds II | Voyageur Insured Funds |
Delaware Group Equity Funds IV | Voyageur Intermediate Tax-Free Funds |
Delaware Group Equity Funds V | Voyageur Mutual Funds |
Delaware Group Foundation Funds | Voyageur Mutual Funds II |
Delaware Group Global & International Funds | Voyageur Mutual Funds III |
Delaware Group Government Fund | Voyageur Tax Free Funds |
Delaware Group Income Funds | Delaware Enhanced Global Dividend and Income Fund |
Delaware Group Limited-Term Government Funds | Delaware Investments Dividend and Income Fund, Inc. |
Delaware Group State Tax-Free Income Trust | Delaware Investments Colorado Insured Municipal Income Fund, Inc. |
Delaware Group Tax-Free Fund | Delaware Investments Minnesota Municipal Income Fund II, Inc. |
Delaware Pooled Trust | Delaware Investments National Municipal Income Fund |
Delaware VIP Trust | Delaware Ivy High Income Opportunities Fund |
POWER OF ATTORNEY
I, the undersigned member of the Boards of Trustees/Directors of Delaware Funds by Macquarie® listed below (the "Trusts"), hereby constitute and appoint David F. Connor, Shawn K. Lytle, Brian L. Murray, Jr. and Richard Salus, and each of them singly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacity, all Registration Statements of the Trusts including Form N-1A, Form N-2, Form N-8A or any successor thereto, any and all subsequent Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said Registration Statements on Form N-1A or any successor thereto, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all related requirements of the Securities and Exchange Commission. I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of this 20th day of January, 2022.
/s/ H. Jeffrey Dobbs |
H. Jeffrey Dobbs |
Delaware Funds by Macquarie | |
Delaware Group Adviser Funds | InvestEd Portfolios |
Delaware Group Cash Reserve | Ivy Funds |
Delaware Group Equity Funds I | Ivy Variable Insurance Portfolios |
Delaware Group Equity Funds II | Voyageur Insured Funds |
Delaware Group Equity Funds IV | Voyageur Intermediate Tax-Free Funds |
Delaware Group Equity Funds V | Voyageur Mutual Funds |
Delaware Group Foundation Funds | Voyageur Mutual Funds II |
Delaware Group Global & International Funds | Voyageur Mutual Funds III |
Delaware Group Government Fund | Voyageur Tax Free Funds |
Delaware Group Income Funds | Delaware Enhanced Global Dividend and Income Fund |
Delaware Group Limited-Term Government Funds | Delaware Investments Dividend and Income Fund, Inc. |
Delaware Group State Tax-Free Income Trust | Delaware Investments Colorado Insured Municipal Income Fund, Inc. |
Delaware Group Tax-Free Fund | Delaware Investments Minnesota Municipal Income Fund II, Inc. |
Delaware Pooled Trust | Delaware Investments National Municipal Income Fund |
Delaware VIP Trust | Delaware Ivy High Income Opportunities Fund |
POWER OF ATTORNEY
I, the undersigned member of the Boards of Trustees/Directors of Delaware Funds by Macquarie® listed below (the "Trusts"), hereby constitute and appoint David F. Connor, Shawn K. Lytle, Brian L. Murray, Jr. and Richard Salus, and each of them singly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacity, all Registration Statements of the Trusts including Form N-1A, Form N-2, Form N-8A or any successor thereto, any and all subsequent Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said Registration Statements on Form N-1A or any successor thereto, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all related requirements of the Securities and Exchange Commission. I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of this 20th day of January, 2022.
/s/ John A. Fry |
John A. Fry |
Delaware Funds by Macquarie | |
Delaware Group Adviser Funds | InvestEd Portfolios |
Delaware Group Cash Reserve | Ivy Funds |
Delaware Group Equity Funds I | Ivy Variable Insurance Portfolios |
Delaware Group Equity Funds II | Voyageur Insured Funds |
Delaware Group Equity Funds IV | Voyageur Intermediate Tax-Free Funds |
Delaware Group Equity Funds V | Voyageur Mutual Funds |
Delaware Group Foundation Funds | Voyageur Mutual Funds II |
Delaware Group Global & International Funds | Voyageur Mutual Funds III |
Delaware Group Government Fund | Voyageur Tax Free Funds |
Delaware Group Income Funds | Delaware Enhanced Global Dividend and Income Fund |
Delaware Group Limited-Term Government Funds | Delaware Investments Dividend and Income Fund, Inc. |
Delaware Group State Tax-Free Income Trust | Delaware Investments Colorado Insured Municipal Income Fund, Inc. |
Delaware Group Tax-Free Fund | Delaware Investments Minnesota Municipal Income Fund II, Inc. |
Delaware Pooled Trust | Delaware Investments National Municipal Income Fund |
Delaware VIP Trust | Delaware Ivy High Income Opportunities Fund |
POWER OF ATTORNEY
I, the undersigned member of the Boards of Trustees/Directors of Delaware Funds by Macquarie® listed below (the "Trusts"), hereby constitute and appoint David F. Connor, Shawn K. Lytle, Brian L. Murray, Jr. and Richard Salus, and each of them singly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacity, all Registration Statements of the Trusts including Form N-1A, Form N-2, Form N-8A or any successor thereto, any and all subsequent Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said Registration Statements on Form N-1A or any successor thereto, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all related requirements of the Securities and Exchange Commission. I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of this 20th day of January, 2022.
/s/ Joseph Harroz, Jr. |
Joseph Harroz, Jr. |
Delaware Funds by Macquarie | |
Delaware Group Adviser Funds | InvestEd Portfolios |
Delaware Group Cash Reserve | Ivy Funds |
Delaware Group Equity Funds I | Ivy Variable Insurance Portfolios |
Delaware Group Equity Funds II | Voyageur Insured Funds |
Delaware Group Equity Funds IV | Voyageur Intermediate Tax-Free Funds |
Delaware Group Equity Funds V | Voyageur Mutual Funds |
Delaware Group Foundation Funds | Voyageur Mutual Funds II |
Delaware Group Global & International Funds | Voyageur Mutual Funds III |
Delaware Group Government Fund | Voyageur Tax Free Funds |
Delaware Group Income Funds | Delaware Enhanced Global Dividend and Income Fund |
Delaware Group Limited-Term Government Funds | Delaware Investments Dividend and Income Fund, Inc. |
Delaware Group State Tax-Free Income Trust | Delaware Investments Colorado Insured Municipal Income Fund, |
Delaware Group Tax-Free Fund | Delaware Investments Minnesota Municipal Income Fund II, Inc. |
Delaware Pooled Trust | Delaware Investments National Municipal Income Fund |
Delaware VIP Trust | Delaware Ivy High Income Opportunities Fund |
POWER OF ATTORNEY
I, the undersigned member of the Boards of Trustees/Directors of Delaware Funds by Macquarie® listed below (the "Trusts"), hereby constitute and appoint David F. Connor, Shawn K. Lytle, Brian L. Murray, Jr. and Richard Salus, and each of them singly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacity, all Registration Statements of the Trusts including Form N-1A, Form N-2, Form N-8A or any successor thereto, any and all subsequent Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said Registration Statements on Form N-1A or any successor thereto, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all related requirements of the Securities and Exchange Commission. I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of this 20th day of January, 2022.
/s/ Sandra A.J. Lawrence |
Sandra A.J. Lawrence |
Delaware Funds by Macquarie | |
Delaware Group Adviser Funds | InvestEd Portfolios |
Delaware Group Cash Reserve | Ivy Funds |
Delaware Group Equity Funds I | Ivy Variable Insurance Portfolios |
Delaware Group Equity Funds II | Voyageur Insured Funds |
Delaware Group Equity Funds IV | Voyageur Intermediate Tax-Free Funds |
Delaware Group Equity Funds V | Voyageur Mutual Funds |
Delaware Group Foundation Funds | Voyageur Mutual Funds II |
Delaware Group Global & International Funds | Voyageur Mutual Funds III |
Delaware Group Government Fund | Voyageur Tax Free Funds |
Delaware Group Income Funds | Delaware Enhanced Global Dividend and Income Fund |
Delaware Group Limited-Term Government Funds | Delaware Investments Dividend and Income Fund, Inc. |
Delaware Group State Tax-Free Income Trust | Delaware Investments Colorado Insured Municipal Income Fund, |
Delaware Group Tax-Free Fund | Delaware Investments Minnesota Municipal Income Fund II, Inc. |
Delaware Pooled Trust | Delaware Investments National Municipal Income Fund |
Delaware VIP Trust | Delaware Ivy High Income Opportunities Fund |
POWER OF ATTORNEY
I, the undersigned member of the Boards of Trustees/Directors of Delaware Funds by Macquarie® listed below (the "Trusts"), hereby constitute and appoint David F. Connor, Shawn K. Lytle, Brian L. Murray, Jr. and Richard Salus, and each of them singly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacity, all Registration Statements of the Trusts including Form N-1A, Form N-2, Form N-8A or any successor thereto, any and all subsequent Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said Registration Statements on Form N-1A or any successor thereto, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all related requirements of the Securities and Exchange Commission. I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of this 20th day of January, 2022.
/s/ Frances A. Sevilla-Sacasa |
Frances A. Sevilla-Sacasa |
Delaware Funds by Macquarie | |
Delaware Group Adviser Funds | InvestEd Portfolios |
Delaware Group Cash Reserve | Ivy Funds |
Delaware Group Equity Funds I | Ivy Variable Insurance Portfolios |
Delaware Group Equity Funds II | Voyageur Insured Funds |
Delaware Group Equity Funds IV | Voyageur Intermediate Tax-Free Funds |
Delaware Group Equity Funds V | Voyageur Mutual Funds |
Delaware Group Foundation Funds | Voyageur Mutual Funds II |
Delaware Group Global & International Funds | Voyageur Mutual Funds III |
Delaware Group Government Fund | Voyageur Tax Free Funds |
Delaware Group Income Funds | Delaware Enhanced Global Dividend and Income Fund |
Delaware Group Limited-Term Government Funds | Delaware Investments Dividend and Income Fund, Inc. |
Delaware Group State Tax-Free Income Trust | Delaware Investments Colorado Insured Municipal Income Fund, Inc. |
Delaware Group Tax-Free Fund | Delaware Investments Minnesota Municipal Income Fund II, Inc. |
Delaware Pooled Trust | Delaware Investments National Municipal Income Fund |
Delaware VIP Trust | Delaware Ivy High Income Opportunities Fund |
POWER OF ATTORNEY
I, the undersigned member of the Boards of Trustees/Directors of Delaware Funds by Macquarie® listed below (the "Trusts"), hereby constitute and appoint David F. Connor, Shawn K. Lytle, Brian L. Murray, Jr. and Richard Salus, and each of them singly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacity, all Registration Statements of the Trusts including Form N-1A, Form N-2, Form N-8A or any successor thereto, any and all subsequent Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said Registration Statements on Form N-1A or any successor thereto, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all related requirements of the Securities and Exchange Commission. I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of this 20th day of January, 2022.
/s/ Thomas K. Whitford |
Thomas K. Whitford |
Delaware Funds by Macquarie | |
Delaware Group Adviser Funds | InvestEd Portfolios |
Delaware Group Cash Reserve | Ivy Funds |
Delaware Group Equity Funds I | Ivy Variable Insurance Portfolios |
Delaware Group Equity Funds II | Voyageur Insured Funds |
Delaware Group Equity Funds IV | Voyageur Intermediate Tax-Free Funds |
Delaware Group Equity Funds V | Voyageur Mutual Funds |
Delaware Group Foundation Funds | Voyageur Mutual Funds II |
Delaware Group Global & International Funds | Voyageur Mutual Funds III |
Delaware Group Government Fund | Voyageur Tax Free Funds |
Delaware Group Income Funds | Delaware Enhanced Global Dividend and Income Fund |
Delaware Group Limited-Term Government Funds | Delaware Investments Dividend and Income Fund, Inc. |
Delaware Group State Tax-Free Income Trust | Delaware Investments Colorado Insured Municipal Income Fund, Inc. |
Delaware Group Tax-Free Fund | Delaware Investments Minnesota Municipal Income Fund II, Inc. |
Delaware Pooled Trust | Delaware Investments National Municipal Income Fund |
Delaware VIP Trust | Delaware Ivy High Income Opportunities Fund |
POWER OF ATTORNEY
I, the undersigned member of the Boards of Trustees/Directors of Delaware Funds by Macquarie® listed below (the "Trusts"), hereby constitute and appoint David F. Connor, Shawn K. Lytle, Brian L. Murray, Jr. and Richard Salus, and each of them singly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacity, all Registration Statements of the Trusts including Form N-1A, Form N-2, Form N-8A or any successor thereto, any and all subsequent Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said Registration Statements on Form N-1A or any successor thereto, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all related requirements of the Securities and Exchange Commission. I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of this 20th day of January, 2022.
/s/ Christianna Wood |
Christianna Wood |
Delaware Funds by Macquarie | |
Delaware Group Adviser Funds | InvestEd Portfolios |
Delaware Group Cash Reserve | Ivy Funds |
Delaware Group Equity Funds I | Ivy Variable Insurance Portfolios |
Delaware Group Equity Funds II | Voyageur Insured Funds |
Delaware Group Equity Funds IV | Voyageur Intermediate Tax-Free Funds |
Delaware Group Equity Funds V | Voyageur Mutual Funds |
Delaware Group Foundation Funds | Voyageur Mutual Funds II |
Delaware Group Global & International Funds | Voyageur Mutual Funds III |
Delaware Group Government Fund | Voyageur Tax Free Funds |
Delaware Group Income Funds | Delaware Enhanced Global Dividend and Income Fund |
Delaware Group Limited-Term Government Funds | Delaware Investments Dividend and Income Fund, Inc. |
Delaware Group State Tax-Free Income Trust | Delaware Investments Colorado Insured Municipal Income Fund, Inc. |
Delaware Group Tax-Free Fund | Delaware Investments Minnesota Municipal Income Fund II, Inc. |
Delaware Pooled Trust | Delaware Investments National Municipal Income Fund |
Delaware VIP Trust | Delaware Ivy High Income Opportunities Fund |
POWER OF ATTORNEY
I, the undersigned member of the Boards of Trustees/Directors of Delaware Funds by Macquarie® listed below (the "Trusts"), hereby constitute and appoint David F. Connor, Shawn K. Lytle, Brian L. Murray, Jr. and Richard Salus, and each of them singly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacity, all Registration Statements of the Trusts including Form N-1A, Form N-2, Form N-8A or any successor thereto, any and all subsequent Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said Registration Statements on Form N-1A or any successor thereto, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all related requirements of the Securities and Exchange Commission. I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of this 20th day of January, 2022.
/s/ Janet L. Yeomans |
Janet L. Yeomans |
Delaware Funds by Macquarie | |
Delaware Group Adviser Funds | InvestEd Portfolios |
Delaware Group Cash Reserve | Ivy Funds |
Delaware Group Equity Funds I | Ivy Variable Insurance Portfolios |
Delaware Group Equity Funds II | Voyageur Insured Funds |
Delaware Group Equity Funds IV | Voyageur Intermediate Tax-Free Funds |
Delaware Group Equity Funds V | Voyageur Mutual Funds |
Delaware Group Foundation Funds | Voyageur Mutual Funds II |
Delaware Group Global & International Funds | Voyageur Mutual Funds III |
Delaware Group Government Fund | Voyageur Tax Free Funds |
Delaware Group Income Funds | Delaware Enhanced Global Dividend and Income Fund |
Delaware Group Limited-Term Government Funds | Delaware Investments Dividend and Income Fund, Inc. |
Delaware Group State Tax-Free Income Trust | Delaware Investments Colorado Insured Municipal Income Fund, Inc. |
Delaware Group Tax-Free Fund | Delaware Investments Minnesota Municipal Income Fund II, Inc. |
Delaware Pooled Trust | Delaware Investments National Municipal Income Fund |
Delaware VIP Trust | Delaware Ivy High Income Opportunities Fund |
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