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    Quarterly Fund Commentary


    Delaware Ivy High Income Opportunities Fund (prospectus)
    December 31, 2016


    Manager(s):
    Adam H. Brown, CFA
    John P. McCarthy, CFA

    Market Sector Update

    • In general, bond markets experienced bouts of volatility and sell offs during the quarter instigated by President-elect Donald Trump’s surprise victory in November. The post-election environment initiated a backup in rates, further emphasized by a 25 basis point hike of the Federal Funds rate on Dec. 14 by the Federal Open Market Committee. These events marked the largest month-overmonth increase in 10-year Treasury yields in years. The 10-year Treasury found its low for 2016 in the previous quarter at 1.36% then rebounded to 2.60% in December.
    • Despite the recent sell off and price pressure experienced within several areas of the fixed-income markets, such as U.S. Treasuries and municipals, highyield bonds garnered positive returns across the majority of sectors. The BofAML US HY Master II Index returned 1.88% for the quarter, making 2016 one of the best performing years for the highyield category since 2009. The index was up approximately 17.5% for the year.
    • Flows into the high-yield asset class were also positive for the quarter, making 2016 the first annual year of net inflows since 2012. For comparison sake, the previous three years (2013, 2014 and 2015) combined for a total of $45 billion of outflows.

    Portfolio Strategy

    • The net asset value (NAV) price ended the quarter at $16.05 per share, substantially above the 52-week low.
    • The NAV price increased 5.03% quarter over quarter due to outperformance across the majority of high-yield sectors, especially in basic industry and the services sectors, and a meaningful allocation to loans (the benchmark does not have an allocation to Loans).
    • The portfolio continues to be invested with a mix of high-yield corporate bonds and senior loans across the noninvestment grade credit spectrum. The portfolio is composed of approximately 84% corporate bonds and 14% senior loans. The loan portfolio is split fairly evenly between first and second lien loans.
    • The majority of the Fund is invested in single B credits (57%) with the remaining exposure primarily in double BB credits (19%), and triple CCC credits (19%).&br;
    • The effective duration of the portfolio is 2.97 years, which can be broken down into 3.30 years for the bond portfolio and 0.83 years for the loan portfolio.

    Outlook

    • Since the peak in yields and spreads on Feb. 11, which coincided with a year-overyear market low of -5.13%, the high-yield asset class has rallied more than 400 basis points and is up approximately 17.50% for 2016.
    • At year end, the BofA Merrill Lynch US High Yield Index sits at a yield of 6.47% and a spread of 476 basis points. Although this is roughly at the 20-year historical average spread for the index (implying the market is close to fair value), we believe there is strong relative value in high-yield spreads if defaults continue on their downward trajectory and a U.S. postelection, pro-growth environment results in stronger corporate earnings.
    • It is our view that finding value in the highyield market has become increasingly more difficult, and considerable caution is warranted in making new investments. As such, we believe our continued process of bottom-up, in-depth fundamental research and analysis will guide us to those investments where the risk/reward is in our favor.
    • We also think with the potential of a continuation of rising interest rates accompanied by the possibility of a more active U.S. Federal Reserve, the ability to continue to invest in loans will be an attractive differentiator for the Fund. We believe our relative underweight to bonds may prove beneficial as we believe bonds (especially those long in duration) may have more downside risk on average over the next 12 months.

    The opinions expressed in this commentary are those of the Fund’s manager and are current through Dec. 31, 2016. The manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed. Any securities or sectors mentioned are based on what the managers feel may be newsworthy and may or may not reflect holdings in this portfolio. It is not intended to represent that an investment in these securities or sectors was or will be profitable. Past performance is no guarantee of future results.

    Risk factors: The price of the Fund’s shares will fluctuate with market conditions and other factors. Fund shares are not guaranteed or endorsed by any bank or other insured depository institution, and are not federally insured by the Federal Deposit Insurance Corporation. Closed-end funds frequently trade at a discount from their net asset values (NAVs), which may increase an investor’s risk of loss. At the time of sale, shares may have a market price that is below NAV, and may be worth less than the original investment. There is no assurance that the Fund will meet its investment objective. Investing in high-income securities may carry a greater risk of nonpayment of interest or principal than with higher-rated bonds. Loans (including loan assignments, loan participations and other loan instruments) carry other risks, including the risk of insolvency of the lending bank or other intermediary. Loans may be unsecured or not fully collateralized, may be subject to restrictions on resale and sometimes trade infrequently on the secondary market.

    BofA Merrill Lynch US High Yield Index reflects the performance of securities representing the high yield sector of the bond market. It is not possible to invest directly in an index

    An investment in the Fund is not appropriate for all investors and is not intended to be a complete investment program. The Fund is designed as a long-term investment and not as a trading vehicle.

    Ivy Investment Management Company (IICO) serves as the Fund’s investment adviser. IICO is a wholly-owned subsidiary of Waddell & Reed Financial, Inc.

    IVY INVESTMENTSSM refers to the investment management and investment advisory services offered by Ivy Investment Management Company, the financial services offered by Ivy Distributors, Inc., a FINRA member broker dealer and the distributor of IVY FUNDS® mutual funds and IVY VARIABLE INSURANCE PORTFOLIOS?, and the financial services offered by their affiliates.

    The Fund is a closed-end exchange traded investment company. This material is presented only to provide information and is not intended as investment advice or recommendations for trading purposes. Closed-end funds, unlike open-end funds, are not continuously offered. After the initial public offering, shares of closed-end funds are sold on the open market through a stock exchange. Investment policies, management fees, risks other than those mentioned above, and other matters of interest to prospective investors may be found in the closed-end fund prospectus used in its initial public offering. For additional information, contact our sales desk at 800-532-2780.

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