UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: | 811-02071 | |
Exact name of registrant as specified in charter: | Delaware Group® Income Funds | |
Address of principal executive offices: | 2005 Market Street | |
Philadelphia, PA 19103 | ||
Name and address of agent for service: | David F. Connor, Esq. | |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
Registrant’s telephone number, including area code: | (800) 523-1918 | |
Date of fiscal year end: | July 31 | |
Date of reporting period: | January 31, 2017 |
Item 1. Reports to Stockholders
Table of Contents
|
Semiannual report
Fixed income mutual funds
Delaware Corporate Bond Fund
Delaware Extended Duration Bond Fund
January 31, 2017
Carefully consider the Funds’ investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Funds’ prospectus and their summary prospectuses, which may be obtained by visiting delawareinvestments.com/literature or calling 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing.
You can obtain shareholder reports and prospectuses online instead of in the mail.
Visit delawareinvestments.com/edelivery.
Table of Contents
Experience Delaware Investments
Delaware Investments is committed to the pursuit of consistently superior asset management and unparalleled client service. We believe in our investment processes, which seek to deliver consistent results, and in convenient services that help add value for our clients.
If you are interested in learning more about creating an investment plan, contact your financial advisor.
You can learn more about Delaware Investments or obtain a prospectus for Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund at delawareinvestments.com/literature.
Manage your investments online
● | 24-hour access to your account information |
● | Obtain share prices |
● | Check your account balance and recent transactions |
● | Request statements or literature |
● | Make purchases and redemptions |
Delaware Management Holdings, Inc. and its subsidiaries (collectively known by the marketing name of Delaware Investments) are wholly owned subsidiaries of Macquarie Group Limited, a global provider of banking, financial, advisory, investment and funds management services.
Neither Delaware Investments nor its affiliates referred to in this document are authorized deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited (MBL), a subsidiary of Macquarie Group Limited and an affiliate of Delaware Investments. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Funds are governed by U.S. laws and regulations.
1 | ||||
3 | ||||
5 | ||||
24 | ||||
26 | ||||
28 | ||||
32 | ||||
49 | ||||
68 | ||||
72 |
Unless otherwise noted, views expressed herein are current as of Jan. 31, 2017, and subject to change for events occurring after such date.
The Funds are not FDIC insured and are not guaranteed. It is possible to lose the principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor. Delaware Investments, a member of Macquarie Group, refers to Delaware Management Holdings, Inc. and its subsidiaries, including the Funds’ distributor, Delaware Distributors, L.P. Macquarie Group refers to Macquarie Group Limited and its subsidiaries and affiliates worldwide.
© 2017 Delaware Management Holdings, Inc.
All third-party marks cited are the property of their respective owners.
Table of Contents
For the six-month period from August 1, 2016 to January 31, 2017 (Unaudited)
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. These following examples are intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period from Aug. 1, 2016 to Jan. 31, 2017.
Actual expenses
The first section of the tables shown, “Actual Fund return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The second section of the tables shown, “Hypothetical 5% return,” provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in each Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of each table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The Funds’ expenses shown in the tables reflect fee waivers in effect. The expenses shown in each table assume reinvestment of all dividends and distributions.
1
Table of Contents
Disclosure of Fund expenses | ||
For the six-month period from August 1, 2016 to January 31, 2017 (Unaudited) |
Delaware Corporate Bond Fund
Expense analysis of an investment of $1,000
Beginning Account Value 8/1/16 | Ending Account Value 1/31/17 | Annualized Expense Ratio | Expenses Paid During Period 8/1/16 to 1/31/17* | |||||||||||||
Actual Fund return† | ||||||||||||||||
Class A | $1,000.00 | $978.00 | 0.94% | $4.69 | ||||||||||||
Class C | 1,000.00 | 974.30 | 1.69% | 8.41 | ||||||||||||
Class R | 1,000.00 | 978.50 | 1.19% | 5.93 | ||||||||||||
Institutional Class | 1,000.00 | 979.30 | 0.69% | 3.44 | ||||||||||||
Hypothetical 5% return (5% return before expenses) |
| |||||||||||||||
Class A | $1,000.00 | $1,020.47 | 0.94% | $4.79 | ||||||||||||
Class C | 1,000.00 | 1,016.69 | 1.69% | 8.59 | ||||||||||||
Class R | 1,000.00 | 1,019.21 | 1.19% | 6.06 | ||||||||||||
Institutional Class | 1,000.00 | 1,021.73 | 0.69% | 3.52 |
Delaware Extended Duration Bond Fund
Expense analysis of an investment of $1,000
Beginning Account Value 8/1/16 | Ending Account Value 1/31/17 | Annualized Expense Ratio | Expenses Paid During Period 8/1/16 to 1/31/17* | |||||||||||||
Actual Fund return† | ||||||||||||||||
Class A | $1,000.00 | $941.30 | 0.96% | $4.70 | ||||||||||||
Class C | 1,000.00 | 937.60 | 1.71% | 8.35 | ||||||||||||
Class R | 1,000.00 | 940.10 | 1.21% | 5.92 | ||||||||||||
Institutional Class | 1,000.00 | 943.70 | 0.71% | 3.48 | ||||||||||||
Class R6 | 1,000.00 | 942.70 | 0.63% | 3.08 | ||||||||||||
Hypothetical 5% return (5% return before expenses) |
| |||||||||||||||
Class A | $1,000.00 | $1,020.37 | 0.96% | $4.89 | ||||||||||||
Class C | 1,000.00 | 1,016.59 | 1.71% | 8.69 | ||||||||||||
Class R | 1,000.00 | 1,019.11 | 1.21% | 6.16 | ||||||||||||
Institutional Class | 1,000.00 | 1,021.63 | 0.71% | 3.62 | ||||||||||||
Class R6 | 1,000.00 | 1,022.03 | 0.63% | 3.21 |
* “Expenses Paid During Period” are equal to the relevant Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
† Because actual returns reflect only the most recent six-month period, the returns shown may differ significantly from fiscal year returns.
2 |
Table of Contents
Security type / sector allocations | ||
Delaware Corporate Bond Fund | As of January 31, 2017 (Unaudited) |
Sector designations may be different than the sector designations presented in other Fund materials. The sector designations may represent the investment manager’s internal sector classifications, which may result in the sector designations for one fund being different than another fund’s sector designations.
Security type / sector | Percentage of net assets | |||||
Convertible Bonds | 0.82% | |||||
Corporate Bonds | 90.34% | |||||
Banking | 21.68% | |||||
Basic Industry | 5.46% | |||||
Brokerage | 1.92% | |||||
Capital Goods | 2.45% | |||||
Communications | 14.13% | |||||
Consumer Cyclical | 2.31% | |||||
Consumer Non-Cyclical | 5.76% | |||||
Electric | 7.53% | |||||
Energy | 10.12% | |||||
Finance Companies | 4.92% | |||||
Insurance | 2.15% | |||||
Real Estate Investment Trusts | 3.36% | |||||
Technology | 5.29% | |||||
Transportation | 3.26% | |||||
Municipal Bonds | 0.83% | |||||
Loan Agreements | 1.05% | |||||
Preferred Stock | 2.41% | |||||
Short-Term Investments | 6.57% | |||||
Total Value of Securities | 102.02% | |||||
Liabilities Net of Receivables and Other Assets | (2.02%) | |||||
Total Net Assets | 100.00% |
3 |
Table of Contents
Security type / sector allocations | ||
Delaware Extended Duration Bond Fund | As of January 31, 2017 (Unaudited) |
Sector designations may be different than the sector designations presented in other Fund materials. The sector designations may represent the investment manager’s internal sector classifications, which may result in the sector designations for one fund being different than another fund’s sector designations.
Security type / sector | Percentage of net assets | |||||
Corporate Bonds | 87.46% | |||||
Banking | 16.37% | |||||
Basic Industry | 3.67% | |||||
Brokerage | 2.27% | |||||
Capital Goods | 2.71% | |||||
Communications. | 8.59% | |||||
Consumer Cyclical | 4.75% | |||||
Consumer Non-Cyclical | 10.95% | |||||
Electric | 11.98% | |||||
Energy | 10.28% | |||||
Finance Companies | 0.48% | |||||
Insurance | 6.24% | |||||
Natural Gas | 1.31% | |||||
Real Estate Investment Trusts | 0.16% | |||||
Technology | 5.14% | |||||
Transportation | 2.56% | |||||
Municipal Bonds | 3.01% | |||||
U.S. Treasury Obligations | 4.22% | |||||
Preferred Stock | 2.02% | |||||
Short-Term Investments | 1.92% | |||||
Total Value of Securities | 98.63% | |||||
Receivables and Other Assets Net of Liabilities | 1.37% | |||||
Total Net Assets | 100.00% |
4 |
Table of Contents
Schedules of investments | ||
Delaware Corporate Bond Fund | January 31, 2017 (Unaudited) |
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Convertible Bonds – 0.82% | ||||||||
| ||||||||
Clearwire Communications 144A 8.25% exercise price $7.08, maturity date 12/1/40 # | 5,502,000 | $ | 5,756,468 | |||||
Meritor 4.00% exercise price $26.73, maturity date 2/15/27 f | 2,603,000 | 2,692,478 | ||||||
|
| |||||||
Total Convertible Bonds (cost $8,118,344) | 8,448,946 | |||||||
|
| |||||||
| ||||||||
Corporate Bonds – 90.34% | ||||||||
| ||||||||
Banking – 21.68% | ||||||||
Ally Financial 8.00% 11/1/31 | 1,840,000 | 2,194,200 | ||||||
Bank of America | ||||||||
4.183% 11/25/27 | 1,835,000 | 1,824,572 | ||||||
4.443% 1/20/48 ● | 6,100,000 | 6,101,653 | ||||||
4.45% 3/3/26 | 5,095,000 | 5,209,128 | ||||||
Bank of New York Mellon | ||||||||
3.442% 2/7/28 ● | 7,060,000 | 7,060,000 | ||||||
4.625% 12/29/49 ● | 5,430,000 | 5,173,704 | ||||||
Barclays | ||||||||
3.20% 8/10/21 | 6,570,000 | 6,538,221 | ||||||
4.337% 1/10/28 | 2,285,000 | 2,280,190 | ||||||
4.95% 1/10/47 | 3,145,000 | 3,147,887 | ||||||
Citizens Financial Group 4.30% 12/3/25 | 6,955,000 | 7,073,256 | ||||||
Compass Bank 3.875% 4/10/25 | 7,970,000 | 7,643,915 | ||||||
Cooperatieve Rabobank 3.75% 7/21/26 | 2,490,000 | 2,428,930 | ||||||
Credit Suisse Group | ||||||||
144A 4.282% 1/9/28 # | 2,145,000 | 2,131,772 | ||||||
144A 6.25% 12/29/49 #● | 3,865,000 | 3,823,451 | ||||||
Credit Suisse Group Funding Guernsey 4.55% 4/17/26 | 11,330,000 | 11,651,761 | ||||||
Fifth Third Bank 3.85% 3/15/26 | 7,115,000 | 7,157,469 | ||||||
Goldman Sachs Group | ||||||||
3.50% 11/16/26 | 2,515,000 | 2,454,836 | ||||||
5.15% 5/22/45 | 5,730,000 | 5,949,998 | ||||||
HSBC Holdings | ||||||||
2.65% 1/5/22 | 3,235,000 | 3,168,420 | ||||||
4.375% 11/23/26 | 2,495,000 | 2,513,074 | ||||||
JPMorgan Chase & Co. | ||||||||
4.25% 10/1/27 | 4,875,000 | 4,980,919 | ||||||
6.75% 8/29/49 ● | 4,000,000 | 4,382,640 | ||||||
KeyBank 3.40% 5/20/26 | 10,610,000 | 10,337,981 | ||||||
KeyCorp 5.00% 12/29/49 ● | 2,185,000 | 2,083,944 | ||||||
Lloyds Banking Group | ||||||||
3.00% 1/11/22 | 3,105,000 | 3,097,098 | ||||||
3.75% 1/11/27 | 6,380,000 | 6,284,115 | ||||||
7.50% 4/30/49 ● | 1,145,000 | 1,190,560 |
5 |
Table of Contents
Schedules of investments | ||
Delaware Corporate Bond Fund |
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Banking (continued) | ||||||||
Morgan Stanley | ||||||||
2.443% 10/24/23 ● | 5,840,000 | $ | 5,917,240 | |||||
3.95% 4/23/27 | 1,705,000 | 1,669,787 | ||||||
4.375% 1/22/47 | 8,435,000 | 8,385,436 | ||||||
Nationwide Building Society 144A 4.00% 9/14/26 # | 7,610,000 | 7,253,266 | ||||||
PNC Financial Services Group 5.00% 12/29/49 ● | 4,560,000 | 4,503,000 | ||||||
Popular 7.00% 7/1/19 | 4,475,000 | 4,698,750 | ||||||
Royal Bank of Scotland Group | ||||||||
3.875% 9/12/23 | 5,195,000 | 5,055,047 | ||||||
8.625% 12/29/49 ● | 4,550,000 | 4,709,250 | ||||||
Santander UK Group Holdings | ||||||||
3.125% 1/8/21 | 2,595,000 | 2,603,584 | ||||||
3.571% 1/10/23 | 2,485,000 | 2,491,180 | ||||||
SunTrust Banks 2.70% 1/27/22 | 6,345,000 | 6,322,329 | ||||||
SVB Financial Group 3.50% 1/29/25 | 655,000 | 632,497 | ||||||
Toronto-Dominion Bank 3.625% 9/15/31 ● | 3,850,000 | 3,757,177 | ||||||
UBS 7.625% 8/17/22 | 7,555,000 | 8,608,923 | ||||||
UBS Group Funding Jersey | ||||||||
144A 2.65% 2/1/22 # | 2,750,000 | 2,671,864 | ||||||
144A 3.00% 4/15/21 # | 200,000 | 199,670 | ||||||
144A 4.125% 4/15/26 # | 1,430,000 | 1,447,892 | ||||||
USB Capital IX 3.50% 10/29/49 ● | 3,207,000 | 2,661,810 | ||||||
Wells Fargo & Co. | ||||||||
2.269% 10/31/23 ● | 5,715,000 | 5,781,180 | ||||||
3.069% 1/24/23 | 2,370,000 | 2,368,545 | ||||||
4.75% 12/7/46 | 1,045,000 | 1,067,715 | ||||||
Wells Fargo Capital X 5.95% 12/15/36 | 5,645,000 | 5,976,644 | ||||||
Westpac Banking 4.322% 11/23/31 ● | 3,470,000 | 3,458,382 | ||||||
Zions Bancorporation 4.50% 6/13/23 | 4,100,000 | 4,205,620 | ||||||
|
| |||||||
224,330,482 | ||||||||
|
| |||||||
Basic Industry – 5.46% | ||||||||
BHP Billiton Finance USA 144A 6.25% 10/19/75 #● | 9,455,000 | 10,414,683 | ||||||
CF Industries | ||||||||
144A 3.40% 12/1/21 # | 1,415,000 | 1,413,268 | ||||||
144A 4.50% 12/1/26 # | 3,275,000 | 3,285,064 | ||||||
Dow Chemical 8.55% 5/15/19 | 4,420,000 | 5,055,348 | ||||||
Eastman Chemical 4.65% 10/15/44 | 4,525,000 | 4,574,078 | ||||||
Georgia-Pacific 8.00% 1/15/24 | 8,345,000 | 10,598,434 | ||||||
INVISTA Finance 144A 4.25% 10/15/19 # | 4,580,000 | 4,626,433 | ||||||
Mexichem 144A 5.875% 9/17/44 # | 3,595,000 | 3,262,391 | ||||||
Novelis | ||||||||
144A 5.875% 9/30/26 # | 870,000 | 888,488 |
6 |
Table of Contents
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Basic Industry (continued) | ||||||||
Novelis | ||||||||
144A 6.25% 8/15/24 # | 2,180,000 | $ | 2,308,075 | |||||
Potash Corp. of Saskatchewan 4.00% 12/15/26 | 6,345,000 | 6,386,661 | ||||||
Steel Dynamics 144A 5.00% 12/15/26 # | 975,000 | 994,500 | ||||||
Vale Overseas 6.25% 8/10/26 | 2,445,000 | 2,634,488 | ||||||
|
| |||||||
56,441,911 | ||||||||
|
| |||||||
Brokerage – 1.92% | ||||||||
Affiliated Managers Group 3.50% 8/1/25 | 4,135,000 | 3,964,270 | ||||||
E*TRADE Financial 5.875% 12/29/49 ● | 4,565,000 | 4,582,803 | ||||||
Jefferies Group | ||||||||
5.125% 1/20/23 | 255,000 | 268,702 | ||||||
6.45% 6/8/27 | 5,627,000 | 6,236,556 | ||||||
6.50% 1/20/43 | 1,575,000 | 1,615,596 | ||||||
Lazard Group | ||||||||
3.625% 3/1/27 | 2,260,000 | 2,187,847 | ||||||
3.75% 2/13/25 | 1,075,000 | 1,062,015 | ||||||
|
| |||||||
19,917,789 | ||||||||
|
| |||||||
Capital Goods – 2.45% | ||||||||
Ardagh Packaging Finance 144A 4.625% 5/15/23 # | 2,900,000 | 2,939,875 | ||||||
Crown Americas 144A 4.25% 9/30/26 # | 3,072,000 | 2,941,440 | ||||||
Fortune Brands Home & Security 3.00% 6/15/20 | 2,865,000 | 2,892,762 | ||||||
LafargeHolcim Finance U.S. | ||||||||
144A 3.50% 9/22/26 # | 3,650,000 | 3,547,800 | ||||||
144A 4.75% 9/22/46 # | 4,580,000 | 4,535,299 | ||||||
Reynolds Group Issuer 144A 5.125% 7/15/23 # | 2,815,000 | 2,888,894 | ||||||
Roper Technologies 2.80% 12/15/21 | 2,205,000 | 2,205,668 | ||||||
United Technologies 3.75% 11/1/46 | 3,625,000 | 3,414,123 | ||||||
|
| |||||||
25,365,861 | ||||||||
|
| |||||||
Communications – 14.13% | ||||||||
21st Century Fox America 4.95% 10/15/45 | 4,300,000 | 4,360,480 | ||||||
Altice Luxembourg 144A 7.75% 5/15/22 # | 2,270,000 | 2,414,713 | ||||||
American Tower | ||||||||
2.80% 6/1/20 | 4,730,000 | 4,741,778 | ||||||
4.00% 6/1/25 | 9,130,000 | 9,162,768 | ||||||
AT&T | ||||||||
3.20% 3/1/22 | 205,000 | 204,844 | ||||||
4.35% 6/15/45 | 2,800,000 | 2,412,986 | ||||||
4.50% 3/9/48 | 9,635,000 | 8,443,902 | ||||||
5.25% 3/1/37 | 3,865,000 | 3,846,796 | ||||||
CCO Holdings | ||||||||
144A 5.50% 5/1/26 # | 2,565,000 | 2,693,250 | ||||||
144A 5.875% 4/1/24 # | 335,000 | 359,184 |
7 |
Table of Contents
Schedules of investments | ||
Delaware Corporate Bond Fund |
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Communications (continued) | ||||||||
Charter Communications Operating 4.908% 7/23/25 | 7,240,000 | $ | 7,604,237 | |||||
Comcast 3.00% 2/1/24 | 5,065,000 | 5,014,902 | ||||||
Crown Castle International | ||||||||
4.00% 3/1/27 | 2,165,000 | 2,164,911 | ||||||
5.25% 1/15/23 | 4,295,000 | 4,681,765 | ||||||
Crown Castle Towers 144A 3.663% 5/15/25 # | 7,035,000 | 7,027,121 | ||||||
CSC Holdings 144A 6.625% 10/15/25 # | 2,125,000 | 2,324,219 | ||||||
Deutsche Telekom International Finance 144A | ||||||||
3.60% 1/19/27 # | 7,500,000 | 7,424,723 | ||||||
DISH DBS 7.75% 7/1/26 | 2,720,000 | 3,045,557 | ||||||
Gray Television 144A 5.875% 7/15/26 # | 2,645,000 | 2,635,081 | ||||||
Grupo Televisa 5.00% 5/13/45 | 4,770,000 | 4,100,166 | ||||||
GTP Acquisition Partners I 144A 2.35% 6/15/20 # | 2,130,000 | 2,095,813 | ||||||
Historic TW 6.875% 6/15/18 | 5,285,000 | 5,650,526 | ||||||
Level 3 Financing 144A 5.25% 3/15/26 # | 3,505,000 | 3,500,619 | ||||||
Nielsen Luxembourg 144A 5.00% 2/1/25 # | 1,875,000 | 1,865,625 | ||||||
Radiate Holdco 144A 6.625% 2/15/25 # | 1,495,000 | 1,495,000 | ||||||
SBA Tower Trust | ||||||||
144A 2.24% 4/16/18 # | 4,945,000 | 4,954,792 | ||||||
144A 2.898% 10/15/19 # | 3,005,000 | 3,025,738 | ||||||
SFR Group 144A 6.00% 5/15/22 # | 1,270,000 | 1,311,275 | ||||||
Sirius XM Radio 144A 5.375% 4/15/25 # | 2,455,000 | 2,513,306 | ||||||
Sky 144A 3.75% 9/16/24 # | 4,260,000 | 4,260,716 | ||||||
Sprint Spectrum 144A 3.36% 9/20/21 # | 4,875,000 | 4,893,281 | ||||||
Time Warner Cable 7.30% 7/1/38 | 8,915,000 | 10,946,702 | ||||||
T-Mobile USA | ||||||||
6.00% 4/15/24 | 950,000 | 1,016,500 | ||||||
6.50% 1/15/26 | 1,885,000 | 2,078,684 | ||||||
UPCB Finance IV 144A 5.375% 1/15/25 # | 1,600,000 | 1,632,000 | ||||||
Verizon Communications 4.522% 9/15/48 | 4,390,000 | 3,981,269 | ||||||
Viacom 3.45% 10/4/26 | 2,745,000 | 2,552,916 | ||||||
WPP Finance 2010 5.625% 11/15/43 | 3,446,000 | 3,723,258 | ||||||
|
| |||||||
146,161,403 | ||||||||
|
| |||||||
Consumer Cyclical – 2.31% | ||||||||
Adient Global Holdings 144A 4.875% 8/15/26 # | 1,500,000 | 1,476,570 | ||||||
Boyd Gaming 144A 6.375% 4/1/26 # | 2,100,000 | 2,262,750 | ||||||
General Motors Financial | ||||||||
3.45% 1/14/22 | 4,910,000 | 4,910,530 | ||||||
3.45% 4/10/22 | 4,155,000 | 4,152,345 | ||||||
5.25% 3/1/26 | 3,445,000 | 3,649,099 | ||||||
GEO Group 6.00% 4/15/26 | 2,500,000 | 2,531,250 | ||||||
Live Nation Entertainment 144A 4.875% 11/1/24 # | 2,103,000 | 2,108,258 |
8 |
Table of Contents
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Consumer Cyclical (continued) | ||||||||
ServiceMaster 144A 5.125% 11/15/24 # | 2,795,000 | $ | 2,836,925 | |||||
|
| |||||||
23,927,727 | ||||||||
|
| |||||||
Consumer Non-Cyclical – 5.76% | ||||||||
Albertsons 144A 5.75% 3/15/25 # | 2,840,000 | 2,829,350 | ||||||
Altria Group 3.875% 9/16/46 | 4,920,000 | 4,521,244 | ||||||
Anheuser-Busch InBev Finance 3.65% 2/1/26 | 4,865,000 | 4,906,080 | ||||||
Becle 144A 3.75% 5/13/25 # | 8,965,000 | 8,604,996 | ||||||
Biogen 5.20% 9/15/45 | 5,330,000 | 5,720,449 | ||||||
BRF 144A 4.35% 9/29/26 # | 2,950,000 | 2,791,437 | ||||||
Gilead Sciences 4.15% 3/1/47 | 6,230,000 | 5,846,338 | ||||||
HealthSouth 5.75% 11/1/24 | 2,405,000 | 2,453,100 | ||||||
Kroger 4.45% 2/1/47 | 3,510,000 | 3,438,206 | ||||||
Lamb Weston Holdings | ||||||||
144A 4.625% 11/1/24 # | 1,120,000 | 1,125,600 | ||||||
144A 4.875% 11/1/26 # | 1,705,000 | 1,711,394 | ||||||
Molson Coors Brewing 3.00% 7/15/26 | 3,180,000 | 2,997,134 | ||||||
Mylan 144A 3.95% 6/15/26 # | 5,040,000 | 4,779,649 | ||||||
Sigma Alimentos 144A 4.125% 5/2/26 # | 3,325,000 | 3,135,475 | ||||||
Tenet Healthcare 6.75% 6/15/23 | 2,700,000 | 2,558,250 | ||||||
Universal Health Services 144A 4.75% 8/1/22 # | 2,170,000 | 2,194,413 | ||||||
|
| |||||||
59,613,115 | ||||||||
|
| |||||||
Electric – 7.53% | ||||||||
Ameren Illinois 9.75% 11/15/18 | 6,971,000 | 7,932,782 | ||||||
Cleveland Electric Illuminating 5.50% 8/15/24 | 3,360,000 | 3,849,149 | ||||||
ComEd Financing III 6.35% 3/15/33 | 7,500,000 | 7,900,590 | ||||||
Dynegy 7.625% 11/1/24 | 1,654,000 | 1,583,705 | ||||||
Emera 6.75% 6/15/76 ● | 5,975,000 | 6,542,625 | ||||||
Emera U.S. Finance 4.75% 6/15/46 | 2,910,000 | 2,969,160 | ||||||
Enel 144A 8.75% 9/24/73 #● | 4,125,000 | 4,712,813 | ||||||
Enel Americas 4.00% 10/25/26 | 1,555,000 | 1,517,680 | ||||||
Entergy 4.00% 7/15/22 | 1,620,000 | 1,697,177 | ||||||
Entergy Louisiana 3.78% 4/1/25 | 4,430,000 | 4,583,176 | ||||||
Fortis 144A 3.055% 10/4/26 # | 7,335,000 | 6,848,301 | ||||||
Kansas City Power & Light 3.65% 8/15/25 | 10,115,000 | 10,205,175 | ||||||
National Rural Utilities Cooperative Finance 5.25% 4/20/46 ● | 1,790,000 | 1,864,494 | ||||||
NV Energy 6.25% 11/15/20 | 4,475,000 | 5,066,201 | ||||||
Pennsylvania Electric 5.20% 4/1/20 | 8,131,000 | 8,699,406 | ||||||
Trans-Allegheny Interstate Line 144A 3.85% 6/1/25 # | 1,880,000 | 1,919,533 | ||||||
|
| |||||||
77,891,967 | ||||||||
|
| |||||||
Energy – 10.12% | ||||||||
Anadarko Petroleum 6.60% 3/15/46 | 8,260,000 | 10,391,047 |
9 |
Table of Contents
Schedules of investments | ||
Delaware Corporate Bond Fund |
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Energy (continued) | ||||||||
BP Capital Markets 3.216% 11/28/23 | 6,620,000 | $ | 6,651,438 | |||||
ConocoPhillips | ||||||||
4.95% 3/15/26 | 5,560,000 | 6,116,017 | ||||||
5.95% 3/15/46 | 2,400,000 | 2,954,090 | ||||||
Enbridge | ||||||||
4.25% 12/1/26 | 1,955,000 | 2,015,640 | ||||||
6.00% 1/15/77 ● | 3,190,000 | 3,237,850 | ||||||
Energy Transfer Partners | ||||||||
4.20% 4/15/27 | 2,680,000 | 2,664,392 | ||||||
5.30% 4/15/47 | 75,000 | 74,100 | ||||||
6.125% 12/15/45 | 5,480,000 | 5,996,413 | ||||||
EnLink Midstream Partners 4.85% 7/15/26 | 2,555,000 | 2,632,879 | ||||||
Kinder Morgan Energy Partners 9.00% 2/1/19 | 3,600,000 | 4,070,650 | ||||||
MPLX 4.875% 6/1/25 | 2,955,000 | 3,108,471 | ||||||
Newfield Exploration 5.75% 1/30/22 | 1,085,000 | 1,160,950 | ||||||
Noble Energy | ||||||||
4.15% 12/15/21 | 3,440,000 | 3,613,541 | ||||||
5.05% 11/15/44 | 2,040,000 | 2,092,746 | ||||||
5.625% 5/1/21 | 1,520,000 | 1,578,611 | ||||||
Petroleos Mexicanos | ||||||||
144A 5.375% 3/13/22 # | 1,595,000 | 1,629,691 | ||||||
6.75% 9/21/47 | 1,765,000 | 1,670,043 | ||||||
Plains All American Pipeline 4.50% 12/15/26 | 8,440,000 | 8,556,843 | ||||||
Regency Energy Partners 5.00% 10/1/22 | 3,920,000 | 4,222,181 | ||||||
Shell International Finance | ||||||||
2.875% 5/10/26 | 2,545,000 | 2,445,114 | ||||||
4.00% 5/10/46 | 3,525,000 | 3,397,469 | ||||||
Transcanada Trust 5.875% 8/15/76 ● | 3,645,000 | 3,863,700 | ||||||
Western Gas Partners 5.45% 4/1/44 | 1,545,000 | 1,616,167 | ||||||
Williams Partners 7.25% 2/1/17 | 8,087,000 | 8,087,000 | ||||||
Woodside Finance | ||||||||
144A 3.65% 3/5/25 # | 2,055,000 | 2,016,126 | ||||||
144A 8.75% 3/1/19 # | 7,800,000 | 8,790,428 | ||||||
|
| |||||||
104,653,597 | ||||||||
|
| |||||||
Finance Companies – 4.92% | ||||||||
AerCap Global Aviation Trust 144A 6.50% 6/15/45 #● | 6,245,000 | 6,463,575 | ||||||
AerCap Ireland Capital | ||||||||
3.50% 5/26/22 | 585,000 | 585,801 | ||||||
3.95% 2/1/22 | 7,340,000 | 7,492,085 | ||||||
4.625% 10/30/20 | 3,095,000 | 3,263,213 | ||||||
Air Lease 3.00% 9/15/23 | 4,000,000 | 3,886,004 | ||||||
Aviation Capital Group 144A 2.875% 1/20/22 # | 8,285,000 | 8,222,307 |
10 |
Table of Contents
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Finance Companies (continued) | ||||||||
Depository Trust & Clearing 144A 4.875% 12/29/49 #● | 6,000,000 | $ | 6,150,000 | |||||
Equate Petrochemical 144A 3.00% 3/3/22 # | 2,840,000 | 2,760,284 | ||||||
Park Aerospace Holdings 144A 5.25% 8/15/22 # | 1,875,000 | 1,924,219 | ||||||
Peachtree Corners Funding Trust 144A 3.976% 2/15/25 # | 7,495,000 | 7,394,125 | ||||||
SMBC Aviation Capital Finance 144A 2.65% 7/15/21 # | 2,800,000 | 2,716,389 | ||||||
|
| |||||||
50,858,002 | ||||||||
|
| |||||||
Insurance – 2.15% | ||||||||
Highmark 144A 6.125% 5/15/41 # | 230,000 | 213,828 | ||||||
MetLife 5.25% 12/29/49 ● | 4,200,000 | 4,305,000 | ||||||
MetLife Capital Trust X 144A 9.25% 4/8/38 # | 2,160,000 | 2,997,000 | ||||||
Prudential Financial 5.375% 5/15/45 ● | 3,370,000 | 3,479,525 | ||||||
TIAA Asset Management Finance 144A 4.125% 11/1/24 # | 6,450,000 | 6,568,906 | ||||||
XLIT | ||||||||
4.45% 3/31/25 | 2,380,000 | 2,382,052 | ||||||
6.50% 12/29/49 ● | 2,752,000 | 2,325,440 | ||||||
|
| |||||||
22,271,751 | ||||||||
|
| |||||||
Real Estate Investment Trusts – 3.36% | ||||||||
Corporate Office Properties 5.25% 2/15/24 | 5,730,000 | 6,038,108 | ||||||
Education Realty Operating Partnership 4.60% 12/1/24 | 4,170,000 | 4,196,012 | ||||||
ESH Hospitality 144A 5.25% 5/1/25 # | 3,070,000 | 3,088,420 | ||||||
Hospitality Properties Trust 4.50% 6/15/23 | 2,450,000 | 2,490,035 | ||||||
Host Hotels & Resorts | ||||||||
3.75% 10/15/23 | 8,645,000 | 8,612,754 | ||||||
4.50% 2/1/26 | 750,000 | 769,957 | ||||||
Lifestorage 3.50% 7/1/26 | 2,745,000 | 2,634,807 | ||||||
Regency Centers 3.60% 2/1/27 | 1,785,000 | 1,775,059 | ||||||
Trust F/1401 144A 5.25% 1/30/26 # | 2,030,000 | 1,928,500 | ||||||
WP Carey 4.60% 4/1/24 | 3,120,000 | 3,194,783 | ||||||
|
| |||||||
34,728,435 | ||||||||
|
| |||||||
Technology – 5.29% | ||||||||
Analog Devices 2.50% 12/5/21 | 685,000 | 678,682 | ||||||
Apple 3.45% 2/9/45 | 3,560,000 | 3,129,222 | ||||||
Broadcom | ||||||||
144A 3.00% 1/15/22 # | 3,660,000 | 3,647,713 | ||||||
144A 3.625% 1/15/24 # | 3,985,000 | 3,981,302 | ||||||
144A 3.875% 1/15/27 # | 1,900,000 | 1,894,053 | ||||||
CDK Global 5.00% 10/15/24 | 3,160,000 | 3,163,950 | ||||||
Diamond 1 Finance | ||||||||
144A 6.02% 6/15/26 # | 3,715,000 | 4,017,839 | ||||||
144A 8.10% 7/15/36 # | 2,750,000 | 3,329,917 | ||||||
First Data 144A 7.00% 12/1/23 # | 3,160,000 | 3,357,500 |
11 |
Table of Contents
Schedules of investments | ||
Delaware Corporate Bond Fund |
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Technology (continued) | ||||||||
Microsoft | ||||||||
2.40% 2/6/22 | 1,040,000 | $ | 1,040,288 | |||||
2.875% 2/6/24 | 1,140,000 | 1,138,274 | ||||||
4.10% 2/6/37 | 3,970,000 | 4,030,848 | ||||||
4.25% 2/6/47 | 3,970,000 | 4,017,410 | ||||||
4.50% 2/6/57 | 2,385,000 | 2,423,162 | ||||||
MSCI 144A 4.75% 8/1/26 # | 2,830,000 | 2,822,925 | ||||||
National Semiconductor 6.60% 6/15/17 | 6,644,000 | 6,779,292 | ||||||
NXP | ||||||||
144A 4.125% 6/1/21 # | 1,200,000 | 1,241,880 | ||||||
144A 4.625% 6/1/23 # | 2,765,000 | 2,930,900 | ||||||
Tech Data 3.70% 2/15/22 | 1,060,000 | 1,058,051 | ||||||
|
| |||||||
54,683,208 | ||||||||
|
| |||||||
Transportation – 3.26% | ||||||||
Air Canada 2015-1 Class A Pass Through Trust 144A 3.60% 3/15/27 #◆ | 2,482,230 | 2,460,510 | ||||||
American Airlines 2014-1 Class A Pass Through Trust 3.70% 10/1/26 ◆ | 1,792,922 | 1,797,404 | ||||||
American Airlines 2015-1 Class A Pass Through Trust 3.375% 5/1/27 ◆ | 3,033,925 | 2,984,624 | ||||||
American Airlines 2015-2 Class AA Pass Through Trust 3.60% 9/22/27 ◆ | 1,381,530 | 1,390,165 | ||||||
American Airlines 2016-1 Class AA Pass Through Trust 3.575% 1/15/28 ◆ | 628,687 | 631,045 | ||||||
ERAC USA Finance 144A 4.20% 11/1/46 # | 2,045,000 | 1,887,392 | ||||||
Penske Truck Leasing | ||||||||
144A 3.30% 4/1/21 # | 4,400,000 | 4,459,673 | ||||||
144A 3.375% 2/1/22 # | 3,135,000 | 3,170,683 | ||||||
144A 3.40% 11/15/26 # | 2,905,000 | 2,789,021 | ||||||
Transurban Finance 144A 3.375% 3/22/27 # | 1,675,000 | 1,592,754 | ||||||
TTX 144A 4.20% 7/1/46 # | 5,365,000 | 5,089,620 | ||||||
United Airlines 2014-1 Class A Pass Through Trust 4.00% 4/11/26 ◆ | 1,427,735 | 1,466,998 | ||||||
United Airlines 2014-2 Class A Pass Through Trust 3.75% 9/3/26 ◆ | 3,660,924 | 3,715,838 | ||||||
United Airlines 2016-1 Class AA Pass Through Trust 3.10% 7/7/28 ◆ | 275,000 | 267,781 | ||||||
|
| |||||||
33,703,508 | ||||||||
|
| |||||||
Total Corporate Bonds (cost $932,468,580) | 934,548,756 | |||||||
|
|
12 |
Table of Contents
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Municipal Bonds – 0.83% | ||||||||
| ||||||||
Commonwealth of Massachusetts | ||||||||
Series C 5.00% 10/1/25 | 935,000 | $ | 1,137,025 | |||||
Los Angeles, California Department of Water & Power Revenue (Taxable Build America Bond) | ||||||||
Series D 6.574% 7/1/45 | 5,365,000 | 7,464,700 | ||||||
|
| |||||||
Total Municipal Bonds (cost $6,561,396) | 8,601,725 | |||||||
|
| |||||||
| ||||||||
Loan Agreements – 1.05%« | ||||||||
| ||||||||
Gardner Denver 1st Lien 4.25% 7/30/20 | 2,082,861 | 2,062,685 | ||||||
KIK Custom Products 1st Lien 6.00% 8/26/22 | 2,961,263 | 2,994,577 | ||||||
Rite Aid 2nd Lien 5.75% 8/21/20 | 2,849,000 | 2,864,581 | ||||||
Solera Tranche B 1st Lien 5.75% 3/3/23 | 2,937,800 | 2,972,277 | ||||||
|
| |||||||
Total Loan Agreements (cost $10,721,906) | 10,894,120 | |||||||
|
| |||||||
Number of shares | ||||||||
| ||||||||
Preferred Stock – 2.41% | ||||||||
| ||||||||
Bank of America 6.50% ● | 2,610,000 | 2,802,487 | ||||||
DTE Energy 5.25% | 105,000 | 2,595,600 | ||||||
General Electric 5.00% ● | 9,227,000 | 9,577,627 | ||||||
GMAC Capital Trust I 6.691% ● | 50,000 | 1,285,000 | ||||||
PNC Preferred Funding Trust II 144A 2.186% #● | 8,600,000 | 8,309,750 | ||||||
USB Realty 144A 2.169% #● | 400,000 | 338,000 | ||||||
|
| |||||||
Total Preferred Stock (cost $24,075,482) | 24,908,464 | |||||||
|
| |||||||
Principal amount° | ||||||||
| ||||||||
Short-Term Investments – 6.57% | ||||||||
| ||||||||
Discount Note – 2.44%≠ | ||||||||
Federal Home Loan Bank 0.00% 2/1/17 | 25,222,838 | 25,222,838 | ||||||
|
| |||||||
25,222,838 | ||||||||
|
| |||||||
Repurchase Agreements – 4.13% | ||||||||
Bank of America Merrill Lynch | 18,339,436 | 18,339,436 | ||||||
Bank of Montreal | 18,339,436 | 18,339,436 |
13 |
Table of Contents
Schedules of investments | ||
Delaware Corporate Bond Fund |
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Short-Term Investments (continued) | ||||||||
| ||||||||
Repurchase Agreements (continued) | ||||||||
BNP Paribas | 6,113,146 | $ | 6,113,146 | |||||
|
| |||||||
42,792,018 | ||||||||
|
| |||||||
Total Short-Term Investments (cost $68,014,856) | 68,014,856 | |||||||
|
| |||||||
Total Value of Securities – 102.02% | $ | 1,055,416,867 | ||||||
|
|
# | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At Jan. 31, 2017, the aggregate value of Rule 144A securities was $293,279,743, which represents 28.35% of the Fund’s net assets. See Note 9 in “Notes to financial statements.” |
◆ | Pass Through Agreement. Security represents the contractual right to receive a proportionate amount of underlying payments due to the counterparty pursuant to various agreements related to the rescheduling of obligations and the exchange of certain notes. |
≠ | The rate shown is the effective yield at the time of purchase. |
« | Loan agreements generally pay interest at rates which are periodically reset by reference to a base lending rate plus a premium. These base lending rates are generally: (i) the prime rate offered by one or more U.S. banks, (ii) the lending rate offered by one or more European banks such as the London Interbank Offered Rate (LIBOR), and (iii) the certificate of deposit rate. Loan agreements may be subject to restrictions on resale. Stated rate in effect at Jan. 31, 2017. |
° | Principal amount shown is stated in U.S. dollars unless noted that the security is denominated in another currency. |
● | Variable rate security. Each rate shown is as of Jan. 31, 2017. Interest rates reset periodically. |
f | Step coupon bond. Coupon increases or decreases periodically based on a predetermined schedule. Stated rate in effect at Jan. 31, 2017. |
14 |
Table of Contents
The following futures contracts were outstanding at Jan. 31, 2017:1
Futures Contracts
Contracts to Buy (Sell) | Notional Cost (Proceeds) | Notional Value | Expiration Date | Unrealized Appreciation (Depreciation) | ||||||||||||
515 | U.S. Treasury 10 yr Notes | $ | 63,835,207 | $ | 64,101,406 | 3/23/17 | $ | 266,199 |
The use of futures contracts involves elements of market risk and risks in excess of the amounts disclosed in the financial statements. The notional values presented above represents the Fund’s total exposure in such contracts, whereas only the net unrealized appreciation (depreciation) is reflected in the Fund’s net assets.
1See Note 6 in “Notes to financial statements.”
yr – Year
See accompanying notes, which are an integral part of the financial statements.
15 |
Table of Contents
Schedules of investments | ||
Delaware Extended Duration Bond Fund | January 31, 2017 (Unaudited) |
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds – 87.46% | ||||||||
| ||||||||
Banking – 16.37% | ||||||||
Ally Financial 8.00% 11/1/31 | 595,000 | $ | 709,537 | |||||
Bank of America | ||||||||
4.443% 1/20/48 ● | 5,980,000 | 5,981,621 | ||||||
4.45% 3/3/26 | 2,740,000 | 2,801,376 | ||||||
5.00% 1/21/44 | 3,380,000 | 3,680,756 | ||||||
Bank of New York Mellon 4.625% 12/29/49 ● | 3,275,000 | 3,120,420 | ||||||
Barclays 4.95% 1/10/47 | 8,085,000 | 8,092,422 | ||||||
Citigroup 4.65% 7/30/45 | 2,063,000 | 2,136,484 | ||||||
Citizens Financial Group 4.30% 12/3/25 | 4,700,000 | 4,779,914 | ||||||
Credit Suisse Group | ||||||||
144A 4.282% 1/9/28 # | 2,225,000 | 2,211,278 | ||||||
144A 6.25% 12/29/49 #● | 2,272,000 | 2,247,576 | ||||||
Credit Suisse Group Funding Guernsey 4.875% 5/15/45 | 7,065,000 | 7,156,690 | ||||||
Fifth Third Bank 3.85% 3/15/26 | 5,000,000 | 5,029,845 | ||||||
First Republic Bank 4.375% 8/1/46 | 3,195,000 | 2,931,796 | ||||||
Goldman Sachs Group | ||||||||
4.75% 10/21/45 | 3,585,000 | 3,730,357 | ||||||
5.15% 5/22/45 | 4,155,000 | 4,314,527 | ||||||
HSBC Holdings 4.375% 11/23/26 | 2,000,000 | 2,014,488 | ||||||
JPMorgan Chase & Co. 4.25% 10/1/27 | 4,390,000 | 4,485,382 | ||||||
KeyBank 6.95% 2/1/28 | 2,467,000 | 3,023,609 | ||||||
KeyCorp 5.00% 12/29/49 ● | 1,305,000 | 1,244,644 | ||||||
Morgan Stanley | ||||||||
3.95% 4/23/27 | 1,450,000 | 1,420,053 | ||||||
4.375% 1/22/47 | 8,700,000 | 8,648,879 | ||||||
PNC Financial Services Group 5.00% 12/29/49 ● | 2,705,000 | 2,671,187 | ||||||
SVB Financial Group 3.50% 1/29/25 | 2,440,000 | 2,356,171 | ||||||
Toronto-Dominion Bank 3.625% 9/15/31 ● | 2,580,000 | 2,517,796 | ||||||
UBS 7.625% 8/17/22 | 4,020,000 | 4,580,790 | ||||||
US Bancorp | ||||||||
3.10% 4/27/26 | 2,830,000 | 2,761,902 | ||||||
5.125% 12/29/49 ● | 2,805,000 | 2,910,187 | ||||||
USB Capital IX 3.50% 10/29/49 ● | 810,000 | 672,300 | ||||||
Wells Fargo & Co. 4.75% 12/7/46 | 1,250,000 | 1,277,171 | ||||||
Wells Fargo Capital X 5.95% 12/15/36 | 3,245,000 | 3,435,644 | ||||||
Westpac Banking 4.322% 11/23/31 ● | 2,060,000 | 2,053,103 | ||||||
|
| |||||||
104,997,905 | ||||||||
|
| |||||||
Basic Industry – 3.67% | ||||||||
Eastman Chemical 4.65% 10/15/44 | 3,650,000 | 3,689,588 | ||||||
Georgia-Pacific 8.00% 1/15/24 | 3,280,000 | 4,165,712 | ||||||
International Paper | ||||||||
4.40% 8/15/47 | 3,715,000 | 3,572,073 |
16 |
Table of Contents
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Basic Industry (continued) | ||||||||
International Paper | ||||||||
5.15% 5/15/46 | 2,359,000 | $ | 2,498,742 | |||||
LYB International Finance 4.875% 3/15/44 | 2,525,000 | 2,642,885 | ||||||
Mexichem 144A 5.875% 9/17/44 # | 1,775,000 | 1,610,777 | ||||||
Potash Corp of Saskatchewan 5.625% 12/1/40 | 1,645,000 | 1,802,431 | ||||||
Westlake Chemical 144A 5.00% 8/15/46 # | 3,530,000 | 3,550,467 | ||||||
|
| |||||||
23,532,675 | ||||||||
|
| |||||||
Brokerage – 2.27% | ||||||||
Jefferies Group | ||||||||
6.45% 6/8/27 | 2,640,000 | 2,925,983 | ||||||
6.50% 1/20/43 | 1,985,000 | 2,036,163 | ||||||
Lazard Group 3.625% 3/1/27 | 2,920,000 | 2,826,776 | ||||||
Legg Mason 5.625% 1/15/44 | 5,000,000 | 5,027,495 | ||||||
Neuberger Berman Group 144A 4.875% 4/15/45 # | 2,140,000 | 1,709,871 | ||||||
|
| |||||||
14,526,288 | ||||||||
|
| |||||||
Capital Goods – 2.71% | ||||||||
Fortive 144A 4.30% 6/15/46 # | 3,430,000 | 3,393,947 | ||||||
LafargeHolcim Finance U.S. 144A 4.75% 9/22/46 # | 5,105,000 | 5,055,175 | ||||||
United Technologies 3.75% 11/1/46 | 3,375,000 | 3,178,666 | ||||||
Valmont Industries 5.00% 10/1/44 | 6,255,000 | 5,732,363 | ||||||
|
| |||||||
17,360,151 | ||||||||
|
| |||||||
Communications – 8.59% | ||||||||
21st Century Fox America 4.95% 10/15/45 | 6,345,000 | 6,434,242 | ||||||
American Tower 4.40% 2/15/26 | 5,375,000 | 5,529,483 | ||||||
AT&T | ||||||||
4.35% 6/15/45 | 3,545,000 | 3,055,014 | ||||||
4.50% 3/9/48 | 5,540,000 | 4,855,134 | ||||||
5.25% 3/1/37 | 1,650,000 | 1,642,228 | ||||||
Charter Communications Operating 4.908% 7/23/25 | 4,310,000 | 4,526,832 | ||||||
Crown Castle International 5.25% 1/15/23 | 6,319,000 | 6,888,026 | ||||||
Deutsche Telekom International Finance 8.75% 6/15/30 | 1,335,000 | 1,963,653 | ||||||
Grupo Televisa 5.00% 5/13/45 | 3,785,000 | 3,253,486 | ||||||
Time Warner Cable 7.30% 7/1/38 | 7,160,000 | 8,791,742 | ||||||
Verizon Communications | ||||||||
4.125% 8/15/46 | 1,905,000 | 1,647,130 | ||||||
4.522% 9/15/48 | 2,890,000 | 2,620,927 | ||||||
WPP Finance 2010 5.625% 11/15/43 | 3,605,000 | 3,895,051 | ||||||
|
| |||||||
55,102,948 | ||||||||
|
| |||||||
Consumer Cyclical – 4.75% | ||||||||
Ford Motor 5.291% 12/8/46 | 6,400,000 | 6,388,339 | ||||||
General Motors 6.75% 4/1/46 | 6,755,000 | 7,991,658 | ||||||
Marriott International 4.50% 10/1/34 | 4,610,000 | 4,611,411 |
17 |
Table of Contents
Schedules of investments | ||
Delaware Extended Duration Bond Fund |
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Consumer Cyclical (continued) | ||||||||
Mastercard 3.80% 11/21/46 | 3,845,000 | $ | 3,735,925 | |||||
Walgreens Boots Alliance 4.65% 6/1/46 | 7,670,000 | 7,709,493 | ||||||
|
| |||||||
30,436,826 | ||||||||
|
| |||||||
Consumer Non-Cyclical – 10.95% | ||||||||
Abbott Laboratories 4.90% 11/30/46 | 3,020,000 | 3,054,890 | ||||||
Altria Group 3.875% 9/16/46 | 6,540,000 | 6,009,946 | ||||||
Amgen 4.40% 5/1/45 | 4,850,000 | 4,625,227 | ||||||
Anheuser-Busch InBev Finance 4.90% 2/1/46 | 8,910,000 | 9,578,393 | ||||||
Baxalta 5.25% 6/23/45 | 4,130,000 | 4,403,427 | ||||||
Biogen 5.20% 9/15/45 | 6,845,000 | 7,346,430 | ||||||
Celgene | ||||||||
4.625% 5/15/44 | 2,000,000 | 1,968,888 | ||||||
5.25% 8/15/43 | 4,315,000 | 4,551,341 | ||||||
Gilead Sciences 4.15% 3/1/47 | 4,305,000 | 4,039,885 | ||||||
Hasbro 5.10% 5/15/44 | 1,375,000 | 1,402,070 | ||||||
Kellogg 4.50% 4/1/46 | 2,865,000 | 2,806,442 | ||||||
Kroger 4.45% 2/1/47 | 2,225,000 | 2,179,490 | ||||||
Molson Coors Brewing 4.20% 7/15/46 | 3,165,000 | 2,934,085 | ||||||
Mylan 144A 5.25% 6/15/46 # | 3,355,000 | 3,164,919 | ||||||
Pernod Ricard 144A 5.50% 1/15/42 # | 5,215,000 | 5,818,469 | ||||||
Thermo Fisher Scientific 5.30% 2/1/44 | 2,365,000 | 2,658,326 | ||||||
Zoetis 4.70% 2/1/43 | 3,800,000 | 3,711,034 | ||||||
|
| |||||||
70,253,262 | ||||||||
|
| |||||||
Electric – 11.98% | ||||||||
American Transmission Systems 144A 5.00% 9/1/44 # | 5,110,000 | 5,471,185 | ||||||
Appalachian Power 4.40% 5/15/44 | 6,950,000 | 7,118,892 | ||||||
Berkshire Hathaway Energy 4.50% 2/1/45 | 6,950,000 | 7,252,839 | ||||||
Black Hills 4.20% 9/15/46 | 4,850,000 | 4,669,129 | ||||||
ComEd Financing III 6.35% 3/15/33 | 4,800,000 | 5,056,378 | ||||||
Duke Energy | ||||||||
3.75% 9/1/46 | 3,420,000 | 3,115,425 | ||||||
4.80% 12/15/45 | 2,545,000 | 2,711,395 | ||||||
Emera 6.75% 6/15/76 ● | 3,450,000 | 3,777,750 | ||||||
Emera U.S. Finance 4.75% 6/15/46 | 3,760,000 | 3,836,441 | ||||||
Enel Finance International 144A 6.00% 10/7/39 # | 4,800,000 | 5,488,550 | ||||||
Entergy Arkansas 4.95% 12/15/44 | 2,765,000 | 2,813,860 | ||||||
Entergy Louisiana 4.95% 1/15/45 | 125,000 | 128,518 | ||||||
Fortis 144A 3.055% 10/4/26 # | 6,875,000 | 6,418,823 | ||||||
Indianapolis Power & Light 144A 4.05% 5/1/46 # | 5,110,000 | 4,879,396 | ||||||
Massachusetts Electric 144A 4.004% 8/15/46 # | 6,115,000 | 5,902,632 | ||||||
National Rural Utilities Cooperative Finance 5.25% 4/20/46 ● | 935,000 | 973,912 |
18 |
Table of Contents
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Electric (continued) | ||||||||
Puget Sound Energy 4.434% 11/15/41 | 4,870,000 | $ | 5,073,741 | |||||
Tampa Electric 4.20% 5/15/45 | 2,175,000 | 2,129,195 | ||||||
|
| |||||||
76,818,061 | ||||||||
|
| |||||||
Energy – 10.28% | ||||||||
Anadarko Petroleum 6.60% 3/15/46 | 5,985,000 | 7,529,106 | ||||||
BP Capital Markets 3.723% 11/28/28 | 6,230,000 | 6,302,891 | ||||||
ConocoPhillips 5.95% 3/15/46 | 1,565,000 | 1,926,313 | ||||||
Dominion Gas Holdings 4.60% 12/15/44 | 1,595,000 | 1,608,120 | ||||||
Enbridge | ||||||||
4.50% 6/10/44 | 1,900,000 | 1,800,106 | ||||||
5.50% 12/1/46 | 4,370,000 | 4,741,712 | ||||||
Energy Transfer Partners | ||||||||
5.30% 4/15/47 | 2,510,000 | 2,479,893 | ||||||
6.125% 12/15/45 | 5,020,000 | 5,493,065 | ||||||
Eni 144A 5.70% 10/1/40 # | 3,450,000 | 3,518,852 | ||||||
Noble Energy | ||||||||
5.05% 11/15/44 | 3,170,000 | 3,251,964 | ||||||
5.25% 11/15/43 | 1,465,000 | 1,529,784 | ||||||
Petroleos Mexicanos 6.75% 9/21/47 | 1,595,000 | 1,509,189 | ||||||
Plains All American Pipeline | ||||||||
4.50% 12/15/26 | 3,585,000 | 3,634,631 | ||||||
4.90% 2/15/45 | 1,660,000 | 1,555,123 | ||||||
Shell International Finance | ||||||||
4.00% 5/10/46 | 6,030,000 | 5,811,841 | ||||||
4.375% 5/11/45 | 1,010,000 | 1,029,451 | ||||||
Spectra Energy Partners 4.50% 3/15/45 | 3,755,000 | 3,610,132 | ||||||
Transcanada Trust 5.875% 8/15/76 ● | 2,190,000 | 2,321,400 | ||||||
Western Gas Partners 5.45% 4/1/44 | 920,000 | 962,378 | ||||||
Woodside Finance 144A 3.70% 9/15/26 # | 5,425,000 | 5,297,594 | ||||||
|
| |||||||
65,913,545 | ||||||||
|
| |||||||
Finance Companies – 0.48% | ||||||||
Depository Trust & Clearing 144A 4.875% 12/29/49 #● | 3,000,000 | 3,075,000 | ||||||
|
| |||||||
3,075,000 | ||||||||
|
| |||||||
Insurance – 6.24% | ||||||||
Alleghany 4.90% 9/15/44 | 3,525,000 | 3,543,143 | ||||||
Allstate 4.20% 12/15/46 | 6,590,000 | 6,647,999 | ||||||
Berkshire Hathaway Finance 4.30% 5/15/43 | 1,800,000 | 1,856,464 | ||||||
Highmark 144A 6.125% 5/15/41 # | 139,000 | 129,227 | ||||||
Marsh & McLennan 4.35% 1/30/47 | 3,180,000 | 3,151,968 | ||||||
MetLife 4.60% 5/13/46 | 7,990,000 | 8,372,234 | ||||||
Nationwide Mutual Insurance 144A 4.95% 4/22/44 # | 3,200,000 | 3,298,019 | ||||||
TIAA Asset Management Finance 144A 4.125% 11/1/24 # | 2,400,000 | 2,444,244 |
19 |
Table of Contents
Schedules of investments | ||
Delaware Extended Duration Bond Fund |
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Insurance (continued) | ||||||||
Trinity Acquisition 6.125% 8/15/43 | 4,570,000 | $ | 4,839,822 | |||||
XLIT | ||||||||
5.50% 3/31/45 | 4,590,000 | 4,508,404 | ||||||
6.50% 12/29/49 ● | 1,480,000 | 1,250,600 | ||||||
|
| |||||||
40,042,124 | ||||||||
|
| |||||||
Natural Gas – 1.31% | ||||||||
Piedmont Natural Gas 3.64% 11/1/46 | 6,300,000 | 5,731,608 | ||||||
Southwest Gas 3.80% 9/29/46 | 2,850,000 | 2,646,234 | ||||||
|
| |||||||
8,377,842 | ||||||||
|
| |||||||
Real Estate Investment Trusts – 0.16% | ||||||||
DDR 4.25% 2/1/26 | 1,045,000 | 1,054,116 | ||||||
|
| |||||||
1,054,116 | ||||||||
|
| |||||||
Technology – 5.14% | ||||||||
Apple | ||||||||
3.45% 2/9/45 | 2,210,000 | 1,942,579 | ||||||
4.65% 2/23/46 | 3,890,000 | 4,104,331 | ||||||
Broadcom 144A 3.875% 1/15/27 # | 6,265,000 | 6,245,391 | ||||||
Diamond 1 Finance 144A 8.10% 7/15/36 # | 4,145,000 | 5,019,093 | ||||||
Microsoft | ||||||||
4.10% 2/6/37 | 3,090,000 | 3,137,360 | ||||||
4.25% 2/6/47 | 3,090,000 | 3,126,901 | ||||||
4.50% 2/6/57 | 1,860,000 | 1,889,762 | ||||||
Oracle 4.00% 7/15/46 | 8,000,000 | 7,527,040 | ||||||
|
| |||||||
32,992,457 | ||||||||
|
| |||||||
Transportation – 2.56% | ||||||||
CSX 3.80% 11/1/46 | 1,250,000 | 1,137,890 | ||||||
ERAC USA Finance 144A 4.20% 11/1/46 # | 6,670,000 | 6,155,943 | ||||||
Penske Truck Leasing 144A 3.40% 11/15/26 # | 6,440,000 | 6,182,889 | ||||||
TTX 144A 4.20% 7/1/46 # | 3,070,000 | 2,912,420 | ||||||
|
| |||||||
16,389,142 | ||||||||
|
| |||||||
Total Corporate Bonds (cost $567,177,455) | 560,872,342 | |||||||
|
| |||||||
| ||||||||
Municipal Bonds – 3.01% | ||||||||
| ||||||||
Chicago, Illinois O’Hare International Airport Revenue | ||||||||
(Taxable Build America Bond) Series B 6.395% 1/1/40 | 3,800,000 | 4,996,658 | ||||||
Commonwealth of Massachusetts | ||||||||
Series C 5.00% 10/1/25 | 560,000 | 680,999 | ||||||
Long Island, New York Power Authority Electric System Revenue | ||||||||
(Taxable Build America Bond) Series B 5.85% 5/1/41 | 3,600,000 | 4,220,496 |
20 |
Table of Contents
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Municipal Bonds (continued) | ||||||||
| ||||||||
Los Angeles, California Department of Water & Power Revenue | ||||||||
(Taxable Build America Bond) Series D 6.574% 7/1/45 | 2,225,000 | $ | 3,095,798 | |||||
Metropolitan Transportation Authority, New York Revenue | ||||||||
(Taxable Build America Bond) Series A2 6.089% 11/15/40 | 3,205,000 | 4,068,908 | ||||||
Oregon Department of Transportation Highway User Tax Revenue | ||||||||
(Taxable Build America Bond-Subordinate Lien) Series A 5.834% 11/15/34 | 1,605,000 | 2,033,840 | ||||||
Texas Water Development Board | ||||||||
Series A 5.00% 10/15/45 | 200,000 | 226,994 | ||||||
|
| |||||||
Total Municipal Bonds (cost $15,406,383) | 19,323,693 | |||||||
|
| |||||||
| ||||||||
U.S. Treasury Obligations – 4.22% | ||||||||
| ||||||||
U.S. Treasury Bond | ||||||||
2.875% 11/15/46 | 24,780,000 | 23,930,616 | ||||||
U.S. Treasury Note | ||||||||
2.00% 11/15/26 | 3,260,000 | 3,132,974 | ||||||
|
| |||||||
Total U.S. Treasury Obligations (cost $26,969,385) | 27,063,590 | |||||||
|
| |||||||
Number of shares | ||||||||
| ||||||||
Preferred Stock – 2.02% | ||||||||
| ||||||||
DTE Energy 5.25% | 60,000 | 1,483,200 | ||||||
General Electric 5.00% ● | 4,814,000 | 4,996,932 | ||||||
Morgan Stanley 5.55% ● | 2,280,000 | 2,342,700 | ||||||
PNC Preferred Funding Trust II 144A 2.186% #● | 3,900,000 | 3,768,375 | ||||||
USB Realty 144A 2.169% #● | 400,000 | 338,000 | ||||||
|
| |||||||
Total Preferred Stock (cost $11,974,265) | 12,929,207 | |||||||
|
| |||||||
Principal amount° | ||||||||
| ||||||||
Short-Term Investments – 1.92% | ||||||||
| ||||||||
Discount Notes – 1.76%≠ | ||||||||
Federal Home Loan Bank | ||||||||
0.495% 2/24/17 | 813,809 | 813,606 | ||||||
0.505% 3/10/17 | 705,301 | 704,939 | ||||||
0.52% 2/10/17 | 3,125,735 | 3,125,429 | ||||||
0.52% 2/27/17 | 4,688,602 | 4,687,280 | ||||||
0.521% 3/24/17 | 1,101,979 | 1,101,198 | ||||||
0.53% 4/25/17 | 881,626 | 880,569 | ||||||
|
| |||||||
11,313,021 | ||||||||
|
|
21 |
Table of Contents
Schedules of investments | ||
Delaware Extended Duration Bond Fund |
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Short-Term Investments (continued) | ||||||||
| ||||||||
U.S. Treasury Obligation – 0.16%≠ | ||||||||
U.S. Treasury Bill 0.465% 2/9/17 | 1,017,261 | $ | 1,017,156 | |||||
|
| |||||||
1,017,156 | ||||||||
|
| |||||||
Total Short-Term Investments (cost $12,329,526) | 12,330,177 | |||||||
|
| |||||||
Total Value of Securities – 98.63% | $ | 632,519,009 | ||||||
|
|
# | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At Jan. 31, 2017, the aggregate value of Rule 144A securities was $105,308,112, which represents 16.42% of the Fund’s net assets. See Note 9 in “Notes to financial statements.” |
≠ | The rate shown is the effective yield at the time of purchase. |
° | Principal amount shown is stated in U.S. dollars unless noted that the security is denominated in another currency. |
● | Variable rate security. Each rate shown is as of Jan. 31, 2017. Interest rates reset periodically. |
The following futures contracts were outstanding at Jan. 31, 2017:1
Futures Contracts
Contracts to Buy (Sell) | Notional Cost (Proceeds) | Notional Value | Expiration Date | Unrealized Appreciation (Depreciation) | ||||||||||||
163 | U.S. Treasury 10 yr Notes | $ | 20,324,524 | $ | 20,288,406 | 3/23/17 | $ | (36,118 | ) |
The use of futures contracts involves elements of market risk and risks in excess of the amounts disclosed in the financial statements. The notional value presented above represents the Fund’s total exposure in such contracts, whereas only the net unrealized appreciation (depreciation) is reflected in the Fund’s net assets.
1See Note 6 in “Notes to financial statements.”
yr – Year
See accompanying notes, which are an integral part of the financial statements.
22 |
Table of Contents
This page intentionally left blank.
Table of Contents
Statements of assets and liabilities | ||
January 31, 2017 (Unaudited) |
Delaware Corporate Bond Fund | Delaware Extended Duration Bond Fund | |||||||||
Assets: | ||||||||||
Investments, at value1 | $ | 987,402,011 | $ | 620,188,832 | ||||||
Short-term investments, at value2 | 68,014,856 | 12,330,177 | ||||||||
Cash collateral due from broker | 747,000 | 237,000 | ||||||||
Cash | 46,322 | 1,363,898 | ||||||||
Receivable for securities sold | 19,327,603 | 45,543,876 | ||||||||
Dividends and interest receivable | 10,681,710 | 7,183,813 | ||||||||
Receivable for fund shares sold | 1,590,394 | 662,759 | ||||||||
Variation margin due from broker on futures contracts | 130,173 | 40,750 | ||||||||
Other assets3 | 438,287 | 166,247 | ||||||||
|
|
|
| |||||||
Total assets | 1,088,378,356 | 687,717,352 | ||||||||
|
|
|
| |||||||
Liabilities: | ||||||||||
Payable for securities purchased | 47,447,419 | 43,222,373 | ||||||||
Payable for fund shares redeemed | 3,020,993 | 1,476,525 | ||||||||
Income distribution payable | 878,526 | 581,895 | ||||||||
Other accrued expenses | 399,401 | 157,218 | ||||||||
Investment management fees payable to affiliates | 392,409 | 287,699 | ||||||||
Distribution fees payable to affiliates | 208,080 | 82,967 | ||||||||
Audit and tax fee payable | 23,969 | 23,969 | ||||||||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 17,323 | 10,923 | ||||||||
Accounting and administration expenses payable to affiliates | 4,041 | 2,548 | ||||||||
Trustees’ fees and expenses payable | 2,989 | �� | 1,873 | |||||||
Legal fees payable to affiliates | 1,721 | 1,051 | ||||||||
Reports and statements to shareholders expenses payable to affiliates | 1,069 | 663 | ||||||||
Bond proceeds payable3 | 1,460,956 | 554,156 | ||||||||
|
|
|
| |||||||
Total liabilities | 53,858,896 | 46,403,860 | ||||||||
|
|
|
| |||||||
Total Net Assets | $ | 1,034,519,460 | $ | 641,313,492 | ||||||
|
|
|
| |||||||
Net Assets Consist of: | ||||||||||
Paid-in capital | $ | 1,080,247,014 | $ | 652,693,714 | ||||||
Distributions in excess of net investment income | (1,422,337 | ) | (912,353 | ) | ||||||
Accumulated net realized loss | (50,027,719 | ) | (9,093,746 | ) | ||||||
Net unrealized appreciation (depreciation) of investments | 5,456,303 | (1,338,005 | ) | |||||||
Net unrealized appreciation (depreciation) of futures contracts | 266,199 | (36,118 | ) | |||||||
|
|
|
| |||||||
Total Net Assets | $ | 1,034,519,460 | $ | 641,313,492 | ||||||
|
|
|
|
24 |
Table of Contents
Delaware Corporate Bond Fund | Delaware Extended Duration Bond Fund | |||||||||
Net Asset Value | ||||||||||
Class A: | ||||||||||
Net assets | $ | 302,701,967 | $ | 229,059,435 | ||||||
Shares of beneficial interest outstanding, unlimited authorization, no par | 52,987,722 | 36,499,124 | ||||||||
Net asset value per share | $ | 5.71 | $ | 6.28 | ||||||
Sales charge | 4.50 | % | 4.50 | % | ||||||
Offering price per share, equal to net asset value per share/(1 – sales charge) | $ | 5.98 | $ | 6.58 | ||||||
Class C: | ||||||||||
Net assets | $ | 153,190,015 | $ | 29,588,251 | ||||||
Shares of beneficial interest outstanding, unlimited authorization, no par | 26,813,172 | 4,716,793 | ||||||||
Net asset value per share | $ | 5.71 | $ | 6.27 | ||||||
Class R: | ||||||||||
Net assets | $ | 25,010,678 | $ | 20,816,190 | ||||||
Shares of beneficial interest outstanding, unlimited authorization, no par | 4,374,437 | 3,312,212 | ||||||||
Net asset value per share | $ | 5.72 | $ | 6.28 | ||||||
Institutional Class: | ||||||||||
Net assets | $ | 553,616,800 | $ | 353,968,106 | ||||||
Shares of beneficial interest outstanding, unlimited authorization, no par | 96,915,393 | 56,495,520 | ||||||||
Net asset value per share | $ | 5.71 | $ | 6.27 | ||||||
Class R6: | ||||||||||
Net assets | $ | — | $ | 7,881,510 | ||||||
Shares of beneficial interest outstanding, unlimited authorization, no par | — | 1,256,939 | ||||||||
Net asset value per share | $ | — | $ | 6.27 | ||||||
1 Investments, at cost | $ | 981,945,708 | $ | 621,527,488 | ||||||
2 Short-term investments, at cost | 68,014,856 | 12,329,526 | ||||||||
3 See Note 11 in “Notes to financial statements.” |
See accompanying notes, which are an integral part of the financial statements.
25 |
Table of Contents
Statements of operations | ||
Six months ended January 31, 2017 (Unaudited) |
Delaware Corporate Bond Fund | Delaware Extended Duration Bond Fund | |||||||||
Investment Income: | ||||||||||
Interest | $ | 22,431,317 | $ | 14,296,709 | ||||||
Dividends | 110,253 | 39,375 | ||||||||
|
|
|
| |||||||
22,541,570 | 14,336,084 | |||||||||
|
|
|
| |||||||
Expenses: | ||||||||||
Management fees | 2,663,322 | 1,781,488 | ||||||||
Distribution expenses – Class A | 418,635 | 294,849 | ||||||||
Distribution expenses – Class C | 834,858 | 161,034 | ||||||||
Distribution expenses – Class R | 68,780 | 59,275 | ||||||||
Dividend disbursing and transfer agent fees and expenses | 743,057 | 376,805 | ||||||||
Accounting and administration expenses | 172,269 | 103,725 | ||||||||
Legal fees | 68,103 | 34,188 | ||||||||
Registration fees | 55,255 | 49,508 | ||||||||
Reports and statements to shareholders expenses | 47,575 | 27,630 | ||||||||
Custodian fees | 34,256 | 13,052 | ||||||||
Trustees’ fees and expenses | 26,511 | 15,881 | ||||||||
Audit and tax fees | 24,495 | 24,218 | ||||||||
Other | 26,162 | 17,423 | ||||||||
|
|
|
| |||||||
5,183,278 | 2,959,076 | |||||||||
Less expenses waived | (61,696 | ) | (93,689 | ) | ||||||
Less expense paid indirectly | (818 | ) | (392 | ) | ||||||
|
|
|
| |||||||
Total operating expenses | 5,120,764 | 2,864,995 | ||||||||
|
|
|
| |||||||
Net Investment Income | 17,420,806 | 11,471,089 | ||||||||
|
|
|
|
26 |
Table of Contents
Delaware Corporate Bond Fund | Delaware Extended Duration Bond Fund | |||||||||
Net Realized and Unrealized Gain (Loss): | ||||||||||
Net realized gain (loss) on: | ||||||||||
Investments | $ | (65,147 | ) | $ | (649,744 | ) | ||||
Futures contracts | 141 | (173,500 | ) | |||||||
Options purchased | (231,985 | ) | (68,765 | ) | ||||||
Swap contracts | (270,411 | ) | — | |||||||
|
|
|
| |||||||
Net realized loss | (567,402 | ) | (892,009 | ) | ||||||
|
|
|
| |||||||
Net change in unrealized appreciation (depreciation) of: | ||||||||||
Investments | (41,491,171 | ) | (51,462,641 | ) | ||||||
Futures contracts | 266,199 | 87,972 | ||||||||
Swap contracts | 116,763 | — | ||||||||
|
|
|
| |||||||
Net change in unrealized appreciation (depreciation) | (41,108,209 | ) | (51,374,669 | ) | ||||||
|
|
|
| |||||||
Net Realized and Unrealized Loss | (41,675,611 | ) | (52,266,678 | ) | ||||||
|
|
|
| |||||||
Net Decrease in Net Assets Resulting from Operations | $ | (24,254,805 | ) | $ | (40,795,589 | ) | ||||
|
|
|
|
See accompanying notes, which are an integral part of the financial statements.
27 |
Table of Contents
Statements of changes in net assets | ||
Delaware Corporate Bond Fund |
Six months ended 1/31/17 (Unaudited) | Year ended 7/31/16 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 17,420,806 | $ | 40,889,501 | ||||
Net realized loss | (567,402 | ) | (32,945,380 | ) | ||||
Net change in unrealized appreciation (depreciation) | (41,108,209 | ) | 52,320,079 | |||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | (24,254,805 | ) | 60,264,200 | |||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Class A | (5,720,321 | ) | (13,714,939 | ) | ||||
Class C | (2,228,093 | ) | (4,947,954 | ) | ||||
Class R | (435,078 | ) | (905,876 | ) | ||||
Institutional Class | (10,480,441 | ) | (24,527,878 | ) | ||||
Net realized gain: | ||||||||
Class A | — | (72,919 | ) | |||||
Class C | — | (32,194 | ) | |||||
Class R | — | (4,867 | ) | |||||
Institutional Class | — | (110,366 | ) | |||||
|
|
|
| |||||
(18,863,933 | ) | (44,316,993 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Class A | 25,799,343 | 74,940,063 | ||||||
Class C | 7,513,501 | 17,081,334 | ||||||
Class R | 3,396,406 | 10,126,554 | ||||||
Institutional Class | 175,847,486 | 238,689,064 | ||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | 5,139,232 | 12,266,547 | ||||||
Class C | 1,913,333 | 4,326,651 | ||||||
Class R | 435,078 | 910,743 | ||||||
Institutional Class | 7,749,081 | 17,812,496 | ||||||
|
|
|
| |||||
227,793,460 | 376,153,452 | |||||||
|
|
|
|
28 |
Table of Contents
Six months ended 1/31/17 (Unaudited) | Year ended 7/31/16 | |||||||
Capital Share Transactions (continued): | ||||||||
Cost of shares redeemed: | ||||||||
Class A | $ | (67,499,103 | ) | $ | (181,824,347 | ) | ||
Class C | (22,796,272 | ) | (45,196,503 | ) | ||||
Class R | (6,927,204 | ) | (10,714,795 | ) | ||||
Institutional Class | (191,264,847 | ) | (504,697,959 | ) | ||||
|
|
|
| |||||
(288,487,426 | ) | (742,433,604 | ) | |||||
|
|
|
| |||||
Decrease in net assets derived from capital share transactions | (60,693,966 | ) | (366,280,152 | ) | ||||
|
|
|
| |||||
Net Decrease in Net Assets | (103,812,704 | ) | (350,332,945 | ) | ||||
Net Assets: | ||||||||
Beginning of period | 1,138,332,164 | 1,488,665,109 | ||||||
|
|
|
| |||||
End of period | $ | 1,034,519,460 | $ | 1,138,332,164 | ||||
|
|
|
| |||||
Undistributed (distributions in excess of) net investment income | $ | (1,422,337 | ) | $ | 20,790 | |||
|
|
|
|
See accompanying notes, which are an integral part of the financial statements.
29 |
Table of Contents
Statements of changes in net assets | ||
Delaware Extended Duration Bond Fund |
Six months ended 1/31/17 (Unaudited) | Year ended 7/31/16 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 11,471,089 | $ | 22,665,763 | ||||
Net realized loss | (892,009 | ) | (5,614,639 | ) | ||||
Net change in unrealized appreciation (depreciation) | (51,374,669 | ) | 54,510,499 | |||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | (40,795,589 | ) | 71,561,623 | |||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Class A | (4,082,092 | ) | (8,060,146 | ) | ||||
Class C | (435,992 | ) | (904,833 | ) | ||||
Class R | (378,746 | ) | (836,690 | ) | ||||
Institutional Class | (6,735,276 | ) | (12,962,354 | ) | ||||
Class R6 | (154,810 | ) | (7,913 | ) | ||||
Net realized gain: | ||||||||
Class A | — | (349,440 | ) | |||||
Class C | — | (52,034 | ) | |||||
Class R | — | (39,832 | ) | |||||
Institutional Class | — | (530,078 | ) | |||||
Return of capital: | ||||||||
Class A | — | (99,043 | ) | |||||
Class C | — | (13,876 | ) | |||||
Class R | — | (10,648 | ) | |||||
Institutional Class | — | (153,033 | ) | |||||
Class R6 | — | (3,526 | ) | |||||
|
|
|
| |||||
(11,786,916 | ) | (24,023,446 | ) | |||||
|
|
|
|
30 |
Table of Contents
Six months ended 1/31/17 (Unaudited) | Year ended 7/31/16 | |||||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Class A | $ | 42,134,359 | $ | 66,062,847 | ||||
Class C | 3,733,373 | 5,838,907 | ||||||
Class R | 5,109,415 | 5,881,821 | ||||||
Institutional Class | 94,027,227 | 104,015,687 | ||||||
Class R6 | 542,140 | 8,480,805 | ||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | 3,919,779 | 8,220,984 | ||||||
Class C | 397,849 | 889,878 | ||||||
Class R | 378,746 | 887,170 | ||||||
Institutional Class | 6,438,053 | 13,105,599 | ||||||
Class R6 | 154,321 | 4,071 | ||||||
|
|
|
| |||||
156,835,262 | 213,387,769 | |||||||
|
|
|
| |||||
Cost of shares redeemed: | ||||||||
Class A | (39,631,798 | ) | (94,248,471 | ) | ||||
Class C | (5,738,956 | ) | (8,621,363 | ) | ||||
Class R | (8,771,738 | ) | (9,120,791 | ) | ||||
Institutional Class | (89,597,282 | ) | (113,840,914 | ) | ||||
Class R6 | (761,646 | ) | (27,699 | ) | ||||
|
|
|
| |||||
(144,501,420 | ) | (225,859,238 | ) | |||||
|
|
|
| |||||
Increase (decrease) in net assets derived from capital share transactions | 12,333,842 | (12,471,469 | ) | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets | (40,248,663 | ) | 35,066,708 | |||||
Net Assets: | ||||||||
Beginning of period | 681,562,155 | 646,495,447 | ||||||
|
|
|
| |||||
End of period | $ | 641,313,492 | $ | 681,562,155 | ||||
|
|
|
| |||||
Distributions in excess of net investment income | $ | (912,353 | ) | $ | (596,526 | ) | ||
|
|
|
|
See accompanying notes, which are an integral part of the financial statements.
31 |
Table of Contents
Delaware Corporate Bond Fund Class A
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
|
|
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods shown reflects waivers by the manager and/or distributor. Performance would have been lower had the waivers not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
32
Table of Contents
Six months ended | ||||||||||||||||||||||||||||||||||||
1/31/171 | Year ended | |||||||||||||||||||||||||||||||||||
(Unaudited) | 7/31/16 | 7/31/15 | 7/31/14 | 7/31/13 | 7/31/12 | |||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
$ | 5.940 | $ | 5.810 | $ | 6.080 | $ | 5.950 | $ | 6.260 | $ | 6.050 | |||||||||||||||||||||||||
0.092 | 0.187 | 0.205 | 0.227 | 0.230 | 0.246 | |||||||||||||||||||||||||||||||
(0.222 | ) | 0.145 | (0.187 | ) | 0.251 | (0.099 | ) | 0.384 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(0.130 | ) | 0.332 | 0.018 | 0.478 | 0.131 | 0.630 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(0.100 | ) | (0.201 | ) | (0.228 | ) | (0.252 | ) | (0.252 | ) | (0.284 | ) | |||||||||||||||||||||||||
— | (0.001 | ) | (0.060 | ) | (0.096 | ) | (0.189 | ) | (0.136 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(0.100 | ) | (0.202 | ) | (0.288 | ) | (0.348 | ) | (0.441 | ) | (0.420 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
$ | 5.710 | $ | 5.940 | $ | 5.810 | $ | 6.080 | $ | 5.950 | $ | 6.260 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(2.20% | ) | 5.91% | 0.28% | 8.33% | 2.02% | 11.04% | ||||||||||||||||||||||||||||||
$ | 302,702 | $ | 352,477 | $ | 442,509 | $ | 511,351 | $ | 645,585 | $ | 638,481 | |||||||||||||||||||||||||
0.94% | 0.94% | 0.95% | 0.94% | 0.93% | 0.94% | |||||||||||||||||||||||||||||||
0.95% | 0.96% | 0.96% | 0.96% | 0.98% | 1.01% | |||||||||||||||||||||||||||||||
3.16% | 3.28% | 3.43% | 3.81% | 3.70% | 4.11% | |||||||||||||||||||||||||||||||
3.15% | 3.26% | 3.42% | 3.79% | 3.65% | 4.04% | |||||||||||||||||||||||||||||||
84% | 217% | 215% | 215% | 230% | 202% | |||||||||||||||||||||||||||||||
|
33
Table of Contents
Financial highlights
Delaware Corporate Bond Fund Class C
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
|
|
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during some of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
34
Table of Contents
Six months ended | ||||||||||||||||||||||||||||||||||||
1/31/171 | Year ended | |||||||||||||||||||||||||||||||||||
(Unaudited) | 7/31/16 | 7/31/15 | 7/31/14 | 7/31/13 | 7/31/12 | |||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
$ | 5.940 | $ | 5.810 | $ | 6.080 | $ | 5.960 | $ | 6.260 | $ | 6.050 | |||||||||||||||||||||||||
0.070 | 0.145 | 0.161 | 0.182 | 0.183 | 0.202 | |||||||||||||||||||||||||||||||
(0.222 | ) | 0.144 | (0.188 | ) | 0.241 | (0.088 | ) | 0.383 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(0.152 | ) | 0.289 | (0.027 | ) | 0.423 | 0.095 | 0.585 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(0.078 | ) | (0.158 | ) | (0.183 | ) | (0.207 | ) | (0.206 | ) | (0.239 | ) | |||||||||||||||||||||||||
— | (0.001 | ) | (0.060 | ) | (0.096 | ) | (0.189 | ) | (0.136 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(0.078 | ) | (0.159 | ) | (0.243 | ) | (0.303 | ) | (0.395 | ) | (0.375 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
$ | 5.710 | $ | 5.940 | $ | 5.810 | $ | 6.080 | $ | 5.960 | $ | 6.260 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(2.57% | ) | 5.12% | (0.48% | ) | 7.35% | 1.43% | 10.21% | |||||||||||||||||||||||||||||
$ | 153,190 | $ | 173,057 | $ | 193,746 | $ | 209,893 | $ | 273,594 | $ | 249,029 | |||||||||||||||||||||||||
1.69% | 1.69% | 1.70% | 1.69% | 1.68% | 1.69% | |||||||||||||||||||||||||||||||
1.70% | 1.71% | 1.71% | 1.70% | 1.68% | 1.71% | |||||||||||||||||||||||||||||||
2.41% | 2.53% | 2.68% | 3.06% | 2.95% | 3.36% | |||||||||||||||||||||||||||||||
2.40% | 2.51% | 2.67% | 3.05% | 2.95% | 3.34% | |||||||||||||||||||||||||||||||
84% | 217% | 215% | 215% | 230% | 202% | |||||||||||||||||||||||||||||||
|
35 |
Table of Contents
Financial highlights
Delaware Corporate Bond Fund Class R
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
|
|
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflects waivers by the manager and/or distributor. Performance would have been lower had the waivers not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
36
Table of Contents
Six months ended | ||||||||||||||||||||||||||||||||||||
1/31/171 | Year ended | |||||||||||||||||||||||||||||||||||
(Unaudited) | 7/31/16 | 7/31/15 | 7/31/14 | 7/31/13 | 7/31/12 | |||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
$ | 5.940 | $ | 5.820 | $ | 6.090 | $ | 5.960 | $ | 6.270 | $ | 6.050 | |||||||||||||||||||||||||
0.085 | 0.173 | 0.191 | 0.212 | 0.214 | 0.231 | |||||||||||||||||||||||||||||||
(0.212 | ) | 0.135 | (0.188 | ) | 0.251 | (0.098 | ) | 0.394 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(0.127 | ) | 0.308 | 0.003 | 0.463 | 0.116 | 0.625 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(0.093 | ) | (0.187 | ) | (0.213 | ) | (0.237 | ) | (0.237 | ) | (0.269 | ) | |||||||||||||||||||||||||
— | (0.001 | ) | (0.060 | ) | (0.096 | ) | (0.189 | ) | (0.136 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(0.093 | ) | (0.188 | ) | (0.273 | ) | (0.333 | ) | (0.426 | ) | (0.405 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
$ | 5.720 | $ | 5.940 | $ | 5.820 | $ | 6.090 | $ | 5.960 | $ | 6.270 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(2.15% | ) | 5.47% | 0.03% | 8.06% | 1.77% | 10.94% | ||||||||||||||||||||||||||||||
$ | 25,010 | $ | 29,149 | $ | 28,245 | $ | 35,142 | $ | 37,293 | $ | 22,661 | |||||||||||||||||||||||||
1.19% | 1.19% | 1.20% | 1.19% | 1.18% | 1.19% | |||||||||||||||||||||||||||||||
1.20% | 1.21% | 1.21% | 1.22% | 1.28% | 1.31% | |||||||||||||||||||||||||||||||
2.91% | 3.03% | 3.18% | 3.56% | 3.45% | 3.86% | |||||||||||||||||||||||||||||||
2.90% | 3.01% | 3.17% | 3.53% | 3.35% | 3.74% | |||||||||||||||||||||||||||||||
84% | 217% | 215% | 215% | 230% | 202% | |||||||||||||||||||||||||||||||
|
37 |
Table of Contents
Financial highlights
Delaware Corporate Bond Fund Institutional Class
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
|
|
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during some of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
38 |
Table of Contents
Six months ended | ||||||||||||||||||||||||||||||||||||
1/31/171 | Year ended | |||||||||||||||||||||||||||||||||||
(Unaudited) | �� | 7/31/16 | 7/31/15 | 7/31/14 | 7/31/13 | 7/31/12 | ||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
$ | 5.940 | $ | 5.810 | $ | 6.080 | $ | 5.950 | $ | 6.260 | $ | 6.050 | |||||||||||||||||||||||||
0.100 | 0.202 | 0.218 | 0.242 | 0.245 | 0.261 | |||||||||||||||||||||||||||||||
(0.223 | ) | 0.144 | (0.186 | ) | 0.251 | (0.098 | ) | 0.384 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(0.123 | ) | 0.346 | 0.032 | 0.493 | 0.147 | 0.645 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(0.107 | ) | (0.215 | ) | (0.242 | ) | (0.267 | ) | (0.268 | ) | (0.299 | ) | |||||||||||||||||||||||||
— | (0.001 | ) | (0.060 | ) | (0.096 | ) | (0.189 | ) | (0.136 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(0.107 | ) | (0.216 | ) | (0.302 | ) | (0.363 | ) | (0.457 | ) | (0.435 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
$ | 5.710 | $ | 5.940 | $ | 5.810 | $ | 6.080 | $ | 5.950 | $ | 6.260 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(2.07% | ) | 6.18% | 0.52% | 8.60% | 2.28% | 11.32% | ||||||||||||||||||||||||||||||
$ | 553,617 | $ | 583,649 | $ | 824,165 | $ | 468,205 | $ | 518,576 | $ | 507,190 | |||||||||||||||||||||||||
0.69% | 0.69% | 0.70% | 0.69% | 0.68% | 0.69% | |||||||||||||||||||||||||||||||
0.70% | 0.71% | 0.71% | 0.70% | 0.68% | 0.71% | |||||||||||||||||||||||||||||||
3.41% | 3.53% | 3.68% | 4.06% | 3.95% | 4.36% | |||||||||||||||||||||||||||||||
3.40% | 3.51% | 3.67% | 4.05% | 3.95% | 4.34% | |||||||||||||||||||||||||||||||
84% | 217% | 215% | 215% | 230% | 202% | |||||||||||||||||||||||||||||||
|
39 |
Table of Contents
Financial highlights
Delaware Extended Duration Bond Fund Class A
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Return of capital |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
|
|
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods shown reflects waivers by the manager and/or distributor. Performance would have been lower had the waivers not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
40 |
Table of Contents
Six months ended | ||||||||||||||||||||||||||||||||||||
1/31/171 | Year ended | |||||||||||||||||||||||||||||||||||
(Unaudited) | 7/31/16 | 7/31/15 | 7/31/14 | 7/31/13 | 7/31/12 | |||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
$ | 6.790 | $ | 6.290 | $ | 6.810 | $ | 6.280 | $ | 7.150 | $ | 6.380 | |||||||||||||||||||||||||
0.110 | 0.226 | 0.259 | 0.278 | 0.280 | 0.300 | |||||||||||||||||||||||||||||||
(0.507 | ) | 0.513 | (0.216 | ) | 0.542 | (0.427 | ) | 1.055 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(0.397 | ) | 0.739 | 0.043 | 0.820 | (0.147 | ) | 1.355 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(0.113 | ) | (0.226 | ) | (0.268 | ) | (0.290 | ) | (0.287 | ) | (0.319 | ) | |||||||||||||||||||||||||
— | (0.010 | ) | (0.295 | ) | — | (0.436 | ) | (0.266 | ) | |||||||||||||||||||||||||||
— | (0.003 | ) | — | — | — | — | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(0.113 | ) | (0.239 | ) | (0.563 | ) | (0.290 | ) | (0.723 | ) | (0.585 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
$ | 6.280 | $ | 6.790 | $ | 6.290 | $ | 6.810 | $ | 6.280 | $ | 7.150 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(5.87% | ) | 12.14% | 0.53% | 13.42% | (2.45% | ) | 22.48% | |||||||||||||||||||||||||||||
$ | 229,059 | $ | 241,190 | $ | 244,514 | $ | 277,041 | $ | 370,553 | $ | 402,639 | |||||||||||||||||||||||||
0.96% | 0.96% | 0.98% | 0.96% | 0.95% | 0.95% | |||||||||||||||||||||||||||||||
0.99% | 1.00% | 1.02% | 1.01% | 1.04% | 1.06% | |||||||||||||||||||||||||||||||
3.37% | 3.60% | 3.89% | 4.35% | 4.13% | 4.53% | |||||||||||||||||||||||||||||||
3.34% | 3.56% | 3.85% | 4.30% | 4.04% | 4.42% | |||||||||||||||||||||||||||||||
91% | 219% | 185% | 216% | 217% | 172% | |||||||||||||||||||||||||||||||
|
41 |
Table of Contents
Financial highlights
Delaware Extended Duration Bond Fund Class C
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Return of capital |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
|
|
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
42 |
Table of Contents
Six months ended | ||||||||||||||||||||||||||||||||||||
1/31/171 | Year ended | |||||||||||||||||||||||||||||||||||
(Unaudited) | 7/31/16 | 7/31/15 | 7/31/14 | 7/31/13 | 7/31/12 | |||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
$ | 6.780 | $ | 6.290 | $ | 6.810 | $ | 6.280 | $ | 7.150 | $ | 6.380 | |||||||||||||||||||||||||
0.085 | 0.179 | 0.208 | 0.230 | 0.230 | 0.251 | |||||||||||||||||||||||||||||||
(0.507 | ) | 0.503 | (0.216 | ) | 0.542 | (0.428 | ) | 1.055 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(0.422 | ) | 0.682 | (0.008 | ) | 0.772 | (0.198 | ) | 1.306 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(0.088 | ) | (0.179 | ) | (0.217 | ) | (0.242 | ) | (0.236 | ) | (0.270 | ) | |||||||||||||||||||||||||
— | (0.010 | ) | (0.295 | ) | — | (0.436 | ) | (0.266 | ) | |||||||||||||||||||||||||||
— | (0.003 | ) | — | — | — | — | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(0.088 | ) | (0.192 | ) | (0.512 | ) | (0.242 | ) | (0.672 | ) | (0.536 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
$ | 6.270 | $ | 6.780 | $ | 6.290 | $ | 6.810 | $ | 6.280 | $ | 7.150 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(6.24% | ) | 11.14% | (0.22% | ) | 12.59% | (3.17% | ) | 21.57% | ||||||||||||||||||||||||||||
$ | 29,588 | $ | 33,777 | $ | 33,323 | $ | 30,091 | $ | 47,326 | $ | 62,275 | |||||||||||||||||||||||||
1.71% | 1.71% | 1.73% | 1.71% | 1.70% | 1.70% | |||||||||||||||||||||||||||||||
1.74% | 1.75% | 1.77% | 1.75% | 1.74% | 1.76% | |||||||||||||||||||||||||||||||
2.62% | 2.85% | 3.14% | 3.60% | 3.38% | 3.78% | |||||||||||||||||||||||||||||||
2.59% | 2.81% | 3.10% | 3.56% | 3.34% | 3.72% | |||||||||||||||||||||||||||||||
91% | 219% | 185% | 216% | 217% | 172% | |||||||||||||||||||||||||||||||
|
43
Table of Contents
Financial highlights
Delaware Extended Duration Bond Fund Class R
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Return of capital |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
|
|
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflects waivers by the manager and/or distributor. Performance would have been lower had the waivers not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
44 |
Table of Contents
Six months ended | ||||||||||||||||||||||||||||||||||||
1/31/171 | Year ended | |||||||||||||||||||||||||||||||||||
(Unaudited) | 7/31/16 | 7/31/15 | 7/31/14 | 7/31/13 | 7/31/12 | |||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
$ | 6.800 | $ | 6.300 | $ | 6.820 | $ | 6.290 | $ | 7.160 | $ | 6.390 | |||||||||||||||||||||||||
0.102 | 0.211 | 0.243 | 0.265 | 0.263 | 0.284 | |||||||||||||||||||||||||||||||
(0.517 | ) | 0.513 | (0.217 | ) | 0.539 | (0.426 | ) | 1.055 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(0.415 | ) | 0.724 | 0.026 | 0.804 | (0.163 | ) | 1.339 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(0.105 | ) | (0.211 | ) | (0.251 | ) | (0.274 | ) | (0.271 | ) | (0.303 | ) | |||||||||||||||||||||||||
— | (0.010 | ) | (0.295 | ) | — | (0.436 | ) | (0.266 | ) | |||||||||||||||||||||||||||
— | (0.003 | ) | — | — | — | — | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(0.105 | ) | (0.224 | ) | (0.546 | ) | (0.274 | ) | (0.707 | ) | (0.569 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
$ | 6.280 | $ | 6.800 | $ | 6.300 | $ | 6.820 | $ | 6.290 | $ | 7.160 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(5.99% | ) | 11.84% | 0.29% | 13.13% | (2.68% | ) | 22.15% | |||||||||||||||||||||||||||||
$ | 20,816 | $ | 25,965 | $ | 26,449 | $ | 34,545 | $ | 29,423 | $ | 20,080 | |||||||||||||||||||||||||
1.21% | 1.21% | 1.23% | 1.21% | 1.20% | 1.20% | |||||||||||||||||||||||||||||||
1.24% | 1.25% | 1.27% | 1.27% | 1.34% | 1.36% | |||||||||||||||||||||||||||||||
3.12% | 3.35% | 3.64% | 4.10% | 3.88% | 4.28% | |||||||||||||||||||||||||||||||
3.09% | 3.31% | 3.60% | 4.04% | 3.74% | 4.12% | |||||||||||||||||||||||||||||||
91% | 219% | 185% | 216% | 217% | 172% | |||||||||||||||||||||||||||||||
|
45
Table of Contents
Financial highlights
Delaware Extended Duration Bond Fund Institutional Class
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Return of capital |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
|
|
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
46 |
Table of Contents
Six months ended | ||||||||||||||||||||||||||||||||||||
1/31/171 | Year ended | |||||||||||||||||||||||||||||||||||
(Unaudited) | 7/31/16 | 7/31/15 | 7/31/14 | 7/31/13 | 7/31/12 | |||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
$ | 6.780 | $ | 6.280 | $ | 6.800 | $ | 6.270 | $ | 7.140 | $ | 6.370 | |||||||||||||||||||||||||
0.118 | 0.241 | 0.274 | 0.295 | 0.297 | 0.317 | |||||||||||||||||||||||||||||||
(0.507 | ) | 0.513 | (0.215 | ) | 0.541 | (0.427 | ) | 1.055 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(0.389 | ) | 0.754 | 0.059 | 0.836 | (0.130 | ) | 1.372 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(0.121 | ) | (0.241 | ) | (0.284 | ) | (0.306 | ) | (0.304 | ) | (0.336 | ) | |||||||||||||||||||||||||
— | (0.010 | ) | (0.295 | ) | — | (0.436 | ) | (0.266 | ) | |||||||||||||||||||||||||||
— | (0.003 | ) | — | — | — | — | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(0.121 | ) | (0.254 | ) | (0.579 | ) | (0.306 | ) | (0.740 | ) | (0.602 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
$ | 6.270 | $ | 6.780 | $ | 6.280 | $ | 6.800 | $ | 6.270 | $ | 7.140 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
(5.63% | ) | 12.26% | 0.78% | 13.72% | (2.21% | ) | 22.82% | |||||||||||||||||||||||||||||
$ | 353,968 | $ | 372,052 | $ | 342,209 | $ | 307,039 | $ | 304,299 | $ | 344,628 | |||||||||||||||||||||||||
0.71% | 0.71% | 0.73% | 0.71% | 0.70% | 0.70% | |||||||||||||||||||||||||||||||
0.74% | 0.75% | 0.77% | 0.75% | 0.74% | 0.76% | |||||||||||||||||||||||||||||||
3.62% | 3.85% | 4.14% | 4.60% | 4.38% | 4.78% | |||||||||||||||||||||||||||||||
3.59% | 3.81% | 4.10% | 4.56% | 4.34% | 4.72% | |||||||||||||||||||||||||||||||
91% | 219% | 185% | 216% | 217% | 172% | |||||||||||||||||||||||||||||||
|
47
Table of Contents
Financial highlights
Delaware Extended Duration Bond Fund Class R6
Selected data for each share of the Fund outstanding throughout each period were as follows:
Six months ended | 5/02/162 | |||||||||||
1/31/171 | to | |||||||||||
(Unaudited) | 7/31/16 | |||||||||||
Net asset value, beginning of period | $ | 6.780 | $ | 6.380 | ||||||||
Income (loss) from investment operations: | ||||||||||||
Net investment income3 | 0.121 | 0.229 | ||||||||||
Net realized and unrealized gain (loss) | (0.508 | ) | 0.228 | |||||||||
|
|
|
| |||||||||
Total from investment operations | (0.387 | ) | 0.457 | |||||||||
|
|
|
| |||||||||
Less dividends and distributions from: | ||||||||||||
Net investment income | (0.123 | ) | (0.054 | ) | ||||||||
Return of capital | — | (0.003 | ) | |||||||||
|
|
|
| |||||||||
Total dividends and distributions | (0.123 | ) | (0.057 | ) | ||||||||
|
|
|
| |||||||||
Net asset value, end of period | $ | 6.270 | $ | 6.780 | ||||||||
|
|
|
| |||||||||
Total return4 | (5.73% | ) | 7.20% | |||||||||
Ratios and supplemental data: | ||||||||||||
Net assets, end of period (000 omitted) | $ | 7,882 | $ | 8,578 | ||||||||
Ratio of expenses to average net assets | 0.63% | 0.63% | ||||||||||
Ratio of expenses to average net assets prior to fees waived | 0.66% | 0.65% | ||||||||||
Ratio of net investment income to average net assets | 3.70% | 3.40% | ||||||||||
Ratio of net investment income to average net assets prior to fees waived | 3.67% | 3.38% | ||||||||||
Portfolio turnover | 91% | 219% | 5 | |||||||||
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | Date of commencement of operations; ratios have been annualized and total return has not been annualized. |
3 | The average shares outstanding method has been applied for per share information. |
4 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during the period shown reflects a waiver by the manager. Performance would have been lower had the waivers not been in effect. |
5 | Portfolio turnover is representative of the Fund for the year ended July 31, 2016. |
See accompanying notes, which are an integral part of the financial statements.
48 |
Table of Contents
Notes to financial statements | ||
Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund |
January 31, 2017 (Unaudited)
Delaware Group® Income Funds (Trust) is organized as a Delaware statutory trust and offers four series: Delaware Corporate Bond Fund, Delaware Floating Rate Fund (formerly, Delaware Diversified Floating Rate Fund), Delaware Extended Duration Bond Fund, and Delaware High-Yield Opportunities Fund. These financial statements and the related notes pertain to Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund (each, a Fund or collectively, the Funds). The Trust is an open-end investment company. The Funds are considered diversified under the Investment Company Act of 1940 (1940 Act), as amended, and offer Class A, Class C, Class R, and Institutional Class, and Delaware Extended Duration Bond Fund also offers Class R6 shares. Class A shares are sold with a maximum front-end sales charge of 4.50%. Class A share purchases of $1,000,000 or more will incur a contingent deferred sales charge (CDSC) instead of a front-end sales charge of 1.00% if redeemed during the first year and 0.50% during the second year, provided that Delaware Distributors, L.P. (DDLP) paid a financial advisor a commission on the purchase of those shares. Class C shares are sold with a CDSC of 1.00%, if redeemed during the first 12 months. Class R, Institutional Class, and Class R6 shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors. In addition, Class R6 shares do not pay any service fees, sub-accounting fees, and/or sub-transfer agency fees. Class R6 commenced operations on May 2, 2016.
The investment objective of the Funds is to seek to provide investors with total return.
1. Significant Accounting Policies
The following accounting policies are in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and are consistently followed by the Funds.
Security Valuation – Equity securities, except those traded on the Nasdaq Stock Market LLC (Nasdaq), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange on the valuation date. Equity 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, the mean between the bid and ask prices will be used, which approximates fair value. U.S. government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. Other 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. 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. 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. Futures contracts and options on futures contracts are valued at the daily quoted settlement prices. Generally, other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Trust’s Board of Trustees (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.
49 |
Table of Contents
Notes to financial statements | ||
Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund |
1. Significant Accounting Policies (continued)
Federal Income Taxes – No provision for federal income taxes has been made as each Fund intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Funds evaluate tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year. Management has analyzed each Fund’s tax positions taken for all open federal income tax years (July 31, 2013–July 31, 2016) and has concluded that no provision for federal income tax is required in the Funds’ financial statements.
Class Accounting – Investment income and common expenses are allocated to the various classes of each Fund on the basis of “settled shares” of each class in relation to the net assets of each Fund. Realized and unrealized gain (loss) on investments are allocated to the various classes of each Fund on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class. Class R6 shares will not be allocated any expenses related to service fees, sub-accounting fees, and/or sub-transfer agency fees paid to brokers, dealers, or other financial intermediaries.
Repurchase Agreements – The Funds may purchase certain U.S. government securities subject to the counterparty’s agreement to repurchase them at an agreed upon date and price. The counterparty will be required on a daily basis to maintain the value of the collateral subject to the agreement at not less than the repurchase price (including accrued interest). The agreements are conditioned upon the collateral being deposited under the Federal Reserve book-entry system with the Funds’ custodian or a third-party sub-custodian. In the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings. All open repurchase agreements as of the date of this report were entered into on Jan. 31, 2017, and matured on the next business day.
Use of Estimates – Each Fund is an investment company, whose financial statements are prepared in conformity with U.S. GAAP. Therefore, each Fund follows the accounting and reporting guidelines for investment companies. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material.
Other – Expenses directly attributable to a Fund are charged directly to that Fund. Other expenses common to various funds within the Delaware Investments® Family of Funds are generally allocated among such funds on the basis of average net assets. Management fees and certain other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Discounts and premiums on debt securities are accreted or amortized to interest income, respectively, over the lives of the respective securities using the effective interest method. Each Fund declares dividends daily from net investment
50 |
Table of Contents
income and pays the dividends monthly and declares and pays distributions from net realized gain on investments, if any, annually. Each Fund may distribute more frequently, if necessary for tax purposes. Dividends and distributions, if any, are recorded on the ex-dividend date.
Each Fund may receive earnings credits from its custodian when positive cash balances are maintained, which may be used to offset custody fees. There were no such earnings credits for the six months ended Jan. 31, 2017.
Each Fund receives earnings credits from its transfer agent when positive cash balances are maintained, which may be used to offset transfer agent fees. If the amount earned is greater than $1, the expense paid under this arrangement is included on the “Statements of operations” under “Dividend disbursing and transfer agent fees and expenses” with the corresponding expense offset shown under “Less expense paid indirectly.” For the six months ended Jan. 31, 2017, each Fund earned the following amounts under this agreement:
Delaware Corporate Bond Fund | Delaware Extended Duration Bond Fund | |||
$818 | $392 |
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates
In accordance with the terms of its respective investment management agreement, each Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee which is calculated based on each Fund’s average daily net assets as follows:
Delaware Corporate Bond Fund | Delaware Extended Duration Bond Fund | |||||
On the first $500 million | 0.5000% | 0.5500% | ||||
On the next $500 million | 0.4750% | 0.5000% | ||||
On the next $1.5 billion | 0.4500% | 0.4500% | ||||
In excess of $2.5 billion | 0.4250% | 0.4250% |
DMC has contractually agreed to waive that portion, if any, of its management fee and/or pay/reimburse each Fund to the extent necessary to ensure that total annual operating expenses ((excluding any distribution and service (12b-1) fees, acquired fund fees and expenses, taxes, interest, short sale and dividend interest expenses, brokerage fees, certain insurance costs, and nonroutine expenses or costs, including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations) (collectively, nonroutine expenses)), do not exceed specified percentages of average daily net assets of each Fund from Aug. 1, 2016 through Jan. 31, 2017* as shown below. For purpose of these waivers and reimbursements, nonroutine expenses may also include such additional costs and expenses as may be agreed upon from time to time by the Board and DMC. These expense waivers and reimbursements apply only to expenses paid directly by the Funds and may only be terminated by agreement of DMC and the Funds.
51 |
Table of Contents
Notes to financial statements | ||
Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund |
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates (continued)
Delaware Corporate Bond Fund | Delaware Extended Duration Bond Fund (Class A, Class C, Class R, and Institutional Class shares) | Delaware Extended Duration Bond Fund (Class R6 shares) | ||||
Operating expense limitation as a percentage of average daily net assets (per annum) | 0.69% | 0.71% | 0.63% |
*The aggregate contractual waiver period covering this report is from Nov. 27, 2015 through Nov. 28, 2017. The aggregate contractual waiver period for Delaware Extended Duration Bond Fund, Class R6, is from April 30, 2016 through Nov. 28, 2017.
Delaware Investments Fund Services Company (DIFSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Funds. For these services, DIFSC’s fees are calculated based on the aggregate daily net assets of the Delaware Investments® Family of Funds at the following annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DIFSC under the service agreement described above are allocated among all funds in the Delaware Investments® Family of Funds on a relative net asset value (NAV) basis. These amounts are included on the “Statements of operations” under “Accounting and administration expenses.” For the six months ended Jan. 31, 2017, the Funds were charged for these services as follows:
Delaware Corporate Bond Fund | Delaware Extended Duration Bond Fund | |||
$25,807 | $15,539 |
DIFSC is also the transfer agent and dividend disbursing agent of the Funds. For these services, DIFSC’s fees are calculated based on the aggregate daily net assets of the retail funds within the Delaware Investments Family of Funds at the following annual rate: 0.025% of the first $20 billion; 0.020% of the next $5 billion; 0.015% of the next $5 billion; and 0.013% of average daily net assets in excess of $30 billion. The fees payable to DIFSC under the service agreement described above are allocated among all retail funds in the Delaware Investments Family of Funds on a relative NAV basis. These amounts are included on the “Statements of operations” under “Dividend disbursing and transfer agent fees and expenses.” For the six months ended Jan. 31, 2017, each Fund was charged for these services as follows:
Delaware Corporate Bond Fund | Delaware Extended Duration Bond Fund | |||
$110,885 | $66,768 |
52 |
Table of Contents
Pursuant to a sub-transfer agency agreement between DIFSC and BNY Mellon Investment Servicing (US) Inc. (BNYMIS), BNYMIS provides certain sub-transfer agency services to the Funds. Sub-transfer agency fees are paid by the Funds and are also included on the “Statements of operations” under “Dividend disbursing and transfer agent fees and expenses.”
Pursuant to a distribution agreement and distribution plan, each Fund pays DDLP, the distributor and an affiliate of DMC, an annual 12b-1 fee of 0.25%, 1.00%, and 0.50% of the average daily net assets of the Class A, Class C, and Class R shares, respectively. Institutional Class and Class R6 shares pay no distribution and service fees.
As provided in the investment management agreement, each Fund bears a portion of the cost of certain resources shared with DMC, including the cost of internal personnel of DMC and/or its affiliates that provide legal, tax, and regulatory reporting services to the Funds. These amounts are included on the “Statements of operations” under “Legal fees.” For the six months ended Jan. 31, 2017, each Fund was charged for internal legal, tax, and regulatory reporting services provided by DMC and/or its affiliates’ employees as follows:
Delaware Corporate Bond Fund | Delaware Extended Duration Bond Fund | |||
$11,077 | $6,659 |
For the six months ended Jan. 31, 2017, DDLP earned commissions on sales of Class A shares for each Fund as follows:
Delaware Corporate Bond Fund | Delaware Extended Duration Bond Fund | |||
$7,144 | $22,051 |
For the six months ended Jan. 31, 2017, DDLP received gross CDSC commissions on redemptions of each Fund’s Class A and Class C shares, respectively, and these commissions were entirely used to offset upfront commissions previously paid by DDLP to broker/dealers on sales of those shares. The amounts received were as follows:
Delaware Corporate Bond Fund | Delaware Extended Duration Bond Fund | |||
Class A | $ 317 | $ 22 | ||
Class C | 1,938 | 6,162 |
Trustees’ fees include expenses accrued by the Funds for each Trustee’s retainer and meeting fees. Certain officers of DMC, DIFSC, and DDLP are officers and/or Trustees of the Trust. These officers and Trustees are paid no compensation by the Funds.
Cross trades for the six months ended Jan. 31, 2017, were executed by the Funds pursuant to procedures adopted by the Board designed to ensure compliance with Rule 17a-7 under the 1940 Act. Cross trading is the buying or selling of portfolio securities between funds of investment companies, or between a fund of an investment company and another entity, that are or could be considered affiliates by virtue of having a common investment advisor (or affiliated investment advisors), common
53 |
Table of Contents
Notes to financial statements | ||
Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund |
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates (continued)
directors/trustees and/or common officers. At its regularly scheduled meetings, the Board reviews such transactions for compliance with the procedures adopted by the Board. Pursuant to these procedures, for the six months ended Jan. 31, 2017, the Funds engaged in securities sales, which resulted in the following net realized gains. There were no Rule 17a-7 securities purchases for the six months ended Jan. 31, 2017.
Delaware Corporate Bond Fund | Delaware Extended Duration Bond Fund | |||||||
Sales | $ | 20,832,148 | $ | 17,152,390 | ||||
Net realized gain | 786 | 639 |
3. Investments
For the six months ended Jan. 31, 2017, the Funds made purchases and sales of investment securities other than short-term investments as follows:
Delaware Corporate Bond Fund | Delaware Extended Duration Bond Fund | |||||||
Purchases other than U.S. government securities | $ | 836,838,571 | $ | 403,098,226 | ||||
Purchases of U.S. government securities | 65,814,786 | 190,242,428 | ||||||
Sales other than U.S. government securities | 932,451,929 | 423,715,445 | ||||||
Sales of U.S. government securities | 68,194,677 | 166,322,450 |
At Jan. 31, 2017, the cost of investments for federal income tax purposes has been estimated since final tax characteristics cannot be determined until fiscal year end. At Jan. 31, 2017, the cost and unrealized appreciation (depreciation) of investments for federal income tax purposes for each Fund were as follows:
Delaware Corporate Bond Fund | Delaware Extended Duration Bond Fund | |||||||
Cost of investments | $ | 1,058,093,211 | $ | 634,265,844 | ||||
|
|
|
| |||||
Aggregate unrealized appreciation of investments | $ | 16,732,217 | $ | 14,832,325 | ||||
Aggregate unrealized depreciation of investments | (19,408,561 | ) | (16,579,160) | |||||
|
|
|
| |||||
Net unrealized depreciation of investments | $ | (2,676,344 | ) | $ | (1,746,835) | |||
|
|
|
|
U.S. GAAP defines fair value as the price that each Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. A three-level hierarchy for fair value measurements has been established based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market
54 |
Table of Contents
participants would use in pricing the asset or liability based on the best information available under the circumstances. Each Fund’s investment in its entirety is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-level hierarchy of inputs is summarized below.
Level 1 – | Inputs are quoted prices in active markets for identical investments. (Examples: equity securities, open-end investment companies, futures contracts, exchange-traded options contracts) | |
Level 2 – | Other observable inputs, including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, and default rates) or other market-corroborated inputs. (Examples: debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities) | |
Level 3 – | Significant unobservable inputs, including each Fund’s own assumptions used to determine the fair value of investments. (Examples: broker-quoted securities, fair valued securities) |
Level 3 investments are valued using significant unobservable inputs. Each Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Valuations may also be based upon current market prices of securities that are comparable in coupon, rating, maturity, and industry. The derived value of a Level 3 investment may not represent the value which is received upon disposition and this could impact the results of operations.
The following tables summarize the valuation of each Fund’s investments by fair value hierarchy levels as of Jan. 31, 2017:
Delaware Corporate Bond Fund | ||||||||||||
Securities | Level 1 | Level 2 | Total | |||||||||
Corporate Debt | $ | — | $ | 942,997,702 | $ | 942,997,702 | ||||||
Foreign Debt | — | — | — | |||||||||
Municipal Bonds | — | 8,601,725 | 8,601,725 | |||||||||
Loan Agreements | — | 10,894,120 | 10,894,120 | |||||||||
Preferred Stock1 | 3,880,600 | 21,027,864 | 24,908,464 | |||||||||
Short-Term Investments | — | 68,014,856 | 68,014,856 | |||||||||
|
|
|
|
|
| |||||||
Total Value of Securities | $ | 3,880,600 | $ | 1,051,536,267 | $ | 1,055,416,867 | ||||||
|
|
|
|
|
| |||||||
Futures Contracts | $ | 266,199 | $ | — | $ | 266,199 |
55 |
Table of Contents
Notes to financial statements | ||
Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund |
3. Investments (continued)
Delaware Extended Duration Bond Fund | ||||||||||||
Securities | Level 1 | Level 2 | Total | |||||||||
Corporate Debt | $ | — | $ | 560,872,342 | $ | 560,872,342 | ||||||
Municipal Bonds | — | 19,323,693 | 19,323,693 | |||||||||
Preferred Stock1 | 1,483,200 | 11,446,007 | 12,929,207 | |||||||||
U.S. Treasury Obligations | — | 27,063,590 | 27,063,590 | |||||||||
Short-Term Investments | — | 12,330,177 | 12,330,177 | |||||||||
|
|
|
|
|
| |||||||
Total Value of Securities | $ | 1,483,200 | $ | 631,035,809 | $ | 632,519,009 | ||||||
|
|
|
|
|
| |||||||
Futures Contracts | $ | (36,118 | ) | $ | — | $ | (36,118 | ) |
1 | Security type is valued across multiple levels. Level 1 investments represent exchange-traded investments while Level 2 investments represent investments with observable input or matrix-priced investments. The amounts attributed to Level 1 investments and Level 2 investments represent the following percentages of the total market value of these security types for each Fund: |
Delaware Corporate Bond Fund | ||||||||||||
Level 1 | Level 2 | Total | ||||||||||
Preferred Stock | 15.58 | % | 84.42 | % | 100.00 | % | ||||||
Delaware Extended Duration Bond Fund | ||||||||||||
Level 1 | Level 2 | Total | ||||||||||
Preferred Stock | 11.47 | % | 88.53 | % | 100.00 | % |
During the six months ended Jan. 31, 2017, there were no transfers between Level 1 investments, Level 2 investments, or Level 3 investments that had a significant impact to the Funds. Each Fund’s policy is to recognize transfers between levels at the beginning of the reporting period.
A reconciliation of Level 3 investments is presented when each Fund has a significant amount of Level 3 investments at the beginning, interim, or end of the period in relation to net assets. During the six months ended Jan. 31, 2017, there were no Level 3 investments.
56 |
Table of Contents
4. Capital Shares
Transactions in capital shares were as follows:
Delaware Corporate Bond Fund | Delaware Extended Duration Bond Fund | |||||||||||||||
Six months ended 1/31/17 | Year ended 7/31/16 | Six months ended 1/31/17 | Year ended 7/31/16 | |||||||||||||
Shares sold: | ||||||||||||||||
Class A | 4,415,603 | 13,130,903 | 6,538,132 | 10,458,177 | ||||||||||||
Class C | 1,280,901 | 3,003,061 | 571,490 | 916,079 | ||||||||||||
Class R | 583,354 | 1,773,012 | 782,004 | 928,514 | ||||||||||||
Institutional Class | 30,520,728 | 41,839,997 | 14,517,124 | 16,558,897 | ||||||||||||
Class R6 | — | — | 85,845 | 1,268,678 | ||||||||||||
Shares issued upon reinvestment of dividends and distributions: |
| |||||||||||||||
Class A | 886,388 | 2,149,957 | 607,825 | 1,310,984 | ||||||||||||
Class C | 330,137 | 758,010 | 61,712 | 142,135 | ||||||||||||
Class R | 75,081 | 159,585 | 58,757 | 142,443 | ||||||||||||
Institutional Class | 1,336,975 | 3,121,204 | 999,426 | 2,092,804 | ||||||||||||
Class R6 | — | — | 23,928 | 606 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
39,429,167 | 65,935,729 | 24,246,243 | 33,819,317 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Shares redeemed: |
| |||||||||||||||
Class A | (11,697,563 | ) | (32,022,046 | ) | (6,187,754 | ) | (15,100,859 | ) | ||||||||
Class C | (3,950,538 | ) | (7,933,176 | ) | (895,829 | ) | (1,378,607 | ) | ||||||||
Class R | (1,190,701 | ) | (1,880,417 | ) | (1,349,417 | ) | (1,449,098 | ) | ||||||||
Institutional Class | (33,277,427 | ) | (88,409,759 | ) | (13,935,842 | ) | (18,228,734 | ) | ||||||||
Class R6 | — | — | (117,996 | ) | (4,122 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
(50,116,229 | ) | (130,245,398 | ) | (22,486,838 | ) | (36,161,420 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (10,687,062 | ) | (64,309,669 | ) | 1,759,405 | (2,342,103 | ) | |||||||||
|
|
|
|
|
|
|
|
57 |
Table of Contents
Notes to financial statements | ||
Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund |
4. Capital Shares (continued)
Certain shareholders may exchange shares of one class for shares of another class in the same Fund. For the six months ended Jan. 31, 2017 and the year ended July 31, 2016, the Funds had the following exchange transactions. These exchange transactions are included as subscriptions and redemptions in the tables on the previous page, and the “Statements of changes in net assets.”
Six months ended 1/31/17 | ||||||||||||||||||||
Exchange Redemptions | Exchange Subscriptions | |||||||||||||||||||
Class A Shares | Class C Shares | Value | Institutional Class Shares | Value | ||||||||||||||||
Delaware Corporate Bond Fund | 328,752 | 35,328 | $ | 2,107,433 | 364,663 | $ | 2,107,433 | |||||||||||||
Delaware Extended Duration Bond Fund | 24,023 | 775 | 158,882 | 24,894 | 158,882 |
Year ended 7/31/16 | ||||||||||||||||||||||||||||
Exchange Redemptions | Exchange Subscriptions | |||||||||||||||||||||||||||
Class A Shares | Class C Shares | Institutional Class Shares | Value | Class A Shares | Institutional Class Shares | Value | ||||||||||||||||||||||
Delaware Corporate Bond Fund | 2,576,461 | 16,485 | — | $ | 15,070,249 | 3,327 | 2,594,863 | $ | 15,070,249 | |||||||||||||||||||
Delaware Extended Duration Bond Fund | 19,810 | — | 2,721 | 146,180 | 2,718 | 19,879 | 146,180 |
5. Line of Credit
Each Fund, along with certain other funds in the Delaware Investments® Family of Funds (Participants), was a participant in a 155,000,000 revolving line of credit to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, the Participants were charged an annual commitment fee of 0.10%, which was allocated across the Participants on the basis of relative net assets of each Participant’s allocation of the entire facility. The Participants were permitted to borrow up to a maximum of one third of their net assets under the agreement. Each Participant is individually, and not jointly, liable for its particular advances, if any, under the line of credit. The line of credit available under the agreement expired on Nov. 7, 2016.
On Nov. 7, 2016, each Fund, along with the other Participants, entered into an amendment to the agreement for a $155,000,000 revolving line of credit. The line of credit is to be used as described above and operates in substantially the same manner as the original agreement, with the exception of the annual commitment fee. Under the amendment to the agreement, the Participants are charged an annual commitment fee of 0.15%, which is allocated across the Participants on the basis of relative net assets
58 |
Table of Contents
of each Participant’s allocation of the entire facility. The line of credit available under the agreement expires on Nov. 6, 2017.
The Funds had no amounts outstanding as of Jan. 31, 2017, or at any time during the period then ended.
6. Derivatives
U.S. GAAP requires disclosures that enable investors to understand: (1) how and why an entity uses derivatives; (2) how they are accounted for; and (3) how they affect an entity’s results of operations and financial position.
Futures Contracts – A futures contract is an agreement in which the writer (or seller) of the contract agrees to deliver to the buyer an amount of cash or securities equal to a specific dollar amount times the difference between the value of a specific security or index at the close of the last trading day of the contract and the price at which the agreement is made. Each Fund may use futures in the normal course of pursuing its investment objective. Each Fund may invest in futures contracts to hedge its existing portfolio securities against fluctuations in value caused by changes in interest rates or market conditions. Upon entering into a futures contract, each Fund deposits cash or pledges U.S. government securities to a broker, equal to the minimum “initial margin” requirements of the exchange on which the contract is traded. Subsequent payments are received from the broker or paid to the broker each day, based on the daily fluctuation in the market value of the contract. These receipts or payments are known as “variation margin” and are recorded daily by the Funds as unrealized gains or losses until the contracts are closed. When the contracts are closed, the Funds record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Risks of entering into futures contracts include potential imperfect correlation between the futures contracts and the underlying securities and the possibility of an illiquid secondary market for these instruments. When investing in futures, there is reduced counterparty credit risk to a Fund because futures are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees against default. At Jan. 31, 2017 each Fund posted cash as margin for open futures contracts as follows. These amounts are presented as “Cash collateral due from broker” on the “Statements of assets and liabilities.”
Delaware Corporate Bond Fund | Delaware Extended Duration Bond Fund | |||
Cash collateral due from broker | $747,000 | $237,000 |
During the six months ended Jan. 31, 2017, the Funds used futures contracts to hedge the Funds’ existing portfolio securities against fluctuations in value caused by changes in interest rates or market conditions.
Options Contracts – During the six months ended Jan. 31, 2017, each Fund entered into options contracts in the normal course of pursuing its investment objective. The Funds may buy or write options contracts for any number of reasons, including without limitation: to manage the Funds’ exposure to changes in securities prices caused by interest rates or market conditions, and foreign currencies; as an efficient means of adjusting the Funds’ overall exposure to certain markets; to protect the value of portfolio securities; and as a cash management tool. The Funds may buy or write call or put options on securities, futures, swaps, swaptions, financial indices, and foreign currencies. When the Funds buy an
59 |
Table of Contents
Notes to financial statements | ||
Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund |
6. Derivatives (continued)
option, a premium is paid and an asset is recorded and adjusted on a daily basis to reflect the current market value of the option purchased. When the Funds write an option, a premium is received and a liability is recorded and adjusted on a daily basis to reflect the current market value of the option written. Premiums received from writing options that expire unexercised are treated by the Funds on the expiration date as realized gains. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is treated as realized gain or loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether the Funds have a realized gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by each Fund. Each Fund, as writer of an option, bears the market risk of an unfavorable change in the price of the security underlying the written option. When writing options, each Fund is subject to minimal counterparty risk because the counterparty is only obligated to pay premiums and does not bear the market risk of an unfavorable market change. There were no transactions in options written during the six months ended Jan. 31, 2017.
During the six months ended Jan. 31, 2017, the Funds used options contracts to manage the Funds’ exposure to changes in securities prices caused by interest rates or market conditions.
Swap Contracts – Each Fund may enter into CDS contracts in the normal course of pursuing its investment objective. Each Fund may enter into CDS contracts in order to hedge against a credit event, to enhance total return or to gain exposure to certain securities or markets. The Funds will not be permitted to enter into any swap transactions unless, at the time of entering into such transactions, the unsecured long-term debt of the actual counterparty, combined with any credit enhancements, is rated at least BBB- by Standard & Poor’s Financial Services LLC. (S&P) or Baa3 by Moody’s Investors Service, Inc. (Moody’s) or is determined to be of equivalent credit quality by DMC.
Credit Default Swaps. A CDS contract is a risk-transfer instrument through which one party (purchaser of protection) transfers to another party (seller of protection) the financial risk of a credit event (as defined in the CDS agreement), as it relates to a particular reference security or basket of securities (such as an index). In exchange for the protection offered by the seller of protection, the purchaser of protection agrees to pay the seller of protection a periodic amount at a stated rate that is applied to the notional amount of the CDS contract. In addition, an upfront payment may be made or received by the Funds in connection with an unwinding or assignment of a CDS contract. Upon the occurrence of a credit event, the seller of protection would pay the par (or other agreed-upon) value of the reference security (or basket of securities) to the counterparty. Credit events generally include, among others, bankruptcy, failure to pay, and obligation default.
During the six months ended Jan. 31, 2017, Delaware Corporate Bond Fund entered into CDS contracts as a purchaser of protection. Periodic payments (receipts) on such contracts are accrued daily and recorded as unrealized losses (gains) on swap contracts. Upon payment (receipt), such amounts are recorded as realized losses (gains) on swap contracts. Upfront payments made or received in connection with CDS contracts are amortized over the expected life of the CDS contracts as unrealized losses (gains) on swap contracts. The change in value of CDS contracts is recorded daily as unrealized appreciation or depreciation. A realized gain or loss is recorded upon a credit event (as defined in the
60 |
Table of Contents
CDS agreement) or the maturity or termination of the agreement. Initial margin and variation margin are posted to central counterparties for CDS basket trades, as determined by the applicable central counterparty. During the six months ended Jan. 31, 2017, the Funds did not enter into any CDS contracts as a seller of protection.
CDS contracts may involve greater risks than if the Funds had invested in the reference obligation directly. CDS contracts are subject to general market risk, liquidity risk, counterparty risk, and credit risk. The Funds’ maximum risk of loss from counterparty credit risk, either as the seller of protection or the buyer of protection, is the fair value of the contract. This risk is mitigated by (1) for bilateral swap contracts, having a netting arrangement between the Funds and the counterparty and by the posting of collateral by the counterparty to the Funds to cover the Funds’ exposure to the counterparty, and (2) for cleared swaps, trading these instruments through a central counterparty.
During the six months ended Jan. 31, 2017, Delaware Corporate Bond Fund used CDS contracts to hedge against credit events.
Swaps Generally. The value of open swaps may differ from that which would be realized in the event each Fund terminated its position in the contract on a given day. Risks of entering into these contracts include the potential inability of the counterparty to meet the terms of the contracts. This type of risk is generally limited to the amount of favorable movement in the value of the underlying security, instrument, or basket of instruments, if any, at the day of default. Risks also arise from potential losses from adverse market movements and such losses could exceed the unrealized amounts shown on the “Schedules of investments.” No swap contracts were outstanding at Jan. 31, 2017 for the Funds.
Fair values of derivative instruments as of Jan. 31, 2017 were as follows:
Delaware Corporate Bond Fund | ||
Assets Derivatives Fair Value | ||
Statements of Assets and Liabilities Location | Interest Rate Contracts | |
Variation margin due to brokers on futures contracts* | $266,199 | |
Delaware Extended Duration Bond Fund | ||
Liability Derivatives Fair Value | ||
Statements of Assets and Liabilities Location | Interest Rate Contracts | |
Variation margin due to broker on futures contracts* | $(36,118) |
*Includes cumulative appreciation (depreciation) of futures contracts from the date the contracts are opened through Jan. 31, 2017. Only current day variation margin is reported on the Funds’ “Statements of assets and liabilities.”
61 |
Table of Contents
Notes to financial statements | ||
Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund |
6. Derivatives (continued)
The effect of derivative instruments on the “Statements of operations” for the six months ended Jan. 31, 2017 was as follows:
Delaware Corporate Bond Fund | ||||||||||||||||
Net Realized Gain (Loss) on: | ||||||||||||||||
Futures | Options | Swap | Total | |||||||||||||
Interest rate contracts | $141 | $(231,985 | ) | $ — | $(231,844 | ) | ||||||||||
Credit contracts | — | — | (270,411 | ) | (270,411 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $141 | $(231,985 | ) | $(270,411 | ) | $(502,255 | ) | |||||||||
|
|
|
|
|
|
|
|
Delaware Corporate Bond Fund | ||||||||||||
Net Change in Unrealized Appreciation (Depreciation) of: | ||||||||||||
Futures Contracts | Swap Contracts | Total | ||||||||||
Interest rate contracts | $266,199 | $ — | $266,199 | |||||||||
Credit contracts | — | 116,763 | 116,763 | |||||||||
|
|
|
|
|
| |||||||
Total | $266,199 | $116,763 | $382,962 | |||||||||
|
|
|
|
|
| |||||||
Delaware Extended Duration Bond Fund | ||||||||||||
Net Realized Gain (Loss) on: | ||||||||||||
Futures Contracts | Options Purchased | Total | ||||||||||
Interest rate contracts | $(173,500 | ) | $(68,765 | ) | $(242,265 | ) |
Delaware Extended Duration Bond Fund | ||
Net Change in Unrealized Appreciation (Depreciation) of: | ||
Futures Contracts | ||
Interest rate contracts | $87,972 |
62 |
Table of Contents
Derivatives generally. The table below summarizes the average balance of derivative holdings by the Funds during the six months ended Jan. 31, 2017:
Long Derivative Volume | ||||||||
Delaware Corporate Bond Fund | Delaware Extended Duration Bond Fund | |||||||
Futures contracts (average notional value) | $1,872,688 | $3,361,005 | ||||||
Options contracts (average notional value) | 1,182 | 350 | ||||||
CDS contracts (average notional value)* | 5,296,063 | — | ||||||
Short Derivative Volume | ||||||||
Delaware Corporate Bond Fund | Delaware Extended Duration Bond Fund | |||||||
Futures contracts (average notional value) | $— | $3,505,235 |
*Long represents buying protection and short represents selling protection.
7. Offsetting
In December 2011, the Financial Accounting Standards Board (FASB) issued guidance that expanded disclosure requirements on the offsetting of certain assets and liabilities. The disclosures are required for investments and derivative financial instruments subject to master netting or similar agreements which are eligible for offset on the “Statements of assets and liabilities” and require an entity to disclose both gross and net information about such investments and transactions in the financial statements. In January 2013, the FASB issued guidance that clarified which investments and transactions are subject to the offsetting disclosure requirements. The scope of the disclosure requirements for offsetting is limited to derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing.
In order to better define its contractual rights and to secure rights that will help each Fund mitigate its counterparty risk, each Fund entered into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement) or a similar agreement with certain of its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between the Funds and a counterparty that governs certain over-the-counter (OTC) derivatives and foreign exchange contracts and typically contains, among other things, collateral posting items and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, each Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default (close-out), including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency or other events.
For financial reporting purposes, each Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements on the “Statements of assets and liabilities.”
63 |
Table of Contents
Notes to financial statements | ||
Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund |
7. Offsetting (continued)
At Jan. 31, 2017, the Funds had the following assets and liabilities subject to offsetting provisions:
Master Repurchase Agreements
Delaware Corporate Bond Fund | |||||||||||||||||||||||||
Counterparty | Repurchase Agreements | Fair Value of Non-Cash | Cash Collateral Received | Net Collateral Received | Net Exposure(b) | ||||||||||||||||||||
Bank of America Merrill Lynch | $18,339,436 | $(18,339,436 | ) | $— | $(18,339,436 | ) | $— | ||||||||||||||||||
Bank of Montreal | 18,339,436 | (18,339,436 | ) | — | (18,339,436 | ) | — | ||||||||||||||||||
BNP Paribas | 6,113,146 | (6,113,146 | ) | — | (6,113,146 | ) | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total | $42,792,018 | $(42,792,018 | ) | $— | $(42,792,018 | ) | $— | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
(a)The value of the related collateral received exceeded the value of the repurchase agreements as of Jan. 31, 2017.
(b)Net exposure represents the receivable (payable) that would be due from (to) the counterparty in the event of default.
8. Securities Lending
Each Fund, along with other funds in the Delaware Investments® Family of 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: (1) 102% with respect to U.S. securities and foreign securities that are denominated and payable in U.S. dollars; and (2) 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 that 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.
Cash collateral received by each series of the Trust is generally invested in a series of individual separate accounts, each corresponding to a Fund. 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 U.S. Treasury securities; obligations issued by the central government of any Organization for Economic Cooperation and Development (OECD) country or its agencies, instrumentalities, or establishments; 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.
64 |
Table of Contents
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 the Funds or, at the discretion of the lending agent, replace the loaned securities. The Funds continue to record dividends or interest, as applicable, on the securities loaned and are subject to changes in value of the securities loaned that may occur during the term of the loan. The Funds have 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, the Funds receive 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 Funds, the security lending agent, and the borrower. The Funds record security lending income net of allocations to the security lending agent and the borrower.
Each Fund may incur investment losses as a result of investing securities lending collateral. This could occur if an investment in the collateral investment account defaulted or became impaired. Under those circumstances, the value of a Fund’s cash collateral account may be less than the amount a Fund would be required to return to the borrowers of the securities and that Fund would be required to make up for this shortfall.
During the six months ended Jan. 31, 2017, the Funds had no securities on loan.
9. Credit and Market Risk
Some countries in which the Funds may invest require governmental approval for the repatriation of investment income, capital, or the proceeds of sales of securities by foreign investors. In addition, if there is deterioration in a country’s balance of payments or for other reasons, a country may impose temporary restrictions on foreign capital remittances abroad.
The securities exchanges of certain foreign markets are substantially smaller, less liquid, and more volatile than the major securities markets in the United States. Consequently, acquisition and disposition of securities by the Funds may be inhibited. In addition, a significant portion of the aggregate market value of securities listed on the major securities exchanges in emerging markets is held by a smaller number of investors. This may limit the number of shares available for acquisition or disposition by the Funds.
Each Fund invests in high yield fixed income securities, which are securities rated lower than BBB- by S&P and lower than Baa3 by Moody’s, or similarly rated by another nationally recognized statistical rating organization. Investments in these higher yielding securities are generally accompanied by a greater degree of credit risk than higher rated securities. Additionally, lower rated securities may be more susceptible to adverse economic and competitive industry conditions than investment grade securities.
Each Fund invests in bank loans and other securities that may subject it to direct indebtedness risk, the risk that the Funds 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 the Funds 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.
65 |
Table of Contents
Notes to financial statements | ||
Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund |
9. Credit and Market Risk (continued)
Some loans or claims may be in default at the time of purchase. Certain of the loans and the other direct indebtedness acquired by the Funds may involve revolving credit facilities or other standby financing commitments that obligate the Funds to pay additional cash on a certain date or on demand. These commitments may require each Fund to increase its investment in a company at a time when the Funds might not otherwise decide to do so (including at a time when the company’s financial condition makes it unlikely that such amounts will be repaid). To the extent that each Fund is committed to advance additional funds, it will at all times hold and maintain cash or other high-grade debt obligations in an amount sufficient to meet such commitments. As the Funds may be required to rely upon another lending institution to collect and pass on to the Funds amounts payable with respect to the loan and to enforce the Funds’ rights under the loan and other direct indebtedness, an insolvency, bankruptcy, or reorganization of the lending institution may delay or prevent the Funds from receiving such amounts. The highly leveraged nature of many loans may make them especially vulnerable to adverse changes in economic or market conditions. Investments in such loans and other direct indebtedness may involve additional risk to the Funds.
Each Fund invests in certain obligations that may have liquidity protection designed to ensure that the receipt of payments due on the underlying security is timely. Such protection may be provided through guarantees, insurance policies, or letters of credit obtained by the issuer or sponsor through 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.
Each Fund may invest up to 15% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A, promulgated under the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair each Fund from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, the Board has delegated to DMC, the day-to-day functions of determining whether individual securities are liquid for purposes of the Funds’ limitation on investments in illiquid securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Funds’ 15% limit on investments in illiquid securities. Rule 144A securities have been identified on the “Schedules of investments.”
10. Contractual Obligations
Each Fund enters into contracts in the normal course of business that contain a variety of indemnifications. The Funds’ maximum exposure under these arrangements is unknown. However, each Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Funds’ existing contracts and expects the risk of loss to be remote.
11. General Motors Corporation Term Loan Litigation
Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund received notice of a litigation proceeding related to a General Motors Corporation (G.M.) term loan participation previously held by the Funds in 2009. We believe the matter subject to the litigation notice will likely lead to a
66 |
Table of Contents
recovery from the Funds of certain amounts received by the Funds because a U.S. Court of Appeals has ruled that the Funds and similarly situated investors were unsecured creditors rather than secured lenders of G.M. as a result of an erroneous Uniform Commercial Code filing made by a third party. The Funds received the full principal on the loans in 2009 after the G.M. bankruptcy. However, based upon the court ruling the estate is seeking to recover such amounts arguing that, as unsecured creditors, the Funds should not have received payment in full. Based upon currently available information related to the litigation and the Funds’ potential exposure, the Funds recorded a liability and an asset based on the expected recoveries to unsecured creditors as of Jan. 31, 2017 that resulted in a decrease in the Funds’ NAVs to reflect this likely recovery as follows:
Delaware Corporate Bond Fund | Delaware Extended Duration Bond Fund | |||||
Asset | $ | 438,287 | $166,247 | |||
Liability | 1,460,956 | 554,156 |
12. Recent Accounting Pronouncements
On Oct. 13, 2016, the Securities and Exchange Commission amended existing rules intended to modernize reporting and disclosure of information. These amendments relate to Regulation S-X which sets forth the form and content of financial statements. At this time, management is evaluating the implications of adopting these amendments and their impact on the financial statements and accompanying notes.
13. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to Jan. 31, 2017 that would require recognition or disclosure in the Funds’ financial statements.
67 |
Table of Contents
Other Fund information (Unaudited)
Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund
Board consideration of Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund investment advisory agreements
At a meeting held on Aug. 16–18, 2016 (the “Annual Meeting”), the Board approved the renewal of the Investment Advisory Agreements for Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund (each, a “Fund” and together, the “Funds”). In making its decision, the Board considered information furnished at regular quarterly Board meetings, including reports detailing Fund performance, investment strategies, and expenses, as well as information prepared specifically in connection with the renewal of the investment advisory and sub-advisory contracts. Information furnished specifically in connection with the renewal of the Investment Management Agreement with Delaware Management Company (“DMC”) included materials provided by DMC and its affiliates (“Delaware Investments”) concerning, among other things, the nature, extent, and quality of services provided to the Funds; the costs of such services to the Funds; economies of scale; and the investment manager’s financial condition and profitability. In addition, in connection with the Annual Meeting, reports were provided to the Trustees in May 2016 and included reports provided by Broadridge Financial Solutions (“Broadridge”). The Broadridge reports compared each Fund’s investment performance and expenses with those of other comparable mutual funds. The Independent Trustees reviewed and discussed the Broadridge reports with independent legal counsel to the Independent Trustees. In addition to the information noted above, the Board also requested and received information regarding DMC’s policy with respect to advisory fee levels and its breakpoint philosophy; the structure of portfolio manager compensation; comparative client fee information; and any constraints or limitations on the availability of securities for certain investment styles, which had in the past year inhibited, or which were likely in the future to inhibit, the investment manager’s ability to invest fully in accordance with Fund policies.
In considering information relating to the approval of each Fund’s advisory agreement, the Independent Trustees received assistance and advice from and met separately with independent legal counsel to the Independent Trustees. Although the Board gave attention to all information furnished, the following discussion identifies, under separate headings, the primary factors taken into account by the Board during its contract renewal considerations.
Nature, extent, and quality of service. The Board considered the services provided by DMC to the Funds and their shareholders. In reviewing the nature, extent, and quality of services, the Board considered reports furnished to it throughout the year, which covered matters such as the relative performance of each Fund; compliance of portfolio managers with the investment policies, strategies, and restrictions for each Fund; compliance by DMC and Delaware Distributors, L.P. (together, “Management”) personnel with the Code of Ethics adopted throughout the Delaware Investments® Family of Funds complex; and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of the Funds’ investment advisor and the emphasis placed on research in the investment process. The Board recognized DMC’s receipt of several industry distinctions during the past several years. The Board gave favorable consideration to DMC’s efforts to control expenditures while maintaining service levels committed to Fund matters. The Board also noted the benefits provided to Fund shareholders through each shareholder’s ability to exchange an investment in one Delaware Investments fund for the same class of shares in another Delaware Investments fund without a sales charge, to reinvest Fund dividends into additional shares of the same Fund or into additional shares of other Delaware Investments funds, and the privilege to combine
68 |
Table of Contents
holdings in other Delaware Investments funds to obtain a reduced sales charge. The Board was satisfied with the nature, extent, and quality of the overall services provided by DMC.
Investment performance. The Board placed significant emphasis on the investment performance of the Funds in view of the importance of investment performance to shareholders. Although the Board gave appropriate consideration to performance reports and discussions with portfolio managers at Investment Committee meetings throughout the year, the Board gave particular weight to the Broadridge reports furnished for the Annual Meeting. The Broadridge reports prepared for each Fund showed the investment performance of its Class A shares in comparison to a group of similar funds as selected by Broadridge (the “Performance Universe”). A fund with the best performance ranked first, and a fund with the poorest performance ranked last. The highest/best performing 25% of funds in the Performance Universe make up the first quartile; the next 25%, the second quartile; the next 25%, the third quartile; and the poorest/worst performing 25% of funds in the Performance Universe make up the fourth quartile. Comparative annualized performance for each Fund was shown for the past 1-, 3-, 5-, and 10-year periods, to the extent applicable, ended March 31, 2015. The Board’s objective is that each Fund’s performance for the periods considered be at or above the median of its Performance Universe.
Delaware Corporate Bond Fund – The Performance Universe for the Fund consisted of the Fund and all retail and institutional BBB-rated corporate debt funds as selected by Broadridge. The Broadridge report comparison showed that the Fund’s total return for the 1-year period was in the second quartile of its Performance Universe. The report further showed that the Fund’s total return for the 3-, 5-, and 10-year periods was in the first quartile of its Performance Universe. The Board was satisfied with performance.
Delaware Extended Duration Bond Fund – The Performance Universe for the Fund consisted of the Fund and all retail and institutional BBB-rated corporate debt funds as selected by Broadridge. The Broadridge report comparison showed that the Fund’s total return for the 1-, 3-, 5-, and 10-year periods was in the first quartile of its Performance Universe. The Board was very satisfied with performance.
Comparative expenses. The Board considered expense comparison data for the Delaware Investments® Family of Funds. Management provided the Board with information on pricing levels and fee structures for each Fund as of its most recently completed fiscal year. The Board also focused on the comparative analysis of effective management fees and total expense ratios of each Fund versus effective management fees and expense ratios of a group of similar funds as selected by Lipper (the “Expense Group”). In reviewing comparative costs, each Fund’s contractual management fee and the actual management fee incurred by the Fund were compared with the contractual management fees (assuming all funds in the Expense Group were similar in size to the Fund) and actual management fees (as reported by each fund) within the Expense Group, taking into account any applicable breakpoints and fee waivers. Each Fund’s total expenses were also compared with those of its Expense Group. The Lipper total expenses, for comparative consistency, were shown by Lipper for Class A shares and comparative total expenses including 12b-1 and non-12b-1 service fees. The Board considered fees paid to DMC for non-management services. The Board’s objective is to limit each Fund’s total expense ratio to be competitive with that of the Expense Group.
69 |
Table of Contents
Other Fund information (Unaudited) | ||
Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund |
Board consideration of Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund investment advisory agreements (continued)
Delaware Corporate Bond Fund – The expense comparisons for the Fund showed that its actual management fee and total expenses were in the quartile with the second highest expenses of its Expense Group. The Board noted that the Fund’s management fee and total expenses were not in line with the Board’s objective. In evaluating total expenses, the Board considered fee waivers in place through November 2016 and various initiatives implemented by Management, such as the negotiation of lower fees for fund accounting services, which had created an opportunity for a further reduction in expenses. The Board was satisfied with Management’s efforts to improve the Fund’s total expense ratio and to bring it in line with the Board’s objective.
Delaware Extended Duration Bond Fund – The expense comparisons for the Fund showed that its actual management fee and total expenses were in the quartile with the second highest expenses of its Expense Group. The Board noted that the Fund’s management fee and total expenses were not in line with the Board’s objective. In evaluating total expenses, the Board considered fee waivers in place through Nov. 28, 2016 and various initiatives implemented by Management, such as the negotiation of lower fees for fund accounting services, which had created an opportunity for a further reduction in expenses. The Board was satisfied with Management’s efforts to improve the Fund’s total expense ratio and to bring it in line with the Board’s objective.
Management profitability. The Board considered the level of profits realized by DMC in connection with the operation of the Funds. In this respect, the Board reviewed the Investment Management Profitability Analysis that addressed the overall profitability of DMC’s business in providing management and other services to each of the individual funds and the Delaware Investments® Family of Funds as a whole. Specific attention was given to the methodology followed in allocating costs for the purpose of determining profitability. Management stated that the level of profits of DMC, to a certain extent, reflects recent operational cost savings and efficiencies initiated by DMC. The Board considered DMC’s efforts to improve services provided to fund shareholders and to meet additional regulatory and compliance requirements resulting from recent industry-wide Securities and Exchange Commission initiatives. The Board also considered the extent to which DMC might derive ancillary benefits from fund operations, including the potential for procuring additional business as a result of the prestige and visibility associated with its role as service provider to the Delaware Investments Family of Funds and the benefits from allocation of fund brokerage to improve trading efficiencies. The Board found that the management fees were reasonable in light of the services rendered and the level of profitability of DMC.
Economies of scale. The Trustees considered whether economies of scale are realized by DMC as each Fund’s assets increase and the extent to which any economies of scale are reflected in the level of management fees charged. The Trustees reviewed the standardized advisory fee pricing and structure, approved by the Board and shareholders, which includes breakpoints, and which applies to most funds in the Delaware Investments Family of Funds complex. Breakpoints in the advisory fee occur when the advisory fee rate is reduced on assets in excess of specified levels. Breakpoints result in a lower advisory fee, than would otherwise be the case in the absence of breakpoints, when the asset levels specified in the breakpoints are exceeded. The Board noted that the fee under each Fund’s management contract fell within the standard structure. The Board also noted that, as of May 31, 2016, the assets of Delaware Corporate Bond Fund exceeded the second breakpoint level and that the assets of Delaware Extended
70 |
Table of Contents
Duration Bond Fund exceeded the first breakpoint level. The Board believed that, given the extent to which economies of scale might be realized by the advisor and its affiliates, the schedule of fees under the Investment Management Agreement for each Fund provides a sharing of benefits with the Fund and its shareholders.
71 |
Table of Contents
Board of trustees | ||||||
Shawn K. Lytle President and Chief Executive Officer Delaware Investments® Family of Funds Philadelphia, PA
Thomas L. Bennett Chairman of the Board Delaware Investments Family of Funds Private Investor Rosemont, PA | Ann D. Borowiec Former Chief Executive Officer Private Wealth Management J.P. Morgan Chase & Co. New York, NY
Joseph W. Chow Former Executive Vice President State Street Corporation Boston, MA | John A. Fry President Drexel University Philadelphia, PA
Lucinda S. Landreth Former Chief Investment Officer Assurant, Inc. New York, NY | Frances A. Sevilla-Sacasa Former Chief Executive Officer Banco Itaú International Miami, FL
Thomas K. Whitford Former Vice Chairman PNC Financial Services Group Pittsburgh, PA
Janet L. Yeomans Former Vice President and Treasurer 3M Company St. Paul, MN | |||
Affiliated officers | ||||||
David F. Connor Senior Vice President, General Counsel, and Secretary Delaware Investments Family of Funds Philadelphia, PA | Daniel V. Geatens Vice President and Treasurer Delaware Investments Family of Funds Philadelphia, PA | Richard Salus Senior Vice President and Chief Financial Officer Delaware Investments Family of Funds Philadelphia, PA |
This semiannual report is for the information of Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund shareholders, but it may be used with prospective investors when preceded or accompanied by the Delaware Investments Fund fact sheet for the most recently completed calendar quarter. These documents are available at delawareinvestments.com/literature.
Delaware Investments is the marketing name of Delaware Management Holdings, Inc. and its subsidiaries.
Each Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. Each Fund’s Forms N-Q, as well as a description of the policies and procedures that the Funds use to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 800 523-1918; and (ii) on the SEC’s website at sec.gov. In addition, a description of the policies and procedures that the Funds use to determine how to vote proxies (if any) relating to portfolio securities and the Schedules of Investments included in the Funds’ most recent Forms N-Q are available without charge on the Funds’ website at delawareinvestments.com/literature. Each Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C.; information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330.
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 delawareinvestments.com/proxy; and (ii) on the SEC’s website at sec.gov.
72 |
Table of Contents
Semiannual report
Fixed income mutual fund
Delaware High-Yield Opportunities Fund
January 31, 2017
Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Fund’s prospectus and its summary prospectus, which may be obtained by visiting delawareinvestments.com/literature or calling 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing.
You can obtain shareholder reports and prospectuses online instead of in the mail.
Visit delawareinvestments.com/edelivery.
Table of Contents
Experience Delaware Investments
Delaware Investments is committed to the pursuit of consistently superior asset management and unparalleled client service. We believe in our investment processes, which seek to deliver consistent results, and in convenient services that help add value for our clients.
If you are interested in learning more about creating an investment plan, contact your financial advisor.
You can learn more about Delaware Investments or obtain a prospectus for Delaware High-Yield Opportunities Fund at delawareinvestments.com/literature.
Manage your investments online
● | 24-hour access to your account information |
● | Obtain share prices |
● | Check your account balance and recent transactions |
● | Request statements or literature |
● | Make purchases and redemptions |
Delaware Management Holdings, Inc. and its subsidiaries (collectively known by the marketing name of Delaware Investments) are wholly owned subsidiaries of Macquarie Group Limited, a global provider of banking, financial, advisory, investment, and funds management services.
Neither Delaware Investments nor its affiliates referred to in this document are authorized deposit-taking institutions for the purpose of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited (MBL), a subsidiary of Macquarie Group Limited and an affiliate of Delaware Investments. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Fund is governed by U.S. laws and regulations.
1 | ||||
3 | ||||
4 | ||||
13 | ||||
15 | ||||
16 | ||||
18 | ||||
26 | ||||
38 | ||||
41 |
Unless otherwise noted, views expressed herein are current as of Jan. 31, 2017, and subject to change for events occurring after such date.
The Fund is not FDIC insured and is not guaranteed. It is possible to lose the principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor. Delaware Investments, a member of Macquarie Group, refers to Delaware Management Holdings, Inc. and its subsidiaries, including the Fund’s distributor, Delaware Distributors, L.P. Macquarie Group refers to Macquarie Group Limited and its subsidiaries and affiliates worldwide.
© 2017 Delaware Management Holdings, Inc.
All third-party marks cited are the property of their respective owners.
Table of Contents
Disclosure of Fund expenses | ||
For the six-month period from August 1, 2016 to January 31, 2017 (Unaudited) |
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period from Aug. 1, 2016 to Jan. 31, 2017.
Actual expenses
The first section of the table shown, “Actual Fund return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The second section of the table shown, “Hypothetical 5% return,” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The Fund’s expenses shown in the table reflect fee waivers in effect. The expenses shown in the table assume reinvestment of all dividends and distributions.
1 |
Table of Contents
Disclosure of Fund expenses | ||
For the six-month period from August 1, 2016 to January 31, 2017 (Unaudited) |
Delaware High-Yield Opportunities Fund
Expense analysis of an investment of $1,000
Beginning Account Value 8/1/16 | Ending Account Value 1/31/17 | Annualized Expense Ratio | Expenses Paid During Period 8/1/16 to 1/31/17* | |||||||||||||
Actual Fund return† | ||||||||||||||||
Class A | $1,000.00 | $1,050.30 | 1.05% | $5.43 | ||||||||||||
Class C | 1,000.00 | 1,046.30 | 1.80% | 9.28 | ||||||||||||
Class R | 1,000.00 | 1,048.90 | 1.30% | 6.71 | ||||||||||||
Institutional Class | 1,000.00 | 1,051.60 | 0.80% | 4.14 | ||||||||||||
Hypothetical 5% return (5% return before expenses) |
| |||||||||||||||
Class A | $1,000.00 | $1,019.91 | 1.05% | $5.35 | ||||||||||||
Class C | 1,000.00 | 1,016.13 | 1.80% | 9.15 | ||||||||||||
Class R | 1,000.00 | 1,018.65 | 1.30% | 6.61 | ||||||||||||
Institutional Class | 1,000.00 | 1,021.17 | 0.80% | 4.08 |
* “Expenses Paid During Period” are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
† Because actual returns reflect only the most recent six-month period, the returns shown may differ significantly from fiscal year returns.
2 |
Table of Contents
Security type / sector allocation | ||
Delaware High-Yield Opportunities Fund | As of January 31, 2017 (Unaudited) |
Sector designations may be different than the sector designations presented in other Fund materials. The sector designations may represent the investment manager’s internal sector classifications.
Security type / sector
| Percentage of net assets
| |||||
Corporate Bonds |
91.47% | |||||
Automotive | 0.86% | |||||
Banking | 3.72% | |||||
Basic Industry | 13.65% | |||||
Capital Goods | 6.62% | |||||
Consumer Cyclical | 5.98% | |||||
Consumer Non-Cyclical | 3.76% | |||||
Energy | 13.29% | |||||
Financial Services | 1.56% | |||||
Healthcare | 6.77% | |||||
Insurance | 1.65% | |||||
Media | 10.09% | |||||
Services | 6.04% | |||||
Technology & Electronics | 5.62% | |||||
Telecommunications | 7.76% | |||||
Transportation | 0.55% | |||||
Utilities | 3.55% | |||||
Loan Agreements | 6.59% | |||||
Common Stock | 0.00% | |||||
Preferred Stock | 1.31% | |||||
Short-Term Investments | 3.11% | |||||
Total Value of Securities | 102.48% | |||||
Liabilities Net of Receivables and Other Assets | (2.48%) | |||||
Total Net Assets | 100.00% |
3 |
Table of Contents
Schedule of investments | ||
Delaware High-Yield Opportunities Fund | January 31, 2017 (Unaudited) |
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds – 91.47% | ||||||||
| ||||||||
Automotive – 0.86% | ||||||||
American Tire Distributors 144A 10.25% 3/1/22 # | 1,835,000 | $ | 1,798,300 | |||||
Gates Global 144A 6.00% 7/15/22 # | 835,000 | 827,694 | ||||||
|
| |||||||
2,625,994 | ||||||||
|
| |||||||
Banking – 3.72% | ||||||||
Ally Financial 5.75% 11/20/25 | 2,120,000 | 2,170,732 | ||||||
Credit Suisse Group 144A 6.25% 12/29/49 #● | 1,580,000 | 1,563,015 | ||||||
Lloyds Banking Group 7.50% 4/30/49 ● | 1,785,000 | 1,856,025 | ||||||
Popular 7.00% 7/1/19 | 2,238,000 | 2,349,900 | ||||||
Royal Bank of Scotland Group 8.625% 12/29/49 ● | 1,655,000 | 1,712,925 | ||||||
UBS Group 6.875% 12/29/49 ● | 1,730,000 | 1,727,336 | ||||||
|
| |||||||
11,379,933 | ||||||||
|
| |||||||
Basic Industry – 13.65% | ||||||||
BMC East 144A 5.50% 10/1/24 # | 1,015,000 | 1,040,071 | ||||||
Boise Cascade 144A 5.625% 9/1/24 # | 1,705,000 | 1,743,363 | ||||||
Builders FirstSource | ||||||||
144A 5.625% 9/1/24 # | 855,000 | 881,719 | ||||||
144A 10.75% 8/15/23 # | 2,105,000 | 2,449,694 | ||||||
Cemex 144A 7.75% 4/16/26 # | 1,780,000 | 1,987,726 | ||||||
Cemex Finance 144A 6.00% 4/1/24 # | 895,000 | 922,700 | ||||||
Cliffs Natural Resources | ||||||||
144A 7.75% 3/31/20 # | 398,000 | 412,177 | ||||||
144A 8.00% 9/30/20 # | 385,000 | 402,325 | ||||||
FMG Resources August 2006 Pty 144A 9.75% 3/1/22 # | 300,000 | 349,500 | ||||||
Freeport-McMoRan | ||||||||
4.55% 11/14/24 | 1,060,000 | 999,050 | ||||||
144A 6.875% 2/15/23 # | 2,660,000 | 2,786,350 | ||||||
Grinding Media 144A 7.375% 12/15/23 # | 440,000 | 465,850 | ||||||
Hexion 2 US Finance 144A 10.375% 2/1/22 # | 835,000 | 855,875 | ||||||
Hudbay Minerals | ||||||||
144A 7.25% 1/15/23 # | 165,000 | 175,313 | ||||||
144A 7.625% 1/15/25 # | 1,290,000 | 1,386,750 | ||||||
Joseph T Ryerson & Son 144A 11.00% 5/15/22 # | 715,000 | 798,583 | ||||||
Koppers 144A 6.00% 2/15/25 # | 1,585,000 | 1,644,437 | ||||||
Kraton Polymers 144A 10.50% 4/15/23 # | 1,495,000 | 1,708,037 | ||||||
Lennar 4.75% 5/30/25 | 830,000 | 840,375 | ||||||
M/I Homes 6.75% 1/15/21 | 1,450,000 | 1,524,414 | ||||||
NCI Building Systems 144A 8.25% 1/15/23 # | 1,465,000 | 1,604,175 | ||||||
New Gold | ||||||||
144A 6.25% 11/15/22 # | 615,000 | 621,150 | ||||||
144A 7.00% 4/15/20 # | 770,000 | 780,106 | ||||||
NOVA Chemicals 144A 5.00% 5/1/25 # | 975,000 | 979,875 |
4 |
Table of Contents
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Basic Industry (continued) | ||||||||
Novelis | ||||||||
144A 5.875% 9/30/26 # | 300,000 | $ | 306,375 | |||||
144A 6.25% 8/15/24 # | 1,700,000 | 1,799,875 | ||||||
PQ 144A 6.75% 11/15/22 # | 1,426,000 | 1,547,210 | ||||||
PulteGroup 5.00% 1/15/27 | 840,000 | 828,450 | ||||||
Steel Dynamics 144A 5.00% 12/15/26 # | 1,630,000 | 1,662,600 | ||||||
Summit Materials | ||||||||
6.125% 7/15/23 | 2,110,000 | 2,189,125 | ||||||
8.50% 4/15/22 | 315,000 | 353,588 | ||||||
Tronox Finance 144A 7.50% 3/15/22 # | 1,580,000 | 1,548,400 | ||||||
US Concrete 6.375% 6/1/24 | 1,715,000 | 1,817,900 | ||||||
Vale Overseas | ||||||||
6.25% 8/10/26 | 1,490,000 | 1,605,475 | ||||||
6.875% 11/10/39 | 690,000 | 713,287 | ||||||
|
| |||||||
41,731,900 | ||||||||
|
| |||||||
Capital Goods – 6.62% | ||||||||
Ardagh Packaging Finance | ||||||||
144A 6.00% 2/15/25 # | 1,400,000 | 1,412,250 | ||||||
144A 7.25% 5/15/24 # | 2,265,000 | 2,434,875 | ||||||
BWAY Holding 144A 9.125% 8/15/21 # | 2,657,000 | 2,869,560 | ||||||
Flex Acquisition 144A 6.875% 1/15/25 # | 670,000 | 682,395 | ||||||
Gardner Denver 144A 6.875% 8/15/21 # | 2,674,000 | 2,680,685 | ||||||
KLX 144A 5.875% 12/1/22 # | 1,685,000 | 1,771,356 | ||||||
Reynolds Group Issuer 8.25% 2/15/21 | 802,827 | 826,603 | ||||||
Signode Industrial Group 144A 6.375% 5/1/22 # | 1,805,000 | 1,841,100 | ||||||
StandardAero Aviation Holdings 144A 10.00% 7/15/23 # | 730,000 | 775,625 | ||||||
TransDigm 144A 6.375% 6/15/26 # | 2,855,000 | 2,826,450 | ||||||
Zekelman Industries 144A 9.875% 6/15/23 # | 1,870,000 | 2,117,775 | ||||||
|
| |||||||
20,238,674 | ||||||||
|
| |||||||
Consumer Cyclical – 5.98% | ||||||||
Boyd Gaming 144A 6.375% 4/1/26 # | 2,690,000 | 2,898,475 | ||||||
Golden Nugget 144A 8.50% 12/1/21 # | 500,000 | 538,750 | ||||||
JC Penney 8.125% 10/1/19 | 1,700,000 | 1,805,187 | ||||||
L Brands 6.875% 11/1/35 | 1,465,000 | 1,435,700 | ||||||
Landry’s 144A 6.75% 10/15/24 # | 1,275,000 | 1,316,437 | ||||||
Live Nation Entertainment 144A 4.875% 11/1/24 # | 1,575,000 | 1,578,937 | ||||||
MGM Resorts International 4.625% 9/1/26 | 1,365,000 | 1,329,169 | ||||||
Mohegan Tribal Gaming Authority 144A 7.875% 10/15/24 # | 2,040,000 | 2,144,550 |
5 |
Table of Contents
Schedule of investments | ||
Delaware High-Yield Opportunities Fund |
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Consumer Cyclical (continued) | ||||||||
Penn National Gaming 144A 5.625% 1/15/27 # | 1,555,000 | $ | 1,560,862 | |||||
Penske Automotive Group 5.50% 5/15/26 | 1,685,000 | 1,680,787 | ||||||
Scientific Games International 10.00% 12/1/22 | 1,940,000 | 1,997,463 | ||||||
|
| |||||||
18,286,317 | ||||||||
|
| |||||||
Consumer Non-Cyclical – 3.76% | ||||||||
Albertsons 144A 6.625% 6/15/24 # | 1,645,000 | 1,718,532 | ||||||
Dean Foods 144A 6.50% 3/15/23 # | 1,285,000 | 1,346,037 | ||||||
JBS USA 144A 5.75% 6/15/25 # | 1,665,000 | 1,710,788 | ||||||
Kronos Acquisition Holdings 144A 9.00% 8/15/23 # | 1,720,000 | 1,745,800 | ||||||
Nature’s Bounty 144A 7.625% 5/15/21 # | 1,655,000 | 1,737,750 | ||||||
Post Holdings | ||||||||
144A 5.00% 8/15/26 # | 795,000 | 770,649 | ||||||
144A 8.00% 7/15/25 # | 695,000 | 785,350 | ||||||
Revlon Consumer Products 6.25% 8/1/24 | 1,630,000 | 1,691,125 | ||||||
|
| |||||||
11,506,031 | ||||||||
|
| |||||||
Energy – 13.29% | ||||||||
Alta Mesa Holdings 144A 7.875% 12/15/24 # | 1,600,000 | 1,728,000 | ||||||
AmeriGas Partners 5.875% 8/20/26 | 2,155,000 | 2,246,587 | ||||||
Antero Resources 5.625% 6/1/23 | 2,402,000 | 2,462,050 | ||||||
Cheniere Corpus Christi Holdings | ||||||||
144A 5.875% 3/31/25 # | 715,000 | 758,794 | ||||||
144A 7.00% 6/30/24 # | 830,000 | 930,637 | ||||||
Chesapeake Energy 144A 8.00% 1/15/25 # | 1,475,000 | 1,522,937 | ||||||
Energy Transfer Equity 5.50% 6/1/27 | 985,000 | 1,024,400 | ||||||
Genesis Energy | ||||||||
6.00% 5/15/23 | 855,000 | 882,787 | ||||||
6.75% 8/1/22 | 1,090,000 | 1,158,125 | ||||||
Gulfport Energy 144A 6.00% 10/15/24 # | 1,680,000 | 1,719,900 | ||||||
Hilcorp Energy I | ||||||||
144A 5.00% 12/1/24 # | 700,000 | 693,000 | ||||||
144A 5.75% 10/1/25 # | 740,000 | 750,175 | ||||||
Holly Energy Partners 144A 6.00% 8/1/24 # | 930,000 | 978,825 | ||||||
Laredo Petroleum 6.25% 3/15/23 | 1,650,000 | 1,734,563 | ||||||
Murphy Oil 6.875% 8/15/24 | 2,220,000 | 2,386,500 | ||||||
Murphy Oil USA 6.00% 8/15/23 | 1,695,000 | 1,783,987 | ||||||
NuStar Logistics 6.75% 2/1/21 | 1,630,000 | 1,772,625 | ||||||
Oasis Petroleum 6.875% 3/15/22 | 885,000 | 911,550 | ||||||
QEP Resources 5.25% 5/1/23 | 2,405,000 | 2,398,988 | ||||||
Sabine Pass Liquefaction 144A 5.00% 3/15/27 # | 650,000 | 683,313 | ||||||
Southwestern Energy 4.95% 1/23/25 | 2,545,000 | 2,564,088 | ||||||
Targa Resources Partners 144A 5.375% 2/1/27 # | 1,685,000 | 1,754,506 |
6 |
Table of Contents
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Energy (continued) | ||||||||
Targa Resources Partners 6.75% 3/15/24 | 1,650,000 | $ | 1,810,875 | |||||
Tesoro Logistics 5.25% 1/15/25 | 1,500,000 | 1,569,375 | ||||||
Transocean 144A 9.00% 7/15/23 # | 1,375,000 | 1,470,391 | ||||||
Transocean Proteus 144A 6.25% 12/1/24 # | 740,000 | 770,525 | ||||||
WildHorse Resource Development 144A 6.875% 2/1/25 # | 1,580,000 | 1,578,025 | ||||||
WPX Energy 7.50% 8/1/20 | 525,000 | 572,250 | ||||||
|
| |||||||
40,617,778 | ||||||||
|
| |||||||
Financial Services – 1.56% | ||||||||
AerCap Global Aviation Trust 144A 6.50% 6/15/45 #● | 1,630,000 | 1,687,050 | ||||||
E*TRADE Financial 5.875% 12/29/49 ● | 1,595,000 | 1,601,221 | ||||||
Park Aerospace Holdings 144A 5.50% 2/15/24 # | 1,435,000 | 1,476,256 | ||||||
|
| |||||||
4,764,527 | ||||||||
|
| |||||||
Healthcare – 6.77% | ||||||||
Air Medical Group Holdings 144A 6.375% 5/15/23 # | 1,900,000 | 1,833,500 | ||||||
DaVita 5.00% 5/1/25 | 1,945,000 | 1,904,875 | ||||||
HCA | ||||||||
5.375% 2/1/25 | 1,815,000 | 1,853,569 | ||||||
5.875% 2/15/26 | 1,020,000 | 1,063,350 | ||||||
7.58% 9/15/25 | 690,000 | 753,825 | ||||||
HealthSouth | ||||||||
5.75% 11/1/24 | 1,750,000 | 1,785,000 | ||||||
5.75% 9/15/25 | 875,000 | 881,563 | ||||||
Hill-Rom Holdings 144A 5.75% 9/1/23 # | 1,730,000 | 1,803,525 | ||||||
IASIS Healthcare 8.375% 5/15/19 | 1,228,000 | 1,181,950 | ||||||
inVentiv Group Holdings 144A 7.50% 10/1/24 # | 900,000 | 947,250 | ||||||
Mallinckrodt International Finance | ||||||||
144A 5.50% 4/15/25 # | 285,000 | 246,881 | ||||||
144A 5.625% 10/15/23 # | 1,030,000 | 917,987 | ||||||
MPH Acquisition Holdings 144A 7.125% 6/1/24 # | 2,425,000 | 2,579,594 | ||||||
Tenet Healthcare 8.125% 4/1/22 | 1,775,000 | 1,801,625 | ||||||
Tennessee Merger Sub 144A 6.375% 2/1/25 # | 1,165,000 | 1,141,700 | ||||||
|
| |||||||
20,696,194 | ||||||||
|
| |||||||
Insurance – 1.65% | ||||||||
HUB International | ||||||||
144A 7.875% 10/1/21 # | 2,545,000 | 2,672,250 | ||||||
144A 9.25% 2/15/21 # | 510,000 | 527,531 | ||||||
USI 144A 7.75% 1/15/21 # | 1,800,000 | 1,839,375 | ||||||
|
| |||||||
5,039,156 | ||||||||
|
| |||||||
Media – 10.09% | ||||||||
Altice Luxembourg 144A 7.75% 5/15/22 # | 1,390,000 | 1,478,613 |
7 |
Table of Contents
Schedule of investments | ||
Delaware High-Yield Opportunities Fund |
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Media (continued) | ||||||||
CCO Holdings | ||||||||
144A 5.50% 5/1/26 # | 25,000 | $ | 26,250 | |||||
144A 5.75% 2/15/26 # | 1,095,000 | 1,163,096 | ||||||
144A 5.875% 5/1/27 # | 1,680,000 | 1,786,579 | ||||||
Cequel Communications Holdings I 144A 7.75% 7/15/25 # | 1,535,000 | 1,705,769 | ||||||
CSC Holdings | ||||||||
144A 5.50% 4/15/27 # | 861,000 | 874,991 | ||||||
144A 10.875% 10/15/25 # | 2,065,000 | 2,462,512 | ||||||
DISH DBS 7.75% 7/1/26 | 1,491,000 | 1,669,458 | ||||||
Gray Television 144A 5.875% 7/15/26 # | 2,450,000 | 2,440,813 | ||||||
Lamar Media 5.75% 2/1/26 | 1,310,000 | 1,393,513 | ||||||
Nexstar Escrow 144A 5.625% 8/1/24 # | 2,270,000 | 2,272,837 | ||||||
Radiate Holdco 144A 6.625% 2/15/25 # | 1,450,000 | 1,450,000 | ||||||
SFR Group 144A 7.375% 5/1/26 # | 3,170,000 | 3,265,100 | ||||||
Sinclair Television Group 144A 5.125% 2/15/27 # | 1,465,000 | 1,387,172 | ||||||
Sirius XM Radio 144A 5.375% 4/15/25 # | 1,600,000 | 1,638,000 | ||||||
Tribune Media 5.875% 7/15/22 | 1,620,000 | 1,644,300 | ||||||
Virgin Media Secured Finance 144A 5.25% 1/15/26 # | 1,995,000 | 2,009,204 | ||||||
VTR Finance 144A 6.875% 1/15/24 # | 2,060,000 | 2,168,150 | ||||||
|
| |||||||
30,836,357 | ||||||||
|
| |||||||
Services – 6.04% | ||||||||
Advanced Disposal Services 144A 5.625% 11/15/24 # | 1,665,000 | 1,698,300 | ||||||
Avis Budget Car Rental 144A 6.375% 4/1/24 # | 1,320,000 | 1,303,500 | ||||||
ESH Hospitality 144A 5.25% 5/1/25 # | 2,290,000 | 2,303,740 | ||||||
GEO Group | ||||||||
5.875% 10/15/24 | 590,000 | 598,113 | ||||||
6.00% 4/15/26 | 1,215,000 | 1,230,187 | ||||||
Herc Rentals | ||||||||
144A 7.50% 6/1/22 # | 455,000 | 493,675 | ||||||
144A 7.75% 6/1/24 # | 1,870,000 | 2,033,625 | ||||||
Iron Mountain U.S. Holdings 144A 5.375% 6/1/26 # | 1,785,000 | 1,726,987 | ||||||
NES Rentals Holdings 144A 7.875% 5/1/18 # | 1,735,000 | 1,756,687 | ||||||
Prime Security Services Borrower 144A 9.25% 5/15/23 # | 3,340,000 | 3,628,075 | ||||||
United Rentals North America 5.50% 5/15/27 | 1,680,000 | 1,696,800 | ||||||
|
| |||||||
18,469,689 | ||||||||
|
| |||||||
Technology & Electronics – 5.62% | ||||||||
CDK Global 5.00% 10/15/24 | 1,515,000 | 1,516,894 | ||||||
CommScope 144A 5.50% 6/15/24 # | 900,000 | 932,625 | ||||||
CommScope Technologies Finance 144A 6.00% 6/15/25 # | 835,000 | 893,972 | ||||||
Diamond 1 Finance 144A 8.10% 7/15/36 # | 1,300,000 | 1,574,143 | ||||||
Entegris 144A 6.00% 4/1/22 # | 1,610,000 | 1,688,487 | ||||||
First Data 144A 7.00% 12/1/23 # | 2,945,000 | 3,129,062 |
8 |
Table of Contents
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Technology & Electronics (continued) | ||||||||
Genesys Telecommunications Laboratories 144A 10.00% 11/30/24 # | 790,000 | $ | 855,175 | |||||
Infor Software Parent 144A PIK 7.125% 5/1/21 #❆ | 1,035,000 | 1,068,637 | ||||||
Infor US 6.50% 5/15/22 | 1,435,000 | 1,479,844 | ||||||
Microsemi 144A 9.125% 4/15/23 # | 955,000 | 1,112,575 | ||||||
Sensata Technologies UK Financing 144A 6.25% 2/15/26 # | 1,545,000 | 1,664,738 | ||||||
Solera 144A 10.50% 3/1/24 # | 1,120,000 | 1,276,800 | ||||||
|
| |||||||
17,192,952 | ||||||||
|
| |||||||
Telecommunications – 7.76% | ||||||||
CenturyLink | ||||||||
6.75% 12/1/23 | 1,935,000 | 1,997,887 | ||||||
7.50% 4/1/24 | 305,000 | 323,681 | ||||||
Cincinnati Bell 144A 7.00% 7/15/24 # | 1,545,000 | 1,635,769 | ||||||
Cogent Communications Finance 144A 5.625% 4/15/21 # | 965,000 | 986,713 | ||||||
Cogent Communications Group 144A 5.375% 3/1/22 # | 835,000 | 871,531 | ||||||
Columbus Cable Barbados 144A 7.375% 3/30/21 # | 1,035,000 | 1,102,275 | ||||||
Communications Sales & Leasing | ||||||||
144A 7.125% 12/15/24 # | 830,000 | 846,600 | ||||||
8.25% 10/15/23 | 1,520,000 | 1,656,800 | ||||||
Frontier Communications 10.50% 9/15/22 | 1,265,000 | 1,327,459 | ||||||
Level 3 Financing 5.375% 5/1/25 | 1,305,000 | 1,335,185 | ||||||
Sprint | ||||||||
7.125% 6/15/24 | 2,290,000 | 2,421,675 | ||||||
7.875% 9/15/23 | 640,000 | 701,184 | ||||||
Sprint Communications 7.00% 8/15/20 | 1,242,000 | 1,332,045 | ||||||
T-Mobile USA | ||||||||
6.375% 3/1/25 | 1,145,000 | 1,240,894 | ||||||
6.50% 1/15/26 | 1,120,000 | 1,235,080 | ||||||
Wind Acquisition Finance 144A 7.375% 4/23/21 # | 2,355,000 | 2,454,852 | ||||||
Zayo Group 6.375% 5/15/25 | 2,120,000 | 2,245,875 | ||||||
|
| |||||||
23,715,505 | ||||||||
|
| |||||||
Transportation – 0.55% | ||||||||
XPO Logistics | ||||||||
144A 6.125% 9/1/23 # | 935,000 | 972,400 | ||||||
144A 6.50% 6/15/22 # | 665,000 | 696,588 | ||||||
|
| |||||||
1,668,988 | ||||||||
|
| |||||||
Utilities – 3.55% | ||||||||
AES | ||||||||
5.50% 4/15/25 | 1,405,000 | 1,429,588 | ||||||
6.00% 5/15/26 | 285,000 | 296,400 |
9 |
Table of Contents
Schedule of investments | ||
Delaware High-Yield Opportunities Fund |
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Utilities (continued) | ||||||||
Calpine | ||||||||
5.50% 2/1/24 | 1,220,000 | $ | 1,195,600 | |||||
5.75% 1/15/25 | 1,625,000 | 1,600,625 | ||||||
Dynegy | ||||||||
7.625% 11/1/24 | 2,230,000 | 2,135,225 | ||||||
144A 8.00% 1/15/25 # | 1,170,000 | 1,129,050 | ||||||
Emera 6.75% 6/15/76 ● | 1,645,000 | 1,801,275 | ||||||
Enel 144A 8.75% 9/24/73 #● | 1,108,000 | 1,265,890 | ||||||
|
| |||||||
10,853,653 | ||||||||
|
| |||||||
Total Corporate Bonds (cost $270,499,923) | 279,623,648 | |||||||
|
| |||||||
| ||||||||
Loan Agreements – 6.59%« | ||||||||
| ||||||||
Accudyne Industries Borrower 1st Lien 4.00% 12/13/19 | 1,344,580 | 1,276,847 | ||||||
Amaya Holdings 1st Lien 5.00% 8/1/21 | 1,588,869 | 1,599,793 | ||||||
Applied Systems 2nd Lien 7.50% 1/23/22 | 3,122,132 | 3,148,802 | ||||||
BJ’s Wholesale Club 2nd Lien | ||||||||
8.50% 3/31/20 | 1,894,931 | 1,904,405 | ||||||
8.50% 1/27/25 | 1,252,000 | 1,273,910 | ||||||
Blue Ribbon 1st Lien 5.00% 11/13/21 | 677,635 | 671,494 | ||||||
CH Hold 2nd Lien 8.25% 2/1/25 | 380,000 | 385,700 | ||||||
Flint Group 2nd Lien 8.25% 9/7/22 | 1,985,000 | 1,975,075 | ||||||
Frank Russell Tranche B 1st Lien 6.75% 6/1/23 | 942,265 | 959,344 | ||||||
Genesys Telecommunications Laboratories Tranche B 1st Lien 6.25% 12/1/23 | 815,000 | 825,060 | ||||||
Immucor Tranche B2 1st Lien 5.00% 8/17/18 | 540 | 526 | ||||||
KIK Custom Products 1st Lien 5.50% 8/26/22 | 513,672 | 519,451 | ||||||
Kronos 2nd Lien 9.284% 11/1/24 | 1,670,000 | 1,727,929 | ||||||
Lightstone Generation | ||||||||
Tranche B 1st Lien 6.50% 1/30/24 | 744,130 | 754,478 | ||||||
Tranche C 1st Lien 6.50% 12/14/23 | 70,870 | 71,855 | ||||||
Moran Foods Tranche B 1st Lien 7.00% 12/5/23 | 830,000 | 827,406 | ||||||
Optiv Security 2nd Lien 8.25% 2/1/25 | 760,000 | 770,133 | ||||||
Solera Tranche B 1st Lien 5.75% 3/3/23 | 610,388 | 617,551 | ||||||
Windstream Services Tranche B6 1st Lien 4.77% 3/30/21 | 831,725 | 842,330 | ||||||
|
| |||||||
Total Loan Agreements (cost $19,649,303) | 20,152,089 | |||||||
|
| |||||||
Number of shares | ||||||||
| ||||||||
Common Stock – 0.00% | ||||||||
| ||||||||
Century Communications =† | 4,250,000 | 0 | ||||||
|
| |||||||
Total Common Stock (cost $128,662) | 0 | |||||||
|
|
10 |
Table of Contents
Number of shares | Value (U.S. $) | |||||||
| ||||||||
Preferred Stock – 1.31% | ||||||||
| ||||||||
Bank of America 6.50% ● | 1,970,000 | $ | 2,115,288 | |||||
GMAC Capital Trust I 6.691% ● | 73,000 | 1,876,100 | ||||||
|
| |||||||
Total Preferred Stock (cost $3,893,800) | 3,991,388 | |||||||
|
| |||||||
Principal amount° | ||||||||
| ||||||||
Short-Term Investments – 3.11% | ||||||||
| ||||||||
Discount Note – 1.15%≠ | ||||||||
Federal Home Loan Bank 0.00% 2/1/17 | 3,528,246 | 3,528,246 | ||||||
|
| |||||||
3,528,246 | ||||||||
|
| |||||||
Repurchase Agreements – 1.96% | ||||||||
Bank of America Merrill Lynch | 2,565,375 | 2,565,375 | ||||||
Bank of Montreal | 2,565,374 | 2,565,374 | ||||||
BNP Paribas | 855,125 | 855,125 | ||||||
|
| |||||||
5,985,874 | ||||||||
|
| |||||||
Total Short-Term Investments (cost $9,514,120) | 9,514,120 | |||||||
|
| |||||||
Total Value of Securities – 102.48% | $ | 313,281,245 | ||||||
|
|
# | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At Jan. 31, 2017, the aggregate value of Rule 144A securities was $174,557,717, which represents 57.10% of the Fund’s net assets. See Note 8 in “Notes to financial statements.” |
❆ | PIK. 100% of the income received was in the form of cash. |
= | Security is being fair valued in accordance with the Fund’s fair valuation policy. At Jan. 31, 2017, the aggregate value of fair valued securities was $0, which represents 0.00% of the Fund’s net assets. See Note 1 in “Notes to financial statements.” |
≠ | The rate shown is the effective yield at the time of purchase. |
« | Loan agreements generally pay interest at rates which are periodically reset by reference to a base lending rate plus a premium. These base lending rates are generally: (i) the prime rate offered by one or more U.S. banks, (ii) the lending rate offered by one or more European banks such as the London |
11 |
Table of Contents
Schedule of investments | ||
Delaware High-Yield Opportunities Fund |
Interbank Offered Rate (LIBOR), and (iii) the certificate of deposit rate. Loan agreements may be subject to restrictions on resale. Stated rate in effect at Jan. 31, 2017. |
° | Principal amount shown is stated in U.S. dollars unless noted that the security is denominated in another currency. |
† | Non-income-producing security. |
● | Variable rate security. Each rate shown is as of Jan. 31, 2017. Interest rates reset periodically. |
PIK – Payment-in-kind
See accompanying notes, which are an integral part of the financial statements.
12 |
Table of Contents
Statement of assets and liabilities | ||
Delaware High-Yield Opportunities Fund | January 31, 2017 (Unaudited) |
Assets: | ||||
Investments, at value1 | $ | 303,767,125 | ||
Short-term investments, at value2 | 9,514,120 | |||
Cash | 8,784 | |||
Receivable for securities sold | 5,582,465 | |||
Interest receivable | 4,653,860 | |||
Receivable for fund shares sold | 260,567 | |||
Other assets3 | 786,990 | |||
|
| |||
Total assets | 324,573,911 | |||
|
| |||
Liabilities: | ||||
Payable for securities purchased | 11,736,448 | |||
Payable for fund shares redeemed | 3,722,092 | |||
Bonds proceeds payable3 | 2,623,299 | |||
Income distribution payable | 379,717 | |||
Investment management fees payable to affiliates | 149,810 | |||
Other accrued expenses | 146,534 | |||
Distribution fees payable to affiliates | 75,680 | |||
Audit and tax fees payable | 21,579 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 5,308 | |||
Accounting and administration expenses payable to affiliates | 1,238 | |||
Trustees’ fees and expenses payable | 920 | |||
Legal fees payable to affiliates | 546 | |||
Reports and statements to shareholders payable to affiliates | 319 | |||
|
| |||
Total liabilities | 18,863,490 | |||
|
| |||
Total Net Assets | $ | 305,710,421 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 376,566,709 | ||
Distributions in excess of net investment income | (440,737 | ) | ||
Accumulated net realized loss on investments | (80,010,988 | ) | ||
Net unrealized appreciation of investments | 9,595,437 | |||
|
| |||
Total Net Assets | $ | 305,710,421 | ||
|
|
13 |
Table of Contents
Statement of assets and liabilities | ||
Delaware High-Yield Opportunities Fund |
Net Asset Value | ||||
Class A: | ||||
Net assets | $ | 165,805,866 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 43,434,819 | |||
Net asset value per share | $ | 3.82 | ||
Sales charge | 4.50 | % | ||
Offering price per share, equal to net asset value per share / (1 – sales charge) | $ | 4.00 | ||
Class C: | ||||
Net assets | $ | 43,437,857 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 11,364,460 | |||
Net asset value per share | $ | 3.82 | ||
Class R: | ||||
Net assets | $ | 7,981,790 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 2,084,277 | |||
Net asset value per share | $ | 3.83 | ||
Institutional Class: | ||||
Net assets | $ | 88,484,908 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 23,188,556 | |||
Net asset value per share | $ | 3.82 | ||
1Investments, at cost | $ | 294,171,688 | ||
2Short-term investments, at cost | 9,514,120 | |||
3See Note 10 in “Notes to financial statements.” |
See accompanying notes, which are an integral part of the financial statements.
14 |
Table of Contents
Statement of operations | ||
Delaware High-Yield Opportunities Fund | Six months ended January 31, 2017 (Unaudited) |
Investment Income: | ||||
Interest | $ | 10,776,162 | ||
Dividends | 70,704 | |||
|
| |||
10,846,866 | ||||
|
| |||
Expenses: | ||||
Management fees | 1,065,902 | |||
Distribution expenses — Class A | 212,953 | |||
Distribution expenses — Class C | 227,289 | |||
Distribution expenses — Class R | 20,968 | |||
Dividend disbursing and transfer agent fees and expenses | 211,252 | |||
Accounting and administration expenses | 51,373 | |||
Registration fees | 40,404 | |||
Reports and statements to shareholders | 36,830 | |||
Audit and tax fees | 23,176 | |||
Legal fees | 22,214 | |||
Custodian fees | 10,188 | |||
Trustees’ fees and expenses | 7,811 | |||
Other | 15,304 | |||
|
| |||
1,945,664 | ||||
Less expenses waived | (171,272 | ) | ||
Less expense paid indirectly | (423 | ) | ||
|
| |||
Total operating expenses | 1,773,969 | |||
|
| |||
Net Investment Income | 9,072,897 | |||
|
| |||
Net Realized and Unrealized Gain: | ||||
Net realized gain on investments | 3,853,046 | |||
Net change in unrealized appreciation (depreciation) of investments | 2,949,645 | |||
|
| |||
Net Realized and Unrealized Gain | 6,802,691 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 15,875,588 | ||
|
|
See accompanying notes, which are an integral part of the financial statements.
15 |
Table of Contents
Statements of changes in net assets | ||
Delaware High-Yield Opportunities Fund |
Six months ended 1/31/17 | Year ended 7/31/16 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 9,072,897 | $ | 22,008,316 | ||||
Net realized gain (loss) | 3,853,046 | (50,513,603 | ) | |||||
Net change in unrealized appreciation (depreciation) | 2,949,645 | 22,155,569 | ||||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | 15,875,588 | (6,349,718 | ) | |||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Class A | (4,753,269 | ) | (11,219,277 | ) | ||||
Class C | (1,089,294 | ) | (2,657,517 | ) | ||||
Class R | (221,182 | ) | (548,084 | ) | ||||
Institutional Class | (2,966,951 | ) | (7,022,928 | ) | ||||
Return of capital: | ||||||||
Class A | — | (150,785 | ) | |||||
Class C | — | (40,584 | ) | |||||
Class R | — | (7,580 | ) | |||||
Institutional Class | — | (89,798 | ) | |||||
|
|
|
| |||||
(9,030,696 | ) | (21,736,553 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Class A | 7,270,632 | 11,038,316 | ||||||
Class C | 1,433,147 | 4,297,791 | ||||||
Class R | 927,261 | 2,431,583 | ||||||
Institutional Class | 12,603,996 | 24,823,227 |
16 |
Table of Contents
Six months ended 1/31/17 (Unaudited) | Year ended 7/31/16 | |||||||
Capital Share Transactions (continued): | ||||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | $ | 4,091,172 | $ | 9,902,692 | ||||
Class C | 996,299 | 2,457,184 | ||||||
Class R | 221,182 | 550,479 | ||||||
Institutional Class | 2,897,980 | 6,872,798 | ||||||
|
|
|
| |||||
30,441,669 | 62,374,070 | |||||||
|
|
|
| |||||
Cost of shares redeemed: | ||||||||
Class A | (22,990,865 | ) | (71,228,482 | ) | ||||
Class C | (6,784,666 | ) | (22,321,850 | ) | ||||
Class R | (2,107,803 | ) | (6,471,729 | ) | ||||
Institutional Class | (32,604,674 | ) | (66,099,003 | ) | ||||
|
|
|
| |||||
(64,488,008 | ) | (166,121,064 | ) | |||||
|
|
|
| |||||
Decrease in net assets derived from capital share transactions | (34,046,339 | ) | (103,746,994 | ) | ||||
|
|
|
| |||||
Net Decrease in Net Assets | (27,201,447 | ) | (131,833,265 | ) | ||||
Net Assets: | ||||||||
Beginning of period | 332,911,868 | 464,745,133 | ||||||
|
|
|
| |||||
End of period | $ | 305,710,421 | $ | 332,911,868 | ||||
|
|
|
| |||||
Distributions in excess of net investment income | $ | (440,737 | ) | $ | (482,938 | ) | ||
|
|
|
|
See accompanying notes, which are an integral part of the financial statements.
17 |
Table of Contents
Delaware High-Yield Opportunities Fund Class A
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Return of capital |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
|
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding have been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
18 |
Table of Contents
Six months ended | ||||||||||||||||||||||||||||||||
1/31/171 (Unaudited) | Year ended | |||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
7/31/16 | 7/31/15 | 7/31/14 | 7/31/13 | 7/31/12 | ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
$3.740 | $ | 3.950 | $ | 4.380 | $ | 4.270 | $ | 4.110 | $ | 4.200 | ||||||||||||||||||||||
0.106 | 0.218 | 0.238 | 0.238 | 0.271 | 0.308 | |||||||||||||||||||||||||||
0.080 | (0.213 | ) | (0.373 | ) | 0.121 | 0.173 | (0.090 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
0.186 | 0.005 | (0.135 | ) | 0.359 | 0.444 | 0.218 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
(0.106) | (0.212 | ) | (0.237 | ) | (0.249 | ) | (0.284 | ) | (0.308 | ) | ||||||||||||||||||||||
— | (0.003 | ) | — | — | — | — | ||||||||||||||||||||||||||
— | — | (0.058 | ) | — | — | — | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
(0.106) | (0.215 | ) | (0.295 | ) | (0.249 | ) | (0.284 | ) | (0.308 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
$3.820 | $ | 3.740 | $ | 3.950 | $ | 4.380 | $ | 4.270 | $ | 4.110 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
5.03% | 0.41% | (3.15% | ) | 8.59% | 11.02% | 5.73% | ||||||||||||||||||||||||||
$165,806 | $ | 173,815 | $ | 238,290 | $ | 327,088 | $ | 328,534 | $ | 311,859 | ||||||||||||||||||||||
1.05% | 1.06% | 1.07% | 1.07% | 1.11% | 1.11% | |||||||||||||||||||||||||||
1.15% | 1.15% | 1.14% | 1.12% | 1.16% | 1.18% | |||||||||||||||||||||||||||
5.56% | 5.98% | 5.78% | 5.46% | 6.33% | 7.71% | |||||||||||||||||||||||||||
5.46% | 5.89% | 5.71% | 5.41% | 6.28% | 7.64% | |||||||||||||||||||||||||||
47% | 109% | 86% | 105% | 88% | 61% | |||||||||||||||||||||||||||
|
19 |
Table of Contents
Financial highlights
Delaware High-Yield Opportunities Fund Class C
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Return of capital |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
|
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding have been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
20 |
Table of Contents
Six months ended | ||||||||||||||||||||||||||||||||
1/31/171 (Unaudited) | Year ended | |||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
7/31/16 | 7/31/15 | 7/31/14 | 7/31/13 | 7/31/12 | ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
$3.740 | $ | 3.960 | $ | 4.390 | $ | 4.280 | $ | 4.120 | $ | 4.200 | ||||||||||||||||||||||
0.092 | 0.190 | 0.207 | 0.206 | 0.241 | 0.280 | |||||||||||||||||||||||||||
0.079 | (0.223 | ) | (0.373 | ) | 0.121 | 0.173 | (0.080 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
0.171 | (0.033 | ) | (0.166 | ) | 0.327 | 0.414 | 0.200 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
(0.091) | (0.184 | ) | (0.206 | ) | (0.217 | ) | (0.254 | ) | (0.280 | ) | ||||||||||||||||||||||
— | (0.003 | ) | — | — | — | — | ||||||||||||||||||||||||||
— | — | (0.058 | ) | — | — | — | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
(0.091) | (0.187 | ) | (0.264 | ) | (0.217 | ) | (0.254 | ) | (0.280 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
$3.820 | $ | 3.740 | $ | 3.960 | $ | 4.390 | $ | 4.280 | $ | 4.120 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
4.63% | (0.59% | ) | (3.85% | ) | 7.79% | 10.23% | 5.24% | |||||||||||||||||||||||||
$43,438 | $ | 46,842 | $ | 66,354 | $ | 89,127 | $ | 85,574 | $ | 65,771 | ||||||||||||||||||||||
1.80% | 1.81% | 1.82% | 1.81% | 1.81% | 1.81% | |||||||||||||||||||||||||||
1.90% | 1.90% | 1.89% | 1.86% | 1.86% | 1.88% | |||||||||||||||||||||||||||
4.81% | 5.23% | 5.03% | 4.72% | 5.63% | 7.01% | |||||||||||||||||||||||||||
4.71% | 5.14% | 4.96% | 4.67% | 5.58% | 6.94% | |||||||||||||||||||||||||||
47% | 109% | 86% | 105% | 88% | 61% | |||||||||||||||||||||||||||
|
21 |
Table of Contents
Financial highlights
Delaware High-Yield Opportunities Fund Class R
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Return of capital |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
|
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding have been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflects waivers by the manager and/or distributor. Performance would have been lower had the waivers not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
22 |
Table of Contents
Six months ended | ||||||||||||||||||||||||||||||||
1/31/171 (Unaudited) | Year ended | |||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
7/31/16 | 7/31/15 | 7/31/14 | 7/31/13 | 7/31/12 | ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
$3.750 | $ | 3.970 | $ | 4.390 | $ | 4.290 | $ | 4.120 | $ | 4.210 | ||||||||||||||||||||||
0.102 | 0.209 | 0.229 | 0.228 | 0.263 | 0.301 | |||||||||||||||||||||||||||
0.079 | (0.223 | ) | (0.363 | ) | 0.111 | 0.183 | (0.090 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
0.181 | (0.014 | ) | (0.134 | ) | 0.339 | 0.446 | 0.211 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
(0.101) | (0.203 | ) | (0.228 | ) | (0.239 | ) | (0.276 | ) | (0.301 | ) | ||||||||||||||||||||||
— | (0.003 | ) | — | — | — | — | ||||||||||||||||||||||||||
— | — | (0.058 | ) | — | — | — | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
(0.101) | (0.206 | ) | (0.286 | ) | (0.239 | ) | (0.276 | ) | (0.301 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
$3.830 | $ | 3.750 | $ | 3.970 | $ | 4.390 | $ | 4.290 | $ | 4.120 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
4.89% | (0.09% | ) | (3.13% | ) | 8.08% | 11.05% | 5.51% | |||||||||||||||||||||||||
$7,981 | $ | 8,766 | $ | 13,032 | $ | 16,580 | $ | 16,506 | $ | 14,637 | ||||||||||||||||||||||
1.30% | 1.31% | 1.32% | 1.31% | 1.31% | 1.31% | |||||||||||||||||||||||||||
1.40% | 1.40% | 1.39% | 1.38% | 1.46% | 1.48% | |||||||||||||||||||||||||||
5.31% | 5.73% | 5.53% | 5.22% | 6.13% | 7.51% | |||||||||||||||||||||||||||
5.21% | 5.64% | 5.46% | 5.15% | 5.98% | 7.34% | |||||||||||||||||||||||||||
47% | 109% | 86% | 105% | 88% | 61% | |||||||||||||||||||||||||||
|
23 |
Table of Contents
Financial highlights
Delaware High-Yield Opportunities Fund Institutional Class
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Return of capital |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
|
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding have been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
24 |
Table of Contents
Six months ended | ||||||||||||||||||||||||||||||||
1/31/171 (Unaudited) | Year ended | |||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
7/31/16 | 7/31/15 | 7/31/14 | 7/31/13 | 7/31/12 | ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
$3.740 | $ | 3.950 | $ | 4.380 | $ | 4.270 | $ | 4.110 | $ | 4.200 | ||||||||||||||||||||||
0.111 | 0.227 | 0.249 | 0.249 | 0.284 | 0.320 | |||||||||||||||||||||||||||
0.079 | (0.213 | ) | (0.373 | ) | 0.121 | 0.173 | (0.090 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
0.190 | 0.014 | (0.124 | ) | 0.370 | 0.457 | 0.230 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
(0.110) | (0.221 | ) | (0.248 | ) | (0.260 | ) | (0.297 | ) | (0.320 | ) | ||||||||||||||||||||||
— | (0.003 | ) | — | — | — | — | ||||||||||||||||||||||||||
— | — | (0.058 | ) | — | — | — | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
(0.110) | (0.224 | ) | (0.306 | ) | (0.260 | ) | (0.297 | ) | (0.320 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
$3.820 | $ | 3.740 | $ | 3.950 | $ | 4.380 | $ | 4.270 | $ | 4.110 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
5.16% | 0.66% | (2.91% | ) | 8.87% | 11.34% | 6.03% | ||||||||||||||||||||||||||
$88,485 | $ | 103,489 | $ | 147,069 | $ | 232,971 | $ | 200,282 | $ | 185,843 | ||||||||||||||||||||||
0.80% | 0.81% | 0.82% | 0.81% | �� | 0.81% | 0.81% | ||||||||||||||||||||||||||
0.90% | 0.90% | 0.89% | 0.86% | 0.86% | 0.88% | |||||||||||||||||||||||||||
5.81% | 6.23% | 6.03% | 5.72% | 6.63% | 8.01% | |||||||||||||||||||||||||||
5.71% | 6.14% | 5.96% | 5.67% | 6.58% | 7.94% | |||||||||||||||||||||||||||
47% | 109% | 86% | 105% | 88% | 61% | |||||||||||||||||||||||||||
|
25 |
Table of Contents
Notes to financial statements | ||
Delaware High-Yield Opportunities Fund | January 31, 2017 (Unaudited) |
Delaware Group® Income Funds (Trust) is organized as a Delaware statutory trust and offers four series: Delaware Corporate Bond Fund, Delaware Floating Rate Fund (formerly, Delaware Diversified Floating Rate Fund), Delaware Extended Duration Bond Fund, and Delaware High-Yield Opportunities Fund. These financial statements and the related notes pertain to Delaware High-Yield Opportunities Fund (Fund). The Trust is an open-end investment company. The Fund is considered diversified under the Investment Company Act of 1940 (1940 Act), as amended, and offers Class A, Class C, Class R, and Institutional Class shares. Class A shares are sold with a maximum front-end sales charge of 4.50%. Class A share purchases of $1,000,000 or more will incur a contingent deferred sales charge (CDSC) of 1.00% if redeemed during the first year, and 0.50% during the second year, provided that Delaware Distributors, L.P. (DDLP) paid a financial advisor a commission on the purchase of those shares. Class C shares are sold with a CDSC of 1.00%, if redeemed during the first 12 months. Class R and Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors.
The investment objective of the Fund is to seek total return and, as a secondary objective, high current income.
1. Significant Accounting Policies
The following accounting policies are in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and are consistently followed by the Fund.
Security Valuation – Equity securities, except those traded on the Nasdaq Stock Market LLC (Nasdaq), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange on the valuation date. Equity 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, the mean between the bid and ask prices will be used, which approximates fair value. U.S. government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. Other debt securities are valued based upon valuations provided by an independent pricing service or broker 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. 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. Generally, other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Trust’s Board of Trustees (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.
Federal Income Taxes – No provision for federal income taxes has been made as the Fund intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Fund evaluates tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year. Management has analyzed
26 |
Table of Contents
the Fund’s tax positions taken for all open federal income tax years (July 31, 2013–July 31, 2016), and has concluded that no provision for federal income tax is required in the Fund’s financial statements.
Class Accounting – Investment income and common expenses are allocated to the various classes of the Fund on the basis of “settled shares” of each class in relation to the net assets of the Fund. Realized and unrealized gain (loss) on investments are allocated to the various classes of the Fund on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class.
Repurchase Agreements – The Fund may purchase certain U.S. government securities subject to the counterparty’s agreement to repurchase them at an agreed upon date and price. The counterparty will be required on a daily basis to maintain the value of the collateral subject to the agreement at not less than the repurchase price (including accrued interest). The agreements are conditioned upon the collateral being deposited under the Federal Reserve book-entry system with the Fund’s custodian or a third party subcustodian. In the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings. All open repurchase agreements as of the date of this report were entered into on Jan. 31, 2017 and matured on the next business day.
Use of Estimates – The Fund is an investment company, whose financial statements are prepared in conformity with U.S. GAAP. Therefore, the Fund follows the accounting and reporting guidelines for investment companies. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material.
Other – Expenses directly attributable to the Fund are charged directly to the Fund. Other expenses common to various funds within the Delaware Investments® Family of Funds are generally allocated among such funds on the basis of average net assets. Management fees and certain other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Discounts and premiums on debt securities are accreted or amortized to interest income, respectively, over the lives of the respective securities using the effective interest method. The Fund declares dividends daily from net investment income and pays the dividends monthly and declares and pays distributions from net realized gain on investments, if any, annually. The Fund may distribute more frequently, if necessary for tax purposes. Dividends and distributions, if any, are recorded on the ex-dividend date.
The Fund may receive earnings credits from its custodian when positive cash balances are maintained, which may be used to offset custody fees. There were no such earnings credits for the six months ended Jan. 31, 2017.
The Fund receives earnings credits from its transfer agent when positive cash balances are maintained, which may be used to offset transfer agent fees. If the amount earned is greater than $1.00, the expense paid under this arrangement is included on the “Statement of operations” under “Dividend disbursing
27 |
Table of Contents
Notes to financial statements | ||
Delaware High-Yield Opportunities Fund |
1. Significant Accounting Policies (continued)
and transfer agent fees and expenses” with the corresponding expense offset shown under “Less expense paid indirectly.” For the six months ended Jan. 31, 2017, the Fund earned $423 under this agreement.
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates
In accordance with the terms of its investment management agreement, the Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee which is calculated daily at the rate of 0.65% on the first $500 million of average daily net assets of the Fund, 0.60% on the next $500 million, 0.55% on the next $1.5 billion, and 0.50% on average daily net assets in excess of $2.5 billion.
DMC has contractually agreed to waive all or a portion, if any, of its investment advisory fee and/or pay/reimburse the Fund to the extent necessary to ensure total annual operating expenses (excluding any distribution and service (12b-1) fees, acquired fund fees and expenses, taxes, interest, short sale and dividend interest expenses, brokerage fees, certain insurance costs, and nonroutine expenses or costs, including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations (collectively, nonroutine expenses)), from exceeding 0.80% of the Fund’s average daily net assets from Aug. 1, 2016 through Jan. 31, 2017.* These waivers and reimbursements may only be terminated by agreement of DMC and the Fund.
Delaware Investments Fund Services Company (DIFSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Fund. For these services, DIFSC’s fees are calculated based on the aggregate daily net assets of the Delaware Investments® Family of Funds at the following annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DIFSC under the service agreement described above are allocated among all funds in the Delaware Investments Family of Funds on a relative net asset value (NAV) basis. For the six months ended Jan. 31, 2017, the Fund was charged $7,696 for these services. This amount is included on the “Statement of operations” under “Accounting and administration expenses.”
DIFSC is also the transfer agent and dividend disbursing agent of the Fund. For these services, DIFSC’s fees are calculated based on the aggregate daily net assets of the retail funds within the Delaware Investments Family of Funds at the following annual rate: 0.025% of the first $20 billion; 0.020% of the next $5 billion; 0.015% of the next $5 billion; and 0.013% on average daily net assets in excess of $30 billion. The fees payable to DIFSC under the service agreement described above are allocated among all retail funds in the Delaware Investments Family of Funds on a relative NAV basis. This amount is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.” For the six months ended Jan. 31, 2017, the Fund was charged $33,069 for these services. Pursuant to a sub-transfer agency agreement between DIFSC and BNY Mellon Investment Servicing (US) Inc. (BNYMIS), BNYMIS provides certain sub-transfer agency services to the Fund. Sub-transfer agency fees are paid by the Fund and are also included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.”
28 |
Table of Contents
Pursuant to a distribution agreement and distribution plan, the Fund pays DDLP, the distributor and an affiliate of DMC, annual 12b-1 fee of 0.25% of the average daily net assets of the Class A shares, 1.00% of the average daily net assets of the Class C shares, and 0.50% of the average daily net assets of the Class R shares. The Board has adopted a formula for calculating 12b-1 fees for the Fund’s Class A shares that went into effect on June 1, 1992. The Fund’s Class A shares are currently subject to a blended 12b-1 fees equal to the sum of: (i) 0.10% of the average daily net assets representing shares that were acquired prior to June 1, 1992, and (ii) 0.25% of the average daily net assets representing shares that were acquired on or after June 1, 1992. All Class A shareholders currently bear 12b-1 fees at the same rate, the blended rate based on the formula described above. This method of calculating Class A 12b-1 fees may be discontinued at the sole discretion of the Board. Institutional Class shares pay no 12b-1 fees.
As provided in the investment management agreement, the Fund bears a portion of the cost of certain resources shared with DMC, including the cost of internal personnel of DMC and/or its affiliates that provide legal, tax, and regulatory reporting services to the Fund. For the six months ended Jan. 31, 2017, the Fund was charged $3,304 for internal legal, tax, and regulatory services provided by DMC and/or its affiliates’ employees. This amount is included on the “Statement of operations” under “Legal fees.”
For the six months ended Jan. 31, 2017, DDLP earned $6,525 for commissions on sales of the Fund’s Class A shares. For the six months ended Jan. 31, 2017, DDLP received gross CDSC commissions of $144 and $397 on redemptions of the Fund’s Class A and Class C shares, respectively, and these commissions were entirely used to offset upfront commissions previously paid by DDLP to broker/ dealers on sales of those shares.
Trustees’ fees include expenses accrued by the Fund for each Trustee’s retainer and meeting fees. Certain officers of DMC, DIFSC, and DDLP are officers and/or Trustees of the Trust. These officers and Trustees are paid no compensation by the Fund.
Cross trades for the six months ended Jan. 31, 2017, were executed by the Fund pursuant to procedures adopted by the Board designed to ensure compliance with Rule 17a-7 under the 1940 Act. Cross trading is the buying or selling of portfolio securities between funds of investment companies, or between a fund of an investment company and another entity, that are or could be considered affiliates by virtue of having a common investment advisor (or affiliated investment advisors), common directors/trustees and/or common officers. At its regularly scheduled meetings, the Board reviews such transactions for compliance with the procedures adopted by the Board. Pursuant to these procedures, for the six months ended Jan. 31, 2017, the Fund engaged in securities sales of $5,851,691, which resulted in net realized gains of $242,738. The Fund did not engage in securities purchases during the six months ended Jan. 31, 2017.
* The aggregate contractual waiver period covering this report is from Nov. 27, 2015 through Nov. 28, 2017.
29 |
Table of Contents
Notes to financial statements | ||
Delaware High-Yield Opportunities Fund |
3. Investments
For the six months ended Jan. 31, 2017, the Fund made purchases and sales of investment securities other than short-term investments as follows:
Purchases | $ | 147,335,732 | ||
Sales | 176,588,770 |
At Jan. 31, 2017, the cost of investments for federal income tax purposes has been estimated since final tax characteristics cannot be determined until fiscal year end. At Jan. 31, 2017, the cost and unrealized appreciation (depreciation) of investments were as follows:
Cost of investments | $ | 303,415,324 | ||
|
| |||
Aggregate unrealized appreciation of investments | $ | 10,761,124 | ||
Aggregate unrealized depreciation of investments | (895,203 | ) | ||
|
| |||
Net unrealized appreciation of investments | $ | 9,865,921 | ||
|
|
Under the Regulated Investment Company Modernization Act of 2010 (Act), net capital losses recognized for tax years beginning after Dec. 22, 2010 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses
The Fund has capital loss carryovers available to offset future realized capital gains, through the indicated expiration dates as follows:
Pre-enactment capital loss | No expiration | |||||
expiration date | Post-enactment capital loss character | |||||
2017 | Short-term | Long-term | Total capital loss carryforward | |||
$12,611,587 | $32,537,332 | $37,036,303 | $82,185,222 |
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. A three-level hierarchy for fair value measurements has been established based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available under the circumstances. The Fund’s investment in its entirety is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-level hierarchy of inputs is summarized below.
Level 1 – | Inputs are quoted prices in active markets for identical investments. (Examples: equity securities, open-end investment companies, futures contracts, exchange-traded options contracts) |
30 |
Table of Contents
Level 2 – | Other observable inputs, including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, and default rates), or other market-corroborated inputs. (Examples: debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities) | |
Level 3 – | Significant unobservable inputs, including the Fund’s own assumptions used to determine the fair value of investments. (Examples: broker-quoted securities, fair valued securities) |
Level 3 investments are valued using significant unobservable inputs. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Valuations may also be based upon current market prices of securities that are comparable in coupon, rating, maturity, and industry. The derived value of a Level 3 investment may not represent the value which is received upon disposition and this could impact the results of operations.
The following table summarizes the valuation of the Fund’s investments by fair value hierarchy levels as of Jan. 31, 2017:
Securities | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Corporate Debt | $ | — | $ | 279,623,648 | $ | — | $ | 279,623,648 | ||||||||||||
Loan Agreements | — | 20,152,089 | — | 20,152,089 | ||||||||||||||||
Common Stock | — | — | — | — | ||||||||||||||||
Preferred Stock1 | 1,876,100 | 2,115,288 | — | 3,991,388 | ||||||||||||||||
Short-Term Investments | — | 9,514,120 | — | 9,514,120 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total Value of Securities | $ | 1,876,100 | $ | 311,405,145 | $ | — | $ | 313,281,245 | ||||||||||||
|
|
|
|
|
|
|
|
The security that has been valued at zero on the “Schedule of investments” is considered to be a Level 3 investment in the table.
1Security type is valued across multiple levels. Level 1 investments represent exchange-traded investments, and Level 2 investments represent investments with observable input or matrix-priced investments. The amounts attributed to Level 1 investments, and Level 2 investments represent the following percentages of the total market value of this security type:
Level 1 | Level 2 | Total | ||||||||||||||||||
Preferred Stock | 47.00 | % | 53.00 | % | 100.00 | % |
During the six months ended Jan. 31, 2017, there were no transfers between Level 1 investments, Level 2 investments, or Level 3 investments that had a significant impact to the Fund. The Fund’s policy is to recognize transfers between levels at the beginning of the reporting period.
A reconciliation of Level 3 investments is presented when the Fund has a significant amount of Level 3 investments at the beginning, interim, or end of the period in relation to net assets. Management has determined not to provide a reconciliation of Level 3 investments as they were not considered significant
31 |
Table of Contents
Notes to financial statements | ||
Delaware High-Yield Opportunities Fund |
3. Investments (continued)
to the Fund’s net assets at the beginning, interim, or end of the period. Management has determined not to provide additional disclosure on Level 3 inputs since the Level 3 investments are not considered significant to the Fund’s net assets at the end of the period.
4. Capital Shares
Transactions in capital shares were as follows:
Six months ended | Year ended | |||||||||||
1/31/17
| 7/31/16
| |||||||||||
Shares sold: | ||||||||||||
Class A | 1,930,203 | 3,019,815 | ||||||||||
Class C | 378,383 | 1,192,571 | ||||||||||
Class R | 244,406 | 667,983 | ||||||||||
Institutional Class | 3,340,764 | 6,793,889 | ||||||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||||||
Class A | 1,082,470 | 2,710,084 | ||||||||||
Class C | 263,510 | 671,195 | ||||||||||
Class R | 58,454 | 149,986 | ||||||||||
Institutional Class | 766,852 | 1,880,382 | ||||||||||
|
|
|
| |||||||||
8,065,042 | 17,085,905 | |||||||||||
|
|
|
| |||||||||
Shares redeemed: | ||||||||||||
Class A | (6,089,134 | ) | (19,499,391 | ) | ||||||||
Class C | (1,795,959 | ) | (6,109,682 | ) | ||||||||
Class R | (556,898 | ) | (1,765,897 | ) | ||||||||
Institutional Class | (8,618,245 | ) | (18,185,078 | ) | ||||||||
|
|
|
| |||||||||
(17,060,236 | ) | (45,560,048 | ) | |||||||||
|
|
|
| |||||||||
Net decrease | (8,995,194 | ) | (28,474,143 | ) | ||||||||
|
|
|
|
Certain shareholders may exchange shares of one class for shares of another class in the same Fund. For the six months ended Jan. 31, 2017 and the year ended July 31, 2016, the Fund had the following exchange transactions. These exchange transactions are included as subscriptions and redemptions in the table above and the “Statements of changes in net assets.”
Exchange Redemptions | Exchange | |||||||||||||||||||||||||||
Institutional | ||||||||||||||||||||||||||||
Class A | Class C | Class | ||||||||||||||||||||||||||
Shares | Shares | Shares | Value | |||||||||||||||||||||||||
Six months ended 1/31/17 | 4,485 | 10,218 | 14,766 | $ | 55,753 | |||||||||||||||||||||||
Year ended 7/31/16 | 108,834 | 21,495 | 130,773 | 476,062 |
32 |
Table of Contents
5. Line of Credit
The Fund, along with certain other funds in the Delaware Investments® Family of Funds (Participants), was a participant in a $155,000,000 revolving line of credit intended to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, the Participants were charged an annual commitment fee of 0.10%, which was allocated across the Participants on the basis of relative net assets of each Participant’s allocation of the entire facility. The Participants were permitted to borrow up to a maximum of one third of their net assets under the agreement. Each Participant was individually, and not jointly, liable for its particular advances, if any, under the line of credit. The line of credit under the agreement expired on Nov. 7, 2016.
On Nov. 7, 2016, the Fund, along with the other Participants, entered into an amendment to the agreement for a $155,000,000 revolving line of credit. The line of credit is to be used as described above and operates in substantially the same manner as the original agreement, with the exception of the annual commitment fee. Under the amendment to the agreement, the Participants are charged an annual commitment fee of 0.15%, which is allocated across the Participants on the basis of relative net assets of each Participant’s allocation of the entire facility. The line of credit available under the agreement expires on Nov. 6, 2017.
The Fund had no amounts outstanding as of Jan. 31, 2017, or at any time during the period then ended.
6. Offsetting
In December 2011, the Financial Accounting Standards Board (FASB) issued guidance that expanded disclosure requirements on the offsetting of certain assets and liabilities. The disclosures are required for investments and derivative financial instruments subject to master netting or similar agreements which are eligible for offset on the “Statement of assets and liabilities” and require an entity to disclose both gross and net information about such investments and transactions in the financial statements. In January 2013, the FASB issued guidance that clarified which investments and transactions are subject to the offsetting disclosure requirements. The scope of the disclosure requirements for offsetting is limited to derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing.
In order to better define its contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund entered into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement) or a similar agreement with certain of its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between the Fund and a counterparty that governs over-the-counter (OTC) derivatives and foreign exchange contracts and typically contains, among other things, collateral posting items and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default (close-out), including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency, or other events.
33 |
Table of Contents
Notes to financial statements | ||
Delaware High-Yield Opportunities Fund |
6. Offsetting (continued)
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements on the “Statement of assets and liabilities.”
At Jan. 31, 2017, the Fund had the following assets and liabilities subject to offsetting provisions:
Master Repurchase Agreements
Fair Value of | Cash | Net | |||||||||||||||||||||||
Repurchase | Non-Cash | Collateral | Collateral | ||||||||||||||||||||||
Counterparty | Agreements | Collateral Received(a) | Received | Received | Net Exposure(b) | ||||||||||||||||||||
Bank of America Merrill Lynch | $ | 2,565,375 | $ | (2,565,375 | ) | $ | — | $ | (2,565,375 | ) | $ | — | |||||||||||||
Bank of Montreal | 2,565,374 | (2,565,374 | ) | — | (2,565,374 | ) | — | ||||||||||||||||||
BNP Paribas | 855,125 | (855,125 | ) | — | (855,125 | ) | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total | $ | 5,985,874 | $ | (5,985,874 | ) | $ | — | $ | (5,985,874 | ) | $ | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
(a)The value of the related collateral received exceeded the value of the repurchase agreements as of Jan. 31, 2017.
(b)Net exposure represents the receivable (payable) that would be due from (to) the counterparty in the event of default.
7. Securities Lending
The Fund, along with other funds in the Delaware Investments® Family of 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: (1) 102% with respect to U.S. securities and foreign securities that are denominated and payable in U.S. dollars; and (2) 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 that 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.
Cash collateral received is generally invested in government securities; certain obligations issued by government sponsored enterprises; repurchase agreements collateralized by U.S. Treasury securities; obligations issued by the central government of any Organization for Economic Cooperation and Development (OECD) country or its agencies, instrumentalities, or establishments; obligations of
34 |
Table of Contents
supranational organizations; commercial paper, notes, bonds, and other debt obligations; certificates of deposit, time deposits, and other bank obligations; and asset-backed securities.
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 the Fund or, at the discretion of the lending agent, replace the loaned securities. The 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. The 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, the 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. The Fund records security lending income net of allocations to the security lending agent and the borrower.
The Fund may incur investment losses as a result of investing securities lending collateral. This could occur if an investment in the collateral investment account defaulted or became impaired. Under those circumstances, the value of a Fund’s cash collateral account may be less than the amount the Fund would be required to return to the borrowers of the securities and the Fund would be required to make up for this shortfall.
During the six months ended Jan. 31, 2017, the Fund had no securities out on loan.
8. Credit and Market Risk
The Fund invests in high yield fixed income securities, which are securities rated lower than BBB-by Standard & Poor’s Financial Services LLC and Baa3 by Moody’s Investors Service Inc., or similarly rated by another nationally recognized statistical rating organization. Investments in these higher yielding securities are generally accompanied by a greater degree of credit risk than higher rated securities. Additionally, lower rated securities may be more susceptible to adverse economic and competitive industry conditions than investment grade securities.
The Fund invests in bank loans and other securities that may subject it to direct indebtedness risk, the risk that the 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 the Fund more protection than unsecured loans in the event of nonpayment of scheduled interest or principal, although there is no assurance that the liquidation of collateral from a secured loan would satisfy the corporate borrower’s obligation, or that the collateral can be liquidated. Some loans or claims may be in default at the time of purchase. Certain of the loans and the other direct indebtedness acquired by the Fund may involve revolving credit facilities or other standby financing commitments that obligate the Fund to pay additional cash on a certain date or on demand. These commitments may require the 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). To the extent that the Fund is committed to advance
35 |
Table of Contents
Notes to financial statements | ||
Delaware High-Yield Opportunities Fund |
8. Credit and Market Risk (continued)
additional funds, it will at all times hold and maintain cash or other high grade debt obligations in an amount sufficient to meet such commitments.
As the Fund may be required to rely upon another lending institution to collect and pass on to the Fund amounts payable with respect to the loan and to enforce the Fund’s rights under the loan and other direct indebtedness, an insolvency, bankruptcy, or reorganization of the lending institution may delay or prevent the Fund from receiving such amounts. The highly leveraged nature of many loans may make them especially vulnerable to adverse changes in economic or market conditions. Investments in such loans and other direct indebtedness may involve additional risk to the Fund.
The Fund invests in certain obligations that may have liquidity protection designed to ensure that the receipt of payments due on the underlying security is timely. Such protection may be provided through guarantees, insurance policies, or letters of credit obtained by the issuer or sponsor through third parties, through various means of structuring the transaction or through a combination of such approaches. The Fund will not pay any additional fees for such credit support, although the existence of credit support may increase the price of the security.
The Fund may invest up to 15% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A promulgated under the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair the Fund from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, the Board has delegated to DMC, the day-to-day functions of determining whether individual securities are liquid for purposes of the Fund’s limitation on investments in illiquid securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Fund’s 15% limit on investments in illiquid securities. Rule 144A securities have been identified on the “Schedule of investments.”
9. Contractual Obligations
The Fund enters into contracts in the normal course of business that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Fund’s existing contracts and expects the risk of loss to be remote.
10. General Motors Term Loan Litigation
The Fund received notice of a litigation proceeding related to a General Motors Corporation (G.M.) term loan participation previously held by the Fund in 2009. We believe the matter subject to the litigation notice will likely lead to a recovery from the Fund of certain amounts received by the Fund because a U.S. Court of Appeals has ruled that the Fund and similarly situated investors were unsecured creditors rather than secured lenders of G.M. as a result of an erroneous Uniform Commercial Code filing made by a third party. The Fund received the full principal on the loans in 2009 after the G.M. bankruptcy. However, based upon the court ruling the estate is seeking to recover such amounts arguing that, as unsecured creditors, the Fund should not have received payment in full. Based upon currently available
36 |
Table of Contents
information related to the litigation and the Fund’s potential exposure, the Fund recorded a liability of $2,623,299 and an asset of $786,990 based on the expected recoveries to unsecured creditors as of Jan. 31, 2017 that resulted in a net decrease in the Fund’s NAV to reflect this likely recovery.
11. Recent Accounting Pronouncements
On Oct. 13, 2016, the Securities and Exchange Commission amended existing rules intended to modernize reporting and disclosure of information. These amendments relate to Regulation S-X which sets forth the form and content of financial statements. At this time, management is evaluating the implications of adopting these amendments and their impact on the financial statements and accompanying notes.
12. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to Jan. 31, 2017 that would require recognition or disclosure in the Fund’s financial statements.
37 |
Table of Contents
Other Fund information (Unaudited)
Delaware High-Yield Opportunities Fund
Board consideration of Delaware High-Yield Opportunities Fund investment advisory agreement
At a meeting held Aug. 16–18, 2016 (the “Annual Meeting”), the Board of Trustees (the “Board”), including a majority of disinterested or independent Trustees, approved the renewal of the Investment Advisory Agreement for Delaware High-Yield Opportunities Fund (the “Fund”). In making its decision, the Board considered information furnished at regular quarterly Board meetings, including reports detailing Fund performance, investment strategies, and expenses, as well as information prepared specifically in connection with the renewal of the investment advisory and sub-advisory contracts. Information furnished specifically in connection with the renewal of the Investment Management Agreement with Delaware Management Company (“DMC”) included materials provided by DMC and its affiliates (“Delaware Investments”) concerning, among other things, the nature, extent, and quality of services provided to the Fund; the costs of such services to the Fund; economies of scale; and the investment manager’s financial condition and profitability. In addition, in connection with the Annual Meeting, reports were provided to the Trustees in May 2016 and included reports provided by Broadridge Financial Solutions (“Broadridge”). The Broadridge reports compared the Fund’s investment performance and expenses with those of other comparable mutual funds. The Independent Trustees reviewed and discussed the Broadridge reports with independent legal counsel to the Independent Trustees. In addition to the information noted above, the Board also requested and received information regarding DMC’s policy with respect to advisory fee levels and its breakpoint philosophy; the structure of portfolio manager compensation; comparative client fee information; and any constraints or limitations on the availability of securities for certain investment styles, which had in the past year inhibited, or which were likely in the future to inhibit, the investment manager’s ability to invest fully in accordance with Fund policies.
In considering information relating to the approval of the Fund’s advisory agreement, the Independent Trustees received assistance and advice from and met separately with independent legal counsel to the Independent Trustees. Although the Board gave attention to all information furnished, the following discussion identifies, under separate headings, the primary factors taken into account by the Board during its contract renewal considerations.
Nature, extent, and quality of service. The Board considered the services provided by DMC to the Fund and its shareholders. In reviewing the nature, extent, and quality of services, the Board considered reports furnished to it throughout the year, which covered matters such as the relative performance of the Fund; compliance of portfolio managers with the investment policies, strategies, and restrictions for the Fund; compliance by DMC and Delaware Distributors, L.P. (together, “Management”) personnel with the Code of Ethics adopted throughout the Delaware Investments® Family of Funds complex; and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of the Fund’s investment advisor and the emphasis placed on research in the investment process. The Board recognized DMC’s receipt of several industry distinctions during the past several years. The Board gave favorable consideration to DMC’s efforts to control expenditures while maintaining service levels committed to Fund matters. The Board also noted the benefits provided to Fund shareholders through each shareholder’s ability to exchange an investment in one Delaware Investments fund for the same class of shares in another Delaware Investments fund without a sales charge, to reinvest Fund dividends into additional shares of the Fund or into additional shares of other Delaware Investments funds, and the privilege to combine holdings in other Delaware Investments funds
38 |
Table of Contents
to obtain a reduced sales charge. The Board was satisfied with the nature, extent, and quality of the overall services provided by DMC.
Investment performance. The Board placed significant emphasis on the investment performance of the Fund in view of the importance of investment performance to shareholders. Although the Board gave appropriate consideration to performance reports and discussions with portfolio managers at Investment Committee meetings throughout the year, the Board gave particular weight to the Broadridge reports furnished for the Annual Meeting. The Broadridge reports prepared for the Fund showed the investment performance of its Class A shares in comparison to a group of similar funds as selected by Broadridge (the “Performance Universe”). A fund with the best performance ranked first, and a fund with the poorest performance ranked last. The highest/best performing 25% of funds in the Performance Universe make up the first quartile; the next 25%, the second quartile; the next 25%, the third quartile; and the poorest/ worst performing 25% of funds in the Performance Universe make up the fourth quartile. Comparative annualized performance for the Fund was shown for the past 1-, 3-, 5-, and 10-year periods, to the extent applicable, ended Jan. 31, 2016. The Board’s objective is that the Fund’s performance for the periods considered be at or above the median of its Performance Universe.
The Performance Universe for the Fund consisted of the Fund and all retail and institutional high yield funds as selected by Broadridge. The Broadridge report comparison showed that the Fund’s total return for the 1- and 3-year periods was in the fourth quartile of its Performance Universe. The report further showed that the Fund’s total return for the 5- and 10-year periods was in the third quartile and second quartile, respectively, of its Performance Universe. In evaluating the Fund’s short-term and intermediate-term performance, the Board considered the performance attribution included in the Meeting materials, as well as the Fund’s long-term performance results, which were acceptable. The Board also considered the numerous investment and performance reports delivered by Management personnel to the Board’s Investments Committee. The Board was satisfied that Management was taking action to improve Fund short-term performance and thereby, to meet the Board’s performance objective.
Comparative expenses. The Board considered expense comparison data for the Delaware Investments® Family of Funds. Management provided the Board with information on pricing levels and fee structures for the Fund as of its most recently completed fiscal year. The Board also focused on the comparative analysis of effective management fees and total expense ratios of the Fund versus effective management fees and expense ratios of a group of similar funds as selected by Broadridge (the “Expense Group”). In reviewing comparative costs, the Fund’s contractual management fee and the actual management fee incurred by the Fund were compared with the contractual management fees (assuming all funds in the Expense Group were similar in size to the Fund) and actual management fees (as reported by each fund) within the Expense Group, taking into account any applicable breakpoints and fee waivers. The Fund’s total expenses were also compared with those of its Expense Group. The Broadridge total expenses, for comparative consistency, were shown by Broadridge for Class A shares and comparative total expenses including 12b-1 and non-12b-1 service fees. The Board’s objective is to limit the Fund’s total expense ratio to be competitive with that of the Expense Group.
39 |
Table of Contents
Other Fund information (Unaudited) | ||
Delaware High-Yield Opportunities Fund |
Board consideration of Delaware High-Yield Opportunities Fund investment advisory agreement (continued)
The expense comparisons for the Fund showed that its actual management fee and total expenses were in the quartile with the second highest expenses of its Expense Group. The Board noted that the Fund’s Management fee and total expenses were not in line with the Board’s objective. In evaluating total expenses, the Board considered fee waivers in place through Nov. 28, 2016 and various initiatives implemented by Management, such as the negotiation of lower fees for fund accounting services, which had created an opportunity for a further reduction in expenses. The Board was satisfied with Management’s efforts to improve the Fund’s total expense ratio and to bring it in line with the Board’s objective.
Management profitability. The Board considered the level of profits realized by DMC in connection with the operation of the Fund. In this respect, the Board reviewed the Investment Management Profitability Analysis that addressed the overall profitability of DMC’s business in providing management and other services to each of the individual funds and the Delaware Investments® Family of Funds as a whole. Specific attention was given to the methodology followed in allocating costs for the purpose of determining profitability. Management stated that the level of profits of DMC, to a certain extent, reflects recent operational cost savings and efficiencies initiated by DMC. The Board considered DMC’s efforts to improve services provided to fund shareholders and to meet additional regulatory and compliance requirements resulting from recent industry-wide Securities and Exchange Commission initiatives. The Board also considered the extent to which DMC might derive ancillary benefits from fund operations, including the potential for procuring additional business as a result of the prestige and visibility associated with its role as service provider to the Delaware Investments Family of Funds and the benefits from allocation of fund brokerage to improve trading efficiencies. The Board found that the management fees were reasonable in light of the services rendered and the level of profitability of DMC.
Economies of scale. The Trustees considered whether economies of scale are realized by DMC as the Fund’s assets increase and the extent to which any economies of scale are reflected in the level of management fees charged. The Trustees reviewed the standardized advisory fee pricing and structure, approved by the Board and shareholders, which includes breakpoints, and which applies to most funds in the Delaware Investments Family of Funds complex. Breakpoints in the advisory fee occur when the advisory fee rate is reduced on assets in excess of specified levels. Breakpoints result in a lower advisory fee than would otherwise be the case in the absence of breakpoints, when the asset levels specified in the breakpoints are exceeded. The Board noted that the fee under the Fund’s management contract fell within the standardized fee pricing structure. Although, as of May 31, 2016, the Fund has not reached a size at which it can take advantage of any breakpoints in the applicable fee schedule, the Board recognized that the fee was structured so that if the Fund grows, economies of scale may be shared.
40 |
Table of Contents
Board of trustees | ||||||||
Shawn K. Lytle President and Chief Executive Officer Delaware Investments® Family of Funds Philadelphia, PA
Thomas L. Bennett Chairman of the Board Delaware Investments Family of Funds Private Investor Rosemont, PA | Ann D. Borowiec Former Chief Executive Officer Private Wealth Management J.P. Morgan Chase & Co. New York, NY
Joseph W. Chow Former Executive Vice President State Street Corporation Boston, MA | John A. Fry President Drexel University
Lucinda S. Landreth Former Chief Investment Officer Assurant, Inc. New York, NY | Frances A. Sevilla-Sacasa Former Chief Executive Officer Banco Itaú International Miami, FL
Thomas K. Whitford Former Vice Chairman PNC Financial Services Group Pittsburgh, PA
Janet L. Yeomans Former Vice President and 3M Company St. Paul, MN | |||||
Affiliated officers | ||||||||
David F. Connor Senior Vice President, General Counsel, and Secretary Delaware Investments Family of Funds Philadelphia, PA | Daniel V. Geatens Vice President and Treasurer Delaware Investments Family of Funds Philadelphia, PA | | Richard Salus Senior Vice | |
This semiannual report is for the information of Delaware High-Yield Opportunities Fund shareholders, but it may be used with prospective investors when preceded or accompanied by the Delaware Investments Fund fact sheet for the most recently completed calendar quarter. These documents are available at delawareinvestments.com/literature.
Delaware Investments is the marketing name of Delaware Management Holdings, Inc. and its subsidiaries.
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 800 523-1918; and (ii) on the SEC’s website at sec.gov. In addition, a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities and the Schedules of Investments included in the Fund’s most recent Form N-Q are available without charge on the Fund’s website at delawareinvestments.com/literature. The Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C.; information on the operation of the Public Reference Room may be obtained by calling 800 SEC- 0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund’s website at delawareinvestments.com/proxy; and (ii) on the SEC’s website at sec.gov.
41 |
Table of Contents
Semiannual report
Fixed income mutual fund
Delaware Floating Rate Fund
(formerly, Delaware Diversified Floating Rate Fund)
January 31, 2017
Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Fund’s prospectus and its summary prospectus, which may be obtained by visiting delawareinvestments.com/literature or calling 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing.
You can obtain shareholder reports and prospectuses online instead of in the mail.
Visit delawareinvestments.com/edelivery.
Table of Contents
Experience Delaware Investments
Delaware Investments is committed to the pursuit of consistently superior asset management and unparalleled client service. We believe in our investment processes, which seek to deliver consistent results, and in convenient services that help add value for our clients.
If you are interested in learning more about creating an investment plan, contact your financial advisor.
You can learn more about Delaware Investments or obtain a prospectus for Delaware Floating Rate Fund at delawareinvestments.com/literature.
Manage your investments online
● | 24-hour access to your account information |
● | Obtain share prices |
● | Check your account balance and recent transactions |
● | Request statements or literature |
● | Make purchases and redemptions |
Delaware Management Holdings, Inc. and its subsidiaries (collectively known by the marketing name of Delaware Investments) are wholly owned subsidiaries of Macquarie Group Limited, a global provider of banking, financial, advisory, investment and funds management services.
Neither Delaware Investments nor its affiliates referred to in this document are authorized deposit-taking institutions for the purpose of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited (MBL), a subsidiary of Macquarie Group Limited and an affiliate of Delaware Investments. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Fund is governed by U.S. laws and regulations.
1 | ||||
3 | ||||
4 | ||||
22 | ||||
24 | ||||
26 | ||||
28 | ||||
36 | ||||
50 | ||||
54 |
Unless otherwise noted, views expressed herein are current as of Jan. 31, 2017, and subject to change for events occurring after such date.
The Fund is not FDIC insured and is not guaranteed. It is possible to lose the principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor. Delaware Investments, a member of Macquarie Group, refers to Delaware Management Holdings, Inc. and its subsidiaries, including the Fund’s distributor, Delaware Distributors, L.P. Macquarie Group refers to Macquarie Group Limited and its subsidiaries and affiliates worldwide.
© 2017 Delaware Management Holdings, Inc.
All third-party marks cited are the property of their respective owners.
Table of Contents
Disclosure of Fund expenses | ||
For the six-month period from August 1, 2016 to January 31, 2017 (Unaudited) |
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period from Aug. 1, 2016 to Jan. 31, 2017.
Actual expenses
The first section of the table shown, “Actual Fund return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The second section of the table shown, “Hypothetical 5% return,” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The Fund’s expenses shown in the table reflect fee waivers in effect. The expenses shown in the table assume reinvestment of all dividends and distributions.
1 |
Table of Contents
Disclosure of Fund expenses | ||
For the six-month period from August 1, 2016 to January 31, 2017 (Unaudited) |
Delaware Floating Rate Fund
Expense analysis of an investment of $1,000
Beginning
Account Value
8/1/16
| Ending
Account Value
1/31/17 | Annualized
Expense Ratio | Expenses
Paid During Period
8/1/16 to 1/31/17* | |||||||||||||
Actual Fund return† | ||||||||||||||||
Class A | $1,000.00 | $1,018.80 | 0.96% | $4.88 | ||||||||||||
Class C | 1,000.00 | 1,013.80 | 1.71% | 8.68 | ||||||||||||
Class R | 1,000.00 | 1,016.30 | 1.21% | 6.15 | ||||||||||||
Institutional Class | 1,000.00 | 1,018.90 | 0.71% | 3.61 | ||||||||||||
Hypothetical 5% return (5% return before expenses) |
| |||||||||||||||
Class A | $1,000.00 | $1,020.37 | 0.96% | $4.89 | ||||||||||||
Class C | 1,000.00 | 1,016.59 | 1.71% | 8.69 | ||||||||||||
Class R | 1,000.00 | 1,019.11 | 1.21% | 6.16 | ||||||||||||
Institutional Class | 1,000.00 | 1,021.63 | 0.71% | 3.62 |
* | “Expenses Paid During Period” are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
† | Because actual returns reflect only the most recent six-month period, the returns shown may differ significantly from fiscal year returns. |
2 |
Table of Contents
Security type / sector allocation | ||
Delaware Floating Rate Fund | As of January 31, 2017 (Unaudited) |
Sector designations may be different than the sector designations presented in other fund materials. The sector designations may represent the investment manager’s internal sector classifications.
Security type / sector | Percentage of net assets | |||||||
Agency Collateralized Mortgage Obligations | 1.06% | |||||||
Agency Mortgage-Backed Security | 0.00% | |||||||
Collateralized Debt Obligations | 3.48% | |||||||
Convertible Bonds | 0.37% | |||||||
Corporate Bonds | 43.65% | |||||||
Banking | 15.10% | |||||||
Basic Industry | 1.04% | |||||||
Capital Goods | 1.14% | |||||||
Communications. | 5.02% | |||||||
Consumer Cyclical | 2.33% | |||||||
Consumer Non-Cyclical | 3.86% | |||||||
Electric | 2.49% | |||||||
Energy | 4.75% | |||||||
Finance Companies. | 2.58% | |||||||
Insurance | 0.31% | |||||||
Natural Gas | 1.09% | |||||||
Real Estate | 1.86% | |||||||
Technology | 1.33% | |||||||
Telecommunications | 0.06% | |||||||
Transportation | 0.69% | |||||||
Municipal Bonds | 2.06% | |||||||
Non-Agency Asset-Backed Securities | 3.28% | |||||||
Loan Agreements | 44.22% | |||||||
Sovereign Bonds | 0.66% | |||||||
Supranational Bank | 0.92% | |||||||
Convertible Preferred Stock | 0.02% | |||||||
Preferred Stock | 1.72% | |||||||
Short-Term Investments | 3.67% | |||||||
Total Value of Securities | 105.11% | |||||||
Liabilities Net of Receivables and Other Assets | (5.11%) | |||||||
Total Net Assets | 100.00% |
3 |
Table of Contents
Schedule of investments | ||
Delaware Floating Rate Fund | January 31, 2017 (Unaudited) |
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Agency Collateralized Mortgage Obligations – 1.06% | ||||||||
| ||||||||
Fannie Mae Connecticut Avenue Securities | ||||||||
Series 2015-C03 1M1 2.271% 7/25/25 • | 130,088 | $ | 130,248 | |||||
Series 2015-C03 2M1 2.271% 7/25/25 • | 237,346 | 238,098 | ||||||
Series 2015-C04 2M1 2.471% 4/25/28 • | 194,637 | 195,382 | ||||||
Series 2016-C03 1M1 2.771% 10/25/28 • | 249,659 | 253,758 | ||||||
Series 2016-C04 1M1 2.221% 1/25/29 • | 126,275 | 127,303 | ||||||
Series 2017-C01 1M1 144A 2.073% 7/25/29 #• | 100,000 | 100,223 | ||||||
Fannie Mae REMICs | ||||||||
Series 2004-36 FA 1.171% 5/25/34 • | 36,516 | 36,494 | ||||||
Series 2005-66 FD 1.071% 7/25/35 • | 44,850 | 44,648 | ||||||
Series 2005-106 QF 1.281% 12/25/35 • | 279,412 | 281,306 | ||||||
Series 2006-105 FB 1.191% 11/25/36 • | 28,563 | 28,549 | ||||||
Series 2007-109 NF 1.321% 12/25/37 • | 21,528 | 21,645 | ||||||
Freddie Mac REMICs | ||||||||
Series 3067 FA 1.117% 11/15/35 • | 69,153 | 68,978 | ||||||
Series 3239 EF 1.117% 11/15/36 • | 51,794 | 51,705 | ||||||
Series 3241 FM 1.147% 11/15/36 • | 5,207 | 5,199 | ||||||
Series 3780 LF 1.167% 3/15/29 • | 3,443 | 3,445 | ||||||
Freddie Mac Structured Agency Credit Risk Debt Notes | ||||||||
Series 2015-DNA3 M1 2.121% 4/25/28 • | 57,165 | 57,190 | ||||||
Series 2016-DNA3 M1 1.871% 12/25/28 • | 663,268 | 665,348 | ||||||
Series 2016-HQA2 M1 1.971% 11/25/28 • | 800,785 | 802,617 | ||||||
|
| |||||||
Total Agency Collateralized Mortgage Obligations (cost $3,097,828) | 3,112,136 | |||||||
|
| |||||||
| ||||||||
Agency Mortgage-Backed Security – 0.00% | ||||||||
| ||||||||
Freddie Mac ARM | ||||||||
2.977% 2/1/35 • | 11,164 | 11,809 | ||||||
|
| |||||||
Total Agency Mortgage-Backed Security (cost $11,792) | 11,809 | |||||||
|
| |||||||
| ||||||||
Collateralized Debt Obligations – 3.48% | ||||||||
| ||||||||
Cedar Funding V CLO | ||||||||
Series 2016-5A A1 144A 2.633% 7/17/28 #• | 1,270,000 | 1,280,231 | ||||||
CIFC Funding | ||||||||
Series 2014-2A A1L 144A 2.41% 5/24/26 #• | 1,000,000 | 1,001,695 | ||||||
Flagship VII CLO | ||||||||
Series 2013-7A A1 144A 2.50% 1/20/26 #• | 1,000,000 | 999,495 | ||||||
JFIN CLO | ||||||||
Series 2015-2A AX 144A 2.473% 10/19/26 #• | 490,417 | 489,538 | ||||||
KKR Financial CLO | ||||||||
Series 2013-1A A1 144A 2.173% 7/15/25 #• | 1,395,000 | 1,394,579 | ||||||
OCP CLO | ||||||||
Series 2013-4A A1A 144A 2.443% 10/24/25 #• | 1,500,000 | 1,504,304 |
4 |
Table of Contents
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Collateralized Debt Obligations (continued) | ||||||||
| ||||||||
Shackleton CLO | ||||||||
Series 2014-5A A 144A 2.381% 5/7/26 #• | 420,000 | $ | 420,129 | |||||
Series 2015-VIII 144A 2.54% 10/20/27 #• | 410,000 | 410,591 | ||||||
Telos CLO | ||||||||
Series 2013-4A A 144A 2.323% 7/17/24 #• | 2,000,000 | 1,998,990 | ||||||
Venture XXI CLO | ||||||||
Series 2015-21A A 144A 2.513% 7/15/27 #• | 685,000 | 685,404 | ||||||
|
| |||||||
Total Collateralized Debt Obligations (cost $10,101,664) | 10,184,956 | |||||||
|
| |||||||
| ||||||||
Convertible Bonds – 0.37% | ||||||||
| ||||||||
Alaska Communications Systems Group 6.25% exercise price $10.28, maturity date 5/1/18 | 71,000 | 70,645 | ||||||
BioMarin Pharmaceutical 1.50% exercise price $94.15, maturity date 10/15/20 | 20,000 | 24,200 | ||||||
Blackstone Mortgage Trust 5.25% exercise price $27.99, maturity date 12/1/18 | 90,000 | 100,631 | ||||||
Cemex 3.72% exercise price $11.45, maturity date 3/15/20 | 25,000 | 28,875 | ||||||
Chart Industries 2.00% exercise price $69.03, maturity date 8/1/18 | 42,000 | 41,790 | ||||||
Clearwire Communications 144A 8.25% exercise price $7.08, maturity date 12/1/40 # | 38,000 | 39,757 | ||||||
GAIN Capital Holdings 4.125% exercise price $12.00, maturity date 12/1/18 | 60,000 | 58,987 | ||||||
General Cable 4.50% exercise price $31.67, maturity date 11/15/29 f | 62,000 | 51,770 | ||||||
HealthSouth 2.00% exercise price $37.16, maturity date 12/1/43 | 46,000 | 52,469 | ||||||
Insulet 144A 1.25% exercise price $58.37, maturity date 9/15/21 # | 19,000 | 18,822 | ||||||
Jefferies Group 3.875% exercise price $43.93, maturity date 11/1/29 | 91,000 | 92,024 | ||||||
Liberty Interactive 144A 1.75% exercise price $341.10, maturity date 9/30/46 # | 16,000 | 18,030 | ||||||
Liberty Media 144A 2.25% exercise price $104.55, maturity date 9/30/46 # | 9,000 | 9,664 | ||||||
New Mountain Finance 5.00% exercise price $15.80, maturity date 6/15/19 | 29,000 | 30,015 | ||||||
Nuance Communications 2.75% exercise price $32.30, maturity date 11/1/31 | 97,000 | 97,667 | ||||||
NXP Semiconductors 1.00% exercise price $102.84, maturity date 12/1/19 | 39,000 | 44,387 | ||||||
Spectrum Pharmaceuticals 2.75% exercise price $10.53, maturity date 12/15/18 | 83,000 | 74,648 |
5 |
Table of Contents
Schedule of investments | ||
Delaware Floating Rate Fund |
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Convertible Bonds (continued) | ||||||||
| ||||||||
Spirit Realty Capital 3.75% exercise price $13.10, maturity date 5/15/21 | 47,000 | $ | 49,145 | |||||
Synchronoss Technologies 0.75% exercise price $53.17, maturity date 8/15/19 | 37,000 | 38,781 | ||||||
Vector Group 1.75% exercise price $23.46, maturity date 4/15/20 • | 82,000 | 94,454 | ||||||
VEREIT 3.75% exercise price $14.99, maturity date 12/15/20 | 59,000 | 58,853 | ||||||
|
| |||||||
Total Convertible Bonds (cost $1,090,556) | 1,095,614 | |||||||
|
| |||||||
| ||||||||
Corporate Bonds – 43.65% | ||||||||
| ||||||||
Banking – 15.10% | ||||||||
Banco Nacional de Costa Rica 144A 5.875% 4/25/21 # | 200,000 | 209,050 | ||||||
Bank of New York Mellon 2.089% 10/30/23 • | 2,125,000 | 2,162,179 | ||||||
Barclays | ||||||||
3.20% 8/10/21 | 505,000 | 502,557 | ||||||
4.337% 1/10/28 | 200,000 | 199,579 | ||||||
BB&T 1.823% 6/15/18 • | 2,586,000 | 2,605,470 | ||||||
BBVA Bancomer 144A 7.25% 4/22/20 # | 200,000 | 219,750 | ||||||
Branch Banking & Trust 1.22% 5/23/17 • | 1,405,000 | 1,405,431 | ||||||
Citigroup | ||||||||
1.80% 1/10/20 • | 1,495,000 | 1,497,890 | ||||||
2.361% 9/1/23 • | 2,150,000 | 2,187,926 | ||||||
Citizens Bank 2.55% 5/13/21 | 250,000 | 249,116 | ||||||
Citizens Financial Group 4.30% 12/3/25 | 345,000 | 350,866 | ||||||
CoBank 1.563% 6/15/22 • | 75,000 | 72,807 | ||||||
Compass Bank 3.875% 4/10/25 | 400,000 | 383,634 | ||||||
Credit Suisse Group Funding Guernsey 3.125% 12/10/20 | 1,550,000 | 1,551,305 | ||||||
Fifth Third Bank 2.25% 6/14/21 | 645,000 | 637,090 | ||||||
Goldman Sachs Group 2.537% 11/29/23 • | 2,260,000 | 2,327,244 | ||||||
Huntington Bancshares 2.30% 1/14/22 | 345,000 | 334,940 | ||||||
JPMorgan Chase & Co. | ||||||||
2.273% 10/24/23 • | 2,915,000 | 2,967,642 | ||||||
4.25% 10/1/27 | 520,000 | 531,298 | ||||||
KeyBank | ||||||||
2.35% 3/8/19 | 250,000 | 251,925 | ||||||
2.50% 11/22/21 | 2,205,000 | 2,191,759 | ||||||
3.18% 5/22/22 | 480,000 | 485,572 | ||||||
Lloyds Banking Group | ||||||||
3.00% 1/11/22 | 600,000 | 598,473 | ||||||
3.75% 1/11/27 | 535,000 | 526,959 | ||||||
Morgan Stanley | ||||||||
2.177% 1/27/20 • | 1,555,000 | 1,576,733 |
6 |
Table of Contents
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Banking (continued) | ||||||||
Morgan Stanley | ||||||||
2.443% 10/24/23 • | 3,510,000 | $ | 3,556,423 | |||||
PNC Bank 2.45% 11/5/20 | 250,000 | 251,210 | ||||||
Regions Bank 2.25% 9/14/18 | 1,420,000 | 1,425,436 | ||||||
Royal Bank of Canada 2.75% 2/1/22 | 540,000 | 542,304 | ||||||
Royal Bank of Scotland Group 8.625% 12/29/49 • | 270,000 | 279,450 | ||||||
Santander UK 1.78% 8/24/18 • | 3,135,000 | 3,140,768 | ||||||
Santander UK Group Holdings 3.571% 1/10/23 | 400,000 | 400,995 | ||||||
State Street 2.55% 8/18/20 | 370,000 | 374,541 | ||||||
SunTrust Banks 2.70% 1/27/22 | 520,000 | 518,142 | ||||||
SVB Financial Group 3.50% 1/29/25 | 460,000 | 444,196 | ||||||
UBS Group Funding Jersey | ||||||||
144A 2.65% 2/1/22 # | 200,000 | 194,317 | ||||||
144A 3.00% 4/15/21 # | 1,790,000 | 1,787,043 | ||||||
USB Capital IX 3.50% 10/29/49 • | 440,000 | 365,200 | ||||||
Wells Fargo & Co. 2.269% 10/31/23 • | 4,420,000 | 4,471,184 | ||||||
Zions Bancorporation 4.50% 6/13/23 | 420,000 | 430,820 | ||||||
|
| |||||||
44,209,224 | ||||||||
|
| |||||||
Basic Industry – 1.04% | ||||||||
Air Liquide Finance 144A 1.75% 9/27/21 # | 340,000 | 328,829 | ||||||
BHP Billiton Finance USA 144A 6.25% 10/19/75 #• | 575,000 | 633,363 | ||||||
CF Industries 144A 3.40% 12/1/21 # | 365,000 | 364,553 | ||||||
Dow Chemical 8.55% 5/15/19 | 140,000 | 160,124 | ||||||
Georgia-Pacific 8.00% 1/15/24 | 400,000 | 508,014 | ||||||
OCP 144A 4.50% 10/22/25 # | 325,000 | 312,593 | ||||||
Suzano Austria 144A 5.75% 7/14/26 # | 240,000 | 240,912 | ||||||
Vale Overseas 5.875% 6/10/21 | 280,000 | 300,300 | ||||||
Vedanta Resources 144A 6.375% 7/30/22 # | 200,000 | 200,800 | ||||||
|
| |||||||
3,049,488 | ||||||||
|
| |||||||
Capital Goods – 1.14% | ||||||||
Ardagh Packaging Finance 144A 4.156% 5/15/21 #• | 1,110,000 | 1,141,913 | ||||||
Cemex Finance 144A 9.375% 10/12/22 # | 200,000 | 218,060 | ||||||
Fortune Brands Home & Security 3.00% 6/15/20 | 220,000 | 222,132 | ||||||
Masco 3.50% 4/1/21 | 95,000 | 97,409 | ||||||
Reynolds Group Issuer 8.25% 2/15/21 | 256,627 | 264,227 | ||||||
Roper Technologies 2.80% 12/15/21 | 1,080,000 | 1,080,327 | ||||||
Union Andina de Cementos 144A 5.875% 10/30/21 # | 295,000 | 305,355 | ||||||
|
| |||||||
3,329,423 | ||||||||
|
| |||||||
Communications – 5.02% | ||||||||
21st Century Fox America 4.50% 2/15/21 | 395,000 | 421,935 | ||||||
AT&T 1.928% 6/30/20 • | 2,130,000 | 2,157,307 | ||||||
CenturyLink 5.80% 3/15/22 | 225,000 | 232,243 |
7 |
Table of Contents
Schedule of investments | ||
Delaware Floating Rate Fund |
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Communications (continued) | ||||||||
Cisco Systems 1.431% 3/1/19 • | 1,875,000 | $ | 1,888,262 | |||||
Columbus Cable Barbados 144A 7.375% 3/30/21 # | 390,000 | 415,350 | ||||||
Crown Castle Towers 144A 4.883% 8/15/20 # | 685,000 | 730,390 | ||||||
Deutsche Telekom International Finance | ||||||||
144A 1.95% 9/19/21 # | 645,000 | 622,759 | ||||||
144A 2.485% 9/19/23 # | 935,000 | 894,363 | ||||||
DISH Network 144A 3.375% 8/15/26 # | 9,000 | 10,558 | ||||||
GTP Acquisition Partners 144A 2.35% 6/15/20 # | 185,000 | 182,031 | ||||||
Historic TW 6.875% 6/15/18 | 400,000 | 427,665 | ||||||
Millicom International Cellular 144A 6.00% 3/15/25 # | 290,000 | 296,368 | ||||||
NBCUniversal Enterprise 144A 1.707% 4/15/18 #• | 2,910,000 | 2,930,114 | ||||||
SBA Tower Trust | ||||||||
144A 2.24% 4/16/18 # | 220,000 | 220,436 | ||||||
144A 2.898% 10/15/19 # | 475,000 | 478,278 | ||||||
Sky 144A 3.75% 9/16/24 # | 430,000 | 430,072 | ||||||
Verizon Communications 1.75% 8/15/21 | 2,485,000 | 2,374,584 | ||||||
|
| |||||||
14,712,715 | ||||||||
|
| |||||||
Consumer Cyclical – 2.33% | ||||||||
Cablevision 6.50% 6/15/21 | 150,000 | 154,875 | ||||||
CDK Global 5.00% 10/15/24 | 260,000 | 260,325 | ||||||
Daimler Finance North America 144A 2.20% 10/30/21 # | 310,000 | 301,953 | ||||||
General Motors Financial 4.375% 9/25/21 | 1,650,000 | 1,721,519 | ||||||
INVISTA Finance 144A 4.25% 10/15/19 # | 550,000 | 555,576 | ||||||
Marriott International 3.75% 3/15/25 | 315,000 | 317,208 | ||||||
PACCAR Financial 1.546% 12/6/18 • | 2,000,000 | 2,018,386 | ||||||
Walgreens Boots Alliance 2.60% 6/1/21 | 1,495,000 | 1,493,726 | ||||||
|
| |||||||
6,823,568 | ||||||||
|
| |||||||
Consumer Non-Cyclical – 3.86% | ||||||||
Abbott Laboratories 2.90% 11/30/21 | 1,490,000 | 1,488,318 | ||||||
Anheuser-Busch InBev Finance 2.65% 2/1/21 | 2,000,000 | 2,013,610 | ||||||
Arcor SAIC 144A 6.00% 7/6/23 # | 50,000 | 52,375 | ||||||
Becle 144A 3.75% 5/13/25 # | 300,000 | 287,953 | ||||||
BRF 144A 4.35% 9/29/26 # | 200,000 | 189,250 | ||||||
Brookdale Senior Living 2.75% 6/15/18 | 59,000 | 58,336 | ||||||
Medicines 144A 2.75% 7/15/23 # | 25,000 | 25,234 | ||||||
Mylan 144A 3.95% 6/15/26 # | 510,000 | 483,655 | ||||||
NuVasive 144A 2.25% 3/15/21 # | 14,000 | 18,498 | ||||||
PepsiCo 1.372% 10/13/17 • | 2,010,000 | 2,015,791 | ||||||
Pernod Ricard 144A 4.45% 1/15/22 # | 720,000 | 767,183 | ||||||
Pfizer 1.263% 6/15/18 • | 1,260,000 | 1,265,321 | ||||||
Raizen Fuels Finance 144A 5.30% 1/20/27 # | 200,000 | 200,100 | ||||||
Shire Acquisitions Investments Ireland 2.40% 9/23/21 | 865,000 | 841,341 |
8 |
Table of Contents
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Consumer Non-Cyclical (continued) | ||||||||
Siemens Financieringsmaatschappij 144A 1.21% 5/25/18 #• | 1,600,000 | $ | 1,601,054 | |||||
|
| |||||||
11,308,019 | ||||||||
|
| |||||||
Electric – 2.49% | ||||||||
AES Gener 144A 5.00% 7/14/25 # | 275,000 | 275,505 | ||||||
Ameren Illinois 9.75% 11/15/18 | 165,000 | 187,765 | ||||||
Emera 6.75% 6/15/76 • | 200,000 | 219,000 | ||||||
Enel 144A 8.75% 9/24/73 #• | 260,000 | 297,050 | ||||||
Enel Americas 4.00% 10/25/26 | 190,000 | 185,440 | ||||||
Entergy 4.00% 7/15/22 | 500,000 | 523,820 | ||||||
Fortis 144A 2.10% 10/4/21 # | 2,095,000 | 2,029,598 | ||||||
National Rural Utilities Cooperative Finance 4.75% 4/30/43 • | 1,110,000 | 1,121,845 | ||||||
NV Energy 6.25% 11/15/20 | 390,000 | 441,524 | ||||||
Pennsylvania Electric 5.20% 4/1/20 | 625,000 | 668,691 | ||||||
Southern 2.35% 7/1/21 | 1,170,000 | 1,152,961 | ||||||
Trinidad Generation 144A 5.25% 11/4/27 # | 200,000 | 198,550 | ||||||
|
| |||||||
7,301,749 | ||||||||
|
| |||||||
Energy – 4.75% | ||||||||
Chevron 1.472% 3/3/22 • | 2,200,000 | 2,200,563 | ||||||
Cia Brasileira de Aluminio 144A 6.75% 4/5/21 # | 105,000 | 112,088 | ||||||
CNOOC Finance 2015 Australia 2.625% 5/5/20 | 200,000 | 199,540 | ||||||
ConocoPhillips 1.806% 5/15/22 • | 2,050,000 | 2,031,812 | ||||||
Ecopetrol 5.875% 9/18/23 | 185,000 | 198,590 | ||||||
Empresa Nacional del Petroleo 144A 4.75% 12/6/21 # | 200,000 | 209,048 | ||||||
Kinder Morgan Energy Partners 5.80% 3/1/21 | 280,000 | 309,542 | ||||||
Kunlun Energy 144A 2.875% 5/13/20 # | 200,000 | 200,510 | ||||||
Pampa Energia 144A 7.50% 1/24/27 # | 150,000 | 148,463 | ||||||
Pertamina Persero 144A 5.25% 5/23/21 # | 200,000 | 211,999 | ||||||
Petrobras Global Finance | ||||||||
5.375% 1/27/21 | 5,000 | 5,050 | ||||||
6.25% 3/17/24 | 20,000 | 20,242 | ||||||
7.375% 1/17/27 | 5,000 | 5,216 | ||||||
8.375% 5/23/21 | 230,000 | 256,404 | ||||||
Petroleos Mexicanos 144A 4.607% 3/11/22 #• | 435,000 | 452,400 | ||||||
Petronas Global Sukuk 144A 2.707% 3/18/20 # | 320,000 | 323,421 | ||||||
Regency Energy Partners 5.00% 10/1/22 | 610,000 | 657,023 | ||||||
Shell International Finance 1.352% 5/11/20 • | 2,105,000 | 2,108,528 | ||||||
Statoil 1.343% 11/8/18 • | 2,640,000 | 2,655,552 | ||||||
Tengizchevroil Finance Co. International 144A 4.00% 8/15/26 # | 200,000 | 188,238 | ||||||
Total Capital International 1.343% 6/19/19 • | 645,000 | 643,865 |
9 |
Table of Contents
Schedule of investments | ||
Delaware Floating Rate Fund |
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Energy (continued) | ||||||||
Woodside Finance 144A 8.75% 3/1/19 # | 540,000 | $ | 608,568 | |||||
YPF 144A 8.50% 3/23/21 # | 160,000 | 173,800 | ||||||
|
| |||||||
13,920,462 | ||||||||
|
| |||||||
Finance Companies – 2.58% | ||||||||
AerCap Ireland Capital 3.95% 2/1/22 | 1,525,000 | 1,556,598 | ||||||
Aviation Capital Group 144A 2.875% 1/20/22 # | 810,000 | 803,871 | ||||||
Blackhawk Network Holdings 144A 1.50% 1/15/22 # | 37,000 | 37,324 | ||||||
Equate Petrochemical 144A 3.00% 3/3/22 # | 200,000 | 194,386 | ||||||
General Electric | ||||||||
1.414% 5/5/26 • | 1,690,000 | 1,643,643 | ||||||
1.629% 1/9/20 • | 1,435,000 | 1,450,472 | ||||||
1.963% 3/15/23 • | 1,050,000 | 1,061,933 | ||||||
144A 3.80% 6/18/19 # | 250,000 | 260,943 | ||||||
6.00% 8/7/19 | 215,000 | 237,285 | ||||||
SMBC Aviation Capital Finance 144A 2.65% 7/15/21 # | 215,000 | 208,580 | ||||||
SUAM Finance 144A 4.875% 4/17/24 # | 100,000 | 104,000 | ||||||
|
| |||||||
7,559,035 | ||||||||
|
| |||||||
Insurance – 0.31% | ||||||||
MetLife 5.25% 12/29/49 • | 375,000 | 384,375 | ||||||
Prudential Financial 5.375% 5/15/45 • | 295,000 | 304,588 | ||||||
XLIT 6.50% 12/29/49 • | 250,000 | 211,250 | ||||||
|
| |||||||
900,213 | ||||||||
|
| |||||||
Natural Gas – 1.09% | ||||||||
Enbridge 1.384% 6/2/17 • | 1,800,000 | 1,800,594 | ||||||
Enterprise Products Operating 7.034% 1/15/68 • | 80,000 | 83,586 | ||||||
Spire 1.656% 8/15/17 • | 1,320,000 | 1,320,727 | ||||||
|
| |||||||
3,204,907 | ||||||||
|
| |||||||
Real Estate – 1.86% | ||||||||
American Tower 2.25% 1/15/22 | 1,065,000 | 1,020,759 | ||||||
Corporate Office Properties | ||||||||
3.60% 5/15/23 | 225,000 | 219,094 | ||||||
5.25% 2/15/24 | 575,000 | 605,918 | ||||||
Crown Castle International 5.25% 1/15/23 | 1,075,000 | 1,171,804 | ||||||
Education Realty Operating Partnership 4.60% 12/1/24 | 465,000 | 467,901 | ||||||
Hospitality Properties Trust 4.50% 3/15/25 | 460,000 | 450,250 | ||||||
Host Hotels & Resorts 3.75% 10/15/23 | 1,100,000 | 1,095,897 | ||||||
WP Carey 4.60% 4/1/24 | 400,000 | 409,588 | ||||||
|
| |||||||
5,441,211 | ||||||||
|
| |||||||
Technology – 1.33% | ||||||||
Alibaba Group Holding 3.125% 11/28/21 | 200,000 | 201,267 | ||||||
Analog Devices 2.50% 12/5/21 | 1,190,000 | 1,179,025 | ||||||
Broadcom 144A 3.00% 1/15/22 # | 860,000 | 857,113 |
10 |
Table of Contents
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Technology (continued) | ||||||||
Knowles 144A 3.25% 11/1/21 # | 26,000 | $ | 31,687 | |||||
Microsoft | ||||||||
2.40% 2/6/22 | 85,000 | 85,024 | ||||||
2.875% 2/6/24 | 100,000 | 99,849 | ||||||
National Semiconductor 6.60% 6/15/17 | 310,000 | 316,313 | ||||||
NXP 144A 4.125% 6/1/21 # | 400,000 | 413,960 | ||||||
ON Semiconductor 1.00% 12/1/20 | 23,000 | 24,308 | ||||||
PROS Holdings 2.00% 12/1/19 | 41,000 | 40,846 | ||||||
Samsung Electronics America 144A 1.75% 4/10/17 # | 500,000 | 500,348 | ||||||
Tech Data 3.70% 2/15/22 | 90,000 | 89,834 | ||||||
Verint Systems 1.50% 6/1/21 | 48,000 | 45,630 | ||||||
|
| |||||||
3,885,204 | ||||||||
|
| |||||||
Telecommunications – 0.06% | ||||||||
Digicel Group 144A 7.125% 4/1/22 # | 200,000 | 161,018 | ||||||
|
| |||||||
161,018 | ||||||||
|
| |||||||
Transportation – 0.69% | ||||||||
Air Canada 2015-1 Class A Pass Through Trust 144A | ||||||||
3.60% 3/15/27 # ◆ | 225,657 | 223,683 | ||||||
American Airlines 2014-1 Class A Pass Through Trust | ||||||||
3.70% 10/1/26 ◆ | 225,775 | 226,340 | ||||||
Aviation Capital Group 144A 2.875% 9/17/18 # | 90,000 | 91,237 | ||||||
Penske Truck Leasing 144A 3.375% 2/1/22 # | 1,170,000 | 1,183,317 | ||||||
United Airlines 2014-1 Class A Pass Through Trust | ||||||||
4.00% 4/11/26 ◆ | 183,043 | 188,077 | ||||||
United Airlines 2014-2 Class A Pass Through Trust | ||||||||
3.75% 9/3/26 ◆ | 103,656 | 105,210 | ||||||
|
| |||||||
2,017,864 | ||||||||
|
| |||||||
Total Corporate Bonds (cost $127,381,681) | 127,824,100 | |||||||
|
| |||||||
| ||||||||
Municipal Bonds – 2.06% | ||||||||
| ||||||||
Missouri Higher Education Loan Authority | ||||||||
Series 2010-2 A-1 0.00% 8/27/29 • | 25,286 | 25,023 | ||||||
New Mexico Educational Assistance Foundation (Libor Floating) | ||||||||
Series 2010-1 A-3 2.131% 12/1/38 • | 120,000 | 122,905 | ||||||
North Texas Higher Education Authority Student Loan Revenue (Libor Floating) | ||||||||
Series 2010-1 A-2 1.898% 7/1/30 • | 45,000 | 45,121 | ||||||
Series 2011-1 A 2.098% 4/1/40 • | 178,384 | 180,252 | ||||||
Oklahoma Student Loan Authority (Libor-Indexed) | ||||||||
Series 2010-A A-2A 1.835% 9/1/37 • | 80,000 | 81,396 | ||||||
Series 2011-1 A-1 2.081% 6/1/40 • | 423,093 | 420,326 |
11 |
Table of Contents
Schedule of investments | ||
Delaware Floating Rate Fund |
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Municipal Bonds (continued) | ||||||||
| ||||||||
Pennsylvania Turnpike Commission | ||||||||
Series B-1 1.63% 12/1/21 • | 1,160,000 | $ | 1,156,265 | |||||
State of California | ||||||||
Series D 1.246% 12/1/28 • | 2,000,000 | 2,003,220 | ||||||
University of California | ||||||||
Series Y-1 1.28% 7/1/41 •
|
| 2,000,000
|
|
| 1,999,240
|
| ||
|
| |||||||
Total Municipal Bonds (cost $6,031,738) | 6,033,748 | |||||||
|
| |||||||
| ||||||||
Non-Agency Asset-Backed Securities – 3.28% | ||||||||
| ||||||||
American Express Credit Account Master Trust | ||||||||
Series 2013-1 A 1.188% 2/16/21 • | 500,000 | 501,444 | ||||||
Chesapeake Funding | ||||||||
Series 2014-1A A 144A 1.186% 3/7/26 #• | 85,845 | 85,579 | ||||||
Citibank Credit Card Issuance Trust | ||||||||
Series 2013-A7 A7 1.193% 9/10/20 • | 800,000 | 802,694 | ||||||
Discover Card Execution Note Trust | ||||||||
Series 2013-A1 A1 1.068% 8/17/20 • | 675,000 | 675,740 | ||||||
Series 2014-A1 A1 1.198% 7/15/21 • | 1,300,000 | 1,304,538 | ||||||
Series 2015-A1 A1 1.117% 8/17/20 • | 250,000 | 250,367 | ||||||
Ford Credit Auto Owner Trust | ||||||||
Series 2016-C A2B 0.908% 9/15/19 • | 2,400,000 | 2,400,057 | ||||||
Ford Credit Floorplan Master Owner Trust A | ||||||||
Series 2014-1 A2 1.168% 2/15/19 • | 2,000,000 | 2,000,130 | ||||||
Golden Credit Card Trust | ||||||||
Series 2015-1A A 144A 1.208% 2/15/20 #• | 300,000 | 300,417 | ||||||
Hertz Fleet Lease Funding | ||||||||
Series 2014-1 A 144A 1.163% 4/10/28 #• | 66,422 | 66,394 | ||||||
Nissan Auto Lease Trust | ||||||||
Series 2016-B A2B 1.048% 12/17/18 • | 350,000 | 350,265 | ||||||
Nissan Auto Receivables Owner Trust | ||||||||
Series 2016-B A2B 1.068% 4/15/19 • | 379,065 | 379,276 | ||||||
PFS Financing | ||||||||
Series 2015-AA A 144A 1.388% 4/15/20 #• | 500,000 | 499,123 | ||||||
|
| |||||||
Total Non-Agency Asset-Backed Securities | 9,616,024 | |||||||
|
| |||||||
| ||||||||
Loan Agreements – 44.22%« | ||||||||
| ||||||||
Accudyne Industries Borrower 1st Lien 4.00% 12/13/19 | 1,459,227 | 1,385,719 | ||||||
Air Medical Group Holdings Tranche B 1st Lien | ||||||||
4.25% 4/28/22 | 1,248,394 | 1,246,444 | ||||||
Albertsons Tranche B 1st Lien 3.778% 8/25/21 | 1,092,711 | 1,099,814 | ||||||
Allied Universal Holdco 1st Lien 5.50% 7/28/22 | 1,177,777 | 1,187,788 |
12 |
Table of Contents
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Loan Agreements« (continued) | ||||||||
| ||||||||
Allied Universal Holdco Tranche DD 1st Lien | ||||||||
4.50% 7/28/22 | 233,974 | $ | 235,963 | |||||
Amaya Holdings 1st Lien 5.00% 8/1/21 | 2,078,281 | 2,092,569 | ||||||
American Airlines Tranche B 1st Lien 3.267% 12/14/23 | 433,659 | 436,694 | ||||||
Applied Systems 1st Lien 4.00% 1/23/21 | 249,331 | 251,512 | ||||||
Applied Systems 2nd Lien 7.50% 1/23/22 | 2,708,900 | 2,732,039 | ||||||
ATI Holdings Acquisition Tranche 1st Lien 5.50% 5/10/23 | 616,900 | 622,941 | ||||||
Atotech Tranche B1 1st Lien 4.00% 1/25/24 | 240,000 | 241,650 | ||||||
Avolon TLB Borrower 1 US Tranche B2 1st Lien | ||||||||
3.50% 1/20/22 | 590,000 | 598,235 | ||||||
BJ’s Wholesale Club 2nd Lien | ||||||||
8.50% 3/31/20 | 1,510,570 | 1,518,123 | ||||||
8.50% 1/27/25 | 1,232,000 | 1,253,560 | ||||||
BJ’s Wholesale Club Tranche B 1st Lien 4.75% 1/27/24 | 765,000 | 767,550 | ||||||
Blue Ribbon Tranche 1st Lien 5.00% 11/13/21 | 1,227,940 | 1,216,812 | ||||||
Boyd Gaming Tranche B2 1st Lien 3.776% 9/15/23 | 354,113 | 357,906 | ||||||
Builders FirstSource Tranche B 1st Lien 4.75% 7/31/22 | 2,431,570 | 2,443,222 | ||||||
BWAY Holding Tranche B 1st Lien 4.75% 8/14/23 | 1,421,438 | 1,434,911 | ||||||
Caesars Growth Properties Holdings Tranche B 1st Lien | ||||||||
6.25% 5/8/21 | 1,147,059 | 1,157,813 | ||||||
Calpine Construction Finance 3.02% 5/3/20 | 244,367 | 244,927 | ||||||
Calpine Tranche B 1st Lien 3.75% 1/15/23 | 747,450 | 752,356 | ||||||
CH Hold 1st Lien 4.00% 2/1/24 | 535,000 | 540,350 | ||||||
CH Hold 2nd Lien 8.25% 2/1/25 | 1,620,000 | 1,644,300 | ||||||
Change Healthcare Holdings 1st Lien 3.75% 11/2/18 | 2,000,787 | 2,005,581 | ||||||
Charter Communications Operating 1st Lien | ||||||||
3.264% 1/15/24 | 519,078 | 521,580 | ||||||
Charter Communications Operating Tranche F | ||||||||
3.00% 1/3/21 | 930,623 | 933,402 | ||||||
3.00% 7/1/20 | 501,198 | 502,974 | ||||||
Charter Communications Operating Tranche H 1st Lien | ||||||||
2.776% 1/15/22 | 172,695 | 173,158 | ||||||
Chesapeake Energy Tranche B 1st Lien 8.50% 8/23/21 | 590,000 | 646,603 | ||||||
CityCenter Holdings Tranche B 1st Lien 4.25% 10/16/20 | 593,844 | 601,329 | ||||||
Colouroz (Flint Group) 1st Lien 4.50% 9/7/21 | 524,270 | 525,580 | ||||||
Colouroz (Flint Group) Tranche C 1st Lien 4.50% 9/7/21 | 86,668 | 87,426 | ||||||
Communications Sale & Leasing Tranche B 1st Lien | ||||||||
4.50% 10/24/22 | 715,938 | 724,525 | ||||||
Community Health Systems Tranche F 1st Lien | ||||||||
4.185% 12/31/18 | 538,224 | 531,982 | ||||||
Community Health Systems Tranche H 1st Lien | ||||||||
4.00% 1/27/21 | 109,649 | 103,961 | ||||||
CSC Holdings Tranche B 1st Lien 3.767% 10/11/24 | 410,156 | 415,347 | ||||||
DaVita Tranche B 1st Lien 3.50% 6/24/21 | 1,399,125 | 1,419,456 |
13 |
Table of Contents
Schedule of investments | ||
Delaware Floating Rate Fund |
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Loan Agreements« (continued) | ||||||||
| ||||||||
Dell International Tranche B 1st Lien 4.00% 9/7/23 | 1,022,438 | $ | 1,032,396 | |||||
Dynegy Finance IV 1st Lien 5.00% 6/27/23 | 660,000 | 665,952 | ||||||
Dynegy Finance IV Tranche C 1st Lien 4.25% 2/7/24 | 125,000 | 126,127 | ||||||
ESH Hospitality Tranche B 1st Lien 3.78% 8/30/23 | 294,263 | 296,627 | ||||||
ExamWorks Group Tranche 1st Lien 6.50% 7/27/23 | 1,082,288 | 1,087,293 | ||||||
First Data 1st Lien | ||||||||
3.584% 3/24/21 | 1,200,087 | 1,208,057 | ||||||
3.775% 7/10/22 | 849,921 | 856,523 | ||||||
First Eagle Holdings Tranche B 1st Lien 4.998% 12/1/22 | 1,982,045 | 1,999,388 | ||||||
Flint Group 2nd Lien 8.25% 9/7/22 | 250,000 | 248,750 | ||||||
Flying Fortress Tranche B 1st Lien 3.248% 10/30/22 | 275,000 | 277,200 | ||||||
FMG Resources August 2006 1st Lien 3.75% 6/30/19 | 1,527,291 | 1,538,109 | ||||||
Forterra Finance 1st Lien 4.50% 10/25/23 | 1,950,113 | 1,973,880 | ||||||
Frank Russell Tranche B 1st Lien 6.75% 6/1/23 | 2,212,508 | 2,252,610 | ||||||
Gardner Denver 1st Lien 4.568% 7/30/20 | 1,868,299 | 1,850,200 | ||||||
Gates Global 1st Lien 4.25% 7/6/21 | 1,181,665 | 1,180,558 | ||||||
Genesys Telecommunications Laboratories Tranche B 1st | ||||||||
Lien 6.25% 12/1/23 | 935,000 | 946,542 | ||||||
Genoa a QoL Healthcare 1st Lien 4.75% 10/28/23 | 997,500 | 1,004,108 | ||||||
Green Energy Partners/Stonewall Tranche B 1st Lien | ||||||||
6.50% 11/13/21 | 568,000 | 565,160 | ||||||
HCA Tranche B6 1st Lien 4.028% 3/17/23 | 200,485 | 202,631 | ||||||
HCA Tranche B7 1st Lien 3.528% 2/9/24 | 280,298 | 282,675 | ||||||
Hilton Worldwide Finance Tranche B1 1st Lien | ||||||||
3.50% 10/26/20 | 130,722 | 131,948 | ||||||
Hilton Worldwide Finance Tranche B2 1st Lien | ||||||||
3.271% 10/25/23 | 1,777,321 | 1,797,731 | ||||||
Houghton International 1st Lien 4.25% 12/20/19 | 1,108,824 | 1,118,526 | ||||||
HUB International Tranche B 1st Lien 4.00% 10/2/20 | 545,000 | 547,214 | ||||||
Hyperion Insurance Group Tranche B 1st Lien | ||||||||
5.50% 4/29/22 | 1,334,454 | 1,341,460 | ||||||
IASIS Healthcare Tranche B 1st Lien 4.50% 5/3/18 | 683,027 | 681,381 | ||||||
Immucor Tranche B2 1st Lien 5.00% 8/17/18 | 322 | 314 | ||||||
Ineos U.S. Finance Tranche B 1st Lien | ||||||||
3.75% 12/15/20 | 537,077 | 540,194 | ||||||
4.25% 3/31/22 | 800,730 | 807,070 | ||||||
InVentiv Group Holdings Tranche B 1st Lien | ||||||||
4.75% 11/9/23 | 850,000 | 857,362 | ||||||
JBS USA Lux Tranche B 1st Lien 3.25% 10/30/22 | 2,925,000 | 2,939,625 | ||||||
JC Penney Tranche B 1st Lien 5.25% 6/23/23 | 1,476,944 | 1,483,098 | ||||||
Keurig Green Mountain Tranche B 1st Lien 5.31% 3/3/23 | 509,109 | 517,443 | ||||||
KIK Custom Products 1st Lien 6.00% 8/26/22 | 1,779,745 | 1,799,768 | ||||||
Kinetic Concepts Tranche F1 1st Lien 5.00% 11/4/20 | 581,738 | 583,435 | ||||||
KRATON Polymers Tranche B 1st Lien 5.00% 1/6/22 | 1,335,000 | 1,352,773 |
14 |
Table of Contents
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Loan Agreements« (continued) | ||||||||
| ||||||||
Kronos 2nd Lien 9.284% 11/1/24 | 680,000 | $ | 703,588 | |||||
Kronos Tranche B 1st Lien 5.00% 11/1/23 | 490,000 | 495,652 | ||||||
Landry’s 4.00% 10/4/23 | 650,000 | 657,080 | ||||||
Las Vegas Sands Tranche B 1st Lien 3.02% 12/19/20 | 648,329 | 652,381 | ||||||
Level 3 Financing Tranche B 1st Lien 4.00% 1/15/20 | 2,365,000 | 2,384,216 | ||||||
Lightstone Generation Tranche B 1st Lien 6.50% 1/30/24 | 461,087 | 467,499 | ||||||
Lightstone Generation Tranche C 1st Lien 6.50% 12/14/23 | 43,913 | 44,524 | ||||||
LTS Buyer 1st Lien 4.248% 4/13/20 | 168,875 | 170,352 | ||||||
MGM Growth Properties Operating Partnership Tranche B | ||||||||
1st Lien 3.52% 4/25/23 | 749,338 | 755,426 | ||||||
Micron Technology Tranche B 1st Lien 4.53% 4/26/22 | 747,497 | 759,332 | ||||||
Mohegan Tribal Gaming Authority Tranche B 1st Lien | ||||||||
5.50% 10/13/23 | 1,236,349 | 1,248,327 | ||||||
Moran Foods Tranche B 1st Lien 7.00% 12/5/23 | 1,565,000 | 1,560,109 | ||||||
MPH Acquisition Holdings 5.00% 6/7/23 | 965,072 | 979,774 | ||||||
Nature’s Bounty Tranche B 1st Lien 5.00% 5/5/23 | 944,245 | 952,113 | ||||||
Novolex 1st Lien 4.25% 12/29/23 | 260,000 | 262,478 | ||||||
NXP Tranche B 1st Lien 3.27% 12/7/20 | 444,885 | 447,573 | ||||||
ON Semiconductor Tranche B 1st Lien 4.028% 3/31/23 | 1,057,350 | 1,069,612 | ||||||
Optiv Security 1st Lien 4.25% 2/1/24 | 60,000 | 60,450 | ||||||
Optiv Security 2nd Lien 8.25% 2/1/25 | 650,000 | 658,666 | ||||||
Panda Hummel Tranche B1 1st Lien 7.00% 10/27/22 | 295,000 | 289,100 | ||||||
Panda Liberty Tranche B 1st Lien 7.50% 8/21/20 | 523,282 | 514,125 | ||||||
Penn National Gaming Tranche B 1st Lien 3.25% 1/19/24 | 250,000 | 251,250 | ||||||
Petco Animal Supplies Tranche B 1st Lien 5.00% 1/26/23 | 538,150 | 539,009 | ||||||
PQ 1st Lien 5.289% 11/4/22 | 1,450,719 | 1,469,889 | ||||||
Prestige Brands Tranche B 1st Lien 3.523% 1/26/24 | 245,000 | 247,833 | ||||||
Prospect Medical Holdings Tranche B 1st Lien | ||||||||
7.00% 6/30/22 | 470,225 | 469,049 | ||||||
Protection 1 1st Lien 4.25% 5/2/22 | 673,313 | 681,886 | ||||||
RCN Grande 1st Lien 3.75% 2/1/23 | 740,000 | 746,872 | ||||||
Revlon Consumer Products Tranche B 1st Lien | ||||||||
4.278% 9/7/23 | 743,463 | 750,940 | ||||||
Reynolds Group Holdings 1st Lien 4.25% 2/5/23 | 1,508,681 | 1,515,439 | ||||||
Sable International Finance Tranche B 1st Lien | ||||||||
5.528% 1/3/23 | 1,925,000 | 1,948,060 | ||||||
SAM Finance Tranche B 1st Lien 4.25% 12/17/20 | 550,294 | 554,078 | ||||||
Scientific Games International 6.00% 10/18/20 | 2,007,429 | 2,029,510 | ||||||
Seminole Tribe of Florida Tranche B 3.248% 4/29/20 | 737,500 | 739,690 | ||||||
SFR Group Tranche B 1st Lien 5.29% 1/15/24 | 1,617,775 | 1,634,964 | ||||||
SFR Group Tranche B10 1st Lien 4.29% 1/31/25 | 892,763 | 900,813 | ||||||
Sinclair Television Group Tranche B2 1st Lien | ||||||||
3.03% 1/3/24 | 600,000 | 602,697 | ||||||
Solera Tranche B 1st Lien 5.75% 3/3/23 | 1,357,763 | 1,373,697 |
15 |
Table of Contents
Schedule of investments | ||
Delaware Floating Rate Fund |
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Loan Agreements« (continued) | ||||||||
| ||||||||
Spectrum Brands Tranche B 1st Lien 3.313% 6/23/22 | 394,272 | $ | 399,310 | |||||
Sprint Communications Tranche B 1st Lien 3.25% 2/29/24 | 4,500,000 | 4,500,000 | ||||||
StandardAero Aviation Holdings 1st Lien 5.25% 7/7/22 | 577,688 | 581,749 | ||||||
Summit Materials Tranche B1 3.75% 7/17/22 | 576,225 | 582,528 | ||||||
SUPERVALU 1st Lien 5.50% 3/21/19 | 158,660 | 159,872 | ||||||
Telenet Financing USD Tranche B 1st Lien | ||||||||
3.767% 1/31/25 | 1,705,000 | 1,723,724 | ||||||
Tennessee Merger Sub Tranche B 1st Lien 3.75% 2/6/24 | 1,000,000 | 1,000,000 | ||||||
TKC Holdings 1st Lien 4.75% 1/13/23 | 2,000,000 | 1,990,000 | ||||||
TransDigm Tranche E 1st Lien 3.998% 5/14/22 | 197,087 | 196,791 | ||||||
TransDigm Tranche F 1st Lien 3.778% 6/9/23 | 1,819,542 | 1,817,722 | ||||||
Travel Leaders Group Tranche B 1st Lien 5.25% 1/19/24 | 245,000 | 248,675 | ||||||
Tribune Media Tranche B 1st Lien 3.75% 12/27/20 | 576,225 | 579,553 | ||||||
Tronox Pigments Holland Tranche B 1st Lien 4.50% 3/19/20 | 635,000 | 637,092 | ||||||
Univar USA Tranche B 1st Lien | ||||||||
3.519% 7/1/22 | 1,840,000 | 1,839,233 | ||||||
4.25% 7/1/22 | 184,663 | 184,720 | ||||||
Univision Communications 1st Lien 4.00% 3/1/20 | 952,277 | 954,956 | ||||||
Univision Communications Tranche C4 1st Lien | ||||||||
4.00% 3/1/20 | 1,774,277 | 1,780,314 | ||||||
USI Tranche B 1st Lien 4.25% 12/27/19 | 1,371,087 | 1,376,801 | ||||||
USIC Holdings 1st Lien 4.75% 12/9/23 | 950,000 | 961,133 | ||||||
Virgin Media Bristol Tranche I 1st Lien 3.517% 1/31/25 | 820,000 | 826,150 | ||||||
Vistra Operations Tranche B2 1st Lien 4.017% 8/4/23 | 260,000 | 262,828 | ||||||
Western Digital Tranche B 1st Lien 4.526% 4/29/23 | 700,480 | 709,674 | ||||||
WideOpenWest Finance Tranche B 1st Lien | ||||||||
4.50% 8/19/23 | 1,187,029 | 1,197,268 | ||||||
Windstream Services 1st Lien 4.75% 12/2/23 | 450,000 | 455,738 | ||||||
Windstream Services Tranche B6 1st Lien 4.75% 3/30/21 | 817,166 | 827,584 | ||||||
Zayo Group Tranche B2 1st Lien 3.50% 1/19/24 | 170,000 | 171,806 | ||||||
Zayo Group Tranche B3 1st Lien 3.50% 1/19/24 | 80,000 | 80,850 | ||||||
Zekelman Industries Tranche 1st Lien 6.00% 6/14/21 | 507,450 | 513,635 | ||||||
Zekelman Industries Tranche B 1st Lien 4.75% 6/14/21 | 603,636 | 603,636 | ||||||
|
| |||||||
Total Loan Agreements (cost $127,624,409) | 129,501,625 | |||||||
|
| |||||||
| ||||||||
Sovereign Bonds – 0.66%D | ||||||||
| ||||||||
Argentina – 0.08% | ||||||||
Argentine Republic Government International Bond 144A | ||||||||
5.625% 1/26/22 # | 225,000 | 225,844 | ||||||
|
| |||||||
225,844 | ||||||||
|
|
16 |
Table of Contents
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Sovereign BondsD (continued) | ||||||||
| ||||||||
Brazil – 0.07% | ||||||||
Brazilian Government International Bond | ||||||||
4.875% 1/22/21 | 195,000 | $ | 203,287 | |||||
|
| |||||||
203,287 | ||||||||
|
| |||||||
Croatia – 0.07% | ||||||||
Croatia Government International Bond 144A | ||||||||
6.375% 3/24/21 # | 200,000 | 219,250 | ||||||
|
| |||||||
219,250 | ||||||||
|
| |||||||
India – 0.07% | ||||||||
Export-Import Bank of India | ||||||||
3.125% 7/20/21 | 210,000 | 210,091 | ||||||
|
| |||||||
210,091 | ||||||||
|
| |||||||
Qatar – 0.11% | ||||||||
Qatar Government International Bond 144A | ||||||||
2.375% 6/2/21 # | 315,000 | 311,535 | ||||||
|
| |||||||
311,535 | ||||||||
|
| |||||||
Saudi Arabia – 0.07% | ||||||||
Saudi Government International Bond 144A | ||||||||
2.375% 10/26/21 # | 200,000 | 194,980 | ||||||
|
| |||||||
194,980 | ||||||||
|
| |||||||
South Africa – 0.05% | ||||||||
Republic of South Africa Government International Bond | ||||||||
5.875% 5/30/22 | 140,000 | 153,979 | ||||||
|
| |||||||
153,979 | ||||||||
|
| |||||||
Sri Lanka – 0.08% | ||||||||
Sri Lanka Government International Bond 144A | ||||||||
5.75% 1/18/22 # | 225,000 | 225,994 | ||||||
|
| |||||||
225,994 | ||||||||
|
| |||||||
Turkey – 0.06% | ||||||||
Export Credit Bank of Turkey | ||||||||
144A 5.375% 10/24/23 # | 200,000 | 190,630 | ||||||
|
| |||||||
190,630 | ||||||||
|
| |||||||
Total Sovereign Bonds (cost $1,947,865) | 1,935,590 | |||||||
|
| |||||||
| ||||||||
Supranational Bank – 0.92% | ||||||||
| ||||||||
Inter-American Development Bank 1.243% 10/15/20 • | 2,680,000 | 2,691,773 | ||||||
|
| |||||||
Total Supranational Bank (cost $2,670,927) | 2,691,773 | |||||||
|
| |||||||
Number of shares | ||||||||
| ||||||||
Convertible Preferred Stock – 0.02% | ||||||||
| ||||||||
DTE Energy 6.50% exercise price $116.31, expiration date 10/1/19 | 489 | 25,932 | ||||||
El Paso Energy Capital Trust I 4.75% exercise price $50.00, expiration date 3/31/28 | 365 | 18,159 |
17 |
Table of Contents
Schedule of investments | ||
Delaware Floating Rate Fund |
| Number of shares |
| Value (U.S. $) | |||||
| ||||||||
Convertible Preferred Stock (continued) | ||||||||
| ||||||||
Teva Pharmaceutical Industries 7.00% exercise price $75.00, expiration date 12/15/18 | 17 | $ | 10,482 | |||||
|
| |||||||
Total Convertible Preferred Stock (cost $55,784) | 54,573 | |||||||
|
| |||||||
| ||||||||
Preferred Stock – 1.72% | ||||||||
| ||||||||
General Electric 5.00% • | 864,000 | 896,832 | ||||||
Integrys Holdings 6.00% • | 14,900 | 384,606 | ||||||
PNC Preferred Funding Trust II 144A 2.186% #• | 2,500,000 | 2,415,625 | ||||||
USB Realty 144A 2.169% #• | 1,600,000 | 1,352,000 | ||||||
|
| |||||||
Total Preferred Stock (cost $5,061,823) | 5,049,063 | |||||||
|
| |||||||
Principal amount° | ||||||||
| ||||||||
Short-Term Investments – 3.67% | ||||||||
| ||||||||
Discount Notes – 1.67%≠ | ||||||||
Federal Home Loan Bank | ||||||||
0.00% 2/1/17 | 3,381,019 | 3,381,019 | ||||||
0.495% 2/24/17 | 80,619 | 80,599 | ||||||
0.505% 3/10/17 | 69,870 | 69,834 | ||||||
0.511% 2/15/17 | 10,969 | 10,968 | ||||||
0.514% 2/6/17 | 32,908 | 32,906 | ||||||
0.52% 2/10/17 | 452,331 | 452,287 | ||||||
0.52% 2/27/17 | 678,496 | 678,305 | ||||||
0.521% 3/24/17 | 109,167 | 109,090 | ||||||
0.53% 4/25/17 | 87,338 | 87,233 | ||||||
|
| |||||||
4,902,241 | ||||||||
|
| |||||||
Repurchase Agreements – 1.96% | ||||||||
Bank of America Merrill Lynch | ||||||||
0.47%, dated 1/31/17, to be repurchased on 2/1/17, repurchase price $2,458,359 (collateralized by U.S.government obligations 3.00% 11/15/44; market value $2,507,493) | 2,458,327 | 2,458,327 | ||||||
Bank of Montreal | ||||||||
0.46%, dated 1/31/17, to be repurchased on 2/1/17, repurchase price $2,458,358 (collateralized by U.S.government obligations 0.00%–2.00% | ||||||||
8/31/20–5/15/40; market value $2,507,494) | 2,458,327 | 2,458,327 | ||||||
BNP Paribas | ||||||||
0.51%, dated 1/31/17, to be repurchased on 2/1/17, repurchase price $819,454 (collateralized by U.S.government obligations 0.00%–3.125% 1/31/23–8/15/45; market value $835,831) | 819,442 | 819,442 | ||||||
|
| |||||||
5,736,096 | ||||||||
|
|
18 |
Table of Contents
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Short-Term Investments (continued) | ||||||||
| ||||||||
U.S. Treasury Obligation – 0.04%≠ | ||||||||
U.S. Treasury Bill 0.465% 2/9/17 | 100,774 | $ | 100,764 | |||||
|
| |||||||
100,764 | ||||||||
|
| |||||||
Total Short-Term Investments (cost $10,739,011) | 10,739,101 | |||||||
|
| |||||||
Total Value of Securities – 105.11% | ||||||||
(cost $305,428,809) | $ | 307,850,112 | ||||||
|
|
# | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At Jan. 31, 2017, the aggregate value of Rule 144A securities was $44,809,616, which represents 15.30% of the Fund’s net assets. See Note 9 in “Notes to financial statements.” |
◆ | Pass Through Agreement. Security represents the contractual right to receive a proportionate amount of underlying payments due to the counterparty pursuant to various agreements related to the rescheduling of obligations and the exchange of certain notes. |
≠ | The rate shown is the effective yield at the time of purchase. |
« | Loan agreements generally pay interest at rates which are periodically reset by reference to a base lending rate plus a premium. These base lending rates are generally: (i) the prime rate offered by one or more U.S. banks, (ii) the lending rate offered by one or more European banks such as the London Interbank Offered Rate (LIBOR), and (iii) the certificate of deposit rate. Loan agreements may be subject to restrictions on resale. Stated rate in effect at Jan. 31, 2017. |
° | Principal amount shown is stated in U.S. dollars unless noted that the security is denominated in another currency. |
D | Securities have been classified by country of origin. |
• | Variable rate security. Each rate shown is as of Jan. 31, 2017. Interest rates reset periodically. |
f | Step coupon bond. Coupon increases or decreases periodically based on a predetermined schedule. Stated rate in effect at Jan. 31, 2017. |
The following swap contracts were outstanding at Jan. 31, 2017:1
Swap Contracts
Interest Rate Swap Contracts2
Counterparty & Swap Referenced Obligation | Notional Value3 | Fixed Interest Rate Received (Paid) | Variable Interest Rate Received (Paid) | Termination Date | Unrealized Appreciation (Depreciation)4 | |||||||||
CME - BAML 10 yr | 3,065,000 | 1.687% | 1.035% | 4/5/26 | $ | 170,356 | ||||||||
CME - BAML 3 yr | 14,250,000 | 0.978% | 1.035% | 4/6/19 | 169,991 | |||||||||
CME - BAML 5 yr | 12,165,000 | 1.883% | 1.035% | 12/5/21 | 51,014 | |||||||||
CME - BAML 5 yr | 14,830,000 | 1.199% | 1.035% | 4/6/21 | 412,911 | |||||||||
CME - BAML 7 yr | 7,855,000 | 1.416% | 1.035% | 4/6/23 | 321,614 |
19 |
Table of Contents
Schedule of investments | ||
Delaware Floating Rate Fund |
Counterparty & Swap Referenced Obligation | Notional Value3 | Fixed Interest Rate Received (Paid) | Variable Interest Rate Received (Paid) | Termination Date | Unrealized Appreciation (Depreciation)4 | |||||||||||||||
CME - BAML 5 yr | 9,580,000 | 1.191% | 1.035% | 8/9/21 | 310,728 | |||||||||||||||
|
| |||||||||||||||||||
$ | 1,436,614 | |||||||||||||||||||
|
|
The use of swap contracts involves elements of market risk and risks in excess of the amounts disclosed in the financial statements. The notional values presented above represent the Fund’s total exposure in such contracts, whereas only the net unrealized appreciation (depreciation) is reflected in the Fund’s net assets.
1 | See Note 6 in “Notes to financial statements.” |
2 | An interest rate swap agreement is an exchange of interest rates between counterparties. Periodic payments/(receipts) on such contracts are accrued daily and recorded as unrealized appreciation (depreciation) on swap contracts. Upon periodic payment (receipt) or termination of the contract, such amounts are recorded as realized gains (losses) on swap contracts. |
3 | Notional value shown is stated in U.S. dollars unless noted that the swap is denominated in another currency. |
4 | Unrealized appreciation (depreciation) does not include periodic interest payments on swap contracts accrued daily in the amount of $(180,159). |
Summary of abbreviations:
ARM – Adjustable Rate Mortgage
BAML – Bank of America Merrill Lynch
CLO – Collateralized Loan Obligation
CME – Chicago Mercantile Exchange Inc.
REMIC – Real Estate Mortgage Investment Conduit
UBS – Union Bank of Switzerland
yr – Year
See accompanying notes, which are an integral part of the financial statements.
20 |
Table of Contents
This page intentionally left blank.
Table of Contents
Statement of assets and liabilities | ||
Delaware Floating Rate Fund | January 31, 2017 (Unaudited) |
Assets: | ||||
Investments, at value1 | $ | 297,111,011 | ||
Short-term investments, at value2 | 10,739,101 | |||
Cash collateral due from brokers | 706,650 | |||
Receivable for securities sold | 9,425,882 | |||
Receivable for fund shares sold | 2,359,563 | |||
Dividends and interest receivable | 1,128,871 | |||
Swap payments receivable | 67,127 | |||
Unrealized appreciation on interest rate swap contracts | 1,436,614 | |||
|
| |||
Total assets | 322,974,819 | |||
|
| |||
Liabilities: | ||||
Cash overdraft | 1,298,833 | |||
Payable for securities purchased | 27,107,511 | |||
Payable for fund shares redeemed | 941,857 | |||
Swap payments payable | 245,900 | |||
Income distribution payable | 187,032 | |||
Investment management fees payable | 126,590 | |||
Other accrued expenses | 107,960 | |||
Distribution fees payable | 52,276 | |||
Audit and tax fees payable | 23,585 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 5,086 | |||
Accounting and administration expenses payable to affiliates | 1,186 | |||
Trustees’ fees and expenses payable | 884 | |||
Legal fees payable to affiliates | 505 | |||
Reports and statements to shareholders payable to affiliates | 302 | |||
|
| |||
Total liabilities | 30,099,507 | |||
|
| |||
Total Net Assets | $ | 292,875,312 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 305,582,159 | ||
Distributions in excess of net investment income | (807,074 | ) | ||
Accumulated net realized loss on investments | (15,577,531 | ) | ||
Net unrealized appreciation of investments | 2,421,303 | |||
Net unrealized appreciation of swap contracts | 1,256,455 | |||
|
| |||
Total Net Assets | $ | 292,875,312 | ||
|
|
22 |
Table of Contents
Net Asset Value | ||||
Class A: | ||||
Net assets | $ | 59,459,027 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 7,114,726 | |||
Net asset value per share | $ | 8.36 | ||
Sales charge | 2.75 | % | ||
Offering price per share, equal to net asset value per share/(1 – sales charge) | $ | 8.60 | ||
Class C: | ||||
Net assets | $ | 45,710,404 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 5,471,048 | |||
Net asset value per share | $ | 8.35 | ||
Class R: | ||||
Net assets | $ | 485,822 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 58,157 | |||
Net asset value per share | $ | 8.35 | ||
Institutional Class: | ||||
Net assets | $ | 187,220,059 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 22,408,280 | |||
Net asset value per share | $ | 8.35 | ||
1 Investments, at cost | $ | 294,689,798 | ||
2 Short-term investments, at cost | 10,739,011 |
See accompanying notes, which are an integral part of the financial statements.
23 |
Table of Contents
Statement of operations | ||
Delaware Floating Rate Fund | Six months ended January 31, 2017 (Unaudited) |
Investment Income: | ||||
Interest | $ | 4,329,371 | ||
Dividends | 12,800 | |||
Foreign tax withheld | (45 | ) | ||
|
| |||
4,342,126 | ||||
|
| |||
Expenses: | ||||
Management fees | 737,105 | |||
Distribution expenses – Class A | 72,422 | |||
Distribution expenses – Class C | 244,352 | |||
Distribution expenses – Class R | 1,250 | |||
Dividend disbursing and transfer agent fees and expenses | 128,008 | |||
Accounting and administration expenses | 46,181 | |||
Registration fees | 30,204 | |||
Audit and tax fees | 25,423 | |||
Legal fees | 21,237 | |||
Reports and statements to shareholders | 18,526 | |||
Custodian fees | 14,021 | |||
Trustees’ fees and expenses | 6,972 | |||
Other | 22,566 | |||
|
| |||
1,368,267 | ||||
Less expense paid indirectly | (124 | ) | ||
|
| |||
Total operating expenses | 1,368,143 | |||
|
| |||
Net Investment Income | 2,973,983 | |||
|
| |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 319,418 | |||
Swap contracts | (112,398 | ) | ||
|
| |||
Net realized gain | 207,020 | |||
|
| |||
Net change in unrealized appreciation (depreciation) of: | ||||
Investments | 456,807 | |||
Swap contracts | 1,804,546 | |||
|
| |||
Net change in unrealized appreciation (depreciation) | 2,261,353 | |||
|
| |||
Net Realized and Unrealized Gain | 2,468,373 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 5,442,356 | ||
|
|
See accompanying notes, which are an integral part of the financial statements.
24 |
Table of Contents
This page intentionally left blank.
Table of Contents
Statements of changes in net assets | ||
Delaware Floating Rate Fund |
Six months ended 1/31/17 | Year ended 7/31/16 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 2,973,983 | $ | 7,305,425 | ||||
Net realized gain (loss) | 207,020 | (13,226,320 | ) | |||||
Net change in unrealized appreciation (depreciation) | 2,261,353 | 4,797,273 | ||||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | 5,442,356 | (1,123,622 | ) | |||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Class A | (593,213 | ) | (1,115,437 | ) | ||||
Class C | (317,698 | ) | (490,673 | ) | ||||
Class R | (4,495 | ) | (6,519 | ) | ||||
Institutional Class | (2,150,683 | ) | (3,812,302 | ) | ||||
Return of capital: | ||||||||
Class A | — | (203,324 | ) | |||||
Class C | — | (180,280 | ) | |||||
Class R | — | (1,731 | ) | |||||
Institutional Class | — | (651,222 | ) | |||||
|
|
|
| |||||
(3,066,089 | ) | (6,461,488 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Class A | 14,687,792 | 10,978,370 | ||||||
Class C | 3,443,740 | 3,925,377 | ||||||
Class R | 2,039 | 34,265 | ||||||
Institutional Class | 51,722,866 | 133,445,745 | ||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | 536,286 | 1,222,620 | ||||||
Class C | 281,361 | 624,878 | ||||||
Class R | 4,408 | 8,250 | ||||||
Institutional Class | 1,793,510 | 3,297,673 | ||||||
|
|
|
| |||||
72,472,002 | 153,537,178 | |||||||
|
|
|
|
26 |
Table of Contents
Six months ended 1/31/17 (Unaudited) | Year ended 7/31/16 | |||||||
Capital Share Transactions (continued): | ||||||||
Cost of shares redeemed: | ||||||||
Class A | $ | (14,217,824 | ) | $ | (40,123,305 | ) | ||
Class C | (9,809,296 | ) | (24,433,394 | ) | ||||
Class R | (18,128 | ) | (109,897 | ) | ||||
Institutional Class | (53,480,725 | ) | (175,754,126 | ) | ||||
|
|
|
| |||||
(77,525,973 | ) | (240,420,722 | ) | |||||
|
|
|
| |||||
Decrease in net assets derived from capital share transactions | (5,053,971 | ) | (86,883,544 | ) | ||||
|
|
|
| |||||
Net Decrease in Net Assets | (2,677,704 | ) | (94,468,654 | ) | ||||
Net Assets: | ||||||||
Beginning of period | 295,553,016 | 390,021,670 | ||||||
|
|
|
| |||||
End of period | $ | 292,875,312 | $ | 295,553,016 | ||||
|
|
|
| |||||
Distributions in excess of net investment income | $ | (807,074 | ) | $ | (714,968 | ) | ||
|
|
|
| |||||
See accompanying notes, which are an integral part of the financial statements.
27 |
Table of Contents
Delaware Floating Rate Fund Class A
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) |
Total from investment operations. |
Less dividends and distributions from: |
Net investment income |
Return of capital |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
|
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during some of the periods shown reflects a waiver by the manager and/or distributor. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
28 |
Table of Contents
Six months ended | ||||||||||||||||||||||||||||||||||||||||||||
1/31/171 (Unaudited) | Year ended | |||||||||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||
7/31/16 | 7/31/15 | 7/31/14 | 7/31/13 | 7/31/12 | ||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||
$ | 8.290 | $ | 8.420 | $ | 8.630 | $ | 8.600 | $ | 8.570 | $ | 8.590 | |||||||||||||||||||||||||||||||||
0.083 | 0.172 | 0.177 | 0.163 | 0.163 | 0.193 | |||||||||||||||||||||||||||||||||||||||
0.072 | (0.150 | ) | (0.208 | ) | 0.042 | 0.060 | (0.005 | ) | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
0.155 | 0.022 | (0.031 | ) | 0.205 | 0.223 | 0.188 | ||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
(0.085 | ) | (0.123 | ) | (0.168 | ) | (0.145 | ) | (0.175 | ) | (0.208 | ) | |||||||||||||||||||||||||||||||||
— | (0.029 | ) | (0.011 | ) | (0.030 | ) | (0.018 | ) | — | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
(0.085 | ) | (0.152 | ) | (0.179 | ) | (0.175 | ) | (0.193 | ) | (0.208 | ) | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
$ | 8.360 | $ | 8.290 | $ | 8.420 | $ | 8.630 | $ | 8.600 | $ | 8.570 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
1.88% | 0.29% | (0.35% | ) | 2.40% | 2.61% | 2.24% | ||||||||||||||||||||||||||||||||||||||
$ | 59,459 | $ | 57,985 | $ | 87,398 | $ | 158,691 | $ | 194,795 | $ | 49,009 | |||||||||||||||||||||||||||||||||
0.96% | 0.96% | 0.96% | 0.95% | 1.01% | 1.05% | |||||||||||||||||||||||||||||||||||||||
0.96% | 0.96% | 0.96% | 0.96% | 1.06% | 1.12% | |||||||||||||||||||||||||||||||||||||||
1.98% | 2.09% | 2.08% | 1.89% | 1.88% | 2.28% | |||||||||||||||||||||||||||||||||||||||
1.98% | 2.09% | 2.08% | 1.88% | 1.83% | 2.21% | |||||||||||||||||||||||||||||||||||||||
46% | 90% | 86% | 96% | 112% | 97% | |||||||||||||||||||||||||||||||||||||||
|
29 |
Table of Contents
Financial highlights
Delaware Floating Rate Fund Class C
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) |
Total from investment operations. |
Less dividends and distributions from: |
Net investment income |
Return of capital |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
|
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during some of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
30 |
Table of Contents
Six months ended | ||||||||||||||||||||||||||||||||||||||||||||
1/31/171 (Unaudited) | Year ended | |||||||||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||
7/31/16 | 7/31/15 | 7/31/14 | 7/31/13 | 7/31/12 | ||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||
$ | 8.290 | $ | 8.420 | $ | 8.630 | $ | 8.600 | $ | 8.570 | $ | 8.590 | |||||||||||||||||||||||||||||||||
0.052 | 0.110 | 0.113 | 0.098 | 0.098 | 0.130 | |||||||||||||||||||||||||||||||||||||||
0.062 | (0.150 | ) | (0.208 | ) | 0.042 | 0.060 | (0.006 | ) | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
0.114 | (0.040 | ) | (0.095 | ) | 0.140 | 0.158 | 0.124 | |||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
(0.054 | ) | (0.061 | ) | (0.104 | ) | (0.080 | ) | (0.110 | ) | (0.144 | ) | |||||||||||||||||||||||||||||||||
— | (0.029 | ) | (0.011 | ) | (0.030 | ) | (0.018 | ) | — | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
(0.054 | ) | (0.090 | ) | (0.115 | ) | (0.110 | ) | (0.128 | ) | (0.144 | ) | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
$ | 8.350 | $ | 8.290 | $ | 8.420 | $ | 8.630 | $ | 8.600 | $ | 8.570 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
1.38% | (0.46% | ) | (1.10% | ) | 1.64% | 1.85% | 1.47% | |||||||||||||||||||||||||||||||||||||
$ | 45,710 | $ | 51,400 | $ | 72,505 | $ | 100,779 | $ | 83,619 | $ | 25,495 | |||||||||||||||||||||||||||||||||
1.71% | 1.71% | 1.71% | 1.70% | 1.76% | 1.80% | |||||||||||||||||||||||||||||||||||||||
1.71% | 1.71% | 1.71% | 1.70% | 1.76% | 1.82% | |||||||||||||||||||||||||||||||||||||||
1.23% | 1.34% | 1.33% | 1.14% | 1.13% | 1.53% | |||||||||||||||||||||||||||||||||||||||
1.23% | 1.34% | 1.33% | 1.14% | 1.13% | 1.51% | |||||||||||||||||||||||||||||||||||||||
46% | 90% | 86% | 96% | 112% | 97% | |||||||||||||||||||||||||||||||||||||||
|
31 |
Table of Contents
Financial highlights
Delaware Floating Rate Fund Class R
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) |
Total from investment operations. |
Less dividends and distributions from: |
Net investment income |
Return of capital |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
|
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during some of the periods shown reflects waivers by the manager and/or distributor. Performance would have been lower had the waivers not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
32 |
Table of Contents
Six months ended | ||||||||||||||||||||||||||||||||||||||||||||
1/31/171 (Unaudited) | Year ended | |||||||||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||
7/31/16 | 7/31/15 | 7/31/14 | 7/31/13 | 7/31/12 | ||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||
$ | 8.290 | $ | 8.420 | $ | 8.630 | $ | 8.600 | $ | 8.570 | $ | 8.590 | |||||||||||||||||||||||||||||||||
0.073 | 0.152 | 0.156 | 0.142 | 0.141 | 0.173 | |||||||||||||||||||||||||||||||||||||||
0.062 | (0.151 | ) | (0.208 | ) | 0.041 | 0.060 | (0.011 | ) | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
0.135 | 0.001 | (0.052 | ) | 0.183 | 0.201 | 0.162 | ||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
(0.075 | ) | (0.102 | ) | (0.147 | ) | (0.123 | ) | (0.153 | ) | (0.182 | ) | |||||||||||||||||||||||||||||||||
— | (0.029 | ) | (0.011 | ) | (0.030 | ) | (0.018 | ) | — | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
(0.075 | ) | (0.131 | ) | (0.158 | ) | (0.153 | ) | (0.171 | ) | (0.182 | ) | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
$ | 8.350 | $ | 8.290 | $ | 8.420 | $ | 8.630 | $ | 8.600 | $ | 8.570 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
1.63% | 0.03% | (0.61% | ) | 2.15% | 2.36% | 1.93% | ||||||||||||||||||||||||||||||||||||||
$ | 486 | $ | 494 | $ | 570 | $ | 845 | $ | 44 | $ | 5 | |||||||||||||||||||||||||||||||||
1.21% | 1.21% | 1.21% | 1.20% | 1.26% | 1.30% | |||||||||||||||||||||||||||||||||||||||
1.21% | 1.21% | 1.21% | 1.20% | 1.36% | 1.42% | |||||||||||||||||||||||||||||||||||||||
1.73% | 1.84% | 1.83% | 1.64% | 1.63% | 2.03% | |||||||||||||||||||||||||||||||||||||||
1.73% | 1.84% | 1.83% | 1.64% | 1.53% | 1.91% | |||||||||||||||||||||||||||||||||||||||
46% | 90% | 86% | 96% | 112% | 97% | |||||||||||||||||||||||||||||||||||||||
|
33 |
Table of Contents
Financial highlights
Delaware Floating Rate Fund Institutional Class
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) |
Total from investment operations. |
Less dividends and distributions from: |
Net investment income |
Return of capital |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
|
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during some of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
34 |
Table of Contents
Six months ended | ||||||||||||||||||||||||||||||||||||||||||||
1/31/171 (Unaudited) | Year ended | |||||||||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||
7/31/16 | 7/31/15 | 7/31/14 | 7/31/13 | 7/31/12 | ||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||
$ | 8.290 | $ | 8.420 | $ | 8.630 | $ | 8.600 | $ | 8.570 | $ | 8.590 | |||||||||||||||||||||||||||||||||
0.094 | 0.193 | 0.198 | 0.184 | 0.184 | 0.214 | |||||||||||||||||||||||||||||||||||||||
0.062 | (0.151 | ) | (0.208 | ) | 0.042 | 0.061 | (0.005 | ) | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
0.156 | 0.042 | (0.010 | ) | 0.226 | 0.245 | 0.209 | ||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
(0.096 | ) | (0.143 | ) | (0.189 | ) | (0.166 | ) | (0.197 | ) | (0.229 | ) | |||||||||||||||||||||||||||||||||
— | (0.029 | ) | (0.011 | ) | (0.030 | ) | (0.018 | ) | — | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
(0.096 | ) | (0.172 | ) | (0.200 | ) | (0.196 | ) | (0.215 | ) | (0.229 | ) | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
$ | 8.350 | $ | 8.290 | $ | 8.420 | $ | 8.630 | $ | 8.600 | $ | 8.570 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
1.89% | 0.54% | (0.11% | ) | 2.66% | 2.87% | 2.49% | ||||||||||||||||||||||||||||||||||||||
$ | 187,220 | $ | 185,674 | $ | 229,549 | $ | 268,629 | $ | 139,097 | $ | 31,663 | |||||||||||||||||||||||||||||||||
0.71% | 0.71% | 0.71% | 0.70% | 0.76% | 0.80% | |||||||||||||||||||||||||||||||||||||||
0.71% | 0.71% | 0.71% | 0.70% | 0.76% | 0.82% | |||||||||||||||||||||||||||||||||||||||
2.23% | 2.34% | 2.33% | 2.14% | 2.13% | 2.53% | |||||||||||||||||||||||||||||||||||||||
2.23% | 2.34% | 2.33% | 2.14% | 2.13% | 2.51% | |||||||||||||||||||||||||||||||||||||||
46% | 90% | 86% | 96% | 112% | 97% | |||||||||||||||||||||||||||||||||||||||
|
35 |
Table of Contents
Notes to financial statements | ||
Delaware Floating Rate Fund | January 31, 2017 (Unaudited) |
Delaware Group® Income Funds (Trust) is organized as a Delaware statutory trust and offers four series: Delaware Corporate Bond Fund, Delaware Floating Rate Fund (formerly, Delaware Diversified Floating Rate Fund), Delaware Extended Duration Bond Fund, and Delaware High-Yield Opportunities Fund. These financial statements and the related notes pertain to Delaware Floating Rate Fund (Fund). The Trust is an open-end investment company. The Fund is considered diversified under the Investment Company Act of 1940 (1940 Act), as amended, and offers Class A, Class C, Class R, and Institutional Class shares. Class A shares are sold with a maximum front-end sales charge of 2.75%. Class A share purchases of $1,000,000 or more will incur a limited contingent deferred sales charge (CDSC) of 0.75% if redeemed during the first year, provided that Delaware Distributors, L.P. (DDLP) paid a financial advisor a commission on the purchase of those shares. Class C shares are sold with a CDSC of 1.00%, if redeemed during the first 12 months. Class R and Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors.
The investment objective of the Fund is to seek high current income and, secondarily, long-term total return.
1. Significant Accounting Policies
The following accounting policies are in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and are consistently followed by the Fund.
Security Valuation — Equity securities, except those traded on the Nasdaq Stock Market LLC (Nasdaq), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange on the valuation date. Equity 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, the mean between the bid and ask prices will be used, which approximates fair value. Debt securities, credit default swap (CDS) contracts, and interest rate swap 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. U.S. 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, commercial mortgage securities, and U.S. government agency mortgage securities, 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. Foreign currency exchange 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. Generally, other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Trust’s
36 |
Table of Contents
Board of Trustees (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.
Federal and Foreign Income Taxes — No provision for federal income taxes has been made as the Fund intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Fund evaluates tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year. Management has analyzed the Fund’s tax positions taken for all open federal income tax years (July 31, 2013–July 31, 2016) and has concluded that no provision for federal income tax is required in the Fund’s financial statements. In regard to foreign taxes only, the Fund has open tax years in certain foreign countries in which it invests that may date back to the inception of the Fund.
Class Accounting — Investment income and common expenses are allocated to the various classes of the Fund on the basis of “settled shares” of each class in relation to the net assets of the Fund. Realized and unrealized gain (loss) on investments are allocated to the various classes of the Fund on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class.
Repurchase Agreements — The Fund may purchase certain U.S. government securities subject to the counterparty’s agreement to repurchase them at an agreed upon date and price. The counterparty will be required on a daily basis to maintain the value of the collateral subject to the agreement at not less than the repurchase price (including accrued interest). The agreements are conditioned upon the collateral being deposited under the Federal Reserve book-entry system with the Fund’s custodian or a third-party sub-custodian. In the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings. All open repurchase agreements as of the date of this report were entered into on Jan. 31, 2017 and matured on the next business day.
Foreign Currency Transactions — Transactions denominated in foreign currencies are recorded at the prevailing exchange rates on the valuation date in accordance with the Fund’s prospectus. The value of all assets and liabilities denominated in foreign currencies is translated daily into U.S. dollars at the exchange rate of such currencies against the U.S. dollar. Transaction gains or losses resulting from changes in exchange rates during the reporting period or upon settlement of the foreign currency transaction are reported in operations for the current period. The Fund generally bifurcates that portion of realized gains and losses on investments in debt securities which is due to changes in foreign exchange rates from that which is due to changes in market prices of debt securities. That portion of gains (losses) attributable to changes in foreign exchange rates is included on the “Statement of operations” under “Net realized gain (loss) on foreign currencies.” The Fund reports certain foreign currency related transactions as components of realized gains (losses) for financial reporting purposes, whereas such components are treated as ordinary income (loss) for federal income tax purposes.
Use of Estimates — The Fund is an investment company, whose financial statements are prepared in conformity with U.S. GAAP. Therefore, the Fund follows the accounting and reporting guidelines for
37 |
Table of Contents
Notes to financial statements | ||
Delaware Floating Rate Fund |
1. Significant Accounting Policies (continued)
investment companies. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material.
Other — Expenses directly attributable to the Fund are charged directly to the Fund. Other expenses common to various funds within the Delaware Investments® Family of Funds are generally allocated among such funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Discounts and premiums on debt securities are accreted or amortized to interest income, respectively, over the lives of the respective securities using the effective interest method. Realized gains (losses) on paydowns of asset- and mortgage-backed securities are classified as interest income. The Fund declares dividends daily from net investment income and pays the dividends monthly and declares and pays distributions from net realized gain on investments, if any, annually. The Fund may distribute more frequently, if necessary for tax purposes. Dividends and distributions, if any, are recorded on the ex-dividend date.
The Fund may receive earnings credits from its custodian when positive cash balances are maintained, which may be used to offset custody fees. There were no such earnings credits for the six months ended Jan. 31, 2017.
The Fund receives earnings credits from its transfer agent when positive cash balances are maintained, which may be used to offset transfer agent fees. If the amount earned is greater than $1.00, the expense paid under this arrangement is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses” with the corresponding expense offset shown under “Less expense paid indirectly.” For the six months ended Jan. 31, 2017, the Fund earned $124 under this agreement.
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates
In accordance with the terms of its investment management agreement, the Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee which is calculated daily at the rate of 0.50% on the first $500 million of average daily net assets of the Fund, 0.475% on the next $500 million, 0.45% on the next $1.5 billion, and 0.425% on average daily net assets in excess of $2.5 billion.
Delaware Investments Fund Services Company (DIFSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Fund. For these services, DIFSC’s fees are calculated based on the aggregate daily net assets of the Delaware Investments Family of Funds at the following annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DIFSC under the service agreement described above are allocated among all funds in the
38 |
Table of Contents
Delaware Investments® Family of Funds on a relative net asset value basis. For the six months ended Jan. 31, 2017, the Fund was charged $6,919 for these services. This amount is included on the “Statement of operations” under “Accounting and administration expenses.”
DIFSC is also the transfer agent and dividend disbursing agent of the Fund. For these services, DIFSC’s fees are calculated based on the aggregate daily net assets of the retail funds within the Delaware Investments Family of Funds at the following annual rate: 0.025% of the first $20 billion; 0.020% of the next $5 billion; 0.015% of the next $5 billion; and 0.013% on average daily net assets in excess of $30 billion. The fees payable to DIFSC under the service agreement described above are allocated among all retail funds in the Delaware Investments Family of Funds on a relative net asset value basis. This amount is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.” For the six months ended Jan. 31, 2017, the Fund was charged $29,727 for these services. Pursuant to a sub-transfer agency agreement between DIFSC and BNY Mellon Investment Servicing (US) Inc. (BNYMIS), BNYMIS provides certain sub-transfer agency services to the Fund. Sub-transfer agency fees are paid by the Fund and are also included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.”
Pursuant to a distribution agreement and distribution plan, the Fund pays DDLP, the distributor and an affiliate of DMC, an annual distribution and service fee of 0.25%, 1.00%, and 0.50% of the average daily net assets of the Class A, Class C, and Class R shares, respectively. Institutional Class shares pay no distribution and service fees.
As provided in the investment management agreement, the Fund bears a portion of the cost of resources shared with DMC, including the cost of internal personnel of DMC and/or its affiliates that provide legal, tax, and regulatory reporting services to the Fund. For the six months ended Jan. 31, 2017, the Fund was charged $9,705 for internal legal, tax, and regulatory reporting services provided by DMC and/or its affiliates’ employees. This amount is included on the “Statement of operations” under “Legal fees.”
For the six months ended Jan. 31, 2017, DDLP earned $873 for commissions on sales of the Fund’s Class A shares. For the six months ended Jan. 31, 2017, DDLP received gross CDSC commissions of $1,085 on redemption of the Fund’s Class C shares, and these commissions were entirely used to offset upfront commissions previously paid by DDLP to broker/dealers on sales of those shares.
Trustees’ fees include expenses accrued by the Fund for each Trustee’s retainer and meeting fees. Certain officers of DMC, DIFSC, and DDLP are officers and/or Trustees of the Trust. These officers and Trustees are paid no compensation by the Fund.
Cross trades for the six months ended Jan. 31, 2017, were executed by the Fund pursuant to procedures adopted by the Board designed to ensure compliance with Rule 17a-7 under the 1940 Act. Cross trading is the buying or selling of portfolio securities between funds of investment companies, or between a fund of an investment company and another entity, that are or could be considered affiliates by virtue of having a common investment advisor (or affiliated investment advisors), common directors/trustees and/or common officers. At its regularly scheduled meetings, the Board reviews such transactions for compliance with the procedures adopted by the Board. Pursuant to these procedures, for the six months ended Jan. 31, 2017, the Fund engaged in securities purchases of $27,802 and securities sales of $5,360,838, which resulted in net realized gains of $133.
39 |
Table of Contents
Notes to financial statements | ||
Delaware Floating Rate Fund |
3. Investments
For the six months ended Jan. 31, 2017, the Fund made purchases and sales of investment securities other than short-term investments as follows:
Purchases other than U.S. government securities | $ | 131,541,187 | ||
Purchases of U.S. government securities | 9,682,011 | |||
Sales other than U.S. government securities | 118,553,523 | |||
Sales of U.S. government securities | 14,955,219 |
At Jan. 31, 2017, the cost of investments for federal income tax purposes has been estimated since final tax characteristics cannot be determined until fiscal year end. At Jan. 31, 2017, the cost of investments and unrealized appreciation (depreciation) for the Fund were as follows:
Cost of investments | $ | 305,626,580 | ||
|
| |||
Aggregate unrealized appreciation of investments | $ | 3,390,422 | ||
Aggregate unrealized depreciation of investments | (1,166,890 | ) | ||
|
| |||
Net unrealized appreciation of investments | $ | 2,223,532 | ||
|
|
On Dec. 22, 2010, the Regulated Investment Company Modernization Act of 2010 (Act) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes were generally effective for taxable years beginning after the date of enactment. Under the Act, the Fund is permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period.
Losses incurred that will be carried forward under the Act are as follows:
Loss carryforward character | ||||||
Short-term | Long-term | |||||
$6,176,235 | $ | 9,342,563 |
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. A three-level hierarchy for fair value measurements has been established based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available under the circumstances. The Fund’s investment in its entirety is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-level hierarchy of inputs is summarized below.
Level 1 – | Inputs are quoted prices in active markets for identical investments. (Examples: equity securities, open-end investment companies, futures contracts, exchange-traded options contracts) |
40 |
Table of Contents
Level 2 – | Other observable inputs, including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs. (Examples: debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities) | |
Level 3 – | Significant unobservable inputs, including the Fund’s own assumptions used to determine the fair value of investments. (Examples: broker-quoted securities, fair valued securities) |
Level 3 investments are valued using significant unobservable inputs. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Valuations may also be based upon current market prices of securities that are comparable in coupon, rating, maturity, and industry. The derived value of a Level 3 investment may not represent the value which is received upon disposition and this could impact the results of operations.
The following table summarizes the valuation of the Fund’s investments by fair value hierarchy levels as of Jan. 31, 2017:
Securities | Level 2 | Level 3 | Total | |||||||||
Agency, Asset- & Mortgage-Backed Securities | $ | 12,739,969 | $ | — | $ | 12,739,969 | ||||||
Corporate Debt | 139,104,670 | — | 139,104,670 | |||||||||
Municipal Bonds | 6,033,748 | — | 6,033,748 | |||||||||
Loan Agreements1 | 128,467,416 | 1,034,209 | 129,501,625 | |||||||||
Foreign Debt | 4,627,363 | — | 4,627,363 | |||||||||
Convertible Preferred Stock | 54,573 | — | 54,573 | |||||||||
Preferred Stock | 5,049,063 | — | 5,049,063 | |||||||||
Short-Term Investments | 10,739,101 | — | 10,739,101 | |||||||||
|
|
|
|
|
| |||||||
Total Value of Securities | $ | 306,815,903 | $ | 1,034,209 | $ | 307,850,112 | ||||||
|
|
|
|
|
| |||||||
Swap Contracts | $ | 1,436,614 | — | 1,436,614 |
1Security type is valued across multiple levels. Level 2 investments represent investments with observable inputs or matrix-priced investments and Level 3 investments represent investments with significant unobservable inputs. The amounts attributed to Level 2 investments and Level 3 investments represent the following percentages of the total market value of this security type:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||
Loan Agreements | — | 99.20 | % | 0.80 | % | 100.00 | % |
During the six months ended Jan. 31, 2017, there were no transfers between Level 1 investments, Level 2 investments, or Level 3 investments that had a significant impact to the Fund. The Fund’s policy is to recognize transfers between levels at the beginning of the reporting period.
A reconciliation of Level 3 investments is presented when the Fund has a significant amount of Level 3 investments at the beginning, interim, or end of the period in relation to net assets. Management has
41 |
Table of Contents
Notes to financial statements | ||
Delaware Floating Rate Fund |
3. Investments (continued)
determined not to provide additional disclosure on Level 3 inputs since the Level 3 investments are not considered significant to the Fund’s net assets at the end of the period.
4. Capital Shares
Transactions in capital shares were as follows:
Six Months Ended 1/31/17 | Year ended 7/31/16 | |||||||||||
Shares sold: | ||||||||||||
Class A | 1,762,781 | 1,326,626 | ||||||||||
Class C | 413,395 | 473,458 | ||||||||||
Class R | 245 | 4,132 | ||||||||||
Institutional Class | 6,212,561 | 16,148,745 | ||||||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||||||
Class A | 64,390 | 148,041 | ||||||||||
Class C | 33,790 | 75,642 | ||||||||||
Class R | 529 | 1,012 | ||||||||||
Institutional Class | 215,381 | 399,646 | ||||||||||
|
|
|
| |||||||||
8,703,072 | 18,577,302 | |||||||||||
|
|
|
| |||||||||
Shares redeemed: | ||||||||||||
Class A | (1,707,508 | ) | (4,861,568 | ) | ||||||||
Class C | (1,178,406 | ) | (2,961,723 | ) | ||||||||
Class R | (2,172 | ) | (13,303 | ) | ||||||||
Institutional Class | (6,423,909 | ) | (21,419,000 | ) | ||||||||
|
|
|
| |||||||||
(9,311,995 | ) | (29,255,594 | ) | |||||||||
|
|
|
| |||||||||
Net decrease | (608,923 | ) | (10,678,292 | ) | ||||||||
|
|
|
|
42 |
Table of Contents
Certain shareholders may exchange shares of one class for shares of another class in the same Fund. For the six months ended Jan. 31, 2017 and the year ended July 31, 2016, the Fund had the following exchange transactions. These exchange transactions are included as subscriptions and redemptions in the table on the previous page and the “Statements of changes in net assets.”
Exchange Subscriptions Institutional | ||||||||||||||||
Exchange Redemptions | ||||||||||||||||
Class A Shares | Class C Shares | Class Shares | Value | |||||||||||||
Six months ended 1/31/17 | 21,617 | — | 21,647 | $179,925 | ||||||||||||
Year ended 7/31/16 | 24,148 | 1,642 | 25,838 | $213,398 |
5. Line of Credit
The Fund, along with certain other funds in the Delaware Investments® Family of Funds (Participants), was a participant in a $155,000,000 revolving line of credit to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, the Participants were charged an annual commitment fee of 0.10%, which was allocated across the Participants on the basis of relative net assets of each Participant’s allocation of the entire facility. The Participants were permitted to borrow up to a maximum of one third of their net assets under the agreement. Each Participant is individually, and not jointly, liable for its particular advances, if any, under the line of credit. The line of credit available under the agreement expired on Nov. 7, 2016.
On Nov. 7, 2016, the Fund, along with the other Participants, entered into an amendment to the agreement for a $155,000,000 revolving line of credit. The line of credit is to be used as described above and operates in substantially the same manner as the original agreement, with the exception of the annual commitment fee. Under the amendment to the agreement, the Participants are charged an annual commitment fee of 0.15%, which is allocated across the Participants on the basis of relative net assets of each Participant’s allocation of the entire facility. The line of credit available under the agreement expires on Nov. 6, 2017.
6. Derivatives
U.S. GAAP requires disclosures that enable investors to understand: (1) how and why an entity uses derivatives; (2) how they are accounted for; and (3) how they affect an entity’s results of operations and financial position.
Swap Contracts — The Fund may enter into interest rate swap contracts in the normal course of pursuing its investment objective. The Fund may use interest rate swaps to adjust the Fund’s sensitivity to interest rates or to hedge against changes in interest rates. The Fund will not be permitted to enter into any swap transactions unless, at the time of entering into such transactions, the unsecured long-term debt of the actual counterparty, combined with any credit enhancements, is rated at least BBB- by Standard & Poor’s Financial Services LLC (S&P) or Baa3 by Moody’s Investors Service Inc. (Moody’s) or is determined to be of equivalent credit quality by DMC.
43 |
Table of Contents
Notes to financial statements | ||
Delaware Floating Rate Fund |
6. Derivatives (continued)
Interest Rate Swaps. An interest rate swap contract is an exchange of interest rates between counterparties. In one instance, an interest rate swap involves payments received by the Fund 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 the Fund receiving payments based on a fixed interest rate and making payments based on a variable or floating interest rate. Interest rate swaps may be used to adjust the Fund’s sensitivity to interest rates or to hedge against changes in interest rates. Periodic payments on such contracts are accrued daily and recorded as unrealized appreciation/(depreciation) on swap contracts. Upon periodic payment/(receipt) or termination of the contract, such amounts are recorded as realized gains or losses on swap contracts. The Fund’s maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from/paid to the counterparty over the interest rate swap contract’s remaining life, to the extent that the amount is positive. This risk is mitigated by (1) for bilateral swap contracts, having a netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty, and (2) for cleared swaps, trading these instruments through a central counterparty.
During the six months ended Jan. 31, 2017, the Fund used interest rate swap contracts to manage the Fund’s sensitivity to interest rates or to hedge against changes in interest rates.
Swaps Generally. The value of open swaps may differ from that which would be realized in the event the Fund terminated its position in the contract on a given day. Risks of entering into these contracts include the potential inability of the counterparty to meet the terms of the contracts. This type of risk is generally limited to the amount of favorable movement in the value of the underlying security, instrument or basket of instruments, if any, at the day of default. Risks also arise from potential losses from adverse market movements and such losses could exceed the unrealized amounts shown on the “Schedule of investments.”
At Jan. 31, 2017, for bilateral swap contracts, the Fund posted $706,650 cash collateral for centrally cleared swap contracts, which is presented as “Cash collateral due from brokers” on the “Statement of assets and liabilities.”
44 |
Table of Contents
Fair values of derivative instruments as of Jan. 31, 2017 were as follows:
Statement of Assets and Liabilities Location | Asset Derivatives Fair Value Interest Rate Contracts | ||||
Unrealized appreciation on interest rate swap contracts | $1,436,614 |
The effect of derivative instruments in the “Statement of operations” for the six months ended Jan. 31, 2017 was as follows:
Net realized gain (loss) on: Swap Contracts | |||||
Credit contracts | $(112,398) | ||||
Total | $(112,398) |
Net Change in Unrealized Appreciation (Depreciation) of: Swap Contracts | |||||
Interest rate contracts | $106,537 | ||||
Credit contracts | 1,698,009 | ||||
Total | $1,804,546 |
Derivatives Generally. The table below summarizes the average balance of derivative holdings by the Fund during the six months ended Jan. 31, 2017.
Long Derivative Volume | Short Derivative Volume | |||||||
Interest rate swap contracts (average notional value)* | USD53,263,504 | USD | — |
* Long represents receiving fixed interest payments and short represents paying fixed interest payments.
7. Offsetting
In December 2011, the Financial Accounting Standards Board (FASB) issued guidance that expanded disclosure requirements on the offsetting of certain assets and liabilities. The disclosures are required for investments and derivative financial instruments subject to master netting or similar agreements which are eligible for offset on the “Statement of assets and liabilities” and require an entity to disclose both gross and net information about such investments and transactions in the financial statements. In January 2013, the FASB issued guidance that clarified which investments and transactions are subject to the offsetting disclosure requirements. The scope of the disclosure requirements for offsetting is limited to derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing.
In order to better define its contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund entered into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement) or a similar agreement with certain of its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between the Fund and a
45 |
Table of Contents
Notes to financial statements | ||
Delaware Floating Rate Fund |
7. Offsetting (continued)
counterparty that governs over-the-counter (OTC) derivatives and foreign exchange contracts and typically contains, among other things, collateral posting items and provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default (close-out) including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency or other events.
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements on the “Statement of assets and liabilities.”
At Jan. 31, 2017, the Fund had the following assets and liabilities subject to offsetting provisions:
Master Repurchase Agreements
Fair Value of | |||||||||||||||||||||||||
Non-Cash | Cash Collateral | Net Collateral | |||||||||||||||||||||||
Counterparty | Repurchase Agreements | Collateral Received(a) | Received | Received | Net Exposure(b) | ||||||||||||||||||||
Bank of America Merrill Lynch | $2,458,327 | $(2,458,327) | $— | $(2,458,327) | $— | ||||||||||||||||||||
Bank of Montreal | 2,458,327 | (2,458,327) | — | (2,458,327) | — | ||||||||||||||||||||
BNP Paribas | 819,442 | (819,442) | — | (819,442) | — | ||||||||||||||||||||
Total | $5,736,096 | $(5,736,096) | $— | $(5,736,096) | $— |
(a)The value of the related collateral received exceeded the value of the repurchase agreements as of Jan. 31, 2017.
(b)Net exposure represents the receivable (payable) that would be due from (to) the counterparty in the event of default.
8. Securities Lending
The Fund, along with other funds in the Delaware Investments® Family of 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: (1) 102% with respect to U.S. securities and foreign securities that are denominated and payable in U.S. dollars; and (2) 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 that 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.
46 |
Table of Contents
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.
Cash collateral received is generally invested in government securities; certain obligations issued by government sponsored enterprises; repurchase agreements collateralized by U.S. Treasury securities; obligations issued by the central government of any Organization for Economic Cooperation and Development (OECD) country or its agencies, instrumentalities, or establishments; 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.
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 the Fund or, at the discretion of the lending agent, replace the loaned securities. The 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. The 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, the 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. The Fund records security lending income net of allocations to the security lending agent and the borrower.
The Fund may incur investment losses as a result of investing securities lending collateral. This could occur if an investment in the collateral investment account defaulted or became impaired. Under those circumstances, the value of a Fund’s cash collateral account may be less than the amount the Fund would be required to return to the borrowers of the securities and the Fund would be required to make up for this shortfall.
During the six months ended Jan. 31, 2017, the Fund had no securities out on loan.
9. Credit and Market Risk
Some countries in which the Fund may invest require governmental approval for the repatriation of investment income, capital, or the proceeds of sales of securities by foreign investors. In addition, if there is deterioration in a country’s balance of payments or for other reasons, a country may impose temporary restrictions on foreign capital remittances abroad.
The securities exchanges of certain foreign markets are substantially smaller, less liquid and more volatile than the major securities markets in the United States. Consequently, acquisition and disposition of securities by the Fund may be inhibited. In addition, a significant portion of the aggregate market value of equity securities listed on the major securities exchanges in emerging markets is held by a smaller number of investors. This may limit the number of shares available for acquisition or disposition by the Fund.
The Fund invests a portion of its assets in high yield fixed income securities, which are securities rated lower than BBB- by S&P and Baa3 by Moody’s, or similarly rated by another nationally recognized
47 |
Table of Contents
Notes to financial statements | ||
Delaware Floating Rate Fund |
9. Credit and Market Risk (continued)
statistical rating organization. Investments in these higher yielding securities are generally accompanied by a greater degree of credit risk than higher rated securities. Additionally, lower rated securities may be more susceptible to adverse economic and competitive industry conditions than investment grade securities.
The Fund invests in fixed income securities whose value is derived from an underlying pool of mortgages or consumer loans. The value of these securities is sensitive to changes in economic conditions, including delinquencies and/or defaults, and may be adversely affected by shifts in the market’s perception of the issuers and changes in interest rates. Investors receive principal and interest payments as the underlying mortgages and consumer loans are paid back. Some of these securities are collateralized mortgage obligations (CMOs). CMOs are debt securities issued by U.S. government agencies or by financial institutions and other mortgage lenders, which are collateralized by a pool of mortgages held under an indenture. Prepayment of mortgages may shorten the stated maturity of the obligations and can result in a loss of premium, if any has been paid. Certain of these securities may be stripped (securities which provide only the principal or interest feature of the underlying security). The yield to maturity on an interest-only CMO is extremely sensitive not only to changes in prevailing interest rates, but also to the rate of principal payments (including prepayments) on the related underlying mortgage assets. A rapid rate of principal payments may have a material adverse effect on the Fund’s yield to maturity. If the underlying mortgage assets experience greater-than-anticipated prepayments of principal, the Fund may fail to fully recoup its initial investment in these securities even if the securities are rated in the highest rating categories.
The Fund invests in certain obligations that may have liquidity protection designed to ensure that the receipt of payments due on the underlying security is timely. Such protection may be provided through guarantees, insurance policies or letters of credit obtained by the issuer or sponsor through third parties, through various means of structuring the transaction or through a combination of such approaches. The Fund will not pay any additional fees for such credit support, although the existence of credit support may increase the price of the security.
The Fund invests in bank loans and other securities that may subject it to direct indebtedness risk, the risk that the 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 the Fund more protection than unsecured loans in the event of nonpayment of scheduled interest or principal, although there is no assurance that the liquidation of collateral from a secured loan would satisfy the corporate borrower’s obligation, or that the collateral can be liquidated. Some loans or claims may be in default at the time of purchase. Certain of the loans and the other direct indebtedness acquired by the Fund may involve revolving credit facilities or other standby financing commitments that obligate the Fund to pay additional cash on a certain date or on demand. These commitments may require the 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). To the extent that the Fund is committed to advance additional funds, it will at all times hold and maintain cash or other high grade debt obligations in an amount sufficient to meet such commitments. As the 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
48 |
Table of Contents
the Fund’s rights under the loan and other direct indebtedness, an insolvency, bankruptcy, or reorganization of the lending institution may delay or prevent the Fund from receiving such amounts. The highly leveraged nature of many loans may make them especially vulnerable to adverse changes in economic or market conditions. Investments in such loans and other direct indebtedness may involve additional risk to the Fund.
The Fund may invest up to 15% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A, promulgated under the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair the Fund from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, the Fund’s Board has delegated to DMC the day-to-day functions of determining whether individual securities are liquid for purposes of the Fund’s limitation on investments in illiquid securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Fund’s 15% limit on investments in illiquid securities. Rule 144A securities have been identified on the “Schedule of investments.”
10. Contractual Obligations
The Fund enters into contracts in the normal course of business that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Fund’s existing contracts and expects the risk of loss to be remote.
11. Recent Accounting Pronouncements
On Oct. 13, 2016, the Securities and Exchange Commission amended existing rules intended to modernize reporting and disclosure of information. These amendments relate to Regulation S-X which sets forth the form and content of financial statements. At this time, management is evaluating the implications of adopting these amendments and their impact on the financial statements and accompanying notes.
12. Fund Repositioning
Effective Jan. 31, 2017, the investment strategies for Delaware Diversified Floating Rate Fund changed and the Fund was repositioned as a bank loan fund. In connection with the repositioning, the Fund’s name changed to Delaware Floating Rate Fund.
13. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to Jan. 31, 2017 that would require recognition or disclosure in the Fund’s financial statements.
49 |
Table of Contents
Other Fund information (Unaudited) | ||
Delaware Floating Rate Fund |
Board consideration of Delaware Floating Rate Fund investment advisory agreement
At a meeting held Aug. 16–18, 2016 (the “Annual Meeting”), the Board of Trustees (the “Board”), including a majority of disinterested or independent Trustees, approved the renewal of the Investment Advisory Agreement for Delaware Floating Rate Fund (the “Fund”). In making its decision, the Board considered information furnished at regular quarterly Board meetings, including reports detailing Fund performance, investment strategies, and expenses, as well as information prepared specifically in connection with the renewal of the investment advisory and sub-advisory contracts. Information furnished specifically in connection with the renewal of the Investment Management Agreement with Delaware Management Company (“DMC”) included materials provided by DMC and its affiliates (“Delaware Investments”) concerning, among other things, the nature, extent, and quality of services provided to the Fund; the costs of such services to the Fund; economies of scale; and the investment manager’s financial condition and profitability. In addition, in connection with the Annual Meeting, reports were provided to the Trustees in May 2016 and included reports provided by Broadridge Financial Solutions (“Broadridge”). The Broadridge reports compared the Fund’s investment performance and expenses with those of other comparable mutual funds. The Independent Trustees reviewed and discussed the Broadridge reports with independent legal counsel to the Independent Trustees. In addition to the information noted above, the Board also requested and received information regarding DMC’s policy with respect to advisory fee levels and its breakpoint philosophy; the structure of portfolio manager compensation; comparative client fee information; and any constraints or limitations on the availability of securities for certain investment styles, which had in the past year inhibited, or which were likely in the future to inhibit, the investment manager’s ability to invest fully in accordance with Fund policies.
In considering information relating to the approval of the Fund’s advisory agreement, the Independent Trustees received assistance and advice from and met separately with independent legal counsel to the Independent Trustees. Although the Board gave attention to all information furnished, the following discussion identifies, under separate headings, the primary factors taken into account by the Board during its contract renewal considerations.
Nature, extent, and quality of service. The Board considered the services provided by DMC to the Fund and its shareholders. In reviewing the nature, extent, and quality of services, the Board considered reports furnished to it throughout the year, which covered matters such as the relative performance of the Fund; compliance of portfolio managers with the investment policies, strategies, and restrictions for the Fund; compliance by DMC and Delaware Distributors, L.P. (together, “Management”) personnel with the Code of Ethics adopted throughout the Delaware Investments® Family of Funds complex; and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of the Fund’s investment advisor and the emphasis placed on research in the investment process. The Board recognized DMC’s receipt of several industry distinctions during the past several years. The Board gave favorable consideration to DMC’s efforts to control expenditures while maintaining service levels committed to Fund matters. The Board also noted the benefits provided to Fund shareholders through each shareholder’s ability to exchange an investment in one Delaware Investments fund for the same class of shares in another Delaware Investments fund without a sales charge, to reinvest Fund dividends into additional shares of the Fund or into additional shares of other Delaware Investments funds, and the privilege to combine holdings in other Delaware Investments funds
50 |
Table of Contents
to obtain a reduced sales charge. The Board was satisfied with the nature, extent, and quality of the overall services provided by DMC.
Investment performance. The Board placed significant emphasis on the investment performance of the Fund in view of the importance of investment performance to shareholders. Although the Board gave appropriate consideration to performance reports and discussions with portfolio managers at Investment Committee meetings throughout the year, the Board gave particular weight to the Broadridge reports furnished for the Annual Meeting. The Broadridge reports prepared for the Fund showed the investment performance of its Class A shares in comparison to a group of similar funds as selected by Broadridge (the “Performance Universe”). A fund with the best performance ranked first, and a fund with the poorest performance ranked last. The highest/best performing 25% of funds in the Performance Universe make up the first quartile; the next 25%, the second quartile; the next 25%, the third quartile; and the poorest/ worst performing 25% of funds in the Performance Universe make up the fourth quartile. Comparative annualized performance for the Fund was shown for the past 1-, 3-, 5-, and 10-year periods, to the extent applicable, ended Jan. 31, 2016. The Board’s objective is that the Fund’s performance for the periods considered be at or above the median of its Performance Universe.
Lipper currently classifies the Fund as an ultra-short obligation fund. However, because the Fund is competing against funds in the loan participation category for assets, and the cost structure of the Fund is aligned to compete with the cost structures of these funds, Management believes that it would be more appropriate to include the Fund in the loan participation funds category. Accordingly, the Broadridge report prepared for the Fund compares the Fund’s performance to two separate Performance Universes — one consisting of the Fund and all retail and institutional ultra-short obligation funds, and the other consisting of the Fund and all retail and institutional loan participation funds. When compared to other ultra-short obligation funds, the Broadridge report comparison showed that the Fund’s total return for the 1- and 3-year periods was in the fourth quartile of its Performance Universe. The Broadridge report further showed that the Fund’s total return for the 5-year period was in the first quartile of its Performance Universe. When compared to other loan participation funds, the Broadridge report comparison showed that the Fund’s total return for the 1-year period was in the second quartile of its Performance Universe. The Broadridge report further showed that the Fund’s total return for the 3- and 5-year periods was in the fourth quartile of its Performance Universe. The Board noted that the Fund’s performance results were mixed. In evaluating the Fund’s performance, the Board considered recent changes to the Fund’s investment authority relating to the credit quality of investments in structured products. The Board also considered the performance attribution included in the Meeting materials, as well as the numerous investment and performance reports delivered by Management personnel to the Board’s Investments Committee. The Board was satisfied that Management was taking action to improve Fund performance and meet the Board’s performance objective.
51 |
Table of Contents
Other Fund information (Unaudited) | ||
Delaware Floating Rate Fund |
Board consideration of Delaware Floating Rate Fund investment advisory agreement (continued)
Comparative expenses. The Board considered expense comparison data for the Delaware Investments® Family of Funds. Management provided the Board with information on pricing levels and fee structures for the Fund as of its most recently completed fiscal year. The Board also focused on the comparative analysis of effective management fees and total expense ratios of the Fund versus effective management fees and expense ratios of a group of similar funds as selected by Broadridge (the “Expense Group”). In reviewing comparative costs, the Fund’s contractual management fee and the actual management fee incurred by the Fund were compared with the contractual management fees (assuming all funds in the Expense Group were similar in size to the Fund) and actual management fees (as reported by each fund) within the Expense Group, taking into account any applicable breakpoints and fee waivers. The Fund’s total expenses were also compared with those of its Expense Group. The Broadridge total expenses, for comparative consistency, were shown by Broadridge for Class A shares and comparative total expenses including 12b-1 and non-12b-1 service fees. The Board’s objective is to limit the Fund’s total expense ratio to be competitive with that of the Expense Group.
When compared to other ultra-short obligation funds, the expense comparisons for the Fund showed that its actual management fee and total expenses were in the quartile with the highest expenses of its Expense Group. When compared to other loan participation funds, the expense comparisons for the Fund showed that its actual management fee and total expenses were in the quartile with the lowest expenses of its Expense Group. The Board noted that, when compared to other ultra-short obligation funds, the Fund’s total expenses were not in line with the Board’s objective. In evaluating total expenses, the Board considered various initiatives implemented by Management, such as the negotiation of lower fees for fund accounting services, which had created an opportunity for a further reduction in expenses. The Board was satisfied with Management’s efforts to improve the Fund’s total expense ratio and to bring it in line with the Board’s objective.
Management profitability. The Board considered the level of profits realized by DMC in connection with the operation of the Fund. In this respect, the Board reviewed the Investment Management Profitability Analysis that addressed the overall profitability of DMC’s business in providing management and other services to each of the individual funds and the Delaware Investments Family of Funds as a whole. Specific attention was given to the methodology followed in allocating costs for the purpose of determining profitability. Management stated that the level of profits of DMC, to a certain extent, reflects recent operational cost savings and efficiencies initiated by DMC. The Board considered DMC’s efforts to improve services provided to fund shareholders and to meet additional regulatory and compliance requirements resulting from recent industry-wide Securities and Exchange Commission initiatives. The Board also considered the extent to which DMC might derive ancillary benefits from fund operations, including the potential for procuring additional business as a result of the prestige and visibility associated with its role as service provider to the Delaware Investments Family of Funds and the benefits from allocation of fund brokerage to improve trading efficiencies. The Board found that the management fees were reasonable in light of the services rendered and the level of profitability of DMC.
Economies of scale. The Trustees considered whether economies of scale are realized by DMC as the Fund’s assets increase and the extent to which any economies of scale are reflected in the level of management fees charged. The Trustees reviewed the standardized advisory fee pricing and structure,
52 |
Table of Contents
approved by the Board and shareholders, which includes breakpoints, and which applies to most funds in the Delaware Investments® Family of Funds complex. Breakpoints in the advisory fee occur when the advisory fee rate is reduced on assets in excess of specified levels. Breakpoints result in a lower advisory fee than would otherwise be the case in the absence of breakpoints, when the asset levels specified in the breakpoints are exceeded. The Board noted that the fee under the Fund’s management contract fell within the standardized fee pricing structure. Although, as of May 31, 2016, the Fund has not reached a size at which it can take advantage of any breakpoints in the applicable fee schedule, the Board recognized that the fee was structured so that if the Fund grows, economies of scale may be shared.
53 |
Table of Contents
Board of trustees
| ||||||
Shawn K. Lytle President and Chief Executive Officer Delaware Investments ® Family of Funds Philadelphia, PA
Thomas L. Bennett Chairman of the Board Delaware Investments Family of Funds Private Investor Rosemont, PA | Ann D. Borowiec Former Chief Executive Officer Private Wealth Management J.P. Morgan Chase & Co. New York, NY
Joseph W. Chow Former Executive Vice President State Street Corporation Boston, MA | John A. Fry President Drexel University Philadelphia, PA
Lucinda S. Landreth Former Chief Investment Officer Assurant, Inc. New York, NY | Frances A. Sevilla-Sacasa Former Chief Executive Officer Banco Itaú International Miami, FL
Thomas K. Whitford Former Vice Chairman PNC Financial Services Group Pittsburgh, PA
Janet L. Yeomans Former Vice President and Treasurer 3M Company St. Paul, MN | |||
Affiliated officers | ||||||
David F. Connor Senior Vice President, General Counsel, and Secretary Delaware Investments Family of Funds Philadelphia, PA | Daniel V. Geatens Vice President and Treasurer Delaware Investments Family of Funds Philadelphia, PA | Richard Salus Senior Vice President and Chief Financial Officer Delaware Investments Family of Funds Philadelphia, PA |
This semiannual report is for the information of Delaware Floating Rate Fund shareholders, but it may be used with prospective investors when preceded or accompanied by the Delaware Investments Fund fact sheet for the most recently completed calendar quarter. These documents are available at delawareinvestments.com/literature.
Delaware Investments is the marketing name of Delaware Management Holdings, Inc. and its subsidiaries.
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 800 523-1918; and (ii) on the SEC’s website at sec.gov. In addition, a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities and the Schedules of Investments included in the Fund’s most recent Form N-Q are available without charge on the Fund’s website at delawareinvestments.com/literature. The Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C.; information on the operation of the Public Reference Room may be obtained by calling 800 SEC- 0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund’s website at delawareinvestments.com/proxy; and (ii) on the SEC’s website at sec.gov.
54 |
Item 2. Code of Ethics
Not applicable.
Item 3. Audit Committee Financial Expert
Not applicable.
Item 4. Principal Accountant Fees and Services
PwC has informed the Trust that it has identified an issue related to its independence under Rule 2-01(c)(1)(ii)(A) of Regulation S-X (referred to as the “Loan Rule”). The Loan Rule prohibits accounting firms, such as PwC, from being considered independent if they have certain financial relationships with their audit clients or certain affiliates of those clients. The Trust is required under various securities laws to have its financial statements audited by an independent accounting firm. PwC has informed the Trust that PwC has relationships with lenders who hold or own more than ten percent of the shares of certain funds within the Delaware FundsSM by Macquarie. These relationships call into question PwC’s independence under the Loan Rule with respect to those funds, as well as all other funds in the complex. The SEC has granted no-action relief to another fund complex in circumstances that appear to be substantially similar to the Trust’s (see Fidelity Management & Research Company et al., No-Action Letter (June 20, 2016)). In addition, PwC has advised the Trust’s Audit Committee that PwC believes that under the facts and circumstances surrounding PwC’s lending relationships, its ability to exercise objective and impartial judgment in connection with its audit engagement with the Trust has not been impaired and that a reasonable investor with knowledge of all relevant facts and circumstances would reach the same conclusion. If in the future, however, the independence of PwC is called into question under the Loan Rule by circumstances that are not addressed in the SEC’s no-action letter, the Trust will need to take other action in order for the Trust’s filings with the SEC containing financial statements to be deemed compliant with applicable securities laws. Finally, the SEC has indicated that its no-action relief will expire 18 months from its issuance, after which PwC and the Delaware FundsSM by Macquarie will no longer be able rely on the letter unless its term is extended or made permanent by the SEC Staff.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Investments
(a) Included as part of report to shareholders filed under Item 1 of this Form N-CSR.
(b) Divestment of securities in accordance with Section 13(c) of the Investment Company Act of 1940.
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 11. Controls and Procedures
The registrant’s principal executive officer and principal financial officer have evaluated the registrant’s disclosure controls and procedures within 90 days of the filing of this report and have concluded that they are effective in providing reasonable assurance that the information required to be disclosed by the registrant in its reports or statements filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.
There were no significant changes in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by the report to stockholders included herein (i.e., the registrant’s second fiscal quarter) that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits
(a) (1) Code of Ethics
Not applicable.
(2) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rule 30a-2 under the Investment Company Act of 1940 are attached hereto as Exhibit 99.CERT.
(3) Written solicitations to purchase securities pursuant to Rule 23c-1 under the Securities Exchange Act of 1934.
Not applicable.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are furnished herewith as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf, by the undersigned, thereunto duly authorized.
DELAWARE GROUP® INCOME FUNDS
/s/ SHAWN K. LYTLE | |
By: | Shawn K. Lytle |
Title: | President and Chief Executive Officer |
Date: | April 5, 2017 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ SHAWN K. LYTLE | |
By: | Shawn K. Lytle |
Title: | President and Chief Executive Officer |
Date: | April 5, 2017 |
/s/ RICHARD SALUS | |
By: | Richard Salus |
Title: | Chief Financial Officer |
Date: | April 5, 2017 |