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: 811-04997
Exact name of registrant as specified in charter:
Delaware Group Equity Funds V
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: November 30
Date of reporting period: May 31, 2008
Item 1. Reports to Stockholders
![]() | ![]() |
Semiannual report | |
Delaware Small Cap Core Fund | |
May 31, 2008 |
Core equity mutual fund |
Table of contents
Disclosure of Fund expenses | 1 |
Sector allocation and top 10 holdings | 3 |
Statement of net assets | 5 |
Statement of operations | 13 |
Statements of changes in net assets | 14 |
Financial highlights | 16 |
Notes to financial statements | 24 |
Other Fund information | 33 |
About the organization | 37 |
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.
© 2008 Delaware Distributors, L.P.
Disclosure of Fund expenses
For the period December 1, 2007 to May 31, 2008
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 period December 1, 2007 to May 31, 2008.
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 actual expenses shown in the table reflect fee waivers in effect. The expenses shown in the table assume reinvestment of all dividends and distributions.
1
Disclosure of Fund expenses
Delaware Small Cap Core Fund
Expense analysis of an investment of $1,000
Beginning | Ending | Expenses | ||||||
Account Value | Account Value | Annualized | Paid During Period | |||||
12/1/07 | 5/31/08 | Expense Ratio | 12/1/07 to 5/31/08* | |||||
Actual Fund return | ||||||||
Class A | $1,000.00 | $ 930.60 | 1.32% | $ 6.37 | ||||
Class C | 1,000.00 | 926.70 | 2.07% | 9.97 | ||||
Class R | 1,000.00 | 929.30 | 1.57% | 7.57 | ||||
Institutional Class | 1,000.00 | 931.60 | 1.07% | 5.17 | ||||
Hypothetical 5% return (5% return before expenses) | ||||||||
Class A | $1,000.00 | $1,018.40 | 1.32% | $ 6.66 | ||||
Class C | 1,000.00 | 1,014.65 | 2.07% | 10.43 | ||||
Class R | 1,000.00 | 1,017.15 | 1.57% | 7.92 | ||||
Institutional Class | 1,000.00 | 1,019.65 | 1.07% | 5.40 |
*“Expenses Paid During Period” are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by the 183/366 (to reflect the one-half year period).
2
Sector allocation and top 10 holdings | |
Delaware Small Cap Core Fund | As of May 31, 2008 |
Sector designations may be different than the sector designations presented in other Fund materials. The sector designations may also 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.
Sector | Percentage of net assets | |
Common Stock | 97.38% | |
Basic Materials | 6.03% | |
Business Services | 6.23% | |
Capital Goods | 9.40% | |
Communication Services | 1.26% | |
Consumer Discretionary | 5.63% | |
Consumer Services | 4.87% | |
Consumer Staples | 3.33% | |
Credit Cyclicals | 0.65% | |
Energy | 7.88% | |
Financials | 10.75% | |
Health Care | 14.28% | |
Media | 1.88% | |
Real Estate | 4.47% | |
Technology | 16.94% | |
Transportation | 1.13% | |
Utilities | 2.65% | |
Repurchase Agreements | 2.00% | |
Securities Lending Collateral | 19.57% | |
Total Value of Securities | 118.95% | |
Obligation to Return Securities Lending Collateral | (19.57% | ) |
Receivables and Other Assets Net of Liabilities | 0.62% | |
Total Net Assets | 100.00% |
3
Sector allocation and top 10 holdings | |
Delaware Small Cap Core Fund | As of May 31, 2008 |
Holdings are for informational purposes only and are subject to change at any time. They are not a recommendation to buy, sell, or hold any security.
Top 10 Holdings | Percentage of net assets |
Penn Virginia | 1.27% |
Petrohawk Energy | 1.16% |
United Therapeutics | 1.10% |
PetroQuest Energy | 1.10% |
W-H Energy Services | 1.08% |
Otter Tail | 0.98% |
Lincoln Electric Holdings | 0.98% |
ON Semiconductor | 0.98% |
Aeropostale | 0.95% |
Hercules | 0.92% |
4
Statement of net assets | |
Delaware Small Cap Core Fund | May 31, 2008 (Unaudited) |
Number of shares | Value | ||||
Common Stock – 97.38% | |||||
Basic Materials – 6.03% | |||||
†Century Aluminum | 6,700 | $ | 489,100 | ||
Ferro | 40,680 | 787,565 | |||
Hercules | 40,680 | 839,229 | |||
†Horsehead Holding | 22,100 | 310,505 | |||
†Intrepid Potash | 1,840 | 90,454 | |||
†OM Group | 12,400 | 539,152 | |||
*†PolyOne | 79,890 | 618,349 | |||
Rock-Tenn Class A | 16,540 | 590,313 | |||
*†Rockwood Holdings | 21,870 | 803,066 | |||
*†Terra Industries | 9,810 | 428,010 | |||
5,495,743 | |||||
Business Services – 6.23% | |||||
Administaff | 16,560 | 462,355 | |||
American Ecology | 10,350 | 297,252 | |||
*†AMN Healthcare Services | 38,920 | 677,597 | |||
*Arbitron | 11,290 | 562,919 | |||
DeVry | 11,940 | 681,178 | |||
†FTI Consulting | 8,930 | 536,336 | |||
*Healthcare Services Group | 31,425 | 554,337 | |||
†Kforce | 43,300 | 400,525 | |||
McGrath RentCorp | 16,700 | 461,421 | |||
†RiskMetrics Group | 22,080 | 457,718 | |||
†United Stationers | 13,750 | 582,175 | |||
5,673,813 | |||||
Capital Goods – 9.40% | |||||
AAON | 27,650 | 581,203 | |||
*Acuity Brands | 10,840 | 577,230 | |||
*Applied Industrial Technologies | 13,450 | 370,010 | |||
Barnes Group | 25,270 | 807,124 | |||
†Chart Industries | 15,150 | 634,634 | |||
†Columbus McKinnon | 22,650 | 645,752 | |||
Crane | 15,840 | 723,096 | |||
Granite Construction | 11,690 | 426,217 | |||
†Hexcel | 21,020 | 556,189 | |||
†Kadant | 14,490 | 387,318 | |||
Lincoln Electric Holdings | 10,850 | 894,907 | |||
*†Perini | 9,830 | 378,357 |
5
Statement of net assets
Delaware Small Cap Core Fund
Number of shares | Value | ||||
Common Stock (continued) | |||||
Capital Goods (continued) | |||||
†Rofin-Sinar Technologies | 15,950 | $ | 564,471 | ||
Triumph Group | 5,560 | 345,776 | |||
†URS | 14,030 | 670,774 | |||
8,563,058 | |||||
Communication Services – 1.26% | |||||
*Alaska Communications Systems Group | 45,200 | 584,888 | |||
NTELOS Holdings | 20,100 | 561,192 | |||
1,146,080 | |||||
Consumer Discretionary – 5.63% | |||||
†Aeropostale | 24,745 | 864,590 | |||
*†Fossil | 17,400 | 551,754 | |||
*†J Crew Group | 13,530 | 504,263 | |||
*†Jos A Bank Clothiers | 25,800 | 701,760 | |||
†Marvel Entertainment | 12,770 | 434,563 | |||
Phillips-Van Heusen | 12,450 | 565,604 | |||
*†True Religion Apparel | 28,450 | 719,216 | |||
†Warnaco Group | 16,270 | 784,051 | |||
5,125,801 | |||||
Consumer Services – 4.87% | |||||
*†AFC Enterprises | 39,650 | 396,500 | |||
*†Bally Technologies | 14,040 | 631,940 | |||
*†Buffalo Wild Wings | 19,950 | 657,353 | |||
CKE Restaurants | 50,810 | 601,590 | |||
*IHOP | 8,830 | 414,039 | |||
†Jack in the Box | 21,920 | 538,574 | |||
†Papa John’s International | 23,750 | 698,963 | |||
†WMS Industries | 13,350 | 494,484 | |||
4,433,443 | |||||
Consumer Staples – 3.33% | |||||
Alberto-Culver | 21,250 | 561,638 | |||
*Casey’s General Stores | 33,100 | 724,558 | |||
†Chattem | 6,200 | 385,702 | |||
Longs Drug Stores | 15,140 | 717,939 | |||
Seaboard | 360 | 646,200 | |||
3,036,037 | |||||
Credit Cyclicals – 0.65% | |||||
†Tenneco | 24,730 | 593,025 | |||
593,025 |
6
Number of shares | Value | ||||
Common Stock (continued) | |||||
Energy – 7.88% | |||||
†Bristow Group | 14,400 | $ | 752,688 | ||
†Complete Production Services | 23,400 | 670,644 | |||
*†Exco Resources | 16,620 | 414,503 | |||
†Mariner Energy | 16,020 | 523,854 | |||
Penn Virginia | 18,390 | 1,158,939 | |||
†Petrohawk Energy | 35,880 | 1,054,154 | |||
*†PetroQuest Energy | 45,220 | 1,001,623 | |||
*St. Mary Land & Exploration | 12,090 | 616,106 | |||
†W-H Energy Services | 11,470 | 981,029 | |||
7,173,540 | |||||
Financials – 10.75% | |||||
Aspen Insurance Holdings | 28,620 | 731,526 | |||
*Bancfirst | 13,950 | 605,849 | |||
Citizens Republic Bancorp | 49,200 | 272,568 | |||
City Holding | 12,750 | 548,505 | |||
*Colonial BancGroup | 47,660 | 292,156 | |||
Dime Community Bancshares | 25,650 | 466,317 | |||
*East West Bancorp | 29,250 | 387,270 | |||
FBL Financial Group Class A | 18,300 | 491,355 | |||
*First Niagara Financial Group | 45,700 | 647,569 | |||
*Greenhill & Co | 9,110 | 548,878 | |||
Harleysville Group | 11,450 | 446,665 | |||
Horace Mann Educators | 19,430 | 316,515 | |||
Max Capital Group | 28,050 | 676,566 | |||
optionsXpress Holdings | 21,500 | 491,060 | |||
RLI | 15,820 | 809,034 | |||
Trustmark | 22,650 | 452,094 | |||
†United America Indemnity Class A | 31,900 | 464,783 | |||
Waddell & Reed Financial Class A | 23,660 | 836,617 | |||
Webster Financial | 11,680 | 303,330 | |||
9,788,657 | |||||
Health Care – 14.28% | |||||
†Align Technology | 36,700 | 483,339 | |||
†Alkermes | 43,500 | 551,145 | |||
*†Applera-Celera Group | 39,050 | 502,964 | |||
*†Bio-Rad Laboratories Class A | 6,610 | 591,463 | |||
†Eurand | 34,300 | 515,529 | |||
†Gen-Probe | 8,150 | 464,061 |
7
Statement of net assets
Delaware Small Cap Core Fund
Number of shares | Value | ||||
Common Stock (continued) | |||||
Health Care (continued) | |||||
*†Geron | 68,050 | $ | 289,213 | ||
*†Healthways | 13,200 | 426,360 | |||
*†Hologic | 12,300 | 295,569 | |||
†Kendle International | 10,550 | 398,685 | |||
*†Medarex | 60,450 | 526,520 | |||
*Mentor | 18,510 | 583,250 | |||
*†Noven Pharmaceuticals | 28,500 | 348,840 | |||
†Omrix Biopharmaceuticals | 17,950 | 326,511 | |||
*†Onyx Pharmaceuticals | 10,150 | 358,701 | |||
*†OSI Pharmaceuticals | 9,300 | 328,290 | |||
*†Psychiatric Solutions | 16,550 | 603,578 | |||
*Quality Systems | 14,200 | 467,606 | |||
†Quidel | 21,150 | 361,031 | |||
†Regeneron Pharmaceuticals | 22,250 | 442,775 | |||
†Res-Care | 29,000 | 553,030 | |||
*†Sciele Pharma | 22,400 | 490,784 | |||
†Sun Healthcare Group | 43,950 | 631,121 | |||
†Techne | 6,300 | 494,550 | |||
†United Therapeutics | 10,500 | 1,002,854 | |||
Universal Health Services Class B | 6,450 | 419,250 | |||
Vital Signs | 9,700 | 550,863 | |||
13,007,882 | |||||
Media – 1.88% | |||||
*Entercom Communications Class A | 31,480 | 304,726 | |||
infoUSA | 72,500 | 406,725 | |||
National CineMedia | 30,900 | 614,910 | |||
*†Scholastic | 12,450 | 387,195 | |||
1,713,556 | |||||
Real Estate – 4.47% | |||||
Digital Realty Trust | 7,290 | 308,367 | |||
*First Industrial Realty Trust | 18,880 | 591,510 | |||
*Home Properties | 11,270 | 577,024 | |||
*Nationwide Health Properties | 16,790 | 573,043 | |||
*Pennsylvania Real Estate Investment Trust | 19,070 | 512,030 | |||
Senior Housing Properties Trust | 34,530 | 766,911 | |||
Sovran Self Storage | 16,720 | 738,857 | |||
4,067,742 |
8
Number of shares | Value | |||||
Common Stock (continued) | ||||||
Technology – 16.94% | ||||||
*†Anixter International | 9,870 | $ | 641,649 | |||
*†Blackboard | 18,650 | 706,461 | ||||
*†Chordiant Software | 22,300 | 143,166 | ||||
*†DealerTrack Holdings | 15,300 | 321,912 | ||||
*†Digital River | 18,450 | 739,106 | ||||
†Dionex | 6,550 | 477,626 | ||||
†Harris Stratex Networks Class A | 40,900 | 459,716 | ||||
Heartland Payment Systems | 17,780 | 458,902 | ||||
†iGate | 35,850 | 306,518 | ||||
*†j2 Global Communications | 26,100 | 692,172 | ||||
†JDA Software Group | 16,850 | 343,740 | ||||
*†Kulicke & Soffa Industries | 70,650 | 500,202 | ||||
†Lawson Software | 76,250 | 664,900 | ||||
†Netgear | 29,100 | 552,609 | ||||
*†Nuance Communications | 15,500 | 305,660 | ||||
*†ON Semiconductor | 90,450 | 894,550 | ||||
†Progress Software | 25,100 | 781,613 | ||||
*†Sapient | 60,500 | 399,300 | ||||
*†SAVVIS | 28,300 | 472,044 | ||||
*†Secure Computing | 61,650 | 328,595 | ||||
†SI International | 14,000 | 343,000 | ||||
†SPSS | 7,900 | 311,023 | ||||
*†Synaptics | 14,450 | 618,027 | ||||
*†Synchronoss Technolgies | 27,100 | 360,159 | ||||
†Tekelec | 40,400 | 678,316 | ||||
United Online | 43,350 | 530,171 | ||||
†Universal Electronics | 22,600 | 574,492 | ||||
†ValueClick | 15,650 | 314,722 | ||||
†Viasat | 28,750 | 619,275 | ||||
†Virtusa | 27,777 | 280,548 | ||||
†Wind River Systems | 55,700 | 602,674 | ||||
15,422,848 | ||||||
Transportation – 1.13% | ||||||
†HUB Group Class A | 17,000 | 613,360 | ||||
†TBS International Class A | 8,900 | 414,562 | ||||
1,027,922 |
9
Statement of net assets
Delaware Small Cap Core Fund
Number of shares | Value | ||||||
Common Stock (continued) | |||||||
Utilities – 2.65% | |||||||
Black Hills | 22,520 | $ | 793,605 | ||||
*Cleco | 28,850 | 720,673 | |||||
*Otter Tail | 23,850 | 895,329 | |||||
2,409,607 | |||||||
Total Common Stock (cost $90,476,645) | 88,678,754 | ||||||
Principal amount | |||||||
Repurchase Agreements**– 2.00% | |||||||
BNP Paribas 2.18%, dated 5/30/08, to be repurchased | |||||||
on 6/2/08, repurchase price $1,441,262 (collateralized | |||||||
by U.S. Government obligations, ranging in par | |||||||
value $16,000-$1,353,000, 4.00%-5.00%, | |||||||
6/15/09-8/15/11; with total market value $1,471,818) | $ | 1,441,000 | 1,441,000 | ||||
UBS Warburg 2.18%, dated 5/30/08, to be repurchased | |||||||
on 6/2/08, repurchase price $383,070 (collateralized | |||||||
by U.S. Government obligations, ranging in par | |||||||
value $48,000-$219,000, 4.50%-4.875%, | |||||||
12/31/08-6/30/12; with total market value $391,670) | 383,000 | 383,000 | |||||
Total Repurchase Agreements (cost $1,824,000) | 1,824,000 | ||||||
Total Value of Securities Before Securities Lending | |||||||
Collateral – 99.38% (cost $92,300,645) | 90,502,754 | ||||||
Number of shares | |||||||
Securities Lending Collateral*** – 19.57% | |||||||
Investment Companies | |||||||
Mellon GSL DBT II Collateral Fund | 17,821,968 | 17,821,968 | |||||
Total Securities Lending Collateral | |||||||
(cost $17,821,968) | 17,821,968 |
10
Total Value of Securities – 118.95% | ||||
(cost $110,122,613) | $ | 108,324,722 | © | |
Obligation to Return Securities Lending | ||||
Collateral*** – (19.57%) | (17,821,968 | ) | ||
Receivables and Other Assets | ||||
Net of Liabilities – 0.62% | 561,177 | |||
Net Assets Applicable to 8,410,028 | ||||
Shares Outstanding – 100.00% | $ | 91,063,931 | ||
Net Asset Value – Delaware Small Cap Core Fund | ||||
Class A ($34,581,866 / 3,187,961 Shares) | $10.85 | |||
Net Asset Value – Delaware Small Cap Core Fund | ||||
Class C ($14,577,528 / 1,373,525 Shares) | $10.61 | |||
Net Asset Value – Delaware Small Cap Core Fund | ||||
Class R ($3,689,267 / 342,288 Shares) | $10.78 | |||
Net Asset Value – Delaware Small Cap Core Fund | ||||
Institutional Class ($38,215,270 / 3,506,254 Shares) | $10.90 | |||
Components of Net Assets at May 31, 2008: | ||||
Shares of beneficial interest (unlimited authorization – no par) | $ | 102,527,949 | ||
Undistributed net investment income | 73,027 | |||
Accumulated net realized loss on investments | (9,739,154 | ) | ||
Net unrealized depreciation of investments | (1,797,891 | ) | ||
Total net assets | $ | 91,063,931 |
† | Non-income producing security for the period May 31, 2008. |
* | Fully or partially on loan. |
** | See Note 1 in “Notes to financial statements.” |
*** | See Note 8 in “Notes to financial statements.” |
© | Includes $17,064,235 of securities loaned. |
11
Statement of net assets
Delaware Small Cap Core Fund
Net Asset Value and Offering Price Per Share – Delaware Small Cap Core Fund | ||
Net asset value Class A (A) | $ | 10.85 |
Sales charge (5.75% of offering price) (B) | 0.66 | |
Offering price | $ | 11.51 |
(A) | Net asset value per share, as illustrated, is the amount which would be paid upon redemption or repurchase of shares. | |
(B) | See the current prospectus for purchases of $50,000 or more. |
See accompanying notes
12
Statement of operations | |
Delaware Small Cap Core Fund | Six Months Ended May 31, 2008 (Unaudited) |
Investment Income: | ||||||
Dividends | $ | 521,610 | ||||
Interest | 26,493 | |||||
Securities lending income | 104,126 | $ | 652,229 | |||
Expenses: | ||||||
Management fees | 312,359 | |||||
Distribution expenses – Class A | 53,836 | |||||
Distribution expenses – Class C | 77,842 | |||||
Distribution expenses – Class R | 9,621 | |||||
Dividend disbursing and transfer agent fees and expenses | 119,464 | |||||
Registration fees | 26,840 | |||||
Accounting and administration expenses | 16,659 | |||||
Reports and statements to shareholders | 13,537 | |||||
Audit and tax | 7,949 | |||||
Legal fees | 6,635 | |||||
Custodian fees | 5,090 | |||||
Dues and services | 3,277 | |||||
Trustees’ fees | 2,501 | |||||
Pricing fees | 1,503 | |||||
Consulting fees | 657 | |||||
Insurance fees | 629 | |||||
Taxes (other than taxes on income) | 188 | |||||
Trustees’ expenses | 161 | 658,748 | ||||
Less expenses absorbed or waived | (70,722 | ) | ||||
Less waived distribution expenses – Class A | (8,973 | ) | ||||
Less waived distribution expenses – Class R | (1,603 | ) | ||||
Less expense paid indirectly | (748 | ) | ||||
Total operating expenses | 576,702 | |||||
Net Investment Income | 75,527 | |||||
Net Realized and Unrealized Gain (Loss) on Investments: | ||||||
Net realized loss on investments | (9,578,243 | ) | ||||
Net change in unrealized appreciation/depreciation of investments | 3,350,405 | |||||
Net Realized and Unrealized Loss on Investments | (6,227,838 | ) | ||||
Net Decrease in Net Assets Resulting from Operations | $ | (6,152,311 | ) |
See accompanying notes
13
Statements of changes in net assets
Delaware Small Cap Core Fund
Six Months | Year | ||||||
Ended | Ended | ||||||
5/31/08 | 11/30/07 | ||||||
(Unaudited) | |||||||
Increase (Decrease) in Net Assets from Operations: | |||||||
Net investment income (loss) | $ | 75,527 | $ | (127,823 | ) | ||
Net realized gain (loss) on investments | (9,578,243 | ) | 3,714,671 | ||||
Net change in unrealized appreciation/depreciation of investments | 3,350,405 | (8,787,702 | ) | ||||
Net decrease in net assets resulting from operations | (6,152,311 | ) | (5,200,854 | ) | |||
Dividends and Distributions to shareholders from: | |||||||
Net realized gain on investments: | |||||||
Class A | (1,661,865 | ) | (868,326 | ) | |||
Class C | (747,247 | ) | (403,007 | ) | |||
Class R | (129,165 | ) | (7,399 | ) | |||
Institutional Class | (1,184,753 | ) | (501,650 | ) | |||
(3,723,030 | ) | (1,780,382 | ) | ||||
Capital Share Transactions: | |||||||
Proceeds from shares sold: | |||||||
Class A | 6,976,510 | 30,154,046 | |||||
Class C | 1,455,106 | 11,425,330 | |||||
Class R | 1,267,967 | 3,777,371 | |||||
Institutional Class | 11,425,427 | 24,312,531 | |||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | |||||||
Class A | 1,456,783 | 774,260 | |||||
Class C | 706,562 | 374,810 | |||||
Class R | 129,164 | 7,399 | |||||
Institutional Class | 1,184,571 | 501,495 | |||||
24,602,090 | 71,327,242 |
14
Six Months | Year | |||||||
Ended | Ended | |||||||
5/31/08 | 11/30/07 | |||||||
(Unaudited) | ||||||||
Capital Share Transactions (continued): | ||||||||
Cost of shares repurchased: | ||||||||
Class A | $ | (10,995,524 | ) | $ | (11,280,461 | ) | ||
Class C | (4,112,952 | ) | (3,460,754 | ) | ||||
Class R | (475,257 | ) | (693,644 | ) | ||||
Institutional Class | (2,922,951 | ) | (6,761,739 | ) | ||||
(18,506,684 | ) | (22,196,598 | ) | |||||
Increase in net assets derived from capital share transactions | 6,095,406 | 49,130,644 | ||||||
Net Increase (Decrease) in Net Assets | (3,779,935 | ) | 42,149,408 | |||||
Net Assets: | ||||||||
Beginning of period | 94,843,866 | 52,694,458 | ||||||
End of period (including undistributed net investment income of $73,027 and $—, respectively) | $ | 91,063,931 | $ | 94,843,866 |
See accompanying notes
15
Financial highlights
Delaware Small Cap Core 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 income (loss)2 |
Net realized and unrealized gain (loss) on investments |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain on investments |
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 expense limitation and expense paid indirectly |
Ratio of net investment income (loss) to average net assets |
Ratio of net investment income (loss) to average net assets prior to expense limitation and expense paid indirectly |
Portfolio turnover |
1 Ratios and portfolio turnover have been annualized and total return has 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 reflects waivers by the manager and distributor. Performance would have been lower had the waivers not been in effect. |
See accompanying notes
16
Six Months Ended | Year Ended | ||||||||||||||||||
5/31/081 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | 11/30/03 | ||||||||||||||
(Unaudited) | |||||||||||||||||||
$12.150 | $13.030 | $11.380 | $14.600 | $13.080 | $10.290 | ||||||||||||||
0.013 | (0.010 | ) | (0.015 | ) | 0.022 | 0.026 | 0.036 | ||||||||||||
(0.821 | ) | (0.450 | ) | 1.895 | 1.035 | 2.481 | 3.350 | ||||||||||||
(0.808 | ) | (0.460 | ) | 1.880 | 1.057 | 2.507 | 3.386 | ||||||||||||
— | — | — | (0.025 | ) | (0.044 | ) | (0.075 | ) | |||||||||||
(0.492 | ) | (0.420 | ) | (0.230 | ) | (4.252 | ) | (0.943 | ) | (0.521 | ) | ||||||||
(0.492 | ) | (0.420 | ) | (0.230 | ) | (4.277 | ) | (0.987 | ) | (0.596 | ) | ||||||||
$10.850 | $12.150 | $13.030 | $11.380 | $14.600 | $13.080 | ||||||||||||||
(6.94% | ) | (3.62% | ) | 16.83% | 9.04% | 20.62% | 35.19% | ||||||||||||
$34,582 | $41,871 | $25,220 | $3,863 | $20 | $13 | ||||||||||||||
1.32% | 1.29% | 1.26% | 1.02% | 0.75% | 0.75% | ||||||||||||||
1.54% | 1.47% | 1.73% | 2.53% | 1.30% | 1.34% | ||||||||||||||
0.25% | (0.07% | ) | (0.13% | ) | 0.20% | 0.20% | 0.33% | ||||||||||||
0.03% | (0.25% | ) | (0.60% | ) | (1.31% | ) | (0.35% | ) | (0.26% | ) | |||||||||
79% | 104% | 121% | 104% | 136% | 44% |
17
Financial highlights
Delaware Small Cap Core 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 income3 |
Net realized and unrealized gain (loss) on investments |
Total from investment operations |
Less dividends and distributions from: |
Net realized gain on investments |
Total dividends and distributions |
Net asset value, end of period |
Total return4 |
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 expense limitation and expense paid indirectly |
Ratio of net investment loss to average net assets |
Ratio of net investment loss to average net assets |
prior to expense limitation and expense paid indirectly |
Portfolio turnover |
1 Ratios and portfolio turnover have been annualized and total return has not been annualized. | |
2 Date of commencement of operations; ratios have been annualized and total return has not been annualized. | |
3 The average shares outstanding method has been applied for per share information. | |
4 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. | |
5 The portfolio turnover is representative of the Fund for the entire year. |
See accompanying notes
18
Year Ended | 8/1/052 | ||||||||||||
Six Months Ended | to | ||||||||||||
5/31/081 | 11/30/07 | 11/30/06 | 11/30/05 | ||||||||||
(Unaudited) | |||||||||||||
$11.940 | $12.910 | $11.360 | $11.590 | ||||||||||
(0.026 | ) | (0.105 | ) | (0.106 | ) | (0.021 | ) | ||||||
(0.812 | ) | (0.445 | ) | 1.886 | (0.209 | ) | |||||||
(0.838 | ) | (0.550 | ) | 1.780 | (0.230 | ) | |||||||
(0.492 | ) | (0.420 | ) | (0.230 | ) | — | |||||||
(0.492 | ) | (0.420 | ) | (0.230 | ) | — | |||||||
$10.610 | $11.940 | $12.910 | $11.360 | ||||||||||
(7.33% | ) | (4.37% | ) | 15.97% | (1.98% | ) | |||||||
$14,578 | $18,697 | $11,777 | $866 | ||||||||||
2.07% | 2.04% | 2.01% | 2.00% | ||||||||||
2.24% | 2.17% | 2.43% | 5.14% | ||||||||||
(0.50% | ) | (0.82% | ) | (0.88% | ) | (0.56% | ) | ||||||
(0.67% | ) | (0.95% | ) | (1.30% | ) | (3.71% | ) | ||||||
79% | 104% | 121% | 104% | 5 |
19
Financial highlights
Delaware Small Cap Core 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 loss3 |
Net realized and unrealized gain (loss) on investments |
Total from investment operations |
Less dividends and distributions from: |
Net realized gain on investments |
Total dividends and distributions |
Net asset value, end of period |
Total return4 |
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 expense limitation and expense paid indirectly |
Ratio of net investment loss to average net assets |
Ratio of net investment loss to average net assets |
prior to expense limitation and expense paid indirectly |
Portfolio turnover |
1 Ratios and portfolio turnover have been annualized and total return has not been annualized. | |
2 As of November 30, 2005, the Delaware Small Cap Core fund Class R had one share outstanding, representing the initial seed purchase. Shareholder data for this class prior to December 1, 2005 is not disclosed because management does not believe it to be meaningful. | |
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 reflects waivers by the manager and distributor. Performance would have been lower had the waivers not been in effect. |
See accompanying notes
20
Six Months Ended | Year Ended | |||||||||
5/31/081 | 11/30/07 | 11/30/062 | ||||||||
(Unaudited) | ||||||||||
$12.090 | $13.000 | $11.360 | ||||||||
— | (0.042 | ) | (0.047 | ) | ||||||
(0.818 | ) | (0.448 | ) | 1.917 | ||||||
(0.818 | ) | (0.490 | ) | 1.870 | ||||||
(0.492 | ) | (0.420 | ) | (0.230 | ) | |||||
(0.492 | ) | (0.420 | ) | (0.230 | ) | |||||
$10.780 | $12.090 | $13.000 | ||||||||
(7.07% | ) | (3.86% | ) | 16.78% | ||||||
$3,689 | $3,100 | $215 | ||||||||
1.57% | 1.54% | 1.51% | ||||||||
1.84% | 1.77% | 2.03% | ||||||||
— | (0.32% | ) | (0.38% | ) | ||||||
(0.27% | ) | (0.55% | ) | (0.90% | ) | |||||
79% | 104% | 121% |
21
Financial highlights
Delaware Small Cap Core 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) on investments |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain on investments |
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 expense limitation and expense paid indirectly |
Ratio of net investment loss to average net assets |
Ratio of net investment (loss) to average net assets |
prior to expense limitation and expense paid indirectly |
Portfolio turnover |
1 Ratios and portfolio turnover have been annualized and total return has 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 reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes
22
Six Months Ended | Year Ended | ||||||||||||||||||
5/31/081 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | 11/30/03 | ||||||||||||||
(Unaudited) | |||||||||||||||||||
$12.190 | $13.040 | $11.390 | $14.600 | $13.080 | $10.290 | ||||||||||||||
0.026 | 0.023 | 0.015 | 0.031 | 0.026 | 0.036 | ||||||||||||||
(0.824 | ) | (0.453 | ) | 1.895 | 1.036 | 2.481 | 3.350 | ||||||||||||
(0.798 | ) | (0.430 | ) | 1.910 | 1.067 | 2.507 | 3.386 | ||||||||||||
— | — | (0.030 | ) | (0.025 | ) | (0.044 | ) | (0.075 | ) | ||||||||||
(0.492 | ) | (0.420 | ) | (0.230 | ) | (4.252 | ) | (0.943 | ) | (0.521 | ) | ||||||||
(0.492 | ) | (0.420 | ) | (0.260 | ) | (4.277 | ) | (0.987 | ) | (0.596 | ) | ||||||||
$10.900 | $12.190 | $13.040 | $11.390 | $14.600 | $13.080 | ||||||||||||||
(6.84% | ) | (3.38% | ) | 17.13% | 9.14% | 20.62% | 35.19% | ||||||||||||
$38,215 | $31,176 | $15,482 | $6,645 | $4,765 | $3,948 | ||||||||||||||
1.07% | 1.04% | 1.01% | 0.94% | 0.75% | 0.75% | ||||||||||||||
1.24% | 1.17% | 1.43% | 2.23% | 1.00% | 1.04% | ||||||||||||||
0.50% | 0.18% | 0.12% | 0.28% | 0.20% | 0.33% | ||||||||||||||
0.33% | 0.05% | (0.30% | ) | (1.01% | ) | (0.05% | ) | 0.04% | |||||||||||
79% | 104% | 121% | 104% | 136% | 44% |
23
Notes to financial statements | |
Delaware Small Cap Core Fund | May 31, 2008 (Unaudited) |
Delaware Group Equity Funds V (Trust) is organized as a Delaware statutory trust and offers three series: Delaware Dividend Income Fund, Delaware Small Cap Core Fund and Delaware Small Cap Value Fund. These financial statements and the related notes pertain to Delaware Small Cap Core Fund (Fund). The Trust is an open-end investment company. The Fund is considered diversified under the Investment Company Act of 1940, 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 up to 5.75%. Class A share purchases of $1,000,000 or more will incur a contingent deferred sales charge (CDSC) of 1% 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%, 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 long-term capital appreciation.
1. Significant Accounting Policies
The following accounting policies are in accordance with U.S. generally accepted accounting principles and are consistently followed by the Fund.
Security Valuation — Equity securities, except those traded on the Nasdaq Stock Market, Inc. (Nasdaq), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange (NYSE) on the valuation date. Securities traded on the Nasdaq are valued in accordance with the Nasdaq Official Closing Price, which may not be the last sales price. If on a particular day an equity security does not trade, then the mean between the bid and asked prices will be used. Short-term debt securities having less than 60 days to maturity are valued at amortized cost, which approximates market value. Securities lending collateral, which is invested in a collective investment vehicle (Collective Trust), is valued at unit value per share. 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 Fund’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 with respect to foreign securities, aftermarket trading or significant events after local market trading (e.g., government actions or pronouncements, trading volume or volatility on markets, exchanges among dealers, or news events).
Federal Income Taxes — 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. Accordingly, no provision for federal income taxes has been made in the financial statements.
Effective May 30, 2008, the Fund adopted FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements. FIN 48 requires the
24
evaluation of 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. The adoption of FIN 48 did not result in the recording of any tax benefit or expense in the current period.
Class Accounting — Investment income, common expenses and 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 invest in a pooled cash account along with members of the Delaware Investments® Family of Funds pursuant to an exemptive order issued by the Securities and Exchange Commission. The aggregate daily balance of the pooled cash account is invested in repurchase agreements secured by obligations of the U.S. government. The respective collateral is held by the Fund’s custodian bank until the maturity of the respective repurchase agreements. Each repurchase agreement is at least 102% collateralized. However, in the event of default or bankruptcy by the counterparty to the agreement, realization of the collateral may be subject to legal proceedings.
Use of Estimates — The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that may affect the reported amounts of 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.
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 amongst 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. Distributions received from investments in Real Estate Investment Trusts (REITs) are recorded as dividend income on the ex-dividend date, subject to reclassification upon notice of the character of such distributions by the issuer. The financial statements reflect an estimate of the reclassification of the distribution character. The Fund declares and pays dividends from net investment income and distributions from net realized gains on investments, if any, annually.
Subject to seeking best execution, the Fund may direct certain security trades to brokers who have agreed to rebate a portion of the related brokerage commission to the Fund in cash. Such commission rebates are included in realized gain on investments in the accompanying financial statements and totaled $1,041 for the six months ended May 31, 2008. In general, best execution
25
Notes to financial statements
Delaware Small Cap Core Fund
1. Significant Accounting Policies (continued)
refers to many factors, including the price paid or received for a security, the commission charged, the promptness and reliability of execution, the confidentiality and placement accorded the order, and other factors affecting the overall benefit obtained by the Fund on the transaction.
The Fund receives earnings credits from its custodian when positive cash balances are maintained, which are used to offset custody fees. The expense paid under this arrangement is included in custodian fees on the statement of operations with the corresponding expense offset shown as “expense paid indirectly.”
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 0.75% on the first $500 million of average daily net assets of the Fund, 0.70% on the next $500 million, 0.65% on the next $1.5 billion, and 0.60% on average daily net assets in excess of $2.5 billion.
Effective April 1, 2008, DMC has contractually agreed to waive that portion, if any, of its management fee and reimburse the Fund to the extent necessary to ensure that total annual operating expenses (excluding any taxes, interest, brokerage fees, inverse floater program expenses, 12b-1 plan expenses, certain insurance costs and non-routine expenses or costs, including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations, (collectively, “non-routine expenses”)) do not exceed 1.10% of average daily net assets of the Fund through March 31, 2009. For purposes of these waivers and reimbursements, non-routine expenses may also include such additional costs and expenses, as may be agreed upon from time to time by the Fund’s Board and DMC. These expense waivers and reimbursements apply only to expenses paid directly by the Fund. Prior to April 1, 2008, annual operating expenses were limited to 1.05% of average daily net assets of the Fund.
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Fund. For these services, the Fund pays DSC fees 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 DSC under the service agreement described above are allocated among all Funds in the Delaware Investments® Family of Funds on a relative net asset value basis. For the six months ended May 31, 2008, the Fund was charged $2,082 for these services.
DSC also provides dividend disbursing and transfer agency services. The Fund pays DSC a monthly fee based on the number of shareholder accounts for dividend disbursing and transfer agent services.
26
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 not to exceed 0.30% of the average daily net assets of the Class A shares, 1.00% of the average daily net assets of the C shares and 0.60% of the average daily net assets of Class R shares. Institutional Class shares pay no distribution and service expenses. DDLP has contracted to waive distribution and service fees through March 31, 2009, in order to prevent distribution and service fees of Class A and Class R shares from exceeding 0.25% and 0.50%, respectively, of average daily net assets.
At May 31, 2008, the Fund had liabilities payable to affiliates as follows:
Investment management fee payable to DMC | $ | 48,608 |
Dividend disbursing, transfer agent fee and fund accounting | ||
oversight fees and other expenses payable to DSC | 20,386 | |
Distribution fees payable to DDLP | 20,901 | |
Other expenses payable to DMC and affiliates* | 35,569 |
*DMC, as part of its administrative services, pays operating expenses on behalf of the Fund and is reimbursed on a periodic basis. Such expenses include items such as printing of shareholder reports, fees for audit, legal and tax services, registration fees and trustees’ fees.
As provided in the investment management agreement, the Fund bears the cost of certain legal and tax services, including internal legal and tax services provided to the Fund by DMC and/or its affiliates employees. For the six months ended May 31, 2008, the Fund was charged $2,945 for internal legal and tax services provided by DMC and/or its affiliates.
For the six months ended May 31, 2008, DDLP earned $5,724 for commissions on sales of the Fund’s Class A shares. For the six months ended May 31, 2008, DDLP received gross CDSC of $1,678 and $2,456 on redemption of the Fund’s Class A and Class C shares, respectively, and these commissions were entirely used to offset up-front 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 per meeting fees. Certain officers of DMC, DSC and DDLP are officers and/or Trustees of the Trust. These officers and trustees are paid no compensation by the Fund.
3. Investments
For the six months ended May 31, 2008, the Fund made purchases of $35,473,028 and sales of $32,324,917 of investment securities other than short-term investments.
At May 31, 2008, the cost of investments for federal income tax purposes has been estimated since final tax characteristics cannot be determined until fiscal year end. At May 31, 2008, the cost of investments was $110,703,339. At May 31, 2008, net unrealized depreciation was $2,378,617, of which $7,065,773 related to unrealized appreciation of investments and $9,444,390 related to unrealized depreciation of investments.
27
Notes to financial statements
Delaware Small Cap Core Fund
3. Investments (continued)
Effective December 1, 2007, the Fund adopted Financial Accounting Standards No. 157, Fair Value Measurements (FAS 157). FAS 157 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. FAS 157 also establishes a framework for measuring fair value, and a three level hierarchy for fair value measurements 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 developed 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-tier hierarchy of inputs is summarized below.
Level 1 - inputs are quoted prices in active markets
Level 2 - inputs that are observable, directly or indirectly
Level 3 - inputs are unobservable and reflect assumptions on the part of the reporting entity
The following table summarizes the valuation of the Fund’s investments by the above FAS 157 fair value hierarchy levels as of May 31, 2008:
Level | Securities | Derivatives | ||||
Level 1 | $ | 108,324,722 | $ | — | ||
Level 2 | — | — | ||||
Level 3 | — | — | ||||
Total | $ | 108,324,722 | $ | — |
4. Dividend and Distribution Information
Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from U.S. generally accepted accounting principles. Additionally, distributions from net short-term gains on sales of investment securities are treated as ordinary income for federal income tax purposes. The tax character of dividends and distributions paid during the six months ended May 31, 2008 and the year ended November 30, 2007 was as follows:
Six Months Ended | Year Ended | |||||
5/31/08* | 11/30/07 | |||||
Ordinary Income | $1,033,856 | $ | 1,022,198 | |||
Long-term capital gain | 2,689,174 | 758,184 | ||||
Total | $3,723,030 | $ | 1,780,382 |
*Tax information for the period ended May 31, 2008 is an estimate and the tax character of dividends and distributions may be redesignated at fiscal year end.
28
5. Components of Net Assets on a Tax Basis
The components of net assets are estimated since final tax characteristics cannot be determined until fiscal year end. As of May 31, 2008, the estimated components of net assets on a tax basis were as follows:
Shares of beneficial interest | $ | 102,527,949 | |
Undistributed ordinary income | 73,027 | ||
Realized losses (12/1/07 – 5/31/08) | (9,158,428 | ) | |
Unrealized depreciation of investments | (2,378,617 | ) | |
Net assets | $ | 91,063,931 |
The differences between book basis and tax basis components of net assets are primarily attributable to tax deferral of losses on wash sales.
The undistributed earnings for the Fund are estimated pending final notification of the tax character of distributions received from investments in REITs.
For financial reporting purposes, capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Reclassifications are primarily due to tax treatment of dividends and distributions. Results of operations and net assets were not affected by these reclassifications. For the six months ended May 31, 2008, the Fund recorded an estimate of these differences since final tax characteristics cannot be determined until fiscal year end.
Undistributed net investment income | $ | (2,500 | ) | |
Accumulated net realized loss | 2,500 |
29
Notes to financial statements
Delaware Small Cap Core Fund
6. Capital Shares
Transactions in capital shares were as follows:
Six Months | Year | ||||
Ended | Ended | ||||
5/31/08 | 11/30/07 | ||||
Shares sold: | |||||
Class A | 649,840 | 2,325,110 | |||
Class C | 137,985 | 897,859 | |||
Class R | 118,388 | 294,043 | |||
Institutional Class | 1,104,054 | 1,857,057 | |||
Shares issued upon reinvestment of dividends and distributions: | |||||
Class A | 124,511 | 62,038 | |||
Class C | 61,493 | 30,325 | |||
Class R | 11,097 | 594 | |||
Institutional Class | 100,900 | 40,120 | |||
2,308,268 | 5,507,146 | ||||
Shares repurchased: | |||||
Class A | (1,033,334 | ) | (875,119 | ) | |
Class C | (392,070 | ) | (274,351 | ) | |
Class R | (43,704 | ) | (54,664 | ) | |
Institutional Class | (256,830 | ) | (525,920 | ) | |
(1,725,938 | ) | (1,730,054 | ) | ||
Net increase | 582,330 | 3,777,092 |
7. Line of Credit
The Fund, along with certain other funds in the Delaware Investments® Family of Funds (Participants), participates in a $225,000,000 revolving line of credit facility to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. The Participants are charged an annual commitment fee, which is allocated across the Participants on the basis of each Participant’s allocation of the entire facility. The Participants may borrow up to a maximum of one third of their net assets under the agreement. The Fund had no amounts outstanding as of May 31, 2008, or at any time during the period then ended.
30
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). With respect to each loan, if the aggregate market value of the collateral held on any business day is less than the aggregate market value of the securities which are the subject of such loan, the borrower will be notified to provide additional collateral not less then the applicable collateral requirement. Cash collateral received is invested in a Collective Trust established by BNY Mellon for the purpose of investment on behalf of clients participating in its securities lending programs. The Collective Trust invests in fixed income securities, with a weighted average maturity not to exceed 90 days, rated in one of the top three tiers by Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc. or repurchase agreements collateralized by such securities. The Fund can also accept U.S. government securities and letters of credit (non-cash collateral) in connection with securities loans. In the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to 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 change 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.
At May 31, 2008, the value of the securities on loan was $17,064,235, for which the Fund received collateral, comprised of non-cash collateral valued at $167,469, and cash collateral of $17,821,968. Investments purchased with cash collateral are presented on the statement of net assets under the caption “Securities Lending Collateral.”
9. Credit and Market Risk
The Fund invests a significant portion of its assets in small companies and may be subject to certain risks associated with ownership of securities of such companies. Investments in small-sized companies may be more volatile than investments in larger companies for a number of reasons, which include more limited financial resources or a dependence on narrow product lines.
31
Notes to financial statements
Delaware Small Cap Core Fund
9. Credit and Market Risk (continued)
The Fund invests in REITs and is subject to some of the risks associated with that industry. If the Fund holds real estate directly as a result of defaults or receives rental income directly from real estate holdings, its tax status as a regulated investment company may be jeopardized. There were no direct real estate holdings during the six months ended May 31, 2008. The Fund’s REIT holdings are also affected by interest rate changes, particularly if the REITs it holds use floating rate debt to finance their ongoing operations.
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 of 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 assets. 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. As of May 31, 2008, there were no Rule 144A securities and no securities have been determined to be illiquid under the Fund’s Liquidity Procedures.
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.
32
Other Fund information (unaudited)
Delaware Small Cap Core Fund
Board Consideration of Delaware Small Cap Core Fund Investment Advisory Agreement
At a meeting held on May 20-22, 2008 (the “Annual Meeting”), the Board of Trustees, including a majority of disinterested or independent Trustees, approved the renewal of the Investment Advisory Agreement for the Delaware Small Cap Core 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 contract. Information furnished specifically in connection with the renewal of the Investment Advisory 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 financial condition and profitability of Delaware Investments. In addition, in connection with the Annual Meeting, the Board separately received and reviewed in February 2008 independent historical and comparative reports prepared by Lipper Inc. (“Lipper”), an independent statistical compilation organization. The Lipper reports compared the Fund’s investment performance and expenses with those of other comparable mutual funds. The independent Trustees reviewed Lipper reports with Counsel to the Independent Trustees at the February 2008 Board meeting and discussed such reports further with counsel earlier in the Annual Meeting. The Board requested and received certain information regarding Management’s policy with respect to advisory fee levels and its philosophy with respect to breakpoints; the structure of portfolio manager compensation; the investment manager’s profitability; and any constraints or limitations on the availability of securities in certain investment styles which might inhibit DMC’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 counsel. Although the Trustees gave attention to all information furnished, the following discussion identifies under separate headings the primary factors taken into account by the Board in its contract renewal considerations.
Nature, Extent And Quality Of Service. The Board considered the services provided by Delaware Investments to the Fund and its shareholders. In reviewing the nature, extent and quality of services, the Board emphasized reports furnished to it throughout the year at regular Board meetings covering matters such as the relative performance of the Fund, compliance of portfolio managers with the investment policies, strategies and restrictions for the Fund, the compliance of management personnel with the Code of Ethics adopted throughout the Delaware Investments® Family of Funds complex and the 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. Favorable consideration was given to DMC’s efforts to maintain expenditures and, in some instances, increase financial and human resources committed to fund matters. The Board also considered the transfer agent and
33
Other Fund information (unaudited)
Delaware Small Cap Core Fund
Board Consideration of Delaware Small Cap Core Fund Investment Advisory Agreement (continued)
shareholder services provided to Fund shareholders by Delaware Investments’ affiliate, Delaware Service Company, Inc. (“DSC”), noting DSC’s commitment to maintain a high level of service as well as Delaware Investments’ expenditures to improve the delivery of shareholder services. During 2007 Management commenced the outsourcing of certain investment accounting functions that are expected to improve further the quality and the cost of delivering investment accounting services to the Fund. The Board once again noted the benefits provided to Fund shareholders by being part of the Delaware Investments® Family of Funds, including each shareholder’s ability to exchange an investment in one Delaware fund for the same class of shares in another Delaware fund without a sales charge, to reinvest Fund dividends into additional shares of the Fund or into additional shares of other Delaware funds and the privilege to combine holdings in other Delaware funds to obtain a reduced sales charge. The Board was satisfied with the nature, extent and quality of the overall services provided by Delaware Investments.
Investment Performance. The Board considered the overall investment performance of DMC and the Fund. The Board placed significant emphasis on the investment performance of the Fund in view of its importance to shareholders. Although the Board gave appropriate consideration to performance reports and discussions with portfolio managers at Board meetings throughout the year, the Board gave particular weight to the Lipper reports furnished for the Annual Meeting. The Lipper 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 Lipper (the “Performance Universe”). A fund with the best performance ranked first, and a fund with the poorest, 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 one-, three- and five-year periods ended December 31, 2007. 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 Trustees complimented Management on navigating the Delaware Investments Family of Funds fixed income funds through the turbulent financial markets since 2007 without incurring a major difficulty. The following paragraph summarizes the performance results for the Fund and the Board’s view of such performance.
The Performance Universe for the Fund consisted of the Fund and all retail and institutional small-cap core funds as selected by Lipper. The Lipper report comparison showed that the Fund’s total return for the one-, three- and five-year periods was in the third quartile of its Performance Universe. The Fund’s performance results were not in line with the Board’s objective. In evaluating the Fund’s performance, the Board noted Management’s efforts to increase portfolio management depth by the hiring of a new head of the equity department in 2007. The Board was satisfied that Management was taking action to improve Fund performance and meet the Board’s performance objective.
34
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 October 31, 2007 and the most recent fiscal year end for comparative funds as of August 31, 2007 or earlier. For any fund with a fiscal year end after August 31, 2007, such fund’s expense data was measured as of its fiscal year end for 2006. The Board focused on the comparative analysis of the effective management fees and total expense ratios of the Fund versus the effective management fees and expense ratios of a group of similar funds as selected by Lipper (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) of other funds 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 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 also considered fees paid to Delaware Investments for non-management services. The Board noted its objective to limit the Fund’s total expense ratio to be competitive with that of the Expense Group. The following paragraph summarizes the expense results for the Fund and the Board’s view of such expenses.
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 was satisfied with the management fees and total expenses of the Fund in comparison to its Expense Group as shown in the Lipper report.
Management Profitability. The Board considered the level of profits, if any, realized by Delaware Investments 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 Delaware Investments’ 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 Delaware Investments, to a certain extent, reflect operational cost savings and efficiencies initiated by Delaware Investments. The Board considered Delaware Investments’ efforts to improve services provided to fund shareholders and to meet additional regulatory and compliance requirements resulting from recent industry-wide SEC initiatives. The Board also considered the extent to which Delaware Investments 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 Delaware Investments.
35
Other Fund information (unaudited)
Delaware Small Cap Core Fund
Board Consideration of Delaware Small Cap Core Fund Investment Advisory Agreement (continued)
Economies of Scale. The Trustees considered whether economies of scale are realized by Delaware Investments 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. 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 on all assets when the asset levels specified are exceeded. The Board noted that the fee under the Fund’s management contract fell within the standard structure. Although the Fund has not reached a size at which it can take advantage of breakpoints, the Board recognized that the fee was structured so that when the Fund grows, economies of scale may be shared.
36
About the organization
This semiannual report is for the information of Delaware Small Cap Core Fund shareholders, but it may be used with prospective investors when preceded or accompanied by a current prospectus for Delaware Small Cap Core Fund and the Delaware Investments® Fund profile for the most recently completed calendar quarter. These documents are available at www.delawareinvestments.com. The prospectus sets forth details about charges, expenses, investment objectives, and operating policies of the investment company. You should read the prospectus carefully before you invest. The figures in this report represent past results that are not a guarantee of future results. The return and principal value of an investment in the investment company will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
Board of trustees | ||
Patrick P. Coyne Thomas L. Bennett John A. Fry Anthony D. Knerr Lucinda S. Landreth | Ann R. Leven Thomas F. Madison Janet L. Yeomans J. Richard Zecher |
37
Affiliated officers | Contact information | |
David F. Connor Daniel V. Geatens David P. O’Connor Richard Salus | Investment manager National distributor Shareholder servicing, dividend disbursing, For shareholders For securities dealers and financial Web site |
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 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 Commission’s Web site at www.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 Fund’s Schedule of Investments are available without charge on the Fund’s Web site at www.delawareinvestments.com. The Fund’s Forms N-Q may be reviewed and copied at the Commission’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 Web site at www.delawareinvestments.com; and (ii) on the Commission’s Web site at www.sec.gov.
38
![]() | ![]() |
Semiannual report | |
Delaware Small Cap Value Fund | |
May 31, 2008 |
Value equity mutual fund |
Table of contents
Disclosure of Fund expenses | 1 |
Sector allocation and top 10 holdings | 3 |
Statement of net assets | 4 |
Statement of operations | 10 |
Statements of changes in net assets | 12 |
Financial highlights | 14 |
Notes to financial statements | 24 |
Other Fund information | 33 |
About the organization | 37 |
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.
© 2008 Delaware Distributors, L.P.
Disclosure of Fund expenses
For the period December 1, 2007 to May 31, 2008
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 period December 1, 2007 to May 31, 2008.
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
Disclosure of Fund expenses
Delaware Small Cap Value Fund
Expense analysis of an investment of $1,000
Beginning | Ending | Expenses | ||||||||||||||||||
Account Value | Account Value | Annualized | Paid During Period | |||||||||||||||||
12/1/07 | 5/31/08 | Expense Ratios | 12/1/07 to 5/31/08* | |||||||||||||||||
Actual Fund return | ||||||||||||||||||||
Class A | $ | 1,000.00 | $ | 1,038.20 | 1.47 | % | $ | 7.49 | ||||||||||||
Class B | 1,000.00 | 1,034.20 | 2.22 | % | 11.29 | |||||||||||||||
Class C | 1,000.00 | 1,034.20 | 2.22 | % | 11.29 | |||||||||||||||
Class R | 1,000.00 | 1,036.60 | 1.72 | % | 8.76 | |||||||||||||||
Institutional Class | 1,000.00 | 1,039.50 | 1.22 | % | 6.22 | |||||||||||||||
Hypothetical 5% return (5% return before expenses) | ||||||||||||||||||||
Class A | $ | 1,000.00 | $ | 1,017.65 | 1.47 | % | $ | 7.41 | ||||||||||||
Class B | 1,000.00 | 1,013.90 | 2.22 | % | 11.18 | |||||||||||||||
Class C | 1,000.00 | 1,013.90 | 2.22 | % | 11.18 | |||||||||||||||
Class R | 1,000.00 | 1,016.40 | 1.72 | % | 8.67 | |||||||||||||||
Institutional Class | 1,000.00 | 1,018.90 | 1.22 | % | 6.16 |
* | “Expenses Paid During Period” are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). |
2
Sector allocation and top 10 holdings | ||||
Delaware Small Cap Value Fund | As of May 31, 2008 |
Sector designations may be different than the sector designations presented in other Fund materials. The sector designations may also 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.
Sector | Percentage of net assets | |
Common Stock | 96.04 | % |
Basic Industry | 10.98 | % |
Business Services | 2.84 | % |
Capital Spending | 10.59 | % |
Consumer Cyclical | 1.13 | % |
Consumer Services | 11.09 | % |
Consumer Staples | 1.60 | % |
Energy | 9.77 | % |
Financial Services | 17.17 | % |
Health Care | 4.84 | % |
Real Estate | 4.56 | % |
Technology | 15.10 | % |
Transportation | 3.75 | % |
Utilities | 2.62 | % |
Repurchase Agreements | 3.89 | % |
Securities Lending Collateral | 22.34 | % |
Total Value of Securities | 122.27 | % |
Obligation to Return Securities Lending Collateral | (22.34 | %) |
Receivables and Other Assets Net of Liabilities | 0.07 | % |
Total Net Assets | 100.00 | % |
Holdings are for informational purposes only and are subject to change at any time. They are not a recommendation to buy, sell, or hold any security.
Top 10 Holdings | Percentage of net assets | |
Whiting Petroleum | 2.83 | % |
Walter Industries | 2.49 | % |
Newfield Exploration | 2.10 | % |
FMC | 2.01 | % |
W-H Energy Services | 1.88 | % |
Brink’s | 1.86 | % |
Actuant Class A | 1.78 | % |
STERIS | 1.75 | % |
Bank of Hawaii | 1.74 | % |
Albemarle | 1.70 | % |
3
Statement of net assets | ||
Delaware Small Cap Value Fund | May 31, 2008 (Unaudited) |
Number of shares | Value | ||||
Common Stock – 96.04% | |||||
Basic Industry – 10.98% | |||||
*AbitibiBowater | 143,064 | $ | 1,699,600 | ||
Albemarle | 198,200 | 8,813,954 | |||
*Arch Coal | 80,300 | 5,212,273 | |||
†Crown Holdings | 296,100 | 8,542,485 | |||
Cytec Industries | 104,700 | 6,612,852 | |||
FMC | 140,300 | 10,379,394 | |||
*Hercules | 146,100 | 3,014,043 | |||
Kaiser Aluminum | 60,200 | 3,861,830 | |||
*Texas Industries | 64,900 | 4,731,210 | |||
*Valspar | 173,300 | 3,909,648 | |||
56,777,289 | |||||
Business Services – 2.84% | |||||
Brink’s | 132,900 | 9,632,592 | |||
*†United Stationers | 118,959 | 5,036,724 | |||
14,669,316 | |||||
Capital Spending – 10.59% | |||||
*Actuant Class A | 251,700 | 9,189,567 | |||
†Casella Waste Systems | 119,700 | 1,335,852 | |||
†Colfax | 38,700 | 959,373 | |||
†Gardner Denver | 126,000 | 6,685,560 | |||
Harsco | 107,100 | 6,781,572 | |||
*Insteel Industries | 182,600 | 2,927,078 | |||
Mueller Water Products Class B | 164,588 | 1,629,421 | |||
Timken | 146,100 | 5,351,643 | |||
*Wabtec | 150,500 | 7,008,785 | |||
*Walter Industries | 138,300 | 12,895,092 | |||
54,763,943 | |||||
Consumer Cyclical – 1.13% | |||||
*MDC Holdings | 143,900 | 5,846,657 | |||
5,846,657 | |||||
Consumer Services – 11.09% | |||||
Advance Auto Parts | 104,000 | 4,191,200 | |||
AH Belo – Class A | 40,740 | 387,030 | |||
Belo Class A | 334,400 | 3,196,864 | |||
*Cato Class A | 300,800 | 4,653,376 | |||
*†CEC Entertainment | 139,900 | 5,055,986 | |||
†Dollar Tree Stores | 209,200 | 7,719,479 | |||
*Men’s Wearhouse | 141,300 | 2,929,149 |
4
Number of shares | Value | ||||
Common Stock (continued) | |||||
Consumer Services (continued) | |||||
*Meredith | 60,800 | $ | 1,994,848 | ||
*PETsMART | 156,400 | 3,666,016 | |||
Ross Stores | 175,300 | 6,419,486 | |||
*Stage Stores | 230,150 | 3,109,327 | |||
*†Warnaco Group | 86,500 | 4,168,435 | |||
*Wolverine World Wide | 138,150 | 3,966,287 | |||
*†Zale | 271,600 | 5,915,448 | |||
57,372,931 | |||||
Consumer Staples – 1.60% | |||||
American Greetings Class A | 193,400 | 3,608,844 | |||
Del Monte Foods | 537,000 | 4,677,270 | |||
8,286,114 | |||||
Energy – 9.77% | |||||
*†Grey Wolf | 581,600 | 4,553,928 | |||
†Hercules Offshore | 148,776 | 5,046,482 | |||
†Newfield Exploration | 171,700 | 10,858,308 | |||
*Southwest Gas | 182,100 | 5,677,878 | |||
†W-H Energy Services | 113,700 | 9,724,761 | |||
†Whiting Petroleum | 156,700 | 14,656,151 | |||
50,517,508 | |||||
Financial Services – 17.17% | |||||
*Bank of Hawaii | 166,700 | 9,018,470 | |||
Berkley (W.R.) | 261,800 | 7,092,162 | |||
*Boston Private Financial Holdings | 281,800 | 2,375,574 | |||
*Colonial BancGroup | 481,100 | 2,949,143 | |||
*East West Bancorp | 237,700 | 3,147,148 | |||
*First Midwest Bancorp | 164,800 | 4,301,280 | |||
*Hancock Holding | 117,800 | 5,240,922 | |||
*Harleysville Group | 154,700 | 6,034,847 | |||
*Independent Bank | 102,100 | 2,991,530 | |||
*Infinity Property & Casualty | 131,500 | 5,302,080 | |||
*NBT Bancorp | 139,300 | 3,415,636 | |||
Platinum Underwriters Holdings | 244,400 | 8,668,868 | |||
Protective Life | 129,000 | 5,415,420 | |||
*Provident Bankshares | 218,900 | 2,092,684 | |||
*Selective Insurance Group | 365,800 | 8,003,704 | |||
*StanCorp Financial Group | 101,700 | 5,592,483 | |||
Sterling Bancshares | 446,500 | 4,563,230 | |||
*Sterling Financial | 293,468 | 2,605,996 | |||
88,811,177 |
5
Statement of net assets
Delaware Small Cap Value Fund
Number of shares | Value | ||||
Common Stock (continued) | |||||
Health Care – 4.84% | |||||
*†Pediatrix Medical Group | 66,000 | $ | 3,552,780 | ||
*Service Corp International | 562,100 | 6,014,470 | |||
*STERIS | 299,200 | 9,050,800 | |||
*Universal Health Services Class B | 98,400 | 6,396,000 | |||
25,014,050 | |||||
Real Estate – 4.56% | |||||
*Ashford Hospitality Trust | 360,400 | 2,212,856 | |||
*Brandywine Realty Trust | 292,937 | 5,498,427 | |||
*Education Realty Trust | 203,400 | 2,654,370 | |||
*Highwoods Properties | 165,600 | 5,961,600 | |||
*Washington Real Estate Investment Trust | 215,800 | 7,270,302 | |||
23,597,555 | |||||
Technology – 15.10% | |||||
*†Bell Microproducts | 311,200 | 824,680 | |||
*†Brocade Communications Systems | 669,600 | 5,396,976 | |||
†Checkpoint Systems | 162,700 | 4,225,319 | |||
*†Cirrus Logic | 703,700 | 4,616,272 | |||
†Compuware | 861,500 | 8,778,685 | |||
†Entegris | 417,600 | 3,211,344 | |||
†Parametric Technology | 443,000 | 8,319,540 | |||
*†Premiere Global Services | 285,150 | 4,320,023 | |||
*QAD | 218,000 | 1,669,880 | |||
†Sybase | 227,100 | 7,271,742 | |||
*†Sykes Enterprises | 265,100 | 5,490,221 | |||
†Syniverse Holdings | 242,700 | 5,232,612 | |||
†Synopsys | 284,800 | 7,504,480 | |||
†Tech Data | 159,700 | 5,843,423 | |||
*†Vishay Intertechnology | 534,800 | 5,390,784 | |||
78,095,981 | |||||
Transportation – 3.75% | |||||
Alexander & Baldwin | 164,800 | 8,482,256 | |||
*†Kirby | 117,100 | 6,517,786 | |||
*†Saia | 115,200 | 1,602,432 | |||
SkyWest | 181,300 | 2,802,898 | |||
19,405,372 |
6
Number of shares | Value | |||||
Common Stock (continued) | ||||||
Utilities – 2.62% | ||||||
*Black Hills | 73,500 | $ | 2,590,140 | |||
†El Paso Electric | 253,000 | 5,467,330 | ||||
*FairPoint Communications | 155,500 | 1,399,500 | ||||
*Otter Tail | 108,600 | 4,076,844 | ||||
13,533,814 | ||||||
Total Common Stock (cost $395,307,860) | 496,691,707 | |||||
Principal amount | ||||||
Repurchase Agreements** – 3.89% | ||||||
BNP Paribas 2.18%, dated 5/30/08, to be repurchased | ||||||
on 6/2/08, repurchase price $15,868,882 | ||||||
(collateralized by U.S. Government obligations, | ||||||
ranging in par value $172,000-$14,906,000, | ||||||
4.00%-5.00%, 6/15/09-8/15/11; with total market | ||||||
value $16,211,786) | $ | 15,866,000 | 15,866,000 | |||
UBS Warburg 2.18%, dated 5/30/08, to be repurchased on | ||||||
6/2/08, repurchase price $4,225,768 (collateralized by | ||||||
U.S. Government obligations, ranging in par value | ||||||
$527,000-$2,414,000, 4.50%-4.875%, | ||||||
12/31/08-6/30/12; with total market value $4,314,165) | 4,225,000 | 4,225,000 | ||||
Total Repurchase Agreements (cost $20,091,000) | 20,091,000 | |||||
Total Value of Securities Before Securities Lending | ||||||
Collateral – 99.93% (cost $415,398,860) | 516,782,707 |
7
Statement of net assets
Delaware Small Cap Value Fund
Number of shares | Value | |||||
Securities Lending Collateral*** – 22.34% | ||||||
Investment Companies | ||||||
Mellon GSL DBT II Collateral Fund | 115,550,829 | $ | 115,550,829 | |||
Total Securities Lending Collateral | ||||||
(cost $115,550,829) | 115,550,829 | |||||
Total Value of Securities – 122.27% | ||||||
(cost $530,949,689) | 632,333,536 | © | ||||
Obligation to Return Securities Lending | ||||||
Collateral*** – (22.34%) | (115,550,829 | ) | ||||
Receivables and Other Assets | ||||||
Net of Liabilities – 0.07% | 359,447 | |||||
Net Assets Applicable to 15,656,438 | ||||||
Shares Outstanding – 100.00% | $ | 517,142,154 | ||||
Net Asset Value – Delaware Small Cap Value Fund | ||||||
Class A ($348,932,680 / 10,305,374 Shares) | $33.86 | |||||
Net Asset Value – Delaware Small Cap Value Fund | ||||||
Class B ($43,248,105 / 1,418,827 Shares) | $30.48 | |||||
Net Asset Value – Delaware Small Cap Value Fund | ||||||
Class C ($78,739,849 / 2,584,522 Shares) | $30.47 | |||||
Net Asset Value – Delaware Small Cap Value Fund | ||||||
Class R ($20,796,636 / 624,135 Shares) | $33.32 | |||||
Net Asset Value – Delaware Small Cap Value Fund | ||||||
Institutional Class ($25,424,884 / 723,580 Shares) | $35.14 |
8
Components of Net Assets at May 31, 2008: | ||
Shares of beneficial interest (unlimited authorization – no par) | $ | 404,494,431 |
Accumulated net realized gain on investments | 11,263,876 | |
Net unrealized appreciation of investments | 101,383,847 | |
Total net assets | $ | 517,142,154 |
† | Non-income producing security for the period May 31, 2008. |
* | Fully or partially on loan. |
** | See Note 1 in “Notes to financial statements.” |
*** | See Note 8 in “Notes to financial statements.” |
© | Includes $111,286,796 of securities loaned. |
Net Asset Value and Offering Price Per Share – | ||
Delaware Small Cap Value Fund | ||
Net asset value Class A (A) | $ | 33.86 |
Sales charge (5.75% of offering price) (B) | 2.07 | |
Offering price | $ | 35.93 |
(A) | Net asset value per share, as illustrated, is the amount which would be paid upon redemption or repurchase of shares. | |
(B) | See the current prospectus for purchases of $50,000 or more. |
See accompanying notes
9
Delaware Small Cap Value Fund | Six Months Ended May 31, 2008 (Unaudited) |
Investment Income: | ||||||
Dividends | $ | 3,521,570 | ||||
Interest | 116,005 | |||||
Securities lending income | 444,354 | $ | 4,081,929 | |||
Expenses: | ||||||
Management fees | 1,925,679 | |||||
Distribution expenses – Class A | 518,202 | |||||
Distribution expenses – Class B | 225,806 | |||||
Distribution expenses – Class C | 406,515 | |||||
Distribution expenses – Class R | 59,440 | |||||
Dividend disbursing and transfer agent fees and expenses | 892,211 | |||||
Accounting and administration expenses | 102,933 | |||||
Reports and statements to shareholders | 73,361 | |||||
Legal fees | 46,569 | |||||
Registration fees | 46,105 | |||||
Audit and tax | 23,681 | |||||
Trustees’ fees | 15,306 | |||||
Custodian fees | 9,860 | |||||
Insurance fees | 6,674 | |||||
Consulting fees | 5,585 | |||||
Taxes (other than taxes on income) | 4,592 | |||||
Dues and services | 4,457 | |||||
Pricing fees | 1,507 | |||||
Trustees’ expenses | 1,339 | 4,369,822 | ||||
Less expenses absorbed or waived | (15,938 | ) | ||||
Less waiver of distribution expenses – Class A | (86,367 | ) | ||||
Less waiver of distribution expenses – Class R | (9,862 | ) | ||||
Less expenses paid indirectly | (897 | ) | ||||
Total expenses | 4,256,758 | |||||
Net Investment Loss | (174,829 | ) | ||||
Net Realized and Unrealized Gain on Investments: | ||||||
Net realized gain on investments | 11,964,053 | |||||
Net change in unrealized appreciation/depreciation of investments | 2,940,575 | |||||
Net Realized and Unrealized Gain on Investments | 14,904,628 | |||||
Net Increase in Net Assets Resulting from Operations | $ | 14,729,799 |
See accompanying notes
10
Statements of changes in net assets
Delaware Small Cap Value Fund
Six Months | Year | ||||||
Ended | Ended | ||||||
5/31/08 | 11/30/07 | ||||||
(Unaudited) | |||||||
Increase (Decrease) in Net Assets from Operations: | |||||||
Net investment loss | $ | (174,829 | ) | $ | (2,421,917 | ) | |
Net realized gain on investments | 11,964,053 | 56,029,521 | |||||
Net change in unrealized | |||||||
appreciation/depreciation of investments | 2,940,575 | (97,258,265 | ) | ||||
Net increase (decrease) in net assets resulting | |||||||
from operations | 14,729,799 | (43,650,661 | ) | ||||
Dividends and Distributions to Shareholders from: | |||||||
Net realized gain on investments: | |||||||
Class A | (36,249,009 | ) | (38,697,231 | ) | |||
Class B | (5,369,287 | ) | (7,487,846 | ) | |||
Class C | (9,806,574 | ) | (12,118,767 | ) | |||
Class R | (2,003,395 | ) | (1,670,691 | ) | |||
Institutional Class | (2,385,198 | ) | (2,825,209 | ) | |||
(55,813,463 | ) | (62,799,744 | ) | ||||
Capital Share Transactions: | |||||||
Proceeds from shares sold: | |||||||
Class A | 19,492,958 | 58,097,755 | |||||
Class B | 89,961 | 1,197,141 | |||||
Class C | 2,895,984 | 6,957,838 | |||||
Class R | 3,857,906 | 15,645,466 | |||||
Institutional Class | 2,124,123 | 7,208,827 | |||||
Net asset value of shares issued upon reinvestment | |||||||
of dividends and distributions: | |||||||
Class A | 34,396,588 | 36,524,727 | |||||
Class B | 5,029,038 | 6,972,418 | |||||
Class C | 9,210,483 | 11,396,318 | |||||
Class R | 2,003,388 | 1,670,616 | |||||
Institutional Class | 2,364,527 | 2,798,205 | |||||
81,464,956 | 148,469,311 |
12
Six Months | Year | ||||||
Ended | Ended | ||||||
5/31/08 | 11/30/07 | ||||||
(Unaudited) | |||||||
Capital Share Transactions (continued): | |||||||
Cost of shares repurchased: | |||||||
Class A | $ | (68,532,080 | ) | $ | (131,609,980 | ) | |
Class B | (12,067,189 | ) | (36,484,190 | ) | |||
Class C | (22,636,231 | ) | (46,345,644 | ) | |||
Class R | (4,829,543 | ) | (13,383,734 | ) | |||
Institutional Class | (3,849,530 | ) | (16,190,231 | ) | |||
(111,914,573 | ) | (244,013,779 | ) | ||||
Decrease in net assets derived from capital share transactions | (30,449,617 | ) | (95,544,468 | ) | |||
Net Decrease in Net Assets | (71,533,281 | ) | (201,994,873 | ) | |||
Net Assets: | |||||||
Beginning of period | 588,675,435 | 790,670,308 | |||||
End of period (there was no undistributed | |||||||
net investment income at either period end) | $ | 517,142,154 | $ | 588,675,435 |
See accompanying notes
13
Financial highlights
Delaware Small Cap Value 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 income (loss)2 |
Net realized and unrealized gain (loss) on investments |
Total from investment operations |
Less dividends and distributions: |
From net realized gain on investments |
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 and expense paid indirectly |
Ratio of net investment income (loss) to average net assets |
Ratio of net investment income (loss) to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 Ratios and portfolio turnover have been annualized and total return has 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 reflects a waiver by the manager and distributor, as applicable. Performance would have been lower had the waiver not been in effect. |
See accompanying notes
14
Six Months Ended | Year Ended | ||||||||||||||||||
5/31/081 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | 11/30/03 | ||||||||||||||
(Unaudited) | |||||||||||||||||||
$36.000 | $41.970 | $39.110 | $39.640 | $35.220 | $27.120 | ||||||||||||||
0.017 | (0.050 | ) | (0.047 | ) | (0.075 | ) | (0.105 | ) | (0.136 | ) | |||||||||
1.261 | (2.647 | ) | 5.960 | 4.170 | 6.879 | 9.079 | |||||||||||||
1.278 | (2.697 | ) | 5.913 | 4.095 | 6.774 | 8.943 | |||||||||||||
(3.418 | ) | (3.273 | ) | (3.053 | ) | (4.625 | ) | (2.354 | ) | (0.843 | ) | ||||||||
(3.418 | ) | (3.273 | ) | (3.053 | ) | (4.625 | ) | (2.354 | ) | (0.843 | ) | ||||||||
$33.860 | $36.000 | $41.970 | $39.110 | $39.640 | $35.220 | ||||||||||||||
3.82% | (6.90% | ) | 16.26% | 11.42% | 20.52% | 34.17% | |||||||||||||
$348,933 | $389,129 | $493,193 | $409,567 | $270,332 | $240,322 | ||||||||||||||
1.47% | 1.37% | 1.41% | 1.44% | 1.54% | 1.63% | ||||||||||||||
1.53% | 1.42% | 1.44% | 1.44% | 1.54% | 1.63% | ||||||||||||||
0.12% | (0.12% | ) | (0.12% | ) | (0.20% | ) | (0.30% | ) | (0.47% | ) | |||||||||
0.06% | (0.17% | ) | (0.15% | ) | (0.20% | ) | (0.30% | ) | (0.47% | ) | |||||||||
8% | 23% | 36% | 33% | 35% | 42% |
15
Financial highlights
Delaware Small Cap Value Fund Class B
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 loss2 |
Net realized and unrealized gain (loss) on investments |
Total from investment operations |
Less dividends and distributions from: |
Net realized gain on investments |
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 and expense paid indirectly |
Ratio of net investment loss to average net assets |
Ratio of net investment loss to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 Ratios and portfolio turnover have been annualized and total return has 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 reflects a waiver by the manager, as applicable. Performance would have been lower had the waiver not been in effect. |
See accompanying notes
16
Six Months Ended | Year Ended | ||||||||||||||||||
5/31/081 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | 11/30/03 | ||||||||||||||
(Unaudited) | |||||||||||||||||||
$32.860 | $38.860 | $36.690 | $37.690 | $33.820 | $26.260 | ||||||||||||||
(0.087 | ) | (0.314 | ) | (0.306 | ) | (0.311 | ) | (0.334 | ) | (0.327 | ) | ||||||||
1.125 | (2.413 | ) | 5.529 | 3.936 | 6.558 | 8.730 | |||||||||||||
1.038 | (2.727 | ) | 5.223 | 3.625 | 6.224 | 8.403 | |||||||||||||
(3.418 | ) | (3.273 | ) | (3.053 | ) | (4.625 | ) | (2.354 | ) | (0.843 | ) | ||||||||
(3.418 | ) | (3.273 | ) | (3.053 | ) | (4.625 | ) | (2.354 | ) | (0.843 | ) | ||||||||
$30.480 | $32.860 | $38.860 | $36.690 | $37.690 | $33.820 | ||||||||||||||
3.42% | (7.59% | ) | 15.38% | 10.68% | 19.69% | 33.21% | |||||||||||||
$43,248 | $54,684 | $94,495 | $110,684 | $111,348 | $107,136 | ||||||||||||||
2.22% | 2.12% | 2.14% | 2.14% | 2.24% | 2.33% | ||||||||||||||
2.23% | — | — | — | — | — | ||||||||||||||
(0.63% | ) | (0.87% | ) | (0.85% | ) | (0.90% | ) | (1.00% | ) | (1.17% | ) | ||||||||
(0.64% | ) | — | — | — | — | — | |||||||||||||
8% | 23% | 36% | 33% | 35% | 42% |
17
Financial highlights
Delaware Small Cap Value 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 loss2 |
Net realized and unrealized gain (loss) on investments |
Total from investment operations |
Less dividends and distributions from: |
Net realized gain on investments |
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 and expense paid indirectly |
Ratio of net investment loss to average net assets |
Ratio of net investment loss to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 Ratios and portfolio turnover have been annualized and total return has 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 reflects a waiver by the manager, as applicable. Performance would have been lower had the waiver not been in effect. |
See accompanying notes
18
Six Months Ended | Year Ended | ||||||||||||||||||
5/31/081 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | 11/30/03 | ||||||||||||||
(Unaudited) | |||||||||||||||||||
$32.850 | $38.840 | $36.670 | $37.680 | $33.810 | $26.250 | ||||||||||||||
(0.087 | ) | (0.314 | ) | (0.306 | ) | (0.313 | ) | (0.333 | ) | (0.326 | ) | ||||||||
1.125 | (2.403 | ) | 5.529 | 3.928 | 6.557 | 8.729 | |||||||||||||
1.038 | (2.717 | ) | 5.223 | 3.615 | 6.224 | 8.403 | |||||||||||||
(3.418 | ) | (3.273 | ) | (3.053 | ) | (4.625 | ) | (2.354 | ) | (0.843 | ) | ||||||||
(3.418 | ) | (3.273 | ) | (3.053 | ) | (4.625 | ) | (2.354 | ) | (0.843 | ) | ||||||||
$30.470 | $32.850 | $38.840 | $36.670 | $37.680 | $33.810 | ||||||||||||||
3.42% | (7.56% | ) | 15.39% | 10.65% | 19.69% | 33.22% | |||||||||||||
$78,740 | $97,428 | $145,385 | $119,968 | $66,313 | $48,453 | ||||||||||||||
2.22% | 2.12% | 2.14% | 2.14% | 2.24% | 2.33% | ||||||||||||||
2.23% | — | — | — | — | — | ||||||||||||||
(0.63% | ) | (0.87% | ) | (0.85% | ) | (0.90% | ) | (1.00% | ) | (1.17% | ) | ||||||||
(0.64% | ) | — | — | — | — | — | |||||||||||||
8% | 23% | 36% | 33% | 35% | 42% |
19
Financial highlights
Delaware Small Cap Value 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 loss3 |
Net realized and unrealized gain (loss) on investments |
Total from investment operations |
Less dividends and distributions from: |
Net realized gain on investments |
Total dividends and distributions |
Net asset value, end of period |
Total return4 |
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 and expense paid indirectly |
Ratio of net investment loss to average net assets |
Ratio of net investment loss to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 Ratios and portfolio turnover have been annualized and total return has 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. |
See accompanying notes
20
6/2/032 | |||||||||||||||||||
Six Months Ended | Year Ended | to | |||||||||||||||||
5/31/081 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | 11/30/03 | ||||||||||||||
(Unaudited) | |||||||||||||||||||
$35.530 | $41.550 | $38.840 | $39.480 | $35.190 | $29.000 | ||||||||||||||
(0.022 | ) | (0.146 | ) | (0.138 | ) | (0.169 | ) | (0.209 | ) | (0.160 | ) | ||||||||
1.230 | (2.601 | ) | 5.901 | 4.154 | 6.853 | 6.350 | |||||||||||||
1.208 | (2.747 | ) | 5.763 | 3.985 | 6.644 | 6.190 | |||||||||||||
(3.418 | ) | (3.273 | ) | (3.053 | ) | (4.625 | ) | (2.354 | ) | — | |||||||||
(3.418 | ) | (3.273 | ) | (3.053 | ) | (4.625 | ) | (2.354 | ) | — | |||||||||
$33.320 | $35.530 | $41.550 | $38.840 | $39.480 | $35.190 | ||||||||||||||
3.66% | (7.11% | ) | 15.97% | 11.15% | 20.15% | 21.35% | |||||||||||||
$20,796 | $21,126 | $20,564 | $10,574 | $4,539 | $1,740 | ||||||||||||||
1.72% | 1.62% | 1.64% | 1.70% | 1.84% | 1.97% | ||||||||||||||
1.83% | 1.72% | 1.74% | 1.74% | 1.84% | 1.97% | ||||||||||||||
(0.13% | ) | (0.37% | ) | (0.35% | ) | (0.46% | ) | (0.60% | ) | (0.97% | ) | ||||||||
(0.24% | ) | (0.47% | ) | (0.45% | ) | (0.50% | ) | (0.60% | ) | (0.97% | ) | ||||||||
8% | 23% | 36% | 33% | 35% | 42% | 5 |
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 reflects a waiver by the manager and distributor, as applicable. Performance would have been lower had the waiver not been in effect. | |
5 The portfolio turnover is representative of the fund for the entire year. |
21
Financial highlights
Delaware Small Cap Value 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 income (loss)2 |
Net realized and unrealized gain (loss) on investments |
Total from investment operations |
Less dividends and distributions: |
From net realized gain on investments |
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 and expense paid indirectly |
Ratio of net investment income (loss) to average net assets |
Ratio of net investment income to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 Ratios and portfolio turnover have been annualized and total return has 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 reflects a waiver by the manager, as applicable. Performance would have been lower had the waiver not been in effect. |
See accompanying notes
22
Six Months Ended | Year Ended | ||||||||||||||||||
5/31/081 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | 11/30/03 | ||||||||||||||
(Unaudited) | |||||||||||||||||||
$37.190 | $43.140 | $40.020 | $40.350 | $35.700 | $27.400 | ||||||||||||||
0.057 | 0.049 | 0.058 | 0.036 | — | (0.050 | ) | |||||||||||||
1.311 | (2.726 | ) | 6.115 | 4.259 | 7.004 | 9.193 | |||||||||||||
1.368 | (2.677 | ) | 6.173 | 4.295 | 7.004 | 9.143 | |||||||||||||
(3.418 | ) | (3.273 | ) | (3.053 | ) | (4.625 | ) | (2.354 | ) | (0.843 | ) | ||||||||
(3.418 | ) | (3.273 | ) | (3.053 | ) | (4.625 | ) | (2.354 | ) | (0.843 | ) | ||||||||
$35.140 | $37.190 | $43.140 | $40.020 | $40.350 | $35.700 | ||||||||||||||
3.95% | (6.65% | ) | 16.56% | 11.77% | 20.88% | 34.57% | |||||||||||||
$25,425 | $26,308 | $37,033 | $30,918 | $23,731 | $33,387 | ||||||||||||||
1.22% | 1.12% | 1.14% | 1.14% | 1.24% | 1.33% | ||||||||||||||
1.23% | — | — | — | — | — | ||||||||||||||
0.37% | 0.13% | 0.15% | 0.10% | — | (0.17% | ) | |||||||||||||
0.36% | — | — | — | — | — | ||||||||||||||
8% | 23% | 36% | 33% | 35% | 42% |
23
Notes to financial statements | ||
Delaware Small Cap Value Fund | May 31, 2008 (Unaudited) |
Delaware Group Equity Funds V (Trust) is organized as a Delaware statutory trust and offers three series: Delaware Dividend Income Fund, Delaware Small-Cap Core Fund, and Delaware Small Cap Value Fund. These financial statements and the related notes pertain to Delaware Small Cap Value Fund (Fund). The Trust is an open-end investment company. The Fund is considered diversified under the Investment Company Act of 1940, as amended and offers Class A, Class B, Class C, Class R, and Institutional Class shares. Class A shares are sold with a maximum front-end sales charge of up to 5.75%. Class A share purchases of $1,000,000 or more will incur a contingent deferred sales charge (CDSC) of 1% 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 B shares may only be purchased through dividend reinvestment and certain permitted exchanges. Prior to June 1, 2007, Class B shares were sold with a CDSC that declined from 4% to zero depending upon the period of time the shares were held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase. Class C shares are sold with a CDSC of 1%, 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 capital appreciation.
1. Significant Accounting Policies
The following accounting policies are in accordance with U.S. generally accepted accounting principles and are consistently followed by the Fund.
Security Valuation — Equity securities, except those traded on the Nasdaq Stock Market, Inc. (Nasdaq), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange (NYSE) on the valuation date. Securities traded on the Nasdaq are valued in accordance with the Nasdaq Official Closing Price, which may not be the last sales price. If on a particular day an equity security does not trade, then the mean between the bid and the asked prices will be used. Short-term debt securities having less than 60 days to maturity are valued at amortized cost, which approximates market value. Securities lending collateral, which is invested in a collective investment vehicle (Collective Trust), is valued at unit value per share. 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 Fund’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 with respect to foreign securities, aftermarket trading or significant events after local market trading (e.g., government actions or pronouncements, trading volume or volatility on markets, exchanges among dealers, or news events).
Federal Income Taxes — 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. Accordingly, no provision for federal income taxes has been made in the financial statements.
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Effective May 30, 2008, the Fund adopted FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements. FIN 48 requires the evaluation of 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. The adoption of FIN 48 did not result in the recording of any tax benefit or expense in the current period.
Class Accounting — Investment income, common expenses and 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 invest in a pooled cash account along with members of the Delaware Investments® Family of Funds pursuant to an exemptive order issued by the Securities and Exchange Commission. The aggregate daily balance of the pooled cash account is invested in repurchase agreements secured by obligations of the U.S. government. The respective collateral is held by the Fund’s custodian bank until the maturity of the respective repurchase agreements. Each repurchase agreement is at least 102% collateralized. However, in the event of default or bankruptcy by the counterparty to the agreement, realization of the collateral may be subject to legal proceedings.
Use of Estimates — The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that may affect the reported amounts of 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.
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 amongst 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. Distributions received from investments in Real Estate Investment Trusts (REITs) are recorded as dividend income on the ex-dividend date, subject to reclassification upon notice of the character of such distributions by the issuer. The financial statements reflect an estimate of the reclassification of the distribution character. The Fund declares and pays dividends from net investment income and distributions from net realized gains on investments, if any, annually.
Subject to seeking best execution, the Fund may direct certain security trades to brokers who have agreed to rebate a portion of the related brokerage commission to the Fund in cash. Such commission rebates are included in realized gain on investments in the accompanying financial
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Notes to financial statements
Delaware Small Cap Value Fund
1. Significant Accounting Policies (continued)
statements and totaled $1,401 for the six months ended May 31, 2008. In general, best execution refers to many factors, including the price paid or received for a security, the commission charged, the promptness and reliability of execution, the confidentiality and placement accorded the order, and other factors affecting the overall benefit obtained by the Fund on the transaction.
The Fund receives earnings credits from its custodian when positive cash balances are maintained, which are used to offset custody fees. The expense paid under this arrangement is included in custodian fees on the statement of operations with the corresponding expense offset shown as “expense paid indirectly.”
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 0.75% on the first $500 million of average daily net assets of the Fund, 0.70% on the next $500 million, 0.65% on the next $1.5 billion, and 0.60% on average daily net assets in excess of $2.5 billion.
Effective April 1, 2008, DMC has contractually agreed to waive that portion, if any, of its management fee and reimburse the Fund to the extent necessary to ensure that total annual operating expenses, ( excluding any 12b-1 plan expenses, taxes, interest, inverse floater program expenses, brokerage fees, certain insurance costs and non-routine expenses or costs including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations (collectively, “non-routine expenses”)), do not exceed 1.16% of average daily net assets of the Fund through March 31, 2009. For purposes of these waivers and reimbursements, non-routine expenses may also include such additional costs and expenses, as may be agreed upon from time to time by the Fund’s Board of Trustees and DMC. These expense waivers and reimbursements apply only to expenses paid directly by the Fund.
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Fund. For these services, the Fund pays DSC fees based on the aggregate daily net assets of the Delaware Investments® Family of Funds at the following annual rate: 0.005% of the first $30 billion; 0.0045% of the next $10 billion; 0.004% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DSC under the service agreement described above are allocated among all Funds in the Delaware Investments® Family of Funds on a relative net asset value basis. For the six months ended April 30, 2008, the Fund was charged $12,867 for these services.
DSC also provides dividend disbursing and transfer agency services. The Fund pays DSC a monthly fee based on the number of shareholder accounts for dividend disbursing and transfer agent services.
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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 not to exceed 0.30% of the average daily net assets of the Class A shares, 1.00% of the average daily net assets of the Class B and C shares and 0.60% of the average daily net assets of Class R shares. Institutional Class shares pay no distribution and service expenses. DDLP has contracted to waive distribution and service fees through March 31, 2009, in order to prevent distribution and service fees of Class A and Class R shares from exceeding 0.25% and 0.50%, respectively, of average daily net assets.
At May 31, 2008, the Fund had liabilities payable to affiliates as follows:
Investment management fee payable to DMC | $ | 318,576 |
Dividend disbursing, transfer agent and fund accounting | ||
oversight fees, and other expenses payable to DSC | 141,080 | |
Distribution fees payable to DDLP | 183,898 | |
Other expenses payable to DMC and affiliates* | 30,429 |
*DMC, as part of its administrative services, pays operating expenses on behalf of the Fund and is reimbursed on a periodic basis. Such expenses include items such as printing of shareholder reports, fees for audit, legal and tax services, registration fees and trustees’ fees.
As provided in the investment management agreement, the Fund bears the cost of certain legal and tax services, including internal legal and tax services provided to the Fund by DMC and/or its affiliates’ employees. For the six months ended May 31, 2008, the Fund was charged $18,310 for internal legal and tax services provided by DMC and/or its affiliates’ employees.
For the six months ended May 31, 2008, DDLP earned $10,086 for commissions on sales of the Fund’s Class A shares. For the six months ended May 31, 2008, DDLP received gross CDSC Commissions of $157, $28,882 and $3,107 on redemption of the Fund’s Class A, Class B, and Class C shares, respectively, and these commissions were entirely used to offset up-front 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, DSC and DDLP are officers and/or Trustees of the Trust. These officers and trustees are paid no compensation by the Fund.
3. Investments
For the six months ended May 31, 2008, the Fund made purchases of $21,279,122 and sales of $124,591,745 of investment securities other than short-term investments.
At May 31, 2008, the cost of investments for federal income tax purposes has been estimated since final tax characteristics cannot be determined until fiscal year end. At May 31, 2008, the cost of investments was $531,233,318. At May 31, 2008, net unrealized appreciation was $101,100,218, of which $156,925,673 related to unrealized appreciation of investments and $55,825,455 related to unrealized depreciation of investments.
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Notes to financial statements
Delaware Small Cap Value Fund
3. Investments (continued)
Effective December 1, 2007, the Fund adopted Financial Accounting Standards No. 157, Fair Value Measurements (FAS 157). FAS 157 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. FAS 157 also establishes a framework for measuring fair value, and a three level hierarchy for fair value measurements 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 developed 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-tier hierarchy of inputs is summarized below.
Level 1 – inputs are quoted prices in active markets
Level 2 – inputs that are observable, directly or indirectly
Level 3 – inputs are unobservable and reflect assumptions on the part of the reporting entity
The following table summarizes the valuation of the Fund’s investments by the above FAS 157 fair value hierarchy levels as of May 31, 2008:
Level | Securities | Derivatives | |||||
Level 1 | $ | 632,333,536 | $— | ||||
Level 2 | — | — | |||||
Level 3 | — | — | |||||
Total | $ | 632,333,536 | $— |
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4. Dividend and Distribution Information
Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from U.S. generally accepted accounting principles. Additionally, net short-term gains on sales of investment securities are treated as ordinary income for federal income tax purposes. The tax character of dividends and distributions paid during the six months ended May 31, 2008 and the year ended November 30, 2007 was as follows:
Six Months | Year | ||||
Ended | Ended | ||||
5/31/08* | 11/30/07 | ||||
Ordinary Income | $ | — | $ | 14,551,917 | |
Long-term capital gain | 55,813,463 | 48,247,827 | |||
Total | $ | 55,813,463 | $ | 62,799,744 |
*Tax information for the period ended May 31, 2008 is an estimate and the tax character of dividends and distributions may be redesignated at fiscal year end.
5. Components of Net Assets on a Tax Basis
The components of net assets are estimated since final tax characteristics cannot be determined until fiscal year end. As of May 31, 2008, the estimated components of net assets on a tax basis were as follows:
Shares of beneficial interest | $ | 404,494,431 |
Undistributed long-term capital gains | 11,547,505 | |
Unrealized appreciation of investments | 101,100,218 | |
Net assets | $ | 517,142,154 |
The differences between book basis and tax basis components of net assets are primarily attributable to tax deferral of losses on wash sales. The undistributed earnings for the Fund are estimated pending final notification of the tax character of distributions received from investments in REITs.
For financial reporting purposes, capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Reclassifications are primarily due to tax treatment of net operating losses and dividends and distributions. Results of operations and net assets were not affected by these reclassifications. For the six months ended May 31, 2008, the Fund recorded an estimate of these differences since final tax characteristics cannot be determined until fiscal year end.
Accumulated net investment loss | $ | 174,829 | |
Paid-in capital | (174,829 | ) |
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Notes to financial statements
Delaware Small Cap Value Fund
6. Capital Shares
Transactions in capital shares were as follows:
Six Months | Year | ||||
Ended | Ended | ||||
5/31/08 | 11/30/07 | ||||
Shares sold: | |||||
Class A | 611,372 | 1,463,749 | |||
Class B | 3,117 | 32,759 | |||
Class C | 100,574 | 192,771 | |||
Class R | 123,687 | 397,624 | |||
Institutional Class | 65,055 | 177,796 | |||
Shares issued upon reinvestment of dividends and distributions: | |||||
Class A | 1,044,854 | 952,637 | |||
Class B | 169,157 | 197,855 | |||
Class C | 310,013 | 323,483 | |||
Class R | 61,776 | 44,056 | |||
Institutional Class | 69,301 | 70,822 | |||
2,558,906 | 3,853,552 | ||||
Shares repurchased: | |||||
Class A | (2,159,155 | ) | (3,360,466 | ) | |
Class B | (417,490 | ) | (998,258 | ) | |
Class C | (792,301 | ) | (1,292,964 | ) | |
Class R | (155,987 | ) | (341,947 | ) | |
Institutional Class | (118,139 | ) | (399,673 | ) | |
(3,643,072 | ) | (6,393,308 | ) | ||
Net decrease | (1,084,166 | ) | (2,539,756 | ) |
For the six months ended May 31, 2008 and the year ended November 30, 2007, 114,818 Class B shares were converted to 104,113 Class A shares valued at $3,423,756 and 357,349 Class B shares were converted to 328,289 Class A shares valued at $13,268,291, respectively. The respective amounts are included in Class B redemptions and Class A subscriptions in the table above and the statements of changes in net assets.
7. Line of Credit
The Fund, along with certain other funds in the Delaware Investments® Family of Funds (Participants), participates in a $225,000,000 revolving line of credit facility to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. The Participants are charged an annual commitment fee, which is allocated across the Participants on the basis of each Participant’s allocation of the entire facility. The Participants may borrow up to a maximum of one third of their net assets under the agreement. The Fund had no amounts outstanding as of May 31, 2008, or at any time during the period then ended.
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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). With respect to each loan, if the aggregate market value of the collateral held on any business day is less than the aggregate market value of the securities which are the subject of such loan, the borrower will be notified to provide additional collateral not less then the applicable collateral requirement. Cash collateral received is invested in a Collective Trust established by BNY Mellon for the purpose of investment on behalf of clients participating in its securities lending programs. The Collective Trust invests in fixed income securities, with a weighted average maturity not to exceed 90 days, rated in one of the top three tiers by Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc. or repurchase agreements collateralized by such securities. The Fund can also accept U.S. government securities and letters of credit (non-cash collateral) in connection with securities loans. In the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to 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 change 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.
At May 31, 2008, the value of the securities on loan was $111,286,796, for which the Fund received collateral, comprised of non-cash collateral valued at $491,666, and cash collateral of $115,550,829. Investments purchased with cash collateral are presented on the statement of net assets under the caption “Securities Lending Collateral.”
9. Credit and Market Risk
The Fund invests a significant portion of its assets in small companies and may be subject to certain risks associated with ownership of securities of such companies. Investments in small-sized companies may be more volatile than investments in larger companies for a number of reasons, which include more limited financial resources or a dependence on narrow product lines.
The Fund invests in REITs and is subject to some of the risks associated with that industry. If the Fund holds real estate directly as a result of defaults or receives rental income directly from real estate holdings, its tax status as a regulated investment company may be jeopardized. There
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Notes to financial statements
Delaware Small Cap Value Fund
9. Credit and Market Risk (continued)
were no direct real estate holdings during the six months ended May 31, 2008. The Fund’s REIT holdings are also affected by interest rate changes, particularly if the REITs it holds use floating rate debt to finance their ongoing operations.
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 of 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 assets. 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. As of May 31, 2008, there were no Rule 144A securities and no securities have been determined to be illiquid under the Fund’s Liquidity Procedures.
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.
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Other Fund information (unaudited)
Delaware Small Cap Value Fund
Board Consideration of Delaware Small Cap Value Fund Investment Advisory Agreement
At a meeting held on May 20-22, 2008 (the “Annual Meeting”), the Board of Trustees, including a majority of disinterested or independent Trustees, approved the renewal of the Investment Advisory Agreement for the Delaware Small Cap Value 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 contract. Information furnished specifically in connection with the renewal of the Investment Advisory 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 financial condition and profitability of Delaware Investments. In addition, in connection with the Annual Meeting, the Board separately received and reviewed in February 2008 independent historical and comparative reports prepared by Lipper Inc. (“Lipper”), an independent statistical compilation organization. The Lipper reports compared the Fund’s investment performance and expenses with those of other comparable mutual funds. The independent Trustees reviewed Lipper reports with Counsel to the Independent Trustees at the February 2008 Board meeting and discussed such reports further with counsel earlier in the Annual Meeting. The Board requested and received certain information regarding Management’s policy with respect to advisory fee levels and its philosophy with respect to breakpoints; the structure of portfolio manager compensation; the investment manager’s profitability; and any constraints or limitations on the availability of securities in certain investment styles which might inhibit DMC’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 counsel. Although the Trustees gave attention to all information furnished, the following discussion identifies under separate headings the primary factors taken into account by the Board in its contract renewal considerations.
Nature, Extent and Quality of Service. The Board considered the services provided by Delaware Investments to the Fund and its shareholders. In reviewing the nature, extent and quality of services, the Board emphasized reports furnished to it throughout the year at regular Board meetings covering matters such as the relative performance of the Fund, compliance of portfolio managers with the investment policies, strategies and restrictions for the Fund, the compliance of management personnel with the Code of Ethics adopted throughout the Delaware Investments Family of Funds complex and the 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. Favorable consideration was given to DMC’s efforts to maintain expenditures and, in some instances,
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Other Fund information (unaudited)
Delaware Small Cap Value Fund
Board Consideration of Delaware Small Cap Value Fund Investment Advisory Agreement (continued)
increase financial and human resources committed to fund matters. The Board also considered the transfer agent and shareholder services provided to Fund shareholders by Delaware Investments’ affiliate, Delaware Service Company, Inc. (“DSC”), noting DSC’s commitment to maintain a high level of service as well as Delaware Investments’ expenditures to improve the delivery of shareholder services. During 2007 Management commenced the outsourcing of certain investment accounting functions that are expected to improve further the quality and the cost of delivering investment accounting services to the Fund. The Board once again noted the benefits provided to Fund shareholders for being part of the Delaware Investments Family of Funds, including each shareholder’s ability to exchange an investment in one Delaware fund for the same class of shares in another Delaware fund without a sales charge, to reinvest Fund dividends into additional shares of the Fund or into additional shares of other Delaware funds and the privilege to combine holdings in other Delaware funds to obtain a reduced sales charge. The Board was satisfied with the nature, extent and quality of the overall services provided by Delaware Investments.
Investment Performance. The Board considered the overall investment performance of DMC and the Fund. The Board placed significant emphasis on the investment performance of the Fund in view of its importance to shareholders. Although the Board gave appropriate consideration to performance reports and discussions with portfolio managers at Board meetings throughout the year, the Board gave particular weight to the Lipper reports furnished for the Annual Meeting. The Lipper 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 Lipper (the “Performance Universe”). A fund with the best performance ranked first, and a fund with the poorest, 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 one-, three-, five- and ten-year periods ended December 31, 2007. 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 Trustees complimented Management on navigating the Delaware Investments Family of Funds fixed income funds through the turbulent financial markets since 2007 without incurring a major difficulty. The following paragraph summarizes the performance results for the Fund and the Board’s view of such performance.
The Performance Universe for the Fund consisted of the Fund and all retail and institutional small-cap value funds as selected by Lipper. The Lipper report comparison showed that the Fund’s total return for the one-, three-, five- and ten-year periods was in the third quartile of its Performance Universe. The Board noted that the Fund’s performance results were not in line with the Board’s objective. However, early 2008 performance improved relative to the Fund’s Lipper peers. The Board expressed confidence in the portfolio management team and efforts to enhance Fund performance and meet the Board’s objective.
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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 October 31, 2007 and the most recent fiscal year end for comparative funds as of August 31, 2007 or earlier. For any fund with a fiscal year end after August 31, 2007, such fund’s expense data were measured as of its fiscal year end for 2006. The Board focused on the comparative analysis of the effective management fees and total expense ratios of the Fund versus the effective management fees and expense ratios of a group of similar funds as selected by Lipper (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) of other funds 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 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 also considered fees paid to Delaware Investments for non-management services. The Board noted its objective to limit the Fund’s total expense ratio to be competitive with that of the Expense Group. The following paragraph summarizes the expense results for the Fund and the Board’s view of such expenses.
The expense comparisons for the Fund showed that its actual management fee was in the quartile with the lowest expenses of its Expense Group and its total expenses were in the quartile with the second highest expenses of its Expense Group. The Board gave favorable consideration to the Fund’s management fee, but noted that the Fund’s total expenses were not in line with the Board’s objective. In evaluating the total expenses, the Board considered waivers in place through March 2009 and recent initiatives implemented by Management, such as the outsourcing of certain transfer agency and investment accounting services, creating an opportunity for a reduction in expenses. The Board was satisfied with Management’s efforts to improve the Fund’s total expense ratio and bring it in line with the Board’s objective.
Management Profitability. The Board considered the level of profits realized by Delaware Investments 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 Delaware Investments’ 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 Delaware Investments, to a certain extent, reflected operational cost savings and efficiencies initiated by Delaware Investments. The Board considered Delaware Investments’ efforts to improve services provided to fund shareholders and to meet additional regulatory and compliance requirements resulting from recent industry-wide SEC initiatives. The Board also considered
35
Board Consideration of Delaware Small Cap Value Fund Investment Advisory Agreement (continued)
the extent to which Delaware Investments 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 Delaware Investments.
Economies of Scale. The Trustees considered whether economies of scale are realized by Delaware Investments 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. 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 on all assets when the asset levels specified are exceeded. The Board noted that the fee under the Fund’s management contract fell within the standard structure. The Board also noted that the Fund’s assets 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 Advisory Agreement provides a sharing of benefits with the Fund and its shareholders.
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About the organization
This semiannual report is for the information of Delaware Small Cap Value Fund shareholders, but it may be used with prospective investors when preceded or accompanied by a current prospectus for Delaware Small Cap Value Fund and the Delaware Investments® Fund profile for the most recently completed calendar quarter. These documents are available at www.delawareinvestments.com. The prospectus sets forth details about charges, expenses, investment objectives, and operating policies of the investment company. You should read the prospectus carefully before you invest. The figures in this report represent past results that are not a guarantee of future results. The return and principal value of an investment in the investment company will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
Board of trustees | ||||
Patrick P. Coyne Thomas L. Bennett John A. Fry Anthony D. Knerr Lucinda S. Landreth | Ann R. Leven Thomas F. Madison Janet L. Yeomans J. Richard Zecher |
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Affiliated officers | Contact information | |
David F. Connor Daniel V. Geatens David P. O’Connor Richard Salus | Investment manager National distributor Shareholder servicing, dividend disbursing, For shareholders For securities dealers and financial Web site | |
|
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 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 Commission’s Web site at www.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 Fund’s Schedule of Investments are available without charge on the Fund’s Web site at www.delawareinvestments.com. The Fund’s Forms N-Q may be reviewed and copied at the Commission’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 Web site at www.delawareinvestments.com; and (ii) on the Commission’s Web site at www.sec.gov.
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![]() | ![]() |
Semiannual report | |
Delaware Dividend Income Fund | |
May 31, 2008 |
Value equity mutual fund |
Table of contents
Disclosure of Fund expenses | 1 |
Sector allocation and top 10 equity holdings | 3 |
Statement of net assets | 6 |
Statement of operations | 26 |
Statements of changes in net assets | 28 |
Financial highlights | 30 |
Notes to financial statements | 40 |
Other Fund information | 51 |
About the organization | 56 |
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.
© 2008 Delaware Distributors, L.P.
Disclosure of Fund expenses
For the period December 1, 2007 to May 31, 2008
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 period December 1, 2007 to May 31, 2008.
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
Disclosure of Fund expenses
Delaware Dividend Income Fund
Expense analysis of an investment of $1,000
Beginning | Ending | Expenses | |||||
Account | Account Value | Annualized | Paid During Period | ||||
12/1/07 | 5/31/08 | Expense Ratio | 12/1/07 to 5/31/08* | ||||
Actual Fund return | |||||||
Class A | $1,000.00 | $ 960.80 | 1.00% | $4.90 | |||
Class B | 1,000.00 | 956.20 | 1.75% | 8.56 | |||
Class C | 1,000.00 | 957.00 | 1.75% | 8.56 | |||
Class R | 1,000.00 | 958.80 | 1.25% | 6.12 | |||
Institutional Class | 1,000.00 | 961.20 | 0.75% | 3.68 | |||
Hypothetical 5% return (5% return before expenses) | |||||||
Class A | $1,000.00 | $1,020.00 | 1.00% | $5.05 | |||
Class B | 1,000.00 | 1,016.25 | 1.75% | 8.82 | |||
Class C | 1,000.00 | 1,016.25 | 1.75% | 8.82 | |||
Class R | 1,000.00 | 1,018.75 | 1.25% | 6.31 | |||
Institutional Class | 1,000.00 | 1,021.25 | 0.75% | 3.79 |
* | “Expenses Paid During Period” are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). |
2
Sector allocation and top 10 equity holdings | |
Delaware Dividend Income Fund | As of May 31, 2008 |
Sector designations may be different than the sector designations presented in other Fund materials. The sector designations may also 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.
Sector | Percentage of net assets | ||
Common Stock | 54.07 | % | |
Consumer Discretionary | 3.73 | % | |
Consumer Staples | 5.06 | % | |
Diversified REITs | 1.45 | % | |
Energy | 3.38 | % | |
Financials | 7.99 | % | |
Health Care | 7.80 | % | |
Health Care REITs | 1.08 | % | |
Hotel REITs | 0.95 | % | |
Industrial REITs | 1.43 | % | |
Industrials | 2.76 | % | |
Information Technology | 4.94 | % | |
Mall REITs | 2.40 | % | |
Manufactured Housing REITs | 0.32 | % | |
Materials | 1.21 | % | |
Mortgage REITs | 0.41 | % | |
Multifamily REITs | 1.34 | % | |
Office REITs | 1.89 | % | |
Real Estate Operating Companies | 0.51 | % | |
Self-Storage REITs | 0.47 | % | |
Shopping Center REITs | 0.89 | % | |
Specialty REITs | 0.29 | % | |
Telecommunications | 2.47 | % | |
Transportation | 0.00 | % | |
Utilities | 1.30 | % | |
Convertible Preferred Stock | 4.83 | % | |
Automobiles & Automotive Parts | 0.29 | % | |
Banking, Finance & Insurance | 2.14 | % | |
Cable, Media & Publishing | 0.19 | % | |
Energy | 0.56 | % | |
Health Care & Pharmaceuticals | 0.55 | % | |
Telecommunications | 0.33 | % | |
Utilities | 0.77 | % |
3
Sector allocation and top 10 equity holdings
Delaware Dividend Income Fund
Sector | Percentage of net assets | ||
Convertible Bonds | 13.65 | % | |
Aerospace & Defense | 0.40 | % | |
Basic Industries | 0.39 | % | |
Cable, Media & Publishing | 0.65 | % | |
Computers & Technology | 2.82 | % | |
Electronics & Electrical Equipment | 0.94 | % | |
Energy | 1.16 | % | |
Environmental Services | 0.09 | % | |
Health Care & Pharmaceuticals | 3.91 | % | |
Real Estate | 0.64 | % | |
Retail | 0.51 | % | |
Telecommunications | 1.49 | % | |
Transportation | 0.47 | % | |
Utilities | 0.18 | % | |
Corporate Bonds | 23.42 | % | |
Basic Industries | 2.39 | % | |
Brokerage | 0.06 | % | |
Capital Goods | 2.13 | % | |
Consumer Cyclical | 2.23 | % | |
Consumer Non-Cyclical | 1.30 | % | |
Energy | 3.52 | % | |
Finance & Investments | 0.37 | % | |
Media | 1.63 | % | |
Real Estate | 0.25 | % | |
Services Cyclical | 1.98 | % | |
Services Non-Cyclical | 1.73 | % | |
Technology & Electronics | 0.46 | % | |
Telecommunications | 3.33 | % | |
Utilities | 2.04 | % | |
Senior Secured Loans | 0.91 | % | |
Sovereign Debt | 0.07 | % | |
Leveraged Non-Recourse Security | 0.00 | % | |
Limited Partnership | 0.15 | % |
4
Sector | Percentage of net assets | ||
Preferred Stock | 0.47 | % | |
Industrials | 0.03 | % | |
Leisure, Lodging & Entertainment | 0.06 | % | |
Real Estate | 0.38 | % | |
Residual Interest Trust Certificate | 0.06 | % | |
Warrants | 0.00 | % | |
Repurchase Agreements | 1.53 | % | |
Securities Lending Collateral | 12.31 | % | |
Total Value of Securities | 111.47 | % | |
Obligation to Return Securities Lending Collateral | (12.31 | %) | |
Receivables and Other Assets Net of Liabilities | 0.84 | % | |
Total Net Assets | 100.00 | % |
Holdings are for informational purposes only and are subject to change at any time. They are not a recommendation to buy, sell, or hold any security.
Top 10 Equity Holdings | Percentage of net assets | ||
Johnson & Johnson | 1.40 | % | |
Morgan Stanley | 1.39 | % | |
Bristol-Myers Squibb | 1.37 | % | |
Discover Financial Services | 1.34 | % | |
Simon Property Group | 1.30 | % | |
Kraft Foods Class A | 1.30 | % | |
Progress Energy | 1.30 | % | |
Heinz (H.J.) | 1.26 | % | |
Kimberly-Clark | 1.26 | % | |
Baxter international | 1.25 | % |
5
Statement of net assets | |
Delaware Dividend Income Fund | May 31, 2008 (Unaudited) |
Number of shares | Value | |||
Common Stock – 54.07% | ||||
Consumer Discretionary – 3.73% | ||||
*Gap | 490,000 | $ | 8,942,499 | |
*†Jarden | 8,850 | 165,938 | ||
Limited Brands | 460,300 | 8,920,614 | ||
Mattel | 426,900 | 8,597,766 | ||
†Penn National Gaming | 4,200 | 194,964 | ||
†Time Warner Cable Class A | 12 | 361 | ||
26,822,142 | ||||
Consumer Staples – 5.06% | ||||
Heinz (H.J.) | 181,800 | 9,073,638 | ||
Kimberly-Clark | 141,600 | 9,034,080 | ||
Kraft Foods Class A | 288,600 | 9,373,728 | ||
Safeway | 280,600 | 8,942,722 | ||
36,424,168 | ||||
Diversified REITs – 1.45% | ||||
*iStar Financial | 112,800 | 2,156,736 | ||
*Liberty Property Trust | 34,100 | 1,210,550 | ||
Vornado Realty Trust | 72,200 | 7,056,106 | ||
10,423,392 | ||||
Energy – 3.38% | ||||
Chevron | 85,000 | 8,427,750 | ||
ConocoPhillips | 93,700 | 8,723,470 | ||
Marathon Oil | 140,000 | 7,194,600 | ||
24,345,820 | ||||
Financials – 7.99% | ||||
Allstate | 171,600 | 8,741,304 | ||
Discover Financial Services | 559,950 | 9,603,143 | ||
Hartford Financial Services Group | 125,300 | 8,905,071 | ||
*KKR Financial Holdings | 92,300 | 1,122,368 | ||
*Lehman Brothers Holdings | 198,400 | 7,303,104 | ||
Morgan Stanley | 226,700 | 10,026,941 | ||
*Wachovia | 281,500 | 6,699,700 | ||
*Washington Mutual | 568,600 | 5,128,772 | ||
57,530,403 | ||||
Health Care – 7.80% | ||||
Abbott Laboratories | 157,900 | 8,897,665 | ||
Baxter International | 147,800 | 9,030,580 | ||
Bristol-Myers Squibb | 432,700 | 9,861,233 | ||
*Brookdale Senior Living | 37,500 | 989,250 |
6
Number of shares | Value | |||
Common Stock (continued) | ||||
Health Care (continued) | ||||
Johnson & Johnson | 150,800 | $ | 10,064,392 | |
Pfizer | 437,000 | 8,460,320 | ||
Wyeth | 198,400 | 8,822,848 | ||
56,126,288 | ||||
Health Care REITs – 1.08% | ||||
*HCP | 40,200 | 1,377,252 | ||
*Health Care REIT | 47,700 | 2,303,910 | ||
Ventas | 85,500 | 4,074,930 | ||
7,756,092 | ||||
Hotel REITs – 0.95% | ||||
*Ashford Hospitality Trust | 97,200 | 596,808 | ||
Hersha Hospitality Trust | 330,300 | 3,141,153 | ||
*Host Hotels & Resorts | 180,000 | 3,094,200 | ||
6,832,161 | ||||
Industrial REITs – 1.43% | ||||
AMB Property | 49,500 | 2,917,530 | ||
ProLogis | 119,000 | 7,369,670 | ||
10,287,200 | ||||
Industrials – 2.76% | ||||
Donnelley (R.R.) & Sons | 272,000 | 8,929,760 | ||
Grupo Aeroportuario del Centro Norte ADR | 75,042 | 1,503,842 | ||
@Õ=†Port Townsend | 1,110 | 692,640 | ||
Waste Management | 231,400 | 8,777,002 | ||
19,903,244 | ||||
Information Technology – 4.94% | ||||
Intel | 381,300 | 8,838,534 | ||
*International Business Machines | 69,000 | 8,930,670 | ||
Motorola | 966,500 | 9,017,445 | ||
Xerox | 643,400 | 8,737,372 | ||
35,524,021 | ||||
Mall REITs – 2.40% | ||||
*General Growth Properties | 124,300 | 5,165,908 | ||
*Macerich | 38,400 | 2,746,752 | ||
*Simon Property Group | 94,500 | 9,389,520 | ||
17,302,180 | ||||
Manufactured Housing REITs – 0.32% | ||||
*Equity Lifestyle Properties | 33,100 | 1,644,739 | ||
*Sun Communities | 34,000 | 681,700 | ||
2,326,439 |
7
Statement of net assets
Delaware Dividend Income Fund
Number of shares | Value | |||
Common Stock (continued) | ||||
Materials – 1.21% | ||||
duPont (E.I.) deNemours | 181,400 | $ | 8,690,874 | |
8,690,874 | ||||
Mortgage REITs – 0.41% | ||||
Annaly Capital Management | 96,400 | 1,716,884 | ||
*Chimera Investment | 87,800 | 1,216,908 | ||
2,933,792 | ||||
Multifamily REITs – 1.34% | ||||
*American Campus Communities | 59,200 | 1,800,864 | ||
*Apartment Investment & Management | 38,520 | 1,524,236 | ||
AvalonBay Communities | 8,400 | 850,080 | ||
*Camden Property Trust | 33,900 | 1,669,914 | ||
Equity Residential | 77,300 | 3,269,017 | ||
*UDR | 22,300 | 551,702 | ||
9,665,813 | ||||
Office REITs – 1.89% | ||||
*Alexandria Real Estate Equities | 41,200 | 4,297,160 | ||
*Brandywine Realty Trust | 70,000 | 1,313,900 | ||
*Highwoods Properties | 63,000 | 2,268,000 | ||
Mack-Cali Realty | 45,500 | 1,758,120 | ||
PS Business Parks | 23,800 | 1,368,500 | ||
*SL Green Realty | 25,900 | 2,582,230 | ||
13,587,910 | ||||
Real Estate Operating Companies – 0.51% | ||||
*Macquarie Infrastructure | 74,400 | 2,473,056 | ||
*Marriott International Class A | 35,600 | 1,171,596 | ||
3,644,652 | ||||
Self-Storage REITs – 0.47% | ||||
Public Storage | 38,200 | 3,366,566 | ||
3,366,566 | ||||
Shopping Center REITs – 0.89% | ||||
*Developers Diversified Realty | 34,500 | 1,368,960 | ||
*Federal Realty Investment Trust | 46,400 | 3,740,768 | ||
*Ramco-Gershenson Properties Trust | 56,600 | 1,265,010 | ||
6,374,738 | ||||
Specialty REITs – 0.29% | ||||
*Entertainment Properties Trust | 37,400 | 2,058,870 | ||
2,058,870 |
8
Number of shares | Value | |||
Common Stock (continued) | ||||
Telecommunications – 2.47% | ||||
AT&T | 222,300 | $ | 8,869,770 | |
†Century Communications | 1,625,000 | 1,158 | ||
*Verizon Communications | 231,000 | 8,886,570 | ||
17,757,498 | ||||
Transportation – 0.00% | ||||
†Northwest Airlines | 1,197 | 8,451 | ||
8,451 | ||||
Utilities – 1.30% | ||||
*†Mirant | 448 | 18,198 | ||
Progress Energy | 218,300 | 9,334,508 | ||
9,352,706 | ||||
Total Common Stock (cost $425,749,237) | 389,045,420 | |||
Convertible Preferred Stock – 4.83% | ||||
Automobiles & Automotive Parts – 0.29% | ||||
*General Motors 5.25% exercise price $64.90, | ||||
expiration date 3/6/32 | 128,500 | 2,084,270 | ||
2,084,270 | ||||
Banking, Finance & Insurance – 2.14% | ||||
Aspen Insurance 5.625% exercise price $29.28, | ||||
expiration date 12/31/49 | 37,800 | 1,840,388 | ||
*·Citigroup Funding 4.973% exercise price $29.50, | ||||
expiration date 9/27/08 | 155,000 | 3,613,050 | ||
E Trade Group 6.125% exercise price $21.82, | ||||
expiration date 11/18/08 | 75,500 | 471,875 | ||
*Fannie Mae 8.75% exercise price $32.45, | ||||
expiration date 5/13/11 | 25,000 | 1,246,875 | ||
#Goldman Sachs Group 144A 35.60% exercise price | ||||
$100.00, expiration date 8/22/08 | 20,000 | 1,931,420 | ||
#Morgan Stanley 144A | ||||
11.00% exercise price $94.64, | ||||
expiration date 1/7/09 | 35,432 | 3,337,517 | ||
35.50% exercise price $100.00, | ||||
expiration date 10/28/08 | 1,000 | 969,435 | ||
Sovereign Capital Trust IV 4.375% exercise price | ||||
$29.16, expiration date 3/1/34 | 35,700 | 1,115,625 | ||
XL Capital 7.00% exercise price $80.59, | ||||
expiration date 2/15/09 | 64,400 | 896,448 | ||
15,422,633 |
9
Statement of net assets
Delaware Dividend Income Fund
Number of shares | Value | ||||
Convertible Preferred Stock (continued) | |||||
Cable, Media & Publishing – 0.19% | |||||
#Interpublic Group 144A 5.25% exercise price $13.66, | |||||
expiration date 12/31/49 | 1,500 | $ | 1,386,000 | ||
1,386,000 | |||||
Energy – 0.56% | |||||
*Chesapeake Energy 4.50% exercise price $44.17, | |||||
expiration date 12/31/49 | 17,075 | 2,317,931 | |||
El Paso Energy Capital Trust I 4.75% | |||||
exercise price $41.59, expiration date 3/31/28 | 39,900 | 1,668,219 | |||
3,986,150 | |||||
Health Care & Pharmaceuticals – 0.55% | |||||
Mylan 6.50% exercise price $17.08, | |||||
expiration date 11/15/10 | 1,700 | 1,612,722 | |||
Schering-Plough 6.00% exercise price $33.69, | |||||
expiration date 8/13/10 | 12,000 | 2,354,250 | |||
3,966,972 | |||||
Telecommunications – 0.33% | |||||
Lucent Technologies Capital Trust I 7.75% exercise | |||||
price $24.80, expiration date 3/15/17 | 3,000 | 2,400,750 | |||
2,400,750 | |||||
Utilities – 0.77% | |||||
·CenterPoint Energy 2.00% exercise price $40.88, | |||||
expiration date 9/15/29 | 26,000 | 767,156 | |||
Entergy 7.625% exercise price $86.97, | |||||
expiration date 2/17/09 | 40,750 | 2,888,156 | |||
NRG Energy 5.75% exercise price $30.23, | |||||
expiration date 3/16/09 | 5,335 | 1,890,257 | |||
5,545,569 | |||||
Total Convertible Preferred Stock (cost $40,813,659) | 34,792,344 | ||||
Principal amount | |||||
Convertible Bonds – 13.65% | |||||
Aerospace & Defense – 0.40% | |||||
#AAR 144A 1.75% 2/1/26 exercise price $29.43, | |||||
expiration date 2/1/26 | $ | 1,150,000 | 1,053,688 |
10
Principal amount | Value | ||||
Convertible Bonds (continued) | |||||
Aerospace & Defense (continued) | |||||
#L-3 Communications Holdings 144A | |||||
3.00% 8/1/35 exercise price $101.70, | |||||
expiration date 8/1/35 | $ | 1,500,000 | $ | 1,848,750 | |
2,902,438 | |||||
Basic Industries – 0.39% | |||||
#Apex Silver Mines 144A 2.875% 3/15/24 | |||||
exercise price $28.62, expiration date 3/15/24 | 1,000,000 | 541,250 | |||
Rayonier TRS Holdings 3.75% 10/15/12 | |||||
exercise price $54.82, expiration date 10/15/12 | 2,130,000 | 2,279,100 | |||
2,820,350 | |||||
Cable, Media & Publishing – 0.65% | |||||
Liberty Media 3.25% 3/15/31 exercise price $53.86, | |||||
expiration date 3/8/31 | 3,000,000 | 2,043,750 | |||
#Playboy Enterprises 144A 3.00% 3/15/25 exercise | |||||
price $17.02, expiration date 3/15/25 | 3,240,000 | 2,668,950 | |||
4,712,700 | |||||
Computers & Technology – 2.82% | |||||
Advanced Micro Devices | |||||
6.00% 5/1/15 exercise price $28.08, | |||||
expiration date 5/1/15 | 2,430,000 | 1,652,400 | |||
#144A 6.00% 5/1/15 exercise price $28.08, | |||||
expiration date 5/1/15 | 3,385,000 | 2,301,800 | |||
Electronic Data Systems 3.875% 7/15/23 exercise price $34.14, | |||||
expiration date 7/15/23 | 3,200,000 | 3,215,999 | |||
Euronet Worldwide 3.50% 10/15/25 exercise price $40.48, | |||||
expiration date 10/15/25 | 3,445,000 | 2,893,800 | |||
Fairchild Semiconductor 5.00% 11/1/08 exercise price $30.00, | |||||
expiration date 11/1/08 | 1,950,000 | 1,954,875 | |||
Hutchinson Technology 3.25% 1/15/26 exercise price $36.43, | |||||
expiration date 1/15/26 | 1,540,000 | 1,170,400 |
11
Statement of net assets
Delaware Dividend Income Fund
Principal amount | Value | ||||
Convertible Bonds (continued) | |||||
Computers & Technology (continued) | |||||
Intel | |||||
2.95% 12/15/35 exercise price $31.53, | |||||
expiration date 12/15/35 | $ | 500,000 | $ | 507,500 | |
#144A 2.95% 12/15/26 exercise price $31.53, | |||||
expiration date 12/15/35 | 1,140,000 | 1,157,100 | |||
ON Semiconductor 2.625% 12/15/26 exercise price | |||||
$10.50, expiration date 12/15/26 | 2,125,000 | 2,472,969 | |||
SanDisk 1.00% 5/15/13 exercise price $82.36, | |||||
expiration date 5/15/13 | 3,870,000 | 2,941,200 | |||
20,268,043 | |||||
Electronics & Electrical Equipment – 0.94% | |||||
*Fisher Scientific International 3.25% 3/1/24 exercise | |||||
price $40.20,expiration date 3/1/24 | 1,500,000 | 2,388,750 | |||
Flextronics International 1.00% 8/1/10 exercise price | |||||
$15.53, expiration date 8/1/10 | 3,450,000 | 3,363,750 | |||
Vishay Intertechnology 3.625% 8/1/23 exercise price | |||||
$21.28, expiration date 8/1/23 | 1,000,000 | 1,000,000 | |||
6,752,500 | |||||
Energy – 1.16% | |||||
Halliburton 3.125% 7/15/23 exercise price | |||||
$18.74, expiration date 7/15/23 | 1,750,000 | 4,552,187 | |||
Peabody Energy 4.75% 12/15/41 exercise | |||||
price $58.45, expiration date 12/15/41 | 1,295,000 | 1,887,463 | |||
Transocean | |||||
1.50% 12/15/37 exercise price $168.61, | |||||
expiration date 12/15/37 | 865,000 | 976,369 | |||
1.625% 12/15/37 exercise price $168.61, | |||||
expiration date 12/15/37 | 865,000 | 974,206 | |||
8,390,225 | |||||
Environmental Services – 0.09% | |||||
Allied Waste Industries 4.25% 4/15/34 exercise price $20.43, | |||||
expiration date 4/15/34 | 660,000 | 635,250 | |||
635,250 |
12
Principal amount | Value | ||
Convertible Bonds (continued) | |||
Health Care & Pharmaceuticals – 3.91% | |||
Advanced Medical Optics 3.25% 8/1/26 exercise price $59.61, | |||
expiration date 8/1/26 | $4,075,000 | $3,173,405 | |
Allergan | |||
1.50% 4/1/26 exercise price $63.33, | |||
expiration date 4/1/26 | 600,000 | 663,000 | |
#144A 1.50% 4/1/26 exercise price $63.33, | |||
expiration date 4/1/26 | 1,935,000 | 2,138,175 | |
Amgen | |||
*0.375% 2/1/13 exercise price $79.48, | |||
expiration date 2/1/13 | 1,680,000 | 1,455,300 | |
#144A 0.375% 2/1/13 exercise price $79.48, | |||
expiration date 2/1/13 | 775,000 | 671,344 | |
ŸBristol-Myers Squibb 2.30% 9/15/23 | |||
exercise price $41.28, expiration date 9/15/23 | 1,600,000 | 1,592,000 | |
CV Therapeutics 3.25% 8/16/13 exercise price $27.00, | |||
expiration date 8/16/13 | 530,000 | 398,825 | |
Encysive Pharmaceuticals | |||
2.50% 3/15/12 exercise price $13.95, | |||
expiration date 3/15/12 | 200,000 | 199,250 | |
#144A 2.50% 3/15/12 exercise price $13.95, | |||
expiration date 3/15/12 | 2,000,000 | 1,992,500 | |
*Genzyme 1.25% 12/1/23 exercise price $71.24, | |||
expiration date 12/1/23 | 2,000,000 | 2,160,000 | |
Health Management Associates 4.375% 8/1/23 | |||
exercise price $13.93, expiration date 8/1/23 | 1,550,000 | 1,553,875 | |
fHologic 2.00% 12/15/37 exercise price $38.59, | |||
expiration date 12/15/37 | 1,715,000 | 1,534,925 | |
LifePoint Hospitals 3.50% 5/15/14 exercise price $51.79, | |||
expiration date 5/14/14 | 850,000 | 775,625 | |
Lincare Holdings 3.00% 6/15/33 exercise price $53.33, | |||
expiration date 6/15/33 | 2,000,000 | 2,002,500 |
13
Statement of net assets
Delaware Dividend Income Fund
Principal amount | Value | ||
Convertible Bonds (continued) | |||
Health Care & Pharmaceuticals (continued) | |||
Medtronic | |||
1.50% 4/15/11 exercise price $55.96, | |||
expiration date 4/15/11 | $1,000,000 | $ 1,052,500 | |
*1.625% 4/15/13 exercise price $55.96, | |||
expiration date 4/15/13 | 2,000,000 | 2,120,000 | |
Teva Pharmaceutical Finance 0.25% 2/1/26 exercise price | |||
$47.06, expiration date 2/1/26 | 1,535,000 | 1,577,213 | |
ŸWyeth 3.581% 1/15/24 exercise price $60.09, | |||
expiration date 1/15/24 | 3,000,000 | 3,060,630 | |
28,121,067 | |||
Real Estate – 0.64% | |||
MeriStar Hospitality 9.50% 4/1/10 exercise price $10.18, | |||
expiration date 4/1/10 | 1,685,000 | 1,729,653 | |
#Weingarten Realty Investors 144A 3.95% 8/1/26 | |||
exercise price $46.13, expiration date 8/1/26 | 3,000,000 | 2,876,250 | |
4,605,903 | |||
Retail – 0.51% | |||
Pantry 3.00% 11/15/12 exercise price $50.10, | |||
expiration date 11/15/12 | 1,755,000 | 1,230,694 | |
#Saks 144A 2.00% 3/15/24 exercise price $11.97, | |||
expiration date 3/15/24 | 1,135,000 | 1,444,287 | |
Sonic Automotive 5.25% 5/7/09 exercise price $46.87, | |||
expiration date 5/7/09 | 1,000,000 | 975,000 | |
3,649,981 | |||
Telecommunications – 1.49% | |||
Amdocs 0.50% 3/15/24 exercise price $43.12, | |||
expiration date 3/15/24 | 2,000,000 | 1,997,500 | |
Level 3 Communications 3.50% 6/15/12 exercise price | |||
$5.46, expiration date 6/15/12 | 2,425,000 | 2,112,781 | |
NII Holdings 3.125% 6/15/12 exercise price $118.32, | |||
expiration date 6/15/12 | 3,435,000 | 2,984,156 | |
#Nortel Networks 144A | |||
1.75% 4/15/12 exercise price $32.00, | |||
expiration date 4/15/12 | 845,000 | 636,919 | |
2.125% 4/15/14 exercise price $32.00, | |||
expiration date 4/15/14 | 845,000 | 583,050 |
14
Principal amount | Value | ||
Convertible Bonds (continued) | |||
Telecommunications (continued) | |||
Qwest Communications International 3.50% 11/15/25 | |||
exercise price $5.73, expiration date 11/15/25 | $ 750,000 | $ 805,313 | |
#Virgin Media 144A 6.50% 11/15/16 | |||
exercise price $19.22, expiration date 11/15/16 | 1,400,000 | 1,596,000 | |
10,715,719 | |||
Transportation – 0.47% | |||
*#ExpressJet Holdings 144A 4.25% 8/1/23 | |||
exercise price $18.20, expiration date 8/1/23 | 750,000 | 622,500 | |
*JetBlue Airways 3.50% 7/15/33 exercise price $28.33, | |||
expiration date 7/15/33 | 2,775,000 | 2,740,313 | |
3,362,813 | |||
Utilities – 0.18% | |||
Dominion Resources 2.125% 12/15/23 | |||
exercise price $36.33, expiration date 12/15/23 | 1,000,000 | 1,277,500 | |
1,277,500 | |||
Total Convertible Bonds (cost $102,109,341) | 98,214,489 | ||
Corporate Bonds – 23.42% | |||
Basic Industries – 2.39% | |||
*Domtar 7.125% 8/15/15 | 505,000 | 484,800 | |
*#Evraz Group 144A 9.50% 4/24/18 | 1,775,000 | 1,821,504 | |
Foundation Pennsylvania Coal 7.25% 8/1/14 | 1,230,000 | 1,266,900 | |
Freeport McMoRan Copper & Gold 8.25% 4/1/15 | 1,030,000 | 1,093,226 | |
Georgia-Pacific | |||
*7.70% 6/15/15 | 315,000 | 314,213 | |
8.875% 5/15/31 | 865,000 | 860,675 | |
Innophos 8.875% 8/15/14 | 615,000 | 630,375 | |
#Innophos Holding 144A 9.50% 4/15/12 | 510,000 | 494,700 | |
International Coal Group 10.25% 7/15/14 | 725,000 | 728,625 | |
International Paper 7.95% 6/15/18 | 375,000 | 376,942 | |
#MacDermid 144A 9.50% 4/15/17 | 935,000 | 911,625 | |
Momentive Performance Materials 9.75% 12/1/14 | 1,085,000 | 1,011,763 | |
#NewPage 144A 10.00% 5/1/12 | 850,000 | 909,500 | |
#Norske Skogindustrier 144A 7.125% 10/15/33 | 175,000 | 111,125 | |
@Õ=Port Townsend Private Note 12.431% 8/27/12 | 310,800 | 307,692 | |
Potlatch 13.00% 12/1/09 | 1,075,000 | 1,187,866 |
15
Statement of net assets
Delaware Dividend Income Fund
Principal amount | Value | ||
Corporate Bonds (continued) | |||
Basic Industries (continued) | |||
*#Rock-Tenn 144A 9.25% 3/15/16 | $ 490,000 | $ 519,400 | |
Rockwood Specialties Group 7.50% 11/15/14 | 690,000 | 679,650 | |
Ÿ#Ryerson 144A 10.248% 11/1/14 | 980,000 | 908,950 | |
#Sappi Papier Holding 144A 6.75% 6/15/12 | 850,000 | 799,865 | |
#Steel Dynamics 144A 7.75% 4/15/16 | 1,330,000 | 1,339,975 | |
ŸVerso Paper Holdings 6.623% 8/1/14 | 470,000 | 439,450 | |
17,198,821 | |||
Brokerage – 0.06% | |||
LaBranche 11.00% 5/15/12 | 440,000 | 454,300 | |
454,300 | |||
Capital Goods – 2.13% | |||
*Associated Materials 9.75% 4/15/12 | 615,000 | 615,000 | |
BWAY 10.00% 10/15/10 | 715,000 | 723,938 | |
CPG International I 10.50% 7/1/13 | 620,000 | 517,700 | |
DR Horton 8.00% 2/1/09 | 565,000 | 567,825 | |
DRS Technologies 7.625% 2/1/18 | 885,000 | 958,013 | |
Graham Packaging 8.50% 10/15/12 | 1,035,000 | 1,009,125 | |
Graphic Packaging International 8.50% 8/15/11 | 760,000 | 771,400 | |
Greenbrier 8.375% 5/15/15 | 1,005,000 | 972,338 | |
Interface 10.375% 2/1/10 | 1,130,000 | 1,192,150 | |
Intertape Polymer 8.50% 8/1/14 | 460,000 | 411,700 | |
KB HOME | |||
7.75% 2/1/10 | 270,000 | 266,625 | |
8.625% 12/15/08 | 615,000 | 624,225 | |
*L-3 Communications 7.625% 6/15/12 | 435,000 | 444,244 | |
#Moog 144A 7.25% 6/15/18 | 145,000 | 146,813 | |
*NXP BV Funding 9.50% 10/15/15 | 1,840,000 | 1,741,099 | |
Owens Brockway Glass Container 6.75% 12/1/14 | 940,000 | 956,450 | |
Owens Corning 6.50% 12/1/16 | 555,000 | 488,046 | |
*Smurfit-Stone Container Enterprises 8.00% 3/15/17 | 540,000 | 468,450 | |
Thermadyne Holdings 10.50% 2/1/14 | 425,000 | 416,500 | |
Toll | |||
8.25% 2/1/11 | 220,000 | 213,400 | |
8.25% 12/1/11 | 275,000 | 265,375 | |
Trimas 9.875% 6/15/12 | 630,000 | 589,050 | |
Vitro 11.75% 11/1/13 | 940,000 | 944,700 | |
15,304,166 |
16
Principal amount | Value | ||
Corporate Bonds (continued) | |||
Consumer Cyclical – 2.23% | |||
*Dollar General 10.625% 7/15/15 | $ 925,000 | $ 911,125 | |
Ford Motor 7.45% 7/16/31 | 1,260,000 | 878,850 | |
Ford Motor Credit 7.80% 6/1/12 | 5,245,000 | 4,644,259 | |
*General Motors 8.375% 7/15/33 | 1,245,000 | 859,050 | |
Global Cash Access 8.75% 3/15/12 | 790,000 | 790,000 | |
GMAC | |||
*5.85% 1/14/09 | 485,000 | 476,509 | |
6.875% 8/28/12 | 4,310,000 | 3,474,657 | |
Lear 8.75% 12/1/16 | 1,650,000 | 1,505,625 | |
*Neiman Marcus Group | |||
10.375% 10/15/15 | 240,000 | 249,300 | |
PIK 9.00% 10/15/15 | 780,000 | 801,450 | |
Sonic Automotive 8.625% 8/15/13 | 470,000 | 458,250 | |
Tenneco 8.625% 11/15/14 | 1,038,000 | 1,032,810 | |
16,081,885 | |||
Consumer Non-Cyclical – 1.30% | |||
ACCO Brands 7.625% 8/15/15 | 565,000 | 522,625 | |
Advanced Medical Optics 7.50% 5/1/17 | 990,000 | 930,600 | |
*#Bausch & Lomb 144A 9.875% 11/1/15 | 1,200,000 | 1,259,999 | |
Cardtronics | |||
9.25% 8/15/13 | 315,000 | 302,400 | |
#144A 9.25% 8/15/13 | 645,000 | 619,200 | |
*Constellation Brands 8.125% 1/15/12 | 1,035,000 | 1,053,113 | |
Del Monte | |||
6.75% 2/15/15 | 300,000 | 291,750 | |
8.625% 12/15/12 | 245,000 | 252,350 | |
*Jarden 7.50% 5/1/17 | 991,000 | 889,423 | |
Õ@National Beef Packing 10.50% 8/1/11 | 895,000 | 836,825 | |
Pilgrim’s Pride | |||
7.625% 5/1/15 | 489,000 | 452,325 | |
*8.375% 5/1/17 | 548,000 | 480,870 | |
Universal Hospital Services PIK 8.50% 6/1/15 | 885,000 | 898,275 | |
*Visant Holding 8.75% 12/1/13 | 555,000 | 555,000 | |
9,344,755 | |||
Energy – 3.52% | |||
*AmeriGas Partners 7.125% 5/20/16 | 1,125,000 | 1,096,875 | |
Chesapeake Energy 6.375% 6/15/15 | 100,000 | 96,250 | |
Complete Production Service 8.00% 12/15/16 | 500,000 | 508,750 |
17
Statement of net assets
Delaware Dividend Income Fund
Principal amount | Value | ||
Corporate Bonds (continued) | |||
Energy (continued) | |||
Compton Petroleum Finance 7.625% 12/1/13 | $1,740,000 | $ 1,711,724 | |
#Connacher Oil & Gas 144A 10.25% 12/15/15 | 1,100,000 | 1,166,000 | |
#Copano Energy 144A 7.75% 6/1/18 | 490,000 | 489,388 | |
Dynergy Holdings 7.75% 6/1/19 | 1,765,000 | 1,681,162 | |
*El Paso 6.875% 6/15/14 | 1,145,000 | 1,154,710 | |
#El Paso Performance-Linked Trust 144A | |||
7.75% 7/15/11 | 525,000 | 542,682 | |
Energy Partners 9.75% 4/15/14 | 505,000 | 477,225 | |
Ferrellgas Escrow 6.75% 5/1/14 | 780,000 | 748,800 | |
Geophysique-Veritas | |||
7.50% 5/15/15 | 155,000 | 157,713 | |
7.75% 5/15/17 | 670,000 | 686,750 | |
#Helix Energy Solutions 144A 9.50% 1/15/16 | 1,155,000 | 1,206,974 | |
#Hilcorp Energy I 144A | |||
7.75% 11/1/15 | 1,100,000 | 1,080,750 | |
9.00% 6/1/16 | 455,000 | 474,338 | |
Inergy Finance | |||
6.875% 12/15/14 | 350,000 | 339,500 | |
8.25% 3/1/16 | 200,000 | 204,500 | |
*#144A 8.25% 3/1/16 | 335,000 | 342,538 | |
KCS Energy 7.125% 4/1/12 | 465,000 | 455,700 | |
*#Key Energy Services 144A 8.375% 12/1/14 | 720,000 | 747,000 | |
Mariner Energy 8.00% 5/15/17 | 1,175,000 | 1,142,688 | |
#MarkWest Energy Partners 144A 8.75% 4/15/18 | 465,000 | 489,413 | |
Massey Energy 6.875% 12/15/13 | 980,000 | 970,200 | |
OPTI Canada | |||
7.875% 12/15/14 | 485,000 | 493,488 | |
8.25% 12/15/14 | 410,000 | 424,350 | |
PetroHawk Energy 9.125% 7/15/13 | 1,325,000 | 1,384,624 | |
Plains Exploration & Production | |||
7.00% 3/15/17 | 1,180,000 | 1,141,650 | |
7.625% 6/1/18 | 225,000 | 227,250 | |
Range Resources 7.25% 5/1/18 | 200,000 | 204,000 | |
Regency Energy Partners 8.375% 12/15/13 | 949,000 | 986,960 | |
#Stallion Oilfield Services 144A 9.75% 2/1/15 | 405,000 | 336,150 | |
Whiting Petroleum 7.25% 5/1/13 | 1,355,000 | 1,354,999 | |
Williams 7.50% 1/15/31 | 735,000 | 771,750 | |
25,296,851 |
18
Principal amount | Value | ||
Corporate Bonds (continued) | |||
Finance & Investments – 0.37% | |||
*Leucadia National 8.125% 9/15/15 | $ 536,000 | $ 551,410 | |
#LVB Acquisition Merger 144A 10.00% 10/15/17 | 830,000 | 894,324 | |
#Nuveen Investments 144A 10.50% 11/15/15 | 945,000 | 893,025 | |
Silicon Valley Bank 6.05% 6/1/17 | 310,000 | 270,409 | |
Unum Group 5.859% 5/15/09 | 50,000 | 50,606 | |
2,659,774 | |||
Media – 1.63% | |||
CCO Holdings 8.75% 11/15/13 | 790,000 | 754,450 | |
*#Charter Communications Operating 144A | |||
10.875% 9/15/14 | 2,230,000 | 2,397,249 | |
*Clear Channel Communications 5.50% 9/15/14 | 655,000 | 429,541 | |
#CSC Holdings 144A 8.50% 6/15/15 | 725,000 | 728,625 | |
Dex Media West 9.875% 8/15/13 | 1,345,000 | 1,299,606 | |
#DirecTV Holdings 144A 7.625% 5/15/16 | 910,000 | 911,138 | |
Echostar DBS 7.125% 2/1/16 | 420,000 | 403,200 | |
Lamar Media | |||
*6.625% 8/15/15 | 615,000 | 582,713 | |
6.625% 8/15/15 | 455,000 | 431,113 | |
#LBI Media 144A 8.50% 8/1/17 | 465,000 | 378,975 | |
Quebecor Media 7.75% 3/15/16 | 1,220,000 | 1,201,700 | |
Time Warner Telecom Holdings 9.25% 2/15/14 | 660,000 | 686,400 | |
Univision Communications 7.85% 7/15/11 | 470,000 | 446,500 | |
#Videotron 144A 9.125% 4/15/18 | 1,000,000 | 1,075,000 | |
11,726,210 | |||
Real Estate – 0.25% | |||
Host Hotels & Resorts 7.125% 11/1/13 | 900,000 | 895,500 | |
iStar Financial 8.625% 6/1/13 | 935,000 | 925,401 | |
1,820,901 | |||
Services Cyclical – 1.98% | |||
FTI Consulting 7.625% 6/15/13 | 1,630,000 | 1,695,199 | |
#Galaxy Entertainment Finance 144A 9.875% 12/15/12 | 1,495,000 | 1,517,425 | |
Gaylord Entertainment 8.00% 11/15/13 | 965,000 | 936,050 | |
Harrah’s Operating 5.50% 7/1/10 | 1,010,000 | 922,888 | |
Hertz 8.875% 1/1/14 | 1,015,000 | 1,015,000 | |
Kansas City Southern de Mexico 9.375% 5/1/12 | 1,280,000 | 1,344,000 | |
Majestic Star Casino 9.50% 10/15/10 | 450,000 | 390,375 | |
MGM MIRAGE | |||
7.50% 6/1/16 | 1,770,000 | 1,581,938 | |
7.625% 1/15/17 | 879,000 | 777,915 |
19
Statement of net assets
Delaware Dividend Income Fund
Principal amount | Value | ||
Corporate Bonds (continued) | |||
Services Cyclical (continued) | |||
‡Northwest Airlines 10.00% 2/1/09 | $ 265,000 | $ 2,650 | |
Park Place Entertainment 7.875% 3/15/10 | 800,000 | 762,000 | |
#Pokagon Gaming Authority 144A 10.375% 6/15/14 | 1,753,000 | 1,906,387 | |
Seabulk International 9.50% 8/15/13 | 424,000 | 447,850 | |
Travelport 9.875% 9/1/14 | 995,000 | 962,663 | |
14,262,340 | |||
Services Non-Cyclical – 1.73% | |||
Allied Waste North America 7.875% 4/15/13 | 510,000 | 524,025 | |
ARAMARK | |||
Ÿ6.373% 2/1/15 | 485,000 | 468,025 | |
*8.50% 2/1/15 | 980,000 | 1,008,175 | |
Casella Waste Systems 9.75% 2/1/13 | 1,083,000 | 1,088,415 | |
Community Health Systems 8.875% 7/15/15 | 1,340,000 | 1,388,575 | |
Õ@CRC Health 10.75% 2/1/16 | 545,000 | 460,525 | |
HCA | |||
9.25% 11/15/16 | 2,170,000 | 2,297,487 | |
PIK 9.625% 11/15/16 | 1,550,000 | 1,639,125 | |
*ŸHealthSouth 10.829% 6/15/14 | 925,000 | 948,125 | |
Iron Mountain | |||
6.625% 1/1/16 | 505,000 | 489,850 | |
8.625% 4/1/13 | 545,000 | 555,900 | |
Select Medical 7.625% 2/1/15 | 565,000 | 505,675 | |
#Seminole Indian Tribe of Florida 144A | |||
7.804% 10/1/20 | 775,000 | 743,985 | |
8.03% 10/1/20 | 350,000 | 340,358 | |
12,458,245 | |||
Technology & Electronics – 0.46% | |||
Freescale Semiconductor | |||
Ÿ6.675% 12/15/14 | 775,000 | 658,750 | |
8.875% 12/15/14 | 25,000 | 22,250 | |
Sungard Data Systems | |||
9.125% 8/15/13 | 1,049,000 | 1,085,715 | |
10.25% 8/15/15 | 1,452,000 | 1,517,340 | |
3,284,055 | |||
Telecommunications – 3.33% | |||
Õ@=‡ Allegiance Telecom 11.75% 2/15/08 | 10,000 | 0 | |
Alltel 7.00% 7/1/12 | 880,000 | 774,400 | |
Broadview Networks Holdings 11.375% 9/1/12 | 505,000 | 484,800 |
20
Principal amount | Value | ||
Corporate Bonds (continued) | |||
Telecommunications (continued) | |||
ŸCentennial Communications 8.448% 1/1/13 | $ 650,000 | $ 622,375 | |
Citizens Communications 7.125% 3/15/19 | 970,000 | 892,400 | |
*Cricket Communications 9.375% 11/1/14 | 1,365,000 | 1,324,050 | |
#Digicel 144A 9.25% 9/1/12 | 1,205,000 | 1,244,163 | |
Hughes Network Systems 9.50% 4/15/14 | 1,095,000 | 1,111,425 | |
WInmarsat Finance 10.375% 11/15/12 | 1,920,000 | 1,929,600 | |
Intelsat Bermuda 11.25% 6/15/16 | 1,975,000 | 2,024,374 | |
Lucent Technologies 6.45% 3/15/29 | 544,000 | 419,560 | |
MetroPCS Wireless 9.25% 11/1/14 | 1,740,000 | 1,681,275 | |
Nortel Networks | |||
Ÿ6.963% 7/15/11 | 1,075,000 | 1,015,875 | |
10.75% 7/15/16 | 865,000 | 858,513 | |
*#144A 10.75% 7/15/16 | 45,000 | 44,663 | |
PAETEC Holding 9.50% 7/15/15 | 540,000 | 510,300 | |
Qwest 7.50% 10/1/14 | 490,000 | 490,000 | |
Qwest Capital Funding 7.25% 2/15/11 | 1,255,000 | 1,233,038 | |
Rural Cellular | |||
Ÿ8.623% 11/1/12 | 430,000 | 439,675 | |
9.875% 2/1/10 | 800,000 | 824,000 | |
Sprint Capital 8.375% 3/15/12 | 2,285,000 | 2,223,923 | |
#Vimpelcom 144A 9.125% 4/30/18 | 970,000 | 1,003,226 | |
Virgin Media Finance 8.75% 4/15/14 | 1,875,000 | 1,851,563 | |
Windstream 8.125% 8/1/13 | 960,000 | 986,400 | |
23,989,598 | |||
Utilities – 2.04% | |||
AES | |||
7.75% 3/1/14 | 665,000 | 668,325 | |
8.00% 10/15/17 | 730,000 | 736,388 | |
Edison Mission Energy 7.625% 5/15/27 | 725,000 | 686,938 | |
Elwood Energy 8.159% 7/5/26 | 1,030,096 | 989,819 | |
Midwest Generation 8.30% 7/2/09 | 628,674 | 641,247 | |
Mirant Americas Generation 8.30% 5/1/11 | 900,000 | 938,250 | |
Mirant North America 7.375% 12/31/13 | 1,195,000 | 1,209,938 | |
*NRG Energy 7.375% 2/1/16 | 2,640,000 | 2,580,600 | |
Orion Power Holdings 12.00% 5/1/10 | 806,000 | 888,615 | |
#Texas Competitive Electric Holdings 144A | |||
10.25% 11/1/15 | 5,165,000 | 5,300,580 | |
14,640,700 | |||
Total Corporate Bonds (cost $167,993,736) | 168,522,601 |
21
Statement of net assets
Delaware Dividend Income Fund
Principal amount | Value | ||
«Senior Secured Loans – 0.91% | |||
BNY ConvergEx Group 5.696% 9/29/13 | $1,050,000 | $ 994,875 | |
Calpine 1st Lien 5.571% 3/29/14 | 940,000 | 911,086 | |
Ford Motor 5.80% 11/29/13 | 1,818,171 | 1,572,381 | |
Talecris Biotherapeutics 2nd Lien 9.18% 12/6/14 | 780,000 | 694,200 | |
USI Holdings 5.446% 5/4/14 | 992,500 | 921,164 | |
Venetian Macau 4.946% 5/26/13 | 1,500,000 | 1,447,500 | |
Total Senior Secured Loans (cost $6,894,194) | 6,541,206 | ||
Sovereign Debt – 0.07% | |||
Argentina – 0.07% | |||
Republic of Argentina 8.28% 12/31/33 | 581,128 | 475,072 | |
Total Sovereign Debt (cost $466,849) | 475,072 | ||
Leveraged Non-Recourse Security – 0.00% | |||
@w#JP Morgan Fixed Income Pass Through Trust 2007 | |||
144A 0.02% 1/15/87 | 1,300,000 | 0 | |
Total Leveraged Non-Recourse Security (cost $1,105,000) | 0 | ||
Number of shares | |||
Limited Partnership – 0.15% | |||
Brookfield Infrastructure Partners | 59,100 | 1,114,626 | |
Total Limited Partnership (cost $1,123,157) | 1,114,626 | ||
Preferred Stock – 0.47% | |||
Industrials – 0.03% | |||
@Õ=Port Townsend | 222 | 219,780 | |
219,780 | |||
Leisure, Lodging & Entertainment – 0.06% | |||
*Red Lion Hotels Capital Trust 9.50% | 17,479 | 422,118 | |
422,118 | |||
Real Estate – 0.38% | |||
W2007 Grace Acquisitions 8.75% | 21,700 | 217,000 | |
*SL Green Realty 7.625% | 108,900 | 2,487,276 | |
2,704,276 | |||
Total Preferred Stock (cost $3,961,583) | 3,346,174 |
22
Number of shares | Value | |||
Residual Interest Trust Certificate – 0.06% | ||||
@w#Auction Pass Through Trust 2007-6 144A | 1,000,000 | $ 456,400 | ||
Total Residual Interest Trust Certificate (cost $1,088,378) | 456,400 | |||
Warrants – 0.00% | ||||
@Õ =†Port Townsend | 222 | 5,328 | ||
†#Solutia 144A, exercise price $7.59, | ||||
expiration date 7/15/09 | 12 | 0 | ||
Total Warrants (cost $6,349) | 5,328 | |||
Principal amount | ||||
Repurchase Agreements** – 1.53% | ||||
BNP Paribas 2.18%, dated 5/30/08, to be repurchased | ||||
on 6/2/08, repurchase price $8,687,578 (collateralized | ||||
by U.S. Government obligations, ranging in par value | ||||
$94,000-$8,160,000, 4.00%-5.00%, 6/15/09-8/15/11; | ||||
with total market value $8,875,289) | $8,686,000 | 8,686,000 | ||
UBS Warburg 2.18%, dated 5/30/08, to be repurchased | ||||
on 6/2/08, repurchase price $2,313,420 (collateralized | ||||
by U.S. Government obligations, ranging in par | ||||
value $288,000-$1,322,000, 4.50%-4.875%, | ||||
12/31/08-6/30/12; with total market value $2,361,829) | 2,313,000 | 2,313,000 | ||
Total Repurchase Agreements (cost $10,999,000) | 10,999,000 | |||
Total Value of Securities Before Securities Lending | ||||
Collateral – 99.16% (cost $762,310,483) | 713,512,660 | |||
Number of shares | ||||
Securities Lending Collateral*** – 12.31% | ||||
Investment Companies | ||||
Mellon GSL DBT II Collateral Fund | 88,573,705 | 88,573,705 | ||
Total Securities Lending Collateral | ||||
(cost $88,573,705) | 88,573,705 | |||
Total Value of Securities – 111.47% | ||||
(cost $850,884,188) | 802,086,365 | © | ||
Obligation to Return Securities | ||||
Lending Collateral*** – (12.31%) | (88,573,705 | ) |
23
Statement of net assets
Delaware Dividend Income Fund
Receivables and Other Assets | |||
Net of Liabilities – 0.84% | $ 6,061,872 | ||
Net Assets Applicable to 65,676,737 | |||
Shares Outstanding – 100.00% | $719,574,532 | ||
Net Asset Value – Delaware Dividend Income Fund | |||
Class A ($345,440,779 / 31,524,746 Shares) | $10.96 | ||
Net Asset Value – Delaware Dividend Income Fund | |||
Class B ($62,937,844 / 5,746,422 Shares) | $10.95 | ||
Net Asset Value – Delaware Dividend Income Fund | |||
Class C ($303,415,558 / 27,695,496 Shares) | $10.96 | ||
Net Asset Value – Delaware Dividend Income Fund | |||
Class R ($3,956,595 / 361,277 Shares) | $10.95 | ||
Net Asset Value – Delaware Dividend Income Fund | |||
Institutional Class ($3,823,756 / 348,796 Shares) | $10.96 | ||
Components of Net Assets at May 31, 2008: | |||
Shares of beneficial interest (unlimited authorization – no par) | $787,170,699 | ||
Undistributed net investment income | 3,257,649 | ||
Accumulated net realized loss on investments | (22,058,292 | ) | |
Net unrealized depreciation of investments | (48,795,524 | ) | |
Total net assets | $719,574,532 | ||
† | Non-income producing security for the period ended May 31, 2008. |
‡ | Non-income producing security. Security is currently in default. |
Ÿ | Variable rate security. The rate shown is the rate as of May 31, 2008. |
f | Step coupon bond. Coupon increases periodically based on a predetermined schedule. Stated rate in effect at May 31, 2008. |
W | Step coupon bond. Indicates security that has a zero coupon that remains in effect until a predetermined date at which time the stated interest rate becomes effective. |
w | 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. |
Õ | Restricted Security. Investment in a security not registered under the Securities Act of 1933, as amended. This security has certain restrictions on resale which may limit its liquidity. At May 31, 2008, the aggregate amount of restricted securities was $2,522,790 which represented 0.35% of the Fund’s net assets. See Note 10 in “Notes to financial statements.” |
24
# | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At May 31, 2008, the aggregate amount of Rule 144A securities was $66,310,347, which represented 9.22% of the Fund’s net assets. See Note 10 in “Notes to financial statements.” |
« | Senior Secured Loans generally pay interest at rates which are periodically redetermined 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 United States banks, (ii) the lending rate offered by one or more European banks such as the London Inter-Bank Offered Rate (LIBOR), and (iii) the certificate of deposit rate. Senior Secured Loans may be subject to restrictions on resale. |
@ | Illiquid security. At May 31, 2008, the aggregate amount of illiquid securities was $2,979,190, which represented 0.41% of the Fund’s net assets. See Note 10 in “Notes to financial statements.” |
= | Security is being fair valued in accordance with the Fund’s fair valuation policy. At May 31, 2008, the aggregate amount of fair valued securities was $1,225,440, which represented 0.17% of the Fund’s net assets. See Note 1 in “Notes to financial statements.” |
* | Fully or partially on loan. |
** | See Note 1 in “Notes to financial statements.” |
*** | See Note 9 in “Notes to financial statements.” |
© | Includes $107,692,087 of securities loaned. |
Summary of Abbreviations:
ADR – American Depositary Receipts
PIK – Pay-in-kind
REIT – Real Estate Investment Trust
Net Asset Value and Offering Price Per Share – | |
Delaware Dividend Income Fund | |
Net asset value Class A (A) | $10.96 |
Sales charge (5.75% of offering price) (B) | 0.67 |
Offering price | $11.63 |
(A) | Net asset value per share, as illustrated, is the amount which would be paid upon redemption or repurchase of shares. | |
(B) | See the current prospectus for purchases of $50,000 or more. |
See accompanying notes
25
Statement of operations | |
Delaware Dividend Income Fund | Six Months Ended May 31, 2008 (Unaudited) |
Investment Income: | ||||
Dividends | $9,501,311 | |||
Interest | 9,624,469 | |||
Security lending income | 288,251 | $ 19,414,031 | ||
Expenses: | ||||
Management fees | 2,500,813 | |||
Distribution expenses – Class A | 572,859 | |||
Distribution expenses – Class B | 339,071 | |||
Distribution expenses – Class C | 1,691,176 | |||
Distribution expenses – Class R | 15,728 | |||
Dividend disbursing and transfer agent fees and expenses | 741,647 | |||
Accounting and administration expenses | 158,384 | |||
Reports and statements to shareholders | 111,436 | |||
Legal fees | 61,460 | |||
Registration fees | 47,623 | |||
Trustees’ fees | 23,687 | |||
Audit and tax | 23,134 | |||
Custodian fees | 13,926 | |||
Pricing fees | 8,885 | |||
Consulting fees | 7,629 | |||
Insurance fees | 6,834 | |||
Dues and services | 3,656 | |||
Taxes (other than taxes on income) | 3,527 | |||
Trustees’ expenses | 2,101 | 6,333,576 | ||
Less expenses absorbed or waived | (721,775 | ) | ||
Less waived distribution expenses – Class A | (94,944 | ) | ||
Less waived distribution expenses – Class R | (2,621 | ) | ||
Less expense paid indirectly | (4,960 | ) | ||
Total operating expenses | 5,509,276 | |||
Net Investment Income | 13,904,755 | |||
Net Realized and Unrealized Loss on Investments: | ||||
Net realized loss on investments | (10,057,941 | ) | ||
Net change in unrealized appreciation/depreciation of investments | (44,922,490 | ) | ||
Net Realized and Unrealized Loss on Investments | (54,980,431 | ) | ||
Net Decrease in Net Assets Resulting from Operations | $(41,075,676 | ) |
See accompanying notes
26
Statements of changes in net assets
Delaware Dividend Income Fund
Six Months | Year | ||||||
Ended | Ended | ||||||
5/31/08 | 11/30/07 | ||||||
(Unaudited) | |||||||
Increase (Decrease) in Net Assets from Operations: | |||||||
Net investment income | $ | 13,904,755 | $ | 31,348,884 | |||
Net realized gain (loss) on investments | (10,057,941 | ) | 30,788,501 | ||||
Net change in unrealized | |||||||
appreciation/depreciation of investments | (44,922,490 | ) | (83,487,127 | ) | |||
Net decrease in net assets resulting from operations | (41,075,676 | ) | (21,349,742 | ) | |||
Dividends and Distributions to Shareholders from: | |||||||
Net investment income: | |||||||
Class A | (9,632,665 | ) | (16,059,869 | ) | |||
Class B | (1,432,569 | ) | (2,196,802 | ) | |||
Class C | (7,263,011 | ) | (9,685,778 | ) | |||
Class R | (132,373 | ) | (195,835 | ) | |||
Institutional Class | (113,066 | ) | (167,153 | ) | |||
Net realized gain on investments: | |||||||
Class A | (12,269,365 | ) | (1,953,956 | ) | |||
Class B | (2,153,362 | ) | (378,723 | ) | |||
Class C | (11,034,624 | ) | (1,353,820 | ) | |||
Class R | (173,217 | ) | (26,721 | ) | |||
Institutional Class | (148,811 | ) | (13,824 | ) | |||
(44,353,063 | ) | (32,032,481 | ) | ||||
Capital Share Transactions: | |||||||
Proceeds from shares sold: | |||||||
Class A | 24,022,042 | 251,940,325 | |||||
Class B | 731,139 | 19,193,290 | |||||
Class C | 15,593,732 | 217,432,584 | |||||
Class R | 638,221 | 7,282,256 | |||||
Institutional Class | 690,054 | 6,330,417 | |||||
Net asset value of shares issued upon reinvestment | |||||||
of dividends and distributions: | |||||||
Class A | 18,117,690 | 13,895,633 | |||||
Class B | 3,060,749 | 2,123,967 | |||||
Class C | 15,986,149 | 9,394,214 | |||||
Class R | 305,589 | 222,556 | |||||
Institutional Class | 231,867 | 148,975 | |||||
79,377,232 | 527,964,217 |
28
Six Months | Year | ||||||
Ended | Ended | ||||||
5/31/08 | 11/30/07 | ||||||
(Unaudited) | |||||||
Capital Share Transactions (continued): | |||||||
Cost of shares repurchased: | |||||||
Class A | $ | (106,730,523 | ) | $ | (188,208,309 | ) | |
Class B | (11,957,418 | ) | (16,879,537 | ) | |||
Class C | (94,316,569 | ) | (69,641,978 | ) | |||
Class R | (2,607,290 | ) | (5,325,318 | ) | |||
Institutional Class | (2,003,594 | ) | (3,371,741 | ) | |||
(217,615,394 | ) | (283,426,883 | ) | ||||
Increase (decrease) in net assets derived from capital | |||||||
share transactions | (138,238,162 | ) | 244,537,334 | ||||
Net Increase (Decrease) in Net Assets | (223,666,901 | ) | 191,155,111 | ||||
Net Assets: | |||||||
Beginning of period | 943,241,433 | 752,086,322 | |||||
End of period (including undistributed | |||||||
net investment income of $3,257,649 | |||||||
and $7,228,971, respectively) | $ | 719,574,532 | $ | 943,241,433 |
See accompanying notes
29
Financial highlights
Delaware Dividend Income 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) on investments |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain on investments |
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 expense limitation and expense paid indirectly |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets |
prior to expense limitation and expense paid indirectly |
Portfolio turnover |
1 Ratios and portfolio turnover have been annualized and total return has 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 reflects waivers by the manager and distributor. Performance would have been lower had the waivers not been in effect. |
See accompanying notes
30
Six Months Ended | Year Ended | |||||||||||||||||
5/31/081 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | 11/30/03 | |||||||||||||
(Unaudited) | ||||||||||||||||||
$12.030 | $12.590 | $11.140 | $11.050 | $10.210 | $ 9.030 | |||||||||||||
0.213 | 0.456 | 0.422 | 0.450 | 0.345 | 0.450 | |||||||||||||
(0.675 | ) | (0.529 | ) | 1.551 | 0.081 | 0.891 | 1.213 | |||||||||||
(0.462 | ) | (0.073 | ) | 1.973 | 0.531 | 1.236 | 1.663 | |||||||||||
(0.272 | ) | (0.426 | ) | (0.457 | ) | (0.360 | ) | (0.362 | ) | (0.483 | ) | |||||||
(0.336 | ) | (0.061 | ) | (0.066 | ) | (0.081 | ) | (0.034 | ) | — | ||||||||
(0.608 | ) | (0.487 | ) | (0.523 | ) | (0.441 | ) | (0.396 | ) | (0.483 | ) | |||||||
$10.960 | $12.030 | $12.590 | $11.140 | $11.050 | $10.210 | |||||||||||||
(3.92% | ) | (0.72% | ) | 18.34% | 4.89% | 12.38% | 19.45% | |||||||||||
$345,441 | $450,620 | $398,124 | $285,159 | $105,253 | $5,821 | |||||||||||||
1.00% | 1.00% | 1.01% | 1.00% | 1.00% | 0.79% | |||||||||||||
1.24% | 1.17% | 1.23% | 1.27% | 1.32% | 2.05% | |||||||||||||
3.91% | 3.60% | 3.64% | 4.05% | 3.26% | 4.69% | |||||||||||||
3.67% | 3.43% | 3.42% | 3.78% | 2.94% | 3.43% | |||||||||||||
54% | 52% | 51% | 85% | 95% | 212% |
31
Financial highlights
Delaware Dividend Income Fund Class B
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 income3 |
Net realized and unrealized gain (loss) on investments |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain on investments |
Total dividends and distributions |
Net asset value, end of period |
Total return4 |
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 expense limitation and expense paid indirectly |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets |
prior to expense limitation and expense paid indirectly |
Portfolio turnover |
1 Ratios and portfolio turnover have been annualized and total return has 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. |
See accompanying notes
32
10/1/032 | |||||||||||||||||||
Six Months Ended | Year Ended | to | |||||||||||||||||
5/31/081 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | 11/30/03 | ||||||||||||||
(Unaudited) | |||||||||||||||||||
$12.020 | $12.580 | $11.130 | $11.040 | $10.200 | $ 9.950 | ||||||||||||||
0.172 | 0.360 | 0.335 | 0.367 | 0.267 | 0.051 | ||||||||||||||
(0.677 | ) | (0.528 | ) | 1.552 | 0.079 | 0.889 | 0.199 | ||||||||||||
(0.505 | ) | (0.168 | ) | 1.887 | 0.446 | 1.156 | 0.250 | ||||||||||||
(0.229 | ) | (0.331 | ) | (0.371 | ) | (0.275 | ) | (0.282 | ) | — | |||||||||
(0.336 | ) | (0.061 | ) | (0.066 | ) | (0.081 | ) | (0.034 | ) | — | |||||||||
(0.565 | ) | (0.392 | ) | (0.437 | ) | (0.356 | ) | (0.316 | ) | — | |||||||||
$10.950 | $12.020 | $12.580 | $11.130 | $11.040 | $10.200 | ||||||||||||||
(4.38% | ) | (1.38% | ) | 17.46% | 4.09% | 11.54% | 2.51% | ||||||||||||
$62,938 | $78,235 | $77,757 | $57,904 | $32,165 | $2,125 | ||||||||||||||
1.75% | 1.75% | 1.76% | 1.75% | 1.75% | 1.75% | ||||||||||||||
1.94% | 1.87% | 1.93% | 1.97% | 2.02% | 4.10% | ||||||||||||||
3.16% | 2.85% | 2.89% | 3.30% | 2.51% | 3.65% | ||||||||||||||
2.97% | 2.73% | 2.72% | 3.08% | 2.25% | 1.30% | ||||||||||||||
54% | 52% | 51% | 85% | 95% | 212% | 5 |
4 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
5 Portfolio turnover is representative of the Fund for the entire year. |
33
Financial highlights
Delaware Dividend Income 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 income3 |
Net realized and unrealized gain (loss) on investments |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain on investments |
Total dividends and distributions |
Net asset value, end of period |
Total return4 |
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 expense limitation and expense paid indirectly |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets |
prior to expense limitation and expense paid indirectly |
Portfolio turnover |
1 Ratios and portfolio turnover have been annualized and total return has 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. |
See accompanying notes
34
10/1/032 | |||||||||||||||||||
Six Months Ended | Year Ended | to | |||||||||||||||||
5/31/081 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | 11/30/03 | ||||||||||||||
(Unaudited) | |||||||||||||||||||
$12.030 | $12.580 | $11.130 | $11.040 | $10.200 | $ 9.950 | ||||||||||||||
0.172 | 0.360 | 0.335 | 0.367 | 0.267 | 0.051 | ||||||||||||||
(0.677 | ) | (0.518 | ) | 1.552 | 0.079 | 0.889 | 0.199 | ||||||||||||
(0.505 | ) | (0.158 | ) | 1.887 | 0.446 | 1.156 | 0.250 | ||||||||||||
(0.229 | ) | (0.331 | ) | (0.371 | ) | (0.275 | ) | (0.282 | ) | — | |||||||||
(0.336 | ) | (0.061 | ) | (0.066 | ) | (0.081 | ) | (0.034 | ) | — | |||||||||
(0.565 | ) | (0.392 | ) | (0.437 | ) | (0.356 | ) | (0.316 | ) | — | |||||||||
$10.960 | $12.030 | $12.580 | $11.130 | $11.040 | $10.200 | ||||||||||||||
(4.30% | ) | (1.38% | ) | 17.46% | 4.09% | 11.53% | 2.51% | ||||||||||||
$303,415 | $402,782 | $269,274 | $165,663 | $82,083 | $4,341 | ||||||||||||||
1.75% | 1.75% | 1.76% | 1.75% | 1.75% | 1.75% | ||||||||||||||
1.94% | 1.87% | 1.93% | 1.97% | 2.02% | 4.10% | ||||||||||||||
3.16% | 2.85% | 2.89% | 3.30% | 2.52% | 3.65% | ||||||||||||||
2.97% | 2.73% | 2.72% | 3.08% | 2.25% | 1.30% | ||||||||||||||
54% | 52% | 51% | 85% | 95% | 212% | 5 |
4 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
5 Portfolio turnover is representative of the Fund for the entire year. |
35
Financial highlights
Delaware Dividend Income 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 income3 |
Net realized and unrealized gain (loss) on investments |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain on investments |
Total dividends and distributions |
Net asset value, end of period |
Total return4 |
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 expense limitation and expense paid indirectly |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets |
prior to expense limitation and expense paid indirectly |
Portfolio turnover |
1 Ratios and portfolio turnover have been annualized and total return has 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. |
See accompanying notes
36
10/1/032 | |||||||||||||||||||
Six Months Ended | Year Ended | to | |||||||||||||||||
5/31/081 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | 11/30/03 | ||||||||||||||
(Unaudited) | |||||||||||||||||||
$12.020 | $12.580 | $11.130 | $11.040 | $10.220 | $ 9.950 | ||||||||||||||
0.200 | 0.424 | 0.394 | 0.416 | 0.308 | 0.056 | ||||||||||||||
(0.675 | ) | (0.528 | ) | 1.551 | 0.078 | 0.879 | 0.214 | ||||||||||||
(0.475 | ) | (0.104 | ) | 1.945 | 0.494 | 1.187 | 0.270 | ||||||||||||
(0.259 | ) | (0.395 | ) | (0.429 | ) | (0.323 | ) | (0.333 | ) | — | |||||||||
(0.336 | ) | (0.061 | ) | (0.066 | ) | (0.081 | ) | (0.034 | ) | — | |||||||||
(0.595 | ) | (0.456 | ) | (0.495 | ) | (0.404 | ) | (0.367 | ) | — | |||||||||
$10.950 | $12.020 | $12.580 | $11.130 | $11.040 | $10.220 | ||||||||||||||
(4.12% | ) | (0.88% | ) | 18.06% | 4.55% | 11.86% | 2.71% | ||||||||||||
$3,957 | $6,220 | $4,275 | $1,429 | $373 | $3 | ||||||||||||||
1.25% | 1.25% | 1.26% | 1.30% | 1.35% | 1.35% | ||||||||||||||
1.54% | 1.47% | 1.53% | 1.57% | 1.62% | 3.70% | ||||||||||||||
3.66% | 3.35% | 3.39% | 3.75% | 2.89% | 4.05% | ||||||||||||||
3.37% | 3.13% | 3.12% | 3.48% | 2.62% | 1.70% | ||||||||||||||
54% | 52% | 51% | 85% | 95% | 212% | 5 |
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 reflects waivers by the manager and distributor. Performance would have been lower had the waivers not been in effect. |
5 Portfolio turnover is representative of the Fund for the entire year. |
37
Financial highlights
Delaware Dividend Income 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) on investments |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain on investments |
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 expense limitation and expense paid indirectly |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets |
prior to expense limitation and expense paid indirectly |
Portfolio turnover |
1 Ratios and portfolio turnover have been annualized and total return has 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 reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes
38
Six Months Ended | Year Ended | ||||||||||||||||||
5/31/081 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | 11/30/03 | ||||||||||||||
(Unaudited) | |||||||||||||||||||
$12.040 | $12.600 | $11.140 | $11.050 | $10.220 | $ 9.030 | ||||||||||||||
0.227 | 0.488 | 0.452 | 0.477 | 0.371 | 0.453 | ||||||||||||||
(0.684 | ) | (0.528 | ) | 1.559 | 0.082 | 0.882 | 1.220 | ||||||||||||
(0.457 | ) | (0.040 | ) | 2.011 | 0.559 | 1.253 | 1.673 | ||||||||||||
(0.287 | ) | (0.459 | ) | (0.485 | ) | (0.388 | ) | (0.389 | ) | (0.483 | ) | ||||||||
(0.336 | ) | (0.061 | ) | (0.066 | ) | (0.081 | ) | (0.034 | ) | — | |||||||||
(0.623 | ) | (0.520 | ) | (0.551 | ) | (0.469 | ) | (0.423 | ) | (0.483 | ) | ||||||||
$10.960 | $12.040 | $12.600 | $11.140 | $11.050 | $10.220 | ||||||||||||||
(3.88% | ) | (0.46% | ) | 18.72% | 5.16% | 12.55% | 19.56% | ||||||||||||
$3,824 | $5,384 | $2,656 | $941 | $102 | $3,879 | ||||||||||||||
0.75% | 0.75% | 0.76% | 0.75% | 0.75% | 0.75% | ||||||||||||||
0.94% | 0.87% | 0.93% | 0.97% | 1.02% | 1.75% | ||||||||||||||
4.16% | 3.85% | 3.89% | 4.30% | 3.49% | 4.73% | ||||||||||||||
3.97% | 3.73% | 3.72% | 4.08% | 3.22% | 3.73% | ||||||||||||||
54% | 52% | 51% | 85% | 95% | 212% |
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Notes to financial statements | ||
Delaware Dividend Income Fund | May 31, 2008 (Unaudited) |
Delaware Group Equity Funds V (Trust) is organized as a Delaware statutory trust and offers three series: Delaware Dividend Income Fund, Delaware Small Cap Core Fund and Delaware Small Cap Value Fund. These financial statements and the related notes pertain to Delaware Dividend Income Fund (Fund). The Trust is an open-end investment company. The Fund is considered diversified under the Investment Company Act of 1940, as amended, and offers Class A, Class B, Class C, Class R and Institutional Class shares. Class A shares are sold with a maximum front-end sales charge of up to 5.75%. Class A share purchases of $1,000,000 or more will incur a contingent deferred sales charge (CDSC) of 1% 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 B shares may only be purchased through dividend reinvestment and certain permitted exchanges. Prior to June 1, 2007, Class B shares were sold with a CDSC that declined from 4% to zero depending upon the period of time the shares were held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase. Class C shares are sold with a CDSC of 1%, 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 to provide high current income and an investment that has the potential for capital appreciation.
1. Significant Accounting Policies
The following accounting policies are in accordance with U.S. generally accepted accounting principles and are consistently followed by the Fund.
Security Valuation — Equity securities, except those traded on the Nasdaq Stock Market, Inc. (Nasdaq), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange (NYSE) on the valuation date. Securities traded on the Nasdaq are valued in accordance with the Nasdaq Official Closing Price, which may not be the last sales price. If on a particular day an equity security does not trade, then the mean between the bid and asked prices will be used. Long-term debt securities, credit default swap (CDS) contracts and interest rate swap contracts are valued by an independent pricing service or broker and such prices are believed to reflect the fair value of such securities. Short-term debt securities having less than 60 days to maturity are valued at amortized cost, which approximates market value. Securities lending collateral, which is invested in a collective investment vehicle (Collective Trust), is valued at unit value per share. Generally, index swap contracts and 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 Fund’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 with respect to foreign securities, aftermarket trading or significant events after local market trading (e.g., government actions or pronouncements, trading volume or volatility on markets, exchanges among dealers, or news events).
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Federal Income Taxes — 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. Accordingly, no provision for federal income taxes has been made in the financial statements.
Effective May 30, 2008, the Fund adopted FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements. FIN 48 requires the evaluation of 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. The adoption of FIN 48 did not result in the recording of any tax benefit or expense in the current period.
Class Accounting — Investment income, common expenses and 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 invest in a pooled cash account along with members of the Delaware Investments® Family of Funds pursuant to an exemptive order issued by the Securities and Exchange Commission. The aggregate daily balance of the pooled cash account is invested in repurchase agreements secured by obligations of the U.S. government. The respective collateral is held by the Fund’s custodian bank until the maturity of the respective repurchase agreements. Each repurchase agreement is at least 102% collateralized. However, in the event of default or bankruptcy by the counterparty to the agreement, realization of the collateral may be subject to legal proceedings.
Use of Estimates — The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of 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.
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 amongst 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 non-convertible bonds are amortized to interest income over the lives of the respective securities. Distributions received from investments in Real Estate Investment Trusts (REITs) are recorded as dividend income on
41
Notes to financial statements
Delaware Dividend Income Fund
1. Significant Accounting Policies (continued)
ex-dividend date, subject to reclassification upon notice of the character of such distribution by the issuer. The financial statements reflect an estimate of the reclassification of the distribution character. The Fund declares and pays dividends from net investment income quarterly and distributions from net realized gains on investments, if any, annually.
Subject to seeking best execution, the Fund may direct certain security trades to brokers who have agreed to rebate a portion of the related brokerage commission to the Fund in cash. Such commission rebates are included in realized gain on investments in the accompanying financial statements and totaled $8,142 for the six months ended May 31, 2008. In general, best execution refers to many factors, including the price paid or received for a security, the commission charged, the promptness and reliability of execution, the confidentiality and placement accorded the order, and other factors affecting the overall benefit obtained by the Fund on the transaction.
The Fund receives earnings credits from its custodian when positive cash balances are maintained, which are used to offset custody fees. The expense paid under this arrangement is included in custodian fees on the statement of operations with the corresponding expense offset shown as “expense paid indirectly.”
2. Investment Management, Administration Agreements and Other Transactions with AffiliatesIn 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 voluntarily agreed to waive that portion, if any, of its management fees and reimburse the Fund to the extent necessary to ensure that total annual operating expenses, (excluding any 12b-1 plan expenses, taxes, interest, inverse floater program expenses, brokerage fees, certain insurance costs and non-routine expenses or costs including but not limited to those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations (collectively, “non-routine expenses”)), do not exceed 0.75% of average daily until such time as the waiver is discontinued. This waiver and expense limitation may be discontinued at any time because it is voluntary. For purposes of these waivers and reimbursements, non-routine expenses may also include such additional costs and expenses, as may be agreed upon from time to time by the Fund’s Board and DMC. These expense waivers and reimbursements apply only to expenses paid directly by the Fund.
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Fund. For these services, the Fund pays DSC fees 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
42
fees payable to DSC under the service agreement described above are allocated among all Funds in the Delaware Investments® Family of Funds on a relative net asset value basis. For the six months ended May 31, 2008, the Fund was charged $ 19,798 for these services.
DSC also provides dividend disbursing and transfer agency services. The Fund pays DSC a monthly fee based on the number of shareholder accounts for dividend disbursing and transfer agent services.
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 not to exceed 0.30% of the average daily net assets of the Class A shares, 1.00% of the average daily net assets of the Class B and C shares and 0.60% of the average daily net assets of Class R shares. Institutional Class shares pay no distribution and service expenses. DDLP has contracted to waive distribution and service fees through March 31, 2009 in order to prevent distribution and service fees of Class A and Class R shares from exceeding 0.25% and 0.50%, respectively, of average daily net assets.
At May 31, 2008, the Fund had liabilities payable to affiliates as follows:
Investment management fee payable to DMC | $ | 286,184 |
Dividend disbursing, transfer agent and fund | ||
accounting oversight fees and other expenses | ||
payable to DSC | 121,600 | |
Distribution fees payable to DDLP | 390,700 | |
Other expenses payable to DMC and affiliates* | 43,473 |
*DMC, as part of its administrative services, pays operating expenses on behalf of the Fund and is reimbursed on a periodic basis. Such expenses include items such as printing of shareholder reports, fees for audit, legal and tax services, registration fees and trustees’ fees.
As provided in the investment management agreement, the Fund bears the cost of certain legal and tax services, including internal legal and tax services provided to the Fund by DMC and/or its affiliates’ employees. For the six months ended May 31, 2008, the Fund was charged $27,796 for internal legal and tax services provided by DMC and/or its affiliates’ employees.
For the six months ended May 31, 2008, DDLP earned $58,124 for commissions on sales of the Fund’s Class A shares. For the six months ended May 31, 2008, DDLP received gross CDSC commissions of $14,476, $82,975 and $41,802 on redemption of the Fund’s Class A, Class B, and Class C shares, respectively, and these commissions were entirely used to offset up-front 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, DSC and DDLP are officers and/or Trustees of the Trust. These officers and trustees are paid no compensation by the Fund.
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Notes to financial statements
Delaware Dividend Income Fund
3. Investments
For the six months ended May 31, 2008, the Fund made purchases of $209,655,166 and sales of $352,343,854 of investment securities other than short-term investments.
At May 31, 2008, the cost of investments for federal income tax purposes has been estimated since final tax characteristics cannot be determined until fiscal year end. At May 31, 2008, the cost of investments was $852,952,462. At May 31, 2008, the net unrealized depreciation was $50,866,097, of which $35,089,822 related to unrealized appreciation of investments and $85,955,919 related to unrealized depreciation of investments.
Effective December 1, 2007, the Fund adopted Financial Accounting Standards No. 157, Fair Value Measurements (FAS 157). FAS 157 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. FAS 157 also establishes a framework for measuring fair value, and a three level hierarchy for fair value measurements 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 developed 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-tier hierarchy of inputs is summarized below.
Level 1 – inputs are quoted prices in active markets
Level 2 – inputs that are observable, directly or indirectly
Level 3 – inputs are unobservable and reflect assumptions on the part of the reporting entity
The following table summarizes the valuation of the Fund’s investments by the above FAS 157 fair value hierarchy levels as of May 31, 2008:
Level | Securities | Derivatives | ||||
Level 1 | $497,313,559 | $— | ||||
Level 2 | 298,060,271 | — | ||||
Level 3 | 6,712,535 | — | ||||
Total | $802,086,365 | $— |
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The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:
Securities | Derivatives | ||||||
Balance as of 11/30/07 | $ | 698,921 | $— | ||||
Net realized gain (loss) | (820,938 | ) | — | ||||
Net change in unrealized appreciation/depreciation | (728,543 | ) | — | ||||
Net purchases, sales and settlements | 6,458,095 | — | |||||
Net transfers in and/or out of Level 3 | 1,105,000 | — | |||||
Balance as of 5/31/08 | $ | 6,712,535 | $— | ||||
Net change in unrealized appreciation/depreciation from | |||||||
investments still held as of 5/31/08 | $ | (3,873 | ) | $— |
4. Dividend and Distribution Information
Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from U.S. generally accepted accounting principles. Additionally, distributions from net short-term gains on sales of investment securities are treated as ordinary income for federal income tax purposes. The tax character of dividends and distributions paid during the six months ended May 31, 2008 and the year ended November 30, 2007 was as follows:
Six Months Ended | Year Ended | |||||
5/31/08* | 11/30/07 | |||||
Ordinary income | $18,532,092 | $28,305,437 | ||||
Long-term capital gains | 25,820,971 | 3,727,044 | ||||
Total | $44,353,063 | $32,032,481 |
*Tax information for the period ended May 31, 2008 is an estimate and the tax character of dividends and distributions may be redesignated at fiscal year end.
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Notes to financial statements
Delaware Dividend Income Fund
5. Components of Net Assets on a Tax Basis
The components of net assets are estimated since final tax characteristics cannot be determined until fiscal year end. As of May 31, 2008, the estimated components of net assets on a tax basis were as follows:
Shares of beneficial interest | $ | 787,170,699 | ||
Undistributed ordinary income | 5,441,044 | |||
Realized losses 12/1/07 – 5/31/08 | (8,750,764 | ) | ||
Capital loss carryforwards as of 11/30/07* | (11,239,254 | ) | ||
Other temporary differences | (2,183,395 | ) | ||
Unrealized depreciation of investments | (50,863,798 | ) | ||
Net assets | $ | 719,574,532 |
*The amount of this loss which can be utilized in subsequent years is subject to an annual limitation in accordance with the Internal Revenue Code due to the Fund merger with Lincoln Convertible Securities Fund in 2005.
The differences between book basis and tax basis components of net assets are primarily attributable to tax deferral of losses on wash sales, tax treatment of market discount and premium on debt instruments and contingent payment debt instruments.
The undistributed earnings for the Delaware Dividend Income Fund are estimated pending final notification of the tax character of distributions received from investments in REITs.
For financial reporting purposes, capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Reclassifications are primarily due to dividend and distributions, market discount and premium on certain debt instruments. Results of operations and net assets were not affected by these reclassifications. For the six months ended May 31, 2008, the Fund recorded an estimate of these differences since final tax characteristics cannot be determined until fiscal year end.
Undistributed net investment income | $ | 697,607 | |
Accumulated net realized loss | (697,607 | ) |
For federal income tax purposes, capital loss carryforwards may be carried forward and applied against future capital gains. Capital loss carryforwards remaining at November 30, 2007 will expire as follows: $3,174,810 expires in 2009 and $8,064,444 expires in 2010. The use of these losses are subject to an annual limitation in accordance with the Internal Revenue Code.
For the six months ended May 31, 2008, the Fund had capital losses of $8,750,764 which may increase the capital loss carryforwards.
46
6. Capital Shares
Transactions in capital shares were as follows:
Six Months | Year | ||||
Ended | Ended | ||||
5/31/08 | 11/30/07 | ||||
Shares sold: | |||||
Class A | 2,192,860 | 19,661,015 | |||
Class B | 64,333 | 1,495,433 | |||
Class C | 1,418,737 | 16,931,359 | |||
Class R | 58,187 | 578,113 | |||
Institutional Class | 64,179 | 491,799 | |||
Shares issued upon reinvestment of dividends and distributions: | |||||
Class A | 1,610,592 | 1,097,573 | |||
Class B | 271,393 | 167,811 | |||
Class C | 1,416,859 | 741,787 | |||
Class R | 27,176 | 17,602 | |||
Institutional Class | 20,562 | 11,771 | |||
7,144,878 | 41,194,263 | ||||
Shares repurchased: | |||||
Class A | (9,738,927 | ) | (14,928,573 | ) | |
Class B | (1,096,659 | ) | (1,336,512 | ) | |
Class C | (8,634,347 | ) | (5,577,210 | ) | |
Class R | (241,429 | ) | (418,141 | ) | |
Institutional Class | (183,299 | ) | (267,061 | ) | |
(19,894,661 | ) | (22,527,497 | ) | ||
Net increase (decrease) | (12,749,783 | ) | 18,666,766 |
For the six months ended May 31, 2008 and the year ended November 30, 2007, 104,873 Class B shares were converted to 104,830 Class A shares valued at $1,166,686 and 211,527 Class B shares were converted to 211,278 Class A shares valued at $2,703,112, respectively. The respective amounts are included in Class B redemptions and Class A subscriptions in the table above and the statements of changes in net assets.
7. Line of Credit
The Fund, along with certain other funds in the Delaware Investments® Family of Funds (Participants), participates in a $225,000,000 revolving line of credit facility to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. The Participants are charged an annual commitment fee, which is allocated across the Participants on the basis of each Participant’s allocation of the entire facility. The Participants may borrow up to a maximum of one third of their net assets under the agreement. The Fund had no amounts outstanding as of May 31, 2008, or at any time during the period then ended.
47
Notes to financial statements
Delaware Dividend Income Fund
8. Swap Contracts
The Fund may enter into interest rate swap contracts, index swap contracts and CDS contracts in accordance with its investment objectives. The Fund may use interest rate swaps to adjust the Fund’s sensitivity to interest rates or to hedge against changes in interest rates. Index swaps may be used to gain exposure to markets that the Fund invests in, such as the corporate bond market. The Fund may also use index swaps as a substitute for futures or options contracts if such contracts are not directly available to the Fund on favorable terms. The Fund may enter into CDS contracts in order to hedge against a credit event, to enhance total return or to gain exposure to certain securities or markets.
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.
Index swaps involve commitments to pay interest in exchange for a market-linked return based on a notional amount. To the extent the total return of the security, instrument or basket of instruments underlying the transaction exceeds the offsetting interest obligation, the Fund will receive a payment from the counterparty. To the extent the total return of the security, instrument or basket of instruments underlying the transaction falls short of the offsetting interest obligation, the Fund will make a payment to the counterparty. The change in value of swap contracts outstanding, if any, is recorded as unrealized appreciation or depreciation daily. A realized gain or loss is recorded on maturity or termination of the swap contract.
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 Fund 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 referenced security (or basket of securities) to the counterparty.
During the six months ended May 31, 2008, the Fund did not enter into CDS contracts as a purchaser of protection or seller of protection.
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CDS’s may involve greater risks than if the Fund had invested in the referenced obligation directly. CDS’s are subject to general market risk, liquidity risk, counterparty risk and credit risk. If the Fund enters into a CDS contract as a purchaser of protection and no credit event occurs, its exposure is limited to the periodic payments previously made to the counterparty.
Because there is no organized market for swap contracts, the value of open swaps may differ from that which would be realized in the event the Fund terminated its position in the agreement. 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 movements 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 statement of net assets.
9. 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). With respect to each loan, if the aggregate market value of the collateral held on any business day is less than the aggregate market value of the securities which are the subject of such loan, the borrower will be notified to provide additional collateral not less then the applicable collateral requirement. Cash collateral received is invested in a Collective Trust established by BNY Mellon for the purpose of investment on behalf of clients participating in its securities lending programs. The Collective Trust invests in fixed income securities, with a weighted average maturity not to exceed 90 days, rated in one of the top three tiers by Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc. or repurchase agreements collateralized by such securities. The Fund can also accept U.S. government securities and letters of credit (non-cash collateral) in connection with securities loans. In the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to 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 change 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.
49
Notes to financial statements
Delaware Dividend Income Fund
9. Securities Lending (continued)
At May 31, 2008, the value of the securities on loan was $107,692,087, for which the Fund received collateral, comprised of non-cash collateral valued at $22,618,303, and cash collateral of $88,573,705. Investments purchased with cash collateral are presented on the statement of net assets under the caption “Securities Lending Collateral.”
10. Credit and Market Risk
The Fund invests a portion of its assets in high yield fixed income securities, which carry ratings of BBB or lower by Standard & Poor’s Ratings Group and/or Baa or lower by Moody’s Investor Services, Inc. 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 REITs and is subject to some of the risks associated with that industry. If the Fund holds real estate directly as a result of defaults or receives rental income directly from real estate holdings, its tax status as a regulated investment company may be jeopardized. There were no direct real estate holdings during the six months ended May 31, 2008. The Fund’s REIT holdings are also affected by interest rate changes, particularly if the REITs it holds use floating rate debt to finance their ongoing operations.
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 of 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 assets. 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 and illiquid securities have been identified on the statement of net assets.
11. 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.
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Other Fund information (unaudited)
Delaware Dividend Income Fund
Board Consideration of Delaware Dividend Income Fund Investment Advisory Agreement
At a meeting held on May 20-22, 2008 (the “Annual Meeting”), the Board of Trustees, including a majority of disinterested or independent Trustees, approved the renewal of the Investment Advisory Agreement for the Delaware Dividend Income 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 contract. Information furnished specifically in connection with the renewal of the Investment Advisory 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 financial condition and profitability of Delaware Investments. In addition, in connection with the Annual Meeting, the Board separately received and reviewed in February 2008 independent historical and comparative reports prepared by Lipper Inc. (“Lipper”), an independent statistical compilation organization. The Lipper reports compared the Fund’s investment performance and expenses with those of other comparable mutual funds. The independent Trustees reviewed Lipper reports with Counsel to the Independent Trustees at the February 2008 Board meeting and discussed reports further with such counsel earlier in the Annual Meeting. The Board requested and received certain information regarding Management’s policy with respect to advisory fee levels and its philosophy with respect to breakpoints; the structure of portfolio manager compensation; the investment manager’s profitability; and any constraints or limitations on the availability of securities in certain investment styles which might inhibit DMC’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 counsel. Although the Trustees gave attention to all information furnished, the following discussion identifies under separate headings the primary factors taken into account by the Board in its contract renewal considerations.
Nature, Extent and Quality of Service. The Board considered the services provided by Delaware Investments to the Fund and its shareholders. In reviewing the nature, extent and quality of services, the Board emphasized reports furnished to it throughout the year at regular Board meetings covering matters such as the relative performance of the Fund, compliance of portfolio managers with the investment policies, strategies and restrictions for the Fund, the compliance of management personnel with the Code of Ethics adopted throughout the Delaware Investments Family of Funds complex and the 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. Favorable consideration was given to DMC’s efforts to maintain expenditures and, in some instances, increase financial and human resources committed to fund matters. The Board also
51
Other Fund information (unaudited)
Delaware Dividend Income Fund
Board Consideration of Delaware Dividend Income Fund Investment Advisory Agreement (continued)
considered the transfer agent and shareholder services provided to Fund shareholders by Delaware Investments’ affiliate, Delaware Service Company, Inc. (“DSC”), noting DSC’s commitment to maintain a high level of service as well as Delaware Investments’ expenditures to improve the delivery of shareholder services. During 2007 Management commenced the outsourcing of certain investment accounting functions that are expected to improve further the quality and the cost of delivering investment accounting services to the Fund. The Board once again noted the benefits provided to Fund shareholders by being part of the Delaware Investments Family of Funds, including each shareholder’s ability to exchange an investment in one Delaware fund for the same class of shares in another Delaware fund without a sales charge, to reinvest Fund dividends into additional shares of the Fund or into additional shares of other Delaware funds and the privilege to combine holdings in other Delaware funds to obtain a reduced sales charge. The Board was satisfied with the nature, extent and quality of the overall services provided by Delaware Investments.
Investment Performance. The Board considered the overall investment performance of DMC and the Fund. The Board placed significant emphasis on the investment performance of the Fund in view of its importance to shareholders. Although the Board gave appropriate consideration to performance reports and discussions with portfolio managers at Board meetings throughout the year, the Board gave particular weight to the Lipper reports furnished for the Annual Meeting. The Lipper 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 Lipper (the “Performance Universe”). A fund with the best performance ranked first, and a fund with the poorest, 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 one-, three-, five- and ten-year periods ended December 31, 2007. 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 Trustees complimented Management on navigating the Delaware Investments Family of Funds fixed income funds through the turbulent financial markets since 2007 without incurring a major difficulty. The following paragraph summarizes the performance results for the Fund and the Board’s view of such performance.
The Performance Universe for the Fund consisted of the Fund and all retail and institutional mixed asset target allocation funds as selected by Lipper. The Lipper report comparison showed that the Fund’s total return for the one- and three-year periods was in the fourth quartile of its Performance Universe. The report further showed that the Fund’s total return for the five- and ten-year periods was in the second quartile and first quartile, respectively. Early 2008 performance improved relative to the Fund’s Lipper peers. The Board considered the perceived advantages of personnel changes that took place in 2006 and 2007. The Board commended Management’s efforts
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to enhance Fund performance and expressed confidence in the new additions to the investment team, its philosophy and processes. The Board was satisfied that Management was taking effective action to improve Fund performance and 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 October 31, 2007 and most recent fiscal year end for comparative funds as of August 31, 2007 or earlier. For any fund with a fiscal year end after August 31, 2007, such fund’s expense data were measured as of its fiscal year end for 2006. The Board focused on the comparative analysis of the effective management fees and total expense ratios of the Fund versus the effective management fees and expense ratios of a group of similar funds as selected by Lipper (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) of other funds 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 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 also considered fees paid to Delaware Investments for non-management services. The Board noted its objective to limit the Fund’s total expense ratio to be competitive with that of the Expense Group. The following paragraph summarizes the expense results for the Fund and the Board’s view of such expenses.
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 was satisfied with the management fee and total expenses of the Fund in comparison to its Expense Group as shown in the Lipper report.
Management Profitability. The Board considered the level of profits realized by Delaware Investments 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 Delaware Investments’ 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 Delaware Investments, to a certain extent, reflected operational cost savings and efficiencies initiated by Delaware Investments. The Board considered Delaware Investments’ efforts to improve services provided to fund shareholders and to meet additional regulatory and compliance requirements resulting from recent industry-wide SEC initiatives. The Board also considered the extent to which Delaware Investments 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 Delaware Investments.
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Other Fund information (unaudited)
Delaware Dividend Income Fund
Board Consideration of Delaware Dividend Income Fund Investment Advisory Agreement (continued)
Economies of Scale. The Trustees considered whether economies of scale are realized by Delaware Investments 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. 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 on all assets when the asset levels specified are exceeded. The Board noted that the fee under the Fund’s management contract fell within the standard structure. The Board also noted that the Fund’s assets exceeded the second 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 Advisory Agreement provides a sharing of benefits with the Fund and its shareholders.
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About the organization
This semiannual report is for the information of Delaware Dividend Income Fund shareholders, but it may be used with prospective investors when preceded or accompanied by a current prospectus for Delaware Dividend Income Fund and the Delaware Investments® Fund profile for the most recently completed calendar quarter. These documents are available at www.delawareinvestments.com. The prospectus sets forth details about charges, expenses, investment objectives, and operating policies of the investment company. You should read the prospectus carefully before you invest. The figures in this report represent past results that are not a guarantee of future results. The return and principal value of an investment in the investment company will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
Board of trustees | |
Patrick P. Coyne | Ann R. Leven |
Chairman, President, and | Consultant |
Chief Executive Officer | ARL Associates |
Delaware Investments Family of Funds | New York, NY |
Philadelphia, PA | |
Thomas F. Madison | |
Thomas L. Bennett | President and Chief Executive Officer |
Private Investor | MLM Partners, Inc. |
Rosemont, PA | Minneapolis, MN |
John A. Fry | Janet L. Yeomans |
President | Vice President and Treasurer |
Franklin & Marshall College | 3M Corporation |
Lancaster, PA | St. Paul, MN |
Anthony D. Knerr | J. Richard Zecher |
Founder and Managing Director | Founder |
Anthony Knerr & Associates | Investor Analytics |
New York, NY | Scottsdale, AZ |
Lucinda S. Landreth | |
Former Chief Investment Officer | |
Assurant, Inc. | |
Philadelphia, PA |
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Affiliated officers | Contact information |
David F. Connor | Investment manager |
Vice President, Deputy General Counsel, and | Delaware Management Company, a series of |
Secretary | Delaware Management Business Trust |
Delaware Investments® Family of Funds | Philadelphia, PA |
Philadelphia, PA | |
National distributor | |
Daniel V. Geatens | Delaware Distributors, L.P. |
Vice President and Treasurer | Philadelphia, PA |
Delaware Investments Family of Funds | |
Philadelphia, PA | Shareholder servicing, dividend disbursing, |
and transfer agent | |
David P. O’Connor | Delaware Service Company, Inc. |
Senior Vice President, General Counsel, | 2005 Market Street |
and Chief Legal Officer | Philadelphia, PA 19103-7094 |
Delaware Investments Family of Funds | |
Philadelphia, PA | For shareholders |
800 523-1918 | |
Richard Salus | |
Senior Vice President and | For securities dealers and financial |
Chief Financial Officer | institutions representatives only |
Delaware Investments Family of Funds | 800 362-7500 |
Philadelphia, PA | |
Web site | |
www.delawareinvestments.com |
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 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 Commission’s Web site at www.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 Fund’s Schedule of Investments are available without charge on the Fund’s Web site at www.delawareinvestments.com. The Fund’s Forms N-Q may be reviewed and copied at the Commission’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 Web site at www.delawareinvestments.com; and (ii) on the Commission’s Web site at www.sec.gov.
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Item 2. Code of Ethics
Not applicable.
Item 3. Audit Committee Financial Expert
Not applicable.
Item 4. Principal Accountant Fees and Services
Not applicable.
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.
Name of Registrant: DELAWARE GROUP EQUITY FUNDS V
PATRICK P. COYNE | |
By: | Patrick P. Coyne |
Title: | Chief Executive Officer |
Date: | August 8, 2008 |
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.
PATRICK P. COYNE | |
By: | Patrick P. Coyne |
Title: | Chief Executive Officer |
Date: | August 8, 2008 |
RICHARD SALUS | |
By: | Richard Salus |
Title: | Chief Financial Officer |
Date: | August 8, 2008 |