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: November 30, 2008
Item 1. Reports to Stockholders
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Annual report | |
Delaware Small Cap Value Fund | |
November 30, 2008 |
Value equity mutual fund |
Table of contents
Portfolio management review | 1 | |
Performance summary | 4 | |
Disclosure of Fund expenses | 8 | |
Sector allocation and top 10 holdings | 10 | |
Statement of net assets | 12 | |
Statement of operations | 17 | |
Statements of changes in net assets | 18 | |
Financial highlights | 20 | |
Notes to financial statements | 30 | |
Report of independent registered public accounting firm | 40 | |
Other Fund information | 41 | |
Board of trustees/directors and officers addendum | 42 | |
About the organization | 50 |
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.
© 2009 Delaware Distributors, L.P.
All third-party trademarks cited are the property of their respective owners.
Portfolio management review | |
Delaware Small Cap Value Fund | Dec. 9, 2008 |
The managers of Delaware Small Cap Value Fund provided the answers to the questions below as a review of the Fund’s activities for the fiscal year that ended Nov. 30, 2008.
Please discuss the investment climate during the last 12 months.
Dramatic events in the financial markets and concerns about the overall health of the global economy drove stock prices down significantly during the fiscal year. The combined effects of the troubled housing market and the escalating credit crisis sent many major indices into significantly negative territory. In late September, the market, as measured by the benchmark S&P 500-stock index, plunged almost 9%, its third-largest single-day decline since World War II.
Merrill Lynch and Lehman Brothers (now largely owned by Barclays Capital) were among several financial institutions that collapsed because of mortgage-related debt exposure. As a result, the U.S. Treasury and Federal Reserve Board took unprecedented steps to inject liquidity into the system in an effort to help stabilize the financial markets.
For small company stocks specifically, economic malaise and credit tightening created a challenging environment. Cheap financing and increased liquidity had fueled merger and acquisition activity in recent years. The tightening credit market made financing terms less attractive for potential buyers. This led to a significant decline in merger and acquisition activity among smaller companies.
At the close of the fiscal year, investors struggled with continued stock market volatility and dismal economic news both at home and abroad. Oil prices, which had risen above $140 a barrel by mid-July, reversed course and fell below $40 a barrel by the end of the period. Although lower oil prices were positive news for consumers, consumer spending continued to be weighed down by falling home prices, market volatility, and general uncertainty.
How did the Fund perform relative to its benchmark index for the one-year period ended Nov. 30, 2008?
Class A shares of Delaware Small Cap Value Fund returned -34.55% at net asset value and -38.33% at their maximum offer price (both figures reflect all distributions reinvested). The Fund’s benchmark, the Russell 2000® Value Index, returned -33.61% during the same 12-month period. For the complete annualized performance of Delaware Small Cap Value Fund, please see the table on page 4.
How did you manage the Fund over the past 12 months and what factors affected performance?
Investors found few, if any, places to seek shelter from market turbulence. All sectors of the Russell 2000 Value Index posted negative returns during the 12-month period. Consumer cyclicals were the worst performers, fueled by the dramatic slowdown in housing and auto sales. Traditionally less susceptible to market volatility, sectors such as utilities, healthcare, and consumer staples posted steep declines. Real estate investment trusts (REITs) and consumer services fell even further.
At the beginning of the fiscal year period, the Fund seemed positioned to take advantage of an economic rebound, holding a significant overweight position in economically sensitive
The views expressed are current as of the date of this report and are subject to change.
Data for this portfolio management review were provided by Bloomberg unless otherwise noted.
1
Portfolio management review
Delaware Small Cap Value Fund
areas such as energy, capital spending, and basic industries. The Fund’s overweight in energy aided performance through the second quarter. However, these stocks deteriorated after mid-July as energy prices fell because of fears about weaker global demand. In anticipation of further economic slowing, we trimmed our weighting in basic industries, capital spending, and energy stocks. In hindsight, we failed to reduce our energy weighting enough, which had negative consequences for performance.
At the same time, the Fund held a significant underweight in interest rate–sensitive sectors such as REITs and financials. In July, we began to increase our weighting in financial stocks to take advantage of compelling valuations and bring the Fund more in line with our benchmark, the Russell 2000 Value Index.
Which holdings were among the most significant underperformers?
One of our worst performers was AbitibiBowater, a leading forest products manufacturer. This company’s high debt level was compounded by the credit crunch, which made refinancing at reasonable rates difficult. The stock price fell sharply and we subsequently sold our position at a sizeable loss.
One of the world’s largest providers of shallow water drilling, Hercules Offshore, was a holding that came under pressure as natural gas prices fell. We slightly reduced our exposure during the period, but continued to hold it at the end of the fiscal period because we believed the stock offered attractive long-term value.
Another significant performance detractor was Boston Private Financial Holdings. The corporation’s subsidiary, Boston Private Bank & Trust, provides personal and business banking services in major metropolitan areas around the country. The combined effects of mortgage delinquencies in the southern California market and market depreciation of assets under management drove the stock price down. However, we held on to our position at the end of the period based on our belief that it still offered attractive long-term prospects.
Which stocks performed well during the period?
Although the economic turmoil had a negative effect on overall fund performance, several holdings offered relative strength. Dollar Tree Stores, a discount retail chain, posted double-digit returns as cash-strapped consumers sought bargains. We trimmed our weighting, but owned a sizeable position at the end of the period.
W-H Energy Services, an oil field service company that manufactures a rotary steering tool for drilling, also delivered positive performance. The company announced that it was being acquired by Smith International, and we sold the stock soon after this announcement.
Infinity Property & Casualty, a leading nonstandard personal auto insurer, posted strong results. The company benefited from profitable underwriting related to the recent increase in auto insurance prices, and we held this stock at the end of the reporting period.
2
What factors were important as you positioned the Fund at period end?
Despite an extremely volatile year, we made no changes to the Fund’s time-tested strategy in 2008. Our bottom-up approach (focusing first on researching individual securities) continued to emphasize companies with positive free cash flow generation and attractive long-term potential. We believe that the actions of the Federal Reserve and Treasury during the fiscal year will have a positive impact on market liquidity in the future.
Fund basics | |||||
Delaware Small Cap Value Fund | As of Nov. 30, 2008 | ||||
Fund objective | The Fund seeks capital appreciation. | ||||
Total Fund net assets | $298 million | ||||
Number of holdings | 91 | ||||
Fund start date | June 24, 1987 | ||||
Nasdaq symbols | CUSIPs | ||||
Class A | DEVLX | 246097109 | |||
Class B | DEVBX | 246097307 | |||
Class C | DEVCX | 246097406 | |||
Class R | DVLRX | 246097505 | |||
Institutional Class | DEVIX | 246097208 |
3
Performance summary | |
Delaware Small Cap Value Fund | Nov. 30, 2008 |
The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. Please obtain the performance data for the most recent month end by calling 800 523-1918 or visiting our Web site at www.delawareinvestments.com/performance. Current performance may be lower or higher than the performance data quoted.
You should consider the investment objectives, risks, charges, and expenses of the investment company carefully before investing. The Delaware Small Cap Value Fund prospectus contains this and other important information about the investment company. Please request a prospectus through your financial advisor by calling 800 523-1918 or visiting our Web site at www.delawareinvestments.com. Read the prospectus carefully before you invest or send money.
Fund performance | Average annual total returns through Nov. 30, 2008 | |||||||
1 year | 5 years | 10 years | Lifetime | |||||
Class A (Est. June 24, 1987) | ||||||||
Excluding sales charge | -34.55% | -0.94% | +4.79% | +9.75% | ||||
Including sales charge | -38.33% | -2.11% | +4.17% | +9.44% | ||||
Class B (Est. Sept. 6, 1994) | ||||||||
Excluding sales charge | -35.08% | -1.66% | +4.19% | +6.95% | ||||
Including sales charge | -37.41% | -1.93% | +4.19% | +6.95% | ||||
Class C (Est. Nov. 29, 1995) | ||||||||
Excluding sales charge | -35.05% | -1.65% | +4.05% | +6.30% | ||||
Including sales charge | -35.64% | -1.65% | +4.05% | +6.30% |
Returns reflect the reinvestment of all distributions and any applicable sales charges as noted in the following paragraphs.
Performance for Class B and C shares, excluding sales charges, assumes either that contingent deferred sales charges did not apply or that the investment was not redeemed.
Expense limitations were in effect for all classes during the periods shown in the Fund performance chart and in the Performance of a $10,000 Investment chart. The current expenses for each class are listed on the “Fund expense ratios” table. (Note that all charts and graphs referred to in the “Performance summary” section of this report are found on pages 4 through 6.) Performance would have been lower had the expense limitation not been in effect.
The Fund offers Class A, B, C, R, and Institutional Class shares. Class A shares are sold with a maximum front-end sales charge of up to 5.75%, and have an annual distribution and service fee of up to 0.30% of average daily net assets.
Class B shares may only be purchased through dividend reinvestment and certain permitted exchanges as described in the prospectus. Please see the prospectus for additional information on Class B purchase and sales charges. Class B shares have a contingent
4
deferred sales charge that declines from 4.00% to zero depending on the period of time the shares are held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase. They are also subject to an annual distribution and service fee of up to 1.00% of average daily net assets.
Ten-year and lifetime performance figures for Class B shares reflect conversion to Class A shares after approximately eight years.
Class C shares are sold with a contingent deferred sales charge of 1.00% if redeemed during the first 12 months. They are also subject to an annual distribution and service fee of 1.00% of average daily net assets.
Please see the fee table in the prospectus and your financial professional for a more complete explanation of sales charges.
Class R shares were first made available June 2, 2003, and are available only for certain retirement plan products. They are sold without a sales charge and have an annual distribution and service fee of up to 0.60% of average daily net assets.
The Fund’s expense ratios, as described in the most recent prospectus, are disclosed in the “Fund expense ratios” table. Management has contracted to reimburse certain expenses and/or waive its management fees from April 1, 2008, through March 31, 2009. Please see the most recent prospectus for additional information on the fee waivers.
Fund expense ratios | Class A | Class B | Class C | Class R | Institutional Class | |||||
Total annual operating expense | 1.42% | 2.12% | 2.12% | 1.72% | 1.12% | |||||
(without fee waivers) | ||||||||||
Net expense ratio | 1.37% | 2.12% | 2.12% | 1.62% | 1.12% | |||||
(including fee waivers, if any)* |
*The applicable fee waivers are discussed in the text on pages 4 and 5.
The average annual total returns for the 1-year, 5-year, and lifetime (since June 2, 2003) periods ended Nov. 30, 2008, for Delaware Small Cap Value Fund Class R shares were -34.74%, -1.20%, and +2.45%, respectively.
The average annual total returns for the 1-year, 5-year, 10-year, and lifetime (since June 24, 1987) periods ended Nov. 30, 2008, for Delaware Small Cap Value Fund Institutional Class shares were - -34.38%, -0.66%, +5.09%, and +9.99%, respectively. Institutional Class shares were first made available Nov. 9, 1992, and are available without sales or asset-based distribution charges only to certain eligible institutional accounts. Institutional Class performance prior to Nov. 9, 1992, is based on Class A performance and was adjusted to eliminate the sales charges, but not the asset-based distribution charge of Class A shares.
The “Fund performance” table and the “Performance of a $10,000 investment” graph do not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares.
In addition to the normal risks associated with investing, investments in small- and/or medium-sized company stocks typically exhibit greater risk, and higher volatility particularly in the short term, than those investing in larger, more established companies.
5
Performance summary
Delaware Small Cap Value Fund
Performance of a $10,000 investment
Average annual total returns from Nov. 30, 1998, through Nov. 30, 2008
For period beginning Nov. 30 1998, through Nov. 30, 2008 | Starting value | Ending value | ||
Russel 2000 Value Index | $10,000 | $17,569 | ||
Delaware Small Cap Value Fund — Class A Shares | $9,425 | $15,044 |
The chart assumes $10,000 invested in the Fund on Nov. 30, 1998, and includes the effect of a 5.75% front-end sales charge and the reinvestment of all distributions. Please note additional details on these fees in the “Performance summary” section of this report, which includes pages 4 through 6.
The chart also assumes $10,000 invested in the Russell 2000 Value Index as of Nov. 30, 1998. The Russell 2000 Value Index measures the performance of the small-cap value segment of the U.S. equity universe. It includes those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. The S&P 500 Index, mentioned on page 1, measures the performance of 500 mostly large-cap stocks weighted by market value, and is often used to represent performance of the U.S. stock market. An index is unmanaged and does not reflect the costs of operating a mutual fund, such as the costs of buying, selling, and holding securities. You cannot invest directly in an index.
Past performance is not a guarantee of future results.
Performance of other Fund classes will vary due to different charges and expenses.
The chart does not reflect the deduction of taxes the shareholders would pay on Fund distributions or redemptions of Fund shares.
6
Disclosure of Fund expenses
For the period June 1, 2008 to November 30, 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 June 1, 2008 to November 30, 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.
8
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.
Delaware Small Cap Value Fund
Expense analysis of an investment of $1,000
Beginning | Ending | Expenses | ||||||||||||
Account Value | Account Value | Annualized | Paid During Period | |||||||||||
6/1/08 | 11/30/08 | Expense Ratios | 6/1/08 to 11/30/08* | |||||||||||
Actual Fund return | ||||||||||||||
Class A | $1,000.00 | $ | 632.00 | 1.41% | $ | 5.75 | ||||||||
Class B | 1,000.00 | 629.60 | 2.16% | 8.80 | ||||||||||
Class C | 1,000.00 | 629.80 | 2.16% | 8.80 | ||||||||||
Class R | 1,000.00 | 631.20 | 1.66% | 6.77 | ||||||||||
Institutional Class | 1,000.00 | 632.90 | 1.16% | 4.74 | ||||||||||
Hypothetical 5% return (5% return before expenses) | ||||||||||||||
Class A | $1,000.00 | $ | 1,017.95 | 1.41% | $ | 7.11 | ||||||||
Class B | 1,000.00 | 1,014.20 | 2.16% | 10.88 | ||||||||||
Class C | 1,000.00 | 1,014.20 | 2.16% | 10.88 | ||||||||||
Class R | 1,000.00 | 1,016.70 | 1.66% | 8.37 | ||||||||||
Institutional Class | 1,000.00 | 1,019.20 | 1.16% | 5.86 |
*“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).
9
Sector allocation and top 10 holdings | |
Delaware Small Cap Value Fund | As of November 30, 2008 |
Sector designations may differ from sector designations presented in other Fund materials. The sector designations may represent the investment manager’s internal sector classifications, which may result in the sector designations for one Fund being different than another Fund’s sector designations.
Sector | Percentage of net assets | |
Common Stock² | 94.20 | % |
Basic Industry | 7.15 | % |
Business Services | 3.13 | % |
Capital Spending | 7.55 | % |
Consumer Cyclical | 1.50 | % |
Consumer Services | 12.13 | % |
Consumer Staples | 1.81 | % |
Energy | 6.12 | % |
Financial Services | 30.45 | % |
Health Care | 4.54 | % |
Real Estate | 4.24 | % |
Technology | 10.29 | % |
Transportation | 2.62 | % |
Utilities | 2.67 | % |
Repurchase Agreement | 6.36 | % |
Securities Lending Collateral | 10.86 | % |
Total Value of Securities | 111.42 | % |
Obligation to Return Securities Lending Collateral | (11.27 | %) |
Liabilities Net of Receivables and Other Assets | (0.15 | %) |
Total Net Assets | 100.00 | % |
²Narrow industries are utilized for compliance purposes for diversification whereas broad sectors are used for financial reporting. |
10
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 | |
Berkley (W.R.) | 2.92 | % |
Selective Insurance Group | 2.58 | % |
Platinum Underwriters Holdings | 2.52 | % |
Bank of Hawaii | 2.26 | % |
Infinity Property & Casualty | 2.02 | % |
Dollar Tree Stores | 1.99 | % |
Harleysville Group | 1.95 | % |
FMC | 1.92 | % |
Washington Real Restate Investment Trust | 1.92 | % |
NTB Bancorp | 1.90 | % |
11
Statement of net assets | |
Delaware Small Cap Value Fund | November 30, 2008 |
Number of shares | Value | |||||
Common Stock – 94.20%² | ||||||
Basic Industry – 7.15% | ||||||
* | Albemarle | 181,700 | $ | 3,693,961 | ||
* | Arch Coal | 66,400 | 1,021,232 | |||
† | Crown Holdings | 273,900 | 4,396,098 | |||
Cytec Industries | 90,100 | 1,984,903 | ||||
FMC | 131,100 | 5,729,070 | ||||
Kaiser Aluminum | 52,800 | 1,114,608 | ||||
Valspar | 173,300 | 3,400,146 | ||||
21,340,018 | ||||||
Business Services – 3.13% | ||||||
Brink’s | 132,900 | 2,893,233 | ||||
† | Brinks Home Security Holding | 132,900 | 2,658,000 | |||
† | United Stationers | 118,959 | 3,784,086 | |||
9,335,319 | ||||||
Capital Spending – 7.55% | ||||||
* | Actuant Class A | 225,000 | 4,036,500 | |||
†* | Casella Waste Systems | 99,700 | 499,497 | |||
† | Colfax | 38,700 | 369,972 | |||
† | Gardner Denver | 126,300 | 3,125,925 | |||
Harsco | 107,100 | 2,693,565 | ||||
Insteel Industries | 161,400 | 1,575,264 | ||||
Mueller Water Products Class B | 164,588 | 976,007 | ||||
* | Regal Beloit | 73,100 | 2,459,084 | |||
Timken | 146,100 | 2,119,911 | ||||
* | Wabtec | 55,700 | 2,149,463 | |||
* | Walter Industries | 138,300 | 2,522,592 | |||
22,527,780 | ||||||
Consumer Cyclical – 1.50% | ||||||
MDC Holdings | 143,900 | 4,460,900 | ||||
4,460,900 | ||||||
Consumer Services – 12.13% | ||||||
* | Advance Auto Parts | 104,000 | 3,157,440 | |||
Cato Class A | 300,800 | 4,199,168 | ||||
†* | CEC Entertainment | 139,900 | 2,407,679 | |||
†* | Dollar Tree Stores | 139,800 | 5,921,928 | |||
† | Genesco | 94,500 | 1,271,970 | |||
† | Jack in the Box | 146,700 | 2,567,250 | |||
Men’s Wearhouse | 191,500 | 2,037,560 |
12
Number of shares | Value | |||||
Common Stock (continued) | ||||||
Consumer Services (continued) | ||||||
* | Meredith | 82,900 | $ | 1,338,006 | ||
PETsMART | 156,400 | 2,744,820 | ||||
* | Ross Stores | 175,300 | 4,645,450 | |||
* | Stage Stores | 208,500 | 1,205,130 | |||
† | Warnaco Group | 85,000 | 1,521,500 | |||
Wolverine World Wide | 109,450 | 2,109,102 | ||||
† | Zale | 175,800 | 1,042,494 | |||
36,169,497 | ||||||
Consumer Staples – 1.81% | ||||||
American Greetings Class A | 193,400 | 2,227,968 | ||||
Del Monte Foods | 537,000 | 3,179,040 | ||||
5,407,008 | ||||||
Energy – 6.12% | ||||||
†* | Grey Wolf | 581,600 | 3,187,168 | |||
†* | Hercules Offshore | 166,876 | 971,218 | |||
† | Newfield Exploration | 171,700 | 3,876,986 | |||
* | Southwest Gas | 182,100 | 4,716,390 | |||
† | Whiting Petroleum | 143,500 | 5,496,050 | |||
18,247,812 | ||||||
Financial Services – 30.45% | ||||||
Bank of Hawaii | 151,300 | 6,749,493 | ||||
Berkley (W.R.) | 306,600 | 8,716,638 | ||||
Boston Private Financial Holdings | 324,800 | 2,244,368 | ||||
Colonial BancGroup | 344,900 | 865,699 | ||||
Community Bank System | 105,500 | 2,432,830 | ||||
CVB Financial | 153,200 | 1,720,436 | ||||
East West Bancorp | 324,100 | 4,796,680 | ||||
First Midwest Bancorp | 200,600 | 3,693,046 | ||||
Hancock Holding | 115,100 | 4,961,961 | ||||
* | Harleysville Group | 154,700 | 5,829,096 | |||
Independent Bank | 129,600 | 3,070,224 | ||||
Infinity Property & Casualty | 131,500 | 6,034,535 | ||||
IPC Holdings | 133,000 | 3,724,000 | ||||
NBT Bancorp | 213,800 | 5,669,976 | ||||
Platinum Underwriters Holdings | 244,400 | 7,510,412 | ||||
Provident Bankshares | 263,600 | 2,483,112 | ||||
S&T Bancorp | 72,100 | 2,450,679 | ||||
* | Selective Insurance Group | 335,100 | 7,693,896 |
13
Statement of net assets
Delaware Small Cap Value Fund
Number of shares | Value | |||||
Common Stock (continued) | ||||||
Financial Services (continued) | ||||||
* | StanCorp Financial Group | 89,300 | $ | 2,974,583 | ||
Sterling Bancshares | 555,900 | 3,724,530 | ||||
Sterling Financial | 229,768 | 1,222,366 | ||||
Wesbanco | 87,400 | 2,257,542 | ||||
90,826,102 | ||||||
Health Care – 4.54% | ||||||
Hill-Rom Holdings | 86,400 | 1,774,656 | ||||
* | Service Corp International | 562,100 | 3,271,422 | |||
* | STERIS | 175,500 | 4,852,575 | |||
* | Universal Health Services Class B | 98,400 | 3,655,560 | |||
13,554,213 | ||||||
Real Estate – 4.24% | ||||||
* | Brandywine Realty Trust | 252,937 | 1,244,450 | |||
* | Education Realty Trust | 203,400 | 909,198 | |||
Highwoods Properties | 200,600 | 4,790,328 | ||||
Washington Real Estate Investment Trust | 215,800 | 5,712,226 | ||||
12,656,202 | ||||||
Technology – 10.29% | ||||||
† | Brocade Communications Systems | 351,200 | 1,130,864 | |||
† | Checkpoint Systems | 162,700 | 1,880,812 | |||
† | Cirrus Logic | 703,700 | 2,969,614 | |||
† | Compuware | 399,600 | 2,537,460 | |||
†* | Parametric Technology | 295,500 | 3,415,980 | |||
† | Premiere Global Services | 285,150 | 1,739,415 | |||
* | QAD | 218,000 | 887,260 | |||
†* | Sybase | 139,400 | 3,434,816 | |||
†* | Syniverse Holdings | 200,600 | 1,959,862 | |||
† | Synopsys | 284,800 | 4,565,344 | |||
† | Tech Data | 233,900 | 4,079,216 | |||
† | Vishay Intertechnology | 483,000 | 2,105,880 | |||
30,706,523 | ||||||
Transportation – 2.62% | ||||||
* | Alexander & Baldwin | 164,800 | 4,260,080 | |||
† | Kirby | 98,800 | 2,512,484 | |||
† | Saia | 115,200 | 1,026,432 | |||
7,798,996 |
14
Number of shares | Value | ||||||
Common Stock (continued) | |||||||
Utilities – 2.67% | |||||||
* | Black Hills | 73,500 | $ | 1,897,035 | |||
† | El Paso Electric | 253,000 | 4,559,060 | ||||
* | Otter Tail | 80,400 | 1,510,716 | ||||
7,966,811 | |||||||
Total Common Stock (cost $350,352,684) | 280,997,181 | ||||||
Principal amount | |||||||
Repurchase Agreement** – 6.36% | |||||||
BNP Paribas 0.20%, dated 11/28/08, to be repurchased | |||||||
on 12/1/08, repurchase price $18,972,316 | |||||||
(collateralized by U.S. Government obligations, | |||||||
6/4/09; with market value $19,601,293) | $ | 18,972,000 | 18,972,000 | ||||
Total Repurchase Agreement (cost $18,972,000) | 18,972,000 | ||||||
Total Value of Securities Before Securities Lending | |||||||
Collateral – 100.56% (cost $369,324,684) | 299,969,181 | ||||||
Number of shares | |||||||
Securities Lending Collateral*** – 10.86% | |||||||
Investment Companies | |||||||
Mellon GSL DBT II Collateral Fund | 33,235,634 | 32,351,566 | |||||
=Mellon GSL DBT II Liquidation Trust | 392,139 | 32,155 | |||||
Total Securities Lending Collateral | |||||||
(cost $33,627,773) | 32,383,721 | ||||||
Total Value of Securities – 111.42% | |||||||
(cost $402,952,457) | 332,352,902 | © | |||||
Obligation to Return Securities Lending | |||||||
Collateral*** – (11.27%) | (33,627,773 | ) | |||||
Liabilities Net of Receivables and | |||||||
Other Assets – (0.15%) | (441,061 | ) | |||||
Net Assets Applicable to 14,322,660 | |||||||
Shares Outstanding – 100.00% | $ | 298,284,068 |
15
Statement of net assets
Delaware Small Cap Value Fund
Net Asset Value – Delaware Small Cap Value Fund | |||||
Class A ($205,439,545 / 9,627,216 Shares) | $21.34 | ||||
Net Asset Value – Delaware Small Cap Value Fund | |||||
Class B ($21,825,386 / 1,140,740 Shares) | $19.13 | ||||
Net Asset Value – Delaware Small Cap Value Fund | |||||
Class C ($44,338,836 / 2,318,533 Shares) | $19.12 | ||||
Net Asset Value – Delaware Small Cap Value Fund | |||||
Class R ($12,760,731 / 608,453 Shares) | $20.97 | ||||
Net Asset Value – Delaware Small Cap Value Fund | |||||
Institutional Class ($13,919,570 / 627,718 Shares) | $22.17 | ||||
Components of Net Assets at November 30, 2008: | |||||
Shares of beneficial interest (unlimited authorization – no par) | $ | 369,092,132 | |||
Undistributed net investment income | 459,074 | ||||
Accumulated net realized loss on investments | (667,583 | ) | |||
Net unrealized depreciation of investments | (70,599,555 | ) | |||
Total net assets | $ | 298,284,068 |
² | Narrow industries are utilized for compliance purposes for diversification whereas broad sectors are used for financial reporting. |
† | Non income producing security. |
= | Security is being fair valued in accordance with the Fund’s fair valuation policy. At November 30, 2008, the aggregate amount of fair valued securities was $32,155, which represented 0.01% 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 8 in “Notes to financial statements.” |
© | Includes $31,943,385 of securities loaned. |
Net Asset Value and Offering Price Per Share – | |||
Delaware Small Cap Value Fund | |||
Net asset value Class A (A) | $ | 21.34 | |
Sales charge (5.75% of offering price) (B) | 1.30 | ||
Offering price | $ | 22.64 |
(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
16
Statement of operations | |
Delaware Small Cap Value Fund | Year Ended November 30, 2008 |
Investment Income: | ||||||
Dividends | $ | 6,939,786 | ||||
Interest | 280,072 | |||||
Securities lending income | 770,562 | $ | 7,990,420 | |||
Expenses: | ||||||
Management fees | 3,534,187 | |||||
Distribution expenses – Class A | 955,306 | |||||
Distribution expenses – Class B | 391,178 | |||||
Distribution expenses – Class C | 725,281 | |||||
Distribution expenses – Class R | 112,238 | |||||
Dividend disbursing and transfer agent fees and expenses | 1,674,340 | |||||
Accounting and administration expenses | 188,720 | |||||
Reports and statements to shareholders | 87,087 | |||||
Registration fees | 72,152 | |||||
Legal and professional fees | 67,290 | |||||
Audit & Tax | 60,653 | |||||
Trustees’ fees | 29,230 | |||||
Custodian fees | 13,738 | |||||
Insurance fees | 12,306 | |||||
Consulting | 7,053 | |||||
Dues and services | 6,442 | |||||
Pricing fees | 3,060 | |||||
Taxes (other than taxes on income) | 2,501 | |||||
Trustees’ expenses | 2,003 | 7,944,765 | ||||
Less fees waived | (121,474 | ) | ||||
Less waiver of distribution expenses – Class A | (159,718 | ) | ||||
Less waiver of distribution expenses – Class R | (18,662 | ) | ||||
Less expenses paid indirectly | (1,062 | ) | ||||
Total expenses | 7,643,849 | |||||
Net Investment Income | 346,571 | |||||
Net Realized and Unrealized Loss on Investments: | ||||||
Net realized loss on investments | (283,632 | ) | ||||
Net change in unrealized appreciation/depreciation of investments | (169,042,827 | ) | ||||
Net Realized and Unrealized Loss on Investments | (169,326,459 | ) | ||||
Net Decrease in Net Assets Resulting from Operations | $ | (168,979,888 | ) |
See accompanying notes
17
Statements of changes in net assets
Delaware Small Cap Value Fund
Year Ended | ||||||||
11/30/08 | 11/30/07 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | 346,571 | $ | (2,421,917 | ) | |||
Net realized gain (loss) on investments and | ||||||||
foreign currencies | (283,632 | ) | 56,029,521 | |||||
Net change in unrealized | ||||||||
appreciation/depreciation of investments | (169,042,827 | ) | (97,258,265 | ) | ||||
Net decrease in net assets resulting from operations | (168,979,888 | ) | (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 | 44,883,012 | 58,097,755 | ||||||
Class B | 365,548 | 1,197,141 | ||||||
Class C | 6,866,414 | 6,957,838 | ||||||
Class R | 7,231,904 | 15,645,466 | ||||||
Institutional Class | 4,930,839 | 7,208,827 | ||||||
Net asset value of shares issued upon reinvestment | ||||||||
of dividends and distributions: | ||||||||
Class A | 34,396,594 | 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 | 2,364,526 | 2,798,205 | ||||||
117,281,746 | 148,469,311 |
18
Year Ended | ||||||||
11/30/08 | 11/30/07 | |||||||
Capital Share Transactions (continued): | ||||||||
Cost of shares repurchased: | ||||||||
Class A | $ | (111,709,459 | ) | $ | (131,609,980 | ) | ||
Class B | (19,676,154 | ) | (36,484,190 | ) | ||||
Class C | (33,121,658 | ) | (46,345,644 | ) | ||||
Class R | (8,648,107 | ) | (13,383,734 | ) | ||||
Institutional Class | (9,724,384 | ) | (16,190,231 | ) | ||||
(182,879,762 | ) | (244,013,779 | ) | |||||
Decrease in net assets derived from capital share transactions | (65,598,016 | ) | (95,544,468 | ) | ||||
Net Decrease in Net Assets | (290,391,367 | ) | (201,994,873 | ) | ||||
Net Assets: | ||||||||
Beginning of year | 588,675,435 | 790,670,308 | ||||||
End of year (including undistributed net investment | ||||||||
income of $459,074 and $—, respectively) | $ | 298,284,068 | $ | 588,675,435 |
See accompanying notes
19
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)1 |
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 return2 |
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 The average shares outstanding method has been applied for per share information. |
2 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers by the manager and distributor, as applicable. Performance would have been lower had the waivers not been in effect. |
See accompanying notes
20
Year Ended | |||||||||||||||
11/30/08 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | |||||||||||
$36.000 | $41.970 | $39.110 | $39.640 | $35.220 | |||||||||||
0.072 | (0.050 | ) | (0.047 | ) | (0.075 | ) | (0.105 | ) | |||||||
(11.314 | ) | (2.647 | ) | 5.960 | 4.170 | 6.879 | |||||||||
(11.242 | ) | (2.697 | ) | 5.913 | 4.095 | 6.774 | |||||||||
(3.418 | ) | (3.273 | ) | (3.053 | ) | (4.625 | ) | (2.354 | ) | ||||||
(3.418 | ) | (3.273 | ) | (3.053 | ) | (4.625 | ) | (2.354 | ) | ||||||
$21.340 | $36.000 | $41.970 | $39.110 | $39.640 | |||||||||||
(34.55% | ) | (6.90% | ) | 16.26% | 11.42% | 20.52% | |||||||||
$205,439 | $389,129 | $493,193 | $409,567 | $270,332 | |||||||||||
1.44% | 1.37% | 1.41% | 1.44% | 1.54% | |||||||||||
1.52% | 1.42% | 1.44% | 1.44% | 1.54% | |||||||||||
0.25% | (0.12% | ) | (0.12% | ) | (0.20% | ) | (0.30% | ) | |||||||
0.17% | (0.17% | ) | (0.15% | ) | (0.20% | ) | (0.30% | ) | |||||||
13% | 23% | 36% | 33% | 35% |
21
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 loss1 |
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 return2 |
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 The average shares outstanding method has been applied for per share information. |
2 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver by the manager, as applicable. Performance would have been lower had the waiver not been in effect. |
See accompanying notes
22
Year Ended | |||||||||||||||
11/30/08 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | |||||||||||
$32.860 | $38.860 | $36.690 | $37.690 | $33.820 | |||||||||||
(0.127 | ) | (0.314 | ) | (0.306 | ) | (0.311 | ) | (0.334 | ) | ||||||
(10.185 | ) | (2.413 | ) | 5.529 | 3.936 | 6.558 | |||||||||
(10.312 | ) | (2.727 | ) | 5.223 | 3.625 | 6.224 | |||||||||
(3.418 | ) | (3.273 | ) | (3.053 | ) | (4.625 | ) | (2.354 | ) | ||||||
(3.418 | ) | (3.273 | ) | (3.053 | ) | (4.625 | ) | (2.354 | ) | ||||||
$19.130 | $32.860 | $38.860 | $36.690 | $37.690 | |||||||||||
(35.08% | ) | (7.59% | ) | 15.38% | 10.68% | 19.69% | |||||||||
$21,825 | $54,684 | $94,495 | $110,684 | $111,348 | |||||||||||
2.19% | 2.12% | 2.14% | 2.14% | 2.24% | |||||||||||
2.22% | 2.12% | 2.14% | 2.14% | 2.24% | |||||||||||
(0.50% | ) | (0.87% | ) | (0.85% | ) | (0.90% | ) | (1.00% | ) | ||||||
(0.53% | ) | (0.87% | ) | (0.85% | ) | (0.90% | ) | (1.00% | ) | ||||||
13% | 23% | 36% | 33% | 35% |
23
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 loss1 |
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 return2 |
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 The average shares outstanding method has been applied for per share information. |
2 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver by the manager, as applicable. Performance would have been lower had the waiver not been in effect. |
See accompanying notes
24
Year Ended | |||||||||||||||
11/30/08 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | |||||||||||
$32.850 | $38.840 | $36.670 | $37.680 | $33.810 | |||||||||||
(0.126 | ) | (0.314 | ) | (0.306 | ) | (0.313 | ) | (0.333 | ) | ||||||
(10.186 | ) | (2.403 | ) | 5.529 | 3.928 | 6.557 | |||||||||
(10.312 | ) | (2.717 | ) | 5.223 | 3.615 | 6.224 | |||||||||
(3.418 | ) | (3.273 | ) | (3.053 | ) | (4.625 | ) | (2.354 | ) | ||||||
(3.418 | ) | (3.273 | ) | (3.053 | ) | (4.625 | ) | (2.354 | ) | ||||||
$19.120 | $32.850 | $38.840 | $36.670 | $37.680 | |||||||||||
(35.05% | ) | (7.56% | ) | 15.39% | 10.65% | 19.69% | |||||||||
$44,339 | $97,428 | $145,385 | $119,968 | $66,313 | |||||||||||
2.19% | 2.12% | 2.14% | 2.14% | 2.24% | |||||||||||
2.22% | 2.12% | 2.14% | 2.14% | 2.24% | |||||||||||
(0.50% | ) | (0.87% | ) | (0.85% | ) | (0.90% | ) | (1.00% | ) | ||||||
(0.53% | ) | (0.87% | ) | (0.85% | ) | (0.90% | ) | (1.00% | ) | ||||||
13% | 23% | 36% | 33% | 35% |
25
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 loss1 |
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 return2 |
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 The average shares outstanding method has been applied for per share information. |
2 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return reflects waivers by the manager and distributor, as applicable. Performance would have been lower had the waivers not been in effect. |
See accompanying notes
26
Year Ended | |||||||||||||||
11/30/08 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | |||||||||||
$35.530 | $41.550 | $38.840 | $39.480 | $35.190 | |||||||||||
(0.002 | ) | (0.146 | ) | (0.138 | ) | (0.169 | ) | (0.209 | ) | ||||||
(11.140 | ) | (2.601 | ) | 5.901 | 4.154 | 6.853 | |||||||||
(11.142 | ) | (2.747 | ) | 5.763 | 3.985 | 6.644 | |||||||||
(3.418 | ) | (3.273 | ) | (3.053 | ) | (4.625 | ) | (2.354 | ) | ||||||
(3.418 | ) | (3.273 | ) | (3.053 | ) | (4.625 | ) | (2.354 | ) | ||||||
$20.970 | $35.530 | $41.550 | $38.840 | $39.480 | |||||||||||
(34.74% | ) | (7.11% | ) | 15.97% | 11.15% | 20.15% | |||||||||
$12,761 | $21,126 | $20,564 | $10,574 | $4,539 | |||||||||||
1.69% | 1.62% | 1.64% | 1.70% | 1.84% | |||||||||||
1.82% | 1.72% | 1.74% | 1.74% | 1.84% | |||||||||||
— | (0.37% | ) | (0.35% | ) | (0.46% | ) | (0.60% | ) | |||||||
(0.13% | ) | (0.47% | ) | (0.45% | ) | (0.50% | ) | (0.60% | ) | ||||||
13% | 23% | 36% | 33% | 35% |
27
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 income1 |
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 return2 |
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 to average net assets |
Ratio of net investment income to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 The average shares outstanding method has been applied for per share information. |
2 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return reflects a waiver by the manager, as applicable. Performance would have been lower had the waiver not been in effect. |
See accompanying notes
28
Year Ended | |||||||||||||||
11/30/08 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | |||||||||||
$37.190 | $43.140 | $40.020 | $40.350 | $35.700 | |||||||||||
0.148 | 0.049 | 0.058 | 0.036 | — | |||||||||||
(11.750 | ) | (2.726 | ) | 6.115 | 4.259 | 7.004 | |||||||||
(11.602 | ) | (2.677 | ) | 6.173 | 4.295 | 7.004 | |||||||||
(3.418 | ) | (3.273 | ) | (3.053 | ) | (4.625 | ) | (2.354 | ) | ||||||
(3.418 | ) | (3.273 | ) | (3.053 | ) | (4.625 | ) | (2.354 | ) | ||||||
$22.170 | $37.190 | $43.140 | $40.020 | $40.350 | |||||||||||
(34.38% | ) | (6.65% | ) | 16.56% | 11.77% | 20.88% | |||||||||
$13,920 | $26,308 | $37,033 | $30,918 | $23,731 | |||||||||||
1.19% | 1.12% | 1.14% | 1.14% | 1.24% | |||||||||||
1.22% | 1.12% | 1.14% | 1.14% | 1.24% | |||||||||||
0.50% | 0.13% | 0.15% | 0.10% | — | |||||||||||
0.47% | 0.13% | 0.15% | 0.10% | — | |||||||||||
13% | 23% | 36% | 33% | 35% |
29
Notes to financial statements | |
Delaware Small Cap Value Fund | November 30, 2008 |
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 ask prices will be used. Short-term debt securities having less than 60 days to maturity are valued at amortized cost, which approximates market value. Investment companies are valued at net asset 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 suspension of trading in a security. The Fund may use fair value pricing more frequently for securities traded primarily in non-U.S. markets because, among other things, most foreign markets close well before the Fund values its securities at 4:00 p.m. Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, government actions or pronouncements, aftermarket trading or new events, may have occurred in the interim. To account for this, the Fund may frequently value foreign securities using fair value prices based on third-party vendor modeling tools (“international fair value pricing”).
30
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 other 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
31
Notes to financial statements
Delaware Small Cap Value Fund
1. Significant Accounting Policies (continued)
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 $1,714 for the year ended November 30, 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 this waiver and reimbursement, 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. This expense waiver and reimbursement 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
32
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 year ended November 30, 2008, the Fund was charged $23,590 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 November 30, 2008, the Fund had liabilities payable to affiliates as follows:
Investment management fee payable to DMC | $191,238 | |
Dividend disbursing, transfer agent and fund accounting | ||
oversight fees and other expenses payable to DSC | 126,749 | |
Distribution fees payable to DDLP | 102,800 | |
Other expenses payable to DMC and affiliates* | 8,470 |
*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 year ended November 30, 2008, the Fund was charged $32,218 for internal legal and tax services provided by DMC and/or its affiliates’ employees.
For the year ended November 30, 2008, DDLP earned $22,745 for commissions on sales of the Fund’s Class A shares. For the year ended November 30, 2008, DDLP received gross CDSC commissions of $637, $54,702 and $4,923 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.
33
Notes to financial statements
Delaware Small Cap Value Fund
For the year ended November 30, 2008, the Fund made purchases of $61,644,029 and sales of $197,109,995 of investment securities other than short-term investments.
At November 30, 2008, the cost of investments for federal income purposes was $403,236,086. At November 30, 2008, net unrealized depreciation was $70,883,184, of which $35,598,828 related to unrealized appreciation of investments and $106,482,012 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 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 November 30, 2008:
Level | Securities | ||
Level 1 | $299,969,181 | ||
Level 2 | 32,351,566 | ||
Level 3 | 32,155 | ||
Total | $332,352,902 |
34
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:
Securities | ||||
Balance as of 11/30/07 | $ | — | ||
Net change in unrealized appreciation/depreciation | (359,984 | ) | ||
Net transfers in and/or out of Level 3 | 392,139 | |||
Balance as of 11/30/08 | $ | 32,155 |
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 years ended November 30, 2008 and 2007 was as follows:
Year Ended | ||||||
11/30/08 | 11/30/07 | |||||
Ordinary Income | $ | 316,226 | $ | 14,551,917 | ||
Long-term capital gain | 55,497,237 | 48,247,827 | ||||
Total | $ | 55,813,463 | $ | 62,799,744 |
5. Components of Net Assets on a Tax Basis
As of November 30, 2008, the components of net assets on a tax basis were as follows:
Shares of beneficial interest | $ | 369,092,132 | ||
Undistributed ordinary income | 459,074 | |||
Capital loss carryforward | (383,954 | ) | ||
Unrealized depreciation of investments | (70,883,184 | ) | ||
Net assets | $ | 298,284,068 |
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.
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Notes to financial statements
Delaware Small Cap Value Fund
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 year ended November 30, 2008, the Fund recorded the following reclassifications.
Undistributed net investment income | $ | 112,503 | ||
Accumulated net realized loss | 316,226 | |||
Paid-in capital | (428,729 | ) |
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, 2008 will expire as follows: $383,954 expires in 2016.
6. Capital Shares
Transactions in capital shares were as follows:
Year Ended | ||||||
11/30/08 | 11/30/07 | |||||
Shares sold: | ||||||
Class A | 1,465,800 | 1,463,749 | ||||
Class B | 13,363 | 32,759 | ||||
Class C | 258,185 | 192,771 | ||||
Class R | 244,933 | 397,624 | ||||
Institutional Class | 156,706 | 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 | 69,300 | 70,822 | ||||
3,794,087 | 3,853,552 | |||||
Shares repurchased: | ||||||
Class A | (3,691,741 | ) | (3,360,466 | ) | ||
Class B | (705,823 | ) | (998,258 | ) | ||
Class C | (1,215,902 | ) | (1,292,964 | ) | ||
Class R | (292,915 | ) | (341,947 | ) | ||
Institutional Class | (305,651 | ) | (399,673 | ) | ||
(6,212,032 | ) | (6,393,308 | ) | |||
Net decrease | (2,417,945 | ) | (2,539,756 | ) |
36
For the years ended November 30, 2008 and 2007, 202,901 Class B shares were converted to 183,322 Class A shares valued at $5,984,507 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 Statement of changes in the net assets.
7. Line of Credit
The Fund, along with certain other funds in the Delaware Investments® Family of Funds (Participants), was a participant in a $225,000,000 revolving line of credit with The Bank of New York Mellon (BNY Mellon) to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, Participants were charged an annual commitment fee, which was allocated across the Participants on the basis of each Participant’s allocation of the entire facility. Participants were permitted to borrow up to a maximum of one third of their net assets under the agreement. The agreement expired on November 18, 2008. The Fund had no loans outstanding as of November 30, 2008, or at any time during the year then ended.
Effective November 18, 2008, the Fund along with the other Participants entered into an amendment to the agreement with BNY Mellon for a $35,000,000 revolving line of credit. The agreement, as amended, is to be used as described above and operates in substantially the same manner as the original agreement. The agreement, as amended, expires on November 17, 2009.
8. Securities Lending
The Fund, along with other funds in the Delaware Investments® Family of Funds, may lend their securities pursuant to a security lending agreement (Lending Agreement) with BNY Mellon. With respect to each loan, if the aggregate market value of securities collateral held plus cash collateral received 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 than the applicable collateral requirements. Cash collateral received is generally invested in the Mellon GSL DBT II Collateral Fund (the “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 Collective Trust seeks to maintain a net asset value per unit of $1.00, but there can be no assurance that it will always be able to do so. The Fund may incur investment losses as a result of investing securities lending collateral in the Collective Trust. This could occur if an investment in the Collective Trust defaulted or if it were necessary to liquidate assets in the Collective Trust to meet returns on outstanding security loans at a time when the Collective Trust’s net asset value per unit was less than $1.00. Under those circumstances, the Fund may not receive an amount from the Collective Trust that is equal in amount to the collateral the Fund would be required to return to the borrower of the securities and the Fund would be required to make up for this shortfall. During the year ended November 30, 2008, BNY Mellon transferred certain distressed securities from
37
Notes to financial statements
Delaware Small Cap Value Fund
8. Securities Lending (continued)
the Collective Trust into the Mellon GSL DBT II Liquidation Trust. 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 are 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 November 30, 2008, the value of securities on loan was $31,943,385, for which cash collateral was received and invested in accordance with the Lending Agreement. Such investments 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 were no direct real estate holdings during the year ended November 30, 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 November 30, 2008,
38
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.
11. Tax Information (Unaudited)
The information set forth below is for the Fund’s fiscal year as required by federal laws. Shareholders, however, must report distributions on a calendar year basis for income tax purposes, which may include distributions for portions of two fiscal years of a fund. Accordingly, the information needed by shareholders for income tax purposes will be sent to them in January of each year. Please consult your tax advisor for proper treatment of the information.
For the fiscal year ended November 30, 2008, the Fund designates distributions paid during the year as follows:
(A) Long-Term Capital Gains Distributions (Tax Basis) | 99.43 | % | |
(B) Ordinary Income Distributions* (Tax Basis) | 0.57 | % | |
(C) Total Distributions (Tax Basis) | 100.00 | % | |
(D) Qualifying Dividends1 | 100.00 | % |
(A) and (B) are based on a percentage of the Fund’s total distributions. |
(C) is based on a percentage of the Fund’s ordinary income distributions. |
1 Qualifying dividends represent dividends which qualify for the corporate dividends received deduction. |
For the fiscal year ended November 30, 2008, certain interest income paid by the Fund, determined to be Qualified Interest Income and Short-Term Capital Gains, may be subject to relief from U.S. withholding for foreign shareholders, as provided by the American Jobs Creation Act of 2004. For the fiscal year ended November 30, 2008, the Fund has designated maximum distributions of Qualified Interest Income of $25,791.
39
Report of independent
registered public accounting firm
To the Shareholders and Board of Trustees
Delaware Group® Equity Funds V – Delaware Small Cap Value Fund
We have audited the accompanying statement of net assets of Delaware Small Cap Value Fund (one of the series constituting Delaware Group Equity Funds V) (the “Fund”) as of November 30, 2008, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of November 30, 2008 by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Delaware Small Cap Value Fund of Delaware Group Equity Funds V at November 30, 2008, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Philadelphia, Pennsylvania | |
January 16, 2009 |
40
Other Fund information
(Unaudited)
Delaware Small Cap Value Fund
Fund management
Christopher S. Beck, CFA
Senior Vice President, Senior Portfolio Manager
Christopher S. Beck leads the firm’s Small/Mid-Cap Value team. Prior to joining Delaware Investments in 1997, he served as a vice president at Pitcairn Trust from 1995 to 1997, where he managed small-capitalization stocks and analyzed equity sectors. Before that he was chief investment officer of the University of Delaware from 1992 to 1995 and held management positions during his seven years at Cypress Capital Management and four years at Wilmington Trust. Beck earned a bachelor’s degree at the University of Delaware and an MBA from Lehigh University, and he is a member of the CFA Society of Philadelphia.
41
Board of trustees/directors and officers addendum
Delaware Investments® Family of Funds
A mutual fund is governed by a Board of Trustees/Directors (“Trustees”), which has oversight responsibility for the management of a fund’s business affairs. Trustees establish procedures and oversee and review the performance of the investment manager, the distributor, and others who perform services for the fund. The independent fund trustees, in particular, are advocates
Name, Address, | Position(s) | Length of | ||
and Birth Date | Held with Fund(s) | Time Served | ||
Interested Trustees | ||||
Patrick P. Coyne1 | Chairman, President, | Chairman and Trustee | ||
2005 Market Street | Chief Executive Officer, | since August 16, 2006 | ||
Philadelphia, PA 19103 | and Trustee | |||
April 1963 | President and | |||
Chief Executive Officer | ||||
since August 1, 2006 | ||||
Independent Trustees | ||||
Thomas L. Bennett | Trustee | Since March 2005 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
October 1947 | ||||
1 Patrick P. Coyne is considered to be an “Interested Trustee” because he is an executive officer of the Fund’s(s’) investment advisor.
42
for shareholder interests. Each trustee has served in that capacity since he or she was elected to or appointed to the Board of Trustees, and will continue to serve until his or her retirement or the election of a new trustee in his or her place. The following is a list of the Trustees and Officers with certain background and related information.
Number of Portfolios in | ||||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships | ||
During Past 5 Years | by Trustee or Officer | Held by Trustee or Officer | ||
Patrick P. Coyne has served in | 85 | Director | ||
various executive capacities | Kaydon Corp. | |||
at different times at | ||||
Delaware Investments.2 | Board of Governors Member | |||
Investment Company | ||||
Institute (ICI) | ||||
(2007–Present) | ||||
Member of Investment Committee | ||||
Cradle of Liberty Council, BSA | ||||
(November 2007–Present) | ||||
Finance Committee Member | ||||
St. John Vianney | ||||
Roman Catholic Church | ||||
(2007–Present) | ||||
Private Investor | 85 | Director | ||
(March 2004–Present) | Bryn Mawr Bank Corp. (BMTC) | |||
(April 2007–Present) | ||||
Investment Manager | ||||
Morgan Stanley & Co. | Chairman of | |||
(January 1984–March 2004) | Investment Committee | |||
Pennsylvania Academy of | ||||
Fine Arts (2007–Present) | ||||
Trustee (2004–Present) | ||||
2 Delaware Investments is the marketing name for Delaware Management Holdings, Inc. and its subsidiaries, including the Fund’s(s’) investment advisor, principal underwriter, and its transfer agent.
43
Board of trustees/directors and officers addendum
Delaware Investments® Family of Funds
Name, Address, | Position(s) | Length of | ||
and Birth Date | Held with Fund(s) | Time Served | ||
Independent Trustees (continued) | ||||
Thomas L. Bennett | ||||
(continued) | ||||
John A. Fry | Trustee | Since January 2001 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
May 1960 | ||||
Anthony D. Knerr | Trustee | Since April 1990 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
December 1938 | ||||
Lucinda S. Landreth | Trustee | Since March 2005 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
June 1947 | ||||
Ann R. Leven | Trustee | Since October 1989 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
November 1940 | ||||
Thomas F. Madison | Trustee | Since May 19973 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
February 1936 | ||||
3 In 1997, several funds managed by Voyageur Fund Managers, Inc. (the “Voyageur Funds”) were incorporated into the Delaware Investments Family of Funds. Mr. Madison served as a director of the Voyageur Funds from 1993 until 1997.
44
Number of Portfolios in | ||||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships | ||
During Past 5 Years | by Trustee or Officer | Held by Trustee or Officer | ||
Investment Committee and | ||||
Governance Committee | ||||
Member | ||||
Pennsylvania Horticultural | ||||
Society | ||||
(February 2006–Present) | ||||
President | 85 | Director | ||
Franklin & Marshall College | Community Health Systems | |||
(June 2002–Present) | ||||
Executive Vice President | ||||
University of Pennsylvania | ||||
(April 1995–June 2002) | ||||
Founder and | 85 | None | ||
Managing Director | ||||
Anthony Knerr & Associates | ||||
(Strategic Consulting) | ||||
(1990–Present) | ||||
Chief Investment Officer | 85 | None | ||
Assurant, Inc. (Insurance) | ||||
(2002–2004) | ||||
Consultant | 85 | Director and Audit | ||
ARL Associates | Committee Chair | |||
(Financial Planning) | Systemax, Inc. | |||
(1983–Present) | ||||
President and | 85 | Director and Chair of | ||
Chief Executive Officer | Compensation Committee, | |||
MLM Partners, Inc. | Governance Committee | |||
(Small Business Investing | Member | |||
and Consulting) | CenterPoint Energy | |||
(January 1993–Present) | ||||
45
Board of trustees/directors and officers addendum
Delaware Investments® Family of Funds
Name, Address, | Position(s) | Length of | ||
and Birth Date | Held with Fund(s) | Time Served | ||
Independent Trustees (continued) | ||||
Thomas F. Madison | ||||
(continued) | ||||
Janet L. Yeomans | Trustee | Since April 1999 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
July 1948 | ||||
J. Richard Zecher | Trustee | Since March 2005 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
July 1940 | ||||
46
Number of Portfolios in | ||||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships | ||
During Past 5 Years | by Trustee or Officer | Held by Trustee or Officer | ||
Lead Director and Chair of | ||||
Audit and Governance | ||||
Committees, Member of | ||||
Compensation Committee | ||||
Digital River, Inc. | ||||
Director and Chair of | ||||
Governance Committee, | ||||
Audit Committee | ||||
Member | ||||
Rimage Corporation | ||||
Director and Chair of | ||||
the Compensation Committee | ||||
Spanlink Communications | ||||
Lead Director and Chair of | ||||
Compensation and | ||||
Governance Committees | ||||
Valmont Industries, Inc. | ||||
Vice President and Treasurer | 85 | None | ||
(January 2006–Present) | ||||
Vice President — Mergers & Acquisitions | ||||
(January 2003–January 2006), and | ||||
Vice President | ||||
(July 1995–January 2003) | ||||
3M Corporation | ||||
Founder | 85 | Director and Audit | ||
Investor Analytics | Committee Member | |||
(Risk Management) | Investor Analytics | |||
(May 1999–Present) | ||||
Founder | ||||
Sutton Asset Management | ||||
(Hedge Fund) | ||||
(September 1996–Present) | ||||
47
Board of trustees/directors and officers addendum
Delaware Investments® Family of Funds
Name, Address, | Position(s) | Length of | ||
and Birth Date | Held with Fund(s) | Time Served | ||
Officers | ||||
David F. Connor | Vice President, | Vice President since | ||
2005 Market Street | Deputy General | September 2000 | ||
Philadelphia, PA 19103 | Counsel, and Secretary | and Secretary since | ||
December 1963 | October 2005 | |||
Daniel V. Geatens | Vice President | Treasurer | ||
2005 Market Street | and Treasurer | since October 25, 2007 | ||
Philadelphia, PA 19103 | ||||
October 1972 | ||||
David P. O’Connor | Senior Vice President, | Senior Vice President, | ||
2005 Market Street | General Counsel, | General Counsel, and | ||
Philadelphia, PA 19103 | and Chief Legal Officer | Chief Legal Officer | ||
February 1966 | since October 2005 | |||
Richard Salus | Senior Vice President | Chief Financial Officer | ||
2005 Market Street | and Chief Financial Officer | since November 2006 | ||
Philadelphia, PA 19103 | ||||
October 1963 | ||||
4 David F. Connor, Daniel V. Geatens, David P. O’Connor, and Richard Salus serve in similar capacities for the six portfolios of the Optimum Fund Trust, which have the same investment advisor, principal underwriter, and transfer agent as the registrant.
48
Number of Portfolios in | ||||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships | ||
During Past 5 Years | by Trustee or Officer | Held by Trustee or Officer | ||
David F. Connor has served as | 85 | None4 | ||
Vice President and Deputy | ||||
General Counsel of | ||||
Delaware Investments | ||||
since 2000. | ||||
Daniel V. Geatens has served | 85 | None4 | ||
in various capacities at | ||||
different times at | ||||
Delaware Investments. | ||||
David P. O’Connor has served in | 85 | None4 | ||
various executive and legal | ||||
capacities at different times | ||||
at Delaware Investments. | ||||
Richard Salus has served in | 85 | None4 | ||
various executive capacities | ||||
at different times at | ||||
Delaware Investments. | ||||
The Statement of Additional Information for the Fund(s) includes additional information about the Trustees and Officers and is available, without charge, upon request by calling 800 523-1918.
49
About the organization
This annual 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 | 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 |
50
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.
51
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Annual report | |
Delaware Small Cap Core Fund | |
November 30, 2008 |
Core equity mutual fund |
Table of contents
Portfolio management review | 1 |
Performance summary | 4 |
Disclosure of Fund expenses | 8 |
Sector allocation and top 10 holdings | 10 |
Statement of net assets | 12 |
Statement of operations | 19 |
Statements of changes in net assets | 20 |
Financial highlights | 22 |
Notes to financial statements | 30 |
Report of independent registered public accounting firm | 40 |
Other Fund information | 41 |
Board of trustees/directors and officers addendum | 42 |
About the organization | 50 |
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.
© 2009 Delaware Distributors, L.P.
All third-party trademarks cited are the property of their respective owners.
Portfolio management review | |
Delaware Small Cap Core Fund | Dec. 9, 2008 |
The managers of Delaware Small Cap Core Fund provided the answers to the questions below as a review of the Fund’s activities for the fiscal year that ended Nov. 30, 2008.
How did the Fund perform?
Delaware Small Cap Core Fund returned -40.55% at net asset value and -43.98% at maximum offer price (both figures represent Class A shares with distributions reinvested) for the fiscal year ended Nov. 30, 2008. The Fund’s benchmark index, the Russell 2000® Index, returned -37.46% for the same period. Complete, annualized performance for Delaware Small Cap Core Fund is shown in the table on page 4.
Please discuss the investment climate during the past 12 months.
The annual period presented an extraordinarily challenging investment environment, as investors contended with the dual threats posed by declining economic conditions coupled with a credit crisis that grew in intensity as the period progressed.
Early during the period, declining economic conditions dominated investors’ attention. Unemployment figures rose, reflecting a deteriorating job market, while inflationary pressures mounted, primarily due to higher oil and food prices. Crude oil prices, in particular, seemed to reach new heights on an almost daily basis through the spring; they peaked at more than $140 a barrel before finally declining during the summer months. However, a steady and sometimes sharp drop in home prices drew increasing attention as the period progressed.
Lower home prices caused a general loss of confidence and effectively crippled the global credit markets, making credit extremely difficult to obtain for both individuals and corporations. The result was a long list of problems at banks and other financial institutions that began with the March 2008 bailout of Bear Stearns by J.P. Morgan (with assistance from the Federal Reserve). Severe strains on credit and liquidity also led Lehman Brothers to file for bankruptcy, with parts of the company purchased by Barclays Capital. Similar conditions forced Merrill Lynch to sell itself to Bank of America, among other notable financial industry shakeups that resulted from the credit crisis.
The Federal Reserve took an array of steps to stem the crisis, including lowering the fed funds rate on a total of seven separate occasions, and establishing a plan for biweekly emergency auctions of loans to banks. Along with central banks around the world, the Fed also provided major markets with almost unlimited liquidity, and in a dramatic departure from its normal operations, facilitated (in coordination with the Treasury Department) a number of mergers or acquisitions and took the unprecedented step of injecting capital directly into major financial institutions as liquidity deteriorated.
Although all of these problems had roots in the credit markets, almost all areas of the equity markets experienced troubles as well. In general, small-capitalization stocks closely tracked their large-capitalization peers for the fiscal year. As measured by the benchmark Russell 2000 Index, for example, small-cap stocks declined by 37%, and large-cap stocks, as measured by the S&P 500 Index, fell 38% for the 12-month period ended Nov. 30, 2008.
The views expressed are current as of the date of this report and are subject to change.
Data for this portfolio management review were provided by Bloomberg unless otherwise noted.
1
Portfolio management review
Delaware Small Cap Core Fund
What was your investment strategy during the past 12 months?
We manage the Fund using a “bottom up” approach, meaning that we base individual investment decisions primarily on the merits and financial attributes of an individual company, rather than focusing solely on the health of its broader industry or sector.
In accordance with this approach, we tended to emphasize traditionally defensive companies (those that perform well during economic downturns) during the period because we anticipated that the economy would continue to deteriorate due to the difficulties in the credit markets. Specifically, we sought companies within the small-cap universe that had low debt levels, as well as those we believed would be able to maintain positive free cash flow despite the slowing economic conditions.
Broadly, our emphasis on defensive companies included the establishment of underweight positions compared to the benchmark within the financials, basic materials, and credit cyclicals sectors. Alternatively, we held overweight positions compared to the Russell 2000 Index in the healthcare and technology sectors. We reduced our investments in technology during the period due to a belief that technology spending would slow along with the broader deceleration in the economy.
Which sectors and stocks contributed to performance?
All industry sectors experienced negative returns, a condition indicative of the difficult investment climate that we faced during the period. Compared to the benchmark, however, the Fund’s holdings in the business services sector held up best. For example, Fund holdings there declined by 26% during the annual period, whereas the same sector within the Russell 2000 Index fell by almost 34% for the same period. Huron Consulting Group was among our top performers within the business services sector. Huron outperformed over the period due to its exposure to defensive markets as well as an accretive acquisition made by the company in the healthcare consulting space, which is expected to boost earnings growth in 2009.
Fund performance also benefited from our underweight position within the consumer discretionary sector. Stocks within this sector declined by more than 50% within the benchmark due, we believe, to the severe pressures on consumer spending that persisted throughout the fiscal period. As of the end of the period, the Fund was significantly underweight compared to the benchmark in consumer discretionary stocks.
Despite the depressed conditions within the sector, men’s clothing retailer Jos. A. Bank stood out for its strong performance. Jos. A. Bank shares outperformed as the company’s sales held up much better than its peers in the retail space. Following the company’s outperformance, we completely sold out of our position as we felt that the stock’s valuation was starting to look expensive when considering the weakening fundamental outlook for retailers.
What sectors and stocks detracted from Fund returns?
The Fund’s financials holdings performed the worst compared to the benchmark index, although other sectors declined more on an absolute basis. The Fund’s performance within financials was hurt most because of our exposure to savings and loans and regional banks, primarily during the early part of the
2
reporting period. Both were at the epicenter of the financial crisis, reporting significant losses due to their portfolios of nonperforming loans (both real estate and beyond). Many companies were forced to raise capital, which further diluted their stock.
Citizens Republic Bancorp, a diversified banking and financial services company with branches located in the Midwest, detracted from Fund returns over the year. The company reported faster-than-expected deterioration in its portfolio of loans, particularly among the commercial real estate sector. We sold our positions in Citizens Bank during the year in favor of opportunities we deemed to be more attractive. As the period progressed, we moved our portfolio of financial holdings toward what we considered to be a more defensive posture — purchasing stocks of property and casualty insurance companies that were far less exposed to the difficulties in the credit markets.
Our overweight position in the healthcare sector also hurt Fund returns for the year. Though the healthcare sector has traditionally held up well during times of slow or no economic growth, Fund performance within the sector was negatively affected by stock-specific factors. Healthways, a provider of disease management and wellness services, was a notable detractor within the sector. The stock came under pressure as investors became concerned that HMOs would reduce their spending on specialized health and care support solutions, which would in turn weaken Healthways’ growth prospects. We maintained our position in the stock because we didn’t believe HMOs would cut back spending and we remained confident in the company’s long-term growth opportunities.
Fund basics | |||||
Delaware Small Cap Core Fund | As of Nov. 30, 2008 | ||||
Fund objective: | The Fund seeks long-term capital appreciation. | ||||
Total Fund net assets: | $50.6 million | ||||
Number of holdings: | 149 | ||||
Fund start date: | Dec. 29, 1998 | ||||
Nasdaq symbols | CUSIPs | ||||
Class A | DCCAX | 24610B883 | |||
Class C | DCCCX | 24610B867 | |||
Class R | DCCRX | 24610B834 | |||
Institutional Class | DCCIX | 24610B859 |
3
Performance summary | |
Delaware Small Cap Core Fund | Nov. 30, 2008 |
The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. Please obtain the performance data for the most recent month end by calling 800 523-1918 or visiting our Web site at www.delawareinvestments.com/performance. Current performance may be lower or higher than the performance data quoted.
You should consider the investment objectives, risks, charges, and expenses of the investment company carefully before investing. The Delaware Small Cap Core Fund prospectus contains this and other important information about the investment company. Please request a prospectus through your financial advisor by calling 800 523-1918 or visiting our Web site at www.delawareinvestments.com. Read the prospectus carefully before you invest or send money.
Fund performance | Average annual total returns through Nov. 30, 2008 | |||||||
1 year | 3 years | 5 years | Lifetime | |||||
Class A (Est. Dec. 29, 1998) | ||||||||
Excluding sales charge | -40.55% | -12.32% | -2.38% | +5.81% | ||||
Including sales charge | -43.98% | -14.02% | -3.53% | +5.18% | ||||
Class C (Est. Aug. 1, 2005) | ||||||||
Excluding sales charge | -41.03% | -12.99% | n/a | -12.30% | ||||
Including sales charge | -41.60% | -12.99% | n/a | -12.30% |
Returns reflect the reinvestment of all distributions and any applicable sales charges as noted in the following paragraphs.
Performance for Class C shares, excluding sales charges, assumes either that contingent deferred sales charges did not apply or that the investment was not redeemed.
Expense limitations were in effect for all classes during the periods shown in the Fund performance chart and in the Performance of a $10,000 Investment chart. The current expenses for each class are listed on the “Fund expenses” chart. (Note that all charts and graphs referred to in the “Performance summary” section of this report are found on pages 4 through 6.) Performance would have been lower had the expense limitation not been in effect.
The Fund offers Class A, C, R, and Institutional Class shares. Class A shares are sold with a maximum front-end sales charge of up to 5.75%, and have an annual distribution and service fee of up to 0.30% of average daily net assets.
Class C shares are sold with a contingent deferred sales charge of 1.00% if redeemed during the first 12 months. They are also subject to an annual distribution and service fee of 1.00% of average daily net assets.
Please see the fee table in the prospectus and your financial professional for a more complete explanation of sales charges.
4
Class R shares were first made available Aug. 1, 2005, and are available only for certain retirement plan products. They are sold without a sales charge and have an annual distribution and service fee of up to 0.60% of average daily net assets.
The Fund's expense ratios, as described in the most recent prospectus, are disclosed in the “Fund expense ratios” table. Management has contracted to reimburse certain expenses and/or waive its management fees from April 1, 2008, through March 31, 2009. Please see the most recent prospectus for additional information on the fee waivers.
Fund expense ratios | Class A | Class C | Class R | Institutional Class | ||||
Total annual operating expense | 1.47% | 2.17% | 1.77% | 1.17% | ||||
(without fee waivers) | ||||||||
Net expense ratio | 1.35% | 2.10% | 1.60% | 1.10% | ||||
(including fee waivers, if any)* |
* The applicable fee waivers are discussed in the text on pages 4 and 5.
The average annual total returns for the 1-year, 3-year, and lifetime (since Aug. 1, 2005) periods ended Nov. 30, 2008, for Delaware Small Cap Core Fund Class R shares were -40.75%, -12.51%, and - -11.86%, respectively.
The average annual total returns for the 1-year, 3-year, 5-year, and lifetime (since Dec. 29, 1998) periods ended Nov. 30, 2008, for Delaware Small Cap Core Fund Institutional Class shares were - -40.41%, -12.10%, -2.22%, and +5.89%, respectively. Institutional Class shares were first made available Dec. 29, 1998, and are available without sales or asset-based distribution charges only to certain eligible institutional accounts.
The “Fund performance” table and the Performance of a $10,000 Investment graph do not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares.
Funds that invest in small- and/or medium-sized company stocks typically involve greater risk, particularly in the short term, than those investing in larger, more established companies.
5
Performance summary
Delaware Small Cap Core Fund
Performance of a $10,000 investment
Average annual total returns from Dec. 29, 1998, through Nov. 30, 2008
For period beginning Dec. 29, 1998, through Nov. 30, 2008 | Starting value | Ending value | ||
Russell 2000 Index | $10,000 | $13,166 | ||
Delaware Small Cap Core Fund — Class A Shares | $9,425 | $16,502 |
The chart assumes $10,000 invested in the Fund on Dec. 29, 1998, and includes the effect of a 5.75% front-end sales charge and the reinvestment of all distributions. Please note additional details on these fees in the “Performance summary” section of this report, which includes pages 4 through 6.
The chart also assumes $10,000 invested in the Russell 2000 Index as of Dec. 29, 1998. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 Index is a subset of the Russell 3000® Index, representing approximately 10% of the total market capitalization of that index. The S&P 500 Index, mentioned in the portfolio management review, measures the performance of 500 mostly large-cap stocks weighted by market value, and is often used to represent performance of the U.S. stock market. An index is unmanaged and does not reflect the costs of operating a mutual fund, such as the costs of buying, selling, and holding securities. You cannot invest directly in an index.
Past performance is not a guarantee of future results.
Performance of other Fund classes will vary due to different charges and expenses.
The chart does not reflect the deduction of taxes the shareholders would pay on Fund distributions or redemptions of Fund shares.
6
Disclosure of Fund expenses
For the period June 1, 2008 to November 30, 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 June 1, 2008 to November 30, 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
8
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.
Delaware Small Cap Core Fund
Expense analysis of an investment of $1,000
Beginning | Ending | Expenses | |||||||||||||||
Account Value | Account Value | Annualized | Paid During Period | ||||||||||||||
6/1/08 | 11/30/08 | Expense Ratio | 6/1/08 to 11/30/08* | ||||||||||||||
Actual Fund return | |||||||||||||||||
Class A | $ | 1,000.00 | $ | 643.30 | 1.36% | $ | 5.59 | ||||||||||
Class C | 1,000.00 | 640.90 | 2.11% | 8.66 | |||||||||||||
Class R | 1,000.00 | 641.90 | 1.61% | 6.61 | |||||||||||||
Institutional Class | 1,000.00 | 644.00 | 1.11% | 4.56 | |||||||||||||
Hypothetical 5% return (5% return before expenses) | |||||||||||||||||
Class A | $ | 1,000.00 | $ | 1,018.20 | 1.36% | $ | 6.86 | ||||||||||
Class C | 1,000.00 | 1,014.45 | 2.11% | 10.63 | |||||||||||||
Class R | 1,000.00 | 1,016.95 | 1.61% | 8.12 | |||||||||||||
Institutional Class | 1,000.00 | 1,019.45 | 1.11% | 5.60 |
* “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).
9
Sector allocation and top 10 holdings | |
Delaware Small Cap Core Fund | As of November 30, 2008 |
Sector designations may be different than the sector designations presented in other Fund materials. The sector designations may represent the investment manager’s internal sector classifications, which may result in the sector designations for one Fund being different than another Fund’s sector designations.
Sector | Percentage of net assets | ||
Common Stock | 97.51 | % | |
Basic Materials | 4.56 | % | |
Business Services | 7.65 | % | |
Capital Goods | 9.43 | % | |
Communication Services | 2.11 | % | |
Consumer Discretionary | 3.76 | % | |
Consumer Services | 4.29 | % | |
Consumer Staples | 3.85 | % | |
Energy | 4.64 | % | |
Financials | 16.17 | % | |
Health Care | 16.16 | % | |
Media | 1.08 | % | |
Real Estate | 3.71 | % | |
Technology | 16.27 | % | |
Transportation | 0.84 | % | |
Utilities | 2.99 | % | |
Repurchase Agreements | 3.73 | % | |
Securities Lending Collateral | 26.49 | % | |
Total Value of Securities | 127.73 | % | |
Obligation to Return Securities Lending Collateral | (27.60 | %) | |
Liabilities Net of Receivables and Other Assets | (0.13 | %) | |
Total Net Assets | 100.00 | % |
10
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 | ||
Black Hills | 1.26 | % | |
Granite Construction | 1.25 | % | |
ProAssurance | 1.22 | % | |
Aspen Insurance Holdings | 1.18 | % | |
AAON | 1.18 | % | |
Rock-Tenn Class A | 1.12 | % | |
Cleco | 1.12 | % | |
Bio-Rad Laboratories Class A | 1.12 | % | |
First Niagara Financial Group | 1.09 | % | |
Senior Housing Properties Trust | 1.08 | % |
11
Statement of net assets | |
Delaware Small Cap Core Fund | November 30, 2008 |
Number of shares | Value | |||||
Common Stock – 97.51% | ||||||
Basic Materials – 4.56% | ||||||
Ashland | 6,092 | $ | 58,175 | |||
Compass Minerals International | 8,110 | 454,079 | ||||
* | Ferro | 33,370 | 214,569 | |||
*† | OM Group | 14,000 | 276,220 | |||
† | PolyOne | 90,360 | 255,719 | |||
Rock-Tenn Class A | 16,850 | 569,024 | ||||
*† | Rockwood Holdings | 30,720 | 274,637 | |||
Silgan Holdings | 4,600 | 208,104 | ||||
2,310,527 | ||||||
Business Services – 7.65% | ||||||
* | Administaff | 20,560 | 351,165 | |||
American Ecology | 16,650 | 294,372 | ||||
† | AMN Healthcare Services | 32,640 | 291,149 | |||
*† | CRA International | 6,350 | 184,277 | |||
*† | DynCorp International Class A | 21,660 | 321,651 | |||
*† | FTI Consulting | 2,920 | 160,133 | |||
* | Healthcare Services Group | 28,230 | 448,856 | |||
*† | Huron Consulting Group | 7,400 | 385,540 | |||
† | Kforce | 35,700 | 242,760 | |||
* | McGrath RentCorp | 18,800 | 338,024 | |||
† | RiskMetrics Group | 19,590 | 292,675 | |||
*† | TeleTech Holdings | 17,800 | 156,996 | |||
† | United Stationers | 12,650 | 402,397 | |||
3,869,995 | ||||||
Capital Goods – 9.43% | ||||||
AAON | 31,350 | 596,903 | ||||
* | Acuity Brands | 12,210 | 329,182 | |||
* | Applied Industrial Technologies | 15,270 | 291,046 | |||
Barnes Group | 21,640 | 289,760 | ||||
† | Chart Industries | 19,150 | 183,074 | |||
† | Columbus McKinnon | 25,600 | 300,032 | |||
Granite Construction | 14,750 | 632,627 | ||||
† | Hexcel | 36,770 | 275,775 | |||
*† | Kadant | 16,490 | 247,020 | |||
Lufkin Industries | 6,850 | 337,774 | ||||
† | Perini | 11,100 | 212,565 | |||
† | Rofin-Sinar Technologies | 12,800 | 303,872 | |||
Triumph Group | 9,970 | 340,974 | ||||
*† | URS | 11,460 | 435,022 | |||
4,775,626 |
12
Number of shares | Value | |||||
Common Stock (continued) | ||||||
Communication Services – 2.11% | ||||||
* | Alaska Communications Systems Group | 51,200 | $ | 496,640 | ||
† | IPG Photonics | 16,700 | 226,953 | |||
NTELOS Holdings | 15,450 | 343,145 | ||||
1,066,738 | ||||||
Consumer Discretionary – 3.76% | ||||||
† | Aeropostale | 24,770 | 374,522 | |||
*† | Fossil | 19,750 | 300,200 | |||
Guess | 12,870 | 170,270 | ||||
*† | Marvel Entertainment | 14,440 | 425,258 | |||
Phillips-Van Heusen | 14,050 | 245,032 | ||||
*† | True Religion Apparel | 11,450 | 144,156 | |||
† | ULTA Salon Cosmetics & Fragrance | 34,250 | 245,915 | |||
1,905,353 | ||||||
Consumer Services – 4.29% | ||||||
*† | Bally Technologies | 19,480 | 359,796 | |||
*† | Buffalo Wild Wings | 10,100 | 231,896 | |||
CKE Restaurants | 40,130 | 288,936 | ||||
† | Jack in the Box | 24,820 | 434,350 | |||
*† | Papa John’s International | 23,000 | 407,560 | |||
*† | WMS Industries | 18,240 | 449,616 | |||
2,172,154 | ||||||
Consumer Staples – 3.85% | ||||||
Alberto-Culver | 16,950 | 363,917 | ||||
* | Casey’s General Stores | 16,050 | 475,883 | |||
*† | Chattem | 7,200 | 522,503 | |||
† | Ralcorp Holdings | 5,300 | 331,568 | |||
Seaboard | 280 | 252,280 | ||||
1,946,151 | ||||||
Energy – 4.64% | ||||||
*† | Basic Energy Services | 17,670 | 202,852 | |||
† | Brigham Exploration | 39,050 | 118,322 | |||
*† | Bristow Group | 16,400 | 371,132 | |||
† | Carrizo Oil & Gas | 6,900 | 142,830 | |||
† | Complete Production Services | 32,190 | 263,636 | |||
*† | Exco Resources | 16,150 | 123,871 | |||
*† | Grey Wolf | 62,910 | 344,747 | |||
* | Penn Virginia | 14,370 | 431,530 | |||
*† | PetroQuest Energy | 49,930 | 350,009 | |||
2,348,929 |
13
Statement of net assets
Delaware Small Cap Core Fund
Number of shares | Value | |||||
Common Stock (continued) | ||||||
Financials – 16.17% | ||||||
Aspen Insurance Holdings | 32,440 | $ | 597,868 | |||
Dime Community Bancshares | 29,000 | 391,210 | ||||
East West Bancorp | 30,100 | 445,480 | ||||
First Commonwealth Financial | 27,990 | 336,160 | ||||
First Midwest Bancorp | 19,700 | 362,677 | ||||
First Niagara Financial Group | 35,700 | 553,707 | ||||
* | Greenhill & Co | 7,600 | 517,560 | |||
Harleysville Group | 12,850 | 484,188 | ||||
Independent Bank (MA) | 11,050 | 261,775 | ||||
IPC Holdings | 11,600 | 324,800 | ||||
Max Capital Group | 31,750 | 367,030 | ||||
optionsXpress Holdings | 24,400 | 343,796 | ||||
† | ProAssurance | 11,270 | 615,228 | |||
Provident Bankshares | 16,050 | 151,191 | ||||
RLI | 9,140 | 533,045 | ||||
Smithtown Bancorp | 5,050 | 100,798 | ||||
TCF Financial | 15,500 | 258,850 | ||||
† | Texas Capital Bancshares | 19,500 | 312,975 | |||
* | Trustmark | 25,600 | 510,976 | |||
Valley National Bancorp | 10,950 | 211,664 | ||||
Waddell & Reed Financial Class A | 19,370 | 260,333 | ||||
Washington Federal | 14,500 | 244,905 | ||||
8,186,216 | ||||||
Health Care – 16.16% | ||||||
† | Align Technology | 41,400 | 289,800 | |||
*† | Alkermes | 48,000 | 354,240 | |||
† | Bio-Rad Laboratories Class A | 7,630 | 565,840 | |||
† | Catalyst Health Solutions | 14,550 | 327,375 | |||
† | Celera | 38,670 | 376,646 | |||
† | Conmed | 7,900 | 185,729 | |||
† | Eurand | 32,900 | 259,252 | |||
† | Gen-Probe | 5,800 | 213,730 | |||
† | Healthways | 20,400 | 165,036 | |||
*† | Kendle International | 15,650 | 320,356 | |||
*† | Medarex | 54,350 | 274,468 | |||
*† | Noven Pharmaceuticals | 32,350 | 370,408 | |||
*† | Onyx Pharmaceuticals | 12,800 | 359,680 | |||
*† | OSI Pharmaceuticals | 11,750 | 437,100 | |||
*† | Psychiatric Solutions | 18,650 | 471,844 |
14
Number of shares | Value | |||||
Common Stock (continued) | ||||||
Health Care (continued) | ||||||
* | Quality Systems | 14,000 | $ | 420,980 | ||
† | Quidel | 24,000 | 327,120 | |||
† | Regeneron Pharmaceuticals | 20,600 | 318,476 | |||
† | Res-Care | 32,750 | 427,388 | |||
*† | Sun Healthcare Group | 42,800 | 428,856 | |||
† | Techne | 7,100 | 440,270 | |||
*† | United Therapeutics | 7,350 | 403,001 | |||
Universal Health Services Class B | 5,490 | 203,954 | ||||
* | West Pharmaceutical Services | 6,710 | 238,205 | |||
8,179,754 | ||||||
Media – 1.08% | ||||||
National CineMedia | 40,550 | 330,077 | ||||
*† | Scholastic | 14,050 | 214,544 | |||
544,621 | ||||||
Real Estate – 3.71% | ||||||
* | Digital Realty Trust | 11,740 | 321,206 | |||
* | Home Properties | 12,740 | 496,860 | |||
Senior Housing Properties Trust | 39,180 | 545,778 | ||||
* | Sovran Self Storage | 18,870 | 512,509 | |||
1,876,353 | ||||||
Technology – 16.27% | ||||||
*† | Anixter International | 11,160 | 305,784 | |||
*† | Blackboard | 15,800 | 389,154 | |||
† | Digital River | 12,950 | 273,634 | |||
† | Dionex | 7,600 | 389,804 | |||
† | FARO Technologies | 17,200 | 247,508 | |||
† | Harris Stratex Networks Class A | 46,400 | 231,536 | |||
* | Heartland Payment Systems | 20,160 | 346,349 | |||
† | iGate | 40,850 | 249,185 | |||
InfoGROUP | 82,100 | 322,653 | ||||
† | Informatica | 19,050 | 264,414 | |||
*† | j2 Global Communications | 25,250 | 492,879 | |||
† | JDA Software Group | 25,250 | 332,795 | |||
† | Lawson Software | 86,250 | 338,100 | |||
*† | Netgear | 32,850 | 397,484 | |||
*† | NIC | 16,850 | 78,016 | |||
*† | Nuance Communications | 17,500 | 160,650 | |||
*† | ON Semiconductor | 52,100 | 152,132 | |||
† | Progress Software | 22,350 | 475,607 |
15
Statement of net assets
Delaware Small Cap Core Fund
Number of shares | Value | |||||
Common Stock (continued) | ||||||
Technology (continued) | ||||||
† | Sapient | 57,300 | $ | 225,762 | ||
*† | SAVVIS | 32,050 | 252,234 | |||
*† | Synaptics | 11,180 | 245,625 | |||
† | Tekelec | 39,250 | 480,812 | |||
United Online | 49,050 | 325,202 | ||||
*† | Universal Electronics | 17,700 | 293,820 | |||
† | ValueClick | 25,750 | 158,878 | |||
† | ViaSat | 25,150 | 538,964 | |||
† | Wind River Systems | 32,150 | 268,131 | |||
8,237,112 | ||||||
Transportation – 0.84% | ||||||
† | HUB Group | 16,000 | 427,200 | |||
427,200 | ||||||
Utilities – 2.99% | ||||||
Black Hills | 24,640 | 635,957 | ||||
Cleco | 24,050 | 566,859 | ||||
* | Otter Tail | 16,550 | 310,975 | |||
1,513,791 | ||||||
Total Common Stock (cost $74,113,397) | 49,360,520 | |||||
Principal amount | ||||||
Repurchase Agreements** – 3.73% | ||||||
BNP Paribas 0.20%, dated 11/28/08, to be | ||||||
repurchased on 12/1/08, repurchase price | ||||||
$1,888,031 (collateralized by U.S. Government | ||||||
obligations, 6/4/09; market value $1,950,624) | $1,888,000 | 1,888,000 | ||||
Total Repurchase Agreements (cost $1,888,000) | 1,888,000 | |||||
Total Value of Securities Before Securities Lending | ||||||
Collateral – 101.24% (cost $76,001,397) | 51,248,520 |
16
Number of shares | Value | |||||||
Securities Lending Collateral*** – 26.49% | ||||||||
Investment Companies | ||||||||
Mellon GSL DBT II Collateral Fund | 13,757,205 | $ | 13,391,263 | |||||
=Mellon GSL DBT II Liquidation Trust | 214,226 | 17,567 | ||||||
Total Securities Lending Collateral (cost $13,971,431) | 13,408,830 | |||||||
Total Value of Securities – 127.73% | ||||||||
(cost $89,972,828) | 64,657,350 | © | ||||||
Obligation to Return Securities Lending | ||||||||
Collateral*** – (27.60%) | (13,971,431 | ) | ||||||
Liabilities Net of Receivables and | ||||||||
Other Assets – (0.13%) | (64,144 | ) | ||||||
Net Assets Applicable to 7,319,911 | ||||||||
Shares Outstanding – 100.00% | $ | 50,621,775 | ||||||
Net Asset Value – Delaware Small Cap Core Fund | ||||||||
Class A ($17,528,627/ 2,530,713 Shares) | $6.93 | |||||||
Net Asset Value – Delaware Small Cap Core Fund | ||||||||
Class C ($7,494,387/ 1,110,351 Shares) | $6.75 | |||||||
Net Asset Value – Delaware Small Cap Core Fund | ||||||||
Class R ($2,610,581/ 379,857 Shares) | $6.87 | |||||||
Net Asset Value – Delaware Small Cap Core Fund | ||||||||
Institutional Class ($22,988,180/ 3,298,990 Shares) | $6.97 | |||||||
Components of Net Assets at November 30, 2008: | ||||||||
Shares of beneficial interest (unlimited authorization – no par) | $ | 91,044,318 | ||||||
Undistributed net investment income | 112,666 | |||||||
Accumulated net realized loss on investments | (15,219,731 | ) | ||||||
Net unrealized depreciation of investments | (25,315,478 | ) | ||||||
Total net assets | $ | 50,621,775 |
† | Non income producing security. |
* | Fully or partially on loan. |
** | See Note 1 in “Notes to financial statements.” |
*** | See Note 8 in “Notes to financial statements.” |
© | Includes $13,137,285 of securities loaned. |
= | Security is being fair valued in accordance with the Fund’s fair valuation policy. At November 30, 2008, the aggregate amount of fair valued securities was $17,567, which represented 0.03% of the Fund’s net assets. See Note 1 in “Notes to financial statements.” |
17
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) | $6.93 | ||
Sales charge (5.75% of offering price) (B) | 0.42 | ||
Offering price | $7.35 |
(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
18
Statement of operations | |
Delaware Small Cap Core Fund | Year Ended November 30, 2008 |
Investment Income: | |||||||
Dividends | $ | 961,793 | |||||
Interest | 42,446 | ||||||
Securities lending income | 193,627 | $ | 1,197,866 | ||||
Expenses: | |||||||
Management fees | 588,504 | ||||||
Distribution expenses – Class A | 92,864 | ||||||
Distribution expenses – Class C | 136,624 | ||||||
Distribution expenses – Class R | 19,660 | ||||||
Dividend disbursing and transfer agent fees and expenses | 223,293 | ||||||
Registration fees | 68,499 | ||||||
Reports and statements to shareholders | 33,295 | ||||||
Accounting and administration expenses | 31,387 | ||||||
Audit and tax | 19,696 | ||||||
Legal fees | 11,243 | ||||||
Custodian fees | 7,166 | ||||||
Dues and services | 5,757 | ||||||
Trustees’ fees | 4,863 | ||||||
Pricing fees | 2,983 | ||||||
Insurance fees | 1,779 | ||||||
Consulting fees | 1,104 | ||||||
Taxes (other than taxes on income) | 383 | ||||||
Trustees’ expenses | 335 | 1,249,435 | |||||
Less fees waived | (147,029 | ) | |||||
Less waived distribution expenses – Class A | (15,477 | ) | |||||
Less waived distribution expenses – Class R | (3,277 | ) | |||||
Less expense paid indirectly | (952 | ) | |||||
Total operating expenses | 1,082,700 | ||||||
Net Investment Income | 115,166 | ||||||
Net Realized and Unrealized Loss on Investments: | |||||||
Net realized loss on investments | (15,059,482 | ) | |||||
Net realized loss on redemptions in-kind* | (230,128 | ) | |||||
Net realized loss | (15,289,610 | ) | |||||
Net change in unrealized appreciation/depreciation of investments | (20,167,182 | ) | |||||
Net Realized and Unrealized Loss on Investments | (35,456,792 | ) | |||||
Net Decrease in Net Assets Resulting from Operations | $ | (35,341,626 | ) |
*See Note 11 in “Notes to Financial Statements.”
See accompanying notes
19
Statements of changes in net assets
Delaware Small Cap Core Fund
Year Ended | ||||||||
11/30/08 | 11/30/07 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | 115,166 | $ | (127,823 | ) | |||
Net realized gain (loss) on investments | (15,289,610 | ) | 3,714,671 | |||||
Net change in unrealized appreciation/depreciation of investments | (20,167,182 | ) | (8,787,702 | ) | ||||
Net decrease in net assets resulting from operations | (35,341,626 | ) | (5,200,854 | ) | ||||
Dividends and Distributions to Shareholders from: | ||||||||
Net realized gain on investments: | ||||||||
Class A | (1,661,864 | ) | (868,326 | ) | ||||
Class C | (747,248 | ) | (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 | 15,242,391 | 30,154,046 | ||||||
Class C | 3,445,661 | 11,425,330 | ||||||
Class R | 2,133,293 | 3,777,371 | ||||||
Institutional Class | 16,003,810 | 24,312,531 | ||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | 1,456,794 | 774,260 | ||||||
Class C | 706,562 | 374,810 | ||||||
Class R | 129,164 | 7,399 | ||||||
Institutional Class | 1,184,571 | 501,495 | ||||||
40,302,246 | 71,327,242 |
20
Year Ended | ||||||||
11/30/08 | 11/30/07 | |||||||
Capital Share Transactions (continued): | ||||||||
Cost of shares repurchased: | ||||||||
Class A | $ | (25,213,086 | ) | $ | (11,280,461 | ) | ||
Class C | (8,306,747 | ) | (3,460,754 | ) | ||||
Class R | (986,931 | ) | (693,644 | ) | ||||
Institutional Class | (10,952,917 | ) | (6,761,739 | ) | ||||
(45,459,681 | ) | (22,196,598 | ) | |||||
Increase (decrease) in net assets derived from capital share transactions | (5,157,435 | ) | 49,130,644 | |||||
Net Increase (Decrease) in Net Assets | (44,222,091 | ) | 42,149,408 | |||||
Net Assets: | ||||||||
Beginning of year | 94,843,866 | 52,694,458 | ||||||
End of year (including undistributed net investment income of $112,666 and $—, respectively) | $ | 50,621,775 | $ | 94,843,866 |
See accompanying notes
21
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)1 |
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 return2 |
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 loss to average net assets prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 The average shares outstanding method has been applied for per share information. |
2 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers by the manager and distributor. Performance would have been lower had the waivers not been in effect. |
See accompanying notes
22
Year Ended | |||||||||||||||
11/30/08 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | |||||||||||
$12.150 | $13.030 | $11.380 | $14.600 | $13.080 | |||||||||||
0.019 | (0.010 | ) | (0.015 | ) | 0.022 | 0.026 | |||||||||
(4.747 | ) | (0.450 | ) | 1.895 | 1.035 | 2.481 | |||||||||
(4.728 | ) | (0.460 | ) | 1.880 | 1.057 | 2.507 | |||||||||
— | — | — | (0.025 | ) | (0.044 | ) | |||||||||
(0.492 | ) | (0.420 | ) | (0.230 | ) | (4.252 | ) | (0.943 | ) | ||||||
(0.492 | ) | (0.420 | ) | (0.230 | ) | (4.277 | ) | (0.987 | ) | ||||||
$ 6.930 | $12.150 | $13.030 | $11.380 | $14.600 | |||||||||||
(40.55% | ) | (3.62% | ) | 16.83% | 9.04% | 20.62% | |||||||||
$17,529 | $41,871 | $25,220 | $3,863 | $20 | |||||||||||
1.34% | 1.29% | 1.26% | 1.02% | 0.75% | |||||||||||
1.57% | 1.47% | 1.73% | 2.53% | 1.30% | |||||||||||
0.19% | (0.07% | ) | (0.13% | ) | 0.20% | 0.20% | |||||||||
(0.04% | ) | (0.25% | ) | (0.60% | ) | (1.31% | ) | (0.35% | ) | ||||||
84% | 104% | 121% | 104% | 136% |
23
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 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 Date of commencement of operations; ratios 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. Performance would have been lower had the waiver not been in effect. |
4 The portfolio turnover is representative for the Fund for the entire year. |
See accompanying notes
24
8/1/051 | ||||||||||||
Year Ended | to | |||||||||||
11/30/08 | 11/30/07 | 11/30/06 | 11/30/05 | |||||||||
$11.940 | $12.910 | $11.360 | $11.590 | |||||||||
(0.055 | ) | (0.105 | ) | (0.106 | ) | (0.021 | ) | |||||
(4.643 | ) | (0.445 | ) | 1.886 | (0.209 | ) | ||||||
(4.698 | ) | (0.550 | ) | 1.780 | (0.230 | ) | ||||||
(0.492 | ) | (0.420 | ) | (0.230 | ) | — | ||||||
(0.492 | ) | (0.420 | ) | (0.230 | ) | — | ||||||
$ 6.750 | $11.940 | $12.910 | $11.360 | |||||||||
(41.03% | ) | (4.37% | ) | 15.97% | (1.98% | ) | ||||||
$7,494 | $18,697 | $11,777 | $866 | |||||||||
2.09% | 2.04% | 2.01% | 2.00% | |||||||||
2.27% | 2.17% | 2.43% | 5.14% | |||||||||
(0.56% | ) | (0.82% | ) | (0.88% | ) | (0.56% | ) | |||||
(0.74% | ) | (0.95% | ) | (1.30% | ) | (3.71% | ) | |||||
84% | 104% | 121% | 104%4 |
25
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 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 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. |
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 waivers by the manager and distributor. Performance would have been lower had the waivers not been in effect. |
See accompanying notes
26
Year Ended | |||||||||
11/30/08 | 11/30/07 | 11/30/061 | |||||||
$12.090 | $13.000 | $11.360 | |||||||
(0.005 | ) | (0.042 | ) | (0.047 | ) | ||||
(4.723 | ) | (0.448 | ) | 1.917 | |||||
(4.728 | ) | (0.490 | ) | 1.870 | |||||
(0.492 | ) | (0.420 | ) | (0.230 | ) | ||||
(0.492 | ) | (0.420 | ) | (0.230 | ) | ||||
$ 6.870 | $12.090 | $13.000 | |||||||
(40.75% | ) | (3.86% | ) | 16.78% | |||||
$2,611 | $3,100 | $215 | |||||||
1.59% | 1.54% | 1.51% | |||||||
1.87% | 1.77% | 2.03% | |||||||
(0.06% | ) | (0.32% | ) | (0.38% | ) | ||||
(0.34% | ) | (0.55% | ) | (0.90% | ) | ||||
84% | 104% | 121% |
27
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 income1 |
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 return2 |
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 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 The average shares outstanding method has been applied for per share information. |
2 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes
28
Year Ended | |||||||||||||||
11/30/08 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | |||||||||||
$12.190 | $13.040 | $11.390 | $14.600 | $13.080 | |||||||||||
0.044 | 0.023 | 0.015 | 0.031 | 0.026 | |||||||||||
(4.772 | ) | (0.453 | ) | 1.895 | 1.036 | 2.481 | |||||||||
(4.728 | ) | (0.430 | ) | 1.910 | 1.067 | 2.507 | |||||||||
— | — | (0.030 | ) | (0.025 | ) | (0.044 | ) | ||||||||
(0.492 | ) | (0.420 | ) | (0.230 | ) | (4.252 | ) | (0.943 | ) | ||||||
(0.492 | ) | (0.420 | ) | (0.260 | ) | (4.277 | ) | (0.987 | ) | ||||||
$ 6.970 | $12.190 | $13.040 | $11.390 | $14.600 | |||||||||||
(40.41% | ) | (3.38% | ) | 17.13% | 9.14% | 20.62% | |||||||||
$22,988 | $31,176 | $15,482 | $6,645 | $4,765 | |||||||||||
1.09% | 1.04% | 1.01% | 0.94% | 0.75% | |||||||||||
1.27% | 1.17% | 1.43% | 2.23% | 1.00% | |||||||||||
0.44% | 0.18% | 0.12% | 0.28% | 0.20% | |||||||||||
0.26% | 0.05% | (0.30% | ) | (1.01% | ) | (0.05% | ) | ||||||||
84% | 104% | 121% | 104% | 136% |
29
Notes to financial statements | |
Delaware Small Cap Core Fund | November 30, 2008 |
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 ask prices will be used. Short-term debt securities having less than 60 days to maturity are valued at amortized cost, which approximates market value. Investment companies are valued at net asset 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 suspension of trading in a security. The Fund may use fair value pricing more frequently for securities traded primarily in non-U.S. markets because, among other things, most foreign markets close well before the Fund values its securities at 4:00 p.m. Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, government actions or pronouncements, aftermarket trading or new events, may have occurred in the interim. To account for this, the Fund may frequently value foreign securities using fair value prices based on third-party vendor modeling tools (“international fair value pricing”).
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.
30
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 other 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 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
31
Notes to financial statements
Delaware Small Cap Core Fund
1. Significant Accounting Policies (continued)
statements and totaled $1,124 for the year ended November 30, 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 1.10% 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. For the period April 1, 2007 to March 31, 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 year ended November 30, 2008, the Fund was charged $ 3,923 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.
32
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 November 30, 2008, the Fund had liabilities payable to affiliates as follows:
Investment management fee payable to DMC | $ | 19,938 |
Dividend disbursing, transfer agent fees and fund accounting | ||
oversight fees and other expenses payable to DSC | 18,325 | |
Distribution fees payable to DDLP | 10,997 | |
Other expenses payable to DMC and affiliates* | 2,653 |
*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 year ended November 30, 2008, the Fund was charged $5,318 for internal legal and tax services provided by DMC and/or its affiliates.
For the year ended November 30, 2008, DDLP earned $7,012 for commissions on sales of the Fund’s Class A shares. For the year ended November 30, 2008, DDLP received gross CDSC of $2,392 and $4,103 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 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 year ended November 30, 2008, the Fund made purchases of $64,514,375 and sales of $71,803,832 of investment securities other than short-term investments.
At November 30, 2008, the cost of investments for federal income tax purposes was $90,423,794. At November 30, 2008, net unrealized depreciation was $25,766,444, of which $578,376 related to unrealized appreciation of investments and $ 26,344,820 related to unrealized depreciation of investments.
33
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 in 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 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 November 30, 2008:
Securities | |||
Level 1 | $ | 51,248,520 | |
Level 2 | 13,391,263 | ||
Level 3 | 17,567 | ||
Total | $ | 64,657,350 |
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:
Securities | ||||
Balance as of 11/30/07 | $ | — | ||
Net change in unrealized appreciation/depreciation of investments | (196,659 | ) | ||
Net transfers in and/or out of Level 3 | 214,226 | |||
Balance as of 11/30/08 | $ | 17,567 |
34
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 years ended November 30, 2008 and 2007 was as follows:
Year Ended | ||||||
11/30/08 | 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 |
5. Components of Net Assets on a Tax Basis
As of November 30, 2008, the components of net assets on a tax basis were as follows:
Shares of beneficial interest | $ | 91,044,318 | ||
Undistributed ordinary income | 112,666 | |||
Capital loss carryforwards | (14,768,765 | ) | ||
Unrealized depreciation of investments | (25,766,444 | ) | ||
Net assets | $ | 50,621,775 |
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 wash sales on redemption in-kind, gain(loss) on redemptions in-kind and dividends and distributions. Results of operations and net assets were not affected by these reclassifications. For the year ended November 30, 2008, the Fund recorded the following reclassifications.
Accumulated net realized loss | $ | 233,290 | ||
Undistributed net investment income | (2,500 | ) | ||
Paid-in capital | (230,790 | ) |
For federal income tax purposes, capital loss carryforwards may be carried forward and applied against future capital gains. Capital loss carry forwards remaining at November 30, 2008 will expire as follows: $14,768,765 expires in 2016.
35
Notes to financial statements
Delaware Small Cap Core Fund
6. Capital Shares
Transactions in capital shares were as follows:
Year Ended | ||||||
11/30/08 | 11/30/07 | |||||
Shares sold: | ||||||
Class A | 1,449,626 | 2,325,110 | ||||
Class C | 341,626 | 897,859 | ||||
Class R | 212,992 | 294,043 | ||||
Institutional Class | 1,644,887 | 1,857,057 | ||||
Shares issued upon reinvestment of dividends and distributions: | ||||||
Class A | 124,512 | 62,038 | ||||
Class C | 61,494 | 30,325 | ||||
Class R | 11,097 | 594 | ||||
Institutional Class | 100,901 | 40,120 | ||||
3,947,135 | 5,507,146 | |||||
Shares repurchased: | ||||||
Class A | (2,490,369 | ) | (875,119 | ) | ||
Class C | (858,886 | ) | (274,351 | ) | ||
Class R | (100,739 | ) | (54,664 | ) | ||
Institutional Class | (1,004,928 | ) | (525,920 | ) | ||
(4,454,922 | ) | (1,730,054 | ) | |||
Net increase (decrease) | (507,787 | ) | 3,777,092 |
7. Line of Credit
The Fund, along with certain other funds in the Delaware Investments® Family of Funds (Participants), was a participant in a $225,000,000 revolving line of credit with The Bank of New York Mellon (BNY Mellon) to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, Participants were charged an annual commitment fee, which was allocated across the Participants on the basis of each Participant’s allocation of the entire facility. Participants were permitted to borrow up to a maximum of one third of their net assets under the agreement. The agreement expired on November 18, 2008. The Fund had no loans outstanding as of November 30, 2008, or at any time during the year then ended.
Effective as of November 18, 2008, the Fund along with the other Participants entered into an amendment to the agreement with BNY Mellon for a $35,000,000 revolving line of credit. The agreement, as amended, is to be used as described above and operates in substantially the same manner as the original agreement. The agreement, as amended, expires on November 17, 2009.
36
8. Securities Lending
The Fund, along with other funds in the Delaware Investments® Family of Funds, may lend their securities pursuant to a security lending agreement (Lending Agreement) with BNY Mellon. With respect to each loan, if the aggregate market value of securities collateral held plus cash collateral received 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 than the applicable collateral requirements. Cash collateral received is generally invested in the Mellon GSL DBT II Collateral Fund (the “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 Collective Trust seeks to maintain a net asset value per unit of $1.00, but there can be no assurance that it will always be able to do so. The Fund may incur investment losses as a result of investing securities lending collateral in the Collective Trust. This could occur if an investment in the Collective Trust defaulted or if it were necessary to liquidate assets in the Collective Trust to meet returns on outstanding security loans at a time when the Collective Trust’s net asset value per unit was less than $1.00. Under those circumstances, the Fund may not receive an amount from the Collective Trust that is equal in amount to the collateral the Fund would be required to return to the borrower of the securities and the Fund would be required to make up for this shortfall. During the year ended November 30, 2008, BNY Mellon transferred certain distressed securities from the Collective Trust into the Mellon GSL DBT II Liquidation Trust. 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 are 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 November 30, 2008, the value of the securities on loan was $13,137,285, for which cash collateral was received and invested in accordance with the Lending Agreement. Such investments are presented on the statement of net assets under the caption “Securities Lending Collateral”.
37
Notes to financial statements
Delaware Small Cap Core Fund
9. Credit and Market Risk
The Fund invests a significant portion of its assets in small-sized 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 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 year ended November 30, 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 November 30, 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.
11. Redemptions In-Kind
During the year ended November 30, 2008, the Fund satisfied withdrawal requests with transfers of securities and cash totaling $5,305,405, resulting in a net realized loss of $230,128.
38
12. Tax Information (Unaudited)
The information set forth below is for the Fund’s fiscal year as required by federal laws. Shareholders, however, must report distributions on a calendar year basis for income tax purposes, which may include distributions for portions of two fiscal years of a fund. Accordingly, the information needed by shareholders for income tax purposes will be sent to them in January of each year. Please consult your tax advisor for proper treatment of this information.
For the fiscal year ended November 30, 2008, the Fund designates distributions paid during the year as follows:
(A) Long-Term Capital Gains Distributions (Tax Basis) | 72.23% |
(B) Ordinary Income Distributions* (Tax Basis) | 27.77% |
Total Distributions (Tax Basis) | 100.00% |
(C) Qualifying Dividends1 | 52.86% |
(A) and (B) are based on a percentage of the Fund’s total distributions.
(C) is based on a percentage of the Fund’s ordinary income distributions.
1 Qualifying dividends represent dividends which qualify for the corporate dividends received deduction.
* For the fiscal year ended November 30, 2008, certain dividends paid by the Fund may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Fund intends to designate up to a maximum amount of $519,111 to be taxed at maximum rate of 15%. Complete information will be computed and reported in conjunction with your 2008 Form 1099-DIV.
39
Report of independent
registered public accounting firm
To the Shareholders and Board of Trustees
Delaware Group® Equity Funds V — Delaware Small Cap Core Fund
We have audited the accompanying statement of net assets of Delaware Small Cap Core Fund (one of the series constituting Delaware Group Equity Funds V) (the “Fund”) as of November 30, 2008, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of November 30, 2008 by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Delaware Small Cap Core Fund of Delaware Group Equity Funds V at November 30, 2008, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
Philadelphia, Pennsylvania
January 16, 2009
40
Other Fund information
(Unaudited)
Delaware Small Cap Core Fund
Fund management
Christopher S. Adams, CFA
Vice President, Portfolio Manager, Senior Equity Analyst
Christopher S. Adams is a portfolio manager on the firm’s Core Equity team. He also performs analysis and research to support the portfolio management function. From 1995 to 1998, he served as the firm’s vice president, strategic planning. Prior to joining Delaware Investments in 1995, Adams had approximately 10 years of experience in the financial services industry in the U.S. and U.K., including positions with Coopers & Lybrand, The Sumitomo Bank, Bank of America, and Lloyds Bank. Adams holds both bachelor’s and master’s degrees in history and economics from Oxford University, England, and received an MBA with dual concentrations in finance and insurance/risk management from The Wharton School of the University of Pennsylvania. He is a director and past president of the CFA Society of Philadelphia.
Francis X. Morris
Senior Vice President, Chief Investment Officer – Core Equity
Francis X. Morris joined Delaware Investments in 1997 and is currently the chief investment officer for Core Equity investments. Prior to joining the firm, Morris served as vice president and director of equity research at PNC Asset Management. He received a bachelor’s degree from Providence College and holds an MBA from Widener University. Morris is a past president of the CFA Society of Philadelphia and is a member of the CFA Institute. In addition, he is a former officer of the National Association of Petroleum Investment Analysts.
Donald G. Padilla, CFA
Vice President, Portfolio Manager, Senior Equity Analyst
Donald G. Padilla joined Delaware Investments in 1994 and is a portfolio manager on the firm’s Core Equity team. He also performs analysis and research to support the portfolio management function. Padilla joined Delaware Investments as an assistant controller in the firm’s treasury function, responsible for managing corporate cash investments, developing financial models, and overseeing the financial operations of the Lincoln Life 401(k) annuities segment. Prior to joining Delaware Investments, he held various positions at The Vanguard Group. Padilla holds a bachelor’s degree in accounting from Lehigh University, and he is a member of the CFA Society of Philadelphia.
Michael S. Morris, CFA
Vice President, Portfolio Manager, Senior Equity Analyst
Michael S. Morris, who joined Delaware Investments in 1999, is a portfolio manager on the firm’s Core Equity team. He also performs analysis and research to support the portfolio management function. Prior to joining the firm, he worked as a senior equity analyst at Newbold’s Asset Management, covering financial stocks. Morris began his investment career in 1993 at Ohio Casualty. He earned his bachelor’s degree in finance from Indiana University and an MBA with a concentration in finance from The Wharton School of the University of Pennsylvania. He is a member of the Bank and Financial Analysts Association.
41
Board of trustees/directors and officers addendum
Delaware Investments® Family of Funds
A mutual fund is governed by a Board of Trustees/Directors (“Trustees”), which has oversight responsibility for the management of a fund’s business affairs. Trustees establish procedures and oversee and review the performance of the investment manager, the distributor, and others who perform services for the fund. The independent fund trustees, in particular, are advocates
Name, Address, | Position(s) | Length of | ||
and Birth Date | Held with Fund(s) | Time Served | ||
Interested Trustees | ||||
Patrick P. Coyne1 | Chairman, President, | Chairman and Trustee | ||
2005 Market Street | Chief Executive Officer, | since August 16, 2006 | ||
Philadelphia, PA 19103 | and Trustee | |||
April 1963 | President and | |||
Chief Executive Officer | ||||
since August 1, 2006 | ||||
Independent Trustees | ||||
Thomas L. Bennett | Trustee | Since March 2005 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
October 1947 | ||||
1 Patrick P. Coyne is considered to be an “Interested Trustee” because he is an executive officer of the Fund’s(s’) investment advisor.
42
for shareholder interests. Each trustee has served in that capacity since he or she was elected to or appointed to the Board of Trustees, and will continue to serve until his or her retirement or the election of a new trustee in his or her place. The following is a list of the Trustees and Officers with certain background and related information.
Number of Portfolios in | ||||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships | ||
During Past 5 Years | by Trustee or Officer | Held by Trustee or Officer | ||
Patrick P. Coyne has served in | 85 | Director | ||
various executive capacities | Kaydon Corp. | |||
at different times at | ||||
Delaware Investments.2 | Board of Governors Member | |||
Investment Company | ||||
Institute (ICI) | ||||
(2007–Present) | ||||
Member of Investment Committee | ||||
Cradle of Liberty Council, BSA | ||||
(November 2007–Present) | ||||
Finance Committee Member | ||||
St. John Vianney | ||||
Roman Catholic Church | ||||
(2007–Present) | ||||
Private Investor | 85 | Director | ||
(March 2004–Present) | Bryn Mawr Bank Corp. (BMTC) | |||
(April 2007–Present) | ||||
Investment Manager | ||||
Morgan Stanley & Co. | Chairman of | |||
(January 1984–March 2004) | Investment Committee | |||
Pennsylvania Academy of | ||||
Fine Arts (2007–Present) | ||||
Trustee (2004–Present) | ||||
2 Delaware Investments is the marketing name for Delaware Management Holdings, Inc. and its subsidiaries, including the Fund’s(s’) investment advisor, principal underwriter, and its transfer agent.
43
Board of trustees/directors and officers addendum
Delaware Investments® Family of Funds
Name, Address, | Position(s) | Length of | ||
and Birth Date | Held with Fund(s) | Time Served | ||
Independent Trustees (continued) | ||||
Thomas L. Bennett | ||||
(continued) | ||||
John A. Fry | Trustee | Since January 2001 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
May 1960 | ||||
Anthony D. Knerr | Trustee | Since April 1990 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
December 1938 | ||||
Lucinda S. Landreth | Trustee | Since March 2005 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
June 1947 | ||||
Ann R. Leven | Trustee | Since October 1989 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
November 1940 | ||||
Thomas F. Madison | Trustee | Since May 19973 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
February 1936 | ||||
3 In 1997, several funds managed by Voyageur Fund Managers, Inc. (the “Voyageur Funds”) were incorporated into the Delaware Investments Family of Funds. Mr. Madison served as a director of the Voyageur Funds from 1993 until 1997.
44
Number of Portfolios in | ||||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships | ||
During Past 5 Years | by Trustee or Officer | Held by Trustee or Officer | ||
Investment Committee and | ||||
Governance Committee | ||||
Member | ||||
Pennsylvania Horticultural | ||||
Society | ||||
(February 2006–Present) | ||||
President | 85 | Director | ||
Franklin & Marshall College | Community Health Systems | |||
(June 2002–Present) | ||||
Executive Vice President | ||||
University of Pennsylvania | ||||
(April 1995–June 2002) | ||||
Founder and | 85 | None | ||
Managing Director | ||||
Anthony Knerr & Associates | ||||
(Strategic Consulting) | ||||
(1990–Present) | ||||
Chief Investment Officer | 85 | None | ||
Assurant, Inc. (Insurance) | ||||
(2002–2004) | ||||
Consultant | 85 | Director and Audit | ||
ARL Associates | Committee Chair | |||
(Financial Planning) | Systemax, Inc. | |||
(1983–Present) | ||||
President and | 85 | Director and Chair of | ||
Chief Executive Officer | Compensation Committee, | |||
MLM Partners, Inc. | Governance Committee | |||
(Small Business Investing | Member | |||
and Consulting) | CenterPoint Energy | |||
(January 1993–Present) | ||||
45
Board of trustees/directors and officers addendum
Delaware Investments® Family of Funds
Name, Address, | Position(s) | Length of | ||
and Birth Date | Held with Fund(s) | Time Served | ||
Independent Trustees (continued) | ||||
Thomas F. Madison | ||||
(continued) | ||||
�� | ||||
Janet L. Yeomans | Trustee | Since April 1999 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
July 1948 | ||||
J. Richard Zecher | Trustee | Since March 2005 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
July 1940 | ||||
46
Number of Portfolios in | ||||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships | ||
During Past 5 Years | by Trustee or Officer | Held by Trustee or Officer | ||
Lead Director and Chair of | ||||
Audit and Governance | ||||
Committees, Member of | ||||
Compensation Committee | ||||
Digital River, Inc. | ||||
Director and Chair of | ||||
Governance Committee, | ||||
Audit Committee | ||||
Member | ||||
Rimage Corporation | ||||
Director and Chair of | ||||
the Compensation Committee | ||||
Spanlink Communications | ||||
Lead Director and Chair of | ||||
Compensation and | ||||
Governance Committees | ||||
Valmont Industries, Inc. | ||||
Vice President and Treasurer | 85 | None | ||
(January 2006–Present) | ||||
Vice President — Mergers & Acquisitions | ||||
(January 2003–January 2006), and | ||||
Vice President | ||||
(July 1995–January 2003) | ||||
3M Corporation | ||||
Founder | 85 | Director and Audit | ||
Investor Analytics | Committee Member | |||
(Risk Management) | Investor Analytics | |||
(May 1999–Present) | ||||
Founder | ||||
Sutton Asset Management | ||||
(Hedge Fund) | ||||
(September 1996–Present) | ||||
47
Board of trustees/directors and officers addendum
Delaware Investments® Family of Funds
Name, Address, | Position(s) | Length of | ||
and Birth Date | Held with Fund(s) | Time Served | ||
Officers | ||||
David F. Connor | Vice President, | Vice President since | ||
2005 Market Street | Deputy General | September 2000 | ||
Philadelphia, PA 19103 | Counsel, and Secretary | and Secretary since | ||
December 1963 | October 2005 | |||
Daniel V. Geatens | Vice President | Treasurer | ||
2005 Market Street | and Treasurer | since October 25, 2007 | ||
Philadelphia, PA 19103 | ||||
October 1972 | ||||
David P. O’Connor | Senior Vice President, | Senior Vice President, | ||
2005 Market Street | General Counsel, | General Counsel, and | ||
Philadelphia, PA 19103 | and Chief Legal Officer | Chief Legal Officer | ||
February 1966 | since October 2005 | |||
Richard Salus | Senior Vice President | Chief Financial Officer | ||
2005 Market Street | and Chief Financial Officer | since November 2006 | ||
Philadelphia, PA 19103 | ||||
October 1963 | ||||
4 David F. Connor, Daniel V. Geatens, David P. O’Connor, and Richard Salus serve in similar capacities for the six portfolios of the Optimum Fund Trust, which have the same investment advisor, principal underwriter, and transfer agent as the registrant.
48
Number of Portfolios in | ||||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships | ||
During Past 5 Years | by Trustee or Officer | Held by Trustee or Officer | ||
David F. Connor has served as | 85 | None4 | ||
Vice President and Deputy | ||||
General Counsel of | ||||
Delaware Investments | ||||
since 2000. | ||||
Daniel V. Geatens has served | 85 | None4 | ||
in various capacities at | ||||
different times at | ||||
Delaware Investments. | ||||
David P. O’Connor has served in | 85 | None4 | ||
various executive and legal | ||||
capacities at different times | ||||
at Delaware Investments. | ||||
Richard Salus has served in | 85 | None4 | ||
various executive capacities | ||||
at different times at | ||||
Delaware Investments. | ||||
The Statement of Additional Information for the Fund(s) includes additional information about the Trustees and Officers and is available, without charge, upon request by calling 800 523-1918.
49
About the organization
This annual 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 | 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 |
50
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.
51
![]() | ![]() |
Annual report | |
Delaware Dividend Income Fund | |
November 30, 2008 |
Value equity mutual fund |
Table of contents
Portfolio management review | 1 |
Performance summary | 5 |
Disclosure of Fund expenses | 8 |
Sector allocation and top 10 equity holdings | 10 |
Statement of net assets | 13 |
Statement of operations | 34 |
Statements of changes in net assets | 36 |
Financial highlights | 38 |
Notes to financial statements | 48 |
Report of independent registered public accounting firm | 61 |
Other Fund information | 62 |
Board of trustees/directors and officers addendum | 66 |
About the organization | 74 |
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.
© 2009 Delaware Distributors, L.P.
All third-party trademarks cited are the property of their respective owners.
Portfolio management review | ||
Delaware Dividend Income Fund | Dec. 9, 2008 |
The managers of Delaware Dividend Income Fund provided answers to the questions below as a review of the Fund’s activities for the fiscal year that ended Nov. 30, 2008.
How would you describe the economic and market backdrop for the Fund during the past 12 months?
The past fiscal year was an especially challenging time for equity investors, particularly late in the 12-month time frame. The roots of the problems had been established well before the start of the reporting period, with the declining housing market. As housing prices fell, defaults on mortgage loans rose, leading to big drops in the value of collateralized debt obligations, securities for which the value can be hard to assess because they are backed by a pool of bonds, loans, or other fixed income instruments that are being held as collateral.
Investor worries about troubled mortgages spread to other corners of the credit market. Financial institutions eventually became very reluctant to lend funds to each other, unsure about the other firms’ abilities to pay back their debts.
Against this backdrop, a number of major financial institutions faced tremendous challenges, including bankruptcy filings, forced mergers, government takeovers, a mandated conservatorship, and the conversion of two major investment banks into bank holding companies, which are more heavily regulated by the government.
Stocks, which had performed poorly for the majority of the fiscal year, plummeted in September and October. Major equity indices experienced some of their biggest single-day declines in history. Many of the worst-performing stocks were in the financial sector, which was hit hard by the problems in the credit market. For the full 12-month fiscal period, the broad U.S. stock market, as measured by the S&P 500 Index, fell roughly 38%.
Real estate investment trusts (REITs) encountered particular distress in this investing environment. As the U.S. credit crunch had worsened, lenders were forced to all but shut off access to needed investment capital. This was a particular problem for REITs, which depend on regular financing to fund their operations. As financing became scarce and more expensive, many property companies saw their stock prices fall sharply. During the past 12 months, U.S. REITs, as measured by the FTSE NAREIT Equity REITs Index, lost more than 46%.
The high yield bond market also performed poorly, losing more than 30% of its value, as measured by the Merrill Lynch U.S. High Yield Master II Constrained Index. A weak economy led to growing worries that companies, especially those with higher levels of debt and weaker balance sheets, could default on their bonds. The majority of the high yield market downturn took place in October and November 2008, the two worst months for the asset class in the history of the Merrill Lynch index.
How did Delaware Dividend Income Fund perform during the 12 months ending Nov. 30, 2008?
Delaware Dividend Income Fund returned –37.15% at net asset value and –40.75% with the sales charge included (both figures reflect Class A shares with all distributions reinvested). The Fund’s all-equity benchmark, the S&P 500 Index, returned –38.09% during
The views expressed are current as of the date of this report and are subject to change.
Data for this portfolio management review were provided by Bloomberg unless otherwise noted.
1
Portfolio management review
Delaware Dividend Income Fund
the same time frame. For the complete, annualized performance of Delaware Dividend Income Fund, please see the table on page 5.
What factors influenced the Fund’s performance the most during the past 12 months?
The economic crisis that developed late in the period had an extremely negative impact on Fund performance across asset types. Historically, the Fund’s four asset types — large-cap value equities, REITs, high yield bonds, and convertible bonds — have had relatively limited correlation in performance, meaning that their returns tended to move up and down independently of each other. For investors, this low correlation had helped limit losses in prior downturns. During this fiscal year, however, all four asset classes fell to varying degrees. Of the four, high yield bonds did the best overall, followed by convertible bonds, equities, and REITs.
In the Fund’s large-cap value portfolio, the most negative effect on relative performance came from too little exposure to the energy sector. Despite the recent decline in crude oil prices, energy stocks outperformed the benchmark S&P 500 Index during the period, in large part because of the increase in oil prices between December 2007 and July 2008. The Fund’s more-limited allocation to this sector detracted from our performance.
The equity portfolio’s performance was also hampered by our investments in the financial sector. Although we benefited from a relative lack of exposure to this weak-performing group, many of the financial stocks we owned were particularly poor performers — especially Wachovia, Washington Mutual, and Lehman Brothers (now owned primarily by Barclays Capital). All three were sold during the period.
On the positive side, many of our best performers, compared to the benchmark, were healthcare and consumer staples stocks. Both of these sectors have tended to generate relatively predictable earnings and therefore held up relatively well during challenging economic conditions.
In the Fund’s REIT portfolio, we benefited greatly from a large cash weighting. We had begun adding to our cash holdings before the start of the period, anticipating more-challenging market conditions. This defensive positioning was helpful as the period progressed and conditions became even more difficult. Another positive area of performance was in the self-storage sector, especially a position in PS Business Parks. Other strong-performing holdings included Highwoods Properties, which is a Southeastern owner/operator of office properties, and Health Care REIT, which owns and operates healthcare facilities.
In contrast, we were hurt by underweighting the so-called specialty subsector, a category that includes a handful of timber property companies. These owners of timberland have done relatively well compared to the rest of the REIT market and benefited from solid demand despite the slowing housing market.
Elsewhere, some of the Fund’s biggest individual detractors were ProLogis, an owner of industrial warehouses with a separate fund-management business; SL Green Realty, which owns Manhattan office space; and mall operator General Growth Properties. We sold two of these holdings prior to period end because of concerns about the health of the companies. We believed that the deteriorating ProLogis balance sheet had caused a decline in merchant development that would
2
negatively affect its business, and that General Growth Properties was weighed down with debt to the point that the company’s viability was threatened.
Despite significant negative returns, the Fund’s convertible securities portfolio significantly outperformed that of the benchmark S&P 500 Index. In particular, the Fund benefited from having selected comparatively strong stocks in the consumer discretionary sector. Also being significantly underrepresented in financials was helpful. Our holdings in industrials contributed as well. However, we were overweight relative to the benchmark in the media sector, and were also hampered by the disappointing performance of our holdings in that category.
In the high yield portfolio, we benefited from our conservative positioning, having made cuts before the beginning of the fiscal year to our allocation of CCC-rated bonds, the riskiest tier of the high yield market. Being overweight relative to the benchmark in telecommunications, utility, and energy bonds, as well as being underweight in consumer-product and auto-loan issues helped mitigate our overall negative results.
Unfortunately, we saw negative performance from some of our media, technology, and cable bonds, as well as from a handful of emerging market corporate bonds that performed quite poorly because of their perceived risks. A large position in bank loans early in the period detracted as well, as these interest-rate-sensitive bonds failed to perform as well in the volatile marketplace as we anticipated.
What was your recent portfolio management approach?
Given the challenges in the market and the weakening economy, we favored large-cap value stocks that we believed were best able to hold up in a chaotic market. As the period progressed, we increased our focus on companies we believed had stronger balance sheets and relatively predictable earnings. This defensive focus led us to make several new purchases in the healthcare and consumer staples sectors. In addition, the market’s large drop created new opportunities to add fundamentally strong companies at increasingly attractive valuations. At period end, we were evaluating potential purchase candidates in several sectors, including consumer discretionary, energy, industrials, and utilities.
Among REITs, we continued to focus on companies with what we deemed to be strong balance sheets, relatively modest debt loads, and a limited number of new property development projects on the horizon. Given the tremendous market uncertainty, especially late in the fiscal period, we found opportunities to invest in high-quality real estate stocks trading at what we believed were unusually attractive prices. We also maintained a higher-than-normal cash balance in the portfolio. In our view, this was a prudent step in light of the weaker economy and the REIT market’s volatility.
Relating to the Fund’s convertibles, we held substantially smaller positions in financial sector securities relative to our benchmark S&P 500 Index, a stance taken because of the ongoing significant risks facing investors in that sector. We also were, to an extent, underweight in industrials because of slowing economic activity. During the period, we added slightly to our exposure to materials sector companies, as we found certain stocks that declined more than we felt was warranted.
3
Portfolio management review
Delaware Dividend Income Fund
In addition, we maintained an overweight in technology, a sector we felt offered numerous opportunities to own solid companies.
Our belief that yields on lower-rated bonds were at historic lows relative to U.S. Treasury yields at the beginning of the period led us to position the Fund conservatively. We had an overweight in industries consisting of companies with tangible assets, strong cash flows, and modest debt levels.
Additionally, the Fund’s equity weighting including its REIT holdings, made up slightly less than half of the portfolio. At roughly 20%, the Fund allocation to convertible securities was higher than it would be during a typical economic environment. We also maintained a greater-than-normal allocation to high yield bonds.
Fund basics | |||||
Delaware Dividend Income Fund | As of Nov. 30, 2008 | ||||
Fund objective: | The Fund seeks to provide high current income and an investment that has the potential for capital appreciation. | ||||
Total Fund net assets: | $363 million | ||||
Number of holdings: | 364 | ||||
Fund start date: | Dec. 2, 1996 | ||||
Nasdaq symbols | CUSIPs | ||||
Class A | DDIAX | 24610B107 | |||
Class B | DDDBX | 24610B206 | |||
Class C | DDICX | 24610B305 | |||
Class R | DDDRX | 24610B842 | |||
Institutional Class | DDIIX | 24610B404 |
4
Performance summary | |
Delaware Dividend Income Fund | Nov. 30, 2008 |
The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. Please obtain the performance data for the most recent month end by calling 800 523-1918 or visiting our Web site at www.delawareinvestments.com/performance. Current performance may be lower or higher than the performance data quoted.
You should consider the investment objectives, risks, charges, and expenses of the investment company carefully before investing. The Delaware Dividend Income Fund prospectus contains this and other important information about the investment company. Please request a prospectus through your financial advisor by calling 800 523-1918 or visiting our Web site at www.delawareinvestments.com. Read the prospectus carefully before you invest or send money.
A rise or fall in interest rates can have a significant impact on bond prices and the net asset value (NAV) of the Fund. Funds that invest in bonds can lose their value as interest rates rise, and an investor can lose principal.
Fund performance | Average annual total returns through Nov. 30, 2008 | ||||||
1 year | 5 years | 10 years | Lifetime | ||||
Class A (Est. Dec. 2, 1996) | |||||||
Excluding sales charge | -37.15% | -2.70% | +2.11% | +4.74% | |||
Including sales charge | -40.75% | -3.84% | +1.51% | +4.22% | |||
Class B (Est. Oct. 1, 2003) | |||||||
Excluding sales charge | -37.72% | -3.44% | n/a | -2.87% | |||
Including sales charge | -40.05% | -3.80% | n/a | -3.10% | |||
Class C (Est. Oct. 1, 2003) | |||||||
Excluding sales charge | -37.63% | -3.41% | n/a | -2.84% | |||
Including sales charge | -38.22% | -3.41% | n/a | -2.84% |
Returns reflect the reinvestment of all distributions and any applicable sales charges as noted in the following paragraphs.
Performance for Class B and C shares, excluding sales charges, assumes either that contingent deferred sales charges did not apply or that the investment was not redeemed.
Expense limitations were in effect for all classes during the periods shown in the Fund performance chart and in the Performance of a $10,000 Investment chart. The current expenses for each class are listed on the “Fund expense ratios” table. (Note that all charts and graphs referred to in the “Performance summary” section of this report are found on pages 5 through 7.) Performance would have been lower had the expense limitation not been in effect.
The Fund offers Class A, B, C, R, and Institutional Class shares. Class A shares are sold with a maximum front-end sales charge of up to 5.75%, and have an annual distribution and service fee of up to 0.30% of average daily net assets.
5
Performance summary
Delaware Dividend Income Fund
Class B shares may only be purchased through dividend reinvestment and certain permitted exchanges as described in the prospectus. Please see the prospectus for additional information on Class B purchase and sales charges. Class B shares have a contingent deferred sales charge that declines from 4.00% to zero depending on the period of time the shares are held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase. They are also subject to an annual distribution and service fee of up to 1.00% of average daily net assets.
Class C shares are sold with a contingent deferred sales charge of 1.00% if redeemed during the first 12 months. They are also subject to an annual distribution and service fee of 1.00% of average daily net assets.
Please see the fee table in the prospectus and your financial professional for a more complete explanation of sales charges.
Class R shares were first made available Oct. 1, 2003, and are available only for certain retirement plan products. They are sold without a sales charge and have an annual distribution and service fee of up to 0.60% of average daily net assets, but such fee is subject to a contractual cap of 0.50% of average daily net assets.
The average annual total returns for the 1-year, 5-year, and lifetime (since Oct. 1, 2003) periods ended Nov. 30, 2008, for Delaware Dividend Income Fund Class R shares were -37.39%, -3.00%, and - -2.40%, respectively.
The average annual total returns for the 1-year, 5-year, 10-year, and lifetime (since Dec. 2, 1996) periods ended Nov. 30, 2008, for Delaware Dividend Income Fund Institutional Class shares were - -37.04%, -2.47%, +2.26%, and +4.85%, respectively. Institutional Class shares were first made available Dec. 2, 1996, and are available without sales or asset-based distribution charges only to certain eligible institutional accounts.
The “Fund performance” table and the “Performance of a $10,000 investment” graph do not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares.
The Fund’s expense ratios, as described in the most recent prospectus, are disclosed in the “Fund expense ratios” table. Management has contracted to reimburse certain expenses and/or waive its management fees from April 1, 2008, through March 31, 2009. Please see the most recent prospectus for additional information on the fee waivers.
Fund expense ratios | Class A | Class B | Class C | Class R | Institutional Class | |||||||||
Total annual operating expense | 1.42 | % | 2.12 | % | 2.12 | % | 1.72 | % | 1.12 | % | ||||
(without fee waivers) | ||||||||||||||
Net expense ratio | 1.37 | % | 2.12 | % | 2.12 | % | 1.62 | % | 1.12 | % | ||||
(including fee waivers, if any)* | ||||||||||||||
* The applicable fee waivers are discussed in the text on pages 5 and 6. |
6
Performance of a $10,000 investment
Average annual total returns from Nov. 30, 1998, through Nov. 30, 2008
![](https://capedge.com/proxy/N-CSR/0001206774-09-000168/geladivincfund_ncsr2x1x1.jpg)
For period beginning Nov. 30, 1998, through Nov. 30, 2008 | Starting value | Ending value | ||
Delaware Dividend Income Fund — Class A Shares | $ 9,425 | $11,618 | ||
S&P 500 Index | $10,000 | $ 9,104 |
The chart assumes $10,000 invested in the Fund on Nov. 30, 1998, and includes the effect of a 5.75% front-end sales charge and the reinvestment of all distributions. Please note additional details on these fees in the “Performance summary” section of this report, which includes pages 5 through 7.
The chart also assumes $10,000 invested in the S&P 500 Index as of Nov. 30, 1998. The S&P 500 Index measures the performance of 500 mostly large-cap stocks weighted by market value, and is often used to represent performance of the U.S. stock market.
The FTSE NAREIT Equity REITs Index, mentioned on page 1, measures the performance of all publicly traded equity real estate investment trusts traded on U.S. exchanges.
The Merrill Lynch U.S. High Yield Master II Constrained Index, mentioned on page 1, is a market value–weighted index that tracks the public high yield debt market.
An index is unmanaged and does not reflect the costs of operating a mutual fund, such as the costs of buying, selling, and holding securities. You cannot invest directly in an index. Past performance is not a guarantee of future results.
Performance of other Fund classes will vary due to different charges and expenses.
The chart does not reflect the deduction of taxes the shareholders would pay on Fund distributions or redemptions of Fund shares.
7
Disclosure of Fund expenses
For the period June 1, 2008 to November 30, 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 June 1, 2008 to November 30, 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.
8
Delaware Dividend Income Fund
Expense analysis of an investment of $1,000
Beginning | Ending | Expenses | |||||||||
Account Value | Account Value | Annualized | Paid During Period | ||||||||
6/1/08 | 11/30/08 | Expense Ratio | 6/1/08 to 11/30/08* | ||||||||
Actual Fund return | |||||||||||
Class A | $1,000.00 | $ 655.50 | 1.00% | $4.14 | |||||||
Class B | 1,000.00 | 652.70 | 1.75% | 7.23 | |||||||
Class C | 1,000.00 | 653.00 | 1.75% | 7.23 | |||||||
Class R | 1,000.00 | 654.30 | 1.25% | 5.17 | |||||||
Institutional Class | 1,000.00 | 656.40 | 0.75% | 3.11 | |||||||
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 the 183/366 (to reflect the one-half year period). |
9
Sector allocation and top 10 equity holdings | |
Delaware Dividend Income Fund | As of November 30, 2008 |
Sector designations may be different than the sector designations presented in other Fund materials. The sector designations may represent the investment manager’s internal sector classifications, which may result in the sector designations for one Fund being different than another Fund’s sector designations.
Sector | Percentage of net assets | |
Common Stock | 48.00 | % |
Consumer Discretionary | 3.30 | % |
Consumer Staples | 8.01 | % |
Diversified REITs | 1.10 | % |
Energy | 3.80 | % |
Financials | 4.14 | % |
Health Care | 9.08 | % |
Health Care REITs | 0.88 | % |
Hotel REITs | 0.58 | % |
Industrial REITs | 0.17 | % |
Industrials | 2.11 | % |
Information Technology | 4.43 | % |
Mall REITs | 1.00 | % |
Manufactured Housing REITs | 0.38 | % |
Materials | 0.97 | % |
Multifamily REITs | 1.22 | % |
Office REITs | 1.22 | % |
Self-Storage REITs | 0.51 | % |
Shopping Center REITs | 0.81 | % |
Specialty REITs | 0.25 | % |
Telecommunications | 2.73 | % |
Transportation | 0.00 | % |
Utilities | 1.31 | % |
Convertible Preferred Stock | 3.59 | % |
Banking, Finance & Insurance | 1.04 | % |
Basic Materials | 0.15 | % |
Cable, Media & Publishing | 0.16 | % |
Energy | 0.57 | % |
Health Care & Pharmaceuticals | 0.79 | % |
Telecommunications | 0.24 | % |
Utilities | 0.64 | % |
10
Sector | Percentage of net assets | |
Convertible Bonds | 17.09 | % |
Aerospace & Defense | 0.62 | % |
Banking, Finance & Insurance | 0.16 | % |
Basic Industry | 0.86 | % |
Cable, Media & Publishing | 1.26 | % |
Computers & Technology | 2.78 | % |
Electronics & Electrical Equipment | 1.20 | % |
Energy | 0.53 | % |
Environmental Services | 0.37 | % |
Health Care & Pharmaceuticals | 4.62 | % |
Real Estate | 1.04 | % |
Retail | 0.70 | % |
Telecommunications | 2.46 | % |
Transportation | 0.21 | % |
Utilities | 0.28 | % |
Corporate Bonds | 24.75 | % |
Basic Industry | 3.02 | % |
Brokerage | 0.10 | % |
Capital Goods | 3.50 | % |
Consumer Cyclical | 1.27 | % |
Consumer Non-Cyclical | 1.50 | % |
Energy | 3.79 | % |
Financials | 0.56 | % |
Media | 1.60 | % |
Real Estate | 0.12 | % |
Services Cyclical | 1.68 | % |
Services Non-Cyclical | 2.09 | % |
Technology & Electronics | 0.32 | % |
Telecommunications | 3.64 | % |
Utilities | 1.56 | % |
Senior Secured Loans | 0.61 | % |
Leveraged Non-Recourse Security | 0.00 | % |
Exchange Traded Fund | 0.05 | % |
Limited Partnership | 0.19 | % |
11
Sector allocation and top 10 equity holdings
Delaware Dividend Income Fund
Sector | Percentage of net assets | |
Preferred Stock | 0.55 | % |
Residual Interest Trust Certificate | 0.00 | % |
Warrants | 0.00 | % |
Repurchase Agreements | 0.91 | % |
Securities Lending Collateral | 8.01 | % |
Total Value of Securities | 103.75 | % |
Obligation to Return Securities Lending Collateral | (8.42 | %) |
Receivables and Other Assets Net of Liabilities | 4.67 | % |
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 | |
Travelers | 1.75 | % |
Archer-Daniels-Midland | 1.68 | % |
Merck | 1.51 | % |
Wyeth | 1.39 | % |
Kraft Foods Class A | 1.39 | % |
Verizon Communications | 1.38 | % |
Chevron | 1.37 | % |
CVS | 1.37 | % |
AT&T | 1.35 | % |
Quest Diagnostics | 1.31 | % |
12
Statement of net assets | |
Delaware Dividend Income Fund | November 30, 2008 |
Number of shares | Value | ||||
Common Stock – 48.00% | |||||
Consumer Discretionary – 3.30% | |||||
Gap | 338,000 | $ | 4,400,760 | ||
Limited Brands | 330,600 | 3,077,886 | |||
Mattel | 330,900 | 4,523,403 | |||
*† | Time Warner Cable Class A | 12 | 245 | ||
12,002,294 | |||||
Consumer Staples – 8.01% | |||||
Archer-Daniels-Midland | 223,200 | 6,111,216 | |||
CVS Caremark | 171,600 | 4,964,388 | |||
Heinz (H.J.) | 108,500 | 4,214,140 | |||
Kimberly-Clark | 74,200 | 4,288,018 | |||
Kraft Foods Class A | 184,900 | 5,031,129 | |||
Safeway | 205,000 | 4,469,000 | |||
29,077,891 | |||||
Diversified REITs – 1.10% | |||||
Ascendas Real Estate Investment Trust | 473,900 | 463,487 | |||
* | Digital Realty Trust | 21,600 | 590,976 | ||
Liberty Property Trust | 34,100 | 651,992 | |||
Vornado Realty Trust | 42,800 | 2,287,660 | |||
3,994,115 | |||||
Energy – 3.80% | |||||
Chevron | 62,900 | 4,969,729 | |||
ConocoPhillips | 83,900 | 4,406,428 | |||
Marathon Oil | 168,900 | 4,421,802 | |||
13,797,959 | |||||
Financials – 4.14% | |||||
Allstate | 158,800 | 4,039,872 | |||
Bank of New York Mellon | 153,500 | 4,637,235 | |||
Travelers | 145,600 | 6,355,441 | |||
15,032,548 | |||||
Health Care – 9.08% | |||||
Bristol-Myers Squibb | 227,300 | 4,705,110 | |||
Cardinal Health | 115,900 | 3,769,068 | |||
Johnson & Johnson | 78,800 | 4,616,104 | |||
Merck | 205,700 | 5,496,304 | |||
Pfizer | 277,400 | 4,557,682 | |||
Quest Diagnostics | 101,900 | 4,745,483 | |||
Wyeth | 140,400 | 5,055,804 | |||
32,945,555 |
13
Statement of net assets
Delaware Dividend Income Fund
Number of shares | Value | ||||
Common Stock (continued) | |||||
Health Care REITs – 0.88% | |||||
HCP | 40,200 | $ | 830,934 | ||
* | Health Care REIT | 37,100 | 1,409,800 | ||
Ventas | 41,900 | 962,862 | |||
3,203,596 | |||||
Hotel REITs – 0.58% | |||||
Hersha Hospitality Trust | 216,900 | 763,488 | |||
Host Hotels & Resorts | 180,000 | 1,353,600 | |||
2,117,088 | |||||
Industrial REITs – 0.17% | |||||
AMB Property | 35,800 | 616,476 | |||
616,476 | |||||
Industrials – 2.11% | |||||
† | BWAY Holding | 7,120 | 34,247 | ||
Donnelley (R.R.) & Sons | 272,000 | 3,470,720 | |||
* | Grupo Aeroportuario del Centro Norte ADR | 20,242 | 168,413 | ||
†=P@ | Port Townsend | 1,110 | 11 | ||
* | Waste Management | 136,300 | 3,979,961 | ||
7,653,352 | |||||
Information Technology – 4.43% | |||||
Intel | 320,000 | 4,416,000 | |||
International Business Machines | 55,800 | 4,553,280 | |||
* | Motorola | 728,000 | 3,137,680 | ||
Xerox | 570,600 | 3,988,494 | |||
16,095,454 | |||||
Mall REITs – 1.00% | |||||
* | Macerich | 23,000 | 309,580 | ||
* | Simon Property Group | 70,100 | 3,329,750 | ||
3,639,330 | |||||
Manufactured Housing REITs – 0.38% | |||||
Equity Lifestyle Properties | 28,800 | 996,480 | |||
* | Sun Communities | 34,000 | 372,300 | ||
1,368,780 | |||||
Materials – 0.97% | |||||
duPont (E.I.) deNemours | 140,200 | 3,513,412 | |||
3,513,412 | |||||
Multifamily REITs – 1.22% | |||||
* | American Campus Communities | 36,100 | 808,279 | ||
* | Apartment Investment & Management | 14,384 | 164,984 |
14
Number of shares | Value | ||||||
Common Stock (continued) | |||||||
Multifamily REITs (continued) | |||||||
* | AvalonBay Communities | 8,400 | $ | 509,628 | |||
Camden Property Trust | 33,900 | 897,333 | |||||
Equity Residential | 67,700 | 2,060,111 | |||||
4,440,335 | |||||||
Office REITs – 1.22% | |||||||
* | Alexandria Real Estate Equities | 17,400 | 770,472 | ||||
* | Highwoods Properties | 63,000 | 1,504,440 | ||||
Mack-Cali Realty | 45,500 | 863,135 | |||||
PS Business Parks | 23,800 | 1,134,308 | |||||
* | SL Green Realty | 8,500 | 161,160 | ||||
4,433,515 | |||||||
Self-Storage REITs – 0.51% | |||||||
* | Public Storage | 26,600 | 1,859,074 | ||||
1,859,074 | |||||||
Shopping Center REITs – 0.81% | |||||||
* | Federal Realty Investment Trust | 27,600 | 1,596,384 | ||||
Kimco Realty | 64,000 | 905,600 | |||||
Kite Realty Group Trust | 53,300 | 208,403 | |||||
Ramco-Gershenson Properties Trust | 41,700 | 205,581 | |||||
2,915,968 | |||||||
Specialty REITs – 0.25% | |||||||
* | Entertainment Properties Trust | 37,400 | 917,422 | ||||
917,422 | |||||||
Telecommunications – 2.73% | |||||||
AT&T | 171,100 | 4,886,616 | |||||
† | Century Communications | 1,625,000 | 0 | ||||
Verizon Communications | 153,800 | 5,021,570 | |||||
9,908,186 | |||||||
Transportation – 0.00% | |||||||
*† | Delta Air Lines | 399 | 3,513 | ||||
3,513 | |||||||
Utilities – 1.31% | |||||||
*† | Mirant | 448 | 7,715 | ||||
*† | NRG Energy | 4,650 | 110,159 | ||||
Progress Energy | 116,800 | 4,635,791 | |||||
4,753,665 | |||||||
Total Common Stock (cost $263,042,117) | 174,289,528 |
15
Statement of net assets
Delaware Dividend Income Fund
Number of shares | Value | ||||||
Convertible Preferred Stock – 3.59% | |||||||
Banking, Finance & Insurance – 1.04% | |||||||
Aspen Insurance 5.625% exercise price $29.28, | |||||||
expiration date 12/31/49 | 37,800 | $ | 1,228,500 | ||||
Fannie Mae 8.75% exercise price $32.45, | |||||||
expiration date 5/13/11 | 25,000 | 46,000 | |||||
# | Morgan Stanley 144A 11.00% exercise price | ||||||
$94.64, expiration date 1/7/09 | 35,432 | 1,772,131 | |||||
Sovereign Capital Trust IV 4.375% exercise price | |||||||
$29.16, expiration date 3/1/34 | 35,700 | 582,356 | |||||
XL Capital 7.00% exercise price $80.59, | |||||||
expiration date 2/15/09 | 64,400 | 131,376 | |||||
3,760,363 | |||||||
Basic Materials – 0.15% | |||||||
Freeport-McMoRan Copper & Gold 6.75% | |||||||
exercise price $73.50, expiration date 5/1/10 | 12,700 | 533,400 | |||||
533,400 | |||||||
Cable, Media & Publishing – 0.16% | |||||||
# | Interpublic Group 144A 5.25% exercise price | ||||||
$13.66, expiration date 12/31/49 | 1,500 | 594,750 | |||||
594,750 | |||||||
Energy – 0.57% | |||||||
* | Chesapeake Energy 4.50% exercise price | ||||||
$44.17, expiration date 12/31/49 | 17,075 | 1,088,531 | |||||
El Paso Energy Capital Trust I 4.75% exercise | |||||||
price $41.59, expiration date 3/31/28 | 39,900 | 999,495 | |||||
2,088,026 | |||||||
Health Care & Pharmaceuticals – 0.79% | |||||||
Mylan 6.50% exercise price $17.08, | |||||||
expiration date 11/15/10 | 1,700 | 1,003,000 | |||||
Schering-Plough 6.00% exercise price $33.69, | |||||||
expiration date 8/13/10 | 12,000 | 1,859,250 | |||||
2,862,250 | |||||||
Telecommunications – 0.24% | |||||||
Lucent Technologies Capital Trust I 7.75% | |||||||
exercise price $24.80, expiration date 3/15/17 | 3,000 | 870,750 | |||||
870,750 |
16
Number of shares | Value | ||||||
Convertible Preferred Stock (continued) | |||||||
Utilities – 0.64% | |||||||
Ÿ | CenterPoint Energy 2.00% exercise price $40.88, | ||||||
expiration date 9/15/29 | 26,000 | $ | 299,000 | ||||
Entergy 7.625% exercise price $87.46, | |||||||
expiration date 2/17/09 | 40,750 | 2,027,313 | |||||
2,326,313 | |||||||
Total Convertible Preferred Stock (cost $28,745,082) | 13,035,852 | ||||||
Principal amount | |||||||
Convertible Bonds – 17.09% | |||||||
Aerospace & Defense – 0.62% | |||||||
# | AAR 144A 1.75% 2/1/26 exercise price $29.43, | ||||||
expiration date 2/1/26 | $ | 1,150,000 | 849,563 | ||||
# | L-3 Communications 144A 3.00% 8/1/35 | ||||||
exercise price $101.70, expiration date 8/1/35 | 1,500,000 | 1,393,125 | |||||
2,242,688 | |||||||
Banking, Finance & Insurance – 0.16% | |||||||
Ÿ | Prudential Financial 0.419% 12/12/36 exercise | ||||||
price $104.21, expiration date 12/12/36 | 600,000 | 594,060 | |||||
594,060 | |||||||
Basic Industry – 0.86% | |||||||
# | Apex Silver Mines 144A 2.875% 3/15/24 | ||||||
exercise price $28.62, expiration date 3/15/24 | 1,000,000 | 82,500 | |||||
Rayonier TRS Holdings 3.75% 10/15/12 | |||||||
exercise price $54.82 expiration date 10/15/12 | 2,770,000 | 2,340,650 | |||||
# | Sino-Forest 144A 5.00% 8/1/13 exercise price | ||||||
$20.29, expiration date 8/1/13 | 1,275,000 | 696,469 | |||||
3,119,619 | |||||||
Cable, Media & Publishing – 1.26% | |||||||
Liberty Media 3.25% 3/15/31 exercise price | |||||||
$53.86, expiration date 3/8/31 | 3,000,000 | 738,750 | |||||
^ | Omnicom Group 0.162% 2/7/31 exercise price | ||||||
$55.01, expiration date 2/7/31 | 2,000,000 | 1,952,500 | |||||
# | Playboy Enterprises 144A 3.00% 3/15/25 | ||||||
exercise price $17.02, expiration date 3/15/25 | 3,240,000 | 1,895,400 | |||||
4,586,650 | |||||||
Computers & Technology – 2.78% | |||||||
Advanced Micro Devices | |||||||
6.00% 5/1/15 exercise price $28.08, | |||||||
expiration date 5/1/15 | 1,930,000 | 576,588 |
17
Statement of net assets
Delaware Dividend Income Fund
Principal amount | Value | ||||||
Convertible Bonds (continued) | |||||||
Computers & Technology (continued) | |||||||
Advanced Micro Reviews | |||||||
#144A 6.00% 5/1/15 exercise price $28.08, | |||||||
expiration date 5/1/15 | $ | 3,385,000 | $ | 1,011,269 | |||
Euronet Worldwide 3.50% 10/15/25 exercise | |||||||
price $40.48, expiration date 10/15/25 | 3,500,000 | 2,161,249 | |||||
Hutchinson Technology 3.25% 1/15/26 | |||||||
exercise price $36.43, expiration date 1/15/26 | 1,540,000 | 492,800 | |||||
Intel | |||||||
2.95% 12/15/35 exercise price $31.53, | |||||||
expiration date 12/15/35 | 500,000 | 378,750 | |||||
#144A 2.95% 12/15/35 exercise price $31.53, | |||||||
expiration date 12/15/35 | 1,140,000 | 863,550 | |||||
* | Linear Technology 3.125% 5/1/27 exercise price | ||||||
$49.03, expiration date 5/1/27 | 1,500,000 | 1,342,500 | |||||
Red Hat 0.50% 1/15/24 exercise price $25.59, | |||||||
expiration date 1/15/24 | 1,600,000 | 1,588,000 | |||||
SanDisk 1.00% 5/15/13 exercise price $82.36, | |||||||
expiration date 5/15/13 | 3,870,000 | 1,668,937 | |||||
10,083,643 | |||||||
Electronics & Electrical Equipment – 1.20% | |||||||
Fisher Scientific 3.25% 3/1/24 exercise price | |||||||
$40.20, expiration date 3/1/24 | 1,500,000 | 1,625,625 | |||||
Flextronics International 1.00% 8/1/10 | |||||||
exercise price $15.53, expiration date 8/1/10 | 3,450,000 | 2,725,500 | |||||
4,351,125 | |||||||
Energy – 0.53% | |||||||
Peabody Energy 4.75% 12/15/41 exercise price | |||||||
$58.45, expiration date 12/15/41 | 865,000 | 509,269 | |||||
Transocean | |||||||
1.50% 12/15/37 exercise price $168.61, | |||||||
expiration date 12/15/37 | 865,000 | 679,025 | |||||
1.625% 12/15/37 exercise price $168.61, | |||||||
expiration date 12/15/37 | 865,000 | 736,331 | |||||
1,924,625 | |||||||
Environmental Services – 0.37% | |||||||
Allied Waste 4.25% 4/15/34 exercise price | |||||||
$20.43, expiration date 4/15/34 | 1,480,000 | 1,326,450 | |||||
1,326,450 |
18
Principal amount | Value | ||||||
Convertible Bonds (continued) | |||||||
Health Care & Pharmaceuticals – 4.62% | |||||||
Advanced Medical Optics 3.25% 8/1/26 | |||||||
exercise price $59.61, expiration date 8/1/26 | $3,610,000 | $ | 1,389,850 | ||||
Allergan | |||||||
*1.50% 4/1/26 exercise price $63.33, | |||||||
expiration date 4/1/26 | 600,000 | 562,500 | |||||
#144A 1.50% 4/1/26 exercise price $63.33, | |||||||
expiration date 4/1/26 | 1,935,000 | 1,814,063 | |||||
Amgen | |||||||
0.375% 2/1/13 exercise price $79.48, | |||||||
expiration date 2/1/13 | 1,680,000 | 1,457,400 | |||||
#144A 0.375% 2/1/13 exercise price $79.48, | |||||||
expiration date 2/1/13 | 775,000 | 672,313 | |||||
CV Therapeutics 3.25% 8/16/13 exercise price | |||||||
$27.00, expiration date 8/16/13 | 530,000 | 339,200 | |||||
Φ | Hologic 2.00% 12/15/37 exercise price $38.59, | ||||||
expiration date 12/15/37 | 1,715,000 | 979,694 | |||||
LifePoint Hospitals 3.50% 5/15/14 exercise | |||||||
price $51.79, expiration date 5/14/14 | 850,000 | 478,125 | |||||
Medtronic | |||||||
1.50% 4/15/11 exercise price $56.08, | |||||||
expiration date 4/15/11 | 1,000,000 | 897,500 | |||||
1.625% 4/15/13 exercise price $56.08, | |||||||
expiration date 4/15/13 | 2,000,000 | 1,657,500 | |||||
Mentor 2.75% 1/1/24 exercise price $28.81, | |||||||
expiration date 1/1/24 | 2,100,000 | 2,063,249 | |||||
Teva Pharmaceutical Finance 0.25% 2/1/26 | |||||||
exercise price $47.06, expiration date 2/1/26 | 1,535,000 | 1,479,356 | |||||
Ÿ | Wyeth 2.621% 1/15/24 exercise price $60.09, | ||||||
expiration date 1/15/24 | 3,000,000 | 2,976,299 | |||||
16,767,049 | |||||||
Real Estate – 1.04% | |||||||
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 $48.45, expiration date 8/1/26 | 3,000,000 | 2,040,000 | |||||
3,769,653 |
19
Statement of net assets
Delaware Dividend Income Fund
Principal amount | Value | |||||||
Convertible Bonds (continued) | ||||||||
Retail – 0.70% | ||||||||
Pantry 3.00% 11/15/12 exercise price $50.10, | ||||||||
expiration date 11/15/12 | $ | 1,755,000 | $ | 1,004,738 | ||||
# | Saks 144A 2.00% 3/15/24 exercise price | |||||||
$11.97, expiration date 3/15/24 | 1,135,000 | 662,556 | ||||||
Sonic Automotive 5.25% 5/7/09 exercise price | ||||||||
$46.87, expiration date 5/7/09 | 1,000,000 | 885,000 | ||||||
2,552,294 | ||||||||
Telecommunications – 2.46% | ||||||||
Amdocs 0.50% 3/15/24 exercise price $43.12, | ||||||||
expiration date 3/15/24 | 2,000,000 | 1,965,001 | ||||||
CommScope 1.00% 3/15/24 exercise price | ||||||||
$21.75, expiration date 3/15/24 | 1,925,000 | 1,843,188 | ||||||
Level 3 Communications 3.50% 6/15/12 | ||||||||
exercise price $5.46, expiration date 6/15/12 | 2,425,000 | 936,656 | ||||||
NII Holdings 3.125% 6/15/12 exercise price | ||||||||
$118.32, expiration date 6/15/12 | 3,435,000 | 1,919,306 | ||||||
# | Nortel Networks 144A | |||||||
1.75% 4/15/12 exercise price $32.00, | ||||||||
expiration date 4/15/12 | 845,000 | 122,525 | ||||||
2.125% 4/15/14 exercise price $32.00, | ||||||||
expiration date 4/15/14 | 845,000 | 122,525 | ||||||
Qwest Communications International | ||||||||
3.50% 11/15/25 exercise price $5.90, | ||||||||
expiration date 11/15/25 | 750,000 | 609,375 | ||||||
# | Virgin Media 144A 6.50% 11/15/16 exercise | |||||||
price $19.22, expiration date 11/15/16 | 3,385,000 | 1,425,931 | ||||||
8,944,507 | ||||||||
Transportation – 0.21% | ||||||||
Bristow Group 3.00% 6/15/38 exercise price | ||||||||
$77.34, expiration date 6/15/38 | 1,500,000 | 774,375 | ||||||
774,375 | ||||||||
Utilities – 0.28% | ||||||||
Dominion Resources 2.125% 12/15/23 exercise | ||||||||
price $36.33, expiration date 12/15/23 | 1,000,000 | 1,023,750 | ||||||
1,023,750 | ||||||||
Total Convertible Bonds (cost $91,859,584) | 62,060,488 |
20
Principal amount | Value | |||||||
Corporate Bonds – 24.75% | ||||||||
Basic Industry – 3.02% | ||||||||
California Steel Industries 6.125% 3/15/14 | $ | 495,000 | $ | 304,425 | ||||
* | Domtar 7.125% 8/15/15 | 421,000 | 288,385 | |||||
#@ | Evraz Group 44A 9.50% 4/24/18 | 1,775,000 | 772,125 | |||||
Freeport McMoRan Copper & Gold 8.25% 4/1/15 | 675,000 | 489,921 | ||||||
Georgia-Pacific | ||||||||
7.70% 6/15/15 | 255,000 | 195,075 | ||||||
8.875% 5/15/31 | 525,000 | 330,750 | ||||||
Innophos 8.875% 8/15/14 | 745,000 | 636,975 | ||||||
@# | Innophos Holding 144A 9.50% 4/15/12 | 510,000 | 379,950 | |||||
International Coal Group 10.25% 7/15/14 | 870,000 | 661,200 | ||||||
# | MacDermid 144A 9.50% 4/15/17 | 1,185,000 | 645,825 | |||||
Momentive Performance Materials 9.75% 12/1/14 | 800,000 | 314,000 | ||||||
NewPage 10.00% 5/1/12 | 950,000 | 517,750 | ||||||
Ÿ | Noranda Aluminium Acquisition 6.595% 5/15/15 | 615,000 | 202,950 | |||||
@ | Norske Skog Canada 8.625% 6/15/11 | 725,000 | 413,250 | |||||
@# | Norske Skogindustrier 144A 7.125% 10/15/33 | 175,000 | 84,875 | |||||
=@ | Port Townsend Private Note 12.431% 8/27/12 | 310,800 | 307,692 | |||||
@ | Potlatch 13.00% 12/1/09 | 1,075,000 | 1,164,214 | |||||
# | Rock-Tenn 144A 9.25% 3/15/16 | 490,000 | 423,850 | |||||
@ | Rockwood Specialties Group 7.50% 11/15/14 | 690,000 | 569,250 | |||||
*Ÿ# | Ryerson 144A 10.568% 11/1/14 | 405,000 | 269,325 | |||||
#@ | Sappi Papier Holding 144A 6.75% 6/15/12 | 1,230,000 | 905,434 | |||||
#@ | Severstal 144A 9.75% 7/29/13 | 350,000 | 152,250 | |||||
*# | Steel Dynamics 144A 7.75% 4/15/16 | 760,000 | 467,400 | |||||
# | Vedanta Resources 144A 9.50% 7/18/18 | 595,000 | 294,525 | |||||
Ÿ | Verso Paper Holdings 6.943% 8/1/14 | 295,000 | 160,775 | |||||
10,952,171 | ||||||||
Brokerage – 0.10% | ||||||||
LaBranche 11.00% 5/15/12 | 440,000 | 367,400 | ||||||
367,400 | ||||||||
Capital Goods – 3.50% | ||||||||
Allied Waste North America | ||||||||
*6.875% 6/1/17 | 290,000 | 253,750 | ||||||
7.125% 5/15/16 | 215,000 | 190,275 | ||||||
*7.25% 3/15/15 | 190,000 | 168,625 | ||||||
*@ | Associated Materials 9.75% 4/15/12 | 820,000 | 705,200 | |||||
@ | BWAY 10.00% 10/15/10 | 1,280,000 | 1,107,200 | |||||
Celestica 7.875% 7/1/11 | 235,000 | 200,925 |
21
Statement of net assets
Delaware Dividend Income Fund
Principal amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Capital Goods (continued) | ||||||||
Centex | ||||||||
4.55% 11/1/10 | $ | 460,000 | $ | 381,800 | ||||
5.125% 10/1/13 | 170,000 | 102,850 | ||||||
@ | CPG International I 10.50% 7/1/13 | 595,000 | 336,175 | |||||
DR Horton | ||||||||
6.00% 4/15/11 | 200,000 | 157,000 | ||||||
7.875% 8/15/11 | 780,000 | 643,500 | ||||||
DRS Technologies 7.625% 2/1/18 | 575,000 | 573,563 | ||||||
Flextronics International 6.25% 11/15/14 | 375,000 | 279,375 | ||||||
* | Graham Packaging 9.875% 10/15/14 | 1,036,000 | 657,860 | |||||
* | Graphic Packaging International 9.50% 8/15/13 | 1,260,000 | 875,700 | |||||
Greenbrier 8.375% 5/15/15 | 1,005,000 | 748,725 | ||||||
@ | Intertape Polymer 8.50% 8/1/14 | 400,000 | 306,000 | |||||
M/I Homes 6.875% 4/1/12 | 320,000 | 171,200 | ||||||
# | Moog 144A 7.25% 6/15/18 | 465,000 | 360,375 | |||||
Owens Brockway Glass Container 6.75% 12/1/14 | 800,000 | 700,000 | ||||||
Ryland Group 6.875% 6/15/13 | 905,000 | 628,975 | ||||||
Sally Holdings 10.05% 11/15/16 | 815,000 | 476,775 | ||||||
Thermadyne Holdings 9.50% 2/1/14 | 910,000 | 723,450 | ||||||
Toll | ||||||||
8.25% 2/1/11 | 885,000 | 734,550 | ||||||
8.25% 12/1/11 | 295,000 | 243,375 | ||||||
*@ | Vitro 11.75% 11/1/13 | 900,000 | 256,500 | |||||
Vought Aircraft Industries 8.00% 7/15/11 | 1,055,000 | 733,225 | ||||||
12,716,948 | ||||||||
Consumer Cyclical – 1.27% | ||||||||
@ | Denny’s Holdings 10.00% 10/1/12 | 235,000 | 162,150 | |||||
* | Dollar General 10.625% 7/15/15 | 585,000 | 529,424 | |||||
* | Ford Motor 7.45% 7/16/31 | 495,000 | 126,225 | |||||
Ford Motor Credit | ||||||||
Ÿ7.569% 1/13/12 | 460,000 | 202,975 | ||||||
7.80% 6/1/12 | 1,135,000 | 489,832 | ||||||
@ | Global Cash Access 8.75% 3/15/12 | 595,000 | 467,075 | |||||
GMAC | ||||||||
5.625% 5/15/09 | 460,000 | 316,985 | ||||||
6.625% 5/15/12 | 320,000 | 112,259 | ||||||
6.875% 8/28/12 | 255,000 | 89,323 | ||||||
* | Goodyear Tire & Rubber 9.00% 7/1/15 | 235,000 | 176,250 |
22
Principal amount | Value | |||||
Corporate Bonds (continued) | ||||||
Consumer Cyclical (continued) | ||||||
# | Invista 144A 9.25% 5/1/12 | $ | 330,000 | $ | 242,550 | |
Lear 8.75% 12/1/16 | 1,550,000 | 341,000 | ||||
Levi Strauss 9.75% 1/15/15 | 542,000 | 327,910 | ||||
* | Neiman Marcus Group 10.375% 10/15/15 | 1,050,000 | 399,000 | |||
* | Tenneco 8.625% 11/15/14 | 1,038,000 | 389,250 | |||
*# | TRW Automotive 144A 7.00% 3/15/14 | 475,000 | 232,750 | |||
4,604,958 | ||||||
Consumer Non-Cyclical – 1.50% | ||||||
@ | ACCO Brands 7.625% 8/15/15 | 515,000 | 270,375 | |||
Advanced Medical Optics 7.50% 5/1/17 | 950,000 | 527,250 | ||||
*# | Bausch & Lomb 144A 9.875% 11/1/15 | 600,000 | 463,500 | |||
* | Biomet 10.00% 10/15/17 | 575,000 | 520,375 | |||
@ | Cardtronics | |||||
9.25% 8/15/13 | 315,000 | 235,069 | ||||
9.25% 8/15/13 | 705,000 | 526,106 | ||||
* | Chiquita Brands 8.875% 12/1/15 | 645,000 | 461,175 | |||
* | Constellation Brands 8.125% 1/15/12 | 665,000 | 581,875 | |||
Del Monte | ||||||
6.75% 2/15/15 | 175,000 | 143,500 | ||||
*8.625% 12/15/12 | 245,000 | 222,950 | ||||
* | Jarden 7.50% 5/1/17 | 506,000 | 331,430 | |||
Φ | JohnsonDiversey Holdings 10.67% 5/15/13 | 410,000 | 293,150 | |||
Tysons Food 7.35% 4/1/16 | 410,000 | 258,026 | ||||
* | Visant Holding 8.75% 12/1/13 | 820,000 | 594,499 | |||
5,429,280 | ||||||
Energy – 3.79% | ||||||
AmeriGas Partners 7.125% 5/20/16 | 920,000 | 648,600 | ||||
Chesapeake Energy | ||||||
*6.375% 6/15/15 | 100,000 | 70,500 | ||||
7.00% 8/15/14 | 625,000 | 478,125 | ||||
Complete Production Service 8.00% 12/15/16 | 475,000 | 301,625 | ||||
Compton Petroleum Finance 7.625% 12/1/13 | 1,385,000 | 574,775 | ||||
#@ | Connacher Oil & Gas 144A 10.25% 12/15/15 | 1,125,000 | 590,625 | |||
# | Copano Energy 144A 7.75% 6/1/18 | 440,000 | 290,400 | |||
* | Dynergy Holdings 7.75% 6/1/19 | 800,000 | 536,000 | |||
El Paso 6.875% 6/15/14 | 605,000 | 451,515 | ||||
# | El Paso Performance-Linked Trust 144A | |||||
7.75% 7/15/11 | 525,000 | 438,096 |
23
Statement of net assets
Delaware Dividend Income Fund
Principal amount | Value | |||||
Corporate Bonds (continued) | ||||||
Energy (continued) | ||||||
* | Energy Partners 9.75% 4/15/14 | $ | 355,000 | $ | 165,075 | |
Frontier Oil 8.50% 9/15/16 | 330,000 | 278,850 | ||||
@ | Geophysique-Veritas | |||||
7.50% 5/15/15 | 95,000 | 62,225 | ||||
7.75% 5/15/17 | 670,000 | 414,563 | ||||
#Helix Energy Solutions 144A 9.50% 1/15/16 | 1,155,000 | 612,150 | ||||
#Hilcorp Energy I 144A | ||||||
7.75% 11/1/15 | 1,100,000 | 791,999 | ||||
9.00% 6/1/16 | 220,000 | 158,400 | ||||
Inergy Finance | ||||||
6.875% 12/15/14 | 350,000 | 256,375 | ||||
*8.25% 3/1/16 | 535,000 | 395,900 | ||||
KCS Energy 7.125% 4/1/12 | 465,000 | 337,125 | ||||
Key Energy Services 8.375% 12/1/14 | 905,000 | 635,763 | ||||
Mariner Energy 8.00% 5/15/17 | 1,075,000 | 580,500 | ||||
MarkWest Energy 8.75% 4/15/18 | 465,000 | 295,275 | ||||
Massey Energy 6.875% 12/15/13 | 965,000 | 658,613 | ||||
OPTI Canada | ||||||
7.875% 12/15/14 | 485,000 | 186,725 | ||||
8.25% 12/15/14 | 310,000 | 122,450 | ||||
PetroHawk Energy 9.125% 7/15/13 | 696,000 | 535,920 | ||||
@ | Petroleum Development 12.00% 2/15/18 | 525,000 | 362,250 | |||
Plains Exploration & Production 7.00% 3/15/17 | 710,000 | 479,250 | ||||
* | Range Resources 7.25% 5/1/18 | 415,000 | 331,481 | |||
Regency Energy Partners 8.375% 12/15/13 | 909,000 | 647,663 | ||||
Whiting Petroleum 7.25% 5/1/13 | 1,090,000 | 779,349 | ||||
Williams 7.50% 1/15/31 | 439,000 | 288,142 | ||||
13,756,304 | ||||||
Financials – 0.56% | ||||||
· | Hartford Financial Services Group 8.125% | |||||
6/15/38 | 465,000 | 215,388 | ||||
Hexion US Finance 9.75% 11/15/14 | 360,000 | 189,000 | ||||
Leucadia National 8.125% 9/15/15 | 490,000 | 427,525 | ||||
·# | MetLife Capital Trust X 144A 9.25% 4/8/38 | 300,000 | 199,919 | |||
#@ | Nuveen Investments 144A 10.50% 11/15/15 | 1,155,000 | 359,494 | |||
Silicon Valley Bank 6.05% 6/1/17 | 310,000 | 261,131 | ||||
· | USB Capital IX 6.189% 4/15/49 | 310,000 | 161,273 | |||
· | Wells Fargo Capital XIII 7.70% 12/29/49 | 260,000 | 211,102 | |||
2,024,832 |
24
Principal amount | Value | |||||
Corporate Bonds (continued) | ||||||
Media – 1.60% | ||||||
* | CCO Holdings 8.75% 11/15/13 | $ | 790,000 | $ | 454,250 | |
# | Charter Communications Operating 144A | |||||
10.875% 9/15/14 | 2,146,000 | 1,550,485 | ||||
# | CSC Holdings 144A 8.50% 6/15/15 | 600,000 | 487,500 | |||
Dex Media West 9.875% 8/15/13 | 1,340,000 | 298,150 | ||||
#@ | Expedia 144A 8.50% 7/1/16 | 385,000 | 236,775 | |||
Lamar Media 6.625% 8/15/15 | 455,000 | 332,150 | ||||
# | LBI Media 144A 8.50% 8/1/17 | 465,000 | 165,075 | |||
LIN Television Corp 6.50% 5/15/13 | 375,000 | 176,250 | ||||
Mediacom Capital 9.50% 1/15/13 | 355,000 | 292,875 | ||||
Quebecor Media 7.75% 3/15/16 | 720,000 | 486,000 | ||||
# | Rainbow National Services 144A 10.375% 9/1/14 | 275,000 | 239,250 | |||
Time Warner Telecom Holdings 9.25% 2/15/14 | 660,000 | 524,700 | ||||
Videotron | ||||||
6.375% 12/15/15 | 165,000 | 127,875 | ||||
#144A 9.125% 4/15/18 | 475,000 | 420,375 | ||||
5,791,710 | ||||||
Real Estate – 0.12% | ||||||
* | Host Hotels & Resorts 7.125% 11/1/13 | 600,000 | 439,500 | |||
439,500 | ||||||
Services Cyclical – 1.68% | ||||||
FTI Consulting | ||||||
7.625% 6/15/13 | 805,000 | 720,475 | ||||
7.75% 10/1/16 | 305,000 | 263,825 | ||||
#@ | Galaxy Entertainment Finance 144A | |||||
9.875% 12/15/12 | 1,015,000 | 380,625 | ||||
Gaylord Entertainment | ||||||
6.75% 11/15/14 | 275,000 | 149,875 | ||||
8.00% 11/15/13 | 965,000 | 577,794 | ||||
Hertz 8.875% 1/1/14 | 670,000 | 349,238 | ||||
Kansas City Southern de Mexico 9.375% 5/1/12 | 855,000 | 684,000 | ||||
* | MGM MIRAGE | |||||
7.50% 6/1/16 | 550,000 | 286,000 | ||||
#144A 13.00% 11/15/13 | 250,000 | 210,000 | ||||
@ | Mobile Mini 6.875% 5/1/15 | 435,000 | 311,025 | |||
*‡@ | Northwest Airlines 10.00% 2/1/09 | 265,000 | 994 | |||
* | Pinnacle Entertainment | |||||
8.25% 3/15/12 | 500,000 | 367,500 | ||||
8.75% 10/1/13 | 550,000 | 420,750 |
25
Statement of net assets
Delaware Dividend Income Fund
Principal amount | Value | |||||
Corporate Bonds (continued) | ||||||
Services Cyclical (continued) | ||||||
#@ | Pokagon Gaming Authority 144A | |||||
10.375% 6/15/14 | $ | 1,173,000 | $ | 997,049 | ||
Seabulk International 9.50% 8/15/13 | 424,000 | 384,780 | ||||
6,103,930 | ||||||
Services Non-cyclical – 2.09% | ||||||
Alliance Imaging 7.25% 12/15/12 | 425,000 | 355,938 | ||||
* | ARAMARK 8.50% 2/1/15 | 1,190,000 | 993,649 | |||
@ | Casella Waste Systems 9.75% 2/1/13 | 1,083,000 | 947,625 | |||
* | Community Health Systems 8.875% 7/15/15 | 725,000 | 585,438 | |||
Cornell 10.75% 7/1/12 | 210,000 | 187,950 | ||||
HCA | ||||||
6.50% 2/15/16 | 415,000 | 234,475 | ||||
*9.25% 11/15/16 | 245,000 | 199,675 | ||||
HCA PIK 9.625% 11/15/16 | 810,000 | 585,225 | ||||
· | HealthSouth 9.133% 6/15/14 | 925,000 | 772,375 | |||
Iron Mountain | ||||||
6.625% 1/1/16 | 505,000 | 396,425 | ||||
8.00% 6/15/20 | 305,000 | 236,375 | ||||
Lender Process Services 8.125% 7/1/16 | 380,000 | 321,100 | ||||
Rental Services 9.50% 12/1/14 | 430,000 | 212,850 | ||||
Select Medical 7.625% 2/1/15 | 1,075,000 | 639,625 | ||||
@# | Seminole Indian Tribe of Florida 144A | |||||
7.804% 10/1/20 | 705,000 | 617,538 | ||||
8.03% 10/1/20 | 350,000 | 310,405 | ||||
7,596,668 | ||||||
Technology & Electronics – 0.32% | ||||||
· | Freescale Semiconductor 6.694% 12/15/14 | 745,000 | 186,250 | |||
Sungard Data Systems | ||||||
9.125% 8/15/13 | 643,000 | 501,540 | ||||
10.25% 8/15/15 | 834,000 | 487,890 | ||||
1,175,680 | ||||||
Telecommunications – 3.64% | ||||||
‡=@ | Allegiance Telecom 11.75% 2/15/10 | 10,000 | 0 | |||
· | Centennial Communications 9.633% 1/1/13 | 340,000 | 319,600 | |||
Cincinnati Bell | ||||||
7.00% 2/15/15 | 500,000 | 358,750 | ||||
7.25% 7/15/13 | 255,000 | 210,375 | ||||
* | Citizens Communications 7.125% 3/15/19 | 970,000 | 565,025 | |||
Cricket Communications 9.375% 11/1/14 | 1,555,000 | 1,242,056 |
26
Principal amount | Value | |||||
Corporate Bonds (continued) | ||||||
Telecommunications (continued) | ||||||
#@ | Digicel 144A 9.25% 9/1/12 | $ | 1,355,000 | $ | 1,009,475 | |
@ | GCI 7.25% 2/15/14 | 255,000 | 205,913 | |||
Hughes Network Systems/Finance 9.50% 4/15/14 | 800,000 | 664,000 | ||||
W | Inmarsat Finance 10.375% 11/15/12 | 1,540,000 | 1,359,049 | |||
Intelsat Bermuda 11.25% 6/15/16 | 1,011,000 | 818,910 | ||||
Lucent Technologies 6.45% 3/15/29 | 599,000 | 242,595 | ||||
MetroPCS Wireless 9.25% 11/1/14 | 1,100,000 | 907,500 | ||||
# | Nordic Telephone Company Holdings 144A | |||||
8.875% 5/1/16 | 483,000 | 352,590 | ||||
Nortel Networks | ||||||
·9.003% 7/15/11 | 265,000 | 87,450 | ||||
10.75% 7/15/16 | 740,000 | 218,300 | ||||
* | PAETEC Holding 9.50% 7/15/15 | 540,000 | 303,750 | |||
Qwest Capital Funding 7.25% 2/15/11 | 1,255,000 | 972,625 | ||||
* | Sprint Nextel 6.00% 12/1/16 | 1,990,000 | 1,105,941 | |||
# | Telesat Canada 144A 11.00% 11/1/15 | 345,000 | 229,425 | |||
#@ | Vimpelcom 144A 9.125% 4/30/18 | 970,000 | 431,650 | |||
* | Virgin Media Finance 8.75% 4/15/14 | 980,000 | 712,950 | |||
# | Wind Acquisition Finance 144A 10.75% 12/1/15 | 145,000 | 119,625 | |||
Windstream 8.125% 8/1/13 | 960,000 | 796,800 | ||||
13,234,354 | ||||||
Utilities – 1.56% | ||||||
AES | ||||||
7.75% 3/1/14 | 665,000 | 490,438 | ||||
8.00% 10/15/17 | 690,000 | 479,550 | ||||
Celestica 7.625% 7/1/13 | 120,000 | 89,400 | ||||
Edison Mission Energy 7.625% 5/15/27 | 725,000 | 496,625 | ||||
Elwood Energy 8.159% 7/5/26 | 938,629 | 691,704 | ||||
Midwest Generation 8.30% 7/2/09 | 427,584 | 409,412 | ||||
Mirant North America 7.375% 12/31/13 | 890,000 | 774,300 | ||||
NRG Energy 7.375% 2/1/16 | 1,000,000 | 814,999 | ||||
Orion Power Holdings 12.00% 5/1/10 | 736,000 | 717,600 | ||||
Reliant Energy 7.625% 6/15/14 | 350,000 | 269,500 | ||||
# | Texas Competitive Electric Holdings 144A | |||||
10.25% 11/1/15 | 675,000 | 435,375 | ||||
5,668,903 | ||||||
Total Corporate Bonds (cost $127,791,944) | 89,862,638 |
27
Statement of net assets
Delaware Dividend Income Fund
Principal amount | Value | |||||
«Senior Secured Loans – 0.61% | ||||||
Energy Futures Holdings Term Tranche Loan B2 | ||||||
5.603% 10/10/14 | $ | 1,000,000 | $ | 686,125 | ||
Ford Motor Term Tranche Loan B | ||||||
4.423% 11/29/13 | 1,008,965 | 423,765 | ||||
General Motors Term Tranche Loan B | ||||||
5.795% 11/17/13 | 650,000 | 264,176 | ||||
Talecris Biotherapeutics 2nd Lien | ||||||
8.64% 12/6/14 | 925,000 | 818,626 | ||||
Total Senior Secured Loans (cost $2,778,972) | 2,192,692 | |||||
Leveraged Non-Recourse Security – 0.00% | ||||||
·#u@ | JP Morgan Fixed Income Pass Through Trust 2007 | |||||
144A 0.01% 1/15/87 | 1,300,000 | 0 | ||||
Total Leveraged Non-Recourse Security | ||||||
(cost $1,105,000) | 0 | |||||
Number of shares | ||||||
Exchange Traded Fund – 0.05% | ||||||
UltraShort Real Estate ProShares | 1,600 | 194,992 | ||||
Total Exchange Traded Fund (cost $231,175) | 194,992 | |||||
Limited Partnership – 0.19% | ||||||
* | Brookfield Infrastructure Partners | 59,100 | 694,425 | |||
Total Limited Partnership (cost $1,123,157) | 694,425 | |||||
Preferred Stock – 0.55% | ||||||
Banking, Finance & Insurance – 0.06% | ||||||
Freddie Mac 6.02% | 21,000 | 15,750 | ||||
· | JPMorgan Chase 7.9% | 255,000 | 200,120 | |||
215,870 | ||||||
Industrials – 0.02% | ||||||
=@ | Port Townsend | 222 | 54,066 | |||
54,066 | ||||||
Leisure, Lodging & Entertainment – 0.06% | ||||||
Red Lion Hotels Capital Trust 9.50% | 17,479 | 203,893 | ||||
203,893 |
28
Number of shares | Value | |||||
Preferred Stock (continued) | ||||||
Real Estate – 0.41% | ||||||
SL Green Realty 7.625% | 108,900 | $ | 1,197,901 | |||
Vornado Realty Trust 6.625% | 19,900 | 249,745 | ||||
W2007 Grace Acquisitions 8.75% | 21,700 | 54,250 | ||||
1,501,896 | ||||||
Total Preferred Stock (cost $5,050,657) | 1,975,725 | |||||
Principal amount | ||||||
Residual Interest Trust Certificate – 0.00% | ||||||
#u@ | Freddie Mac Auction Pass Through Trust 2007-6 144A | $ | 475,000 | 0 | ||
Total Residual Interest Trust Certificate | ||||||
(cost $516,980) | 0 | |||||
Number of shares | ||||||
Warrants – 0.00% | ||||||
P†=@ | Port Townsend | 222 | 2 | |||
†# | Solutia 144A, exercise price $7.59, | |||||
expiration date 7/15/09 | 12 | 0 | ||||
Total Warrants (cost $6,349) | 2 | |||||
Principal amount | ||||||
Repurchase Agreements** – 0.91% | ||||||
BNP Paribas 0.20%, dated 11/28/08, to be | ||||||
repurchased on 12/1/08, repurchase | ||||||
price $3,311,055 (collateralized by | ||||||
U.S. Government obligations, | ||||||
6/4/09; market value $3,420,824) | $ | 3,311,000 | 3,311,000 | |||
Total Repurchase Agreements (cost $3,311,000) | 3,311,000 | |||||
Total Value of Securities Before Securities Lending | ||||||
Collateral – 95.74% (cost $525,562,017) | 347,617,342 | |||||
Number of shares | ||||||
Securities Lending Collateral*** – 8.01% | ||||||
Investment Companies | ||||||
Mellon GSL DBT II Collateral Fund | 29,828,471 | 29,035,034 | ||||
=Mellon GSL DBT II Liquidation Trust | 741,807 | 60,828 | ||||
Total Securities Lending Collateral | ||||||
(cost $30,570,278) | 29,095,862 |
29
Statement of net assets
Delaware Dividend Income Fund
Total Value of Securities – 103.75% | |||||
(cost $556,132,295) | $ | 376,713,204 | © | ||
Obligation to Return Securities | |||||
Lending Collateral*** – (8.42%) | (30,570,278 | ) | |||
Receivables and Other Assets | |||||
Net of Liabilities – 4.67% | 16,963,658 | ||||
Net Assets Applicable to 51,786,625 | |||||
Shares Outstanding – 100.00% | $ | 363,106,584 | |||
Net Asset Value – Delaware Dividend Income Fund | |||||
Class A ($179,588,090 / 25,610,549 Shares) | $7.01 | ||||
Net Asset Value – Delaware Dividend Income Fund | |||||
Class B ($32,533,384 / 4,641,355 Shares) | $7.01 | ||||
Net Asset Value – Delaware Dividend Income Fund | |||||
Class C ($146,769,246 / 20,933,463 Shares) | $7.01 | ||||
Net Asset Value – Delaware Dividend Income Fund | |||||
Class R ($1,928,378 / 275,163 Shares) | $7.01 | ||||
Net Asset Value – Delaware Dividend Income Fund | |||||
Institutional Class ($2,287,486 / 326,095 Shares) | $7.01 | ||||
Components of Net Assets at November 30, 2008: | |||||
Shares of beneficial interest (unlimited authorization – no par) | $ | 658,978,203 | |||
Undistributed net investment income | 3,932,605 | ||||
Accumulated net realized loss on investments | (120,421,885 | ) | |||
Net unrealized depreciation of investments | (179,382,339 | ) | |||
Total net assets | $ | 363,106,584 |
† | Non income producing security. |
‡ | Non income producing security. Security is currently in default. |
· | Variable rate security. The rate shown is the rate as of November 30, 2008. |
Φ | Step coupon bond. Coupon increases periodically based on a predetermined schedule. Stated rate in effect at November 30, 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. |
u | 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. |
30
# | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At November 30, 2008, the aggregate amount of Rule 144A securities was $33,347,704, which represented 9.16% 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 November 30, 2008, the aggregate amount of illiquid securities was $16,413,200, which represented 4.52% 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 November 30, 2008, the aggregate amount of fair valued securities was $422,599, which represented 0.12% 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 $28,885,689 of securities loaned. |
∏ | 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 November 30, 2008, the aggregate amount of restricted securities was $13 which represented 0.00% of the Fund’s net assets. See Note 10 in “Notes to financial statements.” |
^ | Zero Coupon Security. The rate shown is the yield at the time of purchase. |
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) | $ | 7.01 |
Sales charge (5.75% of offering price) (B) | 0.43 | |
Offering price | $ | 7.44 |
(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. |
31
Statement of net assets
Delaware Dividend Income Fund
The following swap contracts were outstanding at November 30, 2008: | ||||||||||||||||
Swap Contracts1 | ||||||||||||||||
Credit Default Swap Contracts | ||||||||||||||||
Annual | ||||||||||||||||
Swap Counterparty & | Notional | Protection | Termination | Unrealized | ||||||||||||
Referenced Obligation | Value | Payments | Date | Appreciation | ||||||||||||
Protection Purchased: | ||||||||||||||||
Citigroup Global Markets | ||||||||||||||||
Hartford Financial CDS | $ | 135,000 | 4.30 | % | 12/20/13 | $ | 15,530 | |||||||||
Hartford Financial CDS | 135,000 | 4.95 | % | 12/20/13 | 12,492 | |||||||||||
JPMorgan Chase Bank, | ||||||||||||||||
National Association | ||||||||||||||||
Hartford Financial CDS | 135,000 | 5.20 | % | 12/20/13 | 11,332 | |||||||||||
Hartford Financial CDS | 67,500 | 7.00 | % | 12/20/13 | 1,469 | |||||||||||
Total | $ | 472,500 | $ | 40,823 |
The use of swap contracts involves elements of market risk and risks in excess of the amount recognized in the financial statements. The notional values presented above represent the Fund’s total exposure in such contracts, whereas only the net unrealized appreciation is reflected in the Fund’s net assets.
1 See Note 8 in “Notes to financial statements.”
See accompanying notes
32
Statement of operations | |
Delaware Dividend Income Fund | Year Ended November 30, 2008 |
Investment Income: | |||||||
Dividends | $ | 14,445,345 | |||||
Interest | 17,898,262 | ||||||
Security lending income | 478,606 | $ | 32,822,213 | ||||
Expenses: | |||||||
Management fees | 4,245,738 | ||||||
Distribution expenses – Class A | 959,245 | ||||||
Distribution expenses – Class B | 579,884 | ||||||
Distribution expenses – Class C | 2,805,175 | ||||||
Distribution expenses – Class R | 24,334 | ||||||
Dividend disbursing and transfer agent fees and expenses | 1,357,310 | ||||||
Accounting and administration expenses | 266,939 | ||||||
Reports and statements to shareholders | 141,340 | ||||||
Registration fees | 105,203 | ||||||
Legal fees | 101,234 | ||||||
Audit and taxes | 46,825 | ||||||
Trustees’ fees | 41,120 | ||||||
Insurance fees | 17,329 | ||||||
Custodian fees | 16,873 | ||||||
Pricing fees | 16,250 | ||||||
Consulting fees | 9,638 | ||||||
Taxes (other than taxes on income) | 8,054 | ||||||
Dues and services | 7,585 | ||||||
Trustees’ expenses | 3,411 | 10,753,487 | |||||
Less fees waived | (1,340,860 | ) | |||||
Less waived distribution expenses – Class A | (161,050 | ) | |||||
Less waived distribution expenses – Class R | (4,064 | ) | |||||
Less expense paid indirectly | (8,189 | ) | |||||
Total operating expenses | 9,239,324 | ||||||
Net Investment Income | 23,582,889 |
34
Net Realized and Unrealized Gain (Loss) on Investments | |||
and Foreign Currencies: | |||
Net realized gain (loss) on: | |||
Investments | $ | (105,559,505 | ) |
Foreign currencies | (435 | ) | |
Swap contracts | 44,531 | ||
Net realized loss | (105,515,409 | ) | |
Net change in unrealized appreciation/depreciation of | |||
investments and foreign currencies | (175,509,305 | ) | |
Net Realized and Unrealized Loss on Investments | |||
and Foreign Currencies | (281,024,714 | ) | |
Net Decrease in Net Assets Resulting from Operations | $ | (257,441,825 | ) |
See accompanying notes
35
Statements of changes in net assets
Delaware Dividend Income Fund
Year Ended | ||||||||
11/30/08 | 11/30/07 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 23,582,889 | $ | 31,348,884 | ||||
Net realized gain (loss) on investments | ||||||||
and foreign currencies | (105,515,409 | ) | 30,788,501 | |||||
Net change in unrealized appreciation/depreciation | ||||||||
of investments and foreign currencies | (175,509,305 | ) | (83,487,127 | ) | ||||
Net decrease in net assets resulting from operations | (257,441,825 | ) | (21,349,742 | ) | ||||
Dividends and Distributions to shareholders from: | ||||||||
Net investment income: | ||||||||
Class A | (15,949,829 | ) | (16,059,869 | ) | ||||
Class B | (2,391,803 | ) | (2,196,802 | ) | ||||
Class C | (11,754,960 | ) | (9,685,778 | ) | ||||
Class R | (196,063 | ) | (195,835 | ) | ||||
Institutional Class | (190,332 | ) | (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 | ) | ||||
(56,262,366 | ) | (32,032,481 | ) | |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Class A | 37,121,459 | 251,940,325 | ||||||
Class B | 1,241,811 | 19,193,290 | ||||||
Class C | 20,414,014 | 217,432,584 | ||||||
Class R | 950,413 | 7,282,256 | ||||||
Institutional Class | 775,057 | 6,330,417 |
36
Year Ended | ||||||||
11/30/08 | 11/30/07 | |||||||
Capital Share Transactions (continued): | ||||||||
Net asset value of shares issued upon reinvestment | ||||||||
of dividends and distributions: | ||||||||
Class A | $ | 23,259,005 | $ | 13,895,633 | ||||
Class B | 3,856,322 | 2,123,967 | ||||||
Class C | 19,776,863 | 9,394,214 | ||||||
Class R | 369,279 | 222,556 | ||||||
Institutional Class | 299,928 | 148,975 | ||||||
108,064,151 | 527,964,217 | |||||||
Cost of shares repurchased: | ||||||||
Class A | (179,789,630 | ) | (188,208,309 | ) | ||||
Class B | (23,115,207 | ) | (16,879,537 | ) | ||||
Class C | (165,390,120 | ) | (69,641,978 | ) | ||||
Class R | (3,825,251 | ) | (5,325,318 | ) | ||||
Institutional Class | (2,374,601 | ) | (3,371,741 | ) | ||||
(374,494,809 | ) | (283,426,883 | ) | |||||
Increase (decrease) in net assets derived from | ||||||||
capital share transactions | (266,430,658 | ) | 244,537,334 | |||||
Net Increase (Decrease) in Net Assets | (580,134,849 | ) | 191,155,111 | |||||
Net Assets: | ||||||||
Beginning of year | 943,241,433 | 752,086,322 | ||||||
End of year (including undistributed net investment | ||||||||
income of $3,932,605 and $7,228,971, respectively) | $ | 363,106,584 | $ | 943,241,433 |
See accompanying notes
37
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 income1 |
Net realized and unrealized gain (loss) on investments and foreign currencies |
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 return2 |
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 to average net assets |
Ratio of net investment income to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 The average shares outstanding method has been applied for per share information. |
2 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers by the manager and distributor. Performance would have been lower had the waivers not been in effect. |
See accompanying notes
38
Year Ended | |||||||||||||||
11/30/08 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | |||||||||||
$12.030 | $12.590 | $11.140 | $11.050 | $10.210 | |||||||||||
0.400 | 0.456 | 0.422 | 0.450 | 0.345 | |||||||||||
(4.595 | ) | (0.529 | ) | 1.551 | 0.081 | 0.891 | |||||||||
(4.195 | ) | (0.073 | ) | 1.973 | 0.531 | 1.236 | |||||||||
(0.489 | ) | (0.426 | ) | (0.457 | ) | (0.360 | ) | (0.362 | ) | ||||||
(0.336 | ) | (0.061 | ) | (0.066 | ) | (0.081 | ) | (0.034 | ) | ||||||
(0.825 | ) | (0.487 | ) | (0.523 | ) | (0.441 | ) | (0.396 | ) | ||||||
$ 7.010 | $12.030 | $12.590 | $11.140 | $11.050 | |||||||||||
(37.15% | ) | (0.72% | ) | 18.34% | 4.89% | 12.38% | |||||||||
$179,588 | $450,620 | $398,124 | $285,159 | $105,253 | |||||||||||
1.00% | 1.00% | 1.01% | 1.00% | 1.00% | |||||||||||
1.26% | 1.17% | 1.23% | 1.27% | 1.32% | |||||||||||
3.92% | 3.60% | 3.64% | 4.05% | 3.26% | |||||||||||
3.66% | 3.43% | 3.42% | 3.78% | 2.94% | |||||||||||
51% | 52% | 51% | 85% | 95% |
39
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 income1 |
Net realized and unrealized gain (loss) on investments and foreign currencies |
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 return2 |
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 to average net assets |
Ratio of net investment income to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 The average shares outstanding method has been applied for per share information. |
2 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes
40
Year Ended | |||||||||||||||
11/30/08 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | |||||||||||
$12.020 | $12.580 | $11.130 | $11.040 | $10.200 | |||||||||||
0.324 | 0.360 | 0.335 | 0.367 | 0.267 | |||||||||||
(4.590 | ) | (0.528 | ) | 1.552 | 0.079 | 0.889 | |||||||||
(4.266 | ) | (0.168 | ) | 1.887 | 0.446 | 1.156 | |||||||||
(0.408 | ) | (0.331 | ) | (0.371 | ) | (0.275 | ) | (0.282 | ) | ||||||
(0.336 | ) | (0.061 | ) | (0.066 | ) | (0.081 | ) | (0.034 | ) | ||||||
(0.744 | ) | (0.392 | ) | (0.437 | ) | (0.356 | ) | (0.316 | ) | ||||||
$ 7.010 | $12.020 | $12.580 | $11.130 | $11.040 | |||||||||||
(37.72% | ) | (1.38% | ) | 17.46% | 4.09% | 11.54% | |||||||||
$32,534 | $78,235 | $77,757 | $57,904 | $32,165 | |||||||||||
1.75% | 1.75% | 1.76% | 1.75% | 1.75% | |||||||||||
1.96% | 1.87% | 1.93% | 1.97% | 2.02% | |||||||||||
3.17% | 2.85% | 2.89% | 3.30% | 2.51% | |||||||||||
2.96% | 2.73% | 2.72% | 3.08% | 2.25% | |||||||||||
51% | 52% | 51% | 85% | 95% |
41
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 income1 |
Net realized and unrealized gain (loss) on investments and foreign currencies |
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 return2 |
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 to average net assets |
Ratio of net investment income to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 The average shares outstanding method has been applied for per share information. |
2 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes
42
Year Ended | |||||||||||||||
11/30/08 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | |||||||||||
$12.030 | $12.580 | $11.130 | $11.040 | $10.200 | |||||||||||
0.323 | 0.360 | 0.335 | 0.367 | 0.267 | |||||||||||
(4.599 | ) | (0.518 | ) | 1.552 | 0.079 | 0.889 | |||||||||
(4.276 | ) | (0.158 | ) | 1.887 | 0.446 | 1.156 | |||||||||
(0.408 | ) | (0.331 | ) | (0.371 | ) | (0.275 | ) | (0.282 | ) | ||||||
(0.336 | ) | (0.061 | ) | (0.066 | ) | (0.081 | ) | (0.034 | ) | ||||||
(0.744 | ) | (0.392 | ) | (0.437 | ) | (0.356 | ) | (0.316 | ) | ||||||
$ 7.010 | $12.030 | $12.580 | $11.130 | $11.040 | |||||||||||
(37.63% | ) | (1.38% | ) | 17.46% | 4.09% | 11.53% | |||||||||
$146,769 | $402,782 | $269,274 | $165,663 | $82,083 | |||||||||||
1.75% | 1.75% | 1.76% | 1.75% | 1.75% | |||||||||||
1.96% | 1.87% | 1.93% | 1.97% | 2.02% | |||||||||||
3.17% | 2.85% | 2.89% | 3.30% | 2.52% | |||||||||||
2.96% | 2.73% | 2.72% | 3.08% | 2.25% | |||||||||||
51% | 52% | 51% | 85% | 95% |
43
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 income1 |
Net realized and unrealized gain (loss) on investments and foreign currencies |
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 return2 |
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 to average net assets |
Ratio of net investment income to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 The average shares outstanding method has been applied for per share information. |
2 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return reflects waivers by the manager and distributor. Performance would have been lower had the waivers not been in effect. |
See accompanying notes
44
Year Ended | |||||||||||||||
11/30/08 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | |||||||||||
$12.020 | $12.580 | $11.130 | $11.040 | $10.220 | |||||||||||
0.374 | 0.424 | 0.394 | 0.416 | 0.308 | |||||||||||
(4.585 | ) | (0.528 | ) | 1.551 | 0.078 | 0.879 | |||||||||
(4.211 | ) | (0.104 | ) | 1.945 | 0.494 | 1.187 | |||||||||
(0.463 | ) | (0.395 | ) | (0.429 | ) | (0.323 | ) | (0.333 | ) | ||||||
(0.336 | ) | (0.061 | ) | (0.066 | ) | (0.081 | ) | (0.034 | ) | ||||||
(0.799 | ) | (0.456 | ) | (0.495 | ) | (0.404 | ) | (0.367 | ) | ||||||
$ 7.010 | $12.020 | $12.580 | $11.130 | $11.040 | |||||||||||
(37.39% | ) | (0.88% | ) | 18.06% | 4.55% | 11.86% | |||||||||
$1,928 | $6,220 | $4,275 | $1,429 | $373 | |||||||||||
1.25% | 1.25% | 1.26% | 1.30% | 1.35% | |||||||||||
1.56% | 1.47% | 1.53% | 1.57% | 1.62% | |||||||||||
3.67% | 3.35% | 3.39% | 3.75% | 2.89% | |||||||||||
3.36% | 3.13% | 3.12% | 3.48% | 2.62% | |||||||||||
51% | 52% | 51% | 85% | 95% |
45
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 income1 |
Net realized and unrealized gain (loss) on investments and foreign currencies |
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 return2 |
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 to average net assets |
Ratio of net investment income to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 The average shares outstanding method has been applied for per share information. |
2 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes
46
Year Ended | |||||||||||||||
11/30/08 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | |||||||||||
$12.040 | $12.600 | $11.140 | $11.050 | $10.220 | |||||||||||
0.425 | 0.488 | 0.452 | 0.477 | 0.371 | |||||||||||
(4.602 | ) | (0.528 | ) | 1.559 | 0.082 | 0.882 | |||||||||
(4.177 | ) | (0.040 | ) | 2.011 | 0.559 | 1.253 | |||||||||
(0.517 | ) | (0.459 | ) | (0.485 | ) | (0.388 | ) | (0.389 | ) | ||||||
(0.336 | ) | (0.061 | ) | (0.066 | ) | (0.081 | ) | (0.034 | ) | ||||||
(0.853 | ) | (0.520 | ) | (0.551 | ) | (0.469 | ) | (0.423 | ) | ||||||
$ 7.010 | $12.040 | $12.600 | $11.140 | $11.050 | |||||||||||
(37.04% | ) | (0.46% | ) | 18.72% | 5.16% | 12.55% | |||||||||
$2,288 | $5,384 | $2,656 | $941 | $102 | |||||||||||
0.75% | 0.75% | 0.76% | 0.75% | 0.75% | |||||||||||
0.96% | 0.87% | 0.93% | 0.97% | 1.02% | |||||||||||
4.17% | 3.85% | 3.89% | 4.30% | 3.49% | |||||||||||
3.96% | 3.73% | 3.72% | 4.08% | 3.22% | |||||||||||
51% | 52% | 51% | 85% | 95% |
47
Notes to financial statements | |
Delaware Dividend Income Fund | November 30, 2008 |
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 ask prices will be used. Other long-term debt securities, credit default swap (CDS) contracts and interest rate swap contracts are valued by an independent pricing service or broker. To the extent current market prices are not available, the pricing service may take into account developments related to the specific security, as well as transactions in comparable securities. Short-term debt securities having less than 60 days to maturity are valued at amortized cost, which approximates market value. Investment companies are valued at net asset 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 suspension of trading in a security. The Fund may use fair value pricing more frequently for securities traded primarily in non-U.S. markets because, among other things, most foreign markets close well before the Fund values its securities at 4:00 p.m. Eastern Time. The earlier
48
close of these foreign markets gives rise to the possibility that significant events, including broad market moves, government actions or pronouncements, aftermarket trading or new events, may have occurred in the interim. To account for this, the Fund may frequently value foreign securities using fair value prices based on third-party vendor modeling tools (“international fair value pricing”).
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 other 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.
Foreign Currency Transactions — Transactions denominated in foreign currencies are recorded at the prevailing exchange rates on the valuation date. The value of all assets and liabilities denominated in foreign currencies is translated into U.S. dollars at the exchange rate of such currencies against the U.S. dollar daily. Transaction gains or losses resulting from changes in exchange rates during the reporting period or upon settlement of the foreign currency transaction are reported in operations for the current period. The Fund isolates that portion of realized gains and losses on investments in debt securities which is due to foreign exchange rates from that which is due to changes in market prices of debt securities. The Fund reports certain foreign currency related transactions as components of realized gains (losses) for financial reporting purposes, whereas such components are treated as ordinary income (loss) for federal income tax purposes.
49
Notes to financial statements
Delaware Dividend Income Fund
1. Significant Accounting Policies (continued)
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. 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 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 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 $9,427 for the year ended November 30, 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 0.65% 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.
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DMC has voluntarily agreed to waive that portion, if any, of its management fee and reimburse the Fund to the extent necessary to ensure that annual operating expenses (excluding any taxes, interest, brokerage fees, inverse floater 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 0.75% of average daily net assets 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. Effective December 19, 2008, DMC has increased this waiver to 1.00% of average daily net assets.
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 year ended November 30, 2008, the Fund was charged $33,367 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 November 30, 2008, the Fund had liabilities payable to affiliates as follows:
Investment management fee payable to DMC | $ | 148,267 |
Dividend disbursing, transfer agent and fund accounting | ||
oversight fees and other expenses payable to DSC | 98,601 | |
Distribution fees payable to DDLP | 190,998 | |
Other expenses payable to DMC and affiliates* | 11,273 |
*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. |
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Notes to financial statements
Delaware Dividend Income Fund
2. Investment Management, Administration Agreements and Other Transactions with Affiliates (continued)
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 year ended November 30, 2008, the Fund was charged $44,953 for internal legal and tax services provided by DMC and/or its affiliates’ employees.
For the year ended November 30, 2008, DDLP earned $78,132 for commissions on sales of the Fund’s Class A shares. For the year ended November 30, 2008, DDLP received gross CDSC of $18,510, $166,958 and $53,780 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 year ended November 30, 2008, the Fund made purchases of $329,663,563 and sales of $602,476,545 of investment securities other than short-term investments.
At November 30, 2008, the cost of investments for federal income tax purposes was $ 558,373,687. At November 30, 2008, net unrealized depreciation was $ 181,660,483, of which $3,246,449 related to unrealized appreciation of investments and $ 184,906,932 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 are observable, directly or indirectly
Level 3 – inputs are unobservable and reflect assumptions on the part of the reporting entity
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The following table summarizes the valuation of the Fund’s investments by the above FAS 157 fair value hierarchy levels as of November 30, 2008:
Securities | Derivatives | |||||
Level 1 | $ | 178,489,935 | $ | — | ||
Level 2 | 195,770,396 | 40,823 | ||||
Level 3 | 2,452,873 | — | ||||
Total | $ | 376,713,204 | $ | 40,823 |
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:
Securities | |||
Balance as of 12/01/07 | $ | 1,158,621 | |
Net change in unrealized appreciation/depreciation | (3,778,011 | ) | |
Net purchases, sales and settlements | 4,884,934 | ||
Net transfers in and/or out of Level 3 | 187,329 | ||
Balance as of 11/30/08 | $ | 2,452,873 | |
Net change in unrealized appreciation/depreciation from | |||
investments still held as of 11/30/08 | $ | (3,778,011 | ) |
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 gains on foreign currency transactions and 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 years ended November 30, 2008 and 2007 was as follows:
Year Ended | |||||
11/30/08 | 11/30/07 | ||||
Ordinary Income | $ | 28,917,930 | $ | 28,305,437 | |
Long-term capital gain | 27,344,436 | 3,727,044 | |||
Total | $ | 56,262,366 | $ | 32,032,481 |
5. Components of Net Assets on a Tax Basis
As of November 30, 2008, the components of net assets on a tax basis were as follows:
Shares of beneficial interest | $ | 658,978,203 | |
Undistributed ordinary income | 7,070,453 | ||
Capital loss carryforwards* | (118,180,493 | ) | |
Other temporary differences | (3,101,067 | ) | |
Unrealized depreciation of investments, swap contracts | |||
and foreign currencies | (181,660,512 | ) | |
Net assets | $ | 363,106,584 |
*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. |
53
Notes to financial statements
Delaware Dividend Income Fund
5. Components of Net Assets on a Tax Basis (continued)
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, tax treatment of CDS contracts, tax treatment of partnership income and contingent payment debt instruments.
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, gain (loss) on foreign currencies, partnership income, market discount and premium on certain debt instruments, defaulted bonds and CDS contracts. Results of operations and net assets were not affected by these reclassifications. For the year ended November 30, 2008, the Fund recorded the following reclassifications:
Undistributed net investment income | $ | 3,603,732 | |
Accumulated net realized loss | (3,603,732 | ) |
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, 2008 will expire as follows: $3,174,810 expires in 2009, $8,064,444 expires in 2010 and $106,941,239 expires in 2016. The use of these losses are subject to an annual limitation in accordance with the Internal Revenue Code.
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6. Capital Shares
Transactions in capital shares were as follows:
Year Ended | |||||
11/30/08 | 11/30/07 | ||||
Shares sold: | |||||
Class A | 3,644,571 | 19,661,015 | |||
Class B | 118,882 | 1,495,433 | |||
Class C | 1,939,816 | 16,931,359 | |||
Class R | 91,165 | 578,113 | |||
Institutional Class | 73,494 | 491,799 | |||
Shares issued upon reinvestment of dividends and distributions: | |||||
Class A | 2,127,844 | 1,097,573 | |||
Class B | 351,432 | 167,811 | |||
Class C | 1,797,825 | 741,787 | |||
Class R | 33,583 | 17,602 | |||
Institutional Class | 27,422 | 11,771 | |||
10,206,034 | 41,194,263 | ||||
Shares repurchased: | |||||
Class A | (17,622,087 | ) | (14,928,573 | ) | |
Class B | (2,336,314 | ) | (1,336,512 | ) | |
Class C | (16,298,425 | ) | (5,577,210 | ) | |
Class R | (366,928 | ) | (418,141 | ) | |
Institutional Class | (222,175 | ) | (267,061 | ) | |
(36,845,929 | ) | (22,527,497 | ) | ||
Net increase (decrease) | (26,639,895 | ) | 18,666,766 |
For the years ended November 30, 2008 and 2007, 203,437 Class B shares were converted to 203,349 Class A shares valued at $2,168,700 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.
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Notes to financial statements
Delaware Dividend Income Fund
7. Line of Credit
The Fund, along with certain other funds in the Delaware Investments® Family of Funds (Participants), was a participant in a $225,000,000 revolving line of credit with The Bank of New York Mellon (BNY Mellon) to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, Participants were charged an annual commitment fee, which was allocated across the Participants on the basis of each Participant’s allocation of the entire facility. Participants were permitted to borrow up to a maximum of one third of their net assets under the agreement. The agreement expired on November 18, 2008. The Fund had no loans outstanding as of November 30, 2008, or at any time during the year then ended.
Effective as of November 18, 2008, the Fund along with the other Participants entered into an amendment to the agreement with BNY Mellon for a $35,000,000 revolving line of credit. The agreement, as amended, is to be used as described above and operates in substantially the same manner as the original agreement. The agreement, as amended, expires on November 17, 2009.
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.
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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 year ended November 30, 2008, the Fund entered into CDS contracts as a purchaser of protection. Periodic payments on such contracts are accrued daily and recorded as unrealized losses on swap contracts. Upon payment, such amounts are recorded as realized losses on swap contracts. Upfront payments made or received in connection with CDS contracts are amortized over the expected life of the CDS contracts as unrealized losses (gains) on swap contracts. The change in value of CDS contracts is recorded as unrealized appreciation or depreciation daily. A realized gain or loss is recorded upon a credit event (as defined in the CDS agreement) or the maturity or termination of the agreement. For the year ended November 30, 2008, the Fund did not enter into any CDS contracts as a seller of protection.
Credit default swaps may involve greater risks than if the Fund had invested in the referenced obligation directly. Credit default swaps 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 movement in the value of the underlying security, instrument or basket of instruments, if any, at the day of default. Risks also arise from potential losses from adverse market movements and such losses could exceed the unrealized amounts shown on the statements 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 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 than the applicable collateral requirements. Cash collateral received is generally invested in the Mellon GSL DBT II Collateral Fund (the “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
57
Notes to financial statements
Delaware Dividend Income Fund
9. Securities Lending (continued)
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 Collective Trust seeks to maintain a net asset value per unit of $1.00, but there can be no assurance that it will always be able to do so. The Fund may incur investment losses as a result of investing securities lending collateral in the Collective Trust. This could occur if an investment in the Collective Trust defaulted or if it were necessary to liquidate assets in the Collective Trust to meet returns on outstanding security loans at a time when the Collective Trust’s net asset value per unit was less than $1.00. Under those circumstances, the Fund may not receive an amount from the Collective Trust that is equal in amount to the collateral the Fund would be required to return to the borrower of the securities and the Fund would be required to make up for this shortfall. During the year ended November 30, 2008, BNY Mellon transferred certain distressed securities from the Collective Trust into the Mellon GSL DBT II Liquidation Trust. 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 November 30, 2008, the value of securities on loan was $28,855,689, for which the Fund received collateral comprised of non-cash collateral valued $11,256 and cash collateral of $ 30,570,278. Investments purchases with cash collateral are presented on the statement of net assets under the caption “Securities Lending Collateral.”
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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 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 year ended November 30, 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.
12. Tax Information (Unaudited)
The information set forth below is for the Fund’s fiscal year as required by federal laws. Shareholders, however, must report distributions on a calendar year basis for income tax purposes, which may include distributions for portions of two fiscal years of a fund. Accordingly, the information needed by shareholders for income tax purposes will be sent to them in January of each year. Please consult your tax advisor for proper treatment of this information.
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Notes to financial statements
Delaware Dividend Income Fund
For the fiscal year ended November 30, 2008, the Fund designates distributions paid during the year as follows:
(A) Long-Term Capital Gains Distributions (Tax Basis) | 48.60 | % |
(B) Ordinary Income Distributions* (Tax Basis) | 51.40 | % |
Total Distributions (Tax Basis) | 100 | % |
(C) Qualifying Dividends1 | 27.33 | % |
(A) and (B) are based on a percentage of the Fund’s total distributions.
(C) is based on a percentage of the Fund’s ordinary income distributions.
1 | Qualifying dividends represent dividends which qualify for the corporate dividends received deduction. |
* | For the fiscal year ended November 30, 2008 certain dividends paid by the Fund may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Fund intends to designate up to a maximum amount of $6,979,277 to be taxed at a maximum rate of 15% Complete information will be computed and reported in conjunction with your 2008 Form 1099-DIV. |
For the fiscal year ended November 30, 2008, certain interest income paid by the Fund, determined to be Qualified Interest Income and Short-Term Capital Gains, may be subject to relief from U.S. withholding for foreign shareholders, as provided by the American Jobs Creation Act of 2004. For the fiscal year ended November 30, 2008, the Fund has designated maximum distributions of Qualified Interest Income of $13,983,244.
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Report of independent
registered public accounting firm
To the Shareholders and Board of Trustees
Delaware Group® Equity Funds V — Delaware Dividend Income Fund
We have audited the accompanying statement of net assets of Delaware Dividend Income Fund (one of the series constituting Delaware Group Equity Funds V) (the “Fund”) as of November 30, 2008, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of November 30, 2008 by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Delaware Dividend Income Fund of Delaware Group Equity Funds V at November 30, 2008, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Philadelphia, Pennsylvania
January 16, 2009
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Other Fund information
(Unaudited)
Delaware Dividend Income Fund
Fund management
Thomas H. Chow, CFA
Senior Vice President, Senior Portfolio Manager
Thomas H. Chow is a member of the firm’s taxable fixed income portfolio management team with primary responsibility for portfolio construction and strategic asset allocation. His experience includes significant exposure to asset liability management strategies and credit risk opportunities. Prior to joining Delaware Investments in 2001, he was a trader of high grade and high yield securities, and was involved in the portfolio management of collateralized bond obligations (CBOs) and insurance portfolios at SunAmerica/AIG from 1997 to 2001. Before that, he was an analyst, trader, and portfolio manager at Conseco Capital Management from 1989 to 1997. Chow received a bachelor’s degree in business analysis from Indiana University, and he is a Fellow of Life Management Institute.
D. Tysen Nutt Jr.
Senior Vice President, Senior Portfolio Manager, Team Leader – Large-Cap Value Focus Equity
D. Tysen Nutt Jr. joined Delaware Investments in 2004 as senior vice president and senior portfolio manager for the firm’s Large-Cap Value Focus strategy. Before joining the firm, Nutt led the U.S. Active Large-Cap Value team within Merrill Lynch Investment Managers (MLIM), where he managed mutual funds and separate accounts for institutions and private clients. He departed MLIM as a managing director. Prior to joining MLIM in 1994, Nutt was with Van Deventer & Hoch (V&H) where he managed large-cap value portfolios for institutions and private clients. He began his investment career at Dean Witter Reynolds, where he eventually became vice president, investments. Nutt earned his bachelor’s degree from Dartmouth College, and he is a member of the New York Society of Security Analysts and the CFA Institute.
Anthony A. Lombardi, CFA
Vice President, Senior Portfolio Manager
Anthony A. Lombardi joined Delaware Investments in 2004 as a vice president and senior portfolio manager for the firm’s Large-Cap Value Focus strategy. Previously, Lombardi worked at Merrill Lynch Investment Managers from 1998 to 2004, where he rose to the position of director and portfolio manager for the U.S. Active Large-Cap Value team, managing mutual funds and separate accounts for institutions and private clients. Prior to that, he worked at Dean Witter Reynolds for seven years as a sell-side equity research analyst, and he began his career as an investment analyst with Crossland Savings in 1989. Lombardi graduated from Hofstra University, receiving a bachelor’s degree in finance and an MBA with a concentration in finance. He is a member of the New York Society of Security Analysts and the CFA Institute.
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Babak (Bob) Zenouzi
Senior Vice President, Senior Portfolio Manager
Bob Zenouzi is the lead manager for the domestic and global REIT effort at Delaware Investments, which includes the team, its process, and its institutional and retail products, which he created during his prior time with the firm. He also focuses on opportunities in Japan, Singapore, and Malaysia for the firm’s global REIT product. Additionally, he serves as lead portfolio manager for the firm’s Dividend Income products, which he helped to create in the 1990s. He rejoined Delaware Investments in May 2006. In his first term with the firm, he spent seven years as an analyst and portfolio manager, leaving in 1999 to work at Chartwell Investment Partners, where from 1999 to 2006 he was a partner and senior portfolio manager on Chartwell’s Small-Cap Value portfolio. He began his career with The Boston Company, where he held several positions in accounting and financial analysis. Zenouzi earned a master’s degree in finance from Boston College and a bachelor’s degree from Babson College. He is a member of the National Association of Real Estate Investment Trusts and the Urban Land Institute.
Kevin P. Loome, CFA
Senior Vice President, Senior Portfolio Manager, Head of High Yield Investments
Kevin P. Loome is head of the High Yield fixed income team, responsible for portfolio construction and strategic asset allocation of all high yield fixed income assets. Prior to joining Delaware Investments in August 2007, Loome spent 11 years at T. Rowe Price, starting as an analyst and leaving the firm as a portfolio manager. He began his career with Morgan Stanley as a corporate finance analyst in the New York and London offices. Loome received his bachelor’s degree in commerce from the University of Virginia and earned an MBA from the Tuck School of Business at Dartmouth.
Nikhil G. Lalvani, CFA
Vice President, Portfolio Manager
Nikhil G. Lalvani is a portfolio manager with the firm’s Large-Cap Value Focus team. At Delaware Investments, Lalvani has served as both a fundamental and quantitative analyst. Prior to joining the firm in 1997, he was a research associate with Bloomberg. Lalvani holds a bachelor’s degree in finance from The Pennsylvania State University and is a member of the CFA Society of Philadelphia.
Robert A. Vogel Jr., CFA
Vice President, Senior Portfolio Manager
Robert A. Vogel Jr. joined Delaware Investments in 2004 as a vice president, senior portfolio manager for the firm’s Large-Cap Value Focus strategy. He previously worked at Merrill Lynch Investment Managers for more than seven years, where he rose to the position of director and portfolio manager within the U.S. Active Large-Cap Value team. He began his career in 1992 as a financial consultant at Merrill Lynch. Vogel graduated from Loyola College in Maryland, earning both bachelor’s and master’s degrees in finance. He also earned an MBA with a concentration in finance from The Wharton School of the University of Pennsylvania, and he is a member of the New York Society of Security Analysts and the CFA Society of Philadelphia.
63
Other Fund information
(Unaudited)
Delaware Dividend Income Fund
Kristen E. Bartholdson
Vice President, Portfolio Manager
Kristen E. Bartholdson is a portfolio manager with the firm’s Large-Cap Value Focus team. Prior to joining the firm in 2006, she worked at Susquehanna International Group from 2004 to 2006, where she was an equity research salesperson. From 2000 to 2004 she worked in equity research at Credit Suisse, most recently as an associate analyst in investment strategy. Bartholdson earned her bachelor’s degree in economics from Princeton University.
Nashira S. Wynn
Vice President, Portfolio Manager
Nashira S. Wynn is a portfolio manager with the firm’s Large-Cap Value Focus team. Prior to joining Delaware Investments in 2004, she was an equity research analyst for Merrill Lynch Investment Managers, starting there in July 2001. Wynn earned a bachelor’s degree in finance, with a minor in economics, from The College of New Jersey, and she attended England’s Oxford University as a Presidential Scholar.
Damon J. Andres, CFA
Vice President, Senior Portfolio Manager
Damon J. Andres, who joined Delaware Investments in 1994, currently serves as a portfolio manager for REIT investments and convertibles. He also serves as a portfolio manager for the firm’s Dividend Income products. From 1991 to 1994, he performed investment-consulting services as a consulting associate with Cambridge Associates. Andres earned a bachelor’s degree in business administration with an emphasis in finance and accounting from the University of Richmond.
64
Board of trustees/directors and officers addendum
Delaware Investments® Family of Funds
A mutual fund is governed by a Board of Trustees/Directors (“Trustees”), which has oversight responsibility for the management of a fund’s business affairs. Trustees establish procedures and oversee and review the performance of the investment manager, the distributor, and others who perform services for the fund. The independent fund trustees, in particular, are advocates
Name, Address, | Position(s) | Length of | ||
and Birth Date | Held with Fund(s) | Time Served | ||
Interested Trustees | ||||
Patrick P. Coyne1 | Chairman, President, | Chairman and Trustee | ||
2005 Market Street | Chief Executive Officer, | since August 16, 2006 | ||
Philadelphia, PA 19103 | and Trustee | |||
April 1963 | President and | |||
Chief Executive Officer | ||||
since August 1, 2006 | ||||
Independent Trustees | ||||
Thomas L. Bennett | Trustee | Since March 2005 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
October 1947 | ||||
1 Patrick P. Coyne is considered to be an “Interested Trustee” because he is an executive officer of the Fund’s(s’) investment advisor.
66
for shareholder interests. Each trustee has served in that capacity since he or she was elected to or appointed to the Board of Trustees, and will continue to serve until his or her retirement or the election of a new trustee in his or her place. The following is a list of the Trustees and Officers with certain background and related information.
Number of Portfolios in | ||||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships | ||
During Past 5 Years | by Trustee or Officer | Held by Trustee or Officer | ||
Patrick P. Coyne has served in | 85 | Director | ||
various executive capacities | Kaydon Corp. | |||
at different times at | ||||
Delaware Investments.2 | Board of Governors Member | |||
Investment Company | ||||
Institute (ICI) | ||||
(2007–Present) | ||||
Member of Investment Committee | ||||
Cradle of Liberty Council, BSA | ||||
(November 2007–Present) | ||||
Finance Committee Member | ||||
St. John Vianney | ||||
Roman Catholic Church | ||||
(2007–Present) | ||||
Private Investor | 85 | Director | ||
(March 2004–Present) | Bryn Mawr Bank Corp. (BMTC) | |||
(April 2007–Present) | ||||
Investment Manager | ||||
Morgan Stanley & Co. | Chairman of | |||
(January 1984–March 2004) | Investment Committee | |||
Pennsylvania Academy of | ||||
Fine Arts (2007–Present) | ||||
Trustee (2004–Present) | ||||
2 Delaware Investments is the marketing name for Delaware Management Holdings, Inc. and its subsidiaries, including the Fund’s(s’) investment advisor, principal underwriter, and its transfer agent.
67
Board of trustees/directors and officers addendum
Delaware Investments® Family of Funds
Name, Address, | Position(s) | Length of | ||
and Birth Date | Held with Fund(s) | Time Served | ||
Independent Trustees (continued) | ||||
Thomas L. Bennett | ||||
(continued) | ||||
John A. Fry | Trustee | Since January 2001 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
May 1960 | ||||
Anthony D. Knerr | Trustee | Since April 1990 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
December 1938 | ||||
Lucinda S. Landreth | Trustee | Since March 2005 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
June 1947 | ||||
Ann R. Leven | Trustee | Since October 1989 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
November 1940 | ||||
Thomas F. Madison | Trustee | Since May 19973 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
February 1936 | ||||
3 In 1997, several funds managed by Voyageur Fund Managers, Inc. (the “Voyageur Funds”) were incorporated into the Delaware Investments Family of Funds. Mr. Madison served as a director of the Voyageur Funds from 1993 until 1997.
68
Number of Portfolios in | ||||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships | ||
During Past 5 Years | by Trustee or Officer | Held by Trustee or Officer | ||
Investment Committee and | ||||
Governance Committee | ||||
Member | ||||
Pennsylvania Horticultural | ||||
Society | ||||
(February 2006–Present) | ||||
President | 85 | Director | ||
Franklin & Marshall College | Community Health Systems | |||
(June 2002–Present) | ||||
Executive Vice President | ||||
University of Pennsylvania | ||||
(April 1995–June 2002) | ||||
Founder and | 85 | None | ||
Managing Director | ||||
Anthony Knerr & Associates | ||||
(Strategic Consulting) | ||||
(1990–Present) | ||||
Chief Investment Officer | 85 | None | ||
Assurant, Inc. (Insurance) | ||||
(2002–2004) | ||||
Consultant | 85 | Director and Audit | ||
ARL Associates | Committee Chair | |||
(Financial Planning) | Systemax, Inc. | |||
(1983–Present) | ||||
President and | 85 | Director and Chair of | ||
Chief Executive Officer | Compensation Committee, | |||
MLM Partners, Inc. | Governance Committee | |||
(Small Business Investing | Member | |||
and Consulting) | CenterPoint Energy | |||
(January 1993–Present) | ||||
69
Board of trustees/directors and officers addendum
Delaware Investments® Family of Funds
Name, Address, | Position(s) | Length of | ||
and Birth Date | Held with Fund(s) | Time Served | ||
Independent Trustees (continued) | ||||
Thomas F. Madison | ||||
(continued) | ||||
Janet L. Yeomans | Trustee | Since April 1999 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
July 1948 | ||||
J. Richard Zecher | Trustee | Since March 2005 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
July 1940 | ||||
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Number of Portfolios in | ||||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships | ||
During Past 5 Years | by Trustee or Officer | Held by Trustee or Officer | ||
Lead Director and Chair of | ||||
Audit and Governance | ||||
Committees, Member of | ||||
Compensation Committee | ||||
Digital River, Inc. | ||||
Director and Chair of | ||||
Governance Committee, | ||||
Audit Committee | ||||
Member | ||||
Rimage Corporation | ||||
Director and Chair of | ||||
the Compensation Committee | ||||
Spanlink Communications | ||||
Lead Director and Chair of | ||||
Compensation and | ||||
Governance Committees | ||||
Valmont Industries, Inc. | ||||
Vice President and Treasurer | 85 | None | ||
(January 2006–Present) | ||||
Vice President — Mergers & Acquisitions | ||||
(January 2003–January 2006), and | ||||
Vice President | ||||
(July 1995–January 2003) | ||||
3M Corporation | ||||
Founder | 85 | Director and Audit | ||
Investor Analytics | Committee Member | |||
(Risk Management) | Investor Analytics | |||
(May 1999–Present) | ||||
Founder | ||||
Sutton Asset Management | ||||
(Hedge Fund) | ||||
(September 1996–Present) | ||||
71
Board of trustees/directors and officers addendum
Delaware Investments® Family of Funds
Name, Address, | Position(s) | Length of | ||
and Birth Date | Held with Fund(s) | Time Served | ||
Officers | ||||
David F. Connor | Vice President, | Vice President since | ||
2005 Market Street | Deputy General | September 2000 | ||
Philadelphia, PA 19103 | Counsel, and Secretary | and Secretary since | ||
December 1963 | October 2005 | |||
Daniel V. Geatens | Vice President | Treasurer | ||
2005 Market Street | and Treasurer | since October 25, 2007 | ||
Philadelphia, PA 19103 | ||||
October 1972 | ||||
David P. O’Connor | Senior Vice President, | Senior Vice President, | ||
2005 Market Street | General Counsel, | General Counsel, and | ||
Philadelphia, PA 19103 | and Chief Legal Officer | Chief Legal Officer | ||
February 1966 | since October 2005 | |||
Richard Salus | Senior Vice President | Chief Financial Officer | ||
2005 Market Street | and Chief Financial Officer | since November 2006 | ||
Philadelphia, PA 19103 | ||||
October 1963 | ||||
4 David F. Connor, Daniel V. Geatens, David P. O’Connor, and Richard Salus serve in similar capacities for the six portfolios of the Optimum Fund Trust, which have the same investment advisor, principal underwriter, and transfer agent as the registrant.
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Number of Portfolios in | ||||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships | ||
During Past 5 Years | by Trustee or Officer | Held by Trustee or Officer | ||
David F. Connor has served as | 85 | None4 | ||
Vice President and Deputy | ||||
General Counsel of | ||||
Delaware Investments | ||||
since 2000. | ||||
Daniel V. Geatens has served | 85 | None4 | ||
in various capacities at | ||||
different times at | ||||
Delaware Investments. | ||||
David P. O’Connor has served in | 85 | None4 | ||
various executive and legal | ||||
capacities at different times | ||||
at Delaware Investments. | ||||
Richard Salus has served in | 85 | None4 | ||
various executive capacities | ||||
at different times at | ||||
Delaware Investments. | ||||
The Statement of Additional Information for the Fund(s) includes additional information about the Trustees and Officers and is available, without charge, upon request by calling 800 523-1918.
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About the organization
This annual 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
The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. A copy of the registrant’s Code of Business Ethics has been posted on the Delaware Investments® Internet Web site at www.delawareinvestments.com. Any amendments to the Code of Business Ethics, and information on any waiver from its provisions granted by the registrant, will also be posted on this Web site within five business days of such amendment or waiver and will remain on the Web site for at least 12 months.
Item 3. Audit Committee Financial Expert
The registrant’s Board of Trustees/Directors has determined that each member of the registrant’s Audit Committee is an audit committee financial expert, as defined below. For purposes of this item, an “audit committee financial expert” is a person who has the following attributes:
a. An understanding of generally accepted accounting principles and financial statements;
b. The ability to assess the general application of such principles in connection with the accounting for estimates, accruals, and reserves;
c. Experience preparing, auditing, analyzing, or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the registrant’s financial statements, or experience actively supervising one or more persons engaged in such activities;
d. An understanding of internal controls and procedures for financial reporting; and
e. An understanding of audit committee functions.
An “audit committee financial expert” shall have acquired such attributes through:
a. Education and experience as a principal financial officer, principal accounting officer, controller, public accountant, or auditor or experience in one or more positions that involve the performance of similar functions;
b. Experience actively supervising a principal financial officer, principal accounting officer, controller, public accountant, auditor, or person performing similar functions;
c. Experience overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing, or evaluation of financial statements; or
d. Other relevant experience.
The registrant’s Board of Trustees/Directors has also determined that each member of the registrant’s Audit Committee is independent. In order to be “independent” for purposes of this item, the Audit Committee member may not: (i) other than in his or her capacity as a member of the Board of Trustees/Directors or any committee thereof, accept directly or indirectly any consulting, advisory or other compensatory fee from the issuer; or (ii) be an “interested person” of the registrant as defined in Section 2(a)(19) of the Investment Company Act of 1940.
The names of the audit committee financial experts on the registrant’s Audit Committee are set forth below:
Thomas L. Bennett 1
Thomas F. Madison
Janet L. Yeomans 1
J. Richard Zecher
Item 4. Principal Accountant Fees and Services
(a) Audit fees.
The aggregate fees billed for services provided to the registrant by its independent auditors for the audit of the registrant’s annual financial statements and for services normally provided by the independent auditors in connection with statutory and regulatory filings or engagements were $93,200 for the fiscal year ended November 30, 2008.
_______________________
1 The instructions to Form N-CSR require disclosure on the relevant experience of persons who qualify as audit committee financial experts based on “other relevant experience.” The Board of Trustees/Directors has determined that Mr. Bennett qualifies as an audit committee financial expert by virtue of his education, Chartered Financial Analyst designation, and his experience as a credit analyst, portfolio manager and the manager of other credit analysts and portfolio managers. The Board of Trustees/Directors has determined that Ms. Yeomans qualifies as an audit committee financial expert by virtue of her education and experience as the Treasurer of a large global corporation.
The aggregate fees billed for services provided to the registrant by its independent auditors for the audit of the registrant’s annual financial statements and for services normally provided by the independent auditors in connection with statutory and regulatory filings or engagements were $89,800 for the fiscal year ended November 30, 2007.
(b) Audit-related fees.
The aggregate fees billed by the registrant’s independent auditors for services relating to the performance of the audit of the registrant’s financial statements and not reported under paragraph (a) of this Item were $0 for the fiscal year ended November 30, 2008.
The aggregate fees billed by the registrant’s independent auditors for services relating to the performance of the audit of the financial statements of the registrant’s investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $19,074 for the registrant’s fiscal year ended November 30, 2008. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These audit-related services were as follows: issuance of report concerning transfer agent's system of internal accounting control pursuant to Rule 17Ad-13 of the Securities Exchange Act.
The aggregate fees billed by the registrant’s independent auditors for services relating to the performance of the audit of the registrant’s financial statements and not reported under paragraph (a) of this Item were $0 for the fiscal year ended November 30, 2007.
The aggregate fees billed by the registrant’s independent auditors for services relating to the performance of the audit of the financial statements of the registrant’s investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $19,074 for the registrant’s fiscal year ended November 30, 2007. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These audit-related services were as follows: issuance of report concerning transfer agent's system of internal accounting control pursuant to Rule 17Ad-13 of the Securities Exchange Act.
(c) Tax fees.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant were $32,650 for the fiscal year ended November 30, 2008. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These tax-related services were as follows: review of income tax returns and review of annual excise distribution calculations.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant’s investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended November 30, 2008.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant were $34,650 for the fiscal year ended November 30, 2007. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These tax-related services were as follows: review of income tax returns and review of annual excise distribution calculations.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant’s adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended November 30, 2007.
(d) All other fees.
The aggregate fees billed for all services provided by the independent auditors to the registrant other than those set forth in paragraphs (a), (b) and (c) of this Item were $0 for the fiscal year ended November 30, 2008.
The aggregate fees billed for all services other than those set forth in paragraphs (b) and (c) of this Item provided by the registrant’s independent auditors to the registrant’s adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended November 30, 2008.
The aggregate fees billed for all services provided by the independent auditors to the registrant other than those set forth in paragraphs (a), (b) and (c) of this Item were $0 for the fiscal year ended November 30, 2007.
The aggregate fees billed for all services other than those set forth in paragraphs (b) and (c) of this Item provided by the registrant’s independent auditors to the registrant’s adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended November 30, 2007.
(e) The registrant’s Audit Committee has established pre-approval policies and procedures as permitted by Rule 2-01(c)(7)(i)(B) of Regulation S-X (the “Pre-Approval Policy”) with respect to services provided by the registrant’s independent auditors. Pursuant to the Pre-Approval Policy, the Audit Committee has pre-approved the services set forth in the table below with respect to the registrant up to the specified fee limits. Certain fee limits are based on aggregate fees to the registrant and other registrants within the Delaware Investments® Family of Funds.
Service | Range of Fees |
Audit Services | |
Statutory audits or financial audits for new Funds | up to $25,000 per Fund |
Services associated with SEC registration statements (e.g., Form N-1A, Form N-14, etc.), periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings (e.g., comfort letters for closed-end Fund offerings, consents), and assistance in responding to SEC comment letters | up to $10,000 per Fund |
Consultations by Fund management as to the accounting or disclosure treatment of transactions or events and/or the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, or other regulatory or standard-setting bodies (Note: Under SEC rules, some consultations may be considered “audit-related services” rather than “audit services”) | up to $25,000 in the aggregate |
Audit-Related Services | |
Consultations by Fund management as to the accounting or disclosure treatment of transactions or events and /or the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, or other regulatory or standard-setting bodies (Note: Under SEC rules, some consultations may be considered “audit services” rather than “audit-related services”) | up to $25,000 in the aggregate |
Tax Services | |
U.S. federal, state and local and international tax planning and advice (e.g., consulting on statutory, regulatory or administrative developments, evaluation of Funds’ tax compliance function, etc.) | up to $25,000 in the aggregate |
U.S. federal, state and local tax compliance (e.g., excise distribution reviews, etc.) | up to $5,000 per Fund |
Review of federal, state, local and international income, franchise and other tax returns | up to $5,000 per Fund |
Under the Pre-Approval Policy, the Audit Committee has also pre-approved the services set forth in the table below with respect to the registrant’s investment adviser and other entities controlling, controlled by or under common control with the investment adviser that provide ongoing services to the registrant (the “Control Affiliates”) up to the specified fee limit. This fee limit is based on aggregate fees to the investment adviser and its Control Affiliates.
Service | Range of Fees |
Non-Audit Services | |
Services associated with periodic reports and other documents filed with the SEC and assistance in responding to SEC comment letters | up to $10,000 in the aggregate |
The Pre-Approval Policy requires the registrant’s independent auditors to report to the Audit Committee at each of its regular meetings regarding all services initiated since the last such report was rendered, including those services authorized by the Pre-Approval Policy.
(f) Not applicable.
(g) The aggregate non-audit fees billed by the registrant’s independent auditors for services rendered to the registrant and to its investment adviser and other service providers under common control with the adviser were $286,652 and $289,012 for the registrant’s fiscal years ended November 30, 2008 and November 30, 2007, respectively.
(h) In connection with its selection of the independent auditors, the registrant’s Audit Committee has considered the independent auditors’ provision of non-audit services to the registrant’s investment adviser and other service providers under common control with the adviser that were not required to be pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X. The Audit Committee has determined that the independent auditors’ provision of these services is compatible with maintaining the auditors’ independence.
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 Company 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 fourth 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: | February 4, 2009 |
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: | February 4, 2009 |
RICHARD SALUS | |
By: | Richard Salus |
Title: | Chief Financial Officer |
Date: | February 4, 2009 |