UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number: 811-04997
Exact name of registrant as specified in charter:
Delaware Group® Equity Funds V
Address of principal executive offices:
2005 Market Street
Philadelphia, PA 19103
Name and address of agent for service:
David F. Connor, Esq.
2005 Market Street
Philadelphia, PA 19103
Registrant’s telephone number, including area code: (800) 523-1918
Date of fiscal year end: | November 30 |
Date of reporting period: | May 31, 2009 |
Item 1. Reports to Stockholders
![]() | ![]() |
Semiannual report | |
Delaware Small Cap Core Fund | |
May 31, 2009 |
Core equity mutual fund |
Table of contents
Disclosure of Fund expenses | 1 |
Sector allocation and top 10 holdings | 3 |
Statement of net assets | 5 |
Statement of operations | 12 |
Statements of changes in net assets | 14 |
Financial highlights | 16 |
Notes to financial statements | 24 |
Other Fund information | 33 |
About the organization | 37 |
Funds are not FDIC insured and are not guaranteed. It is possible to lose the principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management
Business Trust, which is a registered investment advisor.
© 2009 Delaware Distributors, L.P.
All third-party trademarks cited are the property of their respective owners.
Disclosure of Fund expenses
For the period December 1, 2008 to May 31, 2009
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period December 1, 2008 to May 31, 2009.
Actual expenses
The first section of the table shown, “Actual Fund Return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The second section of the table shown, “Hypothetical 5% Return,” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The Fund’s expenses shown in the table reflect fee waivers in effect. The expenses shown in the table assume reinvestment of all dividends and distributions.
1
Disclosure of Fund expenses
Delaware Small Cap Core Fund
Expense analysis of an investment of $1,000
Beginning | Ending | Expenses | ||||||||||||||
Account Value | Account Value | Annualized | Paid During Period | |||||||||||||
12/1/08 | 5/31/09 | Expense Ratio | 12/1/08 to 5/31/09* | |||||||||||||
Actual Fund return | ||||||||||||||||
Class A | $ | 1,000.00 | $ | 1,108.70 | 1.45 | % | $ | 7.62 | ||||||||
Class C | 1,000.00 | 1,104.40 | 2.20 | % | 11.54 | |||||||||||
Class R | 1,000.00 | 1,108.40 | 1.70 | % | 8.94 | |||||||||||
Institutional Class | 1,000.00 | 1,109.00 | 1.20 | % | 6.31 | |||||||||||
Hypothetical 5% return (5% return before expenses) | ||||||||||||||||
Class A | $ | 1,000.00 | $ | 1,017.70 | 1.45 | % | $ | 7.29 | ||||||||
Class C | 1,000.00 | 1,013.96 | 2.20 | % | 11.05 | |||||||||||
Class R | 1,000.00 | 1,016.45 | 1.70 | % | 8.55 | |||||||||||
Institutional Class | 1,000.00 | 1,018.95 | 1.20 | % | 6.04 |
*“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 182/365 (to reflect the one-half year period).
2
Sector allocation and top 10 holdings | |
Delaware Small Cap Core Fund | As of May 31, 2009 |
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 | 97.94 | % |
Basic Materials | 6.04 | % |
Business Services | 8.17 | % |
Capital Goods | 10.31 | % |
Communication Services | 1.86 | % |
Consumer Discretionary | 5.14 | % |
Consumer Services | 4.80 | % |
Consumer Staples | 3.94 | % |
Energy | 3.46 | % |
Financials | 12.74 | % |
Health Care | 14.35 | % |
Media | 0.46 | % |
Real Estate | 3.76 | % |
Technology | 19.11 | % |
Transportation | 0.65 | % |
Utilities | 3.15 | % |
Discount Note | 2.56 | % |
Securities Lending Collateral | 14.97 | % |
Total Value of Securities | 115.47 | % |
Obligation to Return Securities Lending Collateral | (15.70 | %) |
Receivables and Other Assets Net of Liabilities | 0.23 | % |
Total Net Assets | 100.00 | % |
3
Sector allocation and top 10 holdings
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 | |
Jack in the Box | 1.08 | % |
Anixter International | 1.06 | % |
Tekelec | 1.03 | % |
Senior Housing Properties Trust | 1.03 | % |
Ashland | 1.02 | % |
Aspen Insurance Holdings | 1.01 | % |
Chart Industries | 1.01 | % |
ViaSat | 1.00 | % |
United Therapeutics | 1.00 | % |
WMS Industries | 1.00 | % |
4
Statement of net assets | |
Delaware Small Cap Core Fund | May 31, 2009 (Unaudited) |
Number of shares | Value | ||||
Common Stock – 97.94% | |||||
Basic Materials – 6.04% | |||||
Ashland | 20,771 | $ | 556,652 | ||
Compass Minerals International | 9,050 | 485,352 | |||
Cytec Industries | 10,190 | 218,881 | |||
† | GrafTech International | 46,440 | 472,295 | ||
Rock-Tenn Class A | 13,990 | 536,936 | |||
† | Rockwood Holdings | 22,580 | 336,894 | ||
Schulman (A.) | 19,700 | 294,121 | |||
Silgan Holdings | 9,130 | 404,094 | |||
3,305,225 | |||||
Business Services – 8.17% | |||||
* | Administaff | 14,130 | 303,795 | ||
American Ecology | 15,280 | 291,084 | |||
† | AMN Healthcare Services | 32,630 | 234,936 | ||
† | CRA International | 10,120 | 266,662 | ||
† | DynCorp International Class A | 24,170 | 349,740 | ||
Healthcare Services Group | 20,780 | 363,234 | |||
*† | Huron Consulting Group | 6,060 | 277,730 | ||
† | Kforce | 39,850 | 371,004 | ||
*† | Lincoln Educational Services | 19,530 | 360,133 | ||
McGrath RentCorp | 17,180 | 311,989 | |||
† | RiskMetrics Group | 18,110 | 291,028 | ||
† | TeleTech Holdings | 26,300 | 303,239 | ||
† | Tetra Tech | 5,800 | 148,886 | ||
† | Titan Machinery | 15,550 | 195,308 | ||
† | United Stationers | 11,350 | 406,443 | ||
4,475,211 | |||||
Capital Goods – 10.31% | |||||
* | AAON | 22,750 | 473,200 | ||
* | Acuity Brands | 13,620 | 370,192 | ||
Applied Industrial Technologies | 17,040 | 353,921 | |||
Barnes Group | 16,400 | 250,264 | |||
† | Chart Industries | 26,140 | 554,951 | ||
† | Columbus McKinnon | 22,720 | 315,581 | ||
† | ESCO Technologies | 5,700 | 231,534 | ||
* | Granite Construction | 12,700 | 464,185 | ||
† | Hexcel | 41,020 | 438,504 | ||
† | Kadant | 18,400 | 256,864 | ||
Koppers Holdings | 7,120 | 180,065 |
5
Statement of net assets
Delaware Small Cap Core Fund
Number of shares | Value | ||||
Common Stock (continued) | |||||
Capital Goods (continued) | |||||
Lufkin Industries | 7,590 | $ | 344,434 | ||
† | Perini | 12,380 | 255,647 | ||
† | Rofin-Sinar Technologies | 14,300 | 322,465 | ||
Triumph Group | 11,120 | 438,239 | |||
† | Willbros Group | 26,070 | 398,089 | ||
5,648,135 | |||||
Communication Services – 1.86% | |||||
Alaska Communications Systems Group | 54,200 | 366,934 | |||
† | IPG Photonics | 28,200 | 290,742 | ||
NTELOS Holdings | 20,090 | 359,008 | |||
1,016,684 | |||||
Consumer Discretionary – 5.14% | |||||
† | Aeropostale | 10,830 | 374,935 | ||
Guess | 9,660 | 249,421 | |||
† | Gymboree | 9,700 | 357,445 | ||
*† | Hibbett Sports | 14,700 | 265,041 | ||
† | Jo-Ann Stores | 11,750 | 253,918 | ||
*† | Marvel Entertainment | 12,390 | 411,100 | ||
Phillips-Van Heusen | 10,210 | 300,889 | |||
† | Susser Holdings | 14,050 | 190,799 | ||
† | ULTA Salon Cosmetics & Fragrance | 48,100 | 411,735 | ||
2,815,283 | |||||
Consumer Services – 4.80% | |||||
† | Bally Technologies | 16,940 | 474,320 | ||
*† | Buffalo Wild Wings | 2,420 | 85,910 | ||
† | CEC Entertainment | 7,810 | 250,935 | ||
CKE Restaurants | 44,780 | 368,092 | |||
† | Jack in the Box | 22,580 | 593,854 | ||
† | Papa John’s International | 11,440 | 310,024 | ||
*† | WMS Industries | 15,400 | 546,238 | ||
2,629,373 | |||||
Consumer Staples – 3.94% | |||||
* | Alberto-Culver | 18,940 | 440,166 | ||
Casey’s General Stores | 17,900 | 451,617 | |||
*† | Chattem | 8,010 | 478,437 | ||
Lance | 7,250 | 154,643 | |||
† | Ralcorp Holdings | 7,960 | 455,869 | ||
† | Smart Balance | 23,950 | 177,230 | ||
2,157,962 |
6
Number of shares | Value | ||||
Common Stock (continued) | |||||
Energy – 3.46% | |||||
† | Bristow Group | 9,550 | $ | 302,067 | |
*† | Carrizo Oil & Gas | 24,500 | 523,075 | ||
† | Exco Resources | 21,570 | 331,962 | ||
Massey Energy | 16,400 | 375,396 | |||
Penn Virginia | 19,020 | 363,662 | |||
1,896,162 | |||||
Financials – 12.74% | |||||
Apollo Investment | 27,150 | 149,597 | |||
Aspen Insurance Holdings | 24,040 | 555,083 | |||
City Holding | 11,350 | 360,249 | |||
Dime Community Bancshares | 36,700 | 326,997 | |||
First Commonwealth Financial | 25,850 | 191,290 | |||
First Niagara Financial Group | 28,250 | 358,493 | |||
Greenhill & Co | 2,510 | 184,485 | |||
Harleysville Group | 9,570 | 280,305 | |||
Independent Bank (MA) | 16,300 | 331,216 | |||
IPC Holdings | 12,970 | 322,305 | |||
Max Capital Group | 22,550 | 356,516 | |||
optionsXpress Holdings | 27,200 | 464,847 | |||
† | ProAssurance | 9,330 | 421,809 | ||
Protective Life | 18,056 | 223,172 | |||
Provident Financial Services | 29,240 | 287,722 | |||
RLI | 7,540 | 353,324 | |||
Smithtown Bancorp | 9,150 | 112,545 | |||
TCF Financial | 20,080 | 288,349 | |||
† | Texas Capital Bancshares | 27,000 | 414,450 | ||
Trustmark | 18,700 | 366,333 | |||
Waddell & Reed Financial Class A | 13,830 | 337,452 | |||
Washington Federal | 22,140 | 290,477 | |||
6,977,016 | |||||
Health Care – 14.35% | |||||
† | Align Technology | 25,570 | 302,493 | ||
† | Alkermes | 39,530 | 321,774 | ||
† | Bio-Rad Laboratories Class A | 6,870 | 511,402 | ||
† | Catalyst Health Solutions | 16,290 | 348,443 | ||
† | Celera | 37,410 | 283,194 | ||
† | Conmed | 20,940 | 329,805 | ||
† | Eurand | 35,550 | 458,595 |
7
Statement of net assets
Delaware Small Cap Core Fund
Number of shares | Value | ||||
Common Stock (continued) | |||||
Health Care (continued) | |||||
*† | Gen-Probe | 6,750 | $ | 287,753 | |
*† | Medarex | 60,620 | 438,889 | ||
† | Merit Medical Systems | 14,790 | 202,475 | ||
*† | Noven Pharmaceuticals | 36,050 | 400,155 | ||
† | Onyx Pharmaceuticals | 14,290 | 338,101 | ||
*† | OSI Pharmaceuticals | 13,860 | 468,468 | ||
*† | Psychiatric Solutions | 19,100 | 352,395 | ||
† | Quidel | 16,200 | 206,226 | ||
† | Regeneron Pharmaceuticals | 19,510 | 298,698 | ||
† | Res-Care | 21,100 | 298,565 | ||
† | SonoSite | 10,550 | 195,281 | ||
† | Sun Healthcare Group | 37,950 | 351,797 | ||
Techne | 6,550 | 394,769 | |||
*† | United Therapeutics | 6,850 | 549,027 | ||
Universal Health Services Class B | 3,290 | 180,720 | |||
* | West Pharmaceutical Services | 10,610 | 342,915 | ||
7,861,940 | |||||
Media – 0.46% | |||||
National CineMedia | 20,250 | 253,328 | |||
253,328 | |||||
Real Estate – 3.76% | |||||
* | Alexandria Real Estate Equities | 6,120 | 219,708 | ||
* | Digital Realty Trust | 13,100 | 468,587 | ||
* | Home Properties | 14,210 | 473,193 | ||
Senior Housing Properties Trust | 33,560 | 562,130 | |||
Sovran Self Storage | 13,930 | 336,549 | |||
2,060,167 | |||||
Technology – 19.11% | |||||
*† | Anixter International | 14,150 | 580,432 | ||
*† | Blackboard | 12,700 | 366,014 | ||
† | Digital River | 11,300 | 430,869 | ||
† | Dionex | 8,500 | 479,060 | ||
† | FARO Technologies | 19,190 | 296,102 | ||
iGate | 67,380 | 359,809 | |||
InfoGROUP | 74,000 | 414,400 | |||
† | Informatica | 21,240 | 346,849 | ||
*† | j2 Global Communications | 18,300 | 408,090 | ||
† | JDA Software Group | 28,150 | 419,435 |
8
Number of shares | Value | |||||
Common Stock (continued) | ||||||
Technology (continued) | ||||||
† | Knology | 30,250 | $ | 242,000 | ||
† | Lawson Software | 91,350 | 480,501 | |||
† | Netgear | 18,610 | 261,098 | |||
NIC | 25,300 | 152,559 | ||||
*† | ON Semiconductor | 58,090 | 397,917 | |||
† | Progress Software | 19,650 | 440,553 | |||
* | Quality Systems | 8,150 | 406,930 | |||
† | Sapient | 50,340 | 267,305 | |||
*† | SAVVIS | 39,550 | 465,504 | |||
† | Semtech | 18,300 | 294,447 | |||
*† | SolarWinds | 4,180 | 62,700 | |||
*† | Synaptics | 13,320 | 467,798 | |||
*† | Tekelec | 34,690 | 566,487 | |||
United Online | 54,710 | 350,144 | ||||
† | ValueClick | 28,730 | 317,467 | |||
† | ViaSat | 21,930 | 550,004 | |||
*† | Vocus | 18,750 | 358,313 | |||
† | Wind River Systems | 35,850 | 282,857 | |||
10,465,644 | ||||||
Transportation – 0.65% | ||||||
† | HUB Group | 17,870 | 353,111 | |||
353,111 | ||||||
Utilities – 3.15% | ||||||
Black Hills | 7,930 | 169,702 | ||||
Cleco | 25,890 | 529,710 | ||||
Otter Tail | 16,570 | 314,333 | ||||
* | Piedmont Natural Gas | 11,850 | 268,521 | |||
UIL Holdings | 12,780 | 264,929 | ||||
UNITIL | 8,890 | 178,511 | ||||
1,725,706 | ||||||
Total Common Stock (cost $61,142,606) | 53,640,947 | |||||
Principal amount | ||||||
¹Discount Note – 2.56% | ||||||
Federal Home Loan Bank 0.07% 6/1/09 | $ | 1,404,009 | 1,404,009 | |||
Total Discount Note (cost $1,404,009) | 1,404,009 | |||||
Total Value of Securities Before Securities | ||||||
Lending Collateral – 100.50% (cost $62,546,615) | 55,044,956 |
9
Statement of net assets
Delaware Small Cap Core Fund
Number of shares | Value | |||||
Securities Lending Collateral** – 14.97% | ||||||
Investment Companies | ||||||
Mellon GSL DBT II Collateral Fund | 2,062,660 | $ | 2,062,660 | |||
BNY Mellon SL DBT II Liquidating Fund | 6,319,993 | 6,133,039 | ||||
†Mellon GSL Reinvestment Trust II | 214,226 | 21 | ||||
Total Securities Lending Collateral | ||||||
(cost $8,596,879) | 8,195,720 | |||||
Total Value of Securities – 115.47% | ||||||
(cost $71,143,494) | 63,240,676 | © | ||||
Obligation to Return Securities | ||||||
Lending Collateral** – (15.70%) | (8,596,879 | ) | ||||
Receivables and Other Assets | ||||||
Net of Liabilities – 0.23% | 126,109 | |||||
Net Assets Applicable to 7,107,586 | ||||||
Shares Outstanding – 100.00% | $ | 54,769,906 | ||||
Net Asset Value – Delaware Small Cap Core Fund | ||||||
Class A ($18,715,796 / 2,422,742 Shares) | $7.73 | |||||
Net Asset Value – Delaware Small Cap Core Fund | ||||||
Class C ($7,228,304 / 962,434 Shares) | $7.51 | |||||
Net Asset Value – Delaware Small Cap Core Fund | ||||||
Class R ($3,402,741 / 443,922 Shares) | $7.67 | |||||
Net Asset Value – Delaware Small Cap Core Fund | ||||||
Institutional Class ($25,423,065 / 3,278,488 Shares) | $7.75 | |||||
Components of Net Assets at May 31, 2009: | ||||||
Shares of beneficial interest | ||||||
(unlimited authorization – no par) | $ | 89,554,738 | ||||
Undistributed net investment income | 60,566 | |||||
Accumulated net realized loss on investments | (26,942,580 | ) | ||||
Net unrealized depreciation of investments | ||||||
and foreign currencies | (7,902,818 | ) | ||||
Total net assets | $ | 54,769,906 |
10
† | Non income producing security. |
* | Fully or partially on loan. |
** | See Note 8 in “Notes to financial statements.” |
© | Includes $8,311,313 of securities loaned. |
¹ | The rate shown is the effective yield at the time of purchase. |
Net Asset Value and Offering Price Per Share – | |||
Delaware Small Cap Core Fund | |||
Net asset value Class A (A) | $ | 7.73 | |
Sales charge (5.75% of offering price) (B) | 0.47 | ||
Offering price | $ | 8.20 |
(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
11
Statement of operations | |
Delaware Small Cap Core Fund | Six Months Ended May 31, 2009 (Unaudited) |
Investment Income: | ||||||||
Dividends | $ | 389,266 | ||||||
Interest | 1,738 | |||||||
Securities lending income | 45,978 | |||||||
Foreign tax withheld | (177 | ) | $ | 436,805 | ||||
Expenses: | ||||||||
Management fees | 187,499 | |||||||
Dividend disbursing and transfer agent fees and expenses | 103,261 | |||||||
Distribution expenses – Class A | 24,123 | |||||||
Distribution expenses – Class C | 34,209 | |||||||
Distribution expenses – Class R | 8,465 | |||||||
Registration fees | 33,008 | |||||||
Reports and statements to shareholders | 15,380 | |||||||
Audit and tax | 10,059 | |||||||
Accounting and administration expenses | 10,000 | |||||||
Legal fees | 5,560 | |||||||
Custodian fees | 2,016 | |||||||
Trustees’ fees | 1,819 | |||||||
Pricing fees | 1,504 | |||||||
Insurance fees | 717 | |||||||
Consulting fees | 427 | |||||||
Trustees’ expenses | 181 | |||||||
Dues and services | 149 | 438,377 | ||||||
Less fees waived | (71,677 | ) | ||||||
Less waived distribution expenses – Class A | (4,021 | ) | ||||||
Less waived distribution expenses – Class R | (1,411 | ) | ||||||
Total operating expenses | 361,268 | |||||||
Net Investment Income | 75,537 |
12
Net Realized and Unrealized Gain (Loss) on Investments | ||||
and Foreign Currencies: | ||||
Net realized loss on: | ||||
Investments | $ | (11,722,849 | ) | |
Foreign currencies | (32 | ) | ||
Net realized loss | (11,722,881 | ) | ||
Net change in unrealized appreciation/depreciation of investments | ||||
and foreign currencies | 17,412,660 | |||
Net Realized and Unrealized Gain on Investments | ||||
and Foreign Currencies | 5,689,779 | |||
Net Increase in Net Assets Resulting from Operations | $ | 5,765,316 |
See accompanying notes
13
Statements of changes in net assets
Delaware Small Cap Core Fund
Six Months | Year | |||||||
Ended | Ended | |||||||
5/31/09 | 11/30/08 | |||||||
(Unaudited) | ||||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 75,537 | $ | 115,166 | ||||
Net realized loss on investments and foreign currencies | (11,722,881 | ) | (15,289,610 | ) | ||||
Net change in unrealized appreciation/depreciation | ||||||||
of investments and foreign currencies | 17,412,660 | (20,167,182 | ) | |||||
Net increase (decrease) in net assets resulting | ||||||||
from operations | 5,765,316 | (35,341,626 | ) | |||||
Dividends and Distributions to shareholders from: | ||||||||
Net investment income: | ||||||||
Class A | (18,682 | ) | — | |||||
Institutional Class | (108,923 | ) | — | |||||
Net realized gain on investments: | ||||||||
Class A | — | (1,661,864 | ) | |||||
Class C | — | (747,248 | ) | |||||
Class R | — | (129,165 | ) | |||||
Institutional Class | — | (1,184,753 | ) | |||||
(127,605 | ) | (3,723,030 | ) | |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Class A | 4,021,878 | 15,242,391 | ||||||
Class C | 976,102 | 3,445,661 | ||||||
Class R | 993,479 | 2,133,293 | ||||||
Institutional Class | 3,536,548 | 16,003,810 | ||||||
Net asset value of shares issued upon reinvestment of | ||||||||
dividends and distributions: | ||||||||
Class A | 16,792 | 1,456,794 | ||||||
Class C | — | 706,562 | ||||||
Class R | — | 129,164 | ||||||
Institutional Class | 108,923 | 1,184,571 | ||||||
9,653,722 | 40,302,246 |
14
Six Months | Year | |||||||
Ended | Ended | |||||||
5/31/09 | 11/30/08 | |||||||
(Unaudited) | ||||||||
Capital Share Transactions (continued): | ||||||||
Cost of shares repurchased: | ||||||||
Class A | $ | (4,676,301 | ) | $ | (25,213,086 | ) | ||
Class C | (1,929,166 | ) | (8,306,747 | ) | ||||
Class R | (516,584 | ) | (986,931 | ) | ||||
Institutional Class | (4,021,251 | ) | (10,952,917 | ) | ||||
(11,143,302 | ) | (45,459,681 | ) | |||||
Decrease in net assets derived from capital share transactions | (1,489,580 | ) | (5,157,435 | ) | ||||
Net Increase (Decrease) in Net Assets | 4,148,131 | (44,222,091 | ) | |||||
Net Assets: | ||||||||
Beginning of period | 50,621,775 | 94,843,866 | ||||||
End of period (including undistributed net investment | ||||||||
income of $60,566 and $112,666, respectively) | $ | 54,769,906 | $ | 50,621,775 |
See accompanying notes
15
Financial highlights
Delaware Small Cap Core Fund Class A
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income (loss)2 |
Net realized and unrealized gain (loss) on investments 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 return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived and expense paid indirectly |
Ratio of net investment income (loss) to average net assets |
Ratio of net investment income (loss) to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
See accompanying notes
16
Six Months Ended | Year Ended | |||||||||||||||||
5/31/091 | 11/30/08 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | |||||||||||||
(Unaudited) | ||||||||||||||||||
$6.930 | $12.150 | $13.030 | $11.380 | $14.600 | $13.080 | |||||||||||||
0.010 | 0.019 | (0.010 | ) | (0.015 | ) | 0.022 | 0.026 | |||||||||||
0.798 | (4.747 | ) | (0.450 | ) | 1.895 | 1.035 | 2.481 | |||||||||||
0.808 | (4.728 | ) | (0.460 | ) | 1.880 | 1.057 | 2.507 | |||||||||||
(0.008 | ) | — | — | — | (0.025 | ) | (0.044 | ) | ||||||||||
— | (0.492 | ) | (0.420 | ) | (0.230 | ) | (4.252 | ) | (0.943 | ) | ||||||||
(0.008 | ) | (0.492 | ) | (0.420 | ) | (0.230 | ) | (4.277 | ) | (0.987 | ) | |||||||
$7.730 | $6.930 | $12.150 | $13.030 | $11.380 | $14.600 | |||||||||||||
10.87% | (40.55% | ) | (3.62% | ) | 16.83% | 9.04% | 20.62% | |||||||||||
$18,716 | $17,529 | $41,871 | $25,220 | $3,863 | $20 | |||||||||||||
1.45% | 1.34% | 1.29% | 1.26% | 1.02% | 0.75% | |||||||||||||
1.79% | 1.57% | 1.47% | 1.73% | 2.53% | 1.30% | |||||||||||||
0.30% | 0.19% | (0.07% | ) | (0.13% | ) | 0.20% | 0.20% | |||||||||||
(0.04% | ) | (0.04% | ) | (0.25% | ) | (0.60% | ) | (1.31% | ) | (0.35% | ) | |||||||
72% | 84% | 104% | 121% | 104% | 136% |
17
Financial highlights
Delaware Small Cap Core Fund Class C
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment loss3 |
Net realized and unrealized gain (loss) on investments and foreign currencies |
Total from investment operations |
Less dividends and distributions from: |
Net realized gain on investments |
Total dividends and distributions |
Net asset value, end of period |
Total return4 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived and expense paid indirectly |
Ratio of net investment loss to average net assets |
Ratio of net investment loss to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
See accompanying notes
18
8/1/052 | |||||||||||||||
Six Months Ended | Year Ended | to | |||||||||||||
5/31/091 | 11/30/08 | 11/30/07 | 11/30/06 | 11/30/05 | |||||||||||
(Unaudited) | |||||||||||||||
$6.750 | $11.940 | $12.910 | $11.360 | $11.590 | |||||||||||
(0.015 | ) | (0.055 | ) | (0.105 | ) | (0.106 | ) | (0.021 | ) | ||||||
0.775 | (4.643 | ) | (0.445 | ) | 1.886 | (0.209 | ) | ||||||||
0.760 | (4.698 | ) | (0.550 | ) | 1.780 | (0.230 | ) | ||||||||
— | (0.492 | ) | (0.420 | ) | (0.230 | ) | — | ||||||||
— | (0.492 | ) | (0.420 | ) | (0.230 | ) | — | ||||||||
$7.510 | $6.750 | $11.940 | $12.910 | $11.360 | |||||||||||
10.44% | (41.03% | ) | (4.37% | ) | 15.97% | (1.98% | ) | ||||||||
$7,228 | $7,494 | $18,697 | $11,777 | $866 | |||||||||||
2.20% | 2.09% | 2.04% | 2.01% | 2.00% | |||||||||||
2.49% | 2.27% | 2.17% | 2.43% | 5.14% | |||||||||||
(0.45% | ) | (0.56% | ) | (0.82% | ) | (0.88% | ) | (0.56% | ) | ||||||
(0.74% | ) | (0.74% | ) | (0.95% | ) | (1.30% | ) | (3.71% | ) | ||||||
72% | 84% | 104% | 121% | 104% | 5 |
19
Financial highlights
Delaware Small Cap Core Fund Class R
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income (loss)3 |
Net realized and unrealized gain (loss) on investments and foreign currencies |
Total from investment operations |
Less dividends and distributions from: |
Net realized gain on investments |
Total dividends and distributions |
Net asset value, end of period |
Total return4 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived and expense paid indirectly |
Ratio of net investment 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 |
See accompanying notes
20
Six Months Ended | Year Ended | |||||||||||
5/31/091 | 11/30/08 | 11/30/07 | 11/30/062 | |||||||||
(Unaudited) | ||||||||||||
$6.870 | $12.090 | $13.000 | $11.360 | |||||||||
0.002 | (0.005 | ) | (0.042 | ) | (0.047 | ) | ||||||
0.798 | (4.723 | ) | (0.448 | ) | 1.917 | |||||||
0.800 | (4.728 | ) | (0.490 | ) | 1.870 | |||||||
— | (0.492 | ) | (0.420 | ) | (0.230 | ) | ||||||
— | (0.492 | ) | (0.420 | ) | (0.230 | ) | ||||||
$7.670 | $6.870 | $12.090 | $13.000 | |||||||||
10.84% | (40.75% | ) | (3.86% | ) | 16.78% | |||||||
$3,403 | $2,611 | $3,100 | $215 | |||||||||
1.70% | 1.59% | 1.54% | 1.51% | |||||||||
2.09% | 1.87% | 1.77% | 2.03% | |||||||||
0.05% | (0.06% | ) | (0.32% | ) | (0.38% | ) | ||||||
(0.34% | ) | (0.34% | ) | (0.55% | ) | (0.90% | ) | |||||
72% | 84% | 104% | 121% |
21
Financial highlights
Delaware Small Cap Core Fund Institutional Class
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) on investments 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 return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived and expense paid indirectly |
Ratio of net investment income to average net assets |
Ratio of net investment income (loss) to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
See accompanying notes
22
Six Months Ended | Year Ended | |||||||||||||||||
5/31/091 | 11/30/08 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | |||||||||||||
(Unaudited) | ||||||||||||||||||
$6.970 | $12.190 | $13.040 | $11.390 | $14.600 | $13.080 | |||||||||||||
0.019 | 0.044 | 0.023 | 0.015 | 0.031 | 0.026 | |||||||||||||
0.793 | (4.772 | ) | (0.453 | ) | 1.895 | 1.036 | 2.481 | |||||||||||
0.812 | (4.728 | ) | (0.430 | ) | 1.910 | 1.067 | 2.507 | |||||||||||
(0.032 | ) | — | — | (0.030 | ) | (0.025 | ) | (0.044 | ) | |||||||||
— | (0.492 | ) | (0.420 | ) | (0.230 | ) | (4.252 | ) | (0.943 | ) | ||||||||
(0.032 | ) | (0.492 | ) | (0.420 | ) | (0.260 | ) | (4.277 | ) | (0.987 | ) | |||||||
$7.750 | $6.970 | $12.190 | $13.040 | $11.390 | $14.600 | |||||||||||||
10.90% | (40.41% | ) | (3.38% | ) | 17.13% | 9.14% | 20.62% | |||||||||||
$25,423 | $22,988 | $31,176 | $15,482 | $6,645 | $4,765 | |||||||||||||
1.20% | 1.09% | 1.04% | 1.01% | 0.94% | 0.75% | |||||||||||||
1.49% | 1.27% | 1.17% | 1.43% | 2.23% | 1.00% | |||||||||||||
0.55% | 0.44% | 0.18% | 0.12% | 0.28% | 0.20% | |||||||||||||
0.26% | 0.26% | 0.05% | (0.30% | ) | (1.01% | ) | (0.05% | ) | ||||||||||
72% | 84% | 104% | 121% | 104% | 136% |
23
Notes to financial statements | |
Delaware Small Cap Core Fund | May 31, 2009 (Unaudited) |
Delaware Group® Equity Funds V (Trust) is organized as a Delaware statutory trust and offers three series: Delaware Dividend Income Fund, Delaware Small Cap Core Fund and Delaware Small Cap Value Fund. These financial statements and the related notes pertain to Delaware Small Cap Core Fund (Fund). The Trust is an open-end investment company. The Fund is considered diversified under the Investment Company Act of 1940, as amended, and offers Class A, Class C, Class R and Institutional Class shares. Class A shares are sold with a maximum front-end sales charge of up to 5.75%. Class A share purchases of $1,000,000 or more will incur a contingent deferred sales charge (CDSC) of 1% if redeemed during the first year and 0.50% during the second year, provided that Delaware Distributors, L.P. (DDLP) paid a financial advisor a commission on the purchase of those shares. Class C shares are sold with a CDSC of 1%, if redeemed during the first twelve 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. 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 news 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 — No provision for federal income taxes has been made as the Fund intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Fund evaluates tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are
24
“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 Fund did not record 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. At May 31, 2009, the Fund held no investments in repurchase agreements.
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 statements and totaled $330 for the six months ended May 31, 2009. 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.
25
Notes to financial statements
Delaware Small Cap Core Fund
1. Significant Accounting Policies (continued)
The Fund may receive earnings credits from its custodian when positive cash balances are maintained, which are used to offset custody fees. There were no earnings credits for the six months ended May 31, 2009.
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, 2009, 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 total annual operating expenses (excluding any 12b-1 plan expenses, taxes, interest, inverse floater program expenses, brokerage fees, short sale and dividend interest expenses, certain insurance costs, and non-routine expenses or costs, including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations (collectively, non-routine expenses)) do not exceed 1.45% of average daily net assets of the Fund until such time as the waivers are discontinued. For purposes of these waivers and reimbursements, non-routine expenses may also include such additional costs and expenses, as may be agreed upon from time to time by the Fund’s Board and DMC. These expense waivers and reimbursements apply only to expenses paid directly by the Fund. Prior to April 1, 2009, annual operating expenses were contractually limited to 1.10% of average daily net assets of the Fund.
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Fund. For these services, the Fund pays DSC fees based on the aggregate daily net assets of the Delaware Investments® Family of Funds at the following annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DSC under the service agreement described above are allocated among all Funds in the Delaware Investments® Family of Funds on a relative net asset value basis. For the six months ended May 31, 2009, the Fund was charged $1,250 for these services.
DSC also provides dividend disbursing and transfer agency services. The Fund pays DSC a monthly fee based on the number of shareholder accounts for dividend disbursing and transfer agent services.
26
Pursuant to a distribution agreement and distribution plan, the Fund pays DDLP, the distributor and an affiliate of DMC, an annual distribution and service fee not to exceed 0.30% of the average daily net assets of the Class A shares, 1.00% of the average daily net assets of the C shares and 0.60% of the average daily net assets of Class R shares. Institutional Class shares pay no distribution and service expenses. DDLP has contracted to waive distribution and service fees through March 31, 2010, in order to prevent distribution and service fees of Class A and Class R shares from exceeding 0.25% and 0.50%, respectively, of average daily net assets.
At May 31, 2009, the Fund had liabilities payable to affiliates as follows:
Investment management fee payable to DMC | $ | 33,954 |
Dividend disbursing, transfer agent and fund accounting | ||
oversight fees and other expenses payable to DSC | 14,404 | |
Distribution fees payable to DDLP | 11,268 | |
Other expenses payable to DMC and affiliates* | 1,129 |
*DMC, as part of its administrative services, pays operating expenses on behalf of the Fund and is reimbursed on a periodic basis. Such expenses include items such as printing of shareholder reports, fees for audit, legal and tax services, registration fees and trustees’ fees.
As provided in the investment management agreement, the Fund bears the cost of certain legal and tax services, including internal legal and tax services provided to the Fund by DMC and/or its affiliates’ employees. For the six months ended May 31, 2009, the Fund was charged $2,730 for internal legal and tax services provided by DMC and/or its affiliates’ employees.
For the six months ended May 31, 2009, DDLP earned $1,581 for commissions on sales of the Fund’s Class A shares. For the six months ended May 31, 2009, DDLP received gross CDSC commissions of $90 and $388 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 six months ended May 31, 2009, the Fund made purchases of $17,628,245 and sales of $19,096,760 of investment securities other than short-term investments.
At May 31, 2009, the cost of investments for federal income tax purposes has been estimated since the final tax characteristics cannot be determined until fiscal year end. At May 31, 2009, the cost of investments was $73,582,615. At May 31, 2009, net unrealized depreciation was $10,341,939, of which $2,762,011 related to unrealized appreciation of investments and $13,103,950 related to unrealized depreciation of investments.
27
Notes to financial statements
Delaware Small Cap Core Fund
3. Investments (continued)
The Fund applies 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 under current market conditions. 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 FAS 157 fair value hierarchy levels as of May 31, 2009:
Securities | ||
Level 1 | $ | 55,703,607 |
Level 2 | 7,537,048 | |
Level 3 | 21 | |
Total | $ | 63,240,676 |
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:
Securities | |||
Balance as of 11/30/08 | $ | 17,567 | |
Net change in unrealized appreciation/depreciation | (17,546 | ) | |
Balance as of 5/31/09 | $ | 21 | |
Net change in unrealized appreciation/depreciation from | |||
investments still held as of 5/31/09 | $ | (17,546 | ) |
28
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 six months ended May 31, 2009 and the year ended November 30, 2008 was as follows:
Six Months | Year | ||||
Ended | Ended | ||||
5/31/09* | 11/30/08 | ||||
Ordinary income | $ | 127,605 | $ | 1,033,856 | |
Long-term capital gain | — | 2,689,174 | |||
Total | $ | 127,605 | $ | 3,723,030 |
*Tax information for the period ended May 31, 2009 is an estimate and the tax character of dividends and distributions may be redesignated at the fiscal year end.
5. Components of Net Assets on a Tax Basis
The components of net assets are estimated since final tax characteristics cannot be determined until fiscal year end. As of May 31, 2009, the estimated components of net assets on a tax basis were as follows:
Shares of beneficial interest | $ | 89,554,738 | |
Undistributed ordinary income | 60,566 | ||
Realized losses 12/1/08 – 5/31/09 | (9,734,694 | ) | |
Capital loss carryforwards as of 11/30/08 | (14,768,765 | ) | |
Unrealized depreciation of investments and foreign currencies | (10,341,939 | ) | |
Net assets | $ | 54,769,906 |
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 gain (loss) on foreign currencies. Results of operations and net assets were not affected by these reclassifications. For the six months ended May 31, 2009, the Fund recorded an estimate of these differences since the final tax characteristics cannot be determined until fiscal year end.
Undistributed net investment income | $ | (32 | ) |
Accumulated net realized loss | 32 |
29
Notes to financial statements
Delaware Small Cap Core Fund
5. Components of Net Assets on a Tax Basis (continued)
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.
For the six months ended May 31, 2009, the Fund had capital losses of $9,734,694, which may increase the capital loss carryforwards.
6. Capital Shares
Transactions in capital shares were as follows:
Six Months | Year | ||||
Ended | Ended | ||||
5/31/09 | 11/30/08 | ||||
Shares sold: | |||||
Class A | 592,972 | 1,449,626 | |||
Class C | 145,878 | 341,626 | |||
Class R | 145,897 | 212,992 | |||
Institutional Class | 514,138 | 1,644,887 | |||
Shares issued upon reinvestment of dividends and distributions: | |||||
Class A | 2,392 | 124,512 | |||
Class C | — | 61,494 | |||
Class R | — | 11,097 | |||
Institutional Class | 15,472 | 100,901 | |||
1,416,749 | 3,947,135 | ||||
Shares repurchased: | |||||
Class A | (703,335 | ) | (2,490,369 | ) | |
Class C | (293,795 | ) | (858,886 | ) | |
Class R | (81,832 | ) | (100,739 | ) | |
Institutional Class | (550,112 | ) | (1,004,928 | ) | |
(1,629,074 | ) | (4,454,922 | ) | ||
Net decrease | (212,325 | ) | (507,787 | ) |
7. Line of Credit
The Fund, along with certain other funds in the Delaware Investments® Family of Funds (Participants), participates in a $35,000,000 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, the Participants are charged an annual commitment fee, which is allocated across the Participants on the basis of each Participant’s allocation of the entire facility. The Participants may borrow up to a maximum
30
of one third of their net assets under the agreement. The agreement expires on November 17, 2009. The Fund had no amounts outstanding as of May 31, 2009 or at any time during the period then ended.
8. Securities Lending
The Fund, along with other funds in the Delaware Investments® Family of Funds, may lend its securities pursuant to a security lending agreement (Lending Agreement) with 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 (Collective Trust) established by BNY Mellon for the purpose of investment on behalf of clients participating in its securities lending programs. The Collective Trust may invest 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. At May, 31, 2009, the Collective Trust held only cash and assets with a maturity of one business day or less (Cash/Overnight Assets). 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. Effective April 20, 2009, BNY Mellon transferred the assets of the Collective Trust other than the Cash/Overnight Assets to the BNY Mellon SL DBT II Liquidating Fund (the Liquidating Fund), effectively bifurcating the collateral investment pool. The Fund’s exposure to the Liquidating Fund is expected to decrease as the Liquidating Fund’s assets mature or are sold. In October 2008, BNY Mellon transferred certain distressed securities from the Collective Trust into the Mellon GSL Reinvestment Trust II. The Fund may 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.
31
Notes to financial statements
Delaware Small Cap Core Fund
8. Securities Lending (continued)
The Fund has the right under the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized by non-cash collateral, the Fund receives loan premiums paid by the borrower. With respect to security loans collateralized by cash collateral, the earnings from the collateral investments are shared among the Fund, the security lending agent, and the borrower. The Fund records security lending income net of allocations to the security lending agent and the borrower.
At May 31, 2009, the value of securities on loan was $8,311,313, 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-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 six months ended May 31, 2009. The Fund’s REIT holdings are also affected by interest rate changes, particularly if the REITs it holds use floating rate debt to finance their ongoing operations.
The Fund may invest up to 15% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair the Fund from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, the Fund’s Board has delegated to DMC the day-to-day functions of determining whether individual securities are liquid for purposes of the Fund’s limitation on investments in illiquid assets. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Fund’s 15% limit on investments in illiquid securities. As of May 31, 2009, there were no Rule 144A securities and no securities have been determined to be illiquid under the Fund’s Liquidity Procedures.
10. Contractual Obligations
The Fund enters into contracts in the normal course of business that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Fund’s existing contracts and expects the risk of loss to be remote.
32
Other Fund information
(Unaudited)
Delaware Small Cap Core Fund
Board Consideration of Delaware Small Cap Core Fund Investment Advisory Agreement
At a meeting held on May 19-21, 2009 (the “Annual Meeting”), the Board of Trustees (the “Board”), including a majority of disinterested or independent Trustees, approved the renewal of the Investment Advisory Agreement for the Delaware Small Cap Core Fund (the “Fund”). In making its decision, the Board considered information furnished specifically in connection with the renewal of the Investment Advisory Agreement with Delaware Management Company (“DMC”), which included materials provided by DMC and its affiliates (“Delaware Investments”) concerning, among other things, the nature, extent and quality of services provided to the Fund, the costs of such services to the Fund, economies of scale and the financial condition and profitability of Delaware Investments. Reference was made to information furnished at regular quarterly Board meetings, including reports detailing Fund performance, investment strategies and expenses, as well as information prepared specifically in connection with the renewal of the investment advisory and sub-advisory contracts. In addition, in connection with the Annual Meeting, reports were provided in February 2009 and included independent historical and comparative reports prepared by Lipper Inc. (“Lipper”), an independent statistical compilation organization. The Lipper reports compared the Fund’s investment performance and expenses with those of other comparable mutual funds. The independent Trustees reviewed and discussed the Lipper reports with counsel to the independent Trustees. The Board requested and received information regarding Management’s policy with respect to advisory fee levels and its breakpoint philosophy; the structure of portfolio manager compensation; the investment manager’s profitability; and any constraints or limitations on the availability of securities in certain investment styles which had in the past year inhibited, or which were likely in the future to inhibit, DMC’s ability to invest fully in accordance with Fund policies.
In considering information relating to the approval of the Fund’s advisory agreement, the independent Trustees received assistance and advice from and met separately with counsel to the independent Trustees. Although the Trustees gave attention to all information furnished, the following discussion identifies, under separate headings, the primary factors taken into account by the Board during its contract renewal considerations.
Nature, Extent and Quality of Service. The Board considered the services provided by Delaware Investments to the Fund and its shareholders. In reviewing the nature, extent and quality of services, the Board considered reports furnished to it throughout the year which covered matters such as the relative performance of the Fund, compliance of portfolio managers with the investment policies, strategies and restrictions for the Fund, compliance by Management personnel with the Code of Ethics adopted throughout the Delaware Investments® Family of Funds complex and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of the Fund’s investment advisor and the emphasis placed on research in the investment process. The Board gave favorable consideration to DMC’s efforts to control expenditures while maintaining service levels committed to fund matters. The
33
Other Fund information
(Unaudited)
Delaware Small Cap Core Fund
Board Consideration of Delaware Small Cap Core Fund Investment Advisory Agreement (continued)
Board also considered the transfer agent and shareholder services provided to Fund shareholders by DMC’s affiliate, Delaware Service Company, Inc. (“DSC”), noting DSC’s high level of service. The Board noted that Management finished upgrading investment accounting functions through outsourcing to improve the quality and lower the cost of delivering investment accounting services to the Fund. The Board once again noted the benefits provided to Fund shareholders through each shareholder’s ability to exchange an investment in one Delaware Investments® fund for the same class of shares in another Delaware Investments fund without a sales charge, to reinvest Fund dividends into additional shares of the Fund or into additional shares of other Delaware Investments funds and the privilege to combine holdings in other Delaware Investments funds to obtain a reduced sales charge. The Board was satisfied with the nature, extent and quality of the overall services provided by Delaware Investments.
Investment Performance. The Board placed significant emphasis on the investment performance of the Fund in view of its importance to shareholders. Although the Board gave appropriate consideration to performance reports and discussions with portfolio managers at Board meetings throughout the year, the Board gave particular weight to the Lipper reports furnished for the Annual Meeting. The Lipper reports prepared for the Fund showed the investment performance of its Class A shares in comparison to a group of similar funds as selected by Lipper (the “Performance Universe”). A fund with the best performance ranked first, and a fund with the poorest performance ranked last. The highest/best performing 25% of funds in the Performance Universe make up the first quartile; the next 25%, the second quartile; the next 25%, the third quartile; and the poorest/worst performing 25% of funds in the Performance Universe make up the fourth quartile. Comparative annualized performance for the Fund was shown for the past one-, three-, five- and ten-year periods ended December 31, 2008. The Board’s objective is that the Fund’s performance for the periods considered be at or above the median of its Performance Universe. The following paragraph summarizes the performance results for the Fund and the Board’s view of such performance.
The Performance Universe for the Fund consisted of the Fund and all retail and institutional small-cap core funds as selected by Lipper. The Lipper report comparison showed that the Fund’s total return for the one- and ten-year periods was in the second quartile of its Performance Universe. The report further showed that the Fund’s total return for the three- and five-year periods was in the third quartile. The Board determined that the Fund’s performance results were mixed but on an overall basis tended toward median. The Board also observed the improvement in one-year relative performance in 2008. Accordingly, the Board was satisfied that Management was taking action to improve Fund performance and to meet the Board’s performance objective.
34
Comparative Expenses. The Board considered expense comparison data for the Delaware Investments® Family of Funds. Management provided the Board with information on pricing levels and fee structures for the Fund as of October 31, 2008 and, for comparative funds, information as of their respective fiscal year end occurring on or before August 31, 2008. The Board also focused on the comparative analysis of effective management fees and total expense ratios of the Fund versus effective management fees and expense ratios of a group of similar funds as selected by Lipper (the “Expense Group”). In reviewing comparative costs, the Fund’s contractual management fee and the actual management fee incurred by the Fund were compared with the contractual management fees (assuming all funds in the Expense Group were similar in size to the Fund) and actual management fees (as reported by each fund) within the Expense Group, taking into account any applicable breakpoints and fee waivers. The Fund’s total expenses were also compared with those of its Expense Group. The Lipper total expenses, for comparative consistency, were shown by Lipper for Class A shares and comparative total expenses including 12b-1 and non 12b-1 service fees. The Board considered fees paid to Delaware Investments for non management services. The Board’s objective is to limit the Fund’s total expense ratio to be competitive with that of the Expense Group. The following paragraph summarizes the expense results for the Fund and the Board’s view of such expenses.
The expense comparisons for the Fund showed that its actual management fee and total expenses were in the quartile with the lowest expenses of its Expense Group. The Board was satisfied with the management fee and total expenses of the Fund in comparison to those of its Expense Group as shown in the Lipper report.
Management Profitability. The Board considered the level of profits realized by Delaware Investments in connection with the operation of the Fund. In this respect, the Board reviewed the Investment Management Profitability Analysis that addressed the overall profitability of Delaware Investments’ business in providing management and other services to each of the individual funds and the Delaware Investments Family of Funds as a whole. Specific attention was given to the methodology followed in allocating costs for the purpose of determining profitability. Management stated that the level of profits of Delaware Investments, to a certain extent, reflect recent operational cost savings and efficiencies initiated by Delaware Investments. The Board considered Delaware Investments’ efforts to improve services provided to fund shareholders and to meet additional regulatory and compliance requirements resulting from recent industry-wide Securities and Exchange Commission initiatives. The Board also considered the extent to which Delaware Investments might derive ancillary benefits from fund operations, including the potential for procuring additional business as a result of the prestige and visibility associated with its role as service provider to the Delaware Investments Family of Funds and the benefits from allocation of fund brokerage to improve trading efficiencies. The Board found that the management fees were reasonable in light of the services rendered and the level of profitability of Delaware Investments.
35
Other Fund information
(Unaudited)
Delaware Small Cap Core Fund
Board Consideration of Delaware Small Cap Core Fund Investment Advisory Agreement (continued)
Economies of Scale. The Trustees considered whether economies of scale are realized by Delaware Investments as the Fund’s assets increase and the extent to which any economies of scale are reflected in the level of management fees charged. The Trustees reviewed the standardized advisory fee pricing and structure, approved by the Board and shareholders, which includes breakpoints. Breakpoints in the advisory fee occur when the advisory fee rate is reduced on assets in excess of specified levels. Breakpoints result in a lower advisory fee than would otherwise be the case on all assets when the asset levels specified are exceeded. The Board noted that the fee under the Fund’s management contract fell within the standard structure. Although the Fund has not reached a size at which it can take advantage of breakpoints, the Board recognized that the fee was structured so that when the Fund grows, economies of scale may be shared.
36
About the organization
This semiannual report is for the information of Delaware Small Cap Core Fund shareholders, but it may be used with prospective investors when preceded or accompanied by a current prospectus for Delaware Small Cap Core Fund and the Delaware Investments® Fund profile for the most recently completed calendar quarter. These documents are available at www.delawareinvestments.com. The prospectus sets forth details about charges, expenses, investment objectives, and operating policies of the investment company. You should read the prospectus carefully before you invest. The figures in this report represent past results that are not a guarantee of future results. The return and principal value of an investment in the investment company will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
Board of trustees | |
Patrick P. Coyne | 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 |
37
About the organization
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.
38
![]() | ![]() |
Semiannual report | |
Delaware Small Cap Value Fund | |
May 31, 2009 |
Value equity mutual fund |
Table of contents
Disclosure of Fund expenses | 1 |
Sector allocation and top 10 holdings | 3 |
Statement of net assets | 4 |
Statement of operations | 10 |
Statements of changes in net assets | 12 |
Financial highlights | 14 |
Notes to financial statements | 24 |
Other Fund information | 34 |
About the organization | 38 |
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.
Disclosure of Fund expenses
For the period December 1, 2008 to May 31, 2009
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period December 1, 2008 to May 31, 2009.
Actual expenses
The first section of the table shown, “Actual Fund Return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The second section of the table shown, “Hypothetical 5% Return,” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The Fund’s expenses shown in the table reflect fee waivers in effect. The expenses shown in the table assume reinvestment of all dividends and distributions.
1
Disclosure of Fund expenses
Delaware Small Cap Value Fund
Expense analysis of an investment of $1,000
Beginning | Ending | Expenses | ||||||||||
Account Value | Account Value | Annualized | Paid During Period | |||||||||
12/1/08 | 5/31/09 | Expense Ratio | 12/1/08 to 5/31/09* | |||||||||
Actual Fund return | ||||||||||||
Class A | $ | 1,000.00 | $ | 1,076.40 | 1.42% | $ | 7.35 | |||||
Class B | 1,000.00 | 1,075.80 | 2.17% | 11.23 | ||||||||
Class C | 1,000.00 | 1,076.40 | 2.17% | 11.23 | ||||||||
Class R | 1,000.00 | 1,078.20 | 1.67% | 8.65 | ||||||||
Institutional Class | 1,000.00 | 1,077.50 | 1.17% | 6.06 | ||||||||
Hypothetical 5% return (5% return before expenses) | ||||||||||||
Class A | $ | 1,000.00 | $ | 1,017.85 | 1.42% | $ | 7.14 | |||||
Class B | 1,000.00 | 1,014.11 | 2.17% | 10.90 | ||||||||
Class C | 1,000.00 | 1,014.11 | 2.17% | 10.90 | ||||||||
Class R | 1,000.00 | 1,016.60 | 1.67% | 8.40 | ||||||||
Institutional Class | 1,000.00 | 1,019.10 | 1.17% | 5.89 |
*“Expenses Paid During Period” are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period).
2
Sector allocation and top 10 holdings | |
Delaware Small Cap Value Fund | As of May 31, 2009 |
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 | 97.83 | % |
Basic Industry | 9.88 | % |
Business Services | 3.19 | % |
Capital Spending | 7.61 | % |
Consumer Cyclical | 2.25 | % |
Consumer Services | 16.42 | % |
Consumer Staples | 1.77 | % |
Energy | 7.11 | % |
Financial Services | 21.35 | % |
Health Care | 3.90 | % |
Real Estate | 4.17 | % |
Technology | 14.85 | % |
Transportation | 3.16 | % |
Utilities | 2.17 | % |
Discount Note | 2.51 | % |
Securities Lending Collateral | 9.14 | % |
Total Value of Securities | 109.48 | % |
Obligation to Return Securities Lending Collateral | (9.46 | %) |
Liabilities Net of Receivables and Other Assets | (0.02 | %) |
Total Net Assets | 100.00 | % |
Holdings are for informational purposes only and are subject to change at any time. They are not a recommendation to buy, sell, or hold any security.
Top 10 Holdings | ||
Tech Data | 2.60% | |
Platinum Underwriters Holdings | 2.45% | |
FMC | 2.42% | |
Crown Holdings | 2.18% | |
Newfield Exploration | 2.15% | |
Whiting Petroleum | 1.95% | |
Synopsys | 1.92% | |
Universal Health Services Class B | 1.88% | |
Walter Industries | 1.82% | |
Albemarle | 1.74% |
3
Statement of net assets | |
Delaware Small Cap Value Fund | May 31, 2009 (Unaudited) |
Number of shares | Value | ||||
Common Stock – 97.83% | |||||
Basic Industry – 9.88% | |||||
* | Albemarle | 181,700 | $ | 5,127,574 | |
* | Arch Coal | 68,000 | 1,260,040 | ||
† | Crown Holdings | 273,900 | 6,436,658 | ||
Cytec Industries | 167,400 | 3,595,752 | |||
FMC | 131,100 | 7,125,285 | |||
Kaiser Aluminum | 52,800 | 1,640,496 | |||
Valspar | 173,300 | 3,959,905 | |||
29,145,710 | |||||
Business Services – 3.19% | |||||
Brink’s | 132,900 | 3,533,811 | |||
† | Brink’s Home Security Holdings | 136,000 | 3,916,800 | ||
† | United Stationers | 52,359 | 1,874,976 | ||
Viad | 4,800 | 70,272 | |||
9,395,859 | |||||
Capital Spending – 7.61% | |||||
Actuant Class A | 225,000 | 2,763,000 | |||
*† | Casella Waste Systems | 89,700 | 224,250 | ||
† | Colfax | 47,000 | 382,580 | ||
† | Gardner Denver | 126,300 | 3,579,342 | ||
Harsco | 109,600 | 3,184,976 | |||
Insteel Industries | 161,400 | 1,391,268 | |||
Mueller Water Products Class A | 176,888 | 638,566 | |||
* | Regal Beloit | 73,100 | 2,888,181 | ||
Wabtec | 57,000 | 2,033,760 | |||
* | Walter Industries | 164,700 | 5,375,808 | ||
22,461,731 | |||||
Consumer Cyclical – 2.25% | |||||
Autoliv | 46,700 | 1,297,326 | |||
MDC Holdings | 147,300 | 4,523,583 | |||
† | Walter Investment Management | 60,116 | 811,559 | ||
6,632,468 | |||||
Consumer Services – 16.42% | |||||
Advance Auto Parts | 90,700 | 3,862,913 | |||
* | Bebe Stores | 152,700 | 1,230,762 | ||
Cato Class A | 247,700 | 4,765,748 | |||
† | CEC Entertainment | 99,900 | 3,209,787 | ||
*† | Children’s Place Retail Stores | 55,000 | 1,975,050 | ||
*† | Collective Brands | 99,500 | 1,468,620 | ||
† | Dollar Tree Stores | 73,600 | 3,295,072 |
4
Number of shares | Value | ||||
Common Stock (continued) | |||||
Consumer Services (continued) | |||||
Finish Line Class A | 214,500 | $ | 1,482,195 | ||
† | Genesco | 96,700 | 2,493,893 | ||
† | Jack in the Box | 146,700 | 3,858,210 | ||
Men’s Wearhouse | 196,000 | 3,349,640 | |||
* | Meredith | 118,200 | 3,186,672 | ||
Movado Group | 104,500 | 792,110 | |||
PETsMART | 160,100 | 3,259,636 | |||
Phillips-Van Heusen | 56,700 | 1,670,949 | |||
Ross Stores | 37,200 | 1,456,752 | |||
† | Skechers USA Class A | 94,800 | 900,600 | ||
* | Stage Stores | 213,400 | 2,588,542 | ||
† | Warnaco Group | 87,000 | 2,749,200 | ||
Wolverine World Wide | 29,750 | 589,348 | |||
† | Zale | 62,400 | 243,360 | ||
48,429,059 | |||||
Consumer Staples – 1.77% | |||||
American Greetings Class A | 107,600 | 737,060 | |||
Del Monte Foods | 549,700 | 4,496,546 | |||
5,233,606 | |||||
Energy – 7.11% | |||||
† | Encore Acquisition | 70,800 | 2,512,692 | ||
*† | Forest Oil | 130,700 | 2,484,607 | ||
*† | Newfield Exploration | 175,800 | 6,349,896 | ||
Southwest Gas | 186,400 | 3,873,392 | |||
*† | Whiting Petroleum | 122,600 | 5,745,036 | ||
20,965,623 | |||||
Financial Services – 21.35% | |||||
Bank of Hawaii | 135,000 | 5,053,050 | |||
Berkley (W.R.) | 211,400 | 4,585,266 | |||
Boston Private Financial Holdings | 304,900 | 1,518,402 | |||
Community Bank System | 121,900 | 1,889,450 | |||
CVB Financial | 125,400 | 796,290 | |||
East West Bancorp | 260,400 | 2,101,428 | |||
First Midwest Bancorp | 161,700 | 1,406,790 | |||
Hancock Holding | 134,900 | 4,712,057 | |||
Harleysville Group | 159,400 | 4,668,826 | |||
Independent Bank | 167,600 | 3,405,632 | |||
Infinity Property & Casualty | 131,500 | 4,840,515 | |||
IPC Holdings | 136,100 | 3,382,085 |
5
Statement of net assets
Delaware Small Cap Value Fund
Number of shares | Value | ||||
Common Stock (continued) | |||||
Financial Services (continued) | |||||
NBT Bancorp | 229,900 | $ | 5,044,006 | ||
Platinum Underwriters Holdings | 250,200 | 7,213,265 | |||
S&T Bancorp | 76,300 | 1,139,922 | |||
Selective Insurance Group | 343,000 | 4,531,030 | |||
* | StanCorp Financial Group | 54,500 | 1,690,590 | ||
Sterling Bancshares | 569,100 | 3,608,094 | |||
Wesbanco | 85,000 | 1,396,550 | |||
62,983,248 | |||||
Health Care – 3.90% | |||||
† | Alliance HealthCare Services | 179,100 | 1,235,790 | ||
* | Service Corporation International | 575,400 | 3,078,390 | ||
STERIS | 70,500 | 1,665,915 | |||
Universal Health Services Class B | 100,700 | 5,531,451 | |||
11,511,546 | |||||
Real Estate – 4.17% | |||||
* | Brandywine Realty Trust | 252,937 | 1,884,381 | ||
Education Realty Trust | 203,400 | 947,844 | |||
Highwoods Properties | 205,300 | 4,643,886 | |||
Washington Real Estate Investment Trust | 220,900 | 4,828,874 | |||
12,304,985 | |||||
Technology – 14.85% | |||||
*† | Amkor Technology | 465,300 | 2,112,462 | ||
† | Brocade Communications Systems | 359,500 | 2,638,730 | ||
† | Checkpoint Systems | 166,600 | 2,339,064 | ||
† | Cirrus Logic | 703,700 | 2,737,393 | ||
† | Compuware | 399,600 | 3,048,948 | ||
† | Electronics for Imaging | 65,700 | 668,169 | ||
*† | ON Semiconductor | 287,000 | 1,965,950 | ||
† | Parametric Technology | 302,500 | 3,502,950 | ||
† | Premiere Global Services | 291,850 | 3,493,445 | ||
*@ | QAD | 218,000 | 649,640 | ||
*† | Sybase | 142,700 | 4,642,031 | ||
† | Synopsys | 291,500 | 5,678,420 | ||
*† | Tech Data | 239,400 | 7,665,588 | ||
† | Vishay Intertechnology | 483,000 | 2,670,990 | ||
43,813,780 |
6
Number of shares | Value | ||||||
Common Stock (continued) | |||||||
Transportation – 3.16% | |||||||
* | Alexander & Baldwin | 168,700 | $ | 4,175,325 | |||
*† | Kirby | 101,100 | 3,398,982 | ||||
† | Saia | 125,900 | 1,731,125 | ||||
9,305,432 | |||||||
Utilities – 2.17% | |||||||
Black Hills | 75,200 | 1,609,280 | |||||
† | El Paso Electric | 259,000 | 3,429,160 | ||||
* | Otter Tail | 72,500 | 1,375,325 | ||||
6,413,765 | |||||||
Total Common Stock (cost $317,549,799) | 288,596,812 | ||||||
Principal amount | |||||||
¹Discount Note – 2.51% | |||||||
Federal Home Loan Bank 0.07% 6/1/09 | $ | 7,414,047 | 7,414,047 | ||||
Total Discount Note (cost $7,414,047) | 7,414,047 | ||||||
Total Value of Securities Before Securities | |||||||
Lending Collateral – 100.34% (cost $324,963,846) | 296,010,859 | ||||||
Number of shares | |||||||
Securities Lending Collateral** – 9.14% | |||||||
Investment Companies | |||||||
Mellon GSL DBT II Collateral Fund | 8,824,315 | 8,824,315 | |||||
BNY Mellon SL DBT II Liquidating Fund | 18,705,605 | 18,152,266 | |||||
†Mellon GSL Reinvestment Trust II | 392,139 | 39 | |||||
Total Securities Lending Collateral (cost $27,922,059) | 26,976,620 | ||||||
Total Value of Securities – 109.48% | |||||||
(cost $352,885,905) | 322,987,479 | © | |||||
Obligation to Return Securities Lending | |||||||
Collateral** – (9.46%) | (27,922,059 | ) | |||||
Liabilities Net of Receivables and | |||||||
Other Assets – (0.02%) | (56,378 | ) | |||||
Net Assets Applicable to 13,134,948 | |||||||
Shares Outstanding – 100.00% | $ | 295,009,042 |
7
Statement of net assets
Delaware Small Cap Value Fund
Net Asset Value – Delaware Small Cap Value Fund | ||||
Class A ($210,789,461 / 9,175,528 Shares) | $22.97 | |||
Net Asset Value – Delaware Small Cap Value Fund | ||||
Class B ($18,736,633 / 910,214 Shares) | $20.58 | |||
Net Asset Value – Delaware Small Cap Value Fund | ||||
Class C ($40,662,509 / 1,976,243 Shares) | $20.58 | |||
Net Asset Value – Delaware Small Cap Value Fund | ||||
Class R ($13,851,434 / 612,500 Shares) | $22.61 | |||
Net Asset Value – Delaware Small Cap Value Fund | ||||
Institutional Class ($10,969,005 / 460,463 Shares) | $23.82 | |||
Components of Net Assets at May 31, 2009: | ||||
Shares of beneficial interest (unlimited authorization – no par) | $ | 347,203,681 | ||
Undistributed net investment income | 384,566 | |||
Accumulated net realized loss on investments | (22,680,779 | ) | ||
Net unrealized depreciation of investments | (29,898,426 | ) | ||
Total net assets | $ | 295,009,042 |
* | Fully or partially on loan. |
** | See Note 8 in “Notes to financial statements.” |
@ | Illiquid security. At May 31, 2009, the aggregate amount of illiquid securities was $649,640, which represented 0.22% of the Fund’s net assets. |
© | Includes $29,287,671 of securities loaned. |
† | Non income producing security. |
¹ | The rate shown is the effective yield at the time of purchase. |
Net Asset Value and Offering Price Per Share – | ||
Delaware Small Cap Value Fund | ||
Net asset value Class A (A) | $ | 22.97 |
Sales charge (5.75% of offering price) (B) | 1.40 | |
Offering price | $ | 24.37 |
(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
8
Statement of operations | |
Delaware Small Cap Value Fund | Six Months Ended May 31, 2009 (Unaudited) |
Investment Income: | |||||||
Dividends | $ | 2,667,633 | |||||
Interest | 7,587 | ||||||
Securities lending income | 62,950 | ||||||
Foreign tax withheld | (3,032 | ) | $ | 2,735,138 | |||
Expenses: | |||||||
Management fees | 1,027,316 | ||||||
Dividend disbursing and transfer agent fees and expenses | 683,140 | ||||||
Distribution expenses – Class A | 289,267 | ||||||
Distribution expenses – Class B | 92,324 | ||||||
Distribution expenses – Class C | 194,354 | ||||||
Distribution expenses – Class R | 36,579 | ||||||
Accounting and administration expenses | 54,790 | ||||||
Registration fees | 45,133 | ||||||
Reports and statements to shareholders | 39,459 | ||||||
Audit & tax | 31,383 | ||||||
Legal fees | 28,853 | ||||||
Trustees’ fees | 10,004 | ||||||
Insurance fees | 3,902 | ||||||
Custodian fees | 2,237 | ||||||
Consulting fees | 2,012 | ||||||
Pricing fees | 1,460 | ||||||
Trustees’ expenses | 1,087 | ||||||
Dues and services | 748 | 2,544,048 | |||||
Less fees waived | (329,296 | ) | |||||
Less waiver of distribution expenses – Class A | (48,216 | ) | |||||
Less waiver of distribution expenses – Class R | (6,097 | ) | |||||
Total expenses | 2,160,439 | ||||||
Net Investment Income | 574,699 |
10
Net Realized and Unrealized Gain (Loss) on Investments | |||
and Foreign Currencies: | |||
Net realized loss on: | |||
Investments | (22,013,196 | ) | |
Foreign currencies | (246 | ) | |
Net realized loss | (22,013,442 | ) | |
Net change in unrealized appreciation/depreciation of investments | 40,701,129 | ||
Net Realized and Unrealized Gain on Investments | |||
and Foreign Currencies | 18,687,687 | ||
Net Increase in Net Assets Resulting from Operations | $ | 19,262,386 |
See accompanying notes
11
Statements of changes in net assets
Delaware Small Cap Value Fund
Six Months | Year | ||||||
Ended | Ended | ||||||
5/31/09 | 11/30/08 | ||||||
(Unaudited) | |||||||
Increase (Decrease) in Net Assets from Operations: | |||||||
Net investment income | $ | 574,699 | $ | 346,571 | |||
Net realized loss on investments and | |||||||
foreign currencies | (22,013,442 | ) | (283,632 | ) | |||
Net change in unrealized appreciation/depreciation | |||||||
of investments | 40,701,129 | (169,042,827 | ) | ||||
Net increase (decrease) in net assets resulting | |||||||
from operations | 19,262,386 | (168,979,888 | ) | ||||
Dividends and Distributions to Shareholders from: | |||||||
Net investment income: | |||||||
Class A | (565,076 | ) | — | ||||
Institutional Class | (83,885 | ) | — | ||||
Net realized gain on investments: | |||||||
Class A | — | (36,249,009 | ) | ||||
Class B | — | (5,369,287 | ) | ||||
Class C | — | (9,806,574 | ) | ||||
Class R | — | (2,003,395 | ) | ||||
Institutional Class | — | (2,385,198 | ) | ||||
(648,961 | ) | (55,813,463 | ) | ||||
Capital Share Transactions: | |||||||
Proceeds from shares sold: | |||||||
Class A | 21,653,048 | 44,883,012 | |||||
Class B | 192,186 | 365,548 | |||||
Class C | 1,696,224 | 6,866,414 | |||||
Class R | 3,024,264 | 7,231,904 | |||||
Institutional Class | 1,832,058 | 4,930,839 | |||||
Net asset value of shares issued upon reinvestment | |||||||
of dividends and distributions: | |||||||
Class A | 530,916 | 34,396,594 | |||||
Class B | — | 5,029,038 | |||||
Class C | — | 9,210,483 | |||||
Class R | — | 2,003,388 | |||||
Institutional Class | 83,443 | 2,364,526 | |||||
29,012,139 | 117,281,746 |
12
Six Months | Year | ||||||
Ended | Ended | ||||||
5/31/09 | 11/30/08 | ||||||
(Unaudited) | |||||||
Capital Share Transactions (continued): | |||||||
Cost of shares repurchased: | |||||||
Class A | (30,479,345 | ) | (111,709,459 | ) | |||
Class B | (4,296,715 | ) | (19,676,154 | ) | |||
Class C | (7,721,882 | ) | (33,121,658 | ) | |||
Class R | (2,914,244 | ) | (8,648,107 | ) | |||
Institutional Class | (5,488,404 | ) | (9,724,384 | ) | |||
(50,900,590 | ) | (182,879,762 | ) | ||||
Decrease in net assets derived from capital share transactions | (21,888,451 | ) | (65,598,016 | ) | |||
Net Decrease in Net Assets | (3,275,026 | ) | (290,391,367 | ) | |||
Net Assets: | |||||||
Beginning of period | 298,284,068 | 588,675,435 | |||||
End of period (including undistributed net investment | |||||||
income of $384,566 and $459,074, respectively) | $ | 295,009,042 | $ | 298,284,068 |
See accompanying notes
13
Financial highlights
Delaware Small Cap Value Fund Class A
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income (loss)2 |
Net realized and unrealized gain (loss) on investments 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 return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived and expense paid indirectly |
Ratio of net investment income (loss) to average net assets |
Ratio of net investment income (loss) to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 Ratios and portfolio turnover have been annualized and total return has not been annualized. |
2 The average shares outstanding method has been applied for per share information. |
3 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers by the manager and distributor, as applicable. Performance would have been lower had the waivers not been in effect. |
See accompanying notes
14
Six Months Ended | Year Ended | |||||||||||||||||
5/31/091 | 11/30/08 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | |||||||||||||
(Unaudited) | ||||||||||||||||||
$21.340 | $36.000 | $41.970 | $39.110 | $39.640 | $35.220 | |||||||||||||
0.057 | 0.072 | (0.050 | ) | (0.047 | ) | (0.075 | ) | (0.105 | ) | |||||||||
1.633 | (11.314 | ) | (2.647 | ) | 5.960 | 4.170 | 6.879 | |||||||||||
1.690 | (11.242 | ) | (2.697 | ) | 5.913 | 4.095 | 6.774 | |||||||||||
(0.060 | ) | — | — | — | — | — | ||||||||||||
— | (3.418 | ) | (3.273 | ) | (3.053 | ) | (4.625 | ) | (2.354 | ) | ||||||||
(0.060 | ) | (3.418 | ) | (3.273 | ) | (3.053 | ) | (4.625 | ) | (2.354 | ) | |||||||
$22.970 | $21.340 | $36.000 | $41.970 | $39.110 | $39.640 | |||||||||||||
7.64% | (34.55% | ) | (6.90% | ) | 16.26% | 11.42% | 20.52% | |||||||||||
$210,789 | $205,439 | $389,129 | $493,193 | $409,567 | $270,332 | |||||||||||||
1.42% | 1.44% | 1.37% | 1.41% | 1.44% | 1.54% | |||||||||||||
1.71% | 1.52% | 1.42% | 1.44% | 1.44% | 1.54% | |||||||||||||
0.58% | 0.25% | (0.12% | ) | (0.12% | ) | (0.20% | ) | (0.30% | ) | |||||||||
0.29% | 0.17% | (0.17% | ) | (0.15% | ) | (0.20% | ) | (0.30% | ) | |||||||||
21% | 13% | 23% | 36% | 33% | 35% |
15
Financial highlights
Delaware Small Cap Value Fund Class B
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment loss2 |
Net realized and unrealized gain (loss) on investments and foreign currencies |
Total from investment operations |
Less dividends and distributions from: |
Net realized gain on investments |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived and expense paid indirectly |
Ratio of net investment loss to average net assets |
Ratio of net investment loss to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 Ratios and portfolio turnover have been annualized and total return has not been annualized. |
2 The average shares outstanding method has been applied for per share information. |
3 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver by the manager, as applicable. Performance would have been lower had the waiver not been in effect. |
See accompanying notes
16
Six Months Ended | Year Ended | |||||||||||||||||
5/31/091 | 11/30/08 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | |||||||||||||
(Unaudited) | ||||||||||||||||||
$19.130 | $ 32.860 | $38.860 | $36.690 | $37.690 | $33.820 | |||||||||||||
(0.009 | ) | (0.127 | ) | (0.314 | ) | (0.306 | ) | (0.311 | ) | (0.334 | ) | |||||||
1.459 | (10.185 | ) | (2.413 | ) | 5.529 | 3.936 | 6.558 | |||||||||||
1.450 | (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 | ) | ||||||||
$20.580 | $19.130 | $32.860 | $38.860 | $36.690 | $37.690 | |||||||||||||
7.58% | (35.08% | ) | (7.59% | ) | 15.38% | 10.68% | 19.69% | |||||||||||
$18,737 | $21,825 | $54,684 | $94,495 | $110,684 | $111,348 | |||||||||||||
2.17% | 2.19% | 2.12% | 2.14% | 2.14% | 2.24% | |||||||||||||
2.41% | 2.22% | 2.12% | 2.14% | 2.14% | 2.24% | |||||||||||||
(0.17% | ) | (0.50% | ) | (0.87% | ) | (0.85% | ) | (0.90% | ) | (1.00% | ) | |||||||
(0.41% | ) | (0.53% | ) | (0.87% | ) | (0.85% | ) | (0.90% | ) | (1.00% | ) | |||||||
21% | 13% | 23% | 36% | 33% | 35% |
17
Financial highlights
Delaware Small Cap Value Fund Class C
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment loss2 |
Net realized and unrealized gain (loss) on investments and foreign currencies |
Total from investment operations |
Less dividends and distributions from: |
Net realized gain on investments |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived and expense paid indirectly |
Ratio of net investment loss to average net assets |
Ratio of net investment loss to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 Ratios and portfolio turnover have been annualized and total return has not been annualized. |
2 The average shares outstanding method has been applied for per share information. |
3 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver by the manager, as applicable. Performance would have been lower had the waiver not been in effect. |
See accompanying notes
18
Six Months Ended | Year Ended | |||||||||||||||||
5/31/091 | 11/30/08 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | |||||||||||||
(Unaudited) | ||||||||||||||||||
$19.120 | $32.850 | $38.840 | $36.670 | $37.680 | $33.810 | |||||||||||||
(0.009 | ) | (0.126 | ) | (0.314 | ) | (0.306 | ) | (0.313 | ) | (0.333 | ) | |||||||
1.469 | (10.186 | ) | (2.403 | ) | 5.529 | 3.928 | 6.557 | |||||||||||
1.460 | (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 | ) | ||||||||
$20.580 | $19.120 | $32.850 | $38.840 | $36.670 | $37.680 | |||||||||||||
7.64% | (35.05% | ) | (7.56% | ) | 15.39% | 10.65% | 19.69% | |||||||||||
$40,663 | $44,339 | $97,428 | $145,385 | $119,968 | $66,313 | |||||||||||||
2.17% | 2.19% | 2.12% | 2.14% | 2.14% | 2.24% | |||||||||||||
2.41% | 2.22% | 2.12% | 2.14% | 2.14% | 2.24% | |||||||||||||
(0.17% | ) | (0.50% | ) | (0.87% | ) | (0.85% | ) | (0.90% | ) | (1.00% | ) | |||||||
(0.41% | ) | (0.53% | ) | (0.87% | ) | (0.85% | ) | (0.90% | ) | (1.00% | ) | |||||||
21% | 13% | 23% | 36% | 33% | 35% |
19
Financial highlights
Delaware Small Cap Value Fund Class R
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income (loss)2 |
Net realized and unrealized gain (loss) on investments and foreign currencies |
Total from investment operations |
Less dividends and distributions from: |
Net realized gain on investments |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived and expense paid indirectly |
Ratio of net investment income (loss) to average net assets |
Ratio of net investment loss to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 Ratios and portfolio turnover have been annualized and total return has not been annualized. |
2 The average shares outstanding method has been applied for per share information. |
3 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. 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
Six Months Ended | Year Ended | |||||||||||||||||
5/31/091 | 11/30/08 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | |||||||||||||
(Unaudited) | ||||||||||||||||||
$20.970 | $35.530 | $41.550 | $38.840 | $39.480 | $35.190 | |||||||||||||
0.032 | (0.002 | ) | (0.146 | ) | (0.138 | ) | (0.169 | ) | (0.209 | ) | ||||||||
1.608 | (11.140 | ) | (2.601 | ) | 5.901 | 4.154 | 6.853 | |||||||||||
1.640 | (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 | ) | ||||||||
$22.610 | $20.970 | $35.530 | $41.550 | $38.840 | $39.480 | |||||||||||||
7.82% | (34.74% | ) | (7.11% | ) | 15.97% | 11.15% | 20.15% | |||||||||||
$13,851 | $12,761 | $21,126 | $20,564 | $10,574 | $4,539 | |||||||||||||
1.67% | 1.69% | 1.62% | 1.64% | 1.70% | 1.84% | |||||||||||||
2.01% | 1.82% | 1.72% | 1.74% | 1.74% | 1.84% | |||||||||||||
0.33% | — | (0.37% | ) | (0.35% | ) | (0.46% | ) | (0.60% | ) | |||||||||
(0.01% | ) | (0.13% | ) | (0.47% | ) | (0.45% | ) | (0.50% | ) | (0.60% | ) | |||||||
21% | 13% | 23% | 36% | 33% | 35% |
21
Financial highlights
Delaware Small Cap Value Fund Institutional Class
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
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 return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived and expense paid indirectly |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 Ratios and portfolio turnover have been annualized and total return has not been annualized. |
2 The average shares outstanding method has been applied for per share information. |
3 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return reflects a waiver by the manager, as applicable. Performance would have been lower had the waiver not been in effect. |
See accompanying notes
22
Six Months Ended | Year Ended | |||||||||||||||||
5/31/091 | 11/30/08 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | |||||||||||||
(Unaudited) | ||||||||||||||||||
$22.170 | $37.190 | $43.140 | $40.020 | $40.350 | $35.700 | |||||||||||||
0.083 | 0.148 | 0.049 | 0.058 | 0.036 | — | |||||||||||||
1.700 | (11.750 | ) | (2.726 | ) | 6.115 | 4.259 | 7.004 | |||||||||||
1.783 | (11.602 | ) | (2.677 | ) | 6.173 | 4.295 | 7.004 | |||||||||||
(0.133 | ) | — | — | — | — | — | ||||||||||||
— | (3.418 | ) | (3.273 | ) | (3.053 | ) | (4.625 | ) | (2.354 | ) | ||||||||
(0.133 | ) | (3.418 | ) | (3.273 | ) | (3.053 | ) | (4.625 | ) | (2.354 | ) | |||||||
$23.820 | $22.170 | $37.190 | $43.140 | $40.020 | $40.350 | |||||||||||||
7.75% | (34.38% | ) | (6.65% | ) | 16.56% | 11.77% | 20.88% | |||||||||||
$10,969 | $13,920 | $26,308 | $37,033 | $30,918 | $23,731 | |||||||||||||
1.17% | 1.19% | 1.12% | 1.14% | 1.14% | 1.24% | |||||||||||||
1.41% | 1.22% | 1.12% | 1.14% | 1.14% | 1.24% | |||||||||||||
0.83% | 0.50% | 0.13% | 0.15% | 0.10% | — | |||||||||||||
0.59% | 0.47% | 0.13% | 0.15% | 0.10% | — | |||||||||||||
21% | 13% | 23% | 36% | 33% | 35% |
23
Notes to financial statements | |
Delaware Small Cap Value Fund | May 31, 2009 (Unaudited) |
Delaware Group® Equity Funds V (Trust) is organized as a Delaware statutory trust and offers three series: Delaware Dividend Income Fund, Delaware Small-Cap Core Fund and Delaware Small Cap Value Fund. These financial statements and the related notes pertain to Delaware Small Cap Value Fund (Fund). The Trust is an open-end investment company. The Fund is considered diversified under the Investment Company Act of 1940, as amended, and offers Class A, Class B, Class C, Class R and Institutional Class shares. Class A shares are sold with a maximum front-end sales charge of up to 5.75%. Class A share purchases of $1,000,000 or more will incur a contingent deferred sales charge (CDSC) of 1% if redeemed during the first year and 0.50% during the second year, provided that Delaware Distributors, L.P. (DDLP) paid a financial advisor a commission on the purchase of those shares. Class B shares may only be purchased through dividend reinvestment and certain permitted exchanges. Prior to June 1, 2007, Class B shares were sold with a CDSC that declined from 4% to zero depending upon the period of time the shares were held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase. Class C shares are sold with a CDSC of 1%, if redeemed during the first twelve 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. Securities listed on a foreign exchange are valued at the last quoted sales price on the valuation date. 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 value 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 news 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).
24
Federal Income Taxes — No provision for federal income taxes has been made as the Fund intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Fund evaluates tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. The Fund did not record 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. At May 31, 2009, the Fund held no investments in repurchase agreements.
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 are 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 does not isolate that portion of realized gains and losses on investments which are due to changes in foreign exchange rates from that which are due to changes in market prices. The Fund reports certain foreign currency related transactions as components of realized gains (losses) for financial reporting purposes, whereas such components are treated as ordinary income (loss) for federal income tax purposes.
Use of Estimates — The 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
25
Notes to financial statements
Delaware Small Cap Value Fund
1. Significant Accounting Policies (continued)
securities are purchased or sold (trade date) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Distributions received from investments in Real Estate Investment Trusts (REITs) are recorded as dividend income on the ex-dividend date, subject to reclassification upon notice of the character of such distributions by the issuer. The financial statements reflect an estimate of the reclassification of the distributions 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. 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. There were no commission rebates for the six months ended May 31, 2009.
The Fund may receive earnings credits from its custodian when positive cash balances are maintained, which are used to offset custody fees. There were no earnings credits for the period ended May 31, 2009.
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, 2009, 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 total annual operating expenses, (excluding any 12b-1 plan expenses, taxes, interest, inverse floater program expenses, brokerage fees, short sale and dividend interest 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) do not exceed 1.19% of average daily net assets of the Fund until such time as the waivers are discontinued. These expense waivers and reimbursements may be discontinued at any time because they are voluntary, and they apply only to expenses paid directly by the Fund. Prior to April 1, 2009, the waiver was contractually limited to 1.16% of the Fund’s average daily net assets.
26
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Fund. For these services, the Fund pays DSC fees based on the aggregate daily net assets of the Delaware Investments® Family of Funds at the following annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DSC under the service agreement described above are allocated among all Funds in the Delaware Investments® Family of Funds on a relative net asset value basis. For the six months ended May 31, 2009, the Fund was charged $6,849 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, 2010, in order to prevent distribution and service fees of Class A and Class R shares from exceeding 0.25% and 0.50%, respectively, of average daily net assets.
At May 31, 2009, the Fund had liabilities payable to affiliates as follows:
Investment management fee payable to DMC | $147,791 |
Dividend disbursing, transfer agent and fund accounting | |
oversight fees and other expenses payable to DSC | 94,417 |
Distribution fees payable to DDLP | 99,782 |
Other expenses payable to DMC and affiliates* | 9,326 |
*DMC, as part of its administrative services, pays operating expenses on behalf of the Fund and is reimbursed on a periodic basis. Such expenses include items such as printing of shareholder reports, fees for audit, legal and tax services, registration fees and trustees’ fees.
As provided in the investment management agreement, the Fund bears the cost of certain legal and tax services, including internal legal and tax services provided to the Fund by DMC and/or its affiliates’ employees. For the six months ended May 31, 2009, the Fund was charged $14,658 for internal legal and tax services provided by DMC and/or its affiliates’ employees.
For the six months ended May 31, 2009, DDLP earned $7,089 for commissions on sales of the Fund’s Class A shares. For the six months ended May 31, 2009, DDLP received gross CDSC commissions of $29, $16,043 and $2,353 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.
27
Notes to financial statements
Delaware Small Cap Value Fund
2. Investment Management, Administration Agreements and Other Transactions with Affiliates (continued)
Trustees’ fees include expenses accrued by the Fund for each Trustee’s retainer and meeting fees. Certain officers of DMC, DSC and DDLP are officers and/or Trustees of the Trust. These officers and Trustees are paid no compensation by the Fund.
3. Investments
For the six months ended May 31, 2009, the Fund made purchases of $28,270,486 and sales of $39,791,963 of investment securities other than short-term investments.
At May 31, 2009, the cost of investments for federal income tax purposes has been estimated since the final tax characteristics cannot be determined until fiscal year end. At May 31, 2009, the cost of investments was $ 352,995,018. At May 31, 2009, net unrealized depreciation was $30,007,539, of which $49,476,261 related to unrealized appreciation of investments and $79,483,800 related to unrealized depreciation of investments.
The Fund applies 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 under current market conditions. 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 FAS 157 fair value hierarchy levels as of May 31, 2009:
Securities | |
Level 1 | $297,421,127 |
Level 2 | 25,566,313 |
Level 3 | 39 |
Total | $322,987,479 |
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The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:
Securities | |||
Balance as of 11/30/08 | $ | 32,155 | |
Net change in unrealized appreciation/depreciation | (32,116 | ) | |
Balance as of 5/31/09 | $ | 39 | |
Net change in unrealized appreciation/depreciation from | |||
investments still held as of 5/31/09 | $ | (32,116 | ) |
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 six months ended May 31, 2009 and the year ended November 30, 2008 was as follows:
Six Months | Year | ||||
Ended | Ended | ||||
5/31/09* | 11/30/08 | ||||
Ordinary income | $ | 648,961 | $ | 316,226 | |
Long-term capital gain | — | 55,497,237 | |||
Total | $ | 648,961 | $ | 55,813,463 |
*Tax information for the period ended May 31, 2009 is an estimate and the tax character of dividends and distributions may be redesignated at the fiscal year end.
5. Components of Net Assets on a Tax Basis
The components of net assets are estimated since final tax characteristics cannot be determined until fiscal year end. As of May 31, 2009, the estimated components of net assets on a tax basis were as follows:
Shares of beneficial interest | $ | 347,203,681 | |
Undistributed ordinary income | 384,566 | ||
Realized losses 12/1/08 – 5/31/09 | (22,187,712 | ) | |
Capital loss carryforwards as of 11/30/08 | (383,954 | ) | |
Unrealized depreciation of investments | (30,007,539 | ) | |
Net assets | $ | 295,009,042 |
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.
29
Notes to financial statements
Delaware Small Cap Value Fund
5. Components of Net Assets on a Tax Basis (continued)
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 gain (loss) on foreign currency transactions. Results of operations and net assets were not affected by these reclassifications. For the six months ended May 31, 2009, the Fund recorded an estimate of these differences since the final tax characteristics cannot be determined until fiscal year end.
Undistributed net investment income | $ | (246 | ) |
Accumulated net realized loss | 246 |
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: $383,954 expires in 2016.
For the six months ended May 31, 2009, the Fund had capital losses of $22,187,712, which may increase the capital loss carryforwards.
6. Capital Shares
Transactions in capital shares were as follows:
Six Months | Year | ||||
Ended | Ended | ||||
5/31/09 | 11/30/08 | ||||
Shares sold: | |||||
Class A | 1,047,949 | 1,465,800 | |||
Class B | 10,075 | 13,363 | |||
Class C | 91,765 | 258,185 | |||
Class R | 151,334 | 244,933 | |||
Institutional Class | 87,833 | 156,706 | |||
Shares issued upon reinvestment of dividends and distributions: | |||||
Class A | 25,004 | 1,044,854 | |||
Class B | — | 169,157 | |||
Class C | — | 310,013 | |||
Class R | — | 61,776 | |||
Institutional Class | 3,795 | 69,300 | |||
1,417,755 | 3,794,087 | ||||
Shares repurchased: | |||||
Class A | (1,524,641 | ) | (3,691,741 | ) | |
Class B | (240,601 | ) | (705,823 | ) | |
Class C | (434,055 | ) | (1,215,902 | ) | |
Class R | (147,287 | ) | (292,915 | ) | |
Institutional Class | (258,883 | ) | (305,651 | ) | |
(2,605,467 | ) | (6,212,032 | ) | ||
Net decrease | (1,187,712 | ) | (2,417,945 | ) |
30
For the six months ended May 31, 2009 and the year ended November 30, 2008, 73,912 Class B shares were converted to 66,316 Class A shares valued at $1,340,136 and 202,901 Class B shares were converted to 183,322 Class A shares valued at $5,984,507, respectively. The respective amounts are included in Class B redemptions and Class A subscriptions in the table on the previous page and the statements of changes in net assets.
7. Line of Credit
The Fund, along with certain other funds in the Delaware Investments® Family of Funds (Participants), participates in a $35,000,000 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, the Participants are charged an annual commitment fee, which is allocated across the Participants on the basis of each Participant’s allocation of the entire facility. Participants may borrow up to a maximum of one third of their net assets under the agreement. The agreement expires on November 17, 2009. The Fund had no amounts outstanding as of May 31, 2009, or at any time during the period then ended.
8. Securities Lending
The Fund, along with other funds in the Delaware Investments® Family of Funds, may lend its securities pursuant to a security lending agreement (Lending Agreement) with 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 (Collective Trust) established by BNY Mellon for the purpose of investment on behalf of clients participating in its securities lending programs. The Collective Trust may invest 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. At May 31, 2009, the Collective Trust held only cash and assets with a maturity of one business day or less (Cash/Overnight Assets). 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. Effective April 20, 2009, BNY Mellon transferred the assets of the Collective Trust other than the Cash/Overnight Assets to the BNY Mellon SL DBT II Liquidating Fund (Liquidating Fund), effectively bifurcating the collateral investment pool. The Fund’s exposure to the Liquidating Fund
31
Notes to financial statements
Delaware Small Cap Value Fund
8. Securities Lending (continued)
is expected to decrease as the Liquidating Fund’s assets mature or are sold. In October 2008, BNY Mellon transferred certain distressed securities from the Collective Trust into the Mellon GSL Reinvestment Trust II. The Fund can also accept U.S. government securities and letters of credit (non-cash collateral) in connection with securities loans. In the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Fund, or at the discretion of the lending agent, replace the loaned securities. The Fund continues to record dividends or interest, as applicable, on the securities loaned and is subject to change in value of the securities loaned that may occur during the term of the loan. The Fund has the right under the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized by non-cash collateral, the Fund receives loan premiums paid by the borrower. With respect to security loans collateralized by cash collateral, the earnings from the collateral investments are shared among the Fund, the security lending agent and the borrower. The Fund records security lending income net of allocations to the security lending agent and the borrower.
At May 31, 2009, the value of the securities on loan was $ 29,287,671, for which the Fund received collateral, comprised of non-cash collateral valued at $2,567,000, and cash collateral of $27,922,059. Investments purchased with cash collateral are presented on the statement of net assets under the caption “Securities Lending Collateral.”
9. Credit and Market Risk
The Fund invests a significant portion of its assets in small companies and may be subject to certain risks associated with ownership of securities of such companies. Investments in small-sized companies may be more volatile than investments in larger companies for a number of reasons, which include more limited financial resources or a dependence on narrow product lines.
The Fund invests in REITs and is subject the risks associated with that industry. If the Fund holds real estate directly as a result of defaults or receives rental income directly from real estate holdings, its tax status as a regulated investment company may be jeopardized. There were no direct real estate holdings during the six months ended May 31, 2009. 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.
32
The Fund may invest up to 15% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair the Fund from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, the Fund’s Board has delegated to DMC the day-to-day functions of determining whether individual securities are liquid for purposes of the Fund’s limitation on investments in illiquid assets. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Fund’s 15% limit on investments in illiquid securities. As of May 31, 2009, there were no Rule 144A securities. Illiquid securities have been identified on the statement of net assets.
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.
33
Other Fund information
(Unaudited)
Delaware Small Cap Value Fund
Board Consideration of Delaware Small Cap Value Fund Investment Advisory Agreement
At a meeting held on May 19-21, 2009 (the “Annual Meeting”), the Board of Trustees (the “Board”), including a majority of disinterested or independent Trustees, approved the renewal of the Investment Advisory Agreement for the Delaware Small Cap Value Fund (the “Fund”). In making its decision, the Board considered information furnished specifically in connection with the renewal of the Investment Advisory Agreement with Delaware Management Company (“DMC”), which included materials provided by DMC and its affiliates (“Delaware Investments”) concerning, among other things, the nature, extent and quality of services provided to the Fund, the costs of such services to the Fund, economies of scale and the financial condition and profitability of Delaware Investments. Reference was made to information furnished at regular quarterly Board meetings, including reports detailing Fund performance, investment strategies and expenses, as well as information prepared specifically in connection with the renewal of the investment advisory and sub-advisory contracts. In addition, in connection with the Annual Meeting, reports were provided in February 2009 and included independent historical and comparative reports prepared by Lipper Inc. (“Lipper”), an independent statistical compilation organization. The Lipper reports compared the Fund’s investment performance and expenses with those of other comparable mutual funds. The independent Trustees reviewed and discussed the Lipper reports with counsel to the independent Trustees. The Board requested and received information regarding Management’s policy with respect to advisory fee levels and its breakpoint philosophy; the structure of portfolio manager compensation; the investment manager’s profitability; and any constraints or limitations on the availability of securities in certain investment styles which had in the past year inhibited, or which were likely in the future to inhibit, DMC’s ability to invest fully in accordance with Fund policies.
In considering information relating to the approval of the Fund’s advisory agreement, the independent Trustees received assistance and advice from and met separately with counsel to the independent Trustees. Although the Trustees gave attention to all information furnished, the following discussion identifies, under separate headings, the primary factors taken into account by the Board during its contract renewal considerations.
Nature, Extent and Quality of Service. The Board considered the services provided by Delaware Investments to the Fund and its shareholders. In reviewing the nature, extent and quality of services, the Board considered reports furnished to it throughout the year which covered matters such as the relative performance of the Fund, compliance of portfolio managers with the investment policies, strategies and restrictions for the Fund, compliance by Management personnel with the Code of Ethics adopted throughout the Delaware Investments® Family of Funds complex and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of the Fund’s investment advisor and the emphasis placed on research in the investment process. The Board gave favorable consideration to DMC’s efforts to control expenditures while maintaining service levels committed to fund matters. The Board also
34
considered the transfer agent and shareholder services provided to Fund shareholders by DMC’s affiliate, Delaware Service Company, Inc. (“DSC”), noting DSC’s high level of service. The Board noted that Management finished upgrading investment accounting functions through outsourcing to improve the quality and lower the cost of delivering investment accounting services to the Fund. The Board once again noted the benefits provided to Fund shareholders through each shareholder’s ability to exchange an investment in one Delaware Investments® fund for the same class of shares in another Delaware Investments fund without a sales charge, to reinvest Fund dividends into additional shares of the Fund or into additional shares of other Delaware Investments funds and the privilege to combine holdings in other Delaware Investments funds to obtain a reduced sales charge. The Board was satisfied with the nature, extent and quality of the overall services provided by Delaware Investments.
Investment Performance. The Board placed significant emphasis on the investment performance of the Fund in view of its importance to shareholders. Although the Board gave appropriate consideration to performance reports and discussions with portfolio managers at Board meetings throughout the year, the Board gave particular weight to the Lipper reports furnished for the Annual Meeting. The Lipper reports prepared for the Fund showed the investment performance of its Class A shares in comparison to a group of similar funds as selected by Lipper (the “Performance Universe”). A fund with the best performance ranked first, and a fund with the poorest performance ranked last. The highest/best performing 25% of funds in the Performance Universe make up the first quartile; the next 25%, the second quartile; the next 25%, the third quartile; and the poorest/worst performing 25% of funds in the Performance Universe make up the fourth quartile. Comparative annualized performance for the Fund was shown for the past one-, three-, five- and ten-year periods ended December 31, 2008. The Board’s objective is that the Fund’s performance for the periods considered be at or above the median of its Performance Universe. The following paragraph summarizes the performance results for the Fund and the Board’s view of such performance.
The Performance Universe for the Fund consisted of the Fund and all retail and institutional small-cap value funds as selected by Lipper. The Lipper report showed that the Fund’s total return for the one- and five-year periods was in the second quartile of its Performance Universe. The report further showed that the Fund’s total return for the three- and ten-year periods was in the third quartile. The Board noted the improvement in one-year relative performance in 2008. The Fund’s performance results were mixed but on an overall basis tended toward median, which was acceptable.
Comparative Expenses. The Board considered expense comparison data for the Delaware Investments Family of Funds. Management provided the Board with information on pricing levels and fee structures for the Fund as of October 31, 2008 and, for comparative funds, information as of their respective fiscal year end occurring on or before August 31, 2008. The Board also focused on the comparative analysis of effective management fees and total expense ratios of the Fund versus effective management fees and expense ratios of a group of similar funds as selected by
35
Other Fund information
(Unaudited)
Delaware Small Cap Value Fund
Board Consideration of Delaware Small Cap Value Fund Investment Advisory Agreement (continued)
Lipper (the “Expense Group”). In reviewing comparative costs, the Fund’s contractual management fee and the actual management fee incurred by the Fund were compared with the contractual management fees (assuming all funds in the Expense Group were similar in size to the Fund) and actual management fees (as reported by each fund) within the Expense Group, taking into account any applicable breakpoints and fee waivers. The Fund’s total expenses were also compared with those of its Expense Group. The Lipper total expenses, for comparative consistency, were shown by Lipper for Class A shares and comparative total expenses including 12b-1 and non-12b 1 service fees. The Board considered fees paid to Delaware Investments for non management services. The Board’s objective is to limit the Fund’s total expense ratio to be competitive with that of the Expense Group. The following paragraph summarizes the expense results for the Fund and the Board’s view of such expenses.
The expense comparisons for the Fund showed that its actual management fee was in the quartile with the lowest expenses of its Expense Group and its total expenses were in the quartile with the second highest expenses of its Expense Group. The Board gave favorable consideration to the Fund’s management fee, but noted that the Fund’s total expenses were not in line with the Board’s objective. In evaluating the total expenses, the Board considered various initiatives implemented by Management, such as the outsourcing of certain transfer agency and investment accounting services, creating an opportunity for a reduction in expenses. The Board was satisfied with Management’s efforts to improve the Fund’s total expense ratio and bring it in line with the Board’s objective.
Management Profitability. The Board considered the level of profits realized by Delaware Investments in connection with the operation of the Fund. In this respect, the Board reviewed the Investment Management Profitability Analysis that addressed the overall profitability of Delaware Investments’ business in providing management and other services to each of the individual funds and the Delaware Investments® Family of Funds as a whole. Specific attention was given to the methodology followed in allocating costs for the purpose of determining profitability. Management stated that the level of profits of Delaware Investments, to a certain extent, reflect recent operational cost savings and efficiencies initiated by Delaware Investments. The Board considered Delaware Investments’ efforts to improve services provided to fund shareholders and to meet additional regulatory and compliance requirements resulting from recent industry-wide Securities and Exchange Commission initiatives. The Board also considered the extent to which Delaware Investments might derive ancillary benefits from fund operations, including the potential for procuring additional business as a result of the prestige and visibility associated with its role as service provider to the Delaware Investments Family of Funds and the benefits from allocation of fund brokerage to improve trading efficiencies. The Board found that the management fees were reasonable in light of the services rendered and the level of profitability of Delaware Investments.
36
Economies of Scale. The Trustees considered whether economies of scale are realized by Delaware Investments as the Fund’s assets increase and the extent to which any economies of scale are reflected in the level of management fees charged. The Trustees reviewed the standardized advisory fee pricing and structure, approved by the Board and shareholders, which includes breakpoints. Breakpoints in the advisory fee occur when the advisory fee rate is reduced on assets in excess of specified levels. Breakpoints result in a lower advisory fee than would otherwise be the case on all assets when the asset levels specified are exceeded. The Board noted that the fee under the Fund’s management contract fell within the standard structure. Although the Fund has not reached a size at which it can take advantage of breakpoints, the Board recognized that the fee was structured so that when the Fund grows, economies of scale may be shared.
37
About the organization
This semiannual report is for the information of Delaware Small Cap Value Fund shareholders, but it may be used with prospective investors when preceded or accompanied by a current prospectus for Delaware Small Cap Value Fund and the Delaware Investments® Fund profile for the most recently completed calendar quarter. These documents are available at www.delawareinvestments.com. The prospectus sets forth details about charges, expenses, investment objectives, and operating policies of the investment company. You should read the prospectus carefully before you invest. The figures in this report represent past results that are not a guarantee of future results. The return and principal value of an investment in the investment company will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
Board of trustees | |
Patrick P. Coyne | 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 |
38
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.
39
![]() | ![]() |
Semiannual report | |
Delaware Dividend Income Fund | |
May 31, 2009 |
Value equity mutual fund |
Table of contents
Disclosure of Fund expenses | 1 | |
Sector allocation and top 10 equity holdings | 3 | |
Statement of net assets | 6 | |
Statement of operations | 28 | |
Statements of changes in net assets | 30 | |
Financial highlights | 32 | |
Notes to financial statements | 42 | |
Other Fund information | 54 | |
About the organization | 58 |
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.
Disclosure of Fund expenses
For the period December 1, 2008 to May 31, 2009
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period December 1, 2008 to May 31, 2009.
Actual expenses
The first section of the table shown, “Actual Fund Return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The second section of the table shown, “Hypothetical 5% Return,” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The Fund’s expenses shown in the table reflect fee waivers in effect. The expenses shown in the table assume reinvestment of all dividends and distributions.
1
Disclosure of Fund expenses
Delaware Dividend Income Fund
Expense analysis of an investment of $1,000
Beginning | Ending | Expenses | |||||||||||||||
Account Value | Account Value | Annualized | Paid During Period | ||||||||||||||
12/1/08 | 5/31/09 | Expense Ratio | 12/1/08 to 5/31/09* | ||||||||||||||
Actual Fund return | |||||||||||||||||
Class A | $ | 1,000.00 | $ | 1,159.90 | 1.18 | % | $ | 6.35 | |||||||||
Class B | 1,000.00 | 1,156.80 | 1.93 | % | 10.38 | ||||||||||||
Class C | 1,000.00 | 1,155.10 | 1.93 | % | 10.37 | ||||||||||||
Class R | 1,000.00 | 1,158.20 | 1.43 | % | 7.69 | ||||||||||||
Institutional Class | 1,000.00 | 1,161.20 | 0.93 | % | 5.01 | ||||||||||||
Hypothetical 5% return (5% return before expenses) | |||||||||||||||||
Class A | $ | 1,000.00 | $ | 1,019.05 | 1.18 | % | $ | 5.94 | |||||||||
Class B | 1,000.00 | 1,015.31 | 1.93 | % | 9.70 | ||||||||||||
Class C | 1,000.00 | 1,015.31 | 1.93 | % | 9.70 | ||||||||||||
Class R | 1,000.00 | 1,017.80 | 1.43 | % | 7.19 | ||||||||||||
Institutional Class | 1,000.00 | 1,020.29 | 0.93 | % | 4.68 |
*“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 182/365 (to reflect the one-half year period).
2
Sector allocation and top 10 equity holdings | |
Delaware Dividend Income Fund | As of May 31, 2009 |
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 | 42.79 | % | |
Consumer Discretionary | 2.37 | % | |
Consumer Staples | 6.77 | % | |
Diversified REITs | 0.78 | % | |
Energy | 3.39 | % | |
Financials | 3.30 | % | |
Health Care | 8.03 | % | |
Health Care REITs | 1.01 | % | |
Hotel REITs | 0.34 | % | |
Industrial REITs | 0.25 | % | |
Industrials | 2.21 | % | |
Information Technology | 4.38 | % | |
Mall REITs | 0.85 | % | |
Manufactured Housing REITs | 0.16 | % | |
Materials | 1.41 | % | |
Mortgage REITs | 0.21 | % | |
Multifamily REITs | 1.13 | % | |
Office REITs | 0.99 | % | |
Self-Storage REITs | 0.51 | % | |
Shopping Center REITs | 0.49 | % | |
Specialty REITs | 0.03 | % | |
Telecommunications | 1.94 | % | |
Utilities | 2.24 | % | |
Convertible Preferred Stock | 4.39 | % | |
Banking, Finance & Insurance | 0.65 | % | |
Basic Materials | 0.37 | % | |
Cable, Media & Publishing | 0.22 | % | |
Energy | 0.34 | % | |
Health Care & Pharmaceuticals | 1.86 | % | |
Telecommunications | 0.80 | % | |
Utilities | 0.15 | % |
3
Sector allocation and top 10 equity holdings
Delaware Dividend Income Fund
Sector | Percentage of net assets | ||
Convertible Bonds | 19.09 | % | |
Aerospace & Defense | 1.08 | % | |
Banking, Finance & Insurance | 0.30 | % | |
Basic Industry | 1.07 | % | |
Cable, Media & Publishing | 0.33 | % | |
Computers & Technology | 3.19 | % | |
Electronics & Electrical Equipment | 1.15 | % | |
Energy | 0.95 | % | |
Environmental Services | 0.40 | % | |
Health Care & Pharmaceuticals | 3.22 | % | |
Leisure, Lodging & Entertainment | 0.44 | % | |
Real Estate | 2.63 | % | |
Retail | 0.39 | % | |
Telecommunications | 3.14 | % | |
Transportation | 0.50 | % | |
Utilities | 0.30 | % | |
Corporate Bonds | 28.95 | % | |
Basic Industry | 3.13 | % | |
Brokerage | 0.31 | % | |
Capital Goods | 1.95 | % | |
Consumer Cyclical | 3.79 | % | |
Consumer Non-Cyclical | 1.97 | % | |
Energy | 3.16 | % | |
Financials | 2.21 | % | |
Media | 1.79 | % | |
Services Cyclical | 1.76 | % | |
Services Non-Cyclical | 2.99 | % | |
Technology & Electronics | 0.71 | % | |
Telecommunications | 3.91 | % | |
Utilities | 1.27 | % | |
Leveraged Non-Recourse Security | 0.00 | % | |
Residual Interest Trust Certificate | 0.00 | % | |
Senior Secured Loans | 2.00 | % | |
Exchange Traded Funds | 0.20 | % | |
Limited Partnership | 0.12 | % | |
Preferred Stock | 0.54 | % | |
Warrants | 0.00 | % | |
Discount Note | 1.36 | % |
4
Percentage of net assets | |||
Securities Lending Collateral | 7.87 | % | |
Total Value of Securities | 107.31 | % | |
Obligation to Return Securities Lending Collateral | (8.29 | %) | |
Receivables and Other Assets Net of Liabilities | 0.98 | % | |
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 | ||
Kraft Foods Class A | 1.29 | % | |
Gap | 1.24 | % | |
Motorola | 1.22 | % | |
Marathon Oil | 1.19 | % | |
Pfizer | 1.18 | % | |
Archer-Daniels-Midland | 1.17 | % | |
Johnson & Johnson | 1.16 | % | |
Quest Diagnostics | 1.16 | % | |
Wyeth | 1.16 | % | |
Cardinal Health | 1.16 | % |
5
Statement of net assets | |
Delaware Dividend Income Fund | May 31, 2009 (Unaudited) |
Number of shares | Value | |||||
Common Stock – 42.79% | ||||||
Consumer Discretionary – 2.37% | ||||||
Cablevision Systems Class A | 3,000 | $ | 57,090 | |||
† | DIRECTV Group | 4,450 | 100,125 | |||
Gap | 248,100 | 4,428,585 | ||||
Mattel | 249,900 | 3,900,939 | ||||
Time Warner Cable Class A | 4 | 124 | ||||
8,486,863 | ||||||
Consumer Staples – 6.77% | ||||||
* | Archer-Daniels-Midland | 152,800 | 4,205,056 | |||
CVS Caremark | 123,200 | 3,671,360 | ||||
Heinz (H.J.) | 108,500 | 3,968,930 | ||||
Kimberly-Clark | 74,200 | 3,850,238 | ||||
Kraft Foods Class A | 176,500 | 4,608,415 | ||||
Safeway | 194,200 | 3,934,492 | ||||
24,238,491 | ||||||
Diversified REITs – 0.78% | ||||||
* | Digital Realty Trust | 13,500 | 482,895 | |||
Liberty Property Trust | 35,800 | 833,424 | ||||
Vornado Realty Trust | 32,013 | 1,493,727 | ||||
2,810,046 | ||||||
Energy – 3.39% | ||||||
Chevron | 60,600 | 4,040,202 | ||||
ConocoPhillips | 83,900 | 3,845,976 | ||||
Marathon Oil | 133,300 | 4,249,604 | ||||
12,135,782 | ||||||
Financials – 3.30% | ||||||
Allstate | 158,800 | 4,085,924 | ||||
Bank of New York Mellon | 132,400 | 3,678,072 | ||||
Blackstone Group | 12,000 | 131,400 | ||||
†@ | Cardtronics | 29,300 | 94,932 | |||
Travelers | 94,100 | 3,826,106 | ||||
11,816,434 | ||||||
Health Care – 8.03% | ||||||
Bristol-Myers Squibb | 193,600 | 3,856,512 | ||||
* | Cardinal Health | 115,900 | 4,143,425 | |||
Johnson & Johnson | 75,400 | 4,159,064 | ||||
* | Merck | 147,200 | 4,059,776 | |||
Pfizer | 277,400 | 4,213,705 |
6
Number of shares | Value | |||||
Common Stock (continued) | ||||||
Health Care (continued) | ||||||
Quest Diagnostics | 79,600 | $ | 4,156,712 | |||
Wyeth | 92,600 | 4,154,036 | ||||
28,743,230 | ||||||
Health Care REITs – 1.01% | ||||||
HCP | 42,200 | 980,306 | ||||
* | Health Care REIT | 38,300 | 1,311,775 | |||
Ventas | 43,200 | 1,311,552 | ||||
3,603,633 | ||||||
Hotel REITs – 0.34% | ||||||
Host Hotels & Resorts | 129,500 | 1,214,710 | ||||
1,214,710 | ||||||
Industrial REITs – 0.25% | ||||||
AMB Property | 23,000 | 410,550 | ||||
DCT Industrial Trust | 35,200 | 157,696 | ||||
ProLogis | 40,400 | 342,996 | ||||
911,242 | ||||||
Industrials – 2.21% | ||||||
† | BWAY Holding | 7,120 | 104,166 | |||
† | Flextronics International | 19,100 | 75,636 | |||
† | Graphic Packaging Holding | 54,048 | 101,610 | |||
Grupo Aeroportuario del Centro Norte ADR | 20,242 | 194,728 | ||||
Northrop Grumman | 76,900 | 3,661,978 | ||||
†P= | Port Townsend | 1,110 | 11 | |||
Waste Management | 136,300 | 3,760,517 | ||||
7,898,646 | ||||||
Information Technology – 4.38% | ||||||
Intel | 256,500 | 4,032,180 | ||||
International Business Machines | 36,600 | 3,889,848 | ||||
Motorola | 719,600 | 4,360,776 | ||||
Xerox | 499,300 | 3,395,240 | ||||
15,678,044 | ||||||
Mall REITs – 0.85% | ||||||
* | Macerich | 44,100 | 744,408 | |||
* | Simon Property Group | 43,064 | 2,302,632 | |||
3,047,040 | ||||||
Manufactured Housing REITs – 0.16% | ||||||
Equity Lifestyle Properties | 14,700 | 576,828 | ||||
576,828 |
7
Statement of net assets
Delaware Dividend Income Fund
Number of shares | Value | |||||
Common Stock (continued) | ||||||
Materials – 1.41% | ||||||
* | duPont (E.I.) deNemours | 140,200 | $ | 3,991,494 | ||
†= | Golden Minerals | 10,288 | 23,148 | |||
* | Plum Creek Timber | 29,400 | 1,018,710 | |||
5,033,352 | ||||||
Mortgage REITs – 0.21% | ||||||
Annaly Mortgage Management | 31,400 | 437,716 | ||||
Chimera Investment | 90,300 | 315,147 | ||||
752,863 | ||||||
Multifamily REITs – 1.13% | ||||||
* | American Campus Communities | 37,300 | 857,527 | |||
Apartment Investment & Management | 18,747 | 177,159 | ||||
AvalonBay Communities | 8,965 | 551,168 | ||||
Camden Property Trust | 35,000 | 1,050,700 | ||||
Equity Residential | 57,800 | 1,406,852 | ||||
4,043,406 | ||||||
Office REITs – 0.99% | ||||||
* | Alexandria Real Estate Equities | 11,200 | 402,080 | |||
Boston Properties | 13,400 | 647,488 | ||||
* | Highwoods Properties | 39,600 | 895,752 | |||
Mack-Cali Realty | 47,000 | 1,161,370 | ||||
Parkway Properties | 19,400 | 252,976 | ||||
SL Green Realty | 8,800 | 201,520 | ||||
3,561,186 | ||||||
Self-Storage REITs – 0.51% | ||||||
* | Public Storage | 27,500 | 1,831,775 | |||
1,831,775 | ||||||
Shopping Center REITs – 0.49% | ||||||
Federal Realty Investment Trust | 16,600 | 873,990 | ||||
Kimco Realty | 45,500 | 531,895 | ||||
Kite Realty Group Trust | 41,700 | 135,108 | ||||
Ramco-Gershenson Properties Trust | 23,500 | 211,735 | ||||
1,752,728 | ||||||
Specialty REITs – 0.03% | ||||||
Entertainment Properties Trust | 5,100 | 103,632 | ||||
103,632 |
8
Number of shares | Value | |||||
Common Stock (continued) | ||||||
Telecommunications – 1.94% | ||||||
AT&T | 143,700 | $ | 3,562,323 | |||
† | Century Communications | 1,625,000 | 0 | |||
* | Verizon Communications | 116,100 | 3,397,086 | |||
6,959,409 | ||||||
Utilities – 2.24% | ||||||
Edison International | 131,400 | 3,842,136 | ||||
†* | Mirant | 448 | 6,993 | |||
†* | NRG Energy | 4,650 | 104,625 | |||
Progress Energy | 115,000 | 4,083,650 | ||||
8,037,404 | ||||||
Total Common Stock (cost $215,527,893) | 153,236,744 | |||||
Convertible Preferred Stock – 4.39% | ||||||
Banking, Finance & Insurance – 0.65% | ||||||
Aspen Insurance Holdings 5.625% | ||||||
exercise price $29.28, expiration date 12/31/49 | 37,800 | 1,641,938 | ||||
@ | Fannie Mae 8.75% exercise price $32.45, | |||||
expiration date 5/13/11 | 25,000 | 26,750 | ||||
Sovereign Capital Trust IV 4.375% | ||||||
exercise price $89.54, expiration date 3/1/34 | 35,700 | 651,525 | ||||
2,320,213 | ||||||
Basic Materials – 0.37% | ||||||
Freeport-McMoRan Copper & Gold 6.75% | ||||||
exercise price $73.24, expiration date 5/1/10 | 15,500 | 1,313,625 | ||||
1,313,625 | ||||||
Cable, Media & Publishing – 0.22% | ||||||
# | Interpublic Group 144A 5.25% | |||||
exercise price $13.66, expiration date 12/31/49 | 1,500 | 801,000 | ||||
801,000 | ||||||
Energy – 0.34% | ||||||
El Paso Energy Capital Trust I 4.75% | ||||||
exercise price $41.59, expiration date 3/31/28 | 39,900 | 1,218,945 | ||||
1,218,945 | ||||||
Health Care & Pharmaceuticals – 1.86% | ||||||
Inverness Medical Innovations 3.00% | ||||||
exercise price $69.32, expiration date 12/31/49 | 6,770 | 1,439,979 | ||||
Mylan 6.50% exercise price $17.08, | ||||||
expiration date 11/15/10 | 1,875 | 1,889,287 |
9
Statement of net assets
Delaware Dividend Income Fund
Number of shares | Value | ||||||
Convertible Preferred Stock (continued) | |||||||
Health Care & Pharmaceuticals (continued) | |||||||
* | Nationwide Health Properties 7.75% | ||||||
exercise price $22.25, expiration date 12/31/49 | 14,900 | $ | 1,788,000 | ||||
Schering-Plough 6.00% exercise price $33.69, | |||||||
expiration date 8/13/10 | 6,975 | 1,527,525 | |||||
6,644,791 | |||||||
Telecommunications – 0.80% | |||||||
Crown Castle International 6.25% | |||||||
exercise price $36.88, expiration date 8/15/12 | 28,250 | 1,378,953 | |||||
Lucent Technologies Capital Trust I 7.75% | |||||||
exercise price $24.80, expiration date 3/15/17 | 3,000 | 1,485,750 | |||||
2,864,703 | |||||||
Utilities – 0.15% | |||||||
· | CenterPoint Energy 2.644% exercise price $122.63, | ||||||
expiration date 9/15/29 | 26,000 | 535,600 | |||||
535,600 | |||||||
Total Convertible Preferred Stock (cost $22,111,609) | 15,698,877 | ||||||
Principal amount | |||||||
Convertible Bonds – 19.09% | |||||||
Aerospace & Defense – 1.08% | |||||||
# | AAR 144A 1.75% 2/1/26 exercise price $29.43, | ||||||
expiration date 1/1/26 | $ | 1,150,000 | 928,625 | ||||
L-3 Communications 3.00% 8/1/35 | |||||||
exercise price $101.13, expiration date 8/1/35 | 1,480,000 | 1,461,500 | |||||
# | L-3 Communications 144A 3.00% 8/1/35 | ||||||
exercise price $101.13, expiration date 8/1/35 | 1,500,000 | 1,481,250 | |||||
3,871,375 | |||||||
Banking, Finance & Insurance – 0.30% | |||||||
National City 4.00% 2/1/11 exercise price $482.51, | |||||||
expiration date 2/1/11 | 1,125,000 | 1,075,781 | |||||
1,075,781 | |||||||
Basic Industry – 1.07% | |||||||
Rayonier TRS Holdings 3.75% 10/15/12 | |||||||
exercise price $54.82 expiration date 10/15/12 | 2,770,000 | 2,766,538 | |||||
# | Sino-Forest 144A 5.00% 8/1/13 | ||||||
exercise price $20.29, expiration date 8/1/13 | 1,275,000 | 1,051,875 | |||||
3,818,413 |
10
Principal amount | Value | ||||||
Convertible Bonds (continued) | |||||||
Cable, Media & Publishing – 0.33% | |||||||
Liberty Media 3.25% 3/15/31 | |||||||
exercise price $53.86, expiration date 3/8/31 | $ | 3,000,000 | $ | 1,170,000 | |||
1,170,000 | |||||||
Computers & Technology – 3.19% | |||||||
Advanced Micro Devices 6.00% 5/1/15 | |||||||
exercise price $28.08, expiration date 5/1/15 | 1,930,000 | 936,050 | |||||
# | Advanced Micro Devices 144A 6.00% 5/1/15 | ||||||
exercise price $28.08, expiration date 5/1/15 | 3,385,000 | 1,641,725 | |||||
Euronet Worldwide 3.50% 10/15/25 | |||||||
exercise price $40.48, expiration date 10/15/25 | 3,500,000 | 2,931,250 | |||||
Hutchinson Technology 3.25% 1/15/26 | |||||||
exercise price $36.43, expiration date 1/14/26 | 1,540,000 | 569,800 | |||||
Intel 2.95% 12/15/35 exercise price $31.53, | |||||||
expiration date 12/15/35 | 500,000 | 406,875 | |||||
# | Intel 144A 2.95% 12/15/35 exercise price $31.53, | ||||||
expiration date 12/15/35 | 1,140,000 | 927,675 | |||||
* | Linear Technology 3.125% 5/1/27 | ||||||
exercise price $47.33, expiration date 5/1/27 | 1,500,000 | 1,471,875 | |||||
SanDisk 1.00% 5/15/13 exercise price $82.36, | |||||||
expiration date 5/15/13 | 3,870,000 | 2,534,850 | |||||
11,420,100 | |||||||
Electronics & Electrical Equipment – 1.15% | |||||||
* | Fisher Scientific 3.25% 3/1/24 | ||||||
exercise price $40.20, expiration date 3/1/24 | 1,500,000 | 1,813,125 | |||||
Flextronics International 1.00% 8/1/10 | |||||||
exercise price $15.53, expiration date 8/1/10 | 739,000 | 696,508 | |||||
General Cable 0.875% 11/14/13 | |||||||
exercise price $50.36, expiration date 11/14/13 | 1,720,000 | 1,610,350 | |||||
4,119,983 | |||||||
Energy – 0.95% | |||||||
Chesapeake Energy 2.25% 12/15/38 | |||||||
exercise price $85.89, expiration date 12/15/38 | 1,950,000 | 1,140,749 | |||||
Peabody Energy 4.75% 12/15/41 | |||||||
exercise price $58.44, expiration date 12/15/41 | 865,000 | 664,969 |
11
Statement of net assets
Delaware Dividend Income Fund
Principal amount | Value | ||||||
Convertible Bonds (continued) | |||||||
Energy (continued) | |||||||
Transocean | |||||||
1.50% 12/15/37 exercise price $168.61, | |||||||
expiration date 12/15/37 | $ | 865,000 | $ | 787,150 | |||
1.625% 12/15/37 exercise price $168.61, | |||||||
expiration date 12/15/37 | 865,000 | 819,588 | |||||
3,412,456 | |||||||
Environmental Services – 0.40% | |||||||
Allied Waste 4.25% 4/15/34 exercise price $45.40, | |||||||
expiration date 4/15/34 | 1,480,000 | 1,443,000 | |||||
1,443,000 | |||||||
Health Care & Pharmaceuticals – 3.22% | |||||||
Allergan 1.50% 4/1/26 exercise price $63.33, | |||||||
expiration date 4/1/26 | 600,000 | 612,000 | |||||
# | Allergan 144A 1.50% 4/1/26 exercise price $63.33, | ||||||
expiration date 4/1/26 | 1,935,000 | 1,973,700 | |||||
Amgen 0.375% 2/1/13 exercise price $79.48, | |||||||
expiration date 2/1/13 | 1,680,000 | 1,512,000 | |||||
# | Amgen 144A 0.375% 2/1/13 exercise price $79.48, | ||||||
expiration date 2/1/13 | 775,000 | 697,500 | |||||
Φ | Hologic 2.00% 12/15/37 exercise price $38.59, | ||||||
expiration date 12/15/37 | 1,715,000 | 1,200,500 | |||||
LifePoint Hospitals 3.50% 5/14/14 | |||||||
exercise price $51.79, expiration date 5/14/14 | 850,000 | 701,250 | |||||
Medtronic 1.625% 4/15/13 exercise price $55.41, | |||||||
expiration date 4/15/13 | 3,445,000 | 3,178,012 | |||||
Teva Pharmaceutical Finance 0.25% 2/1/26 | |||||||
exercise price $46.81, expiration date 2/1/26 | 1,535,000 | 1,642,450 | |||||
11,517,412 | |||||||
Leisure, Lodging & Entertainment – 0.44% | |||||||
# | International Game Technology 144A 3.25% 5/1/14 | ||||||
exercise price $19.97, expiration date 5/1/14 | 1,410,000 | 1,582,725 | |||||
1,582,725 | |||||||
Real Estate – 2.63% | |||||||
# | Digital Realty Trust 144A 5.50% 4/15/29 | ||||||
exercise price $43.00, expiration date 4/15/29 | 2,030,000 | 1,992,851 | |||||
# | Host Hotels & Resorts 144A 3.25% 4/15/24 | ||||||
exercise price $16.00, expiration date 3/15/24 | 1,605,000 | 1,576,913 | |||||
@ | MeriStar Hospitality 9.50% 4/1/10 | ||||||
exercise price $10.18, expiration date 4/1/10 | 1,685,000 | 1,729,653 |
12
Principal amount | Value | ||||||
Convertible Bonds (continued) | |||||||
Real Estate (continued) | |||||||
ProLogis 2.25% 4/1/37 exercise price $75.98, | |||||||
expiration date 4/1/37 | $ | 690,000 | $ | 539,925 | |||
Vornado Realty Trust 2.85% 4/1/27 | |||||||
exercise price $159.04, expiration date 3/15/27 | 1,005,000 | 864,300 | |||||
# | Weingarten Realty Investors 144A 3.95% 8/1/26 | ||||||
exercise price $48.45, expiration date 8/1/26 | 3,000,000 | 2,714,999 | |||||
9,418,641 | |||||||
Retail – 0.39% | |||||||
Pantry 3.00% 11/15/12 exercise price $50.10, | |||||||
expiration date 11/15/12 | 1,755,000 | 1,406,194 | |||||
1,406,194 | |||||||
Telecommunications – 3.14% | |||||||
# | Alaska Communication System Group 144A | ||||||
5.75% 3/1/13 exercise price $12.90, | |||||||
expiration date 3/1/13 | 2,312,000 | 1,676,200 | |||||
Level 3 Communications 3.50% 6/15/12 | |||||||
exercise price $5.46, expiration date 6/15/12 | 2,425,000 | 1,439,844 | |||||
NII Holdings 3.125% 6/15/12 | |||||||
exercise price $118.32, expiration date 6/15/12 | 3,765,000 | 2,833,163 | |||||
Qwest Communications International | |||||||
3.50% 11/15/25 exercise price $5.23, | |||||||
expiration date 11/15/25 | 750,000 | 758,438 | |||||
# | SBA Communications 144A 4.00% 10/1/14 | ||||||
exercise price $30.38, expiration date 10/1/14 | 1,460,000 | 1,491,025 | |||||
# | Virgin Media 144A 6.50% 11/15/16 | ||||||
exercise price $19.22, expiration date 11/15/16 | 3,920,000 | 3,052,699 | |||||
11,251,369 | |||||||
Transportation – 0.50% | |||||||
Bristow Group 3.00% 6/15/38 | |||||||
exercise price $77.34, expiration date 6/15/38 | 2,500,000 | 1,800,000 | |||||
1,800,000 | |||||||
Utilities – 0.30% | |||||||
Dominion Resources 2.125% 12/15/23 | |||||||
exercise price $36.14, expiration date 12/15/23 | 1,000,000 | 1,071,250 | |||||
1,071,250 | |||||||
Total Convertible Bonds (cost $80,261,662) | 68,378,699 |
13
Statement of net assets
Delaware Dividend Income Fund
Principal amount | Value | ||||||
Corporate Bonds – 28.95% | |||||||
Basic Industry – 3.13% | |||||||
California Steel Industries 6.125% 3/15/14 | $ | 495,000 | $ | 404,663 | |||
Domtar 7.125% 8/15/15 | 421,000 | 351,535 | |||||
#@ | Evraz Group 144A 9.50% 4/24/18 | 825,000 | 602,250 | ||||
Freeport McMoRan Copper & Gold | |||||||
8.25% 4/1/15 | 564,000 | 564,644 | |||||
8.375% 4/1/17 | 250,000 | 248,476 | |||||
Georgia-Pacific | |||||||
7.70% 6/15/15 | 255,000 | 239,063 | |||||
8.875% 5/15/31 | 525,000 | 448,875 | |||||
Huntsman International | |||||||
7.375% 1/1/15 | 180,000 | 121,725 | |||||
*7.875% 11/15/14 | 360,000 | 248,400 | |||||
Innophos 8.875% 8/15/14 | 745,000 | 672,362 | |||||
#@ | Innophos Holding 144A 9.50% 4/15/12 | 510,000 | 425,850 | ||||
International Coal Group 10.25% 7/15/14 | 550,000 | 382,250 | |||||
# | MacDermid 144A 9.50% 4/15/17 | 835,000 | 513,525 | ||||
# | Nalco 144A 8.25% 5/15/17 | 110,000 | 111,100 | ||||
NewPage 10.00% 5/1/12 | 265,000 | 149,725 | |||||
Noranda Aluminium Acquisition PIK | |||||||
5.413% 5/15/15 | 615,000 | 329,025 | |||||
Norske Skog Canada 8.625% 6/15/11 | 725,000 | 425,938 | |||||
#@ | Norske Skogindustrier 144A 7.125% 10/15/33 | 175,000 | 84,875 | ||||
PolyOne 8.875% 5/1/12 | 45,000 | 30,488 | |||||
@= | Port Townsend Private Note 12.431% 8/27/12 | 325,364 | 235,889 | ||||
@ | Potlatch 12.50% 12/1/09 | 1,075,000 | 1,115,619 | ||||
Rock-Tenn 9.25% 3/15/16 | 490,000 | 499,800 | |||||
Rockwood Specialties Group 7.50% 11/15/14 | 690,000 | 658,949 | |||||
#· | Ryerson 144A 8.403% 11/1/14 | 405,000 | 225,281 | ||||
#@ | Sappi Papier Holding 144A 6.75% 6/15/12 | 485,000 | 302,058 | ||||
#@ | Severstal 144A 9.75% 7/29/13 | 350,000 | 287,000 | ||||
# | Steel Dynamics 144A 8.25% 4/15/16 | 565,000 | 484,488 | ||||
# | Teck Resources 144A | ||||||
10.25% 5/15/16 | 185,000 | 187,542 | |||||
10.75% 5/15/19 | 330,000 | 340,005 | |||||
# | Vedanta Resources 144A 9.50% 7/18/18 | 595,000 | 520,625 | ||||
11,212,025 |
14
Principal amount | Value | ||||||
Corporate Bonds (continued) | |||||||
Brokerage – 0.31% | |||||||
Citigroup | |||||||
5.00% 9/15/14 | $ | 485,000 | $ | 422,169 | |||
6.125% 8/25/36 | 245,000 | 181,875 | |||||
LaBranche 11.00% 5/15/12 | 545,000 | 502,763 | |||||
1,106,807 | |||||||
Capital Goods – 1.95% | |||||||
Associated Materials 9.75% 4/15/12 | 445,000 | 378,250 | |||||
Building Materials 7.75% 8/1/14 | 455,000 | 400,400 | |||||
# | BWAY 144A 10.00% 4/15/14 | 935,000 | 938,506 | ||||
Celestica 7.875% 7/1/11 | 235,000 | 236,763 | |||||
@ | CPG International I 10.50% 7/1/13 | 300,000 | 159,000 | ||||
Flextronics International 6.25% 11/15/14 | 250,000 | 225,000 | |||||
* | Graham Packaging 9.875% 10/15/14 | 931,000 | 833,245 | ||||
Graphic Packaging International 9.50% 8/15/13 | 1,060,000 | 996,399 | |||||
@ | Intertape Polymer 8.50% 8/1/14 | 400,000 | 180,000 | ||||
# | Moog 144A 7.25% 6/15/18 | 465,000 | 439,425 | ||||
Owens-Brockway Glass Container 6.75% 12/1/14 | 290,000 | 276,225 | |||||
# | Plastipak Holdings 144A 8.50% 12/15/15 | 210,000 | 180,600 | ||||
Pregis 12.375% 10/15/13 | 80,000 | 51,200 | |||||
* | RBS Global/Rexnord 11.75% 8/1/16 | 495,000 | 314,325 | ||||
* | Sally Holdings 10.50% 11/15/16 | 725,000 | 730,438 | ||||
Solo Cup 8.50% 2/15/14 | 295,000 | 237,475 | |||||
Thermadyne Holdings 10.00% 2/1/14 | 625,000 | 415,625 | |||||
6,992,876 | |||||||
Consumer Cyclical – 3.79% | |||||||
Beazer Homes USA 8.625% 5/15/11 | 175,000 | 113,313 | |||||
Dave & Buster’s 11.25% 3/15/14 | 40,000 | 33,800 | |||||
Denny’s Holdings 10.00% 10/1/12 | 255,000 | 247,350 | |||||
* | Dollar General 10.625% 7/15/15 | 480,000 | 510,000 | ||||
DR Horton | |||||||
6.00% 4/15/11 | 200,000 | 193,500 | |||||
7.875% 8/15/11 | 780,000 | 780,000 | |||||
Ford Motor Credit | |||||||
·3.889% 1/13/12 | 235,000 | 185,944 | |||||
7.25% 10/25/11 | 165,000 | 142,464 | |||||
7.375% 10/28/09 | 285,000 | 277,998 | |||||
7.80% 6/1/12 | 1,100,000 | 939,931 | |||||
8.00% 6/1/14 | 425,000 | 345,123 | |||||
9.875% 8/10/11 | 500,000 | 456,672 |
15
Statement of net assets
Delaware Dividend Income Fund
Principal amount | Value | ||||||
Corporate Bonds (continued) | |||||||
Consumer Cyclical (continued) | |||||||
Global Cash Access 8.75% 3/15/12 | $595,000 | $ | 586,075 | ||||
# | GMAC 144A | ||||||
6.00% 12/15/11 | 285,000 | 248,089 | |||||
6.625% 5/15/12 | 367,000 | 317,658 | |||||
6.875% 9/15/11 | 950,000 | 850,679 | |||||
6.875% 8/28/12 | 608,000 | 526,285 | |||||
Goodyear Tire & Rubber | |||||||
*9.00% 7/1/15 | 615,000 | 590,399 | |||||
10.50% 5/15/16 | 180,000 | 180,000 | |||||
# | Invista 144A 9.25% 5/1/12 | 525,000 | 493,500 | ||||
# | Landry’s Restaurants 144A 14.00% 8/15/11 | 295,000 | 275,825 | ||||
Levi Strauss 9.75% 1/15/15 | 592,000 | 574,240 | |||||
Limited Brands 6.90% 7/15/17 | 350,000 | 297,586 | |||||
Macy’s Retail Holdings | |||||||
8.875% 7/15/15 | 585,000 | 564,285 | |||||
10.625% 11/1/10 | 200,000 | 204,806 | |||||
Meritage Homes | |||||||
6.25% 3/15/15 | 105,000 | 79,538 | |||||
7.00% 5/1/14 | 425,000 | 333,625 | |||||
M/I Homes 6.875% 4/1/12 | 320,000 | 257,600 | |||||
Mobile Mini 6.875% 5/1/15 | 435,000 | 357,788 | |||||
Mohawk Industries 6.625% 1/15/16 | 355,000 | 306,871 | |||||
New Albertson’s 7.25% 5/1/13 | 185,000 | 178,525 | |||||
Ryland Group | |||||||
6.875% 6/15/13 | 905,000 | 868,800 | |||||
8.40% 5/15/17 | 415,000 | 404,625 | |||||
# | Sealy Mattress 144A 10.875% 4/15/16 | 165,000 | 169,950 | ||||
Toll 8.25% 12/1/11 | 33,000 | 33,165 | |||||
Toys R Us 7.625% 8/1/11 | 305,000 | 233,325 | |||||
# | TRW Automotive 144A | ||||||
*7.00% 3/15/14 | 475,000 | 351,500 | |||||
7.25% 3/15/17 | 100,000 | 70,500 | |||||
13,581,334 | |||||||
Consumer Non-Cyclical – 1.97% | |||||||
Alliance One International | |||||||
8.50% 5/15/12 | 105,000 | 98,175 | |||||
11.00% 5/15/12 | 160,000 | 162,000 | |||||
* | Bausch & Lomb 9.875% 11/1/15 | 620,000 | 568,850 |
16
Principal amount | Value | ||||||
Corporate Bonds (continued) | |||||||
Consumer Non-Cyclical (continued) | |||||||
Biomet | |||||||
*10.00% 10/15/17 | $545,000 | $ | 559,988 | ||||
11.625% 10/15/17 | 125,000 | 123,750 | |||||
@ | Cardtronics | ||||||
9.25% 8/15/13 | 705,000 | 623,924 | |||||
9.75% 8/15/13 | 315,000 | 278,775 | |||||
* | Constellation Brands 8.125% 1/15/12 | 240,000 | 240,000 | ||||
Cornell 10.75% 7/1/12 | 210,000 | 207,900 | |||||
Cott Beverages 8.00% 12/15/11 | 440,000 | 380,600 | |||||
Del Monte | |||||||
6.75% 2/15/15 | 175,000 | 166,688 | |||||
8.625% 12/15/12 | 85,000 | 85,850 | |||||
# | Dole Food 144A 13.875% 3/15/14 | 420,000 | 451,500 | ||||
Elan Finance | |||||||
7.75% 11/15/11 | 155,000 | 140,275 | |||||
8.875% 12/1/13 | 320,000 | 276,800 | |||||
# | Ingles Markets 144A 8.875% 5/15/17 | 335,000 | 331,231 | ||||
* | Jarden 7.50% 5/1/17 | 235,000 | 204,450 | ||||
# | JBS USA 144A 11.625% 5/1/14 | 505,000 | 487,325 | ||||
JohnsonDiversey Holdings 10.67% 5/15/13 | 475,000 | 375,250 | |||||
Smithfield Foods 7.75% 5/15/13 | 495,000 | 376,200 | |||||
Supervalu 8.00% 5/1/16 | 85,000 | 83,725 | |||||
# | Tyson Foods 144A 10.50% 3/1/14 | 285,000 | 303,525 | ||||
Visant Holding 8.75% 12/1/13 | 540,000 | 525,150 | |||||
7,051,931 | |||||||
Energy – 3.16% | |||||||
AmeriGas Partners 7.125% 5/20/16 | 225,000 | 209,531 | |||||
Berry Petroleum 10.25% 6/1/14 | 180,000 | 177,525 | |||||
Chesapeake Energy | |||||||
6.375% 6/15/15 | 100,000 | 86,250 | |||||
7.00% 8/15/14 | 420,000 | 383,250 | |||||
9.50% 2/15/15 | 505,000 | 501,213 | |||||
Complete Production Service 8.00% 12/15/16 | 475,000 | 387,125 | |||||
# | Copano Energy 144A 7.75% 6/1/18 | 440,000 | 391,600 | ||||
Denbury Resources | |||||||
7.50% 4/1/13 | 10,000 | 9,650 | |||||
9.75% 3/1/16 | 295,000 | 302,375 | |||||
Dynergy Holdings 7.75% 6/1/19 | 720,000 | 527,400 |
17
Statement of net assets
Delaware Dividend Income Fund
Principal amount | Value | ||||||
Corporate Bonds (continued) | |||||||
Energy (continued) | |||||||
El Paso 6.875% 6/15/14 | $ | 605,000 | $ | 575,998 | |||
# | El Paso Performance-Linked Trust 144A | ||||||
7.75% 7/15/11 | 525,000 | 521,225 | |||||
Forest Oil 7.25% 6/15/19 | 265,000 | 229,225 | |||||
Geophysique-Veritas | |||||||
7.50% 5/15/15 | 95,000 | 87,400 | |||||
7.75% 5/15/17 | 420,000 | 371,700 | |||||
# | Helix Energy Solutions 144A 9.50% 1/15/16 | 700,000 | 581,000 | ||||
# | Hilcorp Energy I 144A 7.75% 11/1/15 | 655,000 | 566,575 | ||||
Inergy Finance 6.875% 12/15/14 | 350,000 | 322,000 | |||||
KCS Energy 7.125% 4/1/12 | 465,000 | 435,938 | |||||
Key Energy Services 8.375% 12/1/14 | 605,000 | 535,425 | |||||
Mariner Energy 8.00% 5/15/17 | 755,000 | 600,225 | |||||
MarkWest Energy 8.75% 4/15/18 | 380,000 | 317,300 | |||||
Massey Energy 6.875% 12/15/13 | 965,000 | 858,849 | |||||
OPTI Canada | |||||||
7.875% 12/15/14 | 365,000 | 248,200 | |||||
8.25% 12/15/14 | 125,000 | 86,875 | |||||
PetroHawk Energy 9.125% 7/15/13 | 116,000 | 114,550 | |||||
@ | Petroleum Development 12.00% 2/15/18 | 525,000 | 393,750 | ||||
Plains Exploration & Production 7.00% 3/15/17 | 215,000 | 188,125 | |||||
Range Resources 7.25% 5/1/18 | 415,000 | 390,619 | |||||
Regency Energy Partners 8.375% 12/15/13 | 259,000 | 247,345 | |||||
# | SandRidge Energy 144A 9.875% 5/15/16 | 230,000 | 220,225 | ||||
Whiting Petroleum 7.25% 5/1/13 | 485,000 | 446,200 | |||||
11,314,668 | |||||||
Financials – 2.21% | |||||||
· | BAC Capital Trust XIV 5.63% 12/31/49 | 615,000 | 283,723 | ||||
Bank of America 6.10% 6/15/17 | 1,010,000 | 888,033 | |||||
BB&T Capital Trust I 5.85% 8/18/35 | 90,000 | 63,479 | |||||
BB&T Capital Trust II 6.75% 6/7/36 | 95,000 | 68,847 | |||||
Capital One Financial 6.15% 9/1/16 | 155,000 | 130,466 | |||||
CIT Group | |||||||
4.75% 12/15/10 | 125,000 | 106,380 | |||||
5.40% 1/30/16 | 140,000 | 92,327 | |||||
5.65% 2/13/17 | 550,000 | 364,329 | |||||
5.85% 9/15/16 | 1,035,000 | 684,022 | |||||
#144A 12.00% 12/18/18 | 500,000 | 274,825 |
18
Principal amount | Value | ||||||
Corporate Bonds (continued) | |||||||
Financials (continued) | |||||||
International Lease Finance | |||||||
5.25% 1/10/13 | $ | 165,000 | $ | 128,557 | |||
5.35% 3/1/12 | 60,000 | 45,196 | |||||
5.55% 9/5/12 | 205,000 | 161,742 | |||||
5.625% 9/20/13 | 310,000 | 241,857 | |||||
JPMorgan Chase Capital XXV 6.80% 10/1/37 | 65,000 | 55,112 | |||||
·# | Liberty Mutual Group 144A 10.75% 6/15/58 | 770,000 | 478,093 | ||||
MetLife 6.40% 12/15/36 | 350,000 | 249,149 | |||||
·# | Metlife Capital Trust X 144A 9.25% 4/8/38 | 600,000 | 511,132 | ||||
#@ | Nuveen Investments 144A 10.50% 11/15/15 | 1,035,000 | 558,900 | ||||
@ | Popular North America Capital Trust I | ||||||
6.564% 9/15/34 | 385,000 | 127,913 | |||||
·# | Rabobank Nederland 44A 11.00% 12/29/49 | 290,000 | 304,500 | ||||
Silicon Valley Bank 6.05% 6/1/17 | 310,000 | 226,506 | |||||
· | USB Capital IX 6.189% 4/15/49 | 490,000 | 319,848 | ||||
Ventas Realty 6.50% 6/1/16 | 320,000 | 292,800 | |||||
· | Wells Fargo Capital XIII 7.70% 12/29/49 | 845,000 | 659,608 | ||||
Zions Bancorporation | |||||||
5.50% 11/16/15 | 250,000 | 170,903 | |||||
6.00% 9/15/15 | 620,000 | 434,973 | |||||
7,923,220 | |||||||
Media – 1.79% | |||||||
#‡ | Charter Communications Operating 144A | ||||||
*10.00% 4/30/12 | 240,000 | 231,600 | |||||
10.375% 4/30/14 | 330,000 | 315,150 | |||||
*10.875% 9/15/14 | 1,226,000 | 1,268,909 | |||||
# | CSC Holdings 144A | ||||||
8.50% 4/15/14 | 31,000 | 31,000 | |||||
8.50% 6/15/15 | 575,000 | 569,250 | |||||
DIRECTV Holdings 7.625% 5/15/16 | 350,000 | 340,375 | |||||
Echostar DBS 7.125% 2/1/16 | 545,000 | 504,125 | |||||
# | Expedia 144A 8.50% 7/1/16 | 385,000 | 367,675 | ||||
Interpublic Group 6.25% 11/15/14 | 328,000 | 281,260 | |||||
Lamar Media 6.625% 8/15/15 | 455,000 | 370,825 | |||||
Mediacom Capital 9.50% 1/15/13 | 355,000 | 340,800 | |||||
Nielsen Finance 10.00% 8/1/14 | 360,000 | 344,700 | |||||
Quebecor Media 7.75% 3/15/16 | 315,000 | 281,138 | |||||
# | Rainbow National Services 144A 10.375% 9/1/14 | 245,000 | 253,881 | ||||
# | UPC Holding 9.875% 4/15/18 | 280,000 | 271,600 |
19
Statement of net assets
Delaware Dividend Income Fund
Principal amount | Value | ||||||
Corporate Bonds (continued) | |||||||
Media (continued) | |||||||
Videotron | |||||||
6.375% 12/15/15 | $ | 165,000 | $ | 150,150 | |||
#144A 9.125% 4/15/18 | 475,000 | 494,000 | |||||
6,416,438 | |||||||
Services Cyclical – 1.76% | |||||||
# | Ashtead Capital 144A 9.00% 8/15/16 | 325,000 | 242,125 | ||||
Delta Air Lines 7.92% 11/18/10 | 80,000 | 70,400 | |||||
# | Erac USA Finance 144A 6.375% 10/15/17 | 365,000 | 307,037 | ||||
FTI Consulting 7.75% 10/1/16 | 260,000 | 256,750 | |||||
#@ | Galaxy Entertainment Finance 144A | ||||||
9.875% 12/15/12 | 615,000 | 513,525 | |||||
Gaylord Entertainment | |||||||
6.75% 11/15/14 | 275,000 | 210,375 | |||||
8.00% 11/15/13 | 545,000 | 451,669 | |||||
# | Harrah’s Operating Escrow 144A 11.25% 6/1/17 | 590,000 | 575,250 | ||||
* | Hertz | ||||||
8.875% 1/1/14 | 460,000 | 420,900 | |||||
10.50% 1/1/16 | 255,000 | 223,125 | |||||
Kansas City Southern de Mexico | |||||||
9.375% 5/1/12 | 260,000 | 234,650 | |||||
#144A 12.50% 4/1/16 | 140,000 | 132,300 | |||||
# | MGM MIRAGE 144A | ||||||
10.375% 5/15/14 | 180,000 | 186,300 | |||||
11.125% 11/15/17 | 230,000 | 242,075 | |||||
13.00% 11/15/13 | 680,000 | 746,300 | |||||
‡@ | Northwest Airlines 10.00% 2/1/10 | 265,000 | 2,677 | ||||
Pinnacle Entertainment | |||||||
7.50% 6/15/15 | 345,000 | 289,800 | |||||
*8.75% 10/1/13 | 450,000 | 445,500 | |||||
#@ | Pokagon Gaming Authority 144A 10.375% 6/15/14 | 630,000 | 611,100 | ||||
# | Shingle Springs Tribal Gaming Authority | ||||||
9.375% 6/15/15 | 235,000 | 137,475 | |||||
6,299,333 | |||||||
Services Non-Cyclical – 2.99% | |||||||
Alliance Imaging 7.25% 12/15/12 | 425,000 | 418,625 | |||||
* | ARAMARK 8.50% 2/1/15 | 845,000 | 810,144 | ||||
Casella Waste Systems 9.75% 2/1/13 | 1,083,000 | 904,305 |
20
Principal amount | Value | ||||||
Corporate Bonds (continued) | |||||||
Services Non-Cyclical (continued) | |||||||
Community Health Systems 8.875% 7/15/15 | $ | 980,000 | $ | 973,875 | |||
HCA | |||||||
6.50% 2/15/16 | 1,065,000 | 820,050 | |||||
9.25% 11/15/16 | 145,000 | 142,825 | |||||
HCA PIK 9.625% 11/15/16 | 810,000 | 777,600 | |||||
· | HealthSouth 8.323% 6/15/14 | 475,000 | 439,375 | ||||
Inverness Medical Innovations 9.00% 5/15/16 | 235,000 | 226,188 | |||||
Iron Mountain | |||||||
6.625% 1/1/16 | 505,000 | 469,650 | |||||
8.00% 6/15/20 | 305,000 | 283,650 | |||||
Lender Processing Services 8.125% 7/1/16 | 380,000 | 376,200 | |||||
Psychiatric Solutions | |||||||
7.75% 7/15/15 | 420,000 | 380,100 | |||||
#144A 7.75% 7/15/15 | 175,000 | 156,625 | |||||
RSC Equipment Rental 9.50% 12/1/14 | 465,000 | 365,025 | |||||
Select Medical 7.625% 2/1/15 | 1,180,000 | 938,100 | |||||
#@ | Seminole Indian Tribe of Florida 144A | ||||||
7.804% 10/1/20 | 705,000 | 590,557 | |||||
8.03% 10/1/20 | 350,000 | 284,158 | |||||
Tenet Healthcare 7.375% 2/1/13 | 570,000 | 551,475 | |||||
Universal Hospital Services PIK 8.50% 6/1/15 | 360,000 | 347,400 | |||||
US Oncology | |||||||
6.904% 3/15/12 | 225,000 | 154,125 | |||||
9.00% 8/15/12 | 295,000 | 296,475 | |||||
10,706,527 | |||||||
Technology & Electronics – 0.71% | |||||||
Amkor Technology 7.75% 5/15/13 | 275,000 | 247,156 | |||||
Anixter 10.00% 3/15/14 | 225,000 | 223,875 | |||||
Avago Technologies Finance 10.125% 12/1/13 | 335,000 | 323,694 | |||||
Celestica 7.625% 7/1/13 | 430,000 | 421,400 | |||||
National Semiconductor 6.60% 6/15/17 | 240,000 | 203,219 | |||||
Sanmina-SCI 8.125% 3/1/16 | 480,000 | 271,200 | |||||
Sungard Data Systems | |||||||
9.125% 8/15/13 | 93,000 | 89,978 | |||||
10.25% 8/15/15 | 834,000 | 761,024 | |||||
2,541,546 |
21
Statement of net assets
Delaware Dividend Income Fund
Principal amount | Value | ||||||
Corporate Bonds (continued) | |||||||
Telecommunications – 3.91% | |||||||
=@‡ | Allegiance Telecom 11.75% 2/15/10 | $ | 10,000 | $ | 0 | ||
Cincinnati Bell 7.00% 2/15/15 | 500,000 | 461,250 | |||||
Citizens Communications | |||||||
6.25% 1/15/13 | 270,000 | 254,138 | |||||
7.125% 3/15/19 | 595,000 | 528,063 | |||||
Cricket Communications | |||||||
9.375% 11/1/14 | 615,000 | 615,000 | |||||
#144A 7.75% 5/15/16 | 270,000 | 262,238 | |||||
Crown Castle International 9.00% 1/15/15 | 255,000 | 258,825 | |||||
# | Digicel 144A | ||||||
8.875% 1/15/15 | 390,000 | 313,950 | |||||
*9.25% 9/1/12 | 440,000 | 422,400 | |||||
# | DigitalGlobe 144A 10.50% 5/1/14 | 270,000 | 278,775 | ||||
Frontier Communications 8.25% 5/1/14 | 280,000 | 275,100 | |||||
GCI 7.25% 2/15/14 | 290,000 | 264,263 | |||||
Hughes Network Systems 9.50% 4/15/14 | 800,000 | 776,000 | |||||
Inmarsat Finance 10.375% 11/15/12 | 710,000 | 736,625 | |||||
Intelsat Jackson Holdings 11.25% 6/15/16 | 786,000 | 809,579 | |||||
Lucent Technologies 6.45% 3/15/29 | 614,000 | 353,050 | |||||
MetroPCS Wireless 9.25% 11/1/14 | 795,000 | 801,956 | |||||
Nextel Communications 7.375% 8/1/15 | 765,000 | 610,088 | |||||
# | Nordic Telephone Holdings 144A 8.875% 5/1/16 | 553,000 | 555,765 | ||||
Qwest Communications International | |||||||
7.50% 2/15/14 | 255,000 | 235,875 | |||||
# | Qwest 144A 8.375% 5/1/16 | 390,000 | 385,125 | ||||
Sprint Nextel 6.00% 12/1/16 | 1,660,000 | 1,358,060 | |||||
# | Telesat Canada 144A | ||||||
11.00% 11/1/15 | 370,000 | 360,750 | |||||
12.50% 11/1/17 | 425,000 | 376,125 | |||||
Time Warner Telecom Holdings 9.25% 2/15/14 | 545,000 | 549,088 | |||||
#@ | Vimpelcom 144A 9.125% 4/30/18 | 970,000 | 812,374 | ||||
Virgin Media Finance 8.75% 4/15/14 | 430,000 | 417,100 | |||||
# | Wind Acquisition Finance 144A 10.75% 12/1/15 | 395,000 | 416,725 | ||||
Windstream 8.125% 8/1/13 | 505,000 | 499,319 | |||||
13,987,606 |
22
Principal amount | Value | |||||
Corporate Bonds (continued) | ||||||
Utilities – 1.27% | ||||||
AES | ||||||
7.75% 3/1/14 | $ | 665,000 | $ | 636,738 | ||
8.00% 10/15/17 | 180,000 | 168,300 | ||||
Elwood Energy 8.159% 7/5/26 | 642,158 | 524,868 | ||||
Midwest Generation 8.30% 7/2/09 | 218,146 | 217,055 | ||||
Mirant Americas Generation 8.50% 10/1/21 | 665,000 | 555,275 | ||||
t | Mirant Mid Atlantic Pass Through Trust | |||||
Series A 8.625% 6/30/12 | 306,548 | 300,417 | ||||
NRG Energy | ||||||
7.375% 2/1/16 | 880,000 | 830,499 | ||||
7.375% 1/15/17 | 95,000 | 89,538 | ||||
Orion Power Holdings 12.00% 5/1/10 | 736,000 | 763,599 | ||||
RRI Energy 6.75% 12/15/14 | 185,000 | 178,988 | ||||
* | Texas Competitive Electric Holdings | |||||
10.25% 11/1/15 | 475,000 | 283,813 | ||||
4,549,090 | ||||||
Total Corporate Bonds (cost $105,350,529) | 103,683,401 | |||||
Leveraged Non-Recourse Security – 0.00% | ||||||
#t@ | JPMorgan Pass Through Trust | |||||
Series 2007-B 144A 0.001% 1/15/87 | 1,300,000 | 0 | ||||
Total Leveraged Non-Recourse Security | ||||||
(cost $1,105,000) | 0 | |||||
Residual Interest Trust Certificate – 0.00% | ||||||
#t | Auction Pass Through 2007-6 Series 7-6B 144A | 475,000 | 0 | |||
Total Residual Interest Trust Certificate | ||||||
(cost $516,980) | 0 | |||||
«Senior Secured Loans – 2.00% | ||||||
Calpine Term Tranche Loan T1 4.095% 3/29/14 | 320,000 | 279,333 | ||||
Energy Futures Holdings Term Tranche Loan B2 | ||||||
3.882% 10/10/14 | 1,538,434 | 1,068,889 | ||||
Flextronics International | ||||||
Term Tranche Loan A2 2.678% 10/1/14 | 241,696 | 195,169 | ||||
Term Tranche Loan A3 2.678% 10/1/14 | 281,978 | 227,698 |
23
Statement of net assets
Delaware Dividend Income Fund
Principal amount | Value | |||||
«Senior Secured Loans (continued) | ||||||
Ford Motor Term Tranche Loan B 3.603% 12/15/13 | $ | 1,540,833 | $ | 1,114,700 | ||
General Motors Term Tranche Loan B | ||||||
8.00% 11/29/13 | 1,818,824 | 1,741,534 | ||||
Northwest Airlines 2.36% 8/21/13 | 350,000 | 327,689 | ||||
Talecris Biotherapeutics Term Tranche Loan 2nd Lien | ||||||
7.42% 12/6/14 | 925,000 | 817,085 | ||||
Toys R Us Term Tranche Loan B 4.566% 7/19/12 | 810,000 | 670,275 | ||||
Univision Communications Term Tranche Loan B | ||||||
2.678% 9/29/14 | 1,025,000 | 711,734 | ||||
Total Senior Secured Loans (cost $5,442,903) | 7,154,106 | |||||
Number of shares | ||||||
Exchange Traded Funds – 0.20% | ||||||
Commodity Fund – 0.09% | ||||||
† | SPDR Gold Trust | 3,300 | 317,493 | |||
317,493 | ||||||
Equity Funds – 0.11% | ||||||
* | Energy Select Sector SPDR Fund | 6,400 | 329,664 | |||
* | ProShares UltraShort Real Estate | 3,900 | 76,245 | |||
405,909 | ||||||
Total Exchange Traded Funds (cost $710,165) | 723,402 | |||||
Limited Partnership – 0.12% | ||||||
* | Brookfield Infrastructure Partners | 33,900 | 423,411 | |||
Total Limited Partnership (cost $638,388) | 423,411 | |||||
Preferred Stock – 0.54% | ||||||
Banking, Finance & Insurance – 0.14% | ||||||
* | Freddie Mac 6.02% | 21,000 | 7,770 | |||
· | JPMorgan Chase 7.90% | 245,000 | 205,125 | |||
· | PNC Financial Services Group 8.25% | 340,000 | 289,993 | |||
502,888 | ||||||
Industrials – 0.00% | ||||||
= | Port Townsend | 222 | 0 | |||
0 |
24
Number of shares | Value | ||||||
Preferred Stock (continued) | |||||||
Leisure, Lodging & Entertainment – 0.07% | |||||||
* | Red Lion Hotels Capital Trust 9.50% | 17,479 | $ | 262,185 | |||
262,185 | |||||||
Real Estate – 0.33% | |||||||
Developers Diversified Realty 7.50% | 25,050 | 230,711 | |||||
SL Green Realty 7.625% | 46,300 | 732,003 | |||||
* | Vornado Realty Trust 6.625% | 12,700 | 226,060 | ||||
W2007 Grace Acquisitions Series B 8.75% | 21,700 | 6,510 | |||||
1,195,284 | |||||||
Total Preferred Stock (cost $3,788,245) | 1,960,357 | ||||||
Warrants – 0.00% | |||||||
†= | 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 | |||||||
¹Discount Note – 1.36% | |||||||
Federal Home Loan Bank 0.07% 6/1/09 | $ | 4,869,031 | 4,869,031 | ||||
Total Discount Note (cost $4,869,031) | 4,869,031 | ||||||
Total Value of Securities Before Securities | |||||||
Lending Collateral – 99.44% (cost $440,328,754) | 356,128,030 | ||||||
Number of shares | |||||||
Securities Lending Collateral** – 7.87% | |||||||
Investment Companies | |||||||
Mellon GSL DBT II Collateral Fund | 2,706,565 | 2,706,565 | |||||
BNY Mellon SL DBT II Liquidating Fund | 26,236,594 | 25,460,477 | |||||
†Mellon GSL Reinvestment Trust II | 741,807 | 74 | |||||
Total Securities Lending Collateral | |||||||
(cost $29,684,966) | 28,167,116 | ||||||
Total Value of Securities – 107.31% | |||||||
(cost $470,013,720) | 384,295,146 | © |
25
Statement of net assets
Delaware Dividend Income Fund
Obligation to Return Securities | ||||
Lending Collateral** – (8.29%) | $ | (29,684,966 | ) | |
Receivables and Other Assets | ||||
Net of Liabilities – 0.98% | 3,511,264 | |||
Net Assets Applicable to 45,755,025 | ||||
Shares Outstanding – 100.00% | $ | 358,121,444 | ||
Net Asset Value – Delaware Dividend Income Fund | ||||
Class A ($180,501,878 / 23,063,502 Shares) | $7.83 | |||
Net Asset Value – Delaware Dividend Income Fund | ||||
Class B ($31,796,859 / 4,063,054 Shares) | $7.83 | |||
Net Asset Value – Delaware Dividend Income Fund | ||||
Class C ($140,932,815 / 18,003,815 Shares) | $7.83 | |||
Net Asset Value – Delaware Dividend Income Fund | ||||
Class R ($2,415,050 / 308,654 Shares) | $7.82 | |||
Net Asset Value – Delaware Dividend Income Fund | ||||
Institutional Class ($2,474,842 / 316,000 Shares) | $7.83 | |||
Components of Net Assets at May 31, 2009: | ||||
Shares of beneficial interest (unlimited authorization – no par) | $ | 616,824,006 | ||
Accumulated net investment loss | (59,432 | ) | ||
Accumulated net realized loss on investments | (172,924,558 | ) | ||
Net unrealized depreciation of investments and foreign currencies | (85,718,572 | ) | ||
Total net assets | $ | 358,121,444 |
† | Non income producing security. |
‡ | Non income producing security. Security is currently in default. |
· | Variable rate security. The rate shown is the rate as of May 31, 2009. |
Φ | Step coupon bond. Coupon increases periodically based on a predetermined schedule. Stated rate in effect at May 31, 2009. |
t | 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. |
# | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At May 31, 2009, the aggregate amount of Rule 144A securities was $51,231,653, which represented 14.31% of the Fund’s net assets. See Note 10 in “Notes to financial statements.” |
26
« | Senior Secured Loans generally pay interest at rates which are periodically redetermined by reference to a base lending rate plus a premium. These base lending rates are generally: (i) the prime rate offered by one or more United States banks, (ii) the lending rate offered by one or more European banks such as the London Inter-Bank Offered Rate (LIBOR), and (iii) the certificate of deposit rate. Senior Secured Loans may be subject to restrictions on resale. |
@ | Illiquid security. At May 31, 2009, the aggregate amount of illiquid securities was $10,041,529, which represented 2.80% of the Fund’s net assets. See Note 10 in “Notes to financial statements.” |
= | Security is being fair valued in accordance with the Fund’s fair valuation policy. At May 31, 2009, the aggregate amount of fair valued securities was $259,051, which represented 0.07% of the Fund’s net assets. See Note 1 in “Notes to financial statements.” |
* | Fully or partially on loan. |
** | See Note 9 in “Notes to financial statements.” |
© | Includes $29,370,766 of securities loaned. |
∏ | Restricted Security. These investments are in securities not registered under the Securities Act of 1933, as amended, and have certain restrictions on resale which may limit their liquidity. At May 31, 2009, the aggregate amount of restricted securities was $11 or 0.00% of the Fund’s net assets. See Note 10 in “Notes to financial statements.” |
¹ | The rate shown is the effective 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) | $ | 7.83 |
Sales charge (5.75% of offering price) (B) | 0.48 | |
Offering price | $ | 8.31 |
(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
27
Statement of operations | |
Delaware Dividend Income Fund | Six Months Ended May 31, 2009 (Unaudited) |
Investment Income: | ||||||
Dividends | $ | 4,624,268 | ||||
Interest | 6,915,760 | |||||
Security lending income | 120,135 | $ | 11,660,163 | |||
Expenses: | ||||||
Management fees | 1,112,922 | |||||
Distribution expenses – Class A | 257,656 | |||||
Distribution expenses – Class B | 153,443 | |||||
Distribution expenses – Class C | 685,019 | |||||
Distribution expenses – Class R | 6,266 | |||||
Dividend disbursing and transfer agent fees and expenses | 542,416 | |||||
Accounting and administration expenses | 68,488 | |||||
Reports and statements to shareholders | 55,175 | |||||
Registration fees | 47,610 | |||||
Legal fees | 37,385 | |||||
Audit and taxes | 26,777 | |||||
Trustees’ fees | 12,647 | |||||
Pricing fees | 7,782 | |||||
Insurance fees | 6,427 | |||||
Custodian fees | 4,707 | |||||
Consulting fees | 2,939 | |||||
Dues and services | 1,408 | |||||
Trustees’ expenses | 1,069 | 3,030,136 | ||||
Less fees waived | (328,589 | ) | ||||
Less waived distribution expenses – Class A | (42,658 | ) | ||||
Less waived distribution expenses – Class R | (1,044 | ) | ||||
Less expense paid indirectly | (245 | ) | ||||
Total operating expenses | 2,657,600 | |||||
Net Investment Income | 9,002,563 |
28
Net Realized and Unrealized Gain (Loss) on Investments | |||
and Foreign Currencies: | |||
Net realized gain (loss) on: | |||
Investments | $ | (52,496,330 | ) |
Foreign currencies | (1,026 | ) | |
Swap contracts | 97,314 | ||
Net realized loss | (52,400,042 | ) | |
Net change in unrealized appreciation/depreciation of | |||
investments and foreign currencies | 93,663,767 | ||
Net Realized and Unrealized Gain on Investments | |||
and Foreign Currencies | 41,263,725 | ||
Net Increase in Net Assets Resulting from Operations | $ | 50,266,288 |
See accompanying notes
29
Statements of changes in net assets
Delaware Dividend Income Fund
Six Months | Year | ||||||
Ended | Ended | ||||||
5/31/09 | 11/30/08 | ||||||
(Unaudited) | |||||||
Increase (Decrease) in Net Assets from Operations: | |||||||
Net investment income | $ | 9,002,563 | $ | 23,582,889 | |||
Net realized loss on investments and | |||||||
foreign currencies | (52,400,042 | ) | (105,515,409 | ) | |||
Net change in unrealized appreciation/depreciation | |||||||
of investments and foreign currencies | 93,663,767 | (175,509,305 | ) | ||||
Net increase (decrease) in net assets resulting | |||||||
from operations | 50,266,288 | (257,441,825 | ) | ||||
Dividends and Distributions to shareholders from: | |||||||
Net investment income: | |||||||
Class A | (6,844,444 | ) | (15,949,829 | ) | |||
Class B | (1,104,571 | ) | (2,391,803 | ) | |||
Class C | (4,976,457 | ) | (11,754,960 | ) | |||
Class R | (76,653 | ) | (196,063 | ) | |||
Institutional Class | (95,106 | ) | (190,332 | ) | |||
Net realized gain on investments: | |||||||
Class A | — | (12,269,365 | ) | ||||
Class B | — | (2,153,362 | ) | ||||
Class C | — | (11,034,624 | ) | ||||
Class R | — | (173,217 | ) | ||||
Institutional Class | — | (148,811 | ) | ||||
(13,097,231 | ) | (56,262,366 | ) | ||||
Capital Share Transactions: | |||||||
Proceeds from shares sold: | |||||||
Class A | 12,419,834 | 37,121,459 | |||||
Class B | 373,483 | 1,241,811 | |||||
Class C | 4,136,871 | 20,414,014 | |||||
Class R | 343,016 | 950,413 | |||||
Institutional Class | 131,009 | 775,057 |
30
Six Months | Year | ||||||
Ended | Ended | ||||||
5/31/09 | 11/30/08 | ||||||
(Unaudited) | |||||||
Capital Share Transactions (continued): | |||||||
Net asset value of shares issued upon reinvestment | |||||||
of dividends and distributions: | |||||||
Class A | $ | 5,556,863 | $ | 23,259,005 | |||
Class B | 924,794 | 3,856,322 | |||||
Class C | 4,130,188 | 19,776,863 | |||||
Class R | 76,652 | 369,279 | |||||
Institutional Class | 84,936 | 299,928 | |||||
28,177,646 | 108,064,151 | ||||||
Cost of shares repurchased: | |||||||
Class A | (35,834,111 | ) | (179,789,630 | ) | |||
Class B | (5,361,070 | ) | (23,115,207 | ) | |||
Class C | (28,646,271 | ) | (165,390,120 | ) | |||
Class R | (190,695 | ) | (3,825,251 | ) | |||
Institutional Class | (299,696 | ) | (2,374,601 | ) | |||
(70,331,843 | ) | (374,494,809 | ) | ||||
Decrease in net assets derived from | |||||||
capital share transactions | (42,154,197 | ) | (266,430,658 | ) | |||
Net Decrease in Net Assets | (4,985,140 | ) | (580,134,849 | ) | |||
Net Assets: | |||||||
Beginning of period | 363,106,584 | 943,241,433 | |||||
End of period (including accumulated net investment | |||||||
loss and undistributed net investment income of | |||||||
$(59,432) and $3,932,605, respectively) | $ | 358,121,444 | $ | 363,106,584 |
See accompanying notes
31
Financial highlights
Delaware Dividend Income Fund Class A
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) on investments 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 return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived and expense paid indirectly |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 Ratios and portfolio turnover have been annualized and total return has not been annualized. |
2 The average shares outstanding method has been applied for per share information. |
3 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value 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
32
Six Months Ended | Year Ended | |||||||||||||||||
5/31/091 | 11/30/08 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | |||||||||||||
(Unaudited) | ||||||||||||||||||
$7.010 | $12.030 | $12.590 | $11.140 | $11.050 | $10.210 | |||||||||||||
0.199 | 0.400 | 0.456 | 0.422 | 0.450 | 0.345 | |||||||||||||
0.901 | (4.595 | ) | (0.529 | ) | 1.551 | 0.081 | 0.891 | |||||||||||
1.100 | (4.195 | ) | (0.073 | ) | 1.973 | 0.531 | 1.236 | |||||||||||
(0.280 | ) | (0.489 | ) | (0.426 | ) | (0.457 | ) | (0.360 | ) | (0.362 | ) | |||||||
— | (0.336 | ) | (0.061 | ) | (0.066 | ) | (0.081 | ) | (0.034 | ) | ||||||||
(0.280 | ) | (0.825 | ) | (0.487 | ) | (0.523 | ) | (0.441 | ) | (0.396 | ) | |||||||
$7.830 | $7.010 | $12.030 | $12.590 | $11.140 | $11.050 | |||||||||||||
15.99% | (37.15% | ) | (0.72% | ) | 18.34% | 4.89% | 12.38% | |||||||||||
$180,502 | $179,588 | $450,620 | $398,124 | $285,159 | $105,253 | |||||||||||||
1.18% | 1.00% | 1.00% | 1.01% | 1.00% | 1.00% | |||||||||||||
1.42% | 1.26% | 1.17% | 1.23% | 1.27% | 1.32% | |||||||||||||
5.62% | 3.92% | 3.60% | 3.64% | 4.05% | 3.26% | |||||||||||||
5.38% | 3.66% | 3.43% | 3.42% | 3.78% | 2.94% | |||||||||||||
54% | 51% | 52% | 51% | 85% | 95% |
33
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 income2 |
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 return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived and expense paid indirectly |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 Ratios and portfolio turnover have been annualized and total return has not been annualized. |
2 The average shares outstanding method has been applied for per share information. |
3 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value 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
34
Six Months Ended | Year Ended | |||||||||||||||||
5/31/091 | 11/30/08 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | |||||||||||||
(Unaudited) | ||||||||||||||||||
$7.010 | $12.020 | $12.580 | $11.130 | $11.040 | $10.200 | |||||||||||||
0.173 | 0.324 | 0.360 | 0.335 | 0.367 | 0.267 | |||||||||||||
0.899 | (4.590 | ) | (0.528 | ) | 1.552 | 0.079 | 0.889 | |||||||||||
1.072 | (4.266 | ) | (0.168 | ) | 1.887 | 0.446 | 1.156 | |||||||||||
(0.252 | ) | (0.408 | ) | (0.331 | ) | (0.371 | ) | (0.275 | ) | (0.282 | ) | |||||||
— | (0.336 | ) | (0.061 | ) | (0.066 | ) | (0.081 | ) | (0.034 | ) | ||||||||
(0.252 | ) | (0.744 | ) | (0.392 | ) | (0.437 | ) | (0.356 | ) | (0.316 | ) | |||||||
$7.830 | $7.010 | $12.020 | $12.580 | $11.130 | $11.040 | |||||||||||||
15.68% | (37.72% | ) | (1.38% | ) | 17.46% | 4.09% | 11.54% | |||||||||||
$31,797 | $32,534 | $78,235 | $77,757 | $57,904 | $32,165 | |||||||||||||
1.93% | 1.75% | 1.75% | 1.76% | 1.75% | 1.75% | |||||||||||||
2.12% | 1.96% | 1.87% | 1.93% | 1.97% | 2.02% | |||||||||||||
4.87% | 3.17% | 2.85% | 2.89% | 3.30% | 2.51% | |||||||||||||
4.68% | 2.96% | 2.73% | 2.72% | 3.08% | 2.25% | |||||||||||||
54% | 51% | 52% | 51% | 85% | 95% |
35
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 income2 |
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 return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived and expense paid indirectly |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 Ratios and portfolio turnover have been annualized and total return has not been annualized. |
2 The average shares outstanding method has been applied for per share information. |
3 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflect a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes
36
Six Months Ended | Year Ended | |||||||||||||||||
5/31/091 | 11/30/08 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | |||||||||||||
(Unaudited) | ||||||||||||||||||
$7.010 | $12.030 | $12.580 | $11.130 | $11.040 | $10.200 | |||||||||||||
0.173 | 0.323 | 0.360 | 0.335 | 0.367 | 0.267 | |||||||||||||
0.899 | (4.599 | ) | (0.518 | ) | 1.552 | 0.079 | 0.889 | |||||||||||
1.072 | (4.276 | ) | (0.158 | ) | 1.887 | 0.446 | 1.156 | |||||||||||
(0.252 | ) | (0.408 | ) | (0.331 | ) | (0.371 | ) | (0.275 | ) | (0.282 | ) | |||||||
— | (0.336 | ) | (0.061 | ) | (0.066 | ) | (0.081 | ) | (0.034 | ) | ||||||||
(0.252 | ) | (0.744 | ) | (0.392 | ) | (0.437 | ) | (0.356 | ) | (0.316 | ) | |||||||
$7.830 | $7.010 | $12.030 | $12.580 | $11.130 | $11.040 | |||||||||||||
15.51% | (37.63% | ) | (1.38% | ) | 17.46% | 4.09% | 11.53% | |||||||||||
$140,932 | $146,769 | $402,782 | $269,274 | $165,663 | $82,083 | |||||||||||||
1.93% | 1.75% | 1.75% | 1.76% | 1.75% | 1.75% | |||||||||||||
2.12% | 1.96% | 1.87% | 1.93% | 1.97% | 2.02% | |||||||||||||
4.87% | 3.17% | 2.85% | 2.89% | 3.30% | 2.52% | |||||||||||||
4.68% | 2.96% | 2.73% | 2.72% | 3.08% | 2.25% | |||||||||||||
54% | 51% | 52% | 51% | 85% | 95% |
37
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 income2 |
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 return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived and expense paid indirectly |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 Ratios and portfolio turnover have been annualized and total return has not been annualized. |
2 The average shares outstanding method has been applied for per share information. |
3 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return reflects waivers by the manager and distributor. Performance would have been lower had the waivers not been in effect. |
See accompanying notes
38
Six Months Ended | Year Ended | |||||||||||||||||
5/31/091 | 11/30/08 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | |||||||||||||
(Unaudited) | ||||||||||||||||||
$7.010 | $12.020 | $12.580 | $11.130 | $11.040 | $10.220 | |||||||||||||
0.191 | 0.374 | 0.424 | 0.394 | 0.416 | 0.308 | |||||||||||||
0.888 | (4.585 | ) | (0.528 | ) | 1.551 | 0.078 | 0.879 | |||||||||||
1.079 | (4.211 | ) | (0.104 | ) | 1.945 | 0.494 | 1.187 | |||||||||||
(0.269 | ) | (0.463 | ) | (0.395 | ) | (0.429 | ) | (0.323 | ) | (0.333 | ) | |||||||
— | (0.336 | ) | (0.061 | ) | (0.066 | ) | (0.081 | ) | (0.034 | ) | ||||||||
(0.269 | ) | (0.799 | ) | (0.456 | ) | (0.495 | ) | (0.404 | ) | (0.367 | ) | |||||||
$7.820 | $7.010 | $12.020 | $12.580 | $11.130 | $11.040 | |||||||||||||
15.82% | (37.39% | ) | (0.88% | ) | 18.06% | 4.55% | 11.86% | |||||||||||
$2,415 | $1,928 | $6,220 | $4,275 | $1,429 | $373 | |||||||||||||
1.43% | 1.25% | 1.25% | 1.26% | 1.30% | 1.35% | |||||||||||||
1.72% | 1.56% | 1.47% | 1.53% | 1.57% | 1.62% | |||||||||||||
5.37% | 3.67% | 3.35% | 3.39% | 3.75% | 2.89% | |||||||||||||
5.08% | 3.36% | 3.13% | 3.12% | 3.48% | 2.62% | |||||||||||||
54% | 51% | 52% | 51% | 85% | 95% |
39
Financial highlights
Delaware Dividend Income Fund Institutional Class
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) on investments 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 return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived and expense paid indirectly |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 Ratios and portfolio turnover have been annualized and total return has not been annualized. |
2 The average shares outstanding method has been applied for per share information. |
3 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes
40
Six Months Ended | Year Ended | |||||||||||||||||
5/31/091 | 11/30/08 | 11/30/07 | 11/30/06 | 11/30/05 | 11/30/04 | |||||||||||||
(Unaudited) | ||||||||||||||||||
$7.010 | $12.040 | $12.600 | $11.140 | $11.050 | $10.220 | |||||||||||||
0.208 | 0.425 | 0.488 | 0.452 | 0.477 | 0.371 | |||||||||||||
0.900 | (4.602 | ) | (0.528 | ) | 1.559 | 0.082 | 0.882 | |||||||||||
1.108 | (4.177 | ) | (0.040 | ) | 2.011 | 0.559 | 1.253 | |||||||||||
(0.288 | ) | (0.517 | ) | (0.459 | ) | (0.485 | ) | (0.388 | ) | (0.389 | ) | |||||||
— | (0.336 | ) | (0.061 | ) | (0.066 | ) | (0.081 | ) | (0.034 | ) | ||||||||
(0.288 | ) | (0.853 | ) | (0.520 | ) | (0.551 | ) | (0.469 | ) | (0.423 | ) | |||||||
$7.830 | $7.010 | $12.040 | $12.600 | $11.140 | $11.050 | |||||||||||||
16.12% | (37.04% | ) | (0.46% | ) | 18.72% | 5.16% | 12.55% | |||||||||||
$2,475 | $2,288 | $5,384 | $2,656 | $941 | $102 | |||||||||||||
0.93% | 0.75% | 0.75% | 0.76% | 0.75% | 0.75% | |||||||||||||
1.12% | 0.96% | 0.87% | 0.93% | 0.97% | 1.02% | |||||||||||||
5.87% | 4.17% | 3.85% | 3.89% | 4.30% | 3.49% | |||||||||||||
5.68% | 3.96% | 3.73% | 3.72% | 4.08% | 3.22% | |||||||||||||
54% | 51% | 52% | 51% | 85% | 95% |
41
Notes to financial statements | |
Delaware Dividend Income Fund | May 31, 2009 (Unaudited) |
Delaware Group® Equity Funds V (Trust) is organized as a Delaware statutory trust and offers three series: Delaware Dividend Income Fund, Delaware Small Cap Core Fund and Delaware Small Cap Value Fund. These financial statements and the related notes pertain to Delaware Dividend Income Fund (Fund). The Trust is an open-end investment company. The Fund is considered diversified under the Investment Company Act of 1940, as amended, and offers Class A, Class B, Class C, Class R and Institutional Class shares. Class A shares are sold with a maximum front-end sales charge of up to 5.75%. Class A share purchases of $1,000,000 or more will incur a contingent deferred sales charge (CDSC) of 1% if redeemed during the first year and 0.50% during the second year, provided that Delaware Distributors, L.P. (DDLP) paid a financial advisor a commission on the purchase of those shares. Class B shares may only be purchased through dividend reinvestment and certain permitted exchanges. Prior to June 1, 2007, Class B shares were sold with a CDSC that declined from 4% to zero depending upon the period of time the shares were held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase. Class C shares are sold with a CDSC of 1%, if redeemed during the first twelve 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 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. 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 close of these foreign markets gives rise to the possibility that significant events, including broad market moves, government actions or pronouncements,
42
aftermarket trading, or news 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 — No provision for federal income taxes has been made as the Fund intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Fund evaluates tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. The Fund did not record 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. At May 31, 2009, the Fund held no investments in repurchase agreements.
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.
Use of Estimates — The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
43
Notes to financial statements
Delaware Dividend Income Fund
1. Significant Accounting Policies (continued)
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. 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. There were no commission rebates for the six months ended May 31, 2009.
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.
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 12b-1 plan expenses, taxes, interest, inverse floater expenses, brokerage fees, short sale and dividend interest 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 0.87% of average daily
44
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.
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Fund. For these services, the Fund pays DSC fees based on the aggregate daily net assets of the Delaware Investments® Family of Funds at the following annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DSC under the service agreement described above are allocated among all Funds in the Delaware Investments Family of Funds on a relative net asset value basis. For the six months ended May 31, 2009, the Fund was charged $8,561 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, 2010 in order to prevent distribution and service fees of Class A and Class R shares from exceeding 0.25% and 0.50%, respectively, of average daily net assets.
At May 31, 2009, the Fund had liabilities payable to affiliates as follows:
Investment management fee payable to DMC | $ | 132,710 |
Dividend disbursing, transfer agent and fund accounting | ||
oversight fees and other expenses payable to DSC | 84,335 | |
Distribution fees payable to DDLP | 182,439 | |
Other expenses payable to DMC and affiliates* | 12,133 |
*DMC, as part of its administrative services, pays operating expenses on behalf of the Fund and is reimbursed on a periodic basis. Such expenses include items such as printing of shareholder reports, fees for audit, legal and tax services, registration fees and trustees’ fees.
As provided in the investment management agreement, the Fund bears the cost of certain legal and tax services, including internal legal and tax services provided to the Fund by DMC and/or its affiliates’ employees. For the six months ended May 31, 2009, the Fund was charged $18,140 for internal legal and tax services provided by DMC and/or its affiliates’ employees.
45
Notes to financial statements
Delaware Dividend Income Fund
2. Investment Management, Administration Agreements and Other Transactions with Affiliates (continued)
For the six months ended May 31, 2009, DDLP earned $24,988 for commissions on sales of the Fund’s Class A shares. For the six months ended May 31, 2009, DDLP received gross CDSC commissions of $1, $37,740 and $4,214 on redemption of the Fund’s Class A, Class B and Class C shares, respectively, and these commissions were entirely used to offset up-front commissions previously paid by DDLP to broker-dealers on sales of those shares.
Trustees’ fees include expenses accrued by the Fund for each Trustee’s retainer and meeting fees. Certain officers of DMC, DSC and DDLP are officers and/or Trustees of the Trust. These officers and Trustees are paid no compensation by the Fund.
3. Investments
For the six months ended May 31, 2009, the Fund made purchases of $89,933,863 and sales of $123,457,038 of investment securities other than short-term investments.
At May 31, 2009, the cost of investments for federal income tax purposes has been estimated since the final tax characteristics cannot be determined until fiscal year end. At May 31, 2009, the cost of investments was $474,859,074. At May 31, 2009, net unrealized depreciation was $90,563,928, of which $11,195,669 related to unrealized appreciation of investments and $101,759,597 related to unrealized depreciation of investments.
The Fund applies 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 under current market conditions. 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
46
The following table summarizes the valuation of the Fund’s investments by the FAS 157 fair value hierarchy levels as of May 31, 2009:
Securities | ||
Level 1 | $ | 157,066,964 |
Level 2 | 226,700,363 | |
Level 3 | 527,819 | |
Total | $ | 384,295,146 |
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:
Securities | |||
Balance as of 11/30/08 | $ | 2,452,873 | |
Net change in unrealized appreciation/depreciation | 1,366,231 | ||
Net purchases (sales) | 61,999 | ||
Net transfers in and/or out of Level 3 | (3,353,284 | ) | |
Balance as of 5/31/09 | $ | 527,819 | |
Net change in unrealized appreciation/depreciation from | |||
investments still held as of 5/31/09 | $ | 1,366,231 |
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 six months ended May 31, 2009 and the year ended November 30, 2008 was as follows:
Six Months | Year | ||
Ended | Ended | ||
5/31/09* | 11/30/08 | ||
Ordinary income | $13,097,231 | $28,917,930 | |
Long-term capital gain | — | 27,344,436 | |
Total | $13,097,231 | $56,262,366 |
*Tax information for the period ended May 31, 2009 is an estimate and the tax character of dividends and distributions may be redesignated at the fiscal year end.
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Notes to financial statements
Delaware Dividend Income Fund
5. Components of Net Assets on a Tax Basis
The components of net assets are estimated since final tax characteristics cannot be determined until fiscal year end. As of May 31, 2009, the estimated components of net assets on a tax basis were as follows:
Shares of beneficial interest | $ | 616,824,006 | |
Undistributed ordinary income | 3,041,635 | ||
Realized losses 12/1/08 – 5/31/09 | (52,999,778 | ) | |
Capital loss carryforwards as of 11/30/08* | (118,180,493 | ) | |
Unrealized depreciation of investments and foreign currencies | (90,563,926 | ) | |
Net assets | $ | 358,121,444 |
*The amount of this loss which can be utilized in subsequent years is subject to an annual limitation in accordance with the Internal Revenue Code due to the Fund merger with Lincoln Convertible Securities Fund in 2005.
The differences between book basis and tax basis components of net assets are primarily attributable to tax deferral of losses on wash sales, tax treatment of market discount and premium on debt instruments, 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 gain (loss) on foreign currencies, market discount and premium on debt instruments and CDS contracts. Results of operations and net assets were not affected by these reclassifications. For the six months ended May 31, 2009, the Fund recorded an estimate of these differences since the final tax characteristics cannot be determined until fiscal year end.
Undistributed net investment income | $ | 102,631 | |
Accumulated net realized loss | (102,631 | ) |
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.
For the six months ended May 31, 2009, the Fund had capital losses of $52,999,778, which may increase the capital loss carryforwards.
48
6. Capital Shares
Transactions in capital shares were as follows:
Six Months | |||||
Ended | Year Ended | ||||
5/31/09 | 11/30/08 | ||||
Shares sold: | |||||
Class A | 1,754,136 | 3,644,571 | |||
Class B | 52,379 | 118,882 | |||
Class C | 578,066 | 1,939,816 | |||
Class R | 49,005 | 91,165 | |||
Institutional Class | 18,582 | 73,494 | |||
Shares issued upon reinvestment of dividends and distributions: | |||||
Class A | 812,506 | 2,127,844 | |||
Class B | 134,924 | 351,432 | |||
Class C | 602,163 | 1,797,825 | |||
Class R | 11,219 | 33,583 | |||
Institutional Class | 12,433 | 27,422 | |||
4,025,413 | 10,206,034 | ||||
Shares repurchased: | |||||
Class A | (5,113,689 | ) | (17,622,087 | ) | |
Class B | (765,604 | ) | (2,336,314 | ) | |
Class C | (4,109,877 | ) | (16,298,425 | ) | |
Class R | (26,733 | ) | (366,928 | ) | |
Institutional Class | (41,110 | ) | (222,175 | ) | |
(10,057,013 | ) | (36,845,929 | ) | ||
Net decrease | (6,031,600 | ) | (26,639,895 | ) |
For the six months ended May 31, 2009 and the year ended November 30, 2008, 85,954 Class B shares were converted to 85,833 Class A shares valued at $604,503 and 203,437 Class B shares were converted to 203,349 Class A shares valued at $2,168,700, 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.
49
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), participates in a $35,000,000 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, the Participants are charged an annual commitment fee, which is allocated across the Participants on the basis of each Participant’s allocation of the entire facility. The Participants may borrow up to a maximum of one third of their net assets under the agreement. The agreement expires on November 17, 2009. The Fund had no amounts outstanding as of May 31, 2009 or at any time during the period then ended.
8. Swap Contracts
The Fund may enter into interest rate swap contracts, index swap contracts and CDS contracts in the normal course of pursuing 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.
Interest Rate Swaps. An interest rate swap involves payments received by the Fund from another party based on a variable or floating interest rate, in return for making payments based on a fixed interest rate. An interest rate swap can also work in reverse with the Fund receiving payments based on a fixed interest rate and making payments based on a variable or floating interest rate. Interest rate swaps may be used to adjust the Fund’s sensitivity to interest rates or to hedge against changes in interest rates. Periodic payments on such contracts are accrued daily and recorded as unrealized appreciation/depreciation on swap contracts. Upon periodic payment/receipt or termination of the contract, such amounts are recorded as realized gains or losses on swap contracts. The Fund’s maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from/paid to the counterparty over the interest rate swap contract’s remaining life, to the extent that the amount is positive. This risk is mitigated by having a netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty.
Index Swaps. 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.
50
A realized gain or loss is recorded on maturity or termination of the swap contract. The Fund’s maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from/paid to the counterparty over the index swap contract’s remaining life, to the extent that the amount is positive. This risk is mitigated by having a netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty.
Credit Default Swaps. A CDS contract is a risk-transfer instrument through which one party (purchaser of protection) transfers to another party (seller of protection) the financial risk of a credit event (as defined in the CDS agreement), as it relates to a particular reference security or basket of securities (such as an index). In exchange for the protection offered by the seller of protection, the purchaser of protection agrees to pay the seller of protection a periodic amount at a stated rate that is applied to the notional amount of the CDS contract. In addition, an upfront payment may be made or received by the Fund in connection with an unwinding or assignment of a CDS contract. Upon the occurrence of a credit event, the seller of protection would pay the par (or other agreed-upon) value of the referenced security (or basket of securities) to the counterparty.
During the six months ended May 31, 2009, 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 six months ended May 31, 2009, the Fund did not enter into any CDS contracts as a seller of protection. There were no outstanding swap contracts at May 31, 2009.
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. The Fund’s maximum risk of loss from counterparty credit risk, either as the seller of protection or the buyer of protection, is the fair value of the contract. This risk is mitigated by having a netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty.
Swaps Generally. 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.
51
Notes to financial statements
Delaware Dividend Income Fund
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 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 may invest 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 (S&P) or Moody’s Investors Service, Inc. (Moody’s) 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. At May 31, 2009, the Collective Trust held only cash and assets with a maturity of one business day or less (Cash/Overnight Assets). 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. Effective April 20, 2009, BNY Mellon transferred the assets of the Collective Trust other than the Cash/Overnight Assets to the BNY Mellon SL DBT II Liquidating Fund (the Liquidating Fund), effectively bifurcating the collateral investment pool. The Fund’s exposure to the Liquidating Fund is expected to decrease as the Liquidating Fund’s assets mature or are sold. In October 2008, BNY Mellon transferred certain distressed securities from the Collective Trust into the Mellon GSL Reinvestment Trust II. 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
52
collateral investments are shared among the Fund, the security lending agent and the borrower. The Fund records security lending income net of allocations to the security lending agent and the borrower.
At May 31, 2009, the value of securities on loan was $29,370,766, for which the Fund received collateral, comprised of non-cash collateral valued at $401,212, and cash collateral of $29,684,966. Investments purchased with cash collateral are presented on the statement of net assets under the caption “Securities Lending Collateral”.
10. Credit and Market Risk
The Fund invests a portion of its assets in high yield fixed income securities, which carry ratings of BBB or lower by S&P and/or Baa or lower by Moody’s. 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 six months ended May 31, 2009. 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.
53
Other Fund information
(Unaudited)
Delaware Dividend Income Fund
Board Consideration of Delaware Dividend Income Fund Investment Advisory Agreement
At a meeting held on May 19-21, 2009 (the “Annual Meeting”), the Board of Trustees (the “Board”), including a majority of disinterested or independent Trustees, approved the renewal of the Investment Advisory Agreement for the Delaware Dividend Income Fund (the “Fund”). In making its decision, the Board considered information furnished specifically in connection with the renewal of the Investment Advisory Agreement with Delaware Management Company (“DMC”), which included materials provided by DMC and its affiliates (“Delaware Investments”) concerning, among other things, the nature, extent and quality of services provided to the Fund, the costs of such services to the Fund, economies of scale and the financial condition and profitability of Delaware Investments. Reference was made to information furnished at regular quarterly Board meetings, including reports detailing Fund performance, investment strategies and expenses, as well as information prepared specifically in connection with the renewal of the investment advisory and sub-advisory contracts. In addition, in connection with the Annual Meeting, reports were provided in February 2009 and included independent historical and comparative reports prepared by Lipper Inc. (“Lipper”), an independent statistical compilation organization. The Lipper reports compared the Fund’s investment performance and expenses with those of other comparable mutual funds. The independent Trustees reviewed and discussed the Lipper reports with counsel to the independent Trustees. The Board requested and received information regarding Management’s policy with respect to advisory fee levels and its breakpoint philosophy; the structure of portfolio manager compensation; the investment manager’s profitability; and any constraints or limitations on the availability of securities in certain investment styles which had in the past year inhibited, or which were likely in the future to inhibit, DMC’s ability to invest fully in accordance with Fund policies.
In considering information relating to the approval of the Fund’s advisory agreement, the independent Trustees received assistance and advice from and met separately with counsel to the independent Trustees. Although the Trustees gave attention to all information furnished, the following discussion identifies, under separate headings, the primary factors taken into account by the Board during its contract renewal considerations.
Nature, Extent and Quality of Service. The Board considered the services provided by Delaware Investments to the Fund and its shareholders. In reviewing the nature, extent and quality of services, the Board considered reports furnished to it throughout the year which covered matters such as the relative performance of the Fund, compliance of portfolio managers with the investment policies, strategies and restrictions for the Fund, compliance by Management personnel with the Code of Ethics adopted throughout the Delaware Investments® Family of Funds complex and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of the Fund’s investment advisor and the emphasis placed on research in the investment process. The Board gave favorable consideration to DMC’s efforts to control expenditures while maintaining service levels committed to fund matters. The Board also considered the transfer agent and shareholder services provided to Fund shareholders
54
by DMC’s affiliate, Delaware Service Company, Inc. (“DSC”), noting DSC’s high level of service. The Board noted that Management finished upgrading investment accounting functions through outsourcing to improve the quality and lower the cost of delivering investment accounting services to the Fund. The Board once again noted the benefits provided to Fund shareholders through each shareholder’s ability to exchange an investment in one Delaware Investments® fund for the same class of shares in another Delaware Investments fund without a sales charge, to reinvest Fund dividends into additional shares of the Fund or into additional shares of other Delaware Investments funds and the privilege to combine holdings in other Delaware Investments funds to obtain a reduced sales charge. The Board was satisfied with the nature, extent and quality of the overall services provided by Delaware Investments.
Investment Performance. The Board placed significant emphasis on the investment performance of the Fund in view of its importance to shareholders. Although the Board gave appropriate consideration to performance reports and discussions with portfolio managers at Board meetings throughout the year, the Board gave particular weight to the Lipper reports furnished for the Annual Meeting. The Lipper reports prepared for the Fund showed the investment performance of its Class A shares in comparison to a group of similar funds as selected by Lipper (the “Performance Universe”). A fund with the best performance ranked first, and a fund with the poorest performance ranked last. The highest/best performing 25% of funds in the Performance Universe make up the first quartile; the next 25%, the second quartile; the next 25%, the third quartile; and the poorest/worst performing 25% of funds in the Performance Universe make up the fourth quartile. Comparative annualized performance for the Fund was shown for the past one-, three-, five- and ten-year periods ended December 31, 2008. The Board’s objective is that the Fund’s performance for the periods considered be at or above the median of its Performance Universe. The following paragraph summarizes the performance results for the Fund and the Board’s view of such performance.
The Performance Universe for the Fund consisted of the Fund and all retail and institutional mixed asset target allocation moderate funds as selected by Lipper. The Lipper report comparison showed that the Fund’s total return for the one-, three- and five-year periods was in the fourth quartile of its Performance Universe. The report further showed that the Fund’s total return for the ten-year period was in the second quartile. The Fund’s performance results were not in line with the Board’s objective. However, in evaluating the Fund’s performance, the Board considered improvements in performance in early 2009 as well as Management’s efforts to increase portfolio management depth. The Board was satisfied that Management was taking effective action to improve Fund performance and to meet the Board’s performance objective.
55
Other Fund information
(Unaudited)
Delaware Dividend Income Fund
Board Consideration of Delaware Dividend Income Fund Investment Advisory Agreement (continued)
Comparative Expenses. The Board considered expense comparison data for the Delaware Investments® Family of Funds. Management provided the Board with information on pricing levels and fee structures for the Fund as of October 31, 2008 and, for comparative funds, information as of their respective fiscal year end occurring on or before August 31, 2008. The Board also focused on the comparative analysis of effective management fees and total expense ratios of the Fund versus effective management fees and expense ratios of a group of similar funds as selected by Lipper (the “Expense Group”). In reviewing comparative costs, the Fund’s contractual management fee and the actual management fee incurred by the Fund were compared with the contractual management fees (assuming all funds in the Expense Group were similar in size to the Fund) and actual management fees (as reported by each fund) within the Expense Group, taking into account any applicable breakpoints and fee waivers. The Fund’s total expenses were also compared with those of its Expense Group. The Lipper total expenses, for comparative consistency, were shown by Lipper for Class A shares and comparative total expenses including 12b-1 and non 12b-1 service fees. The Board considered fees paid to Delaware Investments for non management services. The Board’s objective is to limit the Fund’s total expense ratio to be competitive with that of the Expense Group. The following paragraph summarizes the expense results for the Fund and the Board’s view of such expenses.
The expense comparisons for the Fund showed that its actual management fee and total expenses were in the quartile with the lowest expenses of its Expense Group. The Board was satisfied with the management fee and total expenses of the Fund in comparison to those of its Expense Group as shown in the Lipper report.
Management Profitability. The Board considered the level of profits realized by Delaware Investments in connection with the operation of the Fund. In this respect, the Board reviewed the Investment Management Profitability Analysis that addressed the overall profitability of Delaware Investments’ business in providing management and other services to each of the individual funds and the Delaware Investments Family of Funds as a whole. Specific attention was given to the methodology followed in allocating costs for the purpose of determining profitability. Management stated that the level of profits of Delaware Investments, to a certain extent, reflect recent operational cost savings and efficiencies initiated by Delaware Investments. The Board considered Delaware Investments’ efforts to improve services provided to fund shareholders and to meet additional regulatory and compliance requirements resulting from recent industry-wide Securities and Exchange Commission initiatives. The Board also considered the extent to which Delaware Investments might derive ancillary benefits from fund operations, including the potential for procuring additional business as a result of the prestige and visibility associated with its role as service provider to the Delaware Investments Family of Funds and the benefits from allocation of fund brokerage to improve trading efficiencies. The Board found that the management fees were reasonable in light of the services rendered and the level of profitability of Delaware Investments.
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Economies of Scale. The Trustees considered whether economies of scale are realized by Delaware Investments as the Fund’s assets increase and the extent to which any economies of scale are reflected in the level of management fees charged. The Trustees reviewed the standardized advisory fee pricing and structure, approved by the Board and shareholders, which includes breakpoints. Breakpoints in the advisory fee occur when the advisory fee rate is reduced on assets in excess of specified levels. Breakpoints result in a lower advisory fee than would otherwise be the case on all assets when the asset levels specified are exceeded. The Board noted that the fee under the Fund’s management contract fell within the standard structure. Although the Fund has not reached a size at which it can take advantage of breakpoints, the Board recognized that the fee was structured so that when the Fund grows, economies of scale may be shared.
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About the organization
This semiannual report is for the information of Delaware Dividend Income Fund shareholders, but it may be used with prospective investors when preceded or accompanied by a current prospectus for Delaware Dividend Income Fund and the Delaware Investments® Fund profile for the most recently completed calendar quarter. These documents are available at www.delawareinvestments.com. The prospectus sets forth details about charges, expenses, investment objectives, and operating policies of the investment company. You should read the prospectus carefully before you invest. The figures in this report represent past results that are not a guarantee of future results. The return and principal value of an investment in the investment company will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
Board of trustees | |
Patrick P. Coyne | Ann R. Leven |
Chairman, President, and | Consultant |
Chief Executive Officer | ARL Associates |
Delaware Investments Family of Funds | New York, NY |
Philadelphia, PA | |
Thomas F. Madison | |
Thomas L. Bennett | President and Chief Executive Officer |
Private Investor | MLM Partners, Inc. |
Rosemont, PA | Minneapolis, MN |
John A. Fry | Janet L. Yeomans |
President | Vice President and Treasurer |
Franklin & Marshall College | 3M Corporation |
Lancaster, PA | St. Paul, MN |
Anthony D. Knerr | J. Richard Zecher |
Founder and Managing Director | Founder |
Anthony Knerr & Associates | Investor Analytics |
New York, NY | Scottsdale, AZ |
Lucinda S. Landreth | |
Former Chief Investment Officer | |
Assurant, Inc. | |
Philadelphia, PA |
58
Affiliated officers | Contact information |
David F. Connor | Investment manager |
Vice President, Deputy General Counsel, and | Delaware Management Company, a series of |
Secretary | Delaware Management Business Trust |
Delaware Investments® Family of Funds | Philadelphia, PA |
Philadelphia, PA | |
National distributor | |
Daniel V. Geatens | Delaware Distributors, L.P. |
Vice President and Treasurer | Philadelphia, PA |
Delaware Investments Family of Funds | |
Philadelphia, PA | Shareholder servicing, dividend disbursing, |
and transfer agent | |
David P. O’Connor | Delaware Service Company, Inc. |
Senior Vice President, General Counsel, | 2005 Market Street |
and Chief Legal Officer | Philadelphia, PA 19103-7094 |
Delaware Investments Family of Funds | |
Philadelphia, PA | For shareholders |
800 523-1918 | |
Richard Salus | |
Senior Vice President and | For securities dealers and financial |
Chief Financial Officer | institutions representatives only |
Delaware Investments Family of Funds | 800 362-7500 |
Philadelphia, PA | |
Web site | |
www.delawareinvestments.com |
Delaware Investments is the marketing name of Delaware Management Holdings, Inc. and its subsidiaries.
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 800 523-1918; and (ii) on the Commission’s Web site at www.sec.gov. In addition, a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities and the Fund’s Schedule of Investments are available without charge on the Fund’s Web site at www.delawareinvestments.com. The Fund’s Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C.; information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund’s Web site at www.delawareinvestments.com; and (ii) on the Commission’s Web site at www.sec.gov.
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Item 2. Code of Ethics
Not applicable.
Item 3. Audit Committee Financial Expert
Not applicable.
Item 4. Principal Accountant Fees and Services
Not applicable.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Investments
(a) Included as part of report to shareholders filed under Item 1 of this Form N-CSR.
(b) Divestment of securities in accordance with Section 13(c) of the Investment Company Act of 1940.
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 11. Controls and Procedures
The registrant’s principal executive officer and principal financial officer have evaluated the registrant’s disclosure controls and procedures within 90 days of the filing of this report and have concluded that they are effective in providing reasonable assurance that the information required to be disclosed by the registrant in its reports or statements filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.
There were no significant changes in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by the report to stockholders included herein (i.e., the registrant’s second fiscal quarter) that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits
(a) (1) Code of Ethics | ||
Not applicable. | ||
(2) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rule 30a-2 under the Investment Company Act of 1940 are attached hereto as Exhibit 99.CERT. | ||
(3) Written solicitations to purchase securities pursuant to Rule 23c-1 under the Securities Exchange Act of 1934. | ||
Not applicable. | ||
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are furnished herewith as Exhibit 99.906CERT. | ||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf, by the undersigned, thereunto duly authorized.
Name of Registrant: Delaware Group® Equity Funds V
PATRICK P. COYNE | |
By: | Patrick P. Coyne |
Title: | Chief Executive Officer |
Date: | August 5, 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: | August 5, 2009 |
RICHARD SALUS | |
By: | Richard Salus |
Title: | Chief Financial Officer |
Date: | August 5, 2009 |