UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: | 811-04997 | |
Exact name of registrant as specified in charter: | Delaware Group® Equity Funds V | |
Address of principal executive offices: | 2005 Market Street | |
Philadelphia, PA 19103 | ||
Name and address of agent for service: | David F. Connor, Esq. | |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
Registrant’s telephone number, including area code: | (800) 523-1918 | |
Date of fiscal year end: | November 30 | |
Date of reporting period: | November 30, 2013 |
Item 1. Reports to Stockholders
![](https://capedge.com/proxy/N-CSR/0001206774-14-000426/del_topimg02.jpg)
Annual report Income and growth mutual fund Delaware Dividend Income Fund November 30, 2013 |
Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Fund’s prospectus and its summary prospectus, which may be obtained by visiting delawareinvestments.com or calling 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing. |
You can obtain shareholder reports and prospectuses online instead of in the mail. Visit delawareinvestments.com/edelivery. |
Experience Delaware Investments
Delaware Investments is committed to the pursuit of consistently superior asset management and unparalleled client service. We believe in our investment processes, which seek to deliver consistent results, and in convenient services that help add value for our clients.
If you are interested in learning more about creating an investment plan, contact your financial advisor.
You can learn more about Delaware Investments or obtain a prospectus for Delaware Dividend Income Fund at delawareinvestments.com.
Manage your investments online |
|
Delaware Management Holdings, Inc. and its subsidiaries (collectively known by the marketing name of Delaware Investments) are wholly owned subsidiaries of Macquarie Group Limited, a global provider of banking, financial, advisory, investment and funds management services.
Investments in Delaware Dividend Income Fund are not and will not be deposits with or liabilities of Macquarie Bank Limited ABN 46 008 583 542 and its holding companies, including their subsidiaries or related companies (Macquarie Group), and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. No Macquarie Group company guarantees or will guarantee the performance of the Fund, the repayment of capital from the Fund, or any particular rate of return.
Table of contents | |
Portfolio management review | 1 |
Performance summary | 4 |
Disclosure of Fund expenses | 8 |
Security type/sector allocation | |
and top 10 equity holdings | 10 |
Schedule of investments | 13 |
Statement of assets and liabilities | 36 |
Statement of operations | 38 |
Statements of changes in net assets | 40 |
Financial highlights | 42 |
Notes to financial statements | 52 |
Report of independent registered | |
public accounting firm | 69 |
Other Fund information | 70 |
Board of trustees/directors and | |
officers addendum | 74 |
About the organization | 82 |
Unless otherwise noted, views expressed herein are current as of Nov. 30, 2013, and subject to change.
Funds are not FDIC insured and are not guaranteed. It is possible to lose the principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor. Delaware Investments, a member of Macquarie Group, refers to Delaware Management Holdings, Inc. and its subsidiaries, including the Fund’s distributor, Delaware Distributors, L.P. Macquarie Group refers to Macquarie Group Limited and its subsidiaries and affiliates worldwide.
© 2013 Delaware Management Holdings, Inc.
All third-party marks cited are the property of their respective owners.
Portfolio management review Delaware Dividend Income Fund | December 10, 2013 |
Performance preview (for the year ended November 30, 2013) | |||
Delaware Dividend Income Fund (Class A shares) | 1-year return | +20.07% | |
S&P 500® Index (benchmark) | 1-year return | +30.30% | |
Lipper Mixed-Asset Target Allocation Moderate Funds Average | 1-year return | +14.14% |
For its fiscal year ended Nov. 30, 2013, Delaware Dividend Income Fund (Class A shares) returned +20.07% at net asset value and +13.14% at maximum offer price (both figures reflect all distributions invested). The Fund underperformed its benchmark, the S&P 500 Index, which returned +30.30% for the same time frame. Complete annualized performance for Delaware Dividend Income Fund is shown in the table on page 4.
Stocks outpaced other asset classes
Developed market stocks enjoyed strong results during the fiscal year ended Nov. 30, 2013, aided by the presence of quantitative easing (QE) programs — large-scale economic stimulus efforts implemented by central banks in an effort to lift asset values.
The U.S. Federal Reserve, for example, implemented a third round of QE, consisting of $85 billion in monthly Treasury and mortgage-backed security purchases. In May 2013, Fed Chairman Ben Bernanke announced the central bank’s intention to begin tapering its bond purchases if the U.S. economy were to demonstrate signs of sustained economic growth.
1
Portfolio management review
Delaware Dividend Income Fund
Despite investors’ initial concerns about tapering, the bond-buying program remained in place through the remainder of the Fund’s fiscal year, as the U.S. economy continued its subdued growth.
Against this backdrop, equity investments performed particularly well. Income-oriented investments such as high yield bonds and real estate investment trusts (REITs) — both of which struggled in the summer months, concurrent with the heightened concerns about QE tapering — also generated positive performance, but did not keep pace with the equity market.
Challenges from REITs and convertibles
Given the equity market’s strong performance during the Fund’s fiscal year, our portfolio allocation to income-oriented asset classes weighed on results in relative terms. For example, REITs, which made up about 6% of the portfolio at period end, struggled amid a rising interest rate environment. As measured by the FTSE NAREIT Equity REITs Index, the REIT market was up 6% during the period — more than 20 percentage points behind the S&P 500 Index. Individual REIT holdings that detracted most from Fund performance included healthcare property company HCP, office industrial REIT Liberty Property Trust, and regional mall operator CBL & Associates Properties.
The Fund’s allocation to convertible securities — representing 14% of the portfolio at the end of the fiscal year — was another source of underperformance. Its holdings in convertible securities tended to be higher yielding than the overall convertibles market and priced at a premium, which made them less sensitive to strength in the equity market.
A beneficial equity allocation
The Fund’s sizeable equity-market exposure helped drive performance during the fiscal year. As of Nov. 30, 2013, about half of the portfolio was invested in U.S. large-cap value stocks — a segment of the market that enjoyed very strong results during the year — while the Fund’s roughly 5% stake in foreign developed-market equities also added to results.
The Fund’s leading individual equity contributors during the fiscal year included Johnson Controls, which makes heating and air conditioning systems; Xerox, a leading printer manufacturer; and defense contractor Northrop Grumman.
Of final note, the Fund maintained certain positions in derivative securities in an attempt to help the Fund generate attractive returns while also seeking to manage the Fund’s overall level of risk. These positions included high yield bond credit default swaps and foreign currency hedges to help manage currency risk associated with the Fund’s international fixed income investments. We also wrote options on stock positions in the portfolio in an attempt to provide additional downside protection. None of these positions had a material effect on the Fund’s performance during the fiscal year.
Consistent portfolio positioning
Our basic strategy remained the same during this reporting period, as it does throughout a variety of market conditions. We continued to strive to purchase a diversified collection of income-generating securities that we believe have the potential to provide a competitive yield but greater upside potential than bonds, while at the same time potentially providing higher yields than equities but with better downside protection.
2
During the Fund’s fiscal year, we kept the Fund’s portfolio positioning largely consistent. Well before the start of the fiscal year, we had determined that most income-oriented securities such as investment grade bonds, high yield bonds, utility-company stocks, master limited partnerships, and REITs had become expensive and, in our view, many of these securities no longer offered good value for the Fund. Accordingly, we began the period in December 2012 with relatively limited exposure to these yield-oriented asset classes and generally preserved that stance throughout the subsequent 12 months.
The Fund ended the fiscal year with an 18% allocation to high yield bonds, down from 22% at the start of the period. While we generally remained comfortable with the credit quality of high yield issuers, their high valuations were a source of some concern. Our search for better-valued opportunities continued to lead us to areas of the equity market.
Focused on total return
By the end of the Fund’s fiscal year, the Fund’s portfolio continued to emphasize equities; however, we were aware that stock valuations, after a long rally, were no longer as attractive as they had been in prior quarters. Accordingly, we remained focused on trying to identify what we considered to be good large-cap value stocks at a reasonable price. We also sought to take advantage of value wherever we believed we could find it, which involved establishing inaugural positions in two new asset classes for the Fund: municipal bonds and emerging market debt, both of which had begun to offer what we saw as a worthwhile risk-return trade-off.
We continue to believe that investors should consider taking a total-return approach to investing in income-oriented securities. We believe yield is an important criterion for deciding whether an investment is worth owning, but certainly not the only one. In short: We believe valuation matters. Accordingly, our investment discipline continues to focus not just on how much income a security may provide, but on how much value it may have the potential to deliver to the Fund’s shareholders over time.
3
Performance summary Delaware Dividend Income Fund | November 30, 2013 |
The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. Please obtain the performance data current for the most recent month end by calling 800 523-1918 or visiting our website at delawareinvestments.com/performance. Current performance may be lower or higher than the performance data quoted.
Fund and benchmark performance1,2 | Average annual total returns through November 30, 2013 | ||||||||
1 year | 5 years | 10 years | |||||||
Class A (Est. Dec. 2, 1996) | |||||||||
Excluding sales charge | +20.07% | +17.43% | +6.89% | ||||||
Including sales charge | +13.14% | +16.05% | +6.27% | ||||||
Class B (Est. Oct. 1, 2003) | |||||||||
Excluding sales charge | +19.15% | +16.57% | +6.25% | ||||||
Including sales charge | +15.15% | +16.33% | +6.25% | ||||||
Class C (Est. Oct. 1, 2003) | |||||||||
Excluding sales charge | +19.13% | +16.56% | +6.10% | ||||||
Including sales charge | +18.13% | +16.56% | +6.10% | ||||||
Class R (Est. Oct. 1, 2003) | |||||||||
Excluding sales charge | +19.77% | +17.16% | +6.60% | ||||||
Including sales charge | +19.77% | +17.16% | +6.60% | ||||||
Institutional Class (Est. Dec. 2, 1996) | |||||||||
Excluding sales charge | +20.37% | +17.73% | +7.16% | ||||||
Including sales charge | +20.37% | +17.73% | +7.16% | ||||||
S&P 500 Index | +30.30% | +17.60% | +7.69% |
1 Returns reflect the reinvestment of all distributions and are presented both with and without the applicable sales charges described below. Returns do not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares.
Expense limitations were in effect for certain classes during some or all of the periods shown in the “Fund performance” chart. Expenses for each class are listed on the “Fund expense ratios” table on page 5. Performance would have been lower had expense limitations not been in effect.
Class A shares are sold with a maximum front-end sales charge of 5.75%, and have an annual distribution and service fee of 0.25% of average daily net assets. Prior to Oct. 1, 2013, Class A shares had an annual distribution and service fee of 0.30% of average daily net assets. This fee was contractually limited to 0.25% during the period from Dec. 1, 2012 until Oct. 1, 2013. Performance for Class A shares, excluding sales charges, assumes that no front-end sales charge applied. Performance for Class A shares, excluding sales charges, assumes that no front-end sales charge applied.
Class B shares may be purchased only through dividend reinvestment and certain permitted exchanges as described in the prospectus. Please see the prospectus for additional information on Class B shares. Class B shares have a contingent
4
deferred sales charge that declines from 4.00% to zero depending on the period of time the shares are held. They are also subject to an annual distribution and service fee of 1.00% of average daily net assets. Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase. Ten-year performance figures for Class B shares reflect conversion to Class A shares after approximately eight years.
Class C shares are sold with a contingent deferred sales charge of 1.00% if redeemed during the first 12 months. They are also subject to an annual distribution and service fee of 1.00% of average daily net assets.
Performance for Class B and C shares, excluding sales charges, assumes either that contingent deferred sales charges did not apply or that the investment was not redeemed.
Class R shares are available only for certain retirement plan products. They are sold without a sales charge and have an annual distribution and service fee of 0.50% of average daily net assets. Prior to Oct. 1, 2013, Class R shares had an annual distribution and service fee of 0.60% of average daily net assets. This fee was contractually limited to 0.50% during the period from Dec. 1, 2012 until Oct. 1, 2013.
Institutional Class shares are available without sales or asset-based distribution charges only to certain eligible institutional accounts.
The “Fund performance” table and the “Performance of a $10,000 investment” graph do not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares.
Fixed income securities and bond funds can lose value, and investors can lose principal, as interest rates rise. They also may be affected by economic conditions that hinder an issuer’s ability to make interest and principal payments on its debt.
The Fund may also be subject to prepayment risk, the risk that the principal of a fixed income security that is held by the Fund may be prepaid prior to maturity, potentially forcing the Fund to reinvest that money at a lower interest rate.
High yielding, noninvestment grade bonds (junk bonds) involve higher risk than investment grade bonds. The high yield secondary market is particularly susceptible to liquidity problems when institutional investors, such as mutual funds and certain other financial institutions, temporarily stop buying bonds for regulatory, financial, or other reasons. In addition, a less liquid secondary market makes it more difficult for the Fund to obtain precise valuations of the high yield securities in its portfolio.
Diversification may not protect against market risk.
2 The Fund’s expense ratios, as described in the most recent prospectus and any applicable supplement(s), are disclosed in the following “Fund expense ratios” table.
Fund expense ratios | Class A | Class B | Class C | Class R | Institutional Class | |||||||||||||||||||
Total annual operating expenses | 1.16 | % | 1.91 | % | 1.91 | % | 1.41 | % | 0.91 | % | ||||||||||||||
(without fee waivers) | ||||||||||||||||||||||||
Net expenses | 1.16 | % | 1.91 | % | 1.91 | % | 1.41 | % | 0.91 | % | ||||||||||||||
(including fee waivers, if any) | ||||||||||||||||||||||||
Type of waiver | n/a | n/a | n/a | n/a | n/a |
5
Performance summary
Delaware Dividend Income Fund
Performance of a $10,000 investment1
Average annual total returns from Nov. 30, 2003, through Nov. 30, 2013
For period beginning Nov. 30, 2003, through Nov. 30, 2013 | Starting value | Ending value | ||
S&P 500 Index | $10,000 | $20,968 | ||
Delaware Dividend Income Fund — Class A shares | $9,425 | $18,358 |
1 The “Performance of a $10,000 investment” graph assumes $10,000 invested in Class A shares of the Fund on Nov. 30, 2003, and includes the effect of a 5.75% front-end sales charge and the reinvestment of all distributions. The graph does not reflect the deduction of taxes the shareholders would pay on Fund distributions or redemptions of Fund shares. Expense limitations were in effect for some or all of the periods shown. Performance would have been lower had expense limitations not been in effect. Expenses are listed in the “Fund expense ratios” table on page 5. Please note additional details on pages 4 through 6.
The chart also assumes $10,000 invested in the S&P 500 Index as of Nov. 30, 2003. The S&P 500 Index measures the performance of 500 mostly large-cap stocks weighted by market value, and is often used to represent performance of the U.S. stock market.
The FTSE NAREIT Equity REITs Index, mentioned on page 2, measures the performance of all publicly traded equity real estate investment trusts (REITs) traded on U.S. exchanges, excluding timber REITs.
Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index. Past performance is not a guarantee of future results.
Performance of other Fund classes will vary due to different charges and expenses.
Nasdaq symbols | CUSIPs | ||||||||
Class A | �� | DDIAX | 24610B107 | ||||||
Class B | DDDBX | 24610B206 | |||||||
Class C | DDICX | 24610B305 | |||||||
Class R | DDDRX | 24610B842 | |||||||
Institutional Class | DDIIX | 24610B404 |
6
Disclosure of Fund expenses
For the six-month period from June 1, 2013 to November 30, 2013 (Unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period from June 1, 2013 to Nov. 30, 2013.
Actual expenses
The first section of the table shown, “Actual Fund return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The second section of the table shown, “Hypothetical 5% return,” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The Fund’s expenses shown in the table reflect fee waivers in effect. The expenses shown in the table assume reinvestment of all dividends and distributions.
8
Delaware Dividend Income Fund
Expense analysis of an investment of $1,000
Beginning | Ending | Expenses | ||||||||||||||
Account Value | Account Value | Annualized | Paid During Period | |||||||||||||
6/1/13 | 11/30/13 | Expense Ratio | 6/1/13 to 11/30/13* | |||||||||||||
Actual Fund return† | ||||||||||||||||
Class A | $ | 1,000.00 | $ | 1,067.30 | 1.12% | $ | 5.80 | |||||||||
Class B | 1,000.00 | 1,063.10 | 1.87% | 9.67 | ||||||||||||
Class C | 1,000.00 | 1,064.00 | 1.87% | 9.68 | ||||||||||||
Class R | 1,000.00 | 1,066.00 | 1.37% | 7.10 | ||||||||||||
Institutional Class | 1,000.00 | 1,068.60 | 0.87% | 4.51 | ||||||||||||
Hypothetical 5% return (5% return before expenses) | ||||||||||||||||
Class A | $ | 1,000.00 | $ | 1,019.45 | 1.12% | $ | 5.67 | |||||||||
Class B | 1,000.00 | 1,015.69 | 1.87% | 9.45 | ||||||||||||
Class C | 1,000.00 | 1,015.69 | 1.87% | 9.45 | ||||||||||||
Class R | 1,000.00 | 1,018.20 | 1.37% | 6.93 | ||||||||||||
Institutional Class | 1,000.00 | 1,020.71 | 0.87% | 4.41 |
*“Expenses Paid During Period” are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period).
†Because actual returns reflect only the most recent six month period, the returns shown may differ significantly from fiscal year returns.
9
Security type/sector allocation and | As of November 30, 2013 (Unaudited) |
Sector designations may be different than the sector designations presented in other Fund materials. The sector designations may represent the investment manager’s internal sector classifications, which may result in the sector designations for one fund being different than another fund’s sector designations.
Sector | Percentage of net assets | |||
Common Stock | 63.41 | % | ||
Consumer Discretionary | 4.92 | % | ||
Consumer Staples | 6.43 | % | ||
Diversified REITs | 0.37 | % | ||
Energy | 7.83 | % | ||
Financials | 6.83 | % | ||
Healthcare | 9.65 | % | ||
Healthcare REITs | 0.47 | % | ||
Hotel REITs | 0.68 | % | ||
Industrial REITs | 0.27 | % | ||
Industrials | 5.55 | % | ||
Information Technology | 9.22 | % | ||
Mall REITs | 0.95 | % | ||
Manufactured Housing REITs | 0.22 | % | ||
Materials | 1.91 | % | ||
Mixed REITs | 0.94 | % | ||
Multifamily REITs | 0.81 | % | ||
Office REITs | 0.26 | % | ||
Shopping Center REITs | 0.98 | % | ||
Single Tenant REIT | 0.07 | % | ||
Telecommunications | 3.43 | % | ||
Utilities | 1.62 | % | ||
Convertible Preferred Stock | 3.17 | % | ||
Commercial Mortgage-Backed Securities | 0.35 | % |
10
Sector | Percentage of net assets | |||
Convertible Bonds | 10.73 | % | ||
Basic Industry | 0.22 | % | ||
Capital Goods | 0.97 | % | ||
Communications | 2.27 | % | ||
Consumer Cyclical | 1.46 | % | ||
Consumer Non-Cyclical | 1.68 | % | ||
Energy | 0.79 | % | ||
Financials | 1.26 | % | ||
Industrials | 0.11 | % | ||
Insurance | 0.16 | % | ||
Technology | 1.81 | % | ||
Corporate Bonds | 13.77 | % | ||
Automobiles | 0.62 | % | ||
Banking | 0.32 | % | ||
Basic Industry | 1.71 | % | ||
Capital Goods | 0.70 | % | ||
Communications | 1.43 | % | ||
Consumer Cyclical | 1.10 | % | ||
Consumer Non-Cyclical | 0.39 | % | ||
Energy | 1.95 | % | ||
Financials | 0.24 | % | ||
Healthcare | 1.04 | % | ||
Industrials | 0.05 | % | ||
Insurance | 0.45 | % | ||
Media | 1.07 | % | ||
Service-Other | 1.24 | % | ||
Technology | 0.94 | % | ||
Utilities | 0.52 | % |
11
Security type/sector allocation and
top 10 equity holdings
Delaware Dividend Income Fund
Sector | Percentage of net assets | |||
Municipal Bonds | 0.53 | % | ||
Leveraged Non-Recourse Securities | 0.00 | % | ||
Senior Secured Loans | 1.56 | % | ||
Sovereign Bonds | 0.87 | % | ||
Brazil | 0.46 | % | ||
Mexico | 0.41 | % | ||
Limited Partnership | 0.18 | % | ||
Preferred Stock | 0.53 | % | ||
Short-Term Investments | 5.01 | % | ||
Total Value of Securities | 100.11 | % | ||
Options Written | (0.01 | %) | ||
Liabilities Net of Receivables and Other Assets | (0.10 | %) | ||
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 | |||
Xerox | 1.66 | % | ||
Johnson Controls | 1.65 | % | ||
Cardinal Health | 1.63 | % | ||
Merck | 1.56 | % | ||
Raytheon | 1.55 | % | ||
CVS Caremark | 1.54 | % | ||
Baxter International | 1.52 | % | ||
Waste Management | 1.52 | % | ||
Marsh & McLennan | 1.51 | % | ||
Bank of New York Mellon | 1.51 | % |
12
Schedule of investments | |
Delaware Dividend Income Fund | November 30, 2013 |
Number of shares | Value (U.S. $) | |||||
Common Stock – 63.41% | ||||||
Consumer Discretionary – 4.92% | ||||||
Abercrombie & Fitch Class A | 41,661 | $ | 1,428,139 | |||
Asian Pay Television Trust | 1,643,000 | 1,021,107 | ||||
Bayerische Motoren Werke | 4,245 | 487,683 | ||||
Cablevision Systems Class A | 36,100 | 605,397 | ||||
Carnival | 17,570 | 634,453 | ||||
† | DIRECTV Class A | 6,350 | 419,799 | |||
Don Quijote | 4,500 | 275,577 | ||||
† | Hertz Global Holdings | 10,600 | 257,156 | |||
Johnson Controls | 205,400 | 10,374,753 | ||||
Lowe’s | 195,000 | 9,258,599 | ||||
Nitori Holdings | 7,193 | 666,715 | ||||
PPR | 2,130 | 472,364 | ||||
Publicis Groupe | 9,133 | 807,181 | ||||
† | Quiksilver | 36,764 | 327,200 | |||
Tarkett | 33,550 | 1,317,146 | ||||
Techtronic Industries | 126,000 | 338,865 | ||||
Toyota Motor | 21,400 | 1,333,516 | ||||
† | United Rentals | 2,575 | 176,980 | |||
Yue Yuen Industrial Holdings | 214,500 | 670,948 | ||||
30,873,578 | ||||||
Consumer Staples – 6.43% | ||||||
† | Akorn | 10,895 | 280,546 | |||
Archer-Daniels-Midland | 225,300 | 9,068,325 | ||||
Aryzta | 17,587 | 1,310,537 | ||||
Carlsberg Class B | 6,853 | 750,656 | ||||
CVS Caremark | 144,400 | 9,669,024 | ||||
Kraft Foods Group | 176,300 | 9,365,056 | ||||
Mondelez International Class A | 271,900 | 9,116,807 | ||||
TESCO | 129,681 | 738,430 | ||||
40,299,381 | ||||||
Diversified REITs – 0.37% | ||||||
Lexington Reality Trust | 63,700 | 654,199 | ||||
Mapletree Commercial Trust | 725,000 | 710,529 | ||||
Vornado Realty Trust | 10,500 | 923,265 | ||||
2,287,993 |
13
Schedule of investments
Delaware Dividend Income Fund
Number of shares | Value (U.S. $) | |||||
Common Stock (continued) | ||||||
Energy – 7.83% | ||||||
Chevron | 76,800 | $ | 9,403,391 | |||
CNOOC | 337,000 | 690,288 | ||||
ConocoPhillips | 125,300 | 9,121,840 | ||||
† | Halcon Resources | 7,088 | 28,421 | |||
Halliburton | 173,100 | 9,118,908 | ||||
† | Kodiak Oil & Gas | 26,564 | 301,236 | |||
Marathon Oil | 254,900 | 9,186,596 | ||||
Occidental Petroleum | 92,400 | 8,774,304 | ||||
Range Resources | 3,097 | 240,482 | ||||
Saipem | 23,385 | 524,797 | ||||
Subsea 7 | 25,056 | 487,512 | ||||
Total | 12,236 | 741,258 | ||||
Transocean | 9,239 | 465,461 | ||||
49,084,494 | ||||||
Financials – 6.83% | ||||||
Allstate | 167,700 | 9,101,079 | ||||
AXA | 40,050 | 1,049,218 | ||||
Bank of New York Mellon | 280,100 | 9,439,370 | ||||
Bank Rakyat Indonesia Persero Tbk IRP | 391,500 | 243,818 | ||||
Huntington Bancshares | 99,800 | 916,164 | ||||
Marsh & McLennan | 199,200 | 9,452,041 | ||||
Mitsubishi UFJ Financial Group | 164,600 | 1,059,446 | ||||
Nordea Bank | 77,077 | 996,366 | ||||
Standard Chartered | 24,095 | 571,165 | ||||
Travelers | 102,300 | 9,282,702 | ||||
UniCredit | 101,999 | 739,913 | ||||
42,851,282 | ||||||
Healthcare – 9.65% | ||||||
Baxter International | 139,600 | 9,555,620 | ||||
Cardinal Health | 157,800 | 10,193,880 | ||||
Johnson & Johnson | 96,500 | 9,134,690 | ||||
Meda Class A | 5,524 | 68,122 | ||||
Merck | 196,600 | 9,796,578 | ||||
Novartis | 12,579 | 994,247 | ||||
Pfizer | 286,538 | 9,091,851 | ||||
Quest Diagnostics | 151,200 | 9,214,128 | ||||
Sanofi | 9,696 | 1,025,272 |
14
Number of shares | Value (U.S. $) | |||||
Common Stock (continued) | ||||||
Healthcare (continued) | ||||||
Stada Arzneimittel | 8,939 | $ | 461,866 | |||
Teva Pharmaceutical Industries ADR | 23,261 | 948,118 | ||||
60,484,372 | ||||||
Healthcare REITs – 0.47% | ||||||
HCP | 11,600 | 426,532 | ||||
Healthcare Realty Trust | 26,400 | 584,232 | ||||
Healthcare Trust of America | 86,900 | 882,035 | ||||
LTC Properties | 16,100 | 620,011 | ||||
Ventas | 7,500 | 426,225 | ||||
2,939,035 | ||||||
Hotel REITs – 0.68% | ||||||
Ashford Hospitality Prime | 7,600 | 155,496 | ||||
Ashford Hospitality Trust | 38,000 | 311,980 | ||||
Concentradora Fibra Hotelera | 544,185 | 843,852 | ||||
RLJ Lodging Trust | 47,300 | 1,141,822 | ||||
† | Strategic Hotel & Resorts | 126,300 | 1,127,859 | |||
Summit Hotel Properties | 73,696 | 669,160 | ||||
4,250,169 | ||||||
Industrial REITs – 0.27% | ||||||
First Industrial Realty Trust | 57,400 | 1,002,204 | ||||
First Potomac Realty Trust | 54,900 | 658,800 | ||||
1,661,004 | ||||||
Industrials – 5.55% | ||||||
Delta Air Lines | 123 | 3,565 | ||||
Deutsche Post | 27,707 | 979,732 | ||||
East Japan Railway | 3,746 | 306,968 | ||||
Eaton | 23,100 | 1,678,446 | ||||
ITOCHU | 59,689 | 753,218 | ||||
Koninklijke Philips Electronics | 21,753 | 778,504 | ||||
Mueller Water Products Class A | 15,570 | 134,058 | ||||
Northrop Grumman | 82,600 | 9,307,368 | ||||
Raytheon | 109,900 | 9,745,932 | ||||
† | Rexnord | 4,050 | 98,456 | |||
Vinci | 13,602 | 874,454 | ||||
Waste Management | 208,100 | 9,506,008 | ||||
Westjet Airlines | 23,794 | 618,462 | ||||
34,785,171 |
15
Schedule of investments
Delaware Dividend Income Fund
Number of shares | Value (U.S. $) | |||||
Common Stock (continued) | ||||||
Information Technology – 9.22% | ||||||
Apple | 11,500 | $ | 6,394,805 | |||
Broadcom Class A | 343,600 | 9,170,684 | ||||
† | CGI Group Class A | 33,368 | 1,238,436 | |||
Cisco Systems | 434,300 | 9,228,875 | ||||
Intel | 384,700 | 9,171,248 | ||||
Microsoft | 57,000 | 2,173,410 | ||||
Motorola Solutions | 141,642 | 9,331,375 | ||||
Teleperformance | 12,673 | 721,163 | ||||
Xerox | 912,400 | 10,383,111 | ||||
57,813,107 | ||||||
Mall REITs – 0.95% | ||||||
CBL & Associates Properties | 42,500 | 767,550 | ||||
General Growth Properties | 91,900 | 1,906,925 | ||||
Macerich | 10,100 | 575,094 | ||||
Simon Property Group | 12,263 | 1,837,611 | ||||
Taubman Centers | 13,700 | 895,706 | ||||
5,982,886 | ||||||
Manufactured Housing REITs – 0.22% | ||||||
Equity Lifestyle Properties | 9,627 | 341,759 | ||||
Sun Communities | 25,400 | 1,036,320 | ||||
1,378,079 | ||||||
Materials – 1.91% | ||||||
AuRico Gold | 43,907 | 170,360 | ||||
duPont (E.I.) deNemours | 150,800 | 9,256,105 | ||||
Lafarge | 9,947 | 706,163 | ||||
Rexam | 73,682 | 602,421 | ||||
Rio Tinto | 14,572 | 777,772 | ||||
Rockwood Holdings | 1,767 | 120,969 | ||||
Yamana Gold | 41,511 | 372,557 | ||||
12,006,347 | ||||||
Mixed REITs – 0.94% | ||||||
Duke Realty | 114,600 | 1,739,628 | ||||
EPR Properties | 21,500 | 1,081,235 | ||||
Gladstone Land | 51,010 | 836,054 | ||||
Liberty Property Trust | 48,900 | 1,583,871 | ||||
Nippon Prologis | 35 | 338,428 | ||||
PS Business Parks | 3,900 | 305,448 | ||||
5,884,664 |
16
Number of shares | Value (U.S. $) | |||||
Common Stock (continued) | ||||||
Multifamily REITs – 0.81% | ||||||
American Campus Communities | 17,500 | $ | 567,525 | |||
Apartment Investment & Management | 24,265 | 609,294 | ||||
BRE Properties | 25,100 | 1,285,873 | ||||
Equity Residential | 39,800 | 2,051,292 | ||||
Post Properties | 13,700 | 587,182 | ||||
5,101,166 | ||||||
Office REITs – 0.26% | ||||||
Highwoods Properties | 25,800 | 926,736 | ||||
Parkway Properties | 39,443 | 721,412 | ||||
1,648,148 | ||||||
Shopping Center REITs – 0.98% | ||||||
Agree Realty | 35,800 | 1,048,940 | ||||
Amreit Class B | 7,700 | 134,057 | ||||
DDR | 71,100 | 1,136,889 | ||||
First Capital Realty | 43,366 | 716,334 | ||||
Lippo Malls Indonesia Retail Trust | 2,477,000 | 809,187 | ||||
Ramco-Gershenson Properties Trust | 113,300 | 1,812,800 | ||||
Wheeler Real Estate Investment Trust | 113,393 | 476,251 | ||||
6,134,458 | ||||||
Single Tenant REIT – 0.07% | ||||||
National Retail Properties | 14,400 | 457,200 | ||||
457,200 | ||||||
Telecommunications – 3.43% | ||||||
AT&T | 260,600 | 9,175,726 | ||||
= | Century Communications | 1,625,000 | 0 | |||
CenturyLink | 6,206 | 190,524 | ||||
KDDI | 6,778 | 425,673 | ||||
Mobile TeleSystems ADR | 27,032 | 569,835 | ||||
Telstra | 138,613 | 638,959 | ||||
Verizon Communications | 181,500 | 9,006,030 | ||||
Vivendi | 46,438 | 1,179,350 | ||||
Vodafone Group | 82,930 | 307,801 | ||||
21,493,898 | ||||||
Utilities – 1.62% | ||||||
Edison International | 200,300 | 9,255,863 | ||||
Mirant (Escrow) | 425,000 | 0 | ||||
National Grid | 24,906 | 315,880 |
17
Schedule of investments
Delaware Dividend Income Fund
Number of shares | Value (U.S. $) | |||||
Common Stock (continued) | ||||||
Utilities (continued) | ||||||
Nippon Telegraph & Telephone | 7,237 | $ | 363,317 | |||
NRG Energy | 8,696 | 230,096 | ||||
10,165,156 | ||||||
Total Common Stock (cost $315,810,023) | 397,581,588 | |||||
Convertible Preferred Stock – 3.17% | ||||||
# | Chesapeake Energy 144A 5.75% | |||||
exercise price $27.83, expiration date 12/31/49 | 955 | 1,097,056 | ||||
El Paso Energy Capital Trust I 4.75% | ||||||
exercise price $34.49, expiration date 3/31/28 | 39,900 | 2,250,360 | ||||
Goodyear Tire & Rubber 5.875% | ||||||
exercise price $18.21, expiration date 3/31/14 | 20,950 | 1,328,360 | ||||
Halcon Resources 5.75%, | ||||||
exercise price $6.16, expiration date 12/31/49 | 2,055 | 1,769,098 | ||||
HealthSouth 6.50% | ||||||
exercise price $30.50, expiration date 12/31/49 | 1,753 | 2,323,163 | ||||
Huntington Bancshares 8.50% | ||||||
exercise price $11.95, expiration date 12/31/49 | 1,038 | 1,323,450 | ||||
Intelsat 5.75% | ||||||
exercise price $22.05, expiration date 5/1/16 | 30,358 | 1,758,032 | ||||
Maiden Holding 7.25% | ||||||
exercise price $15.50, expiration date 9/15/16 | 40,625 | 2,046,281 | ||||
MetLife 5.00% | ||||||
exercise price $44.28, expiration date 9/4/13 | 67,870 | 2,094,468 | ||||
SandRidge Energy 7.00% | ||||||
exercise price $7.76, expiration date 12/31/49 | 5,300 | 500,519 | ||||
SandRidge Energy 8.50% | ||||||
exercise price $8.01, expiration date 12/31/49 | 11,790 | 1,176,524 | ||||
Wells Fargo 7.50% | ||||||
exercise price $156.71, expiration date 12/31/49 | 1,411 | 1,589,139 | ||||
Weyerhaeuser 6.375% | ||||||
exercise price $33.30, expiration date 7/1/16 | 11,113 | 609,215 | ||||
Total Convertible Preferred Stock | ||||||
(cost $18,676,642) | 19,865,665 |
18
Principal amount° | Value (U.S. $) | |||||
Commercial Mortgage-Backed Securities – 0.35% | ||||||
Bank of America Commercial Mortgage Trust | ||||||
Series 2006-4 A4 5.634% 7/10/46 | $1,000,000 | $ | 1,091,771 | |||
• | Morgan Stanley Capital I | |||||
Series 2007-T27 A4 5.814% 6/11/42 | 1,000,000 | 1,132,450 | ||||
Total Commercial Mortgage-Backed Securities | ||||||
(cost $1,997,930) | 2,224,221 | |||||
Convertible Bonds – 10.73% | ||||||
Basic Industry – 0.22% | ||||||
Peabody Energy 4.75% | ||||||
exercise price $57.95, expiration date 12/15/41 | 788,000 | 636,310 | ||||
Steel Dynamics 5.125% | ||||||
exercise price $17.21, expiration date 6/15/14 | 658,000 | 749,709 | ||||
1,386,019 | ||||||
Capital Goods – 0.97% | ||||||
L-3 Communications Holdings 3.00% | ||||||
exercise price $90.24, expiration date 8/1/35 | 1,492,000 | 1,754,965 | ||||
# | Owens-Brockway Glass Container 144A 3.00% | |||||
exercise price $47.47, expiration date 5/28/15 | 2,517,000 | 2,616,107 | ||||
Titan Machinery 3.75% | ||||||
exercise price $43.17, expiration date 4/30/19 | 1,935,000 | 1,682,241 | ||||
6,053,313 | ||||||
Communications – 2.27% | ||||||
# | Alaska Communications Systems Group 144A 6.25% | |||||
exercise price $10.28, expiration date 5/1/18 | 1,810,000 | 1,514,744 | ||||
# | Blucora 144A 4.25% | |||||
exercise price $21.66, expiration date 3/29/19 | 633,000 | 939,214 | ||||
# | Clearwire Communications 144A 8.25% | |||||
exercise price $7.08, expiration date 11/30/40 | 2,720,000 | 3,124,600 | ||||
Leap Wireless International 4.50% | ||||||
exercise price $93.21, expiration date 7/10/14 | 2,433,000 | 2,484,701 | ||||
# | Liberty Interactive 144A 1.00% | |||||
exercise price $74.31, expiration date 9/28/43 | 2,662,000 | 2,755,170 | ||||
# | Liberty Interactive 144A 0.75% | |||||
exercise price $1,000, expiration date 3/30/43 | 1,464,000 | 1,835,490 | ||||
Rovi 2.625% | ||||||
exercise price $47.36, expiration date 2/10/40 | 884,000 | 896,155 |
19
Schedule of investments
Delaware Dividend Income Fund
Principal amount° | Value (U.S. $) | ||||||
Convertible Bonds (continued) | |||||||
Communications (continued) | |||||||
SBA Communications 4.00% | |||||||
exercise price $ 30.38, expiration date 9/29/14 | $ | 271,000 | $ | 761,171 | |||
14,311,245 | |||||||
Consumer Cyclical – 1.46% | |||||||
Φ | ArvinMeritor 4.00% | ||||||
exercise price $26.73, expiration date 2/12/27 | 3,072,000 | 2,839,680 | |||||
Iconix Brand Group 2.50% | |||||||
exercise price $30.75, expiration date 5/31/16 | 1,245,000 | 1,722,769 | |||||
International Game Technology 3.25% | |||||||
exercise price $19.93, expiration date 5/1/14 | 554,000 | 583,085 | |||||
Live Nation Entertainment 2.875% | |||||||
exercise price $27.14, expiration date 7/14/27 | 2,165,000 | 2,208,300 | |||||
MGM Resorts International 4.25% | |||||||
exercise price $18.58, expiration date 4/10/15 | 1,459,000 | 1,769,949 | |||||
9,123,783 | |||||||
Consumer Non-Cyclical – 1.68% | |||||||
Alere 3.00% | |||||||
exercise price $43.98, expiration date 2/12/27 | 1,262,000 | 1,394,510 | |||||
Dendreon 2.875% | |||||||
exercise price $51.24, expiration date 1/13/16 | 1,139,000 | 737,503 | |||||
Φ | Hologic 2.00% | ||||||
exercise price $38.59, expiration date 12/15/43 | 1,666,000 | 1,762,836 | |||||
Φ | Hologic 2.00% | ||||||
exercise price $31.17, expiration date 2/27/42 | 1,168,000 | 1,195,740 | |||||
# | Illumina 144A 0.25% | ||||||
exercise price $83.55, expiration date 3/11/16 | 574,000 | 731,133 | |||||
Mylan 3.75% | |||||||
exercise price $13.32, expiration date 9/15/15 | 419,000 | 1,400,246 | |||||
NuVasive 2.75% | |||||||
exercise price $42.13, expiration date 6/30/17 | 2,636,000 | 2,886,419 | |||||
# | Opko Health 144A 3.00% | ||||||
exercise price $7.07, expiration date 1/28/33 | 278,000 | 436,286 | |||||
10,544,673 | |||||||
Energy – 0.79% | |||||||
Chesapeake Energy 2.50% | |||||||
exercise price $50.90, expiration date 5/15/37 | 683,000 | 700,502 | |||||
# | Energy XXI Bermuda 144A 3.00% | ||||||
exercise price $40.40, expiration date 12/13/18 | 615,000 | 610,388 |
20
Principal amount° | Value (U.S. $) | ||||||
Convertible Bonds (continued) | |||||||
Energy (continued) | |||||||
Helix Energy Solutions Group 3.25% | |||||||
exercise price $25.02, expiration date 3/12/32 | $ | 1,387,000 | $ | 1,667,001 | |||
# | Vantage Drilling 144A 5.50% | ||||||
exercise price $2.39, expiration date 7/15/43 | 1,786,000 | 1,946,739 | |||||
4,924,630 | |||||||
Financials – 1.26% | |||||||
Ares Capital 5.75% | |||||||
exercise price $19.13, expiration date 2/1/16 | 1,558,000 | 1,688,483 | |||||
BGC Partners 4.50% | |||||||
exercise price $9.84, expiration date 7/13/16 | 2,015,000 | 2,117,009 | |||||
Blackstone Mortgage Trust 5.25% | |||||||
exercise price $28.67, expiration date 12/1/18 | 1,331,000 | 1,350,965 | |||||
# | Campus Crest Communities | ||||||
Operating Partnership 144A 4.75%, | |||||||
exercise price $12.56, expiration date 10/11/18 | 1,692,000 | 1,727,955 | |||||
# | Forest City Enterprises 144A 3.625% | ||||||
exercise price $24.21, expiration date 8/14/20 | 960,000 | 996,000 | |||||
7,880,412 | |||||||
Industrials – 0.11% | |||||||
Φ | General Cable 4.50% | ||||||
exercise price $36.34, expiration date 11/15/29 | 623,000 | 665,442 | |||||
665,442 | |||||||
Insurance – 0.16% | |||||||
Wellpoint 2.75% | |||||||
exercise price $75.31, expiration date 10/15/42 | 736,000 | 1,014,760 | |||||
1,014,760 | |||||||
Technology – 1.81% | |||||||
# | Ciena 144A 3.75% | ||||||
exercise price $20.17, expiration date 10/15/18 | 1,141,000 | 1,573,867 | |||||
Equinix 4.75% | |||||||
exercise price $84.32, expiration date 6/13/16 | 455,000 | 909,147 | |||||
Linear Technology 3.00% | |||||||
exercise price $41.46, expiration date 4/30/27 | 1,912,000 | 2,069,740 | |||||
Nuance Communications 2.75% | |||||||
exercise price $32.30, expiration date 11/1/31 | 1,574,000 | 1,511,040 | |||||
SanDisk 1.50% | |||||||
exercise price $52.17, expiration date 8/11/17 | 1,204,000 | 1,729,998 |
21
Schedule of investments
Delaware Dividend Income Fund
Principal amount° | Value (U.S. $) | ||||||
Convertible Bonds (continued) | |||||||
Technology (continued) | |||||||
TIBCO Software 2.25% | |||||||
exercise price $50.57, expiration date 4/30/32 | $ | 2,064,000 | $ | 2,078,189 | |||
VeriSign 3.25% | |||||||
exercise price $34.37, expiration date 8/15/37 | 856,000 | 1,481,950 | |||||
11,353,931 | |||||||
Total Convertible Bonds (cost $61,557,922) | 67,258,208 | ||||||
Corporate Bonds – 13.77% | |||||||
Automobiles – 0.62% | |||||||
American Axle & Manufacturing 7.75% 11/15/19 | 274,000 | 312,360 | |||||
# | Chassix 144A 9.25% 8/1/18 | 255,000 | 274,125 | ||||
Chrysler Group 8.25% 6/15/21 | 1,070,000 | 1,222,475 | |||||
# | Cooper-Standard Holdings PIK 144A 7.375% 4/1/18 | 505,000 | 512,575 | ||||
# | International Automotive Components Group 144A | ||||||
9.125% 6/1/18 | 518,000 | 538,720 | |||||
# | LKQ 144A 4.75% 5/15/23 | 610,000 | 574,925 | ||||
Meritor | |||||||
6.75% 6/15/21 | 325,000 | 328,250 | |||||
10.625% 3/15/18 | 95,000 | 102,838 | |||||
3,866,268 | |||||||
Banking – 0.32% | |||||||
# | Credit Suisse 144A 6.50% 8/8/23 | 475,000 | 503,956 | ||||
#• | HBOS Capital Funding 144A 6.071% 6/29/49 | 1,192,000 | 1,193,490 | ||||
• | JPMorgan Chase 6.00% 12/29/49 | 300,000 | 290,250 | ||||
1,987,696 | |||||||
Basic Industry – 1.71% | |||||||
AK Steel 7.625% 5/15/20 | 228,000 | 216,600 | |||||
# | APERAM 144A 7.75% 4/1/18 | 275,000 | 285,313 | ||||
ArcelorMittal 6.125% 6/1/18 | 939,000 | 1,023,509 | |||||
# | Builders FirstSource 144A 7.625% 6/1/21 | 504,000 | 524,160 | ||||
# | Cemex Espana Luxembourg 144A 9.25% 5/12/20 | 285,000 | 311,006 | ||||
# | Cemex SAB 144A 7.25% 1/15/21 | 315,000 | 320,119 | ||||
# | CPG Merger Sub 144A 8.00% 10/1/21 | 540,000 | 565,649 | ||||
# | Essar Steel Algoma 144A 9.375% 3/15/15 | 214,000 | 209,185 | ||||
# | FMG Resources August 2006 144A | ||||||
6.875% 2/1/18 | 222,000 | 235,320 | |||||
6.875% 4/1/22 | 574,000 | 622,789 |
22
Principal amount° | Value (U.S. $) | ||||||
Corporate Bonds (continued) | |||||||
Basic Industry (continued) | |||||||
HD Supply 11.50% 7/15/20 | $ | 425,000 | $ | 508,938 | |||
Headwaters 7.625% 4/1/19 | 403,000 | 436,248 | |||||
# | Inmet Mining 144A 8.75% 6/1/20 | 389,000 | 424,983 | ||||
# | JMC Steel Group 144A 8.25% 3/15/18 | 527,000 | 525,683 | ||||
# | LSB Industries 144A 7.75% 8/1/19 | 240,000 | 252,000 | ||||
# | Masonite International 144A 8.25% 4/15/21 | 480,000 | 528,600 | ||||
# | New Gold 144A 6.25% 11/15/22 | 394,000 | 389,075 | ||||
Norcraft 10.50% 12/15/15 | 243,000 | 250,240 | |||||
Nortek 8.50% 4/15/21 | 455,000 | 505,050 | |||||
# | Perstorp Holding 144A 8.75% 5/15/17 | 435,000 | 467,625 | ||||
Ryerson | |||||||
9.00% 10/15/17 | 277,000 | 291,889 | |||||
11.25% 10/15/18 | 112,000 | 118,160 | |||||
# | Sappi Papier Holding 144A 8.375% 6/15/19 | 455,000 | 497,656 | ||||
# | Taminco Global Chemical 144A 9.75% 3/31/20 | 359,000 | 410,158 | ||||
# | TPC Group 144A 8.75% 12/15/20 | 523,000 | 555,033 | ||||
# | U.S. Coatings Acquisition 144A 7.375% 5/1/21 | 265,000 | 282,225 | ||||
10,757,213 | |||||||
Capital Goods – 0.70% | |||||||
# | Allegion US Holding 144A 5.75% 10/1/21 | 315,000 | 328,388 | ||||
# | BOE Intermediate Holding PIK 144A | ||||||
9.00% 11/1/17 | 187,735 | 194,306 | |||||
# | BOE Merger PIK 144A 9.50% 11/1/17 | 469,000 | 499,484 | ||||
# | Consolidated Container 144A 10.125% 7/15/20 | 419,000 | 451,473 | ||||
# | Milacron 144A 7.75% 2/15/21 | 435,000 | 458,925 | ||||
# | Plastipak Holdings 144A 6.50% 10/1/21 | 405,000 | 422,213 | ||||
Reynolds Group Issuer | |||||||
8.25% 2/15/21 | 405,000 | 428,288 | |||||
9.875% 8/15/19 | 675,000 | 752,624 | |||||
# | Silver II Borrower 144A 7.75% 12/15/20 | 400,000 | 424,000 | ||||
TransDigm 7.50% 7/15/21 | 415,000 | 448,200 | |||||
4,407,901 | |||||||
Communications – 1.43% | |||||||
Centurylink 6.75% 12/1/23 | 370,000 | 379,019 | |||||
# | Columbus International 144A 11.50% 11/20/14 | 295,000 | 320,075 | ||||
# | Digicel Group 144A 8.25% 9/30/20 | 725,000 | 761,250 | ||||
Hughes Satellite Systems 7.625% 6/15/21 | 368,000 | 407,560 |
23
Schedule of investments
Delaware Dividend Income Fund
Principal amount° | Value (U.S. $) | |||||||
Corporate Bonds (continued) | ||||||||
Communications (continued) | ||||||||
# | Intelsat Luxembourg 144A | |||||||
7.75% 6/1/21 | $ | 935,000 | $ | 982,918 | ||||
8.125% 6/1/23 | 970,000 | 1,026,987 | ||||||
Level 3 Communications 8.875% 6/1/19 | 153,000 | 168,491 | ||||||
# | Level 3 Financing | |||||||
#144A 6.125% 1/15/21 | 185,000 | 188,238 | ||||||
7.00% 6/1/20 | 466,000 | 496,290 | ||||||
# | MetroPCS Wireless 144A 6.25% 4/1/21 | 210,000 | 219,188 | |||||
# | RCN Telecom Services 144A 8.50% 8/15/20 | 270,000 | 274,050 | |||||
# | Sprint 144A | |||||||
7.25% 9/15/21 | 240,000 | 260,700 | ||||||
7.875% 9/15/23 | 190,000 | 208,525 | ||||||
Sprint Capital 6.90% 5/1/19 | 495,000 | 539,550 | ||||||
Sprint Nextel 8.375% 8/15/17 | 333,000 | 387,945 | ||||||
T-Mobile | ||||||||
6.125% 1/15/22 | 160,000 | 163,400 | ||||||
6.50% 1/15/24 | 100,000 | 101,500 | ||||||
6.731% 4/28/22 | 185,000 | 193,556 | ||||||
# | Wind Acquisition Finance 144A | |||||||
7.25% 2/15/18 | 200,000 | 211,000 | ||||||
11.75% 7/15/17 | 225,000 | 239,344 | ||||||
Windstream | ||||||||
7.50% 6/1/22 | 223,000 | 232,199 | ||||||
#144A 7.75% 10/1/21 | 300,000 | 321,750 | ||||||
Zayo Group 10.125% 7/1/20 | 739,000 | 857,240 | ||||||
8,940,775 | ||||||||
Consumer Cyclical – 1.10% | ||||||||
# | BI-LO Finance 144A 8.625% 9/15/18 | 375,000 | 390,469 | |||||
Burlington Coat Factory Warehouse 10.00% 2/15/19 | 433,000 | 487,666 | ||||||
# | Burlington Holdings 144A 9.00% 2/15/18 | 84,000 | 86,940 | |||||
# | CDR DB Sub 144A 7.75% 10/15/20 | 636,000 | 632,819 | |||||
# | Chinos Intermediate Holdings PIK 144A | |||||||
7.75% 5/1/19 | 600,000 | 606,000 | ||||||
Dave & Buster’s 11.00% 6/1/18 | 331,000 | 366,586 | ||||||
#^ | Dave & Buster’s Entertainment 144A | |||||||
10.004% 2/15/16 | 502,000 | 415,405 | ||||||
# | Landry’s 144A 9.375% 5/1/20 | 531,000 | 581,445 | |||||
# | Michaels FinCo Holdings 144A 7.50% 8/1/18 | 345,000 | 358,800 |
24
Principal amount° | Value (U.S. $) | |||||||
Corporate Bonds (continued) | ||||||||
Consumer Cyclical (continued) | ||||||||
Michaels Stores 11.375% 11/1/16 | $ | 74,000 | $ | 76,036 | ||||
Pantry 8.375% 8/1/20 | 406,000 | 435,435 | ||||||
Party City Holdings 8.875% 8/1/20 | 450,000 | 501,750 | ||||||
# | Quiksilver 144A 7.875% 8/1/18 | 520,000 | 562,900 | |||||
Rite Aid 6.75% 6/15/21 | 505,000 | 529,619 | ||||||
Tempur Sealy International 6.875% 12/15/20 | 330,000 | 358,050 | ||||||
# | Wok Acquisition 144A 10.25% 6/30/20 | 467,000 | 506,695 | |||||
6,896,615 | ||||||||
Consumer Non-Cyclical – 0.39% | ||||||||
# | Beverage Packaging Holdings 144A | |||||||
5.625% 12/15/16 | 270,000 | 277,425 | ||||||
# | Crestview DS Merger Sub II 144A 10.00% 9/1/21 | 330,000 | 351,450 | |||||
Del Monte 7.625% 2/15/19 | 403,000 | 421,134 | ||||||
# | JBS Investments GmbH 144A 7.75% 10/28/20 | 200,000 | 202,000 | |||||
# | JBS USA 144A 8.25% 2/1/20 | 368,000 | 399,280 | |||||
Smithfield Foods 6.625% 8/15/22 | 390,000 | 413,888 | ||||||
# | Spectrum Brands Escrow 144A | |||||||
6.375% 11/15/20 | 77,000 | 82,198 | ||||||
6.625% 11/15/22 | 291,000 | 310,643 | ||||||
2,458,018 | ||||||||
Energy – 1.95% | ||||||||
AmeriGas Finance 7.00% 5/20/22 | 435,000 | 473,063 | ||||||
Calumet Specialty Products Partners | ||||||||
#144A 7.625% 1/15/22 | 295,000 | 297,950 | ||||||
9.375% 5/1/19 | 515,000 | 572,938 | ||||||
Chaparral Energy | ||||||||
7.625% 11/15/22 | 189,000 | 205,538 | ||||||
8.25% 9/1/21 | 236,000 | 260,190 | ||||||
CHC Helicopter 9.375% 6/1/21 | 220,000 | 223,850 | ||||||
Chesapeake Energy | ||||||||
5.375% 6/15/21 | 90,000 | 93,375 | ||||||
6.125% 2/15/21 | 72,000 | 77,760 | ||||||
6.625% 8/15/20 | 325,000 | 365,625 | ||||||
Comstock Resources 7.75% 4/1/19 | 421,000 | 444,155 | ||||||
# | Drill Rigs Holdings 144A 6.50% 10/1/17 | 406,000 | 441,525 | |||||
# | Exterran Partners 144A 6.00% 4/1/21 | 460,000 | 460,000 | |||||
Genesis Energy 5.75% 2/15/21 | 530,000 | 539,275 | ||||||
Halcon Resources 8.875% 5/15/21 | 492,000 | 501,840 |
25
Schedule of investments
Delaware Dividend Income Fund
Principal amount° | Value (U.S. $) | ||||||
Corporate Bonds (continued) | |||||||
Energy (continued) | |||||||
# | Hercules Offshore 144A | ||||||
7.50% 10/1/21 | $ | 255,000 | $ | 269,025 | |||
8.75% 7/15/21 | 140,000 | 155,400 | |||||
Key Energy Services 6.75% 3/1/21 | 520,000 | 534,300 | |||||
Laredo Petroleum | |||||||
7.375% 5/1/22 | 98,000 | 106,575 | |||||
9.50% 2/15/19 | 410,000 | 459,200 | |||||
Linn Energy | |||||||
6.50% 5/15/19 | 187,000 | 189,338 | |||||
#144A 7.00% 11/1/19 | 150,000 | 150,000 | |||||
8.625% 4/15/20 | 105,000 | 112,875 | |||||
Markwest Energy Partners 5.50% 2/15/23 | 210,000 | 215,250 | |||||
Midstates Petroleum 9.25% 6/1/21 | 715,000 | 749,855 | |||||
# | Murphy Oil USA 144A 6.00% 8/15/23 | 360,000 | 369,000 | ||||
Northern Oil and Gas 8.00% 6/1/20 | 430,000 | 452,575 | |||||
NuStar Logistics 6.75% 2/1/21 | 315,000 | 326,025 | |||||
# | Oasis Petroleum 144A 6.875% 3/15/22 | 580,000 | 626,399 | ||||
Offshore Group Investment 7.125% 4/1/23 | 210,000 | 217,350 | |||||
PDC Energy 7.75% 10/15/22 | 450,000 | 489,375 | |||||
Pioneer Drilling 9.875% 3/15/18 | 482,000 | 518,150 | |||||
Rosetta Resources 5.625% 5/1/21 | 290,000 | 292,538 | |||||
# | Samson Investment 144A 10.50% 2/15/20 | 368,000 | 399,740 | ||||
SandRidge Energy 8.125% 10/15/22 | 639,000 | 676,540 | |||||
12,266,594 | |||||||
Financials – 0.24% | |||||||
• | Barclays 8.25% 12/29/49 | 250,000 | 258,281 | ||||
ETrade Financial 6.375% 11/15/19 | 642,000 | 690,150 | |||||
# | Nuveen Investments 144A 9.50% 10/15/20 | 571,000 | 563,863 | ||||
1,512,294 | |||||||
Healthcare – 1.04% | |||||||
Air Medical Group Holdings 9.25% 11/1/18 | 358,000 | 390,220 | |||||
Alere 6.50% 6/15/20 | 270,000 | 278,100 | |||||
Biomet 6.50% 10/1/20 | 392,000 | 409,640 | |||||
Community Health Systems | |||||||
7.125% 7/15/20 | 227,000 | 235,229 | |||||
8.00% 11/15/19 | 343,000 | 374,728 | |||||
Immucor 11.125% 8/15/19 | 555,000 | 624,374 |
26
Principal amount° | Value (U.S. $) | ||||||
Corporate Bonds (continued) | |||||||
Healthcare (continued) | |||||||
Kinetic Concepts | |||||||
10.50% 11/1/18 | $ | 334,000 | $ | 383,265 | |||
12.50% 11/1/19 | 245,000 | 273,175 | |||||
# | MPH Intermediate Holding Company 2 144A | ||||||
8.375% 8/1/18 | 255,000 | 264,881 | |||||
Par Pharmaceutical 7.375% 10/15/20 | 612,000 | 645,659 | |||||
Radnet Management 10.375% 4/1/18 | 291,000 | 304,095 | |||||
# | Service Corp International 144A 5.375% 1/15/22 | 480,000 | 486,000 | ||||
Tenet Healthcare | |||||||
# | 144A 6.00% 10/1/20 | 485,000 | 507,734 | ||||
8.125% 4/1/22 | 315,000 | 342,563 | |||||
Truven Health Analytics 10.625% 6/1/20 | 178,000 | 202,253 | |||||
# | Valeant Pharmaceuticals International 144A | ||||||
5.625% 12/1/21 | 440,000 | 443,300 | |||||
7.00% 10/1/20 | 95,000 | 102,363 | |||||
# | VPI Escrow 144A 6.375% 10/15/20 | 237,000 | 250,924 | ||||
6,518,503 | |||||||
Industrials – 0.05% | |||||||
# | WESCO Distribution 144A 5.375% 12/15/21 | 50,000 | 50,500 | ||||
# | Wise Metals Group 144A 8.75% 12/15/18 | 235,000 | 242,050 | ||||
292,550 | |||||||
Insurance – 0.45% | |||||||
• | American International Group 8.175% 5/15/58 | 620,000 | 747,410 | ||||
•# | Hockey Merger Sub 144A 2 7.875% 10/1/21 | 400,000 | 415,500 | ||||
•# | Liberty Mutual Group 144A 7.00% 3/15/37 | 443,000 | 462,935 | ||||
•# | Onex USI Acquisition 144A 7.75% 1/15/21 | 446,000 | 458,265 | ||||
• | XL Group 6.50% 12/29/49 | 758,000 | 746,630 | ||||
2,830,740 | |||||||
Media – 1.07% | |||||||
CCO Holdings 5.25% 9/30/22 | 402,000 | 380,895 | |||||
# | Cequel Communications Holdings 1 144A | ||||||
6.375% 9/15/20 | 317,000 | 328,888 | |||||
Clear Channel Worldwide Holdings | |||||||
7.625% 3/15/20 | 563,000 | 596,390 | |||||
CSC Holdings 6.75% 11/15/21 | 305,000 | 330,163 | |||||
DISH DBS 5.00% 3/15/23 | 665,000 | 636,738 | |||||
# | Gray Television 144A 7.50% 10/1/20 | 510,000 | 539,325 |
27
Schedule of investments
Delaware Dividend Income Fund
Principal amount° | Value (U.S. $) | |||||
Corporate Bonds (continued) | ||||||
Media (continued) | ||||||
# | MDC Partners 144A 6.75% 4/1/20 | $ | 575,000 | $ | 600,875 | |
# | Nara Cable Funding 144A 8.875% 12/1/18 | 400,000 | 429,000 | |||
# | Nielsen 144A 5.50% 10/1/21 | 330,000 | 338,250 | |||
# | Ono Finance II 144A 10.875% 7/15/19 | 260,000 | 283,400 | |||
Satelites Mexicanos 9.50% 5/15/17 | 232,000 | 255,200 | ||||
# | Univision Communications 144A 8.50% 5/15/21 | 884,000 | 983,449 | |||
# | UPCB Finance VI 144A 6.875% 1/15/22 | 322,000 | 346,955 | |||
# | Virgin Media Finance 144A 6.375% 4/15/23 | 620,000 | 643,250 | |||
6,692,778 | ||||||
Service-Other – 1.24% | ||||||
# | Algeco Scotsman Global Finance 144A | |||||
8.50% 10/15/18 | 490,000 | 531,650 | ||||
10.75% 10/15/19 | 894,000 | 934,230 | ||||
# | ARAMARK 144A 5.75% 3/15/20 | 550,000 | 576,125 | |||
Avis Budget Car Rental 5.50% 4/1/23 | 416,000 | 406,640 | ||||
# | Carlson Wagonlit 144A 6.875% 6/15/19 | 425,000 | 442,000 | |||
# | DigitalGlobe 144A 5.25% 2/1/21 | 450,000 | 441,000 | |||
H&E Equipment Services 7.00% 9/1/22 | 364,000 | 399,490 | ||||
M/I Homes 8.625% 11/15/18 | 490,000 | 531,650 | ||||
# | Mattamy Group 144A 6.50% 11/15/20 | 402,000 | 397,980 | |||
MGM Resorts International | ||||||
6.75% 10/1/20 | 135,000 | 145,463 | ||||
7.75% 3/15/22 | 197,000 | 219,655 | ||||
11.375% 3/1/18 | 560,000 | 718,200 | ||||
PHH | ||||||
6.375% 8/15/21 | 200,000 | 202,250 | ||||
7.375% 9/1/19 | 219,000 | 237,615 | ||||
Pinnacle Entertainment | ||||||
7.75% 4/1/22 | 163,000 | 178,485 | ||||
8.75% 5/15/20 | 25,000 | 27,750 | ||||
# | PNK Finance 144A 6.375% 8/1/21 | 210,000 | 217,875 | |||
Seven Seas Cruises 9.125% 5/15/19 | 479,000 | 531,091 | ||||
Swift Services Holdings 10.00% 11/15/18 | 380,000 | 425,125 | ||||
# | Watco 144A 6.375% 4/1/23 | 220,000 | 220,550 | |||
7,784,824 |
28
Principal amount° | Value (U.S. $) | ||||||
Corporate Bonds (continued) | |||||||
Technology – 0.94% | |||||||
# | ACI Worldwide 144A 6.375% 8/15/20 | $ | 295,000 | $ | 307,169 | ||
# | Activision Blizzard 144A | ||||||
5.625% 9/15/21 | 370,000 | 385,263 | |||||
6.125% 9/15/23 | 445,000 | 467,250 | |||||
# | BMC Software Finance 144A 8.125% 7/15/21 | 765,000 | 814,724 | ||||
First Data | |||||||
11.25% 3/31/16 | 166,000 | 168,698 | |||||
# | 144A 11.25% 1/15/21 | 685,000 | 756,924 | ||||
# | 144A 11.75% 8/15/21 | 505,000 | 526,463 | ||||
Freescale Semiconductor | |||||||
# | 144A 6.00% 1/15/22 | 255,000 | 258,188 | ||||
10.75% 8/1/20 | 50,000 | 57,000 | |||||
# | Healthcare Technology Intermediate PIK 144A | ||||||
7.375% 9/1/18 | 480,000 | 495,600 | |||||
Infor US 9.375% 4/1/19 | 432,000 | 489,240 | |||||
j2 Global 8.00% 8/1/20 | 618,000 | 668,985 | |||||
# | Viasystems 144A 7.875% 5/1/19 | 430,000 | 469,775 | ||||
5,865,279 | |||||||
Utilities – 0.52% | |||||||
AES | |||||||
7.375% 7/1/21 | 699,000 | 793,365 | |||||
8.00% 6/1/20 | 45,000 | 52,875 | |||||
# | Calpine 144A | ||||||
5.875% 1/15/24 | 125,000 | 125,000 | |||||
6.00% 1/15/22 | 500,000 | 516,250 | |||||
Elwood Energy 8.159% 7/5/26 | 407,753 | 434,767 | |||||
•# | Enel SpA 144A 8.75% 9/24/73 | 400,000 | 436,500 | ||||
GenOn Energy 9.875% 10/15/20 | 402,000 | 453,255 | |||||
Mirant Americas 8.50% 10/1/21 | 410,000 | 448,950 | |||||
3,260,962 | |||||||
Total Corporate Bonds (cost $82,116,995) | 86,339,010 | ||||||
Municipal Bonds – 0.53% | |||||||
California Statewide Communities | |||||||
Development Authority 5.00% 4/1/42 | 855,000 | 847,904 | |||||
Grand Parkway Transportation 5.25% 10/1/51 | 1,000,000 | 1,012,960 |
29
Schedule of investments
Delaware Dividend Income Fund
Principal amount° | Value (U.S. $) | |||||
Municipal Bonds (continued) | ||||||
New Jersey Transportation Trust Fund Authority | ||||||
5.00% 6/15/42 | $ | 240,000 | $ | 243,326 | ||
5.00% 6/15/44 | 760,000 | 766,300 | ||||
Texas Private Activity Bond Surface Transportation | ||||||
6.75% 6/30/43 (AMT) | 450,000 | 472,226 | ||||
Total Municipal Bonds (cost $3,198,889) | 3,342,716 | |||||
Leveraged Non-Recourse Securities – 0.00% | ||||||
#t@ | JPMorgan Fixed Income Pass Through Trust | |||||
Series 2007-B 0.00% 1/15/87 | 1,300,000 | 0 | ||||
Total Leveraged Non-Recourse Securities | ||||||
(cost $1,105,000) | 0 | |||||
«Senior Secured Loans – 1.56% | ||||||
Akorn Tranche B 4.50% 11/13/20 | 295,000 | 296,383 | ||||
Allegion US Holding Company Tranche B | ||||||
3.00% 12/26/20 | 165,000 | 165,619 | ||||
Azure Midstream Tranche B 6.50% 10/21/18 | 170,000 | 171,169 | ||||
BJ’S Wholesale Club Tranche 2nd Lien | ||||||
8.50% 3/31/20 | 280,000 | 286,213 | ||||
Bmc Software Tranche 1st Lien 5.00% 8/9/20 | 250,000 | 252,526 | ||||
Borgata Tranche B 1st Lien 6.75% 8/15/18 | 540,000 | 542,699 | ||||
Citycenter Holdings Tranche B 5.00% 10/9/20 | 265,000 | 268,699 | ||||
Clear Channel Communication | ||||||
New Tranche B 3.65% 1/29/16 | 280,000 | 271,463 | ||||
Tranche D 6.75% 1/30/19 | 250,000 | 237,110 | ||||
Drillships Financing Holding Tranche B1 | ||||||
6.00% 2/17/21 | 255,000 | 260,865 | ||||
Exopack Tranche B 1st Lien 5.25% 4/24/19 | 315,000 | 320,316 | ||||
Gentiva Health Services Tranche B 6.50% 10/10/19 | 535,000 | 528,646 | ||||
Getty Images Tranche B 4.75% 9/19/19 | 344,133 | 319,582 | ||||
Gray Television Loan 4.75% 10/11/19 | 367,000 | 369,447 | ||||
Hostess Brands Tranche 1st Lien 6.75% 3/12/20 | 330,000 | 340,725 | ||||
Hudson’s Bay Tranche 2nd Lien 8.25% 10/7/21 | 240,000 | 246,360 | ||||
Ineos US Finance Loan 4.50% 5/4/18 | 515,000 | 516,753 | ||||
Kik Custom Products | ||||||
Tranche 1st Lien 5.50% 5/23/19 | 80,000 | 78,950 | ||||
Tranche 2nd Lien 9.50% 11/23/19 | 40,000 | 40,000 |
30
Principal amount° | Value (U.S. $) | ||||||
«Senior Secured Loans (continued) | |||||||
Lts Buyer Tranche 2nd Lien 8.00% 3/15/21 | $ | 130,000 | $ | 131,138 | |||
Moxie Liberty Tranche B 7.50% 8/21/20 | 530,000 | 541,924 | |||||
Neiman Marcus Group Loan 5.00% 10/18/20 | 560,000 | 564,159 | |||||
Nuveen Investments Tranche 2nd Lien | |||||||
6.50% 2/28/19 | 280,000 | 274,808 | |||||
Otter Products Tranche B 5.25% 4/29/19 | 105,000 | 105,350 | |||||
Panda Temple Power II Tranche B 1st Lien | |||||||
7.25% 3/28/19 | 360,000 | 370,800 | |||||
@ | Polymer Group Bridge Loan 7.00% 5/26/19 | 515,000 | 517,574 | ||||
Quickrete Company Tranche 2nd Lien | |||||||
7.00% 3/19/21 | 50,000 | 51,266 | |||||
Ranpak Tranche 2nd Lien 8.50% 4/10/20 | 72,000 | 74,160 | |||||
Rite Aid Tranche 2nd Lien 5.75% 8/3/20 | 220,000 | 226,508 | |||||
Samson Investment Company Tranche 2nd Lien | |||||||
6.00% 9/10/18 | 260,000 | 262,275 | |||||
Smart & Final Tranche 2nd Lien 10.50% 11/8/20 | 344,615 | 351,508 | |||||
State Class Tankers II Tranche 1st Lien | |||||||
6.75% 6/10/20 | 310,000 | 313,488 | |||||
Toys R US Property Tranche B 6.00% 7/31/19 | 225,000 | 219,544 | |||||
Usi Insurance Services Tranche B 5.25% 12/14/19 | 255,000 | 256,594 | |||||
Total Senior Secured Loans (cost $9,665,239) | 9,774,621 | ||||||
Sovereign Bonds – 0.87% | |||||||
Brazil – 0.46% | |||||||
Brazil Notas do Tesouro Nacional | |||||||
Serie F 10.00% 1/1/18 | BRL | 7,281,000 | 2,888,932 | ||||
2,888,932 | |||||||
Mexico – 0.41% | |||||||
Mexican Bonos 8.00% 6/11/20 | MXN | 29,745,000 | 2,583,214 | ||||
2,583,214 | |||||||
Total Sovereign Bonds (cost $5,942,671) | 5,472,146 | ||||||
Number of shares | |||||||
Limited Partnerships – 0.18% | |||||||
Brookfield Infrastructure Partners | 14,200 | 543,576 | |||||
Lehigh Gas Partners | 19,800 | 560,736 | |||||
Total Limited Partnerships (cost $957,940) | 1,104,312 |
31
Schedule of investments
Delaware Dividend Income Fund
Number of shares | Value (U.S. $) | |||||
Preferred Stock – 0.53% | ||||||
# | Ally Financial 144A 7.00% | 500 | $ | 482,984 | ||
Freddie Mac 6.02% | 40,000 | 294,400 | ||||
• | GMAC Capital Trust I 8.125% | 17,000 | 456,280 | |||
Regions Financial 6.375% | 17,000 | 378,590 | ||||
Vornado Realty 6.625% | 27,300 | 656,565 | ||||
@ | Wheeler REIT 9.00% | 1,028 | 1,072,393 | |||
Total Preferred Stock (cost $3,910,352) | 3,341,212 | |||||
Principal amount° | ||||||
Short-Term Investments – 5.01% | ||||||
≠Discount Note – 0.06% | ||||||
Federal Home Loan Bank 0.05% 12/27/13 | $ | 388,198 | 388,195 | |||
388,195 | ||||||
Repurchase Agreements – 3.07% | ||||||
Bank of America 0.04%, dated 11/29/13, to | ||||||
be repurchased on 12/2/13, repurchase price | ||||||
$3,562,908 (collateralized by U.S. government | ||||||
obligations 0.375%-1.875% 11/15/14-6/30/15; | ||||||
market value $3,634,155) | 3,562,897 | 3,562,897 | ||||
BNP Paribas 0.06%, dated 11/29/13, to be | ||||||
repurchased on 12/2/13, repurchase price | ||||||
$15,706,182 (collateralized by U.S. government | ||||||
obligations 0.625%-2.625% 6/30/14-11/30/19; | ||||||
market value $16,020,226) | 15,706,103 | 15,706,103 | ||||
19,269,000 | ||||||
≠U.S. Treasury Obligations – 1.88% | ||||||
U.S. Treasury Bills | ||||||
0.02% 12/19/13 | 4,864,527 | 4,864,499 | ||||
0.033% 1/23/14 | 3,151,035 | 3,150,984 | ||||
0.065% 4/24/14 | 3,781,242 | 3,779,907 | ||||
11,795,390 | ||||||
Total Short-Term Investments (cost $31,452,805) | 31,452,585 | |||||
Total Value of Securities – 100.11% | ||||||
(cost $536,392,408) | $ | 627,756,284 |
32
Number of contracts | Value (U.S. $) | |||||
Option Written – (0.01%) | ||||||
Call Option – (0.01%) | ||||||
ANF US, strike price $34.00, expires 12/21/13 (MSC) | (416 | ) | $ | (53,248 | ) | |
Total Option Written (premium received ($46,460)) | (53,248 | ) |
° | Principal amount shown is stated in U.S. Dollars unless noted that the security is denominated in another currency. |
† | Non income producing security. |
= | Security is being fair valued in accordance with the Fund’s fair valuation policy. At Nov. 30, 2013, the aggregate value of fair valued securities was $0, which represented 0.00% of the Fund’s net assets. See Note 1 in “Notes to financial statements.” |
• | Variable rate security. The rate shown is the rate as of Nov. 30, 2013. Interest rates reset periodically. |
# | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At Nov. 30, 2013, the aggregate value of Rule 144A securities was $68,180,648, which represented 10.87% of the Fund’s net assets. See Note 11 in “Notes to financial statements.” |
Φ | Step coupon bond. Coupon increases or decreases periodically based on a predetermined schedule. Stated rate in effect at Nov. 30, 2013. |
@ | Illiquid security. At Nov. 30, 2013, the aggregate value of illiquid securities was $1,589,967 which represented 0.25% of the Fund’s net assets. See Note 11 in “Notes to financial statements.” |
^ | Zero coupon security. The rate shown is the yield at the time of purchase. |
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. |
« | 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. Stated rate in effect at Nov. 30, 2013. |
≠ | The rate shown is the effective yield at the time of purchase. |
§ | All or a portion of this holding is subject to unfunded loan commitments. See Note 7 in “Notes to financial statements.” |
33
Schedule of investments
Delaware Dividend Income Fund
Foreign Currency Exchange Contracts
Unrealized | |||||||||||
Appreciation | |||||||||||
Counterparty | Contracts to Receive (Deliver) | In Exchange For | Settlement Date | (Depreciation) | |||||||
MNB | JPY 32,063,920 | USD | (319,967 | ) | 12/3/13 | $(6,785) |
Futures Contracts
Unrealized | ||||||||
Appreciation | ||||||||
Contracts to Buy (Sell) | Notional Cost | Notional Value | Expiration Date | (Depreciation) | ||||
(100) S&P 500 EMINI | $8,750,204 | $9,020,500 | 12/21/13 | ($270,296) |
Swap Contracts
CDS Contracts2
Annual | Unrealized | |||||||||
Protection | Termination | Appreciation | ||||||||
Counterparty | Swap Referenced Obligation | Notional Value | Payments | Date | (Depreciation) | |||||
Protection Purchased: | ||||||||||
CME | CDX.NA.HY.21 | $10,000,000 | 5.00% | 12/20/18 | $(286,249) |
The use of foreign currency exchange contracts, futures contracts, written options and contracts involves elements of market risk and risks in excess of the amount recognized in the financial statements. The notional values and foreign currency exchange contracts presented above represent the Fund’s total exposure in such contracts, whereas only the net unrealized appreciation (depreciation) is reflected in the Fund’s net assets.
1See Note 9 in “Notes to financial statements.”
2A 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). Periodic payments (receipts) on such contracts are accrued daily and recorded as unrealized losses (gains) on swap contracts. Upon payment (receipt), such amounts are recorded as unrealized losses (gains) on swap contracts. Upfront payments made or received in connection with CDS contracts are amortized over the expected life of the CDS contracts as unrealized losses (gains) on swap contracts. The change in value of CDS contracts is recorded 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.
34
AMT — Subject to Alternative Minimum Tax
BRL — Brazilian Real
CDS — Credit Default Swap
CDX.NA.HY — Credit Default Swap Index North America High-Yield
CME — Chicago Mercantile Exchange
JPY — Japanese Yen
MNB — Mellon National Bank
MSC — Morgan Stanley Capital
MXN — Mexican Peso
PIK — Pay-in-kind
REIT — Real Estate Investment Trust
USD — United States Dollar
See accompanying notes, which are an integral part of the financial statements.
35
Statement of assets and liabilities | |
Delaware Dividend Income Fund | November 30, 2013 |
Assets: | |||
Investments, at value1 | $ | 596,303,699 | |
Short-term investments, at value2 | 31,452,585 | ||
Cash | 113,673 | ||
Cash collateral for derivatives | 1,733,827 | ||
Foreign currencies, at value3 | 69,660 | ||
Receivable for securities sold | 1,119,735 | ||
Receivable for fund shares sold | 1,505,041 | ||
Dividends and interest receivable | 3,319,691 | ||
Variation margin receivable on futures contracts | 1,000 | ||
Other assets | 2,575 | ||
Total assets | 635,621,486 | ||
Liabilities: | |||
Payable for securities purchased | 6,356,445 | ||
Payable for fund shares redeemed | 463,958 | ||
Unrealized loss on foreign currency exchange contracts | 6,785 | ||
Unrealized loss on credit default swap contracts5 | 709,747 | ||
Options written, at value4 | 53,248 | ||
Investment management fees payable | 327,495 | ||
Other accrued expenses | 209,985 | ||
Annual protection payments on credit default swap contracts | 100,000 | ||
Distribution fees payable to affiliates | 276,090 | ||
Trustees’ fees and expenses payable | 4,294 | ||
Other affiliates payable | 35,738 | ||
Total liabilities | 8,543,785 | ||
Total Net Assets | $ | 627,077,701 | |
Net Assets Consist of: | |||
Paid-in capital | $ | 675,116,233 | |
Undistributed net investment income | 207,449 | ||
Accumulated net realized loss on investments | (138,957,002 | ) | |
Net unrealized appreciation of investments | 90,711,021 | ||
Total Net Assets | $ | 627,077,701 | |
1Investments, at cost | $ | 504,939,603 | |
2Short-term investments, at cost | 31,452,805 | ||
3Foreign currencies, at cost | 69,447 | ||
4Options written, at cost | 46,460 | ||
5Including upfront payments received | (423,498 | ) |
36
Net Asset Value | ||
Class A | ||
Net assets | $ | 297,116,886 |
Shares of beneficial interest outstanding, unlimited authorization, no par | 23,192,723 | |
Net asset value per share | $ | 12.81 |
Sales charge | 5.75% | |
Offering price per share, equal to net asset value per share/(1 - sales charge) | $ | 13.59 |
Class B | ||
Net assets | $ | 10,161,623 |
Shares of beneficial interest outstanding, unlimited authorization, no par | 792,487 | |
Net asset value per share | $ | 12.82 |
Class C | ||
Net assets | $ | 254,960,683 |
Shares of beneficial interest outstanding, unlimited authorization, no par | 19,875,429 | |
Net asset value per share | $ | 12.83 |
Class R | ||
Net assets | $ | 3,029,705 |
Shares of beneficial interest outstanding, unlimited authorization, no par | 236,513 | |
Net asset value per share | $ | 12.81 |
Institutional Class | ||
Net assets | $ | 61,808,804 |
Shares of beneficial interest outstanding, unlimited authorization, no par | 4,824,745 | |
Net asset value per share | $ | 12.81 |
See accompanying notes, which are an integral part of the financial statements.
37
Statement of operations | |
Delaware Dividend Income Fund | Year Ended November 30, 2013 |
Investment Income: | |||||||
Dividends | $ | 9,103,817 | |||||
Interest | 9,182,653 | ||||||
Security lending income | 23,630 | ||||||
Foreign tax withheld | (63,720 | ) | $ | 18,246,380 | |||
Expenses: | |||||||
Management fees | 3,253,634 | ||||||
Distribution expenses – Class A | 709,525 | ||||||
Distribution expenses – Class B | 134,205 | ||||||
Distribution expenses – Class C | 1,961,134 | ||||||
Distribution expenses – Class R | 18,466 | ||||||
Dividend disbursing and transfer agent fees and expenses | 600,641 | ||||||
Accounting and administration expenses | 194,858 | ||||||
Registration fees | 97,835 | ||||||
Reports and statements to shareholders | 54,727 | ||||||
Audit and taxes | 46,122 | ||||||
Custodian fees | 44,023 | ||||||
Legal fees | 42,239 | ||||||
Trustees’ fees and expenses | 25,786 | ||||||
Other expenses | 37,199 | 7,220,394 | |||||
Less waived distribution expenses – Class A | (98,101 | ) | |||||
Less waived distribution expenses – Class R | (2,671 | ) | |||||
Less expense paid indirectly | (567 | ) | |||||
Total operating expenses | 7,119,055 | ||||||
Net Investment Income | 11,127,325 |
38
Net Realized and Unrealized Gain (Loss): | |||
Net realized gain (loss) on: | |||
Investments | $ | 20,843,342 | |
Foreign currencies | (80,800 | ) | |
Foreign currency exchange contracts | (227,122 | ) | |
Futures contracts | (629,446 | ) | |
Options written | 346,375 | ||
Swap contracts | (2,961,102 | ) | |
Net realized gain | 17,291,247 | ||
Net change in unrealized appreciation (depreciation) of: | |||
Investments | 59,406,205 | ||
Foreign currencies | 4,993 | ||
Foreign currency exchange contracts | (5,959 | ) | |
Futures contracts | (321,190 | ) | |
Options written | 98,213 | ||
Swap contracts | (39,947 | ) | |
Net change in unrealized appreciation (depreciation) | 59,142,315 | ||
Net Realized and Unrealized Gain | 76,433,562 | ||
Net Increase in Net Assets Resulting from Operations | $ | 87,560,887 |
See accompanying notes, which are an integral part of the financial statements.
39
Statements of changes in net assets
Delaware Dividend Income Fund
Year Ended | |||||||
11/30/13 | 11/30/12 | ||||||
Increase in Net Assets from Operations: | |||||||
Net investment income | $ | 11,127,325 | $ | 12,119,863 | |||
Net realized gain | 17,291,247 | 6,224,448 | |||||
Net change in unrealized appreciation (depreciation) | 59,142,315 | 34,303,651 | |||||
Net increase in net assets resulting from operations | 87,560,887 | 52,647,962 | |||||
Dividends and Distributions to Shareholders from: | |||||||
Net investment income: | |||||||
Class A | (6,053,997 | ) | (6,418,029 | ) | |||
Class B | (235,428 | ) | (493,834 | ) | |||
Class C | (3,338,842 | ) | (3,896,652 | ) | |||
Class R | (71,763 | ) | (98,748 | ) | |||
Institutional Class | (1,226,175 | ) | (1,017,121 | ) | |||
(10,926,205 | ) | (11,924,384 | ) | ||||
Capital Share Transactions: | |||||||
Proceeds from shares sold: | |||||||
Class A | 96,741,474 | 29,742,813 | |||||
Class B | 205,221 | 102,079 | |||||
Class C | 90,858,443 | 17,557,460 | |||||
Class R | 1,189,004 | 1,266,352 | |||||
Institutional Class | 38,525,198 | 12,708,292 | |||||
Net asset value of shares issued upon reinvestment | |||||||
of dividends and distributions: | |||||||
Class A | 5,604,764 | 5,582,624 | |||||
Class B | 217,686 | 438,026 | |||||
Class C | 3,003,745 | 3,398,886 | |||||
Class R | 71,517 | 98,747 | |||||
Institutional Class | 1,057,730 | 806,893 | |||||
237,474,782 | 71,702,172 |
40
Year Ended | ||||||||
11/30/13 | 11/30/12 | |||||||
Capital Share Transactions (continued): | ||||||||
Cost of shares redeemed: | ||||||||
Class A | $ | (46,311,215 | ) | $ | (40,612,519 | ) | ||
Class B | (9,382,458 | ) | (8,621,617 | ) | ||||
Class C | (25,556,412 | ) | (31,006,812 | ) | ||||
Class R | (1,884,594 | ) | (1,881,753 | ) | ||||
Institutional Class | (14,947,724 | ) | (10,801,705 | ) | ||||
(98,082,403 | ) | (92,924,406 | ) | |||||
Increase (decrease) in net assets derived from | ||||||||
capital share transactions | 139,392,379 | (21,222,234 | ) | |||||
Net Increase in Net Assets | 216,027,061 | 19,501,344 | ||||||
Net Assets: | ||||||||
Beginning of year | 411,050,640 | 391,549,296 | ||||||
End of year (including undistributed | ||||||||
net investment income of $207,449 | ||||||||
and $138,633, respectively) | $ | 627,077,701 | $ | 411,050,640 |
See accompanying notes, which are an integral part of the financial statements.
41
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 from investment operations: |
Net investment income1 |
Net realized and unrealized gain |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Total dividends and distributions |
Net asset value, end of period |
Total return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets |
prior to fees waived |
Portfolio turnover |
See accompanying notes, which are an integral part of the financial statements.
42
Year Ended | |||||||||||||||
11/30/13 | 11/30/12 | 11/30/11 | 11/30/10 | 11/30/09 | |||||||||||
$10.940 | $9.890 | $9.810 | $9.190 | $7.010 | |||||||||||
0.316 | 0.348 | 0.351 | 0.373 | 0.407 | |||||||||||
1.854 | 1.045 | 0.086 | 0.695 | 2.247 | |||||||||||
2.170 | 1.393 | 0.437 | 1.068 | 2.654 | |||||||||||
(0.300 | ) | (0.343 | ) | (0.357 | ) | (0.448 | ) | (0.474 | ) | ||||||
(0.300 | ) | (0.343 | ) | (0.357 | ) | (0.448 | ) | (0.474 | ) | ||||||
$12.810 | $10.940 | $9.890 | $9.810 | $9.190 | |||||||||||
20.07% | 14.25% | 4.39% | 11.91% | 39.35% | |||||||||||
$297,117 | $203,819 | $189,313 | $192,876 | $200,720 | |||||||||||
1.12% | 1.16% | 1.19% | 1.26% | 1.17% | |||||||||||
1.16% | 1.21% | 1.24% | 1.31% | 1.36% | |||||||||||
2.62% | 3.28% | 3.41% | 3.93% | 5.22% | |||||||||||
2.58% | 3.23% | 3.36% | 3.88% | 5.03% | |||||||||||
51% | 47% | 110% | 109% | 69% |
43
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 from investment operations: |
Net investment income1 |
Net realized and unrealized gain |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Total dividends and distributions |
Net asset value, end of period |
Total return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets |
prior to fees waived |
Portfolio turnover |
See accompanying notes, which are an integral part of the financial statements.
44
Year Ended | |||||||||||||||
11/30/13 | 11/30/12 | 11/30/11 | 11/30/10 | 11/30/09 | |||||||||||
$10.950 | $9.900 | $9.820 | $9.190 | $7.010 | |||||||||||
0.223 | 0.268 | 0.274 | 0.302 | 0.348 | |||||||||||
1.856 | 1.046 | 0.086 | 0.694 | 2.248 | |||||||||||
2.079 | 1.314 | 0.360 | 0.996 | 2.596 | |||||||||||
(0.209 | ) | (0.264 | ) | (0.280 | ) | (0.366 | ) | (0.416 | ) | ||||||
(0.209 | ) | (0.264 | ) | (0.280 | ) | (0.366 | ) | (0.416 | ) | ||||||
$12.820 | $10.950 | $9.900 | $9.820 | $9.190 | |||||||||||
19.15% | 13.39% | 3.61% | 11.06% | 38.47% | |||||||||||
$10,161 | $16,874 | $22,803 | $29,003 | $33,725 | |||||||||||
1.87% | 1.91% | 1.94% | 2.01% | 1.92% | |||||||||||
1.87% | 1.91% | 1.94% | 2.01% | 2.06% | |||||||||||
1.86% | 2.53% | 2.66% | 3.18% | 4.47% | |||||||||||
1.86% | 2.53% | 2.66% | 3.18% | 4.33% | |||||||||||
51% | 47% | 110% | 109% | 69% |
45
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 from investment operations: |
Net investment income1 |
Net realized and unrealized gain |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Total dividends and distributions |
Net asset value, end of period |
Total return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets |
prior to fees waived |
Portfolio turnover |
See accompanying notes, which are an integral part of the financial statements.
46
Year Ended | |||||||||||||||
11/30/13 | 11/30/12 | 11/30/11 | 11/30/10 | 11/30/09 | |||||||||||
$10.960 | $9.900 | $9.820 | $9.190 | $7.010 | |||||||||||
0.226 | 0.268 | 0.274 | 0.302 | 0.348 | |||||||||||
1.853 | 1.056 | 0.086 | 0.694 | 2.248 | |||||||||||
2.079 | 1.324 | 0.360 | 0.996 | 2.596 | |||||||||||
(0.209 | ) | (0.264 | ) | (0.280 | ) | (0.366 | ) | (0.416 | ) | ||||||
(0.209 | ) | (0.264 | ) | (0.280 | ) | (0.366 | ) | (0.416 | ) | ||||||
$12.830 | $10.960 | $9.900 | $9.820 | $9.190 | |||||||||||
19.13% | 13.50% | 3.61% | 11.06% | 38.27% | |||||||||||
$254,961 | $156,758 | $151,107 | $152,009 | $155,028 | |||||||||||
1.87% | 1.91% | 1.94% | 2.01% | 1.92% | |||||||||||
1.87% | 1.91% | 1.94% | 2.01% | 2.06% | |||||||||||
1.87% | 2.53% | 2.66% | 3.18% | 4.47% | |||||||||||
1.87% | 2.53% | 2.66% | 3.18% | 4.33% | |||||||||||
51% | 47% | 110% | 109% | 69% |
47
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 from investment operations: |
Net investment income1 |
Net realized and unrealized gain |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Total dividends and distributions |
Net asset value, end of period |
Total return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets |
prior to fees waived |
Portfolio turnover |
See accompanying notes, which are an integral part of the financial statements.
48
Year Ended | |||||||||||||||
11/30/13 | 11/30/12 | 11/30/11 | 11/30/10 | 11/30/09 | |||||||||||
$10.940 | $9.890 | $9.810 | $9.190 | $7.010 | |||||||||||
0.284 | 0.321 | 0.325 | 0.349 | 0.387 | |||||||||||
1.856 | 1.046 | 0.086 | 0.693 | 2.246 | |||||||||||
2.140 | 1.367 | 0.411 | 1.042 | 2.633 | |||||||||||
(0.270 | ) | (0.317 | ) | (0.331 | ) | (0.422 | ) | (0.453 | ) | ||||||
(0.270 | ) | (0.317 | ) | (0.331 | ) | (0.422 | ) | (0.453 | ) | ||||||
$12.810 | $10.940 | $9.890 | $9.810 | $9.190 | |||||||||||
19.77% | 13.97% | 4.13% | 11.60% | 39.15% | |||||||||||
$3,030 | $3,151 | $3,340 | $3,069 | $3,067 | |||||||||||
1.37% | 1.41% | 1.44% | 1.51% | 1.42% | |||||||||||
1.46% | 1.51% | 1.54% | 1.61% | 1.66% | |||||||||||
2.37% | 3.03% | 3.16% | 3.68% | 4.97% | |||||||||||
2.28% | 2.93% | 3.06% | 3.58% | 4.73% | |||||||||||
51% | 47% | 110% | 109% | 69% |
49
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 from investment operations: |
Net investment income1 |
Net realized and unrealized gain |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Total dividends and distributions |
Net asset value, end of period |
Total return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets |
prior to fees waived |
Portfolio turnover |
See accompanying notes, which are an integral part of the financial statements.
50
Year Ended | |||||||||||||||
11/30/13 | 11/30/12 | 11/30/11 | 11/30/10 | 11/30/09 | |||||||||||
$10.940 | $9.890 | $9.810 | $9.190 | $7.010 | |||||||||||
0.347 | 0.375 | 0.375 | 0.399 | 0.426 | |||||||||||
1.853 | 1.045 | 0.088 | 0.697 | 2.246 | |||||||||||
2.200 | 1.420 | 0.463 | 1.096 | 2.672 | |||||||||||
(0.330 | ) | (0.370 | ) | (0.383 | ) | (0.476 | ) | (0.492 | ) | ||||||
(0.330 | ) | (0.370 | ) | (0.383 | ) | (0.476 | ) | (0.492 | ) | ||||||
$12.810 | $10.940 | $9.890 | $9.810 | $9.190 | |||||||||||
20.37% | 14.66% | 4.55% | 12.24% | 39.68% | |||||||||||
$61,809 | $30,449 | $24,986 | $12,766 | $2,394 | |||||||||||
0.87% | 0.91% | 0.94% | 1.01% | 0.92% | |||||||||||
0.87% | 0.91% | 0.94% | 1.01% | 1.06% | |||||||||||
2.87% | 3.53% | 3.66% | 4.18% | 5.47% | |||||||||||
2.87% | 3.53% | 3.66% | 4.18% | 5.33% | |||||||||||
51% | 47% | 110% | 109% | 69% |
51
Notes to financial statements | ||
Delaware Dividend Income Fund | November 30, 2013 |
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 5.75%. Class A share purchases of $1,000,000 or more will incur a contingent deferred sales charge (CDSC) of 1.00% if redeemed during the first year and 0.50% during the second year, provided that Delaware Distributors, L.P. (DDLP) paid a financial advisor a commission on the purchase of those shares. Class B shares may be purchased only through dividend reinvestment and certain permitted exchanges. Prior to June 1, 2007, Class B shares were sold with a CDSC that declined from 4.00% 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 1.00%, 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 (U.S. GAAP) 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, which approximates fair value. Securities listed on a foreign exchange are normally valued at the last quoted sales price on the valuation date. Debt securities and credit default swap (CDS) contracts are valued based upon valuations provided by an independent pricing service or counterparty and reviewed by management. To the extent current market prices are not available, the pricing service may take into account developments related to the specific security, as well as transactions in comparable securities. U.S. government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. For asset backed securities, collateralized mortgage obligations, commercial mortgage securities and U.S. government agency mortgage securities, pricing vendors utilize matrix pricing which considers prepayment speed, attributes of the collateral, yield or price of bonds of comparable quality, coupon, maturity and type as well as broker/dealer-supplied prices. Swap prices are derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows, trades and values of the underlying reference instruments. Foreign currency exchange contracts are valued
52
at the mean between the bid and ask prices, which approximates fair value. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available. Futures contracts and options on futures contracts are valued at the daily quoted settlement prices. Exchange-traded options are valued at the last reported sale price or, if no sales are reported, at the mean between the last reported bid and ask prices, which approximates fair value. 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, generally as of 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 Foreign Income Taxes — No provision for federal income taxes has been made as the Fund intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Fund evaluates tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year. Management has analyzed the Fund’s tax positions taken for all open federal income tax years (Nov. 30, 2010 - Nov. 30, 2013), and has concluded that no provision for federal income tax is required in the Fund’s financial statements. In regards to foreign taxes only, the Fund has open tax years in certain foreign countries it invests in that may date back to the inception of the Fund.
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 purchase certain U.S. government securities subject to the counterparty’s agreement to repurchase them at an agreed upon date and price. The counterparty will be required on a daily basis to maintain the value of the collateral subject to the agreement at not less than the repurchase price (including accrued interest). The agreements are conditioned upon the collateral being deposited under the Federal Reserve book-entry system with the Fund's custodian or a third party sub-custodian. In the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings. All open repurchase agreements as of the date of this report were entered into on Nov. 29, 2013.
53
Notes to financial statements
Delaware Dividend Income Fund
1. Significant Accounting Policies (continued)
Foreign Currency Transactions — Transactions denominated in foreign currencies are recorded at the prevailing exchange rates on the valuation date in accordance with the Fund’s prospectus. The value of all assets and liabilities denominated in foreign currencies is translated 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 generally bifurcates that portion of realized gains and losses on investments in debt securities which is due to changes in foreign exchange rates from that which is due to changes in market prices of debt securities. That portion of gains (losses) is included in the statements of operations under the caption net realized gain (loss) on foreign currencies. For foreign equity securities, these changes are included in net realized and unrealized gain or loss on investments. 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. GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material.
Other — Expenses directly attributable to the Fund are charged directly to the Fund. Other expenses common to various funds within the Delaware Investments® Family of Funds are generally allocated among such funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Interest income is recorded on the accrual basis. Discounts and premiums on debt securities are amortized to interest income over the lives of the respective securities using the effective interest method. Distributions received from investments in Real Estate Investment Trusts (REITs) are recorded as dividend income on 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. Foreign dividends are also recorded on the ex-dividend date or as soon after the ex-dividend date that the Fund is aware of such dividends, net of all tax withholdings, a portion of which may be reclaimable. Withholding taxes and reclaims on foreign dividends have been recorded in accordance with the Fund’s understanding of the applicable country’s tax rules and rates.
54
The Fund declares and pays dividends from net investment income monthly and distributions from net realized gain on investments, if any, annually. The Fund may distribute more frequently, if necessary for tax purposes. Dividends and distributions, if any, are recorded on the ex-dividend date.
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 year ended Nov. 30, 2013.
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 year ended Nov. 30, 2013.
The Fund receives earnings credits from its transfer agent when positive cash balances are maintained, which are used to offset transfer agent fees. If the amount earned is greater than one dollar, the expense paid under this arrangement is included in dividend disbursing and transfer agent fees and expenses and appears on the statement of operations with the corresponding expense offset shown as “expense paid indirectly.” For the year ended Nov. 30, 2013, the Fund earned $567 under this agreement.
2. Investment Management, Administration Agreements and Other Transactions with Affiliates
In accordance with the terms of its investment management agreement, the Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee which is calculated daily at the rate of 0.65% on the first $500 million of average daily net assets of the Fund, 0.60% on the next $500 million, 0.55% on the next $1.5 billion, and 0.50% on average daily net assets in excess of $2.5 billion.
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Fund. For these services, the Fund pays DSC fees based on the aggregate daily net assets of the Delaware Investments® Family of Funds at the following annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DSC under the service agreement described above are allocated among all Funds in the Delaware Investments® Family of Funds on a relative net asset value basis. For the year ended Nov. 30, 2013, the Fund was charged $ 24,350 for these services.
55
Notes to financial statements
Delaware Dividend Income Fund
2. Investment Management, Administration Agreements and Other Transactions with Affiliates (continued)
DSC is also the transfer agent and dividend disbursing agent of the Fund. For these services, the Fund pays DSC fees based on the aggregate daily net assets of the retail funds within the Delaware Investments Family of Funds at the following annual rate: 0.025% of the first $20 billion; 0.020% of the next $5 billion; 0.015% of the next $5 billion; and 0.013% on average daily net assets in excess of $30 billion. These amounts are included in the statement of operations as dividend disbursing and transfer agent fees and expenses. For the year ended Nov. 30, 2013, the amount charged by DSC was $111,204. Pursuant to a sub-transfer agency agreement between DSC and BNY Mellon Investment Servicing (US) Inc. (BNYMIS), BNYMIS provides certain sub-transfer agency services to the Fund. Sub-transfer agency fees are passed on to and paid directly by the Fund.
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 0.25% 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 0.50% of the average daily net assets of Class R shares. Prior to Oct.1, 2013, the Fund paid an annual distribution and service fee of 0.30%, 1.00% and 0.60% of the average daily net assets of the Class A, Class B and Class R shares, respectively. For the period from Dec. 1, 2012 to Oct. 1, 2013, the distribution and service fees for Class A and Class R were contractually limited to 0.25% and 0.50% of the classes’ average daily net assets. Institutional Class shares pay no distribution and service expenses.
As provided in the investment management agreement, the Fund bears the cost of certain legal services, including internal legal services provided to the Fund by DMC and/or its affiliates’ employees. For the year ended Nov. 30, 2013, the Fund was charged $15,841 for internal legal services provided by DMC and/or its affiliates’ employees.
For the year ended Nov. 30, 2013, DDLP earned $113,311 for commissions on sales of the Fund’s Class A shares. For the year ended Nov. 30, 2013 DDLP received gross CDSC commissions of $138, $2,694 and $1,625 on redemption of the Fund’s Class A, Class B and Class C shares, respectively, and these commissions were entirely used to offset up-front commissions previously paid by DDLP to broker/dealers on sales of those shares.
Trustees’ fees include expenses accrued by the Fund for each Trustee’s retainer and meeting fees. Certain officers of DMC, DSC and DDLP are officers and/or Trustees of the Trust. These officers and Trustees are paid no compensation by the Fund.
3. Investments
For the year ended Nov. 30, 2013, the Fund made purchases of $366,107,303 and sales of $235,809,668 of investment securities other than U.S. government securities and short-term investments.
56
At Nov. 30, 2013, the cost of investments for federal income tax purposes was $546,184,917. At Nov. 30, 2013, the net unrealized appreciation was $81,571,367, of which $100,628,213 related to unrealized appreciation of investments and $19,056,846 related to unrealized depreciation of investments.
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. A three-level hierarchy for fair value measurements has been established based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability 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-level hierarchy of inputs is summarized below.
Level 1 | – | inputs are quoted prices in active markets for identical investments (e.g., equity securities, open-end investment companies, futures contracts, exchange-traded options contracts) |
Level 2 | – | other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs) (e.g., debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities) |
Level 3 | – | inputs are significant unobservable inputs (including the Fund's own assumptions used to determine the fair value of investments) (e.g., broker-quoted securities, fair valued securities) |
Level 3 investments are valued using significant unobservable inputs. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Valuations may also be based upon current market prices of securities that are comparable in coupon, rating, maturity and industry. The derived value of a Level 3 investment may not represent the value which is received upon disposition and this could impact the results of operations.
57
Notes to financial statements
Delaware Dividend Income Fund
3. Investments (continued)
The following table summarizes the valuation of the Fund's investments by fair value hierarchy levels as of Nov. 30, 2013:
Level 1 | Level 2 | Level 3 | Total | |||||||||||
Commercial Mortgage-Backed | ||||||||||||||
Securities | $ | — | $ | 2,224,221 | $ | — | $ | 2,224,221 | ||||||
Bank Loans | — | 8,350,003 | 1,424,618 | 9,774,621 | ||||||||||
Corporate Debt | — | 153,597,218 | — | 153,597,218 | ||||||||||
Foreign Debt | — | 5,472,146 | — | 5,472,146 | ||||||||||
Municipal Bonds | — | 3,342,716 | — | 3,342,716 | ||||||||||
Common Stock | 397,581,588 | — | — | 397,581,588 | ||||||||||
Convertible Preferred Stock1 | 11,670,945 | 8,194,720 | — | 19,865,665 | ||||||||||
Preferred Stock1 | 1,491,435 | 777,384 | 1,072,393 | 3,341,212 | ||||||||||
Limited Partnership | 1,104,312 | — | — | 1,104,312 | ||||||||||
Short-Term Investments | — | 31,452,585 | — | 31,452,585 | ||||||||||
Total | $ | 411,848,280 | $ | 213,410,993 | $ | 2,497,011 | $ | 627,756,284 | ||||||
Options Written | $ | (53,248 | ) | $ | — | $ | — | $ | (53,248 | ) | ||||
Foreign Currency | ||||||||||||||
Exchange Contracts | — | (6,785 | ) | — | (6,785 | ) | ||||||||
Futures Contracts | (270,296 | ) | — | — | (270,296 | ) | ||||||||
Swap Contracts | — | (286,249 | ) | — | (286,249 | ) |
1Security type is valued across multiple levels. The amount attributed to Level 1 investments, Level 2 investments and Level 3 investments represents the following percentages of the total market value of this security type for the Fund. Level 1 investments represent exchange-traded investments, Level 2 investments represent investments with observable inputs, while Level 3 investments represent investments without observable inputs.
Level 1 | Level 2 | Level 3 | Total | ||||
Bank Loans | — | 85.43% | 14.57% | 100.00% | |||
Convertible Preferred Stock | 58.75% | 41.25% | — | 100.00% | |||
Preferred Stock | 44.64% | 23.27% | 32.09% | 100.00% |
The securities deemed worthless on the schedule of investments are considered to be Level 3 securities in this table.
A reconciliation of Level 3 investments is presented when the Fund has a significant amount of Level 3 investments at the beginning, interim or end of period in relation to net assets. Management has determined not to provide additional disclosure on Level 3 inputs under ASU No. 2011-04 since the Level 3 investments are not considered significant to the Fund’s net assets at the end of the period.
During the year ended Nov. 30, 2013, there were no transfers between Level 1 investments, Level 2 investments and Level 3 investments that had a significant impact to the Fund. The Fund’s policy is to recognize transfers between levels at the beginning of the reporting period.
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4. Dividend and Distribution Information
Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Additionally, distributions from net gains on foreign currency transactions and net short-term gains on sales of investment securities are treated as ordinary income for federal income tax purposes. The tax character of dividends and distributions paid during the years ended Nov. 30, 2013 and 2012 was as follows:
Year Ended | |||||
11/30/13 | 11/30/12 | ||||
Ordinary income | $ | 10,926,205 | $ | 11,924,384 |
5. Components of Net Assets on a Tax Basis
As of Nov. 30, 2013, the components of net assets on a tax basis were as follows:
Shares of beneficial interest | $ | 675,116,233 | |
Undistributed ordinary income | 1,630,813 | ||
Capital loss carryforwards | (131,235,699 | ) | |
Unrealized appreciation | 81,566,354 | ||
Net assets | $ | 627,077,701 |
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, mark-to market of foreign currency contracts, mark-to-market on futures and options contracts, tax treatment of CDS contracts, trust preferred securities, REITs, tax treatment of partnership income and contingent payment debt instruments.
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, market discount and premium on certain debt instruments, passive foreign investment companies, CDS contracts, contingent payment debt instruments, and partnership income. Results of operations and net assets were not affected by these reclassifications. For the year ended Nov. 30, 2013, the Fund recorded the following reclassifications.
Undistributed net investment income | $ | 144,962 | |
Accumulated net realized loss | (144,962 | ) |
For federal income tax purposes, capital loss carryforwards may be carried forward and applied against future capital gains. $14,163,914 was utilized in 2013. Capital loss carryforwards remaining at Nov. 30, 2013 will expire as follows: $76,486,649 expires in 2016 and $54,749,050 expires in 2017.
59
Notes to financial statements
Delaware Dividend Income Fund
5. Components of Net Assets on a Tax Basis (continued)
On Dec. 22, 2010, the Regulated Investment Company Modernization Act of 2010 (Act) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes were generally effective for taxable years beginning after the date of enactment. Under the Act, the Fund is permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under previous regulation.
6. Capital Shares
Transactions in capital shares were as follows:
Year Ended | |||||
11/30/13 | 11/30/12 | ||||
Shares sold: | |||||
Class A | 7,963,286 | 2,797,793 | |||
Class B | 17,010 | 9,586 | |||
Class C | 7,445,097 | 1,650,812 | |||
Class R | 99,301 | 120,275 | |||
Institutional Class | 3,182,591 | 1,204,797 | |||
Shares issued upon reinvestment of dividends and distributions: | |||||
Class A | 467,743 | 526,855 | |||
Class B | 18,398 | 41,400 | |||
Class C | 250,979 | 320,522 | |||
Class R | 6,010 | 9,332 | |||
Institutional Class | 87,786 | 76,031 | |||
19,538,201 | 6,757,403 | ||||
Shares redeemed: | |||||
Class A | (3,863,148 | ) | (3,846,267 | ) | |
Class B | (783,456 | ) | (814,349 | ) | |
Class C | (2,126,944 | ) | (2,927,509 | ) | |
Class R | (156,755 | ) | (179,453 | ) | |
Institutional Class | (1,228,075 | ) | (1,025,570 | ) | |
(8,158,378 | ) | (8,793,148 | ) | ||
Net increase (decrease) | 11,379,823 | (2,035,745 | ) |
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For the years ended Nov. 30, 2013 and 2012, 105,064 Class B shares were converted to 105,126 Class A shares valued at $1,249,804 and 204,345 Class B shares were converted to 204,433 Class A shares valued at $2,148,049, respectively. The respective amounts are included in Class B redemptions and Class A subscriptions in the table above and the statements of changes in net assets.
7. Unfunded Commitments
The Fund may invest in floating rate loans. In connection with these investments, the Fund may also enter into unfunded corporate loan commitments (commitments). Commitments may obligate the Fund to furnish temporary financing to a borrower until permanent financing can be arranged. In connection with these commitments, the Fund earns a commitment fee, typically set as a percentage of the commitment amount.
As of Nov. 30, 2013, the Fund had the following unfunded loan commitments:
Borrower | Unfunded Loan Commitment | |||
Community Health Systems Secured Bridge Loan | $ | 272,014 | ||
Community Health Systems Unsecured Bridge Loan | 292,986 | |||
Darling International Bridge Loan | 515,000 |
8. Line of Credit
The Fund, along with certain other funds in the Delaware Investments® Family of Funds (Participants), was a participant in a $125,000,000 revolving line of credit to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, the Participants were charged an annual commitment fee of 0.08%, which was allocated across the Participants on the basis of each Participant’s allocation of the entire facility. The Participants were permitted to borrow up to a maximum of one third of their net assets under the agreement. Each Participant was individually, and not jointly, liable for its particular advances, if any, under the line of credit. The line of credit available under the agreement expired on Nov. 12, 2013.
On Nov. 12, 2013, the Fund, along with the other Participants, entered into an amendment to the agreement for a $225,000,000 revolving line of credit. The line of credit is to be used as described above and operates in substantially the same manner as the original agreement. The line of credit available under the agreement expires on Nov. 10, 2014.
The Fund had no amounts outstanding as of Nov. 30, 2013 or at any time during the year then ended.
61
Notes to financial statements
Delaware Dividend Income Fund
9. Derivatives
U.S. GAAP requires disclosures that enable investors to understand: 1) how and why an entity uses derivatives, 2) how they are accounted for, and 3) how they affect an entity's results of operations and financial position.
Foreign Currency Exchange Contracts — The Fund enters into foreign currency exchange contracts as a way of managing foreign exchange rate risk. The Fund may enter into these contracts to fix the U.S. dollar value of a security that it has agreed to buy or sell for the period between the date the trade was entered into and the date the security is delivered and paid for. The Fund may also use these contracts to hedge the U.S. dollar value of securities it already owns that are denominated in foreign currencies. The change in value is recorded as an unrealized gain or loss. When the contract is closed, a realized gain or loss is recorded equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
The use of foreign currency exchange contracts does not eliminate fluctuations in the underlying prices of the securities, but does establish a rate of exchange that can be achieved in the future. Although foreign currency exchange contracts limit the risk of loss due to an unfavorable change in the value of the hedged currency, they also limit any potential gain that might result should the value of the currency change favorably. In addition, the Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts. The Fund’s maximum risk of loss from counterparty credit risk is the value of its currency exchanged with the counterparty. The risk is generally 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.
Futures Contracts — A futures contract is an agreement in which the writer (or seller) of the contract agrees to deliver to the buyer an amount of cash or securities equal to a specific dollar amount times the difference between the value of a specific security or index at the close of the last trading day of the contract and the price at which the agreement is made. The Fund may use futures in the normal course of pursuing its investment objective. The Fund may invest in financial futures contracts to hedge its existing portfolio securities against fluctuations in fair value caused by changes in prevailing market interest rates. Upon entering into a futures contract, the Fund deposits cash or pledges U.S. government securities to a broker, equal to the minimum “initial margin” requirements of the exchange on which the contract is traded. Subsequent payments are received from the broker or paid to the broker each day, based on the daily fluctuation in the market value of the contract. These receipts or payments are known as “variation margin” and are recorded daily by the Fund as unrealized gains or losses until the contracts are closed. When the contracts are closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Risks of entering into futures contracts include potential imperfect correlation between the futures contracts and the underlying securities and the possibility of an illiquid secondary market for these instruments. When investing
62
in futures, there is minimal counterparty credit risk to the Fund because futures are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees against default.
Options Contracts — During the year ended Nov. 30, 2013, the Fund entered into options contracts in the normal course of pursuing its investment objective. The Fund may buy or write options contracts for any number of reasons: to manage the Fund’s exposure to changes in securities prices and foreign currencies; to earn income; as an efficient means of adjusting the Fund's overall exposure to certain markets; to protect the value of portfolio securities; and as a cash management tool. The Fund may buy or write call or put options on securities, financial indices, and foreign currencies. When the Fund buys an option, a premium is paid and an asset is recorded and adjusted on a daily basis to reflect the current market value of the options purchased. When the Fund writes an option, a premium is received and a liability is recorded and adjusted on a daily basis to reflect the current market value of the options written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is treated as realized gain or loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether the Fund has a realized gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by the Fund. The Fund, as writer of an option, bears the market risk of an unfavorable change in the price of the security underlying the written option. When writing options, the Fund is subject to minimal counterparty risk because the counterparty is only obligated to pay premiums and does not bear the market risk of an unfavorable market change.
Transactions in options written during the year ended Nov. 30, 2013 for the Fund were as follows:
Number of | |||||||
Contracts | Premiums | ||||||
Options outstanding at Nov. 30, 2012 | 450 | $ | 146,999 | ||||
Options written | 4,776 | 645,175 | |||||
Options expired | (2,455 | ) | (346,375 | ) | |||
Options terminated in closing purchase transactions | (2,355 | ) | (399,339 | ) | |||
Options outstanding at Nov. 30, 2013 | 416 | $ | 46,460 |
Swap Contracts — The Fund may enter into CDS contracts in the normal course of pursuing its investment objective. 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. The Fund will not be permitted to enter into any swap transactions unless, at the time of entering into such transactions, the unsecured long-term debt of the actual counterparty combined with any credit enhancements, is rated at least BBB- by S&P or Baa3 by Moody's or is determined to be of equivalent quality by the manager.
63
Notes to financial statements
Delaware Dividend Income Fund
9. Derivatives (continued)
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 reference security (or basket of securities) to the counterparty. Credit events generally include, among others, bankruptcy, failure to pay, and obligation default.
During the year ended Nov. 30, 2013, 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 (gains) on swap contracts. Upfront payments made or received in connection with CDS contracts are amortized over the expected life of the CDS contracts as unrealized losses (gains) on swap contracts. The change in value of CDS contracts is recorded as unrealized appreciation or depreciation daily. A realized gain or loss is recorded upon a credit event (as defined in the CDS agreement) or the maturity or termination of the agreement. For the year ended Nov. 30, 2013, the Fund did not enter into any CDS contracts as a seller of protection. The Fund received $1,733,827 in cash collateral for certain open derivatives.
CDS contracts may involve greater risks than if the Fund had invested in the reference obligation directly. CDS contracts 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 are generally 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 statement of net assets.
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Fair values of derivative instruments as of Nov. 30, 2013 were as follows:
Asset Derivatives | Liability Derivatives | ||||||||||||
Statement of Assets | Fair | Statement of Assets | Fair | ||||||||||
and Liabilities Location | Value | and Liabilities Location | Value | ||||||||||
Forward currency exchange contracts (Foreign currency | |||||||||||||
exchange contracts) | Unrealized gain on foreign currency exchange contracts | $ | — | Unrealized loss on foreign currency exchange contracts | $ | (6,785 | ) | ||||||
Interest rate contracts | |||||||||||||
(Futures contracts) | Variation margin receivable on futures contracts | — | Variation margin payable on futures contracts | (270,296 | )* | ||||||||
Credit contracts | |||||||||||||
(Swap contracts) | Unrealized gain of credit default swap contracts | — | Unrealized loss of credit default swap contracts | (286,249 | ) | ||||||||
Total | $ | — | $ | (563,330 | ) |
*Includes cumulative appreciation or depreciation of futures contracts from the date the contracts are opened through Nov. 30, 2013. Only current day variation margin is reported on the Portfolio’s statement of assets and liabilities.
The effect of derivative instruments on the statement of operations for the year ended Nov. 30, 2013 was as follows:
Net Realized Gain (Loss) on: | ||||||||||||||
Foreign | Financial | |||||||||||||
Currency | Futures | Options | ||||||||||||
Transactions | Contracts | Written | Swaps | |||||||||||
Foreign currency exchange contracts | $ | (227,122 | ) | $ | — | $ | — | $ | — | |||||
Interest rate contracts | — | (629,446 | ) | — | — | |||||||||
Equity contracts | — | — | 346,375 | — | ||||||||||
Credit contracts | — | — | — | (2,961,102 | ) | |||||||||
Total | $ | (227,122 | ) | $ | (629,446 | ) | $ | 346,375 | $ | (2,961,102 | ) | |||
Net Change in Unrealized Appreciation (Depreciation) of: | ||||||||||||||
Foreign | Financial | |||||||||||||
Currency | Futures | Options | ||||||||||||
Transactions | Contracts | Written | Swaps | |||||||||||
Foreign currency exchange contracts | $ | (5,959 | ) | $ | — | $ | — | $ | — | |||||
Interest rate contracts | — | (321,190 | ) | — | — | |||||||||
Equity contracts | — | — | 98,213 | — | ||||||||||
Credit contracts | — | — | — | (39,947 | ) | |||||||||
Total | $ | (5,959 | ) | $ | (321,190 | ) | $ | 98,213 | $ | (39,947 | ) |
65
Notes to financial statements
Delaware Dividend Income Fund
9. Derivatives (continued)
Derivatives Generally. The table below summarizes the average balance of derivative holdings by the Fund during the year ended Nov. 30, 2013. The average balance of derivatives held is generally similar to the volume of derivative activity for the year ended Nov. 30, 2013.
Long | Short | ||||
Derivative | Derivative | ||||
Volume | Volume | ||||
Foreign currency exchange contracts (average cost) | USD | 273,142 | USD | 420,184 | |
Futures contracts (average notional value) | 426,359 | 5,807,220 | |||
Swap contracts (average notional value) | 20,266,932 | — | |||
Options contracts (average notional value) | — | 20,158 |
10. Securities Lending
The Fund, along with other funds in the Delaware Investments® Family of Funds, may lend its securities pursuant to a security lending agreement (Lending Agreement) with The Bank of New York Mellon (BNY Mellon). At the time a security is loaned, the borrower must post collateral equal to the required percentage of the market value of the loaned security, including any accrued interest. The required percentage is: (i) 102% with respect to U.S. securities and foreign securities that are denominated and payable in U.S. dollars; and (ii) 105% with respect to foreign securities. With respect to each loan, if on any business day the aggregate market value of securities collateral plus cash collateral held is less than the aggregate market value of the securities which are the subject of such loan, the borrower will be notified to provide additional collateral by the end of the following business day which, together with the collateral already held, will be not less than the applicable initial collateral requirements for such security loan. If the aggregate market value of securities collateral and cash collateral held with respect to a security loan exceeds the applicable initial collateral requirement, upon request of the borrower, BNY Mellon must return enough collateral to the borrower by the end of the following business day to reduce the value of the remaining collateral to the applicable initial collateral requirement for such security loan. As a result of the foregoing, the value of the collateral held with respect to a loaned security may be more or less than the value of the security on loan.
Cash collateral received is generally invested in the Delaware Investments Collateral Fund No. 1 (Collective Trust) established by BNY Mellon for the purpose of investment on behalf of funds managed by DMC that participate in BNY Mellon's securities lending program. The Collective Trust may invest in U.S. government securities and high quality corporate debt, asset-backed and other money market securities and in repurchase agreements collateralized by such securities, provided that the Collective Trust will generally have a dollar-weighted average portfolio maturity of 60 days or less. 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,
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the lending agent has agreed to pay the amount of the shortfall to the Fund, or at the discretion of the lending agent, replace the loaned securities. The Fund continues to record dividends or interest, as applicable, on the securities loaned and is subject to changes in value of the securities loaned that may occur during the term of the loan. The Fund has the right under the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized by non-cash collateral, the Fund receives loan premiums paid by the borrower. With respect to security loans collateralized by cash collateral, the earnings from the collateral investments are shared among the Fund, the security lending agent and the borrower. The Fund records security lending income net of allocations to the security lending agent and the borrower.
The Collective Trust used for the investment of cash collateral received from borrowers of securities seeks to maintain a net asset value per unit of $1.00, but there can be no assurance that it will always be able to do so. The Fund may incur investment losses as a result of investing securities lending collateral in the Collective Trust. This could occur if an investment in the Collective Trust defaulted or if it were necessary to liquidate assets in the Collective Trust to meet returns on outstanding security loans at a time when the Collective Trust’s net asset value per unit was less than $1.00. Under those circumstances, the Fund may not receive an amount from the Collective Trust that is equal in amount to the collateral the Fund would be required to return to the borrower of the securities and the Fund would be required to make up for this shortfall. During the year ended Nov. 30, 2013, the Fund had no securities out on loan.
11. Credit and Market Risk
The Fund invests a portion of its assets in high yield fixed income securities, which are securities rated lower than BBB- by Standard & Poor’s and Baa3 by Moody’s Investors Service, or similarly rated by another nationally recognized statistical rating organization. Investments in these higher yielding securities are generally accompanied by a greater degree of credit risk than higher rated securities. Additionally, lower rated securities may be more susceptible to adverse economic and competitive industry conditions than investment grade securities.
The Fund invests in fixed income securities whose value is derived from an underlying pool of mortgages or consumer loans. The value of these securities is sensitive to changes in economic conditions, including delinquencies and/or defaults, and may be adversely affected by shifts in the market’s perception of the issuers and changes in interest rates. Investors receive principal and interest payments as the underlying mortgages and consumer loans are paid back. Prepayment of mortgages may shorten the stated maturity of the obligations and can result in a loss of premium, if any has been paid.
The Fund invests in REITs and is subject to the risks associated with that industry. If the Fund holds real estate directly as a result of defaults or receives rental income directly from real estate holdings, its tax status as a regulated investment company may be jeopardized. There were no direct real estate holdings during the year ended Nov. 30, 2013. 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.
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Notes to financial statements
Delaware Dividend Income Fund
11. Credit and Market Risk (continued)
Fund invests in certain obligations that may have liquidity protection to ensure that the receipt of payments due on the underlying security is timely. Such protection may be provided through guarantees, insurance policies or letters of credit obtained by the issuer or sponsor through third parties, through various means of structuring the transaction or through a combination of such approaches. The Fund will not pay any additional fees for such credit support, although the existence of credit support may increase the price of a security.
The Fund may invest up to 15% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A 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 securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Fund’s 15% limit on investments in illiquid securities. Rule 144A and illiquid securities held by the Fund have been identified in the schedule of investments.
12. 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.
13. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to Nov. 30, 2013 that would require recognition or disclosure in the Fund’s financial statements.
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Report of independent
registered public accounting firm
To the Board of Trustees of Delaware Group® Equity Funds V
and Shareholders of Delaware Dividend Income Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Delaware Dividend Income Fund (one of the series constituting Delaware Group Equity Funds V, hereafter referred to as the “Fund”) at November 30, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at November 30, by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. The financial highlights for the year ended November 30, 2009 were audited by other independent accountants whose report dated January 21, 2010 expressed an unqualified opinion on those statements.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
January 17, 2014
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Other Fund information
(Unaudited)
Delaware Dividend Income Fund
Tax Information
The information set forth below is for the Fund’s fiscal year as required by federal income tax laws. Shareholders, however, must report distributions on a calendar year basis for income tax purposes, which may include distributions for portions of two fiscal years of the Fund. Accordingly, the information needed by shareholders for income tax purposes will be sent to them in January of each year. Please consult your tax advisor for proper treatment of this information.
All disclosures are based on financial information available as of the date of this annual report and, accordingly are subject to change. For any and all items requiring reporting, it is the intention of the Fund to report the maximum amount permitted under the Internal Revenue Code and the regulations thereunder.
For the fiscal year ended Nov. 30, 2013, the Fund reports distributions paid during the year as follows:
(A) | Ordinary Income Distributions (Tax Basis)* | 100.00% |
(B) | Qualified Dividends1 | 63.84% |
1 | Qualified dividends represent dividends which qualify for the corporate dividends received deduction. |
* | For the fiscal year ended Nov. 30, 2013, certain dividends paid by the Fund may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003, and by the Tax Relief Unemployment Insurance Reauthorization and Job Creations Act of 2010 and made permanent by the American Taxpayer Relief Act of 2012. The Fund intends to report 69.82% to be taxed at a maximum rate of 15%. Complete information will be computed and reported in conjunction with your 2013 Form 1099-DIV, as applicable. |
For the fiscal year ended Nov. 30, 2013, certain interest income paid by the Fund, determined to be Qualified Interest Income may be subject to relief from U.S. withholding for foreign shareholders, as provided by the American Jobs Creation Act of 2004, and by Tax Relief Unemployment Insurance Reauthorization and Job Creations Act of 2010 and as extended by the American Taxpayer Relief Act of 2012. For the fiscal year ended Nov. 30, 2013, the Fund has reported maximum distributions of Qualified Interest Income of $5,530,962.
Board consideration of Delaware Dividend Income Fund investment advisory agreement
At a meeting held on Aug. 20-22, 2013 (the “Annual Meeting”), the Board of Trustees (the “Board”), including a majority of disinterested or independent Trustees, approved the renewal of the Investment Advisory Agreement for Delaware Dividend Income Fund (the “Fund”). In making its decision, the Board considered information furnished at regular quarterly Board meetings, including reports detailing Fund performance, investment strategies and expenses, as well as information prepared specifically in connection with the renewal of the investment advisory and sub-advisory contracts. Information furnished specifically in connection with the renewal of the Investment Advisory Agreement with Delaware Management Company (“DMC”) included materials provided by DMC and its affiliates (“Delaware Investments”) concerning, among other
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things, the nature, extent and quality of services provided to the Fund, the costs of such services to the Fund, economies of scale and the financial condition and profitability of Delaware Investments. In addition, in connection with the Annual Meeting, reports were provided to the Trustees in May 2013 and included reports provided by Lipper, Inc., an independent statistical compilation organization (“Lipper”). 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 independent legal counsel to the Independent Trustees. The Board requested and received information regarding DMC’s policy with respect to advisory fee levels and its breakpoint philosophy; the structure of portfolio manager compensation; the investment manager’s profitability; comparative client fee information; and any constraints or limitations on the availability of securities for certain investment styles, which had in the past year inhibited, or which were likely in the future to inhibit, DMC’s ability to invest fully in accordance with Fund policies.
In considering information relating to the approval of the Fund’s advisory agreement, the Independent Trustees received assistance and advice from and met separately with independent legal counsel to the Independent Trustees. Although the Board gave attention to all information furnished, the following discussion identifies, under separate headings, the primary factors taken into account by the Board during its contract renewal considerations.
Nature, Extent and Quality of Service. The Board considered the services provided by 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 DMC and Delaware Distributors, L.P. (together, “Management”) personnel with the Code of Ethics adopted throughout the Delaware Investments® Family of Funds complex and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of the Fund’s investment advisor and the emphasis placed on research in the investment process. The Board recognized DMC’s recent receipt of several industry distinctions. The Board gave favorable consideration to DMC’s efforts to control expenditures while maintaining service levels committed to fund matters. The Board noted that in July 2011 Management implemented measures to reduce overall costs and improve transfer agent and shareholder servicing functions through outsourcing. The Board 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.
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Other Fund information
(Unaudited)
Delaware Dividend Income Fund
Board consideration of Delaware Dividend Income Fund investment advisory agreement (continued)
Investment Performance. The Board placed significant emphasis on the investment performance of the Fund in view of the importance of investment performance to shareholders. Although the Board gave appropriate consideration to performance reports and discussions with portfolio managers at Investment Committee meetings throughout the year, the Board gave particular weight to the 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 March 31, 2013. 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-, five- and ten-year periods was in the first quartile of its Performance Universe. The Board was satisfied with performance.
Comparative Expenses. The Board considered expense comparison data for the Delaware Investments® Family of Funds. Management provided the Board with information on pricing levels and fee structures for the Fund as of its most recently completed fiscal year. The Board also focused on the comparative analysis of effective management fees and total expense ratios of the Fund versus effective management fees and expense ratios of a group of similar funds as selected by 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.
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The expense comparisons for the Fund showed that its actual management fee was in the quartile with the second highest expenses of its Expense Group and its total expenses were in the quartile with the second lowest expenses of its Expense Group. The Board was satisfied with the 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, reflects 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.
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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Board of trustees/directors and officers addendum
Delaware Investments® Family of Funds
A mutual fund is governed by a Board of Trustees/Directors (“Trustees”), which has oversight responsibility for the management of a fund’s business affairs. Trustees establish procedures and oversee and review the performance of the investment manager, the distributor, and others who perform services for the fund. The independent fund trustees, in particular, are advocates
Name, Address, | Position(s) | Length of |
and Birth Date | Held with Fund(s) | Time Served |
Interested Trustees | ||
Patrick P. Coyne1 | Chairman, President, | Chairman and Trustee |
2005 Market Street | Chief Executive Officer, | since August 16, 2006 |
Philadelphia, PA 19103 | and Trustee | |
April 1963 | President and | |
Chief Executive Officer | ||
since August 1, 2006 | ||
Independent Trustees | ||
Thomas L. Bennett | Trustee | Since March 2005 |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
October 1947 | ||
Joseph W. Chow | Trustee | Since January 2013 |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
January 1953 | ||
John A. Fry | Trustee | Since January 2001 |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
May 1960 | ||
Anthony D. Knerr | Trustee | Since April 1990 |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
December 1938 |
1 Patrick P. Coyne is considered to be an “Interested Trustee” because he is an executive officer of the Fund’s(s’) investment advisor.
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for shareholder interests. Each trustee has served in that capacity since he or she was elected to or appointed to the Board of Trustees, and will continue to serve until his or her retirement or the election of a new trustee in his or her place. The following is a list of the Trustees and Officers with certain background and related information.
Number of Portfolios in | ||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships |
During Past 5 Years | by Trustee or Officer | Held by Trustee or Officer |
Patrick P. Coyne has served in | 70 | Director and Audit |
various executive capacities | Committee Member | |
at different times at | Kaydon Corp. | |
Delaware Investments.2 | ||
Board of Governors Member | ||
Investment Company | ||
Institute (ICI) | ||
Private Investor | 70 | Director |
(March 2004–Present) | Bryn Mawr Bank Corp. (BMTC) | |
(2007–2011) | ||
Executive Vice President | 70 | Director and Audit Committee |
(Emerging Economies Strategies, | Member — Hercules | |
Risk and Corporate Administration) | Technology Growth | |
State Street Corporation | Capital, Inc. | |
(July 2004–March 2011) | ||
President | 70 | Director — Hershey Trust |
Drexel University | ||
(August 2010–Present) | Director and Audit | |
Committee Member | ||
President | Community Health Systems | |
Franklin & Marshall College | ||
(July 2002–July 2010) | ||
Managing Director | 70 | None |
AKA Strategy | ||
(Strategic Consulting) | ||
(1990–Present) |
2 Delaware Investments is the marketing name for Delaware Management Holdings, Inc. and its subsidiaries, including the Fund’s(s’) investment advisor, principal underwriter, and its transfer agent.
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Board of trustees/directors and officers addendum
Delaware Investments® Family of Funds
Name, Address, | Position(s) | Length of |
and Birth Date | Held with Fund(s) | Time Served |
Independent Trustees (continued) | ||
Lucinda S. Landreth | Trustee | Since March 2005 |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
June 1947 | ||
Frances A. Sevilla-Sacasa | Trustee | Since September 2011 |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
January 1956 | ||
Thomas K. Whitford | Trustee | Since January 2013 |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
March 1956 | ||
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Number of Portfolios in | ||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships |
During Past 5 Years | by Trustee or Officer | Held by Trustee or Officer |
Private Investor | 70 | None |
(2004–Present) | ||
Chief Executive Officer — | 70 | Trust Manager and |
Banco Itaú Europa | Audit Committee | |
International | Member — Camden | |
(April 2012–Present) | Property Trust | |
Executive Advisor to Dean | ||
(August 2011–March 2012) | ||
and Interim Dean | ||
(January 2011–July 2011) — | ||
University of Miami School of | ||
Business Administration | ||
President — U.S. Trust, | ||
Bank of America Private | ||
Wealth Management | ||
(Private Banking) | ||
(July 2007–December 2008) | ||
Vice Chairman | 70 | None |
(2010–April 2013) | ||
Chief Administrative | ||
Officer (2008–2010) | ||
and Executive Vice | ||
President and Chief | ||
Administrative Officer | ||
(2007–2009) — | ||
PNC Financial | ||
Services Group |
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Board of trustees/directors and officers addendum
Delaware Investments® Family of Funds
Name, Address, | Position(s) | Length of |
and Birth Date | Held with Fund(s) | Time Served |
Independent Trustees (continued) | ||
Janet L. Yeomans | Trustee | Since April 1999 |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
July 1948 | ||
J. Richard Zecher | Trustee | Since March 2005 |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
July 1940 | ||
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Number of Portfolios in | ||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships |
During Past 5 Years | by Trustee or Officer | Held by Trustee or Officer |
Vice President and Treasurer | 70 | Director, Audit |
(January 2006–July 2012) | Committee Member and | |
Vice President — Mergers & Acquisitions | Investment Committee | |
(January 2003–January 2006), and | Member | |
Vice President and Treasurer | Okabena Company | |
(July 1995–January 2003) | ||
3M Corporation | Chair — 3M | |
Investment Management | ||
Company | ||
(2005–2012) | ||
Founder | 70 | Director and Compensation |
Investor Analytics | Committee Member | |
(Risk Management) | Investor Analytics | |
(May 1999–Present) | ||
Director — P/E Investments | ||
Founder | ||
P/E Investments | ||
(Hedge Fund) | ||
(September 1996–Present) |
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Board of trustees/directors and officers addendum
Delaware Investments® Family of Funds
Name, Address, | Position(s) | Length of |
and Birth Date | Held with Fund(s) | Time Served |
Officers | ||
David F. Connor | Senior Vice President, | Senior Vice President, |
2005 Market Street | Deputy General | Deputy General Counsel |
Philadelphia, PA 19103 | Counsel, and Secretary | since May 2013; |
December 1963 | Vice President, Deputy | |
General Counsel | ||
September 2000– | ||
May 2013; Secretary since | ||
October 2005 | ||
Daniel V. Geatens | Vice President | Treasurer |
2005 Market Street | and Treasurer | since October 2007 |
Philadelphia, PA 19103 | ||
October 1972 | ||
David P. O’Connor | Executive Vice President, | Executive Vice President |
2005 Market Street | General Counsel | since February 2012; |
Philadelphia, PA 19103 | and Chief Legal Officer | Senior Vice President |
February 1966 | October 2005– | |
February 2012; | ||
General Counsel and | ||
Chief Legal Officer | ||
since October 2005 | ||
Richard Salus | Senior Vice President | Chief Financial Officer |
2005 Market Street | and Chief Financial Officer | since November 2006 |
Philadelphia, PA 19103 | ||
October 1963 |
The Statement of Additional Information for the Fund(s) includes additional information about the Trustees and Officers and is available, without charge, upon request by calling 800 523-1918.
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Number of Portfolios in | ||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships |
During Past 5 Years | by Trustee or Officer | Held by Trustee or Officer |
David F. Connor has served as | 70 | None3 |
Deputy General Counsel of | ||
Delaware Investments | ||
since 2000. | ||
Daniel V. Geatens has served | 70 | None3 |
in various capacities at | ||
different times at | ||
Delaware Investments. | ||
David P. O’Connor has served in | 70 | None3 |
various executive and legal | ||
capacities at different times | ||
at Delaware Investments. | ||
Richard Salus has served in | 70 | None3 |
various executive capacities | ||
at different times at | ||
Delaware Investments. |
3 David F. Connor, Daniel V. Geatens, David P. O’Connor, and Richard Salus serve in similar capacities for the six portfolios of the Optimum Fund Trust, which have the same investment advisor, principal underwriter, and transfer agent as the registrant.
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About the organization
Board of trustees | |||
Patrick P. Coyne Thomas L. Bennett | Joseph W. Chow John A. Fry Anthony D. Knerr | Lucinda S. Landreth Frances A. | Thomas K. Whitford Janet L. Yeomans J. Richard Zecher |
Affiliated officers | |||
David F. Connor | Daniel V. Geatens | David P. O’Connor | Richard Salus |
This annual report is for the information of Delaware Dividend Income Fund shareholders, but it may be used with prospective investors when preceded or accompanied by the Delaware Investments Fund fact sheet for the most recently completed calendar quarter. These documents are available at 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 (SEC) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 800 523-1918; and (ii) on the SEC’s website at sec.gov. In addition, a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities and the Fund’s Schedule of Investments are available without charge on the Fund’s website at delawareinvestments.com. The Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C.; information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund’s website at delawareinvestments.com; and (ii) on the SEC’s website at sec.gov. |
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![](https://capedge.com/proxy/N-CSR/0001206774-14-000426/del_topimg02.jpg)
Annual report U.S. core equity mutual fund Delaware Small Cap Core Fund November 30, 2013 |
Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Fund’s prospectus and its summary prospectus, which may be obtained by visiting delawareinvestments.com or calling 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing. |
You can obtain shareholder reports and prospectuses online instead of in the mail. Visit delawareinvestments.com/edelivery. |
Experience Delaware Investments
Delaware Investments is committed to the pursuit of consistently superior asset management and unparalleled client service. We believe in our investment processes, which seek to deliver consistent results, and in convenient services that help add value for our clients.
If you are interested in learning more about creating an investment plan, contact your financial advisor.
You can learn more about Delaware Investments or obtain a prospectus for Delaware Small Cap Core Fund at delawareinvestments.com.
Manage your investments online
- 24-hour access to your account information
- Obtain share prices
- Check your account balance and recent transactions
- Request statements or literature
- Make purchases and redemptions
Delaware Management Holdings, Inc. and its subsidiaries (collectively known by the marketing name of Delaware Investments) are wholly owned subsidiaries of Macquarie Group Limited, a global provider of banking, financial, advisory, investment and funds management services.
Investments in Delaware Small Cap Core Fund are not and will not be deposits with or liabilities of Macquarie Bank Limited ABN 46 008 583 542 and its holding companies, including their subsidiaries or related companies (Macquarie Group), and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. No Macquarie Group company guarantees or will guarantee the performance of the Fund, the repayment of capital from the Fund, or any particular rate of return.
Table of contents | |
Portfolio management review | 1 |
Performance summary | 4 |
Disclosure of Fund expenses | 8 |
Security type/sector allocation and | |
top 10 equity holdings | 10 |
Schedule of investments | 12 |
Statement of assets and liabilities | 18 |
Statement of operations | 20 |
Statements of changes in net assets | 22 |
Financial highlights | 24 |
Notes to financial statements | 32 |
Report of independent registered | |
public accounting firm | 43 |
Other Fund information | 44 |
Board of trustees/directors and | |
officers addendum | 48 |
About the organization | 56 |
Unless otherwise noted, views expressed herein are current as of Nov. 30, 2013, and subject to change.
Funds are not FDIC insured and are not guaranteed. It is possible to lose the principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor. Delaware Investments, a member of Macquarie Group, refers to Delaware Management Holdings, Inc. and its subsidiaries, including the Fund’s distributor, Delaware Distributors, L.P. Macquarie Group refers to Macquarie Group Limited and its subsidiaries and affiliates worldwide.
© 2013 Delaware Management Holdings, Inc.
All third-party marks cited are the property of their respective owners.
Portfolio management review | ||
Delaware Small Cap Core Fund | December 10, 2013 |
Performance preview (for the year ended November 30, 2013) | |||
Delaware Small Cap Core Fund (Class A shares) | 1-year return | +44.21% | |
Russell 2000® Index (benchmark) | 1-year return | +40.99% | |
Past performance does not guarantee future results. |
During the fiscal year ended Nov. 30, 2013, small-cap stocks had an impressive run, rising 41%. Steadily improving economic data combined with supportive monetary policy from the Federal Reserve were the main drivers behind the strong market performance.
The U.S. economy grew at a modest pace during the fiscal year, with gross domestic product (GDP) growth in the 2-3% range. A strong improvement in the U.S. housing market, steady declines in the unemployment rate, and persistently low levels of inflation provided positive tailwinds to the economy. While earnings growth moderated somewhat during the year, corporate profitability still stood near record levels.
From October 1 through 16, the U.S. federal government entered a shutdown after Congress failed to enact legislation appropriating funds for fiscal 2014. Regular government operations resumed on October 17, after an interim appropriations bill was signed into law. However, the shutdown did not hamper the positive momentum in the market.
The continuation of accommodative monetary policy from the Fed also had a positive influence on equity markets during the year. In an effort to support economic growth, the Fed maintained its key interest rate target at 0.25%, and maintained its monthly asset purchase program (quantitative easing). We expect interest rates to remain at this low level until the Fed sees evidence of a greater improvement in economic growth and a further reduction in the unemployment rate.
From a sector perspective, the strongest performing sectors in the Russell 2000 Index were media, consumer services, and business services. The sharp rise in the 10-year Treasury yield led to underperformance from interest rate sensitive sectors such as real estate investment trusts (REITs) and utilities. Small-cap stocks outperformed large-caps during the period, with the Russell 2000 Index rising 41% versus the 31% gain for the Russell 1000® Index. (Source: Bloomberg.)
Within the Fund
For the fiscal year ended Nov. 30, 2013, Delaware Small Cap Core Fund (Class A shares with all distributions reinvested) returned +44.21% at net asset value and +35.90% at maximum offer price. In comparison, the Fund’s benchmark, the Russell 2000 Index, returned +40.99% during the same period. For complete, annualized performance of Delaware Small Cap Core Fund, please see the table on page 4.
1
Portfolio management review
Delaware Small Cap Core Fund
Portfolio performance was strong over the fiscal year. Stock selection in the basic materials, energy, and finance sectors were the top contributors to outperformance. On the negative side, stock selection in the media and technology were the only two detractors from relative performance.
One of the Fund’s top detractors was its holding in Vocus, a provider of cloud marketing software that helps businesses attract, engage, and retain customers. The stock first sold off in April when the company announced weaker than expected results. The company made an acquisition in 2012 that was expected to be a catalyst for growth. The company’s turnaround targets fell short of expectations and as a result we sold the stock in the third quarter of the year.
Perry Ellis International is an apparel manufacturing company, that designs, sources, markets and licenses brands such as Perry Ellis, Original Penguin, Callaway Golf, and Ben Hogan. Over the period the stock fell; most of this decline came sharply in November when the company preannounced lower-than-expected third quarter results. The miss in earnings was primarily a result of a shortfall in mid-tier department store business. Going forward, we believe a number of the company’s brands may have strong potential, particularly the golf business, which recently signed a license agreement with the brand Jack Nicklaus.
Spectrum Pharmaceuticals, a commercial-stage biotechnology company with a diversified portfolio of oncology products, declined during the Fund’s fiscal year. Shares fell in March when the company reduced its 2013 guidance because of lower Fusilev sales due to increased generic competition. Fusilev is its product for colorectal cancer. There had been much debate about how far and how quickly the generics could retake share in this market but company management had been very confident that they would not lose significant share. Clearly management is in the penalty box with investors after this incident, but we have continued to hold the position in the Fund because the company is a profitable biotech that, in our view, has generated strong free cash flow and has several promising new drug candidates in its pipeline that potentially may act as upside catalysts.
On the positive side of the healthcare sector of the portfolio, biopharmaceutical company Incyte was the period’s top-performing holding. Incyte is a commercial-stage biotechnology company focused on the development of therapies for oncology and inflammation conditions. Ruxolitinib ( also known as Jakafi), its first commercial product, is approved for the treatment of myelofibrosis (a disease of the spleen) and sold outside of the United States with Swiss pharmaceutical company Novartis. The stock has been strong as ruxolitinib sales have proven to be stronger than the market first expected, and the company announced positive Phase II trial data for Jakafi in pancreatic cancer in August.
The Fund’s position in U.S. Silica Holdings, a leading producer of industrial sand (silica), advanced during the Fund’s fiscal year. U.S. Silica continued to benefit from surging demand and higher pricing of frac sand, which is utilized by oil and gas producers to increase well efficiency.
2
Technology was one of the top overall sectors contributing to the period’s returns. The top-performing stock in that sector was security software provider Proofpoint. The stock performed well on the back of strong revenue growth after a launch of new products and improved competitive positioning.
The Fund ended the period with small overweight positions in the technology, communications services, and basic materials sectors. The Fund held underweight positions in the utilities, credit cyclicals, and media sectors.
We continue to maintain our strategy of investing in companies with what we view as strong balance sheets and cash flow, sustainable competitive advantages, and high-quality management teams that we believe have the potential to deliver value to shareholders even under challenging economic conditions.
3
Performance summary | |
Delaware Small Cap Core Fund | November 30, 2013 |
The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. Please obtain the performance data current for the most recent month end by calling 800 523-1918 or visiting our website at delawareinvestments.com/performance. Current performance may be lower or higher than the performance data quoted.
Fund and benchmark performance1,2 | Average annual total returns through November 30, 2013 | |||||||
1 year | 5 years | 10 years | Lifetime | |||||
Class A (Est. Dec. 29, 1998) | ||||||||
Excluding sales charge | +44.21% | +23.00% | +9.58% | n/a | ||||
Including sales charge | +35.90% | +21.54% | +8.93% | n/a | ||||
Class C (Est. Aug. 1, 2005) | ||||||||
Excluding sales charge | +43.14% | +22.09% | n/a | +6.96% | ||||
Including sales charge | +42.14% | +22.09% | n/a | +6.96% | ||||
Class R (Est. Aug. 1, 2005) | ||||||||
Excluding sales charge | +43.86% | +22.71% | n/a | +7.49% | ||||
Including sales charge | +43.86% | +22.71% | n/a | +7.49% | ||||
Institutional Class (Est. Dec. 29, 1998) | ||||||||
Excluding sales charge | +44.64% | +23.31% | +9.81% | n/a | ||||
Including sales charge | +44.64% | +23.31% | +9.81% | n/a | ||||
Russell 2000 Index | +40.99% | +20.97% | +9.08% | n/a |
1 Returns reflect the reinvestment of all distributions and are presented both with and without the applicable sales charges described below. Returns do not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares.
Expense limitations were in effect for certain classes during some or all of the periods shown in the “Fund performance” chart. Expenses for each class are listed on the “Fund expense ratios” table on page 5. Performance would have been lower had expense limitations not been in effect.
Class A shares are sold with a maximum front-end sales charge of 5.75%, and have an annual distribution and service fee of 0.25% of average daily net assets. Prior to Oct. 1, 2013, Class A shares had an annual distribution and service fee of 0.30% of average daily net assets. This fee was contractually limited to 0.25% during the period from Dec. 1, 2012 until Oct. 1, 2013. Performance for Class A shares, excluding sales charges, assumes that no front-end sales charge applied.
Class C shares are sold with a contingent deferred sales charge of 1.00% if redeemed during the first 12 months. They are also subject to an annual distribution and service fee of 1.00% of average daily net assets.
Performance for Class C shares, excluding sales charges, assumes either that contingent deferred sales charges did not apply or that the investment was not redeemed.
4
Class R shares are available only for certain retirement plan products. They are sold without a sales charge and have an annual distribution and service fee of 0.50% of average daily net assets. Prior to Oct. 1, 2013, Class R shares had an annual distribution and service fee of 0.60% of average daily net assets. This fee was contractually limited to 0.50% during the period from Nov. 1, 2012 until Oct. 1, 2013.
Institutional Class shares are available without sales or asset-based distribution charges only to certain eligible institutional accounts.
The “Fund performance” table and the “Performance of a $10,000 investment” graph do not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares.
Investments in small and/or medium-sized companies typically exhibit greater risk and higher volatility than larger, more established companies.
Narrowly focused investments may exhibit higher volatility than investments in multiple industry sectors.
Prior to Aug. 1, 2005, the Fund had not engaged in a broad distribution effort of its shares and had been subject to limited redemption requests. 12b-1 fees were waived for this period. Had 12b-1 fees been applied, performance would have been lower. Expense waivers were in effect for the periods shown. Performance would have been lower if waivers did not apply.
2 The Fund’s expense ratios, as described in the most recent prospectus, are disclosed in the following “Fund expense ratios” table. Delaware Management Company has agreed to reimburse certain expenses and/or waive certain fees in order to prevent total fund operating expenses (excluding any 12b-1 plan, taxes, interest, inverse floater program expenses, short sale and dividend interest expenses, brokerage fees, certain insurance costs, acquired fund fees and expenses, and nonroutine expenses or costs, including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations (collectively nonroutine expenses)) from exceeding 1.15% of the Fund’s average daily net assets during the period from Dec. 1, 2012, through Nov. 30, 2013.* Please see the most recent prospectus and any applicable supplement(s) for additional information on these fee waivers and/or reimbursements.
Fund expense ratios | Class A | Class C | Class R | Institutional Class | ||||
Total annual operating expenses | 1.36% | 2.11% | 1.61% | 1.11% | ||||
(without fee waivers) | ||||||||
Net expenses | 1.36% | 2.11% | 1.61% | 1.11% | ||||
(including fee waivers, if any) | ||||||||
Type of waiver | Contractual | Contractual | Contractual | Contractual |
* The contractual waiver period is from March 29, 2012 through March 28, 2014.
5
Performance summary
Delaware Small Cap Core Fund
Performance of a $10,000 investment1
Average annual total returns from Nov. 30, 2003, through Nov. 30, 2013
For period beginning Nov. 30, 2003, through Nov. 30, 2013 | Starting value | Ending value | ||||||
Russell 2000 Index | $ | 10,000 | $23,845 | |||||
Delaware Small Cap Core Fund — Class A shares | $ | 9,425 | $23,525 |
1 The “Performance of a $10,000 investment” graph assumes $10,000 invested in Class A shares of the Fund on Nov. 30, 2003, and includes the effect of a 5.75% front-end sales charge and the reinvestment of all distributions. The graph does not reflect the deduction of taxes the shareholders would pay on Fund distributions or redemptions of Fund shares. Expense limitations were in effect for some or all of the periods shown. Performance would have been lower had expense limitations not been in effect. Expenses are listed in the “Fund expense ratios” table on page 5. Please note additional details on pages 4 through 6.
The chart also assumes $10,000 invested in the Russell 2000 Index as of Nov. 30, 2003. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe.
The Russell 1000 Index, mentioned on page 1, measures the performance of the large-cap segment of the U.S. equity universe.
Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index. Past performance is not a guarantee of future results.
Performance of other Fund classes will vary due to different charges and expenses.
Nasdaq symbols | CUSIPs | |||||
Class A | DCCAX | 24610B883 | ||||
Class C | DCCCX | 24610B867 | ||||
Class R | DCCRX | 24610B834 | ||||
Institutional Class | DCCIX | 24610B859 |
6
Disclosure of Fund expenses
For the six-month period from June 1, 2013 to November 30, 2013 (Unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period from June 1, 2013 to Nov. 30, 2013.
Actual expenses
The first section of the table shown, “Actual Fund return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The second section of the table shown, “Hypothetical 5% return,” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The Fund’s expenses shown in the table reflect fee waivers in effect. The expenses shown in the table assume reinvestment of all dividends and distributions.
8
Delaware Small Cap Core Fund
Expense analysis of an investment of $1,000
Beginning | Ending | Expenses | |||||||||||||
Account Value | Account Value | Annualized | Paid During Period | ||||||||||||
6/1/13 | 11/30/13 | Expense Ratio | 6/1/13 to 11/30/13* | ||||||||||||
Actual Fund return† | |||||||||||||||
Class A | $ | 1,000.00 | $ | 1,219.70 | 1.31% | $ | 7.29 | ||||||||
Class C | 1,000.00 | 1,215.40 | 2.06% | 11.44 | |||||||||||
Class R | 1,000.00 | 1,218.00 | 1.56% | 8.67 | |||||||||||
Institutional Class | 1,000.00 | 1,221.50 | 1.06% | 5.90 | |||||||||||
Hypothetical 5% return (5% return before expenses) | |||||||||||||||
Class A | $ | 1,000.00 | $ | 1,018.50 | 1.31% | $ | 6.63 | ||||||||
Class C | 1,000.00 | 1,014.74 | 2.06% | 10.40 | |||||||||||
Class R | 1,000.00 | 1,017.25 | 1.56% | 7.89 | |||||||||||
Institutional Class | 1,000.00 | 1,019.75 | 1.06% | 5.37 |
*“Expenses Paid During Period” are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period).
†Because actual returns reflect only the most recent six month period, the returns shown may differ significantly from fiscal year returns.
9
Security type/sector allocation and | |
top 10 equity holdings | |
Delaware Small Cap Core Fund | As of November 30, 2013 (Unaudited) |
Sector designations may be different than the sector designations presented in other Fund materials. The sector designations may represent the investment manager’s internal sector classifications, which may result in the sector designations for one fund being different than another fund’s sector designations.
Sector type/sector | Percentage of net assets | |
Common Stock | 95.64 | % |
Basic Materials | 6.54 | % |
Business Services | 5.95 | % |
Capital Goods | 9.46 | % |
Communication Services | 1.88 | % |
Consumer Discretionary | 5.84 | % |
Consumer Services | 3.70 | % |
Consumer Staples | 3.76 | % |
Credit Cyclical | 1.12 | % |
Energy | 4.47 | % |
Financials | 15.29 | % |
Healthcare | 12.32 | % |
Media | 0.54 | % |
Real Estate | 5.35 | % |
Technology | 16.21 | % |
Transportation | 1.51 | % |
Utilities | 1.70 | % |
Short-Term Investments | 3.95 | % |
Total Value of Securities | 99.59 | % |
Receivables and Other Assets Net of Liabilities | 0.41 | % |
Total Net Assets | 100.00 | % |
10
Holdings are for informational purposes only and are subject to change at any time. They are not a recommendation to buy, sell, or hold any security.
Top 10 equity holdings | Percentage of net assets | |
Air Methods | 1.29 | % |
AAON | 1.25 | % |
Susser Holdings | 1.24 | % |
West Pharmaceutical Services | 1.19 | % |
Steven Madden | 1.16 | % |
Align Technology | 1.12 | % |
Tenneco | 1.12 | % |
G-III Apparel Group | 1.09 | % |
Casey’s General Stores | 1.06 | % |
FARO Technologies | 1.06 | % |
11
Schedule of investments | |
Delaware Small Cap Core Fund | November 30, 2013 |
Number of shares | Value | ||||
Common Stock – 95.64% | |||||
Basic Materials – 6.54% | |||||
Axiall | 33,200 | $ | 1,503,960 | ||
† | Boise Cascade | 47,365 | 1,215,386 | ||
Cabot | 23,900 | 1,166,320 | |||
† | Chemtura | 68,900 | 1,818,960 | ||
Innophos Holdings | 18,800 | 902,024 | |||
Kaiser Aluminum | 17,900 | 1,205,028 | |||
Materion | 35,300 | 1,015,228 | |||
Neenah Paper | 26,100 | 1,095,939 | |||
Stepan | 15,200 | 964,592 | |||
† | Taminco | 48,500 | 1,043,720 | ||
U.S. Silica Holdings | 13,995 | 482,967 | |||
12,414,124 | |||||
Business Services – 5.95% | |||||
† | Cross Country Healthcare | 93,700 | 715,868 | ||
† | FTI Consulting | 40,600 | 1,823,346 | ||
Kforce | 81,775 | 1,650,220 | |||
McGrath RentCorp | 25,780 | 1,002,584 | |||
† | TeleTech Holdings | 59,600 | 1,530,528 | ||
U.S. Ecology | 36,280 | 1,396,054 | |||
United Stationers | 42,700 | 1,920,646 | |||
† | WageWorks | 21,993 | 1,260,199 | ||
11,299,445 | |||||
Capital Goods – 9.46% | |||||
AAON | 76,887 | 2,365,813 | |||
Acuity Brands | 12,820 | 1,314,435 | |||
Applied Industrial Technologies | 36,740 | 1,777,481 | |||
Barnes Group | 47,200 | 1,722,800 | |||
† | Chart Industries | 3,134 | 304,938 | ||
† | Columbus McKinnon | 55,220 | 1,529,594 | ||
ESCO Technologies | 25,400 | 865,124 | |||
† | Esterline Technologies | 8,700 | 765,774 | ||
Granite Construction | 41,341 | 1,291,906 | |||
Kadant | 39,300 | 1,627,806 | |||
† | MYR Group | 49,300 | 1,252,713 | ||
† | Rofin-Sinar Technologies | 47,200 | 1,219,176 | ||
† | Tetra Tech | 43,900 | 1,255,101 | ||
† | Titan Machinery | 37,050 | 659,861 | ||
17,952,522 |
12
Number of shares | Value | ||||
Common Stock (continued) | |||||
Communication Services – 1.88% | |||||
Atlantic Tele-Network | 16,384 | $ | 918,651 | ||
† | InterXion Holding | 46,691 | 1,051,014 | ||
† | RigNet | 37,801 | 1,605,787 | ||
3,575,452 | |||||
Consumer Discretionary – 5.84% | |||||
† | Express | 52,200 | 1,284,642 | ||
† | Francesca’s Holdings | 55,100 | 1,081,062 | ||
† | G-III Apparel Group | 34,200 | 2,060,550 | ||
† | Iconix Brand Group | 49,500 | 1,964,160 | ||
† | Jos. A. Bank Clothiers | 29,150 | 1,656,303 | ||
Perry Ellis International | 54,500 | 846,385 | |||
† | Steven Madden | 56,450 | 2,199,292 | ||
11,092,394 | |||||
Consumer Services – 3.70% | |||||
† | AFC Enterprises | 40,300 | 1,756,677 | ||
† | Buffalo Wild Wings | 11,720 | 1,760,812 | ||
CEC Entertainment | 11,610 | 556,700 | |||
Cheesecake Factory | 26,300 | 1,282,125 | |||
† | Jack in the Box | 35,280 | 1,670,508 | ||
7,026,822 | |||||
Consumer Staples – 3.76% | |||||
Casey’s General Stores | 27,100 | 2,016,782 | |||
J&J Snack Foods | 13,586 | 1,167,309 | |||
† | Prestige Brands Holdings | 45,400 | 1,599,896 | ||
† | Susser Holdings | 36,850 | 2,359,137 | ||
7,143,124 | |||||
Credit Cyclical – 1.12% | |||||
† | Tenneco | 37,000 | 2,123,800 | ||
2,123,800 | |||||
Energy – 4.47% | |||||
† | Bonanza Creek Energy | 27,000 | 1,238,490 | ||
Bristow Group | 11,050 | 886,210 | |||
† | C&J Energy Services | 36,900 | 874,530 | ||
† | Carrizo Oil & Gas | 29,700 | 1,201,068 | ||
† | Diamondback Energy | 14,110 | 701,831 | ||
† | Jones Energy | 37,070 | 535,662 |
13
Schedule of investments
Delaware Small Cap Core Fund
Number of shares | Value | ||||
Common Stock (continued) | |||||
Energy (continued) | |||||
† | Kodiak Oil & Gas | 101,100 | $ | 1,146,474 | |
† | Pioneer Energy Services | 115,000 | 830,300 | ||
† | Rosetta Resources | 21,300 | 1,077,141 | ||
8,491,706 | |||||
Financials – 15.29% | |||||
American Equity Investment Life Holding | 81,500 | 1,932,364 | |||
AMERISAFE | 23,000 | 1,009,240 | |||
BBCN Bancorp | 79,100 | 1,320,179 | |||
Bryn Mawr Bank | 14,700 | 445,116 | |||
† | Capital Bank Financial | 57,097 | 1,332,644 | ||
Cardinal Financial | 74,600 | 1,322,658 | |||
City Holding | 29,050 | 1,429,551 | |||
† | Essent Group | 4,875 | 105,983 | ||
Evercore Partners Class A | 23,500 | 1,288,975 | |||
Flushing Financial | 66,200 | 1,430,582 | |||
Greenhill | 18,800 | 1,028,548 | |||
@ | Independent Bank | 34,300 | 1,309,231 | ||
Maiden Holdings | 109,900 | 1,391,334 | |||
Park National | 17,000 | 1,435,480 | |||
Primerica | 35,400 | 1,523,262 | |||
Prosperity Bancshares | 26,900 | 1,725,097 | |||
Sterling Bancorp | 93,400 | 1,227,276 | |||
† | Stifel Financial | 31,700 | 1,419,209 | ||
Susquehanna Bancshares | 126,200 | 1,588,858 | |||
† | Texas Capital Bancshares | 18,700 | 1,050,379 | ||
United Fire Group | 31,600 | 940,100 | |||
Webster Financial | 55,200 | 1,627,296 | |||
† | Western Alliance Bancorp | 49,700 | 1,154,034 | ||
29,037,396 | |||||
Healthcare – 12.32% | |||||
† | Acorda Therapeutics | 43,300 | 1,507,273 | ||
Air Methods | 43,900 | 2,456,645 | |||
† | Align Technology | 38,970 | 2,129,321 | ||
† | Auxilium Pharmaceuticals | 64,200 | 1,310,322 | ||
† | Cepheid | 28,800 | 1,308,096 | ||
CONMED | 37,840 | 1,540,466 | |||
CryoLife | 93,005 | 1,027,705 |
14
Number of shares | Value | ||||
Common Stock (continued) | |||||
Healthcare (continued) | |||||
† | Haemonetics | 32,600 | $ | 1,377,676 | |
† | ICON | 42,700 | 1,628,578 | ||
† | Incyte | 5,800 | 270,280 | ||
† | InterMune | 85,000 | 1,175,550 | ||
† | Medicines | 24,300 | 889,623 | ||
† | Merit Medical Systems | 51,987 | 851,027 | ||
† | Quidel | 51,800 | 1,303,288 | ||
Spectrum Pharmaceuticals | 95,500 | 919,665 | |||
† | WellCare Health Plans | 19,300 | 1,433,990 | ||
West Pharmaceutical Services | 45,320 | 2,262,374 | |||
23,391,879 | |||||
Media – 0.54% | |||||
National CineMedia | 55,150 | 1,028,548 | |||
1,028,548 | |||||
Real Estate – 5.35% | |||||
DCT Industrial Trust | 157,400 | 1,174,204 | |||
DuPont Fabros Technology | 55,300 | 1,297,891 | |||
EastGroup Properties | 18,300 | 1,108,797 | |||
EPR Properties | 28,600 | 1,438,294 | |||
Kite Realty Group Trust | 159,000 | 1,041,450 | |||
LaSalle Hotel Properties | 56,800 | 1,778,976 | |||
Ramco-Gershenson Properties Trust | 69,000 | 1,104,000 | |||
Sovran Self Storage | 18,030 | 1,203,322 | |||
10,146,934 | |||||
Technology – 16.21% | |||||
† | Accelrys | 125,500 | 1,221,115 | ||
† | Amkor Technology | 206,300 | 1,237,800 | ||
† | Anixter International | 17,450 | 1,542,580 | ||
† | Applied Micro Circuits | 92,900 | 1,165,895 | ||
† | Brightcove | 108,700 | 1,546,801 | ||
† | ChannelAdvisor | 24,630 | 845,548 | ||
† | EPAM Systems | 29,121 | 1,032,922 | ||
† | ExlService Holdings | 21,190 | 558,568 | ||
† | FARO Technologies | 36,890 | 2,011,981 | ||
† | inContact | 146,370 | 1,097,775 | ||
j2 Global | 33,600 | 1,611,792 | |||
† | KEYW Holding | 119,382 | 1,479,143 | ||
† | Netgear | 36,910 | 1,185,180 |
15
Schedule of investments
Delaware Small Cap Core Fund
Number of shares | Value | |||||
Common Stock (continued) | ||||||
Technology (continued) | ||||||
Plantronics | 25,100 | $ | 1,122,723 | |||
† | Proofpoint | 62,600 | 1,909,300 | |||
† | Rocket Fuel | 27,400 | 1,308,076 | |||
† | SciQuest | 40,700 | 1,137,972 | |||
† | Semtech | 49,800 | 1,480,056 | |||
† | Shutterfly | 29,000 | 1,369,670 | |||
† | SS&C Technologies Holdings | 32,432 | 1,398,144 | |||
† | Synaptics | 37,420 | 1,890,084 | |||
† | Trulia | 38,600 | 1,325,524 | |||
† | WNS Holdings ADR | 64,898 | 1,299,258 | |||
30,777,907 | ||||||
Transportation – 1.51% | ||||||
† | Roadrunner Transportation Systems | 52,600 | 1,440,188 | |||
† | XPO Logistics | 61,800 | 1,418,928 | |||
2,859,116 | ||||||
Utilities – 1.70% | ||||||
Cleco | 30,200 | 1,380,442 | ||||
NorthWestern | 22,800 | 1,002,744 | ||||
UIL Holdings | 22,516 | 845,025 | ||||
3,228,211 | ||||||
Total Common Stock (cost $135,583,001) | 181,589,380 | |||||
Principal amount | ||||||
Short-Term Investments – 3.95% | ||||||
≠Discount Note – 0.04% | ||||||
Federal Home Loan Bank 0.05% 12/27/13 | $ 75,755 | 75,755 | ||||
75,755 | ||||||
Repurchase Agreements – 2.44% | ||||||
Bank of America 0.04%, dated 11/29/13, | ||||||
to be repurchased on 12/2/13, repurchase price | ||||||
$856,102 (collateralized by U.S. government | ||||||
obligations 0.375%-1.875% 11/15/14-6/30/15; | ||||||
market value $873,223) | 856,101 | 856,101 | ||||
BNP Paribas 0.06%, dated 11/29/13, | ||||||
to be repurchased on 12/2/13, repurchase price | ||||||
$3,773,905 (collateralized by U.S. government | ||||||
obligations 0.625%-2.625% 6/30/14-11/30/19; | ||||||
market value $3,849,377) | 3,773,899 | 3,773,899 | ||||
4,630,000 |
16
Principal amount | Value | ||||
Short-Term Investments (continued) | |||||
≠U.S. Treasury Obligations – 1.47% | |||||
U.S. Treasury Bills | |||||
0.02% 12/19/13 | $ | 862,991 | $ | 862,986 | |
0.033% 1/23/14 | 876,061 | 876,047 | |||
0.065% 4/24/14 | 1,051,273 | 1,050,901 | |||
2,789,934 | |||||
Total Short-Term Investments (cost $7,495,754) | 7,495,689 | ||||
Total Value of Securities – 99.59% (cost $143,078,755) | $ | 189,085,069 |
† | Non income producing security. |
@ | Illiquid security. At Nov. 30, 2013, the aggregate value of illiquid securities was $1,309,231, which represented 0.69% of the Fund’s net assets. See Note 9 in “Notes to financial statements.” |
≠ | The rate shown is the effective yield at the time of purchase. |
ADR – American Depositary Receipt
See accompanying notes, which are an integral part of the financial statements.
17
Statement of assets and liabilities | |
Delaware Small Cap Core Fund | November 30, 2013 |
Assets: | |||
Investments, at value1 | $ | 181,589,380 | |
Short-term investments, at value2 | 7,495,689 | ||
Cash | 17,011 | ||
Receivable for fund shares sold | 1,008,985 | ||
Dividends and interest receivable | 98,319 | ||
Total assets | 190,209,384 | ||
Liabilities: | |||
Payable for fund shares redeemed | 109,938 | ||
Investment management fees payable | 112,134 | ||
Distribution fees payable to affiliates | 38,473 | ||
Audit fees payable | 27,535 | ||
Trustees’ fees and expenses payable | 1,221 | ||
Other affiliates payable | 15,748 | ||
Other accrued expenses | 47,646 | ||
Total liabilities | 352,695 | ||
Total Net Assets | $ | 189,856,689 | |
Net Assets Consist of: | |||
Paid-in capital | $ | 140,104,309 | |
Distributions in excess of net investment loss | (355,911 | ) | |
Accumulated net realized gain on investments | 4,101,977 | ||
Net unrealized appreciation of investments | 46,006,314 | ||
Total Net Assets | $ | 189,856,689 | |
1Investments, at cost | $ | 135,583,001 | |
2Short-term investments, at cost | 7,495,754 |
18
Net Asset Value
Class A | ||
Net assets | $ | 69,385,513 |
Shares of beneficial interest outstanding, unlimited authorization, no par | 3,551,384 | |
Net asset value per share | $ | 19.54 |
Sales charge | 5.75% | |
Offering price per share, equal to net asset value per share/(1 - sales charge) | $ | 20.73 |
Class C | ||
Net assets | $ | 25,827,518 |
Shares of beneficial interest outstanding, unlimited authorization, no par | 1,400,039 | |
Net asset value per share | $ | 18.45 |
Class R | ||
Net assets | $ | 12,785,453 |
Shares of beneficial interest outstanding, unlimited authorization, no par | 665,088 | |
Net asset value per share | $ | 19.22 |
Institutional Class | ||
Net assets | $ | 81,858,205 |
Shares of beneficial interest outstanding, unlimited authorization, no par | 4,147,570 | |
Net asset value per share | $ | 19.74 |
See accompanying notes, which are an integral part of the financial statements.
19
Statement of operations | |
Delaware Small Cap Core Fund | Year Ended November 30, 2013 |
Investment Income: | ||||||
Dividends | $ | 1,361,835 | ||||
Securities lending income | 12,039 | |||||
Interest | 2,802 | $ | 1,376,676 | |||
Expenses: | ||||||
Management fees | 942,227 | |||||
Distribution expenses – Class A | 122,308 | |||||
Distribution expenses – Class C | 156,952 | |||||
Distribution expenses – Class R | 52,092 | |||||
Dividend disbursing and transfer agent fees and expenses | 186,526 | |||||
Registration fees | 75,665 | |||||
Accounting and administration expenses | 48,681 | |||||
Audit and tax | 27,730 | |||||
Reports and statements to shareholders | 19,643 | |||||
Legal fees | 9,856 | |||||
Trustees’ fees and expenses | 6,395 | |||||
Custodian fees | 5,243 | |||||
Other expenses | 14,388 | 1,667,706 | ||||
Less waived distribution expenses – Class A | (16,133 | ) | ||||
Less waived distribution expenses – Class R | (7,016 | ) | ||||
Less expense paid indirectly | (125 | ) | ||||
Total operating expenses | 1,644,432 | |||||
Net Investment Loss | (267,756 | ) | ||||
Net Realized and Unrealized Gain: | ||||||
Net realized gain on investments | 12,854,496 | |||||
Net change in unrealized appreciation (depreciation) | ||||||
of investments | 33,855,724 | |||||
Net Realized and Unrealized Gain | 46,710,220 | |||||
Net Increase in Net Assets Resulting from Operations | $ | 46,442,464 |
See accompanying notes, which are an integral part of the financial statements.
20
Statements of changes in net assets
Delaware Small Cap Core Fund
Year Ended | |||||||
11/30/13 | 11/30/12 | ||||||
Increase (Decrease) in Net Assets from Operations: | |||||||
Net investment loss | $ | (267,756 | ) | $ | (122,098 | ) | |
Net realized gain | 12,854,496 | 5,527,183 | |||||
Net change in unrealized appreciation (depreciation) | 33,855,724 | 3,363,440 | |||||
Net increase in net assets resulting from operations | 46,442,464 | 8,768,525 | |||||
Dividends and Distributions to Shareholders from: | |||||||
Net investment income: | |||||||
Class A | (22,899 | ) | — | ||||
Institutional Class | (133,052 | ) | — | ||||
(155,951 | ) | — | |||||
Capital Share Transactions: | |||||||
Proceeds from shares sold: | |||||||
Class A | 38,621,136 | 8,834,083 | |||||
Class C | 11,670,310 | 3,125,991 | |||||
Class R | 4,701,991 | 2,206,774 | |||||
Institutional Class | 29,676,984 | 10,737,301 | |||||
Net asset value of shares issued upon reinvestment | |||||||
of dividends and distributions: | |||||||
Class A | 22,424 | — | |||||
Institutional Class | 131,836 | — | |||||
84,824,681 | 24,904,149 |
22
Year Ended | ||||||||
11/30/13 | 11/30/12 | |||||||
Capital Share Transactions (continued): | ||||||||
Cost of shares redeemed: | ||||||||
Class A | (10,033,078 | ) | (10,866,354 | ) | ||||
Class C | (1,587,669 | ) | (1,705,061 | ) | ||||
Class R | (2,037,193 | ) | (1,931,142 | ) | ||||
Institutional Class | (10,705,047 | ) | (4,714,614 | ) | ||||
(24,362,987 | ) | (19,217,171 | ) | |||||
Increase in net assets derived from | ||||||||
capital share transactions | 60,461,694 | 5,686,978 | ||||||
Net Increase in Net Assets | 106,748,207 | 14,455,503 | ||||||
Net Assets: | ||||||||
Beginning of year | 83,108,482 | 68,652,979 | ||||||
End of year (including accumulated (distributions in | ||||||||
excess of) net investment income (loss) of $(355,911) | ||||||||
and $(88,155), respectively) | $ | 189,856,689 | $ | 83,108,482 |
See accompanying notes, which are an integral part of the financial statements.
23
Financial highlights
Delaware Small Cap Core Fund Class A
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income (loss)1 |
Net realized and unrealized gain |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Total dividends and distributions |
Net asset value, end of period |
Total return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived |
Ratio of net investment income (loss) to average net assets |
Ratio of net investment income (loss) to average net assets |
prior to fees waived |
Portfolio turnover |
See accompanying notes, which are an integral part of the financial statements.
24
Year Ended | ||||||||||||||
11/30/13 | 11/30/12 | 11/30/11 | 11/30/10 | 11/30/09 | ||||||||||
$13.560 | $12.010 | $11.150 | $8.740 | $6.930 | ||||||||||
(0.036 | ) | (0.022 | ) | (0.024 | ) | 0.034 | 0.003 | |||||||
6.027 | 1.572 | 0.928 | 2.376 | 1.815 | ||||||||||
5.991 | 1.550 | 0.904 | 2.410 | 1.818 | ||||||||||
(0.011 | ) | — | (0.044 | ) | — | (0.008 | ) | |||||||
(0.011 | ) | — | (0.044 | ) | — | (0.008 | ) | |||||||
$19.540 | $13.560 | $12.010 | $11.150 | $8.740 | ||||||||||
44.21% | 12.91% | 8.10% | 27.57% | 25.36% | ||||||||||
$69,386 | $25,084 | $24,242 | $23,191 | $24,512 | ||||||||||
1.31% | 1.36% | 1.39% | 1.40% | 1.45% | ||||||||||
1.35% | 1.41% | 1.45% | 1.54% | 1.63% | ||||||||||
(0.22% | ) | (0.17% | ) | (0.20% | ) | 0.35% | 0.04% | |||||||
(0.26% | ) | (0.22% | ) | (0.26% | ) | 0.21% | (0.14% | ) | ||||||
38% | 37% | 42% | 37% | 79% |
25
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 loss1 |
Net realized and unrealized gain |
Total from investment operations |
Net asset value, end of period |
Total return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived |
Ratio of net investment loss to average net assets |
Ratio of net investment loss to average net assets |
prior to fees waived |
Portfolio turnover |
See accompanying notes, which are an integral part of the financial statements.
26
Year Ended | |||||||||||||||
11/30/13 | 11/30/12 | 11/30/11 | 11/30/10 | 11/30/09 | |||||||||||
$12.890 | $11.510 | $10.720 | $8.470 | $6.750 | |||||||||||
(0.152 | ) | (0.115 | ) | (0.112 | ) | (0.039 | ) | (0.052 | ) | ||||||
5.712 | 1.495 | 0.902 | 2.289 | 1.772 | |||||||||||
5.560 | 1.380 | 0.790 | 2.250 | 1.720 | |||||||||||
$18.450 | $12.890 | $11.510 | $10.720 | $8.470 | |||||||||||
43.14% | 11.99% | 7.37% | 26.56% | 25.48% | |||||||||||
$25,828 | $10,051 | $7,702 | $8,285 | $7,468 | |||||||||||
2.06% | 2.11% | 2.14% | 2.15% | 2.20% | |||||||||||
2.06% | 2.11% | 2.15% | 2.24% | 2.33% | |||||||||||
(0.97% | ) | (0.92% | ) | (0.95% | ) | (0.40% | ) | (0.71% | ) | ||||||
(0.97% | ) | (0.92% | ) | (0.96% | ) | (0.49% | ) | (0.84% | ) | ||||||
38% | 37% | 42% | 37% | 79% |
27
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)1 |
Net realized and unrealized gain |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Total dividends and distributions |
Net asset value, end of period |
Total return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived |
Ratio of net investment income (loss) to average net assets |
Ratio of net investment loss to average net assets |
prior to fees waived |
Portfolio turnover |
See accompanying notes, which are an integral part of the financial statements.
28
Year Ended | |||||||||||||||
11/30/13 | 11/30/12 | 11/30/11 | 11/30/10 | 11/30/09 | |||||||||||
$13.360 | $11.870 | $11.030 | $8.660 | $6.870 | |||||||||||
(0.076 | ) | (0.054 | ) | (0.054 | ) | 0.009 | (0.016 | ) | |||||||
5.936 | 1.544 | 0.913 | 2.361 | 1.806 | |||||||||||
5.860 | 1.490 | 0.859 | 2.370 | 1.790 | |||||||||||
— | — | (0.019 | ) | — | — | ||||||||||
— | — | (0.019 | ) | — | — | ||||||||||
$19.220 | $13.360 | $11.870 | $11.030 | $8.660 | |||||||||||
43.86% | 12.55% | 7.79% | 27.37% | 26.06% | |||||||||||
$12,785 | $6,809 | $5,786 | $5,322 | $3,848 | |||||||||||
1.56% | 1.61% | 1.64% | 1.65% | 1.70% | |||||||||||
1.64% | 1.71% | 1.75% | 1.84% | 1.93% | |||||||||||
(0.47% | ) | (0.42% | ) | (0.45% | ) | 0.10% | (0.21% | ) | |||||||
(0.55% | ) | (0.52% | ) | (0.56% | ) | (0.09% | ) | (0.44% | ) | ||||||
38% | 37% | 42% | 37% | 79% |
29
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 from investment operations: |
Net investment income1 |
Net realized and unrealized gain |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Total dividends and distributions |
Net asset value, end of period |
Total return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets |
prior to fees waived |
Portfolio turnover |
See accompanying notes, which are an integral part of the financial statements.
30
Year Ended | |||||||||||||||
11/30/13 | 11/30/12 | 11/30/11 | 11/30/10 | 11/30/09 | |||||||||||
$13.690 | $12.100 | $11.230 | $8.790 | $6.970 | |||||||||||
0.005 | 0.011 | 0.006 | 0.060 | 0.022 | |||||||||||
6.089 | 1.579 | 0.934 | 2.385 | 1.830 | |||||||||||
6.094 | 1.590 | 0.940 | 2.445 | 1.852 | |||||||||||
(0.044 | ) | — | (0.070 | ) | (0.005 | ) | (0.032 | ) | |||||||
(0.044 | ) | — | (0.070 | ) | (0.005 | ) | (0.032 | ) | |||||||
$19.740 | $13.690 | $12.100 | $11.230 | $8.790 | |||||||||||
44.64% | 13.14% | 8.37% | 27.83% | 25.78% | |||||||||||
$81,858 | $41,164 | $30,923 | $33,877 | $30,401 | |||||||||||
1.06% | 1.11% | 1.14% | 1.15% | 1.20% | |||||||||||
1.06% | 1.11% | 1.15% | 1.24% | 1.33% | |||||||||||
0.03% | 0.08% | 0.05% | 0.60% | 0.29% | |||||||||||
0.03% | 0.08% | 0.04% | 0.51% | 0.16% | |||||||||||
38% | 37% | 42% | 37% | 79% |
31
Notes to financial statements | |
Delaware Small Cap Core Fund | November 30, 2013 |
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 5.75%. Class A share purchases of $1,000,000 or more will incur a contingent deferred sales charge (CDSC) of 1.00% if redeemed during the first year and 0.50% during the second year, provided that Delaware Distributors, L.P. (DDLP) paid a financial advisor a commission on the purchase of those shares. Class C shares are sold with a CDSC of 1.00%, if redeemed during the first 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 (U.S. GAAP) 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 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, which approximates fair value. U.S. government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. Investment company securities are valued at net asset value per share, as reported by the underlying investment company. 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, generally as of 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).
32
Federal Income Taxes — No provision for federal income taxes has been made as the Fund intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Fund evaluates tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year. Management has analyzed the Fund’s tax positions taken for all open federal income tax years (Nov. 30, 2010 – Nov. 30, 2013), and has concluded that no provision for federal income tax is required in the Fund’s financial statements.
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 purchase certain U.S. government securities subject to the counterparty’s agreement to repurchase them at an agreed upon date and price. The counterparty will be required on a daily basis to maintain the value of the collateral subject to the agreement at not less than the repurchase price (including accrued interest). The agreements are conditioned upon the collateral being deposited under the Federal Reserve book-entry system with the Fund’s custodian or a third-party sub-custodian. In the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings. All open repurchase agreements as of the date of this report were entered into on Nov. 29, 2013.
Use of Estimates — The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material.
Other — Expenses directly attributable to the Fund are charged directly to the Fund. Other expenses common to various funds within the Delaware Investments® Family of Funds are generally allocated 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 ex-dividend date, subject to reclassification
33
Notes to financial statements
Delaware Small Cap Core Fund
1. Significant Accounting Policies (continued)
upon notice of the character of such distributions by the issuer. The Fund declares and pays distributions from net investment income and net realized gain on investments, if any, annually. The Fund may distribute more frequently, if necessary for tax purposes. Dividends and distributions, if any, are recorded on the ex-dividend date.
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 year ended Nov. 30, 2013.
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 year ended Nov. 30, 2013.
The Fund may receive earnings credits from its transfer agent when positive cash balances are maintained, which are used to offset transfer agent fees. If the amount earned is greater than one dollar, the expense paid under this arrangement is included in dividend disbursing and transfer agent fees and expenses and appears on the statement of operations with the corresponding expense offset shown as “expense paid indirectly.” For the year ended Nov. 30, 2013, the Fund earned $ 125 under this agreement.
2. Investment Management, Administration Agreements and Other Transactions with Affiliates
In accordance with the terms of its investment management agreement, the Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee which is calculated daily at the rate of 0.75% 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.
DMC has contractually agreed to waive that portion, if any, of its management fee and reimburse the Fund to the extent necessary to ensure that total annual operating expenses (excluding any 12b-1 fees, taxes, interest, inverse floater program expenses, short sale and dividend interest expenses, brokerage fees, certain insurance costs, acquired fund fees and expenses, and nonroutine expenses or costs, including, but not limited to those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations, (collectively, nonroutine expenses)) do not exceed 1.15% of average daily net assets of the Fund from Dec. 1, 2012 through Nov. 30, 2013*. For purposes of this waiver and reimbursement, nonroutine expenses may also
* The contractual waiver period is from March 29, 2012 through March 28, 2014.
34
include such additional costs and expenses as may be agreed upon from time to time by the Fund’s Board and DMC. This expense waiver and reimbursement applies 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 year ended Nov. 30, 2013, the Fund was charged $ 6,083 for these services.
DSC is also the transfer agent and dividend disbursing agent of the Fund. For these services, the Fund pays DSC fees based on the aggregate daily net assets of the retail funds within the Delaware Investments Family of Funds at the following annual rate: 0.025% of the first $20 billion; 0.020% of the next $5 billion; 0.015% of the next $5 billion; and 0.013% on average daily net assets in excess of $30 billion. This amount is included in the statement of operations as dividend disbursing and transfer agent fees and expenses. For the year ended Nov. 30, 2013, the amount charged by DSC was 27,781. Pursuant to a sub-transfer agency agreement between DSC and BNY Mellon Investment Servicing (US) Inc. (BNYMIS), BNYMIS provides certain sub-transfer agency services to the Fund. Sub-transfer agency fees are passed on to and paid directly by the Fund.
Pursuant to a distribution agreement and distribution plan, the Fund pays DDLP, the distributor and an affiliate of DMC, an annual distribution and service fee of 1.00% of the average daily net assets of the Class C shares. Effective Oct. 1, 2013, the Fund pays DDLP an annual distribution and service fees of 0.25% and 0.50% of the average daily net assets of the Class A and Class R shares, respectively. Prior to Oct. 1, 2013, the Fund paid DDLP an annual distribution and service fee of 0.30% and 0.60%, respectively, of the average daily net assets of the Class A and Class R shares, respectively. For the period from Dec. 1, 2012 to Oct. 1, 2013, the distribution and service fees for Class A and Class R were contractually limited to 0.25% and 0.50% of the classes’ average daily net assets. Institutional Class shares pay no distribution and service expenses.
As provided in the investment management agreement, the Fund bears a portion of the cost of certain resources shared with DMC, including the cost of internal personnel of DMC and/or its affiliates that provide legal, tax and regulatory reporting services to the Fund. For the year ended Nov. 30, 2013, the Fund was charged $4,389 for internal legal, tax and regulatory reporting services provided by DMC and/or its affiliates’ employees.
For the year ended Nov. 30, 2013, DDLP earned $ 36,733 for commissions on sales of the Fund’s Class A shares. For the year ended Nov. 30, 2013, DDLP received gross CDSC commissions of $269 and $389 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.
35
Notes to financial statements
Delaware Small Cap Core 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 year ended Nov. 30, 2013, the Fund made purchases of $ 98,789,940 and sales of $ 45,538,755 of investment securities other than short-term investments.
At Nov. 30, 2013, the cost of investments for federal income tax purposes was $143,847,046. At Nov. 30, 2013, the net unrealized appreciation was $45,238,023, of which $46,884,854 related to unrealized appreciation of investments and $1,646,831 related to unrealized depreciation of investments.
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. A three-level hierarchy for fair value measurements has been established based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability 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-level hierarchy of inputs is summarized below.
Level 1 – | inputs are quoted prices in active markets for identical investments (e.g., equity securities, open-end investment companies, futures contracts, exchange-traded options contracts) |
Level 2 – | other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs) (e.g., debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities) |
36
Level 3 – | inputs are significant unobservable inputs (including the Fund’s own assumptions used to determine the fair value of investments) (e.g., broker-quoted securities, fair valued securities) |
Level 3 investments are valued using significant unobservable inputs. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Valuations may also be based upon current market prices of securities that are comparable in coupon, rating, maturity and industry. The derived value of a Level 3 investment may not represent the value which is received upon disposition and this could impact the results of operations.
The following table summarizes the valuation of the Fund’s investments by fair value hierarchy levels as of Nov. 30, 2013:
Level 1 | Level 2 | Total | ||||||
Common Stock | $ | 181,589,380 | $ | — | $ | 181,589,380 | ||
Short-Term Investments | — | 7,495,689 | 7,495,689 | |||||
Total | $ | 181,589,380 | $ | 7,495,689 | $ | 189,085,069 |
During the year ended Nov. 30, 2013, there were no transfers between Level 1 investments, Level 2 investments or Level 3 investments that had a significant impact to the Fund. The Fund’s policy is to recognize transfers between levels at the beginning of the reporting period.
At Nov. 30, 2013, there were no Level 3 investments.
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. GAAP. Additionally, distributions from net short-term gains on sales of investment securities are treated as ordinary income for federal income tax purposes. There were no dividends and distributions paid during the year ended Nov. 30, 2012. The tax character of dividends and distributions paid during the year ended Nov. 30, 2013 was as follows:
Year Ended | ||
11/30/13 | ||
Long-term capital gain | $ | 155,951 |
37
Notes to financial statements
Delaware Small Cap Core Fund
5. Components of Net Assets on a Tax Basis
As of Nov. 30, 2013, the components of net assets on a tax basis were as follows:
Shares of beneficial interest | $ | 140,104,309 | ||
Qualified late year losses deferred | (355,911 | ) | ||
Undistributed long-term capital gain | 4,870,268 | |||
Unrealized appreciation of investments | 45,238,023 | |||
Net assets | $ | 189,856,689 |
The differences between book basis and tax basis components of net assets are primarily attributable to tax deferral of losses on wash sales.
Qualified late year ordinary and capital losses (including currency and specified gain/loss items) represent losses realized from Jan. 1, 2013 through Nov. 30, 2013 and Dec. 1, 2012 through Nov. 30, 2013, respectively, that, in accordance with federal income tax regulations, the Fund has elected to defer and treat as having arisen in the following fiscal year.
For financial reporting purposes, capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Reclassifications are primarily due to dividends and distributions. Results of operations and net assets were not affected by these reclassifications. For the year ended Nov. 30, 2013, the Fund recorded the following reclassifications.
Distributions in excess of net investment loss | $ | 155,951 | |
Accumulated net realized gain | (155,951 | ) |
For federal income tax purposes, capital loss carryforwards may be carried forward and applied against future capital gains. $7,390,998 was utilized in 2013.
On Dec. 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the Act) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes were generally effective for taxable years beginning after the date of enactment. Under the Act, the Fund is permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under previous regulation.
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6. Capital Shares
Transactions in capital shares were as follows:
Year Ended | ||||||
11/30/13 | 11/30/12 | |||||
Shares sold: | ||||||
Class A | 2,308,325 | 665,954 | ||||
Class C | 724,461 | 247,010 | ||||
Class R | 283,583 | 169,158 | ||||
Institutional Class | 1,783,487 | 805,690 | ||||
Shares issued upon reinvestment of dividends and distributions: | ||||||
Class A | 1,609 | — | ||||
Institutional Class | 9,390 | — | ||||
5,110,855 | 1,887,812 | |||||
Shares redeemed: | ||||||
Class A | (608,787 | ) | (833,529 | ) | ||
Class C | (104,432 | ) | (136,402 | ) | ||
Class R | (128,048 | ) | (147,035 | ) | ||
Institutional Class | (651,586 | ) | (354,193 | ) | ||
(1,492,853 | ) | (1,471,159 | ) | |||
Net increase | 3,618,002 | 416,653 |
7. Line of Credit
The Fund, along with certain other funds in the Delaware Investments® Family of Funds (Participants), was a participant in a $125,000,000 revolving line of credit to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, the Participants were charged an annual commitment fee of 0.08%, which was allocated across the Participants on the basis of each Participant’s allocation of the entire facility. The Participants were permitted to borrow up to a maximum of one third of their net assets under the agreement. Each Participant was individually, and not jointly, liable for its particular advances, if any, under the line of credit. The line of credit under the agreement expired on Nov. 12, 2013.
On Nov. 12, 2013, the Fund, along with the other Participants, entered into an amendment to the agreement for a $225,000,000 revolving line of credit. The line of credit is to be used as described above and operates in substantially the same manner as the original agreement. The line of credit available under the agreement expires on Nov. 10, 2014.
The Fund had no amounts outstanding as of Nov. 30, 2013 or at any time during the year then ended.
39
Notes to financial statements
Delaware Small Cap Core Fund
8. Securities Lending
The Fund, along with other funds in the Delaware Investments® Family of Funds, may lend its securities pursuant to a security lending agreement (Lending Agreement) with The Bank of New York Mellon (BNY Mellon). At the time a security is loaned, the borrower must post collateral equal to the required percentage of the market value of the loaned security, including any accrued interest. The required percentage is: (i) 102% with respect to U.S. securities and foreign securities that are denominated and payable in U.S. dollars; and (ii) 105% with respect to foreign securities. With respect to each loan, if on any business day the aggregate market value of securities collateral plus cash collateral held is less than the aggregate market value of the securities which are the subject of such loan, the borrower will be notified to provide additional collateral by the end of the following business day which, together with the collateral already held, will be not less than the applicable initial collateral requirements for such security loan. If the aggregate market value of securities collateral and cash collateral held with respect to a security loan exceeds the applicable initial collateral requirement, upon the request of the borrower, BNY Mellon must return enough collateral to the borrower by the end of the following business day to reduce the value of the remaining collateral to the applicable initial collateral requirement for such security loan. As a result of the foregoing, the value of the collateral held with respect to a loaned security may be more or less than the value of the security on loan.
Cash collateral received is generally invested in the Delaware Investments Collateral Fund No. 1 (Collective Trust) established by BNY Mellon for the purpose of investment on behalf of funds managed by DMC that participate in BNY Mellon’s securities lending program. The Collective Trust may invest in U.S. government securities and high quality corporate debt, asset-backed and other money market securities and in repurchase agreements collateralized by such securities, provided that the Collective Trust will generally have a dollar-weighted average portfolio maturity of 60 days or less. 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 changes in value of the securities loaned that may occur during the term of the loan. The Fund has the right under the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized by non-cash collateral, the Fund receives loan premiums paid by the borrower. With respect to security loans collateralized by cash collateral, the earnings from the collateral investments are shared among the Fund, the security lending agent and the borrower. The Fund records security lending income net of allocations to the security lending agent and the borrower.
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The Collective Trust used for the investment of cash collateral received from borrowers of securities seeks to maintain a net asset value per unit of $1.00, but there can be no assurance that it will always be able to do so. The Fund may incur investment losses as a result of investing securities lending collateral in the Collective Trust or another collateral investment pool. This could occur if an investment in a collateral investment pool defaulted or if it were necessary to liquidate assets in the collateral investment pool to meet returns on outstanding security loans at a time when the collateral investment pool’s net asset value per unit was less than $1.00. Under those circumstances, the Fund may not receive an amount from the collateral investment pool 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.
At Nov. 30, 2013, the Fund had no securities out on loan.
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 to the risks associated with that industry. If the Fund holds real estate directly as a result of defaults or receives rental income directly from real estate holdings, its tax status as a regulated investment company may be jeopardized. There were no direct real estate holdings during the year ended Nov. 30, 2013. 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 DMC the day-to-day functions of determining whether individual securities are liquid for purposes of the Fund’s limitation on investments in illiquid securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Fund’s 15% limit on investments in illiquid securities. As of Nov. 30, 2013, there were no Rule 144A securities held by the Fund. Illiquid securities have been identified in the schedule of investments.
41
Notes to financial statements
Delaware Small Cap Core Fund
10. Contractual Obligations
The Fund enters into contracts in the normal course of business that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Fund’s existing contracts and expects the risk of loss to be remote.
11. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to Nov. 30, 2013 that would require recognition or disclosure in the Fund’s financial statements.
42
Report of independent
registered public accounting firm
To the Board of Trustees of Delaware Group® Equity Funds V
and Shareholders of Delaware Small Cap Core Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Delaware Small Cap Core Fund (one of the series constituting Delaware Group Equity Funds V, hereafter referred to as the “Fund”) at November 30, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at November 30, 2013 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. The financial highlights for the year ended November 30, 2009 were audited by other independent accountants whose report dated January 21, 2010 expressed an unqualified opinion on those statements.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
January 17, 2014
43
Other Fund information
(Unaudited)
Delaware Small Cap Core Fund
Tax Information
The information set forth below is for the Fund’s fiscal year as required by federal income tax laws. Shareholders, however, must report distributions on a calendar year basis for income tax purposes, which may include distributions for portions of two fiscal years of the Fund. Accordingly, the information needed by shareholders for income tax purposes will be sent to them in January of each year. Please consult your tax advisor for proper treatment of this information.
All reporting is based on financial information available as of the date of this annual report and, accordingly is subject to change. For any and all items requiring reporting, it is the intention of the Fund to report the maximum amount permitted under the Internal Revenue Code and the regulations thereunder.
For the fiscal year ended Nov. 30, 2013, the Fund reports distributions paid during the year as follows:
(A) Long-Term Distributions (Tax Basis) | 100.00 | % |
Total Distributions (Tax Basis) | 100.00 | % |
(A) is based on a percentage of the Fund’s total distributions.
Board consideration of Delaware Small Cap Core Fund investment advisory agreement
At a meeting held on August 20-22, 2013 (the “Annual Meeting”), the Board of Trustees (the “Board”), including a majority of disinterested or independent Trustees, approved the renewal of the Investment Advisory Agreement for Delaware Small Cap Core Fund (the “Fund”). In making its decision, the Board considered information furnished at regular quarterly Board meetings, including reports detailing Fund performance, investment strategies and expenses, as well as information prepared specifically in connection with the renewal of the investment advisory and sub-advisory contracts. Information furnished specifically in connection with the renewal of the Investment Advisory Agreement with Delaware Management Company (“DMC”) included materials provided by DMC and its affiliates (“Delaware Investments”) concerning, among other things, the nature, extent and quality of services provided to the Fund, the costs of such services to the Fund, economies of scale and the financial condition and profitability of Delaware Investments. In addition, in connection with the Annual Meeting, reports were provided to the Trustees in May 2013 and included reports provided by Lipper, Inc., an independent statistical compilation organization (“Lipper”). 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 independent legal counsel to the Independent Trustees. The Board requested and received information regarding DMC’s policy with respect to advisory fee levels and its breakpoint philosophy; the structure of portfolio manager compensation; the investment manager’s profitability; comparative client fee information; and any constraints or limitations on the availability of securities for certain investment styles, which had in the past year inhibited, or which were likely in the future to inhibit, DMC’s ability to invest fully in accordance with Fund policies.
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In considering information relating to the approval of the Fund’s advisory agreement, the Independent Trustees received assistance and advice from and met separately with independent legal counsel to the Independent Trustees. Although the Board gave attention to all information furnished, the following discussion identifies, under separate headings, the primary factors taken into account by the Board during its contract renewal considerations.
Nature, Extent and Quality of Service. The Board considered the services provided by 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 DMC and Delaware Distributors, L.P. (together, “Management”) personnel with the Code of Ethics adopted throughout the Delaware Investments Family of Funds complex and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of the Fund’s investment advisor and the emphasis placed on research in the investment process. The Board recognized DMC’s recent receipt of several industry distinctions. The Board gave favorable consideration to DMC’s efforts to control expenditures while maintaining service levels committed to fund matters. The Board noted that in July 2011 Management implemented measures to reduce overall costs and improve transfer agent and shareholder servicing functions through outsourcing. The Board 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 the importance of investment performance to shareholders. Although the Board gave appropriate consideration to performance reports and discussions with portfolio managers at Investment Committee meetings throughout the year, the Board gave particular weight to the 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- and five-year periods ended March 31, 2013. 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.
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Other Fund information
(Unaudited)
Delaware Small Cap Core Fund
Board consideration of Delaware Small Cap Core Fund investment advisory agreement (continued)
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-year period 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 first quartile of its Performance Universe and the Fund’s total return for the ten-year period was in the third quartile of its Performance Universe. The Board was satisfied with performance.
Comparative Expenses. The Board considered expense comparison data for the Delaware Investments Family of Funds. Management provided the Board with information on pricing levels and fee structures for the Fund as of its most recently completed fiscal year. The Board also focused on the comparative analysis of effective management fees and total expense ratios of the Fund versus effective management fees and expense ratios of a group of similar funds as selected by 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 second lowest expenses of its Expense Group and its 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, reflects 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
46
which Delaware Investments might derive ancillary benefits from fund operations, including the potential for procuring additional business as a result of the prestige and visibility associated with its role as service provider to the Delaware Investments Family of Funds and the benefits from allocation of fund brokerage to improve trading efficiencies. The Board found that the management fees were reasonable in light of the services rendered and the level of profitability of Delaware Investments.
Economies of Scale. The Trustees considered whether economies of scale are realized by Delaware Investments as the Fund’s assets increase and the extent to which any economies of scale are reflected in the level of management fees charged. The Trustees reviewed the standardized advisory fee pricing and structure, approved by the Board and shareholders, which includes breakpoints. Breakpoints in the advisory fee occur when the advisory fee rate is reduced on assets in excess of specified levels. Breakpoints result in a lower advisory fee than would otherwise be the case on all assets when the asset levels specified are exceeded. The Board noted that the fee under the Fund’s management contract fell within the standard structure. 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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Board of trustees/directors and officers addendum
Delaware Investments® Family of Funds
A mutual fund is governed by a Board of Trustees/Directors (“Trustees”), which has oversight responsibility for the management of a fund’s business affairs. Trustees establish procedures and oversee and review the performance of the investment manager, the distributor, and others who perform services for the fund. The independent fund trustees, in particular, are advocates
Name, Address, | Position(s) | Length of |
and Birth Date | Held with Fund(s) | Time Served |
Interested Trustees | ||
Patrick P. Coyne1 | Chairman, President, | Chairman and Trustee |
2005 Market Street | Chief Executive Officer, | since August 16, 2006 |
Philadelphia, PA 19103 | and Trustee | |
April 1963 | President and | |
Chief Executive Officer | ||
since August 1, 2006 | ||
Independent Trustees | ||
Thomas L. Bennett | Trustee | Since March 2005 |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
October 1947 | ||
Joseph W. Chow | Trustee | Since January 2013 |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
January 1953 | ||
John A. Fry | Trustee | Since January 2001 |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
May 1960 | ||
Anthony D. Knerr | Trustee | Since April 1990 |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
December 1938 |
1 Patrick P. Coyne is considered to be an “Interested Trustee” because he is an executive officer of the Fund’s(s’) investment advisor.
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for shareholder interests. Each trustee has served in that capacity since he or she was elected to or appointed to the Board of Trustees, and will continue to serve until his or her retirement or the election of a new trustee in his or her place. The following is a list of the Trustees and Officers with certain background and related information.
Number of Portfolios in | ||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships |
During Past 5 Years | by Trustee or Officer | Held by Trustee or Officer |
Patrick P. Coyne has served in | 70 | Director and Audit |
various executive capacities | Committee Member | |
at different times at | Kaydon Corp. | |
Delaware Investments.2 | ||
Board of Governors Member | ||
Investment Company | ||
Institute (ICI) | ||
Private Investor | 70 | Director |
(March 2004–Present) | Bryn Mawr Bank Corp. (BMTC) | |
(2007–2011) | ||
Executive Vice President | 70 | Director and Audit Committee |
(Emerging Economies Strategies, | Member — Hercules | |
Risk and Corporate Administration) | Technology Growth | |
State Street Corporation | Capital, Inc. | |
(July 2004–March 2011) | ||
President | 70 | Director — Hershey Trust |
Drexel University | ||
(August 2010–Present) | Director and Audit | |
Committee Member | ||
President | Community Health Systems | |
Franklin & Marshall College | ||
(July 2002–July 2010) | ||
Managing Director | 70 | None |
AKA Strategy | ||
(Strategic Consulting) | ||
(1990–Present) |
2 Delaware Investments is the marketing name for Delaware Management Holdings, Inc. and its subsidiaries, including the Fund’s(s’) investment advisor, principal underwriter, and its transfer agent.
49
Board of trustees/directors and officers addendum
Delaware Investments® Family of Funds
Name, Address, | Position(s) | Length of |
and Birth Date | Held with Fund(s) | Time Served |
Independent Trustees (continued) | ||
Lucinda S. Landreth | Trustee | Since March 2005 |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
June 1947 | ||
Frances A. Sevilla-Sacasa | Trustee | Since September 2011 |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
January 1956 | ||
Thomas K. Whitford | Trustee | Since January 2013 |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
March 1956 | ||
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Number of Portfolios in | ||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships |
During Past 5 Years | by Trustee or Officer | Held by Trustee or Officer |
Private Investor | 70 | None |
(2004–Present) | ||
Chief Executive Officer — | 70 | Trust Manager and |
Banco Itaú Europa | Audit Committee | |
International | Member — Camden | |
(April 2012–Present) | Property Trust | |
Executive Advisor to Dean | ||
(August 2011–March 2012) | ||
and Interim Dean | ||
(January 2011–July 2011) — | ||
University of Miami School of | ||
Business Administration | ||
President — U.S. Trust, | ||
Bank of America Private | ||
Wealth Management | ||
(Private Banking) | ||
(July 2007–December 2008) | ||
Vice Chairman | 70 | None |
(2010–April 2013) | ||
Chief Administrative | ||
Officer (2008–2010) | ||
and Executive Vice | ||
President and Chief | ||
Administrative Officer | ||
(2007–2009) — | ||
PNC Financial | ||
Services Group |
51
Board of trustees/directors and officers addendum
Delaware Investments® Family of Funds
Name, Address, | Position(s) | Length of |
and Birth Date | Held with Fund(s) | Time Served |
Independent Trustees (continued) | ||
Janet L. Yeomans | Trustee | Since April 1999 |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
July 1948 | ||
J. Richard Zecher | Trustee | Since March 2005 |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
July 1940 | ||
52
Number of Portfolios in | ||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships |
During Past 5 Years | by Trustee or Officer | Held by Trustee or Officer |
Vice President and Treasurer | 70 | Director, Audit |
(January 2006–July 2012) | Committee Member and | |
Vice President — Mergers & Acquisitions | Investment Committee | |
(January 2003–January 2006), and | Member | |
Vice President and Treasurer | Okabena Company | |
(July 1995–January 2003) | ||
3M Corporation | Chair — 3M | |
Investment Management | ||
Company | ||
(2005–2012) | ||
Founder | 70 | Director and Compensation |
Investor Analytics | Committee Member | |
(Risk Management) | Investor Analytics | |
(May 1999–Present) | ||
Director — P/E Investments | ||
Founder | ||
P/E Investments | ||
(Hedge Fund) | ||
(September 1996–Present) |
53
Board of trustees/directors and officers addendum
Delaware Investments® Family of Funds
Name, Address, | Position(s) | Length of |
and Birth Date | Held with Fund(s) | Time Served |
Officers | ||
David F. Connor | Senior Vice President, | Senior Vice President, |
2005 Market Street | Deputy General | Deputy General Counsel |
Philadelphia, PA 19103 | Counsel, and Secretary | since May 2013; |
December 1963 | Vice President, Deputy | |
General Counsel | ||
September 2000– | ||
May 2013; Secretary since | ||
October 2005 | ||
Daniel V. Geatens | Vice President | Treasurer |
2005 Market Street | and Treasurer | since October 2007 |
Philadelphia, PA 19103 | ||
October 1972 | ||
David P. O’Connor | Executive Vice President, | Executive Vice President |
2005 Market Street | General Counsel | since February 2012; |
Philadelphia, PA 19103 | and Chief Legal Officer | Senior Vice President |
February 1966 | October 2005– | |
February 2012; | ||
General Counsel and | ||
Chief Legal Officer | ||
since October 2005 | ||
Richard Salus | Senior Vice President | Chief Financial Officer |
2005 Market Street | and Chief Financial Officer | since November 2006 |
Philadelphia, PA 19103 | ||
October 1963 |
The Statement of Additional Information for the Fund(s) includes additional information about the Trustees and Officers and is available, without charge, upon request by calling 800 523-1918.
54
Number of Portfolios in | ||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships |
During Past 5 Years | by Trustee or Officer | Held by Trustee or Officer |
David F. Connor has served as | 70 | None3 |
Deputy General Counsel of | ||
Delaware Investments | ||
since 2000. | ||
Daniel V. Geatens has served | 70 | None3 |
in various capacities at | ||
different times at | ||
Delaware Investments. | ||
David P. O’Connor has served in | 70 | None3 |
various executive and legal | ||
capacities at different times | ||
at Delaware Investments. | ||
Richard Salus has served in | 70 | None3 |
various executive capacities | ||
at different times at | ||
Delaware Investments. |
3 David F. Connor, Daniel V. Geatens, David P. O’Connor, and Richard Salus serve in similar capacities for the six portfolios of the Optimum Fund Trust, which have the same investment advisor, principal underwriter, and transfer agent as the registrant.
55
About the organization
Board of trustees | |||
Patrick P. Coyne Thomas L. Bennett | Joseph W. Chow John A. Fry Anthony D. Knerr | Lucinda S. Landreth Frances A. | Thomas K. Whitford Janet L. Yeomans J. Richard Zecher |
Affiliated officers | |||
David F. Connor | Daniel V. Geatens | David P. O’Connor | Richard Salus |
This annual report is for the information of Delaware Small Cap Core Fund shareholders, but it may be used with prospective investors when preceded or accompanied by the Delaware Investments Fund fact sheet for the most recently completed calendar quarter. These documents are available at 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 (SEC) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 800 523-1918; and (ii) on the SEC’s website at sec.gov. In addition, a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities and the Fund’s Schedule of Investments are available without charge on the Fund’s website at delawareinvestments.com. The Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C.; information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund’s website at delawareinvestments.com; and (ii) on the SEC’s website at sec.gov. |
56
![](https://capedge.com/proxy/N-CSR/0001206774-14-000426/del_topimg02.jpg)
Annual report U.S. value equity mutual fund Delaware Small Cap Value Fund November 30, 2013 |
Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Fund’s prospectus and its summary prospectus, which may be obtained by visiting delawareinvestments.com or calling 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing. |
You can obtain shareholder reports and prospectuses online instead of in the mail. Visit delawareinvestments.com/edelivery. |
Experience Delaware Investments
Delaware Investments is committed to the pursuit of consistently superior asset management and unparalleled client service. We believe in our investment processes, which seek to deliver consistent results, and in convenient services that help add value for our clients.
If you are interested in learning more about creating an investment plan, contact your financial advisor.
You can learn more about Delaware Investments or obtain a prospectus for Delaware Small Cap Value Fund at delawareinvestments.com.
- 24-hour access to your account information
- Obtain share prices
- Check your account balance and recent transactions
- Request statements or literature
- Make purchases and redemptions
Delaware Management Holdings, Inc. and its subsidiaries (collectively known by the marketing name of Delaware Investments) are wholly owned subsidiaries of Macquarie Group Limited, a global provider of banking, financial, advisory, investment and funds management services.
Investments in Delaware Small Cap Value Fund are not and will not be deposits with or liabilities of Macquarie Bank Limited ABN 46 008 583 542 and its holding companies, including their subsidiaries or related companies (Macquarie Group), and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. No Macquarie Group company guarantees or will guarantee the performance of the Fund, the repayment of capital from the Fund, or any particular rate of return.
Table of contents
Portfolio management review | 1 | |
Performance summary | 4 | |
Disclosure of Fund expenses | 8 | |
Security type/sector allocation and | ||
top 10 equity holdings | 10 | |
Schedule of investments | 12 | |
Statement of assets and liabilities | 18 | |
Statement of operations | 20 | |
Statements of changes in net assets | 22 | |
Financial highlights | 24 | |
Notes to financial statements | 34 | |
Report of independent registered | ||
public accounting firm | 44 | |
Other Fund information | 45 | |
Board of trustees/directors and | ||
officers addendum | 50 | |
About the organization | 58 |
Unless otherwise noted, views expressed herein are current as of Nov. 30, 2013, and subject to change.
Funds are not FDIC insured and are not guaranteed. It is possible to lose the principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor. Delaware Investments, a member of Macquarie Group, refers to Delaware Management Holdings, Inc. and its subsidiaries, including the Fund’s distributor, Delaware Distributors, L.P. Macquarie Group refers to Macquarie Group Limited and its subsidiaries and affiliates worldwide.
© 2013 Delaware Management Holdings, Inc.
All third-party marks cited are the property of their respective owners.
Portfolio management review | ||
Delaware Small Cap Value Fund | December 10, 2013 |
Performance preview (for the year ended November 30, 2013) | |||||
Delaware Small Cap Value Fund (Class A shares) | 1-year return | + | 32.87 | % | |
Russell 2000® Value Index (benchmark) | 1-year return | + | 37.60 | % |
For complete, annualized performance for Delaware Small Cap Value Fund, please see the table on page 4.
The performance of Class A shares excludes the applicable sales charge and reflects the reinvestment of all distributions.
Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.
Small-cap value stocks pushed higher during the Fund’s fiscal year ended Nov. 30, 2013, propelled by a relaxation of financial tensions in Europe, continued economic growth in the United States, and the perception that the Federal Reserve stood ready to cushion any potential downturn with additional billions of newly minted dollars.
The sharp gains came despite fiscal headwinds and political dysfunction, including worries about the perceived so-called fiscal cliff, a sizeable budgetary sequester, a 16-day government shutdown, and the threat of a first-ever default on the national debt. In spite of these potential headwinds, smaller stocks outperformed their large- and mid-sized cousins by a significant margin during the Fund’s fiscal year (source: Bloomberg).
Although there were hints that the Fed might soon remove the monetary punchbowl — delivered first by Fed Chairman Ben Bernanke in May 2013 and repeated by various Fed officials over subsequent weeks — quantitative easing (QE), remained in full-force through the end of the Fund’s fiscal year. The rally picked up steam after mid-September when the Fed pleased the financial markets by declining to taper its monthly bond-buying program. President Barack Obama’s nomination of Janet Yellen to succeed Ben Bernanke as Fed chair in January 2014 further bolstered the bullish mood, given that Yellen is widely viewed as relatively “dovish” on monetary policy where it concerns employment and inflation.
Though economic growth remained generally lackluster during the fiscal period, there were few signs of recession. Unemployment also drifted lower, albeit at glacial speed, while corporate profits mostly beat modest expectations.
Fund performance
For the fiscal year ended Nov. 30, 2013, Delaware Small Cap Value Fund (Class A shares) returned +32.87% at net asset value (NAV) and +25.22% at maximum offer price (both figures reflect all distributions reinvested). The Fund underperformed its benchmark, the Russell 2000 Value Index, which returned +37.60% for the same period. Complete annualized performance for Delaware Small Cap Value Fund is shown in the table on page 4.
In the mostly “risk-on” mindset that prevailed during the fiscal year, the Fund benefited from the decision to underweight real estate investment trusts (REITs) and “defensive” stocks in general. The Fund’s allocation to the capital spending and consumer services sectors also contributed to relative performance, although the Fund’s stock selection within the consumer group was
1
Portfolio management review
Delaware Small Cap Value Fund
subpar. We maintained a relatively neutral weighting to the strong-performing domestic banks sector, and stock selection within this group further boosted relative performance.
However, our lack of exposure to asset management companies — with the notable exception of Boston Private Financial Holdings — detracted from relative performance, as did our ongoing underweight to what we viewed as highly leveraged and lower-quality stocks. Finally, although biotechnology companies represented only a small portion of the Fund’s benchmark, the Fund’s total lack of exposure to the industry negatively affected relative performance. It is important to note, however, that most biotechnology companies generally have little or no earnings and only qualify for inclusion in a “value” index on the basis of the price-to-book value metric. Similarly, it has been the policy of the Fund to minimize exposure to companies with higher levels of debt. Finally, the technology sector detracted from Fund performance due to a more defensive stock selection within a normally high-beta group.
Among individual securities, the Fund’s allocation to East West Bancorp contributed positively to the Fund’s relative performance. The California-based company is a full-service commercial bank with customers located throughout the U.S. and China. Its stock performed quite well during the fiscal year amid two dividend increases, a share repurchase program, and solid loan growth. The Fund held shares of East West Bancorp during the full fiscal year and continues to do so.
The Fund also benefited from its holdings in Saia, a Georgia-based trucking company that experienced strong revenue and earnings increases while it implemented cost controls. The stock more than doubled during the fiscal year as the successful implementation of those controls allowed for significant earnings’ gains despite relatively modest revenue growth. Although the Fund continues to hold Saia shares, we scaled back the Fund’s position in recent months.
Chicago Bridge & Iron, an engineering and construction firm with significant exposure to the energy sector, also boosted relative returns. The company benefited from its acquisition of The Shaw Group in a deal that, in our view, provided valuable synergies. The Fund held the stock entering the fiscal year and we used the near-doubling of its share price to reduce the Fund’s position during the latter part of 2013.
The largest detractor from the Fund’s performance during the fiscal year was Cirrus Logic, in part because of an overweight allocation to the stock. The company is heavily dependent on its main customer, Apple, which has insisted on price concessions from major suppliers. Because of this and other concerns over Apple’s longer-term growth profile the share fell, shares of Cirrus Logic fell sharply during the first half of the fiscal year. While Cirrus continued to have, in our view, a solid balance sheet and free cash flow, many investors nonetheless discounted a lowering of earnings expectations in coming quarters. The stock has rebounded — not coincidentally, along with Apple — from its midsummer lows; therefore, we continue to hold its shares in the Fund.
Women’s apparel retailer Stage Stores also detracted from relative performance. Though management achieved considerable success in getting the company’s finances in order,
2
same-store sales were slightly off during the spring and summer earnings reporting seasons, triggering a sharp selloff in its stock. (Given the broad-based nature of the current bull market, most disappointed investors have not been willing to linger.) At current levels, however, we view Stage Stores as having potential to be a solid long-term holding and recently added to the Fund’s position.
Finally, Education Realty Trust, a student-housing REIT, also detracted from Fund performance. The company reported solid earnings growth, but its shares nonetheless were painted with the same negative brush that tarnished the REIT industry in general. An earnings shortfall at a major competitor gave investors another reason to look outside the industry. Despite its negative effect on the Fund’s relative performance, the decline in shares of Education Realty Trust was modest in nominal terms, and the Fund continues to hold the shares.
At the end of the fiscal year, the Fund maintained its procyclical tilt, which translated into overweight positions in basic industries, capital spending, consumer services, and technology, with corresponding underweights in utilities, REITs, and consumer staples. We also continue to apply our traditional higher-quality bias to the Fund’s portfolio, with a particular emphasis on companies that, in our opinion, have potential to generate free cash flow, appear to be in a position to raise their dividend or buyback shares, and exhibit disciplined capital spending and acquisition strategies. Also in accordance with the Fund’s long-held preferences, we continue to underweight companies that, in our view, are excessively levered.
3
Performance summary | |
Delaware Small Cap Value Fund | November 30, 2013 |
The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. Please obtain the performance data current for the most recent month end by calling 800 523-1918 or visiting our website at delawareinvestments.com/performance. Current performance may be lower or higher than the performance data quoted.
Fund and benchmark performance1,2 | Average annual total returns through November 30, 2013 | |||||
1 year | 5 years | 10 years | ||||
Class A (Est. June 24, 1987) | ||||||
Excluding sales charge | +32.87% | +21.14% | +9.54% | |||
Including sales charge | +25.22% | +19.71% | +8.90% | |||
Class B (Est. Sept. 6, 1994) | ||||||
Excluding sales charge | +31.97% | +20.25% | +8.90% | |||
Including sales charge | +27.97% | +20.04% | +8.90% | |||
Class C (Est. Nov. 29, 1995) | ||||||
Excluding sales charge | +31.93% | +20.23% | +8.74% | |||
Including sales charge | +30.93% | +20.23% | +8.74% | |||
Class R (Est. June 2, 2003) | ||||||
Excluding sales charge | +32.55% | +20.84% | +9.27% | |||
Including sales charge | +32.55% | +20.84% | +9.27% | |||
Institutional Class (Est. Nov. 9, 1992) | ||||||
Excluding sales charge | +33.22% | +21.44% | +9.83% | |||
Including sales charge | +33.22% | +21.44% | +9.83% | |||
Russell 2000 Value Index | +37.60% | +18.60% | +8.79% |
1 Returns reflect the reinvestment of all distributions and are presented both with and without the applicable sales charges described below. Returns do not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares.
Expense limitations were in effect for certain classes during some or all of the periods shown in the “Fund performance” chart. Expenses for each class are listed on the “Fund expense ratios” table on page 5. Performance would have been lower had expense limitations not been in effect.
Class A shares are sold with a maximum front-end sales charge of 5.75%, and have an annual distribution and service fee of 0.25% of average daily net assets. Prior to Oct. 1, 2013, Class A shares had an annual distribution and service fee of 0.30% of average daily net assets. This fee was contractually limited to 0.25% during the period from Dec. 1, 2012 until Oct. 1, 2013. Performance for Class A shares, excluding sales charges, assumes that no front-end sales charge applied.
4
Class B shares may be purchased only through dividend reinvestment and certain permitted exchanges as described in the prospectus. Please see the prospectus for additional information on Class B shares. Class B shares have a contingent deferred sales charge that declines from 4.00% to zero depending on the period of time the shares are held. They are also subject to an annual distribution and service fee of 1.00% of average daily net assets. This fee has been contractually limited to 0.25% of average daily net assets from Nov. 1, 2013, through Oct. 31, 2014. Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase. Ten-year performance figures for Class B shares reflect conversion to Class A shares after approximately eight years.
Class C shares are sold with a contingent deferred sales charge of 1.00% if redeemed during the first 12 months. They are also subject to an annual distribution and service fee of 1.00% of average daily net assets.
Performance for Class B and C shares, excluding sales charges, assumes either that contingent deferred sales charges did not apply or that the investment was not redeemed.
Class R shares are available only for certain retirement plan products. They are sold without a sales charge and have an annual distribution and service fee of 0.50% of average daily net assets. Prior to Oct. 1, 2013, Class R shares had an annual distribution and service fee of 0.60% of average daily net assets. This fee was contractually limited to 0.50% during the period from Dec. 1, 2012 until Oct. 1, 2013.
Institutional Class shares are available without sales or asset-based distribution charges only to certain eligible institutional accounts.
The “Fund performance” table and the “Performance of a $10,000 investment” graph do not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares.
Investments in small and/or medium-sized companies typically exhibit greater risk and higher volatility than larger, more established companies.
2 The Fund’s expense ratios, as described in the most recent prospectus and any applicable supplement(s), are disclosed in the following “Fund expense ratios” table.
Fund expense ratios | Class A | Class B | Class C | Class R | Institutional Class | ||||||||||
Total annual operating expenses | 1.32 | % | 1.32 | % | 2.07 | % | 1.57 | % | 1.07 | % | |||||
(without fee waivers) | |||||||||||||||
Net expenses | 1.32 | % | 1.32 | % | 2.07 | % | 1.57 | % | 1.07 | % | |||||
(including fee waivers, if any) | |||||||||||||||
Type of waiver | n/a | n/a | n/a | n/a | n/a |
5
Performance summary
Delaware Small Cap Value Fund
Performance of a $10,000 investment1
Average annual total returns from Nov. 30, 2003, through Nov. 30, 2013
For period beginning Nov. 30, 2003, through Nov. 30, 2013 | Starting value | Ending value | ||||||||
Delaware Small Cap Value Fund — Class A shares | $ | 9,425 | $ | 23,450 | ||||||
Russell 2000 Value Index | $ | 10,000 | $ | 23,218 |
1 The “Performance of a $10,000 investment” graph assumes $10,000 invested in Class A shares of the Fund on Nov. 30, 2003, and includes the effect of a 5.75% front-end sales charge and the reinvestment of all distributions. The graph does not reflect the deduction of taxes the shareholders would pay on Fund distributions or redemptions of Fund shares. Expense limitations were in effect for some or all of the periods shown. Performance would have been lower had expense limitations not been in effect. Expenses are listed in the “Fund expense ratios” table on page 5. Please note additional details on pages 4 through 6.
The chart also assumes $10,000 invested in the Russell 2000 Value Index as of Nov. 30, 2003.
The Russell 2000 Value Index measures the performance of the small-cap value segment of the U.S. equity universe. It includes those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values.
Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index. Past performance is not a guarantee of future results.
Performance of other Fund classes will vary due to different charges and expenses.
Nasdaq symbols | CUSIPs | |||||
Class A | DEVLX | 246097109 | ||||
Class B | DEVBX | 246097307 | ||||
Class C | DEVCX | 246097406 | ||||
Class R | DVLRX | 246097505 | ||||
Institutional Class | DEVIX | 246097208 |
6
Disclosure of Fund expenses
For the six-month period from June 1, 2013 to November 30, 2013 (Unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period from June 1, 2013 to Nov. 30, 2013.
Actual expenses
The first section of the table shown, “Actual Fund return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The second section of the table shown, “Hypothetical 5% return,” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The Fund’s expenses shown in the table reflect fee waivers in effect. The expenses shown in the table assume reinvestment of all dividends and distributions.
8
Delaware Small Cap Value Fund
Expense analysis of an investment of $1,000
Beginning | Ending | Expenses | ||||||||||||||
Account Value | Account Value | Annualized | Paid During Period | |||||||||||||
6/1/13 | 11/30/13 | Expense Ratio | 6/1/13 to 11/30/13* | |||||||||||||
Actual Fund return† | ||||||||||||||||
Class A | $ | 1,000.00 | $ | 1,130.40 | 1.26 | % | $ | 6.73 | ||||||||
Class B | 1,000.00 | 1,126.80 | 1.93 | % | 10.29 | |||||||||||
Class C | 1,000.00 | 1,126.40 | 2.01 | % | 10.71 | |||||||||||
Class R | 1,000.00 | 1,129.10 | 1.51 | % | 8.06 | |||||||||||
Institutional Class | 1,000.00 | 1,131.90 | 1.01 | % | 5.40 | |||||||||||
Hypothetical 5% return (5% return before expenses) | ||||||||||||||||
Class A | $ | 1,000.00 | $ | 1,018.75 | 1.26 | % | $ | 6.38 | ||||||||
Class B | 1,000.00 | 1,015.39 | 1.93 | % | 9.75 | |||||||||||
Class C | 1,000.00 | 1,014.99 | 2.01 | % | 10.15 | |||||||||||
Class R | 1,000.00 | 1,017.50 | 1.51 | % | 7.64 | |||||||||||
Institutional Class | 1,000.00 | 1,020.00 | 1.01 | % | 5.11 |
*“Expenses Paid During Period” are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period).
† | Because actual returns reflect only the most recent six month period, the returns shown may differ significantly from fiscal year returns. |
9
top 10 equity holdings
Delaware Small Cap Value Fund | As of November 30, 2013 (Unaudited) |
Sector designations may be different than the sector designations presented in other Fund materials. The sector designations may represent the investment manager’s internal sector classifications, which may result in the sector designations for one fund being different than another fund’s sector designations.
Security type/sector | Percentage of net assets | ||
Common Stock | 96.46 | % | |
Basic Industry | 10.11 | % | |
Business Services | 1.27 | % | |
Capital Spending | 10.42 | % | |
Consumer Cyclical | 3.70 | % | |
Consumer Services | 10.82 | % | |
Consumer Staples | 0.41 | % | |
Energy | 7.35 | % | |
Financial Services | 20.87 | % | |
Healthcare | 7.01 | % | |
Real Estate | 6.05 | % | |
Technology | 13.47 | % | |
Transportation | 2.74 | % | |
Utilities | 2.24 | % | |
Exchange-Traded Fund | 1.01 | % | |
Short-Term Investments | 2.71 | % | |
Total Value of Securities | 100.18 | % | |
Liabilities Net of Receivables and Other Assets | (0.18 | %) | |
Total Net Assets | 100.00 | % |
10
Holdings are for informational purposes only and are subject to change at any time. They are not a recommendation to buy, sell, or hold any security.
Top 10 equity holdings | Percentage of net assets | |
United Rentals | 3.31 | % |
East West Bancorp | 2.43 | % |
Whiting Petroleum | 2.39 | % |
Platinum Underwriters Holdings | 1.78 | % |
Fuller (H.B.) | 1.77 | % |
Chemtura | 1.66 | % |
Hancock Holding | 1.61 | % |
Helix Energy Solutions Group | 1.60 | % |
Synopsys | 1.60 | % |
Chicago Bridge & Iron | 1.54 | % |
11
Schedule of investments | |
Delaware Small Cap Value Fund | November 30, 2013 |
Number of shares | Value | ||||||
Common Stock – 96.46% | |||||||
Basic Industry – 10.11% | |||||||
Albemarle | 403,100 | $ | 27,697,001 | ||||
† | Berry Plastics Group | 1,168,000 | 25,053,600 | ||||
† | Chemtura | 1,430,100 | 37,754,640 | ||||
Cytec Industries | 322,100 | 28,821,508 | |||||
Fuller (H.B.) | 786,400 | 40,287,272 | |||||
Glatfelter | 717,400 | 20,080,026 | |||||
Kaiser Aluminum | 442,027 | 29,757,258 | |||||
Olin | 617,100 | 15,322,593 | |||||
Valspar | 77,700 | 5,486,397 | |||||
230,260,295 | |||||||
Business Services – 1.27% | |||||||
Brink’s | 390,900 | 13,106,877 | |||||
United Stationers | 350,618 | 15,770,798 | |||||
28,877,675 | |||||||
Capital Spending – 10.42% | |||||||
Actuant Class A | 574,900 | 22,467,092 | |||||
@ | Altra Holdings | 753,114 | 22,879,603 | ||||
Chicago Bridge & Iron | 458,800 | 35,180,784 | |||||
† | EnPro Industries | 229,800 | 13,006,680 | ||||
ITT | 803,500 | 32,798,870 | |||||
Regal Beloit | 330,000 | 24,281,400 | |||||
† | Thermon Group Holdings | 398,600 | 11,479,680 | ||||
† | United Rentals | 1,096,200 | 75,341,826 | ||||
237,435,935 | |||||||
Consumer Cyclical – 3.70% | |||||||
Barnes Group | 467,500 | 17,063,750 | |||||
Dana Holdings | 982,800 | 19,931,184 | |||||
Knoll | 656,700 | 11,656,425 | |||||
† | Meritage Homes | 554,500 | 24,165,110 | ||||
Standard Motor Products | 333,000 | 11,561,760 | |||||
84,378,229 | |||||||
Consumer Services – 10.82% | |||||||
† | Big Lots | 491,400 | 18,835,362 | ||||
Brinker International | 296,700 | 13,953,801 | |||||
@ | Cato Class A | 692,600 | 23,576,104 | ||||
CEC Entertainment | 190,400 | 9,129,680 | |||||
Cheesecake Factory | 453,900 | 22,127,625 |
12
Number of shares | Value | ||||||
Common Stock (continued) | |||||||
Consumer Services (continued) | |||||||
Finish Line Class A | 745,500 | $ | 19,688,655 | ||||
† | Genesco | 213,100 | 15,963,321 | ||||
Guess | 248,800 | 8,523,888 | |||||
Hanesbrands | 325,900 | 22,845,590 | |||||
† | Madden (Steven) | 423,150 | 16,485,924 | ||||
Meredith | 367,000 | 19,575,780 | |||||
Pier 1 Imports | 643,200 | 14,336,928 | |||||
Rent-A-Center | 395,100 | 13,457,106 | |||||
Stage Stores | 647,100 | 13,595,571 | |||||
Texas Roadhouse | 509,200 | 14,247,416 | |||||
246,342,751 | |||||||
Consumer Staples – 0.41% | |||||||
Pinnacle Foods | 335,500 | 9,256,445 | |||||
9,256,445 | |||||||
Energy – 7.35% | |||||||
† | Helix Energy Solutions Group | 1,642,000 | 36,468,820 | ||||
† | Jones Energy | 437,100 | 6,316,095 | ||||
Patterson-UTI Energy | 1,233,900 | 28,762,209 | |||||
Southwest Gas | 528,000 | 28,015,680 | |||||
† | Stone Energy | 406,663 | 13,452,412 | ||||
† | Whiting Petroleum | 901,800 | 54,468,720 | ||||
167,483,936 | |||||||
Financial Services – 20.87% | |||||||
Bank of Hawaii | 555,700 | 32,869,655 | |||||
Boston Private Financial Holdings | 1,420,700 | 16,899,227 | |||||
@ | Community Bank System | 778,100 | 30,236,966 | ||||
CVB Financial | 537,200 | 8,670,408 | |||||
East West Bancorp | 1,612,123 | 55,263,575 | |||||
First Financial Bancorp | 1,146,600 | 18,953,298 | |||||
First Midwest Bancorp | 974,500 | 17,891,820 | |||||
Hancock Holding | 1,041,500 | 36,660,800 | |||||
@ | Independent Bank | 622,900 | 23,776,093 | ||||
@ | Infinity Property & Casualty | 293,082 | 20,911,401 | ||||
Main Street Capital | 490,100 | 16,148,795 | |||||
@ | NBT Bancorp | 929,700 | 24,107,121 | ||||
Platinum Underwriters Holdings | 640,100 | 40,582,340 | |||||
ProAssurance | 129,900 | 6,245,592 | |||||
@ | S&T Bancorp | 495,300 | 13,031,343 |
13
Schedule of investments
Delaware Small Cap Value Fund
Number of shares | Value | ||||||
Common Stock (continued) | |||||||
Financial Services (continued) | |||||||
@ | Selective Insurance Group | 1,101,600 | $ | 31,054,104 | |||
StanCorp Financial Group | 198,000 | 12,693,780 | |||||
Validus Holdings | 470,884 | 18,858,904 | |||||
Webster Financial | 1,046,600 | 30,853,768 | |||||
@ | WesBanco | 620,900 | 19,558,350 | ||||
475,267,340 | |||||||
Healthcare – 7.01% | |||||||
Cooper | 113,300 | 14,926,142 | |||||
† | Haemonetics | 474,300 | 20,043,918 | ||||
Owens & Minor | 509,900 | 19,462,883 | |||||
Service Corp. International | 1,318,200 | 23,819,874 | |||||
STERIS | 495,700 | 22,871,598 | |||||
Teleflex | 276,900 | 27,222,039 | |||||
Universal Health Services Class B | 166,300 | 13,708,109 | |||||
† | VCA Antech | 585,000 | 17,520,750 | ||||
159,575,313 | |||||||
Real Estate – 6.05% | |||||||
Alexander & Baldwin | 450,200 | 17,013,058 | |||||
Brandywine Realty Trust | 1,490,637 | 19,795,659 | |||||
Education Realty Trust | 1,345,300 | 11,704,110 | |||||
Healthcare Realty Trust | 577,700 | 12,784,501 | |||||
Highwoods Properties | 560,300 | 20,125,976 | |||||
Lexington Realty Trust | 1,798,900 | 18,474,703 | |||||
Ramco-Gershenson Properties Trust | 844,289 | 13,508,624 | |||||
Summit Hotel Properties | 1,041,700 | 9,458,636 | |||||
Washington Real Estate Investment Trust | 628,300 | 14,915,842 | |||||
137,781,109 | |||||||
Technology – 13.47% | |||||||
@ | Black Box | 223,813 | 6,269,002 | ||||
† | Brocade Communications Systems | 2,897,700 | 25,470,783 | ||||
† | Cirrus Logic | 978,600 | 19,748,148 | ||||
† | CommScope Holding | 889,500 | 14,312,055 | ||||
Compuware | 2,407,000 | 26,452,930 | |||||
† | Electronics for Imaging | 502,700 | 19,906,920 | ||||
† | Netscout Systems | 551,900 | 16,794,317 | ||||
† | ON Semiconductor | 3,226,800 | 22,878,012 | ||||
†@ | Premiere Global Services | 962,850 | 8,983,391 | ||||
† | PTC | 889,200 | 28,934,568 |
14
Number of shares | Value | ||||||
Common Stock (continued) | |||||||
Technology (continued) | |||||||
† | RF Micro Devices | 1,932,600 | $ | 10,204,128 | |||
† | Synopsys | 994,900 | 36,443,187 | ||||
† | Tech Data | 407,400 | 21,119,616 | ||||
† | Teradyne | 1,207,300 | 20,560,319 | ||||
† | Vishay Intertechnology | 2,229,300 | 28,824,849 | ||||
306,902,225 | |||||||
Transportation – 2.74% | |||||||
† | Kirby | 163,700 | 15,461,465 | ||||
Matson | 499,900 | 12,512,497 | |||||
† | Saia | 393,950 | 13,681,884 | ||||
Werner Enterprises | 862,200 | 20,753,154 | |||||
62,409,000 | |||||||
Utilities – 2.24% | |||||||
Black Hills | 349,800 | 17,584,446 | |||||
El Paso Electric | 432,900 | 15,597,387 | |||||
NorthWestern | 405,000 | 17,811,900 | |||||
50,993,733 | |||||||
Total Common Stock (cost $1,655,630,332) | 2,196,963,986 | ||||||
Exchange-Traded Fund – 1.01% | |||||||
iShares Russell 2000 Value Index Fund | 234,700 | 23,035,805 | |||||
Total Exchange-Traded Fund (cost $20,270,185) | 23,035,805 | ||||||
Principal amount | |||||||
Short-Term Investments – 2.71% | |||||||
≠Discount Note – 0.04% | |||||||
Federal Home Loan Bank 0.05% 12/27/13 | $ | 962,719 | 962,712 | ||||
962,712 | |||||||
Repurchase Agreements – 1.51% | |||||||
Bank of America 0.04%, dated 11/29/13, to be | |||||||
repurchased on 12/2/13, repurchase price | |||||||
$6,348,098 (collateralized by U.S. government | |||||||
obligations 0.375%-1.875% 11/15/14-6/30/15; | |||||||
market value $6,475,053) | 6,348,091 | 6,348,091 |
15
Schedule of investments
Delaware Small Cap Value Fund
Principal amount | Value | ||||
Short-Term Investments (continued) | |||||
Repurchase Agreements (continued) | |||||
BNP Paribas 0.06%, dated 11/29/13, to be | |||||
repurchased on 12/2/13, repurchase price | |||||
$27,983,956 (collateralized by U.S. government | |||||
obligations 0.625%-2.625% 6/30/14-11/30/19; | |||||
market value $28,543,588) | $27,983,909 | $ | 27,983,909 | ||
34,332,000 | |||||
≠U.S. Treasury Obligations – 1.16% | |||||
U.S. Treasury Bills | |||||
0.02% 12/19/13 | 7,974,918 | 7,974,870 | |||
0.033% 1/23/14 | 8,376,977 | 8,376,843 | |||
0.065% 4/24/14 | 10,052,373 | 10,048,824 | |||
26,400,537 | |||||
Total Short-Term Investments (cost $61,695,858) | 61,695,249 | ||||
Total Value of Securities – 100.18% | |||||
(cost $1,737,596,375) | $ | 2,281,695,040 |
† | Non income producing security. |
@ | Illiquid security. At Nov. 30, 2013, the aggregate value of illiquid securities was $224,383,478, which represented 9.85% of the Fund’s net assets. See Note 9 in “Notes to Financial Statements.” |
≠ | The rate shown is the effective yield at the time of purchase. |
See accompanying notes, which are an integral part of the financial statements.
16
Statement of assets and liabilities | |
Delaware Small Cap Value Fund | November 30, 2013 |
Assets: | ||
Investments, at value1 | $ | 2,219,999,791 |
Short-term investments, at value2 | 61,695,249 | |
Receivable for securities sold | 4,972,582 | |
Receivable for fund shares sold | 5,137,771 | |
Dividends and interest receivable | 2,675,413 | |
Total assets | 2,294,480,806 | |
Liabilities: | ||
Cash overdraft | 8,348,774 | |
Payable for securities purchased | 3,452,391 | |
Payable for fund shares redeemed | 2,415,417 | |
Investment management fees payable | 1,244,832 | |
Distribution fees payable to affiliates | 288,650 | |
Trustees’ fees and expenses payable | 15,046 | |
Other affiliates payable | 260,272 | |
Other accrued expenses | 855,846 | |
Total liabilities | 16,881,228 | |
Total Net Assets | $ | 2,277,599,578 |
Net Assets Consist of: | ||
Paid-in capital | $ | 1,684,272,298 |
Undistributed net investment income | 3,147,895 | |
Accumulated net realized gain on investments | 46,080,720 | |
Net unrealized appreciation of investments | 544,098,665 | |
Total Net Assets | $ | 2,277,599,578 |
1Investments, at cost | $ | 1,675,900,517 |
2Short-term investments, at cost | 61,695,858 |
18
Net Asset Value
Class A | ||
Net assets | $ | 884,026,228 |
Shares of beneficial interest outstanding, unlimited authorization, no par | 16,879,569 | |
Net asset value per share | $ | 52.37 |
Sales charge | 5.75% | |
Offering price per share, equal to net asset value per share/(1-sales charge) | $ | 55.56 |
Class B | ||
Net assets | $ | 3,462,203 |
Shares of beneficial interest outstanding, unlimited authorization, no par | 76,680 | |
Net asset value per share | $ | 45.15 |
Class C | ||
Net assets | $ | 99,099,043 |
Shares of beneficial interest outstanding, unlimited authorization, no par | 2,197,056 | |
Net asset value per share | $ | 45.11 |
Class R | ||
Net assets | $ | 76,500,811 |
Shares of beneficial interest outstanding, unlimited authorization, no par | 1,498,316 | |
Net asset value per share | $ | 51.06 |
Institutional Class | ||
Net assets | $ | 1,214,511,293 |
Shares of beneficial interest outstanding, unlimited authorization, no par | 22,150,243 | |
Net asset value per share | $ | 54.83 |
See accompanying notes, which are an integral part of the financial statements.
19
Statement of operations | |
Delaware Small Cap Value Fund | Year Ended November 30, 2013 |
Investment Income: | |||||||
Dividends | $ | 24,216,010 | |||||
Interest | 37,517 | ||||||
Securities lending income | 2,887 | ||||||
Foreign tax withheld | (6,627 | ) | $ | 24,249,787 | |||
Expenses: | |||||||
Management fees | 11,241,975 | ||||||
Dividend disbursing and transfer agent fees and expenses | 3,503,159 | ||||||
Distribution expenses – Class A | 2,081,461 | ||||||
Distribution expenses – Class B | 49,783 | ||||||
Distribution expenses – Class C | 831,483 | ||||||
Distribution expenses – Class R | 371,796 | ||||||
Accounting and administration expenses | 625,487 | ||||||
Registration fees | 213,453 | ||||||
Reports and statements to shareholders | 183,611 | ||||||
Legal fees | 110,038 | ||||||
Trustees’ fees and expenses | 81,592 | ||||||
Audit and tax | 29,403 | ||||||
Custodian fees | 28,115 | ||||||
Other expenses | 45,181 | 19,396,537 | |||||
Less waiver of distribution expenses – Class A | (287,547 | ) | |||||
Less waiver of distribution expenses – Class B | (2,100 | ) | |||||
Less waiver of distribution expenses – Class R | (51,638 | ) | |||||
Less expense paid indirectly | (1,135 | ) | |||||
Total expenses | 19,054,117 | ||||||
Net Investment Income | 5,195,670 | ||||||
Net Realized and Unrealized Gain: | |||||||
Net realized gain on investments | 46,586,853 | ||||||
Net change in unrealized appreciation (depreciation) | |||||||
of investments | 392,175,103 | ||||||
Net Realized and Unrealized Gain | 438,761,956 | ||||||
Net Increase in Net Assets Resulting from Operations | $ | 443,957,626 |
See accompanying notes, which are an integral part of the financial statements.
20
Statements of changes in net assets
Delaware Small Cap Value Fund
Year Ended | |||||||
11/30/13 | 11/30/12 | ||||||
Increase in Net Assets from Operations: | |||||||
Net investment income | $ | 5,195,670 | $ | 1,335,675 | |||
Net realized gain | 46,586,853 | 6,504,252 | |||||
Net change in unrealized appreciation (depreciation) | 392,175,103 | 54,895,533 | |||||
Net increase in net assets resulting from operations | 443,957,626 | 62,735,460 | |||||
Dividends and Distributions to Shareholders from: | |||||||
Net investment income: | |||||||
Class A | (1,279,159 | ) | — | ||||
Institutional Class | (1,785,939 | ) | — | ||||
Net realized gain on investments: | |||||||
Class A | (3,531,372 | ) | (18,061,149 | ) | |||
Class B | (42,667 | ) | (503,913 | ) | |||
Class C | (493,148 | ) | (2,847,089 | ) | |||
Class R | (302,813 | ) | (4,348,768 | ) | |||
Institutional Class | (2,388,692 | ) | (1,391,736 | ) | |||
(9,823,790 | ) | (27,152,655 | ) | ||||
Capital Share Transactions: | |||||||
Proceeds from shares sold: | |||||||
Class A | 360,137,117 | 254,891,248 | |||||
Class B | 38,348 | 60,866 | |||||
Class C | 25,678,037 | 20,845,992 | |||||
Class R | 35,157,866 | 26,856,223 | |||||
Institutional Class | 845,588,890 | 304,482,220 | |||||
Net asset value of shares issued upon reinvestment | |||||||
of dividends and distributions: | |||||||
Class A | 4,730,881 | 17,499,346 | |||||
Class B | 41,272 | 476,308 | |||||
Class C | 468,386 | 2,639,701 | |||||
Class R | 302,736 | 1,391,128 | |||||
Institutional Class | 3,993,286 | 3,578,023 | |||||
1,276,136,819 | 632,721,055 |
22
Year Ended | |||||||
11/30/13 | 11/30/12 | ||||||
Capital Share Transactions (continued): | |||||||
Cost of shares redeemed: | |||||||
Class A | $ | (199,410,980 | ) | $ | (146,679,412 | ) | |
Class B | (4,431,904 | ) | (4,265,249 | ) | |||
Class C | (15,414,318 | ) | (12,058,654 | ) | |||
Class R | (20,699,591 | ) | (13,904,316 | ) | |||
Institutional Class | (180,684,573 | ) | (60,952,716 | ) | |||
(420,641,366 | ) | (237,860,347 | ) | ||||
Increase in net assets derived | |||||||
from capital share transactions | 855,495,453 | 394,860,708 | |||||
Net Increase in Net Assets | 1,289,629,289 | 430,443,513 | |||||
Net Assets: | |||||||
Beginning of year | 987,970,289 | 557,526,776 | |||||
End of year (including undistributed net investment | |||||||
income of $3,147,895 and $1,017,323, respectively) | $ | 2,277,599,578 | $ | 987,970,289 |
See accompanying notes, which are an integral part of the financial statements.
23
Financial highlights
Delaware Small Cap Value Fund Class A
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income (loss)1 |
Net realized and unrealized gain |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period |
Total return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived |
Ratio of net investment income (loss) to average net assets |
Ratio of net investment income (loss) to average net assets |
prior to fees waived |
Portfolio turnover |
See accompanying notes, which are an integral part of the financial statements.
24
Year Ended | |||||||||||||||
11/30/13 | 11/30/12 | 11/30/11 | 11/30/10 | 11/30/09 | |||||||||||
$39.750 | $37.860 | $36.190 | $27.530 | $21.340 | |||||||||||
0.119 | 0.074 | (0.008 | ) | (0.003 | ) | 0.059 | |||||||||
12.847 | 3.622 | 1.818 | 8.680 | 6.191 | |||||||||||
12.966 | 3.696 | 1.810 | 8.677 | 6.250 | |||||||||||
(0.092 | ) | — | — | (0.017 | ) | (0.060 | ) | ||||||||
(0.254 | ) | (1.806 | ) | (0.140 | ) | — | — | ||||||||
(0.346 | ) | (1.806 | ) | (0.140 | ) | (0.017 | ) | (0.060 | ) | ||||||
$52.370 | $39.750 | $37.860 | $36.190 | $27.530 | |||||||||||
32.87% | 10.21% | 4.99% | 31.53% | 29.01% | |||||||||||
$884,026 | $522,403 | $375,299 | $301,747 | $233,317 | |||||||||||
1.25% | 1.32% | 1.37% | 1.43% | 1.43% | |||||||||||
1.29% | 1.37% | 1.42% | 1.49% | 1.62% | |||||||||||
0.26% | 0.19% | (0.02% | ) | (0.01% | ) | 0.27% | |||||||||
0.22% | 0.14% | (0.07% | ) | (0.07% | ) | 0.08% | |||||||||
28% | 11% | 29% | 12% | 19% |
25
Financial highlights
Delaware Small Cap Value Fund Class B
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment loss1 |
Net realized and unrealized gain |
Total from investment operations |
Less dividends and distributions from: |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period |
Total return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived |
Ratio of net investment loss to average net assets |
Ratio of net investment loss to average net assets |
prior to fees waived |
Portfolio turnover |
See accompanying notes, which are an integral part of the financial statements.
26
Year Ended | |||||||||||||||
11/30/13 | 11/30/12 | 11/30/11 | 11/30/10 | 11/30/09 | |||||||||||
$34.460 | $33.300 | $32.080 | $24.570 | $19.130 | |||||||||||
(0.177 | ) | (0.189 | ) | (0.262 | ) | (0.214 | ) | (0.088 | ) | ||||||
11.121 | 3.155 | 1.622 | 7.724 | 5.528 | |||||||||||
10.944 | 2.966 | 1.360 | 7.510 | 5.440 | |||||||||||
(0.254 | ) | (1.806 | ) | (0.140 | ) | — | — | ||||||||
(0.254 | ) | (1.806 | ) | (0.140 | ) | — | — | ||||||||
$45.150 | $34.460 | $33.300 | $32.080 | $24.570 | |||||||||||
31.97% | 9.37% | 4.23% | 30.57% | 28.44% | |||||||||||
$3,462 | $6,424 | $9,835 | $14,249 | $17,532 | |||||||||||
1.96% | 2.07% | 2.12% | 2.18% | 2.18% | |||||||||||
2.00% | 2.07% | 2.12% | 2.19% | 2.32% | |||||||||||
(0.45% | ) | (0.56% | ) | (0.77% | ) | (0.76% | ) | (0.48% | ) | ||||||
(0.49% | ) | (0.56% | ) | (0.77% | ) | (0.77% | ) | (0.62% | ) | ||||||
28% | 11% | 29% | 12% | 19% |
27
Financial highlights
Delaware Small Cap Value Fund Class C
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment loss1 |
Net realized and unrealized gain |
Total from investment operations |
Less dividends and distributions from: |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period |
Total return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived |
Ratio of net investment loss to average net assets |
Ratio of net investment loss to average net assets |
prior to fees waived |
Portfolio turnover |
See accompanying notes, which are an integral part of the financial statements.
28
Year Ended | |||||||||||||||
11/30/13 | 11/30/12 | 11/30/11 | 11/30/10 | 11/30/09 | |||||||||||
$34.450 | $33.280 | $32.070 | $24.560 | $19.120 | |||||||||||
(0.196 | ) | (0.188 | ) | (0.260 | ) | (0.215 | ) | (0.090 | ) | ||||||
11.110 | 3.164 | 1.610 | 7.725 | 5.530 | |||||||||||
10.914 | 2.976 | 1.350 | 7.510 | 5.440 | |||||||||||
(0.254 | ) | (1.806 | ) | (0.140 | ) | — | — | ||||||||
(0.254 | ) | (1.806 | ) | (0.140 | ) | — | — | ||||||||
$45.110 | $34.450 | $33.280 | $32.070 | $24.560 | |||||||||||
31.93% | 9.37% | 4.20% | 30.58% | 28.45% | |||||||||||
$99,099 | $66,231 | $52,648 | $49,706 | $44,564 | |||||||||||
2.00% | 2.07% | 2.12% | 2.18% | 2.18% | |||||||||||
2.00% | 2.07% | 2.12% | 2.19% | 2.32% | |||||||||||
(0.49% | ) | (0.56% | ) | (0.77% | ) | (0.76% | ) | (0.48% | ) | ||||||
(0.49% | ) | (0.56% | ) | (0.77% | ) | (0.77% | ) | (0.62% | ) | ||||||
28% | 11% | 29% | 12% | 19% |
29
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)1 |
Net realized and unrealized gain |
Total from investment operations |
Less dividends and distributions from: |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period |
Total return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived |
Ratio of net investment income (loss) to average net assets |
Ratio of net investment loss to average net assets |
prior to fees waived |
Portfolio turnover |
See accompanying notes, which are an integral part of the financial statements.
30
Year Ended | |||||||||||||||
11/30/13 | 11/30/12 | 11/30/11 | 11/30/10 | 11/30/09 | |||||||||||
$38.770 | $37.050 | $35.510 | $27.070 | $20.970 | |||||||||||
0.004 | (0.022 | ) | (0.102 | ) | (0.081 | ) | 0.003 | ||||||||
12.540 | 3.548 | 1.782 | 8.521 | 6.097 | |||||||||||
12.544 | 3.526 | 1.680 | 8.440 | 6.100 | |||||||||||
(0.254 | ) | (1.806 | ) | (0.140 | ) | — | — | ||||||||
(0.254 | ) | (1.806 | ) | (0.140 | ) | — | — | ||||||||
$51.060 | $38.770 | $37.050 | $35.510 | $27.070 | |||||||||||
32.55% | 9.96% | 4.72% | 31.18% | 29.09% | |||||||||||
$76,501 | $44,379 | $28,303 | $20,757 | $15,971 | |||||||||||
1.50% | 1.57% | 1.62% | 1.68% | 1.68% | |||||||||||
1.58% | 1.67% | 1.72% | 1.79% | 1.92% | |||||||||||
0.01% | (0.06% | ) | (0.27% | ) | (0.26% | ) | 0.02% | ||||||||
(0.07% | ) | (0.16% | ) | (0.37% | ) | (0.37% | ) | (0.22% | ) | ||||||
28% | 11% | 29% | 12% | 19% |
31
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 from investment operations: |
Net investment income1 |
Net realized and unrealized gain |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period |
Total return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets |
prior to fees waived |
Portfolio turnover |
See accompanying notes, which are an integral part of the financial statements.
32
Year Ended | |||||||||||||||
11/30/13 | 11/30/12 | 11/30/11 | 11/30/10 | 11/30/09 | |||||||||||
$41.590 | $39.430 | $37.590 | $28.580 | $22.170 | |||||||||||
0.250 | 0.180 | 0.090 | 0.081 | 0.116 | |||||||||||
13.434 | 3.786 | 1.890 | 9.005 | 6.427 | |||||||||||
13.684 | 3.966 | 1.980 | 9.086 | 6.543 | |||||||||||
(0.190 | ) | — | — | (0.076 | ) | (0.133 | ) | ||||||||
(0.254 | ) | (1.806 | ) | (0.140 | ) | — | — | ||||||||
(0.444 | ) | (1.806 | ) | (0.140 | ) | (0.076 | ) | (0.133 | ) | ||||||
$54.830 | $41.590 | $39.430 | $37.590 | $28.580 | |||||||||||
33.22% | 10.49% | 5.26% | 31.85% | 29.28% | |||||||||||
$1,214,512 | $348,533 | $91,442 | $48,996 | $15,912 | |||||||||||
1.00% | 1.07% | 1.12% | 1.18% | 1.18% | |||||||||||
1.00% | 1.07% | 1.12% | 1.19% | 1.32% | |||||||||||
0.51% | 0.44% | 0.23% | 0.24% | 0.52% | |||||||||||
0.51% | 0.44% | 0.23% | 0.23% | 0.38% | |||||||||||
28% | 11% | 29% | 12% | 19% |
33
Delaware Small Cap Value Fund | November 30, 2013 |
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 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 (U.S. GAAP) and are consistently followed by the Fund.
Security Valuation — Equity securities and exchange-traded funds (ETFs), 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 on the valuation date. Securities and ETFs 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 or ETF does not trade, then the mean between the bid and ask prices will be used, which approximates fair value. U.S. government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. Investment company securities are valued at net asset value per share, as reported by the underlying investment company. 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, generally as of 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).
34
Federal & Foreign Income Taxes — No provision for federal income taxes has been made as the Fund intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Fund evaluates tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year. Management has analyzed the Fund’s tax positions taken for all open federal income tax years (Nov. 30, 2010 – Nov. 30, 2013), and has concluded that no provision for federal income tax is required in the Fund’s financial statements. In regard to foreign taxes only, the Fund has open tax years in certain foreign countries it invests in that may date back to the inception of the Fund.
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 purchase certain U.S. government securities subject to the counterparty’s agreement to repurchase them at an agreed upon date and price. The counterparty will be required on a daily basis to maintain the value of the collateral subject to the agreement at not less than the repurchase price (including accrued interest). The agreements are conditioned upon the collateral being deposited under the Federal Reserve book-entry system with the Fund’s custodian or a third-party sub-custodian. In the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings. All open repurchase agreements as of the date of this report were entered into on Nov. 29, 2013.
Use of Estimates — The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material.
Other — Expenses directly attributable to the Fund are charged directly to the Fund. Other expenses common to various funds within the Delaware Investments® Family of Funds are generally allocated among such funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. 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. Foreign dividends
35
Notes to financial statements
Delaware Small Cap Value Fund
1. Significant Accounting Policies (continued)
are also recorded on the ex-dividend date or as soon after the ex-dividend date that the Fund is aware of such dividends, net of all tax withholdings, a portion of which may be reclaimable. Withholding taxes and reclaims on foreign dividends have been recorded in accordance with the Fund’s understanding of the applicable country’s tax rules and rates. The Fund declares and pays distributions from net investment income and net realized gain on investments, if any, annually. The Fund may distribute more frequently, if necessary for tax purposes. Dividends and distributions, if any, are recorded on the ex-dividend date.
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 year ended Nov. 30, 2013.
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 year ended Nov. 30, 2013.
The Fund may receive earnings credits from its transfer agent when positive cash balances are maintained, which are used to offset transfer agent fees. If the amount earned is greater than one dollar, the expense paid under this arrangement is included in dividend disbursing and transfer agent fees and expenses and appears on the statement of operations with the corresponding expense offset shown as “expense paid indirectly.” For the year ended Nov. 30, 2013, the Fund earned $1,135 under this agreement.
2. Investment Management, Administration Agreements and Other Transactions with Affiliates
In accordance with the terms of its investment management agreement, the Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee which is calculated daily at the rate of 0.75% 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 the average daily net assets in excess $2.5 billion.
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Fund. For these services, the Fund pays DSC fees based on the aggregate daily net assets of the Delaware Investments® Family of Funds at the following annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DSC under the service agreement described above are allocated among all funds in the Delaware Investments® Family of Funds on a relative net asset value basis. For the year ended Nov. 30, 2013, the Fund was charged $ 78,159 for these services.
36
DSC is also the transfer agent and dividend disbursing agent of the Fund. For these services, the Fund pays DSC fees based on the aggregate daily net assets of the retail funds within the Delaware Investments Family of Funds at the following annual rate: 0.025% of the first $20 billion; 0.020% of the next $5 billion; 0.015% of the next $5 billion; and 0.013% on average daily net assets in excess of $30 billion. This amount is included in the statement of operations as dividend disbursing and transfer agent fees and expenses. For the year ended Nov. 30, 2013, the amount charged by DSC was $ 356,957. Pursuant to a sub-transfer agency agreement between DSC and BNY Mellon Investment Servicing (US) Inc. (BNYMIS), BNYMIS provides certain sub-transfer agency services to the Fund. Sub-transfer agency fees are passed on to and paid directly by the Fund.
Pursuant to a distribution agreement and distribution plan, the Fund pays DDLP, the distributor and an affiliate of DMC, an annual distribution and service fee of 1.00% of the average daily net assets of the Class B and Class C shares. Effective Oct. 1, 2013, the Fund pays DDLP an annual distribution and service fee of 0.25% and 0.50% of the average daily net assets of the Class A and Class R shares, respectively. Prior to Oct. 1, 2013, the Fund paid an annual distribution and service fee of 0.30% and 0.60%, respectively, of the average daily net assets of the Class A and Class R shares, respectively. For the period from Dec. 1, 2012 to Oct. 1, 2013, the distribution and service fees for Class A and Class R shares were contractually limited to 0.25% and 0.50% of the classes’ average daily net assets. Institutional Class shares pay no distribution and service expenses. Effective Nov. 1, 2013, DDLP has contractually agreed to waive Class B shares’ 12b-1 fees to 0.25% of average daily net assets through Oct. 31, 2014. This waiver and reimbursement may be terminated only by agreement of the distributor and the Fund.
As provided in the investment management agreement, the Fund bears a portion of the cost of certain resources shared with DMC, including the cost of internal personnel of DMC and/or its affiliates that provide legal, tax and regulatory reporting services to the Fund. For the year ended Nov. 30, 2013, the Fund was charged $ 47,791 for internal legal, tax and regulatory reporting services provided by DMC and/or its affiliates’ employees.
For the year ended Nov. 30, 2013, DDLP earned $56,198 for commissions on sales of the Fund’s Class A shares. For the year ended Nov. 30, 2013, DDLP received gross CDSC commissions of $11, $71 and $3,499 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.
37
Notes to financial statements
Delaware Small Cap Value Fund
3. Investments
For the year ended Nov. 30, 2013, the Fund made purchases of $1,269,035,033 and sales of $429,853,314 of investment securities other than short-term investments.
At Nov. 30, 2013, the cost of investments for federal income tax purposes was $1,738,770,051. At Nov. 30, 2013, the net unrealized appreciation was $542,924,989 of which $552,957,574 related to unrealized appreciation of investments and $10,032,585 related to unrealized depreciation of investments.
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. A three-level hierarchy for fair value measurements has been established based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability 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-level hierarchy of inputs is summarized below.
Level 1 – | inputs are quoted prices in active markets for identical investments (e.g., equity securities, open-end investment companies, futures contracts, exchange-traded options contracts) |
Level 2 – | other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs) (e.g., debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities) |
Level 3 – | inputs are significant unobservable inputs (including the Fund’s own assumptions used to determine the fair value of investments) (e.g., broker-quoted securities, fair valued securities) |
Level 3 investments are valued using significant unobservable inputs. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Valuations may also be based upon
38
current market prices of securities that are comparable in coupon, rating, maturity and industry. The derived value of a Level 3 investment may not represent the value which is received upon disposition and this could impact the results of operations.
The following table summarizes the valuation of the Fund’s investments by fair value hierarchy levels as of Nov. 30, 2013:
Level 1 | Level 2 | Total | |||||||
Common Stock | $ | 2,196,963,986 | $ | — | $ | 2,196,963,986 | |||
Exchange-Traded Fund | 23,035,805 | — | 23,035,805 | ||||||
Short-Term Investments | — | 61,695,249 | 61,695,249 | ||||||
Total | $ | 2,219,999,791 | $ | 61,695,249 | $ | 2,281,695,040 |
During the year ended Nov. 30, 2013, there were no transfers between Level 1 investments, Level 2 investments or Level 3 investments that had a significant impact to the Fund. The Fund’s policy is to recognize transfers between levels at the beginning of the reporting period.
At Nov. 30, 2013, there were no Level 3 investments.
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. GAAP. Additionally, distributions from net short-term gains on sales of investment securities are treated as ordinary income for federal income tax purposes. The tax character of dividends and distributions paid during the years ended Nov. 30, 2013 and 2012 were as follows:
Year Ended | ||||||
11/30/13 | 11/30/12 | |||||
Ordinary income | $ | 3,065,098 | $ | 5,374,345 | ||
Long-term capital gain | 6,758,692 | 21,778,310 | ||||
Total | $ | 9,823,790 | $ | 27,152,655 |
5. Components of Net Assets on a Tax Basis
As of Nov. 30, 2013, the components of net assets on a tax basis were as follows:
Shares of beneficial interest | $ | 1,684,272,298 | |
Undistributed ordinary income | 14,042,229 | ||
Undistributed long-term capital gain | 36,360,062 | ||
Unrealized appreciation | 542,924,989 | ||
Net assets | $ | 2,277,599,578 |
The differences between book basis and tax basis components of net assets are primarily attributable to tax deferral of losses on wash sales.
39
Notes to financial statements
Delaware Small Cap Value Fund
6. Capital Shares
Transactions in capital shares were as follows:
Year Ended | ||||||
11/30/13 | 11/30/12 | |||||
Shares sold: | ||||||
Class A | 7,956,581 | 6,535,447 | ||||
Class B | 961 | 1,802 | ||||
Class C | 649,744 | 615,066 | ||||
Class R | 803,908 | 705,870 | ||||
Institutional Class | 17,365,329 | 7,453,049 | ||||
Shares issued upon reinvestment of dividends and distributions: | ||||||
Class A | 116,899 | 481,148 | ||||
Class B | 1,176 | 14,997 | ||||
Class C | 13,344 | 83,166 | ||||
Class R | 7,655 | 39,131 | ||||
Institutional Class | 94,471 | 94,233 | ||||
27,010,068 | 16,023,909 | |||||
Shares redeemed: | ||||||
Class A | (4,336,760 | ) | (3,787,414 | ) | ||
Class B | (111,867 | ) | (125,780 | ) | ||
Class C | (388,826 | ) | (357,385 | ) | ||
Class R | (458,041 | ) | (364,034 | ) | ||
Institutional Class | (3,689,734 | ) | (1,485,984 | ) | ||
(8,985,228 | ) | (6,120,597 | ) | |||
Net increase | 18,024,840 | 9,903,312 |
For the years ended Nov. 30, 2013 and 2012, 26,366 Class B shares were converted to 22,814 Class A shares valued at $1,034,574 and 54,036 Class B shares were converted to 47,127 Class A shares valued at $1,832,315, respectively. The respective amounts are included in Class B redemptions and Class A subscriptions in the table above and the statements of changes in net assets.
7. Line of Credit
The Fund, along with certain other funds in the Delaware Investments® Family of Funds (Participants), was a participant in a $125,000,000 revolving line of credit to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, the Participants were charged an annual commitment fee of 0.08%, which was allocated across the Participants on the basis of each Participant’s allocation of the entire facility. The Participants were permitted to borrow up to a maximum of one third of their net assets under the agreement. Each Participant was individually, and not jointly, liable for its particular advances, if any, under the line of credit. The line of credit under the agreement expired on Nov. 12, 2013.
40
On Nov. 12, 2013, the Fund, along with the other Participants, entered into an amendment to the agreement for a $225,000,000 revolving line of credit. The line of credit is to be used as described above and operates in substantially the same manner as the original agreement. The line of credit available under the agreement expires on Nov. 10, 2014.
The Fund had no amounts outstanding as of Nov. 30, 2013 or at any time during the year 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 The Bank of New York Mellon (BNY Mellon). At the time a security is loaned, the borrower must post collateral equal to the required percentage of the market value of the loaned security, including any accrued interest. The required percentage is: (i) 102% with respect to U.S. securities and foreign securities that are denominated and payable in U.S. dollars; and (ii) 105% with respect to foreign securities. With respect to each loan, if on any business day the aggregate market value of securities collateral plus cash collateral held is less than the aggregate market value of the securities which are the subject of such loan, the borrower will be notified to provide additional collateral by the end of the following business day which, together with the collateral already held, will be not less than the applicable initial collateral requirements for such security loan. If the aggregate market value of securities collateral and cash collateral held with respect to a security loan exceeds the applicable initial collateral requirement, upon the request of the borrower, BNY Mellon must return enough collateral to the borrower by the end of the following business day to reduce the value of the remaining collateral to the applicable initial collateral requirement for such security loan. As a result of the foregoing, the value of the collateral held with respect to a loaned security may be more or less than the value of the security on loan.
Cash collateral received is generally invested in the Delaware Investments Collateral Fund No. 1 (Collective Trust) established by BNY Mellon for the purpose of investment on behalf of funds managed by DMC that participate in BNY Mellon’s securities lending program. The Collective Trust may invest in U.S. government securities and high quality corporate debt, asset-backed and other money market securities and in repurchase agreements collateralized by such securities, provided that the Collective Trust will generally have a dollar-weighted average portfolio maturity of 60 days or less. 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 changes in value of the securities loaned that may occur during the term of the loan. The Fund has the right under
41
Notes to financial statements
Delaware Small Cap Value Fund
8. Securities Lending (continued)
the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized by non-cash collateral, the Fund receives loan premiums paid by the borrower. With respect to security loans collateralized by cash collateral, the earnings from the collateral investments are shared among the Fund, the security lending agent and the borrower. The Fund records security lending income net of allocations to the security lending agent and the borrower.
The Collective Trust used for the investment of cash collateral received from borrowers of securities seeks to maintain a net asset value per unit of $1.00, but there can be no assurance that it will always be able to do so. The Fund may incur investment losses as a result of investing securities lending collateral in the Collective Trust or another collateral investment pool. This could occur if an investment in a collateral investment pool defaulted or if it were necessary to liquidate assets in the collateral investment pool to meet returns on outstanding security loans at a time when the collateral investment pool’s net asset value per unit was less than $1.00. Under those circumstances, the Fund may not receive an amount from the collateral investment pool 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.
At Nov. 30, 2013, the Fund had no securities out on loan.
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 limited financial resources or a dependence on narrow product lines.
The Fund invests in REITs and is subject to the risks associated with that industry. If the Fund holds real estate directly as a result of defaults or receives rental income directly from real estate holdings, its tax status as a regulated investment company may be jeopardized. There were no direct real estate holdings during the year ended Nov. 30, 2013. 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 securities. Securities eligible for resale pursuant to Rule 144A, which are determined
42
to be liquid, are not subject to the Fund’s 15% limit on investments in illiquid securities. As of Nov. 30, 2013, there were no Rule 144A securities held by the Fund. Illiquid securities have been identified in the schedule of investments.
10. Contractual Obligations
The Fund enters into contracts in the normal course of business that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Fund’s existing contracts and expects the risk of loss to be remote.
11. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to Nov. 30, 2013 that would require recognition or disclosure in the Fund’s financial statements.
43
Report of independent
registered public accounting firm
To the Board of Trustees of Delaware Group® Equity Funds V
and Shareholders of Delaware Small Cap Value Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Delaware Small Cap Value Fund (one of the series constituting Delaware Group Equity Funds V, hereafter referred to as the “Fund”) at November 30, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at November 30, 2013 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. The financial highlights for the year ended November 30, 2009 were audited by other independent accountants whose report dated January 21, 2010 expressed an unqualified opinion on those statements.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
January 17, 2014
44
Other Fund information
(Unaudited)
Delaware Small Cap Value Fund
Tax Information
The information set forth below is for the Fund’s fiscal year as required by federal income tax laws. Shareholders, however, must report distributions on a calendar year basis for income tax purposes, which may include distributions for portions of two fiscal years of the Fund. Accordingly, the information needed by shareholders for income tax purposes will be sent to them in January of each year. Please consult your tax advisor for proper treatment of this information.
All disclosures are based on financial information available as of the date of this annual report and, accordingly is subject to change. For any and all items requiring reporting, it is the intention of the Fund to report the maximum amount permitted under the Internal Revenue Code and the regulations thereunder.
For the fiscal year ended Nov. 30, 2013, the Fund reports distributions paid during the year as follows:
(A) Long-Term Distributions (Tax Basis) | 68.80% | |
(B) Ordinary Income Distributions (Tax Basis)* | 31.20% | |
Total Distributions (Tax Basis) | 100.00% | |
(C) Qualifying Dividends(1) | 100.00% |
(C) is based on a percentage of the Fund’s ordinary income distributions.
(1)Qualifying dividends represent dividends which qualify for the corporate dividends received deduction.
* | For the fiscal year ended Nov. 30, 2013, certain dividends paid by the Fund may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003, and by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creations Act of 2010, and made permanent by the American Taxpayer Relief Act of 2012. The Fund intends to report up to a maximum of 100.00% to be taxed at a maximum rate of 15%. Complete information will be computed and reported in conjunction with your 2013 Form 1099-DIV, as applicable. |
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Other Fund information
(Unaudited)
Delaware Small Cap Value Fund
Board consideration of Delaware Small Cap Value Fund investment advisory agreement
At a meeting held on August 20-22, 2013 (the “Annual Meeting”), the Board of Trustees (the “Board”), including a majority of disinterested or independent Trustees, approved the renewal of the Investment Advisory Agreement for Delaware Small Cap Value Fund (the “Fund”). In making its decision, the Board considered information furnished at regular quarterly Board meetings, including reports detailing Fund performance, investment strategies and expenses, as well as information prepared specifically in connection with the renewal of the investment advisory and sub-advisory contracts. Information furnished specifically in connection with the renewal of the Investment Advisory Agreement with Delaware Management Company (“DMC”) included materials provided by DMC and its affiliates (“Delaware Investments”) concerning, among other things, the nature, extent and quality of services provided to the Fund, the costs of such services to the Fund, economies of scale and the financial condition and profitability of Delaware Investments. In addition, in connection with the Annual Meeting, reports were provided to the Trustees in May 2013 and included reports provided by Lipper, Inc., an independent statistical compilation organization (“Lipper”). 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 independent legal counsel to the Independent Trustees. The Board requested and received information regarding DMC’s policy with respect to advisory fee levels and its breakpoint philosophy; the structure of portfolio manager compensation; the investment manager’s profitability; comparative client fee information; and any constraints or limitations on the availability of securities for certain investment styles, which had in the past year inhibited, or which were likely in the future to inhibit, DMC’s ability to invest fully in accordance with Fund policies.
In considering information relating to the approval of the Fund’s advisory agreement, the Independent Trustees received assistance and advice from and met separately with independent legal counsel to the Independent Trustees. Although the Board gave attention to all information furnished, the following discussion identifies, under separate headings, the primary factors taken into account by the Board during its contract renewal considerations.
Nature, Extent and Quality of Service. The Board considered the services provided by 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 DMC and Delaware Distributors, L.P. (together, “Management”) personnel with the Code of Ethics adopted throughout the Delaware Investments Family of Funds complex and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of the Fund’s investment advisor and the emphasis placed on research in the investment process. The Board recognized DMC’s recent receipt of several industry distinctions. The Board gave favorable consideration to DMC’s efforts to control expenditures while maintaining service levels committed
46
to fund matters. The Board noted that in July 2011 Management implemented measures to reduce overall costs and improve transfer agent and shareholder servicing functions through outsourcing. The Board 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 the importance of investment performance to shareholders. Although the Board gave appropriate consideration to performance reports and discussions with portfolio managers at Investment Committee meetings throughout the year, the Board gave particular weight to the 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 March 31, 2013. 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.
Lipper currently classifies the Fund as a small-cap value fund. However, Management believes that it would be more appropriate to include the Fund in the small-cap core funds category. Accordingly, the Lipper report prepared for the Fund compares the Fund’s performance to two separate Performance Universes – one consisting of the Fund and all retail and institutional small-cap core funds, and the other consisting of the Fund and all retail and institutional small-cap value funds. When compared to other small-cap core funds, the Lipper report comparison showed that the Fund’s total return for the one-year period was in the third quartile of its Performance Universe, the Fund’s total return for the three- and ten-year period was in the second quartile and the Fund’s total return for the five-year period was in the first quartile. When compared to other small-cap value funds, the Lipper report comparison showed that the Fund’s total return for the one-year period was in the fourth quartile of the Performance Universe. The report further showed that the Fund’s total return for the three- and five-year periods was in the first quartile of its Performance Universe and the Fund’s total return for the ten-year period was in the third quartile of its Performance Universe. The Fund’s performance results were mixed but tended toward median, which was acceptable.
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Other Fund information
(Unaudited)
Delaware Small Cap Value Fund
Board consideration of Delaware Small Cap Value Fund investment advisory agreement (continued)
Comparative Expenses. The Board considered expense comparison data for the Delaware Investments Family of Funds. Management provided the Board with information on pricing levels and fee structures for the Fund as of its most recently completed fiscal year. The Board also focused on the comparative analysis of effective management fees and total expense ratios of the Fund versus effective management fees and expense ratios of a group of similar funds as selected by 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.
When compared to other small-cap core funds, the expense comparisons for the Fund showed that its actual management fee and total expenses were in the quartile with the lowest expenses of the Expense Group. When compared to other small-cap value funds, 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 lowest expenses of the Expense. 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, reflects 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
48
with its role as service provider to the Delaware Investments Family of Funds and the benefits from allocation of fund brokerage to improve trading efficiencies. The Board found that the management fees were reasonable in light of the services rendered and the level of profitability of Delaware Investments.
Economies of Scale. The Trustees considered whether economies of scale are realized by Delaware Investments as the Fund’s assets increase and the extent to which any economies of scale are reflected in the level of management fees charged. The Trustees reviewed the standardized advisory fee pricing and structure, approved by the Board and shareholders, which includes breakpoints. Breakpoints in the advisory fee occur when the advisory fee rate is reduced on assets in excess of specified levels. Breakpoints result in a lower advisory fee than would otherwise be the case on all assets when the asset levels specified are exceeded. The Board noted that the fee under the Fund’s management contract fell within the standard structure. The Board also noted that the Fund’s assets exceeded the second breakpoint level. The Board believed that, given the extent to which economics of scale might be realized by the advisor and its affiliates, the schedule of fees under the Investment Management Agreement provides a sharing of benefits with the Fund and its shareholders.
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Board of trustees/directors and officers addendum
Delaware Investments® Family of Funds
A mutual fund is governed by a Board of Trustees/Directors (“Trustees”), which has oversight responsibility for the management of a fund’s business affairs. Trustees establish procedures and oversee and review the performance of the investment manager, the distributor, and others who perform services for the fund. The independent fund trustees, in particular, are advocates
Name, Address, | Position(s) | Length of |
and Birth Date | Held with Fund(s) | Time Served |
Interested Trustees | ||
Patrick P. Coyne1 | Chairman, President, | Chairman and Trustee |
2005 Market Street | Chief Executive Officer, | since August 16, 2006 |
Philadelphia, PA 19103 | and Trustee | |
April 1963 | President and | |
Chief Executive Officer | ||
since August 1, 2006 | ||
Independent Trustees | ||
Thomas L. Bennett | Trustee | Since March 2005 |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
October 1947 | ||
Joseph W. Chow | Trustee | Since January 2013 |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
January 1953 | ||
John A. Fry | Trustee | Since January 2001 |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
May 1960 | ||
Anthony D. Knerr | Trustee | Since April 1990 |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
December 1938 |
1 Patrick P. Coyne is considered to be an “Interested Trustee” because he is an executive officer of the Fund’s(s’) investment advisor.
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for shareholder interests. Each trustee has served in that capacity since he or she was elected to or appointed to the Board of Trustees, and will continue to serve until his or her retirement or the election of a new trustee in his or her place. The following is a list of the Trustees and Officers with certain background and related information.
Number of Portfolios in | ||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships |
During Past 5 Years | by Trustee or Officer | Held by Trustee or Officer |
Patrick P. Coyne has served in | 70 | Director and Audit |
various executive capacities | Committee Member | |
at different times at | Kaydon Corp. | |
Delaware Investments.2 | ||
Board of Governors Member | ||
Investment Company | ||
Institute (ICI) | ||
Private Investor | 70 | Director |
(March 2004–Present) | Bryn Mawr Bank Corp. (BMTC) | |
(2007–2011) | ||
Executive Vice President | 70 | Director and Audit Committee |
(Emerging Economies Strategies, | Member — Hercules | |
Risk and Corporate Administration) | Technology Growth | |
State Street Corporation | Capital, Inc. | |
(July 2004–March 2011) | ||
President | 70 | Director — Hershey Trust |
Drexel University | ||
(August 2010–Present) | Director and Audit | |
Committee Member | ||
President | Community Health Systems | |
Franklin & Marshall College | ||
(July 2002–July 2010) | ||
Managing Director | 70 | None |
AKA Strategy | ||
(Strategic Consulting) | ||
(1990–Present) |
2 Delaware Investments is the marketing name for Delaware Management Holdings, Inc. and its subsidiaries, including the Fund’s(s’) investment advisor, principal underwriter, and its transfer agent.
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Board of trustees/directors and officers addendum
Delaware Investments® Family of Funds
Name, Address, | Position(s) | Length of |
and Birth Date | Held with Fund(s) | Time Served |
Independent Trustees (continued) | ||
Lucinda S. Landreth | Trustee | Since March 2005 |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
June 1947 | ||
Frances A. Sevilla-Sacasa | Trustee | Since September 2011 |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
January 1956 | ||
Thomas K. Whitford | Trustee | Since January 2013 |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
March 1956 | ||
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Number of Portfolios in | ||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships |
During Past 5 Years | by Trustee or Officer | Held by Trustee or Officer |
Private Investor | 70 | None |
(2004–Present) | ||
Chief Executive Officer — | 70 | Trust Manager and |
Banco Itaú Europa | Audit Committee | |
International | Member — Camden | |
(April 2012–Present) | Property Trust | |
Executive Advisor to Dean | ||
(August 2011–March 2012) | ||
and Interim Dean | ||
(January 2011–July 2011) — | ||
University of Miami School of | ||
Business Administration | ||
President — U.S. Trust, | ||
Bank of America Private | ||
Wealth Management | ||
(Private Banking) | ||
(July 2007–December 2008) | ||
Vice Chairman | 70 | None |
(2010–April 2013) | ||
Chief Administrative | ||
Officer (2008–2010) | ||
and Executive Vice | ||
President and Chief | ||
Administrative Officer | ||
(2007–2009) — | ||
PNC Financial | ||
Services Group |
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Board of trustees/directors and officers addendum
Delaware Investments® Family of Funds
Name, Address, | Position(s) | Length of |
and Birth Date | Held with Fund(s) | Time Served |
Independent Trustees (continued) | ||
Janet L. Yeomans | Trustee | Since April 1999 |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
July 1948 | ||
J. Richard Zecher | Trustee | Since March 2005 |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
July 1940 | ||
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Number of Portfolios in | ||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships |
During Past 5 Years | by Trustee or Officer | Held by Trustee or Officer |
Vice President and Treasurer | 70 | Director, Audit |
(January 2006–July 2012) | Committee Member and | |
Vice President — Mergers & Acquisitions | Investment Committee | |
(January 2003–January 2006), and | Member | |
Vice President and Treasurer | Okabena Company | |
(July 1995–January 2003) | ||
3M Corporation | Chair — 3M | |
Investment Management | ||
Company | ||
(2005–2012) | ||
Founder | 70 | Director and Compensation |
Investor Analytics | Committee Member | |
(Risk Management) | Investor Analytics | |
(May 1999–Present) | ||
Director — P/E Investments | ||
Founder | ||
P/E Investments | ||
(Hedge Fund) | ||
(September 1996–Present) |
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Board of trustees/directors and officers addendum
Delaware Investments® Family of Funds
Name, Address, | Position(s) | Length of |
and Birth Date | Held with Fund(s) | Time Served |
Officers | ||
David F. Connor | Senior Vice President, | Senior Vice President, |
2005 Market Street | Deputy General | Deputy General Counsel |
Philadelphia, PA 19103 | Counsel, and Secretary | since May 2013; |
December 1963 | Vice President, Deputy | |
General Counsel | ||
September 2000– | ||
May 2013; Secretary since | ||
October 2005 | ||
Daniel V. Geatens | Vice President | Treasurer |
2005 Market Street | and Treasurer | since October 2007 |
Philadelphia, PA 19103 | ||
October 1972 | ||
David P. O’Connor | Executive Vice President, | Executive Vice President |
2005 Market Street | General Counsel | since February 2012; |
Philadelphia, PA 19103 | and Chief Legal Officer | Senior Vice President |
February 1966 | October 2005– | |
February 2012; | ||
General Counsel and | ||
Chief Legal Officer | ||
since October 2005 | ||
Richard Salus | Senior Vice President | Chief Financial Officer |
2005 Market Street | and Chief Financial Officer | since November 2006 |
Philadelphia, PA 19103 | ||
October 1963 |
The Statement of Additional Information for the Fund(s) includes additional information about the Trustees and Officers and is available, without charge, upon request by calling 800 523-1918.
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Number of Portfolios in | ||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships |
During Past 5 Years | by Trustee or Officer | Held by Trustee or Officer |
David F. Connor has served as | 70 | None3 |
Deputy General Counsel of | ||
Delaware Investments | ||
since 2000. | ||
Daniel V. Geatens has served | 70 | None3 |
in various capacities at | ||
different times at | ||
Delaware Investments. | ||
David P. O’Connor has served in | 70 | None3 |
various executive and legal | ||
capacities at different times | ||
at Delaware Investments. | ||
Richard Salus has served in | 70 | None3 |
various executive capacities | ||
at different times at | ||
Delaware Investments. |
3 David F. Connor, Daniel V. Geatens, David P. O’Connor, and Richard Salus serve in similar capacities for the six portfolios of the Optimum Fund Trust, which have the same investment advisor, principal underwriter, and transfer agent as the registrant.
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About the organization
Board of trustees | |||
Patrick P. Coyne Thomas L. Bennett | Joseph W. Chow John A. Fry Anthony D. Knerr | Lucinda S. Landreth Frances A. | Thomas K. Whitford Janet L. Yeomans J. Richard Zecher |
Affiliated officers | |||
David F. Connor | Daniel V. Geatens | David P. O’Connor | Richard Salus |
This annual report is for the information of Delaware Small Cap Value Fund shareholders, but it may be used with prospective investors when preceded or accompanied by the Delaware Investments Fund fact sheet for the most recently completed calendar quarter. These documents are available at 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 (SEC) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 800 523-1918; and (ii) on the SEC’s website at sec.gov. In addition, a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities and the Fund’s Schedule of Investments are available without charge on the Fund’s website at delawareinvestments.com. The Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C.; information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund’s website at delawareinvestments.com; and (ii) on the SEC’s website at sec.gov. |
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Item 2. Code of Ethics
The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. A copy of the registrant’s Code of Business Ethics has been posted on the Delaware Investments Internet Web site at www.delawareinvestments.com. Any amendments to the Code of Business Ethics, and information on any waiver from its provisions granted by the registrant, will also be posted on this Web site within five business days of such amendment or waiver and will remain on the Web site for at least 12 months.
Item 3. Audit Committee Financial Expert
The registrant’s Board of Trustees/Directors has determined that certain members of the registrant’s Audit Committee are audit committee financial experts, as defined below. For purposes of this item, an “audit committee financial expert” is a person who has the following attributes:
a. An understanding of generally accepted accounting principles and financial statements;
b. The ability to assess the general application of such principles in connection with the accounting for estimates, accruals, and reserves;
c. Experience preparing, auditing, analyzing, or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the registrant’s financial statements, or experience actively supervising one or more persons engaged in such activities;
d. An understanding of internal controls and procedures for financial reporting; and
e. An understanding of audit committee functions.
An “audit committee financial expert” shall have acquired such attributes through:
a. Education and experience as a principal financial officer, principal accounting officer, controller, public accountant, or auditor or experience in one or more positions that involve the performance of similar functions;
b. Experience actively supervising a principal financial officer, principal accounting officer, controller, public accountant, auditor, or person performing similar functions;
c. Experience overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing, or evaluation of financial statements; or
d. Other relevant experience.
The registrant’s Board of Trustees/Directors has also determined that each member of the registrant’s Audit Committee is independent. In order to be “independent” for purposes of this item, the Audit Committee member may not: (i) other than in his or her capacity as a member of the Board of Trustees/Directors or any committee thereof, accept directly or indirectly any consulting, advisory or other compensatory fee from the issuer; or (ii) be an “interested person” of the registrant as defined in Section 2(a)(19) of the Investment Company Act of 1940.
The names of the audit committee financial experts on the registrant’s Audit Committee are set forth below:
Frances A. Sevilla-Sacasa
Janet L. Yeomans
Item 4. Principal Accountant Fees and Services
(a) Audit fees.
The aggregate fees billed for services provided to the registrant by its independent auditors for the audit of the registrant’s annual financial statements and for services normally provided by the independent auditors in connection with statutory and regulatory filings or engagements were $77,405 for the fiscal year ended November 30, 2013.
The aggregate fees billed for services provided to the registrant by its independent auditors for the audit of the registrant’s annual financial statements and for services normally provided by the independent auditors in connection with statutory and regulatory filings or engagements were $67,800 for the fiscal year ended November 30, 2012.
(b) Audit-related fees.
The aggregate fees billed by the registrant’s independent auditors for services relating to the performance of the audit of the registrant’s financial statements and not reported under paragraph (a) of this Item were $0 for the fiscal year ended November 30, 2013.
The aggregate fees billed by the registrant’s independent auditors for services relating to the performance of the audit of the financial statements of the registrant’s investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $618,000 for the registrant’s fiscal year ended November 30, 2013. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These audit-related services were as follows: year-end audit procedures; group reporting and subsidiary statutory audits.
The aggregate fees billed by the registrant’s independent auditors for services relating to the performance of the audit of the registrant’s financial statements and not reported under paragraph (a) of this Item were $0 for the fiscal year ended November 30, 2012.
The aggregate fees billed by the registrant’s independent auditors for services relating to the performance of the audit of the financial statements of the registrant’s investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $685,000 for the registrant’s fiscal year ended November 30, 2012. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These audit-related services were as follows: year-end audit procedures; group reporting and subsidiary statutory audits.
(c) Tax fees.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant were $13,500 for the fiscal year ended November 30, 2013. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These tax-related services were as follows: review of income tax returns and review of annual excise distribution calculations.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant’s investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended November 30, 2013.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant were $12,640 for the fiscal year ended November 30, 2012. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These tax-related services were as follows: review of income tax returns and review of annual excise distribution calculations.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant’s investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended November 30, 2012.
(d) All other fees.
The aggregate fees billed for all services provided by the independent auditors to the registrant other than those set forth in paragraphs (a), (b) and (c) of this Item were $0 for the fiscal year ended November 30, 2013.
The aggregate fees billed for all services other than those set forth in paragraphs (b) and (c) of this Item provided by the registrant’s independent auditors to the registrant’s adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended November 30, 2013. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%.
The aggregate fees billed for all services provided by the independent auditors to the registrant other than those set forth in paragraphs (a), (b) and (c) of this Item were $0 for the fiscal year ended November 30, 2012.
The aggregate fees billed for all services other than those set forth in paragraphs (b) and (c) of this Item provided by the registrant’s independent auditors to the registrant’s adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended November 30, 2012. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%.
(e) The registrant’s Audit Committee has established pre-approval policies and procedures as permitted by Rule 2-01(c)(7)(i)(B) of Regulation S-X (the “Pre-Approval Policy”) with respect to services provided by the registrant’s independent auditors. Pursuant to the Pre-Approval Policy, the Audit Committee has pre-approved the services set forth in the table below with respect to the registrant up to the specified fee limits. Certain fee limits are based on aggregate fees to the registrant and other registrants within the Delaware Investments Family of Funds.
Service | Range of Fees |
Audit Services | |
Statutory audits or financial audits for new Funds | up to $40,000 per Fund |
Services associated with SEC registration statements (e.g., Form N-1A, Form N-14, etc.), periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings (e.g., comfort letters for closed-end Fund offerings, consents), and assistance in responding to SEC comment letters | up to $10,000 per Fund |
Consultations by Fund management as to the accounting or disclosure treatment of transactions or events and/or the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, or other regulatory or standard-setting bodies (Note: Under SEC rules, some consultations may be considered “audit-related services” rather than “audit services”) | up to $25,000 in the aggregate |
Audit-Related Services | |
Consultations by Fund management as to the accounting or disclosure treatment of transactions or events and/or the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, or other regulatory or standard-setting bodies (Note: Under SEC rules, some consultations may be considered “audit services” rather than “audit-related services”) | up to $25,000 in the aggregate |
Tax Services | |
U.S. federal, state and local and international tax planning and advice (e.g., consulting on statutory, regulatory or administrative developments, evaluation of Funds’ tax compliance function, etc.) | up to $25,000 in the aggregate |
U.S. federal, state and local tax compliance (e.g., excise distribution reviews, etc.) | up to $5,000 per Fund |
Review of federal, state, local and international income, franchise and other tax returns | up to $5,000 per Fund |
Under the Pre-Approval Policy, the Audit Committee has also pre-approved the services set forth in the table below with respect to the registrant’s investment adviser and other entities controlling, controlled by or under common control with the investment adviser that provide ongoing services to the registrant (the “Control Affiliates”) up to the specified fee limit. This fee limit is based on aggregate fees to the investment adviser and its Control Affiliates.
Service | Range of Fees |
Non-Audit Services | |
Services associated with periodic reports and other documents filed with the SEC and assistance in responding to SEC comment letters | up to $10,000 in the aggregate |
The Pre-Approval Policy requires the registrant’s independent auditors to report to the Audit Committee at each of its regular meetings regarding all services initiated since the last such report was rendered, including those services authorized by the Pre-Approval Policy.
(f) Not applicable.
(g) The aggregate non-audit fees billed by the registrant’s independent auditors for services rendered to the registrant and to its investment adviser and other service providers under common control with the adviser were $7,732,970 and $10,867,923 for the registrant’s fiscal years ended November 30, 2013 and November 30, 2012, respectively.
(h) In connection with its selection of the independent auditors, the registrant’s Audit Committee has considered the independent auditors’ provision of non-audit services to the registrant’s investment adviser and other service providers under common control with the adviser that were not required to be pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X. The Audit Committee has determined that the independent auditors’ provision of these services is compatible with maintaining the auditors’ independence.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Investments
(a) Included as part of report to shareholders filed under Item 1 of this Form N-CSR.
(b) Divestment of securities in accordance with Section 13(c) of the Investment Company Act of 1940.
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 11. Controls and Procedures
The registrant’s principal executive officer and principal financial officer have evaluated the registrant’s disclosure controls and procedures within 90 days of the filing of this report and have concluded that they are effective in providing reasonable assurance that the information required to be disclosed by the registrant in its reports or statements filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.
There were no significant changes in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by the report to stockholders included herein (i.e., the registrant’s fourth fiscal quarter) that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits
(a) (1) Code of Ethics
Not applicable.
(2) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rule 30a-2 under the Investment Company Act of 1940 are attached hereto as Exhibit 99.CERT.
(3) Written solicitations to purchase securities pursuant to Rule 23c-1 under the Securities Exchange Act of 1934.
Not applicable.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are furnished herewith as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf, by the undersigned, thereunto duly authorized.
DELAWARE GROUP® EQUITY FUNDS V
/s/ PATRICK P. COYNE | |
By: | Patrick P. Coyne |
Title: | Chief Executive Officer |
Date: | February 3, 2014 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ PATRICK P. COYNE | |
By: | Patrick P. Coyne |
Title: | Chief Executive Officer |
Date: | February 3, 2014 |
/s/ RICHARD SALUS | |
By: | Richard Salus |
Title: | Chief Financial Officer |
Date: | February 3, 2014 |