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, 2015 |
Item 1. Reports to Stockholders
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Annual report
Multi-asset mutual fund
Delaware Dividend Income Fund
November 30, 2015
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.
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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
• | 24-hour access to your account information |
• | Obtain share prices |
• | Check your account balance and recent transactions |
• | Request statements or literature |
• | Make purchases and redemptions |
Delaware Management Holdings, Inc. and its subsidiaries (collectively known by the marketing name of Delaware Investments) are wholly owned subsidiaries of Macquarie Group Limited, a global provider of banking, financial, advisory, investment and funds management services.
Neither Delaware Investments nor its affiliates noted in this document are authorized deposit-taking institutions for the purpose of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise.
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Security type / sector allocation and top 10 equity holdings | 10 | |||
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Unless otherwise noted, views expressed herein are current as of Nov. 30, 2015, and subject to change for events occurring after such date.
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.
© 2016 Delaware Management Holdings, Inc.
All third-party marks cited are the property of their respective owners.
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Delaware Dividend Income Fund | December 8, 2015 |
Performance preview (for the year ended November 30, 2015)
Delaware Dividend Income Fund (Class A shares)
| 1-year return
|
| -1.91%
|
| ||
S&P 500® Index (benchmark)
| 1-year return
|
| +2.75%
|
|
Past performance does not guarantee future results.
For complete, annualized performance for Delaware Dividend Income 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. Please see page 6 for a description of the index.
Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.
A challenging market backdrop
The fiscal year ended Nov. 30, 2015, was challenging for income-generating securities, due largely to uncertainty about the direction of the U.S. Federal Reserve. While most of the world’s central banks implemented policies designed to boost their struggling economies, the Fed signaled its eventual plans to raise its short-term benchmark interest rate. The market’s expectation for higher rates, as well as uncertainty about the timing of an increase, was an obstacle for various asset classes.
Continued turmoil in commodity markets, especially energy, was a second source of difficulty. Slower global economic growth, especially in China, cut into the demand for oil. With supply remaining high, the price of oil continued to drop sharply, taking energy stocks with it, along with many high yield bonds and convertible securities. The high yield bond market, as measured by the BofA Merrill Lynch U.S. High Yield Constrained Index, declined 3.5% for the fiscal year, while convertible securities also fared relatively poorly.
Meanwhile, the S&P 500 Index, a proxy for the broad U.S. stock market, returned 2.7%, outperforming the -2.5% return turned in by international equities, as measured by the MSCI ACWI (All Country World Index) (net).
Another income-oriented asset class, real estate investment trusts (REITs), advanced 3.2%, as measured by the FTSE NAREIT Equity REITs Index.
Fund performance
For its fiscal year ended Nov. 30, 2015, Delaware Dividend Income Fund (Class A shares) returned -1.91% at net asset value and -7.56% at maximum offer price (both figures reflect all distributions reinvested). For the same period, the Fund’s benchmark, the S&P 500 Index, returned +2.75%. Complete annualized performance for Delaware Dividend Income Fund is shown in the table on page 4.
Performance effect from equities
Of the different asset types in which the Fund invests, the Fund’s allocation to large-cap value equities was the largest, comprising 41% of the portfolio’s net assets as of Nov. 30, 2015. In this category, strong performance came from the industrials and consumer staples sectors.
Among industrials, the Fund was underweighted in cyclical (economically sensitive) stocks, which encountered difficulty against the backdrop of a weak global economy. At the same time, investments in defense contractors Raytheon and Northrop Grumman were notable contributors. It appeared that Raytheon shares benefited from strong earnings and the company’s favorable revenue forecast, while Northrop
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Portfolio management review
Delaware Dividend Income Fund
Grumman stock rose on news that the company had won a large U.S. military contract.
In consumer staples, food products company Kraft Heinz was a particularly strong performer. Kraft and Heinz merged in July 2015, a transaction that caused the Fund’s prior stake in Kraft to rise sharply.
Other notable equity performers during the Fund’s fiscal year included semiconductor company Broadcom and home products superstore retailer Lowe’s.
Not surprisingly, in light of the falling price of oil, energy holdings were particularly weak performers, especially Marathon Oil. Various other stocks in the sector also hurt results, most notably energy producers ConocoPhillips and Chevron, as well as oilfield services company Halliburton.
Elsewhere, Xerox, which provides document management services, endured a tough year amid challenging business conditions. The Fund’s underweighting in the financials sector also hampered results, while healthcare stocks provided another source of difficulty for the Fund.
REIT results
In the REIT portion of the portfolio, we saw good results from several apartment property owners, especially Essex Property Trust, an apartment management company focused on West Coast properties. AvalonBay Communities and Equity Residential also added value.
Other sources of outperformance included a position in Equity Commonwealth, an office REIT that gained ground during the period, as well as an underweighting in healthcare REITs, a relatively interest-rate-sensitive group that struggled as investors anticipated higher rates.
In contrast, the Fund was underweight in self-storage REITs, a particularly strong-performing segment of the real estate securities market. We chose to limit the Fund’s exposure because of
relatively high valuations in the sector. In retrospect, however, it would have been helpful to maintain a larger weighting in the group, given its continued favorable results.
In addition, our investments in various lodging REITs such as Pebblebrook Hotel Trust, Host Hotels & Resorts, and RLJ Lodging Trust performed relatively poorly. The business environment was challenging for hotel operators, due in part to a strong dollar, which made travel to the United States more expensive for visitors from abroad. We sold Host Hotels and RLJ Lodging during the fiscal year.
Of final note, exposure to two weak-performing asset classes, convertible securities and high yield bonds, hampered results. Both categories were disproportionately hurt by struggles in the energy sector.
A defensive management stance
Throughout the period, we continued to emphasize securities offering competitive yields and the potential for dividend growth. Given the low interest rate environment, with income scarce and in high demand, we focused on managing downside risk and seeking to limit potential capital losses. To that end, many of our changes to the portfolio centered on reducing our allocation to the energy sector. More than one of the Fund’s asset-class subportfolios had greater energy exposure than we found desirable, given the significant drop in the price of oil and the prospect for further market challenges. This led us to reduce our allocation to large-cap value equities to 41% of net assets at fiscal year end, down from 46% at the end of the previous fiscal year.
We also reduced the Fund’s exposure to convertible securities, from 13% to 11% of the portfolio’s net assets as of Nov. 30, 2015. Many of the convertibles in the portfolio were either issued by energy-related companies or otherwise vulnerable to the sluggish global economy.
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Accordingly, we thought it was prudent to limit our exposure to this area of the market.
To make the portfolio more defensive, we increased the Fund’s allocation to cash, finishing November 2015 with a roughly 10% weighting – well above normal for us. We also added exposure to U.S. Treasurys, reflecting our view that inflation was under control and that other investment alternatives were providing inadequate value to shareholders.
We increased the Fund’s allocation to international value stocks from 3% of the portfolio to 7% at the end of the fiscal year. Although we recognized that non-U.S. securities can be subject to additional volatility, their relative lack of exposure to the energy sector appealed to us.
Meanwhile, in light of strong performance in the REIT asset class in the first half of the period, we took advantage of higher valuations to sell some of our holdings. This was particularly true in the healthcare REIT area, in light of the prospect for performance challenges coming from higher rates.
Of final note, we added a credit default swap as a hedge against struggles in the high yield bond market tied to weak energy pricing. We also
employed other derivative securities, including currency futures as well as futures on the S&P 500, the latter of which we used tactically in an attempt to take advantage of periodic marketplace opportunities. Derivatives overall had a slight positive effect on Fund performance.
Remaining cautious
As of the end of the fiscal year, we remained cautious about the Fund’s energy allocation, as we did not anticipate quick resolution to the sector’s challenges. We also limited exposure to securities in emerging markets, which faced substantial economic challenges, and we kept U.S. stocks as the portfolio’s single largest allocation by far, even as we reduced exposure to the sector. These moves supported our goal of keeping the Fund defensively positioned in an effort to preserve investors’ capital.
Even as yield-oriented securities have struggled, we remain committed to our mandate of seeking high current income with the potential for capital appreciation, while managing yield to seek to avoid excess risk to limit the potential for loss.
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Delaware Dividend Income Fund | November 30, 2015 |
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, 2015 | ||||||||||||||
1 year | 5 years | 10 years | |||||||||||||
Class A (Est. Dec. 2, 1996) | |||||||||||||||
Excluding sales charge | -1.91 | % | +9.04 | % | +5.93% | ||||||||||
Including sales charge | -7.56 | % | +7.75 | % | +5.30% | ||||||||||
Class C (Est. Oct. 1, 2003) | |||||||||||||||
Excluding sales charge | -2.63 | % | +8.23 | % | +5.14% | ||||||||||
Including sales charge | -3.59 | % | +8.23 | % | +5.14% | ||||||||||
Class R (Est. Oct. 1, 2003) | |||||||||||||||
Excluding sales charge | -2.15 | % | +8.77 | % | +5.67% | ||||||||||
Including sales charge | -2.15 | % | +8.77 | % | +5.67% | ||||||||||
Institutional Class (Est. Dec. 2, 1996) | |||||||||||||||
Excluding sales charge | -1.66 | % | +9.31 | % | +6.20% | ||||||||||
Including sales charge | -1.66 | % | +9.31 | % | +6.20% | ||||||||||
S&P 500 Index | +2.75 | % | +14.40 | % | +7.48% |
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 and benchmark performance” table. 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. 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.
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.
Institutional Class shares are available without sales or asset-based distribution charges only to certain eligible institutional accounts.
The Fund may invest up to 45% of its net assets in high yield, higher-risk corporate bonds.
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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, non-investment-grade bonds (junk bonds) involve higher risk than investment grade bonds.
International investments entail risks not ordinarily associated with U.S. investments including fluctuation in currency values, differences in accounting principles, or economic or political instability in other nations.
Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility and lower trading volume.
2 The Fund’s expense ratios, as described in the most recent prospectus, are disclosed in the following “Fund expense ratios” table.
Fund expense ratios | Class A | Class C | Class R | Institutional Class | ||||||||||||||||
Total annual operating expenses | 1.10 | % | 1.85 | % | 1.35 | % | 0.85 | % | ||||||||||||
(without fee waivers) | ||||||||||||||||||||
Net expenses | 1.10 | % | 1.85 | % | 1.35 | % | 0.85 | % | ||||||||||||
(including fee waivers, if any) | ||||||||||||||||||||
Type of waiver | n/a | n/a | n/a | n/a |
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Performance summary
Delaware Dividend Income Fund
Performance of a $10,000 investment1
Average annual total returns from Nov. 30, 2005, through Nov. 30, 2015
For the period beginning Nov. 30, 2005, through Nov. 30, 2015
| Starting value
| Ending value
| ||||||
| $10,000 | $20,573 | ||||||
|
| $9,425
|
|
| $16,764
|
|
1 The “Performance of a $10,000 investment” graph assumes $10,000 invested in Class A shares of the Fund on Nov. 30, 2005, 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 7.
The graph also assumes $10,000 invested in the S&P 500 Index as of Nov. 30, 2005. 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 BofA Merrill Lynch U.S. High Yield Constrained Index, mentioned on page 1, tracks the performance of U.S. dollar–denominated high
yield corporate debt publicly issued in the U.S. domestic market, but caps individual issuer exposure at 2% of the benchmark.
The MSCI ACWI Index, mentioned on page 1, is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance across developed and emerging markets worldwide. Index “net” return approximates the minimum possible dividend reinvestment, after deduction of withholding tax at the highest possible rate.
The FTSE NAREIT Equity REITs Index, mentioned on page 1, measures the performance of all publicly traded equity real estate investment trusts (REITs) traded on U.S. exchanges, excluding timber and infrastructure 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.
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Nasdaq symbols | CUSIPs | ||||||||
Class A | DDIAX | 24610B107 | |||||||
Class C | DDICX | 24610B305 | |||||||
Class R | DDDRX | 24610B842 | |||||||
Institutional Class | DDIIX | 24610B404 |
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For the six-month period from June 1, 2015 to November 30, 2015 (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, 2015 to Nov. 30, 2015.
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.
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Delaware Dividend Income Fund
Expense analysis of an investment of $1,000
Beginning Account Value 6/1/15 | Ending Account Value 11/30/15 | Annualized Expense Ratio | Expenses Paid During Period 6/1/15 to 11/30/15* | |||||||||||||||||
Actual Fund return† | ||||||||||||||||||||
Class A | $1,000.00 | $961.10 | 1.09% | $5.36 | ||||||||||||||||
Class C | 1,000.00 | 957.50 | 1.84% | 9.03 | ||||||||||||||||
Class R | 1,000.00 | 959.90 | 1.34% | 6.58 | ||||||||||||||||
Institutional Class | 1,000.00 | 962.30 | 0.84% | 4.13 | ||||||||||||||||
Hypothetical 5% return (5% return before expenses) | ||||||||||||||||||||
Class A | $1,000.00 | $1,019.60 | 1.09% | $5.52 | ||||||||||||||||
Class C | 1,000.00 | 1,015.84 | 1.84% | 9.30 | ||||||||||||||||
Class R | 1,000.00 | 1,018.35 | 1.34% | 6.78 | ||||||||||||||||
Institutional Class | 1,000.00 | 1,020.86 | 0.84% | 4.26 |
* | “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. |
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Security type / sector allocation and top 10 equity holdings
Delaware Dividend Income Fund | As of November 30, 2015 (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 | 57.46% | |
Consumer Discretionary | 4.31% | |
Consumer Staples | 6.03% | |
Diversified REITs | 0.36% | |
Energy | 6.24% | |
Financials | 6.20% | |
Healthcare | 9.44% | |
Healthcare REIT | 0.15% | |
Hotel REITs | 0.26% | |
Industrial REIT | 0.09% | |
Industrials | 5.29% | |
Information Technology | 7.58% | |
Mall REITs | 0.90% | |
Manufactured Housing REIT | 0.10% | |
Materials | 1.51% | |
Mixed REIT | 0.18% | |
Mortgage REIT | 0.17% | |
Multifamily REITs | 1.57% | |
Office REITs | 1.66% | |
Self-Storage REITs | 0.16% | |
Shopping Center REITs | 0.96% | |
Telecommunication Services | 3.01% | |
Utilities | 1.29% | |
Exchange-Traded Funds | 0.56% | |
Convertible Preferred Stock | 1.78% | |
Commercial Mortgage-Backed Security | 0.12% | |
Convertible Bonds | 7.99% | |
Capital Goods | 0.10% | |
Communications | 1.06% | |
Consumer Cyclical | 0.41% | |
Consumer Non-Cyclical | 1.37% | |
Energy | 0.22% | |
Financials | 1.12% | |
Industrials | 0.57% | |
Real Estate Investment Trusts | 1.23% | |
Technology | 1.91% |
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Security type / sector | Percentage of net assets | |||
Corporate Bonds | 11.98% | |||
Automotive | 0.12% | |||
Banking | 0.76% | |||
Basic Industry | 1.33% | |||
Capital Goods | 0.71% | |||
Consumer Cyclical | 0.89% | |||
Consumer Non-Cyclical | 0.94% | |||
Energy | 1.10% | |||
Financials | 0.16% | |||
Healthcare | 1.39% | |||
Insurance | 0.21% | |||
Media | 1.40% | |||
Real Estate Investment Trusts | 0.06% | |||
Services | 0.52% | |||
Technology | 0.58% | |||
Telecommunications | 1.40% | |||
Utilities | 0.41% | |||
Leveraged Non-Recourse Security | 0.00% | |||
Municipal Bonds | 1.18% | |||
Regional Bond | 0.07% | |||
Senior Secured Loans | 0.98% | |||
Sovereign Bonds | 0.92% | |||
U.S. Treasury Obligations | 3.65% | |||
Master Limited Partnership | 0.28% | |||
Preferred Stock | 0.37% | |||
Rights | 0.01% | |||
Warrant | 0.00% | |||
Short-Term Investments | 12.26% | |||
Total Value of Securities before Security Sold Short | 99.61% | |||
Security Sold Short | (0.54%) | |||
Total Value of Securities | 99.07% | |||
Receivables and Other Assets Net of Liabilities | 0.93% | |||
Total Net Assets | 100.00% |
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Security type / sector allocation and top 10 equity holdings
Delaware Dividend Income Fund
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 | |
Microsoft | 1.50% | |
Xerox | 1.35% | |
Verizon Communications | 1.32% | |
Lowe’s | 1.31% | |
Kraft Heinz | 1.30% | |
Intel | 1.30% | |
Raytheon | 1.29% | |
Cisco Systems | 1.28% | |
Halliburton | 1.28% | |
Johnson Controls | 1.27% |
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Schedule of investments | ||
Delaware Dividend Income Fund | November 30, 2015 |
Number of shares | Value (U.S. $) | |||||||
| ||||||||
Common Stock – 57.46% | ||||||||
| ||||||||
Consumer Discretionary – 4.31% | ||||||||
Asian Pay Television Trust | 8,204,600 | $ | 4,333,671 | |||||
Bayerische Motoren Werke | 5,805 | 633,567 | ||||||
Johnson Controls | 205,500 | 9,453,000 | ||||||
Kering | 3,342 | 577,493 | ||||||
Lowe’s | 126,700 | 9,705,221 | ||||||
Nitori Holdings | 18,186 | 1,498,079 | ||||||
Publicis Groupe | 6,868 | 433,351 | ||||||
Sumitomo Rubber Industries | 62,700 | 846,561 | ||||||
Techtronic Industries | 250,500 | 1,016,080 | ||||||
Toyota Motor | 30,500 | 1,897,222 | ||||||
Yue Yuen Industrial Holdings | 426,000 | 1,546,633 | ||||||
|
| |||||||
31,940,878 | ||||||||
|
| |||||||
Consumer Staples – 6.03% | ||||||||
Archer-Daniels-Midland | 217,600 | 7,940,224 | ||||||
Aryzta † | 30,369 | 1,426,161 | ||||||
Carlsberg Class B | 12,417 | 1,055,969 | ||||||
Coca-Cola | 84,793 | 3,613,878 | ||||||
Coca-Cola Amatil | 98,780 | 645,082 | ||||||
CVS Health | 95,100 | 8,947,959 | ||||||
Japan Tobacco | 34,800 | 1,246,744 | ||||||
Kraft Heinz | 131,000 | 9,653,390 | ||||||
Mondelez International | 216,300 | 9,443,658 | ||||||
Tesco | 309,178 | 778,623 | ||||||
|
| |||||||
44,751,688 | ||||||||
|
| |||||||
Diversified REITs – 0.36% | ||||||||
Intervest Offices & Warehouses | 66,160 | 1,612,275 | ||||||
Vornado Realty Trust ¥ | 10,700 | 1,035,332 | ||||||
|
| |||||||
2,647,607 | ||||||||
|
| |||||||
Energy – 6.24% | ||||||||
Chevron | 100,400 | 9,168,528 | ||||||
CNOOC | 662,000 | 732,563 | ||||||
ConocoPhillips | 171,800 | 9,285,790 | ||||||
Halliburton | 238,100 | 9,488,285 | ||||||
Marathon Oil | 363,200 | 6,359,632 | ||||||
Occidental Petroleum | 121,100 | 9,153,949 | ||||||
Saipem † | 45,888 | 396,591 | ||||||
Subsea 7 † | 10,260 | 81,639 | ||||||
Suncor Energy | 27,700 | 765,411 | ||||||
TOTAL | 16,210 | 804,954 | ||||||
|
| |||||||
46,237,342 | ||||||||
|
| |||||||
Financials – 6.20% | ||||||||
Allstate | 144,600 | 9,075,096 |
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Schedule of investments
Delaware Dividend Income Fund
Number of shares | Value (U.S. $) | |||||||
| ||||||||
Common Stock (continued) | ||||||||
| ||||||||
Financials (continued) | ||||||||
AXA | 79,039 | $ | 2,138,656 | |||||
Bank of New York Mellon | 207,700 | 9,105,568 | ||||||
Bank Rakyat Indonesia Persero | 956,098 | 744,630 | ||||||
BB&T | 237,800 | 9,183,836 | ||||||
ING Groep CVA | 87,857 | 1,206,265 | ||||||
Marsh & McLennan | 164,200 | 9,080,260 | ||||||
Mitsubishi UFJ Financial Group | 323,300 | 2,074,877 | ||||||
Nordea Bank | 151,514 | 1,679,030 | ||||||
Standard Chartered | 101,514 | 851,961 | ||||||
UniCredit | 146,282 | 858,549 | ||||||
|
| |||||||
45,998,728 | ||||||||
|
| |||||||
Healthcare – 9.44% | ||||||||
Baxalta | 264,200 | 9,083,196 | ||||||
Cardinal Health | 104,600 | 9,084,510 | ||||||
Express Scripts Holding † | 107,830 | 9,217,308 | ||||||
Johnson & Johnson | 89,700 | 9,081,228 | ||||||
Merck | 169,700 | 8,995,797 | ||||||
Novartis | 19,093 | 1,631,666 | ||||||
Pfizer | 269,638 | 8,836,037 | ||||||
Quest Diagnostics | 136,200 | 9,305,184 | ||||||
Sanofi | 15,241 | 1,358,761 | ||||||
STADA Arzneimittel | 30,005 | 1,145,702 | ||||||
Teva Pharmaceutical Industries ADR | 36,128 | 2,273,535 | ||||||
|
| |||||||
70,012,924 | ||||||||
|
| |||||||
Healthcare REIT – 0.15% | ||||||||
Healthcare Trust of America Class A ¥ | 43,300 | 1,130,563 | ||||||
|
| |||||||
1,130,563 | ||||||||
|
| |||||||
Hotel REITs – 0.26% | ||||||||
Concentradora Fibra Hotelera Mexicana | 399,257 | 361,253 | ||||||
Pebblebrook Hotel Trust ¥ | 48,200 | 1,535,170 | ||||||
|
| |||||||
1,896,423 | ||||||||
|
| |||||||
Industrial REIT – 0.09% | ||||||||
Terreno Realty ¥ | 28,540 | 646,431 | ||||||
|
| |||||||
646,431 | ||||||||
|
| |||||||
Industrials – 5.29% | ||||||||
ADT | 84,200 | 2,986,574 | ||||||
Deutsche Post | 41,208 | 1,204,487 | ||||||
East Japan Railway | 16,146 | 1,524,160 | ||||||
ITOCHU | 117,989 | 1,439,697 | ||||||
Koninklijke Philips | 42,587 | 1,164,478 | ||||||
Meggitt | 108,718 | 634,863 | ||||||
Northrop Grumman | 50,000 | 9,318,000 |
14
Table of Contents
Number of shares | Value (U.S. $) | |||||||
| ||||||||
Common Stock (continued) | ||||||||
| ||||||||
Industrials (continued) | ||||||||
Raytheon | 77,200 | $ | 9,575,116 | |||||
Rexel | 32,017 | 438,574 | ||||||
Vinci | 21,112 | 1,373,150 | ||||||
Waste Management | 170,600 | 9,173,162 | ||||||
WestJet Airlines @ | 24,356 | 387,391 | ||||||
|
| |||||||
39,219,652 | ||||||||
|
| |||||||
Information Technology – 7.58% | ||||||||
CA | 333,764 | 9,382,106 | ||||||
CGI Group Class A † | 42,046 | 1,830,263 | ||||||
Cisco Systems | 348,800 | 9,504,800 | ||||||
Intel | 277,400 | 9,645,198 | ||||||
Microsoft | 205,209 | 11,153,109 | ||||||
Playtech | 71,958 | 876,278 | ||||||
QUALCOMM | 25,800 | 1,258,782 | ||||||
Samsung Electronics | 929 | 1,028,325 | ||||||
Teleperformance | 18,249 | 1,517,027 | ||||||
Xerox | 951,600 | 10,039,380 | ||||||
|
| |||||||
56,235,268 | ||||||||
|
| |||||||
Mall REITs – 0.90% | ||||||||
General Growth Properties ¥ | 124,200 | 3,163,374 | ||||||
Simon Property Group ¥ | 12,163 | 2,265,237 | ||||||
Taubman Centers ¥ | 17,600 | 1,264,912 | ||||||
|
| |||||||
6,693,523 | ||||||||
|
| |||||||
Manufactured Housing REIT – 0.10% | ||||||||
Equity LifeStyle Properties ¥ | 11,527 | 719,054 | ||||||
|
| |||||||
719,054 | ||||||||
|
| |||||||
Materials – 1.51% | ||||||||
Alamos Gold | 43,352 | 131,802 | ||||||
EI du Pont de Nemours | 136,000 | 9,158,240 | ||||||
Rexam | 128,451 | 1,121,175 | ||||||
Rio Tinto | 19,416 | 645,862 | ||||||
Yamana Gold | 76,013 | 160,519 | ||||||
|
| |||||||
11,217,598 | ||||||||
|
| |||||||
Mixed REIT – 0.18% | ||||||||
Duke Realty ¥ | 67,200 | 1,367,520 | ||||||
|
| |||||||
1,367,520 | ||||||||
|
| |||||||
Mortgage REIT – 0.17% | ||||||||
Colony Capital ¥ | 62,300 | 1,274,658 | ||||||
|
| |||||||
1,274,658 | ||||||||
|
| |||||||
Multifamily REITs – 1.57% | ||||||||
ADO Properties 144A #† | 96,439 | 2,496,369 |
15
Table of Contents
Schedule of investments
Delaware Dividend Income Fund
Number of shares | Value (U.S. $) | |||||||
| ||||||||
Common Stock (continued) | ||||||||
| ||||||||
Multifamily REITs (continued) | ||||||||
American Campus Communities ¥ | 15,300 | $ | 618,120 | |||||
American Residential Properties ¥ | 130,200 | 2,277,198 | ||||||
Apartment Investment & Management ¥ | 18,500 | 705,035 | ||||||
AvalonBay Communities ¥ | 10,000 | 1,817,900 | ||||||
Equity Residential ¥ | 21,400 | 1,708,148 | ||||||
Gecina | 8,692 | 1,049,678 | ||||||
Vonovia | 30,908 | 957,959 | ||||||
|
| |||||||
11,630,407 | ||||||||
|
| |||||||
Office REITs – 1.66% | ||||||||
alstria office REIT † | 64,072 | 847,206 | ||||||
Boston Properties ¥ | 5,100 | 637,449 | ||||||
Brandywine Realty Trust ¥ | 152,800 | 2,102,528 | ||||||
Easterly Government Properties | 194,100 | 3,466,626 | ||||||
Empire State Realty Trust ¥ | 51,900 | 954,441 | ||||||
Equity Commonwealth †¥ | 38,600 | 1,066,132 | ||||||
Hudson Pacific Properties ¥ | 24,000 | 688,080 | ||||||
Paramount Group | 50,100 | 920,838 | ||||||
SL Green Realty ¥ | 13,500 | 1,594,080 | ||||||
|
| |||||||
12,277,380 | ||||||||
|
| |||||||
Self-Storage REITs – 0.16% | ||||||||
CubeSmart ¥ | 26,400 | 768,768 | ||||||
Jernigan Capital | 25,600 | 407,808 | ||||||
|
| |||||||
1,176,576 | ||||||||
|
| |||||||
Shopping Center REITs – 0.96% | ||||||||
DDR ¥ | 71,900 | 1,225,895 | ||||||
Equity One ¥ | 25,600 | 697,088 | ||||||
First Capital Realty | 39,503 | 579,500 | ||||||
Kimco Realty | 42,300 | 1,103,607 | ||||||
Klepierre | 22,518 | 1,022,078 | ||||||
Ramco-Gershenson Properties Trust ¥ | 38,000 | 641,060 | ||||||
Urban Edge Properties | 29,300 | 702,907 | ||||||
Wheeler Real Estate Investment Trust @ | 597,330 | 1,111,034 | ||||||
|
| |||||||
7,083,169 | ||||||||
|
| |||||||
Telecommunication Services – 3.01% | ||||||||
AT&T | 277,800 | 9,353,526 | ||||||
Century Communications =† | 1,625,000 | 0 | ||||||
Mobile TeleSystems ADR | 40,271 | 283,910 | ||||||
Nippon Telegraph & Telephone | 53,974 | 2,001,635 | ||||||
Tele2 Class B | 89,834 | 914,655 | ||||||
Verizon Communications | 215,500 | 9,794,475 | ||||||
|
| |||||||
22,348,201 | ||||||||
|
|
16
Table of Contents
Number of shares | Value (U.S. $) | |||||||
| ||||||||
Common Stock (continued) | ||||||||
| ||||||||
Utilities – 1.29% | ||||||||
Edison International | 150,000 | $ | 8,904,000 | |||||
National Grid | 48,976 | 682,941 | ||||||
|
| |||||||
9,586,941 | ||||||||
|
| |||||||
Total Common Stock (cost $373,530,072) | 426,092,531 | |||||||
|
| |||||||
| ||||||||
Exchange-Traded Funds – 0.56% | ||||||||
| ||||||||
Aberdeen Asia-Pacific Income Fund | 99,762 | 448,929 | ||||||
Market Vectors High Yield Municipal Index | 52,800 | 1,624,656 | ||||||
ProShares Short High Yield† | 72,800 | 2,052,960 | ||||||
|
| |||||||
Total Exchange-Traded Funds (cost $4,318,363) | 4,126,545 | |||||||
|
| |||||||
| ||||||||
Convertible Preferred Stock – 1.78% | ||||||||
| ||||||||
Chesapeake Energy 5.75% exercise price $26.10, expiration date 12/31/49 | 1,065 | 292,875 | ||||||
Crown Castle International 4.50% exercise price $87.58, expiration date 11/1/16 | 15,000 | 1,599,450 | ||||||
El Paso Energy Capital Trust I 4.75% exercise price $50.00, expiration date 3/31/28 @ | 39,900 | 1,826,622 | ||||||
Exelon 6.50% exercise price $43.75, expiration date 6/1/17 | 41,750 | 1,668,330 | ||||||
Halcon Resources 5.75% exercise price $6.16, expiration date 12/31/49 @ | 1,141 | 128,363 | ||||||
Huntington Bancshares 8.50% exercise price $11.95, expiration date 12/31/49 @ | 1,437 | 1,939,950 | ||||||
Intelsat 5.75% exercise price $22.05, expiration date 5/1/16 @ | 56,644 | 778,288 | ||||||
Laclede Group 6.75% exercise price $57.81, expiration date 4/1/17 | 14,861 | 822,259 | ||||||
Maiden Holdings 7.25% exercise price $15.22, expiration date 9/15/16 | 34,260 | 1,835,993 | ||||||
Wells Fargo 7.50% exercise price $156.71, expiration date 12/31/49 | 1,989 | 2,322,157 | ||||||
|
| |||||||
Total Convertible Preferred Stock (cost $16,791,225) | 13,214,287 | |||||||
|
| |||||||
Principal amount° | ||||||||
| ||||||||
Commercial Mortgage-Backed Security – 0.12% | ||||||||
| ||||||||
Banc of America Commercial Mortgage Trust Series 2006-4 A4 5.634% 7/10/46 | 855,034 | 863,995 | ||||||
|
| |||||||
Total Commercial Mortgage-Backed Security (cost $867,526) | 863,995 | |||||||
|
|
17
Table of Contents
Schedule of investments
Delaware Dividend Income Fund
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Convertible Bonds – 7.99% | ||||||||
| ||||||||
Capital Goods – 0.10% | ||||||||
Abengoa 144A 5.125% exercise price $37.29, expiration date 2/23/17 #@ | 2,400,000 | $ | 423,000 | |||||
Titan Machinery 3.75% exercise price $43.17, expiration date 4/30/19 @ | 457,000 | 331,039 | ||||||
|
| |||||||
754,039 | ||||||||
|
| |||||||
Communications – 1.06% | ||||||||
Alaska Communications Systems Group 6.25% exercise price $10.28, expiration date 4/27/18 @ | 2,913,000 | 2,938,489 | ||||||
Clearwire Communications 144A 8.25% exercise price $7.08, expiration date 11/30/40 #@ | 2,548,000 | 2,589,405 | ||||||
Liberty Interactive 144A 1.00% exercise price $64.26, expiration date 9/28/43 # | 2,662,000 | 2,325,923 | ||||||
|
| |||||||
7,853,817 | ||||||||
|
| |||||||
Consumer Cyclical – 0.41% | ||||||||
Meritor 4.00% exercise price $26.73, expiration date 2/12/27 f | 3,072,000 | 3,031,680 | ||||||
|
| |||||||
3,031,680 | ||||||||
|
| |||||||
Consumer Non-Cyclical – 1.37% | ||||||||
HealthSouth 2.00% exercise price $38.08, expiration date 11/30/43 | 1,644,000 | 1,800,180 | ||||||
Hologic 0.00% exercise price $38.59, expiration date 12/15/43 †f | 1,666,000 | 2,155,387 | ||||||
Spectrum Pharmaceuticals 2.75% exercise price $10.53, expiration date 12/13/18 @ | 2,710,000 | 2,366,169 | ||||||
Vector Group 1.75% exercise price $24.64, expiration date 4/15/20 • | 2,566,000 | 3,040,710 | ||||||
Vector Group 2.50% exercise price $15.98, expiration date 1/14/19 • | 481,000 | 781,750 | ||||||
|
| |||||||
10,144,196 | ||||||||
|
| |||||||
Energy – 0.22% | ||||||||
Chesapeake Energy 2.50% exercise price $47.55, expiration date 5/15/37 | 683,000 | 440,535 | ||||||
Helix Energy Solutions Group 3.25% exercise price $25.02, expiration date 3/12/32 | 1,387,000 | 1,169,414 | ||||||
|
| |||||||
1,609,949 | ||||||||
|
| |||||||
Financials – 1.12% | ||||||||
BGC Partners 4.50% exercise price $9.84, expiration date 7/13/16 | 2,293,000 | 2,436,313 | ||||||
GAIN Capital Holdings 4.125% exercise price $12.00, expiration date 11/30/18 @ | 2,037,000 | 2,068,828 | ||||||
Jefferies Group 3.875% exercise price $44.69, expiration date 10/31/29 | 1,832,000 | 1,866,350 |
18
Table of Contents
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Convertible Bonds (continued) | ||||||||
| ||||||||
Financials (continued) | ||||||||
New Mountain Finance 5.00% exercise price $15.93, expiration date 6/14/19 @ | 1,943,000 | $ | 1,957,573 | |||||
|
| |||||||
8,329,064 | ||||||||
|
| |||||||
Industrials – 0.57% | ||||||||
Chart Industries 2.00% exercise price $69.03, expiration date 7/30/18 @ | 2,400,000 | 2,125,500 | ||||||
General Cable 4.50% exercise price $33.38, expiration date 11/15/29 @f | 3,105,000 | 2,101,697 | ||||||
|
| |||||||
4,227,197 | ||||||||
|
| |||||||
Real Estate Investment Trusts – 1.23% | ||||||||
Blackstone Mortgage Trust 5.25% exercise price $28.66, expiration date 12/1/18 | 3,147,000 | 3,339,754 | ||||||
Campus Crest Communities Operating Partnership 144A 4.75% exercise price $12.56, expiration date 10/11/18 #@ | 1,567,000 | 1,565,041 | ||||||
Spirit Realty Capital 3.75% exercise price $13.10, expiration date 5/13/21 @ | 2,470,000 | 2,332,619 | ||||||
VEREIT 3.75% exercise price $14.99, expiration date 12/14/20 @ | 2,076,000 | 1,926,798 | ||||||
|
| |||||||
9,164,212 | ||||||||
|
| |||||||
Technology – 1.91% | ||||||||
Blucora 4.25% exercise price $21.66, expiration date 3/29/19 | 1,247,000 | 1,080,214 | ||||||
Cardtronics 1.00% exercise price $52.35, expiration date 11/27/20 | 3,192,000 | 3,156,090 | ||||||
Ciena 144A 3.75% exercise price $20.17, expiration date 10/15/18 # | 1,375,000 | 1,941,328 | ||||||
Electronics For Imaging 0.75% exercise price $52.72, expiration date 8/29/19 | 1,673,000 | 1,847,619 | ||||||
j2 Global 3.25% exercise price $69.37, expiration date 6/14/29 | 1,417,000 | 1,846,528 | ||||||
Nuance Communications 2.75% exercise price $32.30, expiration date 11/1/31 | 1,928,000 | 1,974,995 | ||||||
PROS Holdings 144A 2.00% exercise price $33.79, expiration date 11/27/19 # | 2,263,000 | 2,288,459 | ||||||
|
| |||||||
14,135,233 | ||||||||
|
| |||||||
Total Convertible Bonds (cost $61,298,743) | 59,249,387 | |||||||
|
| |||||||
| ||||||||
Corporate Bonds – 11.98% | ||||||||
| ||||||||
Automotive – 0.12% | ||||||||
Gates Global 144A 6.00% 7/15/22 # | 750,000 | 555,000 | ||||||
Meritor 6.75% 6/15/21 | 345,000 | 336,806 | ||||||
|
| |||||||
891,806 | ||||||||
|
|
19
Table of Contents
Schedule of investments
Delaware Dividend Income Fund
Principal amount° | Value (U.S. $) | |||||||||||
| ||||||||||||
Corporate Bonds (continued) | ||||||||||||
| ||||||||||||
Banking – 0.76% | ||||||||||||
Australia & New Zealand Banking Group 4.935% 6/20/22 • | AUD | 1,090,000 | $ | 808,034 | ||||||||
Credit Suisse Group 144A 7.50% 12/29/49 #• | 720,000 | 760,606 | ||||||||||
ING Groep 6.50% 12/29/49 • | 650,000 | 640,250 | ||||||||||
JPMorgan Chase 6.75% 1/29/49 • | 605,000 | 656,274 | ||||||||||
Lloyds Banking Group 7.50% 4/30/49 • | 615,000 | 663,277 | ||||||||||
Popular 7.00% 7/1/19 | 700,000 | 691,075 | ||||||||||
Royal Bank of Scotland Group 8.00% 12/29/49 • | 565,000 | 597,487 | ||||||||||
Societe Generale 144A 8.00% 9/29/49 #• | 310,000 | 316,347 | ||||||||||
US Bancorp 5.125% 12/29/49 • | 495,000 | 498,341 | ||||||||||
|
| |||||||||||
5,631,691 | ||||||||||||
|
| |||||||||||
Basic Industry – 1.33% | ||||||||||||
AK Steel | ||||||||||||
7.625% 5/15/20 | 528,000 | 224,400 | ||||||||||
7.625% 10/1/21 | 295,000 | 120,950 | ||||||||||
American Tire Distributors 144A 10.25% 3/1/22 # | 575,000 | 567,813 | ||||||||||
ArcelorMittal | ||||||||||||
6.125% 6/1/25 | 170,000 | 134,309 | ||||||||||
6.50% 3/1/21 | 360,000 | 315,900 | ||||||||||
Ball 5.25% 7/1/25 | 75,000 | 75,844 | ||||||||||
Berry Plastics 144A 6.00% 10/15/22 # | 425,000 | 440,937 | ||||||||||
Builders FirstSource | ||||||||||||
144A 7.625% 6/1/21 # | 374,000 | 398,310 | ||||||||||
144A 10.75% 8/15/23 # | 490,000 | 504,700 | ||||||||||
Cemex 144A 7.25% 1/15/21 # | 665,000 | 671,650 | ||||||||||
Chemours | ||||||||||||
144A 6.625% 5/15/23 # | 185,000 | 139,675 | ||||||||||
144A 7.00% 5/15/25 # | 435,000 | 326,250 | ||||||||||
CPG Merger Sub 144A 8.00% 10/1/21 #@ | 505,000 | 502,475 | ||||||||||
FMG Resources August 2006 Pty 144A 9.75% 3/1/22 # | 285,000 | 275,737 | ||||||||||
Hexion | ||||||||||||
6.625% 4/15/20 | 235,000 | 171,550 | ||||||||||
10.00% 4/15/20 | 175,000 | 141,313 | ||||||||||
Joseph T Ryerson & Son | ||||||||||||
9.00% 10/15/17 | 492,000 | 415,681 | ||||||||||
11.25% 10/15/18 @ | 174,000 | 145,290 | ||||||||||
Kissner Milling 144A 7.25% 6/1/19 #@ | 315,000 | 316,575 | ||||||||||
Lundin Mining 144A 7.875% 11/1/22 # | 485,000 | 463,175 | ||||||||||
NCI Building Systems 144A 8.25% 1/15/23 # | 355,000 | 376,300 | ||||||||||
New Gold | ||||||||||||
144A 6.25% 11/15/22 # | 506,000 | 433,263 | ||||||||||
144A 7.00% 4/15/20 # | 210,000 | 196,087 |
20
Table of Contents
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Basic Industry (continued) | ||||||||
Norbord 144A 6.25% 4/15/23 # | 260,000 | $ | 260,650 | |||||
Rayonier AM Products 144A 5.50% 6/1/24 # | 785,000 | 582,863 | ||||||
Steel Dynamics 5.50% 10/1/24 | 495,000 | 473,963 | ||||||
Summit Materials | ||||||||
144A 6.125% 7/15/23 # | 305,000 | 305,763 | ||||||
6.125% 7/15/23 | 300,000 | 300,750 | ||||||
TPC Group 144A 8.75% 12/15/20 # | 548,000 | 383,600 | ||||||
Tronox Finance 144A 7.50% 3/15/22 # | 95,000 | 63,413 | ||||||
Wise Metals Intermediate Holdings 144A PIK 9.75% 6/15/19 #@T | 170,000 | 123,887 | ||||||
|
| |||||||
9,853,073 | ||||||||
|
| |||||||
Capital Goods – 0.71% | ||||||||
Ardagh Packaging Finance 144A 6.00% 6/30/21 # | 600,000 | 594,000 | ||||||
BWAY Holding 144A 9.125% 8/15/21 # | 704,000 | 667,040 | ||||||
Gardner Denver 144A 6.875% 8/15/21 # | 1,007,000 | 828,257 | ||||||
KLX 144A 5.875% 12/1/22 # | 585,000 | 568,547 | ||||||
Milacron 144A 7.75% 2/15/21 # | 135,000 | 135,000 | ||||||
Plastipak Holdings 144A 6.50% 10/1/21 # | 555,000 | 545,287 | ||||||
Reynolds Group Issuer 8.25% 2/15/21 | 210,000 | 211,575 | ||||||
Signode Industrial Group 144A 6.375% 5/1/22 # | 555,000 | 510,600 | ||||||
StandardAero Aviation Holdings 144A 10.00% 7/15/23 # | 555,000 | 557,775 | ||||||
TransDigm | ||||||||
6.00% 7/15/22 | 190,000 | 187,625 | ||||||
6.50% 7/15/24 | 435,000 | 430,650 | ||||||
|
| |||||||
5,236,356 | ||||||||
|
| |||||||
Consumer Cyclical – 0.89% | ||||||||
American Builders & Contractors Supply 144A 5.75% 12/15/23 # | 155,000 | 157,519 | ||||||
Beacon Roofing Supply 144A 6.375% 10/1/23 # | 225,000 | 235,687 | ||||||
Boyd Gaming 6.875% 5/15/23 | 510,000 | 536,137 | ||||||
Caesars Growth Properties Holdings 9.375% 5/1/22 | 200,000 | 166,000 | ||||||
Caleres 6.25% 8/15/23 | 405,000 | 402,975 | ||||||
Goodyear Tire & Rubber 5.125% 11/15/23 | 245,000 | 250,880 | ||||||
L Brands 144A 6.875% 11/1/35 # | 575,000 | 591,531 | ||||||
M/I Homes 144A 6.75% 1/15/21 # | 245,000 | 246,225 | ||||||
MGM Resorts International 6.00% 3/15/23 | 820,000 | 814,363 | ||||||
Midas Intermediate Holdco II 144A 7.875% 10/1/22 # | 415,000 | 404,625 | ||||||
Mohegan Tribal Gaming Authority | ||||||||
144A 9.75% 9/1/21 # | 305,000 | 314,150 | ||||||
9.75% 9/1/21 | 180,000 | 185,400 | ||||||
Neiman Marcus Group 144A PIK 8.75% 10/15/21 #T | 830,000 | 742,850 | ||||||
Party City Holdings 144A 6.125% 8/15/23 # | 185,000 | 177,137 |
21
Table of Contents
Schedule of investments
Delaware Dividend Income Fund
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Consumer Cyclical (continued) | ||||||||
Rite Aid 144A 6.125% 4/1/23 # | 320,000 | $ | 340,400 | |||||
Sabre GLBL 144A 5.25% 11/15/23 # | 155,000 | 153,450 | ||||||
Sally Holdings 5.625% 12/1/25 | 450,000 | 458,437 | ||||||
Tempur Sealy International 144A 5.625% 10/15/23 # | 175,000 | 178,937 | ||||||
Univar USA 144A 6.75% 7/15/23 # | 260,000 | 251,875 | ||||||
|
| |||||||
6,608,578 | ||||||||
|
| |||||||
Consumer Non-Cyclical – 0.94% | ||||||||
Avis Budget Car Rental 144A 5.25% 3/15/25 # | 350,000 | 338,187 | ||||||
Constellation Brands 4.75% 12/1/25 | 155,000 | 157,325 | ||||||
Cott Beverages | ||||||||
5.375% 7/1/22 | 195,000 | 190,125 | ||||||
6.75% 1/1/20 | 205,000 | 213,200 | ||||||
ExamWorks Group 5.625% 4/15/23 | 630,000 | 629,213 | ||||||
JBS Investments | ||||||||
144A 7.25% 4/3/24 # | 200,000 | 201,000 | ||||||
144A 7.75% 10/28/20 # | 285,000 | 296,400 | ||||||
JBS USA 144A 5.75% 6/15/25 # | 1,705,000 | 1,634,243 | ||||||
Kronos Acquisition Holdings 144A 9.00% 8/15/23 # | 640,000 | 603,200 | ||||||
Post Holdings | ||||||||
7.375% 2/15/22 | 365,000 | 381,312 | ||||||
144A 7.75% 3/15/24 # | 445,000 | 462,800 | ||||||
Prestige Brands 144A 5.375% 12/15/21 # | 375,000 | 363,750 | ||||||
Spectrum Brands 144A 6.125% 12/15/24 # | 265,000 | 277,587 | ||||||
SUPERVALU 7.75% 11/15/22 | 715,000 | 668,525 | ||||||
Team Health 144A 7.25% 12/15/23 # | 340,000 | 351,050 | ||||||
Visant 10.00% 10/1/17 | 240,000 | 246,540 | ||||||
|
| |||||||
7,014,457 | ||||||||
|
| |||||||
Energy – 1.10% | ||||||||
Archrock Partners 6.00% 4/1/21 | 355,000 | 308,850 | ||||||
Calumet Specialty Products Partners 7.625% 1/15/22 | 840,000 | 798,000 | ||||||
Chesapeake Energy | ||||||||
4.875% 4/15/22 | 415,000 | 177,672 | ||||||
6.50% 8/15/17 | 350,000 | 245,875 | ||||||
6.625% 8/15/20 | 50,000 | 23,875 | ||||||
7.25% 12/15/18 | 55,000 | 32,966 | ||||||
CSI Compressco 7.25% 8/15/22 | 470,000 | 380,406 | ||||||
Energy Transfer Equity 5.875% 1/15/24 | 417,000 | 387,810 | ||||||
EP Energy 6.375% 6/15/23 | 395,000 | 304,150 | ||||||
Genesis Energy | ||||||||
5.75% 2/15/21 | 350,000 | 320,250 | ||||||
6.00% 5/15/23 | 255,000 | 225,037 | ||||||
6.75% 8/1/22 | 225,000 | 210,375 |
22
Table of Contents
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Energy (continued) | ||||||||
Laredo Petroleum | ||||||||
5.625% 1/15/22 | 270,000 | $ | 253,800 | |||||
7.375% 5/1/22 | 203,000 | 198,940 | ||||||
MarkWest Energy Partners | ||||||||
4.875% 12/1/24 | 305,000 | 272,022 | ||||||
5.50% 2/15/23 | 235,000 | 223,250 | ||||||
Murphy Oil USA 6.00% 8/15/23 | 580,000 | 613,350 | ||||||
Northern Oil & Gas 8.00% 6/1/20 | 155,000 | 123,225 | ||||||
NuStar Logistics 6.75% 2/1/21 | 500,000 | 507,500 | ||||||
Oasis Petroleum 6.875% 3/15/22 | 765,000 | 659,813 | ||||||
PDC Energy 7.75% 10/15/22 | 470,000 | 477,050 | ||||||
Pioneer Energy Services 6.125% 3/15/22 | 665,000 | 379,050 | ||||||
Rose Rock Midstream 144A 5.625% 11/15/23 #@ | 170,000 | 141,100 | ||||||
Targa Resources Partners 144A 6.75% 3/15/24 # | 600,000 | 571,500 | ||||||
Transocean | ||||||||
4.30% 10/15/22 | 180,000 | 116,100 | ||||||
6.875% 12/15/21 | 305,000 | 229,817 | ||||||
|
| |||||||
8,181,783 | ||||||||
|
| |||||||
Financials – 0.16% | ||||||||
Ally Financial 5.75% 11/20/25 | 550,000 | 555,156 | ||||||
James Hardie International Finance 144A 5.875% 2/15/23 # | 645,000 | 667,575 | ||||||
|
| |||||||
1,222,731 | ||||||||
|
| |||||||
Healthcare – 1.39% | ||||||||
Air Medical Merger Sub 144A 6.375% 5/15/23 # | 620,000 | 558,775 | ||||||
Community Health Systems 6.875% 2/1/22 | 1,025,000 | 996,813 | ||||||
DaVita HealthCare Partners 5.00% 5/1/25 | 580,000 | 558,250 | ||||||
HCA | ||||||||
5.375% 2/1/25 | 500,000 | 493,125 | ||||||
5.875% 2/15/26 | 335,000 | 340,444 | ||||||
HealthSouth | ||||||||
144A 5.75% 11/1/24 # | 295,000 | 286,150 | ||||||
5.75% 11/1/24 | 55,000 | 53,350 | ||||||
144A 5.75% 9/15/25 # | 265,000 | 255,063 | ||||||
Hill-Rom Holdings 144A 5.75% 9/1/23 # | 545,000 | 557,944 | ||||||
IASIS Healthcare 8.375% 5/15/19 | 850,000 | 803,250 | ||||||
Immucor 11.125% 8/15/19 | 1,355,000 | 1,368,550 | ||||||
Kinetic Concepts | ||||||||
10.50% 11/1/18 | 239,000 | 232,667 | ||||||
12.50% 11/1/19 | 430,000 | 417,100 | ||||||
LifePoint Health 5.875% 12/1/23 | 250,000 | 252,187 |
23
Table of Contents
Schedule of investments
Delaware Dividend Income Fund
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Healthcare (continued) | ||||||||
Mallinckrodt International Finance | ||||||||
4.75% 4/15/23 | 200,000 | $ | 167,000 | |||||
144A 5.625% 10/15/23 # | 335,000 | 290,613 | ||||||
MPH Acquisition Holdings 144A 6.625% 4/1/22 # | 360,000 | 364,500 | ||||||
Sterigenics-Nordion Holdings 144A 6.50% 5/15/23 # | 670,000 | 672,513 | ||||||
Tenet Healthcare | ||||||||
6.75% 6/15/23 | 120,000 | 112,650 | ||||||
8.125% 4/1/22 | 775,000 | 776,453 | ||||||
Valeant Pharmaceuticals International | ||||||||
144A 5.875% 5/15/23 # | 150,000 | 130,500 | ||||||
144A 6.125% 4/15/25 # | 390,000 | 338,325 | ||||||
144A 6.75% 8/15/18 # | 265,000 | 259,700 | ||||||
|
| |||||||
10,285,922 | ||||||||
|
| |||||||
Insurance – 0.21% | ||||||||
HUB International 144A 7.875% 10/1/21 # | 680,000 | 654,500 | ||||||
USI 144A 7.75% 1/15/21 # | 456,000 | 448,590 | ||||||
XLIT 6.50% 10/29/49 • | 573,000 | 448,373 | ||||||
|
| |||||||
1,551,463 | ||||||||
|
| |||||||
Media – 1.40% | ||||||||
Altice Luxembourg 144A 7.75% 5/15/22 # | 435,000 | 407,813 | ||||||
CCO Holdings | ||||||||
144A 5.375% 5/1/25 # | 245,000 | 243,775 | ||||||
144A 5.875% 5/1/27 # | 470,000 | 467,650 | ||||||
CCOH Safari 144A 5.75% 2/15/26 # | 340,000 | 342,550 | ||||||
Clear Channel Worldwide Holdings 7.625% 3/15/20 | 385,000 | 374,894 | ||||||
Columbus International 144A 7.375% 3/30/21 # | 280,000 | 296,100 | ||||||
CSC Holdings 5.25% 6/1/24 | 680,000 | 578,000 | ||||||
DISH DBS 5.875% 11/15/24 | 435,000 | 390,413 | ||||||
Gray Television 7.50% 10/1/20 | 407,000 | 423,789 | ||||||
Midcontinent Communications & Midcontinent Finance 144A 6.875% 8/15/23 # | 185,000 | 189,163 | ||||||
Neptune Finco | ||||||||
144A 6.625% 10/15/25 # | 400,000 | 415,500 | ||||||
144A 10.125% 1/15/23 # | 220,000 | 230,450 | ||||||
144A 10.875% 10/15/25 # | 200,000 | 212,000 | ||||||
Numericable-SFR 144A 6.00% 5/15/22 # | 590,000 | 584,100 | ||||||
RCN Telecom Services 144A 8.50% 8/15/20 # | 465,000 | 476,044 | ||||||
Sinclair Television Group 144A 5.625% 8/1/24 # | 790,000 | 775,187 | ||||||
Sirius XM Radio 144A 5.375% 4/15/25 # | 735,000 | 729,487 | ||||||
Tribune Media 144A 5.875% 7/15/22 # | 550,000 | 551,375 | ||||||
Univision Communications 144A 8.50% 5/15/21 # | 630,000 | 657,563 | ||||||
VTR Finance 144A 6.875% 1/15/24 # | 865,000 | 833,255 |
24
Table of Contents
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Media (continued) | ||||||||
WideOpenWest Finance | ||||||||
10.25% 7/15/19 | 985,000 | $ | 946,831 | |||||
13.375% 10/15/19 @ | 300,000 | 294,750 | ||||||
|
| |||||||
10,420,689 | ||||||||
|
| |||||||
Real Estate Investment Trusts – 0.06% | ||||||||
Communications Sales & Leasing | ||||||||
144A 6.00% 4/15/23 # | 210,000 | 198,975 | ||||||
8.25% 10/15/23 | 255,000 | 228,225 | ||||||
|
| |||||||
427,200 | ||||||||
|
| |||||||
Services – 0.52% | ||||||||
BlueLine Rental Finance 144A 7.00% 2/1/19 # | 400,000 | 365,000 | ||||||
GEO Group 5.125% 4/1/23 | 265,000 | 250,425 | ||||||
Iron Mountain 144A 6.00% 10/1/20 # | 255,000 | 268,133 | ||||||
Mattamy Group 144A 6.50% 11/15/20 # | 690,000 | 674,475 | ||||||
Navios South American Logistics 144A 7.25% 5/1/22 # | 570,000 | 458,137 | ||||||
OPE KAG Finance Sub 144A 7.875% 7/31/23 # | 470,000 | 483,513 | ||||||
Pinnacle Entertainment 7.75% 4/1/22 | 223,000 | 246,136 | ||||||
United Rentals North America 5.75% 11/15/24 | 635,000 | 644,919 | ||||||
Vander Intermediate Holding II 144A PIK 9.75% 2/1/19 #T | 255,000 | 191,250 | ||||||
XPO Logistics 144A 6.50% 6/15/22 # | 270,000 | 249,413 | ||||||
|
| |||||||
3,831,401 | ||||||||
|
| |||||||
Technology – 0.58% | ||||||||
CommScope 144A 5.50% 6/15/24 # | 630,000 | 607,163 | ||||||
Emdeon 144A 6.00% 2/15/21 # | 495,000 | 473,344 | ||||||
Entegris 144A 6.00% 4/1/22 # | 420,000 | 429,236 | ||||||
Equinix 5.875% 1/15/26 | 320,000 | 325,600 | ||||||
First Data 144A 7.00% 12/1/23 # | 1,103,000 | 1,115,409 | ||||||
Infor US 144A 6.50% 5/15/22 # | 805,000 | 716,450 | ||||||
Micron Technology | ||||||||
144A 5.25% 1/15/24 # | 230,000 | 214,475 | ||||||
144A 5.625% 1/15/26 # | 130,000 | 119,763 | ||||||
Sensata Technologies UK Financing 144A 6.25% 2/15/26 # | 285,000 | 294,619 | ||||||
|
| |||||||
4,296,059 | ||||||||
|
| |||||||
Telecommunications – 1.40% | ||||||||
Altice US Finance 144A 7.75% 7/15/25 # | 510,000 | 490,875 | ||||||
CenturyLink 6.75% 12/1/23 | 615,000 | 586,187 | ||||||
Cogent Communications Finance 144A 5.625% 4/15/21 #@ | 435,000 | 408,900 | ||||||
Cogent Communications Group 144A 5.375% 3/1/22 # | 190,000 | 186,675 | ||||||
CommScope Technologies Finance 144A 6.00% 6/15/25 # | 395,000 | 379,200 | ||||||
Digicel 144A 6.75% 3/1/23 # | 550,000 | 487,960 |
25
Table of Contents
Schedule of investments
Delaware Dividend Income Fund
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Telecommunications (continued) | ||||||||
Digicel Group | ||||||||
144A 7.125% 4/1/22 # | 1,250,000 | $ | 1,013,387 | |||||
144A 8.25% 9/30/20 # | 960,000 | 838,800 | ||||||
Frontier Communications | ||||||||
144A 10.50% 9/15/22 # | 235,000 | 233,531 | ||||||
144A 11.00% 9/15/25 # | 500,000 | 491,250 | ||||||
Hughes Satellite Systems 7.625% 6/15/21 | 198,000 | 214,355 | ||||||
Intelsat Jackson Holdings | ||||||||
5.50% 8/1/23 | 379,000 | 284,250 | ||||||
7.25% 4/1/19 | 125,000 | 109,766 | ||||||
7.50% 4/1/21 | 110,000 | 91,850 | ||||||
Intelsat Luxembourg | ||||||||
6.75% 6/1/18 | 340,000 | 224,400 | ||||||
7.75% 6/1/21 | 176,000 | 69,520 | ||||||
8.125% 6/1/23 | 458,000 | 174,040 | ||||||
Level 3 Financing 144A 5.375% 5/1/25 # | 720,000 | 718,200 | ||||||
Sable International Finance 144A 6.875% 8/1/22 # | 610,000 | 616,100 | ||||||
Sprint | ||||||||
7.125% 6/15/24 | 490,000 | 377,300 | ||||||
7.25% 9/15/21 | 490,000 | 398,125 | ||||||
7.875% 9/15/23 | 10,000 | 8,075 | ||||||
Sprint Capital 6.90% 5/1/19 | 160,000 | 142,800 | ||||||
T-Mobile USA | ||||||||
6.00% 3/1/23 | 245,000 | 246,837 | ||||||
6.375% 3/1/25 | 90,000 | 90,000 | ||||||
6.50% 1/15/26 | 150,000 | 150,187 | ||||||
Wind Acquisition Finance 144A 7.375% 4/23/21 # | 515,000 | 498,263 | ||||||
Zayo Group 144A 6.00% 4/1/23 # | 885,000 | 854,025 | ||||||
|
| |||||||
10,384,858 | ||||||||
|
| |||||||
Utilities – 0.41% | ||||||||
AES 5.50% 4/15/25 | 410,000 | 370,025 | ||||||
AES Gener 144A 8.375% 12/18/73 #@• | 200,000 | 205,750 | ||||||
Calpine | ||||||||
5.375% 1/15/23 | 550,000 | 515,625 | ||||||
5.50% 2/1/24 | 325,000 | 303,469 | ||||||
DPL 6.75% 10/1/19 | 295,000 | 301,637 | ||||||
Dynegy | ||||||||
5.875% 6/1/23 | 365,000 | 329,869 | ||||||
7.375% 11/1/22 | 190,000 | 184,099 | ||||||
7.625% 11/1/24 | 365,000 | 348,575 |
26
Table of Contents
Principal amount° | Value (U.S. $) | |||||||||||
| ||||||||||||
Corporate Bonds (continued) | ||||||||||||
| ||||||||||||
Utilities (continued) | ||||||||||||
Enel 144A 8.75% 9/24/73 #• | 400,000 | $ | 461,000 | |||||||||
|
| |||||||||||
3,020,049 | ||||||||||||
|
| |||||||||||
Total Corporate Bonds (cost $95,706,009) | 88,858,116 | |||||||||||
|
| |||||||||||
| ||||||||||||
Leveraged Non-Recourse Security – 0.00% | ||||||||||||
| ||||||||||||
JPMorgan Fixed Income Pass Through Trust | ||||||||||||
Series 2007-B 144A 0.00% 1/15/87 #@¨ | 1,300,000 | 0 | ||||||||||
|
| |||||||||||
Total Leveraged Non-Recourse Security (cost $1,105,000) | 0 | |||||||||||
|
| |||||||||||
| ||||||||||||
Municipal Bonds – 1.18% | ||||||||||||
| ||||||||||||
California State | ||||||||||||
(Various Purposes) 5.00% 11/1/43 | 1,000,000 | 1,146,100 | ||||||||||
California Statewide Communities Development Authority | ||||||||||||
(California Baptist University) Series A 6.375% 11/1/43 | 1,000,000 | �� | 1,103,740 | |||||||||
City of Chicago, Illinois | ||||||||||||
(Taxable Build America Bond) Series B 7.75% 1/1/42 | 385,000 | 409,186 | ||||||||||
Colorado Health Facilities Authority Revenue | ||||||||||||
(Catholic Health Initiatives) Series A 5.25% 1/1/45 | 1,250,000 | 1,384,950 | ||||||||||
Dallas/Fort Worth International Airport, Texas | ||||||||||||
Series H 5.00% 11/1/42 (AMT) | 1,000,000 | 1,083,440 | ||||||||||
Golden State, California Tobacco Securitization Corporate Settlement Revenue | ||||||||||||
(Asset-Backed Senior Notes) Series A-1 5.75% 6/1/47 | 650,000 | 602,212 | ||||||||||
New York State Thruway Authority | ||||||||||||
Series J 5.00% 1/1/41 | 1,000,000 | 1,122,400 | ||||||||||
Palm Beach County, Florida Health Facilities Authority (Sinai Residences Boca Raton Project) | ||||||||||||
7.25% 6/1/34 | 65,000 | 77,500 | ||||||||||
Series A 7.50% 6/1/49 | 325,000 | 388,999 | ||||||||||
Texas Private Activity Bond Surface Transportation Revenue Bond (Senior Lien NTC Mobility Partners) | ||||||||||||
6.75% 6/30/43 (AMT) | 450,000 | 548,145 | ||||||||||
Utility Debt Securitization Authority, New York | ||||||||||||
(Restructuring) Series TE 5.00% 12/15/41 | 750,000 | 861,660 | ||||||||||
|
| |||||||||||
Total Municipal Bonds (cost $7,753,898) | 8,728,332 | |||||||||||
|
| |||||||||||
| ||||||||||||
Regional Bond – 0.07%D | ||||||||||||
| ||||||||||||
Australia – 0.07% | ||||||||||||
New South Wales Treasury 4.00% 5/20/26 | AUD | 640,200 | 496,558 | |||||||||
|
| |||||||||||
Total Regional Bond (cost $558,092) | 496,558 | |||||||||||
|
|
27
Table of Contents
Schedule of investments
Delaware Dividend Income Fund
Principal amount° | Value (U.S. $) | |||||||||||
| ||||||||||||
Senior Secured Loans – 0.98%« | ||||||||||||
| ||||||||||||
Accudyne Industries Borrower (Hamilton Sundstrand Industrial) 1st Lien 4.00% 12/13/19 | 345,000 | $ | 305,325 | |||||||||
Albertson’s Tranche B4 1st Lien 5.50% 8/25/21 | 540,000 | 540,244 | ||||||||||
Applied Systems 2nd Lien 7.50% 1/23/22 | 560,223 | 544,117 | ||||||||||
Atkore International 2nd Lien 7.75% 10/9/21 @ | 363,000 | 316,717 | ||||||||||
Avaya 1st Lien 4.50% 10/26/17 | 477,326 | 412,589 | ||||||||||
BJ’s Wholesale Club 2nd Lien 8.50% 3/31/20 | 790,000 | 760,869 | ||||||||||
CD&R Millennium Holdco (Mauser Holdings) 2nd Lien 8.75% 7/31/22 @ | 290,000 | 272,600 | ||||||||||
Colouroz (Flint Group) 2nd Lien 8.25% 9/7/22 @ | 530,000 | 514,763 | ||||||||||
Drillship Ocean Ventures (Ocean Rig) Tranche B 1st Lien 5.50% 7/25/21 | 55,293 | 32,116 | ||||||||||
FMG Resources (Fortescue Resources) August 2006 Pty 1st Lien 4.25% 6/30/19 | 539,198 | 442,143 | ||||||||||
Green Energy Partners (Panda Stonewall) Tranche B 1st Lien 6.50% 11/13/21 | 148,000 | 144,300 | ||||||||||
iHeartCommunications Tranche D 1st Lien 6.75% 1/30/19 | 840,000 | 613,200 | ||||||||||
J.C. Penney 1st Lien 6.00% 5/22/18 | 543,610 | 539,804 | ||||||||||
KIK Custom Products 1st Lien 6.00% 8/26/22 | 255,000 | 253,247 | ||||||||||
MacDermid (Platform Specialty) Tranche B 1st Lien 5.50% 6/7/20 | 240,000 | 233,975 | ||||||||||
Marina District (Borgata) Tranche B 1st Lien 6.50% 8/15/18 | 342,332 | 343,259 | ||||||||||
Moxie Patriot Tranche B1 1st Lien 6.75% 12/19/20 | 178,000 | 169,100 | ||||||||||
Pabst Blue Ribbon 1st Lien 5.75% 11/13/21 | 155,000 | 154,871 | ||||||||||
Pabst Blue Ribbon 2nd Lien 9.25% 11/13/22 | 105,000 | 103,425 | ||||||||||
Panda Liberty Tranche B 1st Lien 7.50% 8/21/20 | 161,000 | 152,950 | ||||||||||
Rite Aid 2nd Lien 5.75% 8/21/20 | 220,000 | 222,200 | ||||||||||
Solenis International (Ashland Water) 2nd Lien 7.75% 7/31/22 | 220,000 | 203,019 | ||||||||||
|
| |||||||||||
Total Senior Secured Loans (cost $7,613,900) | 7,274,833 | |||||||||||
|
| |||||||||||
| ||||||||||||
Sovereign Bonds – 0.92%D | ||||||||||||
| ||||||||||||
Indonesia – 0.45% | ||||||||||||
Indonesia Government International Bond | ||||||||||||
144A 5.125% 1/15/45 # | 1,500,000 | 1,379,929 | ||||||||||
144A 6.75% 1/15/44 # | 1,800,000 | 1,982,198 | ||||||||||
|
| |||||||||||
3,362,127 | ||||||||||||
|
| |||||||||||
Mexico – 0.41% | ||||||||||||
Mexican Bonos 10.00% 12/5/24 | MXN | 39,301,000 | 3,013,363 | |||||||||
|
| |||||||||||
3,013,363 | ||||||||||||
|
|
28
Table of Contents
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Sovereign BondsD (continued) | ||||||||
| ||||||||
South Africa – 0.06% | ||||||||
South Africa Government International Bond | ||||||||
5.375% 7/24/44 | 500,000 | $ | 482,745 | |||||
|
| |||||||
482,745 | ||||||||
|
| |||||||
Total Sovereign Bonds (cost $7,906,500) | 6,858,235 | |||||||
|
| |||||||
| ||||||||
U.S. Treasury Obligations – 3.65% | ||||||||
| ||||||||
U.S. Treasury Notes | ||||||||
1.375% 10/31/20 | 4,930,000 | 4,863,558 | ||||||
1.75% 9/30/22 | 5,000,000 | 4,924,805 | ||||||
2.00% 8/15/25 | 17,615,000 | 17,265,800 | ||||||
|
| |||||||
Total U.S. Treasury Obligations (cost $27,404,369) | 27,054,163 | |||||||
|
| |||||||
Number of shares | ||||||||
| ||||||||
Master Limited Partnership – 0.28% | ||||||||
| ||||||||
Enterprise Products Partners | 19,200 | 487,488 | ||||||
Valero Energy Partners | 34,200 | 1,584,486 | ||||||
|
| |||||||
Total Master Limited Partnership (cost $2,082,615) | 2,071,974 | |||||||
|
| |||||||
| ||||||||
Preferred Stock – 0.37% | ||||||||
| ||||||||
Ally Financial 144A 7.00% # | 550 | 556,566 | ||||||
Bank of America 6.50% • | 625,000 | 660,937 | ||||||
Freddie Mac 6.02% | 40,000 | 130,000 | ||||||
GMAC Capital Trust I 8.125% • | 17,000 | 433,500 | ||||||
NorthStar Realty Finance 8.50% | 15,700 | 355,919 | ||||||
Vornado Realty Trust 6.625% | 24,900 | 633,456 | ||||||
|
| |||||||
Total Preferred Stock (cost $3,609,785) | 2,770,378 | |||||||
|
| |||||||
| ||||||||
Rights – 0.01% | ||||||||
| ||||||||
Standard Chartered | ||||||||
exercise price GBP 4.65 | ||||||||
expiration date 12/10/15 † | 29,004 | 39,754 | ||||||
|
| |||||||
Total Rights (cost $0) | 39,754 | |||||||
|
| |||||||
| ||||||||
Warrant – 0.00% | ||||||||
| ||||||||
Wheeler Real Estate Investment Trust strike price $5.50, expiration date 4/29/19 @† | 43,188 | 1,222 | ||||||
|
| |||||||
Total Warrant (cost $358) | 1,222 | |||||||
|
|
29
Table of Contents
Schedule of investments
Delaware Dividend Income Fund
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Short-Term Investments – 12.26% | ||||||||
| ||||||||
Discount Notes – 3.15%≠ | ||||||||
Federal Home Loan Bank | ||||||||
0.12% 1/4/16 | 3,322,074 | $ | 3,321,745 | |||||
0.12% 1/25/16 | 1,825,569 | 1,825,277 | ||||||
0.14% 2/18/16 | 2,112,660 | 2,111,779 | ||||||
0.155% 2/3/16 | 2,193,552 | 2,192,810 | ||||||
0.17% 1/21/16 | 2,124,202 | 2,123,885 | ||||||
0.18% 2/26/16 | 2,113,649 | 2,112,679 | ||||||
0.18% 3/7/16 | 1,739,533 | 1,738,502 | ||||||
0.185% 1/19/16 | 1,290,655 | 1,290,471 | ||||||
0.19% 3/22/16 | 4,237,783 | 4,234,884 | ||||||
0.195% 12/2/15 | 1,828,007 | 1,828,003 | ||||||
0.295% 3/2/16 | 624,677 | 624,326 | ||||||
|
| |||||||
23,404,361 | ||||||||
|
| |||||||
Repurchase Agreements – 9.11% | ||||||||
Bank of America Merrill Lynch | ||||||||
0.07%, dated 11/30/15, to be repurchased on 12/1/15, repurchase price $13,183,167 (collateralized by U.S.government obligations 1.50%–3.375% | ||||||||
5/31/19–5/15/44; market value $13,446,806) | 13,183,141 | 13,183,141 | ||||||
Bank of Montreal | ||||||||
0.09%, dated 11/30/15, to be repurchased on 12/1/15, repurchase price $21,971,957 (collateralized by U.S.government obligations 0.125%–4.625% | ||||||||
4/15/16–2/15/40; market value $22,411,345) | 21,971,902 | 21,971,902 | ||||||
BNP Paribas | ||||||||
0.11%, dated 11/30/15, to be repurchased on 12/1/15, repurchase price $32,389,056 (collateralized by U.S.government obligations 0.00%–3.125% | ||||||||
9/15/17–8/15/44; market value $33,036,739) | 32,388,957 | 32,388,957 | ||||||
|
| |||||||
67,544,000 | ||||||||
|
| |||||||
Total Short-Term Investments (cost $90,948,810) | 90,948,361 | |||||||
|
| |||||||
Total Value of Securities Before Securities Sold Short – 99.61% | 738,648,671 | |||||||
|
| |||||||
Number of shares | ||||||||
| ||||||||
Security Sold Short – (0.54%) | ||||||||
| ||||||||
iShares U.S. Real Estate ETF JDR | (53,100 | ) | (3,993,651 | ) | ||||
|
| |||||||
Total Security Sold Short | (3,993,651 | ) | ||||||
|
| |||||||
Total Value of Securities – 99.07% | $ | 734,655,020 | ||||||
|
|
30
Table of Contents
# | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At Nov. 30, 2015, the aggregate value of Rule 144A securities was $67,595,034, which represents 9.12% of the Fund’s net assets. See Note 11 in “Notes to financial statements.” |
@ | Illiquid security. At Nov. 30, 2015, the aggregate value of illiquid securities was $32,141,835, which represents 4.33% of the Fund’s net assets. See Note 11 in “Notes to financial statements.” |
¿ | Pass Through Agreement. Security represents the contractual right to receive a proportionate amount of underlying payments due to the counterparty pursuant to various agreements related to the rescheduling of obligations and the exchange of certain notes. |
T | 100% of the income received was in the form of cash. |
= | Security is being fair valued in accordance with the Fund’s fair valuation policy. At Nov. 30, 2015, the aggregate value of fair valued securities was $0, which represents 0.00% of the Fund’s net assets. See Note 1 in “Notes to financial statements.” |
≠ | The rate shown is the effective yield at the time of purchase. |
° | Principal amount shown is stated in U.S. dollars unless noted that the security is denominated in another currency. |
† | Non-income-producing security. |
• | Variable rate security. The rate shown is the rate as of Nov. 30, 2015. Interest rates reset periodically. |
¥ | Fully or partially pledged as collateral for security sold short. |
D | Securities have been classified by country of origin. |
« | 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 U.S. banks, (ii) the lending rate offered by one or more European banks such as the London Interbank Offered Rate (LIBOR), and (iii) the certificate of deposit rate. Senior secured loans may be subject to restrictions on resale. Stated rate in effect at Nov. 30, 2015. |
f | Step coupon bond. Coupon increases or decreases periodically based on a predetermined schedule. Stated rate in effect at Nov. 30, 2015. |
31
Table of Contents
Schedule of investments
Delaware Dividend Income Fund
The following foreign currency exchange contracts, futures contracts and swap contracts were outstanding at Nov. 30, 2015:1
Foreign Currency Exchange Contracts
Counterparty | Contracts to Receive (Deliver) | In Exchange For | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||||
BNYM | EUR | 913,955 | USD | (965,893 | ) | 12/2/15 | $ | (183 | ) |
Futures Contracts
Contracts to Buy (Sell) | Notional Cost (Proceeds) | Notional Value | Expiration Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||
(90) | E-mini S&P 500 Index | $ | (9,296,745 | ) | $ | (9,359,100 | ) | 12/21/15 | $ | (62,355 | ) |
Swap Contract
CDS Contract2 | ||||||||||||||||||
Counterparty | Swap Referenced Obligation | Notional Value | Annual Protection Payments | Termination Date | Unrealized Appreciation (Depreciation)3 | |||||||||||||
�� | Protection Purchased: | |||||||||||||||||
ICE | BCLY - CDX.NA.HY.25 | $ | 9,000,000 | 5.00% | 12/20/20 | $ | 43,332 | |||||||||||
ICE | CITI - CDX.NA.HY.25 | 9,000,000 | 5.00% | 12/20/20 | 32,201 | |||||||||||||
|
| |||||||||||||||||
$ | 75,533 | |||||||||||||||||
|
|
The use of foreign currency exchange contracts, futures contracts and swap contracts involves elements of market risk and risks in excess of the amounts disclosed in the financial statements. The foreign currency exchange contracts and notional values presented above represent the Fund’s total exposure in such contracts, whereas only the net unrealized appreciation (depreciation) is reflected in the Fund’s net assets.
1See Note 8 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 realized losses (gains) on swap contracts. Upfront payments made or received in connection with CDS contracts are amortized over the expected life of the CDS contracts as unrealized losses (gains) on swap contracts. The change in value of CDS contracts is recorded daily as unrealized appreciation or depreciation. A realized gain or loss is recorded upon a credit event (as defined in the CDS agreement) or the maturity or termination of the agreement.
3Unrealized appreciation (depreciation) does not include periodic interest payments on swap contracts accrued daily in the amount of $(78,783).
32
Table of Contents
Summary of abbreviations:
ADR – American Depositary Receipt
AMT – Subject to Alternative Minimum Tax
AUD – Australian Dollar
BCLY – Barclays Bank
BNYM – Bank of New York Mellon
CDS – Credit Default Swap
CDX.NA.HY – Credit Default Swap Index North America High Yield
CITI – Citigroup Global Markets
CVA – Dutch Certificate
ETF – Exchange-Traded Fund
EUR – European Monetary Unit
GBP – British Pound Sterling
ICE – Intercontinental Exchange, Inc.
JDR – Japanese Depositary Receipt
MXN – Mexican Peso
PIK – Pay-in-kind
REIT – Real Estate Investment Trust
USD – U.S. Dollar
See accompanying notes, which are an integral part of the financial statements.
33
Table of Contents
Statement of assets and liabilities
Delaware Dividend Income Fund | November 30, 2015 |
Assets: | ||||
Investments, at value1 | $ | 647,700,310 | ||
Short-term investments, at value2 | 90,948,361 | |||
Foreign currencies, at value3 | 60,081 | |||
Cash | 4,272,197 | |||
Cash collateral due from broker | 1,680,826 | |||
Dividends and interest receivable | 4,000,456 | |||
Receivable for securities sold | 2,100,970 | |||
Receivable for fund shares sold | 797,406 | |||
Variation margin due from broker on futures contracts | 45,450 | |||
Unrealized appreciation on credit default swap contracts | 91,061 | |||
Other assets4 | 270,461 | |||
|
| |||
Total assets | 751,967,579 | |||
|
| |||
Liabilities: | ||||
Security sold short, at value5 | 3,993,651 | |||
Payable for securities purchased | 2,778,352 | |||
Payable for fund shares redeemed | 1,090,258 | |||
Swap payments payable | 177,500 | |||
Variation margin due to broker on centrally cleared credit default swap contracts | 15,528 | |||
Investment management fees payable | 388,250 | |||
Distribution fees payable to affiliates | 309,525 | |||
Other accrued expenses | 290,627 | |||
Other affiliates payable | 37,963 | |||
Trustees’ fees and expenses payable | 4,422 | |||
Upfront payments received on credit default swap contracts | 455,520 | |||
Unrealized depreciation on foreign currency exchange contracts | 183 | |||
Bond proceeds payable4 | 901,538 | |||
|
| |||
Total liabilities | 10,443,317 | |||
|
| |||
Total Net Assets | $ | 741,524,262 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 774,455,815 | ||
Undistributed net investment income | 1,250,576 | |||
Accumulated net realized loss on investments | (71,274,479 | ) | ||
Net unrealized appreciation of investments | 37,165,653 | |||
Net unrealized depreciation of foreign currencies | (7,515 | ) | ||
Net unrealized depreciation of foreign currency exchange contracts | (183 | ) | ||
Net unrealized depreciation of futures contracts | (62,355 | ) | ||
Net unrealized depreciation of swap contracts | (3,250 | ) | ||
|
| |||
Total Net Assets | $ | 741,524,262 | ||
|
|
34
Table of Contents
Net Asset Value | ||||
Class A: | ||||
Net assets | $ | 291,876,512 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 22,172,291 | |||
Net asset value per share | $ | 13.16 | ||
Sales charge | 5.75 | % | ||
Offering price per share, equal to net asset value per share / (1 – sales charge) | $ | 13.96 | ||
Class C: | ||||
Net assets | $ | 298,832,667 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 22,668,555 | |||
Net asset value per share | $ | 13.18 | ||
Class R: | ||||
Net assets | $ | 3,682,248 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 279,766 | |||
Net asset value per share | $ | 13.16 | ||
Institutional Class: | ||||
Net assets | $ | 147,132,835 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 11,176,951 | |||
Net asset value per share | $ | 13.16 | ||
| ||||
1 Investments, at cost | $ | 610,546,455 | ||
2 Short-term investments, at cost | 90,948,810 | |||
3 Foreign currencies, at cost | 59,945 | |||
4 See Note 14 in “Notes to financial statements.” | ||||
5 Security sold short, proceeds | (4,005,898 | ) |
See accompanying notes, which are an integral part of the financial statements.
35
Table of Contents
Delaware Dividend Income Fund | Year ended November 30, 2015 |
Investment Income: | ||||
Dividends | $ | 14,299,646 | ||
Interest | 13,184,838 | |||
Foreign tax withheld | (146,637 | ) | ||
|
| |||
27,337,847 | ||||
|
| |||
Expenses: | ||||
Management fees | 4,958,239 | |||
Distribution expenses — Class A | 780,938 | |||
Distribution expenses — Class C | 3,118,058 | |||
Distribution expenses — Class R | 19,374 | |||
Dividend disbursing and transfer agent fees and expenses | 902,218 | |||
Accounting and administration expenses | 250,178 | |||
Reports and statements to shareholders | 249,855 | |||
Registration fees | 90,309 | |||
Custodian fees | 65,309 | |||
Legal fees | 63,301 | |||
Audit and tax | 45,255 | |||
Trustees’ fees and expenses | 36,845 | |||
Other | 47,909 | |||
|
| |||
10,627,788 | ||||
Less expense paid indirectly | (230 | ) | ||
|
| |||
Total operating expenses | 10,627,558 | |||
|
| |||
Net Investment Income | 16,710,289 | |||
|
|
36
Table of Contents
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments 1 | $ | 37,812,594 | ||
Foreign currencies | (609,292 | ) | ||
Foreign currency exchange contracts | (226,117 | ) | ||
Futures contracts | 1,986,676 | |||
Swap contracts | (70,539 | ) | ||
|
| |||
Net realized gain | 38,893,322 | |||
|
| |||
Net change in unrealized appreciation (depreciation) of: | ||||
Investments | (72,716,717 | ) | ||
Foreign currencies | 5,718 | |||
Foreign currency exchange contracts | (183 | ) | ||
Futures contracts | 170,882 | |||
Swap contracts | 112,766 | |||
|
| |||
Net change in unrealized appreciation (depreciation) | (72,427,534 | ) | ||
|
| |||
Net Realized and Unrealized Loss | (33,534,212 | ) | ||
|
| |||
Net Decrease in Net Assets Resulting from Operations | $ | (16,823,923 | ) | |
|
| |||
1 Includes $631,076 loss contingencies on General Motors term loan litigation. See | ||||
Note 14 in “Notes to financial statements.” |
See accompanying notes, which are an integral part of the financial statements.
37
Table of Contents
Statements of changes in net assets
Delaware Dividend Income Fund
Year ended | ||||||||
11/30/15 | 11/30/14 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 16,710,289 | $ | 14,663,282 | ||||
Net realized gain | 38,893,322 | 29,498,876 | ||||||
Net change in unrealized appreciation (depreciation) | (72,427,534 | ) | 18,808,863 | |||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | (16,823,923 | ) | 62,971,021 | |||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Class A | (7,265,924 | ) | (7,317,367 | ) | ||||
Class B | — | (130,696 | ) | |||||
Class C | (4,909,329 | ) | (4,581,895 | ) | ||||
Class R | (80,322 | ) | (75,505 | ) | ||||
Institutional Class | (4,037,658 | ) | (2,655,964 | ) | ||||
|
|
|
| |||||
(16,293,233 | ) | (14,761,427 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Class A | 48,575,598 | 87,227,442 | ||||||
Class B | — | 12,087 | ||||||
Class C | 43,687,213 | 65,462,355 | ||||||
Class R | 1,817,301 | 1,900,495 | ||||||
Institutional Class | 55,140,551 | 97,952,473 | ||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | 6,656,357 | 6,744,169 | ||||||
Class B | — | 123,159 | ||||||
Class C | 4,462,182 | 4,163,166 | ||||||
Class R | 79,381 | 70,986 | ||||||
Institutional Class | 3,548,777 | 2,279,362 | ||||||
|
|
|
| |||||
163,967,360 | 265,935,694 | |||||||
|
|
|
|
38
Table of Contents
Year ended | ||||||||
11/30/15 | 11/30/14 | |||||||
Capital Share Transactions (continued): | ||||||||
Cost of shares redeemed: | ||||||||
Class A | $ | (65,461,808 | ) | $ | (97,579,843 | ) | ||
Class B | — | (10,736,134 | ) | |||||
Class C | (45,124,879 | ) | (35,216,011 | ) | ||||
Class R | (2,032,523 | ) | (1,255,241 | ) | ||||
Institutional Class | (54,676,612 | ) | (18,465,880 | ) | ||||
|
|
|
| |||||
(167,295,822 | ) | (163,253,109 | ) | |||||
|
|
|
| |||||
Increase (decrease) in net assets derived from capital share transactions | (3,328,462 | ) | 102,682,585 | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets | (36,445,618 | ) | 150,892,179 | |||||
Net Assets: | ||||||||
Beginning of year | 777,969,880 | 627,077,701 | ||||||
|
|
|
| |||||
End of year | $ | 741,524,262 | $ | 777,969,880 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | 1,250,576 | $ | 683,874 | ||||
|
|
|
|
See accompanying notes, which are an integral part of the financial statements.
39
Table of Contents
Delaware Dividend Income Fund Class A
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income1 |
Net realized and unrealized gain (loss) |
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 |
1 | The average shares outstanding method has been applied for per share information. |
2 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during some of the periods shown reflects a waiver by the distributor. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
40
Table of Contents
Year ended | ||||||||||||||||||||
|
| |||||||||||||||||||
11/30/15 | 11/30/14 | 11/30/13 | 11/30/12 | 11/30/11 | ||||||||||||||||
$ | 13.730 | $ | 12.810 | $ | 10.940 | $ | 9.890 | $ | 9.810 | |||||||||||
0.321 | 0.312 | 0.316 | 0.348 | 0.351 | ||||||||||||||||
(0.577 | ) | 0.923 | 1.854 | 1.045 | 0.086 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(0.256 | ) | 1.235 | 2.170 | 1.393 | 0.437 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(0.314 | ) | (0.315 | ) | (0.300 | ) | (0.343 | ) | (0.357 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(0.314 | ) | (0.315 | ) | (0.300 | ) | (0.343 | ) | (0.357 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
$ | 13.160 | $ | 13.730 | $ | 12.810 | $ | 10.940 | $ | 9.890 | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(1.91% | ) | 9.74% | 20.07% | 14.25% | 4.39% | |||||||||||||||
$ | 291,876 | $ | 315,098 | $ | 297,117 | $ | 203,819 | $ | 189,313 | |||||||||||
1.10% | 1.10% | 1.12% | 1.16% | 1.19% | ||||||||||||||||
1.10% | 1.10% | 1.16% | 1.21% | 1.24% | ||||||||||||||||
2.38% | 2.35% | 2.62% | 3.28% | 3.41% | ||||||||||||||||
2.38% | 2.35% | 2.58% | 3.23% | 3.36% | ||||||||||||||||
67% | 56% | 51% | 47% | 110% |
41
Table of Contents
Financial highlights
Delaware Dividend Income Fund Class C
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income1 |
Net realized and unrealized gain (loss) |
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 net investment income to average net assets |
Portfolio turnover |
1 | The average shares outstanding method has been applied for per share information. |
2 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. |
See accompanying notes, which are an integral part of the financial statements.
42
Table of Contents
Year ended | ||||||||||||||||||||
|
| |||||||||||||||||||
11/30/15 | 11/30/14 | 11/30/13 | 11/30/12 | 11/30/11 | ||||||||||||||||
| ||||||||||||||||||||
$ | 13.750 | $ | 12.830 | $ | 10.960 | $ | 9.900 | $ | 9.820 | |||||||||||
0.220 | 0.213 | 0.226 | 0.268 | 0.274 | ||||||||||||||||
(0.577 | ) | 0.921 | 1.853 | 1.056 | 0.086 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(0.357 | ) | 1.134 | 2.079 | 1.324 | 0.360 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(0.213 | ) | (0.214 | ) | (0.209 | ) | (0.264 | ) | (0.280 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(0.213 | ) | (0.214 | ) | (0.209 | ) | (0.264 | ) | (0.280 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
$ | 13.180 | $ | 13.750 | $ | 12.830 | $ | 10.960 | $ | 9.900 | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(2.63% | ) | 8.90% | 19.13% | 13.50% | 3.61% | |||||||||||||||
$ | 298,833 | $ | 308,975 | $ | 254,961 | $ | 156,758 | $ | 151,107 | |||||||||||
1.85% | 1.85% | 1.87% | 1.91% | 1.94% | ||||||||||||||||
1.63% | 1.60% | 1.87% | 2.53% | 2.66% | ||||||||||||||||
| 67%
|
|
| 56%
|
|
| 51%
|
|
| 47%
|
|
| 110%
|
|
43
Table of Contents
Financial highlights
Delaware Dividend Income Fund Class R
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income1 |
Net realized and unrealized gain (loss) |
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 |
1 | The average shares outstanding method has been applied for per share information. |
2 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during some of the periods shown reflects a waiver by the distributor. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
44
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Year ended | ||||||||||||||||||||
|
| |||||||||||||||||||
11/30/15 | 11/30/14 | 11/30/13 | 11/30/12 | 11/30/11 | ||||||||||||||||
| ||||||||||||||||||||
$ | 13.730 | $ | 12.810 | $ | 10.940 | $ | 9.890 | $ | 9.810 | |||||||||||
0.287 | 0.280 | 0.284 | 0.321 | 0.325 | ||||||||||||||||
(0.576 | ) | 0.921 | 1.856 | 1.046 | 0.086 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(0.289 | ) | 1.201 | 2.140 | 1.367 | 0.411 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(0.281 | ) | (0.281 | ) | (0.270 | ) | (0.317 | ) | (0.331 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(0.281 | ) | (0.281 | ) | (0.270 | ) | (0.317 | ) | (0.331 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
$ | 13.160 | $ | 13.730 | �� | $ | 12.810 | $ | 10.940 | $ | 9.890 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(2.15% | ) | 9.46% | 19.77% | 13.97% | 4.13% | |||||||||||||||
$ | 3,682 | $ | 3,983 | $ | 3,030 | $ | 3,151 | $ | 3,340 | |||||||||||
1.35% | 1.35% | 1.37% | 1.41% | 1.44% | ||||||||||||||||
1.35% | 1.35% | 1.46% | 1.51% | 1.54% | ||||||||||||||||
2.13% | 2.10% | 2.37% | 3.03% | 3.16% | ||||||||||||||||
2.13% | 2.10% | 2.28% | 2.93% | 3.06% | ||||||||||||||||
67% | 56% | 51% | 47% | 110% |
45
Table of Contents
Financial highlights
Delaware Dividend Income Fund Institutional Class
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income1 |
Net realized and unrealized gain (loss) |
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 net investment income to average net assets |
Portfolio turnover |
1 | The average shares outstanding method has been applied for per share information. |
2 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. |
See accompanying notes, which are an integral part of the financial statements.
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Table of Contents
Year ended | ||||||||||||||||||||
|
| |||||||||||||||||||
11/30/15 | 11/30/14 | 11/30/13 | 11/30/12 | 11/30/11 | ||||||||||||||||
$ | 13.730 | $ | 12.810 | $ | 10.940 | $ | 9.890 | $ | 9.810 | |||||||||||
0.355 | 0.348 | 0.347 | 0.375 | 0.375 | ||||||||||||||||
(0.577 | ) | 0.920 | 1.853 | 1.045 | 0.088 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(0.222 | ) | 1.268 | 2.200 | 1.420 | 0.463 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(0.348 | ) | (0.348 | ) | (0.330 | ) | (0.370 | ) | (0.383 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(0.348 | ) | (0.348 | ) | (0.330 | ) | (0.370 | ) | (0.383 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
$ | 13.160 | $ | 13.730 | $ | 12.810 | $ | 10.940 | $ | 9.890 | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(1.66% | ) | 10.01% | 20.37% | 14.66% | 4.55% | |||||||||||||||
$ | 147,133 | $ | 149,914 | $ | 61,809 | $ | 30,449 | $ | 24,986 | |||||||||||
0.85% | 0.85% | 0.87% | 0.91% | 0.94% | ||||||||||||||||
2.63% | 2.60% | 2.87% | 3.53% | 3.66% | ||||||||||||||||
67% | 56% | 51% | 47% | 110% |
47
Table of Contents
Delaware Dividend Income Fund | November 30, 2015 |
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 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. Effective Sept. 25, 2014, all remaining shares of Class B were converted to Class A shares. Class C shares are sold with a CDSC of 1.00%, if redeemed during the first 12 months. Class R and Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors.
The investment objective of the Fund is to seek 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 and exchange-traded funds (ETFs), except those traded on the Nasdaq Stock Market LLC (Nasdaq), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange on the valuation date. Equity securities 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, 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 broker/counterparty and reviewed by management. To the extent current market prices are not available, the pricing service may take into account developments related to the specific security, as well as transactions in comparable securities. U.S. government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. Valuations for fixed income securities utilize matrix systems, which reflect such factors as security prices, yields, maturities, and ratings, and are supplemented by dealer and exchange quotations. For asset-backed securities, collateralized mortgage obligations, commercial mortgage securities and U.S. government agency mortgage securities, pricing vendors utilize matrix pricing which considers prepayment speed; attributes of the collateral; yield or price of bonds of comparable quality, coupon, maturity, and type as well as broker/ dealer-supplied prices. Swap prices are derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows, trades, and values of the underlying reference instruments. Foreign currency exchange contracts are valued at the mean between the bid and ask prices, which approximates fair value. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available. Futures contracts and options on futures contracts are valued at the daily quoted settlement prices. Generally, other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith
48
Table of Contents
under the direction of the Trust’s Board of Trustees (Board). In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures or suspension of trading in a security. 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. Whenever such a significant event occurs, the Fund may value foreign securities using fair value prices based on third-party vendor modeling tools (international fair value pricing).
Federal and Foreign Income Taxes — No provision for federal income taxes has been made as the Fund intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Fund evaluates tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year. Management has analyzed the Fund’s tax positions taken for all open federal income tax years (Nov. 30, 2012–Nov. 30, 2015), and has concluded that no provision for federal income tax is required in the Fund’s financial statements. In regard to foreign taxes only, the Fund has open tax years in certain foreign countries in which it invests that may date back to the inception of the Fund.
Class Accounting — Investment income, 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. 30, 2015, and matured on the next business day.
Short Sales — The Fund may make short sales in an attempt to protect against declines in an individual security or the overall market, to manage duration or for such other purposes consistent with the Fund’s investment objectives and strategies. Typically, short sales are transactions in which the Fund sells a security it does not own and, at the time a short sale is effected, the Fund incurs an obligation to replace the security borrowed at whatever its price may be at the time the Fund purchases it for delivery to the lender. The price at such time may be more or less than the price at which the security was sold by the Fund. When a short sale transaction is closed out by delivery of the security, any gain or loss on the transaction generally is taxable as short-term capital gain or loss. Until the security is replaced, the Fund is required to pay the lender amounts equal to any dividends or interest that accrue during the period of the loan. To borrow the security, the Fund also may be required to pay a premium, which would increase
49
Table of Contents
Notes to financial statements
Delaware Dividend Income Fund
1. Significant Accounting Policies (continued)
the cost of the security sold. The proceeds of the short sale, and potentially additional margin, will be retained by the broker from whom the security is borrowed, to the extent necessary to meet margin requirements, until the short position is closed out.
Foreign Currency Transactions — Transactions denominated in foreign currencies are recorded at the prevailing exchange rates on the valuation date in accordance with the Fund’s prospectus. The value of all assets and liabilities denominated in foreign currencies is translated daily into U.S. dollars at the exchange rate of such currencies against the U.S. dollar. Transaction gains or losses resulting from changes in exchange rates during the reporting period or upon settlement of the foreign currency transaction are reported in operations for the current period. The Fund generally bifurcates that portion of realized gains and losses on investments in debt securities which is due to changes in foreign exchange rates from that which is due to changes in market prices of debt securities. That portion of gains (losses) is included on the “Statement of operations” under “Net realized gain (loss) on foreign currencies.” For foreign equity securities, these changes are included on the “Statement of operations” under “Net realized and unrealized gain (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 Fund is an investment company, whose financial statements are prepared in conformity with U.S. GAAP. Therefore, the Fund follows the accounting and reporting guidelines for investment companies. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material.
Other — Expenses directly attributable to the Fund are charged directly to the Fund. Other expenses common to various funds within the Delaware Investments® Family of Funds are generally allocated among such funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Discounts and premiums on debt securities are accreted or amortized to interest income, respectively, over the lives of the respective securities using the effective interest method. Realized gain (loss) on paydowns of asset- and mortgage-backed securities are classified as interest income. 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. 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. 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
50
Table of Contents
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, 2015.
The Fund may receive earnings credits from its custodian when positive cash balances are maintained, which may be used to offset custody fees. There were no such earnings credits for the year ended Nov. 30, 2015.
The Fund receives earnings credits from its transfer agent when positive cash balances are maintained, which may be used to offset transfer agent fees. If the amount earned is greater than one dollar, the expense paid under this arrangement is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses” with the corresponding expense offset shown under “Less expense paid indirectly.” For the year ended Nov. 30, 2015, the Fund earned $230 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 Investments Fund Services Company (DIFSC), an affiliate of DMC, provides fund accounting and financial administrative oversight services to the Fund. For these services, DIFSC’s fees are calculated based on the aggregate daily net assets of the Delaware Investments® Family of Funds at the following annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DIFSC under the service agreement described above are allocated among all funds in the Delaware Investments Family of Funds on a relative net asset value (NAV) basis. For the year ended Nov. 30, 2015, the Fund was charged $37,099 for these services. This amount is included on the “Statement of operations” under “Accounting and administration expenses.”
DIFSC is also the transfer agent and dividend disbursing agent of the Fund. For these services, DIFSC’s fees are calculated based on the aggregate daily net assets of the retail funds within the Delaware Investments Family of Funds at the following annual rate: 0.025% of the first $20 billion; 0.020% of the next $5 billion; 0.015% of the next $5 billion; and 0.013% of average daily net assets in excess of $30 billion. The fees payable to DIFSC under the service agreement described above are allocated among all retail funds in the Delaware Investments Family of Funds on a relative NAV basis. For the year ended Nov. 30, 2015, the Fund was charged $162,319 for these services. This amount is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.” Pursuant
51
Table of Contents
Notes to financial statements
Delaware Dividend Income Fund
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates (continued)
to a sub-transfer agency agreement between DIFSC and BNY Mellon Investment Servicing (US) Inc. (BNYMIS), BNYMIS provides certain sub-transfer agency services to the Fund. Sub-transfer agency fees are paid by the Fund and are also included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.”
Pursuant to a distribution agreement and distribution plan, the Fund pays DDLP, the distributor and an affiliate of DMC, an annual distribution and service fee of 0.25% of the average daily net assets of the Class A shares, 1.00% of the average daily net assets of the Class C shares, and 0.50% of the average daily net assets of Class R shares. Institutional Class shares pay no distribution and service fees.
As provided in the investment management agreement, the Fund bears a portion of the cost of 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, 2015, the Fund was charged $19,270 for internal legal, tax, and regulatory reporting services provided by DMC and/or its affiliates’ employees. This amount is included on the “Statement of operations” under “Legal fees.”
For the year ended Nov. 30, 2015, DDLP earned $69,568 for commissions on sales of the Fund’s Class A shares. For the year ended Nov. 30, 2015, DDLP received gross CDSC commissions of $207 and $21,417 on redemptions of the Fund’s Class A and Class C shares, respectively, and these commissions were entirely used to offset upfront commissions previously paid by DDLP to broker/ dealers on sales of those shares.
Trustees’ fees include expenses accrued by the Fund for each Trustee’s retainer and meeting fees. Certain officers of DMC, DIFSC, and DDLP are officers and/or Trustees of the Trust. These officers and Trustees are paid no compensation by the Fund.
3. Investments
For the year ended Nov. 30, 2015, the Fund made purchases and sales of investment securities other than U.S. government securities and short-term investments as follows:
Purchases other than U.S. government securities | $ | 408,406,148 | ||
Purchases of U.S. government securities | 62,266,820 | |||
Sales other than U.S. government securities | 463,188,275 | |||
Sales of U.S. government securities | 35,302,487 |
At Nov. 30, 2015, the cost and unrealized appreciation (depreciation) of investments for federal income tax purposes were as follows:
Cost of investments | $ | 704,257,321 | ||
|
| |||
Aggregate unrealized appreciation of investments | $ | 78,393,083 | ||
Aggregate unrealized depreciation of investments | (47,995,384 | ) | ||
|
| |||
Net unrealized appreciation of investments | $ | 30,397,699 | ||
|
|
52
Table of Contents
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. A three-level hierarchy for fair value measurements has been established based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available under the circumstances. The Fund’s investment in its entirety is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-level hierarchy of inputs is summarized below.
Level 1 – | Inputs are quoted prices in active markets for identical investments. (Examples: equity securities, open-end investment companies, futures contracts, exchange-traded options contracts) | |
Level 2 – | Other observable inputs, including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, and default rates), or other market-corroborated inputs. (Examples: debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities) | |
Level 3 – | Significant unobservable inputs, including the Fund’s own assumptions used to determine the fair value of investments. (Examples: broker-quoted securities, fair valued securities) |
Level 3 investments are valued using significant unobservable inputs. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Valuations may also be based upon current market prices of securities that are comparable in coupon, rating, maturity, and industry. The derived value of a Level 3 investment may not represent the value which is received upon disposition and this could impact the results of operations.
53
Table of Contents
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, 2015:
Securities | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | ||||||||||||||||
Agency, Asset- & Mortgage-Backed Securities | $ | — | $ | 863,995 | $ | — | $ | 863,995 | ||||||||
Corporate Debt | — | 148,107,503 | — | 148,107,503 | ||||||||||||
Foreign Debt | — | 7,354,793 | — | 7,354,793 | ||||||||||||
Senior Secured Loans1 | — | 6,952,783 | 322,050 | 7,274,833 | ||||||||||||
Municipal Bonds | — | 8,728,332 | — | 8,728,332 | ||||||||||||
Leveraged Non-Recourse Security | — | — | — | — | ||||||||||||
Common Stock | 426,092,531 | — | — | 426,092,531 | ||||||||||||
Convertible Preferred Stock1 | 11,970,790 | 1,243,497 | — | 13,214,287 | ||||||||||||
Preferred Stock1 | 1,422,875 | 1,347,503 | — | 2,770,378 | ||||||||||||
Master Limited Partnership | 2,071,974 | — | — | 2,071,974 | ||||||||||||
Rights | 39,754 | — | — | 39,754 | ||||||||||||
Warrant | 1,222 | — | — | 1,222 | ||||||||||||
Exchange-Traded Funds | 4,126,545 | — | — | 4,126,545 | ||||||||||||
U.S. Treasury Obligation | — | 27,054,163 | — | 27,054,163 | ||||||||||||
Short-Term Investments | — | 90,948,361 | — | 90,948,361 | ||||||||||||
Liabilities: | ||||||||||||||||
Security Sold Short | (3,993,651 | ) | — | — | (3,993,651 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Value of Securities | $ | 441,732,040 | $ | 292,600,930 | $ | 322,050 | $ | 734,655,020 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Foreign Currency Exchange Contracts | $ | — | $ | (183 | ) | $ | — | $ | (183 | ) | ||||||
Futures Contracts | (62,355 | ) | — | — | (62,355 | ) | ||||||||||
Swap Contracts | — | 75,533 | — | 75,533 |
1Security type is valued across multiple levels. Level 1 investments represent exchange-traded investments, Level 2 investments represent investments with observable input or matrix-price investments, and Level 3 investments represent investments without observable inputs. The amounts attributed to Level 1 investments, Level 2 investments, and Level 3 investments represent the following percentages of the total market value of these security types:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Senior Secured Loans | — | 95.57 | % | 4.43 | % | 100.00 | % | |||||||||
Convertible Preferred Stock | 90.59 | % | 9.41 | % | — | 100.00 | % | |||||||||
Preferred Stock | 51.36 | % | 48.64 | % | — | 100.00 | % |
The securities that have been valued at zero on the “Schedule of investments” are considered to be Level 3 investments in this table.
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During the year ended Nov. 30, 2015, there were no transfers between Level 1 investments, Level 2 investments, or Level 3 investments that had a significant impact to the Fund. This does not include transfers between Level 1 investments and Level 2 investments due to the Fund utilizing international fair value pricing during the year. In accordance with the fair valuation procedures described in Note 1, international fair value pricing of securities in the Fund occurs when market volatility exceeds an established rolling threshold. If the threshold is exceeded on a given date, then prices of international securities (those that traded on exchanges that close at a different time than the time that the Fund’s NAV is determined) are established using a separate pricing feed from a third-party vendor designed to establish a price for each such security as of the time that the Fund’s NAV is determined. Further, international fair value pricing uses other observable market-based inputs in place of the closing exchange price due to the events occurring after the close of the exchange or market on which the investment is principally traded, causing a change in classification between levels. The Fund’s policy is to recognize transfers between levels at the beginning of the reporting period.
A reconciliation of Level 3 investments is presented when the Fund has a significant amount of Level 3 investments at the beginning, interim, or end of the period in relation to the Fund’s net assets. Management has determined not to provide additional disclosure on Level 3 inputs since the Level 3 investments are not considered significant to the Fund’s net assets at the end of the year.
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, 2015 and 2014 was as follows:
Year ended | ||||||||
11/30/15 | 11/30/14 | |||||||
Ordinary income | $ | 16,293,233 | $ | 14,761,427 |
5. Components of Net Assets on a Tax Basis
As of Nov. 30, 2015, the components of net assets on a tax basis were as follows:
Shares of beneficial interest | $ | 774,455,815 | ||
Undistributed ordinary income | 3,236,185 | |||
Other temporary differences | (631,076 | ) | ||
Capital loss carryforwards | (65,926,663 | ) | ||
Net unrealized appreciation of investments, foreign currencies, and derivatives | 30,390,001 | |||
|
| |||
Net assets | $ | 741,524,262 | ||
|
|
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 contingent payment on debt instruments, partnership income, trust preferred securities, market discount and premium on debt instruments, mark-to-market on futures and CDS contracts, and troubled debt.
55
Table of Contents
Notes to financial statements
Delaware Dividend Income Fund
5. Components of Net Assets on a Tax Basis (continued)
For financial reporting purposes, capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Reclassifications are primarily due to tax treatment of gain (loss) on foreign currency transactions, market discount and premium on certain debt instruments, CDS contracts, contingent payment debt instruments, passive foreign investment companies sales, paydowns of asset-and mortgage-backed securities, and partnership income. Results of operations and net assets were not affected by these reclassifications. For the year ended Nov. 30, 2015, the Fund recorded the following reclassifications:
Undistributed net investment income | $ | 149,646 | ||
Accumulated net realized loss | (144,749 | ) | ||
Paid in capital | (4,897 | ) |
For federal income tax purposes, capital loss carryforwards may be carried forward and applied against future capital gains. $37,765,539 was utilized in 2015. Capital loss carryforwards remaining at Nov. 30, 2015 will expire as follows: $11,177,613 expires in 2016 and $54,749,050 expires in 2017.
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. At Nov. 30, 2015, no capital loss carryforwards were incurred under the Act.
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6. Capital Shares
Transactions in capital shares were as follows:
Year ended | ||||||||
11/30/15 | 11/30/14 | |||||||
Shares sold: | ||||||||
Class A | 3,580,552 | 6,568,466 | ||||||
Class B | — | 867 | ||||||
Class C | 3,216,426 | 4,927,542 | ||||||
Class R | 134,326 | 142,656 | ||||||
Institutional Class | 4,076,177 | 7,307,070 | ||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | 491,286 | 505,623 | ||||||
Class B | — | 9,242 | ||||||
Class C | 328,386 | 311,250 | ||||||
Class R | 5,861 | 5,312 | ||||||
Institutional Class | 262,119 | 169,625 | ||||||
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| |||||
12,095,133 | 19,947,653 | |||||||
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| |||||
Shares redeemed: | ||||||||
Class A | (4,850,797 | ) | (7,315,562 | ) | ||||
Class B | — | (802,596 | ) | |||||
Class C | (3,349,498 | ) | (2,640,980 | ) | ||||
Class R | (150,528 | ) | (94,374 | ) | ||||
Institutional Class | (4,080,655 | ) | (1,382,130 | ) | ||||
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| |||||
(12,431,478 | ) | (12,235,642 | ) | |||||
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|
| |||||
Net increase (decrease) | (336,345 | ) | 7,712,011 | |||||
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For the year ended Nov. 30, 2014, 117,065 Class B shares were converted to 117,213 Class A shares valued at $1,571,284. 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.”
Certain shareholders of one class shares may exchange their shares for another class shares. For the years ended Nov. 30, 2015 and 2014, the Fund had the following exchange transactions. These exchange transactions are included as subscriptions and redemptions in the table above and the “Statements of changes in net assets.”
Exchange Redemptions | Exchange Subscriptions | |||||||||||||
Year ended | | Class A Shares | | | Class C Shares | | Institutional Class Shares | Value | ||||||
11/30/15 | 20,757 | 1,461 | 22,220 | $ | 308,554 | |||||||||
11/30/14 | 1,931 | 653 | 2,585 | 34,197 |
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Notes to financial statements
Delaware Dividend Income Fund
7. Line of Credit
The Fund, along with certain other funds in the Delaware Investments® Family of Funds (Participants), was a participant in a $275,000,000 revolving line of credit intended to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, the Participants were charged an annual commitment fee of 0.08%, 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. 9, 2015.
On Nov. 9, 2015, the Fund, along with the other Participants, entered into an amendment to the agreement for a $155,000,000 revolving line of credit. Under the agreement, the Participants are charged an annual commitment fee of 0.10% which is allocated across the Participants on the basis of each Participant’s allocation of the entire facility. Other than the annual commitment fee, the line of credit is to be used as described above and to be operated in substantially the same manner as the original agreement. The line of credit available under the agreement expires on Nov. 7, 2016.
The Fund had no amounts outstanding as of Nov. 30, 2015 or at any time during the year then ended.
8. 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 may enter into foreign currency exchange contracts and foreign cross 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. In addition, the Fund may enter into these contracts to facilitate or expedite the settlement of portfolio transactions. 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 and foreign cross 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 and foreign cross 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.
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During the year ended Nov. 30, 2015, the Fund entered into foreign currency exchange contracts to hedge the U.S. dollar value of securities it already owns that are denominated in foreign currencies.
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 contracts in the normal course of pursuing its investment objective. The Fund may invest in futures contracts to hedge its existing portfolio securities against fluctuations in value caused by changes in interest rates, or market conditions. Upon entering into a futures contract, 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 in futures, there is reduced 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. The Fund posted $414,000 cash collateral for open futures contracts, which is presented as “Cash collateral due from brokers” on the “Statement of assets and liabilities.”
During the year ended Nov. 30, 2015, the Fund used futures contracts to hedge the Fund’s existing portfolio securities against fluctuations in value caused by changes in interest rates or market conditions.
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 Standard & Poor’s Financial Services LLC (S&P) or Baa3 by Moody’s Investors Service, Inc. (Moody’s) or is determined to be of equivalent quality by DMC.
Credit Default Swaps. A CDS contract is a risk-transfer instrument through which one party (purchaser of protection) transfers to another party (seller of protection) the financial risk of a credit event (as defined in the CDS agreement), as it relates to a particular reference security or basket of securities (such as an index). In exchange for the protection offered by the seller of protection, the purchaser of protection agrees to pay the seller of protection a periodic amount at a stated rate that is applied to the notional amount of the CDS contract. In addition, an upfront payment may be made or received by the 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.
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Notes to financial statements
Delaware Dividend Income Fund
8. Derivatives (continued)
During the year ended Nov. 30, 2015, the Fund entered into CDS contracts as a purchaser of protection. Periodic payments (receipts) on such contracts are accrued daily and recorded as unrealized losses (gains) on swap contracts. Upon payment (receipt), such amounts are recorded as realized losses (gains) on swap contracts. Upfront payments made or received in connection with CDS contracts are amortized over the expected life of the CDS contracts as unrealized losses (gains) on swap contracts. The change in value of CDS contracts is recorded daily as unrealized appreciation or depreciation. A realized gain or loss is recorded upon a credit event (as defined in the CDS agreement) or the maturity or termination of the agreement. Initial margin and variation margin is posted to central counterparties for CDS basket trades, as determined by the applicable central counterparty. During the year ended Nov. 30, 2015, the Fund did not enter into any CDS contracts as a seller of protection.
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 (1) for bilateral swap contracts, having a netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty, and (2) for cleared swaps, trading these instruments through a central counterparty.
During the year ended Nov. 30, 2015, the Fund used CDS contracts to hedge against credit events and to gain exposure to certain securities or markets.
Swaps Generally. The value of open swaps may differ from that which would be realized in the event the Fund terminated its position in the contract on a given day. Risks of entering into these contracts include the potential inability of the counterparty to meet the terms of the contracts. This type of risk is generally limited to the amount of favorable movement in the value of the underlying security, instrument, or basket of instruments, if any, at the day of default. Risks also arise from potential losses from adverse market movements and such losses could exceed the unrealized amounts shown on the “Schedule of investments.”
At Nov. 30, 2015, the Fund posted $1,266,826 in cash collateral for centrally cleared swap contracts, which is presented as “Cash collateral due from brokers” on the “Statement of assets and liabilities.”
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Fair values of derivative instruments as of Nov. 30, 2015 were as follows:
Asset Derivatives | Liability Derivatives | |||||||||||
Statement of Assets and Liabilities Location | Fair Value | Statement of Assets and Liabilities Location | Fair Value | |||||||||
Forward currency exchange contracts (Foreign currency exchange contracts) | Unrealized appreciation on foreign currency exchange contracts | $ — | Unrealized depreciation on foreign currency exchange contracts | $ (183) | ||||||||
Equity contracts (Futures contracts) | Variation margin due from broker on futures contracts* | — | Variation margin due from broker on futures contracts* | (62,355) | ||||||||
Credit contracts (Swap contracts) | Variation margin due to broker on credit default swap contracts | — | Variation margin due to broker on swap contracts | (15,528) | ||||||||
Credit contracts (Swap contracts) | Unrealized appreciation on credit default swap contracts | 91,061 | Unrealized depreciation on credit default swap contracts | — | ||||||||
Total | $91,061 | $(78,066) |
*Includes cumulative appreciation (depreciation) of futures contracts from the date the contracts are opened through Nov. 30, 2015. Only current day variation margin is reported on the “Statement of assets and liabilities.”
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Notes to financial statements
Delaware Dividend Income Fund
8. Derivatives (continued)
The effect of derivative instruments on the “Statement of operations” for the year ended Nov. 30, 2015 was as follows:
Net Realized Gain (Loss) on: | ||||||||||||||||
Foreign Currency Exchange | Futures Contracts | Swap Contracts | Total | |||||||||||||
Forward currency exchange contracts | $ | (226,117 | ) | $ | — | $ | — | $ | (226,117 | ) | ||||||
Equity contracts | — | 1,986,676 | — | 1,986,676 | ||||||||||||
Credit contracts | — | — | (70,539 | ) | (70,539 | ) | ||||||||||
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Total | $ | (226,117 | ) | $ | 1,986,676 | $ | (70,539 | ) | $ | 1,690,020 | ||||||
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Net Change in Unrealized Appreciation (Depreciation) of: | ||||||||||||||||
Foreign Currency Exchange | Futures Contracts | Swap Contracts | Total | |||||||||||||
Forward currency exchange contracts | $ | (183 | ) | $ | — | $ | — | $ | (183 | ) | ||||||
Equity contracts | — | 170,882 | — | 170,882 | ||||||||||||
Credit contracts | — | — | 112,766 | 112,766 | ||||||||||||
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Total | $ | (183 | ) | $ | 170,882 | $ | 112,766 | $ | 283,465 | |||||||
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Derivatives Generally. The table below summarizes the average balance of derivative holdings by the Fund during the year ended Nov. 30, 2015.
Long Derivatives Volume | Short Derivatives Volume | |||||||
Foreign currency exchange contracts (average cost) | $ | 369,499 | $ | 185,357 | ||||
Futures contracts (average notional value) | 2,632,854 | 8,147,506 | ||||||
CDS contracts (average notional value)* | 5,725,714 | — |
*Long represents buying protection and short represents selling protection.
9. Offsetting
In December 2011, the Financial Accounting Standards Board (FASB) issued guidance that expanded disclosure requirements on the offsetting of certain assets and liabilities. The disclosures are required for investments and derivative financial instruments subject to master netting or similar agreements which are eligible for offset on the “Statement of assets and liabilities” and requires an entity to disclose both gross and net information about such investments and transactions in the financial statements. In January 2013, the FASB issued guidance that clarified which investments and transactions are subject to the offsetting disclosure requirements. The scope of the disclosure requirements for offsetting is limited to derivative instruments, repurchase agreements and reverse repurchase agreements, and securities
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borrowing. The guidance is effective for financial statements with fiscal years beginning on or after Jan. 1, 2013, and interim periods within those fiscal years.
In order to better define its contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund entered into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement) or a similar agreement with certain of its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between the Fund and a counterparty that governs certain over-the-counter (OTC) derivatives and foreign exchange contracts and typically contains, among other things, collateral posting items and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default (close-out), including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency, or other events.
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements on the “Statement of assets and liabilities.”
At Nov. 30, 2015, the Fund had the following assets and liabilities subject to offsetting provisions:
Offsetting of Financial Assets and Liabilities and Derivative Assets and Liabilities
Counterparty | Gross Value of | Gross Value of | Net Position | |||||||||
BNY Mellon | $(183) | $— | $(183) | |||||||||
Counterparty | Net Position | Fair Value of Non-Cash Collateral Received | Cash Collateral Received | Fair Value of Non-Cash Collateral Pledged | Cash Collateral Pledged | Net Exposure(a) | ||||||
BNY Mellon | $(183) | $— | $— | $— | $— | $(183) |
Master Repurchase Agreements
Counterparty | Repurchase | Fair Value of | Cash Collateral | Net Collateral | Net Exposure(a) | |||||||||||
Bank of America | ||||||||||||||||
Merrill Lynch | $ | 13,183,141 | $ | (13,183,141 | ) | $— | $ | (13,183,141 | ) | $— | ||||||
Bank of Montreal | 21,971,902 | (21,971,902 | ) | — | (21,971,902 | ) | — | |||||||||
BNP Paribas | 32,388,957 | (32,388,957 | ) | — | (32,388,957 | ) | — | |||||||||
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Total | $ | 67,544,000 | $ | (67,544,000 | ) | $— | $ | (67,544,000 | ) | $— | ||||||
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(a)Net exposure represents the receivable (payable) that would be due from (to) the counterparty in the event of default.
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
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Notes to financial statements
Delaware Dividend Income Fund
10. Securities Lending (continued)
(BNY Mellon). At the time a security is loaned, the borrower must post collateral equal to the required percentage of the market value of the loaned security, including any accrued interest. The required percentage is: (1) 102% with respect to U.S. securities and foreign securities that are denominated and payable in U.S. dollars; and (2) 105% with respect to foreign securities. With respect to each loan, if on any business day the aggregate market value of securities collateral plus cash collateral held is less than the aggregate market value of the securities 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 on any particular day 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 the loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Fund or, at the discretion of the lending agent, replace the loaned securities. The Fund continues to record dividends or interest, as applicable, on the securities loaned and is subject to changes in value of the securities loaned that may occur during the term of the loan. The Fund has the right under the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized by non-cash collateral, the Fund receives loan premiums paid by the borrower. With respect to security loans collateralized by cash collateral, the earnings from the collateral investments are shared among the Fund, the security lending agent, and the borrower. The Fund records security lending income net of allocations to the security lending agent and the borrower.
The Collective Trust used for the investment of cash collateral received from borrowers of securities seeks to maintain a NAV 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 NAV per unit was less than $1.00. Under those circumstances, the Fund may not
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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, 2015, the Fund had no securities out on loan.
11. Credit and Market Risk
Some countries in which the Fund may invest require governmental approval for the repatriation of investment income, capital or the proceeds of sales of securities by foreign investors. In addition, if there is deterioration in a country’s balance of payments or for other reasons, a country may impose temporary restrictions on foreign capital remittances abroad.
The securities exchanges of certain foreign markets are substantially smaller, less liquid and more volatile than the major securities markets in the United States. Consequently, acquisition and disposition of securities by the Fund may be inhibited. In addition, a significant portion of the aggregate market value of equity securities listed on the major securities exchanges in emerging markets is held by a smaller number of investors. This may limit the number of shares available for acquisition or disposition by the Fund.
The Fund invests a portion of its assets in high yield fixed income securities, which are securities rated lower than BBB- by S&P and Baa3 by Moody’s, or similarly rated by another nationally recognized statistical rating organization. Investments in these higher yielding securities are generally accompanied by a greater degree of credit risk than higher rated securities. Additionally, lower rated securities may be more susceptible to adverse economic and competitive industry conditions than investment grade securities.
The Fund invests in fixed income securities whose value is derived from an underlying pool of mortgages or consumer loans. The value of these securities is sensitive to changes in economic conditions, including delinquencies and/or defaults, and may be adversely affected by shifts in the market’s perception of the issuers and changes in interest rates. Investors receive principal and interest payments as the underlying mortgages and consumer loans are paid back. Some of these securities are collateralized mortgage obligations (CMOs). CMOs are debt securities issued by U.S. government agencies or by financial institutions and other mortgage lenders, which are collateralized by a pool of mortgages held under an indenture. Prepayment of mortgages may shorten the stated maturity of the obligations and can result in a loss of premium, if any has been paid. Certain of these securities may be stripped (securities which provide only the principal or interest feature of the underlying security). The yield to maturity on an interest-only CMO is extremely sensitive not only to changes in prevailing interest rates, but also to the rate of principal payments (including prepayments) on the related underlying mortgage assets. A rapid rate of principal payments may have a material adverse effect on the Fund’s yield to maturity. If the underlying mortgage assets experience greater than anticipated prepayments of principal, the Fund may fail to fully recoup its initial investment in these securities even if the securities are rated in the highest rating categories.
The Fund invests in 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
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Notes to financial statements
Delaware Dividend Income Fund
11. Credit and Market Risk (continued)
during the year ended Nov. 30, 2015. 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 invests in certain obligations that may have liquidity protection designed to ensure that the receipt of payments due on the underlying security is timely. Such protection may be provided through guarantees, insurance policies, or letters of credit obtained by the issuer or sponsor through third parties, through various means of structuring the transaction, or through a combination of such approaches. The Fund will not pay any additional fees for such credit support, although the existence of credit support may increase the price of a security.
The Fund invests in bank loans and other securities that may subject it to direct indebtedness risk, the risk that the Fund will not receive payment of principal, interest, and other amounts due in connection with these investments and will depend primarily on the financial condition of the borrower. Loans that are fully secured offer the Fund more protection than unsecured loans in the event of nonpayment of scheduled interest or principal, although there is no assurance that the liquidation of collateral from a secured loan would satisfy the corporate borrower’s obligation, or that the collateral can be liquidated. Some loans or claims may be in default at the time of purchase. Certain of the loans and the other direct indebtedness acquired by the Fund may involve revolving credit facilities or other standby financing commitments that obligate the Fund to pay additional cash on a certain date or on demand. These commitments may require the Fund to increase its investment in a company at a time when the Fund might not otherwise decide to do so (including at a time when the company’s financial condition makes it unlikely that such amounts will be repaid). To the extent that the Fund is committed to advance additional funds, it will at all times hold and maintain cash or other high grade debt obligations in an amount sufficient to meet such commitments.
As the Fund may be required to rely upon another lending institution to collect and pass on to the Fund amounts payable with respect to the loan and to enforce the Fund’s rights under the loan and other direct indebtedness, an insolvency, bankruptcy, or reorganization of the lending institution may delay or prevent the Fund from receiving such amounts. The highly leveraged nature of many loans may make them especially vulnerable to adverse changes in economic or market conditions. Investments in such loans and other direct indebtedness may involve additional risk to the Fund.
The Fund may invest up to 15% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A promulgated under the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair the Fund from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, the Fund’s Board has delegated to DMC the day-to-day functions of determining whether individual securities are liquid for purposes of the Fund’s limitation on investments in illiquid securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Fund’s 15% limit on investments in illiquid securities. Rule 144A and illiquid securities held by the Fund have been identified on the “Schedule of investments.”
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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. Recent Accounting Pronouncements
In June 2014, the FASB issued guidance to improve the financial reporting of reverse repurchase agreements and other similar transactions. The guidance includes expanded disclosure requirements for entities that enter into reverse repurchase agreements and similar transactions accounted for as secured borrowings. The guidance is effective for financial statements with fiscal years beginning on or after Dec. 15, 2014 and interim periods within those fiscal years. Management has determined that this pronouncement has no impact to the Fund’s financial statements.
In May 2015, the FASB issued Accounting Standards Update (“ASU”) No. 2015-07 regarding “Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share.” The amendments in this update are effective for the Funds for fiscal years beginning after Dec. 15, 2015, and interim periods within those fiscal years. ASU No. 2015-07 will eliminate the requirement to categorize investments in the fair value hierarchy if their fair value is measured at NAV per share (or its equivalent) using the practical expedient in the FASB’s fair value measurement guidance. Management is evaluating the impact, if any, of this guidance on the Fund’s financial statement disclosures.
14. General Motors Term Loan Litigation
The Fund received notice of a litigation proceeding related to a General Motors Corporation (G.M.) term loan participation previously held by the Fund in 2009.We believe the matter subject to the litigation notice will likely lead to a recovery from the Fund of certain amounts received by the Fund because a U.S. Court of Appeals has ruled that the Fund and similarly situated investors were unsecured creditors rather than secured lenders of G.M. as a result of an erroneous UCC filing made by a third party. The Fund received the full principal on the loans in 2009 after the G.M. bankruptcy. However, based upon the court ruling the estate is seeking to recover such amounts arguing that, as unsecured creditors, the Fund should not have received payment in full. Based upon currently available information related to the litigation and the Fund’s potential exposure, the Fund recorded a liability of $901,538 and an asset of $270,461 based on the expected recoveries to unsecured creditors as of Nov. 30, 2015 that resulted in a net decrease in the Fund’s NAV to reflect this likely recovery.
15. Subsequent Events
Management has determined that no other material events or transactions occurred subsequent to Nov. 30, 2015 that would require recognition or disclosure in the Fund’s financial statements.
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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, 2015, 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 five 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, 2015 by correspondence with the custodian and brokers and the application of alternative auditing procedures where confirmations of security purchases had not been received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
January 21, 2016
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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, 2015, the Fund reports distributions paid during the year as follows:
(A) Ordinary Income Distributions (Tax Basis)* | 100.00 | % | ||
(B) Qualified Dividends1 | 61.53 | % |
(A) is based on a percentage of the Fund’s total distributions.
(B) is based on the Fund’s ordinary income distributions.
1 | Qualified dividends represent dividends which qualify for the corporate dividends received deduction. |
* | For the fiscal year ended Nov. 30, 2015, certain dividends paid by the Fund may be subject to a maximum tax rate of 20%. The percentage of dividends paid by the Fund from ordinary income reported as qualified dividend income is 70.17%. Complete information will be computed and reported in conjunction with your 2015 Form 1099-DIV, as applicable. |
For the fiscal year ended Nov. 30, 2015, 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; the 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, 2015, the Fund has reported maximum distributions of Qualified Interest Income of $6,973,199.
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Other Fund information (Unaudited)
Delaware Dividend Income Fund
Board consideration of Delaware Dividend Income Fund investment management agreement
At a meeting held on Aug. 18–20, 2015 (the “Annual Meeting”), the Board of Trustees (collectively referred to here as 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 Management Agreement with Delaware Management Company (“DMC”) included materials provided by DMC and its affiliates (“Delaware Investments”) concerning, among other things, the nature, extent, and quality of services provided to the Fund; the costs of such services to the Fund; economies of scale; and the investment manager’s financial condition and profitability. In addition, in connection with the Annual Meeting, reports were provided to the Trustees in May 2015 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. In addition to the information noted above, the Board also requested and received information regarding DMC’s policy with respect to advisory fee levels and its breakpoint philosophy; the structure of portfolio manager compensation; comparative client fee information; and any constraints or limitations on the availability of securities for certain investment styles, which had in the past year inhibited, or which were likely in the future to inhibit, the investment manager’s ability to invest fully in accordance with Fund policies.
In considering information relating to the approval of the Fund’s advisory agreement, the Independent Trustees received assistance and advice from and met separately with independent legal counsel to the Independent Trustees. They also engaged a consultant to assist them in analyzing portions of the data received. The Independent Trustees reviewed and discussed with such consultant two reports prepared by the consultant with respect to such data. Although the Board gave attention to all information furnished, the following discussion identifies, under separate headings, the primary factors taken into account by the Board during its contract renewal considerations.
Nature, extent, and quality of service. The Board considered the services provided by DMC to the Fund and its shareholders. In reviewing the nature, extent, and quality of services, the Board considered reports furnished to it throughout the year, which covered matters such as the relative performance of the Fund; compliance of portfolio managers with the investment policies, strategies, and restrictions for the Fund; compliance by DMC and Delaware Distributors, L.P. (together, “Management”) personnel with the Code of Ethics adopted throughout the Delaware Investments® Family of Funds complex; and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of the Fund’s investment adviser and the emphasis placed on research in the investment process. The Board recognized DMC’s receipt of several industry distinctions during the past several years. The Board gave favorable consideration to DMC’s efforts to control expenditures while maintaining service levels committed to Fund matters. The Board noted that, in the third and fourth quarters of 2013, Management reduced the maximum 12b-1 fee for certain Funds, and in November 2013 Management negotiated a substantial reduction in fees for fund accounting services provided to
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the Funds. 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 DMC.
Investment performance. The Board placed significant emphasis on the investment performance of the Fund in view of the importance of investment performance to shareholders. Although the Board gave appropriate consideration to performance reports and discussions with portfolio managers at Investment Committee meetings throughout the year, the Board gave particular weight to the 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 1-, 3-, 5-, and 10-year periods, to the extent applicable, ended March 31, 2015. The Board’s objective is that the Fund’s performance for the periods considered be at or above the median of its Performance Universe.
The Performance Universe for the Fund consisted of the Fund and all retail and institutional flexible portfolio funds as selected by Lipper. The Lipper report comparison showed that the Fund’s total return for the 1-, 3-, and 5-year periods was in the first quartile of its Performance Universe. The report further showed that the Fund’s total return for the 10-year period was in the second 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 12b1 and non-12b1 service fees. The Board considered fees paid to DMC 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 expense comparisons for the Fund showed that its actual management fee and total expenses were in the quartile with the lowest expenses of its Expense Group. The Board was satisfied with the
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Other Fund information (Unaudited)
Delaware Dividend Income Fund
Board consideration of Delaware Dividend Income Fund investment management agreement (continued)
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 DMC in connection with the operation of the Fund. In this respect, the Board reviewed the Investment Management Profitability Analysis that addressed the overall profitability of DMC’s business in providing management and other services to each of the individual funds and the Delaware Investments® Family of Funds as a whole. Specific attention was given to the methodology followed in allocating costs for the purpose of determining profitability. Management stated that the level of profits of DMC, to a certain extent, reflects recent operational cost savings and efficiencies initiated by DMC. The Board considered DMC’s efforts to improve services provided to fund shareholders and to meet additional regulatory and compliance requirements resulting from recent industry-wide Securities and Exchange Commission initiatives. The Board also considered the extent to which DMC might derive ancillary benefits from fund operations, including the potential for procuring additional business as a result of the prestige and visibility associated with its role as service provider to the Delaware Investments Family of Funds and the benefits from allocation of fund brokerage to improve trading efficiencies. The Board found that the management fees were reasonable in light of the services rendered and the level of profitability of DMC.
Economies of scale. The Trustees considered whether economies of scale are realized by DMC as the Fund’s assets increase and the extent to which any economies of scale are reflected in the level of management fees charged. The Trustees reviewed the standardized advisory fee pricing and structure, approved by the Board and shareholders, which includes breakpoints, and which applies to most funds in the Delaware Investments Family of Funds complex. Breakpoints in the advisory fee occur when the advisory fee rate is reduced on assets in excess of specified levels. Breakpoints result in a lower advisory fee than would otherwise be the case in the absence of breakpoints, when the asset levels specified in the breakpoints are exceeded. The Board noted that the fee under the Fund’s management contract fell within the standardized fee pricing structure. The Board also noted that the Fund’s assets exceeded the first breakpoint level. The Board believed that, given the extent to which economies of scale might be realized by the adviser 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, and Birth Date | Position(s) Held with Fund(s) | Length of Time Served | ||||
Interested Trustee | ||||||
Shawn K. Lytle1 2005 Market Street Philadelphia, PA 19103 February 1970 | President, Chief Executive Officer, and Trustee | Trustee since September 2015
President and Chief Executive Officer since August 2015
| ||||
Independent Trustees | ||||||
Thomas L. Bennett 2005 Market Street Philadelphia, PA 19103 October 1947
| Chairman and Trustee | Trustee since March 2005
Chairman since March 2015 | ||||
Ann D. Borowiec 2005 Market Street Philadelphia, PA 19103 November 1958
| Trustee | Since March 2015 | ||||
Joseph W. Chow 2005 Market Street Philadelphia, PA 19103 January 1953
| Trustee | Since January 2013 |
1 | Shawn K. Lytle 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.
Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee or Officer | Other Directorships Held by Trustee or Officer | ||||
Shawn K. Lytle has served as President of Delaware Investments2 since June 2015 and was the Regional Head of Americas for UBS Global Asset Management from 2010 through 2015. | 65 | Trustee — UBS Relationship Funds, SMA Relationship Trust, and UBS Funds (May 2010–April 2015) | ||||
Private Investor (March 2004–Present)
| 65 | Director — Bryn Mawr Bank Corp. (2007–2011) | ||||
Chief Executive Officer Private Wealth Management (2011–2013) and Market Manager, New Jersey Private Bank (2005–2011) — J.P. Morgan Chase & Co. | 65 | None | ||||
Executive Vice President (Emerging Economies Strategies, Risks, and Corporate Administration) State Street Corporation (July 2004–March 2011) | 65 | Director and Audit Committee Member — Hercules Technology Growth Capital, Inc. (2004–2014) |
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, and Birth Date | Position(s) Held with Fund(s) | Length of Time Served | ||||
Independent Trustees (continued) | ||||||
John A. Fry 2005 Market Street Philadelphia, PA 19103 May 1960
| Trustee | Since January 2001 | ||||
Lucinda S. Landreth 2005 Market Street Philadelphia, PA 19103 June 1947 | Trustee | Since March 2005 | ||||
Frances A. Sevilla-Sacasa 2005 Market Street Philadelphia, PA 19103 January 1956
| Trustee | Since September 2011 |
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Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee or Officer | Other Directorships Held by Trustee or Officer | ||||
President — Drexel University (August 2010–Present)
President — Franklin & Marshall College (July 2002–July 2010) | 65 | Director — Hershey Trust Company
Director, Audit Committee, and Governance Committee Member — Community Health Systems
Director — Drexel Morgan & Co.
| ||||
Private Investor (2004–Present)
| 65 | None | ||||
Chief Executive Officer — Banco Itaú International (April 2012–Present)
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)
| 65 | Trust Manager and Audit Committee Member — Camden Property Trust |
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Board of trustees / directors and officers addendum
Delaware Investments® Family of Funds
Name, Address, and Birth Date | Position(s) Held with Fund(s) | Length of Time Served | ||||
Independent Trustees (continued) | ||||||
Thomas K. Whitford 2005 Market Street Philadelphia, PA 19103 March 1956
| Trustee | Since January 2013 | ||||
Janet L. Yeomans 2005 Market Street Philadelphia, PA 19103 July 1948
| Trustee | Since April 1999 |
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Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee or Officer | Other Directorships Held by Trustee or Officer | ||||
Vice Chairman (2010–April 2013), Chief Administrative Officer (2008–2010), and Executive Vice President and Chief Administrative Officer (2007–2009) — PNC Financial Services Group
| 65 | Director — HSBC Finance Corporation and HSBC North America Holdings Inc.
Director — HSBC Bank | ||||
Vice President and Treasurer (January 2006–July 2012) Vice President — Mergers & Acquisitions (January 2003–January 2006), and Vice President and Treasurer (July 1995–January 2003) 3M Corporation | 65 | Director, Audit and Compliance Committee Chair, Investment Committee Member, and Governance Committee Member — Okabena Company | ||||
Chair — 3M Investment Management Company (2005–2012)
| ||||||
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Board of trustees / directors and officers addendum
Delaware Investments® Family of Funds
Name, Address, and Birth Date | Position(s) Held with Fund(s) | Length of Time Served | ||||
Officers | ||||||
David F. Connor 2005 Market Street Philadelphia, PA 19103 December 1963 | Senior Vice President, General Counsel, and Secretary | Senior Vice President since May 2013; General Counsel since May 2015; Secretary since October 2005
| ||||
Daniel V. Geatens 2005 Market Street Philadelphia, PA 19103 October 1972
| Vice President and Treasurer | Treasurer since October 2007 | ||||
Richard Salus 2005 Market Street Philadelphia, PA 19103 October 1963
| Senior Vice President and Chief Financial Officer | Chief Financial Officer since November 2006 |
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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Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee or Officer | Other Directorships Held by Trustee or Officer | ||||
David F. Connor has served as Senior Vice President of the Fund(s) and the investment advisor since 2013, General Counsel of the Fund(s) and the investment advisor since 2015, and Secretary of the Fund(s) and the investment advisor since 2005.
| 65 | None3 | ||||
Daniel V. Geatens has served as Vice President and Treasurer of the Fund(s) since 2007 and Vice President and Director of Financial Administration of the investment advisor since 2010.
| 65 | None3 | ||||
Richard Salus has served as Senior Vice President and Chief Financial Officer of the Fund(s) and the investment advisor since 2006.
| 65 | None3 |
3 | David F. Connor, Daniel V. Geatens, 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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Board of trustees | ||||||||
Shawn K. Lytle President and Chief Executive Officer Delaware Investments ® Family of Funds Philadelphia, PA
Thomas L. Bennett Chairman of the Board Delaware Investments Family of Funds Private Investor Rosemont, PA | Ann D. Borowiec Former Chief Executive Officer Private Wealth Management J.P. Morgan Chase & Co. New York, NY
Joseph W. Chow Former Executive Vice President State Street Corporation Boston, MA | John A. Fry President Drexel University Philadelphia, PA
Lucinda S. Landreth Former Chief Investment Officer Assurant, Inc. New York, NY | Frances A. Sevilla-Sacasa Chief Executive Officer Banco Itaú International Miami, FL
Thomas K. Whitford Former Vice Chairman PNC Financial Services Group Pittsburgh, PA
Janet L. Yeomans Former Vice President and Treasurer 3M Corporation St. Paul, MN | |||||
Affiliated officers | ||||||||
David F. Connor Senior Vice President, General Counsel, and Secretary Delaware Investments Family of Funds Philadelphia, PA | Daniel V. Geatens Vice President and Treasurer Delaware Investments Family of Funds Philadelphia, PA | Richard Salus Senior Vice President and Chief Financial Officer Delaware Investments Family of Funds Philadelphia, PA |
This 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 Schedule of Investments included in the Fund’s most recent Form N-Q 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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Annual report
U.S. equity mutual fund
Delaware Small Cap Value Fund
November 30, 2015
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.
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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.
Manage your investments online
• | 24-hour access to your account information |
• | Obtain share prices |
• | Check your account balance and recent transactions |
• | Request statements or literature |
• | Make purchases and redemptions |
Delaware Management Holdings, Inc. and its subsidiaries (collectively known by the marketing name of Delaware Investments) are wholly owned subsidiaries of Macquarie Group Limited, a global provider of banking, financial, advisory, investment, and funds management services.
Neither Delaware Investments nor its affiliates noted in this document are authorized deposit-taking institutions for the purpose of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise.
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Unless otherwise noted, views expressed herein are current as of Nov. 30, 2015, and subject to change for events occurring after such date.
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.
© 2016 Delaware Management Holdings, Inc.
All third-party marks cited are the property of their respective owners.
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Portfolio management review | ||
Delaware Small Cap Value Fund | December 8, 2015 |
Performance preview (for the year ended November 30, 2015) | ||||||||
Delaware Small Cap Value Fund (Class A shares) | 1-year return | +0.90% | ||||||
Russell 2000® Value Index (benchmark) | 1-year return | +0.35% |
Past performance does not guarantee future results.
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. Please see page 6 for a description of the index. 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 finished the Fund’s fiscal year ended Nov. 30, 2015 virtually unchanged, based on the Russell 2000 Value Index, reflecting both a domestic economy stuck in neutral and remarkably stable interest rates courtesy of the U.S. Federal Reserve.
The year did not pass without a mild bout of volatility, however. Beginning in June, mounting evidence that the Chinese economy was decelerating more than previously thought triggered a three-month long correction in equities. By the end of the reporting period, however, small-cap stocks had mostly recovered amid indications that the U.S. economy was healthy enough to sustain an increase in short-term interest rates, and many investors believed that a December 2015 rate hike was all but assured.
The relatively flat overall performance of small-caps masked a sharply bifurcated market in which most cyclical and commodity-based industries underperformed. Energy stocks were particularly hard hit, beginning with the announcement in late 2014 that the Organization of the Petroleum Exporting Countries (OPEC) planned to maintain oil production at then-current levels despite slowing global demand. The energy selloff accelerated in May as investors evaluated the effect that China’s economic woes would have on energy demand. Overall, from April through September, many energy stocks fell by nearly
one-third. Additionally, some stocks that were dependent on capital-spending budgets began to lag the benchmark.
On the plus side, the healthcare and technology sectors continued to outperform, given investors’ preference for companies that can grow earnings in this sluggish macroeconomic environment. Consequently, small-cap growth stocks outperformed their small-cap value counterparts by more than six percentage points over the fiscal year. Meanwhile, financial stocks were buffeted by speculation over the timing of the long-anticipated increase in interest rates. Real estate investment trusts (REITs), for example, typically underperform when rates are rising while small banks often benefit because of their relatively high concentration of floating-rate loans.
Within the Fund
Delaware Small Cap Value Fund returned +0.90% at net asset value and -4.91% at maximum offer price (both figures represent Class A shares with distributions reinvested) for the fiscal year ended Nov. 30, 2015. For the same period, the Fund’s benchmark, the Russell 2000 Value Index, returned +0.35%. Complete annualized performance for Delaware Small Cap Value Fund is shown in the table on page 4.
Sector weightings played a role in the Fund’s performance. Specifically, the Fund’s overweight
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Portfolio management review
Delaware Small Cap Value Fund
allocations to technology, healthcare, and bank stocks were positive contributors, as was the Fund’s underweight to REITs. Conversely, the Fund’s overweight of capital spending and energy stocks detracted, as did our near market-weighting of transportation companies and traditional industrial-related businesses.
Among individual positions, the Fund’s allocation to Cytec Industries was a strong contributor to relative performance. Cytec is a diversified specialty chemicals company Belgium-based Solvay SA acquired in July for $5.5 billion. The lightweight composite materials Cytec produces are highly valued in the aerospace and automotive industries for their positive effect on fuel efficiency. The Fund closed its position in Cytec after the Solvay acquisition was announced, but before the deal was scheduled to close.
Among financial companies, the Fund’s overweight position in Independent Bank also contributed to relative performance. A community-oriented commercial bank operating mainly in the northeast United States, the company’s loan portfolio performed strongly, contributing to a 33% jump in the stock price. Though we continue to hold the stock, we significantly reduced the Fund’s position late in the fiscal year on the basis of valuation.
Within the technology sector, the Fund’s large overweight to Cirrus Logic, a supplier of integrated circuits for audio applications, also contributed to relative performance. The company’s share price climbed 88% over the Fund’s fiscal year. Cirrus benefited from its exposure to Apple’s audio product line while also gaining traction with Samsung. We continue to like the company and therefore continue to hold its shares.
Among detractors, the Fund’s large overweight to Helix Energy Solutions Group hurt relative performance. Helix provides well intervention and robotics services to energy-production companies, a sector that has had little incentive to
increase extraction of oil and gas at current prices. Consequently, oil service companies such as Helix were generally affected even more by the broad market selloff in energy stocks than were businesses with assets likely to rebound more quickly. Though we continue to like Helix’s long-term fundamentals, the recent plunge in the price of oil – and its uninspiring near-term outlook – led us to reduce (but not close) the Fund’s position in the stock during the period.
Among the capital spending group, the Fund’s holdings in H&E Equipment Services detracted from relative performance. The company sells and leases heavy construction equipment. Its client base along the Gulf Coast left it especially vulnerable to the combined effect of reduced capital spending in general and less offshore oil drilling in particular. Given its relatively stable backlog of business, however, we took advantage of current weakness to add to the Fund’s position.
Finally, the Fund’s allocation to the trucking company Saia also detracted from nominal and relative performance. Saia was hurt by sluggish growth in consumer spending and by heightened competition for drivers, which sharply increased its labor costs. Still, we continue to view Saia’s market valuation and balance sheet favorably, and maintain a position in the stock.
At fiscal year end, the Fund retained an underweight to defensive sectors, including utilities and REITs, offset by above-benchmark allocations to procyclical industries such as basic materials, capital spending, technology, and certain financials. As always, we continue to focus on businesses that we view as having strong balance sheets and that trade at reasonable valuations. We also prefer companies that generate significant amounts of free cash flow, money that can be returned to investors in the form of share buybacks and dividend increases. Under pressure from shareholders, many companies have increasingly chosen to employ these shareholder-friendly strategies, especially
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given the ultra-low interest rate that has prevailed in recent years. Though we have positioned the Fund in anticipation of higher interest rates, we do not expect the Fed to move too far or too fast in normalizing monetary policy.
3
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Performance summary | ||||
Delaware Small Cap Value Fund | November 30, 2015 |
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, 2015 | |||||
1 year | 5 years | 10 years | ||||
Class A (Est. June 24, 1987) | ||||||
Excluding sales charge | +0.90% | +10.69% | +7.19% | |||
Including sales charge | -4.91% | +9.39% | +6.56% | |||
Class C (Est. Nov. 29, 1995) | ||||||
Excluding sales charge | +0.14% | +9.86% | +6.39% | |||
Including sales charge | -0.81% | +9.86% | +6.39% | |||
Class R (Est. June 2, 2003) | ||||||
Excluding sales charge | +0.63% | +10.41% | +6.92% | |||
Including sales charge | +0.63% | +10.41% | +6.92% | |||
Institutional Class (Est. Nov. 9, 1992) | ||||||
Excluding sales charge | +1.15% | +10.97% | +7.46% | |||
Including sales charge | +1.15% | +10.97% | +7.46% | |||
Russell 2000 Value Index | +0.35% | +10.60% | +6.06% |
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 and benchmark performance” table. 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. 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.
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.
Institutional Class shares are available without sales or asset-based distribution charges only to certain eligible institutional accounts.
Investments in small and/or medium-sized companies typically exhibit greater risk and higher volatility than larger, more established companies.
4
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Narrowly focused investments may exhibit higher volatility than investments in multiple industry sectors.
REIT investments are subject to many of the risks associated with direct real estate ownership, including changes in economic conditions, credit risk, and interest rate fluctuations.
2 The Fund’s expense ratios, as described in the most recent prospectus, are disclosed in the following “Fund expense ratios” table.
Fund expense ratios | Class A | Class C | Class R | Institutional Class | ||||
Total annual operating expenses | 1.22% | 1.97% | 1.47% | 0.97% | ||||
(without fee waivers) | ||||||||
Net expenses | 1.22% | 1.97% | 1.47% | 0.97% | ||||
(including fee waivers, if any) | ||||||||
Type of waiver | n/a | n/a | n/a | n/a |
5
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Performance summary
Delaware Small Cap Value Fund
Performance of a $10,000 investment1
Average annual total returns from Nov. 30, 2005 through Nov. 30, 2015
1 The “Performance of a $10,000 investment” graph assumes $10,000 invested in Class A shares of the Fund on Nov. 30, 2005, 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 graph also assumes $10,000 invested in the Russell 2000 Value Index as of Nov. 30, 2005. 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.
Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Russell® is a trademark of Russell Investment Group.
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 C | DEVCX | 246097406 | ||
Class R | DVLRX | 246097505 | ||
Institutional Class | DEVIX | 246097208 |
6
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Table of Contents
For the six-month period from June 1, 2015 to November 30, 2015 (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, 2015 to Nov. 30, 2015.
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 expenses shown in the table assume reinvestment of all dividends and distributions.
8
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Delaware Small Cap Value Fund
Expense analysis of an investment of $1,000
Beginning Account Value 6/1/15 | Ending Account Value 11/30/15 | Annualized Expense Ratio | Expenses Paid During Period 6/1/15 to 11/30/15* | |||||||||||||||||
Actual Fund return† | ||||||||||||||||||||
Class A | $1,000.00 | $982.40 | 1.21% | $6.01 | ||||||||||||||||
Class C | 1,000.00 | 978.80 | 1.96% | 9.72 | ||||||||||||||||
Class R | 1,000.00 | 981.20 | 1.46% | 7.25 | ||||||||||||||||
Institutional Class | 1,000.00 | 983.80 | 0.96% | 4.77 | ||||||||||||||||
Hypothetical 5% return (5% return before expenses) |
| |||||||||||||||||||
Class A | $1,000.00 | $1,019.00 | 1.21% | $6.12 | ||||||||||||||||
Class C | 1,000.00 | 1,015.24 | 1.96% | 9.90 | ||||||||||||||||
Class R | 1,000.00 | 1,017.75 | 1.46% | 7.38 | ||||||||||||||||
Institutional Class | 1,000.00 | 1,020.26 | 0.96% | 4.86 |
* | “Expenses Paid During Period” are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 183/365 (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
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Security type / sector allocation and top 10 equity holdings | ||
Delaware Small Cap Value Fund | As of November 30, 2015 (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 | 98.49% | |
Basic Industry | 9.04% | |
Business Services | 1.54% | |
Capital Spending | 7.60% | |
Consumer Cyclical | 3.97% | |
Consumer Services | 7.58% | |
Consumer Staples | 3.32% | |
Energy | 5.33% | |
Financial Services | 27.05% | |
Healthcare | 7.08% | |
Real Estate | 7.61% | |
Technology | 13.22% | |
Transportation | 2.70% | |
Utilities | 2.45% | |
Short-Term Investments | 1.62% | |
Total Value of Securities | 100.11% | |
Liabilities Net of Receivables and Other Assets | (0.11%) | |
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 | |
East West Bancorp | 3.05% | |
Webster Financial | 1.99% | |
Berry Plastics Group | 1.84% | |
Synopsys | 1.72% | |
Selective Insurance Group | 1.68% | |
Bank of Hawaii | 1.67% | |
ITT | 1.49% | |
Community Bank System | 1.49% | |
STERIS | 1.44% | |
Olin | 1.39%
|
10
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Schedule of investments | ||
Delaware Small Cap Value Fund | November 30, 2015 |
Number of shares | Value (U.S. $) | |||||||
| ||||||||
Common Stock – 98.49% | ||||||||
| ||||||||
Basic Industry – 9.04% | ||||||||
Albemarle | 482,600 | $ | 25,848,056 | |||||
Berry Plastics Group † | 1,494,210 | 54,329,476 | ||||||
Chemtura † | 1,208,000 | 37,109,760 | ||||||
Clearwater Paper † | 417,700 | 20,387,937 | ||||||
Fuller (H.B.) | 1,006,500 | 40,068,765 | ||||||
Glatfelter (P.H.) @ | 770,416 | 13,705,701 | ||||||
Kaiser Aluminum | 352,827 | 30,244,330 | ||||||
Olin | 1,888,000 | 41,101,760 | ||||||
Ryerson Holding @† | 843,100 | 4,181,776 | ||||||
|
| |||||||
266,977,561 | ||||||||
|
| |||||||
Business Services – 1.54% | ||||||||
Deluxe | 354,600 | 20,797,290 | ||||||
Essendant | 399,018 | 14,452,432 | ||||||
WESCO International † | 211,800 | 10,176,990 | ||||||
|
| |||||||
45,426,712 | ||||||||
|
| |||||||
Capital Spending – 7.60% | ||||||||
Altra Industrial Motion @ | 859,843 | 24,092,801 | ||||||
CIRCOR International | 205,100 | 9,321,795 | ||||||
EnPro Industries | 308,200 | 15,453,148 | ||||||
H&E Equipment Services | 1,260,000 | 25,212,600 | ||||||
ITT | 1,108,000 | 43,998,680 | ||||||
MasTec † | 1,974,300 | 40,334,949 | ||||||
Primoris Services | 1,156,100 | 26,682,788 | ||||||
Regal Beloit | 373,600 | 24,082,256 | ||||||
Thermon Group Holdings @† | 844,400 | 15,376,524 | ||||||
|
| |||||||
224,555,541 | ||||||||
|
| |||||||
Consumer Cyclical – 3.97% | ||||||||
Barnes Group | 501,800 | 19,329,336 | ||||||
Knoll | 795,269 | 17,718,593 | ||||||
Meritage Homes † | 964,100 | 35,970,571 | ||||||
Standard Motor Products @ | 438,860 | 18,326,794 | ||||||
Tenneco † | 480,500 | 25,889,340 | ||||||
|
| |||||||
117,234,634 | ||||||||
|
| |||||||
Consumer Services – 7.58% | ||||||||
Asbury Automotive Group † | 195,500 | 14,682,050 | ||||||
Brinker International | 343,000 | 15,647,660 | ||||||
Cato Class A | 334,644 | 13,144,816 | ||||||
Cheesecake Factory | 616,900 | 29,074,497 | ||||||
Cinemark Holdings | 580,331 | 20,137,486 | ||||||
Finish Line Class A | 443,100 | 7,351,029 | ||||||
Genesco † | 167,981 | 9,097,851 |
11
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Schedule of investments
Delaware Small Cap Value Fund
Number of shares | Value (U.S. $) | |||||||
| ||||||||
Common Stock (continued) | ||||||||
| ||||||||
Consumer Services (continued) | ||||||||
International Speedway Class A | 594,000 | $ | 21,140,460 | |||||
Madden (Steven) † | 561,850 | 17,923,015 | ||||||
Meredith | 351,518 | 16,398,315 | ||||||
Stage Stores | 565,700 | 4,378,518 | ||||||
Texas Roadhouse | 570,600 | 19,971,000 | ||||||
UniFirst | 195,600 | 21,238,248 | ||||||
Wolverine World Wide | 756,800 | 13,766,192 | ||||||
|
| |||||||
223,951,137 | �� | |||||||
|
| |||||||
Consumer Staples – 3.32% | ||||||||
Core-Mark Holding | 279,200 | 23,812,968 | ||||||
J&J Snack Foods | 208,900 | 24,374,452 | ||||||
Pinnacle Foods | 537,100 | 23,385,334 | ||||||
Scotts Miracle-Gro Class A | 380,500 | 26,555,095 | ||||||
|
| |||||||
98,127,849 | ||||||||
|
| |||||||
Energy – 5.33% | ||||||||
Bonanza Creek Energy † | 837,600 | 7,111,224 | ||||||
Dril-Quip † | 276,500 | 17,449,915 | ||||||
Helix Energy Solutions Group † | 1,811,800 | 11,740,464 | ||||||
Jones Energy Class A @† | 437,100 | 2,452,131 | ||||||
Oasis Petroleum † | 1,644,600 | 18,896,454 | ||||||
Patterson-UTI Energy | 1,406,500 | 22,813,430 | ||||||
SM Energy | 721,100 | 21,178,707 | ||||||
Southwest Gas | 623,300 | 34,954,664 | ||||||
Stone Energy † | 1,026,563 | 7,483,644 | ||||||
Whiting Petroleum † | 817,600 | 13,498,576 | ||||||
|
| |||||||
157,579,209 | ||||||||
|
| |||||||
Financial Services – 27.05% | ||||||||
American Equity Investment Life Holding | 1,234,200 | 33,088,902 | ||||||
Bank of Hawaii | 714,400 | 49,429,336 | ||||||
Boston Private Financial Holdings | 1,857,500 | 22,475,750 | ||||||
Community Bank System @ | 1,019,700 | 43,979,661 | ||||||
East West Bancorp | 2,078,623 | 90,170,666 | ||||||
First Financial Bancorp @ | 1,511,000 | 30,446,650 | ||||||
First Interstate BancSystem @ | 624,400 | 18,988,004 | ||||||
First Midwest Bancorp | 1,398,500 | 27,326,690 | ||||||
Great Western Bancorp | 1,220,750 | 36,891,065 | ||||||
Hancock Holding | 1,393,600 | 40,581,632 | ||||||
Independent Bank @ | 325,600 | 16,846,544 | ||||||
Infinity Property & Casualty @ | 296,782 | 25,374,861 | ||||||
Main Street Capital | 615,300 | 19,634,223 | ||||||
NBT Bancorp @ | 1,246,700 | 37,563,071 | ||||||
ProAssurance | 643,400 | 34,042,294 |
12
Table of Contents
Number of shares | Value (U.S. $) | |||||||
| ||||||||
Common Stock (continued) | ||||||||
| ||||||||
Financial Services (continued) | ||||||||
Prosperity Bancshares | 240,700 | $ | 13,337,187 | |||||
S&T Bancorp @ | 709,556 | 24,068,139 | ||||||
Selective Insurance Group @ | 1,440,000 | 49,694,400 | ||||||
Stifel Financial † | 693,000 | 31,434,480 | ||||||
Validus Holdings | 618,484 | 29,180,075 | ||||||
Valley National Bancorp | 3,214,800 | 35,812,872 | ||||||
Webster Financial | 1,461,500 | 58,766,915 | ||||||
WesBanco @ | 881,900 | 29,914,048 | ||||||
|
| |||||||
799,047,465 | ||||||||
|
| |||||||
Healthcare – 7.08% | ||||||||
Haemonetics † | 528,800 | 17,048,512 | ||||||
Owens & Minor | 752,800 | 28,990,328 | ||||||
Service International | 1,354,200 | 37,714,470 | ||||||
STERIS | 555,880 | 42,458,114 | ||||||
Teleflex | 198,500 | 26,142,450 | ||||||
VCA † | 603,600 | 33,216,108 | ||||||
VWR † | 882,816 | 23,553,531 | ||||||
|
| |||||||
209,123,513 | ||||||||
|
| |||||||
Real Estate – 7.61% | ||||||||
Alexander & Baldwin | 569,400 | 21,585,954 | ||||||
Brandywine Realty Trust | 2,354,137 | 32,392,925 | ||||||
Education Realty Trust | 557,133 | 20,530,351 | ||||||
Healthcare Realty Trust | 935,600 | 25,438,964 | ||||||
Highwoods Properties | 780,600 | 34,002,936 | ||||||
Lexington Realty Trust | 2,901,000 | 24,919,590 | ||||||
Ramco-Gershenson Properties Trust | 1,204,389 | 20,318,042 | ||||||
Summit Hotel Properties | 1,542,100 | 20,556,193 | ||||||
Washington Real Estate Investment Trust | 913,800 | 25,138,638 | ||||||
|
| |||||||
224,883,593 | ||||||||
|
| |||||||
Technology – 13.22% | ||||||||
Black Box | 75,277 | 851,383 | ||||||
Brocade Communications Systems | 2,417,800 | 22,691,053 | ||||||
Cirrus Logic † | 651,300 | 21,531,978 | ||||||
CommScope Holding † | 1,251,348 | 35,813,580 | ||||||
Electronics For Imaging † | 770,000 | 37,791,600 | ||||||
NetScout Systems † | 737,300 | 24,404,630 | ||||||
ON Semiconductor † | 3,254,200 | 35,666,032 | ||||||
Premiere Global Services † | 976,150 | 13,539,201 | ||||||
PTC † | 818,900 | 29,513,156 | ||||||
Super Micro Computer † | 822,900 | 20,210,424 | ||||||
Synopsys † | 1,014,800 | 50,821,184 |
13
Table of Contents
Schedule of investments
Delaware Small Cap Value Fund
Number of shares | Value (U.S. $) | |||||||
| ||||||||
Common Stock (continued) | ||||||||
| ||||||||
Technology (continued) | ||||||||
Tech Data † | 542,000 | $ | 36,666,300 | |||||
Teradyne | 1,369,200 | 28,451,976 | ||||||
Vishay Intertechnology | 2,728,300 | 32,521,336 | ||||||
|
| |||||||
390,473,833 | ||||||||
|
| |||||||
Transportation – 2.70% | ||||||||
Kirby † | 227,700 | 14,709,420 | ||||||
Matson | 532,400 | 27,530,404 | ||||||
Saia † | 366,950 | 8,993,945 | ||||||
Werner Enterprises | 1,054,100 | 28,418,536 | ||||||
|
| |||||||
79,652,305 | ||||||||
|
| |||||||
Utilities – 2.45% | ||||||||
Black Hills | 449,000 | 19,271,080 | ||||||
El Paso Electric | 597,500 | 23,093,375 | ||||||
NorthWestern | 550,500 | 30,018,765 | ||||||
|
| |||||||
72,383,220 | ||||||||
|
| |||||||
Total Common Stock (cost $2,477,781,845) | 2,909,416,572 | |||||||
|
| |||||||
Principal amount° | ||||||||
| ||||||||
Short-Term Investments – 1.62% | ||||||||
| ||||||||
Discount Notes – 1.57%≠ | ||||||||
Federal Home Loan Bank | ||||||||
0.12% 1/4/16 | 7,304,476 | 7,303,753 | ||||||
0.14% 2/18/16 | 6,211,705 | 6,209,114 | ||||||
0.155% 2/3/16 | 5,436,353 | 5,434,515 | ||||||
0.17% 1/21/16 | 4,263,943 | 4,263,307 | ||||||
0.18% 2/26/16 | 4,198,604 | 4,196,677 | ||||||
0.18% 3/7/16 | 2,713,266 | 2,711,657 | ||||||
0.185% 1/19/16 | 5,624,323 | 5,623,519 | ||||||
0.195% 12/2/15 | 7,965,954 | 7,965,938 | ||||||
0.295% 3/2/16 | 2,791,433 | 2,789,865 | ||||||
|
| |||||||
46,498,345 | ||||||||
|
| |||||||
Repurchase Agreements – 0.05% | ||||||||
Bank of America Merrill Lynch | 268,175 | 268,175 | ||||||
Bank of Montreal | 446,959 | 446,959 |
14
Table of Contents
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Short-Term Investments (continued) | ||||||||
| ||||||||
Repurchase Agreements (continued) | ||||||||
BNP Paribas | 658,866 | $ | 658,866 | |||||
|
| |||||||
1,374,000 | ||||||||
|
| |||||||
Total Short-Term Investments (cost $47,872,089) | 47,872,345 | |||||||
|
| |||||||
Total Value of Securities – 100.11% | $ | 2,957,288,917 | ||||||
|
|
@ | Illiquid security. At Nov. 30, 2015, the aggregate value of illiquid securities was $355,011,105, which represents 12.02% of the Fund’s net assets. See Note 10 in “Notes to financial statements.” |
≠ | The rate shown is the effective yield at the time of purchase. |
° | Principal amount shown is stated in U.S. dollars unless noted that the security is denominated in another currency. |
† | Non-income-producing security. |
See accompanying notes, which are an integral part of the financial statements.
15
Table of Contents
Statement of assets and liabilities | ||
Delaware Small Cap Value Fund | November 30, 2015 |
Assets: | ||||
Investments, at value1 | $ | 2,909,416,572 | ||
Short-term investments, at value2 | 47,872,345 | |||
Cash | 633,375 | |||
Receivable for fund shares sold | 6,414,482 | |||
Dividends and interest receivable | 4,019,193 | |||
Receivable for securities sold | 2,860,259 | |||
|
| |||
Total assets | 2,971,216,226 | |||
|
| |||
Liabilities: | ||||
Payable for fund shares redeemed | 12,880,952 | |||
Payable for securities purchased | 554,875 | |||
Investment management fees payable | 1,610,067 | |||
Other accrued expenses | 1,471,874 | |||
Other affiliates payable | 299,781 | |||
Distribution fees payable to affiliates | 285,643 | |||
Trustees’ fees and expenses payable | 17,020 | |||
|
| |||
Total liabilities | 17,120,212 | |||
|
| |||
Total Net Assets | $ | 2,954,096,014 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 2,348,231,966 | ||
Undistributed net investment income | 16,952,462 | |||
Accumulated net realized gain on investments | 157,276,603 | |||
Net unrealized appreciation of investments | 431,634,983 | |||
|
| |||
Total Net Assets | $ | 2,954,096,014 | ||
|
|
16
Table of Contents
Net Asset Value | ||||
Class A: | ||||
Net assets | $ | 794,663,556 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 15,122,706 | |||
Net asset value per share | $ | 52.55 | ||
Sales charge | 5.75 | % | ||
Offering price per share, equal to net asset value per share / (1 – sales charge) | $ | 55.76 | ||
Class C: | ||||
Net assets | $ | 108,890,176 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 2,461,291 | |||
Net asset value per share | $ | 44.24 | ||
Class R: | ||||
Net assets | $ | 81,187,168 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 1,590,323 | |||
Net asset value per share | $ | 51.05 | ||
Institutional Class: | ||||
Net assets | $ | 1,969,355,114 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 35,660,101 | |||
Net asset value per share | $ | 55.23 | ||
| ||||
1 Investments, at cost | $ | 2,477,781,845 | ||
2 Short-term investments, at cost | 47,872,089 |
See accompanying notes, which are an integral part of the financial statements.
17
Table of Contents
Statement of operations | ||
Delaware Small Cap Value Fund | Year ended November 30, 2015 |
Investment Income: | ||||
Dividends | $ | 52,509,223 | ||
Interest | 58,075 | |||
|
| |||
52,567,298 | ||||
|
| |||
Expenses: | ||||
Management fees | 19,188,434 | |||
Distribution expenses – Class A | 1,974,292 | |||
Distribution expenses – Class C | 1,100,749 | |||
Distribution expenses – Class R | 420,479 | |||
Dividend disbursing and transfer agent fees and expenses | 6,131,584 | |||
Accounting and administration expenses | 913,379 | |||
Reports and statements to shareholders | 772,772 | |||
Legal fees | 223,535 | |||
Registration fees | 151,137 | |||
Trustees’ fees and expenses | 133,248 | |||
Custodian fees | 127,651 | |||
Audit and tax | 33,890 | |||
Other | 75,442 | |||
|
| |||
31,246,592 | ||||
Less expense paid indirectly | (607 | ) | ||
|
| |||
Total operating expenses | 31,245,985 | |||
|
| |||
Net Investment Income | 21,321,313 | |||
|
| |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain on investments | 157,799,628 | |||
Net change in unrealized appreciation (depreciation) of investments | (144,766,971 | ) | ||
|
| |||
Net Realized and Unrealized Gain | 13,032,657 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 34,353,970 | ||
|
|
See accompanying notes, which are an integral part of the financial statements.
18
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Table of Contents
Statements of changes in net assets
Delaware Small Cap Value Fund
Year ended | ||||||||
11/30/15 | 11/30/14 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 21,321,313 | $ | 9,556,705 | ||||
Net realized gain | 157,799,628 | 129,268,108 | ||||||
Net change in unrealized appreciation (depreciation) | (144,766,971 | ) | 32,303,289 | |||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 34,353,970 | 171,128,102 | ||||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Class A | (2,529,301 | ) | (933,389 | ) | ||||
Class R | (78,471 | ) | — | |||||
Institutional Class | (9,685,508 | ) | (3,846,782 | ) | ||||
Net realized gain: | ||||||||
Class A | (37,171,869 | ) | (18,684,386 | ) | ||||
Class B | — | (57,082 | ) | |||||
Class C | (6,106,100 | ) | (2,419,192 | ) | ||||
Class R | (4,105,600 | ) | (1,637,404 | ) | ||||
Institutional Class | (81,208,563 | ) | (24,481,657 | ) | ||||
|
|
|
| |||||
(140,885,412 | ) | (52,059,892 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Class A | 254,031,977 | 244,270,963 | ||||||
Class B | — | 19,761 | ||||||
Class C | 18,856,506 | 22,133,681 | ||||||
Class R | 24,715,625 | 25,151,148 | ||||||
Institutional Class | 768,303,708 | 806,723,199 | ||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | 39,096,602 | 19,373,779 | ||||||
Class B | — | 56,684 | ||||||
Class C | 5,896,531 | 2,330,338 | ||||||
Class R | 4,183,570 | 1,637,197 | ||||||
Institutional Class | 89,377,797 | 27,825,139 | ||||||
|
|
|
| |||||
1,204,462,316 | 1,149,521,889 | |||||||
|
|
|
|
20
Table of Contents
Year ended | ||||||||
11/30/15 | 11/30/14 | |||||||
Capital Share Transactions (continued): | ||||||||
Cost of shares redeemed: | ||||||||
Class A | $ | (243,557,284 | ) | $ | (412,973,803 | ) | ||
Class B | — | (3,608,169 | ) | |||||
Class C | (19,187,893 | ) | (18,107,340 | ) | ||||
Class R | (26,427,025 | ) | (24,371,953 | ) | ||||
Institutional Class | (590,103,471 | ) | (351,687,599 | ) | ||||
|
|
|
| |||||
(879,275,673 | ) | (810,748,864 | ) | |||||
|
|
|
| |||||
Increase in net assets derived from capital share transactions | 325,186,643 | 338,773,025 | ||||||
|
|
|
| |||||
Net Increase in Net Assets | 218,655,201 | 457,841,235 | ||||||
Net Assets: | ||||||||
Beginning of year | 2,735,440,813 | 2,277,599,578 | ||||||
|
|
|
| |||||
End of year | $ | 2,954,096,014 | $ | 2,735,440,813 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | 16,952,462 | $ | 7,924,429 | ||||
|
|
|
|
See accompanying notes, which are an integral part of the financial statements.
21
Table of Contents
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 |
|
1 | The average shares outstanding method has been applied for per share information. |
2 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during some of the periods shown reflects a waiver by the distributor. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
22
Table of Contents
Year ended | ||||||||||||||||||||
11/30/15 | 11/30/14 | 11/30/13 | 11/30/12 | 11/30/11 | ||||||||||||||||
| ||||||||||||||||||||
$ | 54.870 | $ | 52.370 | $ | 39.750 | $ | 37.860 | $ | 36.190 | |||||||||||
0.322 | 0.148 | 0.119 | 0.074 | (0.008 | ) | |||||||||||||||
0.152 | 3.508 | 12.847 | 3.622 | 1.818 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
0.474 | 3.656 | 12.966 | 3.696 | 1.810 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(0.178 | ) | (0.055 | ) | (0.092 | ) | — | — | |||||||||||||
(2.616 | ) | (1.101 | ) | (0.254 | ) | (1.806 | ) | (0.140 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(2.794 | ) | (1.156 | ) | (0.346 | ) | (1.806 | ) | (0.140 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
$ | 52.550 | $ | 54.870 | $ | 52.370 | $ | 39.750 | $ | 37.860 | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
0.90% | 7.12% | 32.87% | 10.21% | 4.99% | ||||||||||||||||
$ | 794,664 | $ | 775,076 | $ | 884,026 | $ | 522,403 | $ | 375,299 | |||||||||||
1.22% | 1.22% | 1.25% | 1.32% | 1.37% | ||||||||||||||||
1.22% | 1.22% | 1.29% | 1.37% | 1.42% | ||||||||||||||||
0.62% | 0.27% | 0.26% | 0.19% | (0.02% | ) | |||||||||||||||
0.62% | 0.27% | 0.22% | 0.14% | (0.07% | ) | |||||||||||||||
20% | 17% | 28% | 11% | 29% | ||||||||||||||||
|
23
Table of Contents
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 net investment loss to average net assets |
Portfolio turnover |
|
1 | The average shares outstanding method has been applied for per share information. |
2 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. |
See accompanying notes, which are an integral part of the financial statements.
24
Table of Contents
Year ended | ||||||||||||||||||||
11/30/15 | 11/30/14 | 11/30/13 | 11/30/12 | 11/30/11 | ||||||||||||||||
| ||||||||||||||||||||
$ | 46.790 | $ | 45.110 | $ | 34.450 | $ | 33.280 | $ | 32.070 | |||||||||||
(0.059 | ) | (0.219 | ) | (0.196 | ) | (0.188 | ) | (0.260 | ) | |||||||||||
0.125 | 3.000 | 11.110 | 3.164 | 1.610 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
0.066 | 2.781 | 10.914 | 2.976 | 1.350 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(2.616 | ) | (1.101 | ) | (0.254 | ) | (1.806 | ) | (0.140 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(2.616 | ) | (1.101 | ) | (0.254 | ) | (1.806 | ) | (0.140 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
$ | 44.240 | $ | 46.790 | $ | 45.110 | $ | 34.450 | $ | 33.280 | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
0.14% | 6.30% | 31.93% | 9.37% | 4.20% | ||||||||||||||||
$ | 108,890 | $ | 109,368 | $ | 99,099 | $ | 66,231 | $ | 52,648 | |||||||||||
1.97% | 1.97% | 2.00% | 2.07% | 2.12% | ||||||||||||||||
(0.13% | ) | (0.48% | ) | (0.49% | ) | (0.56% | ) | (0.77% | ) | |||||||||||
20% | 17% | 28% | 11% | 29% | ||||||||||||||||
|
25
Table of Contents
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 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 |
|
1 | The average shares outstanding method has been applied for per share information. |
2 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during some of the periods shown reflects a waiver by the distributor. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
26
Table of Contents
Year ended | ||||||||||||||||||||
11/30/15 | 11/30/14 | 11/30/13 | 11/30/12 | 11/30/11 | ||||||||||||||||
| ||||||||||||||||||||
$ | 53.390 | $ | 51.060 | $ | 38.770 | $ | 37.050 | $ | 35.510 | |||||||||||
0.186 | 0.012 | 0.004 | (0.022 | ) | (0.102 | ) | ||||||||||||||
0.140 | 3.419 | 12.540 | 3.548 | 1.782 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
0.326 | 3.431 | 12.544 | 3.526 | 1.680 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(0.050 | ) | — | — | — | — | |||||||||||||||
(2.616 | ) | (1.101 | ) | (0.254 | ) | (1.806 | ) | (0.140 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(2.666 | ) | (1.101 | ) | (0.254 | ) | (1.806 | ) | (0.140 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
$ | 51.050 | $ | 53.390 | $ | 51.060 | $ | 38.770 | $ | 37.050 | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
0.63% | 6.85% | 32.55% | 9.96% | 4.72% | ||||||||||||||||
$ | 81,187 | $ | 82,577 | $ | 76,501 | $ | 44,379 | $ | 28,303 | |||||||||||
1.47% | 1.47% | 1.50% | 1.57% | 1.62% | ||||||||||||||||
1.47% | 1.47% | 1.58% | 1.67% | 1.72% | ||||||||||||||||
0.37% | 0.02% | 0.01% | (0.06% | ) | (0.27% | ) | ||||||||||||||
0.37% | 0.02% | (0.07% | ) | (0.16% | ) | (0.37% | ) | |||||||||||||
20% | 17% | 28% | 11% | 29% | ||||||||||||||||
|
27
Table of Contents
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 net investment income to average net assets |
Portfolio turnover |
|
1 | The average shares outstanding method has been applied for per share information. |
2 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. |
See accompanying notes, which are an integral part of the financial statements.
28
Table of Contents
Year ended | ||||||||||||||||||||
11/30/15 | 11/30/14 | 11/30/13 | 11/30/12 | 11/30/11 | ||||||||||||||||
| ||||||||||||||||||||
$ | 57.520 | $ | 54.830 | $ | 41.590 | $ | 39.430 | $ | 37.590 | |||||||||||
0.475 | 0.292 | 0.250 | 0.180 | 0.090 | ||||||||||||||||
0.163 | 3.672 | 13.434 | 3.786 | 1.890 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
0.638 | 3.964 | 13.684 | 3.966 | 1.980 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(0.312 | ) | (0.173 | ) | (0.190 | ) | — | — | |||||||||||||
(2.616 | ) | (1.101 | ) | (0.254 | ) | (1.806 | ) | (0.140 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(2.928 | ) | (1.274 | ) | (0.444 | ) | (1.806 | ) | (0.140 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
$ | 55.230 | $ | 57.520 | $ | 54.830 | $ | 41.590 | $ | 39.430 | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
1.15% | 7.38% | 33.22% | 10.49% | 5.26% | ||||||||||||||||
$ | 1,969,355 | $ | 1,768,420 | $ | 1,214,512 | $ | 348,533 | $ | 91,442 | |||||||||||
0.97% | 0.97% | 1.00% | 1.07% | 1.12% | ||||||||||||||||
0.87% | 0.52% | 0.51% | 0.44% | 0.23% | ||||||||||||||||
20% | 17% | 28% | 11% | 29% | ||||||||||||||||
|
29
Table of Contents
Notes to financial statements | ||
Delaware Small Cap Value Fund | November 30, 2015 |
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 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. Effective Sept. 25, 2014, all remaining shares of Class B were converted to Class A shares. Class C shares are sold with a CDSC of 1.00%, if redeemed during the first 12 months. Class R and Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors.
The investment objective of the Fund is to seek 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 LLC (Nasdaq), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange on the valuation date. Equity securities 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, 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. Generally, other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Trust’s Board of Trustees (Board). In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures or suspension of trading in a security.
Federal and Foreign Income Taxes – No provision for federal income taxes has been made as the Fund intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Fund evaluates tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year. Management has analyzed the Fund’s tax positions taken for all open federal income tax years (Nov. 30, 2012–Nov. 30, 2015), and has concluded that no provision for federal income tax is required in the Fund’s financial statements. In regard to foreign taxes only, the Fund has open tax years in certain foreign countries in which it invests in that may date back to the inception of the Fund.
30
Table of Contents
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. 30, 2015 and matured on the next business day.
Use of Estimates – The Fund is an investment company, whose financial statements are prepared in conformity with U.S. GAAP. Therefore, the Fund follows the accounting and reporting guidelines for investment companies. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material.
Other – Expenses directly attributable to the Fund are charged directly to the Fund. Other expenses common to various funds within the Delaware Investments® Family of Funds are generally allocated among such funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Discounts and premiums on debt securities are accreted or amortized to interest income, respectively, over the lives of the respective securities using the effective interest method. 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 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 dividends from net investment income 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. Such commission rebates are included on the “Statement of operations” under “Net realized gain on investments” and totaled $1,342 for the year ended Nov. 30, 2015. In general, best execution refers to many factors, including the price paid or received for a security, the commission charged, the promptness and
31
Table of Contents
Notes to financial statements
Delaware Small Cap Value Fund
1. Significant Accounting Policies (continued)
reliability of execution, the confidentiality and placement accorded the order, and other factors affecting the overall benefit obtained by the Fund on the transaction.
The Fund may receive earnings credits from its custodian when positive cash balances are maintained, which may be used to offset custody fees. There were no such earnings credits for the year ended Nov. 30, 2015.
The Fund receives earnings credits from its transfer agent when positive cash balances are maintained, which may be used to offset transfer agent fees. If the amount earned is greater than one dollar, the expense paid under this arrangement is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses” with the corresponding expense offset shown under “Less expense paid indirectly.” For the year ended Nov. 30, 2015, the Fund earned $607 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.
Delaware Investments Fund Services Company (DIFSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Fund. For these services, DIFSC’s fees are calculated based on the aggregate daily net assets of the Delaware Investments® Family of Funds at the following annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DIFSC under the service agreement described above are allocated among all retail funds in the Delaware Investments Family of Funds on a relative net asset value basis (NAV). For the year ended Nov. 30, 2015, the Fund was charged $135,440 for these services. This amount is included on the “Statement of operations” under “Accounting and administration expenses.”
DIFSC is also the transfer agent and dividend disbursing agent of the Fund. For these services, DIFSC’s fees are calculated based on the aggregate daily net assets of the retail funds within the Delaware Investments Family of Funds at the following annual rate: 0.025% of the first $20 billion; 0.020% of the next $5 billion; 0.015% of the next $5 billion; and 0.013% of average daily net assets in excess of $30 billion. The fees payable to DIFSC under the service agreement described above are allocated among all retail funds in the Delaware Investments Family of Funds on a relative NAV basis. This amount is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.” For the year ended Nov. 30, 2015, the Fund was charged $592,548 for these services. Pursuant to a sub-transfer agency agreement between DIFSC and BNY Mellon Investment Servicing (US) Inc. (BNYMIS), BNYMIS provides certain sub-transfer agency services to the Fund. Sub-transfer agency fees are paid by the Fund and are also included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.”
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Pursuant to a distribution agreement and distribution plan, the Fund pays DDLP, the distributor and an affiliate of DMC, an annual distribution and service fee of 0.25% of the average daily net assets of the Class A shares, 1.00% of the average daily net assets of the Class C shares, and 0.50% of the average daily net assets of the Class R shares. Institutional Class shares pay no distribution and service fee.
As provided in the investment management agreement, the Fund bears a portion of the cost of resources shared with DMC, including the cost of internal personnel of DMC and/or its affiliates that provide legal, tax, and regulatory reporting services to the Fund. For the year ended Nov. 30, 2015, the Fund was charged $69,514 for internal legal, tax, and regulatory reporting services provided by DMC and/or its affiliates’ employees. This amount is included on the “Statement of operations” under “Legal fees.”
For the year ended Nov. 30, 2015, DDLP earned $36,264 for commissions on sales of the Fund’s Class A shares. For the year ended, Nov. 30, 2015, DDLP received gross CDSC commissions of $57 and $5,653, on redemption of the Fund’s Class A and Class C shares, respectively, and these commissions were entirely used to offset upfront commissions previously paid by DDLP to broker/dealers on sales of those shares.
Trustees’ fees include expenses accrued by the Fund for each Trustee’s retainer and meeting fees. Certain officers of DMC, DIFSC, and DDLP are officers and/or Trustees of the Trust. These officers and Trustees are paid no compensation by the Fund.
3. Investments
For the year ended Nov. 30, 2015, the Fund made purchases and sales of investment securities other than short-term investments as follows:
Purchases | $829,927,625 | |||
Sales | 558,703,522 |
At November 30, 2015, the cost and unrealized appreciation (depreciation) of investments for federal income tax purposes were as follows:
Cost of investments | $ | 2,526,281,089 | ||
|
| |||
Aggregate unrealized appreciation of investments | $ | 628,495,649 | ||
Aggregate unrealized depreciation of investments | (197,487,821 | ) | ||
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| |||
Net unrealized appreciation of investments | $ | 431,007,828 | ||
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|
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. A three-level hierarchy for fair value measurements has been established based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available under the circumstances. The Fund’s investment in its entirety is assigned a level based upon the observability
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Notes to financial statements
Delaware Small Cap Value Fund
3. Investments (continued)
of the inputs which are significant to the overall valuation. The three-level hierarchy of inputs is summarized on the next page.
Level 1 – | Inputs are quoted prices in active markets for identical investments. (Examples: equity securities, open-end investment companies, futures contracts, exchange-traded options contracts) | |
Level 2 – | Other observable inputs, including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, and default rates) or other market-corroborated inputs. (Examples: debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities) | |
Level 3 – | Significant unobservable inputs, including the Fund’s own assumptions used to determine the fair value of investments. (Examples: broker-quoted securities, fair valued securities) |
Level 3 investments are valued using significant unobservable inputs. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Valuations may also be based upon current market prices of securities that are comparable in coupon, rating, maturity, and industry. The derived value of a Level 3 investment may not represent the value which is received upon disposition and this could impact the results of operations.
The following table summarizes the valuation of the Fund’s investments by fair value hierarchy levels as of Nov. 30, 2015:
Securities | Level 1 | Level 2 | Total | |||||||||
Common Stock | $ | 2,909,416,572 | $ | — | $ | 2,909,416,572 | ||||||
Short-Term Investments | — | 47,872,345 | 47,872,345 | |||||||||
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Total Value of Securities | $ | 2,909,416,572 | $ | 47,872,345 | $ | 2,957,288,917 | ||||||
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During the year ended Nov. 30, 2015, there were no transfers between Level 1 investments, Level 2 investments, or Level 3 investments that had a significant impact to the Fund. The Fund’s policy is to recognize transfers between levels at the beginning of the reporting period.
A reconciliation of Level 3 investments is presented when the Fund has a significant amount of Level 3 investments at the beginning, interim, or end of the period in relation to net assets. At Nov. 30, 2015, there were no Level 3 investments.
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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 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, 2015 and 2014 were as follows:
Year ended | ||||||||
11/30/15 | 11/30/14 | |||||||
Ordinary income | $ | 31,906,524 | $ | 15,687,573 | ||||
Long-term capital gain | 108,978,888 | 36,372,319 | ||||||
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| |||||
Total | $ | 140,885,412 | $ | 52,059,892 | ||||
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5. Components of Net Assets on a Tax Basis
As of Nov. 30, 2015, the components of net assets on a tax basis were as follows:
Shares of beneficial interest | $ | 2,348,231,966 | ||
Undistributed ordinary income | 26,422,941 | |||
Undistributed long-term capital gain | 148,433,279 | |||
Net unrealized appreciation of investments | 431,007,828 | |||
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| |||
Net assets | $ | 2,954,096,014 | ||
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The differences between book basis and tax basis components of net assets are primarily attributable to tax deferral of losses on wash sales.
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Notes to financial statements
Delaware Small Cap Value Fund
6. Capital Shares
Transactions in capital shares were as follows:
Year ended | ||||||||
11/30/15 | 11/30/14 | |||||||
Shares sold: | ||||||||
Class A | 4,919,498 | 4,575,040 | ||||||
Class B | — | 442 | ||||||
Class C | 425,227 | 484,338 | ||||||
Class R | 484,938 | 482,799 | ||||||
Institutional Class | 14,039,643 | 14,369,342 | ||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | 748,690 | 375,243 | ||||||
Class B | — | 1,276 | ||||||
Class C | 133,165 | 52,556 | ||||||
Class R | 82,273 | 32,516 | ||||||
Institutional Class | 1,632,471 | 515,280 | ||||||
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| |||||
22,465,905 | 20,888,832 | |||||||
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| |||||
Shares redeemed: | ||||||||
Class A | (4,670,476 | ) | (7,704,858 | ) | ||||
Class B | — | (78,398 | ) | |||||
Class C | (434,350 | ) | (396,701 | ) | ||||
Class R | (523,606 | ) | (466,913 | ) | ||||
Institutional Class | (10,754,425 | ) | (6,292,453 | ) | ||||
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(16,382,857 | ) | (14,939,323 | ) | |||||
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Net increase | 6,083,048 | 5,949,509 | ||||||
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Certain shareholders may exchange shares of one class for shares of another class in the same Fund. For the years ended Nov. 30, 2015 and 2014, the Fund had the following exchange transactions:
Year ended Nov. 30, 2015
Exchange Redemptions | Exchange Subscriptions | |||||||||
Class A Shares | Class C Shares | Institutional Class Shares | Class A Shares | Institutional Class Shares | Value | |||||
107,154 | 1,934 | 3,358 | 3,960 | 103,305 | $5,893,372 |
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Year ended Nov. 30, 2014
Exchange Redemptions | Exchange Subscriptions | |||||||
Class A Shares | Class C Shares | Class A Shares | Institutional Class Shares | Value | ||||
33,683 | 2,494 | 93 | 34,114 | $1,978,114 |
These exchange transactions are included as subscriptions and redemptions in the table on the previous page and the “Statements of changes in net assets.”
7. Line of Credit
The Fund, along with certain other funds in the Delaware Investments® Family of Funds (Participants), was a participant in a $275,000,000 revolving line of credit intended to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, the Participants were charged an annual commitment fee of 0.08%, 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. 9, 2015.
On Nov. 9, 2015, the Fund, along with the other Participants, entered into an amendment to the agreement for a $155,000,000 revolving line of credit. Under the amendment to the agreement, the Participants are charged an annual commitment fee of 0.10%, which is allocated across the participants on the basis of each Participant’s allocation of the entire facility. The line of credit available 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. 7, 2016.
The Fund had no amounts outstanding as of Nov. 30, 2015 or at any time during the year then ended.
8. Offsetting
In December 2011, the Financial Accounting Standards Board (FASB) issued guidance that expanded disclosure requirements on the offsetting of certain assets and liabilities. The disclosures are required for investments and derivative financial instruments subject to master netting or similar agreements which are eligible for offset on the “Statement of assets and liabilities” and requires an entity to disclose both gross and net information about such investments and transactions in the financial statements. In January 2013, the FASB issued guidance that clarified which investments and transactions are subject to the offsetting disclosure requirements. The scope of the disclosure requirements for offsetting is limited to derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing. The guidance is effective for financial statements with fiscal years beginning on or after Jan. 1, 2013, and interim periods within those fiscal years.
In order to better define its contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund entered into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement) or similar agreement with certain of its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between the Fund and a
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Notes to financial statements
Delaware Small Cap Value Fund
8. Offsetting (continued)
counterparty that governs certain over-the-counter (OTC) derivatives and foreign exchange contracts and typically contains, among other things, collateral posting items and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default (close-out), including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency, or other events.
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements on the “Statement of assets and liabilities.” There were no derivatives during the year ended Nov. 30, 2015.
At Nov. 30, 2015, the Fund had the following assets and liabilities subject to offsetting provisions:
Offsetting of Financial Assets and Liabilities and Derivative Assets and Liabilities
Master Repurchase Agreements
Counterparty | Repurchase Agreements | Fair Value of Non-cash Collateral Received | Cash Collateral Received | Net Collateral Received | Net Exposure(a) | ||||||||||||||||||||
Bank of America | $ | 268,175 | $ | (268,175 | ) | $ | — | $ | (268,175 | ) | $ | — | |||||||||||||
Bank of Montreal | 446,959 | (446,959 | ) | — | (446,959 | ) | — | ||||||||||||||||||
BNP Paribas | 658,866 | (658,866 | ) | — | (658,866 | ) | — | ||||||||||||||||||
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Total | $ | 1,374,000 | $ | (1,374,000 | ) | $ | — | $ | (1,374,000 | ) | $ | — | |||||||||||||
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(a)Net exposure represents the receivable(payable) that would be due from(to) the counterparty in the event of default.
9. Securities Lending
The Fund, along with other funds in the Delaware Investments® Family of Funds, may lend its securities pursuant to a security lending agreement (Lending Agreement) with The Bank of New York Mellon (BNY Mellon). At the time a security is loaned, the borrower must post collateral equal to the required percentage of the market value of the loaned security, including any accrued interest. The required percentage is: (1) 102% with respect to U.S. securities and foreign securities that are denominated and payable in U.S. dollars; and (2) 105% with respect to foreign securities. With respect to each loan, if on any business day the aggregate market value of securities collateral plus cash collateral held is less than the aggregate market value of the securities 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
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reduce the value of the remaining collateral to the applicable initial collateral requirement for such security loan. As a result of the foregoing, the value of the collateral held with respect to a loaned security on any particular day may be more or less than the value of the security on loan.
Cash collateral received is generally invested in 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.
The Collective Trust used for the investment of cash collateral received from borrowers of securities seeks to maintain a NAV 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 NAV 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, 2015, the Fund had no securities out on loan.
10. Credit and Market Risk
The Fund invests a significant portion of its assets in small companies and may be subject to certain risks associated with ownership of securities of such companies. Investments in small-sized companies may be more volatile than investments in larger companies for a number of reasons, which include more limited financial resources or a dependence on narrow product lines.
The Fund invests in REITs and is subject to 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
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Notes to financial statements
Delaware Small Cap Value Fund
10. Credit and Market Risk (continued)
status as a regulated investment company may be jeopardized. There were no direct real estate holdings during the period ended Nov. 30, 2015. 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 promulgated under the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair the Fund from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, the Fund’s Board has delegated to DMC the day-to-day functions of determining whether individual securities are liquid for purposes of the Fund’s limitation on investments in illiquid securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Fund’s 15% limit on investments in illiquid securities. As of Nov. 30, 2015, there were no Rule 144A securities held by the Fund. Illiquid securities have been identified on the “Schedule of investments”.
11. Contractual Obligations
The Fund enters into contracts in the normal course of business that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Fund’s existing contracts and expects the risk of loss to be remote.
12. Recent Accounting Pronouncements
In June 2014, the FASB issued guidance to improve the financial reporting of reverse repurchase agreements and other similar transactions. The guidance includes expanded disclosure requirements for entities that enter into reverse repurchase agreements and similar transactions accounted for as secured borrowings. The guidance is effective for financial statements with fiscal years beginning on or after Dec. 15, 2014 and interim periods within those fiscal years. Management has determined that this pronouncement has no impact to the Fund’s financial statements.
In May 2015, the FASB issued Accounting Standards Update (“ASU”) No. 2015-07 regarding “Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share.” The amendments in this update are effective for the Fund for fiscal years beginning after Dec. 15, 2015, and interim periods within those fiscal years. ASU No. 2015-07 will eliminate the requirement to categorize investments in the fair value hierarchy if the fair value is measured at NAV per share (or its equivalent) using the practical expedient in the FASB’s fair value measurement guidance. Management is evaluating the impact, if any, of this guidance on the Fund’s financial statement disclosures.
13. Subsequent Events
Management has determined that no other material events or transactions occurred subsequent to Nov. 30, 2015 that would require recognition or disclosure in the Fund’s financial statements.
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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, 2015, 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 five 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, 2015 by correspondence with the custodian and brokers and the application of alternative auditing procedures where confirmations of security purchases had not been received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
January 21, 2016
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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 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, 2015, the Fund reports distributions paid during the year as follows:
(A) Long-Term Capital Gain Distributions (Tax Basis) | 77.35 | % | ||
(B) Ordinary Income Distributions (Tax Basis)* | 22.65 | % | ||
Total Distributions (Tax Basis) | 100.00 | % | ||
(C) Qualifying Dividends1 | 99.66 | % |
(A) and (B) is based on a percentage of the Fund’s total distributions.
(C) is based on a percentage of the Fund’s ordinary income distributions.
1 | Qualifying dividends represent dividends which qualify for the corporate dividends received deduction. |
* | For the fiscal year ended Nov. 30, 2015, certain dividends paid by the Fund may be subject to a maximum tax rate of 20%. The percentage of dividends paid by the Fund from ordinary income reported as qualified dividend income is 100.00%. Complete information will be computed and reported in conjunction with your 2015 Form 1099-DIV. |
For the fiscal year ended Nov. 30, 2015, certain interest income paid by the Fund, has been determined to be Qualified Interest Income and Short-Term Capital Gains, and may be subject to relief from U.S. withholding for foreign shareholders, as provided by the American Jobs Creation Act of 2004; the 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, 2015, the Fund has reported maximum distributions of Qualified Interest Income and Short-Term Capital Gains of $5,909 and $19,613,244, respectively.
Board consideration of Delaware Small Cap Value Fund investment management agreement
At a meeting held on Aug. 18–20, 2015 (the “Annual Meeting”), the Board of Trustees (collectively referred to here as 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 Management Agreement with Delaware Management Company (“DMC”) included materials provided by DMC and its affiliates (“Delaware Investments”) concerning, among other things, the nature, extent, and quality of services provided to the Fund; the costs of such services to the Fund; economies of scale; and the investment manager’s financial condition and profitability. In addition, in connection with the Annual
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Meeting, reports were provided to the Trustees in May 2015 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. In addition to the information noted above, the Board also requested and received information regarding DMC’s policy with respect to advisory fee levels and its breakpoint philosophy; the structure of portfolio manager compensation; comparative client fee information; and any constraints or limitations on the availability of securities for certain investment styles, which had in the past year inhibited, or which were likely in the future to inhibit, the investment manager’s ability to invest fully in accordance with Fund policies.
In considering information relating to the approval of the Fund’s advisory agreement, the Independent Trustees received assistance and advice from and met separately with independent legal counsel to the Independent Trustees. They also engaged a consultant to assist them in analyzing portions of the data received. The Independent Trustees reviewed and discussed with such consultant two reports prepared by the consultant with respect to such data. Although the Board gave attention to all information furnished, the following discussion identifies, under separate headings, the primary factors taken into account by the Board during its contract renewal considerations.
Nature, extent, and quality of service. The Board considered the services provided by DMC to the Fund and its shareholders. In reviewing the nature, extent, and quality of services, the Board considered reports furnished to it throughout the year, which covered matters such as the relative performance of the Fund; compliance of portfolio managers with the investment policies, strategies, and restrictions for the Fund; compliance by DMC and Delaware Distributors, L.P. (together, “Management”) personnel with the Code of Ethics adopted throughout the Delaware Investments® Family of Funds complex; and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of the Fund’s investment adviser and the emphasis placed on research in the investment process. The Board recognized DMC’s receipt of several industry distinctions during the past several years. The Board gave favorable consideration to DMC’s efforts to control expenditures while maintaining service levels committed to Fund matters. The Board noted that, in the third and fourth quarters of 2013, Management reduced the maximum 12b-1 fee for certain Funds, and in November 2013 Management negotiated a substantial reduction in fees for fund accounting services provided to the Funds. 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 DMC.
Lipper currently classifies the Fund as a small-cap core fund. However, Management believes that, because the Fund utilizes a value investment philosophy and process, it would be more appropriate to include the Fund in the small-cap value 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
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Other Fund information (Unaudited)
Delaware Small Cap Value Fund
Board consideration of Delaware Small Cap Value Fund investment management agreement (continued)
report comparison showed that the Fund’s total return for the 1-, 3-, and 10-year periods was in the third quartile of its Performance Universe and the Fund’s total return for the 5-year period was in the second quartile of its Performance Universe. When compared to other small-cap value funds, the Lipper report comparison showed that the Fund’s total return for the 1-, 5-, and 10-year periods was in the second quartile of the Performance Universe. The report further showed that the Fund’s total return for the 3-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 to the Board.
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 DMC 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.
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 second lowest expenses of its Expense Group. When compared to other small-cap value funds, the expense comparisons for the Fund showed that its actual management fee and total expenses were in the quartile with the lowest expenses of its Expense Group. The Board 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 DMC in connection with the operation of the Fund. In this respect, the Board reviewed the Investment Management Profitability Analysis that addressed the overall profitability of DMC’s business in providing management and other services to each of the individual funds and the Delaware Investments Family of Funds as a whole. Specific attention was given to the methodology followed in allocating costs for the purpose of determining profitability. Management stated that the level of profits of DMC, to a certain extent, reflects recent operational cost savings and efficiencies initiated by DMC. The Board considered DMC’s efforts to improve services provided to fund shareholders and to meet additional regulatory and compliance requirements resulting from recent industry-wide Securities and Exchange Commission initiatives. The Board also considered the extent to which DMC might derive ancillary benefits from fund operations, including the potential for procuring additional business as a result of the prestige and visibility associated with its role as service provider to the Delaware Investments Family of Funds and the benefits
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from allocation of fund brokerage to improve trading efficiencies. The Board found that the management fees were reasonable in light of the services rendered and the level of profitability of DMC.
Economies of scale. The Trustees considered whether economies of scale are realized by DMC as the Fund’s assets increase and the extent to which any economies of scale are reflected in the level of management fees charged. The Trustees reviewed the standardized advisory fee pricing and structure, approved by the Board and shareholders, which includes breakpoints, and which applies to most funds in the Delaware Investments® Family of Funds complex. Breakpoints in the advisory fee occur when the advisory fee rate is reduced on assets in excess of specified levels. Breakpoints result in a lower advisory fee than would otherwise be the case in the absence of breakpoints, when the asset levels specified in the breakpoints are exceeded. The Board noted that the fee under the Fund’s management contract fell within the standardized fee pricing structure. The Board also noted that the Fund’s assets exceeded the final breakpoint level. The Board believed that, given the extent to which economies of scale might be realized by the advisor and its affiliates, the schedule of fees under the Investment Management Agreement 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 Trustee
| ||||
Shawn K. Lytle1 | President, | Trustee since | ||
2005 Market Street | Chief Executive Officer, | September 2015 | ||
Philadelphia, PA 19103 | and Trustee | |||
February 1970 | President and | |||
Chief Executive Officer | ||||
since August 2015 | ||||
Independent Trustees
| ||||
Thomas L. Bennett | Chairman and Trustee | Trustee since | ||
2005 Market Street | March 2005 | |||
Philadelphia, PA 19103 | ||||
October 1947 | Chairman since | |||
March 2015 | ||||
Ann D. Borowiec | Trustee | Since March 2015 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
November 1958 | ||||
Joseph W. Chow | Trustee | Since January 2013 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
January 1953 | ||||
1 Shawn K. Lytle 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 the Past Five Years | by Trustee or Officer | Held by Trustee or Officer | ||
| ||||
Shawn K. Lytle has served as | 65 | Trustee — UBS | ||
President of | Relationship Funds, | |||
Delaware Investments2 | SMA Relationship | |||
since June 2015 and was the | Trust, and UBS Funds | |||
Regional Head of Americas for | (May 2010–April 2015) | |||
UBS Global Asset | ||||
Management from | ||||
2010 through 2015. | ||||
| ||||
Private Investor | 65 | Director — | ||
(March 2004–Present) | Bryn Mawr Bank Corp. (BMTC) | |||
(2007–2011) | ||||
Chief Executive Officer | 65 | None | ||
Private Wealth Management | ||||
(2011–2013) and | ||||
Market Manager, | ||||
New Jersey Private | ||||
Bank (2005–2011) — | ||||
J.P. Morgan Chase & Co. | ||||
Executive Vice President | 65 | Director and Audit Committee | ||
(Emerging Economies | Member — Hercules | |||
Strategies, Risks, and | Technology Growth | |||
Corporate Administration) | Capital, Inc. | |||
State Street Corporation | (2004–2014) | |||
(July 2004–March 2011) |
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)
| ||||
John A. Fry | Trustee | Since January 2001 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
May 1960 | ||||
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 | ||||
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Number of Portfolios in | ||||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships | ||
During the Past Five Years | by Trustee or Officer | Held by Trustee or Officer | ||
| ||||
President — | 65 | Director — Hershey Trust | ||
Drexel University | Company | |||
(August 2010–Present) | ||||
Director, Audit Committee, | ||||
President — | and Governance Committee | |||
Franklin & Marshall College | Member — Community | |||
(July 2002–July 2010) | Health Systems | |||
Director — Drexel | ||||
Morgan & Co. | ||||
Private Investor | 65 | None | ||
(2004–Present) | ||||
Chief Executive Officer — | 65 | Trust Manager and | ||
Banco Itaú | 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) |
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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)
| ||||
Thomas K. Whitford | Trustee | Since January 2013 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
March 1956 | ||||
Janet L. Yeomans | Trustee | Since April 1999 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
July 1948 | ||||
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Number of Portfolios in | ||||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships | ||
During the Past Five Years | by Trustee or Officer | Held by Trustee or Officer | ||
| ||||
Vice Chairman | 65 | Director — HSBC Finance | ||
(2010–April 2013), | Corporation and HSBC | |||
Chief Administrative | North America Holdings Inc. | |||
Officer (2008–2010), | ||||
and Executive Vice | Director — | |||
President and Chief | HSBC Bank | |||
Administrative Officer | ||||
(2007–2009) — | ||||
PNC Financial | ||||
Services Group | ||||
Vice President and Treasurer | 65 | Director, Audit and | ||
(January 2006–July 2012) | Compliance Committee Chair, | |||
Vice President — | Investment Committee | |||
Mergers & Acquisitions | Member, and Governance | |||
(January 2003–January 2006), | Committee Member — | |||
and Vice President | Okabena Company | |||
and Treasurer | ||||
(July 1995–January 2003) | Chair — 3M | |||
3M Corporation | Investment Management | |||
Company | ||||
(2005–2012) |
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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 | General Counsel, | since May 2013; | ||
Philadelphia, PA 19103 | and Secretary | General Counsel | ||
December 1963 | since May 2015; | |||
Secretary since | ||||
October 2005 | ||||
Daniel V. Geatens | Vice President | Treasurer since October 2007 | ||
2005 Market Street | and Treasurer | |||
Philadelphia, PA 19103 | ||||
October 1972 | ||||
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 the Past Five Years | by Trustee or Officer | Held by Trustee or Officer | ||
| ||||
David F. Connor has served as | 65 | None3 | ||
Senior Vice President of the Fund(s) and the investment advisor since 2013, General Counsel of the Fund(s) and the investment advisor since 2015, and Secretary of the Fund(s) and the investment advisor since 2005.
| ||||
Daniel V. Geatens has served | 65 | None3 | ||
as Vice President and | ||||
Treasurer of the Fund(s) since 2007 and Vice President and Director of Financial | ||||
Administration of the investment advisor since 2010.
| ||||
Richard Salus has served as | 65 | None3 | ||
Senior Vice President and Chief Financial Officer of the Fund(s) and the investment advisor since 2006.
|
3 | David F. Connor, Daniel V. Geatens, 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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Board of trustees | ||||||
Shawn K. Lytle President and Chief Executive Officer Delaware Investments® Family of Funds Philadelphia, PA
Thomas L. Bennett Chairman of the Board Delaware Investments Family of Funds Private Investor Rosemont, PA | Ann D. Borowiec Former Chief Executive Officer Private Wealth Management J.P. Morgan Chase & Co. New York, NY
Joseph W. Chow Former Executive Vice President State Street Corporation Boston, MA | John A. Fry President Drexel University Philadelphia, PA
Lucinda S. Landreth Former Chief Investment Officer Assurant, Inc. New York, NY | Frances A. Sevilla-Sacasa Chief Executive Officer Banco Itaú International Miami, FL
Thomas K. Whitford Former Vice Chairman PNC Financial Services Group Pittsburgh, PA
Janet L. Yeomans Former Vice President and Treasurer 3M Corporation St. Paul, MN | |||
Affiliated officers | ||||||
David F. Connor | Daniel V. Geatens | Richard Salus | ||||
Senior Vice President, | Vice President and | Senior Vice President and | ||||
General Counsel, | Treasurer | Chief Financial Officer | ||||
and Secretary | Delaware Investments | Delaware Investments | ||||
Delaware Investments | Family of Funds | Family of Funds | ||||
Family of Funds | Philadelphia, PA | Philadelphia, PA | ||||
Philadelphia, PA |
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 Schedule of Investments included in the Fund’s most recent Form N-Q 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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Annual report
U.S. equity mutual fund
Delaware Small Cap Core Fund
November 30, 2015
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.
Table of Contents
Experience Delaware Investments
Delaware Investments is committed to the pursuit of consistently superior asset management and unparalleled client service. We believe in our investment processes, which seek to deliver consistent results, and in convenient services that help add value for our clients.
If you are interested in learning more about creating an investment plan, contact your financial advisor.
You can learn more about Delaware Investments or obtain a prospectus for Delaware 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.
Neither Delaware Investments nor its affiliates noted in this document are authorized deposit-taking institutions for the purpose of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited ( MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise.
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4 | ||||
8 | ||||
10 | ||||
12 | ||||
18 | ||||
20 | ||||
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56 |
Unless otherwise noted, views expressed herein are current as of Nov. 30, 2015, and subject to change for events occurring after such date.
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.
© 2016 Delaware Management Holdings, Inc.
All third-party marks cited are the property of their respective owners.
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Portfolio management review | ||
Delaware Small Cap Core Fund | December 8, 2015 |
Performance preview (for the year ended November 30, 2015)
| ||||
Delaware Small Cap Core Fund (Class A shares)
| 1-year return | +4.86% | ||
Russell 2000® Index (benchmark)
| 1-year return | +3.51% |
Past performance does not guarantee future results.
For complete, annualized performance for Delaware Small Cap Core 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. Please see page 6 for a description of the index. 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 stocks exhibited a high degree of volatility during the fiscal year ended Nov. 30, 2015. After reaching a new high over the summer, the Russell 2000 Index generated a 1-year gain of 3.51%. The return of the Russell 2000® Growth Index was about 6% higher than the Russell 2000® Value Index. Companies able to generate earnings in line with, or in excess of, expectations were typically rewarded, while companies with disappointing earnings were penalized. Overall, valuations remained more attractive than a few years ago.
During calendar year 2015, economic output – as measured by gross domestic product (GDP) – continued to increase at a moderate pace. For the first three quarters of 2015, GDP was estimated to have advanced at an annual rate of slightly more than 2%, which is on par with the previous five years (data: U.S. Commerce Department). However, similar to the equities market, the economy has exhibited an uneven growth pattern from quarter to quarter. Overall, this has placed strain on companies’ abilities to accurately project guidance.
We have seen sluggishness in the industrial side of the economy, which has been in a waiting game for new orders to improve. According to a report released by the U.S. Federal Reserve on Nov. 17, 2015, capacity utilization for the industrial sector has declined slowly over the year,
with a recent reading of 77.5% (which is 2.6 percentage points below the long-term average).
Six years into the current economic expansion, the unemployment rate has been cut in half (from 10% in October 2009 to the most recent reading of 5%) (source: U.S. Labor Department). While this is a significant improvement, the Federal Reserve is not yet ready to declare that the labor market has reached full employment. Additionally, labor is being replaced by technology in several sectors of the U.S. economy, thus counteracting some of the wage pressure that typically emerges at this stage of an economic expansion. We will continue to monitor the employment situation with particular focus on wages and the size of the labor force. As of the date of this report, we are patiently waiting for the Fed to begin raising interest rates. After the Fed’s first move, subsequent rate hikes should be slow and measured, as policy makers have not wanted to surprise investors. We expect that sensitivity to continue.
Within the Fund
For the fiscal year ended Nov. 30, 2015, Delaware Small Cap Core Fund (Class A shares with all distributions reinvested) returned +4.86% at net asset value and
-1.19% at maximum offer price. For the same period, the Fund’s benchmark, the Russell 2000 Index, returned +3.51%. For
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Portfolio management review
Delaware Small Cap Core Fund
complete annualized performance of Delaware Small Cap Core Fund, please see the table on page 4.
Relative portfolio performance was strong during the fiscal year, with stock selection in the finance sector contributing the most to relative outperformance. Finance was the strongest performing sector both in the Fund and in the benchmark. Within the sector, stock selection among the bank industry was most beneficial to performance. During the fiscal year, we exited one bank, Susquehanna Bancshares, which was purchased by BB&T, and added four new banks: CoBiz Financial, FirstMerit, Great Western Bancorp, and Old National Bancorp.
Stock selection in the technology sector added value, particularly in the software industry. A leading contributor was Proofpoint, which gained 69% during the fiscal year. Proofpoint provides enterprise data security protection from a security-as-a-service platform. The company added a number of clients during the period as cyber-security threats have been on the rise. We continue to favor the company as we believe it has a great product and should continue to gain market share.
FARO Technologies fell 55% during the fiscal year and detracted from the Fund’s performance. FARO Technologies makes 3D documentation tools, laser scanners, and portable coordinate-measuring machines that are used throughout the world in a variety of industries. The company missed sales estimates and lowered guidance over the fiscal year. Additionally, after 11 years with the company, the CEO resigned. These issues drove us to exit the Fund’s position.
The Fund generated an excess return in the healthcare sector, with two stocks performing strongly: Ligand Pharmaceuticals and Dexcom. Ligand, which was purchased during the fiscal year, returned 104%. The company’s business model is focused on internal drug development and the acquisition of royalty-revenue generating
assets from biotechnology and pharmaceutical companies. We continue to favor shares of Ligand based on its diversified business model and what we see as an attractive pipeline of potential new drugs.
Dexcom’s main business involves the development of continuous glucose monitoring systems for people with diabetes. The company’s shares appreciated 61% during the fiscal year. Although we remain positive on the company’s fundamentals, we exited the Fund’s position as the company’s growth in market capitalization reached the point where it graduated from the Russell 2000 Index to the Russell 1000® Index in June.
Also within the healthcare sector, life science tools and diagnostics company Cepheid fell by 35%. Cepheid detracted from the Fund’s returns during the fiscal year as the company’s expenses led to earnings misses and guidance cuts. The company has a unique molecular diagnostic instrument, the GeneXpert, and positive long-term growth potential.
On the negative side, the weakest-performing sector in the Fund was consumer services. We only have exposure to the restaurant industry, which relatively underperformed the other three industries in consumer services: airlines, gambling, and travel. Del Frisco’s Restaurant Group was a notable detractor as high-end steakhouse sales softened. We continue to view the company’s outlook as positive. Del Frisco’s has taken action to close underperforming restaurants in addition to revamping its management structure.
The Fund’s performance in the consumer discretionary sector detracted from overall returns and was led by the 59% decline in Boot Barn Holdings, a lifestyle retail chain devoted to western apparel, footwear, and accessories. Integration costs put pressure on the company’s stock after it acquired competitor Sheplers. The acquisition should enable Boot Barn to increase
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online sales. We continue to have a positive outlook for Boot Barn since the company is still in the early stages of growth and with more than 200 stores, is now the largest western lifestyle retailer in the United States.
Stock selection in the transportation sector detracted from relative performance. Within this sector of the benchmark, the railroad and trucking industries were negative during the fiscal year. While the Fund does not have exposure to railroads, it was hurt by two trucking companies. Roadrunner Transportation Systems was down 52%, and we exited that position. We remain invested in Swift Transportation, which was down 45%. Swift, with a fleet of more than 18,000 trucks, is the largest public truckload carrier and has taken steps to achieve better use of its fleet and improve the company’s cash flow.
While stock selection in the energy sector was strong during the fiscal year, energy was the weakest-performing sector in the benchmark. Much of the sector’s pressure was related to the falling price of oil. We sold the Fund’s positions in oil industry service providers C&J Energy Services and Pioneer Energy Services as we expected the outlook for this industry to come under pricing pressure from exploration and production companies.
Stock selection in the communications services sector also detracted from returns. Within the sector, RigNet, a provider of fully-managed voice and data networks for the oil and gas industry, fell 46% during the period. The stock’s decline was mainly the result of the company’s exposure to the energy sector. We continue to own this stock, believing that the company’s unique business model should allow it to respond well to stabilization and recovery in the energy markets.
The Fund ended the period with the largest overweight positions in the finance, basic materials, and capital goods sectors. The Fund’s largest underweights were in the utilities, real
estate investment trusts (REITs), and credit cyclicals sectors. On balance, we believe the unsettled macroeconomic environment continues to render U.S. equities an active manager’s market, in which outperformance can potentially be generated through thorough company-by-company analysis. 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 ability to deliver value to shareholders.
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Performance summary | ||
Delaware Small Cap Core Fund | November 30, 2015 |
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, 2015 | |||||
1 year | 5 years | 10 years | ||||
Class A (Est. Dec. 29, 1998) | ||||||
Excluding sales charge | +4.86% | +14.64% | +7.88% | |||
Including sales charge | -1.19% | +13.29% | +7.25% | |||
Class C (Est. Aug. 1, 2005) | ||||||
Excluding sales charge | +4.11% | +13.78% | +7.07% | |||
Including sales charge | +3.13% | +13.78% | +7.07% | |||
Class R (Est. Aug. 1, 2005) | ||||||
Excluding sales charge | +4.60% | +14.33% | +7.63% | |||
Including sales charge | +4.60% | +14.33% | +7.63% | |||
Institutional Class (Est. Dec. 29, 1998) | ||||||
Excluding sales charge | +5.15% | +14.93% | +8.15% | |||
Including sales charge | +5.15% | +14.93% | +8.15% | |||
Russell 2000 Index | +3.51% | +12.02% | +7.31% |
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 and benchmark performance” table. 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. 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.
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.
Institutional Class shares are available without sales or asset-based distribution charges only to certain eligible institutional accounts.
Narrowly focused investments may exhibit higher volatility than investments in multiple industry sectors.
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Investments in small and/or medium-sized companies typically exhibit greater risk and higher volatility than larger, more established companies.
REIT investments are subject to many of the risks associated with direct real estate ownership, including changes in economic conditions, credit risk, and interest rate fluctuations.
International investments entail risks not ordinarily associated with U.S. investments including
fluctuation in currency values, differences in accounting principles, or economic or political instability in other nations.
Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility and lower trading volume.
2The Fund’s expense ratios, as described in the most recent prospectus, are disclosed in the following “Fund expense ratios” table.
Fund expense ratios | Class A | Class C | Class R | Institutional Class | ||||
Total annual operating expenses (without fee waivers) | 1.32% | 2.07% | 1.57% | 1.07% | ||||
Net expenses (including fee waivers, if any) | 1.32% | 2.07% | 1.57% | 1.07% | ||||
Type of waiver | n/a | n/a | n/a | n/a | ||||
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Performance summary
Delaware Small Cap Core Fund
Performance of a $10,000 investment1
Average annual total returns from Nov. 30, 2005 through Nov. 30, 2015
1 The “Performance of a $10,000 investment” graph assumes $10,000 invested in Class A shares of the Fund on Nov. 30, 2005, 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 7.
The graph also assumes $10,000 invested in the Russell 2000 Index as of Nov. 30, 2005. 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 2, measures the performance of the large-cap segment of the U.S. equity universe.
The Russell 2000 Growth Index, mentioned on page 1, measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values.
The Russell 2000 Value Index, mentioned on page 1, 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.
Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Russell® is a trademark of Russell Investment Group.
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.
6
Table of Contents
Nasdaq symbols | CUSIPs | |||
Class A | DCCAX | 24610B883 | ||
Class C | DCCCX | 24610B867 | ||
Class R | DCCRX | 24610B834 | ||
Institutional Class
| DCCIX
| 24610B859
|
7
Table of Contents
For the six-month period from June 1, 2015 to November 30, 2015 (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, 2015 to Nov. 30, 2015.
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 expenses shown in the table assume reinvestment of all dividends and distributions.
8
Table of Contents
Delaware Small Cap Core Fund
Expense analysis of an investment of $1,000
Beginning | Ending | Expenses | ||||||||||||||||||
Account Value | Account Value | Annualized | Paid During Period | |||||||||||||||||
6/1/15 | 11/30/15 | Expense Ratio | 6/1/15 to 11/30/15* | |||||||||||||||||
Actual Fund return† | ||||||||||||||||||||
Class A | $1,000.00 | $1,007.90 | 1.30 | % | $6.54 | |||||||||||||||
Class C | 1,000.00 | 1,003.70 | 2.05 | % | 10.30 | |||||||||||||||
Class R | 1,000.00 | 1,006.10 | 1.55 | % | 7.79 | |||||||||||||||
Institutional Class | 1,000.00 | 1,008.80 | 1.05 | % | 5.29 | |||||||||||||||
Hypothetical 5% return (5% return before expenses) | ||||||||||||||||||||
Class A | $1,000.00 | $1,018.55 | 1.30 | % | $6.58 | |||||||||||||||
Class C | 1,000.00 | 1,014.79 | 2.05 | % | 10.35 | |||||||||||||||
Class R | 1,000.00 | 1,017.30 | 1.55 | % | 7.84 | |||||||||||||||
Institutional Class | 1,000.00 | 1,019.80 | 1.05 | % | 5.32 |
* | “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
Table of Contents
Security type / sector allocation and
top 10 equity holdings
Delaware Small Cap Core Fund | As of November 30, 2015 (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 | 97.72% | |
Basic Materials | 7.05% | |
Business Services | 5.56% | |
Capital Goods | 9.14% | |
Communications Services | 1.61% | |
Consumer Discretionary | 3.45% | |
Consumer Services | 4.18% | |
Consumer Staples | 2.22% | |
Credit Cyclicals | 1.03% | |
Energy | 2.12% | |
Financials | 18.36% | |
Healthcare | 15.10% | |
Media | 0.59% | |
Real Estate | 6.89% | |
Technology | 17.71% | |
Transportation | 1.04% | |
Utilities | 1.67% | |
Short-Term Investments | 1.77% | |
Total Value of Securities | 99.49% | |
Receivables and Other Assets Net of Liabilities | 0.51% | |
Total Net Assets | 100.00% |
10
Table of Contents
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 | |
West Pharmaceutical Services | 1.23% | |
j2 Global | 1.21% | |
Tyler Technologies | 1.21% | |
Ligand Pharmaceuticals Class B | 1.17% | |
Sterling Bancorp | 1.13% | |
Synaptics | 1.12% | |
Proofpoint | 1.11% | |
Acorda Therapeutics | 1.06% | |
Barnes Group | 1.05% | |
Minerals Technologies
| 1.05%
|
11
Table of Contents
Delaware Small Cap Core Fund | November 30, 2015 |
Number of shares | Value (U.S. $) | |||||||
| ||||||||
Common Stock – 97.72% | ||||||||
| ||||||||
Basic Materials – 7.05% | ||||||||
Axiall | 136,200 | $ | 2,838,408 | |||||
Balchem | 70,700 | 4,842,243 | ||||||
Boise Cascade † | 163,765 | 5,125,845 | ||||||
Chemtura † | 179,800 | 5,523,456 | ||||||
Continental Building Products † | 435,000 | 7,934,400 | ||||||
Kaiser Aluminum | 95,100 | 8,151,972 | ||||||
Minerals Technologies | 173,200 | 10,658,728 | ||||||
Neenah Paper | 143,900 | 9,565,033 | ||||||
Quaker Chemical | 88,800 | 7,568,424 | ||||||
Worthington Industries | 302,900 | 9,320,233 | ||||||
|
| |||||||
71,528,742 | ||||||||
|
| |||||||
Business Services – 5.56% | ||||||||
Convergys | 379,800 | 9,783,648 | ||||||
Essendant | 249,900 | 9,051,378 | ||||||
Kforce | 359,175 | 9,676,175 | ||||||
On Assignment † | 225,900 | 10,545,012 | ||||||
TeleTech Holdings | 213,900 | 6,207,378 | ||||||
U.S. Ecology | 100,780 | 3,813,515 | ||||||
WageWorks † | 170,693 | 7,261,280 | ||||||
|
| |||||||
56,338,386 | ||||||||
|
| |||||||
Capital Goods – 9.14% | ||||||||
AAON | 364,030 | 8,995,181 | ||||||
Actuant Class A | 181,600 | 4,496,416 | ||||||
Applied Industrial Technologies | 214,840 | 9,162,926 | ||||||
Barnes Group | 276,800 | 10,662,336 | ||||||
Columbus McKinnon | 346,761 | 7,157,147 | ||||||
ESCO Technologies | 234,587 | 9,202,848 | ||||||
Esterline Technologies † | 30,500 | 2,899,940 | ||||||
Federal Signal | 359,300 | 6,057,798 | ||||||
Granite Construction | 242,241 | 9,876,166 | ||||||
Kadant | 163,238 | 7,069,838 | ||||||
KLX † | 127,900 | 4,105,590 | ||||||
MYR Group † | 207,300 | 4,394,760 | ||||||
Rofin-Sinar Technologies † | 50,400 | 1,448,496 | ||||||
Tetra Tech | 257,100 | 7,144,809 | ||||||
|
| |||||||
92,674,251 | ||||||||
|
| |||||||
Communications Services – 1.61% | ||||||||
Atlantic Tele-Network | 96,284 | 7,574,662 | ||||||
InterXion Holding † | 157,391 | 4,835,052 | ||||||
RigNet † | 178,901 | 3,951,923 | ||||||
|
| |||||||
16,361,637 | ||||||||
|
|
12
Table of Contents
Number of shares | Value (U.S. $) | |||||||
| ||||||||
Common Stock (continued) | ||||||||
| ||||||||
Consumer Discretionary – 3.45% | ||||||||
Boot Barn Holdings † | 337,800 | $ | 3,546,900 | |||||
Express † | 440,600 | 7,375,644 | ||||||
G-III Apparel Group † | 218,100 | 10,004,247 | ||||||
Madden (Steven) † | 250,850 | 8,002,115 | ||||||
Malibu Boats Class A † | 387,100 | 6,007,792 | ||||||
|
| |||||||
34,936,698 | ||||||||
|
| |||||||
Consumer Services – 4.18% | ||||||||
Buffalo Wild Wings † | 26,920 | 4,313,661 | ||||||
Cheesecake Factory | 169,500 | 7,988,535 | ||||||
Del Frisco’s Restaurant Group † | 416,600 | 6,244,834 | ||||||
Fiesta Restaurant Group † | 176,600 | 6,786,738 | ||||||
Jack in the Box | 111,180 | 8,242,885 | ||||||
Popeyes Louisiana Kitchen † | 153,000 | 8,852,580 | ||||||
|
| |||||||
42,429,233 | ||||||||
|
| |||||||
Consumer Staples – 2.22% | ||||||||
Casey’s General Stores | 86,500 | 10,057,355 | ||||||
J&J Snack Foods | 55,886 | 6,520,778 | ||||||
Prestige Brands Holdings † | 116,100 | 5,908,329 | ||||||
|
| |||||||
22,486,462 | ||||||||
|
| |||||||
Credit Cyclicals – 1.03% | ||||||||
Tenneco † | 193,000 | 10,398,840 | ||||||
|
| |||||||
10,398,840 | ||||||||
|
| |||||||
Energy – 2.12% | ||||||||
Bonanza Creek Energy † | 240,900 | 2,045,241 | ||||||
Bristow Group | 64,450 | 1,968,947 | ||||||
Carrizo Oil & Gas † | 213,700 | 8,629,206 | ||||||
Parsley Energy Class A † | 163,500 | 3,212,775 | ||||||
RSP Permian † | 200,315 | 5,684,940 | ||||||
|
| |||||||
21,541,109 | ||||||||
|
| |||||||
Financials – 18.36% | ||||||||
American Equity Investment Life Holding | 308,000 | 8,257,480 | ||||||
BBCN Bancorp | 460,280 | 8,703,895 | ||||||
Bryn Mawr Bank | 74,200 | 2,207,450 | ||||||
Cardinal Financial | 276,500 | 6,801,900 | ||||||
City Holding | 170,884 | 8,530,529 | ||||||
CoBiz Financial | 307,900 | 4,224,388 | ||||||
Evercore Partners Class A | 165,800 | 9,206,874 | ||||||
First NBC Bank Holding † | 197,300 | 8,353,682 | ||||||
FirstMerit | 478,900 | 9,688,147 | ||||||
Flushing Financial | 298,700 | 6,801,399 | ||||||
Great Western Bancorp | 283,400 | 8,564,348 |
13
Table of Contents
Schedule of investments
Delaware Small Cap Core Fund
Number of shares | Value (U.S. $) | |||||||
| ||||||||
Common Stock (continued) | ||||||||
| ||||||||
Financials (continued) | ||||||||
Houlihan Lokey | 160,000 | $ | 3,912,000 | |||||
Independent Bank @ | 124,900 | 6,462,326 | ||||||
Infinity Property & Casualty @ | 71,200 | 6,087,600 | ||||||
Old National Bancorp | 591,000 | 8,717,250 | ||||||
Primerica | 189,100 | 9,689,484 | ||||||
Prosperity Bancshares | 188,200 | 10,428,162 | ||||||
Selective Insurance Group @ | 245,800 | 8,482,558 | ||||||
Sterling Bancorp | 651,600 | 11,429,064 | ||||||
Stifel Financial † | 224,000 | 10,160,640 | ||||||
Texas Capital Bancshares † | 107,700 | 6,384,456 | ||||||
United Fire Group | 132,873 | 5,318,906 | ||||||
Webster Financial | 207,200 | 8,331,512 | ||||||
Western Alliance Bancorp † | 243,100 | 9,429,849 | ||||||
|
| |||||||
186,173,899 | ||||||||
|
| |||||||
Healthcare – 15.10% | ||||||||
Acorda Therapeutics † | 281,100 | 10,735,209 | ||||||
Air Methods † | 240,500 | 10,509,850 | ||||||
Catalent † | 326,700 | 9,098,595 | ||||||
Cepheid † | 216,100 | 7,766,634 | ||||||
CONMED | 189,440 | 8,051,200 | ||||||
CryoLife @ | 473,040 | 5,137,214 | ||||||
ICON † | 127,800 | 9,499,374 | ||||||
Insys Therapeutics † | 180,100 | 5,737,986 | ||||||
Ligand Pharmaceuticals Class B † | 111,000 | 11,885,880 | ||||||
Medicines † | 206,000 | 8,654,060 | ||||||
Merit Medical Systems † | 338,187 | 6,550,682 | ||||||
Quidel † | 333,200 | 7,227,108 | ||||||
Retrophin † | 257,400 | 5,752,890 | ||||||
Spectrum Pharmaceuticals † | 639,500 | 3,837,000 | ||||||
Team Health Holdings † | 152,100 | 8,386,794 | ||||||
TESARO † | 139,600 | 7,125,184 | ||||||
Vanda Pharmaceuticals † | 541,200 | 5,336,232 | ||||||
WellCare Health Plans † | 112,600 | 9,287,248 | ||||||
West Pharmaceutical Services | 197,920 | 12,478,856 | ||||||
|
| |||||||
153,057,996 | ||||||||
|
| |||||||
Media – 0.59% | ||||||||
National CineMedia | 376,050 | 5,967,913 | ||||||
|
| |||||||
5,967,913 | ||||||||
|
| |||||||
Real Estate – 6.89% | ||||||||
DCT Industrial Trust | 272,850 | 10,414,685 | ||||||
EastGroup Properties | 154,100 | 8,970,161 | ||||||
EPR Properties | 150,100 | 8,411,604 |
14
Table of Contents
Number of shares | Value (U.S. $) | |||||||
| ||||||||
Common Stock (continued) | ||||||||
| ||||||||
Real Estate (continued) | ||||||||
Kite Realty Group Trust | 374,900 | $ | 10,088,559 | |||||
LaSalle Hotel Properties | 250,800 | 7,075,068 | ||||||
Pebblebrook Hotel Trust | 217,400 | 6,924,190 | ||||||
Ramco-Gershenson Properties Trust | 535,600 | 9,035,572 | ||||||
Sovran Self Storage | 88,430 | 8,886,331 | ||||||
|
| |||||||
69,806,170 | ||||||||
|
| |||||||
Technology – 17.71% | ||||||||
Anixter International † | 93,350 | 6,362,736 | ||||||
Applied Micro Circuits † | 973,700 | 7,127,484 | ||||||
Callidus Software † | 462,000 | 9,586,500 | ||||||
ExlService Holdings † | 191,990 | 8,979,372 | ||||||
GrubHub † | 203,900 | 5,227,996 | ||||||
Guidewire Software † | 166,400 | 9,872,512 | ||||||
inContact † | 857,870 | 8,467,177 | ||||||
Infinera † | 312,300 | 7,032,996 | ||||||
j2 Global @ | 152,300 | 12,255,581 | ||||||
MaxLinear Class A † | 280,800 | 4,914,000 | ||||||
Microsemi † | 139,300 | 5,016,193 | ||||||
NETGEAR † | 125,910 | 5,553,890 | ||||||
Plantronics | 112,600 | 5,957,666 | ||||||
Proofpoint † | 153,600 | 11,260,416 | ||||||
Q2 Holdings † | 100,500 | 2,761,740 | ||||||
Qlik Technologies † | 233,100 | 7,414,911 | ||||||
Ruckus Wireless † | 307,200 | 3,517,440 | ||||||
SciQuest † | 435,371 | 5,620,640 | ||||||
Semtech † | 450,700 | 9,059,070 | ||||||
Shutterfly † | 171,300 | 7,862,670 | ||||||
Silicon Laboratories † | 86,400 | 4,675,104 | ||||||
Synaptics † | 126,320 | 11,339,746 | ||||||
Tyler Technologies † | 68,600 | 12,240,984 | ||||||
WNS Holdings ADR † | 241,598 | 7,429,139 | ||||||
|
| |||||||
179,535,963 | ||||||||
|
| |||||||
Transportation – 1.04% | ||||||||
Swift Transportation † | 202,000 | 3,225,940 | ||||||
XPO Logistics † | 241,200 | 7,356,600 | ||||||
|
| |||||||
10,582,540 | ||||||||
|
| |||||||
Utilities – 1.67% | ||||||||
Cleco | 104,500 | 5,236,495 |
15
Table of Contents
Schedule of investments
Delaware Small Cap Core Fund
Number of shares | Value (U.S. $) | |||||||
| ||||||||
Common Stock (continued) | ||||||||
| ||||||||
Utilities (continued) | ||||||||
NorthWestern | 169,600 | $ | 9,248,288 | |||||
South Jersey Industries | 105,300 | 2,417,688 | ||||||
|
| |||||||
16,902,471 | ||||||||
|
| |||||||
Total Common Stock (cost $947,950,309) | 990,722,310 | |||||||
|
| |||||||
Principal amount° | ||||||||
| ||||||||
Short-Term Investments – 1.77% | ||||||||
| ||||||||
Discount Notes – 1.30%≠ | ||||||||
Federal Home Loan Bank | ||||||||
0.12% 1/4/16 | 1,635,364 | 1,635,202 | ||||||
0.12% 1/25/16 | 1,288,287 | 1,288,081 | ||||||
0.14% 2/18/16 | 1,136,905 | 1,136,431 | ||||||
0.155% 2/3/16 | 1,079,824 | 1,079,459 | ||||||
0.17% 1/21/16 | 1,166,322 | 1,166,148 | ||||||
0.18% 2/26/16 | 956,456 | 956,017 | ||||||
0.18% 3/7/16 | 856,324 | 855,816 | ||||||
0.185% 1/19/16 | 698,972 | 698,872 | ||||||
0.19% 3/22/16 | 3,025,019 | 3,022,950 | ||||||
0.195% 12/2/15 | 989,982 | 989,980 | ||||||
0.295% 3/2/16 | 338,303 | 338,112 | ||||||
|
| |||||||
13,167,068 | ||||||||
|
| |||||||
Repurchase Agreements – 0.47% | ||||||||
Bank of America Merrill Lynch | 925,537 | 925,537 | ||||||
Bank of Montreal | 1,542,561 | 1,542,561 | ||||||
BNP Paribas | 2,273,902 | 2,273,902 | ||||||
|
| |||||||
4,742,000 | ||||||||
|
| |||||||
Total Short-Term Investments (cost $17,909,352) | �� | 17,909,068 | ||||||
|
| |||||||
Total Value of Securities – 99.49% | $ | 1,008,631,378 | ||||||
|
|
16
Table of Contents
@ | Illiquid security. At Nov. 30, 2015, the aggregate value of illiquid securities was $38,425,279, which represents 3.79% of the Fund’s net assets. See Note 10 in “Notes to financial statements.” |
≠ | The rate shown is the effective yield at the time of purchase. |
° | Principal amount shown is stated in U.S. dollars unless noted that the security is denominated in another currency. |
† | Non-income-producing security. |
ADR – American Depositary Receipt
See accompanying notes, which are an integral part of the financial statements.
17
Table of Contents
Statement of assets and liabilities | ||||
Delaware Small Cap Core Fund | November 30, 2015 |
Assets: | ||||
Investments, at value1 | $ | 990,722,310 | ||
Short-term investments, at value2 | 17,909,068 | |||
Cash | 322,627 | |||
Receivable for fund shares sold | 4,852,890 | |||
Receivables for securities sold | 3,533,068 | |||
Dividends and interest receivable | 761,917 | |||
|
| |||
Total assets | 1,018,101,880 | |||
|
| |||
Liabilities: | ||||
Payable for fund shares redeemed | 1,740,879 | |||
Payable for securities purchased | 1,226,126 | |||
Investment management fees payable | 587,779 | |||
Other accrued expenses | 455,986 | |||
Distribution fees payable to affiliates | 143,337 | |||
Other affiliates payable | 97,818 | |||
Trustees’ fees and expenses payable | 5,582 | |||
|
| |||
Total liabilities | 4,257,507 | |||
|
| |||
Total Net Assets | $ | 1,013,844,373 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 942,864,841 | ||
Accumulated net investment loss | (505,504 | ) | ||
Accumulated net realized gain on investments | 28,713,319 | |||
Net unrealized appreciation of investments | 42,771,717 | |||
|
| |||
Total Net Assets | $ | 1,013,844,373 | ||
|
|
18
Table of Contents
Net Asset Value | ||||||
Class A: | ||||||
Net assets | $ | 266,426,884 | ||||
Shares of beneficial interest outstanding, unlimited authorization, no par | 13,111,590 | |||||
Net asset value per share | $ | 20.32 | ||||
Sales charge | 5.75 | % | ||||
Offering price per share, equal to net asset value per share / (1 – sales charge) | $ | 21.56 | ||||
Class C: | ||||||
Net assets | $ | 99,019,273 | ||||
Shares of beneficial interest outstanding, unlimited authorization, no par | 5,266,676 | |||||
Net asset value per share | $ | 18.80 | ||||
Class R: | ||||||
Net assets | $ | 28,177,666 | ||||
Shares of beneficial interest outstanding, unlimited authorization, no par | 1,418,592 | |||||
Net asset value per share | $ | 19.86 | ||||
Institutional Class: | ||||||
Net assets | $ | 620,220,550 | ||||
Shares of beneficial interest outstanding, unlimited authorization, no par | 30,035,292 | |||||
Net asset value per share | $ | 20.65 | ||||
| ||||||
1Investments, at cost | $ | 947,950,309 | ||||
2Short-term investments, at cost | 17,909,352 |
See accompanying notes, which are an integral part of the financial statements.
19
Table of Contents
Statement of operations | ||||
Delaware Small Cap Core Fund | Year ended November 30, 2015 |
Investment Income: | ||||
Dividends | $ | 8,167,606 | ||
Interest | 15,502 | |||
|
| |||
8,183,108 | ||||
|
| |||
Expenses: | ||||
Management fees | 5,632,288 | |||
Distribution expenses – Class A | 508,855 | |||
Distribution expenses – Class C | 786,161 | |||
Distribution expenses – Class R | 120,007 | |||
Dividend disbursing and transfer agent fees and expenses | 1,474,320 | |||
Accounting and administration expenses | 245,191 | |||
Registration fees | 199,800 | |||
Reports and statements to shareholders | 197,702 | |||
Legal fees | 63,893 | |||
Custodian fees | 51,481 | |||
Trustees’ fees and expenses | 35,051 | |||
Audit and tax | 33,924 | |||
Other | 21,720 | |||
|
| |||
9,370,393 | ||||
Less expense paid indirectly | (260 | ) | ||
|
| |||
Total operating expenses | 9,370,133 | |||
|
| |||
Net Investment Loss | (1,187,025 | ) | ||
|
| |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain on investments | 30,515,993 | |||
Net change in unrealized appreciation (depreciation) of investments | (2,803,584 | ) | ||
|
| |||
Net Realized and Unrealized Gain | 27,712,409 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 26,525,384 | ||
|
|
See accompanying notes, which are an integral part of the financial statements.
20
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Table of Contents
Statements of changes in net assets
Delaware Small Cap Core Fund
Year ended | ||||||||
11/30/15 | 11/30/14 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (1,187,025 | ) | $ | (859,699 | ) | ||
Net realized gain | 30,515,993 | 24,458,446 | ||||||
Net change in unrealized appreciation (depreciation) | (2,803,584 | ) | (431,013 | ) | ||||
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|
| |||||
Net increase in net assets resulting from operations | 26,525,384 | 23,167,734 | ||||||
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| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net realized gain: | ||||||||
Class A | (7,433,888 | ) | (1,836,861 | ) | ||||
Class C | (3,048,397 | ) | (741,927 | ) | ||||
Class R | (896,555 | ) | (340,355 | ) | ||||
Institutional Class | (12,057,024 | ) | (2,110,959 | ) | ||||
|
|
|
| |||||
(23,435,864 | ) | (5,030,102 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Class A | 177,187,979 | 89,996,368 | ||||||
Class C | 53,178,029 | 28,493,872 | ||||||
Class R | 17,433,914 | 6,283,013 | ||||||
Institutional Class | 522,238,544 | 153,026,330 | ||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | 7,190,462 | 1,789,684 | ||||||
Class C | 2,974,938 | 717,211 | ||||||
Class R | 894,660 | 340,354 | ||||||
Institutional Class | 11,198,200 | 2,073,221 | ||||||
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| |||||
792,296,726 | 282,720,053 | |||||||
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22
Table of Contents
Year ended | ||||||||
11/30/15 | 11/30/14 | |||||||
Capital Share Transactions (continued): | ||||||||
Cost of shares redeemed: | ||||||||
Class A | $ | (53,711,295 | ) | $ | (30,740,706 | ) | ||
Class C | (8,612,152 | ) | (5,111,025 | ) | ||||
Class R | (5,834,993 | ) | (4,234,053 | ) | ||||
Institutional Class | (141,980,145 | ) | (22,031,878 | ) | ||||
|
|
|
| |||||
(210,138,585 | ) | (62,117,662 | ) | |||||
|
|
|
| |||||
Increase in net assets derived from capital share transactions | 582,158,141 | 220,602,391 | ||||||
|
|
|
| |||||
Net Increase in Net Assets | 585,247,661 | 238,740,023 | ||||||
Net Assets: | ||||||||
Beginning of year | 428,596,712 | 189,856,689 | ||||||
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|
|
| |||||
End of year | $ | 1,013,844,373 | $ | 428,596,712 | ||||
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| |||||
Accumulated net investment loss | $ | 505,504 | $ | – | ||||
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|
|
See accompanying notes, which are an integral part of the financial statements.
23
Table of Contents
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 loss1 |
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 loss to average net assets |
Ratio of net investment loss to average net assets prior to fees waived |
Portfolio turnover |
1 | The average shares outstanding method has been applied for per share information. |
2 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during some of the periods shown reflects waivers by the manager and/or distributor. Performance would have been lower had the waivers not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
24
Table of Contents
Year ended | ||||||||||||||||||||
11/30/15 | 11/30/14 | 11/30/13 | 11/30/12 | 11/30/11 | ||||||||||||||||
| ||||||||||||||||||||
$ |
20.430 |
| $ | 19.540 | $ | 13.560 | $ | 12.010 | $ | 11.150 | ||||||||||
(0.044 | ) | (0.059 | ) | (0.036 | ) | (0.022 | ) | (0.024 | ) | |||||||||||
1.012 | 1.447 | 6.027 | 1.572 | 0.928 | ||||||||||||||||
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0.968 | 1.388 | 5.991 | 1.550 | 0.904 | ||||||||||||||||
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|
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| |||||||||||
— | — | (0.011 | ) | — | (0.044 | ) | ||||||||||||||
(1.078 | ) | (0.498 | ) | — | — | — | ||||||||||||||
|
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| |||||||||||
(1.078 | ) | (0.498 | ) | (0.011 | ) | — | (0.044 | ) | ||||||||||||
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| |||||||||||
$ | 20.320 | $ | 20.430 | $ | 19.540 | $ | 13.560 | $ | 12.010 | |||||||||||
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| |||||||||||
4.86% | 7.28% | 44.21% | 12.91% | 8.10% | ||||||||||||||||
$ | 266,427 | $ | 136,070 | $ | 69,386 | $ | 25,084 | $ | 24,242 | |||||||||||
1.28% | 1.32% | 1.31% | 1.36% | 1.39% | ||||||||||||||||
1.28% | 1.32% | 1.35% | 1.41% | 1.45% | ||||||||||||||||
(0.22% | ) | (0.30% | ) | (0.22% | ) | (0.17% | ) | (0.20% | ) | |||||||||||
(0.22% | ) | (0.30% | ) | (0.26% | ) | (0.22% | ) | (0.26% | ) | |||||||||||
| 38%
|
|
| 30%
|
|
| 38%
|
|
| 37%
|
|
| 42%
|
|
25
Table of Contents
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 |
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 |
1 | The average shares outstanding method has been applied for per share information. |
2 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during some of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
26
Table of Contents
Year ended | ||||||||||||||||||||
11/30/15 | 11/30/14 | 11/30/13 | 11/30/12 | 11/30/11 | ||||||||||||||||
| ||||||||||||||||||||
$ |
19.110 |
| $ | 18.450 | $ | 12.890 | $ | 11.510 | $ | 10.720 | ||||||||||
(0.180 | ) | (0.193 | ) | (0.152 | ) | (0.115 | ) | (0.112 | ) | |||||||||||
0.948 | 1.351 | 5.712 | 1.495 | 0.902 | ||||||||||||||||
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0.768 | 1.158 | 5.560 | 1.380 | 0.790 | ||||||||||||||||
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| |||||||||||
(1.078 | ) | (0.498 | ) | — | — | — | ||||||||||||||
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| |||||||||||
(1.078 | ) | (0.498 | ) | — | — | — | ||||||||||||||
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| |||||||||||
$ | 18.800 | $ | 19.110 | $ | 18.450 | $ | 12.890 | $ | 11.510 | |||||||||||
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| |||||||||||
4.11% | 6.44% | 43.14% | 11.99% | 7.37% | ||||||||||||||||
$ | 99,019 | $ | 51,923 | $ | 25,828 | $ | 10,051 | $ | 7,702 | |||||||||||
2.03% | 2.07% | 2.06% | 2.11% | 2.14% | ||||||||||||||||
2.03% | 2.07% | 2.06% | 2.11% | 2.15% | ||||||||||||||||
(0.97% | ) | (1.05% | ) | (0.97% | ) | (0.92% | ) | (0.95% | ) | |||||||||||
(0.97% | ) | (1.05% | ) | (0.97% | ) | (0.92% | ) | (0.96% | ) | |||||||||||
| 38%
|
|
| 30%
|
|
| 38%
|
|
| 37%
|
|
| 42%
|
|
27
Table of Contents
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 loss1 |
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 loss to average net assets |
Ratio of net investment loss to average net assets prior to fees waived |
Portfolio turnover |
1 | The average shares outstanding method has been applied for per share information. |
2 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during some of the periods shown reflects waivers by the manager and/or distributor. Performance would have been lower had the waivers not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
28
Table of Contents
Year ended | ||||||||||||||||||||
11/30/15 | 11/30/14 | 11/30/13 | 11/30/12 | 11/30/11 | ||||||||||||||||
| ||||||||||||||||||||
$ |
20.040 |
| $ | 19.220 | $ | 13.360 | $ | 11.870 | $ | 11.030 | ||||||||||
(0.092 | ) | (0.106 | ) | (0.076 | ) | (0.054 | ) | (0.054 | ) | |||||||||||
0.990 | 1.424 | 5.936 | 1.544 | 0.913 | ||||||||||||||||
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0.898 | 1.318 | 5.860 | 1.490 | 0.859 | ||||||||||||||||
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| |||||||||||
— | — | — | — | (0.019 | ) | |||||||||||||||
(1.078 | ) | (0.498 | ) | — | — | — | ||||||||||||||
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(1.078 | ) | (0.498 | ) | — | — | (0.019 | ) | |||||||||||||
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$ | 19.860 | $ | 20.040 | $ | 19.220 | $ | 13.360 | $ | 11.870 | |||||||||||
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| |||||||||||
4.60% | 7.03% | 43.86% | 12.55% | 7.79% | ||||||||||||||||
$ | 28,178 | $ | 15,833 | $ | 12,785 | $ | 6,809 | $ | 5,786 | |||||||||||
1.53% | 1.57% | 1.56% | 1.61% | 1.64% | ||||||||||||||||
1.53% | 1.57% | 1.64% | 1.71% | 1.75% | ||||||||||||||||
(0.47% | ) | (0.55% | ) | (0.47% | ) | (0.42% | ) | (0.45% | ) | |||||||||||
(0.47% | ) | (0.55% | ) | (0.55% | ) | (0.52% | ) | (0.56% | ) | |||||||||||
| 38%
|
|
| 30%
|
|
| 38%
|
|
| 37%
|
|
| 42%
|
|
29
Table of Contents
Financial highlights
Delaware Small Cap Core Fund Institutional Class
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment 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 |
1 | The average shares outstanding method has been applied for per share information. |
2 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during some of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
30
Table of Contents
Year ended | ||||||||||||||||||||
11/30/15 | 11/30/14 | 11/30/13 | 11/30/12 | 11/30/11 | ||||||||||||||||
| ||||||||||||||||||||
$ |
20.690 |
| $ | 19.740 | $ | 13.690 | $ | 12.100 | $ | 11.230 | ||||||||||
0.006 | (0.011 | ) | 0.005 | 0.011 | 0.006 | |||||||||||||||
1.032 | 1.459 | 6.089 | 1.579 | 0.934 | ||||||||||||||||
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| |||||||||||
1.038 | 1.448 | 6.094 | 1.590 | 0.940 | ||||||||||||||||
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| |||||||||||
— | — | (0.044 | ) | — | (0.070 | ) | ||||||||||||||
(1.078 | ) | (0.498 | ) | — | — | — | ||||||||||||||
|
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| |||||||||||
(1.078 | ) | (0.498 | ) | (0.044 | ) | — | (0.070 | ) | ||||||||||||
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| |||||||||||
$ | 20.650 | $ | 20.690 | $ | 19.740 | $ | 13.690 | $ | 12.100 | |||||||||||
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| |||||||||||
5.15% | 7.51% | 44.64% | 13.14% | 8.37% | ||||||||||||||||
$ | 620,220 | $ | 224,771 | $ | 81,858 | $ | 41,164 | $ | 30,923 | |||||||||||
1.03% | 1.07% | 1.06% | 1.11% | 1.14% | ||||||||||||||||
1.03% | 1.07% | 1.06% | 1.11% | 1.15% | ||||||||||||||||
0.03% | (0.05% | ) | 0.03% | 0.08% | 0.05% | |||||||||||||||
0.03% | (0.05% | ) | 0.03% | 0.08% | 0.04% | |||||||||||||||
| 38%
|
|
| 30%
|
|
| 38%
|
|
| 37%
|
|
| 42%
|
|
31
Table of Contents
Notes to financial statements | ||||
Delaware Small Cap Core Fund | November 30, 2015 |
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. Effective September 25, 2014, all remaining shares of Class B were converted to Class A shares. Class C shares are sold with a CDSC of 1.00%, if redeemed during the first 12 months. Class R and Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors.
The investment objective of the Fund is to seek 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 LLC (Nasdaq), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange on the valuation date. Equity securities traded on the Nasdaq are valued in accordance with the Nasdaq Official Closing Price, which may not be the last sales price. If, on a particular day an equity security does not trade, the mean between the bid and ask prices will be used, which approximates fair value. U.S. government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. Generally, other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Trust’s Board of Trustees (Board). In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures or suspension of trading in a security.
Federal Income Taxes – No provision for federal income taxes has been made as the Fund intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Fund evaluates tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year. Management has analyzed the Fund’s tax positions taken for all open federal income tax years (Nov. 30, 2012–Nov. 30, 2015), 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.
32
Table of Contents
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. 30, 2015 and matured on the next business day.
Use of Estimates – The Fund is an investment company, whose financial statements are prepared in conformity with U.S. GAAP. Therefore, the Fund follows the accounting and reporting guidelines for investment companies. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material.
Other – Expenses directly attributable to the Fund are charged directly to the Fund. Other expenses common to various funds within the Delaware Investments® Family of Funds are generally allocated among such funds on the basis of average net assets. Management fees and 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. Discounts and premiums on debt securities are accreted or amortized to interest income, respectively, over the lives of the respective securities using the effective interest method. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Distributions received from investments in real estate investment trusts (REITs) are recorded as dividend income on the ex-dividend date, subject to reclassification upon notice of the character of such distributions by the issuer. The Fund declares and pays dividends from net investment income and distributions from net realized 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. Such commission rebates are included on the “Statement of operations” under “Net realized gain on investments” and totaled $277 for the year ended Nov. 30, 2015. In general, best execution refers to many factors, including the price paid or received for a security, the commission charged, the promptness and reliability of execution, the confidentiality and placement accorded the order, and other factors affecting the overall benefit obtained by the Fund on the transaction.
The Fund may receive earnings credits from its custodian when positive cash balances are maintained, which may be used to offset custody fees. There were no such earnings credits for the year ended Nov. 30, 2015.
The Fund receives earnings credits from its transfer agent when positive cash balances are maintained, which may be used to offset transfer agent fees. If the amount earned is greater than one dollar, the
33
Table of Contents
Notes to financial statements
Delaware Small Cap Core Fund
1. Significant Accounting Policies (continued)
expense paid under this arrangement is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses” with the corresponding expense offset shown under “Less expense paid indirectly.” For the year ended Nov. 30, 2015, the Fund earned $260 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.
Delaware Investments Fund Services Company (DIFSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Fund. For these services, DIFSC’s fees are calculated based on the aggregate daily net assets of the Delaware Investments® Family of Funds at the following annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DIFSC under the service agreement described above are allocated among all retail funds in the Delaware Investments Family of Funds on a relative net asset value basis (NAV). For the year ended Nov. 30, 2015, the Fund was charged $36,366 for these services. This amount is included on the “Statement of operations” under “Accounting and administration expenses.”
DIFSC is also the transfer agent and dividend disbursing agent of the Fund. For these services, DIFSC’s fees are calculated based on the aggregate daily net assets of the retail funds within the Delaware Investments Family of Funds at the following annual rate: 0.025% of the first $20 billion; 0.020% of the next $5 billion; 0.015% of the next $5 billion; and 0.013% on average daily net assets in excess of $30 billion. The fees payable to DIFSC under the service agreement described above are allocated among all retail funds in the Delaware Investment Family of Funds on a relative NAV basis. This amount is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.” For the year ended Nov. 30, 2015, the Fund was charged $158,991 for these services. Pursuant to a sub-transfer agency agreement between DIFSC and BNY Mellon Investment Servicing (US) Inc. (BNYMIS), BNYMIS provides certain sub-transfer agency services to the Fund. Sub-transfer agency fees are paid by the Fund and are also included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.”
Pursuant to a distribution agreement and distribution plan, the Fund pays DDLP, the distributor and an affiliate of DMC, an annual distribution and service fee of 0.25% of the average daily net assets of the Class A shares, 1.00% of the average daily net assets of the Class C shares, and 0.50% of the average daily net assets of the Class R shares. Institutional Class shares pay no distribution and service fee.
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, 2015, the Fund was
34
Table of Contents
charged $17,471 for internal legal, tax, and regulatory reporting services provided by DMC and/or its affiliates’ employees. This amount is included on the “Statement of operations” under “Legal fees.”
For the year ended Nov. 30, 2015, DDLP earned $75,255 for commissions on sales of the Fund’s Class A shares. For the year ended Nov. 30, 2015, DDLP received gross CDSC commissions of $3,936 and $8,804, on redemptions of the Fund’s Class A and Class C shares, respectively, and these commissions were entirely used to offset upfront commissions previously paid by DDLP to broker/dealers on sales of those shares.
Trustees’ fees include expenses accrued by the Fund for each Trustee’s retainer and meeting fees. Certain officers of DMC, DIFSC, and DDLP are officers and/or Trustees of the Trust. These officers and Trustees are paid no compensation by the Fund.
3. Investments
For the year ended Nov. 30, 2015, the Fund made purchases and sales of investment securities other than short-term investments as follows:
Purchases | $ | 826,180,546 | ||
Sales | 280,640,352 | |||
At Nov. 30, 2015, the cost and unrealized appreciation (depreciation) of investments for federal income tax purposes were as follows:
|
| |||
Cost of investments | $ | 966,731,885 | ||
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| |||
Aggregate unrealized appreciation of investments | $ | 95,784,319 | ||
Aggregate unrealized depreciation of investments | (53,884,826 | ) | ||
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| |||
Net unrealized appreciation of investments | $ | 41,899,493 | ||
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|
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. A three-level hierarchy for fair value measurements has been established based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available under the circumstances. The Fund’s investment in its entirety is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-level hierarchy of inputs is summarized below.
Level 1 – | Inputs are quoted prices in active markets for identical investments. (Examples: equity securities, open-end investment companies, futures contracts, exchange-traded options contracts) | |
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 |
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Notes to financial statements
Delaware Small Cap Core Fund
3. Investments (continued)
or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, and default rates) or other market-corroborated inputs. (Examples: debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities) | ||
Level 3 – | Significant unobservable inputs, including the Fund’s own assumptions used to determine the fair value of investments. (Examples: broker-quoted securities, fair valued securities) |
Level 3 investments are valued using significant unobservable inputs. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Valuations may also be based upon current market prices of securities that are comparable in coupon, rating, maturity, and industry. The derived value of a Level 3 investment may not represent the value which is received upon disposition and this could impact the results of operations.
The following table summarizes the valuation of the Fund’s investments by fair value hierarchy levels as of Nov. 30, 2015:
Securities | Level 1 | Level 2 | Total | |||||||||
Common Stock | $ | 990,722,310 | $ | — | $ | 990,722,310 | ||||||
Short-Term Investments | — | 17,909,068 | 17,909,068 | |||||||||
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| |||||||
Total Value of Securities | $ | 990,722,310 | $ | 17,909,068 | $ | 1,008,631,378 | ||||||
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During the year ended Nov. 30, 2015, there were no transfers between Level 1 investments, Level 2 investments, or Level 3 investments that had a significant impact to the Fund. The Fund’s policy is to recognize transfers between levels at the beginning of the reporting period.
A reconciliation of Level 3 investments is presented when the Fund has a significant amount of Level 3 investments at the beginning, interim, or end of the period in relation to net assets. At Nov. 30, 2015, 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, 2015 and 2014 was as follows:
Year ended | ||||||||
11/30/15 | 11/30/14 | |||||||
Ordinary Income | $ | 2,417,350 | $ | — | ||||
Long-term capital gain | 21,018,514 | 5,030,102 | ||||||
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| |||||
Total | $ | 23,435,864 | $ | 5,030,102 | ||||
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5. Components of Net Assets on a Tax Basis
As of Nov. 30, 2015, the components of net assets on a tax basis were as follows:
Shares of beneficial interest | $ | 942,864,841 | ||
Undistributed long-term capital gain | 29,585,543 | |||
Qualified late year loss deferrals | (505,504 | ) | ||
Net unrealized appreciation of investments | 41,899,493 | |||
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| |||
Net assets | $ | 1,013,844,373 | ||
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|
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, 2015 through Nov. 30, 2015 and Dec. 1, 2014 through Nov. 30, 2015, 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 net operating losses. Results of operations and net assets were not affected by these reclassifications. For the year ended Nov. 30, 2015, the Fund recorded the following reclassifications:
Accumulated net investment loss | $ | 681,521 | ||
Accumulated net realized gain on investments | (681,521 | ) |
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. 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. At Nov. 30, 2015, there were no capital loss carryforwards incurred under the Act.
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Notes to financial statements
Delaware Small Cap Core Fund
6. Capital Shares
Transactions in capital shares were as follows:
Year ended | ||||||||
11/30/15 | 11/30/14 | |||||||
Shares sold: | ||||||||
Class A | 8,800,988 | 4,608,007 | ||||||
Class C | 2,853,899 | 1,557,859 | ||||||
Class R | 881,190 | 328,816 | ||||||
Institutional Class | 25,606,614 | 7,723,938 | ||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | 362,058 | 93,554 | ||||||
Class C | 160,808 | 39,779 | ||||||
Class R | 45,998 | 18,094 | ||||||
Institutional Class | 556,294 | 107,254 | ||||||
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39,267,849 | 14,477,301 | |||||||
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Shares redeemed: | ||||||||
Class A | (2,712,915 | ) | (1,591,486 | ) | ||||
Class C | (464,555 | ) | (281,153 | ) | ||||
Class R | (298,710 | ) | (221,884 | ) | ||||
Institutional Class | (6,990,358 | ) | (1,116,020 | ) | ||||
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(10,466,538 | ) | (3,210,543 | ) | |||||
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Net increase | 28,801,311 | 11,266,758 | ||||||
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Certain shareholders may exchange shares of one class of shares for another class in the same Fund. For the years ended Nov. 30, 2015 and 2014, the Fund had the following exchange transactions:
Year ended Nov. 30, 2015
Exchange Redemptions | Exchange Subscriptions | |||||
Institutional | ||||||
Class A | Class C | Class | ||||
Shares | Shares | Shares | Value | |||
1,967 | 56,284 | 53,562 | $1,091,472 |
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Year ended Nov. 30, 2014
Exchange Redemptions | Exchange Subscriptions | |||
Institutional | ||||
Class C | Class | |||
Shares | Shares | Value | ||
686 | 634 | $13,073 |
These exchange transactions are included as subscriptions and redemptions in the table on the previous page and on 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 $275,000,000 revolving line of credit intended to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, the Participants were charged an annual commitment fee of 0.08%, 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. 9, 2015.
On Nov. 9, 2015, the Fund, along with the other Participants, entered into an amendment to the agreement for a $155,000,000 revolving line of credit. Under the amendment to the agreement, the Participants are charged an annual commitment fee of 0.10%, which is allocated across the Participants on the basis of each Participant’s allocation of the entire facility. Other than the annual commitment fee, 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. 7, 2016.
The Fund had no amounts outstanding as of Nov. 30, 2015 or at any time during the year then ended.
8. Offsetting
In December 2011, the Financial Accounting Standards Board (FASB) issued guidance that expanded disclosure requirements on the offsetting of certain assets and liabilities. The disclosures are required for investments and derivative financial instruments subject to master netting or similar agreements which are eligible for offset in the “Statement of assets and liabilities” and require an entity to disclose both gross and net information about such investments and transactions in the financial statements. In January 2013, the FASB issued guidance that clarified which investments and transactions are subject to the offsetting disclosure requirements. The scope of the disclosure requirements for offsetting is limited to derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing. The guidance is effective for financial statements with fiscal years beginning on or after Jan. 1, 2013, and interim periods within those fiscal years.
In order to better define its contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund entered into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement) or a similar agreement with certain of its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between the Fund and a
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Notes to financial statements
Delaware Small Cap Core Fund
8. Offsetting (continued)
counterparty that governs over-the-counter (OTC) derivatives and foreign exchange contracts and typically contains, among other things, collateral posting items and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default (close-out), including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency, or other events.
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements on the “Statement of assets and liabilities.” During the year ended Nov. 30, 2015, the Fund held no derivatives.
At Nov. 30, 2015, the Fund had the following assets and liabilities subject to offsetting provisions:
Offsetting of Financial Assets and Liabilities and Derivative Assets and Liabilities
Master Repurchase Agreements
Repurchase | Fair Value of Non-Cash | Cash Collateral | Net Collateral | ||||||||||||||||||||||
Counterparty | Agreements | Collateral Received | Received | Received | Net Exposure(a) | ||||||||||||||||||||
Bank of America Merrill Lynch | $ | 925,537 | $ | (925,537 | ) | $ | — | $ | (925,537 | ) | $ | — | |||||||||||||
Bank of Montreal | 1,542,561 | (1,542,561 | ) | — | (1,542,561 | ) | — | ||||||||||||||||||
BNP Paribas | 2,273,902 | (2,273,902 | ) | — | (2,273,902 | ) | — | ||||||||||||||||||
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| ||||||||||||||||
Total | $ | 4,742,000 | $ | (4,742,000 | ) | $ | — | $ | (4,742,000 | ) | $ | — | |||||||||||||
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(a)Net exposure represents the receivable(payable) that would be due from(to) the counterparty in the event of default.
9. Securities Lending
The Fund, along with other funds in the Delaware Investments® Family of Funds, may lend its securities pursuant to a security lending agreement (Lending Agreement) with The Bank of New York Mellon (BNY Mellon). At the time a security is loaned, the borrower must post collateral equal to the required percentage of the market value of the loaned security, including any accrued interest. The required percentage is: (1) 102% with respect to U.S. securities and foreign securities that are denominated and payable in U.S. dollars; and (2) 105% with respect to foreign securities. With respect to each loan, if on any business day the aggregate market value of securities collateral plus cash collateral held is less than the aggregate market value of the securities 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
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reduce the value of the remaining collateral to the applicable initial collateral requirement for such security loan. As a result of the foregoing, the value of the collateral held with respect to a loaned security on any particular day may be more or less than the value of the security on loan.
Cash collateral received is generally invested in 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.
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 NAV 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, 2015, the Fund had no securities out on loan.
10. 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
41
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Notes to financial statements
Delaware Small Cap Core Fund
10. Credit and Market Risk (continued)
status as a regulated investment company may be jeopardized. There were no direct real estate holdings during the six months ended Nov. 30, 2015. 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 promulgated under the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair the Fund from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, the Fund’s Board has delegated to DMC the day-to-day functions of determining whether individual securities are liquid for purposes of the Fund’s limitation on investments in illiquid securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Fund’s 15% limit on investments in illiquid securities. As of Nov. 30, 2015, there were no Rule 144A securities held by the Fund. Illiquid securities have been identified on the “Schedule of investments.”
11. Contractual Obligations
The Fund enters into contracts in the normal course of business that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Fund’s existing contracts and expects the risk of loss to be remote.
12. Recent Accounting Pronouncements
In June 2014, the FASB issued guidance to improve the financial reporting of reverse repurchase agreements and other similar transactions. The guidance includes expanded disclosure requirements for entities that enter into reverse repurchase agreements and similar transactions accounted for as secured borrowings. The guidance is effective for financial statements with fiscal years beginning on or after Dec. 15, 2014 and interim periods within those fiscal years. Management has determined that this pronouncement has no impact to the Fund’s financial statements.
In May 2015, the FASB issued Accounting Standards Update (“ASU”) No. 2015-07 regarding “Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share.” The amendments in this update are effective for the Fund for fiscal years beginning after Dec. 15, 2015, and interim periods within those fiscal years. ASU No. 2015-07 will eliminate the requirement to categorize investments in the fair value hierarchy if the fair value is measured at NAV per share (or its equivalent) using the practical expedient in the FASB’s fair value measurement guidance. Management is evaluating the impact, if any, of this guidance on the Fund’s financial statement disclosures.
13. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to Nov. 30, 2015 that would require recognition or disclosure in the Fund’s financial statements.
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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, 2015, 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 five 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, 2015 by correspondence with the custodian and brokers and the application of alternative auditing procedures where confirmations of security purchases had not been received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
January 21, 2016
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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 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, 2015, the Fund reports distributions paid during the year as follows:
(A) Long-Term Capital Gain Distributions (Tax Basis) | 89.69 | % | ||
(B) Ordinary Income Distributions (Tax Basis)* | 10.31 | % | ||
Total Distributions (Tax Basis) | 100.00 | % | ||
(C) Qualifying Dividends1 | 90.50 | % |
(A) and (B) are based on a percentage of the Fund’s total distributions.
(C) is based on a percentage of the Fund’s ordinary income distributions.
1Qualifying dividends represent dividends which qualify for the corporate dividends received deduction.
* | For the fiscal year ended Nov. 30, 2015, certain dividends paid by the Fund may be subject to a maximum tax rate of 20%. The percentage of dividends paid by the Fund from ordinary income reported as qualified dividend income is 90.79%. Complete information will be computed and reported in conjunction with your 2015 Form 1099-DIV. |
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Board consideration of Delaware Small Cap Core Fund investment management agreement
At a meeting held on Aug. 18–20, 2015 (the “Annual Meeting”), the Board of Trustees (collectively referred to here as 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 Management Agreement with Delaware Management Company (“DMC”) included materials provided by DMC and its affiliates (“Delaware Investments”) concerning, among other things, the nature, extent, and quality of services provided to the Fund; the costs of such services to the Fund; economies of scale; and the investment manager’s financial condition and profitability. In addition, in connection with the Annual Meeting, reports were provided to the Trustees in May 2015 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. In addition to the information noted above, the Board also requested and received information regarding DMC’s policy with respect to advisory fee levels and its breakpoint philosophy; the structure of portfolio manager compensation; comparative client fee information; and any constraints or limitations on the availability of securities for certain investment styles, which had in the past year inhibited, or which were likely in the future to inhibit, the investment manager’s ability to invest fully in accordance with Fund policies.
In considering information relating to the approval of the Fund’s advisory agreement, the Independent Trustees received assistance and advice from and met separately with independent legal counsel to the Independent Trustees. They also engaged a consultant to assist them in analyzing portions of the data received. The Independent Trustees reviewed and discussed with such consultant two reports prepared by the consultant with respect to such data. Although the Board gave attention to all information furnished, the following discussion identifies, under separate headings, the primary factors taken into account by the Board during its contract renewal considerations.
Nature, extent, and quality of service. The Board considered the services provided by DMC to the Fund and its shareholders. In reviewing the nature, extent, and quality of services, the Board considered reports furnished to it throughout the year, which covered matters such as the relative performance of the Fund; compliance of portfolio managers with the investment policies, strategies, and restrictions for the Fund; compliance by DMC and Delaware Distributors, L.P. (together, “Management”) personnel with the Code of Ethics adopted throughout the Delaware Investments® Family of Funds complex; and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of the Fund’s investment adviser and the emphasis placed on research in the investment process. The Board recognized DMC’s receipt of several industry distinctions during the past several years. The Board gave favorable consideration to DMC’s efforts to control expenditures while maintaining service levels committed to Fund matters. The Board noted that, in the third and fourth quarters of 2013, Management reduced the maximum 12b-1 fee for certain Funds, and in November 2013 Management negotiated a substantial reduction in fees for fund accounting services
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Other Fund information (Unaudited)
Delaware Small Cap Core Fund
Board consideration of Delaware Small Cap Core Fund investment management agreement (continued)
provided to the Funds. 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 DMC.
Investment performance. The Board placed significant emphasis on the investment performance of the Fund in view of the importance of investment performance to shareholders. Although the Board gave appropriate consideration to performance reports and discussions with portfolio managers at Investment Committee meetings throughout the year, the Board gave particular weight to the 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 1-, 3-, 5-, and 10-year periods, to the extent applicable, ended March 31, 2015. The Board’s objective is that the Fund’s performance for the periods considered be at or above the median of its Performance Universe.
The Performance Universe for the Fund consisted of the Fund and all retail and institutional small-cap core funds as selected by Lipper. The Lipper report comparison showed that the Fund’s total return for the 1-, 3-, and 5-year periods was in the first quartile of its Performance Universe. The report further showed that the Fund’s total return for the 10-year period was in the second 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 DMC 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.
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The expense comparisons for the Fund showed that its actual management fee and total expenses were in the quartile with the second 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 DMC in connection with the operation of the Fund. In this respect, the Board reviewed the Investment Management Profitability Analysis that addressed the overall profitability of DMC’s business in providing management and other services to each of the individual funds and the Delaware Investments Family of Funds as a whole. Specific attention was given to the methodology followed in allocating costs for the purpose of determining profitability. Management stated that the level of profits of DMC, to a certain extent, reflects recent operational cost savings and efficiencies initiated by DMC. The Board considered DMC’s efforts to improve services provided to fund shareholders and to meet additional regulatory and compliance requirements resulting from recent industry-wide Securities and Exchange Commission initiatives. The Board also considered the extent to which DMC might derive ancillary benefits from fund operations, including the potential for procuring additional business as a result of the prestige and visibility associated with its role as service provider to the Delaware Investments Family of Funds and the benefits from allocation of fund brokerage to improve trading efficiencies. The Board found that the management fees were reasonable in light of the services rendered and the level of profitability of DMC.
Economies of scale. The Trustees considered whether economies of scale are realized by DMC as the Fund’s assets increase and the extent to which any economies of scale are reflected in the level of management fees charged. The Trustees reviewed the standardized advisory fee pricing and structure, approved by the Board and shareholders, which includes breakpoints, and which applies to most funds in the Delaware Investments® Family of Funds complex. Breakpoints in the advisory fee occur when the advisory fee rate is reduced on assets in excess of specified levels. Breakpoints result in a lower advisory fee than would otherwise be the case in the absence of breakpoints, when the asset levels specified in the breakpoints are exceeded. The Board noted that the fee under the Fund’s management contract fell within the standardized fee pricing structure. The Board also noted that the Fund’s assets exceeded the first breakpoint level. The Board believed that, given the extent to which economies of scale might be realized by the adviser 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, and Birth Date | Position(s) Held with Fund(s) | Length of Time Served | ||
Interested Trustee
| ||||
Shawn K. Lytle1 | President, | Trustee since | ||
2005 Market Street | Chief Executive Officer, | September 2015 | ||
Philadelphia, PA 19103 | and Trustee | |||
February 1970 | President and | |||
Chief Executive Officer | ||||
since August 2015 | ||||
Independent Trustees
| ||||
Thomas L. Bennett | Chairman and Trustee | Trustee since | ||
2005 Market Street | March 2005 | |||
Philadelphia, PA 19103 | ||||
October 1947 | Chairman since | |||
March 2015 | ||||
Ann D. Borowiec | Trustee | Since March 2015 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
November 1958 | ||||
Joseph W. Chow | Trustee | Since January 2013 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
January 1953 | ||||
1 | Shawn K. Lytle is considered to be an “Interested Trustee” because he is an executive officer of the Fund’s(s’) investment advisor. |
48
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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 the Past Five Years | by Trustee or Officer | Held by Trustee or Officer | ||
| ||||
Shawn K. Lytle has served as | 65 | Trustee — UBS | ||
President of | Relationship Funds, | |||
Delaware Investments2 | SMA Relationship | |||
since June 2015 and was the | Trust, and UBS Funds | |||
Regional Head of Americas for | (May 2010–April 2015) | |||
UBS Global Asset | ||||
Management from | ||||
2010 through 2015. | ||||
| ||||
Private Investor | 65 | Director — | ||
(March 2004–Present) | Bryn Mawr Bank Corp. (BMTC) | |||
(2007–2011) | ||||
Chief Executive Officer | 65 | None | ||
Private Wealth Management | ||||
(2011–2013) and | ||||
Market Manager, | ||||
New Jersey Private | ||||
Bank (2005–2011) — | ||||
J.P. Morgan Chase & Co. | ||||
Executive Vice President | 65 | Director and Audit Committee | ||
(Emerging Economies | Member — Hercules | |||
Strategies, Risks, and | Technology Growth | |||
Corporate Administration) | Capital, Inc. | |||
State Street Corporation | (2004–2014) | |||
(July 2004–March 2011) | ||||
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
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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)
| ||||
John A. Fry | Trustee | Since January 2001 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
May 1960 | ||||
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 | ||||
50
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Number of Portfolios in | ||||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships | ||
During the Past Five Years | by Trustee or Officer | Held by Trustee or Officer | ||
| ||||
President — | 65 | Director — Hershey Trust | ||
Drexel University | Company | |||
(August 2010–Present) | ||||
Director, Audit Committee, | ||||
President — | and Governance Committee | |||
Franklin & Marshall College | Member — Community | |||
(July 2002–July 2010) | Health Systems | |||
Director — Drexel | ||||
Morgan & Co. | ||||
Private Investor | 65 | None | ||
(2004–Present) | ||||
Chief Executive Officer — | 65 | Trust Manager and | ||
Banco Itaú | 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) | ||||
51
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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)
| ||||
Thomas K. Whitford | Trustee | Since January 2013 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
March 1956 | ||||
Janet L. Yeomans | Trustee | Since April 1999 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
July 1948 | ||||
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Number of Portfolios in | ||||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships | ||
During the Past Five Years | by Trustee or Officer | Held by Trustee or Officer | ||
| ||||
Vice Chairman | 65 | Director — HSBC Finance | ||
(2010–April 2013), | Corporation and HSBC | |||
Chief Administrative | North America Holdings Inc. | |||
Officer (2008–2010), and Executive Vice | Director — | |||
President and Chief | HSBC Bank | |||
Administrative Officer | ||||
(2007–2009) — | ||||
PNC Financial | ||||
Services Group | ||||
Vice President and Treasurer | 65 | Director, Audit and | ||
(January 2006–July 2012) | Compliance Committee Chair, | |||
Vice President — | Investment Committee | |||
Mergers & Acquisitions | Member, and Governance | |||
(January 2003–January 2006), | Committee Member — | |||
and Vice President | Okabena Company | |||
and Treasurer | ||||
(July 1995–January 2003) | Chair — 3M | |||
3M Corporation | Investment Management | |||
Company | ||||
(2005–2012) | ||||
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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 | General Counsel, | since May 2013; | ||
Philadelphia, PA 19103 | and Secretary | General Counsel | ||
December 1963 | since May 2015; | |||
Secretary since | ||||
October 2005 | ||||
Daniel V. Geatens | Vice President | Treasurer since October 2007 | ||
2005 Market Street | and Treasurer | |||
Philadelphia, PA 19103 | ||||
October 1972 | ||||
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 the Past Five Years | by Trustee or Officer | Held by Trustee or Officer | ||
| ||||
David F. Connor has served as | 65 | None3 | ||
Senior Vice President of the Fund(s) and the investment advisor since 2013, General Counsel of the Fund(s) and the investment advisor since 2015, and Secretary of the Fund(s) and the investment advisor since 2005. | ||||
Daniel V. Geatens has served | 65 | None3 | ||
as Vice President and | ||||
Treasurer of the Fund(s) since 2007 and Vice President and Director of Financial | ||||
Administration of the investment advisor since 2010. | ||||
Richard Salus has served as | 65 | None3 | ||
Senior Vice President and Chief Financial Officer of the Fund(s) and the investment advisor since 2006. | ||||
3 David F. Connor, Daniel V. Geatens, 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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Board of trustees
| ||||||
Shawn K. Lytle President and Chief Executive Officer Delaware Investments ® Family of Funds Philadelphia, PA
Thomas L. Bennett Chairman of the Board Delaware Investments Family of Funds Private Investor Rosemont, PA | Ann D. Borowiec Former Chief Executive Officer Private Wealth Management J.P. Morgan Chase & Co. New York, NY
Joseph W. Chow Former Executive Vice President State Street Corporation Boston, MA | John A. Fry President Drexel University Philadelphia, PA
Lucinda S. Landreth Former Chief Investment Officer Assurant, Inc. New York, NY | Frances A. Sevilla-Sacasa Chief Executive Officer Banco Itaú International Miami, FL
Thomas K. Whitford Former Vice Chairman PNC Financial Services Group Pittsburgh, PA
Janet L. Yeomans Former Vice President and Treasurer 3M Corporation St. Paul, MN | |||
Affiliated officers
| ||||||
David F. Connor | Daniel V. Geatens | Richard Salus | ||||
Senior Vice President, | Vice President and | Senior Vice President and | ||||
General Counsel, | Treasurer | Chief Financial Officer | ||||
and Secretary | Delaware Investments | Delaware Investments | ||||
Delaware Investments | Family of Funds | Family of Funds | ||||
Family of Funds | Philadelphia, PA | Philadelphia, PA | ||||
Philadelphia, PA |
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 Schedule of Investments included in the Fund’s most recent Form N-Q 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
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:
Ann D. Borowiec
Joseph W. Chow
Lucinda S. Landreth1
Frances A. Sevilla-Sacasa
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 $95,275 for the fiscal year ended November 30, 2015.
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 $87,790 for the fiscal year ended November 30, 2014.
(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, 2015.
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 $612,000 for the registrant’s fiscal year ended November 30, 2015. 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, 2014.
1 The instructions to Form N-CSR require disclosure on the relevant experience of persons who qualify as audit committee financial experts based on “other relevant experience.” The Board of Trustees/Directors has determined that Ms. Landreth qualifies as an audit committee financial expert by virtue of her experience as a financial analyst, her Chartered Financial Analyst (CFA) designation and her service as an audit committee chairperson for a non-profit organization.
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, 2014. 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 $15,474 for the fiscal year ended November 30, 2015. 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, 2015.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant were $14,223 for the fiscal year ended November 30, 2014. 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, 2014.
(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, 2015.
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, 2015. 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, 2014.
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, 2014. 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 $11,111,212 and $5,653,375 for the registrant’s fiscal years ended November 30, 2015 and November 30, 2014, 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/ SHAWN LYTLE | |
By: | Shawn Lytle |
Title: | President and Chief Executive Officer |
Date: | February 3, 2016 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ SHAWN LYTLE | |
By: | Shawn Lytle |
Title: | President and Chief Executive Officer |
Date: | February 3, 2016 |
/s/ RICHARD SALUS | |
By: | Richard Salus |
Title: | Chief Financial Officer |
Date: | February 3, 2016 |