UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: | 811-04997 | |
Exact name of registrant as specified in charter: | Delaware Group® Equity Funds V | |
Address of principal executive offices: | 2005 Market Street | |
Philadelphia, PA 19103 | ||
Name and address of agent for service: | David F. Connor, Esq. | |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
Registrant’s telephone number, including area code: | (800) 523-1918 | |
Date of fiscal year end: | November 30 | |
Date of reporting period: | May 31, 2016 |
Item 1. Reports to Stockholders
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Semiannual report
Multi-asset mutual fund
Delaware Wealth Builder Fund
(formerly, Delaware Dividend Income Fund)
May 31, 2016
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/literature or calling 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing.
You can obtain shareholder reports and prospectuses online instead of in the mail.
Visit delawareinvestments.com/edelivery.
Experience Delaware Investments
Delaware Investments is committed to the pursuit of consistently superior asset management and unparalleled client service. We believe in our investment processes, which seek to deliver consistent results, and in convenient services that help add value for our clients.
If you are interested in learning more about creating an investment plan, contact your financial advisor.
You can learn more about Delaware Investments or obtain a prospectus for Delaware Wealth Builder Fund at delawareinvestments.com/literature.
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 referred to 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), a subsidiary of Macquarie Group Limited and an affiliate of Delaware Investments. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Fund is governed by U.S. laws and regulations.
Table of contents | ||||
1 | ||||
Security type / sector allocation and top 10 equity holdings | 3 | |||
6 | ||||
26 | ||||
28 | ||||
30 | ||||
32 | ||||
40 | ||||
59 |
Unless otherwise noted, views expressed herein are current as of May 31, 2016, and subject to change for events occurring after such date.
The Fund is not FDIC insured and is 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.
For the six-month period from December 1, 2015 to May 31, 2016 (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 Dec. 1, 2015 to May 31, 2016.
Actual expenses
The first section of the table shown, “Actual Fund return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The second section of the table shown, “Hypothetical 5% return,” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The Fund’s expenses shown in the table reflect fee waivers in effect. The expenses shown in the table assume reinvestment of all dividends and distributions.
1
Disclosure of Fund expenses
For the six-month period from December 1, 2015 to May 31, 2016 (Unaudited)
Delaware Wealth Builder Fund
Expense analysis of an investment of $1,000
Beginning
Account Value
12/1/15 | Ending
Account Value
5/31/16 | Annualized
Expense Ratio | Expenses
Paid During Period
12/1/15 to 5/31/16* | |||||||||||||||||
Actual Fund return† | ||||||||||||||||||||
Class A | $1,000.00 | $1,030.40 | 1.14% | $5.79 | ||||||||||||||||
Class C | 1,000.00 | 1,026.50 | 1.89% | 9.58 | ||||||||||||||||
Class R | 1,000.00 | 1,029.10 | 1.39% | 7.05 | ||||||||||||||||
Institutional Class | 1,000.00 | 1,031.60 | 0.89% | 4.52 | ||||||||||||||||
Hypothetical 5% return (5% return before expenses) | ||||||||||||||||||||
Class A | $1,000.00 | $1,019.30 | 1.14% | $5.75 | ||||||||||||||||
Class C | 1,000.00 | 1,015.55 | 1.89% | 9.52 | ||||||||||||||||
Class R | 1,000.00 | 1,018.05 | 1.39% | 7.01 | ||||||||||||||||
Institutional Class | 1,000.00 | 1,020.55 | 0.89% | 4.50 |
* | “Expenses Paid During Period” are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). |
† | Because actual returns reflect only the most recent six-month period, the returns shown may differ significantly from fiscal year returns. |
2
Security type / sector allocation and top 10 equity holdings
Delaware Wealth Builder Fund | As of May 31, 2016 (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.
Security type / sector | Percentage of net assets | ||||
Common Stock | 56.94% | ||||
Consumer Discretionary | 3.71% | ||||
Consumer Staples | 6.39% | ||||
Diversified REIT | 0.23% | ||||
Energy | 6.37% | ||||
Financials | 6.39% | ||||
Healthcare | 9.98% | ||||
Healthcare REIT | 0.05% | ||||
Hotel REIT | 0.09% | ||||
Industrial REIT | 0.10% | ||||
Industrials | 4.93% | ||||
Information Technology | 6.90% | ||||
Mall REITs | 0.78% | ||||
Manufactured Housing REIT | 0.12% | ||||
Materials | 1.49% | ||||
Mixed REIT | 0.24% | ||||
Multifamily REITs | 1.57% | ||||
Office REITs | 1.38% | ||||
Self-Storage REIT | 0.10% | ||||
Shopping Center REITs | 1.16% | ||||
Single Tenant REIT | 0.71% | ||||
Telecommunication Services | 2.88% | ||||
Utilities | 1.37% | ||||
Exchange-Traded Funds | 0.82% | ||||
Convertible Preferred Stock | 1.67% | ||||
Commercial Mortgage-Backed Security | 0.08% | ||||
Convertible Bonds | 7.66% | ||||
Capital Goods | 0.05% | ||||
Communications | 1.11% | ||||
Consumer Cyclical | 0.42% | ||||
Consumer Non-Cyclical | 1.62% | ||||
Energy | 0.18% | ||||
Financials | 1.16% | ||||
Industrials | 0.29% | ||||
REITs | 1.10% | ||||
Technology | 1.73% |
3
Security type / sector allocation and top 10 equity holdings
Delaware Wealth Builder Fund
Security type / sector | Percentage of net assets | ||||
Corporate Bonds | 13.08% | ||||
Automotive | 0.05% | ||||
Banking | 0.54% | ||||
Basic Industry | 1.31% | ||||
Capital Goods | 0.84% | ||||
Consumer Cyclical | 1.20% | ||||
Consumer Non-Cyclical | 1.20% | ||||
Energy | 1.48% | ||||
Financials | 0.08% | ||||
Healthcare | 1.20% | ||||
Insurance | 0.24% | ||||
Media | 1.40% | ||||
REITs | 0.83% | ||||
Services | 0.45% | ||||
Technology | 0.69% | ||||
Telecommunications | 1.25% | ||||
Utilities | 0.32% | ||||
Leveraged Non-Recourse Security | 0.00% | ||||
Municipal Bonds | 1.05% | ||||
Senior Secured Loans | 0.89% | ||||
Sovereign Bonds | 0.53% | ||||
U.S. Treasury Obligations | 2.87% | ||||
Master Limited Partnership | 0.52% | ||||
Preferred Stock | 0.54% | ||||
Warrant | 0.00% | ||||
Short-Term Investments | 10.49% | ||||
Total Value of Securities before Securities Sold Short | 97.14% | ||||
Securities Sold Short | (0.81%) | ||||
Total Value of Securities | 96.33% | ||||
Receivables and Other Assets Net of Liabilities | 3.67% | ||||
Total Net Assets | 100.00% |
4
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 | |
| ||
Archer-Daniels-Midland | 1.50% | |
Johnson Controls | 1.48% | |
Baxalta | 1.46% | |
Bank of New York Mellon | 1.45% | |
Halliburton | 1.44% | |
Marsh & McLennan | 1.43% | |
Northrop Grumman | 1.42% | |
Waste Management | 1.41% | |
CA | 1.40% | |
Express Scripts Holding | 1.40% | |
|
5
Schedule of investments | ||
Delaware Wealth Builder Fund | May 31, 2016 (Unaudited) |
Number of shares | Value (U.S. $) | |||||||
| ||||||||
Common Stock – 56.94% | ||||||||
| ||||||||
Consumer Discretionary – 3.71% | ||||||||
Asian Pay Television Trust | 3,169,600 | $ | 1,334,956 | |||||
Bayerische Motoren Werke | 6,728 | 568,106 | ||||||
Johnson Controls | 234,500 | 10,353,175 | ||||||
Kering | 1,810 | 292,317 | ||||||
Lowe’s | 122,300 | 9,799,899 | ||||||
Nitori Holdings | 6,586 | 669,692 | ||||||
Publicis Groupe | 3,718 | 269,142 | ||||||
Sumitomo Rubber Industries | 33,900 | 499,002 | ||||||
Techtronic Industries | 135,000 | 542,901 | ||||||
Toyota Motor | 16,600 | 866,915 | ||||||
Yue Yuen Industrial Holdings | 231,000 | 870,997 | ||||||
|
| |||||||
26,067,102 | ||||||||
|
| |||||||
Consumer Staples – 6.39% | ||||||||
Archer-Daniels-Midland | 246,300 | 10,534,251 | ||||||
Aryzta † | 9,574 | 381,034 | ||||||
Carlsberg Class B | 6,721 | 648,502 | ||||||
Coca-Cola | 84,793 | 3,781,768 | ||||||
Coca-Cola Amatil | 53,464 | 343,133 | ||||||
CVS Health | 90,100 | 8,690,145 | ||||||
Japan Tobacco | 18,800 | 747,348 | ||||||
Kraft Heinz | 117,700 | 9,791,463 | ||||||
Mondelez International | 214,100 | 9,525,309 | ||||||
Tesco † | 167,346 | 400,162 | ||||||
|
| |||||||
44,843,115 | ||||||||
|
| |||||||
Diversified REIT – 0.23% | ||||||||
Vornado Realty Trust ¥ | 17,200 | 1,642,944 | ||||||
|
| |||||||
1,642,944 | ||||||||
|
| |||||||
Energy – 6.37% | ||||||||
Chevron | 95,200 | 9,615,200 | ||||||
CNOOC | 359,000 | 428,726 | ||||||
ConocoPhillips | 210,200 | 9,204,658 | ||||||
Halliburton | 240,000 | 10,123,200 | ||||||
Marathon Oil | 363,200 | 4,747,024 | ||||||
Occidental Petroleum | 127,300 | 9,603,512 | ||||||
Suncor Energy | 14,800 | 408,782 | ||||||
TOTAL | 11,879 | 577,260 | ||||||
|
| |||||||
44,708,362 | ||||||||
|
| |||||||
Financials – 6.39% | ||||||||
Allstate | 138,100 | 9,323,131 | ||||||
AXA | 30,170 | 757,980 | ||||||
Bank of New York Mellon | 242,700 | 10,207,962 |
6
Number of shares | Value (U.S. $) | |||||||
| ||||||||
Common Stock (continued) | ||||||||
| ||||||||
Financials (continued) | ||||||||
Bank Rakyat Indonesia Persero | 517,498 | $ | 392,101 | |||||
BB&T | 269,900 | 9,816,263 | ||||||
ING Groep CVA | 47,551 | 592,301 | ||||||
Marsh & McLennan | 152,200 | 10,055,854 | ||||||
Mitsubishi UFJ Financial Group | 175,200 | 876,198 | ||||||
Nordea Bank | 81,999 | 795,773 | ||||||
Standard Chartered | 72,751 | 557,718 | ||||||
UniCredit | 122,791 | 392,929 | ||||||
Wells Fargo | 21,900 | 1,110,768 | ||||||
|
| |||||||
44,878,978 | ||||||||
|
| |||||||
Healthcare – 9.98% | ||||||||
Baxalta | 226,800 | 10,258,164 | ||||||
Cardinal Health | 109,000 | 8,605,550 | ||||||
Express Scripts Holding † | 130,130 | 9,831,321 | ||||||
Johnson & Johnson | 82,700 | 9,319,463 | ||||||
Merck | 169,700 | 9,547,322 | ||||||
Novartis | 10,335 | 820,354 | ||||||
Pfizer | 282,638 | 9,807,539 | ||||||
Quest Diagnostics @ | 121,200 | 9,353,004 | ||||||
Sanofi | 11,233 | 921,007 | ||||||
STADA Arzneimittel | 11,309 | 602,220 | ||||||
Teva Pharmaceutical Industries ADR | 19,433 | 1,007,990 | ||||||
|
| |||||||
70,073,934 | ||||||||
|
| |||||||
Healthcare REIT – 0.05% | ||||||||
Healthcare Trust of America Class A ¥ | 11,100 | 334,998 | ||||||
|
| |||||||
334,998 | ||||||||
|
| |||||||
Hotel REIT – 0.09% | ||||||||
Pebblebrook Hotel Trust ¥ | 24,000 | 605,280 | ||||||
|
| |||||||
605,280 | ||||||||
|
| |||||||
Industrial REIT – 0.10% | ||||||||
Terreno Realty ¥ | 28,540 | 683,248 | ||||||
|
| |||||||
683,248 | ||||||||
|
| |||||||
Industrials – 4.93% | ||||||||
Deutsche Post | 22,302 | 650,507 | ||||||
East Japan Railway | 8,746 | 800,476 | ||||||
ITOCHU | 63,889 | 802,831 | ||||||
Koninklijke Philips | 23,048 | 621,106 | ||||||
Meggitt | 81,722 | 459,245 | ||||||
Northrop Grumman ¥ | 46,800 | 9,952,956 | ||||||
Raytheon | 72,800 | 9,439,976 | ||||||
Rexel | 17,327 | 264,988 | ||||||
Teleperformance | 9,878 | 861,455 |
7
Schedule of investments
Delaware Wealth Builder Fund
Number of shares | Value (U.S. $) | |||||||
| ||||||||
Common Stock (continued) | ||||||||
| ||||||||
Industrials (continued) | ||||||||
Vinci | 11,428 | $ | 859,431 | |||||
Waste Management | 162,700 | 9,916,565 | ||||||
|
| |||||||
34,629,536 | ||||||||
|
| |||||||
Information Technology – 6.90% | ||||||||
CA @ | 304,764 | 9,849,972 | ||||||
CGI Group Class A † | 17,046 | 797,217 | ||||||
Cisco Systems | 329,300 | 9,566,165 | ||||||
Intel | 292,000 | 9,224,280 | ||||||
Microsoft | 151,809 | 8,045,877 | ||||||
Playtech | 38,947 | 479,193 | ||||||
QUALCOMM | 21,000 | 1,153,320 | ||||||
Samsung Electronics | 746 | 808,719 | ||||||
Xerox @ | 849,400 | 8,468,518 | ||||||
|
| |||||||
48,393,261 | ||||||||
|
| |||||||
Mall REITs – 0.78% | ||||||||
General Growth Properties ¥ | 78,200 | 2,101,234 | ||||||
Simon Property Group ¥ | 12,163 | 2,403,895 | ||||||
Taubman Centers ¥ | 13,700 | 939,409 | ||||||
|
| |||||||
5,444,538 | ||||||||
|
| |||||||
Manufactured Housing REIT – 0.12% | ||||||||
Equity LifeStyle Properties ¥ | 11,527 | 844,929 | ||||||
|
| |||||||
844,929 | ||||||||
|
| |||||||
Materials – 1.49% | ||||||||
Alamos Gold | 23,652 | 151,325 | ||||||
EI du Pont de Nemours | 140,700 | 9,203,187 | ||||||
Rexam | 69,525 | 632,878 | ||||||
Rio Tinto | 10,510 | 295,690 | ||||||
Yamana Gold | 41,413 | 174,640 | ||||||
|
| |||||||
10,457,720 | ||||||||
|
| |||||||
Mixed REIT – 0.24% | ||||||||
Duke Realty ¥ | 70,700 | 1,673,469 | ||||||
|
| |||||||
1,673,469 | ||||||||
|
| |||||||
Multifamily REITs – 1.57% | ||||||||
ADO Properties 144A # | 64,401 | 2,326,663 | ||||||
American Campus Communities ¥ | 15,300 | 719,406 | ||||||
American Homes 4 Rent ¥ | 72,090 | 1,322,130 | ||||||
Apartment Investment & Management ¥ | 39,600 | 1,688,940 | ||||||
Equity Residential ¥ | 22,400 | 1,550,304 | ||||||
Gecina | 8,692 | 1,227,753 | ||||||
Post Properties | 17,300 | 1,047,861 |
8
Number of shares | Value (U.S. $) | |||||||
| ||||||||
Common Stock (continued) | ||||||||
| ||||||||
Multifamily REITs (continued) | ||||||||
Vonovia | 32,489 | $ | 1,113,566 | |||||
|
| |||||||
10,996,623 | ||||||||
|
| |||||||
Office REITs – 1.38% | ||||||||
Boston Properties ¥ | 5,100 | 640,713 | ||||||
Easterly Government Properties | 147,400 | 2,759,328 | ||||||
Empire State Realty Trust ¥ | 51,900 | 983,505 | ||||||
Equity Commonwealth @†¥ | 61,100 | 1,765,179 | ||||||
Hudson Pacific Properties ¥ | 15,000 | 421,650 | ||||||
Intervest Offices & Warehouses | 66,160 | 1,839,219 | ||||||
Mack-Cali Realty | 48,800 | 1,280,512 | ||||||
|
| |||||||
9,690,106 | ||||||||
|
| |||||||
Self-Storage REIT – 0.10% | ||||||||
CubeSmart ¥ | 21,200 | 675,008 | ||||||
|
| |||||||
675,008 | ||||||||
|
| |||||||
Shopping Center REITs – 1.16% | ||||||||
Brixmor Property Group ¥ | 93,000 | 2,348,250 | ||||||
DDR ¥ | 71,900 | 1,237,399 | ||||||
Kimco Realty | 22,900 | 645,322 | ||||||
Klepierre | 15,999 | 731,811 | ||||||
Ramco-Gershenson Properties Trust ¥ | 21,800 | 392,618 | ||||||
Retail Properties of America | 61,200 | 970,020 | ||||||
Urban Edge Properties | 39,600 | 1,063,260 | ||||||
Wheeler Real Estate Investment Trust | 500,130 | 755,196 | ||||||
|
| |||||||
8,143,876 | ||||||||
|
| |||||||
Single Tenant REIT – 0.71% | ||||||||
STORE Capital ¥ | 195,700 | 4,996,221 | ||||||
|
| |||||||
4,996,221 | ||||||||
|
| |||||||
Telecommunication Services – 2.88% | ||||||||
AT&T | 238,700 | 9,345,105 | ||||||
Century Communications @=† | 1,625,000 | 0 | ||||||
Mobile TeleSystems ADR | 21,796 | 190,933 | ||||||
Nippon Telegraph & Telephone | 25,674 | 1,125,636 | ||||||
Tele2 Class B | 48,624 | 426,703 | ||||||
Verizon Communications | 178,900 | 9,106,010 | ||||||
|
| |||||||
20,194,387 | ||||||||
|
| |||||||
Utilities – 1.37% | ||||||||
Edison International | 129,300 | 9,261,759 | ||||||
National Grid | 26,506 | 386,587 | ||||||
|
| |||||||
9,648,346 | ||||||||
|
| |||||||
Total Common Stock (cost $332,408,628) | 399,625,981 | |||||||
|
|
9
Schedule of investments
Delaware Wealth Builder Fund
Number of shares | Value (U.S. $) | |||||||
| ||||||||
Exchange-Traded Funds – 0.82% | ||||||||
| ||||||||
ProShares Short High Yield† | 97,700 | $ | 2,617,383 | |||||
SPDR Gold Shares† | 12,700 | 1,473,708 | ||||||
VanEck Vectors High-Yield Municipal Index ETF | 52,800 | 1,681,680 | ||||||
|
| |||||||
Total Exchange-Traded Funds (cost $5,889,462) | 5,772,771 | |||||||
|
| |||||||
| ||||||||
Convertible Preferred Stock – 1.67% | ||||||||
| ||||||||
Crown Castle International 4.50% exercise price $85.77, expiration date 11/1/16 | 15,000 | 1,636,800 | ||||||
El Paso Energy Capital Trust I 4.75% exercise price $50.00, expiration date 3/31/28 @ | 39,900 | 1,935,150 | ||||||
Exelon 6.50% exercise price $43.75, expiration date 6/1/17 | 41,750 | 1,971,435 | ||||||
Halcon Resources 5.75% exercise price $30.78, expiration date 12/31/49 @ | 789 | 38,267 | ||||||
Huntington Bancshares 8.50% exercise price $11.95, expiration date 12/31/49 @ | 1,437 | 2,010,334 | ||||||
Maiden Holdings 7.25% exercise price $15.11, expiration date 9/15/16 | 34,260 | 1,667,434 | ||||||
Wells Fargo 7.50% exercise price $156.71, expiration date 12/31/49 | 1,989 | 2,445,217 | ||||||
|
| |||||||
Total Convertible Preferred Stock (cost $12,202,828) | 11,704,637 | |||||||
|
| |||||||
Principal amount° | ||||||||
| ||||||||
Commercial Mortgage-Backed Security – 0.08% | ||||||||
| ||||||||
JPMBB Commercial Mortgage Securities Trust | 500,000 | 536,784 | ||||||
|
| |||||||
Total Commercial Mortgage-Backed Security (cost $528,066) | 536,784 | |||||||
|
| |||||||
| ||||||||
Convertible Bonds – 7.66% | ||||||||
| ||||||||
Capital Goods – 0.05% | ||||||||
Titan Machinery 3.75% exercise price $43.17, maturity date 5/1/19 @ | 457,000 | 378,167 | ||||||
|
| |||||||
378,167 | ||||||||
|
| |||||||
Communications – 1.11% | ||||||||
Alaska Communications Systems Group 6.25% exercise price $10.28, maturity date 5/1/18 @ | 2,913,000 | 2,789,197 | ||||||
Clearwire Communications 144A 8.25% exercise price $7.08, maturity date 12/1/40 #@ | 2,588,000 | 2,636,525 | ||||||
Liberty Interactive 144A 1.00% exercise price $64.20, maturity date 9/30/43 # | 2,662,000 | 2,325,923 | ||||||
|
| |||||||
7,751,645 | ||||||||
|
|
10
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Convertible Bonds (continued) | ||||||||
| ||||||||
Consumer Cyclical – 0.42% | ||||||||
Meritor 4.00% exercise price $26.73, maturity date 2/15/27 f | 3,072,000 | $ | 2,968,320 | |||||
|
| |||||||
2,968,320 | ||||||||
|
| |||||||
Consumer Non-Cyclical – 1.62% | ||||||||
Brookdale Senior Living 2.75% exercise price $29.33, maturity date 6/15/18 | 839,000 | 831,659 | ||||||
HealthSouth 2.00% exercise price $37.59, maturity date 12/1/43 | 1,718,000 | 2,045,494 | ||||||
Hologic 2.00% exercise price $31.18, maturity date 3/1/42 f | 913,000 | 1,176,629 | ||||||
NuVasive 144A 2.25% exercise price $59.82, maturity date 3/15/21 # | 1,031,000 | 1,170,829 | ||||||
Spectrum Pharmaceuticals 2.75% exercise price $10.53, maturity date 12/15/18 @ | 2,710,000 | 2,643,944 | ||||||
Vector Group 1.75% exercise price $24.64, maturity date 4/15/20 | 2,566,000 | 2,785,714 | ||||||
Vector Group 2.50% exercise price $15.98, maturity date 1/15/19 ● | 481,000 | 675,029 | ||||||
|
| |||||||
11,329,298 | ||||||||
|
| |||||||
Energy – 0.18% | ||||||||
Helix Energy Solutions Group 3.25% exercise price $25.02, maturity date 3/15/32 | 1,387,000 | 1,261,303 | ||||||
|
| |||||||
1,261,303 | ||||||||
|
| |||||||
Financials – 1.16% | ||||||||
BGC Partners 4.50% exercise price $9.84, maturity date 7/15/16 | 2,293,000 | 2,315,930 | ||||||
GAIN Capital Holdings 4.125% exercise price $12.00, maturity date 12/1/18 @ | 2,037,000 | 1,927,511 | ||||||
Jefferies Group 3.875% exercise price $44.35, maturity date 11/1/29 | 1,984,000 | 2,001,360 | ||||||
New Mountain Finance 5.00% exercise price $15.93, maturity date 6/15/19 @ | 1,943,000 | 1,906,569 | ||||||
|
| |||||||
8,151,370 | ||||||||
|
| |||||||
Industrials – 0.29% | ||||||||
Atlas Air Worldwide Holdings 2.25% exercise price $74.05, maturity date 6/1/22 | 753,000 | 741,705 | ||||||
Chart Industries 2.00% exercise price $69.03, maturity date 8/1/18 @ | 1,424,000 | 1,314,530 | ||||||
|
| |||||||
2,056,235 | ||||||||
|
| |||||||
REITs – 1.10% | ||||||||
Blackstone Mortgage Trust 5.25% exercise price $28.36, maturity date 12/1/18 | 3,147,000 | 3,369,257 |
11
Schedule of investments
Delaware Wealth Builder Fund
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Convertible Bonds (continued) | ||||||||
| ||||||||
REITs (continued) | ||||||||
Spirit Realty Capital 3.75% exercise price $13.10, maturity date 5/15/21 @ | 2,025,000 | $ | 2,188,276 | |||||
VEREIT 3.75% exercise price $14.99, maturity date 12/15/20 @ | 2,170,000 | 2,168,655 | ||||||
|
| |||||||
7,726,188 | ||||||||
|
| |||||||
Technology – 1.73% | ||||||||
Cardtronics 1.00% exercise price $52.35, maturity date 12/1/20 | 3,192,000 | 3,263,820 | ||||||
Ciena 144A 3.75% exercise price $20.17, maturity date 10/15/18 # | 1,154,000 | 1,325,657 | ||||||
Electronics For Imaging 0.75% exercise price $52.72, maturity date 9/1/19 | 1,673,000 | 1,785,927 | ||||||
j2 Global 3.25% exercise price $69.21, maturity date 6/15/29 | 1,417,000 | 1,647,263 | ||||||
Knowles 144A 3.25% exercise price $18.43, maturity date 11/1/21 # | 200,000 | 209,625 | ||||||
Nuance Communications 2.75% exercise price $32.30, maturity date 11/1/31 | 1,928,000 | 1,950,895 | ||||||
PROS Holdings 2.00% exercise price $33.79, maturity date 12/1/19 | 2,263,000 | 1,929,207 | ||||||
|
| |||||||
12,112,394 | ||||||||
|
| |||||||
Total Convertible Bonds (cost $53,473,570) | 53,734,920 | |||||||
|
| |||||||
| ||||||||
Corporate Bonds – 13.08% | ||||||||
| ||||||||
Automotive – 0.05% | ||||||||
American Tire Distributors 144A 10.25% 3/1/22 # | 395,000 | 344,144 | ||||||
|
| |||||||
344,144 | ||||||||
|
| |||||||
Banking – 0.54% | ||||||||
Credit Suisse Group 144A 6.25% 12/29/49 #● | 560,000 | 541,316 | ||||||
HSBC Holdings 6.875% 12/29/49 ● | 345,000 | 348,450 | ||||||
JPMorgan Chase 6.75% 8/29/49 ● | 460,000 | 511,175 | ||||||
Lloyds Banking Group 7.50% 4/30/49 ● | 415,000 | 417,075 | ||||||
Popular 7.00% 7/1/19 | 700,000 | 698,250 | ||||||
Royal Bank of Scotland Group 8.00% 12/29/49 ● | 545,000 | 537,506 | ||||||
Santander Issuances 5.179% 11/19/25 | 200,000 | 199,206 | ||||||
UBS Group 6.875% 12/29/49 ● | 520,000 | 503,844 | ||||||
|
| |||||||
3,756,822 | ||||||||
|
| |||||||
Basic Industry – 1.31% | ||||||||
AK Steel 7.625% 5/15/20 | 363,000 | 294,030 | ||||||
ArcelorMittal | ||||||||
6.50% 3/1/21 | 235,000 | 244,400 |
12
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Basic Industry (continued) | ||||||||
ArcelorMittal | ||||||||
7.25% 2/25/22 | 235,000 | $ | 246,750 | |||||
10.85% 6/1/19 | 115,000 | 135,556 | ||||||
Ball 5.25% 7/1/25 | 250,000 | 261,250 | ||||||
Builders FirstSource | ||||||||
144A 7.625% 6/1/21 # | 366,000 | 386,130 | ||||||
144A 10.75% 8/15/23 # | 490,000 | 535,325 | ||||||
Cemex | ||||||||
144A 7.25% 1/15/21 # | 665,000 | 696,521 | ||||||
144A 7.75% 4/16/26 # | 200,000 | 210,750 | ||||||
Chemours | ||||||||
6.625% 5/15/23 | 185,000 | 166,963 | ||||||
7.00% 5/15/25 | 160,000 | 141,100 | ||||||
FMG Resources August 2006 144A 6.875% 4/1/22 # | 385,000 | 350,924 | ||||||
Freeport-McMoRan 3.55% 3/1/22 | 320,000 | 269,600 | ||||||
James Hardie International Finance 144A 5.875% 2/15/23 # | 445,000 | 453,900 | ||||||
Joseph T Ryerson & Son 144A 11.00% 5/15/22 # | 215,000 | 221,450 | ||||||
Kraton Polymers 144A 10.50% 4/15/23 # | 245,000 | 260,313 | ||||||
NCI Building Systems 144A 8.25% 1/15/23 # | 440,000 | 473,000 | ||||||
New Gold | ||||||||
144A 6.25% 11/15/22 # | 201,000 | 191,453 | ||||||
144A 7.00% 4/15/20 # | 210,000 | 211,837 | ||||||
NOVA Chemicals 144A 5.00% 5/1/25 # | 420,000 | 415,800 | ||||||
PQ 144A 6.75% 11/15/22 # | 510,000 | 532,950 | ||||||
PTC 6.00% 5/15/24 | 270,000 | 281,813 | ||||||
Rayonier AM Products 144A 5.50% 6/1/24 # | 349,000 | 297,523 | ||||||
Standard Industries | ||||||||
144A 5.50% 2/15/23 # | 170,000 | 175,950 | ||||||
144A 6.00% 10/15/25 # | 140,000 | 149,450 | ||||||
Steel Dynamics 5.50% 10/1/24 | 305,000 | 314,211 | ||||||
Summit Materials | ||||||||
6.125% 7/15/23 | 605,000 | 611,050 | ||||||
144A 8.50% 4/15/22 # | 130,000 | 139,100 | ||||||
US Concrete 144A 6.375% 6/1/24 # | 515,000 | 516,287 | ||||||
|
| |||||||
9,185,386 | ||||||||
|
| |||||||
Capital Goods – 0.84% | ||||||||
Ardagh Packaging Finance | ||||||||
144A 4.625% 5/15/23 # | 200,000 | 200,000 | ||||||
144A 6.00% 6/30/21 # | 600,000 | 594,000 | ||||||
144A 7.25% 5/15/24 # | 200,000 | 205,000 | ||||||
BWAY Holding 144A 9.125% 8/15/21 # | 649,000 | 627,907 |
13
Schedule of investments
Delaware Wealth Builder Fund
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Capital Goods (continued) | ||||||||
Gardner Denver 144A 6.875% 8/15/21 # | 632,000 | $ | 545,100 | |||||
KLX 144A 5.875% 12/1/22 # | 505,000 | 499,950 | ||||||
Plastipak Holdings 144A 6.50% 10/1/21 # | 555,000 | 572,344 | ||||||
Reynolds Group Issuer 8.25% 2/15/21 | 690,000 | 717,984 | ||||||
Signode Industrial Group 144A 6.375% 5/1/22 # | 555,000 | 532,106 | ||||||
StandardAero Aviation Holdings 144A 10.00% 7/15/23 # | 555,000 | 557,775 | ||||||
TransDigm 144A 6.375% 6/15/26 # | 830,000 | 832,075 | ||||||
|
| |||||||
5,884,241 | ||||||||
|
| |||||||
Consumer Cyclical – 1.20% | ||||||||
American Builders & Contractors Supply 144A 5.75% 12/15/23 # | 155,000 | 161,587 | ||||||
Beacon Roofing Supply 6.375% 10/1/23 | 395,000 | 420,675 | ||||||
Boyd Gaming | ||||||||
144A 6.375% 4/1/26 # | 200,000 | 207,000 | ||||||
6.875% 5/15/23 | 650,000 | 684,775 | ||||||
GLP Capital 5.375% 4/15/26 | 235,000 | 245,575 | ||||||
Group 1 Automotive 144A 5.25% 12/15/23 # | 350,000 | 346,500 | ||||||
HD Supply 144A 5.75% 4/15/24 # | 270,000 | 281,475 | ||||||
JC Penney 8.125% 10/1/19 | 510,000 | 524,025 | ||||||
L Brands 6.875% 11/1/35 | 575,000 | 609,500 | ||||||
LKQ 4.75% 5/15/23 | 240,000 | 237,000 | ||||||
M/I Homes 6.75% 1/15/21 | 420,000 | 424,200 | ||||||
Mattamy Group 144A 6.50% 11/15/20 # | 350,000 | 342,125 | ||||||
MGM Resorts International 6.00% 3/15/23 | 571,000 | 598,123 | ||||||
MGP Growth Properties Operating Partnership 144A 5.625% 5/1/24 # | 280,000 | 294,700 | ||||||
Mohegan Tribal Gaming Authority 9.75% 9/1/21 | 940,000 | 995,225 | ||||||
MPH Acquisition Holdings 144A 7.125% 6/1/24 # | 730,000 | 751,900 | ||||||
Neiman Marcus Group 144A 8.00% 10/15/21 # | 290,000 | 220,400 | ||||||
Penske Automotive Group 5.50% 5/15/26 | 505,000 | 502,475 | ||||||
Rite Aid 144A 6.125% 4/1/23 # | 320,000 | 339,600 | ||||||
Scientific Games 8.125% 9/15/18 | 265,000 | 258,375 | ||||||
|
| |||||||
8,445,235 | ||||||||
|
| |||||||
Consumer Non-Cyclical – 1.20% | ||||||||
Albertsons 144A 6.625% 6/15/24 # | 710,000 | 728,637 | ||||||
Amsurg 5.625% 7/15/22 | 385,000 | 392,219 | ||||||
Dean Foods 144A 6.50% 3/15/23 # | 395,000 | 412,775 | ||||||
ExamWorks Group 5.625% 4/15/23 | 505,000 | 543,506 | ||||||
JBS Investments 144A 7.75% 10/28/20 # | 200,000 | 210,500 | ||||||
JBS USA 144A 5.75% 6/15/25 # | 1,705,000 | 1,636,800 | ||||||
Kronos Acquisition Holdings 144A 9.00% 8/15/23 # | 720,000 | 700,200 | ||||||
NBTY 144A 7.625% 5/15/21 # | 645,000 | 659,513 |
14
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Consumer Non-Cyclical (continued) | ||||||||
NES Rentals Holdings 144A 7.875% 5/1/18 # | 310,000 | $ | 302,250 | |||||
Post Holdings | ||||||||
7.375% 2/15/22 | 285,000 | 302,100 | ||||||
144A 7.75% 3/15/24 # | 445,000 | 485,606 | ||||||
Prestige Brands | ||||||||
144A 5.375% 12/15/21 # | 265,000 | 269,637 | ||||||
144A 6.375% 3/1/24 # | 95,000 | 100,463 | ||||||
Prime Security Services Borrower 144A 9.25% 5/15/23 # | 735,000 | 769,913 | ||||||
Spectrum Brands 6.125% 12/15/24 | 265,000 | 281,563 | ||||||
SUPERVALU 7.75% 11/15/22 | 295,000 | 257,756 | ||||||
Team Health 144A 7.25% 12/15/23 # | 340,000 | 365,500 | ||||||
|
| |||||||
8,418,938 | ||||||||
|
| |||||||
Energy – 1.48% | ||||||||
AmeriGas Finance 7.00% 5/20/22 | 405,000 | 428,794 | ||||||
Antero Resources | ||||||||
5.125% 12/1/22 | 140,000 | 134,750 | ||||||
5.375% 11/1/21 | 205,000 | 200,900 | ||||||
6.00% 12/1/20 | 90,000 | 89,775 | ||||||
Calumet Specialty Products Partners 7.625% 1/15/22 | 355,000 | 236,963 | ||||||
Cheniere Corpus Christi Holdings 144A 7.00% 6/30/24 # | 235,000 | 241,169 | ||||||
Concho Resources | ||||||||
5.50% 10/1/22 | 230,000 | 231,150 | ||||||
5.50% 4/1/23 | 280,000 | 281,400 | ||||||
Continental Resources 5.00% 9/15/22 | 270,000 | 256,500 | ||||||
Energy Transfer Equity 7.50% 10/15/20 | 315,000 | 322,875 | ||||||
EnLink Midstream Partners | ||||||||
2.70% 4/1/19 | 310,000 | 288,379 | ||||||
4.15% 6/1/25 | 622,000 | 533,824 | ||||||
Freeport-McMoran Oil & Gas 6.50% 11/15/20 | 540,000 | 521,100 | ||||||
Genesis Energy | ||||||||
5.75% 2/15/21 | 350,000 | 327,250 | ||||||
6.00% 5/15/23 | 105,000 | 97,125 | ||||||
6.75% 8/1/22 | 419,000 | 400,145 | ||||||
Hilcorp Energy I | ||||||||
144A 5.00% 12/1/24 # | 271,000 | 258,805 | ||||||
144A 5.75% 10/1/25 # | 197,000 | 191,090 | ||||||
Laredo Petroleum 7.375% 5/1/22 | 250,000 | 252,813 | ||||||
Murphy Oil USA 6.00% 8/15/23 | 525,000 | 547,313 | ||||||
Newfield Exploration 5.625% 7/1/24 | 370,000 | 370,000 | ||||||
Noble Holding International 5.00% 3/16/18 | 280,000 | 272,090 | ||||||
NuStar Logistics 6.75% 2/1/21 | 500,000 | 505,000 | ||||||
Oasis Petroleum 6.875% 3/15/22 | 555,000 | 513,375 |
15
Schedule of investments
Delaware Wealth Builder Fund
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Energy (continued) | ||||||||
QEP Resources 5.25% 5/1/23 | 285,000 | $ | 263,625 | |||||
Regency Energy Partners 5.875% 3/1/22 | 340,000 | 347,455 | ||||||
Sunoco 144A 6.25% 4/15/21 # | 275,000 | 275,687 | ||||||
Targa Resources Partners | ||||||||
6.625% 10/1/20 | 60,000 | 61,500 | ||||||
144A 6.75% 3/15/24 # | 500,000 | 496,250 | ||||||
6.875% 2/1/21 | 393,000 | 399,877 | ||||||
Tesoro Logistics | ||||||||
6.125% 10/15/21 | 70,000 | 72,625 | ||||||
6.375% 5/1/24 | 215,000 | 222,525 | ||||||
Transocean | ||||||||
6.00% 3/15/18 | 360,000 | 351,000 | ||||||
7.375% 4/15/18 | 150,000 | 146,813 | ||||||
WPX Energy 7.50% 8/1/20 | 250,000 | 246,250 | ||||||
|
| |||||||
10,386,192 | ||||||||
|
| |||||||
Financials – 0.08% | ||||||||
Ally Financial 5.75% 11/20/25 | 550,000 | 558,937 | ||||||
|
| |||||||
558,937 | ||||||||
|
| |||||||
Healthcare – 1.20% | ||||||||
Air Medical Merger Sub 144A 6.375% 5/15/23 # | 570,000 | 560,025 | ||||||
Community Health Systems 6.875% 2/1/22 | 592,000 | 511,719 | ||||||
DaVita HealthCare Partners 5.00% 5/1/25 | 585,000 | 581,344 | ||||||
HCA | ||||||||
5.25% 6/15/26 | 140,000 | 144,200 | ||||||
5.375% 2/1/25 | 500,000 | 508,125 | ||||||
5.875% 2/15/26 | 335,000 | 347,563 | ||||||
HealthSouth | ||||||||
5.75% 11/1/24 | 350,000 | 356,563 | ||||||
5.75% 9/15/25 | 265,000 | 268,975 | ||||||
Hill-Rom Holdings 144A 5.75% 9/1/23 # | 545,000 | 559,987 | ||||||
IASIS Healthcare 8.375% 5/15/19 | 850,000 | 820,250 | ||||||
Immucor 11.125% 8/15/19 | 110,000 | 100,650 | ||||||
Kinetic Concepts | ||||||||
10.50% 11/1/18 | 294,000 | 294,735 | ||||||
12.50% 11/1/19 | 395,000 | 363,400 | ||||||
LifePoint Health 5.875% 12/1/23 | 595,000 | 615,825 | ||||||
Mallinckrodt International Finance | ||||||||
4.75% 4/15/23 | 200,000 | 165,750 | ||||||
144A 5.50% 4/15/25 # | 100,000 | 90,750 | ||||||
144A 5.625% 10/15/23 # | 185,000 | 174,825 | ||||||
MPH Acquisition Holdings 144A 6.625% 4/1/22 # | 360,000 | 393,300 | ||||||
Sterigenics-Nordion Holdings 144A 6.50% 5/15/23 # | 525,000 | 535,500 |
16
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Healthcare (continued) | ||||||||
Tenet Healthcare 8.125% 4/1/22 | 495,000 | $ | 500,569 | |||||
Valeant Pharmaceuticals International | ||||||||
144A 5.375% 3/15/20 # | 145,000 | 128,687 | ||||||
144A 6.125% 4/15/25 # | 240,000 | 201,300 | ||||||
144A 6.75% 8/15/18 # | 200,000 | 196,500 | ||||||
|
| |||||||
8,420,542 | ||||||||
|
| |||||||
Insurance – 0.24% | ||||||||
HUB International | ||||||||
144A 7.875% 10/1/21 # | 680,000 | 668,100 | ||||||
144A 9.25% 2/15/21 # | 155,000 | 161,587 | ||||||
USI 144A 7.75% 1/15/21 # | 456,000 | 455,430 | ||||||
XLIT 6.50% 12/29/49 ● | 573,000 | 406,114 | ||||||
|
| |||||||
1,691,231 | ||||||||
|
| |||||||
Media – 1.40% | ||||||||
Altice Luxembourg 144A 7.75% 5/15/22 # | 435,000 | 447,234 | ||||||
CCO Holdings | ||||||||
144A 5.375% 5/1/25 # | 245,000 | 249,287 | ||||||
144A 5.50% 5/1/26 # | 45,000 | 45,563 | ||||||
144A 5.75% 2/15/26 # | 395,000 | 405,863 | ||||||
144A 5.875% 4/1/24 # | 30,000 | 31,350 | ||||||
144A 5.875% 5/1/27 # | 470,000 | 482,337 | ||||||
Cequel Communications Holdings I 144A 7.75% 7/15/25 # | 200,000 | 208,500 | ||||||
Columbus International 144A 7.375% 3/30/21 # | 280,000 | 294,560 | ||||||
CSC Holdings 5.25% 6/1/24 | 675,000 | 609,187 | ||||||
DISH DBS | ||||||||
5.00% 3/15/23 | 250,000 | 228,125 | ||||||
5.875% 11/15/24 | 435,000 | 404,228 | ||||||
Gray Television 7.50% 10/1/20 | 377,000 | 397,264 | ||||||
Lamar Media 144A 5.75% 2/1/26 # | 492,000 | 519,060 | ||||||
Midcontinent Communications & Midcontinent Finance 144A 6.875% 8/15/23 # | 325,000 | 339,625 | ||||||
Neptune Finco 144A 10.875% 10/15/25 # | 200,000 | 228,000 | ||||||
Numericable-SFR 144A 7.375% 5/1/26 # | 1,175,000 | 1,186,750 | ||||||
RCN Telecom Services 144A 8.50% 8/15/20 # | 465,000 | 480,694 | ||||||
Sinclair Television Group 144A 5.625% 8/1/24 # | 500,000 | 514,375 | ||||||
Sirius XM Radio 144A 5.375% 4/15/25 # | 500,000 | 503,125 | ||||||
Tribune Media 5.875% 7/15/22 | 560,000 | 568,400 | ||||||
Unitymedia 144A 6.125% 1/15/25 # | 600,000 | 618,750 | ||||||
VTR Finance 144A 6.875% 1/15/24 # | 465,000 | 459,769 | ||||||
WideOpenWest Finance 10.25% 7/15/19 | 605,000 | 632,981 | ||||||
|
| |||||||
9,855,027 | ||||||||
|
|
17
Schedule of investments
Delaware Wealth Builder Fund
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
REITs – 0.83% | ||||||||
Brixmor Operating Partnership 3.875% 8/15/22 | 1,600,000 | $ | 1,605,694 | |||||
Communications Sales & Leasing | ||||||||
144A 6.00% 4/15/23 # | 210,000 | 209,475 | ||||||
8.25% 10/15/23 | 255,000 | 241,613 | ||||||
Equinix 5.875% 1/15/26 | 230,000 | 240,350 | ||||||
ESH Hospitality 144A 5.25% 5/1/25 # | 800,000 | 780,000 | ||||||
GEO Group 6.00% 4/15/26 | 365,000 | 369,563 | ||||||
Iron Mountain 144A 4.375% 6/1/21 # | 215,000 | 215,000 | ||||||
Iron Mountain US Holdings 144A 5.375% 6/1/26 # | 535,000 | 529,316 | ||||||
VEREIT Operating Partnership 2.00% 2/6/17 | 1,650,000 | 1,654,881 | ||||||
|
| |||||||
5,845,892 | ||||||||
|
| |||||||
Services – 0.45% | ||||||||
ADT 6.25% 10/15/21 | 250,000 | 263,125 | ||||||
BlueLine Rental Finance 144A 7.00% 2/1/19 # | 515,000 | 437,750 | ||||||
GEO Group 5.125% 4/1/23 | 265,000 | 259,037 | ||||||
GFL Environmental 144A 9.875% 2/1/21 # | 355,000 | 380,737 | ||||||
OPE KAG Finance Sub 144A 7.875% 7/31/23 # | 470,000 | 474,700 | ||||||
United Rentals North America 5.75% 11/15/24 | 635,000 | 639,763 | ||||||
Vander Intermediate Holding II 144A PIK 9.75% 2/1/19 #T | 255,000 | 141,525 | ||||||
XPO Logistics 144A 6.50% 6/15/22 # | 575,000 | 554,875 | ||||||
|
| |||||||
3,151,512 | ||||||||
|
| |||||||
Technology – 0.69% | ||||||||
Change Healthcare Holdings 144A 6.00% 2/15/21 # | 495,000 | 499,950 | ||||||
CommScope 144A 5.50% 6/15/24 # | 120,000 | 121,350 | ||||||
Entegris 144A 6.00% 4/1/22 # | 420,000 | 435,225 | ||||||
First Data 144A 7.00% 12/1/23 # | 1,103,000 | 1,122,303 | ||||||
Infor US 6.50% 5/15/22 | 735,000 | 678,037 | ||||||
Micron Technology 144A 7.50% 9/15/23 # | 340,000 | 357,850 | ||||||
Microsemi 144A 9.125% 4/15/23 # | 500,000 | 551,250 | ||||||
Open Text 144A 5.875% 6/1/26 # | 215,000 | 216,075 | ||||||
Sensata Technologies UK Financing 144A 6.25% 2/15/26 # | 285,000 | 300,675 | ||||||
Solera 144A 10.50% 3/1/24 # | 340,000 | 369,750 | ||||||
Western Digital 144A 10.50% 4/1/24 # | 180,000 | 186,750 | ||||||
|
| |||||||
4,839,215 | ||||||||
|
| |||||||
Telecommunications – 1.25% | ||||||||
CenturyLink | ||||||||
6.75% 12/1/23 | 525,000 | 513,844 | ||||||
7.50% 4/1/24 | 130,000 | 128,944 | ||||||
Cogent Communications Finance 144A | ||||||||
5.625% 4/15/21 #@ | 435,000 | 433,913 | ||||||
Cogent Communications Group 144A 5.375% 3/1/22 # | 190,000 | 191,900 |
18
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Telecommunications (continued) | ||||||||
CommScope Technologies Finance 144A 6.00% 6/15/25 # | 395,000 | $ | 403,887 | |||||
Digicel 144A 6.75% 3/1/23 # | 550,000 | 486,750 | ||||||
Digicel Group | ||||||||
144A 7.125% 4/1/22 # | 1,250,000 | 970,375 | ||||||
144A 8.25% 9/30/20 # | 560,000 | 488,600 | ||||||
Frontier Communications | ||||||||
144A 10.50% 9/15/22 # | 397,000 | 414,865 | ||||||
144A 11.00% 9/15/25 # | 500,000 | 510,625 | ||||||
Level 3 Financing 5.375% 5/1/25 | 680,000 | 694,586 | ||||||
Sable International Finance 144A 6.875% 8/1/22 # | 280,000 | 287,700 | ||||||
Sprint | ||||||||
7.125% 6/15/24 | 235,000 | 178,013 | ||||||
7.25% 9/15/21 | 490,000 | 399,350 | ||||||
7.875% 9/15/23 | 10,000 | 7,850 | ||||||
Sprint Capital 6.90% 5/1/19 | 160,000 | 150,000 | ||||||
Sprint Communications | ||||||||
144A 7.00% 3/1/20 # | 110,000 | 114,069 | ||||||
144A 9.00% 11/15/18 # | 425,000 | 453,687 | ||||||
T-Mobile USA | ||||||||
6.00% 3/1/23 | 245,000 | 256,331 | ||||||
6.00% 4/15/24 | 110,000 | 114,906 | ||||||
6.375% 3/1/25 | 180,000 | 189,225 | ||||||
6.50% 1/15/26 | 430,000 | 456,337 | ||||||
Wind Acquisition Finance 144A 7.375% 4/23/21 # | 515,000 | 489,894 | ||||||
Zayo Group 6.00% 4/1/23 | 385,000 | 397,513 | ||||||
|
| |||||||
8,733,164 | ||||||||
|
| |||||||
Utilities – 0.32% | ||||||||
AES | ||||||||
5.50% 4/15/25 | 410,000 | 408,975 | ||||||
6.00% 5/15/26 | 95,000 | 96,425 | ||||||
Calpine | ||||||||
144A 5.25% 6/1/26 # | 505,000 | 505,631 | ||||||
5.375% 1/15/23 | 195,000 | 191,527 | ||||||
5.50% 2/1/24 | 325,000 | 315,961 | ||||||
Dynegy | ||||||||
7.375% 11/1/22 | 40,000 | 38,800 | ||||||
7.625% 11/1/24 | 495,000 | 477,675 | ||||||
Enel 144A 8.75% 9/24/73 #● | 200,000 | 231,000 | ||||||
|
| |||||||
2,265,994 | ||||||||
|
| |||||||
Total Corporate Bonds (cost $93,931,700) | 91,782,472 | |||||||
|
|
19
Schedule of investments
Delaware Wealth Builder Fund
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Leveraged Non-Recourse Security – 0.00% | ||||||||
| ||||||||
JPMorgan Fixed Income Pass Through Trust | 1,300,000 | $ | 0 | |||||
|
| |||||||
Total Leveraged Non-Recourse Security (cost $1,105,000) | 0 | |||||||
|
| |||||||
| ||||||||
Municipal Bonds – 1.05% | ||||||||
| ||||||||
California State | 1,000,000 | 1,196,670 | ||||||
California Statewide Communities Development Authority | 1,000,000 | 1,132,230 | ||||||
Colorado Health Facilities Authority Revenue | 1,250,000 | 1,414,063 | ||||||
Dallas/Fort Worth International Airport, Texas | 1,000,000 | 1,125,890 | ||||||
New York State Thruway Authority | 1,000,000 | 1,152,300 | ||||||
Palm Beach County, Florida Health Facilities Authority | ||||||||
7.25% 6/1/34 | 65,000 | 79,462 | ||||||
Series A 7.50% 6/1/49 | 325,000 | 401,684 | ||||||
Utility Debt Securitization Authority, New York | 750,000 | 899,753 | ||||||
|
| |||||||
Total Municipal Bonds (cost $6,432,472) | 7,402,052 | |||||||
|
| |||||||
| ||||||||
Senior Secured Loans – 0.89%« | ||||||||
| ||||||||
Accudyne Industries Borrower 1st Lien 4.00% 12/13/19 | 337,125 | 307,626 | ||||||
Albertson’s Tranche B4 1st Lien 5.50% 8/25/21 | 538,544 | 540,414 | ||||||
Amaya Holdings 1st Lien 5.00% 8/1/21 | 548,618 | 532,312 | ||||||
Applied Systems 2nd Lien 7.50% 1/23/22 @ | 554,104 | 552,718 | ||||||
Atkore International 2nd Lien 7.75% 10/9/21 | 105,000 | 102,637 | ||||||
BJ’s Wholesale Club 2nd Lien 8.50% 3/31/20 | 569,275 | 552,909 | ||||||
Blue Ribbon 1st Lien 5.00% 11/13/21 | 305,000 | 305,127 | ||||||
Flint Group 2nd Lien 8.25% 9/7/22 @ | 530,000 | 494,225 | ||||||
FMG Resources August 2006 1st Lien 4.25% 6/30/19 | 327,830 | 307,750 | ||||||
Immucor Tranche B2 1st Lien 5.00% 8/17/18 @ | 350,000 | 332,208 | ||||||
Keurig Green Mountain Tranche B 1st Lien 5.25% 3/3/23 | 317,133 | 318,653 | ||||||
KIK Custom Products 1st Lien 6.00% 8/26/22 @ | 328,537 | 325,662 | ||||||
Kraton Polymers Tranche B 1st Lien 6.00% 1/6/22 | 100,000 | 99,063 | ||||||
Marina District Finance Tranche B 1st Lien 6.50% 8/15/18 | 342,356 | 343,105 | ||||||
Mohegan Tribal Gaming Authority Tranche B 1st Lien 5.50% 6/15/18 | 334,121 | 333,599 | ||||||
Solera Tranche B 1st Lien 5.75% 3/3/23 | 185,000 | 186,553 |
20
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Senior Secured Loans« (continued) | ||||||||
| ||||||||
Stardust Finance Holdings Tranche B 1st Lien 6.50% 3/13/22 @ | 401,105 | $ | 401,104 | |||||
Windstream Services Tranche B6 1st Lien 5.75% 3/29/21 | 252,000 | 253,365 | ||||||
|
| |||||||
Total Senior Secured Loans (cost $6,232,965) | 6,289,030 | |||||||
|
| |||||||
| ||||||||
Sovereign Bonds – 0.53%D | ||||||||
| ||||||||
Indonesia – 0.53% | ||||||||
Indonesia Government International Bond | ||||||||
144A 5.125% 1/15/45 # | 1,500,000 | 1,523,547 | ||||||
144A 6.75% 1/15/44 # | 1,800,000 | 2,204,741 | ||||||
|
| |||||||
Total Sovereign Bonds (cost $3,659,250) | 3,728,288 | |||||||
|
| |||||||
| ||||||||
U.S. Treasury Obligations – 2.87% | ||||||||
| ||||||||
U.S. Treasury Bond | ||||||||
3.00% 11/15/45 | 455,000 | 489,791 | ||||||
U.S. Treasury Notes | ||||||||
1.375% 4/30/21 | 5,000,000 | 5,001,760 | ||||||
1.625% 2/15/26 | 9,770,000 | 9,576,886 | ||||||
1.75% 9/30/22 | 5,000,000 | 5,048,340 | ||||||
|
| |||||||
Total U.S. Treasury Obligations (cost $20,122,478) | 20,116,777 | |||||||
|
| |||||||
Number of shares | ||||||||
| ||||||||
Master Limited Partnership – 0.52% | ||||||||
| ||||||||
Blackstone Group | 23,900 | 625,941 | ||||||
Merion Countryside 144A #@= | 2,080,418 | 1,937,285 | ||||||
Valero Energy Partners | 23,200 | 1,073,464 | ||||||
|
| |||||||
Total Master Limited Partnership (cost $3,811,264) | 3,636,690 | |||||||
|
| |||||||
| ||||||||
Preferred Stock – 0.54% | ||||||||
| ||||||||
Bank of America 6.50% ● | 995,000 | 1,050,969 | ||||||
Freddie Mac 6.02% | 40,000 | 151,200 | ||||||
GMAC Capital Trust I 6.411% ● | 17,000 | 425,765 | ||||||
Morgan Stanley 5.55% ● | 455,000 | 455,569 | ||||||
NorthStar Realty Finance 8.50% | 20,000 | 480,800 | ||||||
Taubman Centers 6.50% | 21,505 | 559,775 | ||||||
Vornado Realty Trust 6.625% | 24,900 | 650,388 | ||||||
|
| |||||||
Total Preferred Stock (cost $4,523,180) | 3,774,466 | |||||||
|
| |||||||
| ||||||||
Warrant – 0.00% | ||||||||
| ||||||||
Wheeler Real Estate Investment Trust strike price $5.50, expiration date 4/29/19 @† | 43,188 | 2,591 | ||||||
|
| |||||||
Total Warrant (cost $358) | 2,591 | |||||||
|
|
21
Schedule of investments
Delaware Wealth Builder Fund
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Short-Term Investments – 10.49% | ||||||||
| ||||||||
Discount Notes – 6.08%≠ | ||||||||
Federal Home Loan Bank | ||||||||
0.325% 7/13/16 | 17,796,219 | $ | 17,789,546 | |||||
0.325% 8/3/16 | 3,865,761 | 3,863,036 | ||||||
0.335% 7/12/16 | 2,776,769 | 2,775,753 | ||||||
0.335% 7/21/16 | 3,856,624 | 3,854,904 | ||||||
0.34% 7/22/16 | 3,853,330 | 3,851,577 | ||||||
0.35% 7/25/16 | 4,748,831 | 4,746,542 | ||||||
0.38% 7/18/16 | 2,459,614 | 2,458,583 | ||||||
0.385% 6/8/16 | 1,649,744 | 1,649,676 | ||||||
0.53% 8/15/16 | 1,662,450 | 1,661,054 | ||||||
|
| |||||||
42,650,671 | ||||||||
|
| |||||||
Repurchase Agreements – 4.41% | ||||||||
Bank of America Merrill Lynch | 6,387,360 | 6,387,360 | ||||||
Bank of Montreal | 10,645,599 | 10,645,599 | ||||||
BNP Paribas | 13,958,041 | 13,958,041 | ||||||
|
| |||||||
30,991,000 | ||||||||
|
| |||||||
Total Short-Term Investments (cost $73,641,012) | 73,641,671 | |||||||
|
| |||||||
Total Value of Securities Before Securities Sold Short – 97.14% | 681,749,130 | |||||||
|
| |||||||
Number of shares | ||||||||
| ||||||||
Securities Sold Short – (0.81%) | ||||||||
| ||||||||
ConocoPhillips | (19,200 | ) | (840,768 | ) | ||||
iShares U.S. Real Estate ETF | (62,200 | ) | (4,869,016 | ) | ||||
|
| |||||||
Total Securities Sold Short | (5,709,784 | ) | ||||||
|
| |||||||
Total Value of Securities – 96.33% | $ | 676,039,346 | ||||||
|
|
22
# | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At May 31, 2016, the aggregate value of Rule 144A securities was $63,989,542, which represents 9.12% of the Fund’s net assets. See Note 9 in “Notes to financial statements.” |
@ | Illiquid security. At May 31, 2016, the aggregate value of illiquid securities was $55,853,504, which represents 7.96% of the Fund’s net assets. See Note 9 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 May 31, 2016, the aggregate value of fair valued securities was $1,937,285, which represents 0.28% 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 May 31, 2016. 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 May 31, 2016. |
f | Step coupon bond. Coupon increases or decreases periodically based on a predetermined schedule. Stated rate in effect at May 31, 2016. |
Unfunded Commitment
The Fund may invest in floating rate loans. In connection with these investments, the Fund may also enter into unfunded corporate loan commitments (commitments). Commitments may obligate the Fund to furnish temporary financing to a borrower until permanent financing can be arranged. In connection with these commitments, the Fund earns a commitment fee, typically set as a percentage of the commitment amount. The following commitments were outstanding at May 31, 2016:
Borrower | Unfunded Loan Commitments | |||
Nexstar Broadcasting | $1,220,000 |
23
Schedule of investments
Delaware Wealth Builder Fund
The following futures contract and swap contract were outstanding at May 31, 2016:1
Futures Contracts
Notional | Unrealized | |||||||||||||||||||||
Cost | Notional | Expiration | Appreciation | |||||||||||||||||||
Contracts to Buy (Sell) | (Proceeds) | Value | Date | (Depreciation) | ||||||||||||||||||
(50) E-mini S&P 500 Index |
|
$ |
(5,086,733) |
|
$ |
(5,237,250) |
|
|
6/20/16 |
|
$ |
(150,517) |
| |||||||||
Swap Contract CDS Contract2
|
| |||||||||||||||||||||
Upfront | ||||||||||||||||||||||
Swap | Annual | Payment | Unrealized | |||||||||||||||||||
Referenced | Protection | Termination | Paid | Appreciation | ||||||||||||||||||
Counterparty | Obligation | Notional Value3 | Payments | Date | (Received) | (Depreciation)4 | ||||||||||||||||
Protection Purchased: | ||||||||||||||||||||||
ICE | JPMC - CDX.NA.HY.265 | 30,000,000 | 5.00% | 6/20/21 | $ | (918,086) | $ | 100,756 |
The use of futures contracts and swap contracts involves elements of market risk and risks in excess of the amounts disclosed in these financial statements. The notional values presented above represents 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 6 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.
3Notional value shown is stated in U.S. Dollars unless noted that the swap is denominated in another currency.
4Unrealized appreciation (depreciation) does not include periodic interest payments on swap contracts accrued daily in the amount of $(150,033).
5Markit’s CDX.NA.HY Index is composed of one hundred (100) of the most liquid North American entities with high yield credit ratings that trade in the CDS market.
Summary of abbreviations:
ADR – American Depositary Receipt
AMT – Subject to Alternative Minimum Tax
CDS – Credit Default Swap
CDX.NA.HY – Credit Default Swap Index North America High Yield
24
Summary of abbreviations: (continued)
CVA – Dutch Certificate
ETF – Exchange-Traded Fund
ICE – Intercontinental Exchange, Inc.
JPMC – JPMorgan Chase Bank
PIK – Payment-in-kind
REIT – Real Estate Investment Trust
yr – Year
See accompanying notes, which are an integral part of the financial statements.
25
Statement of assets and liabilities | ||
Delaware Wealth Builder Fund | May 31, 2016 (Unaudited) |
Assets: | ||||
Investments, at value1 | $ | 608,107,459 | ||
Short-term investments, at value2 | 73,641,671 | |||
Cash | 5,449,220 | |||
Cash collateral due from broker | 2,452,936 | |||
Foreign currencies, at value3 | 85,578 | |||
Receivable for securities sold | 21,573,259 | |||
Dividends and interest receivable | 3,529,057 | |||
Receivable for fund shares sold | 496,320 | |||
Unrealized appreciation on credit default swap contracts | 77,353 | |||
Variation margin due to broker on centrally cleared credit default swap contracts | 23,403 | |||
Variation margin due from broker on futures contracts | 6,000 | |||
Other assets4 | 270,461 | |||
|
| |||
Total assets | 715,712,717 | |||
|
| |||
Liabilities: | ||||
Securities sold short, at value5 | 5,709,784 | |||
Payable for securities purchased | 4,308,330 | |||
Upfront payments received on credit default swap contracts | 918,086 | |||
Payable for fund shares redeemed | 799,531 | |||
Swap payments payable | 300,000 | |||
Dividends payable on securities sold short | 4,800 | |||
Income distribution payable | 1,049 | |||
Investment management fees payable | 374,966 | |||
Distribution fees payable to affiliates | 303,944 | |||
Other accrued expenses | 266,430 | |||
Audit and tax fees payable | 21,716 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 12,167 | |||
Trustees’ fees and expenses payable | 4,477 | |||
Accounting and administration expenses payable to affiliates | 2,794 | |||
Legal fees payable to affiliates | 1,347 | |||
Reports and statements to shareholders expenses payable to affiliates | 242 | |||
Other liabilities4 | 901,538 | |||
|
| |||
Total liabilities | 13,931,201 | |||
|
| |||
Total Net Assets | $ | 701,781,516 | ||
|
|
26
Net Assets Consist of: | ||||
Paid-in capital | $ | 725,083,080 | ||
Undistributed net investment income | 62,560 | |||
Accumulated net realized loss on investments | (86,712,645 | ) | ||
Net unrealized appreciation of investments | 63,549,416 | |||
Net unrealized depreciation of foreign currencies | (1,101 | ) | ||
Net unrealized depreciation of futures contracts | (150,517 | ) | ||
Net unrealized depreciation of swap contracts | (49,277 | ) | ||
|
| |||
Total Net Assets | $ | 701,781,516 | ||
|
| |||
Net Asset Value | ||||
Class A: | ||||
Net assets | $ | 279,737,708 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 20,905,275 | |||
Net asset value per share | $ | 13.38 | ||
Sales charge | 5.75 | % | ||
Offering price per share, equal to net asset value per share / (1 – sales charge) | $ | 14.20 | ||
Class C: | ||||
Net assets | $ | 290,236,747 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 21,659,597 | |||
Net asset value per share | $ | 13.40 | ||
Class R: | ||||
Net assets | $ | 3,095,953 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 231,407 | |||
Net asset value per share | $ | 13.38 | ||
Institutional Class: | ||||
Net assets | $ | 128,711,108 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 9,619,006 | |||
Net asset value per share | $ | 13.38 | ||
| ||||
1Investments, at cost | $ | 544,321,221 | ||
2Short-term investments, at cost | 73,641,012 | |||
3Foreign currencies, at cost | 85,331 | |||
4See Note 12 in “Notes to financial statements.” | ||||
5Securities sold short, proceeds | (5,472,303 | ) |
See accompanying notes, which are an integral part of the financial statements.
27
Statement of operations | ||
Delaware Wealth Builder Fund | Six months ended May 31, 2016 (Unaudited) |
Investment Income: | ||||
Interest | $ | 6,552,317 | ||
Dividends | 5,687,451 | |||
Foreign tax withheld | (101,225 | ) | ||
|
| |||
12,138,543 | ||||
|
| |||
Expenses: | ||||
Management fees | 2,215,663 | |||
Distribution expenses – Class A | 348,543 | |||
Distribution expenses – Class C | 1,426,900 | |||
Distribution expenses – Class R | 7,541 | |||
Dividend disbursing and transfer agent fees and expenses | 407,056 | |||
Accounting and administration expenses | 114,129 | |||
Reports and statements to shareholders | 58,263 | |||
Registration fees | 49,097 | |||
Custodian fees | 30,455 | |||
Legal fees | 23,940 | |||
Audit and tax | 22,355 | |||
Trustees’ fees and expenses | 18,024 | |||
Other | 25,019 | |||
|
| |||
Expenses before dividends on short sales and interest expense | 4,746,985 | |||
Dividends on short sales | 112,070 | |||
Interest expense | 15,210 | |||
Less expense paid indirectly | (385 | ) | ||
|
| |||
Total operating expenses | 4,873,880 | |||
|
| |||
Net Investment Income | 7,264,663 | |||
|
|
28
Net Realized and Unrealized Gain (Loss): | ||||
Net realized loss on: | ||||
Investments | $ | (12,463,119 | ) | |
Foreign currencies | (1,155,683 | ) | ||
Foreign currency exchange contracts | (84,572 | ) | ||
Futures contracts | (600,388 | ) | ||
Swap contracts | (1,134,404 | ) | ||
|
| |||
Net realized loss | (15,438,166 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) of: | ||||
Investments | 26,383,763 | |||
Foreign currencies | 6,414 | |||
Foreign currency exchange contracts | 183 | |||
Futures contracts | (88,162 | ) | ||
Swap contracts | (46,027 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) | 26,256,171 | |||
|
| |||
Net Realized and Unrealized Gain | 10,818,005 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 18,082,668 | ||
|
|
See accompanying notes, which are an integral part of the financial statements.
29
Statements of changes in net assets
Delaware Wealth Builder Fund
Six months ended 5/31/16 (Unaudited) | Year ended 11/30/15 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 7,264,663 | $ | 16,710,289 | ||||
Net realized gain (loss) | (15,438,166 | ) | 38,893,322 | |||||
Net change in unrealized appreciation (depreciation) | 26,256,171 | (72,427,534 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | 18,082,668 | (16,823,923 | ) | |||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Class A | (3,736,095 | ) | (7,265,924 | ) | ||||
Class C | (2,753,282 | ) | (4,909,329 | ) | ||||
Class R | (35,698 | ) | (80,322 | ) | ||||
Institutional Class | (1,927,604 | ) | (4,037,658 | ) | ||||
|
|
|
| |||||
(8,452,679 | ) | (16,293,233 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Class A | 15,220,882 | 48,575,598 | ||||||
Class C | 11,187,656 | 43,687,213 | ||||||
Class R | 617,562 | 1,817,301 | ||||||
Institutional Class | 19,972,368 | 55,140,551 | ||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | 3,430,113 | 6,656,357 | ||||||
Class C | 2,494,376 | 4,462,182 | ||||||
Class R | 35,205 | 79,381 | ||||||
Institutional Class | 1,714,166 | 3,548,777 | ||||||
|
|
|
| |||||
54,672,328 | 163,967,360 | |||||||
|
|
|
|
30
Six months ended 5/31/16 (Unaudited) | Year ended 11/30/15 | |||||||
Capital Share Transactions (continued): | ||||||||
Cost of shares redeemed: | ||||||||
Class A | $ | (34,787,128 | ) | $ | (65,461,808 | ) | ||
Class C | (26,614,917 | ) | (45,124,879 | ) | ||||
Class R | (1,289,511 | ) | (2,032,523 | ) | ||||
Institutional Class | (41,353,507 | ) | (54,676,612 | ) | ||||
|
|
|
| |||||
(104,045,063 | ) | (167,295,822 | ) | |||||
|
|
|
| |||||
Decrease in net assets derived from capital share transactions | (49,372,735 | ) | (3,328,462 | ) | ||||
|
|
|
| |||||
Net Decrease in Net Assets | (39,742,746 | ) | (36,445,618 | ) | ||||
Net Assets: | ||||||||
Beginning of period | 741,524,262 | 777,969,880 | ||||||
|
|
|
| |||||
End of period | $ | 701,781,516 | $ | 741,524,262 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | 62,560 | $ | 1,250,576 | ||||
|
|
|
|
See accompanying notes, which are an integral part of the financial statements.
31
Delaware Wealth Builder Fund Class A
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets4 |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets5 |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover
|
|
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during some of the periods shown reflects a waiver by the distributor. Performance would have been lower had the waiver not been in effect. |
4 | The ratio of expenses to average net assets excluding interest expense for the six months ended May 31, 2016 was 1.14%. |
5 | Ratio of net investment income to average net assets excluding interest expense for the six months ended May 31, 2016 was 2.35%. |
See accompanying notes, which are an integral part of the financial statements.
32
Six months ended (Unaudited) |
Year ended | |||||||||||||||||||||||
|
| |||||||||||||||||||||||
11/30/15 | 11/30/14 | 11/30/13 | 11/30/12 | 11/30/11 | ||||||||||||||||||||
| ||||||||||||||||||||||||
|
$ 13.160 |
|
|
$ 13.730 |
|
|
$ 12.810 |
|
|
$ 10.940 |
|
|
$ 9.890 |
|
|
$ 9.810 |
| |||||||
| ||||||||||||||||||||||||
0.151 | 0.321 | 0.312 | 0.316 | 0.348 | 0.351 | |||||||||||||||||||
0.227 | (0.577 | ) | 0.923 | 1.854 | 1.045 | 0.086 | ||||||||||||||||||
0.378 | (0.256 | ) | 1.235 | 2.170 | 1.393 | 0.437 | ||||||||||||||||||
| ||||||||||||||||||||||||
(0.158) | (0.314 | ) | (0.315 | ) | (0.300 | ) | (0.343 | ) | (0.357 | ) | ||||||||||||||
(0.158) | (0.314 | ) | (0.315 | ) | (0.300 | ) | (0.343 | ) | (0.357 | ) | ||||||||||||||
$ 13.380 | $ 13.160 | $ 13.730 | $ 12.810 | $ 10.940 | $ 9.890 | |||||||||||||||||||
3.04% | (1.91% | ) | 9.74% | 20.07% | 14.25% | 4.39% | ||||||||||||||||||
| ||||||||||||||||||||||||
$279,738 | $291,876 | $315,098 | $297,117 | $203,819 | $189,313 | |||||||||||||||||||
1.14% | 1.10% | 1.10% | 1.12% | 1.16% | 1.19% | |||||||||||||||||||
1.14% | 1.10% | 1.10% | 1.16% | 1.21% | 1.24% | |||||||||||||||||||
2.35% | 2.38% | 2.35% | 2.62% | 3.28% | 3.41% | |||||||||||||||||||
2.35% | 2.38% | 2.35% | 2.58% | 3.23% | 3.36% | |||||||||||||||||||
| 35%
|
|
| 67%
|
|
| 56%
|
|
| 51%
|
|
| 47%
|
|
| 110%
|
| |||||||
|
33
Financial highlights
Delaware Wealth Builder Fund Class C
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets4 |
Ratio of net investment income to average net assets5 |
Portfolio turnover
|
|
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. |
4 | The ratio of expenses to average net assets excluding interest expense for the six months ended May 31, 2016 was 1.89%. |
5 | Ratio of net investment income to average net assets excluding interest expense for the six months ended May 31, 2016 was 1.60%. |
See accompanying notes, which are an integral part of the financial statements.
34
Six months ended 5/31/161 (Unaudited) |
Year ended | |||||||||||||||||||||||
|
| |||||||||||||||||||||||
11/30/15 | 11/30/14 | 11/30/13 | 11/30/12 | 11/30/11 | ||||||||||||||||||||
| ||||||||||||||||||||||||
|
$ 13.180 |
|
|
$ 13.750 |
|
|
$ 12.830 |
�� |
|
$ 10.960 |
|
|
$ 9.900 |
|
|
$ 9.820 |
| |||||||
0.103 | 0.220 | 0.213 | 0.226 | 0.268 | 0.274 | |||||||||||||||||||
0.235 | (0.577 | ) | 0.921 | 1.853 | 1.056 | 0.086 | ||||||||||||||||||
0.338 | (0.357 | ) | 1.134 | 2.079 | 1.324 | 0.360 | ||||||||||||||||||
(0.118) | (0.213 | ) | (0.214 | ) | (0.209 | ) | (0.264 | ) | (0.280 | ) | ||||||||||||||
(0.118) | (0.213 | ) | (0.214 | ) | (0.209 | ) | (0.264 | ) | (0.280 | ) | ||||||||||||||
$ 13.400 | $ 13.180 | $ 13.750 | $ 12.830 | $ 10.960 | $ 9.900 | |||||||||||||||||||
2.65% | (2.63% | ) | 8.90% | 19.13% | 13.50% | 3.61% | ||||||||||||||||||
$290,237 | $298,833 | $308,975 | $254,961 | $156,758 | $151,107 | |||||||||||||||||||
1.89% | 1.85% | 1.85% | 1.87% | 1.91% | 1.94% | |||||||||||||||||||
1.60% | 1.63% | 1.60% | 1.87% | 2.53% | 2.66% | |||||||||||||||||||
| 35%
|
|
| 67%
|
|
| 56%
|
|
| 51%
|
|
| 47%
|
|
| 110%
|
| |||||||
|
35
Financial highlights
Delaware Wealth Builder Fund Class R
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets4 |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets5 |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover
|
|
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during some of the periods shown reflects a waiver by the distributor. Performance would have been lower had the waiver not been in effect. |
4 | The ratio of expenses to average net assets excluding interest expense for the six months ended May 31, 2016 was 1.39%. |
5 | Ratio of net investment income to average net assets excluding interest expense for the six months ended May 31, 2016 was 2.10%. |
See accompanying notes, which are an integral part of the financial statements.
36
Six months ended 5/31/161 (Unaudited) |
Year ended | |||||||||||||||||||||||
|
| |||||||||||||||||||||||
11/30/15 | 11/30/14 | 11/30/13 | 11/30/12 | 11/30/11 | ||||||||||||||||||||
| ||||||||||||||||||||||||
|
$13.160 |
| $ | 13.730 | $ | 12.810 | $ | 10.940 | $ | 9.890 | $ | 9.810 | ||||||||||||
| ||||||||||||||||||||||||
0.135 | 0.287 | 0.280 | 0.284 | 0.321 | 0.325 | |||||||||||||||||||
0.229 | (0.576 | ) | 0.921 | 1.856 | 1.046 | 0.086 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
0.364 | (0.289 | ) | 1.201 | 2.140 | 1.367 | 0.411 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| ||||||||||||||||||||||||
(0.144) | (0.281 | ) | (0.281 | ) | (0.270 | ) | (0.317 | ) | (0.331 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
(0.144) | (0.281 | ) | (0.281 | ) | (0.270 | ) | (0.317 | ) | (0.331 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
$13.380 | $ | 13.160 | $ | 13.730 | $ | 12.810 | $ | 10.940 | $ | 9.890 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
2.91% | (2.15% | ) | 9.46% | 19.77% | 13.97% | 4.13% | ||||||||||||||||||
| ||||||||||||||||||||||||
$ 3,096 | $ | 3,682 | $ | 3,983 | $ | 3,030 | $ | 3,151 | $ | 3,340 | ||||||||||||||
1.39% | 1.35% | 1.35% | 1.37% | 1.41% | 1.44% | |||||||||||||||||||
1.39% | �� | 1.35% | 1.35% | 1.46% | 1.51% | 1.54% | ||||||||||||||||||
2.10% | 2.13% | 2.10% | 2.37% | 3.03% | 3.16% | |||||||||||||||||||
2.10% | 2.13% | 2.10% | 2.28% | 2.93% | 3.06% | |||||||||||||||||||
| 35%
|
|
| 67%
|
|
| 56%
|
|
| 51%
|
|
| 47%
|
|
| 110%
|
| |||||||
|
37
Financial highlights
Delaware Wealth Builder Fund Institutional Class
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets4 |
Ratio of net investment income to average net assets5 |
Portfolio turnover
|
|
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. |
4 | The ratio of expenses to average net assets excluding interest expense for the six months ended May 31, 2016 was 0.89%. |
5 | Ratio of net investment income to average net assets excluding interest expense for the six months ended May 31, 2016 was 2.60%. |
See accompanying notes, which are an integral part of the financial statements.
38
Six months ended 5/31/161 (Unaudited) |
Year ended | |||||||||||||||||||||||||
|
| |||||||||||||||||||||||||
11/30/15 | 11/30/14 | 11/30/13 | 11/30/12 | 11/30/11 | ||||||||||||||||||||||
|
| |||||||||||||||||||||||||
|
$ 13.160 |
| $ | 13.730 | $ | 12.810 | $ | 10.940 | $ | 9.890 | $ | 9.810 | ||||||||||||||
0.167 | 0.355 | 0.348 | 0.347 | 0.375 | 0.375 | |||||||||||||||||||||
0.224 | (0.577 | ) | 0.920 | 1.853 | 1.045 | 0.088 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
0.391 | (0.222 | ) | 1.268 | 2.200 | 1.420 | 0.463 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
(0.171) | (0.348 | ) | (0.348 | ) | (0.330 | ) | (0.370 | ) | (0.383 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
(0.171) | (0.348 | ) | (0.348 | ) | (0.330 | ) | (0.370 | ) | (0.383 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
$ 13.380 | $ | 13.160 | $ | 13.730 | $ | 12.810 | $ | 10.940 | $ | 9.890 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
3.16% | (1.66% | ) | 10.01% | 20.37% | 14.66% | 4.55% | ||||||||||||||||||||
$128,711 | $ | 147,133 | $ | 149,914 | $ | 61,809 | $ | 30,449 | $ | 24,986 | ||||||||||||||||
0.89% | 0.85% | 0.85% | 0.87% | 0.91% | 0.94% | |||||||||||||||||||||
2.60% | 2.63% | 2.60% | 2.87% | 3.53% | 3.66% | |||||||||||||||||||||
| 35%
|
|
| 67%
|
|
| 56%
|
|
| 51%
|
|
| 47%
|
|
| 110%
|
| |||||||||
|
|
39
Notes to financial statements | ||
Delaware Wealth Builder Fund | May 31, 2016 (Unaudited) |
Delaware Group® Equity Funds V (Trust) is organized as a Delaware statutory trust and offers three series: Delaware Wealth Builder Fund (formerly, 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 Wealth Builder Fund (Fund). The Trust is an open-end investment company. The Fund is considered diversified under the Investment Company Act of 1940, as amended, and offers Class A, Class C, Class R, and Institutional Class shares. Class A shares are sold with a maximum front-end sales charge of 5.75%. Class A share purchases of $1,000,000 or more will incur a contingent deferred sales charge (CDSC) of 1.00%, if redeemed during the first year and 0.50% during the second year, provided that Delaware Distributors, L.P. (DDLP) paid a financial advisor a commission on the purchase of those shares. Class C shares are sold with a CDSC of 1.00%, if redeemed during the first 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. Equity securities listed on a foreign exchange are normally valued at the last quoted sales price on the valuation date. Other 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
40
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. 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 May 31, 2016, 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
41
Notes to financial statements
Delaware Wealth Builder Fund
1. Significant Accounting Policies (continued)
the loan. To borrow the security, the Fund also may be required to pay a premium, which would increase 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
42
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 six months ended May 31, 2016.
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 six months ended May 31, 2016.
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 six months ended May 31, 2016, the Fund earned $385 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 six months ended May 31, 2016, the Fund was charged $16,597 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 six months ended May 31, 2016, the Fund was charged $72,951 for these services. This amount is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.”
43
Notes to financial statements
Delaware Wealth Builder Fund
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates (continued)
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 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 six months ended May 31, 2016, the Fund was charged $7,869 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 six months ended May 31, 2016, DDLP earned $31,663 for commissions on sales of the Fund’s Class A shares. For the six months ended May 31, 2016, DDLP received gross CDSC commissions of $650 and $9,536 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.
Cross trades for the six months ended May 31, 2016 were executed by the Fund pursuant to procedures adopted by the Board designed to ensure compliance with Rule 17a-7 under the 1940 Act. Cross trading is the buying or selling of portfolio securities between funds of investment companies, or between a fund of an investment company and another entity, that are or could be considered affiliates by virtue of having a common investment advisor (or affiliated investment advisors), common directors/trustees and/or common officers. At its regularly scheduled meetings, the Board reviews such transactions for compliance with the procedures adopted by the Board. Pursuant to these procedures, for the six months ended May 31, 2016, the Fund engaged in securities purchased of $123,803, and sales of $3,959,332, which resulted in net realized losses of $3,093.
3. Investments
For the six months ended May 31, 2016, the Fund made purchases and sales of investment securities other than U.S. government securities and short-term investments as follows:
44
Purchases other than U.S. government securities | $149,163,117 | |||
Purchases of U.S. government securities | 64,174,793 | |||
Sales other than U.S. government securities | 195,019,220 | |||
Sales of U.S. government securities | 72,545,161 |
At May 31, 2016, the cost of investments for federal income tax purposes has been estimated since final tax characteristics cannot be determined until fiscal year end. At May 31, 2016, the cost and unrealized appreciation (depreciation) of investments were as follows:
Cost of investments | $ | 610,490,115 | ||
|
| |||
Aggregate unrealized appreciation of investments | $ | 91,393,971 | ||
Aggregate unrealized depreciation of investments | (25,844,740 | ) | ||
|
| |||
Net unrealized appreciation of investments | $ | 65,549,231 | ||
|
|
For federal income tax purposes, capital loss carryforwards may be carried forward and applied against future capital gains. 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. 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 that will be carried forward under the Act.
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 |
45
Notes to financial statements
Delaware Wealth Builder 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 May 31, 2016:
Securities | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: | ||||||||||||||||
Common Stock | 399,625,981 | — | — | 399,625,981 | ||||||||||||
Exchange-Traded Funds | 5,772,771 | — | — | 5,772,771 | ||||||||||||
Convertible Preferred Stock1 | 11,666,370 | 38,267 | — | 11,704,637 | ||||||||||||
Commercial Mortgage-Backed Security | — | 536,784 | — | 536,784 | ||||||||||||
Corporate Debt1 | — | 145,168,942 | 348,450 | 145,517,392 | ||||||||||||
Leveraged Non-Recourse Security | — | — | — | — | ||||||||||||
Municipal Bonds | — | 7,402,052 | — | 7,402,052 | ||||||||||||
Senior Secured Loans | — | 6,289,030 | — | 6,289,030 | ||||||||||||
Foreign Debt | — | 3,728,288 | — | 3,728,288 | ||||||||||||
U.S. Treasury Obligations | — | 20,116,777 | — | 20,116,777 | ||||||||||||
Master Limited Partnership1 | 1,699,405 | — | 1,937,285 | 3,636,690 | ||||||||||||
Preferred Stock1 | 2,116,728 | 1,657,738 | — | 3,774,466 | ||||||||||||
Warrant | 2,591 | — | — | 2,591 | ||||||||||||
Short-Term Investments | — | 73,641,671 | — | 73,641,671 | ||||||||||||
Liabilities: | ||||||||||||||||
Securities Sold Short | (5,709,784 | ) | — | — | (5,709,784 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Value of Securities | $ | 415,174,062 | $ | 258,579,549 | $ | 2,285,735 | $ | 676,039,346 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Futures Contracts | $ | (150,517 | ) | $ | — | $ | — | $ | (150,517 | ) | ||||||
Swap Contract | — | 100,756 | — | 100,756 |
46
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 | |||||||||||||
Corporate Debt | — | 99.76 | % | 0.24 | % | 100.00 | % | |||||||||
Convertible Preferred Stock | 99.67 | % | 0.33 | % | — | 100.00 | % | |||||||||
Preferred Stock | 56.08 | % | 43.92 | % | — | 100.00 | % | |||||||||
Master Limited Partnership | 46.73 | % | — | 53.27 | % | 100.00 | % |
Securities valued at zero on the “Schedule of investments” are considered to be Level 3 investments in this table.
During the six months ended May 31, 2016, 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 period.
47
Notes to financial statements
Delaware Wealth Builder Fund
4. Capital Shares
Transactions in capital shares were as follows:
Six months ended 5/31/16 | Year ended 11/30/15 | |||||||
Shares sold: | ||||||||
Class A | 1,178,904 | 3,580,552 | ||||||
Class C | 869,897 | 3,216,426 | ||||||
Class R | 48,223 | 134,326 | ||||||
Institutional Class | 1,546,043 | 4,076,177 | ||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | 266,061 | 491,286 | ||||||
Class C | 193,028 | 328,386 | ||||||
Class R | 2,729 | 5,861 | ||||||
Institutional Class | 133,019 | 262,119 | ||||||
|
|
|
| |||||
4,237,904 | 12,095,133 | |||||||
|
|
|
| |||||
Shares redeemed: | ||||||||
Class A | (2,711,981 | ) | (4,850,797 | ) | ||||
Class C | (2,071,883 | ) | (3,349,498 | ) | ||||
Class R | (99,311 | ) | (150,528 | ) | ||||
Institutional Class | (3,237,007 | ) | (4,080,655 | ) | ||||
|
|
|
| |||||
(8,120,182 | ) | (12,431,478 | ) | |||||
|
|
|
| |||||
Net decrease | (3,882,278 | ) | (336,345 | ) | ||||
|
|
|
|
Certain shareholders of one class shares may exchange their shares for another class shares. For the six months ended May 31, 2016 and the year ended Nov. 30, 2015, 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 | |||||||||||||||||||||
Class A | Class C | Institutional Class Shares | Value | |||||||||||||||||||
Six months ended 5/31/16 | 2,975 | — | 2,975 | $ | 37,878 | |||||||||||||||||
Year ended 11/30/15 | 20,757 | 1,461 | 22,220 | 308,554 |
5. 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
48
the agreement, the Participants were charged an annual commitment fee of 0.08%, which was allocated across the Participants on the basis of each Participant’s allocation of the entire facility. The Participants were permitted to borrow up to a maximum of one third of their net assets under the agreement. Each Participant was individually, and not jointly, liable for its particular advances, if any, under the line of credit. The line of credit available under the agreement expired on Nov. 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 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 May 31, 2016 or at any time during the six months then ended.
6. 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.
During the six months ended May 31, 2016, 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.
49
Notes to financial statements
Delaware Wealth Builder Fund
6. Derivatives (continued)
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. At May 31, 2016, the Fund posted $210,000 cash collateral as margin for futures contracts, which is presented as “Cash collateral due from brokers” on the “Statement of assets and liabilities.”
During the six months ended May 31, 2016, 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.
50
During the six months ended May 31, 2016, 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 six months ended May 31, 2016, 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 six months ended May 31, 2016, 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 May 31, 2016, the Fund posted $2,242,936 in cash collateral for centrally cleared swap contracts, which is presented as “Cash collateral due from brokers” on the “Statement of assets and liabilities.”
51
Notes to financial statements
Delaware Wealth Builder Fund
6. Derivatives (continued)
Fair values of derivative instruments as of May 31, 2016 were as follows:
Statements of Assets and Liabilities Location | Asset Derivatives Credit Contracts | ||||
Variation margin due to broker on centrally cleared credit default swap contracts | $ | 23,403 | |||
Unrealized appreciation on credit default swap contracts | 77,353 | ||||
|
| ||||
Total | $ | 100,756 | |||
|
| ||||
Statements of Assets and Liabilities Location | Liability Derivatives Fair Value Equity Contracts | ||||
Variation margin due from broker on futures contracts* | $ | 150,517 |
*Includes cumulative appreciation (depreciation) of futures contracts from the date the contracts are opened through May 31, 2016. Only current day variation margin is reported on the “Statement of assets and liabilities.”
The effect of derivative instruments on the “Statement of operations” for the six months ended May 31, 2016 was as follows:
Net Realized Loss on: | ||||||||||||||||||
Foreign | Futures | Swap | Total | |||||||||||||||
Currency contracts | $ | (84,572 | ) | $ | — | $ | — | $ | (84,572 | ) | ||||||||
Equity contracts | — | (600,388 | ) | — | (600,388 | ) | ||||||||||||
Credit contracts | — | — | (1,134,404 | ) | (1,134,404 | ) | ||||||||||||
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|
|
|
|
|
|
| |||||||||||
Total | $ | (84,572 | ) | $ | (600,388 | ) | $ | (1,134,404 | ) | $ | (1,819,364 | ) | ||||||
|
|
|
|
|
|
|
|
Net Change in Unrealized Appreciation (Depreciation) of: | |||||||||||||||||||||||
Foreign | Futures | Swap | Total | ||||||||||||||||||||
Currency contracts | $ | 183 | $ | — | $ | — | $ | 183 | |||||||||||||||
Equity contracts | — | (88,162 | ) | — | (88,162 | ) | |||||||||||||||||
Credit contracts | — | — | (46,027 | ) | (46,027 | ) | |||||||||||||||||
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|
|
|
|
|
|
| ||||||||||||||||
Total | $ | 183 | $ | (88,162 | ) | $ | (46,027 | ) | $ | (134,006 | ) | ||||||||||||
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|
|
|
|
|
|
|
52
Derivatives Generally. The table below summarizes the average balance of derivative holdings by the Fund during the six months ended May 31, 2016.
Long Derivatives Volume | Short Derivatives Volume | |||||||
Foreign currency exchange contracts (average cost) | $ | 95,956 | $ | 391,682 | ||||
Futures contracts (average notional value) | — | 6,681,871 | ||||||
CDS contracts (average notional value)* | 24,896,000 | — |
*Long represents buying protection and short represents selling protection.
7. 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.
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.”
53
Notes to financial statements
Delaware Wealth Builder Fund
7. Offsetting (continued)
At May 31, 2016, the Fund had the following assets and liabilities subject to offsetting provisions:
Master Repurchase Agreements
Counterparty | Repurchase | Fair Value of Non-Cash | Cash Collateral Received | Net Collateral | Net Exposure(a) | ||||||||||||||||||||
Bank of America Merrill Lynch | $ | 6,387,360 | $ | (6,387,360 | ) | $ | — | $ | (6,387,360 | ) | $ | — | |||||||||||||
Bank of Montreal | 10,645,599 | (10,645,599 | ) | — | (10,645,599 | ) | — | ||||||||||||||||||
BNP Paribas | 13,958,041 | (13,958,041 | ) | — | (13,958,041 | ) | — | ||||||||||||||||||
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|
|
|
|
|
|
|
| ||||||||||||||||
Total | $ | 30,991,000 | $ | (30,991,000 | ) | $ | — | $ | (30,991,000 | ) | $ | — | |||||||||||||
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(a)Net exposure represents the receivable (payable) that would be due from (to) the counterparty in the event of default.
8. Securities Lending
The Fund, along with other funds in the Delaware Investments® Family of Funds, may lend its securities pursuant to a security lending agreement (Lending Agreement) with The Bank of New York Mellon (BNY Mellon). At the time a security is loaned, the borrower must post collateral equal to the required percentage of the market value of the loaned security, including any accrued interest. The required percentage is: (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.
Prior to Dec. 29, 2015, cash collateral received was generally invested in the Delaware Investments Collateral Fund No. 1 (Collective Trust), a pooled account established by BNY Mellon for the use of funds managed by DMC that participate in BNY Mellon’s securities lending program. The Collective Trust sought to maintain a net asset value per unit of $1.00. Under the previous investment guidelines, the Collective Trust was permitted to 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 would generally have a dollar-weighted average portfolio maturity of 60 days or less.
On Dec. 29, 2015, the assets in the Collective Trust were transferred to a series of individual separate accounts, each corresponding to a Fund. The investment guidelines permit each separate account to hold certain securities that would be considered eligible securities for a money market fund. Cash
54
collateral received is generally invested in government securities; certain obligations issued by government sponsored enterprises; repurchase agreements collateralized by U.S. Treasury securities; obligations issued by the central government of any Organization for Economic Cooperation and Development (OECD) country or its agencies, instrumentalities or establishments; obligations of supranational organizations, commercial paper, notes, bonds and other debt obligations; certificates of deposit, time deposits and other bank obligations; and asset-backed securities.
In the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Fund or, at the discretion of the lending agent, replace the loaned securities. The Fund continues to record dividends or interest, as applicable, on the securities loaned and are subject to 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 Fund may incur investment losses as a result of investing securities lending collateral. This could occur if an investment in the collateral investment account defaulted or became impaired. Under those circumstances, the value of a Fund’s cash collateral account may be less than the amount the Fund would be required to return to the borrowers of the securities and the Fund would be required to make up for this shortfall.
During the six months ended May 31, 2016, the Fund had no securities out on loan.
9. 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
55
Notes to financial statements
Delaware Wealth Builder Fund
9. Credit and Market Risk (continued)
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 during the six months ended May 31, 2016. 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
56
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.” When monitoring compliance with the Fund’s illiquid limit, certain holdings that are common to multiple clients of the investment manager may be aggregated and considered illiquid in the aggregate solely for monitoring purposes. For purposes of determining illiquidity for financial reporting purposes, only the holdings of this Fund will be considered.
10. Contractual Obligations
The Fund enters into contracts in the normal course of business that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Fund’s existing contracts and expects the risk of loss to be remote.
11. Recent Accounting Pronouncements
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.
12. 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
57
Notes to financial statements
Delaware Wealth Builder Fund
12. General Motors Term Loan Litigation (continued)
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 May 31, 2016 that resulted in a net decrease in the Fund’s NAV to reflect this likely recovery.
13. Subsequent Events
On June 30, 2016, the Fund’s name was changed from Delaware Dividend Income Fund to Delaware Wealth Builder Fund.
Management has determined that no other material events or transactions occurred subsequent to May 31, 2016 that would require recognition or disclosure in the Fund’s financial statements.
58
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 semiannual report is for the information of Delaware Wealth Builder 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/literature.
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/literature. 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/proxy; and (ii) on the SEC’s website at sec.gov.
59
Table of Contents
Semiannual report
U.S. equity mutual fund
Delaware Small Cap Core Fund
May 31, 2016
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/literature 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/literature.
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 referred to 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), a subsidiary of Macquarie Group Limited and an affiliate of Delaware Investments. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Fund is governed by U.S. laws and regulations.
1 | ||||
Security type / sector allocation and top 10 equity holdings | 3 | |||
5 | ||||
10 | ||||
12 | ||||
14 | ||||
16 | ||||
25 | ||||
35 |
Unless otherwise noted, views expressed herein are current as of May 31, 2016, and subject to change for events occurring after such date.
The Fund is not FDIC insured and is 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.
Table of Contents
For the six-month period from December 1, 2015 to May 31, 2016 (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 Dec. 1, 2015 to May 31, 2016.
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.
1
Table of Contents
Disclosure of Fund expenses
For the six-month period from December 1, 2015 to May 31, 2016 (Unaudited)
Delaware Small Cap Core Fund
Expense analysis of an investment of $1,000
Beginning
Account Value
12/1/15 | Ending
Account Value
5/31/16 | Annualized
Expense Ratio | Expenses
Paid During Period
12/1/15 to 5/31/16* | |||||||||
Actual Fund return† | ||||||||||||
Class A | $1,000.00 | $969.70 | 1.25% | $6.16 | ||||||||
Class C | 1,000.00 | 966.10 | 2.00% | 9.83 | ||||||||
Class R | 1,000.00 | 969.00 | 1.50% | 7.38 | ||||||||
Institutional Class | 1,000.00 | 971.20 | 1.00% | 4.93 | ||||||||
Class R6** | 1,000.00 | 1,018.90 | 0.82% | 0.66 | ||||||||
Hypothetical 5% return (5% return before expenses) |
| |||||||||||
Class A | $1,000.00 | $1,018.75 | 1.25% | $6.31 | ||||||||
Class C | 1,000.00 | 1,015.00 | 2.00% | 10.08 | ||||||||
Class R | 1,000.00 | 1,017.50 | 1.50% | 7.57 | ||||||||
Institutional Class | 1,000.00 | 1,020.00 | 1.00% | 5.05 | ||||||||
Class R6** | 1,000.00 | 1,020.90 | 0.82% | 4.14 |
* | “Expenses Paid During Period” are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). |
† | Because actual returns reflect only the most recent six-month period, the returns shown may differ significantly from fiscal year returns. |
** | The Class R6 shares commenced operations on May 2, 2016. The ending account value for “Actual” uses the performance since inception and is not annualized and the expenses paid during the period for “Actual” are equal to the Class R6 annualized expense ratio, multiplied by 29/366 (to reflect the actual days since inception). |
2
Table of Contents
Security type / sector allocation and
top 10 equity holdings
Delaware Small Cap Core Fund | As of May 31, 2016 (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.
Security type / sector | Percentage of net assets | ||||
Common Stock | 98.01% | ||||
Basic Materials | 7.29% | ||||
Business Services | 6.11% | ||||
Capital Goods | 9.61% | ||||
Communications Services | 1.43% | ||||
Consumer Discretionary | 2.86% | ||||
Consumer Services | 3.77% | ||||
Consumer Staples | 2.51% | ||||
Credit Cyclicals | 1.11% | ||||
Energy | 2.44% | ||||
Financials | 18.33% | ||||
Healthcare | 14.58% | ||||
Media | 0.59% | ||||
Real Estate | 7.80% | ||||
Technology | 16.40% | ||||
Transportation | 1.09% | ||||
Utilities | 2.09% | ||||
Short-Term Investments | 1.35% | ||||
Total Value of Securities | 99.36% | ||||
Receivables and Other Assets Net of Liabilities | 0.64% | ||||
Total Net Assets | 100.00% |
3
Table of Contents
Security type / sector allocation and
top 10 equity holdings
Delaware Small Cap Core 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 | ||||
West Pharmaceutical Services | 1.24% | ||||
WellCare Health Plans | 1.16% | ||||
EPR Properties | 1.14% | ||||
Tenneco | 1.11% | ||||
Webster Financial | 1.10% | ||||
j2 Global | 1.09% | ||||
Prosperity Bancshares | 1.08% | ||||
Proofpoint | 1.08% | ||||
DCT Industrial Trust | 1.07% | ||||
Ligand Pharmaceuticals Class B
|
| 1.07%
|
|
4
Table of Contents
Delaware Small Cap Core Fund | May 31, 2016 (Unaudited) |
Number of shares | Value (U.S. $) | |||||||
| ||||||||
Common Stock – 98.01% | ||||||||
| ||||||||
Basic Materials – 7.29% | ||||||||
Balchem | 108,800 | $ | 6,522,560 | |||||
Boise Cascade † | 250,665 | 5,755,268 | ||||||
Chemtura † | 303,800 | 8,105,384 | ||||||
Continental Building Products † | 666,000 | 15,258,060 | ||||||
Kaiser Aluminum | 145,400 | 12,462,234 | ||||||
Minerals Technologies | 247,400 | 14,250,240 | ||||||
Neenah Paper | 220,200 | 15,279,678 | ||||||
Quaker Chemical | 136,200 | 11,769,042 | ||||||
Worthington Industries | 405,500 | 15,149,480 | ||||||
|
| |||||||
104,551,946 | ||||||||
|
| |||||||
Business Services – 6.11% | ||||||||
ABM Industries | 297,000 | 10,148,490 | ||||||
Convergys | 411,400 | 11,597,366 | ||||||
Essendant | 382,300 | 11,771,017 | ||||||
Kforce | 605,575 | 11,324,253 | ||||||
On Assignment † | 345,300 | 13,007,451 | ||||||
TeleTech Holdings | 327,600 | 8,943,480 | ||||||
U.S. Ecology | 188,180 | 8,526,436 | ||||||
WageWorks † | 217,893 | 12,212,903 | ||||||
|
| |||||||
87,531,396 | ||||||||
|
| |||||||
Capital Goods – 9.61% | ||||||||
AAON | 536,930 | 14,733,359 | ||||||
Actuant Class A | 278,000 | 7,586,620 | ||||||
Applied Industrial Technologies | 328,440 | 14,845,488 | ||||||
Barnes Group | 424,200 | 14,164,038 | ||||||
Columbus McKinnon @ | 522,961 | 7,833,956 | ||||||
ESCO Technologies @ | 359,187 | 14,464,460 | ||||||
Esterline Technologies † | 46,500 | 3,134,565 | ||||||
Federal Signal | 549,600 | 7,150,296 | ||||||
Granite Construction | 356,141 | 15,289,133 | ||||||
Kadant @ | 248,738 | 12,377,203 | ||||||
KLX † | 196,400 | 6,459,596 | ||||||
MYR Group † | 317,800 | 7,687,582 | ||||||
Tetra Tech | 393,700 | 12,047,220 | ||||||
|
| |||||||
137,773,516 | ||||||||
|
| |||||||
Communications Services – 1.43% | ||||||||
Atlantic Tele-Network | 146,984 | 10,948,838 | ||||||
InterXion Holding † | 240,991 | 9,027,523 | ||||||
RigNet † | 42,235 | 524,981 | ||||||
|
| |||||||
20,501,342 | ||||||||
|
| |||||||
Consumer Discretionary – 2.86% | ||||||||
Express † | 674,200 | 9,802,868 |
5
Table of Contents
Schedule of investments
Delaware Small Cap Core Fund
Number of shares | Value (U.S. $) | |||||||
| ||||||||
Common Stock (continued) | ||||||||
| ||||||||
Consumer Discretionary (continued) | ||||||||
G-III Apparel Group † | 254,400 | $ | 9,952,128 | |||||
Malibu Boats Class A @† | 592,700 | 8,060,720 | ||||||
Steven Madden † | 383,550 | 13,159,601 | ||||||
|
| |||||||
40,975,317 | ||||||||
|
| |||||||
Consumer Services – 3.77% | ||||||||
Buffalo Wild Wings † | 10,620 | 1,544,042 | ||||||
Cheesecake Factory | 161,900 | 8,073,953 | ||||||
Del Frisco’s Restaurant Group † | 629,000 | 9,724,340 | ||||||
Fiesta Restaurant Group † | 319,400 | 8,026,522 | ||||||
Jack in the Box | 170,280 | 14,507,856 | ||||||
Popeyes Louisiana Kitchen † | 210,320 | 12,223,798 | ||||||
|
| |||||||
54,100,511 | ||||||||
|
| |||||||
Consumer Staples – 2.51% | ||||||||
Casey’s General Stores | 120,900 | 14,533,389 | ||||||
J&J Snack Foods | 116,486 | 12,289,273 | ||||||
Prestige Brands Holdings † | 168,600 | 9,111,144 | ||||||
|
| |||||||
35,933,806 | ||||||||
|
| |||||||
Credit Cyclicals – 1.11% | ||||||||
Tenneco † | 295,600 | 15,879,632 | ||||||
|
| |||||||
15,879,632 | ||||||||
|
| |||||||
Energy – 2.44% | ||||||||
Carrizo Oil & Gas † | 376,800 | 14,506,800 | ||||||
Parsley Energy Class A † | 249,609 | 6,507,307 | ||||||
PDC Energy † | 67,500 | 3,918,375 | ||||||
RSP Permian † | 306,715 | 10,100,125 | ||||||
|
| |||||||
35,032,607 | ||||||||
|
| |||||||
Financials – 18.33% | ||||||||
American Equity Investment Life Holding | 540,700 | 8,764,747 | ||||||
BBCN Bancorp | 695,580 | 11,310,131 | ||||||
Bryn Mawr Bank | 150,000 | 4,386,000 | ||||||
Cardinal Financial | 423,600 | 9,615,720 | ||||||
City Holding @ | 261,484 | 12,854,553 | ||||||
CoBiz Financial @ | 471,600 | 5,965,740 | ||||||
Evercore Partners Class A | 211,900 | 11,018,800 | ||||||
FirstMerit | 558,000 | 12,655,440 | ||||||
Flushing Financial @ | 457,200 | 9,537,192 | ||||||
Great Western Bancorp | 433,900 | 14,761,278 | ||||||
Houlihan Lokey | 274,800 | 6,636,420 | ||||||
Independent Bank | 191,200 | 9,424,248 | ||||||
Infinity Property & Casualty @ | 109,400 | 8,525,542 | ||||||
Old National Bancorp | 904,600 | 11,904,536 | ||||||
Primerica | 258,600 | 14,510,046 |
6
Table of Contents
Number of shares | Value (U.S. $) | |||||||
| ||||||||
Common Stock (continued) | ||||||||
| ||||||||
Financials (continued) | ||||||||
Prosperity Bancshares | 288,200 | $ | 15,519,570 | |||||
Selective Insurance Group @ | 336,500 | 12,500,975 | ||||||
Sterling Bancorp | 789,600 | 12,996,816 | ||||||
Stifel Financial † | 343,500 | 12,977,430 | ||||||
Umpqua Holdings | 698,100 | 11,162,619 | ||||||
United Fire Group | 203,173 | 8,364,632 | ||||||
Webster Financial | 404,200 | 15,828,472 | ||||||
Western Alliance Bancorp † | 372,700 | 14,050,790 | ||||||
WSFS Financial | 209,200 | 7,420,324 | ||||||
|
| |||||||
262,692,021 | ||||||||
|
| |||||||
Healthcare – 14.58% | ||||||||
Acorda Therapeutics † | 342,900 | 9,755,505 | ||||||
Air Methods † | 351,900 | 11,918,853 | ||||||
Catalent † | 451,000 | 12,682,120 | ||||||
Cepheid † | 364,800 | 10,218,048 | ||||||
CONMED | 290,140 | 11,553,375 | ||||||
CryoLife @ | 580,940 | 6,709,857 | ||||||
ICON † | 172,300 | 12,136,812 | ||||||
Insys Therapeutics † | 331,800 | 5,192,670 | ||||||
Ligand Pharmaceuticals Class B † | 128,100 | 15,319,479 | ||||||
Medicines † | 315,700 | 11,873,477 | ||||||
Merit Medical Systems † | 517,687 | 9,716,985 | ||||||
Quidel † | 510,400 | 8,477,744 | ||||||
Retrophin † | 551,000 | 9,796,780 | ||||||
Spectrum Pharmaceuticals † | 978,500 | 7,328,965 | ||||||
Team Health Holdings † | 278,700 | 13,369,239 | ||||||
TESARO † | 213,700 | 9,894,310 | ||||||
Vanda Pharmaceuticals † | 829,200 | 8,623,680 | ||||||
WellCare Health Plans † | 163,900 | 16,622,738 | ||||||
West Pharmaceutical Services | 237,320 | 17,817,986 | ||||||
|
| |||||||
209,008,623 | ||||||||
|
| |||||||
Media – 0.59% | ||||||||
National CineMedia | 575,450 | 8,401,570 | ||||||
|
| |||||||
8,401,570 | ||||||||
|
| |||||||
Real Estate – 7.80% | ||||||||
DCT Industrial Trust | 355,950 | 15,352,124 | ||||||
EastGroup Properties | 183,200 | 11,730,296 | ||||||
EPR Properties | 229,900 | 16,387,272 | ||||||
Kite Realty Group Trust | 496,700 | 13,346,329 | ||||||
LaSalle Hotel Properties | 384,000 | 8,874,240 | ||||||
Mack-Cali Realty | 389,700 | 10,225,728 | ||||||
Pebblebrook Hotel Trust | 333,200 | 8,403,304 |
7
Table of Contents
Schedule of investments
Delaware Small Cap Core Fund
Number of shares | Value (U.S. $) | |||||||
| ||||||||
Common Stock (continued) | ||||||||
| ||||||||
Real Estate (continued) | ||||||||
Ramco-Gershenson Properties Trust | 741,500 | $ | 13,354,415 | |||||
Sovran Self Storage | 131,230 | 14,208,272 | ||||||
|
| |||||||
111,881,980 | ||||||||
|
| |||||||
Technology – 16.40% | ||||||||
Anixter International † | 143,050 | 8,611,610 | ||||||
Applied Micro Circuits † | 1,489,700 | 9,802,226 | ||||||
Callidus Software † | 542,800 | 10,074,368 | ||||||
ExlService Holdings † | 293,990 | 15,228,682 | ||||||
GrubHub † | 216,300 | 5,535,117 | ||||||
Guidewire Software † | 250,100 | 14,680,870 | ||||||
inContact † | 606,970 | 8,424,744 | ||||||
Infinera † | 659,900 | 8,651,289 | ||||||
j2 Global | 233,300 | 15,624,101 | ||||||
MaxLinear Class A † | 430,200 | 8,913,744 | ||||||
Microsemi † | 274,800 | 9,296,484 | ||||||
NETGEAR † | 173,410 | 7,803,450 | ||||||
Plantronics | 172,400 | 7,675,248 | ||||||
Proofpoint † | 263,700 | 15,458,094 | ||||||
Q2 Holdings † | 153,900 | 3,844,422 | ||||||
Qlik Technologies † | 267,300 | 7,671,510 | ||||||
SciQuest @† | 428,071 | 7,551,172 | ||||||
Semtech † | 474,700 | 11,174,438 | ||||||
Shutterfly † | 262,000 | 12,654,600 | ||||||
Silicon Laboratories † | 211,300 | 10,512,175 | ||||||
Synaptics † | 193,620 | 13,133,245 | ||||||
Tyler Technologies † | 75,100 | 11,512,079 | ||||||
WNS Holdings ADR @† | 370,298 | 11,294,089 | ||||||
|
| |||||||
235,127,757 | ||||||||
|
| |||||||
Transportation – 1.09% | ||||||||
Swift Transportation † | 309,400 | 4,820,452 | ||||||
XPO Logistics † | 369,300 | 10,805,718 | ||||||
|
| |||||||
15,626,170 | ||||||||
|
| |||||||
Utilities – 2.09% | ||||||||
NorthWestern | 259,700 | 15,052,212 | ||||||
South Jersey Industries | 161,500 | 4,665,735 | ||||||
Spire | 161,600 | 10,274,528 | ||||||
|
| |||||||
29,992,475 | ||||||||
|
| |||||||
Total Common Stock (cost $1,354,473,447) | 1,405,010,669 | |||||||
|
|
8
Table of Contents
Principal amount° | Value (U.S. $) | |||||||
| ||||||||
Short-Term Investments – 1.35% | ||||||||
| ||||||||
Discount Notes – 0.63%≠ | ||||||||
Federal Home Loan Bank | ||||||||
0.325% 7/13/16 | 2,397,647 | $ | 2,396,747 | |||||
0.335% 7/12/16 | 707,135 | 706,876 | ||||||
0.335% 7/21/16 | 982,132 | 981,694 | ||||||
0.34% 7/22/16 | 1,497,630 | 1,496,949 | ||||||
0.35% 7/25/16 | 615,580 | 615,283 | ||||||
0.38% 7/18/16 | 645,135 | 644,864 | ||||||
0.387% 6/8/16 | 15,713 | 15,712 | ||||||
0.53% 8/15/16 | 2,156,576 | 2,154,764 | ||||||
|
| |||||||
9,012,889 | ||||||||
|
| |||||||
Repurchase Agreements – 0.72% | ||||||||
Bank of America Merrill Lynch | 2,143,478 | 2,143,478 | ||||||
Bank of Montreal | 3,572,464 | 3,572,464 | ||||||
BNP Paribas | 4,684,058 | 4,684,058 | ||||||
|
| |||||||
10,400,000 | ||||||||
|
| |||||||
Total Short-Term Investments (cost $19,412,165) | 19,412,889 | |||||||
|
| |||||||
Total Value of Securities – 99.36% | $ | 1,424,423,558 | ||||||
|
|
@ | Illiquid security. At May 31, 2016, the aggregate value of illiquid securities was $117,675,459, which represents 8.21% of the Fund’s net assets. See Note 8 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.
9
Table of Contents
Statement of assets and liabilities
Delaware Small Cap Core Fund | May 31, 2016 (Unaudited) |
Assets: | ||||
Investments, at value1 | $ | 1,405,010,669 | ||
Short-term investments, at value2 | 19,412,889 | |||
Receivable for fund shares sold | 6,058,980 | |||
Receivables for securities sold | 5,550,969 | |||
Dividends and interest receivable | 982,304 | |||
|
| |||
Total assets | 1,437,015,811 | |||
|
| |||
Liabilities: | ||||
Cash overdraft | 47,918 | |||
Payable for fund shares redeemed | 1,859,989 | |||
Investment management fees payable | 811,968 | |||
Other accrued expenses | 551,829 | |||
Distribution fees payable to affiliates | 159,374 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 23,759 | |||
Audit and tax fees payable | 16,829 | |||
Trustees’ fees and expenses payable | 7,510 | |||
Accounting and administration expenses payable to affiliates | 5,456 | |||
Legal fees payable to affiliates | 2,265 | |||
Reports and statements to shareholders expenses payable to affiliates | 494 | |||
|
| |||
Total liabilities | 3,487,391 | |||
|
| |||
Total Net Assets | $ | 1,433,528,420 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 1,396,703,315 | ||
Accumulated net investment loss | (402,140 | ) | ||
Accumulated net realized loss on investments | (13,310,701 | ) | ||
Net unrealized appreciation of investments | 50,537,946 | |||
|
| |||
Total Net Assets | $ | 1,433,528,420 | ||
|
|
10
Table of Contents
Net Asset Value | ||||
Class A: | ||||
Net assets | $ | 290,927,633 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 15,230,952 | |||
Net asset value per share | $ | 19.10 | ||
Sales charge | 5.75 | % | ||
Offering price per share, equal to net asset value per share / (1 – sales charge) | $ | 20.27 | ||
Class C: | ||||
Net assets | $ | 109,470,475 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 6,233,338 | |||
Net asset value per share | $ | 17.56 | ||
Class R: | ||||
Net assets | $ | 27,895,117 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 1,496,926 | |||
Net asset value per share | $ | 18.63 | ||
Institutional Class: | ||||
Net assets | $ | 1,005,233,157 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 51,694,851 | |||
Net asset value per share | $ | 19.45 | ||
Class R6: | ||||
Net assets | $ | 2,038 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 104.8 | |||
Net asset value per share | $ | 19.45 |
1Investments, at cost | $ | 1,354,473,447 | ||
2Short-term investments, at cost | 19,412,165 |
See accompanying notes, which are an integral part of the financial statements.
11
Table of Contents
Delaware Small Cap Core Fund | Six months ended May 31, 2016 (Unaudited) |
Investment Income: | ||||
Dividends | $ | 6,329,785 | ||
Interest | 45,408 | |||
|
| |||
6,375,193 | ||||
|
| |||
Expenses: | ||||
Management fees | 3,887,951 | |||
Distribution expenses — Class A | 326,098 | |||
Distribution expenses — Class C | 489,608 | |||
Distribution expenses — Class R | 64,740 | |||
Dividend disbursing and transfer agent fees and expenses | 1,067,021 | |||
Accounting and administration expenses | 177,055 | |||
Registration fees | 87,169 | |||
Reports and statements to shareholders expenses | 51,936 | |||
Legal fees | 31,225 | |||
Custodian fees | 28,925 | |||
Trustees’ fees and expenses | 26,793 | |||
Audit and tax fees | 16,855 | |||
Other | 17,221 | |||
|
| |||
6,272,597 | ||||
Less expense paid indirectly | (768 | ) | ||
|
| |||
Total operating expenses | 6,271,829 | |||
|
| |||
Net Investment Income | 103,364 | |||
|
| |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized loss on investments | (12,198,308 | ) | ||
Net change in unrealized appreciation (depreciation) of investments | 7,766,229 | |||
|
| |||
Net Realized and Unrealized Loss | (4,432,079 | ) | ||
|
| |||
Net Decrease in Net Assets Resulting from Operations | $ | (4,328,715 | ) | |
|
|
See accompanying notes, which are an integral part of the financial statements.
12
Table of Contents
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Table of Contents
Statements of changes in net assets
Delaware Small Cap Core Fund
Six months ended 5/31/16 (Unaudited) | Year ended 11/30/15 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | 103,364 | $ | (1,187,025 | ) | |||
Net realized gain (loss) | (12,198,308 | ) | 30,515,993 | |||||
Net change in unrealized appreciation (depreciation) | 7,766,229 | (2,803,584 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | (4,328,715 | ) | 26,525,384 | |||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net realized gain: | ||||||||
Class A | (7,929,245 | ) | (7,433,888 | ) | ||||
Class C | (3,159,907 | ) | (3,048,397 | ) | ||||
Class R | (829,845 | ) | (896,555 | ) | ||||
Institutional Class | (17,906,715 | ) | (12,057,024 | ) | ||||
|
|
|
| |||||
(29,825,712 | ) | (23,435,864 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Class A | 86,507,828 | 177,187,979 | ||||||
Class C | 22,699,347 | 53,178,029 | ||||||
Class R | 4,987,133 | 17,433,914 | ||||||
Institutional Class | 491,075,169 | 522,238,544 | ||||||
Class R6 | 2,000 | — | ||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | 7,599,237 | 7,190,462 | ||||||
Class C | 3,089,891 | 2,974,938 | ||||||
Class R | 829,090 | 894,660 | ||||||
Institutional Class | 16,963,530 | 11,198,200 | ||||||
|
|
|
| |||||
633,753,225 | 792,296,726 | |||||||
|
|
|
|
14
Table of Contents
Six months ended 5/31/16 (Unaudited) | Year ended 11/30/15 | |||||||
Capital Share Transactions (continued): | ||||||||
Cost of shares redeemed: | ||||||||
Class A | $ | (54,968,438 | ) | $ | (53,711,295 | ) | ||
Class C | (9,627,193 | ) | (8,612,152 | ) | ||||
Class R | (4,475,966 | ) | (5,834,993 | ) | ||||
Institutional Class | (110,843,154 | ) | (141,980,145 | ) | ||||
|
|
|
| |||||
(179,914,751 | ) | (210,138,585 | ) | |||||
|
|
|
| |||||
Increase in net assets derived from capital share transactions | 453,838,474 | 582,158,141 | ||||||
|
|
|
| |||||
Net Increase in Net Assets | 419,684,047 | 585,247,661 | ||||||
Net Assets: | ||||||||
Beginning of period | 1,013,844,373 | 428,596,712 | ||||||
|
|
|
| |||||
End of period | $ | 1,433,528,420 | $ | 1,013,844,373 | ||||
|
|
|
| |||||
Accumulated net investment loss | $ | 402,140 | $ | 505,504 | ||||
|
|
|
|
See accompanying notes, which are an integral part of the financial statements.
15
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 loss2 |
Net realized and unrealized gain (loss) |
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 return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
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 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return 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.
16
Table of Contents
Six months ended | ||||||||||||||||||||||||||||||||||
5/31/161 (Unaudited) | Year ended | |||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||
11/30/15 | 11/30/14 | 11/30/13 | 11/30/12 | 11/30/11 | ||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||
$ | 20.320 | $ | 20.430 | $ | 19.540 | $ | 13.560 | $ | 12.010 | $ | 11.150 | |||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||
(0.006 | ) | (0.044 | ) | (0.059 | ) | (0.036 | ) | (0.022 | ) | (0.024 | ) | |||||||||||||||||||||||
(0.624 | ) | 1.012 | 1.447 | 6.027 | 1.572 | 0.928 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
(0.630 | ) | 0.968 | 1.388 | 5.991 | 1.550 | 0.904 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||
— | — | — | (0.011 | ) | — | (0.044 | ) | |||||||||||||||||||||||||||
(0.590 | ) | (1.078 | ) | (0.498 | ) | — | — | — | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
(0.590 | ) | (1.078 | ) | (0.498 | ) | (0.011 | ) | — | (0.044 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
$ | 19.100 | $ | 20.320 | $ | 20.430 | $ | 19.540 | $ | 13.560 | $ | 12.010 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
(3.03% | ) | 4.86% | 7.28% | 44.21% | 12.91% | 8.10% | ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||
$ | 290,928 | $ | 266,427 | $ | 136,070 | $ | 69,386 | $ | 25,084 | $ | 24,242 | |||||||||||||||||||||||
1.25% | 1.28% | 1.32% | 1.31% | 1.36% | 1.39% | |||||||||||||||||||||||||||||
1.25% | 1.28% | 1.32% | 1.35% | 1.41% | 1.45% | |||||||||||||||||||||||||||||
(0.07% | ) | (0.22% | ) | (0.30% | ) | (0.22% | ) | (0.17% | ) | (0.20% | ) | |||||||||||||||||||||||
(0.07% | ) | (0.22% | ) | (0.30% | ) | (0.26% | ) | (0.22% | ) | (0.26% | ) | |||||||||||||||||||||||
21% | 38% | 30% | 38% | 37% | 42% | |||||||||||||||||||||||||||||
|
17
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 loss2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
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 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return 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.
18
Table of Contents
Six months ended | ||||||||||||||||||||||||||||||||||
5/31/161 (Unaudited) | Year ended | |||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||
11/30/15 | 11/30/14 | 11/30/13 | 11/30/12 | 11/30/11 | ||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||
|
$ 18.800 |
| $19.110 | $18.450 | $ 12.890 | $ 11.510 | $10.720 | |||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||
(0.068 | ) | (0.180 | ) | (0.193 | ) | (0.152 | ) | (0.115 | ) | (0.112 | ) | |||||||||||||||||||||||
(0.582 | ) | 0.948 | 1.351 | 5.712 | 1.495 | 0.902 | ||||||||||||||||||||||||||||
(0.650 | ) | 0.768 | 1.158 | 5.560 | 1.380 | 0.790 | ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||
(0.590 | ) | (1.078 | ) | (0.498 | ) | — | — | — | ||||||||||||||||||||||||||
(0.590 | ) | (1.078 | ) | (0.498 | ) | — | — | — | ||||||||||||||||||||||||||
$ 17.560 | $18.800 | $19.110 | $ 18.450 | $ 12.890 | $11.510 | |||||||||||||||||||||||||||||
(3.39% | ) | 4.11% | 6.44% | 43.14% | 11.99% | 7.37% | ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||
$109,470 | $99,019 | $51,923 | $ 25,828 | $ 10,051 | $ 7,702 | |||||||||||||||||||||||||||||
2.00% | 2.03% | 2.07% | 2.06% | 2.11% | 2.14% | |||||||||||||||||||||||||||||
2.00% | 2.03% | 2.07% | 2.06% | 2.11% | 2.15% | |||||||||||||||||||||||||||||
(0.82% | ) | (0.97% | ) | (1.05% | ) | (0.97% | ) | (0.92% | ) | (0.95% | ) | |||||||||||||||||||||||
(0.82% | ) | (0.97% | ) | (1.05% | ) | (0.97% | ) | (0.92% | ) | (0.96% | ) | |||||||||||||||||||||||
| 21%
|
|
| 38%
|
|
| 30%
|
|
| 38%
|
|
| 37%
|
|
| 42%
|
| |||||||||||||||||
|
19
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 loss2 |
Net realized and unrealized gain (loss) |
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 return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
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 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return 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.
20
Table of Contents
Six months ended 5/31/161 | Year ended | |||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||
(Unaudited) | 11/30/15 | 11/30/14 | 11/30/13 | 11/30/12 | 11/30/11 | |||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||
|
$19.860 |
| $20.040 | $19.220 | $ 13.360 | $ 11.870 | $11.030 | |||||||||||||||||||||||||||
(0.028) | (0.092) | (0.106) | (0.076) | (0.054) | (0.054) | |||||||||||||||||||||||||||||
(0.612) | 0.990 | 1.424 | 5.936 | 1.544 | 0.913 | |||||||||||||||||||||||||||||
(0.640) | 0.898 | 1.318 | 5.860 | 1.490 | 0.859 | |||||||||||||||||||||||||||||
— | — | — | — | — | (0.019) | |||||||||||||||||||||||||||||
(0.590) | (1.078) | (0.498) | — | — | — | |||||||||||||||||||||||||||||
(0.590) | (1.078) | (0.498) | — | — | (0.019) | |||||||||||||||||||||||||||||
$18.630 | $19.860 | $20.040 | $ 19.220 | $ 13.360 | $11.870 | |||||||||||||||||||||||||||||
(3.10%) | 4.60% | 7.03% | 43.86% | 12.55% | 7.79% | |||||||||||||||||||||||||||||
$27,895 | $28,178 | $15,833 | $ 12,785 | $ 6,809 | $ 5,786 | |||||||||||||||||||||||||||||
1.50% | 1.53% | 1.57% | 1.56% | 1.61% | 1.64% | |||||||||||||||||||||||||||||
1.50% | 1.53% | 1.57% | 1.64% | 1.71% | 1.75% | |||||||||||||||||||||||||||||
(0.32%) | (0.47%) | (0.55%) | (0.47%) | (0.42%) | (0.45%) | |||||||||||||||||||||||||||||
(0.32%) | (0.47%) | (0.55%) | (0.55%) | (0.52%) | (0.56%) | |||||||||||||||||||||||||||||
| 21%
|
|
| 38%
|
|
| 30%
|
|
| 38%
|
|
| 37%
|
|
| 42%
|
| |||||||||||||||||
|
21
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)2 |
Net realized and unrealized gain (loss) |
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 return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
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 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return 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.
22
Table of Contents
Six months ended 5/31/161 | Year ended | |||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||
(Unaudited) | 11/30/15 | 11/30/14 | 11/30/13 | 11/30/12 | 11/30/11 | |||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||
$ |
20.650 |
| $ | 20.690 | $ | 19.740 | $ | 13.690 | $ | 12.100 | $ | 11.230 | ||||||||||||||||||||||
0.017 | 0.006 | (0.011 | ) | 0.005 | 0.011 | 0.006 | ||||||||||||||||||||||||||||
(0.627 | ) | 1.032 | 1.459 | 6.089 | 1.579 | 0.934 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
(0.610 | ) | 1.038 | 1.448 | 6.094 | 1.590 | 0.940 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
— | — | — | (0.044 | ) | — | (0.070 | ) | |||||||||||||||||||||||||||
(0.590 | ) | (1.078 | ) | (0.498 | ) | — | — | — | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
(0.590 | ) | (1.078 | ) | (0.498 | ) | (0.044 | ) | — | (0.070 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
$ | 19.450 | $ | 20.650 | $ | 20.690 | $ | 19.740 | $ | 13.690 | $ | 12.100 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
(2.88% | ) | 5.15% | 7.51% | 44.64% | 13.14% | 8.37% | ||||||||||||||||||||||||||||
$ | 1,005,233 | $ | 620,221 | $ | 224,771 | $ | 81,858 | $ | 41,164 | $ | 30,923 | |||||||||||||||||||||||
1.00% | 1.03% | 1.07% | 1.06% | 1.11% | 1.14% | |||||||||||||||||||||||||||||
1.00% | 1.03% | 1.07% | 1.06% | 1.11% | 1.15% | |||||||||||||||||||||||||||||
0.18% | 0.03% | (0.05% | ) | 0.03% | 0.08% | 0.05% | ||||||||||||||||||||||||||||
0.18% | 0.03% | (0.05% | ) | 0.03% | 0.08% | 0.04% | ||||||||||||||||||||||||||||
| 21%
|
|
| 38%
|
|
| 30%
|
|
| 38%
|
|
| 37%
|
|
| 42%
|
| |||||||||||||||||
|
23
Table of Contents
Financial highlights
Delaware Small Cap Core Fund Class R6
Selected data for each share of the Fund outstanding throughout the period were as follows:
5/2/161 to 5/31/16 | ||||
| ||||
Net asset value, beginning of period | $ | 19.090 | ||
Income from investment operations: | ||||
Net investment income2 | 0.026 | |||
Net realized and unrealized gain | 0.334 | |||
|
| |||
Total from investment operations | 0.360 | |||
|
| |||
Net asset value, end of period | $ | 19.450 | ||
|
| |||
Total return3 | 1.89% | |||
Ratios and supplemental data: | ||||
Net assets, end of period (000 omitted) | $ | 2 | ||
Ratio of expenses to average net assets | 0.82% | |||
Ratio of net investment income to average net assets | 0.27% | |||
Portfolio turnover4
|
| 21%
|
| |
|
1 | Date of commencement of operations; ratios have been annualized and total return has not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. |
4 | Portfolio turnover is representative of the Fund for the six months ended May 31, 2016. |
See accompanying notes, which are an integral part of the financial statements.
24
Table of Contents
Delaware Small Cap Core Fund | May 31, 2016 (Unaudited) |
Delaware Group® Equity Funds V (Trust) is organized as a Delaware statutory trust and offers three series: Delaware Wealth Builder Fund (formerly, 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, Institutional Class, and Class R6 shares. Class A shares are sold with a maximum front-end sales charge of 5.75%. Class A share purchases of $1,000,000 or more will incur a contingent deferred sales charge (CDSC) of 1.00% if redeemed during the first year and 0.50% during the second year, provided that Delaware Distributors, L.P. (DDLP) paid a financial advisor a commission on the purchase of those shares. Class C shares are sold with a CDSC of 1.00%, if redeemed during the first 12 months. Class R, Institutional Class, and Class R6 shares, are not subject to a sales charge and are offered for sale exclusively to certain eligible investors. In addition, Class R6 shares do not pay any service fees, sub-accounting fees, and/or sub-transfer agency fees. Class R6 commenced operations on May 2, 2016.
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.
25
Table of Contents
Notes to financial statements
Delaware Small Cap Core Fund
1. Significant Accounting Policies (continued)
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 May 31, 2016, 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. 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 such commission rebates for the six months ended May 31, 2016.
26
Table of Contents
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 six months ended May 31, 2016.
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 six months ended May 31, 2016, the Fund earned $768 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 (NAV) basis. For the six months ended May 31, 2016, the Fund was charged $25,771 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 six months ended May 31, 2016, the Fund was charged $113,181 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
27
Table of Contents
Notes to financial statements
Delaware Small Cap Core Fund
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates (continued)
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 and Class R6 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 six months ended May 31, 2016, the Fund was charged $11,821 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 six months ended May 31, 2016, DDLP earned $72,412 for commissions on sales of the Fund’s Class A shares. For the six months ended May 31, 2016, DDLP received gross CDSC commissions of $771 and $7,396, 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.
Cross trades for the six months ended May 31, 2016, were executed by the Fund pursuant to procedures adopted by the Board designed to ensure compliance with Rule 17a-7 under the 1940 Act. Cross trading is the buying or selling of portfolio securities between funds of investment companies, or between a fund of an investment company and another entity, that are or could be considered affiliates by virtue of having a common investment advisor (or affiliated investment advisors), common directors/trustees and/or common officers. At its regularly scheduled meetings, the Board reviews such transactions for compliance with the procedures adopted by the Board. Pursuant to these procedures, for the six months ended May 31, 2016, the Fund engaged in securities sales of $5,109,589, which resulted in net realized gains of $263.
3. Investments
For the six months ended May 31, 2016, the Fund made purchases and sales of investment securities other than short-term investments as follows:
Purchases | $ | 649,093,525 | ||
Sales | 230,119,421 |
At May 31, 2016, the cost of investments for federal income tax purposes has been estimated since final tax characteristics cannot be determined until fiscal year end. At May 31, 2016, the cost and unrealized appreciation (depreciation) of investments for the Fund were as follows:
Cost of investments | $ | 1,373,885,612 | ||
|
| |||
Aggregate unrealized appreciation of investments | $ | 121,546,841 | ||
Aggregate unrealized depreciation of investments | (71,008,895 | ) | ||
|
| |||
Net unrealized appreciation of investments | $ | 50,537,946 | ||
|
|
28
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.
The following table summarizes the valuation of the Fund’s investments by fair value hierarchy levels as of May 31, 2016:
Securities | Level 1 | Level 2 | Total | |||||||||
Common Stock | $ | 1,405,010,669 | $ | — | $ | 1,405,010,669 | ||||||
Short-Term Investments | — | 19,412,889 | 19,412,889 | |||||||||
|
|
|
|
|
| |||||||
Total Value of Securities | $ | 1,405,010,669 | $ | 19,412,889 | $ | 1,424,423,558 | ||||||
|
|
|
|
|
|
During the six months ended May 31, 2016, 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.
29
Table of Contents
Notes to financial statements
Delaware Small Cap Core Fund
3. Investments (continued)
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 May 31, 2016, there were no Level 3 investments.
4. Capital Shares
Transactions in capital shares were as follows:
Six months ended 5/31/16 | Year ended 11/30/15 | |||||||||
Shares sold: | ||||||||||
Class A | 4,789,523 | 8,800,988 | ||||||||
Class C | 1,360,786 | 2,853,899 | ||||||||
Class R | 283,938 | 881,190 | ||||||||
Institutional Class | 26,773,021 | 25,606,614 | ||||||||
Class R6 | 105 | — | ||||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||||
Class A | 407,469 | 362,058 | ||||||||
Class C | 179,645 | 160,808 | ||||||||
Class R | 45,504 | 45,998 | ||||||||
Institutional Class | 894,227 | 556,294 | ||||||||
|
|
|
| |||||||
34,734,218 | 39,267,849 | |||||||||
|
|
|
| |||||||
Shares redeemed: | ||||||||||
Class A | (3,077,630 | ) | (2,712,915 | ) | ||||||
Class C | (573,769 | ) | (464,555 | ) | ||||||
Class R | (251,108 | ) | (298,710 | ) | ||||||
Institutional Class | (6,007,689 | ) | (6,990,358 | ) | ||||||
|
|
|
| |||||||
(9,910,196 | ) | (10,466,538 | ) | |||||||
|
|
|
| |||||||
Net increase | 24,824,022 | 28,801,311 | ||||||||
|
|
|
|
Certain shareholders may exchange shares of one class of shares for another class in the same Fund. For the six months ended May 31, 2016 and the year ended Nov. 30, 2015, the Fund had the following exchange transactions. These exchange transactions are included as subscriptions and redemptions in the table above and on the “Statements of changes in net assets.”
Exchange Redemptions | Exchange Subscriptions | ||||||||||||||||||||||||
Class A Shares | Class C Shares | Class A Shares |
Institutional | Value | |||||||||||||||||||||
Six months ended 5/31/16 | 8,006 | 24,511 | 246 | 29,801 | $ | 546,585 | |||||||||||||||||||
Year ended 11/30/15 | 1,967 | 56,284 | — | 53,562 | 1,091,472 |
30
Table of Contents
5. 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 May 31, 2016, or at any time during the period then ended.
6. 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 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.
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 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.
31
Table of Contents
Notes to financial statements
Delaware Small Cap Core Fund
6. Offsetting (continued)
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 May 31, 2016, the Fund had the following assets and liabilities subject to offsetting provisions:
Master Repurchase Agreements
Counterparty | Repurchase | Fair Value of | Cash Collateral Received | Net Collateral Received | Net Exposure(a) | |||||
Bank of America Merrill Lynch | $ 2,143,478 | $ (2,143,478) | $— | $ (2,143,478) | $— | |||||
Bank of Montreal | 3,572,464 | (3,572,464) | — | (3,572,464) | — | |||||
BNP Paribas | 4,684,058 | (4,684,058) | — | (4,684,058) | — | |||||
Total | $10,400,000 | $(10,400,000) | $— | $(10,400,000) | $— |
(a)Net exposure represents the receivable (payable) that would be due from (to) the counterparty in the event of default.
7. 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 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.
Prior to Dec. 29, 2015, cash collateral received was generally invested in the Delaware Investments Collateral Fund No. 1 (Collective Trust), a pooled account established by BNY Mellon for the use of funds managed by DMC that participate in BNY Mellon’s securities lending program. The Collective Trust sought to maintain a NAV per unit of $1.00. Under the previous investment guidelines, the Collective Trust was permitted to 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 would generally have a dollar-weighted average portfolio maturity of 60 days or less.
32
Table of Contents
On Dec. 29, 2015, the assets in the Collective Trust were transferred to a series of individual separate accounts, each corresponding to a Fund. The investment guidelines permit each separate account to hold certain securities that would be considered eligible securities for a money market fund. Cash collateral received is generally invested in government securities; certain obligations issued by government sponsored enterprises; repurchase agreements collateralized by U.S. Treasury securities; obligations issued by the central government of any Organization for Economic Cooperative and Development (OECD) country or its agencies, instrumentalities or establishments; obligations of supranational organizations, commercial paper, notes, bonds and other debt obligations; certificates of deposit, time deposits and other bank obligations; and asset-backed securities.
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 Fund may incur investment losses as a result of investing securities lending collateral. This could occur if an investment in the collateral investment account defaulted or became impaired. Under those circumstances, the value of a Fund’s cash collateral account may be less than the amount the Fund would be required to return to the borrowers of the securities and the Fund would be required to make up for this shortfall.
During the six months ended May 31, 2016, the Fund had no securities out on loan.
8. Credit and Market Risk
The Fund invests a significant portion of its assets in small-sized companies and may be subject to certain risks associated with ownership of securities of such companies. Investments in small-sized companies may be more volatile than investments in larger companies for a number of reasons, which include more limited financial resources or a dependence on narrow product lines.
The Fund invests in REITs and is subject to the risks associated with that industry. If the Fund holds real estate directly as a result of defaults or receives rental income directly from real estate holdings, its tax status as a regulated investment company may be jeopardized. There were no direct real estate holdings during the six months ended May 31, 2016. 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.
33
Table of Contents
Notes to financial statements
Delaware Small Cap Core Fund
8. Credit and Market Risk (continued)
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 May 31, 2016, there were no Rule 144A securities held by the Fund. Illiquid securities have been identified on the “Schedule of investments.” When monitoring compliance with the Fund’s illiquid limit, certain holdings that are common to multiple clients of the investment manager may be aggregated and considered illiquid in the aggregate solely for monitoring purposes. For purposes of determining illiquidity for financial reporting purposes, only the holdings of this Fund will be considered.
9. 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.
10. Recent Accounting Pronouncements
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.
11. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to May 31, 2016 that would require recognition or disclosure in the Fund’s financial statements.
34
Table of Contents
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 |
Affiliated officers
|
David F. Connor |
Senior Vice President, General Counsel, and Secretary Delaware Investments Family of Funds Philadelphia, 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 |
Daniel V. Geatens |
Vice President and Treasurer Delaware Investments Family of Funds Philadelphia, PA |
John A. Fry |
President Drexel University Philadelphia, PA |
Lucinda S. Landreth |
Former Chief Investment Officer Assurant, Inc. New York, NY |
Richard Salus |
Senior Vice President and Chief Financial Officer Delaware Investments Family of Funds Philadelphia, PA |
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 |
This semiannual report is for the information of Delaware Small Cap Core Fund shareholders, but it may be used with prospective investors when preceded or accompanied by the Delaware Investments Fund fact sheet for the most recently completed calendar quarter. These documents are available at delawareinvestments.com/literature.
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/literature. 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/proxy; and (ii) on the SEC’s website at sec.gov.
35
Table of Contents
Semiannual report
U.S. equity mutual fund
Delaware Small Cap Value Fund
May 31, 2016
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/literature 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 Value Fund at delawareinvestments.com/literature.
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 referred to 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), a subsidiary of Macquarie Group Limited and an affiliate of Delaware Investments. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Fund is governed by U.S. laws and regulations.
| ||||
| 1 | |||
Security type / sector allocation and top 10 equity holdings
| 3 | |||
| 4 | |||
Statement of assets and liabilities
| 10 | |||
| 12 | |||
Statements of changes in net assets
| 14 | |||
| 16 | |||
| 25 | |||
36 |
Unless otherwise noted, views expressed herein are current as of May 31, 2016, and subject to change for events occurring after such date.
The Fund is not FDIC insured and is 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.
Table of Contents
For the six-month period from December 1, 2015 to May 31, 2016 (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 Dec. 1, 2015 to May 31, 2016.
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.
1
Table of Contents
Disclosure of Fund expenses
For the six-month period from December 1, 2015 to May 31, 2016 (Unaudited)
Delaware Small Cap Value Fund
Expense analysis of an investment of $1,000
Beginning Account Value 12/1/15 | Ending Account Value 5/31/16 | Annualized Expense Ratio | Expenses Paid During Period 12/1/15 to 5/31/16* | |||||
Actual Fund return† | ||||||||
Class A | $1,000.00 | $1,013.60 | 1.26% | $6.34 | ||||
Class C | 1,000.00 | 1,009.90 | 2.01% | 10.10 | ||||
Class R | 1,000.00 | 1,012.30 | 1.51% | 7.60 | ||||
Institutional Class | 1,000.00 | 1,014.90 | 1.01% | 5.09 | ||||
Class R6** | 1,000.00 | 1,018.50 | 0.78% | 0.62 | ||||
Hypothetical 5% return (5% return before expenses) | ||||||||
Class A | $1,000.00 | $1,018.70 | 1.26% | $6.36 | ||||
Class C | 1,000.00 | 1,014.95 | 2.01% | 10.13 | ||||
Class R | 1,000.00 | 1,017.45 | 1.51% | 7.62 | ||||
Institutional Class | 1,000.00 | 1,019.95 | 1.01% | 5.10 | ||||
Class R6** | 1,000.00 | 1,021.10 | 0.78% | 3.94 |
* | “Expenses Paid During Period” are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). |
† | Because actual returns reflect only the most recent six-month period, the returns shown may differ significantly from fiscal year returns. |
** | The Class R6 shares commenced operations on May 2, 2016. The ending account value for “Actual” uses the performance since inception and is not annualized and the expenses paid during the period for “Actual” are equal to the Class R6 annualized expense ratio, multiplied by the average account value over the period, multiplied by 29/366 (to reflect the actual days since inception). |
2
Table of Contents
Security type / sector allocation and top 10
equity holdings
Delaware Small Cap Value Fund | As of May 31, 2016 (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.
Security type / sector | Percentage of net assets | |||
Common Stock | 97.97% | |||
Basic Industry | 9.74% | |||
Business Services | 1.63% | |||
Capital Spending | 7.78% | |||
Consumer Cyclical | 3.84% | |||
Consumer Services | 6.95% | |||
Consumer Staples | 3.40% | |||
Energy | 6.08% | |||
Financial Services | 27.22% | |||
Healthcare | 4.99% | |||
Real Estate | 8.57% | |||
Technology | 12.28% | |||
Transportation | 2.52% | |||
Utilities | 2.97% | |||
Short-Term Investments | 1.40% | |||
Total Value of Securities | 99.37% | |||
Receivables and Other Assets Net of Liabilities | 0.63% | |||
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 | 2.90% | |||
Berry Plastics Group | 2.03% | |||
Webster Financial | 1.98% | |||
Selective Insurance Group | 1.85% | |||
MasTec | 1.69% | |||
Synopsys | 1.65% | |||
Bank of Hawaii | 1.63% | |||
Fuller (H.B.) | 1.49% | |||
Olin | 1.48% | |||
Southwest Gas
|
| 1.45%
|
|
3
Table of Contents
Schedule of investments | ||
Delaware Small Cap Value Fund | May 31, 2016 (Unaudited) |
Number of shares | Value (U.S. $) | |||||||
| ||||||||
Common Stock – 97.97% | ||||||||
| ||||||||
Basic Industry – 9.74% | ||||||||
Albemarle | 442,100 | $ | 34,704,850 | |||||
Berry Plastics Group † | 1,396,610 | 54,705,214 | ||||||
Chemtura † | 962,200 | 25,671,496 | ||||||
Clearwater Paper @† | 472,905 | 29,608,582 | ||||||
HB Fuller | 878,300 | 40,103,178 | ||||||
Kaiser Aluminum | 209,027 | 17,915,704 | ||||||
Olin | 1,729,200 | 39,788,892 | ||||||
PH Glatfelter | 475,716 | 9,752,178 | ||||||
Ryerson Holding † | 115,400 | 1,607,522 | ||||||
Trinseo † | 173,100 | 8,151,279 | ||||||
|
| |||||||
262,008,895 | ||||||||
|
| |||||||
Business Services – 1.63% | ||||||||
Deluxe | 322,200 | 20,984,886 | ||||||
Essendant | 371,818 | 11,448,276 | ||||||
WESCO International † | 197,400 | 11,514,342 | ||||||
|
| |||||||
43,947,504 | ||||||||
|
| |||||||
Capital Spending – 7.78% | ||||||||
Altra Industrial Motion @ | 796,043 | 21,525,003 | ||||||
CIRCOR International | 191,200 | 10,714,848 | ||||||
EnPro Industries | 287,400 | 14,533,818 | ||||||
H&E Equipment Services @ | 1,222,200 | 23,490,684 | ||||||
ITT | 968,700 | 34,398,537 | ||||||
MasTec † | 1,975,300 | 45,431,900 | ||||||
Primoris Services @ | 1,102,900 | 23,734,408 | ||||||
Regal Beloit | 345,100 | 19,715,563 | ||||||
Thermon Group Holdings @† | 786,900 | 15,816,690 | ||||||
|
| |||||||
209,361,451 | ||||||||
|
| |||||||
Consumer Cyclical – 3.84% | ||||||||
Barnes Group | 583,000 | 19,466,370 | ||||||
Knoll | 741,369 | 18,400,778 | ||||||
Meritage Homes † | 728,000 | 26,564,720 | ||||||
Standard Motor Products @ | 482,640 | 18,649,210 | ||||||
Tenneco † | 373,600 | 20,069,792 | ||||||
|
| |||||||
103,150,870 | ||||||||
|
| |||||||
Consumer Services – 6.95% | ||||||||
Asbury Automotive Group † | 182,300 | 10,227,030 | ||||||
Cato Class A | 311,744 | 11,799,510 | ||||||
Cheesecake Factory | 471,500 | 23,513,705 | ||||||
Cinemark Holdings | 527,431 | 19,082,454 | ||||||
Finish Line Class A | 264,800 | 4,800,824 | ||||||
Genesco † | 154,481 | 9,979,473 | ||||||
International Speedway Class A @ | 538,400 | 17,810,272 |
4
Table of Contents
Number of shares | �� | Value (U.S. $) | ||||||
| ||||||||
Common Stock (continued) | ||||||||
| ||||||||
Consumer Services (continued) | ||||||||
Meredith | 327,418 | $ | 16,207,191 | |||||
Steven Madden † | 523,550 | 17,963,001 | ||||||
Texas Roadhouse | 389,700 | 17,462,457 | ||||||
UniFirst | 193,400 | 22,370,578 | ||||||
Wolverine World Wide | 867,600 | 15,798,996 | ||||||
|
| |||||||
187,015,491 | ||||||||
|
| |||||||
Consumer Staples – 3.40% | ||||||||
Core-Mark Holding | 251,200 | 21,507,744 | ||||||
J&J Snack Foods | 216,200 | 22,809,100 | ||||||
Pinnacle Foods | 500,500 | 21,086,065 | ||||||
Scotts Miracle-Gro Class A | 375,800 | 26,118,100 | ||||||
|
| |||||||
91,521,009 | ||||||||
|
| |||||||
Energy – 6.08% | ||||||||
Dril-Quip † | 257,800 | 15,733,534 | ||||||
Helix Energy Solutions Group † | 1,846,200 | 14,788,062 | ||||||
Jones Energy Class A † | 393,000 | 1,493,400 | ||||||
Oasis Petroleum † | 1,776,400 | 17,835,056 | ||||||
Patterson-UTI Energy | 1,352,800 | 25,175,608 | ||||||
SM Energy | 757,600 | 23,879,552 | ||||||
Southwest Gas | 563,300 | 39,109,919 | ||||||
Western Refining | 740,300 | 15,723,972 | ||||||
Whiting Petroleum † | 800,100 | 9,881,235 | ||||||
|
| |||||||
163,620,338 | ||||||||
|
| |||||||
Financial Services – 27.22% | ||||||||
American Equity Investment Life Holding | 1,405,600 | 22,784,776 | ||||||
Bank of Hawaii | 610,800 | 43,885,980 | ||||||
Boston Private Financial Holdings | 1,716,300 | 21,608,217 | ||||||
Community Bank System @ | 892,100 | 36,790,204 | ||||||
East West Bancorp | 2,017,823 | 77,887,968 | ||||||
First Financial Bancorp @ | 1,448,100 | 28,628,937 | ||||||
First Interstate BancSystem @ | 561,100 | 16,255,067 | ||||||
First Midwest Bancorp | 1,329,700 | 24,865,390 | ||||||
Great Western Bancorp | 1,137,750 | 38,706,255 | ||||||
Hancock Holding | 1,298,600 | 35,698,514 | ||||||
Independent Bank | 273,200 | 13,466,028 | ||||||
Infinity Property & Casualty @ | 259,682 | 20,237,018 | ||||||
Main Street Capital | 573,500 | 18,443,760 | ||||||
NBT Bancorp @ | 1,138,200 | 33,189,912 | ||||||
ProAssurance | 573,300 | 30,092,517 | ||||||
Prosperity Bancshares | 475,100 | 25,584,135 | ||||||
S&T Bancorp @ | 645,156 | 16,690,186 |
5
Table of Contents
Schedule of investments
Delaware Small Cap Value Fund
Number of shares | Value (U.S. $) | |||||||
| ||||||||
Common Stock (continued) | ||||||||
| ||||||||
Financial Services (continued) | ||||||||
Selective Insurance Group @ | 1,342,000 | $ | 49,855,300 | |||||
Stifel Financial † | 705,100 | 26,638,678 | ||||||
Umpqua Holdings | 844,100 | 13,497,159 | ||||||
Validus Holdings | 576,484 | 28,069,006 | ||||||
Valley National Bancorp | 3,063,000 | 29,190,390 | ||||||
Webster Financial | 1,362,100 | 53,339,836 | ||||||
WesBanco @ | 822,700 | 26,869,382 | ||||||
|
| |||||||
732,274,615 | ||||||||
|
| |||||||
Healthcare – 4.99% | ||||||||
Haemonetics † | 351,100 | 9,830,800 | ||||||
Owens & Minor | 704,500 | 26,270,805 | ||||||
Service International | 636,100 | 17,429,140 | ||||||
STERIS | 299,380 | 20,785,953 | ||||||
Teleflex | 121,400 | 19,557,540 | ||||||
VCA † | 257,100 | 16,693,503 | ||||||
VWR † | 822,816 | 23,746,470 | ||||||
|
| |||||||
134,314,211 | ||||||||
|
| |||||||
Real Estate – 8.57% | ||||||||
Alexander & Baldwin | 530,600 | 19,982,396 | ||||||
Brandywine Realty Trust | 2,221,937 | 35,084,385 | ||||||
Education Realty Trust | 519,033 | 22,209,422 | ||||||
Healthcare Realty Trust | 855,200 | 27,186,808 | ||||||
Highwoods Properties | 743,800 | 36,193,308 | ||||||
Lexington Realty Trust | 2,772,800 | 26,202,960 | ||||||
Ramco-Gershenson Properties Trust | 1,122,489 | 20,216,027 | ||||||
Summit Hotel Properties @ | 1,486,100 | 17,387,370 | ||||||
Washington Real Estate Investment Trust | 875,600 | 25,944,028 | ||||||
|
| |||||||
230,406,704 | ||||||||
|
| |||||||
Technology – 12.28% | ||||||||
Brocade Communications Systems | 1,585,000 | 14,360,100 | ||||||
Cirrus Logic † | 607,100 | 21,855,600 | ||||||
CommScope Holding † | 1,166,248 | 36,328,625 | ||||||
Electronics For Imaging † | 717,700 | 31,456,791 | ||||||
NetScout Systems † | 840,006 | 20,378,545 | ||||||
ON Semiconductor † | 3,032,800 | 29,630,456 | ||||||
PTC † | 736,800 | 26,333,232 | ||||||
Super Micro Computer † | 740,300 | 19,425,472 | ||||||
Synopsys † | 857,200 | 44,291,524 | ||||||
Tech Data † | 376,200 | 28,429,434 | ||||||
Teradyne | 1,276,100 | 25,279,541 | ||||||
Vishay Intertechnology | 2,507,100 | 32,492,016 | ||||||
|
| |||||||
330,261,336 | ||||||||
|
|
6
Table of Contents
Number of shares | Value (U.S. $) | |||||||
| ||||||||
Common Stock (continued) | ||||||||
| ||||||||
Transportation – 2.52% | ||||||||
Kirby † | 253,300 | $ | 17,751,264 | |||||
Matson | 496,200 | 16,538,346 | ||||||
Saia † | 341,750 | 8,909,423 | ||||||
Werner Enterprises | 982,400 | 24,451,936 | ||||||
|
| |||||||
67,650,969 | ||||||||
|
| |||||||
Utilities – 2.97% | ||||||||
Black Hills | 418,400 | 25,329,936 | ||||||
El Paso Electric | 552,400 | 24,670,184 | ||||||
NorthWestern | 513,000 | 29,733,480 | ||||||
|
| |||||||
79,733,600 | ||||||||
|
| |||||||
Total Common Stock (cost $2,155,349,575) | 2,635,266,993 | |||||||
|
| |||||||
Principal amount° | ||||||||
| ||||||||
Short-Term Investments – 1.40% | ||||||||
| ||||||||
Discount Notes – 0.30%≠ | ||||||||
Federal Home Loan Bank | ||||||||
0.318% 7/13/16 | 4,219,785 | 4,218,202 | ||||||
0.325% 8/3/16 | 1,719,442 | 1,718,230 | ||||||
0.335% 7/12/16 | 488,493 | 488,314 | ||||||
0.335% 7/21/16 | 678,462 | 678,159 | ||||||
0.34% 7/22/16 | 214,011 | 213,914 | ||||||
0.35% 7/25/16 | 625,732 | 625,430 | ||||||
|
| |||||||
7,942,249 | ||||||||
|
| |||||||
Repurchase Agreements – 1.10% | ||||||||
Bank of America Merrill Lynch | 6,106,853 | 6,106,853 | ||||||
Bank of Montreal | 10,178,087 | 10,178,087 | ||||||
BNP Paribas | 13,345,060 | 13,345,060 | ||||||
|
| |||||||
29,630,000 | ||||||||
|
| |||||||
Total Short-Term Investments (cost $37,572,445) | 37,572,249 | |||||||
|
|
7
Table of Contents
Schedule of investments
Delaware Small Cap Value Fund
Total Value of Securities – 99.37% | $ | 2,672,839,242 | ||
|
|
@ | Illiquid security. At May 31, 2016, the aggregate value of illiquid securities was $396,538,225, which represents 14.74% of the Fund’s net assets. See Note 8 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.
8
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This page intentionally left blank.
Table of Contents
Statement of assets and liabilities | ||
Delaware Small Cap Value Fund | May 31, 2016 (Unaudited) |
Assets: | ||||
Investments, at value1 | $ | 2,635,266,993 | ||
Short-term investments, at value2 | 37,572,249 | |||
Cash | 438,975 | |||
Receivable for fund shares sold | 21,552,314 | |||
Dividends and interest receivable | 3,623,177 | |||
Receivable for securities sold | 2,056,600 | |||
|
| |||
Total assets | 2,700,510,308 | |||
|
| |||
Liabilities: | ||||
Payable for fund shares redeemed | 6,933,246 | |||
Payable for securities purchased | 319,797 | |||
Other accrued expenses | 1,586,244 | |||
Investment management fees payable | 1,454,763 | |||
Distribution fees payable to affiliates | 270,632 | |||
Trustees’ fees and expenses payable | 14,825 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 44,204 | |||
Audit and tax fees | 16,830 | |||
Accounting and administration expenses payable to affiliates | 10,151 | |||
Legal fees payable to affiliates | 4,874 | |||
Reports and statements to shareholders expenses payable to affiliates | 929 | |||
|
| |||
Total liabilities | 10,656,495 | |||
|
| |||
Total Net Assets | $ | 2,689,853,813 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 2,279,191,203 | ||
Undistributed net investment income | 4,120,125 | |||
Accumulated net realized loss on investments | (73,374,737 | ) | ||
Net unrealized appreciation of investments | 479,917,222 | |||
|
| |||
Total Net Assets | $ | 2,689,853,813 | ||
|
|
10
Table of Contents
Net Asset Value | ||||
Class A: | ||||
Net assets | $ | 771,417,455 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 15,503,719 | |||
Net asset value per share | $ | 49.76 | ||
Sales charge | 5.75 | % | ||
Offering price per share, equal to net asset value per share / (1 – sales charge) | $ | 52.80 | ||
Class C: | ||||
Net assets | $ | 97,380,856 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 2,345,613 | |||
Net asset value per share | $ | 41.52 | ||
Class R: | ||||
Net assets | $ | 75,705,402 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 1,567,012 | |||
Net asset value per share | $ | 48.31 | ||
Institutional Class: | ||||
Net assets | $ | 1,745,348,063 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 33,311,285 | |||
Net asset value per share | $ | 52.40 | ||
Class R6: | ||||
Net assets | $ | 2,037 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 38.87 | |||
Net asset value per share | $ | 52.41 | ||
| ||||
1Investments, at cost | $ | 2,155,349,575 | ||
2Short-term investments, at cost | 37,572,445 |
See accompanying notes, which are an integral part of the financial statements.
11
Table of Contents
Statement of operations | ||
Delaware Small Cap Value Fund | Six months ended May 31, 2016 (Unaudited) |
Investment Income: | ||||
Dividends | $ | 22,642,027 | ||
Interest | 20,806 | |||
|
| |||
22,662,833 | ||||
|
| |||
Expenses: | ||||
Management fees | 8,436,954 | |||
Distribution expenses – Class A | 897,559 | |||
Distribution expenses – Class C | 475,544 | |||
Distribution expenses – Class R | 179,154 | |||
Dividend disbursing and transfer agent fees and expenses | 3,190,174 | |||
Accounting and administration expenses | 406,759 | |||
Reports and statements to shareholders expenses | 212,479 | |||
Legal fees | 83,125 | |||
Custodian fees | 74,404 | |||
Registration fees | 69,129 | |||
Trustees’ fees and expenses | 64,564 | |||
Audit and tax fees | 16,840 | |||
Other | 39,075 | |||
|
| |||
14,145,760 | ||||
Less expense paid indirectly | (962 | ) | ||
|
| |||
Total operating expenses | 14,144,798 | |||
|
| |||
Net Investment Income | 8,518,035 | |||
|
| |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized loss on investments | (72,678,907 | ) | ||
Net change in unrealized appreciation (depreciation) of investments | 48,282,239 | |||
|
| |||
Net Realized and Unrealized Loss | (24,396,668 | ) | ||
|
| |||
Net Decrease in Net Assets Resulting from Operations | $ | (15,878,633 | ) | |
|
|
See accompanying notes, which are an integral part of the financial statements.
12
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Table of Contents
Statements of changes in net assets
Delaware Small Cap Value Fund
Six months | ||||||||
ended | ||||||||
5/31/16 | Year ended | |||||||
(Unaudited) | 11/30/15 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 8,518,035 | $ | 21,321,313 | ||||
Net realized gain (loss) | (72,678,907 | ) | 157,799,628 | |||||
Net change in unrealized appreciation (depreciation) | 48,282,239 | (144,766,971 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | (15,878,633 | ) | 34,353,970 | |||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Class A | (4,888,535 | ) | (2,529,301 | ) | ||||
Class C | (36,511 | ) | — | |||||
Class R | (315,170 | ) | (78,471 | ) | ||||
Institutional Class | (16,110,155 | ) | (9,685,508 | ) | ||||
Net realized gain: | ||||||||
Class A | (43,679,962 | ) | (37,171,869 | ) | ||||
Class C | (7,046,702 | ) | (6,106,100 | ) | ||||
Class R | (4,516,923 | ) | (4,105,600 | ) | ||||
Institutional Class | (102,728,847 | ) | (81,208,563 | ) | ||||
|
|
|
| |||||
(179,322,805 | ) | (140,885,412 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Class A | 89,876,746 | 254,031,977 | ||||||
Class C | 5,494,450 | 18,856,506 | ||||||
Class R | 9,794,809 | 24,715,625 | ||||||
Institutional Class | 382,154,005 | 768,303,708 | ||||||
Class R6 | 2,000 | — | ||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | 47,959,569 | 39,096,602 | ||||||
Class C | 6,859,386 | 5,896,531 | ||||||
Class R | 4,831,510 | 4,183,570 | ||||||
Institutional Class | 116,778,226 | 89,377,797 | ||||||
|
|
|
| |||||
663,750,701 | 1,204,462,316 | |||||||
|
|
|
|
14
Table of Contents
Six months | ||||||||
ended | ||||||||
5/31/16 | Year ended | |||||||
(Unaudited) | 11/30/15 | |||||||
Capital Share Transactions (continued): | ||||||||
Cost of shares redeemed: | ||||||||
Class A | $ | (121,368,856 | ) | $ | (243,557,284 | ) | ||
Class C | (16,816,732 | ) | (19,187,893 | ) | ||||
Class R | (15,813,876 | ) | (26,427,025 | ) | ||||
Institutional Class | (578,792,000 | ) | (590,103,471 | ) | ||||
|
|
|
| |||||
(732,791,464 | ) | (879,275,673 | ) | |||||
|
|
|
| |||||
Increase (decrease) in net assets derived from capital share transactions | (69,040,763 | ) | 325,186,643 | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets | (264,242,201 | ) | 218,655,201 | |||||
Net Assets: | ||||||||
Beginning of period | 2,954,096,014 | 2,735,440,813 | ||||||
|
|
|
| |||||
End of period | $ | 2,689,853,813 | $ | 2,954,096,014 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | 4,120,125 | $ | 16,952,462 | ||||
|
|
|
|
See accompanying notes, which are an integral part of the financial statements.
15
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)2 |
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 return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
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 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return 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.
16
Table of Contents
Six months ended 5/31/161 | Year ended | |||||||||||||||||||||
|
| |||||||||||||||||||||
(Unaudited) | 11/30/15 | 11/30/14 | 11/30/13 | 11/30/12 | 11/30/11 | |||||||||||||||||
| ||||||||||||||||||||||
$ 52.550 | $ | 54.870 | $ | 52.370 | $ | 39.750 | $ | 37.860 | $ | 36.190 | ||||||||||||
0.128 | 0.322 | 0.148 | 0.119 | 0.074 | (0.008 | ) | ||||||||||||||||
0.301 | 0.152 | 3.508 | 12.847 | 3.622 | 1.818 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
0.429 | 0.474 | 3.656 | 12.966 | 3.696 | 1.810 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
(0.324) | (0.178 | ) | (0.055 | ) | (0.092 | ) | — | — | ||||||||||||||
(2.895) | (2.616 | ) | (1.101 | ) | (0.254 | ) | (1.806 | ) | (0.140 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
(3.219) | (2.794 | ) | (1.156 | ) | (0.346 | ) | (1.806 | ) | (0.140 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
$ 49.760 | $ | 52.550 | $ | 54.870 | $ | 52.370 | $ | 39.750 | $ | 37.860 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
1.36% | 0.90% | 7.12% | 32.87% | 10.21% | 4.99% | |||||||||||||||||
$771,418 | $ | 794,664 | $ | 775,076 | $ | 884,026 | $ | 522,403 | $ | 375,299 | ||||||||||||
1.26% | 1.22% | 1.22% | 1.25% | 1.32% | 1.37% | |||||||||||||||||
1.26% | 1.22% | 1.22% | 1.29% | 1.37% | 1.42% | |||||||||||||||||
0.56% | 0.62% | 0.27% | 0.26% | 0.19% | (0.02% | ) | ||||||||||||||||
0.56% | 0.62% | 0.27% | 0.22% | 0.14% | (0.07% | ) | ||||||||||||||||
7% | 20% | 17% | 28% | 11% | 29% | |||||||||||||||||
|
17
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 loss2 |
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 return3 |
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 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. |
See accompanying notes, which are an integral part of the financial statements.
18
Table of Contents
Six months ended | ||||||||||||||||||||||
5/31/161 | Year ended | |||||||||||||||||||||
|
| |||||||||||||||||||||
(Unaudited) | 11/30/15 | 11/30/14 | 11/30/13 | 11/30/12 | 11/30/11 | |||||||||||||||||
| ||||||||||||||||||||||
$ 44.240 | $ | 46.790 | $ | 45.110 | $ | 34.450 | $ | 33.280 | $ | 32.070 | ||||||||||||
(0.036) | (0.059 | ) | (0.219 | ) | (0.196 | ) | (0.188 | ) | (0.260 | ) | ||||||||||||
0.226 | 0.125 | 3.000 | 11.110 | 3.164 | 1.610 | |||||||||||||||||
|
|
|
|
| �� |
|
|
|
| |||||||||||||
0.190 | 0.066 | 2.781 | 10.914 | 2.976 | 1.350 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
(0.015) | — | — | — | — | — | |||||||||||||||||
(2.895) | (2.616 | ) | (1.101 | ) | (0.254 | ) | (1.806 | ) | (0.140 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
(2.910) | (2.616 | ) | (1.101 | ) | (0.254 | ) | (1.806 | ) | (0.140 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
$ 41.520 | $ | 44.240 | $ | 46.790 | $ | 45.110 | $ | 34.450 | $ | 33.280 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
0.99% | 0.14% | 6.30% | 31.93% | 9.37% | 4.20% | |||||||||||||||||
$ 97,381 | $ | 108,890 | $ | 109,368 | $ | 99,099 | $ | 66,231 | $ | 52,648 | ||||||||||||
2.01% | 1.97% | 1.97% | 2.00% | 2.07% | 2.12% | |||||||||||||||||
(0.19%) | (0.13% | ) | (0.48% | ) | (0.49% | ) | (0.56% | ) | (0.77% | ) | ||||||||||||
7%
|
| 20%
|
|
| 17%
|
|
| 28%
|
|
| 11%
|
|
| 29%
|
| |||||||
|
19
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)2 |
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 return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
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 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return 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.
20
Table of Contents
Six months ended 5/31/161 | Year ended | |||||||||||||||||||||
|
| |||||||||||||||||||||
(Unaudited) | 11/30/15 | 11/30/14 | 11/30/13 | 11/30/12 | 11/30/11 | |||||||||||||||||
| ||||||||||||||||||||||
$51.050 | $53.390 | $51.060 | $ | 38.770 | $ 37.050 | $ 35.510 | ||||||||||||||||
0.069 | 0.186 | 0.012 | 0.004 | (0.022 | ) | (0.102 | ) | |||||||||||||||
0.288 | 0.140 | 3.419 | 12.540 | 3.548 | 1.782 | |||||||||||||||||
|
| |||||||||||||||||||||
0.357 | 0.326 | 3.431 | 12.544 | 3.526 | 1.680 | |||||||||||||||||
|
| |||||||||||||||||||||
(0.202) | (0.050 | ) | — | — | — | — | ||||||||||||||||
(2.895) | (2.616 | ) | (1.101 | ) | (0.254 | ) | (1.806 | ) | (0.140 | ) | ||||||||||||
|
| |||||||||||||||||||||
(3.097) | (2.666 | ) | (1.101 | ) | (0.254 | ) | (1.806 | ) | (0.140 | ) | ||||||||||||
|
| |||||||||||||||||||||
$48.310 | $51.050 | $53.390 | $ | 51.060 | $ 38.770 | $ 37.050 | ||||||||||||||||
|
| |||||||||||||||||||||
1.23% | 0.63% | 6.85% | 32.55% | 9.96% | 4.72% | |||||||||||||||||
$75,705 | $81,187 | $82,577 | $ | 76,501 | $ 44,379 | $ 28,303 | ||||||||||||||||
1.51% | 1.47% | 1.47% | 1.50% | 1.57% | 1.62% | |||||||||||||||||
1.51% | 1.47% | 1.47% | 1.58% | 1.67% | 1.72% | |||||||||||||||||
0.31% | 0.37% | 0.02% | 0.01% | (0.06% | ) | (0.27% | ) | |||||||||||||||
0.31% | 0.37% | 0.02% | (0.07% | ) | (0.16% | ) | (0.37% | ) | ||||||||||||||
7%
|
| 20%
|
|
| 17%
|
|
| 28%
|
|
| 11%
|
|
| 29%
|
| |||||||
|
21
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 income2 |
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 return3 |
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 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. |
See accompanying notes, which are an integral part of the financial statements.
22
Table of Contents
Six months ended 5/31/161 | Year ended | |||||||||||||||||||||
|
| |||||||||||||||||||||
(Unaudited) | 11/30/15 | 11/30/14 | 11/30/13 | 11/30/12 | 11/30/11 | |||||||||||||||||
| ||||||||||||||||||||||
$ 55.230 | $ | 57.520 | $ | 54.830 | $ | 41.590 | $ | 39.430 | $37.590 | |||||||||||||
0.196 | 0.475 | 0.292 | 0.250 | 0.180 | 0.090 | |||||||||||||||||
0.323 | 0.163 | 3.672 | 13.434 | 3.786 | 1.890 | |||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
0.519 | 0.638 | 3.964 | 13.684 | 3.966 | 1.980 | |||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
(0.454) | (0.312 | ) | (0.173 | ) | (0.190 | ) | — | — | ||||||||||||||
(2.895) | (2.616 | ) | (1.101 | ) | (0.254 | ) | (1.806 | ) | (0.140 | ) | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
(3.349) | (2.928 | ) | (1.274 | ) | (0.444 | ) | (1.806 | ) | (0.140 | ) | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
$ 52.400 | $ | 55.230 | $ | 57.520 | $ | 54.830 | $ | 41.590 | $39.430 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
1.49% | 1.15% | 7.38% | 33.22% | 10.49% | 5.26% | |||||||||||||||||
$1,745,348 | $ | 1,969,355 | $ | 1,768,420 | $ | 1,214,512 | $ | 348,533 | $91,442 | |||||||||||||
1.01% | 0.97% | 0.97% | 1.00% | 1.07% | 1.12% | |||||||||||||||||
0.81% | 0.87% | 0.52% | 0.51% | 0.44% | 0.23% | |||||||||||||||||
7%
|
| 20%
|
|
| 17%
|
|
| 28%
|
|
| 11%
|
|
| 29%
|
| |||||||
|
23
Table of Contents
Financial highlights
Delaware Small Cap Value Fund Class R6
Selected data for each share of the Fund outstanding throughout the period were as follows:
5/2/161 to 5/31/16 (Unaudited) | ||||
| ||||
Net asset value, beginning of period | $51.460 | |||
Income from investment operations: | ||||
Net investment income2 | 0.020 | |||
Net realized and unrealized gain | 0.930 | |||
Total from investment operations | 0.950 | |||
Net asset value, end of period | $52.410 | |||
Total return3 | 1.85% | |||
Ratios and supplemental data: | ||||
Net assets, end of period (000 omitted) | $ 2 | |||
Ratio of expenses to average net assets | 0.78% | |||
Ratio of net investment income to average net assets | 0.45% | |||
Portfolio turnover4
| 7% | |||
|
1 | Date of commencement of operations; ratios have been annualized and total return has not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. |
4 | Portfolio turnover is representative of the Fund for the six months ended May 31, 2016. |
See accompanying notes, which are an integral part of the financial statements.
24
Table of Contents
Delaware Small Cap Value Fund | May 31, 2016 (Unaudited) |
Delaware Group® Equity Funds V (Trust) is organized as a Delaware statutory trust and offers three series: Delaware Wealth Builder Fund (formerly, 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, Institutional Class, and Class R6 shares. Class A shares are sold with a maximum front-end sales charge of 5.75%. Class A share purchases of $1,000,000 or more will incur a contingent deferred sales charge (CDSC) of 1.00% if redeemed during the first year and 0.50% during the second year, provided that Delaware Distributors, L.P. (DDLP) paid a financial advisor a commission on the purchase of those shares. Class C shares are sold with a CDSC of 1.00%, if redeemed during the first 12 months. Class R, Institutional Class, and Class R6 shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors. In addition, Class R6 shares do not pay any service fees, sub-accounting fees, and/or sub-transfer agency fees. Class R6 commenced operations on May 2, 2016.
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, 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 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.
25
Table of Contents
Notes to financial statements
Delaware Small Cap Value Fund
1. Significant Accounting Policies (continued)
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 May 31, 2016 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. 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
26
Table of Contents
order, and other factors affecting the overall benefit obtained by the Fund on the transaction. There were no such commission rebates for the six months ended May 31, 2016.
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 six months ended May 31, 2016.
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 six months ended May 31, 2016, the Fund earned $962 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 (NAV) basis. For the six months ended May 31, 2016, the Fund was charged $59,167 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 six months ended May 31, 2016, the Fund was charged $260,033 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.”
27
Table of Contents
Notes to financial statements
Delaware Small Cap Value Fund
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates (continued)
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 and Class R6 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 six months ended May 31, 2016, the Fund was charged $28,415 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 six months ended May 31, 2016, DDLP earned $12,728 for commissions on sales of the Fund’s Class A shares. For the six months ended, May 31, 2016, DDLP received gross CDSC commissions of $119 and $2,910, 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 six months ended May 31, 2016, the Fund made purchases and sales of investment securities other than short-term investments as follows:
Purchases | $ | 183,814,189 | ||
Sales | 431,129,549 |
At May 31, 2016, the cost of investments for federal income tax purposes has been estimated since final tax characteristics cannot be determined until fiscal year end. At May 31, 2016, the cost of investments and unrealized appreciation (depreciation) were as follows:
Cost of investments | $ | 2,192,922,020 | ||
|
| |||
Aggregate unrealized appreciation of investments | $ | 602,404,118 | ||
Aggregate unrealized depreciation of investments | (122,486,896 | ) | ||
|
| |||
Net unrealized appreciation of investments | $ | 479,917,222 | ||
|
|
28
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.
The following table summarizes the valuation of the Fund’s investments by fair value hierarchy levels as of May 31, 2016:
Securities | Level 1 | Level 2 | Total | |||||||||
Common Stock | $ | 2,635,266,993 | $ | — | $ | 2,635,266,993 | ||||||
Short-Term Investments | — | 37,572,249 | 37,572,249 | |||||||||
|
|
|
|
|
| |||||||
Total Value of Securities | $ | 2,635,266,993 | $ | 37,572,249 | $ | 2,672,839,242 | ||||||
|
|
|
|
|
|
29
Table of Contents
Notes to financial statements
Delaware Small Cap Value Fund
3. Investments (continued)
During the six months ended May 31, 2016, 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 May 31, 2016, there were no Level 3 investments.
4. Capital Shares
Transactions in capital shares were as follows:
Six months ended 5/31/16 | Year ended 11/30/15 | |||||||
Shares sold: | ||||||||
Class A | 1,977,920 | 4,919,498 | ||||||
Class C | 144,174 | 425,227 | ||||||
Class R | 220,471 | 484,938 | ||||||
Institutional Class | 7,856,259 | 14,039,643 | ||||||
Class R6 | 39 | — | ||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | 1,049,903 | 748,690 | ||||||
Class C | 179,377 | 133,165 | ||||||
Class R | 108,793 | 82,273 | ||||||
Institutional Class | 2,430,351 | 1,632,471 | ||||||
|
|
|
| |||||
13,967,287 | 22,465,905 | |||||||
|
|
|
| |||||
Shares redeemed: | ||||||||
Class A | (2,646,810) | (4,670,476 | ) | |||||
Class C | (439,229) | (434,350 | ) | |||||
Class R | (352,575) | (523,606 | ) | |||||
Institutional Class | (12,635,426) | (10,754,425 | ) | |||||
|
|
|
| |||||
(16,074,040) | (16,382,857 | ) | ||||||
|
|
|
| |||||
Net increase (decrease) | (2,106,753) | 6,083,048 | ||||||
|
|
|
|
30
Table of Contents
Certain shareholders may exchange shares of one class for shares of another class in the same Fund. For the six months ended May 31, 2016 and year ended Nov. 30, 2015, 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 | |||||||||||||||||||||||
Class A Shares | Class C Shares | Institutional Class Shares | Class A Shares | Institutional Class Shares | Value | |||||||||||||||||||
Six months ended 5/31/16 | 4,161 | 305 | 26 | 27 | 4,194 | $ | 218,384 | |||||||||||||||||
Year ended 11/30/15 | 107,154 | 1,934 | — | 3,960 | 103,305 | 5,893,372 |
5. 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 available 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 May 31, 2016, or at any time during the period then ended.
6. 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.
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
31
Table of Contents
Notes to financial statements
Delaware Small Cap Value Fund
6. Offsetting (continued)
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 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 May 31, 2016, the Fund had the following assets and liabilities subject to offsetting provisions:
Master Repurchase Agreements
Counterparty | Repurchase | Fair Value of Non-cash | Cash Collateral Received | Net Collateral Received | Net Exposure(a) | |||||
Bank of America Merrill Lynch | $ 6,106,853 | $ (6,106,853) | $ — | $ (6,106,853) | $ — | |||||
Bank of Montreal | 10,178,087 | (10,178,087) | — | (10,178,087) | — | |||||
BNP Paribas | 13,345,060 | (13,345,060) | — | (13,345,060) | — | |||||
Total | $29,630,000 | $(29,630,000) | $ — | $(29,630,000) | $ — |
(a)Net exposure represents the receivable (payable) that would be due from (to) the counterparty in the event of default.
7. 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 request of the borrower, BNY Mellon must return enough collateral to the borrower by the end of the following business day to
32
Table of Contents
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.
Prior to Dec. 29, 2015, cash collateral received was generally invested in the Delaware Investments Collateral Fund No. 1 (Collective Trust), a pooled account established by BNY Mellon for the use of funds managed by DMC that participate in BNY Mellon’s securities lending program. The Collective Trust sought to maintain a NAV per unit of $1.00. Under the previous investment guidelines, the Collective Trust was permitted to 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 would generally have a dollar-weighted average portfolio maturity of 60 days or less.
On Dec. 29, 2015, the assets in the Collective Trust were transferred to a series of individual separate accounts, each corresponding to a Fund. The investment guidelines permit each separate account to hold certain securities that would be considered eligible securities for a money market fund. Cash collateral received is generally invested in government securities; certain obligations issued by government sponsored enterprises; repurchase agreements collateralized by U.S. Treasury securities; obligations issued by the central government of any Organization for Economic Cooperation and Development (OECD) country or its agencies, instrumentalities or establishments; obligations of supranational organizations, commercial paper, notes, bonds and other debt obligations; certificates of deposit, time deposits and other bank obligations; and asset-backed securities.
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 Fund may incur investment losses as a result of investing securities lending collateral. This could occur if an investment in the collateral investment account defaulted or became impaired. Under those circumstances, the value of a Fund’s cash collateral account may be less than the amount the Fund would be required to return to the borrowers of the securities and the Fund would be required to make up for this shortfall.
During the six months ended May 31, 2016, the Fund had no securities out on loan.
33
Table of Contents
Notes to financial statements
Delaware Small Cap Value Fund
8. 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 status as a regulated investment company may be jeopardized. There were no direct real estate holdings during the period ended May 31, 2016. 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 May 31, 2016, there were no Rule 144A securities held by the Fund. Illiquid securities have been identified on the “Schedule of investments.” When monitoring compliance with the Fund’s illiquid limit, certain holdings that are common to multiple clients of the investment manager may be aggregated and considered illiquid in the aggregate solely for monitoring purposes. For purposes of determining illiquidity for financial reporting purposes, only the holdings of this Fund will be considered.
9. 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.
10. Recent Accounting Pronouncements
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 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 disclosure.
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11. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to May 31, 2016 that would require recognition or disclosure in the Fund’s financial statements.
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Board of trustees | ||||||
Shawn K. Lytle | Ann D. Borowiec | John A. Fry | Frances A. | |||
President and Chief Executive Officer Delaware Investments® Family of Funds Philadelphia, PA
| Former Chief Executive Officer Private Wealth Management J.P. Morgan Chase & Co. New York, NY
| President Drexel University Philadelphia, PA
Lucinda S. Landreth Former Chief Investment Officer Assurant, Inc. New York, NY | Sevilla-Sacasa Chief Executive Officer Banco Itaú International Miami, FL
| |||
Thomas L. Bennett | Joseph W. Chow | Thomas K. Whitford | ||||
Chairman of the Board Delaware Investments Family of Funds Private Investor Rosemont, PA | Former Executive Vice President State Street Corporation Boston, MA | 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 semiannual report is for the information of Delaware Small Cap Value Fund shareholders, but it may be used with prospective investors when preceded or accompanied by the Delaware Investments Fund fact sheet for the most recently completed calendar quarter. These documents are available at delawareinvestments.com/literature.
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/literature. 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/proxy; and (ii) on the SEC’s website at sec.gov.
36
Item 2. Code of Ethics
Not applicable.
Item 3. Audit Committee Financial Expert
Not applicable.
Item 4. Principal Accountant Fees and Services
Not applicable.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Investments
(a) Included as part of report to shareholders filed under Item 1 of this Form N-CSR.
(b) Divestment of securities in accordance with Section 13(c) of the Investment Company Act of 1940.
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 11. Controls and Procedures
The registrant’s principal executive officer and principal financial officer have evaluated the registrant’s disclosure controls and procedures within 90 days of the filing of this report and have concluded that they are effective in providing reasonable assurance that the information required to be disclosed by the registrant in its reports or statements filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.
There were no significant changes in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by the report to stockholders included herein (i.e., the registrant’s second fiscal quarter) that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits
(a) (1) Code of Ethics
Not applicable.
(2) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rule 30a-2 under the Investment Company Act of 1940 are attached hereto as Exhibit 99.CERT.
(3) Written solicitations to purchase securities pursuant to Rule 23c-1 under the Securities Exchange Act of 1934.
Not applicable.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are furnished herewith as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf, by the undersigned, thereunto duly authorized.
DELAWARE GROUP® EQUITY FUNDS V
/s/ SHAWN LYTLE | |
By: | Shawn Lytle |
Title: | President and Chief Executive Officer |
Date: | August 4, 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: | August 4, 2016 |
/s/ RICHARD SALUS | |
By: | Richard Salus |
Title: | Chief Financial Officer |
Date: | August 4, 2016 |