UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: | 811-04997 | |
Exact name of registrant as specified in charter: | Delaware Group®Equity Funds V | |
Address of principal executive offices: | 2005 Market Street | |
Philadelphia, PA 19103 | ||
Name and address of agent for service: | David F. Connor, Esq. | |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
Registrant’s telephone number, including area code: | (800) 523-1918 | |
Date of fiscal year end: | November 30 | |
Date of reporting period: | November 30, 2019 |
Item 1. Reports to Stockholders
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Annual report
Multi-asset mutual fund
Delaware Wealth Builder Fund
November 30, 2019
Beginning on or about June 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of your Fund’s shareholder reports will no longer be sent to you by mail, unless you specifically request them from the Fund or from your financial intermediary, such as a broker/dealer, bank, or insurance company. Instead, you will be notified by mail each time a report is posted on the website and provided with a link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you do not need to take any action. You may elect to receive shareholder reports and other communications from the Fund electronically by signing up at delawarefunds.com/edelivery. If you own these shares through a financial intermediary, you may contact your financial intermediary.
You may elect to receive paper copies of all future shareholder reports free of charge. You can inform the Fund that you wish to continue receiving paper copies of your shareholder reports by contacting us at 800 523-1918. If you own these shares through a financial intermediary, you may contact your financial intermediary to elect to continue to receive paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held with the Delaware Funds® by Macquarie or your financial intermediary.
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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 delawarefunds.com/literature or calling 800523-1918. 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 delawarefunds.com/edelivery. |
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Experience Delaware Funds®by Macquarie
Macquarie Investment Management (MIM) is a global asset manager with offices in the United States, Europe, Asia, and Australia. As active managers we prioritize autonomy and accountability at the investment team level in pursuit of opportunities that matter for clients. Delaware Funds is one of the longest-standing mutual fund families, with more than 80 years in existence.
If you are interested in learning more about creating an investment plan, contact your financial advisor.
You can learn more about Delaware Funds or obtain a prospectus for Delaware Wealth Builder Fund at delawarefunds.com/literature.
Manage your account online
● | Check your account balance and transactions |
● | View statements and tax forms |
● | Make purchases and redemptions |
Visit delawarefunds.com/account-access.
Macquarie Asset Management (MAM) offers a diverse range of products including securities investment management, infrastructure and real asset management, and fund and equity-based structured products. MIM is the marketing name for certain companies comprising the asset management division of Macquarie Group. This includes the following investment advisers: Macquarie Investment Management Business Trust (MIMBT), Macquarie Funds Management Hong Kong Limited, Macquarie Investment Management Austria Kapitalanlage AG, Macquarie Investment Management Global Limited, Macquarie Investment Management Europe Limited, Macquarie Capital Investment Management LLC, and Macquarie Investment Management Europe S.A.
The Fund is distributed byDelaware Distributors, L.P. (DDLP), an affiliate of MIMBT and Macquarie Group Limited.
Other than Macquarie Bank Limited (MBL), none of the entities noted are authorized deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Fund is governed by US laws and regulations.
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Security type / sector allocation and top 10 equity holdings | 11 | |||
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Unless otherwise noted, views expressed herein are current as of Nov. 30, 2019, 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.
Advisory services provided by Delaware Management Company, a series of MIMBT, a US registered investment advisor.
All third-party marks cited are the property of their respective owners.
© 2020 Macquarie Management Holdings, Inc.
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Portfolio management review | ||
Delaware Wealth Builder Fund | December 10, 2019 (Unaudited) |
Performance preview (for the year ended November 30, 2019) | ||||||||
Delaware Wealth Builder Fund (Institutional Class shares) | 1-year return | +8.59% | ||||||
Delaware Wealth Builder Fund (Class A shares) | 1-year return | +8.30% | ||||||
60% S&P 500® Index / 40% Bloomberg Barclays US Aggregate Index (primary benchmark) | 1-year return | +14.42% | ||||||
S&P 500 Index (secondary benchmark) | 1-year return | +16.11% |
Past performance does not guarantee future results.
For complete, annualized performance for Delaware Wealth Builder Fund, please see the table on page 5. Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors. In addition, Institutional Class shares pay no distribution and service fee.
The performance of Class A shares excludes the applicable sales charge. Both Institutional Class shares and Class A shares reflect the reinvestment of all distributions.
Please see page 7 for a description of the index. Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.
A shifting monetary backdrop
The Fund’s fiscal year ended Nov. 30, 2019, began with a sharp downturn, with most financial assets experiencing steep valuation drops. These asset-price declines primarily reflected investors’ worries about rising interest rates amid mounting global economic uncertainty.
By the first quarter of 2019, however, conditions for most asset classes had turned significantly positive and generally remained that way for the rest of the fiscal year. Global financial markets marched ahead, as central banks globally signaled their intent to provide monetary support for their respective economies.
These central banks included the US Federal Reserve, which gradually shifted from a policy of raising interest rates to one of cutting them. The shift took place against a backdrop of consistent US economic growth with few signs of inflation. In December 2018, the Fed raised its benchmark short-term interest rate by 0.25 percentage points – it was the central bank’s seventh such rate increase in the previous two years. The Fed then kept the federal funds rate steady until late July, when it initiated its first of three successive0.25-percentage-point rate cuts. By fiscal year end, the federal funds rate was within a range of 1.50% to 1.75% – where it had been inmid-2018.
The Fed’s monetary policy shift came amid the US economy’s weakest quarterly performance of the |
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After the fiscal year began with a sharp downturn, conditions turned strongly positive for the rest of the period, driven by support from global central banks. After raising its benchmark interest rate by a quarter point in December 2018, the US Federal Reserve pivoted and cut rates three times in mid to late 2019. |
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Portfolio management review | ||
Delaware Wealth Builder Fund |
fiscal year. US gross domestic product (GDP), a measure of national economic output, grew by an annualized rate of just 1.1% in the final three months of 2018. By the first quarter of 2019, however, US annual GDP growth accelerated to 3.1%. The national economy subsequently expanded by 2.0% and an estimated 2.1% in the year’s second and third quarters, respectively. Meanwhile, the US unemployment rate declined further, reaching 3.5% in November 2019 – the lowest since 1969. (Sources: US Bureau of Economic Analysis and US Bureau of Labor Statistics.)
Favorable market conditions
The shift in Fed interest rate policy was the main driver behind the favorable results seen across all the Fund’s asset classes, as financial markets benefited strongly from the increase in global liquidity.
For the fiscal year ended Nov. 30, 2019, USlarge-cap value stocks, as measured by the Russell 1000® Value Index, gained 11.33%, as the equity market recovered from a December 2018 market correction to produce steady gains throughout the rest of the12-month period. In comparison, international developed market stocks, as measured by the MSCI EAFE (Europe, Australasia, Far East) Index (net), gained 12.44% over the same time frame. US stocks tended to outperform their international counterparts, reflecting better growth fundamentals in the United States.
High yield corporate bonds gained 9.68%, as reflected in the performance of the Bloomberg Barclays US Corporate High-Yield Index. During the fiscal year, high yield bonds benefited from narrowing credit spreads, indicating that investors were willing to accept gradually less income in exchange for taking on credit risk.
Investment grade debt rose 10.79%, as measured by the Bloomberg Barclays US Aggregate Index.
The Bloomberg Barclays Municipal Bond Index, a proxy for the municipal bond market, gained 8.49%.
Meanwhile, convertible securities, as measured by the ICE BofA US Convertible Index, gained 14.53%, while US real estate securities, as indicated by the FTSE Nareit Equity REITs Index, gained 16.33%.
Within the Fund
For its fiscal year ended Nov. 30, 2019, Delaware Wealth Builder Fund underperformed its primary benchmark – a blend of 60% S&P 500 Index and 40% Bloomberg Barclays US Aggregate Index – due largely to subpar results from the Fund’slarge-cap value equity subportfolio. The Fund also underperformed its secondary benchmark, the S&P 500 Index. The Fund’s Institutional Class shares gained 8.59%. The Fund’s Class A shares advanced 8.30% at net asset value and 2.10% at maximum offer price. These figures reflect all distributions reinvested. For the same period, the blend of 60% S&P 500 Index and 40% Bloomberg Barclays US Aggregate Index rose 14.42% and the S&P 500 Index gained 16.11%. Complete annualized performance for Delaware Wealth Builder Fund is shown in the table on page 5.
Individual contributors and detractors
Within the USlarge-cap value equity subportfolio, we saw subpar results from several energy stocks, especiallyHalliburton Co., an energy-services provider, andMarathon Oil Corp.andOccidental Petroleum Corp., both exploration and production (E&P) companies.
Halliburton continued to face difficult business conditions, as the company has had to adjust to declining North American investment activity and its increasingly returns-focused business model. Marathon Oil struggled due to its sensitivity to changes in the price of oil, which can often lead to exaggerated moves in the company’s stock price.
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Finally, shares of Occidental Petroleum came under pressure following its decision to acquire Anadarko Petroleum at what investors viewed was too high a price. Investors also appeared to dislike the terms of the deal’s financing.
In contrast, several defense-related companies within the industrials sector contributed to the Fund’s relative performance, especiallyNorthrop Grumman Corp.andRaytheon Co. Defense-company stocks generally fared well due to rising geopolitical tensions and potentially weaker fundamentals weighing on stocks in many other areas of the industrials sector.
Meanwhile, in the Fund’s real estate investment trust (REIT) portfolio, a position inBrookdale Senior Living Inc. hampered results. This operator of senior-care facilities has struggled for some time due to poor operational execution and capital-allocation decisions. In contrast, the Fund benefited from real estate securities positions inAssura PLC(aUK-based REIT that owns healthcare properties) andSun Communities Inc. (a US owner of manufactured housing properties).
Sticking to our strategy
We regularly invest across multiple asset classes, searching for securities that offer a competitive yield and the opportunity for dividend growth. We also prioritize managing downside risk while seeking to limit potential capital losses.
Throughout the fiscal year, we maintained a relatively consistent asset mix. The Fund’s largest portfolio shift was to increase exposure tolarge-cap value equities, which expanded from roughly 38% of the portfolio in December 2018 to 42% at fiscal year end. This increase, which primarily occurred in early 2019, reflected our view that US equities were attractively valued following their sharp correction in late 2018.Non-US developed market equities remained a modest component of the Fund’s portfolio, finishing the fiscal year at about 4%, up from a 3% allocation a year earlier.
Meanwhile, the Fund’s weighting in REITs declined from about 11% to roughly 8%, while exposure to convertible securities went from roughly 13% to 11%. In both cases, we believed that US equities offered a better risk-rewardtrade-off.
Other asset allocation shifts were incremental. The Fund’s municipal bond allocation finished the12-month period at 6% of the portfolio, up from 5%, while weightings in US investment grade debt and foreign developed market bonds remained consistent at roughly 4% and 2%, respectively. The Fund’s high yield bond exposure drifted from 10% to 9%.
Of final note, the Fund employed derivative securities during the fiscal year. These included foreign currency exchange contracts to facilitate the purchase and sale of securities in the Fund, futures contracts to hedge currency risks, options contracts to receive premiums for writing options, and credit default swap contracts to hedge against credit events. The Fund owned futures on the S&P 500 Index, using them tactically as an attempt to increase the portfolio’s defensive characteristics in a highly valued market. None of these positions had a material effect (that is, more than 0.50 percentage points) on the Fund’s performance during the fiscal year.
Monitoring market conditions
We continue to believe that income-generating securities, such aslarge-cap value equities, REITs, convertibles, and investment grade bonds, have the potential to perform well as markets remain uneven and volatile.
We will continue to closely monitor market conditions as we seek to provide a favorable total return to investors while managing downside risk and seeking potential upside via income-generating securities across multiple asset classes and regions. We also may seek to take advantage of market shifts to increase or decrease exposure
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Portfolio management review | ||
Delaware Wealth Builder Fund |
to certain asset classes as relative value
opportunities emerge.
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Performance summary | ||
Delaware Wealth Builder Fund | November 30, 2019 (Unaudited) |
The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 800523-1918 or visiting delawarefunds.com/performance.
Fund and benchmark performance1,2 | Average annual total returns through November 30, 2019 | |||||||||||||
1 year | 5 year | 10 year | Lifetime | |||||||||||
Class A (Est. Dec. 2, 1996) | ||||||||||||||
Excluding sales charge | +8.30% | +4.26% | +8.04% | +7.49% | ||||||||||
Including sales charge | +2.10% | +3.03% | +7.40% | +7.21% | ||||||||||
Class C (Est. Oct. 1, 2003) | ||||||||||||||
Excluding sales charge | +7.46% | +3.48% | +7.23% | +5.55% | ||||||||||
Including sales charge | +6.47% | +3.48% | +7.23% | +5.55% | ||||||||||
Class R (Est. Oct. 1, 2003) | ||||||||||||||
Excluding sales charge | +8.02% | +4.00% | +7.77% | +6.07% | ||||||||||
Including sales charge | +8.02% | +4.00% | +7.77% | +6.07% | ||||||||||
Institutional Class (Est. Dec. 2, 1996) | ||||||||||||||
Excluding sales charge | +8.59% | +4.52% | +8.32% | +7.68% | ||||||||||
Including sales charge | +8.59% | +4.52% | +8.32% | +7.68% | ||||||||||
60% S&P 500 Index / 40% Bloomberg Barclays US Aggregate Index | +14.42% | +7.96% | +9.63% | +7.48%* | ||||||||||
S&P 500 Index | +16.11% | +10.98% | +13.44% | +8.53%* |
*The benchmark lifetime return is for Institutional Class share comparison only and is calculated using the last business day in the month of the Fund’s Institutional Class inception date.
1 Returns reflect the reinvestment of all distributions and are presented both with and without the applicable sales charges described below. Returns do not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares.
Expense limitations were in effect for certain classes during some or all of the periods shown in the “Fund and benchmark performance” table. Expenses for each class are listed on the “Fund expense ratios” table on page 6. Performance would have been lower had expense limitations not been in effect.
Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to
certain eligible investors. In addition, Institutional Class shares pay no distribution and service(12b-1) fee.
Class A shares are sold with a maximumfront-end sales charge of 5.75%, and have an annual12b-1 fee of 0.25% of average daily net assets. Performance for Class A shares, excluding sales charges, assumes that nofront-end sales charge applied.
Class C shares are sold with a contingent deferred sales charge of 1.00% if redeemed during the first 12 months. They are also subject to an annual12b-1 fee of 1.00% of average daily net assets. Performance for Class C shares, excluding sales charges, assumes either that contingent deferred
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Performance summary | ||
Delaware Wealth Builder Fund |
sales charges did not apply or that the investment was not redeemed.
Class R shares are available only for certain retirement plan products. They are sold without a sales charge and have an annual12b-1 fee of 0.50% of average daily net assets.
Investment in the Fund does not in any way provide an indication of future performance or a guarantee of positive returns.
The Fund may invest up to 45% of its net assets in high yield, higher-risk corporate bonds.
Fixed income securities and bond funds can lose value, and investors can lose principal, as interest rates rise. They also may be affected by economic conditions that hinder an issuer’s ability to make interest and principal payments on its debt.
The Fund may also be subject to prepayment risk, the risk that the principal of a bond that is held by a portfolio will be prepaid prior to maturity, at the time when interest rates are lower than what the bond was paying. A portfolio may then have to reinvest that money at a lower interest rate.
High yielding,non-investment-grade bonds (junk bonds) involve higher risk than investment grade bonds.
International investments entail risks not ordinarily associated with US investments including fluctuation in currency values, differences in accounting principles, or economic or political instability in other nations.
Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility and lower trading volume.
2 The Fund’s expense ratios, as described in the most recent prospectus, are disclosed in the following “Fund expense ratios” table. Please see the “Financial highlights” section in this report for the most recent expense ratios.
Fund expense ratios | Class A | Class C | Class R | Institutional Class | ||||
Total annual operating expenses | 1.09% | 1.84% | 1.34% | 0.84% | ||||
(without fee waivers) | ||||||||
Net expenses | 1.09% | 1.84% | 1.34% | 0.84% | ||||
(including fee waivers, if any) | ||||||||
Type of waiver | n/a | n/a | n/a | n/a |
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Performance of a $10,000 investment1
Average annual total returns from Nov. 30, 2009 through Nov. 30, 2019
1 The “Performance of a $10,000 investment” graph assumes $10,000 invested in Institutional Class and Class A shares of the Fund on Nov. 30, 2009, and includes the effect of a 5.75%front-end sales charge (for Class A shares) and the reinvestment of all distributions. The graph does not reflect the deduction of taxes the shareholders would pay on Fund distributions or redemptions of Fund shares. Expense limitations were in effect for some or all of the periods shown. Performance would have been lower had expense limitations not been in effect. Expenses are listed in the “Fund expense ratios” table on page 6. Please note additional details on pages 5 through 8.
The graph also assumes $10,000 invested in 60% S&P 500 Index / 40% Bloomberg Barclays US Aggregate Index (the Fund’s primary benchmark) and the S&P 500 Index (the Fund’s secondary benchmark) as of Nov. 30, 2009. The S&P 500 Index measures the performance of 500 mostly
large-cap stocks weighted by market value, and is often used to represent performance of the US stock market. The Bloomberg Barclays US Aggregate Index is a broad composite that tracks the investment grade domestic bond market.
The Russell 1000 Value Index, mentioned on page 2, measures the performance of thelarge-cap value segment of the US equity universe. It includes those Russell 1000 companies with lowerprice-to-book ratios and lower forecasted growth values.
The MSCI EAFE (Europe, Australasia, Far East) Index, mentioned on page 2, represents large- andmid-cap stocks across 21 developed markets, excluding the United States and Canada. The index covers approximately 85% of the free float-adjusted market capitalization in each country. Index “net” return approximates the minimum possible dividend reinvestment, after
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Performance summary | ||
Delaware Wealth Builder Fund |
deduction of withholding tax at the highest possible rate.
The Bloomberg Barclays US Corporate High-Yield Index, mentioned on page 2, is composed of US dollar-denominated, noninvestment-grade corporate bonds for which the middle rating among Moody’s Investors Service, Inc., Fitch, Inc., and Standard & Poor’s is Ba1/BB+/BB+ or below.
The Bloomberg Barclays Municipal Bond Index, mentioned on page 2, measures the total return performance of the long-term, investment gradetax-exempt bond market.
The ICE BofA US Convertible Index, mentioned on page 2, tracks the performance of publicly issued US dollar-denominated convertible securities of US companies. Qualifying securities must have at least $50 million face amount outstanding and at least one month remaining to the final conversion date.
The FTSE Nareit Equity REITs Index, mentioned on page 2, contains alltax-qualified real estate
investment trusts (REITs) traded on US exchanges excluding timber and infrastructure REITs, with more than 50% of total assets in qualifying real estate assets other than mortgages secured by real property that also meet minimum size and liquidity criteria.
Frank Russell Company is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company.
Gross domestic product is a measure of all goods and services produced by a nation in a year.
Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.Past performance is not a guarantee of future results.
Performance of other Fund classes will vary due to different charges and expenses.
Nasdaq symbols | CUSIPs | |||||
Class A | DDIAX | 24610B107 | ||||
Class C | DDICX | 24610B305 | ||||
Class R | DDDRX | 24610B842 | ||||
Institutional Class | DDIIX | 24610B404 |
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Disclosure of Fund expenses | ||
For thesix-month period from June 1, 2019 to November 30, 2019 (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 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 entiresix-month period from June 1, 2019 to Nov. 30, 2019.
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 and assume reinvestment of all dividends and distributions.
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Disclosure of Fund expenses | ||
For thesix-month period from June 1, 2019 to November 30, 2019 (Unaudited) |
Delaware Wealth Builder Fund
Expense analysis of an investment of $1,000
Beginning
Account Value
6/1/19 | Ending
Account Value
11/30/19 | Annualized
Expense Ratio | Expenses
Paid During Period
6/1/19 to 11/30/19* | |||||||||
Actual Fund return† | ||||||||||||
Class A | $1,000.00 | $1,080.10 | 1.08% | $5.63 | ||||||||
Class C | 1,000.00 | 1,075.80 | 1.83% | 9.52 | ||||||||
Class R | 1,000.00 | 1,079.50 | 1.33% | 6.93 | ||||||||
Institutional Class | 1,000.00 | 1,081.50 | 0.83% | 4.33 | ||||||||
Hypothetical 5% return(5% return before expenses) |
| |||||||||||
Class A | $1,000.00 | $1,019.65 | 1.08% | $5.47 | ||||||||
Class C | 1,000.00 | 1,015.89 | 1.83% | 9.25 | ||||||||
Class R | 1,000.00 | 1,018.40 | 1.33% | 6.73 | ||||||||
Institutional Class | 1,000.00 | 1,020.91 | 0.83% | 4.20 |
*“Expenses Paid During Period” are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 183/365 (to reflect theone-half year period).
†Because actual returns reflect only the most recentsix-month period, the returns shown may differ significantly from fiscal year returns.
In addition to the Fund’s expenses reflected above, the Fund also indirectly bears its portion of the fees and expenses of the investment companies in which it invests (Underlying Funds), including exchange-traded funds. The table above does not reflect the expenses of the Underlying Funds.
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Security type / sector allocation and top 10 equity holdings | ||
Delaware Wealth Builder Fund | As of November 30, 2019 (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 | 60.45% | ||||
Communication Services | 3.12% | ||||
Consumer Discretionary | 3.09% | ||||
Consumer Staples | 5.40% | ||||
Energy | 4.95% | ||||
Financials | 9.12% | ||||
Healthcare | 11.38% | ||||
Industrials | 5.06% | ||||
Information Technology | 7.09% | ||||
Materials | 1.37% | ||||
Real Estate Operating/Development | 0.45% | ||||
REIT Diversified | 1.14% | ||||
REIT Healthcare | 0.98% | ||||
REIT Hotel | 0.09% | ||||
REIT Industrial | 0.73% | ||||
REIT Mall | 0.13% | ||||
REIT Manufactured Housing | 0.30% | ||||
REIT Mortgage | 0.24% | ||||
REIT Multifamily | 2.41% | ||||
REIT Self-Storage | 0.17% | ||||
REIT Shopping Center | 0.54% | ||||
REIT Single Tenant | 0.40% | ||||
REIT Specialty | 0.53% | ||||
Utilities | 1.76% | ||||
Closed-End Funds | 0.46% | ||||
Convertible Preferred Stock | 1.91% | ||||
Exchange-Traded Funds | 1.19% | ||||
Limited Partnerships | 1.53% | ||||
Agency Mortgage-Backed Securities | 0.75% | ||||
Convertible Bonds | 8.94% | ||||
Brokerage | 0.30% | ||||
Capital Goods | 0.36% | ||||
Communications | 1.40% | ||||
Consumer Cyclical | 0.17% | ||||
ConsumerNon-Cyclical | 2.14% | ||||
Energy | 1.42% | ||||
Real Estate Investment Trusts | 0.33% | ||||
Technology | 2.53% |
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Security type / sector allocation and top 10 equity holdings | ||
Delaware Wealth Builder Fund |
Security type / sector | Percentage of net assets | ||||
Utilities | 0.29% | ||||
Corporate Bonds | 11.70% | ||||
Banking | 0.86% | ||||
Basic Industry | 1.33% | ||||
Capital Goods | 0.34% | ||||
Communications | 0.66% | ||||
Consumer Cyclical | 1.03% | ||||
ConsumerNon-Cyclical | 0.80% | ||||
Energy | 1.52% | ||||
Financials | 0.28% | ||||
Healthcare | 0.77% | ||||
Insurance | 0.26% | ||||
Media | 1.24% | ||||
Real Estate Investment Trusts | 0.38% | ||||
Services | 0.53% | ||||
Technology & Electronics | 0.71% | ||||
Transportation | 0.32% | ||||
Utilities | 0.67% | ||||
LeveragedNon-Recourse Security | 0.00% | ||||
Municipal Bonds | 6.12% | ||||
Non-Agency Commercial Mortgage-Backed Securities | 0.43% | ||||
Sovereign Bonds | 1.18% | ||||
Supranational Bank | 0.04% | ||||
US Treasury Obligations | 1.10% | ||||
Preferred Stock | 0.65% | ||||
Rights | 0.00% | ||||
Short-Term Investments | 2.85% | ||||
Total Value of Securities | 99.30% | ||||
Receivables and Other Assets Net of Liabilities | 0.70% | ||||
Total Net Assets | 100.00% |
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Table of Contents
Holdings are for informational purposes only and are subject to change at any time. They are not a recommendation to buy, sell, or hold any security.
Top 10 equity holdings | Percentage of net assets | ||||
Brookdale Senior Living | 1.61% | ||||
Conagra Brands | 1.35% | ||||
Johnson & Johnson | 1.34% | ||||
Lowe’s | 1.33% | ||||
Cardinal Health | 1.33% | ||||
Halliburton | 1.32% | ||||
Intel | 1.32% | ||||
Merck & Co. | 1.32% | ||||
ConocoPhillips | 1.32% | ||||
Marsh & McLennan
|
| 1.32%
|
|
13 |
Table of Contents
Schedule of investments | ||
Delaware Wealth Builder Fund | November 30, 2019 |
Number of shares | Value (US $) | |||||||
Common Stock – 60.45% | ||||||||
Communication Services – 3.12% | ||||||||
AT&T | 168,600 | $ | 6,302,268 | |||||
Century Communications =† | 1,625,000 | 0 | ||||||
CenturyLink | 96,623 | 1,400,067 | ||||||
KDDI | 29,900 | 857,486 | ||||||
Orange † | 50,590 | 836,025 | ||||||
Verizon Communications | 108,800 | 6,554,112 | ||||||
|
| |||||||
15,949,958 | ||||||||
|
| |||||||
Consumer Discretionary – 3.09% | ||||||||
adidas AG | 1,000 | 311,506 | ||||||
Dollar Tree † | 58,800 | 5,377,848 | ||||||
DR Horton | 10,647 | 589,312 | ||||||
Lowe’s | 58,100 | 6,815,711 | ||||||
Next | 3,460 | 302,420 | ||||||
Publicis Groupe | 21,260 | 935,480 | ||||||
Sodexo | 7,480 | 871,868 | ||||||
Swatch Group | 2,110 | 590,800 | ||||||
|
| |||||||
15,794,945 | ||||||||
|
| |||||||
Consumer Staples – 5.40% | ||||||||
Archer-Daniels-Midland | 154,700 | 6,641,271 | ||||||
Asahi Group Holdings | 12,200 | 586,955 | ||||||
Conagra Brands | 239,000 | 6,899,930 | ||||||
Danone | 15,580 | 1,282,530 | ||||||
Diageo | 20,090 | 822,375 | ||||||
Kao | 4,200 | 330,459 | ||||||
Kerry Group Class A | 2,280 | 292,382 | ||||||
Kirin Holdings | 11,400 | 252,361 | ||||||
Koninklijke Ahold Delhaize | 56,280 | 1,449,956 | ||||||
Lawson | 7,800 | 424,723 | ||||||
Mondelez International Class A | 126,200 | 6,630,548 | ||||||
Nestle | 10,390 | 1,079,729 | ||||||
Seven & i Holdings | 26,100 | 972,416 | ||||||
|
| |||||||
27,665,635 | ||||||||
|
| |||||||
Energy – 4.95% | ||||||||
ConocoPhillips | 112,400 | 6,737,256 | ||||||
Halliburton | 321,600 | 6,750,384 | ||||||
Marathon Oil | 524,800 | 6,113,920 | ||||||
Occidental Petroleum | 148,100 | 5,712,217 | ||||||
|
| |||||||
25,313,777 | ||||||||
|
| |||||||
Financials – 9.12% | ||||||||
Allstate | 58,400 | 6,502,840 | ||||||
American International Group | 118,900 | 6,261,274 | ||||||
Banco Espirito Santo =† | 105,000 | 0 |
14 |
Table of Contents
|
Number of shares | Value (US $) | |||||||
Common Stock(continued) | ||||||||
Financials(continued) | ||||||||
Bank of America | 144,095 | $ | 4,801,245 | |||||
Bank of New York Mellon | 133,200 | 6,522,804 | ||||||
BB&T | 121,400 | 6,643,008 | ||||||
Hercules Capital | 217,265 | 3,113,407 | ||||||
JPMorgan Chase & Co. | 46,207 | 6,088,234 | ||||||
Marsh & McLennan | 62,300 | 6,732,761 | ||||||
|
| |||||||
46,665,573 | ||||||||
|
| |||||||
Healthcare – 11.38% | ||||||||
Abbott Laboratories | 74,700 | 6,383,115 | ||||||
Brookdale Senior Living † | 1,156,919 | 8,260,402 | ||||||
Cardinal Health | 123,600 | 6,801,708 | ||||||
Cigna | 32,200 | 6,437,424 | ||||||
CVS Health | 88,700 | 6,676,449 | ||||||
Fresenius Medical Care AG & Co. | 13,340 | 978,211 | ||||||
Johnson & Johnson | 50,000 | 6,874,500 | ||||||
Merck & Co. | 77,300 | 6,739,014 | ||||||
Novo Nordisk Class B | 22,860 | 1,284,887 | ||||||
Pfizer | 171,038 | 6,588,384 | ||||||
Roche Holding | 4,020 | 1,238,964 | ||||||
|
| |||||||
58,263,058 | ||||||||
|
| |||||||
Industrials – 5.06% | ||||||||
G4S | 276,800 | 748,577 | ||||||
Honeywell International | 21,517 | 3,841,860 | ||||||
Makita | 15,000 | 496,094 | ||||||
Northrop Grumman | 18,500 | 6,507,745 | ||||||
Raytheon | 30,400 | 6,609,568 | ||||||
Secom | 3,200 | 272,097 | ||||||
Securitas Class B | 45,130 | 748,228 | ||||||
Waste Management | 59,000 | 6,661,690 | ||||||
|
| |||||||
25,885,859 | ||||||||
|
| |||||||
Information Technology – 7.09% | ||||||||
Broadcom | 20,800 | 6,577,168 | ||||||
Cisco Systems | 139,600 | 6,325,276 | ||||||
Intel | 116,200 | 6,745,410 | ||||||
Microsoft | 37,346 | 5,653,438 | ||||||
Oracle | 119,400 | 6,703,116 | ||||||
Texas Instruments | 35,701 | 4,291,617 | ||||||
|
| |||||||
36,296,025 | ||||||||
|
| |||||||
Materials – 1.37% | ||||||||
Air Liquide | 7,820 | 1,060,112 | ||||||
DuPont de Nemours | 92,200 | 5,975,482 | ||||||
|
| |||||||
7,035,594 | ||||||||
|
|
15 |
Table of Contents
Schedule of investments | ||
Delaware Wealth Builder Fund |
|
Number of shares | Value (US $) | |||||||
Common Stock(continued) | ||||||||
Real Estate Operating/Development – 0.45% | ||||||||
Grainger | 192,741 | $ | 706,963 | |||||
Postal Realty Trust Class A | 55,000 | 872,300 | ||||||
Sun Hung Kai Properties | 50,000 | 727,512 | ||||||
|
| |||||||
2,306,775 | ||||||||
|
| |||||||
REIT Diversified – 1.14% | ||||||||
Alpine Income Property Trust † | 62,010 | 1,163,928 | ||||||
American Tower | 1,837 | 393,173 | ||||||
Cousins Properties | 29,824 | 1,207,574 | ||||||
Lexington Realty Trust | 124,053 | 1,374,507 | ||||||
VICI Properties | 67,980 | 1,681,145 | ||||||
|
| |||||||
5,820,327 | ||||||||
|
| |||||||
REIT Healthcare – 0.98% | ||||||||
Assura | 1,028,579 | 1,008,377 | ||||||
Healthpeak Properties | 46,429 | 1,619,444 | ||||||
Sabra Health Care REIT | 31,900 | 710,732 | ||||||
Welltower | 19,877 | 1,680,998 | ||||||
|
| |||||||
5,019,551 | ||||||||
|
| |||||||
REIT Hotel – 0.09% | ||||||||
MGM Growth Properties Class A | 15,576 | 482,700 | ||||||
|
| |||||||
482,700 | ||||||||
|
| |||||||
REIT Industrial – 0.73% | ||||||||
Americold Realty Trust | 30,443 | 1,145,266 | ||||||
Liberty Property Trust | 20,760 | 1,279,231 | ||||||
Prologis | 14,483 | 1,325,919 | ||||||
|
| |||||||
3,750,416 | ||||||||
|
| |||||||
REIT Mall – 0.13% | ||||||||
Simon Property Group | 4,548 | 687,703 | ||||||
|
| |||||||
687,703 | ||||||||
|
| |||||||
REIT Manufactured Housing – 0.30% | ||||||||
Sun Communities | 9,227 | 1,519,779 | ||||||
|
| |||||||
1,519,779 | ||||||||
|
| |||||||
REIT Mortgage – 0.24% | ||||||||
Annaly Capital Management | 132,182 | 1,233,258 | ||||||
|
| |||||||
1,233,258 | ||||||||
|
| |||||||
REIT Multifamily – 2.41% | ||||||||
Apartment Investment & Management Class A | 16,783 | 902,422 | ||||||
Bluerock Residential Growth REIT | 85,507 | 1,048,316 | ||||||
Camden Property Trust | 12,788 | 1,426,501 | ||||||
Equity Residential | 75,510 | 6,425,901 |
16 |
Table of Contents
| ||
|
|
Number of shares | Value (US $) | |||||||
Common Stock(continued) | ||||||||
REIT Multifamily(continued) | ||||||||
NexPoint Residential Trust | 20,925 | $ | 1,001,261 | |||||
UDR | 31,504 | 1,513,767 | ||||||
|
| |||||||
12,318,168 | ||||||||
|
| |||||||
REIT Self-Storage – 0.17% | ||||||||
Extra Space Storage | 8,057 | 854,445 | ||||||
|
| |||||||
854,445 | ||||||||
|
| |||||||
REIT Shopping Center – 0.54% | ||||||||
Brixmor Property Group | 17,277 | 379,057 | ||||||
Retail Properties of America Class A | 77,855 | 1,107,877 | ||||||
SITE Centers | 87,976 | 1,274,772 | ||||||
|
| |||||||
2,761,706 | ||||||||
|
| |||||||
REIT Single Tenant – 0.40% | ||||||||
Spirit Realty Capital | 18,226 | 955,042 | ||||||
STORE Capital | 27,167 | 1,105,969 | ||||||
|
| |||||||
2,061,011 | ||||||||
|
| |||||||
REIT Specialty – 0.53% | ||||||||
Front Yard Residential | 100,206 | 1,162,390 | ||||||
Invitation Homes | 50,394 | 1,538,529 | ||||||
|
| |||||||
2,700,919 | ||||||||
|
| |||||||
Utilities – 1.76% | ||||||||
Edison International | 97,100 | 6,709,610 | ||||||
TerraForm Power Class A | 147,235 | 2,283,615 | ||||||
|
| |||||||
8,993,225 | ||||||||
|
| |||||||
Total Common Stock(cost $295,894,747) | 309,380,407 | |||||||
|
| |||||||
Closed-End Funds – 0.46% | ||||||||
Aberdeen Total Dynamic Dividend Fund | 108,235 | 932,986 | ||||||
Western Asset Emerging Markets Debt Fund | 102,002 | 1,435,168 | ||||||
|
| |||||||
TotalClosed-End Funds(cost $2,355,168) | 2,368,154 | |||||||
|
| |||||||
Convertible Preferred Stock – 1.91% | ||||||||
A Schulman 6.00% exercise price $52.33y | 2,140 | 2,198,615 | ||||||
AMG Capital Trust II 5.15% exercise price $195.47, maturity date 10/15/37 | 28,850 | 1,400,489 | ||||||
Bank of America 7.25% exercise price $50.00y | 1,198 | 1,773,040 | ||||||
El Paso Energy Capital Trust I 4.75% exercise price $34.49, maturity date 3/31/28 | 37,300 | 1,842,993 | ||||||
QTS Realty Trust 6.50% exercise price $46.99y | 20,104 | 2,537,728 | ||||||
|
| |||||||
Total Convertible Preferred Stock(cost $8,761,584) | 9,752,865 | |||||||
|
|
17 |
Table of Contents
Schedule of investments | ||
Delaware Wealth Builder Fund |
Number of shares | Value (US $) | |||||||
Exchange-Traded Funds – 1.19% | ||||||||
iShares Preferred & Income Securities ETF | 25,721 | $ | 956,821 | |||||
iShares Russell 1000 Value ETF | 10,870 | 1,457,449 | ||||||
SPDR Gold Shares † | 10,401 | 1,433,882 | ||||||
VanEck Vectors High-Yield Municipal Index ETF | 29,818 | 1,920,279 | ||||||
Vanguard FTSE Developed Markets ETF | 7,980 | 342,901 | ||||||
|
| |||||||
Total Exchange-Traded Funds(cost $5,849,891) | 6,111,332 | |||||||
|
| |||||||
Limited Partnerships – 1.53% | ||||||||
Merion Champion’s Walk =p† | 2,790,000 | 2,351,412 | ||||||
Merion Countryside 144A #=p† | 2,342,813 | 1,889,244 | ||||||
Merion The Ledges =p† | 3,970,235 | 3,589,887 | ||||||
|
| |||||||
Total Limited Partnerships(cost $6,166,856) | 7,830,543 | |||||||
|
| |||||||
Principal amount° | ||||||||
Agency Mortgage-Backed Securities – 0.75% | ||||||||
Fannie Mae S.F. 30 yr | 987,885 | 1,005,389 | ||||||
3.00% 10/1/49 | 147,273 | 149,663 | ||||||
3.50% 2/1/48 | 131,732 | 137,807 | ||||||
3.50% 11/1/49 | 238,046 | 244,962 | ||||||
4.00% 4/1/48 | 182,000 | 190,882 | ||||||
4.00% 4/1/49 | 381,369 | 395,429 | ||||||
4.50% 4/1/48 | 810,643 | 879,761 | ||||||
4.50% 1/1/49 | 268,616 | 290,500 | ||||||
4.50% 11/1/49 | 47,606 | 50,122 | ||||||
5.00% 7/1/49 | 353,936 | 383,014 | ||||||
Freddie Mac S.F. 30 yr | 101,897 | 106,753 | ||||||
|
| |||||||
Total Agency Mortgage-Backed Securities(cost $3,815,837) | 3,834,282 | |||||||
|
| |||||||
Convertible Bonds – 8.94% | ||||||||
Brokerage – 0.30% | ||||||||
GAIN Capital Holdings | 1,764,000 | 1,546,420 | ||||||
|
| |||||||
1,546,420 | ||||||||
|
| |||||||
Capital Goods – 0.36% | ||||||||
Chart Industries | 928,000 | 1,073,045 | ||||||
Dycom Industries | 775,000 | 755,228 | ||||||
|
| |||||||
1,828,273 | ||||||||
|
|
18 |
Table of Contents
Principal amount° | Value (US $) | |||||
Convertible Bonds(continued) | ||||||
Communications – 1.40% | ||||||
DISH Network | 2,135,000 | $ 1,935,516 | ||||
GCI Liberty | 1,626,000 | 2,186,038 | ||||
InterDigital | 1,391,000 | 1,400,990 | ||||
Liberty Media | 2,947,000 | 1,667,273 | ||||
| ||||||
7,189,817 | ||||||
| ||||||
Consumer Cyclical – 0.17% | ||||||
Meritor | 803,000 | 860,317 | ||||
| ||||||
860,317 | ||||||
| ||||||
ConsumerNon-Cyclical – 2.14% | ||||||
BioMarin Pharmaceutical | 1,143,000 | 1,178,631 | ||||
Chefs’ Warehouse | 666,000 | 693,016 | ||||
FTI Consulting | 1,548,000 | 1,931,130 | ||||
Jazz Investments I | 1,105,000 | 1,138,863 | ||||
Ligand Pharmaceuticals | 864,000 | 754,531 | ||||
Paratek Pharmaceuticals | 1,604,000 | 989,884 | ||||
Retrophin | 1,390,000 | 1,086,467 | ||||
Team | 1,514,000 | 1,586,942 | ||||
Vector Group | 1,511,000 | 1,570,496 | ||||
| ||||||
10,929,960 | ||||||
| ||||||
Energy – 1.42% | ||||||
Cheniere Energy | 2,892,000 | 2,284,751 | ||||
Helix Energy Solutions Group | 2,574,000 | 2,641,275 |
19 |
Table of Contents
Schedule of investments | ||
Delaware Wealth Builder Fund |
Principal amount° | Value (US $) | |||||
Convertible Bonds(continued) | ||||||
Energy(continued) | ||||||
PDC Energy | 2,527,000 | $ 2,330,811 | ||||
| ||||||
7,256,837 | ||||||
| ||||||
Real Estate Investment Trusts – 0.33% | ||||||
Blackstone Mortgage Trust | 1,599,000 | 1,697,033 | ||||
| ||||||
1,697,033 | ||||||
| ||||||
Technology – 2.53% | ||||||
Boingo Wireless | 2,698,000 | 2,377,933 | ||||
CSG Systems International | 1,429,000 | 1,686,474 | ||||
Knowles | 973,000 | 1,300,413 | ||||
Pluralsight 144A | 1,796,000 | 1,554,164 | ||||
Quotient Technology | 1,564,000 | 1,538,107 | ||||
Synaptics | 1,678,000 | 1,747,449 | ||||
Verint Systems | 1,503,000 | 1,548,898 | ||||
Vishay Intertechnology | 1,228,000 | 1,202,555 | ||||
| ||||||
12,955,993 | ||||||
| ||||||
Utilities – 0.29% | ||||||
NRG Energy | 1,303,000 | 1,471,191 | ||||
| ||||||
1,471,191 | ||||||
| ||||||
Total Convertible Bonds(cost $44,726,185) | 45,735,841 | |||||
| ||||||
Corporate Bonds – 11.70% | ||||||
Banking – 0.86% | ||||||
Ally Financial 5.75% 11/20/25 | 798,000 | 880,793 | ||||
Banco de Credito del Peru 144A 2.70% 1/11/25 # | 204,000 | 203,235 | ||||
Bank of America | ||||||
2.456% 10/22/25 µ | 15,000 | 15,054 | ||||
2.884% 10/22/30 µ | 20,000 | 20,169 | ||||
3.194% 7/23/30 µ | 55,000 | 56,878 | ||||
3.458% 3/15/25 µ | 45,000 | 46,954 |
20 |
Table of Contents
Principal amount° | Value (US $) | |||||
Corporate Bonds(continued) | ||||||
Banking(continued) | ||||||
BBVA Bancomer | ||||||
144A 5.125% 1/18/33 #µ | 384,000 | $ 379,210 | ||||
144A 6.75% 9/30/22 # | 274,000 | 297,016 | ||||
Branch Banking & Trust 2.636% 9/17/29 µ | 185,000 | 184,372 | ||||
Credit Suisse Group 144A 6.25% #µy | 360,000 | 389,320 | ||||
JPMorgan Chase & Co. | ||||||
2.739% 10/15/30 µ | 20,000 | 19,982 | ||||
4.023% 12/5/24 µ | 80,000 | 85,123 | ||||
5.00%µy | 85,000 | 88,719 | ||||
Morgan Stanley | ||||||
3.124% (LIBOR03M + 1.22%) 5/8/24 • | 35,000 | 35,642 | ||||
5.00% 11/24/25 | 95,000 | 107,048 | ||||
PNC Financial Services Group 2.60% 7/23/26 | 180,000 | 182,311 | ||||
Popular 6.125% 9/14/23 | 455,000 | 489,314 | ||||
Royal Bank of Scotland Group 8.625% µy | 520,000 | 562,630 | ||||
State Street | ||||||
3.10% 5/15/23 | 10,000 | 10,335 | ||||
3.30% 12/16/24 | 130,000 | 136,997 | ||||
US Bancorp | ||||||
3.00% 7/30/29 | 25,000 | 25,867 | ||||
3.10% 4/27/26 | 25,000 | 26,066 | ||||
3.375% 2/5/24 | 60,000 | 63,062 | ||||
USB Capital IX 3.50% (LIBOR03M + 1.02%)y• | 85,000 | 74,827 | ||||
| ||||||
4,380,924 | ||||||
| ||||||
Basic Industry – 1.33% | ||||||
BMC East 144A 5.50% 10/1/24 # | 163,000 | 169,791 | ||||
Boise Cascade 144A 5.625% 9/1/24 # | 295,000 | 307,660 | ||||
Builders FirstSource 144A 5.625% 9/1/24 # | 122,000 | 127,184 | ||||
Chemours 5.375% 5/15/27 | 379,000 | 319,317 | ||||
CSN Resources 144A 7.625% 4/17/26 # | 297,000 | 304,981 | ||||
FMG Resources August 2006 144A 5.125% 5/15/24 # | 246,000 | 258,708 | ||||
Freeport-McMoRan | ||||||
4.55% 11/14/24 | 200,000 | 210,692 | ||||
5.45% 3/15/43 | 320,000 | 308,032 | ||||
GUSAP III 144A 4.25% 1/21/30 # | 205,000 | 202,489 | ||||
Hudbay Minerals 144A 7.625% 1/15/25 # | 165,000 | 165,823 | ||||
Koppers 144A 6.00% 2/15/25 # | 434,000 | 440,506 | ||||
Methanex 5.25% 12/15/29 | 185,000 | 188,344 | ||||
Minera Mexico 144A 4.50% 1/26/50 # | 200,000 | 197,187 | ||||
Newmont Goldcorp 2.80% 10/1/29 | 190,000 | 188,441 | ||||
Novelis 144A 6.25% 8/15/24 # | 202,000 | 212,914 |
21 |
Table of Contents
Schedule of investments | ||
Delaware Wealth Builder Fund |
Principal amount° | Value (US $) | |||||
Corporate Bonds(continued) | ||||||
Basic Industry(continued) | ||||||
Olin | ||||||
5.00% 2/1/30 | 135,000 | $ 134,328 | ||||
5.125% 9/15/27 | 437,000 | 454,402 | ||||
Orbia Advance 144A 5.50% 1/15/48 # | 221,000 | 220,378 | ||||
RPM International 4.55% 3/1/29 | 170,000 | 184,784 | ||||
Standard Industries | ||||||
144A 4.75% 1/15/28 # | 445,000 | 460,496 | ||||
144A 5.00% 2/15/27 # | 160,000 | 166,372 | ||||
Steel Dynamics 5.00% 12/15/26 | 505,000 | 537,647 | ||||
Suzano Austria 6.00% 1/15/29 | 500,000 | 555,174 | ||||
Univar Solutions USA 144A 5.125% 12/1/27 # | 180,000 | 184,536 | ||||
US Concrete 6.375% 6/1/24 | 10,000 | 10,425 | ||||
Zekelman Industries 144A 9.875% 6/15/23 # | 285,000 | 300,853 | ||||
| ||||||
6,811,464 | ||||||
| ||||||
Capital Goods – 0.34% | ||||||
Bombardier 144A 6.00% 10/15/22 # | 240,000 | 241,200 | ||||
Crown Americas 4.75% 2/1/26 | 463,000 | 486,890 | ||||
Mauser Packaging Solutions Holding 144A 5.50% 4/15/24 # | 551,000 | 564,769 | ||||
Roper Technologies 2.35% 9/15/24 | 185,000 | 185,017 | ||||
TransDigm 144A 6.25% 3/15/26 # | 237,000 | 254,923 | ||||
| ||||||
1,732,799 | ||||||
| ||||||
Communications – 0.66% | ||||||
Altice France 144A 7.375% 5/1/26 # | 565,000 | 604,564 | ||||
AT&T 4.35% 3/1/29 | 170,000 | 187,710 | ||||
Level 3 Financing 144A 3.875% 11/15/29 # | 375,000 | 378,109 | ||||
Ooredoo International Finance 144A 5.00% 10/19/25 # | 200,000 | 223,496 | ||||
Sprint | ||||||
7.125% 6/15/24 | 612,000 | 660,960 | ||||
7.875% 9/15/23 | 22,000 | 24,241 | ||||
T-Mobile USA | ||||||
6.375% 3/1/25 = | 166,000 | 0 | ||||
6.50% 1/15/26 | 460,000 | 493,362 | ||||
6.50% 1/15/26 = | 180,000 | 0 | ||||
Verizon Communications | ||||||
4.50% 8/10/33 | 95,000 | 111,209 | ||||
4.522% 9/15/48 | 35,000 | 42,158 | ||||
Vodafone Group | ||||||
4.25% 9/17/50 | 110,000 | 114,588 | ||||
4.875% 6/19/49 | 40,000 | 45,505 |
22 |
Table of Contents
| ||
Principal amount° | Value (US $) | |||||||
Corporate Bonds(continued) | ||||||||
Communications(continued) | ||||||||
Zayo Group | 15,000 | $ | 15,343 | |||||
6.375% 5/15/25 | 455,000 | 469,214 | ||||||
|
| |||||||
3,370,459 | ||||||||
|
| |||||||
Consumer Cyclical – 1.03% | ||||||||
Allison Transmission 144A 5.875% 6/1/29 # | 575,000 | 621,617 | ||||||
AMC Entertainment Holdings 6.125% 5/15/27 | 539,000 | 486,461 | ||||||
Boyd Gaming 6.375% 4/1/26 | 452,000 | 483,560 | ||||||
General Motors Financial | ||||||||
4.35% 4/9/25 | 75,000 | 78,981 | ||||||
5.25% 3/1/26 | 95,000 | 103,575 | ||||||
HD Supply 144A 5.375% 10/15/26 # | 290,000 | 308,074 | ||||||
Hilton Worldwide Finance 4.875% 4/1/27 | 545,000 | 578,966 | ||||||
KFC Holding 144A 5.25% 6/1/26 # | 470,000 | 499,434 | ||||||
Lennar 4.75% 5/30/25 | 115,000 | 123,802 | ||||||
Levi Strauss & Co. 5.00% 5/1/25 | 295,000 | 304,710 | ||||||
Lowe’s | ||||||||
4.05% 5/3/47 | 5,000 | 5,379 | ||||||
4.55% 4/5/49 | 150,000 | 174,464 | ||||||
MGM Resorts International 5.75% 6/15/25 | 285,000 | 318,841 | ||||||
Penn National Gaming 144A 5.625% 1/15/27 # | 337,000 | 350,597 | ||||||
PulteGroup 5.00% 1/15/27 | 15,000 | 16,385 | ||||||
Scientific Games International | ||||||||
144A 8.25% 3/15/26 # | 375,000 | 406,678 | ||||||
10.00% 12/1/22 | 392,000 | 402,780 | ||||||
|
| |||||||
5,264,304 | ||||||||
|
| |||||||
ConsumerNon-Cyclical – 0.80% | ||||||||
Alcon Finance 144A 3.00% 9/23/29 # | 200,000 | 202,898 | ||||||
Anheuser-Busch InBev Worldwide | ||||||||
3.65% 2/1/26 | 125,000 | 134,164 | ||||||
4.75% 1/23/29 | 50,000 | 58,206 | ||||||
Cott Holdings 144A 5.50% 4/1/25 # | 272,000 | 285,597 | ||||||
CVS Health 3.25% 8/15/29 | 185,000 | 188,274 | ||||||
Gilead Sciences 4.15% 3/1/47 | 165,000 | 184,599 | ||||||
JBS USA | ||||||||
144A 5.75% 6/15/25 # | 318,000 | 330,852 | ||||||
144A 6.50% 4/15/29 # | 305,000 | 338,656 | ||||||
Pilgrim’s Pride 144A 5.75% 3/15/25 # | 535,000 | 556,395 | ||||||
Post Holdings | ||||||||
144A 5.00% 8/15/26 # | 311,000 | 327,266 | ||||||
144A 5.625% 1/15/28 # | 160,000 | 171,172 | ||||||
144A 5.75% 3/1/27 # | 295,000 | 316,710 |
23 |
Table of Contents
Schedule of investments | ||
Delaware Wealth Builder Fund |
Principal amount° | Value (US $) | |||||||
Corporate Bonds(continued) | ||||||||
ConsumerNon-Cyclical(continued) | ||||||||
United Rentals North America | ||||||||
5.50% 5/15/27 | 713,000 | $ | 762,928 | |||||
5.875% 9/15/26 | 5,000 | 5,363 | ||||||
Verscend Escrow 144A 9.75% 8/15/26 # | 225,000 | 242,443 | ||||||
|
| |||||||
4,105,523 | ||||||||
|
| |||||||
Energy – 1.52% | ||||||||
AmeriGas Partners 5.875% 8/20/26 | 224,000 | 246,360 | ||||||
Cheniere Corpus Christi Holdings 7.00% 6/30/24 | 135,000 | 155,228 | ||||||
Cheniere Energy Partners 5.25% 10/1/25 | 305,000 | 314,909 | ||||||
Crestwood Midstream Partners 6.25% 4/1/23 | 245,000 | 246,223 | ||||||
Energy Transfer Operating | ||||||||
5.25% 4/15/29 | 95,000 | 104,938 | ||||||
6.25% 4/15/49 | 60,000 | 70,755 | ||||||
Genesis Energy 6.75% 8/1/22 | 242,000 | 237,007 | ||||||
Hilcorp Energy I 144A 5.00% 12/1/24 # | 240,000 | 214,393 | ||||||
Israel Electric 144A 4.25% 8/14/28 # | 500,000 | 545,153 | ||||||
KazMunayGas National 144A 5.375% 4/24/30 # | 524,000 | 604,015 | ||||||
KazTransGas 144A 4.375% 9/26/27 # | 381,000 | 400,288 | ||||||
Marathon Oil 4.40% 7/15/27 | 130,000 | 140,071 | ||||||
MPLX | ||||||||
4.00% 3/15/28 | 30,000 | 30,755 | ||||||
5.50% 2/15/49 | 55,000 | 60,399 | ||||||
Murphy Oil | ||||||||
5.875% 12/1/27 | 278,000 | 279,796 | ||||||
6.875% 8/15/24 | 203,000 | 212,975 | ||||||
Murphy Oil USA 5.625% 5/1/27 | 609,000 | 658,312 | ||||||
Newfield Exploration 5.375% 1/1/26 | 423,000 | 454,265 | ||||||
Noble Energy | ||||||||
3.25% 10/15/29 | 85,000 | 84,362 | ||||||
3.90% 11/15/24 | 20,000 | 20,974 | ||||||
4.20% 10/15/49 | 15,000 | 14,549 | ||||||
4.95% 8/15/47 | 50,000 | 53,342 | ||||||
5.05% 11/15/44 | 5,000 | 5,327 | ||||||
NuStar Logistics 5.625% 4/28/27 | 228,000 | 235,940 | ||||||
Precision Drilling 144A 7.125% 1/15/26 # | 400,000 | 350,861 | ||||||
Sabine Pass Liquefaction | ||||||||
5.625% 3/1/25 | 55,000 | 61,465 | ||||||
5.75% 5/15/24 | 110,000 | 122,519 | ||||||
Saudi Arabian Oil 144A 4.25% 4/16/39 # | 250,000 | 269,439 | ||||||
Sinopec Group Overseas Development 2018 144A 2.50% 8/8/24 # | 610,000 | 608,884 | ||||||
Southwestern Energy 7.75% 10/1/27 | 290,000 | 252,670 |
24 |
Table of Contents
| ||
|
|
Principal amount° | Value (US $) | |||||||
Corporate Bonds(continued) | ||||||||
Energy(continued) | ||||||||
Targa Resources Partners 5.375% 2/1/27 | 237,000 | $ | 241,698 | |||||
Transocean 144A 9.00% 7/15/23 # | 458,000 | 468,442 | ||||||
|
| |||||||
7,766,314 | ||||||||
|
| |||||||
Financials – 0.28% | ||||||||
AerCap Global Aviation Trust 144A 6.50% 6/15/45 #µ | 240,000 | 264,024 | ||||||
AerCap Ireland Capital 4.45% 4/3/26 | 150,000 | 161,415 | ||||||
Avolon Holdings Funding | ||||||||
144A 3.95% 7/1/24 # | 45,000 | 46,717 | ||||||
144A 4.375% 5/1/26 # | 130,000 | 137,300 | ||||||
E*TRADE Financial 5.875% µy | 530,000 | 555,671 | ||||||
International Lease Finance 8.625% 1/15/22 | 50,000 | 56,425 | ||||||
Jefferies Group | ||||||||
4.15% 1/23/30 | 170,000 | 175,337 | ||||||
6.45% 6/8/27 | 10,000 | 11,760 | ||||||
6.50% 1/20/43 | 5,000 | 5,939 | ||||||
|
| |||||||
1,414,588 | ||||||||
|
| |||||||
Healthcare – 0.77% | ||||||||
Bausch Health 144A 5.50% 11/1/25 # | 630,000 | 659,925 | ||||||
Charles River Laboratories International 144A 5.50% 4/1/26 # | 425,000 | 453,612 | ||||||
Encompass Health | ||||||||
5.75% 11/1/24 | 240,000 | 243,898 | ||||||
5.75% 9/15/25 | 244,000 | 256,911 | ||||||
HCA | ||||||||
5.375% 2/1/25 | 559,000 | 619,087 | ||||||
5.875% 2/15/26 | 219,000 | 247,749 | ||||||
7.58% 9/15/25 | 219,000 | 262,526 | ||||||
Hill-Rom Holdings 144A 5.00% 2/15/25 # | 242,000 | 252,990 | ||||||
Hologic 144A 4.625% 2/1/28 # | 300,000 | 317,354 | ||||||
Tenet Healthcare | ||||||||
5.125% 5/1/25 | 345,000 | 355,350 | ||||||
8.125% 4/1/22 | 241,000 | 263,895 | ||||||
Universal Health Services 144A 5.00% 6/1/26 # | 5,000 | 5,289 | ||||||
|
| |||||||
3,938,586 | ||||||||
|
| |||||||
Insurance – 0.26% | ||||||||
HUB International 144A 7.00% 5/1/26 # | 360,000 | 369,909 | ||||||
USI 144A 6.875% 5/1/25 # | 468,000 | 471,505 | ||||||
WellCare Health Plans 144A 5.375% 8/15/26 # | 470,000 | 501,642 | ||||||
|
| |||||||
1,343,056 | ||||||||
|
|
25 |
Table of Contents
Schedule of investments | ||
Delaware Wealth Builder Fund |
Principal amount° | Value (US $) | |||||||
Corporate Bonds(continued) | ||||||||
Media – 1.24% | ||||||||
AMC Networks 4.75% 8/1/25 | 505,000 | $ | 502,475 | |||||
CCO Holdings | ||||||||
144A 5.75% 2/15/26 # | 218,000 | 230,760 | ||||||
144A 5.875% 5/1/27 # | 569,000 | 607,307 | ||||||
Charter Communications Operating | ||||||||
4.80% 3/1/50 | 70,000 | 73,055 | ||||||
5.05% 3/30/29 | 100,000 | 112,757 | ||||||
CSC Holdings | ||||||||
5.25% 6/1/24 | 5,000 | 5,387 | ||||||
6.75% 11/15/21 | 370,000 | 399,045 | ||||||
144A 7.50% 4/1/28 # | 400,000 | 451,429 | ||||||
144A 7.75% 7/15/25 # | 465,000 | 499,875 | ||||||
Discovery Communications 4.125% 5/15/29 | 175,000 | 187,543 | ||||||
Gray Television 144A 5.875% 7/15/26 # | 473,000 | 502,646 | ||||||
Lamar Media | ||||||||
5.375% 1/15/24 | 155,000 | 158,873 | ||||||
5.75% 2/1/26 | 473,000 | 504,110 | ||||||
Netflix 5.875% 11/15/28 | 625,000 | 684,391 | ||||||
Sinclair Television Group 144A 5.125% 2/15/27 # | 362,000 | 366,651 | ||||||
Sirius XM Radio | ||||||||
144A 5.00% 8/1/27 # | 470,000 | 495,862 | ||||||
144A 5.375% 4/15/25 # | 286,000 | 296,722 | ||||||
Time Warner Cable 7.30% 7/1/38 | 60,000 | 77,022 | ||||||
Time Warner Entertainment 8.375% 3/15/23 | 25,000 | 29,661 | ||||||
Viacom 4.375% 3/15/43 | 180,000 | 186,235 | ||||||
|
| |||||||
6,371,806 | ||||||||
|
| |||||||
Real Estate Investment Trusts – 0.38% | ||||||||
Crown Castle International 5.25% 1/15/23 | 125,000 | 136,178 | ||||||
CyrusOne 5.375% 3/15/27 | 378,000 | 416,876 | ||||||
ESH Hospitality 144A 5.25% 5/1/25 # | 494,000 | 511,290 | ||||||
MGM Growth Properties Operating Partnership 144A 5.75% 2/1/27 # | 160,000 | 179,400 | ||||||
SBA Communications 4.875% 9/1/24 | 670,000 | 696,582 | ||||||
|
| |||||||
1,940,326 | ||||||||
|
| |||||||
Services – 0.53% | ||||||||
Advanced Disposal Services 144A 5.625% 11/15/24 # | 389,000 | 407,153 | ||||||
Aramark Services 144A 5.00% 2/1/28 # | 285,000 | 299,970 | ||||||
Ashtead Capital 144A 5.25% 8/1/26 # | 570,000 | 610,451 | ||||||
Avis Budget Car Rental 144A 6.375% 4/1/24 # | 104,000 | 108,593 | ||||||
Covanta Holding 5.875% 7/1/25 | 233,000 | 244,164 | ||||||
KAR Auction Services 144A 5.125% 6/1/25 # | 200,000 | 203,748 |
26 |
Table of Contents
Principal amount° | Value (US $) | |||||||
Corporate Bonds(continued) | ||||||||
Services(continued) | ||||||||
Prime Security Services Borrower | ||||||||
144A 5.75% 4/15/26 # | 310,000 | $ | 324,382 | |||||
144A 9.25% 5/15/23 # | 227,000 | 239,059 | ||||||
Service Corp. International 4.625% 12/15/27 | 280,000 | 291,150 | ||||||
|
| |||||||
2,728,670 | ||||||||
|
| |||||||
Technology & Electronics – 0.71% | ||||||||
Apple 2.20% 9/11/29 | 140,000 | 138,201 | ||||||
CDK Global | ||||||||
5.00% 10/15/24 | 161,000 | 174,482 | ||||||
5.875% 6/15/26 | 518,000 | 554,816 | ||||||
CDW Finance 5.00% 9/1/25 | 156,000 | 163,018 | ||||||
CommScope Technologies 144A 5.00% 3/15/27 # | 192,000 | 168,969 | ||||||
Global Payments | ||||||||
2.65% 2/15/25 | 135,000 | 135,524 | ||||||
3.20% 8/15/29 | 50,000 | 50,868 | ||||||
Infor US 6.50% 5/15/22 | 447,000 | 456,518 | ||||||
International Business Machines 3.30% 5/15/26 | 140,000 | 147,430 | ||||||
Iron Mountain US Holdings 144A 5.375% 6/1/26 # | 471,000 | 491,181 | ||||||
NXP | ||||||||
144A 4.30% 6/18/29 # | 15,000 | 16,040 | ||||||
144A 4.875% 3/1/24 # | 90,000 | 97,786 | ||||||
Sensata Technologies UK Financing 144A | 285,000 | 306,857 | ||||||
SS&C Technologies 144A 5.50% 9/30/27 # | 660,000 | 707,405 | ||||||
|
| |||||||
3,609,095 | ||||||||
|
| |||||||
Transportation – 0.32% | ||||||||
Adani Ports & Special Economic Zone 144A | 395,000 | 409,699 | ||||||
DAE Funding 144A 5.75% 11/15/23 # | 554,000 | 584,700 | ||||||
FedEx 4.05% 2/15/48 | 140,000 | 137,275 | ||||||
Rutas 2 and 7 Finance 144A 3.413% 9/30/36 # | 200,000 | 129,937 | ||||||
XPO Logistics 144A 6.125% 9/1/23 # | 368,000 | 380,876 | ||||||
|
| |||||||
1,642,487 | ||||||||
|
| |||||||
Utilities – 0.67% | ||||||||
Calpine 144A 5.25% 6/1/26 # | 443,000 | 464,021 | ||||||
Duke Energy 4.875%µy | 85,000 | 89,176 | ||||||
Emera 6.75% 6/15/76 µ | 225,000 | 253,467 | ||||||
Empresas Publicas de Medellin 144A 4.25% 7/18/29 # | 387,000 | 399,712 | ||||||
Enel 144A 8.75% 9/24/73 #µ | 200,000 | 234,520 | ||||||
Entergy Louisiana 4.95% 1/15/45 | 5,000 | 5,429 | ||||||
Entergy Mississippi 2.85% 6/1/28 | 60,000 | 61,770 | ||||||
Entergy Texas 3.55% 9/30/49 | 115,000 | 119,536 |
27 |
Table of Contents
Schedule of investments | ||
Delaware Wealth Builder Fund |
|
Principal amount° | Value (US $) | |||||||
Corporate Bonds(continued) | ||||||||
Utilities(continued) | ||||||||
Evergy 2.90% 9/15/29 | 160,000 | $ | 159,538 | |||||
Evergy Metro 3.65% 8/15/25 | 25,000 | 26,662 | ||||||
MidAmerican Energy 3.15% 4/15/50 | 55,000 | 55,762 | ||||||
Mong Duong Finance Holdings 144A 5.125% 5/7/29 # | 500,000 | 512,213 | ||||||
National Rural Utilities Cooperative Finance | ||||||||
4.75% 4/30/43 µ | 5,000 | 5,161 | ||||||
5.25% 4/20/46 µ | 60,000 | 64,624 | ||||||
NextEra Energy Capital Holdings 5.65% 5/1/79 µ | 55,000 | 60,886 | ||||||
PacifiCorp 3.50% 6/15/29 | 75,000 | 81,216 | ||||||
Southern California Edison | ||||||||
4.00% 4/1/47 | 30,000 | 31,592 | ||||||
4.20% 3/1/29 | 90,000 | 99,070 | ||||||
4.875% 3/1/49 | 45,000 | 53,921 | ||||||
Southwestern Electric Power 4.10% 9/15/28 | 165,000 | 181,489 | ||||||
Vistra Operations 144A 5.50% 9/1/26 # | 465,000 | 490,492 | ||||||
|
| |||||||
3,450,257 | ||||||||
|
| |||||||
Total Corporate Bonds(cost $57,950,839) | 59,870,658 | |||||||
|
| |||||||
LeveragedNon-Recourse Security – 0.00% | ||||||||
JPMorgan Fixed Income Pass Through Trust Auction 144A | 1,300,000 | 1,300 | ||||||
|
| |||||||
Total LeveragedNon-Recourse Security(cost $1,105,000) | 1,300 | |||||||
|
| |||||||
Municipal Bonds – 6.12% | ||||||||
Allentown, Pennsylvania Neighborhood Improvement Zone Development Authority Revenue | 500,000 | 560,350 | ||||||
Arizona Industrial Development Authority | 1,000,000 | 1,148,610 | ||||||
Buckeye, Ohio Tobacco Settlement Financing Authority | ||||||||
SeriesA-2 5.875% 6/1/47 | 1,250,000 | 1,256,437 | ||||||
SeriesA-2 6.00% 6/1/42 | 1,000,000 | 1,005,690 | ||||||
California Municipal Finance Authority | 300,000 | 349,968 | ||||||
California State | 1,000,000 | 1,131,880 | ||||||
California Statewide Communities Development Authority | 1,000,000 | 1,149,540 |
28 |
Table of Contents
Principal amount° | Value (US $) | |||||||
Municipal Bonds(continued) | ||||||||
Capital Trust Agency | 1,000,000 | $ | 1,049,690 | |||||
City of Apple Valley, Minnesota | 1,000,000 | 1,034,500 | ||||||
City of Chicago, Illinois | 1,000,000 | 1,123,160 | ||||||
Colorado Health Facilities Authority Revenue | 750,000 | 840,540 | ||||||
Conley Road Transportation Development District, Missouri | 500,000 | 522,735 | ||||||
Cuyahoga County, Ohio | 1,000,000 | 1,157,850 | ||||||
Dallas/Fort Worth International Airport, Texas | 1,000,000 | 1,058,340 | ||||||
Dominion Water & Sanitation District, Colorado | 1,000,000 | 1,069,630 | ||||||
Florida Development Finance Surface Transportation Facilities Revenue | 1,150,000 | 1,088,165 | ||||||
Golden State Tobacco Securitization Settlement Revenue | 500,000 | 517,535 | ||||||
Illinois State | ||||||||
Series A 5.00% 12/1/34 | 625,000 | 708,969 | ||||||
Series A 5.00% 4/1/38 | 100,000 | 106,554 | ||||||
Montgomery County Industrial Development Authority Revenue | 250,000 | 266,517 | ||||||
M-S-R Energy Authority, California | 1,000,000 | 1,549,880 | ||||||
New Jersey Transportation Trust Fund Authority | 1,000,000 | 1,091,000 | ||||||
New York Liberty Development Revenue | 1,000,000 | 1,361,990 | ||||||
(World Trade Center Project)Class 1-3 144A 5.00% 11/15/44 # | 1,000,000 | 1,104,910 | ||||||
New York State Thruway Authority Series J 5.00% 1/1/41 | 1,000,000 | 1,119,130 |
29 |
Table of Contents
Schedule of investments | ||
Delaware Wealth Builder Fund |
Principal amount° | Value (US $) | |||||||
Municipal Bonds(continued) | ||||||||
Palm Beach County, Florida Health Facilities Authority (Sinai Residences Boca Raton Project) | ||||||||
Series A 7.25% 6/1/34 | 65,000 | $ | 73,085 | |||||
Series A 7.50% 6/1/49 | 325,000 | 366,015 | ||||||
Public Authority for Colorado Energy Natural Gas Revenue | 1,000,000 | 1,518,560 | ||||||
Public Finance Authority, Wisconsin | 1,000,000 | 1,115,380 | ||||||
Puerto Rico Sales Tax Financing Revenue | ||||||||
SeriesA-1 4.55% 7/1/40 | 250,000 | 258,807 | ||||||
SeriesA-1 4.75% 7/1/53 | 1,880,000 | 1,945,518 | ||||||
SeriesA-1 5.00% 7/1/58 | 720,000 | 756,540 | ||||||
Salt Verde, Arizona Financial Senior Gas Revenue | 1,000,000 | 1,335,110 | ||||||
Tobacco Settlement Financing | 500,000 | 552,810 | ||||||
|
| |||||||
Total Municipal Bonds(cost $28,790,439) | 31,295,395 | |||||||
|
| |||||||
Non-Agency Commercial Mortgage-Backed Securities – 0.43% | ||||||||
BANK | ||||||||
Series 2017-BNK5 B 3.896% 6/15/60 • | 95,000 | 100,355 | ||||||
Series 2019-BN20 A3 3.011% 9/15/61 | 250,000 | 259,160 | ||||||
Benchmark Mortgage Trust | 250,000 | 278,751 | ||||||
CD Mortgage Trust | 250,000 | 256,399 | ||||||
DB-JPM Mortgage Trust | 250,000 | 256,943 | ||||||
GRACE Mortgage Trust | 100,000 | 101,285 | ||||||
GS Mortgage Securities Trust | ||||||||
Series2017-GS6 A3 3.433% 5/10/50 | 165,000 | 175,635 | ||||||
Series 2019-GC42 A4 3.001% 9/1/52 | 250,000 | 258,606 | ||||||
JPM-BB Commercial Mortgage Securities Trust | 500,000 | 536,840 | ||||||
|
| |||||||
TotalNon-Agency Commercial Mortgage-Backed Securities(cost $2,221,144) |
| 2,223,974 | ||||||
|
| |||||||
Sovereign Bonds – 1.18%D | ||||||||
Argentina – 0.02% | ||||||||
Argentine Republic Government International Bond | 229,000 | 99,915 | ||||||
|
| |||||||
99,915 | ||||||||
|
|
30 |
Table of Contents
Principal amount° | Value (US $) | |||||||||||
Sovereign BondsD(continued) | ||||||||||||
Azerbaijan – 0.12% | ||||||||||||
Republic of Azerbaijan International Bond 144A 3.50% 9/1/32 # | 625,000 | $ | 617,780 | |||||||||
|
| |||||||||||
617,780 | ||||||||||||
|
| |||||||||||
Dominican Republic – 0.05% | ||||||||||||
Dominican Republic International Bond 144A 6.00% 7/19/28 # | 250,000 | 273,527 | ||||||||||
|
| |||||||||||
273,527 | ||||||||||||
|
| |||||||||||
Egypt – 0.10% | ||||||||||||
Egypt Government International Bond 144A 8.70% 3/1/49 # | 466,000 | 502,253 | ||||||||||
|
| |||||||||||
502,253 | ||||||||||||
|
| |||||||||||
El Salvador – 0.10% | ||||||||||||
El Salvador Government International Bond 144A 7.125% 1/20/50 # | 505,000 | 513,906 | ||||||||||
|
| |||||||||||
513,906 | ||||||||||||
|
| |||||||||||
Georgia – 0.04% | ||||||||||||
Georgia Government International Bond 6.875% 4/12/21 | 200,000 | 210,992 | ||||||||||
|
| |||||||||||
210,992 | ||||||||||||
|
| |||||||||||
Guatemala – 0.04% | ||||||||||||
Guatemala Government Bond 144A 4.875% 2/13/28 # | 200,000 | 210,569 | ||||||||||
|
| |||||||||||
210,569 | ||||||||||||
|
| |||||||||||
Indonesia – 0.04% | ||||||||||||
Indonesia Government International Bond 144A 4.625% 4/15/43 # | 200,000 | 223,130 | ||||||||||
|
| |||||||||||
223,130 | ||||||||||||
|
| |||||||||||
Ivory Coast – 0.06% | ||||||||||||
Ivory Coast Government International Bond | ||||||||||||
144A 6.125% 6/15/33 # | 207,000 | 203,278 | ||||||||||
144A 6.875% 10/17/40 # | EUR | 100,000 | 112,069 | |||||||||
|
| |||||||||||
315,347 | ||||||||||||
|
| |||||||||||
Mongolia – 0.08% | ||||||||||||
Mongolia Government International Bond 144A 5.625% 5/1/23 # | 393,000 | 403,483 | ||||||||||
|
| |||||||||||
403,483 | ||||||||||||
|
| |||||||||||
Paraguay – 0.07% | ||||||||||||
Paraguay Government International Bond 144A 6.10% 8/11/44 # | 279,000 | 336,037 | ||||||||||
|
| |||||||||||
336,037 | ||||||||||||
|
| |||||||||||
Poland – 0.08% | ||||||||||||
Republic of Poland Government Bond 2.25% 4/25/22 | PLN | 1,524,000 | 396,025 | |||||||||
|
| |||||||||||
396,025 | ||||||||||||
|
|
31 |
Table of Contents
Schedule of investments | ||
Delaware Wealth Builder Fund |
Principal amount° | Value (US $) | |||||||||||
Sovereign BondsD(continued) | ||||||||||||
Qatar – 0.08% | ||||||||||||
Qatar Government International Bond 144A 4.00% 3/14/29 # | 367,000 | $ | 409,499 | |||||||||
|
| |||||||||||
409,499 | ||||||||||||
|
| |||||||||||
Romania – 0.04% | ||||||||||||
Romania Government Bond 4.40% 9/25/23 | RON | 855,000 | 200,707 | |||||||||
|
| |||||||||||
200,707 | ||||||||||||
|
| |||||||||||
Russia – 0.09% | ||||||||||||
Russian Foreign Bond - Eurobond 144A 4.25% 6/23/27 # | 400,000 | 434,800 | ||||||||||
|
| |||||||||||
434,800 | ||||||||||||
|
| |||||||||||
Ukraine – 0.12% | ||||||||||||
Ukraine Government International Bond 144A 7.75% 9/1/21 # | 584,000 | 612,085 | ||||||||||
|
| |||||||||||
612,085 | ||||||||||||
|
| |||||||||||
Uzbekistan – 0.05% | ||||||||||||
Republic of Uzbekistan Bond 144A 4.75% 2/20/24 # | 250,000 | 263,062 | ||||||||||
|
| |||||||||||
263,062 | ||||||||||||
|
| |||||||||||
Total Sovereign Bonds(cost $5,978,933) | 6,023,117 | |||||||||||
|
| |||||||||||
| ||||||||||||
Supranational Bank – 0.04% | ||||||||||||
Banque Ouest Africaine de Developpement 144A 4.70% 10/22/31 # | 202,000 | 204,009 | ||||||||||
|
| |||||||||||
Total Supranational Bank(cost $202,000) | 204,009 | |||||||||||
|
| |||||||||||
| ||||||||||||
US Treasury Obligations – 1.10% | ||||||||||||
US Treasury Floating Rate Note 1.786% (USBMMY3M + 0.22%) 7/31/21 • | 1,700,000 | 1,700,812 | ||||||||||
US Treasury Notes | ||||||||||||
1.50% 9/30/24 | 2,380,000 | 2,364,846 | ||||||||||
1.625% 8/15/29 | 1,255,000 | 1,236,641 | ||||||||||
2.00% 10/31/22 | 340,000 | 343,778 | ||||||||||
|
| |||||||||||
Total US Treasury Obligations(cost $5,664,693) | 5,646,077 | |||||||||||
|
| |||||||||||
Number of shares | ||||||||||||
Preferred Stock – 0.65% | ||||||||||||
Bank of America 6.50% µ | 440,000 | 498,615 | ||||||||||
GMAC Capital Trust I 7.695% (LIBOR03M + 5.79%) 2/15/40 • | 5,000 | 129,650 | ||||||||||
Pebblebrook Hotel Trust 6.375% | 46,295 | 1,165,708 | ||||||||||
Taubman Centers 6.50% | 37,077 | 939,902 | ||||||||||
Washington Prime Group 6.875% | 28,700 | 594,411 | ||||||||||
|
| |||||||||||
Total Preferred Stock(cost $3,286,620) | 3,328,286 | |||||||||||
|
|
32 |
Table of Contents
Number of shares | Value (US $) | |||||||
Rights – 0.00% | ||||||||
DISH Network † | 1,405 | $ | 955 | |||||
|
| |||||||
Total Rights(cost $0) | 955 | |||||||
|
| |||||||
| ||||||||
Short-Term Investments – 2.85% | ||||||||
Money Market Mutual Funds – 2.85% | ||||||||
BlackRock FedFund – Institutional Shares(seven-day effective yield 1.55%) | 2,916,048 | 2,916,048 | ||||||
Fidelity Investments Money Market Government Portfolio – Class I(seven-day effective yield 1.53%) | 2,916,048 | 2,916,048 | ||||||
GS Financial Square Government Fund – Institutional Shares(seven-day effective yield 1.54%) | 2,916,048 | 2,916,048 | ||||||
Morgan Stanley Government Portfolio – Institutional Share Class(seven-day effective yield 1.52%) | 2,916,048 | 2,916,048 | ||||||
State Street Institutional US Government Money Market Fund – Investor Class(seven-day effective yield 1.51%) | 2,916,048 | 2,916,048 | ||||||
|
| |||||||
Total Short-Term Investments(cost $14,580,240) | 14,580,240 | |||||||
|
| |||||||
Total Value of Securities – 99.30% | $ | 508,187,435 | ||||||
|
|
# | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At Nov. 30, 2019, the aggregate value of Rule 144A securities was $51,186,574, which represents 10.00% of the Fund’s net assets. See Note 12 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. |
= | The value of this security was determined using significant unobservable inputs and is reported as a Level 3 security in the disclosure table located in Note 3 in “Notes to financial statements.” |
° | Principal amount shown is stated in USD unless noted that the security is denominated in another currency. |
D | Securities have been classified by country of origin. |
µ | Fixed to variable rate investment. The rate shown reflects the fixed rate in effect at Nov. 30, 2019. Rate will reset at a future date. |
p | Restricted security. These investments are in securities not registered under the Securities Act of 1933, as amended, and have certain restrictions on resale which may limit their liquidity. At Nov. 30, 2019, the aggregate value of restricted securities was $7,830,543, which represented 1.53% of the Fund’s net assets. See table on the next page for additional details on restricted securities. |
y | No contractual maturity date. |
† | Non-income producing security. |
• | Variable rate investment. Rates reset periodically. Rate shown reflects the rate in effect at Nov. 30, 2019. For securities based on a published reference rate and spread, the reference rate and |
33 |
Table of Contents
Schedule of investments | ||
Delaware Wealth Builder Fund |
spread are indicated in their description above. The reference rate descriptions (i.e. LIBOR03M, LIBOR06M, etc.) used in this report are identical for different securities, but the underlying reference rates may differ due to the timing of the reset period. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions, or for mortgage-backed securities, are impacted by the individual mortgages which are paying off over time. These securities do not indicate a reference rate and spread in their description above.
Restricted Securities
Investments | Date of Acquisition | Cost | Value | |||||||||
Merion Champion’s Walk | 8/4/17 | $ | 2,260,169 | $ | 2,130,379 | |||||||
Merion Champion’s Walk | 2/13/18 | 58,625 | 55,258 | |||||||||
Merion Champion’s Walk | 7/11/18 | 61,395 | 55,258 | |||||||||
Merion Champion’s Walk | 10/22/18 | 62,331 | 55,258 | |||||||||
Merion Champion’s Walk | 2/13/19 | 63,244 | 55,259 | |||||||||
Merion Countryside | 5/11/16 | — | 1,677,649 | |||||||||
Merion Countryside | 4/7/17 | — | 136,025 | |||||||||
Merion Countryside | 5/3/18 | — | 75,570 | |||||||||
Merion The Ledges | 9/26/18 | 3,515,735 | 3,455,852 | |||||||||
Merion The Ledges | 9/12/19 | 145,357 | 134,035 | |||||||||
|
|
|
| |||||||||
Total | $ | 6,166,856 | $ | 7,830,543 | ||||||||
|
|
|
|
The following foreign currency exchange contracts, futures contracts and swap contracts were outstanding at Nov. 30, 2019:1
Foreign Currency Exchange Contracts
Counterparty | Contracts to Receive (Deliver) | In Exchange For | Settlement Date | Unrealized Appreciation | Unrealized Depreciation | |||||||||||||||||
BNYM | JPY | (355,677) | USD | 3,246 | 12/2/19 | $ | — | $ | (3 | ) | ||||||||||||
JPMCB | BRL | 852,453 | USD | (202,531) | 1/10/20 | — | (1,348 | ) | ||||||||||||||
JPMCB | EUR | (650,213) | USD | 722,630 | 1/10/20 | 3,845 | — | |||||||||||||||
JPMCB | ZAR | (24,277) | USD | 1,631 | 1/10/20 | — | (15 | ) | ||||||||||||||
JPMCB | ZAR | (2,976,218) | USD | 202,919 | 1/10/20 | 1,044 | — | |||||||||||||||
|
|
|
| |||||||||||||||||||
Total Foreign Currency Exchange Contracts |
| $ | 4,889 | $ | (1,366 | ) | ||||||||||||||||
|
|
|
|
34 |
Table of Contents
|
Futures Contracts
Contracts to Buy (Sell) | Notional Amount | Notional Cost (Proceeds) | Expiration Date | Value/ Unrealized Appreciation | Value/ Unrealized Depreciation | Variation Margin Due from (Due to) Brokers | ||||||||||||||||||||
E-mini S&P | ||||||||||||||||||||||||||
34 | 500 Index | $ | 5,344,290 | $ | 5,099,427 | 12/20/19 | $ | 244,863 | $ | — | $ | (17,170 | ) | |||||||||||||
US Treasury | ||||||||||||||||||||||||||
4 | 10 yr Notes | 517,438 | 518,135 | 3/20/20 | — | (697 | ) | (500 | ) | |||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||
Total Futures Contracts | $ | 5,617,562 | $ | 244,863 | $ | (697 | ) | $ | (17,670 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
Swap Contracts
CDS Contracts2
Reference Obligation/ | Notional | Annual Protection Payments | Value | Upfront | Unrealized Depreciation4 | Variation Margin Due from (Due to) Brokers | ||||||||||||||||||
Centrally Cleared/ | ||||||||||||||||||||||||
Protection Purchased: | ||||||||||||||||||||||||
CDX.NA.HY.335 | ||||||||||||||||||||||||
Quarterly | 11,000,000 | 5.00 | % | $ | (841,948) | $ | (647,554) | $ | (194,394) | $ | (309) |
The use of foreign currency exchange contracts, futures contracts and swap contracts involve elements of market risk and risks in excess of the amounts disclosed in these financial statements. The foreign currency exchange contracts and notional amounts presented above represent the Fund’s total exposure in such contracts, whereas only the net unrealized appreciation (depreciation) is reflected in the Fund’s net assets.
1See Note 9 in “Notes to financial statements.”
2A CDS contract is a risk-transfer instrument through which one party (purchaser of protection) transfers to another party (seller of protection) the financial risk of a credit event (as defined in the CDS agreement), as it relates to a particular reference security or basket of securities (such as an index). Periodic payments (receipts) on such contracts are accrued daily and recorded as unrealized losses (gains) on swap contracts. Upon payment (receipt), such amounts are recorded as 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 CDS agreement.
3Notional amount shown is stated in USD 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 aggregate amount of $(71,359).
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.
35 |
Table of Contents
Schedule of investments | ||
Delaware Wealth Builder Fund |
Summary of abbreviations:
AMT – Subject to Alternative Minimum Tax |
BB – Barclays Bank |
BNYM – The Bank of New York Mellon |
BRL – Brazilian Real |
CDS – Credit Default Swap |
CDX.NA.HY – Credit Default Swap Index North America High Yield |
ETF – Exchange-Traded Fund |
EUR – European Monetary Unit |
GS – Goldman Sachs |
ICE – Intercontinental Exchange |
JPM – JPMorgan |
JPMCB – JPMorgan Chase Bank, National Association |
JPY – Japanese Yen |
LIBOR – London Interbank Offered Rate |
LIBOR03M – ICE LIBOR USD 3 Month |
LIBOR06M – ICE LIBOR USD 6 Month |
PLN – Polish Zloty |
REIT – Real Estate Investment Trust |
RON – Romanian New Leu |
S&P – Standard & Poor’s |
S.F. – Single Family |
SPDR – S&P Depositary Receipts |
USBMMY3M – US Treasury 3 Month Bill Money Market Yield |
USD – US Dollar |
yr – Year |
ZAR – South African Rand |
See accompanying notes, which are an integral part of the financial statements.
36 |
Table of Contents
This page intentionally left blank.
Table of Contents
Statement of assets and liabilities | ||
Delaware Wealth Builder Fund | November 30, 2019 |
Assets: | ||||
Investments, at value1 | $508,187,435 | |||
Cash collateral due from broker | 643,959 | |||
Cash | 760,264 | |||
Foreign currencies, at value2 | 155,185 | |||
Dividends and interest receivable | 2,323,880 | |||
Receivable for securities sold | 936,040 | |||
Foreign tax reclaims receivable | 455,339 | |||
Receivable for fund shares sold | 122,006 | |||
Unrealized appreciation on foreign currency exchange contracts | 4,889 | |||
|
| |||
Total assets | 513,588,997 | |||
|
| |||
Liabilities: | ||||
Upfront payments received on centrally cleared credit default swap contracts | 647,554 | |||
Investment management fees payable to affiliates | 273,968 | |||
Payable for fund shares redeemed | 245,699 | |||
Payable for securities purchased | 191,237 | |||
Distribution fees payable to affiliates | 133,453 | |||
Other accrued expenses | 125,214 | |||
Swap payments payable | 110,000 | |||
Dividend disbursing and transfer agent fees and expenses payable tonon-affiliates | 67,673 | |||
Variation margin due to broker on futures contracts | 17,670 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 3,649 | |||
Accounting and administration expenses payable to affiliates | 1,733 | |||
Unrealized depreciation on foreign currency exchange contracts | 1,366 | |||
Legal fees payable to affiliates | 914 | |||
Variation margin due to broker on centrally cleared credit default swap contracts | 309 | |||
Reports and statements to shareholders expenses payable to affiliates | 293 | |||
Trustees’ fees and expenses payable | 8 | |||
|
| |||
Total liabilities | 1,820,740 | |||
|
| |||
Total Net Assets | $511,768,257 | |||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $486,227,072 | |||
Total distributable earnings (loss) | 25,541,185 | |||
|
| |||
Total Net Assets | $511,768,257 | |||
|
|
38 |
Table of Contents
| ||
|
Net Asset Value | ||||
Class A: | ||||
Net assets | $ | 259,283,299 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 18,502,556 | |||
Net asset value per share | $ | 14.01 | ||
Sales charge | 5.75 | % | ||
Offering price per share, equal to net asset value per share / (1 – sales charge) | $ | 14.86 | ||
Class C: | ||||
Net assets | $ | 95,672,306 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 6,813,179 | |||
Net asset value per share | $ | 14.04 | ||
Class R: | ||||
Net assets | $ | 1,288,319 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 91,911 | |||
Net asset value per share | $ | 14.02 | ||
Institutional Class: | ||||
Net assets | $ | 155,524,333 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 11,101,502 | |||
Net asset value per share | $ | 14.01 | ||
| ||||
1Investments, at cost | $ | 487,350,176 | ||
2Foreign currencies, at cost | 157,993 |
See accompanying notes, which are an integral part of the financial statements.
39 |
Table of Contents
Statement of operations | ||
Delaware Wealth Builder Fund | Year ended November 30, 2019 |
Investment Income: | ||||
Interest | $ | 15,567,599 | ||
Dividends | 11,423,154 | |||
Foreign tax withheld | (134,069 | ) | ||
|
| |||
26,856,684 | ||||
|
| |||
Expenses: | ||||
Management fees | 3,469,572 | |||
Distribution expenses – Class A | 644,255 | |||
Distribution expenses – Class C | 1,156,240 | |||
Distribution expenses – Class R | 8,272 | |||
Dividend disbursing and transfer agent fees and expenses | 504,261 | |||
Accounting and administration expenses | 136,956 | |||
Reports and statements to shareholders expenses | 91,805 | |||
Registration fees | 69,403 | |||
Audit and tax fees | 65,053 | |||
Legal fees | 50,635 | |||
Custodian fees | 36,276 | |||
Trustees’ fees and expenses | 31,710 | |||
Other | 71,108 | |||
|
| |||
6,335,546 | ||||
Less expenses paid indirectly | (5,227 | ) | ||
|
| |||
Total operating expenses | 6,330,319 | |||
|
| |||
Net Investment Income | 20,526,365 | |||
|
|
40 |
Table of Contents
| ||
|
|
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments* | $ | 2,509,064 | ||
Foreign currencies | (37,051 | ) | ||
Foreign currency exchange contracts | 4,196 | |||
Futures contracts | (731,135 | ) | ||
Options written | 1,323,273 | |||
Swap contracts | (240,936 | ) | ||
|
| |||
Net realized gain | 2,827,411 | |||
|
| |||
Net change in unrealized appreciation (depreciation) of: | ||||
Investments | 16,630,263 | |||
Foreign currencies | (6,089 | ) | ||
Foreign currency exchange contracts | 3,547 | |||
Futures contracts | 210,682 | |||
Swap contracts | (303,531 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) | 16,534,872 | |||
|
| |||
Net Realized and Unrealized Gain | 19,362,283 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 39,888,648 | ||
|
|
*Includes $631,076 related to the General Motors term loan litigation. See Note 14 in “Notes to financial statements.”
See accompanying notes, which are an integral part of the financial statements.
41 |
Table of Contents
Statements of changes in net assets | ||
Delaware Wealth Builder Fund |
Year ended | ||||||||
11/30/19 | 11/30/18 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 20,526,365 | $ | 15,203,067 | ||||
Net realized gain | 2,827,411 | 32,211,435 | ||||||
Net change in unrealized appreciation (depreciation) | 16,534,872 | (51,994,176 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | 39,888,648 | (4,579,674 | ) | |||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Distributable earnings: | ||||||||
Class A | (22,227,219 | ) | (7,546,199 | ) | ||||
Class C | (9,875,532 | ) | (3,570,496 | ) | ||||
Class R | (152,030 | ) | (67,220 | ) | ||||
Institutional Class | (15,088,656 | ) | (5,777,766 | ) | ||||
|
|
|
| |||||
(47,343,437 | ) | (16,961,681 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Class A | 26,721,168 | 58,772,382 | ||||||
Class C | 6,055,876 | 6,019,571 | ||||||
Class R | 180,663 | 744,682 | ||||||
Institutional Class | 22,726,766 | 49,348,771 | ||||||
Net assets from merger:* | ||||||||
Class A | — | 34,209,151 | ||||||
Class C | — | 10,597,997 | ||||||
Class R | — | 1,907,750 | ||||||
Institutional Class | — | 4,798,603 |
42 |
Table of Contents
| ||
|
|
Year ended | ||||||||
11/30/19 | 11/30/18 | |||||||
Capital Share Transactions (continued): | ||||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | $ | 21,081,563 | $ | 7,101,684 | ||||
Class C | 9,359,325 | 3,383,522 | ||||||
Class R | 151,066 | 72,796 | ||||||
Institutional Class | 13,671,291 | 5,187,021 | ||||||
|
|
|
| |||||
99,947,718 | 182,143,930 | |||||||
|
|
|
| |||||
Cost of shares redeemed: | ||||||||
Class A | (59,772,304 | ) | (73,756,847 | ) | ||||
Class C | (54,997,396 | ) | (102,200,279 | ) | ||||
Class R | (979,678 | ) | (2,999,542 | ) | ||||
Institutional Class | (63,450,417 | ) | (68,536,803 | ) | ||||
|
|
|
| |||||
(179,199,795 | ) | (247,493,471 | ) | |||||
|
|
|
| |||||
Decrease in net assets derived from capital share transactions | (79,252,077 | ) | (65,349,541 | ) | ||||
|
|
|
| |||||
Net Decrease in Net Assets | (86,706,866 | ) | (86,890,896 | ) | ||||
Net Assets: | ||||||||
Beginning of year | 598,475,123 | 685,366,019 | ||||||
|
|
|
| |||||
End of year | $ | 511,768,257 | $ | 598,475,123 | ||||
|
|
|
|
*See Note 7 in “Notes to financial statements.”
See accompanying notes, which are an integral part of the financial statements.
43 |
Table of Contents
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 income1 |
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 return2 |
|
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets4,5 |
Ratio of net investment income to average net assets6 |
Portfolio turnover |
|
|
1 | The average shares outstanding method has been applied for per share information. |
2 | Total 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. |
3 | General Motors term loan litigation was included in total return. If excluded, the impact on the total return would be 0.11% lower. See Note 14 in “Notes to financial statements.” |
4 | Expense ratios do not include expenses of the Underlying Funds in which the Fund invests. |
5 | The ratios of expenses to average net assets excluding interest expense and dividend expense for the years ended Nov. 30, 2018, 2017, and 2016 were 1.09%, 1.09%, and 1.12%, respectively. |
6 | The ratios of net investment income to average net assets excluding interest expense and dividend expense for the years ended Nov. 30, 2018, 2017, and 2016 were 2.40%, 2.51%, and 2.05%, respectively. |
See accompanying notes, which are an integral part of the financial statements.
44 |
Table of Contents
Year ended | ||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
11/30/19 | 11/30/18 | 11/30/17 | 11/30/16 | 11/30/15 | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||
$ | 14.15 | $ | 14.62 | $ | 13.64 | $ | 13.16 | $ | 13.73 | |||||||||||||||||||
| ||||||||||||||||||||||||||||
0.53 | 0.35 | 0.36 | 0.27 | 0.32 | ||||||||||||||||||||||||
0.50 | (0.43 | ) | 0.98 | 0.52 | (0.58 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
1.03 | (0.08 | ) | 1.34 | 0.79 | (0.26 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
| ||||||||||||||||||||||||||||
(0.35 | ) | (0.34 | ) | (0.36 | ) | (0.31 | ) | (0.31 | ) | |||||||||||||||||||
(0.82 | ) | (0.05 | ) | — | — | — | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(1.17 | ) | (0.39 | ) | (0.36 | ) | (0.31 | ) | (0.31 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
$ | 14.01 | $ | 14.15 | $ | 14.62 | $ | 13.64 | $ | 13.16 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
| ||||||||||||||||||||||||||||
8.30% | 3 | (0.56% | ) | 9.90% | 6.11% | (1.91% | ) | |||||||||||||||||||||
| ||||||||||||||||||||||||||||
$ | 259,283 | $ | 273,384 | $ | 256,157 | $ | 270,324 | $ | 291,876 | |||||||||||||||||||
1.09% | 1.09% | 1.09% | 1.13% | 1.10% | ||||||||||||||||||||||||
3.91% | 2.41% | 2.51% | 2.04% | 2.38% | ||||||||||||||||||||||||
91% | 57% | 81% | 102% | 67% | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||
|
45 |
Table of Contents
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 income1 |
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 return2 |
|
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets4,5 |
Ratio of net investment income to average net assets6 |
Portfolio turnover |
|
|
1 | The average shares outstanding method has been applied for per share information. |
2 | Total 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. |
3 | General Motors term loan litigation was included in total return. If excluded, the impact on the total return would be 0.11% lower. See Note 14 in “Notes to financial statements.” |
4 | Expense ratios do not include expenses of the Underlying Funds in which the Fund invests. |
5 | The ratios of expenses to average net assets excluding interest expense and dividend expense for the years ended Nov. 30, 2018, 2017, and 2016 were 1.84%, 1.84%, and 1.87%, respectively. |
6 | The ratios of net investment income to average net assets excluding interest expense and dividend expense for the years ended Nov. 30, 2018, 2017, and 2016 were 1.65%, 1.76%, and 1.30%, respectively. |
See accompanying notes, which are an integral part of the financial statements.
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11/30/19 | 11/30/18 | 11/30/17 | 11/30/16 | 11/30/15 | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||
$ | 14.18 | $ | 14.65 | $ | 13.66 | $ | 13.18 | $ | 13.75 | |||||||||||||||||||
| ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||
0.43 | 0.24 | 0.25 | 0.17 | 0.22 | ||||||||||||||||||||||||
0.49 | (0.43 | ) | 0.99 | 0.52 | (0.58 | ) | ||||||||||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||||||||||
0.92 | (0.19 | ) | 1.24 | 0.69 | (0.36 | ) | ||||||||||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||||||||||
| ||||||||||||||||||||||||||||
(0.24 | ) | (0.23 | ) | (0.25 | ) | (0.21 | ) | (0.21 | ) | |||||||||||||||||||
(0.82 | ) | (0.05 | ) | — | — | — | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(1.06 | ) | (0.28 | ) | (0.25 | ) | (0.21 | ) | (0.21 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
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| |||||||||||||||||||
$ | 14.04 | $ | 14.18 | $ | 14.65 | $ | 13.66 | $ | 13.18 | |||||||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||||||||||
| ||||||||||||||||||||||||||||
7.46% | 3 | (1.34% | ) | 9.13% | 5.30% | (2.63% | ) | |||||||||||||||||||||
| ||||||||||||||||||||||||||||
$ | 95,672 | $ | 137,403 | $ | 225,604 | $ | 283,243 | $ | 298,833 | |||||||||||||||||||
1.84% | 1.84% | 1.84% | 1.88% | 1.85% | ||||||||||||||||||||||||
3.17% | 1.66% | 1.76% | 1.29% | 1.63% | ||||||||||||||||||||||||
91% | 57% | 81% | 102% | 67% | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||
|
47 |
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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 income1 |
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 return2 |
|
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets4,5 |
Ratio of net investment income to average net assets6 |
Portfolio turnover |
|
|
1 | The average shares outstanding method has been applied for per share information. |
2 | Total return is based on the change in a net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. |
3 | General Motors term loan litigation was included in total return. If excluded, the impact on the total return would be 0.11% lower. See Note 14 in “Notes to financial statements.” |
4 | Expense ratios do not include expenses of the Underlying Funds in which the Fund invests. |
5 | The ratios of expenses to average net assets excluding interest expense and dividend expense for the years ended Nov. 30, 2018, 2017, and 2016 were 1.34%, 1.34%, and 1.37%, respectively. |
6 | The ratios of net investment income to average net assets excluding interest expense and dividend expense for the years ended Nov. 30, 2018, 2017, and 2016 were 2.15%, 2.26%, and 1.80%, respectively. |
See accompanying notes, which are an integral part of the financial statements.
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Year ended | ||||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||
11/30/19 | 11/30/18 | 11/30/17 | 11/30/16 | 11/30/15 | ||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||
$ | 14.16 | $ | 14.62 | $ | 13.63 | $ | 13.16 | $ | 13.73 | |||||||||||||||||||||||||||||
0.49 | 0.31 | 0.32 | 0.24 | 0.29 | ||||||||||||||||||||||||||||||||||
0.50 | (0.42 | ) | 0.99 | 0.51 | (0.58 | ) | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
0.99 | (0.11 | ) | 1.31 | 0.75 | (0.29 | ) | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
(0.31 | ) | (0.30 | ) | (0.32 | ) | (0.28 | ) | (0.28 | ) | |||||||||||||||||||||||||||||
(0.82 | ) | (0.05 | ) | — | — | — | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
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| |||||||||||||||||||||||||||||
(1.13 | ) | (0.35 | ) | (0.32 | ) | (0.28 | ) | (0.28 | ) | |||||||||||||||||||||||||||||
|
|
|
|
|
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| |||||||||||||||||||||||||||||
$ | 14.02 | $ | 14.16 | $ | 14.62 | $ | 13.63 | $ | 13.16 | |||||||||||||||||||||||||||||
|
|
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|
|
|
|
|
|
| |||||||||||||||||||||||||||||
8.02% | 3 | (0.78% | ) | 9.70% | 5.76% | (2.15% | ) | |||||||||||||||||||||||||||||||
$ | 1,288 | $ | 1,968 | $ | 2,320 | $ | 3,229 | $ | 3,682 | |||||||||||||||||||||||||||||
1.34% | 1.34% | 1.34% | 1.38% | 1.35% | ||||||||||||||||||||||||||||||||||
3.66% | 2.16% | 2.26% | 1.79% | 2.13% | ||||||||||||||||||||||||||||||||||
91% | 57% | 81% | 102% | 67% | ||||||||||||||||||||||||||||||||||
|
|
49 |
Table of Contents
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 income1 |
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 return2 |
|
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets4,5 |
Ratio of net investment income to average net assets6 |
Portfolio turnover |
|
|
1 | The average shares outstanding method has been applied for per share information. |
2 | Total 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. |
3 | General Motors term loan litigation was included in total return. If excluded, the impact on the total return would be 0.11% lower. See Note 14 in “Notes to financial statements.” |
4 | Expense ratios do not include expenses of the Underlying Funds in which the Fund invests. |
5 | The ratios of expenses to average net assets excluding interest expense and dividend expense for the years ended Nov. 30, 2018, 2017, and 2016 were 0.84%, 0.84%, and 0.87%, respectively. |
6 | The ratios of net investment income to average net assets excluding interest expense and dividend expense for the years ended Nov. 30, 2018, 2017, and 2016 were 2.65%, 2.76%, and 2.30%, respectively. |
See accompanying notes, which are an integral part of the financial statements.
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Year ended | ||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||
11/30/19 | 11/30/18 | 11/30/17 | 11/30/16 | 11/30/15 | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||
$ | 14.15 | $ | 14.63 | $ | 13.64 | $ | 13.16 | $ | 13.73 | |||||||||||||||||||
| ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||
0.56 | 0.38 | 0.39 | 0.30 | 0.36 | ||||||||||||||||||||||||
0.50 | (0.43 | ) | 0.99 | 0.52 | (0.58 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
1.06 | (0.05 | ) | 1.38 | 0.82 | (0.22 | ) | ||||||||||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||||||||||
(0.38 | ) | (0.38 | ) | (0.39 | ) | (0.34 | ) | (0.35 | ) | |||||||||||||||||||
(0.82 | ) | (0.05 | ) | — | — | — | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
| (1.20 | ) | (0.43 | ) | (0.39 | ) | (0.34 | ) | (0.35 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
| ||||||||||||||||||||||||||||
| $ | 14.01 | $ | 14.15 | $ | 14.63 | $ | 13.64 | $ | 13.16 | ||||||||||||||||||
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|
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8.59% | 3 | (0.37% | ) | 10.24% | 6.37% | (1.66% | ) | |||||||||||||||||||||
| ||||||||||||||||||||||||||||
$ | 155,525 | $ | 185,720 | $ | 201,285 | $ | 149,830 | $ | 147,133 | |||||||||||||||||||
0.84% | 0.84% | 0.84% | 0.88% | 0.85% | ||||||||||||||||||||||||
4.16% | 2.66% | 2.76% | 2.29% | 2.63% | ||||||||||||||||||||||||
91% | 57% | 81% | 102% | 67% | ||||||||||||||||||||||||
|
51 |
Table of Contents
Notes to financial statements | ||
Delaware Wealth Builder Fund | November 30, 2019 |
Delaware Group® Equity Funds V (Trust) is organized as a Delaware statutory trust and offers three series: Delaware Wealth Builder 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 Fund is anopen-end investment company. The Fund is considered diversified under the Investment Company Act of 1940, as amended (1940 Act), and offers Class A, Class C, Class R, and Institutional Class shares. Class A shares are sold with a maximumfront-end sales charge of 5.75%. Class A share purchases of $1,000,000 or more will incur a contingent deferred sales charge (CDSC), instead of afront-end sales charge, 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%, which will be incurred 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 Fund follows accounting and reporting guidance under Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services – Investment Companies. The following accounting policies are in accordance with US generally accepted accounting principles (US 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. Investments in repurchase agreements are generally valued at par, which approximates fair value, each business day. Other debt securities and credit default swap 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. US 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 US 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
52 |
Table of Contents
settlement date of the contract is an interim date for which quotations are not available. Futures contracts are valued at the daily quoted settlement prices.Open-end investment companies are valued at their published net asset value (NAV). 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. The Fund may use fair value pricing more frequently for securities traded primarily innon-US markets because, among other things, most foreign markets close well before the Fund values its securities, generally as of 4:00pm 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). Restricted securities are valued at fair value using methods approved by the Board.
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 or expected to be taken on the Fund’s federal income tax returns through the year ended Nov. 30, 2019 and for all open tax years (years ended Nov. 30, 2016–Nov. 30, 2018), 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. If applicable, the Fund recognizes interest accrued on unrecognized tax benefits in interest expense and penalties in “Other expenses” on the “Statement of operations.” During the year ended Nov. 30, 2019, the Fund did not incur any interest or tax penalties.
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.
Underlying Funds– The Fund may invest in other investment companies (Underlying Funds) to the extent permitted by the 1940 Act. The Underlying Funds in which the Fund invests include ETFs. The Fund will indirectly bear the investment management fees and other expenses of the Underlying Funds.
Repurchase Agreements– The Fund may purchase certain US 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-partysub-custodian. In the event of default or bankruptcy by the other party to the agreement,
53 |
Table of Contents
Notes to financial statements | ||
Delaware Wealth Builder Fund |
1. Significant Accounting Policies (continued)
retention of the collateral may be subject to legal proceedings. At Nov. 30, 2019, the Fund held no investments in repurchase agreements.
Foreign Currency Transactions– Transactions denominated in foreign currencies are recorded at the prevailing exchange rates on the valuation date in accordance with the Fund’s prospectus. The value of all assets and liabilities denominated in foreign currencies is translated daily into US dollars at the exchange rate of such currencies against the US 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), which is due to changes in foreign exchange rates, 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 preparation of financial statements in conformity with US 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 Funds® by Macquarie (Delaware Funds) are generally allocated among such funds on the basis of average net assets. Management fees and certain 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 theex-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 theex-dividend date, subject to reclassification upon notice of the character of such distributions by the issuer. Distributions received from investments in master limited partnerships are recorded as return of capital on investments. Foreign dividends are also recorded on theex-dividend date or as soon after theex-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 distribute more frequently, if necessary for tax purposes. Dividends and distributions, if any, are recorded on theex-dividend date.
54 |
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| ||
|
The Fund receives earnings credits from its custodian when positive cash balances are maintained, which may be used to offset custody fees. The expenses paid under this arrangement are included on the “Statement of operations” under “Custodian fees” with the corresponding expenses offset included under “Less expenses paid indirectly.” For the year ended Nov. 30, 2019, the Fund earned $4,452 under this arrangement.
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 $1, the expenses paid under this arrangement are included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses” with the corresponding expenses offset included under “Less expenses paid indirectly.” For the year ended Nov. 30, 2019, the Fund earned $775 under this arrangement.
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 Macquarie Investment Management Business Trust and the investment manager, an annual fee which is calculated daily and paid monthly at the rates 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.
Effective May 30, 2019, DMC may seek investment advice and recommendations from its affiliates: Macquarie Investment Management Europe Limited, Macquarie Investment Management Austria Kapitalanlage AG, and Macquarie investment Management Global Limited (MIMGL) (together, the “AffiliatedSub-Advisors”). The Manager may also permit these AffiliatedSub-Advisors to execute Fund security trades on behalf of the Manager and exercise investment discretion for securities in certain markets where DMC believes it will be beneficial to utilize an AffiliatedSub-Advisor’s specialized market knowledge. DMC may permit its affiliates, MIMGL and Macquarie Funds Management Hong Kong Limited, to execute Fund security trades on behalf of the Manager. DMC may also seek quantitative support from MIMGL. Although the AffiliatedSub-Advisors serve assub-advisors, DMC has ultimate responsibility for all investment advisory services. For these services, DMC, not the Fund, pays each AffiliatedSub-Advisor a portion of its investment management fee.
55 |
Table of Contents
Notes to financial statements | ||
Delaware Wealth Builder Fund |
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates (continued)
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 daily and paid monthly based on the aggregate daily net assets of all funds within the Delaware Funds at the following annual rates: 0.00475% of the first $35 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $45 billion (Total Fee). Each fund in the Delaware Funds pays a minimum of $4,000, which, in aggregate, is subtracted from the Total Fee. Each fund then pays its portion of the remainder of the Total Fee on a relative NAV basis. This amount is included on the “Statement of operations” under “Accounting and administration expenses.” For the year ended Nov. 30, 2019, the Fund was charged $23,939 for these services.
DIFSC is also the transfer agent and dividend disbursing agent of the Fund. For these services, DIFSC’s fees were calculated daily and paid monthly based on the aggregate daily net assets of the retail funds within the Delaware Funds at the following annual rates: 0.014% of the first $20 billion; 0.011% of the next $5 billion; 0.007% of the next $5 billion; 0.005% of the next $20 billion; and 0.0025% of average daily net assets in excess of $50 billion. The fees payable to DIFSC under the shareholder services agreement described above are allocated among all retail funds in the Delaware Funds on a relative NAV basis. This amount is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.” For the year ended Nov. 30, 2019, the Fund was charged $52,219 for these services.
Pursuant to asub-transfer agency agreement between DIFSC and BNY Mellon Investment Servicing (US) Inc. (BNYMIS), BNYMIS provides certainsub-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.” The fees that are calculated daily and paid as invoices are received on a monthly or quarterly basis.
Pursuant to a distribution agreement and distribution plan, the Fund pays DDLP, the distributor and an affiliate of DMC, annual12b-1 fees of 0.25%, 1.00%, and 0.50% of the average daily net assets of the Class A, Class C, and Class R shares, respectively. These fees are calculated daily and paid monthly. Institutional Class shares do not pay12b-1 fees.
As provided in the investment management agreement, the Fund bears a portion of the cost of certain resources shared with DMC, including the cost of internal personnel of DMC and/or its affiliates that provide legal, tax, and regulatory reporting services to the Fund. For the year ended Nov. 30, 2019, the Fund was charged $17,027 for internal legal, tax, and regulatory reporting services provided by DMC and/or its affiliates’ employees. This amount is included on the “Statement of operations” under “Legal fees.”
For the year ended Nov. 30, 2019, DDLP earned $18,557 for commissions on sales of the Fund’s Class A shares. For the year ended Nov. 30, 2019, DDLP received gross CDSC commissions of $685 and $2,671 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.
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|
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.
In addition to the management fees and other expenses of the Fund, the Fund indirectly bears the investment management fees and other expenses of the investment companies (Underlying Funds) in which it invests. The amount of these fees and expenses incurred indirectly by the Fund will vary based upon the expense and fee levels of the Underlying Funds and the number of shares that are owned of the Underlying Funds at different times.
3. Investments
For the year ended Nov. 30, 2019, the Fund made purchases and sales of investment securities other than US government securities and short-term investments as follows:
Purchases other than US government securities | $ | 431,016,205 | ||
Purchases of US government securities | 38,314,651 | |||
Sales other than US government securities | 538,045,713 | |||
Sales of US government securities | 31,664,109 |
The tax cost of investments includes adjustments to net unrealized appreciation (depreciation) which may not necessarily be final tax cost basis adjustments, but approximate the tax basis unrealized gains and losses that may be realized and distributed to shareholders. At Nov. 30, 2019, the cost and unrealized appreciation (depreciation) of investments and derivatives for federal income tax purposes for the Fund were as follows:
Cost of investments and derivatives | $ | 491,076,752 | ||
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| |||
Aggregate unrealized appreciation of investments and derivatives | $ | 34,338,460 | ||
Aggregate unrealized depreciation of investments and derivatives | (17,174,482 | ) | ||
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| |||
Net unrealized appreciation of investments and derivatives | $ | 17,163,978 | ||
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|
US 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 and on the next page.
Level 1 – | Inputs are quoted prices in active markets for identical investments. (Examples: equity securities,open-end investment companies, futures contracts, and exchange-traded options contracts) |
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Notes to financial statements | ||
Delaware Wealth Builder Fund |
3. Investments (continued)
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, and 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 and 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.
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The table below and on the following page summarizes the valuation of the Fund’s investments by fair value hierarchy levels as of Nov. 30, 2019:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Securities | ||||||||||||||||
Assets: | ||||||||||||||||
Common Stock | $ | 309,380,407 | $ | — | $ | — | $ | 309,380,407 | ||||||||
Exchange-Traded Funds | 6,111,332 | — | — | 6,111,332 | ||||||||||||
Limited Partnerships | — | — | 7,830,543 | 7,830,543 | ||||||||||||
Convertible Preferred Stock1 | 6,153,761 | 3,599,104 | — | 9,752,865 | ||||||||||||
Corporate Debt | — | 105,606,499 | — | 105,606,499 | ||||||||||||
LeveragedNon-Recourse Security | — | — | 1,300 | 1,300 | ||||||||||||
Municipal Bonds | — | 31,295,395 | — | 31,295,395 | ||||||||||||
Agency, Asset-Backed and Mortgage-Backed Securities | — | 6,058,256 | — | 6,058,256 | ||||||||||||
Foreign Debt | — | 6,227,126 | — | 6,227,126 | ||||||||||||
US Treasury Obligations | — | 5,646,077 | — | 5,646,077 | ||||||||||||
Preferred Stock1 | 2,829,671 | 498,615 | — | 3,328,286 | ||||||||||||
Rights | 955 | — | — | 955 | ||||||||||||
Closed End Fund | 2,368,154 | — | — | 2,368,154 | ||||||||||||
Short-Term Investments | 14,580,240 | — | — | 14,580,240 | ||||||||||||
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Total Value of Securities | $ | 341,424,520 | $ | 158,931,072 | $ | 7,831,843 | $ | 508,187,435 | ||||||||
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Derivatives2 | ||||||||||||||||
Assets: | ||||||||||||||||
Foreign Currency Exchange Contracts | $ | — | $ | 4,889 | $ | — | $ | 4,889 | ||||||||
Futures Contracts | 244,863 | — | — | 244,863 | ||||||||||||
Liabilities: | ||||||||||||||||
Foreign Currency Exchange Contracts | $ | — | $ | (1,366 | ) | $ | — | $ | (1,366 | ) | ||||||
Futures Contracts | (697 | ) | — | — | (697 | ) | ||||||||||
Swap Contracts | — | (194,394 | ) | — | (194,394 | ) |
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Notes to financial statements | ||
Delaware Wealth Builder Fund |
3. Investments (continued)
1Security type is valued across multiple levels. Level 1 investments represent exchange-traded investments, Level 2 investments represent investments with observable inputs or matrix-priced 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 value of these security types:
Level 1 | Level 2 | Total | ||||||||||
Convertible Preferred Stock | 63.10 | % | 36.90 | % | 100.00 | % | ||||||
Preferred Stock | 85.02 | % | 14.98 | % | 100.00 | % |
2Futures contracts and swap contracts are valued at the unrealized appreciation (depreciation) on the instrument at the year end.
The securities that have been valued at zero on the “Schedule of investments” are considered to be Level 3 investments in this table.
During the year ended Nov. 30, 2019, 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 based on fair value 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.
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The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value for the Fund:
Limited Partnerships | Leveraged Non- Recourse Security | Loan Agreements | Total | |||||||||||||||||||||||||||
Beginning balance Nov. 30, 2018 | $ 9,669,138 | $ | — | $ | 20,183 | $ | 9,689,321 | |||||||||||||||||||||||
Purchases | 213,801 | — | — | 213,801 | ||||||||||||||||||||||||||
Sales | — | — | (20,368 | ) | (20,368 | ) | ||||||||||||||||||||||||
Return of Capital | (2,223,888 | ) | — | — | (2,223,888 | ) | ||||||||||||||||||||||||
Net realized loss | — | — | (945 | ) | (945 | ) | ||||||||||||||||||||||||
Net change in unrealized appreciation (depreciation) | 171,492 | 1,300 | 1,130 | 173,922 | ||||||||||||||||||||||||||
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Ending balance Nov. 30, 2019 | $ 7,830,543 | $ | 1,300 | $ | — | $ | 7,831,843 | |||||||||||||||||||||||
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Net change in unrealized appreciation from investments still held at the end of the year | $ 171,492 | $ | 1,300 | $ | — | $ | 172,792 | |||||||||||||||||||||||
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When market quotations are not readily available for one or more portfolio securities, the Fund’s NAV shall be calculated by using the “fair value” of the securities as determined by the Pricing Committee. Such “fair value” is the amount that the Fund might reasonably expect to receive for the security (or asset) upon its current sale. Each such determination should be based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples of such factors may include, but are not limited to: (i) the type of security, (ii) the size of the holding, (iii) the initial cost of the security, (iv) the existence of any contractual restrictions of the security’s disposition, (v) the price and extent of public trading in similar securities of the issuer or of comparable companies, (vi) quotations or evaluated prices from broker/dealers and/or pricing services, (vii) information obtained from the issuer, analysts, and/or appropriate stock exchange (for exchange-traded securities), (viii) an analysis of the company’s financial statements, and (ix) an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold.
The Pricing Committee, or its delegate, employs various methods for calibrating these valuation approaches, including due diligence of the Fund’s pricing vendors and periodic back-testing of the prices that are fair valued under these procedures and reviews of any market related activity. The pricing of all securities fair valued by the Pricing Committee is subsequently reported to and approved by the Board on a quarterly basis.
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Notes to financial statements | ||
Delaware Wealth Builder Fund |
3. Investments (continued)
Quantitative information about Level 3 fair value measurements for the Fund are as follows:
Assets | Value | Valuation Techniques | Unobservable Inputs | |||||
Limited Partnership | $7,830,543 | Market cap rate method | Trailing 12 months NOI, adjusted for assets and liabilities; liquidity discount | |||||
Leverage | ||||||||
Non-Recourse Security | 1,300 | Valued by 3rd party | Unadjusted price provided by 3rd party | |||||
Total | $7,831,843 |
A significant change to the inputs may result in a significant change to the valuation.
4. Dividend and Distribution Information
Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP. Additionally, distributions from net gains on foreign currency transactions and net short-term gains on sales of investment securities are treated as ordinary income for federal income tax purposes. The tax character of dividends and distributions paid during the years ended Nov. 30, 2019 and 2018 were as follows:
Year ended | ||||||||
11/30/19 | 11/30/18 | |||||||
Ordinary income | $ | 14,605,108 | $ | 14,654,949 | ||||
Long-term capital gain | 32,738,329 | 2,306,732 | ||||||
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| |||||
Total | $ | 47,343,437 | $ | 16,961,681 | ||||
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5. Components of Net Assets on a Tax Basis
As of Nov. 30, 2019, the components of net assets on a tax basis were as follows:
Shares of beneficial interest | $ | 486,227,072 | ||
Undistributed ordinary income | 5,553,957 | |||
Undistributed long-term capital gains | 2,823,250 | |||
Net unrealized appreciation of investments, foreign currencies, and derivatives | 17,163,978 | |||
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| |||
Net assets | $ | 511,768,257 | ||
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The differences between book basis and tax basis components of net assets are primarily attributable to tax deferral of losses on wash sales,mark-to-market on forward currency contracts, tax treatment of contingent payment on debt instruments, partnership income, trust preferred securities, market discount and premium on debt instruments,mark-to-market on futures and CDS contracts, and deemed dividend income.
For financial reporting purposes, capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Reclassifications are primarily due to tax treatment of gain (loss) on foreign currency transactions, market discount and premium on certain debt instruments, CDS contracts,
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contingent payment debt instruments, deemed dividend income, and partnership expenses. Results of operations and net assets were not affected by these reclassifications. For the year ended Nov. 30, 2019, the Fund recorded the following reclassifications:
Distributable earnings | $ | 685 | ||
Paid-in capital | (685 | ) |
6. Capital Shares
Transactions in capital shares were as follows:
Year ended | ||||||||
11/30/19 | 11/30/18 | |||||||
Shares sold: | ||||||||
Class A | 1,964,437 | 4,082,871 | ||||||
Class C | 450,690 | 414,960 | ||||||
Class R | 13,428 | 51,084 | ||||||
Institutional Class | 1,688,057 | 3,412,530 | ||||||
Shares from merger: | ||||||||
Class A | — | 2,344,699 | ||||||
Class C | — | 725,393 | ||||||
Class R | — | 130,757 | ||||||
Institutional Class | — | 328,897 | ||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | 1,666,341 | 494,157 | ||||||
Class C | 744,080 | 234,968 | ||||||
Class R | 11,990 | 5,054 | ||||||
Institutional Class | 1,080,956 | 360,758 | ||||||
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7,619,979 | 12,586,128 | |||||||
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Shares redeemed: | ||||||||
Class A | (4,444,226 | ) | (5,120,956 | ) | ||||
Class C | (4,072,093 | ) | (7,087,765 | ) | ||||
Class R | (72,569 | ) | (206,501 | ) | ||||
Institutional Class | (4,791,380 | ) | (4,741,179 | ) | ||||
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(13,380,268 | ) | (17,156,401 | ) | |||||
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| |||||
Net decrease | (5,760,289 | ) | (4,570,273 | ) | ||||
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Notes to financial statements | ||
Delaware Wealth Builder Fund |
|
6. Capital Shares (continued)
Certain shareholders may exchange shares of one class for shares of another class in the same Fund. These exchange transactions are included as subscriptions and redemptions in the tables on the previous page and on the “Statements of changes in net assets.” For the years ended Nov. 30, 2019 and 2018, the Fund had the following exchange transactions:
Exchange Redemptions | Exchange Subscriptions | |||||||||||||||||||||||||||
Year ended | Class A | Class C | Class A | Institutional Class Shares | Value | |||||||||||||||||||||||
11/30/19 | 15,392 | 61,229 | 48,707 | 28,025 | $ | 1,042,765 | ||||||||||||||||||||||
11/30/18 | 27,361 | 374,773 | 298,584 | 106,942 | 5,847,175 |
7. Fund Merger
As of the close of business on Dec. 15, 2017, the Fund acquired all of the assets and liabilities of Delaware Foundation® Growth Allocation Fund (“Acquired Fund”), anopen-end investment company, in exchange for the shares of Delaware Wealth Builder Fund (“Acquiring Fund”) pursuant to a Plan and Agreement of Reorganization (“Reorganization”). For financial reporting purposes, assets received and shares issued by the Acquiring Fund were recorded at fair value. The shareholders of the Acquired Fund received shares of the respective class of the Acquiring Fund equal to the aggregate net asset value of their shares in the Acquired Fund by a taxable exchange prior to the Reorganization, as shown in the following table:
Acquired Fund Shares Outstanding | Shares Converted to | Acquired Fund Net Assets | Conversion Ratio | |||||||||||
Class A | 3,642,448 | 2,344,699 | $ | 34,209,151 | 0.644 | |||||||||
Class C | 1,167,237 | 725,393 | 10,597,997 | 0.621 | ||||||||||
Class R | 205,030 | 130,757 | 1,907,750 | 0.638 | ||||||||||
Institutional Class | 507,236 | 328,897 | 4,798,603 | 0.648 |
The net assets of the Acquiring Fund before the acquisition were $687,884,216. The net assets of the Acquiring Fund immediately following the acquisition were $739,397,717.
If the acquisition had been completed on Dec. 1, 2017, the beginning of the Acquiring Fund’s reporting period, the Acquiring Fund’s pro forma results of operations for the year ended Nov 30, 2018, would have been as follows (unaudited):
Net investment income | $ | 15,806,818 | (a) | |
Net realized gain | 36,664,200 | (b) | ||
Net change in unrealized appreciation (depreciation) | (50,776,959 | )(c) | ||
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Net increase in net assets resulting from operations | $ | 1,694,059 | ||
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(a)$15,203,067, as reported in the “Statement of operations,” plus $603,751 net investment income from Delaware Foundation® Growth Allocation Fundpre-merger.
(b)$32,211,435, as reported in the “Statement of operations,” plus $4,452,765 net realized gain from Delaware Foundation Growth Allocation Fundpre-merger.
(c)$(51,994,176), as reported in the “Statement of operations,” plus $1,217,217 net change in unrealized appreciation (depreciation) from Delaware Foundation Growth Allocation Fundpre-merger.
Because the combined investment portfolios have been managed as a single integrated portfolio since the acquisition was completed, it is not practical to separate the amounts of revenue and earnings of the Acquired Fund that have been included in the Fund’s “Statement of operations” since Dec. 18, 2017.
8. Line of Credit
The Fund, along with certain other funds in the Delaware Funds (Participants), was a participant in a $220,000,000 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 0.15%, which was allocated across the Participants based on a weighted average of the respective net assets of each Participant. The Participants were permitted to borrow up to a maximum ofone-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. 4, 2019.
On Nov. 4, 2019, the Participants entered into an amendment to the agreement for a $250,000,000 revolving line of credit. The revolving 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. 2, 2020.
The Fund had no amounts outstanding as of Nov. 30, 2019, or at any time during the year then ended.
9. Derivatives
US 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 US 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 US 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.
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Notes to financial statements | ||
Delaware Wealth Builder Fund |
|
9. Derivatives (continued)
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 year ended Nov. 30, 2019, the Fund entered into foreign currency exchange contracts to hedge the US dollar value of securities it already owns that are denominated in foreign currencies and to fix the US dollar value of a security between trade date and settlement date.
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 US 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 Nov. 30, 2019, the Fund posted $219,260 in cash as margin for open futures contracts, which is included in “Cash collateral due from broker” on the “Statement of assets and liabilities.”
During the year ended Nov. 30, 2019, 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.
Options Contracts– The Fund may enter into options contracts in the normal course of pursuing its investment objective. The Fund may buy or write options contracts for any number of reasons, including without limitation: to manage the Fund’s exposure to changes in securities prices caused by interest rates or market conditions and foreign currencies; as an efficient means of adjusting the Fund’s overall exposure to certain markets; to protect the value of portfolio securities; and as a cash management tool.
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The Fund may buy or write call or put options on securities, futures, swaps, swaptions, financial indices, and foreign currencies. When the Fund buys an option, a premium is paid and an asset is recorded and adjusted on a daily basis to reflect the current market value of the option purchased. When the Fund writes an option, a premium is received and a liability is recorded and adjusted on a daily basis to reflect the current market value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is treated as realized gain or loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether the Fund has a realized gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by the Fund. The Fund, as writer of an option, bears the market risk of an unfavorable change in the price of the security underlying the written option. When writing options, the Fund is subject to minimal counterparty risk because the counterparty is only obligated to pay premiums and does not bear the market risk of an unfavorable market change. There were no open written option contracts at Nov. 30, 2019.
During the year ended Nov. 30, 2019, the Fund used options contracts to manage the Fund’s exposure to changes in securities prices caused by 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 leastBBB- 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 credit 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.
During the year ended Nov. 30, 2019, 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 are posted to central counterparties for
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Notes to financial statements | ||
Delaware Wealth Builder Fund |
|
9. Derivatives (continued)
central cleared CDS basket trades, as determined by the applicable central counterparty. During the year ended Nov. 30, 2019, the Fund did not enter into any CDS contracts as a seller of protection.
CDS contracts may involve greater risks than if the Fund had invested in the reference obligation directly. CDS contracts are subject to general market risk, liquidity risk, counterparty risk, and credit risk. The Fund’s maximum risk of loss from counterparty credit risk, either as the seller of protection or the buyer of protection, is the fair value of the contract. This risk is mitigated by (1) for bilateral swap contracts, having a netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty, and (2) for cleared swaps, trading these instruments through a central counterparty.
During the year ended Nov. 30, 2019, the Fund used CDS contracts to hedge against credit events.
Swaps Generally. The value of open swaps may differ from that which would be realized in the event the Fund terminated its position in the contract on a given day. Risks of entering into these contracts include the potential inability of the counterparty to meet the terms of the contracts. This type of risk is generally limited to the amount of favorable movement in the value of the underlying security, instrument, or basket of instruments, if any, at the day of default. Risks also arise from potential losses from adverse market movements and such losses could exceed the unrealized amounts shown on the “Schedule of investments.”
At Nov. 30, 2019, the Fund posted $424,699 in cash collateral for open centrally cleared CDS contracts, which is included in “Cash collateral due from broker” on the “Statement of assets and liabilities.”
Fair values of derivative instruments as of Nov. 30, 2019 were as follows:
Asset Derivatives Fair Value | ||||||||||||||||
Statement of Assets and Liabilities Location | Currency Contracts | Equity Contracts | Total | |||||||||||||
Unrealized appreciation on foreign currency exchange contracts |
| $4,889 | | $ — | | $ | 4,889 | |||||||||
Variation margin due from broker on futures contracts* | — | 244,863 | 244,863 | |||||||||||||
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Total | $4,889 | $244,863 | $ | 249,752 | ||||||||||||
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Liability Derivatives Fair Value | ||||||||||||||||
Statement of Assets and Liabilities Location | Currency | Equity | Credit | Total | ||||||||||||
Unrealized depreciation on foreign currency exchange contracts | $1,366 | $ — | $ — | $ 1,366 | ||||||||||||
Variation margin due to brokers on futures contracts* | — | 697 | — | 697 | ||||||||||||
Variation margin due to broker on centrally cleared credit default swap contracts* | — | — | 194,394 | 194,394 | ||||||||||||
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Total | 1366 | $697 | $194,394 | $195,091 | ||||||||||||
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| �� |
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*Includes cumulative appreciation/depreciation of futures and centrally cleared CDS contracts from the date the contracts were opened through Nov. 30, 2019. Only current day variation margin is reported on the “Statement of assets and liabilities.”
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The effect of derivative instruments on the “Statement of operations” for the year ended Nov. 30, 2019 was as follows:
Net Realized Gain (Loss) on: | ||||||||||||||||||||
Foreign Currency Contracts | Futures Contracts | Options Written | Swap Contracts | Total | ||||||||||||||||
Currency contracts | $4,196 | $ — | $ — | $ — | $ 4,196 | |||||||||||||||
Interest rate contracts | — | 78,431 | — | — | 78,431 | |||||||||||||||
Equity contracts | — | (809,566 | ) | 1,323,273 | — | 513,707 | ||||||||||||||
Credit contracts | — | — | — | (240,936) | (240,936 | ) | ||||||||||||||
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Total | $4,196 | $(731,135) |
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$1,323,273 |
| $(240,936) |
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$ 355,398 |
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Net Change in Unrealized Appreciation (Depreciation) of: | ||||||||||||||||
Foreign Currency Exchange Contracts | Futures Contracts | Swap Contracts | Total | |||||||||||||
Currency contracts | $3,547 | $ — | $ — | $ 3,547 | ||||||||||||
Interest rate contracts | — | (697 | ) | — | (697 | ) | ||||||||||
Equity contracts | — | 211,379 | — | 211,379 | ||||||||||||
Credit contracts | — | — | (303,531 | ) | (303,531 | ) | ||||||||||
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Total | $3,547 | $210,682 | $(303,531) | $ (89,302) | ||||||||||||
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Derivatives Generally. The table below summarizes the average balance of derivative holdings by the Fund during the year ended Nov. 30, 2019:
Long Derivatives Volume | Short Derivatives Volume | |||||||
Foreign currency exchange contracts (average cost) | $ 178,281 | $ 275,722 | ||||||
Futures contracts (average notional value) | 2,174,982 | 6,261,162 | ||||||
Options contracts (average notional value) | — | 46,690 | ||||||
CDS contracts (average notional value)* | 6,588,088 | — |
*Long represents buying protection and short represents selling protection.
10. Offsetting
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 in order to better define its contractual rights and to secure rights that will help the Fund mitigate its counterparty risk. An ISDA Master Agreement is a bilateral agreement between the Fund and a counterparty that governs certainover-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
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Notes to financial statements | ||
Delaware Wealth Builder Fund |
10. Offsetting (continued)
Agreement typically permit a single net payment in the event of default(close-out), including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency, or other events.
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements on the “Statement of assets and liabilities.”
At Nov. 30, 2019, the Fund had the following assets and liabilities subject to offsetting provisions:
Offsetting of Financial Assets and Liabilities and Derivative Assets and Liabilities
Gross Value of | Gross Value of | ||||||||||||||
Counterparty | Derivative Asset | Derivative Liability | Net Position | ||||||||||||
The Bank of New York Mellon | $ | — | $ | (3) | $ | (3) | |||||||||
JPMorgan Chase Bank | 4,889 | (1,363) | 3,526 | ||||||||||||
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Total | $ | 4,889 | $ | (1,366) | $ | 3,523 | |||||||||
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Counterparty | Net Position | Fair Value of Non-Cash Collateral Received | Cash Collateral Received | Fair Value of Non-Cash Collateral Pledged | Cash Collateral Pledged | Net Exposure(a) | ||||||||||||||||||||||||
The Bank of New York Mellon | $ | (3 | ) | $ | — | $ | — | $ | — | $ | — | $ | (3) | |||||||||||||||||
JPMorgan Chase Bank | 3,526 | — | — | — | — | 3,526 | ||||||||||||||||||||||||
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Total | $ | 3,523 | $— | $— | $— | $— | $ | 3,523 | ||||||||||||||||||||||
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(a)Net exposure represents the receivable (payable) that would be due from (to) the counterparty in the event of default.
11. Securities Lending
The Fund, along with other funds in the Delaware 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 US securities and foreign securities that are denominated and payable in US 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
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be more or less than the value of the security on loan. The collateral percentage with respect to the market value of the loaned security is determined by the security lending agent.
Cash collateral received by each fund of the Trust is generally invested in 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 US 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. A fund can also accept US government securities and letters of credit(non-cash collateral) in connection with securities loans.
In the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Fund or, at the discretion of the lending agent, replace the loaned securities. The Fund continues to record dividends or interest, as applicable, on the securities loaned and is subject to changes in value of the securities loaned that may occur during the term of the loan. The Fund has the right under the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized bynon-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 year ended Nov. 30, 2019, the Fund had no securities out on loan.
12. Credit and Market Risk
When interest rates rise, fixed income securities (i.e. debt obligations) generally will decline in value. These declines in value are greater for fixed income securities with longer maturities or durations.
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
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Notes to financial statements | ||
Delaware Wealth Builder Fund |
|
12. Credit and Market Risk (continued)
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 thanBBB- by S&P and Baa3 by Moody’s, or similarly rated by another nationally recognized statistical rating organization. Investments in these higher yielding securities are generally accompanied by a greater degree of credit risk than higher rated securities. Additionally, lower rated securities may be more susceptible to adverse economic and competitive industry conditions than investment grade securities.
The Fund invests in fixed income securities whose value is derived from an underlying pool of mortgages or consumer loans. The value of these securities is sensitive to changes in economic conditions, including delinquencies and/or defaults, and may be adversely affected by shifts in the market’s perception of the issuers and changes in interest rates. Investors receive principal and interest payments as the underlying mortgages and consumer loans are paid back. Some of these securities are collateralized mortgage obligations (CMOs). CMOs are debt securities issued by US 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 year ended Nov. 30, 2019. 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 also invests in real estate acquired as a result of ownership of securities or other instruments, including issuers that invest, deal, or otherwise engage in transactions in real estate or interests therein. These instruments may include interests in private equity limited partnerships or limited liability companies that hold real estate investments (Real Estate Limited Partnerships). The Fund will limit its investments in Real Estate Limited Partnerships to 5% of its total assets at the time of purchase. The unfunded commitment for the limited partnerships totaled $582,748.
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,
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through various means of structuring the transaction, or through a combination of such approaches. The Fund will not pay any additional fees for such credit support, although the existence of credit support may increase the price of a security.
The Fund invests in bank loans and other securities that may subject it to direct indebtedness risk, the risk that the Fund will not receive payment of principal, interest, and other amounts due in connection with these investments and will depend primarily on the financial condition of the borrower. Loans that are fully secured offer the Fund more protection than unsecured loans in the event of nonpayment of scheduled interest or principal, although there is no assurance that the liquidation of collateral from a secured loan would satisfy the corporate borrower’s obligation, or that the collateral can be liquidated. Some loans or claims may be in default at the time of purchase. Certain of the loans and the other direct indebtedness acquired by the Fund may involve revolving credit facilities or other standby financing commitments that obligate the Fund to pay additional cash on a certain date or on demand. These commitments may require the Fund to increase its investment in a company at a time when the Fund might not otherwise decide to do so (including at a time when the company’s financial condition makes it unlikely that such amounts will be repaid). To the extent that the Fund is committed to advance additional funds, it will at all times hold and maintain cash or other high grade debt obligations in an amount sufficient to meet such commitments. When a loan agreement is purchased the Fund may pay an assignment fee. On an ongoing basis, the Fund may receive a commitment fee based on the undrawn portion of the underlying line of credit portion of a loan agreement. Prepayment penalty fees are received upon the prepayment of a loan agreement by a borrower. Prepayment penalty, facility, commitment, consent and amendment fees are recorded to income as earned or paid.
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 Board has delegated to DMC theday-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 restricted securities held by the Fund have been identified on the “Schedule of investments.” Restricted securities are valued pursuant to the security valuation procedures described in Note 1.
13. 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
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Notes to financial statements | ||
Delaware Wealth Builder Fund |
|
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.
14. General Motors Term Loan Litigation
The Fund received notice of a litigation proceeding related to a General Motors Corporation (G.M.) term loan participation previously held by the Fund in 2009. Because it was believed that the Fund was a secured creditor, the Fund received the full principal on the loans in 2009 after the G.M. bankruptcy. However, based upon a US Court of Appeals ruling the Motors Liquidation Company Avoidance Action Trust sought to recover such amounts arguing that, the Fund was an unsecured creditor and, as an unsecured creditor, the Fund should not have received payment in full. Based on available information related to the litigation and the Fund’s potential exposure, the Fund previously recorded a contingent liability of $901,538 and an asset of $270,461 based on the potential recoveries by the estate that resulted in a net decrease in the Fund’s NAV to reflect this potential recovery.
During the year, the plaintiff and the term loan lenders, which included the Fund, reached an agreement that resolved the disputes. The parties agreed to terms of a settlement agreement and presented the settlement agreement to the court for approval at a hearing on June 12, 2019. The court approved the settlement documentation and dismissed the case on July 2, 2019. The court’s approval of the settlement and dismissal of the case with prejudice became final on July 16, 2019.
The contingent liability and other asset were removed in connection with the case being settled, which resulted in the Fund recognizing a gain in the amount of the liability reversed.
15. Recent Accounting Pronouncements
In March 2017, the FASB issued an Accounting Standards Update (ASU), ASU2017-08, Receivables — Nonrefundable Fees and Other Costs (Subtopic310-20), Premium Amortization on Purchased Callable Debt Securities which amends the amortization period for certain callable debt securities purchased at a premium, shortening such period to the earliest call date. The ASU2017-08 does not require any accounting change for debt securities held at a discount; the discount continues to be amortized to maturity. The ASU2017-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after Dec. 15, 2018. At this time, management is evaluating the implications of these changes on the financial statements.
In August 2018, the FASB issued an Accounting Standards Update (ASU), ASU2018-13, which changes certain fair value measurement disclosure requirements. The ASU2018-13, in addition to other modifications and additions, removes the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for the timing of transfers between levels and the valuation process for Level 3 fair value measurements. The ASU2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after Dec. 15, 2019. At this time, management is evaluating the implications of these changes on the financial statements.
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16. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to Nov. 30, 2019, that would require recognition or disclosure in the Fund’s financial statements.
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registered public accounting firm
To the Board of Trustees of Delaware Group® Equity Funds V and Shareholders of Delaware Wealth Builder Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Delaware Wealth Builder Fund (one of the funds constituting Delaware Group® Equity Funds V, referred to hereafter as the “Fund”) as of November 30, 2019, the related statement of operations for the year ended November 30, 2019, the statements of changes in net assets for each of the two years in the period ended November 30, 2019, including the related notes, and the financial highlights for each of the five years in the period ended November 30, 2019 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of November 30, 2019, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended November 30, 2019 and the financial highlights for each of the five years in the period ended November 30, 2019 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of November 30, 2019 by correspondence with the custodian, transfer agents and brokers. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
January 22, 2020
We have served as the auditor of one or more investment companies in Delaware Funds® by Macquarie since 2010.
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Other Fund information (Unaudited)
Delaware Wealth Builder Fund
Tax Information
The information set forth below is for the Fund’s fiscal year as required by federal income tax laws. Shareholders, however, must report distributions on a calendar year basis for income tax purposes, which may include distributions for portions of two fiscal years of the Fund. Accordingly, the information needed by shareholders for income tax purposes will be sent to them in January of each year. Please consult your tax advisor for proper treatment of this information.
All disclosures are based on financial information available as of the date of this annual report and, accordingly are subject to change. For any and all items requiring reporting, it is the intention of the Fund to report the maximum amount permitted under the Internal Revenue Code and the regulations thereunder.
For the fiscal year ended Nov. 30, 2019, the Fund reports distributions paid during the year as follows:
(A) Long-Term Capital Gain Distributions (Tax Basis) | 69.15 | % | ||
(B) Ordinary Income Distribution (Tax Basis)1 | 30.85 | % | ||
Total Distributions (Tax Basis) | 100.00 | % | ||
(C) Qualified Dividends2 | 46.21 | % |
(A) and (B) are based on a percentage of the Fund’s total distributions.
(C) is based on the Fund’s ordinary income distributions.
1 For the fiscal year ended Nov. 30, 2019, certain dividends paid by the Fund may be subject to a maximum tax rate of 20%. The percentage of dividends paid by the Fund from ordinary income reported as qualified dividend income is 57.68%. Complete information will be computed and reported in conjunction with your 2019 Form1099-DIV, as applicable.
2Qualified dividends represent dividends which qualify for the corporate dividends received deduction.
For the fiscal year ended Nov. 30, 2019, certain interest income paid by the Fund has been determined to be Qualified Interest Income and Short Term Capital Gains, which may be subject to relief from US withholding for foreign shareholders, as provided by the American Jobs Creation Act of 2004; the Tax Relief, Unemployment Insurance Reauthorization, and Job Creations Act of 2010; and as extended by the American Taxpayer Relief Act of 2012. For the fiscal year ended Nov. 30, 2019, the Fund has reported maximum distributions of Qualified Interest Income and Short Term Capital Gains of $5,314,787 and $4,129,603, respectively.
Board consideration of Investment Advisory andSub-Advisory agreements for Delaware Wealth Builder Fund at a meeting held August21-22, 2019
At a meeting held on Aug.21-22, 2019 (the “Annual Meeting”), the Board of Trustees (the “Board”), including a majority of disinterested or independent Trustees, approved the renewal of the Investment Advisory andSub-Advisory Agreements for Delaware Wealth Builder Fund (the “Fund”). In making its decision, the Board considered information furnished at regular quarterly Board meetings, including reports detailing Fund performance, investment strategies, and expenses, as well as information prepared specifically in connection with the renewal of the investment advisory andsub-advisory contracts. Information furnished specifically in connection with the renewal of the Investment Management Agreement with Delaware Management Company (“DMC”), a series of Macquarie
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Other Fund information (Unaudited)
Delaware Wealth Builder Fund
Board consideration of Investment Advisory andSub-Advisory agreements for Delaware Wealth Builder Fund at a meeting held August21-22, 2019 (continued)
Investment Management Business Trust (“MIMBT”), and theSub-Advisory Agreements with Macquarie Investment Management Global Limited (“MIMGL”), Macquarie Funds Management Hong Kong Limited (“MFMHK”), and Macquarie Investment Management Europe Limited (“MIMEL”) included materials provided by DMC and its affiliates (collectively, “Macquarie Investment Management”), MIMGL, MFMHK, and MIMEL concerning, among other things, the nature, extent, and quality of services provided to the Fund; the costs of such services to the Fund; economies of scale; and the investment manager’s financial condition and profitability. In addition, in connection with the Annual Meeting, materials were provided to the Trustees in May 2019, including reports provided by Broadridge Financial Solutions (“Broadridge”). The Broadridge reports compared the Fund’s investment performance and expenses with those of other comparable mutual funds. The Independent Trustees reviewed and discussed the Broadridge reports with independent legal counsel to the Independent Trustees. In addition to the information noted above, the Board also requested and received information regarding DMC’s policy with respect to advisory fee levels and its breakpoint philosophy; the structure of portfolio manager compensation; comparative client fee information; and any constraints or limitations on the availability of securities for certain investment styles, which had in the past year inhibited, or which were likely in the future to inhibit, the investment manager’s ability to invest fully in accordance with Fund policies.
In considering information relating to the approval of the Fund’s investment advisory andsub-advisory agreements, the Independent Trustees received assistance and advice from and met separately with independent legal counsel to the Independent Trustees and also received assistance and advice from an experienced and knowledgeable independent fund consultant, JDL Consultants, LLC (“JDL”). Although the Board gave attention to all information furnished, the following discussion identifies, under separate headings, the primary factors taken into account by the Board during its contract renewal considerations.
Nature, extent, and quality of services.The Board considered the services provided by DMC to the Fund and its shareholders. In reviewing the nature, extent, and quality of services, the Board considered reports furnished to it throughout the year, which covered matters such as the relative performance of the Fund; compliance of portfolio managers with the investment policies, strategies, and restrictions for the Fund; compliance by DMC and Delaware Distributors, L.P. (together, “Management”) personnel with the Code of Ethics adopted throughout the Delaware Funds® by Macquarie (“Delaware Funds”); and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of DMC and the emphasis placed on research in the investment process. The Board recognized DMC’s receipt of certain favorable industry distinctions during the past several years. The Board gave favorable consideration to DMC’s efforts to control expenses while maintaining service levels committed to Fund matters. The Board also noted the benefits provided to Fund shareholders through (a) each shareholder’s ability to: (i) exchange an investment in one Delaware Fund for the same class of shares in another Delaware Fund without a sales charge, or (ii) reinvest Fund dividends into additional shares of the Fund or into additional shares of other Delaware Funds, and (b) the privilege to combine holdings in other Delaware Funds to obtain a reduced sales charge. The Board was satisfied with the nature, extent, and quality of the overall services provided by DMC.
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Nature, extent, and quality of services.The Board considered the services provided by MIMGL to the Fund and its shareholders. In reviewing the nature, extent, and quality of services, the Board considered reports furnished to it throughout the year at regular Board Meetings covering matters such as relative performance of the Fund; compliance of portfolio managers with the investment policies, strategies, and restrictions for the Fund; the compliance of MIMGL personnel with its Code of Ethics; and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of MIMGL and the emphasis placed on research in the investment process. The Board was satisfied with the nature, extent, and quality of the overall services provided by MIMGL.
Nature, extent, and quality of services.The Board considered the services provided by MFMHK to the Fund and its shareholders. In reviewing the nature, extent, and quality of services, the Board considered reports furnished to it throughout the year at regular Board Meetings covering matters such as relative performance of the Fund; compliance of portfolio managers with the investment policies, strategies, and restrictions for the Fund; the compliance of MFMHK personnel with its Code of Ethics; and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of MFMHK and the emphasis placed on research in the investment process. The Board was satisfied with the nature, extent, and quality of the overall services provided by MFMHK.
Nature, extent, and quality of services.The Board considered the services provided by MIMEL to the Fund and its shareholders. In reviewing the nature, extent, and quality of services, the Board considered reports furnished to it throughout the year at regular Board Meetings covering matters such as relative performance of the Fund; compliance of portfolio managers with the investment policies, strategies, and restrictions for the Fund; the compliance of MIMEL personnel with its Code of Ethics; and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of MIMEL and the emphasis placed on research in the investment process. The Board was satisfied with the nature, extent, and quality of the overall services provided by MIMEL.
Investment performance.The Board placed significant emphasis on the investment performance of the Fund in view of the importance of investment performance to shareholders. Although the Board considered performance reports and discussions with portfolio managers at Investment Committee meetings throughout the year, the Board gave particular weight to the Broadridge reports furnished for the Annual Meeting. The Broadridge reports prepared for the Fund showed the investment performance of its Class A shares in comparison to a group of similar funds as selected by Broadridge (the “Performance Universe”). A fund with the best performance ranked first, and a fund with the poorest performance ranked last. The highest/best performing 25% of funds in the Performance Universe make up the first quartile; the next 25%, the second quartile; the next 25%, the third quartile; and the poorest/worst performing 25% of funds in the Performance Universe make up the fourth quartile. Comparative annualized performance for the Fund was shown for the past1-,3-,5-, and10-year periods, to the extent applicable, ended Jan. 31, 2019. The Board’s objective is that the Fund’s performance for the1-,3-, and5-year periods be at or above the median of its Performance Universe.
The Performance Universe for the Fund consisted of the Fund and all retail and institutional flexible portfolio funds as selected by Broadridge. The Broadridge report comparison showed that the Fund’s total return for the1-year period was in the second quartile of its Performance Universe. The report further showed that the Fund’s total return for the3-year period was in the third quartile of its
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Other Fund information (Unaudited)
Delaware Wealth Builder Fund
Board consideration of Investment Advisory andSub-Advisory agreements for Delaware Wealth Builder Fund at a meeting held August21-22, 2019 (continued)
Performance Universe and the Fund’s total return for the5- and10-year periods was in the first quartile of its Performance Universe. The Board was satisfied with the Fund’s performance.
Comparative expenses.The Board considered expense data for the Delaware Funds. Management provided the Board with information on pricing levels and fee structures for the Fund as of its most recently completed fiscal year. The Board also focused on the comparative analysis of effective management fees and total expense ratios of the Fund versus effective management fees and total expense ratios of a group of similar funds as selected by Broadridge (the “Expense Group”). In reviewing comparative costs, the Fund’s contractual management fee and the actual management fee incurred by the Fund were compared with the contractual management fees (assuming all funds in the Expense Group were similar in size to the Fund) and actual management fees (as reported by each fund) within the Expense Group, taking into account any applicable breakpoints and fee waivers. The Fund’s total expenses were also compared with those of its Expense Group. The Broadridge total expenses, for comparative consistency, were shown by Broadridge for Class A shares and comparative total expenses including 12b 1 andnon-12b 1 service fees. The Board’s objective is for the Fund’s total expense ratio to be competitive with those of the peer funds within its Expense Group.
The expense comparisons for the Fund showed that its actual management fee and total expenses were in the quartile with the second highest expenses of its Expense Group. The Board noted that the Fund’s management fee and total expenses were not in line with the Board’s objective. In evaluating the total expenses, the Board considered various initiatives implemented by Management, such as the negotiation of lower fees for fund accounting, fund accounting oversight services, and custody, which had created an opportunity for a further reduction in expenses. The Board was satisfied with Management’s efforts to improve the Fund’s total expense ratio and to bring it in line with the Board’s objective.
Management profitability.The Board considered the level of profits realized by DMC in connection with the operation of the Fund. In this respect, the Board reviewed the Investment Management Profitability Analysis that addressed the overall profitability of DMC’s business in providing management and other services to each of the individual funds and the Delaware Funds as a whole. Specific attention was given to the methodology used by DMC in allocating costs for the purpose of determining profitability. Management stated that the level of profits of DMC, to a certain extent, reflects recent operational cost savings and efficiencies initiated by DMC. The Board considered DMC’s efforts to improve services provided to Fund shareholders and to meet additional regulatory and compliance requirements resulting from recent industry-wide Securities and Exchange Commission initiatives. The Board also considered the extent to which DMC might derive ancillary benefits from fund operations, including the potential for procuring additional business as a result of the prestige and visibility associated with its role as service provider to the Delaware Funds and the benefits from allocation of fund brokerage to improve trading efficiencies. As part of its work, the Board also reviewed a report prepared by JDL regarding MIMBT profitability as compared to certain peer fund complexes and the Independent Trustees discussed with JDL personnel regarding DMC’s profitability in such context. The Board found that the management fees were reasonable in light of the services rendered and the level of profitability of DMC.
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Management profitability.Trustees were also given available information on profits being realized by MIMGL in relation to the services being provided to the Fund and in relation to MIMGL’s overall investment advisory business, but believed such information to be of limited relevance because thesub-advisory fees are paid by DMC out of its management fee, and changes in the level ofsub-advisory fees have no impact on Fund expenses. The Board was also provided information on potentialfall-out benefits derived or to be derived by MIMGL in connection with its relationship to the Fund, such as reputational enhancement, soft dollar arrangements, or commissions paid to affiliated broker/dealers, as applicable.
Management profitability.Trustees were also given available information on profits being realized by MFMHK in relation to the services being provided to the Fund and in relation to MFMHK’s overall investment advisory business, but believed such information to be of limited relevance because thesub-advisory fees are paid by DMC out of its management fee, and changes in the level ofsub-advisory fees have no impact on Fund expenses. The Board was also provided information on potentialfall-out benefits derived or to be derived by MFMHK in connection with its relationship to the Fund, such as reputational enhancement, soft dollar arrangements, or commissions paid to affiliated broker/dealers, as applicable.
Management profitability.Trustees were also given available information on profits being realized by MIMEL in relation to the services being provided to the Fund and in relation to MIMEL’s overall investment advisory business, but believed such information to be of limited relevance because thesub-advisory fees are paid by DMC out of its management fee, and changes in the level ofsub-advisory fees have no impact on Fund expenses. The Board was also provided information on potentialfall-out benefits derived or to be derived by MIMEL in connection with its relationship to the Fund, such as reputational enhancement, soft dollar arrangements, or commissions paid to affiliated broker/dealers, as applicable.
Economies of scale.The Trustees considered whether economies of scale are realized by DMC as the Fund’s assets increase and the extent to which any economies of scale are reflected in the level of management fees charged. The Trustees reviewed the Fund’s advisory fee pricing and structure, approved by the Board and shareholders, which includes breakpoints, and which applies to most funds in the Delaware Funds complex. Breakpoints in the advisory fee occur when the advisory fee rate is reduced on assets in excess of specified levels. Breakpoints result in a lower advisory fee than would otherwise be the case in the absence of breakpoints, when the asset levels specified in the breakpoints are exceeded. The Board noted that, as of March 31, 2019, the Fund’s assets exceeded the first breakpoint level. The Board believed that, given the extent to which economies of scale might be realized by DMC and its affiliates, the schedule of fees under the Investment Management Agreement provides a sharing of benefits with the Fund and its shareholders.
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Board of trustees / directors and officers addendum | ||
Delaware Funds®by Macquarie |
A mutual fund is governed by a Board of Trustees/Directors (“Trustees”), which has oversight responsibility for the management of a fund’s business affairs. Trustees establish procedures and oversee and review the performance of the investment manager, the distributor, and others who perform services for the fund. The independent fund trustees, in particular, are advocates
Name, Address, and Birth Date | Position(s) Held with Fund(s) | Length of Time Served | ||
Interested Trustee
| ||||
Shawn K. Lytle1 | President, | President and | ||
2005 Market Street | Chief Executive Officer, | Chief Executive Officer | ||
Philadelphia, PA 19103 | and Trustee | since August 2015 | ||
February 1970 | ||||
Trustee since | ||||
September 2015 | ||||
Independent Trustees
| ||||
Thomas L. Bennett | Chair and Trustee | Trustee since | ||
2005 Market Street | March 2005 | |||
Philadelphia, PA 19103 | ||||
October 1947 | Chair since | |||
March 2015
| ||||
Jerome D. Abernathy | Trustee | Since January 2019 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
July 1959 | ||||
Ann D. Borowiec | Trustee | Since March 2015 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
November 1958 | ||||
1 | Shawn K. Lytle is considered to be an “Interested Trustee” because he is an executive officer of the Fund’s(s’) investment advisor. |
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�� |
for shareholder interests. Each trustee has served in that capacity since he or she was elected to or appointed to the Board of Trustees, and will continue to serve until his or her retirement or the election of a new trustee in his or her place. The following is a list of the Trustees and Officers with certain background and related information.
Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee or Officer | Other Directorships Held by Trustee or Officer | ||
President — Macquarie | 95 | Trustee — UBS | ||
Investment Management2 | Relationship Funds, | |||
(June 2015–Present) | SMA Relationship | |||
Trust, and UBS Funds | ||||
Regional Head of | (May 2010–April 2015) | |||
Americas — UBS Global | ||||
Asset Management | ||||
(April 2010–May 2015)
| ||||
Private Investor | 95 | None | ||
(March 2004–Present) | ||||
Managing Member, | 95 | None | ||
Stonebrook Capital | ||||
Management, LLC (financial | ||||
technology: macro factors | ||||
and databases) | ||||
(January 1993–Present) | ||||
Chief Executive Officer, | 95 | Director — | ||
Private Wealth Management | Banco Santander International | |||
(2011–2013) and | (October 2016– | |||
Market Manager, | December 2019) | |||
New Jersey Private | ||||
Bank (2005–2011) — | Director — | |||
J.P. Morgan Chase & Co. | Santander Bank, N.A. | |||
(December 2016– | ||||
December 2019)
|
2 | Macquarie Investment Management is the marketing name for Macquarie Management Holdings, Inc. and its subsidiaries, including the Fund’s(s’) investment advisor, principal underwriter, and its transfer agent. |
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Board of trustees / directors and officers addendum | ||
Delaware Funds®by Macquarie |
Name, Address, and Birth Date | Position(s) Held with Fund(s) | Length of Time Served | ||
Independent Trustees (continued)
| ||||
Joseph W. Chow | Trustee | Since January 2013 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
January 1953 | ||||
John A. Fry | Trustee | Since January 2001 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
May 1960 | ||||
Lucinda S. Landreth | Trustee | Since March 2005 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
June 1947 | ||||
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Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee or Officer | Other Directorships Held by Trustee or Officer | ||
Private Investor | 95 | Director and Audit Committee | ||
(April 2011–Present) | Member — Hercules | |||
Technology Growth | ||||
Capital, Inc. | ||||
(July 2004–July 2014) | ||||
President — | 95 | Director; Compensation | ||
Drexel University | Committee and | |||
(August 2010–Present) | Governance Committee | |||
Member — Community | ||||
President — | Health Systems | |||
Franklin & Marshall College | (May 2004–Present) | |||
(July 2002–June 2010) | ||||
Director — Drexel | ||||
Morgan & Co. | ||||
(2015–Present) | ||||
Director and Audit Committee | ||||
Member — vTv | ||||
Therapeutics Inc. | ||||
(2017–Present) | ||||
Director and Audit Committee | ||||
Member — FS Credit Real | ||||
Estate Income Trust, Inc. | ||||
(2018–Present) | ||||
Director — Federal Reserve | ||||
Bank of Philadelphia | ||||
(January 2020–Present) | ||||
Private Investor | 95 | None | ||
(2004–Present) | ||||
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Board of trustees / directors and officers addendum | ||
Delaware Funds®by Macquarie |
Name, Address, and Birth Date | Position(s) Held with Fund(s) | Length of Time Served | ||
Independent Trustees (continued)
| ||||
Frances A. Sevilla-Sacasa | Trustee | Since September 2011 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
January 1956 | ||||
Thomas K. Whitford | Trustee | Since January 2013 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
March 1956 | ||||
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Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee or Officer | Other Directorships Held by Trustee or Officer | ||
| ||||
Private Investor | 95 | Trust Manager and | ||
(January 2017–Present) | Audit Committee | |||
Chair — Camden | ||||
Chief Executive Officer — | Property Trust | |||
Banco Itaú | (August 2011–Present) | |||
International | ||||
(April 2012–December 2016) | Director; Strategic | |||
Planning and Reserves | ||||
Executive Advisor to Dean | Committee and Nominating | |||
(August 2011–March 2012) | and Governance | |||
and Interim Dean | Committee Member — | |||
(January 2011–July 2011) — | Callon Petroleum Company | |||
University of Miami School of | (December 2019–Present) | |||
Business Administration | ||||
Director; Audit | ||||
President — U.S. Trust, | Committee Member — | |||
Bank of America Private | Carrizo Oil & Gas, Inc. | |||
Wealth Management | (March 2018–December 2019) | |||
(Private Banking) | ||||
(July 2007–December 2008) | ||||
Vice Chairman | 95 | Director — HSBC North | ||
(2010–April 2013) — | America Holdings Inc. | |||
PNC Financial | (December 2013–Present) | |||
Services Group | ||||
Director — HSBC USA Inc. | ||||
(July 2014–Present) | ||||
Director — | ||||
HSBC Bank USA, | ||||
National Association | ||||
(July 2014–March 2017) | ||||
Director — HSBC | ||||
Finance Corporation | ||||
(December 2013–April 2018) |
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Board of trustees / directors and officers addendum | ||
Delaware Funds®by Macquarie |
Name, Address, and Birth Date | Position(s) Held with Fund(s) | Length of Time Served | ||||
Independent Trustees (continued)
| ||||||
Christianna Wood | Trustee | Since January 2019 | ||||
2005 Market Street | ||||||
Philadelphia, PA 19103 | ||||||
August 1959 |
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Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee or Officer | Other Directorships Held by Trustee or Officer | ||
| ||||
Chief Executive Officer | 95 | Director; Finance Committee | ||
and President — | and Audit Committee | |||
Gore Creek | Member — H&R | |||
Capital, Ltd. | Block Corporation | |||
(August 2009–Present) | (July 2008–Present) | |||
Director; Chair of Investments | ||||
Committee and Audit | ||||
Committee Member — | ||||
Grange Insurance | ||||
(2013–Present) | ||||
Trustee; Chair of | ||||
Nominating and Governance | ||||
Committee and Audit | ||||
Committee Member — | ||||
The Merger Fund | ||||
(2013–Present), | ||||
The Merger Fund VL | ||||
(2013-Present), | ||||
WCM Alternatives: | ||||
Event-Driven Fund | ||||
(2013–Present), | ||||
and WCM Alternatives: | ||||
Credit Event Fund | ||||
(December 2017–Present) | ||||
Director; Chair of | ||||
Governance Committee | ||||
and Audit Committee | ||||
Member — International | ||||
Securities Exchange | ||||
(2010–2016) |
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Board of trustees / directors and officers addendum | ||
Delaware Funds®by Macquarie |
Name, Address, and Birth Date | Position(s) Held with Fund(s) | Length of Time Served | ||
Independent Trustees (continued)
| ||||
Janet L. Yeomans | Trustee | Since April 1999 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
July 1948 | ||||
Officers | ||||
David F. Connor | Senior Vice President, | Senior Vice President since | ||
2005 Market Street | General Counsel, | May 2013; General | ||
Philadelphia, PA 19103 | and Secretary | Counsel since May 2015; | ||
December 1963 | Secretary since | |||
October 2005
| ||||
Daniel V. Geatens |
Vice President |
Vice President and | ||
2005 Market Street | and Treasurer | Treasurer since October 2007 | ||
Philadelphia, PA 19103 | ||||
October 1972 | ||||
Richard Salus |
Senior Vice President |
Senior Vice President and | ||
2005 Market Street | and Chief Financial Officer | Chief Financial Officer | ||
Philadelphia, PA 19103 | since November 2006 | |||
October 1963 | ||||
The Statement of Additional Information for the Fund(s) includes additional information about the Trustees and Officers and is available, without charge, upon request by calling 800523-1918. |
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Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee or Officer | Other Directorships Held by Trustee or Officer | ||
| ||||
Vice President and Treasurer | 95 | Director; Personnel and | ||
(January 2006–July 2012), | �� | Compensation Committee | ||
Vice President — | Chair; Member of Nominating, | |||
Mergers & Acquisitions | Investments, and Audit | |||
(January 2003–January 2006), | Committees for various | |||
and Vice President | periods throughout | |||
and Treasurer | directorship — | |||
(July 1995–January 2003) — | Okabena Company | |||
3M Company | (2009–2017) | |||
| ||||
David F. Connor has served | 95 | None3 | ||
in various capacities at | ||||
different times at | ||||
Macquarie Investment | ||||
Management.
| ||||
Daniel V. Geatens has served | 95 | None3 | ||
in various capacities at | ||||
different times at | ||||
Macquarie Investment | ||||
Management.
| ||||
Richard Salus has served | 95 | None | ||
in various capacities | ||||
at different times at | ||||
Macquarie Investment | ||||
Management.
|
3 | David F. Connor and Daniel V. Geatens serve in similar capacities for the six portfolios of the Optimum Fund Trust, which have the same investment advisor, principal underwriter, and transfer agent as the registrant. Mr. Geatens also serves as the Chief Financial Officer of the Optimum Fund Trust and he is the Chief Financial Officer and Treasurer for Macquarie Global Infrastructure Total Return Fund Inc. |
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Board of trustees | ||||||
Shawn K. Lytle | Ann D. Borowiec | Lucinda S. Landreth | Thomas K. Whitford | |||
President and | Former Chief Executive | Former Chief Investment | Former Vice Chairman | |||
Chief Executive Officer | Officer | Officer | PNC Financial Services Group | |||
Delaware Funds® | Private Wealth Management | Assurant, Inc. | Pittsburgh, PA | |||
by Macquarie Philadelphia, PA
Thomas L. Bennett Chairman of the Board Delaware Funds by Macquarie Private Investor Rosemont, PA | J.P. Morgan Chase & Co. New York, NY
Joseph W. Chow Former Executive Vice President State Street Corporation Boston, MA | New York, NY
Frances A. Sevilla-Sacasa Former Chief Executive Officer Banco Itaú International Miami, FL |
Christianna Wood Chief Executive Officer and President Gore Creek Capital, Ltd. Golden, CO
Janet L. Yeomans Former Vice President and | |||
Jerome D. Abernathy Managing Member Stonebrook Capital Management, LLC Jersey City, NJ | John A. Fry President Drexel University Philadelphia, PA | Treasurer 3M Company 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 Funds | Delaware Funds | ||||
Delaware Funds | by Macquarie | by Macquarie | ||||
by Macquarie | Philadelphia, PA | Philadelphia, PA | ||||
Philadelphia, PA |
This annual 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 Fund fact sheet for the most recently completed calendar quarter. These documents are available at delawarefunds.com/literature.
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 FormN-Q or FormN-PORT (available for filings after March 31, 2019). The Fund’s FormsN-Q or FormsN-PORT, 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 800523-1918; 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 FormN-Q or FormN-PORT are available without charge on the Fund’s website at delawarefunds.com/literature. The Fund’s FormsN-Q and FormsN-PORT 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 800SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed12-month period ended June 30 is available without charge (i) through the Fund’s website at delawarefunds.com/proxy; and (ii) on the SEC’s website at sec.gov.
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Annual report
US equity mutual fund
Delaware Small Cap Core Fund
November 30, 2019
Beginning on or about June 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of your Fund’s shareholder reports will no longer be sent to you by mail, unless you specifically request them from the Fund or from your financial intermediary, such as a broker/dealer, bank, or insurance company. Instead, you will be notified by mail each time a report is posted on the website and provided with a link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you do not need to take any action. You may elect to receive shareholder reports and other communications from the Fund electronically by signing up at delawarefunds.com/edelivery. If you own these shares through a financial intermediary, you may contact your financial intermediary.
You may elect to receive paper copies of all future shareholder reports free of charge. You can inform the Fund that you wish to continue receiving paper copies of your shareholder reports by contacting us at 800523-1918. If you own these shares through a financial intermediary, you may contact your financial intermediary to elect to continue to receive paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held with the Delaware Funds® by Macquarie or your financial intermediary.
|
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 delawarefunds.com/literature or calling 800523-1918. 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 delawarefunds.com/edelivery. |
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Experience Delaware Funds®by Macquarie
Macquarie Investment Management (MIM) is a global asset manager with offices in the United States, Europe, Asia, and Australia. As active managers, we prioritize autonomy and accountability at the investment team level in pursuit of opportunities that matter for clients. Delaware Funds is one of the longest-standing mutual fund families, with more than 80 years in existence.
If you are interested in learning more about creating an investment plan, contact your financial advisor.
You can learn more about Delaware Funds or obtain a prospectus for Delaware Small Cap Core Fund at delawarefunds.com/literature.
Manage your account online
• Check your account balance and transactions
• View statements and tax forms
• Make purchases and redemptions
Visit delawarefunds.com/account-access.
Macquarie Asset Management (MAM) offers a diverse range of products including securities investment management, infrastructure and real asset management, and fund and equity-based structured products. MIM is the marketing name for certain companies comprising the asset management division of Macquarie Group. This includes the following investment advisers: Macquarie Investment Management Business Trust (MIMBT), Macquarie Funds Management Hong Kong Limited, Macquarie Investment Management Austria Kapitalanlage AG, Macquarie Investment Management Global Limited, Macquarie Investment Management Europe Limited, Macquarie Capital Investment Management LLC, and Macquarie Investment Management Europe S.A.
The Fund is distributed byDelaware Distributors, L.P.
(DDLP), an affiliate of MIMBT and Macquarie Group Limited.
Other than Macquarie Bank Limited (MBL), none of the entities noted are authorized deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Fund is governed by US laws and regulations.
| ||||
1 | ||||
5 | ||||
9 | ||||
Security type / sector allocation and top 10 equity holdings | 11 | |||
12 | ||||
17 | ||||
19 | ||||
20 | ||||
22 | ||||
32 | ||||
42 | ||||
43 | ||||
48 | ||||
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Unless otherwise noted, views expressed herein are current as of Nov. 30, 2019, 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.
Advisory services provided by Delaware Management Company, a series of MIMBT, a US registered investment advisor.
All third-party marks cited are the property of their respective owners.
© 2020 Macquarie Management Holdings, Inc.
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Portfolio management review | ||
Delaware Small Cap Core Fund | December 10, 2019 (Unaudited) |
Performance preview (for the year ended November 30, 2019) | ||||||||
Delaware Small Cap Core Fund (Institutional Class shares) | 1-year return | +8.06 | % | |||||
Delaware Small Cap Core Fund (Class A shares) | 1-year return | +7.79 | % | |||||
Russell 2000® Index (benchmark) | 1-year return | +7.51 | % |
Past performance does not guarantee future results.
For complete, annualized performance for Delaware Small Cap Core Fund, please see the table on page 5. Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors. In addition, Institutional Class shares pay no distribution and service fee.
The performance of Class A shares excludes the applicable sales charge. Both Institutional Class shares and Class A shares reflect the reinvestment of all distributions.
Please see page 7 for a description of the index. Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.
Market review
Small-cap stocks experienced periods of volatility during the Fund’s fiscal year ended Nov. 30, 2019. The Fund’s benchmark, the Russell 2000 Index, started the fiscal year with a sharp pullback during December 2018 and recovered during the first few months of 2019 to end the period with an increase of 7.51%. Growth stocks led thesmall-cap market during most of the fiscal year as the Russell 2000® Growth Index advanced 10.93% and the Russell 2000® Value Index gained 3.96%.Larger-cap companies outperformed during the fiscal year, with the Russell 1000® Index gaining 16.10% while the smallest segment of the US equity market, tracked by the Russell Microcap® Index, lagged with a 1.87% return.
The Russell 2000 Index ended the fiscal year trading at a forwardprice-to-earnings (P/E) ratio of 16.4 after starting the fiscal year at 15.4. The Russell 1000 Index’s P/E of 18.1 placedsmall-cap stocks at 9% discount relative tolarge-cap stocks, significantly less than the 4% long-term average premium of small-caps. Sector-level performance within the Russell 2000 Index was mixed during the fiscal year with 12 of 16 sectors advancing and four declining. The strongest performing sectors in the benchmark were technology, credit cyclicals, real estate investment trusts (REITs), capital goods, and utilities, which
|
|
In our opinion, Delaware Small Cap Core Fund benefited from:
● favorable stock selection in business services, finance, healthcare, and communications services
● the pending acquisitions of 12 companies in the portfolio
● a macroeconomic environment that favors active managers
● attractive valuations and earnings growth rates. |
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Portfolio management review | ||
Delaware Small Cap Core Fund |
each advanced more than 10% during the fiscal year. Four sectors in the benchmark declined during the fiscal year, with energy the weakest, followed by companies in the communications services, consumer staples, and media sectors.
On the economic front, the gross domestic product (GDP) growth rate slowed with the third quarter, measuring 2.1%. At 3.5% in November, the unemployment rate remained at historically low levels. While the Conference Board Consumer Confidence Index® (1985=100, SA) trended lower over the year, a November survey of 125.5 continued to indicate confidence. In the manufacturing sector, the Purchasing Managers’ Index (PMI®) has remained below 50 four months in a row; the November report was 48.1%. The National Federation of Independent Business (NFIB) Small Business Optimism Index had a strong reading of 104.7 in November as small business owners understand that they are in a supportive environment.
Source: Bloomberg.
Within the Fund
For the fiscal year ended Nov. 30, 2019, Delaware Small Cap Core Fund Institutional Class shares gained 8.06%. The Fund’s Class A shares rose 7.79% at net asset value (NAV) and 1.59% at maximum offer price. These figures reflect reinvestment of all distributions. During the same period, the Fund’s benchmark, the Russell 2000 Index, gained 7.51%. For complete annualized performance of Delaware Small Cap Core Fund, please see the table on page 5.
Stock selection drove the Fund’s relative outperformance during the fiscal year, with significant contributions from companies in the business services, finance, healthcare, and communications services sectors. Stock selection in the credit cyclicals, technology, consumer services, and utilities sectors detracted from the Fund’s relative performance.
Genetic-testing and diagnostics-testing companyNatera Inc. contributed to the Fund’s performance during the fiscal year. Natera’s two main tests are Panorama, anon-invasive prenatal screening test and Horizon, a carrier screen for inherited diseases. Natera’s screening volumes for Panorama and Horizon continued to grow during the period and the company was able to increase pricing, which further improved revenues and margins. Natera progressed with its plans to develop personalized cancer monitoring by announcing a partnership with Foundation Medicine Inc. to develop and commercialize personalized circulating tumor DNA monitoring assays, which should accelerate the company’s progress in oncology.
During the Fund’s fiscal year, 12 holdings announced plans to be acquired. The Fund’s first takeout was announced in February, when Roche Holding AG announced it had entered into a definitive agreement to acquireSpark Therapeutics Inc. in anall-cash transaction with a total equity value of $4.8 billion. A contributor to the Fund’s performance, Spark Therapeutics is a pioneer in gene therapy, leveraging fundamental discoveries that the company made at the Children’s Hospital of Philadelphia. The company’s gene therapies have the potential to produce long-lasting effects after a patient receives a single dose. Two of its therapies, LUXTURNA®, to treat inherited retinal disease, and fidanacogene elaparvovec, to treat hemophilia B, have already received breakthrough therapy designations from the US Food and Drug Administration (FDA). (Spark Therapeutics transitioned fidanacogene elaparvovec, formerly known asSPK-9001, to its collaborator, Pfizer Inc., in February 2019.) LUXTURNA has also been awarded a rare pediatric disease designation and an orphan product designation from the FDA, making it the firstFDA-approved gene therapy for a genetic disease. Following the announcement of the acquisition, we trimmed the Fund’s position in
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Spark Therapeutics and continue to hold the shares until we receive cash when the deal closes in December.
Q2 Holdings Inc., a contributor to performance, is modernizing the online banking market by providing next generation, cloud-based solutions that address the increasingly complex demands of retail and corporate banking customers. Q2 has generated consistently strong revenue growth by winning more new deals with larger customers, and cross-selling existing customers new solutions andadd-on technologies. The company has improved its profitability, is growing cash flow, and trades at what we consider to be an attractive valuation.
A detractor from the Fund’s relative performance during the fiscal year,Merit Medical Systems Inc. is a medical-device company engaged in the development, manufacture, and distribution of proprietary disposable medical devices used in interventional, diagnostic, and therapeutic procedures, particularly in cardiology, radiology, oncology, critical care, and endoscopy. Shares of Merit Medical detracted during the fiscal year as the stock sold off when the company lowered its sales expectations. The main headwinds faced by the company were slower-than-expected sales from Cianna Medical, a wire-free breast-cancer location system, and ClariVein®, a specialty infusion and occlusion catheter system. Both were recent company acquisitions. Merit Medical’s management is focused on improving its financial issues and has established parameters for cash flow and improvements to operating efficiency. While we were disappointed with the company’s recent results, as longer-term investors, we view Merit Medical’s valuation as attractive and believe the company is taking necessary steps to improve its earnings.
In the credit cyclicals sector,Tenneco Inc. also detracted from performance. Tenneco designs, manufactures, and distributes engineered
products for automobiles and commercial trucks. Tenneco operates two businesses, Aftermarket and Ride Performance, which the company calls DRiV, and Powertrain Technology. Tenneco expected to spinoff the DRiV business in the second half of 2019 but had to delay due toend-market headwinds that have pressured its financials. We remain invested in Tenneco as its valuation is discounted and management is committed to taking strategic actions to reduce leverage and keep the spinoff timeline moving forward, in our opinion.
Granite Construction Inc., a civil contractor and construction-materials producer, detracted from performance. Granite’s principal projects are infrastructure-related and include bridges, tunnels, rail, and road. During the fiscal year, shares of Granite underperformed as issues in its Heavy Civil group hurt the company’s earnings before interest, taxes, depreciation and amortization (EBITDA). Management acknowledged disappointment in the results from its Heavy Civil group and accelerated a strategic review of the business that resulted in a replacement of the group’s management and implementation of a new project-pricing model to mitigate risk. Granite plans to continue reducing the projects in its Heavy Civil business as it focuses on growing its construction, materials, water, and transportation segments. In our view, Granite’s backlog is healthy, the funding environment is robust, and the company continues to win new business in markets where it has a strategic advantage.
With respect to sector positioning, the Fund ended the fiscal period with its largest relative overweight positions in basic materials, capital goods, utilities, finance, and REITs. The largest sector underweights were in energy, credit cyclicals, transportation, and consumer staples. On balance, we believe the macroeconomic environment favors active managers that can apply thorough company-level analysis when making investment decisions. We continue to
3
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Portfolio management review | ||
Delaware Small Cap Core Fund |
maintain our strategy of investing in companies that, we believe, have strong balance sheets and cash flow, sustainable competitive advantages, and high-quality management teams with the ability to deliver value to shareholders.
We appreciate your confidence and look forward to serving your investment needs in the next fiscal year.
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Performance summary | ||
Delaware Small Cap Core Fund | November 30, 2019 (Unaudited) |
The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 800523-1918 or visiting delawarefunds.com/performance.
Fund and benchmark performance1,2 | Average annual total returns through November 30, 2019 | |||||||||||||||
1 year | 5 year | 10 year | Lifetime | |||||||||||||
Class A (Est. Dec. 29, 1998) | ||||||||||||||||
Excluding sales charge | +7.79% | +8.44% | +13.70% | +10.40% | ||||||||||||
Including sales charge | +1.59% | +7.16% | +13.04% | +10.09% | ||||||||||||
Class C (Est. Aug. 1, 2005) | ||||||||||||||||
Excluding sales charge | +6.99% | +7.64% | +12.85% | +7.16% | ||||||||||||
Including sales charge | +6.03% | +7.64% | +12.85% | +7.16% | ||||||||||||
Class R (Est. Aug. 1, 2005) | ||||||||||||||||
Excluding sales charge | +7.55% | +8.18% | +13.42% | +7.70% | ||||||||||||
Including sales charge | +7.55% | +8.18% | +13.42% | +7.70% | ||||||||||||
Institutional Class (Est. Dec. 29, 1998) | ||||||||||||||||
Excluding sales charge | +8.06% | +8.72% | +13.98% | +10.59% | ||||||||||||
Including sales charge | +8.06% | +8.72% | +13.98% | +10.59% | ||||||||||||
Class R6 (Est. May 2, 2016) | ||||||||||||||||
Excluding sales charge | +8.20% | — | — | +12.46% | ||||||||||||
Including sales charge | +8.20% | — | — | +12.46% | ||||||||||||
Russell 2000 Index | +7.51% | +8.22% | +12.38% | +8.09%* |
*The benchmark lifetime return is for Institutional Class share comparison only and is calculated using the last business day in the month of the Fund’s Institutional Class inception date.
1 Returns reflect the reinvestment of all distributions and are presented both with and without the applicable sales charges described below. Returns do not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares.
Expense limitations were in effect for certain classes during some or all of the periods shown in the “Fund and benchmark performance” table. Expenses for each class are listed on the “Fund expense ratios” table on page 6. Performance would have been lower had expense limitations not been in effect.
Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors. In addition, Institutional Class shares pay no distribution and service(12b-1) fee.
Class A shares are sold with a maximumfront-end sales charge of 5.75%, and have an annual12b-1 fee of 0.25% of average daily net assets. Performance for Class A shares, excluding sales charges, assumes that nofront-end sales charge applied.
Class C shares are sold with a contingent deferred sales charge of 1.00% if redeemed during the first 12 months. They are also subject to an annual
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Performance summary
Delaware Small Cap Core Fund
12b-1 fee of 1.00% of average daily net assets. Performance for Class C shares, excluding sales charges, assumes either that contingent deferred sales charges did not apply or that the investment was not redeemed.
Class R shares are available only for certain retirement plan products. They are sold without a sales charge and have an annual12b-1 fee of 0.50% of average daily net assets.
Class R6 shares are available only to certain investors. In addition, Class R6 shares do not pay any12b-1 fees,sub-accounting fees, and/orsub-transfer agency fees to any brokers, dealers, or other financial intermediaries.
Narrowly focused investments may exhibit higher volatility than investments in multiple industry sectors.
Investments in small and/ormedium-sized companies typically exhibit greater risk and higher volatility than larger, more established companies. REIT investments are subject to many of the risks associated with direct real estate ownership, including changes in economic conditions, credit risk, and interest rate fluctuations.
International investments entail risks not ordinarily associated with US investments including fluctuation in currency values, differences in accounting principles, or economic or political instability in other nations.
Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility and lower trading volume.
2 The Fund’s expense ratios, as described in the most recent prospectus, are disclosed in the following “Fund expense ratios” table. Please see the “Financial highlights” section in this report for the most recent expense ratios.
Fund expense ratios | Class A | Class C | Class R | Institutional Class | Class R6 | |||||||||||||||
Total annual operating expenses (without fee waivers) | 1.12% | 1.87% | 1.37% | 0.87% | 0.74% | |||||||||||||||
Net expenses (including fee waivers, if any) | 1.12% | 1.87% | 1.37% | 0.87% | 0.74% | |||||||||||||||
Type of waiver | n/a | n/a | n/a | n/a | n/a |
6
Table of Contents
Performance of a $10,000 investment1
Average annual total returns from Nov. 30, 2009 through Nov. 30, 2019
1 The “Performance of a $10,000 investment” graph assumes $10,000 invested in Institutional Class and Class A shares of the Fund on Nov. 30, 2009, and includes the effect of a 5.75%front-end sales charge (for Class A shares) and the reinvestment of all distributions. The graph does not reflect the deduction of taxes the shareholders would pay on Fund distributions or redemptions of Fund shares. Expense limitations were in effect for some or all of the periods shown. Performance would have been lower had expense limitations not been in effect. Expenses are listed in the “Fund expense ratios” table on page 6. Please note additional details on pages 5 through 8.
The graph also assumes $10,000 invested in the Russell 2000 Index as of Nov. 30, 2009. The Russell 2000 Index measures the performance of thesmall-cap segment of the US equity universe.
The Russell 2000 Growth Index, mentioned on page 1, measures the performance of thesmall-cap growth segment of the US equity universe.
It includes those Russell 2000
companies with higherprice-to-book ratios and higher forecasted growth values.
The Russell 2000 Value Index, mentioned on page 1, measures the performance of thesmall-cap value segment of the US equity universe. It includes those Russell 2000 companies with lowerprice-to-book ratios and lower forecasted growth values.
The Russell 1000 Index, mentioned on page 1, measures the performance of thelarge-cap segment of the US equity universe.
The Russell Microcap Index, mentioned on page 1, measures almost 1,550small-cap andmicro-cap stocks, including the smallest 1,000 companies in the Russell 2000 Index, plus 1,000 smallerUS-based listed stocks.
The Conference Board Consumer Confidence Index, mentioned on page 2, is a barometer of the health of the US economy from the perspective of the consumer. The index is based on consumers’ perceptions of current business and employment conditions, as well as their expectations for
7
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Performance summary
Delaware Small Cap Core Fund
six months hence regarding business conditions, employment, and income. The resulting relative value is then used as an “index value” and compared against each respective monthly value for 1985. In that year, the result of the index was arbitrarily set at 100, representing it as the index benchmark.
The NFIB Small Business Optimism Index, mentioned on page 2, is a survey asking small business owners a battery of questions related to their expectations for the future and their plans to hire, build inventory, borrow, and expand.
The Purchasing Managers’ Index (PMI), mentioned on page 2, is an indicator of the economic health of the manufacturing sector. A PMI reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally declining.
Theprice-to-earnings (P/E) ratio is a valuation ratio of a company’s current share price compared to its earnings per share. In this case, P/E is calculated using consensus forecasted earnings per share for the next 12 months.
Gross domestic product is a measure of all goods and services produced by a nation in a year.
Frank Russell Company is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company.
Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.Past performance is not a guarantee of future results.
Performance of other Fund classes will vary due to different charges and expenses.
Nasdaq symbols | CUSIPs | |||||
Class A | DCCAX | 24610B883 | ||||
Class C | DCCCX | 24610B867 | ||||
Class R | DCCRX | 24610B834 | ||||
Institutional Class | DCCIX | 24610B859 | ||||
Class R6
| DCZRX
| 24610B826
|
8
Table of Contents
For thesix-month period from June 1, 2019 to November 30, 2019 (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 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 entiresix-month period from June 1, 2019 to Nov. 30, 2019.
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 assume reinvestment of all dividends and distributions.
9
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Disclosure of Fund expenses
For thesix-month period from June 1, 2019 to November 30, 2019 (Unaudited)
Delaware Small Cap Core Fund
Expense analysis of an investment of $1,000
Beginning
| Ending | Expenses | ||||||||||||||
Account Value
| Account Value | Annualized | Paid During Period | |||||||||||||
6/1/19 | 11/30/19 | Expense Ratio | 6/1/19 to 11/30/19* | |||||||||||||
Actual Fund return† | ||||||||||||||||
Class A | $1,000.00 | $1,126.20 | 1.10% | $5.86 | ||||||||||||
Class C | 1,000.00 | 1,122.40 | 1.85% | 9.84 | ||||||||||||
Class R | 1,000.00 | 1,125.50 | 1.35% | 7.19 | ||||||||||||
Institutional Class | 1,000.00 | 1,127.90 | 0.85% | 4.53 | ||||||||||||
Class R6 | 1,000.00 | 1,128.70 | 0.72% | 3.84 | ||||||||||||
Hypothetical 5% return (5% return before expenses) |
| |||||||||||||||
Class A | $1,000.00 | $1,019.55 | 1.10% | $5.57 | ||||||||||||
Class C | 1,000.00 | 1,015.79 | 1.85% | 9.35 | ||||||||||||
Class R | 1,000.00 | 1,018.30 | 1.35% | 6.83 | ||||||||||||
Institutional Class | 1,000.00 | 1,020.81 | 0.85% | 4.31 | ||||||||||||
Class R6 | 1,000.00 | 1,021.46 | 0.72% | 3.65 |
*“Expenses Paid During Period” are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 183/365 (to reflect theone-half year period).
† Because actual returns reflect only the most recentsix-month period, the returns shown may differ significantly from fiscal year returns.
In addition to the Fund’s expenses reflected above, the Fund also indirectly bears its portion of the fees and expenses of the investment companies (Underlying Funds) in which it invests. The table above does not reflect the expenses of the Underlying Funds.
10
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Security type / sector allocation and
top 10 equity holdings
Delaware Small Cap Core Fund | As of November 30, 2019 (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 | 97.82% | |
Basic Materials | 8.43% | |
Business Services | 4.79% | |
Capital Goods | 10.12% | |
Communications Services | 1.25% | |
Consumer Discretionary | 3.66% | |
Consumer Services | 2.74% | |
Consumer Staples | 2.09% | |
Credit Cyclicals | 0.93% | |
Energy | 0.48% | |
Financials | 17.96% | |
Healthcare | 16.86% | |
Information Technology | 14.13% | |
Media | 0.43% | |
Real Estate Investment Trusts | 8.64% | |
Transportation | 0.68% | |
Utilities | 4.63% | |
Short-Term Investments | 2.08% | |
Total Value of Securities | 99.90% | |
Receivables and Other Assets Net of Liabilities | 0.10% | |
Total Net Assets | 100.00% |
Holdings are for informational purposes only and are subject to change at any time. They are not a recommendation to buy, sell, or hold any security.
Top 10 equity holdings
| Percentage of net assets
| |
Spire | 1.65% | |
South Jersey Industries | 1.60% | |
Steven Madden | 1.52% | |
First Industrial Realty Trust | 1.41% | |
NorthWestern | 1.37% | |
Q2 Holdings | 1.36% | |
Repligen | 1.29% | |
Federal Signal | 1.24% | |
CONMED | 1.24% | |
Stifel Financial
| 1.23%
|
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Table of Contents
Schedule of investments | ||
Delaware Small Cap Core Fund | November 30, 2019 |
Number of shares | Value (US $) | |||||||
Common Stock – 97.82% | ||||||||
Basic Materials – 8.43% | ||||||||
Balchem | 342,317 | $ | 34,105,043 | |||||
Boise Cascade | 1,527,079 | 57,906,836 | ||||||
Coeur Mining † | 3,014,830 | 19,777,285 | ||||||
Continental Building Products † | 1,678,273 | 61,743,664 | ||||||
Kaiser Aluminum | 525,813 | 57,618,588 | ||||||
Minerals Technologies | 987,777 | 53,339,958 | ||||||
Neenah | 794,753 | 57,842,123 | ||||||
Quaker Chemical | 217,267 | 32,422,754 | ||||||
Worthington Industries | 1,251,712 | 47,940,570 | ||||||
|
| |||||||
422,696,821 | ||||||||
|
| |||||||
Business Services – 4.79% | ||||||||
ABM Industries | 1,256,242 | 47,724,634 | ||||||
ASGN† | 724,138 | 48,524,487 | ||||||
BrightView Holdings † | 1,704,981 | 27,347,895 | ||||||
Casella Waste Systems Class A † | 1,052,363 | 49,155,876 | ||||||
Mobile Mini | 624,531 | 23,707,197 | ||||||
US Ecology | 792,137 | 43,559,614 | ||||||
|
| |||||||
240,019,703 | ||||||||
|
| |||||||
Capital Goods – 10.12% | ||||||||
Applied Industrial Technologies | 770,625 | 49,204,406 | ||||||
Barnes Group | 503,036 | 29,774,701 | ||||||
Belden | 627,539 | 33,723,946 | ||||||
Columbus McKinnon | 1,078,221 | 44,293,319 | ||||||
ESCO Technologies | 392,430 | 34,561,310 | ||||||
Federal Signal | 1,894,122 | 62,392,379 | ||||||
Granite Construction | 955,929 | 24,624,731 | ||||||
Kadant | 413,546 | 40,279,380 | ||||||
MasTec † | 731,882 | 48,553,052 | ||||||
MYR Group † | 1,015,289 | 34,885,330 | ||||||
Rexnord † | 1,013,513 | 32,016,876 | ||||||
Tetra Tech | 667,527 | 58,935,959 | ||||||
Woodward | 119,649 | 13,973,807 | ||||||
|
| |||||||
507,219,196 | ||||||||
|
| |||||||
Communications Services – 1.25% | ||||||||
ATN International | 422,504 | 23,723,600 | ||||||
InterXion Holding † | 459,248 | 39,054,450 | ||||||
|
| |||||||
62,778,050 | ||||||||
|
| |||||||
Consumer Discretionary – 3.66% | ||||||||
American Eagle Outfitters | 2,902,340 | 43,448,030 | ||||||
Five Below † | 246,271 | 30,466,185 |
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Table of Contents
Number of shares | Value (US $) | |||||||
Common Stock(continued) | ||||||||
Consumer Discretionary(continued) | ||||||||
Malibu Boats Class A † | 852,093 | $ | 33,691,757 | |||||
Steven Madden | 1,789,631 | 76,005,628 | ||||||
|
| |||||||
183,611,600 | ||||||||
|
| |||||||
Consumer Services – 2.74% | ||||||||
Cheesecake Factory | 1,014,257 | 44,231,748 | ||||||
Chuy’s Holdings † | 537,335 | 15,485,995 | ||||||
Jack in the Box | 626,453 | 49,671,458 | ||||||
Wendy’s | 1,310,505 | 28,097,227 | ||||||
|
| |||||||
137,486,428 | ||||||||
|
| |||||||
Consumer Staples – 2.09% | ||||||||
J&J Snack Foods | 250,937 | 46,423,345 | ||||||
Prestige Consumer Healthcare † | 1,539,726 | 58,155,451 | ||||||
|
| |||||||
104,578,796 | ||||||||
|
| |||||||
Credit Cyclicals – 0.93% | ||||||||
Taylor Morrison Home † | 1,585,357 | 36,811,989 | ||||||
Tenneco Class A | 794,058 | 9,838,379 | ||||||
|
| |||||||
46,650,368 | ||||||||
|
| |||||||
Energy – 0.48% | ||||||||
NexTier Oilfield Solutions † | 1,932,959 | 9,258,874 | ||||||
Patterson-UTI Energy | 1,400,028 | 12,516,250 | ||||||
SRC Energy † | 622,123 | 2,220,979 | ||||||
|
| |||||||
23,996,103 | ||||||||
|
| |||||||
Financials – 17.96% | ||||||||
American Equity Investment Life Holding | 1,802,712 | 53,576,601 | ||||||
Bryn Mawr Bank | 530,334 | 20,826,216 | ||||||
CenterState Bank | 1,998,553 | 50,823,203 | ||||||
City Holding | 372,506 | 29,606,777 | ||||||
Essent Group | 1,079,428 | 58,990,740 | ||||||
First Bancorp | 836,436 | 32,704,648 | ||||||
First Financial Bancorp | 2,129,084 | 51,779,323 | ||||||
First Interstate BancSystem Class A | 892,912 | 37,591,595 | ||||||
Great Western Bancorp | 1,531,624 | 52,641,917 | ||||||
Hamilton Lane Class A | 556,494 | 32,276,652 | ||||||
Independent Bank | 492,709 | 41,486,098 | ||||||
Independent Bank Group | 930,622 | 53,631,746 | ||||||
Kemper | 213,162 | 15,756,935 | ||||||
MGIC Investment | 2,592,459 | 37,357,334 | ||||||
Old National Bancorp | 2,923,222 | 52,851,854 | ||||||
Primerica | 115,792 | 15,497,601 | ||||||
Selective Insurance Group | 562,071 | 37,220,342 | ||||||
Stifel Financial | 988,031 | 61,771,698 | ||||||
Umpqua Holdings | 1,926,870 | 31,542,862 |
13
Table of Contents
Schedule of investments
Delaware Small Cap Core Fund
Number of shares | Value (US $) | |||||||
Common Stock(continued) | ||||||||
Financials(continued) | ||||||||
United Community Banks | 1,230,965 | $ | 38,159,915 | |||||
Valley National Bancorp | 3,793,782 | 43,931,995 | ||||||
WesBanco | 601,836 | 21,954,977 | ||||||
WSFS Financial | 635,630 | 28,342,742 | ||||||
|
| |||||||
900,323,771 | ||||||||
|
| |||||||
Healthcare – 16.86% | ||||||||
Adamas Pharmaceuticals † | 1,715,010 | 10,204,309 | ||||||
Agios Pharmaceuticals † | 710,686 | 27,645,685 | ||||||
CONMED | 549,111 | 62,197,803 | ||||||
CryoLife † | 1,352,326 | 33,443,022 | ||||||
Intercept Pharmaceuticals † | 387,446 | 41,987,523 | ||||||
Ligand Pharmaceuticals † | 450,346 | 50,889,098 | ||||||
Medicines † | 695,314 | 58,545,439 | ||||||
Merit Medical Systems † | 1,302,640 | 36,473,920 | ||||||
Natera † | 1,342,725 | 48,996,035 | ||||||
NuVasive † | 674,674 | 48,738,450 | ||||||
Quidel † | 839,281 | 57,591,462 | ||||||
Repligen † | 730,845 | 64,862,494 | ||||||
Retrophin † | 2,345,502 | 32,532,113 | ||||||
Spark Therapeutics † | 141,745 | 15,753,539 | ||||||
Spectrum Pharmaceuticals † | 2,421,695 | 21,746,821 | ||||||
Supernus Pharmaceuticals † | 1,065,960 | 24,922,145 | ||||||
Tabula Rasa HealthCare † | 739,351 | 32,982,448 | ||||||
Teladoc Health † | 590,228 | 49,425,693 | ||||||
Ultragenyx Pharmaceutical † | 945,227 | 37,478,250 | ||||||
Vanda Pharmaceuticals † | 2,405,753 | 40,248,248 | ||||||
Wright Medical Group † | 1,629,900 | 48,522,123 | ||||||
|
| |||||||
845,186,620 | ||||||||
|
| |||||||
Information Technology – 14.13% | ||||||||
Anixter International † | 303,299 | 26,035,186 | ||||||
Blackbaud | 239,584 | 19,856,722 | ||||||
Brooks Automation | 1,107,589 | 49,586,759 | ||||||
Chegg † | 637,904 | 24,731,538 | ||||||
ExlService Holdings † | 812,032 | 56,687,954 | ||||||
II-VI † | 1,407,983 | 41,099,024 | ||||||
j2 Global | 618,231 | 59,980,772 | ||||||
LendingTree † | 56,532 | 20,381,482 | ||||||
MACOM Technology Solutions Holdings † | 283,769 | 7,000,581 | ||||||
MaxLinear † | 1,899,915 | 37,751,311 | ||||||
Mimecast † | 442,558 | 19,627,447 | ||||||
NETGEAR † | 808,024 | 20,289,483 | ||||||
Paylocity Holding † | 161,305 | 19,730,828 |
14
Table of Contents
Number of shares | Value (US $) | |||||||
Common Stock(continued) | ||||||||
Information Technology(continued) | ||||||||
Plantronics | 704,817 | $ | 17,860,063 | |||||
Q2 Holdings † | 810,085 | 68,395,476 | ||||||
Rapid7 † | 880,591 | 49,374,737 | ||||||
Semtech † | 938,440 | 45,476,802 | ||||||
Silicon Laboratories † | 358,938 | 38,022,302 | ||||||
WNS Holdings ADR † | 906,651 | 57,227,811 | ||||||
Yelp † | 839,016 | 29,097,075 | ||||||
|
| |||||||
708,213,353 | ||||||||
|
| |||||||
Media – 0.43% | ||||||||
Nexstar Media Group Class A | 201,960 | 21,753,112 | ||||||
|
| |||||||
21,753,112 | ||||||||
|
| |||||||
Real Estate Investment Trusts – 8.64% | ||||||||
American Assets Trust | 684,030 | 32,511,946 | ||||||
Armada Hoffler Properties | 1,759,436 | 31,775,414 | ||||||
Cousins Properties | 702,443 | 28,441,917 | ||||||
EastGroup Properties | 423,194 | 57,634,791 | ||||||
First Industrial Realty Trust | 1,660,461 | 70,702,429 | ||||||
Kite Realty Group Trust | 2,399,845 | 46,437,001 | ||||||
Mack-Cali Realty | 1,512,031 | 32,342,343 | ||||||
Pebblebrook Hotel Trust | 1,581,191 | 41,427,204 | ||||||
Physicians Realty Trust | 2,310,073 | 44,330,301 | ||||||
RPT Realty | 3,234,478 | 47,805,585 | ||||||
|
| |||||||
433,408,931 | ||||||||
|
| |||||||
Transportation – 0.68% | ||||||||
Hub Group Class A † | 669,090 | 34,170,426 | ||||||
|
| |||||||
34,170,426 | ||||||||
|
| |||||||
Utilities – 4.63% | ||||||||
NorthWestern | 962,094 | 68,857,068 | ||||||
South Jersey Industries | 2,574,581 | 80,429,910 | ||||||
Spire | 1,068,024 | 82,686,418 | ||||||
|
| |||||||
231,973,396 | ||||||||
|
| |||||||
Total Common Stock(cost $4,606,030,694) | 4,904,066,674 | |||||||
|
| |||||||
Short-Term Investments – 2.08% | ||||||||
Money Market Mutual Funds – 2.08% | ||||||||
BlackRock FedFund – Institutional Shares (seven-day effective yield 1.55%) | 20,811,841 | 20,811,840 | ||||||
Fidelity Investments Money Market Government Portfolio – Class I (seven-day effective yield 1.53%) | 20,811,840 | 20,811,840 | ||||||
GS Financial Square Government Fund – Institutional Shares (seven-day effective yield 1.54%) | 20,811,840 | 20,811,840 |
15
Table of Contents
Schedule of investments
Delaware Small Cap Core Fund
Number of shares | Value (US $) | |||||||
Short-Term Investments(continued) | ||||||||
Money Market Mutual Funds(continued) | ||||||||
Morgan Stanley Government Portfolio – Institutional Share | 20,811,840 | $ | 20,811,840 | |||||
State Street Institutional US Government Money Market | 20,811,840 | 20,811,840 | ||||||
|
| |||||||
Total Short-Term Investments(cost $104,059,201) | 104,059,200 | |||||||
|
| |||||||
Total Value of Securities – 99.90% | $ | 5,008,125,874 | ||||||
|
|
† | Non-income producing security. |
Summary of Abbreviations:
ADR – American Depositary Receipt
GS – Goldman Sachs
See accompanying notes, which are an integral part of the financial statements.
16
Table of Contents
Statement of assets and liabilities | ||
Delaware Small Cap Core Fund | November 30, 2019 |
Assets: | ||||
Investments, at value1 | $ | 5,008,125,874 | ||
Cash | 3,076,402 | |||
Receivable for fund shares sold | 7,580,981 | |||
Dividends and interest receivable | 4,142,905 | |||
|
| |||
Total assets | 5,022,926,162 | |||
|
| |||
Liabilities: | ||||
Payable for fund shares redeemed | 3,075,569 | |||
Investment management fees payable to affiliates | 2,590,531 | |||
Payable for securities purchased | 2,496,921 | |||
Dividend disbursing and transfer agent fees and expenses payable tonon-affiliates | 791,597 | |||
Other accrued expenses | 318,430 | |||
Reports and statements to shareholders expenses payable tonon-affiliates | 182,259 | |||
Distribution fees payable to affiliates | 181,581 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 34,939 | |||
Accounting and administration expenses payable to affiliates | 13,774 | |||
Legal fees payable to affiliates | 8,475 | |||
Reports and statements to shareholders expenses payable to affiliates | 2,869 | |||
Trustees’ fees and expenses payable to affiliates | 72 | |||
|
| |||
Total liabilities | 9,697,017 | |||
|
| |||
Total Net Assets | $ | 5,013,229,145 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 4,651,810,354 | ||
Total distributable earnings (loss) | 361,418,791 | |||
|
| |||
Total Net Assets | $ | 5,013,229,145 | ||
|
|
17
Table of Contents
Statement of assets and liabilities
Delaware Small Cap Core Fund
Net Asset Value | ||||
Class A: | ||||
Net assets | $ | 279,872,013 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 12,062,215 | |||
Net asset value per share | $ | 23.20 | ||
Sales charge | 5.75 | % | ||
Offering price per share, equal to net asset value per share / (1 – sales charge) | $ | 24.62 | ||
Class C: | ||||
Net assets | $ | 139,807,523 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 6,870,453 | |||
Net asset value per share | $ | 20.35 | ||
Class R: | ||||
Net assets | $ | 27,630,851 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 1,237,595 | |||
Net asset value per share | $ | 22.33 | ||
Institutional Class: | ||||
Net assets | $ | 3,888,603,460 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 163,294,927 | |||
Net asset value per share | $ | 23.81 | ||
Class R6: | ||||
Net assets | $ | 677,315,298 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 28,401,339 | |||
Net asset value per share | $ | 23.85 | ||
| ||||
1Investments, at cost | $ | 4,710,089,895 |
See accompanying notes, which are an integral part of the financial statements.
18
Table of Contents
Statement of operations | ||
Delaware Small Cap Core Fund | Year ended November 30, 2019 |
Investment Income: | ||||
Dividends | $ | 55,984,542 | ||
Interest | 609,270 | |||
|
| |||
56,593,812 | ||||
|
| |||
Expenses: | ||||
Management fees | 29,143,688 | |||
Dividend disbursing and transfer agent fees and expenses | 6,069,617 | |||
Distribution expenses — Class A | 669,290 | |||
Distribution expenses — Class C | 1,449,261 | |||
Distribution expenses — Class R | 136,110 | |||
Accounting and administration expenses | 831,502 | |||
Reports and statements to shareholders expenses | 593,240 | |||
Registration fees | 285,745 | |||
Trustees’ fees and expenses | 260,174 | |||
Legal fees | 198,154 | |||
Custodian fees | 141,220 | |||
Audit and tax fees | 36,013 | |||
Other | 131,712 | |||
|
| |||
39,945,726 | ||||
Less expenses paid indirectly | (20,821 | ) | ||
|
| |||
Total operating expenses | 39,924,905 | |||
|
| |||
Net Investment Income | 16,668,907 | |||
|
| |||
Net Realized and Unrealized Gain: | ||||
Net realized gain on investments | 59,919,437 | |||
Net change in unrealized appreciation (depreciation) of investments | 298,900,482 | |||
|
| |||
Net Realized and Unrealized Gain | 358,819,919 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 375,488,826 | ||
|
|
See accompanying notes, which are an integral part of the financial statements.
19
Table of Contents
Statements of changes in net assets
Delaware Small Cap Core Fund
Year ended | ||||||||
11/30/19 | 11/30/18 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 16,668,907 | $ | 13,516,669 | ||||
Net realized gain | 59,919,437 | 343,964,368 | ||||||
Net change in unrealized appreciation (depreciation) | 298,900,482 | (438,421,978 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | 375,488,826 | (80,940,941 | ) | |||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Distributable earnings: | ||||||||
Class A | (23,201,283 | ) | (24,118,583 | ) | ||||
Class C | (15,155,451 | ) | (12,756,944 | ) | ||||
Class R | (2,408,871 | ) | (2,553,434 | ) | ||||
Institutional Class | (284,199,890 | ) | (170,782,143 | ) | ||||
Class R6 | (35,356,232 | ) | (3,959,994 | ) | ||||
|
|
|
| |||||
(360,321,727 | ) | (214,171,098 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Class A | 75,268,971 | 122,183,732 | ||||||
Class C | 12,865,967 | 55,673,270 | ||||||
Class R | 5,369,377 | 9,215,190 | ||||||
Institutional Class | 1,456,229,567 | 2,097,348,975 | ||||||
Class R6 | 321,865,935 | 501,388,246 | ||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | 22,970,955 | 23,939,317 | ||||||
Class C | 15,002,741 | 12,623,788 | ||||||
Class R | 2,408,397 | 2,553,432 | ||||||
Institutional Class | 234,609,635 | 138,241,898 | ||||||
Class R6 | 33,313,487 | 3,959,994 | ||||||
|
|
|
| |||||
2,179,905,032 | 2,967,127,842 | |||||||
|
|
|
|
20
Table of Contents
Year ended | ||||||||
11/30/19 | 11/30/18 | |||||||
Capital Share Transactions (continued): | ||||||||
Cost of shares redeemed: | ||||||||
Class A | $ | (103,447,595 | ) | $ | (161,013,497 | ) | ||
Class C | (49,231,885 | ) | (40,269,838 | ) | ||||
Class R | (7,898,063 | ) | (14,304,721 | ) | ||||
Institutional Class | (1,255,551,504 | ) | (819,289,460 | ) | ||||
Class R6 | (115,555,694 | ) | (125,112,319 | ) | ||||
|
|
|
| |||||
(1,531,684,741 | ) | (1,159,989,835 | ) | |||||
|
|
|
| |||||
Increase in net assets derived from capital share transactions | 648,220,291 | 1,807,138,007 | ||||||
|
|
|
| |||||
Net Increase in Net Assets | 663,387,390 | 1,512,025,968 | ||||||
Net Assets: | ||||||||
Beginning of year | 4,349,841,755 | 2,837,815,787 | ||||||
|
|
|
| |||||
End of year | $ | 5,013,229,145 | $ | 4,349,841,755 | ||||
|
|
|
|
See accompanying notes, which are an integral part of the financial statements.
21
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 income (loss)1 |
Net realized and unrealized gain |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period |
Total return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of net investment income (loss) to average net assets |
Portfolio turnover
|
1 | The average shares outstanding method has been applied for per share information. |
2 | Total 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.
22
Table of Contents
Year ended | ||||||||||||||||||||
|
| |||||||||||||||||||
11/30/19 | 11/30/18 | 11/30/17 | 11/30/16 | 11/30/15 | ||||||||||||||||
| ||||||||||||||||||||
$ | 23.91 | $ | 25.74 | $ | 22.23 | $ | 20.32 | $ | 20.43 | |||||||||||
�� | ||||||||||||||||||||
0.03 | 0.05 | (0.03 | ) | (0.02 | ) | (0.04 | ) | |||||||||||||
1.25 | 0.04 | 3.78 | 2.52 | 1.01 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
1.28 | 0.09 | 3.75 | 2.50 | 0.97 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(0.02) | — | — | — | — | ||||||||||||||||
(1.97) | (1.92 | ) | (0.24 | ) | (0.59 | ) | (1.08 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(1.99) | (1.92 | ) | (0.24 | ) | (0.59 | ) | (1.08 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
$ | 23.20 | $ | 23.91 | $ | 25.74 | $ | 22.23 | $ | 20.32 | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
7.79% | 0.44% | 17.02% | 12.86% | 4.86% | ||||||||||||||||
$279,872 | $ | 288,721 | $ | 324,710 | $ | 358,054 | $ | 266,427 | ||||||||||||
1.10% | 1.12% | 1.18% | 1.24% | 1.28% | ||||||||||||||||
0.15% | 0.19% | (0.12% | ) | (0.09% | ) | (0.22% | ) | |||||||||||||
| 34%
|
|
| 38%
|
|
| 54%
|
|
| 43%
|
|
| 38%
|
| ||||||
|
23
Table of Contents
Financial highlights
Delaware Small Cap Core Fund Class C
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment loss1 |
Net realized and unrealized gain |
Total from investment operations |
Less dividends and distributions from: |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period |
Total return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of net investment loss to average net assets |
Portfolio turnover |
1 | The average shares outstanding method has been applied for per share information. |
2 | Total return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. |
See accompanying notes, which are an integral part of the financial statements.
24
Table of Contents
Year ended | ||||||||||||||||||||
|
| |||||||||||||||||||
11/30/19 | 11/30/18 | 11/30/17 | 11/30/16 | 11/30/15 | ||||||||||||||||
| ||||||||||||||||||||
$ | 21.38 | $ | 23.38 | $ | 20.36 | $ | 18.80 | $ | 19.11 | |||||||||||
(0.11 | ) | (0.13 | ) | (0.19 | ) | (0.15 | ) | (0.18 | ) | |||||||||||
1.05 | 0.05 | 3.45 | 2.30 | 0.95 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
0.94 | (0.08 | ) | 3.26 | 2.15 | 0.77 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(1.97 | ) | (1.92 | ) | (0.24 | ) | (0.59 | ) | (1.08 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(1.97 | ) | (1.92 | ) | (0.24 | ) | (0.59 | ) | (1.08 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
$ | 20.35 | $ | 21.38 | $ | 23.38 | $ | 20.36 | $ | 18.80 | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
6.99% | (0.31% | ) | 16.17% | 12.01% | 4.11% | |||||||||||||||
$ | 139,808 | $ | 168,400 | $ | 154,837 | $ | 126,787 | $ | 99,019 | |||||||||||
1.85% | 1.87% | 1.93% | 1.99% | 2.03% | ||||||||||||||||
(0.60%) | (0.56% | ) | (0.87% | ) | (0.84% | ) | (0.97% | ) | ||||||||||||
34% | 38% | 54% | 43% | 38% | ||||||||||||||||
|
25
Table of Contents
Financial highlights
Delaware Small Cap Core Fund Class R
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment loss1 |
Net realized and unrealized gain |
Total from investment operations |
Less dividends and distributions from: |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period |
Total return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of net investment loss to average net assets |
Portfolio turnover
|
1 | The average shares outstanding method has been applied for per share information. |
2 | Total 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.
26
Table of Contents
Year ended | ||||||||||||||||||||||
|
| |||||||||||||||||||||
11/30/19 | 11/30/18 | 11/30/17 | 11/30/16 | 11/30/15 | ||||||||||||||||||
|
| |||||||||||||||||||||
$ | 23.12 | $ | 25.01 | $ | 21.66 | $ | 19.86 | $ | 20.04 | |||||||||||||
(0.02 | ) | (0.02 | ) | (0.08 | ) | (0.06 | ) | (0.09 | ) | |||||||||||||
1.20 | 0.05 | 3.67 | 2.45 | 0.99 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
1.18 | 0.03 | 3.59 | 2.39 | 0.90 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
(1.97 | ) | (1.92 | ) | (0.24 | ) | (0.59 | ) | (1.08 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
(1.97 | ) | (1.92 | ) | (0.24 | ) | (0.59 | ) | (1.08 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
$ | 22.33 | $ | 23.12 | $ | 25.01 | $ | 21.66 | $ | 19.86 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
7.55% | 0.19% | 16.73% | 12.60% | 4.60% | ||||||||||||||||||
$ | 27,631 | $ | 28,138 | $ | 33,112 | $ | 31,416 | $ | 28,178 | |||||||||||||
1.35% | 1.37% | 1.43% | 1.49% | 1.53% | ||||||||||||||||||
(0.10% | ) | (0.06% | ) | (0.37% | ) | (0.34% | ) | (0.47% | ) | |||||||||||||
| 34%
|
|
| 38%
|
|
| 54%
|
|
| 43%
|
|
| 38%
|
| ||||||||
|
|
27
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 from investment operations: |
Net investment income1 |
Net realized and unrealized gain |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period |
Total return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of net investment income to average net assets |
Portfolio turnover
|
1 | The average shares outstanding method has been applied for per share information. |
2 | Total return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. |
See accompanying notes, which are an integral part of the financial statements.
28
Table of Contents
Year ended | ||||||||||||||||||||||
|
| |||||||||||||||||||||
11/30/19 | 11/30/18 | 11/30/17 | 11/30/16 | 11/30/15 | ||||||||||||||||||
|
| |||||||||||||||||||||
$ | 24.50 | $ | 26.29 | $ | 22.66 | $ | 20.65 | $ | 20.69 | |||||||||||||
0.09 | 0.11 | 0.03 | 0.03 | 0.01 | ||||||||||||||||||
1.28 | 0.05 | 3.86 | 2.57 | 1.03 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
1.37 | 0.16 | 3.89 | 2.60 | 1.04 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
(0.09 | ) | (0.03 | ) | (0.02 | ) | — | — | |||||||||||||||
(1.97 | ) | (1.92 | ) | (0.24 | ) | (0.59 | ) | (1.08 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
(2.06 | ) | (1.95 | ) | (0.26 | ) | (0.59 | ) | (1.08 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
$ | 23.81 | $ | 24.50 | $ | 26.29 | $ | 22.66 | $ | 20.65 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
8.06% | 0.69% | 17.31% | 13.15% | 5.15% | ||||||||||||||||||
$ | 3,888,603 | $ | 3,451,251 | $ | 2,275,563 | $ | 1,271,533 | $ | 620,220 | |||||||||||||
0.85% | 0.87% | 0.93% | 0.99% | 1.03% | ||||||||||||||||||
0.40% | 0.44% | 0.13% | 0.16% | 0.03% | ||||||||||||||||||
| 34%
|
|
| 38%
|
|
| 54%
|
|
| 43%
|
|
| 38%
|
| ||||||||
|
|
29
Table of Contents
Financial highlights
Delaware Small Cap Core Fund Class R6
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 | 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 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 entire year ended Nov. 30, 2016. |
See accompanying notes, which are an integral part of the financial statements.
30
Table of Contents
5/2/161 to 11/30/16 | ||||||||||||||||||
Year ended | ||||||||||||||||||
11/30/19 | 11/30/18 | 11/30/17 | ||||||||||||||||
$ | 24.54 | $ | 26.32 | $ | 22.68 | $ | 19.09 | |||||||||||
0.12 | 0.15 | 0.06 | 0.03 | |||||||||||||||
1.28 | 0.05 | 3.86 | 3.56 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
1.40 | 0.20 | 3.92 | 3.59 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
(0.12 | ) | (0.06 | ) | (0.04 | ) | — | ||||||||||||
(1.97 | ) | (1.92 | ) | (0.24 | ) | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||
(2.09 | ) | (1.98 | ) | (0.28 | ) | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||
$ | 23.85 | $ | 24.54 | $ | 26.32 | $ | 22.68 | |||||||||||
|
|
|
|
|
|
|
| |||||||||||
8.20% | 0.86% | 17.45% | 18.81% | |||||||||||||||
$ | 677,315 | $ | 413,332 | $ | 49,594 | $ | 2 | |||||||||||
0.72% | 0.74% | 0.79% | 0.82% | |||||||||||||||
0.53% | 0.57% | 0.27% | 0.29% | |||||||||||||||
| 34%
|
|
| 38%
|
|
| 54%
|
|
| 43%
| 4
|
31
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Notes to financial statements | ||
Delaware Small Cap Core Fund | November 30, 2019 |
Delaware Group® Equity Funds V (Trust) is organized as a Delaware statutory trust and offers three series: Delaware Wealth Builder 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 Fund is anopen-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 maximumfront-end sales charge of 5.75%. Class A share purchases of $1,000,000 or more will incur a contingent deferred sales charge (CDSC) instead of afront-end sales charge 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%, which will be incurred 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/orsub-transfer agency fees to any brokers, dealers, or other financial intermediaries.
The investment objective of the Fund is to seek long-term capital appreciation.
1. Significant Accounting Policies
The Fund follows accounting and reporting guidance under Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services – Investment Companies. The following accounting policies are in accordance with US generally accepted accounting principles (US 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.Open-end investment companies are valued at their published net asset value (NAV). US government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. Investments in repurchase agreements are generally valued at par, which approximates fair value, each business day. 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. Restricted securities are valued at fair value using methods approved by the Board.
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
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the Fund’s tax positions taken or expected to be taken on the Fund’s federal income tax returns through the year ended Nov. 30, 2019 and for all open tax years (years ended Nov. 30,2016-Nov. 30, 2018), and has concluded that no provision for federal income tax is required in the Fund’s financial statements. If applicable, the Fund recognizes interest accrued on unrecognized tax benefits in interest expense and penalties in “Other” on the “Statement of operations.” During the year ended Nov. 30, 2019, the Fund did not incur any interest or tax penalties.
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. Class R6 shares are not allocated any expenses related to service fees,sub-accounting fees, and/orsub-transfer agency fees paid to brokers, dealers, or financial intermediaries.
Repurchase Agreements – The Fund may purchase certain US 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-partysub-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. At Nov. 30, 2019, the Fund held no investments in repurchase agreements.
Use of Estimates – The preparation of financial statements in conformity with US 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 Funds® by Macquarie (Delaware Funds) are generally allocated among such funds on the basis of average net assets. Management fees and certain 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 theex-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 theex-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 theex-dividend date.
The Fund receives earnings credits from its custodian when positive cash balances are maintained, which may be used to offset custody fees. The expenses paid under this arrangement are included on the “Statement of operations” under “Custodian fees” with the corresponding expenses offset included
33
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Notes to financial statements
Delaware Small Cap Core Fund
1. Significant Accounting Policies (continued)
under “Less expenses paid indirectly.” For the year ended Nov. 30, 2019, the Fund earned $17,339 under this arrangement.
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 $1, the expenses paid under this arrangement are included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses” with the corresponding expenses offset included under “Less expenses paid indirectly.” For the year ended Nov. 30, 2019, the Fund earned $3,482 under this arrangement.
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 Macquarie Investment Management Business Trust and the investment manager, an annual fee which is calculated daily and paid monthly at the rate of 0.75% on the first $500 million of average daily net assets of the Fund, 0.70% on the next $500 million, 0.65% on the next $1.5 billion, and 0.60% on average daily net assets in excess of $2.5 billion.
Effective May 30, 2019, DMC may permit its affiliates, Macquarie Investment Management Global Limited (MIMGL) and Macquarie Funds Management Hong Kong Limited (together, the “AffiliatedSub- Advisors”), to execute Fund security trades on behalf of the Manager. The Manager may also seek quantitative support from MIMGL. Although the AffiliatedSub-Advisors serve assub-advisors, DMC has ultimate responsibility for all investment advisory services. For these services, DMC, not the Fund, may pay each AffiliatedSub-Advisor a portion of its investment management fee.
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 daily and paid monthly based on the aggregate daily net assets of all funds within the Delaware Funds at the following annual rates: 0.00475% of the first $35 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $45 billion (Total Fee). Each fund in the Delaware Funds pays a minimum of $4,000, which, in aggregate, is subtracted from the Total Fee. Each fund in the Delaware Funds then pays its portion of the remainder of the Total Fee on a relative NAV basis. This amount is included on the “Statement of operations” under “Accounting and administration expenses.” For the year ended Nov. 30, 2019, the Fund was charged $171,619 for these services.
DIFSC is also the transfer agent and dividend disbursing agent of the Fund. For these services, DIFSC’s fees are calculated daily and paid monthly based on the aggregate daily net assets of the retail funds within the Delaware Funds at the following annual rates: 0.014% of the first $20 billion; 0.011% of the next $5 billion; 0.007% of the next $5 billion; 0.005% of the next $20 billion; and 0.0025% of average daily net assets in excess of $50 billion. The fees payable to DIFSC under the shareholder services agreement described above are allocated among all retail funds in the Delaware Funds on a relative NAV basis. This amount is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.” For the year ended Nov. 30, 2019, the Fund was charged $438,781 for these services. Pursuant to asub-transfer agency agreement between DIFSC and BNY Mellon Investment
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Servicing (US) Inc. (BNYMIS), BNYMIS provides certainsub-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.” The fees that are calculated daily and paid as invoices are received on a monthly or quarterly basis.
Pursuant to a distribution agreement and distribution plan, the Fund pays DDLP, the distributor and an affiliate of DMC, annual12b-1 fees of 0.25%, 1.00%, and 0.50% of the average daily net assets of the Class A shares, Class C shares, and Class R shares, respectively. These fees are calculated daily and paid monthly. Institutional Class and Class R6 shares do not pay12b-1 fees.
As provided in the investment management agreement, the Fund bears a portion of the cost of certain resources shared with DMC, including the cost of internal personnel of DMC and/or its affiliates that provide legal, tax, and regulatory reporting services to the Fund. For the year ended Nov. 30, 2019, the Fund was charged $122,876 for internal legal, tax, and regulatory reporting services provided by DMC and/or its affiliates’ employees. This amount is included on the “Statement of operations” under “Legal fees.”
For the year ended Nov. 30, 2019, DDLP earned $29,307 for commissions on sales of the Fund’s Class A shares. For the year ended Nov. 30, 2019, DDLP received gross CDSC commissions of $34,050 and $19,882, 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.
In addition to the management fees and other expenses of the Fund, the Fund indirectly bears the investment management fees and other expenses of the investment companies (Underlying Funds) in which it invests. The amount of these fees and expenses incurred indirectly by the Fund will vary based upon the expense and fee levels of the Underlying Funds and the number of shares that are owned of the Underlying Funds at different times.
Cross trades for the year ended Nov. 30, 2019 were executed by the Fund pursuant to procedures adopted by the Board designed to ensure compliance with Rule17a-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 year ended Nov. 30, 2019, the Fund engaged in Rule17a-7 securities purchases of $8,465,620 and securities sales of $1,054,248, which resulted in a net realized loss of $1,612,255.
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Notes to financial statements
Delaware Small Cap Core Fund
3. Investments
For the year ended Nov. 30, 2019, the Fund made purchases and sales of investment securities other than short-term investments as follows:
Purchases | $ | 1,834,482,312 | ||
Sales | 1,585,687,659 |
The tax cost of investments includes adjustments to net unrealized appreciation (depreciation) which may not necessarily be final tax cost basis adjustments, but approximate the tax basis unrealized gains and losses that may be realized and distributed to shareholders. At Nov. 30, 2019, the cost and unrealized appreciation (depreciation) of investments for federal income tax purposes for the Fund were as follows:
Cost of investments | $ | 4,740,969,962 | ||
|
| |||
Aggregate unrealized appreciation of investments | $ | 630,547,109 | ||
Aggregate unrealized depreciation of investments | (363,391,197 | ) | ||
|
| |||
Net unrealized appreciation of investments | $ | 267,155,912 | ||
|
|
US 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, and 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, and 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 and fair valued securities) |
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Level 3 investments are valued using significant unobservable inputs. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Valuations may also be based upon current market prices of securities that are comparable in coupon, rating, maturity, and industry. The derived value of a Level 3 investment may not represent the value which is received upon disposition and this could impact the results of operations.
The following table summarizes the valuation of the Fund’s investments by fair value hierarchy levels as of Nov. 30, 2019:
Level 1 | ||||
Securities | ||||
Assets: | ||||
Common Stock | $ | 4,904,066,674 | ||
Short-Term Investments | 104,059,200 | |||
|
| |||
Total Value of Securities | $ | 5,008,125,874 | ||
|
|
During the year ended Nov. 30, 2019, 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 based on fair value 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. During the year ended Nov. 30, 2019, there were no Level 3 investments.
4. Dividend and Distribution Information
Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP. Additionally, distributions from net short-term gains on sales of investment securities are treated as ordinary income for federal income tax purposes. The tax character of dividends and distributions paid during the years ended Nov. 30, 2019 and 2018 was as follows:
Year ended | ||||||||
11/30/19 | 11/30/18 | |||||||
Ordinary Income | $ | 17,281,911 | $ | 28,212,954 | ||||
Long-term capital gain | 343,039,816 | 185,958,144 | ||||||
|
|
|
| |||||
Total | $ | 360,321,727 | $ | 214,171,098 | ||||
|
|
|
|
37
Table of Contents
Notes to financial statements
Delaware Small Cap Core Fund
5. Components of Net Assets on a Tax Basis
As of Nov. 30, 2019, the components of net assets on a tax basis were as follows:
Shares of beneficial interest | $ | 4,651,810,354 | ||
Undistributed ordinary income | 21,190,575 | |||
Undistributed long-term capital gains | 73,072,304 | |||
Net unrealized appreciation of investments | 267,155,912 | |||
|
| |||
Net assets | $ | 5,013,229,145 | ||
|
|
The differences between book basis and tax basis components of net assets are primarily attributable to tax deferral of losses on wash sales.
6. Capital Shares
Transactions in capital shares were as follows:
Year ended | ||||||||
11/30/19 | 11/30/18 | |||||||
Shares sold: | ||||||||
Class A | 3,525,026 | 4,906,025 | ||||||
Class C | 698,490 | 2,466,280 | ||||||
Class R | 259,057 | 380,376 | ||||||
Institutional Class | 67,539,219 | 81,160,139 | ||||||
Class R6 | 14,982,914 | 19,845,721 | ||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | 1,278,296 | 1,011,807 | ||||||
Class C | 945,352 | 592,386 | ||||||
Class R | 138,973 | 111,309 | ||||||
Institutional Class | 12,750,523 | 5,714,837 | ||||||
Class R6 | 1,809,532 | 163,636 | ||||||
|
|
|
| |||||
103,927,382 | 116,352,516 | |||||||
|
|
|
| |||||
Shares redeemed: | ||||||||
Class A | (4,815,693 | ) | (6,460,395 | ) | ||||
Class C | (2,650,192 | ) | (1,805,769 | ) | ||||
Class R | (377,314 | ) | (598,874 | ) | ||||
Institutional Class | (57,842,998 | ) | (32,589,388 | ) | ||||
Class R6 | (5,236,194 | ) | (5,048,255 | ) | ||||
|
|
|
| |||||
(70,922,391 | ) | (46,502,681 | ) | |||||
|
|
|
| |||||
Net increase | 33,004,991 | 69,849,835 | ||||||
|
|
|
|
38
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Certain shareholders may exchange shares of one class for shares of another class in the same Fund. These exchange transactions are included as subscriptions and redemptions in the table on the previous page and on the “Statements of changes in net assets.” For the years ended Nov. 30, 2019 and 2018, the Fund had the following exchange transactions:
Exchange Redemptions | Exchange Subscriptions | |||||||||||||||||||||||||||||
Institutional | Institutional | |||||||||||||||||||||||||||||
Class A | Class C | Class | Class R6 | Class A | Class | Class R6 | ||||||||||||||||||||||||
Year ended | Shares | Shares | Shares | Shares | Shares | Shares | Shares | Value | ||||||||||||||||||||||
11/30/19 | 28,993 | 16,061 | 1,919,173 | 153,502 | 1,548 | 194,245 | 1,916,718 | $ | 49,384,010 | |||||||||||||||||||||
11/30/18 | 18,792 | 14,031 | 153,738 | — | 10,080 | 20,821 | 153,562 | 4,907,742 |
7. Line of Credit
The Fund, along with certain other funds in the Delaware Funds (Participants), was a participant in a $220,000,000 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 0.15%, which was allocated across the Participants based on a weighted average of the respective net assets of each Participant. The Participants were permitted to borrow up to a maximum ofone-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. 4, 2019.
On Nov. 4, 2019, the Fund, along with the other Participants, entered into an amendment to the agreement for a $250,000,000 revolving line of credit. The revolving 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. 2, 2020.
The Fund had no amounts outstanding as of Nov. 30, 2019, or at any time during the year then ended.
8. Securities Lending
The Fund, along with other funds in the Delaware 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 US securities and foreign securities that are denominated and payable in US 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
39
Table of Contents
Notes to financial statements
Delaware Small Cap Core Fund
8. Securities Lending (continued)
more or less than the value of the security on loan. The collateral percentage with respect to the market value of the loaned security is determined by the security lending agent.
Cash collateral received by each fund of the Trust is generally invested in 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 US 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. The Fund can also accept US government securities and letters of credit(non-cash collateral) in connection with securities loans.
In the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Fund or, at the discretion of the lending agent, replace the loaned securities. The Fund continues to record dividends or interest, as applicable, on the securities loaned and is subject to changes in value of the securities loaned that may occur during the term of the loan. The Fund has the right under the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized bynon-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 the 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 year ended Nov. 30, 2019, the Fund had no securities out on loan.
9. Credit and Market Risk
The Fund invests a significant portion of its assets in small companies and may be subject to certain risks associated with ownership of securities of such companies. Investments in small sized companies may be more volatile than investments in larger companies for a number of reasons, which include limited financial resources or a dependence on narrow product lines.
The Fund invests in REITs and is subject to the risks associated with that industry. If the Fund holds real estate directly as a result of defaults or receives rental income directly from real estate holdings, its tax
40
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status as a regulated investment company may be jeopardized. There were no direct real estate holdings during the year ended Nov. 30, 2019. 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 Board has delegated to DMC theday-to-day functions of determining whether individual securities are liquid for purposes of the Fund’s limitation on investments in illiquid securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Fund’s 15% limit on investments in illiquid securities. As of Nov. 30, 2019, there were no Rule 144A securities held by the Fund. Restricted securities are valued pursuant to the security valuation procedures described in Note 1.
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 August 2018, the FASB issued an Accounting Standards Update (ASU), ASU2018-13, which changes certain fair value measurement disclosure requirements. The ASU2018-13, in addition to other modifications and additions, removes the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for the timing of transfers between levels and the valuation process for Level 3 fair value measurements. The ASU2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after Dec. 15, 2019. At this time, management is evaluating the implications of these changes on the financial statements.
12. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to Nov. 30, 2019, that would require recognition or disclosure in the Fund’s financial statements.
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registered public accounting firm
To the Board of Trustees of Delaware Group® Equity Funds V
and Shareholders of Delaware Small Cap Core Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Delaware Small Cap Core Fund (one of the funds constituting Delaware Group® Equity Funds V, referred to hereafter as the “Fund”) as of November 30, 2019, the related statement of operations for the year ended November 30, 2019, the statements of changes in net assets for each of the two years in the period ended November 30, 2019, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of November 30, 2019, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended November 30, 2019 and the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of November 30, 2019 by correspondence with the custodian and transfer agents. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
January 22, 2020
We have served as the auditor of one or more investment companies in Delaware Funds® by Macquarie since 2010.
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Other Fund information (Unaudited)
Delaware Small Cap Core Fund
Tax Information
The information set forth below is for the Fund’s fiscal year as required by federal income tax laws. Shareholders, however, must report distributions on a calendar year basis for income tax purposes, which may include distributions for portions of two fiscal years of the Fund. Accordingly, the information needed by shareholders for income tax purposes will be sent to them in January of each year. Please consult your tax advisor for proper treatment of this information.
All disclosures are based on financial information available as of the date of this annual report and, accordingly are subject to change. For any and all items requiring reporting, it is the intention of the Fund to report the maximum amount permitted under the Internal Revenue Code and the regulations thereunder.
For the fiscal year ended Nov. 30, 2019, the Fund reports distributions paid during the year as follows:
(A) Long-Term Capital Gain Distributions (Tax Basis) | 95.20 | % | ||
(B) Ordinary Income Distributions (Tax Basis)1 | 4.80 | % | ||
Total Distributions (Tax Basis) | 100.00 | % | ||
(C) Qualified Dividends2 | 100.00 | % |
(A) and (B) are based on a percentage of the Fund’s total distributions.
(C) is based on a percentage of the Fund’s ordinary income distributions.
1 | For the fiscal year ended Nov. 30, 2019, certain dividends paid by the Fund may be subject to a maximum tax rate of 20%. The percentage of dividends paid by the Fund from ordinary income reported as qualified dividend income is 100.00%. Complete information will be compiled and reported in conjunction with your 2019 Form1099-DIV. |
2 | Qualified dividends represent dividends which qualify for the corporate dividends received deduction. |
For the fiscal year ended Nov. 30, 2019, certain interest income paid by the Fund, determined to be Qualified Short-Term Capital Gains may be subject to relief from US withholding for foreign shareholders, as provided by the American Jobs Creation Act of 2004; the Tax Relief Unemployment Insurance Reauthorization, and Job Creations Act of 2010; and as extended by the American Taxpayer Relief Act of 2012. For the fiscal year ended Nov. 30, 2019, the Fund has reported maximum distributions of Qualified Short-Term Capital Gains of $8,257,711.
Board consideration of Investment Advisory andSub-Advisory agreements for Delaware Small Cap Core Fund at a meeting held August21-22, 2019
At a meeting held on Aug.21-22, 2019 (the “Annual Meeting”), the Board of Trustees (the “Board”), including a majority of disinterested or independent Trustees, approved the renewal of the Investment Advisory andSub-Advisory Agreements for Delaware Small Cap Core Fund (the “Fund”). In making its decision, the Board considered information furnished at regular quarterly Board meetings, including reports detailing Fund performance, investment strategies, and expenses, as well as information prepared specifically in connection with the renewal of the investment advisory andsub-advisory contracts. Information furnished specifically in connection with the renewal of the Investment Management Agreement with Delaware Management Company (“DMC”), a series of Macquarie Investment Management Business Trust (“MIMBT”), and theSub-Advisory Agreements with Macquarie Investment Management Global Limited (“MIMGL”) and Macquarie Funds Management Hong Kong Limited (“MFMHK”), included materials provided by DMC and its affiliates (collectively, “Macquarie
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Other Fund information (Unaudited)
Delaware Small Cap Core Fund
Board consideration of Investment Advisory andSub-Advisory agreements for Delaware Small Cap Core Fund at a meeting held August21-22, 2019 (continued)
Investment Management”), MIMGL, and MFMHK, concerning, among other things, the nature, extent, and quality of services provided to the Fund; the costs of such services to the Fund; economies of scale; and the investment manager’s financial condition and profitability. In addition, in connection with the Annual Meeting, materials were provided to the Trustees in May 2019, including reports provided by Broadridge Financial Solutions (“Broadridge”). The Broadridge reports compared the Fund’s investment performance and expenses with those of other comparable mutual funds. The Independent Trustees reviewed and discussed the Broadridge reports with independent legal counsel to the Independent Trustees. In addition to the information noted above, the Board also requested and received information regarding DMC’s policy with respect to advisory fee levels and its breakpoint philosophy; the structure of portfolio manager compensation; comparative client fee information; and any constraints or limitations on the availability of securities for certain investment styles, which had in the past year inhibited, or which were likely in the future to inhibit, the investment manager’s ability to invest fully in accordance with Fund policies.
In considering information relating to the approval of the Fund’s investment advisory andsub-advisory agreements, the Independent Trustees received assistance and advice from and met separately with independent legal counsel to the Independent Trustees and also received assistance and advice from an experienced and knowledgeable independent fund consultant, JDL Consultants, LLC (“JDL”). Although the Board gave attention to all information furnished, the following discussion identifies, under separate headings, the primary factors taken into account by the Board during its contract renewal considerations.
Nature, extent, and quality of services.The Board considered the services provided by DMC to the Fund and its shareholders. In reviewing the nature, extent, and quality of services, the Board considered reports furnished to it throughout the year, which covered matters such as the relative performance of the Fund; compliance of portfolio managers with the investment policies, strategies, and restrictions for the Fund; compliance by DMC and Delaware Distributors, L.P. (together, “Management”) personnel with the Code of Ethics adopted throughout the Delaware Funds® by Macquarie (“Delaware Funds”); and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of DMC and the emphasis placed on research in the investment process. The Board recognized DMC’s receipt of certain favorable industry distinctions during the past several years. The Board gave favorable consideration to DMC’s efforts to control expenses while maintaining service levels committed to Fund matters. The Board also noted the benefits provided to Fund shareholders through (a) each shareholder’s ability to: (i) exchange an investment in one Delaware Fund for the same class of shares in another Delaware Fund without a sales charge, or (ii) reinvest Fund dividends into additional shares of the Fund or into additional shares of other Delaware Funds, and (b) the privilege to combine holdings in other Delaware Funds to obtain a reduced sales charge. The Board was satisfied with the nature, extent, and quality of the overall services provided by DMC.
Nature, extent, and quality of services.The Board considered the services provided by MIMGL to the Fund and its shareholders. In reviewing the nature, extent, and quality of services, the Board considered reports furnished to it throughout the year at regular Board Meetings covering matters such as relative performance of the Fund; compliance of portfolio managers with the investment policies, strategies, and
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restrictions for the Fund; the compliance of MIMGL personnel with its Code of Ethics; and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of MIMGL and the emphasis placed on research in the investment process. The Board was satisfied with the nature, extent, and quality of the overall services provided by MIMGL.
Nature, extent, and quality of services.The Board considered the services provided by MFMHK to the Fund and its shareholders. In reviewing the nature, extent, and quality of services, the Board considered reports furnished to it throughout the year at regular Board Meetings covering matters such as relative performance of the Fund; compliance of portfolio managers with the investment policies, strategies, and restrictions for the Fund; the compliance of MFMHK personnel with its Code of Ethics; and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of MFMHK and the emphasis placed on research in the investment process. The Board was satisfied with the nature, extent, and quality of the overall services provided by MFMHK.
Investment performance.The Board placed significant emphasis on the investment performance of the Fund in view of the importance of investment performance to shareholders. Although the Board considered performance reports and discussions with portfolio managers at Investment Committee meetings throughout the year, the Board gave particular weight to the Broadridge reports furnished for the Annual Meeting. The Broadridge reports prepared for the Fund showed the investment performance of its Class A shares in comparison to a group of similar funds as selected by Broadridge (the “Performance Universe”). A fund with the best performance ranked first, and a fund with the poorest performance ranked last. The highest/best performing 25% of funds in the Performance Universe make up the first quartile; the next 25%, the second quartile; the next 25%, the third quartile; and the poorest/worst performing 25% of funds in the Performance Universe make up the fourth quartile. Comparative annualized performance for the Fund was shown for the past1-,3-,5-, and10-year periods, to the extent applicable, ended Jan. 31, 2019. The Board’s objective is that the Fund’s performance for the1-,3-, and5-year periods be at or above the median of its Performance Universe.
The Performance Universe for the Fund consisted of the Fund and all retail and institutionalsmall-cap core funds as selected by Broadridge. The Broadridge report comparison showed that the Fund’s total return for the1-year period was in the third quartile of its Performance Universe. The report further showed that the Fund’s total return for the3-year period was in the second quartile of its Performance Universe and the Fund’s total return for the5- and10-year periods was in the first quartile of its Performance Universe. The Board was satisfied with performance.
Comparative expenses.The Board considered expense data for the Delaware Funds. Management provided the Board with information on pricing levels and fee structures for the Fund as of its most recently completed fiscal year. The Board also focused on the comparative analysis of effective management fees and total expense ratios of the Fund versus effective management fees and total expense ratios of a group of similar funds as selected by Broadridge (the “Expense Group”). In reviewing comparative costs, the Fund’s contractual management fee and the actual management fee incurred by the Fund were compared with the contractual management fees (assuming all funds in the Expense Group were similar in size to the Fund) and actual management fees (as reported by each fund) within the Expense Group, taking into account any applicable breakpoints and fee waivers. The Fund’s total expenses were also compared with those of its Expense Group. The Broadridge total expenses, for
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Other Fund information (Unaudited)
Delaware Small Cap Core Fund
Board consideration of Investment Advisory and Sub-Advisory agreements for Delaware Small Cap Core Fund at a meeting held August 21-22, 2019 (continued)
comparative consistency, were shown by Broadridge for Class A shares and comparative total expenses including12b-1 andnon-12b-1 service fees. The Board’s objective is for the Fund’s total expense ratio to be competitive with those of the peer funds within its Expense Group.
The expense comparisons for the Fund showed that its actual management fee was in the quartile with the second lowest expenses of its Expense Group and its total expenses were in the quartile the lowest expenses of its Expense Group. The Board was satisfied with the management fee and total expenses of the Fund in comparison to those of its Expense Group as shown in the Broadridge report.
Management profitability.The Board considered the level of profits realized by DMC in connection with the operation of the Fund. In this respect, the Board reviewed the Investment Management Profitability Analysis that addressed the overall profitability of DMC’s business in providing management and other services to each of the individual funds and the Delaware Funds as a whole. Specific attention was given to the methodology used by DMC in allocating costs for the purpose of determining profitability. Management stated that the level of profits of DMC, to a certain extent, reflects recent operational cost savings and efficiencies initiated by DMC. The Board considered DMC’s efforts to improve services provided to Fund shareholders and to meet additional regulatory and compliance requirements resulting from recent industry-wide Securities and Exchange Commission initiatives. The Board also considered the extent to which DMC might derive ancillary benefits from fund operations, including the potential for procuring additional business as a result of the prestige and visibility associated with its role as service provider to the Delaware Funds and the benefits from allocation of fund brokerage to improve trading efficiencies. As part of its work, the Board also reviewed a report prepared by JDL regarding MIMBT profitability as compared to certain peer fund complexes and the Independent Trustees discussed with JDL personnel regarding DMC’s profitability in such context. The Board found that the management fees were reasonable in light of the services rendered and the level of profitability of DMC.
Management profitability.Trustees were also given available information on profits being realized by MIMGL in relation to the services being provided to the Fund and in relation to MIMGL’s overall investment advisory business, but believed such information to be of limited relevance because thesub-advisory fees are paid by DMC out of its management fee, and changes in the level ofsub-advisory fees have no impact on Fund expenses. The Board was also provided information on potentialfall-out benefits derived or to be derived by MIMGL in connection with its relationship to the Fund, such as reputational enhancement, soft dollar arrangements, or commissions paid to affiliated broker/dealers, as applicable.
Management profitability.Trustees were also given available information on profits being realized by MFMHK in relation to the services being provided to the Fund and in relation to MFMHK’s overall investment advisory business, but believed such information to be of limited relevance because thesub-advisory fees are paid by DMC out of its management fee, and changes in the level ofsub-advisory fees have no impact on Fund expenses. The Board was also provided information on potentialfall-out benefits derived or to be derived by MFMHK in connection with its relationship to the Fund, such as reputational enhancement, soft dollar arrangements, or commissions paid to affiliated broker/dealers, as applicable.
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Economies of scale.The Trustees considered whether economies of scale are realized by DMC as the Fund’s assets increase and the extent to which any economies of scale are reflected in the level of management fees charged. The Trustees reviewed the Fund’s advisory fee pricing and structure, approved by the Board and shareholders, which includes breakpoints, and which applies to most funds in the Delaware Funds complex. Breakpoints in the advisory fee occur when the advisory fee rate is reduced on assets in excess of specified levels. Breakpoints result in a lower advisory fee than would otherwise be the case in the absence of breakpoints, when the asset levels specified in the breakpoints are exceeded. The Board noted that, as of March 31, 2019, the Fund’s assets exceeded the final breakpoint level. The Board believed that, given the extent to which economies of scale might be realized by DMC and its affiliates, the schedule of fees under the Investment Management Agreement provides a sharing of benefits with the Fund and its shareholders.
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Board of trustees / directors and officers addendum
Delaware Funds®by Macquarie
A mutual fund is governed by a Board of Trustees/Directors (“Trustees”), which has oversight responsibility for the management of a fund’s business affairs. Trustees establish procedures and oversee and review the performance of the investment manager, the distributor, and others who perform services for the fund. The independent fund trustees, in particular, are advocates
Name, Address, | Position(s) | Length of | ||
and Birth Date | Held with Fund(s) | Time Served | ||
Interested Trustee | ||||
Shawn K. Lytle1 | President, | President and | ||
2005 Market Street | Chief Executive Officer, | Chief Executive Officer | ||
Philadelphia, PA 19103 | and Trustee | since August 2015 | ||
February 1970 | ||||
Trustee since | ||||
September 2015
| ||||
Independent Trustees | ||||
Thomas L. Bennett | Chair and Trustee | Trustee since | ||
2005 Market Street | March 2005 | |||
Philadelphia, PA 19103 | ||||
October 1947 | Chair since | |||
March 2015
| ||||
Jerome D. Abernathy | Trustee | Since January 2019 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
July 1959 | ||||
Ann D. Borowiec | Trustee | Since March 2015 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
November 1958 | ||||
1 | Shawn K.Lytle is considered to be an “Interested Trustee” because he is an executive officer of the Fund’s(s’) investment advisor. |
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for shareholder interests. Each trustee has served in that capacity since he or she was elected to or appointed to the Board of Trustees, and will continue to serve until his or her retirement or the election of a new trustee in his or her place. The following is a list of the Trustees and Officers with certain background and related information.
Number of Portfolios in | ||||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships | ||
During the Past Five Years | by Trustee or Officer | Held by Trustee or Officer | ||
President — Macquarie | 95 | Trustee — UBS | ||
Investment Management2 | Relationship Funds, | |||
(June 2015–Present) | SMA Relationship | |||
Trust, and UBS Funds | ||||
Regional Head of | (May 2010–April 2015) | |||
Americas —UBS Global | ||||
Asset Management | ||||
(April 2010–May 2015) | ||||
Private Investor | 95 | None | ||
(March 2004–Present) | ||||
Managing Member, | 95 | None | ||
Stonebrook Capital | ||||
Management, LLC (financial | ||||
technology: macro factors | ||||
and databases) | ||||
(January 1993–Present) | ||||
Chief Executive Officer, | 95 | Director — | ||
Private Wealth Management | Banco Santander International | |||
(2011–2013) and | (October 2016– | |||
Market Manager, | December 2019) | |||
New Jersey Private | ||||
Bank (2005–2011) — | Director — | |||
J.P. Morgan Chase & Co. | Santander Bank, N.A. | |||
(December 2016– | ||||
December 2019) |
2 | Macquarie Investment Management is the marketing name for Macquarie Management Holdings, Inc. and its subsidiaries, including the Fund’s(s’) investment advisor, principal underwriter, and its transfer agent. |
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Board of trustees / directors and officers addendum
Delaware Funds®by Macquarie
Name, Address, and Birth Date | Position(s) Held with Fund(s) | Length of Time Served | ||
Independent Trustees (continued)
| ||||
Joseph W. Chow | Trustee | Since January 2013 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
January 1953 | ||||
John A. Fry | Trustee | Since January 2001 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
May 1960 | ||||
Lucinda S. Landreth | Trustee | Since March 2005 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
June 1947 |
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Number of Portfolios in | ||||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships | ||
During the Past Five Years | by Trustee or Officer | Held by Trustee or Officer | ||
Private Investor | 95 | Director and Audit Committee | ||
(April 2011–Present) | Member — Hercules | |||
Technology Growth | ||||
Capital, Inc. | ||||
(July 2004–July 2014) | ||||
President — | 95 | Director; Compensation | ||
Drexel University | Committee and | |||
(August 2010–Present) | Governance Committee | |||
Member — Community | ||||
President — | Health Systems | |||
Franklin & Marshall College | (May 2004–Present) | |||
(July 2002–June 2010) | ||||
Director — Drexel | ||||
Morgan & Co. | ||||
(2015–Present) | ||||
Director and Audit Committee | ||||
Member — vTv | ||||
Therapeutics Inc. | ||||
(2017–Present) | ||||
Director and Audit Committee | ||||
Member — FS Credit Real | ||||
Estate Income Trust, Inc. | ||||
(2018–Present) | ||||
Director — Federal Reserve | ||||
Bank of Philadelphia | ||||
(January 2020–Present) | ||||
Private Investor | 95 | None | ||
(2004–Present) | ||||
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Board of trustees / directors and officers addendum
Delaware Funds®by Macquarie
Name, Address, | Position(s) | Length of | ||
and Birth Date | Held with Fund(s) | Time Served | ||
Independent Trustees (continued) | ||||
Frances A. Sevilla-Sacasa | Trustee | Since September 2011 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
January 1956 | ||||
Thomas K. Whitford | Trustee | Since January 2013 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
March 1956 | ||||
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Number of Portfolios in | ||||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships | ||
During the Past Five Years | by Trustee or Officer | Held by Trustee or Officer | ||
Private Investor | 95 | Trust Manager and | ||
(January 2017–Present) | Audit Committee | |||
Chair — Camden | ||||
Chief Executive Officer — | Property Trust | |||
Banco Itaú | (August 2011–Present) | |||
International | ||||
(April 2012–December 2016) | Director; Strategic | |||
Planning and Reserves | ||||
Executive Advisor to Dean | Committee and Nominating | |||
(August 2011–March 2012) | and Governance | |||
and Interim Dean | Committee Member — | |||
(January 2011–July 2011) — | Callon Petroleum Company | |||
University of Miami School of | (December 2019–Present) | |||
Business Administration | ||||
Director; Audit | ||||
President — U.S. Trust, | Committee Member — | |||
Bank of America Private | Carrizo Oil & Gas, Inc. | |||
Wealth Management | (March 2018–December 2019) | |||
(Private Banking) | ||||
(July 2007–December 2008) | ||||
Vice Chairman | 95 | Director — HSBC North | ||
(2010–April 2013) — | America Holdings Inc. | |||
PNC Financial Services Group | (December 2013–Present)
Director — HSBC USA Inc. | |||
(July 2014–Present) | ||||
Director — | ||||
HSBC Bank USA, | ||||
National Association | ||||
(July 2014–March 2017) | ||||
Director — HSBC | ||||
Finance Corporation | ||||
(December 2013–April 2018) |
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Board of trustees / directors and officers addendum
Delaware Funds®by Macquarie
Name, Address, | Position(s) | Length of | ||
and Birth Date | Held with Fund(s) | Time Served | ||
Independent Trustees (continued)
| ||||
Christianna Wood | Trustee | Since January 2019 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
August 1959 | ||||
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Number of Portfolios in | ||||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships | ||
During the Past Five Years | by Trustee or Officer | Held by Trustee or Officer | ||
Chief Executive Officer | 95 | Director; Finance Committee | ||
and President — | and Audit Committee | |||
Gore Creek | Member — H&R | |||
Capital, Ltd. | Block Corporation | |||
(August 2009–Present) | (July 2008–Present) | |||
Director; Chair of Investments | ||||
Committee and Audit | ||||
Committee Member — | ||||
Grange Insurance | ||||
(2013–Present) | ||||
Trustee; Chair of | ||||
Nominating and Governance | ||||
Committee and Audit | ||||
Committee Member — | ||||
The Merger Fund | ||||
(2013–Present), | ||||
The Merger Fund VL | ||||
(2013-Present), | ||||
WCM Alternatives: | ||||
Event-Driven Fund | ||||
(2013–Present), | ||||
and WCM Alternatives: | ||||
Credit Event Fund | ||||
(December 2017–Present) | ||||
Director; Chair of | ||||
Governance Committee | ||||
and Audit Committee | ||||
Member — International | ||||
Securities Exchange | ||||
(2010–2016) |
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Board of trustees / directors and officers addendum
Delaware Funds®by Macquarie
Name, Address, | Position(s) | Length of | ||
and Birth Date | Held with Fund(s) | Time Served | ||
Independent Trustees (continued) | ||||
Janet L. Yeomans | Trustee | Since April 1999 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
July 1948 | ||||
Officers | ||||
David F. Connor | Senior Vice President, | Senior Vice President since | ||
2005 Market Street | General Counsel, | May 2013; General | ||
Philadelphia, PA 19103 | and Secretary | Counsel since May 2015; | ||
December 1963 | Secretary since | |||
October 2005
| ||||
Daniel V. Geatens | Vice President | Vice President and | ||
2005 Market Street | and Treasurer | Treasurer since October 2007 | ||
Philadelphia, PA 19103 | ||||
October 1972 | ||||
Richard Salus | Senior Vice President | Senior Vice President and | ||
2005 Market Street | and Chief Financial Officer | Chief Financial Officer | ||
Philadelphia, PA 19103 | since November 2006 | |||
October 1963 | ||||
The Statement of Additional Information for the Fund(s) includes additional information about the Trustees and Officers and is available, without charge, upon request by calling 800523-1918.
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Number of Portfolios in | ||||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships | ||
During the Past Five Years | by Trustee or Officer | Held by Trustee or Officer | ||
Vice President and Treasurer | 95 | Director; Personnel and | ||
(January 2006–July 2012), | Compensation Committee | |||
Vice President — | Chair; Member of Nominating, | |||
Mergers & Acquisitions | Investments, and Audit | |||
(January 2003–January 2006), | Committees for various | |||
and Vice President | periods throughout | |||
and Treasurer | directorship — | |||
(July 1995–January 2003) — | Okabena Company | |||
3M Company | (2009–2017) | |||
David F. Connor has served | 95 | None3 | ||
in various capacities at | ||||
different times at | ||||
Macquarie Investment | ||||
Management. | ||||
Daniel V. Geatens has served | 95 | None3 | ||
in various capacities at | ||||
different times at | ||||
Macquarie Investment | ||||
Management. | ||||
Richard Salus has served | 95 | None | ||
in various capacities | ||||
at different times at | ||||
Macquarie Investment | ||||
Management. |
3 | David F. Connor and Daniel V. Geatens serve in similar capacities for the six portfolios of the Optimum Fund Trust, which have the same investment advisor, principal underwriter, and transfer agent as the registrant. Mr. Geatens also serves as the Chief Financial Officer of the Optimum Fund Trust and he is the Chief Financial Officer and Treasurer for Macquarie Global Infrastructure Total Return Fund Inc. |
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Board of trustees | ||||||
Shawn K. Lytle | Ann D. Borowiec | Lucinda S. Landreth | Thomas K. Whitford | |||
President and Chief Executive Officer Delaware Funds® by Macquarie Philadelphia, PA
Thomas L. Bennett Chairman of the Board Delaware Funds by Macquarie Private Investor Rosemont, PA
Jerome D. Abernathy Managing Member Stonebrook Capital Management, LLC Jersey City, NJ | 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 | Former Chief Investment Officer Assurant, Inc. New York, NY
Frances A. Sevilla-Sacasa Former Chief Executive Officer Banco Itaú International Miami, FL | Former Vice Chairman PNC Financial Services Group Pittsburgh, PA
Christianna Wood Chief Executive Officer and President Gore Creek Capital, Ltd. Golden, CO
Janet L. Yeomans Former Vice President and Treasurer 3M Company 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 Funds | Delaware Funds | ||||
Delaware Funds | by Macquarie | by Macquarie | ||||
by Macquarie | Philadelphia, PA | Philadelphia, PA | ||||
Philadelphia, PA |
This annual report is for the information of Delaware Small Cap Core Fund shareholders, but it may be used with prospective investors when preceded or accompanied by the Delaware Fund fact sheet for the most recently completed calendar quarter. These documents are available at delawarefunds.com/literature.
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 FormN-Q or FormN-PORT (available for filings after March 31, 2019). The Fund’s FormsN-Q or FormsN-PORT, 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 800523-1918; 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 FormN-Q or FormN-PORT are available without charge on the Fund’s website at delawarefunds.com/literature. The Fund’s FormsN-Q and FormsN-PORT 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 800SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed12-month period ended June 30 is available without charge (i) through the Fund’s website at delawarefunds.com/proxy; and (ii) on the SEC’s website at sec.gov.
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Annual report
US equity mutual fund
Delaware Small Cap Value Fund
November 30, 2019
Beginning on or about June 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of your Fund’s shareholder reports will no longer be sent to you by mail, unless you specifically request them from the Fund or from your financial intermediary, such as a broker/dealer, bank, or insurance company. Instead, you will be notified by mail each time a report is posted on the website and provided with a link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you do not need to take any action. You may elect to receive shareholder reports and other communications from the Fund electronically by signing up at delawarefunds.com/edelivery. If you own these shares through a financial intermediary, you may contact your financial intermediary.
You may elect to receive paper copies of all future shareholder reports free of charge. You can inform the Fund that you wish to continue receiving paper copies of your shareholder reports by contacting us at 800523-1918. If you own these shares through a financial intermediary, you may contact your financial intermediary to elect to continue to receive paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held with the Delaware Funds® by Macquarie or your financial intermediary.
|
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 delawarefunds.com/literature or calling 800523-1918. 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 delawarefunds.com/edelivery.
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Experience Delaware Funds®by Macquarie
Macquarie Investment Management (MIM) is a global asset manager with offices in the United States, Europe, Asia, and Australia. As active managers, we prioritize autonomy and accountability at the investment team level in pursuit of opportunities that matter for clients. Delaware Funds is one of the longest-standing mutual fund families, with more than 80 years in existence.
If you are interested in learning more about creating an investment plan, contact your financial advisor.
You can learn more about Delaware Funds or obtain a prospectus for Delaware Small Cap Value Fund at delawarefunds.com/literature.
Manage your account online
● | Check your account balance and transactions |
● | View statements and tax forms |
● | Make purchases and redemptions |
Visit delawarefunds.com/account-access.
Macquarie Asset Management (MAM) offers a diverse range of products including securities investment management, infrastructure and real asset management, and fund and equity-based structured products. MIM is the marketing name for certain companies comprising the asset management division of Macquarie Group. This includes the following investment advisers: Macquarie Investment Management Business Trust (MIMBT), Macquarie Funds Management Hong Kong Limited, Macquarie Investment Management Austria Kapitalanlage AG, Macquarie Investment Management Global Limited, Macquarie Investment Management Europe Limited, Macquarie Capital Investment Management LLC, and Macquarie Investment Management Europe S.A.
The Fund is distributed byDelaware Distributors, L.P. (DDLP), an affiliate of MIMBT and Macquarie Group Limited.
Other than Macquarie Bank Limited (MBL), none of the entities noted are authorized deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Fund is governed by US laws and regulations.
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Security type / sector allocation and top 10 equity holdings | 10 | |||
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Unless otherwise noted, views expressed herein are current as of Nov. 30, 2019, 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.
Advisory services provided by Delaware Management Company, a series of MIMBT, a US registered investment advisor.
All third-party marks cited are the property of their respective owners.
© 2020 Macquarie Management Holdings, Inc.
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Portfolio management review | ||
Delaware Small Cap Value Fund | December 10, 2019 (Unaudited) |
Performance preview (for the year ended November 30, 2019) | ||||||||
Delaware Small Cap Value Fund (Institutional Class shares) | 1-year return | +8.95 | % | |||||
Delaware Small Cap Value Fund (Class A shares) | 1-year return | +8.69 | % | |||||
Russell 2000®Value Index (benchmark) | 1-year return | +3.96 | % |
Past performance does not guarantee future results.
For complete, annualized performance for Delaware Small Cap Value Fund, please see the table on page 4. Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors. In addition, Institutional Class shares pay no distribution and service fee.
The performance of Class A shares excludes the applicable sales charge. Both Institutional Class shares and Class A shares reflect the reinvestment of all distributions.
Please see page 6 for a description of the index. Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.
Market review
Small-cap value stocks experienced substantial volatility during the Fund’s fiscal year ended Nov. 30, 2019, finishing the period with a positive return. During the fiscal year, growth companies outperformed value companies across the US market cap spectrum, as investors continued to favor momentum over quality. The performance disparity between value companies and growth companies was significant insmall-cap equities throughout the fiscal year – the Russell 2000 Value Index gained 3.96% while the Russell 2000® Growth Index rose 10.93%.
Sector-level performance within the Fund’s benchmark, the Russell 2000 Value Index, was mixed during the fiscal period. The strongest-performing sectors of the benchmark were technology, business services, and real estate investment trusts (REITs), each of which advanced more than 10% during the period. Four sectors in the benchmark declined during the period, with energy being the weakest, followed by companies in the healthcare, consumer staples, and consumer services sectors.
The gross domestic product (GDP) growth rate slowed but remained positive during the fiscal year. The unemployment rate remained at historically low levels with a November reading of 3.5%, while wage growth was positive. The Federal Reserve reduced the federal funds rate in
In our opinion, Delaware Small Cap Value Fund benefited from:
● favorable stock selection in capital spending, consumer services, consumer cyclical, and technology
● procyclical sector positioning
● a supportive economic backdrop featuring moderate growth, low inflation, and low interest rates
● continuing high levels of consumer confidence.
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Portfolio management review | ||
Delaware Small Cap Value Fund |
the second half of the Fund’s fiscal year to support economic growth. The Conference Board Consumer Confidence Index® (1985=100, SA) was at historically high levels over the summer, peaking in August, and then declining month over month to settle at 125.5 for November, which was well above long-term averages.
Source: Bloomberg.
Within the Fund
For the fiscal year ended Nov. 30, 2019, Delaware Small Cap Value Fund Institutional Class shares gained 8.95%. The Fund’s Class A shares rose 8.69% at net asset value (NAV) and 2.44% at maximum offer price. These figures reflect reinvestment of all distributions. During the same period, the Fund’s benchmark, the Russell 2000 Value Index, gained 3.96%. For complete annualized performance of Delaware Small Cap Value Fund, please see the table on page 4.
Stock selection in the capital spending, consumer services, consumer cyclical, and technology sectors contributed to the Fund’s relative performance during the fiscal year. Stock selection in the financial services, business services, basic industry, and energy sectors detracted from the Fund’s performance.
MasTec Inc., a specialty engineering and construction company operating in the oil and gas, telecommunications, and power generationend-markets, contributed to the Fund’s performance during the fiscal year. MasTec reported multiple quarters of strong growth of revenue, earnings per share (EPS), and earnings before interest, taxes, depreciation and amortization (EBITDA) growth. The company has a healthy backlog of projects across business segments. We maintained the Fund’s position in MasTec as its share price remains discounted relative to its historical multiple, and its balance sheet continues to improve as management pays down debt.
Teradyne Inc., a supplier of automation equipment for test and industrial applications, also contributed to performance. Teradyne designs systems used to test semiconductors, wireless products, and electronic systems, in addition to producing collaborativeindustrial-use robots. Teradyne’s stock price rose throughout the fiscal year and experienced a significant price increase after the company reported fiscal second-quarter earnings in July. Teradyne’s largest business segment – Semiconductor Test – reported stronger-than-expected sales, driven by 5G infrastructure, networking, and memory test. We believe Teradyne is well positioned to continue benefiting from increasing demand for its products, although we did reduce the Fund’s position during the fiscal year due to valuation.
Meritage Homes Corp., one of the largest builders of single-family homes in the United States, contributed to the Fund’s performance. During the fiscal year, shares of Meritage Homes outperformed as the company reported consistently strong earnings and revenue. Meritage Homes has delivered more homes than expected and announced year-over-year order growth. During the fiscal year, we trimmed the Fund’s position in Meritage Homes and purchased shares of peer homebuilderKB Home.We were attracted to KB Home, which was trading at a discounted valuation, pays a dividend, and has a strong balance sheet. Both homebuilders have a unique focus on selling to the entry-level and firstmove-up, home-buyer markets, which we believe have sustainable demand.
In the consumer services sector, shares of television broadcasting and magazine companyMeredith Corp.detracted from the Fund’s relative performance during the fiscal year. Meredith closed its acquisition of Time Inc. in January 2018 and had anticipated that significant cost synergies from the deal would likely be realized in its 2020 fiscal year. When Meredith reported fiscal third quarter 2018 results, it set a goal to generate $1
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billion of EBITDA in fiscal 2020. More than a year later, however, on its fiscal 2019, fourth-quarter earnings call, Meredith said that fiscal 2020 adjusted EBITDA guidance was now expected to range from $640 million to $675 million, acknowledging that the company was not where it expected to be at this point in time. The deterioration of the company’s fundamentals changed our investment rationale and resulted in our exiting the position prior to the end of the Fund’s fiscal year.
Whiting Petroleum Corp., an independent oil and gas exploration and production (E&P) company with primary operations in the Bakken and Niobrara basins, also detracted from performance. The company reported weaker-than-expected second-quarter results that missed oil production and earnings expectations. The oil production miss was a result of infrastructure constraints that were more severe than anticipated. In our view, Whiting Petroleum’s weaker financial outlook should make its ability to meet its deleveraging goals less realistic, and it is likely to force the company to take financial action that isn’t consistent with our investment discipline. We believe this would not be in the best interest of equity shareholders and exited Whiting Petroleum accordingly prior to the Fund’s fiscal year end as a result of what we viewed as negative changes in its financial position.
Stock selection in the financial services sector detracted from performance during the fiscal year as several of the Fund’s regional bank holdings underperformed.Webster Financial Corp.is a New England headquartered community bank that provides financial services to individuals and businesses and offers Health Savings Account (HSA) administration under its HSA Bank® division. Webster’s net interest margin and income are more sensitive to changes in interest rates than its peers because the bank’s balance sheet is more asset sensitive. The flattening of the US
Treasury yield curve and the reductions in the federal funds rate slowed Webster’s growth during the fiscal year. Webster’s management is in the process of transitioning the bank’s balance sheet from asset sensitive to rate neutral. We maintained the Fund’s position in Webster as it trades at a discounted valuation and has what we view as an attractive business mix, with HSAs providing the company with cheaper noninterest bearing deposits and additional fee income.
Although market volatility may remain elevated, we believe the moderate-growth, low inflation, low interest rate environment that we have experienced for several years should continue to support equity prices. Several indicators suggest to us that value-oriented companies have the potential to perform strongly in the current market environment, and we have positioned the Fund to potentially benefit from this. The Fund ended its fiscal year overweight the capital spending, technology, and consumer staples sectors. The Fund remained underweight the traditionally defensive sectors, including REITs, utilities, and healthcare. The Fund was close to neutral weight in the consumer cyclical, consumer services, energy, basic industry, and financial services sectors.
Our team’s disciplined philosophy remains unchanged. We continue to focus onbottom-up stock selection and specifically on identifying companies that trade at what we view as attractive valuations, generate strong free-cash flow, and implement shareholder-friendly policies through share buybacks, dividend increases, and debt reduction. In that regard, we are encouraged by the number of companies that continue to meet these criteria.
We appreciate your confidence and look forward to serving your investment needs in the next fiscal year.
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Performance summary | ||
Delaware Small Cap Value Fund | November 30, 2019 (Unaudited) |
The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 800523-1918 or visiting delawarefunds.com/performance.
Fund and benchmark performance1,2 | Average annual total returns through November 30, 2019 | |||||||
1 year | 5 year | 10 year | Lifetime | |||||
Class A (Est. June 24, 1987) | ||||||||
Excluding sales charge | +8.69% | +7.06% | +11.78% | +10.92% | ||||
Including sales charge | +2.44% | +5.80% | +11.12% | +10.72% | ||||
Class C (Est. Nov. 29, 1995) | ||||||||
Excluding sales charge | +7.88% | +6.26% | +10.95% | +9.05% | ||||
Including sales charge | +6.90% | +6.26% | +10.95% | +9.05% | ||||
Class R (Est. June 2, 2003) | ||||||||
Excluding sales charge | +8.42% | +6.79% | +11.50% | +9.35% | ||||
Including sales charge | +8.42% | +6.79% | +11.50% | +9.35% | ||||
Institutional Class (Est. Nov. 9, 1992) | ||||||||
Excluding sales charge | +8.95% | +7.32% | +12.06% | +10.43% | ||||
Including sales charge | +8.95% | +7.32% | +12.06% | +10.43% | ||||
Class R6 (Est. May 2, 2016) | ||||||||
Excluding sales charge | +9.14% | — | — | +10.32% | ||||
Including sales charge | +9.14% | — | — | +10.32% | ||||
Russell 2000 Value Index | +3.96% | +6.83% | +10.99% | +10.19%* |
*The benchmark lifetime return is for Institutional Class share comparison only and is calculated using the last business day in the month of the Fund’s Institutional Class inception date.
1 Returns reflect the reinvestment of all distributions and are presented both with and without the applicable sales charges described below. Returns do not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares.
Expense limitations were in effect for certain classes during some or all of the periods shown in the “Fund and benchmark performance” table. Expenses for each class are listed on the “Fund expense ratios” table on page 5. Performance would have been lower had expense limitations not been in effect.
Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors. In addition, Institutional Class shares pay no distribution and service(12b-1) fee.
Class A shares are sold with a maximumfront-end sales charge of 5.75%, and have an annual12b-1 fee of 0.25% of average daily net assets. Performance for Class A shares, excluding sales charges, assumes that nofront-end sales charge applied.
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Class C shares are sold with a contingent deferred sales charge of 1.00% if redeemed during the first 12 months. They are also subject to an annual12b-1 fee of 1.00% of average daily net assets. Performance for Class C shares, excluding sales charges, assumes either that contingent deferred sales charges did not apply or that the investment was not redeemed.
Class R shares are available only for certain retirement plan products. They are sold without a sales charge and have an annual12b-1 fee of 0.50% of average daily net assets.
Class R6 shares are available only to certain investors. In addition, Class R6 shares do not pay
any12b-1 fees,sub-accounting fees, and/orsub-transfer agency fees to any brokers, dealers, or other financial intermediaries.
Investments in small and/ormedium-sized companies typically exhibit greater risk and higher volatility than larger, more established companies.
Narrowly focused investments may exhibit higher volatility than investments in multiple industry sectors.
REIT investments are subject to many of the risks associated with direct real estate ownership, including changes in economic conditions, credit risk, and interest rate fluctuations.
2 The Fund’s expense ratios, as described in the most recent prospectus, are disclosed in the following “Fund expense ratios” table. Please see the “Financial highlights” section in this report for the most recent expense ratios.
Fund expense ratios | Class A | Class C | Class R | Institutional Class | Class R6 | |||||
Total annual operating expenses | 1.15% | 1.90% | 1.40% | 0.90% | 0.72% | |||||
(without fee waivers) | ||||||||||
Net expenses | 1.15% | 1.90% | 1.40% | 0.90% | 0.72% | |||||
(including fee waivers, if any) | ||||||||||
Type of waiver | n/a | n/a | n/a | n/a | n/a |
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Performance summary | ||
Delaware Small Cap Value Fund |
Performance of a $10,000 investment1
Average annual total returns from Nov. 30, 2009 through Nov. 30, 2019
For the period beginning Nov. 30, 2009 through Nov. 30, 2019 | Starting value | Ending value | ||||||||
| Delaware Small Cap Value Fund — Institutional Class shares | $10,000 | $31,236 | |||||||
Delaware Small Cap Value Fund — Class A shares | $9,425 | $28,713 | ||||||||
Russell 2000 Value Index | $10,000 | $28,374 |
1 The “Performance of a $10,000 investment” graph assumes $10,000 invested in Institutional Class and Class A shares of the Fund on Nov. 30, 2009, and includes the effect of a 5.75%front-end sales charge (for Class A shares) and the reinvestment of all distributions. The graph does not reflect the deduction of taxes the shareholders would pay on Fund distributions or redemptions of Fund shares. Expense limitations were in effect for some or all of the periods shown. Performance would have been lower had expense limitations not been in effect. Expenses are listed in the “Fund expense ratios” table on page 5. Please note additional details on pages 4 through 7.
The graph also assumes $10,000 invested in the Russell 2000 Value Index as of Nov. 30, 2009. The Russell 2000 Value Index measures the performance of thesmall-cap value segment of the US equity universe. It includes those Russell 2000 companies with lowerprice-to-book ratios and lower forecasted growth values.
The Russell 2000 Growth Index, mentioned on page 1, measures the performance of thesmall-cap growth segment of the US equity universe. It includes those Russell 2000 companies with higherprice-to-book ratios and higher forecasted growth values.
The Conference Board Consumer Confidence Index, mentioned on page 2, is a barometer of the health of the US economy from the perspective of the consumer. The index is based on consumers’ perceptions of current business and employment conditions, as well as their expectations for six months hence regarding business conditions, employment, and income. The resulting relative value is then used as an “index value” and compared against each respective monthly value for 1985. In that year, the result of the index was arbitrarily set at 100, representing it as the index benchmark
Gross domestic product is a measure of all goods and services produced by a nation in a year.
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Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company.
Index performance returns do not reflect any management fees, transaction costs, or expenses.
Indices are unmanaged and one cannot invest directly in an index.Past performance is not a guarantee of future results.
Performance of other Fund classes will vary due to different charges and expenses.
Nasdaq symbols | CUSIPs | |||||
Class A | DEVLX | 246097109 | ||||
Class C | DEVCX | 246097406 | ||||
Class R | DVLRX | 246097505 | ||||
Institutional Class | DEVIX | 246097208 | ||||
Class R6
| DVZRX | 24610B818 |
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Disclosure of Fund expenses | ||
For thesix-month period from June 1, 2019 to November 30, 2019 (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 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 entiresix-month period from June 1, 2019 to Nov. 30, 2019.
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 assume reinvestment of all dividends and distributions.
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Delaware Small Cap Value Fund
Expense analysis of an investment of $1,000
Beginning Account Value 6/1/19 | Ending Account Value 11/30/19 | Annualized Expense Ratio | Expenses Paid During Period 6/1/19 to 11/30/19* | |||||||||||
Actual Fund return† | ||||||||||||||
Class A | $1,000.00 | $1,136.40 | 1.14% | $6.11 | ||||||||||
Class C | 1,000.00 | 1,132.10 | 1.89% | 10.10 | ||||||||||
Class R | 1,000.00 | 1,135.00 | 1.39% | 7.44 | ||||||||||
Institutional Class | 1,000.00 | 1,137.70 | 0.89% | 4.77 | ||||||||||
Class R6 | 1,000.00 | 1,138.70 | 0.72% | 3.86 | ||||||||||
Hypothetical 5% return(5% return before expenses) |
| |||||||||||||
Class A | $1,000.00 | $1,019.35 | 1.14% | $5.77 | ||||||||||
Class C | 1,000.00 | 1,015.59 | 1.89% | 9.55 | ||||||||||
Class R | 1,000.00 | 1,018.10 | 1.39% | 7.03 | ||||||||||
Institutional Class | 1,000.00 | 1,020.61 | 0.89% | 4.51 | ||||||||||
Class R6 | 1,000.00 | 1,021.46 | 0.72% | 3.65 |
*“Expenses Paid During Period” are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 183/365 (to reflect theone-half year period).
†Because actual returns reflect only the most recentsix-month period, the returns shown may differ significantly from fiscal year returns.
In addition to the Fund’s expenses reflected above, the Fund also indirectly bears its portion of the fees and expenses of the investment companies in which it invests (Underlying Funds), including business development corporations and exchange-traded funds. The table above does not reflect the expenses of the Underlying Fund.
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Security type / sector allocation and top 10 equity holdings | ||
Delaware Small Cap Value Fund | As of November 30, 2019 (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 Stock² | 97.84% | ||||
Basic Industry | 5.19% | ||||
Business Services | 0.94% | ||||
Capital Spending | 9.70% | ||||
Consumer Cyclical | 4.00% | ||||
Consumer Services | 9.05% | ||||
Consumer Staples | 3.52% | ||||
Energy | 4.46% | ||||
Financial Services | 29.10% | ||||
Healthcare | 2.88% | ||||
Real Estate Investment Trusts | 9.23% | ||||
Technology | 12.25% | ||||
Transportation | 2.37% | ||||
Utilities | 5.15% | ||||
Short-Term Investments | 2.10% | ||||
Total Value of Securities | 99.94% | ||||
Receivables and Other Assets Net of Liabilities | 0.06% | ||||
Total Net Assets | 100.00% |
² | Narrow industries are utilized for compliance purposes for diversification whereas broad sectors are used for financial reporting. |
To monitor compliance with the Fund’s concentration guidelines as described in the Fund’s prospectus and statement of additional information, the Financial Services sector (as disclosed herein for financial reporting purposes) is subdivided into a variety of “industries” (in accordance with the requirements of the Investment Company Act of 1940). The Financial Services sector consisted of banks, diversified financial services, insurance, and investment companies. As of Nov. 30, 2019, such amounts, as a percentage of total net assets were 21.16%, 2.54%, 4.92%, and 0.48%, respectively. The percentage in any such single industry will comply with the Fund’s concentration policy even if the percentage in the Financial Services sector for financial reporting purposes may exceed 25%.
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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 | |
MasTec | 2.89% | |
East West Bancorp | 2.50% | |
ITT | 2.17% | |
Hancock Whitney | 1.90% | |
Stifel Financial | 1.74% | |
Webster Financial | 1.71% | |
Teradyne | 1.61% | |
Hanover Insurance Group | 1.61% | |
FNB | 1.53% | |
Tech Data
| 1.51%
|
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Schedule of investments | ||
Delaware Small Cap Value Fund | November 30, 2019 |
Number of shares | Value (US $) | |||||||
| ||||||||
Common Stock – 97.84%² | ||||||||
| ||||||||
Basic Industry – 5.19% | ||||||||
Berry Global Group † | 1,281,610 | $ | 59,838,371 | |||||
Ferro † | 1,673,300 | 24,128,986 | ||||||
HB Fuller | 949,700 | 47,371,036 | ||||||
Louisiana-Pacific | 1,796,200 | 53,275,292 | ||||||
Olin | 2,282,800 | 39,994,656 | ||||||
|
| |||||||
224,608,341 | ||||||||
|
| |||||||
Business Services – 0.94% | ||||||||
Deluxe | 427,500 | 21,836,700 | ||||||
WESCO International † | 360,200 | 18,953,724 | ||||||
|
| |||||||
40,790,424 | ||||||||
|
| |||||||
Capital Spending – 9.70% | ||||||||
Altra Industrial Motion | 1,434,643 | 47,156,715 | ||||||
Atkore International Group † | 1,269,700 | 52,971,884 | ||||||
H&E Equipment Services | 1,105,700 | 36,488,100 | ||||||
ITT | 1,342,900 | 93,707,562 | ||||||
MasTec † | 1,883,759 | 124,968,571 | ||||||
Primoris Services | 1,420,900 | 31,288,218 | ||||||
Rexnord † | 1,036,200 | 32,733,558 | ||||||
|
| |||||||
419,314,608 | ||||||||
|
| |||||||
Consumer Cyclical – 4.00% | ||||||||
Barnes Group | 722,900 | 42,788,451 | ||||||
KB Home | 1,074,200 | 37,145,836 | ||||||
Knoll | 1,369,269 | 37,737,054 | ||||||
Meritage Homes † | 624,200 | 41,534,268 | ||||||
Standard Motor Products | 270,240 | 13,611,989 | ||||||
|
| |||||||
172,817,598 | ||||||||
|
| |||||||
Consumer Services – 9.05% | ||||||||
Asbury Automotive Group † | 301,500 | 33,418,260 | ||||||
Cable One | 28,630 | 43,947,050 | ||||||
Caleres | 946,800 | 20,725,452 | ||||||
Cheesecake Factory | 656,400 | 28,625,604 | ||||||
Choice Hotels International | 584,500 | 56,842,625 | ||||||
Cinemark Holdings | 1,016,031 | 34,412,970 | ||||||
Cracker Barrel Old Country Store | 192,200 | 29,548,828 | ||||||
Steven Madden | 691,925 | 29,386,055 | ||||||
Texas Roadhouse | 496,100 | 28,724,190 | ||||||
UniFirst | 258,200 | 53,253,750 | ||||||
Wolverine World Wide | 1,004,800 | 32,254,080 | ||||||
|
| |||||||
391,138,864 | ||||||||
|
| |||||||
Consumer Staples – 3.52% | ||||||||
Core-Mark Holding | 720,000 | 19,404,000 |
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Number of shares | Value (US $) | |||||||
| ||||||||
Common Stock²(continued) | ||||||||
| ||||||||
Consumer Staples(continued) | ||||||||
J&J Snack Foods | 215,100 | $ | 39,793,500 | |||||
Performance Food Group † | 744,554 | 35,038,711 | ||||||
Scotts Miracle-Gro | 335,000 | 33,861,800 | ||||||
Spectrum Brands Holdings | 388,900 | 24,314,028 | ||||||
|
| |||||||
152,412,039 | ||||||||
|
| |||||||
Energy – 4.46% | ||||||||
Callon Petroleum † | 4,941,900 | 18,037,935 | ||||||
Delek US Holdings | 1,136,300 | 38,986,453 | ||||||
Dril-Quip † | 470,500 | 19,883,330 | ||||||
Helix Energy Solutions Group † | 3,155,600 | 26,191,480 | ||||||
Oasis Petroleum † | 3,753,400 | 8,782,956 | ||||||
Patterson-UTI Energy | 2,819,100 | 25,202,754 | ||||||
SM Energy | 2,337,100 | 19,421,301 | ||||||
Valaris Class A | 1,495,737 | 6,371,840 | ||||||
WPX Energy † | 3,028,800 | 29,803,392 | ||||||
|
| |||||||
192,681,441 | ||||||||
|
| |||||||
Financial Services – 29.10% | ||||||||
American Equity Investment Life Holding | 1,993,000 | 59,231,960 | ||||||
Bank of NT Butterfield & Son | 641,800 | 22,174,190 | ||||||
Community Bank System | 260,500 | 17,674,925 | ||||||
East West Bancorp | 2,361,323 | 108,195,820 | ||||||
First Financial Bancorp | 2,018,100 | 49,080,192 | ||||||
First Hawaiian | 1,814,000 | 51,771,560 | ||||||
First Interstate BancSystem Class A | 923,900 | 38,896,190 | ||||||
First Midwest Bancorp | 2,136,300 | 46,058,628 | ||||||
FNB | 5,329,900 | 66,197,358 | ||||||
Great Western Bancorp | 1,703,950 | 58,564,762 | ||||||
Hancock Whitney | 2,020,600 | 82,056,566 | ||||||
Hanover Insurance Group | 511,000 | 69,460,230 | ||||||
Kemper | 290,300 | 21,458,976 | ||||||
Legg Mason | 889,100 | 34,746,028 | ||||||
Main Street Capital (BDC) | 480,800 | 20,727,288 | ||||||
NBT Bancorp | 939,000 | 37,560,000 | ||||||
Prosperity Bancshares | 541,900 | 38,068,475 | ||||||
S&T Bancorp | 673,456 | 25,402,760 | ||||||
Selective Insurance Group | 944,506 | 62,545,187 | ||||||
Stifel Financial | 1,203,500 | 75,242,820 | ||||||
Umpqua Holdings | 3,266,800 | 53,477,516 | ||||||
Valley National Bancorp | 4,528,300 | 52,437,714 | ||||||
Webster Financial | 1,516,800 | 73,852,992 |
13 |
Table of Contents
Schedule of investments | ||
Delaware Small Cap Value Fund |
Number of shares | Value (US $) | |||||||
| ||||||||
Common Stock²(continued) | ||||||||
| ||||||||
Financial Services(continued) | ||||||||
WesBanco | 910,000 | $ | 33,196,800 | |||||
Western Alliance Bancorp | 1,155,300 | 60,260,448 | ||||||
|
| |||||||
1,258,339,385 | ||||||||
|
| |||||||
Healthcare – 2.88% | ||||||||
Avanos Medical † | 809,900 | 28,071,134 | ||||||
Catalent † | 583,500 | 30,336,165 | ||||||
Service Corp. International | 698,100 | 30,730,362 | ||||||
STERIS | 234,980 | 35,514,877 | ||||||
|
| |||||||
124,652,538 | ||||||||
|
| |||||||
Real Estate Investment Trusts – 9.23% | ||||||||
Brandywine Realty Trust | 3,308,637 | 51,052,269 | ||||||
Highwoods Properties | 998,000 | 48,452,900 | ||||||
Kite Realty Group Trust | 174,800 | 3,382,380 | ||||||
Lexington Realty Trust | 3,721,800 | 41,237,544 | ||||||
Life Storage | 384,000 | 42,055,680 | ||||||
Outfront Media | 2,433,900 | 60,798,822 | ||||||
RPT Realty | 2,120,689 | 31,343,783 | ||||||
Spirit Realty Capital | 919,200 | 48,166,080 | ||||||
Summit Hotel Properties | 2,460,700 | 29,823,684 | ||||||
Washington Real Estate Investment Trust | 1,373,400 | 42,671,538 | ||||||
|
| |||||||
398,984,680 | ||||||||
|
| |||||||
Technology – 12.25% | ||||||||
Cirrus Logic † | 540,400 | 38,746,680 | ||||||
Coherent † | 156,500 | 23,609,590 | ||||||
CommScope Holding † | 1,119,648 | 15,227,213 | ||||||
Flex † | 2,970,100 | 35,255,087 | ||||||
MaxLinear † | 875,200 | 17,390,224 | ||||||
NCR † | 1,168,559 | 38,363,792 | ||||||
NetScout Systems † | 964,606 | 24,308,071 | ||||||
ON Semiconductor † | 2,270,400 | 48,745,488 | ||||||
Tech Data † | 450,319 | 65,246,720 | ||||||
Teradyne | 1,113,900 | 69,719,001 | ||||||
Tower Semiconductor † | 1,728,500 | 37,888,720 | ||||||
TTM Technologies † | 2,490,102 | 33,392,268 | ||||||
Viavi Solutions † | 2,009,100 | 30,176,682 | ||||||
Vishay Intertechnology | 2,582,500 | 51,365,925 | ||||||
|
| |||||||
529,435,461 | ||||||||
|
| |||||||
Transportation – 2.37% | ||||||||
Kirby † | 271,200 | 22,881,144 | ||||||
Saia † | 350,150 | 33,229,235 | ||||||
Werner Enterprises | 1,260,000 | 46,317,600 | ||||||
|
| |||||||
102,427,979 | ||||||||
|
|
14 |
Table of Contents
Number of shares | Value (US $) | |||||||
| ||||||||
Common Stock²(continued) | ||||||||
| ||||||||
Utilities – 5.15% | ||||||||
ALLETE | 461,800 | $ | 36,994,798 | |||||
Black Hills | 759,500 | 58,154,915 | ||||||
El Paso Electric | 668,900 | 45,364,798 | ||||||
South Jersey Industries | 1,008,400 | 31,502,416 | ||||||
Southwest Gas Holdings | 668,200 | 50,622,832 | ||||||
|
| |||||||
222,639,759 | ||||||||
|
| |||||||
Total Common Stock(cost $3,185,532,440) | 4,230,243,117 | |||||||
|
| |||||||
| ||||||||
Short-Term Investments – 2.10% | ||||||||
| ||||||||
Money Market Mutual Funds – 2.10% | ||||||||
BlackRock FedFund – Institutional Shares(seven-day effective yield 1.55%) | 18,113,087 | 18,113,087 | ||||||
Fidelity Investments Money Market Government Portfolio – Class I(seven-day effective yield 1.53%) | 18,113,086 | 18,113,087 | ||||||
GS Financial Square Government Fund – Institutional Shares(seven-day effective yield 1.54%) | 18,113,086 | 18,113,086 | ||||||
Morgan Stanley Government Portfolio – Institutional Share Class(seven-day effective yield 1.52%) | 18,113,086 | 18,113,086 | ||||||
State Street Institutional US Government Money Market Fund – Investor Class(seven-day effective yield 1.51%) | 18,113,086 | 18,113,086 | ||||||
|
| |||||||
Total Short-Term Investments(cost $90,565,432) | 90,565,432 | |||||||
|
| |||||||
Total Value of Securities – 99.94% | $ | 4,320,808,549 | ||||||
|
|
² | Narrow industries are utilized for compliance purposes for diversification whereas broad sectors are used for financial reporting. |
† | Non-income producing security. |
Summary of abbreviations:
BDC – Business Development Corporation
GS – Goldman Sachs
See accompanying notes, which are an integral part of the financial statements.
15 |
Table of Contents
Statement of assets and liabilities | ||
Delaware Small Cap Value Fund | November 30, 2019 |
Assets: | ||||
Investments, at value1 | $ | 4,320,808,549 | ||
Cash | 825,320 | |||
Dividends and interest receivable | 5,752,166 | |||
Receivable for fund shares sold | 4,812,857 | |||
|
| |||
Total assets | 4,332,198,892 | |||
|
| |||
Liabilities: | ||||
Payable for fund shares redeemed | 4,474,374 | |||
Investment management fees payable to affiliates | 2,301,544 | |||
Dividend disbursing and transfer agent fees and expenses payable tonon-affiliates | 1,240,985 | |||
Other accrued expenses | 271,492 | |||
Distribution fees payable to affiliates | 212,766 | |||
Reports and statements to shareholders expenses payable tonon-affiliates | 173,044 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 30,777 | |||
Accounting and administration expenses payable to affiliates | 12,172 | |||
Legal fees payable to affiliates | 7,579 | |||
Reports and statements to shareholders expenses payable to affiliates | 2,476 | |||
Trustees’ fees and expenses payable to affiliates | 64 | |||
|
| |||
Total liabilities | 8,727,273 | |||
|
| |||
Total Net Assets | $ | 4,323,471,619 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 3,122,972,921 | ||
Total distributable earnings (loss) | 1,200,498,698 | |||
|
| |||
Total Net Assets | $ | 4,323,471,619 | ||
|
|
16 |
Table of Contents
Net Asset Value | ||||
Class A: | ||||
Net assets | $ | 637,145,795 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 10,347,210 | |||
Net asset value per share | $ | 61.58 | ||
Sales charge | 5.75 | % | ||
Offering price per share, equal to net asset value per share / (1 – sales charge) | $ | 65.34 | ||
Class C: | ||||
Net assets | $ | 69,109,100 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 1,383,631 | |||
Net asset value per share | $ | 49.95 | ||
Class R: | ||||
Net assets | $ | 55,697,428 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 935,814 | |||
Net asset value per share | $ | 59.52 | ||
Institutional Class: | ||||
Net assets | $ | 2,955,896,571 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 45,277,524 | |||
Net asset value per share | $ | 65.28 | ||
Class R6: | ||||
Net assets | $ | 605,622,725 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 9,258,822 | |||
Net asset value per share | $ | 65.41 | ||
| ||||
1Investments, at cost | $ | 3,276,097,872 |
See accompanying notes, which are an integral part of the financial statements.
17 |
Table of Contents
This page intentionally left blank.
Table of Contents
Statement of operations | ||
Delaware Small Cap Value Fund | Year ended November 30, 2019 |
Investment Income: | ||||
Dividends | $ | 82,213,011 | ||
Interest | 497,794 | |||
|
| |||
82,710,805 | ||||
|
| |||
Expenses: | ||||
Management fees | 26,155,229 | |||
Dividend disbursing and transfer agent fees and expenses | 7,137,544 | |||
Distribution expenses — Class A | 1,606,082 | |||
Distribution expenses — Class C | 712,299 | |||
Distribution expenses — Class R | 281,288 | |||
Accounting and administration expenses | 746,448 | |||
Reports and statements to shareholders expenses | 515,088 | |||
Trustees’ fees and expenses | 226,907 | |||
Registration fees | 197,129 | |||
Legal fees | 172,149 | |||
Custodian fees | 116,769 | |||
Audit and tax fees | 36,071 | |||
Other | 130,712 | |||
|
| |||
38,033,715 | ||||
Less expenses paid indirectly | (16,639 | ) | ||
|
| |||
Total operating expenses | 38,017,076 | |||
|
| |||
Net Investment Income | 44,693,729 | |||
|
| |||
Net Realized and Unrealized Gain: | ||||
Net realized gain on investments | 138,185,186 | |||
Net change in unrealized appreciation (depreciation) of investments | 171,381,637 | |||
|
| |||
Net Realized and Unrealized Gain | 309,566,823 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 354,260,552 | ||
|
|
See accompanying notes, which are an integral part of the financial statements.
19 |
Table of Contents
Statements of changes in net assets | ||
Delaware Small Cap Value Fund |
Year ended | ||||||||
11/30/19 | 11/30/18 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 44,693,729 | $ | 33,357,980 | ||||
Net realized gain | 138,185,186 | 244,545,395 | ||||||
Net change in unrealized appreciation (depreciation) | 171,381,637 | (552,002,875 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | 354,260,552 | (274,099,500 | ) | |||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Distributable earnings: | ||||||||
Class A | (48,159,678 | ) | (11,503,582 | ) | ||||
Class C | (5,793,001 | ) | (1,165,335 | ) | ||||
Class R | (4,426,662 | ) | (951,441 | ) | ||||
Institutional Class | (192,050,571 | ) | (47,820,037 | ) | ||||
Class R6 | (29,190,659 | ) | (3,498,224 | ) | ||||
|
|
|
| |||||
(279,620,571 | ) | (64,938,619 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Class A | 125,669,755 | 164,517,883 | ||||||
Class C | 12,928,017 | 14,056,663 | ||||||
Class R | 12,291,124 | 16,145,594 | ||||||
Institutional Class | 876,690,020 | 735,000,602 | ||||||
Class R6 | 281,229,086 | 285,889,067 | ||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | 47,116,404 | 11,370,015 | ||||||
Class C | 5,707,402 | 1,146,823 | ||||||
Class R | 4,426,273 | 951,281 | ||||||
Institutional Class | 186,340,898 | 47,031,805 | ||||||
Class R6 | 28,524,928 | 3,491,535 | ||||||
|
|
|
| |||||
1,580,923,907 | 1,279,601,268 | |||||||
|
|
|
|
20 |
Table of Contents
Year ended | ||||||||
11/30/19 | 11/30/18 | |||||||
Capital Share Transactions (continued): | ||||||||
Cost of shares redeemed: | ||||||||
Class A | $ | (273,609,076 | ) | $ | (257,975,480 | ) | ||
Class C | (23,929,760 | ) | (39,418,359 | ) | ||||
Class R | (23,592,812 | ) | (32,694,944 | ) | ||||
Institutional Class | (888,513,776 | ) | (1,092,309,296 | ) | ||||
Class R6 | (119,337,638 | ) | (71,544,371 | ) | ||||
|
|
|
| |||||
(1,328,983,062 | ) | (1,493,942,450 | ) | |||||
|
|
|
| |||||
Increase (Decrease) in net assets derived from capital share transactions | 251,940,845 | (214,341,182 | ) | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets | 326,580,826 | (553,379,301 | ) | |||||
Net Assets: | ||||||||
Beginning of year | 3,996,890,793 | 4,550,270,094 | ||||||
|
|
|
| |||||
End of year | $ | 4,323,471,619 | $ | 3,996,890,793 | ||||
|
|
|
|
See accompanying notes, which are an integral part of the financial statements.
21 |
Table of Contents
Delaware Small Cap Value Fund Class A
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income1 |
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 return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of net investment income to average net assets |
Portfolio turnover |
|
1 | The average shares outstanding method has been applied for per share information. |
2 | Total 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.
22
Table of Contents
Year ended | ||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
11/30/19 | 11/30/18 | 11/30/17 | 11/30/16 | 11/30/15 | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||
$ | 61.81 | $ | 67.13 | $ | 58.16 | $ | 52.55 | $ | 54.87 | |||||||||||||||||||
0.52 | 0.37 | 0.34 | 0.28 | 0.32 | ||||||||||||||||||||||||
3.63 | (4.81 | ) | 8.94 | 8.55 | 0.16 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
4.15 | (4.44 | ) | 9.28 | 8.83 | 0.48 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(0.42 | ) | (0.27 | ) | (0.31 | ) | (0.32 | ) | (0.18 | ) | |||||||||||||||||||
(3.96 | ) | (0.61 | ) | — | (2.90 | ) | (2.62 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(4.38 | ) | (0.88 | ) | (0.31 | ) | (3.22 | ) | (2.80 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
$ | 61.58 | $ | 61.81 | $ | 67.13 | $ | 58.16 | $ | 52.55 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
8.69% | (6.70% | ) | 16.01% | 18.47% | 0.90% | |||||||||||||||||||||||
$ | 637,146 | $ | 733,864 | $ | 881,709 | $ | 870,158 | $ | 794,664 | |||||||||||||||||||
1.15% | 1.15% | 1.18% | 1.24% | 1.22% | ||||||||||||||||||||||||
0.90% | 0.56% | 0.55% | 0.57% | 0.62% | ||||||||||||||||||||||||
18% | 18% | 15% | 19% | 20% | ||||||||||||||||||||||||
|
23
Table of Contents
Financial highlights
Delaware Small Cap Value Fund Class C
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income (loss)1 |
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 return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of net investment income (loss) to average net assets |
Portfolio turnover |
|
1 | The average shares outstanding method has been applied for per share information. |
2 | Total return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. |
See accompanying notes, which are an integral part of the financial statements.
24
Table of Contents
Year ended | ||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
11/30/19 | 11/30/18 | 11/30/17 | 11/30/16 | 11/30/15 | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||
$ | 50.96 | $ | 55.65 | $ | 48.34 | $ | 44.24 | $ | 46.79 | |||||||||||||||||||
0.07 | (0.10 | ) | (0.10 | ) | (0.07 | ) | (0.06 | ) | ||||||||||||||||||||
2.88 | (3.98 | ) | 7.43 | 7.09 | 0.13 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
2.95 | (4.08 | ) | 7.33 | 7.02 | 0.07 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
— | — | (0.02 | ) | (0.02 | ) | — | ||||||||||||||||||||||
(3.96 | ) | (0.61 | ) | — | (2.90 | ) | (2.62 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(3.96 | ) | (0.61 | ) | (0.02 | ) | (2.92 | ) | (2.62 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
$ | 49.95 | $ | 50.96 | $ | 55.65 | $ | 48.34 | $ | 44.24 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
7.88% | (7.41% | ) | 15.17% | 17.58% | 0.14% | |||||||||||||||||||||||
$ | 69,109 | $ | 74,828 | $ | 105,757 | $ | 107,104 | $ | 108,890 | |||||||||||||||||||
1.90% | 1.90% | 1.93% | 1.99% | 1.97% | ||||||||||||||||||||||||
0.15% | (0.19% | ) | (0.20% | ) | (0.18% | ) | (0.13% | ) | ||||||||||||||||||||
18% | 18% | 15% | 19% | 20% | ||||||||||||||||||||||||
|
25
Table of Contents
Financial highlights
Delaware Small Cap Value Fund Class R
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income1 |
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 return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of net investment income to average net assets |
Portfolio turnover |
|
1 | The average shares outstanding method has been applied for per share information. |
2 | Total 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.
26
Table of Contents
Year ended | ||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
11/30/19 | 11/30/18 | 11/30/17 | 11/30/16 | 11/30/15 | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||
$ | 59.86 | $ | 65.05 | $ | 56.40 | $ | 51.05 | $ | 53.39 | |||||||||||||||||||
0.36 | 0.20 | 0.18 | 0.15 | 0.19 | ||||||||||||||||||||||||
3.52 | (4.66 | ) | 8.66 | 8.30 | 0.14 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
3.88 | (4.46 | ) | 8.84 | 8.45 | 0.33 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(0.26 | ) | (0.12 | ) | (0.19 | ) | (0.20 | ) | (0.05 | ) | |||||||||||||||||||
(3.96 | ) | (0.61 | ) | — | (2.90 | ) | (2.62 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(4.22 | ) | (0.73 | ) | (0.19 | ) | (3.10 | ) | (2.67 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
$ | 59.52 | $ | 59.86 | $ | 65.05 | $ | 56.40 | $ | 51.05 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
8.42% | (6.92% | ) | 15.71% | 18.19% | 0.63% | |||||||||||||||||||||||
�� | ||||||||||||||||||||||||||||
$ | 55,697 | $ | 62,791 | $ | 84,131 | $ | 83,557 | $ | 81,187 | |||||||||||||||||||
1.40% | 1.40% | 1.43% | 1.49% | 1.47% | ||||||||||||||||||||||||
0.65% | 0.31% | 0.30% | 0.32% | 0.37% | ||||||||||||||||||||||||
18% | 18% | 15% | 19% | 20% | ||||||||||||||||||||||||
|
27
Table of Contents
Financial highlights
Delaware Small Cap Value Fund Institutional Class
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income1 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period |
Total return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of net investment income to average net assets |
Portfolio turnover |
|
1 | The average shares outstanding method has been applied for per share information. |
2 | Total return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. |
See accompanying notes, which are an integral part of the financial statements.
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Year ended | ||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
11/30/19 | 11/30/18 | 11/30/17 | 11/30/16 | 11/30/15 | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||
$ | 65.29 | $ | 70.83 | $ | 61.32 | $ | 55.23 | $ | 57.52 | |||||||||||||||||||
0.70 | 0.57 | 0.52 | 0.42 | 0.48 | ||||||||||||||||||||||||
3.86 | (5.08 | ) | 9.42 | 9.02 | 0.16 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
4.56 | (4.51 | ) | 9.94 | 9.44 | 0.64 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(0.61 | ) | (0.42 | ) | (0.43 | ) | (0.45 | ) | (0.31 | ) | |||||||||||||||||||
(3.96 | ) | (0.61 | ) | — | (2.90 | ) | (2.62 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(4.57 | ) | (1.03 | ) | (0.43 | ) | (3.35 | ) | (2.93 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
$ | 65.28 | $ | 65.29 | $ | 70.83 | $ | 61.32 | $ | 55.23 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
8.95% | (6.46% | ) | 16.30% | 18.77% | 1.15% | |||||||||||||||||||||||
$ | 2,955,897 | $ | 2,731,344 | $ | 3,270,954 | $ | 2,166,172 | $ | 1,969,355 | |||||||||||||||||||
0.90% | 0.90% | 0.93% | 0.99% | 0.97% | ||||||||||||||||||||||||
1.15% | 0.81% | 0.80% | 0.82% | 0.87% | ||||||||||||||||||||||||
18% | 18% | 15% | 19% | 20% | ||||||||||||||||||||||||
|
29
Table of Contents
Financial highlights
Delaware Small Cap Value Fund Class R6
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 |
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 | 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 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 entire year ended Nov. 30, 2016. |
See accompanying notes, which are an integral part of the financial statements.
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5/2/161 | ||||||||||||||||||||||
Year ended | to | |||||||||||||||||||||
|
| |||||||||||||||||||||
11/30/19 | 11/30/18 | 11/30/17 | 11/30/16 | |||||||||||||||||||
| ||||||||||||||||||||||
$ | 65.41 | $ | 70.95 | $ | 61.38 | $ | 51.46 | |||||||||||||||
0.81 | 0.69 | 0.65 | 0.32 | |||||||||||||||||||
3.85 | (5.08 | ) | 9.43 | 9.60 | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
4.66 | (4.39 | ) | 10.08 | 9.92 | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
(0.70 | ) | (0.54 | ) | (0.51 | ) | — | ||||||||||||||||
(3.96 | ) | (0.61 | ) | — | — | |||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
(4.66 | ) | (1.15 | ) | (0.51 | ) | — | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
$ | 65.41 | $ | 65.41 | $ | 70.95 | $ | 61.38 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
9.14% | (6.29% | ) | 16.52% | 19.28% | ||||||||||||||||||
$ | 605,623 | $ | 394,064 | $ | 207,719 | $ | 4,187 | |||||||||||||||
0.72% | 0.72% | 0.75% | 0.77% | |||||||||||||||||||
1.33% | 0.99% | 0.98% | 0.96% | |||||||||||||||||||
18% | 18% | 15% | 19% | 4 | ||||||||||||||||||
|
31
Table of Contents
Notes to financial statements | ||
Delaware Small Cap Value Fund | November 30, 2019 |
Delaware Group® Equity Funds V (Trust) is organized as a Delaware statutory trust and offers three series: Delaware Wealth Builder 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 Fund is anopen-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 maximumfront-end sales charge of 5.75%. Class A share purchases of $1,000,000 or more will incur a contingent deferred sales charge (CDSC) instead of afront-end sales charge 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%, which will be incurred 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/orsub-transfer agency fees to any brokers, dealers, or other financial intermediaries.
The investment objective of the Fund is to seek capital appreciation.
1. Significant Accounting Policies
The Fund follows accounting and reporting guidance under Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services – Investment Companies. The following accounting policies are in accordance with US generally accepted accounting principles (US 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.Open-end investment companies are valued at their published net asset value (NAV). US government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. Investments in repurchase agreements are generally valued at par, which approximates fair value, each business day. 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. Restricted securities are valued at fair value using methods approved by the Board.
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
32 |
Table of Contents
current year. Management has analyzed the Fund’s tax positions taken or expected to be taken on the Fund’s federal income tax returns through the year ended Nov. 30, 2019 and for all open tax years (years ended Nov. 30, 2016–Nov. 30, 2018), and has concluded that no provision for federal income tax is required in the Fund’s financial statements. If applicable, the Fund recognizes interest accrued on unrecognized tax benefits in interest expense and penalties in “Other” on the “Statement of operations.” During the year ended Nov. 30, 2019, the Fund did not incur any interest or tax penalties. 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. Class R6 shares are not allocated any expenses related to service fees,sub-accounting fees, and/orsub-transfer agency fees paid to brokers, dealers, or financial intermediaries.
Underlying Funds— The Fund may invest in other investment companies (Underlying Funds) to the extent permitted by the 1940 Act. The Underlying Funds in which the Fund invests include business development corporations (BDC) and ETFs. The Fund will indirectly bear the investment management fees and other expenses of the Underlying Funds.
Repurchase Agreements— The Fund may purchase certain US 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-partysub-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. At Nov. 29, 2019, the Fund held no investments in repurchase agreements.
Use of Estimates— The preparation of financial statements in conformity with US 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 Funds® by Macquarie (Delaware Funds) are generally allocated among such funds on the basis of average net assets. Management fees and certain 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 theex-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 theex-dividend date, subject to reclassification upon notice of the character of such distributions by the issuer. The Fund declares and
33 |
Table of Contents
Notes to financial statements
Delaware Small Cap Value Fund
1. Significant Accounting Policies (continued)
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 theex-dividend date.
The Fund receives earnings credits from its custodian when positive cash balances are maintained, which may be used to offset custody fees. The expenses paid under this arrangement are included on the “Statement of operations” under “Custodian fees” with the corresponding expenses offset included under “Less expenses paid indirectly.” For the year ended Nov. 30, 2019, the Fund earned $14,818 under this arrangement.
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 $1, the expenses paid under this arrangement are included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses” with the corresponding expenses offset included under “Less expenses paid indirectly.” For the year ended Nov. 30, 2019, the Fund earned $1,821 under this arrangement.
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 Macquarie Investment Management Business Trust and the investment manager, an annual fee which is calculated daily and paid monthly at the rates of 0.75% on the first $500 million of average daily net assets of the Fund, 0.70% on the next $500 million, 0.65% on the next $1.5 billion, and 0.60% on average daily net assets in excess of $2.5 billion.
Effective May 30, 2019, DMC may permit its affiliates, Macquarie Investment Management Global Limited (MIMGL) and Macquarie Funds Management Hong Kong Limited (together, the “AffiliatedSub-Advisors”), to execute Fund security trades on behalf of the Manager. The Manager may also seek quantitative support from MIMGL. Although the AffiliatedSub-Advisors serve assub-advisors, DMC has ultimate responsibility for all investment advisory services. For these services, DMC, not the Fund, may pay each AffiliatedSub-Advisor a portion of its investment management fee.
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 daily and paid monthly based on the aggregate daily net assets of all funds within the Delaware Funds at the following annual rates: 0.00475% of the first $35 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $45 billion (Total Fee). Each fund in the Delaware Funds pays a minimum of $4,000, which, in aggregate, is subtracted from the Total Fee. Each fund in the Delaware Funds then pays its portion of the remainder of the Total Fee on a relative NAV basis. This amount is included on the “Statement of operations” under “Accounting and administration expenses.” For the year ended Nov. 30, 2019, the Fund was charged $153,216 for these services.
DIFSC is also the transfer agent and dividend disbursing agent of the Fund. For these services, DIFSC’s fees are calculated daily and paid monthly based on the aggregate daily net assets of the retail funds
34
Table of Contents
within the Delaware Funds at the following annual rates: 0.014% of the first $20 billion; 0.011% of the next $5 billion; 0.007% of the next $5 billion; 0.005% of the next $20 billion; and 0.0025% of average daily net assets in excess of $50 billion. The fees payable to DIFSC under the shareholder services agreement described above are allocated among all retail funds in the Delaware Funds on a relative NAV basis. This amount is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.” For the year ended Nov. 30, 2019, the Fund was charged $390,660 for these services.
Pursuant to asub-transfer agency agreement between DIFSC and BNY Mellon Investment Servicing (US) Inc. (BNYMIS), BNYMIS provides certainsub-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.” The fees that are calculated daily and paid as invoices are received on a monthly or quarterly basis.
Pursuant to a distribution agreement and distribution plan, the Fund pays DDLP, the distributor and an affiliate of DMC, annual12b-1 fees of 0.25%, 1.00%, and 0.50% of the average daily net assets of the Class A, Class C, and Class R shares, respectively. These fees are calculated daily and paid monthly. Class R6 and Institutional Class shares do not pay12b-1 fees.
As provided in the investment management agreement, the Fund bears a portion of the cost of certain resources shared with DMC, including the cost of internal personnel of DMC and/or its affiliates that provide legal, tax, and regulatory reporting services to the Fund. For the year ended Nov. 30, 2019, the Fund was charged $109,471 for internal legal, tax, and regulatory reporting services provided by DMC and/or its affiliates’ employees. This amount is included on the “Statement of operations” under “Legal fees.”
For the year ended Nov. 30, 2019, DDLP earned $36,260 for commissions on sales of the Fund’s Class A shares. For the year ended Nov. 30, 2019, DDLP received gross CDSC commissions of $10,020 and $5,301 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.
In addition to the management fees and other expenses of the Fund, the Fund indirectly bears the investment management fees and other expenses of the investment companies (Underlying Funds) in which it invests. The amount of these fees and expenses incurred indirectly by the Fund will vary based upon the expense and fee levels of the Underlying Funds and the number of shares that are owned of the Underlying Funds at different times.
35 |
Table of Contents
Notes to financial statements | ||
Delaware Small Cap Value Fund | �� |
3. Investments
For the year ended Nov. 30, 2019, the Fund made purchases and sales of investment securities other than short-term investments as follows:
Purchases | $ | 724,500,795 | ||
Sales | 759,061,329 |
The tax cost of investments includes adjustments to net unrealized appreciation (depreciation) which may not necessarily be final tax cost basis adjustments, but approximate the tax basis unrealized gains and losses that may be realized and distributed to shareholders. At Nov. 30, 2019, the cost and unrealized appreciation (depreciation) of investments for federal income tax purposes for the Fund were as follows:
Cost of investments | $ | 3,296,141,305 | ||
|
| |||
Aggregate unrealized appreciation of investments | $ | 1,228,867,990 | ||
Aggregate unrealized depreciation of investments | (204,200,746 | ) | ||
|
| |||
Net unrealized appreciation of investments | $ | 1,024,667,244 | ||
|
|
US 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, and 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, and 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 and 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
36 |
Table of Contents
discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Valuations may also be based upon current market prices of securities that are comparable in coupon, rating, maturity, and industry. The derived value of a Level 3 investment may not represent the value which is received upon disposition and this could impact the results of operations.
The following table summarizes the valuation of the Fund’s investments by fair value hierarchy levels as of Nov. 30, 2019:
Level 1 | ||||
Securities | ||||
Assets: | ||||
Common Stock | $ | 4,230,243,117 | ||
Short-Term Investments | 90,565,432 | |||
|
| |||
Total Value of Securities | $ | 4,320,808,549 | ||
|
|
During the year ended Nov. 30, 2019, 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 based on fair value 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. During the year ended Nov. 30, 2019, there were no Level 3 investments.
4. Dividend and Distribution Information
Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP. Additionally, distributions from net short-term gains on sales of investment securities are treated as ordinary income for federal income tax purposes. The tax character of dividends and distributions paid during the years ended Nov. 30, 2019 and 2018 was as follows:
Year ended | ||||||||
11/30/19 | 11/30/18 | |||||||
Ordinary income | $ | 65,079,056 | $ | 24,728,138 | ||||
Long-term capital gain | 214,541,515 | 40,210,481 | ||||||
|
|
|
| |||||
Total | $ | 279,620,571 | $ | 64,938,619 | ||||
|
|
|
|
5. Components of Net Assets on a Tax Basis
As of Nov. 30, 2019, the components of net assets on a tax basis were as follows:
Shares of beneficial interest | $ | 3,122,972,921 | ||
Undistributed ordinary income | 39,445,406 | |||
Undistributed long-term capital gains | 136,386,048 | |||
Net unrealized appreciation of investments | 1,024,667,244 | |||
|
| |||
Net assets | $ | 4,323,471,619 | ||
|
|
37 |
Table of Contents
Notes to financial statements
Delaware Small Cap Value Fund
5. Components of Net Assets on a Tax Basis (continued)
The difference between book basis and tax basis components of net assets is primarily attributable to tax deferral of losses on wash sales.
6. Capital Shares
Transactions in capital shares were as follows:
Year ended | ||||||||
11/30/19 | 11/30/18 | |||||||
Shares sold: | ||||||||
Class A | 2,210,400 | 2,478,313 | ||||||
Class C | 285,091 | 256,541 | ||||||
Class R | 221,304 | 251,704 | ||||||
Institutional Class | 14,452,689 | 10,515,739 | ||||||
Class R6 | 4,643,083 | 4,075,356 | ||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | 977,924 | 171,779 | ||||||
Class C | 145,005 | 20,871 | ||||||
Class R | 94,822 | 14,806 | ||||||
Institutional Class | 3,655,894 | 674,291 | ||||||
Class R6 | 559,532 | 50,051 | ||||||
|
|
|
| |||||
27,245,744 | 18,509,451 | |||||||
|
|
|
| |||||
Shares redeemed: | ||||||||
Class A | (4,713,812 | ) | (3,912,064 | ) | ||||
Class C | (514,743 | ) | (709,620 | ) | ||||
Class R | (429,251 | ) | (510,815 | ) | ||||
Institutional Class | (14,666,586 | ) | (15,532,652 | ) | ||||
Class R6 | (1,968,495 | ) | (1,028,271 | ) | ||||
|
|
|
| |||||
(22,292,887 | ) | (21,693,422 | ) | |||||
|
|
|
| |||||
Net increase (decrease) | 4,952,857 | (3,183,971 | ) | |||||
|
|
|
|
38
Table of Contents
Certain shareholders may exchange shares of one class for shares of another class in the same Fund. These exchange transactions are included as subscriptions and redemptions in the table above and on the “Statements of changes in net assets.” For the years ended Nov. 30, 2019 and 2018, the Fund had the following exchange transactions:
Exchange Redemptions | Exchange Subscriptions | |||||||||||||||||||||||||||||||
Institutional | Institutional | |||||||||||||||||||||||||||||||
Class A | Class C | Class | Class R6 | Class A | Class | Class R6 | ||||||||||||||||||||||||||
Year ended | Shares | Shares | Shares | Shares | Shares | Shares | Shares | Value | ||||||||||||||||||||||||
11/30/2019 | 43,988 | 3,061 | 380,736 | 17,034 | 3,175 | 57,579 | 380,602 | $ | 27,557,018 | |||||||||||||||||||||||
11/30/2018 | 41,984 | 70,004 | 574,181 | 6,184 | 52,297 | 51,349 | 573,522 | 48,981,556 |
7. Line of Credit
The Fund, along with certain other funds in the Delaware Funds (Participants), was a participant in a $220,000,000 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 0.15%, which was allocated across the Participants based on a weighted average of the respective net assets of each Participant. The Participants were permitted to borrow up to a maximum ofone-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. 4, 2019.
On Nov. 4, 2019, the Participants entered into an amendment to the agreement for a $250,000,000 revolving line of credit. The revolving 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. 2, 2020.
The Fund had no amounts outstanding as of Nov. 30, 2019, or at any time during the year then ended.
8. Securities Lending
The Fund, along with other funds in the Delaware 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 US securities and foreign securities that are denominated and payable in US 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
39 |
Table of Contents
Notes to financial statements
Delaware Small Cap Value Fund
8. Securities Lending (continued)
more or less than the value of the security on loan. The collateral percentage with respect to the market value of the loaned security is determined by the security lending agent.
Cash collateral received by each fund of the Trust is generally invested in 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 US 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. The Fund can also accept US government securities and letters of credit(non-cash collateral) in connection with securities loans.
In the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Fund or, at the discretion of the lending agent, replace the loaned securities. The Fund continues to record dividends or interest, as applicable, on the securities loaned and is subject to changes in value of the securities loaned that may occur during the term of the loan. The Fund has the right under the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized bynon-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 the 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 year ended Nov. 30, 2019, the Fund had no securities out on loan.
9. Credit and Market Risk
The Fund invests in growth stocks (such as those in the financial services sector), which reflect projections of future earnings and revenue. These prices may rise or fall dramatically depending on whether those projections are met. These companies’ stock prices may be more volatile, particularly over the short term.
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
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may be more volatile than investments in larger companies for a number of reasons, which include limited financial resources or a dependence on narrow product lines.
The Fund invests in REITs and is subject to the risks associated with that industry. If the Fund holds real estate directly as a result of defaults or receives rental income directly from real estate holdings, its tax status as a regulated investment company may be jeopardized. There were no direct real estate holdings during the year ended Nov. 30, 2019. 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 Board has delegated to DMC theday-to-day functions of determining whether individual securities are liquid for purposes of the Fund’s limitation on investments in illiquid securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Fund’s 15% limit on investments in illiquid securities. As of Nov. 30, 2019, there were no Rule 144A securities held by the Fund. Restricted securities are valued pursuant to the security valuation procedures described in Note 1.
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 August 2018, the FASB issued an Accounting Standards Update (ASU), ASU2018-13, which changes certain fair value measurement disclosure requirements. The ASU2018-13, in addition to other modifications and additions, removes the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for the timing of transfers between levels and the valuation process for Level 3 fair value measurements. The ASU2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after Dec. 15, 2019. At this time, management is evaluating the implications of these changes on the financial statements.
12. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to Nov. 30, 2019, that would require recognition or disclosure in the Fund’s financial statements.
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registered public accounting firm
To the Board of Trustees of Delaware Group® Equity Funds V
and Shareholders of Delaware Small Cap Value Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Delaware Small Cap Value Fund (one of the funds constituting Delaware Group® Equity Funds V, referred to hereafter as the “Fund”) as of November 30, 2019, the related statement of operations for the year ended November 30, 2019, the statements of changes in net assets for each of the two years in the period ended November 30, 2019, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of November 30, 2019, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended November 30, 2019 and the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of November 30, 2019 by correspondence with the custodian and transfer agents. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
January 22, 2020
We have served as the auditor of one or more investment companies in Delaware Funds® by Macquarie since 2010.
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Other Fund information (Unaudited) | ||
Delaware Small Cap Value Fund |
Tax Information
The information set forth below is for the Fund’s fiscal year as required by federal income tax laws. Shareholders, however, must report distributions on a calendar year basis for income tax purposes, which may include distributions for portions of two fiscal years of the Fund. Accordingly, the information needed by shareholders for income tax purposes will be sent to them in January of each year. Please consult your tax advisor for proper treatment of this information.
All disclosures are based on financial information available as of the date of this annual report and, accordingly are subject to change. For any and all items requiring reporting, it is the intention of the Fund to report the maximum amount permitted under the Internal Revenue Code and the regulations thereunder.
For the fiscal year ended Nov. 30, 2019, the Fund reports distributions paid during the year as follows:
(A) Long-Term Capital Gain Distributions (Tax Basis) | 76.73 | % | ||
(B) Ordinary Income Distributions (Tax Basis)1 | 23.27 | % | ||
Total Distributions (Tax Basis) | 100.00 | % | ||
(C) Qualified Dividends2 | 98.54 | % |
(A) and (B) are based on a percentage of the Fund’s total distributions.
(C) is based on a percentage of the Fund’s ordinary income distributions.
1 | For the fiscal year ended Nov. 30, 2019, certain dividends paid by the Fund may be subject to a maximum tax rate of 20%. The percentage of dividends paid by the Fund from ordinary income reported as qualified dividend income is 100.00%. Complete information will be compiled and reported in conjunction with your 2019 Form1099-DIV. |
2 | Qualified dividends represent dividends which qualify for the corporate dividends received deduction. |
Board consideration of Investment Advisory andSub-Advisory agreements for Delaware Small Cap Value Fund at a meeting held August21-22, 2019
At a meeting held on Aug.21-22, 2019 (the “Annual Meeting”), the Board of Trustees (the “Board”), including a majority of disinterested or independent Trustees, approved the renewal of the Investment Advisory andSub-Advisory Agreements for Delaware Small Cap Value Fund (the “Fund”). In making its decision, the Board considered information furnished at regular quarterly Board meetings, including reports detailing Fund performance, investment strategies, and expenses, as well as information prepared specifically in connection with the renewal of the investment advisory andsub-advisory contracts. Information furnished specifically in connection with the renewal of the Investment Management Agreement with Delaware Management Company (“DMC”), a series of Macquarie Investment Management Business Trust (“MIMBT”), and theSub-Advisory Agreements with Macquarie Investment Management Global Limited (“MIMGL”) and Macquarie Funds Management Hong Kong Limited (“MFMHK”), included materials provided by DMC and its affiliates (collectively, “Macquarie Investment Management”), MIMGL, and MFMHK, concerning, among other things, the nature, extent, and quality of services provided to the Fund; the costs of such services to the Fund; economies of scale; and the investment manager’s financial condition and profitability. In addition, in connection with the Annual Meeting, materials were provided to the Trustees in May 2019, including reports provided by Broadridge Financial Solutions (“Broadridge”). The Broadridge reports compared the Fund’s investment performance and expenses with those of other comparable mutual funds. The Independent Trustees
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Other Fund information (Unaudited) | ||
Delaware Small Cap Value Fund |
Board consideration of Investment Advisory andSub-Advisory agreements for Delaware Small Cap Value Fund at a meeting held August21-22, 2019 (continued)
reviewed and discussed the Broadridge reports with independent legal counsel to the Independent Trustees. In addition to the information noted above, the Board also requested and received information regarding DMC’s policy with respect to advisory fee levels and its breakpoint philosophy; the structure of portfolio manager compensation; comparative client fee information; and any constraints or limitations on the availability of securities for certain investment styles, which had in the past year inhibited, or which were likely in the future to inhibit, the investment manager’s ability to invest fully in accordance with Fund policies.
In considering information relating to the approval of the Fund’s investment advisory andsub-advisory agreements, the Independent Trustees received assistance and advice from and met separately with independent legal counsel to the Independent Trustees and also received assistance and advice from an experienced and knowledgeable independent fund consultant, JDL Consultants, LLC (“JDL”). Although the Board gave attention to all information furnished, the following discussion identifies, under separate headings, the primary factors taken into account by the Board during its contract renewal considerations.
Nature, extent, and quality of services.The Board considered the services provided by DMC to the Fund and its shareholders. In reviewing the nature, extent, and quality of services, the Board considered reports furnished to it throughout the year, which covered matters such as the relative performance of the Fund; compliance of portfolio managers with the investment policies, strategies, and restrictions for the Fund; compliance by DMC and Delaware Distributors, L.P. (together, “Management”) personnel with the Code of Ethics adopted throughout the Delaware Funds® by Macquarie (“Delaware Funds”); and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of DMC and the emphasis placed on research in the investment process. The Board recognized DMC’s receipt of certain favorable industry distinctions during the past several years. The Board gave favorable consideration to DMC’s efforts to control expenses while maintaining service levels committed to Fund matters. The Board also noted the benefits provided to Fund shareholders through (a) each shareholder’s ability to: (i) exchange an investment in one Delaware Fund for the same class of shares in another Delaware Fund without a sales charge, or (ii) reinvest Fund dividends into additional shares of the Fund or into additional shares of other Delaware Funds, and (b) the privilege to combine holdings in other Delaware Funds to obtain a reduced sales charge. The Board was satisfied with the nature, extent, and quality of the overall services provided by DMC.
Nature, extent, and quality of services.The Board considered the services provided by MIMGL to the Fund and its shareholders. In reviewing the nature, extent, and quality of services, the Board considered reports furnished to it throughout the year at regular Board Meetings covering matters such as relative performance of the Fund; compliance of portfolio managers with the investment policies, strategies, and restrictions for the Fund; the compliance of MIMGL personnel with its Code of Ethics; and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of MIMGL and the emphasis placed on research in the investment process. The Board was satisfied with the nature, extent, and quality of the overall services provided by MIMGL.
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Nature, extent, and quality of services.The Board considered the services provided by MFMHK to the Fund and its shareholders. In reviewing the nature, extent, and quality of services, the Board considered reports furnished to it throughout the year at regular Board Meetings covering matters such as relative performance of the Fund; compliance of portfolio managers with the investment policies, strategies, and restrictions for the Fund; the compliance of MFMHK personnel with its Code of Ethics; and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of MFMHK and the emphasis placed on research in the investment process. The Board was satisfied with the nature, extent, and quality of the overall services provided by MFMHK.
Investment performance.The Board placed significant emphasis on the investment performance of the Fund in view of the importance of investment performance to shareholders. Although the Board considered performance reports and discussions with portfolio managers at Investment Committee meetings throughout the year, the Board gave particular weight to the Broadridge reports furnished for the Annual Meeting. The Broadridge reports prepared for the Fund showed the investment performance of its Class A shares in comparison to a group of similar funds as selected by Broadridge (the “Performance Universe”). A fund with the best performance ranked first, and a fund with the poorest performance ranked last. The highest/best performing 25% of funds in the Performance Universe make up the first quartile; the next 25%, the second quartile; the next 25%, the third quartile; and the poorest/worst performing 25% of funds in the Performance Universe make up the fourth quartile. Comparative annualized performance for the Fund was shown for the past1-,3-,5-, and10-year periods, to the extent applicable, ended Jan. 31, 2019. The Board’s objective is that the Fund’s performance for the1-,3-, and5-year periods be at or above the median of its Performance Universe.
Broadridge currently classifies the Fund as asmall-cap core fund. However, Management believes that, because the Fund utilizes a value investment philosophy and process, it would be more appropriate to include the Fund in thesmall-cap value funds category. Accordingly, the Broadridge report prepared for the Fund compares the Fund’s performance to two separate Performance Universes – one consisting of the Fund and all retail and institutionalsmall-cap core funds and the other consisting of the Fund and all retail and institutionalsmall-cap value funds. When compared to othersmall-cap core funds, the Broadridge report comparison showed that the Fund’s total return for the1-year period was in the fourth quartile of the Performance Universe. The report further showed that the Fund’s total return for the3-,5-, and10-year periods was in the second quartile of its Performance Universe. When compared to othersmall-cap value funds, the Broadridge report comparison showed that the Fund’s total return for the1-year period was in the fourth quartile of the Performance Universe. The report further showed that the Fund’s total return for the3- and10-year periods was in the second quartile of its Performance Universe and the Fund’s total return for the5-year period was in the first quartile of its Performance Universe. The Board observed that, when compared to both Performance Universes, the Fund’s short-term performance results were not in line with the Board’s objective. In evaluating the Fund’s performance, the Board considered the Fund’s intermediate- and long-term performance results, which were strong. The Board also considered the numerous investment and performance reports delivered by Management personnel to the Board’s Investments Committee. The Board was satisfied that Management was taking action to improve comparative Fund performance and to meet the Board’s performance objective.
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Other Fund information (Unaudited) | ||
Delaware Small Cap Value Fund |
Board consideration of Investment Advisory andSub-Advisory agreements for Delaware Small Cap Value Fund at a meeting held August21-22, 2019 (continued)
Comparative expenses.The Board considered expense data for the Delaware Funds. Management provided the Board with information on pricing levels and fee structures for the Fund as of its most recently completed fiscal year. The Board also focused on the comparative analysis of effective management fees and total expense ratios of the Fund versus effective management fees and total expense ratios of a group of similar funds as selected by Broadridge (the “Expense Group”). In reviewing comparative costs, the Fund’s contractual management fee and the actual management fee incurred by the Fund were compared with the contractual management fees (assuming all funds in the Expense Group were similar in size to the Fund) and actual management fees (as reported by each fund) within the Expense Group, taking into account any applicable breakpoints and fee waivers. The Fund’s total expenses were also compared with those of its Expense Group. The Broadridge total expenses, for comparative consistency, were shown by Broadridge for Class A shares and comparative total expenses including12b-1 andnon-12b-1 service fees. The Board’s objective is for the Fund’s total expense ratio to be competitive with those of the peer funds within its Expense Group.
When compared to othersmall-cap value funds, the expense comparisons for the Fund showed that its actual management fee and total expenses were in the quartile with the second lowest expenses of its Expense Group. When compared tosmall-cap core funds, the expense comparisons for the Fund showed that its actual management fee and total expenses were in the quartile with the lowest expenses of its Expense Group. The Board was satisfied with the management fee and total expenses of the Fund in comparison to those of its Expense Group as shown in the Broadridge report.
Management profitability.The Board considered the level of profits realized by DMC in connection with the operation of the Fund. In this respect, the Board reviewed the Investment Management Profitability Analysis that addressed the overall profitability of DMC’s business in providing management and other services to each of the individual funds and the Delaware Funds as a whole. Specific attention was given to the methodology used by DMC in allocating costs for the purpose of determining profitability. Management stated that the level of profits of DMC, to a certain extent, reflects recent operational cost savings and efficiencies initiated by DMC. The Board considered DMC’s efforts to improve services provided to Fund shareholders and to meet additional regulatory and compliance requirements resulting from recent industry-wide Securities and Exchange Commission initiatives. The Board also considered the extent to which DMC might derive ancillary benefits from fund operations, including the potential for procuring additional business as a result of the prestige and visibility associated with its role as service provider to the Delaware Funds and the benefits from allocation of fund brokerage to improve trading efficiencies. As part of its work, the Board also reviewed a report prepared by JDL regarding MIMBT profitability as compared to certain peer fund complexes and the Independent Trustees discussed with JDL personnel regarding DMC’s profitability in such context. The Board found that the management fees were reasonable in light of the services rendered and the level of profitability of DMC.
Management profitability.Trustees were also given available information on profits being realized by MIMGL in relation to the services being provided to the Fund and in relation to MIMGL’s overall investment advisory business, but believed such information to be of limited relevance because thesub-advisory fees are paid by DMC out of its management fee, and changes in the level ofsub-advisory fees have no impact on Fund expenses. The Board was also provided information on potentialfall-out
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benefits derived or to be derived by MIMGL in connection with its relationship to the Fund, such as reputational enhancement, soft dollar arrangements, or commissions paid to affiliated broker/dealers, as applicable.
Management profitability.Trustees were also given available information on profits being realized by MFMHK in relation to the services being provided to the Fund and in relation to MFMHK’s overall investment advisory business, but believed such information to be of limited relevance because thesub-advisory fees are paid by DMC out of its management fee, and changes in the level ofsub-advisory fees have no impact on Fund expenses. The Board was also provided information on potentialfall-out benefits derived or to be derived by MFMHK in connection with its relationship to the Fund, such as reputational enhancement, soft dollar arrangements, or commissions paid to affiliated broker/dealers, as applicable.
Economies of scale.The Trustees considered whether economies of scale are realized by DMC as the Fund’s assets increase and the extent to which any economies of scale are reflected in the level of management fees charged. The Trustees reviewed the Fund’s advisory fee pricing and structure, approved by the Board and shareholders, which includes breakpoints, and which applies to most funds in the Delaware Funds complex. Breakpoints in the advisory fee occur when the advisory fee rate is reduced on assets in excess of specified levels. Breakpoints result in a lower advisory fee than would otherwise be the case in the absence of breakpoints, when the asset levels specified in the breakpoints are exceeded. The Board noted that, as of March 31, 2019, the Fund’s assets exceeded the final breakpoint level. The Board believed that, given the extent to which economies of scale might be realized by DMC and its affiliates, the schedule of fees under the Investment Management Agreement provides a sharing of benefits with the Fund and its shareholders.
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Board of trustees / directors and officers addendum | ||
Delaware Funds®by Macquarie |
A mutual fund is governed by a Board of Trustees/Directors (“Trustees”), which has oversight responsibility for the management of a fund’s business affairs. Trustees establish procedures and oversee and review the performance of the investment manager, the distributor, and others who perform services for the fund. The independent fund trustees, in particular, are advocates
Name, Address, and Birth Date | Position(s) Held with Fund(s) | Length of Time Served | ||
Interested Trustee
| ||||
Shawn K. Lytle1 | President, | President and | ||
2005 Market Street | Chief Executive Officer, | Chief Executive Officer | ||
Philadelphia, PA 19103 | and Trustee | since August 2015 | ||
February 1970 | ||||
Trustee since | ||||
September 2015 | ||||
Independent Trustees
| ||||
Thomas L. Bennett | Chair and Trustee | Trustee since | ||
2005 Market Street | March 2005 | |||
Philadelphia, PA 19103 | ||||
October 1947 | Chair since | |||
March 2015
| ||||
Jerome D. Abernathy | Trustee | Since January 2019 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
July 1959 | ||||
Ann D. Borowiec | Trustee | Since March 2015 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
November 1958 | ||||
1 | Shawn K. Lytle is considered to be an “Interested Trustee” because he is an executive officer of the Fund’s(s’) investment advisor. |
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for shareholder interests. Each trustee has served in that capacity since he or she was elected to or appointed to the Board of Trustees, and will continue to serve until his or her retirement or the election of a new trustee in his or her place. The following is a list of the Trustees and Officers with certain background and related information.
Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee or Officer | Other Directorships Held by Trustee or Officer | ||
| ||||
President — Macquarie | 95 | Trustee — UBS | ||
Investment Management2 | Relationship Funds, | |||
(June 2015–Present) | SMA Relationship | |||
Trust, and UBS Funds | ||||
Regional Head of | (May 2010–April 2015) | |||
Americas — UBS Global | ||||
Asset Management | ||||
(April 2010–May 2015) | ||||
| ||||
Private Investor | 95 | None | ||
(March 2004–Present) | ||||
Managing Member, | 95 | None | ||
Stonebrook Capital | ||||
Management, LLC (financial | ||||
technology: macro factors | ||||
and databases) | ||||
(January 1993–Present)
| ||||
Chief Executive Officer, |
95 |
Director — | ||
Private Wealth Management | Banco Santander International | |||
(2011–2013) and | (October 2016– | |||
Market Manager, | December 2019) | |||
New Jersey Private | ||||
Bank (2005–2011) — | Director — | |||
J.P. Morgan Chase & Co. | Santander Bank, N.A. | |||
(December 2016– | ||||
December 2019)
|
2 | Macquarie Investment Management is the marketing name for Macquarie Management Holdings, Inc. and its subsidiaries, including the Fund’s(s’) investment advisor, principal underwriter, and its transfer agent. |
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Board of trustees / directors and officers addendum | ||
Delaware Funds®by Macquarie |
Name, Address, and Birth Date | Position(s) Held with Fund(s) | Length of Time Served | ||
Independent Trustees (continued)
| ||||
Joseph W. Chow | Trustee | Since January 2013 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
January 1953 | ||||
John A. Fry | Trustee | Since January 2001 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
May 1960 | ||||
Lucinda S. Landreth | Trustee | Since March 2005 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
June 1947
|
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Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee or Officer | Other Directorships Held by Trustee or Officer | ||
| ||||
Private Investor | 95 | Director and Audit Committee | ||
(April 2011–Present) | Member — Hercules | |||
Technology Growth | ||||
Capital, Inc. | ||||
(July 2004–July 2014)
| ||||
President — | 95 | Director; Compensation | ||
Drexel University | Committee and | |||
(August 2010–Present) | Governance Committee | |||
Member — Community | ||||
President — | Health Systems | |||
Franklin & Marshall College | (May 2004–Present) | |||
(July 2002–June 2010) | ||||
Director — Drexel | ||||
Morgan & Co. | ||||
(2015–Present) | ||||
Director and Audit Committee | ||||
Member — vTv | ||||
Therapeutics Inc. | ||||
(2017–Present) | ||||
Director and Audit Committee | ||||
Member — FS Credit Real | ||||
Estate Income Trust, Inc. | ||||
(2018–Present) | ||||
Director — Federal Reserve | ||||
Bank of Philadelphia | ||||
(January 2020–Present)
| ||||
Private Investor | 95 | None | ||
(2004–Present) | ||||
|
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Board of trustees / directors and officers addendum | ||
Delaware Funds®by Macquarie |
Name, Address, and Birth Date | Position(s) Held with Fund(s) | Length of Time Served | ||
Independent Trustees (continued)
| ||||
Frances A. Sevilla-Sacasa | Trustee | Since September 2011 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
January 1956 | ||||
Thomas K. Whitford | Trustee | Since January 2013 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
March 1956 | ||||
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Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee or Officer | Other Directorships Held by Trustee or Officer | ||
| ||||
Private Investor | 95 | Trust Manager and | ||
(January 2017–Present) | Audit Committee | |||
Chair — Camden | ||||
Chief Executive Officer — | Property Trust | |||
Banco Itaú | (August 2011–Present) | |||
International | ||||
(April 2012–December 2016) | Director; Strategic | |||
Planning and Reserves | ||||
Executive Advisor to Dean | Committee and Nominating | |||
(August 2011–March 2012) | and Governance | |||
and Interim Dean | Committee Member — | |||
(January 2011–July 2011) — | Callon Petroleum Company | |||
University of Miami School of | (December 2019–Present) | |||
Business Administration | ||||
Director; Audit | ||||
President — U.S. Trust, | Committee Member — | |||
Bank of America Private | Carrizo Oil & Gas, Inc. | |||
Wealth Management | (March 2018–December 2019) | |||
(Private Banking) | ||||
(July 2007–December 2008)
| ||||
Vice Chairman | 95 | Director — HSBC North | ||
(2010–April 2013) — | America Holdings Inc. | |||
PNC Financial | (December 2013–Present) | |||
Services Group | ||||
Director — HSBC USA Inc. | ||||
(July 2014–Present) | ||||
Director — | ||||
HSBC Bank USA, | ||||
National Association | ||||
(July 2014–March 2017) | ||||
Director — HSBC | ||||
Finance Corporation | ||||
(December 2013–April 2018)
|
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Board of trustees / directors and officers addendum | ||
Delaware Funds®by Macquarie |
Name, Address, and Birth Date | Position(s) Held with Fund(s) | Length of Time Served | ||
Independent Trustees (continued)
| ||||
Christianna Wood | Trustee | Since January 2019 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
August 1959 | ||||
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Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee or Officer | Other Directorships Held by Trustee or Officer | ||
| ||||
Chief Executive Officer | 95 | Director; Finance Committee | ||
and President — | and Audit Committee | |||
Gore Creek | Member — H&R | |||
Capital, Ltd. | Block Corporation | |||
(August 2009–Present) | (July 2008–Present) | |||
Director; Chair of Investments | ||||
Committee and Audit | ||||
Committee Member — | ||||
Grange Insurance | ||||
(2013–Present) | ||||
Trustee; Chair of | ||||
Nominating and Governance | ||||
Committee and Audit | ||||
Committee Member — | ||||
The Merger Fund | ||||
(2013–Present), | ||||
The Merger Fund VL | ||||
(2013-Present), | ||||
WCM Alternatives: | ||||
Event-Driven Fund | ||||
(2013–Present), | ||||
and WCM Alternatives: | ||||
Credit Event Fund | ||||
(December 2017–Present) | ||||
Director; Chair of | ||||
Governance Committee | ||||
and Audit Committee | ||||
Member — International | ||||
Securities Exchange | ||||
(2010–2016) |
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Board of trustees / directors and officers addendum | ||
Delaware Funds®by Macquarie |
Name, Address, and Birth Date | Position(s) Held with Fund(s) | Length of Time Served | ||
Independent Trustees (continued)
| ||||
Janet L. Yeomans | Trustee | Since April 1999 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
July 1948 | ||||
Officers
| ||||
David F. Connor | Senior Vice President, | Senior Vice President since | ||
2005 Market Street | General Counsel, | May 2013; General | ||
Philadelphia, PA 19103 | and Secretary | Counsel since May 2015; | ||
December 1963 | Secretary since | |||
October 2005 | ||||
Daniel V. Geatens | Vice President | Vice President and | ||
2005 Market Street | and Treasurer | Treasurer since October 2007 | ||
Philadelphia, PA 19103 | ||||
October 1972 | ||||
Richard Salus | Senior Vice President | Senior Vice President and | ||
2005 Market Street | and Chief Financial Officer | Chief Financial Officer | ||
Philadelphia, PA 19103 | since November 2006 | |||
October 1963 | ||||
The Statement of Additional Information for the Fund(s) includes additional information about the Trustees and Officers and is available, without charge, upon request by calling 800523-1918.
56 |
Table of Contents
Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee or Officer | Other Directorships Held by Trustee or Officer | ||
| ||||
Vice President and Treasurer | 95 | Director; Personnel and | ||
(January 2006–July 2012), | Compensation Committee | |||
Vice President — | Chair; Member of Nominating, | |||
Mergers & Acquisitions | Investments, and Audit | |||
(January 2003–January 2006), | Committees for various | |||
and Vice President | periods throughout | |||
and Treasurer | directorship — | |||
(July 1995–January 2003) — | Okabena Company | |||
3M Company | (2009–2017) | |||
| ||||
David F. Connor has served | 95 | None3 | ||
in various capacities at | ||||
different times at | ||||
Macquarie Investment | ||||
Management. | ||||
Daniel V. Geatens has served | 95 | None3 | ||
in various capacities at | ||||
different times at | ||||
Macquarie Investment | ||||
Management. | ||||
Richard Salus has served | 95 | None | ||
in various capacities | ||||
at different times at | ||||
Macquarie Investment | ||||
Management. |
3 | David F. Connor and Daniel V. Geatens serve in similar capacities for the six portfolios of the Optimum Fund Trust, which have the same investment advisor, principal underwriter, and transfer agent as the registrant. Mr. Geatens also serves as the Chief Financial Officer of the Optimum Fund Trust and he is the Chief Financial Officer and Treasurer for Macquarie Global Infrastructure Total Return Fund Inc. |
57 |
Table of Contents
Board of trustees | ||||||
Shawn K. Lytle President and Chief Executive Officer Delaware Funds® by Macquarie Philadelphia, PA
Thomas L. Bennett Chairman of the Board Delaware Funds by Macquarie Private Investor Rosemont, PA
Jerome D. Abernathy Managing Member Stonebrook Capital Management, LLC Jersey City, NJ | 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 Former Chief Executive Officer Banco Itaú International Miami, FL | Thomas K. Whitford Former Vice Chairman PNC Financial Services Group Pittsburgh, PA
Christianna Wood Chief Executive Officer and President Gore Creek Capital, Ltd. Golden, CO
Janet L. Yeomans Former Vice President and Treasurer 3M Company 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 Funds | Delaware Funds | ||||
Delaware Funds | by Macquarie | by Macquarie | ||||
by Macquarie | Philadelphia, PA | Philadelphia, PA | ||||
Philadelphia, PA |
This annual report is for the information of Delaware Small Cap Value Fund shareholders, but it may be used with prospective investors when preceded or accompanied by the Delaware Fund fact sheet for the most recently completed calendar quarter. These documents are available at delawarefunds.com/literature.
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 FormN-Q or FormN-PORT (available for filings after March 31, 2019). The Fund’s FormsN-Q or FormsN-PORT, 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 800523-1918; 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 FormN-Q or FormN-PORT are available without charge on the Fund’s website at delawarefunds.com/literature. The Fund’s FormsN-Q and FormsN-PORT 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 800SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed12-month period ended June 30 is available without charge (i) through the Fund’s website at delawarefunds.com/proxy; and (ii) on the SEC’s website at sec.gov.
58
Item 2. Code of Ethics
The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. A copy of the registrant’s Code of Business Ethics has been posted on the Delaware Funds®by Macquarie Internet Web site atwww.delawarefunds.com. Any amendments to the Code of Business Ethics, and information on any waiver from its provisions granted by the registrant, will also be posted on this Web site within five business days of such amendment or waiver and will remain on the Web site for at least 12 months.
Item 3. Audit Committee Financial Expert
The registrant’s Board of Trustees has determined that certain members of the registrant’s Audit Committee are audit committee financial experts, as defined below. For purposes of this item, an “audit committee financial expert” is a person who has the following attributes:
a. An understanding of generally accepted accounting principles and financial statements;
b. The ability to assess the general application of such principles in connection with the accounting for estimates, accruals, and reserves;
c. Experience preparing, auditing, analyzing, or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the registrant’s financial statements, or experience actively supervising one or more persons engaged in such activities;
d. An understanding of internal controls and procedures for financial reporting; and
e. An understanding of audit committee functions.
An “audit committee financial expert” shall have acquired such attributes through:
a. Education and experience as a principal financial officer, principal accounting officer, controller, public accountant, or auditor or experience in one or more positions that involve the performance of similar functions;
b. Experience actively supervising a principal financial officer, principal accounting officer, controller, public accountant, auditor, or person performing similar functions;
c. Experience overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing, or evaluation of financial statements; or
d. Other relevant experience.
The registrant’s Board of Trustees has also determined that each member of the registrant’s Audit Committee is independent. In order to be “independent” for purposes of this item, the Audit Committee member may not: (i) other than in his or her capacity as a member of the Board of Trustees or any committee thereof, accept directly or indirectly any consulting, advisory or other compensatory fee from the issuer; or (ii) be an “interested person” of the registrant as defined in Section 2(a)(19) of the Investment Company Act of 1940.
The names of the audit committee financial experts on the registrant’s Audit Committee are set forth below:
Jerome D. Abernathy
John A. Fry
Thomas K. Whitford, Chair
Christianna Wood
Item 4. Principal Accountant Fees and Services
(a)Audit fees.
The aggregate fees billed for services provided to the registrant by its independent auditors for the audit of the registrant’s annual financial statements and for services normally provided by the independent auditors in connection with statutory and regulatory filings or engagements were $103,940 for the fiscal year ended November 30, 2019.
The aggregate fees billed for services provided to the registrant by its independent auditors for the audit of the registrant’s annual financial statements and for services normally provided by the independent auditors in connection with statutory and regulatory filings or engagements were $101,900 for the fiscal year ended November 30, 2018.
(b)Audit-related fees.
The aggregate fees billed by the registrant’s independent auditors for services relating to the performance of the audit of the registrant’s financial statements and not reported under paragraph (a) of this Item were $0 for the fiscal year ended November 30, 2019.
The aggregate fees billed by the registrant’s independent auditors for services relating to the performance of the audit of the financial statements of the registrant’s investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $909,000 for the registrant’s fiscal year ended November 30, 2019. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to thedeminimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These audit-related services were as follows: year-end audit procedures; group reporting and subsidiary statutory audits.
The aggregate fees billed by the registrant’s independent auditors for services relating to the performance of the audit of the registrant’s financial statements and not reported under paragraph (a) of this Item were $0 for the fiscal year ended November 30, 2018.
The aggregate fees billed by the registrant’s independent auditors for services relating to the performance of the audit of the financial statements of the registrant’s investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $640,000 for the registrant’s fiscal year ended November 30, 2018. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to thedeminimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These audit-related services were as follows: year-end audit procedures; group reporting and subsidiary statutory audits.
(c)Tax fees.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant were $17,310 for the fiscal year ended November 30, 2019. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to thedeminimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These tax-related services were as follows: review of income tax returns and review of annual excise distribution calculations.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant’s investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended November 30, 2019.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant were $15,972 for the fiscal year ended November 30, 2018. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to thedeminimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These tax-related services were as follows: review of income tax returns and review of annual excise distribution calculations.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant’s investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended November 30, 2018.
(d)All other fees.
The aggregate fees billed for all services provided by the independent auditors to the registrant other than those set forth in paragraphs (a), (b) and (c) of this Item were $0 for the fiscal year ended November 30, 2019.
The aggregate fees billed for all services other than those set forth in paragraphs (b) and (c) of this Item provided by the registrant’s independent auditors to the registrant’s adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended November 30, 2019. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to thedeminimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%.
The aggregate fees billed for all services provided by the independent auditors to the registrant other than those set forth in paragraphs (a), (b) and (c) of this Item were $0 for the fiscal year ended November 30, 2018.
The aggregate fees billed for all services other than those set forth in paragraphs (b) and (c) of this Item provided by the registrant’s independent auditors to the registrant’s adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended November 30, 2018. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to thedeminimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%.
(e) The registrant’s Audit Committee has established pre-approval policies and procedures as permitted by Rule 2-01(c)(7)(i)(B) of Regulation S-X (the “Pre-Approval Policy”) with respect to services provided by the registrant’s independent auditors. Pursuant to the Pre-Approval Policy, the Audit Committee has pre-approved the services set forth in the table below with respect to the registrant up to the specified fee limits. Certain fee limits are based on aggregate fees to the registrant and other registrants within the Delaware Funds®by Macquarie.
Service | Range of Fees |
Audit Services | |
Statutory audits or financial audits for new Funds | up to $40,000 per Fund |
Services associated with SEC registration statements (e.g., Form N-1A, Form N-14, etc.), periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings (e.g., comfort letters for closed-end Fund offerings, consents), and assistance in responding to SEC comment letters | up to $10,000 per Fund |
Consultations by Fund management as to the accounting or disclosure treatment of transactions or events and/or the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, or other regulatory or standard-setting bodies (Note: Under SEC rules, some consultations may be considered “audit-related services” rather than “audit services”) | up to $25,000 in the aggregate |
Audit-Related Services | |
Consultations by Fund management as to the accounting or disclosure treatment of transactions or events and /or the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, or other regulatory or standard-setting bodies (Note: Under SEC rules, some consultations may be considered “audit services” rather than “audit-related services”) | up to $25,000 in the aggregate |
Tax Services | |
U.S. federal, state and local and international tax planning and advice (e.g., consulting on statutory, regulatory or administrative developments, evaluation of Funds’ tax compliance function, etc.) | up to $25,000 in the aggregate |
U.S. federal, state and local tax compliance (e.g., excise distribution reviews, etc.) | up to $5,000 per Fund |
Review of federal, state, local and international income, franchise and other tax returns | up to $5,000 per Fund |
Under the Pre-Approval Policy, the Audit Committee has also pre-approved the services set forth in the table below with respect to the registrant’s investment adviser and other entities controlling, controlled by or under common control with the investment adviser that provide ongoing services to the registrant (the “Control Affiliates”) up to the specified fee limit. This fee limit is based on aggregate fees to the investment adviser and its Control Affiliates.
Service | Range of Fees |
Non-Audit Services | |
Services associated with periodic reports and other documents filed with the SEC and assistance in responding to SEC comment letters | up to $10,000 in the aggregate |
The Pre-Approval Policy requires the registrant’s independent auditors to report to the Audit Committee at each of its regular meetings regarding all services initiated since the last such report was rendered, including those services authorized by the Pre-Approval Policy.
(f) Not applicable.
(g) The aggregate non-audit fees billed by the registrant’s independent auditors for services rendered to the registrant and to its investment adviser and other service providers under common control with the adviser were $4,687,000 and $11,748,000 for the registrant’s fiscal years ended November 30, 2019 and November 30, 2018, respectively.
(h) In connection with its selection of the independent auditors, the registrant’s Audit Committee has considered the independent auditors’ provision of non-audit services to the registrant’s investment adviser and other service providers under common control with the adviser that were not required to be pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X. The Audit Committee has determined that the independent auditors’ provision of these services is compatible with maintaining the auditors’ independence.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Investments
(a) Included as part of report to shareholders filed under Item 1 of this Form N-CSR.
(b) Divestment of securities in accordance with Section 13(c) of the Investment Company Act of 1940.
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment 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 period covered by the report to stockholders included herein that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies
Not applicable.
Item 13. 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
SHAWN K. LYTLE | |
By: | Shawn K. Lytle |
Title: | President and Chief Executive Officer |
Date: | February 3, 2020 |
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.
SHAWN K. LYTLE | |
By: | Shawn K. Lytle |
Title: | President and Chief Executive Officer |
Date: | February 3, 2020 |
RICHARD SALUS | |
By: | Richard Salus |
Title: | Chief Financial Officer |
Date: | February 3, 2020 |