INVESTMENT COMPANIES
Investment Company Act file number: | 811-07972 | |
Exact name of registrant as specified in charter: | Delaware Group® Adviser Funds | |
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: | October 31 | |
Date of reporting period: | April 30, 2012 |
Item 1. Reports to Stockholders
![](https://capedge.com/proxy/N-CSRS/0001206774-12-002900/del_topimg02.jpg)
Semiannual report Delaware Diversified Income Fund April 30, 2012 Fixed income mutual fund |
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, if available, its summary prospectus, which may be obtained by visiting www.delawareinvestments.com or calling 800 523-1918. Investors should read the prospectus and, if available, the summary prospectus carefully before investing. |
You can obtain shareholder reports and prospectuses online instead of in the mail. Visit www.delawareinvestments.com/edelivery. |
Experience Delaware Investments
Delaware Investments is committed to the pursuit of consistently superior asset management and unparalleled client service. We believe in our investment processes, which seek to deliver consistent results, and in convenient services that help add value for our clients.
If you are interested in learning more about creating an investment plan, contact your financial advisor.
You can learn more about Delaware Investments or obtain a prospectus for Delaware Diversified Income Fund at www.delawareinvestments.com.
Manage your investments online |
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Delaware Management Holdings, Inc. and its subsidiaries (collectively known by the marketing name of Delaware Investments) are wholly owned subsidiaries of Macquarie Group Limited, a global provider of banking, financial, advisory, investment and funds management services.
Investments in Delaware Diversified Income Fund are not and will not be deposits with or liabilities of Macquarie Bank Limited ABN 46 008 583 542 and its holding companies, including their subsidiaries or related companies (Macquarie Group), and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. No Macquarie Group company guarantees or will guarantee the performance of the Fund, the repayment of capital from the Fund, or any particular rate of return.
Table of contents | |
Disclosure of Fund expenses | 1 |
Security type/sector allocation | 3 |
Statement of net assets | 5 |
Statement of operations | 52 |
Statements of changes in net assets | 54 |
Financial highlights | 56 |
Notes to financial statements | 66 |
Other Fund information | 86 |
About the organization | 87 |
Unless otherwise noted, views expressed herein are current as of April 30, 2012, and subject to change.
Funds are not FDIC insured and are not guaranteed. It is possible to lose the principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor. Delaware Investments, a member of Macquarie Group, refers to Delaware Management Holdings, Inc. and its subsidiaries, including the Fund’s distributor, Delaware Distributors, L.P. Macquarie Group refers to Macquarie Group Limited and its subsidiaries and affiliates worldwide.
© 2012 Delaware Management Holdings, Inc.
All third-party marks cited are the property of their respective owners.
Disclosure of Fund expenses
For the six-month period from November 1, 2011 to April 30, 2012
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period from November 1, 2011 to April 30, 2012.
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 for Class A and Class R shares. The expenses shown in the table assume reinvestment of all dividends and distributions.
1
Disclosure of Fund expenses
Delaware Diversified Income Fund
Expense analysis of an investment of $1,000
Beginning | Ending | Expenses | |||||||||||||
Account Value | Account Value | Annualized | Paid During Period | ||||||||||||
11/1/11 | 4/30/12 | Expense Ratio | 11/1/11 to 4/30/12* | ||||||||||||
Actual Fund return | |||||||||||||||
Class A | $ | 1,000.00 | $ | 1,039.70 | 0.90 | % | $ | 4.56 | |||||||
Class B | 1,000.00 | 1,034.80 | 1.65 | % | 8.35 | ||||||||||
Class C | 1,000.00 | 1,035.80 | 1.65 | % | 8.35 | ||||||||||
Class R | 1,000.00 | 1,038.40 | 1.15 | % | 5.83 | ||||||||||
Institutional Class | 1,000.00 | 1,041.00 | 0.65 | % | 3.30 | ||||||||||
Hypothetical 5% return (5% return before expenses) | |||||||||||||||
Class A | $ | 1,000.00 | $ | 1,020.39 | 0.90 | % | $ | 4.52 | |||||||
Class B | 1,000.00 | 1,016.66 | 1.65 | % | 8.27 | ||||||||||
Class C | 1,000.00 | 1,016.66 | 1.65 | % | 8.27 | ||||||||||
Class R | 1,000.00 | 1,019.14 | 1.15 | % | 5.77 | ||||||||||
Institutional Class | 1,000.00 | 1,021.63 | 0.65 | % | 3.27 |
*“Expenses Paid During Period” are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).
2
Security type/sector allocation | |
Delaware Diversified Income Fund | As of April 30, 2012 |
Sector designations may be different than the sector designations presented in other Fund materials. The sector designations may also represent the investment manager’s internal sector classifications, which may result in the sector designations for one fund being different than another fund’s sector designations.
Security type/sector | Percentage of net assets | |
Agency Asset-Backed Securities | 0.01 | % |
Agency Collateralized Mortgage Obligations | 1.68 | % |
Agency Mortgage-Backed Securities | 7.85 | % |
Commercial Mortgage-Backed Securities | 4.50 | % |
Convertible Bonds | 1.64 | % |
Corporate Bonds | 47.99 | % |
Automotive | 0.82 | % |
Banking | 5.76 | % |
Basic Industry | 5.20 | % |
Brokerage | 0.39 | % |
Capital Goods | 0.79 | % |
Communications | 6.65 | % |
Consumer Cyclical | 2.11 | % |
Consumer Non-Cyclical | 4.29 | % |
Electric | 3.73 | % |
Energy | 5.19 | % |
Finance Companies | 1.68 | % |
Healthcare | 0.71 | % |
Insurance | 1.52 | % |
Natural Gas | 2.90 | % |
Real Estate | 1.66 | % |
Services | 1.28 | % |
Technology | 2.03 | % |
Transportation | 1.00 | % |
Utilities | 0.28 | % |
Municipal Bond | 0.01 | % |
Non-Agency Asset-Backed Securities | 1.67 | % |
Non-Agency Collateralized Mortgage Obligations | 0.48 | % |
Regional Bonds | 3.51 | % |
Senior Secured Loans | 4.53 | % |
Sovereign Bonds | 9.53 | % |
Supranational Banks | 0.47 | % |
3
Security type/sector allocation
Delaware Diversified Income Fund
Security type/sector | Percentage of net assets | |
U.S. Treasury Obligations | 8.43 | % |
Common Stock | 0.00 | % |
Convertible Preferred Stock | 0.18 | % |
Preferred Stock | 0.52 | % |
Warrant | 0.00 | % |
Short-Term Investments | 10.32 | % |
Securities Lending Collateral | 0.99 | % |
Total Value of Securities | 104.31 | % |
Options Written | (0.01 | %) |
Obligation to Return Securities Lending Collateral | (1.07 | %) |
Other Liabilities Net of Receivables and Other Assets | (3.23 | %) |
Total Net Assets | 100.00 | % |
4
Statement of net assets | |
Delaware Diversified Income Fund | April 30, 2012 (Unaudited) |
Principal amount° | Value (U.S. $) | ||||||||
Agency Asset-Backed Securities – 0.01% | |||||||||
Fannie Mae Grantor Trust | |||||||||
Series 2003-T4 2A5 5.407% 9/26/33 | USD | 855,829 | $ | 907,599 | |||||
Fannie Mae Whole Loan | |||||||||
Series 2001-W2 AS5 6.473% 10/25/31 | 2,538 | 2,671 | |||||||
•Series 2002-W11 AV1 0.579% 11/25/32 | 14,317 | 13,222 | |||||||
Total Agency Asset-Backed Securities | |||||||||
(cost $834,929) | 923,492 | ||||||||
Agency Collateralized Mortgage Obligations – 1.68% | |||||||||
Fannie Mae Grantor Trust | |||||||||
•Series 1999-T2 A1 7.50% 1/19/39 | 22,434 | 25,500 | |||||||
Series 2001-T8 A2 9.50% 7/25/41 | 78,803 | 95,219 | |||||||
Series 2002-T4 A3 7.50% 12/25/41 | 245,262 | 283,501 | |||||||
Series 2002-T19 A1 6.50% 7/25/42 | 156,810 | 181,703 | |||||||
Series 2004-T1 1A2 6.50% 1/25/44 | 77,118 | 86,505 | |||||||
Fannie Mae Interest Strip | |||||||||
Series 265 2 9.00% 3/1/24 | 11,141 | 13,167 | |||||||
Fannie Mae REMICS | |||||||||
Series 1990-92 C 7.00% 8/25/20 | 1,313 | 1,493 | |||||||
Series 1996-46 ZA 7.50% 11/25/26 | 220,812 | 249,760 | |||||||
Series 2001-50 BA 7.00% 10/25/41 | 120,047 | 129,362 | |||||||
Series 2002-83 GH 5.00% 12/25/17 | 409,781 | 439,411 | |||||||
Series 2002-90 A2 6.50% 11/25/42 | 292,350 | 340,222 | |||||||
Series 2003-26 AT 5.00% 11/25/32 | 14,121,062 | 15,029,940 | |||||||
Series 2003-38 MP 5.50% 5/25/23 | 5,396,978 | 5,951,513 | |||||||
Series 2003-106 WE 4.50% 11/25/22 | 11,400,000 | 11,920,852 | |||||||
Series 2003-122 AJ 4.50% 2/25/28 | 222,837 | 228,083 | |||||||
Series 2005-110 MB 5.50% 9/25/35 | 2,428,011 | 2,674,872 | |||||||
Series 2009-94 AC 5.00% 11/25/39 | 5,995,610 | 6,816,236 | |||||||
Series 2010-41 PN 4.50% 4/25/40 | 7,623,413 | 8,461,481 | |||||||
Series 2010-75 NA 4.00% 9/25/28 | 1,420,554 | 1,480,017 | |||||||
Series 2010-96 DC 4.00% 9/25/25 | 14,575,000 | 15,788,005 | |||||||
Fannie Mae Whole Loan | |||||||||
•Series 2002-W1 2A 7.084% 2/25/42 | 22,458 | 26,251 | |||||||
•Series 2002-W6 2A 7.115% 6/25/42 | 44,026 | 51,042 | |||||||
•Series 2003-W1 2A 7.073% 12/25/42 | 22,165 | 25,921 | |||||||
Series 2003-W10 1A4 4.505% 6/25/43 | 37,042 | 40,226 | |||||||
Series 2003-W15 2A7 5.55% 8/25/43 | 17,789 | 19,629 | |||||||
Series 2004-W9 2A1 6.50% 2/25/44 | 330,657 | 377,284 | |||||||
Series 2004-W11 1A2 6.50% 5/25/44 | 479,166 | 545,839 |
5
Statement of net assets
Delaware Diversified Income Fund
Principal amount° | Value (U.S. $) | |||||||||
Agency Collateralized Mortgage Obligations (continued) | ||||||||||
Freddie Mac REMICS | ||||||||||
Series 1730 Z 7.00% 5/15/24 | USD | 320,163 | $ | 372,331 | ||||||
Series 2326 ZQ 6.50% 6/15/31 | 885,160 | 1,013,860 | ||||||||
Series 2557 WE 5.00% 1/15/18 | 4,181,000 | 4,516,956 | ||||||||
Series 2598 QD 5.50% 4/15/32 | 654,685 | 681,093 | ||||||||
Series 2621 QH 5.00% 5/15/33 | 35,000 | 37,822 | ||||||||
Series 2622 PE 4.50% 5/15/18 | 6,867,752 | 7,303,802 | ||||||||
Series 2624 QH 5.00% 6/15/33 | 40,000 | 45,195 | ||||||||
Series 2687 PG 5.50% 3/15/32 | 1,187,960 | 1,225,865 | ||||||||
Series 2694 QG 4.50% 1/15/29 | 361,295 | 361,685 | ||||||||
Series 2717 MH 4.50% 12/15/18 | 125,000 | 133,469 | ||||||||
Series 2762 LG 5.00% 9/15/32 | 9,050,000 | 9,473,487 | ||||||||
Series 2809 DC 4.50% 6/15/19 | 2,785,210 | 2,969,628 | ||||||||
Series 2872 GC 5.00% 11/15/29 | 367,382 | 367,625 | ||||||||
Series 2890 PC 5.00% 7/15/30 | 795,390 | 801,644 | ||||||||
Series 3123 HT 5.00% 3/15/26 | 50,000 | 56,094 | ||||||||
Series 3131 MC 5.50% 4/15/33 | 2,075,000 | 2,201,184 | ||||||||
Series 3150 EQ 5.00% 5/15/26 | 45,000 | 50,714 | ||||||||
Series 3171 MG 6.00% 8/15/34 | 4,000,000 | 4,273,752 | ||||||||
Series 3173 PE 6.00% 4/15/35 | 1,135,000 | 1,237,815 | ||||||||
Series 3416 GK 4.00% 7/15/22 | 229,951 | 238,539 | ||||||||
Series 3656 PM 5.00% 4/15/40 | 11,118,918 | 12,667,884 | ||||||||
• | Freddie Mac Strip Series 19 F 1.073% 6/1/28 | 8,301 | 8,173 | |||||||
w | Freddie Mac Structured Pass Through Securities | |||||||||
Series T-42 A5 7.50% 2/25/42 | 124,734 | 150,509 | ||||||||
Series T-54 2A 6.50% 2/25/43 | 34,006 | 38,150 | ||||||||
Series T-58 2A 6.50% 9/25/43 | 774,505 | 895,427 | ||||||||
•Series T-60 1A4C 5.144% 3/25/44 | 10,677 | 10,891 | ||||||||
GNMA Series 2010-113 KE 4.50% 9/20/40 | 20,392,264 | 22,913,530 | ||||||||
NCUA Guaranteed Notes Series 2010-C1 A2 | ||||||||||
2.90% 10/29/20 | 6,420,000 | 6,818,001 | ||||||||
• | Vendee Mortgage Trust Series 2000-1 1A | |||||||||
6.813% 1/15/30 | 8,554 | 10,177 | ||||||||
Total Agency Collateralized Mortgage | ||||||||||
Obligations (cost $144,506,620) | 152,158,336 | |||||||||
Agency Mortgage-Backed Securities – 7.85% | ||||||||||
Fannie Mae | ||||||||||
5.50% 1/1/13 | 88,615 | 90,059 | ||||||||
6.50% 8/1/17 | 151,181 | 167,747 | ||||||||
7.00% 11/15/16 | 77,919 | 80,057 |
6
Principal amount° | Value (U.S. $) | ||||||||
Agency Mortgage-Backed Securities (continued) | |||||||||
• | Fannie Mae ARM | ||||||||
2.063% 11/1/24 | USD | 3,194 | $ | 3,339 | |||||
2.071% 7/1/33 | 88,784 | 92,278 | |||||||
2.198% 11/1/35 | 1,239,503 | 1,323,264 | |||||||
2.198% 1/1/36 | 142,703 | 150,227 | |||||||
2.277% 10/1/33 | 117,891 | 124,159 | |||||||
2.315% 12/1/33 | 6,122 | 6,454 | |||||||
2.325% 8/1/34 | 9,788 | 10,393 | |||||||
2.50% 11/1/35 | 176,963 | 188,100 | |||||||
2.522% 6/1/34 | 164,942 | 174,323 | |||||||
2.527% 6/1/34 | 2,487 | 2,621 | |||||||
2.578% 11/1/32 | 614 | 651 | |||||||
2.675% 4/1/36 | 642,399 | 686,767 | |||||||
2.767% 4/1/36 | 379,318 | 403,494 | |||||||
4.677% 3/1/38 | 21,844 | 23,261 | |||||||
4.963% 11/1/33 | 516,581 | 552,578 | |||||||
4.985% 9/1/38 | 665,375 | 716,135 | |||||||
5.059% 5/1/36 | 625,397 | 675,664 | |||||||
5.07% 8/1/35 | 186,591 | 199,929 | |||||||
5.176% 4/1/37 | 1,608,908 | 1,721,745 | |||||||
5.535% 6/1/37 | 12,603 | 13,460 | |||||||
5.939% 8/1/37 | 1,429,288 | 1,554,881 | |||||||
6.004% 6/1/36 | 214,087 | 230,840 | |||||||
6.047% 7/1/36 | 126,454 | 136,434 | |||||||
6.276% 7/1/36 | 6,249 | 6,771 | |||||||
6.29% 4/1/36 | 1,421 | 1,534 | |||||||
6.34% 8/1/36 | 83,346 | 90,112 | |||||||
Fannie Mae Relocation 15 yr 4.00% 9/1/20 | 604,635 | 633,251 | |||||||
Fannie Mae Relocation 30 yr | |||||||||
4.00% 3/1/35 | 10,360 | 10,838 | |||||||
5.00% 9/1/33 | 224,128 | 241,301 | |||||||
5.00% 11/1/33 | 237,715 | 255,929 | |||||||
5.00% 1/1/34 | 62,027 | 66,780 | |||||||
5.00% 8/1/34 | 55,947 | 60,234 | |||||||
5.00% 11/1/34 | 250,044 | 269,204 | |||||||
5.00% 4/1/35 | 359,212 | 386,735 | |||||||
5.00% 10/1/35 | 316,955 | 341,241 | |||||||
5.00% 1/1/36 | 642,241 | 691,450 |
7
Statement of net assets
Delaware Diversified Income Fund
Principal amount° | Value (U.S. $) | ||||||
Agency Mortgage-Backed Securities (continued) | |||||||
Fannie Mae S.F. 15 yr | |||||||
3.00% 3/1/27 | USD | 9,025,781 | $ | 9,444,727 | |||
4.00% 5/1/19 | 4,330 | 4,645 | |||||
4.00% 11/1/25 | 23,940,839 | 25,768,322 | |||||
5.00% 9/1/20 | 8,146 | 8,907 | |||||
5.00% 5/1/21 | 862,795 | 938,380 | |||||
5.50% 4/1/23 | 201,133 | 219,810 | |||||
5.50% 6/1/23 | 148,241 | 162,007 | |||||
6.00% 9/1/21 | 5,206,040 | 5,708,165 | |||||
6.00% 8/1/22 | 83,589 | 91,651 | |||||
Fannie Mae S.F. 15 yr TBA | |||||||
3.00% 5/1/27 | 38,548,000 | 40,222,428 | |||||
3.50% 5/1/27 | 36,941,000 | 38,972,755 | |||||
Fannie Mae S.F. 20 yr 5.50% 8/1/28 | 5,885,763 | 6,446,060 | |||||
Fannie Mae S.F. 30 yr | |||||||
4.00% 1/1/42 | 5,201,071 | 5,509,173 | |||||
5.00% 6/1/35 | 7,345 | 7,986 | |||||
5.00% 7/1/35 | 17,699 | 19,243 | |||||
5.00% 9/1/35 | 1,411,237 | 1,534,361 | |||||
5.00% 12/1/36 | 9,442,080 | 10,265,864 | |||||
5.00% 12/1/37 | 1,179,310 | 1,281,463 | |||||
5.00% 2/1/38 | 962,249 | 1,045,600 | |||||
5.50% 8/1/37 | 571,826 | 629,656 | |||||
6.00% 10/1/33 | 2,123 | 2,380 | |||||
6.00% 6/1/35 | 10,995 | 12,239 | |||||
6.00% 4/1/36 | 367,508 | 408,859 | |||||
6.00% 9/1/36 | 3,156,431 | 3,499,816 | |||||
6.00% 12/1/36 | 384,665 | 426,513 | |||||
6.00% 2/1/38 | 1,075,348 | 1,192,334 | |||||
6.00% 7/1/38 | 25,626,132 | 28,413,976 | |||||
6.00% 11/1/39 | 2,690,956 | 2,983,213 | |||||
6.00% 1/1/40 | 23,400,526 | 25,946,248 | |||||
6.00% 4/1/40 | 6,366,135 | 7,054,549 | |||||
6.00% 2/1/41 | 15,837,945 | 17,615,384 | |||||
6.50% 2/1/36 | 3,392,984 | 3,858,657 | |||||
6.50% 3/1/36 | 2,580,432 | 2,934,586 | |||||
6.50% 11/1/36 | 557,609 | 630,131 | |||||
6.50% 9/1/37 | 2,376,713 | 2,685,825 | |||||
7.00% 8/1/32 | 92,866 | 109,449 |
8
Principal amount° | Value (U.S. $) | ||||||
Agency Mortgage-Backed Securities (continued) | |||||||
Fannie Mae S.F. 30 yr (continued) | |||||||
7.00% 9/1/32 | USD | 76,333 | $ | 89,963 | |||
7.00% 2/1/36 | 24,221 | 28,114 | |||||
7.00% 4/1/37 | 25,763 | 29,862 | |||||
7.00% 12/1/37 | 30,157 | 34,951 | |||||
7.50% 1/1/31 | 2,241 | 2,733 | |||||
7.50% 3/1/32 | 31,650 | 38,625 | |||||
7.50% 4/1/32 | 35,379 | 43,313 | |||||
7.50% 6/1/34 | 20,890 | 25,595 | |||||
7.50% 10/1/34 | 28,291 | 34,482 | |||||
Fannie Mae S.F. 30 yr TBA | |||||||
3.50% 5/1/42 | 137,910,000 | 143,189,359 | |||||
4.00% 5/1/42 | 75,345,000 | 79,689,105 | |||||
5.50% 5/1/42 | 33,260,000 | 36,367,731 | |||||
6.00% 5/1/42 | 32,835,000 | 36,298,068 | |||||
6.00% 6/1/42 | 22,070,000 | 24,373,558 | |||||
Freddie Mac 7.00% 2/25/14 | 839 | 849 | |||||
• | Freddie Mac ARM | ||||||
2.342% 12/1/33 | 336,717 | 355,896 | |||||
2.457% 4/1/33 | 3,041 | 3,057 | |||||
2.498% 7/1/36 | 621,969 | 659,038 | |||||
2.501% 5/1/35 | 289,640 | 306,740 | |||||
2.56% 4/1/34 | 34,659 | 36,852 | |||||
2.567% 12/1/33 | 85,912 | 91,235 | |||||
2.65% 2/1/37 | 929,852 | 993,388 | |||||
2.671% 3/1/36 | 114,223 | 122,477 | |||||
5.228% 8/1/37 | 14,206 | 15,158 | |||||
5.81% 10/1/36 | 159,896 | 170,836 | |||||
6.005% 10/1/37 | 14,333 | 15,579 | |||||
6.194% 10/1/37 | 477,397 | 519,913 | |||||
Freddie Mac Relocation 15 yr 3.50% 10/1/18 | 93,265 | 96,583 | |||||
Freddie Mac Relocation 30 yr | |||||||
5.00% 9/1/33 | 575,230 | 617,687 | |||||
6.50% 10/1/30 | 748 | 753 | |||||
Freddie Mac S.F. 15 yr | |||||||
4.50% 5/1/20 | 1,963,279 | 2,109,379 | |||||
5.00% 6/1/18 | 746,860 | 803,864 | |||||
5.00% 4/1/20 | 964,455 | 1,044,535 | |||||
5.50% 7/1/14 | 1,241 | 1,325 |
9
Statement of net assets
Delaware Diversified Income Fund
Principal amount° | Value (U.S. $) | ||||||
Agency Mortgage-Backed Securities (continued) | |||||||
Freddie Mac S.F. 30 yr | |||||||
5.50% 7/1/40 | USD | 73,446,000 | $ | 80,196,715 | |||
6.00% 2/1/36 | 5,836,434 | 6,457,695 | |||||
6.00% 8/1/38 | 11,446,291 | 12,757,696 | |||||
6.00% 10/1/38 | 16,042,695 | 17,880,712 | |||||
6.50% 10/1/32 | 2,935 | 3,359 | |||||
6.50% 8/1/38 | 824,249 | 928,471 | |||||
7.00% 11/1/33 | 335,143 | 395,441 | |||||
GNMA I S.F. 30 yr | |||||||
7.00% 5/15/28 | 170,212 | 199,457 | |||||
7.00% 12/15/34 | 3,552,495 | 4,096,795 | |||||
7.50% 10/15/30 | 1,618 | 1,971 | |||||
7.50% 2/15/32 | 579 | 682 | |||||
9.50% 9/15/17 | 4,401 | 5,095 | |||||
10.00% 7/15/17 | 3,101 | 3,116 | |||||
Total Agency Mortgage-Backed Securities | |||||||
(cost $699,512,212) | 709,577,410 | ||||||
Commercial Mortgage-Backed Securities – 4.50% | |||||||
# | American Tower Trust | ||||||
Series 2007-1A AFX 144A 5.42% 4/15/37 | 8,015,000 | 8,531,463 | |||||
BAML Commercial Mortgage Securities | |||||||
Series 2004-2 A3 4.05% 11/10/38 | 723,648 | 731,719 | |||||
•Series 2005-1 A5 5.337% 11/10/42 | 14,810,000 | 16,217,054 | |||||
•Series 2005-6 A4 5.366% 9/10/47 | 10,190,000 | 11,412,586 | |||||
•Series 2006-2 A4 5.921% 5/10/45 | 7,622,000 | 8,702,388 | |||||
Series 2006-4 A4 5.634% 7/10/46 | 15,875,000 | 17,940,004 | |||||
• | Bear Stearns Commercial Mortgage Securities | ||||||
Series 2005-PW10 A4 5.405% 12/11/40 | 7,786,000 | 8,719,386 | |||||
Series 2005-T20 A4A 5.299% 10/12/42 | 3,000,000 | 3,345,018 | |||||
Series 2006-PW12 A4 5.902% 9/11/38 | 7,235,000 | 8,239,652 | |||||
# | CFCRE Commercial Mortgage Trust | ||||||
Series 2011-C1 A2 144A | |||||||
3.759% 4/15/44 | 2,815,000 | 2,994,228 | |||||
• | Citigroup/Deutsche Bank | ||||||
Commercial Mortgage Trust | |||||||
Series 2005-CD1 A4 5.40% 7/15/44 | 845,000 | 941,784 | |||||
Series 2005-CD1 AM 5.40% 7/15/44 | 5,150,000 | 5,554,023 |
10
Principal amount° | Value (U.S. $) | ||||||
Commercial Mortgage-Backed Securities (continued) | |||||||
w | Commercial Mortgage Pass Through Certificates | ||||||
•Series 2005-C6 A5A 5.116% 6/10/44 | USD | 9,515,000 | $ | 10,449,363 | |||
Series 2006-C7 A2 5.69% 6/10/46 | 77,828 | 77,806 | |||||
#Series 2010-C1 A1 144A | |||||||
3.156% 7/10/46 | 9,087,832 | 9,496,021 | |||||
• | Credit Suisse Mortgage Capital | ||||||
Certificates Series 2006-C1 AAB | |||||||
5.596% 2/15/39 | 465,039 | 489,985 | |||||
# | DBUBS Mortgage Trust 144A | ||||||
Series 2011-LC1A A3 | |||||||
5.002% 11/10/46 | 16,620,000 | 18,955,875 | |||||
•Series 2011-LC1A C 5.728% 11/10/46 | 6,595,000 | 6,775,551 | |||||
• | GE Capital Commercial Mortgage | ||||||
Series 2005-C4 A4 5.437% 11/10/45 | 108,000 | 119,682 | |||||
Goldman Sachs Mortgage Securities II | |||||||
•Series 2004-GG2 A5 5.279% 8/10/38 | 2,310,000 | 2,440,587 | |||||
•Series 2004-GG2 A6 5.396% 8/10/38 | 10,047,000 | 10,831,560 | |||||
Series 2005-GG4 A4 4.761% 7/10/39 | 13,580,350 | 14,453,390 | |||||
Series 2005-GG4 A4A 4.751% 7/10/39 | 30,459,000 | 33,100,526 | |||||
•Series 2006-GG6 A4 5.553% 4/10/38 | 8,365,000 | 9,319,597 | |||||
#Series 2010-C1 A2 144A 4.592% 8/10/43 | 14,975,000 | 16,681,566 | |||||
•#Series 2010-C1 C 144A 5.635% 8/10/43 | 5,240,000 | 5,378,373 | |||||
#Series 2011 ALF A 144A 2.716% 2/10/21 | 2,474,238 | 2,516,795 | |||||
•#Series 2011-GC3 B 144A 5.361% 3/10/44 | 10,420,000 | 10,924,807 | |||||
• | Greenwich Capital Commercial Funding | ||||||
Series 2005-GG5 A5 5.224% 4/10/37 | 28,220,000 | 30,624,570 | |||||
• | JPMorgan Chase Commercial Mortgage Securities | ||||||
Series 2005-CB11 A4 5.335% 8/12/37 | 2,280,000 | 2,513,057 | |||||
Series 2005-LDP3 A4A 4.936% 8/15/42 | 8,280,000 | 9,130,662 | |||||
Series 2005-LDP4 A4 4.918% 10/15/42 | 13,948,000 | 15,130,456 | |||||
Series 2005-LDP5 A4 5.372% 12/15/44 | 10,685,000 | 11,959,998 | |||||
LB-UBS Commercial Mortgage Trust | |||||||
Series 2004-C1 A4 4.568% 1/15/31 | 5,110,000 | 5,363,471 | |||||
Merrill Lynch Mortgage Trust | |||||||
#Series 2002-MW1 J 144A 5.695% 7/12/34 | 30,000 | 27,280 | |||||
Series 2005-CIP1 A2 4.96% 7/12/38 | 168,014 | 170,426 | |||||
•Series 2005-CKI1 A6 5.391% 11/12/37 | 2,050,000 | 2,291,230 | |||||
Morgan Stanley Capital I | |||||||
Series 2005-HQ6 A4A 4.989% 8/13/42 | 4,695,000 | 5,168,707 | |||||
•Series 2007-T27 A4 5.817% 6/11/42 | 29,472,500 | 34,155,355 |
11
Statement of net assets
Delaware Diversified Income Fund
Principal amount° | Value (U.S. $) | ||||||
Commercial Mortgage-Backed Securities (continued) | |||||||
•# | Morgan Stanley Dean Witter Capital I | ||||||
Series 2001-TOP1 E 144A | |||||||
7.607% 2/15/33 | USD | 185,000 | $ | 181,973 | |||
# | OBP Depositor Trust | ||||||
Series 2010-OBP A 144A 4.646% 7/15/45 | 8,545,000 | 9,725,235 | |||||
# | Timberstar Trust 144A | ||||||
Series 2006-1A A 5.668% 10/15/36 | 14,335,000 | 16,021,455 | |||||
Series 2006-1A C 5.884% 10/15/36 | 1,500,000 | 1,572,791 | |||||
# | WF-RBS Commercial Mortgage Trust | ||||||
Series 2011-C3 A4 144A 4.375% 3/15/44 | 16,065,000 | 17,477,901 | |||||
Total Commercial Mortgage-Backed Securities | |||||||
(cost $375,857,824) | 406,855,356 | ||||||
Convertible Bonds – 1.64% | |||||||
AAR 1.75% exercise price $29.04, | |||||||
expiration date 1/1/26 | 3,482,000 | 3,451,533 | |||||
Advanced Micro Devices | |||||||
5.75% exercise price $20.13, | |||||||
expiration date 8/15/12 | 2,831,000 | 2,869,926 | |||||
6.00% exercise price $28.08, | |||||||
expiration date 4/30/15 | 4,465,000 | 4,621,275 | |||||
# | Alaska Communications System Group | ||||||
144A 6.25% exercise price $10.28, | |||||||
expiration date 4/27/18 | 3,532,000 | 2,622,510 | |||||
* | Alcatel-Lucent USA 2.875% exercise | ||||||
price $15.35, expiration date 6/15/25 | 5,280,000 | 5,240,400 | |||||
* | Alere 3.00% exercise price $43.98, | ||||||
expiration date 5/15/16 | 5,684,000 | 5,541,900 | |||||
# | Ares Capital 144A 5.75% exercise price | ||||||
$19.13, expiration date 2/1/16 | 2,269,000 | 2,368,269 | |||||
* | ArvinMeritor 4.00% exercise price | ||||||
$26.73, expiration date 2/15/27 | 5,128,000 | 4,076,760 | |||||
# | BGC Partners 144A 4.50% exercise | ||||||
price $9.84, expiration date 7/13/16 | 2,166,000 | 2,144,340 | |||||
*# | Clearwire Communications 144A 8.25% | ||||||
exercise price $7.08, | |||||||
expiration date 11/30/40 | 3,276,000 | 1,981,980 |
12
Principal amount° | Value (U.S. $) | ||||||
Convertible Bonds (continued) | |||||||
# | Corporate Office Properties 144A 4.25% | ||||||
exercise price $48.00, | |||||||
expiration date 4/12/30 | USD | 2,481,000 | $ | 2,425,178 | |||
Dendreon 2.875% exercise price $51.24, | |||||||
expiration date 1/13/16 | 1,634,000 | 1,319,455 | |||||
Euronet Worldwide 3.50% exercise price | |||||||
$40.48, expiration date 10/15/25 | 3,099,000 | 3,114,495 | |||||
# | Gaylord Entertainment 144A 3.75% | ||||||
exercise price $27.25, | |||||||
expiration date 9/29/14 | 3,400,000 | 4,432,750 | |||||
ϕ | General Cable 4.50% exercise price $36.75, | ||||||
expiration date 11/15/29 | 2,528,000 | 2,698,640 | |||||
Health Care REIT 3.00% exercise price | |||||||
$51.08, expiration date 11/30/29 | 3,597,000 | 4,168,024 | |||||
Helix Energy Solutions Group 3.25% | |||||||
exercise price $25.02, | |||||||
expiration date 3/12/32 | 3,830,000 | 4,390,138 | |||||
ϕ | Hologic 2.00% exercise price $31.17, | ||||||
expiration date 2/27/42 | 1,287,000 | 1,222,650 | |||||
# | Illumina 144A 0.25% exercise price $83.55, | ||||||
expiration date 3/11/16 | 1,404,000 | 1,289,925 | |||||
Intel 2.95% exercise price $29.96, | |||||||
expiration date 12/15/35 | 4,060,000 | 4,643,625 | |||||
James River Coal 4.50% exercise price $25.78, | |||||||
expiration date 12/1/15 | 1,138,000 | 517,790 | |||||
Jefferies Group 3.875% exercise price $37.77, | |||||||
expiration date 11/1/29 | 3,924,000 | 3,703,275 | |||||
L-3 Communications Holdings 3.00% | |||||||
exercise price $96.48, | |||||||
expiration date 8/1/35 | 4,301,000 | 4,247,238 | |||||
* | Leap Wireless International 4.50% | ||||||
exercise price $93.21, | |||||||
expiration date 7/15/14 | 5,536,000 | 5,210,760 | |||||
# | Lexington Realty Trust 144A | ||||||
6.00% exercise price $7.01, | |||||||
expiration date 1/11/30 | 2,958,000 | 4,037,670 | |||||
Linear Technology 3.00% exercise price | |||||||
$43.39, expiration date 5/1/27 | 7,575,000 | 7,991,624 | |||||
Live Nation Entertainment 2.875% | |||||||
exercise price $27.14, | |||||||
expiration date 7/14/27 | 7,106,000 | 6,857,289 |
13
Statement of net assets
Delaware Diversified Income Fund
Principal amount° | Value (U.S. $) | ||||||
Convertible Bonds (continued) | |||||||
MGM Resorts International 4.25% | |||||||
exercise price $18.58, | |||||||
expiration date 4/10/15 | USD | 3,251,000 | $ | 3,450,124 | |||
Mirant (Escrow) 2.50% exercise price $67.95, | |||||||
expiration date 6/15/21 | 695,000 | 0 | |||||
Mylan 3.75% exercise price $13.32, | |||||||
expiration date 9/10/15 | 2,624,000 | 4,614,960 | |||||
National Retail Properties 5.125% | |||||||
exercise price $25.36, | |||||||
expiration date 6/15/28 | 1,948,000 | 2,201,240 | |||||
# | Nuance Communications 144A 2.75% | ||||||
exercise price $32.30, | |||||||
expiration date 11/1/31 | 1,463,000 | 1,645,875 | |||||
NuVasive | |||||||
2.25% exercise price $44.74, | |||||||
expiration date 3/15/13 | 1,585,000 | 1,585,000 | |||||
2.75% exercise price $42.13, | |||||||
expiration date 6/30/17 | 2,440,000 | 2,095,350 | |||||
# | Owens-Brockway Glass Container | ||||||
144A 3.00% exercise price $47.47, | |||||||
expiration date 5/28/15 | 6,520,000 | 6,397,749 | |||||
Pantry 3.00% exercise price $50.09, | |||||||
expiration date 11/15/12 | 5,105,000 | 5,136,906 | |||||
* | Peabody Energy 4.75% exercise price $58.19, | ||||||
expiration date 12/15/41 | 636,000 | 609,765 | |||||
PHH 4.00% exercise price $25.80, | |||||||
expiration date 9/1/14 | 5,551,000 | 5,384,470 | |||||
Rovi 2.625% exercise price $47.36, | |||||||
expiration date 2/10/40 | 3,778,000 | 3,872,450 | |||||
SanDisk 1.50% exercise price $52.37, | |||||||
expiration date 8/11/17 | 3,688,000 | 3,840,130 | |||||
SBA Communications 4.00% exercise | |||||||
price $30.38, expiration date 10/1/14 | 1,692,000 | 3,115,395 | |||||
Transocean 1.50% exercise price $158.97, | |||||||
expiration date 12/15/37 | 2,374,000 | 2,362,130 | |||||
VeriSign 3.25% exercise price $34.37, | |||||||
expiration date 8/15/37 | 3,622,000 | 4,858,008 | |||||
Total Convertible Bonds (cost $142,678,003) | 148,358,971 |
14
Principal amount° | Value (U.S. $) | ||||||
Corporate Bonds – 47.99% | |||||||
Automotive – 0.82% | |||||||
# | Allison Transmission 144A 11.00% 11/1/15 | USD | 2,109,000 | $ | 2,224,995 | ||
America Axle & Manufacturing 7.875% 3/1/17 | 6,837,000 | 7,093,388 | |||||
ArvinMeritor 8.125% 9/15/15 | 8,498,000 | 9,060,993 | |||||
Chrysler Group 8.25% 6/15/21 | 5,635,000 | 5,860,400 | |||||
* | Ford Motor 7.45% 7/16/31 | 12,734,000 | 16,283,602 | ||||
Ford Motor Credit | |||||||
5.00% 5/15/18 | 12,500,000 | 13,539,112 | |||||
7.50% 8/1/12 | 701,000 | 712,200 | |||||
12.00% 5/15/15 | 10,732,000 | 13,602,809 | |||||
Tomkins 9.00% 10/1/18 | 5,109,000 | 5,709,308 | |||||
74,086,807 | |||||||
Banking – 5.76% | |||||||
Abbey National Treasury Services | |||||||
4.00% 4/27/16 | 9,305,000 | 9,208,433 | |||||
AgriBank 9.125% 7/15/19 | 12,423,000 | 15,983,742 | |||||
Bank of America | |||||||
3.75% 7/12/16 | 15,730,000 | 15,677,415 | |||||
3.875% 3/22/17 | 7,065,000 | 7,055,109 | |||||
5.70% 1/24/22 | 10,600,000 | 11,148,370 | |||||
BB&T | |||||||
3.95% 3/22/22 | 10,710,000 | 11,026,106 | |||||
5.25% 11/1/19 | 20,134,000 | 22,382,968 | |||||
BB&T Capital Trust II 6.75% 6/7/36 | 13,235,000 | 13,542,356 | |||||
• | BB&T Capital Trust IV 6.82% 6/12/57 | 2,300,000 | 2,331,625 | ||||
Branch Banking & Trust 0.622% 9/13/16 | 5,500,000 | 5,189,525 | |||||
Capital One Capital V 10.25% 8/15/39 | 7,422,000 | 7,774,545 | |||||
* | City National 5.25% 9/15/20 | 13,865,000 | 14,842,011 | ||||
@# | CoBank 144A 7.875% 4/16/18 | 10,520,000 | 12,824,490 | ||||
Export-Import Bank of Korea 5.00% 4/11/22 | 21,345,000 | 23,033,496 | |||||
Fifth Third Bancorp 3.50% 3/15/22 | 6,480,000 | 6,501,203 | |||||
• | Fifth Third Capital Trust IV 6.50% 4/15/37 | 19,171,000 | 19,075,145 | ||||
Goldman Sachs Group 5.75% 1/24/22 | 6,785,000 | 7,098,060 | |||||
•# | HBOS Capital Funding 144A | ||||||
6.071% 6/29/49 | 5,595,000 | 3,776,625 | |||||
# | HSBC Bank 144A 4.75% 1/19/21 | 12,600,000 | 13,567,163 | ||||
HSBC Holdings 4.00% 3/30/22 | 23,940,000 | 24,371,230 | |||||
JPMorgan Chase | |||||||
4.50% 1/24/22 | 10,480,000 | 11,185,514 | |||||
•4.63% 6/21/12 | AUD | 14,500,000 | 15,097,517 | ||||
6.00% 10/1/17 | USD | 11,420,000 | 13,127,724 |
15
Statement of net assets
Delaware Diversified Income Fund
Principal amount° | Value (U.S. $) | ||||||
Corporate Bonds (continued) | |||||||
Banking (continued) | |||||||
JPMorgan Chase Capital XXV 6.80% 10/1/37 | USD | 18,628,000 | $ | 18,814,280 | |||
KeyBank 6.95% 2/1/28 | 19,095,000 | 22,019,457 | |||||
KeyCorp 5.10% 3/24/21 | 8,965,000 | 10,096,392 | |||||
Korea Development Bank 8.00% 1/23/14 | 13,825,000 | 15,202,233 | |||||
Lloyds TSB Bank 4.20% 3/28/17 | 11,730,000 | 11,913,575 | |||||
• | National City Bank 0.845% 6/7/17 | 10,600,000 | 9,964,477 | ||||
PNC Bank 6.875% 4/1/18 | 18,049,000 | 21,717,766 | |||||
PNC Funding 3.30% 3/8/22 | 6,090,000 | 6,171,308 | |||||
•# | PNC Preferred Funding Trust II 144A | ||||||
1.696% 3/29/49 | 13,400,000 | 10,211,336 | |||||
SunTrust Bank | |||||||
•0.782% 8/24/15 | 6,285,000 | 5,811,683 | |||||
3.50% 1/20/17 | 5,890,000 | 6,048,147 | |||||
SVB Financial Group 5.375% 9/15/20 | 5,500,000 | 6,061,748 | |||||
U.S. Bank | |||||||
4.95% 10/30/14 | 5,005,000 | 5,477,707 | |||||
6.30% 2/4/14 | 2,361,000 | 2,575,797 | |||||
• | USB Capital IX 3.50% 4/15/49 | 30,217,000 | 23,071,283 | ||||
# | VTB Bank 144A 6.00% 4/12/17 | 2,959,000 | 3,027,057 | ||||
• | Wachovia 0.837% 10/15/16 | 7,950,000 | 7,404,543 | ||||
Wachovia Bank 5.60% 3/15/16 | 17,070,000 | 19,117,990 | |||||
Wells Fargo 3.50% 3/8/22 | 9,040,000 | 9,175,455 | |||||
Wells Fargo Bank 4.75% 2/9/15 | 10,855,000 | 11,689,858 | |||||
Zions Bancorporation | |||||||
4.50% 3/27/17 | 5,435,000 | 5,468,990 | |||||
7.75% 9/23/14 | 3,805,000 | 4,148,409 | |||||
521,009,863 | |||||||
Basic Industry – 5.20% | |||||||
* | AK Steel 7.625% 5/15/20 | 5,423,000 | 5,233,195 | ||||
Alcoa | |||||||
5.40% 4/15/21 | 11,000,000 | 11,581,636 | |||||
6.75% 7/15/18 | 24,384,000 | 27,980,128 | |||||
# | Anglo American Capital 144A | ||||||
2.625% 4/3/17 | 20,155,000 | 20,283,670 | |||||
ArcelorMittal | |||||||
6.25% 2/25/22 | 8,360,000 | 8,531,112 | |||||
9.85% 6/1/19 | 16,275,000 | 19,697,698 | |||||
# | Barrick Gold 144A | ||||||
3.85% 4/1/22 | 40,080,000 | 41,449,372 | |||||
5.25% 4/1/42 | 2,405,000 | 2,534,750 |
16
Principal amount° | Value (U.S. $) | ||||||
Corporate Bonds (continued) | |||||||
Basic Industry (continued) | |||||||
Barrick North America Finance | |||||||
4.40% 5/30/21 | USD | 5,264,000 | $ | 5,680,498 | |||
Celanese U.S. Holdings 6.625% 10/15/18 | 2,276,000 | 2,458,080 | |||||
*# | Cemex Espana Luxembourg 144A | ||||||
9.25% 5/12/20 | 4,298,000 | 3,891,839 | |||||
*•# | Cemex SAB 144A 5.47% 9/30/15 | 14,829,000 | 13,309,028 | ||||
Century Aluminum 8.00% 5/15/14 | 5,067,000 | 5,193,675 | |||||
CF Industries 7.125% 5/1/20 | 6,726,000 | 8,054,385 | |||||
# | CODELCO 144A 3.75% 11/4/20 | 5,437,000 | 5,691,424 | ||||
Compass Minerals International | |||||||
8.00% 6/1/19 | 3,575,000 | 3,887,813 | |||||
Domtar 4.40% 4/1/22 | 7,710,000 | 7,770,223 | |||||
Dow Chemical 8.55% 5/15/19 | 35,451,000 | 47,073,858 | |||||
# | Essar Steel Algoma 144A | ||||||
9.875% 6/15/15 | 5,482,000 | 5,070,850 | |||||
# | FMG Resources August 2006 144A | ||||||
*6.875% 4/1/22 | 1,800,000 | 1,831,500 | |||||
7.00% 11/1/15 | 5,046,000 | 5,247,840 | |||||
Georgia-Pacific | |||||||
8.00% 1/15/24 | 24,421,000 | 31,918,466 | |||||
#144A 8.25% 5/1/16 | 1,890,000 | 2,093,175 | |||||
Headwaters 7.625% 4/1/19 | 6,763,000 | 6,644,648 | |||||
Hexion U.S. Finance 8.875% 2/1/18 | 8,589,000 | 9,039,923 | |||||
International Paper | |||||||
4.75% 2/15/22 | 26,806,000 | 28,671,321 | |||||
9.375% 5/15/19 | 2,347,000 | 3,141,004 | |||||
# | International Wire Group Holdings 144A | ||||||
9.75% 4/15/15 | 82,000 | 86,715 | |||||
# | Kinross Gold 144A 5.125% 9/1/21 | 10,195,000 | 10,565,272 | ||||
# | LyondellBasell Industries 144A | ||||||
5.75% 4/15/24 | 8,525,000 | 8,844,688 | |||||
# | MacDermid 144A 9.50% 4/15/17 | 4,088,000 | 4,282,180 | ||||
Mohawk Industries 6.375% 1/15/16 | 2,349,000 | 2,589,773 | |||||
* | Momentive Performance Materials | ||||||
11.50% 12/1/16 | 3,276,000 | 2,727,270 | |||||
# | Murray Energy 144A 10.25% 10/15/15 | 4,660,000 | 4,450,300 | ||||
Norcraft Finance 10.50% 12/15/15 | 3,368,000 | 3,165,920 | |||||
Nortek 8.50% 4/15/21 | 6,440,000 | 6,391,700 | |||||
Novelis 8.75% 12/15/20 | 7,055,000 | 7,813,413 |
17
Statement of net assets
Delaware Diversified Income Fund
Principal amount° | Value (U.S. $) | ||||||
Corporate Bonds (continued) | |||||||
Basic Industry (continued) | |||||||
Ply Gem Industries 13.125% 7/15/14 | USD | 3,187,000 | $ | 3,234,805 | |||
=@ | Port Townsend 12.431% 8/27/12 | 629,656 | 286,493 | ||||
Rayonier 3.75% 4/1/22 | 9,660,000 | 9,588,236 | |||||
Ryerson | |||||||
•7.922% 11/1/14 | 1,560,000 | 1,521,000 | |||||
12.00% 11/1/15 | 5,346,000 | 5,599,935 | |||||
Smurfit Kappa Funding 7.75% 4/1/15 | 4,016,000 | 4,056,160 | |||||
Steel Dynamics | |||||||
6.75% 4/1/15 | 2,595,000 | 2,653,388 | |||||
7.75% 4/15/16 | 5,445,000 | 5,690,025 | |||||
Teck Resources | |||||||
3.00% 3/1/19 | 5,330,000 | 5,331,487 | |||||
5.20% 3/1/42 | 13,435,000 | 13,127,339 | |||||
Vale Overseas 4.375% 1/11/22 | 33,150,000 | 34,130,278 | |||||
470,097,488 | |||||||
Brokerage – 0.39% | |||||||
• | Bear Stearns 4.923% 12/7/12 | AUD | 6,340,000 | 6,581,343 | |||
Jefferies Group | |||||||
6.25% 1/15/36 | USD | 6,538,000 | 5,769,785 | ||||
6.45% 6/8/27 | 4,100,000 | 3,936,000 | |||||
Lazard Group 6.85% 6/15/17 | 16,889,000 | 18,670,874 | |||||
34,958,002 | |||||||
Capital Goods – 0.79% | |||||||
Anixter 10.00% 3/15/14 | 2,102,000 | 2,306,945 | |||||
Berry Plastics 9.75% 1/15/21 | 5,045,000 | 5,536,888 | |||||
Case New Holland 7.75% 9/1/13 | 4,069,000 | 4,364,003 | |||||
# | DAE Aviation Holdings 144A 11.25% 8/1/15 | 90,000 | 93,375 | ||||
Kratos Defense & Security Solutions | |||||||
10.00% 6/1/17 | 2,705,000 | 2,921,400 | |||||
# | Plastipak Holdings 144A 10.625% 8/15/19 | 3,668,000 | 4,199,860 | ||||
# | Reynolds Group Issuer 144A 9.00% 4/15/19 | 13,490,000 | 13,624,900 | ||||
Stanley Black & Decker 3.40% 12/1/21 | 8,680,000 | 8,967,872 | |||||
TriMas 9.75% 12/15/17 | 3,500,000 | 3,902,500 | |||||
# | URS 144A 5.00% 4/1/22 | 8,655,000 | 8,674,353 | ||||
# | Votorantim Cimentos 144A 7.25% 4/5/41 | 16,180,000 | 16,624,949 | ||||
71,217,045 |
18
Principal amount° | Value (U.S. $) | ||||||
Corporate Bonds (continued) | |||||||
Communications – 6.65% | |||||||
Affinion Group 7.875% 12/15/18 | USD | 6,058,000 | $ | 5,315,895 | |||
America Movil SAB 5.00% 3/30/20 | 11,125,000 | 12,623,604 | |||||
American Tower | |||||||
4.50% 1/15/18 | 1,735,000 | 1,834,350 | |||||
4.70% 3/15/22 | 2,595,000 | 2,669,191 | |||||
5.90% 11/1/21 | 29,665,000 | 33,406,912 | |||||
* | AT&T 3.00% 2/15/22 | 3,295,000 | 3,311,610 | ||||
# | Brasil Telecom 144A 5.75% 2/10/22 | 16,473,000 | 16,926,008 | ||||
Cablevision Systems | |||||||
8.00% 4/15/20 | 122,000 | 132,370 | |||||
8.625% 9/15/17 | 335,000 | 369,338 | |||||
CCO Holdings | |||||||
7.375% 6/1/20 | 2,270,000 | 2,488,488 | |||||
8.125% 4/30/20 | 57,000 | 64,125 | |||||
CenturyLink 5.80% 3/15/22 | 13,225,000 | 13,135,665 | |||||
Citizens Communications 6.25% 1/15/13 | 1,495,000 | 1,536,113 | |||||
Clear Channel Communications | |||||||
9.00% 3/1/21 | 2,783,000 | 2,532,530 | |||||
# | Clear Channel Worldwide Holdings 144A | ||||||
7.625% 3/15/20 | 4,435,000 | 4,403,113 | |||||
# | Clearwire Communications 144A | ||||||
12.00% 12/1/15 | 10,263,000 | 9,518,933 | |||||
*# | Columbus International 144A | ||||||
11.50% 11/20/14 | 7,905,000 | 8,655,975 | |||||
Cricket Communications | |||||||
7.75% 5/15/16 | 882,000 | 932,715 | |||||
*7.75% 10/15/20 | 9,844,000 | 9,265,665 | |||||
Crown Castle International | |||||||
9.00% 1/15/15 | 1,893,000 | 2,101,230 | |||||
# | Crown Castle Towers 144A | ||||||
4.883% 8/15/20 | 53,140,000 | 56,463,056 | |||||
# | Deutsche Telekom International | ||||||
Finance 144A | |||||||
2.25% 3/6/17 | 15,590,000 | 15,493,373 | |||||
3.125% 4/11/16 | 10,005,000 | 10,376,816 | |||||
# | Digicel 144A 8.25% 9/1/17 | 2,277,000 | 2,396,543 | ||||
# | Digicel Group 144A | ||||||
8.875% 1/15/15 | 2,865,000 | 2,893,650 | |||||
9.125% 1/15/15 | 1,038,000 | 1,049,937 |
19
Statement of net assets
Delaware Diversified Income Fund
Principal amount° | Value (U.S. $) | ||||||
Corporate Bonds (continued) | |||||||
Communications (continued) | |||||||
DirecTV Holdings | |||||||
#144A 3.80% 3/15/22 | USD | 29,675,000 | $ | 29,601,079 | |||
4.60% 2/15/21 | 425,000 | 455,416 | |||||
DISH DBS | |||||||
6.75% 6/1/21 | 1,171,000 | 1,288,100 | |||||
7.125% 2/1/16 | 415,000 | 461,688 | |||||
7.875% 9/1/19 | 6,165,000 | 7,166,813 | |||||
Entravision Communications 8.75% 8/1/17 | 2,400,000 | 2,544,000 | |||||
Intelsat Bermuda 11.25% 2/4/17 | 7,322,000 | 7,614,880 | |||||
Intelsat Bermuda PIK | |||||||
11.50% 2/4/17 | 1,035,287 | 1,081,875 | |||||
#144A 11.50% 2/4/17 | 1,975,000 | 2,044,125 | |||||
Intelsat Jackson Holdings 7.25% 10/15/20 | 3,558,000 | 3,727,005 | |||||
Interpublic Group 4.00% 3/15/22 | 14,800,000 | 14,823,088 | |||||
Level 3 Financing 10.00% 2/1/18 | 4,041,000 | 4,445,100 | |||||
MDC Partners 11.00% 11/1/16 | 111,000 | 121,268 | |||||
MetroPCS Wireless 6.625% 11/15/20 | 2,785,000 | 2,687,525 | |||||
# | Nara Cable Funding 144A 8.875% 12/1/18 | 6,560,000 | 6,035,200 | ||||
Nexstar Broadcasting 8.875% 4/15/17 | 106,000 | 113,685 | |||||
Nielsen Finance | |||||||
11.50% 5/1/16 | 1,928,000 | 2,236,480 | |||||
11.625% 2/1/14 | 1,453,000 | 1,689,113 | |||||
NII Capital | |||||||
8.875% 12/15/19 | 1,557,000 | 1,576,463 | |||||
10.00% 8/15/16 | 6,000,000 | 6,750,000 | |||||
# | Oi 144A 9.75% 9/15/16 | BRL | 34,266,000 | 19,010,200 | |||
Omnicom Group 3.625% 5/1/22 | USD | 13,450,000 | 13,489,032 | ||||
# | ONO Finance II 144A 10.875% 7/15/19 | 1,860,000 | 1,590,300 | ||||
PAETEC Holding 8.875% 6/30/17 | 3,792,000 | 4,161,720 | |||||
Qwest 6.75% 12/1/21 | 12,490,000 | 14,101,622 | |||||
# | Sinclair Television Group 144A | ||||||
9.25% 11/1/17 | 3,380,000 | 3,785,600 | |||||
# | Sirius XM Radio 144A 8.75% 4/1/15 | 4,500,000 | 5,130,000 | ||||
Sprint Capital 8.75% 3/15/32 | 3,321,000 | 2,831,153 | |||||
Sprint Nextel | |||||||
6.00% 12/1/16 | 2,915,000 | 2,659,938 | |||||
8.375% 8/15/17 | 3,110,000 | 3,008,925 | |||||
#144A 9.125% 3/1/17 | 5,010,000 | 4,984,950 | |||||
Telecom Italia Capital 5.25% 10/1/15 | 6,095,000 | 6,216,900 |
20
Principal amount° | Value (U.S. $) | ||||||
Corporate Bonds (continued) | |||||||
Communications (continued) | |||||||
Telefonica Emisiones 6.421% 6/20/16 | USD | 23,950,000 | $ | 24,676,618 | |||
Telesat Canada | |||||||
#144A 6.00% 5/15/17 | 3,630,000 | 3,630,000 | |||||
11.00% 11/1/15 | 10,548,000 | 11,259,990 | |||||
12.50% 11/1/17 | 1,753,000 | 1,972,125 | |||||
Time Warner Cable | |||||||
5.50% 9/1/41 | 12,505,000 | 13,233,241 | |||||
8.25% 4/1/19 | 14,091,000 | 18,379,455 | |||||
# | Univision Communications 144A | ||||||
6.875% 5/15/19 | 5,325,000 | 5,411,531 | |||||
# | UPC Holding 144A 9.875% 4/15/18 | 2,204,000 | 2,446,440 | ||||
# | UPCB Finance III 144A 6.625% 7/1/20 | 9,469,000 | 9,658,380 | ||||
Videotron Ltee | |||||||
6.375% 12/15/15 | 552,000 | 567,180 | |||||
9.125% 4/15/18 | 2,093,000 | 2,323,230 | |||||
# | VimpelCom Holdings 144A | ||||||
•4.471% 6/29/14 | 11,790,000 | 11,804,490 | |||||
7.504% 3/1/22 | 6,389,000 | 6,229,275 | |||||
Virgin Media Finance 8.375% 10/15/19 | 3,394,000 | 3,826,735 | |||||
Virgin Media Secured Finance | |||||||
5.25% 1/15/21 | 1,010,000 | 1,123,901 | |||||
6.50% 1/15/18 | 36,143,000 | 39,576,584 | |||||
# | Vivendi 144A | ||||||
3.45% 1/12/18 | 400,000 | 390,981 | |||||
6.625% 4/4/18 | 26,463,000 | 30,037,489 | |||||
# | Wind Acquisition Finance 144A | ||||||
11.75% 7/15/17 | 8,461,000 | 8,355,238 | |||||
Windstream | |||||||
7.875% 11/1/17 | 1,811,000 | 2,010,210 | |||||
8.125% 8/1/13 | 1,918,000 | 2,047,465 | |||||
# | XM Satellite Radio 144A 13.00% 8/1/13 | 4,424,000 | 5,026,770 | ||||
601,317,776 | |||||||
Consumer Cyclical – 2.11% | |||||||
AutoZone 3.70% 4/15/22 | 7,565,000 | 7,713,743 | |||||
CKE Restaurants 11.375% 7/15/18 | 4,893,000 | 5,663,648 | |||||
Dave & Buster’s 11.00% 6/1/18 | 1,514,000 | 1,642,690 | |||||
# | Delphi 144A 6.125% 5/15/21 | 6,275,000 | 6,714,250 | ||||
Express 8.75% 3/1/18 | 4,000 | 4,450 | |||||
# | FUEL Trust 144A 3.984% 6/15/16 | 6,710,000 | 6,957,787 |
21
Statement of net assets
Delaware Diversified Income Fund
Principal amount° | Value (U.S. $) | ||||||
Corporate Bonds (continued) | |||||||
Consumer Cyclical (continued) | |||||||
Hanesbrands 6.375% 12/15/20 | USD | 5,070,000 | $ | 5,260,125 | |||
Historic TW 6.875% 6/15/18 | 23,194,000 | 28,566,286 | |||||
Host Hotels & Resorts | |||||||
#144A 5.25% 3/15/22 | 5,615,000 | 5,607,981 | |||||
*5.875% 6/15/19 | 3,250,000 | 3,469,375 | |||||
6.00% 11/1/20 | 5,090,000 | 5,439,938 | |||||
#144A 6.00% 10/1/21 | 5,645,000 | 6,040,150 | |||||
Ingles Markets 8.875% 5/15/17 | 3,484,000 | 3,788,850 | |||||
* | Levi Strauss 7.625% 5/15/20 | 1,380,000 | 1,488,675 | ||||
Lowe’s 3.12% 4/15/22 | 21,965,000 | 22,315,605 | |||||
Macy’s Retail Holdings | |||||||
3.875% 1/15/22 | 890,000 | 918,096 | |||||
5.90% 12/1/16 | 11,621,000 | 13,354,528 | |||||
New Albertsons 7.25% 5/1/13 | 1,110,000 | 1,165,500 | |||||
OSI Restaurant Partners 10.00% 6/15/15 | 3,756,000 | 3,896,850 | |||||
Quiksilver 6.875% 4/15/15 | 5,750,000 | 5,850,625 | |||||
*# | Rite Aid 144A 9.25% 3/15/20 | 1,530,000 | 1,556,775 | ||||
# | Sealy Mattress 144A 10.875% 4/15/16 | 1,100,000 | 1,196,261 | ||||
Time Warner 4.70% 1/15/21 | 250,000 | 277,669 | |||||
Tops Markets 10.125% 10/15/15 | 2,209,000 | 2,374,675 | |||||
Western Union 3.65% 8/22/18 | 7,680,000 | 8,314,921 | |||||
Wyndham Worldwide | |||||||
4.25% 3/1/22 | 24,490,000 | 24,681,854 | |||||
5.625% 3/1/21 | 6,755,000 | 7,490,025 | |||||
5.75% 2/1/18 | 8,002,000 | 8,893,271 | |||||
190,644,603 | |||||||
Consumer Non-Cyclical – 4.29% | |||||||
Bio-Rad Laboratories | |||||||
4.875% 12/15/20 | 1,360,000 | 1,433,037 | |||||
8.00% 9/15/16 | 2,021,000 | 2,243,310 | |||||
CareFusion 6.375% 8/1/19 | 35,940,000 | 42,574,884 | |||||
Celgene | |||||||
2.45% 10/15/15 | 4,630,000 | 4,753,232 | |||||
3.95% 10/15/20 | 11,675,000 | 12,239,253 | |||||
Constellation Brands 6.00% 5/1/22 | 5,325,000 | 5,617,875 | |||||
Del Monte 7.625% 2/15/19 | 7,038,000 | 7,143,570 | |||||
# | Dole Food 144A 8.00% 10/1/16 | 3,055,000 | 3,238,300 |
22
Principal amount° | Value (U.S. $) | ||||||||
Corporate Bonds (continued) | |||||||||
Consumer Non-Cyclical (continued) | |||||||||
# | Express Scripts Holding 144A | ||||||||
2.65% 2/15/17 | USD | 8,970,000 | $ | 9,141,479 | |||||
3.50% 11/15/16 | 4,105,000 | 4,342,039 | |||||||
3.90% 2/15/22 | 4,185,000 | 4,315,459 | |||||||
4.75% 11/15/21 | 2,630,000 | 2,883,332 | |||||||
# | Heineken 144A 3.40% 4/1/22 | 17,735,000 | 18,018,813 | ||||||
Jarden | |||||||||
6.125% 11/15/22 | 2,120,000 | 2,236,600 | |||||||
7.50% 1/15/20 | 2,285,000 | 2,502,075 | |||||||
Koninklijke Philips Electronics | |||||||||
3.75% 3/15/22 | 10,310,000 | 10,644,910 | |||||||
5.00% 3/15/42 | 10,905,000 | 11,401,308 | |||||||
• | Kraft Foods 1.344% 7/10/13 | 16,705,000 | 16,796,193 | ||||||
Kroger 3.40% 4/15/22 | 14,475,000 | 14,510,884 | |||||||
Medtronic 3.125% 3/15/22 | 8,985,000 | 9,229,724 | |||||||
Molson Coors Brewing | |||||||||
3.50% 5/1/22 | 9,110,000 | 9,209,800 | |||||||
5.00% 5/1/42 | 11,080,000 | 11,351,948 | |||||||
NBTY 9.00% 10/1/18 | 7,000,000 | 7,761,250 | |||||||
# | Penrod-Ricard 144A | ||||||||
2.95% 1/15/17 | 6,365,000 | 6,483,745 | |||||||
4.45% 1/15/22 | 13,114,000 | 13,626,718 | |||||||
5.50% 1/15/42 | 6,701,000 | 6,875,380 | |||||||
Quest Diagnostics | |||||||||
4.70% 4/1/21 | 15,330,000 | 16,949,936 | |||||||
4.75% 1/30/20 | 2,035,000 | 2,229,222 | |||||||
# | SABMiller Holdings 144A | ||||||||
2.45% 1/15/17 | 8,425,000 | 8,637,647 | |||||||
3.75% 1/15/22 | 31,525,000 | 32,853,023 | |||||||
Safeway 4.75% 12/1/21 | 13,650,000 | 13,680,794 | |||||||
Sara Lee 4.10% 9/15/20 | 3,689,000 | 3,815,706 | |||||||
Scotts Miracle-Gro 6.625% 12/15/20 | 3,478,000 | 3,704,070 | |||||||
Tyson Foods 10.50% 3/1/14 | 2,985,000 | 3,455,138 | |||||||
# | Woolworths 144A | ||||||||
3.15% 4/12/16 | 4,045,000 | 4,208,980 | |||||||
4.55% 4/12/21 | 19,205,000 | 21,117,569 | |||||||
Yale University 2.90% 10/15/14 | 4,905,000 | 5,180,798 |
23
Statement of net assets
Delaware Diversified Income Fund
Principal amount° | Value (U.S. $) | ||||||
Corporate Bonds (continued) | |||||||
Consumer Non-Cyclical (continued) | |||||||
Zimmer Holdings | |||||||
3.375% 11/30/21 | USD | 12,500,000 | $ | 12,837,850 | |||
4.625% 11/30/19 | 16,726,000 | 18,796,178 | |||||
388,042,029 | |||||||
Electric – 3.73% | |||||||
Ameren Illinois 9.75% 11/15/18 | 17,440,000 | 23,994,719 | |||||
# | American Transmission Systems 144A | ||||||
5.25% 1/15/22 | 20,345,000 | 23,215,028 | |||||
Baltimore Gas & Electric 3.50% 11/15/21 | 17,975,000 | 18,806,452 | |||||
CenterPoint Energy 5.95% 2/1/17 | 11,365,000 | 13,006,561 | |||||
# | Centrais Eletricas Brasileiras 144A | ||||||
5.75% 10/27/21 | 25,126,000 | 27,450,154 | |||||
CMS Energy | |||||||
4.25% 9/30/15 | 6,995,000 | 7,293,148 | |||||
6.25% 2/1/20 | 8,265,000 | 9,148,917 | |||||
ComEd Financing III 6.35% 3/15/33 | 8,504,000 | 8,387,699 | |||||
Commonwealth Edison 3.40% 9/1/21 | 19,410,000 | 20,622,135 | |||||
Duquense Light Holdings 5.50% 8/15/15 | 3,168,000 | 3,352,343 | |||||
* | Florida Power 5.65% 6/15/18 | 2,785,000 | 3,378,882 | ||||
• | FPL Group Capital 6.35% 10/1/66 | 16,936,000 | 17,291,199 | ||||
Great Plains Energy 5.292% 6/15/22 | 15,025,000 | 16,457,138 | |||||
• | Integrys Energy Group 6.11% 12/1/66 | 7,285,000 | 7,319,538 | ||||
Ipalco Enterprises 5.00% 5/1/18 | 5,745,000 | 5,745,000 | |||||
Jersey Central Power & Light | |||||||
5.625% 5/1/16 | 3,240,000 | 3,663,980 | |||||
LG&E & KU Energy | |||||||
3.75% 11/15/20 | 12,102,000 | 12,350,309 | |||||
#144A 4.375% 10/1/21 | 16,415,000 | 17,368,662 | |||||
PacifiCorp 2.95% 2/1/22 | 10,705,000 | 10,849,839 | |||||
Pennsylvania Electric 5.20% 4/1/20 | 9,953,000 | 11,084,019 | |||||
• | PPL Capital Funding 6.70% 3/30/67 | 3,920,000 | 3,884,798 | ||||
Public Service Company of Oklahoma | |||||||
5.15% 12/1/19 | 14,625,000 | 16,720,529 | |||||
Puget Energy 6.00% 9/1/21 | 4,660,000 | 4,991,093 | |||||
• | Puget Sound Energy 6.974% 6/1/67 | 18,119,000 | 18,742,312 | ||||
SCANA 4.125% 2/1/22 | 10,490,000 | 10,687,768 | |||||
Wisconsin Electric Power 2.95% 9/15/21 | 100,000 | 102,723 | |||||
• | Wisconsin Energy 6.25% 5/15/67 | 20,260,000 | 20,941,911 | ||||
336,856,856 |
24
Principal amount° | Value (U.S. $) | ||||||
Corporate Bonds (continued) | |||||||
Energy – 5.19% | |||||||
American Petroleum Tankers Parent | |||||||
10.25% 5/1/15 | USD | 175,000 | $ | 185,063 | |||
AmeriGas Finance | |||||||
6.75% 5/20/20 | 1,260,000 | 1,291,500 | |||||
7.00% 5/20/22 | 1,360,000 | 1,390,600 | |||||
AmeriGas Partners 6.50% 5/20/21 | 1,467,000 | 1,496,340 | |||||
Antero Resources Finance 9.375% 12/1/17 | 2,410,000 | 2,644,975 | |||||
# | BG Energy Capital 144A 4.00% 10/15/21 | 16,145,000 | 17,299,836 | ||||
# | Canadian Oil Sands 144A 4.50% 4/1/22 | 9,640,000 | 9,919,425 | ||||
Comstock Resources 7.75% 4/1/19 | 2,082,000 | 1,946,670 | |||||
# | Continental Resources 144A 5.00% 9/15/22 | 3,820,000 | 3,882,075 | ||||
Copano Energy 7.75% 6/1/18 | 3,453,000 | 3,668,813 | |||||
Crosstex Energy 8.875% 2/15/18 | 93,000 | 100,208 | |||||
Ecopetrol 7.625% 7/23/19 | 13,942,000 | 17,573,891 | |||||
* | Encana 3.90% 11/15/21 | 16,065,000 | 15,850,789 | ||||
# | ENI 144A 4.15% 10/1/20 | 17,210,000 | 17,197,351 | ||||
* | Forest Oil 7.25% 6/15/19 | 3,837,000 | 3,808,223 | ||||
# | Helix Energy Solutions Group 144A | ||||||
9.50% 1/15/16 | 3,151,000 | 3,312,489 | |||||
# | Hercules Offshore 144A 10.50% 10/15/17 | 6,335,000 | 6,651,750 | ||||
# | Hilcorp Energy I 144A | ||||||
7.625% 4/15/21 | 2,600,000 | 2,821,000 | |||||
8.00% 2/15/20 | 111,000 | 121,823 | |||||
Holly 9.875% 6/15/17 | 4,221,000 | 4,748,625 | |||||
Husky Energy 3.95% 4/15/22 | 25,455,000 | 26,452,530 | |||||
Inergy 6.875% 8/1/21 | 2,350,000 | 2,385,250 | |||||
# | IPIC GMTN 144A 5.50% 3/1/22 | 7,350,000 | 7,717,500 | ||||
Linn Energy | |||||||
#144A 6.25% 11/1/19 | 1,390,000 | 1,370,888 | |||||
#144A 6.50% 5/15/19 | 1,085,000 | 1,095,850 | |||||
8.625% 4/15/20 | 2,636,000 | 2,893,010 | |||||
Lukoil International Finance | |||||||
6.125% 11/9/20 | 12,885,000 | 13,738,889 | |||||
# | NFR Energy 144A 9.75% 2/15/17 | 3,730,000 | 3,301,050 | ||||
Noble Holding International | |||||||
3.95% 3/15/22 | 12,416,000 | 12,638,669 | |||||
5.25% 3/15/42 | 21,580,000 | 21,857,561 | |||||
Pemex Project Funding Master Trust | |||||||
6.625% 6/15/35 | 6,850,000 | 8,100,125 |
25
Statement of net assets
Delaware Diversified Income Fund
Principal amount° | Value (U.S. $) | ||||||
Corporate Bonds (continued) | |||||||
Energy (continued) | |||||||
Petrobras International Finance | |||||||
3.50% 2/6/17 | USD | 6,345,000 | $ | 6,536,993 | |||
5.375% 1/27/21 | 34,669,000 | 38,150,807 | |||||
5.875% 3/1/18 | 1,180,000 | 1,335,006 | |||||
Petrohawk Energy 7.25% 8/15/18 | 12,263,000 | 13,995,149 | |||||
Petroleos de Venezuela 9.00% 11/17/21 | 52,664,000 | 43,131,815 | |||||
Petroleum Development 12.00% 2/15/18 | 3,235,000 | 3,509,975 | |||||
Pioneer Drilling 9.875% 3/15/18 | 53,000 | 56,180 | |||||
Pride International 6.875% 8/15/20 | 38,285,000 | 47,224,853 | |||||
* | Quicksilver Resources 9.125% 8/15/19 | 3,270,000 | 3,171,900 | ||||
Range Resources | |||||||
5.75% 6/1/21 | 1,840,000 | 1,936,600 | |||||
8.00% 5/15/19 | 5,208,000 | 5,754,840 | |||||
# | Ras Laffan Liquefied Natural Gas III 144A | ||||||
5.832% 9/30/16 | 913,764 | 984,580 | |||||
# | Samson Investment 144A 9.75% 2/15/20 | 1,425,000 | 1,489,125 | ||||
SandRidge Energy | |||||||
7.50% 3/15/21 | 1,715,000 | 1,740,725 | |||||
#144A 8.125% 10/15/22 | 2,855,000 | 2,965,631 | |||||
8.75% 1/15/20 | 5,000 | 5,350 | |||||
Transocean | |||||||
5.05% 12/15/16 | 17,035,000 | 18,517,215 | |||||
6.375% 12/15/21 | 9,375,000 | 10,998,338 | |||||
Weatherford International | |||||||
4.50% 4/15/22 | 16,980,000 | 17,560,241 | |||||
9.625% 3/1/19 | 10,546,000 | 13,969,569 | |||||
# | Woodside Finance 144A | ||||||
8.125% 3/1/14 | 4,095,000 | 4,543,018 | |||||
8.75% 3/1/19 | 11,176,000 | 14,396,733 | |||||
469,437,411 | |||||||
Finance Companies – 1.68% | |||||||
# | CDP Financial 144A | ||||||
4.40% 11/25/19 | 20,171,000 | 22,240,545 | |||||
5.60% 11/25/39 | 3,130,000 | 3,752,341 | |||||
E Trade Financial 12.50% 11/30/17 | 7,406,000 | 8,665,020 | |||||
General Electric Capital | |||||||
2.30% 4/27/17 | 6,045,000 | 6,060,294 | |||||
#144A 3.80% 6/18/19 | 8,320,000 | 8,392,733 | |||||
4.65% 10/17/21 | 10,230,000 | 11,144,173 | |||||
*5.50% 2/1/17 | NZD | 8,950,000 | 7,586,059 | ||||
6.00% 8/7/19 | USD | 38,621,000 | 45,713,282 |
26
Principal amount° | Value (U.S. $) | ||||||
Corporate Bonds (continued) | |||||||
Finance Companies (continued) | |||||||
*# | Hyundai Capital Services 144A 3.50% 9/13/17 | USD | 6,725,000 | $ | 6,795,021 | ||
•# | ILFC E-Capital Trust I 144A 5.03% 12/21/65 | 6,865,000 | 4,840,786 | ||||
•# | ILFC E-Capital Trust II 144A 6.25% 12/21/65 | 2,787,000 | 2,076,315 | ||||
International Lease Finance | |||||||
5.875% 4/1/19 | 3,775,000 | 3,712,675 | |||||
6.25% 5/15/19 | 3,232,000 | 3,264,698 | |||||
6.625% 11/15/13 | 170,000 | 175,950 | |||||
8.25% 12/15/20 | 3,395,000 | 3,810,888 | |||||
8.75% 3/15/17 | 6,429,000 | 7,232,625 | |||||
Nuveen Investments 10.50% 11/15/15 | 6,345,000 | 6,582,938 | |||||
152,046,343 | |||||||
Healthcare – 0.71% | |||||||
Accellent 8.375% 2/1/17 | 2,760,000 | 2,797,950 | |||||
# | AMGH Merger Sub 144A 9.25% 11/1/18 | 4,305,000 | 4,455,675 | ||||
Biomet 11.625% 10/15/17 | 3,292,000 | 3,588,280 | |||||
Biomet PIK 10.375% 10/15/17 | 2,823,000 | 3,066,484 | |||||
Boston Scientific 6.00% 1/15/20 | 11,725,000 | 13,713,711 | |||||
Community Health Systems | |||||||
#144A 8.00% 11/15/19 | 2,185,000 | 2,321,563 | |||||
8.875% 7/15/15 | 1,019,000 | 1,053,391 | |||||
HCA 7.50% 2/15/22 | 6,330,000 | 6,828,488 | |||||
* | HCA Holdings 7.75% 5/15/21 | 7,174,000 | 7,568,570 | ||||
# | Kinetic Concepts 144A 12.50% 11/1/19 | 5,165,000 | 4,803,450 | ||||
# | Multiplan 144A 9.875% 9/1/18 | 5,304,000 | 5,781,360 | ||||
# | Mylan 144A 6.00% 11/15/18 | 5,615,000 | 5,923,825 | ||||
Radnet Management 10.375% 4/1/18 | 2,510,000 | 2,503,725 | |||||
64,406,472 | |||||||
Insurance – 1.52% | |||||||
American International Group | |||||||
5.85% 1/16/18 | 1,300,000 | 1,433,233 | |||||
•8.175% 5/15/58 | 1,576,000 | 1,692,230 | |||||
8.25% 8/15/18 | 10,795,000 | 13,112,633 | |||||
• | Chubb 6.375% 3/29/67 | 13,273,000 | 13,654,599 | ||||
Coventry Health Care 5.45% 6/15/21 | 19,270,000 | 21,794,890 | |||||
# | Highmark 144A | ||||||
4.75% 5/15/21 | 5,710,000 | 5,806,425 | |||||
6.125% 5/15/41 | 2,145,000 | 2,269,172 | |||||
• | ING Groep 5.775% 12/29/49 | 6,320,000 | 5,435,200 | ||||
•# | Liberty Mutual Group 144A 7.00% 3/15/37 | 3,575,000 | 3,235,375 |
27
Statement of net assets
Delaware Diversified Income Fund
Principal amount° | Value (U.S. $) | ||||||
Corporate Bonds (continued) | |||||||
Insurance (continued) | |||||||
MetLife | |||||||
6.40% 12/15/36 | USD | 35,000 | $ | 34,412 | |||
6.817% 8/15/18 | 10,550,000 | 13,053,800 | |||||
# | MetLife Capital Trust X 144A 9.25% 4/8/38 | 11,710,000 | 14,344,750 | ||||
# | Metropolitan Life Global Funding I 144A | ||||||
3.875% 4/11/22 | 100,000 | 101,110 | |||||
Prudential Financial | |||||||
3.875% 1/14/15 | 4,320,000 | 4,560,386 | |||||
4.50% 11/15/20 | 3,640,000 | 3,895,386 | |||||
4.50% 11/16/21 | 3,310,000 | 3,537,579 | |||||
6.00% 12/1/17 | 7,845,000 | 9,236,570 | |||||
w=‡@# | Twin Reefs Pass Through Trust 144A | ||||||
4.058% 12/31/49 | 1,900,000 | 0 | |||||
• | XL Group 6.50% 12/31/49 | 5,104,000 | 4,274,600 | ||||
•# | ZFS Finance USA Trust II 144A 6.45% 12/15/65 | 12,255,000 | 12,071,175 | ||||
•# | ZFS Finance USA Trust IV 144A 5.875% 5/9/32 | 3,420,000 | 3,432,825 | ||||
136,976,350 | |||||||
Natural Gas – 2.90% | |||||||
Apache | |||||||
3.25% 4/15/22 | 5,255,000 | 5,436,581 | |||||
4.75% 4/15/43 | 15,050,000 | 16,102,522 | |||||
# | CNOOC Finance 2012 144A 3.875% 5/2/22 | 12,235,000 | 12,270,261 | ||||
El Paso Pipeline Partners Operating | |||||||
6.50% 4/1/20 | 12,790,000 | 14,755,759 | |||||
• | Enbridge Energy Partners 8.05% 10/1/37 | 18,785,000 | 20,571,416 | ||||
Energy Transfer Partners 9.70% 3/15/19 | 8,635,000 | 11,137,138 | |||||
Enterprise Products Operating | |||||||
•7.034% 1/15/68 | 26,630,000 | 28,594,283 | |||||
•8.375% 8/1/66 | 1,492,000 | 1,620,270 | |||||
9.75% 1/31/14 | 3,046,000 | 3,478,157 | |||||
Kinder Morgan Energy Partners | |||||||
3.95% 9/1/22 | 10,345,000 | 10,439,429 | |||||
9.00% 2/1/19 | 16,492,000 | 21,254,873 | |||||
NiSource Finance 5.80% 2/1/42 | 10,475,000 | 11,440,093 | |||||
# | Pertamina Persero 144A | ||||||
4.875% 5/3/22 | 4,650,000 | 4,638,375 | |||||
6.00% 5/3/42 | 14,550,000 | 14,331,750 | |||||
Plains All American Pipeline 8.75% 5/1/19 | 14,204,000 | 18,763,953 | |||||
Southwest Gas 3.875% 4/1/22 | 13,365,000 | 14,007,522 |
28
Principal amount° | Value (U.S. $) | ||||||
Corporate Bonds (continued) | |||||||
Natural Gas (continued) | |||||||
• | TransCanada Pipelines 6.35% 5/15/67 | USD | 27,180,000 | $ | 28,403,427 | ||
Williams Partners | |||||||
4.00% 11/15/21 | 9,090,000 | 9,433,202 | |||||
7.25% 2/1/17 | 12,798,000 | 15,529,208 | |||||
262,208,219 | |||||||
Real Estate – 1.66% | |||||||
Alexandria Real Estate Equities | |||||||
4.60% 4/1/22 | 13,785,000 | 13,869,585 | |||||
Brandywine Operating Partnership | |||||||
4.95% 4/15/18 | 10,955,000 | 11,206,132 | |||||
Developers Diversified Realty | |||||||
4.75% 4/15/18 | 7,770,000 | 8,060,699 | |||||
7.50% 4/1/17 | 5,330,000 | 6,119,261 | |||||
7.875% 9/1/20 | 9,374,000 | 11,275,525 | |||||
9.625% 3/15/16 | 3,656,000 | 4,453,655 | |||||
Digital Realty Trust | |||||||
5.25% 3/15/21 | 16,343,000 | 17,340,577 | |||||
5.875% 2/1/20 | 7,425,000 | 8,192,968 | |||||
Health Care REIT | |||||||
4.125% 4/1/19 | 7,030,000 | 7,093,727 | |||||
5.25% 1/15/22 | 1,410,000 | 1,495,701 | |||||
Mack-Cali Realty 4.50% 4/18/22 | 8,860,000 | 9,074,137 | |||||
# | Qatari Diar Finance 144A 5.00% 7/21/20 | 7,392,000 | 8,094,240 | ||||
Regency Centers | |||||||
4.80% 4/15/21 | 9,255,000 | 9,785,821 | |||||
5.875% 6/15/17 | 2,168,000 | 2,452,086 | |||||
UDR 4.625% 1/10/22 | 9,500,000 | 9,955,126 | |||||
•# | USB Realty 144A 1.614% 12/22/49 | 7,700,000 | 5,766,453 | ||||
# | WEA Finance 144A 4.625% 5/10/21 | 14,750,000 | 15,317,551 | ||||
149,553,244 | |||||||
Services – 1.28% | |||||||
Ameristar Casinos 7.50% 4/15/21 | 5,490,000 | 5,833,125 | |||||
# | Ashtead Capital 144A 9.00% 8/15/16 | 3,721,000 | 3,902,399 | ||||
Beazer Homes USA 9.125% 5/15/19 | 2,428,000 | 2,045,590 | |||||
Casella Waste Systems 11.00% 7/15/14 | 2,199,000 | 2,374,920 | |||||
Clean Harbors 7.625% 8/15/16 | 802,000 | 846,110 | |||||
Corrections Corporation of America | |||||||
7.75% 6/1/17 | 6,151,000 | 6,704,590 |
29
Statement of net assets
Delaware Diversified Income Fund
Principal amount° | Value (U.S. $) | ||||||
Corporate Bonds (continued) | |||||||
Services (continued) | |||||||
# | Delta Air Lines 144A 12.25% 3/15/15 | USD | 101,000 | $ | 110,343 | ||
# | Equinox Holdings 144A 9.50% 2/1/16 | 1,146,000 | 1,236,248 | ||||
FTI Consulting | |||||||
6.75% 10/1/20 | 3,645,000 | 3,877,369 | |||||
7.75% 10/1/16 | 1,035,000 | 1,081,575 | |||||
Geo Group 6.625% 2/15/21 | 4,067,000 | 4,311,020 | |||||
Harrah’s Operating 11.25% 6/1/17 | 2,161,000 | 2,398,710 | |||||
Iron Mountain | |||||||
7.75% 10/1/19 | 1,475,000 | 1,615,125 | |||||
8.00% 6/15/20 | 2,163,000 | 2,300,891 | |||||
Kansas City Southern de Mexico | |||||||
8.00% 2/1/18 | 1,533,000 | 1,720,793 | |||||
M/I Homes 8.625% 11/15/18 | 4,285,000 | 4,306,425 | |||||
MGM Resorts International | |||||||
10.375% 5/15/14 | 175,000 | 200,375 | |||||
*11.375% 3/1/18 | 11,469,000 | 13,719,790 | |||||
13.00% 11/15/13 | 3,503,000 | 4,080,995 | |||||
Mobile Mini 6.875% 5/1/15 | 2,249,000 | 2,293,980 | |||||
PHH 9.25% 3/1/16 | 10,874,000 | 11,145,850 | |||||
* | Pinnacle Entertainment 8.75% 5/15/20 | 6,124,000 | 6,782,330 | ||||
Royal Caribbean Cruises 7.00% 6/15/13 | 4,605,000 | 4,835,250 | |||||
RSC Equipment Rental 10.25% 11/15/19 | 6,011,000 | 6,792,430 | |||||
* | Ryland Group 8.40% 5/15/17 | 4,675,000 | 5,200,938 | ||||
•# | ServiceMaster 144A 10.75% 7/15/15 | 1,790,000 | 1,872,805 | ||||
Standard Pacific 10.75% 9/15/16 | 4,573,000 | 5,281,815 | |||||
# | United Air Lines 144A 12.00% 11/1/13 | 5,406,000 | 5,743,875 | ||||
West 7.875% 1/15/19 | 1,985,000 | 2,126,431 | |||||
Wynn Las Vegas 7.75% 8/15/20 | 1,030,000 | 1,143,300 | |||||
115,885,397 | |||||||
Technology – 2.03% | |||||||
Amkor Technology 7.375% 5/1/18 | 2,365,000 | 2,542,375 | |||||
Applied Materials 4.30% 6/15/21 | 600,000 | 664,825 | |||||
Aspect Software 10.625% 5/15/17 | 48,000 | 52,200 | |||||
Avaya | |||||||
#144A 7.00% 4/1/19 | 6,071,000 | 6,101,355 | |||||
9.75% 11/1/15 | 4,930,000 | 4,911,513 | |||||
PIK 10.125% 11/1/15 | 1,755,000 | 1,748,419 | |||||
CDW 12.535% 10/12/17 | 3,352,000 | 3,670,440 |
30
Principal amount° | Value (U.S. $) | ||||||
Corporate Bonds (continued) | |||||||
Technology (continued) | |||||||
Fidelity National Information Services | |||||||
7.875% 7/15/20 | USD | 1,350,000 | $ | 1,518,750 | |||
First Data | |||||||
9.875% 9/24/15 | 5,981,000 | 6,055,763 | |||||
10.55% 9/24/15 | 3,495,000 | 3,573,638 | |||||
*11.25% 3/31/16 | 3,068,000 | 2,837,900 | |||||
GXS Worldwide 9.75% 6/15/15 | 10,014,000 | 9,688,545 | |||||
Hewlett-Packard 4.05% 9/15/22 | 27,570,000 | 27,871,725 | |||||
Jabil Circuit 7.75% 7/15/16 | 1,152,000 | 1,314,720 | |||||
# | Lawson Software 144A 9.375% 4/1/19 | 1,225,000 | 1,286,250 | ||||
* | MagnaChip Semiconductor 10.50% 4/15/18 | 81,000 | 91,328 | ||||
National Semiconductor 6.60% 6/15/17 | 24,882,000 | 30,934,123 | |||||
# | Samsung Electronics America 144A | ||||||
1.75% 4/10/17 | 11,685,000 | 11,709,188 | |||||
# | Seagate Technology International 144A | ||||||
10.00% 5/1/14 | 10,270,000 | 11,630,775 | |||||
Symantec 4.20% 9/15/20 | 9,630,000 | 10,086,443 | |||||
Tyco Electronics Group 3.50% 2/3/22 | 11,095,000 | 11,121,916 | |||||
# | Unisys 144A 12.75% 10/15/14 | 1,719,000 | 1,914,536 | ||||
Xerox | |||||||
4.50% 5/15/21 | 18,395,000 | 19,242,568 | |||||
6.35% 5/15/18 | 11,188,000 | 13,184,129 | |||||
183,753,424 | |||||||
Transportation – 1.00% | |||||||
# | Brambles USA 144A | ||||||
3.95% 4/1/15 | 20,145,000 | 21,102,713 | |||||
5.35% 4/1/20 | 7,310,000 | 8,030,525 | |||||
Burlington Northern Santa Fe | |||||||
4.40% 3/15/42 | 19,850,000 | 19,575,594 | |||||
5.65% 5/1/17 | 2,095,000 | 2,469,177 | |||||
# | ERAC USA Finance 144A 5.25% 10/1/20 | 30,240,000 | 33,347,644 | ||||
Union Pacific 4.163% 7/15/22 | 5,380,000 | 5,919,625 | |||||
90,445,278 | |||||||
Utilities – 0.28% | |||||||
AES 8.00% 6/1/20 | 2,420,000 | 2,795,100 | |||||
# | Calpine 144A 7.875% 7/31/20 | 4,180,000 | 4,577,100 | ||||
Elwood Energy 8.159% 7/5/26 | 3,049,297 | 3,117,906 | |||||
GenOn Energy 9.875% 10/15/20 | 2,995,000 | 2,830,275 | |||||
* | Mirant Americas Generation 8.50% 10/1/21 | 7,728,000 | 6,993,839 |
31
Statement of net assets
Delaware Diversified Income Fund
Principal amount° | Value (U.S. $) | ||||||
Corporate Bonds (continued) | |||||||
Utilities (continued) | |||||||
NRG Energy | |||||||
7.625% 1/15/18 | USD | 925,000 | $ | 941,188 | |||
7.875% 5/15/21 | 3,595,000 | 3,532,088 | |||||
24,787,496 | |||||||
Total Corporate Bonds (cost $4,138,563,054) | 4,337,730,103 | ||||||
Municipal Bond – 0.01% | |||||||
Oregon State Taxable Pension 5.892% 6/1/27 | 305,000 | 381,348 | |||||
Total Municipal Bond (cost $305,000) | 381,348 | ||||||
Non-Agency Asset-Backed Securities – 1.67% | |||||||
• | Ally Master Owner Trust | ||||||
Series 2011-1 A1 1.11% 1/15/16 | 10,500,000 | 10,577,908 | |||||
Ameriquest Mortgage Securities | |||||||
Series 2003-8 AF4 5.82% 10/25/33 | 65,676 | 66,662 | |||||
# | Avis Budget Rental Car Funding AESOP | ||||||
Series 2011-2A A 144A | |||||||
2.37% 11/20/14 | 5,455,000 | 5,553,337 | |||||
# | Cabela’s Master Credit Card Trust | ||||||
Series 2012-1A A1 144A 1.63% 2/18/20 | 8,925,000 | 8,967,889 | |||||
Capital One Multi-Asset Execution Trust | |||||||
•Series 2007-A1 A1 0.29% 11/15/19 | 1,500,000 | 1,472,264 | |||||
•Series 2007-A4 A4 0.27% 3/16/15 | 400,000 | 399,979 | |||||
Series 2007-A7 A7 5.75% 7/15/20 | 27,750,000 | 33,555,760 | |||||
CenterPoint Energy Transition Bond | |||||||
Series 2012-1 A2 2.161% 10/15/21 | 4,200,000 | 4,280,367 | |||||
# | CIT Equipment Collateral Series | ||||||
2010-VT1A A3 144A 2.41% 5/15/13 | 1,503,741 | 1,508,129 | |||||
Citibank Credit Card Issuance Trust | |||||||
Series 2007-A3 A3 6.15% 6/15/39 | 3,938,000 | 5,294,816 | |||||
Citicorp Residential Mortgage Securities | |||||||
Series 2006-3 A4 5.703% 11/25/36 | 5,642,517 | 5,450,632 | |||||
Series 2006-3 A5 5.948% 11/25/36 | 5,800,000 | 4,503,294 | |||||
Citifinancial Mortgage Securities | |||||||
Series 2003-2 AF4 4.598% 5/25/33 | 253,832 | 224,503 | |||||
•# | CNH Wholesale Master Note Trust | ||||||
Series 2011-1A A 144A 1.04% 12/15/15 | 11,750,000 | 11,783,862 |
32
Principal amount° | Value (U.S. $) | ||||||
Non-Agency Asset-Backed Securities (continued) | |||||||
@ | Contimortgage Home Equity Trust | ||||||
Series 1996-4 A8 7.22% 1/15/28 | USD | 6,830 | $ | 6,327 | |||
Countrywide Asset-Backed Certificates | |||||||
•Series 2005-7 AF3 4.454% 10/25/35 | 717 | 712 | |||||
@Series 2006-13 1AF3 5.944% 1/25/37 | 28,210 | 17,890 | |||||
Discover Card Master Trust | |||||||
Series 2007-A1 A1 5.65% 3/16/20 | 1,980,000 | 2,379,787 | |||||
Series 2012-A1 A1 0.81% 8/15/17 | 10,010,000 | 10,012,074 | |||||
# | Enterprise Fleet Financing Series 2012-1 | ||||||
A2 144A 1.14% 11/20/17 | 2,000,000 | 1,999,800 | |||||
# | Ford Auto Securitization Trust | ||||||
Series 2011-R1A A3 144A 3.02% 2/15/16 | CAD | 5,165,000 | 5,333,637 | ||||
GE Capital Credit Card Master Note Trust | |||||||
Series 2012-2A 2.22% 1/15/22 | USD | 7,190,000 | 7,246,505 | ||||
# | Golden Credit Card Trust Series 2012-2A | ||||||
A1 144A 1.77% 1/15/19 | 8,045,000 | 8,090,568 | |||||
Harley-Davidson Motorcycle Trust | |||||||
Series 2008-1 A4 4.90% 12/15/13 | 1,120,172 | 1,127,697 | |||||
Series 2009-4 A3 1.87% 2/15/14 | 327,477 | 327,800 | |||||
• | MBNA Credit Card Master Note Trust | ||||||
Series 2002-C3 C3 1.59% 10/15/14 | 7,185,000 | 7,187,928 | |||||
• | Merrill Auto Trust Securitization | ||||||
Series 2007-1 A4 0.30% 12/15/13 | 112,163 | 112,148 | |||||
Mid-State Trust Series 11 A1 4.864% 7/15/38 | 336,223 | 341,933 | |||||
Residential Asset Securities | |||||||
•Series 2006-EMX1 A2 0.469% 1/25/36 | 3,024,696 | 2,721,824 | |||||
•Series 2006-KS3 AI3 0.409% 4/25/36 | 53,104 | 48,575 | |||||
# | Sonic Capital Series 2011-1A A2 144A | ||||||
5.438% 5/20/41 | 9,428,388 | 9,894,141 | |||||
Total Non-Agency Asset-Backed Securities | |||||||
(cost $146,875,290) | 150,488,748 | ||||||
Non-Agency Collateralized Mortgage Obligations – 0.48% | |||||||
American Home Mortgage Investment Trust | |||||||
Series 2005-2 5A1 5.064% 9/25/35 | 1,334,128 | 1,236,907 | |||||
Bank of America Alternative Loan Trust | |||||||
Series 2004-11 1CB1 6.00% 12/25/34 | 750,086 | 731,622 | |||||
Series 2005-1 2A1 5.50% 2/25/20 | 509,717 | 494,646 |
33
Statement of net assets
Delaware Diversified Income Fund
Principal amount° | Value (U.S. $) | ||||||
Non-Agency Collateralized Mortgage Obligations (continued) | |||||||
Bank of America Alternative Loan Trust (continued) | |||||||
Series 2005-3 2A1 5.50% 4/25/20 | USD | 404,264 | $ | 415,035 | |||
Series 2005-6 7A1 5.50% 7/25/20 | 1,493,682 | 1,427,795 | |||||
Series 2005-9 5A1 5.50% 10/25/20 | 1,812,363 | 1,755,110 | |||||
Bank of America Funding | |||||||
Series 2006-5 2A10 5.75% 9/25/36 | 1,341,187 | 1,338,338 | |||||
• | Bank of America Mortgage Securities | ||||||
Series 2003-D 1A2 2.885% 5/25/33 | 738 | 579 | |||||
Series 2003-E 2A2 2.889% 6/25/33 | 158,826 | 154,756 | |||||
Series 2004-D 1A1 2.851% 5/25/34 | 2,575 | 2,336 | |||||
Series 2005-I 2A2 2.747% 10/25/35 | 28,549 | 3,522 | |||||
Chase Mortgage Finance | |||||||
Series 2003-S8 A2 5.00% 9/25/18 | 263,638 | 273,629 | |||||
•Series 2005-A1 3A1 5.095% 12/25/35 | 1,080,993 | 942,710 | |||||
• | Chaseflex Trust Series 2006-1 A4 | ||||||
6.23% 6/25/36 | 6,119,000 | 4,866,183 | |||||
Citicorp Mortgage Securities | |||||||
Series 2006-3 1A9 5.75% 6/25/36 | 1,017,985 | 988,741 | |||||
Series 2006-4 3A1 5.50% 8/25/21 | 676,463 | 663,390 | |||||
• | Citigroup Mortgage Loan Trust | ||||||
Series 2004-UST1 A6 5.071% 8/25/34 | 900,733 | 913,491 | |||||
Countrywide Alternative Loan Trust | |||||||
Series 2005-57CB 4A3 5.50% 12/25/35 | 603,935 | 424,117 | |||||
•w | Countrywide Home Loan Mortgage | ||||||
Pass Through Trust | |||||||
Series 2003-21 A1 2.85% 5/25/33 | 61,705 | 60,996 | |||||
Series 2004-HYB2 2A 2.942% 7/20/34 | 188,184 | 138,808 | |||||
Series 2004-HYB5 3A1 2.966% 4/20/35 | 191,141 | 135,107 | |||||
Credit Suisse First Boston Mortgage Securities | |||||||
Series 2004-1 3A1 7.00% 2/25/34 | 90,334 | 93,861 | |||||
First Horizon Asset Securities | |||||||
Series 2004-5 2A1 6.25% 8/25/17 | 64,339 | 66,478 | |||||
•# | GSMPS Mortgage Loan Trust 144A | ||||||
Series 1998-3 A 7.75% 9/19/27 | 82,195 | 87,229 | |||||
Series 1999-3 A 8.00% 8/19/29 | 116,954 | 115,427 | |||||
• | GSR Mortgage Home Loan Trust | ||||||
Series 2004-9 4A1 2.77% 8/25/34 | 169,453 | 151,891 | |||||
Series 2006-AR1 3A1 5.002% 1/25/36 | 954,138 | 781,195 |
34
Principal amount° | Value (U.S. $) | ||||||
Non-Agency Collateralized Mortgage Obligations (continued) | |||||||
• | JPMorgan Mortgage Trust | ||||||
Series 2005-A2 5A1 4.299% 4/25/35 | USD | 96,324 | $ | 96,494 | |||
Series 2005-A8 1A1 5.341% 11/25/35 | 800,891 | 746,445 | |||||
Series 2005-A8 2A1 2.589% 11/25/35 | 937,551 | 922,629 | |||||
Series 2006-A2 3A3 5.563% 4/25/36 | 2,411,291 | 2,073,968 | |||||
Series 2007-A1 7A4 4.066% 7/25/35 | 183,898 | 85,335 | |||||
• | MASTR ARM Trust | ||||||
Series 2003-6 1A2 2.70% 12/25/33 | 53,166 | 51,213 | |||||
Series 2004-10 2A2 3.319% 10/25/34 | 73,416 | 38,613 | |||||
Series 2005-6 7A1 5.323% 6/25/35 | 1,465,894 | 1,470,253 | |||||
Series 2005-7 2A2 5.36% 9/25/35 | 14,030 | 974 | |||||
Series 2006-2 4A1 4.651% 2/25/36 | 358,516 | 344,678 | |||||
•# | MASTR Specialized Loan Trust Series | ||||||
2005-2 A2 144A 5.006% 7/25/35 | 512,391 | 517,744 | |||||
• | Residential Accredit Loans Series | ||||||
2004-QA6 NB1 3.53% 12/26/34 | 8,556 | 5,712 | |||||
• | Structured ARM Loan Trust | ||||||
Series 2006-5 5A4 5.207% 6/25/36 | 371,404 | 25,932 | |||||
w | Washington Mutual Alternative Mortgage | ||||||
Pass Through Certificates | |||||||
Series 2005-1 5A2 6.00% 3/25/35 | 468,565 | 303,240 | |||||
w | Washington Mutual Mortgage | ||||||
Pass Through Certificates | |||||||
Series 2003-S10 A2 5.00% 10/25/18 | 674,074 | 697,174 | |||||
Series 2004-CB3 1A 6.00% 10/25/34 | 551,790 | 572,425 | |||||
•Series 2006-AR14 2A1 5.173% 11/25/36 | 7,103,373 | 5,631,823 | |||||
Wells Fargo Mortgage-Backed Securities Trust | |||||||
Series 2005-18 1A1 5.50% 1/25/36 | 1,297,464 | 1,201,181 | |||||
Series 2006-2 3A1 5.75% 3/25/36 | 4,690,048 | 4,637,865 | |||||
Series 2006-3 A11 5.50% 3/25/36 | 3,281,698 | 3,206,495 | |||||
•Series 2006-AR5 2A1 2.616% 4/25/36 | 2,929,354 | 2,297,305 | |||||
Series 2007-8 2A6 6.00% 7/25/37 | 337,932 | 300,145 | |||||
Series 2007-14 1A1 6.00% 10/25/37 | 264,751 | 252,915 | |||||
Total Non-Agency Collateralized Mortgage | |||||||
Obligations (cost $41,521,713) | 43,744,457 |
35
Statement of net assets
Delaware Diversified Income Fund
Principal amount° | Value (U.S. $) | ||||||
ΔRegional Bonds – 3.51% | |||||||
Australia – 2.29% | |||||||
New South Wales Treasury 6.00% 4/1/19 | AUD | 48,791,000 | $ | 56,643,124 | |||
Queensland Treasury | |||||||
6.00% 9/14/17 | AUD | 21,648,000 | 24,698,117 | ||||
6.25% 6/14/19 | AUD | 101,963,000 | 119,151,534 | ||||
Western Australia Treasury 7.00% 7/15/21 | AUD | 5,147,000 | 6,383,956 | ||||
206,876,731 | |||||||
Canada – 1.22% | |||||||
Province of British Columbia 1.20% 4/25/17 | USD | 10,955,000 | 10,978,247 | ||||
Province of Ontario | |||||||
3.15% 6/2/22 | CAD | 44,777,000 | 45,588,902 | ||||
4.00% 6/2/21 | CAD | 37,290,000 | 40,831,181 | ||||
4.40% 4/14/20 | USD | 7,890,000 | 9,077,808 | ||||
Province of Quebec 4.25% 12/1/21 | CAD | 3,235,000 | 3,595,361 | ||||
110,071,499 | |||||||
Total Regional Bonds (cost $306,390,525) | 316,948,230 | ||||||
«Senior Secured Loans – 4.53% | |||||||
Alliance HealthCare Services 7.25% 6/1/16 | USD | 5,568,233 | 5,331,583 | ||||
Allied Security Holdings Tranche 2L | |||||||
8.50% 1/21/18 | 2,715,000 | 2,730,842 | |||||
Anchor Glass Container 6.00% 2/3/16 | 4,210,780 | 4,217,791 | |||||
Aspect Software Tranche B 6.25% 5/7/16 | 2,041,830 | 2,046,935 | |||||
Attachmate 6.50% 11/21/16 | 7,991,668 | 7,995,664 | |||||
Autoparts Holdings | |||||||
1st Lien 6.50% 7/5/17 | 2,313,375 | 2,281,566 | |||||
2nd Lien 10.50% 7/5/18 | 1,330,000 | 1,300,075 | |||||
Avis Budget Group Tranche B 6.25% 6/13/18 | 3,351,939 | 3,390,487 | |||||
BNY ConvergEx Group | |||||||
8.75% 11/29/17 | 1,695,142 | 1,684,547 | |||||
8.75% 12/16/17 | 4,039,858 | 4,014,609 | |||||
Brickman Group Holdings | |||||||
Tranche B 7.25% 10/14/16 | 4,405,861 | 4,457,255 | |||||
Brock Holdings III | |||||||
10.00% 2/15/18 | 7,951,797 | 7,762,942 | |||||
Tranche B 6.00% 2/15/17 | 2,853,147 | 2,847,198 | |||||
Burlington Coat Factory Warehouse | |||||||
Tranche B 6.25% 2/10/17 | 12,831,943 | 12,868,065 |
36
Principal amount° | Value (U.S. $) | ||||||
«Senior Secured Loans (continued) | |||||||
Caesars Entertainment Operating | |||||||
Tranche B6 5.494% 1/28/18 | USD | 14,449,000 | $ | 13,259,558 | |||
Cengage Learning Acquisitions | |||||||
2.49% 7/3/14 | 1,860,000 | 1,709,163 | |||||
7.50% 7/7/14 | 4,676,377 | 4,528,767 | |||||
Chrysler Group 6.00% 4/28/17 | 12,668,246 | 12,919,077 | |||||
Clear Channel Communication | |||||||
Tranche A 3.639% 7/30/14 | 14,252,340 | 13,265,437 | |||||
Tranche B 3.889% 1/29/16 | 13,809,940 | 11,170,722 | |||||
Consolidated Container 5.75% 9/28/14 | 7,625,000 | 7,284,277 | |||||
Covanta Energy Tranche B 4.00% 3/1/19 | 1,115,000 | 1,117,509 | |||||
Datatel Tranche B 6.25% 6/5/18 | 2,090,000 | 2,126,575 | |||||
Delos Aircraft 4.75% 3/17/16 | 1,750,000 | 1,760,763 | |||||
Delta Air Lines Tranche B 5.50% 3/29/17 | 10,536,360 | 10,575,871 | |||||
Dynegy Power 1st Lien 9.25% 7/11/16 | 2,747,621 | 2,886,734 | |||||
EGP Energy 1st Lien 6.50% 5/1/18 | 2,085,000 | 2,111,719 | |||||
Emdeon Tranche B 6.75% 8/3/18 | 6,179,513 | 6,247,920 | |||||
First Data Tranche B2 5.00% 3/24/17 | 13,434,445 | 12,856,159 | |||||
Frac Tech International Tranche B 6.25% 4/19/16 | 9,888,086 | 9,514,218 | |||||
GenOn Energy Tranche B 6.00% 6/20/17 | 3,742,485 | 3,727,684 | |||||
Goodman Global 1st Lien 5.75% 10/28/16 | 622,946 | 627,705 | |||||
Houghton International Tranche B1 6.75% 1/11/16 | 4,317,419 | 4,341,704 | |||||
IASIS Healthcare Tranche B 5.00% 4/18/18 | 5,650,468 | 5,676,601 | |||||
Immucor Tranche B 7.25% 7/2/18 | 7,512,250 | 7,603,824 | |||||
Ineos US Finance 6.50% 5/4/18 | 4,993,776 | 5,024,988 | |||||
Kinetic Concepts Tranche B 7.00% 1/12/18 | 9,820,388 | 10,040,315 | |||||
Kronos 1st Lien 6.25% 12/28/17 | 2,259,338 | 2,281,366 | |||||
Landry’s Tranche B 6.50% 3/22/18 | 9,715,000 | 9,731,175 | |||||
Lawson Software Tranche B 6.25% 3/16/18 | 4,480,000 | 4,548,611 | |||||
Level 3 Financing | |||||||
Tranche B 5.75% 9/1/18 | 4,075,000 | 4,140,709 | |||||
Tranche B2 5.75% 4/11/18 | 4,655,000 | 4,730,062 | |||||
Lord & Taylor 5.75% 12/2/18 | 2,947,613 | 2,992,755 | |||||
LPL Holdings Tranche B 4.00% 3/6/19 | 3,815,000 | 3,826,331 | |||||
MTL Publishing Tranche B 5.50% 11/14/17 | 3,505,000 | 3,532,024 | |||||
Multiplan Tranche B 4.75% 8/26/17 | 6,950,632 | 6,947,400 | |||||
Nuveen Investment | |||||||
5.863% 5/13/17 | 5,253,365 | 5,267,050 | |||||
�� 8.25% 3/1/19 | 11,624,000 | 11,914,600 | |||||
Tranche B 3.257% 11/13/14 | 1,565,000 | 1,566,471 | |||||
Tranche B 7.25% 5/13/17 | 3,760,000 | 3,792,900 |
37
Statement of net assets
Delaware Diversified Income Fund
Principal amount° | Value (U.S. $) | |||||||
«Senior Secured Loans (continued) | ||||||||
NXP 5.25% 2/13/19 | USD | 10,480,000 | $ | 10,499,650 | ||||
OSI Restaurant Partners | ||||||||
2.00% 6/14/13 | 461,683 | 448,410 | ||||||
2.563% 6/13/14 | 11,085,212 | 10,980,456 | ||||||
2.593% 6/14/13 | 635,664 | 629,657 | ||||||
Pharmaceutical Product Development | ||||||||
6.25% 11/10/18 | 4,129,650 | 4,178,256 | ||||||
Pinnacle Entertainment | ||||||||
Tranche B 4.50% 3/5/19 | 2,540,000 | 2,549,843 | ||||||
Pinnacle Foods Finance | ||||||||
Tranche B 4.75% 10/31/16 | 2,055,000 | 2,055,853 | ||||||
PQ 6.74% 7/30/15 | 15,190,000 | 14,525,437 | ||||||
Prestige Brands 5.25% 12/20/18 | 2,037,424 | 2,055,252 | ||||||
@ | Prime Healthcare Services | |||||||
Tranche B 7.25% 4/28/15 | 8,084,458 | 8,044,036 | ||||||
Protection One 5.75% 3/31/19 | 4,722,678 | 4,742,371 | ||||||
Remy International Tranche B 6.25% 12/16/16 | 3,359,870 | 3,378,064 | ||||||
Reynolds Group Holdings 6.50% 7/7/18 | 13,704,558 | 13,921,912 | ||||||
Roundy’s Supermarkets | ||||||||
Tranche B 5.75%1/24/19 | 1,990,000 | 2,013,940 | ||||||
Sensus USA 2nd Lien 8.50% 4/13/18 | 6,235,000 | 6,223,341 | ||||||
SRAM 8.50% 11/12/18 | 1,600,000 | 1,612,984 | ||||||
Swift Transportation | ||||||||
Tranche B2 1.25% 12/15/17 | 5,449,526 | 5,494,920 | ||||||
Taminco Global Chemical 6.25% 12/16/18 | 5,265,000 | 5,317,229 | ||||||
Toys R US Delaware Tranche B 6.00% 9/1/16 | 9,445,526 | 9,463,189 | ||||||
Univision Communications 4.489% 3/29/17 | 13,212,674 | 12,369,441 | ||||||
US TelePacific 5.75% 2/10/17 | 6,524,218 | 6,264,881 | ||||||
Visant 5.25% 12/31/16 | 2,331,460 | 2,305,651 | ||||||
Yankee Candle 5.25% 3/2/19 | 1,795,000 | 1,810,706 | ||||||
Total Senior Secured Loans (cost $400,185,856) | 409,463,782 | |||||||
ΔSovereign Bonds – 9.53% | ||||||||
Brazil – 0.37% | ||||||||
Brazil Government International Bond | ||||||||
5.625% 1/7/41 | 12,934,000 | 15,456,130 | ||||||
8.875% 10/14/19 | 12,580,000 | 17,964,240 | ||||||
33,420,370 |
38
Principal amount° | Value (U.S. $) | |||||||
ΔSovereign Bonds (continued) | ||||||||
Canada – 0.36% | ||||||||
Canadian Government Bond | ||||||||
3.75% 6/1/19 | CAD | 14,339,000 | $ | 16,362,066 | ||||
4.00% 6/1/17 | CAD | 14,336,000 | 16,174,172 | |||||
32,536,238 | ||||||||
Chile – 0.39% | ||||||||
Chile Government International Bond | ||||||||
5.50% 8/5/20 | CLP | 16,226,500,000 | 35,048,705 | |||||
35,048,705 | ||||||||
Colombia – 0.18% | ||||||||
Colombia Government International Bond | ||||||||
6.125% 1/18/41 | USD | 13,155,000 | 16,680,540 | |||||
16,680,540 | ||||||||
Croatia – 0.26% | ||||||||
*#Croatia Government International Bond | ||||||||
144A 6.25% 4/27/17 | 22,823,000 | 23,118,147 | ||||||
23,118,147 | ||||||||
Finland – 0.16% | ||||||||
Finland Government Bond 4.00% 7/4/25 | EUR | 9,289,000 | 14,261,616 | |||||
14,261,616 | ||||||||
Germany – 0.30% | ||||||||
Deutschland Republic | ||||||||
2.50% 1/4/21 | EUR | 10,895,659 | 15,723,638 | |||||
3.50% 7/4/19 | EUR | 7,627,000 | 11,758,365 | |||||
27,482,003 | ||||||||
Indonesia – 0.33% | ||||||||
Indonesia Treasury Bond | ||||||||
11.00% 11/15/20 | IDR | 111,000,000,000 | 16,155,674 | |||||
# | Republic of Indonesia 144A | |||||||
5.25% 1/17/42 | USD | 13,143,000 | 13,520,861 | |||||
29,676,535 | ||||||||
Malaysia – 0.06% | ||||||||
Malaysia Government Bond | ||||||||
4.262% 9/15/16 | MYR | 15,658,000 | 5,382,263 | |||||
5,382,263 |
39
Statement of net assets
Delaware Diversified Income Fund
Principal amount° | Value (U.S. $) | |||||||
ΔSovereign Bonds (continued) | ||||||||
Mexico – 1.01% | ||||||||
Mexican Bonos | ||||||||
6.50% 6/10/21 | MXN | 71,091,100 | $ | 5,619,816 | ||||
7.50% 6/3/27 | MXN | 101,530,500 | 8,303,697 | |||||
8.50% 5/31/29 | MXN | 752,860,400 | 66,872,640 | |||||
Mexico Government International Bond | ||||||||
4.75% 3/8/44 | USD | 10,090,000 | 10,397,745 | |||||
91,193,898 | ||||||||
Norway – 2.09% | ||||||||
Norway Government Bond | ||||||||
3.75% 5/25/21 | NOK | 53,444,000 | 10,657,419 | |||||
4.25% 5/19/17 | NOK | 58,455,000 | 11,524,491 | |||||
4.50% 5/22/19 | NOK | 327,172,000 | 67,300,589 | |||||
5.00% 5/15/15 | NOK | 516,619,000 | 99,598,776 | |||||
189,081,275 | ||||||||
Panama – 0.29% | ||||||||
Panama Government International Bond | ||||||||
6.70% 1/26/36 | USD | 4,581,000 | 6,166,026 | |||||
7.125% 1/29/26 | 5,600,000 | 7,616,000 | ||||||
7.25% 3/15/15 | 3,504,000 | 4,073,400 | ||||||
8.875% 9/30/27 | 5,330,000 | 8,394,750 | ||||||
26,250,176 | ||||||||
Peru – 0.32% | ||||||||
Peruvian Government International Bond | ||||||||
5.625% 11/18/50 | 4,410,000 | 5,126,625 | ||||||
7.125% 3/30/19 | 18,619,000 | 24,018,510 | ||||||
29,145,135 | ||||||||
Philippines – 0.36% | ||||||||
Philippine Government International Bond | ||||||||
5.00% 1/13/37 | 9,940,000 | 10,499,125 | ||||||
6.50% 1/20/20 | 8,241,000 | 10,095,225 | ||||||
9.50% 10/21/24 | 7,927,000 | 11,870,683 | ||||||
32,465,033 | ||||||||
Poland – 0.22% | ||||||||
Poland Government Bond | ||||||||
5.25% 10/25/17 | PLN | 53,279,000 | 17,154,741 | |||||
5.25% 10/25/20 | PLN | 9,970,000 | 3,147,784 | |||||
20,302,525 |
40
Principal amount° | Value (U.S. $) | |||||||
ΔSovereign Bonds (continued) | ||||||||
Republic of Korea – 0.13% | ||||||||
Korea Treasury Inflation-Linked Bond | ||||||||
2.75% 6/10/20 | KRW | 11,272,119,928 | $ | 11,416,424 | ||||
11,416,424 | ||||||||
Russia – 0.33% | ||||||||
Russia Eurobond | ||||||||
#144A 3.25% 4/4/17 | USD | 9,200,000 | 9,349,500 | |||||
7.50% 3/31/30 | 17,397,656 | 20,898,934 | ||||||
30,248,434 | ||||||||
South Africa – 0.82% | ||||||||
# | Eskom Holdings 144A 5.75% 1/26/21 | 13,410,000 | 14,482,800 | |||||
Republic of South Africa | ||||||||
7.25% 1/15/20 | ZAR | 54,611,000 | 6,909,715 | |||||
8.00% 12/21/18 | ZAR | 396,387,000 | 52,912,180 | |||||
74,304,695 | ||||||||
Sweden – 0.14% | ||||||||
* | Sweden Government Bond | |||||||
3.00% 7/12/16 | SEK | 77,050,000 | 12,235,070 | |||||
12,235,070 | ||||||||
Turkey – 0.07% | ||||||||
Turkey Government International Bond | ||||||||
5.625% 3/30/21 | USD | 5,581,000 | 5,999,575 | |||||
5,999,575 | ||||||||
United Kingdom – 1.19% | ||||||||
United Kingdom Gilt | ||||||||
4.00% 3/7/22 | GBP | 32,207,121 | 61,139,035 | |||||
4.25% 12/7/27 | GBP | 6,612,000 | 12,763,897 | |||||
4.50% 3/7/19 | GBP | 6,906,000 | 13,411,866 | |||||
4.75% 3/7/20 | GBP | 10,194,200 | 20,258,525 | |||||
107,573,323 | ||||||||
Uruguay – 0.15% | ||||||||
Uruguay Government International Bond | ||||||||
8.00% 11/18/22 | USD | 9,967,500 | 13,819,939 | |||||
13,819,939 | ||||||||
Total Sovereign Bonds (cost $829,612,748) | 861,641,919 |
41
Statement of net assets
Delaware Diversified Income Fund
Principal amount° | Value (U.S. $) | |||||||
Supranational Banks – 0.47% | ||||||||
International Bank for Reconstruction | ||||||||
& Development | ||||||||
3.25% 12/15/17 | SEK | 39,500,000 | $ | 6,211,176 | ||||
3.375% 4/30/15 | NOK | 94,610,000 | 17,052,452 | |||||
3.625% 6/22/20 | NOK | 54,680,000 | 9,821,215 | |||||
6.00% 2/15/17 | AUD | 7,700,000 | 8,671,724 | |||||
7.50% 7/30/14 | NZD | 1,011,000 | 907,719 | |||||
Total Supranational Banks (cost $39,457,785) | 42,664,286 | |||||||
U.S. Treasury Obligations – 8.43% | ||||||||
U.S. Treasury Bonds | ||||||||
∞3.125% 11/15/41 | USD | 251,005,000 | 251,828,547 | |||||
3.125% 2/15/42 | 3,930,000 | 3,941,668 | ||||||
U.S. Treasury Notes | ||||||||
0.875% 4/30/17 | 60,175,000 | 60,372,434 | ||||||
1.00% 3/31/17 | 119,445,000 | 120,658,083 | ||||||
2.00% 2/15/22 | 322,776,000 | 325,247,174 | ||||||
Total U.S. Treasury Obligations (cost $755,276,351) | 762,047,906 | |||||||
Number of shares | ||||||||
Common Stock – 0.00% | ||||||||
=† | Calpine | 1,195,000 | 0 | |||||
=† | Century Communications | 7,875,000 | 0 | |||||
† | Delta Air Lines | 197 | 2,159 | |||||
† | Genon Energy | 2,075 | 4,421 | |||||
Masco | 30 | 395 | ||||||
=∏† | PT Holdings | 1,970 | 20 | |||||
*† | United Continental Holdings | 10 | 219 | |||||
Total Common Stock (cost $1,520,237) | 7,214 | |||||||
Convertible Preferred Stock – 0.18% | ||||||||
* | Apache 6.00% exercise price $109.12, | |||||||
expiration date 8/1/13 | 55,900 | 2,969,408 | ||||||
Aspen Insurance Holdings | ||||||||
5.625% exercise price $29.28, | ||||||||
expiration date 12/31/49 | 62,854 | 3,476,612 |
42
Number of shares | Value (U.S. $) | |||||||
Convertible Preferred Stock (continued) | ||||||||
Bank of America 7.50% exercise price | ||||||||
$50.00, expiration date 12/31/49 | 902 | $ | 877,421 | |||||
# | Chesapeake Energy 144A 5.75% | |||||||
exercise price $27.90, | ||||||||
expiration date 12/31/49 | 788 | 681,620 | ||||||
HealthSouth 6.50% exercise price | ||||||||
$30.50, expiration date 12/31/49 | 4,283 | 4,401,852 | ||||||
PPL 9.50% exercise price $28.80, | ||||||||
expiration date 7/1/13 | 68,150 | 3,669,878 | ||||||
SandRidge Energy 8.50% exercise price | ||||||||
$8.01, expiration date 12/31/49 | 4,000 | 483,500 | ||||||
Total Convertible Preferred Stock | ||||||||
(cost $17,114,337) | 16,560,291 | |||||||
Preferred Stock – 0.52% | ||||||||
Alabama Power 5.625% | 303,360 | 7,684,109 | ||||||
# | Ally Financial 144A 7.00% | 9,820 | 8,335,339 | |||||
BB&T 5.85% | 222,725 | 5,568,125 | ||||||
• | PNC Financial Services Group | |||||||
6.125% | 225,000 | 5,692,500 | ||||||
8.25% | 12,972,000 | 13,517,304 | ||||||
=† | PT Holdings | 394 | 0 | |||||
• | U.S. Bancorp 6.50% | 227,400 | 6,153,444 | |||||
Total Preferred Stock (cost $46,306,169) | 46,950,821 | |||||||
Warrant – 0.00% | ||||||||
=∏@† | Port Townsend | 394 | 4 | |||||
Total Warrant (cost $9,456) | 4 | |||||||
Principal amount° | ||||||||
Short-Term Investments – 10.32% | ||||||||
≠Discount Notes – 2.95% | ||||||||
Federal Home Loan Bank | ||||||||
0.11% 5/25/12 | USD | 195,177,609 | 195,173,705 | |||||
0.115% 6/29/12 | 71,435,005 | 71,428,004 | ||||||
266,601,709 |
43
Statement of net assets
Delaware Diversified Income Fund
Principal amount° | Value (U.S. $) | ||||||||
Short-Term Investments (continued) | |||||||||
Repurchase Agreements – 7.37% | |||||||||
Bank of America 0.17%, dated 4/30/12, | |||||||||
to be repurchased on 5/1/12, | |||||||||
repurchase price $164,104,728 | |||||||||
(collateralized by U.S. government | |||||||||
obligations 2.25%-4.125% 1/31/15- | |||||||||
5/15/15; market value $167,386,032) | USD | 164,103,953 | $ | 164,103,953 | |||||
BNP Paribas 0.17%, dated 4/30/12, | |||||||||
to be repurchased on 5/1/12, | |||||||||
repurchase price $502,126,418 | |||||||||
(collateralized by U.S. government | |||||||||
obligations 0.00%-2.375% 7/26/12- | |||||||||
10/31/16; market value $512,166,528) | 502,124,047 | 502,124,047 | |||||||
666,228,000 | |||||||||
Total Short-term Investments | |||||||||
(cost $932,812,837) | 932,829,709 | ||||||||
Total Value of Securities Before Securities | |||||||||
Lending Collateral – 103.32% | |||||||||
(cost $9,019,340,946) | 9,339,332,383 | ||||||||
Number of shares | |||||||||
**Securities Lending Collateral – 0.99% | |||||||||
Investment Companies | |||||||||
BNY Mellon SL DBT II Liquidating Fund | 2,506,307 | 2,442,897 | |||||||
Delaware Investments Collateral Fund No. 1 | 87,284,203 | 87,284,203 | |||||||
@†Mellon GSL Reinvestment Trust II | 7,211,337 | 0 | |||||||
Total Securities Lending Collateral | |||||||||
(cost $97,001,847) | 89,727,100 | ||||||||
Total Value of Securities – 104.31% | |||||||||
(cost $9,116,342,793) | 9,429,059,483 | © |
44
Number of contracts | Value (U.S. $) | |||||||
Options Written – (0.01%) | ||||||||
Call Options – (0.01%) | ||||||||
U.S. Long Bond Future, strike price $140, | ||||||||
expires 6/30/12 (JPMC) | (293 | ) | $ | (956,828 | ) | |||
U.S. Long Bond Future, strike price $145, | ||||||||
expires 6/30/12 (JPMC) | (132 | ) | (63,938 | ) | ||||
Total Options Written | ||||||||
(premium received $(559,282)) | (1,020,766 | ) | ||||||
**Obligation to Return Securities Lending | ||||||||
Collateral – (1.07%) | (97,001,847 | ) | ||||||
Other Liabilities Net of Receivables and | ||||||||
Other Assets – (3.23%) | (292,045,780 | )« | ||||||
Net Assets Applicable to 973,989,410 | ||||||||
Shares Outstanding – 100.00% | $ | 9,038,991,090 | ||||||
Net Asset Value – Delaware Diversified Income Fund | ||||||||
Class A ($4,740,126,872 / 510,822,946 Shares) | $9.28 | |||||||
Net Asset Value – Delaware Diversified Income Fund | ||||||||
Class B ($26,383,504 / 2,847,785 Shares) | $9.26 | |||||||
Net Asset Value – Delaware Diversified Income Fund | ||||||||
Class C ($2,162,205,374 / 233,038,490 Shares) | $9.28 | |||||||
Net Asset Value – Delaware Diversified Income Fund | ||||||||
Class R ($160,784,494 / 17,335,162 Shares) | $9.28 | |||||||
Net Asset Value – Delaware Diversified Income Fund | ||||||||
Institutional Class ($1,949,490,846 / 209,945,027 Shares) | $9.29 | |||||||
Components of Net Assets at April 31, 2012: | ||||||||
Shares of beneficial interest (unlimited authorization – no par) | $ | 8,765,196,157 | ||||||
Distributions in excess of net investment income | (28,165,434 | ) | ||||||
Accumulated net realized loss on investments | (20,375,481 | ) | ||||||
Net unrealized appreciation of investments and foreign currencies | 322,335,848 | |||||||
Total net assets | $ | 9,038,991,090 |
45
Statement of net assets
Delaware Diversified Income Fund
° | Principal amount shown is stated in the currency in which each security is denominated. |
• | Variable rate security. The rate shown is the rate as of April 30, 2012. Interest rates reset periodically. |
u | Pass Through Agreement. Security represents the contractual right to receive a proportionate amount of underlying payments due to the counterparty pursuant to various agreements related to the rescheduling of obligations and the exchange of certain notes. |
# | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At April 30, 2012, the aggregate value of Rule 144A securities was $1,398,327,236, which represented 15.47% of the Fund’s net assets. See Note 10 in “Notes to financial statements.” |
* | Fully or partially on loan. |
ϕ | Step coupon bond. Coupon increases or decreases periodically based on a predetermined schedule. Stated rate in effect at April 30, 2012. |
@ | Illiquid security. At April 30, 2012, the aggregate value of illiquid securities was $21,179,240, which represented 0.23% of the Fund’s net assets. See Note 10 in “Notes to financial statements.” |
= | Security is being fair valued in accordance with the Fund’s fair valuation policy. At April 30, 2012, the aggregate value of fair valued securities was $286,517, which represented 0.00% of the Fund’s net assets. See Note 1 in “Notes to financial statements.” |
‡ | Non income producing security. Security is currently in default. |
Δ | Securities have been classified by country of origin. |
« | Senior Secured Loans generally pay interest at rates which are periodically redetermined by reference to a base lending rate plus a premium. These base lending rates are generally: (i) the prime rate offered by one or more United States banks, (ii) the lending rate offered by one or more European banks such as the London Inter-Bank Offered Rate (LIBOR), and (iii) the certificate of deposit rate. Senior Secured Loans may be subject to restrictions on resale. Stated rate in effect at April 30, 2012. |
46
∞ | Fully or partially pledged as collateral for futures contracts. |
† | Non income producing security. |
∏ | 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 April 30, 2012, the aggregate value of the restricted securities was $24, which represent 0.00% of the Fund’s net assets. |
≠ | The rate shown is the effective yield at the time of purchase. |
** | See Note 9 in “Notes to financial statements” for additional information on securities lending collateral. |
© | Includes $89,729,239 of securities loaned. |
« | Includes foreign currency valued at $26,867,786 with a cost of $26,710,104. |
Net Asset Value and Offering Price Per Share – | |||
Delaware Diversified Income Fund | |||
Net asset value Class A (A) | $ | 9.28 | |
Sales charge (4.50% of offering price) (B) | 0.44 | ||
Offering price | $ | 9.72 |
(A) | Net asset value per share, as illustrated, is the amount which would be paid upon redemption or repurchase of shares. |
(B) | See the current prospectus for purchases of $100,000 or more. |
47
Statement of net assets
Delaware Diversified Income Fund
The following foreign currency exchange contracts, futures contracts and swap contracts were outstanding at April 30, 2012:1 Foreign Currency Exchange Contracts |
Unrealized | ||||||||||||||
Appreciation | ||||||||||||||
Counterparty | Contracts to Receive (Deliver) | In Exchange For | Settlement Date | (Depreciation) | ||||||||||
BAML | AUD | (15,582,970 | ) | USD | 16,075,236 | 6/1/12 | $ | (100,791 | ) | |||||
BAML | BRL | 28,133,993 | USD | (14,830,000 | ) | 6/1/12 | (176,217 | ) | ||||||
BAML | CLP | (7,784,587,000 | ) | USD | 15,919,401 | 6/1/12 | (160,138 | ) | ||||||
BAML | EUR | (109,988,066 | ) | USD | 145,499,542 | 6/1/12 | (126,897 | ) | ||||||
BAML | HUF | (26,612,375,100 | ) | USD | 121,356,993 | 6/1/12 | (847,988 | ) | ||||||
BAML | JPY | 22,635,396 | USD | (271,482 | ) | 5/2/12 | 11,996 | |||||||
BAML | JPY | (462,988,116 | ) | USD | 5,662,839 | 6/1/12 | (136,815 | ) | ||||||
BAML | MXN | 201,049,067 | USD | (15,120,767 | ) | 6/1/12 | 263,474 | |||||||
BAML | NOK | (94,678,808 | ) | USD | 16,515,570 | 6/1/12 | (8,522 | ) | ||||||
BAML | NZD | (5,431,109 | ) | USD | 4,413,787 | 6/1/12 | (17,215 | ) | ||||||
BAML | RUB | 1,223,155,490 | USD | (41,474,848 | ) | 6/1/12 | (46,161 | ) | ||||||
BAML | ZAR | (476,316,989 | ) | USD | 61,025,597 | 6/1/12 | 52,808 | |||||||
BCLY | EUR | (12,027,594 | ) | USD | 15,905,651 | 6/1/12 | (19,128 | ) | ||||||
BCLY | JPY | 905,498,459 | USD | (11,144,734 | ) | 6/1/12 | 198,059 | |||||||
CITI | BRL | 51,329,970 | USD | (27,030,000 | ) | 6/1/12 | (294,434 | ) | ||||||
CITI | EUR | (31,756,581 | ) | USD | 41,995,633 | 6/1/12 | (50,727 | ) | ||||||
CITI | JPY | 1,053,567,228 | USD | (12,969,152 | ) | 6/1/12 | 228,434 | |||||||
GSC | BRL | 92,691,656 | USD | (49,074,362 | ) | 6/1/12 | (795,279 | ) | ||||||
GSC | GBP | (18,691,206 | ) | USD | 30,214,477 | 6/1/12 | (117,369 | ) | ||||||
GSC | NOK | (27,458,560 | ) | USD | 4,790,064 | 6/1/12 | (2,221 | ) | ||||||
GSC | RUB | 792,304,500 | USD | (26,866,887 | ) | 6/1/12 | (31,267 | ) | ||||||
HSBC | AUD | (40,672,739 | ) | USD | 41,934,204 | 6/1/12 | (286,460 | ) | ||||||
HSBC | CLP | (11,372,650,698 | ) | USD | 23,292,679 | 6/1/12 | (198,223 | ) | ||||||
HSBC | EUR | (20,264,326 | ) | USD | 26,791,871 | 6/1/12 | (38,510 | ) | ||||||
HSBC | JPY | 963,903,350 | USD | (11,870,000 | ) | 6/1/12 | 204,405 | |||||||
HSBC | NOK | (271,391,051 | ) | USD | 47,405,378 | 6/1/12 | 40,072 | |||||||
HSBC | PLN | (75,009,168 | ) | USD | 23,682,743 | 6/1/12 | (22,189 | ) | ||||||
JPMC | BRL | 47,339,250 | USD | (25,039,273 | ) | 6/1/12 | (382,301 | ) | ||||||
JPMC | EUR | (23,724,432 | ) | USD | 31,330,485 | 6/1/12 | (81,146 | ) | ||||||
JPMC | NOK | (186,799,152 | ) | USD | 32,582,005 | 6/1/12 | (19,656 | ) | ||||||
MNB | GBP | (34,050 | ) | USD | 55,268 | 5/1/12 | 0 | |||||||
MSC | AUD | (16,618,905 | ) | USD | 17,118,569 | 6/1/12 | (132,819 | ) | ||||||
MSC | EUR | (57,275,353 | ) | USD | 75,696,596 | 6/1/12 | (137,138 | ) | ||||||
MSC | GBP | (7,957,549 | ) | USD | 12,828,652 | 6/1/12 | (84,756 | ) | ||||||
MSC | JPY | 68,852,272 | USD | (847,316 | ) | 6/1/12 | 15,168 | |||||||
MSC | NOK | (237,886,217 | ) | USD | 41,492,385 | 6/1/12 | (25,394 | ) | ||||||
MSC | RUB | 809,827,550 | USD | (27,436,714 | ) | 6/1/12 | (7,583 | ) | ||||||
$ | (3,332,928 | ) |
48
Futures Contracts |
Unrealized | ||||||||
Appreciation | ||||||||
Contracts to Buy | Notional Cost | Notional Value | Expiration Date | (Depreciation) | ||||
227 Long Gilt | $41,238,350 | $42,597,088 | 6/30/12 | $1,358,738 |
Swap Contracts
CDS Contracts
Annual | Unrealized | ||||||||||||||
Protection | Termination | Appreciation | |||||||||||||
Counterparty | Swap Referenced Obligation | Notional Value | Payments | Date | (Depreciation) | ||||||||||
Protection Purchased: | |||||||||||||||
ITRAXX Europe Subordinate | |||||||||||||||
BAML | Financials 17.1 5 yr CDS | EUR | 101,345,000 | 5.00% | 6/20/17 | $ | 5,084,819 | ||||||||
BAML | Kingdom of Spain 5 yr CDS | USD | 32,561,000 | 1.00% | 12/20/15 | 1,317,110 | |||||||||
ITRAXX Europe Subordinate | |||||||||||||||
BCLY | Financials 17.1 5 yr CDS | EUR | 84,635,000 | 5.00% | 6/20/17 | 4,219,655 | |||||||||
Kingdom of Spain | |||||||||||||||
BCLY | 5 yr CDS | USD | 23,880,000 | 1.00% | 3/20/15 | 1,252,552 | |||||||||
BCLY | 5 yr CDS | 11,960,000 | 1.00% | 3/21/16 | 543,147 | ||||||||||
Republic of France | |||||||||||||||
BCLY | 5 yr CDS | 1,158,000 | 0.25% | 6/20/17 | 3,037 | ||||||||||
BCLY | 5 yr CDS | 34,803,000 | 0.25% | 9/20/16 | (205,701 | ) | |||||||||
GSC | Republic of France 5 yr CDS | 12,125,000 | 0.25% | 9/20/16 | (50,674 | ) | |||||||||
ITRAXX Europe Crossover | |||||||||||||||
JPMC | 17.1 5 yr CDS | EUR | 110,435,000 | 5.00% | 6/20/17 | 1,314,660 | |||||||||
Kingdom of Belgium | |||||||||||||||
JPMC | 5 yr CDS | USD | 12,650,000 | 1.00% | 3/20/17 | (433,077 | ) | ||||||||
JPMC | 5 yr CDS | 40,158,000 | 1.00% | 12/20/16 | (1,220,321 | ) | |||||||||
Kingdom of Spain | |||||||||||||||
JPMC | 5 yr CDS | 22,471,000 | 1.00% | 3/20/17 | 919,080 | ||||||||||
JPMC | 5 yr CDS | 24,353,000 | 1.00% | 9/20/16 | 971,376 | ||||||||||
JPMC | MeadWestvaco 5 yr CDS | 9,850,000 | 1.00% | 12/20/16 | (394,666 | ) | |||||||||
JPMC | Republic of France 5 yr CDS | 11,325,000 | 0.25% | 12/20/16 | (83,466 | ) | |||||||||
JPMC | Republic of Italy 5 yr CDS | 12,650,000 | 1.00% | 3/20/17 | (359,052 | ) | |||||||||
Japan | |||||||||||||||
MSC | 5 yr CDS | 31,660,000 | 1.00% | 3/20/17 | (718,408 | ) | |||||||||
MSC | 5 yr CDS | 19,640,000 | 1.00% | 9/20/16 | (270,697 | ) |
49
Statement of net assets
Delaware Diversified Income Fund
Annual | Unrealized | ||||||||||||||
Protection | Termination | Appreciation | |||||||||||||
Counterparty | Swap Referenced Obligation | Notional Value | Payments | Date | (Depreciation) | ||||||||||
Protection Purchased (continued): | |||||||||||||||
Kingdom of Spain | |||||||||||||||
MSC | 5 yr CDS | USD | 16,530,000 | 1.00% | 6/20/16 | $ | 1,046,045 | ||||||||
MSC | 5 yr CDS | 14,670,000 | 1.00% | 6/20/17 | (82,661 | ) | |||||||||
MSC | 5 yr CDS | 27,280,000 | 1.00% | 3/20/17 | 803,892 | ||||||||||
MSC | Republic of France 5 yr CDS | 30,915,000 | 0.25% | 9/20/16 | (119,525 | ) | |||||||||
MSC | Republic of Italy 5 yr CDS | 19,760,000 | 1.00% | 9/20/16 | 670,519 | ||||||||||
$ | 14,207,644 | ||||||||||||||
Protection Sold / | |||||||||||||||
Moody’s Rating: | |||||||||||||||
JPMC | Georgia Pacific 5 yr CDS / Baa | USD | 9,850,000 | 1.00% | 12/20/16 | $ | 322,006 | ||||||||
JPMC | Tyson Foods CDS / Ba | 11,300,000 | 1.00% | 3/20/16 | 235,309 | ||||||||||
$ | 557,315 | ||||||||||||||
Total | $ | 14,764,959 |
The use of foreign currency exchange contracts, futures contracts and swap contracts involves elements of market risk and risks in excess of the amounts recognized in the financial statements. The notional values presented above represent the Fund’s total exposure in such contracts, whereas only the net unrealized appreciation (depreciation) is reflected in the Fund’s net assets.
1See Note 8 in “Notes to financial statements.”
Summary of abbreviations:
ARM — Adjustable Rate Mortgage
AUD — Australian Dollar
BAML — Bank of America Merrill Lynch
BCLY — Barclays Bank
BRL — Brazilian Real
CAD — Canadian Dollar
CDS — Credit Default Swap
CITI — Citigroup Global Markets
CLP — Chilean Peso
EUR — European Monetary Unit
GBP — British Pound Sterling
GNMA — Government National Mortgage Association
50
GSC — Goldman Sachs Capital GSMPS — Goldman Sachs Reperforming Mortgage Securities HSBC — Hong Kong Shanghai Bank HUF — Hungarian Forint IDR — Indonesian Rupiah JPMC — JPMorgan Chase Bank JPY — Japanese Yen KRW — South Korean Won MASTR — Mortgage Asset Securitization Transactions, Inc. MNB — Mellon National Bank MSC — Morgan Stanley Capital MXN — Mexican Peso MYR — Malaysian Ringgit NCUA — National Credit Union Administration NOK — Norwegian Krone NZD — New Zealand Dollar PIK — Pay-in-kind PLN — Polish Zloty REIT — Real Estate Investment Trust REMIC — Real Estate Mortgage Investment Conduit RUB — Russian Ruble S.F. — Single Family SEK — Swedish Krona TBA — To be announced USD — United States Dollar yr — Year ZAR — South African Rand |
See accompanying notes, which are an integral part of the financial statements.
51
Statement of operations | |
Delaware Diversified Income Fund | Six Months Ended April 30, 2012 (Unaudited) |
Investment Income: | |||||||
Interest | $ | 183,350,866 | |||||
Dividends | 1,671,563 | ||||||
Securities lending income | 675,676 | $ | 185,698,105 | ||||
Expenses: | |||||||
Management fees | 18,881,288 | ||||||
Distribution expenses – Class A | 6,794,135 | ||||||
Distribution expenses – Class B | 144,141 | ||||||
Distribution expenses – Class C | 10,422,278 | ||||||
Distribution expenses – Class R | 454,131 | ||||||
Dividend disbursing and transfer agent fees and expenses | 5,729,196 | ||||||
Accounting and administration expenses | 1,677,635 | ||||||
Reports and statements to shareholders | 508,844 | ||||||
Custodian fees | 284,144 | ||||||
Legal fees | 272,270 | ||||||
Registration fees | 220,784 | ||||||
Trustees’ fees | 219,658 | ||||||
Audit and tax | 102,985 | ||||||
Insurance fees | 57,011 | ||||||
Consulting fees | 30,864 | ||||||
Dues and services | 25,187 | ||||||
Pricing fees | 22,562 | ||||||
Trustees’ expenses | 14,332 | 45,861,445 | |||||
Less waived distribution expenses – Class A | (1,132,356 | ) | |||||
Less waived distribution expenses – Class R | (75,689 | ) | |||||
Less expense paid indirectly | (2,907 | ) | |||||
Total operating expenses | 44,650,493 | ||||||
Net Investment Income | 141,047,612 |
52
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | $ | 94,638,013 | ||
Foreign currencies | (1,666,432 | ) | ||
Foreign currency exchange contracts | (1,291,022 | ) | ||
Futures contracts | 6,612,296 | |||
Options written | 7,494,157 | |||
Swap contracts | (75,080,373 | ) | ||
Net realized gain | 30,706,639 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 135,416,925 | |||
Foreign currencies | 761,296 | |||
Foreign currency exchange contracts | (17,926,232 | ) | ||
Futures contracts | (7,392,390 | ) | ||
Options written | (461,484 | ) | ||
Swap contracts | 44,043,687 | |||
Net change in unrealized appreciation (depreciation) | 154,441,802 | |||
Net Realized and Unrealized Gain | 185,148,441 | |||
Net Increase in Net Assets Resulting from Operations | $ | 326,196,053 |
See accompanying notes, which are an integral part of the financial statements.
53
Statements of changes in net assets
Delaware Diversified Income Fund
Six Months | Year | |||||||
Ended | Ended | |||||||
4/30/12 | 10/31/11 | |||||||
(Unaudited) | ||||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 141,047,612 | $ | 287,512,900 | ||||
Net realized gain | 30,706,639 | 220,654,817 | ||||||
Net change in unrealized appreciation (depreciation) | 154,441,802 | (245,157,342 | ) | |||||
Net increase in net assets resulting from operations | 326,196,053 | 263,010,375 | ||||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Class A | (86,396,534 | ) | (180,563,454 | ) | ||||
Class B | (442,647 | ) | (1,360,869 | ) | ||||
Class C | (31,945,302 | ) | (70,141,716 | ) | ||||
Class R | (2,698,594 | ) | (6,238,194 | ) | ||||
Institutional Class | (35,767,827 | ) | (62,505,804 | ) | ||||
Net realized gain on investments: | ||||||||
Class A | (111,610,939 | ) | (163,675,776 | ) | ||||
Class B | (732,822 | ) | (1,643,334 | ) | ||||
Class C | (51,559,199 | ) | (78,473,063 | ) | ||||
Class R | (3,715,710 | ) | (6,494,334 | ) | ||||
Institutional Class | (42,449,671 | ) | (48,037,910 | ) | ||||
(367,319,245 | ) | (619,134,454 | ) | |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Class A | 878,664,925 | 1,537,381,945 | ||||||
Class B | 190,654 | 723,660 | ||||||
Class C | 271,797,606 | 403,002,773 | ||||||
Class R | 41,533,932 | 62,052,674 | ||||||
Institutional Class | 566,230,758 | 909,998,254 |
54
Six Months | Year | |||||||
Ended | Ended | |||||||
4/30/12 | 10/31/11 | |||||||
(Unaudited) | ||||||||
Capital Share Transactions (continued): | ||||||||
�� Net asset value of shares issued upon reinvestment | ||||||||
of dividends and distributions: | ||||||||
Class A | $ | 181,799,956 | $ | 310,646,306 | ||||
Class B | 1,006,943 | 2,533,420 | ||||||
Class C | 73,921,683 | 126,909,318 | ||||||
Class R | 6,382,162 | 12,728,828 | ||||||
Institutional Class | 68,528,518 | 89,617,464 | ||||||
2,090,057,137 | 3,455,594,642 | |||||||
Cost of shares repurchased: | ||||||||
Class A | (668,720,320 | ) | (1,704,348,999 | ) | ||||
Class B | (6,084,493 | ) | (15,569,657 | ) | ||||
Class C | (185,788,692 | ) | (521,216,797 | ) | ||||
Class R | (33,060,251 | ) | (93,034,978 | ) | ||||
Institutional Class | (297,435,660 | ) | (565,155,102 | ) | ||||
(1,191,089,416 | ) | (2,899,325,533 | ) | |||||
Increase in net assets derived from | ||||||||
capital share transactions | 898,967,721 | 556,269,109 | ||||||
Net Increase in Net Assets | 857,844,529 | 200,145,030 | ||||||
Net Assets: | ||||||||
Beginning of period | 8,181,146,561 | 7,981,001,531 | ||||||
End of period (including distributions in excess | ||||||||
of net investment income of $28,165,434 and | ||||||||
$27,912,886, respectively.) | $ | 9,038,991,090 | $ | 8,181,146,561 |
See accompanying notes, which are an integral part of the financial statements.
55
Financial highlights
Delaware Diversified Income Fund Class A
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived and expense paid indirectly |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
See accompanying notes, which are an integral part of the financial statements.
56
Six Months Ended | Year Ended | |||||||||||||||||||
4/30/121 | 10/31/11 | 10/31/10 | 10/31/09 | 10/31/08 | 10/31/07 | |||||||||||||||
(Unaudited) | ||||||||||||||||||||
$9.330 | $9.770 | $9.270 | $7.740 | $8.930 | $8.690 | |||||||||||||||
0.158 | 0.359 | 0.444 | 0.500 | 0.411 | 0.391 | |||||||||||||||
0.201 | (0.033 | ) | 0.598 | 1.611 | (1.053 | ) | 0.307 | |||||||||||||
0.359 | 0.326 | 1.042 | 2.111 | (0.642 | ) | 0.698 | ||||||||||||||
(0.175 | ) | (0.399 | ) | (0.474 | ) | (0.581 | ) | (0.467 | ) | (0.458 | ) | |||||||||
(0.234 | ) | (0.367 | ) | (0.068 | ) | — | (0.081 | ) | — | |||||||||||
(0.409 | ) | (0.766 | ) | (0.542 | ) | (0.581 | ) | (0.548 | ) | (0.458 | ) | |||||||||
$9.280 | $9.330 | $9.770 | $9.270 | $7.740 | $8.930 | |||||||||||||||
3.97% | 3.64% | 11.60% | 28.42% | (7.69% | ) | 8.22% | ||||||||||||||
$4,740,127 | $4,370,224 | $4,423,278 | $3,658,355 | $2,361,034 | $1,795,553 | |||||||||||||||
0.90% | 0.92% | 0.93% | 0.97% | 0.97% | 0.99% | |||||||||||||||
0.95% | 0.97% | 0.98% | 1.02% | 1.02% | 1.05% | |||||||||||||||
3.43% | 3.84% | 4.68% | 5.96% | 4.75% | 4.43% | |||||||||||||||
3.38% | 3.79% | 4.63% | 5.91% | 4.70% | 4.37% | |||||||||||||||
117% | 237% | 232% | 213% | 251% | 277% |
57
Financial highlights
Delaware Diversified Income Fund Class B
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived and expense paid indirectly |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 The average shares outstanding method has been applied for per share information. |
3 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during some of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
58
Six Months Ended | Year Ended | |||||||||||||||||||
4/30/121 | 10/31/11 | 10/31/10 | 10/31/09 | 10/31/08 | 10/31/07 | |||||||||||||||
(Unaudited) | ||||||||||||||||||||
$9.320 | $9.750 | $9.260 | $7.730 | $8.920 | $8.680 | |||||||||||||||
0.123 | 0.288 | 0.372 | 0.438 | 0.346 | 0.325 | |||||||||||||||
0.192 | (0.022 | ) | 0.589 | 1.610 | (1.053 | ) | 0.307 | |||||||||||||
0.315 | 0.266 | 0.961 | 2.048 | (0.707 | ) | 0.632 | ||||||||||||||
(0.141 | ) | (0.329 | ) | (0.403 | ) | (0.518 | ) | (0.402 | ) | (0.392 | ) | |||||||||
(0.234 | ) | (0.367 | ) | (0.068 | ) | — | (0.081 | ) | — | |||||||||||
(0.375 | ) | (0.696 | ) | (0.471 | ) | (0.518 | ) | (0.483 | ) | (0.392 | ) | |||||||||
$9.260 | $9.320 | $9.750 | $9.260 | $7.730 | $8.920 | |||||||||||||||
3.48% | 2.98% | 10.78% | 27.51% | (8.39% | ) | 7.43% | ||||||||||||||
$26,384 | $31,451 | $45,741 | $50,608 | $50,501 | $58,799 | |||||||||||||||
1.65% | 1.67% | 1.68% | 1.72% | 1.72% | 1.74% | |||||||||||||||
1.65% | 1.67% | 1.68% | 1.72% | 1.72% | 1.75% | |||||||||||||||
2.68% | 3.09% | 3.93% | 5.21% | 4.00% | 3.68% | |||||||||||||||
2.68% | 3.09% | 3.93% | 5.21% | 4.00% | 3.67% | |||||||||||||||
117% | 237% | 232% | 213% | 251% | 277% |
59
Financial highlights
Delaware Diversified Income Fund Class C
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived and expense paid indirectly |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 The average shares outstanding method has been applied for per share information. |
3 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during some of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
60
Six Months Ended | Year Ended | |||||||||||||||||||
4/30/121 | 10/31/11 | 10/31/10 | 10/31/09 | 10/31/08 | 10/31/07 | |||||||||||||||
(Unaudited) | ||||||||||||||||||||
$9.330 | $9.760 | $9.270 | $7.740 | $8.930 | $8.690 | |||||||||||||||
0.123 | 0.289 | 0.373 | 0.437 | 0.346 | 0.326 | |||||||||||||||
0.202 | (0.023 | ) | 0.588 | 1.611 | (1.054 | ) | 0.306 | |||||||||||||
0.325 | 0.266 | 0.961 | 2.048 | (0.708 | ) | 0.632 | ||||||||||||||
(0.141 | ) | (0.329 | ) | (0.403 | ) | (0.518 | ) | (0.401 | ) | (0.392 | ) | |||||||||
(0.234 | ) | (0.367 | ) | (0.068 | ) | — | (0.081 | ) | — | |||||||||||
(0.375 | ) | (0.696 | ) | (0.471 | ) | (0.518 | ) | (0.482 | ) | (0.392 | ) | |||||||||
$9.280 | $9.330 | $9.760 | $9.270 | $7.740 | $8.930 | |||||||||||||||
3.58% | 2.98% | 10.65% | 27.47% | (8.39% | ) | 7.42% | ||||||||||||||
$2,162,205 | $2,012,603 | $2,097,340 | $1,375,429 | $717,511 | $489,431 | |||||||||||||||
1.65% | 1.67% | 1.68% | 1.72% | 1.72% | 1.74% | |||||||||||||||
1.65% | 1.67% | 1.68% | 1.72% | 1.72% | 1.75% | |||||||||||||||
2.68% | 3.09% | 3.93% | 5.21% | 4.00% | 3.68% | |||||||||||||||
2.68% | 3.09% | 3.93% | 5.21% | 4.00% | 3.67% | |||||||||||||||
117% | 237% | 232% | 213% | 251% | 277% |
61
Financial highlights
Delaware Diversified Income Fund Class R
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived and expense paid indirectly |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 The average shares outstanding method has been applied for per share information. |
3 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during some of the periods shown reflects waivers by the manager and distributor. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
62
Six Months Ended | Year Ended | |||||||||||||||||||
4/30/121 | 10/31/11 | 10/31/10 | 10/31/09 | 10/31/08 | 10/31/07 | |||||||||||||||
(Unaudited) | ||||||||||||||||||||
$9.330 | $9.760 | $9.270 | $7.730 | $8.930 | $8.690 | |||||||||||||||
0.146 | 0.336 | 0.420 | 0.479 | 0.390 | 0.369 | |||||||||||||||
0.202 | (0.023 | ) | 0.589 | 1.621 | (1.064 | ) | 0.307 | |||||||||||||
0.348 | 0.313 | 1.009 | 2.100 | (0.674 | ) | 0.676 | ||||||||||||||
(0.164 | ) | (0.376 | ) | (0.451 | ) | (0.560 | ) | (0.445 | ) | (0.436 | ) | |||||||||
(0.234 | ) | (0.367 | ) | (0.068 | ) | — | (0.081 | ) | — | |||||||||||
(0.398 | ) | (0.743 | ) | (0.519 | ) | (0.560 | ) | (0.526 | ) | (0.436 | ) | |||||||||
$9.280 | $9.330 | $9.760 | $9.270 | $7.730 | $8.930 | |||||||||||||||
3.84% | 3.49% | 11.33% | 28.27% | (8.04% | ) | 7.95% | ||||||||||||||
$160,784 | $146,620 | $172,642 | $137,179 | $96,238 | $75,112 | |||||||||||||||
1.15% | 1.17% | 1.18% | 1.22% | 1.22% | 1.24% | |||||||||||||||
1.25% | 1.27% | 1.28% | 1.32% | 1.32% | 1.35% | |||||||||||||||
3.18% | 3.59% | 4.43% | 5.71% | 4.50% | 4.18% | |||||||||||||||
3.08% | 3.49% | 4.33% | 5.61% | 4.40% | 4.07% | |||||||||||||||
117% | 237% | 232% | 213% | 251% | 277% |
63
Financial highlights
Delaware Diversified Income Fund Institutional Class
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived and expense paid indirectly |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 The average shares outstanding method has been applied for per share information. |
3 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during some of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
64
Six Months Ended | Year Ended | |||||||||||||||||||
4/30/121 | 10/31/11 | 10/31/10 | 10/31/09 | 10/31/08 | 10/31/07 | |||||||||||||||
(Unaudited) | ||||||||||||||||||||
$9.340 | $9.770 | $9.280 | $7.740 | $8.940 | $8.700 | |||||||||||||||
0.169 | 0.383 | 0.470 | 0.521 | 0.433 | 0.413 | |||||||||||||||
0.202 | (0.023 | ) | 0.586 | 1.621 | (1.064 | ) | 0.307 | |||||||||||||
0.371 | 0.360 | 1.056 | 2.142 | (0.631 | ) | 0.720 | ||||||||||||||
(0.187 | ) | (0.423 | ) | (0.498 | ) | (0.602 | ) | (0.488 | ) | (0.480 | ) | |||||||||
(0.234 | ) | (0.367 | ) | (0.068 | ) | — | (0.081 | ) | — | |||||||||||
(0.421 | ) | (0.790 | ) | (0.566 | ) | (0.602 | ) | (0.569 | ) | (0.480 | ) | |||||||||
$9.290 | $9.340 | $9.770 | $9.280 | $7.740 | $8.940 | |||||||||||||||
4.10% | 4.01% | 11.76% | 28.87% | (7.57% | ) | 8.48% | ||||||||||||||
$1,949,491 | $1,620,249 | $1,242,001 | $323,134 | $85,857 | $40,881 | |||||||||||||||
0.65% | 0.67% | 0.68% | 0.72% | 0.72% | 0.74% | |||||||||||||||
0.65% | 0.67% | 0.68% | 0.72% | 0.72% | 0.75% | |||||||||||||||
3.68% | 4.09% | 4.93% | 6.21% | 5.00% | 4.68% | |||||||||||||||
3.68% | 4.09% | 4.93% | 6.21% | 5.00% | 4.67% | |||||||||||||||
117% | 237% | 232% | 213% | 251% | 277% |
65
Notes to financial statements | |
Delaware Diversified Income Fund | April 30, 2012 (Unaudited) |
Delaware Group® Adviser Funds (Trust) is organized as a Delaware statutory trust and offers three series: Delaware Diversified Income Fund, Delaware International Bond Fund and Delaware U.S. Growth Fund. These financial statements and related notes pertain to Delaware Diversified Income Fund (Fund). The Trust is an open-end investment company. The Fund is considered diversified under the Investment Company Act of 1940, as amended, and offers Class A, Class B, Class C, Class R and Institutional Class shares. Class A shares are sold with a maximum front-end sales charge of up to 4.50%. Class A share purchases of $1,000,000 or more will incur a contingent deferred sales charge (CDSC) of 1% if redeemed during the first year and 0.50% during the second year, provided that Delaware Distributors, L.P. (DDLP) paid a financial advisor a commission on the purchase of those shares. Class B shares may be purchased only through dividend reinvestment and certain permitted exchanges. Prior to June 1, 2007, Class B shares were sold with a CDSC that declined from 4% to zero depending upon the period of time the shares were held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase. Class C shares are sold with a CDSC of 1%, if redeemed during the first twelve months. Class R and Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors.
The investment objective of the Fund is to seek maximum long-term total return, consistent with reasonable risk.
1. Significant Accounting Policies
The following accounting policies are in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and are consistently followed by the Fund.
Security Valuation — Equity securities, except those traded on the Nasdaq Stock Market, Inc. (Nasdaq), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange (NYSE) on the valuation date. Securities traded on the Nasdaq are valued in accordance with the Nasdaq Official Closing Price, which may not be the last sales price. If on a particular day an equity security does not trade, then the mean between the bid and ask prices will be used, which approximates fair value. Securities listed on a foreign exchange are normally valued at the last quoted sales price on the valuation date. U.S. government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. Short-term debt securities are valued using the evaluated mean. Other debt securities and credit default swap (CDS) contracts are valued based upon valuations provided by an independent pricing service or broker 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. 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. Investment company securities are valued at net asset value per share. Foreign currency exchange contracts are valued at the mean between the bid and ask price, which approximates fair value. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available. Futures contracts
66
and options on futures contracts are valued at the daily quoted settlement prices. Exchange-traded options are valued at the last reported sale price or, if no sales are reported, at the mean between the last reported bid and ask prices, which approximates fair value. Generally, other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Fund’s Board of Trustees (Board). In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures or suspension of trading in a security. The Fund may use fair value pricing more frequently for securities traded primarily in non-U.S. markets because, among other things, most foreign markets close well before the Fund values its securities, generally as of 4:00 p.m. Eastern time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, government actions or pronouncements, aftermarket trading, or news events may have occurred in the interim. To account for this, the Fund may frequently value foreign securities using fair value prices based on third-party vendor modeling tools (international fair value pricing).
Federal 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 on federal income tax returns for all open tax years (October 31, 2008–October 31, 2011), and has concluded that no provision for federal income tax is required in the Fund’s financial statements.
Class Accounting — Investment income and common expenses are allocated to the various classes of the Fund on the basis of “settled shares” of each class in relation to the net assets of the Fund. Realized and unrealized gain (loss) on investments are allocated to the various classes of the Fund on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class.
Repurchase Agreements — The Fund may purchase certain U.S. government securities subject to the counterparty’s agreement to repurchase them at an agreed upon date and price. The counterparty will be required on a daily basis to maintain the value of the collateral subject to the agreement at not less than the repurchase price (including accrued interest). The agreements are conditioned upon the collateral being deposited under the Federal Reserve book-entry system with the Fund’s custodian or a third-party sub-custodian. In the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings. All open repurchase agreements as of the date of this report were entered into on April 30, 2012.
67
Notes to financial statements
Delaware Diversified Income Fund
1. Significant Accounting Policies (continued)
To Be Announced Trades — The Fund may contract to purchase securities for a fixed price at a transaction date beyond the customary settlement period (e.g, “when issued,” “delayed delivery,” “forward commitment,” or “TBA transactions”) consistent with the Fund’s ability to manage its investment portfolio and meet redemption requests. These transactions involve a commitment by the Fund to purchase securities for a predetermined price or yield with payment and delivery taking place more than three days in the future, or after a period longer than the customary settlement period for that type of security. No interest will be earned by the Fund on such purchases until the securities are delivered; however, the market value may change prior to delivery.
Foreign Currency Transactions — Transactions denominated in foreign currencies are recorded at the prevailing exchange rates on the valuation date in accordance with the Fund’s prospectus. The value of all assets and liabilities denominated in foreign currencies is translated into U.S. dollars at the exchange rate of such currencies against the U.S. dollar daily. Transaction gains or losses resulting from changes in exchange rates during the reporting period or upon settlement of the foreign currency transaction are reported in operations for the current period. The Fund generally isolates 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. The Fund reports certain foreign currency related transactions as components of realized gains (losses) for financial reporting purposes, whereas such components are treated as ordinary income (loss) for federal income tax purposes.
Use of Estimates — The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material.
Other — Expenses directly attributable to the Fund are charged directly to the Fund. Other expenses common to various funds within the Delaware Investments® Family of Funds are generally allocated amongst such funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Discounts and premiums on non-convertible debt securities are amortized to interest income over the lives of the respective securities using the effective interest method. Realized gains (losses) on paydowns of asset- and mortgage-backed securities are classified as interest income. Withholding taxes on foreign interest have been recorded in accordance with the Fund’s understanding of the applicable country’s tax rules and rates. The
68
Fund declares dividends daily from net investment income and pays the dividends monthly and declares and pays distributions from net realized gain on investments, if any, annually. The Fund may distribute income dividends and capital gains more frequently, if necessary for tax purposes. Dividends and distributions, if any, are recorded on the ex-dividend date.
The Fund may receive earnings credits from its custodian when positive cash balances are maintained, which are used to offset custody fees. There were no earnings credits for the six months ended April 30, 2012.
The Fund receives earnings credits from its transfer agent when positive cash balances are maintained, which are used to offset transfer agent fees. The expense paid under this arrangement is included in dividend disbursing and transfer agent fees and expenses on the statement of operations with the corresponding expense offset shown as “expense paid indirectly.” For the six months ended April 30, 2012, the Fund earned $2,907 under this agreement.
2. Investment Management, Administration Agreements and Other Transactions with Affiliates
In accordance with the terms of its investment management agreement, the Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee which is calculated daily at the rate of 0.55% on the first $500 million of average daily net assets of the Fund, 0.50% on the next $500 million, 0.45% on the next $1.5 billion and 0.425% on average daily net assets in excess $2.5 billion.
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Fund. For these services, the Fund pays DSC fees based on the aggregate daily net assets of the Delaware Investments® Family of Funds at the following annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DSC under the service agreement described above are allocated among all Funds in the Delaware Investments® Family of Funds on a relative net asset value basis. For the six months ended April 30, 2012, the Fund was charged $210,652 for these services.
DSC also provides dividend disbursing and transfer agent services. The Fund pays DSC a monthly asset-based fee for these services.
Pursuant to a distribution agreement and distribution plan, the Fund pays DDLP, the distributor and an affiliate of DMC, an annual distribution and service fee not to exceed 0.30% of the average daily net assets of the Class A shares, 1.00% of the average daily net assets of the Class B and Class C shares and 0.60% of the average daily net assets of the Class R shares. Institutional Class shares pay no distribution and service expenses. DDLP has contracted to limit the Fund’s Class A and Class R shares’ 12b-1 fees through February 28, 2013 to no more than 0.25% and 0.50%, of the average daily net assets, respectively.
69
Notes to financial statements
Delaware Diversified Income Fund
2. Investment Management, Administration Agreements and Other Transactions with Affiliates (continued)
At April 30, 2012, the Fund had liabilities payable to affiliates as follows:
Investment management fee payable to DMC | $3,256,512 |
Dividend disbursing, transfer agent and fund accounting | |
oversight fees and other expenses payable to DSC | 204,742 |
Distribution fees payable to DDLP | 2,811,165 |
Other expenses payable to DMC and affiliates* | 209,788 |
*DMC, as part of its administrative services, pays operating expenses on behalf of the Fund and is reimbursed on a periodic basis. Expenses include items such as printing of shareholder reports, fees for audit, legal and tax services, registration fees and trustees’ fees.
As provided in the investment management agreement, the Fund bears the cost of certain legal and tax services, including internal legal and tax services provided to the Fund by DMC and/or its affiliates’ employees. For the six months ended April 30, 2012, the Fund was charged $ 121,741 for internal legal and tax services provided by DMC and/or its affiliates’ employees.
For the six months ended April 30, 2012, DDLP earned $309,017 for commissions on sales of the Fund’s Class A shares. For the six months ended April 30, 2012, DDLP received gross CDSC commissions of $3,152, $3,062 and $38,862 on redemptions of the Fund’s Class A, Class B and Class C shares, respectively, and these commissions were entirely used to offset up-front commissions previously paid by DDLP to broker/dealers on sales of those shares.
Trustees’ fees include expenses accrued by the Fund for each Trustee’s retainer and meeting fees. Certain officers of DMC, DSC and DDLP are officers and/or Trustees of the Trust. These officers and Trustees are paid no compensation by the Fund.
3. Investments
For the six months ended April 30, 2012, the Fund made purchases of $7,234,442,615 and sales of $ 6,723,608,072 of investment securities other than U.S. government securities and short-term investments. For the six months ended April 30, 2012, the Fund made purchases of $2,743,716,313 and sales of 2,699,521,322 of long-term U.S. government securities.
At April 30, 2012, the cost of investments for federal income tax purposes was $9,153,039,946. At April 30, 2012, net unrealized appreciation was $ 276,019,537, of which $349,894,337 related to unrealized appreciation of investments and $ 73,874,800 related to unrealized depreciation of investments.
70
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. A three level hierarchy for fair value measurements has been established based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability developed based on the best information available under the circumstances. The Fund’s investment in its entirety is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three level hierarchy of inputs is summarized below.
Level 1 – | inputs are quoted prices in active markets for identical investments (e.g., equity securities, open-end investment companies, futures contracts, options contracts) |
Level 2 – | other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs) (e.g., debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair value securities) |
Level 3 – | inputs are significant unobservable inputs (including the Fund’s own assumptions used to determine the fair value of investments) (e.g., broker-quoted securities, fair valued securities) |
Level 3 investments are valued using significant unobservable inputs, including related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. 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.
71
Notes to financial statements
Delaware Diversified Income Fund
3. Investments (continued)
The following table summarizes the valuation of the Fund’s investments by fair value hierarchy levels as of April 30, 2012:
Level 1 | Level 2 | Level 3 | Total | |||||||||||
Agency, Asset- & Mortgage- | ||||||||||||||
Backed Securities | $ | — | $ | 1,456,414,362 | $ | 7,333,437 | $ | 1,463,747,799 | ||||||
Corporate Debt | 2,969,408 | 4,908,857,246 | 286,493 | 4,912,113,147 | ||||||||||
Common Stock | 7,194 | — | 20 | 7,214 | ||||||||||
Foreign Debt | — | 1,221,254,435 | — | 1,221,254,435 | ||||||||||
Municipal Bond | — | 381,348 | — | 381,348 | ||||||||||
U.S. Treasury Obligations | — | 762,047,906 | — | 762,047,906 | ||||||||||
Short-Term Investments | — | 932,829,709 | — | 932,829,709 | ||||||||||
Securities Lending | ||||||||||||||
Collateral | — | 89,727,100 | — | 89,727,100 | ||||||||||
Other | 25,098,178 | 21,852,643 | 4 | 46,950,825 | ||||||||||
Options written | (1,020,766 | ) | — | — | (1,020,766 | ) | ||||||||
Total | $ | 27,054,014 | $ | 9,393,364,749 | $ | 7,619,954 | $ | 9,428,038,717 | ||||||
Foreign Currency | ||||||||||||||
Exchange Contracts | $ | — | $ | (3,332,928 | ) | $ | — | $ | (3,332,928 | ) | ||||
Futures Contracts | $ | 1,358,738 | $ | — | $ | — | $ | 1,358,738 | ||||||
Swap Contracts | $ | — | $ | 14,764,959 | $ | — | $ | 14,764,959 |
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:
Agency, Asset- & | ||||||||||||||||||
Mortgage-Backed | Corporate | Common | ||||||||||||||||
Securities | Debt | Stock | Other | Total | ||||||||||||||
Balance as of 10/31/11 | $ | 5,277,603 | $ | 268,455 | $ | 20 | $ | 4 | $ | 5,546,082 | ||||||||
Purchases | 1,999,820 | 18,038 | — | — | 2,017,858 | |||||||||||||
Sales | (144 | ) | — | — | — | (144 | ) | |||||||||||
Net realized loss | (12,622 | ) | — | — | — | (12,622 | ) | |||||||||||
Net change in unrealized | ||||||||||||||||||
appreciation (depreciation) | 68,780 | — | — | — | 68,780 | |||||||||||||
Balance as of 4/30/12 | $ | 7,333,437 | $ | 286,493 | $ | 20 | $ | 4 | $ | 7,619,954 | ||||||||
Net change in unrealized | ||||||||||||||||||
appreciation (depreciation) | ||||||||||||||||||
from Level 3 investments still | ||||||||||||||||||
held as of 4/30/12 | $ | 56,014 | $ | — | $ | — | $ | — | $ | 56,014 |
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During the six months ended April 30, 2012, there were no transfers between Level 1 investments, Level 2 investments and Level 3 investments that had a material impact to the Fund. The Fund’s policy is to recognize transfers between levels at the beginning of the reporting period.
In May 2011, the Financial Accounting Standards Board (FASB) issued ASU No. 2011-04 modifying Topic 820, Fair Value Measurements and Disclosures. ASU No. 2011-04 requires reporting entities to disclose i) the amounts of any transfers between Level 1 and Level 2, and the reasons for the transfers, ii) for Level 3 fair value measurements, iii) quantitative information about significant unobservable inputs used, iv) a description of the valuation processes used by the reporting entity and v) a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs if a change in those inputs might result in a significantly higher or lower fair value measurement. The effective date of ASU No. 2011-04 is for interim and annual periods beginning after December 15, 2011. Management is currently evaluating the implications of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.
4. Dividend and Distribution Information
Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Additionally, distributions from net gains on foreign currency transactions and net short-term gains on sales of investment securities are treated as ordinary income for federal income tax purposes. The tax character of dividends and distributions paid during the six months ended April 30, 2012 and the year ended October 31, 2011 was as follows:
Six Months Ended | Year Ended | |||||
4/30/12* | 10/31/11 | |||||
Ordinary income | $248,819,155 | $524,600,731 | ||||
Long-term capital gain | 118,500,090 | 94,533,723 | ||||
Total | $367,319,245 | $619,134,454 |
*Tax information for the six months ended April 30, 2012 is an estimate and the tax character of dividends and distributions may be redesignated at fiscal year end.
73
Notes to financial statements
Delaware Diversified Income Fund
5. Components of Net Assets on a Tax Basis
The components of net assets are estimated since final tax characteristics cannot be determined until fiscal year end. As of April 30, 2012, the estimated components of net assets on a tax basis were as follows:
Shares of beneficial interest | $ | 8,765,196,157 | |
Undistributed long-term capital gain | 19,100,311 | ||
Distributions payable | (7,414,307 | ) | |
Other temporary differences | (31,325,829 | ) | |
Unrealized appreciation | 293,434,758 | ||
Net assets | $ | 9,038,991,090 |
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 of futures contracts, mark-to-market of foreign currency contracts, tax deferral of losses on straddles, tax treatment of CDS contracts, tax treatment of contingent payment on debt instruments, and tax treatment of market discount and premium on debt instruments.
For financial reporting purposes, capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Reclassifications are primarily due to tax treatment of dividends and distributions, gain (loss) on foreign currency transactions, market discount and premium on certain debt instruments and tax treatments of paydowns gains (losses) of asset- and mortgage-backed securities. Results of operations and net assets were not affected by these reclassifications. For the six months ended April 30, 2012, the Fund recorded an estimate of these differences since final tax characteristics cannot be determined until fiscal year end:
Undistributed net investment loss | $ | 15,950,744 | |
Accumulated net realized loss | (15,950,744 | ) |
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6. Capital Shares
Transactions in capital shares were as follows:
Six Months | Year | ||||
Ended | Ended | ||||
4/30/12 | 10/31/11 | ||||
Shares sold: | |||||
Class A | 95,052,812 | 164,470,549 | |||
Class B | 20,510 | 77,815 | |||
Class C | 29,381,622 | 43,028,869 | |||
Class R | 4,494,373 | 6,641,685 | |||
Institutional Class | 61,208,411 | 97,271,380 | |||
Shares issued upon reinvestment of dividends and distributions: | |||||
Class A | 19,850,580 | 33,577,359 | |||
Class B | 110,234 | 274,551 | |||
Class C | 8,076,342 | 13,733,750 | |||
Class R | 697,537 | 1,376,689 | |||
Institutional Class | 7,479,370 | 9,663,781 | |||
226,371,791 | 370,116,428 | ||||
Shares repurchased: | |||||
Class A | (72,381,062 | ) | (182,685,744 | ) | |
Class B | (658,356 | ) | (1,667,829 | ) | |
Class C | (20,110,331 | ) | (55,864,286 | ) | |
Class R | (3,575,122 | ) | (9,986,150 | ) | |
Institutional Class | (32,245,028 | ) | (60,528,667 | ) | |
(128,969,899 | ) | (310,732,676 | ) | ||
Net increase | 97,401,892 | 59,383,752 |
For the six months ended April 30, 2012 and the year ended October 31, 2011, 209,777 Class B shares were converted to 209,792 Class A shares valued at $1,948,818 and 348,565 Class B shares were converted to 348,042 Class A shares valued at $3,260,407, respectively. The respective amounts are included in Class B redemptions and Class A subscriptions in the table above and the statements of changes in net assets.
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Notes to financial statements
Delaware Diversified Income Fund
7. Line of Credit
The Fund, along with certain other funds in the Delaware Investments® Family of Funds (Participants), was a participant in a $100,000,000 revolving line of credit to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, the Participants were charged an annual commitment fee, which was allocated across the Participants on the basis of each Participant’s allocation of the entire facility. The Participants were permitted to borrow up to a maximum of one third of their net assets under the agreement. The line of credit under the agreement expired on November 15, 2011.
On November 15, 2011, the Fund, along with the other Participants, entered into an amendment to the agreement for a $125,000,000 revolving line of credit. The agreement is to be used as described above and operates in substantially the same manner as the original agreement. The agreement expires on November 13, 2012. The Fund had no amounts outstanding as of April 30, 2012, or at any time during the period then ended.
8. Derivatives
U.S. GAAP requires disclosures that enable investors to understand: 1) how and why an entity uses derivatives; 2) how they are accounted for; and 3) how they affect an entity’s results of operations and financial position.
Foreign Currency Exchange Contracts — The Fund enter into foreign currency exchange contracts as a way of managing foreign exchange rate risk. The Fund may enter into these contracts to fix the U.S. dollar value of a security that it has agreed to buy or sell for the period between the date the trade was entered into and the date the security is delivered and paid for. The Fund may also use these contracts to hedge the U.S. dollar value of securities it already owns that are denominated in foreign currencies. The change in value is recorded as an unrealized gain or loss. When the contract is closed, a realized gain or loss is recorded equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
The use of foreign currency exchange contracts does not eliminate fluctuations in the underlying prices of the securities, but does establish a rate of exchange that can be achieved in the future. Although foreign currency exchange contracts limit the risk of loss due to an unfavorable change in the value of the hedged currency, they also limit any potential gain that might result should the value of the currency change favorably. In addition, the Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts. The Fund’s maximum risk of loss from counterparty credit risk is the value of its currency exchanged with the counterparty. The risk is generally mitigated by having a netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty.
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Futures Contracts — A futures contract is an agreement in which the writer (or seller) of the contract agrees to deliver to the buyer an amount of cash or securities equal to a specific dollar amount times the difference between the value of a specific security or index at the close of the last trading day of the contract and the price at which the agreement is made. The Fund may use futures in the normal course of pursuing its investment objective. The Fund may invest in futures contracts to hedge its existing portfolio securities against fluctuations in fair value caused by changes in prevailing market interest rates. Upon entering into a futures contract, the Fund deposits cash or pledges U.S. government securities to a broker, equal to the minimum “initial margin” requirements of the exchange on which the contract is traded. Subsequent payments are received from the broker or paid to the broker each day, based on the daily fluctuation in the market value of the contract. These receipts or payments are known as “variation margin” and are recorded daily by the Fund as unrealized gains or losses until the contracts are closed. When the contracts are closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Risks of entering into futures contracts include potential imperfect correlation between the futures contracts and the underlying securities and the possibility of an illiquid secondary market for these instruments. When investing in futures, there is minimal counterparty credit risk to a Fund because futures are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees against default.
Options Contracts — During the period ended April 30, 2012, the Fund entered into options contracts in the normal course of pursuing its investment objective. The Fund may buy or write options contracts for any number of reasons, including without limitation: to manage the Fund’s exposure to changes in securities prices 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. 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 options purchased. When the Fund writes an option, a premium is received and a liability is recorded and adjusted on a daily basis to reflect the current market value of the options written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is treated as realized gain or loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether the Fund has a realized gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by the Fund. The Fund, as writer of an option, bears the market risk of an unfavorable change in the price of the security underlying the written option. When writing options, the Fund is subject to minimal counterparty risk because the counterparty is only obligated to pay premiums and does not bear the market risk of an unfavorable market change.
77
Notes to financial statements
Delaware Diversified Income Fund
8. Derivatives (continued)
Transactions in options written during the six months ended April 30, 2012 for the Fund were as follows:
Number of | |||||||
Contracts | Premiums | ||||||
Options outstanding at October 31, 2011 | — | $ | — | ||||
Options written | 8,203 | 8,721,373 | |||||
Options expired | (3,807 | ) | (3,458,282 | ) | |||
Options terminated in closing purchase transactions | (3,971 | ) | (4,703,809 | ) | |||
Options outstanding at April 30, 2012 | 425 | $ | 559,282 |
Swap Contracts — The Fund enters 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.
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 six months ended April 30, 2012, the Fund entered into CDS contracts as a purchaser and seller 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 as unrealized appreciation or depreciation daily. A realized gain or loss is recorded upon a credit event (as defined in the CDS agreement) or the maturity or termination of the agreement. At April 30, 2012, net unrealized appreciation of CDS was $14,764,959. The Fund has posted $11,490,000 as cash collateral for open swap contracts. If a credit event had occurred for all open swap transactions where collateral posting was required as of April 30, 2012, the Fund would have received EUR 296,415,000 and USD 389,249,000 less the value of the contracts’ related reference obligations. The Fund received $32,714,000 in securities collateral for open swap contracts.
78
As disclosed in the footnotes to the statement of net assets, at April 30, 2012, the notional value of the protection sold was $21,150,000, which reflects the maximum potential amount the Fund would have been required to make as a seller of credit protection if a credit event had occurred. The quoted market prices and resulting market values for CDS contracts on securities and credit indices serve as an indicator of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative if the swap agreement has been closed/sold as of the period end. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the reference entity’s credit soundness and a greater likelihood of risk of default or other credit event occurring as defined under the terms of the agreement. At April 30, 2012, net unrealized appreciation of the protection sold was $557,315.
CDS contracts may involve greater risks than if the Fund had invested in the reference obligation directly. CDS contracts are subject to general market risk, liquidity risk, counterparty risk and credit risk. The Fund’s maximum risk of loss from counterparty credit risk, either as the seller of protection or the buyer of protection, is the fair value of the contract. This risk is mitigated by having a netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty.
Swaps Generally. Because there is generally no organized market for swap contracts, the value of open swaps may differ from that which would be realized in the event that the Fund terminated its position in the agreement. Risks of entering into these contracts include the potential inability of the counterparty to meet the terms of the contracts. This type of risk is generally limited to the amount of favorable movement in the value of the underlying security, instrument or basket of instruments, if any, at the day of default. Risks also arise from potential losses from adverse market movements and such losses could exceed the unrealized amounts shown on the statement of net assets.
79
Notes to financial statements
Delaware Diversified Income Fund
8. Derivatives (continued)
Fair values of derivative instruments as of April 30, 2012 were as follows:
Asset Derivatives | Liability Derivatives | ||||||||||
Statement of Net | Statement of Net | ||||||||||
Assets Location | Fair Value | Assets Location | Fair Value | ||||||||
Forward currency exchange | |||||||||||
contracts (Foreign currency | |||||||||||
exchange contracts) | Other liabilities net of receivables and other assets | $ | 178,931 | Other liabilities net of receivables and other assets | $ | (3,511,859 | ) | ||||
Interest rate contracts | |||||||||||
(Futures contracts) | Other liabilities net of receivables and other assets | 1,358,738 | Other liabilities net of receivables and other assets | — | |||||||
Interest rate contracts | |||||||||||
(Options written) | Options written, at value | — | Options written, at value | (461,484 | ) | ||||||
Credit contracts | |||||||||||
(Swap contracts) | Other liabilities net of receivables and other assets | 14,815,633 | Other liabilities net of receivables and other assets | (50,674 | ) | ||||||
Total | $ | 16,353,302 | $ | (4,024,017 | ) |
80
The effect of derivative instruments on the statement of operations for the six months ended April 30, 2012 was as follows:
Change in | ||||||||||
Unrealized | ||||||||||
Realized Gain | Appreciation | |||||||||
(Loss) on | (Depreciation) | |||||||||
Derivatives | on Derivatives | |||||||||
Location of Gain (Loss) on | Recognized in | Recognized in | ||||||||
Derivatives Recognized in Income | Income | Income | ||||||||
Forward currency exchange | ||||||||||
contracts (Foreign currency | ||||||||||
exchange contracts) | Net realized loss on foreign currency exchange contracts and net change in unrealized appreciation (depreciation) of investments and foreign currencies | $ | (1,291,022 | ) | $ | (17,926,232 | ) | |||
Interest rate contracts | ||||||||||
(Futures contracts) | Net realized gain on futures contracts and net change in unrealized appreciation (depreciation) of investments and foreign currencies | 6,612,296 | (7,392,390 | ) | ||||||
Interest rate contracts | ||||||||||
(Options written) | Net realized gain on options written and net change in unrealized appreciation (depreciation) of investments and foreign currencies | 7,494,157 | (461,484 | ) | ||||||
Credit contracts | ||||||||||
(Swap contracts) | Net realized loss on swap contracts and net change in unrealized appreciation (depreciation) of investments and foreign currencies | (75,080,373 | ) | 44,043,687 | ||||||
Total | $ | (62,264,942 | ) | $ | 18,263,581 |
81
Notes to financial statements
Delaware Diversified Income Fund
8. Derivatives (continued)
Derivatives Generally. The table below summarizes the average balance of derivative holdings by the Fund during the period ended April 30, 2012. The average balance of derivatives held is generally similar to the volume of derivative activity for the period ended April 30, 2012.
Asset | Liability | |||||||
Derivative | Derivative | |||||||
Volume | Volume | |||||||
Foreign currency exchange contracts | ||||||||
(average cost) | USD | 258,697,127 | USD | 926,595,856 | ||||
Futures contracts (average notional value) | 175,074,318 | 116,839,963 | ||||||
EUR | 43,198,696 | — | ||||||
GBP | 6,966,666 | — | ||||||
Options contracts (average notional value) | USD | 7,107 | 1,303,004 | |||||
Swap contracts (average notional value) | 22,057,742 | 659,838,864 | ||||||
EUR | 268,119,435 |
9. Securities Lending
The Fund, along with other funds in the Delaware Investments® Family of Funds, may lend its securities pursuant to a security lending agreement (Lending Agreement) with The Bank of New York Mellon (BNY Mellon). At the time a security is loaned, the borrower must post collateral equal to the required percentage of the market value of the loaned security, including any accrued interest. The required percentage is: (i) 102% with respect to U.S. securities and foreign securities that are denominated and payable in U.S. dollars; and (ii) 105% with respect to foreign securities. With respect to each loan, if on any business day the aggregate market value of securities collateral plus cash collateral held is less than the aggregate market value of the securities which are the subject of such loan, the borrower will be notified to provide additional collateral by the end of the following business day which, together with the collateral already held, will be not less than the applicable initial collateral requirements for such security loan. If the aggregate market value of securities collateral and cash collateral held with respect to a security loan exceeds the applicable initial collateral requirement, upon request of the borrower BNY Mellon must return enough collateral to the borrower by the end of the following business day to reduce the value of the remaining collateral to the applicable initial collateral requirement for such security loan. As a result of the foregoing, the value of the collateral held with respect to a loaned security may be temporarily more or less than the value of the security on loan.
Cash collateral received is generally invested in the Delaware Investments Collateral Fund No. 1 (Collective Trust) established by BNY Mellon for the purpose of investment on behalf of funds managed by DMC that participate in BNY Mellon’s securities lending program. The Collective Trust may invest in U.S. government securities and high quality corporate debt, asset-backed and other money market securities and in repurchase agreements collateralized by such securities, provided that the Collective Trust will generally have a dollar-weighted average portfolio maturity of 60 days or less. Effective April 20, 2009, BNY Mellon transferred the assets of the Fund’s
82
previous collateral investment pool other than cash and assets with a maturity of one business day or less to the BNY Mellon SL DBT II Liquidating Fund (Liquidating Fund), effectively bifurcating the previous collateral investment pool. The Fund’s exposure to the Liquidating Fund is expected to decrease as the Liquidating Fund’s assets mature or are sold. In October 2008, BNY Mellon transferred certain distressed securities from the previous collateral investment pool into the Mellon GSL Reinvestment Trust II. The Fund can also accept U.S. government securities and letters of credit (non-cash collateral) in connection with securities loans. In the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Fund, or at the discretion of the lending agent, replace the loaned securities. The Fund continues to record dividends or interest, as applicable, on the securities loaned and is subject to change in value of the securities loaned that may occur during the term of the loan. The Fund has the right under the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized by non-cash collateral, the Fund receives loan premiums paid by the borrower. With respect to security loans collateralized by cash collateral, the earnings from the collateral investments are shared among the Fund, the security lending agent and the borrower. The Fund records security lending income net of allocations to the security lending agent and the borrower.
The Collective Trust used for the investment of cash collateral received from borrowers of securities seeks to maintain a net asset value per unit of $1.00, but there can be no assurance that it will always be able to do so. The Fund may incur investment losses as a result of investing securities lending collateral in the Collective Trust or another collateral investment pool. This could occur if an investment in a collateral investment pool defaulted or if it were necessary to liquidate assets in the collateral investment pool to meet returns on outstanding security loans at a time when the collateral investment pool’s net asset value per unit was less than $1.00. Under those circumstances, the Fund may not receive an amount from the collateral investment pool that is equal in amount to the collateral the Fund would be required to return to the borrower of the securities and the Fund would be required to make up this shortfall.
At April 30, 2012, the value of securities on loan was $89,729,239, for which cash collateral was received and invested in accordance with the Lending Agreement. At April 30, 2012, the value of invested collateral was $89,727,100. These investments are presented on the statement of net assets under the caption “Securities Lending Collateral”.
10. Credit and Market Risk
The Fund invests a portion of its assets in high yield fixed income securities, which are securities rated lower than BBB- by Standard & Poor’s and Baa3 by Moody’s Investors Service, or similarly rated by another nationally recognized statistical rating organization. Investments in these high yield 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.
83
Notes to financial statements
Delaware Diversified Income Fund
10. Credit and Market Risk (continued)
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 or consumer loans are paid back. Some of these securities are collateralized mortgage obligations (CMOs). CMOs are debt securities issued by U.S. government agencies or by financial institutions and other mortgage lenders, which are collateralized by a pool of mortgages held under an indenture. Prepayment of mortgages may shorten the stated maturity of the obligations and can result in a loss of premium, if any has been paid. Certain of these securities may be stripped (securities which provide only the principal or interest feature of the underlying security). The yield to maturity on an interest-only CMO is extremely sensitive not only to changes in prevailing interest rates, but also to the rate of principal payments (including prepayments) on the related underlying mortgage assets. A rapid rate of principal payments may have a material adverse effect on the Fund’s yield to maturity. If the underlying mortgage assets experience greater than anticipated prepayments of principal, the Fund may fail to fully recoup its initial investment in these securities even if the securities are rated in the highest rating categories.
Some countries in which the Fund may invest require governmental approval for the repatriation of investment income, capital or the proceeds of sales of securities by foreign investors. In addition, if there is deterioration in a country’s balance of payments or for other reasons, a country may impose temporary restrictions on foreign capital remittances abroad.
The securities exchanges of certain foreign markets are substantially smaller, less liquid and more volatile than the major securities markets in the United States. Consequently, acquisition and disposition of securities by the Fund may be inhibited. In addition, a significant portion of the aggregate market value of 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 may invest up to 15% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair the Fund from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, the Fund’s Board has delegated to DMC the day-to-day functions of determining whether individual securities are liquid for purposes of the Fund’s limitation on investments in illiquid securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Fund’s 15% limit on investments in illiquid securities. Rule 144A and illiquid securities have been identified on the statement of net assets.
84
11. Contractual Obligations
The Fund enters into contracts in the normal course of business that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Fund’s existing contracts and expects the risk of loss to be remote.
12. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to April 30, 2012 that would require recognition or disclosure in the Fund’s financial statements.
85
Other Fund information
(Unaudited)
Delaware Diversified Income Fund
Change in Independent Registered Public Accounting Firm
Due to independence matters under the Securities and Exchange Commission’s auditor independence rules relating to the January 4, 2010 acquisition of Delaware Investments (including DMC, DDLP and DSC) by Macquarie Group, Ernst & Young LLP (E&Y) has resigned as the independent registered public accounting firm for Delaware Group® Adviser Funds (the Trust) effective May 20, 2010. At a meeting held on May 20, 2010, the Board of Trustees of the Trust, upon recommendation of the Audit Committee, selected PricewaterhouseCoopers LLP (PwC) to serve as the independent registered public accounting firm for the Trust for the fiscal year ending October 31, 2010. During the fiscal years ended October 31, 2009 and 2008, E&Y’s audit reports on the financial statements of the Trust did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles. In addition, there were no disagreements between the Trust and E&Y on accounting principles, financial statements disclosures or audit scope, which, if not resolved to the satisfaction of E&Y, would have caused them to make reference to the disagreement in their reports. Neither the Trust nor anyone on its behalf has consulted with PwC at any time prior to their selection with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Trust’s financial statements.
86
About the organization
Board of trustees | |||
Patrick P. Coyne Chairman, President, and Chief Executive Officer Delaware Investments® Family of Funds Philadelphia, PA Thomas L. Bennett Private Investor Rosemont, PA John A. Fry President Drexel University Philadelphia, PA | Anthony D. Knerr Founder and Managing Director Anthony Knerr & Associates New York, NY Lucinda S. Landreth Former Chief Investment Officer Assurant, Inc. Philadelphia, PA | Ann R. Leven Consultant ARL Associates New York, NY Frances A. Sevilla-Sacasa Chief Executive Officer Banco Itaú Europa International Miami, FL | Janet L. Yeomans Vice President and Treasurer 3M Corporation St. Paul, MN J. Richard Zecher Founder Investor Analytics Scottsdale, AZ |
Affiliated officers | |||
David F. Connor Vice President, Deputy General Counsel, and Secretary Delaware Investments Family of Funds Philadelphia, PA | Daniel V. Geatens Vice President and Treasurer Delaware Investments Family of Funds Philadelphia, PA | David P. O’Connor Executive Vice President, General Counsel and Chief Legal Officer Delaware Investments Family of Funds Philadelphia, PA | Richard Salus Senior Vice President and Chief Financial Officer Delaware Investments Family of Funds Philadelphia, PA |
This semiannual report is for the information of Delaware Diversified Income Fund shareholders, but it may be used with prospective investors when preceded or accompanied by the Delaware Investments Fund fact sheet for the most recently completed calendar quarter. These documents are available at www.delawareinvestments.com. |
Delaware Investments is the marketing name of Delaware Management Holdings, Inc. and its subsidiaries. The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 800 523-1918; and (ii) on the SEC’s website at www.sec.gov. In addition, a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities and the Fund’s Schedule of Investments are available without charge on the Fund’s website at www.delawareinvestments.com. The Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C.; information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund’s website at www.delawareinvestments.com; and (ii) on the SEC’s website at www.sec.gov. |
87
![](https://capedge.com/proxy/N-CSRS/0001206774-12-002900/del_topimg02.jpg)
Semiannual report Delaware U.S. Growth Fund April 30, 2012 U.S. growth equity mutual fund |
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, if available, its summary prospectus, which may be obtained by visiting www.delawareinvestments.com or calling 800 523-1918. Investors should read the prospectus and, if available, the summary prospectus carefully before investing. |
You can obtain shareholder reports and prospectuses online instead of in the mail. Visit www.delawareinvestments.com/edelivery. |
Experience Delaware Investments
Delaware Investments is committed to the pursuit of consistently superior asset management and unparalleled client service. We believe in our investment processes, which seek to deliver consistent results, and in convenient services that help add value for our clients.
If you are interested in learning more about creating an investment plan, contact your financial advisor.
You can learn more about Delaware Investments or obtain a prospectus for Delaware U.S. Growth Fund at www.delawareinvestments.com.
Manage your investments online |
|
Delaware Management Holdings, Inc. and its subsidiaries (collectively known by the marketing name of Delaware Investments) are wholly owned subsidiaries of Macquarie Group Limited, a global provider of banking, financial, advisory, investment and funds management services.
Investments in Delaware U.S. Growth Fund are not and will not be deposits with or liabilities of Macquarie Bank Limited ABN 46 008 583 542 and its holding companies, including their subsidiaries or related companies (Macquarie Group), and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. No Macquarie Group company guarantees or will guarantee the performance of the Fund, the repayment of capital from the Fund, or any particular rate of return.
Table of contents | |
Disclosure of Fund expenses | 1 |
Security type/sector allocation | |
and top 10 equity holdings | 3 |
Statement of net assets | 4 |
Statement of operations | 8 |
Statements of changes in net assets | 10 |
Financial highlights | 12 |
Notes to financial statements | 22 |
Other Fund information | 33 |
About the organization | 34 |
Unless otherwise noted, views expressed herein are current as of April 30, 2012, and subject to change.
Funds are not FDIC insured and are not guaranteed. It is possible to lose the principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor. Delaware Investments, a member of Macquarie Group, refers to Delaware Management Holdings, Inc. and its subsidiaries, including the Fund’s distributor, Delaware Distributors, L.P. Macquarie Group refers to Macquarie Group Limited and its subsidiaries and affiliates worldwide.
© 2012 Delaware Management Holdings, Inc.
All third-party marks cited are the property of their respective owners.
Disclosure of Fund expenses
For the six-month period from November 1, 2011 to April 30, 2012
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period from November 1, 2011 to April 30, 2012.
Actual expenses
The first section of the table shown, “Actual Fund return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The second section of the table shown, “Hypothetical 5% return,” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The Fund’s expenses shown in the table reflect fee waivers in effect. The expenses shown in the table assume reinvestment of all dividends and distributions.
1
Disclosure of Fund expenses
Delaware U.S. Growth Fund
Expense analysis of an investment of $1,000
Beginning | Ending | Expenses | ||||||||||||||
Account Value | Account Value | Annualized | Paid During Period | |||||||||||||
11/1/11 | 4/30/12 | Expense Ratio | 11/1/11 to 4/30/12* | |||||||||||||
Actual Fund return | ||||||||||||||||
Class A | $ | 1,000.00 | $ | 1,164.40 | 1.10% | $5.92 | ||||||||||
Class B | 1,000.00 | 1,159.70 | 1.85% | 9.93 | ||||||||||||
Class C | 1,000.00 | 1,160.10 | 1.85% | 9.94 | ||||||||||||
Class R | 1,000.00 | 1,163.00 | 1.35% | 7.26 | ||||||||||||
Institutional Class | 1,000.00 | 1,165.80 | 0.85% | 4.58 | ||||||||||||
Hypothetical 5% return (5% return before expenses) | ||||||||||||||||
Class A | $ | 1,000.00 | $ | 1,019.39 | 1.10% | $5.52 | ||||||||||
Class B | 1,000.00 | 1,015.66 | 1.85% | 9.27 | ||||||||||||
Class C | 1,000.00 | 1,015.66 | 1.85% | 9.27 | ||||||||||||
Class R | 1,000.00 | 1,018.15 | 1.35% | 6.77 | ||||||||||||
Institutional Class | 1,000.00 | 1,020.64 | 0.85% | 4.27 |
*“Expenses Paid During Period” are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).
2
Security type/sector allocation and | |
top 10 equity holdings | |
Delaware U.S. Growth Fund | As of April 30, 2012 |
Sector designations may be different than the sector designations presented in other Fund materials. The sector designations may represent the investment manager’s internal sector classifications, which may result in the sector designations for one fund being different than another fund’s sector designations.
Security type/sector | Percentage of net assets | ||
²Common Stock | 99.35 | % | |
Consumer Discretionary | 13.10 | % | |
Consumer Staples | 1.82 | % | |
Energy | 9.05 | % | |
Financials | 20.63 | % | |
Healthcare | 9.91 | % | |
Materials & Processing | 2.80 | % | |
Producer Durables | 8.60 | % | |
Technology | 33.44 | % | |
Short-Term Investments | 0.61 | % | |
Securities Lending Collateral | 0.10 | % | |
Total Value of Securities | 100.06 | % | |
Obligation to Return Securities Lending Collateral | (0.22 | %) | |
Receivables and Other Assets Net of Other Liabilities | 0.16 | % | |
Total Net Assets | 100.00 | % |
²Narrow industries are utilized for compliance purposes for diversification whereas broad sectors are used for financial reporting.
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 | ||
Apple | 8.22 | % | |
Visa Class A | 5.56 | % | |
MasterCard Class A | 5.46 | % | |
QUALCOMM | 5.22 | % | |
EOG Resources | 5.03 | % | |
priceline.com | 4.97 | % | |
Crown Castle International | 4.97 | % | |
Allergan | 4.62 | % | |
Google Class A | 4.15 | % | |
VeriSign | 3.81 | % |
3
Statement of net assets | |
Delaware U.S. Growth Fund | April 30, 2012 (Unaudited) |
Number of shares | Value | |||||
²Common Stock – 99.35% | ||||||
Consumer Discretionary – 13.10% | ||||||
† | Apollo Group Class A | 431,978 | $ | 15,214,265 | ||
†* | Ctrip.com International ADR | 428,500 | 9,285,595 | |||
NIKE Class B | 232,700 | 26,032,149 | ||||
† | priceline.com | 55,975 | 42,586,900 | |||
Staples | 1,240,225 | 19,099,465 | ||||
112,218,374 | ||||||
Consumer Staples – 1.82% | ||||||
Walgreen | 445,100 | 15,605,206 | ||||
15,605,206 | ||||||
Energy – 9.05% | ||||||
El Paso | 664,400 | 19,712,748 | ||||
EOG Resources | 392,900 | 43,144,349 | ||||
* | Kinder Morgan | 410,000 | 14,719,000 | |||
77,576,097 | ||||||
Financials – 20.63% | ||||||
CME Group | 90,600 | 24,083,292 | ||||
† | IntercontinentalExchange | 225,400 | 29,987,216 | |||
MasterCard Class A | 103,525 | 46,821,252 | ||||
Progressive | 1,323,614 | 28,192,978 | ||||
Visa Class A | 387,650 | 47,673,197 | ||||
176,757,935 | ||||||
Healthcare – 9.91% | ||||||
Allergan | 412,800 | 39,628,800 | ||||
Novo Nordisk ADR | 196,650 | 28,911,483 | ||||
Perrigo | 156,231 | 16,388,632 | ||||
84,928,915 | ||||||
Materials & Processing – 2.80% | ||||||
Syngenta ADR | 342,000 | 23,950,260 | ||||
23,950,260 | ||||||
Producer Durables – 8.60% | ||||||
Caterpillar | 143,800 | 14,778,326 | ||||
† | Crown Castle International | 751,949 | 42,567,833 | |||
Expeditors International of Washington | 409,300 | 16,372,000 | ||||
73,718,159 |
4
Number of shares | Value | ||||||
Common Stock (continued) | |||||||
Technology – 33.44% | |||||||
† | Adobe Systems | 890,200 | $ | 29,875,112 | |||
† | Apple | 120,525 | 70,415,525 | ||||
† | BMC Software | 202,600 | 8,359,276 | ||||
† | Google Class A | 58,800 | 35,587,524 | ||||
Intuit | 558,000 | 32,347,260 | |||||
† | Polycom | 688,406 | 9,135,148 | ||||
QUALCOMM | 700,100 | 44,694,384 | |||||
† | Teradata | 337,700 | 23,564,706 | ||||
VeriSign | 793,600 | 32,624,896 | |||||
286,603,831 | |||||||
Total Common Stock (cost $602,864,619) | 851,358,777 | ||||||
Principal amount | |||||||
Short-Term Investments – 0.61% | |||||||
≠Discount Notes – 0.33% | |||||||
Federal Home Loan Bank | |||||||
0.11% 5/25/12 | $ | 2,100,774 | 2,100,731 | ||||
0.115% 6/29/12 | 768,883 | 768,808 | |||||
2,869,539 | |||||||
Repurchase Agreements – 0.28% | |||||||
Bank of America 0.17%, dated 4/30/12, to be | |||||||
repurchased on 5/1/12, repurchase price | |||||||
$586,732 (collateralized by U.S. government | |||||||
obligations 2.25%-4.125% 1/31/15–5/15/15; | |||||||
market value $598,464) | 586,729 | 586,729 | |||||
BNP Paribas 0.17%, dated 4/30/12, to be | |||||||
repurchased on 5/1/12, repurchase price | |||||||
$1,795,279 (collateralized by U.S. government | |||||||
obligations 0.00%-2.375% 7/26/12–10/31/16; | |||||||
market value $1,831,176) | 1,795,271 | 1,795,271 | |||||
2,382,000 | |||||||
Total Short-Term Investments (cost $5,251,358) | 5,251,539 | ||||||
Total Value of Securities Before Securities | |||||||
Lending Collateral – 99.96% (cost $608,115,977) | 856,610,316 |
5
Statement of net assets
Delaware U.S. Growth Fund
Number of shares | Value | |||||||
**Securities Lending Collateral – 0.10% | ||||||||
Investment Companies | ||||||||
BNY Mellon SL DBT II Liquidating Fund | 364,148 | $ | 354,935 | |||||
Delaware Investments Collateral Fund No. 1 | 518,952 | 518,952 | ||||||
†@Mellon GSL Reinvestment Trust II | 976,789 | 0 | ||||||
Total Securities Lending Collateral | ||||||||
(cost $1,859,889) | 873,887 | |||||||
Total Value of Securities – 100.06% | ||||||||
(cost $609,975,866) | 857,484,203 | © | ||||||
**Obligation to Return Securities | ||||||||
Lending Collateral – (0.22%) | (1,859,889 | ) | ||||||
Receivables and Other Assets | ||||||||
Net of Other Liabilities – 0.16% | 1,335,863 | |||||||
Net Assets Applicable to 47,064,235 | ||||||||
Shares Outstanding – 100.00% | $ | 856,960,177 | ||||||
Net Asset Value – Delaware U.S. Growth Fund | ||||||||
Class A ($109,905,126 / 6,310,766 Shares) | $17.42 | |||||||
Net Asset Value – Delaware U.S. Growth Fund | ||||||||
Class B ($2,978,090 / 198,091 Shares) | $15.03 | |||||||
Net Asset Value – Delaware U.S. Growth Fund | ||||||||
Class C ($22,481,486 / 1,379,603 Shares) | $16.30 | |||||||
Net Asset Value – Delaware U.S. Growth Fund | ||||||||
Class R ($5,075,001 / 297,667 Shares) | $17.05 | |||||||
Net Asset Value – Delaware U.S. Growth Fund | ||||||||
Institutional Class ($716,520,474 / 38,878,108 Shares) | $18.43 | |||||||
Components of Net Assets at April 30, 2012: | ||||||||
Shares of beneficial interest (unlimited authorization – no par) | $ | 765,307,461 | ||||||
Undistributed net investment income | 117,466 | |||||||
Accumulated net realized loss on investments | (155,973,087 | ) | ||||||
Net unrealized appreciation of investments | 247,508,337 | |||||||
Total net assets | $ | 856,960,177 |
6
² | Narrow industries are utilized for compliance purposes for diversification whereas broad sectors are used for financial reporting. |
† | Non income producing security. |
* | Fully or partially on loan. |
≠ | The rate shown is the effective yield at the time of purchase. |
** | See Note 8 in “Notes to financial statements” for additional information on securities lending collateral. |
@ | Illiquid security. At April 30, 2012, the aggregate value of illiquid securities was $0, which represented 0.00% of the Fund’s net assets. See Note 9 in “Notes to financial statements.” |
© | Includes $1,820,398 of securities loaned. |
Net Asset Value and Offering Price Per Share – | ||
Delaware U.S. Growth Fund | ||
Net asset value Class A (A) | $17.42 | |
Sales charges (5.75% of offering price) (B) | 1.06 | |
Offering price | $18.48 |
(A) | Net asset value per share, as illustrated, is the amount which would be paid upon redemption or repurchase of shares. | |
(B) | See the current prospectus for purchases of $50,000 or more. |
ADR — American Depositary Receipt
See accompanying notes, which are an integral part of the financial statements.
7
Statement of operations | |
Delaware U.S. Growth Fund | Six Months Ended April 30, 2012 (Unaudited) |
Investment Income: | ||||||||
Dividends | $ | 3,501,485 | ||||||
Securities lending income | 83,173 | |||||||
Interest | 4,808 | |||||||
Foreign tax withheld | (161,548 | ) | $ | 3,427,918 | ||||
Expenses: | ||||||||
Management fees | 2,328,199 | |||||||
Dividend disbursing and transfer agent fees and expenses | 506,828 | |||||||
Distribution expenses – Class A | 119,195 | |||||||
Distribution expenses – Class B | 15,759 | |||||||
Distribution expenses – Class C | 81,140 | |||||||
Distribution expenses – Class R | 7,896 | |||||||
Accounting and administration expenses | 143,878 | |||||||
Registration fees | 46,175 | |||||||
Reports and statements to shareholders | 41,349 | |||||||
Legal fees | 23,332 | |||||||
Trustees’ fees | 18,092 | |||||||
Audit and tax | 15,619 | |||||||
Custodian fees | 7,130 | |||||||
Dues and services | 6,385 | |||||||
Insurance fees | 4,419 | |||||||
Consulting fees | 2,583 | |||||||
Pricing fees | 1,346 | |||||||
Trustees’ expenses | 1,150 | 3,370,475 | ||||||
Less fees waived | (44,203 | ) | ||||||
Less waived distribution expenses – Class A | (19,866 | ) | ||||||
Less waived distribution expenses – Class R | (1,316 | ) | ||||||
Less expense paid indirectly | (503 | ) | ||||||
Total operating expenses | 3,304,587 | |||||||
Net Investment Income | 123,331 | |||||||
Net Realized and Unrealized Gain: | ||||||||
Net realized gain on investments | 9,175,435 | |||||||
Net change in unrealized appreciation of investments | 103,175,989 | |||||||
Net Realized and Unrealized Gain | 112,351,424 | |||||||
Net Increase in Net Assets Resulting from Operations | $ | 112,474,755 |
See accompanying notes, which are an integral part of the financial statements.
8
Statements of changes in net assets
Delaware U.S. Growth Fund
Six Months | Year | |||||||
Ended | Ended | |||||||
4/30/12 | 10/31/11 | |||||||
(Unaudited) | ||||||||
Increase in Net Assets from Operations: | ||||||||
Net investment income | $ | 123,331 | $ | 1,501,236 | ||||
Net realized gain | 9,175,435 | 38,547,284 | ||||||
Net change in unrealized appreciation | 103,175,989 | 26,724,944 | ||||||
Net increase in net assets resulting from operations | 112,474,755 | 66,773,464 | ||||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Institutional Class | (762,634 | ) | (744,467 | ) | ||||
(762,634 | ) | (744,467 | ) | |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Class A | 45,161,855 | 18,776,727 | ||||||
Class B | 10,155 | 170,480 | ||||||
Class C | 8,041,277 | 3,044,588 | ||||||
Class R | 3,640,635 | 857,818 | ||||||
Institutional Class | 107,461,787 | 169,967,936 | ||||||
Net asset value of shares issued upon reinvestment | ||||||||
of dividends and distributions: | ||||||||
Institutional Class | 611,918 | 595,168 | ||||||
164,927,627 | 193,412,717 |
10
Six Months | Year | |||||||
Ended | Ended | |||||||
4/30/12 | 10/31/11 | |||||||
(Unaudited) | ||||||||
Capital Share Transactions (continued): | ||||||||
Cost of shares repurchased: | ||||||||
Class A | $ | (7,818,108 | ) | $ | (56,544,969 | ) | ||
Class B | (795,938 | ) | (1,736,808 | ) | ||||
Class C | (1,337,692 | ) | (3,364,554 | ) | ||||
Class R | (602,438 | ) | (1,751,349 | ) | ||||
Institutional Class | (51,185,876 | ) | (139,941,075 | ) | ||||
(61,740,052 | ) | (203,338,755 | ) | |||||
Increase (decrease) in net assets derived from | ||||||||
capital share transactions | 103,187,575 | (9,926,038 | ) | |||||
Net Increase in Net Assets | 214,899,696 | 56,102,959 | ||||||
Net Assets: | ||||||||
Beginning of period | 642,060,481 | 585,957,522 | ||||||
End of period (including undistributed net investment | ||||||||
income of $117,466 and $756,769, respectively) | $ | 856,960,177 | $ | 642,060,481 |
See accompanying notes, which are an integral part of the financial statements.
11
Financial highlights
Delaware U.S. Growth Fund Class A
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income (loss)2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived and expense paid indirectly |
Ratio of net investment income (loss) to average net assets |
Ratio of net investment loss to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 Ratios have been annualized and total return and portfolio turnover have not been annualized. 2 The average shares outstanding method has been applied for per share information. 3 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods shown reflects waivers by the manager and distributor. Performance would have been lower had the waivers not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
12
Six Months Ended | Year Ended | |||||||||||||||||||
4/30/121 | 10/31/11 | 10/31/10 | 10/31/09 | 10/31/08 | 10/31/07 | |||||||||||||||
(Unaudited) | ||||||||||||||||||||
$14.960 | $13.450 | $11.100 | $9.380 | $15.760 | $13.110 | |||||||||||||||
(0.013 | ) | 0.006 | (0.038 | ) | 0.001 | (0.019 | ) | (0.036 | ) | |||||||||||
2.473 | 1.504 | 2.388 | 1.719 | (6.361 | ) | 2.686 | ||||||||||||||
2.460 | 1.510 | 2.350 | 1.720 | (6.380 | ) | 2.650 | ||||||||||||||
$17.420 | $14.960 | $13.450 | $11.100 | $9.380 | $15.760 | |||||||||||||||
16.44% | 11.23% | 21.17% | 18.34% | (40.49% | ) | 20.21% | ||||||||||||||
$109,905 | $60,615 | $89,259 | $128,702 | $127,819 | $193,287 | |||||||||||||||
1.10% | 1.10% | 1.07% | 1.00% | 1.01% | 1.05% | |||||||||||||||
1.16% | 1.21% | 1.26% | 1.31% | 1.18% | 1.18% | |||||||||||||||
(0.16% | ) | 0.04% | (0.31% | ) | 0.00% | (0.15% | ) | (0.26% | ) | |||||||||||
(0.22% | ) | (0.07% | ) | (0.50% | ) | (0.31% | ) | (0.32% | ) | (0.39% | ) | |||||||||
6% | 25% | 22% | 30% | 35% | 30% |
13
Financial highlights
Delaware U.S. Growth Fund Class B
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment loss2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived and expense paid indirectly |
Ratio of net investment loss to average net assets |
Ratio of net investment loss to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 Ratios have been annualized and total return and portfolio turnover have not been annualized. 2 The average shares outstanding method has been applied for per share information. 3 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
14
Six Months Ended | Year Ended | |||||||||||||||||||
4/30/121 | 10/31/11 | 10/31/10 | 10/31/09 | 10/31/08 | 10/31/07 | |||||||||||||||
(Unaudited) | ||||||||||||||||||||
$12.960 | $11.740 | $9.760 | $8.310 | $14.070 | $11.790 | |||||||||||||||
(0.063 | ) | (0.090 | ) | (0.114 | ) | (0.058 | ) | (0.106 | ) | (0.121 | ) | |||||||||
2.133 | 1.310 | 2.094 | 1.508 | (5.654 | ) | 2.401 | ||||||||||||||
2.070 | 1.220 | 1.980 | 1.450 | (5.760 | ) | 2.280 | ||||||||||||||
$15.030 | $12.960 | $11.740 | $9.760 | $8.310 | $14.070 | |||||||||||||||
15.97% | 10.39% | 20.29% | 17.45% | (40.94% | ) | 19.34% | ||||||||||||||
$2,978 | $3,288 | $4,428 | $5,564 | $8,352 | $19,350 | |||||||||||||||
1.85% | 1.85% | 1.82% | 1.75% | 1.76% | 1.76% | |||||||||||||||
1.86% | 1.91% | 1.96% | 2.01% | 1.88% | 1.84% | |||||||||||||||
(0.91% | ) | (0.71% | ) | (1.06% | ) | (0.75% | ) | (0.90% | ) | (0.97% | ) | |||||||||
(0.92% | ) | (0.77% | ) | (1.20% | ) | (1.01% | ) | (1.02% | ) | (1.05% | ) | |||||||||
6% | 25% | 22% | 30% | 35% | 30% |
15
Financial highlights
Delaware U.S. Growth Fund Class C
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment loss2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived and expense paid indirectly |
Ratio of net investment loss to average net assets |
Ratio of net investment loss to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 Ratios have been annualized and total return and portfolio turnover have not been annualized. 2 The average shares outstanding method has been applied for per share information. 3 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
16
Six Months Ended | Year Ended | ||||||||||||||||||
4/30/121 | 10/31/11 | 10/31/10 | 10/31/09 | 10/31/08 | 10/31/07 | ||||||||||||||
(Unaudited) | |||||||||||||||||||
$14.050 | $12.720 | $10.580 | $9.010 | $15.250 | $12.780 | ||||||||||||||
(0.068 | ) | (0.098 | ) | (0.123 | ) | (0.065 | ) | (0.115 | ) | (0.131 | ) | ||||||||
2.318 | 1.428 | 2.263 | 1.635 | (6.125 | ) | 2.601 | |||||||||||||
2.250 | 1.330 | 2.140 | 1.570 | (6.240 | ) | 2.470 | |||||||||||||
$16.300 | $14.050 | $12.720 | $10.580 | $9.010 | $15.250 | ||||||||||||||
16.01% | 10.46% | 20.23% | 17.43% | (40.92% | ) | 19.33% | |||||||||||||
$22,482 | $13,456 | $12,535 | $13,112 | $14,536 | $24,406 | ||||||||||||||
1.85% | 1.85% | 1.82% | 1.75% | 1.76% | 1.76% | ||||||||||||||
1.86% | 1.91% | 1.96% | 2.01% | 1.88% | 1.84% | ||||||||||||||
(0.91% | ) | (0.71% | ) | (1.06% | ) | (0.75% | ) | (0.90% | ) | (0.97% | ) | ||||||||
(0.92% | ) | (0.77% | ) | (1.20% | ) | (1.01% | ) | (1.02% | ) | (1.05% | ) | ||||||||
6% | 25% | 22% | 30% | 35% | 30% |
17
Financial highlights
Delaware U.S. Growth Fund Class R
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment loss2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived and expense paid indirectly |
Ratio of net investment loss to average net assets |
Ratio of net investment loss to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 The average shares outstanding method has been applied for per share information. |
3 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflects waivers by the manager and distributor. Performance would have been lower had the waivers not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
18
Six Months Ended | Year Ended | ||||||||||||||||||
4/30/121 | 10/31/11 | 10/31/10 | 10/31/09 | 10/31/08 | 10/31/07 | ||||||||||||||
(Unaudited) | |||||||||||||||||||
$14.660 | $13.210 | $10.930 | $9.260 | $15.600 | $13.000 | ||||||||||||||
(0.033 | ) | (0.030 | ) | (0.067 | ) | (0.022 | ) | (0.050 | ) | (0.065 | ) | ||||||||
2.423 | 1.480 | 2.347 | 1.692 | (6.290 | ) | 2.665 | |||||||||||||
2.390 | 1.450 | 2.280 | 1.670 | (6.340 | ) | 2.600 | |||||||||||||
$17.050 | $14.660 | $13.210 | $10.930 | $9.260 | $15.600 | ||||||||||||||
16.30% | 10.98% | 20.86% | 18.03% | (40.64% | ) | 20.00% | |||||||||||||
$5,075 | $1,697 | $2,375 | $2,336 | $2,055 | $1,529 | ||||||||||||||
1.35% | 1.35% | 1.32% | 1.25% | 1.26% | 1.26% | ||||||||||||||
1.46% | 1.51% | 1.56% | 1.61% | 1.48% | 1.44% | ||||||||||||||
(0.41% | ) | (0.21% | ) | (0.56% | ) | (0.25% | ) | (0.40% | ) | (0.47% | ) | ||||||||
(0.52% | ) | (0.37% | ) | (0.80% | ) | (0.61% | ) | (0.62% | ) | (0.65% | ) | ||||||||
6% | 25% | 22% | 30% | 35% | 30% |
19
Financial highlights
Delaware U.S. Growth Fund Institutional Class
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income (loss)2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived and expense paid indirectly |
Ratio of net investment income (loss) to average net assets |
Ratio of net investment income (loss) to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 The average shares outstanding method has been applied for per share information. |
3 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
20
Six Months Ended | Year Ended | ||||||||||||||||||
4/30/121 | 10/31/11 | 10/31/10 | 10/31/09 | 10/31/08 | 10/31/07 | ||||||||||||||
(Unaudited) | |||||||||||||||||||
$15.830 | $14.220 | $11.710 | $9.890 | $16.580 | $13.750 | ||||||||||||||
0.008 | 0.045 | (0.008 | ) | 0.024 | 0.014 | 0.005 | |||||||||||||
2.613 | 1.587 | 2.527 | 1.813 | (6.704 | ) | 2.825 | |||||||||||||
2.621 | 1.632 | 2.519 | 1.837 | (6.690 | ) | 2.830 | |||||||||||||
(0.021 | ) | (0.022 | ) | (0.009 | ) | (0.017 | ) | — | — | ||||||||||
(0.021 | ) | (0.022 | ) | (0.009 | ) | (0.017 | ) | — | — | ||||||||||
$18.430 | $15.830 | $14.220 | $11.710 | $9.890 | $16.580 | ||||||||||||||
16.58% | 11.48% | 21.42% | 18.48% | (40.35% | ) | 20.58% | |||||||||||||
$716,520 | $563,004 | $477,361 | $460,756 | $542,554 | $671,819 | ||||||||||||||
0.85% | 0.85% | 0.82% | 0.75% | 0.76% | 0.76% | ||||||||||||||
0.86% | 0.91% | 0.96% | 1.01% | 0.88% | 0.84% | ||||||||||||||
0.09% | 0.29% | (0.06% | ) | 0.25% | 0.10% | 0.03% | |||||||||||||
0.08% | 0.23% | (0.20% | ) | (0.01% | ) | (0.02% | ) | (0.05% | ) | ||||||||||
6% | 25% | 22% | 30% | 35% | 30% |
21
Notes to financial statements | ||
Delaware U.S. Growth Fund | April 30, 2012 (Unaudited) |
Delaware Group® Adviser Funds (Trust) is organized as a Delaware statutory trust and offers three series: Delaware Diversified Income Fund, Delaware International Bond Fund and Delaware U.S. Growth Fund. These financial statements and the related notes pertain to Delaware U.S. Growth Fund (Fund). The Trust is an open-end investment company. The Fund is considered diversified under the Investment Company Act of 1940, as amended, and offers Class A, Class B, Class C, Class R and Institutional Class shares. Class A shares are sold with a front-end sales charge of up to 5.75%. Class A share purchases of $1,000,000 or more will incur a contingent deferred sales charge (CDSC) of 1% if redeemed during the first year and 0.50% during the second year, provided that Delaware Distributors, L.P. (DDLP) paid a financial advisor a commission on the purchase of those shares. Class B shares may be purchased only through dividend reinvestment and certain permitted exchanges. Prior to June 1, 2007, Class B shares were sold with a CDSC that declined from 4% to zero depending upon the period of time the shares were held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase. Class C shares are sold with a CDSC of 1%, if redeemed during the first twelve months. Class R and Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors.
The investment objective of the Fund is to seek long-term capital appreciation by investing in equity securities of companies believed to have the potential for sustainable free cash flow growth.
1. Significant Accounting Policies
The following accounting policies are in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and are consistently followed by the Fund.
Security Valuation — Equity securities, except those traded on the Nasdaq Stock Market, Inc. (Nasdaq), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange (NYSE) on the valuation date. Securities traded on the Nasdaq are valued in accordance with the Nasdaq Official Closing Price, which may not be the last sales price. If on a particular day an equity security does not trade, then the mean between the bid and ask prices will be used, which approximates fair value. Short-term debt securities are valued using the evaluated mean. U.S. government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. Investment company securities are valued at net asset value per share. Generally, other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Fund’s Board of Trustees (Board). In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures or suspension of trading in a security. The Fund may use fair value pricing more frequently for securities traded primarily in non-U.S. markets because, among other things, most foreign markets close well before the Fund values its securities generally as of 4:00 p.m. Eastern time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, government actions or pronouncements, aftermarket trading, or
22
news events may have occurred in the interim. To account for this, the Fund may frequently value foreign securities using fair value prices based on third-party vendor modeling tools (international fair value pricing).
Federal Income Taxes — No provision for federal income taxes has been made as the Fund intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Fund evaluates tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. Management has analyzed the Fund’s tax positions taken on federal income tax returns for all open tax years (October 31, 2008–October 31, 2011), and has concluded that no provision for federal income tax is required in the Fund’s financial statements.
Class Accounting — Investment income, common expenses and realized and unrealized gain (loss) on investments are allocated to the various classes of the Fund on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class.
Repurchase Agreements — The Fund may purchase certain U.S. government securities subject to the counterparty’s agreement to repurchase them at an agreed upon date and price. The counterparty will be required on a daily basis to maintain the value of the collateral subject to the agreement at not less than the repurchase price (including accrued interest). The agreements are conditioned upon the collateral being deposited under the Federal Reserve book-entry system with the Fund’s custodian or a third party sub-custodian. In the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings. All open repurchase agreements as of the date of this report were entered into on April 30, 2012.
Use of Estimates — The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material.
Other — Expenses directly attributable to the Fund are charged directly to the Fund. Other expenses common to various funds within the Delaware Investments® Family of Funds are generally allocated amongst such funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Foreign dividends are also recorded on the ex-dividend date or as soon after the ex-dividend date that the Fund is aware of such dividends, net of all non-rebatable
23
Notes to financial statements
Delaware U.S. Growth Fund
1. Significant Accounting Policies (continued)
tax withholdings. Withholding taxes on foreign dividends have been recorded in accordance with the Fund’s understanding of the applicable country’s tax rules and rates. The Fund declares and pays dividends from net investment income and distributions from net realized gain on investments, if any, annually. The Fund may distribute income dividends and capital gains more frequently, if necessary for tax purposes. Dividends and distributions, if any, are recorded on the ex-dividend date.
Subject to seeking best execution, the Fund may direct certain security trades to brokers who have agreed to rebate a portion of the related brokerage commission to the Fund in cash. Such commission rebates are included in realized gain on investments in the accompanying financial statements and totaled $2,683 for the six months ended April 30, 2012. In general, best execution refers to many factors, including the price paid or received for a security, the commission charged, the promptness and reliability of execution, the confidentiality and placement accorded the order, and other factors affecting the overall benefit obtained by the Fund on the transaction.
The Fund may receive earnings credits from its custodian when positive cash balances are maintained, which are used to offset custody fees. There were no earnings credits for the six months ended April 30, 2012.
The Fund receives earnings credits from its transfer agent when positive cash balances are maintained, which are used to offset transfer agent fees. The expense paid under this arrangement is included in dividend disbursing and transfer agent fees and expenses on the statement of operations with the corresponding expense offset shown as “expense paid indirectly.” For the six months ended April 30, 2012, the Fund earned $503 under this agreement.
2. Investment Management, Administration Agreements and Other Transactions with Affiliates
In accordance with the terms of its investment management agreement, the Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee which is calculated daily at the rate of 0.65% on the first $500 million of average daily net assets of the Fund, 0.60% on the next $500 million, 0.55% on the next $1.5 billion and 0.50% on average daily net assets in excess of $2.5 billion.
DMC has contractually agreed to waive that portion, if any, of its management fee and reimburse the Fund to the extent necessary to ensure that total annual operating expenses (excluding any 12b-1 plan and certain other expenses) do not exceed 0.85% of average daily net assets of the Fund through February 28, 2013. This waiver and reimbursement may only be terminated by agreement of the Manager and the Fund. This waiver and reimbursement applies only to expenses paid directly by the Fund.
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Fund. For these services, the Fund pays DSC fees based on the aggregate daily net assets of the Delaware Investments® Family of Funds at the
24
following annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DSC under the service agreement described above are allocated among all Funds in the Delaware Investments® Family of Funds on a relative net asset value basis. For the six months ended April 30, 2012, the Fund was charged $18,064 for these services.
DSC also provides dividend disbursing and transfer agency services. The Fund pays DSC a monthly asset-based fee for these services.
Pursuant to a distribution agreement and distribution plan, the Fund pays DDLP, the distributor and an affiliate of DMC, an annual distribution and service fee not to exceed 0.30% of the average daily net assets of the Class A shares, 1.00% of the average daily net assets of the Class B and Class C shares and 0.60% of the average daily net assets of the Class R shares. Institutional Class shares pay no distribution and services expenses. DDLP has contracted to limit the Fund’s Class A and Class R shares’ 12b-1 fees through February 28, 2013 to no more than 0.25% and 0.50%, of the average daily net assets, respectively.
At April 30, 2012, the Fund had liabilities payable to affiliates as follows:
Investment management fee payable to DMC | $437,765 |
Dividend disbursing, transfer agent and fund accounting | |
oversight fees and other expenses payable to DSC | 19,396 |
Distribution fees payable to DDLP | 43,483 |
Other expenses payable to DMC and affiliates* | 6,380 |
*DMC, as part of its administrative services, pays operating expenses on behalf of the Fund and is reimbursed on a periodic basis. Expenses include items such as printing of shareholder reports, fees for audit, legal and tax services, registration fees and trustees’ fees.
As provided in the investment management agreement, the Fund bears the cost of certain legal and tax services, including internal legal and tax services provided to the Fund by DMC and/or its affiliates’ employees. For the six months ended April 30, 2012, the Fund was charged $ 10,325 for internal legal and tax services provided by DMC and/or its affiliates’ employees.
For the six months ended April 30, 2012, DDLP earned $33,501 for commissions on sales of the Fund’s Class A shares. For the six months ended April 30, 2012, DDLP received gross CDSC commissions of $27, $692 and $1,775 on redemptions of the Fund’s Class A, Class B and Class C shares, respectively, and these commissions were entirely used to offset up-front commissions previously paid by DDLP to broker/dealers on sales of those shares.
Trustees’ fees include expenses accrued by the Fund for each Trustee’s retainer and meeting fees. Certain officers of DMC, DSC and DDLP are officers and/or Trustees of the Trust. These officers and Trustees are paid no compensation by the Fund.
25
Notes to financial statements
Delaware U.S. Growth Fund
3. Investments
For the six months ended April 30, 2012, the Fund made purchases of $152,294,204 and sales of $46,343,253 of investment securities other than short-term investments.
At April 30, 2012, the cost of investments for federal income tax purposes has been estimated since final tax characteristics cannot be determined until fiscal year end. At April 30, 2012, the cost of investments was $619,460,222. At April 30, 2012, net unrealized appreciation was $238,023,981, of which $270,321,268 related to unrealized appreciation of investments and $32,297,287 related to unrealized depreciation of investments.
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. A three level hierarchy for fair value measurements has been established based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability developed based on the best information available under the circumstances. The Fund’s investment in its entirety is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three level hierarchy of inputs is summarized below.
Level 1 – | inputs are quoted prices in active markets for identical investments (e.g., equity securities, open-end investment companies, futures contracts, options contracts) |
Level 2 – | other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs) (e.g., debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair value securities) |
Level 3 – | inputs are significant unobservable inputs (including the Fund’s own assumptions used to determine the fair value of investments) (e.g., broker-quoted securities, fair valued securities) |
26
Level 3 investments are valued using significant unobservable inputs, including related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. 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 April 30, 2012:
Level 1 | Level 2 | Total | |||||||
Common Stock | $ | 851,358,777 | $ | — | $ | 851,358,777 | |||
Short-Term Investments | — | 5,251,539 | 5,251,539 | ||||||
Securities Lending Collateral | — | 873,887 | 873,887 | ||||||
Total | $ | 851,358,777 | $ | 6,125,426 | $ | 857,484,203 |
The value of Level 3 investments was zero at the beginning and end of the period and there was no change in unrealized appreciation (depreciation).
During the six months ended April 30, 2012, there were no transfers between Level 1 investments, Level 2 investments or Level 3 investments that had a material impact to the Fund. The Fund’s policy is to recognize transfers between levels at the beginning of the reporting period.
In May 2011, the Financial Accounting Standards Board (FASB) issued ASU No. 2011-04 modifying Topic 820, Fair Value Measurements and Disclosures. ASU No. 2011-04 requires reporting entities to disclose i) the amounts of any transfers between Level 1 and Level 2, and the reasons for the transfers, ii) for Level 3 fair value measurements, iii) quantitative information about significant unobservable inputs used, iv) a description of the valuation processes used by the reporting entity and v) a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs if a change in those inputs might result in a significantly higher or lower fair value measurement. The effective date of ASU No. 2011-04 is for interim and annual periods beginning after December 15, 2011. Management is currently evaluating the implications of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.
27
Notes to financial statements
Delaware U.S. Growth Fund
4. Dividend and Distribution Information
Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Additionally, distributions from net short-term gains on sales of investment securities are treated as ordinary income for federal income tax purposes. The tax character of dividends and distributions paid during the six months ended April 30, 2012 and the year ended October 31, 2011 was as follows:
Six Months Ended | Year Ended | |||
4/30/12* | 10/31/11 | |||
Ordinary income | $762,634 | $744,467 |
*Tax information for the six months ended April 30, 2012 is an estimate and the tax character of dividends and distributions may be redesignated at fiscal year end.
5. Components of Net Assets on a Tax Basis
The components of net assets are estimated since final tax characteristics cannot be determined until fiscal year end. As of April 30, 2012, the estimated components of net assets on a tax basis were as follows:
Shares of beneficial interest | $ | 765,307,461 | ||
Undistributed ordinary income | 117,466 | |||
Realized gains 11/1/11 – 4/30/12 | 9,304,507 | |||
Capital loss carryforwards as of 10/31/11 | (155,793,238 | ) | ||
Unrealized appreciation | 238,023,981 | |||
Net assets | $ | 856,960,177 |
The differences between book basis and tax basis components of net assets are primarily attributable to tax deferral of losses on wash sales.
For federal income tax purposes, capital loss carryforwards may be carried forward and applied against future capital gains. Capital loss carryforwards remaining at October 31, 2011 will expire as follows: $155,793,238 expires in 2017.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the Act) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes are generally effective for taxable years beginning after the date of enactment. Under the Act, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under previous regulation.
28
For the six months ended April 30, 2012, the Fund had capital gains of $9,304,507, which may reduce the capital loss carryforwards.
6. Capital Shares
Transactions in capital shares were as follows:
Six Months | Year | ||||||
Ended | Ended | ||||||
4/30/12 | 10/31/11 | ||||||
Shares sold: | |||||||
Class A | 2,735,406 | 1,280,410 | |||||
Class B | 702 | 13,679 | |||||
Class C | 509,926 | 217,453 | |||||
Class R | 218,668 | 59,998 | |||||
Institutional Class | 6,303,877 | 10,998,934 | |||||
Shares issued upon reinvestment of dividends and distributions: | |||||||
Institutional Class | 38,269 | 39,784 | |||||
9,806,848 | 12,610,258 | ||||||
Shares repurchased: | |||||||
Class A | (476,079 | ) | (3,867,181 | ) | |||
Class B | (56,264 | ) | (137,165 | ) | |||
Class C | (87,982 | ) | (244,978 | ) | |||
Class R | (36,691 | ) | (124,051 | ) | |||
Institutional Class | (3,021,082 | ) | (9,061,340 | ) | |||
(3,678,098 | ) | (13,434,715 | ) | ||||
Net increase (decrease) | 6,128,750 | (824,457 | ) |
For the six months ended April 30, 2012 and the year ended October 31, 2011, 25,824 Class B shares were converted to 22,328 Class A shares valued at $368,114 and 75,628 Class B shares were converted to 65,761 Class A shares valued at $946,603, respectively. The respective amounts are included in Class B redemptions and Class A subscriptions in the table above and the statements of changes in net assets.
7. Line of Credit
The Fund, along with certain other funds in the Delaware Investments® Family of Funds (Participants), was a participant in a $100,000,000 revolving line of credit to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, the Participants were charged an annual commitment fee, which was allocated across the Participants on the basis of each Participant’s allocation of the entire facility. The Participants were permitted to borrow up to a maximum of one third of their net assets under the agreement. The line of credit under the agreement expired on November 15, 2011.
29
Notes to financial statements
Delaware U.S. Growth Fund
7. Line of Credit (continued)
On November 15, 2011, the Fund, along with the other Participants, entered into an amendment to the agreement for a $125,000,000 revolving line of credit. The agreement is to be used as described above and operates in substantially the same manner as the original agreement. The agreement expires on November 13, 2012. The Fund had no amounts outstanding as of April 30, 2012, or at any time during the period then ended.
8. Securities Lending
The Fund, along with other funds in the Delaware Investments® Family of Funds, may lend its securities pursuant to a security lending agreement (Lending Agreement) with The Bank of New York Mellon (BNY Mellon). At the time a security is loaned, the borrower must post collateral equal to the required percentage of the market value of the loaned security, including any accrued interest. The required percentage is: (i) 102% with respect to U.S. securities and foreign securities that are denominated and payable in U.S. dollars; and (ii) 105% with respect to foreign securities. With respect to each loan, if on any business day the aggregate market value of securities collateral plus cash collateral held is less than the aggregate market value of the securities which are the subject of such loan, the borrower will be notified to provide additional collateral by the end of the following business day which, together with the collateral already held, will be not less than the applicable initial collateral requirements for such security loan. If the aggregate market value of securities collateral and cash collateral held with respect to a security loan exceeds the applicable initial collateral requirement, upon request of the borrower BNY Mellon must return enough collateral to the borrower by the end of the following business day to reduce the value of the remaining collateral to the applicable initial collateral requirement for such security loan. As a result of the foregoing, the value of the collateral held with respect to a loaned security may be temporarily more or less than the value of the security on loan.
Cash collateral received is generally invested in the Delaware Investments Collateral Fund No. 1 (Collective Trust) established by BNY Mellon for the purpose of investment on behalf of funds managed by DMC that participate in BNY Mellon’s securities lending program. The Collective Trust may invest in U.S. government securities and high quality corporate debt, asset-backed and other money market securities and in repurchase agreements collateralized by such securities, provided that the Collective Trust will generally have a dollar-weighted average portfolio maturity of 60 days or less. Effective April 20, 2009, BNY Mellon transferred the assets of the Fund’s previous collateral investment pool other than cash and assets with a maturity of one business day or less to the BNY Mellon SL DBT II Liquidating Fund (Liquidating Fund), effectively bifurcating the previous collateral investment pool. The Fund’s exposure to the Liquidating Fund is expected to decrease as the Liquidating Fund’s assets mature or are sold. In October 2008, BNY Mellon transferred certain distressed securities from the previous collateral investment pool into the Mellon GSL Reinvestment Trust II. The Fund can also accept U.S. government securities and letters of credit (non-cash collateral) in connection with securities loans. In the event of default
30
or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Fund, or at the discretion of the lending agent, replace the loaned securities. The Fund continues to record dividends or interest, as applicable, on the securities loaned and is subject to changes in value of the securities loaned that may occur during the term of the loan. The Fund has the right under the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized by non-cash collateral, the Fund receives loan premiums paid by the borrower. With respect to security loans collateralized by cash collateral, the earnings from the collateral investments are shared among the Fund, the security lending agent and the borrower. The Fund records security lending income net of allocations to the security lending agent and the borrower.
The Collective Trust used for the investment of cash collateral received from borrowers of securities seeks to maintain a net asset value per unit of $1.00, but there can be no assurance that it will always be able to do so. The Fund may incur investment losses as a result of investing securities lending collateral in the Collective Trust or another collateral investment pool. This could occur if an investment in a collateral investment pool defaulted or if it were necessary to liquidate assets in the collateral investment pool to meet returns on outstanding security loans at a time when the collateral investment pool’s net asset value per unit was less than $1.00. Under those circumstances, the Fund may not receive an amount from the collateral investment pool that is equal in amount to the collateral the Fund would be required to return to the borrower of the securities and the Fund would be required to make up for this shortfall.
At April 30, 2012, the value of the securities on loan was $1,820,398, for which cash collateral was received and invested in accordance with the Lending Agreement. At April 30, 2012, the value of invested collateral was $873,887. These investments are presented on the statement of net assets under the caption “Securities Lending Collateral.”
9. Credit and Market Risk
The Fund may invest up to 15% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair the Fund from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, the Fund’s Board has delegated to DMC the day-to-day functions of determining whether individual securities are liquid for purposes of the Fund’s limitation on investments in illiquid securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Fund’s 15% limit on investments in illiquid securities. As of April 30, 2012, there were no Rule 144A securities. Illiquid securities have been identified on the statement of net assets.
31
Notes to financial statements
Delaware U.S. Growth Fund
10. Contractual Obligations
The Fund enters into contracts in the normal course of business that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Fund’s existing contracts and expects the risk of loss to be remote.
11. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to April 30, 2012 that would require recognition or disclosure in the Fund’s financial statements.
32
Other Fund information
(Unaudited)
Delaware U.S. Growth Fund
Change in Independent Registered Public Accounting Firm
Due to independence matters under the Securities and Exchange Commission’s auditor independence rules relating to the January 4, 2010 acquisition of Delaware Investments (including DMC, DDLP and DSC) by Macquarie Group, Ernst & Young LLP (E&Y) has resigned as the independent registered public accounting firm for Delaware Group® Adviser Funds (the Trust) effective May 20, 2010. At a meeting held on May 20, 2010, the Board of Trustees of the Trust, upon recommendation of the Audit Committee, selected PricewaterhouseCoopers LLP (PwC) to serve as the independent registered public accounting firm for the Trust for the fiscal year ending October 31, 2010. During the fiscal years ended October 31, 2009 and 2008, E&Y’s audit reports on the financial statements of the Trust did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles. In addition, there were no disagreements between the Trust and E&Y on accounting principles, financial statements disclosures or audit scope, which, if not resolved to the satisfaction of E&Y, would have caused them to make reference to the disagreement in their reports. Neither the Trust nor anyone on its behalf has consulted with PwC at any time prior to their selection with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Trust’s financial statements.
33
About the organization
Board of trustees | |||
Patrick P. Coyne Chairman, President, and Chief Executive Officer Delaware Investments® Family of Funds Philadelphia, PA Thomas L. Bennett Private Investor Rosemont, PA John A. Fry President Drexel University Philadelphia, PA | Anthony D. Knerr Founder and Managing Director Anthony Knerr & Associates New York, NY Lucinda S. Landreth Former Chief Investment Officer Assurant, Inc. Philadelphia, PA | Ann R. Leven Consultant ARL Associates New York, NY Frances A. Sevilla-Sacasa Chief Executive Officer Banco Itaú Europa International Miami, FL | Janet L. Yeomans Vice President and Treasurer 3M Corporation St. Paul, MN J. Richard Zecher Founder Investor Analytics Scottsdale, AZ |
Affiliated officers | |||
David F. Connor Vice President, Deputy General Counsel, and Secretary Delaware Investments Family of Funds Philadelphia, PA | Daniel V. Geatens Vice President and Treasurer Delaware Investments Family of Funds Philadelphia, PA | David P. O’Connor Executive Vice President, General Counsel and Chief Legal Officer Delaware Investments Family of Funds Philadelphia, PA | Richard Salus Senior Vice President and Chief Financial Officer Delaware Investments Family of Funds Philadelphia, PA |
This semiannual report is for the information of Delaware U.S. Growth Fund shareholders, but it may be used with prospective investors when preceded or accompanied by the Delaware Investments Fund fact sheet for the most recently completed calendar quarter. These documents are available at www.delawareinvestments.com. |
Delaware Investments is the marketing name of Delaware Management Holdings, Inc. and its subsidiaries. The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 800 523-1918; and (ii) on the SEC’s website at www.sec.gov. In addition, a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities and the Fund’s Schedule of Investments are available without charge on the Fund’s website at www.delawareinvestments.com. The Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C.; information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund’s website at www.delawareinvestments.com; and (ii) on the SEC’s website at www.sec.gov. |
34
![](https://capedge.com/proxy/N-CSRS/0001206774-12-002900/del_topimg02.jpg)
Semiannual report Delaware International Bond Fund April 30, 2012 Fixed income mutual fund |
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, if available, its summary prospectus, which may be obtained by visiting www.delawareinvestments.com or calling 800 523-1918. Investors should read the prospectus and, if available, the summary prospectus carefully before investing. |
You can obtain shareholder reports and prospectuses online instead of in the mail. Visit www.delawareinvestments.com/edelivery. |
Experience Delaware Investments
Delaware Investments is committed to the pursuit of consistently superior asset management and unparalleled client service. We believe in our investment processes, which seek to deliver consistent results, and in convenient services that help add value for our clients.
If you are interested in learning more about creating an investment plan, contact your financial advisor.
You can learn more about Delaware Investments or obtain a prospectus for Delaware International Bond Fund at www.delawareinvestments.com.
Manage your investments online |
|
Investments in Delaware International Bond Fund are not and will not be deposits with or liabilities of Macquarie Bank Limited ABN 46 008 583 542 and its holding companies, including their subsidiaries or related companies (Macquarie Group), and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. No Macquarie Group company guarantees or will guarantee the performance of the Fund, the repayment of capital from the Fund, or any particular rate of return.
Table of contents | |
Disclosure of Fund expenses | 1 |
Security type/country allocation | 3 |
Statement of net assets | 5 |
Statement of assets and liabilities | 15 |
Statement of operations | 16 |
Statements of changes in net assets | 18 |
Financial highlights | 20 |
Notes to financial statements | 25 |
Other Fund information | 41 |
About the organization | 42 |
Unless otherwise noted, views expressed herein are current as of April 30, 2012, and subject to change.
Funds are not FDIC insured and are not guaranteed. It is possible to lose the principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor. Delaware Investments, a member of Macquarie Group, refers to Delaware Management Holdings, Inc. and its subsidiaries, including the Fund’s distributor, Delaware Distributors, L.P. Macquarie Group refers to Macquarie Group Limited and its subsidiaries and affiliates worldwide.
© 2012 Delaware Management Holdings, Inc.
All third-party marks cited are the property of their respective owners.
Disclosure of Fund expenses
For the six-month period from November 1, 2011 to April 30, 2012
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period from November 1, 2011 to April 30, 2012.
Actual expenses
The first section of the table shown, “Actual Fund return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The second section of the table shown, “Hypothetical 5% return,” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The Fund’s expenses shown in the table reflect fee waivers in effect. The expenses shown in the table assume reinvestment of all dividends and distributions.
1
Disclosure of Fund expenses
Delaware International Bond Fund
Expense analysis of an investment of $1,000
Beginning | Ending | Expenses | |||||||||||||||
Account Value | Account Value | Annualized | Paid During Period | ||||||||||||||
11/1/11 | 4/30/12 | Expense Ratio | 11/1/11 to 4/30/12* | ||||||||||||||
Actual Fund return | |||||||||||||||||
Class A | $ | 1,000.00 | $ | 1,009.40 | 1.10% | $ | 5.50 | ||||||||||
Class C | 1,000.00 | 1,005.60 | 1.85% | 9.23 | |||||||||||||
Class R | 1,000.00 | 1,008.10 | 1.35% | 6.74 | |||||||||||||
Institutional Class | 1,000.00 | 1,010.70 | 0.85% | 4.25 | |||||||||||||
Hypothetical 5% return (5% return before expenses) | |||||||||||||||||
Class A | $ | 1,000.00 | $ | 1,019.39 | 1.10% | $ | 5.52 | ||||||||||
Class C | 1,000.00 | 1,015.66 | 1.85% | 9.27 | |||||||||||||
Class R | 1,000.00 | 1,018.15 | 1.35% | 6.77 | |||||||||||||
Institutional Class | 1,000.00 | 1,020.64 | 0.85% | 4.27 |
*“Expenses Paid During Period” are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).
2
Delaware International Bond Fund | As of April 30, 2012 |
Sector designations may be different than the sector designations presented in other Fund materials. The sector designations may represent the investment manager’s internal sector classifications, which may result in the sector designations for one fund being different than another fund’s sector designations.
Security type/country | Percentage of net assets | |
Corporate Bonds | 44.06 | % |
Australia | 3.03 | % |
Bermuda | 0.61 | % |
Brazil | 3.29 | % |
Canada | 4.39 | % |
Cayman Islands | 1.69 | % |
Chile | 0.85 | % |
France | 3.58 | % |
Indonesia | 1.59 | % |
Ireland | 0.74 | % |
Italy | 1.21 | % |
Luxembourg | 3.47 | % |
Mexico | 1.68 | % |
Netherlands | 3.83 | % |
Spain | 0.15 | % |
United Kingdom | 3.85 | % |
United States | 10.10 | % |
Regional Bonds | 7.30 | % |
Australia | 5.64 | % |
Canada | 1.66 | % |
Sovereign Bonds | 38.77 | % |
Brazil | 0.97 | % |
Canada | 0.97 | % |
Chile | 2.62 | % |
Colombia | 1.16 | % |
Finland | 1.55 | % |
Germany | 7.14 | % |
Indonesia | 1.40 | % |
Malaysia | 0.92 | % |
Mexico | 5.27 | % |
Norway | 0.87 | % |
Panama | 1.20 | % |
Peru | 1.20 | % |
3
Security type/country allocation
Security type/country | Percentage of net assets | |
Sovereign Bonds (continued) | ||
Russia | 1.64 | % |
South Africa | 1.43 | % |
Sweden | 0.47 | % |
United Kingdom | 9.41 | % |
Uruguay | 0.55 | % |
Option Purchased | 0.03 | % |
Short-Term Investments | 2.25 | % |
Total Value of Securities | 92.41 | % |
Receivables and other Assets Net of Liabilities | 7.59 | % |
Total Net Assets | 100.00 | % |
4
Delaware International Bond Fund | April 30, 2012 (Unaudited) |
Principal amount° | Value (U.S. $) | ||||||
ΔCorporate Bonds – 44.06% | |||||||
Australia – 3.03% | |||||||
BHP Billiton Finance USA 3.25% 11/21/21 | USD | 105,000 | $ | 108,845 | |||
Rio Tinto Finance USA 3.75% 9/20/21 | 90,000 | 95,557 | |||||
# | Woodside Finance 144A 8.75% 3/1/19 | 60,000 | 77,291 | ||||
# | Woolworths 144A 4.55% 4/12/21 | 85,000 | 93,465 | ||||
375,158 | |||||||
Bermuda – 0.61% | |||||||
Weatherford Bermuda 5.125% 9/15/20 | 70,000 | 75,138 | |||||
75,138 | |||||||
Brazil – 3.29% | |||||||
# | Brasil Telecom144A 5.75% 2/10/22 | 202,000 | 207,554 | ||||
Vale Overseas | |||||||
4.375% 1/11/22 | 36,000 | 37,065 | |||||
6.25% 1/23/17 | 140,000 | 161,979 | |||||
406,598 | |||||||
Canada – 4.39% | |||||||
Barrick Gold | |||||||
2.90% 5/30/16 | 115,000 | 120,707 | |||||
#144A 3.85% 4/1/22 | 45,000 | 46,537 | |||||
Canadian Natural Resources | |||||||
3.45% 11/15/21 | 45,000 | 46,554 | |||||
6.25% 3/15/38 | 25,000 | 31,315 | |||||
Encana 3.90% 11/15/21 | 50,000 | 49,333 | |||||
Teck Resources 4.75% 1/15/22 | 90,000 | 96,954 | |||||
• | TransCanada Pipelines 6.35% 5/15/67 | 145,000 | 151,528 | ||||
542,928 | |||||||
Cayman Islands – 1.69% | |||||||
Noble Holding International 3.95% 3/15/22 | 125,000 | 127,242 | |||||
Transocean 6.375% 12/15/21 | 70,000 | 82,121 | |||||
209,363 | |||||||
Chile – 0.85% | |||||||
# | CODELCO 144A 3.75% 11/4/20 | 100,000 | 104,680 | ||||
104,680 | |||||||
France – 3.58% | |||||||
France Telecom 4.125% 9/14/21 | 85,000 | 87,630 | |||||
# | Pernod-Ricard 144A 4.45% 1/15/22 | 150,000 | 155,864 |
5
Statement of net assets
Delaware International Bond Fund
Principal amount° | Value (U.S. $) | ||||||
ΔCorporate Bonds (continued) | |||||||
France (continued) | |||||||
Total Capital International 2.875% 2/17/22 | USD | 125,000 | $ | 125,156 | |||
# | Vivendi 144A 6.625% 4/4/18 | 65,000 | 73,780 | ||||
442,430 | |||||||
Indonesia – 1.59% | |||||||
# | Pertamina Persero 144A 6.00% 5/3/42 | 200,000 | 197,000 | ||||
197,000 | |||||||
Ireland – 0.74% | |||||||
# | Nara Cable Funding 144A 8.875% 12/1/18 | 100,000 | 92,000 | ||||
92,000 | |||||||
Italy – 1.21% | |||||||
# | ENI 144A 4.15% 10/1/20 | 150,000 | 149,890 | ||||
149,890 | |||||||
Luxembourg – 3.47% | |||||||
ArcelorMittal 5.50% 3/1/21 | 80,000 | 78,934 | |||||
Covidien International Finance 4.20% 6/15/20 | 50,000 | 55,356 | |||||
# | Schlumberger Investment 144A 3.30% 9/14/21 | 110,000 | 114,316 | ||||
Tyco Electronics Group 3.50% 2/3/22 | 85,000 | 85,206 | |||||
# | Wind Acquisition Finance 144A 7.25% 2/15/18 | 100,000 | 95,250 | ||||
429,062 | |||||||
Mexico – 1.68% | |||||||
America Movil 3.75% 6/28/17 | EUR | 145,000 | 207,910 | ||||
207,910 | |||||||
Netherlands – 3.83% | |||||||
Cemex Finance Europe 4.75% 3/5/14 | EUR | 200,000 | 244,595 | ||||
Koninklijke Philips Electronics 3.75% 3/15/22 | USD | 65,000 | 67,111 | ||||
•# | Rabobank 144A 11.00% 12/29/49 | 115,000 | 146,798 | ||||
Syngenta Finance 3.125% 3/28/22 | 15,000 | 15,522 | |||||
474,026 | |||||||
Spain – 0.15% | |||||||
Telefonica Emisiones 5.462% 2/16/21 | 20,000 | 18,829 | |||||
18,829 | |||||||
United Kingdom – 3.85% | |||||||
# | BG Energy Capital 144A 4.00% 12/9/20 | 100,000 | 107,233 | ||||
Ensco 4.70% 3/15/21 | 105,000 | 114,781 |
6
Principal amount° | Value (U.S. $) | |||||||
ΔCorporate Bonds (continued) | ||||||||
United Kingdom (continued) | ||||||||
HSBC Holdings 6.25% 3/19/18 | EUR | 100,000 | $ | 146,647 | ||||
# | Ineos Finance 144A 8.375% 2/15/19 | USD | 100,000 | 107,500 | ||||
476,161 | ||||||||
United States – 10.10% | ||||||||
Burlington North Santa Fe 5.65% 5/1/17 | 30,000 | 35,358 | ||||||
CenturyLink 6.45% 6/15/21 | 75,000 | 78,192 | ||||||
Comcast 6.30% 11/15/17 | 35,000 | 42,506 | ||||||
Commonwealth Edison 1.95% 9/1/16 | 45,000 | 46,062 | ||||||
Coventry Health Care 5.45% 6/15/21 | 35,000 | 39,586 | ||||||
# | Crown Castle Towers 144A 4.883% 8/15/20 | 35,000 | 37,189 | |||||
CSX 5.60% 5/1/17 | 30,000 | 34,821 | ||||||
Domtar 4.40% 4/1/22 | 10,000 | 10,078 | ||||||
Dow Chemical 8.55% 5/15/19 | 30,000 | 39,836 | ||||||
Enterprise Products Operating 6.30% 9/15/17 | 45,000 | 53,947 | ||||||
• | Fifth Third Capital Trust IV 6.50% 4/15/37 | 55,000 | 54,725 | |||||
General Electric Capital | ||||||||
5.30% 2/11/21 | 40,000 | 44,124 | ||||||
5.50% 2/1/17 | NZD | 30,000 | 25,428 | |||||
Hewlett-Packard 4.65% 12/9/21 | USD | 25,000 | 26,468 | |||||
International Paper 4.75% 2/15/22 | 40,000 | 42,783 | ||||||
Jersey Central Power & Light 5.625% 5/1/16 | 50,000 | 56,543 | ||||||
Kinder Morgan Energy Partners 6.00% 2/1/17 | 20,000 | 23,272 | ||||||
Lowe’s 3.12% 4/15/22 | 30,000 | 30,479 | ||||||
Molson Coors Brewing 2.00% 5/1/17 | 60,000 | 60,268 | ||||||
National Semiconductor 6.60% 6/15/17 | 55,000 | 68,378 | ||||||
Noble Energy 4.15% 12/15/21 | 20,000 | 20,965 | ||||||
# | SABMiller Holdings 144A 3.75% 1/15/22 | 200,000 | 208,424 | |||||
Safeway 4.75% 12/1/21 | 15,000 | 15,034 | ||||||
SCANA 4.125% 2/1/22 | 15,000 | 15,283 | ||||||
Stanley Black & Decker 3.40% 12/1/21 | 50,000 | 51,658 | ||||||
UDR 4.625% 1/10/22 | 15,000 | 15,719 | ||||||
Vornado Realty 5.00% 1/15/22 | 15,000 | 15,788 | ||||||
• | Wisconsin Energy 6.25% 5/15/67 | 55,000 | 56,850 | |||||
1,249,764 | ||||||||
Total Corporate Bonds (cost $5,307,814) | 5,450,937 |
7
Statement of net assets
Delaware International Bond Fund
Principal amount° | Value (U.S. $) | |||||||
ΔRegional Bonds – 7.30% | ||||||||
Australia – 5.64% | ||||||||
New South Wales Treasury | ||||||||
6.00% 4/1/15 | AUD | 135,000 | $ | 149,230 | ||||
6.00% 4/1/19 | AUD | 276,000 | 320,417 | |||||
Queensland Treasury 6.25% 6/14/19 | AUD | 100,000 | 116,858 | |||||
Western Australia Treasury 7.00% 7/15/21 | AUD | 89,000 | 110,389 | |||||
696,894 | ||||||||
Canada – 1.66% | ||||||||
Providence of Quebec 4.25% 12/1/21 | CAD | 185,000 | 205,608 | |||||
205,608 | ||||||||
Total Regional Bonds (cost $874,940) | 902,502 | |||||||
ΔSovereign Bonds – 38.77% | ||||||||
Brazil – 0.97% | ||||||||
Republic of Brazil 5.625% 1/7/41 | USD | 100,000 | 119,500 | |||||
119,500 | ||||||||
Canada – 0.97% | ||||||||
Canadian Government Bond 3.75% 6/1/19 | CAD | 105,000 | 119,814 | |||||
119,814 | ||||||||
Chile – 2.62% | ||||||||
Chile Government International Bond 5.50% 8/5/20 | CLP | 150,000,000 | 323,995 | |||||
323,995 | ||||||||
Colombia – 1.16% | ||||||||
Colombia Government International Bond | ||||||||
8.125% 5/21/24 | USD | 100,000 | 143,400 | |||||
143,400 | ||||||||
Finland – 1.55% | ||||||||
Finland Government Bond 3.875% 9/15/17 | EUR | 128,000 | 192,000 | |||||
192,000 | ||||||||
Germany – 7.14% | ||||||||
Deutschland Republic | ||||||||
2.00% 1/4/22 | EUR | 107,000 | 147,101 | |||||
2.50% 1/4/21 | EUR | 67,886 | 97,967 | |||||
3.50% 7/4/19 | EUR | 233,000 | 359,211 | |||||
6.25% 1/4/24 | EUR | 145,000 | 279,498 | |||||
883,777 |
8
Principal amount° | Value (U.S. $) | |||||||
ΔSovereign Bonds (continued) | ||||||||
Indonesia – 1.40% | ||||||||
Indonesia Treasury Bond 7.00% 5/15/27 | IDR | 1,500,000,000 | $ | 173,185 | ||||
173,185 | ||||||||
Malaysia – 0.92% | ||||||||
Malaysia Government Bond 4.262% 9/15/16 | MYR | 330,000 | 113,434 | |||||
113,434 | ||||||||
Mexico – 5.27% | ||||||||
Mexican Bonos 8.50% 5/31/29 | MXN | 4,429,000 | 393,405 | |||||
Mexico Government International Bonds | ||||||||
4.75% 3/8/44 | USD | 110,000 | 113,355 | |||||
5.125% 1/15/20 | 124,000 | 145,576 | ||||||
652,336 | ||||||||
Norway – 0.87% | ||||||||
Norway Government Bond 3.75% 5/25/21 | NOK | 540,000 | 107,683 | |||||
107,683 | ||||||||
Panama – 1.20% | ||||||||
Panama Government International Bond | ||||||||
6.70% 1/26/36 | USD | 110,000 | 148,060 | |||||
148,060 | ||||||||
Peru – 1.20% | ||||||||
Peruvian Government International Bond | ||||||||
7.125% 3/30/19 | 115,000 | 148,350 | ||||||
148,350 | ||||||||
Russia – 1.64% | ||||||||
# | Russian Eurobond 144A 3.25% 4/4/17 | 200,000 | 203,250 | |||||
203,250 | ||||||||
South Africa – 1.43% | ||||||||
South Africa Government Bond 7.25% 1/15/20 | ZAR | 1,400,000 | 177,136 | |||||
177,136 | ||||||||
Sweden – 0.47% | ||||||||
Swedish Government Bond 3.00% 7/12/16 | SEK | 365,000 | 57,960 | |||||
57,960 |
9
Statement of net assets
Delaware International Bond Fund
Principal amount° | Value (U.S. $) | |||||||
ΔSovereign Bonds (continued) | ||||||||
United Kingdom – 9.41% | ||||||||
United Kingdom Gilt | ||||||||
1.75% 1/22/17 | GBP | 65,000 | $ | 108,843 | ||||
4.00% 3/7/22 | GBP | 212,000 | 402,441 | |||||
5.00% 3/7/25 | GBP | 314,200 | 653,453 | |||||
1,164,737 | ||||||||
Uruguay – 0.55% | ||||||||
Uruguay Government International Bond | ||||||||
8.00% 11/18/22 | USD | 48,750 | 67,592 | |||||
67,592 | ||||||||
Total Sovereign Bonds (cost $4,678,798) | 4,796,209 | |||||||
Number of contracts | ||||||||
Option Purchased – 0.03% | ||||||||
Call Option – 0.03% | ||||||||
U.S. 10 yr Futures Option, strike price | ||||||||
$132.50, expires 6/23/12 (JPMC) | 8 | 3,125 | ||||||
Total Option Purchased | ||||||||
(Cost $2,773) | 3,125 | |||||||
Principal amount° | ||||||||
Short-Term Investments – 2.25% | ||||||||
≠Discount Notes – 0.59% | ||||||||
Federal Home Loan Bank | ||||||||
0.11% 5/25/12 | USD | 54,005 | 54,004 | |||||
0.115% 6/29/12 | 19,766 | 19,764 | ||||||
73,768 | ||||||||
Repurchase Agreements – 1.66% | ||||||||
Bank of America 0.17%, dated 4/30/12, | ||||||||
to be repurchased on 5/1/12, | ||||||||
repurchase price $50,495 | ||||||||
(collateralized by U.S. government | ||||||||
obligations 2.25%-4.125% 1/31/15-5/15/15; | ||||||||
market value $51,505) | 50,495 | 50,495 |
10
Principal amount° | Value (U.S. $) | ||||||||||
Short-Term Investments (continued) | |||||||||||
Repurchase Agreements (continued) | |||||||||||
BNP Paribas 0.17%, dated 4/30/12, | |||||||||||
to be repurchased on 5/1/12, | |||||||||||
repurchase price $154,506 | |||||||||||
(collateralized by U.S. government | |||||||||||
obligations 0.00%-2.375% 7/26/12-10/31/16; | |||||||||||
market value $157,595) | USD | 154,505 | $ | 154,505 | |||||||
205,000 | |||||||||||
Total Short-Term Investments (cost $278,763) | 278,768 | ||||||||||
Total Value of Securities – 92.41% | |||||||||||
(cost $11,143,088) | 11,431,541 | ||||||||||
Receivables and Other Assets | |||||||||||
Net of Liabilities – 7.59% | 938,987 | « | |||||||||
Net Assets Applicable to 1,356,847 | |||||||||||
Shares Outstanding – 100.00% | $ | 12,370,528 | |||||||||
Net Asset Value – Delaware International Bond Fund | |||||||||||
Class A ($11,915,679 / 1,306,958 Shares) | $9.12 | ||||||||||
Net Asset Value – Delaware International Bond Fund | |||||||||||
Class C ($377,649 / 41,422 Shares) | $9.12 | ||||||||||
Net Asset Value – Delaware International Bond Fund | |||||||||||
Class R ($20,321/ 2,229 Shares) | $9.12 | ||||||||||
Net Asset Value – Delaware International Bond Fund | |||||||||||
Institutional Class ($56,879 / 6,238 Shares) | $9.12 | ||||||||||
Components of Net Assets at April 30, 2012: | |||||||||||
Shares of beneficial interest (unlimited authorization – no par) | $ | 12,406,848 | |||||||||
Accumulated net investment loss | (29,127 | ) | |||||||||
Accumulated net realized loss on investments | (352,649 | ) | |||||||||
Net unrealized appreciation of investments and derivatives | 345,456 | ||||||||||
Total net assets | $ | 12,370,528 |
11
Statement of net assets
Delaware International Bond Fund
° | Principal amount is stated in the currency in which each security is denominated. |
Δ | Securities have been classified by country of origin. |
# | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At April 30, 2012, the aggregate value of Rule 144A securities was $2,218,021, which represented 17.93% of the Fund’s net assets. See Note 11 in “Notes to financial statements.” |
• | Variable rate security. The rate shown is the rate as April 30, 2012. Interest rates reset periodically. |
≠ | The rate shown is the effective yield at the time of purchase. |
« | Includes foreign currency valued at $243,577 with a cost of $241,451, $579,834 for receivable for securities sold $257,146 for payable for securities purchased as of April 30, 2012. |
Net Asset Value and Offering Price Per Share – | ||
Delaware International Bond Fund | ||
Net asset value Class A (A) | $ | 9.12 |
Sales charges (4.50% of offering price) (B) | 0.43 | |
Offering price | $ | 9.55 |
(A) | Net asset value per share, as illustrated, is the amount which would be paid upon redemption or repurchase of shares. |
(B) | See the current prospectus for purchase of $100,000 or more. |
12
Foreign Currency Exchange Contracts
Unrealized | ||||||||||||||||
Contracts to | Appreciation | |||||||||||||||
Counterparty | Receive (Deliver) | In Exchange For | Settlement Date | (Depreciation) | ||||||||||||
BAML | AUD | (455,417 | ) | USD | 469,803 | 6/1/12 | $ | (2,946 | ) | |||||||
BAML | BRL | 540,330 | USD | (284,261 | ) | 6/1/12 | (2,826 | ) | ||||||||
BAML | CAD | 504,690 | USD | (512,511 | ) | 6/1/12 | (1,923 | ) | ||||||||
BAML | EUR | 674,491 | USD | (892,230 | ) | 6/1/12 | 810 | |||||||||
BAML | GBP | (180,000 | ) | USD | 291,528 | 6/1/12 | (574 | ) | ||||||||
BAML | JPY | 232,983,260 | USD | (2,866,377 | ) | 6/1/12 | 52,105 | |||||||||
BAML | MXN | (2,897,385 | ) | USD | 220,419 | 6/1/12 | (1,289 | ) | ||||||||
BAML | NOK | (54,240 | ) | USD | 9,462 | 6/1/12 | (5 | ) | ||||||||
BAML | NZD | (24,573 | ) | USD | 19,970 | 6/1/12 | (78 | ) | ||||||||
BAML | SEK | 337,675 | USD | (50,064 | ) | 6/1/12 | 110 | |||||||||
BAML | ZAR | (2,018,477 | ) | USD | 258,607 | 6/1/12 | 224 | |||||||||
JPMC | CLP | (107,738,000 | ) | USD | 220,143 | 6/1/12 | (2,396 | ) | ||||||||
MSC | GBP | (65,333 | ) | USD | 105,326 | 6/1/12 | (696 | ) | ||||||||
$ | 40,516 |
Annual | Unrealized | ||||||||||||||||
Protection | Termination | Appreciation | |||||||||||||||
Counterparty | Swap Referenced Obligation | Notional Value | Payments | Date | (Depreciation) | ||||||||||||
Protection Purchased: | |||||||||||||||||
Kingdom of Spain | |||||||||||||||||
MSC | 5 yr CDS | $ | 30,000 | 1.00% | 3/20/17 | $ | 884 | ||||||||||
MSC | 5 yr CDS | 563,000 | 1.00% | 9/20/16 | 15,116 | ||||||||||||
MSC | Republic of France 5 yr CDS | 121,000 | 0.25% | 6/20/17 | (210 | ) | |||||||||||
$ | 15,790 |
The use of foreign currency exchange contracts and swap contracts involves elements of market risk and risks in excess of the amounts recognized in the financial statements. The notional values presented above represent the Fund’s total exposure in such contracts, whereas only the net unrealized appreciation (depreciation) is reflected in the Fund’s net assets.
1See Note 9 in “Notes to financial statements.”
13
Statement of net assets
Delaware International Bond Fund
AUD — Australian Dollar
BAML — Bank of America Merrill Lynch
BRL — Brazilian Real
CAD — Canadian Dollar
CDS — Credit Default Swap
CLP — Chilean Peso
EUR — European Monetary Unit
GBP — British Pound Sterling
IDR — Indonesian Rupiah
JPMC — JPMorgan Chase Bank
JPY — Japanese Yen
MSC — Morgan Stanley Capital
MXN — Mexican Peso
MYR — Malaysian Ringgit
NOK — Norwegian Kroner
NZD — New Zealand Dollar
SEK — Swedish Krona
USD — United States Dollar
yr — Year
ZAR — South African Rand
See accompanying notes, which are an integral part of the financial statements.
14
Statement of assets and liabilities | |
Delaware International Bond Fund | April 30, 2012 (Unaudited) |
Assets: | ||
Investments, at value | $ | 11,149,648 |
Option purchased, at value | 3,125 | |
Short-term investments, at value | 278,768 | |
Cash | 795 | |
Foreign currencies, at value | 243,577 | |
Receivable for fund shares sold | 22,135 | |
Receivable for securities sold | 603,803 | |
Unrealized gain on credit default swaps (including upfront payments $76,259) | 92,049 | |
Unrealized gain on foreign currency exchange contracts | 43,608 | |
Interest receivable | 148,808 | |
Due from DMC | 27,973 | |
Other accrued expenses | 21,003 | |
Total assets | 12,635,292 | |
Liabilities: | ||
Payable for securities purchased | 257,146 | |
Unrealized loss on foreign currency exchange contracts | 3,092 | |
Distribution payable | 96 | |
Annual protection payments on credit default swap contracts | 727 | |
Due to manager and affiliates | 3,068 | |
Other liabilities | 635 | |
Total liabilities | 264,764 | |
Total Net Assets | $ | 12,370,528 |
Investments, at cost | $ | 10,861,552 |
Option purchased, at cost | 2,773 | |
Short-term investments, at cost | 278,763 | |
Foreign currencies, at cost | 241,451 |
See accompanying notes, which are an integral part of the financial statements.
15
Statement of operations | |
Delaware International Bond Fund | Six months ended April 30, 2012 (Unaudited) |
Investment Income: | |||
Interest | $ | 204,628 | |
Expenses: | |||
Registration fees | 59,947 | ||
Management fees | 36,148 | ||
Legal fees | 23,931 | ||
Distribution expenses – Class A | 16,288 | ||
Distribution expenses – Class C | 1,169 | ||
Distribution expenses – Class R | 34 | ||
Reports and statements to shareholders | 13,014 | ||
Audit and tax | 12,932 | ||
Dues and services | 4,373 | ||
Custodian fees | 4,093 | ||
Dividend disbursing and transfer agent fees and expenses | 3,160 | ||
Accounting and administration expenses | 2,179 | ||
Pricing fees | 2,095 | ||
Trustees’ fees | 284 | ||
Insurance fees | 75 | ||
Consulting fees | 27 | ||
Trustees’ expenses | 19 | ||
179,768 | |||
Less fees waived | (114,981 | ) | |
Less waived distribution expenses – Class A | (2,715 | ) | |
Less waived distribution expenses – Class R | (5 | ) | |
Less expense paid indirectly | (1 | ) | |
Total operating expenses | 62,066 | ||
Net Investment Income | 142,562 |
16
Net Realized and Unrealized Gain (Loss): | |||
Net realized gain (loss) on: | |||
Investments | $ | 69,358 | |
Foreign currencies | 95,750 | ||
Foreign currency exchange contracts | (302,493 | ) | |
Futures contracts | (42,707 | ) | |
Swap contracts | (29,716 | ) | |
Options written | 668 | ||
Net realized loss | (209,140 | ) | |
Net change in unrealized appreciation (depreciation) on: | |||
Investments | 80,414 | ||
Foreign currencies | (7,535 | ) | |
�� Foreign currency exchange contracts | 91,326 | ||
Swap contracts | 15,088 | ||
Net change in unrealized appreciation | 179,293 | ||
Net Realized and Unrealized Loss | (29,847 | ) | |
Net Increase in Net Assets Resulting from Operations | $ | 112,715 |
See accompanying notes, which are an integral part of the financial statements.
17
Statements of changes in net assets
Delaware International Bond Fund
Six Months | Year | ||||||
Ended | Ended | ||||||
4/30/12 | 10/31/11 | ||||||
(Unaudited) | |||||||
Increase (Decrease) in Net Assets from Operations: | |||||||
Net investment income | $ | 142,562 | $ | 382,004 | |||
Net realized gain (loss) | (209,140 | ) | 2,587,604 | ||||
Net change in unrealized appreciation (depreciation) | 179,293 | (2,889,582 | ) | ||||
Net increase in net assets resulting from operations | 112,715 | 80,026 | |||||
Dividends and Distributions to Shareholders from: | |||||||
Net investment income: | |||||||
Class A | (2,416,465 | ) | (951,076 | ) | |||
Class C | (40,044 | ) | (1,007 | ) | |||
Class R | (150 | ) | — | ||||
Institutional Class | (3,717 | ) | (98 | ) | |||
(2,460,376 | ) | (952,181 | ) | ||||
Capital Share Transactions: | |||||||
Proceeds from shares sold: | |||||||
Class A | 1,544,441 | 20,541,599 | |||||
Class C | 226,050 | 179,034 | |||||
Class R | 19,977 | 36 | |||||
Institutional Class | 40,773 | 21,406 | |||||
Net asset value of shares issued upon reinvestment | |||||||
of dividends and distributions: | |||||||
Class A | 2,415,467 | 951,031 | |||||
Class C | 40,036 | 952 | |||||
Class R | 150 | — | |||||
Institutional Class | 3,717 | 98 | |||||
Net assets from Reorganization* | |||||||
Class A | — | — | |||||
4,290,611 | 21,694,156 |
18
Six Months | Year | ||||||
Ended | Ended | ||||||
4/30/12 | 10/31/11 | ||||||
(Unaudited) | |||||||
Capital Share Transactions (continued): | |||||||
Cost of shares repurchased: | |||||||
Class A | $ | (74,181 | ) | $ | (31,645,919 | ) | |
Class C | (16,929 | ) | (10,000 | ) | |||
Institutional Class | (112 | ) | (5,502 | ) | |||
(91,222 | ) | (31,661,421 | ) | ||||
Increase (Decrease) in net assets derived from | |||||||
capital share transactions | 4,199,389 | (9,967,265 | ) | ||||
Net Increase (Decrease) in Net Assets | 1,851,728 | (10,839,420 | ) | ||||
Net Assets: | |||||||
Beginning of period | 10,518,800 | 21,358,220 | |||||
End of period (including undistributed (accumulated) | |||||||
net investment income (loss) of $(29,127) and | |||||||
$2,259,711, respectively) | $ | 12,370,528 | $ | 10,518,800 |
*See Note 7 in “Notes to financial statements.”
See accompanying notes, which are an integral part of the financial statements.
19
Financial highlights
Delaware International Bond 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 income3 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Total dividends and distributions |
Net asset value, end of period |
Total return4 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets |
prior to fees waived and expense paid indirectly |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets |
prior to fees waived and expense paid indirectly |
Portfolio turnover |
1 Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 Effective July 28, 2011, the Fund received all of the assets and liabilities of the Delaware Pooled® Trust – The International Fixed Income Portfolio (the Portfolio). The Class A shares financial highlights for the periods prior to July 28, 2011 reflect the performance of the Institutional Class shares of the Portfolio. Fees paid by Portfolio were less than Class A share fees, and performance would have been lower if Class A fees were paid. See Note 2 in “Notes to financial statements.” |
3 The average shares outstanding method has been applied for per share information. |
See accompanying notes, which are an integral part of the financial statements.
20
Six Months Ended | Year Ended | |||||||||||||||||
4/30/121 | 10/31/112 | 10/31/102 | 10/31/092 | 10/31/082 | 10/31/072 | |||||||||||||
(Unaudited) | ||||||||||||||||||
$11.690 | $12.140 | $12.430 | $11.570 | $11.740 | $10.940 | |||||||||||||
0.122 | 0.269 | 0.279 | 0.876 | 0.265 | 0.245 | |||||||||||||
(0.076 | ) | (0.124 | ) | 0.752 | 1.173 | 0.189 | 0.686 | |||||||||||
0.046 | 0.145 | 1.031 | 2.049 | 0.454 | 0.931 | |||||||||||||
(2.616 | ) | (0.595 | ) | (1.321 | ) | (1.189 | ) | (0.624 | ) | (0.131 | ) | |||||||
(2.616 | ) | (0.595 | ) | (1.321 | ) | (1.189 | ) | (0.624 | ) | (0.131 | ) | |||||||
$ 9.120 | $11.690 | $12.140 | $12.430 | $11.570 | $11.740 | |||||||||||||
0.94% | 1.52% | 9.33% | 18.86% | 4.04% | 8.60% | |||||||||||||
$11,916 | $10,337 | $21,358 | $19,538 | $29,815 | $32,169 | |||||||||||||
1.10% | 0.72% | 0.60% | 0.60% | 0.60% | 0.61% | |||||||||||||
3.22% | 1.28% | 0.81% | 0.79% | 0.72% | 0.72% | |||||||||||||
2.58% | 2.33% | 2.48% | 7.73% | 2.22% | 2.22% | |||||||||||||
0.46% | 1.77% | 2.27% | 7.54% | 2.10% | 2.11% | |||||||||||||
87% | 151% | 31% | 98% | 26% | 49% |
4 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value, and does not reflect the impact of a sales charge. Total investment return during some of the periods shown reflects waivers by the manager and/or distributor. Performance would have been lower had the waivers not been in effect.
21
Financial highlights
Delaware International Bond Fund Class C
Selected data for each share of the Fund outstanding throughout each period were as follows:
7/28/112 | ||||||
Six Months Ended | to | |||||
4/30/121 | 10/31/11 | |||||
(Unaudited) | ||||||
Net asset value, beginning of period | $11.690 | $12.020 | ||||
Income (loss) from investment operations: | ||||||
Net investment income (loss)3 | 0.086 | (0.025 | ) | |||
Net realized and unrealized loss | (0.077 | ) | (0.218 | ) | ||
Total from investment operations | 0.009 | (0.243 | ) | |||
Less dividends and distributions from: | ||||||
Net investment income | (2.579 | ) | (0.087 | ) | ||
Total dividends and distributions | (2.579 | ) | (0.087 | ) | ||
Net asset value, end of period | $ 9.120 | $11.690 | ||||
Total return4 | 0.56% | (2.03% | ) | |||
Ratios and supplemental data: | ||||||
Net assets, end of period (000 omitted) | $378 | $166 | ||||
Ratio of expenses to average net assets | 1.85% | 1.85% | ||||
Ratio of expenses to average net assets | ||||||
prior to fees waived and expense paid indirectly | 3.92% | 3.84% | ||||
Ratio of net investment income (loss) to average net assets | 1.83% | (0.81% | ) | |||
Ratio of net investment income (loss) to average net assets | ||||||
prior to fees waived and expense paid indirectly | (0.24% | ) | (2.80% | ) | ||
Portfolio turnover | 87% | 151% | 5 |
1 Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 Date of commencement of operations; ratios have been annualized and total return has not been annualized. |
3 The average shares outstanding method has been applied for per share information. |
4 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods shown reflect a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
5 Portfolio Turnover is representative of the Fund for the period November 1, 2010 through October 31, 2011. |
See accompanying notes, which are an integral part of the financial statements.
22
Delaware International Bond Fund Class R
Selected data for each share of the Fund outstanding throughout each period were as follows:
7/28/112 | ||||||
Six Months Ended | to | |||||
4/30/121 | 10/31/11 | |||||
(Unaudited) | ||||||
Net asset value, beginning of period | $11.690 | $12.020 | ||||
Income (loss) from investment operations: | ||||||
Net investment income (loss)3 | 0.101 | (0.013 | ) | |||
Net realized and unrealized loss | (0.068 | ) | (0.215 | ) | ||
Total from investment operations | 0.033 | (0.228 | ) | |||
Less dividends and distributions from: | ||||||
Net investment income | (2.603 | ) | (0.102 | ) | ||
Total dividends and distributions | (2.603 | ) | (0.102 | ) | ||
Net asset value, end of period | $ 9.120 | $11.690 | ||||
Total return4 | 0.81% | (1.91% | ) | |||
Ratios and supplemental data: | ||||||
Net assets, end of period (000 omitted) | $20 | $— | ||||
Ratio of expenses to average net assets | 1.35% | 1.35% | ||||
Ratio of expenses to average net assets | ||||||
prior to fees waived and expense paid indirectly | 3.52% | 3.44% | ||||
Ratio of net investment income (loss) to average net assets | 2.33% | (0.31% | ) | |||
Ratio of net investment income (loss) to average net assets | ||||||
prior to fees waived and expense paid indirectly | 0.16% | (2.40% | ) | |||
Portfolio turnover | 87% | 151% | 5 |
1 Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 Date of commencement of operations; ratios have been annualized and total return has not been annualized. |
3 The average shares outstanding method has been applied for per share information. |
4 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflects, waivers by the manager and distributor. Performance would have been lower had the waivers not been in effect. |
5 Portfolio Turnover is representative of the Fund for the period November 1, 2010 through October 31, 2011. |
See accompanying notes, which are an integral part of the financial statements.
23
Financial highlights
Delaware International Bond Fund Institutional Class
Selected data for each share of the Fund outstanding throughout each period were as follows:
7/28/112 | ||||||
Six Months Ended | to | |||||
4/30/121 | 10/31/11 | |||||
(Unaudited) | ||||||
Net asset value, beginning of period | $11.690 | $12.020 | ||||
Income (loss) from investment operations: | ||||||
Net investment income3 | 0.137 | 0.006 | ||||
Net realized and unrealized loss | (0.079 | ) | (0.218 | ) | ||
Total from investment operations | 0.058 | (0.212 | ) | |||
Less dividends and distributions from: | ||||||
Net investment income | (2.628 | ) | (0.118 | ) | ||
Total dividends and distributions | (2.628 | ) | (0.118 | ) | ||
Net asset value, end of period | $ 9.120 | $11.690 | ||||
Total return4 | 1.07% | (1.77% | ) | |||
Ratios and supplemental data: | ||||||
Net assets, end of period (000 omitted) | $57 | $16 | ||||
Ratio of expenses to average net assets | 0.85% | 0.85% | ||||
Ratio of expenses to average net assets | ||||||
prior to fees waived and expense paid indirectly | 2.92% | 2.84% | ||||
Ratio of net investment income to average net assets | 2.83% | 0.19% | ||||
Ratio of net investment income (loss) to average net assets | ||||||
prior to fees waived and expense paid indirectly | 0.76% | (1.80% | ) | |||
Portfolio turnover | 87% | 151% | 5 |
1 Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 Date of commencement of operations; ratios have been annualized and total return has not been annualized. |
3 The average shares outstanding method has been applied for per share information. |
4 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflect a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
5 Portfolio Turnover is representative of the Fund for the period November 1, 2010 through October 31, 2011. |
See accompanying notes, which are an integral part of the financial statements.
24
Notes to financial statements | |
Delaware International Bond Fund | April 30, 2012 (Unaudited) |
Delaware Group® Adviser Funds (Trust) is organized as Delaware statutory trust and offers three series: Delaware Diversified Income Fund, Delaware International Bond Fund and Delaware U.S. Growth Fund. These financial statements and the related notes pertain to the Delaware International Bond Fund (Fund). The Trust is an open-end investment company. The Fund is considered diversified under the Investment Company Act of 1940, as amended, and offers Class A, Class C, Class R and Institutional Class shares. Class A shares are sold with a maximum front-end sales charge of up to 4.50%. Class A share purchases of $1,000,000 or more will incur a contingent deferred sales charge (CDSC) of 1% if redeemed during the first year and 0.50% during the second year, provided that Delaware Distributors, L.P. (DDLP) paid a financial advisor a commission on the purchase of those shares. Class C shares are sold with a CDSC of 1%, if redeemed during the first twelve months. Class R and Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors.
The investment objective of the Fund is to seek total return.
1. Significant Accounting Policies
The following accounting policies are in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and are consistently followed by the Fund.
Security Valuation — Securities listed on a foreign exchange are normally valued at the last quoted sales price on the valuation date. U.S. government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. Short-term debt securities are valued using the evaluated mean. Other debt securities and credit default swap (CDS) contracts are valued based upon valuations provided by an independent pricing service or broker 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. 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. Foreign currency exchange contracts are valued at the mean between the bid and ask price, which approximates fair value. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available. Futures contracts and options on futures contracts are valued at the daily quoted settlement prices. Exchange-traded options are valued at the last reported sale price or, if no sales are reported, at the mean between the last reported bid and ask prices, which approximates fair value. Generally, other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Fund’s Board of Trustees (Board). In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures or suspension of trading in a security. The Fund may use fair value pricing more frequently for securities traded primarily in non-U.S. markets because, among other things, most foreign markets close well before the Fund values its securities, generally as of 4:00 p.m. Eastern time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, government actions or pronouncements,
25
Notes to financial statements
Delaware International Bond Fund
1. Significant Accounting Policies (continued)
aftermarket trading, or news events may have occurred in the interim. To account for this, the Fund may frequently value foreign securities using fair value prices based on third-party vendor modeling tools (international fair value pricing).
Federal Income Taxes — No provision for federal income taxes has been made as the Fund intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Fund evaluates tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. Management has analyzed the Fund’s tax positions taken on federal income tax returns for all open tax years (October 31, 2008–October 31, 2011), and has concluded that no provision for federal income tax is required in the Fund’s financial statements.
Class Accounting — Investment income, common expenses and realized and unrealized gains (loss) on investments are allocated to the various classes of the Fund on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class.
Repurchase Agreements — The Fund may purchase certain U.S. government securities subject to the counterparty’s agreement to repurchase them at an agreed upon date and price. The counterparty will be required on a daily basis to maintain the value of the collateral subject to the agreement at not less than the repurchase price (including accrued interest). The agreements are conditioned upon the collateral being deposited under the Federal Reserve book-entry system with the Fund’s custodian or a third-party sub-custodian. In the event of default or bankruptcy by the other-party to the agreement, retention of the collateral may be subject to legal proceedings. All open repurchase agreements as of the date of this report were entered into on April 30, 2012.
Foreign Currency Transactions — Transactions denominated in foreign currencies are recorded at the prevailing exchange rates on the valuation date in accordance with the Fund’s prospectus. The value of all assets and liabilities denominated in foreign currencies is translated into U.S. dollars at the exchange rate of such currencies against the U.S. dollar daily. Transaction gains or losses resulting from changes in exchange rates during the reporting period or upon settlement of the foreign currency transaction are reported in operations for the current period. The Fund generally isolates 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. The Fund reports certain foreign currency related transactions as components of realized gains (losses) for financial reporting purposes, whereas such components are treated as ordinary income (loss) for federal income tax purposes.
Use of Estimates — The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
26
the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material.
Other — Expenses directly attributable to the Fund are charged directly to the Fund. Other expenses common to various funds within the Delaware Investments® Family of Funds are generally allocated amongst such funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Interest income is recorded on the accrual basis. Discounts and premiums on non-convertible debt securities are amortized to interest income over the lives of the respective securities using the effective interest method. 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 income dividends and capital gains more frequently, if necessary for tax purposes. Dividends and distributions, if any, are recorded on the ex-dividend date.
The Fund may receive earnings credits from its custodian when positive cash balances are maintained, which are used to offset custody fees. There were no earnings credits for the six months ended April 30, 2012.
The Fund receives earnings credits from its transfer agent when positive cash balances are maintained, which are used to offset transfer agent fees. The expense paid under this arrangement is included in dividend disbursing and transfer agent fees and expenses on the statement of operations with the corresponding expense offset shown as “expense paid indirectly.” For the six months ended April 30, 2012, the Fund earned $1 under this agreement.
2. Investment Management, Administration Agreements and Other Transactions with Affiliates
In accordance with the terms of its investment management agreement, the Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee which is calculated daily at the rate of 0.65% on the first $500 million of average daily net assets of the Fund, 0.60% on the next $500 million, 0.55% on the next $1.5 billion, and 0.50% on average daily net assets in excess of $2.5 billion.
DMC has contractually agreed to waive that portion, if any, of its management fee and reimburse the Fund to the extent necessary to ensure that total annual operating expenses (excluding any 12b-1 fees, taxes, interest, short sale and dividend interest expenses, brokerage fees, certain insurance costs, and nonroutine expenses or costs, including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations) do not exceed 0.85% of average daily net assets of the Fund through February 28, 2013. This expense waiver and reimbursement may only be terminated by agreement of the Fund’s Board and DMC. This expense waiver and reimbursement apply only to expenses paid directly by the Fund.
27
Notes to financial statements
Delaware International Bond Fund
2. Investment Management, Administration Agreements and Other Transactions with Affiliates (continued)
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Fund. For these services, the Fund pays DSC fees based on the aggregate daily net assets of the Delaware Investments® Family of Funds at the following annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DSC under the service agreement described above are allocated among all Funds in the Delaware Investments® Family of Funds on a relative net asset value basis. For the six months ended April 30, 2012, the Fund was charged $274 for these services.
DSC also provides dividend disbursing and transfer agency services. The Fund pays DSC a monthly asset-based fee for these services.
Pursuant to a distribution agreement and distribution plan, the Fund pays DDLP, the distributor and an affiliate of DMC, an annual distribution and service fee not to exceed 0.30% of the average daily net assets of the Class A shares, 1.00% of the average daily net assets of the Class C shares and 0.60% of the average daily net assets of the Class R shares. Institutional Class shares pay no distribution and service expenses. DDLP has contracted to limit the Class A and Class R shares 12b-1 fees through February 28, 2013 to no more than 0.25% and 0.50% of their respective average daily net assets.
At April 30, 2012, the Fund had receivables due from or liabilities payable to affiliates as follows:
Receivable from DMC under expense limitation agreement | $ | 27,973 | |
Dividend disbursing, transfer agent and fund accounting | |||
oversight fees and other expenses payable to DSC | 276 | ||
Distribution fees payable to DDLP | 2,688 | ||
Other expenses payable to DMC and affiliates* | 104 |
*DMC, as part of its administrative services, pays operating expenses on behalf of the Fund and is reimbursed on a periodic basis. Expenses include items such as printing of shareholder reports, fees for audit, legal and tax services, registration fees and trustees’ fees.
As provided in the investment management agreement, the Fund bears the cost of certain legal and tax services, including internal legal and tax services provided to the Fund by DMC and/or its affiliates’ employees. For the six months ended April 30, 2012, the Fund was charged $ 155 for internal legal and tax services provided by DMC and/or its affiliates’ employees.
For the six months ended April 30, 2012, DDLP earned $2,468 for commissions on sales of the Fund’s Class A shares. For the six months ended April 30, 2012, DDLP received gross CDSC commissions of $79 on redemptions of the Fund’s Class C shares, and these commissions were entirely used to offset up-front commissions previously paid by DDLP to broker/dealers on sales of those shares.
28
Trustees’ fees include expenses accrued by the Fund for each Trustee’s retainer and meeting fees. Certain officers of DMC, DSC and DDLP are officers and/or Trustees of the Trust. These officers and Trustees are paid no compensation by the Fund.
3. Investments
For the six months ended April 30, 2012, the Fund made purchases of $9,101,070 and sales of $8,235,968 of investment securities other than U.S. government securities and short-term investments. For the six months ended April 30, 2012, the Fund made purchases of $758,806 and sales of $755,452 of long-term U.S. government securities.
At April 30, 2012, the cost of investments for federal income tax purposes has been estimated since final tax characteristics cannot be determined until fiscal year end. At April 30, 2012, the cost of investments was $11,178,394. At April 30, 2012, net unrealized appreciation was $253,147, of which $377,664 related to unrealized appreciation and $124,517 related to unrealized depreciation.
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. A three level hierarchy for fair value measurements has been established based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability developed based on the best information available under the circumstances. The Fund’s investment in its entirety is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three level hierarchy of inputs is summarized below.
Level 1 | – | inputs are quoted prices in active markets for identical investments (e.g., equity securities, open-end investment companies, futures contracts, options contracts) |
Level 2 | – | other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs) (e.g., debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities) |
Level 3 | – | inputs are significant unobservable inputs (including the Fund’s own assumptions used to determine the fair value of investments) (e.g., broker-quoted securities, fair valued securities) |
29
Notes to financial statements
Delaware International Bond Fund
3. Investments (continued)
Level 3 investments are valued using significant unobservable inputs, including related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. 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 April 30, 2012:
Level 1 | Level 2 | Total | |||||||
Corporate Bonds | $ | — | $ | 5,450,937 | $ | 5,450,937 | |||
Foreign Debt | — | 5,698,711 | 5,698,711 | ||||||
Option Purchased | 3,125 | — | 3,125 | ||||||
Short-Term Investments | — | 278,768 | 278,768 | ||||||
Total | $ | 3,125 | $ | 11,428,416 | $ | 11,431,541 | |||
Foreign Currency Exchange Contracts | $ | — | $ | 40,516 | $ | 40,516 | |||
Swap Contracts | — | 15,790 | 15,790 |
There were no unobservable inputs used to value investments at the beginning or end of the period. During the six months ended April 30, 2012, there were no transfers between Level 1 investments, Level 2 investments or Level 3 investments that had a material impact to the Fund. The Fund’s policy is to recognize transfers between levels at the beginning of the reporting period.
In May 2011, the Financial Accounting Standards Board (FASB) issued ASU No. 2011-04 modifying Topic 820, Fair Value Measurements and Disclosures. ASU No. 2011-04 requires reporting entities to disclose i) the amounts of any transfers between Level 1 and Level 2, and the reasons for the transfers, ii) for Level 3 fair value measurements, iii) quantitative information about significant unobservable inputs used, iv) a description of the valuation processes used by the reporting entity and v) a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs if a change in those inputs might result in a significantly higher or lower fair value measurement. The effective date of ASU No. 2011-04 is for interim and annual periods beginning after December 15, 2011. Management is currently evaluating the implications of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.
30
4. Dividend and Distribution Information
Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Additionally, distributions from net gains on foreign currency transactions and net short-term gains on sales of investment securities are treated as ordinary income for federal income tax purposes. The tax character of dividends and distributions paid during the six months ended April 30, 2012 and the year ended October 31, 2011 was as follows:
Six Months | Year | |||
Ended | Ended | |||
4/30/12* | 10/31/11 | |||
Ordinary income | $2,460,376 | $952,181 |
*Tax information for the six months ended April 30, 2012 is an estimate and the tax character of dividends and distributions may be redesignated at fiscal year end.
5. Components of Net Assets on a Tax Basis
The components of net assets are estimated since final tax characteristics cannot be determined until fiscal year end. As of April 30, 2012, the estimated components of net assets on a tax basis were as follows:
Shares of beneficial interest | $ | 12,406,848 | ||
Realized losses 11/1/11–4/30/12 | (18,314 | ) | ||
Capital loss carryforwards as of 10/31/11 | (299,029 | ) | ||
Other temporary differences | (78,159 | ) | ||
Unrealized appreciation | 359,182 | |||
Net assets | $ | 12,370,528 |
The differences between book basis and tax basis components of net assets are primarily attributable to mark-to-market of foreign currency exchange contracts, tax deferral of losses on straddles, tax treatment of market discount and premium on debt instruments.
For financial reporting purposes, capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Reclassifications are primarily due to tax treatment gain (loss) on foreign currency transactions, market discount and premium on certain debt instruments operating losses, dividends and distributions. Results of operations and net assets were not affected by these reclassifications. For the six months ended April 30, 2012, the Fund recorded an estimate of these differences since final tax characteristics cannot be determined until fiscal year end.
Accumulated net investment loss | $ | 28,976 | ||
Accumulated net realized loss | 181,325 | |||
Paid in capital | (210,301 | ) |
31
Notes to financial statements
Delaware International Bond Fund
5. Components of Net Assets on a Tax Basis (continued)
For federal income tax purposes, capital loss carryforwards may be carried forward and applied against future capital gains. Capital loss carryforwards remaining at October 31, 2011 will expire as follows: $254,415 expires in 2014, $21,289 expires in 2016 and $23,325 expires in 2017.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the Act) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes are generally effective for taxable years beginning after the date of enactment. Under the Act, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under previous regulation.
6. Capital Shares
Transactions in capital shares were as follows:
Six Months | Year | |||||
Ended | Ended | |||||
4/30/12 | 10/31/11 | |||||
Shares Sold: | ||||||
Class A | 161,818 | 1,743,017 | ||||
Class C | 24,574 | 14,949 | ||||
Class R | 2,209 | 3 | ||||
Institutional Class | 4,501 | 1,808 | ||||
Shares issued upon reinvestment of dividends and distributions: | ||||||
Class A | 268,623 | 86,604 | ||||
Class C | 4,456 | 80 | ||||
Class R | 17 | — | ||||
Institutional Class | 413 | 8 | ||||
466,611 | 1,846,469 | |||||
Shares repurchased: | ||||||
Class A | (7,732 | ) | (2,704,637 | ) | ||
Class C | (1,816 | ) | (821 | ) | ||
Institutional Class | (13 | ) | (479 | ) | ||
(9,561 | ) | (2,705,937 | ) | |||
Net increase (decrease) | 457,050 | (859,468 | ) |
32
7. Fund Reorganization
Following the close of business on July 28, 2011, pursuant to a Plan of Reorganization (Reorganization), the Fund received all of the assets and liabilities of The International Fixed Income Portfolio, a series of the Delaware Pooled® Trust (Portfolio). The shareholders of the Portfolio received Class A shares of the Fund with an aggregate net asset value equal to the aggregate net asset value of their shares in the Portfolio immediately prior to the Reorganization, shown as in the following table:
Shares Prior to | Shares After | |||||||||
Reorganization | Reorganization | Value | ||||||||
Class A | — | 866,702 | $10,430,781 | |||||||
Institutional Class | 866,702 | — | 10,430,781 |
The Reorganization was treated as a tax-free reorganization for federal income purposes and, accordingly, the basis of the assets of the Fund reflected the historical basis of the assets of the Portfolio as of the date of the Reorganization. For financial reporting purposes, the Portfolio’s operating history prior to the Reorganization is reflected in the Fund’s financial statements and financial highlights. The net assets, net unrealized appreciation and accumulated net realized loss of the Portfolio as of the close of business on July 28, were as follows:
Net assets | $ | 10,480,781 | |
Accumulated net realized loss | 1,890,587 | ||
Net unrealized appreciation | 942,547 |
8. Line of Credit
The Fund, along with certain other funds in the Delaware Investments® Family of Funds (Participants), was a participant in a $100,000,000 revolving line of credit to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, the Participants were charged an annual commitment fee, which was allocated across the Participants on the basis of each Participant’s allocation of the entire facility. The Participants were permitted to borrow up to a maximum of one third of their net assets under the agreement. The line of credit under the agreement expired on November 15, 2011.
On November 15, 2011, the Fund, along with the other Participants, entered into an amendment to the agreement for a $125,000,000 revolving line of credit. The agreement is to be used as described above and operates in substantially the same manner as the original agreement. The agreement expires on November 13, 2012. The Fund had no amounts outstanding as of April 30, 2012, or at any time during the period then ended.
9. Derivatives
U.S. GAAP requires disclosures that enable investors to understand: 1) how and why an entity uses derivatives; 2) how they are accounted for; and 3) how they affect an entity’s results of operations and financial position.
33
Notes to financial statements
Delaware International Bond Fund
9. Derivatives (continued)
Foreign Currency Exchange Contracts — The Fund enters into foreign currency exchange contracts as a way of managing foreign exchange rate risk. The Fund may enter into these contracts to fix the U.S. dollar value of a security that it has agreed to buy or sell for the period between the date the trade was entered into and the date the security is delivered and paid for. The Fund may also use these contracts to hedge the U.S. dollar value of securities it already owns that are denominated in foreign currencies. The change in value is recorded as an unrealized gain or loss. When the contract is closed, a realized gain or loss is recorded equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
The use of foreign currency exchange contracts does not eliminate fluctuations in the underlying prices of the securities, but does establish a rate of exchange that can be achieved in the future. Although foreign currency exchange contracts limit the risk of loss due to an unfavorable change in the value of the hedged currency, they also limit any potential gain that might result should the value of the currency change favorably. In addition, the Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts. The Fund’s maximum risk of loss from counterparty credit risk is the value of its currency exchanged with the counterparty. The risk is generally mitigated by having a netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty.
Futures Contracts — A futures contract is an agreement in which the writer (or seller) of the contract agrees to deliver to the buyer an amount of cash or securities equal to a specific dollar amount times the difference between the value of a specific security or index at the close of the last trading day of the contract and the price at which the agreement is made. The Fund may use futures in the normal course of pursuing its investment objective. The Fund may invest in futures contracts to hedge its existing portfolio securities against fluctuations in fair value caused by changes in prevailing market interest rates. Upon entering into a futures contract, the Fund deposits cash or pledges U.S. government securities to a broker, equal to the minimum “initial margin” requirements of the exchange on which the contract is traded. Subsequent payments are received from the broker or paid to the broker each day, based on the daily fluctuation in the market value of the contract. These receipts or payments are known as “variation margin” and are recorded daily by the Fund as unrealized gains or losses until the contracts are closed. When the contracts are closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Risks of entering into futures contracts include potential imperfect correlation between the futures contracts and the underlying securities and the possibility of an illiquid secondary market for these instruments. When investing in futures, there is minimal counterparty credit risk to the Fund because futures are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees against default. No futures contracts were outstanding at April 30, 2012.
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Options Contracts — During the six months ended April 30, 2012, the Fund entered into option 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 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. 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 options purchased. When the Fund writes an option, a premium is received and a liability is recorded and adjusted on a daily basis to reflect the current market value of the options written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is treated as realized gain or loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether the Fund has a realized gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by the Fund. The Fund, as writer of an option, bears the market risk of an unfavorable change in the price of the security underlying the written option. When writing options, the Fund is subject to minimal counterparty risk because the counterparty is only obligated to pay premiums and does not bear the market risk of an unfavorable market change.
Transactions in options written during the six months ended April 30, 2012 for the Fund were as follows:
Number of | |||||||||
Contracts | Premium | ||||||||
Options outstanding at October 31, 2011 | — | $ | — | ||||||
Options written | 2 | 1,128 | |||||||
Options expired | (2 | ) | (1,128 | ) | |||||
Options outstanding at April 30, 2012 | — | $ | — |
Swap Contracts — The Fund enters 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.
Credit Default Swaps. A CDS contract is a risk-transfer instrument through which one party (purchaser of protection) transfers to another party (seller of protection) the financial risk of a credit event (as defined in the CDS agreement), as it relates to a particular reference security or basket of securities (such as an index). In exchange for the protection offered by the seller of protection, the purchaser of protection agrees to pay the seller of protection a periodic amount at a stated rate that is applied to the notional amount of the CDS contract. In addition, an upfront payment may be made or received by the Fund in connection with an unwinding or assignment of a CDS contract. Upon the occurrence of a credit event, the seller of protection would pay the par (or other agreed-upon) value of the reference security (or basket of securities) to the counterparty. Credit events generally include, among others, bankruptcy, failure to pay, and obligation default.
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Notes to financial statements
Delaware International Bond Fund
9. Derivatives (continued)
During the six months ended April 30, 2012, the Fund entered into CDS contracts as a purchaser of protection. Periodic payments on such contracts are accrued daily and recorded as unrealized losses (gains) on swap contracts. Upon payment, such amounts are recorded as realized losses (gains) on swap contracts. Upfront payments made in connection with CDS contracts are amortized over the expected life of the CDS contracts as unrealized losses (gains) on swap contracts. The change in value of CDS contracts is recorded as unrealized appreciation or depreciation daily. A realized gain or loss is recorded upon a credit event (as defined in the CDS agreement) or the maturity or termination of the agreement. At April 30, 2012, net unrealized appreciation of CDS contracts was $15,790. If a credit event had occurred for all open swap transactions where collateral posting was required as of April 30, 2012, the Fund would have received $714,000 less the value of the contracts’ related reference obligations.
CDS contracts may involve greater risks than if the Fund had invested in the reference obligation directly. CDS contracts are subject to general market risk, liquidity risk, counterparty risk and credit risk. The Fund’s maximum risk of loss from counterparty credit risk, either as the seller of protection or the buyer of protection, is the fair value of the contract. This risk is mitigated by having a netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty.
Swaps Generally. Because there are generally no organized markets for swap contracts, the value of open swaps may differ from that which would be realized in the event the Fund terminated its position in the agreement. Risks of entering into these contracts include the potential inability of the counterparty to meet the terms of the contracts. This type of risk is generally limited to the amount of favorable movement in the value of the underlying security, instrument or basket of instruments, if any, at the day of default. Risks also arise from potential losses from adverse market movements and such losses could exceed the unrealized amounts shown on the statement of net assets.
Fair values of derivative instruments as of April 30, 2012 were as follows:
Asset Derivatives | Liability Derivatives | ||||||||||||
Statement of Assets and | Statement of Assets and | ||||||||||||
Liabilities Location | Fair Value | Liabilities Location | Fair Value | ||||||||||
Forward currency exchange | |||||||||||||
contracts (Foreign currency | |||||||||||||
exchange contracts | Unrealized gain on foreign currency exchange contracts | $ | 43,608 | Unrealized loss on foreign currency exchange contracts | $ | (3,092 | ) | ||||||
Credit contracts | |||||||||||||
(Swap contracts) | Unrealized gain on swap contracts | 15,790 | Unrealized loss on swap contracts | — | |||||||||
Total | $ | 59,398 | $ | (3,092 | ) |
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The effect of derivative instruments on the statement of operations for the six months ended April 30, 2012 was as follows:
Change in | ||||||||||||
Unrealized | ||||||||||||
Realized Gain | Appreciation | |||||||||||
or Loss on | (Depreciation) | |||||||||||
Derivatives | on Derivatives | |||||||||||
Location of Gain or Loss on | Recognized in | Recognized in | ||||||||||
Derivatives Recognized in Income | Income | Income | ||||||||||
Forward currency exchange | ||||||||||||
contracts (Foreign currency | ||||||||||||
exchange contracts) | Net realized loss on foreign currency exchange contracts and net change in unrealized appreciation (depreciation) of foreign currency exchange contracts | $ | (302,493 | ) | $ | 91,326 | ||||||
Interest rate contracts | ||||||||||||
(Futures contracts) | Net realized loss on futures contracts and net change in unrealized appreciation (depreciation) of futures contracts | (42,707 | ) | — | ||||||||
Equity contracts | ||||||||||||
(Options written) | Net realized gain on options written and net change in unrealized appreciation (depreciation) of options written | 668 | — | |||||||||
Credit contracts | ||||||||||||
(Swap contracts) | Net realized loss on swap contracts and net change in unrealized appreciation (depreciation) of swap contracts | (29,716 | ) | 15,088 | ||||||||
Total | $ | (374,248 | ) | $ | 106,414 |
Derivatives Generally. The table below summarizes the average balance of derivative holdings by the Fund during the six months ended April 30, 2012. The average balance of derivatives held is generally similar to the volume of derivative activity for the six months ended April 30, 2012.
37
Notes to financial statements
Delaware International Bond Fund
9. Derivatives (continued)
For the six month ended April 30, 2012, the Fund’s average volume of derivative activities is as follows:
Asset | Liability | |||||
Derivative | Derivative | |||||
Volume | Volume | |||||
Forward foreign currency exchange contracts (average cost) | $ | 3,800,227 | $ | 912,101 | ||
Futures contracts (average notional value) | 197,669 | 98,815 | ||||
Option contracts (average notional value) | 88 | 146 | ||||
Swap contracts (average notional value) | — | 326,935 |
10. Securities Lending
The Fund, along with other funds in the Delaware Investments® Family of Funds, may lend its securities pursuant to a security lending agreement (Lending Agreement) with The Bank of New York (BNY Mellon). At the time a security is loaned, the borrower must post collateral equal to the required percentage of the market value of the loaned security, including any accrued interest. The required percentage is: (i) 102% with respect to U.S. securities and foreign securities that are denominated and payable in U.S. dollars; and (ii) 105% with respect to foreign securities. With respect to each loan, if on any business day the aggregate market value of securities collateral plus cash collateral held is less than the aggregate market value of the securities which are the subject of such loan, the borrower will be notified to provide additional collateral by the end of the following business day which, together with the collateral already held, will be not less than the applicable initial collateral requirements for such security loan. If the aggregate market value of securities collateral and cash collateral held with respect to a security loan exceeds the applicable initial collateral requirement, upon the request of the borrower BNY Mellon must return enough collateral to the borrower by the end of the following business day to reduce the value of the remaining collateral to the applicable initial collateral requirement for such security loan. As a result of the foregoing, the value of the collateral held with respect to a loaned security may be temporarily more or less than the value of the security on loan.
Cash collateral received is generally invested in the Delaware Investments Collateral Fund No. 1 (Collective Trust) established by BNY Mellon for the purpose of investment on behalf of funds managed by DMC that participate in BNY Mellon’s securities lending program. The Collective Trust may invest in U.S. government securities and high quality corporate debt, asset-backed and other money market securities and in repurchase agreements collateralized by such securities, provided that the Collective Trust will generally have a dollar-weighted average portfolio maturity of 60 days or less. The Fund can also accept U.S. government securities and letters of credit (non-cash collateral) in connection with securities loans. In the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of
38
investment losses, the lending agent has agreed to pay the amount of the shortfall to the Fund, or at the discretion of the lending agent, replace the loaned securities. The Fund continues to record dividends or interest, as applicable, on the securities loaned and is subject to changes in value of the securities loaned that may occur during the term of the loan. The Fund has the right under the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized by non-cash collateral, the Fund receives loan premiums paid by the borrower. With respect to security loans collateralized by cash collateral, the earnings from the collateral investments are shared among the Fund, the security lending agent and the borrower. The Fund records security lending income net of allocations to the security lending agent and the borrower.
The Collective Trust used for the investment of cash collateral received from borrowers of securities seeks to maintain a net asset value per unit of $1.00, but there can be no assurance that it will always be able to do so. The Fund may incur investment losses as a result of investing securities lending collateral in the Collective Trust. This could occur if an investment in the Collective Trust defaulted or if it were necessary to liquidate assets in the Collective Trust to meet returns on outstanding security loans at a time when the Collective Trust’s net asset value per unit was less than $1.00. Under those circumstances, the Fund may not receive an amount from the Collective Trust that is equal in amount to the collateral the Fund would be required to return to the borrower of the securities and the Fund would be required to make up this shortfall.
During the six months ended April 30, 2012, the Fund had no securities out on loan.
11. Credit and Market Risk
Some countries in which the Fund may invest require governmental approval for the repatriation of investment income, capital or the proceeds of sales of securities by foreign investors. In addition, if there is deterioration in a country’s balance of payments or for other reasons, a country may impose temporary restrictions on foreign capital remittances abroad.
The securities exchanges of certain foreign markets are substantially smaller, less liquid and more volatile than the major securities markets in the United States. Consequently, acquisition and disposition of securities by the Fund may be inhibited. In addition, a significant portion of the aggregate market value of 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 may invest a portion of its net assets in high yield fixed income securities, which are securities rated lower than BBB- by Standard & Poor’s and/or Baa by Moody’s Investor Services Inc., 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.
39
Notes to financial statements
Delaware International Bond Fund
11. Credit and Market Risk (continued)
The Fund may invest up to 15% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair the Fund from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, the Fund’s Board has delegated to DMCs the day-to-day functions of determining whether individual securities are liquid for purposes of the Fund’s limitation on investments in illiquid securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Fund’s 15% limit on investments in illiquid securities. As of April 30, 2012, no securities have been determined to be illiquid under the Fund’s Liquidity Procedures. Rule 144A securities have been identified on the statement of net assets.
12. Contractual Obligations
The Fund enters into contracts in the normal course of business that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Fund’s existing contracts and expects the risk of loss to be remote.
13. Subsequent Events
Management has determined that no other material events or transactions occurred subsequent to April 30, 2012 that would require recognition or disclosure in the Fund’s financial statements.
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Other Fund information
(Unaudited)
Delaware International Bond Fund
Change in Independent Registered Public Accounting Firm
Due to independence matters under the Securities and Exchange Commission’s auditor independence rules relating to the January 4, 2010 acquisition of Delaware Investments (including DMC, DDLP and DSC) by Macquarie Group, Ernst & Young LLP (E&Y) resigned as the independent registered public accounting firm for The International Fixed Income Portfolio (the Portfolio) of Delaware Pooled® Trust (the Trust) effective May 20, 2010. The Portfolio was reorganized into Delaware International Bond Fund (the Fund) on July 28, 2011. Information in the Fund’s financial statements for periods prior to July 28, 2011 relates to the Portfolio. At a meeting held on May 20, 2010, the Board of Trustees of the Trust, upon recommendation of the Audit Committee, selected PricewaterhouseCoopers LLP (PwC) to serve as the independent registered public accounting firm for the Portfolio for the fiscal year ending October 31, 2010. During the fiscal years ended October 31, 2009 and 2008, E&Y’s audit reports on the financial statements of the Portfolio did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles. In addition, there were no disagreements between the Trust and E&Y on accounting principles, financial statements disclosures or audit scope, which, if not resolved to the satisfaction of E&Y, would have caused them to make reference to the disagreement in their reports. Neither the Trust nor anyone on its behalf has consulted with PwC at any time prior to their selection with respect to the application of accounting principles to a specified transaction, either completed or proposed or the type of audit opinion that might be rendered on the Portfolio’s financial statements.
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About the organization
Board of trustees | |||
Patrick P. Coyne Chairman, President, and Chief Executive Officer Delaware Investments® Family of Funds Philadelphia, PA Thomas L. Bennett Private Investor Rosemont, PA John A. Fry President Drexel University Philadelphia, PA | Anthony D. Knerr Founder and Managing Director Anthony Knerr & Associates New York, NY Lucinda S. Landreth Former Chief Investment Officer Assurant, Inc. Philadelphia, PA | Ann R. Leven Consultant ARL Associates New York, NY Frances A. Sevilla-Sacasa Chief Executive Officer Banco Itaú Europa International Miami, FL | Janet L. Yeomans Vice President and Treasurer 3M Corporation St. Paul, MN J. Richard Zecher Founder Investor Analytics Scottsdale, AZ |
Affiliated officers | |||
David F. Connor Vice President, Deputy General Counsel, and Secretary Delaware Investments Family of Funds Philadelphia, PA | Daniel V. Geatens Vice President and Treasurer Delaware Investments Family of Funds Philadelphia, PA | David P. O’Connor Executive Vice President, General Counsel and Chief Legal Officer Delaware Investments Family of Funds Philadelphia, PA | Richard Salus Senior Vice President and Chief Financial Officer Delaware Investments Family of Funds Philadelphia, PA |
This semiannual report is for the information of Delaware International Bond Fund shareholders, but it may be used with prospective investors when preceded or accompanied by the Delaware Investments Fund fact sheet for the most recently completed calendar quarter. These documents are available at www.delawareinvestments.com. |
Delaware Investments is the marketing name of Delaware Management Holdings, Inc. and its subsidiaries. The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 800 523-1918; and (ii) on the SEC’s website at www.sec.gov. In addition, a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities and the Fund’s Schedule of Investments are available without charge on the Fund’s website at www.delawareinvestments.com. The Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C.; information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund’s website at www.delawareinvestments.com; and (ii) on the SEC’s website at www.sec.gov. |
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Item 2. Code of Ethics
Not applicable.
Item 3. Audit Committee Financial Expert
Not applicable.
Item 4. Principal Accountant Fees and Services
Not applicable.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Investments
(a) Included as part of report to shareholders filed under Item 1 of this Form N-CSR.
(b) Divestment of securities in accordance with Section 13(c) of the Investment Company Act of 1940.
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 11. Controls and Procedures
The registrant’s principal executive officer and principal financial officer have evaluated the registrant’s disclosure controls and procedures within 90 days of the filing of this report and have concluded that they are effective in providing reasonable assurance that the information required to be disclosed by the registrant in its reports or statements filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.
There were no significant changes in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by the report to stockholders included herein (i.e., the registrant’s second fiscal quarter) that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits
(a) (1) Code of Ethics
Not applicable.
(2) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rule 30a-2 under the Investment Company Act of 1940 are attached hereto as Exhibit 99.CERT.
(3) Written solicitations to purchase securities pursuant to Rule 23c-1 under the Securities Exchange Act of 1934.
Not applicable.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are furnished herewith as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf, by the undersigned, thereunto duly authorized.
Name of Registrant: DELAWARE GROUP® ADVISER FUNDS
/s/ PATRICK P. COYNE | |
By: | Patrick P. Coyne |
Title: | Chief Executive Officer |
Date: | July 2, 2012 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ PATRICK P. COYNE | |
By: | Patrick P. Coyne |
Title: | Chief Executive Officer |
Date: | July 2, 2012 |
/s/ RICHARD SALUS | |
By: | Richard Salus |
Title: | Chief Financial Officer |
Date: | July 2, 2012 |