ANNUAL N-CSR FOR OPEN-END FUNDS
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-21335
Exact name of registrant as specified in charter: Optimum Fund Trust
Address of principal executive offices:
2005 Market Street
Philadelphia, PA 19103
Name and address of agent for service:
Richelle S. Maestro, Esq.
2005 Market Street
Philadelphia, PA 19103
Registrant's telephone number, including area code: (800) 523-1918
Date of fiscal year end: 3/31
Date of reporting period: 3/31
Item 1. Reports to Stockholders
OPTIMUM FUNDS MAY 28, 2004
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This brochure accompanies an annual report for the information of Optimum Fund
Trust shareholders, but it may be used with prospective investors when preceded
or accompanied by a current prospectus for Optimum Trust Funds. The prospectus
sets forth details about charges, expenses, investment objectives, and operating
policies of each Fund. Prospectuses for all Optimum funds are available from
your financial advisor, online at www.optimummutualfunds.com, or by calling 800
914-0278. Please read the prospectus carefully before you invest or send money.
The figures in the annual report for Optimum Funds represent past results which
are not a guarantee of future results. The return and principal value of each
investment in the Fund will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost.
DEAR SHAREHOLDER: April 8, 2004
Investors experienced sound returns in most financial markets at home and abroad
over the eight-month period ended March 31, 2004. The many successes came amid a
backdrop of geopolitical tumult, and can be attributed to several key factors.
Foremost in our opinion was the general strengthening of global economies.
Starting with the U.S., investor gloom generally gave way to rising expectations
for renewed economic vigor, based in good measure on accommodative monetary and
fiscal policy. The Federal Reserve provided significant stimulus to the economy
by moving short-term rates to levels not experienced since the early 1960s. In
June 2003, the fed funds rate was lowered to a mere 1.0%, where it stayed
through fiscal year-end on March 31, 2004. Within an environment of muted
inflation, low interest rates made borrowing quite attractive. Activity in the
housing sector was rather brisk due to, among other factors, increased home
purchases and mortgage refinancings.
The federal government did its part in lending fiscal stimulus to the economy
when it passed a massive tax cuts package in May 2003. Through it all, the
economy snapped back from its period of recession in 2001 to record annualized
growth, as measured by gross domestic product (GDP), of +6.1% over the second
half of 2003. History bears out, however, that economic expansion at this pace
has not often been sustainable over many quarters.
History can also impart insight to the nature of stock market behavior. For
example, stock prices typically appreciate in advance of rising corporate
profitability. This trend held true during the 12-month period, as investors
shed their bearish ways and began buying stocks in anticipation of the tide of
rising profits that we witnessed throughout the period. Causes for increased
earnings included high productivity levels and cost-cutting initiatives that
stemmed from the recent recession.
Few stocks were left behind with the market's advance, with particular strength
found among the equities of smaller companies. The Russell 2000 Index, which
features such "small caps", gained an impressive +24.9% for the eight-months
ended March 31, 2004. In comparison, large-cap stocks, as are found in the
Russell 1000 Index, increased +15.5% during the same period.
A tendency within the market was a focus on "lesser quality" companies. This
meant that more-aggressive equities often outperformed stocks of companies
exhibiting superior fundamentals, such as a dividend yield or the demonstrated
ability to add shareholder value through sales/earnings growth. However, by the
first quarter of 2004, a shift had emerged, and higher-quality securities were
again becoming favored over the riskier stocks that had performed well during
much of 2003.
Just as monetary and fiscal stimulus benefited the U.S., similar measures
effected around the world allowed international stocks to rise appreciably in
value. Like domestic equities, non-U.S. stocks of different-size companies
experienced rising prices, as did those of established and emerging market
nations. As a measure of more-developed economies, the MSCI EAFE Index rose an
impressive +29.1%, while the MSCI Emerging Markets Index climbed an astounding
+38.9% for the eight-month period.
The domestic bond market performed well during the fiscal year, although rates
of return among its constituent asset classes - to include corporate bonds and
mortgage-backed securities - showed signs of moderating from the strong
performances recorded in recent years. For a broad look at the U.S. fixed-income
market, the Lehman Brothers Aggregate Bond Index rose +6.4% for the eight-month
period ended March 31, 2004.
Foreign fixed-income markets fared better, with the Citigroup ex-U.S. World
Government Bond Index rising +14.3% for the period. A measure of this
performance could be attributed to the general strengthening of world currencies
versus the U.S. dollar. Still, bonds remained an attractive investment vehicle
during the period, for income production, and portfolio diversification, among
other positive qualities.
/s/ Jude T. Driscoll
Jude T. Driscoll
Chairman,
Delaware Investments Family of Funds
THIS PAGE IS NOT PART OF THE ANNUAL REPORT.
ANNUAL REPORT MARCH 31, 2004
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OPTIMUM FIXED INCOME FUND
OPTIMUM INTERNATIONAL FUND
OPTIMUM LARGE CAP GROWTH FUND
OPTIMUM LARGE CAP VALUE FUND
OPTIMUM SMALL CAP GROWTH FUND
OPTIMUM SMALL CAP VALUE FUND
TABLE
OF CONTENTS
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PORTFOLIO MANAGEMENT REVIEW:
Optimum Fixed Income Fund 1
Optimum International Fund 5
Optimum Large Cap Growth Fund 9
Optimum Large Cap Value Fund 13
Optimum Small Cap Growth Fund 17
Optimum Small Cap Value Fund 20
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FINANCIAL STATEMENTS:
Statements of Net Assets 24
Statements of Assets and Liabilities 48
Statements of Operations 49
Statements of Changes in Net Assets 51
Financial Highlights 53
Notes to Financial Statements 59
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REPORT OF INDEPENDENT AUDITORS 69
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BOARD OF TRUSTEES/OFFICERS 70
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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.
(C) 2004 Delaware Distributors, L.P.
PORTFOLIO MANAGEMENT REVIEW April 8, 2004
OPTIMUM FIXED INCOME FUND
ADVISOR:
Delaware Management Company
SUB-ADVISORS:
Delaware International Advisers Ltd. (DIAL)*
Deutsche Investment Management Americas Inc. (DIMA Inc.)
During the eight-month period that began at the Optimum Fixed Income Fund's
inception on August 1, 2003 and ended with its fiscal year close on March 31,
2004, the Fund gained +6.82% (Class A shares at net asset value with
distributions reinvested). For comparison purposes, the Lehman Brothers
Aggregate Bond Index gained +5.71% (index start date was August 31, 2003).
The Fund seeks a high level of income and may also seek growth of capital. The
Fund's advisor, Delaware Management Company, manages one portion of the Fund. It
also selected two sub-advisors to manage portions of the Fund's assets on a
day-to-day basis. Each sub-advisor selects investments for its portion of the
Fund based on its own investment style and strategy, which are generally
intended to complement one another. Within its portion of the Fund, the manager
allocates investments principally among the following three sectors of the fixed
income market:
1) U.S. investment grade
2) U.S. high yield
3) International
Sub-advisor DIAL manages the portion of the Fund allocated to international
investments. Sub-advisor DIMA Inc. uses a "bottom-up" security selection
approach and focuses on the securities and sectors it believes are undervalued
relative to the market, rather than relying on interest rate forecasts. For more
information on each sub-advisor's investment approach, please see the
Fund's prospectus.
DELAWARE MANAGEMENT COMPANY
Q: CAN YOU PROVIDE SOME BACKGROUND ABOUT PERFORMANCE IN THE THREE MAIN
FIXED-INCOME SECTORS WITHIN THE FUND?
A: HIGH YIELD - Performance in the high-yield sector was very strong during the
period, boosting overall Fund performance.
The secondary CBO (collateralized bond obligation) market, while having rallied
tremendously over the past year, remains a source of stable yield, although it
likely presents fewer opportunities for new purchases.
The Delaware Investments credit research team will continue to focus on
high-quality, high-yield credit ideas. Specifically, we have found good
opportunities in yield-to-call paper, which typically provides excellent yield
with relatively lower duration risk. In addition, we are intensely focused on
valuations between high yield and high-grade bonds. We continue to examine ideas
among bank loans of distressed companies in the high-yield market. The loan
market continues to provide a stable, above-average yield advantage versus the
Lehman Brothers Aggregate Bond Index.
Current valuations lead us to be more cautious about near-term performance in
the sector. We currently anticipate that the allocation to the "plus" sectors of
the market will be lower than they were in 2003.
INVESTMENT-GRADE -- In our opinion, corporate valuations appear less compelling
versus other high-grade asset classes, though the yield advantage remains
attractive. While we believe that corporate bonds may outperform the benchmark
index, we have opportunistically pared back our risk exposure in this area.
Improved fundamentals - in both balance sheets and income statements - and lower
volatility might propel the sector to further outperformance.
In the last three months of the reporting period, slower prepayments increased
the income component of total return for premium mortgage-backed securities
(MBS) more significantly than on discount MBS. The recent March Treasury rally
prompted a new prepayment wave in which discount and par-priced mortgages
outperformed. 10-year Treasury notes were yielding 3.84% as of March 31, 2004,
down from 4.41% at the onset of the period.
The market began pricing in future inflation during the early portion of 2004
when the economy showed signs of strength and commodity prices rallied. This
likely led to the significant outperformance of the Treasury Inflation-Protected
Securities (TIPS) sector. Signs that a sustained recovery may be further into
the future led the market to re-price anticipated inflation to more modest
levels as the quarter progressed and TIPS traded off in tandem.
*On May 5, 2004, Delaware Management Holdings Corp., a parent company of DIAL,
signed a Limited Liability Interest Purchase Agreement to sell DIAL and its
direct parent companies, Delaware International Holdings Ltd. and DIAL Holding
Company, Inc., to Atlantic Value Partners (No. 3) Ltd., a newly formed joint
venture involving Hellman & Friedman, LLC, a private equity firm, and certain
members of DIAL's management. Upon the closing, the Fund's sub-advisory
agreement with DIAL will automatically terminate. The Fund's Boards will
consider appropriate action relating to this matter at its upcoming meeting,
and any necessary shareholder approval will be sought.
1
INTERNATIONAL (DIAL)
Latin America and Russia, which have been the management team's focus for the
past two years, may continue to perform well in 2004 on the back of strong
commodity markets and the U.S. economic recovery. Inflows into emerging markets
may underpin price levels as investors seek higher yielding credits. We
currently believe that the U.S. dollar may continue its gradual decline versus
the euro, as well as Asian-based currencies, and that non-U.S. dollar securities
may be a source of positive excess return over the balance of 2004.
We used U.S. dollar weakness to boost the Fund's foreign currency-denominated
bond exposure. We believe many opportunities exist to capture attractive yield
relative to Treasuries in foreign government debt markets.
Higher oil and commodity prices should support reserve levels for countries like
Venezuela, Russia, and Peru. We anticipate ratings upgrades in countries such as
Brazil, which continues to show dedication to passing necessary reforms and
controlling inflation. In the currency markets, our focus continues to be on
securities denominated in the euro, as well as Australian and
New Zealand dollars.
DIMA INC.
Q: CAN YOU PROVIDE SOME BACKGROUND ON THE FIXED-INCOME MARKETS DURING THE
PERIOD?
A: From the Fund's inception on August 1, 2003, to the close of the period on
March 31, 2004, the bond market rewarded investors with positive returns.
Corporate bonds provided strong performance through the end of 2003 but
underperformed in the first calendar quarter. In addition, lower-quality
corporate bonds produced a more muted performance than was the case last year.
After outperforming in 2003, the Lehman Brothers Credit Index underperformed
Treasuries in the first quarter, while lower-rated (Baa/BBB) issuers were flat
versus Treasuries.
Q: CAN YOU ELABORATE ON YOUR STRATEGIES FOR THE FUND?
A: In managing the Fund, our goal is to deliver consistent performance over time
by investing in securities that we believe offer the most favorable trade-off of
risk and return potential. To this end, we employ a systematic investment
process that emphasizes individual security selection and risk management. We
attempt to avoid making "bets" on broader factors such as the direction of
interest rates. We also seek to manage risk by focusing on the value and credit
quality of individual holdings and by broadly diversifying the portfolio.
This approach worked well during the reporting period, as a variety of sources
helped the Fund outperform its benchmark index. Performance in corporate bonds
was aided by an overweighted position in industrials, including
telecommunications, autos, and media. We were also overweighted in structured
mortgage-backed securities with a corresponding underweighting in generic
mortgage pass-throughs.
Mexico was a particularly strong performer in "Yankee" bonds (foreign bonds
issued and denominated in U.S. dollars). We decided to relax our weighting in
Treasuries, which performed well on an absolute basis, but underperformed other
sectors during the reporting period.
Our relative underweighting in utilities dampened performance earlier on in the
period, but our decision to selectively add to positions in this area later
helped performance overall.
We will continue to seek opportunities and take advantage of disparities in
value among the various bond market sectors as conditions warrant. We will look
to sell securities that our fundamental research reveals to be too expensive,
while buying those that offer attractive values, in our opinion. We believe this
approach may enable us to achieve our goal of delivering steady returns to
shareholders over time, even if the strong recent performance of the bond market
begins to moderate.
2
OPTIMUM
FIXED INCOME FUND
FUND BASICS
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Fund Objective:
The Fund seeks a high level of income and may
also seek growth of capital.
- ----------------------------------------------
Total Fund Net Assets:
$91.27 million
- ----------------------------------------------
Number of Holdings:
608
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Fund Start Date:
August 1, 2003
- ----------------------------------------------
Advisor:
Delaware Management Company
- ----------------------------------------------
Sub-advisors:
DIAL
DIMA Inc.
- ----------------------------------------------
CUSIP Numbers:
Class A 246118-68-1
Class B 246118-67-3
Class C 246118-66-5
Institutional 246118-65-7
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be lower or higher than the performance
data quoted. Please obtain the performance data for the most recent month end by
calling 800 914-0278 or visiting our web site at www.optimummutualfunds.com. You
should consider the investment objectives, risks, charges and expenses of the
investment carefully before investing. The Optimum Fixed Income Fund prospectus
contains this and other important information about the investment company.
Please request a prospectus by calling 800 914-0278. Read it carefully before
you invest or send money. Performance includes reinvestment of
all distributions.
FUND PERFORMANCE
Cumulative Total Returns
Through March 31, 2004 Lifetime
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Class A (Est 8/1/03)
Excluding Sales Charge +6.82%
Including Sales Charge +2.02%
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Class B (Est 8/1/03)
Excluding Sales Charge +6.52%
Including Sales Charge +2.52%
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Class C (Est 8/1/03)
Excluding Sales Charge +6.52%
Including Sales Charge +5.52%
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Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Performance
for Class B and C shares, excluding sales charges, assumes either that
contingent deferred sales charges did not apply or the investment was not
redeemed. Past performance is not a guarantee of future results.
The Fund offers Class A, B, C, and Institutional Class shares. Class A shares
are sold with a front-end sales charge of up to 4.50% and have an annual
distribution and service fee of up to 0.35%.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1%.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
The cumulative total return for the lifetime period ended March 31, 2004 for
Optimum Fixed Income Fund's Institutional Class was +7.07%. The Institutional
Class shares were first made available on August 1, 2003 and are available
without sales or asset-based distribution charges only to certain eligible
institutional accounts.
The performance table and graph on the following page do not reflect the
deduction of taxes the shareholder would pay on Fund distributions or
redemptions of Fund shares.
An expense limitation was in effect for all classes of Optimum Fixed Income Fund
during the period shown. Performance would have been lower had the expense
limitation not been in effect.
3
OPTIMUM
FIXED INCOME FUND (CONTINUED)
OPTIMUM FIXED INCOME FUND PERFORMANCE
Performance of a $10,000 Investment
August 1, 2003 (Fund's inception) through March 31, 2004
[GRAPHIC OMITTED]
OPTIMUM FIXED LEHMAN BROTHERS
INCOME FUND - AGGREGATE BOND
CLASS A SHARES INDEX
-------------- --------------
8/31/03 $ 9,595 $10,000
9/30/03 $ 9,853 $10,265
10/31/03 $ 9,786 $10,170
11/30/03 $ 9,831 $10,194
12/31/03 $ 9,964 $10,298
1/31/04 $10,043 $10,380
2/29/04 $10,123 $10,493
3/31/04 $10,202 $10,571
Chart assumes $10,000 invested on August 1, 2003 and includes the effect of a
4.50% front-end sales charge and the reinvestment of all distributions.
Performance of other Fund classes will vary due to different charges and
expenses. Returns plotted on the chart were as of the last day of each month
shown. The Lehman Brothers Aggregate Bond Index is an unmanaged composite that
tracks the broad U.S. bond markets. An index is unmanaged and does not reflect
the costs of operating a mutual fund, such as the costs of buying, selling, and
holding securities. You cannot invest directly in an index. Past performance is
not a guarantee of future results.
4
PORTFOLIO MANAGEMENT REVIEW April 8, 2004
OPTIMUM INTERNATIONAL FUND
SUB-ADVISORS:
Delaware International Advisers Ltd. (DIAL)*
Marsico Capital Management, LLC (Marsico Capital)
During the eight-month period that began at the Optimum International Fund's
inception on August 1, 2003 and ended with its fiscal year close on March 31,
2004, the Fund gained +25.61% (Class A shares at net asset value with
distributions reinvested). For comparison purposes, the MSCI EAFE Index gained
+26.06% (index start date was August 31, 2003).
The Fund seeks long-term growth of capital and may also seek income. The Fund's
advisor, Delaware Management Company, selected two sub-advisors to manage the
Fund's assets, each of which is responsible for day-to-day investment management
of a portion of the Fund's assets. Each selects investments for its portion of
the Fund based on its own investment style and strategy, which are generally
intended to complement one another. Sub-advisor DIAL uses a value-oriented stock
selection approach. Sub-advisor Marsico Capital uses a more growth-oriented
approach, which combines "top-down" economic analysis with "bottom-up" stock
selection. For more information on each sub-advisor's investment approach,
please see the Fund's prospectus.
DIAL
Q: CAN YOU DESCRIBE SOME KEY EVENTS THAT HAVE OCCURRED IN THE INTERNATIONAL
MARKET DURING THE PERIOD?
A: The euro zone is enjoying moderately strong money growth. This augurs well
for a reasonable recovery in the euro zone in 2004. Further, Germany and France
have started to tackle the issue of inefficient labor markets, although the
measures they have brought in should only have full effect over many years. In
light of this, and the adverse effects on euro zone exports of a strong euro, we
remain cautious about the intermediate-term prospects for continental Europe. By
way of contrast, the pattern of growth seems more assured in the U.K.
At one stage, there were concerns that a bubble in the U.K. housing market would
burst and cause a major problem in the economy. At the moment, the residential
property market is slowing in a controlled manner, without seeming to do undue
harm to the economy.
Long-suffering Japan is enjoying a cyclical boost. But with loan demand still
weak, it is too early to say if it has escaped the structural problems that held
the economy back over the last decade.
Five national elections took place in March, representing an old and new wave of
leadership among the various countries. The Spanish elections caught global
headlines with the Madrid train bombing occurring just before election day when
the Socialist Workers' Party won the campaign. We continue to believe that the
Spanish market offers value and we will continue to monitor the progress of the
new government.
Q: WHAT WERE SOME OF THE STRATEGIES YOU VIEW FOR THE FUND?
A: Throughout the period, we remained focused on selecting securities with
strong value orientations. With its market overvalued, we have kept our position
in Japan underweighted. In the Australasia market, we positioned the Fund quite
differently than Japan and remain overweighted in Australasia due to its
undervalued nature, in our opinion. We believe the U.K. market remains
attractively valued, but the sterling has risen to significantly overvalued
levels against the U.S. dollar. We have therefore put in place a defensive hedge
seeking to help protect the Fund from a potential depreciation of sterling.
During this period, we initiated the purchase of BOC, the U.K.-based industrial
gas company. We also added to the Fund's holdings of National Australia Bank,
Finnish paper company UPM Kymmene, Dutch diversified financials company ING
Groep, and British pharmaceutical company GlaxoSmithKline. These transactions
utilized the proceeds from the sale of British Airways.
*On May 5, 2004, Delaware Management Holdings Corp., a parent company of DIAL,
signed a Limited Liability Interest Purchase Agreement to sell DIAL and its
direct parent companies, Delaware International Holdings Ltd. and DIAL Holding
Company, Inc., to Atlantic Value Partners (No. 3) Ltd., a newly formed joint
venture involving Hellman & Friedman, LLC, a private equity firm, and certain
members of DIAL's management. Upon the closing, the Fund's sub-advisory
agreement with DIAL will automatically terminate. The Fund's Boards will
consider appropriate action relating to this matter at its upcoming meeting,
and any necessary shareholder approval will be sought.
5
MARSICO CAPITAL
Q: CAN YOU DESCRIBE WHICH AREAS BENEFITED THE FUND?
A: As of March 31, 2004, our most significant economic sector allocations for
the Fund were in banking and finance, electronics and electrical equipment,
energy, and cable, media, and publishing. In reviewing the Fund's investment
results, several factors emerge as positive contributors to performance. The
consumer discretionary sector was the largest contributor as three of the five
industries within the sector added to relative outperformance during the period.
EMI Group, Esprit Holdings, Wynn Resorts, and Sogecable were among the top stock
contributors during the period. Our exposure to the U.K., Russia, and Spain were
the largest national contributors to performance.
The Fund benefited from specific stock selection in the financial sector with
UFJ Holdings, UBS, and Erste Bank der Oestereichischen Sparkassen showing gains
during the period. In the telecommunications sector, stock selection aided
performance. We also experienced solid performance in Samsung Electronics within
the information technology sector.
Q: HOW ABOUT THE AREAS THAT DETRACTED FROM PERFORMANCE?
A: In the industrial sector, all three securities detracted from performance,
primarily due to stock selection, with Ryanair (which is no longer a holding of
the Fund) leading the group. Vedanata Resources in the materials sector declined
nearly five percent and has since been removed from the portfolio.
Stock selection diminished performance in the consumer staples sector with
Wal-Mart Mexico and Molson among the worst performers. We have since sold our
remaining shares of both securities as of period end. Other stocks with negative
perfomances included Sohu, Nortel Network, and Royal Bank of Scotland, all of
which are no longer holdings of the Fund. Lastly, our exposure to Ireland and
Japan hindered performance.
6
OPTIMUM
INTERNATIONAL FUND
FUND BASICS
- -----------------------------------------------
Fund Objective:
The Fund seeks long-term growth of capital and
may also seek income.
- -----------------------------------------------
Total Fund Net Assets:
$29.35 million
- -----------------------------------------------
Number of Holdings:
99
- -----------------------------------------------
Fund Start Date:
August 1, 2003
- -----------------------------------------------
Sub-advisors:
DIAL
Marsico Capital
- -----------------------------------------------
CUSIP Numbers:
Class A 246118-73-1
Class B 246118-72-3
Class C 246118-71-5
Institutional 246118-69-9
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be lower or higher than the performance
data quoted. Please obtain the performance data for the most recent month end by
calling 800 914-0278 or visiting our web site at www.optimummutualfunds.com. You
should consider the investment objectives, risks, charges and expenses of the
investment carefully before investing. The Optimum International Fund prospectus
contains this and other important information about the investment company.
Please request a prospectus by calling 800 914-0278. Read it carefully before
you invest or send money. Performance includes reinvestment of all
distributions. Instances of high double-digit returns are highly unusual and
cannot be sustained and were achieved primarily during favorable market
conditions.
FUND PERFORMANCE
Cumulative Total Returns
Through March 31, 2004 Lifetime
- ---------------------------------------------------------------------
Class A (Est 8/1/03)
Excluding Sales Charge +25.61%
Including Sales Charge +18.36%
- ---------------------------------------------------------------------
Class B (Est 8/1/03)
Excluding Sales Charge +25.02%
Including Sales Charge +21.02%
- ---------------------------------------------------------------------
Class C (Est 8/1/03)
Excluding Sales Charge +25.02%
Including Sales Charge +24.02%
- ---------------------------------------------------------------------
Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Performance
for Class B and C shares, excluding sales charges, assumes either that
contingent deferred sales charges did not apply or the investment was not
redeemed. Past performance is not a guarantee of future results.
The Fund offers Class A, B, C, and Institutional Class shares. Class A shares
are sold with a front-end sales charge of up to 5.75% and have an annual
distribution and service fee of up to 0.35%.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1%.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
The cumulative total return for the lifetime period ended March 31, 2004 for
Optimum International Fund's Institutional Class was +25.84%. The Institutional
Class shares were first made available on August 1, 2003 and are available
without sales or asset-based distribution charges only to certain eligible
institutional accounts.
The performance table and graph on the following page do not reflect the
deduction of taxes the shareholder would pay on Fund distributions or
redemptions of Fund shares.
An expense limitation was in effect for all classes of Optimum International
Fund during the period shown. Performance would have been lower had the expense
limitation not been in effect.
7
OPTIMUM
INTERNATIONAL FUND (CONTINUED)
OPTIMUM INTERNATIONAL FUND PERFORMANCE
Performance of a $10,000 Investment
August 1, 2003 (Fund's inception) through March 31, 2004
[GRAPHIC OMITTED]
OPTIMUM
INTERNATIONAL CLASS
A SHARES MSCI EAFE INDEX
------------------- ---------------
8/31/03 $ 9,602 $10,000
9/30/03 $ 9,768 $10,310
10/31/03 $10,423 $10,954
11/30/03 $10,633 $11,199
12/31/03 $11,305 $12,075
1/31/04 $11,516 $12,245
2/29/04 $11,760 $12,531
3/31/04 $11,836 $12,606
Chart assumes $10,000 invested on August 1, 2003 and includes the effect of a
5.75% front-end sales charge and the reinvestment of all distributions.
Performance of other Fund classes will vary due to different charges and
expenses. Returns plotted on the chart were as of the last day of each month
shown. The MSCI EAFE Index is an unmanaged composite of international stocks in
Europe, Australasia, and the Far East. An index is unmanaged and does not
reflect the costs of operating a mutual fund, such as the costs of buying,
selling, and holding securities. You cannot invest directly in an index. Past
performance is not a guarantee of future results.
8
PORTFOLIO MANAGEMENT REVIEW April 8, 2004
OPTIMUM LARGE CAP GROWTH FUND
SUB-ADVISORS:
Marsico Capital Management, LLC (Marsico Capital)
T. Rowe Price Associates, Inc. (T. Rowe Price)
During the eight-month period that began at the Optimum Large Cap Growth Fund's
inception on August 1, 2003 and ended with its fiscal year close on March 31,
2004, the Fund gained +12.59% (Class A shares at net asset value with
distributions reinvested). By comparison, the Russell 1000 Growth Index gained
+10.09% (index start date was August 31, 2003).
The Fund seeks long-term growth of capital and may also seek income. The Fund's
advisor, Delaware Management Company, selected two sub-advisors to manage the
Fund's assets, each of which is responsible for day-to-day investment management
of a portion of the Fund's assets. Each selects investments for its portion of
the Fund based on its own investment style and strategy, which are generally
intended to complement one another. Sub-advisor Marisco Capital uses a
growth-oriented approach that combines top-down economic analysis with bottom-up
stock selection. Sub-advisor T. Rowe Price generally looks for companies with an
above-average rate of earnings growth and a lucrative niche in the economy that
may give them the ability to sustain earnings momentum during times of slow
economic growth. For more information on each sub-advisor's investment approach,
please see the Fund's prospectus.
MARSICO CAPITAL
Q: WHICH SECTORS OF THE MARKET MOST BENEFITED THE FUND?
A: During the period, we spread the Fund's assets across a broad and
diversified array of economic sectors, such as healthcare, financials, consumer
discretionary, information technology, and industrials.
We held a significant overweighting in the healthcare sector compared to the
broad-based S&P 500 Index. This benefited the Fund as the healthcare sector was
the largest contributor to performance during the eight-month period.
The Fund holds a substantial position in biotechnology company Genentech, whose
stock rose 33 percent during the period. Other strong performers were Zimmer
Holdings, Boston Scientific, and UnitedHealth Group.
The recent rebound in information technology also benefited the Fund as with
Electronic Arts and Intel. We kept our positions low in the volatile
telecommunications sector with NEXTEL Communications and Qualcomm holding onto
small gains during the period.
Q: WHICH AREAS OF THE MARKET UNDERPERFORMED?
A: A few of the more prominent names in the industrial sector resulted in losses
for the Fund during the period. Airline company JetBlue declined as a result of
sluggish sales and increased competition. Aerospace and defense contractor
Lockheed Martin also declined. We relinquished both holdings by period end.
The aggregate returns for financial stocks were favorable as low interest rates
lead the way for new business in this sector. Despite positive performance, the
Fund was limited in capturing the totality of this surge due to our
lower-than-normal weighting. Our underweighting in consumer staples also
resulted in some missed opportunities for the Fund.
Stock selection in cable and media companies Comcast and Viacom resulted in less
than stellar results. During the period, Comcast surprised investors with an
offer to buy entertainment conglomerate Disney, while cable companies as a whole
grappled with higher programming expenses. The world's largest cable company is
still making waves and showing expansion of its product line as evidenced by
their acquisition of cable show TechTV late in the reporting period.
9
T. ROWE PRICE
Q: CAN YOU DESCRIBE HOW THE LARGE-CAP MARKET PERFORMED DURING THE PERIOD?
A: The U.S. economy continued to strengthen in the first part
of 2004. Corporate earnings generally met our expectations in 2003, while our
assessment, similar to the economy, is for corporate earnings to grow at a more
measured pace than last year. We believe the market is transitioning leadership
from more speculative stocks that led the advance over the past eight months, to
high-quality growth companies with durable earnings and cash flow growth that
closely resembles our investments typically held in the Fund.
During the eight-month period from August 1, 2003 to March 31, 2004, large-cap
stocks underperformed small- and mid caps, and across all capitalizations, value
styles outperformed growth. In the large-cap growth universe, all sectors posted
gains, led by telecommunication services and energy stocks.
Q: CAN YOU COMMENT ON WHICH AREAS OF THE MARKET PERFORMED WELL FOR THE FUND?
A: Solid stock selection in healthcare, industrials, and business services
sectors also turned in solid performances. Within the industrials and business
services sectors, Tyco International was a top absolute and relative performer
returning over 50 percent. Tyco continues to generate strong earnings and
tremendous cash flow and is benefiting from an industrial upturn. Education
services provider Apollo Group was another top contributor after advancing more
than 25% in the first quarter of 2004. The company is benefiting from strong
enrollment trends at both its online and traditional campuses. An overweighting
in Cendant (which owns many well-known brands including Avis, Budget, Days Inn,
Ramada, Century 21, and Coldwell Banker) also contributed to the portfolio's
relative performance.
Since December, investors have been rotating out of riskier stocks in the
technology sector and into more defensive issues in the healthcare sector.
Service providers UnitedHealth Group and Wellpoint Health Networks were top
contributors to absolute and relative performance. Both companies posted solid
earnings and should continue to benefit from substantial cost savings gained in
their late-2003 mergers. Specialty pharmaceutical company Forest Laboratories
was also a top contributor.
Q: WHICH AREAS UNDERPERFORMED DURING THE PERIOD?
A: Stock selection and an underweighted allocation in information technology
detracted from relative results. An overweighted position in First Data also
detracted from performance as the stock lagged its peers. However, we initiated
a position in Research In Motion, which advanced sharply on strong revenue and
earnings growth that helped limit losses.
10
OPTIMUM
LARGE CAP GROWTH FUND
FUND BASICS
- -------------------------------------------
Fund Objective:
The Fund seeks long-term growth of capital.
- -------------------------------------------
Total Fund Net Assets:
$69.61 million
- -------------------------------------------
Number of Holdings:
141
- -------------------------------------------
Fund Start Date:
August 1, 2003
- -------------------------------------------
Sub-advisors:
Marsico Capital
T. Rowe Price
- -------------------------------------------
CUSIP Numbers:
Class A 246118-70-7
Class B 246118-80-6
Class C 246118-88-9
Institutional 246118-87-1
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be lower or higher than the performance
data quoted. Please obtain the performance data for the most recent month end by
calling 800 914-0278 or visiting our web site at www.optimummutualfunds.com. You
should consider the investment objectives, risks, charges and expenses of the
investment carefully before investing. The Optimum Large Cap Growth Fund
prospectus contains this and other important information about the investment
company. Please request a prospectus by calling 800 914-0278. Read it carefully
before you invest or send money. Performance includes reinvestment of all
distributions. Instances of high double-digit returns are highly unusual and
cannot be sustained and were achieved primarily during favorable
market conditions.
FUND PERFORMANCE
Cumulative Total Returns
Through March 31, 2004 Lifetime
- ----------------------------------------------------------------------
Class A (Est 8/1/03)
Excluding Sales Charge +12.59%
Including Sales Charge +6.10%
- ----------------------------------------------------------------------
Class B (Est 8/1/03)
Excluding Sales Charge +12.12%
Including Sales Charge +8.12%
- ----------------------------------------------------------------------
Class C (Est 8/1/03)
Excluding Sales Charge +12.12%
Including Sales Charge +11.12%
- ----------------------------------------------------------------------
Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Performance
for Class B and C shares, excluding sales charges, assumes either that
contingent deferred sales charges did not apply or the investment was not
redeemed. Past performance is not a guarantee of future results.
The Fund offers Class A, B, C, and Institutional Class shares. Class A shares
are sold with a front-end sales charge of up to 5.75% and have an annual
distribution and service fee of up to 0.35%.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1%.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
The cumulative total return for the lifetime period ended March 31, 2004 for
Optimum Large Cap Growth Fund's Institutional Class was +12.82%. The
Institutional Class shares were first made available on August 1, 2003 and are
available without sales or asset-based distribution charges only to certain
eligible institutional accounts.
The performance table and graph on the following page do not reflect the
deduction of taxes the shareholder would pay on Fund distributions or
redemptions of Fund shares.
An expense limitation was in effect for all classes of Optimum Large Cap Growth
Fund during the period shown. Performance would have been lower had the expense
limitation not been in effect.
11
OPTIMUM
LARGE CAP GROWTH FUND (CONTINUED)
OPTIMUM LARGE CAP GROWTH FUND PERFORMANCE
Performance of a $10,000 Investment
August 1, 2003 (Fund's inception) through March 31, 2004
[GRAPHIC OMITTED]
DELAWARE OPTIMUM
LARGE CAP GROWTH RUSSELL 1000
CLASS A SHARES GROWTH INDEX
---------------- ------------
8/31/03 $ 9,691 $10,000
9/30/03 $ 9,580 $ 9,893
10/31/03 $10,090 $10,449
11/30/03 $10,112 $10,559
12/31/03 $10,434 $10,924
1/31/04 $10,534 $11,146
2/29/04 $10,656 $11,219
3/31/04 $10,610 $11,010
Chart assumes $10,000 invested on August 1, 2003 and includes the effect of a
5.75% front-end sales charge and the reinvestment of all distributions.
Performance of other Fund classes will vary due to different charges and
expenses. Returns plotted on the chart were as of the last day of each month
shown. The Russell 1000 Growth Index is an unmanaged composite that includes
performance of those Russell 1000 companies with higher price-to-book ratios and
higher forecasted growth values. An index is unmanaged and does not reflect the
costs of operating a mutual fund, such as the costs of buying, selling, and
holding securities. You cannot invest directly in an index. Past performance is
not a guarantee of future results.
12
PORTFOLIO MANAGEMENT REVIEW April 8, 2004
OPTIMUM LARGE CAP VALUE FUND
SUB-ADVISORS:
Massachusetts Financial Services Company (MFS)
Van Kampen Asset Management, Inc. (Van Kampen)
After two years of falling markets for value investors, absolute returns for
stocks improved during the Optimum Large Cap Value Fund's initial fiscal period.
During the eight-month period that began at the Fund's inception on August 1,
2003 and ended with its fiscal year close on March 31, 2004, the Fund gained
+16.12% (Class A shares at net asset value with distributions reinvested). For
comparison purposes, the Russell 1000 Value Index gained +16.50% (index start
date was August 31, 2003).
The Fund seeks long-term growth of capital and may seek income. The Fund's
advisor, Delaware Management Company, selected two sub-advisors for the Fund's
assets, each of which is responsible for day-to-day investment management of a
portion of the Fund's assets. Each selects investments for its portion of the
Fund based on its own investment style and strategy, which are generally
intended to complement one another. MFS seeks to achieve a gross yield that
exceeds that of the Standard & Poor's 500 Index. MFS uses a "bottom-up" stock
selection approach and selects securities based upon fundamental analysis of
factors such as earnings, cash flows, competitive position, and management's
abilities. Van Kampen uses a stock selection approach that focuses primarily on
a security's potential for capital growth and income. For more information on
each sub-advisor's investment approach, please see the Fund's prospectus.
MFS
Q: WHAT FACTORS INFLUENCED THE EQUITY MARKETS DURING THE PERIOD?
A: The turnaround in global stock markets that began in the spring of 2003
continued for most of the eight-month period ended March 31, 2004. The release
of increasingly positive economic numbers as the period progressed, particularly
with regard to corporate earnings and gross domestic product (GDP) growth,
helped drive the equity rally. By late 2003, corporate capital spending, which
had been weak for some time, also begun to accelerate. Another driver of the
equity rally, in our view, was the U.S. Federal Reserve Board's decision to
leave interest rates at a four-decade low throughout the period. While energy
prices rose late in the period, core inflation -- excluding volatile food and
energy prices -- remained very low relative to historical averages.
Q: CAN YOU DISCUSS SOME FACTORS THAT DETRACTED FROM PERFORMANCE?
A: Stock selection in the leisure sector was a key detractor from relative
returns. Our holding in cable operator Comcast performed poorly after the firm
made a bid to acquire Disney late in the period. Our position in media giant
Viacom, the company behind CBS and MTV, also fell in price due to disappointing
growth in advertising revenues while its Blockbuster Video unit continued to
post weak sales growth.
Stock selection and an underweighting in financial services stocks also
detracted from our relative return. We focused on banks that we believed had
higher quality lending portfolios. However, in the period's low interest rate
environment, the financial firms that generated the strongest returns were those
with lending portfolios that we thought were relatively weak.
Our cash position was another detractor from relative performance. Similar to
other mutual funds, we hold a portion of cash to buy new holdings and to cover
shareholder redemptions. In a period when equity markets rose sharply, cash hurt
performance against our benchmark, the Russell 1000 Value Index, which does not
hold a cash position.
Our holdings in medical products firm Johnson & Johnson and railroad Union
Pacific also detracted from relative results. Although Johnson & Johnson stock
increased in price over the period, it significantly underperformed the overall
market. Severe winter weather in the west cut into freight revenues generated by
Union Pacific, and the company's stock price declined.
13
Q: WHAT FACTORS CONTRIBUTED TO PERFORMANCE OF THE ASSETS YOU MANAGE?
A: The consumer staples sector made the strongest contribution to relative
performance, primarily because of the Fund's stock selections and an
overweighting in the sector. Altria Group (formerly Philip Morris) and
Kimberly-Clark generated particularly strong returns. In our view, food and
tobacco conglomerate Altria benefited from decreased investor concerns about
litigation against the company. Paper products company Kimberly-Clark generated
stronger earnings than it had estimated. It was aided by strong tissue sales and
improvements to some of its key products such as Huggies diapers. The impact of
a weak U.S. dollar also boosted international revenues
An underweighting in utilities and communications stocks and solid stock
selection in that sector helped boost returns for the period. Although
underweighted, we did increase our holdings of regulated electric companies
because we were attracted to their dividend yields, restructuring efforts among
a number of these companies, and the continued benefit of economic recovery.
Fund performance received another positive contribution from stock selection in
the technology sector. Motorola benefited from its improved projections for
cellular handset sales, driven in part by new products and wireless number
portability.
FleetBoston Financial also contributed to relative returns. FleetBoston's stock
price rose sharply when Bank of America announced its $47 billion takeover bid
for Fleet. Also, an underweighted position in pharmaceutical firm Merck added to
results. The company's stock, in our opinion, was adversely affected by
potential patent challenges, competition from generic drug companies, and a weak
pipeline of drugs in development.
VAN KAMPEN
Q: WHAT WERE SOME OF THE KEY AREAS THE FUND FOCUSED ON DURING THE PERIOD?
A: The Fund benefited from favorable stock selection relative to its benchmark;
however, sector allocation was a negative factor. Stock selection was
particularly strong in the materials, healthcare, and energy sectors.
Conversely, the Fund's financial and technology holdings significantly lagged
the performance of those sectors of the benchmark. The technology position
emphasized software stocks, one of the weaker technology groups during the
period.
In terms of sector allocations, the Fund was overweighted in healthcare and
underweighted in financials. Both allocations proved disadvantageous, as
healthcare was the weakest segment of the index, while financial services ranked
among the better performing sectors. On the positive side, an overweight in the
top performing energy sector and an underweight in telecommunications services
added to the Fund's return relative to the benchmark.
Early in the period, troubles in the pharmaceutical industry impacted the Fund's
performance as investors rotated out of pharmaceuticals into more cyclical
healthcare groups. Pharmaceuticals lagged again in the first quarter of 2004 due
to concerns about pending drug re-importation legislation. We believe these
concerns may be overblown.
At the close of the fiscal year, the Fund's dominant investment themes centered
on large-cap pharmaceuticals and consumer discretionary stocks, as well as
select financial and energy stocks.
Toward the end of the period, we increased the Fund's exposure to
telecommunications stocks. We believe an improving economy and industry
consolidation could be catalysts for price appreciation among telecommunications
stocks. Within financials, we continued to favor insurance companies and firms
with exposure to the capital markets (brokerage firms and money-center banks),
rather than stocks such as regional banks, which could suffer from higher
interest rates.
Attractive valuations have been harder to find in 2004 after the market's strong
appreciation last year. Although we believe exceptional stock market growth in
2003 has increased downside equity risks, we remain cautiously optimistic.
14
OPTIMUM
LARGE CAP VALUE FUND
FUND BASICS
- ----------------------------------------------
Fund Objective:
The Fund seeks long-term growth of capital and
may seek income.
- ----------------------------------------------
Total Fund Net Assets:
$66.42 million
- ----------------------------------------------
Number of Holdings:
144
- ----------------------------------------------
Fund Start Date:
August 1, 2003
- ----------------------------------------------
Sub-advisors:
MFS
Van Kampen
- ----------------------------------------------
CUSIP Numbers:
Class A 246118-86-3
Class B 246118-85-5
Class C 246118-84-8
Institutional 246118-83-0
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be lower or higher than the performance
data quoted. Please obtain the performance data for the most recent month end by
calling 800 914-0278 or visiting our web site at www.optimummutualfunds.com. You
should consider the investment objectives, risks, charges and expenses of the
investment carefully before investing. The Optimum Large Cap Value Fund
prospectus contains this and other important information about the investment
company. Please request a prospectus by calling 800 914-0278. Read it carefully
before you invest or send money. Performance includes reinvestment of all
distributions. Instances of high double-digit returns are highly unusual and
cannot be sustained and were achieved primarily during favorable market
conditions.
FUND PERFORMANCE
Cumulative Total Returns
Through March 31, 2004 Lifetime
- ----------------------------------------------------------------------
Class A (Est 8/1/03)
Excluding Sales Charge +16.12%
Including Sales Charge +9.43%
- ----------------------------------------------------------------------
Class B (Est 8/1/03)
Excluding Sales Charge +15.61%
Including Sales Charge +11.61%
- ----------------------------------------------------------------------
Class C (Est 8/1/03)
Excluding Sales Charge +15.61%
Including Sales Charge +14.61%
- ----------------------------------------------------------------------
Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Performance
for Class B and C shares, excluding sales charges, assumes either that
contingent deferred sales charges did not apply or the investment was not
redeemed. Past performance is not a guarantee of future results.
The Fund offers Class A, B, C, and Institutional Class shares. Class A shares
are sold with a front-end sales charge of up to 5.75% and have an annual
distribution and service fee of up to 0.35%.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1%.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
The cumulative total return for the lifetime period ended March 31, 2004 for
Optimum Large Cap Value Fund's Institutional Class was 16.38%. The Institutional
Class shares were first made available on August 1, 2003 and are available
without sales or asset-based distribution charges only to certain eligible
institutional accounts.
The performance table and graph on the following page do not reflect the
deduction of taxes the shareholder would pay on Fund distributions or
redemptions of Fund shares.
An expense limitation was in effect for all classes of Optimum Large Cap Value
Fund during the period shown. Performance would have been lower had the expense
limitation not been in effect.
15
OPTIMUM
LARGE CAP VALUE FUND (CONTINUED)
OPTIMUM LARGE CAP VALUE FUND PERFORMANCE
Performance of a $10,000 Investment
August 1, 2003 (Fund's inception) through March 31, 2004
[GRAPHIC OMITTED]
DELAWARE OPTIMUM
LARGE CAP VALUE RUSSELL 1000
CLASS A SHARES VALUE INDEX
-------------- ------------
8/31/03 $ 9,614 $10,000
9/30/03 $ 9,547 $ 9,902
10/31/03 $ 9,980 $10,508
11/30/03 $10,111 $10,651
12/31/03 $10,766 $11,307
1/31/04 $10,899 $11,506
2/29/04 $11,132 $11,753
3/31/04 $10,943 $11,649
Chart assumes $10,000 invested on August 1, 2003 and includes the effect of a
5.75% front-end sales charge and the reinvestment of all distributions.
Performance of other Fund classes will vary due to different charges and
expenses. Returns plotted on the chart were as of the last day of each month
shown. The Russell 1000 Value Index measures the performance of those Russell
1000 companies with lower price-to-book ratios and lower forecasted growth
values. An index is unmanaged and does not reflect the costs of operating a
mutual fund, such as the costs of buying, selling, and holding securities. You
cannot invest directly in an index. Past performance is not a guarantee of
future results.
16
PORTFOLIO MANAGEMENT REVIEW April 8, 2004
OPTIMUM SMALL CAP GROWTH FUND
SUB-ADVISORS:
Columbia Wanger Asset Management, L.P. (Columbia WAM)
Oberweis Asset Mangement, Inc. (Oberweiss)(beginning 4/1/04)
Optimum Small Cap Growth Fund seeks long-term growth of capital. At the
inception of the Fund, the Fund's advisor, Delaware Management Company, selected
a sub-advisor for the Fund's assets to be responsible for day-to-day investment
management of the Fund's assets. The sub-advisor selects investments for its
portion of the Fund based on its investment style and strategy. Sub-advisor
Columbia WAM typically looks for companies with:
o A strong business franchise that offers growth potential
o Products and services that give the company a competitive advantage,
and/or
o A stock price that they believe is reasonable relative to the assets and
earnings power of the company
Shareholders of the Fund approved a new additional sub-advisor for the Fund,
Oberweis, to begin managing its portion of Fund assets effective April 1, 2004.
The sub-advisor seeks to invest in those companies it considers to have
above-average long-term growth potential. For more information on each
sub-advisor's investment approach, please see the Fund's prospectus.
COLUMBIA WAM
Q: HOW DID THE FUND PERFORM DURING THE PERIOD?
A: During the eight-month period that began at the Fund's inception on August 1,
2003 and ended with its fiscal year close on March 31, 2004, the Fund gained
+32.47% (Class A shares at net asset value with distributions reinvested). By
comparison, the Russell 2000 Growth Index gained +15.96% (index start date was
August 31, 2003).
Strong stock selection was the primary reason for outperformance within
financials. Consumer finance stocks, including a holding in a consumer auto
loans company, benefited from an improving economic environment.
As small caps have continued to outperform their large-cap counterparts, finding
attractively-valued stocks is becoming more challenging. The 20 analysts at
Columbia WAM adhere to a 33-year old philosophy and process of seeking to
uncover underfollowed opportunities in the market. This has helped the Fund
outperform the Russell 2000 Growth Index during the eight-month period.
Q: CAN YOU DESCRIBE SOME AREAS THAT AIDED/DETRACTED FROM PERFORMANCE?
A: Technology, financials, and energy stocks were the Fund's best-performing
sectors. Within technology, stock selection drove performance as technology
stocks averaged a 60 percent increase compared to the Russell 2000 Growth
Index's +15.96% return. Software provider Novell was the Fund's best performing
stock, returning over 216 percent. Much of this increase came after Novell
agreed to buy Suse Linux, a company that may help increase Novell's service and
support for the Linux computer operating system.
Energy also performed well, as the index's energy sector return was 40 percent.
The Fund's energy sector investments surpassed the index, gaining 48 percent. We
are looking to increase this weighting due to our outlook on energy prices.
Analysts' estimates are based primarily on historical averages. We believe these
estimates are too low, noting that the energy futures prices are higher.
The consumer discretionary and materials sectors were the Fund's largest
detractors. Satellite broadcasters have been more competitive in the company's
major markets and telephone companies offering digital subscriber lines (DSL)
continue to take market share from the traditional cable providers.
17
OPTIMUM
SMALL CAP GROWTH FUND
FUND BASICS
- ------------------------------------------
Fund Objective:
The Fund seeks long-term growth of capital.
- ------------------------------------------
Total Fund Net Assets:
$20.64 million
- ------------------------------------------
Number of Holdings:
64
- ------------------------------------------
Fund Start Date:
August 1, 2003
- ------------------------------------------
Sub-advisors:
Columbia WAM
Oberweis (begining 4/1/04)
- ------------------------------------------
CUSIP Numbers:
Class A 246118-82-2
Class B 246118-81-4
Class C 246118-79-8
Institutional 246118-78-0
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be lower or higher than the performance
data quoted. Please obtain the performance data for the most recent month end by
calling 800 914-0278 or visiting our web site at www.optimummutualfunds.com. You
should consider the investment objectives, risks, charges and expenses of the
investment carefully before investing. The Optimum Small Cap Growth Fund
prospectus contains this and other important information about the investment
company. Please request a prospectus by calling 800 914-0278. Read it carefully
before you invest or send money. Performance includes reinvestment of all
distributions. Instances of high double-digit returns are highly unusual and
cannot be sustained and were achieved primarily during favorable
market conditions.
FUND PERFORMANCE
Cumulative Total Returns
Through March 31, 2004 Lifetime
- ----------------------------------------------------------------------
Class A (Est 8/1/03)
Excluding Sales Charge +32.47%
Including Sales Charge +24.83%
- ----------------------------------------------------------------------
Class B (Est 8/1/03)
Excluding Sales Charge +32.12%
Including Sales Charge +28.12%
- ----------------------------------------------------------------------
Class C (Est 8/1/03)
Excluding Sales Charge +32.12%
Including Sales Charge +31.12%
- ----------------------------------------------------------------------
Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Performance
for Class B and C shares, excluding sales charges, assumes either that
contingent deferred sales charges did not apply or the investment was not
redeemed. Past performance is not a guarantee of future results.
The Fund offers Class A, B, C, and Institutional Class shares. Class A shares
are sold with a front-end sales charge of up to 5.75% and have an annual
distribution and service fee of up to 0.35%.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1%.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
The cumulative total return for the lifetime period ended March 31, 2004 for
Optimum Small Cap Growth Fund's Institutional Class was +32.71%. The
Institutional Class shares were first made available on August 1, 2003 and are
available without sales or asset-based distribution charges only to certain
eligible institutional accounts.
The performance table and graph on the following page do not reflect the
deduction of taxes the shareholder would pay on Fund distributions or
redemptions of Fund shares.
An expense limitation was in effect for all classes of Optimum Small Cap Growth
Fund during the period shown. Performance would have been lower had the expense
limitation not been in effect.
18
OPTIMUM SMALL CAP GROWTH FUND PERFORMANCE
Performance of a $10,000 Investment
August 1, 2003 (Fund's inception) through March 31, 2004
[GRAPHIC OMITTED]
OPTIMUM SMALL CAP
GROWTH CLASS A RUSSELL 2000
SHARES GROWTH INDEX
----------------- --------------
8/31/03 $10,146 $10,000
9/30/03 $ 9,968 $ 9,747
10/31/03 $11,232 $10,589
11/30/03 $11,598 $10,935
12/31/03 $11,785 $10,983
1/31/04 $12,495 $11,560
2/29/04 $12,595 $11,543
3/31/04 $12,483 $11,597
Chart assumes $10,000 invested on August 1, 2003 and includes the effect of a
5.75% front-end sales charge and the reinvestment of all distributions.
Performance of other Fund classes will vary due to different charges and
expenses. Returns plotted on the chart were as of the last day of each month
shown. The Russell 2000 Growth Index is an unmanaged index that generally tracks
the performance of those stocks in the Russell 2000 Index that have higher
price-to-book ratios and higher forecasted growth values. An index is unmanaged
and does not reflect the costs of operating a mutual fund, such as the costs of
buying, selling, and holding securities. You cannot invest directly in an index.
Past performance is not a guarantee of future results.
19
PORTFOLIO MANAGEMENT REVIEW April 8, 2004
OPTIMUM SMALL CAP VALUE FUND
SUB-ADVISORS:
Hotchkis and Wiley Capital Management, LLC (H&W)
Delafield Asset Management Division of Reich & Tang Asset
Management, LLC (Delafield)
During the eight-month period that began at the Optimum Small Cap Value Fund's
inception on August 1, 2003 and ended with its fiscal year close on March 31,
2004, the Fund gained +30.30% (Class A shares at net asset value with
distributions reinvested). For comparison purposes, the Russell 2000 Value Index
gained +22.99% (index start date was August 31, 2003).
The Fund seeks long-term growth of capital. The Fund's advisor, Delaware
Management Company, selected two sub-advisors for the Fund's assets, each of
which is responsible for day-to-day investment management of a portion of the
Fund's assets. Each selects investments for its portion of the Fund based on its
own investment style and strategy, which are generally intended to complement
one another. Sub-advisor H&W employs a disciplined bottom-up, value-oriented
investment style with an emphasis on internally generated fundamental research.
Sub-advisor Delafield considers factors including the values of individual
securities relative to other investment alternatives, trends in the determinants
of corporate profits, corporate cash flow, balance sheet changes, management
capability and practices, and the economic and political outlook. For more
information on each sub-advisor's investment approach, please see the
Fund's prospectus.
H&W
Q: WHAT WERE SOME OF THE FACTORS AFFECTING THE MARKET DURING THE PERIOD?
A: Higher levels of consumer confidence, business spending, and retail sales
supported rising stock prices during the first half of the reporting period.
Notably, broad-based investor enthusiasm for speculative issues, along with
increased fervor for economically-sensitive stocks, led to an extended rally and
strong gains for the market. The rally extended into the first two months of
2004; however, rising geopolitical tensions (Madrid terrorist bombings and the
disputed election in Taiwan) coupled with volatile expectations about interest
rates ended the first quarter of 2004 on a mixed note. Nevertheless, the Dow
Jones Industrial Average gained +13.85% and the Nasdaq Composite Index rallied
+14.94% during the eight-month period.
Q: WHAT WERE SOME OF THE SECURITIES THAT AIDED PERFORMANCE?
A: Our performance was primarily attributable to security selection within the
financials and consumer discretionary market sectors. The financial sector
benefited from shares of Allmerica Financial, our biggest contributor, as the
company continued to benefit from decreased concerns over the company's life
insurance and annuity subsidiary. The consumer discretionary sector benefited
from household durables stocks Brookfield Homes, Toll Brothers, and Beazer Homes
USA, as all three stocks benefited from a strong housing market. Hotel stock
Mandalay Resort Group also performed well as the stock price increased due to
strength in the gaming industry.
Q: CAN YOU DESCRIBE WHICH AREAS DETRACTED FROM PERFORMANCE?
A: Offsetting the gains within the consumer discretionary sector was the decline
of Hayes Lemmerz International (supplier of automotive wheels). Hayes declined
as an increase in steel prices caused concern over the company's near-term
earnings. We believe the market has overreacted to the news and that steel
prices will revert to more normal levels; consequently, we have maintained
our position.
Q: WHAT ARE SOME OF THE AREAS YOU'LL BE FOCUSING ON IN THE NEAR FUTURE?
A: We continue to monitor inflationary trends, as the Fed may eventually raise
rates to contain inflation. Our extensive company-specific research process and
long-term approach to valuation remain unchanged, and we continue to seek
opportunities in this volatile environment. We believe that our portfolio is
well-positioned to take advantage of a market that focuses on the importance of
fundamental valuation.
20
DELAFIELD
Q: CAN YOU PROVIDE SOME BACKGROUND ON YOUR INVESTING STRATEGIES FOR THE FUND?
A: The general markets were quite strong, buoyed by improving economic growth
and restrained interest rates. We believe better than expected earnings may
continue for the near term as improving demand, coupled with easy comparisons
through mid-year, should help results.
The major detractor to performance was our cash position. As is Delafield's
practice, we invest at measured prices, therefore the strength of the equity
markets has made it challenging to put the assets in our portion of the
portfolio to work quickly. On December 31, 2003, the invested position was 70
percent and on March 31, 2004 it increased to 81 percent. As a firm, Delafield
has historically been comfortable keeping cash balances when we beleive the
markets are expensive. We are concerned with how high current valuations appear.
Another concern is that inflation is showing signs of reviving, as seen by
higher commodity prices, improved corporate profits, and the upward trend in
employment. These factors could lead to potentially higher interest rates.
Delafield continues to search for new undervalued investments that can be added
to our small-cap portfolio. In the meantime, we believe the market has
anticipated much of the good news and we are pleased with our levels of cash
reserve, even though they may hinder performance if the market
advances significantly.
Q: HOW DID SOME OF YOUR HOLDINGS PERFORM?
A: Performance for the period was very broadly based with
no one security accounting for more than 2% of positive performance. The largest
contributor was Foot Locker followed by Furniture Brands International. There
were only two securities, ESCO Technologies and R.R. Donnelley & Sons, which had
negative performance. During the first quarter of 2004, International Multifoods
Corporation received an acquisition proposal from J.M. Smuckers Co. & Sons and
Apogent Technologies received their proposal from Fischer Scientific
International. In both cases we sold our shares of International Multifoods
Corporation and Apogent Technologies to manage the risk in the investment.
Q: WHAT IS DELAFIELD FOCUSED ON MOVING FORWARD?
A: Delafield's focus remains on finding special situations.
Such investments tend to have performance that more closely parallels the
underlying events of the individual company rather than the broad markets. This
may cause performance on a quarterly basis to be out of sync with the overall
market. We anticipate the markets might be choppy for awhile. A rise in interest
rates and increased terrorist activities, among other factors, could dampen any
improvement seen in the economy and earnings growth.
21
OPTIMUM
SMALL CAP VALUE FUND
FUND BASICS
- ------------------------------------------
Fund Objective:
The Fund seeks long-term growth of capital.
- ------------------------------------------
Total Fund Net Assets:
$21.23 million
- ------------------------------------------
Number of Holdings:
95
- ------------------------------------------
Fund Start Date:
August 1, 2003
- ------------------------------------------
Sub-advisors:
H&W
Delafield
- ------------------------------------------
CUSIP Numbers:
Class A 246118-77-2
Class B 246118-76-4
Class C 246118-75-6
Institutional 246118-74-9
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be lower or higher than the performance
data quoted. Please obtain the performance data for the most recent month end by
calling 800 914-0278 or visiting our web site at www.optimummutualfunds.com. You
should consider the investment objectives, risks, charges and expenses of the
investment carefully before investing. The Optimum Small Cap Value Fund
prospectus contains this and other important information about the investment
company. Please request a prospectus by calling 800 914-0278. Read it carefully
before you invest or send money. Performance includes reinvestment of all
distributions. Instances of high double-digit returns are highly unusual and
cannot be sustained and were achieved primarily during favorable
market conditions.
FUND PERFORMANCE
Cumulative Total Returns
Through March 31, 2004 Lifetime
- ----------------------------------------------------------------------
Class A (Est 8/1/03)
Excluding Sales Charge +30.30%
Including Sales Charge +22.79%
- ----------------------------------------------------------------------
Class B (Est 8/1/03)
Excluding Sales Charge +29.83%
Including Sales Charge +25.83%
- ----------------------------------------------------------------------
Class C (Est 8/1/03)
Excluding Sales Charge +29.83%
Including Sales Charge +28.83%
- ----------------------------------------------------------------------
Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Performance
for Class B and C shares, excluding sales charges, assumes either that
contingent deferred sales charges did not apply or the investment was not
redeemed. Past performance is not a guarantee of future results.
The Fund offers Class A, B, C, and Institutional Class shares. Class A shares
are sold with a front-end sales charge of up to 5.75% and have an annual
distribution and service fee of up to 0.35%.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1%.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
The cumulative total return for the lifetime period ended March 31, 2004 for
Optimum Small Cap Value Fund's Institutional Class was +30.66%. The
Institutional Class shares were first made available on August 1, 2003 and are
available without sales or asset-based distribution charges only to certain
eligible institutional accounts.
The performance table and graph on the following page do not reflect the
deduction of taxes the shareholder would pay on Fund distributions or
redemptions of Fund shares.
An expense limitation was in effect for all classes of Optimum Small Cap Value
Fund during the period shown. Performance would have been lower had the expense
limitation not been in effect.
22
OPTIMUM SMALL CAP VALUE FUND PERFORMANCE
Performance of a $10,000 Investment
August 1, 2003 (Fund's inception) through March 31, 2004
SMALL CAP VALUE FUND PERFORMANCE OF $10,000 INVESTMENT CHART
[GRAPHIC OMITTED]
OPTIMUM SMALL CAP
VALUE CLASS A RUSSELL 2000
SHARES VALUE INDEX
----------------- -------------
8/31/03 $ 9,902 $10,000
9/30/03 $ 9,813 $9,885
10/31/03 $10,545 $10,691
11/30/03 $10,899 $11,101
12/31/03 $11,366 $11,503
1/31/04 $11,690 $11,901
2/29/04 $12,036 $12,132
3/31/04 $12,279 $12,300
Chart assumes $10,000 invested on August 1, 2003 and includes the effect of a
5.75% front-end sales charge and the reinvestment of all distributions.
Performance of other Fund classes will vary due to different charges and
expenses. Returns plotted on the chart were as of the last day of each month
shown. The Russell 2000 Value Index is an unmanaged composite that measures the
stocks of small, value-oriented companies. An index is unmanaged and does not
reflect the costs of operating a mutual fund, such as the costs of buying,
selling, and holding securities. You cannot invest directly in an index. Past
performance is not a guarantee of future results.
23
STATEMENTS OPTIMUM FIXED INCOME FUND
OF NET ASSETS March 31, 2004
Principal Market
Amount* Value (U.S.$)
AGENCY ASSET-BACKED SECURITIES - 0.52%
oSLMA Student Loan Trust
Series 96-2 A2 1.651% 7/27/09 USD 178,131 $179,675
Series 97-1 A2 1.511% 1/25/10 40,782 40,973
Series 97-2 Certificates
1.771% 10/25/12 25,000 25,127
Series 03-8 A1 1.12% 6/16/08 24,587 24,587
Series 04-1 A1 1.16% 1/26/15 200,000 200,155
--------
TOTAL AGENCY ASSET-BACKED SECURITIES
(cost $469,238) 470,517
--------
AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS - 10.61%
Fannie Mae Grantor Trust
Series 02-T16 A2 7.00% 7/25/42 57,892 62,939
Series 04-T1 1A2 6.50% 1/25/44 151,377 162,351
Series 04-T2 1A3 7.00% 11/25/43 205,000 222,233
Series 99-T2 A1 7.50% 1/19/39 102,782 113,092
Fannie Mae Pool Series 763545
5.50% 4/25/34 95,000 97,791
Fannie Mae
Series 01-14 Z 6.00% 5/25/31 119,073 125,492
Series 02-55 KY 4.75% 4/25/28 128,731 129,461
Series 02-56 MC 5.50% 9/25/17 100,000 104,975
Series 03-106 WB 4.50% 10/25/15 405,000 424,440
Series 03-122 TU 4.00% 5/25/16 90,000 93,021
o#Series 03-1A 144A 3.308% 3/24/18 84,883 85,546
Series 03-87 TD 3.50% 4/25/11 30,000 30,463
Series 03-92 KH 5.00% 3/25/32 70,000 70,247
Fannie Mae Whole Loan
Series 03-W8 2A 7.00% 10/25/42 61,755 67,282
Series 03-W15 2A3 4.71% 8/25/43 25,000 25,981
Series 03-W18 1A3 4.732% 8/25/33 70,000 72,909
Series 03-W19 1A3 4.783% 11/25/33 85,000 88,385
Series 04-W1 1A3 4.49% 11/25/43 130,000 134,673
Series 04-W2 2A2 7.00% 2/25/44 349,745 380,457
Series 04-W2 5A 7.50% 3/25/44 551,000 607,479
Freddie Mac
Series 2113 QE 6.00% 11/15/27 103,955 106,393
Series 2410 PD 6.50% 10/15/30 142,479 145,017
Series 2459 PL 5.50% 6/15/30 282 282
Series 2480 EH 6.00% 11/15/31 3,841 3,974
Series 2497 BM 5.00% 2/15/22 16,277 16,670
Series 2526 CA 5.00% 6/15/16 128,386 132,326
Series 2573 HB 5.50% 2/15/18 69,924 73,505
Series 2633 PB 4.00% 3/15/12 385,000 393,157
Series 2658 PA 3.75% 11/15/07 25,000 25,485
Series 2662 DG 5.00% 10/15/22 25,000 25,684
Series 2663 MA 3.50% 1/15/10 25,000 25,458
Series 2672 TN 4.00% 3/15/23 190,000 197,666
Series 2682 LC 4.50% 7/15/32 110,000 107,452
Series 2691 MB 4.00% 4/15/22 531,000 548,010
Series 2691 ME 4.50% 4/15/32 274,000 268,237
Series 2694 QH 4.50% 3/15/32 76,000 74,384
Series 2707 OK 3.50% 5/15/10 225,000 229,896
Series 2721 PTE 5.00% 1/15/23 100,000 101,830
Series 2727 PB 4.25% 4/15/23 215,000 223,175
Series 2727 PE 4.50% 7/15/32 185,000 180,680
Series 2728 TC 4.00% 2/15/23 235,000 241,375
Series 2737 XG 4.00% 11/15/22 120,000 123,256
Principal Market
Amount* Value (U.S.$)
AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Freddie Mac (continued)
Series 2737 YD 5.00% 8/15/32 USD 140,000 $ 140,499
Series 2750 NB 4.00% 12/15/22 388,000 398,983
Series 2755 LE 4.00% 9/15/30 395,000 371,987
Series 2759 AU 3.50% 5/15/19 226,000 230,944
Series 2773 EK 3.50% 4/15/19 220,000 224,881
Series 2786 PA 3.50% 4/15/19 214,000 218,414
Freddie Mac Structure Pass
Through Securities
Series T-56 A2A 2.842% 7/25/36 310,000 311,396
Series T-58 1A2 3.108% 5/25/35 165,000 166,064
Series T-58 2A 6.50% 9/25/43 8,844 9,485
Series T-58 3A 7.00% 9/25/43 17,481 18,939
Series T-59 1A2 7.00% 10/25/43 146,878 159,477
GNMA
Series 01-24 PD 6.60% 11/20/29 6,592 6,589
Series 02-47 PU 6.00% 2/20/28 361,597 364,460
Series 03-116 ND 3.75% 6/20/26 235,000 239,252
Series 03-89 PA 5.50% 12/20/23 74,802 77,813
Series 04-11 QE 5.00% 12/16/32 405,000 406,061
----------
TOTAL AGENCY COLLATERALIZED
MORTGAGE OBLIGATIONS (cost $9,623,389) 9,688,373
----------
AGENCY MORTGAGE-BACKED SECURITIES - 14.96%
Fannie Mae
4.50% 4/15/19 TBA 990,000 1,002,375
4.92% 5/1/13 25,000 26,633
5.00% 2/18/18 146,798 151,110
5.00% 6/1/18 96,617 99,455
5.00% 7/1/18 62,452 64,287
5.00% 8/1/18 29,109 29,964
5.00% 12/1/18 605,043 622,816
5.00% 4/1/19 TBA 740,000 760,813
5.00% 9/1/23 34,043 34,703
5.00% 4/1/34 TBA 760,000 763,563
5.00% 11/1/33 79,470 80,315
5.00% 1/1/34 58,863 59,488
5.00% 2/1/34 89,868 90,823
5.50% 4/1/19 TBA 1,005,000 1,047,083
5.50% 4/1/33 1,850,000 1,895,671
5.50% 11/1/33 149,136 152,911
5.50% 12/1/33 373,685 383,144
5.50% 12/1/33 169,060 173,339
5.50% 1/1/34 335,887 344,389
6.00% 4/1/34 TBA 635,000 660,995
6.00% 8/1/33 208,768 217,445
6.00% 10/1/33 17,477 18,204
6.00% 10/1/33 329,758 343,464
6.00% 10/1/33 88,344 92,015
6.00% 12/1/33 140,917 146,774
6.00% 12/1/33 34,906 36,520
6.00% 1/1/34 99,029 103,145
6.00% 1/1/34 362,425 377,488
6.10% 4/1/11 188,761 212,769
6.50% 4/1/34 TBA 550,000 577,844
6.50% 10/1/32 105,181 110,539
6.50% 11/1/33 151,555 159,275
6.50% 11/1/33 109,408 114,981
6.50% 11/1/33 134,550 141,404
6.50% 11/1/33 116,429 122,360
24
STATEMENTS OPTIMUM FIXED INCOME FUND
OF NET ASSETS (CONTINUED)
Principal Market
Amount* Value (U.S.$)
AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
Fannie Mae (continued)
6.50% 1/1/34 USD 289,487 $ 304,233
6.50% 1/1/34 139,748 146,866
6.53% 2/1/16 222,586 251,661
6.70% 4/1/19 393,191 450,818
6.985% 12/1/06 7,098 7,806
7.00% 8/1/31 27,026 28,690
7.50% 3/1/32 12,606 13,513
7.50% 6/1/32 84,079 90,122
Freddie Mac
5.00% 7/1/18 41,780 43,021
5.00% 9/1/33 9,899 10,041
5.00% 4/1/34 TBA 160,000 160,800
6.00% 10/1/33 88,736 92,285
6.50% 9/1/33 27,476 28,885
6.50% 10/1/33 29,419 30,927
6.50% 11/1/33 222,205 233,593
GNMA
5.50% 10/15/33 157,072 161,735
6.00% 3/20/34 277,376 289,685
6.50% 12/15/32 84,814 89,584
----------
TOTAL AGENCY MORTGAGE-BACKED SECURITIES
(cost $13,606,589) 13,652,369
----------
AGENCY OBLIGATIONS - 1.01%
Fannie Mae
1.75% 3/26/08 JPY 10,000,000 100,921
2.625% 1/19/07 USD 50,000 50,169
3.25% 8/15/08 180,000 182,908
3.375% 12/15/08 15,000 15,260
Federal Home Loan Bank
3.875% 8/22/08 90,000 92,202
Freddie Mac
2.875% 12/15/06 150,000 153,036
4.875% 3/15/07 300,000 322,714
4.875% 11/15/13 5,000 5,249
----------
TOTAL AGENCY OBLIGATIONS (cost $907,545) 922,459
----------
ASSET-BACKED SECURITIES - 5.40%
#ABSC NIMs Trust Series 04-HE1 A 144A
7.00% 1/17/34 39,761 39,761
AmeriCredit Automobile Receivables Trust
Series 01-C A4 5.01% 7/14/08 85,000 88,447
Series 02-1 A3 4.23% 10/6/06 148,119 149,926
Bank One Issuance Trust Series 02-A3
3.59% 5/17/10 15,000 15,494
Capital Auto Receivable Asset Trust
Series 04-1 A4 2.64% 11/17/08 550,000 554,942
Capital One Auto Finance Trust
Series 03-A A4A 2.47% 1/15/10 20,000 20,084
Capital One Multi-Asset Execution Trust
Series 03-A6 A6 2.95% 8/17/09 15,000 15,293
Series 03-C4 C4 6.00% 8/15/13 75,000 81,601
Centex Home Equity Series 02-A AF6
5.54% 1/25/32 65,000 68,930
oChase Funding Mortgage Loan
Series 04-1 2A2 1.321% 12/25/33 525,000 525,000
#Chase Funding Net Interest Margin
Series 03-6A 144A 5.00% 12/27/33 39,822 39,774
Principal Market
Amount* Value (U.S.$)
ASSET-BACKED SECURITIES (continued)
Citibank Credit Card Issuance Trust
Series 02-A1 A1 4.95% 2/9/09 USD 30,000 $ 32,174
Series 03-A3 A3 3.10% 3/10/10 60,000 60,632
Series 04-A1 A1 2.55% 1/20/09 790,000 795,731
CNH Equipment Trust Series 01-B A4
4.45% 4/16/07 390,000 398,105
Countrywide Certificates
oSeries 04-1 3A 1.37% 4/25/34 302,317 302,600
#Series 04-1NIM Note 144A
6.00% 5/25/34 50,000 49,750
Equity One Series 04-1 AF3
3.054% 4/25/34 380,000 384,307
oLong Beach Mortgage Loan Trust
Series 01-4 M3 3.84% 3/25/32 155,000 156,932
MBNA Credit Card Master Note Trust
Series 03-A1 A1 3.30% 7/15/10 60,000 61,167
oSeries 04-A2 A2 1.24% 7/15/13 345,000 345,431
MMCA Automobile Trust
Series 02-2 A4 4.30% 3/15/10 285,000 289,543
Series 02-2 B 4.67% 3/15/10 41,499 41,590
PP&L Transition Bond Series 99-1 A5
6.83% 3/25/07 6,982 7,192
Ramp Series 04-SL1 A3
7.00% 4/25/31 85,000 89,284
oResidential Asset Securities
Series 00-KS5 AI6 7.175% 12/25/31 94,439 100,024
Vanderbilt Mortgage Finance
Series 01-A A4 7.235% 6/7/28 110,000 120,804
Whole Auto Loan Trust
Series 03-1 A4 2.58% 3/15/10 45,000 45,409
Series 03-1 B 2.24% 3/15/10 45,000 45,317
---------
TOTAL ASSET-BACKED SECURITIES
(cost $4,775,469) 4,925,244
---------
COLLATERALIZED MORTGAGE OBLIGATIONS - 3.88%
Bank of America Alternative Loan Trust
Series 03-10 2A1 6.00% 12/25/33 38,581 40,442
Series 04-2 1A1 6.00% 3/25/34 109,611 113,550
Bank of America Mortgage Securities
Series 02-10 1A30 4.75% 11/25/32 215,908 216,584
oSeries 03-I 2A4 3.828% 10/25/33 5,000 5,088
oSeries 04-A 1A1 3.486% 2/25/34 53,463 54,307
Countrywide Alternative Loan Trust
Series 04-J1 1A1 6.00% 2/25/34 147,300 151,127
Series 04-J2 7A1 6.00% 12/25/33 202,000 207,416
Series 04-J3 2A1 6.00% 9/1/33 130,000 134,997
Countrywide Home Loans
oSeries 01-HYB2 3A1 5.534% 9/19/31 52,981 53,274
Series 03-1 1A7 4.50% 3/25/33 13,104 13,227
oSeries 03-21 A1 4.182% 5/25/33 56,650 57,328
Credit Suisse First Boston Mortgage Securities
Series 03-23 5A1 6.00% 9/25/33 4,523 4,695
Series 03-23 6A1 6.50% 9/25/33 8,823 9,314
Series 03-23 7A1 5.00% 9/25/18 9,227 9,487
Series 03-29 5A1 7.00% 12/25/33 47,941 50,971
Series 04-1 3A1 7.00% 2/25/34 44,039 46,489
Deutsche Mortgage Securities Pass-Through
Trust Series 04-2 A2 3.08% 1/25/34 40,000 40,150
25
STATEMENTS OPTIMUM FIXED INCOME FUND
OF NET ASSETS (CONTINUED)
Principal Market
Amount* Value (U.S.$)
COLLATERALIZED MORTGAGE OBLIGATIONS (continued)
First Horizon Mortgage Asset Securities
Pass-Through Trust Series 02-7 1A2
5.00% 12/25/32 USD 158,830 $ 159,756
GSR Mortgage Home Loan Trust
Series 04-2F 6A1 7.00% 1/25/34 46,214 48,823
oMaster Adjustable Rate Mortgages Trust
Series 03-3 3A4 4.626% 9/25/33 35,000 35,679
Series 03-6 1A2 3.101% 12/25/33 10,000 9,956
Master Alternative Loans Trust
Series 03-9 1A1 5.50% 12/25/18 33,645 34,817
Series 04-1 2A1 7.00% 1/25/34 54,908 57,242
Series 04-3 2A1 6.25% 4/25/34 355,000 370,087
Series 04-3 8A1 7.00% 4/25/34 190,000 199,322
Master Asset Securitization Trust
Series 03-12 3A5 5.25% 10/25/14 29,479 30,712
Series 03-6 8A1 5.50% 7/25/33 89,016 91,645
Nomura Asset Acceptance
Series 04-AP1 A2 3.238% 3/25/34 110,000 110,241
Residential Accredit Loans
Series 02-QS14 A5 5.125% 9/25/32 454,953 460,201
Residential Asset Securitization Trust
Series 02-A13 A3 5.00% 12/25/17 410,390 415,263
Structured Asset Securities
oSeries 02-22H 1A 7.00% 11/25/32 2,026 2,135
Series 03-33H 1A1 5.50% 10/25/33 23,885 24,452
o#Summit Mortgage Trust
Series 02-1 B2 144A 6.192% 6/28/16 30,000 30,225
Vende Mortgage Trust
Series 96-1 1F 6.75% 5/15/22 17,996 18,092
Series 97-3 2D 7.50% 1/15/25 18,523 18,882
Washington Mutual MSC Mortgage
Pass-Through CTFS Series 01-MS15 SA1
6.00% 1/25/17 12,005 12,137
Washington Mutual Series 02-S7 4A1
4.50% 11/25/32 123,855 124,565
oWells Fargo Mortgage Backed Securities
Trust Series 03-M A1 4.774% 12/25/33 81,402 81,567
---------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(cost $3,662,726) 3,544,245
---------
COMMERCIAL MORTGAGE-BACKED SECURITIES - 0.37%
Banc of America Commercial Mortgage
Series 04-1 A3 4.429% 11/10/39 40,000 40,938
Series 04-1 A4 4.76% 11/10/39 40,000 40,663
First Union-Lehman Brothers-Bank of America
Series 98-C2 A2 6.56% 11/18/35 115,000 129,880
Nomura Asset Securities Series 98-D6 A1B
6.59% 3/15/30 115,000 130,470
---------
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES
(cost $338,268) 341,951
---------
CORPORATE BONDS - 30.90%
Aerospace & Defense - 0.56%
Armor Holdings 8.25% 8/15/13 270,000 300,375
Raytheon 6.75% 8/15/07 189,000 212,640
---------
513,015
---------
Principal Market
Amount* Value (U.S.$)
CORPORATE BONDS (continued)
Automobiles & Automotive Parts - 1.28%
++#Advanced Accessory Holdings 144A
3.25% 12/15/11 USD 125,000 $ 66,875
Advanced Accessory Systems
10.75% 6/15/11 45,000 47,025
Auburn Hills Trust 12.375% 5/1/20 240,000 368,447
Collins & Aikman Products
10.75% 12/31/11 55,000 56,788
11.50% 4/15/06 75,000 74,063
DaimlerChrysler NA Holding
4.05% 6/4/08 25,000 25,290
Ford Motor 7.45% 7/16/31 180,000 180,284
General Motors
7.125% 7/15/13 15,000 16,414
8.375% 7/15/33 210,000 238,920
Johnson Controls 5.00% 11/15/06 25,000 26,796
United Components 9.375% 6/15/13 65,000 70,525
----------
1,171,427
----------
Banking & Finance - 6.73%
American General Finance 4.625% 9/1/10 380,000 396,475
Bear Stearns 4.65% 7/2/18 25,000 24,064
Capital One Bank 6.50% 6/13/13 5,000 5,449
Citigroup
5.875% 2/22/33 55,000 56,391
6.00% 10/31/33 50,000 52,093
Countrywide Home Loans 4.00% 3/22/11 285,000 282,471
Credit Suisse First Boston USA
6.125% 11/15/11 40,000 44,749
#Erac USA Finance 144A 7.35% 6/15/08 75,000 86,923
#Farmers Exchange Capital 144A
7.05% 7/15/28 105,000 106,776
7.20% 7/15/48 95,000 94,553
#FGIC 144A 6.00% 1/15/34 55,000 57,582
Finova Group 7.50% 11/15/09 170,000 105,825
First Union Capital II - Class A
7.95% 11/15/29 20,000 25,452
Ford Motor Credit
5.625% 10/1/08 40,000 41,326
5.80% 1/12/09 310,000 319,936
6.875% 2/1/06 495,000 526,722
7.00% 10/1/13 40,000 42,284
Franklin Resources 3.70% 4/15/08 45,000 45,724
General Electric Capital 5.45% 1/15/13 60,000 64,722
#Glencore Funding 144A 6.00% 4/15/14 205,000 203,534
GMAC
4.375% 12/10/07 265,000 270,926
4.50% 7/15/06 55,000 56,865
6.125% 9/15/06 25,000 26,745
6.75% 1/15/06 575,000 614,822
7.25% 3/2/11 50,000 55,565
7.75% 1/19/10 455,000 516,425
8.00% 11/1/31 25,000 27,753
Goldman Sachs Group
5.25% 10/15/13 40,000 41,484
6.345% 2/15/34 280,000 288,862
Household Finance 4.125% 12/15/08 65,000 67,183
HSBC Bank USA 4.625% 4/1/14 500,000 496,812
26
STATEMENTS OPTIMUM FIXED INCOME FUND
OF NET ASSETS (CONTINUED)
Principal Market
Amount* Value (U.S.$)
CORPORATE BONDS (continued)
Banking & Finance (continued)
J.P. Morgan Chase 5.75% 1/2/13 USD 20,000 $ 21,776
KFW International Finance
1.75% 3/23/10 JPY 28,000,000 282,082
Midland Funding II
11.75% 7/23/05 USD 45,822 48,686
Morgan Stanley
4.75% 4/1/14 140,000 137,975
5.30% 3/1/13 25,000 26,288
Nisource Finance 3.20% 11/1/06 55,000 56,348
Popular North America 4.25% 4/1/08 100,000 103,769
o#Premium Asset Trust Series 04-01 144A
1.21% 2/6/06 40,000 40,007
#Rabobank Capital Funding II 144A
5.26% 12/29/49 35,000 36,382
oRBS Capital Trust I 4.709% 12/29/49 20,000 19,704
oRBS Capital Trust II 6.425% 12/29/49 130,000 138,748
Regions Financial 6.375% 5/15/12 60,000 68,117
Tanger Properties 9.125% 2/15/08 75,000 82,500
Wells Fargo Financial 6.125% 4/18/12 30,000 33,822
----------
6,142,697
----------
Building & Materials - 0.56%
Interline Brands 11.50% 5/15/11 95,000 103,075
#Lone Star Industries 144A 8.85% 6/15/05 60,000 64,125
Schuler Homes 10.50% 7/15/11 75,000 88,875
Standard-Pacific
7.75% 3/15/13 55,000 61,050
9.25% 4/15/12 110,000 129,525
#Technical Olympic USA 144A
7.50% 3/15/11 65,000 65,244
----------
511,894
----------
Business Services - 0.12%
Brickman Group 11.75% 12/15/09 40,000 46,600
#Great Lakes Dredge & Dock 144A
7.75% 12/15/13 60,000 60,900
----------
107,500
----------
Cable, Media & Publishing - 2.80%
American Media Operation 10.25% 5/1/09 55,000 57,888
#Atlantic Broadband Finance 144A
9.375% 1/15/14 220,000 217,249
#Cablevision Systems 144A 8.00% 4/15/12 205,000 205,513
Charter Communications Holdings
10.75% 10/1/09 195,000 171,600
Comcast Cable Communications
8.375% 3/15/13 146,000 181,672
Comcast Cable Communications Holdings
6.20% 11/15/08 70,000 77,569
CSC Holdings 9.875% 2/15/13 70,000 73,150
#Echostar DBS 144A 5.75% 10/1/08 110,000 114,125
Historic Time Warner 8.18% 8/15/07 160,000 186,720
Insight Midwest 10.50% 11/1/10 90,000 97,200
Liberty Media
o2.61% 9/17/06 185,000 187,328
3.50% 9/25/06 65,000 66,237
Lodgenet Entertainment
9.50% 6/15/13 75,000 83,625
Mediacom Broadband
11.00% 7/15/13 50,000 53,750
PanAmSat 8.50% 2/1/12 160,000 168,000
Principal Market
Amount* Value (U.S.$)
CORPORATE BONDS (continued)
Cable, Media & Publishing (continued)
PEI Holdings 11.00% 3/15/10 USD 100,000 $ 116,000
#Sheridan Acquisition 144A
10.25% 8/15/11 55,000 59,194
Time Warner
7.57% 2/1/24 154,000 177,923
7.70% 5/1/32 90,000 106,797
Time Warner Entertainment
8.375% 3/15/23 25,000 31,280
Xm Satellite Radio 12.00% 6/15/10 25,000 28,406
Young Broadcasting 10.00% 3/1/11 85,000 91,375
----------
2,552,601
----------
Chemicals - 0.48%
Huntsman International
9.875% 3/1/09 40,000 44,200
10.125% 7/1/09 105,000 107,362
Lyondell Chemical 9.875% 5/1/07 95,000 99,038
#Nalco 144A 7.75% 11/15/11 60,000 63,000
Resolution Performance Products
8.00% 12/15/09 85,000 87,125
+Solutia 6.72% 10/15/37 60,000 24,300
Valspar 6.00% 5/1/07 15,000 16,417
----------
441,442
----------
Consumer Products - 0.25%
Alderwoods Group 12.25% 1/2/09 70,000 78,750
American Greetings 11.75% 7/15/08 30,000 35,250
#Corrections Corporation of America 144A
7.50% 5/1/11 30,000 31,763
Hines Nurseries 10.25% 10/1/11 50,000 55,750
#Service Corp International 144A
6.75% 4/1/16 30,000 30,300
----------
231,813
----------
Electronic Components - 0.11%
#Communications & Power Industries 144A
8.00% 2/1/12 100,000 102,125
----------
102,125
----------
Energy - 2.84%
Citgo Petroleum 11.375% 2/1/11 45,000 52,763
Devon Energy 7.875% 9/30/31 145,000 178,987
Devon Financing 7.95% 4/15/32 300,000 372,899
Duke Capital
4.302% 5/18/06 50,000 51,305
5.50% 3/1/14 360,000 364,607
#Dynegy Holdings 144A 10.125% 7/15/13 95,000 104,738
El Paso Production Holding 7.75% 6/1/13 95,000 88,588
#Encore Acquisition 144A 6.25% 4/15/14 170,000 172,338
Enterprise Products Partners 7.50% 2/1/11 60,000 69,964
Halliburton
5.50% 10/15/10 15,000 15,909
8.75% 2/15/21 260,000 326,331
#Halliburton 144A 5.50% 10/15/10 185,000 196,209
#Hilcorp Energy/Finance 144A 10.50% 9/1/10 105,000 117,075
Hornbeck Offshore Services 10.625% 8/1/08 45,000 49,725
Kinder Morgan Energy Partners
7.75% 3/15/32 25,000 30,402
8.00% 3/15/05 105,000 110,936
Northern Border Pipeline 6.25% 5/1/07 50,000 55,028
Transocean 6.75% 4/15/05 35,000 36,632
27
STATEMENTS OPTIMUM FIXED INCOME FUND
OF NET ASSETS (CONTINUED)
Principal Market
Amount* Value (U.S.$)
CORPORATE BONDS (continued)
Energy (continued)
USX
9.125% 1/15/13 USD 15,000 $ 19,841
9.375% 2/15/12 30,000 39,521
Valero Energy 6.125% 4/15/07 40,000 44,008
Valero Logistics Operations
6.05% 3/15/13 70,000 75,956
Weatherford International
4.95% 10/15/13 20,000 20,357
----------
2,594,119
----------
Environmental Services - 0.19%
#Casella Waste Systems 144A
9.75% 2/1/13 45,000 50,625
IESI 10.25% 6/15/12 110,000 121,000
----------
171,625
----------
Farming & Agricultural - 0.20%
Universal 6.50% 2/15/06 40,000 43,073
UST
6.625% 7/15/12 90,000 102,255
8.80% 3/15/05 35,000 37,195
----------
182,523
----------
Food, Beverage & Tobacco - 1.13%
Anheuser-Busch 5.00% 3/1/19 45,000 45,257
Archer-Daniels-Midland 8.125% 6/1/12 55,000 69,144
B&G Foods 9.625% 8/1/07 130,000 134,225
Chiquita Brands International
10.56% 3/15/09 125,000 138,750
#Commonwealth Brands 144A
10.625% 9/1/08 55,000 60,775
Great Atlantic & Pacific Tea 9.125% 12/15/11 35,000 30,800
#Gold Kist 144A 10.25% 3/15/14 45,000 45,675
Kraft Foods
4.00% 10/1/08 95,000 97,853
5.625% 11/1/11 35,000 38,012
#Le-Natures 144A 9.50% 6/15/13 60,000 63,900
#Miller Brewing 144A 4.25% 8/15/08 10,000 10,360
Nabisco 6.85% 6/15/05 70,000 74,044
#PPC Escrow 144A 9.25% 11/15/13 105,000 110,250
#Standard Commercial 144A
8.00% 4/15/12 105,000 109,463
----------
1,028,508
----------
Healthcare & Pharmaceuticals - 0.62%
Ameripath 10.50% 4/1/13 60,000 61,500
#Ameripath 144A 10.50% 4/1/13 85,000 87,125
GlaxoSmithKline Capital 4.375% 4/15/14 75,000 74,969
GlaxoSmithKline Capital 5.375% 4/15/34 55,000 54,795
Medco Health Solutions 7.25% 8/15/13 190,000 214,576
Schering-Plough 5.30% 12/1/13 70,000 73,176
----------
566,141
----------
Insurance - 0.64%
Allstate 5.35% 6/1/33 45,000 43,264
AON 7.375% 12/14/12 75,000 88,419
#Farmers Insurance Exchange 144A
8.625% 5/1/24 5,000 5,901
Harleysville Group 5.75% 7/15/13 15,000 14,774
#Massachusetts Mutual Life Insurance 144A
5.625% 5/15/33 65,000 65,837
Principal Market
Amount* Value (U.S.$)
CORPORATE BONDS (continued)
Insurance (continued)
#Nationwide Mutual Insurance 144A
6.60% 4/15/34 USD 45,000 $ 44,899
7.875% 4/1/33 20,000 24,530
o#Oil Insurance 144A 5.15% 8/15/33 80,000 83,154
Progressive 6.375% 1/15/12 70,000 80,009
Prudential Financial 5.75% 7/15/33 45,000 44,774
TIG Holdings 8.125% 4/15/05 85,000 89,250
----------
584,811
----------
Internet Services - 0.10%
USA Interactive 6.75% 11/15/05 85,000 90,353
----------
90,353
----------
Leisure, Lodging & Entertainment - 1.67%
Ameristar Casinos 10.75% 2/15/09 110,000 127,738
Argosy Gaming 9.00% 9/1/11 175,000 197,750
Boyd Gaming 9.25% 8/1/09 69,000 77,711
#Boyd Gaming 144A 6.75% 4/15/14 115,000 116,294
Caesars Entertainment 9.375% 2/15/07 150,000 169,500
++#Cinemark 144A 9.75% 3/15/14 85,000 53,125
Felcor Lodging 10.00% 9/15/08 110,000 117,700
Hard Rock Hotel 8.875% 6/1/13 55,000 59,125
Herbst Gaming 10.75% 9/1/08 100,000 113,250
Penn National Gaming 8.875% 3/15/10 195,000 213,525
Royal Caribbean Cruises 7.25% 3/15/18 75,000 78,750
++#Town Sports International 144A
11.00% 2/1/14 155,000 87,575
Wheeling Island Gaming 10.125% 12/15/09 100,000 108,500
----------
1,520,543
----------
Metals & Mining - 0.13%
AK Steel 7.75% 6/15/12 65,000 58,337
Barrick Gold Finance 7.50% 5/1/07 10,000 11,527
United States Steel 10.75% 8/1/08 40,000 46,800
----------
116,664
----------
Packaging & Containers - 0.41%
AEP Industries 9.875% 11/15/07 55,000 57,063
Consolidated Container 10.125% 7/15/09 75,000 60,750
Pliant 11.125% 9/1/09 100,000 105,000
#Portola Packaging 144A 8.25% 2/1/12 110,000 97,350
Radnor Holdings 11.00% 3/15/10 65,000 52,975
----------
373,138
----------
Paper & Forest Products - 0.69%
Bowater 9.00% 8/1/09 150,000 169,875
Fort James 7.75% 11/15/23 230,000 244,950
#Newark Group 144A 9.75% 3/15/14 100,000 99,000
Potlatch 12.50% 12/1/09 95,000 117,800
----------
631,625
----------
REITs - 0.17%
#BF Saul 144A 7.50% 3/1/14 110,000 111,925
Developers Diversified Realty
4.625% 8/1/10 40,000 41,129
----------
153,054
----------
28
STATEMENTS OPTIMUM FIXED INCOME FUND
OF NET ASSETS (CONTINUED)
Principal Market
Amount* Value (U.S.$)
CORPORATE BONDS (continued)
Retail - 1.14%
CVS 3.875% 11/1/07 USD 45,000 $ 46,521
Denny's 12.75% 9/30/07 85,000 93,074
#Friendly Ice Cream 144A
8.375% 6/15/12 75,000 77,625
#FTD 144A 7.75% 2/15/14 50,000 50,250
++J Crew Intermediate 16.00% 5/15/08 10,000 7,800
J Crew Operating 10.375% 10/15/07 20,000 20,300
Kroger 6.80% 4/1/11 80,000 91,935
Lowe's 7.50% 12/15/05 50,000 54,764
May Department Stores 7.15% 8/15/04 145,000 147,969
#O'Charleys 144A 9.00% 11/1/13 75,000 78,750
Office Depot 10.00% 7/15/08 35,000 42,525
Petco Animal Supplies 10.75% 11/1/11 45,000 52,763
Remington Arms 10.50% 2/1/11 80,000 81,400
Safeway
3.80% 8/15/05 70,000 71,635
6.15% 3/1/06 15,000 16,092
Target 5.95% 5/15/06 75,000 81,212
Wendy's International 6.35% 12/15/05 25,000 26,839
----------
1,041,454
----------
Technology/Hardware - 0.39%
Activant Solutions 10.50% 6/15/11 100,000 105,000
Dell
6.55% 4/15/08 15,000 16,942
7.10% 4/15/28 70,000 84,037
Electronic Data Systems 6.00% 8/1/13 5,000 4,861
Northern Telecom Capital 7.875% 6/15/26 90,000 92,700
#Stratus Technologies 144A 10.375% 12/1/08 55,000 55,550
----------
359,090
----------
Technology/Semiconductors - 0.13%
#Amkor Technology 144A 7.125% 3/15/11 115,000 115,575
----------
115,575
----------
Telecommunications - 2.46%
Alamosa Delaware 11.00% 7/31/10 9,000 9,653
#Alamosa Delaware 144A 8.50% 1/31/12 40,000 38,200
Alaska Communications Systems
9.875% 8/15/11 60,000 60,900
AT&T
7.50% 6/1/06 40,000 44,006
8.05% 11/15/11 100,000 117,107
8.75% 11/15/31 95,000 112,447
Centennial Cellular Operating
10.125% 6/15/13 80,000 82,800
Cincinnati Bell 8.375% 1/15/14 85,000 83,725
Citizens Communications 8.50% 5/15/06 25,000 27,487
Crown Castle International 10.75% 8/1/11 15,000 16,875
Dobson Communications 8.875% 10/1/13 75,000 59,250
GTE 7.90% 2/1/27 670,000 755,659
MetroPCS 10.75% 10/1/11 20,000 21,300
Nextel Partners 12.50% 11/15/09 17,000 20,060
#Primus Telecommunications 144A
8.00% 1/15/14 30,000 28,800
#Qwest Services 144A 13.50% 12/15/10 120,000 140,100
Sprint Capital
6.375% 5/1/09 10,000 11,157
8.375% 3/15/12 20,000 24,396
8.75% 3/15/32 75,000 95,136
Principal Market
Amount* Value (U.S.$)
CORPORATE BONDS (continued)
Telecommunications (continued)
Telecomunicaciones de Puerto de
Puerto Rico 6.65% 5/15/06 USD 104,000 $ 112,742
++US Unwired 13.375% 11/1/09 60,000 56,400
Verizon Global Funding
7.25% 12/1/10 15,000 17,703
7.75% 12/1/30 6,000 7,316
Verizon New Jersey 7.85% 11/15/29 4,000 4,930
Verizon New York
6.875% 4/1/12 125,000 142,496
7.375% 4/1/32 65,000 74,259
Verizon Pennsylvania 5.65% 11/15/11 25,000 26,953
Verizon Wireless Capital 5.375% 12/15/06 50,000 53,895
+WorldCom 7.50% 5/15/11 10,000 3,225
----------
2,248,977
----------
Textiles, Apparel & Furniture - 0.20%
Interface 10.375% 2/1/10 120,000 136,200
Warnaco 8.875% 6/15/13 45,000 48,713
----------
184,913
----------
Transportation & Shipping - 0.41%
Continental Airlines 6.503% 6/15/11 55,000 54,227
Delta Air Lines 6.417% 7/2/12 35,000 37,702
Kansas City Southern Railway 9.50% 10/1/08 83,000 92,544
OMI 7.625% 12/1/13 75,000 78,188
Overseas Shipholding Group 8.25% 3/15/13 60,000 66,300
Seabulk International 9.50% 8/15/13 40,000 42,000
----------
370,961
----------
Utilities - 4.49%
#Allegheny Energy Supply Statutory Trust 2001
Series B 144A 13.00% 11/15/07 15,000 15,450
American Electric Power 6.125% 5/15/06 60,000 64,851
Avista
7.75% 1/1/07 85,000 95,144
9.75% 6/1/08 45,000 54,450
Calpine
8.25% 8/15/05 90,000 86,400
10.50% 5/15/06 170,000 161,500
o#Calpine Generating 144A 7.00% 4/1/10 80,000 76,600
Cogentrix Energy 8.75% 10/15/08 60,000 63,600
Consolidated Edison 3.625% 8/1/08 30,000 30,630
Consumers Energy
6.00% 3/15/05 40,000 41,489
6.25% 9/15/06 340,000 368,704
Detroit Edison
5.05% 10/1/05 60,000 62,807
6.35% 10/15/32 5,000 5,473
Edison Mission Energy 9.875% 4/15/11 20,000 21,150
El Paso Natural Gas 7.625% 8/1/10 55,000 56,925
Elwood Energy 8.159% 7/5/26 22,886 24,030
Energy East 6.75% 9/15/33 10,000 10,888
Exelon Generation 6.95% 6/15/11 85,000 98,412
FPL Group Capital
3.25% 4/11/06 80,000 81,919
7.625% 9/15/06 10,000 11,269
Homer City Funding 8.137% 10/1/19 50,000 55,500
Illinois Power 7.50% 6/15/09 60,000 68,100
#Metropolitan Edison 144A 4.875% 4/1/14 390,000 388,959
Midwest Generation 8.30% 7/2/09 65,000 66,950
+Mirant Americas Generation 7.625% 5/1/06 5,000 3,725
29
STATEMENTS OPTIMUM FIXED INCOME FUND
OF NET ASSETS (CONTINUED)
Principal Market
Amount* Value (U.S.$)
CORPORATE BONDS (continued)
Utilities (continued)
#NRG Energy 144A 8.00% 12/15/13 USD 95,000 $ 98,563
Oncor Electric Delivery
7.00% 5/1/32 35,000 40,105
Orion Power Holdings
12.00% 5/1/10 60,000 74,550
Pacific Gas & Electric
4.80% 3/1/14 40,000 40,284
6.05% 3/1/34 482,000 489,546
Pacificorp 6.375% 5/15/08 290,000 328,164
#Power Contract Financing 144A
5.20% 2/1/06 17,461 17,839
PP&L Capital Funding 7.75% 4/15/05 180,000 190,421
Progress Energy 6.75% 3/1/06 60,000 65,066
PSEG Energy Holdings 7.75% 4/16/07 55,000 58,438
PSEG Power 8.625% 4/15/31 15,000 19,869
Puget Energy 7.69% 2/1/11 250,000 303,688
Reliant Resources 9.50% 7/15/13 55,000 60,913
Rochester Gas & Electric
6.375% 9/1/33 5,000 5,441
Sempra Energy 6.925% 7/1/04 10,000 10,128
Southern California Edison
6.00% 1/15/34 45,000 46,414
Southern Capital Funding
5.30% 2/1/07 40,000 43,636
Tennessee Gas Pipeline 8.375% 6/15/32 55,000 58,025
TXU Energy 7.00% 3/15/13 30,000 34,449
Xcel Energy 7.00% 12/1/10 80,000 93,540
-----------
4,094,004
-----------
TOTAL CORPORATE BONDS
(cost $27,948,893) 28,202,592
-----------
FOREIGN BONDS - 16.49%
Aruba - 0.19%
UFJ Finance Aruba 6.75% 7/15/13 USD 155,000 171,707
-----------
171,707
-----------
Australia - 0.59%
New South Wales Treasury
8.00% 3/1/08 AUD 100,000 83,151
Queensland Treasury
6.00% 6/14/11 AUD 375,000 291,003
6.00% 8/14/13 AUD 160,000 125,242
#SingTel Optus Finance
Property 144A
8.125% 6/15/09 USD 30,000 36,098
-----------
535,494
-----------
Austria - 0.90%
Oesterreich Kontrollbank
1.80% 3/22/10 JPY 12,000,000 122,470
Republic Of Austria
5.25% 1/4/11 EUR 240,000 325,207
#Sappi Papier Holding 144A
7.50% 6/15/32 USD 315,000 369,338
-----------
817,015
-----------
Brazil - 0.33%
Federal Republic of Brazil
11.00% 8/17/40 USD 280,000 300,440
-----------
300,440
-----------
Principal Market
Amount* Value (U.S.$)
FOREIGN BONDS (continued)
Canada - 1.23%
Alcan 6.125% 12/15/33 USD 541,000 $ 572,467
Canadian Government
0.70% 3/20/06 JPY 25,000,000 242,578
#Hollinger 144A 11.875% 3/1/11 USD 45,000 52,650
Hydro Quebec 8.40% 1/15/22 USD 45,000 62,172
#Norske Skog Canada 144A
7.375% 3/1/14 USD 65,000 67,275
Rogers Cablesystems
10.00% 3/15/05 USD 85,000 91,375
Thomson 5.75% 2/1/08 USD 35,000 38,448
----------
1,126,965
----------
Cayman Islands - 1.31%
Bluewater Finance
10.25% 2/15/12 USD 70,000 73,150
o#DBS Capital Funding 144A
7.657% 3/31/49 USD 260,000 305,655
#Gemstone Investor 144A
7.71% 10/31/04 USD 15,000 15,038
Mizuho Financial Group
8.375% 12/29/49 USD 125,000 134,512
#Mizuho Financial Group 144A
5.79% 4/15/14 USD 645,000 662,932
----------
1,191,287
----------
Chile - 0.02%
Celulosa Arauco 8.625% 8/15/10 USD 15,000 18,332
----------
18,332
----------
Dominican Republic - 0.01%
#Federal Republic of Dominican
Republic 144A 9.04% 1/23/13 USD 10,000 7,250
----------
7,250
----------
Ecuador - 0.17%
++Republic of Ecuador
7.00% 8/15/30 USD 175,000 156,406
----------
156,406
----------
Finland - 0.53%
Finland Government
5.00% 4/25/09 EUR 80,000 106,942
Republic of Finland
5.75% 2/23/11 EUR 270,000 376,758
----------
483,700
----------
France - 1.08%
France Government
5.50% 10/25/07 EUR 245,000 329,475
5.50% 4/25/10 EUR 260,000 356,445
France Telecom 9.00% 3/1/11 USD 130,000 159,027
#Rhodia 144A 8.875% 6/1/11 USD 170,000 142,800
----------
987,747
----------
30
STATEMENTS OPTIMUM FIXED INCOME FUND
OF NET ASSETS (CONTINUED)
Principal Market
Amount* Value (U.S.$)
FOREIGN BONDS (continued)
Germany - 2.72%
Deutsche Telekom International
Finance 8.75% 6/15/30 USD 383,000 $ 503,939
Deutschland Republic
4.00% 7/4/09 EUR 90,000 115,152
4.125% 7/4/08 EUR 180,000 231,834
4.50% 1/4/13 EUR 400,000 516,708
5.00% 7/4/11 EUR 430,000 576,147
5.25% 1/4/11 EUR 150,000 203,866
6.25% 1/4/30 EUR 100,000 150,698
#Gazprom 144A
9.625% 3/1/13 USD 160,000 184,800
----------
2,483,144
----------
Greece - 0.17%
Hellenic Republic 6.30% 1/29/09 EUR 110,000 154,158
----------
154,158
----------
Ireland - 0.08%
Smurfit Capital Funding
7.50% 11/20/25 USD 70,000 70,700
----------
70,700
----------
Italy - 0.49%
Republic of Italy
3.75% 6/8/05 JPY 7,000,000 70,123
3.80% 3/27/08 JPY 30,000,000 324,765
5.75% 7/25/16 EUR 40,000 55,966
----------
450,854
----------
Luxembourg - 0.59%
Tyco International Group
6.375% 2/15/06 USD 95,000 101,191
6.875% 1/15/29 USD 415,000 436,882
----------
538,073
----------
Mexico - 0.60%
Pemex Project Funding Master Trust
8.50% 2/15/08 USD 345,000 403,995
9.125% 10/13/10 USD 65,000 79,950
Petroleos Mexicanos
9.50% 9/15/27 USD 15,000 18,750
#Telefonos de Mexico 144A
4.50% 11/19/08 USD 40,000 41,004
----------
543,699
----------
Netherlands - 0.46%
Aegon 4.75% 6/1/13 USD 50,000 50,914
Netherlands Government
5.25% 7/15/08 EUR 260,000 349,414
Telefonica Europe 7.35% 9/15/05 USD 15,000 16,193
----------
416,521
----------
Norway - 0.27%
Ocean Rig Norway 10.25% 6/1/08 USD 150,000 141,750
Petroleum Geo-Services
8.00% 11/5/06 USD 25,000 25,688
10.00% 11/5/10 USD 72,000 79,020
----------
246,458
----------
Panama - 0.20%
Republic of Panama
8.125% 4/28/34 USD 95,000 95,950
8.875% 9/30/27 USD 77,000 83,930
----------
179,880
----------
Principal Market
Amount* Value (U.S.$)
FOREIGN BONDS (continued)
Peru - 0.04%
Republic of Peru 8.75% 11/21/33 USD 40,000 $ 40,440
-----------
40,440
-----------
Philippines - 0.18%
Republic of Philippines
8.875% 3/17/15 USD 55,000 54,725
10.625% 3/16/25 USD 100,000 109,375
-----------
164,100
-----------
Poland - 0.79%
Poland Government
5.00% 10/24/13 PLZ 1,950,000 448,170
5.75% 6/24/08 PLZ 600,000 150,878
6.00% 11/24/09 PLZ 320,000 80,480
8.50% 11/12/06 PLZ 150,000 40,763
-----------
720,291
-----------
Russia -- 0.05%
++Russian Federation
5.00% 3/31/30 USD 45,000 45,180
-----------
45,180
-----------
Spain - 0.67%
Kingdom of Spain 3.10% 9/20/06 JPY 60,000,000 615,541
-----------
615,541
-----------
Supranational - 0.72%
European Investment Bank
3.00% 9/20/06 JPY 25,000,000 255,982
Inter-American Development Bank
1.90% 7/8/09 JPY 40,000,000 405,281
-----------
661,263
-----------
Sweden - 1.23%
#Nordea Bank Sweden 144A
5.25% 11/30/12 USD 55,000 58,254
Stena 9.625% 12/1/12 USD 60,000 68,400
Swedish Government
5.00% 1/28/09 SEK 1,300,000 184,305
5.25% 3/15/11 SEK 1,310,000 188,220
5.50% 10/8/12 SEK 4,300,000 627,071
-----------
1,126,250
-----------
United Kingdom - 0.60%
Avecia Group PLC 11.00% 7/1/09 USD 60,000 51,300
Chippac International
12.75% 8/1/09 USD 140,000 153,300
Royal Bank of Scotland
7.816% 11/29/49 USD 265,000 290,927
Vodafone Group 5.375% 1/30/15 USD 50,000 52,491
-----------
548,018
-----------
Venezuela - 0.27%
Venezuela Government
6.75% 3/31/20 USD 250,000 235,566
#Venezuela Government 144A
10.75% 9/19/13 USD 12,000 12,600
-----------
248,166
-----------
TOTAL FOREIGN BONDS (cost $14,726,281) 15,049,079
-----------
31
STATEMENTS OPTIMUM FIXED INCOME FUND
OF NET ASSETS (CONTINUED)
Principal Market
Amount* Value (U.S.$)
MUNICIPAL BONDS - 2.72%
Allentown, Pennsylvania
3.98% 10/1/11 USD 320,000 $ 319,239
Aruba Airport Authority
7.70% 1/1/13 200,000 234,920
California State 5.00% 2/1/33 5,000 5,005
Forsyth, Montana Pollution
Control Revenue
(Portland General Project)
Series A 5.20% 5/1/33 20,000 21,500
Hoboken, New Jersey General
Obligation Taxable Series B
4.26% 2/1/10 60,000 61,803
5.33% 2/1/18 65,000 68,464
Hoboken, New Jersey Refunding
Taxable Pension 6.50% 4/1/26 25,000 27,834
Illinois State Taxable Pension
5.10% 6/1/33 135,000 130,437
Industry Urban Development Agency
4.50% 5/1/10 195,000 200,411
LA Quinta Redevelopment
Agency Tax Allocation
5.45% 9/1/13 15,000 15,785
6.24% 9/1/23 10,000 10,726
Long Island, New York Power
Authority Series A 5.00% 6/1/08 5,000 5,466
Los Angeles, California Community
Redevelopment 5.60% 7/1/18 80,000 83,090
Manchester New Hampshire Taxable
5.375% 12/1/11 110,000 119,979
Metropolitan Washington
District of Columbia Airport Authority
4.62% 10/1/10 15,000 15,725
New Jersey Economic Development
Authority Special Facility Revenue
(Continental Airlines Project)
6.25% 9/15/29 (AMT) 15,000 12,068
Sacramento County Public Finance
Authority Series B
3.82% 12/1/08 115,000 117,692
5.18% 12/1/13 105,000 108,715
State of Oregon 5.892% 6/1/27 65,000 70,463
West Virginia Economic
Development Authority
5.37% 7/1/20 590,000 618,231
6.07% 7/1/26 45,000 47,327
Wisconsin State General Revenue
5.70% 5/1/26 175,000 184,986
---------
TOTAL MUNICIPAL BONDS (cost $2,399,815) 2,479,866
---------
U.S. TREASURY OBLIGATIONS - 9.86%
U.S. Treasury Bond 6.00% 2/15/26 832,000 964,860
U.S. Treasury Inflation Index Bonds
3.375% 4/15/32 208,644 276,788
U.S. Treasury Inflation Index Notes
^1.875% 7/15/13 151,230 157,604
2.00% 1/15/14 375,806 394,450
3.375% 1/15/07 555,156 611,995
Principal Market
Amount* Value (U.S.$)
U.S. TREASURY OBLIGATIONS (continued)
U.S. Treasury Notes
1.625% 2/28/06 USD 35,000 $ 35,066
2.25% 2/15/07 240,000 242,119
2.625% 11/15/06 290,000 295,800
3.00% 2/15/09 220,000 222,458
3.25% 1/15/09 120,000 122,780
5.00% 8/15/11 850,000 936,893
6.125% 8/15/07 4,195,000 4,735,764
----------
TOTAL U.S. TREASURY OBLIGATIONS
(cost $8,943,597) 8,996,577
----------
Number of
Shares
PREFERRED STOCK - 0.43%
Alamosa Delaware 7.50% 15 7,069
Cablevision Systems 11.75% 1,340 140,565
#Centaur Funding 144A 9.08% 55 71,913
+Host Marriott Class B 10.00% 225 5,807
Nexen 7.35% 5,200 139,932
TNP Enterprises PIK 14.50% 21 24,507
----------
TOTAL PREFERRED STOCK (cost $381,770) 389,793
----------
Principal
Amount
REPURCHASE AGREEMENTS - 12.13%
With BNP Paribas 1.00% 4/1/04
(dated 3/31/04, to be repurchased
at $5,457,951 collateralized by
$1,461,800 U.S. Treasury Bills due
4/8/04, market value $1,461,512,
$468,000 U.S. Treasury Bills due
6/17/04, market value $467,081,
$1,521,000 U.S. Treasury Bills due
8/5/04, market value $1,516,054,
$390,800 U.S. Treasury Bills due
8/19/04, market value $389,314,
$944,200 U.S. Treasury Bills due
9/9/04, market value $940,054,
$786,000 U.S. Treasury Notes 1.75%
due 12/31/04, market value $793,351) USD 5,457,800 5,457,800
With UBS Warburg 0.99% 4/1/04
(dated 3/31/04, to be repurchased
at $5,616,355 collateralized by
$376,800 U.S. Treasury Notes
6.50% due 5/15/05, market value
$408,043, $1,170,000 U.S. Treasury
Notes 9.375% due 2/15/06, market
value $1,352,701, $1,170,000
U.S. Treasury Notes 7.00% due 7/15/06,
market value $1,324,979, $1,170,000
U.S. Treasury Notes 5.50% due 2/15/08,
market value $1,312,544, $1,170,000
U.S. Treasury Notes 5.625% due
5/15/08, market value $1,337,586) 5,616,200 5,616,200
----------
TOTAL REPURCHASE AGREEMENTS
(cost $11,074,000) 11,074,000
----------
32
STATEMENTS OPTIMUM FIXED INCOME FUND
OF NET ASSETS (CONTINUED)
TOTAL MARKET VALUE OF SECURITIES - 109.28%
(cost $98,857,580) $99,737,065
LIABILITIES NET OF RECEIVABLES AND
OTHER ASSETS - (9.28%) (8,467,499)
-----------
NET ASSETS APPLICABLE TO 10,159,408 SHARES
OUTSTANDING - 100.00% $91,269,566
===========
Net Asset Value - Optimum Fixed Income Fund
Class A ($12,049,068 / 1,342,500 Shares) $8.98
-----
Net Asset Value - Optimum Fixed Income Fund
Class B ($4,296,049 / 478,002 Shares) $8.99
-----
Net Asset Value -- Optimum Fixed Income Fund
Class C ($52,648,320 / 5,856,302 Shares) $8.99
-----
Net Asset Value - Optimum Fixed Income Fund
Institutional Class ($22,276,129 / 2,482,604 Shares) $8.97
-----
COMPONENTS OF NET ASSETS AT MARCH 31, 2004:
Shares of beneficial interest
(unlimited authorization - no par) $89,510,974
Undistributed net investment income** 206,252
Accumulated net realized gain on investments 650,676
Net unrealized appreciation of investments
and foreign currencies 901,664
-----------
Total net assets $91,269,566
===========
*Principal amount is stated in the currency in which each bond is denominated.
**Undistributed net investment income includes net realized gains (losses) on
foreign currencies. Net realized gains (losses) on foreign currencies are
treated as net investment income in accordance with provisions of the
Internal Revenue Code.
#Securities exempt from registration under Rule 144A of the Securities Act of
1933. See Note #10 in "Notes to Financial Statements."
+Non-income producing security. Security currently in default.
++Step coupon bond.
+++Securities have been classified by country of origin. Classification by type
of business has been presented in Note #12 to the Financial Statements.
^Fully or partially pledged as collateral for financial futures contracts.
oVariable Rate Notes - the interest rate shown is the rate as of March 31,
2004.
SUMMARY OF ABBREVIATIONS:
AUD - Australian Dollar
EUR - European Monetary Unit
JPY - Japanese Yen
PLZ - Polish Zloty
SEK - Swedish Krona
USD - U.S. Dollar
SUMMARY OF ABBREVIATIONS:
ADR - American Depositary Receipts
AMT - Subject to Alternative Minimum Tax
GNMA - Government National Mortgage Association
PIK - Pay-in-kind
REIT - Real Estate Investment Trust
SLMA - Student Loan Marketing Association
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
OPTIMUM FIXED INCOME FUND
Net asset value Class A (A) $8.98
Sales charge (4.50% of offering price, or 4.68% of
amount invested per share) (B) 0.42
-----
Offering price $9.40
=====
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
33
STATEMENTS OPTIMUM INTERNATIONAL FUND
OF NET ASSETS (CONTINUED) March 31, 2004
Number of Market
Shares Value (U.S.$)
COMMON STOCK - 93.64%**
Australia - 7.00%
Amcor 49,408 $ 301,764
Coles Myer 34,278 212,497
Foster's Group 108,898 364,977
National Australia Bank 18,969 448,938
Orica 4,240 46,225
Telstra 68,722 238,195
The News Corporation 12,267 441,367
----------
2,053,963
----------
Austria - 0.98%
Erste Bank der Oestereichischen Sparkassen 1,919 287,236
----------
287,236
----------
Belgium - 0.62%
Electrabel 561 182,694
----------
182,694
----------
Bermuda - 1.26%
Tyco International 12,954 371,132
----------
371,132
----------
Brazil - 1.64%
Cia de Bebidas das Americas ADR 7,164 143,280
Cia Vale do Rio Doce ADR 3,403 186,825
Unibanco de Bancos Brasileiros GDR 6,158 150,686
----------
480,791
----------
Finland - 0.56%
UPM-Kymmene 9,000 164,795
----------
164,795
----------
France - 4.57%
Compagnie de Saint Gobain 5,568 281,296
+JC Decaux 8,961 200,311
Societe Generale - Class A 3,273 279,542
Total Fina Elf 3,164 580,903
----------
1,342,052
----------
Germany - 4.61%
Bayer 10,504 257,522
+Bayerische Hypo-und Vereinsbank 5,966 117,159
Bayerische Motoren Werke 7,117 291,245
RWE 8,816 395,440
SAP 1,862 292,891
----------
1,354,257
----------
Hong Kong - 5.25%
ASM Pacific Technology 31,500 140,295
Cathay Pacific Airways 70,000 142,855
CNOOC ADR 5,360 230,479
Esprit Holdings 49,000 205,657
Hong Kong & China Gas 52,000 89,769
Hong Kong Electric 42,500 187,105
Shangri-La Asia 204,246 203,169
Sun Hung Kai Properties 16,000 146,321
Wharf Holdings 65,000 195,223
----------
1,540,873
----------
Hungary - 0.50%
+#OPT Bank GDR 144A 3,869 146,731
----------
146,731
----------
Number of Market
Shares Value (U.S.$)
COMMON STOCK** (continued)
India - 0.81%
ICICI Bank ADR 14,873 $ 237,224
----------
237,224
----------
Italy - 1.23%
Banca Intesa 109,461 361,850
----------
361,850
----------
Japan - 19.90%
Canon 10,000 518,096
Daiwa Securities 18,000 147,066
Eisai 8,000 216,850
Hitachi 35,000 271,495
Ito-Yokado 3,000 136,685
Keyence Corporation 600 146,258
Matsushita Electric Industrial 19,000 293,670
Millea Holdings 11 171,289
Mitsubishi Tokyo Financial 30 297,015
Murata Manufacturing 4,800 304,974
Nissan Motor 38,000 425,531
Sharp 21,000 375,249
Sony 10,400 435,854
Takeda Chemical Industries 9,300 414,783
THK 10,700 211,357
Toyota Motor 8,700 324,468
UFJ Holdings 47 299,072
West Japan Railway 27 108,223
Yamada Denki 7,600 297,323
Yamaha 15,700 293,521
Yamato Transport 9,000 151,218
----------
5,839,997
----------
Netherlands - 4.06%
ING Groep 15,881 348,949
Koninklijke Philips Electronics 7,509 217,130
Reed Elsevier 20,167 266,172
Royal Dutch Petroleum 7,564 359,267
----------
1,191,518
----------
New Zealand - 1.20%
Telecom Corporation of New Zealand 91,416 353,598
----------
353,598
----------
Norway - 0.85%
+Golar LNG 16,400 249,015
----------
249,015
----------
Republic of Korea - 3.60%
+Kookmin Bank 4,420 179,275
POSCO ADR 6,000 212,340
Samsung Electronics 1,330 663,579
----------
1,055,194
----------
Russia - 0.89%
Mobile Telesystems ADR 1,978 260,107
----------
260,107
----------
Singapore - 1.01%
Jardine Matheson 4,400 47,960
Oversea-Chinese Banking 34,000 249,485
----------
297,445
----------
34
STATEMENTS OPTIMUM INTERNATIONAL FUND
OF NET ASSETS (CONTINUED)
Number of Market
Shares Value (U.S.$)
COMMON STOCK** (continued)
South Africa - 0.72%
Sasol 13,639 $ 212,078
----------
212,078
----------
Spain - 5.80%
Banco Santander Central Hispanoamericano 23,414 254,645
Iberdrola 16,107 332,537
+Sogecable 14,859 622,857
Telefonica 32,508 491,774
----------
1,701,813
----------
Switzerland - 5.68%
Roche Holding 6,741 658,482
Syngenta 3,056 222,895
Synthes-Stratec 194 198,923
UBS 7,881 585,391
----------
1,665,691
----------
Taiwan - 0.69%
AU Optronics ADR 9,637 201,413
----------
201,413
----------
United Kingdom - 18.46%
Aviva 12,471 121,246
BG Group 52,841 316,106
BOC Group 4,362 72,070
Boots 27,642 314,971
BP Amoco 37,386 313,317
Brambles Industries 46,766 184,575
British Sky Broadcasting 16,437 205,268
EMI Group 128,326 655,058
GKN 29,646 131,581
GlaxoSmithKline 23,290 457,142
GUS 18,072 248,604
HBOS 28,606 388,781
HSBC Holdings 41,500 617,031
Intercontinental Hotels Group 22,235 202,893
Lloyds TSB Group 44,754 340,108
Mitchells & Butlers 26,304 126,054
Reed Elsevier 50,043 442,843
Rio Tinto 11,372 280,687
----------
5,418,335
----------
United States - 1.75%
+NTL 6,327 376,140
+Wynn Resorts 3,930 137,550
----------
513,690
----------
TOTAL COMMON STOCK (cost $25,117,005) 27,483,492
----------
RIGHTS - 0.02%
Bayerische Hypo 5,966 5,352
----------
TOTAL RIGHTS (cost $0) 5,352
----------
Principal Market
Amount* Value (U.S.$)
REPURCHASE AGREEMENTS - 6.84%
With BNP Paribas 1.00% 4/1/04
(dated 3/31/04, to be repurchased
at $989,027 collateralized by $265,000
U.S. Treasury Bills due 4/8/04, market
value $264,878, $85,000 U.S. Treasury
Bills due 6/17/04, market value
$84,652, $276,000 U.S. Treasury Bills
due 8/5/04, market value $274,763,
$71,000 U.S. Treasury Bills due
8/19/04, market value $70,557, $171,000
U.S. Treasury Bills due 9/9/04, market
value $170,371, $142,000 U.S. Treasury
Notes 1.75% due 12/31/04, market
value $143,783) $ 989,000 $ 989,000
With UBS Warburg 0.99% 4/1/04
(dated 3/31/04, to be repurchased
at $1,018,028 collateralized by
$68,000 U.S. Treasury Notes
6.50% due 5/15/05, market value
$73,952, $212,000 U.S. Treasury
Notes 9.375% due 2/15/06, market
value $245,157, $212,000 U.S. Treasury
Notes 7.00% due 7/15/06, market
value $240,133, $212,000 U.S. Treasury
Notes 5.50% due 2/15/08, market
value $237,879, $212,000 U.S. Treasury
Notes 5.625% due 5/15/08, market
value $242,418) 1,018,000 1,018,000
-----------
TOTAL REPURCHASE AGREEMENTS
(cost $2,007,000) 2,007,000
-----------
TOTAL MARKET VALUE OF SECURITIES - 100.50%
(cost $27,124,005) 29,495,844
LIABILITIES NET OF RECEIVABLES AND
OTHER ASSETS - (0.50%) (147,362)
-----------
NET ASSETS APPLICABLE TO 2,756,147 SHARES
OUTSTANDING - 100.00% $29,348,482
===========
35
STATEMENTS OPTIMUM INTERNATIONAL FUND
OF NET ASSETS (CONTINUED)
Net Asset Value -- Optimum International Fund
Class A ($4,082,810 / 382,818 Shares) $10.67
------
Net Asset Value -- Optimum International Fund
Class B ($1,623,932 / 152,952 Shares) $10.62
------
Net Asset Value -- Optimum International Fund
Class C ($14,339,396 / 1,349,942 Shares) $10.62
------
Net Asset Value -- Optimum International Fund
Institutional Class ($9,302,344 / 870,435 Shares) $10.69
------
Components of Net Assets at March 31, 2004:
Shares of beneficial interest
(unlimited authorization - no par) $26,661,384
Accumulated net investment loss* (32,242)
Accumulated net realized gain on investments 364,919
Net unrealized appreciation of investments
and foreign currencies 2,354,421
-----------
Total net assets $29,348,482
===========
*Accumulated net investment loss includes net realized gains (losses) on
foreign currencies. Net realized gains (losses) on foreign currencies are
treated as net investment income in accordance with provisions of the
Internal Revenue Code.
**Securities have been classified by country of origin. Classification by type
of business has been presented in Note #12 to the Financial Statements.
+Non-income producing security for the period ended March 31, 2004.
#Securities exempt from registration under Rule 144A of the Securities Act of
1933. See Note #10 in "Notes to Financial Statements."
SUMMARY OF ABBREVIATIONS:
ADR - American Depositary Receipts
GDR - Global Depositary Receipts
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
OPTIMUM INTERNATIONAL FUND
Net asset value Class A (A) $10.67
Sales charge (5.75% of offering price, or 6.09% of
the amount invested per share) (B) 0.65
------
Offering price $11.32
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon the redemption or repurchase of shares.
(B) See the current prospectus for purchases of $50,000 or more.
See accompanying notes
36
STATEMENTS OPTIMUM LARGE CAP GROWTH FUND
OF NET ASSETS (CONTINUED) March 31, 2004
Number of Market
Shares Value (U.S.$)
COMMON STOCK - 95.70%
Aerospace & Defense - 0.49%
Honeywell International 10,042 $ 339,922
-----------
339,922
-----------
Automobiles & Automotive Parts - 0.52%
Danaher 3,900 364,143
-----------
364,143
-----------
Banking & Finance - 17.48%
American Express 7,600 394,060
Charles Schwab 9,200 106,812
Citigroup 54,882 2,837,398
Countrywide Financial 10,744 1,030,350
Credit Suisse Group (Switzerland) 7,540 261,283
Fannie Mae 18,070 1,343,505
Freddie Mac 3,300 194,898
Goldman Sachs Group 4,665 486,793
J.P. Morgan Chase 19,856 832,959
MBNA 3,600 99,468
Mellon Financial 9,200 287,868
Merrill Lynch 22,059 1,313,834
Morgan Stanley 3,800 217,740
Northern Trust 5,500 256,245
SLM 37,195 1,556,611
State Street 9,560 498,363
UBS AG (Switzerland) 2,000 148,557
U.S. Bancorp 11,000 304,150
-----------
12,170,894
-----------
Buildings & Materials - 0.83%
Lennar 5,956 321,802
M.D.C. Holdings 3,647 256,749
-----------
578,551
-----------
Business Services - 1.97%
+Accenture Limited Class A 14,300 354,640
Adecco (Switzerland) 2,920 161,345
+Apollo Group Class A 5,180 446,050
Cendant 16,700 407,313
-----------
1,369,348
-----------
Cable, Media & Publishing - 5.88%
British Sky Broadcasting (United Kingdom) 15,600 194,816
Clear Channel Communications 7,850 332,448
+Comcast Special Class A 36,108 1,006,690
Disney (Walt) 17,603 439,898
+EchoStar Communications Class A 11,700 383,175
+Liberty Media Class A 24,800 271,560
News Corporation Limited Preferred ADR 8,600 272,706
Scripps (E.W.) 2,660 268,953
+Sogecable (Spain) 3,200 134,137
+Time Warner 7,700 129,822
+Univision Communications Class A 9,750 321,848
Viacom Class B 8,600 337,206
-----------
4,093,259
-----------
Computers & Technology - 8.74%
Adobe Systems 7,050 277,982
+Affiliated Computer Services Class A 9,100 472,290
Automatic Data Processing 6,238 261,996
+Dell 36,290 1,220,070
+Electronic Arts 16,338 881,599
First Data 8,100 341,496
+Fiserv 8,700 311,199
Number of Market
Shares Value (U.S.$)
COMMON STOCK (continued)
Computers & Technology (continued)
+Intuit 6,350 $ 284,988
+Mercury Interactive 4,400 197,120
Microsoft 43,100 1,076,207
+Research In Motion 2,000 186,620
SAP AG (Germany) 1,600 251,679
+SunGard Data Systems 4,900 134,260
+Synopsys 1,800 52,128
+Veritas Software 5,000 134,550
-----------
6,084,184
-----------
Consumer Products - 3.25%
Gillette 3,150 123,165
Procter & Gamble 10,602 1,111,937
Tyco International 35,890 1,028,249
-----------
2,263,351
-----------
Electronics & Electrical Equipment - 4.70%
+Agilent Technologies 7,703 243,646
General Electric 59,872 1,827,293
Samsung Electronics (Republic of Korea) 1,870 933,002
Sharp (Japan) 15,000 268,035
-----------
3,271,976
-----------
Energy - 1.91%
Baker Hughes 10,500 383,040
ChevronTexaco 3,150 276,507
Exxon Mobil 8,000 332,720
Schlumberger 5,300 338,405
-----------
1,330,672
-----------
Farming & Agricultural - 0.57%
Altria Group 4,700 255,915
Monsanto 3,772 138,319
-----------
394,234
-----------
Food, Beverage & Tobacco - 2.45%
Coca-Cola 6,750 339,525
Compass Group (United Kingdom) 39,000 257,497
PepsiCo 14,527 782,278
Sysco 5,700 222,585
Unilever (United Kingdom) 10,100 100,051
-----------
1,701,936
-----------
Healthcare & Pharmaceuticals - 17.38%
+Amgen 7,680 446,746
Biomet 3,450 132,342
+Boston Scientific 24,460 1,036,615
Cardinal Health 2,100 144,690
+Forest Laboratories 16,101 1,153,154
+Genentech 15,135 1,601,586
+Gilead Sciences 4,330 241,484
Guidant 2,000 126,740
Johnson & Johnson 7,200 365,184
Lilly (Eli) 6,173 412,974
Medtronic 18,360 876,690
Pfizer 23,500 823,675
+St. Jude Medical 3,717 267,996
UnitedHealth Group 43,010 2,771,563
+Wellpoint Health Networks 4,900 557,228
Wyeth 3,700 138,935
+Zimmer Holdings 13,517 997,284
-----------
12,094,886
-----------
37
STATEMENTS OPTIMUM LARGE CAP GROWTH FUND
OF NET ASSETS (CONTINUED)
Number of Market
Shares Value (U.S.$)
COMMON STOCK (continued)
Industrial Machinery - 1.61%
Caterpillar 14,157 $ 1,119,394
-----------
1,119,394
-----------
Insurance - 2.19%
ACE Limited 5,000 213,300
American International Group 11,000 784,850
Hartford Financial Services 4,650 296,205
Travelers Property Casualty Class A 13,350 228,953
-----------
1,523,308
-----------
Internet Services - 1.39%
+eBay 4,770 330,704
+InterActiveCorp 8,500 268,515
+Yahoo 7,550 366,855
-----------
966,074
-----------
Leisure, Lodging & Entertainment - 4.09%
Carnival 7,050 316,616
Four Seasons Hotels 5,574 295,979
Harley-Davidson 5,600 298,704
International Game Technology 10,250 460,840
Mandalay Resort Group 12,117 693,820
+MGM Mirage 3,750 170,025
Royal Caribbean Cruises 3,403 150,072
+Wynn Resorts 13,113 458,955
-----------
2,845,011
-----------
Metals & Mining - 0.77%
Nucor 5,050 310,474
Rio Tinto (United Kingdom) 9,100 224,609
-----------
535,083
-----------
Retail - 7.71%
Best Buy 7,300 377,556
Family Dollar Stores 4,300 154,585
Home Depot 11,750 438,980
Inditex (Spain) 3,400 78,551
Kingfisher (United Kingdom) 30,200 160,543
+Kohl's 2,850 137,741
Lowe's 18,108 1,016,403
+Starbucks 4,000 151,000
Target 13,900 626,056
Tiffany 21,832 833,327
Wal-Mart de Mexico ADR 3,800 116,007
Wal-Mart de Mexico Series V (Mexico) 14,700 44,876
Wal-Mart Stores 16,077 959,636
Walgreen 8,300 273,485
-----------
5,368,746
-----------
Technology/Semiconductors - 2.73%
Analog Devices 3,600 172,836
+Applied Materials 10,950 234,111
Intel 12,900 350,880
Maxim Integrated Products 12,674 596,818
+QLogic 4,700 155,147
+Semiconductor Manufacturing
International ADR 700 10,570
STMicrolectronics (France) 9,000 212,133
+Xilinx 4,400 167,200
-----------
1,899,695
-----------
Number of Market
Shares Value (U.S.$)
COMMON STOCK (continued)
Telecommunications - 5.74%
+Cisco Systems 21,100 $ 496,272
+Corning 13,400 149,812
+Crown Castle International 14,900 188,187
+Juniper Networks 3,500 91,035
Motorola 13,117 230,859
+Nextel Communications Class A 26,272 649,707
Qualcomm 24,316 1,615,068
Vodafone Group (United Kingdom) 143,800 340,925
Vodafone Group ADR 9,850 235,415
----------
3,997,280
----------
Textiles, Apparel & Furniture - 1.46%
Hermes International (France) 895 182,578
Nike 10,717 834,532
----------
1,017,110
----------
Transportation & Shipping - 1.84%
FedEx 13,467 1,012,179
United Parcel Service Class B 3,890 271,678
----------
1,283,857
----------
TOTAL COMMON STOCK (cost $63,739,200) 66,612,914
----------
Principal
Amount
REPURCHASE AGREEMENTS - 3.94%
With BNP Paribas 1.00% 4/1/04
(dated 3/31/04, to be repurchased
at $1,350,938 collateralized by
$361,800 U.S. Treasury Bills due
4/8/04, market value $361,749,
$115,800 U.S. Treasury Bills due
6/17/04, market value $115,610,
$376,500 U.S. Treasury Bills due
8/5/04, market value $375,249,
$96,700 U.S. Treasury Bills due
8/19/04, market value $96,362,
$233,700 U.S. Treasury Bills due
9/9/04, market value $232,679,
$194,500 U.S. Treasury Notes 1.75%
due 12/31/04, market value $196,368) $1,350,900 1,350,900
With UBS Warburg 0.99% 4/1/04
(dated 3/31/04, to be repurchased at
$1,390,238 collateralized by $93,300
U.S. Treasury Notes 6.50% due
5/15/05, market value $100,998,
$289,600 U.S. Treasury Notes 9.375%
due 2/15/06, market value $334,816,
$289,600 U.S. Treasury Notes 7.00%
due 7/15/06, market value $327,955,
$289,600 U.S. Treasury Notes 5.50%
due 2/15/08, market value $324,877,
$289,600 U.S. Treasury Notes 5.625%
due 5/15/08, market value $331,075) 1,390,100 1,390,100
----------
TOTAL REPURCHASE AGREEMENTS
(cost $2,741,000) 2,741,000
----------
38
STATEMENTS OPTIMUM LARGE CAP GROWTH FUND
OF NET ASSETS (CONTINUED)
TOTAL MARKET VALUE OF SECURITIES - 99.64%
(cost $66,480,200) $69,353,914
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 0.36% 251,179
-----------
NET ASSETS APPLICABLE TO 7,287,490 SHARES
OUTSTANDING - 100.00% $69,605,093
===========
Net Asset Value - Optimum Large Cap Growth Fund
Class A ($9,336,828/975,984 Shares) $9.57
-----
Net Asset Value - Optimum Large Cap Growth Fund
Class B ($3,568,643/374,535 Shares) $9.53
-----
Net Asset Value -- Optimum Large Cap Growth Fund
Class C ($35,142,851/3,688,894 Shares) $9.53
-----
Net Asset Value - Optimum Large Cap Growth Fund
Institutional Class ($21,556,771 / 2,248,077 Shares) $9.59
-----
COMPONENTS OF NET ASSETS AT MARCH 31, 2004:
Shares of beneficial interest
(unlimited authorization - no par) $67,114,280
Accumulated net investment loss* (10,943)
Accumulated net realized loss on investments (371,952)
Net unrealized appreciation of investments
and foreign currencies 2,873,708
-----------
Total net assets $69,605,093
===========
+Non-income producing security for the period ended March 31, 2004.
*Net operating loss includes net realized gains (losses) on foreign currencies.
Net realized gains (losses) on foreign currencies are treated as net investment
income in accordance with provisions of the Internal Revenue Code.
SUMMARY OF ABBREVIATIONS
ADR - American Depositary Receipts
NET ASSET VALUE AND OFFERING PRICE PER SHARE --
OPTIMUM LARGE CAP GROWTH FUND
Net asset value Class A (A) $ 9.57
Sales charge (5.75% of offering price, or 6.06% of
the amount invested per share) (B) 0.58
------
Offering price $10.15
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon the redemption or repurchase of shares.
(B) See the current prospectus for purchases of $50,000 or more.
See accompanying notes
39
STATEMENTS OPTIMUM LARGE CAP VALUE FUND
OF NET ASSETS (CONTINUED) March 31, 2004
Number of Market
Shares Value (U.S.$)
COMMON STOCK - 95.70%
Aerospace & Defense - 1.86%
Lockheed Martin 11,560 $ 527,598
Northrop Grumman 7,200 708,624
-----------
1,236,222
-----------
Automobiles & Automotive Parts - 1.48%
Honda Motor ADR 24,320 562,765
Magna International Class A 5,340 422,928
-----------
985,693
-----------
Banking & Finance - 19.15%
American Express 7,030 364,506
Bank of America 14,110 1,142,628
Bank One 18,290 997,171
Citigroup 42,210 2,182,256
Edwards (A.G.) 4,540 177,605
Fannie Mae 15,720 1,168,781
FleetBoston Financial 20,760 932,124
Freddie Mac 7,810 461,259
Goldman Sachs Group 6,660 694,971
Janus Capital Group 2,620 42,916
J.P. Morgan Chase 14,210 596,110
Lehman Brothers Holdings 5,490 454,956
Mellon Financial 18,960 593,258
Merrill Lynch 17,750 1,057,190
PNC Financial Services Group 13,400 742,628
SouthTrust 4,810 159,500
SunTrust Banks 10,170 708,951
Wachovia 5,220 245,340
-----------
12,722,150
-----------
Business Services - 0.97%
+Accenture Limited Class A 7,700 190,960
Equifax 17,580 453,916
-----------
644,876
-----------
Cable, Media & Publishing - 7.16%
Clear Channel Communications 13,640 577,654
+Comcast Special Class A 17,230 480,372
+Cox Communications Class A 6,030 190,548
Disney (Walt) 26,560 663,734
+Interpublic Group 15,000 230,700
Reed Elsevier (United Kingdom) 42,340 374,677
+Time Warner 67,870 1,144,289
Tribune 8,550 431,262
Viacom Class B 16,820 659,512
-----------
4,752,748
-----------
Chemicals - 4.14%
Air Products & Chemicals 7,170 359,360
Bayer ADR 25,400 619,760
Dow Chemical 15,520 625,145
duPont (E.I.) deNemours 5,530 233,477
PPG Industries 7,530 438,999
Praxair 2,810 104,307
Syngenta (Switzerland) 5,070 369,790
-----------
2,750,838
-----------
Number of Market
Shares Value (U.S.$)
COMMON STOCK (continued)
Computers & Technology - 3.88%
Automatic Data Processing 6,780 $ 284,760
Computer Associates International 6,040 162,234
First Data 7,930 334,329
Hewlett-Packard 18,350 419,114
International Business Machines 8,680 797,172
Microsoft 23,230 580,053
----------
2,577,662
----------
Consumer Products - 1.90%
Kimberly-Clark 19,980 1,260,738
----------
1,260,738
----------
Electronics & Electrical Equipment - 1.08%
Emerson Electric 6,520 390,678
Parker Hannifin 5,820 328,830
----------
719,508
----------
Energy - 11.33%
BP ADR 31,620 1,618,943
ChevronTexaco 2,850 250,173
ConocoPhillips 16,290 1,137,205
Devon Energy 2,160 125,604
EOG Resources 3,450 158,321
Exxon Mobil 28,040 1,166,184
GlobalSantaFe 2,770 76,923
National Fuel Gas 3,780 92,988
+Noble 7,140 274,319
Royal Dutch Petroleum 10,950 521,001
Schlumberger 16,290 1,040,117
Total ADR 3,000 276,000
Unocal 11,630 433,566
Valero Energy 5,850 350,766
----------
7,522,110
----------
Farming & Agricultural - 1.22%
Archer-Daniels-Midland 30,330 511,667
Monsanto 8,230 301,794
----------
813,461
----------
Food, Beverage & Tobacco - 5.25%
Altria Group 18,870 1,027,471
Cadbury Schweppes 9,110 292,887
Diageo (United Kingdom) 11,410 148,781
Heinz (H.J.) 8,610 321,067
Kellogg 14,550 570,941
Kraft Foods Class A 7,170 229,512
Nestle ADR 3,620 230,742
PepsiCo 8,280 445,878
Sara Lee 6,950 151,927
Tyson Foods Class A 3,850 69,493
----------
3,488,699
----------
40
STATEMENTS OPTIMUM LARGE CAP VALUE FUND
OF NET ASSETS (CONTINUED) March 31, 2004
Number of Market
Shares Value (U.S.$)
COMMON STOCK (continued)
Healthcare & Pharmaceuticals - 8.67%
Abbott Laboratories 9,930 $ 408,123
AstraZeneca ADR 6,060 283,184
Bard (C.R.) 670 65,419
Bausch & Lomb 8,440 506,147
Baxter International 3,370 104,099
Bristol-Myers Squibb 39,670 961,204
Guidant 550 34,854
Johnson & Johnson 14,650 743,048
Lilly (Eli) 2,350 157,215
Merck 3,500 154,665
Novartis (Switzerland) 6,460 274,340
Pfizer 8,350 292,668
Roche Holding (Switzerland) 3,450 337,007
Roche Holding ADR 5,410 528,466
Schering-Plough 26,310 426,748
+Tenet Healthcare 11,950 133,362
Wyeth 9,280 348,464
----------
5,759,013
----------
Industrial - 1.16%
Cooper Industries 1,800 102,924
Deere 3,515 243,625
Finning International (Canada) 840 18,983
Ingersoll-Rand Class A 4,600 311,189
Textron 1,740 92,481
----------
769,202
----------
Insurance - 7.82%
AFLAC 3,070 123,230
Allstate 8,970 407,776
Chubb 14,380 999,984
Cigna 5,350 315,757
Hartford Financial Services 15,090 961,233
Marsh & McLennan 1,760 81,488
MetLife 25,260 901,277
Prudential Financial 10,560 472,877
Travelers Property Casualty Class A 54,150 928,673
----------
5,192,295
----------
Leisure, Lodging & Entertainment - 1.40%
Hilton Hotels 29,440 478,400
Starwood Hotels & Resorts Worldwide 11,080 448,740
----------
927,140
----------
Metals & Mining - 1.10%
Newmont Mining 6,650 310,090
+Phelps Dodge 5,140 419,732
----------
729,822
----------
Packaging & Containers - 0.21%
+Smurfit-Stone Container 7,940 139,665
----------
139,665
----------
Number of Market
Shares Value (U.S.$)
COMMON STOCK (continued)
Paper & Forest Products - 1.34%
Bowater 3,100 $ 135,253
International Paper 10,360 437,814
Temple-Inland 5,000 316,700
----------
889,767
----------
Retail - 2.23%
+Kohl's 5,310 256,632
McDonald's 16,080 459,406
Sears, Roebuck 1,790 76,898
Target 5,690 256,278
TJX 3,200 78,592
Wal-Mart Stores 5,890 351,574
----------
1,479,380
----------
Semiconductors - 0.40%
Intel 6,490 176,528
+Novellus Systems 2,760 87,740
----------
264,268
----------
Telecommunications - 5.57%
+AT&T Wireless Services 12,670 172,439
Motorola 9,890 174,064
Nokia ADR 19,780 401,138
SBC Communications 29,080 713,623
Sprint - FON Group 41,170 758,763
Verizon Communications 34,400 1,256,976
Vodafone Group (United Kingdom) 92,790 219,989
----------
3,696,992
----------
Transportation & Shipping - 2.09%
Burlington Northern Santa Fe 4,050 127,575
Norfolk Southern 22,850 504,757
Union Pacific 12,590 753,133
----------
1,385,465
----------
Utilities - 4.29%
CINergy 5,690 232,664
Consolidated Edison 4,500 198,450
Dominion Resources 2,160 138,888
Edison International 9,530 231,484
Energy East 7,520 190,707
Entergy 9,190 546,805
Exelon 4,550 313,359
FirstEnergy 8,830 345,076
KeySpan 3,360 128,419
NSTAR 2,190 111,077
PPL 3,310 150,936
TXU 9,160 262,526
----------
2,850,391
----------
TOTAL COMMON STOCK (cost $61,229,378) 63,558,105
----------
41
STATEMENTS OPTIMUM LARGE CAP VALUE FUND
OF NET ASSETS (CONTINUED) March 31, 2004
Principal Market
Amount Value (U.S.$)
REPURCHASE AGREEMENTS - 7.56%
With BNP Paribas 1.00% 4/1/04
(dated 3/31/04, to be repurchased
at $2,476,069 collateralized by
$663,000 U.S. Treasury Bills due
4/8/04, market value $662,920,
$212,000 U.S. Treasury Bills due
6/17/04, market value $211,861,
$690,000 U.S. Treasury Bills due
8/5/04, market value $687,659,
$177,000 U.S. Treasury Bills due
8/19/04, market value $176,587,
$428,000 U.S. Treasury Bills due
9/9/04, market value $426,394,
$356,000 U.S. Treasury Notes
1.75% due 12/31/04, market
value $359,852) $2,476,000 $2,476,000
With UBS Warburg 0.99% 4/1/04
(dated 3/31/04, to be repurchased
at $2,547,070 collateralized by
$171,000 U.S. Treasury Notes
6.50% due 5/15/05, market value
$185,082, $531,000 U.S. Treasury
Notes 9.375% due 2/15/06, market
value $613,565, $531,000 U.S. Treasury
Notes 7.00% due 7/15/06, market value
$600,991, $531,000 U.S. Treasury
Notes 5.50% due 2/15/08, market
value $595,350, $531,000 U.S. Treasury
Notes 5.625% due 5/15/08, market
value $606,709) 2,547,000 2,547,000
-----------
TOTAL REPURCHASE AGREEMENTS (cost $5,023,000) 5,023,000
-----------
TOTAL MARKET VALUE OF SECURITIES - 103.26%
(cost $66,252,378) 68,581,105
LIABILITIES NET OF RECEIVABLES AND
OTHER ASSETS - (3.26%) (2,163,005)
-----------
NET ASSETS APPLICABLE TO 6,763,752 SHARES
OUTSTANDING - 100.00% $66,418,100
===========
Net Asset Value - Optimum Large Cap Value Fund
Class A ($9,114,965 / 927,469 Shares) $9.83
-----
Net Asset Value - Optimum Large Cap Value Fund
Class B ($3,609,360 / 367,833 Shares) $9.81
-----
Net Asset Value - Optimum Large Cap Value Fund
Class C ($35,732,094 / 3,642,912 Shares) $9.81
-----
Net Asset Value - Optimum Large Cap Value Fund
Institutional Class ($17,961,681 / 1,825,538 Shares) $9.84
-----
COMPONENTS OF NET ASSETS AT MARCH 31, 2004:
Shares of beneficial interest
(unlimited authorization - no par) $63,423,652
Undistributed net investment income* 27,884
Accumulated net realized gain on investments 637,779
Net unrealized appreciation of investments
and foreign currencies 2,328,785
-----------
Total net assets $66,418,100
===========
+Non-income producing security for the period ended March 31, 2004.
*Undistributed net investment income includes net realized gains (losses) on
foreign currencies. Net realized gains (losses) on foreign currencies are
treated as net investment income in accordance with provisions of the Internal
Revenue Code.
SUMMARY OF ABBREVIATIONS
ADR - American Depositary Receipts
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
OPTIMUM LARGE CAP VALUE FUND
Net asset value Class A (A) $9.83
Sales charge (5.75% of offering price, or 6.10% of
the amount invested per share) (B) 0.60
------
Offering price $10.43
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon the redemption or repurchase of shares.
(B) See the current prospectus for purchases of $50,000 or more.
See accompanying notes
42
STATEMENTS OPTIMUM SMALL CAP GROWTH FUND
OF NET ASSETS (CONTINUED) March 31, 2004
Number of Market
Shares Value
COMMON STOCK - 87.88%
Banking & Finance - 3.70%
*AmeriCredit 22,500 $ 383,175
TCF Financial 4,200 214,494
*World Acceptance 8,500 165,835
----------
763,504
----------
Biotechnology - 2.53%
*Enzon Pharmaceuticals 13,700 211,391
*Nektar Therapeutics 14,400 310,752
----------
522,143
----------
Business Services - 3.22%
Central Parking 22,000 441,760
*Coinstar 14,000 222,180
----------
663,940
----------
Cable, Media & Publishing - 3.11%
*Mediacom Communications 13,600 109,072
*Salem Communications Class A 5,600 153,328
*Spanish Broadcasting System Class A 36,400 380,380
----------
642,780
----------
Chemicals - 0.75%
*Scotts 2,400 153,960
----------
153,960
----------
Consumer Durable/Cyclical - 2.03%
*Aviall 17,000 258,400
Herman Miller 6,000 159,780
----------
418,180
----------
Electronics & Electrical Equipment - 2.34%
CTS 37,000 482,480
----------
482,480
----------
Energy - 9.44%
Equitable Resources 14,000 621,880
*FMC Technologies 11,000 297,330
*Newpark Resources 37,000 192,400
*Quicksilver Resources 9,900 383,724
Western Gas Resources 8,900 452,565
----------
1,947,899
----------
Environmental Services - 0.74%
*Cuno 3,400 152,592
----------
152,592
----------
Healthcare & Pharmaceuticals - 8.66%
*BioVeris 9,900 117,315
*CTI Molecular Imaging 21,600 315,144
Diagnostic Products 8,000 346,400
*Edwards Lifesciences 6,000 191,700
*First Health Group 25,100 548,686
*Lincare Holdings 3,500 109,970
*Techne 3,900 159,159
----------
1,788,374
----------
Industrial - Others - 3.44%
*ESCO Technologies 9,000 415,080
Pentair 5,000 295,000
----------
710,080
----------
Industrial Machinery - 1.47%
*UNOVA 14,000 302,540
----------
302,540
----------
Number of Market
Shares Value
COMMON STOCK - (continued)
Insurance - 4.20%
HCC Insurance Holdings 18,700 $ 604,571
*Markel 500 143,950
*United National Group Class A 7,000 118,720
----------
867,241
----------
Internet Services - 5.60%
*answerthink 42,800 330,416
*Avocent 4,600 169,234
*DoubleClick 27,000 303,750
*E.piphany 21,900 158,118
*ValueClick 18,000 194,400
----------
1,155,918
----------
Leisure, Lodging & Entertainment - 2.66%
*Pegasus Solutions 47,000 548,960
----------
548,960
----------
Retail - 5.38%
*Aeropostale 10,300 373,478
Christopher & Banks 7,950 167,824
*PETCO Animal Supplies 13,300 374,794
Winn-Dixie Stores 25,500 193,800
----------
1,109,896
----------
Technology/Semiconductors - 4.82%
*Integrated Circuit Systems 9,800 245,294
*IXYS 20,000 188,000
*Pericom Semiconductor 49,000 562,520
----------
995,814
----------
Technology/Software - 10.35%
Global Payments 3,600 162,288
*+#Indus International 144A 80,000 237,248
*JDA Software Group 8,600 125,130
*MAPICS 29,400 237,552
NDCHealth 6,300 171,045
*Novell 50,400 573,552
*PeopleSoft 7,500 138,675
*SeaChange International 12,300 188,190
*THQ 15,000 303,450
----------
2,137,130
----------
Telecommunications - 8.71%
*3Com 70,000 494,200
*American Tower Class A 13,400 152,090
*Andrew 18,200 318,500
*Commonwealth Telephone Enterprises 4,500 184,545
*Crown Castle International 18,400 232,392
*Symmetricom 25,000 224,250
*Western Wireless Class A 8,200 191,634
----------
1,797,611
----------
Utilities - 4.73%
Northeast Utilities 27,000 503,550
ONEOK 21,000 473,550
----------
977,100
----------
TOTAL COMMON STOCK (cost $15,954,924) 18,138,142
----------
43
STATEMENTS OPTIMUM SMALL CAP GROWTH FUND
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
REPURCHASE AGREEMENTS - 11.89%
With BNP Paribas 1.00% 4/1/04
(dated 3/31/04, to be repurchased
at $1,210,033 collateralized by
$324,000 U.S. Treasury Bills
due 4/8/04, market value $324,003,
$104,000 U.S. Treasury Bills due
6/17/04, market value $103,547,
$337,000 U.S. Treasury Bills due
8/5/04, market value $336,095,
$87,000 U.S. Treasury Bills due
8/19/04, market value $86,307,
$209,000 U.S. Treasury Bills due
9/9/04, market value $208,401,
$174,000 U.S. Treasury Notes 1.75%
due 12/31/04, market value $175,878) $1,210,000 $ 1,210,000
With UBS Warburg 0.99% 4/1/04
(dated 3/31/04, to be repurchased
at $1,245,034 collateralized by
$84,000 U.S. Treasury Notes
6.50% due 5/15/05, market value
$90,459, $259,000 U.S. Treasury Notes
9.375% due 2/15/06, market value
$299,881, $259,000 U.S. Treasury Notes
7.00% due 7/15/06, market value
$293,735, $259,000 U.S. Treasury Notes
5.50% due 2/15/08, market value
$290,978, $259,000 U.S. Treasury
Notes 5.625% due 5/15/08, market
value $296,530) 1,245,000 1,245,000
-----------
TOTAL REPURCHASE AGREEMENTS
(cost $2,455,000) 2,455,000
-----------
TOTAL MARKET VALUE OF SECURITIES - 99.77%
(cost $18,409,924) 20,593,142
RECEIVABLES AND OTHER ASSETS NET
OF LIABILITIES - 0.23% 46,558
-----------
NET ASSETS APPLICABLE TO 1,833,216 SHARES
OUTSTANDING - 100.00% $20,639,700
===========
Net Asset Value - Optimum Small Cap Growth Fund
Class A ($2,114,921 / 187,788 Shares) $11.26
------
Net Asset Value - Optimum Small Cap Growth Fund
Class B ($792,249 / 70,575 Shares) $11.23
------
Net Asset Value - Optimum Small Cap Growth Fund
Class C ($7,520,853 / 669,954 Shares) $11.23
------
Net Asset Value - Optimum Small Cap Growth Fund
Institutional Class ($10,211,677 / 904,899 Shares) $11.28
======
COMPONENTS OF NET ASSETS AT MARCH 31, 2004:
Shares of beneficial interest
(unlimited authorization - no par) $18,453,039
Accumulated net realized gain on investments 3,443
Net unrealized appreciation of investments 2,183,218
-----------
Total net assets $20,639,700
===========
*Non-income producing security for the period ended March 31, 2004.
+Securities exempt from registration under Rule 144A of the Securities Act of
1933.
See Note #10 in "Notes to Financial Statements."
#The security is being fair valued in accordance with the Fund's fair valuation
policy.
See Note #1 in "Notes to Financial Statements."
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
OPTIMUM SMALL CAP GROWTH FUND
Net asset value Class A (A) $11.26
Sales charge (5.75% of offering price, or 6.13% of
amount invested per share) (B) 0.69
------
Offering price $11.95
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $50,000 or more.
See accompanying notes
44
STATEMENTS OPTIMUM SMALL CAP VALUE FUND
OF NET ASSETS (CONTINUED) March 31, 2004
Number of Market
Shares Value
COMMON STOCK - 88.26%
Aerospace & Defense - 1.20%
Honeywell International 7,500 $ 253,875
----------
253,875
----------
Airlines - 1.45%
*AirTran Holdings 9,600 114,048
*Atlantic Coast Airlines Holdings 26,700 194,109
----------
308,157
----------
Automobiles & Automotive Parts - 1.77%
Federal Signal 11,500 228,275
*Hayes Lemmerz International 9,600 147,744
----------
376,019
----------
Banking & Finance - 0.45%
*AmeriCredit 3,100 52,793
*Saxon Capital 1,500 42,615
----------
95,408
----------
Basic Industry/Capital Goods - 2.75%
*Mettler-Toledo International 2,400 106,560
Newell Rubbermaid 12,000 278,400
*Thermo Electron 7,000 197,960
----------
582,920
----------
Business Services - 2.88%
Harland (John H.) 8,000 248,960
New England Business Service 6,000 203,100
*R.H. Donnelley 3,400 158,780
----------
610,840
----------
Chemicals - 7.13%
Agrium 2,800 41,160
Ashland 1,100 51,139
Cytec Industries 7,000 248,990
Engelhard 7,700 230,153
*FMC 2,500 107,050
Fuller (H.B.) 6,000 170,640
*Hercules 21,000 241,080
IMC Global 12,200 174,460
Lubrizol 6,500 204,685
Millenium Chemicals 2,900 43,326
----------
1,512,683
----------
Commercial Services & Supplies - 9.01%
Bowne & Company 10,800 184,680
*Heidrick & Struggles International 9,400 224,942
Kelly Services 10,600 313,866
Donnelley (R.R.) & Sons 4,725 142,931
*Spherion 24,100 246,543
*Team 15,000 201,900
*Valassis Communications 11,300 343,520
Viad 10,500 253,785
----------
1,912,167
----------
Consumer Durables - 8.26%
Beazer Homes USA 4,700 497,777
Brookfield Homes 5,100 178,959
Furniture Brands International 15,300 492,660
*Toll Brothers 2,700 122,661
*WCI Communities 18,400 460,552
----------
1,752,609
----------
Number of Market
Shares Value
COMMON STOCK (continued)
Consumer Products - 1.62%
*Del Monte Foods 4,600 $ 51,750
Readers Digest Association - Class A 3,000 42,240
Walter Industries 21,000 250,740
----------
344,730
----------
Energy - 0.29%
Pioneer Natural Resources 1,900 61,370
----------
61,370
----------
Healthcare & Pharmaceuticals - 1.12%
*LifePoint Hospitals 3,700 119,658
*Magellan Health Services 3,400 95,540
*US Oncology 1,500 22,170
----------
237,368
----------
Hotels, Restaurants & Leisure - 4.66%
*Isle of Capri Casinos 3,500 87,990
*Jack in the Box 11,500 287,155
*La Quinta 32,700 246,558
*Magna Entertainment - Class A 13,500 81,270
Mandalay Resort Group 5,000 286,300
----------
989,273
----------
Industrial Machinery - 7.59%
Ametek 10,000 256,400
*ESCO Technologies 5,500 253,660
*Flowserve 10,800 226,260
Kennametal 8,000 330,160
Manitowoc 3,500 103,530
Stanley Works 7,000 298,760
Thomas Industries 4,500 141,750
----------
1,610,520
----------
Insurance - 2.81%
*Allmerica Financial 14,100 487,155
*United National Group - Class A 6,400 108,544
----------
595,699
----------
Metals & Mining - 1.40%
Commercial Metals 3,500 111,440
*Material Sciences 17,000 187,000
----------
298,440
----------
Packaging & Containers - 1.54%
Sonoco Products 13,500 327,780
----------
327,780
----------
Real Estate - 4.71%
LNR Property 8,800 471,064
*MI Developments - Class A 16,100 450,800
St. Joe 1,900 77,311
----------
999,175
----------
REITs - 3.48%
Affordable Residential Communities 4,100 75,850
AMB Property 600 22,302
American Financial Realty Trust 9,300 157,635
American Home Mortgage Investment 10,300 296,640
Arden Realty 2,700 87,291
*+Fieldstone Investments 144A 5,200 100,100
----------
739,818
----------
45
STATEMENTS OPTIMUM SMALL CAP VALUE FUND
OF NET ASSETS (CONTINUED)
Number of Market
Shares Value
COMMON STOCK (continued)
Retail - 4.70%
*BJ's Wholesale Club 9,000 $ 229,050
Foot Locker 21,500 554,700
*Pathmark Stores 12,400 98,952
RadioShack 3,500 116,060
----------
998,762
----------
Technology/Hardware - 0.24%
Ikon Office Solutions 4,000 51,200
----------
51,200
----------
Technology/Services - 3.22%
*BearingPoint 19,400 207,968
*ProQuest 5,500 160,435
Reynolds & Reynolds - Class A 6,000 170,460
*Unisys 10,100 144,228
----------
683,091
----------
Technology/Software - 0.24%
*Parametric Technology 11,200 50,624
----------
50,624
----------
Telecommunications - 0.46%
*Metrocall Holdings 1,400 97,538
----------
97,538
----------
Textiles, Apparel & Furniture - 5.15%
Delta Apparel 6,000 119,400
Jones Apparel Group 7,300 263,895
Russell 10,500 191,730
*Warnaco Group Class A 25,800 518,322
----------
1,093,347
----------
Transportation & Shipping - 7.40%
Alexander & Baldwin 6,500 215,020
Overnite 13,000 299,000
Overseas Shipholding Group 8,200 299,300
Stelmar Shipping Limited 8,400 242,340
Teekay Shipping 1,500 103,350
USF 2,700 92,394
*Yellow Roadway 9,500 319,865
----------
1,571,269
----------
Utilities - 2.73%
Alliant Energy 7,200 187,632
Northeast Utilities 8,700 162,255
*Sierra Pacific Resources 25,900 191,660
*Southern Union 2,000 37,900
----------
579,447
----------
TOTAL COMMON STOCK (cost $16,583,803) 18,734,129
----------
Principal Market
Amount Value
REPURCHASE AGREEMENTS - 12.11%
With BNP Paribas 1.00% 4/1/04
(dated 3/31/04, to be repurchased
at $1,266,735 collateralized by
$339,200 U.S. Treasury Bills due
4/8/04, market value $339,181,
$108,600 U.S. Treasury Bills due
6/17/04, market value $108,398,
$353,000 U.S. Treasury Bills due
8/5/04, market value $351,838,
$90,700 U.S. Treasury Bills due
8/19/04, market value $90,350,
$219,100 U.S. Treasury Bills due
9/9/04, market value $218,163 and
$182,400 U.S. Treasury Notes 1.75%
due 12/31/04, market value $184,117) $1,266,700 $ 1,266,700
With UBS Warburg 0.99% 4/1/04
(dated 3/31/04, to be repurchased
at $1,303,336 collateralized by
$87,400 U.S. Treasury Notes
6.50% due 5/15/05, market value
$94,697, $271,500 U.S. Treasury
Notes 9.375% due 2/15/06, market
value $313,928, $271,500 U.S. Treasury
Notes 7.00% due 7/15/06, market
value $307,495, $271,500 U.S. Treasury
Notes 5.50% due 2/15/08, market value
$304,609 and $271,500 U.S. Treasury
Notes 5.625% due 5/15/08, market
value $310,420) 1,303,300 1,303,300
-----------
TOTAL REPURCHASE AGREEMENTS
(cost $2,570,000) 2,570,000
-----------
TOTAL MARKET VALUE OF SECURITIES - 100.37%
(cost $19,153,803) 21,304,129
LIABILITIES NET OF RECEIVABLES AND
OTHER ASSETS - (0.37%) (79,042)
-----------
NET ASSETS APPLICABLE TO 1,928,801 SHARES
OUTSTANDING - 100.00% $21,225,087
===========
Net Asset Value - Optimum Small Cap Value Fund
Class A ($2,125,474 / 192,970 Shares) $11.01
------
Net Asset Value - Optimum Small Cap Value Fund
Class B ($819,370 / 74,662 Shares) $10.97
------
Net Asset Value - Optimum Small Cap Value Fund
Class C ($9,018,246 / 821,915 Shares) $10.97
------
Net Asset Value - Optimum Small Cap Value Fund
Institutional Class ($9,261,997 / 839,254 Shares) $11.04
======
46
STATEMENTS OPTIMUM SMALL CAP VALUE FUND
OF NET ASSETS (CONTINUED)
COMPONENTS OF NET ASSETS AT MARCH 31, 2004:
Shares of beneficial interest
(unlimited authorization - no par) $18,687,601
Accumulated net realized gain on investments 387,160
Net unrealized appreciation of investments 2,150,326
-----------
Total net assets $21,225,087
===========
*Non-income producing security for the period ended March 31, 2004.
+Securities exempt from registration under Rule 144A of the Securities Act of
1933. See Note #10 in "Notes to Financial Statements."
SUMMARY OF ABBREVIATIONS
REIT - Real Estate Investment Trust
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
OPTIMUM SMALL CAP VALUE FUND
Net asset value Class A (A) $11.01
Sales charge (5.75% of offering price, or 6.09% of
the amount invested per share) (B) 0.67
------
Offering price $11.68
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $50,000 or more.
See accompanying notes
47
STATEMENTS OPTIMUM FUND TRUST
OF ASSETS AND LIABILITIES March 31, 2004
Optimum Optimum Optimum Optimum Optimum Optimum
Fixed Income International Large Cap Large Cap Small Cap Small Cap
Fund Fund Growth Fund Value Fund Growth Fund Value Fund
ASSETS:
Investments at market $ 99,737,065 $29,495,844 $69,353,914 $68,581,105 $20,593,142 $21,304,129
Cash and foreign currencies 12,598 26,395 6,431 9,796 2,300 4,612
Subscriptions receivable 791,049 315,011 824,389 809,008 234,832 244,106
Receivables for securities sold 2,770,709 42,145 479,995 30,689 -- 21,460
Dividends receivable 5,733 124,557 46,949 95,638 3,823 10,109
Interest receivable 893,017 56 76 139 67 71
Other assets 18,877 -- -- 759 -- --
------------ ----------- ----------- ----------- ----------- -----------
Total assets 104,229,048 30,004,008 70,711,754 69,527,134 20,834,164 21,584,487
------------ ----------- ----------- ----------- ----------- -----------
LIABILITIES:
Payables for securities purchased 12,830,663 584,820 988,738 3,016,561 151,488 309,411
Liquidations payable 609 -- 385 384 80 81
Management fees payable -- -- 29,036 -- -- --
Other accrued expenses 128,057 54,821 88,430 92,089 42,896 49,908
Other liabilities 153 15,885 72 -- -- --
------------ ----------- ----------- ----------- ----------- -----------
Total liabilities 12,959,482 655,526 1,106,661 3,109,034 194,464 359,400
------------ ----------- ----------- ----------- ----------- -----------
TOTAL NET ASSETS $ 91,269,566 $29,348,482 $69,605,093 $66,418,100 $20,639,700 $21,225,087
============ =========== =========== =========== =========== ===========
Investments at cost $ 98,857,580 $27,124,005 $66,480,200 $66,252,378 $18,409,924 $19,153,803
See accompanying notes
48
STATEMENTS OPTIMUM FUND TRUST
OF OPERATIONS August 1, 2003* to March 31, 2004
Optimum Optimum Optimum
Fixed Income International Large Cap
Fund Fund Growth Fund
INVESTMENT INCOME:
Dividends $ 8,975 $ 221,986 $ 174,341
Interest 1,040,904 8,951 19,741
Foreign tax withheld -- (18,119) (1,847)
---------- ---------- ----------
1,049,879 212,818 192,235
---------- ---------- ----------
EXPENSES:
Management fees 173,591 83,943 154,104
Distribution expenses -- Class A 12,062 4,106 9,413
Distribution expenses -- Class B 12,414 4,034 9,159
Distribution expenses -- Class C 150,583 39,339 98,577
Accounting and administration expenses 130,721 90,910 101,421
Dividend disbursing and transfer agent fees and expenses 76,547 73,075 74,850
Professional fees 24,126 20,529 21,854
Trustees' fees 24,315 22,658 23,607
Reports and statements to shareholders 10,627 5,871 8,500
Custodian fees 28,915 25,261 11,119
Registration fees 15,977 8,092 17,595
Other 3,007 1,881 1,229
---------- ---------- ----------
662,885 379,699 531,428
Less expenses absorbed or waived (271,765) (183,048) (174,479)
---------- ---------- ----------
Total expenses 391,120 196,651 356,949
---------- ---------- ----------
NET INVESTMENT INCOME (LOSS) 658,759 16,167 (164,714)
---------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on:
Investments 701,448 374,712 (358,212)
Futures contracts 19,087 -- --
Options written (955) -- --
Foreign currencies 11,089 (48,409) (13,194)
---------- ---------- ----------
Net realized gain (loss) 730,669 326,303 (371,406)
Net change in unrealized appreciation/depreciation of investments and foreign currencies 901,664 2,354,421 2,873,708
---------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCIES 1,632,333 2,680,724 2,502,302
---------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,291,092 $2,696,891 $2,337,588
========== ========== ==========
*Commencement of operations
See accompanying notes
49
STATEMENTS OPTIMUM FUND TRUST
OF OPERATIONS (CONTINUED)
Optimum Optimum Optimum
Large Cap Small Cap Small Cap
Value Fund Growth Fund Value Fund
INVESTMENT INCOME:
Dividends $ 379,188 $ 20,799 $ 56,908
Interest 14,851 7,561 12,823
Foreign tax withheld (1,192) -- --
---------- ---------- ----------
392,847 28,360 69,731
---------- ---------- ----------
EXPENSES:
Management fees 150,768 78,425 74,569
Distribution expenses -- Class A 9,293 2,130 2,092
Distribution expenses -- Class B 9,384 2,024 2,020
Distribution expenses -- Class C 99,809 21,019 23,773
Accounting and administration expenses 99,961 58,953 58,856
Dividend disbursing and transfer agent fees and expenses 74,850 74,740 74,813
Professional fees 22,116 19,344 19,681
Trustees' fees 23,600 22,360 22,360
Reports and statements to shareholders 9,184 4,600 4,492
Custodian fees 14,815 1,193 2,300
Registration fees 12,071 6,984 6,978
Other 1,466 1,202 922
---------- ---------- ----------
527,317 292,974 292,856
Less expenses absorbed or waived (193,880) (164,342) (171,751)
Less expenses paid indirectly -- (14) (38)
---------- ---------- ----------
Total expenses 333,437 128,618 121,067
---------- ---------- ----------
NET INVESTMENT INCOME (LOSS) 59,410 (100,258) (51,336)
---------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain on:
Investments 690,507 103,701 506,512
Foreign currencies 1,989 -- --
---------- ---------- ----------
Net realized gain 692,496 103,701 506,512
Net change in unrealized appreciation/depreciation of investments and foreign currencies 2,328,785 2,183,218 2,150,326
---------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCIES 3,021,281 2,286,919 2,656,838
---------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,080,691 $2,186,661 $2,605,502
========== ========== ==========
See accompanying notes
50
STATEMENTS OPTIMUM FUND TRUST
OF CHANGES IN NET ASSETS August 1, 2003* to March 31, 2004
Optimum Optimum Optimum
Fixed Income International Large Cap
Fund Fund Growth Fund
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income (loss) $ 658,759 $ 16,167 $ (164,714)
Net realized gain (loss) on investments and foreign currencies 730,669 326,303 (371,406)
Net change in unrealized appreciation/depreciation of investments
and foreign currencies 901,664 2,354,421 2,873,708
----------- ----------- -----------
Net increase in net assets from operations 2,291,092 2,696,891 2,337,588
----------- ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A (92,235) -- --
Class B (17,545) -- --
Class C (213,683) -- --
Institutional Class (161,149) -- --
Net realized gain on investments:
Class A (7,152) (1,261) --
Class B (2,626) (447) --
Class C (31,584) (4,492) --
Institutional Class (6,526) (3,593) --
----------- ----------- -----------
(532,500) (9,793) --
----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
Class A 11,904,499 3,816,194 9,152,213
Class B 4,259,160 1,535,336 3,510,552
Class C 51,716,890 13,438,723 34,317,631
Institutional Class 26,419,491 10,175,742 25,753,313
Net asset value of shares issued upon reinvestment of dividends and distributions:
Class A 93,236 1,226 --
Class B 18,533 437 --
Class C 237,463 4,422 --
Institutional Class 164,341 3,584 --
----------- ----------- -----------
94,813,613 28,975,664 72,733,709
----------- ----------- -----------
Cost of shares repurchased:
Class A (167,871) (59,769) (156,597)
Class B (69,467) (15,905) (43,727)
Class C (376,974) (131,871) (331,681)
Institutional Class (4,688,327) (2,106,735) (4,934,199)
----------- ----------- -----------
(5,302,639) (2,314,280) (5,466,204)
----------- ----------- -----------
Increase in net assets derived from capital share transactions 89,510,974 26,661,384 67,267,505
----------- ----------- -----------
NET INCREASE IN NET ASSETS 91,269,566 29,348,482 69,605,093
NET ASSETS:
Beginning of period -- -- --
----------- ----------- -----------
End of period $91,269,566 $29,348,482 $69,605,093
----------- ----------- -----------
Undistributed net investment income (loss) $ 206,252 $ (32,242) $ (10,943)
=========== =========== ===========
*Commencement of operations
See accompanying notes
51
STATEMENTS OPTIMUM FUND TRUST
OF CHANGES IN NET ASSETS (CONTINUED)
Optimum Optimum Optimum
Large Cap Small Cap Small Cap
Value Fund Growth Fund Value Fund
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income (loss) $ 59,410 $ (100,258) $ (51,336)
Net realized gain on investments and foreign currencies 692,496 103,701 506,512
Net change in unrealized appreciation/depreciation of investments
and foreign currencies 2,328,785 2,183,218 2,150,326
----------- ----------- -----------
Net increase in net assets from operations 3,080,691 2,186,661 2,605,502
----------- ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A (11,327) -- --
Class B -- -- --
Class C -- -- --
Institutional Class (22,188) -- --
Net realized gain on investments:
Class A (7,880) -- (6,141)
Class B (2,817) -- (2,109)
Class C (31,589) -- (26,029)
Institutional Class (10,442) -- (33,737)
----------- ----------- -----------
(86,243) -- (68,016)
----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
Class A 8,815,092 1,994,189 1,945,722
Class B 3,497,348 757,253 755,420
Class C 34,313,218 7,071,156 8,246,621
Institutional Class 22,144,571 8,802,193 7,830,304
Net asset value of shares issued upon reinvestment of dividends and distributions:
Class A 18,557 -- 5,887
Class B 2,710 -- 2,014
Class C 31,097 -- 25,639
Institutional Class 32,267 -- 33,657
----------- ----------- -----------
68,854,860 18,624,791 18,845,264
----------- ----------- -----------
Cost of shares repurchased:
Class A (169,358) (37,916) (36,465)
Class B (36,814) (11,723) (7,267)
Class C (240,089) (52,150) (59,197)
Institutional Class (4,984,947) (69,963) (54,734)
----------- ----------- -----------
(5,431,208) (171,752) (157,663)
----------- ----------- -----------
Increase in net assets derived from capital share transactions 63,423,652 18,453,039 18,687,601
----------- ----------- -----------
NET INCREASE IN NET ASSETS 66,418,100 20,639,700 21,225,087
NET ASSETS:
Beginning of period -- -- --
----------- ----------- -----------
End of period $66,418,100 $20,639,700 $21,225,087
----------- ----------- -----------
Undistributed net investment income $ 27,884 $ -- $ --
=========== =========== ===========
See accompanying notes
52
FINANCIAL
HIGHLIGHTS
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Optimum Fixed Income Fund
- --------------------------------------------------------------------------------------------------------------------------------
Institutional
Class A Class B Class C Class
8/1/03(1) 8/1/03(1) 8/1/03(1) 8/1/03(1)
to to to to
3/31/04 3/31/04 3/31/04 3/31/04
NET ASSET VALUE, BEGINNING OF PERIOD $8.500 $8.500 $8.500 $8.500
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(2) 0.171 0.133 0.133 0.192
Net realized and unrealized gain on investments and foreign currencies 0.417 0.420 0.420 0.407
------ ------ ------ ------
Total from investment operations 0.588 0.553 0.553 0.599
------ ------ ------ ------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.098) (0.053) (0.053) (0.119)
Net realized gain on investments (0.010) (0.010) (0.010) (0.010)
------ ------ ------ ------
Total dividends and distributions (0.108) (0.063) (0.063) (0.129)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $8.980 $8.990 $8.990 $8.970
====== ====== ====== ======
TOTAL RETURN(3) 6.82% 6.52% 6.52% 7.07%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $12,049 $4,296 $52,648 $22,276
Ratio of expenses to average net assets 1.20% 1.85% 1.85% 0.85%
Ratio of expenses to average net assets prior to expense limitation 2.25% 2.90% 2.90% 1.90%
Ratio of net investment income to average net assets 2.88% 2.23% 2.23% 3.23%
Ratio of net investment income to average net assets prior to
expense limitation 1.83% 1.18% 1.18% 2.18%
Portfolio turnover 383% 383% 383% 383%
(1) Date of commencement of operations; ratios and portfolio turnover have been
annualized and total return has not been annualized.
(2) The average shares outstanding method has been applied for per share
information.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
See accompanying notes
53
FINANCIAL
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Optimum International Fund
- --------------------------------------------------------------------------------------------------------------------------------
Institutional
Class A Class B Class C Class
8/1/03(1) 8/1/03(1) 8/1/03(1) 8/1/03(1)
to to to to
3/31/04 3/31/04 3/31/04 3/31/04
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.500 $ 8.500 $ 8.500 $ 8.500
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)(2) 0.021 (0.023) (0.023) 0.045
Net realized and unrealized gain on investments and foreign currencies 2.155 2.149 2.149 2.151
------- ------- ------- -------
Total from investment operations 2.176 2.126 2.126 2.196
------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net realized gain on investments (0.006) (0.006) (0.006) (0.006)
------- ------- ------- -------
Total dividends and distributions (0.006) (0.006) (0.006) (0.006)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $10.670 $10.620 $10.620 $10.690
======= ======= ======= =======
TOTAL RETURN(3) 25.61% 25.02% 25.02% 25.84%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $4,083 $1,624 $14,339 $9,302
Ratio of expenses to average net assets 1.92% 2.57% 2.57% 1.57%
Ratio of expenses to average net assets prior to expense limitation 3.82% 4.47% 4.47% 3.47%
Ratio of net investment income (loss) to average net assets 0.30% (0.35%) (0.35%) 0.65%
Ratio of net investment loss to average net assets prior to
expense limitation (1.60%) (2.25%) (2.25%) (1.25%)
Portfolio turnover 49% 49% 49% 49%
(1) Date of commencement of operations; ratios and portfolio turnover have been
annualized and total return has not been annualized.
(2) The average shares outstanding method has been applied for per share
information.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
See accompanying notes
54
FINANCIAL
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Optimum Large Cap Growth Fund
- --------------------------------------------------------------------------------------------------------------------------------
Institutional
Class A Class B Class C Class
8/1/03(1) 8/1/03(1) 8/1/03(1) 8/1/03(1)
to to to to
3/31/04 3/31/04 3/31/04 3/31/04
NET ASSET VALUE, BEGINNING OF PERIOD $8.500 $8.500 $8.500 $8.500
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss(2) (0.037) (0.077) (0.077) (0.015)
Net realized and unrealized gain on investments and foreign currencies 1.107 1.107 1.107 1.105
------ ------ ------ ------
Total from investment operations 1.070 1.030 1.030 1.090
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $9.570 $9.530 $9.530 $9.590
====== ====== ====== ======
TOTAL RETURN(3) 12.59% 12.12% 12.12% 12.82%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $9,337 $3,569 $35,143 $21,557
Ratio of expenses to average net assets 1.61% 2.26% 2.26% 1.26%
Ratio of expenses to average net assets prior to expense limitation 2.51% 3.16% 3.16% 2.16%
Ratio of net investment loss to average net assets (0.61%) (1.26%) (1.26%) (0.26%)
Ratio of net investment loss to average net assets prior to
expense limitation (1.51%) (2.16%) (2.16%) (1.16%)
Portfolio turnover 51% 51% 51% 51%
(1) Date of commencement of operations; ratios and portfolio turnover have been
annualized and total return has not been annualized.
(2) The average shares outstanding method has been applied for per share
information.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
See accompanying notes
55
FINANCIAL
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Optimum Large Cap Value Fund
- --------------------------------------------------------------------------------------------------------------------------------
Institutional
Class A Class B Class C Class
8/1/03(1) 8/1/03(1) 8/1/03(1) 8/1/03(1)
to to to to
3/31/04 3/31/04 3/31/04 3/31/04
NET ASSET VALUE, BEGINNING OF PERIOD $8.500 $8.500 $8.500 $8.500
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)(2) 0.038 (0.003) (0.003) 0.060
Net realized and unrealized gain on investments and foreign currencies 1.331 1.329 1.329 1.330
------ ------ ------ ------
Total from investment operations 1.369 1.326 1.326 1.390
------ ------ ------ ------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.023) -- -- (0.034)
Net realized gain on investments (0.016) (0.016) (0.016) (0.016)
------ ------ ------ ------
Total dividends and distributions (0.039) (0.016) (0.016) (0.050)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $9.830 $9.810 $9.810 $9.840
====== ====== ====== ======
TOTAL RETURN(3) 16.12% 15.61% 15.61% 16.38%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $9,115 $3,609 $35,732 $17,962
Ratio of expenses to average net assets 1.50% 2.15% 2.15% 1.15%
Ratio of expenses to average net assets prior to expense limitation 2.52% 3.17% 3.17% 2.17%
Ratio of net investment income (loss) to average net assets 0.59% (0.06%) (0.06%) 0.94%
Ratio of net investment loss to average net assets prior to
expense limitation (0.43%) (1.08%) (1.08%) (0.08%)
Portfolio turnover 38% 38% 38% 38%
(1) Date of commencement of operations; ratios and portfolio turnover have been
annualized and total return has not been annualized.
(2) The average shares outstanding method has been applied for per share
information.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
See accompanying notes
56
FINANCIAL
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Optimum Small Cap Growth Fund
- --------------------------------------------------------------------------------------------------------------------------------
Institutional
Class A Class B Class C Class
8/1/03(1) 8/1/03(1) 8/1/03(1) 8/1/03(1)
to to to to
3/31/04 3/31/04 3/31/04 3/31/04
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.500 $ 8.500 $ 8.500 $ 8.500
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss(2) (0.100) (0.146) (0.146) (0.075)
Net realized and unrealized gain on investments 2.860 2.876 2.876 2.855
------- ------- ------- -------
Total from investment operations 2.760 2.730 2.730 2.780
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.260 $11.230 $11.230 $11.280
======= ======= ======= =======
TOTAL RETURN(3) 32.47% 32.12% 32.12% 32.71%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $2,115 $792 $7,521 $10,212
Ratio of expenses to average net assets 1.81% 2.46% 2.46% 1.46%
Ratio of expenses to average net assets prior to expense limitation
and expenses paid indirectly 4.11% 4.76% 4.76% 3.76%
Ratio of net investment loss to average net assets (1.41%) (2.06%) (2.06%) (1.06%)
Ratio of net investment loss to average net assets prior to
expense limitation and expenses paid indirectly (3.71%) (4.36%) (4.36%) (3.36%)
Portfolio turnover 16% 16% 16% 16%
(1) Date of commencement of operations; ratios and portfolio turnover have been
annualized and total return has not been annualized.
(2) The average shares outstanding method has been applied for per share
information.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
See accompanying notes
57
FINANCIAL
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Optimum Small Cap Value Fund
- --------------------------------------------------------------------------------------------------------------------------------
Institutional
Class A Class B Class C Class
8/1/03(1) 8/1/03(1) 8/1/03(1) 8/1/03(1)
to to to to
3/31/04 3/31/04 3/31/04 3/31/04
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.500 $8.500 $ 8.500 $ 8.500
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss(2) (0.046) (0.090) (0.090) (0.022)
Net realized and unrealized gain on investments 2.616 2.620 2.620 2.622
------- ------- ------- -------
Total from investment operations 2.570 2.530 2.530 2.600
------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net realized gain on investments (0.060) (0.060) (0.060) (0.060)
------- ------- ------- -------
Total dividends and distributions (0.060) (0.060) (0.060) (0.060)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.010 $10.970 $10.970 $11.040
======= ======= ======= =======
TOTAL RETURN(3) 30.30% 29.83% 29.83% 30.66%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $2,126 $819 $9,018 $9,262
Ratio of expenses to average net assets 1.67% 2.32% 2.32% 1.32%
Ratio of expenses to average net assets prior to expense limitation
and expenses paid indirectly 4.08% 4.73% 4.73% 3.73%
Ratio of net investment loss to average net assets (0.69%) (1.34%) (1.34%) (0.34%)
Ratio of net investment loss to average net assets prior to
expense limitation and expenses paid indirectly (3.10%) (3.75%) (3.75%) (2.75%)
Portfolio turnover 40% 40% 40% 40%
(1) Date of commencement of operations; ratios and portfolio turnover have been
annualized and total return has not been annualized.
(2) The average shares outstanding method has been applied for per share
information.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
See accompanying notes
58
NOTES OPTIMUM FUND TRUST
TO FINANCIAL STATEMENTS March 31, 2004
Optimum Fund Trust (the "Trust") is organized as a Delaware statutory trust and
offers six series: Optimum Fixed Income Fund, Optimum International Fund,
Optimum Large Cap Growth Fund, Optimum Large Cap Value Fund, Optimum Small Cap
Growth Fund, and Optimum Small Cap Value Fund (each a "Fund" and collectively,
the "Funds"). The Trust is an open-end investment company. The Funds are
considered diversified under the Investment Company Act of 1940, as amended, and
offer Class A, Class B, Class C and Institutional Class shares. The Funds
commenced operations on August 1, 2003. Class A shares are sold with a front-end
sales charge of up to 5.75% for Optimum Large Cap Growth Fund, Optimum Large Cap
Value Fund, Optimum Small Cap Growth Fund, Optimum Small Cap Value Fund and
Optimum International Fund and 4.50% for Optimum Fixed Income Fund. Class B
shares are sold with a contingent deferred sales charge that declines from 4% to
zero depending upon the period of time the shares are 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 contingent deferred sales
charge of 1%, if redeemed during the first 12 months. Institutional Class shares
are not subject to a sales charge and are offered for sale exclusively to a
limited group of investors.
The investment objective of Optimum Fixed Income Fund is to seek a high level of
income. The Fund may also seek growth of capital.
The investment objective of Optimum International Fund is to seek long-term
growth of capital. The Fund may also seek income.
The investment objective of Optimum Large Cap Growth Fund is to seek long-term
growth of capital.
The investment objective of Optimum Large Cap Value Fund is to seek long-term
growth of capital. The Fund may also seek income.
The investment objective of Optimum Small Cap Growth Fund is to seek long-term
growth of capital.
The investment objective of Optimum Small Cap Value Fund is to seek long-term
growth of capital.
1. SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies are in accordance with accounting principles
generally accepted in the United States and are consistently followed by the
Trust.
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 asked prices will be used. Securities listed on a foreign exchange are
normally valued at the last quoted sales price before each Fund is valued. U.S.
government and agency securities are valued at the mean between the bid and
asked prices. Other long-term debt securities are valued by an independent
pricing service and such prices are believed to reflect the fair value of such
securities. Short-term debt securities having less than 60 days to maturity are
valued at amortized cost, which approximates market value. Forward foreign
currency exchange contracts are valued at the mean between the bid and asked
prices of the contracts and are marked-to-market daily. 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. Swap agreements and other
securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith under the direction of the
Trust's Board of Trustees. 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 with respect to foreign securities,
aftermarket trading or significant events after local market trading (e.g.,
government actions or pronouncements, trading volume or volatility on markets,
exchanges among dealers, or news events).
Federal Income Taxes -- Each Fund intends to qualify for federal income tax
purposes as a regulated investment company and make the requisite distributions
to shareholders. Accordingly, no provision for federal income taxes has been
made in the financial statements.
Class Accounting - Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various classes of
each 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 -- Each Fund may invest in a pooled cash account along
with members of the Delaware Investments Family of Funds. The aggregate daily
balance of the pooled cash account is invested in repurchase agreements secured
by obligations of the U.S. government. The respective collateral is held by each
Fund's custodian bank until the maturity of the respective repurchase
agreements. Each repurchase agreement is 102% collateralized. However, in the
event of default or bankruptcy by the counterparty to the agreement, realization
of the collateral may be subject to legal proceedings.
Foreign Currency Transactions -- Transactions denominated in foreign currencies
are recorded at the prevailing exchange rates on the valuation date. The value
of all assets and liabilities denominated in foreign currencies are 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 Funds isolate
that portion of realized gains and losses on investments in debt securities,
which are due to changes in foreign exchange rates from that which are due to
changes in market prices of debt securities. For foreign equity securities,
these changes are included in realized gains (losses) on investments. The Funds
report certain foreign currency related transactions as components of realized
gains (losses) for financial reporting purposes, where such components are
treated as ordinary income (loss) for federal income tax purposes.
Use of Estimates -- The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
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.
59
NOTES
TO FINANCIAL STATEMENTS (CONTINUED) OPTIMUM FUND TRUST
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Other -- Expenses common to all funds within the Trust are allocated amongst the
funds on the basis of average net assets. Management fees and other expenses are
paid monthly. Security transactions are recorded on the date the securities are
purchased or sold (trade date). 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. Interest income is
recorded on the accrual basis. Discounts and premiums are amortized to interest
income over the lives of the respective securities. Realized gains (losses) on
paydowns of mortgage- and asset-backed securities are classified as interest
income. Distributions received from investments in Real Estate Investment Trusts
are recorded as dividend income on ex-dividend date, subject to reclassification
upon notice of the character of such distribution by the issuer. Foreign
dividends are also recorded on the ex-dividend date or as soon after the
ex-dividend date that the Funds are aware of such dividends, net of all
non-rebatable tax withholdings. Withholding taxes on foreign dividends have been
recorded in accordance with each Fund's understanding of the applicable
country's tax rules and rates.
Optimum International Fund, Optimum Large Cap Growth Fund, Optimum Large Cap
Value Fund, Optimum Small Cap Growth Fund and Optimum Small Cap Value Fund
declare and pay dividends from net investment income, if any, annually. Optimum
Fixed Income Fund declares and pays dividends from net investment income
quarterly. Each Fund will declare and pay distributions from net realized gain
on investments, if any, annually. In addition, in order to satisfy certain
distribution requirements of the Tax Reform Act of 1986, each Fund may declare
special year-end dividend and capital gains distributions during November or
December to shareholders of record on a date in such month. Such distributions,
if received by shareholders by January 31, are deemed to have been paid by a
Fund and received by shareholders on the earlier of the date paid or December 31
of the prior year.
The Funds may receive earnings credits from their custodian when positive cash
balances are maintained, which are used to offset custody fees. The expense paid
under the above arrangement is included in its respective expense caption on the
Statements of Operations with the corresponding expense offset shown as "expense
paid indirectly". The amount of this expense for the period ended March 31, 2004
was as follows:
Optimum Optimum
Small Cap Small Cap
Growth Fund Value Fund
----------- ----------
Earnings credits $14 $38
2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS
WITH AFFILIATES
Delaware Management Company (DMC), a series of Delaware Management Business
Trust, furnishes investment management services to each Fund and has full
discretion and responsibility, subject to the overall supervision of the Trust's
Board of Trustees, to select and contract with one or more investment
sub-advisers to manage the investment operations and composition of each Fund,
and to render investment advice for each Fund, including the purchase,
retention, and disposition of investments, securities and cash contained in each
Fund. The investment management agreement obligates the investment manager to
implement decisions with respect to the allocation or reallocation of each
Fund's assets among one or more current or additional sub-advisers, and to
monitor the sub-advisers' compliance with the relevant Fund's investment
objective, policies and restrictions. DMC pays the sub-advisers out of its fees.
In accordance with the terms of the investment management agreement, the
investment manager is entitled to receive an annual fee equal to the following
percentage rates of the average daily net assets of a Fund:
Optimum Fixed Income Fund 0.7000% of assets up to $25 million
0.6500% of assets from $25 million to $100 million
0.6000% of assets over $100 million
Optimum International Fund 0.8750% of assets up to $50 million
0.8000% of assets from $50 to $100 million
0.7800% of assets from $100 to $300 million
0.7650% of assets from $300 to $400 million
0.7300% of assets over $400 million
Optimum Large Cap Growth Fund 0.8000% of assets up to $250 million
0.7875% of assets from $250 million to $300 million
0.7625% of assets from $300 million to $400 million
0.7375% of assets from $400 million to $500 million
0.7250% of assets over $500 million
Optimum Large Cap Value Fund 0.8000% of assets up to $100 million
0.7375% of assets from $100 million to $250 million
0.7125% of assets from $250 million to $500 million
0.6875% of assets over $500 million
Optimum Small Cap Growth Fund 1.1000% of assets
Optimum Small Cap Value Fund 1.0500% of assets up to $75 million
1.0250% of assets from $75 million to $150 million
1.0000% of assets over $150 million
DMC has entered into sub-advisory agreements for the Trust as follows: Optimum
Fixed Income Fund - Delaware International Advisers Ltd. (DIAL), an affiliate of
DMC, and Deutsche Investment Management Americas Inc.; Optimum International
Fund - DIAL and Marsico Capital Management, LLC; Optimum Large Cap Growth Fund -
Marsico Capital Management, LLC and T. Rowe Price Associates, Inc.; Optimum
Large Cap Value Fund - Massachusetts Financial Services Company and Morgan
Stanley Investment Management doing business as Van Kampen Asset Management,
Inc.; Optimum Small Cap Growth Fund - Columbia Wanger Asset Management, L.P.;
and Optimum Small Cap Value Fund - Hotchkis and Wiley Capital Management, LLC
and Delafield Asset Management (a division of Reich & Tang Asset Management,
LLC).
60
NOTES
TO FINANCIAL STATEMENTS (CONTINUED) OPTIMUM FUND TRUST
2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH
AFFILIATES (CONTINUED)
DMC retains day-to-day investment management responsibilities for a portion of
the assets of the Optimum Fixed Income Fund.
DMC has contractually agreed to waive that portion, if any, of its management
fee and reimburse each Fund to the extent necessary to ensure that annual
operating expenses, exclusive of taxes, interest, brokerage commissions,
distribution fees, certain insurance costs and extraordinary expenses, do not
exceed specified percentages of average daily net assets through August 1, 2004
as shown below:
Optimum Optimum Optimum Optimum Optimum Optimum
Fixed Income International Large Cap Large Cap Small Cap Small Cap
Fund Fund Growth Fund Value Fund Growth Fund Value Fund
------------ ------------- ----------- ---------- ----------- -----------
0.85% 1.57% 1.26% 1.15% 1.46% 1.32%
Costs incurred in connection with the organization of the Trust were borne by
DMC and Linsco/Private Ledger Corp. (LPL), who provides certain sub-transfer
agency services to the Funds and who has entered into an Investment Consulting
Agreement with DMC.
Delaware Service Company, Inc. (DSC), an affiliate of DMC and DIAL, provides the
Trust with fund accounting, administrative, and transfer agency services
pursuant to a Mutual Fund Services Agreement. For fund accounting services, the
Trust pays DSC a fee at an annual rate of 0.04% of the Trust's total average
daily net assets, plus out-of-pocket expenses, subject to certain minimums. DSC
also provides the Trust with administrative services including financial and tax
reporting, corporate governance, and preparation of materials and reports for
the Board of Trustees. For administrative services, the Trust pays DSC a fee at
an annual rate of 0.35% of the Trust's total average daily net assets, plus
out-of-pocket expenses. DSC also serves as the shareholder servicing, dividend
disbursing, and transfer agent for each Fund. For these services, the Trust pays
DSC a fee at an annual rate of 0.15% of the Trust's total average daily net
assets, subject to certain minimums.
Delaware Distributors, L.P. (DDLP), an affiliate of DMC and DIAL, serves as the
national distributor of each Fund's shares pursuant to a Distribution Agreement.
Pursuant to the Distribution Agreement and Rule 12b-1 plans, the Funds pay DDLP
an annual fee of 0.35% of the average daily net assets of the Class A shares and
1.00% of the average daily net assets of the Class B and C shares. Institutional
Class shares pay no distribution expenses.
At March 31, 2004, each Fund had receivables from or liabilities payable to
affiliates as follows:
Optimum Optimum Optimum Optimum Optimum Optimum
Fixed Income International Large Cap Large Cap Small Cap Small Cap
Fund Fund Growth Fund Value Fund Growth Fund Value Fund
------------ ------------- ----------- ---------- ----------- -----------
Investment management fee payable
to DMC $ -- $ -- $(29,036) $ -- $ -- $ --
Dividend disbursing, transfer agent
fees, accounting and other expenses
payable to DSC (26,496) (25,479) (13,266) (32,839) (17,973) (18,079)
Other expenses payable to DMC and
affiliates* (32,358) (24,765) (28,004) (27,872) (27,367) (26,314)
Receivable from DMC under expense
limitation agreement 13,849 21,667 -- 16,444 18,262 8,113
*DMC, as part of its administrative services, pays operating expenses on behalf
of the Funds and is reimbursed on a periodic basis. Such expenses included items
such as printing of shareholder reports, professional fees, registration fees
and trustees' fees.
DMC, DSC and DDLP are indirect, wholly owned subsidiaries of Delaware Management
Holdings, Inc., which is an indirect wholly owned subsidiary of Lincoln National
Corporation.
Certain officers of DIAL, DMC, DSC, DDLP and LPL are officers and/or trustees of
the Trust. These officers and trustees are paid no compensation by the Funds.
3. INVESTMENTS
For the period ended March 31, 2004, the Funds made purchases and sales of
investment securities as follows:
Optimum Optimum Optimum Optimum Optimum Optimum
Fixed Income International Large Cap Large Cap Small Cap Small Cap
Fund Fund Growth Fund Value Fund Growth Fund Value Fund
------------ ------------- ----------- ---------- ----------- -----------
Purchases other than U.S.
government securities and
short-term investments $133,408,469 $29,536,186 $74,612,548 $68,252,172 $16,999,889 $18,704,395
Purchases of U.S. government
securities 60,462,692 -- -- -- -- --
Sales other than U.S. government
securities and short-term
investments 55,566,959 4,795,193 10,515,136 7,713,301 1,148,666 2,627,105
Sales of U.S. government
securities 51,306,566 -- -- -- -- --
61
NOTES
TO FINANCIAL STATEMENTS (CONTINUED) OPTIMUM FUND TRUST
3. INVESTMENTS (CONTINUED)
At March 31, 2004, the cost of investments and unrealized appreciation
(depreciation) for federal income tax purposes for each Fund were as follows:
Optimum Optimum Optimum Optimum Optimum Optimum
Fixed Income International Large Cap Large Cap Small Cap Small Cap
Fund Fund Growth Fund Value Fund Growth Fund Value Fund
------------ ------------- ----------- ---------- ----------- -----------
Cost of investments $98,883,222 $27,132,093 $66,732,047 $66,291,184 $18,409,924 $19,153,136
----------- ----------- ----------- ----------- ----------- -----------
Aggregate unrealized appreciation $ 1,098,463 $ 2,580,970 $ 3,743,003 $ 2,978,421 $ 2,547,854 $ 2,211,202
Aggregate unrealized depreciation (244,620) (217,219) (1,121,136) (688,500) (364,636) (60,209)
----------- ----------- ----------- ----------- ----------- -----------
Net unrealized appreciation $ 853,843 $ 2,363,751 $ 2,621,867 $2,289,921 $ 2,183,218 $ 2,150,993
----------- ----------- ----------- ----------- ----------- -----------
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 accounting principles
generally accepted in the United States. The tax character of dividends and
distributions paid during the period ended March 31, 2004 was as follows:
Optimum Optimum Optimum Optimum
Fixed Income International Large Cap Small Cap
Fund Fund Value Fund Value Fund
------------ ------------- ---------- ----------
Ordinary Income $532,500 $9,793 $86,243 $68,016
As of March 31, 2004, the components of net assets on a tax basis were as
follows:
Optimum Fixed Income Fund Optimum International Fund Optimum Large Cap Growth Fund
------------------------- -------------------------- -----------------------------
Shares of beneficial interest $89,510,974 $26,661,384 $67,114,280
Undistributed ordinary income 873,388 382,413 --
Undistributed long-term capital gain 15,003 -- --
Post-October losses -- (57,533) (120,105)
Post-October currency losses -- -- (11,016)
Unrealized appreciation of investments
and foreign currencies 870,201 2,362,218 2,621,934
----------- ----------- -----------
Net assets $91,269,566 $29,348,482 $69,605,093
----------- ----------- -----------
Optimum Large Cap Value Fund Optimum Small Cap Growth Fund Optimum Small Cap Value Fund
---------------------------- ----------------------------- ----------------------------
Shares of beneficial interest $63,423,652 $18,453,039 $18,687,601
Undistributed ordinary income 705,228 3,443 386,288
Undistributed long-term capital gain -- -- 205
Unrealized appreciation of investments 2,289,220 2,183,218 2,150,993
----------- ----------- -----------
Net assets $66,418,100 $20,639,700 $21,225,087
----------- ----------- -----------
The differences between book basis and tax basis components of net assets are
primarily attributable to tax deferral of losses on wash sales.
Post-October losses represent losses realized on investment and foreign currency
transactions from November 1, 2003 through March 31, 2004 that, in accordance
with federal income tax regulations, the Funds have elected to defer and treat
as having arisen in the following fiscal year.
For financial reporting purposes, capital accounts and distributions to
shareholders are adjusted to reflect the tax character of permanent book/tax
differences. For the period ended March 31, 2004, the Funds recorded the
following permanent reclassifications. Reclassifications are primarily due to
tax treatment of net operating losses, gain (loss) on foreign currency
transactions, and paydowns of mortgage- and asset-backed securities. Results of
operations and net assets were not affected by these reclassifications.
Optimum Optimum Optimum Optimum
Fixed Income Large Cap Small Cap Small Cap
Fund Growth Fund Growth Fund Value Fund
------------ ----------- ----------- -----------
Undistributed net investment income $21,016 $166,965 $100,258 $51,336
Accumulated realized gain (loss) (21,016) (13,740) (100,258) (51,336)
Paid-in capital -- (153,225) -- --
62
NOTES
TO FINANCIAL STATEMENTS (CONTINUED) OPTIMUM FUND TRUST
5. CAPITAL SHARES
Transactions in capital shares were as follows:
Optimum Optimum Optimum Optimum Optimum Optimum
Fixed Income International Large Cap Large Cap Small Cap Small Cap
Fund Fund Growth Fund Value Fund Growth Fund Value Fund
------------ ------------- ----------- ---------- ----------- -----------
Shares sold:
Class A 1,350,930 388,631 992,873 943,488 191,434 196,000
Class B 483,742 154,454 379,178 371,334 71,658 75,160
Class C 5,871,982 1,362,378 3,724,731 3,664,980 674,849 825,171
Institutional Class 2,994,706 1,072,081 2,775,139 2,342,801 911,226 841,044
---------- --------- --------- --------- --------- ---------
10,701,360 2,977,544 7,871,921 7,322,603 1,849,167 1,937,375
---------- --------- --------- --------- --------- ---------
Shares issued upon reinvestment of
dividends and distributions:
Class A 10,485 124 -- 1,959 -- 586
Class B 2,086 44 -- 286 -- 201
Class C 26,727 448 -- 3,284 -- 2,556
Institutional Class 18,433 362 -- 3,404 -- 3,345
---------- --------- --------- --------- --------- ---------
57,731 978 -- 8,933 -- 6,688
---------- --------- --------- --------- --------- ---------
Shares repurchased:
Class A (18,915) (5,937) (16,889) (17,978) (3,646) (3,616)
Class B (7,826) (1,546) (4,643) (3,787) (1,083) (699)
Class C (42,407) (12,884) (35,837) (25,352) (4,895) (5,812)
Institutional Class (530,535) (202,008) (527,062) (520,667) (6,327) (5,135)
---------- --------- --------- --------- --------- ---------
(599,683) (222,375) (584,431) (567,784) (15,951) (15,262)
---------- --------- --------- --------- --------- ---------
Net increase 10,159,408 2,756,147 7,287,490 6,763,752 1,833,216 1,928,801
---------- --------- --------- --------- --------- ---------
6. FOREIGN EXCHANGE CONTRACTS
The Optimum Fixed Income Fund, Optimum International Fund, Optimum Large Cap
Growth Fund and Optimum Large Cap Value Fund may enter into forward foreign
currency exchange contracts as a way of managing foreign exchange rate risk. The
Funds 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 Funds may
also use these contracts to hedge the U.S. dollar value of securities they
already own that are denominated in foreign currencies.
The change in market 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 forward 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 forward foreign
currency exchange contracts limit the risk of loss due to a decline in the value
of the hedged currency, they also limit any potential gain that might result
should the value of the currency increase. In addition, the Funds could be
exposed to risks if the counterparties to the contracts are unable to meet the
terms of their contracts.
63
NOTES
TO FINANCIAL STATEMENTS (CONTINUED) OPTIMUM FUND TRUST
6. FOREIGN EXCHANGE CONTRACTS (CONTINUED)
The following foreign currency exchange contracts were outstanding at March 31,
2004:
OPTIMUM INTERNATIONAL FUND
Contracts In Unrealized
To Exchange Settlement Appreciation
Receive (Deliver) For Date (Depreciation)
- ---------------- ---------- ---------- --------------
31,917 British Pounds US $(58,736) 4/5/04 $ (95)
(855,000) British Pounds 1,551,276 4/30/04 (15,862)
19,397 European Monetary Units (23,641) 4/1/04 196
65,779 European Monetary Units (80,621) 4/2/04 215
30,444 European Monetary Units (37,425) 4/5/04 (15)
72,008 Hong Kong Dollars (9,241) 4/2/04 1
13,987,920 Japanese Yen (134,694) 4/2/04 (240)
1,186,055 Japanese Yen (11,367) 4/5/04 35
(2,088,343) Japanese Yen 20,042 4/5/04 (34)
271,032 Norwegian Kroner (39,509) 4/5/04 (37)
17,697,500 South Korean Won (15,517) 4/2/04 (80)
76,396 Swiss Francs (60,277) 4/5/04 31
--------
$(15,885)
--------
OPTIMUM LARGE CAP GROWTH FUND
(74,175) European Monetary Units US $91,081 4/2/04 $(30)
20,398 British Pounds (37,553) 4/5/04 (42)
--------
$ (72)
--------
OPTIMUM LARGE CAP VALUE FUND
13,657 British Pounds US$(24,836) 4/1/04 $264
41,371 Swiss Francs (32,161) 4/1/04 495
--------
$759
--------
7. FUTURES CONTRACTS
The Optimum Fixed Income Fund may invest in financial futures contracts to hedge
its existing portfolio securities against fluctuations in fair value caused by
changes in prevailing market interest rates. Upon entering into a futures
contract, the Fund deposits cash or pledges U.S. government securities to a
broker, equal to the minimum "initial margin" requirements of the exchange on
which the contract is traded. In some cases, due to the form of the futures
agreement, initial margin is held in a segregated account with the Fund's
custodian, rather than directly with the broker. Subsequent payments are
received from the broker or paid to the broker (or added to the segregated
account) 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.
Financial futures contracts open at March 31, 2004 for the Optimum Fixed Income
Fund were as follows:
Unrealized
Contracts Notional Appreciation
to Buy (Sell) Cost (Proceeds) Expiration Date (Depreciation)
- ------------- -------------- --------------- --------------
5 U.S. Treasury 10 year notes $571,109 6/04 $5,922
(1) U.S. Treasury 5 year notes (113,461) 6/04 (102)
--------
$5,820
--------
The use of futures contracts involves elements of market risk and risks in
excess of the amount recognized in the financial statements. The notional
amounts presented above represent the Fund's total exposure in such contracts,
whereas only the net unrealized appreciation (depreciation) is reflected in the
Fund's net assets.
64
NOTES
TO FINANCIAL STATEMENTS (CONTINUED) OPTIMUM FUND TRUST
8. OPTIONS WRITTEN
During the period ended March 31, 2004, Optimum Fixed Income Fund entered into
options contracts in accordance with its investment objectives. 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.
Transactions in options written during the period ended March 31, 2004 for
Optimum Fixed Income Fund, were as follows:
Number
of Contracts Premiums
------------ --------
Options outstanding at beginning of period -- $ --
Options written 2,200 9,992
Options terminated in closing purchase transaction (2,200) (9,992)
------ ---------
Options outstanding at March 31, 2004 -- $ --
------ ---------
9. SWAP AGREEMENTS
During the period ended March 31, 2004, the Optimum Fixed Income Fund entered
into total return swap agreements in accordance with its investment objectives.
A swap is an agreement to exchange the return generated by one instrument for
the return generated by another instrument. Total return swaps involve
commitments to pay interest in exchange for a market-linked return based on a
notional amount. To the extent the total return of the security, instrument or
basket of instruments underlying the transaction exceeds the offsetting interest
obligation, the Fund will receive a payment from the counterparty. To the extent
the total return of the security, instrument or basket of instruments underlying
the transaction falls short of the offsetting interest obligation, the Fund will
make a payment to the counterparty. The change in value of swap agreements
outstanding, if any, is recorded as unrealized appreciation or depreciation
daily. A realized gain or loss is recorded on maturity or termination of the
swap agreement.
At March 31, 2004, the Optimum Fixed Income Fund had the
following total return swap agreement outstanding:
Notional Amount Expiration Date Description Unrealized Gain
---------------- --------------- ---------- ---------------
$580,000 6/30/04 Agreement with Goldman Sachs to receive $16,455
the notional amount multiplied by the
return on the Lehman Brothers
Commercial MBS Index AAA and
to pay the notional amount multiplied
by the 1 month BBA LIBOR adjusted
by a spread of minus 0.50%.
Because there is no organized market for these swap agreements, 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
agreements include the potential inability of the counterparty to meet the terms
of the agreements. This type of risk is generally limited to the amount of
favorable movements 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
related amounts shown above.
65
NOTES
TO FINANCIAL STATEMENTS (CONTINUED) OPTIMUM FUND TRUST
10. CREDIT AND MARKET RISKS
Some countries in which the Optimum Fixed Income Fund, Optimum International
Fund, Optimum Large Cap Growth Fund and Optimum Large Cap Value 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 Funds may
be inhibited. In addition, a significant portion of the aggregate market value
of equity securities listed on the major securities exchanges in emerging
markets are held by a smaller number of investors. This may limit the number of
shares available for acquisition or disposition by the Funds.
The Optimum Fixed Income Fund may invest in high-yield fixed-income securities,
which carry ratings of BB or lower by Standard & Poor's Ratings Group and/or Ba
or lower by Moody's Investors Service, Inc. Investments in these higher yielding
securities are generally accompanied by a greater degree of credit risk than
higher rated securities. Additionally, lower rated securities may be more
susceptible to adverse economic and competitive industry conditions than
investment grade securities.
The Optimum Fixed Income Fund invests in fixed-income securities whose value is
derived from an underlying pool of mortgages or consumer loans. Investors
receive principal and interest payments as the underlying mortgages and consumer
loans are paid back. Some of these securities are collateralized mortgage
obligations (CMOs). CMOs are debt securities issued by U.S. government agencies
or by financial institutions and other mortgage lenders, which are
collateralized by a pool of mortgages held under an indenture. Prepayment of
mortgages may shorten the stated maturity of the obligations and can result in a
loss of premium, if any has been paid. 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.
Each Fund may invest up to 15% of its total 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.
The Optimum Small Cap Growth Fund and Optimum Small Cap Value Fund invest a
significant portion of their assets in small companies and may be subject to
certain risks associated with ownership of securities of small companies.
Investments in small-sized companies may be more volatile than investments in
larger companies for a number of reasons, which include limited financial
resources or a dependence on narrow product lines.
11. CONTRACTUAL OBLIGATIONS
The Funds enter into contracts in the normal course of business that contain a
variety of indemnifications. The Funds' maximum exposure under these
arrangements is unknown. However, the Funds have not had claims or losses
pursuant to these contracts. Management has reviewed the Funds' existing
contracts and expects the risk of loss to be remote.
66
NOTES
TO FINANCIAL STATEMENTS (CONTINUED) OPTIMUM FUND TRUST
12. INDUSTRY ALLOCATION
As of March 31, 2004, the foreign bond holdings of the Optimum Fixed Income
Fund, classified by type of business, were as follows:
Percentage
Industry of net assets
- -------------------------- -------------
Banking & Finance 2.01%
Cable, Media & Publishing 0.20%
Chemicals 0.21%
Energy 1.02%
Foreign Government 9.27%
Holding Companies 0.07%
Industrial Machinery 0.59%
Insurance 0.06%
Metals & Mining 0.63%
Paper & Forest Products 0.58%
Semiconductors 0.17%
Supranational 0.72%
Telecommunications 0.89%
Utilities 0.07%
--------
Total 16.49%
--------
As of March 31, 2004, the Optimum International Fund's investment in equity
securities classified by type of business were as follows:
Percentage
Industry of net assets
- -------------------------- -------------
Airlines 0.49%
Automobiles & Components 4.00%
Banking & Finance 18.35%
Buildings & Materials 2.34%
Business Services 1.31%
Cable, Media & Publishing 6.74%
Chemicals 2.04%
Computers & Technology 2.76%
Electronics & Electrical Equipment 14.65%
Energy 6.86%
Food, Beverage & Tobacco 1.73%
Healthcare & Pharmaceuticals 6.63%
Insurance 2.19%
Leisure, Lodging & Entertainment 4.08%
Metals & Mining 2.32%
Packaging & Containers 1.03%
Paper & Forest Products 0.56%
Real Estate 0.50%
Retail 5.42%
Semiconductors 1.74%
Telecommunications 5.86%
Transportation & Shipping 1.73%
Utilities 0.31%
--------
Total 93.64%
--------
13. SUBSEQUENT EVENT
On May 5, 2004, Delaware Management Holdings Corp., a parent company of DIAL,
signed a Limited Liability Interest Purchase Agreement to sell DIAL and its
direct parent companies, Delaware International Holdings Ltd. and DIAL Holding
Company, Inc., to Atlantic Value Partners (No. 3) Ltd., a newly formed joint
venture involving Hellman & Friedman, LLC, a private equity firm, and certain
members of DIAL's management. Upon the closing, the Funds' advisory or
sub-advisory agreement, as applicable, with DIAL will automatically terminate.
The Funds' Boards will consider appropriate action relating to this matter at
its upcoming meeting, and necessary shareholder approval will be sought.
67
NOTES
TO FINANCIAL STATEMENTS (CONTINUED) OPTIMUM FUND TRUST
14. TAX INFORMATION (UNAUDITED)
The information set forth below is for each Fund's fiscal year as required by
federal laws. Shareholders, however, must report distributions on a calendar
year basis for income tax purposes, which may include distributions for portions
of two fiscal years of a fund. Accordingly, the information needed by
shareholders for income tax purposes will be sent to them in January of each
year. Please consult your tax advisor for proper treatment of this information.
For the fiscal year ended March 31, 2004, each Fund designates distributions
paid during the year as follows:
(A) (B)
Long-Term Capital Ordinary Income Total (C)
Gains Distributions Distributions* Distributions Qualifying
(Tax Basis) (Tax Basis) (Tax Basis) Dividends(1)
------------------ -------------- ------------ ------------
Optimum Fixed Income Fund -- 100% 100% 1%
Optimum International Fund -- 100% 100% --
Optimum Large Cap Value Fund -- 100% 100% 100%
Optimum Small Cap Value Fund -- 100% 100% 11%
(A) and (B) are based on a percentage of each Fund's total distributions.
(C) is based on a percentage of ordinary income of each Fund.
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
* For the fiscal year ended March 31, 2004 certain dividends paid by the Optimum
Fixed Income Fund may be subject to a maximum tax rate of 15%, as provided for
by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Optimum
Fixed Income Fund intends to designate up to a maximum amount of $8,975 to be
taxed at a maximum rate of 15%. Complete information will be computed and
reported in conjunction with your 2004 Form 1099-DIV.
15. SHAREHOLDER MEETING (UNAUDITED)
On March 30, 2004, shareholders of Optimum Small Cap Growth Fund approved a new
additional sub-adviser, Oberweis Asset Management, Inc. ("Oberweis") for the
Fund. Oberweis began serving as sub-adviser to the Fund on April 1, 2004. The
description of the proposal and number of shares voted are as follows:
1. To approve or disapprove a new Sub-Advisory Agreement between Delaware
Management Company, a series of Delaware Management Business Trust, and
Oberweis Asset Management, Inc. ("Oberweis") whereby Oberweis would have
co-management responsibility for providing investment advisory services to
the Fund.
Number % of % of
Of Shares Outstanding Shares Shares Voted
------------ ------------------ ------------
Affirmative 683,232.079 49.460% 96.766%
Against 12,193.000 0.882 1.727
Abstain 10,638.000 0.770 1.507
----------- ------ -------
Total 706,063.079 51.112 100.000
Fund Totals:
Record Total 1,381,394.969
Voted Shares 706,063.079
Percent Voted 51.112%
68
REPORT
OF INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees
Optimum Fund Trust
We have audited the accompanying statements of net assets and statements of
assets and liabilities of Optimum Fund Trust (comprised of, respectively,
Optimum Fixed Income Fund, Optimum International Fund, Optimum Large Cap Growth
Fund, Optimum Large Cap Value Fund, Optimum Small Cap Growth Fund, and Optimum
Small Cap Value Fund (the "Funds")) as of March 31, 2004, and the related
statements of operations, statements of changes in net assets, and financial
highlights for the period August 1, 2003 (commencement of operations) through
March 31, 2004. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of March 31, 2004, by correspondence with
the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Funds constituting Optimum Fund Trust at March 31, 2004, and
the results of their operations, the changes in their net assets, and their
financial highlights for the period August 1, 2003 (commencement of operations)
through March 31, 2004, in conformity with accounting principles generally
accepted in the United States.
/s/ Ernst + Young LLP
Philadelphia, Pennsylvania
May 7, 2004
69
OPTIMUM FUND TRUST
BOARD OF TRUSTEES AND OFFICERS ADDENDUM
A mutual fund is governed by a Board of Trustees which has oversight
responsibility for the management of a fund's business affairs. Trustees
establish procedures and oversee and review the performance of the investment
manager, the distributor and others that perform services for the fund. The
independent fund trustees, in particular, are advocates for shareholder
interests. The following is a list of the Trustees and Officers with certain
background and related information.
PRINCIPAL NUMBER OF OTHER
NAME, POSITION(S) OCCUPATION(S) PORTFOLIOS IN FUND DIRECTORSHIPS
ADDRESS HELD WITH LENGTH OF TIME DURING COMPLEX OVERSEEN HELD BY
AND BIRTHDATE FUND(S) SERVED PAST 5 YEARS BY TRUSTEE(1) TRUSTEE
- -----------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
MARK S. CASADY(2) Trustee April 21, President and Chief Operating 6 None
2005 Market Street 2003 to Officer - LPL Financial Services
Philadelphia, PA present (2002 - Present)
19103
September 21, 1960 Managing Director -
Scudder Investments
(1994-2002)
JUDE T. DRISCOLL(2) Trustee, President July 17, 2003 President and Chief Executive 6 None(1)
2005 Market Street and Chief to present Officer - Delaware Investments
Philadelphia, PA Executive Officer (January 2003 - Present)
19103
March 10, 1963 Executive Vice President and
Head of Fixed Income - Delaware
Investment Advisers, a series of
Delaware Management Business Trust
(August 2000 - January 2003)
Senior Vice President and
Director of Fixed-Income Process -
Conseco Capital Management
(June 1998-August 2000)
Managing Director -
NationsBanc Capital Markets
(February 1996-June 1998)
DAVID KITTREDGE(2) Trustee July 17, 2003 Mr. Kittredge has served in 6 None
2005 Maret Street to present various management positions
Philadelphia, PA at different times at
19103 Lincoln Financial Group.
July 27, 1962
- -----------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
NICHOLAS D. CONSTAN Trustee July 17, 2003 Adjunct Professor - 6 None
2005 Market Street to present University of Pennsylvania
Philadelphia, PA (1972 - Present)
19103
October 24, 1938
WILLIAM W. HENNIG Trustee July 17, 2003 Private Investor 6 None
2005 Market Street to present
Philadelphia, PA
19103
July 17, 1930
DURANT ADAMS HUNTER Trustee July 17, 2003 Chief Executive Officer and 6 None
2005 Market Street to present Executive Recruiter -
Philadelphia, PA Whitehead MANN Inc.
19103 (Executive Recruiting)
(1992 - Present)
November 25, 1948
70
PRINCIPAL NUMBER OF OTHER
NAME, POSITION(S) OCCUPATION(S) PORTFOLIOS IN FUND DIRECTORSHIPS
ADDRESS HELD WITH LENGTH OF TIME DURING COMPLEX OVERSEEN HELD BY
AND BIRTHDATE FUND(S) SERVED PAST 5 YEARS BY TRUSTEE(1) TRUSTEE
- -----------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES (CONTINUED)
KENNETH R. LEIBLER Trustee July 17, 2003 Chairman and Chief Executive 6 None
2005 Market Street to present Officer - Boston Stock Exchange
Philadelphia, PA (2001 - Present)
19103
February 21, 1949 President and Chief Executive
Officer - Liberty Financial Companies
(Financial Services)
(1995 - 2000)
STEPHEN PAUL MULLIN Trustee July 17, 2003 President - Econsult Corporation 6 None
2005 Market Street to present (Economic Consulting)
Philadelphia, PA (2000 - Present)
19103
Director and Treasurer -
February 8, 1956 Historical Society of Pennsylvania
(Non-profit)
(1996-Present)
Director and
Independence Visitor Center
(Non-profit)
(2000 - Present)
Adjunct Lecturer -
University of Pennsylvania
(1992 - Present)
Adjunct Lecturer -
Drexel University
(1999 - Present)
ROBERT A. RUDDELL(3) Trustee July 17, 2003 Director - Medtox Scientific 6 None
2005 Market Street to present (Clinical Lab)
Philadelphia, PA (2002 - Present)
19103
Director - Search Institute
September 6, 1948 (Social research)
(2002 - Present)
Chief Operating Officer - ZSI
(Asset Management)
(1998 - 2002)
Managing Director -
Scudder, Stevens, Clark
(Asset Management/401(k))
(1996 - 1998)
JON EDWARD SOCOLOFSKY Trustee July 17, 2003 Private Investor 6 None
2005 Market Street (2002 - Present)
Philadelphia, PA
19103 Senior Vice President -
The Northern Trust
March 27, 1946 (Trust Bank)
(1970 - 2001)
PRINCIPAL NUMBER OF OTHER
NAME, POSITION(S) OCCUPATION(S) PORTFOLIOS IN FUND DIRECTORSHIPS
ADDRESS HELD WITH LENGTH OF TIME DURING COMPLEX OVERSEEN HELD BY
AND BIRTHDATE FUND(S) SERVED PAST 5 YEARS BY OFFICER(1) OFFICER
- -----------------------------------------------------------------------------------------------------------------------------------
OFFICERS
JOSEPH H. HASTINGS Executive Executive Mr. Hastings has served in 6 None
2005 Market Street Vice President Vice President various executive capacities
Philadelphia, PA and and at different times at
19103 Chief Financial Chief Financial Delaware Investments.
Officer Officer since
December 19, 1949 August 21, 2003
RICHELLE S. MAESTRO Executive Vice Chief Legal Ms. Maestro has served in 6 None
2005 Market Street President, Chief Officer since various executive capacities
Philadelphia, PA Legal Officer March 17, 2003 at different times at
19103 and Secretary Delaware Investments.
November 26, 1957
MICHAEL P. BISHOF Senior Vice President 8 Years Mr. Bishof has served in 6 None
2005 Market Street and Treasurer various executive capacities
Philadelphia, PA at different times at
19103 Delaware Investments.
August 18, 1962
(1) The term "Fund Complex" refers to the Funds in the Optimum Funds Trust.
Messrs. Driscoll, Bishof, and Hastings and Ms. Maestro also serve in similar
capacities for the Delaware Investments Family of Funds, a fund complex also
managed and distributed by Delaware Investments with 98 funds.
(2) "Interested persons" of the Funds by virtue of their executive and
management positions or relationships with the Fund's service providers or
sub-service providers.
(3) Pursuant to rules under the 1940 Act, it is possible that Mr. Rudell might
be considered an "interested person" of the Trust until March 31, 2004,
because of his prior executive positions and relationship with a predecessor
to Scudder Investments, a sub-adviser to Optimum Fixed Income Fund.
Nevertheless, due to the remote and technical nature of such interest, the
Trust will compensate Mr. Rudell as an independent Trustee.
Delaware Investments is the marketing name for Delaware Management Holdings,
Inc. and its subsidiaries, including the Trust's manager, principal
underwriter and service agent.
71
This annual report is for the information of Optimum Fund Trust shareholders,
but it may be used with prospective investors when preceded or accompanied by a
current prospectus for Optimum Trust Funds and the Delaware Investments
Performance Update for the most recently completed calendar quarter. The
prospectus sets forth details about charges, expenses, investment objectives,
and operating policies of each Fund. You should read the prospectus carefully
before you invest. The figures in this report represent past results which are
not a guarantee of future results. The return and principal value of an
investment in each Fund will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost.
BOARD OF TRUSTEES AFFILIATED OFFICERS CONTACT INFORMATION
MARK S. CASADY JOSEPH H. HASTINGS INVESTMENT MANAGER
President and Chief Operating Officer Senior Vice President and Delaware Management Company
LPL Financial Services Chief Financial Officer Philadelphia, PA
Optimum Fund Trust
JUDE T. DRISCOLL Philadelphia, PA INTERNATIONAL AFFILIATE
Chairman Delaware International Advisers Ltd.
Delaware Investments Family of Funds RICHELLE S. MAESTRO London, England
Executive Vice President,
DAVID KITTREDGE General Counsel and Secretary NATIONAL DISTRIBUTOR
Vice President Optimum Fund Trust Delaware Distributors, L.P.
Lincoln Financial Distributors, Inc. Philadelphia, PA Philadelphia, PA
NICHOLAS D. CONSTAN MICHAEL P. BISHOF SHAREHOLDER SERVICING, DIVIDEND
Adjunct Professor - University of Pennsylvania Senior Vice President and Treasurer DISBURSING AND TRANSFER AGENT
Optimum Fund Trust Delaware Service Company, Inc.
WILLIAM W. HENNIG Philadelphia, PA 2005 Market Street
Private Investor Philadelphia, PA 19103-7094
DURANT ADAMS HUNTER FOR SHAREHOLDERS
Chief Executive Officer and Executive Recruiter 800 523-1918
Whitehead MANN Inc. (Executive Recruiting)
FOR SECURITIES DEALERS AND FINANCIAL
KENNETH R. LEIBLER INSTITUTIONS REPRESENTATIVES ONLY
Chairman and Chief Executive Officer - 800 362-7500
Boston Stock Exchange
STEPHEN PAUL MULLIN
Principal - Econsult Corporation
ROBERT A. RUDELL
Director - Medtox Scientific
JON EDWARD SOCOLOFSKY
Private Investor
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A description of the policies and procedures that the Funds use to determine how
to vote proxies (if any) relating to portfolio securities is available without
charge (i) upon request, by calling 800-914-0278, (ii) on the Funds website at
http://www.optimummutualfunds.com; and (iii) on the Commission's website at
http://www.sec.gov.; and beginning no later than August 31, 2004, information
(if any) regarding how the Funds voted proxies relating to portfolio securities
during the most recent 12-month period ended June 30 is available without charge
(i) through the Funds website at http://www.optimummutualfunds.com; and (ii) on
the Commission's website at http://www.sec.gov.
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(8698) Printed in the USA
AR-901 [3/04] IVES 5/04 J9655
Item 2. Code of Ethics
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or a
third party. A copy of the registrant's Code of Business Ethics has been posted
on its internet website at www.optimummutualfunds.com. Any amendments to the
Code of Business Ethics, and information on any waiver from its provisions
granted by the registrant, will also be posted on this website within five
business days of such amendment or waiver and will remain on the website for at
least 12 months.
Item 3. Audit Committee Financial Expert
The registrant's Board of Trustees/Directors has determined that each
member of the registrant's Audit Committee is an audit committee financial
expert, as defined below. For purposes of this item, an "audit committee
financial expert" is a person who has the following attributes:
a. An understanding of generally accepted accounting principles and
financial statements;
b. The ability to assess the general application of such principles in
connection with the accounting for estimates, accruals, and reserves;
c. Experience preparing, auditing, analyzing, or evaluating financial
statements that present a breadth and level of complexity of accounting issues
that are generally comparable to the breadth and complexity of issues that can
reasonably be expected to be raised by the registrant's financial statements, or
experience actively supervising one or more persons engaged in such activities;
d. An understanding of internal controls and procedures for financial
reporting; and
e. An understanding of audit committee functions.
An "audit committee financial expert" shall have acquired such attributes
through:
a. Education and experience as a principal financial officer, principal
accounting officer, controller, public accountant, or auditor or experience in
one or more positions that involve the performance of similar functions;
b. Experience actively supervising a principal financial officer,
principal accounting officer, controller, public accountant, auditor, or person
performing similar functions;
c. Experience overseeing or assessing the performance of companies or
public accountants with respect to the preparation, auditing, or evaluation of
financial statements; or
d. Other relevant experience.
The registrant's Board of Trustees/Directors has also determined that
each member of the registrant's Audit Committee is independent. In order to be
"independent" for purposes of this item, the Audit Committee member may not: (i)
other than in his or her capacity as a member of the Board of Trustees/Directors
or any committee thereof, accept directly or indirectly any consulting, advisory
or other compensatory fee from the issuer; or (ii) be an "interested person" of
the registrant as defined in Section 2(a)(19) of the Investment Company Act of
1940.
The names of the audit committee financial experts on the registrant's
Audit Committee are set forth below:
Jon E. Socolofsky
Robert A. Rudell
Item 4. Principal Accountant Fees and Services
(a) Audit fees.
The aggregate fees billed for services provided to the Registrant by
its independent auditors for the audit of the Registrant's annual financial
statements and for services normally provided by the independent auditors in
connection with statutory and regulatory filings or engagements were $93,500 for
the fiscal year ended March 31, 2004.
(b) Audit-related fees.
The aggregate fees billed by the Registrant's independent auditors for
services relating to the performance of the audit of the Registrant's financial
statements and not reported under paragraph (a) of this Item were $0 for the
fiscal year ended March 31, 2004. The percentage of these fees relating to
services approved by the Registrant's Audit Committee pursuant to the de minimis
exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of
Regulation S-X was 0%.
The aggregate fees billed by the Registrant's independent auditors for
services relating to the performance of the audit of the financial statements of
the Registrant's investment adviser(s) and other service providers under common
control with the adviser(s) and that relate directly to the operations or
financial reporting of the Registrant were $12,100 for the Registrant's fiscal
year ended March 31, 2004. The percentage of these fees relating to services
approved by the Registrant's Audit Committee pursuant to the de minimis
exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of
Regulation S-X was 0%. These audit-related services were as follows: preparation
of report concerning transfer agents' system of internal accounting control
pursuant to Rule 17ad-13 of the Securities and Exchange Act.
(c) Tax fees.
The aggregate fees billed by the Registrant's independent auditors for
tax-related services provided to the Registrant were $12,000 for the fiscal year
ended March 31, 2004. The percentage of these fees relating to services approved
by the Registrant's Audit Committee pursuant to the de minimis exception from
the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%.
These tax-related services were as follows: review of income tax return and
excise tax return.
The aggregate fees billed by the Registrant's independent auditors for
tax-related services provided to the Registrant's investment adviser(s) and
other service providers under common control with the adviser(s) and that relate
directly to the operations or financial reporting of the Registrant were $0 for
the Registrant's fiscal year ended March 31, 2004. The percentage of these fees
relating to services approved by the Registrant's Audit Committee pursuant to
the de minimis exception from the pre-approval requirement in Rule
2-01(c)(7)(i)(C) of Regulation S-X was 0%.
(d) All other fees.
The aggregate fees billed for all services provided by the independent
auditors to the Registrant other than those set forth in paragraphs (a), (b) and
(c) of this Item were $0 for the fiscal year ended March 31, 2004. The
percentage of these fees relating to services approved by the Registrant's Audit
Committee pursuant to the de minimis exception from the pre-approval requirement
in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%.
The aggregate fees billed for all services other than those set forth
in paragraphs (b) and (c) of this Item provided by the Registrant's independent
auditors to the Registrant's adviser(s) and other service providers under common
control with the adviser(s) and that relate directly to the operations or
financial reporting of the Registrant were $0 for the Registrant's fiscal year
ended March 31, 2004. The percentage of these fees relating to services approved
by the Registrant's Audit Committee pursuant to the de minimis exception from
the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%.
(e) The Registrant's Audit Committee has not established pre-approval
policies and procedures as permitted by Rule 2-01(c)(7)(i)(B) of Regulation S-X.
(f) Not applicable.
(g) The aggregate non-audit fees billed by the Registrant's independent
auditors for services rendered to the Registrant and to its investment
adviser(s) and other service providers under common control with the adviser(s)
were $167,475 for the Registrant's fiscal years ended March 31, 2004.
(h) In connection with its selection of the independent auditors, the
Registrant's Audit Committee has considered the independent auditors' provision
of non-audit services to the Registrant's investment adviser(s) and other
service providers under common control with the adviser(s) that were not
required to be pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X.
The Audit Committee has determined that the independent auditors' provision of
these services is compatible with maintaining the auditors' independence.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. [Reserved]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies
Not applicable.
Item 8. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers
Not applicable.
Item 9. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 10. 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 registrant's last fiscal
half-year (the registrant's second fiscal half-year in the case of an annual
report) that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
Item 11. 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:
JUDE T. DRISCOLL
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By: Jude T. Driscoll
------------------
Title: Chairman
Date: 6-1-04
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.
JUDE T. DRISCOLL
- -------------------------
By: Jude T. Driscoll
Title: Chairman
------------------
Date: 6-1-04
JOSEPH H. HASTINGS
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By: Joseph H. Hastings
------------------------
Title: Chief Financial Officer
Date: 6-1-04