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: | 811-07972 | |
Exact name of registrant as specified in charter: | Delaware Group® Adviser Funds | |
Address of principal executive offices: | 2005 Market Street | |
Philadelphia, PA 19103 | ||
Name and address of agent for service: | David F. Connor, Esq. | |
2005 Market Street | ||
Philadelphia, PA 19103 | ||
Registrant’s telephone number, including area code: | (800) 523-1918 | |
Date of fiscal year end: | October 31 | |
Date of reporting period: | October 31, 2018 |
Item 1. Reports to Stockholders
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Fixed income mutual fund
Delaware Diversified Income Fund
October 31, 2018
Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Fund’s prospectus and its summary prospectus, which may be obtained by visiting delawarefunds.com/literature or calling 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing.
You can obtain shareholder reports and prospectuses online instead of in the mail.
Visit delawarefunds.com/edelivery.
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Experience Delaware Funds® by Macquarie
Macquarie Investment Management (MIM) is a global asset manager with offices throughout the United States, Europe, Asia, and Australia. We are active managers who prioritize autonomy and accountability at the investment team level in pursuit of opportunities that matter for our clients. Delaware Funds is one of the longest-standing mutual fund families, with more than 75 years in existence.
If you are interested in learning more about creating an investment plan, contact your financial advisor.
You can learn more about Delaware Funds or obtain a prospectus for Delaware Diversified Income Fund at delawarefunds.com/literature.
Manage your account online
● | Check your account balance and transactions |
● | View statements and tax forms |
● | Make purchases and redemptions |
Visit delawarefunds.com/account-access.
Macquarie Asset Management (MAM) offers a diverse range of product including securities investment management, infrastructure and real asset management, and fund and equity-based structured products. MIM is the marketing name for certain companies comprising the asset management division of Macquarie Group. This includes the following registered investment advisers: Macquarie Investment Management Business Trust (MIMBT), Macquarie Funds Management Hong Kong Limited, Macquarie Investment Management Austria Kapitalanlage AG, Macquarie Investment Management Global Limited, Macquarie Investment Management Europe Limited, and Macquarie Capital Investment Management LLC.
The Fund is distributed by Delaware Distributors, L.P.
(DDLP), an affiliate of MIMBT and Macquarie Group Limited.
Other than Macquarie Bank Limited (MBL), none of the entities noted are authorized deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Fund is governed by US laws and regulations.
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Unless otherwise noted, views expressed herein are current as of Oct. 31, 2018, and subject to change for events occurring after such date.
The Fund is not FDIC insured and is not guaranteed. It is possible to lose the principal amount invested.
Advisory services provided by Delaware Management Company, a series of MIMBT, a US registered investment advisor.
All third-party marks cited are the property of their respective owners.
© 2018 Macquarie Management Holdings, Inc.
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Delaware Diversified Income Fund | November 13, 2018 |
Performance preview (for the year ended October 31, 2018) | ||||||||
Delaware Diversified Income Fund (Institutional Class shares) | 1-year return | -2.41 | % | |||||
Delaware Diversified Income Fund (Class A shares) | 1-year return | -2.77 | % | |||||
Bloomberg Barclays US Aggregate Index (benchmark) | 1-year return | -2.05 | % |
Past performance does not guarantee future results.
For complete, annualized performance for Delaware Diversified Income Fund, please see the table on page 4. Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors. In addition, Institutional Class shares pay no distribution and service fee.
The performance of Class A shares excludes the applicable sales charge. Both Institutional Class shares and Class A shares reflect the reinvestment of all distributions and reflects the reinvestment of all distributions.
Please see page 7 for a description of the index. Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.
As the Fund’s fiscal year began, the US Federal Reserve announced it would begin tapering reinvestment of its large-scale asset purchases and let its balance sheet gradually shrink, effectively ending the monetary-policy stimulus that had been in place over the past decade. Additionally, the Fed’s short-term interest rate hikes continued, causing the yield curve to flatten as short-term yields rose faster than longer-term yields.
At the same time that the Fed began withdrawing monetary stimulus, businesses received a boost in confidence and profits from government deregulation and the accommodative fiscal policy that resulted from passage of the tax reform bill in December 2017.
In spring 2018, trade tensions flared with the Trump administration’s implementation of tariffs on steel and aluminum. China responded in kind, leading many investors to fear a potential trade war. Closer to home, the administration’s threat to withdraw from the North American Free Trade Agreement (NAFTA) led to a reworking of that agreement with Mexico and Canada, though it has not yet been ratified.
During the fiscal period, the pace of US economic growth diverged from that of other economies. As the US economy rebounded, thanks in part to the federal tax cuts and deregulation, Europe began to encounter new issues and emerging markets
felt pressure on their US dollar-denominated debt as the dollar strengthened. The London interbank offered rate (LIBOR) rose in the second quarter of 2018 in part because of US tax reform and the repatriation of overseas assets by some US-based firms. The US-China trade war intensified, and Italy’s political uncertainty weighed on financial markets as well. Driven by these factors and concerns about rising interest rates, US stock volatility increased in the spring and summer.
Among emerging markets, Turkey and Argentina were particularly concerning. Turkey’s president threatened the independence of the country’s central bank, and the weakening condition of the country’s fiscal accounts raised investors’ anxiety. Argentina’s inflation rose significantly, and the country’s fiscal account deteriorated.
Within the Fund
For the fiscal year ended Oct. 31, 2018, Delaware Diversified Income Fund Institutional Class shares returned -2.41%. The Fund’s Class A shares returned -2.77% at net asset value and -7.13% at maximum offer price. These figures reflect all distributions reinvested. For the same period, the Fund’s benchmark, the Bloomberg Barclays US Aggregate Index, returned -2.05%. Complete annualized performance for Delaware Diversified Income Fund is shown in the table on page 4.
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Portfolio management review
Delaware Diversified Income Fund
Emerging markets exposure detracted from Fund performance as currencies deteriorated and yield premiums widened, causing debt securities issued by emerging market countries to underperform. Argentina and Turkey had a large negative impact among emerging market bonds, as US dollar-denominated and local sovereign bonds detracted along with some bank issues in both countries. Similarly, a small exposure to developed market local currency bonds hurt performance because of the stronger US dollar.
Investment grade financial bonds, which averaged about 10% of the Fund, were adversely affected by increases in the federal funds rate and LIBOR. Meanwhile, yield spreads rose on bank securities, particularly in the first quarter of 2018. More generally, investment grade and high yield bonds posed a challenge as credit spreads widened through the period. Within high yield, American Tire Distributors Inc. detracted from returns after two major customers, tire manufacturers Goodyear and Bridgestone, stopped using the company as a distributor. We exited the Fund’s position in American Tire during the fiscal year.
In retrospect, we underestimated both the extent to which economic growth divergence between the US and other economies would lead to significant monetary policy divergence and the challenges posed by a stronger US dollar. In response, we reduced risk by decreasing the Fund’s exposure to emerging market local currency bonds and, to a certain extent, emerging market US dollar-denominated bonds. We also gradually reduced the Fund’s exposure to investment grade corporate bonds and traditional high yield bonds, redeploying assets into US Treasury securities.
Entering the fourth calendar quarter of 2018, we began to unwind an investment in collateralized mortgage obligations (CMOs) that we had held in the Fund for a few years but felt was no longer attractive in a more volatile environment. We used these assets to add slightly to the Fund’s high-
quality asset-backed securities (ABS), and we plan to purchase fixed-rate agency mortgage-backed securities (MBS).
On the positive side, the Fund’s performance relative to its benchmark was helped to some extent by exposure to sectors that benefited from rising rates. Premium agency mortgage-backed coupons performed well. Similarly, exposure to high-quality collateralized loan obligations (CLOs) contributed to performance as they reset, capturing higher yields. Exposure to bank loans was also positive, as the credit environment was somewhat benign and coupons reset quarterly.
Fannie Mae and Freddie Mac 4.5% pass-through bonds performed well along with bonds issued by financial firms Royal Bank of Scotland Group PLC, Credit Suisse Group AG, and aircraft leasing firm AerCap Global Aviation Trust, as finance spreads widened, creating expanded profit opportunities. Elsewhere, Energy Transfer Partners LP, a master limited partnership that owns and operates a large diversified portfolio of US energy assets, had strong performance and added to returns.
As noted previously, we believe that we reduced risk in the Fund during the fiscal year. Along with adding high-quality securities, including ABS and Treasury securities, we used derivatives to help manage risk exposure. Because we expect more volatility as the Fed continues to increase rates, we’ve added additional derivative protection. Further, we believe 2019 could see the monetary policy divergence between the Fed and other major central banks come back in line if the Fed pauses its rate hikes and dials back its monetary tightening pressure.
At various volatile periods during the fiscal year we used derivatives, credit default swaps, to reduce credit exposure and to hedge the Fund’s small exposure to convertible bonds. The use of credit derivatives had an immaterial effect on the Fund’s returns during the fiscal period.
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We also used forward currency hedges to add liquidity and to reduce local currency exposure in developed and emerging markets. Because the Fund’s natural duration (interest rate sensitivity) was reduced through exposure to less interest
rate sensitive areas such as CLOs and bank loans, we used interest rate futures to add interest rate exposure. However, our bias was to be short, by up to a year, of the benchmark’s interest rate sensitivity measure.
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Delaware Diversified Income Fund | October 31, 2018 |
The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 800 523-1918 or visiting delawarefunds.com/performance.
Fund and benchmark performance1,2 | Average annual total returns through October 31, 2018 | |||||||||||||||
1 year | 5 years | 10 years | Lifetime | |||||||||||||
Class A (Est. Dec. 29, 1997) | ||||||||||||||||
Excluding sales charge | -2.77% | +1.81% | +5.67% | +6.17% | ||||||||||||
Including sales charge | -7.13% | +0.88% | +5.18% | +5.93% | ||||||||||||
Class C (Est. Oct. 28, 2002) | ||||||||||||||||
Excluding sales charge | -3.49% | +1.07% | +4.88% | +4.83% | ||||||||||||
Including sales charge | -4.43% | +1.07% | +4.88% | +4.83% | ||||||||||||
Class R (Est. June 2, 2003) | ||||||||||||||||
Excluding sales charge | -2.90% | +1.57% | +5.40% | +4.65% | ||||||||||||
Including sales charge | -2.90% | +1.57% | +5.40% | +4.65% | ||||||||||||
Institutional Class (Est. Oct. 28, 2002) | ||||||||||||||||
Excluding sales charge | -2.41% | +2.08% | +5.93% | +5.88% | ||||||||||||
Including sales charge | -2.41% | +2.08% | +5.93% | +5.88% | ||||||||||||
Class R6 (Est. May 2, 2016) | ||||||||||||||||
Excluding sales charge | -2.33% | n/a | n/a | +1.24% | ||||||||||||
Including sales charge | -2.33% | n/a | n/a | +1.24% | ||||||||||||
Bloomberg Barclays US Aggregate Index | -2.05% | +1.83% | +3.94% | +3.86%* |
* The benchmark lifetime return is for Institutional Class share comparison only and is calculated using the last business day in the month of the Fund’s Institutional Class inception date.
1 Returns reflect the reinvestment of all distributions and are presented both with and without the applicable sales charges described below. Returns do not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares.
Expense limitations were in effect for certain classes during some or all of the periods shown in the “Fund and benchmark performance” table. Expenses for each class are listed on the “Fund expense ratios” table on page 6. Performance would have been lower had expense limitations not been in effect.
Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors. In addition, Institutional Class shares pay no distribution and service fee.
Class A shares are sold with a maximum front-end sales charge of 4.50%, and have an annual distribution and service fee of 0.25% of average daily net assets. Performance for Class A shares, excluding sales charges, assumes that no front-end sales charge applied.
Class C shares are sold with a contingent deferred sales charge of 1.00% if redeemed during the first 12 months. They are also subject to an annual distribution and service fee of 1.00% of average
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daily net assets. Performance for Class C shares, excluding sales charges, assumes either that contingent deferred sales charges did not apply or that the investment was not redeemed.
Class R shares are available only for certain retirement plan products. They are sold without a sales charge and have an annual distribution and service fee of 0.50% of average daily net assets.
Class R6 shares are available only to certain investors. In addition, Class R6 shares do not pay any service fees, sub-accounting fees, and/or sub-transfer agency fees to any brokers, dealers, or other financial intermediaries. Class R6 shares pay no distribution and service fee.
Fixed income securities and bond funds can lose value, and investors can lose principal, as interest rates rise. They also may be affected by economic conditions that hinder an issuer’s ability to make interest and principal payments on its debt.
The Fund may also be subject to prepayment risk, the risk that the principal of a bond that is held by a portfolio will be prepaid prior to maturity, at the time when interest rates are lower than what the bond was paying. A portfolio may then have to reinvest that money at a lower interest rate.
High yielding, non-investment-grade bonds (junk bonds) involve higher risk than investment grade bonds. The high yield secondary market is particularly susceptible to liquidity problems when institutional investors, such as mutual funds and certain other financial institutions, temporarily stop buying bonds for regulatory, financial, or other reasons. In addition, a less liquid secondary market makes it more difficult for the Fund to obtain precise valuations of the high yield securities in its portfolio.
The Fund may invest in derivatives, which may involve additional expenses and are subject to risk, including the risk that an underlying security or securities index moves in the opposite direction from what the portfolio manager anticipated. A derivatives transaction depends upon the
counterparties’ ability to fulfill their contractual obligations.
If and when the Fund invests in forward foreign currency contracts or uses other investments to hedge against currency risks, the Fund will be subject to special risks, including counterparty risk.
The Fund may experience portfolio turnover in excess of 100%, which could result in higher transaction costs and tax liability.
Investments in mortgage-backed securities (MBS) may involve risks. MBS represent an ownership interest in a pool of mortgage loans. The individual mortgage loans are packaged or “pooled” together for sale to investors. These mortgage loans may have either fixed or adjustable interest rates.
Investments in collateralized loan obligations (CLOs) may involve risks. CLOs are securities backed by a pool of debt, often low-rated corporate loans. Investors receive scheduled debt payments from the underlying loans but assume most of the risk in the event that borrowers default.
Investments in collateralized mortgage obligations (CMOs) may involve risks. CMOs are debt securities issued by US government agencies or by financial institutions and other mortgage lenders, which are collateralized by a pool of mortgages held under an indenture. Prepayment of mortgages may shorten the stated maturity of the obligations and can result in a loss of premium, if any has been paid.
International investments entail risks not ordinarily associated with US investments including fluctuation in currency values, differences in accounting principles, or economic or political instability in other nations.
Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility and lower trading volume.
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Performance summary
Delaware Diversified Income Fund
2 The Fund’s expense ratios, as described in the most recent prospectus, are disclosed in the following “Fund expense ratios” table. Delaware Management Company has agreed to reimburse certain expenses and/or waive certain fees in order to prevent total annual fund operating expenses (excluding any 12b-1 fees, acquired fund fees and expenses, taxes, interest, short sale and dividend and interest expenses, brokerage fees, certain insurance costs, and nonroutine expenses or costs, including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations (collectively, nonroutine expenses)) from exceeding 0.45% of the Fund’s average daily net assets for all share classes other than Class R6, and 0.36% of the Fund’s Class R6 shares’ average daily net assets from April 1, 2018 to Oct. 31, 2018.* Please see the most recent prospectus and any applicable supplement(s) for additional information on these fee waivers and/or reimbursements. Please see the “Financial highlights” section in this report for the most recent expense ratios.
Fund expense ratios | Class A | Class C | Class R | Institutional Class | Class R6 | |||||
Total annual operating expenses | 0.89% | 1.64% | 1.14% | 0.64% | 0.55% | |||||
(without fee waivers) | ||||||||||
Net expenses | 0.70% | 1.45% | 0.95% | 0.45% | 0.36% | |||||
(including fee waivers, if any) | ||||||||||
Type of waiver
| Contractual | Contractual | Contractual | Contractual | Contractual |
*The aggregate contractual waiver period covering this report is from April 1, 2018 through April 1, 2019.
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Performance of a $10,000 investment1
Average annual total returns from Oct. 31, 2008 through Oct. 31, 2018
For the period beginning Oct. 31, 2008 through Oct. 31, 2018 | Starting value | Ending value | ||||||||
Delaware Diversified Income | ||||||||||
Fund — Institutional Class shares | $10,000 | $17,786 | ||||||||
Delaware Diversified Income | ||||||||||
Fund — Class A shares | $9,550 | $16,563 | ||||||||
Bloomberg Barclays US Aggregate Index | $10,000 | $14,715 |
1 The “Performance of a $10,000 investment” graph assumes $10,000 invested in Institutional Class and Class A shares of the Fund on Oct. 31, 2008, and includes the effect of a 4.50% front-end sales charge (for Class A shares) and the reinvestment of all distributions. The graph does not reflect the deduction of taxes the shareholders would pay on Fund distributions or redemptions of Fund shares. Expense limitations were in effect for some or all of the periods shown. Performance would have been lower had expense limitations not been in effect. Expenses are listed in the “Fund expense ratios” table on page 6. Please note additional details on pages 4 through 8.
The graph also assumes $10,000 invested in the Bloomberg Barclays US Aggregate Index as of Oct. 31, 2008. The Bloomberg Barclays US Aggregate Index measures the performance of publicly issued investment grade (Baa3/BBB- or
better) corporate, US government, mortgage- and asset-backed securities with at least one year to maturity and at least $300 million par amount outstanding.
Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index. Past performance is not a guarantee of future results.
Performance of other Fund classes will vary due to different charges and expenses.
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Performance summary
Delaware Diversified Income Fund
Nasdaq | CUSIPs | |||||||||
Class A | DPDFX | 246248744 | ||||||||
Class C | DPCFX | 246248595 | ||||||||
Class R | DPRFX | 246248553 | ||||||||
Institutional Class | DPFFX | 246248587 | ||||||||
Class R6 | DPZRX | 245917612 | ||||||||
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For the six-month period from May 1, 2018 to October 31, 2018 (Unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period from May 1, 2018 to Oct. 31, 2018.
Actual expenses
The first section of the table shown, “Actual Fund return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The second section of the table shown, “Hypothetical 5% return,” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The Fund’s expenses shown in the table reflect fee waivers in effect. The Fund’s expenses shown in the table assume reinvestment of all dividends and distributions.
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Disclosure of Fund expenses
For the six-month period from May 1, 2018 to October 31, 2018 (Unaudited)
Delaware Diversified Income Fund
Expense analysis of an investment of $1,000
Beginning Account Value 5/1/18 | Ending Account Value 10/31/18 | Annualized Expense Ratio | Expenses Paid During Period 5/1/18 to 10/31/18* | |||||||||||||
| ||||||||||||||||
Actual Fund return† | ||||||||||||||||
Class A | $1,000.00 | $985.70 | 0.69% | $3.45 | ||||||||||||
Class C | 1,000.00 | 982.00 | 1.44% | 7.19 | ||||||||||||
Class R | 1,000.00 | 984.40 | 0.94% | 4.70 | ||||||||||||
Institutional Class | 1,000.00 | 987.00 | 0.44% | 2.20 | ||||||||||||
Class R6 | 1,000.00 | 987.40 | 0.36% | 1.80 | ||||||||||||
| ||||||||||||||||
Hypothetical 5% return (5% return before expenses) |
| |||||||||||||||
Class A | $1,000.00 | $1,021.73 | 0.69% | $3.52 | ||||||||||||
Class C | 1,000.00 | 1,017.95 | 1.44% | 7.32 | ||||||||||||
Class R | 1,000.00 | 1,020.47 | 0.94% | 4.79 | ||||||||||||
Institutional Class | 1,000.00 | 1,022.99 | 0.44% | 2.24 | ||||||||||||
Class R6 | 1,000.00 | 1,023.39 | 0.36% | 1.84 | ||||||||||||
|
* | “Expenses Paid During Period” are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
† | Because actual returns reflect only the most recent six-month period, the returns shown may differ significantly from fiscal year returns. |
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Security type / sector allocation | ||
Delaware Diversified Income Fund | As of October 31, 2018 (Unaudited) |
Sector designations may be different than the sector designations presented in other Fund materials.
The sector designations may represent the investment manager’s internal sector classifications.
Security type / sector | Percentage of net assets | |||||||||||
Agency Asset-Backed Securities | 0.02 | % | ||||||||||
Agency Collateralized Mortgage Obligations | 5.81 | % | ||||||||||
Agency Commercial Mortgage-Backed Securities | 1.58 | % | ||||||||||
Agency Mortgage-Backed Securities | 7.05 | % | ||||||||||
Collateralized Debt Obligations | 5.22 | % | ||||||||||
Convertible Bonds | 3.21 | % | ||||||||||
Corporate Bonds | 40.39 | % | ||||||||||
Banking | 8.47 | % | ||||||||||
Basic Industry | 3.92 | % | ||||||||||
Brokerage | 0.94 | % | ||||||||||
Capital Goods | 1.15 | % | ||||||||||
Communications | 4.04 | % | ||||||||||
Consumer Cyclical | 1.65 | % | ||||||||||
Consumer Non-Cyclical | 3.47 | % | ||||||||||
Electric | 5.11 | % | ||||||||||
Energy | 4.57 | % | ||||||||||
Finance Companies | 1.09 | % | ||||||||||
Healthcare | 0.40 | % | ||||||||||
Insurance | 1.92 | % | ||||||||||
Media | 0.34 | % | ||||||||||
Real Estate | 0.92 | % | ||||||||||
Services | 0.21 | % | ||||||||||
Technology | 1.23 | % | ||||||||||
Transportation | 0.73 | % | ||||||||||
Utilities | 0.23 | % | ||||||||||
Loan Agreements | 8.19 | % | ||||||||||
Municipal Bonds | 0.19 | % | ||||||||||
Non-Agency Asset-Backed Securities | 4.16 | % | ||||||||||
Non-Agency Collateralized Mortgage Obligations | 2.48 | % | ||||||||||
Non-Agency Commercial Mortgage-Backed Securities | 6.16 | % | ||||||||||
Regional Bonds | 0.36 | % | ||||||||||
Sovereign Bonds | 2.30 | % | ||||||||||
Supranational Banks | 0.65 | % | ||||||||||
US Treasury Obligations | 10.78 | % | ||||||||||
Common Stock | 0.00 | % | ||||||||||
Convertible Preferred Stock | 0.78 | % | ||||||||||
Preferred Stock | 0.28 | % | ||||||||||
Options Purchased | 0.00 | % |
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Security type / sector allocation | ||
Delaware Diversified Income Fund |
Security type / sector | Percentage of net assets | |||||||||||
Short-Term Investments | 2.49 | % | ||||||||||
Securities Lending Collateral | 1.33 | % | ||||||||||
Total Value of Securities | 103.43 | % | ||||||||||
Obligation to Return Securities Lending Collateral | (1.32 | %) | ||||||||||
Liabilities Net of Receivables and Other Assets | (2.11 | %) | ||||||||||
Total Net Assets | 100.00 | % |
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Schedule of investments | ||
Delaware Diversified Income Fund | October 31, 2018 |
Principal amount° | Value (US $) | |||||||
| ||||||||
Agency Asset-Backed Securities – 0.02% | ||||||||
| ||||||||
Fannie Mae Grantor Trust | ||||||||
Series 2003-T4 2A5 4.678% 9/26/33 ● | 558,594 | $ | 600,834 | |||||
Fannie Mae REMIC Trust | ||||||||
Series 2001-W2 AS5 6.473% 10/25/31 f | 133 | 137 | ||||||
Series 2002-W11 AV1 2.621% (LIBOR01M + 0.34%, Floor 0.17%) 11/25/32 ● | 3,121 | 3,057 | ||||||
|
| |||||||
Total Agency Asset-Backed Securities (cost $541,157) | 604,028 | |||||||
|
| |||||||
| ||||||||
Agency Collateralized Mortgage Obligations – 5.81% | ||||||||
| ||||||||
Fannie Mae Connecticut Avenue Securities | ||||||||
Series 2016-C03 1M1 4.281% (LIBOR01M + 2.00%) 10/25/28 ● | 2,436,645 | 2,462,656 | ||||||
Series 2016-C04 1M1 3.731% (LIBOR01M + 1.45%) 1/25/29 ● | 1,448,943 | 1,457,998 | ||||||
Series 2017-C01 1M1 3.581% (LIBOR01M + 1.30%) 7/25/29 ● | 1,489,000 | 1,498,265 | ||||||
Series 2017-C04 2M2 5.131% (LIBOR01M + 2.85%) 11/25/29 ● | 1,860,000 | 1,950,987 | ||||||
Series 2018-C01 1M2 4.531% (LIBOR01M + 2.25%, Floor 2.25%) 7/25/30 ● | 2,915,000 | 2,939,951 | ||||||
Series 2018-C02 2M2 4.481% (LIBOR01M + 2.20%, Floor 2.20%) 8/25/30 ● | 2,620,000 | 2,629,146 | ||||||
Series 2018-C03 1M2 4.431% (LIBOR01M + 2.15%, Floor 2.15%) 10/25/30 ● | 2,355,000 | 2,350,404 | ||||||
Series 2018-C05 1M2 4.631% (LIBOR01M + 2.35%, Floor 2.35%) 1/25/31 ● | 2,280,000 | 2,291,317 | ||||||
Fannie Mae Grantor Trust | ||||||||
Series 1999-T2 A1 7.50% 1/19/39 ● | 7,962 | 8,508 | ||||||
Series 2002-T4 A3 7.50% 12/25/41 | 84,742 | 94,882 | ||||||
Series 2002-T19 A1 6.50% 7/25/42 | 74,451 | 82,834 | ||||||
Series 2004-T1 1A2 6.50% 1/25/44 | 31,110 | 34,220 | ||||||
Fannie Mae Interest Strip | ||||||||
Series 413 167 4.50% 7/25/42 S● | 154,595 | 40,715 | ||||||
Series 417 C24 3.50% 12/25/42 S | 273,157 | 50,800 | ||||||
Series 418 C12 3.00% 8/25/33 S | 9,194,940 | 1,183,696 | ||||||
Series 419 C2 3.00% 5/25/29 S | 8,579,665 | 777,143 | ||||||
Series 419 C3 3.00% 11/25/43 S | 2,173,223 | 433,706 | ||||||
Fannie Mae REMIC Trust | ||||||||
Series 2002-W6 2A 7.50% 6/25/42 ● | 18,872 | 20,238 | ||||||
Series 2003-W1 2A 5.912% 12/25/42 ● | 10,584 | 11,383 | ||||||
Series 2004-W11 1A2 6.50% 5/25/44 | 210,704 | 230,963 | ||||||
Fannie Mae REMICs | ||||||||
Series 2008-15 SB 4.319% (6.60% minus LIBOR01M, Cap 6.60%) 8/25/36 S● | 587,267 | 88,087 |
13
Table of Contents
Schedule of investments
Delaware Diversified Income Fund
Principal amount° | Value (US $) | |||||||
| ||||||||
Agency Collateralized Mortgage Obligations (continued) | ||||||||
| ||||||||
Fannie Mae REMICs | ||||||||
Series 2010-41 PN 4.50% 4/25/40 | 31,485 | $ | 32,359 | |||||
Series 2012-19 HB 4.00% 1/25/42 | 461,660 | 459,920 | ||||||
Series 2012-19 NI 3.50% 10/25/31 S | 2,332,523 | 301,995 | ||||||
Series 2012-60 KI 3.00% 9/25/26 S | 93,424 | 5,182 | ||||||
Series 2012-98 MI 3.00% 8/25/31 S | 5,733,893 | 633,016 | ||||||
Series 2012-99 AI 3.50% 5/25/39 S | 2,542,216 | 261,338 | ||||||
Series 2012-115 MI 3.50% 3/25/42 S | 1,038,389 | 118,173 | ||||||
Series 2012-118 AI 3.50% 11/25/37 S | 185,398 | 20,081 | ||||||
Series 2012-120 CI 3.50% 12/25/31 S | 427,149 | 42,874 | ||||||
Series 2012-120 WI 3.00% 11/25/27 S | 4,509,167 | 385,047 | ||||||
Series 2012-121 ID 3.00% 11/25/27 S | 183,825 | 17,076 | ||||||
Series 2012-125 MI 3.50% 11/25/42 S | 49,245 | 10,807 | ||||||
Series 2012-128 IC 3.00% 11/25/32 S | 8,000,873 | 1,020,273 | ||||||
Series 2012-137 AI 3.00% 12/25/27 S | 1,981,258 | 173,289 | ||||||
Series 2012-137 WI 3.50% 12/25/32 S | 1,367,958 | 205,556 | ||||||
Series 2012-139 NS 4.419% (6.70% minus LIBOR01M, Cap 6.70%) 12/25/42 S● | 6,157,281 | 1,205,424 | ||||||
Series 2012-144 PI 3.50% 6/25/42 S | 1,508,655 | 199,180 | ||||||
Series 2012-146 IO 3.50% 1/25/43 S | 7,028,759 | 1,414,230 | ||||||
Series 2012-149 IC 3.50% 1/25/28 S | 4,939,511 | 514,166 | ||||||
Series 2013-1 YI 3.00% 2/25/33 S | 6,438,321 | 838,923 | ||||||
Series 2013-7 EI 3.00% 10/25/40 S | 3,359,575 | 449,209 | ||||||
Series 2013-7 GP 2.50% 2/25/43 | 2,000 | 1,663 | ||||||
Series 2013-20 IH 3.00% 3/25/33 S | 1,952,327 | 272,089 | ||||||
Series 2013-23 IL 3.00% 3/25/33 S | 1,779,702 | 245,438 | ||||||
Series 2013-26 ID 3.00% 4/25/33 S | 8,165,104 | 1,137,972 | ||||||
Series 2013-31 MI 3.00% 4/25/33 S | 2,814,328 | 394,933 | ||||||
Series 2013-35 IB 3.00% 4/25/33 S | 4,602,996 | 595,126 | ||||||
Series 2013-35 IG 3.00% 4/25/28 S | 3,362,583 | �� | 297,788 | |||||
Series 2013-38 AI 3.00% 4/25/33 S | 8,102,379 | 1,043,659 | ||||||
Series 2013-41 HI 3.00% 2/25/33 S | 5,680,747 | 612,422 | ||||||
Series 2013-43 IX 4.00% 5/25/43 S | 19,032,505 | 4,673,985 | ||||||
Series 2013-44 DI 3.00% 5/25/33 S | 23,845,668 | 3,349,248 | ||||||
Series 2013-44 Z 3.00% 5/25/43 | 147,660 | 131,090 | ||||||
Series 2013-45 PI 3.00% 5/25/33 S | 2,290,999 | 319,558 | ||||||
Series 2013-51 PI 3.00% 11/25/32 S | 511,485 | 56,514 | ||||||
Series 2013-55 AI 3.00% 6/25/33 S | 7,624,470 | 1,025,009 | ||||||
Series 2013-60 CI 3.00% 6/25/31 S | 1,816,230 | 162,271 | ||||||
Series 2013-64 KI 3.00% 2/25/33 S | 128,798 | 17,002 | ||||||
Series 2013-69 IJ 3.00% 7/25/33 S | 2,582,228 | 357,440 | ||||||
Series 2013-71 ZA 3.50% 7/25/43 | 10,844 | 10,216 | ||||||
Series 2013-75 JI 3.00% 9/25/32 S | 532,055 | 64,084 |
14
Table of Contents
Principal amount° | Value (US $) | |||||||
| ||||||||
Agency Collateralized Mortgage Obligations (continued) | ||||||||
| ||||||||
Fannie Mae REMICs | ||||||||
Series 2013-103 SK 3.639% (5.92% minus LIBOR01M, Cap 5.92%) 10/25/43 S● | 7,549,082 | $ | 1,293,770 | |||||
Series 2014-21 ID 3.50% 6/25/33 S | 73,777 | 10,584 | ||||||
Series 2014-63 KI 3.50% 11/25/33 S | 1,193,642 | 144,081 | ||||||
Series 2014-64 IT 3.50% 6/25/41 S | 450,336 | 37,784 | ||||||
Series 2014-77 AI 3.00% 10/25/40 S | 304,329 | 34,517 | ||||||
Series 2014-85 IB 3.00% 12/25/44 S | 1,172,154 | 220,653 | ||||||
Series 2014-94 AI 3.00% 10/25/32 S | 544,064 | 51,534 | ||||||
Series 2015-27 SA 4.169% (6.45% minus LIBOR01M, Cap 6.45%) 5/25/45 S● | 2,280,898 | 414,227 | ||||||
Series 2015-31 ZD 3.00% 5/25/45 | 715,204 | 574,674 | ||||||
Series 2015-34 OK 1.835% 3/25/44 W | 2,280,667 | 1,810,335 | ||||||
Series 2015-43 PZ 3.50% 6/25/45 | 2,209,103 | 2,045,648 | ||||||
Series 2015-45 AI 3.00% 1/25/33 S | 51,724 | 4,621 | ||||||
Series 2015-56 MI 3.50% 10/25/41 S | 2,029,894 | 267,216 | ||||||
Series 2015-57 LI 3.50% 8/25/35 S | 6,835,579 | 1,081,205 | ||||||
Series 2015-66 KI 3.00% 9/25/45 S | 1,811,576 | 309,768 | ||||||
Series 2015-71 PI 4.00% 3/25/43 S | 534,395 | 94,481 | ||||||
Series 2015-89 AZ 3.50% 12/25/45 | 1,583,455 | 1,440,497 | ||||||
Series 2015-95 SH 3.719% (6.00% minus LIBOR01M, Cap 6.00%) 1/25/46 S● | 5,590,095 | 941,250 | ||||||
Series 2016-2 HI 3.00% 12/25/41 S | 63,959 | 9,213 | ||||||
Series 2016-6 AI 3.50% 4/25/34 S | 4,286,823 | 535,586 | ||||||
Series 2016-17 BI 4.00% 2/25/43 S | 215,881 | 33,749 | ||||||
Series 2016-23 AI 3.50% 2/25/41 S | 1,881,678 | 218,818 | ||||||
Series 2016-33 DI 3.50% 6/25/36 S | 8,873,170 | 1,345,293 | ||||||
Series 2016-36 SB 3.719% (6.00% minus LIBOR01M, Cap 6.00%) 3/25/43 S● | 2,922,224 | 347,362 | ||||||
Series 2016-40 IO 3.50% 7/25/36 S | 1,158,254 | 192,791 | ||||||
Series 2016-55 SK 3.719% (6.00% minus LIBOR01M, Cap 6.00%) 8/25/46 S● | 4,716,575 | 856,059 | ||||||
Series 2016-61 ML 3.00% 9/25/46 | 247,000 | 221,304 | ||||||
Series 2016-62 SA 3.719% (6.00% minus LIBOR01M, Cap 6.00%) 9/25/46 S● | 9,384,378 | 1,733,891 | ||||||
Series 2016-64 CI 3.50% 7/25/43 S | 4,212,992 | 587,680 | ||||||
Series 2016-71 PI 3.00% 10/25/46 S | 2,743,378 | 414,447 | ||||||
Series 2016-72 AZ 3.00% 10/25/46 | 42,576 | 37,199 | ||||||
Series 2016-74 GS 3.719% (6.00% minus LIBOR01M, Cap 6.00%) 10/25/46 S● | 6,501,910 | 1,224,627 | ||||||
Series 2016-77 SA 3.719% (6.00% minus LIBOR01M, Cap 6.00%) 10/25/46 S● | 514,851 | 81,073 | ||||||
Series 2016-79 AZ 3.00% 11/25/46 | 2,590,687 | 2,274,879 | ||||||
Series 2016-80 BZ 3.00% 11/25/46 | 56,273 | 45,778 |
15
Table of Contents
Delaware Diversified Income Fund
Principal amount° | Value (US $) | |||||||
| ||||||||
Agency Collateralized Mortgage Obligations (continued) | ||||||||
| ||||||||
Fannie Mae REMICs | ||||||||
Series 2016-80 JZ 3.00% 11/25/46 | 5,309 | $ | 4,532 | |||||
Series 2016-83 PI 3.50% 7/25/45 S | 484,786 | 82,303 | ||||||
Series 2016-85 SA 3.719% (6.00% minus LIBOR01M, Cap 6.00%) 11/25/46 S● | 9,493,137 | 1,764,265 | ||||||
Series 2016-90 CI 3.00% 2/25/45 S | 894,143 | 117,960 | ||||||
Series 2016-95 IO 3.00% 12/25/46 S | 440,945 | 78,672 | ||||||
Series 2016-95 LZ 2.50% 12/25/46 | 886,789 | 693,365 | ||||||
Series 2016-95 US 3.719% (6.00% minus LIBOR01M, Cap 6.00%) 12/25/46 S● | 426,462 | 67,532 | ||||||
Series 2016-99 DI 3.50% 1/25/46 S | 2,717,057 | 521,107 | ||||||
Series 2016-101 ZP 3.50% 1/25/47 | 3,199 | 2,859 | ||||||
Series 2016-105 SA 3.719% (6.00% minus LIBOR01M, Cap 6.00%) 1/25/47 S● | 5,840,934 | 925,106 | ||||||
Series 2017-4 BI 3.50% 5/25/41 S | 2,583,860 | 365,452 | ||||||
Series 2017-6 NI 3.50% 3/25/46 S | 533,647 | 104,694 | ||||||
Series 2017-8 SG 3.719% (6.00% minus LIBOR01M, Cap 6.00%) 2/25/47 S● | 7,733,805 | 1,414,855 | ||||||
Series 2017-11 EI 3.00% 3/25/42 S | 8,009,268 | 1,202,363 | ||||||
Series 2017-15 NZ 3.50% 3/25/47 | 551,189 | 512,175 | ||||||
Series 2017-16 SM 3.769% (6.05% minus LIBOR01M, Cap 6.05%) 3/25/47 S● | 9,859,893 | 1,807,850 | ||||||
Series 2017-16 WI 3.00% 1/25/45 S | 2,153,839 | 293,714 | ||||||
Series 2017-25 BL 3.00% 4/25/47 | 726,000 | 646,800 | ||||||
Series 2017-40 GZ 3.50% 5/25/47 | 1,628,155 | 1,501,447 | ||||||
Series 2017-46 BI 3.00% 4/25/47 S | 379,407 | 55,792 | ||||||
Series 2017-46 VG 3.50% 4/25/38 | 928,000 | 897,825 | ||||||
Series 2017-59 KI 3.00% 3/25/47 S | 534,091 | 97,656 | ||||||
Series 2017-61 TB 3.00% 8/25/44 | 1,232,000 | 1,114,681 | ||||||
Series 2017-67 BZ 3.00% 9/25/47 | 1,036 | 856 | ||||||
Series 2017-77 HZ 3.50% 10/25/47 | 2,192,458 | 2,042,735 | ||||||
Series 2017-88 EI 3.00% 11/25/47 S | 5,045,583 | 986,761 | ||||||
Series 2017-88 IE 3.00% 11/25/47 S | 3,645,366 | 699,680 | ||||||
Series 2017-94 CZ 3.50% 11/25/47 | 1,364,877 | 1,262,341 | ||||||
Series 2017-99 DZ 3.50% 12/25/47 | 22,716 | 20,620 | ||||||
Series 2017-99 IE 3.00% 12/25/47 S | 3,834,347 | 778,437 | ||||||
Series 2018-15 GZ 3.00% 3/25/48 | 551,915 | 493,103 | ||||||
Freddie Mac REMICs | ||||||||
Series 4015 MY 3.50% 3/15/42 | 25,000 | 24,232 | ||||||
Series 4050 EI 4.00% 2/15/39 S | 4,152,022 | 399,138 | ||||||
Series 4100 EI 3.00% 8/15/27 S | 3,626,113 | 320,525 | ||||||
Series 4101 WI 3.50% 8/15/32 S | 2,341,059 | 433,770 | ||||||
Series 4109 AI 3.00% 7/15/31 S | 10,867,443 | 1,314,109 | ||||||
Series 4120 IK 3.00% 10/15/32 S | 9,884,749 | 1,392,267 |
16
Table of Contents
Principal amount° | Value (US $) | |||||||
| ||||||||
Agency Collateralized Mortgage Obligations (continued) | ||||||||
| ||||||||
Freddie Mac REMICs | ||||||||
Series 4120 MI 3.00% 10/15/32 S | 1,388,975 | $ | 202,428 | |||||
Series 4122 LI 3.00% 10/15/27 S | 4,385,601 | 415,707 | ||||||
Series 4135 AI 3.50% 11/15/42 S | 6,878,397 | 1,456,581 | ||||||
Series 4139 IP 3.50% 4/15/42 S | 1,494,275 | 192,935 | ||||||
Series 4146 AI 3.00% 12/15/27 S | 3,070,309 | 247,622 | ||||||
Series 4146 IA 3.50% 12/15/32 S | 4,965,890 | 772,757 | ||||||
Series 4150 IO 3.50% 1/15/43 S | 5,993,079 | 1,245,356 | ||||||
Series 4150 UI 3.50% 8/15/32 S | 9,319,067 | 1,024,016 | ||||||
Series 4153 IB 2.50% 1/15/28 S | 2,376,687 | 181,688 | ||||||
Series 4156 AI 3.00% 10/15/31 S | 2,401,008 | 263,103 | ||||||
Series 4159 KS 3.871% (6.15% minus LIBOR01M, Cap 6.15%) 1/15/43 S● | 4,595,755 | 840,481 | ||||||
Series 4161 IM 3.50% 2/15/43 S | 1,395,950 | 316,409 | ||||||
Series 4171 Z 3.00% 2/15/43 | 1,150,568 | 1,024,056 | ||||||
Series 4181 DI 2.50% 3/15/33 S | 3,062,771 | 368,824 | ||||||
Series 4184 GS 3.841% (6.12% minus LIBOR01M, Cap 6.12%) 3/15/43 S● | 5,060,053 | 923,100 | ||||||
Series 4185 LI 3.00% 3/15/33 S | 6,142,954 | 876,249 | ||||||
Series 4186 IB 3.00% 3/15/33 S | 3,742,538 | 483,616 | ||||||
Series 4186 IE 3.00% 3/15/33 S | 343,674 | 48,533 | ||||||
Series 4188 JI 3.00% 4/15/33 S | 5,307,200 | 603,221 | ||||||
Series 4191 CI 3.00% 4/15/33 S | 2,447,932 | 339,567 | ||||||
Series 4197 LZ 4.00% 4/15/43 | 3,737 | 3,765 | ||||||
Series 4210 Z 3.00% 5/15/43 | 36,858 | 31,818 | ||||||
Series 4223 HI 3.00% 4/15/30 S | 2,484,882 | 166,201 | ||||||
Series 4342 CI 3.00% 11/15/33 S | 1,838,384 | 222,464 | ||||||
Series 4366 DI 3.50% 5/15/33 S | 57,236 | 8,234 | ||||||
Series 4433 DI 3.00% 8/15/32 S | 161,285 | 16,068 | ||||||
Series 4453 DI 3.50% 11/15/33 S | 2,123,645 | 291,402 | ||||||
Series 4476 GI 3.00% 6/15/41 S | 59,667 | 7,534 | ||||||
Series 4479 TI 4.00% 7/15/34 S | 988,503 | 161,680 | ||||||
Series 4487 ZC 3.50% 6/15/45 | 83,143 | 73,498 | ||||||
Series 4494 SA 3.901% (6.18% minus LIBOR01M, Cap 6.18%) 7/15/45 S● | 1,279,056 | 227,946 | ||||||
Series 4504 IO 3.50% 5/15/42 S | 2,014,286 | 244,409 | ||||||
Series 4518 CI 3.50% 6/15/42 S | 792,761 | 102,043 | ||||||
Series 4520 AI 3.50% 10/15/35 S | 1,307,735 | 263,888 | ||||||
Series 4527 CI 3.50% 2/15/44 S | 5,841,242 | 1,069,571 | ||||||
Series 4531 PZ 3.50% 11/15/45 | 254,682 | 229,153 | ||||||
Series 4567 LI 4.00% 8/15/45 S | 387,695 | 71,726 | ||||||
Series 4574 AI 3.00% 4/15/31 S | 5,508,669 | 683,588 | ||||||
Series 4580 MI 3.50% 2/15/43 S | 250,007 | 39,202 |
17
Table of Contents
Delaware Diversified Income Fund
Principal amount° | Value (US $) | |||||||
| ||||||||
Agency Collateralized Mortgage Obligations (continued) | ||||||||
| ||||||||
Freddie Mac REMICs | ||||||||
Series 4581 LI 3.00% 5/15/36 S | 2,187,962 | $ | 299,605 | |||||
Series 4592 WT 5.50% 6/15/46 | 69,887 | 75,380 | ||||||
Series 4594 SG 3.721% (6.00% minus LIBOR01M, Cap 6.00%) 6/15/46 S● | 13,828,877 | 2,549,010 | ||||||
Series 4609 QZ 3.00% 8/15/46 | 2,096,386 | 1,737,038 | ||||||
Series 4610 IB 3.00% 6/15/41 S | 17,872,864 | 2,199,658 | ||||||
Series 4618 SA 3.721% (6.00% minus LIBOR01M, Cap 6.00%) 9/15/46 S● | 5,517,413 | 953,913 | ||||||
Series 4623 MS 3.721% (6.00% minus LIBOR01M, Cap 6.00%) 10/15/46 S● | 2,084,307 | 382,646 | ||||||
Series 4623 WI 4.00% 8/15/44 S | 83,691 | 12,537 | ||||||
Series 4625 PZ 3.00% 6/15/46 | 1,527,868 | 1,318,102 | ||||||
Series 4627 PI 3.50% 5/15/44 S | 7,133,562 | 1,051,415 | ||||||
Series 4629 KB 3.00% 11/15/46 | 40,000 | 35,799 | ||||||
Series 4631 GS 3.721% (6.00% minus LIBOR01M, Cap 6.00%) 11/15/46 S● | 9,422,014 | 1,550,793 | ||||||
Series 4643 QI 3.50% 9/15/45 S | 88,343 | 15,491 | ||||||
Series 4644 GI 3.50% 5/15/40 S | 3,247,075 | 477,432 | ||||||
Series 4648 MZ 3.00% 6/15/46 | 766,137 | 671,406 | ||||||
Series 4648 SA 3.721% (6.00% minus LIBOR01M, Cap 6.00%) 1/15/47 S● | 7,033,619 | 1,386,809 | ||||||
Series 4655 WI 3.50% 8/15/43 S | 3,359,774 | 525,750 | ||||||
Series 4657 JZ 3.50% 2/15/47 | 827,843 | 715,723 | ||||||
Series 4657 PS 3.721% (6.00% minus LIBOR01M, Cap 6.00%) 2/15/47 S● | 7,344,234 | 1,366,693 | ||||||
Series 4660 GI 3.00% 8/15/43 S | 2,335,255 | 379,727 | ||||||
Series 4663 AI 3.00% 3/15/42 S | 5,124,718 | 730,629 | ||||||
Series 4663 HZ 3.50% 3/15/47 | 742,998 | 687,176 | ||||||
Series 4665 NI 3.50% 7/15/41 S | 13,445,312 | 1,796,447 | ||||||
Series 4667 CI 3.50% 7/15/40 S | 277,891 | 33,328 | ||||||
Series 4667 LI 3.50% 10/15/43 S | 1,554,799 | 272,693 | ||||||
Series 4669 QI 3.50% 6/15/41 S | 899,646 | 146,114 | ||||||
Series 4673 WI 3.50% 9/15/43 S | 3,461,596 | 564,562 | ||||||
Series 4674 GI 3.50% 10/15/40 S | 233,189 | 27,325 | ||||||
Series 4676 KZ 2.50% 7/15/45 | 1,624,996 | 1,303,301 | ||||||
Series 4690 WI 3.50% 12/15/43 S | 4,504,062 | 736,874 | ||||||
Series 4691 LI 3.50% 1/15/41 S | 3,059,364 | 476,542 | ||||||
Series 4693 EI 3.50% 8/15/42 S | 2,266,397 | 363,161 | ||||||
Series 4700 WI 3.50% 1/15/44 S | 3,867,400 | 609,452 | ||||||
Series 4703 CI 3.50% 7/15/42 S | 6,845,240 | 979,223 | ||||||
Freddie Mac Strips | ||||||||
Series 267 S5 3.721% (6.00% minus LIBOR01M, Cap 6.00%) 8/15/42 S● | 5,944,528 | 925,113 |
18
Table of Contents
Principal amount° | Value (US $) | |||||||
| ||||||||
Agency Collateralized Mortgage Obligations (continued) | ||||||||
Freddie Mac Strips | ||||||||
Series 284 S6 3.821% (6.10% minus LIBOR01M, Cap 6.10%) 10/15/42 S● | 5,035,045 | $ | 911,410 | |||||
Series 299 S1 3.721% (6.00% minus LIBOR01M, Cap 6.00%) 1/15/43 S● | 4,800,572 | 769,801 | ||||||
Series 303 151 4.289% 12/15/42 S● | 727,674 | 179,120 | ||||||
Series 304 C38 3.50% 12/15/27 S | 2,865,863 | 254,111 | ||||||
Series 319 S2 3.721% (6.00% minus LIBOR01M, Cap 6.00%) 11/15/43 S● | 2,866,765 | 498,951 | ||||||
Freddie Mac Structured Agency Credit Risk Debt Notes | ||||||||
Series 2015-DNA3 M2 5.131% (LIBOR01M + 2.85%) 4/25/28 ● | 1,836,471 | 1,895,006 | ||||||
Series 2015-HQA1 M2 4.931% (LIBOR01M + 2.65%) 3/25/28 ● | 897,574 | 911,958 | ||||||
Series 2016-DNA3 M2 4.281% (LIBOR01M + 2.00%) 12/25/28 ● | 1,166,628 | 1,179,469 | ||||||
Series 2016-DNA4 M2 3.581% (LIBOR01M + 1.30%, Floor 1.30%) 3/25/29 ● | 1,225,000 | 1,233,785 | ||||||
Series 2016-HQA2 M2 4.531% (LIBOR01M + 2.25%) 11/25/28 ● | 1,305,872 | 1,331,973 | ||||||
Series 2017-DNA1 M2 5.531% (LIBOR01M + 3.25%, Floor 3.25%) 7/25/29 ● | 4,500,000 | 4,901,820 | ||||||
Series 2017-DNA3 M2 4.781% (LIBOR01M + 2.50%) 3/25/30 ● | 1,420,000 | 1,471,902 | ||||||
Series 2017-HQA3 M2 4.631% (LIBOR01M + 2.35%) 4/25/30 ● | 3,480,000 | 3,553,712 | ||||||
Series 2018-DNA1 M2 4.081% (LIBOR01M + 1.80%) 7/25/30 ● | 4,400,000 | 4,328,553 | ||||||
Series 2018-HQA1 M2 4.581% (LIBOR01M + 2.30%) 9/25/30 ● | 3,460,000 | 3,458,250 | ||||||
Freddie Mac Structured Pass Through Certificates | ||||||||
Series T-54 2A 6.50% 2/25/43 ◆ | 17,606 | 19,677 | ||||||
Series T-58 2A 6.50% 9/25/43 ◆ | 358,414 | 400,312 | ||||||
GNMA | ||||||||
Series 2011-157 SG 4.32% (6.60% minus LIBOR01M, Cap 6.60%) 12/20/41 S● | 3,957,713 | 748,772 | ||||||
Series 2012-61 PI 3.00% 4/20/39 S | 218,567 | 16,729 | ||||||
Series 2012-136 MX 2.00% 11/20/42 | 1,210,000 | 999,451 | ||||||
Series 2013-88 LZ 2.50% 6/16/43 | 15,995 | 13,528 | ||||||
Series 2013-113 LY 3.00% 5/20/43 | 862,000 | 787,247 | ||||||
Series 2013-182 CZ 2.50% 12/20/43 | 1,616,847 | 1,405,222 | ||||||
Series 2014-12 ZB 3.00% 1/16/44 | 192,542 | 170,172 | ||||||
Series 2015-44 AI 3.00% 8/20/41 S | 267,914 | 27,587 | ||||||
Series 2015-111 IH 3.50% 8/20/45 S | 6,322,817 | 801,523 |
19
Table of Contents
Schedule of investments | ||
Delaware Diversified Income Fund |
Principal amount° | Value (US $) | |||||||
| ||||||||
Agency Collateralized Mortgage Obligations (continued) | ||||||||
GNMA | ||||||||
Series 2015-139 EY 2.50% 9/16/45 | 1,548,000 | $ | 1,226,900 | |||||
Series 2015-142 AI 4.00% 2/20/44 S | 1,332,893 | 172,978 | ||||||
Series 2015-185 PZ 3.00% 12/20/45 | 1,139,766 | 1,038,609 | ||||||
Series 2016-32 MS 3.77% (6.05% minus LIBOR01M, Cap 6.05%) 3/20/46 S● | 271,871 | 46,121 | ||||||
Series 2016-46 DZ 3.00% 4/20/46 | 450,513 | 376,335 | ||||||
Series 2016-49 PZ 3.00% 11/16/45 | 339,502 | 282,722 | ||||||
Series 2016-74 PL 3.00% 5/20/46 | 1,248,000 | 1,121,646 | ||||||
Series 2016-75 JI 3.00% 9/20/43 S | 16,869,037 | 2,511,213 | ||||||
Series 2016-89 QS 3.77% (6.05% minus LIBOR01M, Cap 6.05%) 7/20/46 S● | 4,466,525 | 869,881 | ||||||
Series 2016-101 QL 3.00% 7/20/46 | 117,000 | 104,880 | ||||||
Series 2016-108 YL 3.00% 8/20/46 | 1,395,000 | 1,265,690 | ||||||
Series 2016-115 SA 3.82% (6.10% minus LIBOR01M, Cap 6.10%) 8/20/46 S● | 12,446,699 | 2,206,628 | ||||||
Series 2016-118 DI 3.50% 3/20/43 S | 9,852,321 | 1,389,654 | ||||||
Series 2016-118 ES 3.82% (6.10% minus LIBOR01M, Cap 6.10%) 9/20/46 S● | 5,388,470 | 897,171 | ||||||
Series 2016-120 IA 3.00% 2/20/46 S | 364,423 | 58,118 | ||||||
Series 2016-120 NS 3.82% (6.10% minus LIBOR01M, Cap 6.10%) 9/20/46 S● | 10,545,051 | 1,963,662 | ||||||
Series 2016-121 JS 3.82% (6.10% minus LIBOR01M, Cap 6.10%) 9/20/46 S● | 7,718,119 | 1,424,936 | ||||||
Series 2016-126 NS 3.82% (6.10% minus LIBOR01M, Cap 6.10%) 9/20/46 S● | 5,124,566 | 975,635 | ||||||
Series 2016-134 MZ 3.00% 10/20/46 | 3,344,535 | 2,954,811 | ||||||
Series 2016-135 JI 3.00% 7/20/46 S | 3,278,141 | 569,271 | ||||||
Series 2016-147 ST 3.77% (6.05% minus LIBOR01M, Cap 6.05%) 10/20/46 S● | 6,923,813 | 1,291,781 | ||||||
Series 2016-149 GI 4.00% 11/20/46 S | 5,141,466 | 1,045,482 | ||||||
Series 2016-156 PB 2.00% 11/20/46 | 1,707,124 | 1,299,025 | ||||||
Series 2016-159 MI 3.00% 3/20/46 S | 449,839 | 73,855 | ||||||
Series 2016-160 GI 3.50% 11/20/46 S | 6,147,753 | 1,445,488 | ||||||
Series 2016-160 VZ 2.50% 11/20/46 | 852,862 | 651,474 | ||||||
Series 2016-163 MI 3.50% 11/20/46 S | 4,296,099 | 559,129 | ||||||
Series 2016-163 XI 3.00% 10/20/46 S | 6,875,235 | 1,002,736 | ||||||
Series 2016-170 MZ 3.00% 12/20/46 | 34,863 | 29,455 | ||||||
Series 2016-171 IO 3.00% 7/20/44 S | 9,683,082 | 1,332,435 | ||||||
Series 2016-171 IP 3.00% 3/20/46 S | 6,286,404 | 958,308 | ||||||
Series 2017-10 IB 4.00% 1/20/47 S | 5,668,941 | 1,267,508 | ||||||
Series 2017-10 KZ 3.00% 1/20/47 | 782,998 | 685,696 | ||||||
Series 2017-18 QS 3.82% (6.10% minus LIBOR01M, Cap 6.10%) 2/16/47 S● | 5,822,779 | 1,033,630 |
20
Table of Contents
Principal amount° | Value (US $) | |||||||
| ||||||||
Agency Collateralized Mortgage Obligations (continued) | ||||||||
GNMA | ||||||||
Series 2017-26 SA 3.82% (6.10% minus LIBOR01M, Cap 6.10%) 2/20/47 S● | 5,665,053 | $ | 979,329 | |||||
Series 2017-33 PZ 3.00% 2/20/47 | 1,408,615 | 1,153,181 | ||||||
Series 2017-34 AZ 3.00% 1/20/47 | 87,032 | 72,261 | ||||||
Series 2017-34 DY 3.50% 3/20/47 | 1,103,995 | 1,038,960 | ||||||
Series 2017-36 ZB 3.00% 3/20/47 | 1,048,584 | 862,798 | ||||||
Series 2017-36 ZC 3.00% 3/20/47 | 180,365 | 150,471 | ||||||
Series 2017-45 JZ 3.50% 3/20/47 | 33,821 | 31,817 | ||||||
Series 2017-52 LE 3.00% 1/16/47 | 19,000 | 16,836 | ||||||
Series 2017-56 JZ 3.00% 4/20/47 | 65,896 | 57,022 | ||||||
Series 2017-56 QS 3.87% (6.15% minus LIBOR01M, Cap 6.15%) 4/20/47 S● | 7,588,536 | 1,302,396 | ||||||
Series 2017-68 SB 3.87% (6.15% minus LIBOR01M, Cap 6.15%) 5/20/47 S● | 11,267,830 | 1,821,222 | ||||||
Series 2017-80 AS 3.92% (6.20% minus LIBOR01M, Cap 6.20%) 5/20/47 S● | 8,490,929 | 1,497,682 | ||||||
Series 2017-91 SM 3.92% (6.20% minus LIBOR01M, Cap 6.20%) 6/20/47 S● | 5,179,416 | 850,783 | ||||||
Series 2017-101 AI 4.00% 7/20/47 S | 3,604,280 | 668,921 | ||||||
Series 2017-101 HD 3.00% 1/20/47 | 3,000 | 2,739 | ||||||
Series 2017-101 KS 3.92% (6.20% minus LIBOR01M, Cap 6.20%) 7/20/47 S● | 5,891,135 | 1,033,918 | ||||||
Series 2017-101 TI 4.00% 3/20/44 S | 5,434,332 | 856,761 | ||||||
Series 2017-107 QZ 3.00% 8/20/45 | 1,022,846 | 853,377 | ||||||
Series 2017-113 LB 3.00% 7/20/47 | 2,620,000 | 2,372,927 | ||||||
Series 2017-114 IK 4.00% 10/20/44 S | 7,925,595 | 1,754,559 | ||||||
Series 2017-116 ZL 3.00% 6/20/47 | 2,021,304 | 1,696,066 | ||||||
Series 2017-117 SD 3.92% (6.20% minus LIBOR01M, Cap 6.20%) 8/20/47 S● | 5,037,014 | 811,367 | ||||||
Series 2017-121 IL 3.00% 2/20/42 S | 292,666 | 38,563 | ||||||
Series 2017-130 YJ 2.50% 8/20/47 | 1,210,000 | 1,047,320 | ||||||
Series 2017-134 KI 4.00% 5/20/44 S | 4,291,901 | 757,574 | ||||||
Series 2017-137 IO 3.00% 6/20/45 S | 8,066,120 | 1,421,518 | ||||||
Series 2017-144 EI 3.00% 12/20/44 S | 7,465,820 | 1,235,740 | ||||||
Series 2017-174 HI 3.00% 7/20/45 S | 6,726,066 | 1,203,456 | ||||||
Series 2018-1 ST 3.92% (6.20% minus LIBOR01M, Cap 6.20%) 1/20/48 S● | 11,187,769 | 2,083,700 | ||||||
Series 2018-8 VZ 3.00% 3/20/47 | 1,902,271 | 1,805,120 | ||||||
Series 2018-11 AI 3.00% 1/20/46 S | 4,478,518 | 829,113 | ||||||
Series 2018-13 PZ 3.00% 1/20/48 | 940,478 | 837,714 | ||||||
Series 2018-14 ZE 3.50% 1/20/48 | 518,412 | 476,975 | ||||||
Series 2018-24 HZ 3.00% 2/20/48 | 481,523 | 407,064 | ||||||
Series 2018-34 TY 3.50% 3/20/48 | 827,000 | 775,103 |
21
Table of Contents
Schedule of investments | ||
Delaware Diversified Income Fund |
Principal amount° | Value (US $) | |||||||
| ||||||||
Agency Collateralized Mortgage Obligations (continued) | ||||||||
GNMA | ||||||||
Series 2018-37 SA 3.92% (6.20% minus LIBOR01M, Cap 6.20%) 3/20/48 S● | 3,793,068 | $ | 678,484 | |||||
Series 2018-46 AS 3.92% (6.20% minus LIBOR01M, Cap 6.20%) 3/20/48 S● | 13,364,201 | 2,519,330 | ||||||
Series 2018-63 BZ 3.00% 4/20/48 | 2,064,701 | 1,775,832 | ||||||
|
| |||||||
Total Agency Collateralized Mortgage Obligations (cost $248,589,838) | 236,369,906 | |||||||
|
| |||||||
| ||||||||
Agency Commercial Mortgage-Backed Securities – 1.58% | ||||||||
Freddie Mac Multifamily Structured Pass Through | ||||||||
Certificates | ||||||||
Series K058 A2 2.653% 8/25/26 ◆ | 3,000,000 | 2,804,863 | ||||||
Series K061 A2 3.347% 11/25/26 ◆● | 6,910,000 | 6,787,159 | ||||||
Series X3FX A2FX 3.00% 6/25/27 ◆ | 4,515,000 | 4,292,596 | ||||||
FREMF Mortgage Trust | ||||||||
Series 2010-K8 B 144A 5.278% 9/25/43 #● | 4,520,000 | 4,634,200 | ||||||
Series 2011-K14 B 144A 5.18% 2/25/47 #● | 3,345,000 | 3,479,297 | ||||||
Series 2011-K15 B 144A 4.948% 8/25/44 #● | 485,000 | 502,467 | ||||||
Series 2012-K22 B 144A 3.686% 8/25/45 #● | 4,410,000 | 4,396,148 | ||||||
Series 2012-K23 B 144A 3.656% 10/25/45 #● | 7,400,000 | 7,381,981 | ||||||
Series 2013-K25 C 144A 3.619% 11/25/45 #● | 2,800,000 | 2,741,720 | ||||||
Series 2013-K28 C 144A 3.49% 6/25/46 #● | 450,000 | 439,843 | ||||||
Series 2013-K33 B 144A 3.50% 8/25/46 #● | 4,295,000 | 4,239,878 | ||||||
Series 2013-K33 C 144A 3.50% 8/25/46 #● | 450,000 | 437,983 | ||||||
Series 2013-K712 B 144A 3.358% 5/25/45 #● | 2,280,000 | 2,276,278 | ||||||
Series 2013-K713 B 144A 3.154% 4/25/46 #● | 1,355,000 | 1,349,428 | ||||||
Series 2013-K713 C 144A 3.154% 4/25/46 #● | 4,425,000 | 4,404,078 | ||||||
Series 2014-K717 B 144A 3.629% 11/25/47 #● | 1,925,000 | 1,921,725 | ||||||
Series 2014-K717 C 144A 3.629% 11/25/47 #● | 650,000 | 641,691 | ||||||
Series 2015-K44 B 144A 3.683% 1/25/48 #● | 1,000,000 | 969,532 | ||||||
Series 2015-K49 B 144A 3.72% 10/25/48 #● | 3,660,000 | 3,524,006 | ||||||
Series 2015-K721 C 144A 3.565% 11/25/47 #● | 2,225,000 | 2,121,937 | ||||||
Series 2016-K53 B 144A 4.019% 3/25/49 #● | 1,465,000 | 1,434,615 | ||||||
Series 2016-K722 B 144A 3.835% 7/25/49 #● | 2,175,000 | 2,162,357 | ||||||
Series 2016-K723 B 144A 3.58% 11/25/23 #● | 1,175,000 | 1,140,733 | ||||||
|
| |||||||
Total Agency Commercial Mortgage-Backed Securities (cost $65,329,821) | 64,084,515 | |||||||
|
| |||||||
| ||||||||
Agency Mortgage-Backed Securities – 7.05% | ||||||||
Fannie Mae S.F. 30 yr 4.50% 4/1/39 | 526,957 | 545,692 | ||||||
4.50% 8/1/40 | 716,595 | 739,002 | ||||||
4.50% 10/1/43 | 2,441,909 | 2,529,567 | ||||||
4.50% 12/1/43 | 326,810 | 337,931 |
22
Table of Contents
Principal amount° | Value (US $) | |||||||
| ||||||||
Agency Mortgage-Backed Securities (continued) | ||||||||
Fannie Mae S.F. 30 yr | ||||||||
4.50% 10/1/44 | 990,722 | $ | 1,024,429 | |||||
4.50% 2/1/46 | 56,051 | 58,067 | ||||||
4.50% 5/1/46 | 3,337,233 | 3,431,212 | ||||||
5.00% 7/1/47 | 2,493,163 | 2,640,728 | ||||||
5.50% 5/1/44 | 46,432,920 | 49,896,124 | ||||||
5.50% 8/1/48 | 3,537,576 | 3,814,958 | ||||||
6.00% 6/1/41 | 8,534,533 | 9,309,899 | ||||||
6.00% 7/1/41 | 25,253,059 | 27,578,509 | ||||||
6.00% 1/1/42 | 7,235,000 | 7,967,482 | ||||||
Fannie Mae S.F. 30 yr TBA | ||||||||
3.50% 12/1/48 | 105,715,000 | 102,793,619 | ||||||
Freddie Mac S.F. 30 yr | ||||||||
4.50% 4/1/39 | 298,794 | 307,725 | ||||||
4.50% 8/1/44 | 1,073,559 | 1,104,131 | ||||||
5.00% 12/1/44 | 5,982,000 | 6,342,384 | ||||||
5.50% 6/1/41 | 7,725,598 | 8,363,440 | ||||||
5.50% 9/1/41 | 15,392,000 | 16,607,012 | ||||||
6.00% 7/1/40 | 21,849,663 | 24,025,937 | ||||||
GNMA I S.F. 30 yr | ||||||||
5.50% 2/15/41 | 1,005,850 | 1,072,538 | ||||||
GNMA II S.F. 30 yr | ||||||||
5.00% 7/20/48 | 3,935,317 | 4,106,988 | ||||||
5.00% 9/20/48 | 3,973,103 | 4,141,642 | ||||||
5.50% 5/20/37 | 709,443 | 745,990 | ||||||
6.00% 2/20/39 | 680,970 | 720,981 | ||||||
6.00% 10/20/39 | 2,535,388 | 2,685,716 | ||||||
6.00% 2/20/40 | 2,857,425 | 3,035,434 | ||||||
6.00% 4/20/46 | 892,330 | 948,766 | ||||||
6.50% 6/20/39 | 4,295 | 4,724 | ||||||
|
| |||||||
Total Agency Mortgage-Backed Securities (cost $290,621,730) | 286,880,627 | |||||||
|
| |||||||
| ||||||||
Collateralized Debt Obligations – 5.22% | ||||||||
AMMC CLO 21 | ||||||||
Series 2017-21A A 144A 3.809% (LIBOR03M + 1.25%) 11/2/30 #● | 2,750,000 | 2,760,956 | ||||||
AMMC CLO 22 | ||||||||
Series 2018-22A A 144A 3.52% (LIBOR03M + 1.03%, Floor 1.03%) 4/25/31 #● | 4,400,000 | 4,375,246 | ||||||
Apex Credit CLO | ||||||||
Series 2018-1A A2 144A 3.52% (LIBOR03M + 1.03%) 4/25/31 #● | 11,200,000 | 11,136,832 |
23
Table of Contents
Schedule of investments | ||
Delaware Diversified Income Fund |
Principal amount° | Value (US $) | |||||||
| ||||||||
Collateralized Debt Obligations (continued) | ||||||||
Atlas Senior Loan Fund X | ||||||||
Series 2018-10A A 144A 3.526% (LIBOR03M + 1.09%) 1/15/31 #● | 5,900,000 | $ | 5,870,476 | |||||
Battalion CLO XII | ||||||||
Series 2018-12A A1 144A 3.40% (LIBOR03M + 1.07%, Floor 1.07%) 5/17/31 #● | 4,400,000 | 4,379,140 | ||||||
Benefit Street Partners CLO II | ||||||||
Series 2013-IIA A1R 144A 3.686% (LIBOR03M + 1.25%) 7/15/29 #● | 4,000,000 | 4,001,288 | ||||||
Benefit Street Partners CLO IV | ||||||||
Series 2014-IVA A1R 144A 3.959% (LIBOR03M + 1.49%) 1/20/29 #● | 14,000,000 | 14,031,094 | ||||||
Black Diamond CLO | ||||||||
Series 2015-1A A2R 144A 3.448% (LIBOR03M + 1.05%, Floor 1.05%) 10/3/29 #● | 3,000,000 | 2,999,577 | ||||||
Series 2017-1A A1A 144A 3.777% (LIBOR03M + 1.29%) 4/24/29 #● | 4,000,000 | 4,002,576 | ||||||
Series 2017-2A A2 144A 3.82% (LIBOR03M + 1.30%, Floor 1.30%) 1/20/32 #● | 2,800,000 | 2,804,292 | ||||||
Catamaran CLO | ||||||||
Series 2014-1A A1BR 144A 3.859% (LIBOR03M + 1.39%) 4/22/30 #● | 5,000,000 | 5,002,490 | ||||||
Cedar Funding IV CLO | ||||||||
Series 2014-4A AR 144A 3.707% (LIBOR03M + 1.23%) 7/23/30 #● | 4,000,000 | 4,005,144 | ||||||
Cedar Funding VIII CLO | ||||||||
Series 2017-8A A1 144A 3.699% (LIBOR03M + 1.25%) 10/17/30 #● | 5,330,000 | 5,332,820 | ||||||
CFIP CLO | ||||||||
Series 2017-1A A 144A 3.665% (LIBOR03M + 1.22%) 1/18/30 #● | 10,800,000 | 10,802,257 | ||||||
ECP CLO | ||||||||
Series 2015-7A A1R 144A 3.609% (LIBOR03M + 1.14%) 4/22/30 #● | 14,000,000 | 13,927,536 | ||||||
Galaxy XXI CLO | ||||||||
Series 2015-21A AR 144A 3.489% (LIBOR03M + 1.02%) 4/20/31 #● | 5,000,000 | 4,971,420 | ||||||
GoldenTree Loan Management US CLO 1 | ||||||||
Series 2017-1A A 144A 3.689% (LIBOR03M + 1.22%) 4/20/29 #● | 5,005,000 | 5,008,794 | ||||||
Hull Street CLO | ||||||||
Series 2014-1A AR 144A 3.665% (LIBOR03M + 1.22%) 10/18/26 #● | 3,000,000 | 3,002,679 | ||||||
Mariner CLO 5 | ||||||||
Series 2018-5A A 144A 3.60% (LIBOR03M + 1.11%, Floor 1.11%) 4/25/31 #● | 8,000,000 | 7,971,512 |
24
Table of Contents
Principal amount° | Value (US $) | |||||||
| ||||||||
Collateralized Debt Obligations (continued) | ||||||||
Midocean Credit CLO IX | ||||||||
Series 2018-9A A1 144A 3.397% (LIBOR03M + 1.15%, Floor 1.15%) 7/20/31 #● | 2,000,000 | $ | 2,002,084 | |||||
Midocean Credit CLO VIII | ||||||||
Series 2018-8A A1 144A 3.472% (LIBOR03M + 1.15%) 2/20/31 #● | 5,830,000 | 5,827,015 | ||||||
MP CLO IV | ||||||||
Series 2013-2A ARR 144A 3.77% (LIBOR03M + 1.28%) 7/25/29 #● | 7,000,000 | 6,999,986 | ||||||
Northwoods Capital XVII | ||||||||
Series 2018-17A A 144A 3.529% (LIBOR03M + 1.06%, Floor 1.06%) 4/22/31 #● | 7,800,000 | 7,741,500 | ||||||
OCP CLO | ||||||||
Series 2017-13A A1A 144A 3.696% (LIBOR03M + 1.26%) 7/15/30 #● | 5,750,000 | 5,758,625 | ||||||
OZLM XVIII | ||||||||
Series 2018-18A A 144A 3.456% (LIBOR03M + 1.02%, Floor 1.02%) 4/15/31 #● | 6,250,000 | 6,204,900 | ||||||
Saranac CLO VII | ||||||||
Series 2014-2A A1AR 144A 3.552% (LIBOR03M + 1.23%) 11/20/29 #● | 6,500,000 | 6,509,990 | ||||||
Shackleton CLO | ||||||||
Series 2013-3A AR 144A 3.556% (LIBOR03M + 1.12%, Floor 1.12%) 7/15/30 #● | 5,500,000 | 5,484,468 | ||||||
Sound Point CLO II | ||||||||
Series 2013-1A A1R 144A 3.578% (LIBOR03M + 1.07%, Floor 1.07%) 1/26/31 #● | 3,200,000 | 3,187,040 | ||||||
Sounds Point CLO IV-R | ||||||||
Series 2013-3RA A 144A 3.595% (LIBOR03M + 1.15%, Floor 1.15%) 4/18/31 #● | 6,000,000 | 6,000,378 | ||||||
Steele Creek CLO | ||||||||
Series 2017-1A A 144A 3.686% (LIBOR03M + 1.25%) 1/15/30 #● | 3,000,000 | 3,007,359 | ||||||
TIAA CLO II | ||||||||
Series 2017-1A A 144A 3.749% (LIBOR03M + 1.28%) 4/20/29 #● | 4,185,000 | 4,189,938 | ||||||
Venture 31 CLO | ||||||||
Series 2018-31A A1 144A 3.499% (LIBOR03M + 1.03%, Floor 1.03%) 4/20/31 #● | 7,150,000 | 7,101,995 | ||||||
Venture CDO | ||||||||
Series 2016-25A A1 144A 3.959% (LIBOR03M + 1.49%) 4/20/29 #● | 2,085,000 | 2,088,730 | ||||||
Venture XXII CLO | ||||||||
Series 2015-22A AR 144A 3.516% (LIBOR03M + 1.08%) 1/15/31 #● | 7,000,000 | 6,992,265 |
25
Table of Contents
Schedule of investments | ||
Delaware Diversified Income Fund |
Principal amount° | Value (US $) | |||||||
| ||||||||
Collateralized Debt Obligations (continued) | ||||||||
Venture XXIV CLO | ||||||||
Series 2016-24A A1D 144A 3.889% (LIBOR03M + 1.42%) 10/20/28 #● | 5,335,000 | $ | 5,346,972 | |||||
Venture XXVIII CLO | ||||||||
Series 2017-28A A2 144A 3.579% (LIBOR03M + 1.11%) 7/20/30 #● | 7,550,000 | 7,539,060 | ||||||
Zais CLO 6 | ||||||||
Series 2017-1A A1 144A 3.806% (LIBOR03M + 1.37%) 7/15/29 #● | 4,000,000 | 4,006,020 | ||||||
|
| |||||||
Total Collateralized Debt Obligations (cost $212,579,315) | 212,374,454 | |||||||
|
| |||||||
| ||||||||
Convertible Bonds – 3.21% | ||||||||
Aerojet Rocketdyne Holdings 2.25% exercise price $26.00, maturity date 12/15/23 | 1,085,000 | 1,596,869 | ||||||
BioMarin Pharmaceutical 1.50% exercise price $94.15, maturity date 10/15/20 * | 2,172,000 | 2,565,875 | ||||||
Blackstone Mortgage Trust 4.375% exercise price $35.67, maturity date 5/5/22 | 754,000 | 745,651 | ||||||
Blackstone Mortgage Trust 4.75% exercise price $36.23, maturity date 3/15/23 | 1,630,000 | 1,609,995 | ||||||
Blackstone Mortgage Trust 5.25% exercise price $27.36, maturity date 12/1/18 | 758,000 | 941,243 | ||||||
Boingo Wireless 144A 1.00% exercise price $42.32, maturity date 10/1/23 # | 205,000 | 206,832 | ||||||
Booking Holdings 0.35% exercise price $1,315.10, maturity date 6/15/20 | 2,143,000 | 3,099,674 | ||||||
Cemex 3.72% exercise price $11.01, maturity date 3/15/20 * | 3,743,000 | 3,686,410 | ||||||
Chart Industries 144A 1.00% exercise price $58.73, maturity date 11/15/24 # | 2,399,000 | 3,100,573 | ||||||
Cheniere Energy 4.25% exercise price $138.38, maturity date 3/15/45 | 6,098,000 | 4,696,173 | ||||||
Cree 144A 0.875% exercise price $59.97, maturity date 9/1/23 # | 4,108,000 | 3,848,600 | ||||||
CSG Systems International 4.25% exercise price $57.09, maturity date 3/15/36 | 2,737,000 | 2,810,439 | ||||||
DISH Network 2.375% exercise price $82.22, maturity date 3/15/24 | 1,943,000 | 1,637,518 | ||||||
DISH Network 3.375% exercise price $65.18, maturity date 8/15/26 | 4,229,000 | 3,778,400 | ||||||
Dycom Industries 0.75% exercise price $96.89, maturity date 9/15/21 * | 1,840,000 | 1,862,663 | ||||||
Empire State Realty OP 144A 2.625% exercise price $19.25, maturity date 8/15/19 # | 2,631,000 | 2,621,549 |
26
Table of Contents
Principal amount° | Value (US $) | |||||||
| ||||||||
Convertible Bonds (continued) | ||||||||
GAIN Capital Holdings 5.00% exercise price $8.20, maturity date 8/15/22 | 3,400,000 | $ | 3,906,709 | |||||
GCI Liberty 144A 1.75% exercise price $370.52, maturity date 9/30/46 # | 3,626,000 | 3,920,214 | ||||||
Helix Energy Solutions Group 4.125% exercise price $9.47, maturity date 9/15/23 | 165,000 | 196,753 | ||||||
Helix Energy Solutions Group 4.25% exercise price $13.89, maturity date 5/1/22 | 3,601,000 | 3,714,572 | ||||||
Huron Consulting Group 1.25% exercise price $79.89, maturity date 10/1/19 | 2,191,000 | 2,155,944 | ||||||
Insulet 1.25% exercise price $58.37, maturity date 9/15/21 | 1,144,000 | 1,781,258 | ||||||
Insulet 144A 1.375% exercise price $93.18, maturity date 11/15/24 # | 1,949,000 | 2,204,777 | ||||||
Jazz Investments I 1.875% exercise price $199.77, maturity date 8/15/21 | 2,005,000 | 2,114,647 | ||||||
Knowles 3.25% exercise price $18.43, maturity date 11/1/21 | 2,351,000 | 2,645,025 | ||||||
Liberty Media 2.25% exercise price $35.14, maturity date 9/30/46 | 4,212,000 | 2,204,169 | ||||||
Ligand Pharmaceuticals 144A 0.75% exercise price $248.48, maturity date 5/15/23 # | 1,979,000 | 1,895,466 | ||||||
Medicines 2.75% exercise price $48.97, maturity date 7/15/23 | 4,386,000 | 3,721,591 | ||||||
Meritor 3.25% exercise price $39.92, maturity date 10/15/37 | 2,150,000 | 1,988,965 | ||||||
Microchip Technology 1.625% exercise price $98.03, maturity date 2/15/27 | 3,327,000 | 3,161,612 | ||||||
Neurocrine Biosciences 2.25% exercise price $75.92, maturity date 5/15/24 | 1,803,000 | 2,782,817 | ||||||
New Mountain Finance 5.00% exercise price $15.80, maturity date 6/15/19 | 2,076,000 | 2,086,455 | ||||||
Novellus Systems 2.625% exercise price $32.95, maturity date 5/15/41 | 625,000 | 2,681,688 | ||||||
NRG Energy 144A 2.75% exercise price $47.74, maturity date 6/1/48 # | 3,499,000 | 3,650,335 | ||||||
NXP Semiconductors 1.00% exercise price $102.57, maturity date 12/1/19 | 1,781,000 | 1,805,328 | ||||||
Pacira Pharmaceuticals 2.375% exercise price $66.89, maturity date 4/1/22 | 1,635,000 | 1,717,097 | ||||||
Palo Alto Networks 144A 0.75% exercise price $266.35, maturity date 7/1/23 # | 2,748,000 | 2,683,348 | ||||||
Paratek Pharmaceuticals 144A 4.75% exercise price $15.90, maturity date 5/1/24 # | 4,889,000 | 4,218,718 |
27
Table of Contents
Schedule of investments | ||
Delaware Diversified Income Fund |
Principal amount° | Value (US $) | |||||||
| ||||||||
Convertible Bonds (continued) | ||||||||
PROS Holdings 2.00% exercise price $48.63, maturity date 6/1/47 | 3,711,000 | $ | 3,529,710 | |||||
Quotient Technology 144A 1.75% exercise price $17.36, maturity date 12/1/22 # | 2,617,000 | 2,676,723 | ||||||
Retrophin 2.50% exercise price $38.80, maturity date 9/15/25 | 708,000 | 689,297 | ||||||
RPM International 2.25% exercise price $52.03, maturity date 12/15/20 | 1,921,000 | 2,219,804 | ||||||
Spectrum Pharmaceuticals 2.75% exercise price $10.53, maturity date 12/15/18 | 469,000 | 568,194 | ||||||
Spirit Realty Capital 3.75% exercise price $11.46, maturity date 5/15/21 * | 1,556,000 | 1,542,149 | ||||||
Splunk 144A 1.125% exercise price $148.30, maturity date 9/15/25 # | 818,000 | 776,343 | ||||||
Synaptics 0.50% exercise price $73.02, maturity date 6/15/22* | 2,677,000 | 2,395,915 | ||||||
Synchronoss Technologies 0.75% exercise price $53.17, maturity date 8/15/19 * | 1,481,000 | 1,420,562 | ||||||
Team 5.00% exercise price $21.70, maturity date 8/1/23 | 1,970,000 | 2,311,570 | ||||||
Tesla Energy Operations 1.625% exercise price $759.35, maturity date 11/1/19 * | 2,703,000 | 2,554,178 | ||||||
Vector Group 1.75% exercise price $21.28, maturity date 4/15/20 ● | 2,295,000 | 2,357,856 | ||||||
Vector Group 2.50% exercise price $13.81, maturity date 1/15/19 ● | 3,300,000 | 3,459,756 | ||||||
VEREIT 3.75% exercise price $14.99, maturity date 12/15/20 * | 2,178,000 | 2,176,948 | ||||||
Verint Systems 1.50% exercise price $64.46, maturity date 6/1/21 | 3,751,000 | 3,740,613 | ||||||
Vishay Intertechnology 144A 2.25% exercise price $31.49, maturity date 6/15/25 # | 2,071,000 | 1,864,528 | ||||||
|
| |||||||
Total Convertible Bonds (cost $131,690,241) | 130,330,098 | |||||||
|
| |||||||
| ||||||||
Corporate Bonds – 40.39% | ||||||||
Banking – 8.47% | ||||||||
Akbank T.A.S. 144A 7.20% 3/16/27 #*µ | 3,060,000 | 2,606,196 | ||||||
ANZ New Zealand International 144A 2.60% 9/23/19 # | 1,300,000 | 1,293,650 | ||||||
Banco de Credito e Inversiones 144A 3.50% 10/12/27 # | 2,575,000 | 2,303,016 | ||||||
Banco do Brasil 144A 4.875% 4/19/23 #* | 2,325,000 | 2,278,965 | ||||||
Banco Santander 3.848% 4/12/23 | 6,300,000 | 6,103,371 | ||||||
Banco Santander Mexico Institucion de Banca Multiple | ||||||||
Grupo Financiero | ||||||||
144A 4.125% 11/9/22 # | 3,260,000 | 3,197,245 | ||||||
144A 5.95% 10/1/28 #µ | 2,295,000 | 2,302,413 |
28
Table of Contents
Principal amount° | Value (US $) | |||||||||||
| ||||||||||||
Corporate Bonds (continued) | ||||||||||||
| ||||||||||||
Banking (continued) | ||||||||||||
Bank of America | ||||||||||||
3.30% 8/5/21 | AUD | 1,420,000 | $ | 1,015,506 | ||||||||
3.864% 7/23/24 µ | 1,695,000 | 1,683,924 | ||||||||||
4.271% 7/23/29 µ | 8,180,000 | 8,077,078 | ||||||||||
5.625% 7/1/20 | 1,405,000 | 1,458,375 | ||||||||||
Bank of China 144A 5.00% 11/13/24 # | 3,800,000 | 3,876,916 | ||||||||||
Bank of Georgia 144A 6.00% 7/26/23 # | 3,380,000 | 3,323,013 | ||||||||||
Bank of New York Mellon 4.625% µy | 820,000 | 777,975 | ||||||||||
Barclays | ||||||||||||
7.75% µy | 2,335,000 | 2,335,467 | ||||||||||
8.25% µy | 7,590,000 | 7,634,743 | ||||||||||
BBVA Bancomer 144A 7.25% 4/22/20 # | 935,000 | 965,631 | ||||||||||
BNG Bank 3.50% 7/19/27 | AUD | 1,736,000 | 1,259,593 | |||||||||
Branch Banking & Trust 2.25% 6/1/20 | 1,355,000 | 1,334,115 | ||||||||||
Citibank 3.40% 7/23/21 | 2,620,000 | 2,609,950 | ||||||||||
Citigroup | ||||||||||||
3.216% (BBSW3M + 1.25%) 8/7/19 ● | AUD | 2,308,000 | 1,641,995 | |||||||||
3.75% 10/27/23 | AUD | 2,222,000 | 1,593,271 | |||||||||
Citizens Bank 2.55% 5/13/21 | 1,975,000 | 1,923,050 | ||||||||||
Citizens Financial Group | ||||||||||||
2.375% 7/28/21 | 485,000 | 467,860 | ||||||||||
4.30% 12/3/25 | 4,810,000 | 4,719,166 | ||||||||||
Compass Bank | ||||||||||||
2.875% 6/29/22 | 5,190,000 | 4,977,841 | ||||||||||
3.875% 4/10/25 | 5,505,000 | 5,234,862 | ||||||||||
Cooperatieve Rabobank | ||||||||||||
2.50% 9/4/20 | NOK | 8,100,000 | 979,086 | |||||||||
3.375% 4/24/23 | NZD | 1,411,000 | 937,135 | |||||||||
Credit Suisse Group | ||||||||||||
144A 6.25% #µy | 10,305,000 | 10,054,135 | ||||||||||
144A 7.25% #µy | 4,240,000 | 4,202,900 | ||||||||||
144A 7.50% #µy | 4,435,000 | 4,523,700 | ||||||||||
DBS Group Holdings 144A 4.52% 12/11/28 #µ | 4,460,000 | 4,514,791 | ||||||||||
Fifth Third Bancorp | ||||||||||||
2.60% 6/15/22 | 2,260,000 | 2,174,400 | ||||||||||
3.95% 3/14/28 | 4,250,000 | 4,143,750 | ||||||||||
Fifth Third Bank | ||||||||||||
2.30% 3/15/19 | 3,935,000 | 3,928,526 | ||||||||||
3.85% 3/15/26 | 2,435,000 | 2,364,976 | ||||||||||
Goldman Sachs Group | ||||||||||||
3.258% (BBSW3M + 1.30%) 8/21/19 ● | AUD | 2,390,000 | 1,701,281 |
29
Table of Contents
Schedule of investments | ||||
Delaware Diversified Income Fund |
Principal amount° | Value (US $) | |||||||||||
| ||||||||||||
Corporate Bonds (continued) | ||||||||||||
| ||||||||||||
Banking (continued) | ||||||||||||
Goldman Sachs Group | ||||||||||||
3.55% 2/12/21 | CAD | 1,500,000 | $ | 1,147,404 | ||||||||
4.223% 5/1/29 µ | 3,605,000 | 3,503,340 | ||||||||||
5.15% 5/22/45 | 4,355,000 | 4,272,963 | ||||||||||
5.20% 12/17/19 | NZD | 1,444,000 | 967,990 | |||||||||
6.00% 6/15/20 | 10,020,000 | 10,431,312 | ||||||||||
HSBC Holdings | ||||||||||||
4.292% 9/12/26 µ | 4,535,000 | 4,477,497 | ||||||||||
6.50% µy | 3,900,000 | 3,666,000 | ||||||||||
Huntington National Bank 2.50% 8/7/22 | 2,745,000 | 2,626,729 | ||||||||||
ICICI Bank 144A 4.00% 3/18/26 #* | 3,180,000 | 2,950,057 | ||||||||||
JPMorgan Chase & Co. | ||||||||||||
3.50% 12/18/26 | GBP | 986,000 | 1,363,229 | |||||||||
3.797% 7/23/24 µ | 4,200,000 | 4,176,638 | ||||||||||
4.203% 7/23/29 µ | 3,440,000 | 3,392,364 | ||||||||||
6.75% *µy | 4,475,000 | 4,778,181 | ||||||||||
KeyBank | ||||||||||||
2.30% 9/14/22 | 3,505,000 | 3,339,648 | ||||||||||
6.95% 2/1/28 | 17,740,000 | 20,884,690 | ||||||||||
Landwirtschaftliche Rentenbank 5.375% 4/23/24 | NZD | 2,457,000 | 1,806,144 | |||||||||
Lloyds Banking Group 7.50% µy | 3,420,000 | 3,458,475 | ||||||||||
Morgan Stanley | ||||||||||||
3.125% 8/5/21 | CAD | 999,000 | 756,211 | |||||||||
3.737% 4/24/24 µ | 10,750,000 | 10,626,524 | ||||||||||
5.00% 9/30/21 | AUD | 1,489,000 | 1,113,335 | |||||||||
5.00% 11/24/25 | 8,020,000 | 8,223,921 | ||||||||||
5.50% 1/26/20 | 3,645,000 | 3,742,143 | ||||||||||
Nationwide Building Society 144A 4.125% 10/18/32 #µ | 6,950,000 | 6,201,513 | ||||||||||
Nederlandse Waterschapsbank 144A 2.354% (LIBOR03M + 0.02%) 3/15/19 #● | 1,145,000 | 1,145,071 | ||||||||||
PNC Bank | ||||||||||||
2.70% 11/1/22 | 725,000 | 696,603 | ||||||||||
4.05% 7/26/28 | 8,005,000 | 7,864,431 | ||||||||||
PNC Financial Services Group 5.00% µy | 5,800,000 | 5,623,100 | ||||||||||
Popular 6.125% 9/14/23 | 1,195,000 | 1,212,089 | ||||||||||
Regions Financial | ||||||||||||
2.75% 8/14/22 | 2,140,000 | 2,059,551 | ||||||||||
3.80% 8/14/23 | 2,665,000 | 2,640,745 | ||||||||||
Royal Bank of Scotland Group | ||||||||||||
3.875% 9/12/23 | 200,000 | 192,627 | ||||||||||
4.519% 6/25/24 µ | 1,295,000 | 1,282,768 | ||||||||||
8.625% µy | 8,640,000 | 9,104,400 |
30
Table of Contents
Principal amount° | Value (US $) | |||||||||||
| ||||||||||||
Corporate Bonds (continued) | ||||||||||||
| ||||||||||||
Banking (continued) | ||||||||||||
Santander UK 144A 5.00% 11/7/23 # | 9,890,000 | $ | 9,927,829 | |||||||||
SunTrust Banks | ||||||||||||
2.45% 8/1/22 | 3,070,000 | 2,943,232 | ||||||||||
2.70% 1/27/22 | 5,605,000 | 5,430,623 | ||||||||||
3.00% 2/2/23 | 2,050,000 | 1,994,153 | ||||||||||
3.30% 5/15/26 | 2,845,000 | 2,666,502 | ||||||||||
Turkiye Garanti Bankasi | ||||||||||||
144A 5.25% 9/13/22 #* | 610,000 | 565,380 | ||||||||||
144A 6.25% 4/20/21 # | 3,965,000 | 3,873,210 | ||||||||||
Turkiye Is Bankasi 144A 7.00% 6/29/28 #µ | 2,760,000 | 2,060,450 | ||||||||||
UBS Group Funding Switzerland | ||||||||||||
144A 4.125% 9/24/25 # | 5,345,000 | 5,263,690 | ||||||||||
6.875% µy | 5,250,000 | 5,271,082 | ||||||||||
US Bancorp | ||||||||||||
3.10% 4/27/26 | 7,010,000 | 6,546,457 | ||||||||||
3.15% 4/27/27 | 2,610,000 | 2,463,275 | ||||||||||
US Bank 3.40% 7/24/23 | 2,655,000 | 2,632,358 | ||||||||||
USB Capital IX 3.50% (LIBOR03M + 1.02%) y● | 27,182,000 | 23,682,317 | ||||||||||
Wells Fargo & Co. | ||||||||||||
3.00% 7/27/21 | AUD | 2,492,000 | 1,768,447 | |||||||||
3.50% 9/12/29 | GBP | 1,700,000 | 2,310,489 | |||||||||
Wells Fargo Capital X 5.95% 12/15/36 | 470,000 | 493,500 | ||||||||||
Westpac Banking 5.00% µy | 1,345,000 | 1,177,830 | ||||||||||
Woori Bank 144A 4.75% 4/30/24 # | 3,670,000 | 3,674,551 | ||||||||||
Zions Bancorporation 4.50% 6/13/23 | 3,460,000 | 3,479,994 | ||||||||||
|
| |||||||||||
344,472,929 | ||||||||||||
|
| |||||||||||
Basic Industry – 3.92% | ||||||||||||
Anglo American Capital | ||||||||||||
144A 4.75% 4/10/27 # | 12,000,000 | 11,571,197 | ||||||||||
144A 4.875% 5/14/25 # | 4,030,000 | 3,977,602 | ||||||||||
BHP Billiton Finance USA 144A 6.25% 10/19/75 #µ | 12,410,000 | 12,959,143 | ||||||||||
BMC East 144A 5.50% 10/1/24 # | 1,200,000 | 1,128,000 | ||||||||||
Boise Cascade 144A 5.625% 9/1/24 # | 2,025,000 | 1,994,625 | ||||||||||
Braskem Netherlands Finance | ||||||||||||
144A 3.50% 1/10/23 # | 610,000 | 577,792 | ||||||||||
144A 4.50% 1/10/28 # | 4,220,000 | 3,903,500 | ||||||||||
Builders FirstSource 144A 5.625% 9/1/24 # | 1,590,000 | 1,488,637 | ||||||||||
CK Hutchison International 17 144A 2.875% 4/5/22 # | 4,320,000 | 4,191,631 | ||||||||||
Cleveland-Cliffs 5.75% 3/1/25 * | 760,000 | 721,050 | ||||||||||
CSN Resources 144A 7.625% 2/13/23 #* | 3,845,000 | 3,566,276 | ||||||||||
Cydsa 144A 6.25% 10/4/27 # | 3,825,000 | 3,574,501 | ||||||||||
Dow Chemical 8.55% 5/15/19 | 33,171,000 | 34,121,090 |
31
Table of Contents
Schedule of investments
Delaware Diversified Income Fund
Principal amount° | Value (US $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Basic Industry (continued) | ||||||||
Equate Petrochemical 144A 3.00% 3/3/22 # | 2,345,000 | $ | 2,248,820 | |||||
First Quantum Minerals | ||||||||
144A 7.25% 4/1/23 # | 2,300,000 | 2,133,250 | ||||||
144A 7.50% 4/1/25 # | 1,495,000 | 1,339,894 | ||||||
Freeport-McMoRan | ||||||||
4.55% 11/14/24 | 780,000 | 724,425 | ||||||
6.875% 2/15/23 | 1,985,000 | 2,084,250 | ||||||
Georgia-Pacific 8.00% 1/15/24 | 11,171,000 | 13,292,966 | ||||||
Hudbay Minerals | ||||||||
144A 7.25% 1/15/23 # | 30,000 | 30,000 | ||||||
144A 7.625% 1/15/25 # | 685,000 | 690,137 | ||||||
Israel Chemicals 144A 6.375% 5/31/38 # | 4,620,000 | 4,595,745 | ||||||
Joseph T Ryerson & Son 144A 11.00% 5/15/22 # | 800,000 | 858,000 | ||||||
Mexichem 144A 5.50% 1/15/48 # | 4,225,000 | 3,726,492 | ||||||
NOVA Chemicals | ||||||||
144A 5.00% 5/1/25 # | 1,055,000 | 962,687 | ||||||
144A 5.25% 6/1/27 # | 860,000 | 778,300 | ||||||
Novelis 144A 6.25% 8/15/24 # | 883,000 | 876,377 | ||||||
Novolipetsk Steel Via Steel Funding 144A 4.00% 9/21/24 # | 3,360,000 | 3,107,157 | ||||||
OCP | ||||||||
144A 4.50% 10/22/25 # | 2,015,000 | 1,911,074 | ||||||
144A 6.875% 4/25/44 #* | 2,310,000 | 2,419,783 | ||||||
Olin 5.125% 9/15/27 * | 1,725,000 | 1,615,031 | ||||||
Petkim Petrokimya Holding 144A 5.875% 1/26/23 # | 3,150,000 | 2,896,028 | ||||||
Phosagro OAO Via Phosagro Bond Funding 144A 3.95% 11/3/21 # | 4,650,000 | 4,512,723 | ||||||
SASOL Financing USA | ||||||||
5.875% 3/27/24 | 1,885,000 | 1,901,281 | ||||||
6.50% 9/27/28 | 1,705,000 | 1,728,846 | ||||||
Standard Industries 144A 5.00% 2/15/27 # | 2,410,000 | 2,205,150 | ||||||
Steel Dynamics 5.50% 10/1/24 | 745,000 | 751,519 | ||||||
Suzano Austria | ||||||||
144A 6.00% 1/15/29 # | 1,960,000 | 1,999,200 | ||||||
144A 7.00% 3/16/47 # | 2,195,000 | 2,300,360 | ||||||
Syngenta Finance | ||||||||
144A 3.933% 4/23/21 # | 2,540,000 | 2,528,700 | ||||||
144A 4.441% 4/24/23 # | 1,560,000 | 1,536,709 | ||||||
144A 5.182% 4/24/28 #* | 6,570,000 | 6,227,539 | ||||||
Tronox Finance 144A 5.75% 10/1/25 # | 1,390,000 | 1,223,200 |
32
Table of Contents
Principal amount° | Value (US $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Basic Industry (continued) | ||||||||
Vedanta Resources | ||||||||
144A 6.125% 8/9/24 # | 965,000 | $ | 856,287 | |||||
144A 7.125% 5/31/23 # | 1,615,000 | 1,522,137 | ||||||
|
| |||||||
159,359,111 | ||||||||
|
| |||||||
Brokerage – 0.94% | ||||||||
Charles Schwab | ||||||||
3.25% 5/21/21 | 2,160,000 | 2,153,573 | ||||||
3.85% 5/21/25 | 2,300,000 | 2,302,526 | ||||||
5.00% µy | 1,740,000 | 1,655,175 | ||||||
E*TRADE Financial | ||||||||
3.80% 8/24/27 | 3,095,000 | 2,899,082 | ||||||
5.875% *µy | 3,380,000 | 3,371,550 | ||||||
Intercontinental Exchange | ||||||||
3.45% 9/21/23 | 1,040,000 | 1,033,626 | ||||||
3.75% 9/21/28 | 1,160,000 | 1,134,046 | ||||||
4.25% 9/21/48 | 1,155,000 | 1,078,793 | ||||||
Jefferies Group | ||||||||
4.15% 1/23/30 | 1,585,000 | 1,386,083 | ||||||
6.45% 6/8/27 | 3,815,000 | 4,053,399 | ||||||
6.50% 1/20/43 | 2,455,000 | 2,463,439 | ||||||
Lazard Group 3.75% 2/13/25 | 15,330,000 | 14,679,591 | ||||||
|
| |||||||
38,210,883 | ||||||||
|
| |||||||
Capital Goods – 1.15% | ||||||||
Ardagh Packaging Finance 144A 6.00% 2/15/25 # | 790,000 | 742,600 | ||||||
BWAY Holding 144A 5.50% 4/15/24 # | 2,165,000 | 2,083,813 | ||||||
CCL Industries 144A 3.25% 10/1/26 # | 3,480,000 | 3,165,559 | ||||||
Crane 4.20% 3/15/48 | 2,585,000 | 2,314,577 | ||||||
Grupo Cementos de Chihuahua 144A 5.25% 6/23/24 #* | 2,065,000 | 2,039,187 | ||||||
Harris 4.40% 6/15/28 | 2,455,000 | 2,461,333 | ||||||
L3 Technologies | ||||||||
3.85% 6/15/23 | 1,925,000 | 1,921,279 | ||||||
4.40% 6/15/28 | 620,000 | 620,404 | ||||||
Martin Marietta Materials 4.25% 12/15/47 | 3,280,000 | 2,642,840 | ||||||
New Enterprise Stone & Lime 144A 10.125% 4/1/22 # | 1,780,000 | 1,869,000 | ||||||
Northrop Grumman | ||||||||
2.55% 10/15/22 | 6,300,000 | 6,062,641 | ||||||
3.25% 8/1/23 | 2,550,000 | 2,498,041 | ||||||
Nvent Finance 4.55% 4/15/28 | 10,470,000 | 10,137,916 | ||||||
TransDigm 6.375% 6/15/26 | 1,550,000 | 1,522,875 |
33
Table of Contents
Schedule of investments
Delaware Diversified Income Fund
Principal amount° | Value (US $) | |||||||||||
| ||||||||||||
Corporate Bonds (continued) | ||||||||||||
| ||||||||||||
Capital Goods (continued) | ||||||||||||
United Technologies | ||||||||||||
3.65% 8/16/23 | 945,000 | $ | 935,418 | |||||||||
4.125% 11/16/28 | 5,815,000 | 5,733,999 | ||||||||||
|
| |||||||||||
46,751,482 | ||||||||||||
|
| |||||||||||
Communications – 4.04% | ||||||||||||
American Tower Trust #1 144A 3.07% 3/15/23 # | 10,235,000 | 9,929,240 | ||||||||||
AT&T | ||||||||||||
3.514% (LIBOR03M + 1.18%) 6/12/24 ● | 2,520,000 | 2,528,903 | ||||||||||
144A 4.30% 2/15/30 # | 1,555,000 | 1,464,504 | ||||||||||
4.50% 3/9/48 | 2,160,000 | 1,806,667 | ||||||||||
5.25% 3/1/37 | 6,330,000 | 6,072,375 | ||||||||||
Bell Canada 3.35% 3/22/23 | CAD | 2,132,000 | 1,605,887 | |||||||||
C&W Senior Financing 144A 7.50% 10/15/26 # | 2,290,000 | 2,301,450 | ||||||||||
Charter Communications Operating 5.375% 4/1/38 | 4,095,000 | 3,768,900 | ||||||||||
Comcast | ||||||||||||
3.70% 4/15/24 | 8,160,000 | 8,138,009 | ||||||||||
4.15% 10/15/28 | 4,010,000 | 3,982,177 | ||||||||||
4.70% 10/15/48 | 5,715,000 | 5,553,460 | ||||||||||
Comcel Trust 144A 6.875% 2/6/24 # | 3,805,000 | 3,903,930 | ||||||||||
Crown Castle International | ||||||||||||
3.80% 2/15/28 | 1,465,000 | 1,366,823 | ||||||||||
5.25% 1/15/23 | 4,275,000 | 4,462,720 | ||||||||||
Crown Castle Towers 144A 4.241% 7/15/28 # | 2,090,000 | 2,090,167 | ||||||||||
Deutsche Telekom International Finance | ||||||||||||
144A 4.375% 6/21/28 # | 4,265,000 | 4,185,276 | ||||||||||
6.50% 4/8/22 | GBP | 1,270,000 | 1,880,278 | |||||||||
Digicel Group | ||||||||||||
144A 7.125% 4/1/22 #* | 4,290,000 | 2,691,975 | ||||||||||
144A 8.25% 9/30/20 # | 2,200,000 | 1,581,250 | ||||||||||
Discovery Communications 5.20% 9/20/47 | 6,325,000 | 5,862,671 | ||||||||||
Equinix 5.375% 5/15/27 | 1,680,000 | 1,667,400 | ||||||||||
GTP Acquisition Partners I 144A 2.35% 6/15/20 # | 2,605,000 | 2,548,108 | ||||||||||
Level 3 Financing 5.375% 5/1/25 | 2,110,000 | 2,065,163 | ||||||||||
Myriad International Holdings 144A 4.85% 7/6/27 # | 1,405,000 | 1,362,007 | ||||||||||
SBA Communications 4.875% 9/1/24 | 2,665,000 | 2,581,719 | ||||||||||
SBA Tower Trust 144A 2.898% 10/15/19 # | 405,000 | 402,739 | ||||||||||
Sirius XM Radio 144A 5.375% 4/15/25 # | 1,337,000 | 1,327,808 | ||||||||||
Sprint | ||||||||||||
7.125% 6/15/24 | 245,000 | 251,125 | ||||||||||
7.875% 9/15/23 | 1,294,000 | 1,384,580 | ||||||||||
Sprint Communications 7.00% 8/15/20 | 270,000 | 280,125 | ||||||||||
Sprint Spectrum 144A 4.738% 3/20/25 # | 3,190,000 | 3,193,987 |
34
Table of Contents
Principal amount° | Value (US $) | |||||||||||
| ||||||||||||
Corporate Bonds (continued) | ||||||||||||
| ||||||||||||
Communications (continued) | ||||||||||||
Telecom Italia 144A 5.303% 5/30/24 # | 1,285,000 | $ | 1,215,931 | |||||||||
Telefonica Emisiones 4.895% 3/6/48 | 6,450,000 | 5,763,920 | ||||||||||
TELUS 4.60% 11/16/48 * | 6,505,000 | 6,249,516 | ||||||||||
Time Warner Cable 7.30% 7/1/38 | 9,865,000 | 10,909,138 | ||||||||||
Time Warner Entertainment 8.375% 3/15/23 | 5,470,000 | 6,310,672 | ||||||||||
T-Mobile USA 6.50% 1/15/26 | 1,875,000 | 1,982,813 | ||||||||||
VEON Holdings | ||||||||||||
144A 4.95% 6/16/24 # | 1,450,000 | 1,376,427 | ||||||||||
144A 5.95% 2/13/23 # | 2,540,000 | 2,556,866 | ||||||||||
Verizon Communications | ||||||||||||
3.25% 2/17/26 | EUR | 2,606,000 | 3,329,820 | |||||||||
4.50% 8/17/27 | AUD | 2,230,000 | 1,604,697 | |||||||||
4.50% 8/10/33 | 11,250,000 | 10,956,697 | ||||||||||
Viacom 4.375% 3/15/43 | 6,660,000 | 5,469,753 | ||||||||||
Vodafone Group 3.75% 1/16/24 | 5,090,000 | 4,981,854 | ||||||||||
VTR Finance 144A 6.875% 1/15/24 # | 3,551,000 | 3,608,704 | ||||||||||
Warner Media | ||||||||||||
3.875% 1/15/26 | 1,705,000 | 1,636,167 | ||||||||||
4.85% 7/15/45 | 2,035,000 | 1,816,243 | ||||||||||
Zayo Group | ||||||||||||
144A 5.75% 1/15/27 # | 1,615,000 | 1,587,061 | ||||||||||
6.375% 5/15/25 | 520,000 | 533,650 | ||||||||||
|
| |||||||||||
164,131,352 | ||||||||||||
|
| |||||||||||
Consumer Cyclical – 1.65% | ||||||||||||
AMC Entertainment Holdings 6.125% 5/15/27 | 1,750,000 | 1,616,563 | ||||||||||
American Axle & Manufacturing 6.25% 3/15/26 | 795,000 | 753,263 | ||||||||||
Atento Luxco 1 144A 6.125% 8/10/22 # | 3,430,000 | 3,378,550 | ||||||||||
Best Buy 4.45% 10/1/28 | 6,320,000 | 6,085,984 | ||||||||||
Boyd Gaming 6.375% 4/1/26 | 1,325,000 | 1,318,375 | ||||||||||
Daimler 2.75% 12/10/18 | NOK | 14,510,000 | 1,724,211 | |||||||||
Daimler Finance North America 144A 3.35% 2/22/23 # | 2,905,000 | 2,837,109 | ||||||||||
Dollar Tree | ||||||||||||
3.70% 5/15/23 | 4,440,000 | 4,331,367 | ||||||||||
4.00% 5/15/25 | 3,960,000 | 3,810,608 | ||||||||||
Ford Motor Credit 4.14% 2/15/23 | 5,675,000 | 5,513,416 | ||||||||||
General Motors 6.75% 4/1/46 | 1,230,000 | 1,255,266 | ||||||||||
General Motors Financial | ||||||||||||
4.35% 4/9/25 | 4,745,000 | 4,577,237 | ||||||||||
5.25% 3/1/26 | 3,725,000 | 3,725,043 | ||||||||||
GLP Capital | ||||||||||||
5.30% 1/15/29 | 2,015,000 | 1,987,294 | ||||||||||
5.375% 4/15/26 | 979,000 | 975,329 |
35
Table of Contents
Schedule of investments
Delaware Diversified Income Fund
Principal amount° | Value (US $) | |||||||||||
| ||||||||||||
Corporate Bonds (continued) | ||||||||||||
| ||||||||||||
Consumer Cyclical (continued) | ||||||||||||
JD.com 3.125% 4/29/21 | 2,625,000 | $ | 2,531,525 | |||||||||
KFC Holding 144A 5.25% 6/1/26 # | 1,700,000 | 1,674,500 | ||||||||||
Live Nation Entertainment 144A 5.625% 3/15/26 # | 1,005,000 | 1,007,513 | ||||||||||
Marriott International 4.50% 10/1/34 | 1,035,000 | 1,003,828 | ||||||||||
MGM Resorts International 5.75% 6/15/25 | 1,280,000 | 1,254,400 | ||||||||||
Penn National Gaming 144A 5.625% 1/15/27 #* | 2,375,000 | 2,214,687 | ||||||||||
Penske Automotive Group 5.50% 5/15/26 | 770,000 | 735,350 | ||||||||||
Royal Caribbean Cruises 3.70% 3/15/28 | 6,840,000 | 6,289,078 | ||||||||||
Sands China | ||||||||||||
144A 4.60% 8/8/23 # | 1,510,000 | 1,493,078 | ||||||||||
144A 5.125% 8/8/25 # | 2,365,000 | 2,322,316 | ||||||||||
Scientific Games International 10.00% 12/1/22 | 2,395,000 | 2,511,756 | ||||||||||
|
| |||||||||||
66,927,646 | ||||||||||||
|
| |||||||||||
Consumer Non-Cyclical – 3.47% | ||||||||||||
AbbVie 4.25% 11/14/28 | 6,155,000 | 5,945,950 | ||||||||||
Air Medical Group Holdings 144A 6.375% 5/15/23 # | 377,000 | 340,714 | ||||||||||
Amgen 4.00% 9/13/29 | GBP | 1,271,000 | 1,809,664 | |||||||||
Anheuser-Busch InBev Finance 3.65% 2/1/26 | 7,255,000 | 6,892,050 | ||||||||||
AstraZeneca | ||||||||||||
3.50% 8/17/23 | 2,165,000 | 2,132,759 | ||||||||||
4.00% 1/17/29 | 7,340,000 | 7,078,458 | ||||||||||
BAT Capital | ||||||||||||
144A 2.297% 8/14/20 # | 705,000 | 690,166 | ||||||||||
144A 3.222% 8/15/24 # | 6,750,000 | 6,378,618 | ||||||||||
Bayer US Finance II | ||||||||||||
144A 4.25% 12/15/25 # | 1,865,000 | 1,833,857 | ||||||||||
144A 4.375% 12/15/28 # | 7,795,000 | 7,563,960 | ||||||||||
Bunge Finance 4.35% 3/15/24 | 5,105,000 | 5,016,395 | ||||||||||
Campbell Soup 3.65% 3/15/23 | 6,305,000 | 6,118,926 | ||||||||||
Conagra Brands | ||||||||||||
4.30% 5/1/24 | 5,345,000 | 5,359,713 | ||||||||||
4.60% 11/1/25 | 1,845,000 | 1,849,165 | ||||||||||
5.30% 11/1/38 | 2,300,000 | 2,234,318 | ||||||||||
Cott Holdings 144A 5.50% 4/1/25 # | 1,205,000 | 1,150,775 | ||||||||||
CVS Health | ||||||||||||
3.70% 3/9/23 | 1,700,000 | 1,681,289 | ||||||||||
4.30% 3/25/28 | 15,605,000 | 15,250,760 | ||||||||||
ESAL 144A 6.25% 2/5/23 #* | 2,180,000 | 2,152,750 | ||||||||||
General Mills 3.70% 10/17/23 | 3,915,000 | 3,861,322 | ||||||||||
JBS USA LUX | ||||||||||||
144A 5.75% 6/15/25 # | 395,000 | 383,644 | ||||||||||
144A 6.75% 2/15/28 # | 2,280,000 | 2,225,850 |
36
Table of Contents
Principal amount° | Value (US $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Consumer Non-Cyclical (continued) | ||||||||
Kernel Holding 144A 8.75% 1/31/22 # | 4,410,000 | $ | 4,442,436 | |||||
Marfrig Holdings Europe 144A 8.00% 6/8/23 # | 4,535,000 | 4,603,025 | ||||||
MHP | ||||||||
144A 6.95% 4/3/26 # | 1,660,000 | 1,537,359 | ||||||
144A 7.75% 5/10/24 # | 3,030,000 | 3,000,079 | ||||||
Mylan 144A 4.55% 4/15/28 # | 3,330,000 | 3,087,545 | ||||||
Nestle Holdings 144A 4.00% 9/24/48 # | 4,905,000 | 4,596,132 | ||||||
New York-Presbyterian Hospital 4.063% 8/1/56 | 3,760,000 | 3,495,506 | ||||||
Pernod Ricard 144A 4.45% 1/15/22 # | 3,010,000 | 3,068,657 | ||||||
Rede D’or Finance 144A 4.95% 1/17/28 #* | 4,415,000 | 3,926,083 | ||||||
Rio Energy 144A 6.875% 2/1/25 # | 2,550,000 | 2,014,500 | ||||||
Teva Pharmaceutical Finance Netherlands III 6.75% 3/1/28* | 3,585,000 | 3,672,203 | ||||||
Zimmer Biomet Holdings 4.625% 11/30/19 | 15,621,000 | 15,813,399 | ||||||
|
| |||||||
141,208,027 | ||||||||
|
| |||||||
Electric – 5.11% | ||||||||
AES Gener 144A 8.375% 12/18/73 #µ | 2,170,000 | 2,204,373 | ||||||
Ameren Illinois 9.75% 11/15/18 | 16,210,000 | 16,250,935 | ||||||
American Transmission Systems 144A 5.25% 1/15/22 # | 14,260,000 | 14,915,177 | ||||||
Ausgrid Finance | ||||||||
144A 3.85% 5/1/23 # | 4,440,000 | 4,402,599 | ||||||
144A 4.35% 8/1/28 # | 3,095,000 | 3,045,060 | ||||||
Avangrid 3.15% 12/1/24 | 6,790,000 | 6,430,011 | ||||||
Cemig Geracao e Transmissao 144A 9.25% 12/5/24 # | 3,090,000 | 3,303,983 | ||||||
CenterPoint Energy | ||||||||
3.85% 2/1/24 | 2,805,000 | 2,806,396 | ||||||
4.25% 11/1/28 | 3,420,000 | 3,393,811 | ||||||
6.125% µy | 3,920,000 | 3,964,100 | ||||||
Cleveland Electric Illuminating 5.50% 8/15/24 | 290,000 | 313,817 | ||||||
ComEd Financing III 6.35% 3/15/33 | 4,959,000 | 5,206,950 | ||||||
Consumers Energy | ||||||||
3.80% 11/15/28 | 1,635,000 | 1,628,854 | ||||||
4.35% 4/15/49 | 1,585,000 | 1,578,430 | ||||||
Dominion Energy 3.625% 12/1/24 | 4,495,000 | 4,411,049 | ||||||
DTE Energy 3.30% 6/15/22 | 5,245,000 | 5,167,144 | ||||||
Electricite de France | ||||||||
144A 4.50% 9/21/28 # | 4,935,000 | 4,777,536 | ||||||
144A 5.00% 9/21/48 # | 3,505,000 | 3,239,745 | ||||||
Emera 6.75% 6/15/76 µ | 6,710,000 | 7,028,725 | ||||||
Enel 144A 8.75% 9/24/73 #µ | 7,060,000 | 7,642,450 | ||||||
Enel Chile 4.875% 6/12/28 | 2,315,000 | 2,299,953 | ||||||
Enel Finance International 144A 3.625% 5/25/27 # | 5,565,000 | 4,841,290 |
37
Table of Contents
Schedule of investments
Delaware Diversified Income Fund
Principal amount° | Value (US $) | |||||||||||
| ||||||||||||
Corporate Bonds (continued) | ||||||||||||
| ||||||||||||
Electric (continued) | ||||||||||||
Entergy Louisiana | ||||||||||||
4.05% 9/1/23 | 14,030,000 | $ | 14,301,583 | |||||||||
4.95% 1/15/45 | 685,000 | 670,144 | ||||||||||
Eskom Holdings SOC 144A 6.35% 8/10/28 # | 3,185,000 | 3,078,780 | ||||||||||
Evergy 4.85% 6/1/21 | 2,805,000 | 2,864,458 | ||||||||||
Exelon 3.497% 6/1/22 | 2,810,000 | 2,742,895 | ||||||||||
Interstate Power & Light 4.10% 9/26/28 | 4,220,000 | 4,204,711 | ||||||||||
Israel Electric 144A 5.00% 11/12/24 # | 2,085,000 | 2,111,063 | ||||||||||
Kallpa Generacion 144A 4.125% 8/16/27 # | 4,195,000 | 3,848,954 | ||||||||||
Kansas City Power & Light 3.65% 8/15/25 | 7,975,000 | 7,824,166 | ||||||||||
Mississippi Power 3.95% 3/30/28 | 3,750,000 | 3,641,396 | ||||||||||
National Rural Utilities Cooperative Finance | ||||||||||||
4.75% 4/30/43 µ | 5,585,000 | 5,572,313 | ||||||||||
5.25% 4/20/46 µ | 6,060,000 | 6,096,175 | ||||||||||
Nevada Power 2.75% 4/15/20 | 4,115,000 | 4,096,597 | ||||||||||
Newfoundland & Labrador Hydro 3.60% 12/1/45 | CAD | 1,500,000 | 1,134,004 | |||||||||
NV Energy 6.25% 11/15/20 | 10,391,000 | 10,947,664 | ||||||||||
Oglethorpe Power 144A 5.05% 10/1/48 # | 4,890,000 | 4,820,090 | ||||||||||
Pennsylvania Electric 5.20% 4/1/20 | 398,000 | 407,338 | ||||||||||
Perusahaan Listrik Negara | ||||||||||||
144A 4.125% 5/15/27 # | 1,675,000 | 1,511,737 | ||||||||||
144A 5.25% 5/15/47 #* | 1,190,000 | 1,049,064 | ||||||||||
PSEG Power 3.85% 6/1/23 | 4,300,000 | 4,273,981 | ||||||||||
Public Service Co. of Oklahoma 5.15% 12/1/19 | 3,340,000 | 3,413,191 | ||||||||||
Southwestern Electric Power 4.10% 9/15/28 | 8,025,000 | 7,943,232 | ||||||||||
Trans-Allegheny Interstate Line 144A 3.85% 6/1/25 # | 2,505,000 | 2,458,498 | ||||||||||
|
| |||||||||||
207,864,422 | ||||||||||||
|
| |||||||||||
Energy – 4.57% | ||||||||||||
Abu Dhabi Crude Oil Pipeline 144A 4.60% 11/2/47 # | 3,555,000 | 3,373,667 | ||||||||||
Alta Mesa Holdings 7.875% 12/15/24 | 905,000 | 814,500 | ||||||||||
AmeriGas Partners 5.875% 8/20/26 | 1,410,000 | 1,339,500 | ||||||||||
Anadarko Petroleum 6.60% 3/15/46 | 1,295,000 | 1,436,502 | ||||||||||
Andeavor Logistics 4.25% 12/1/27 | 5,970,000 | 5,693,224 | ||||||||||
BP Capital Markets America 3.796% 9/21/25 | 7,835,000 | 7,686,756 | ||||||||||
Cheniere Corpus Christi Holdings 5.875% 3/31/25 | 1,465,000 | 1,508,950 | ||||||||||
Chesapeake Energy 7.00% 10/1/24 | 1,380,000 | 1,350,675 | ||||||||||
Crestwood Midstream Partners 5.75% 4/1/25 | 1,695,000 | 1,699,237 | ||||||||||
Diamond Offshore Drilling 7.875% 8/15/25 * | 1,380,000 | 1,362,750 | ||||||||||
Enbridge | ||||||||||||
6.00% 1/15/77 µ | 2,745,000 | 2,580,041 | ||||||||||
6.25% 3/1/78 µ | 1,975,000 | 1,854,909 |
38
Table of Contents
Principal amount° | Value (US $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Energy (continued) | ||||||||
Enbridge Energy Partners | ||||||||
4.375% 10/15/20 | 845,000 | $ | 856,650 | |||||
5.20% 3/15/20 | 445,000 | 454,587 | ||||||
5.50% 9/15/40 | 1,440,000 | 1,478,183 | ||||||
Energy Transfer 7.50% 10/15/20 | 1,199,000 | 1,272,439 | ||||||
Energy Transfer Operating | ||||||||
6.00% 6/15/48 | 970,000 | 958,952 | ||||||
6.625% µy | 5,985,000 | 5,554,828 | ||||||
Ensco 7.75% 2/1/26 * | 1,380,000 | 1,292,025 | ||||||
Enterprise Products Operating 4.80% 2/1/49 | 1,435,000 | 1,385,419 | ||||||
Frontera Energy 144A 9.70% 6/25/23 # | 1,165,000 | 1,236,939 | ||||||
Gazprom OAO Via Gaz Capital 144A 4.95% 3/23/27 # | 3,560,000 | 3,406,870 | ||||||
Genesis Energy 6.75% 8/1/22 | 1,685,000 | 1,701,850 | ||||||
Geopark 144A 6.50% 9/21/24 # | 1,930,000 | 1,927,587 | ||||||
Gulfport Energy 6.625% 5/1/23 | 1,140,000 | 1,145,700 | ||||||
Infraestructura Energetica Nova 144A 4.875% 1/14/48 # | 2,760,000 | 2,331,179 | ||||||
KazMunayGas National JSC 144A 6.375% 10/24/48 # | 3,040,000 | 3,095,319 | ||||||
KazTransGas JSC 144A 4.375% 9/26/27 # | 2,955,000 | 2,797,298 | ||||||
Kinder Morgan 5.20% 3/1/48 | 6,580,000 | 6,377,028 | ||||||
Laredo Petroleum 6.25% 3/15/23 | 1,380,000 | 1,362,750 | ||||||
Marathon Oil | ||||||||
4.40% 7/15/27 | 3,050,000 | 2,977,827 | ||||||
5.20% 6/1/45 | 3,510,000 | 3,455,915 | ||||||
MPLX 4.875% 12/1/24 | 8,490,000 | 8,705,389 | ||||||
Murphy Oil 6.875% 8/15/24 | 2,350,000 | 2,460,404 | ||||||
Murphy Oil USA 6.00% 8/15/23 | 1,609,000 | 1,649,225 | ||||||
Nabors Industries 5.75% 2/1/25 | 1,485,000 | 1,374,345 | ||||||
Newfield Exploration 5.75% 1/30/22 | 1,260,000 | 1,305,675 | ||||||
NiSource 144A 5.65% #µy | 3,660,000 | 3,592,107 | ||||||
Noble Energy | ||||||||
3.85% 1/15/28 | 4,545,000 | 4,175,719 | ||||||
4.95% 8/15/47 | 1,455,000 | 1,324,767 | ||||||
5.05% 11/15/44 | 1,180,000 | 1,085,804 | ||||||
NuStar Logistics 5.625% 4/28/27 | 1,385,000 | 1,329,600 | ||||||
Oasis Petroleum 144A 6.25% 5/1/26 #* | 1,220,000 | 1,200,175 | ||||||
Oil and Gas Holding 144A 7.625% 11/7/24 # | 2,555,000 | 2,555,000 | ||||||
ONEOK 7.50% 9/1/23 | 6,425,000 | 7,271,514 | ||||||
Pertamina Persero 144A 4.875% 5/3/22 # | 355,000 | 360,856 | ||||||
Petrobras Global Finance | ||||||||
7.25% 3/17/44 | 1,265,000 | 1,224,678 | ||||||
7.375% 1/17/27 | 2,470,000 | 2,568,429 |
39
Table of Contents
Schedule of investments
Delaware Diversified Income Fund
Principal amount° | Value (US $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Energy (continued) | ||||||||
Petroleos Mexicanos | ||||||||
6.50% 3/13/27 | 775,000 | $ | 752,913 | |||||
6.75% 9/21/47 | 3,140,000 | 2,712,646 | ||||||
Precision Drilling | ||||||||
144A 7.125% 1/15/26 # | 775,000 | 771,125 | ||||||
7.75% 12/15/23 | 1,125,000 | 1,175,625 | ||||||
QEP Resources 5.25% 5/1/23 | 2,130,000 | 2,050,125 | ||||||
Sabine Pass Liquefaction | ||||||||
5.625% 3/1/25 | 6,815,000 | 7,124,441 | ||||||
5.75% 5/15/24 | 3,725,000 | 3,949,710 | ||||||
5.875% 6/30/26 | 4,185,000 | 4,449,890 | ||||||
Sempra Energy 3.80% 2/1/38 | 3,205,000 | 2,800,477 | ||||||
Shell International Finance 4.375% 5/11/45 | 822,000 | 810,215 | ||||||
Southwestern Energy 6.20% 1/23/25 | 465,000 | 453,956 | ||||||
Summit Midstream Holdings 5.75% 4/15/25 | 2,040,000 | 1,963,500 | ||||||
Sunoco Logistics Partners Operations 4.25% 4/1/24 | 705,000 | 696,076 | ||||||
Targa Resources Partners 5.375% 2/1/27 | 1,665,000 | 1,627,537 | ||||||
Tecpetrol 144A 4.875% 12/12/22 # | 6,390,000 | 5,846,914 | ||||||
TransCanada PipeLines 5.10% 3/15/49 | 2,455,000 | 2,466,454 | ||||||
Transcanada Trust 5.875% 8/15/76 µ | 2,885,000 | 2,847,207 | ||||||
Transcontinental Gas Pipe Line | ||||||||
4.00% 3/15/28 | 1,905,000 | 1,834,135 | ||||||
4.60% 3/15/48 | 2,225,000 | 2,056,642 | ||||||
Transocean 144A 9.00% 7/15/23 # | 330,000 | 346,913 | ||||||
Transocean Proteus 144A 6.25% 12/1/24 # | 1,368,500 | 1,368,500 | ||||||
Transportadora de Gas del Sur 144A 6.75% 5/2/25 # | 2,850,000 | 2,686,153 | ||||||
Tullow Oil 144A 7.00% 3/1/25 # | 4,595,000 | 4,509,303 | ||||||
Williams | ||||||||
3.75% 6/15/27 | 2,070,000 | 1,931,073 | ||||||
4.55% 6/24/24 | 2,555,000 | 2,574,969 | ||||||
4.85% 3/1/48 | 3,760,000 | 3,446,055 | ||||||
YPF | ||||||||
144A 7.00% 12/15/47 #* | 2,670,000 | 2,037,744 | ||||||
144A 47.833% (BADLARPP + 4.00%) 7/7/20 #● | 6,260,000 | 2,738,750 | ||||||
|
| |||||||
185,982,791 | ||||||||
|
| |||||||
Finance Companies – 1.09% | ||||||||
AerCap Global Aviation Trust 144A 6.50% 6/15/45 #µ | 3,310,000 | 3,409,300 | ||||||
AerCap Ireland Capital 3.65% 7/21/27 | 8,998,000 | 8,089,132 | ||||||
Air Lease | ||||||||
3.00% 9/15/23 | 5,685,000 | 5,361,098 | ||||||
3.625% 4/1/27 | 3,575,000 | 3,259,105 |
40
Table of Contents
Principal amount° | Value (US $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Finance Companies (continued) | ||||||||
Aviation Capital Group | ||||||||
144A 3.50% 11/1/27 # | 1,245,000 | $ | 1,121,190 | |||||
144A 4.875% 10/1/25 # | 4,855,000 | 4,896,099 | ||||||
BOC Aviation 144A 2.375% 9/15/21 # | 4,235,000 | 4,043,366 | ||||||
GE Capital International Funding Unlimited 4.418% 11/15/35 | 6,990,000 | 6,049,925 | ||||||
International Lease Finance 8.625% 1/15/22 | 3,082,000 | 3,494,438 | ||||||
Temasek Financial I 144A 2.375% 1/23/23 #* | 4,915,000 | 4,698,040 | ||||||
|
| |||||||
44,421,693 | ||||||||
|
| |||||||
Healthcare – 0.40% | ||||||||
DaVita 5.00% 5/1/25 | 1,163,000 | 1,099,035 | ||||||
Encompass Health | ||||||||
5.75% 11/1/24 | 1,707,000 | 1,709,134 | ||||||
5.75% 9/15/25 | 1,280,000 | 1,273,600 | ||||||
HCA | ||||||||
5.375% 2/1/25 | 2,380,000 | 2,400,825 | ||||||
7.58% 9/15/25 | 160,000 | 176,400 | ||||||
Hill-Rom Holdings 144A 5.75% 9/1/23 # | 1,555,000 | 1,580,269 | ||||||
MPH Acquisition Holdings 144A 7.125% 6/1/24 # | 1,582,000 | 1,610,982 | ||||||
Tenet Healthcare 5.125% 5/1/25 | 2,425,000 | 2,340,125 | ||||||
Teva Pharmaceutical Finance Netherlands III 6.00% 4/15/24 | 2,880,000 | 2,869,393 | ||||||
Universal Health Services 144A 5.00% 6/1/26 # | 1,135,000 | 1,129,325 | ||||||
|
| |||||||
16,189,088 | ||||||||
|
| |||||||
Insurance – 1.92% | ||||||||
Acrisure 144A 7.00% 11/15/25 # | 1,474,000 | 1,322,915 | ||||||
AssuredPartners 144A 7.00% 8/15/25 # | 2,221,000 | 2,196,014 | ||||||
AXA Equitable Holdings | ||||||||
144A 4.35% 4/20/28 # | 1,710,000 | 1,642,087 | ||||||
144A 5.00% 4/20/48 # | 2,815,000 | 2,517,246 | ||||||
Halfmoon Parent | ||||||||
144A 3.326% (LIBOR03M + 0.89%) 7/15/23 #*● | 3,240,000 | 3,239,514 | ||||||
144A 4.125% 11/15/25 # | 6,605,000 | 6,539,215 | ||||||
144A 4.375% 10/15/28 # | 4,655,000 | 4,554,865 | ||||||
HUB International 144A 7.00% 5/1/26 # | 385,000 | 376,723 | ||||||
MetLife | ||||||||
6.40% 12/15/36 | 40,000 | 41,580 | ||||||
144A 9.25% 4/8/38 # | 8,985,000 | 11,950,050 | ||||||
NFP 144A 6.875% 7/15/25 # | 4,553,000 | 4,427,793 | ||||||
Nuveen Finance | ||||||||
144A 2.95% 11/1/19 # | 4,670,000 | 4,662,008 | ||||||
144A 4.125% 11/1/24 # | 2,790,000 | 2,795,539 |
41
Table of Contents
Schedule of investments
Delaware Diversified Income Fund
Principal amount° | Value (US $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Insurance (continued) | ||||||||
Progressive 4.00% 3/1/29 | 3,965,000 | $ | 3,946,480 | |||||
Prudential Financial | ||||||||
4.50% 11/15/20 | 3,385,000 | 3,467,412 | ||||||
5.375% 5/15/45 µ | 4,135,000 | 4,052,300 | ||||||
USIS Merger Sub 144A 6.875% 5/1/25 # | 6,305,000 | 6,163,137 | ||||||
Voya Financial 144A 4.70% 1/23/48 #µ | 3,740,000 | 3,225,750 | ||||||
Willis North America | ||||||||
3.60% 5/15/24 | 986,000 | 949,871 | ||||||
4.50% 9/15/28 | 3,580,000 | 3,550,615 | ||||||
XLIT | ||||||||
4.894% (LIBOR03M + 2.458%) *y● | 2,639,000 | 2,593,134 | ||||||
5.50% 3/31/45 | 3,555,000 | 3,647,991 | ||||||
|
| |||||||
77,862,239 | ||||||||
|
| |||||||
Media – 0.34% | ||||||||
Altice France 144A 6.25% 5/15/24 # | 1,815,000 | 1,749,206 | ||||||
AMC Networks 4.75% 8/1/25 | 1,015,000 | 946,081 | ||||||
CCO Holdings 144A 5.125% 5/1/27 # | 1,190,000 | 1,123,063 | ||||||
Cequel Communications Holdings I 144A 7.75% 7/15/25 # | 2,000,000 | 2,120,000 | ||||||
Gray Television 144A 5.875% 7/15/26 # | 1,920,000 | 1,847,405 | ||||||
Tribune Media 5.875% 7/15/22 | 1,080,000 | 1,098,900 | ||||||
UPCB Finance IV 144A 5.375% 1/15/25 # | 2,849,000 | 2,779,199 | ||||||
Virgin Media Secured Finance 144A 5.25% 1/15/26 # | 2,360,000 | 2,209,550 | ||||||
|
| |||||||
13,873,404 | ||||||||
|
| |||||||
Real Estate – 0.92% | ||||||||
Corporate Office Properties | ||||||||
3.60% 5/15/23 | 6,545,000 | 6,314,313 | ||||||
5.25% 2/15/24 | 5,315,000 | 5,463,669 | ||||||
ESH Hospitality 144A 5.25% 5/1/25 # | 1,110,000 | 1,053,113 | ||||||
Growthpoint Properties International 144A 5.872% 5/2/23 # | 2,175,000 | 2,163,157 | ||||||
Hospitality Properties Trust 4.50% 3/15/25 | 5,010,000 | 4,841,096 | ||||||
Host Hotels & Resorts | ||||||||
3.75% 10/15/23 | 4,180,000 | 4,070,000 | ||||||
3.875% 4/1/24 | 705,000 | 688,138 | ||||||
4.50% 2/1/26 | 1,525,000 | 1,503,335 | ||||||
Kilroy Realty 3.45% 12/15/24 | 3,485,000 | 3,315,896 | ||||||
Life Storage 3.50% 7/1/26 | 3,750,000 | 3,454,550 | ||||||
WP Carey 4.60% 4/1/24 | 4,645,000 | 4,675,550 | ||||||
|
| |||||||
37,542,817 | ||||||||
|
| |||||||
Services – 0.21% | ||||||||
Advanced Disposal Services 144A 5.625% 11/15/24 # | 380,000 | 371,450 |
42
Table of Contents
Principal amount° | Value (US $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Services (continued) | ||||||||
Avis Budget Car Rental 144A 6.375% 4/1/24 #* | 1,115,000 | $ | 1,069,006 | |||||
Covanta Holding 5.875% 7/1/25 | 1,105,000 | 1,074,613 | ||||||
GEO Group | ||||||||
5.125% 4/1/23 | 860,000 | 810,550 | ||||||
5.875% 1/15/22 | 500,000 | 496,250 | ||||||
Iron Mountain US Holdings 144A 5.375% 6/1/26 # | 1,780,000 | 1,646,500 | ||||||
KAR Auction Services 144A 5.125% 6/1/25 # | 875,000 | 831,250 | ||||||
Prime Security Services Borrower 144A 9.25% 5/15/23 # | 1,002,000 | 1,061,318 | ||||||
United Rentals North America 5.50% 5/15/27 | 1,335,000 | 1,271,587 | ||||||
|
| |||||||
8,632,524 | ||||||||
|
| |||||||
Technology – 1.23% | ||||||||
Baidu 4.375% 3/29/28 | 3,905,000 | 3,798,034 | ||||||
Broadcom 3.50% 1/15/28 | 4,470,000 | 3,942,823 | ||||||
CDK Global | ||||||||
4.875% 6/1/27 | 1,450,000 | 1,364,813 | ||||||
5.00% 10/15/24 | 4,350,000 | 4,305,195 | ||||||
CDW Finance 5.00% 9/1/25 | 1,425,000 | 1,394,719 | ||||||
CommScope Technologies 144A 5.00% 3/15/27 # | 3,110,000 | 2,799,000 | ||||||
Corning | ||||||||
4.375% 11/15/57 | 1,955,000 | 1,595,347 | ||||||
5.35% 11/15/48 | 1,955,000 | 1,958,187 | ||||||
Dell International | ||||||||
144A 6.02% 6/15/26 # | 8,675,000 | 9,008,740 | ||||||
144A 8.10% 7/15/36 # | 140,000 | 158,603 | ||||||
First Data 144A 5.75% 1/15/24 # | 1,325,000 | 1,338,250 | ||||||
Fiserv | ||||||||
3.80% 10/1/23 | 1,510,000 | 1,510,834 | ||||||
4.20% 10/1/28 | 2,880,000 | 2,856,800 | ||||||
Genesys Telecommunications Laboratories 144A 10.00% 11/30/24 # | 90,000 | 97,875 | ||||||
Infor US 6.50% 5/15/22 | 320,000 | 320,800 | ||||||
Marvell Technology Group 4.875% 6/22/28 | 6,285,000 | 6,177,529 | ||||||
Microchip Technology | ||||||||
144A 3.922% 6/1/21 # | 1,445,000 | 1,435,449 | ||||||
144A 4.333% 6/1/23 # | 1,665,000 | 1,629,664 | ||||||
MSCI 144A 5.375% 5/15/27 # | 1,180,000 | 1,171,150 | ||||||
NXP 144A 4.625% 6/1/23 # | 3,230,000 | 3,209,813 | ||||||
|
| |||||||
50,073,625 | ||||||||
|
| |||||||
Transportation – 0.73% | ||||||||
Adani Abbot Point Terminal 144A 4.45% 12/15/22 # | 6,770,000 | 5,954,966 | ||||||
Burlington Northern Santa Fe 4.15% 12/15/48 | 2,910,000 | 2,753,179 | ||||||
FedEx 4.05% 2/15/48 | 6,055,000 | 5,132,931 |
43
Table of Contents
Schedule of investments
Delaware Diversified Income Fund
Principal amount° | Value (US $) | |||||||
| ||||||||
Corporate Bonds (continued) | ||||||||
| ||||||||
Transportation (continued) | ||||||||
Norfolk Southern 3.80% 8/1/28 | 3,595,000 | $ | 3,501,911 | |||||
Penske Truck Leasing 144A 4.20% 4/1/27 # | 4,020,000 | 3,909,693 | ||||||
Union Pacific 3.50% 6/8/23 | 3,175,000 | 3,163,197 | ||||||
United Airlines 2014-1 Class A Pass Through Trust 4.00% 4/11/26 ◆ | 1,844,722 | 1,846,078 | ||||||
United Airlines 2014-2 Class A Pass Through Trust 3.75% 9/3/26 ◆ | 1,725,029 | 1,714,342 | ||||||
XPO Logistics 144A 6.125% 9/1/23 # | 1,781,000 | 1,830,779 | ||||||
|
| |||||||
29,807,076 | ||||||||
|
| |||||||
Utilities – 0.23% | ||||||||
Aegea Finance 144A 5.75% 10/10/24 #* | 3,570,000 | 3,453,975 | ||||||
AES Andres 144A 7.95% 5/11/26 # | 4,100,000 | 4,217,875 | ||||||
Calpine | ||||||||
144A 5.25% 6/1/26 # | 405,000 | 373,613 | ||||||
5.75% 1/15/25 | 1,515,000 | 1,359,409 | ||||||
|
| |||||||
9,404,872 | ||||||||
|
| |||||||
Total Corporate Bonds (cost $1,684,557,518) | 1,642,715,981 | |||||||
|
| |||||||
| ||||||||
Loan Agreements – 8.19% | ||||||||
| ||||||||
Acrisure Tranche B 1st Lien 6.552% (LIBOR01M + 4.25%) 11/22/23 ● | 3,523,308 | 3,540,044 | ||||||
Air Medical Group Holdings Tranche B 1st Lien 5.534% (LIBOR01M + 3.25%) 4/28/22 ● | 10,457 | 10,179 | ||||||
Albertson’s Tranche B4 1st Lien 5.052% (LIBOR01M + 2.75%) 8/25/21 ● | 3,169,153 | 3,168,164 | ||||||
Allied Universal Holdco 1st Lien 6.641% (LIBOR03M + 3.25%) 7/28/22 ● | 1,070,000 | 1,065,541 | ||||||
Alpha 3 Tranche B1 1st Lien 5.386% (LIBOR03M + 3.00%) 1/31/24 ● | 1,721,155 | 1,724,024 | ||||||
Altice France Tranche B11 1st Lien 5.052% (LIBOR01M + 2.75%) 7/31/25 ● | 2,609,315 | 2,540,820 | ||||||
Altice France Tranche B12 1st Lien 5.967% (LIBOR01M + 3.688%) 1/31/26 ● | 188,134 | 184,724 | ||||||
Altice France Tranche B13 1st Lien 6.28% (LIBOR01M + 4.00%) 1/31/26 ● | 630,000 | 622,440 | ||||||
American Airlines Tranche B 1st Lien 4.28% (LIBOR01M + 2.00%) 12/14/23 ● | 3,530,500 | 3,511,467 | ||||||
Applied Systems 2nd Lien 9.386% (LIBOR03M + 7.00%) 9/19/25 ● | 3,735,000 | 3,822,772 | ||||||
Aramark Services Tranche B3 1st Lien 4.052% (LIBOR01M + 1.75%) 3/11/25 ● | 1,744,079 | 1,747,349 | ||||||
AssuredPartners Tranche B 1st Lien 5.552% (LIBOR01M + 3.25%) 10/22/24 ● | 3,170,953 | 3,166,494 |
44
Table of Contents
Principal amount° | Value (US $) | |||||||
| ||||||||
Loan Agreements (continued) | ||||||||
| ||||||||
Avis Budget Car Rental Tranche B 1st Lien 4.31% | 2,590,425 | $ | 2,585,537 | |||||
Ball Metalpack Finco Tranche B 1st Lien 6.802% | 2,468,813 | 2,496,587 | ||||||
Ball Metalpack Finco Tranche B 2nd Lien 11.052% | 542,000 | 536,580 | ||||||
Bausch Health Tranche B 1st Lien 5.274% (LIBOR01M + 3.00%) 6/1/25 ● | 2,529,354 | 2,535,503 | ||||||
Blue Ribbon 1st Lien 6.265% (LIBOR03M + 3.00%) 11/13/21 ● | 4,450,007 | 4,177,444 | ||||||
Bombardier Recreational Products Tranche B 1st Lien 4.30% (LIBOR01M + 2.00%) 5/23/25 ● | 1,476,300 | 1,474,762 | ||||||
Boxer Parent Tranche B 1st Lien 6.648% (LIBOR03M + 4.25%) 10/2/25 ● | 2,652,000 | 2,663,603 | ||||||
Builders FirstSource 1st Lien 5.386% (LIBOR03M + 3.00%) 2/29/24 ● | 3,778,654 | 3,749,528 | ||||||
BWAY Holding Tranche B 1st Lien 5.658% (LIBOR03M + 3.25%) 4/3/24 ● | 3,401,938 | 3,387,054 | ||||||
CH Hold 2nd Lien 9.552% (LIBOR01M + 7.25%) 2/1/25 ● | 824,418 | 832,662 | ||||||
Change Healthcare Holdings Tranche B 1st Lien 5.173% (LIBOR01M + 2.75%) 3/1/24 ● | 4,797,786 | 4,798,117 | ||||||
Charter Communications Operating Tranche B 1st Lien 4.31% (LIBOR01M + 2.00%) 4/30/25 ● | 2,496,138 | 2,499,258 | ||||||
Chemours Tranche B2 1st Lien 4.05% (LIBOR01M + 1.75%) 4/3/25 ● | 3,923,996 | 3,906,828 | ||||||
CityCenter Holdings Tranche B 1st Lien 4.552% (LIBOR01M + 2.25%) 4/18/24 ● | 4,394,882 | 4,391,449 | ||||||
Community Health Systems Tranche H 1st Lien 5.563% (LIBOR03M + 3.25%) 1/27/21 ● | 2,260,823 | 2,219,376 | ||||||
Core & Main Tranche B 1st Lien 5.317% (LIBOR03M + 3.00%) 8/1/24 ● | 2,590,376 | 2,592,534 | ||||||
CPM Holdings 1st Lien 0.00% 10/24/25 ● X | 985,000 | 992,388 | ||||||
CPM Holdings 2nd Lien 0.00% 10/24/26 ● X | 540,000 | 542,025 | ||||||
CROWN Americas Tranche B 1st Lien 4.283% (LIBOR01M + 2.00%) 4/3/25 ● | 2,566,318 | 2,575,141 | ||||||
CSC Holdings 1st Lien 4.53% (LIBOR01M + 2.25%) 7/17/25 ● | 1,837,025 | 1,830,114 | ||||||
CSC Holdings Tranche B 1st Lien 4.78% (LIBOR01M + 2.50%) 1/25/26 ● | 1,383,050 | 1,387,545 | ||||||
Dakota Holdings Tranche B 1st Lien 5.552% (LIBOR01M + 3.25%) 2/13/25 ● | 618,890 | 619,222 | ||||||
DaVita Tranche B 1st Lien 5.052% (LIBOR01M + 2.75%) 6/24/21 ● | 619,179 | 621,257 | ||||||
Delek US Holdings Tranche B 1st Lien 4.552% (LIBOR01M + 2.25%) 3/30/25 ● | 1,557,175 | 1,558,798 |
45
Table of Contents
Schedule of investments
Delaware Diversified Income Fund
Principal amount° | Value (US $) | |||||||
| ||||||||
Loan Agreements (continued) | ||||||||
| ||||||||
Digicel International Finance Tranche B 1st Lien 5.57% (LIBOR03M + 3.25%) 5/10/24 ● | 1,144,012 | $ | 1,098,251 | |||||
DTZ US Borrower Tranche B 1st Lien 5.552% (LIBOR01M + 3.25%) 8/21/25 ● | 1,220,000 | 1,221,412 | ||||||
Energy Transfer Tranche B 1st Lien 4.302% (LIBOR01M + 2.00%) 2/2/24 ● | 1,325,000 | 1,326,574 | ||||||
Envision Healthcare Tranche B 1st Lien 6.052% (LIBOR01M + 3.75%) 10/11/25 ● | 5,580,000 | 5,475,760 | ||||||
ESH Hospitality Tranche B 1st Lien 4.302% (LIBOR01M + 2.00%) 8/30/23 ● | 2,281,091 | 2,282,695 | ||||||
ExamWorks Group Tranche B1 1st Lien 5.552% (LIBOR01M + 3.25%) 7/27/23 ● | 3,470,632 | 3,487,263 | ||||||
First Data 1st Lien | ||||||||
4.287% (LIBOR01M + 2.00%) 7/10/22 ● | 1,048,415 | 1,047,271 | ||||||
4.287% (LIBOR01M + 2.00%) 4/26/24 ● | 7,280,438 | 7,272,495 | ||||||
Flex Acquisition 1st Lien 5.256% (LIBOR01M + 3.00%) 12/29/23 ● | 981,571 | 981,395 | ||||||
Flying Fortress Holdings Tranche B 1st Lien 4.136% (LIBOR03M + 1.75%) 10/30/22 ● | 1,150,209 | 1,155,344 | ||||||
Frontier Communications Tranche A-DD 1st Lien 5.06% (LIBOR01M + 2.75%) 3/31/21 ● | 1,118,056 | 1,088,707 | ||||||
Frontier Communications Tranche B1 1st Lien 6.06% (LIBOR01M + 3.75%) 6/15/24 ● | 2,145,027 | 2,080,676 | ||||||
Gardner Denver Tranche B1 1st Lien 5.052% (LIBOR01M + 2.75%) 7/30/24 ● | 4,082,317 | 4,097,989 | ||||||
Gates Global Tranche B2 1st Lien 5.052% (LIBOR01M + 2.75%) 3/31/24 ● | 2,895,253 | 2,903,525 | ||||||
Gentiva Health Services 1st Lien 6.063% (LIBOR01M + 3.75%) 7/2/25 =● | 4,280,905 | 4,296,851 | ||||||
GEO Group Tranche B 1st Lien 4.31% (LIBOR01M + 2.00%) 3/23/24 ● | 810,884 | 809,110 | ||||||
GIP III Stetson I Tranche B 1st Lien 6.695% (LIBOR03M + 4.25%) 7/18/25 ● | 1,449,000 | 1,455,339 | ||||||
Gray Television Tranche B2 1st Lien 4.515% (LIBOR01M + 2.25%) 2/7/24 ● | 2,027,963 | 2,031,343 | ||||||
Greeneden US Holdings II Tranche B3 1st Lien 5.802% (LIBOR01M + 3.50%) 12/1/23 ● | 3,699,488 | 3,711,974 | ||||||
Greenhill & Co. Tranche B 1st Lien 6.048% (LIBOR02M + 3.75%) 10/12/22 ● | 1,514,597 | 1,524,064 | ||||||
GVC Holdings Tranche B2 1st Lien 4.802% (LIBOR01M + 2.50%) 3/16/24 ● | 2,497,450 | 2,502,133 | ||||||
HCA Tranche B10 1st Lien 4.302% (LIBOR01M + 2.00%) 3/13/25 ● | 6,228,700 | 6,265,468 | ||||||
Hearthside Group Holdings 1st Lien 5.302% (LIBOR01M + 3.00%) 5/31/25 ● | 1,463,333 | 1,440,926 |
46
Table of Contents
Principal amount° | Value (US $) | |||||||
| ||||||||
Loan Agreements (continued) | ||||||||
| ||||||||
Heartland Dental 1st Lien 6.052% (LIBOR01M + 3.75%) 4/30/25 ● | 2,021,022 | $ | 2,016,812 | |||||
Hilton Worldwide Finance Tranche B2 1st Lien 4.031% | 1,361,907 | 1,364,555 | ||||||
Hoya Midco Tranche B 1st Lien 5.802% (LIBOR01M + 3.50%) 6/30/24 ● | 2,360,125 | 2,352,750 | ||||||
HUB International Tranche B 1st Lien 5.49% (LIBOR03M + 3.00%) 4/25/25 ● | 3,491,250 | 3,487,511 | ||||||
Hyperion Insurance Group Tranche B 1st Lien 5.813% | 2,964,084 | 2,983,226 | ||||||
INEOS US Finance Tranche B 1st Lien 4.302% (LIBOR01M + 2.00%) 3/31/24 ● | 3,314,950 | 3,317,022 | ||||||
IQVIA Tranche B3 1st Lien 4.136% (LIBOR03M + 1.75%) 6/11/25 ● | 2,628,413 | 2,624,470 | ||||||
Iron Mountain Tranche B 1st Lien 4.052% (LIBOR01M + 1.75%) 1/2/26 ● | 6,288,400 | 6,215,033 | ||||||
JBS USA LUX Tranche B 1st Lien 4.844% (LIBOR03M + 2.50%) 10/30/22 ● | 3,052,186 | 3,055,763 | ||||||
Kronos 2nd Lien 10.593% (LIBOR03M + 8.25%) 11/1/24 ● | 462,000 | 469,123 | ||||||
Kronos Tranche B 1st Lien 5.343% (LIBOR03M + 3.00%) 11/1/23 ● | 1,950,436 | 1,955,819 | ||||||
Lucid Energy Group II Borrower 1st Lien 5.28% | 3,370,257 | 3,312,683 | ||||||
LUX HOLDCO III 1st Lien 5.302% (LIBOR01M + 3.00%) 3/28/25 ● | 1,042,760 | 1,048,626 | ||||||
MGM Growth Properties Operating Partnership Tranche B 1st Lien 4.302% (LIBOR01M + 2.00%) 3/25/25 ● | 2,590,076 | 2,585,220 | ||||||
Microchip Technology 1st Lien 4.31% (LIBOR01M + 2.00%) 5/29/25 ● | 3,807,243 | 3,796,773 | ||||||
MPH Acquisition Holdings Tranche B 1st Lien 5.136% | 5,419,022 | 5,414,367 | ||||||
NCI Building Systems Tranche B 1st Lien 4.302% (LIBOR01M + 2.00%) 2/8/25 ● | 2,666,600 | 2,665,488 | ||||||
NFP Tranche B 1st Lien 5.302% (LIBOR01M + 3.00%) 1/8/24 ● | 2,803,598 | 2,798,692 | ||||||
Nielsen Finance Tranche B4 1st Lien 4.281% (LIBOR01M + 2.00%) 10/4/23 ● | 484,500 | 482,683 | ||||||
Northriver Midstream Finance Tranche B 1st Lien 5.646% | 515,000 | 518,412 | ||||||
OCI Partners 1st Lien 6.386% (LIBOR03M + 4.00%) 3/13/25 ● | 781,075 | 785,957 | ||||||
ON Semiconductor Tranche B 1st Lien 4.052% | 2,402,810 | 2,401,909 | ||||||
Panda Hummel Tranche B1 1st Lien 8.302% (LIBOR01M + 6.00%) 10/27/22 =● | 501,743 | 500,174 |
47
Table of Contents
Schedule of investments
Delaware Diversified Income Fund
Principal amount° | Value (US $) | |||||||
| ||||||||
Loan Agreements (continued) | ||||||||
| ||||||||
Panda Stonewall Tranche B1 1st Lien 7.886% (LIBOR03M + 5.50%) 11/13/21 =● | 1,108,089 | $ | 1,104,973 | |||||
Penn National Gaming Tranche B 1st Lien 4.581% (LIBOR02M + 2.25%) 10/15/25 ● | 2,500,000 | 2,510,353 | ||||||
Pisces Midco Tranche B 1st Lien 6.175% (LIBOR03M + 3.75%) 4/12/25 ● | 1,767,570 | 1,763,519 | ||||||
PQ Tranche B 1st Lien 5.027% (LIBOR03M + 2.50%) 2/8/25 ● | 5,167,410 | 5,169,564 | ||||||
Prestige Brands Tranche B5 1st Lien 4.302% (LIBOR01M + 2.00%) 1/26/24 ● | 2,110,021 | 2,114,730 | ||||||
Radiate Holdco Tranche B 1st Lien 5.302% (LIBOR01M + 3.00%) 2/1/24 ● | 2,631,123 | 2,617,804 | ||||||
Refinitiv US Holdings Tranche B 1st Lien 6.052% (LIBOR01M + 3.75%) 10/1/25 ● | 3,116,000 | 3,092,630 | ||||||
Republic of Angola 8.747% (LIBOR06M + 6.25%) 12/16/23 =● | 6,088,107 | 5,711,862 | ||||||
Russell Investments US Institutional Holdco Tranche B 1st Lien 5.552% (LIBOR01M + 3.25%) 6/1/23 ● | 6,751,722 | 6,790,403 | ||||||
Sable International Finance Tranche B4 1st Lien 5.547% (LIBOR01M + 3.25%) 1/31/26 ● | 950,000 | 951,253 | ||||||
SBA Senior Finance II Tranche B 1st Lien 4.31% (LIBOR01M + 2.00%) 4/11/25 ● | 3,376,538 | 3,373,725 | ||||||
Scientific Games International Tranche B5 1st Lien 5.046% (LIBOR02M + 2.75%) 8/14/24 ● | 5,289,760 | 5,247,881 | ||||||
Sigma US Tranche B2 1st Lien 5.398% (LIBOR03M + 3.00%) 7/2/25 ● | 2,310,000 | 2,306,029 | ||||||
Sinclair Television Group Tranche B2 1st Lien 4.56% (LIBOR01M + 2.25%) 1/3/24 ● | 2,149,847 | 2,151,190 | ||||||
Solenis International 1st Lien 6.311% (LIBOR03M + 4.00%) 12/26/23 ● | 1,316,700 | 1,319,718 | ||||||
Specialty Building Products Holdings 1st Lien 0.00% 10/1/25 ● X | 2,433,000 | 2,429,453 | ||||||
Sprint Communications Tranche B 1st Lien 4.813% (LIBOR01M + 2.50%) 2/2/24 ● | 5,410,305 | 5,406,880 | ||||||
SS&C European Holdings Tranche B4 1st Lien 4.552% (LIBOR01M + 2.25%) 4/16/25 ● | 1,106,487 | 1,102,424 | ||||||
SS&C Technologies Tranche B3 1st Lien 4.552% (LIBOR01M + 2.25%) 4/16/25 ● | 2,854,715 | 2,844,232 | ||||||
SS&C Technologies Tranche B5 1st Lien 4.552% (LIBOR01M + 2.25%) 4/16/25 ● | 1,433,000 | 1,429,955 | ||||||
StandardAero Aviation Holdings 1st Lien 6.05% (LIBOR01M + 3.75%) 7/7/22 ● | 1,620,479 | 1,629,450 | ||||||
Staples 1st Lien 6.343% (LIBOR03M + 4.00%) 9/12/24 ● | 1,062,878 | 1,060,885 | ||||||
Stars Group Holdings Tranche B 1st Lien 5.886% (LIBOR03M + 3.50%) 7/10/25 ● | 4,269,300 | 4,287,978 |
48
Table of Contents
Principal amount° | Value (US $) | |||||||
| ||||||||
Loan Agreements (continued) | ||||||||
| ||||||||
Summit Materials Tranche B 1st Lien 4.302% (LIBOR01M + 2.00%) 11/10/24 ● | 2,545,763 | $ | 2,537,410 | |||||
Summit Midstream Partners Holdings Tranche B 1st Lien 8.302% (LIBOR01M + 6.00%) 5/21/22 ● | 2,521,355 | 2,537,113 | ||||||
Surgery Center Holdings 1st Lien 5.57% (LIBOR03M + 3.25%) 8/31/24 ● | 3,963,647 | 3,961,170 | ||||||
Syneos Health Tranche B 1st Lien 4.302% (LIBOR01M + 2.00%) 8/1/24 ● | 1,573,839 | 1,573,417 | ||||||
Telenet Financing USD Tranche AN 1st Lien 4.53% (LIBOR01M + 2.25%) 8/15/26 ● | 2,530,000 | 2,523,149 | ||||||
Tenneco Tranche B 1st Lien 5.052% (LIBOR01M + 2.75%) 10/1/25 ● | 1,176,000 | 1,174,163 | ||||||
TerraForm Power Operating Tranche B 1st Lien 4.302% (LIBOR01M + 2.00%) 11/8/22 ● | 2,590,425 | 2,590,425 | ||||||
Titan Acquisition Tranche B 1st Lien 5.302% (LIBOR01M + 3.00%) 3/28/25 ● | 2,516,532 | 2,376,027 | ||||||
TMS International Tranche B2 1st Lien 5.187% (LIBOR03M + 2.75%) 8/14/24 ● | 992,104 | 992,104 | ||||||
TransDigm Tranche F 1st Lien 4.802% (LIBOR01M + 2.50%) 6/9/23 ● | 2,990,363 | 2,980,510 | ||||||
Tribune Media Tranche B 1st Lien 5.302% (LIBOR01M + 3.00%) 12/27/20 ● | 159,116 | 159,662 | ||||||
Tribune Media Tranche C 1st Lien 5.302% (LIBOR01M + 3.00%) 1/27/24 ● | 1,983,178 | 1,989,971 | ||||||
Trident TPI Holdings 1st Lien 5.552% (LIBOR01M + 3.25%) 10/5/24 ● | 1,158,423 | 1,151,183 | ||||||
Tronox Blocked Borrower Tranche B 1st Lien 5.302% (LIBOR01M + 3.00%) 9/22/24 ● | 375,073 | 374,838 | ||||||
Tronox Finance Tranche B 1st Lien 5.302% (LIBOR01M + 3.00%) 9/22/24 ● | 865,552 | 865,011 | ||||||
United Rentals North America Tranche B 1st Lien 0.00% 10/31/25 ● X | 225,000 | 226,266 | ||||||
Unitymedia Finance Tranche D 1st Lien 4.53% (LIBOR01M + 2.25%) 1/15/26 ● | 1,025,000 | 1,024,451 | ||||||
Unitymedia Finance Tranche E 1st Lien 4.28% (LIBOR01M + 2.00%) 6/1/23 ● | 4,415,000 | 4,414,210 | ||||||
Univision Communications Tranche C5 1st Lien 5.052% (LIBOR01M + 2.75%) 3/15/24 ● | 1,181,818 | 1,135,776 | ||||||
UPC Financing Partnership Tranche AR 1st Lien 4.78% (LIBOR01M + 2.50%) 1/15/26 ● | 832,911 | 830,699 | ||||||
USI Tranche B 1st Lien 5.386% (LIBOR03M + 3.00%) 5/16/24 ● | 6,037,682 | 6,010,512 | ||||||
USIC Holdings 1st Lien 5.552% (LIBOR01M + 3.25%) 12/9/23 ● | 3,581,452 | 3,598,614 |
49
Table of Contents
Schedule of investments
Delaware Diversified Income Fund
Principal amount° | Value (US $) | |||||||
| ||||||||
Loan Agreements (continued) | ||||||||
| ||||||||
Utz Quality Foods 1st Lien 5.802% (LIBOR01M + 3.50%) 11/21/24 ● | 1,169,005 | $ | 1,174,850 | |||||
Vantage Specialty Chemicals 2nd Lien 10.777% (LIBOR03M + 8.25%) 10/26/25 ● | 190,000 | 190,633 | ||||||
Vantage Specialty Chemicals Tranche B 1st Lien 5.806% (LIBOR01M + 3.50%) 10/28/24 ● | 2,391,925 | 2,401,648 | ||||||
VeriFone Systems 1st Lien 6.322% (LIBOR03M + 4.00%) 8/20/25 ● | 482,000 | 482,964 | ||||||
Virgin Media Bristol Tranche K 1st Lien 4.78% (LIBOR01M + 2.50%) 1/15/26 ● | 1,520,000 | 1,520,815 | ||||||
Vistra Operations Tranche B3 1st Lien 4.293% (LIBOR01M + 2.00%) 12/1/25 ● | 2,992,500 | 2,986,889 | ||||||
Visual Comfort Group 1st Lien 0.00% 2/28/24 ● X | 2,480,000 | 2,498,600 | ||||||
Visual Comfort Group 2nd Lien 9.242% (LIBOR01M + 8.00%) 2/28/25 ● | 212,130 | 214,516 | ||||||
Western Digital Tranche B4 1st Lien 4.044% (LIBOR01M + 1.75%) 4/29/23 ● | 465,829 | 463,732 | ||||||
Wyndham Hotels & Resorts Tranche B 1st Lien 4.052% (LIBOR01M + 1.75%) 5/30/25 ● | 2,010,000 | 2,011,759 | ||||||
Wynn Resorts Tranche B 1st Lien 0.00% 10/22/24 ● X | 1,675,000 | 1,673,692 | ||||||
XPO Logistics Tranche B 1st Lien 4.509% (LIBOR03M + 2.00%) 2/24/25 ● | 3,670,000 | 3,683,252 | ||||||
Zayo Group Tranche B2 1st Lien 4.552% (LIBOR01M + 2.25%) 1/19/24 ● | 2,744,616 | 2,751,905 | ||||||
Zekelman Industries 1st Lien 4.623% (LIBOR03M + 2.25%) 6/14/21 ● | 3,658,872 | 3,658,302 | ||||||
|
| |||||||
Total Loan Agreements (cost $332,500,881) | 332,944,092 | |||||||
|
| |||||||
| ||||||||
Municipal Bonds – 0.19% | ||||||||
| ||||||||
Buckeye, Ohio Tobacco Settlement Financing Authority (Asset-Backed Senior Turbo) Series A-2 5.875% 6/1/47 | 760,000 | 740,962 | ||||||
Commonwealth of Massachusetts | ||||||||
Series C 5.00% 10/1/25 | 280,000 | 323,610 | ||||||
Oregon State Taxable Pension | ||||||||
(Taxable Build America Bonds) 5.892% 6/1/27 | 150,000 | 171,523 | ||||||
South Carolina Public Service Authority | ||||||||
Series D 4.77% 12/1/45 | 790,000 | 776,262 | ||||||
State of California Various Purposes | ||||||||
(Build America Bonds) 7.55% 4/1/39 | 2,195,000 | 3,124,451 | ||||||
Texas Water Development Board | ||||||||
Series A 5.00% 10/15/45 | 670,000 | 735,439 | ||||||
(State Water Implementation Revenue) 5.00% 10/15/46 | 1,745,000 | 1,921,489 | ||||||
|
| |||||||
Total Municipal Bonds (cost $8,240,645) | 7,793,736 | |||||||
|
|
50
Table of Contents
Principal amount° | Value (US $) | |||||||
| ||||||||
Non-Agency Asset-Backed Securities – 4.16% |
| |||||||
| ||||||||
American Express Credit Account Master Trust | ||||||||
Series 2017-2 A 2.73% (LIBOR01M + 0.45%) 9/16/24 ● | 6,610,000 | $ | 6,660,806 | |||||
Series 2017-5 A 2.66% (LIBOR01M + 0.38%) 2/18/25 ● | 5,175,000 | 5,197,777 | ||||||
Series 2018-3 A 2.60% (LIBOR01M + 0.32%) 10/15/25 ● | 2,720,000 | 2,720,736 | ||||||
Series 2018-9 A 2.66% (LIBOR01M + 0.38%) 4/15/26 ● | 5,700,000 | 5,705,136 | ||||||
Avis Budget Rental Car Funding AESOP | ||||||||
Series 2014-1A A 144A 2.46% 7/20/20 # | 2,547,000 | 2,539,623 | ||||||
BA Credit Card Trust | ||||||||
Series 2018-A3 A3 3.10% 12/15/23 | 2,800,000 | 2,789,829 | ||||||
Barclays Dryrock Issuance Trust | ||||||||
Series 2017-1 A 2.61% (LIBOR01M + 0.33%, Floor 0.33%) 3/15/23 ● | 980,000 | 981,650 | ||||||
Carmax Auto Owner Trust | ||||||||
Series 2018-4 A2B 2.482% (LIBOR01M + 0.20%) 2/15/22 ● | 3,425,000 | 3,424,998 | ||||||
Chase Issuance Trust | ||||||||
Series 2017-A2 A 2.68% (LIBOR01M + 0.40%) 3/15/24 ● | 6,010,000 | 6,049,363 | ||||||
Citibank Credit Card Issuance Trust | ||||||||
Series 2017-A5 A5 2.90% (LIBOR01M + 0.62%, Floor 0.62%) 4/22/26 ● | 1,065,000 | 1,074,370 | ||||||
Series 2018-A2 A2 2.61% (LIBOR01M + 0.33%) 1/20/25 ● | 8,710,000 | 8,702,876 | ||||||
Citicorp Residential Mortgage Trust | ||||||||
Series 2006-3 A5 5.287% 11/25/36 ● | 5,800,000 | 5,952,042 | ||||||
CNH Equipment Trust | ||||||||
Series 2017-A A3 2.07% 5/16/22 | 8,300,000 | 8,210,388 | ||||||
Contimortgage Home Equity Loan Trust | ||||||||
Series 1996-4 A8 7.22% 1/15/28 | 2,797 | 2,626 | ||||||
Discover Card Execution Note Trust | ||||||||
Series 2017-A7 A7 2.64% (LIBOR01M + 0.36%) 4/15/25 ● | 2,730,000 | 2,737,669 | ||||||
Series 2018-A6 A6 2.664% (LIBOR01M + 0.39%) 3/15/26 ● | 7,545,000 | 7,545,515 | ||||||
Ford Credit Auto Owner Trust | ||||||||
Series 2018-1 A 144A 3.19% 7/15/31 # | 5,805,000 | 5,613,160 | ||||||
Series 2018-B A2B 2.407% (LIBOR01M + 0.12%, Floor 0.12%) 9/15/21 ● | 4,610,000 | 4,610,043 | ||||||
Ford Credit Floorplan Master Owner Trust A | ||||||||
Series 2017-1 A2 2.70% (LIBOR01M + 0.42%) 5/15/22 ● | 1,350,000 | 1,354,942 | ||||||
GMF Floorplan Owner Revolving Trust | ||||||||
Series 2017-1 A1 144A 2.22% 1/18/22 # | 1,425,000 | 1,411,595 |
51
Table of Contents
Schedule of investments
Delaware Diversified Income Fund
Principal amount° | Value (US $) | |||||||
| ||||||||
Non-Agency Asset-Backed Securities (continued) | ||||||||
| ||||||||
Golden Credit Card Trust | ||||||||
Series 2014-2A A 144A 2.73% (LIBOR01M + 0.45%) 3/15/21 #● | 2,715,000 | $ | 2,717,653 | |||||
Hardee’s Funding | ||||||||
Series 2018-1A A2I 144A 4.25% 6/20/48 # | 3,100,000 | 3,084,779 | ||||||
Hertz Vehicle Financing | ||||||||
Series 2018-2A A 144A 3.65% 6/27/22 # | 1,300,000 | 1,295,399 | ||||||
HOA Funding | ||||||||
Series 2014-1A A2 144A 4.846% 8/20/44 # | 8,114,400 | 7,989,276 | ||||||
Hyundai Auto Lease Securitization Trust | ||||||||
Series 2018-A A2B 144A 2.48% (LIBOR01M + 0.20%) 8/17/20 #● | 4,600,710 | 4,603,332 | ||||||
Series 2018-A A3 144A 2.81% 4/15/21 # | 4,500,000 | 4,478,860 | ||||||
Mercedes-Benz Master Owner Trust | ||||||||
Series 2018-BA A 144A 2.62% (LIBOR01M + 0.34%) 5/15/23 #● | 2,325,000 | 2,329,166 | ||||||
Navistar Financial Dealer Note Master Owner Trust II | ||||||||
Series 2018-1 A 144A 2.911% (LIBOR01M + 0.63%, Floor 0.63%) 9/25/23 #● | 2,200,000 | 2,201,685 | ||||||
New Residential Mortgage Loan Trust | ||||||||
Series 2018-RPL1 A1 144A 3.50% 12/25/57 #● | 1,683,312 | 1,650,655 | ||||||
Nissan Auto Lease Trust | ||||||||
Series 2018-A A2B 2.424% (LIBOR01M + 0.15%) 2/16/21 ● | 3,420,000 | 3,412,936 | ||||||
Nissan Master Owner Trust Receivables | ||||||||
Series 2017-B A 2.71% (LIBOR01M + 0.43%) 4/18/22 ● | 5,765,000 | 5,784,879 | ||||||
Penarth Master Issuer | ||||||||
Series 2018-2A A1 144A 2.742% (LIBOR01M + 0.45%) 9/18/22 #● | 6,670,000 | 6,669,426 | ||||||
PFS Financing | ||||||||
Series 2018-A A 144A 2.68% (LIBOR01M + 0.40%) 2/15/22 #● | 1,865,000 | 1,865,252 | ||||||
Series 2018-E A 144A 2.73% (LIBOR01M + 0.45%) 10/17/22 #=● | 9,325,000 | 9,324,067 | ||||||
Popular ABS Mortgage Pass Through Trust | ||||||||
Series 2006-C A4 2.531% (LIBOR01M + 0.25%, Cap 14.00%, Floor 0.25%) 7/25/36 ◆● | 2,836,930 | 2,814,215 | ||||||
Taco Bell Funding | ||||||||
Series 2016-1A A2II 144A 4.377% 5/25/46 # | 2,807,250 | 2,828,697 | ||||||
Trafigura Securitisation Finance | ||||||||
Series 2017-1A A1 144A 3.13% (LIBOR01M + 0.85%) 12/15/20 #● | 3,200,000 | 3,204,861 | ||||||
Series 2018-1A A1 144A 3.01% (LIBOR01M + 0.73%) 3/15/22 #● | 5,810,000 | 5,811,609 |
52
Table of Contents
Principal amount° | Value (US $) | |||||||
| ||||||||
Non-Agency Asset-Backed Securities (continued) | ||||||||
| ||||||||
Vantage Data Centers Issuer | ||||||||
Series 2018-1A A2 144A 4.072% 2/16/43 # | 1,589,333 | $ | 1,585,086 | |||||
Verizon Owner Trust | ||||||||
Series 2016-2A A 144A 1.68% 5/20/21 # | 3,190,000 | 3,169,255 | ||||||
Series 2018-1A A1B 144A 2.54% (LIBOR01M + 0.26%) 9/20/22 #● | 100,000 | 100,110 | ||||||
Volvo Financial Equipment Master Owner Trust | ||||||||
Series 2017-A A 144A 2.78% (LIBOR01M + 0.50%) 11/15/22 #● | 4,685,000 | 4,698,443 | ||||||
Wendy’s Funding | ||||||||
Series 2018-1A A2I 144A 3.573% 3/15/48 # | 4,570,463 | 4,387,735 | ||||||
Total Non-Agency Asset-Backed Securities | 169,292,520 | |||||||
|
| |||||||
| ||||||||
Non-Agency Collateralized Mortgage Obligations – 2.48% | ||||||||
| ||||||||
Agate Bay Mortgage Trust | ||||||||
Series 2015-1 B1 144A 3.82% 1/25/45 #● | 2,361,739 | 2,306,018 | ||||||
Series 2015-1 B2 144A 3.82% 1/25/45 #● | 1,335,415 | 1,299,246 | ||||||
Banc of America Mortgage Trust | ||||||||
Series 2004-K 2A1 3.62% 12/25/34 ● | 555,855 | 555,111 | ||||||
Bank of America Alternative Loan Trust | ||||||||
Series 2005-1 2A1 5.50% 2/25/20 | 49,328 | 46,429 | ||||||
Series 2005-6 7A1 5.50% 7/25/20 | 134,252 | 125,076 | ||||||
CHL Mortgage Pass Through Trust | ||||||||
Series 2004-HYB2 2A 4.116% 7/20/34 ◆● | 41,115 | 38,327 | ||||||
Citicorp Mortgage Securities Trust | ||||||||
Series 2006-3 1A9 5.75% 6/25/36 | 297,985 | 297,142 | ||||||
Connecticut Avenue Securities Trust | ||||||||
Series 2018-R07 1M2 144A 4.681% (LIBOR01M + 2.40%) 4/25/31 #● | 3,105,000 | 3,105,000 | ||||||
Credit Suisse First Boston Mortgage Securities | ||||||||
Series 2005-5 6A3 5.00% 7/25/35 | 1,427,567 | 1,420,018 | ||||||
First Horizon Mortgage Pass Through Trust | ||||||||
Series 2004-7 1A3 5.50% 1/25/35 ◆ | 418,850 | 433,412 | ||||||
Flagstar Mortgage Trust | ||||||||
Series 2018-1 A5 144A 3.50% 3/25/48 #● | 2,455,147 | 2,399,715 | ||||||
Series 2018-5 A7 144A 4.00% 9/25/48 #● | 1,915,193 | 1,914,172 | ||||||
Galton Funding Mortgage Trust | ||||||||
Series 2018-1 A43 144A 3.50% 11/25/57 #● | 1,895,331 | 1,879,161 | ||||||
GSR Mortgage Loan Trust | ||||||||
Series 2004-9 4A1 4.193% 8/25/34 ● | 309,119 | 302,664 | ||||||
Holmes Master Issuer | ||||||||
Series 2018-2A A2 144A 2.856% (LIBOR03M + 0.42%) 10/15/54 #● | 2,685,000 | 2,684,742 |
53
Table of Contents
Schedule of investments
Delaware Diversified Income Fund
Principal amount° | Value (US $) | |||||||
| ||||||||
Non-Agency Collateralized Mortgage Obligations (continued) | ||||||||
| ||||||||
JPMorgan Mortgage Trust | ||||||||
Series 2005-A8 1A1 4.276% 11/25/35 ● | 180,148 | $ | 174,774 | |||||
Series 2006-S1 1A1 6.00% 4/25/36 | 1,966,018 | 2,064,833 | ||||||
Series 2007-A1 7A4 4.251% 7/25/35 ● | 37,910 | 34,345 | ||||||
Series 2014-2 B1 144A 3.419% 6/25/29 #● | 1,644,114 | 1,604,818 | ||||||
Series 2014-2 B2 144A 3.419% 6/25/29 #● | 612,565 | 594,307 | ||||||
Series 2014-IVR6 2A4 144A 2.50% 7/25/44 #● | 2,470,000 | 2,473,444 | ||||||
Series 2015-1 B2 144A 3.082% 12/25/44 #● | 2,770,394 | 2,759,012 | ||||||
Series 2015-4 B1 144A 3.624% 6/25/45 #● | 2,489,977 | 2,399,179 | ||||||
Series 2015-4 B2 144A 3.624% 6/25/45 #● | 1,787,534 | 1,700,281 | ||||||
Series 2015-5 B2 144A 3.086% 5/25/45 #● | 2,816,542 | 2,777,021 | ||||||
Series 2015-6 B1 144A 3.616% 10/25/45 #● | 1,729,889 | 1,680,358 | ||||||
Series 2015-6 B2 144A 3.616% 10/25/45 #● | 1,674,826 | 1,615,257 | ||||||
Series 2016-4 B1 144A 3.90% 10/25/46 #● | 1,107,022 | 1,079,711 | ||||||
Series 2016-4 B2 144A 3.90% 10/25/46 #● | 1,895,810 | 1,838,690 | ||||||
Series 2017-1 B2 144A 3.551% 1/25/47 #● | 3,296,526 | 3,112,367 | ||||||
Series 2017-2 A3 144A 3.50% 5/25/47 #● | 1,458,296 | 1,400,306 | ||||||
Series 2018-3 A5 144A 3.50% 9/25/48 #● | 4,214,916 | 4,123,536 | ||||||
Series 2018-4 A15 144A 3.50% 10/25/48 #● | 3,065,457 | 3,032,097 | ||||||
Series 2018-6 1A4 144A 3.50% 12/25/48 #● | 1,970,256 | 1,950,742 | ||||||
Series 2018-7FRB A2 144A 2.966% (LIBOR01M + 0.75%) 4/25/46 #● | 2,250,525 | 2,254,219 | ||||||
Series 2018-9 A3 144A 4.00% 2/25/49 #● | 2,437,304 | 2,404,839 | ||||||
MASTR ARM Trust | ||||||||
Series 2004-10 2A2 4.132% 10/25/34 ● | 36,146 | 33,946 | ||||||
Permanent Master Issuer | ||||||||
Series 2018-1A 1A1 144A 2.816% (LIBOR03M + 0.38%) 7/15/58 #● | 2,000,000 | 1,996,562 | ||||||
Sequoia Mortgage Trust | ||||||||
Series 2013-4 B2 3.488% 4/25/43 ● | 1,423,425 | 1,371,816 | ||||||
Series 2013-12 B3 144A 4.19% 12/25/43 #● | 3,935,329 | 3,881,681 | ||||||
Series 2014-2 A4 144A 3.50% 7/25/44 #● | 1,474,492 | 1,430,603 | ||||||
Series 2015-1 B2 144A 3.875% 1/25/45 #● | 1,938,106 | 1,912,667 | ||||||
Series 2017-4 A1 144A 3.50% 7/25/47 #● | 1,565,104 | 1,504,823 | ||||||
Series 2018-5 A4 144A 3.50% 5/25/48 #● | 2,540,749 | 2,487,317 | ||||||
Silverstone Master Issuer | ||||||||
Series 2018-1A 1A 144A 2.859% (LIBOR03M + 0.39%) 1/21/70 #● | 5,400,000 | 5,389,600 | ||||||
Structured Asset Securities Trust | ||||||||
Series 2005-1 4A1 5.00% 2/25/20 | 195,869 | 196,491 | ||||||
Thornburg Mortgage Securities Trust | ||||||||
Series 2007-4 1A1 4.259% 9/25/37 ● | 834,582 | 841,302 | ||||||
Towd Point Mortgage Trust | ||||||||
Series 2015-5 A1B 144A 2.75% 5/25/55 #● | 2,002,498 | 1,967,691 |
54
Table of Contents
Principal amount° | Value (US $) | |||||||
| ||||||||
Non-Agency Collateralized Mortgage Obligations (continued) | ||||||||
| ||||||||
Towd Point Mortgage Trust | ||||||||
Series 2015-6 A1B 144A 2.75% 4/25/55 #● | 2,283,120 | $ | 2,233,377 | |||||
Series 2016-1 A1B 144A 2.75% 2/25/55 #● | 1,373,231 | 1,349,669 | ||||||
Series 2016-2 A1 144A 3.00% 8/25/55 #● | 1,341,394 | 1,314,310 | ||||||
Series 2016-3 A1 144A 2.25% 4/25/56 #● | 1,744,070 | 1,698,061 | ||||||
Series 2017-1 A1 144A 2.75% 10/25/56 #● | 1,367,521 | 1,333,805 | ||||||
Series 2017-2 A1 144A 2.75% 4/25/57 #● | 719,835 | 704,166 | ||||||
Series 2017-4 M1 144A 3.25% 6/25/57 #● | 2,705,000 | 2,503,296 | ||||||
Series 2018-1 A1 144A 3.00% 1/25/58 #● | 1,148,216 | 1,120,703 | ||||||
Washington Mutual Mortgage Pass Through Certificates Trust | ||||||||
Series 2005-1 5A2 6.00% 3/25/35 ◆ | 65,660 | 9,155 | ||||||
Wells Fargo Mortgage-Backed Securities Trust | ||||||||
Series 2005-3 A4 5.50% 5/25/35 | 1,876,734 | 1,927,055 | ||||||
Series 2006-2 3A1 5.75% 3/25/36 | 625,308 | 606,488 | ||||||
Series 2006-3 A11 5.50% 3/25/36 | 946,365 | 949,336 | ||||||
Series 2006-20 A1 5.50% 12/25/21 | 164,389 | 165,473 | ||||||
Series 2006-AR5 2A1 4.188% 4/25/36 ● | 751,561 | 755,684 | ||||||
Series 2007-AR10 2A1 4.13% 1/25/38 ● | 1,346,590 | 1,327,011 | ||||||
|
| |||||||
Total Non-Agency Collateralized Mortgage Obligations (cost $101,536,386) |
| 100,892,457 | ||||||
|
| |||||||
| ||||||||
Non-Agency Commercial Mortgage-Backed Securities – 6.16% | ||||||||
| ||||||||
Banc of America Commercial Mortgage Trust | ||||||||
Series 2017-BNK3 B 3.879% 2/15/50 ● | 30,000 | 29,097 | ||||||
Series 2017-BNK3 C 4.352% 2/15/50 ● | 1,520,000 | 1,476,934 | ||||||
BANK | ||||||||
Series 2017-BNK4 XA 1.445% 5/15/50 ● | 18,971,424 | 1,623,664 | ||||||
Series 2017-BNK5 A5 3.39% 6/15/60 | 6,515,000 | 6,221,832 | ||||||
Series 2017-BNK5 B 3.896% 6/15/60 ● | 2,775,000 | 2,707,532 | ||||||
Series 2017-BNK7 A5 3.435% 9/15/60 | 3,180,000 | 3,042,951 | ||||||
Series 2017-BNK8 A4 3.488% 11/15/50 | 2,372,000 | 2,275,564 | ||||||
Series 2018-BN14 A4 4.231% 9/15/60 | 3,000,000 | 3,037,083 | ||||||
BENCHMARK Mortgage Trust | ||||||||
Series 2018-B6 A4 4.261% 10/10/51 | 2,000,000 | 2,032,303 | ||||||
Caesars Palace Las Vegas Trust | ||||||||
Series 2017-VICI B 144A 3.835% 10/15/34 # | 3,680,000 | 3,662,608 | ||||||
CCUBS Commercial Mortgage Trust | ||||||||
Series 2017-C1 A4 3.544% 11/15/50 | 1,600,000 | 1,537,734 | ||||||
CD Mortgage Trust | ||||||||
Series 2016-CD2 A3 3.248% 11/10/49 | 5,440,000 | 5,200,205 | ||||||
Series 2017-CD6 B 3.911% 11/13/50 ● | 1,925,000 | 1,862,674 | ||||||
CFCRE Commercial Mortgage Trust | ||||||||
Series 2011-C2 C 144A 5.756% 12/15/47 #● | 1,745,000 | 1,823,791 |
55
Table of Contents
Schedule of investments
Delaware Diversified Income Fund
Principal amount° | Value (US $) | |||||||
| ||||||||
Non-Agency Commercial Mortgage-Backed Securities (continued) | ||||||||
| ||||||||
CFCRE Commercial Mortgage Trust | ||||||||
Series 2016-C7 A3 3.839% 12/10/54 | 9,835,000 | $ | 9,745,953 | |||||
Citigroup Commercial Mortgage Trust | ||||||||
Series 2014-GC25 A4 3.635% 10/10/47 | 3,550,000 | 3,524,590 | ||||||
Series 2016-P3 A4 3.329% 4/15/49 | 5,500,000 | 5,297,290 | ||||||
Series 2017-C4 A4 3.471% 10/12/50 | 2,710,000 | 2,596,773 | ||||||
Series 2018-C5 A4 4.228% 6/10/51 | 3,750,000 | 3,798,107 | ||||||
COMM Mortgage Trust | ||||||||
Series 2013-CR6 AM 144A 3.147% 3/10/46 # | 4,220,000 | 4,119,838 | ||||||
Series 2013-WWP A2 144A 3.424% 3/10/31 # | 1,550,000 | 1,551,170 | ||||||
Series 2014-CR19 A5 3.796% 8/10/47 | 2,895,000 | 2,901,689 | ||||||
Series 2014-CR20 AM 3.938% 11/10/47 | 10,355,000 | 10,310,257 | ||||||
Series 2015-3BP A 144A 3.178% 2/10/35 # | 10,890,000 | 10,492,384 | ||||||
Series 2015-CR23 A4 3.497% 5/10/48 | 5,510,000 | 5,403,841 | ||||||
Commercial Mortgage Pass Through Certificates | ||||||||
Series 2016-CR28 A4 3.762% 2/10/49 ◆ | 3,290,000 | 3,253,003 | ||||||
DB-JPM Mortgage Trust | ||||||||
Series 2016-C1 A4 3.276% 5/10/49 | 5,835,000 | 5,599,584 | ||||||
Series 2016-C3 A5 2.89% 8/10/49 | 4,500,000 | 4,189,319 | ||||||
DB-UBS Mortgage Trust | ||||||||
Series 2011-LC1A C 144A 5.698% 11/10/46 #● | 2,205,000 | 2,296,952 | ||||||
GRACE Mortgage Trust | ||||||||
Series 2014-GRCE A 144A 3.369% 6/10/28 # | 3,820,000 | 3,813,400 | ||||||
Series 2014-GRCE B 144A 3.52% 6/10/28 # | 5,000,000 | 4,983,013 | ||||||
GS Mortgage Securities | ||||||||
Series 2018-GS10 C 4.413% 7/10/51 ● | 1,935,000 | 1,904,081 | ||||||
GS Mortgage Securities Trust | ||||||||
Series 2010-C1 C 144A 5.635% 8/10/43 #● | 4,765,000 | 4,869,610 | ||||||
Series 2014-GC24 A5 3.931% 9/10/47 | 20,000 | 20,165 | ||||||
Series 2015-GC32 A4 3.764% 7/10/48 | 3,096,000 | 3,082,017 | ||||||
Series 2017-GS5 A4 3.674% 3/10/50 | 6,835,000 | 6,692,760 | ||||||
Series 2017-GS5 XA 0.821% 3/10/50 ● | 57,596,553 | 3,230,343 | ||||||
Series 2017-GS6 A3 3.433% 5/10/50 | 3,380,000 | 3,242,437 | ||||||
Series 2018-GS9 A4 3.992% 3/10/51 ● | 2,375,000 | 2,362,822 | ||||||
Series 2018-GS9 C 4.364% 3/10/51 ● | 700,000 | 684,638 | ||||||
JPM-BB Commercial Mortgage Securities Trust | ||||||||
Series 2015-C31 A3 3.801% 8/15/48 | 4,980,000 | 4,953,735 | ||||||
Series 2015-C33 A4 3.77% 12/15/48 | 7,550,000 | 7,483,528 | ||||||
JPM-DB Commercial Mortgage Securities Trust | ||||||||
Series 2016-C2 A4 3.144% 6/15/49 | 9,780,000 | 9,282,076 | ||||||
Series 2017-C7 A5 3.409% 10/15/50 | 6,140,000 | 5,859,842 | ||||||
JPMorgan Chase Commercial Mortgage Securities Trust | ||||||||
Series 2005-CB11 E 5.565% 8/12/37 ● | 1,775,000 | 1,819,303 |
56
Table of Contents
Principal amount° | Value (US $) | |||||||||||
| ||||||||||||
Non-Agency Commercial Mortgage-Backed Securities (continued) | ||||||||||||
| ||||||||||||
JPMorgan Chase Commercial Mortgage Securities Trust | ||||||||||||
Series 2013-LC11 B 3.499% 4/15/46 | 8,420,000 | $ | 8,198,014 | |||||||||
Series 2015-JP1 A5 3.914% 1/15/49 | 3,755,000 | 3,752,532 | ||||||||||
Series 2016-JP3 B 3.397% 8/15/49 ● | 1,545,000 | 1,438,509 | ||||||||||
Series 2016-WIKI A 144A 2.798% 10/5/31 # | 3,260,000 | 3,183,337 | ||||||||||
Series 2016-WIKI B 144A 3.201% 10/5/31 # | 3,260,000 | 3,193,220 | ||||||||||
LB-UBS Commercial Mortgage Trust | ||||||||||||
Series 2006-C6 AJ 5.452% 9/15/39 ● | 3,105,678 | 2,142,907 | ||||||||||
Morgan Stanley BAML Trust | ||||||||||||
Series 2014-C17 A5 3.741% 8/15/47 | 3,256,000 | 3,252,911 | ||||||||||
Series 2015-C26 A5 3.531% 10/15/48 | 3,925,000 | 3,838,194 | ||||||||||
Series 2016-C29 A4 3.325% 5/15/49 | 2,500,000 | 2,403,871 | ||||||||||
Morgan Stanley Capital I Trust | ||||||||||||
Series 2006-HQ10 B 5.448% 11/12/41 ● | 5,379,000 | 5,081,864 | ||||||||||
Series 2006-T21 B 144A 5.152% 10/12/52 #● | 2,000,000 | 1,996,118 | ||||||||||
Series 2016-BNK2 B 3.485% 11/15/49 | 1,500,000 | 1,415,991 | ||||||||||
Series 2018-L1 A4 4.407% 10/15/51 | 1,910,000 | 1,972,970 | ||||||||||
UBS Commercial Mortgage Trust | ||||||||||||
Series 2012-C1 A3 3.40% 5/10/45 | 3,827,281 | 3,813,794 | ||||||||||
Series 2018-C9 A4 4.117% 3/15/51 ● | 4,100,000 | 4,105,874 | ||||||||||
UBS-Barclays Commercial Mortgage Trust | ||||||||||||
Series 2013-C5 B 144A 3.649% 3/10/46 #● | 670,000 | 659,015 | ||||||||||
Wells Fargo Commercial Mortgage Trust | ||||||||||||
Series 2012-LC5 B 4.142% 10/15/45 | 205,000 | 206,575 | ||||||||||
Series 2014-LC18 A5 3.405% 12/15/47 | 2,415,029 | 2,357,623 | ||||||||||
Series 2015-C30 XA 0.932% 9/15/58 ● | 29,331,793 | 1,463,343 | ||||||||||
Series 2015-NXS3 A4 3.617% 9/15/57 | 2,270,000 | 2,234,136 | ||||||||||
Series 2016-BNK1 A3 2.652% 8/15/49 | 5,790,000 | 5,308,131 | ||||||||||
Series 2016-BNK1 B 2.967% 8/15/49 | 380,000 | 345,253 | ||||||||||
Series 2017-C38 A5 3.453% 7/15/50 | 4,140,000 | 3,973,888 | ||||||||||
WF-RBS Commercial Mortgage Trust | ||||||||||||
Series 2012-C10 A3 2.875% 12/15/45 | 8,414,577 | 8,184,297 | ||||||||||
|
| |||||||||||
Total Non-Agency Commercial Mortgage-Backed Securities (cost $265,487,483) |
| 250,420,859 | ||||||||||
|
| |||||||||||
| ||||||||||||
Regional Bonds – 0.36%D | ||||||||||||
| ||||||||||||
Argentina – 0.10% | ||||||||||||
Provincia de Cordoba | ||||||||||||
144A 7.125% 8/1/27 # | 3,165,000 | 2,440,247 | ||||||||||
144A 7.45% 9/1/24 # | 1,810,000 | 1,520,418 | ||||||||||
|
| |||||||||||
3,960,665 | ||||||||||||
|
| |||||||||||
Australia – 0.14% | ||||||||||||
New South Wales Treasury 4.00% 5/20/26 | AUD | 2,363,900 | 1,813,322 |
57
Table of Contents
Schedule of investments
Delaware Diversified Income Fund
Principal amount° | Value (US $) | |||||||||||
| ||||||||||||
Regional BondsD (continued) | ||||||||||||
| ||||||||||||
Australia (continued) | ||||||||||||
Queensland Treasury | ||||||||||||
144A 2.75% 8/20/27 # | AUD | 2,839,000 | $ | 1,969,527 | ||||||||
144A 3.25% 7/21/28 # | AUD | 2,933,000 | 2,104,130 | |||||||||
|
| |||||||||||
5,886,979 | ||||||||||||
|
| |||||||||||
Canada – 0.12% | ||||||||||||
Province of Ontario Canada | ||||||||||||
2.60% 6/2/27 | CAD | 1,092,000 | 797,742 | |||||||||
3.45% 6/2/45 | CAD | 2,594,000 | 2,002,175 | |||||||||
Province of Quebec Canada 6.00% 10/1/29 | CAD | 1,985,000 | 1,897,349 | |||||||||
|
| |||||||||||
4,697,266 | ||||||||||||
|
| |||||||||||
Total Regional Bonds (cost $16,918,603) | 14,544,910 | |||||||||||
|
| |||||||||||
| ||||||||||||
Sovereign Bonds – 2.30%D | ||||||||||||
| ||||||||||||
Argentina – 0.20% | ||||||||||||
Argentine Bonos del Tesoro 16.00% 10/17/23 | ARS | 98,941,000 | 2,494,195 | |||||||||
Argentine Republic Government International Bond | ||||||||||||
5.625% 1/26/22 | 3,410,000 | 3,081,787 | ||||||||||
6.875% 1/11/48 | 3,730,000 | 2,769,525 | ||||||||||
|
| |||||||||||
8,345,507 | ||||||||||||
|
| |||||||||||
Bermuda – 0.07% | ||||||||||||
Bermuda Government International Bond 144A | 3,200,000 | 3,020,064 | ||||||||||
3.717% 1/25/27 # | ||||||||||||
|
| |||||||||||
3,020,064 | ||||||||||||
|
| |||||||||||
Brazil – 0.23% | ||||||||||||
Brazil Notas do Tesouro Nacional Series F 10.00% 1/1/27 | BRL | 34,185,000 | 9,208,134 | |||||||||
|
| |||||||||||
9,208,134 | ||||||||||||
|
| |||||||||||
Canada – 0.02% | ||||||||||||
Canadian Government Bond 2.75% 12/1/48 | CAD | 1,202,000 | 956,523 | |||||||||
|
| |||||||||||
956,523 | ||||||||||||
|
| |||||||||||
Colombia – 0.27% | ||||||||||||
Colombia Government International Bond 4.50% 3/15/29 | 1,735,000 | 1,714,197 | ||||||||||
Colombian TES 7.00% 6/30/32 | COP | 31,725,000,000 | 9,451,355 | |||||||||
|
| |||||||||||
11,165,552 | ||||||||||||
|
|
58
Table of Contents
Principal amount° | Value (US $) | |||||||||
| ||||||||||
Sovereign BondsD (continued) | ||||||||||
| ||||||||||
Dominican Republic – 0.09% | ||||||||||
Dominican Republic International Bond 144A | ||||||||||
6.00% 7/19/28 # | 3,675,000 | $ | 3,652,031 | |||||||
|
| |||||||||
3,652,031 | ||||||||||
|
| |||||||||
Egypt – 0.11% | ||||||||||
Egypt Government International Bond | ||||||||||
144A 5.577% 2/21/23 # | 2,285,000 | 2,187,904 | ||||||||
144A 7.903% 2/21/48 # | 2,600,000 | 2,334,329 | ||||||||
|
| |||||||||
4,522,233 | ||||||||||
|
| |||||||||
Indonesia – 0.03% | ||||||||||
Indonesia Government International Bond | ||||||||||
144A 5.125% 1/15/45 # | 1,200,000 | 1,130,218 | ||||||||
|
| |||||||||
1,130,218 | ||||||||||
|
| |||||||||
Ivory Coast – 0.11% | ||||||||||
Ivory Coast Government International Bond 144A | ||||||||||
6.125% 6/15/33 # | 5,150,000 | 4,478,399 | ||||||||
|
| |||||||||
4,478,399 | ||||||||||
|
| |||||||||
Jordan – 0.07% | ||||||||||
Jordan Government International Bond 144A | ||||||||||
5.75% 1/31/27 # | 3,010,000 | 2,773,673 | ||||||||
|
| |||||||||
2,773,673 | ||||||||||
|
| |||||||||
Mexico – 0.09% | ||||||||||
Mexican Bonos 6.50% 6/9/22 | MXN | 80,316,000 | 3,695,289 | |||||||
|
| |||||||||
3,695,289 | ||||||||||
|
| |||||||||
Mongolia – 0.06% | ||||||||||
Development Bank of Mongolia 144A 7.25% 10/23/23 # | 2,430,000 | 2,375,933 | ||||||||
|
| |||||||||
2,375,933 | ||||||||||
|
| |||||||||
Nigeria – 0.07% | ||||||||||
Nigeria Government International Bond 144A | ||||||||||
7.875% 2/16/32 # | 2,835,000 | 2,738,128 | ||||||||
|
| |||||||||
2,738,128 | ||||||||||
|
| |||||||||
Poland – 0.08% | ||||||||||
Republic of Poland Government Bond | ||||||||||
2.50% 1/25/23 | PLN | 2,712,000 | 710,662 | |||||||
3.25% 7/25/25 | PLN | 9,401,000 | 2,504,998 | |||||||
|
| |||||||||
3,215,660 | ||||||||||
|
| |||||||||
Republic of Korea – 0.24% | ||||||||||
Export-Import Bank of Korea 4.00% 6/7/27 | AUD | 1,660,000 | 1,186,150 | |||||||
Inflation Linked Korea Treasury Bond 1.125% 6/10/23 | KRW | 9,333,096,515 | 8,421,679 | |||||||
|
| |||||||||
9,607,829 | ||||||||||
|
|
59
Table of Contents
Schedule of investments
Delaware Diversified Income Fund
Principal amount° | Value (US $) | |||||||||
| ||||||||||
Sovereign BondsD (continued) | ||||||||||
| ||||||||||
Senegal – 0.09% | ||||||||||
Senegal Government International Bond 144A | ||||||||||
6.75% 3/13/48 # | 4,585,000 | $ | 3,795,234 | |||||||
|
| |||||||||
3,795,234 | ||||||||||
|
| |||||||||
South Africa – 0.17% | ||||||||||
Republic of South Africa Government Bond | ||||||||||
8.75% 1/31/44 | ZAR | 57,232,000 | 3,351,578 | |||||||
Republic of South Africa Government International Bond | ||||||||||
5.875% 6/22/30 * | 3,700,000 | 3,491,949 | ||||||||
|
| |||||||||
6,843,527 | ||||||||||
|
| |||||||||
Turkey – 0.06% | ||||||||||
Turkey Government Bond 8.00% 3/12/25 | TRY | 21,040,000 | 2,378,932 | |||||||
|
| |||||||||
2,378,932 | ||||||||||
|
| |||||||||
Ukraine – 0.19% | ||||||||||
Ukraine Government International Bond | ||||||||||
144A 7.375% 9/25/32 # | 1,705,000 | 1,425,602 | ||||||||
144A 7.75% 9/1/26 # | 3,000,000 | 2,719,755 | ||||||||
144A 8.994% 2/1/24 # | 1,635,000 | 1,623,759 | ||||||||
144A 9.75% 11/1/28 # | 2,065,000 | 2,042,853 | ||||||||
|
| |||||||||
7,811,969 | ||||||||||
|
| |||||||||
United Kingdom – 0.05% | ||||||||||
United Kingdom Gilt 3.50% 1/22/45 | GBP | 1,169,100 | 1,991,905 | |||||||
|
| |||||||||
1,991,905 | ||||||||||
|
| |||||||||
Total Sovereign Bonds (cost $104,873,148) | 93,706,740 | |||||||||
|
| |||||||||
| ||||||||||
Supranational Banks – 0.65% | ||||||||||
| ||||||||||
Arab Petroleum Investments 144A 4.125% 9/18/23 # | 3,425,000 | 3,431,703 | ||||||||
Asian Development Bank 3.50% 5/30/24 | NZD | 1,502,000 | 1,015,205 | |||||||
Banque Ouest Africaine de Developpement 144A | ||||||||||
5.00% 7/27/27 # | 4,640,000 | 4,426,560 | ||||||||
European Investment Bank 1.00% 9/21/26 | GBP | 649,000 | 792,106 | |||||||
Inter-American Development Bank | ||||||||||
6.25% 6/15/21 | IDR | 39,200,000,000 | 2,401,794 | |||||||
7.875% 3/14/23 | IDR | 20,000,000,000 | 1,285,756 | |||||||
International Bank for Reconstruction & Development | ||||||||||
2.36% (LIBOR01M + 0.07%) 4/17/19 ● | 1,269,000 | 1,269,354 | ||||||||
2.50% 11/25/24 | 2,469,000 | 2,379,644 | ||||||||
3.00% 2/2/23 | NZD | 5,266,000 | 3,493,017 | |||||||
3.375% 1/25/22 | NZD | 1,980,000 | 1,330,153 | |||||||
4.625% 10/6/21 | NZD | 2,649,000 | 1,838,992 | |||||||
International Finance | ||||||||||
2.375% 7/19/23 | CAD | 1,228,000 | 919,454 |
60
Table of Contents
Principal amount° | Value (US $) | |||||||||
| ||||||||||
Supranational Banks (continued) | ||||||||||
| ||||||||||
International Finance | NZD | 1,035,000 | $ | 690,864 | ||||||
3.625% 5/20/20 | ||||||||||
3.75% 8/9/27 | NZD | 1,795,000 | 1,209,691 | |||||||
|
| |||||||||
Total Supranational Banks (cost $28,417,462) | 26,484,293 | |||||||||
|
| |||||||||
| ||||||||||
US Treasury Obligations – 10.78% | ||||||||||
| ||||||||||
US Treasury Bond | ||||||||||
3.00% 8/15/48 | 9,490,000 | 8,801,975 | ||||||||
US Treasury Notes | ||||||||||
1.25% 6/30/19 | 68,220,000 | 67,636,398 | ||||||||
2.875% 9/30/23 | 162,255,000 | 161,465,905 | ||||||||
2.875% 10/31/23 | 4,810,000 | 4,786,608 | ||||||||
2.875% 5/15/28 ¥ | 27,135,000 | 26,536,652 | ||||||||
2.875% 8/15/28 | 173,285,000 | 169,318,402 | ||||||||
|
| |||||||||
Total US Treasury Obligations (cost $438,708,392) | 438,545,940 | |||||||||
|
| |||||||||
Number of shares | ||||||||||
| ||||||||||
Common Stock – 0.00% | ||||||||||
| ||||||||||
Century Communications =† | 7,875,000 | 0 | ||||||||
|
| |||||||||
Total Common Stock (cost $238,403) | 0 | |||||||||
|
| |||||||||
| ||||||||||
Convertible Preferred Stock – 0.78% | ||||||||||
| ||||||||||
A Schulman 6.00% exercise price $52.33 y | 4,795 | 4,950,838 | ||||||||
AMG Capital Trust II 5.15% exercise price $198.02, maturity date 10/15/37 | 52,740 | 2,803,189 | ||||||||
Assurant 6.50% exercise price $106.91, maturity date 3/15/21 * | 26,609 | 2,845,652 | ||||||||
Bank of America 7.25% exercise price $50.00 y | 1,984 | 2,522,259 | ||||||||
Becton Dickinson and Co. 6.125% exercise price $211.80, maturity date 5/1/20 | 50,172 | 2,943,591 | ||||||||
Crown Castle International 6.875% exercise price $114.88, maturity date 8/1/20 | 1,827 | 1,909,215 | ||||||||
DTE Energy 6.50% exercise price $116.31, maturity date 10/1/19 * | 45,354 | 2,418,729 | ||||||||
El Paso Energy Capital Trust I 4.75% exercise price $34.49, maturity date 3/31/28 | 68,515 | 3,087,286 | ||||||||
QTS Realty Trust 6.50% exercise price $47.03 y | 33,523 | 3,295,981 | ||||||||
Wells Fargo & Co. 7.50% exercise price $156.71 y | 1,605 | 2,041,544 | ||||||||
Welltower 6.50% exercise price $57.16 y | 44,875 | 2,764,300 | ||||||||
|
| |||||||||
Total Convertible Preferred Stock (cost $31,229,939) | 31,582,584 | |||||||||
|
|
61
Table of Contents
Schedule of investments
Delaware Diversified Income Fund
Number of shares | Value (US $) | |||||||
| ||||||||
Preferred Stock – 0.28% | ||||||||
| ||||||||
Bank of America 6.50% *µy | 5,975,000 | $ | 6,343,657 | |||||
Morgan Stanley 5.55% µy | 1,050,000 | 1,061,813 | ||||||
USB Realty 144A 3.583% (LIBOR03M + 1.147%) #y● | 4,485,000 | 4,036,500 | ||||||
|
| |||||||
Total Preferred Stock (cost $11,128,000) | 11,441,970 | |||||||
|
| |||||||
Number of contracts | ||||||||
| ||||||||
Options Purchased – 0.00% | ||||||||
| ||||||||
Currency Put Options – 0.00% | ||||||||
USD vs INR strike price INR 67, expiration date 1/24/19, notional amount INR 6,852,533 (HSBC) | 85,274,000 | 3,185 | ||||||
|
| |||||||
Total Options Purchased (cost $225,976) | 3,185 | |||||||
|
| |||||||
Principal amount° | ||||||||
| ||||||||
Short-Term Investments – 2.49% | ||||||||
| ||||||||
Discount Note – 0.38%≠ | ||||||||
Federal Home Loan Bank 2.00% 11/1/18 | 15,323,178 | 15,323,178 | ||||||
|
| |||||||
15,323,178 | ||||||||
|
| |||||||
Repurchase Agreements – 2.11% | ||||||||
Bank of America Merrill Lynch | ||||||||
2.12%, dated 10/31/18, to be repurchased on 11/1/18, repurchase price $11,787,754 (collateralized by US government obligations 0.00% 5/15/19-8/15/31; market value $12,022,802) | 11,787,060 | 11,787,060 | ||||||
Bank of Montreal | ||||||||
2.10%, dated 10/31/18, to be repurchased on 11/1/18, repurchase price $32,416,307 (collateralized by US government obligations 0.00%-3.75% 11/1/18-2/15/47; market value $33,062,714) | 32,414,416 | 32,414,416 | ||||||
BNP Paribas | ||||||||
2.17%, dated 10/31/18, to be repurchased on 11/1/18, repurchase price $41,623,798 (collateralized by US government obligations 0.00%-8.00% 2/28/19-8/15/46; market value $42,453,717) | 41,621,289 | 41,621,289 | ||||||
|
| |||||||
85,822,765 | ||||||||
|
| |||||||
Total Short-Term Investments (cost $101,145,943) | 101,145,943 | |||||||
|
| |||||||
Total Value of Securities Before Securities Lending Collateral – 102.10% | 4,152,158,838 | |||||||
|
|
62
Table of Contents
Principal amount° | Value (US $) | |||||||
| ||||||||
Security Lending Collateral – 1.33%** | ||||||||
| ||||||||
Certificates of Deposit – 0.10%≠ | ||||||||
Australia & New Zealand Banking Group 2.19% 11/1/18 | 1,783,000 | $ | 1,783,000 | |||||
Northern Trust (Cayman) 2.18% 11/1/18 | 2,424,000 | 2,424,000 | ||||||
|
| |||||||
4,207,000 | ||||||||
|
| |||||||
Repurchase Agreements – 0.87% | ||||||||
Credit Agricole | ||||||||
2.19%, dated 10/31/18, to be repurchased on 11/1/18, repurchase price$12,509,428 (collateralized by US government obligations 1.875%-2.50% 4/30/22-9/9/49; market value $12,758,875) | 12,508,667 | 12,508,667 | ||||||
JPMorgan Securities | ||||||||
2.19%, dated 10/31/18, to be repurchased on 11/1/18, repurchase price$12,509,428 (collateralized by US government obligations 0.00%-1.875% 6/20/19-6/30/20; market value $12,758,846) | 12,508,667 | 12,508,667 | ||||||
Merrill Lynch, Pierce, Fenner & Smith | ||||||||
2.18%, dated 10/31/18, to be repurchased on 11/1/18, repurchase price$10,424,273 (collateralized by US government obligations 0.125%-2.625% 4/15/20-5/15/21; market value $10,632,151) | 10,423,642 | 10,423,642 | ||||||
|
| |||||||
35,440,976 | ||||||||
|
| |||||||
Short-Term Floating Rate Notes – 0.36% | ||||||||
Australia & New Zealand Banking Group 2.43% | ||||||||
(LIBOR01M + 0.15%) 8/23/19 ³● | 641,000 | 640,619 | ||||||
Bank of Montreal (Chicago) | ||||||||
2.48% (LIBOR01M + 0.20%) 11/9/18 ● | 912,000 | 912,053 | ||||||
2.75% (LIBOR03M + 0.21%) 11/1/19 ● | 515,000 | 515,000 | ||||||
Bank of Nova Scotia (Houston) | ||||||||
2.44% (LIBOR03M + 0.13%) 5/17/19 ● | 877,000 | 877,044 | ||||||
2.49% (LIBOR03M + 0.18%) 2/21/19 ● | 700,000 | 700,636 | ||||||
2.52% (LIBOR03M + 0.21%) 2/28/19 ● | 269,000 | 269,156 | ||||||
2.52% (LIBOR03M + 0.20%) 3/6/19 ● | 342,000 | 342,040 | ||||||
Canadian Imperial Bank (New York) 2.72% (LIBOR03M + 0.22%) 1/28/19 ● | 798,000 | 798,324 | ||||||
Commonwealth Bank of Australia | ||||||||
2.39% (LIBOR03M + 0.05%) 8/2/19 ³● | 400,000 | 399,731 | ||||||
2.48% (LIBOR01M + 0.20%) 11/9/18 ³● | 369,000 | 369,022 | ||||||
2.54% (LIBOR03M + 0.20%) 3/18/19 ● | 571,000 | 571,540 | ||||||
National Australia Bank | ||||||||
2.41% (LIBOR03M + 0.10%) 5/21/19 ³● | 257,000 | 257,083 | ||||||
2.43% (LIBOR01M + 0.14%) 8/27/19 ³● | 703,000 | 702,518 | ||||||
2.44% (LIBOR03M + 0.10%) 5/10/19 ³● | 900,000 | 900,276 | ||||||
Royal Bank of Canada (New York) | ||||||||
2.43% (LIBOR03M + 0.06%) 6/26/19 ● | 295,000 | 294,885 |
63
Table of Contents
Schedule of investments
Delaware Diversified Income Fund
Principal amount° | Value (US $) | |||||||
| ||||||||
Security Lending Collateral** (continued) | ||||||||
| ||||||||
Short-Term Floating Rate Notes (continued) | ||||||||
Royal Bank of Canada (New York) | ||||||||
2.62% (LIBOR03M + 0.17%) 4/18/19 ● | 980,000 | $ | 980,357 | |||||
2.69% (LIBOR01M + 0.25%) 11/6/18 ● | 579,000 | 579,028 | ||||||
Toronto-Dominion Bank (New York) | ||||||||
2.42% (LIBOR01M + 0.14%) 3/5/19 ● | 500,000 | 500,050 | ||||||
2.43% (LIBOR01M + 0.15%) 3/19/19 ● | 500,000 | 500,035 | ||||||
US Bank (Cincinnati) 2.54% 7/23/19 ● | 600,000 | 599,957 | ||||||
Wells Fargo Bank | ||||||||
2.49% (LIBOR01M + 0.21%) 11/13/18 ● | 752,000 | 752,065 | ||||||
2.59% (LIBOR01M + 0.33%) 5/31/19 ● | 500,000 | 500,392 | ||||||
Westpac Banking (New York) | ||||||||
2.42% (LIBOR03M + 0.10%) 5/29/19 ● | 1,061,000 | 1,060,934 | ||||||
2.47% (LIBOR03M + 0.10%) 9/19/19 ³● | 500,000 | 499,781 | ||||||
|
| |||||||
14,522,526 | ||||||||
|
| |||||||
Total Securities Lending Collateral (cost $54,168,996) | 54,170,502 | |||||||
|
| |||||||
Total Value of Securities – 103.43% | $ | 4,206,329,340∎ | ||||||
|
|
# | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At Oct. 31, 2018, the aggregate value of Rule 144A securities was $1,130,712,427, which represents 27.80% of the Fund’s net assets. See Note 12 in “Notes to financial statements.” |
* | Fully or partially on loan. |
** | See Note 11 in “Notes to financial statements” for additional information on securities lending collateral. |
¨ | Pass Through Agreement. Security represents the contractual right to receive a proportionate amount of underlying payments due to the counterparty pursuant to various agreements related to the rescheduling of obligations and the exchange of certain notes. |
= | The value of this security was determined using significant unobservable inputs and is reported as a Level 3 security in the disclosure table located in Note 3 in “Notes to financial statements.” |
≠ | The rate shown is the effective yield at the time of purchase. |
³ | Commercial paper exempt from registration under Section 4(a)(2) and/or Rule 144A of the Securities Act of 1933, as amended, and may be resold in transactions exempt from registration only to dealers in that program or other “accredited investors.” At Oct. 31, 2018, the aggregate value of securities was $3,769,030, which represented 0.09% of the Fund’s net assets. See Note 12 in “Notes to financial statements.” |
∎ | Includes $52,183,147 of securities loaned. |
° | Principal amount shown is stated in USD unless noted that the security is denominated in another currency. |
64
Table of Contents
D | Securities have been classified by country of origin. |
µ | Fixed to variable rate investment. The rate shown reflects the fixed rate in effect at Oct. 31, 2018. Rate will reset at a future date. |
S | Interest only security. An interest only security is the interest only portion of a fixed income security, which is separated and sold individually from the principal portion of the security. |
y | No contractual maturity date. |
W | Principal only security. A principal only security is the principal only portion of a fixed income security which is separated and sold individually from the interest portion of the security. |
† | Non-income producing security. |
● | Variable rate investment. Rates reset periodically. Rate shown reflects the rate in effect at Oct. 31, 2018. For securities based on a published reference rate and spread, the reference rate and spread are indicated in their description above. The reference rate descriptions (i.e. LIBOR03M, LIBOR06M, etc.) used in this report are identical for different securities, but the underlying reference rates may differ due to the timing of the reset period. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions, or for mortgage-backed securities, are impacted by the individual mortgages which are paying off over time. These securities do not indicate a reference rate and spread in their description above. |
X | This loan will settle after Oct. 31, 2018, at which time the interest rate, based on the LIBOR and the agreed upon spread on trade date, will be reflected. |
f | Step coupon bond. Stated rate in effect at Oct. 31, 2018 through maturity date. |
¥ | Fully or partially pledged as collateral for futures contracts. |
Unfunded Commitments
The Fund may invest in floating rate loans. In connection with these investments, the Fund may also enter into unfunded corporate loan commitments (commitments). Commitments may obligate the Fund to furnish temporary financing to a borrower until permanent financing can be arranged. In connection with these commitments, the Fund earns a commitment fee, typically set as a percentage of the commitment amount. The following unfunded loan commitments were outstanding at Oct. 31, 2018:
Borrower | Principal Amount | Cost | Value | Unrealized Appreciation (Depreciation) | ||||
Heartland Dental Tranche DD 1st Lien 3.75% | $303,913 | $303,913 | $303,280 | $(633) |
65
Table of Contents
Schedule of investments
Delaware Diversified Income Fund
The following foreign currency exchange contracts, futures contracts, and swap contracts were outstanding at Oct. 31, 2018:1
Foreign Currency Exchange Contracts
Counterparty | Contracts to Receive (Deliver) | In Exchange For | Settlement Date | Unrealized Appreciation | Unrealized Depreciation | |||||||||||||||||
BAML | AUD | 3,388,216 | USD | (2,400,958 | ) | 1/11/19 | $ | 508 | $ | — | ||||||||||||
BAML | CAD | (1,404,495 | ) | USD | 1,073,880 | 1/11/19 | 5,327 | — | ||||||||||||||
BAML | EUR | (1,200,924 | ) | USD | 1,376,090 | 1/11/19 | 6,384 | — | ||||||||||||||
BAML | JPY | (2,099,005,738 | ) | USD | 18,780,023 | 1/11/19 | 52,631 | — | ||||||||||||||
BAML | NZD | (4,564,111 | ) | USD | 2,983,409 | 1/11/19 | 2,570 | — | ||||||||||||||
BNP | AUD | (6,955,237 | ) | USD | 4,932,306 | 1/11/19 | 2,643 | — | ||||||||||||||
BNP | MXN | 16,553,022 | USD | (833,854 | ) | 1/11/19 | — | (28,865 | ) | |||||||||||||
BNP | NOK | (23,773,164 | ) | USD | 2,853,955 | 1/11/19 | 23,750 | — | ||||||||||||||
CITI | BRL | (7,240,095 | ) | USD | 1,982,609 | 1/11/19 | 49,330 | — | ||||||||||||||
CITI | COP | 8,046,020,000 | USD | (2,520,919 | ) | 1/11/19 | — | (28,964 | ) | |||||||||||||
HSBC | EUR | 1,434,656 | USD | (1,642,961 | ) | 1/11/19 | — | (6,673 | ) | |||||||||||||
HSBC | GBP | (9,791,989 | ) | USD | 12,592,468 | 1/11/19 | 26,300 | — | ||||||||||||||
JPMC | KRW | (9,424,747,250 | ) | USD | 8,287,677 | 1/11/19 | 10,263 | — | ||||||||||||||
JPMC | PLN | (9,818,851 | ) | USD | 2,590,726 | 1/11/19 | 26,058 | — | ||||||||||||||
TD | IDR | 39,745,400,000 | USD | (2,580,032 | ) | 1/11/19 | — | (1,122 | ) | |||||||||||||
TD | JPY | 3,038,570,570 | USD | (27,201,133 | ) | 1/11/19 | — | (90,914 | ) | |||||||||||||
UBS | CLP | 1,824,722,754 | USD | (2,656,808 | ) | 1/11/19 | — | (32,301 | ) | |||||||||||||
|
|
|
| |||||||||||||||||||
Total Foreign Currency Exchange Contracts | $ | 205,764 | $ | (188,839 | ) | |||||||||||||||||
|
|
|
|
66
Table of Contents
Futures Contracts
Contracts to Buy (Sell) | Notional Amount | Notional Cost | Expiration Date | Value/ Unrealized Appreciation | Value/ Unrealized Depreciation | Variation Margin Due from (Due to) Brokers | ||||||||||||||||||||
(379) | E-mini S&P 500 Index | $ | (51,375,345 | ) | $ | (51,868,332 | ) | 12/24/18 | $ | 492,987 | $ | — | $ | (458,430 | ) | |||||||||||
899 | US Treasury 5 yr Notes | 101,032,148 | 101,055,763 | 1/2/19 | — | (23,615 | ) | (196,656 | ) | |||||||||||||||||
5,219 | US Treasury 10 yr Notes | 618,125,313 | 616,949,019 | 12/20/18 | 1,176,294 | — | (1,794,031 | ) | ||||||||||||||||||
(32) | US Treasury Long Bonds | (4,420,000 | ) | (4,597,909 | ) | 12/20/18 | 177,909 | — | 25,000 | |||||||||||||||||
884 | US Treasury Long Bonds | 122,102,500 | 127,629,622 | 12/20/18 | — | (5,527,122 | ) | (690,625 | ) | |||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||
Total Futures Contracts | $ | 789,168,163 | $ | 1,847,190 | $ | (5,550,737 | ) | $ | (3,114,742 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
Swap Contracts
CDS Contracts2
Counterparty/ Reference Obligation/ Termination Date/ Payment Frequency | Notional Amount3 | Annual Protection Payments | Value | Upfront Payments Paid (Received) | Unrealized Depreciation4 | Variation Margin Due from (Due to) Brokers | ||||||||||||||||||
Over-The-Counter/ Protection Sold/ Moody’s Ratings: | ||||||||||||||||||||||||
MSC-CMBX.NA.BBB-.65 5/11/63- Monthly | 24,970,000 | 3.00% | $ | (3,475,257 | ) | $ | (2,910,701 | ) | $ | (564,556 | ) | $ | — |
The use of foreign currency exchange contracts, futures contracts, and swap contracts involves elements of market risk and risks in excess of the amounts disclosed in these financial statements. The notional amounts and foreign currency exchange contracts presented above represent the Fund’s total exposure in such contracts, whereas only the net unrealized appreciation (depreciation) is reflected in the Fund’s net assets.
1See Note 8 in “Notes to financial statements.”
2A CDS contract is a risk-transfer instrument through which one party (purchaser of protection) transfers to another party (seller of protection) the financial risk of a credit event (as defined in the CDS agreement), as it relates to a particular reference security or basket of securities (such as an index). Periodic payments (receipts) on such contracts are accrued daily and recorded as unrealized losses (gains) on swap contracts. Upon payment (receipt), such amounts are recorded
67
Table of Contents
Schedule of investments
Delaware Diversified Income Fund
as realized losses (gains) on swap contracts. Upfront payments made or received in connection with CDS contracts are amortized over the expected life of the CDS contracts as unrealized losses (gains) on swap contracts. The change in value of CDS contracts is recorded daily as unrealized appreciation or depreciation. A realized gain or loss is recorded upon a credit event (as defined in the CDS agreement) or the maturity or termination of the agreement.
3Notional amount shown is stated in USD unless noted that the swap is denominated in another currency.
4Unrealized appreciation (depreciation) does not include periodic interest payments (receipt) on swap contracts accrued daily in the amount of $13,391.
5Markit’s CMBX.NA Index is a synthetic tradable index referencing a basket of 25 commercial mortgage-backed securities in North America. Credit-quality ratings are measured on a scale that ranges from AAA (highest) to BB (lowest). US Agency and US Agency mortgage-backed securities appear under US Government.
Summary of abbreviations:
ABS – Asset-Backed Security
ARM – Adjustable Rate Mortgage
ARS – Argentine Peso
AUD – Australian Dollar
BADLARPP – Argentina Term Deposit Rate
BAML – Bank of America Merrill Lynch
BB – Barclays Bank
BBSW3M – Bank Bill Swap 3 Months
BNP – BNP Paribas
BRL – Brazilian Real
CAD – Canadian Dollar
CDO – Collateralized Debt Obligation
CDS – Credit Default Swap
CITI – Citigroup Global Markets
CLO – Collateralized Loan Obligation
CLP – Chilean Peso
CMBX.NA – Commercial Mortgaged-Backed Securities Index North America
COP – Colombian Peso
DB – Deutsche Bank
EUR – European Monetary Unit
FREMF – Freddie Mac Multifamily
GBP – British Pound Sterling
GE – General Electric
GNMA – Government National Mortgage Association
GS – Goldman Sachs
HSBC – Hong Kong Shanghai Bank
ICE – Intercontinental Exchange
IDR – Indonesian Rupiah
INR – Indian Rupee
JPM – JPMorgan
68
Table of Contents
Summary of abbreviations (continued):
JPMC – JPMorgan Chase
JPY – Japanese Yen
KRW – South Korean Won
LB – Lehman Brothers
LIBOR – London Interbank Offered Rate
LIBOR01M – ICE LIBOR USD 1 Month
LIBOR03M – ICE LIBOR USD 3 Month
LIBOR06M – ICE LIBOR USD 6 Month
MASTR – Mortgage Asset Securitization Transactions, Inc.
MSC – Morgan Stanley Capital
MXN – Mexican Peso
NOK – Norwegian Krone
NZD – New Zealand Dollar
PLN – Polish Zloty
RBS – Royal Bank of Scotland
REMIC – Real Estate Mortgage Investment Conduit
S&P – Standard & Poor’s Financial Services LLC
S.F. – Single Family
TBA – To be announced
TD – Toronto Dominion Bank
TRY – Turkish Lira
USD – US Dollar
WF – Wells Fargo
yr – Year
ZAR – South African Rand
See accompanying notes, which are an integral part of the financial statements.
69
Table of Contents
Statement of assets and liabilities
Delaware Diversified Income Fund | October 31, 2018 |
Assets: | ||||
Investments, at value1,2 | $ | 4,152,158,838 | ||
Short-term investments held as collateral for loaned securities, at value3 | 54,170,502 | |||
Foreign currencies, at value4 | 3,154,808 | |||
Cash | 5,361,224 | |||
Cash collateral due from brokers | 4,020,000 | |||
Receivable for securities sold | 42,321,913 | |||
Dividends and interest receivable | 32,249,793 | |||
Receivable for fund shares sold | 4,723,709 | |||
Unrealized appreciation on foreign currency exchange contracts | 205,764 | |||
Securities lending income receivable | 43,145 | |||
Swap payments receivable | 14,594 | |||
Other assets5 | 4,787,750 | |||
|
| |||
Total assets | $ | 4,303,212,040 | ||
|
| |||
Liabilities: | ||||
Payable for securities purchased | 138,020,215 | |||
Obligation to return securities lending collateral | 53,590,416 | |||
Contingent liabilities5 | 15,959,167 | |||
Payable for fund shares redeemed | 13,216,674 | |||
Distribution payable | 3,885,196 | |||
Variation margin due to broker on futures contracts | 3,114,742 | |||
Upfront payments received on credit default swap contracts | 2,910,701 | |||
Investment management fees payable to affiliates | 1,216,202 | |||
Other accrued expenses | 1,128,978 | |||
Cash collateral due to brokers | 1,050,510 | |||
Unrealized depreciation on credit default swap contracts | 564,556 | |||
Payable for securities lending purchased | 515,000 | |||
Distribution fees payable to affiliates | 512,855 | |||
Unrealized depreciation on foreign currency exchange contracts | 188,839 | |||
Administration fees payable | 105,902 | |||
Custodian fees payable | 71,112 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 34,916 | |||
Accounting and administration expenses payable to affiliates | 13,682 | |||
Trustees’ fees and expenses payable to affiliates | 9,964 | |||
Legal fees payable to affiliates | 6,308 | |||
Reports and statements to shareholders expenses payable to affiliates | 3,224 | |||
Other liabilities | 165,664 | |||
|
| |||
Total Liabilities | 236,284,823 | |||
|
| |||
Total Net Assets | $ | 4,066,927,217 | ||
|
|
70
Table of Contents
Net Assets Consist of: | ||||
Paid-in capital | $ | 4,406,056,173 | ||
Total distributable earnings (loss) | (339,128,956 | ) | ||
|
| |||
Total Net Assets | $ | 4,066,927,217 | ||
|
| |||
Net Asset Value | ||||
Class A: | ||||
Net assets | $ | 734,630,183 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 89,665,543 | |||
Net asset value per share | $ | 8.19 | ||
Sales charge | 4.50 | % | ||
Offering price per share, equal to net asset value per share / (1 – sales charge) | $ | 8.58 | ||
Class C: | ||||
Net assets | $ | 382,168,018 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 46,654,525 | |||
Net asset value per share | $ | 8.19 | ||
Class R: | ||||
Net assets | $ | 46,060,279 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 5,625,204 | |||
Net asset value per share | $ | 8.19 | ||
Institutional Class: | ||||
Net assets | $ | 2,886,234,237 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 352,039,475 | |||
Net asset value per share | $ | 8.20 | ||
Class R6: | ||||
Net assets | $ | 17,834,500 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 2,175,516 | |||
Net asset value per share | $ | 8.20 | ||
| ||||
1 Investments, at cost | $ | 4,243,391,116 | ||
2 Including securities on loan | 52,183,147 | |||
3 Short-term investments held as collateral for loaned securities, at cost | 54,168,996 | |||
4 Foreign currencies, at cost | 3,211,449 | |||
5 See Note 13 in “Notes to financial statements.” |
See accompanying notes, which are an integral part of the financial statements.
71
Table of Contents
Statement of operations | ||
Delaware Diversified Income Fund | Year ended October 31, 2018 |
Investment Income: | ||||
Interest | $ | 177,142,353 | ||
Dividends | 2,402,598 | |||
Securities lending income | 718,014 | |||
Foreign tax withheld | (211,802 | ) | ||
|
| |||
180,051,163 | ||||
|
| |||
Expenses: | ||||
Management fees | 19,856,276 | |||
Distribution expenses – Class A | 2,039,246 | |||
Distribution expenses – Class C | 5,142,262 | |||
Distribution expenses – Class R | 271,891 | |||
Dividend disbursing and transfer agent fees and expenses | 4,806,346 | |||
Accounting and administration expenses | 806,571 | |||
Reports and statements to shareholders expenses | 369,024 | |||
Custodian fees | 289,994 | |||
Legal fees | 236,448 | |||
Trustees’ fees and expenses | 203,977 | |||
Registration fees | 107,670 | |||
Audit and tax fees | 57,924 | |||
Other | 247,908 | |||
|
| |||
34,435,537 | ||||
Less expenses waived | (4,295,959 | ) | ||
Less expenses paid indirectly | (98,328 | ) | ||
|
| |||
Total operating expenses | 30,041,250 | |||
|
| |||
Net Investment Income | 150,009,913 | |||
|
|
72
Table of Contents
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | $ | (74,689,721 | ) | |
Foreign currencies | (30,243,458 | ) | ||
Foreign currency exchange contracts | (688,509 | ) | ||
Futures contracts | (2,979,889 | ) | ||
Options purchased | 235,751 | |||
Swap contracts | (3,237,183 | ) | ||
|
| |||
Net realized loss | (111,603,009 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) of: | ||||
Investments | (154,941,510 | ) | ||
Foreign currencies | 309,586 | |||
Foreign currency exchange contracts | 1,023,139 | |||
Futures contracts | (436,697 | ) | ||
Options purchased | (167,553 | ) | ||
Swap contracts | 1,258,140 | |||
|
| |||
Net change in unrealized appreciation (depreciation) | (152,954,895 | ) | ||
|
| |||
Net Realized and Unrealized Loss | (264,557,904 | ) | ||
|
| |||
Net Decrease in Net Assets Resulting from Operations | $ | (114,547,991 | ) | |
|
|
See accompanying notes, which are an integral part of the financial statements.
73
Table of Contents
Statements of changes in net assets | ||
Delaware Diversified Income Fund |
Year ended | ||||||||
10/31/18 | 10/31/17 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 150,009,913 | $ | 147,786,914 | ||||
Net realized loss | (111,603,009 | ) | (11,473,348 | ) | ||||
Net change in unrealized appreciation (depreciation) | (152,954,895 | ) | (14,358,109 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | (114,547,991 | ) | 121,955,457 | |||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Distributable earnings*: | ||||||||
Class A | (24,585,994 | ) | (35,719,780 | ) | ||||
Class C | (12,214,368 | ) | (20,671,479 | ) | ||||
Class R | (1,521,983 | ) | (2,184,123 | ) | ||||
Institutional Class | (94,990,835 | ) | (103,732,622 | ) | ||||
Class R6 | (464,958 | ) | (129,659 | ) | ||||
Return of capital: | ||||||||
Class A | (5,458,408 | ) | (811,257 | ) | ||||
Class C | (2,840,103 | ) | (563,918 | ) | ||||
Class R | (342,435 | ) | (55,969 | ) | ||||
Institutional Class | (21,430,473 | ) | (2,560,569 | ) | ||||
Class R6 | (132,435 | ) | (11,747 | ) | ||||
|
|
|
| |||||
(163,981,992 | ) | (166,441,123 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Class A | 201,342,698 | 143,375,898 | ||||||
Class C | 21,874,952 | 24,968,862 | ||||||
Class R | 8,919,772 | 14,221,329 | ||||||
Institutional Class | 1,100,958,026 | 921,870,328 | ||||||
Class R6 | 7,165,239 | 13,462,002 | ||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | 28,521,458 | 35,097,067 | ||||||
Class C | 14,060,026 | 19,703,738 | ||||||
Class R | 1,822,187 | 2,238,458 | ||||||
Institutional Class | 103,289,669 | 98,334,237 | ||||||
Class R6 | 561,639 | 130,937 | ||||||
|
|
|
| |||||
1,488,515,666 | 1,273,402,856 | |||||||
|
|
|
|
74
Table of Contents
Year ended | ||||||||
10/31/18 | 10/31/17 | |||||||
Capital Share Transactions (continued): | ||||||||
Cost of shares redeemed: | ||||||||
Class A | $ | (337,080,457 | ) | $ | (530,755,749 | ) | ||
Class C | (242,365,548 | ) | (294,678,417 | ) | ||||
Class R | (22,902,621 | ) | (31,475,251 | ) | ||||
Institutional Class | (947,243,145 | ) | (852,537,719 | ) | ||||
Class R6 | (1,852,091 | ) | (654,239 | ) | ||||
|
|
|
| |||||
(1,551,443,862 | ) | (1,710,101,375 | ) | |||||
|
|
|
| |||||
Decrease in net assets derived from capital share transactions | (62,928,196 | ) | (436,698,519 | ) | ||||
|
|
|
| |||||
Net Decrease in Net Assets | (341,458,179 | ) | (481,184,185 | ) | ||||
Net Assets: | ||||||||
Beginning of year | 4,408,385,396 | 4,889,569,581 | ||||||
|
|
|
| |||||
End of year1 | $ | 4,066,927,217 | $ | 4,408,385,396 | ||||
|
|
|
|
1 Net Assets – End of year includes distributions in excess of net investment income of $3,156,843 in 2017. The Securities and Exchange Commission eliminated the requirement to disclose undistributed (distributions in excess of) net investment income in 2018.
* | For the year ended Oct. 31, 2018, the Fund has adopted amendments to Regulation S-X (see Note 14 in “Notes to financial statements”). For the year ended Oct. 31, 2017, the dividends and distributions to shareholders were as follows: |
Class A | Class C | Class R | Institutional Class | Class R6 | ||||||||||||||||
Dividends from net investment income | $ | (35,719,780 | ) | $ | (20,671,479 | ) | $ | (2,184,123 | ) | $ | (103,732,622 | ) | $ | (129,659 | ) |
See accompanying notes, which are an integral part of the financial statements.
75
Table of Contents
Delaware Diversified Income Fund Class A
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income1 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Return of capital |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
1 | The average shares outstanding method has been applied for per share information. |
2 | For the year ended Oct. 31, 2017, return of capital distributions of $811,257 were made by the Fund’s Class A shares, which calculated to a de minimis amount of $0.00 per share. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during some of the periods shown reflects a waiver by the manager and/or distributor. Performance would have been lower had the waivers not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
76
Table of Contents
Year ended | ||||||||||||||||||||||||||||
10/31/18 | 10/31/17 | 10/31/16 | 10/31/15 | 10/31/14 | ||||||||||||||||||||||||
$ | 8.74 | $ | 8.81 | $ | 8.74 | $ | 9.09 | $ | 8.96 | |||||||||||||||||||
0.29 | 0.28 | 0.22 | 0.26 | 0.30 | ||||||||||||||||||||||||
(0.53 | ) | (0.03 | ) | 0.12 | (0.27 | ) | 0.17 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(0.24 | ) | 0.25 | 0.34 | (0.01 | ) | 0.47 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(0.25 | ) | (0.32 | ) | (0.26 | ) | (0.29 | ) | (0.34 | ) | |||||||||||||||||||
— | — | — | (0.03 | ) | — | |||||||||||||||||||||||
(0.06 | ) | — | 2 | (0.01 | ) | (0.02 | ) | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(0.31 | ) | (0.32 | ) | (0.27 | ) | (0.34 | ) | (0.34 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
$ | 8.19 | $ | 8.74 | $ | 8.81 | $ | 8.74 | $ | 9.09 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(2.77% | ) | 2.89% | 3.96% | (0.11% | ) | 5.25% | ||||||||||||||||||||||
$ | 734,630 | $ | 893,311 | $ | 1,259,472 | $ | 1,658,922 | $ | 2,048,203 | |||||||||||||||||||
0.77% | 0.89% | 0.89% | 0.91% | 0.90% | ||||||||||||||||||||||||
0.87% | 0.89% | 0.89% | 0.91% | 0.90% | ||||||||||||||||||||||||
3.37% | 3.24% | 2.54% | 2.95% | 3.34% | ||||||||||||||||||||||||
3.27% | 3.24% | 2.54% | 2.95% | 3.34% | ||||||||||||||||||||||||
122% | 125% | 240% | 218% | 189% |
77
Table of Contents
Financial highlights
Delaware Diversified Income Fund Class C
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income1 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Return of capital |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
1 | The average shares outstanding method has been applied for per share information. |
2 | For the year ended Oct. 31, 2017, return of capital distributions of $563,918 were made by the Fund’s Class C shares, which calculated to a de minimis amount of $0.00 per share. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during some of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
78
Table of Contents
Year ended | ||||||||||||||||||||||||||||
10/31/18 | 10/31/17 | 10/31/16 | 10/31/15 | 10/31/14 | ||||||||||||||||||||||||
$ | 8.74 | $ | 8.81 | $ | 8.74 | $ | 9.09 | $ | 8.96 | |||||||||||||||||||
0.22 | 0.22 | 0.16 | 0.20 | 0.23 | ||||||||||||||||||||||||
(0.52 | ) | (0.04 | ) | 0.11 | (0.28 | ) | 0.18 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(0.30 | ) | 0.18 | 0.27 | (0.08 | ) | 0.41 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(0.19 | ) | (0.25 | ) | (0.19 | ) | (0.22 | ) | (0.28 | ) | |||||||||||||||||||
— | — | — | (0.03 | ) | — | |||||||||||||||||||||||
(0.06 | ) | — | 2 | (0.01 | ) | (0.02 | ) | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(0.25 | ) | (0.25 | ) | (0.20 | ) | (0.27 | ) | (0.28 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
$ | 8.19 | $ | 8.74 | $ | 8.81 | $ | 8.74 | $ | 9.09 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(3.49% | ) | 2.13% | 3.19% | (0.85% | ) | 4.59% | ||||||||||||||||||||||
$ | 382,168 | $ | 620,954 | $ | 879,706 | $ | 1,007,163 | $ | 1,177,575 | |||||||||||||||||||
1.52% | 1.64% | 1.64% | 1.66% | 1.65% | ||||||||||||||||||||||||
1.62% | 1.64% | 1.64% | 1.66% | 1.65% | ||||||||||||||||||||||||
2.62% | 2.49% | 1.79% | 2.20% | 2.59% | ||||||||||||||||||||||||
2.52% | 2.49% | 1.79% | 2.20% | 2.59% | ||||||||||||||||||||||||
122% | 125% | 240% | 218% | 189% | ||||||||||||||||||||||||
79
Table of Contents
Financial highlights
Delaware Diversified Income Fund Class R
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income1 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Return of capital |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
1 | The average shares outstanding method has been applied for per share information. |
2 | For the year ended Oct. 31, 2017, return of capital distributions of $55,969 were made by the Fund’s Class R shares, which calculated to a de minimis amount of $0.00 per share. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during some of the periods shown reflects a waiver by the manager and/or distributor. Performance would have been lower had the waivers not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
80
Table of Contents
Year ended | ||||||||||||||||||||||||||||
10/31/18 | 10/31/17 | 10/31/16 | 10/31/15 | 10/31/14 | ||||||||||||||||||||||||
$ | 8.73 | $ | 8.81 | $ | 8.73 | $ | 9.09 | $ | 8.96 | |||||||||||||||||||
0.27 | 0.26 | 0.20 | 0.24 | 0.28 | ||||||||||||||||||||||||
(0.52 | ) | (0.04 | ) | 0.13 | (0.28 | ) | 0.17 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(0.25 | ) | 0.22 | 0.33 | (0.04 | ) | 0.45 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(0.23 | ) | (0.30 | ) | (0.24 | ) | (0.27 | ) | (0.32 | ) | |||||||||||||||||||
— | — | — | (0.03 | ) | — | |||||||||||||||||||||||
(0.06 | ) | — | 2 | (0.01 | ) | (0.02 | ) | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(0.29 | ) | (0.30 | ) | (0.25 | ) | (0.32 | ) | (0.32 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
$ | 8.19 | $ | 8.73 | $ | 8.81 | $ | 8.73 | $ | 9.09 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(2.90%) | 2.52% | 3.82% | (0.47%) | 5.11% | ||||||||||||||||||||||||
$ | 46,060 | $ | 61,630 | $ | 77,484 | $ | 101,732 | $ | 116,840 | |||||||||||||||||||
1.02% | 1.14% | 1.14% | 1.16% | 1.15% | ||||||||||||||||||||||||
1.12% | 1.14% | 1.14% | 1.16% | 1.15% | ||||||||||||||||||||||||
3.12% | 2.99% | 2.29% | 2.70% | 3.09% | ||||||||||||||||||||||||
3.02% | 2.99% | 2.29% | 2.70% | 3.09% | ||||||||||||||||||||||||
122% | 125% | 240% | 218% | 189% |
81
Table of Contents
Financial highlights
Delaware Diversified Income Fund Institutional Class
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income1 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Return of capital |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
1 | The average shares outstanding method has been applied for per share information. |
2 | For the year ended Oct. 31, 2017, return of capital distributions of $2,560,569 were made by the Fund’s Institutional Class, which calculated to a de minimis amount of $0.00 per share. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during some of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
82
Table of Contents
Year ended | ||||||||||||||||||||||||||||
10/31/18 | 10/31/17 | 10/31/16 | 10/31/15 | 10/31/14 | ||||||||||||||||||||||||
$ | 8.74 | $ | 8.82 | $ | 8.74 | $ | 9.10 | $ | 8.97 | |||||||||||||||||||
0.31 | 0.30 | 0.24 | 0.29 | 0.33 | ||||||||||||||||||||||||
(0.52 | ) | (0.04 | ) | 0.13 | (0.29 | ) | 0.17 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(0.21 | ) | 0.26 | 0.37 | — | 0.50 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(0.27 | ) | (0.34 | ) | (0.28 | ) | (0.31 | ) | (0.37 | ) | |||||||||||||||||||
— | — | — | (0.03 | ) | — | |||||||||||||||||||||||
(0.06 | ) | — | 2 | (0.01 | ) | (0.02 | ) | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(0.33 | ) | (0.34 | ) | (0.29 | ) | (0.36 | ) | (0.37 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
$ | 8.20 | $ | 8.74 | $ | 8.82 | $ | 8.74 | $ | 9.10 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(2.41% | ) | 3.03% | 4.34% | 0.03% | 5.63% | |||||||||||||||||||||||
$ | 2,886,234 | $ | 2,819,555 | $ | 2,672,906 | $ | 2,620,069 | $ | 2,394,335 | |||||||||||||||||||
0.52% | 0.64% | 0.64% | 0.66% | 0.65% | ||||||||||||||||||||||||
0.62% | 0.64% | 0.64% | 0.66% | 0.65% | ||||||||||||||||||||||||
3.62% | 3.49% | 2.79% | 3.20% | 3.59% | ||||||||||||||||||||||||
3.52% | 3.49% | 2.79% | 3.20% | 3.59% | ||||||||||||||||||||||||
122% | 125% | 240% | 218% | 189% | ||||||||||||||||||||||||
83
Table of Contents
Financial highlights
Delaware Diversified Income Fund Class R6
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income2 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Return of capital |
Total dividends and distributions |
Net asset value, end of period |
Total return4 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
1 | Date of commencement of operations; ratios have been annualized and total return has not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | For the year ended Oct. 31, 2017, return of capital distributions of $11,747 were made by the Fund’s Class R6 shares, which calculated to a de minimis amount of $0.00 per share. |
4 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during some of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
5 | Portfolio turnover is representative of the Fund for the entire year ended Oct. 31, 2016. |
See accompanying notes, which are an integral part of the financial statements.
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Year ended | 5/2/161 10/31/16 | |||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
10/31/18 | 10/31/17 | |||||||||||||||||||||||||||
$ | 8.74 | $ | 8.81 | $ | 8.75 | |||||||||||||||||||||||
0.31 | 0.31 | 0.12 | ||||||||||||||||||||||||||
(0.51 | ) | (0.04 | ) | 0.08 | ||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
(0.20 | ) | 0.27 | 0.20 | |||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
(0.28 | ) | (0.34 | ) | (0.13 | ) | |||||||||||||||||||||||
(0.06 | ) | — | 3 | (0.01 | ) | |||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
(0.34 | ) | (0.34 | ) | (0.14 | ) | |||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
$ | 8.20 | $ | 8.74 | $ | 8.81 | |||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
(2.33% | ) | 3.14% | 2.50% | |||||||||||||||||||||||||
$ | 17,835 | $ | 12,935 | $ | 2 | |||||||||||||||||||||||
0.44% | 0.55% | 0.55% | ||||||||||||||||||||||||||
0.54% | 0.55% | 0.55% | ||||||||||||||||||||||||||
3.70% | 3.57% | 2.75% | ||||||||||||||||||||||||||
3.60% | 3.57% | 2.75% | ||||||||||||||||||||||||||
122% | 125% | 240%5 | ||||||||||||||||||||||||||
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Delaware Diversified Income Fund | October 31, 2018 |
Delaware Group® Adviser Funds (Trust) is organized as a Delaware statutory trust and offers three series: Delaware Diversified Income Fund, Delaware Global Real Estate Opportunities Fund, and Delaware U.S. Growth Fund. These financial statements and related notes pertain to Delaware Diversified Income Fund (Fund). The Fund an open-end investment company. The Fund is considered diversified under the Investment Company Act of 1940, as amended (1940 Act), and offers Class A, Class C, Class R, Institutional Class, and Class R6 shares. Class A shares are sold with a maximum front-end sales charge of 4.50%. Class A share purchases of $1,000,000 or more will incur a contingent deferred sales charge (CDSC) instead of a front-end sales charge of 1.00%, if redeemed during the first year, and 0.50% during the second year, provided that Delaware Distributors, L.P. (DDLP) paid a financial advisor a commission on the purchase of those shares. Class C shares are sold with a CDSC of 1.00%, which will be incurred if redeemed during the first 12 months. Class R, Institutional Class, and Class R6 shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors. In addition, Class R6 shares do not pay any service fees, sub-accounting fees, and/or sub-transfer agency fees to any brokers, dealers, or other financial intermediaries.
The investment objective of the Fund is to seek maximum long-term total return, consistent with reasonable risk.
1. Significant Accounting Policies
The Fund is an investment company and follows accounting and reporting guidance under Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services -Investment Companies. The following accounting policies are in accordance with US generally accepted accounting principles (US GAAP) and are consistently followed by the Fund.
Security Valuation – Equity securities, except those traded on the Nasdaq Stock Market LLC (Nasdaq), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange on the valuation date. Equity securities traded on the Nasdaq are valued in accordance with the Nasdaq Official Closing Price, which may not be the last sales price. If, on a particular day, an equity security does not trade, the mean between the bid and ask prices will be used, which approximates fair value. Equity securities listed on a foreign exchange are normally valued at the last quoted sales price on the valuation date. Open-end investment company securities are valued at net asset value (NAV) per share, as reported by the underlying investment company. US government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. Other debt securities, credit default swap (CDS) contracts, interest rate swap options contracts (swaptions) and interest rate swap contracts are valued based upon valuations provided by an independent pricing service or broker/counterparty and reviewed by management. To the extent current market prices are not available, the pricing service may take into account developments related to the specific security, as well as transactions in comparable securities. Valuations for fixed income securities utilize matrix systems, which reflect such factors as security prices, yields, maturities, and ratings, and are supplemented by dealer and exchange quotations. For asset-backed securities, collateralized mortgage obligations, commercial mortgage securities, and US government agency mortgage securities, pricing vendors utilize matrix pricing which considers prepayment speed, attributes of the collateral, yield or price of bonds of comparable quality, coupon, maturity, and type as well as broker/dealer-supplied prices. Swap prices are derived using daily swap curves and models that incorporate a number of
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market data factors, such as discounted cash flows, trades, and values of the underlying reference instruments. Foreign currency exchange contracts and foreign cross currency exchange contracts are valued at the mean between the bid and ask prices, which approximates fair value. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available. Futures contracts and options on futures contracts are valued at the daily quoted settlement prices. Exchange-traded options are valued at the last reported sale price or, if no sales are reported, at the mean between the last reported bid and ask prices, which approximates fair value. Generally, other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Trust’s Board of Trustees (Board). In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures or suspension of trading in a security. Restricted securities are valued at fair value using methods approved by the Board.
Federal and Foreign Income Taxes – No provision for federal income taxes has been made as the Fund intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Fund evaluates tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year. Management has analyzed the Fund’s tax positions taken or expected to be taken on the Fund’s federal income tax returns through the year ended Oct. 31, 2018 and for all open tax years (years ended Oct. 31, 2015–Oct. 31, 2017), and has concluded that no provision for federal income tax is required in the Fund’s financial statements. If applicable, the Fund recognizes interest accrued on unrecognized tax benefits in interest expense and penalties in other expenses on the “Statement of operations.” During the year ended Oct. 31, 2018, the Fund did not incur any interest or tax penalties. In regard to foreign taxes only, the Fund has open tax years in certain foreign countries in which it invests that may date back to the inception of the Fund.
Class Accounting – Investment income and common expenses are allocated to the various classes of the Fund on the basis of “settled shares” of each class in relation to the net assets of the Fund. Realized and unrealized gain (loss) on investments are allocated to the various classes of the Fund on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class. Class R6 shares will not be allocated any expenses related to service fees, sub-accounting fees, and/or sub-transfer agency fees paid to brokers, dealers, or other financial intermediaries.
Repurchase Agreements – The Fund may purchase certain US government securities subject to the counterparty’s agreement to repurchase them at an agreed upon date and price. The counterparty will be required on a daily basis to maintain the value of the collateral subject to the agreement at not less than the repurchase price (including accrued interest). The agreements are conditioned upon the collateral being deposited under the Federal Reserve book-entry system with the Fund’s custodian or a third-party sub-custodian. In the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings. All open repurchase agreements as of the date of this report were entered into on Oct. 31, 2018, and matured on the next business day.
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Notes to financial statements
Delaware Diversified Income Fund
1. Significant Accounting Policies (continued)
To Be Announced Trades (TBA) – The Fund may contract to purchase or sell securities for a fixed price at a transaction date beyond the customary settlement period (examples: when issued, delayed delivery, forward commitment, or TBA transactions) consistent with the Fund’s ability to manage its investment portfolio and meet redemption requests. These transactions involve a commitment by the Fund to purchase or sell securities for a predetermined price or yield with payment and delivery taking place more than three days in the future, or after a period longer than the customary settlement period for that type of security. No interest will be earned by the Fund on such purchases until the securities are delivered or the transaction is completed; however, the market value may change prior to delivery.
Foreign Currency Transactions – Transactions denominated in foreign currencies are recorded at the prevailing exchange rates on the valuation date in accordance with the Fund’s prospectus. The value of all assets and liabilities denominated in foreign currencies is translated daily into US dollars at the exchange rate of such currencies against the US dollar. Transaction gains or losses resulting from changes in exchange rates during the reporting period or upon settlement of the foreign currency transaction are reported in operations for the current period. The Fund generally bifurcates that portion of realized gains and losses on investments in debt securities which is due to changes in foreign exchange rates from that which is due to changes in market prices of debt securities. That portion of gains (losses), which is due to changes in foreign exchange rates, is included on the “Statement of operations” under “Net realized gain (loss) on foreign currencies.” The Fund reports certain foreign currency related transactions as components of realized gains (losses) for financial reporting purposes, whereas such components are treated as ordinary income (loss) for federal income tax purposes.
Use of Estimates – The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material.
Other – Expenses directly attributable to the Fund are charged directly to the Fund. Other expenses common to various funds within the Delaware Funds® by Macquarie (Delaware Funds) are generally allocated among such funds on the basis of average net assets. Management fees and certain other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Discounts and premiums on debt securities are accreted or amortized to interest income, respectively, over the lives of the respective securities using the effective interest method. Realized gains (losses) on paydowns of asset-and mortgage-backed securities are classified as interest income. Withholding taxes and reclaims on foreign interest have been recorded in accordance with the Fund’s understanding of the applicable country’s tax rules and rates. The Fund may pay foreign capital gains taxes on certain foreign securities held, which are reported as components of realized losses for financial reporting purposes, whereas such components are treated as ordinary loss for federal income tax purposes. The Fund will accrue such taxes as applicable based upon current interpretations of the tax rules and regulations that exist in the markets in which it invests. The Fund declares dividends daily from net investment income and pays
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the dividends monthly and declares and pays dividends from net realized gain on investments, if any, annually. The Fund may distribute more frequently, if necessary for tax purposes. Dividends and distributions, if any, are recorded on the ex-dividend date.
The Fund receives earnings credits from its custodian when positive cash balances are maintained, which may be used to offset custody fees. The expense paid under this arrangement is included on the “Statement of operations” under “Custodian fees” with the corresponding expense offset included under “Less expenses paid indirectly.” For the year ended Oct. 31, 2018, the Fund earned $95,536 under this arrangement.
The Fund receives earnings credits from its transfer agent when positive cash balances are maintained, which may be used to offset transfer agent fees. If the amount earned is greater than $1, the expense paid under this arrangement is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses” with the corresponding expense offset included under “Less expenses paid indirectly.” For the year ended Oct. 31, 2018, the Fund earned $2,792 under this arrangement.
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates
In accordance with the terms of its investment management agreement, the Fund pays Delaware Management Company (DMC), a series of Macquarie Investment Management Business Trust and the investment manager, an annual fee which is calculated daily and paid monthly at the rate of 0.55% on the first $500 million of the average daily net assets of the Fund; 0.50% on the next $500 million; 0.45% on the next 1.5 billion; and 0.425% on average daily net assets in excess $2.5 billion.
DMC has contractually agreed to waive all or a portion of its investment advisory fees and/or pay/reimburse expenses (excluding any distribution and service (12b-1) fees, taxes, interest, acquired fund fees and expenses, short sale, dividend and interest expenses, brokerage fees, certain insurance costs, and nonroutine expenses or costs, including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations) do not exceed 0.45% of the Fund’s Class A, Class C, Class R, and Institutional Class average daily net assets and 0.36% of the Fund’s Class R6 shares average daily net assets from April 1, 2018 through Oct. 31, 2018.* These waivers and reimbursements may only be terminated by agreement of DMC and the Fund. The waivers and reimbursements are accrued daily and received monthly.
Delaware Investments Fund Services Company (DIFSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Fund. For these services, DIFSC’s fees were calculated daily and paid monthly based on the aggregate daily net assets of all funds within the Delaware Funds at the following annual rate: 0.00475% of the first $35 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $45 billion (Total Fee). Each Fund in the Delaware Funds pays a minimum of $4,000, which, in aggregate, is subtracted from the Total Fee. Each Fund then pays its portion of the remainder of the Total Fee on a relative net asset value (NAV) basis. This amount is included on the “Statement of operations” under “Accounting and administration expenses.” For the year ended Oct. 31, 2018, the Fund was charged $168,037 for these services.
DIFSC is also the transfer agent and dividend disbursing agent of the Fund. For these services, DIFSC’s fees were calculated daily and paid monthly based on the aggregate daily net assets of the retail funds
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Notes to financial statements
Delaware Diversified Income Fund
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates (continued)
within the Delaware Funds from Nov. 1, 2017 through June 30, 2018 at the following annual rate: 0.025% of the first $20 billion; 0.020% of the next $5 billion; 0.015% of the next $5 billion; and 0.013% of average daily net assets in excess of $30 billion. Effective July 1, 2018, the Fund as well as the other Delaware Funds entered into an amendment to the DIFSC agreement. Under the amendment to the DIFSC agreement, DIFSC’s fees are calculated daily and paid monthly based on the aggregate daily net assets of the retail funds within the Delaware Funds at the following annual rate: 0.014% of the first $20 billion; 0.011% of the next $5 billion; 0.007% of the next $5 billion; 0.005% of the next $20 billion; and 0.0025% of average daily net assets in excess of $50 billion. The fees payable to DIFSC under the transfer agent agreement described above are allocated among all retail funds in the Delaware Funds on a relative NAV basis. This amount is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.” For the year ended Oct. 31, 2018, the Fund was charged $707,046 for these services. Pursuant to a sub-transfer agency agreement between DIFSC and BNY Mellon Investment Servicing (US) Inc. (BNYMIS), BNYMIS provides certain sub-transfer agency services to the Fund. Sub-transfer agency fees are paid by the Fund and are also included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.”
Pursuant to a distribution agreement and distribution plan, the Fund pays DDLP, the distributor and an affiliate of DMC, an annual 12b-1 fees of 0.25% of the average daily net assets of the Class A shares, 1.00% of the average daily net assets of the Class C shares, and 0.50% of the average daily net assets of Class R shares. The fees are calculated daily and paid monthly. Institutional Class and Class R6 shares pay no 12b-1 fees.
As provided in the investment management agreement, the Fund bears a portion of the cost of certain resources shared with DMC, including the cost of internal personnel of DMC and/or its affiliates that provide legal, tax, and regulatory reporting services to the Fund. For the year ended Oct. 31, 2018, the Fund was charged $122,091 for internal legal, tax, and regulatory reporting services provided by DMC and/or its affiliates’ employees. This amount is included on the “Statement of operations” under “Legal fees.”
For the year ended Oct. 31, 2018, DDLP earned $34,189 for commissions on sales of the Fund’s Class A shares. For the year ended Oct. 31, 2018, DDLP received gross CDSC commissions of $9 and $17,605 on redemptions of the Fund’s Class A and Class C shares, respectively, and these commissions were entirely used to offset upfront commissions previously paid by DDLP to broker/dealers on sales of those shares.
Trustees’ fees include expenses accrued by the Fund for each Trustee’s retainer and meeting fees. Certain officers of DMC, DIFSC, and DDLP are officers and/or Trustees of the Trust. These officers and Trustees are paid no compensation by the Fund.
Cross trades for the year ended Oct. 31, 2018 were executed by the Fund pursuant to procedures adopted by the Board designed to ensure compliance with Rule 17a-7 under the 1940 Act. Cross trading is the buying or selling of portfolio securities between funds of investment companies, or between a fund of an investment company and another entity, that are or could be considered affiliates by virtue of
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having a common investment advisor (or affiliated investment advisors), common directors/trustees and/or common officers. At its regularly scheduled meetings, the Board reviews such transactions for compliance with the procedures adopted by the Board. Pursuant to these procedures, for the year ended Oct. 31, 2018, the Fund engaged in Rule 17a-7 securities purchased of $5,188,685 and Rule 17a-7 securities sales of $393,642, which resulted in net realized losses of $(11,900).
*The aggregate contractual waiver period covering this report is from April 1, 2018 through April 1, 2019.
3. Investments
For the year ended Oct. 31, 2018, the Fund made purchases and sales of investment securities other than short-term investments as follows:
Purchases other than US government securities | $ | 2,903,018,690 | ||
Purchases of US government securities | 2,338,697,384 | |||
Sales other than US government securities | 3,245,595,870 | |||
Sales of US government securities | 1,953,109,880 |
The tax cost of investments includes adjustments to net unrealized appreciation (depreciation) which may not necessarily be final tax cost basis adjustments, but approximate the tax basis unrealized gains and losses that may be realized and distributed to shareholders. At Oct. 31, 2018, the cost and unrealized appreciation (depreciation) of investments and derivatives for federal income tax purposes for the Fund were as follows:
Cost of investments and derivatives | $ | 4,316,666,841 | ||
|
| |||
Aggregate unrealized appreciation of investments and derivatives | $ | 65,757,841 | ||
Aggregate unrealized depreciation of investments and derivatives | (180,346,520 | ) | ||
|
| |||
Net unrealized depreciation of investments and derivatives | $ | (114,588,679 | ) | |
|
|
US GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. A three-level hierarchy for fair value measurements has been established based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available under the circumstances. The Fund’s investment in its entirety is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-level hierarchy of inputs is summarized below and on the next page.
Level 1 – | Inputs are quoted prices in active markets for identical investments. (Examples: equity securities, open-end investment companies, futures contracts, exchange-traded options contracts) | |
Level 2 – | Other observable inputs, including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in |
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Notes to financial statements
Delaware Diversified Income Fund
3. Investments (continued)
markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, and default rates) or other market-corroborated inputs. (Examples: debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities) | ||
Level 3 – | Significant unobservable inputs, including the Fund’s own assumptions used to determine the fair value of investments. (Examples: broker-quoted securities, fair valued securities) |
Level 3 investments are valued using significant unobservable inputs. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Valuations may also be based upon current market prices of securities that are comparable in coupon, rating, maturity, and industry. The derived value of a Level 3 investment may not represent the value which is received upon disposition and this could impact the results of operations.
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The following table summarizes the valuation of the Fund’s investments by fair value hierarchy levels as of Oct. 31, 2018:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Securities | ||||||||||||||||
Assets: | ||||||||||||||||
Agency, Asset- & Mortgage-Backed Securities1 | $ | — | $ | 1,311,595,299 | $ | 9,324,067 | $ | 1,320,919,366 | ||||||||
Corporate Debt | — | 1,773,046,079 | — | 1,773,046,079 | ||||||||||||
Municipal Bonds | — | 7,793,736 | — | 7,793,736 | ||||||||||||
Foreign Debt | — | 134,735,943 | — | 134,735,943 | ||||||||||||
Loan Agreements1 | — | 321,330,232 | 11,613,860 | 332,944,092 | ||||||||||||
US Treasury Obligation | — | 438,545,940 | — | 438,545,940 | ||||||||||||
Common Stock | — | — | — | — | ||||||||||||
Convertible Preferred Stock | — | 31,582,584 | — | 31,582,584 | ||||||||||||
Preferred Stock | — | 11,441,970 | — | 11,441,970 | ||||||||||||
Options Purchased | — | 3,185 | — | 3,185 | ||||||||||||
Short-Term Investments | — | 101,145,943 | — | 101,145,943 | ||||||||||||
Securities Lending Collateral | — | 54,170,502 | — | 54,170,502 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Value of Securities | $ | — | $ | 4,185,391,413 | $ | 20,937,927 | $ | 4,206,329,340 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Derivatives:2 | ||||||||||||||||
Assets: | ||||||||||||||||
Foreign Currency Exchange Contracts | — | 205,764 | — | 205,764 | ||||||||||||
Futures Contracts | 1,847,190 | — | — | 1,847,190 | ||||||||||||
Liabilities: | ||||||||||||||||
Foreign Currency Exchange Contracts | — | (188,839 | ) | — | (188,839 | ) | ||||||||||
Futures Contracts | (5,550,737 | ) | — | — | (5,550,737 | ) | ||||||||||
Swap Contracts | — | (564,556 | ) | — | (564,556 | ) |
The security that has been valued at zero on the “Schedule of investments” is considered to be Level 3 investment in this table.
1Security type is valued across multiple levels. Level 1 investments represent exchange-traded investments, Level 2 investments represent investments with observable input or matrix-priced investments, and Level 3 investments represent investments without observable inputs. The amounts attributed to Level 1 investments, Level 2 investments, and Level 3 investments represent the following percentages of the total value of these security types:
Level 1 | Level 2 | Level 3 | Total | |||||||||||
Agency, Asset- & Mortgage- Backed Securities | — | 99.29 | % | 0.71 | % | 100.00 | % | |||||||
Loan Agreements | — | 96.51 | % | 3.49 | % | 100.00 | % |
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Notes to financial statements
Delaware Diversified Income Fund
3. Investments (continued)
2Foreign currency exchange contracts, futures contracts, and swap contracts are valued at the unrealized appreciation (depreciation) on the instrument at the year end.
During the year ended Oct. 31, 2018, there were no transfers between Level 1 investments, Level 2 investments, or Level 3 investments that had a significant impact to the Fund. The Fund’s policy is to recognize transfers between levels based on fair value at the beginning of the reporting period.
A reconciliation of Level 3 investments is presented when the Fund has a significant amount of Level 3 investments at the beginning, interim, or end of the period in relation to the Fund’s net assets. Management has determined not to provide a reconciliation of Level 3 investments as the Level 3 investments were not considered significant to the Fund’s net assets at the beginning, interim, or end of the year. Management has determined not to provide additional disclosure on Level 3 inputs since the Level 3 investments are not considered significant to the Fund’s net assets at the end of the year.
4. Dividend and Distribution Information
Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP. Additionally, distributions from net gains on foreign currency transactions and net short-term gains on sales of investment securities are treated as ordinary income for federal income tax purposes. The tax character of dividends and distributions paid during the years ended Oct. 31, 2018 and 2017 was as follows:
Year ended | ||||||||
10/31/18 | 10/31/17 | |||||||
Ordinary income | $ | 133,778,138 | $ | 162,437,663 | ||||
Return of capital | 30,203,854 | 4,003,460 | ||||||
|
|
|
| |||||
Total | $ | 163,981,992 | $ | 166,441,123 | ||||
|
|
|
|
5. Components of Net Assets on a Tax Basis
As of Oct. 31, 2018, the components of net assets on a tax basis were as follows:
Shares of beneficial interest | $ | 4,406,056,173 | ||
Distributions payable | (3,885,196 | ) | ||
Capital loss carryforwards | (209,483,664 | ) | ||
Troubled debt litigation | (11,171,417 | ) | ||
Unrealized depreciation of investments, foreign currencies, and derivatives | (114,588,679 | ) | ||
|
| |||
Net assets | $ | 4,066,927,217 | ||
|
|
The differences between book basis and tax basis components of net assets are primarily attributable to tax deferral of losses on wash sales, mark-to-market of foreign currency exchange contracts, mark-to-market of futures contracts, tax deferral of straddles losses, tax treatment of CDS contracts, contingent payment on debt instruments, hybrid securities, market discount and premium on debt instruments, and deemed dividend income.
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At Oct. 31, 2018, capital loss carryforwards available to offset future realized capital gains were as follows:
Loss carryforward character | ||||
Short-term | Long-term | Total | ||
$88,212,421 | $121,271,243 | $209,483,664 |
6. Capital Shares
Transactions in capital shares were as follows:
Year ended | ||||||||
10/31/18 | 10/31/17 | |||||||
Shares sold: | ||||||||
Class A | 23,776,387 | 16,474,509 | ||||||
Class C | 2,563,993 | 2,869,327 | ||||||
Class R | 1,047,520 | 1,632,764 | ||||||
Institutional Class | 129,417,375 | 106,070,006 | ||||||
Class R6 | 847,626 | 1,539,327 | ||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | 3,362,209 | 4,038,452 | ||||||
Class C | 1,654,896 | 2,266,960 | ||||||
Class R | 214,729 | 257,591 | ||||||
Institutional Class | 12,178,950 | 11,291,356 | ||||||
Class R6 | 66,316 | 14,933 | ||||||
|
|
|
| |||||
175,130,001 | 146,455,225 | |||||||
|
|
|
| |||||
Shares redeemed: | ||||||||
Class A | (39,716,214 | ) | (61,225,045 | ) | ||||
Class C | (28,643,822 | ) | (33,918,115 | ) | ||||
Class R | (2,694,541 | ) | (3,632,184 | ) | ||||
Institutional Class | (112,025,868 | ) | (98,054,617 | ) | ||||
Class R6 | (217,988 | ) | (74,930 | ) | ||||
|
|
|
| |||||
(183,298,433 | ) | (196,904,891 | ) | |||||
|
|
|
| |||||
Net decrease | (8,168,432 | ) | (50,449,666 | ) | ||||
|
|
|
|
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Notes to financial statements
Delaware Diversified Income Fund
6. Capital Shares (continued)
Certain shareholders may exchange shares of one class for shares of another class in the same Fund. These exchange transactions are included as subscriptions and redemptions in the tables above and on the “Statements of changes in net assets.” For the years ended Oct. 31, 2018 and 2017, the Fund had the following exchange transactions.
Exchange Redemptions | Exchange Subscriptions | |||||||||||||||||
Year ended | Class A | Class C | Class A |
Institutional | Value | |||||||||||||
10/31/18 | 303,887 | 709,270 | 584,427 | 429,381 | $ 8,555,325 | |||||||||||||
10/31/17 | 6,462,318 | 710,034 | 44,559 | 7,133,891 | 62,150,647 |
7. Line of Credit
The Fund, along with certain other funds in the Delaware Funds (Participants), was a participant in a $155,000,000 revolving line of credit intended to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, the Participants were charged an annual commitment fee of 0.15%, which was allocated across the Participants based on a weighted average of the respective net assets of each Participant. The Participants were permitted to borrow up to a maximum of one-third of their net assets under the agreement. Each Participant was individually, and not jointly, liable for its particular advances, if any, under the line of credit. The line of credit available under the agreement expired on Nov. 6, 2017.
On Nov. 6, 2017, the Fund, along with the other Participants, entered into an amendment to the agreement for a $155,000,000 revolving line of credit. The revolving line of credit available was reduced from $155,000,000 to $130,000,0000 on Sept. 6, 2018. The revolving line of credit was to be used as described above and operated in substantially the same manner as the original agreement. The line of credit available under the agreement expired on Nov. 5, 2018.
The Fund had no amounts outstanding as of Oct. 31, 2018, or at any time during the year then ended.
8. Derivatives
US GAAP requires disclosures that enable investors to understand: (1) how and why an entity uses derivatives; (2) how they are accounted for; and (3) how they affect an entity’s results of operations and financial position.
Foreign Currency Exchange Contracts – The Fund may enter into foreign currency exchange contracts and foreign cross currency exchange contracts as a way of managing foreign exchange rate risk. The Fund may enter into these contracts to fix the US dollar value of a security that it has agreed to buy or sell for the period between the date the trade was entered into and the date the security is delivered and paid for. The Fund may also enter these contracts to hedge the US dollar value of securities it already owns that are denominated in foreign currencies. In addition, the Fund may enter into these contracts to facilitate or expedite the settlement of portfolio transactions. The change in value is recorded as an unrealized gain or loss. When the contract is closed, a realized gain or loss is recorded
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equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
The use of foreign currency exchange contracts and foreign cross currency exchange contracts does not eliminate fluctuations in the underlying prices of the securities, but does establish a rate of exchange that can be achieved in the future. Although foreign currency exchange contracts and foreign cross currency exchange contracts limit the risk of loss due to an unfavorable change in the value of the hedged currency, they also limit any potential gain that might result should the value of the currency change favorably. In addition, the Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts. The Fund’s maximum risk of loss from counterparty credit risk is the value of its currency exchanged with the counterparty. The risk is generally mitigated by having a netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty.
During the year ended Oct. 31, 2018, the Fund entered into foreign currency exchange contracts to hedge the US dollar value of securities it already owns that are denominated in foreign currencies.
Futures Contracts – A futures contract is an agreement in which the writer (or seller) of the contract agrees to deliver to the buyer an amount of cash or securities equal to a specific dollar amount times the difference between the value of a specific security or index at the close of the last trading day of the contract and the price at which the agreement is made. The Fund may use futures contracts in the normal course of pursuing its investment objective. The Fund may invest in futures contracts to hedge its existing portfolio securities against fluctuations in value caused by changes in interest rates or market conditions. Upon entering into a futures contract, the Fund deposits cash or pledges US government securities to a broker, equal to the minimum “initial margin” requirements of the exchange on which the contract is traded. Subsequent payments are received from the broker or paid to the broker each day, based on the daily fluctuation in the market value of the contract. These receipts or payments are known as “variation margin” and are recorded daily by the Fund as unrealized gains or losses until the contracts are closed. When the contracts are closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Risks of entering into futures contracts include potential imperfect correlation between the futures contracts and the underlying securities and the possibility of an illiquid secondary market for these instruments. When investing in futures, there is reduced counterparty credit risk to the Fund because futures are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees against default. At Oct. 31, 2018, the Fund posted $12,072,783 in securities as margin for open futures contracts. Securities collateral are presented on the “Schedule of investments.”
During the year ended Oct. 31, 2018, the Fund entered into futures contracts to hedge the Fund’s existing portfolio securities against fluctuations in value caused by changes in interest rates or market conditions.
Options Contracts – The Fund may enter into options contracts in the normal course of pursuing its investment objective. The Fund may buy or write options contracts for any number of reasons, including without limitation: to manage the Fund’s exposure to changes in securities prices caused by interest rates or market conditions and foreign currencies; as an efficient means of adjusting the Fund’s overall
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Notes to financial statements
Delaware Diversified Income Fund
8. Derivatives (continued)
exposure to certain markets; to protect the value of portfolio securities; and as a cash management tool. The Fund may buy or write call or put options on securities, futures, swaps, swaptions, financial indices, and foreign currencies. When the Fund buys an option, a premium is paid and an asset is recorded and adjusted on a daily basis to reflect the current market value of the option purchased. When the Fund writes an option, a premium is received and a liability is recorded and adjusted on a daily basis to reflect the current market value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is treated as realized gain or loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether the Fund has a realized gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by the Fund. The Fund, as writer of an option, bears the market risk of an unfavorable change in the price of the security underlying the written option. When writing options, the Fund is subject to minimal counterparty risk because the counterparty is only obligated to pay premiums and does not bear the market risk of an unfavorable market change.
During the year ended Oct. 31, 2018, the Fund entered into option contracts to manage the Fund’s exposure to changes in securities prices caused by interest rates or market conditions.
Swap Contracts – The Fund may enter into interest rate swap contracts and CDS contracts in the normal course of pursuing its investment objective. The Fund may invest in interest rate swaps to manage the Fund’s sensitivity to interest rates or to hedge against changes in interest rates. The Fund may enter into CDS contracts in order to hedge against a credit event, to enhance total return or to gain exposure to certain securities or markets. The Fund will not be permitted to enter into any swap transactions unless, at the time of entering into such transactions, the unsecured long-term debt of the actual counterparty, combined with any credit enhancements, is rated at least BBB- by Standard & Poor’s Financial Services LLC. (S&P) or Baa3 by Moody’s Investors Service Inc. (Moody’s) or is determined to be of equivalent credit quality by DMC.
Interest Rate Swaps. An interest rate swap contract is an exchange of interest rates between counterparties. In one instance, an interest rate swap involves payments received by the Fund from another party based on a variable or floating interest rate, in return for making payments based on a fixed interest rate. An interest rate swap can also work in reverse with the Fund receiving payments based on a fixed interest rate and making payments based on a variable or floating interest rate. Interest rate swaps may be used to adjust the Fund’s sensitivity to interest rates or to hedge against changes in interest rates. Periodic payments on such contracts are accrued daily and recorded as unrealized appreciation (depreciation) on swap contracts. Upon periodic payment (receipt) or termination of the contract, such amounts are recorded as realized gains or losses on swap contracts. The Fund’s maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from/paid to the counterparty over the interest rate swap contract’s remaining life, to the extent that the amount is positive. This risk is mitigated by (1) for bilateral swap contracts, having a netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty and (2) for cleared swaps, trading these instruments through a central counterparty.
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During the year ended Oct. 31, 2018, the Fund entered into interest rate swap contracts to manage the Fund’s sensitivity to interest rate or to hedge against changes in interest rates.
Credit Default Swaps. A CDS contract is a risk-transfer instrument through which one party (purchaser of protection) transfers to another party (seller of protection) the financial risk of a credit event (as defined in the CDS agreement), as it relates to a particular reference security or basket of securities (such as an index). In exchange for the protection offered by the seller of protection, the purchaser of protection agrees to pay the seller of protection a periodic amount at a stated rate that is applied to the notional amount of the CDS contract. In addition, an upfront payment may be made or received by the Fund in connection with an unwinding or assignment of a CDS contract. Upon the occurrence of a credit event, the seller of protection would pay the par (or other agreed-upon) value of the reference security (or basket of securities) to the counterparty. Credit events generally include, among others, bankruptcy, failure to pay, and obligation default.
During the year ended Oct. 31, 2018, the Fund entered into CDS contracts as a purchaser and seller of protection, as a hedge against credit events. Periodic payments (receipts) on such contracts are accrued daily and recorded as unrealized losses (gains) on swap contracts. Upon payment (receipt), such amounts are recorded as realized losses (gains) on swap contracts. Upfront payments made or received in connection with CDS contracts are amortized over the expected life of the CDS contracts as unrealized losses (gains) on swap contracts. The change in value of CDS contracts is recorded daily as unrealized appreciation or depreciation. A realized gain or loss is recorded upon a credit event (as defined in the CDS agreement) or the maturity or termination of the agreement. Initial margin and variation margin are posted to central counterparties for centrally cleared CDS basket trades, as determined by the applicable central counterparty.
As disclosed in the footnotes to the “Schedule of investments,” at Oct. 31, 2018, the notional value of the protection sold was $24,970,000, which reflects the maximum potential amount the Fund would have been required to make as a seller of credit protection if a credit event had occurred. In addition to serving as the source of the current value of the securities, the quoted market prices and resulting market values for credit default swap agreements on securities and credit indices serve as an indicator of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative if the swap agreement has been closed/sold as of the period end. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the reference entity’s credit soundness and a greater likelihood of risk of default or other credit event occurring as defined under the terms of the agreement. At Oct. 31, 2018, there were no recourse provisions with third parties to recover any amounts paid under the credit derivative agreement (including any purchased credit protection) nor was any collateral held by the Fund and other third parties which the Fund can obtain occurrence of a credit event. At Oct. 31, 2018, net unrealized depreciation of the protection sold was $(564,556).
CDS contracts may involve greater risks than if the Fund had invested in the reference obligation directly. CDS contracts are subject to general market risk, liquidity risk, counterparty risk, and credit risk. The Fund’s maximum risk of loss from counterparty credit risk, either as the seller of protection or the buyer of protection, is the fair value of the contract. This risk is mitigated by (1) for bilateral swap contracts, having a netting arrangement between the Fund and the counterparty and by the posting of collateral by
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Notes to financial statements
Delaware Diversified Income Fund
8. Derivatives (continued)
the counterparty to the Fund to cover the Fund’s exposure to the counterparty, and (2) for cleared swaps, trading these instruments through a central counterparty.
During the year ended Oct. 31, 2018, the Fund entered into CDS contracts to hedge against credit events and to gain exposure to certain securities or markets.
Swaps Generally. For centrally cleared swaps, payments are received from the broker or paid to the broker each day, based on the daily fluctuation in the market value of the contract. These receipts or payments are known as “variation margin” and are recorded 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. The value of open swaps may differ from that which would be realized in the event the Fund terminated its position in the contract on a given day. Risks of entering into these contracts include the potential inability of the counterparty to meet the terms of the contracts. This type of risk is generally limited to the amount of favorable movement in the value of the underlying security, instrument, or basket of instruments, if any, at the day of default. Risks also arise from potential losses from adverse market movements and such losses could exceed the unrealized amounts shown on the “Schedule of investments.”
At Oct. 31, 2018, for bilateral derivative contracts, the Fund posted $4,020,000 in cash collateral for certain open derivatives, which is included in “Cash collateral due from brokers” on the “Statement of assets and liabilities.” the Fund received $1,050,000 in cash and $124,000 in securities as collateral. Cash is included as “Cash collateral due to brokers” on the “Statement of assets and liabilities.” The Fund also received $510 in cash collateral for centrally cleared derivatives, which is included in “Cash collateral due from brokers” on the “Statement of assets and liabilities.”
Fair values of derivative instruments as of Oct. 31, 2018 were as follows:
�� | Asset Derivatives Fair Value | |||||||||||||||||||||||
Statements of Assets and Liabilities Location | Currency Contracts | Equity Contracts | Interest Rate Contracts | Total | ||||||||||||||||||||
Unrealized appreciation on foreign currency exchange contracts | $ | 205,764 | $ | — | $ | — | $ | 205,764 | ||||||||||||||||
Variation margin due to broker on futures contracts* | — | 492,987 | 1,354,203 | 1,847,190 | ||||||||||||||||||||
Options purchased, at value** | 3,185 | — | — | 3,185 | ||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total | $ | 208,949 | $ | 492,987 | $ | 1,354,203 | $ | 2,056,139 | ||||||||||||||||
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Fair values of derivative instruments as of Oct. 31, 2018 were as follows (continued):
Liability Derivatives Fair Value | ||||||||||||||||
Statements of Assets and Liabilities Location | Currency Contracts | Interest Rate Contracts | Credit Contracts | Total | ||||||||||||
Unrealized depreciation on foreign currency exchange contracts | $ | (188,839 | ) | $ | — | $ | — | $ | (188,839 | ) | ||||||
Variation margin due to broker on futures contracts* | — | (5,550,737 | ) | — | (5,550,737 | ) | ||||||||||
Unrealized depreciation on credit default swap contracts | — | — | (564,556 | ) | (564,556 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | (188,839 | ) | $ | (5,550,737 | ) | $ | (564,556 | ) | $ | (6,304,132 | ) | ||||
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|
|
|
|
|
|
*Includes cumulative appreciation (depreciation) of futures contracts from the date the contracts were opened through Oct. 31, 2018. Only current day variation margin is reported on the “Statement of assets and liabilities.”
**Included in Investments, at value.
The effect of derivative instruments on the “Statement of operations” for the year ended Oct. 31, 2018 was as follows:
Net Realized Gain (Loss) on: | ||||||||||||||||||||
Foreign Currency Exchange Contracts | Futures Contracts | Options Purchased | Swap Contracts | Total | ||||||||||||||||
Currency contracts | $ | (688,509 | ) | $ | — | $ | (650,064 | ) | $ | — | $ | (1,338,573 | ) | |||||||
Interest rate contracts | — | 818,710 | 885,815 | 540,111 | 2,244,636 | |||||||||||||||
Equity contracts | — | (3,798,599 | ) | — | — | (3,798,599 | ) | |||||||||||||
Credit contracts | — | — | — | (3,777,294 | ) | (3,777,294 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | (688,509 | ) | $ | (2,979,889 | ) | $ | 235,751 | $ | (3,237,183 | ) | $ | (6,669,830 | ) | ||||||
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Notes to financial statements
Delaware Diversified Income Fund
8. Derivatives (continued)
The effect of derivative instruments on the “Statement of operations” for the year ended Oct. 31, 2018 was as follows (continued):
Net Change in Unrealized Appreciation (Depreciation) of: | ||||||||||||||||||||
Foreign Currency Exchange Contracts | Futures Contracts | Options Purchased | Swap Contracts | Total | ||||||||||||||||
Currency contracts | $ | 1,023,139 | $ | — | $ | (167,553 | ) | $ | — | $ | 855,586 | |||||||||
Interest rate contracts | — | (929,684 | ) | 489,995 | (439,689 | ) | ||||||||||||||
Equity contracts | — | 492,987 | — | — | 492,987 | |||||||||||||||
Credit contracts | — | — | — | 768,145 | 768,145 | |||||||||||||||
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|
|
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|
|
|
|
|
| |||||||||||
Total | $ | 1,023,139 | $ | (436,697 | ) | $ | (167,553 | ) | $ | 1,258,140 | $ | 1,677,029 | ||||||||
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|
|
|
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|
Derivatives Generally. The table below summarizes the average balance of derivative holdings by the Fund during the year ended Oct. 31, 2018:
Long Derivative Volume | Short Derivative Volume | |||||||
Foreign currency exchange contracts (average cost) | USD 98,916,213 | USD 150,049,216 | ||||||
Futures contracts (average notional value) | 286,784,678 | 214,517,294 | ||||||
Options contracts (average value) | 343,429 | 4,282 | ||||||
CDS contracts (average notional value)* | EUR 967,738 | — | ||||||
CDS contracts (average notional value)* | 51,690,057 | 24,022,123 | ||||||
Interest rate swap contracts (average notional value)** | — | 9,448,036 |
*Long represents buying protection and short represents selling protection.
**Long represents receiving fixed interest payments and short represents paying fixed interest payments.
9. Offsetting
The Fund entered into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement) or a similar agreement with certain of its derivative contract counterparties in order to better define its contractual rights and to secure rights that will help the Fund mitigate its counterparty risk. An ISDA Master Agreement is a bilateral agreement between the Fund and a counterparty that governs certain over-the-counter (OTC) derivatives and foreign exchange contracts and typically contains, among other things, collateral posting items and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default (close-out),
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including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency, or other events.
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements on the “Statement of assets and liabilities.”
At Oct. 31, 2018, the Fund had the following assets and liabilities subject to offsetting provisions:
Offsetting of Financial Assets and Liabilities and Derivative Assets and Liabilities
Counterparty | Gross Value of Derivative Asset | Gross Value of Derivative Liability | Net Position | |||||||||
Bank of America Merrill Lynch | $ | 67,420 | $ | — | $ | 67,420 | ||||||
BNP Paribas | 26,393 | (28,865 | ) | (2,472 | ) | |||||||
Citigroup Global Markets | 49,330 | (28,964 | ) | 20,366 | ||||||||
Hong Kong Shanghai Bank | 26,300 | (229,464 | ) | (203,164 | ) | |||||||
JPMorgan Chase Bank | 36,321 | — | 36,321 | |||||||||
Morgan Stanley Capital | — | (564,556 | ) | (564,556 | ) | |||||||
Toronto Dominion Bank | — | (92,036 | ) | (92,036 | ) | |||||||
UBS | — | (32,301 | ) | (32,301 | ) | |||||||
|
|
|
|
|
| |||||||
Total | $ | 205,764 | $ | (976,186 | ) | $ | (770,422 | ) | ||||
|
|
|
|
|
|
Counterparty | Net Position | Fair Value of Non-Cash Collateral Received | Cash Collateral Received(a) | Fair Value of Non-Cash Collateral Pledged | Cash Collateral Pledged | Net Exposure(b) | ||||||||||||||||||||||||
Bank of America Merrill Lynch | $ | 67,420 | $— | $ | (67,420 | ) | $ | — | $ | — | $ | — | ||||||||||||||||||
BNP Paribas | (2,472 | ) | — | — | — | — | (2,472 | ) | ||||||||||||||||||||||
Citigroup Global Markets | 20,366 | — | — | — | — | 20,366 | ||||||||||||||||||||||||
Hong Kong Shanghai Bank | (203,164 | ) | — | — | — | — | (203,164 | ) | ||||||||||||||||||||||
JPMorgan Chase Bank | 36,321 | — | (36,321 | ) | — | — | — | |||||||||||||||||||||||
Morgan Stanley Capital | (564,556 | ) | — | — | — | 564,556 | — | |||||||||||||||||||||||
Toronto Dominion Bank | (92,036 | ) | — | — | — | 92,036 | — | |||||||||||||||||||||||
UBS | (32,301 | ) | — | — | — | — | (32,301 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total | $ | (770,422 | ) | $— | $ | (103,741 | ) | $ | — | $ | 656,592 | $ | (217,571 | ) | ||||||||||||||||
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Master Repurchase Agreements
Repurchase agreements are entered into by the Fund under Master Repurchase Agreements (each, an MRA). The MRA permits the Fund, under certain circumstances including an event of default (such as bankruptcy or insolvency), to offset payables and/or receivables with collateral held by and/or posted to
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Notes to financial statements
Delaware Diversified Income Fund
9. Offsetting (continued)
the counterparty. As a result, one single net payment is created. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of the MRA counterparty’s bankruptcy or insolvency. Based on the terms of the MRA, the Fund receives securities as collateral with a market value in excess of the repurchase price at maturity. Upon a bankruptcy or insolvency of the MRA counterparty, the Fund would recognize a liability with respect to such excess collateral. The liability reflects the Fund’s obligation under bankruptcy law to return the excess to the counterparty. As of Oct. 31, 2018, the following table is a summary of the Fund’s repurchase agreements by counterparty which are subject to offset under an MRA:
Counterparty | Repurchase | Fair Value of | Cash Received | Net | Net | |||||||||||
Bank of America Merrill Lynch | $ | 11,787,060 | $(11,787,060 | ) | $— | $ | (11,787,060 | ) | $— | |||||||
Bank of Montreal | 32,414,416 | (32,414,416 | ) | — | (32,414,416 | ) | — | |||||||||
BNP Paribas | 41,621,289 | (41,621,289 | ) | — | (41,621,289 | ) | — | |||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 85,822,765 | $(85,822,765 | ) | $— | $ | (85,822,765 | ) | $— | |||||||
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|
|
|
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|
Security Lending
Securities lending transactions are entered into by the Fund under Master Securities Lending Agreements (each, an MSLA) which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, the borrower can resell or re-pledge the loaned securities, and the Fund can reinvest cash collateral, or, upon an event of default, resell or re-pledge the collateral (see also Note 11).
As of Oct. 31, 2018, the following table is a summary of the Fund’s securities lending agreements by counterparty which are subject to offset under an MSLA:
Counterparty | Securities | Cash | Fair Value of | Net | Net | |||||||||||
The Bank of New York Mellon | $ | 52,183,147 | $ | (52,183,147 | ) | $— | $ | (52,183,147 | ) | $— |
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Master Securities Forward Transaction Agreements
Master Securities Forward Transaction Agreements (MFA) govern certain forward settling transactions, such as TBA securities, delayed-delivery or sale-buyback transactions by and between the Fund and select counterparties. The MFA maintain provisions for, among other things, transaction initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral. As of Oct. 31, 2018, the following table is a summary of the Fund’s TBA securities by counterparty which are subject to offsetting under MFA:
Counterparty | TBA | Cash | Cash Collateral Pledged | Net | ||||||||
Goldman Sachs | $ | 102,793,619 | $— | $— | $ | 102,793,619 |
(a)The value of the related collateral exceeded the value of the net position, purchase agreements and securities lending transactions as of Oct. 31, 2018.
(b)Net exposure represents the receivable (payable) that would be due from (to) the counterparty in the event of default.
10. Securities Lending
The Fund, along with other funds in the Delaware Funds, may lend its securities pursuant to a security lending agreement (Lending Agreement) with The Bank of New York Mellon (BNY Mellon). At the time a security is loaned, the borrower must post collateral equal to the required percentage of the market value of the loaned security, including any accrued interest. The required percentage is: (1) 102% with respect to US securities and foreign securities that are denominated and payable in US dollars; and (2) 105% with respect to foreign securities. With respect to each loan, if on any business day the aggregate market value of securities collateral plus cash collateral held is less than the aggregate market value of the securities which are the subject of such loan, the borrower will be notified to provide additional collateral by the end of the following business day, which, together with the collateral already held, will be not less than the applicable initial collateral requirements for such security loan. If the aggregate market value of securities collateral and cash collateral held with respect to a security loan exceeds the applicable initial collateral requirement, upon the request of the borrower, BNY Mellon must return enough collateral to the borrower by the end of the following business day to reduce the value of the remaining collateral to the applicable initial collateral requirement for such security loan. As a result of the foregoing, the value of the collateral held with respect to a loaned security on any particular day may be more or less than the value of the security on loan. The collateral percentage with respect to the market value of the loaned security is determined by the security lending agent.
Cash collateral received by each fund of the Trust is generally invested in a series of individual separate accounts, each corresponding to a fund. The investment guidelines permit each separate account to hold certain securities that would be considered eligible securities for a money market fund. Cash collateral received is generally invested in government securities; certain obligations issued by government sponsored enterprises; repurchase agreements collateralized by US Treasury securities; obligations issued by the central government of any Organization for Economic Cooperation and Development (OECD) country or its agencies, instrumentalities, or establishments; obligations of supranational organizations, commercial paper, notes, bonds, and other debt obligations; certificates of deposit, time deposits, and other bank obligations; and asset-backed securities as disclosed on the
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Notes to financial statements
Delaware Diversified Income Fund
10. Securities Lending (continued)
“Schedule of investments.” Securities purchased with cash collateral are valued at the market value. A fund can also accept US government securities and letters of credit (non-cash collateral) in connection with securities loans.
In the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Fund or, at the discretion of the lending agent, replace the loaned securities. The Fund continues to record dividends or interest, as applicable, on the securities loaned and is subject to changes in value of the securities loaned that may occur during the term of the loan. The Fund has the right under the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized by non-cash collateral, the Fund receives loan premiums paid by the borrower. With respect to security loans collateralized by cash collateral, the earnings from the collateral investments are shared among the Fund, the security lending agent, and the borrower. The Fund records security lending income net of allocations to the security lending agent, and the borrower.
The Fund may incur investment losses as a result of investing securities lending collateral. This could occur if an investment in the collateral investment account defaulted or became impaired. Under those circumstances, the value of the Fund’s cash collateral account may be less than the amount the Fund would be required to return to the borrowers of the securities and the Fund would be required to make up for this shortfall.
The following table reflects a breakdown of transactions accounted for as secured borrowings, the gross obligation by the type of collateral pledged, and the remaining contractual maturity of those transactions as of Oct. 31, 2018:
Securities Lending Transactions | Overnight | Under | Between 30 & 90 days | Over 90 days | Total | |||||||||
Certificates of Deposit, Repurchase Agreements, and Short-Term Floating Rate Notes | $ | 54,170,502 | $— | $— | $— | $ | 54,170,502 |
At Oct. 31, 2018, the value of securities on loan was $52,183,147, for which the Fund received cash collateral of $53,590,416. At Oct. 31, 2018, the value of invested collateral was $54,170,502. Investments purchased with cash collateral are presented on the “Schedule of investments” under the caption “Securities Lending Collateral.”
11. Credit and Market Risk
When interest rates rise, fixed income securities (i.e., debt obligations) generally will decline in value. These declines in value are greater for fixed income securities with longer maturities or durations.
The Fund invests in fixed income securities whose value is derived from an underlying pool of mortgages or consumer loans. The value of these securities is sensitive to changes in economic conditions,
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including delinquencies and/or defaults, and may be adversely affected by shifts in the market’s perception of the issuers and changes in interest rates. Investors receive principal and interest payments as the underlying mortgages or consumer loans are paid back. Some of these securities are collateralized mortgage obligations (CMOs). CMOs are debt securities issued by US government agencies or by financial institutions and other mortgage lenders, which are collateralized by a pool of mortgages held under an indenture. Prepayment of mortgages may shorten the stated maturity of the obligations and can result in a loss of premium, if any has been paid. Certain of these securities may be stripped (securities which provide only the principal or interest feature of the underlying security). The yield to maturity on an interest-only CMO is extremely sensitive not only to changes in prevailing interest rates, but also to the rate of principal payments (including prepayments) on the related underlying mortgage assets. A rapid rate of principal payments may have a material adverse effect on the Fund’s yield to maturity. If the underlying mortgage assets experience greater than anticipated prepayments of principal, the Fund may fail to fully recoup its initial investment in these securities even if the securities are rated in the highest rating categories.
The Fund invests in certain obligations that may have liquidity protection designed to ensure that the receipt of payments due on the underlying security is timely. Such protection may be provided through guarantees, insurance policies, or letters of credit obtained by the issuer or sponsor through third parties, through various means of structuring the transaction or through a combination of such approaches. The Fund will not pay any additional fees for such credit support, although the existence of credit support may increase the price of a security.
The Fund invests a portion of its assets in high yield fixed income securities, which are securities rated lower than BBB- by S&P and Baa3 by Moody’s, or similarly rated by another nationally recognized statistical rating organization. Investments in these higher yielding securities are generally accompanied by a greater degree of credit risk than higher rated securities. Additionally, lower rated securities may be more susceptible to adverse economic and competitive industry conditions than investment grade securities.
Some countries in which the Fund may invest require governmental approval for the repatriation of investment income, capital, or the proceeds of sales of securities by foreign investors. In addition, if there is deterioration in a country’s balance of payments or for other reasons, a country may impose temporary restrictions on foreign capital remittances abroad.
The securities exchanges of certain foreign markets are substantially smaller, less liquid, and more volatile than the major securities markets in the United States. Consequently, acquisition and disposition of securities by the Fund may be inhibited. In addition, a significant portion of the aggregate market value of securities listed on the major securities exchanges in emerging markets is held by a smaller number of investors. This may limit the number of shares available for acquisition or disposition by the Fund.
The Fund invests in bank loans and other securities that may subject it to direct indebtedness risk, the risk that the Fund will not receive payment of principal, interest, and other amounts due in connection with these investments and will depend primarily on the financial condition of the borrower. Loans that are fully secured offer the Fund more protection than unsecured loans in the event of nonpayment of scheduled interest or principal, although there is no assurance that the liquidation of collateral from a secured loan would satisfy the corporate borrower’s obligation, or that the collateral can be liquidated.
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Notes to financial statements
Delaware Diversified Income Fund
11. Credit and Market Risk (continued)
Some loans or claims may be in default at the time of purchase. Certain of the loans and the other direct indebtedness acquired by the Fund may involve revolving credit facilities or other standby financing commitments that obligate the Fund to pay additional cash on a certain date or on demand. These commitments may require the Fund to increase its investment in a company at a time when the Fund might not otherwise decide to do so (including at a time when the company’s financial condition makes it unlikely that such amounts will be repaid). To the extent that the Fund is committed to advance additional funds, it will at all times hold and maintain cash or other high grade debt obligations in an amount sufficient to meet such commitments. When a loan agreement is purchased, the Fund may pay an assignment fee. On an ongoing basis, the Fund may receive a commitment fee based on the undrawn portion of the underlying line of credit portion of a loan agreement. Prepayment penalty fees are received upon the prepayment of a loan agreement by a borrower. Prepayment penalty, facility, commitment, consent, and amendment fees are recorded to income as earned or paid.
As the Fund may be required to rely upon another lending institution to collect and pass on to the Fund amounts payable with respect to the loan and to enforce the Fund’s rights under the loan and other direct indebtedness, an insolvency, bankruptcy, or reorganization of the lending institution may delay or prevent the Fund from receiving such amounts. The highly leveraged nature of many loans may make them especially vulnerable to adverse changes in economic or market conditions. Investments in such loans and other direct indebtedness may involve additional risk to the Fund.
The Fund may invest up to 15% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A promulgated under the Securities Act of 1933, as amended (1933 Act), and other securities which may not be readily marketable. The Fund may also invest in securities exempt from registration under Section (4)(a)(2) of the 1933 Act, which exempts from registration transactions by an issuer not involving any public offering. The relative illiquidity of these securities may impair the Fund from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, the Board has delegated to DMC, the day-to-day functions of determining whether individual securities are liquid for purposes of the Fund’s limitation on investments in illiquid securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Fund’s 15% limit on investments in illiquid securities. Rule 144A and (4)(a)(2) securities have been identified on the “Schedule of investments.” Restricted securities are valued pursuant to the security valuation procedures described in Note 1.
12. Contractual Obligations
The Fund enters into contracts in the normal course of business that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Fund’s existing contracts and expects the risk of loss to be remote.
13. General Motors Term Loan Litigation
The Fund received notice of a litigation proceeding related to a General Motors Corporation (G.M.) term loan participation previously held by the Fund in 2009. Management believes the matter subject to the
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litigation notice will likely lead to a recovery from the Fund of certain amounts received by the Fund because a US Court of Appeals has ruled that the Fund and similarly situated investors were unsecured creditors rather than secured lenders of G.M. as a result of an erroneous Uniform Commercial Code filing made by a third party. The Fund received the full principal on the loans in 2009 after the G.M. bankruptcy. However, based upon the court ruling the estate is seeking to recover such amounts arguing that, as unsecured creditors, the Fund should not have received payment in full. Based upon currently available information related to the litigation and the Fund’s potential exposure, the Fund recorded a contingent liability of $15,959,167 and an asset of $4,787,750 based on the expected recoveries to unsecured creditors as of Oct. 31, 2018 that resulted in a decrease in the Fund’s NAV to reflect this potential recovery.
14. Recent Accounting Pronouncements
In March 2017, the FASB issued an Accounting Standards Update (ASU), ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities which amends the amortization period for certain callable debt securities purchased at a premium, shortening such period to the earliest call date. The ASU 2017-08 does not require any accounting change for debt securities held at a discount; the discount continues to be amortized to maturity. The ASU 2017-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after Dec. 15, 2018. At this time, management is evaluating the implications of these changes on the financial statements.
In August 2018, the FASB issued an ASU 2018-13, which changes certain fair value measurement disclosure requirements. The ASU 2018-13, in addition to other modifications and additions, removes the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for the timing of transfers between levels and the valuation process for Level 3 fair value measurements. The ASU 2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after Dec. 15, 2019. At this time, management is evaluating the implications of these changes on the financial statements.
In August 2018, the Securities and Exchange Commission (SEC) adopted amendments to Regulation S-X to update and simplify the disclosure requirements for registered investment companies by eliminating requirements that are redundant or duplicative of US GAAP requirements or other SEC disclosure requirements. The new amendments require the presentation of the total, rather than the components, of distributable earnings on the “Statement of assets and liabilities” and the total, rather than the components, of dividends from net investment income and distributions from net realized gains on the “Statements of changes in net assets.” The amendments also removed the requirement for the parenthetical disclosure of undistributed net investment income on the “Statements of changes in net assets” and certain tax adjustments that were reflected in the “Notes to financial statements.” All of these have been reflected in the Fund’s financial statements.
15. Subsequent Events
On Nov. 5, 2018, the Fund, along with the other Participants, entered into an amendment to the agreement for a $190,000,000 revolving line of credit to be used as described in Note 7 and to be operated in substantially the same manner as the agreement described in Note 7. The revolving line of
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Notes to financial statements
Delaware Diversified Income Fund
15. Subsequent Events (continued)
credit available was increased from $190,000,000 to $220,000,000 on Nov. 29, 2018. Under the amendment to the agreement, the Participants are charged an annual commitment fee of 0.15%, which is allocated across the Participants based on a weighted average of the respective net assets of each Participant. The line of credit available under the agreement expires on Nov. 4, 2019.
Management has determined that no other material events or transactions occurred subsequent to Oct. 31, 2018, that would require recognition or disclosure in the Fund’s financial statements.
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registered public accounting firm
To the Board of Trustees of Delaware Group® Adviser Funds
and Shareholders of Delaware Diversified Income Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Delaware Diversified Income Fund (one of the series constituting Delaware Group® Adviser Funds, referred to hereafter as the “Fund”) as of October 31, 2018, the related statement of operations for the year ended October 31, 2018, the statements of changes in net assets for each of the two years in the period ended October 31, 2018, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of October 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended October 31, 2018 and the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of October 31, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
December 20, 2018
We have served as the auditor of one or more investment companies in Delaware Funds® by Macquarie since 2010.
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Other Fund information (Unaudited)
Delaware Diversified Income Fund
Tax Information
The information set forth below is for the Fund’s fiscal year as required by federal income tax laws. Shareholders, however, must report distributions on a calendar year basis for income tax purposes, which may include distributions for portions of two fiscal years of the Fund. Accordingly, the information needed by shareholders for income tax purposes will be sent to them in January of each year. Please consult your tax advisor for proper treatment of this information.
All disclosures are based on financial information available as of the date of this annual report and, accordingly are subject to change. For any and all items requiring reporting, it is the intention of the Fund to report the maximum amount permitted under the Internal Revenue Code and the regulations thereunder.
For the fiscal year ended Oct. 31, 2018, the Fund reports distributions paid during the year as follows:
(A) Ordinary Income Distributions (Tax Basis)* | 81.58 | % | ||
(B) Return of Capital (Tax Basis) | 18.42 | % | ||
Total Distributions. | 100.00 | % | ||
(C) Qualifying Dividends1 | 1.04 | % |
(A) and (B) are based on a percentage of the Fund’s total distributions.
(C) is based on a percentage of the Fund’s ordinary income distributions.
1 Qualifying dividends represent dividends which qualify for the corporate dividends received deduction.
*For the fiscal year ended Oct. 31, 2018, certain dividends paid by the Fund may be subject to a maximum tax rate of 20%. The percentage of dividends paid by the Fund from ordinary income reported as qualified income is 1.04%. Complete information will be computed and reported in conjunction with your 2018 Form 1099-DIV.
For the fiscal year ended Oct. 31, 2018, certain interest income paid by the Fund, determined to be Qualified Interest Income may be subject to relief from US withholding for foreign shareholders, as provided by the American Jobs Creation Act of 2004; the Tax Relief Unemployment Insurance Reauthorization, and Job Creations Act of 2010; and as extended by the American Taxpayer Relief Act of 2012. For the year ended Oct. 31, 2018, the Fund has reported maximum distributions of Qualified Interest Income of $102,812,340.
Board consideration of advisory agreement for Delaware Diversified Income Fund at a meeting held August 15-16, 2018
At a meeting held on Aug. 15-16, 2018 (the “Annual Meeting”), the Board of Trustees (the “Board”), including a majority of disinterested or independent Trustees, approved the renewal of the Investment Advisory Agreement for Delaware Diversified Income Fund (the “Fund”). In making its decision, the Board considered information furnished at regular quarterly Board meetings, including reports detailing Fund performance, investment strategies, and expenses, as well as information prepared specifically in connection with the renewal of the investment advisory contract. Information furnished specifically in connection with the renewal of the Investment Management Agreement with Delaware Management Company (“DMC”), a series of Macquarie Investment Management Business Trust (“MIMBT”), included materials provided by DMC and its affiliates (collectively, “Macquarie Investment Management”)
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concerning, among other things, the nature, extent, and quality of services provided to the Fund; the costs of such services to the Fund; economies of scale; and the investment manager’s financial condition and profitability. In addition, in connection with the Annual Meeting, materials were provided to the Trustees in May 2018, including reports provided by Broadridge Financial Solutions (“Broadridge”). The Broadridge reports compared the Fund’s investment performance and expenses with those of other comparable mutual funds. The Independent Trustees reviewed and discussed the Broadridge reports with independent legal counsel to the Independent Trustees. In addition to the information noted above, the Board also requested and received information regarding DMC’s policy with respect to advisory fee levels and its breakpoint philosophy; the structure of portfolio manager compensation; comparative client fee information; and any constraints or limitations on the availability of securities for certain investment styles, which had in the past year inhibited, or which were likely in the future to inhibit, the investment manager’s ability to invest fully in accordance with Fund policies.
In considering information relating to the approval of the Fund’s advisory agreement, the Independent Trustees received assistance and advice from and met separately with independent legal counsel to the Independent Trustees and also from an experienced and knowledgeable independent fund consultant, JDL Consultants, LLC (“JDL”). Although the Board gave attention to all information furnished, the following discussion identifies, under separate headings, the primary factors taken into account by the Board during its contract renewal considerations.
Nature, extent, and quality of services. The Board considered the services provided by DMC to the Fund and its shareholders. In reviewing the nature, extent, and quality of services, the Board considered reports furnished to it throughout the year, which covered matters such as the relative performance of the Fund; compliance of portfolio managers with the investment policies, strategies, and restrictions for the Fund; compliance by DMC and Delaware Distributors, L.P. (together, “Management”) personnel with the Code of Ethics adopted throughout the Delaware Funds® by Macquarie (“Delaware Funds”); and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of DMC and the emphasis placed on research in the investment process. The Board recognized DMC’s receipt of certain favorable industry distinctions during the past several years. The Board gave favorable consideration to DMC’s efforts to control expenses while maintaining service levels committed to Fund matters. The Board also noted the benefits provided to Fund shareholders (a) through each shareholder’s ability to: (i) exchange an investment in one Delaware Fund for the same class of shares in another Delaware Fund without a sales charge, or (ii) to reinvest Fund dividends into additional shares of the Fund or into additional shares of other Delaware Funds, and (b) the privilege to combine holdings in other Delaware Funds to obtain a reduced sales charge. The Board was satisfied with the nature, extent, and quality of the overall services provided by DMC.
Investment performance. The Board placed significant emphasis on the investment performance of the Fund in view of the importance of investment performance to shareholders. Although the Board considered performance reports and discussions with portfolio managers at Investment Committee meetings throughout the year, the Board gave particular weight to the Broadridge reports furnished for the Annual Meeting. The Broadridge reports prepared for the Fund showed the investment performance of its Class A shares in comparison to a group of similar funds as selected by Broadridge (the “Performance Universe”). A fund with the best performance ranked first, and a fund with the poorest performance ranked last. The highest/best performing 25% of funds in the Performance Universe make up the first quartile; the next 25%, the second quartile; the next 25%, the third quartile; and the
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Other Fund information (Unaudited)
Delaware Diversified Income Fund
Board consideration of advisory agreement for Delaware Diversified Income Fund at a meeting held August 15-16, 2018 (continued)
poorest/worst performing 25% of funds in the Performance Universe make up the fourth quartile. Comparative annualized performance for the Fund was shown for the past 1-, 3-, 5-, and 10-year periods, to the extent applicable, ended Jan. 31, 2018. The Board’s objective is that the Fund’s performance for the 1-, 3-, and 5-year periods be at or above the median of its Performance Universe.
The Performance Universe for the Fund consisted of the Fund and all retail and institutional multi-sector income funds as selected by Broadridge. The Broadridge report comparison showed that the Fund’s total return for the 1- and 10-year periods was in the third quartile of its Performance Universe. The report further showed that the Fund’s total return for the 3- and 5-year periods was in the fourth quartile of its Performance Universe. The Board observed that the Fund’s performance results were not in line with the Board’s objective. In evaluating the Fund’s performance, the Board considered the numerous investment and performance reports delivered by Management personnel to the Board’s Investments Committee. The Board believed that Management was taking action to improve Fund performance so as to meet the Board’s performance objective.
Comparative expenses. The Board considered expense data for the Delaware Funds. Management provided the Board with information on pricing levels and fee structures for the Fund as of its most recently completed fiscal year. The Board also focused on the comparative analysis of effective management fees and total expense ratios of the Fund versus effective management fees and total expense ratios of a group of similar funds as selected by Broadridge (the “Expense Group”). In reviewing comparative costs, the Fund’s contractual management fee and the actual management fee incurred by the Fund were compared with the contractual management fees (assuming all funds in the Expense Group were similar in size to the Fund) and actual management fees (as reported by each fund) within the Expense Group, taking into account any applicable breakpoints and fee waivers. The Fund’s total expenses were also compared with those of its Expense Group. The Broadridge total expenses, for comparative consistency, were shown by Broadridge for Class A shares and comparative total expenses including 12b-1 and non-12b-1 service fees. The Board’s objective is for each Fund’s total expense ratio to be competitive with those of the peer funds within its Expense Group.
The expense comparisons for the Fund showed that its actual management fee and total expenses were in the quartile with the lowest expenses of its Expense Group. The Board was satisfied with the management fee and total expenses of the Fund in comparison to those of its Expense Group as shown in the Broadridge report.
Management profitability. The Board considered the level of profits realized by DMC in connection with the operation of the Fund. In this respect, the Board reviewed the Investment Management Profitability Analysis that addressed the overall profitability of DMC’s business in providing management and other services to each of the individual funds and the Delaware Funds as a whole. Specific attention was given to the methodology used by DMC in allocating costs for the purpose of determining profitability. Management stated that the level of profits of DMC, to a certain extent, reflects recent operational cost savings and efficiencies initiated by DMC. The Board considered DMC’s efforts to improve services provided to Fund shareholders and to meet additional regulatory and compliance requirements resulting from recent industry-wide Securities and Exchange Commission initiatives. The Board also considered the extent to which DMC might derive ancillary benefits from fund operations, including the potential for
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procuring additional business as a result of the prestige and visibility associated with its role as service provider to the Delaware Funds and the benefits from allocation of fund brokerage to improve trading efficiencies. As part of its work, the Board also reviewed a report prepared by JDL regarding MIMBT profitability as compared to certain peer fund complexes and the Independent Trustees met with JDL personnel to discuss DMC’s profitability in such context. The Board found that the management fees were reasonable in light of the services rendered and the level of profitability of DMC.
Economies of scale. The Trustees considered whether economies of scale are realized by DMC as the Fund’s assets increase and the extent to which any economies of scale are reflected in the level of management fees charged. The Trustees reviewed the Fund’s advisory fee pricing and structure, approved by the Board and shareholders, which includes breakpoints, and which applies to most funds in the Delaware Funds complex. Breakpoints in the advisory fee occur when the advisory fee rate is reduced on assets in excess of specified levels. Breakpoints result in a lower advisory fee than would otherwise be the case in the absence of breakpoints, when the asset levels specified in the breakpoints are exceeded. The Board noted that, as of March 31, 2018, the Fund’s assets exceeded the final breakpoint level. The Board believed that, given the extent to which economies of scale might be realized by DMC and its affiliates, the schedule of fees under the Investment Management Agreement provides a sharing of benefits with the Fund and its shareholders.
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Board of trustees / directors and officers addendum
Delaware Funds® by Macquarie
A mutual fund is governed by a Board of Trustees/Directors (“Trustees”), which has oversight responsibility for the management of a fund’s business affairs. Trustees establish procedures and oversee and review the performance of the investment manager, the distributor, and others who perform services for the fund. The independent fund trustees, in particular, are advocates
Name, Address, | Position(s) | Length of | ||
and Birth Date | Held with Fund(s) | Time Served | ||
Interested Trustee
| ||||
Shawn K. Lytle1, 2 | President, | Trustee since | ||
2005 Market Street | Chief Executive Officer, | September 2015 | ||
Philadelphia, PA 19103 | and Trustee | |||
February 1970 | President and | |||
Chief Executive Officer | ||||
since August 2015
| ||||
Independent Trustees
| ||||
Thomas L. Bennett | Chair and Trustee | Trustee since | ||
2005 Market Street | March 2005 | |||
Philadelphia, PA 19103 | ||||
October 1947 | Chair since | |||
March 2015
| ||||
Ann D. Borowiec | Trustee | Since March 2015 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
November 1958 | ||||
Joseph W. Chow | Trustee | Since January 2013 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
January 1953 | ||||
1 | Shawn K. Lytle is considered to be an “Interested Trustee” because he is an executive officer of the Fund’s(s’) investment advisor. |
2 | Shawn K. Lytle, David F. Connor, Daniel V. Geatens, and Richard Salus serve in similar capacities for the six portfolios of the Optimum Fund Trust, which have the same investment advisor, principal underwriter, and transfer agent as the registrant. Mr. Geatens also serves as the Chief Financial Officer and Treasurer for Macquarie Global Infrastructure Total Return Fund Inc., which has an affiliated investment manager. |
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for shareholder interests. Each trustee has served in that capacity since he or she was elected to or appointed to the Board of Trustees, and will continue to serve until his or her retirement or the election of a new trustee in his or her place. The following is a list of the Trustees and Officers with certain background and related information.
Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee or Officer | Other Directorships Held by Trustee or Officer | ||
| ||||
President — Macquarie | 59 | Trustee — UBS | ||
Investment Management3 | Relationship Funds, | |||
(June 2015–Present) | SMA Relationship | |||
Trust, and UBS Funds | ||||
Regional Head of | (May 2010–April 2015) | |||
Americas —UBS Global | ||||
Asset Management | ||||
(April 2010–May 2015)
| ||||
| ||||
Private Investor | 59 | None | ||
(March 2004–Present) | ||||
Chief Executive Officer, | 59 | Director — | ||
Private Wealth Management | Banco Santander International | |||
(2011–2013) and | (October 2016–Present) | |||
Market Manager, | ||||
New Jersey Private | Director — | |||
Bank (2005–2011) — | Santander Bank, N.A. | |||
J.P. Morgan Chase & Co.
| (December 2016–Present) | |||
Private Investor | 59 | Director and Audit Committee | ||
(April 2011–Present) | Member — Hercules | |||
Technology Growth | ||||
Capital, Inc. | ||||
(July 2004–July 2014)
|
3 | Macquarie Investment Management is the marketing name for Macquarie Management Holdings, Inc. and its subsidiaries, including the Fund’s(s’) investment advisor, principal underwriter, and its transfer agent. |
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Board of trustees / directors and officers addendum
Delaware Funds® by Macquarie
Name, Address, | Position(s) | Length of | ||
and Birth Date | Held with Fund(s) | Time Served | ||
Independent Trustees (continued)
| ||||
John A. Fry | Trustee | Since January 2001 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
May 1960 | ||||
Lucinda S. Landreth | Trustee | Since March 2005 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
June 1947
| ||||
Frances A. Sevilla-Sacasa | Trustee | Since September 2011 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
January 1956 | ||||
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Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee or Officer | Other Directorships Held by Trustee or Officer | ||
| ||||
President — | 59 | Director; Compensation | ||
Drexel University | Committee and | |||
(August 2010–Present) | Governance Committee | |||
Member — Community | ||||
President — | Health Systems | |||
Franklin & Marshall College | ||||
(July 2002–July 2010) | Director — Drexel | |||
Morgan & Co. | ||||
Director; Audit Committee | ||||
Member — vTv | ||||
Therapeutics LLC | ||||
Director; Audit Committee | ||||
Member — FS Credit Real | ||||
Estate Income Trust, Inc.
| ||||
Private Investor | 59 | None | ||
(2004–Present) | ||||
Private Investor | 59 | Trust Manager and | ||
(January 2017–Present) | Audit Committee | |||
Chair — Camden | ||||
Chief Executive Officer — | Property Trust | |||
Banco Itaú | (August 2011–Present) | |||
International | ||||
(April 2012–December 2016) | Director — | |||
Carrizo Oil & Gas, Inc. | ||||
Executive Advisor to Dean | (March 2018–Present) | |||
(August 2011–March 2012) | ||||
and Interim Dean | ||||
(January 2011–July 2011) — | ||||
University of Miami School of | ||||
Business Administration | ||||
President — U.S. Trust, | ||||
Bank of America Private | ||||
Wealth Management | ||||
(Private Banking) | ||||
(July 2007–December 2008)
|
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Board of trustees / directors and officers addendum
Delaware Funds® by Macquarie
Name, Address, | Position(s) | Length of | ||
and Birth Date | Held with Fund(s) | Time Served | ||
Independent Trustees (continued)
| ||||
Thomas K. Whitford | Trustee | Since January 2013 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
March 1956 | ||||
Janet L. Yeomans | Trustee | Since April 1999 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
July 1948 | ||||
Officers
| ||||
David F. Connor | Senior Vice President, | Senior Vice President | ||
2005 Market Street | General Counsel, | since May 2013; | ||
Philadelphia, PA 19103 | and Secretary | General Counsel | ||
December 1963 | since May 2015; | |||
Secretary since | ||||
October 2005
| ||||
Daniel V. Geatens | Vice President | Vice President and | ||
2005 Market Street | and Treasurer | Treasurer since October 2007 | ||
Philadelphia, PA 19103 | ||||
October 1972 | ||||
Richard Salus | Senior Vice President | Senior Vice President and | ||
2005 Market Street | and Chief Financial Officer | Chief Financial Officer | ||
Philadelphia, PA 19103 | since November 2006 | |||
October 1963 | ||||
The Statement of Additional Information for the Fund(s) includes additional information about the Trustees and Officers and is available, without charge, upon request by calling 800 523-1918.
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Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee or Officer | Other Directorships Held by Trustee or Officer | ||
| ||||
Vice Chairman | 59 | Director — HSBC Finance | ||
(2010–April 2013) — | Corporation and HSBC | |||
PNC Financial | North America Holdings Inc. | |||
Services Group | (December 2013–Present) | |||
Director — | ||||
HSBC Bank USA, Inc. | ||||
(July 2014–March 2017) | ||||
Vice President and Treasurer | 59 | Director (2009–2017); | ||
(January 2006–July 2012), | Personnel and Compensation | |||
Vice President — | Committee Chair; Member of | |||
Mergers & Acquisitions | Nominating, Investments, and | |||
(January 2003–January 2006), | Audit Committees for various | |||
and Vice President | periods throughout | |||
and Treasurer | directorship — | |||
(July 1995–January 2003) — | Okabena Company | |||
3M Company | ||||
| ||||
David F. Connor has served | 59 | None2 | ||
in various capacities at | ||||
different times at | ||||
Macquarie Investment | ||||
Management. | ||||
Daniel V. Geatens has served | 59 | None2 | ||
in various capacities at | ||||
different times at | ||||
Macquarie Investment | ||||
Management. | ||||
Richard Salus has served | 59 | None2 | ||
in various executive capacities | ||||
at different times at | ||||
Macquarie Investment | ||||
Management. | ||||
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Board of trustees
Shawn K. Lytle | Ann D. Borowiec | John A. Fry | Frances A. | |||
President and | Former Chief Executive | President | Sevilla-Sacasa | |||
Chief Executive Officer | Officer | Drexel University | Former Chief Executive | |||
Delaware Funds® | Private Wealth Management | Philadelphia, PA | Officer | |||
by Macquarie | J.P. Morgan Chase & Co. | Banco Itaú International | ||||
Philadelphia, PA | New York, NY | Lucinda S. Landreth | Miami, FL | |||
Former Chief Investment | ||||||
Thomas L. Bennett | Joseph W. Chow | Officer | Thomas K. Whitford | |||
Chairman of the Board | Former Executive Vice | Assurant, Inc. | Former Vice Chairman | |||
Delaware Funds | President | New York, NY | PNC Financial Services Group | |||
by Macquarie | State Street Corporation | Pittsburgh, PA | ||||
Private Investor | Boston, MA | |||||
Rosemont, PA | ||||||
Janet L. Yeomans | ||||||
Former Vice President and | ||||||
Treasurer | ||||||
3M Company | ||||||
St. Paul, MN | ||||||
Affiliated officers | ||||||
David F. Connor | Daniel V. Geatens | Richard Salus | ||||
Senior Vice President, | Vice President and | Senior Vice President and | ||||
General Counsel, | Treasurer | Chief Financial Officer | ||||
and Secretary | Delaware Funds | Delaware Funds | ||||
Delaware Funds | by Macquarie | by Macquarie | ||||
by Macquarie | Philadelphia, PA | Philadelphia, PA | ||||
Philadelphia, PA |
This annual report is for the information of Delaware Diversified Income Fund shareholders, but it may be used with prospective investors when preceded or accompanied by the Delaware Fund fact sheet for the most recently completed calendar quarter. These documents are available at delawarefunds.com/literature.
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 800 523-1918; and (ii) on the SEC’s website at sec.gov. In addition, a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities and the Schedule of Investments included in the Fund’s most recent Form N-Q are available without charge on the Fund’s website at delawarefunds.com/literature. The Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C.; information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund’s website at delawarefunds.com/proxy; and (ii) on the SEC’s website at sec.gov.
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US equity mutual fund
Delaware U.S. Growth Fund
October 31, 2018
Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Fund’s prospectus and its summary prospectus, which may be obtained by visiting delawarefunds.com/literature or calling 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing.
You can obtain shareholder reports and prospectuses online instead of in the mail.
Visit delawarefunds.com/edelivery.
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Experience Delaware Funds® by Macquarie
Macquarie Investment Management (MIM) is a global asset manager with offices throughout the United States, Europe, Asia, and Australia. We are active managers who prioritize autonomy and accountability at the investment team level in pursuit of opportunities that matter for our clients. Delaware Funds is one of the longest-standing mutual fund families, with more than 75 years in existence.
If you are interested in learning more about creating an investment plan, contact your financial advisor.
You can learn more about Delaware Funds or obtain a prospectus for Delaware U.S. Growth Fund at delawarefunds.com/literature.
Manage your account online
• | Check your account balance and transactions |
• | View statements and tax forms |
• | Make purchases and redemptions |
Visit delawarefunds.com/account-access.
Macquarie Asset Management (MAM) offers a diverse range of products including securities investment management, infrastructure and real asset management, and fund and equity-based structured products. MIM is the marketing name for certain companies comprising the asset management division of Macquarie Group. This includes the following registered investment advisers: Macquarie Investment Management Business Trust (MIMBT), Macquarie Funds Management Hong Kong Limited, Macquarie Investment Management Austria Kapitalanlage AG, Macquarie Investment Management Global Limited, Macquarie Investment Management Europe Limited, and Macquarie Capital Investment Management LLC.
The Fund is distributed by Delaware Distributors, L.P.
(DDLP), an affiliate of MIMBT and Macquarie Group Limited.
Other than Macquarie Bank Limited (MBL), none of the entities noted are authorized deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Fund is governed by US laws and regulations.
1 | ||||
4 | ||||
8 | ||||
Security type / sector allocation and top 10 equity holdings | 10 | |||
11 | ||||
14 | ||||
16 | ||||
18 | ||||
20 | ||||
30 | ||||
41 | ||||
42 | ||||
48 | ||||
54 |
Unless otherwise noted, views expressed herein are current as of Oct. 31, 2018, and subject to change for events occurring after such date.
The Fund is not FDIC insured and is not guaranteed. It is possible to lose the principal amount invested.
Advisory services provided by Delaware Management Company, a series of MIMBT, a US registered investment advisor.
All third-party marks cited are the property of their respective owners.
© 2018 Macquarie Management Holdings, Inc.
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Portfolio management review | ||||
Delaware U.S. Growth Fund | November 13, 2018 |
Performance preview (for the year ended October 31, 2018) | ||||||||
Delaware U.S. Growth Fund (Institutional Class shares) | 1-year return | +5.15 | % | |||||
Delaware U.S. Growth Fund (Class A shares) | 1-year return | +4.89 | % | |||||
Russell 1000 ® Growth Index (benchmark) | 1-year return | +10.71 | % |
Past performance does not guarantee future results.
For complete, annualized performance for Delaware U.S. Growth Fund, please see the table on page 4. Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors. In addition, Institutional Class shares pay no distribution and service fee.
The performance of Class A shares excludes the applicable sales charge. Both Institutional Class shares and Class A shares reflect the reinvestment of all distributions.
Please see page 6 for a description of the index. Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.
Jackson Square Partners, LLC (JSP), a US registered investment advisor, is the sub-advisor to the Fund. As sub-advisor, JSP is responsible for day-to-day management of the Fund’s assets. Delaware Management Company (DMC), a series of Macquarie Investment Management Business Trust, has ultimate responsibility for all investment advisory services.
Overall US stock performance was fair during the fiscal year ended Oct. 31, 2018 as the S&P 500® Index gained 7.35%, despite marked volatility. Gains spiked in January 2018, only to drop more than 10% during an early February selloff. Stocks slowly regained momentum throughout the summer and early fall but lost some ground once again as the United States geared up for the midterm election cycle. The result was net positive, particularly for the largest blue-chip stocks, as indicated by a 9.87% rise in the Dow Jones Industrial Average® during the fiscal period.
A robust labor market fueled US growth. The unemployment rate fell below 4% (its lowest level since 1969), consumer confidence was at an 18-year high, and the economy hit its fastest pace of growth since 2014. The fiscal year ended with retail sales in October ahead of expectations. (Source: US Bureau of Economic Analysis.)
The Federal Reserve raised rates four times throughout the fiscal year, in December 2017, then March, June, and September 2018.
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Portfolio management review | ||||
Delaware U.S. Growth Fund |
None of these moves came as a surprise to investors, despite a February transition from former Fed Chair Janet Yellen to Jerome Powell. In a September statement, the Federal Open Market Committee (FOMC) announced that the combination of strong labor-market conditions, sustained economic activity, and an inflation rate that was hovering around the target 2% objective all added up to “balanced” risks for the nation’s economic outlook.
The housing market, which had been on an upswing for nearly 10 years, began to wane during the period, as rising house prices and mortgage rates combined with salary stagnation led potential homebuyers to hold off. Residential investment declined, as did existing- and new-home sales. Low inventory and a new tax law that reduces tax incentives for homeownership have the potential to solidify this slump.
An unprecedented surge in US crude oil and natural gas production during the fiscal year, made possible by shale development, led to record US exports. Oil prices had been creeping higher, but with expanding US crude inventories and a lowered estimate for global demand by the Organization of the Petroleum Exporting Countries (OPEC), prices tumbled in October 2018. (Sources: Bloomberg, U.S. Energy Information Administration.)
The US imposed taxes on imports, which included steel and aluminum, from China, Mexico, Canada, and the European Union; all four responded with retaliatory tariffs on US goods. The US, Canada, and Mexico, however, negotiated a new trade deal to replace the North American Free Trade Agreement (NAFTA), the United States-Mexico-Canada Agreement (USMCA).
The combination of a strong US dollar, rising US interest rates, and an escalating global trade war hurt overseas markets. International stocks were down 6.85% for the fiscal year, as measured by the MSCI EAFE Index (net). Emerging markets fared worse, losing 12.52% for the same period,
as measured by the MSCI Emerging Markets Index (net).
Within the Fund
For the fiscal year ended Oct. 31, 2018, Delaware U.S. Growth Fund Institutional Class shares returned +5.15%. The Fund’s Class A shares returned +4.89% at net asset value (NAV) and -1.15% at maximum offer price. These figures reflect all distributions reinvested. During the same period, the Fund’s benchmark, the Russell 1000 Growth Index, returned +10.71%. For complete, annualized performance of Delaware U.S. Growth Fund, please see the table on page 4.
Strong relative performance in financials and industrials was unable to overcome weak relative performance in information technology, consumer discretionary, and healthcare. On a stock-specific level, the following were the most significant contributors and detractors during the fiscal year:
Mastercard Inc., a financial service company that facilitates electronic funds transfer, contributed to the Fund’s performance during the fiscal period. The company has reported a string of positive earnings reports, most recently showing total third-quarter net revenues increasing 17% on a year-on-year basis. Additionally, during the fiscal period, the company revised its three-year performance estimates higher. We believe its operating margins should continue to expand in the near to mid term. More broadly, there is a seemingly inexorable global payment trend away from paper currency and checks toward electronic payments (credit and debit). We believe that Mastercard is well positioned to take advantage of that trend; the company’s revenues are based on transactions that are laid over an existing network with minimal incremental capital investment required, resulting in high incremental margins.
Dollar General Corp., a chain of US variety stores, added to the Fund’s performance during the fiscal year. The company reported strong earnings during the 12-month period, including
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revising upward its net sales and same-store sales guidance after the second quarter of 2018. We believe the company is well positioned to take advantage of the upcoming holiday season, which could help drive sales growth over the short term. In our view, Dollar General is a highly durable and underappreciated consumer discretionary franchise. We further believe there is opportunity for growth given the scarcity of valuable retail assets that Amazon has not targeted.
TripAdvisor Inc., a website providing travel advice and planning features, was also a contributor to the Fund’s performance during the fiscal period. The company’s earnings reports have been positive during the 12-month period, which management attributed to the stabilization of its click-based ad auction and lower online acquisition costs. TripAdvisor has seen accelerated growth in its nonhotel segment and has integrated third-party networks, such as delivery.com, into its website and mobile app. We believe that could drive synergies over the long term and consider TripAdvisor to be an undervalued asset due to its ability to attract 415 million interested travelers.
DENTSPLY SIRONA Inc., a dental-equipment maker and dental-consumables producer, detracted from the Fund’s performance during the fiscal period. Investors have been concerned about declining revenues in the US amid continued headwinds related to foreign-exchange rates. Concern for the timing of a return to growth after recent investments and capital expenditures has weighed on the stock as well. Since we think these issues represent fundamental change to the thesis, we exited the position in the Fund.
eBay Inc., the online shopping and auction site, detracted from the Fund’s performance during the fiscal year. We believe the company’s recent weakness can be explained by investors’ sense of caution about management’s ability to deliver on
eBay’s payments intermediation transition plan that was laid out in January 2018. We believe there may be undue fear that the momentum behind the company’s strategy to drive acceleration in the business could be hard to maintain. Additionally, investors have been more cautious about platforms such as eBay after a Supreme Court ruling in June overturned previous laws holding that online retailers were not obliged to collect sales tax from customers. We exited the position in order to redeploy the capital elsewhere in the Fund’s portfolio.
Applied Materials Inc., the global leader in providing equipment, services, and software to enable the manufacture of advanced semiconductors and flat panel displays, also detracted from the Fund’s performance during the fiscal year. Despite earnings that were broadly in line with guidance, continued industry-wide memory and capital expenditure pushouts into 2019 seemed to provoke caution among investors who have seen estimates come down across the sector. Nonetheless, we continue to believe we are witnessing a small cyclical downturn in an otherwise strong, secular growth story. We remain confident that Applied Materials is undervalued by the market, is competitively placed in a consolidated sector with high barriers to entry, and has growth drivers, namely increasing capital intensity at an industry level, that have the potential to position the company well for the long term.
Regardless of the economic outcome, we remain consistent in our long-term investment philosophy: We want to own what we view as strong secular-growth companies with solid business models and competitive positions that we believe can grow market share and have the potential to deliver shareholder value in a variety of market environments.
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Performance summary | ||||
Delaware U.S. Growth Fund | October 31, 2018 |
The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 800 523-1918 or visiting delawarefunds.com/performance.
Fund and benchmark performance1,2
| Average annual total returns through October 31, 2018 | |||||||||||||||
1 year | 5 years | 10 years | Lifetime | |||||||||||||
Class A (Est. Dec. 3, 1993) | ||||||||||||||||
Excluding sales charge | +4.89% | +9.49% | +13.91% | +7.75% | ||||||||||||
Including sales charge | -1.15% | +8.20% | +13.24% | +7.49% | ||||||||||||
Class C (Est. May 23, 1994) | ||||||||||||||||
Excluding sales charge | +4.08% | +8.67% | +13.06% | +7.32% | ||||||||||||
Including sales charge | +3.18% | +8.67% | +13.06% | +7.32% | ||||||||||||
Class R (Est. June 2, 2003) | ||||||||||||||||
Excluding sales charge | +4.62% | +9.22% | +13.63% | +8.03% | ||||||||||||
Including sales charge | +4.62% | +9.22% | +13.63% | +8.03% | ||||||||||||
Institutional Class (Est. Feb. 3, 1994) | ||||||||||||||||
Excluding sales charge | +5.15% | +9.76% | +14.20% | +7.88% | ||||||||||||
Including sales charge | +5.15% | +9.76% | +14.20% | +7.88% | ||||||||||||
Class R6 (Est. May 2, 2016) | ||||||||||||||||
Excluding sales charge | +5.36% | n/a | n/a | +13.08% | ||||||||||||
Including sales charge | +5.36% | n/a | n/a | +13.08% | ||||||||||||
Russell 1000 Growth Index | +10.71% | +13.43% | +15.45% | +9.35%* |
*The benchmark lifetime return is for Institutional Class share comparison only and is calculated using the last business day in the month of the Fund’s Institutional Class inception date.
1 Returns reflect the reinvestment of all distributions and are presented both with and without the applicable sales charges described below. Returns do not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares.
Expense limitations were in effect for certain classes during some or all of the periods shown in the “Fund and benchmark performance” table. Expenses for each class are listed on the “Fund expense ratios” table on page 5. Performance would have been lower had expense limitations not been in effect.
Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors. In addition, Institutional Class shares pay no distribution and service fee.
Class A shares are sold with a maximum front-end sales charge of 5.75%, and have an annual distribution and service fee of 0.25% of average daily net assets. Performance for Class A shares, excluding sales charges, assumes that no front-end sales charge applied.
Class C shares are sold with a contingent deferred sales charge of 1.00% if redeemed during the first 12 months. They are also subject to an annual distribution and service fee of 1.00% of average daily net assets. Performance for Class C shares,
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excluding sales charges, assumes either that contingent deferred sales charges did not apply or that the investment was not redeemed.
Class R shares are available only for certain retirement plan products. They are sold without a sales charge and have an annual distribution and service fee of 0.50% of average daily net assets.
Class R6 shares are available only to certain investors. In addition, Class R6 shares do not pay any service fees, sub-accounting fees, and/or sub-transfer agency fees to any brokers, dealers, or other financial intermediaries. Class R6 shares pay no distribution and service fee.
2 The Fund’s expense ratios, as described in the most recent prospectus, are disclosed in the following “Fund expense ratios” table. Please see the “Financial highlights” section in this report for the most recent expense ratios.
Fund expense ratios | Class A | Class C | Class R | Institutional Class | Class R6 | |||||
Total annual operating expenses | 1.06% | 1.81% | 1.31% | �� | 0.81% | 0.67% | ||||
(without fee waivers) | ||||||||||
Net expenses | 1.06% | 1.81% | 1.31% | 0.81% | 0.67% | |||||
(including fee waivers, if any) | ||||||||||
Type of waiver | n/a | n/a | n/a | n/a | n/a |
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Performance summary | ||||
Delaware U.S. Growth Fund |
Performance of a $10,000 Investment1
Average annual total returns from Oct. 31, 2008 through Oct. 31, 2018
For the period beginning Oct. 31, 2008 through Oct. 31, 2018 | Starting value | Ending value | ||||||
Russell 1000 Growth Index | $10,000 | $42,082 | ||||||
Delaware U.S. Growth Fund — Institutional Class shares | $10,000 | $37,733 | ||||||
Delaware U.S. Growth Fund — Class A shares | $9,425 | $34,681 |
1 The “Performance of a $10,000 investment” graph assumes $10,000 invested in Institutional Class and Class A shares of the Fund on Oct. 31, 2008, and includes the effect of a 5.75% front-end sales charge (for Class A shares) and the reinvestment of all distributions. The graph does not reflect the deduction of taxes the shareholders would pay on Fund distributions or redemptions of Fund shares. Expense limitations were in effect for some or all of the periods shown. Performance would have been lower had expense limitations not been in effect. Expenses are listed in the “Fund expense ratios” table on page 5. Please note additional details on pages 4 through 7.
The graph also assumes $10,000 invested in the Russell 1000 Growth Index as of Oct. 31, 2008. The Russell 1000 Growth Index measures the performance of the large-cap growth segment of the US equity universe. It includes those Russell
1000 companies with higher price-to-book ratios and higher forecasted growth values.
The S&P 500 Index, mentioned on page 1, measures the performance of 500 mostly large-cap stocks weighted by market value, and is often used to represent performance of the US stock market.
The Dow Jones Industrial Average, mentioned on page 1, is an often-quoted market indicator that comprises 30 widely held US blue-chip stocks.
The MSCI EAFE (Europe, Australasia, Far East) Index, mentioned on page 2, is a free float-adjusted market capitalization weighted index designed to measure equity market performance of developed markets, excluding the United States and Canada. Index “net” return approximates the minimum possible dividend reinvestment, after deduction of withholding tax at the highest possible rate.
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The MSCI Emerging Markets Index, mentioned on page 2, is a free float-adjusted market capitalization index designed to measure equity market performance across emerging market countries worldwide. Index “net” return approximates the minimum possible dividend reinvestment, after deduction of withholding tax at the highest possible rate.
Frank Russell Company (“Russell”) is the source and owner of the trademarks, service marks, and
copyrights related to the Russell Indexes. Russell® is a trademark of the Frank Russell Company.
Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index. Past performance is not a guarantee of future results.
Performance of other Fund classes will vary due to different charges and expenses.
Nasdaq symbols | CUSIPs | |||||
Class A | DUGAX | 245917505 | ||||
Class C | DEUCX | 245917703 | ||||
Class R | DEURX | 245917711 | ||||
Institutional Class | DEUIX | 245917802 | ||||
Class R6 | DUZRX | 245917596 |
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Disclosure of Fund expenses | ||||
For the six-month period from May 1, 2018 to October 31, 2018 (Unaudited) |
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period from May 1, 2018 to Oct. 31, 2018.
Actual expenses
The first section of the table shown, “Actual Fund return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The second section of the table shown, “Hypothetical 5% return,” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The Fund’s expenses shown in the table assume reinvestment of all dividends and distributions.
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Delaware U.S. Growth Fund | ||||
Expense analysis of an investment of $1,000 |
| Beginning Account Value 5/1/18 | Ending Account Value 10/31/18 | Annualized Expense Ratio | Expenses Paid During Period 5/1/18 to 10/31/18* | ||||||||||||||||
Actual Fund return† | ||||||||||||||||||||
Class A | $1,000.00 | $1,020.50 | 1.11 | % | $5.65 | |||||||||||||||
Class C | 1,000.00 | 1,016.50 | 1.86 | % | 9.45 | |||||||||||||||
Class R | 1,000.00 | 1,019.20 | 1.36 | % | 6.92 | |||||||||||||||
Institutional Class | 1,000.00 | 1,021.90 | 0.86 | % | 4.38 | |||||||||||||||
Class R6 | 1,000.00 | 1,023.00 | 0.65 | % | 3.31 | |||||||||||||||
Hypothetical 5% return (5% return before expenses) |
| |||||||||||||||||||
Class A | $1,000.00 | $1,019.61 | 1.11 | % | $5.65 | |||||||||||||||
Class C | 1,000.00 | 1,015.83 | 1.86 | % | 9.45 | |||||||||||||||
Class R | 1,000.00 | 1,018.35 | 1.36 | % | 6.92 | |||||||||||||||
Institutional Class | 1,000.00 | 1,020.87 | 0.86 | % | 4.38 | |||||||||||||||
Class R6 | 1,000.00 | 1,021.93 | 0.65 | % | 3.31 |
* | “Expenses Paid During Period” are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
† | Because actual returns reflect only the most recent six-month period, the returns shown may differ significantly from fiscal year returns. |
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Security type / sector allocation and top 10 equity holdings |
| |||
Delaware U.S. Growth Fund | As of October 31, 2018 | (Unaudited) |
Sector designations may be different than the sector designations presented in other Fund materials. The sector designations may represent the investment manager’s internal sector classifications.
Security type / sector | Percentage of net assets | ||||
Common Stock² | 97.79 | % | |||
Consumer Discretionary | 17.00 | % | |||
Financials | 14.28 | % | |||
Healthcare | 17.12 | % | |||
Industrials | 3.95 | % | |||
Real Estate | 4.28 | % | |||
Technology | 41.16 | % | |||
Short-Term Investments | 1.78 | % | |||
Total Value of Securities | 99.57 | % | |||
Receivables and Other Assets Net of Liabilities | 0.43 | % | |||
Total Net Assets | 100.00 | % |
² | Narrow industries are utilized for compliance purposes for diversification whereas broad sectors are used for financial reporting. |
To monitor compliance with the Fund’s concentration guidelines as described in the Fund’s prospectus and statement of additional information, the Technology sector (as disclosed herein for financial reporting purposes) is subdivided into a variety of “industries” (in accordance with the requirements of the Investment Company Act of 1940). The Technology sector consisted of commercial services, diversified financial services, Internet, semiconductors, software, and telecommunications. As of Oct. 31, 2018 such amounts, as a percentage of total net assets, were 3.96%, 7.09%, 5.95%, 2.96%, 18.38%, and 2.82%, respectively. The percentage in any such single industry will comply with the Fund’s concentration policy even if the percentage in the Technology sector for financial reporting purposes may exceed 25%.
Holdings are for informational purposes only and are subject to change at any time. They are not a recommendation to buy, sell, or hold any security.
Top 10 equity holdings | Percentage of net assets | ||||
Microsoft. | 8.74 | % | |||
IQVIA Holdings | 5.36 | % | |||
Biogen | 4.74 | % | |||
KKR & Co. Class A | 4.68 | % | |||
Dollar General | 4.11 | % | |||
Take-Two Interactive Software | 4.02 | % | |||
UnitedHealth Group | 3.97 | % | |||
Hasbro | 3.96 | % | |||
PayPal Holdings | 3.96 | % | |||
FedEx |
| 3.95
| %
|
10
Table of Contents
Schedule of investments | ||||
Delaware U.S. Growth Fund | October 31, 2018 |
| Number of shares | Value (US $) | ||||||
Common Stock – 97.79%² | ||||||||
Consumer Discretionary – 17.00% | ||||||||
Dollar General | 990,448 | $ | 110,316,098 | |||||
Dollar Tree † | 350,866 | 29,578,004 | ||||||
Hasbro | 1,159,533 | 106,340,772 | ||||||
Liberty Global Class A † | 687,885 | 17,630,493 | ||||||
Liberty Global Class C † | 3,546,254 | 88,798,200 | ||||||
TripAdvisor † | 1,992,765 | 103,902,767 | ||||||
|
| |||||||
456,566,334 | ||||||||
|
| |||||||
Financials – 14.28% | ||||||||
Charles Schwab | 1,845,403 | 85,331,435 | ||||||
CME Group | 391,045 | 71,655,086 | ||||||
Intercontinental Exchange | 1,307,777 | 100,751,140 | ||||||
KKR & Co. Class A | 5,312,448 | 125,639,395 | ||||||
|
| |||||||
383,377,056 | ||||||||
|
| |||||||
Healthcare – 17.12% | ||||||||
Biogen † | 418,627 | 127,375,637 | ||||||
Illumina † | 263,177 | 81,887,524 | ||||||
IQVIA Holdings † | 1,170,542 | 143,894,728 | ||||||
UnitedHealth Group | 408,038 | 106,640,731 | ||||||
|
| |||||||
459,798,620 | ||||||||
|
| |||||||
Industrials – 3.95% | ||||||||
FedEx | 481,162 | 106,019,235 | ||||||
|
| |||||||
106,019,235 | ||||||||
|
| |||||||
Real Estate – 4.28% | ||||||||
Crown Castle International | 714,810 | 77,728,439 | ||||||
Equinix | 98,539 | 37,320,661 | ||||||
|
| |||||||
115,049,100 | ||||||||
|
| |||||||
Technology – 41.16% | ||||||||
Alibaba Group Holding ADR † | 275,237 | 39,160,720 | ||||||
Alphabet Class A † | 76,783 | 83,738,004 | ||||||
Alphabet Class C † | 34,279 | 36,910,599 | ||||||
Applied Materials | 2,419,066 | 79,538,890 | ||||||
Arista Networks † | 329,125 | 75,813,944 | ||||||
Autodesk † | 689,279 | 89,089,311 | ||||||
Electronic Arts † | 680,188 | 61,883,504 | ||||||
Mastercard Class A | 465,063 | 91,929,003 | ||||||
Microsoft | 2,197,620 | 234,727,792 | ||||||
PayPal Holdings † | 1,263,069 | 106,337,779 | ||||||
Take-Two Interactive Software † | 837,228 | 107,893,572 | ||||||
Visa Class A | 713,695 | 98,382,856 | ||||||
|
| |||||||
1,105,405,974 | ||||||||
|
| |||||||
Total Common Stock (cost $2,204,742,213) | 2,626,216,319 | |||||||
|
|
11
Table of Contents
Schedule of investments | ||||
Delaware U.S. Growth Fund |
| Principal amount° | Value (US $) | ||||||
Short-Term Investments – 1.78% | ||||||||
Discount Note – 0.27%≠ | ||||||||
Federal Home Loan Bank 2.00% 11/1/18 | 7,258,380 | $ | 7,258,380 | |||||
|
| |||||||
7,258,380 | ||||||||
|
| |||||||
Repurchase Agreements – 1.51% | ||||||||
Bank of America Merrill Lynch | 5,583,369 | 5,583,369 | ||||||
Bank of Montreal | 15,354,264 | 15,354,264 | ||||||
BNP Paribas | 19,715,434 | 19,715,434 | ||||||
|
| |||||||
40,653,067 | ||||||||
|
| |||||||
Total Short-Term Investments (cost $47,911,446) | 47,911,447 | |||||||
|
| |||||||
Total Value of Securities – 99.57% | $ | 2,674,127,766 | ||||||
|
|
² | Narrow industries are utilized for compliance purposes for diversification whereas broad sectors are used for financial reporting. |
≠ | The rate shown is the effective yield at the time of purchase. |
° | Principal amount shown is stated in USD unless noted that the security is denominated in another currency. |
† | Non-income producing security. |
Summary of abbreviations:
ADR – American Depositary Receipt
USD – US Dollar
See accompanying notes, which are an integral part of the financial statements.
12
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Statement of assets and liabilities | ||||
Delaware U.S. Growth Fund | October 31, 2018 |
Assets: | ||||
Investments, at value1 | $ | 2,674,127,766 | ||
Cash | 806 | |||
Receivable for securities sold | 27,673,153 | |||
Receivable for fund shares sold | 2,041,236 | |||
Dividends and interest receivable | 895,282 | |||
Foreign tax reclaims receivable | 319,313 | |||
|
| |||
Total assets | 2,705,057,556 | |||
|
| |||
Liabilities: | ||||
Payable for securities purchased | 13,386,265 | |||
Payable for fund shares redeemed | 2,842,121 | |||
Other accrued expenses | 1,670,520 | |||
Investment management fees payable to affiliates | 1,344,279 | |||
Administration fees payable | 74,069 | |||
Distribution fees payable to affiliates | 72,861 | |||
Custody fees payable | 29,567 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 23,236 | |||
Accounting and administration expenses payable to affiliates | 9,219 | |||
Trustees’ fees and expenses payable to affiliates | 6,996 | |||
Legal fees payable to affiliates | 4,428 | |||
Reports and statements to shareholders expenses payable to affiliates | 2,126 | |||
|
| |||
Total liabilities | 19,465,687 | |||
|
| |||
Total Net Assets | $ | 2,685,591,869 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 1,879,223,508 | ||
Total distributable earnings (loss) | 806,368,361 | |||
|
| |||
Total Net Assets | $ | 2,685,591,869 | ||
|
|
14
Table of Contents
Net Asset Value | ||||
Class A: | ||||
Net assets | $ | 122,621,431 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 5,022,703 | |||
Net asset value per share | $ | 24.41 | ||
Sales charge | 5.75 | % | ||
Offering price per share, equal to net asset value per share / (1 – sales charge) | $ | 25.90 | ||
Class C: | ||||
Net assets | $ | 45,628,870 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 2,175,625 | |||
Net asset value per share | $ | 20.97 | ||
Class R: | ||||
Net assets | $ | 12,903,481 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 552,867 | |||
Net asset value per share | $ | 23.34 | ||
Institutional Class: | ||||
Net assets | $ | 2,502,062,257 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 93,856,486 | |||
Net asset value per share | $ | 26.66 | ||
Class R6: | ||||
Net assets | $ | 2,375,830 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 88,911 | |||
Net asset value per share | $ | 26.72 | ||
| ||||
1Investments, at cost | $ | 2,252,653,659 |
See accompanying notes, which are an integral part of the financial statements.
15
Table of Contents
Statement of operations | ||||
Delaware U.S. Growth Fund | Year ended October 31, 2018 |
Investment Income: | ||||
Dividends | $ | 23,919,727 | ||
Interest | 544,158 | |||
Foreign tax withheld | (68,989 | ) | ||
|
| |||
24,394,896 | ||||
|
| |||
Expenses: | ||||
Management fees | 17,017,898 | |||
Distribution expenses – Class A | 345,101 | |||
Distribution expenses – Class C | 577,699 | |||
Distribution expenses – Class R | 81,877 | |||
Dividend disbursing and transfer agent fees and expenses | 7,325,002 | |||
Accounting and administration expenses | 566,618 | |||
Reports and statements to shareholders expenses | 461,665 | |||
Trustees’ fees and expenses | 140,417 | |||
Legal fees | 128,663 | |||
Registration fees | 103,678 | |||
Custodian fees | 78,679 | |||
Audit and tax fees | 36,005 | |||
Other | 76,895 | |||
|
| |||
26,940,197 | ||||
Less expenses paid indirectly | (1,917 | ) | ||
|
| |||
Total operating expenses | 26,938,280 | |||
|
| |||
Net Investment Loss | (2,543,384 | ) | ||
|
| |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain on investments | 414,846,088 | |||
Net change in unrealized appreciation (depreciation) of investments | (248,736,477 | ) | ||
|
| |||
Net Realized and Unrealized Gain | 166,109,611 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 163,566,227 | ||
|
|
See accompanying notes, which are an integral part of the financial statements.
16
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Statements of changes in net assets | ||||
Delaware U.S. Growth Fund |
Year ended | ||||||||
10/31/18 | 10/31/17 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (2,543,384 | ) | $ | (2,764,752 | ) | ||
Net realized gain | 414,846,088 | 318,717,295 | ||||||
Net change in unrealized appreciation (depreciation) | (248,736,477 | ) | 281,309,238 | |||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 163,566,227 | 597,261,781 | ||||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Distributable earnings* | ||||||||
Class A | (17,001,490 | ) | (12,628,512 | ) | ||||
Class C | (8,467,815 | ) | (6,105,441 | ) | ||||
Class R | (2,113,241 | ) | (1,577,029 | ) | ||||
Institutional Class | (308,800,151 | ) | (170,119,881 | ) | ||||
Class R6 | (229,320 | ) | (9,171 | ) | ||||
|
|
|
| |||||
(336,612,017 | ) | (190,440,034 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Class A | 19,710,424 | 20,520,887 | ||||||
Class C | 3,681,004 | 4,237,808 | ||||||
Class R | 2,915,624 | 3,429,606 | ||||||
Institutional Class | 535,642,610 | 1,119,023,497 | ||||||
Class R6 | 837,382 | 17,005,462 | ||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | $ | 16,748,732 | $ | 12,332,480 | ||||
Class C | 8,314,280 | 5,938,501 | ||||||
Class R | 2,111,675 | 1,576,018 | ||||||
Institutional Class | 306,144,354 | 167,203,248 | ||||||
Class R6 | 229,319 | 9,171 | ||||||
|
|
|
| |||||
896,335,404 | 1,351,276,678 | |||||||
|
|
|
|
18
Table of Contents
Year ended | ||||||||
10/31/18 | 10/31/17 | |||||||
Cost of shares redeemed: | ||||||||
Class A | (53,094,451 | ) | (103,806,821 | ) | ||||
Class C | (25,402,498 | ) | (34,239,932 | ) | ||||
Class R | (8,203,876 | ) | (11,503,839 | ) | ||||
Institutional Class | (962,904,147 | ) | (1,417,578,844 | ) | ||||
Class R6 | (636,773 | ) | (17,103,573 | ) | ||||
|
|
|
| |||||
(1,050,241,745 | ) | (1,584,233,009 | ) | |||||
|
|
|
| |||||
Decrease in net assets derived from capital share transactions | (153,906,341 | ) | (232,956,331 | ) | ||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets | (326,952,131 | ) | 173,865,416 | |||||
Net Assets: | ||||||||
Beginning of year | $ | 3,012,544,000 | $ | 2,838,678,584 | ||||
|
|
|
| |||||
End of year1 | $ | 2,685,591,869 | $ | 3,012,544,000 | ||||
|
|
|
|
1 | Net Assets – At the end of year 2017, the Fund had no undistributed net investment income. The Securities and Exchange Commission eliminated the requirement to disclose undistributed (distributions in excess of) net investment income in 2018. |
* | For the year ended Oct. 31, 2018, the Fund has adopted amendments to Regulation S-X (see Note 12 in “Notes to financial statements”). For the year ended Oct. 31, 2017, the class specific dividends and distributions to shareholders were as follows: |
Class A | Class C | Class R | Institutional Class | Class R6 | ||||||||||||||||||||
Dividends from net investment income | $ | — | $ | — | $ | — | $ | (4,320,824 | ) | $ | (353 | ) | ||||||||||||
Distributions from net realized gains | (12,628,512 | ) | (6,105,441 | ) | (1,577,029 | ) | (165,799,057 | ) | (8,818 | ) |
See accompanying notes, which are an integral part of the financial statements.
19
Table of Contents
Financial highlights | ||||
Delaware U.S. Growth Fund Class A |
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income (loss)1 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period. |
Total return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of net investment income (loss) to average net assets |
Portfolio turnover
|
1 | The average shares outstanding method has been applied for per share information. |
2 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. |
See accompanying notes, which are an integral part of the financial statements.
20
Table of Contents
Year ended | ||||||||||||||||||||
10/31/18 | 10/31/17 | 10/31/16 | 10/31/15 | 10/31/14 | ||||||||||||||||
$ | 26.37 | $ | 22.99 | $ | 26.84 | $ | 25.66 | $ | 21.97 | |||||||||||
(0.08 | ) | (0.07 | ) | (0.01 | ) | 0.07 | 0.06 | |||||||||||||
1.29 | 5.10 | (0.81 | ) | 1.87 | 3.63 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
1.21 | 5.03 | (0.82 | ) | 1.94 | 3.69 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
— | — | (0.08 | ) | (0.06 | ) | — | ||||||||||||||
(3.17 | ) | (1.65 | ) | (2.95 | ) | (0.70 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(3.17 | ) | (1.65 | ) | (3.03 | ) | (0.76 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
$ | 24.41 | $ | 26.37 | $ | 22.99 | $ | 26.84 | �� | $ | 25.66 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
4.89% | 23.66% | (3.48% | ) | 7.63% | 16.80% | |||||||||||||||
$ | 122,621 | $ | 148,867 | $ | 200,191 | $ | 412,893 | $ | 351,388 | |||||||||||
1.12% | 1.06% | 1.05% | 1.05% | 1.06% | ||||||||||||||||
(0.31% | ) | (0.31% | ) | (0.06% | ) | 0.26% | 0.26% | |||||||||||||
| 39%
|
| 43% | 22% | 40% | 25% |
21
Table of Contents
Financial highlights | ||||
Delaware U.S. Growth Fund Class C |
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment loss1 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net realized gain |
Total dividends and distributions
|
Net asset value, end of period |
Total return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of net investment loss to average net assets |
Portfolio turnover
|
1 | The average shares outstanding method has been applied for per share information. |
2 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. |
See accompanying notes, which are an integral part of the financial statements.
22
Table of Contents
Year ended | ||||||||||||||||||||
10/31/18 | 10/31/17 | 10/31/16 | 10/31/15 | 10/31/14 | ||||||||||||||||
$ | 23.25 | $ | 20.60 | $ | 24.46 | $ | 23.56 | $ | 20.33 | |||||||||||
(0.23 | ) | (0.22 | ) | (0.17 | ) | (0.12 | ) | (0.11 | ) | |||||||||||
1.12 | 4.52 | (0.74 | ) | 1.72 | 3.34 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
0.89 | 4.30 | (0.91 | ) | 1.60 | 3.23 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(3.17 | ) | (1.65 | ) | (2.95 | ) | (0.70 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(3.17 | ) | (1.65 | ) | (2.95 | ) | (0.70 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
$ | 20.97 | $ | 23.25 | $ | 20.60 | $ | 24.46 | $ | 23.56 | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
4.08% | 22.80% | (4.24% | ) | 6.86% | 15.89% | |||||||||||||||
$ | 45,629 | $ | 64,233 | $ | 80,537 | $ | 106,775 | $ | 90,104 | |||||||||||
1.87% | 1.81% | 1.80% | 1.80% | 1.81% | ||||||||||||||||
(1.06% | ) | (1.06% | ) | (0.81% | ) | (0.49% | ) | (0.49% | ) | |||||||||||
| 39%
|
| 43% | 22% | 40% | 25% |
23
Table of Contents
Financial highlights | ||||
Delaware U.S. Growth Fund Class R |
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income (loss)1 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of net investment income (loss) to average net assets |
Portfolio turnover
|
1 | The average shares outstanding method has been applied for per share information. |
2 | The amount is less than $0.005 per share. |
3 | Total investment return is based on the change in a net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. |
See accompanying notes, which are an integral part of the financial statements.
24
Table of Contents
Year ended | ||||||||||||||||||||
10/31/18 | 10/31/17 | 10/31/16 | 10/31/15 | 10/31/14 | ||||||||||||||||
$ | 25.41 | $ | 22.26 | $ | 26.08 | $ | 24.96 | $ | 21.43 | |||||||||||
(0.13 | ) | (0.13 | ) | (0.07 | ) | — | 2 | — | 2 | |||||||||||
1.23 | 4.93 | (0.79 | ) | 1.82 | 3.53 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
1.10 | 4.80 | (0.86 | ) | 1.82 | 3.53 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
— | — | (0.01 | ) | — | — | |||||||||||||||
(3.17 | ) | (1.65 | ) | (2.95 | ) | (0.70 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(3.17 | ) | (1.65 | ) | (2.96 | ) | (0.70 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
$ | 23.34 | $ | 25.41 | $ | 22.26 | $ | 26.08 | $ | 24.96 | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
4.62% | 23.39% | (3.72% | ) | 7.36% | 16.47% | |||||||||||||||
$ | 12,904 | $ | 17,200 | $ | 21,358 | $ | 27,920 | $ | 27,053 | |||||||||||
1.37% | 1.31% | 1.30% | 1.30% | 1.31% | ||||||||||||||||
(0.56% | ) | (0.56% | ) | (0.31% | ) | 0.01% | 0.01% | |||||||||||||
39% | 43% | 22% | 40% | 25% |
25
Table of Contents
Financial highlights | ||||
Delaware U.S. Growth Fund Institutional Class |
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income (loss)1 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period. |
Total return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of net investment income (loss) to average net assets |
Portfolio turnover
|
1 | The average shares outstanding method has been applied for per share information. |
2 | Total investment return is based on the change in a net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. |
See accompanying notes, which are an integral part of the financial statements.
26
Table of Contents
Year ended | ||||||||||||||||||||
10/31/18 | 10/31/17 | 10/31/16 | 10/31/15 | 10/31/14 | ||||||||||||||||
$ | 28.46 | $ | 24.66 | $ | 28.57 | $ | 27.26 | $ | 23.31 | |||||||||||
(0.01 | ) | (0.02 | ) | 0.05 | 0.14 | 0.13 | ||||||||||||||
1.39 | 5.51 | (0.87 | ) | 1.99 | 3.84 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
1.38 | 5.49 | (0.82 | ) | 2.13 | 3.97 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(0.01 | ) | (0.04 | ) | (0.14 | ) | (0.12 | ) | (0.02 | ) | |||||||||||
(3.17 | ) | (1.65 | ) | (2.95 | ) | (0.70 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(3.18 | ) | (1.69 | ) | (3.09 | ) | (0.82 | ) | (0.02 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
$ | 26.66 | $ | 28.46 | $ | 24.66 | $ | 28.57 | $ | 27.26 | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
5.15% | 24.00% | (3.24% | ) | 7.90% | 17.04% | |||||||||||||||
$ | 2,502,062 | $ | 2,780,191 | $ | 2,536,591 | $ | 3,253,926 | $ | 2,983,439 | |||||||||||
0.87% | 0.81% | 0.80% | 0.80% | 0.81% | ||||||||||||||||
(0.06% | ) | (0.06% | ) | 0.19% | 0.51% | 0.51% | ||||||||||||||
39% | 43% | 22% | 40% | 25% |
27
Table of Contents
Financial highlights | ||||
Delaware U.S. Growth Fund Class R6 |
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income from investment operations: |
Net investment income2 |
Net realized and unrealized gain |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Total dividends and distributions |
Net asset value, end of period |
Total return3 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of net investment income to average net assets |
Portfolio turnover
|
1 | Date of commencement of operations; ratios have been annualized and total return has not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in a net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. |
4 | Portfolio turnover is representative of the Fund for the entire year ended Oct. 31, 2016. |
See accompanying notes, which are an integral part of the financial statements.
28
Table of Contents
Year ended | 5/2/161 to | |||||||||||
10/31/18 | 10/31/17 | 10/31/16 | ||||||||||
$ | 28.50 | $ | 24.68 | $ | 23.75 | |||||||
0.05 | 0.02 | 0.04 | ||||||||||
1.38 | 5.52 | 0.89 | ||||||||||
|
|
|
|
|
| |||||||
1.43 | 5.54 | 0.93 | ||||||||||
|
|
|
|
|
| |||||||
(0.04 | ) | (0.07 | ) | — | ||||||||
(3.17 | ) | (1.65 | ) | — | ||||||||
|
|
|
|
|
| |||||||
(3.21 | ) | (1.72 | ) | — | ||||||||
|
|
|
|
|
| |||||||
$ | 26.72 | $ | 28.50 | $ | 24.68 | |||||||
|
|
|
|
|
| |||||||
5.36% | 24.19% | 3.92% | ||||||||||
$ | 2,376 | $ | 2,053 | $ | 2 | |||||||
0.65% | 0.67% | 0.66% | ||||||||||
0.16% | 0.08% | 0.34% | ||||||||||
39% | 43% | 22% | 4 |
29
Table of Contents
Notes to financial statements | ||||
Delaware U.S. Growth Fund | October 31, 2018 |
Delaware Group® Adviser Funds (Trust) is organized as a Delaware statutory trust and offers three series: Delaware Diversified Income Fund, Delaware Global Real Estate Opportunities Fund, and Delaware U.S. Growth Fund. These financial statements and the related notes pertain to Delaware U.S. Growth Fund (Fund). The Trust is an open-end investment company. The Fund is considered diversified under the Investment Company Act of 1940, as amended (1940 Act), and offers Class A, Class C, Class R, Institutional Class, and Class R6 shares. Class A shares are sold with a maximum front-end sales charge of 5.75%. Class A share purchases of $1,000,000 or more will incur a contingent deferred sales charge (CDSC) instead of a front-end sales charge of 1.00% if redeemed during the first year, and 0.50% during the second year, provided that Delaware Distributors, L.P. (DDLP) paid a financial advisor a commission on the purchase of those shares. Class C shares are sold with a CDSC of 1.00%, which will be incurred if redeemed during the first 12 months. Class R, Institutional Class, and Class R6 shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors. In addition, Class R6 shares do not pay any service fees, sub-accounting fees, and/or sub-transfer agency fees to any brokers, dealers, or other financial intermediaries.
The investment objective of the Fund is to seek long-term capital appreciation by investing in equity securities of companies believed to have the potential for sustainable free cash flow growth.
1. Significant Accounting Policies
The Fund is an investment company and follows accounting and reporting guidance under Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services — Investment Companies. The following accounting policies are in accordance with US generally accepted accounting principles (US GAAP) and are consistently followed by the Fund.
Security Valuation — Equity securities, except those traded on the Nasdaq Stock Market LLC (Nasdaq), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange on the valuation date. Equity securities traded on the Nasdaq are valued in accordance with the Nasdaq Official Closing Price, which may not be the last sales price. If, on a particular day, an equity security does not trade, the mean between the bid and ask prices will be used, which approximates fair value. US government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. Generally, other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Trust’s Board of Trustees (Board). In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures or suspension of trading in a security. Restricted securities are valued at fair value using methods approved by the Board.
Federal Income Taxes — No provision for federal income taxes has been made as the Fund intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Fund evaluates tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year. Management has analyzed the Fund’s tax positions taken or expected to be taken on the Fund’s federal income tax returns through
30
Table of Contents
the year ended Oct. 31, 2018 and for all open tax years (years ended Oct. 31, 2015–Oct. 31, 2017), and has concluded that no provision for federal income tax is required in the Fund’s financial statements. If applicable, the Fund recognizes interest accrued on unrecognized tax benefits in interest expense and penalties in other expenses on the “Statement of operations.” During the year ended Oct. 31, 2018, the Fund did not incur any interest or tax penalties.
Class Accounting — Investment income, common expenses, and realized and unrealized gain (loss) on investments are allocated to the various classes of the Fund on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class. Class R6 shares will not be allocated any expenses related to service fees, sub-accounting fees, and/or sub-transfer agency fees paid to brokers, dealers, or other financial intermediaries.
Repurchase Agreements — The Fund may purchase certain US government securities subject to the counterparty’s agreement to repurchase them at an agreed upon date and price. The counterparty will be required on a daily basis to maintain the value of the collateral subject to the agreement at not less than the repurchase price (including accrued interest). The agreements are conditioned upon the collateral being deposited under the Federal Reserve book-entry system with the Fund’s custodian or a third-party sub-custodian. In the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings. All open repurchase agreements as of the date of this report were entered into on Oct. 31, 2018, and matured on the next business day.
Use of Estimates — The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material.
Other — Expenses directly attributable to the Fund are charged directly to the Fund. Other expenses common to various funds within the Delaware Funds® by Macquarie (Delaware Funds) are generally allocated among such funds on the basis of average net assets. Management fees and certain other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Discounts and premiums on debt securities are accreted or amortized to interest income, respectively, over the lives of the respective securities using the effective interest method. Distributions received from investments in real estate investment trusts (REITs) are recorded as dividend income on the ex-dividend date, subject to reclassification upon notice of the character of such distributions by the issuer. Foreign dividends are also recorded on the ex-dividend date or as soon after the ex-dividend date that the Fund is aware of such dividends, net of all tax withholdings, a portion of which may be reclaimable. Withholding taxes and reclaims on foreign dividends have been recorded in accordance with the Fund’s understanding of the applicable country’s tax rules and rates. The Fund declares and pays dividends from net investment income and distributions from net realized gain on investments, if any, annually. The Fund may distribute more frequently, if necessary for tax purposes. Dividends and distributions, if any, are recorded on the ex-dividend date.
31
Table of Contents
Notes to financial statements | ||||
Delaware U.S. Growth Fund |
1. Significant Accounting Policies (continued)
The Fund receives earnings credits from its custodian when positive cash balances are maintained, which may be used to offset custody fees. The expense paid under this arrangement is included on the “Statement of operations” under “Custodian fees” with the corresponding expense offset included under “Less expenses paid indirectly.” For the year ended Oct. 31, 2018, the Fund earned $783 under this arrangement.
The Fund receives earnings credits from its transfer agent when positive cash balances are maintained, which may be used to offset transfer agent fees. If the amount earned is greater than $1, the expense paid under this arrangement is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses” with the corresponding expense offset included under “Less expenses paid indirectly.” For the year ended Oct. 31, 2018, the Fund earned $1,134 under this arrangement.
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates
In accordance with the terms of its investment management agreement, the Fund pays Delaware Management Company (DMC), a series of Macquarie Investment Management Business Trust and the investment manager, an annual fee which is calculated daily and paid monthly at the rate of 0.65% on the first $500 million of average daily net assets of the Fund, 0.60% on the next $500 million, 0.55% on the next $1.5 billion, and 0.50% on average daily net assets in excess of $2.5 billion.
Jackson Square Partners, LLC (JSP), a related party of DMC, furnishes investment sub-advisory services to the Fund. For these services, DMC, not the Fund, pays JSP fees based on the aggregate average daily net assets of the Fund at the following annual rate: 0.39% of the first $500 million; 0.36% of the next $500 million; 0.33% of the next $1.5 billion; and 0.30% of aggregate average daily net assets in excess of $2.5 billion.
Delaware Investments Fund Services Company (DIFSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Fund. For these services, DIFSC’s fees are calculated daily and paid monthly based on the aggregate daily net assets of all funds within the Delaware Funds at the following annual rate: 0.00475% of the first $35 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $45 billion (Total Fee). Each Fund in the Delaware Funds pays a minimum of $4,000, which, in aggregate, is subtracted from the Total Fee. Each Fund in the Delaware Funds then pays its relative portion of the remainder of the Total Fee on a relative net asset value (NAV) basis. For the year ended Oct. 31, 2018, the Fund was charged $117,298 for these services. This amount is included on the “Statement of operations” under “Accounting and administration expenses.”
DIFSC is also the transfer agent and dividend disbursing agent of the Fund. For these services, DIFSC’s fees were calculated daily and paid monthly based on the aggregate daily net assets of the retail funds within the Delaware Funds from Nov. 1, 2017 through June 30, 2018 at the following annual rate: 0.025% of the first $20 billion; 0.020% of the next $5 billion; 0.015% of the next $5 billion; and 0.013% of average daily net assets in excess of $30 billion. Effective July 1, 2018, the Fund as well as the other Delaware Funds entered into an amendment to the DIFSC agreement. Under the amendment to the DIFSC agreement, DIFSC’s fees are calculated daily and paid monthly based on the aggregate daily net
32
Table of Contents
assets of the retail funds within the Delaware Funds at the following annual rate: 0.014% of the first $20 billion; 0.011% of the next $5 billion; 0.007% of the next $5 billion; 0.005% of the next $20 billion; and 0.0025% of average daily net assets in excess of $50 billion. The fees payable to DIFSC under the transfer agent agreement described above are allocated among all retail funds in the Delaware Funds on a relative NAV basis. This amount is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.” For the year ended Oct. 31, 2018, the Fund was charged $489,233 for these services. Pursuant to a sub-transfer agency agreement between DIFSC and BNY Mellon Investment Servicing (US) Inc. (BNYMIS), BNYMIS provides certain sub-transfer agency services to the Fund. Sub-transfer agency fees are paid by the Fund and are also included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.”
Pursuant to a distribution agreement and distribution plan, the Fund pays DDLP, the distributor and an affiliate of DMC, an annual distribution and service (12b-1) fee of 0.25% of the average daily net assets of the Class A shares, 1.00% of the average daily net assets of the Class C shares, and 0.50% of the average daily net assets of the Class R shares. The fees are calculated daily and paid monthly. Institutional Class and Class R6 shares pay no 12b-1 fees.
As provided in the investment management agreement, the Fund bears a portion of the cost of certain resources shared with DMC, including the cost of internal personnel of DMC and/or its affiliates that provide legal, tax, and regulatory reporting services to the Fund. For the year ended Oct. 31, 2018, the Fund was charged $83,518 for internal legal, tax, and regulatory reporting services provided by DMC and/or its affiliates’ employees. This amount is included on the “Statement of operations” under “Legal fees.”
For the year ended Oct. 31, 2018, DDLP earned $19,479 for commissions on sales of the Fund’s Class A shares. For the year ended Oct. 31, 2018, DDLP received gross CDSC commissions of $15 and $1,408 on redemption of the Fund’s Class A and Class C shares, respectively, and these commissions were entirely used to offset up-front commissions previously paid by DDLP to broker/dealers on sales of those shares.
Trustees’ fees include expenses accrued by the Fund for each Trustee’s retainer and meeting fees. Certain officers of DMC, DIFSC, and DDLP are officers and/or Trustees of the Trust. These officers and Trustees are paid no compensation by the Fund.
3. Investments
For the year ended Oct. 31, 2018, the Fund made purchases and sales of investment securities other than short-term investments as follows:
Purchases | $ | 1,147,849,797 | ||
Sales | 1,678,759,729 |
The tax cost of investments includes adjustment to net unrealized appreciation (depreciation) which may not necessarily be final tax cost basis adjustment, but approximate the tax basis unrealized gains and
33
Table of Contents
Notes to financial statements | ||||
Delaware U.S. Growth Fund |
3. Investments (continued)
losses that may be realized and distributed to shareholders. At Oct. 31, 2018, the cost and unrealized appreciation (depreciation) of investments for federal income tax purposes for the Fund were as follows:
Cost of investments | $ | 2,280,478,613 | ||
|
| |||
Aggregate unrealized appreciation of investments | $ | 524,331,605 | ||
Aggregate unrealized depreciation of investments | (130,682,452 | ) | ||
|
| |||
Net unrealized appreciation of investments | $ | 393,649,153 | ||
|
|
US GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. A three-level hierarchy for fair value measurements has been established based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available under the circumstances. The Fund’s investment in its entirety is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-level hierarchy of inputs is summarized below.
Level 1 – | Inputs are quoted prices in active markets for identical investments. (Examples: equity securities, open-end investment companies, futures contracts, exchange-traded options contracts) | |
Level 2 – | Other observable inputs, including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, and default rates) or other market-corroborated inputs. (Examples: debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities) | |
Level 3 – | Significant unobservable inputs, including the Fund’s own assumptions used to determine the fair value of investments. (Examples: broker-quoted securities, fair valued securities) |
Level 3 investments are valued using significant unobservable inputs. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Valuations may also be based upon current market prices of securities that are comparable in coupon, rating, maturity, and industry. The derived value of a Level 3 investment may not represent the value which is received upon disposition and this could impact the results of operations.
34
Table of Contents
The following table summarizes the valuation of the Fund’s investments by fair value hierarchy levels as of Oct. 31, 2018:
Level 1 | Level 2 | Total | ||||||||||
Securities | ||||||||||||
Assets: | ||||||||||||
Common Stock | $ | 2,626,216,319 | $ | — | $ | 2,626,216,319 | ||||||
Short-Term Investments | — | 47,911,447 | 47,911,447 | |||||||||
|
|
|
|
|
| |||||||
Total Value of Securities | $ | 2,626,216,319 | $ | 47,911,447 | $ | 2,674,127,766 | ||||||
|
|
|
|
|
|
During the year ended Oct. 31, 2018, there were no transfers between Level 1 investments, Level 2 investments, or Level 3 investments that had a significant impact to the Fund. The Fund’s policy is to recognize transfers between levels based on the fair value at the beginning of the reporting period.
A reconciliation of Level 3 investments is presented when the Fund has a significant amount of Level 3 investments at the beginning, interim, or end of the period in relation to net assets. During the year ended Oct. 31, 2018, there were no Level 3 investments.
4. Dividend and Distribution Information
Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP. Additionally, distributions from net short-term gains on sales of investment securities are treated as ordinary income for federal income tax purposes. The tax character of dividends and distributions paid during the years ended Oct. 31, 2018 and 2017 was as follows:
Year ended | ||||||||
10/31/18 | 10/31/17 | |||||||
Ordinary income | $ | 15,424,552 | $ | 4,321,177 | ||||
Long-term capital gain | 321,187,465 | 186,118,857 | ||||||
|
|
|
| |||||
Total | $336,612,017 | $190,440,034 |
5. Components of Net Assets on a Tax Basis
As of Oct. 31, 2018, the components of net assets on a tax basis were as follows:
Shares of beneficial interest | $ | 1,879,223,508 | ||
Undistributed ordinary income | 24,678,317 | |||
Undistributed long-term capital gains | 388,040,891 | |||
Unrealized appreciation of investments | 393,649,153 | |||
|
| |||
Net assets | $ | 2,685,591,869 | ||
|
|
The differences between book basis and tax basis components of net assets are primarily attributable to
tax deferral of losses on wash sales.
35
Table of Contents
Notes to financial statements | ||||
Delaware U.S. Growth Fund |
6. Capital Shares
Transactions in capital shares were as follows:
Year ended | ||||||||
10/31/18 | 10/31/17 | |||||||
Shares sold: | ||||||||
Class A | 774,742 | 881,320 | ||||||
Class C | 169,160 | 207,085 | ||||||
Class R | 120,758 | 154,240 | ||||||
Institutional Class | 19,386,545 | 42,865,417 | ||||||
Class R6 | 31,361 | 690,451 | ||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | 704,320 | 583,924 | ||||||
Class C | 404,408 | 316,889 | ||||||
Class R | 92,699 | 77,294 | ||||||
Institutional Class | 11,815,683 | 7,352,825 | ||||||
Class R6 | 8,844 | 403 | ||||||
|
|
|
| |||||
33,508,520 | 53,129,848 | |||||||
|
|
|
| |||||
Shares redeemed: | ||||||||
Class A | (2,100,752 | ) | (4,529,928 | ) | ||||
Class C | (1,160,789 | ) | (1,670,030 | ) | ||||
Class R | (337,554 | ) | (514,122 | ) | ||||
Institutional Class | (35,037,870 | ) | (55,398,802 | ) | ||||
Class R6 | (23,328 | ) | (618,904 | ) | ||||
|
|
|
| |||||
(38,660,293 | ) | (62,731,786 | ) | |||||
|
|
|
| |||||
Net decrease | (5,151,773 | ) | (9,601,938 | ) | ||||
|
|
|
|
Certain shareholders may exchange shares of one class for shares of another class in the same Fund. These exchange transactions are included as subscriptions and redemptions in the table on the previous page and on the “Statements of changes in net assets.” For the years ended Oct. 31, 2018 and 2017, the Fund had the following exchange transactions:
Exchange Redemptions | Exchange Subscriptions | |||||||||||||||||||||||||
Class A Shares | Class C Shares | Institutional Class Shares | Class A Shares | Institutional Class Shares | R6 Class Shares | Value | ||||||||||||||||||||
Year ended 10/31/18 | 4,809 | 91,565 | 614 | 68,907 | 13,612 | 613 | $ | 2,171,576 | ||||||||||||||||||
Year ended 10/31/17 | 549,079 | 4,423 | 212 | 4,029 | 509,937 | — | 12,244,531 |
36
Table of Contents
7. Line of Credit
The Fund, along with certain other funds in the Delaware Funds (Participants), was a participant in a $155,000,000 revolving line of credit intended to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, the Participants were charged an annual commitment fee of 0.15%, which was allocated across the Participants based on a weighted average of the respective net assets of each Participant. The Participants were permitted to borrow up to a maximum of one-third of their net assets under the agreement. Each Participant was individually, and not jointly, liable for its particular advances, if any, under the line of credit. The line of credit under the agreement expired on Nov. 6, 2017.
On Nov. 6, 2017, the Fund, along with the other Participants, entered into an amendment to the agreement for a $130,000,000 revolving line of credit. The revolving line of credit was reduced from $155,000,000 on Sept. 6, 2018. The line of credit was to be used as described above and operated in substantially the same manner as the original agreement. The line of credit available under the agreement expired on Nov. 5, 2018.
The Fund had no amounts outstanding as of Oct. 31, 2018 or at any time during the year then ended.
8. Offsetting
Master Repurchase Agreements
Repurchase agreements are entered into by the Fund under Master Repurchase Agreements (each, an MRA). The MRA permits the Fund, under certain circumstances including an event of default (such as bankruptcy or insolvency), to offset payables and/or receivables with collateral held by and/or posted to the counterparty. As a result, one single net payment is created. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of the MRA counterparty’s bankruptcy or insolvency. Based on the terms of the MRA, the Fund receives securities as collateral with a market value in excess of the repurchase price at maturity. Upon a bankruptcy or insolvency of the MRA counterparty, the Fund would recognize a liability with respect to such excess collateral. The liability reflects the Fund’s obligation under bankruptcy law to return the excess to the counterparty. As of Oct. 31, 2018, the following table is a summary of the Fund’s repurchase agreements by counterparty which are subject to offset under an MRA:
Counterparty | Repurchase Agreements | Fair Value of Non-Cash Collateral Received(a) | Cash Collateral Received | Net Collateral Received | Net Exposure(b) | |||||||||||||||
Bank of America Merrill Lynch | $ 5,583,369 | $ (5,583,369 | ) | $— | $ (5,583,369 | ) | $— | |||||||||||||
Bank of Montreal | 15,354,264 | (15,354,264 | ) | — | (15,354,264 | ) | — | |||||||||||||
BNP Paribas | 19,715,434 | (19,715,434 | ) | — | (19,715,434 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $40,653,067 | $(40,653,067 | ) | $— | $(40,653,067 | ) | $— | |||||||||||||
|
|
|
|
|
|
|
|
|
|
(a)The value of the related collateral received exceeded the value of the repurchase agreements as of Oct. 31, 2018.
(b)Net exposure represents the net receivable (payable) that would be due from (to) the counterparty in the event of default.
37
Table of Contents
Notes to financial statements | ||||
Delaware U.S. Growth Fund |
9. Securities Lending
The Fund, along with other funds in the Delaware Funds, may lend its securities pursuant to a security lending agreement (Lending Agreement) with The Bank of New York Mellon (BNY Mellon). At the time a security is loaned, the borrower must post collateral equal to the required percentage of the market value of the loaned security, including any accrued interest. The required percentage is: (1) 102% with respect to US securities and foreign securities that are denominated and payable in US dollars; and (2) 105% with respect to foreign securities. With respect to each loan, if on any business day the aggregate market value of securities collateral plus cash collateral held is less than the aggregate market value of the securities which are the subject of such loan, the borrower will be notified to provide additional collateral by the end of the following business day which, together with the collateral already held, will be not less than the applicable initial collateral requirements for such security loan. If the aggregate market value of securities collateral and cash collateral held with respect to a security loan exceeds the applicable initial collateral requirement, upon request of the borrower, BNY Mellon must return enough collateral to the borrower by the end of the following business day to reduce the value of the remaining collateral to the applicable initial collateral requirement for such security loan. As a result of the foregoing, the value of the collateral held with respect to a loaned security on any particular day may be more or less than the value of the security on loan. The collateral percentage with respect to the market value of the loaned security is determined by the security lending agent.
Cash collateral received by each fund of the Trust is generally invested in a series of individual separate accounts, each corresponding to a fund. The investment guidelines permit each separate account to hold certain securities that would be considered eligible securities for a money market fund. Cash collateral received is generally invested in government securities; certain obligations issued by government sponsored enterprises; repurchase agreements collateralized by US Treasury securities; obligations issued by the central government of any Organization for Economic Cooperation and Development (OECD) country or its agencies, instrumentalities, or establishments; obligations of supranational organizations; commercial paper, notes, bonds, and other debt obligations; certificates of deposit, time deposits, and other bank obligations; and asset-backed securities. A fund can also accept US government securities and letters of credit (non-cash collateral) in connection with securities loans.
In the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Fund or, at the discretion of the lending agent, replace the loaned securities. The Fund continues to record dividends or interest, as applicable, on the securities loaned and is subject to changes in value of the securities loaned that may occur during the term of the loan. The Fund has the right under the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized by non-cash collateral, the Fund receives loan premiums paid by the borrower. With respect to security loans collateralized by cash collateral, the earnings from the collateral investments are shared among the Fund, the security lending agent, and the borrower. The Fund records security lending income net of allocations to the security lending agent and the borrower.
The Fund may incur investment losses as a result of investing securities lending collateral. This could occur if an investment in the collateral investment account defaulted or became impaired. Under those
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circumstances, the value of a Fund’s cash collateral account may be less than the amount the Fund would be required to return to the borrowers of the securities and the Fund would be required to make up for this shortfall.
During the year ended Oct. 31, 2018, the Fund had no securities out on loan.
10. Credit and Market Risk
The Fund invested in growth stocks (such as those in the technology sector), which reflect projections of future earnings and revenue. These prices may rise or fall dramatically depending on whether those projections are met. These companies’ stock prices may be more volatile, particularly over the short term.
The Fund invests a significant portion of its assets in small companies and may be subject to certain risks associated with ownership of securities of such companies. Investments in small sized companies may be more volatile than investments in larger companies for a number of reasons, which include limited financial resources or a dependence on narrow product lines.
The Fund may invest up to 15% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A promulgated under the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair the Fund from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, the Fund’s Board has delegated to DMC, the day-to-day functions of determining whether individual securities are liquid for purposes of the Fund’s limitation on investments in illiquid securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Fund’s 15% limit on investments in illiquid securities. As of Oct. 31, 2018, there were no Rule 144A securities held by the Fund. Restricted securities are valued pursuant to the security valuation procedures noted in Note 1.
11. Contractual Obligations
The Fund enters into contracts in the normal course of business that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Fund’s existing contracts and expects the risk of loss to be remote.
12. Recent Accounting Pronouncements
In August 2018, the FASB issued an Accounting Standards Update, ASU 2018-13, which changes certain fair value measurement disclosure requirements. The ASU 2018-13, in addition to other modifications and additions, removes the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for the timing of transfers between levels and the valuation process for Level 3 fair value measurements. The ASU 2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after Dec. 15, 2019. At this time, management is evaluating the implications of these changes on the financial statements.
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Notes to financial statements | ||||
Delaware U.S. Growth Fund |
12. Recent Accounting Pronouncements (continued)
In August 2018, the Securities and Exchange Commission (SEC) adopted amendments to Regulation S-X to update and simplify the disclosure requirements for registered investment companies by eliminating requirements that are redundant or duplicative of US GAAP requirements or other SEC disclosure requirements. The new amendments require the presentation of the total, rather than the components, of distributable earnings on the “Statement of assets and liabilities” and the total, rather than the components, of dividends from net investment income and distributions from net realized gains on the “Statements of changes” in net assets. The amendments also removed the requirement for the parenthetical disclosure of undistributed net investment income on the “Statements of changes in net assets” and certain tax adjustments that were reflected in the “Notes to financial statements.” All of these have been reflected in the Fund’s financial statements.
13. Subsequent Events
On Nov. 5, 2018, the Fund, along with the other Participants, entered into an amendment to the agreement for a $190,000,000 revolving line of credit to be used as described in Note 7 and to be operated in substantially the same manner as the agreement described in Note 7. The revolving line of credit available was increased from $190,000,000 to $220,000,000 on Nov. 29, 2018. Under the amendment to the agreement, the Participants are charged an annual commitment fee of 0.15%, which is allocated across the Participants based a weighted average of the respective net assets of each Participant. The line of credit available under the agreement expires on Nov. 4, 2019.
Management has determined that no other material events or transactions occurred subsequent to Oct. 31, 2018, that would require recognition or disclosure in the Fund’s financial statements.
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registered public accounting firm | ||||
To the Board of Trustees of Delaware Group® Adviser Funds and Shareholders of Delaware U.S. Growth Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Delaware U.S. Growth Fund (one of the series constituting Delaware Group® Adviser Funds, referred to hereafter as the “Fund”) as of October 31, 2018, the related statement of operations for the year ended October 31, 2018, the statements of changes in net assets for each of the two years in the period ended October 31, 2018, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of October 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended October 31, 2018 and the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of October 31, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
December 20, 2018
We have served as the auditor of one or more investment companies in Delaware Funds® by Macquarie since 2010.
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Other Fund information (Unaudited) | ||||
Delaware U.S. Growth Fund |
Tax Information
The information set forth below is for the Fund’s fiscal year as required by federal income tax laws. Shareholders, however, must report distributions on a calendar year basis for income tax purposes, which may include distributions for portions of two fiscal years of the Fund. Accordingly, the information needed by shareholders for income tax purposes will be sent to them in January of each year. Please consult your tax advisor for proper treatment of this information.
All disclosures are based on financial information available as of the date of this annual report and, accordingly, are subject to change. For any and all items requiring reporting, it is the intention of the Fund to report the maximum amount permitted under the Internal Revenue Code and the regulations thereunder.
For the fiscal year ended Oct. 31, 2018, the Fund reports distributions paid during the year as follows:
(A) Long-Term Capital Gains Distributions (Tax Basis) | 95.42 | % | ||
(B) Ordinary Income Distributions (Tax Basis)* | 4.58 | % | ||
Total Distributions. | 100.00 | % | ||
(C) Qualified Dividends1 | 84.39 | % |
(A) and (B) are based on a percentage of the Fund’s total distributions.
(C) is based on a percentage of the Fund’s ordinary income distributions.
* For the fiscal year ended Oct. 31, 2018, certain dividends paid by the Fund may be subject to a maximum tax rate of 20%. The percentage of dividends paid by the Fund from ordinary income reported as qualified income is 98.51%. Complete information will be compiled and reported in conjunction with your 2018 Form 1099-DIV.
1 Qualified dividends represent dividends which qualify for the corporate dividends received deduction.
Board consideration of sub-advisory agreements for Delaware U.S. Growth Fund at a meeting held May 16-17, 2018
At a meeting held on May 16-17, 2018, the Board of Trustees of Delaware Group® Adviser Funds, including a majority of non-interested or independent Trustees (the “Independent Trustees”), approved a new Sub-Advisory Agreement between Delaware U.S. Growth Fund (“DMC” or “Management”) and each of Macquarie Investment Management Global Limited (“MIMGL”) and Macquarie Funds Management Hong Kong Limited (“MFMHK”) for Delaware U.S. Growth Fund (the “Fund”). MIMGL and MFMHK may also be referenced as “sub-advisor(s)” below.
In reaching the decision to approve the Sub-Advisory Agreements, the Board considered and reviewed information about each of MIMGL and MFMHK, including their personnel, operations, and financial condition, which had been provided by MIMGL and MFMHK, respectively. The Board also reviewed material furnished by DMC, including: a memorandum from DMC reviewing the Sub-Advisory Agreements and the various services proposed to be rendered by MIMGL and MFMHK; information concerning MIMGL’s and MFMHK’s organizational structure and the experience of their key investment management personnel; copies of MIMGL’s and MFMHK’s Form ADV, financial statements, compliance policies and procedures, and Codes of Ethics; relevant performance information provided with respect to MIMGL and MFMHK; and a copy of the Sub-Advisory Agreements.
In considering such information and materials, the Independent Trustees received assistance and advice from and met separately with independent counsel. The materials prepared by Management in
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connection with the approval of the Sub-Advisory Agreements were sent to the Independent Trustees in advance of the meeting. While attention was given to all information furnished, the following discusses some primary factors relevant to the Board’s decision. This discussion of the information and factors considered by the Board (as well as the discussion above) is not intended to be exhaustive, but rather summarizes certain factors considered by the Board. In view of the wide variety of factors considered, the Board did not, unless otherwise noted, find it practicable to quantify or otherwise assign relative weights to the following factors. In addition, individual Trustees may have assigned different weights to various factors.
Nature, extent, and quality of services. The Board considered the nature, extent, and quality of services that MIMGL and MFMHK each would provide as a sub-advisor to the Fund. The Trustees considered the investment process to be employed by MIMGL and MFMHK in connection with DMC’s collaboration with MIMGL and MFMHK in managing the Fund, and the qualifications and experience of MIMGL and MFMHK’s equity teams with regard to implementing the Fund’s investment mandates. The Board considered MIMGL and MFMHK’s organization, personnel, and operations. The Trustees also considered Management’s review and recommendation process with respect to MIMGL and MFMHK, and Management’s favorable assessment as to the nature, extent, and quality of the sub-advisory services expected to be provided by MIMGL and MFMHK to the Fund. Based on their consideration and review of the foregoing factors, the Board concluded that the nature, extent, and quality of the sub-advisory services to be provided by MIMGL and MFMHK, as well as MIMGL and MFMHK’s ability to render such services based on their experience, organization and resources, were appropriate for the Fund, in light of the Fund’s investment objective, strategies, and policies. In discussing the nature of the services proposed to be provided by the sub-advisors, several Board members observed that, unlike traditional sub-advisors, who make the investment-related decisions with respect to the sub-advised portfolio, the relationship contemplated in this case is limited to access to the additional quantitative investment resources and related technology support of MIMGL and MFMHK.
Sub-advisory fees. The Board considered that DMC would not pay MIMGL and MFMHK fees in conjunction with the services that would be rendered to the sub-advised Fund. The Board concluded that, in light of the quality and extent of the services to be provided and the business relationships between the advisor and sub-advisors, the proposed fee arrangement was understandable and reasonable.
Investment performance. In evaluating performance, the Board considered that MIMGL and MFMHK would provide trade execution support, but that DMC’s portfolio managers for the Fund would retain portfolio management discretion over the Fund.
Economies of scale and fall-out benefits. The Board considered whether the proposed fee arrangement would reflect economies of scale for the benefit of Fund investors as assets in the Fund increased, as applicable. The Board also considered that DMC and its affiliates may benefit by leveraging the global resources of its affiliates.
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Other Fund information (Unaudited) | ||||
Delaware U.S. Growth Fund |
Board consideration of advisory and sub-advisory agreements for Delaware U.S. Growth Fund at a meeting held August 15-16, 2018
At a meeting held on Aug. 15-16, 2018 (the “Annual Meeting”), the Board of Trustees (the “Board”), including a majority of disinterested or independent Trustees, approved the renewal of the Investment Advisory Agreement and Investment Sub-Advisory Agreement for Delaware U.S. Growth Fund (the “Fund”). In making its decision, the Board considered information furnished at regular quarterly Board meetings, including reports detailing Fund performance, investment strategies and expenses, as well as information prepared specifically in connection with the renewal of the investment advisory and sub-advisory contracts. Information furnished specifically in connection with the renewal of the Investment Management Agreement with Delaware Management Company (“DMC”), a series of Macquarie Investment Management Business Trust (“MIMBT”), and Sub-Advisory Agreement with Jackson Square Partners, LLC (“JSP”), included materials provided by DMC and its affiliates (collectively, “Macquarie Investment Management”) and JSP, as applicable, concerning, among other things, the nature, extent, and quality of services provided to the Fund; the costs of such services to the Fund; economies of scale; and the investment manager’s financial condition and profitability. In addition, in connection with the Annual Meeting, materials were provided to the Trustees in May 2018, including reports provided by Broadridge Financial Solutions (“Broadridge”). The Broadridge reports compared the Fund’s investment performance and expenses with those of other comparable mutual funds. The Independent Trustees reviewed and discussed the Broadridge reports with independent legal counsel to the Independent Trustees. In addition to the information noted above, the Board also requested and received information regarding DMC’s or JSP’s, as applicable, policy with respect to advisory fee levels and its breakpoint philosophy; the structure of portfolio manager compensation; comparative client fee information; and any constraints or limitations on the availability of securities for certain investment styles, which had in the past year inhibited, or which were likely in the future to inhibit, the investment manager’s ability to invest fully in accordance with Fund policies.
In considering information relating to the approval of the Fund’s advisory and sub-advisory agreements, the Independent Trustees received assistance and advice from and met separately with independent legal counsel to the Independent Trustees and also from an experienced and knowledgeable independent fund consultant, JDL Consultants, LLC (“JDL”). Although the Board gave attention to all information furnished, the following discussion identifies, under separate headings, the primary factors taken into account by the Board during its contract renewal considerations.
Nature, extent, and quality of services. The Board considered the services provided by DMC to the Fund and its shareholders. In reviewing the nature, extent, and quality of services, the Board considered reports furnished to it throughout the year, which covered matters such as the relative performance of the Fund; compliance of portfolio managers with the investment policies, strategies, and restrictions for the Fund; compliance by DMC and Delaware Distributors, L.P. (together, “Management”) personnel with the Code of Ethics adopted throughout the Delaware Funds® by Macquarie (“Delaware Funds”); and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of DMC and the emphasis placed on research in the investment process. The Board recognized DMC’s receipt of certain favorable industry distinctions during the past several years. The Board gave favorable consideration to DMC’s efforts to control expenses while maintaining service levels committed to Fund matters. The Board also noted the benefits provided to Fund shareholders
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(a) through each shareholder’s ability to: (i) exchange an investment in one Delaware Fund for the same class of shares in another Delaware Fund without a sales charge, or (ii) to reinvest Fund dividends into additional shares of the Fund or into additional shares of other Delaware Funds, and (b) the privilege to combine holdings in other Delaware Funds to obtain a reduced sales charge. The Board was satisfied with the nature, extent, and quality of the overall services provided by DMC.
Nature, extent, and quality of services. The Board considered the services provided by JSP to the Fund and its shareholders. In reviewing the nature, extent, and quality of services, the Board considered reports furnished to it throughout the year at regular Board Meetings covering matters such as relative performance of the Fund; compliance of portfolio managers with the investment policies, strategies; and restrictions for the Fund; the compliance of JSP personnel with its Code of Ethics; and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of JSP and the emphasis placed on research in the investment process. The Board was satisfied with the nature, extent, and quality of the overall services provided by JSP.
Investment performance. The Board placed significant emphasis on the investment performance of the Fund in view of the importance of investment performance to shareholders. Although the Board considered performance reports and discussions with portfolio managers at Investment Committee meetings throughout the year, the Board gave particular weight to the Broadridge reports furnished for the Annual Meeting. The Broadridge reports prepared for the Fund showed the investment performance of its Class A shares in comparison to a group of similar funds as selected by Broadridge (the “Performance Universe”). A fund with the best performance ranked first, and a fund with the poorest performance ranked last. The highest/best performing 25% of funds in the Performance Universe make up the first quartile; the next 25%, the second quartile; the next 25%, the third quartile; and the poorest/worst performing 25% of funds in the Performance Universe make up the fourth quartile. Comparative annualized performance for the Fund was shown for the past 1-, 3-, 5-, and 10-year periods, to the extent applicable, ended Jan. 31, 2018. The Board’s objective is that the Fund’s performance for the 1-, 3-, and 5-year periods be at or above the median of its Performance Universe.
The Performance Universe for the Fund consisted of the Fund and all retail and institutional large-cap growth funds as selected by Broadridge. The Broadridge report comparison showed that the Fund’s total return for the 1- and 10-year periods was in the third quartile of its Performance Universe. The report further showed that the Fund’s total return for the 3- and 5-year periods was in the fourth quartile of its Performance Universe. The Board noted that the Fund’s performance was not in line with the Board’s objective. In evaluating the Fund’s performance, the Board considered the numerous investment and performance reports delivered by Management personnel to the Board’s Investments Committee. The Board was satisfied that Management was taking action to improve Fund performance and meet the Board’s performance objective.
Comparative expenses. The Board considered expense data for the Delaware Funds. Management provided the Board with information on pricing levels and fee structures for the Fund as of its most recently completed fiscal year. The Board also focused on the comparative analysis of effective management fees and total expense ratios of the Fund versus effective management fees and total expense ratios of a group of similar funds as selected by Broadridge (the “Expense Group”). In reviewing comparative costs, the Fund’s contractual management fee and the actual management fee incurred by
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Other Fund information (Unaudited) | ||||
Delaware U.S. Growth Fund |
Board consideration of advisory and sub-advisory agreements for Delaware U.S. Growth Fund at a meeting held August 15-16, 2018 (continued)
the Fund were compared with the contractual management fees (assuming all funds in the Expense Group were similar in size to the Fund) and actual management fees (as reported by each fund) within the Expense Group, taking into account any applicable breakpoints and fee waivers. The Fund’s total expenses were also compared with those of its Expense Group. The Broadridge total expenses, for comparative consistency, were shown by Broadridge for Class A shares and comparative total expenses including 12b-1 and non-12b-1 service fees. The Board’s objective is for each Fund’s total expense ratio to be competitive with those of the peer funds within its Expense Group.
The expense comparisons for the Fund showed that its actual management fee was in the quartile with the lowest expenses of its Expense Group and its total expenses were in the quartile with the second lowest expenses of its Expense Group. The Board was satisfied with the management fee and total expenses of the Fund in comparison to those of its Expense Group as shown in the Broadridge report.
Management profitability. The Board considered the level of profits realized by DMC in connection with the operation of the Fund. In this respect, the Board reviewed the Investment Management Profitability Analysis that addressed the overall profitability of DMC’s business in providing management and other services to each of the individual funds and the Delaware Funds as a whole. Specific attention was given to the methodology used by DMC in allocating costs for the purpose of determining profitability. Management stated that the level of profits of DMC, to a certain extent, reflects recent operational cost savings and efficiencies initiated by DMC. The Board considered DMC’s efforts to improve services provided to Fund shareholders and to meet additional regulatory and compliance requirements resulting from recent industry-wide Securities and Exchange Commission initiatives. The Board also considered the extent to which DMC might derive ancillary benefits from fund operations, including the potential for procuring additional business as a result of the prestige and visibility associated with its role as service provider to the Delaware Funds and the benefits from allocation of fund brokerage to improve trading efficiencies. As part of its work, the Board also reviewed a report prepared by JDL regarding MIMBT profitability as compared to certain peer fund complexes and the Independent Trustees met with JDL personnel to discuss DMC’s profitability in such context. The Board found that the management fees were reasonable in light of the services rendered and the level of profitability of DMC.
Management profitability. Trustees were also given available information on profits being realized by JSP in relation to the services being provided to the Fund and in relation to JSP’s overall investment advisory business, but believed such information to be of limited relevance because the sub-advisory fees are paid by DMC out of its management fee, and changes in the level of sub-advisory fees have no impact on Fund expenses. The Board was also provided information on potential fall-out benefits derived or to be derived by JSP in connection with its relationship to the Fund, such as reputational enhancement, soft dollar arrangements or commissions paid to affiliated broker/dealers, as applicable.
Economies of scale. The Trustees considered whether economies of scale are realized by DMC as the Fund’s assets increase and the extent to which any economies of scale are reflected in the level of management fees charged. The Trustees reviewed the Fund’s advisory fee pricing and structure, approved by the Board and shareholders, which includes breakpoints, and which applies to most funds in the Delaware Funds complex. Breakpoints in the advisory fee occur when the advisory fee rate is
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reduced on assets in excess of specified levels. Breakpoints result in a lower advisory fee than would otherwise be the case in the absence of breakpoints, when the asset levels specified in the breakpoints are exceeded. The Board noted that, as of March 31, 2018, the Fund’s assets exceeded the final breakpoint level. The Board believed that, given the extent to which economies of scale might be realized by DMC and its affiliates, the schedule of fees under the Investment Management Agreement provides a sharing of benefits with the Fund and its shareholders.
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Board of trustees / directors and officers addendum | ||||
Delaware Funds® by Macquarie |
A mutual fund is governed by a Board of Trustees/Directors (“Trustees”), which has oversight responsibility for the management of a fund’s business affairs. Trustees establish procedures and oversee and review the performance of the investment manager, the distributor, and others who perform services for the fund. The independent fund trustees, in particular, are advocates
Name, Address, and Birth Date | Position(s) Held with Fund(s) | Length of Time Served | ||
Interested Trustee
| ||||
Shawn K. Lytle1, 2 2005 Market Street Philadelphia, PA 19103 February 1970 | President, Chief Executive Officer, and Trustee | Trustee since September 2015 | ||
President and Chief Executive Officer since August 2015 | ||||
| ||||
Independent Trustees
| ||||
Thomas L. Bennett 2005 Market Street Philadelphia, PA 19103 October 1947 | Chair and Trustee | Trustee since March 2005 | ||
Chair since March 2015 | ||||
Ann D. Borowiec 2005 Market Street Philadelphia, PA 19103 November 1958
| Trustee | Since March 2015 | ||
Joseph W. Chow 2005 Market Street Philadelphia, PA 19103 January 1953
| Trustee | Since January 2013 |
1 | Shawn K. Lytle is considered to be an “Interested Trustee ” because he is an executive officer of the Fund’s(s’) investment advisor. |
2 | Shawn K. Lytle, David F. Connor, Daniel V. Geatens, and Richard Salus serve in similar capacities for the six portfolios of the Optimum Fund Trust, which have the same investment advisor, principal underwriter, and transfer agent as the registrant. Mr. Geatens also serves as the Chief Financial Officer and Treasurer for Macquarie Global Infrastructure Total Return Fund Inc., which has an affiliated investment manager. |
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for shareholder interests. Each trustee has served in that capacity since he or she was elected to or appointed to the Board of Trustees, and will continue to serve until his or her retirement or the election of a new trustee in his or her place. The following is a list of the Trustees and Officers with certain background and related information.
Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee or Officer | Other Directorships Held by Trustee or Officer | ||
| ||||
President — Macquarie Investment Management3 (June 2015–Present)
Regional Head of Americas — UBS Global Asset Management (April 2010–May 2015) | 59 | Trustee — UBS Relationship Funds, SMA Relationship Trust, and UBS Funds (May 2010–April 2015) | ||
| ||||
Private Investor (March 2004–Present)
| 59 | None | ||
Chief Executive Officer, Private Wealth Management (2011–2013) and Market Manager, New Jersey Private Bank (2005–2011) — J.P. Morgan Chase & Co.
| 59 | Director — Banco Santander International (October 2016–Present)
Director — Santander Bank, N.A. (December 2016–Present) | ||
Private Investor (April 2011–Present)
| 59 | Director and Audit Committee Member — Hercules Technology Growth Capital, Inc. (July 2004–July 2014) |
3 | Macquarie Investment Management is the marketing name for Macquarie Management Holdings, Inc. and its subsidiaries, including the Fund’s(s’) investment advisor, principal underwriter, and its transfer agent. |
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Board of trustees / directors and officers addendum | ||||
Delaware Funds® by Macquarie |
Name, Address, | Position(s) | Length of | ||
and Birth Date | Held with Fund(s) | Time Served | ||
Independent Trustees (continued)
| ||||
John A. Fry | Trustee | Since January 2001 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 May 1960
| ||||
Lucinda S. Landreth | Trustee | Since March 2005 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
June 1947 | ||||
Frances A. Sevilla-Sacasa | Trustee | Since September 2011 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
January 1956
|
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Number of Portfolios in | ||||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships | ||
During the Past Five Years | by Trustee or Officer | Held by Trustee or Officer | ||
President — | 59 | Director; Compensation | ||
Drexel University | Committee and | |||
(August 2010–Present) | Governance Committee | |||
Member — Community | ||||
President — | Health Systems | |||
Franklin & Marshall College | ||||
(July 2002–July 2010) | Director — Drexel | |||
Morgan & Co. | ||||
Director; Audit Committee | ||||
Member — vTv | ||||
Therapeutics LLC | ||||
Director; Audit Committee | ||||
Member — FS Credit Real | ||||
Estate Income Trust, Inc.
| ||||
Private Investor | 59 | None | ||
(2004–Present)
| ||||
Private Investor | 59 | Trust Manager and | ||
(January 2017–Present) | Audit Committee | |||
Chair — Camden | ||||
Chief Executive Officer — | Property Trust | |||
Banco Itaú | (August 2011–Present) | |||
International | ||||
(April 2012–December 2016) | Director — | |||
Carrizo Oil & Gas, Inc. | ||||
Executive Advisor to Dean | (March 2018–Present) | |||
(August 2011–March 2012) | ||||
and Interim Dean | ||||
(January 2011–July 2011) — | ||||
University of Miami School of | ||||
Business Administration | ||||
President — U.S. Trust, | ||||
Bank of America Private | ||||
Wealth Management | ||||
(Private Banking) | ||||
(July 2007–December 2008)
|
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Board of trustees / directors and officers addendum | ||||
Delaware Funds® by Macquarie |
Name, Address, and Birth Date | Position(s) Held with Fund(s) | Length of Time Served | ||
Independent Trustees (continued)
| ||||
Thomas K. Whitford 2005 Market Street Philadelphia, PA 19103 March 1956
| Trustee | Since January 2013 | ||
Janet L. Yeomans 2005 Market Street Philadelphia, PA 19103 July 1948
| Trustee | Since April 1999 | ||
Officers
| ||||
David F. Connor 2005 Market Street Philadelphia, PA 19103 December 1963 | Senior Vice President, General Counsel, and Secretary | Senior Vice President since May 2013; General Counsel since May 2015; Secretary since October 2005
| ||
Daniel V. Geatens 2005 Market Street Philadelphia, PA 19103 October 1972
| Vice President and Treasurer | Vice President and Treasurer since October 2007 | ||
Richard Salus 2005 Market Street Philadelphia, PA 19103 October 1963
| Senior Vice President and Chief Financial Officer | Senior Vice President and Chief Financial Officer since November 2006 |
The Statement of Additional Information for the Fund(s) includes additional information about the Trustees and Officers and is available, without charge, upon request by calling 800 523-1918.
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Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee or Officer | Other Directorships Held by Trustee or Officer | ||
Vice Chairman (2010–April 2013) — PNC Financial Services Group | 59 | Director — HSBC Finance Corporation and HSBC North America Holdings Inc. (December 2013–Present) | ||
Director — | ||||
HSBC Bank USA, Inc. (July 2014–March 2017)
| ||||
Vice President and Treasurer | 59 | Director (2009–2017); | ||
(January 2006–July 2012), | Personnel and Compensation | |||
Vice President — | Committee Chair; Member of | |||
Mergers & Acquisitions | Nominating, Investments, and | |||
(January 2003–January 2006), | Audit Committees for various | |||
and Vice President | periods throughout | |||
and Treasurer | directorship — | |||
(July 1995–January 2003) — | Okabena Company | |||
3M Company
| ||||
David F. Connor has served | 59 | None2 | ||
in various capacities at different times at | ||||
Macquarie Investment | ||||
Management.
| ||||
Daniel V. Geatens has served | 59 | None2 | ||
in various capacities at different times at | ||||
Macquarie Investment | ||||
Management.
| ||||
Richard Salus has served | 59 | None2 | ||
in various executive capacities at different times at | ||||
Macquarie Investment | ||||
Management.
|
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About the organization | ||||
Board of trustees | ||||||
Shawn K. Lytle President and Chief Executive Officer Delaware Funds® by Macquarie Philadelphia, PA
Thomas L. Bennett Chairman of the Board Delaware Funds by Macquarie Private Investor Rosemont, PA | Ann D. Borowiec Former Chief Executive Officer Private Wealth Management J.P. Morgan Chase & Co. New York, NY
Joseph W. Chow Former Executive Vice President State Street Corporation Boston, MA | John A. Fry President Drexel University Philadelphia, PA
Lucinda S. Landreth Former Chief Investment Officer Assurant, Inc. New York, NY | Frances A. Sevilla-Sacasa Former Chief Executive Officer Banco Itaú International Miami, FL
Thomas K. Whitford Former Vice Chairman PNC Financial Services Group Pittsburgh, PA
Janet L. Yeomans Former Vice President and Treasurer 3M Company St. Paul, MN | |||
Affiliated officers | ||||||
David F. Connor | Daniel V. Geatens | Richard Salus | ||||
Senior Vice President, | Vice President and | Senior Vice President and | ||||
General Counsel, | Treasurer | Chief Financial Officer | ||||
and Secretary | Delaware Funds | Delaware Funds | ||||
Delaware Funds | by Macquarie | by Macquarie | ||||
by Macquarie | Philadelphia, PA | Philadelphia, PA | ||||
Philadelphia, PA |
This annual report is for the information of Delaware U.S. Growth Fund shareholders, but it may be used with prospective investors when preceded or accompanied by the Delaware Fund fact sheet for the most recently completed calendar quarter. These documents are available at delawarefunds.com/literature.
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 800 523-1918; and (ii) on the SEC’s website at sec.gov. In addition, a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities and the Schedule of Investments included in the Fund’s most recent Form N-Q are available without charge on the Fund’s website at delawarefunds.com/literature. The Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C.; information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund’s website at delawarefunds.com/proxy; and (ii) on the SEC’s website at sec.gov.
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Alternative / specialty mutual fund
Delaware Global Real Estate Opportunities Fund
October 31, 2018
Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Fund’s prospectus and its summary prospectus, which may be obtained by visiting delawarefunds.com/literature or calling 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing.
You can obtain shareholder reports and prospectuses online instead of in the mail.
Visit delawarefunds.com/edelivery.
Table of Contents
Experience Delaware Funds® by Macquarie
Macquarie Investment Management (MIM) is a global asset manager with offices throughout the United States, Europe, Asia, and Australia. We are active managers who prioritize autonomy and accountability at the investment team level in pursuit of opportunities that matter for our clients. Delaware Funds is one of the longest-standing mutual fund families, with more than 75 years in existence.
If you are interested in learning more about creating an investment plan, contact your financial advisor.
You can learn more about Delaware Funds or obtain a prospectus for Delaware Global Real Estate Opportunities Fund at delawarefunds.com/literature.
Manage your account online
• | Check your account balance and transactions |
• | View statements and tax forms |
• | Make purchases and redemptions |
Visit delawarefunds.com/account-access.
Macquarie Asset Management (MAM) offers a diverse range of products including securities investment management, infrastructure and real asset management, and fund and equity-based structured products. MIM is the marketing name for certain companies comprising the asset management division of Macquarie Group. This includes the following registered investment advisers: Macquarie Investment Management Business Trust (MIMBT), Macquarie Funds Management Hong Kong Limited, Macquarie Investment Management Austria Kapitalanlage AG, Macquarie Investment Management Global Limited, Macquarie Investment Management Europe Limited, and Macquarie Capital Investment Management LLC.
The Fund is distributed by Delaware Distributors, L.P.
(DDLP), an affiliate of MIMBT and Macquarie Group Limited.
Other than Macquarie Bank Limited (MBL), none of the entities noted are authorized deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Fund is governed by US laws and regulations.
1 | ||||
4 | ||||
8 | ||||
10 | ||||
11 | ||||
16 | ||||
18 | ||||
20 | ||||
22 | ||||
30 | ||||
45 | ||||
46 | ||||
52 | ||||
58 |
Unless otherwise noted, views expressed herein are current as of Oct. 31, 2018, and subject to change for events occurring after such date.
The Fund is not FDIC insured and is not guaranteed. It is possible to lose the principal amount invested.
Advisory services provided by Delaware Management Company, a series of MIMBT, a US registered investment advisor.
All third-party marks cited are the property of their respective owners.
© 2018 Macquarie Management Holdings, Inc.
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Portfolio management review | ||||
Delaware Global Real Estate Opportunities Fund | November 13, 2018 |
Performance preview (for the year ended October 31, 2018) |
| |||||||
Delaware Global Real Estate Opportunities Fund (Institutional Class shares) | 1-year return | +0.48% | ||||||
Delaware Global Real Estate Opportunities Fund (Class A shares) | 1-year return | +0.33% | ||||||
FTSE EPRA/NAREIT Developed Index (benchmark) | 1-year return | +1.23% |
Past performance does not guarantee future results.
For complete, annualized performance for Delaware Global Real Estate Opportunities Fund, please see the table on page 4.
Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors. In addition, Institutional Class shares pay no distribution and service fee.
The performance of Class A shares excludes the applicable sales charge. Both Institutional Class shares and Class A shares reflect the reinvestment of all distributions.
Please see page 6 for a description of the index. Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.
Global real estate securities, as measured by the FTSE EPRA/NAREIT Developed Index, returned +1.23% for the Fund’s fiscal year ended Oct. 31, 2018. Two notable concerns affected global financial markets during the period: the tightening of financial conditions by central banks and the potential for trade wars to weigh on global growth and increase geopolitical tension.
In the United States, the Federal Reserve continued to raise its target short-term interest rate. During the fiscal year, the Fed raised the federal funds rate by a quarter percentage point on four separate occasions. In Europe, the European Central Bank began to slowly withdraw its stimulus by tapering asset purchases and started to discuss potentially raising interest rates in 2019.
Within real estate, a wide gap has emerged between public and private real estate market valuations. Private markets continued to raise record amounts of capital for direct investment in real estate, while public (listed) markets continued to trade at a discount. The retail sector has felt the most pressure, although certain markets have started to rebound based on stronger fundamentals and greater access to the capital markets. This rebound has been most apparent in the US, where buyers and sellers have been more realistic about prices, in our view, and retail companies have adjusted to the changing
• | Global real estate securities had muted returns for the fiscal year on concerns of central bank monetary tightening and the possible impact of trade wars on global growth. |
• | A wide gap emerged between public and private real estate market valuations. Private markets continued to raise record amounts of capital for direct investment in real estate, while public (listed) markets continued to trade at a discount. |
• | Meanwhile, industrial real estate was highly sought after, based on changing global supply chains driven by ecommerce growth. |
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Portfolio management review | ||||
Delaware Global Real Estate Opportunities Fund |
landscape. In Europe, however, there still appears to be a wide spread between buyer and seller expectations. Thus, we believe European retail real estate has entered a difficult period, similar to what the US experienced roughly 18 months ago. This resulted in a rebound in retail real estate stocks in the US but a continued disconnect in other areas of the world.
Meanwhile, industrial real estate continued to be highly sought after, as buyers looked to take advantage of changing global supply chains driven by ecommerce growth.
Within the Fund
For the fiscal year ended Oct. 31, 2018, Delaware Global Real Estate Opportunities Fund Institutional Class shares returned +0.48%. The Fund’s Class A shares returned +0.33% at net asset value and -5.39% at maximum offer price. These figures reflect all distributions reinvested. For the same period, the Fund’s benchmark, the FTSE EPRA/NAREIT Developed Index, returned +1.23%. Complete annualized performance for Delaware Global Real Estate Opportunities Fund is shown in the table on page 4.
Individual contributors and detractors
Relative to the FTSE EPRA/NAREIT Developed Index, several notable individual performance challenges came in the US, where more than 60% of the Fund’s investments were focused as of fiscal year end.
In the healthcare area, the Fund’s large out-of-index position in Brookdale Senior Living Inc., an operator of senior care facilities, was especially detrimental. For the fiscal year, the company’s shares returned -11%, as an oversupply of senior housing facilities continued to hamper the group. At its current share price as of period end, we think Brookdale’s stock offers the most potential of any holding in the Fund. In our opinion, Brookdale’s shares are trading dramatically below the value of the real estate it owns.
Also detracting in the healthcare sector was HCP Inc., as our untimely sale of its shares held back Fund performance. Specifically, we owned shares of this benchmark component for most of the fiscal period but sold the Fund’s position in early October 2018, thus missing out on subsequent gains. Partially offsetting that impact, however, was the positive effect of owning another healthcare property stock, Welltower Inc. Other notable US detractors included Equinix Inc., a data center real estate investment trust (REIT), and SBA Communications Corp., an owner of wireless communications towers. We exited the SBA Communications position during the fiscal year.
On the positive side, the Fund benefited from not owning weak-performing benchmark component Brookfield Property REIT, which declined more than 60% during the period. The Fund’s overweight in STORE Capital Corp., a strong-performing triple-net REIT (meaning its tenants are responsible for paying ongoing expenses, such as real estate taxes and insurance), also added value. The company benefited from its ready access to attractively priced capital, which enabled it to add to its external growth. That said, the Fund’s underweight in another triple-net REIT, Realty Income Corp., detracted from results in light of the stock’s healthy gain. The Fund did not hold Realty Income for most of the period.
Outside the US, Japanese real estate developer Mitsui Fudosan Co. Ltd. (-0.9%) detracted from Fund performance. We were overweight in this lagging stock. Meanwhile, the Fund benefited from a position in Canadian apartment owner Killam Apartment Real Estate Investment Trust, which continued to surprise investors with stronger-than-expected rental growth. Spain’s Inmobiliaria Colonial Socimi S.A., a diversified property owner that benefited from a bounce-back in the Spanish economy and favorable supply and demand fundamentals, also added value as did
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Westfield Corp., an Australian mall owner that was acquired for a premium valuation by Unibail-Rodamco SE, an underperforming French firm that the Fund further benefited from not owning for most of the fiscal year.
The Fund utilized foreign currency exchange contracts to facilitate the purchase and sale of equities traded on international exchanges. The effect of these contracts on performance was immaterial.
Seeking opportunities for growth
Our management strategy remained consistent, as it does regardless of the underlying economic or market conditions in which we operate. We prioritize those areas of the REIT market that, in our opinion, have the potential to benefit from a strong fundamental backdrop for commercial real estate, and that offer what we see as attractively valued securities available for investment. We also regularly emphasize companies with the opportunity to continue to grow their cash flow and prudently raise capital.
Throughout the fiscal year, our management approach focused on REIT investments in those market areas that have demonstrated stable to accelerating internal growth. We simultaneously avoided companies experiencing dilution from equity sales or a slowdown in internal growth. We also selectively sought individual value opportunities, even as value investing has become more difficult in the current real estate environment of higher interest rates and capital costs. Following our investment approach, we pursued more opportunities in the US and Japan and found Europe and Australia less attractive, aside from certain individual investments.
The commercial real estate sector has been under pressure globally, driven primarily by concern over rising interest rates. The retail sector continued to be challenged, with ecommerce taking market share from traditional brick-and-mortar business. We believe these are valid concerns. However, the selloff in publicly traded real estate securities has created one of the larger disconnects between public and private market pricing in years. Across most property types, we see significant discounts between the former and the latter. We believe the pickup in privatization and mergers during the fiscal year supports our view that real estate securities are oversold and offer a compelling investment opportunity.
As of fiscal year end, we continue to see the US as offering the most attractive trade-off between risk and reward, reflected in the Fund’s large overweight allocation to this market throughout the fiscal year. We also see potential in certain areas of Canada, such as rental housing, and view select opportunities in Europe, notably Ireland, as favorable.
Overall, however, we remain cautious about Europe, as we believe that limited capitalization rate compression and weak rental growth could put downward pressure on valuations. In emerging markets, we are concerned about the risks associated with a rising dollar and potential trade wars – a situation that helps explain the Fund’s underweighting in Hong Kong.
Meanwhile, we continue to see Japan as posing challenges to investors. In this market, we are selective about certain areas experiencing rental growth, such as the Tokyo office sector.
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Performance summary | ||||
Delaware Global Real Estate Opportunities Fund | October 31, 2018 |
The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 800 523-1918 or visiting delawarefunds.com/performance.
Fund and benchmark performance1,2 | Average annual total returns through October 31, 2018 | |||||||||||||||
1 year | 5 years | 10 years | Lifetime | |||||||||||||
Class A (Est. Jan. 10, 2007) | ||||||||||||||||
Excluding sales charge | +0.33% | +4.16% | +8.80% | +2.01% | ||||||||||||
Including sales charge | -5.39% | +2.92% | +8.16% | +1.50% | ||||||||||||
Class C (Est. Sept. 28, 2012) | ||||||||||||||||
Excluding sales charge | -0.34% | +3.40% | n/a | +5.04% | ||||||||||||
Including sales charge | -1.33% | +3.40% | n/a | +5.04% | ||||||||||||
Class R (Est. Sept. 28, 2012) | ||||||||||||||||
Excluding sales charge | +0.04%* | +3.92% | n/a | +5.56% | ||||||||||||
Including sales charge | +0.04%* | +3.92% | n/a | +5.56% | ||||||||||||
Institutional Class (Est. Jan. 10, 2007) | ||||||||||||||||
Excluding sales charge | +0.48% | +4.40% | +9.05% | +2.25% | ||||||||||||
Including sales charge | +0.48% | +4.40% | +9.05% | +2.25% | ||||||||||||
FTSE EPRA/NAREIT Developed Index | +1.23% | +4.96% | +10.02% | +2.17%** |
*Total returns for the report period presented in the table differ from the returns in the “Financial highlights.” The total returns presented in the above table are calculated based on the net asset value (NAV) at which shareholder transactions were processed. The total returns presented in “Financial highlights” are calculated in the same manner, but also take into account certain adjustments that are necessary under US generally accepted accounting principles (US GAAP) required in the annual report.
**The benchmark lifetime return is for Institutional Class share comparison only and is calculated using the last business day in the month of the Fund’s Institutional Class inception date.
1Returns reflect the reinvestment of all distributions and are presented both with and without the applicable sales charges described below. Returns do not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares.
Expense limitations were in effect for certain classes during some or all of the periods shown in the “Fund and benchmark performance” table. Expenses for each class are listed on the “Fund expense ratios” table on page 5. Performance would have been lower had expense limitations not been in effect.
Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors. In addition, Institutional Class shares pay no distribution and service fee.
Class A shares are sold with a maximum front-end sales charge of 5.75%, and have an annual distribution and service fee of 0.25% of average daily net assets. Performance for Class A shares, excluding sales charges, assumes that no front-end sales charge applied.
Class C shares are sold with a contingent deferred sales charge of 1.00% if redeemed during the first 12 months. They are also subject to an annual distribution and service fee of 1.00% of average
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daily net assets. Performance for Class C shares, excluding sales charges, assumes either that contingent deferred sales charges did not apply or that the investment was not redeemed.
Class R shares are available only for certain retirement plan products. They are sold without a sales charge and have an annual distribution and service fee of 0.50% of average daily net assets.
Narrowly focused investments may exhibit higher volatility than investments in multiple industry sectors.
REIT investments are subject to many of the risks associated with direct real estate ownership, including changes in economic conditions, credit risk, and interest rate fluctuations.
A REIT fund’s tax status as a regulated investment company could be jeopardized if it holds real estate directly, as a result of defaults, or receives rental income from real estate holdings.
“Non-diversified” Funds may allocate more of their net assets to investments in single securities than “diversified” Funds. Resulting adverse effects may subject these Funds to greater risks and volatility.
International investments entail risks not ordinarily associated with US investments including fluctuation in currency values, differences in accounting principles, or economic or political instability in other nations.
Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility and lower trading volume.
2The Fund’s expense ratios, as described in the most recent prospectus, are disclosed in the following “Fund expense ratios” table. Delaware Management Company has agreed to reimburse certain expenses and/or waive certain fees in order to prevent total annual fund operating expenses (excluding any 12b-1 fees, acquired fund fees and expenses, taxes, interest, short sale and dividend and interest expenses, brokerage fees, certain insurance costs, and nonroutine expenses or costs, including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations (collectively, nonroutine expenses)) from exceeding 1.15% of the Fund’s average daily net assets during the period from Nov. 1, 2017 to Oct. 31, 2018.* Please see the most recent prospectus and any applicable supplement(s) for additional information on these fee waivers and/or reimbursements. Please see the “Financial highlights” section in this report for the most recent expense ratios.
Fund expense ratios | Class A | Class C | Class R | Institutional Class | ||||
Total annual operating expenses (without fee waivers) | 1.71% | 2.46% | 1.96% | 1.46% | ||||
Net expenses (including fee waivers, if any) | 1.40% | 2.15% | 1.65% | 1.15% | ||||
Type of waiver | Contractual | Contractual | Contractual | Contractual |
*The aggregate contractual waiver period covering this report is from Nov. 1, 2017 through Feb. 28, 2019.
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Performance summary | ||||
Delaware Global Real Estate Opportunities Fund
|
Performance of a $10,000 investment1
Average annual total returns from Oct. 31, 2008 through Oct. 31, 2018
For the period beginning Oct. 31, 2008 through Oct. 31, 2018 | Starting value | Ending value | ||||||||
FTSE EPRA/NAREIT Developed Index | $10,000 | $25,985 | ||||||||
Delaware Global Real Estate Opportunities Fund — Institutional Class shares | $10,000 | $23,776 | ||||||||
Delaware Global Real Estate Opportunities Fund — Class A shares | $9,425 | $21,906 |
1The “Performance of a $10,000 investment” graph assumes $10,000 invested in Institutional Class and Class A shares of the Fund on Oct. 31, 2008, and includes the effect of a 5.75% front-end sales charge (for Class A shares) and the reinvestment of all distributions. The graph does not reflect the deduction of taxes the shareholders would pay on Fund distributions or redemptions of Fund shares. Expense limitations were in effect for some or all of the periods shown. Performance would have been lower had expense limitations not been in effect. Expenses are listed in the “Fund expense ratios” table on page 5. Please note additional details on pages 4 through 7.
The graph also assumes $10,000 invested in the FTSE EPRA/NAREIT Developed Index as of Oct. 31, 2008. The FTSE EPRA/NAREIT Developed Index tracks the performance of listed real estate companies and real estate investment trusts (REITs) worldwide, based in US dollars.
Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index. Past performance is not a guarantee of future results.
Performance of other Fund classes will vary due to different charges and expenses.
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Nasdaq symbols |
CUSIPs | |||||
Class A | DGRPX | 245917653 | ||||
Class C | DLPCX | 245917646 | ||||
Class R | DLPRX | 245917638 | ||||
Institutional Class
| DGROX
| 245917620
|
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Disclosure of Fund expenses | ||||
For the six-month period from May 1, 2018 to October 31, 2018 (Unaudited) |
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period from May 1, 2018 to Oct. 31, 2018.
Actual expenses
The first section of the table shown, “Actual Fund return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The second section of the table shown, “Hypothetical 5% return,” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The Fund’s expenses shown in the table reflect fee waivers in effect. The Fund’s expenses shown in the table assume reinvestment of all dividends and distributions.
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Delaware Global Real Estate Opportunities Fund | ||||
Expense analysis of an investment of $1,000 |
| Beginning Account Value 5/1/18 | Ending Account Value 10/31/18 | Annualized Expense Ratio | Expenses Paid During Period 5/1/18 to 10/31/18* | ||||||||||||||||
Actual Fund return† | ||||||||||||||||||||
Class A | $1,000.00 | $ 995.80 | 1.40 | % | $ 7.04 | |||||||||||||||
Class C | 1,000.00 | 992.90 | 2.15 | % | 10.80 | |||||||||||||||
Class R | 1,000.00 | 995.70 | 1.65 | % | 8.30 | |||||||||||||||
Institutional Class | 1,000.00 | 997.30 | 1.15 | % | 5.79 | |||||||||||||||
Hypothetical 5% return (5% return before expenses) |
| |||||||||||||||||||
Class A | $1,000.00 | $1,018.15 | 1.40 | % | $ 7.12 | |||||||||||||||
Class C | 1,000.00 | 1,014.37 | 2.15 | % | 10.92 | |||||||||||||||
Class R | 1,000.00 | 1,016.89 | 1.65 | % | 8.39 | |||||||||||||||
Institutional Class | 1,000.00 | 1,019.41 | 1.15 | % | 5.85 |
*“Expenses Paid During Period” are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
† Because actual returns reflect only the most recent six-month period, the returns shown may differ significantly from fiscal year returns.
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Security type / country and sector allocations | ||
Delaware Global Real Estate Opportunities Fund
| As of October 31, 2018 (Unaudited)
|
Sector designations may be different than the sector designations presented in other Fund materials. The sector designations may represent the investment manager’s internal sector classifications.
Security type / country | Percentage of net assets | ||||
Common Stock by Country | 98.45 | % | |||
Australia | 2.90 | % | |||
Canada | 2.76 | % | |||
China/Hong Kong | 6.03 | % | |||
France | 0.58 | % | |||
Germany | 5.04 | % | |||
Ireland | 1.38 | % | |||
Japan | 10.51 | % | |||
Singapore | 1.39 | % | |||
Spain | 0.73 | % | |||
Sweden | 0.59 | % | |||
United Kingdom | 4.75 | % | |||
United States | 61.79 | % | |||
Short-Term Investments | 2.11 | % | |||
Total Value of Securities | 100.56 | % | |||
Liabilities Net of Receivables and Other Assets | (0.56 | %) | |||
Total Net Assets | 100.00 | % | |||
Common stock by sector | Percentage of net assets | ||||
Diversified REITs | 9.61 | % | |||
Healthcare | 5.46 | % | |||
Healthcare REITs | 6.68 | % | |||
Hotel REITs | 4.19 | % | |||
Industrial REITs | 5.34 | % | |||
Information Technology REITs | 2.68 | % | |||
Mall REITs | 4.99 | % | |||
Manufactured Housing REITs | 3.31 | % | |||
Multifamily REITs | 21.19 | % | |||
Office REITs | 12.23 | % | |||
Office/Diversified REITs | 1.38 | % | |||
Office/Industrial REIT | 1.56 | % | |||
Real Estate Operating Companies/Developer | 3.75 | % | |||
Retail REITs | 3.31 | % | |||
Self-Storage REITs | 1.84 | % | |||
Shopping Center REITs | 3.35 | % | |||
Single Tenant REITs | 4.16 | % | |||
Specialty REITs | 3.42 | % | |||
Total | 98.45 | % |
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Schedule of investments | ||||
Delaware Global Real Estate Opportunities Fund | October 31, 2018 |
Number of shares | Value (US $) | |||||||
Common Stock – 98.45%D | ||||||||
Australia – 2.90% | ||||||||
Dexus | 86,552 | $ | 625,366 | |||||
Goodman Group | 81,334 | 597,760 | ||||||
GPT Group-In Specie =† | 1,377,200 | 0 | ||||||
|
| |||||||
1,223,126 | ||||||||
|
| |||||||
Canada – 2.76% | ||||||||
Killam Apartment Real Estate Investment Trust | 79,700 | 978,958 | ||||||
RioCan Real Estate Investment Trust | 10,100 | 184,132 | ||||||
|
| |||||||
1,163,090 | ||||||||
|
| |||||||
China/Hong Kong – 6.03% | ||||||||
CK Asset Holdings | 90,000 | 585,697 | ||||||
Hongkong Land Holdings | 77,809 | 460,782 | ||||||
Link REIT | 136,500 | 1,213,089 | ||||||
Wharf Real Estate Investment | 46,000 | 285,850 | ||||||
|
| |||||||
2,545,418 | ||||||||
|
| |||||||
France – 0.58% | ||||||||
Gecina | 1,671 | 245,074 | ||||||
|
| |||||||
245,074 | ||||||||
|
| |||||||
Germany – 5.04% | ||||||||
ADO Properties 144A # | 2,434 | 143,561 | ||||||
Aroundtown | 94,254 | 781,047 | ||||||
Deutsche Wohnen | 26,319 | 1,203,836 | ||||||
|
| |||||||
2,128,444 | ||||||||
|
| |||||||
Ireland – 1.38% | ||||||||
Green REIT | 352,727 | 582,495 | ||||||
|
| |||||||
582,495 | ||||||||
|
| |||||||
Japan – 10.51% | ||||||||
Daiwa Office Investment | 144 | 879,516 | ||||||
Japan Prime Realty Investment | 48 | 171,272 | ||||||
Japan Rental Housing Investments | 936 | 734,629 | ||||||
Kenedix Office Investment | 99 | 613,497 | ||||||
Mitsui Fudosan | 38,500 | 867,107 | ||||||
Sumitomo Realty & Development | 20,800 | 714,690 | ||||||
United Urban Investment | 298 | 453,037 | ||||||
|
| |||||||
4,433,748 | ||||||||
|
| |||||||
Singapore – 1.39% | ||||||||
CapitaLand | 74,100 | 168,317 | ||||||
Mapletree Commercial Trust | 361,001 | 419,766 | ||||||
|
| |||||||
588,083 | ||||||||
|
| |||||||
Spain – 0.73% | ||||||||
Inmobiliaria Colonial Socimi | 30,575 | 306,989 | ||||||
|
| |||||||
306,989 | ||||||||
|
|
11
Table of Contents
Schedule of investments | ||||
Delaware Global Real Estate Opportunities Fund |
Number of shares | Value (US $) | |||||||
Common StockD (continued) | ||||||||
Sweden – 0.59% | ||||||||
Fabege | 19,410 | $ | 247,854 | |||||
|
| |||||||
247,854 | ||||||||
|
| |||||||
United Kingdom – 4.75% | ||||||||
Assura | 569,660 | 380,490 | ||||||
Grainger | 102,095 | 352,719 | ||||||
Great Portland Estates | 61,780 | 549,696 | ||||||
Tritax EuroBox 144A #† | 336,797 | 429,157 | ||||||
UNITE Group | 26,709 | 290,813 | ||||||
|
| |||||||
2,002,875 | ||||||||
|
| |||||||
United States – 61.79% | ||||||||
American Tower | 3,308 | 515,420 | ||||||
Americold Realty Trust | 8,903 | 220,349 | ||||||
Apartment Investment & Management Class A | 17,435 | 750,402 | ||||||
AvalonBay Communities | 5,748 | 1,008,084 | ||||||
Boston Properties | 4,768 | 575,784 | ||||||
Brookdale Senior Living † | 258,026 | 2,304,172 | ||||||
Camden Property Trust | 10,209 | 921,566 | ||||||
Columbia Property Trust | 34,055 | 764,535 | ||||||
CubeSmart | 12,737 | 369,118 | ||||||
Cushman & Wakefield † | 26,958 | 438,337 | ||||||
Digital Realty Trust | 2,843 | 293,568 | ||||||
Duke Realty | 23,888 | 658,592 | ||||||
Equinix | 855 | 323,823 | ||||||
Equity LifeStyle Properties | 5,931 | 561,606 | ||||||
Equity Residential | 19,828 | 1,288,027 | ||||||
Essex Property Trust | 817 | 204,887 | ||||||
Extra Space Storage | 4,531 | 408,062 | ||||||
Host Hotels & Resorts | 19,422 | 371,154 | ||||||
Invitation Homes | 26,318 | 575,838 | ||||||
Kimco Realty | 23,238 | 373,899 | ||||||
Liberty Property Trust | 9,817 | 411,038 | ||||||
Macerich | 1,683 | 86,876 | ||||||
MGM Growth Properties Class A | 13,129 | 371,419 | ||||||
National Retail Properties | 15,077 | 704,850 | ||||||
Omega Healthcare Investors | 14,585 | 486,410 | ||||||
Park Hotels & Resorts | 24,430 | 710,180 | ||||||
Prologis | 12,534 | 808,067 | ||||||
Regency Centers | 12,413 | 786,488 | ||||||
Rexford Industrial Realty | 19,744 | 625,292 | ||||||
RLJ Lodging Trust | 16,157 | 314,092 | ||||||
Sabra Health Care REIT | 15,250 | 330,164 |
12
Table of Contents
Number of shares | Value (US $) | |||||||
Common StockD (continued) | ||||||||
United States (continued) | ||||||||
Simon Property Group | 10,993 | $ | 2,017,435 | |||||
SITE Centers | 20,198 | 251,061 | ||||||
SL Green Realty | 4,882 | 445,531 | ||||||
STORE Capital | 36,124 | 1,048,680 | ||||||
Sun Communities | 8,320 | 835,910 | ||||||
UDR | 20,881 | 818,326 | ||||||
Ventas | 4,832 | 280,449 | ||||||
Vornado Realty Trust | 6,918 | 470,977 | ||||||
Welltower | 20,319 | 1,342,476 | ||||||
|
| |||||||
26,072,944 | ||||||||
|
| |||||||
Total Common Stock (cost $41,450,866) | 41,540,140 | |||||||
|
| |||||||
Principal amount° | ||||||||
Short-Term Investments – 2.11% | ||||||||
Discount Note – 0.32%≠ | ||||||||
Federal Home Loan Bank 2.00% 11/1/18 | 134,832 | 134,832 | ||||||
|
| |||||||
134,832 | ||||||||
|
| |||||||
Repurchase Agreements – 1.79% | ||||||||
Bank of America Merrill Lynch | 103,717 | 103,717 | ||||||
Bank of Montreal | 285,223 | 285,223 | ||||||
BNP Paribas | 366,236 | 366,236 | ||||||
|
| |||||||
755,176 | ||||||||
|
| |||||||
Total Short-Term Investments (cost $890,008) | 890,008 | |||||||
|
| |||||||
Total Value of Securities – 100.56% | $ | 42,430,148 | ||||||
|
|
# | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At Oct. 31, 2018, the aggregate value of Rule 144A securities was $572,718, which represents 1.36% of the Fund’s net assets. See Note 11 in “Notes to financial statements.” |
13
Table of Contents
Schedule of investments | ||||
Delaware Global Real Estate Opportunities Fund |
= | The value of this security was determined using significant unobservable inputs and is reported as a Level 3 security in the disclosure table located in Note 3 in “Notes to financial statements.” |
≠ | The rate shown is the effective yield at the time of purchase. |
° | Principal amount shown is stated in USD unless noted that the security is denominated in another currency. |
D | Securities have been classified by country of origin. Aggregate classification by business sector has been presented on page 10 in “Security type / country and sector allocations.” |
† | Non-income producing security. |
The following foreign currency exchange contracts were outstanding at Oct. 31, 2018:1
Foreign Currency Exchange Contracts
Contracts to | Settlement | Unrealized | Unrealized | |||||||||||||||||||||
Counterparty | Receive (Deliver) | In Exchange For | Date | Appreciation | Depreciation | |||||||||||||||||||
BNYM | AUD | 40,495 | USD | (28,761 | ) | 11/1/18 | $ | — | $ | (85 | ) | |||||||||||||
BNYM | EUR | (30,006 | ) | USD | 34,060 | 11/1/18 | 71 | — | ||||||||||||||||
BNYM | EUR | (104,777 | ) | USD | 118,423 | 11/2/18 | — | (271 | ) | |||||||||||||||
BNYM | GBP | (33,808 | ) | USD | 43,168 | 11/2/18 | — | (49 | ) | |||||||||||||||
BNYM | HKD | 400,647 | USD | (51,060 | ) | 11/1/18 | 31 | — | ||||||||||||||||
BNYM | HKD | (406,173 | ) | USD | 51,774 | 11/2/18 | — | (24 | ) | |||||||||||||||
BNYM | JPY | 11,296,329 | USD | (100,179 | ) | 11/2/18 | — | (54 | ) | |||||||||||||||
BNYM | JPY | (6,195,510 | ) | USD | 54,735 | 11/5/18 | — | (191 | ) | |||||||||||||||
BNYM | SGD | 18,929 | USD | (13,674 | ) | 11/2/18 | — | (8 | ) | |||||||||||||||
|
|
|
| |||||||||||||||||||||
Total Foreign Currency Exchange Contracts |
| $ | 102 | $ | (682 | ) | ||||||||||||||||||
|
|
|
|
The use of foreign currency exchange contracts involves elements of market risk and risks in excess of the amounts disclosed in the financial statements. The foreign currency exchange contracts presented above represent the Fund’s total exposure in such contracts, whereas only the net unrealized appreciation (depreciation) is reflected in the Fund’s net assets.
1See Note 8 in “Notes to financial statements.
Summary of abbreviations: |
AUD – Australian Dollar |
BNYM – BNY Mellon |
EUR – European Monetary Unit |
GBP – British Pound Sterling |
HKD – Hong Kong Dollar |
JPY – Japanese Yen |
REIT – Real Estate Investment Trust |
SGD – Singapore Dollar |
USD – US Dollar |
See accompanying notes, which are an integral part of the financial statements.
14
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Table of Contents
Statement of assets and liabilities | ||||
Delaware Global Real Estate Opportunities Fund | October 31, 2018 |
Assets: | ||||
Investments, at value1 | $ | 42,430,148 | ||
Cash | 11,287 | |||
Foreign currencies, at value2 | 6,950 | |||
Receivable for securities sold | 547,322 | |||
Dividends and interest receivable | 61,043 | |||
Foreign tax reclaims receivable | 51,640 | |||
Receivable for fund shares sold | 26,110 | |||
Unrealized appreciation of foreign currency exchange contracts | 102 | |||
|
| |||
Total assets | 43,134,602 | |||
|
| |||
Liabilities: | ||||
Payable for securities purchased | 523,983 | |||
Payable for fund shares redeemed | 328,112 | |||
Investment management fees payable to affiliates | 40,231 | |||
Other accrued expenses | 24,486 | |||
Custody fees payable | 12,393 | |||
Administration fees payable | 8,528 | |||
Distribution fees payable to affiliates | 2,344 | |||
Unrealized depreciation of foreign currency exchange contracts | 682 | |||
Accounting and administration expenses payable to affiliates | 477 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 360 | |||
Trustees’ fees and expenses payable | 104 | |||
Legal fees payable to affiliates | 67 | |||
Reports and statements to shareholders expenses payable to affiliates | 34 | |||
|
| |||
Total liabilities | 941,801 | |||
|
| |||
Total Net Assets | $ | 42,192,801 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 44,782,241 | ||
Total distributable earnings (loss) | (2,589,440 | ) | ||
|
| |||
Total Net Assets | $ | 42,192,801 | ||
|
|
16
Table of Contents
Net Asset Value | ||||
Class A: | ||||
Net assets | $ | 3,759,153 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 515,487 | |||
Net asset value per share | $ | 7.29 | ||
Sales charge | 5.75 | % | ||
Offering price per share, equal to net asset value per share / (1 — sales charge) | $ | 7.73 | ||
Class C: | ||||
Net assets | $ | 1,664,289 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 228,426 | |||
Net asset value per share | $ | 7.29 | ||
Class R: | ||||
Net assets | $ | 73,792 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 10,124 | |||
Net asset value per share | $ | 7.29 | ||
Institutional Class: | ||||
Net assets | $ | 36,695,567 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 5,037,984 | |||
Net asset value per share | $ | 7.28 | ||
| ||||
1Investments, at cost | $ | 42,340,874 | ||
2Foreign currencies, at cost | 7,535 |
See accompanying notes, which are an integral part of the financial statements.
17
Table of Contents
Statement of operations | ||||
Delaware Global Real Estate Opportunities Fund | Year ended October 31, 2018 |
Investment Income: | ||||
Dividends | $ | 1,547,046 | ||
Interest | 20,243 | |||
Foreign tax withheld | (43,772 | ) | ||
|
| |||
1,523,517 | ||||
|
| |||
Expenses: | ||||
Management fees | 498,598 | |||
Distribution expenses — Class A | 13,855 | |||
Distribution expenses — Class C | 21,245 | |||
Distribution expenses — Class R | 571 | |||
Registration fees | 63,093 | |||
Dividend disbursing and transfer agent fees and expenses | 54,171 | |||
Audit and tax fees | 42,493 | |||
Accounting and administration expenses | 41,300 | |||
Custodian fees | 32,560 | |||
Reports and statements to shareholders expenses | 27,498 | |||
Legal fees | 2,893 | |||
Trustee’s fees and expenses | 2,404 | |||
Other | 18,451 | |||
|
| |||
819,132 | ||||
|
| |||
Less expense waived | (202,918 | ) | ||
Less expenses paid indirectly | (152 | ) | ||
|
| |||
Total operating expenses | 616,062 | |||
|
| |||
Net Investment Income | 907,455 | |||
|
| |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (228,405 | ) | ||
Foreign currencies | (26,003 | ) | ||
Foreign currency exchange contracts | 10,683 | |||
|
| |||
Net realized loss | (243,725 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) of: | ||||
Investments | (251,442 | ) | ||
Foreign currencies | (1,110 | ) | ||
Foreign currency exchange contracts | (401 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) | (252,953 | ) | ||
|
| |||
Net Realized and Unrealized Loss | (496,678 | ) | ||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 410,777 | ||
|
|
See accompanying notes, which are an integral part of the financial statements.
18
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Table of Contents
Statements of changes in net assets | ||||
Delaware Global Real Estate Opportunities Fund |
Year ended | ||||||||
10/31/18 | 10/31/17 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 907,455 | $ | 923,260 | ||||
Net realized loss | (243,725 | ) | (119,736 | ) | ||||
Net change in unrealized appreciation (depreciation) | (252,953 | ) | 2,442,774 | |||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 410,777 | 3,246,298 | ||||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Distributable earnings*: | ||||||||
Class A | (130,965 | ) | (565,264 | ) | ||||
Class C | (33,648 | ) | (51,576 | ) | ||||
Class R | (2,355 | ) | (4,563 | ) | ||||
Institutional Class | (1,137,174 | ) | (1,200,930 | ) | ||||
|
|
|
| |||||
(1,304,142 | ) | (1,822,333 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Class A | 1,441,213 | 2,914,901 | ||||||
Class C | 203,347 | 398,458 | ||||||
Class R | 30,695 | 32,278 | ||||||
Institutional Class | 17,029,982 | 46,334,816 | ||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | 125,479 | 542,235 | ||||||
Class C | 32,999 | 49,206 | ||||||
Class R | 2,355 | 4,563 | ||||||
Institutional Class | 1,005,015 | 916,836 | ||||||
|
|
|
| |||||
19,871,085 | 51,193,293 | |||||||
|
|
|
| |||||
Cost of shares redeemed: | ||||||||
Class A | (4,402,778 | ) | (25,368,284 | ) | ||||
Class C | (1,002,489 | ) | (867,806 | ) | ||||
Class R | (94,030 | ) | (103,222 | ) | ||||
Institutional Class | (30,797,364 | ) | (33,470,957 | ) | ||||
|
|
|
| |||||
(36,296,661 | ) | (59,810,269 | ) | |||||
|
|
|
| |||||
Decrease in net assets derived from capital share transactions | (16,425,576 | ) | (8,616,976 | ) | ||||
|
|
|
| |||||
Net Decrease in Net Assets | (17,318,941 | ) | (7,193,011 | ) |
20
Table of Contents
Year ended | ||||||||
10/31/18 | 10/31/17 | |||||||
Net Assets: | ||||||||
Beginning of year | $ | 59,511,742 | $ | 66,704,753 | ||||
|
|
|
| |||||
End of year1 | $ | 42,192,801 | $ | 59,511,742 | ||||
|
|
|
|
1 | Net Assets – End of year includes undistributed net investment income of $185,040 in 2017. The Securities and Exchange Commission eliminated the requirement to disclose undistributed (distributions in excess of) net investment income in 2018. |
* | Effective Oct. 31, 2018, the Fund has adopted amendments to Regulation S-X. For the year ended Oct. 31, 2017, the dividends and distributions to shareholders were as follows: |
Institutional | ||||||||||||||||
Class A | Class C | Class R | Class | |||||||||||||
Dividends from net investment income | $ | (565,264 | ) | $ | (51,576 | ) | $ | (4,563 | ) | $ | (1,200,930 | ) |
See accompanying notes, which are an integral part of the financial statements.
21
Table of Contents
Financial highlights | ||||
Delaware Global Real Estate Opportunities Fund Class A |
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income1 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Total dividends and distributions |
Net asset value, end of period |
Total return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
1 | The average shares outstanding method has been applied for per share information. |
2 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
22
Table of Contents
Year ended | ||||||||||||||||||||
10/31/18 | 10/31/17 | 10/31/16 | 10/31/15 | 10/31/14 | ||||||||||||||||
$ | 7.44 | $ | 7.31 | $ | 7.22 | $ | 7.20 | $ | 6.65 | |||||||||||
| ||||||||||||||||||||
0.12 | 0.09 | 0.07 | 0.08 | 0.12 | ||||||||||||||||
(0.09 | ) | 0.24 | 0.09 | 0.07 | 0.64 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
0.03 | 0.33 | 0.16 | 0.15 | 0.76 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| ||||||||||||||||||||
(0.18 | ) | (0.20 | ) | (0.07 | ) | (0.13 | ) | (0.21 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(0.18 | ) | (0.20 | ) | (0.07 | ) | (0.13 | ) | (0.21 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
$ | 7.29 | $ | 7.44 | $ | 7.31 | $ | 7.22 | $ | 7.20 | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
0.33% | 4.69% | 2.20% | 2.16% | 11.80% | ||||||||||||||||
| ||||||||||||||||||||
$ | 3,759 | $ | 6,654 | $ | 28,247 | $ | 8,481 | $ | 6,571 | |||||||||||
1.40% | 1.40% | 1.40% | 1.41% | 1.40% | ||||||||||||||||
1.80% | 1.71% | 1.72% | 1.73% | 1.78% | ||||||||||||||||
1.62% | 1.28% | 0.98% | 1.07% | 1.72% | ||||||||||||||||
1.22% | 0.97% | 0.66% | 0.75% | 1.34% | ||||||||||||||||
187% | 217% | 193% | 116% | 107% |
23
Table of Contents
Financial highlights | ||||
Delaware Global Real Estate Opportunities Fund Class C |
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income1 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Total dividends and distributions |
Net asset value, end of period |
Total return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income (loss) to average net assets prior to fees waived |
Portfolio turnover |
1 | The average shares outstanding method has been applied for per share information. |
2 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
24
Table of Contents
Year ended | ||||||||||||||||||||
10/31/18 | 10/31/17 | 10/31/16 | 10/31/15 | 10/31/14 | ||||||||||||||||
$ | 7.43 | $ | 7.28 | $ | 7.21 | $ | 7.19 | $ | 6.64 | |||||||||||
| ||||||||||||||||||||
0.07 | 0.04 | 0.02 | 0.02 | 0.07 | ||||||||||||||||
(0.09 | ) | 0.25 | 0.07 | 0.08 | 0.63 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(0.02 | ) | 0.29 | 0.09 | 0.10 | 0.70 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| ||||||||||||||||||||
(0.12 | ) | (0.14 | ) | (0.02 | ) | (0.08 | ) | (0.15 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(0.12 | ) | (0.14 | ) | (0.02 | ) | (0.08 | ) | (0.15 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
$ | 7.29 | $ | 7.43 | $ | 7.28 | $ | 7.21 | $ | 7.19 | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(0.34% | ) | 4.05% | 1.24% | 1.41% | 11.06% | |||||||||||||||
| ||||||||||||||||||||
$ | 1,664 | $ | 2,469 | $ | 2,838 | $ | 2,850 | $ | 2,119 | |||||||||||
2.15% | 2.15% | 2.15% | 2.16% | 2.15% | ||||||||||||||||
2.55% | 2.46% | 2.47% | 2.48% | 2.53% | ||||||||||||||||
0.87% | 0.53% | 0.23% | 0.32% | 0.97% | ||||||||||||||||
0.47% | 0.22% | (0.09% | ) | 0.00% | 0.59% | |||||||||||||||
187% | 217% | 193% | 116% | 107% |
25
Table of Contents
Financial highlights | ||||
Delaware Global Real Estate Opportunities Fund Class R |
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income1 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Total dividends and distributions |
Net asset value, end of period |
Total return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
1 | The average shares outstanding method has been applied for per share information. |
2 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflects waivers by the manager and/or distributor. Performance would have been lower had the waivers not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
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Year ended | ||||||||||||||||||||
10/31/18 | 10/31/17 | 10/31/16 | 10/31/15 | 10/31/14 | ||||||||||||||||
$ | 7.43 | $ | 7.30 | $ | 7.22 | $ | 7.19 | $ | 6.64 | |||||||||||
| ||||||||||||||||||||
0.10 | 0.08 | 0.05 | 0.06 | 0.10 | ||||||||||||||||
(0.08 | ) | 0.23 | 0.08 | 0.09 | 0.64 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
0.02 | 0.31 | 0.13 | 0.15 | 0.74 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| ||||||||||||||||||||
(0.16 | ) | (0.18 | ) | (0.05 | ) | (0.12 | ) | (0.19 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(0.16 | ) | (0.18 | ) | (0.05 | ) | (0.12 | ) | (0.19 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
$ | 7.29 | $ | 7.43 | $ | 7.30 | $ | 7.22 | $ | 7.19 | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
0.17% | 4.42% | 1.84% | 2.03% | 11.48% | ||||||||||||||||
| ||||||||||||||||||||
$ | 74 | $ | 138 | $ | 201 | $ | 286 | $ | 121 | |||||||||||
1.65% | 1.65% | 1.65% | 1.66% | 1.65% | ||||||||||||||||
2.05% | 1.96% | 1.97% | 1.98% | 2.03% | ||||||||||||||||
1.37% | 1.03% | 0.73% | 0.82% | 1.47% | ||||||||||||||||
0.97% | 0.72% | 0.41% | 0.50% | 1.09% | ||||||||||||||||
187% | 217% | 193% | 116% | 107% |
27
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Financial highlights | ||||
Delaware Global Real Estate Opportunities Fund Institutional Class |
Selected data for each share of the Fund outstanding throughout each period were as follows:
Net asset value, beginning of period |
Income (loss) from investment operations: |
Net investment income1 |
Net realized and unrealized gain (loss) |
Total from investment operations |
Less dividends and distributions from: |
Net investment income |
Total dividends and distributions |
Net asset value, end of period |
Total return2 |
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
1 | The average shares outstanding method has been applied for per share information. |
2 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
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Year ended | ||||||||||||||||||||
10/31/18 | 10/31/17 | 10/31/16 | 10/31/15 | 10/31/14 | ||||||||||||||||
$ | 7.44 | $ | 7.30 | $ | 7.22 | $ | 7.19 | $ | 6.65 | |||||||||||
| ||||||||||||||||||||
0.14 | 0.11 | 0.09 | 0.10 | 0.13 | ||||||||||||||||
(0.10 | ) | 0.25 | 0.08 | 0.08 | 0.63 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
0.04 | 0.36 | 0.17 | 0.18 | 0.76 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| ||||||||||||||||||||
(0.20 | ) | (0.22 | ) | (0.09 | ) | (0.15 | ) | (0.22 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(0.20 | ) | (0.22 | ) | (0.09 | ) | (0.15 | ) | (0.22 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
$ | 7.28 | $ | 7.44 | $ | 7.30 | $ | 7.22 | $ | 7.19 | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
0.48% | 5.11% | 2.32% | 2.55% | 11.93% | ||||||||||||||||
| ||||||||||||||||||||
$ | 36,696 | $ | 50,251 | $ | 35,419 | $ | 26,182 | $ | 44,999 | |||||||||||
1.15% | 1.15% | 1.15% | 1.16% | 1.15% | ||||||||||||||||
1.55% | 1.46% | 1.47% | 1.48% | 1.53% | ||||||||||||||||
1.87% | 1.53% | 1.23% | 1.32% | 1.97% | ||||||||||||||||
1.47% | 1.22% | 0.91% | 1.00% | 1.59% | ||||||||||||||||
187% | 217% | 193% | 116% | 107% |
29
Table of Contents
Notes to financial statements | ||||
Delaware Global Real Estate Opportunities Fund | October 31, 2018 |
Delaware Group® Adviser Funds (Trust) is organized as a Delaware statutory trust and offers three series: Delaware Diversified Income Fund, Delaware Global Real Estate Opportunities Fund, and Delaware U.S. Growth Fund. These financial statements and related notes pertain to Delaware Global Real Estate Opportunities Fund (Fund). The Trust is an open-end investment company. The Fund is considered non-diversified under the Investment Company Act of 1940, as amended (1940 Act), and offers Class A, Class C, Class R, and Institutional Class shares. Class A shares are sold with a maximum front-end sales charge of 5.75%. Class A share purchases of $1,000,000 or more will incur a contingent deferred sales charge (CDSC) instead of a front-end sales charge of 1.00%, which will be incurred if redeemed during the first year and 0.50% during the second year, provided that Delaware Distributors, L.P. (DDLP) paid a financial advisor a commission on the purchase of those shares. Class C shares are sold with a CDSC of 1.00%, which will be incurred if redeemed during the first 12 months. Class R and Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors.
The investment objective of the Fund is to seek maximum long-term total return through a combination of current income and capital appreciation.
1. Significant Accounting Policies
The Fund is an investment company and follows accounting and reporting guidance under Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services – Investment Companies. The following accounting policies are in accordance with US generally accepted accounting principles (US GAAP) and are consistently followed by the Funds.
Security Valuation — Equity securities, except those traded on the Nasdaq Stock Market LLC (Nasdaq), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange on the valuation date. Equity securities traded on the Nasdaq are valued in accordance with the Nasdaq Official Closing Price, which may not be the last sales price. If, on a particular day, an equity security does not trade, the mean between the bid and ask prices will be used, which approximates fair value. Equity securities listed on a foreign exchange are normally valued at the last quoted sales price on the valuation date. US government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. Foreign currency exchange contracts are valued at the mean between the bid and ask prices, which approximates fair value. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available. Generally, other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Trust’s Board of Trustees (Board). In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures or suspension of trading in a security. The Fund may use fair value pricing more frequently for securities traded primarily in non-US markets because, among other things, most foreign markets close well before the Fund values its securities, generally as of 4:00pm Eastern time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, government actions or pronouncements, aftermarket trading, or news events may have occurred in the interim. Whenever such
30
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a significant event occurs, the Fund may value foreign securities using fair value prices based on third-party vendor modeling tools (international fair value pricing). Restricted securities are valued at fair value using methods approved by the Board.
Federal and Foreign Income Taxes — No provision for federal income taxes has been made as the Fund intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Fund evaluates tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year. Management has analyzed the Fund’s tax positions taken or expected to be taken on the Fund’s federal income tax returns through the year ended Oct. 31, 2018 and for all open tax years (years ended Oct. 31, 2015–Oct. 31, 2017), and has concluded that no provision for federal income tax is required in the Fund’s financial statements. If applicable, the Fund recognizes interest accrued on unrecognized tax benefits in interest expense and penalties in other expenses on the “Statement of operations.” During the year ended Oct. 31, 2018, the Fund did not incur any interest or tax penalties. In regard to foreign taxes only, the Fund has open tax years in certain foreign countries in which it invests that may date back to the inception of the Fund.
Class Accounting — Investment income, common expenses, and realized and unrealized gain (loss) on investments are allocated to the various classes of the Fund on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class.
Repurchase Agreements — The Fund may purchase certain US government securities subject to the counterparty’s agreement to repurchase them at an agreed upon date and price. The counterparty will be required on a daily basis to maintain the value of the collateral subject to the agreement at not less than the repurchase price (including accrued interest). The agreements are conditioned upon the collateral being deposited under the Federal Reserve book-entry system with the Fund’s custodian or a third-party sub-custodian. In the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings. All open repurchase agreements as of the date of this report were entered into on Oct. 31, 2018, and matured on the next business day.
Foreign Currency Transactions — Transactions denominated in foreign currencies are recorded at the prevailing exchange rates on the valuation date in accordance with the Fund’s prospectus. The value of all assets and liabilities denominated in foreign currencies is translated daily into US dollars at the exchange rate of such currencies against the US dollar. Transaction gains or losses resulting from changes in exchange rates during the reporting period or upon settlement of the foreign currency transaction are reported in operations for the current period. The Fund generally does not bifurcate that portion of realized gains and losses on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices. These gains and losses are included on the “Statement of operations” under “Net realized and unrealized gain (loss) on investments.” The Fund reports certain foreign currency related transactions as components of realized gains (losses) for financial reporting purposes, whereas such components are treated as ordinary income (loss) for federal income tax purposes.
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Notes to financial statements | ||||
Delaware Global Real Estate Opportunities Fund |
1. Significant Accounting Policies (continued)
Use of Estimates — The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material.
Other — Expenses directly attributable to the Fund are charged directly to the Fund. Other expenses common to various funds within the Delaware Funds® by Macquarie (Delaware Funds) are generally allocated among such funds on the basis of average net assets. Management fees and certain other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Discounts and premiums on debt securities are accreted or amortized to interest income, respectively, over the lives of the respective securities using the effective interest method. Distributions received from investments in real estate investment trusts (REITs) are recorded as dividend income on the ex-dividend date, subject to reclassification upon notice of the character of such distributions by the issuer. The financial statements reflect an estimate of the reclassification of the distribution character. Foreign dividends are also recorded on the ex-dividend date or as soon after the ex-dividend date that the Fund is aware of such dividends, net of all tax withholdings, a portion of which may be reclaimable. Withholding taxes and reclaims on foreign dividends have been recorded in accordance with the Fund’s understanding of the applicable country’s tax rules and rates. The Fund declares and pays dividends from net investment income quarterly and distributions from net realized gain on investments, if any, annually. The Fund may distribute more frequently, if necessary for tax purposes. Dividends and distributions, if any, are recorded on the ex-dividend date.
The Fund receives earnings credits from its custodian when positive cash balances are maintained, which may be used to offset custody fees. The expense paid under this arrangement is included on the “Statement of operations” under “Custodian fees” with the corresponding expense offset shown under “Less expense paid indirectly.” For the year ended Oct. 31, 2018, the Fund earned $27 under this agreement.
The Fund receives earnings credits from its transfer agent when positive cash balances are maintained, which may be used to offset transfer agent fees. If the amount earned is greater than $1, the expense paid under this arrangement is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses” with the corresponding expense offset shown under “Less expense paid indirectly.” For the year ended Oct. 31, 2018, the Fund earned $125 under this arrangement.
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates
In accordance with the terms of its investment management agreement, the Fund pays Delaware Management Company (DMC), a series of Macquarie Investment Management Business Trust and the investment manager, an annual fee which is calculated daily and paid monthly at the rate of 0.99% on
32
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the first $100 million of the average daily net assets of the Fund, 0.90% on the next $150 million, and 0.80% on average daily net assets in excess of $250 million.
DMC has contractually agreed to waive all or a portion, if any, of its investment advisory fees and/or pay/reimburse the Fund to the extent necessary to limit annual operating expenses (excluding any distribution and service (12b-1) fees, acquired funds fees and expenses, taxes, interest, short sale and dividend interest expenses, brokerage fees, certain insurance costs, and nonroutine expenses or costs, including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations (collectively nonroutine expenses)) do not exceed 1.15% of the Fund’s average daily net assets from Nov. 1, 2017 through Oct. 31, 2018.* These waivers and reimbursements may only be terminated by agreement of DMC and the Fund. The waivers and reimbursements are accrued daily and received monthly.
Delaware Investments Fund Services Company (DIFSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Fund. For these services, DIFSC’s fees are calculated daily and paid monthly based on the aggregate daily net assets of all funds within the Delaware Funds at the following annual rate: 0.00475% of the first $35 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $45 billion (Total Fee). Each fund in the Delaware Funds pays a minimum of $4,000, which, in aggregate, is subtracted from the Total Fee. Each fund in the Delaware Funds then pays its portion of the remainder of the Total Fee on a relative net asset value (NAV) basis. For the year ended Oct. 31, 2018, the Fund was charged $5,901 for these services. This amount is included on the “Statement of operations” under “Accounting and administration expenses.”
DIFSC is also the transfer agent and dividend disbursing agent of the Fund. For these services, DIFSC’s fees were calculated daily and paid monthly based on the aggregate daily net assets of the retail funds within the Delaware Funds from Nov. 1, 2017 through June 30, 2018 at the following annual rate: 0.025% of the first $20 billion; 0.020% of the next $5 billion; 0.015% of the next $5 billion; and 0.013% of average daily net assets in excess of $30 billion. Effective July 1, 2018, each Fund as well as the other Delaware Funds entered into an amendment to the DIFSC agreement. Under the amendment to the DIFSC agreement, DIFSC’s fees are calculated daily and paid monthly based on the aggregate daily net assets of the retail funds within the Delaware Funds at the following annual rate: 0.014% of the first $20 billion; 0.011% of the next $5 billion; 0.007% of the next $5 billion; 0.005% of the next $20 billion; and 0.0025% of average daily net assets in excess of $50 billion. The fees payable to DIFSC under the service agreement described above are allocated among all retail funds in the Delaware Funds on a relative NAV basis. This amount is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.” For the year ended Oct. 31, 2018, the Fund was charged $8,361 for these services. Pursuant to a sub-transfer agency agreement between DIFSC and BNY Mellon Investment Servicing (US) Inc. (BNYMIS), BNYMIS provides certain sub-transfer agency services to the Fund. Sub-transfer agency fees are paid by the Fund and are also included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.”
Pursuant to a distribution agreement and distribution plan, the Fund pays DDLP, the distributor and an affiliate of DMC, an annual distribution and service fee (12b-1) fee of 0.25% of the average daily net assets of the Class A shares, 1.00% of the average daily net assets of the Class C shares, and 0.50% of
33
Table of Contents
Notes to financial statements | ||||
Delaware Global Real Estate Opportunities Fund |
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates (continued)
the average daily net assets of the Class R shares. The fees are calculated daily and paid monthly. Institutional Class shares pay no 12b-1 fee.
As provided in the investment management agreement, the Fund bears a portion of the cost of certain resources shared with DMC, including the cost of internal personnel of DMC and/or its affiliates that provide legal, tax, and regulatory reporting services to the Fund. For the year ended Oct. 31, 2018, the Fund was charged $1,421 for internal legal, tax, and regulatory reporting services provided by DMC and/ or its affiliates’ employees. This amount is included on the “Statement of operations” under “Legal fees.”
For the year ended Oct. 31, 2018, DDLP earned $1,050 for commissions on sales of the Fund’s Class A shares. For the year ended Oct. 31, 2018, DDLP received gross CDSC commissions of $236 on redemptions of the Fund’s Class C shares and these commissions were entirely used to offset upfront commissions previously paid by DDLP to broker/dealers on sales of those shares.
Trustees’ fees include expenses accrued by the Fund for each Trustee’s retainer and meeting fees. Certain officers of DMC, DIFSC, and DDLP are officers and/or Trustees of the Trust. These officers and Trustees are paid no compensation by the Fund.
* The aggregate contractual waiver period covering this report is from Nov. 1, 2017 through Feb. 28, 2019.
3. Investments
For the year ended Oct. 31, 2018, the Fund made purchases and sales of investment securities other than short-term investments as follows:
Purchases | $ | 92,082,896 | ||
Sales | 104,481,851 |
The tax cost of investments includes adjustments to net unrealized appreciation (depreciation) which may not necessarily be final tax cost basis adjustments, but approximate the tax basis unrealized gains and losses that may be realized and distributed to shareholders. At Oct. 31, 2018, the cost and unrealized appreciation (depreciation) of investments and derivatives for federal income tax purposes for the Fund were as follows:
Cost of investments and derivatives | $ | 44,361,275 | ||
|
| |||
Aggregate unrealized appreciation of investments and derivatives | $ | 1,303,000 | ||
Aggregate unrealized depreciation of investments and derivatives | (3,234,707 | ) | ||
|
| |||
Net unrealized depreciation of investments and derivatives | $ | (1,931,707 | ) | |
|
|
US GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. A three-level hierarchy for fair value measurements has been established based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the
34
Table of Contents
asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available under the circumstances. The Fund’s investment in its entirety is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-level hierarchy of inputs is summarized below.
Level 1 – | Inputs are quoted prices in active markets for identical investments. (Examples: equity securities, open-end investment companies, futures contracts, exchange-traded options contracts) | |
Level 2 – | Other observable inputs, including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, and default rates) or other market-corroborated inputs. (Examples: debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities) | |
Level 3 – | Significant unobservable inputs, including the Fund’s own assumptions used to determine the fair value of investments. (Examples: broker-quoted securities, fair valued securities) |
Level 3 investments are valued using significant unobservable inputs. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Valuations may also be based upon current market prices of securities that are comparable in coupon, rating, maturity, and industry. The derived value of a Level 3 investment may not represent the value which is received upon disposition and this could impact the results of operations.
35
Table of Contents
Notes to financial statements | ||||
Delaware Global Real Estate Opportunities Fund |
3. Investments (continued)
The following table summarizes the valuation of the Fund’s investments by fair value hierarchy levels as of Oct. 31, 2018:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Securities | ||||||||||||||||
Assets: | ||||||||||||||||
Common Stock | ||||||||||||||||
Australia | $ | — | $ | 1,223,126 | $ | — | $ | 1,223,126 | ||||||||
Canada | 1,163,090 | — | — | 1,163,090 | ||||||||||||
China/Hong Kong | — | 2,545,418 | — | 2,545,418 | ||||||||||||
France | — | 245,074 | — | 245,074 | ||||||||||||
Germany | — | 2,128,444 | — | 2,128,444 | ||||||||||||
Ireland | 582,495 | — | — | 582,495 | ||||||||||||
Japan | — | 4,433,748 | — | 4,433,748 | ||||||||||||
Singapore | — | 588,083 | — | 588,083 | ||||||||||||
Spain | — | 306,989 | — | 306,989 | ||||||||||||
Sweden | — | 247,854 | — | 247,854 | ||||||||||||
United Kingdom | 429,157 | 1,573,718 | — | 2,002,875 | ||||||||||||
United States | 26,072,944 | — | — | 26,072,944 | ||||||||||||
Short-Term Investments | — | 890,008 | — | 890,008 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Value of Securities | $ | 28,247,686 | $ | 14,182,462 | $ | — | $ | 42,430,148 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Derivatives:* | ||||||||||||||||
Assets: | ||||||||||||||||
Foreign Currency Exchange Contracts | $ | — | $ | 102 | $ | — | $ | 102 | ||||||||
Liabilities: | ||||||||||||||||
Foreign Currency Exchange Contracts | $ | — | $ | (682 | ) | $ | — | $ | (682 | ) |
The security that has been valued at zero on the “Schedule of investments” is considered to be Level 3 investment in this table.
*Foreign currency exchange contracts are valued at the unrealized appreciation (depreciation) on the instrument at the year end.
During the year ended Oct. 31, 2018, there were no transfers between Level 1 investments, Level 2 investments, or Level 3 investments that had a significant impact to the Fund. This does not include transfers between Level 1 investments and Level 2 investments due to the Fund utilizing international fair value pricing during the year. In accordance with the fair valuation procedures described in Note 1, international fair value pricing of securities in the Fund occurs when market volatility exceeds an established rolling threshold. If the threshold is exceeded on a given date, then prices of international securities (those that traded on exchanges that close at a different time than the time that the Fund’s NAV is determined) are established using a separate pricing feed from a third-party vendor designed to establish a price for each such security as of the time that the Fund’s NAV is determined. Further, international fair value pricing uses other observable market-based inputs in place of the closing
36
Table of Contents
exchange price due to the events occurring after the close of the exchange or market on which the investment is principally traded, causing a change in classification between levels. The Fund’s policy is to recognize transfers between levels based on fair value at the beginning of the reporting period.
A reconciliation of Level 3 investments is presented when the Fund has a significant amount of Level 3 investments at the beginning, interim, or end of the period in relation to the Fund’s net assets. Management has determined not to provide a reconciliation of Level 3 investments as the Level 3 investments were not considered significant to the Fund’s net assets at the beginning, interim, or end of the period. Management has determined not to provide additional disclosure on Level 3 inputs since the Level 3 investments are not considered significant to the Fund’s net assets at the end of the year.
4. Dividend and Distribution Information
Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP. Additionally, distributions from net gains on foreign currency transactions and net short-term gains on sales of investment securities are treated as ordinary income for federal income tax purposes. The tax character of dividends and distributions paid during the years ended Oct. 31, 2018 and 2017 was as follows:
Year ended | ||||
10/31/18 | 10/31/17 | |||
Ordinary income | $1,304,142 | $1,822,333 |
5. Components of Net Assets on a Tax Basis
As of Oct. 31, 2018, the components of net assets on a tax basis were as follows:
Shares of beneficial interest | $ | 44,782,241 | ||||||
Undistributed ordinary income* | 240,717 | |||||||
Capital loss carryforwards | (898,450 | ) | ||||||
Unrealized depreciation of investments, foreign currencies, and derivatives | (1,931,707 | ) | ||||||
|
|
|
| |||||
Net assets | $ | 42,192,801 | ||||||
|
|
|
|
* The undistributed earnings for the Fund are estimated pending final notification of the tax character of distributions received from investments in REITs.
The differences between book basis and tax basis components of net assets are primarily attributable to tax deferral of losses on wash sales, and tax treatment of passive foreign investment companies.
For financial reporting purposes, capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Reclassifications are primarily due to expiring capital loss carryforwards. Results of operations and net assets were not affected by these reclassifications. For the year ended Oct. 31, 2018, the Fund recorded the following reclassifications:
Total distributable earnings (loss) | $ | 3,400,957 | ||
Paid in capital | (3,400,957 | ) |
37
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Notes to financial statements | ||||
Delaware Global Real Estate Opportunities Fund |
5. Components of Net Assets on a Tax Basis (continued)
At Oct. 31, 2018, capital loss carryforwards available to offset future realized capital gains for the Fund were as follows:
Short-term | Long-term | Total | ||||
$— | $898,450 | $898,450 |
6. Capital Shares
Transactions in capital shares were as follows:
Year ended | ||||||||
10/31/18 | 10/31/17 | |||||||
Shares sold: | ||||||||
Class A | 191,366 | 402,298 | ||||||
Class C | 27,240 | 54,479 | ||||||
Class R | 4,151 | 4,387 | ||||||
Institutional Class | 2,272,981 | 6,313,652 | ||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||
Class A | 16,800 | 76,948 | ||||||
Class C | 4,408 | 6,915 | ||||||
Class R | 315 | 642 | ||||||
Institutional Class | 134,486 | 126,749 | ||||||
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2,651,747 | 6,986,070 | |||||||
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Shares redeemed: | ||||||||
Class A | (586,819 | ) | (3,451,670 | ) | ||||
Class C | (135,496 | ) | (118,676 | ) | ||||
Class R | (12,834 | ) | (14,054 | ) | ||||
Institutional Class | (4,128,059 | ) | (4,534,337 | ) | ||||
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(4,863,208 | ) | (8,118,737 | ) | |||||
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Net decrease | (2,211,461 | ) | (1,132,667 | ) | ||||
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Certain shareholders may exchange shares of one class for shares of another class in the same Fund. These exchange transactions are included as subscriptions and redemptions in the tables on the previous page and on the “Statements of changes in net assets.” For the years ended Oct. 31, 2018 and 2017, the Fund had the following exchange transactions:
Exchange Redemptions | Exchange Subscriptions | |||||||||||||||
Year ended | Class A Shares | Class C Shares | Class A Shares | Value | ||||||||||||
10/31/18 | — | 1011 | 1,008 | $ | 7,599 | |||||||||||
10/31/17 | 522,232 | 449 | 522,728 | 3,802,129 |
7. Line of Credit
The Fund, along with certain other funds in the Delaware Funds (Participants), was a participant in a $155,000,000 revolving line of credit intended to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, the Participants were charged an annual commitment fee of 0.15%, which was allocated across the Participants based on a weighted average of the respective net assets of each Participant. The Participants were permitted to borrow up to a maximum of one-third of their net assets under the agreement. Each Participant was individually, and not jointly, liable for its particular advances, if any, under the line of credit. The line of credit available under the agreement expired on Nov. 6, 2017.
On Nov. 6, 2017, the Fund, along with the other Participants, entered into an amendment to the agreement for a $155,000,000 revolving line of credit. The revolving line of credit available was reduced from $155,000,000 to $130,000,0000 on Sept. 6, 2018. The revolving line of credit was to be used as described above and operated in substantially the same manner as the original agreement. The line of credit available under the agreement expired on Nov. 5, 2018.
The Fund had no amounts outstanding as of Oct. 31, 2018, or at any time during the year then ended.
8. Derivatives
US GAAP requires disclosures that enable investors to understand: (1) how and why an entity uses derivatives; (2) how they are accounted for; and (3) how they affect an entity’s results of operations and financial position.
Foreign Currency Exchange Contracts — The Fund may enter into foreign currency exchange contracts as a way of managing foreign exchange rate risk. The Fund may enter into these contracts to fix the US dollar value of a security that it has agreed to buy or sell for the period between the date the trade was entered into and the date the security is delivered and paid for. The Fund may also use these contracts to hedge the US dollar value of securities it already owns that are denominated in foreign currencies. In addition, the Fund may enter into these contracts to facilitate or expedite the settlement of portfolio transactions. The change in value is recorded as an unrealized gain or loss. When the contract is closed, a realized gain or loss is recorded equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
The use of foreign currency exchange contracts does not eliminate fluctuations in the underlying prices of the securities, but does establish a rate of exchange that can be achieved in the future. Although
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Notes to financial statements | ||||
Delaware Global Real Estate Opportunities Fund |
8. Derivatives (continued)
foreign currency exchange contracts limit the risk of loss due to an unfavorable change in the value of the hedged currency, they also limit any potential gain that might result should the value of the currency change favorably. In addition, the Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts. The Fund’s maximum risk of loss from counterparty credit risk is the value of its currency exchanged with the counterparty. The risk is generally mitigated by having a netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty.
During the year ended Oct. 31, 2018, the Fund entered into foreign currency exchange contracts to facilitate or expedite the settlement of portfolio transactions.
During the year ended Oct. 31, 2018, the Fund experienced net realized gains or losses attributable to foreign currency holdings, which is disclosed on the “Statement of assets and liabilities” and “Statement of operations.”
Derivatives generally. The table below summarizes the average balance of derivative holdings by the Fund during the year ended Oct. 31, 2018:
Long Derivative Volume | Short Derivative Volume | |||||||||||||||
Foreign currency exchange contracts (average cost) | USD | 117,933 | USD | 161,028 |
9. Offsetting
The Fund entered into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement) or a similar agreement with certain of its derivative contract counterparties in order to better define its contractual rights and to secure rights that will help the Fund mitigate its counterparty risk. An ISDA Master Agreement is a bilateral agreement between the Fund and a counterparty that governs certain over-the-counter (OTC) derivatives and foreign exchange contracts and typically contains, among other things, collateral posting items and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default (close-out), including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency, or other events.
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements on the “Statement of assets and liabilities.”
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At Oct. 31, 2018, the Fund had the following assets and liabilities subject to offsetting provisions:
Offsetting of Financial Assets and Liabilities and Derivative Assets and Liabilities
Counterparty | Gross Value of | Gross Value of | Net Position | |||
BNY Mellon | $102 | $(682) | $(580) |
Counterparty | Net Position | Fair Value of Non-Cash Collateral Received | Cash Collateral Received | Fair Value of Non-Cash Collateral Pledged | Cash Collateral Pledged | Net Exposure(a) | ||||||||||||||||||||||||
BNY Mellon | $ | (580 | ) | $— | $— | $— | $— | $ | (580 | ) |
Master Repurchase Agreements
Repurchase agreements are entered into by the Fund under Master Repurchase Agreements (each, an “MRA”). The MRA permits the Fund, under certain circumstances including an event of default (such as bankruptcy or insolvency), to offset payables and/or receivables with collateral held by and/or posted to the counterparty. As a result, one single net payment is created. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of the MRA counterparty’s bankruptcy or insolvency. Based on the terms of the MRA, the Fund receives securities as collateral with a market value in excess of the repurchase price at maturity. Upon a bankruptcy or insolvency of the MRA counterparty, the Fund would recognize a liability with respect to such excess collateral. The liability reflects the Fund’s obligation under bankruptcy law to return the excess to the counterparty. As of Oct. 31, 2018, the following table is a summary of the Fund’s repurchase agreements by counterparty which are subject to offset under an MRA:
Counterparty | Repurchase | Fair Value of | Cash Collateral | Net Collateral | Net Exposure(a) | ||||||||||||||||||||
Bank of America Merrill Lynch | $ | 103,717 | $ | (103,717 | ) | $ | — | $ | (103,717 | ) | $ | — | |||||||||||||
Bank of Montreal | 285,223 | (285,223 | ) | — | (285,223 | ) | |||||||||||||||||||
BNP Paribas | 366,236 | (366,236 | ) | — | (366,236 | ) | — | ||||||||||||||||||
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Total | $ | 755,176 | $ | (755,176 | ) | $ | — | $ | (755,176 | ) | $ | — | |||||||||||||
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(a)Net exposure represents the receivable (payable) that would be due from (to) the counterparty in the event of default.
(b)The value of the related collateral received exceeded the value of the repurchase agreements as of Oct. 31, 2018.
10. Securities Lending
The Fund, along with other funds in the Delaware Funds, may lend its securities pursuant to a security lending agreement (Lending Agreement) with The Bank of New York Mellon (BNY Mellon). At the time a security is loaned, the borrower must post collateral equal to the required percentage of the market value of the loaned security, including any accrued interest. The required percentage is: (1) 102% with respect to US securities and foreign securities that are denominated and payable in US dollars; and (2) 105% with respect to foreign securities. With respect to each loan, if on any business day the aggregate market value of securities collateral plus cash collateral held is less than the aggregate market value of the securities which are the subject of such loan, the borrower will be notified to provide additional collateral
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Notes to financial statements | ||||
Delaware Global Real Estate Opportunities Fund |
10. Securities Lending (continued)
by the end of the following business day which, together with the collateral already held, will be not less than the applicable initial collateral requirements for such security loan. If the aggregate market value of securities collateral and cash collateral held with respect to a security loan exceeds the applicable initial collateral requirement, upon the request of the borrower, BNY Mellon must return enough collateral to the borrower by the end of the following business day to reduce the value of the remaining collateral to the applicable initial collateral requirement for such security loan. As a result of the foregoing, the value of the collateral held with respect to a loaned security on any particular day may be more or less than the value of the security on loan. The collateral percentage with respect to the market value of the loaned security is determined by the security lending agent.
Cash collateral received by each Fund of the Trust is generally invested in a series of individual separate accounts, each corresponding to a Fund. The investment guidelines permit each separate account to hold certain securities that would be considered eligible securities for a money market fund. Cash collateral received is generally invested in government securities; certain obligations issued by government sponsored enterprises; repurchase agreements collateralized by US Treasury securities; obligations issued by the central government of any Organization for Economic Cooperation and Development (OECD) country or its agencies, instrumentalities, or establishments; obligations of supranational organizations, commercial paper, notes, bonds and other debt obligations; certificates of deposit, time deposits, and other bank obligations; and asset-backed securities. A Fund can also accept US government securities and letters of credit (non-cash collateral) in connection with securities loans.
In the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Fund or, at the discretion of the lending agent, replace the loaned securities. The Fund continues to record dividends or interest, as applicable, on the securities loaned and is subject to changes in value of the securities loaned that may occur during the term of the loan. The Fund has the right under the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized by non-cash collateral, the Fund receives loan premiums paid by the borrower. With respect to security loans collateralized by cash collateral, the earnings from the collateral investments are shared among the Fund, the security lending agent, and the borrower. The Fund records security lending income net of allocations to the security lending agent and the borrower.
The Fund may incur investment losses as a result of investing securities lending collateral. This could occur if an investment in the collateral investment account defaulted or became impaired. Under those circumstances, the value of the Fund’s cash collateral account may be less than the amount the Fund would be required to return to the borrowers of the securities and the Fund would be required to make up for this shortfall.
During the year ended Oct. 31, 2018, the Fund had no securities out on loan.
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11. Credit and Market Risk
Some countries in which the Fund may invest require governmental approval for the repatriation of investment income, capital, or the proceeds of sales of securities by foreign investors. In addition, if there is deterioration in a country’s balance of payments or for other reasons, a country may impose temporary restrictions on foreign capital remittances abroad.
The securities exchanges of certain foreign markets are substantially smaller, less liquid, and more volatile than the major securities markets in the US. Consequently, acquisition and disposition of securities by the Fund may be inhibited. In addition, a significant portion of the aggregate market value of equity securities listed on the major securities exchanges in emerging markets is held by a smaller number of investors. This may limit the number of shares available for acquisition or disposition by the Fund.
When interest rates rise, fixed income securities (i.e., debt obligations) generally will decline in value. These declines in value are greater for fixed income securities with longer maturities or durations.
The Fund is a nondiversified fund that concentrates its investments in the real estate industry and is subject to the risks associated with that industry. If the Fund holds real estate directly as a result of defaults or receives rental income directly from real estate holdings, its tax status as a regulated investment company may be jeopardized. The Fund is also affected by interest rate changes, particularly if the REITs it holds use floating rate debt to finance their ongoing operations. Its investments may also tend to fluctuate more widely than that of a fund that invests in a broad range of industries.
The Fund may invest up to 15% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A promulgated under the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair the Fund from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, the Fund’s Board has delegated to DMC, the day-to-day functions of determining whether individual securities are liquid for purposes of the Fund’s limitation on investments in illiquid securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Fund’s 15% limit on investments in illiquid securities. Rule 144A securities have been identified on the “Schedule of investments.” Restricted securities are valued pursuant to the security valuation procedures described in Note 1.
12. Contractual Obligations
The Fund enters into contracts in the normal course of business that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Fund’s existing contracts and expects the risk of loss to be remote.
13. Recent Accounting Pronouncements
In August 2018, the FASB issued an Accounting Standards Update, ASU 2018-13, which changes certain fair value measurement disclosure requirements. The ASU 2018-13, in addition to other modifications and additions, removes the requirement to disclose the amount and reasons for transfers
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Notes to financial statements | ||||
Delaware Global Real Estate Opportunities Fund |
13. Recent Accounting Pronouncements (continued)
between Level 1 and Level 2 of the fair value hierarchy, the policy for the timing of transfers between levels and the valuation process for Level 3 fair value measurements. The ASU 2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after Dec. 15, 2019. At this time, management is evaluating the implications of these changes on the financial statements.
In August 2018, the Securities and Exchange Commission (SEC) adopted amendments to Regulation S-X to update and simplify the disclosure requirements for registered investment companies by eliminating requirements that are redundant or duplicative of US GAAP requirements or other SEC disclosure requirements. The new amendments require the presentation of the total, rather than the components, of distributable earnings on the “Statement of assets and liabilities” and the total, rather than the components, of dividends from net investment income and distributions from net realized gains on the “Statements of changes in net assets.” The amendments also removed the requirement for the parenthetical disclosure of undistributed net investment income on the “Statements of changes in net assets” and certain tax adjustments that were reflected in the “Notes to financial statements.” All of these have been reflected in the Fund’s financial statements.
14. Subsequent Events
On Nov. 5, 2018, the Fund, along with the other Participants, entered into an amendment to the agreement for a $190,000,000 revolving line of credit to be used as described in Note 7 and to be operated in substantially the same manner as the agreement described in Note 7. The revolving line of credit available was increased from $190,000,000 to $220,000,000 on Nov. 29, 2018. Under the amendment to the agreement, the Participants are charged an annual commitment fee of 0.15%, which is allocated across the Participants based on a weighted average of the respective net assets of each Participant. The line of credit available under the agreement expires on Nov. 4, 2019.
Management has determined that no other material events or transactions occurred subsequent to Oct. 31, 2018, that would require recognition or disclosure in the Fund’s financial statements.
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registered public accounting firm | ||||
To the Board of Trustees of Delaware Group® Adviser Funds
and Shareholders of Delaware Global Real Estate Opportunities Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Delaware Global Real Estate Opportunities Fund (one of the series constituting Delaware Group® Adviser Funds, referred to hereafter as the “Fund”) as of October 31, 2018, the related statement of operations for the year ended October 31, 2018, the statements of changes in net assets for each of the two years in the period ended October 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended October 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of October 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended October 31, 2018 and the financial highlights for each of the five years in the period ended October 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of October 31, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
December 20, 2018
We have served as the auditor of one or more investment companies in Delaware Funds® by Macquarie since 2010.
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Other Fund information (Unaudited) | ||||
Delaware Global Real Estate Opportunities Fund |
Tax Information
The information set forth below is for the Fund’s fiscal year as required by federal income tax laws. Shareholders, however, must report distributions on a calendar year basis for income tax purposes, which may include distributions for portions of two fiscal years of the Fund. Accordingly, the information needed by shareholders for income tax purposes will be sent to them in January of each year. Please consult your tax advisor for proper treatment of the information.
All disclosures are based on financial information available as of the date of this annual report and, accordingly, are subject to change. For any and all items requiring reporting, it is the intention of the Fund to report the maximum amount permitted under the Internal Revenue Code and the regulations thereunder.
For the fiscal year ended Oct. 31, 2018, the Fund reports distributions paid during the year as follows:
(A) Ordinary Income Distributions (Tax Basis)* | 100.00 | % | ||
(B) Qualifying Dividends1 | 5.98 | % |
(A) is based on a percentage of the Fund’s total distributions.
(B) is based on a percentage of the Fund’s ordinary income distributions.
1 Qualifying dividends represent dividends which qualify for the corporate dividends received deduction.
* For the fiscal year ended Oct. 31, 2018, certain dividends paid by the Fund may be subject to a maximum tax rate of 20%. The percentage of dividends paid by the Fund from ordinary income reported as qualified income is 32.32%. Complete information will be compiled and reported in conjunction with your 2018 Form 1099-DIV.
Board consideration of sub-advisory agreements for Delaware Global Real Estate Opportunities Fund at a meeting held May 16-17, 2018
At a meeting held on May 16-17, 2018, the Board of Trustees of Delaware Group® Adviser Funds, including a majority of non-interested or independent Trustees (the “Independent Trustees”), approved a new Sub-Advisory Agreement between Delaware Management Company (“DMC” or “Management”) and each of Macquarie Investment Management Global Limited (“MIMGL”) and Macquarie Funds Management Hong Kong Limited (“MFMHK”) for Delaware Global Real Estate Opportunities Fund (the “Fund”). MIMGL and MFMHK may also be referenced as “sub-advisor(s)” below.
In reaching the decision to approve the Sub-Advisory Agreements, the Board considered and reviewed information about each of MIMGL and MFMHK, including their personnel, operations, and financial condition, which had been provided by MIMGL and MFMHK, respectively. The Board also reviewed material furnished by DMC, including: their memorandum from DMC reviewing the Sub-Advisory Agreements and the various services proposed to be rendered by MIMGL and MFMHK; information concerning MIMGL’s and MFMHK’s organizational structure and the experience of their key investment management personnel; copies of MIMGL’s and MFMHK’s Form ADV, financial statements, compliance policies and procedures, and Codes of Ethics; relevant performance information provided with respect to MIMGL and MFMHK; and a copy of the Sub-Advisory Agreements.
In considering such information and materials, the Independent Trustees received assistance and advice from and met separately with independent counsel. The materials prepared by Management in connection with the approval of the Sub-Advisory Agreements were sent to the Independent Trustees in
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advance of the meeting. While attention was given to all information furnished, the following discusses some primary factors relevant to the Board’s decision. This discussion of the information and factors considered by the Board (as well as the discussion above) is not intended to be exhaustive, but rather summarizes certain factors considered by the Board. In view of the wide variety of factors considered, the Board did not, unless otherwise noted, find it practicable to quantify or otherwise assign relative weights to the following factors. In addition, individual Trustees may have assigned different weights to various factors.
Nature, extent, and quality of services. The Board considered the nature, extent, and quality of services that MIMGL and MFMHK each would provide as a sub-advisor to the Fund. The Trustees considered the investment process to be employed by MIMGL and MFMHK in connection with DMC’s collaboration with MIMGL and MFMHK in managing the Fund, and the qualifications and experience of MIMGL and MFMHK’s equity teams with regard to implementing the Fund’s investment mandates. The Board considered MIMGL and MFMHK’s organization, personnel, and operations. The Trustees also considered Management’s review and recommendation process with respect to MIMGL and MFMHK, and Management’s favorable assessment as to the nature, extent, and quality of the sub-advisory services expected to be provided by MIMGL and MFMHK to the Fund. Based on their consideration and review of the foregoing factors, the Board concluded that the nature, extent, and quality of the sub-advisory services to be provided by MIMGL and MFMHK, as well as MIMGL and MFMHK’s ability to render such services based on their experience, organization and resources, were appropriate for the Fund, in light of the Fund’s investment objective, strategies, and policies. In discussing the nature of the services proposed to be provided by the sub-advisors, several Board members observed that, unlike traditional sub-advisors, who make the investment-related decisions with respect to the sub-advised portfolio, the relationship contemplated in this case is limited to access to the additional quantitative investment resources and related technology support of MIMGL and MFMHK.
Sub-advisory fees. The Board considered that DMC would not pay MIMGL and MFMHK fees in conjunction with the services that would be rendered to the sub-advised Fund. The Board concluded that, in light of the quality and extent of the services to be provided and the business relationships between the advisor and sub-advisors, the proposed fee arrangement was understandable and reasonable.
Investment performance. In evaluating performance, the Board considered that MIMGL and MFMHK would provide trade execution support, but that DMC’s portfolio managers for the Fund would retain portfolio management discretion over the Fund.
Economies of scale and fall-out benefits. The Board considered whether the proposed fee arrangement would reflect economies of scale for the benefit of Fund investors as assets in the Fund increased, as applicable. The Board also considered that DMC and its affiliates may benefit by leveraging the global resources of its affiliates.
Board consideration of advisory agreement for Delaware Global Real Estate Opportunities Fund at a meeting held August 15-16, 2018
At a meeting held on Aug. 15-16, 2018 (the “Annual Meeting”), the Board of Trustees (the “Board”), including a majority of disinterested or independent Trustees, approved the renewal of the Investment
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Other Fund information (Unaudited) | ||||
Delaware Global Real Estate Opportunities Fund |
Board consideration of advisory agreement for Delaware Global Real Estate Opportunities Fund at a meeting held August 15-16, 2018 (continued)
Advisory Agreement for Delaware Global Real Estate Opportunities Fund (the “Fund”). In making its decision, the Board considered information furnished at regular quarterly Board meetings, including reports detailing Fund performance, investment strategies, and expenses, as well as information prepared specifically in connection with the renewal of the investment advisory contract. Information furnished specifically in connection with the renewal of the Investment Management Agreement with Delaware Management Company (“DMC”), a series of Macquarie Investment Management Business Trust (“MIMBT”), included materials provided by DMC and its affiliates (collectively, “Macquarie Investment Management”) concerning, among other things, the nature, extent, and quality of services provided to the Fund; the costs of such services to the Fund; economies of scale; and the investment manager’s financial condition and profitability. In addition, in connection with the Annual Meeting, materials were provided to the Trustees in May 2018, including reports provided by Broadridge Financial Solutions (“Broadridge”). The Broadridge reports compared the Fund’s investment performance and expenses with those of other comparable mutual funds. The Independent Trustees reviewed and discussed the Broadridge reports with independent legal counsel to the Independent Trustees. In addition to the information noted above, the Board also requested and received information regarding DMC’s policy with respect to advisory fee levels and its breakpoint philosophy; the structure of portfolio manager compensation; comparative client fee information; and any constraints or limitations on the availability of securities for certain investment styles, which had in the past year inhibited, or which were likely in the future to inhibit, the investment manager’s ability to invest fully in accordance with Fund policies.
In considering information relating to the approval of the Fund’s advisory agreement, the Independent Trustees received assistance and advice from and met separately with independent legal counsel to the Independent Trustees and also from an experienced and knowledgeable independent fund consultant, JDL Consultants, LLC (“JDL”). Although the Board gave attention to all information furnished, the following discussion identifies, under separate headings, the primary factors taken into account by the Board during its contract renewal considerations.
Nature, extent, and quality of services. The Board considered the services provided by DMC to the Fund and its shareholders. In reviewing the nature, extent, and quality of services, the Board considered reports furnished to it throughout the year, which covered matters such as the relative performance of the Fund, compliance of portfolio managers with the investment policies, strategies and restrictions for the Fund, compliance by DMC and Delaware Distributors, L.P. (together, “Management”) personnel with the Code of Ethics adopted throughout the Delaware Funds® by Macquarie (“Delaware Funds”), and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of DMC and the emphasis placed on research in the investment process. The Board recognized DMC’s receipt of certain favorable industry distinctions during the past several years. The Board gave favorable consideration to DMC’s efforts to control expenses while maintaining service levels committed to Fund matters. The Board also noted the benefits provided to Fund shareholders (a) through each shareholder’s ability to: (i) exchange an investment in one Delaware Fund for the same class of shares in another Delaware Fund without a sales charge, or (ii) to reinvest Fund dividends into additional shares of the Fund or into additional shares of other Delaware Funds, and (b) the privilege to
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combine holdings in other Delaware Funds to obtain a reduced sales charge. The Board was satisfied with the nature, extent, and quality of the overall services provided by DMC.
Investment performance. The Board placed significant emphasis on the investment performance of the Fund in view of the importance of investment performance to shareholders. Although the Board considered performance reports and discussions with portfolio managers at Investment Committee meetings throughout the year, the Board gave particular weight to the Broadridge reports furnished for the Annual Meeting. The Broadridge reports prepared for the Fund showed the investment performance of its Class A shares in comparison to a group of similar funds as selected by Broadridge (the “Performance Universe”). A fund with the best performance ranked first, and a fund with the poorest performance ranked last. The highest/best performing 25% of funds in the Performance Universe make up the first quartile; the next 25%, the second quartile; the next 25%, the third quartile; and the poorest/ worst performing 25% of funds in the Performance Universe make up the fourth quartile. Comparative annualized performance for the Fund was shown for the past 1-, 3-, 5-, and 10-year periods, to the extent applicable, ended Jan. 31, 2018. The Board’s objective is that the Fund’s performance for the 1-, 3-, and 5-year periods be at or above the median of its Performance Universe.
The Performance Universe for the Fund consisted of the Fund and all retail and institutional global real estate funds as selected by Broadridge. The Broadridge report comparison showed that the Fund’s total return for the 1-year period was in the fourth quartile of its Performance Universe. The report further showed that the Fund’s total return for the 3-, 5-, and 10-year periods was in the third quartile of its Performance Universe. The Board observed that the Fund’s performance results were not in line with the Board’s objective. In evaluating the Fund’s performance, the Board considered the numerous investment and performance reports delivered by Management personnel to the Board’s Investments Committee. The Board was satisfied that Management was taking action to improve Fund performance and to meet the Board’s performance objective.
Comparative expenses. The Board considered expense data for the Delaware Funds. Management provided the Board with information on pricing levels and fee structures for the Fund as of its most recently completed fiscal year. The Board also focused on the comparative analysis of effective management fees and total expense ratios of the Fund versus effective management fees and total expense ratios of a group of similar funds as selected by Broadridge (the “Expense Group”). In reviewing comparative costs, the Fund’s contractual management fee and the actual management fee incurred by the Fund were compared with the contractual management fees (assuming all funds in the Expense Group were similar in size to the Fund) and actual management fees (as reported by each fund) within the Expense Group, taking into account any applicable breakpoints and fee waivers. The Fund’s total expenses were also compared with those of its Expense Group. The Broadridge total expenses, for comparative consistency, were shown by Broadridge for Class A shares and comparative total expenses including 12b-1 and non-12b-1 service fees. The Board’s objective is for each Fund’s total expense ratio to be competitive with those of the peer funds within its Expense Group.
The expense comparisons for the Fund showed that its actual management fee and total expenses were in the quartile with the second lowest expenses of its Expense Group. The Board was satisfied with the total expenses of the Fund in comparison to those of its Expense Group as shown in the Broadridge report.
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Other Fund information (Unaudited) | ||||
Delaware Global Real Estate Opportunities Fund |
Board consideration of advisory agreement for Delaware Global Real Estate Opportunities Fund at a meeting held August 15-16, 2018 (continued)
Management profitability. The Board considered the level of profits realized by DMC in connection with the operation of the Fund. In this respect, the Board reviewed the Investment Management Profitability Analysis that addressed the overall profitability of DMC’s business in providing management and other services to each of the individual funds and the Delaware Funds as a whole. Specific attention was given to the methodology used by DMC in allocating costs for the purpose of determining profitability. Management stated that the level of profits of DMC, to a certain extent, reflects recent operational cost savings and efficiencies initiated by DMC. The Board considered DMC’s efforts to improve services provided to Fund shareholders and to meet additional regulatory and compliance requirements resulting from recent industry-wide Securities and Exchange Commission initiatives. The Board also considered the extent to which DMC might derive ancillary benefits from fund operations, including the potential for procuring additional business as a result of the prestige and visibility associated with its role as service provider to the Delaware Funds and the benefits from allocation of fund brokerage to improve trading efficiencies. As part of its work, the Board also reviewed a report prepared by JDL regarding MIMBT profitability as compared to certain peer fund complexes and the Independent Trustees met with JDL personnel to discuss DMC’s profitability in such context. The Board found that the management fees were reasonable in light of the services rendered and the level of profitability of DMC.
Economies of scale. The Trustees considered whether economies of scale are realized by DMC as the Fund’s assets increase and the extent to which any economies of scale are reflected in the level of management fees charged. The Trustees reviewed the Fund’s advisory fee pricing and structure, approved by the Board and shareholders, which includes breakpoints, and which applies to most funds in the Delaware Funds complex. Breakpoints in the advisory fee occur when the advisory fee rate is reduced on assets in excess of specified levels. Breakpoints result in a lower advisory fee than would otherwise be the case in the absence of breakpoints, when the asset levels specified in the breakpoints are exceeded. The Board noted that the fee under the Fund’s management contract did not fall within the standardized fee pricing structure because the Fund was very similar to another existing product offered by DMC, and Management wanted consistency of the fee structure as between the two similar funds. In addition the Fund generally invests a significant portion of its assets in international (including emerging markets) securities, an asset category that requires more research and firm resources than is typically true for funds investing in domestic securities. Although, as of March 31, 2018, the Fund had not reached a size at which it could take advantage of any breakpoints in the applicable fee schedule, the Board recognized that the fee was structured so that, if the Fund increases sufficiently in size, then economies of scale may be shared.
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Board of trustees / directors and officers addendum | ||||
Delaware Funds® by Macquarie |
A mutual fund is governed by a Board of Trustees/Directors (“Trustees”), which has oversight responsibility for the management of a fund’s business affairs. Trustees establish procedures and oversee and review the performance of the investment manager, the distributor, and others who perform services for the fund. The independent fund trustees, in particular, are advocates
Name, Address, and Birth Date | Position(s) Held with Fund(s) | Length of Time Served | ||
Interested Trustee
| ||||
Shawn K. Lytle1, 2 2005 Market Street Philadelphia, PA 19103 | President, Chief Executive Officer, and Trustee | Trustee since September 2015 | ||
February 1970 | President and | |||
Chief Executive Officer | ||||
since August 2015 | ||||
| ||||
Independent Trustees
| ||||
Thomas L. Bennett 2005 Market Street Philadelphia, PA 19103 | Chair and Trustee | Trustee since March 2005 | ||
October 1947 | Chair since | |||
March 2015
| ||||
Ann D. Borowiec 2005 Market Street Philadelphia, PA 19103 November 1958
| Trustee | Since March 2015 | ||
Joseph W. Chow 2005 Market Street Philadelphia, PA 19103 January 1953
| Trustee | Since January 2013 |
1 | Shawn K. Lytle is considered to be an “Interested Trustee” because he is an executive officer of the Fund’s(s’) investment advisor. |
2 | Shawn K. Lytle, David F. Connor, Daniel V. Geatens, and Richard Salus serve in similar capacities for the six portfolios of the Optimum Fund Trust, which have the same investment advisor, principal underwriter, and transfer agent as the registrant. Mr. Geatens also serves as the Chief Financial Officer and Treasurer for Macquarie Global Infrastructure Total Return Fund Inc., which has an affiliated investment manager. |
52
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for shareholder interests. Each trustee has served in that capacity since he or she was elected to or appointed to the Board of Trustees, and will continue to serve until his or her retirement or the election of a new trustee in his or her place. The following is a list of the Trustees and Officers with certain background and related information.
Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee or Officer | Other Directorships Held by Trustee or Officer | ||
| ||||
President — Macquarie | 59 | Trustee — UBS | ||
Investment Management3 | Relationship Funds, | |||
(June 2015–Present) | SMA Relationship | |||
Trust, and UBS Funds | ||||
Regional Head of | (May 2010–April 2015) | |||
Americas — UBS Global | ||||
Asset Management | ||||
(April 2010–May 2015) | ||||
| ||||
Private Investor | 59 | None | ||
(March 2004–Present) | ||||
| ||||
Chief Executive Officer, | 59 | Director — | ||
Private Wealth Management | Banco Santander International | |||
(2011–2013) and | (October 2016–Present) | |||
Market Manager, | ||||
New Jersey Private | Director — | |||
Bank (2005–2011) — | Santander Bank, N.A. | |||
J.P. Morgan Chase & Co. | (December 2016–Present)
| |||
Private Investor | 59 | Director and Audit Committee | ||
(April 2011–Present) | Member — Hercules | |||
Technology Growth | ||||
Capital, Inc. | ||||
(July 2004–July 2014)
|
3 | Macquarie Investment Management is the marketing name for Macquarie Management Holdings, Inc. and its subsidiaries, including the Fund’s(s’) investment advisor, principal underwriter, and its transfer agent. |
53
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Board of trustees / directors and officers addendum | ||||
Delaware Funds® by Macquarie |
Name, Address, | Position(s) | Length of | ||
and Birth Date | Held with Fund(s) | Time Served | ||
Independent Trustees (continued)
| ||||
John A. Fry | Trustee | Since January 2001 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
May 1960 |
Lucinda S. Landreth | Trustee | Since March 2005 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
June 1947 | ||||
Frances A. Sevilla-Sacasa | Trustee | Since September 2011 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
January 1956
|
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Number of Portfolios in | ||||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships | ||
During the Past Five Years | by Trustee or Officer | Held by Trustee or Officer | ||
President — | 59 | Director; Compensation | ||
Drexel University | Committee and | |||
(August 2010–Present) | Governance Committee | |||
Member — Community | ||||
President — | Health Systems | |||
Franklin & Marshall College | ||||
(July 2002–July 2010) | Director — Drexel | |||
Morgan & Co. | ||||
Director; Audit Committee | ||||
Member — vTv | ||||
Therapeutics LLC | ||||
Director; Audit Committee | ||||
Member — FS Credit Real | ||||
Estate Income Trust, Inc.
| ||||
Private Investor | 59 | None | ||
(2004–Present)
| ||||
Private Investor | 59 | Trust Manager and | ||
(January 2017–Present) | Audit Committee | |||
Chair — Camden | ||||
Chief Executive Officer — | Property Trust | |||
Banco Itaú | (August 2011–Present) | |||
International | ||||
(April 2012–December 2016) | Director — | |||
Carrizo Oil & Gas, Inc. | ||||
Executive Advisor to Dean | (March 2018–Present) | |||
(August 2011–March 2012) | ||||
and Interim Dean | ||||
(January 2011–July 2011) — | ||||
University of Miami School of | ||||
Business Administration | ||||
President — U.S. Trust, | ||||
Bank of America Private | ||||
Wealth Management | ||||
(Private Banking) | ||||
(July 2007–December 2008)
|
55
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Board of trustees / directors and officers addendum | ||||
Delaware Funds® by Macquarie |
Name, Address, | Position(s) | Length of | ||
and Birth Date | Held with Fund(s) | Time Served | ||
Independent Trustees (continued)
| ||||
Thomas K. Whitford | Trustee | Since January 2013 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
March 1956
| ||||
Janet L. Yeomans | Trustee | Since April 1999 | ||
2005 Market Street | ||||
Philadelphia, PA 19103 | ||||
July 1948
| ||||
Officers
| ||||
David F. Connor | Senior Vice President, | Senior Vice President | ||
2005 Market Street | General Counsel, | since May 2013; | ||
Philadelphia, PA 19103 | and Secretary | General Counsel | ||
December 1963 | since May 2015; | |||
Secretary since | ||||
October 2005
| ||||
Daniel V. Geatens | Vice President | Vice President and | ||
2005 Market Street | and Treasurer | Treasurer since October 2007 | ||
Philadelphia, PA 19103 | ||||
October 1972
| ||||
Richard Salus | Senior Vice President | Senior Vice President and | ||
2005 Market Street | and Chief Financial Officer | Chief Financial Officer | ||
Philadelphia, PA 19103 | since November 2006 | |||
October 1963
|
The Statement of Additional Information for the Fund(s) includes additional information about the Trustees and Officers and is available, without charge, upon request by calling 800 523-1918.
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Number of Portfolios in | ||||
Principal Occupation(s) | Fund Complex Overseen | Other Directorships | ||
During the Past Five Years | by Trustee or Officer | Held by Trustee or Officer | ||
| ||||
Vice Chairman | 59 | Director — HSBC Finance | ||
(2010–April 2013) — | Corporation and HSBC | |||
PNC Financial | North America Holdings Inc. | |||
Services Group | (December 2013–Present) | |||
Director — | ||||
HSBC Bank USA, Inc. | ||||
(July 2014–March 2017)
| ||||
Vice President and Treasurer | 59 | Director (2009–2017); | ||
(January 2006–July 2012), | Personnel and Compensation | |||
Vice President — | Committee Chair; Member of | |||
Mergers & Acquisitions | Nominating, Investments, and | |||
(January 2003–January 2006), | Audit Committees for various | |||
and Vice President | periods throughout | |||
and Treasurer | directorship — | |||
(July 1995–January 2003) — | Okabena Company | |||
3M Company
| ||||
| ||||
David F. Connor has served | 59 | None2 | ||
in various capacities at | ||||
different times at | ||||
Macquarie Investment | ||||
Management.
| ||||
Daniel V. Geatens has served | 59 | None2 | ||
in various capacities at | ||||
different times at | ||||
Macquarie Investment | ||||
Management.
| ||||
Richard Salus has served | 59 | None2 | ||
in various executive capacities | ||||
at different times at | ||||
Macquarie Investment | ||||
Management.
|
57
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About the organization | ||||
Board of trustees | ||||||
Shawn K. Lytle | Ann D. Borowiec | John A. Fry | Frances A. | |||
President and | Former Chief Executive | President | Sevilla-Sacasa | |||
Chief Executive Officer | Officer | Drexel University | Former Chief Executive | |||
Delaware Funds® | Private Wealth Management | Philadelphia, PA | Officer | |||
by Macquarie | J.P. Morgan Chase & Co. | Banco Itaú International | ||||
Philadelphia, PA | New York, NY | Lucinda S. Landreth | Miami, FL | |||
Former Chief Investment | ||||||
Thomas L. Bennett | Joseph W. Chow | Officer | Thomas K. Whitford | |||
Chairman of the Board | Former Executive Vice | Assurant, Inc. | Former Vice Chairman | |||
Delaware Funds | President | New York, NY | PNC Financial Services Group | |||
by Macquarie | State Street Corporation | Pittsburgh, PA | ||||
Private Investor | Boston, MA | |||||
Rosemont, PA | Janet L. Yeomans | |||||
Former Vice President and | ||||||
Treasurer | ||||||
3M Company | ||||||
St. Paul, MN | ||||||
Affiliated officers | ||||||
David F. Connor | Daniel V. Geatens | Richard Salus | ||||
Senior Vice President, | Vice President and | Senior Vice President and | ||||
General Counsel, | Treasurer | Chief Financial Officer | ||||
and Secretary | Delaware Funds | Delaware Funds | ||||
Delaware Funds | by Macquarie | by Macquarie | ||||
by Macquarie | Philadelphia, PA | Philadelphia, PA | ||||
Philadelphia, PA |
This annual report is for the information of Delaware Global Real Estate Opportunities Fund shareholders, but it may be used with prospective investors when preceded or accompanied by the Delaware Fund fact sheet for the most recently completed calendar quarter. These documents are available at delawarefunds.com/literature.
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 800 523-1918; and (ii) on the SEC’s website at sec.gov. In addition, a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities and the Schedule of Investments included in the Fund’s most recent Form N-Q are available without charge on the Fund’s website at delawarefunds.com/literature. The Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C.; information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund’s website at delawarefunds.com/proxy; and (ii) on the SEC’s website at sec.gov.
58
Item 2. Code of Ethics
The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. A copy of the registrant’s Code of Business Ethics has been posted on the Delaware Funds® by Macquarie Internet Web site at www.delawarefunds.com. Any amendments to the Code of Business Ethics, and information on any waiver from its provisions granted by the registrant, will also be posted on this Web site within five business days of such amendment or waiver and will remain on the Web site for at least 12 months.
Item 3. Audit Committee Financial Expert
The registrant’s Board of Trustees has determined that certain members of the registrant’s Audit Committee are audit committee financial experts, as defined below. For purposes of this item, an “audit committee financial expert” is a person who has the following attributes:
a. An understanding of generally accepted accounting principles and financial statements;
b. The ability to assess the general application of such principles in connection with the accounting for estimates, accruals, and reserves;
c. Experience preparing, auditing, analyzing, or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the registrant’s financial statements, or experience actively supervising one or more persons engaged in such activities;
d. An understanding of internal controls and procedures for financial reporting; and e. An understanding of audit committee functions.
An “audit committee financial expert” shall have acquired such attributes through:
a. Education and experience as a principal financial officer, principal accounting officer, controller, public accountant, or auditor or experience in one or more positions that involve the performance of similar functions;
b. Experience actively supervising a principal financial officer, principal accounting officer, controller, public accountant, auditor, or person performing similar functions;
c. Experience overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing, or evaluation of financial statements; or
d. Other relevant experience.
The registrant’s Board of Trustees has also determined that each member of the registrant’s Audit Committee is independent. In order to be “independent” for purposes of this item, the Audit Committee member may not: (i) other than in his or her capacity as a member of the Board of Trustees or any committee thereof, accept directly or indirectly any consulting, advisory or other compensatory fee from the issuer; or (ii) be an “interested person” of the registrant as defined in Section 2(a)(19) of the Investment Company Act of 1940.
The names of the audit committee financial experts on the registrant’s Audit Committee are set forth below:
Joseph W. Chow
John A. Fry
Lucinda S. Landreth
Thomas K. Whitford
Janet L. Yeomans
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 $113,300 for the fiscal year ended October 31, 2018.
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 $110,130 for the fiscal year ended October 31, 2017.
(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 October 31, 2018.
The aggregate fees billed by the registrant’s independent auditors for services relating to the performance of the audit of the financial statements of the registrant’s investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $640,000 for the registrant’s fiscal year ended October 31, 2018. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These audit-related services were as follows: year end audit procedures; group reporting and subsidiary statutory audits.
The aggregate fees billed by the registrant’s independent auditors for services relating to the performance of the audit of the registrant’s financial statements and not reported under paragraph (a) of this Item were $0 for the fiscal year ended October 31, 2017.
The aggregate fees billed by the registrant’s independent auditors for services relating to the performance of the audit of the financial statements of the registrant’s investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $640,000 for the registrant’s fiscal year ended October 31, 2017. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These audit-related services were as follows: year end audit procedures; group reporting and subsidiary statutory audits.
(c) Tax fees.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant were $18,450 for the fiscal year ended October 31, 2018. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These tax-related services were as follows: review of income tax returns and review of annual excise distribution calculations.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant’s investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended October 31, 2018.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant were $18,435 for the fiscal year ended October 31, 2017. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These tax-related services were as follows: review of income tax returns and review of annual excise distribution calculations.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant’s investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended October 31, 2017.
(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 October 31, 2018.
The aggregate fees billed for all services other than those set forth in paragraphs (b) and (c) of this Item provided by the registrant’s independent auditors to the registrant’s adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended October 31, 2018. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%.
The aggregate fees billed for all services provided by the independent auditors to the registrant other than those set forth in paragraphs (a), (b) and (c) of this Item were $0 for the fiscal year ended October 31, 2017.
The aggregate fees billed for all services other than those set forth in paragraphs (b) and (c) of this Item provided by the registrant’s independent auditors to the registrant’s adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended October 31, 2017. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%.
(e) The registrant’s Audit Committee has established pre-approval policies and procedures as permitted by Rule 2-01(c)(7)(i)(B) of Regulation S-X (the “Pre-Approval Policy”) with respect to services provided by the registrant’s independent auditors. Pursuant to the Pre-Approval Policy, the Audit Committee has pre-approved the services set forth in the table below with respect to the registrant up to the specified fee limits. Certain fee limits are based on aggregate fees to the registrant and other registrants within the Delaware Funds® by Macquarie.
Service | Range of Fees |
Audit Services | |
Statutory audits or financial audits for new Funds | up to $40,000 per Fund |
Services associated with SEC registration statements (e.g., Form N-1A, Form N-14, etc.), periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings (e.g., comfort letters for closed-end Fund offerings, consents), and assistance in responding to SEC comment letters | up to $10,000 per Fund |
Consultations by Fund management as to the accounting or disclosure treatment of transactions or events and/or the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, or other regulatory or standard-setting bodies (Note: Under SEC rules, some consultations may be considered “audit-related services” rather than “audit services”) | up to $25,000 in the aggregate |
Audit-Related Services | |
Consultations by Fund management as to the accounting or disclosure treatment of transactions or events and/or the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, or other regulatory or standard-setting bodies (Note: Under SEC rules, some consultations may be considered “audit services” rather than “audit-related services”) | up to $25,000 in the aggregate |
Tax Services | |
U.S. federal, state and local and international tax planning and advice (e.g., consulting on statutory, regulatory or administrative developments, evaluation of Funds’ tax compliance function, etc.) | up to $25,000 in the aggregate |
U.S. federal, state and local tax compliance (e.g., excise distribution reviews, etc.) | up to $5,000 per Fund |
Review of federal, state, local and international income, franchise and other tax returns | up to $5,000 per Fund |
Under the Pre-Approval Policy, the Audit Committee has also pre-approved the services set forth in the table below with respect to the registrant’s investment adviser and other entities controlling, controlled by or under common control with the investment adviser that provide ongoing services to the registrant (the “Control Affiliates”) up to the specified fee limit. This fee limit is based on aggregate fees to the investment adviser and its Control Affiliates.
Service | Range of Fees |
Non-Audit Services | |
Services associated with periodic reports and other documents filed with the SEC and assistance in responding to SEC comment letters | up to $10,000 in the aggregate |
The Pre-Approval Policy requires the registrant’s independent auditors to report to the Audit Committee at each of its regular meetings regarding all services initiated since the last such report was rendered, including those services authorized by the Pre-Approval Policy.
(f) Not applicable.
(g) The aggregate non-audit fees billed by the registrant’s independent auditors for services rendered to the registrant and to its investment adviser and other service providers under common control with the adviser were $11,748,000 and $11,180,000 for the registrant’s fiscal years ended October 31, 2018 and October 31, 2017, respectively.
(h) In connection with its selection of the independent auditors, the registrant’s Audit Committee has considered the independent auditors’ provision of non-audit services to the registrant’s investment adviser and other service providers under common control with the adviser that were not required to be pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X. The Audit Committee has determined that the independent auditors’ provision of these services is compatible with maintaining the auditors’ independence.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Investments
(a) Included as part of report to shareholders filed under Item 1 of this Form N-CSR.
(b) Divestment of securities in accordance with Section 13(c) of the Investment Company Act of 1940.
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 11. Controls and Procedures
The registrant’s principal executive officer and principal financial officer have evaluated the registrant’s disclosure controls and procedures within 90 days of the filing of this report and have concluded that they are effective in providing reasonable assurance that the information required to be disclosed by the registrant in its reports or statements filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.
There were no significant changes in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by the report to stockholders included herein (i.e., the registrant’s fourth fiscal quarter) that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies
Not applicable.
Item 13. Exhibits
(a) (1) Code of Ethics
Not applicable.
(2) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rule 30a-2 under the Investment Company Act of 1940 are attached hereto as Exhibit 99.CERT.
(3) Written solicitations to purchase securities pursuant to Rule 23c-1 under the Securities Exchange Act of 1934.
Not applicable.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are furnished herewith as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf, by the undersigned, thereunto duly authorized.
DELAWARE GROUP® ADVISER FUNDS
SHAWN K. LYTLE | |
By: | Shawn K. Lytle |
Title: | President and Chief Executive Officer |
Date: | January 3, 2019 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SHAWN K. LYTLE | |
By: | Shawn K. Lytle |
Title: | President and Chief Executive Officer |
Date: | January 3, 2019 |
RICHARD SALUS | |
By: | Richard Salus |
Title: | Chief Financial Officer |
Date: | January 3, 2019 |