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: | 811-00249 | |
| Exact name of registrant as specified in charter: | Delaware Group® Equity Funds I | |
| Address of principal executive offices: | 610 Market Street | |
| Philadelphia, PA 19106 | ||
| Name and address of agent for service: | David F. Connor, Esq. | |
| 610 Market Street | ||
| Philadelphia, PA 19106 | ||
| Registrant’s telephone number, including area code: | (800) 523-1918 | |
| Date of fiscal year end: | October 31 | |
| Date of reporting period: | October 31, 2021 |
Item 1. Reports to Stockholders
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Annual report | |
US equity mutual fund
Delaware Mid Cap Value Fund
October 31, 2021
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.
Experience Delaware Funds by Macquarie®
Macquarie Investment Management (MIM) is a global asset manager with offices in the United States, Europe, Asia, and Australia. As active managers, we prioritize autonomy and accountability at the investment team level in pursuit of opportunities that matter for clients. Delaware Funds is one of the longest-standing mutual fund families, with more than 80 years in existence.
If you are interested in learning more about creating an investment plan, contact your financial advisor.
You can learn more about Delaware Funds or obtain a prospectus for Delaware Mid Cap Value Fund at delawarefunds.com/literature.
Manage your account online
| ● | Check your account balance and transactions |
| ● | View statements and tax forms |
| ● | Make purchases and redemptions |
Visit delawarefunds.com/account-access.
Macquarie Asset Management (MAM) offers a diverse range of products including securities investment management, infrastructure and real asset management, and fund and equity-based structured products. MIM is the marketing name for certain companies comprising the asset management division of Macquarie Group. This includes the following investment advisers: Macquarie Investment Management Business Trust (MIMBT), Macquarie Funds Management Hong Kong Limited, Macquarie Investment Management Austria Kapitalanlage AG, Macquarie Investment Management Global Limited, Macquarie Investment Management Europe Limited, and Macquarie Investment Management Europe S.A.
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.
Unless otherwise noted, views expressed herein are current as of October 31, 2021, 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.
© 2021 Macquarie Management Holdings, Inc.
| Portfolio management review | |
| Delaware Mid Cap Value Fund | November 9, 2021 (Unaudited) |
| Performance preview (for the year ended October 31, 2021) | ||||
| Delaware Mid Cap Value Fund (Institutional Class shares) | 1-year return | +51.85% | ||
| Delaware Mid Cap Value Fund (Class A shares) | 1-year return | +51.43% | ||
| Russell Midcap® Value Index (benchmark) | 1-year return | +48.60% |
Past performance does not guarantee future results.
For complete, annualized performance for Delaware Mid Cap Value Fund, please see the table on page 4.
Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors. In addition, Institutional Class shares pay no distribution and service fee.
The performance of Class A shares excludes the applicable sales charge. The performance of both Institutional Class shares and Class A shares reflects 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.
Investment objective
The Fund seeks capital appreciation.
Market review
Mid-cap value stocks experienced a strong run during the Fund’s fiscal year ended October 31, 2021. During the fiscal year, value companies generally outperformed growth companies across the US market capitalization spectrum as investors showed a preference for higher-quality companies in cyclical and economically sensitive industries. The performance disparity between value companies and growth companies was significant in mid-cap equities over the fiscal year, as the Russell Midcap Value Index returned 48.60%, outpacing the 39.43% return of the Russell Midcap® Growth Index. The small-cap Russell 2000® Value Index was the strongest-performing value index during the Fund’s fiscal year, gaining 64.30%. Large-cap value companies typically gained less than small-and mid-cap value companies as the larger-cap Russell 1000® Value Index advanced 43.76%.
In our opinion, Delaware Mid Cap Value Fund benefited from:
| ● | vaccines providing a boost to the economy |
| ● | investors’ preference for high-quality, cyclical businesses |
| ● | a sharp increase in energy demand |
| ● | stock selection and an overweight position in financial services. |
Each of the sectors in the Russell Midcap Value Index advanced during the Fund’s fiscal year. Companies in the energy, financial services, real estate investment trusts (REITs), and basic industry sectors of the Russell Midcap Value Index were the strongest performing. The utilities,
1
Portfolio management review
Delaware Mid Cap Value Fund
consumer staples, and healthcare sectors in the Russell Midcap Value Index advanced during the Fund’s fiscal year but were relative laggards.
The US Food and Drug Administration (FDA) approved two COVID-19 vaccines in November 2020, resulting in a surge in US equity markets. The US economy continued to improve during the fiscal year, aided by strengthening consumer confidence and spending. The real gross domestic product (GDP) growth rate improved during the period as GDP increased at an annual rate of 2.0% in the third quarter of 2021, according to the US Bureau of Economic Analysis’s advance estimate. The unemployment rate declined from 6.9% in October 2020 to 4.6% in October 2021. For the 12 months ended October 31, 2021, the US Consumer Price Index (CPI) increased 6.2% and the US Producer Price Index (PPI) increased 8.6%. These inflation measures reflect considerable pent-up consumer demand in areas such as travel, entertainment, and dining out, which were among the sectors most negatively impacted by the pandemic. During the Fund’s fiscal year, the US Federal Reserve maintained its extremely accommodative monetary policy, keeping short-term rates near zero.
Within the Fund
For the fiscal year ended October 31, 2021, Delaware Mid Cap Value Fund outperformed its benchmark, the Russell Midcap Value Index. The Fund’s Institutional Class shares advanced 51.85%. The Fund’s Class A shares gained 51.43% at net asset value (NAV) and 42.83% at maximum offer price. These figures reflect reinvestment of all distributions. During the same period, the Fund’s benchmark advanced 48.60%. For complete annualized performance of Delaware Mid Cap Value Fund, please see the table on page 4.
Stock selection and sector positioning contributed to relative outperformance during the fiscal year.
Stock selection and a relative overweight allocation benefited the financial services sector. The Fund’s holdings in the industrials and REITs sectors outperformed those in the benchmark during the fiscal year. The Fund’s holdings in the basic industry, consumer discretionary, and transportation sectors advanced during the fiscal year but lagged the stronger returns of those sectors in the benchmark and thus detracted from relative performance.
Shares of regional bank East West Bancorp Inc. outperformed for the fiscal year. East West Bancorp, headquartered in California, is one of the largest independent banks, operating more than 120 locations in the US and China. The bank reported multiple quarters of better-than-expected earnings results during the fiscal year. We maintained the Fund’s position in East West Bancorp as of the end of the Fund’s fiscal year, as its loan growth is accelerating and its profitability is strong.
American Financial Group Inc. is an insurance holding company with primary business segments in property and casualty insurance and annuities. During the Fund’s fiscal year, American Financial Group outperformed as the company reported better-than-consensus earnings results for each reported quarter. During the Fund’s fiscal year, American Financial Group reported a favorable agreement to sell its Great American Life Insurance Company to Massachusetts Mutual Life Insurance Company (MassMutual) for $3.5 billion. We exited the Fund’s position in American Financial Group prior to the end of the fiscal year and used the proceeds to invest in other financial services firms.
Stock selection in the energy sector contributed to performance. The Fund’s position in independent oil and gas exploration and production (E&P) company Marathon Oil Corp. outperformed. During the fiscal year, the reopening of the US economy led to an increase in demand for oil, thus
2
benefiting Marathon Oil’s financial performance. For the Fund’s fiscal year, Marathon Oil maintained its capital budget, strengthened its balance sheet, and generated significant free cash flow, which it used to repurchase its stock and increase its dividend. We maintained the Fund’s position in Marathon Oil as of the end of the Fund’s fiscal year, as management is committed to returning capital to shareholders.
Michigan-based electric and natural gas utility CMS Energy Corp. lagged the returns of the utilities sector in the benchmark during the Fund’s fiscal year. CMS Energy has an excellent financial and operational track record and historically trades at a premium multiple to its peers in the multi-utility industry. During the Fund’s fiscal year, utility companies’ multiples contracted. This had a large impact on CMS Energy. We maintained the Fund’s position in CMS Energy as of the end of the Fund’s fiscal year; however, as the company’s earnings are growing above peer levels through what we view as its best-in-class cost management and its rate-base investments that include clean energy.
During the Fund’s fiscal year, shares of Newmont Corp. lagged the broader metals and mining industry. Newmont is the world’s leading gold-mining company and a producer of copper, silver, zinc, and lead. We believed Newmont’s stock-price performance would lag during periods of strong market performance, and that is what we experienced during the Fund’s fiscal year. During this period, Newmont increased its dividend and repurchased its stock. This is consistent with the company’s commitment to return incremental free cash flow to shareholders. We maintained the Fund’s position in Newmont as of the end of the Fund’s fiscal year, as it generates significant free cash flow and remains disciplined with its use of capital.
Cable One Inc. is a video, broadband communications, and telephone provider serving residential and business customers in 24 states. With more Americans staying home during the pandemic, Cable One added more broadband subscribers than expected. During the Fund’s fiscal year, Cable One’s subscription growth began to slow, and its shares lagged the stronger returns of the company’s peers in the media industry. We maintained the Fund’s position in Cable One as of the end of the Fund’s fiscal year, as its financial results remain strong, it continues to grow free cash flow, and has organic growth potential, in our opinion.
The Fund ended the fiscal year overweight the financial services, technology, basic industry, and transportation sectors. The Fund ended the fiscal year underweight the REITs, healthcare, consumer staples, and utilities sectors. Sector weightings were like those in the benchmark in the consumer discretionary, industrials, and energy sectors at fiscal year-end.
Our team’s disciplined philosophy remains unchanged. We continue to focus on bottom-up stock selection and specifically on identifying companies that, in our view, trade at attractive valuations, generate strong free cash flow, and have the ability to implement shareholder-friendly policies through share buybacks, dividend increases, and debt reduction.
3
| Performance summary | |
| Delaware Mid Cap Value Fund | October 31, 2021 (Unaudited) |
The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 800 523-1918 or visiting delawarefunds.com/performance.
| Fund and benchmark performance1,2 | Average annual total returns through October 31, 2021 | |||||||||||
| 1 year | 5 year | 10 year | Lifetime | |||||||||
| Class A (Est. February 1, 2008) | ||||||||||||
| Excluding sales charge | +51.43 | % | +11.80 | % | +11.27 | % | +8.44 | % | ||||
| Including sales charge | +42.83 | % | +10.49 | % | +10.61 | % | +7.98 | % | ||||
| Class C (Est. July 31, 2008) | ||||||||||||
| Excluding sales charge | +50.25 | % | +10.93 | % | +10.41 | % | +8.20 | % | ||||
| Including sales charge | +49.25 | % | +10.93 | % | +10.41 | % | +8.20 | % | ||||
| Class R (Est. July 31, 2008) | ||||||||||||
| Excluding sales charge | +51.25 | % | +11.51 | % | +10.97 | % | +8.78 | % | ||||
| Including sales charge | +51.25 | % | +11.51 | % | +10.97 | % | +8.78 | % | ||||
| Institutional Class (Est. February 1, 2008) | ||||||||||||
| Excluding sales charge | +51.85 | % | +12.04 | % | +11.52 | % | +8.69 | % | ||||
| Including sales charge | +51.85 | % | +12.04 | % | +11.52 | % | +8.69 | % | ||||
| Russell Midcap Value Index | +48.60 | % | +12.30 | % | +13.18 | % | +9.87 | %* | ||||
| * | The benchmark lifetime return is for Institutional Class share comparison only and is calculated using the month end prior to 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 in the “Fund expense ratios” table on page 5. Performance would have been lower had expense limitations not been in effect.
Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors. In addition, Institutional Class shares pay no distribution and service (12b-1) fee.
Class A shares are sold with a maximum front-end sales charge of 5.75%, and have an annual 12b-1 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 (CDSC) of 1.00% if redeemed during the first 12 months. They are also subject to an annual 12b-1 fee of 1.00% of average daily net assets. Performance for Class C shares, excluding sales charges, assumes either that CDSCs did not apply or that the investment was not redeemed.
4
Class R shares are available only for certain retirement plan products. They are sold without a sales charge and have an annual 12b-1 fee of 0.50% of average daily net assets.
Investments in small and/or medium-sized companies typically exhibit greater risk and higher volatility than larger, more established companies.
REIT investments are subject to many of the risks associated with direct real estate ownership, including changes in economic conditions, credit risk, and interest rate fluctuations.
The disruptions caused by natural disasters, pandemics, or similar events could prevent the Fund from executing advantageous investment decisions in a timely manner and could negatively impact the Fund’s ability to achieve its investment objective and the value of the Fund’s investments.
| 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 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) from exceeding 0.89% of the Fund’s average daily net assets during the period from November 1, 2020 through October 31, 2021.* 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. |
| Institutional | ||||||||
| Fund expense ratios | Class A | Class C | Class R | Class | ||||
| Total annual operating expenses (without fee waivers) |
1.45% | 2.20% | 1.70% | 1.20% | ||||
| Net expenses (including fee waivers, if any) |
1.14% | 1.89% | 1.39% | 0.89% | ||||
| Type of waiver | Contractual | Contractual | Contractual | Contractual |
| * | The aggregate contractual waiver period covering this report is from February 28, 2020 through March 1, 2022. |
5
Performance summary
Delaware Mid Cap Value Fund
Performance of a $10,000 investment1
Average annual total returns from October 31, 2011 through October 31, 2021
| For period beginning October 31, 2011 through October 31, 2021 | Starting value | Ending value | |||||
 |
Russell Midcap Value Index |
$10,000 |
$34,491 | ||||
 |
Delaware Mid Cap Value Fund — Institutional Class shares |
$10,000 |
$29,755 | ||||
 |
Delaware Mid Cap Value Fund — Class A shares |
$9,425 |
$27,407 | ||||
|
1 |
The “Performance of a $10,000 investment” graph assumes $10,000 invested in Institutional Class and Class A shares of the Fund on October 31, 2011, 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 Midcap Value Index as of October 31, 2011. The Russell Midcap Value Index measures the performance of the mid-cap value segment of the US equity universe. It includes those Russell Midcap Index companies with lower price-to-book ratios and lower forecasted growth values.
The Russell Midcap Growth Index, mentioned on page 1, measures the performance of the mid-cap growth segment of the US equity universe. It includes those Russell Midcap Index companies with higher price-to-book ratios and higher forecasted growth values.
The Russell 1000 Value Index, mentioned on page 1, measures the performance of the large-cap value segment of the US equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.
The Russell 2000 Value Index, mentioned on page 1, measures the performance of the small-cap value segment of the US equity universe. It includes those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values.
6
The US Consumer Price Index (CPI), mentioned on page 2, is a measure of inflation that is calculated by the US Department of Labor, representing changes in prices of all goods and services purchased for consumption by urban households.
The US Producer Price Index (PPI), mentioned on page 2, measures the average change over time in the selling price of goods and services sold by domestic producers for their output. The prices included in the PPI are from the first commercial transaction for many products and some services.
Gross domestic product, mentioned on page 2, is a measure of all goods and services produced by a nation in a year. It is a measure of economic activity.
Frank Russell Company is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company.
Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index. Past performance is not a guarantee of future results.
| Nasdaq symbols | CUSIPs | |||
| Class A | DLMAX | 246093868 | ||
| Class C | DLMCX | 246093850 | ||
| Class R | DLMRX | 246093843 | ||
| Institutional Class | DLMIX | 246093835 |
7
Disclosure of Fund expenses
For the six-month period from May 1, 2021 to October 31, 2021 (Unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period from May 1, 2021 to October 31, 2021.
Actual expenses
The first section of the table shown, “Actual Fund return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The second section of the table shown, “Hypothetical 5% return,” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The Fund’s expenses shown in the table reflect fee waivers in effect and assume reinvestment of all dividends and distributions.
8
Delaware Mid Cap Value Fund
Expense analysis of an investment of $1,000
| Beginning | Ending | Expenses | |||||||||||||||
| Account Value | Account Value | Annualized | Paid During Period | ||||||||||||||
| 5/1/21 | 10/31/21 | Expense Ratio | 5/1/21 to 10/31/21* | ||||||||||||||
| Actual Fund return† | |||||||||||||||||
| Class A | $ | 1,000.00 | $ | 1,041.80 | 1.14% | $ | 5.87 | ||||||||||
| Class C | 1,000.00 | 1,037.30 | 1.89% | 9.71 | |||||||||||||
| Class R | 1,000.00 | 1,039.40 | 1.39% | 7.15 | |||||||||||||
| Institutional Class | 1,000.00 | 1,041.80 | 0.89% | 4.58 | |||||||||||||
| Hypothetical 5% return (5% return before expenses) | |||||||||||||||||
| Class A | $ | 1,000.00 | $ | 1,019.46 | 1.14% | $ | 5.80 | ||||||||||
| Class C | 1,000.00 | 1,015.68 | 1.89% | 9.60 | |||||||||||||
| Class R | 1,000.00 | 1,018.20 | 1.39% | 7.07 | |||||||||||||
| Institutional Class | 1,000.00 | 1,020.72 | 0.89% | 4.53 | |||||||||||||
| * |
“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. |
In addition to the Fund’s expenses reflected above, the Fund also indirectly bears its portion of the fees and expenses of the investment companies (Underlying Funds) in which it invests. The table above does not reflect the expenses of the Underlying Funds.
9
Security type / sector allocations and top 10 equity holdings
| Delaware Mid Cap Value Fund | As of October 31, 2021 (Unaudited) |
Sector designations may be different from the sector designations presented in other Fund materials.
The sector designations may represent the investment manager’s internal sector classifications.
| Security type / sector | Percentage of net assets | |
| Common Stock | 97.99% | |
| Basic Industry | 8.56% | |
| Business Services | 1.40% | |
| Capital Spending | 9.85% | |
| Consumer Cyclical | 6.23% | |
| Consumer Services | 8.22% | |
| Consumer Staples | 2.67% | |
| Energy | 5.42% | |
| Financial Services | 20.74% | |
| Healthcare | 5.88% | |
| Real Estate Investment Trusts | 7.68% | |
| Technology | 12.63% | |
| Transportation | 2.99% | |
| Utilities | 5.72% | |
| Short-Term Investments | 0.92% | |
| Total Value of Securities | 98.91% | |
| Receivables and Other Assets Net of Liabilities | 1.09% | |
| Total Net Assets | 100.00% |
Holdings are for informational purposes only and are subject to change at any time. They are not a recommendation to buy, sell, or hold any security.
| Top 10 equity holdings | Percentage of net assets | |
| East West Bancorp | 2.43% | |
| Hess | 2.24% | |
| Raymond James Financial | 2.12% | |
| Teradyne | 2.03% | |
| Synopsys | 1.96% | |
| Quanta Services | 1.96% | |
| Synchrony Financial | 1.79% | |
| Huntsman | 1.75% | |
| Hartford Financial Services Group | 1.75% | |
| KeyCorp | 1.71% |
10
| Delaware Mid Cap Value Fund | October 31, 2021 |
| Number of | ||||||
| shares | Value (US $) | |||||
| Common Stock – 97.99% | ||||||
| Basic Industry – 8.56% | ||||||
| Alcoa | 9,000 | $ | 413,550 | |||
| Axalta Coating Systems † | 12,250 | 382,077 | ||||
| Berry Global Group † | 12,451 | 816,039 | ||||
| Celanese | 4,200 | 678,342 | ||||
| Crown Holdings | 5,800 | 603,142 | ||||
| Graphic Packaging Holding | 35,250 | 702,532 | ||||
| Huntsman | 34,400 | 1,120,752 | ||||
| Louisiana-Pacific | 7,400 | 436,082 | ||||
| Newmont | 5,800 | 313,200 | ||||
| 5,465,716 | ||||||
| Business Services – 1.40% | ||||||
| Brink’s | 7,650 | 526,932 | ||||
| ManpowerGroup | 3,800 | 367,270 | ||||
| 894,202 | ||||||
| Capital Spending – 9.85% | ||||||
| AECOM † | 12,500 | 854,625 | ||||
| AMETEK | 3,100 | 410,440 | ||||
| Gates Industrial † | 25,950 | 426,618 | ||||
| ITT | 11,000 | 1,034,770 | ||||
| KBR | 25,100 | 1,065,244 | ||||
| Oshkosh | 6,000 | 642,000 | ||||
| Quanta Services | 10,300 | 1,249,184 | ||||
| United Rentals † | 1,600 | 606,576 | ||||
| 6,289,457 | ||||||
| Consumer Cyclical – 6.23% | ||||||
| Aptiv † | 4,700 | 812,583 | ||||
| DR Horton | 11,850 | 1,057,849 | ||||
| Johnson Controls International | 11,918 | 874,424 | ||||
| Regal Rexnord | 2,600 | 396,058 | ||||
| Stanley Black & Decker | 4,650 | 835,745 | ||||
| 3,976,659 | ||||||
| Consumer Services – 8.22% | ||||||
| AutoZone † | 450 | 803,178 | ||||
| Cable One | 200 | 342,242 | ||||
| Darden Restaurants | 3,350 | 482,869 | ||||
| Dollar Tree † | 4,200 | 452,592 | ||||
| Hasbro | 4,400 | 421,344 | ||||
| Marriott International Class A † | 5,970 | 955,319 | ||||
| Polaris | 4,200 | 482,790 | ||||
11
Schedule of investments
Delaware Mid Cap Value Fund
| Number of | ||||||
| shares | Value (US $) | |||||
| Common Stock (continued) | ||||||
| Consumer Services (continued) | ||||||
| PVH † | 2,350 | $ | 256,926 | |||
| Ross Stores | 4,200 | 475,440 | ||||
| VF | 4,750 | 346,180 | ||||
| ViacomCBS Class B | 6,300 | 228,186 | ||||
| 5,247,066 | ||||||
| Consumer Staples – 2.67% | ||||||
| Campbell Soup | 4,900 | 195,755 | ||||
| Conagra Brands | 11,450 | 368,690 | ||||
| Kellogg | 6,000 | 367,800 | ||||
| Tyson Foods Class A | 4,850 | 387,854 | ||||
| US Foods Holding † | 11,050 | 383,104 | ||||
| 1,703,203 | ||||||
| Energy – 5.42% | ||||||
| Coterra Energy | 27,000 | 575,640 | ||||
| Hess | 17,350 | 1,432,589 | ||||
| Marathon Oil | 64,850 | 1,058,352 | ||||
| Valero Energy | 5,100 | 394,383 | ||||
| 3,460,964 | ||||||
| Financial Services – 20.74% | ||||||
| Affiliated Managers Group | 3,900 | 654,732 | ||||
| Allstate | 6,950 | 859,507 | ||||
| Assurant | 4,200 | 677,502 | ||||
| East West Bancorp | 19,500 | 1,549,860 | ||||
| Globe Life | 5,675 | 505,189 | ||||
| Hancock Whitney | 14,900 | 737,252 | ||||
| Hartford Financial Services Group | 15,350 | 1,119,475 | ||||
| KeyCorp | 46,850 | 1,090,199 | ||||
| Raymond James Financial | 13,700 | 1,350,683 | ||||
| Reinsurance Group of America | 4,850 | 572,688 | ||||
| Signature Bank | 2,900 | 863,678 | ||||
| State Street | 6,800 | 670,140 | ||||
| Synchrony Financial | 24,650 | 1,144,992 | ||||
| Synovus Financial | 14,700 | 684,873 | ||||
| Western Alliance Bancorp | 6,600 | 766,194 | ||||
| 13,246,964 | ||||||
| Healthcare – 5.88% | ||||||
| AmerisourceBergen | 4,650 | 567,393 | ||||
| Quest Diagnostics | 5,150 | 755,917 | ||||
| Service Corp. International | 8,067 | 552,509 | ||||
12
| Number of | ||||||
| shares | Value (US $) | |||||
| Common Stock (continued) | ||||||
| Healthcare (continued) | ||||||
| STERIS | 3,000 | $ | 701,220 | |||
| Syneos Health † | 5,200 | 485,368 | ||||
| Zimmer Biomet Holdings | 4,850 | 694,132 | ||||
| 3,756,539 | ||||||
| Real Estate Investment Trusts – 7.68% | ||||||
| Apartment Income REIT | 11,727 | 628,685 | ||||
| Brandywine Realty Trust | 33,900 | 449,175 | ||||
| Host Hotels & Resorts † | 23,400 | 393,822 | ||||
| Kimco Realty | 30,000 | 678,000 | ||||
| Life Storage | 5,225 | 699,157 | ||||
| MGM Growth Properties Class A | 18,200 | 716,716 | ||||
| Outfront Media | 21,700 | 540,113 | ||||
| Spirit Realty Capital | 16,300 | 797,559 | ||||
| 4,903,227 | ||||||
| Technology – 12.63% | ||||||
| Agilent Technologies | 6,650 | 1,047,308 | ||||
| Avnet | 12,500 | 476,375 | ||||
| Ciena † | 9,900 | 537,471 | ||||
| Fiserv † | 2,650 | 260,999 | ||||
| Flex † | 39,850 | 673,465 | ||||
| Keysight Technologies † | 5,025 | 904,600 | ||||
| ON Semiconductor † | 13,350 | 641,735 | ||||
| Qorvo † | 4,600 | 773,858 | ||||
| Synopsys † | 3,750 | 1,249,425 | ||||
| Teradyne | 9,400 | 1,299,456 | ||||
| Western Digital † | 3,900 | 203,931 | ||||
| 8,068,623 | ||||||
| Transportation – 2.99% | ||||||
| CSX | 8,650 | 312,871 | ||||
| JB Hunt Transport Services | 2,750 | 542,272 | ||||
| Kirby † | 6,800 | 356,388 | ||||
| Southwest Airlines † | 14,700 | 695,016 | ||||
| 1,906,547 | ||||||
| Utilities – 5.72% | ||||||
| CMS Energy | 10,800 | 651,780 | ||||
| Edison International | 7,300 | 459,389 | ||||
| MDU Resources Group | 13,600 | 417,928 | ||||
| NRG Energy | 14,400 | 574,416 | ||||
| Public Service Enterprise Group | 12,750 | 813,450 | ||||
13
Schedule of investments
Delaware Mid Cap Value Fund
| Number of | |||||
| shares | Value (US $) | ||||
| Common Stock (continued) | |||||
| Utilities (continued) | |||||
| WEC Energy Group | 4,500 | $ | 405,270 | ||
| Xcel Energy | 5,100 | 329,409 | |||
| 3,651,642 | |||||
| Total Common Stock (cost $38,680,462) | 62,570,809 | ||||
| Short-Term Investments – 0.92% | |||||
| Money Market Mutual Funds – 0.92% | |||||
| BlackRock FedFund – Institutional Shares (seven-day effective yield 0.03%) |
146,960 | 146,960 | |||
| Fidelity Investments Money Market Government Portfolio – Class I (seven-day effective yield 0.01%) |
146,960 | 146,960 | |||
| GS Financial Square Government Fund – Institutional Shares (seven-day effective yield 0.03%) |
146,960 | 146,960 | |||
| Morgan Stanley Government Portfolio – Institutional Share Class (seven-day effective yield 0.03%) |
146,961 | 146,961 | |||
| Total Short-Term Investments (cost $587,841) | 587,841 | ||||
| Total Value of Securities–98.91% | |||||
| (cost $39,268,303) | $ | 63,158,650 | |||
| † | Non-income producing security. |
Summary of abbreviations:
GS – Goldman Sachs
REIT – Real Estate Investment Trust
See accompanying notes, which are an integral part of the financial statements.
14
| Statement of assets and liabilities | |
| Delaware Mid Cap Value Fund | October 31, 2021 |
| Assets: | ||
| Investments, at value* | $ | 63,158,650 |
| Cash | 6,294 | |
| Receivable for fund shares sold | 750,280 | |
| Dividends receivable | 37,238 | |
| Receivable for securities sold | 33,283 | |
| Foreign tax reclaims receivable | 1,184 | |
| Total Assets | 63,986,929 | |
| Liabilities: | ||
| Investment management fees payable to affiliates | 44,935 | |
| Payable for fund shares redeemed | 22,974 | |
| Accounting and administration fees payable to non-affiliates | 17,174 | |
| Reports and statements to shareholders expenses payable to non-affiliates | 17,027 | |
| Dividend disbursing and transfer agent fees and expenses payable to non-affiliates |
10,010 | |
| Distribution fees payable to affiliates | 5,915 | |
| Other accrued expenses | 5,151 | |
| Audit and tax fees payable | 4,365 | |
| Accounting and administration expenses payable to affiliates | 554 | |
| Dividend disbursing and transfer agent fees and expenses payable to affiliates | 511 | |
| Legal fees payable to affiliates | 239 | |
| Trustees’ fees and expenses payable to affiliates | 116 | |
| Reports and statements to shareholders expenses payable to affiliates | 107 | |
| Total Liabilities | 129,078 | |
| Total Net Assets | $ | 63,857,851 |
| Net Assets Consist of: | ||
| Paid-in capital | $ | 41,536,259 |
| Total distributable earnings (loss) | 22,321,592 | |
| Total Net Assets | $ | 63,857,851 |
15
Statement of assets and liabilities
Delaware Mid Cap Value Fund
| Net Asset Value | |||
| Class A: | |||
| Net assets | $ | 14,035,687 | |
| Shares of beneficial interest outstanding, unlimited authorization, no par | 1,706,038 | ||
| Net asset value per share | $ | 8.23 | |
| Sales charge | 5.75 | % | |
| Offering price per share, equal to net asset value per share / (1 - sales charge) | $ | 8.73 | |
| Class C: | |||
| Net assets | $ | 4,185,586 | |
| Shares of beneficial interest outstanding, unlimited authorization, no par | 557,247 | ||
| Net asset value per share | $ | 7.51 | |
| Class R: | |||
| Net assets | $ | 202,250 | |
| Shares of beneficial interest outstanding, unlimited authorization, no par | 24,767 | ||
| Net asset value per share | $ | 8.17 | |
| Institutional Class: | |||
| Net assets | $ | 45,434,328 | |
| Shares of beneficial interest outstanding, unlimited authorization, no par | 5,518,462 | ||
| Net asset value per share | $ | 8.23 | |
| ____________________ | |||
| * Investments, at cost | $ | 39,268,303 |
See accompanying notes, which are an integral part of the financial statements.
16
| Statement of operations | |
| Delaware Mid Cap Value Fund | Year ended October 31, 2021 |
| Investment Income: | |||
| Dividends | $ | 1,992,577 | |
| Foreign tax withheld | 1,184 | ||
| 1,993,761 | |||
| Expenses: | |||
| Management fees | 591,099 | ||
| Distribution expenses – Class A | 26,086 | ||
| Distribution expenses – Class C | 25,395 | ||
| Distribution expenses – Class R | 2,035 | ||
| Dividend disbursing and transfer agent fees and expenses | 91,982 | ||
| Registration fees | 71,667 | ||
| Accounting and administration expenses | 51,584 | ||
| Audit and tax fees | 31,764 | ||
| Reports and statements to shareholders expenses | 28,917 | ||
| Legal fees | 27,052 | ||
| Custodian fees | 6,932 | ||
| Trustees’ fees and expenses | 3,025 | ||
| Other | 13,741 | ||
| 971,279 | |||
| Less expenses waived | (216,334 | ) | |
| Less expenses paid indirectly | (49 | ) | |
| Total operating expenses | 754,896 | ||
| Net Investment Income | 1,238,865 | ||
| Net Realized and Unrealized Gain: | |||
| Net realized gain on investments | 6,803,513 | ||
| Net change in unrealized appreciation (depreciation) of investments | 24,055,839 | ||
| Net Realized and Unrealized Gain | 30,859,352 | ||
| Net Increase in Net Assets Resulting from Operations | $ | 32,098,217 |
See accompanying notes, which are an integral part of the financial statements.
17
Statements of changes in net assets
Delaware Mid Cap Value Fund
| Year ended | |||||||||
| 10/31/21 | 10/31/20 | ||||||||
| Increase (Decrease) in Net Assets from Operations: | |||||||||
| Net investment income | $ | 1,238,865 | $ | 830,229 | |||||
| Net realized gain (loss) | 6,803,513 | (8,940,819 | ) | ||||||
| Net change in unrealized appreciation (depreciation) | 24,055,839 | (4,366,560 | ) | ||||||
| Net increase (decrease) in net assets resulting from | |||||||||
| operations | 32,098,217 | (12,477,150 | ) | ||||||
| Dividends and Distributions to Shareholders from: | |||||||||
| Distributable earnings: | |||||||||
| Class A | (58,546 | ) | (7,832 | ) | |||||
| Class C | (4,116 | ) | — | ||||||
| Class R | (2,383 | ) | — | ||||||
| Institutional Class | (770,040 | ) | (270,191 | ) | |||||
| (835,085 | ) | (278,023 | ) | ||||||
| Capital Share Transactions: | |||||||||
| Proceeds from shares sold: | |||||||||
| Class A | 7,902,041 | 1,563,847 | |||||||
| Class C | 2,396,253 | 315,008 | |||||||
| Class R | 174,701 | 103,392 | |||||||
| Institutional Class | 10,216,482 | 88,760,665 | |||||||
| Net asset value of shares issued upon reinvestment of | |||||||||
| dividends and distributions: | |||||||||
| Class A | 58,536 | 7,649 | |||||||
| Class C | 4,116 | — | |||||||
| Class R | 2,383 | — | |||||||
| Institutional Class | 715,674 | 259,256 | |||||||
| 21,470,186 | 91,009,817 | ||||||||
18
| Year ended | |||||||||
| 10/31/21 | 10/31/20 | ||||||||
| Capital Share Transactions (continued): | |||||||||
| Cost of shares redeemed: | |||||||||
| Class A | $ | (4,091,297 | ) | $ | (3,150,172 | ) | |||
| Class C | (430,178 | ) | (585,359 | ) | |||||
| Class R | (399,615 | ) | (11,511 | ) | |||||
| Institutional Class | (56,918,622 | ) | (29,710,808 | ) | |||||
| (61,839,712 | ) | (33,457,850 | ) | ||||||
| Increase (decrease) in net assets derived from capital share | |||||||||
| transactions | (40,369,526 | ) | 57,551,967 | ||||||
| Net Increase (Decrease) in Net Assets | (9,106,394 | ) | 44,796,794 | ||||||
| Net Assets: | |||||||||
| Beginning of year | 72,964,245 | 28,167,451 | |||||||
| End of year | $ | 63,857,851 | $ | 72,964,245 | |||||
See accompanying notes, which are an integral part of the financial statements.
19
Financial highlights
Delaware Mid Cap Value Fund Class A
Selected data for each share of the Fund outstanding throughout each period were as follows:
| Net asset value, beginning of period |
| Income (loss) from investment operations: |
| Net investment income1 |
| Net realized and unrealized gain (loss) |
| Total from investment operations |
| Less dividends and distributions from: |
| Net investment income |
| Net realized gain |
| Total dividends and distributions |
| Net asset value, end of period |
| Total return2 |
| Ratios and supplemental data: |
| Net assets, end of period (000 omitted) |
| Ratio of expenses to average net assets3 |
| Ratio of expenses to average net assets prior to fees waived3 |
| 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 | Calculated using average shares outstanding. |
| 2 | Total return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total 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. |
| 3 | Expense ratios do not include expenses of the Underlying Funds in which the Fund invests. |
See accompanying notes, which are an integral part of the financial statements.
20
| Year ended | ||||||||||||||||||||
| 10/31/21 | 10/31/20 | 10/31/19 | 10/31/18 | 10/31/17 | ||||||||||||||||
| $ | 5.48 | $ | 6.27 | $ | 5.94 | $ | 6.23 | $ | 5.09 | |||||||||||
| 0.11 | 0.05 | 0.02 | 0.03 | 0.02 | ||||||||||||||||
| 2.69 | (0.83 | ) | 0.52 | (0.24 | ) | 1.20 | ||||||||||||||
| 2.80 | (0.78 | ) | 0.54 | (0.21 | ) | 1.22 | ||||||||||||||
| (0.05 | ) | (0.01 | ) | (0.02 | ) | (0.02 | ) | (0.03 | ) | |||||||||||
| — | — | (0.19 | ) | (0.06 | ) | (0.05 | ) | |||||||||||||
| (0.05 | ) | (0.01 | ) | (0.21 | ) | (0.08 | ) | (0.08 | ) | |||||||||||
| $ | 8.23 | $ | 5.48 | $ | 6.27 | $ | 5.94 | $ | 6.23 | |||||||||||
| 51.43% | (12.53% | ) | 9.99% | (3.45% | ) | 24.17% | ||||||||||||||
| $ | 14,036 | $ | 6,913 | $ | 9,758 | $ | 10,377 | $ | 7,887 | |||||||||||
| 1.14% | 1.14% | 1.17% | 1.25% | 1.25% | ||||||||||||||||
| 1.41% | 1.45% | 2.06% | 2.34% | 2.86% | ||||||||||||||||
| 1.39% | 0.86% | 0.39% | 0.40% | 0.42% | ||||||||||||||||
| 1.12% | 0.55% | (0.50% | ) | (0.69% | ) | (1.19% | ) | |||||||||||||
| 19% | 43% | 12% | 20% | 24% | ||||||||||||||||
21
Financial highlights
Delaware Mid Cap Value Fund Class C
Selected data for each share of the Fund outstanding throughout each period were as follows:
| Net asset value, beginning of period |
| Income (loss) from investment operations: |
| Net investment income (loss)1 |
| Net realized and unrealized gain (loss) |
| Total from investment operations |
| Less dividends and distributions from: |
| Net investment income |
| Net realized gain |
| Total dividends and distributions |
| Net asset value, end of period |
| Total return2 |
| Ratios and supplemental data: |
| Net assets, end of period (000 omitted) |
| Ratio of expenses to average net assets3 |
| Ratio of expenses to average net assets prior to fees waived3 |
| Ratio of net investment income (loss) to average net assets |
| Ratio of net investment income (loss) to average net assets prior to fees waived |
| Portfolio turnover |
| 1 | Calculated using average shares outstanding. |
| 2 | Total return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total 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. |
| 3 | Expense ratios do not include expenses of the Underlying Funds in which the Fund invests. |
See accompanying notes, which are an integral part of the financial statements.
22
| Year ended | ||||||||||||||||||||
| 10/31/21 | 10/31/20 | 10/31/19 | 10/31/18 | 10/31/17 | ||||||||||||||||
| $ | 5.01 | $ | 5.78 | $ | 5.51 | $ | 5.81 | $ | 4.76 | |||||||||||
| 0.04 | 0.01 | (0.02 | ) | (0.02 | ) | (0.02 | ) | |||||||||||||
| 2.47 | (0.78 | ) | 0.48 | (0.22 | ) | 1.12 | ||||||||||||||
| 2.51 | (0.77 | ) | 0.46 | (0.24 | ) | 1.10 | ||||||||||||||
| (0.01 | ) | — | — | — | — | |||||||||||||||
| — | — | (0.19 | ) | (0.06 | ) | (0.05 | ) | |||||||||||||
| (0.01 | ) | — | (0.19 | ) | (0.06 | ) | (0.05 | ) | ||||||||||||
| $ | 7.51 | $ | 5.01 | $ | 5.78 | $ | 5.51 | $ | 5.81 | |||||||||||
| 50.25% | (13.32% | ) | 9.25% | (4.26% | ) | 23.30% | ||||||||||||||
| $ | 4,186 | $ | 1,454 | $ | 1,994 | $ | 1,837 | $ | 1,619 | |||||||||||
| 1.89% | 1.89% | 1.92% | 2.00% | 2.00% | ||||||||||||||||
| 2.16% | 2.20% | 2.81% | 3.09% | 3.61% | ||||||||||||||||
| 0.64% | 0.11% | (0.36% | ) | (0.35% | ) | (0.33% | ) | |||||||||||||
| 0.37% | (0.20% | ) | (1.25% | ) | (1.44% | ) | (1.94% | ) | ||||||||||||
| 19% | 43% | 12% | 20% | 24% | ||||||||||||||||
23
Financial highlights
Delaware Mid Cap Value Fund Class R
Selected data for each share of the Fund outstanding throughout each period were as follows:
| Net asset value, beginning of period |
| Income (loss) from investment operations: |
| Net investment income1 |
| Net realized and unrealized gain (loss) |
| Total from investment operations |
| Less dividends and distributions from: |
| Net investment income |
| Net realized gain |
| Total dividends and distributions |
| Net asset value, end of period |
| Total return2 |
| Ratios and supplemental data: |
| Net assets, end of period (000 omitted) |
| Ratio of expenses to average net assets3 |
| Ratio of expenses to average net assets prior to fees waived3 |
| 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 | Calculated using average shares outstanding. |
| 2 | Total return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total 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. |
| 3 | Expense ratios do not include expenses of the Underlying Funds in which the Fund invests. |
See accompanying notes, which are an integral part of the financial statements.
24
| Year ended | ||||||||||||||||||||
| 10/31/21 | 10/31/20 | 10/31/19 | 10/31/18 | 10/31/17 | ||||||||||||||||
| $ | 5.44 | $ | 6.25 | $ | 5.93 | $ | 6.22 | $ | 5.08 | |||||||||||
| 0.08 | 0.03 | 0.01 | 0.01 | 0.01 | ||||||||||||||||
| 2.70 | (0.84 | ) | 0.51 | (0.23 | ) | 1.20 | ||||||||||||||
| 2.78 | (0.81 | ) | 0.52 | (0.22 | ) | 1.21 | ||||||||||||||
| (0.05 | ) | — | (0.01 | ) | (0.01 | ) | (0.02 | ) | ||||||||||||
| — | — | (0.19 | ) | (0.06 | ) | (0.05 | ) | |||||||||||||
| (0.05 | ) | — | (0.20 | ) | (0.07 | ) | (0.07 | ) | ||||||||||||
| $ | 8.17 | $ | 5.44 | $ | 6.25 | $ | 5.93 | $ | 6.22 | |||||||||||
| 51.25% | (12.96% | ) | 9.69% | (3.66% | ) | 23.96% | ||||||||||||||
| $ | 202 | $ | 283 | $ | 225 | $ | 49 | $ | 31 | |||||||||||
| 1.39% | 1.39% | 1.42% | 1.50% | 1.50% | ||||||||||||||||
| 1.66% | 1.70% | 2.31% | 2.59% | 3.11% | ||||||||||||||||
| 1.14% | 0.61% | 0.14% | 0.15% | 0.17% | ||||||||||||||||
| 0.87% | 0.30% | (0.75% | ) | (0.94% | ) | (1.44% | ) | |||||||||||||
| 19% | 43% | 12% | 20% | 24% | ||||||||||||||||
25
Financial highlights
Delaware Mid Cap Value Fund Institutional Class
Selected data for each share of the Fund outstanding throughout each period were as follows:
| Net asset value, beginning of period |
| Income (loss) from investment operations: |
| Net investment income1 |
| Net realized and unrealized gain (loss) |
| Total from investment operations |
| Less dividends and distributions from: |
| Net investment income |
| Net realized gain |
| Total dividends and distributions |
| Net asset value, end of period |
| Total return2 |
| Ratios and supplemental data: |
| Net assets, end of period (000 omitted) |
| Ratio of expenses to average net assets3 |
| Ratio of expenses to average net assets prior to fees waived3 |
| 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 | Calculated using average shares outstanding. |
| 2 | Total return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total 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. |
| 3 | Expense ratios do not include expenses of the Underlying Funds in which the Fund invests. |
See accompanying notes, which are an integral part of the financial statements.
26
| Year ended | |||||||||||||||||||||
| 10/31/21 | 10/31/20 | 10/31/19 | 10/31/18 | 10/31/17 | |||||||||||||||||
| $ | 5.48 | $ | 6.28 | $ | 5.95 | $ | 6.24 | $ | 5.10 | ||||||||||||
| 0.12 | 0.06 | 0.04 | 0.04 | 0.04 | |||||||||||||||||
| 2.70 | (0.84 | ) | 0.51 | (0.23 | ) | 1.19 | |||||||||||||||
| 2.82 | (0.78 | ) | 0.55 | (0.19 | ) | 1.23 | |||||||||||||||
| (0.07 | ) | (0.02 | ) | (0.03 | ) | (0.04 | ) | (0.04 | ) | ||||||||||||
| – | – | (0.19 | ) | (0.06 | ) | (0.05 | ) | ||||||||||||||
| (0.07 | ) | (0.02 | ) | (0.22 | ) | (0.10 | ) | (0.09 | ) | ||||||||||||
| $ | 8.23 | $ | 5.48 | $ | 6.28 | $ | 5.95 | $ | 6.24 | ||||||||||||
| 51.85% | (12.46% | ) | 10.29% | (3.21% | ) | 24.42% | |||||||||||||||
| $ | 45,434 | $ | 64,314 | $ | 16,190 | $ | 9,804 | $ | 3,159 | ||||||||||||
| 0.89% | 0.89% | 0.92% | 1.00% | 1.00% | |||||||||||||||||
| 1.16% | 1.20% | 1.81% | 2.09% | 2.61% | |||||||||||||||||
| 1.64% | 1.11% | 0.64% | 0.65% | 0.67% | |||||||||||||||||
| 1.37% | 0.80% | (0.25% | ) | (0.44% | ) | (0.94% | ) | ||||||||||||||
| 19% | 43% | 12% | 20% | 24% | |||||||||||||||||
27
| Delaware Mid Cap Value Fund | October 31, 2021 |
Delaware Group® Equity Funds I (Trust) is organized as a Delaware statutory trust and offers one series: Delaware Mid Cap Value Fund (Fund). The Trust is an open-end investment company. The Fund is considered diversified under the Investment Company Act of 1940, as amended, and offers Class A, Class C, Class R, and Institutional Class shares. Class A shares are sold with a maximum front-end sales charge of 5.75%. There is no front-end sales charge when you purchase $1,000,000 or more of Class A shares. However, if Delaware Distributors, L.P. (DDLP) paid your financial intermediary a commission on your purchase of $1,000,000 or more of Class A shares, for shares purchased prior to July 1, 2020, you will have to pay a limited contingent deferred sales charge (Limited CDSC) of 1.00% if you redeem these shares within the first year after your purchase and 0.50% if you redeem shares within the second year; and or for shares purchased on or after July 1, 2020, you will have to pay a Limited CDSC of 1.00% if you redeem these shares within the first 18 months after your purchase; unless a specific waiver of the Limited CDSC applies. 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.
1. Significant Accounting Policies
The Fund follows accounting and reporting guidance under Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services — Investment Companies. The following accounting policies are in accordance with US generally accepted accounting principles (US GAAP) and are consistently followed by the Fund.
Security Valuation — Equity securities, except those traded on the Nasdaq Stock Market LLC (Nasdaq), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange on the valuation date. Equity securities traded on the Nasdaq are valued in accordance with the Nasdaq Official Closing Price, which may not be the last sales price. If, on a particular day, an equity security does not trade, the mean between the bid and ask prices will be used, which approximates fair value. Open-end investment companies are valued at their published net asset value (NAV). 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 October 31, 2021 and for all open tax years (years ended October 31, 2018–October 31, 2020), and has concluded that no provision for federal income tax is
28
required in the Fund’s financial statements. In regard to foreign taxes only, the Fund has open tax years in certain foreign countries in which it invests that may date back to the inception of the Fund. If applicable, the Fund recognizes interest accrued on unrecognized tax benefits in interest expense and penalties in “Other” on the “Statement of operations.” During the year ended October 31, 2021, 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.
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 fund 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. 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 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 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.
The Fund receives earnings credits from its custodian when positive cash balances are maintained, which may be used to offset custody fees. There were no such earnings credits for the year ended October 31, 2021.
The Fund receives earnings credits from its transfer agent when positive cash balances are maintained, which may be used to offset transfer agent fees. If the amount earned is greater than $1, the expenses paid under this arrangement are included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses” with the corresponding expenses offset included under “Less expenses paid indirectly.” For the year ended October 31, 2021, the Fund earned $49 under this arrangement.
29
Notes to financial statements
Delaware Mid Cap Value Fund
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates
In accordance with the terms of its investment management agreement, the Fund pays Delaware Management Company (DMC), a series of Macquarie Investment Management Business Trust and the investment manager, an annual fee which is calculated daily and paid monthly at the rates of 0.75% on the first $500 million of average daily net assets of the Fund, 0.70% on the next $500 million, 0.65% on the next $1.5 billion, and 0.60% on average daily net assets in excess of $2.5 billion.
DMC has contractually agreed to waive all or a portion, if any, of its management fee and/or pay/reimburse expenses (excluding any distribution and service (12b-1) fees, acquired fund fees and expenses, taxes, interest, 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), in order to prevent total annual fund operating expenses from exceeding 0.89% of the Fund’s average daily net assets from November 1, 2020 through October 31, 2021.* 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.
DMC may permit its affiliates, Macquarie Investment Management Global Limited (MIMGL) and Macquarie Funds Management Hong Kong Limited (together, the “Affiliated Sub-Advisors”), to execute Fund equity security trades on its behalf. DMC may also seek quantitative support from MIMGL. Although the Affiliated Sub-Advisors serve as sub-advisors, DMC has ultimate responsibility for all investment advisory services. For these services, DMC, not the Fund, may pay each Affiliated Sub-Advisor a portion of its investment management fee.
Delaware Investments Fund Services Company (DIFSC), an affiliate of DMC, provides fund accounting and financial administrative oversight services to the Fund. For these services, DIFSC’s fees are calculated daily and paid monthly, based on the aggregate daily net assets of all funds within the Delaware Funds at the following annual rates: 0.00475% of the first $35 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $45 billion (Total Fee). Each fund in the Delaware Funds pays a minimum of $4,000, which, in aggregate, is subtracted from the Total Fee. Each fund then pays its portion of the remainder of the Total Fee on a relative NAV basis. This amount is included on the “Statement of operations” under “Accounting and administration expenses.” For the year ended October 31, 2021, the Fund was charged $6,711 for these services.
DIFSC is also the transfer agent and dividend disbursing agent of the Fund. For these services, DIFSC’s fees are calculated daily and paid monthly, based on the aggregate daily net assets of the retail funds within the Delaware Funds at the following annual rates: 0.014% of the first $20 billion; 0.011% of the next $5 billion; 0.007% of the next $5 billion; 0.005% of the next $20 billion; and 0.0025% of average daily net assets in excess of $50 billion. The fees payable to DIFSC under the shareholder services agreement described above are allocated among all retail funds in the Delaware Funds on a relative NAV basis. This amount is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.” For the year ended October 31, 2021, the Fund was charged $6,697 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.
30
Sub-transfer agency fees are paid by the Fund and are also included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.” The fees are calculated daily and paid as invoices are received on a monthly or quarterly basis.
Pursuant to a distribution agreement and distribution plan, the Fund pays DDLP, the distributor and an affiliate of DMC, an annual 12b-1 fee of 0.25%, 1.00%, and 0.50% of the average daily net assets of the Class A, Class C, and Class R shares, respectively. These fees are calculated daily and paid monthly. Institutional class shares do not pay 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 and regulatory reporting services to the Fund. For the year ended October 31, 2021, the Fund was charged $2,751 for internal legal 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 October 31, 2021, DDLP earned $4,143 for commissions on sales of the Fund’s Class A shares. For the year ended October 31, 2021, DDLP received gross CDSC commissions of $114 and $101 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.
| * | The aggregate contractual waiver period covering this report is from February 28, 2020 through March 1, 2022. |
3. Investments
For the year ended October 31, 2021, the Fund made purchases and sales of investment securities other than short-term investments as follows:
| Purchases | $ | 14,445,752 |
| Sales | 55,024,417 |
The tax cost of investments includes adjustments to net unrealized appreciation (depreciation) which may not necessarily be the final tax cost basis adjustments, but approximate the tax basis unrealized gains and losses that may be realized and distributed to shareholders. At October 31, 2021, the cost and
31
Notes to financial statements
Delaware Mid Cap Value Fund
3. Investments (continued)
unrealized appreciation (depreciation) of investments for federal income tax purposes for the Fund were as follows:
| Cost of investments | $ | 40,543,237 | |
| Aggregate unrealized appreciation of investments | $ | 23,990,465 | |
| Aggregate unrealized depreciation of investments | (1,375,052 | ) | |
| Net unrealized appreciation of investments | $ | 22,615,413 |
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 as follows:
| Level 1 – | Inputs are quoted prices in active markets for identical investments. (Examples: equity securities, open-end investment companies, futures contracts, and exchange-traded options contracts) |
| Level 2 – | Other observable inputs, including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, and default rates) or other market-corroborated inputs. (Examples: debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, and fair valued securities) |
| Level 3 – | Significant unobservable inputs, including the Fund’s own assumptions used to determine the fair value of investments. (Examples: broker-quoted securities and fair valued securities) |
Level 3 investments are valued using significant unobservable inputs. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are 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 October 31, 2021:
| Level 1 | |||
| Securities | |||
| Assets: | |||
| Common Stock | $ | 62,570,809 | |
| Short-Term Investments | 587,841 | ||
| Total Value of Securities | $ | 63,158,650 | |
During the year ended October 31, 2021, there were no transfers into or out of Level 3 investments. The Fund’s policy is to recognize transfers into or out of Level 3 investments based on fair value at the beginning of the reporting period.
A reconciliation of Level 3 investments is presented when the Fund has a significant amount of Level 3 investments at the beginning, interim, or end of the period in relation to the Fund’s net assets. During the year ended October 31, 2021, 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 October 31, 2021 and 2020 were as follows:
| Year ended | ||||||
| 10/31/21 | 10/31/20 | |||||
| Ordinary income | $ | 835,085 | $ | 278,023 | ||
| Total | $ | 835,085 | $ | 278,023 | ||
5. Components of Net Assets on a Tax Basis
As of October 31, 2021, the components of net assets on a tax basis were as follows:
| Shares of beneficial interest | $ | 41,536,259 | ||
| Undistributed ordinary income | 1,014,376 | |||
| Capital loss carryforwards | (1,308,197 | ) | ||
| Unrealized appreciation of investments | 22,615,413 | |||
| Net assets | $ | 63,857,851 |
The differences between book basis and tax basis components of net assets are primarily attributable to tax deferral of losses on wash sales.
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Notes to financial statements
Delaware Mid Cap Value Fund
5. Components of Net Assets on a Tax Basis (continued)
For financial reporting purposes, capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Results of operations and net assets were not affected by these reclassifications. For the year ended October 31, 2021, the Fund had no reclassifications.
For federal income tax purposes, capital loss carryforwards may be carried forward and applied against future capital gains. At October 31, 2021, the Fund utilized $6,503,870 of capital loss carryforwards.
At October 31, 2021, capital loss carryforwards available to offset future realized capital gains were as follows:
| Loss carryforward character | |||||
| Short-term | Long-term | Total | |||
| $1,308,197 | $— | $ | 1,308,197 | ||
6. Capital Shares
Transactions in capital shares were as follows:
| Year ended | ||||||
| 10/31/21 | 10/31/20 | |||||
| Shares sold: | ||||||
| Class A | 1,026,869 | 303,382 | ||||
| Class C | 328,965 | 59,336 | ||||
| Class R | 23,305 | 18,023 | ||||
| Institutional Class | 1,407,703 | 14,608,985 | ||||
| Shares issued upon reinvestment of dividends and distributions: | ||||||
| Class A | 9,019 | 1,154 | ||||
| Class C | 689 | — | ||||
| Class R | 369 | — | ||||
| Institutional Class | 110,443 | 39,162 | ||||
| 2,907,362 | 15,030,042 | |||||
| Shares redeemed: | ||||||
| Class A | (591,814 | ) | (597,582 | ) | ||
| Class C | (62,523 | ) | (114,228 | ) | ||
| Class R | (50,930 | ) | (2,059 | ) | ||
| Institutional Class | (7,727,879 | ) | (5,496,699 | ) | ||
| (8,433,146 | ) | (6,210,568 | ) | |||
| Net increase (decrease) | (5,525,784 | ) | 8,819,474 | |||
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Certain shareholders may exchange shares of one class for shares of another class in the same Fund. These exchange transactions are included as subscriptions and redemptions in the table above and on the “Statements of changes in net assets.” For the years ended October 31, 2021 and 2020, the Fund had the following exchange transactions:
| Exchange Redemptions | Exchange Subscriptions | |||||||||
| Institutional | ||||||||||
| Class A | Class C | Class A | Class | |||||||
| Shares | Shares | Shares | Shares | Value | ||||||
| Year ended | ||||||||||
| 10/31/21 | 3,085 | 9,128 | 8,375 | 3,080 | $77,661 | |||||
| 10/31/20 | — | 4,835 | 4,439 | — | 22,000 | |||||
7. Line of Credit
The Fund, along with certain other funds in the Delaware Funds (Participants), was a participant in a $275,000,000 revolving line of credit (Agreement) 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 November 2, 2020.
On November 2, 2020, the Fund, along with the other Participants entered into an amendment to the Agreement for an amount of $225,000,000 to be used as described above. It operates in substantially the same manner as the original Agreement with the addition of an upfront fee of 0.05%, which was allocated across the Participants. The line of credit available under the Agreement expires on November 1, 2021.
The Fund had no amounts outstanding as of October 31, 2021, or at any time during the year then ended.
8. Securities Lending
The Fund, along with other funds in the Delaware Funds, may lend its securities pursuant to a security lending agreement (Lending Agreement) with The Bank of New York Mellon (BNY Mellon). At the time a security is loaned, the borrower must post collateral equal to the required percentage of the market value of the loaned security, including any accrued interest. The required percentage is: (1) 102% with respect to US securities and foreign securities that are denominated and payable in US dollars; and (2) 105% with respect to foreign securities. With respect to each loan, if on any business day the aggregate market value of securities collateral plus cash collateral held is less than the aggregate market value of the securities which are the subject of such loan, the borrower will be notified to provide additional collateral by the end of the following business day, which, together with the collateral already held, will be not less than the applicable initial collateral requirements for such security loan. If the aggregate market value of securities collateral and cash collateral held with respect to a security loan exceeds the applicable initial
35
Notes to financial statements
Delaware Mid Cap Value Fund
8. Securities Lending (continued)
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. The Fund can also accept US government securities and letters of credit (non-cash collateral) in connection with securities loans.
In the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Fund or, at the discretion of the lending agent, replace the loaned securities. The Fund continues to record dividends or interest, as applicable, on the securities loaned and is subject to changes in value of the securities loaned that may occur during the term of the loan. The Fund has the right under the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized 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 October 31, 2021, the Fund had no securities out on loan.
9. Credit and Market Risk
Beginning in January 2020, global financial markets have experienced and may continue to experience significant volatility resulting from the spread of a novel coronavirus known as COVID-19. The outbreak
36
of COVID-19 has resulted in travel and border restrictions, quarantines, supply chain disruptions, lower consumer demand, and general market uncertainty. The effects of COVID-19 have and may continue to adversely affect the global economy, the economies of certain nations, and individual issuers, all of which may negatively impact the Fund’s performance.
Investments in equity securities in general are subject to market risks that may cause their prices to fluctuate over time. Fluctuations in the value of equity securities in which the Fund invests will cause the NAV of the Fund to fluctuate.
The Fund invests a significant portion of its assets in small- and mid-sized companies and may be subject to certain risks associated with ownership of securities of such companies. Investments in small- or mid-sized companies may be more volatile than investments in larger companies for a number of reasons, which include limited financial resources or a dependence on narrow product lines.
The Fund invests in REITs and is subject to the risks associated with that industry. If the Fund holds real estate directly or receives rental income directly from real estate holdings, its tax status as a regulated investment company may be jeopardized. There were no direct real estate holdings during the year ended October 31, 2021. The Fund’s REIT holdings are also affected by interest rate changes, particularly if the REITs it holds use floating rate debt to finance their ongoing operations.
The Fund may invest up to 15% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A promulgated under the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair the Fund from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, the Board has delegated to DMC, 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 October 31, 2021, there were no Rule 144A securities held by the Fund.
10. Contractual Obligations
The Fund enters into contracts in the normal course of business that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Fund’s existing contracts and expects the risk of loss to be remote.
11. Subsequent Events
On November 1, 2021, the Fund, along with the other Participants, entered into an amendment to the agreement for a $355,000,000 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. Under the amendment to the agreement, the Participants are charged an annual commitment fee of 0.15%, with the addition of
37
Notes to financial statements
Delaware Mid Cap Value Fund
11. Subsequent Events (continued)
an upfront fee of 0.05%, 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 October 31, 2022.
Management has determined no other material events or transactions occurred subsequent to October 31, 2021, that would require recognition or disclosure in the Fund’s financial statements.
38
Report of independent registered public accounting firm
To the Board of Trustees of Delaware Group® Equity Funds I and Shareholders of Delaware Mid Cap Value Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Delaware Mid Cap Value Fund (constituting Delaware Group® Equity Funds I, referred to hereafter as the “Fund”) as of October 31, 2021, the related statement of operations for the year ended October 31, 2021, the statements of changes in net assets for each of the two years in the period ended October 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended October 31, 2021 (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, 2020, 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, 2021 and the financial highlights for each of the five years in the period ended October 31, 2021 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, 2021 by correspondence with the custodian and transfer agents. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
December 20, 2021
We have served as the auditor of one or more investment companies in Delaware Funds® by Macquarie since 2010.
39
Other Fund information (Unaudited)
Delaware Mid Cap Value Fund
Liquidity Risk Management Program
The Securities and Exchange Commission (the “SEC”) has adopted Rule 22e-4 under the Investment Company Act of 1940 (the “Liquidity Rule”), which requires all open-end funds (other than money market funds) to adopt and implement a program reasonably designed to assess and manage the fund’s “liquidity risk,” defined as the risk that the fund could not meet requests to redeem shares issued by the fund without significant dilution of remaining investors’ interests in the fund.
The Fund has adopted and implemented a liquidity risk management program in accordance with the Liquidity Rule (the “Program”). The Board has designated a member of the US Operational Risk Group of Macquarie Asset Management as the Program Administrator for each Fund in the Trust.
As required by the Liquidity Rule, the Program includes policies and procedures that provide for: (1) assessment, management, and review (no less frequently than annually) of the Fund’s liquidity risk; (2) classification of each of the Fund’s portfolio holdings into one of four liquidity categories (Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid); (3) funds that do not primarily hold assets that are Highly Liquid, establishing and maintaining a minimum percentage of the Fund’s net assets in Highly Liquid investments (called a “Highly Liquid Investment Minimum” or “HLIM”); and (4) prohibiting the Fund’s acquisition of Illiquid investments if, immediately after the acquisition, the Fund would hold more than 15% of its net assets in Illiquid assets. The Program also requires reporting to the SEC (on a non-public basis) and to the Board if the Fund’s holdings of Illiquid assets exceed 15% of the Fund’s net assets. Funds with HLIMs must have procedures for addressing HLIM shortfalls, including reporting to the Board and, with respect to HLIM shortfalls lasting more than seven consecutive calendar days, reporting to the SEC (on a non-public basis).
In assessing and managing the Fund’s liquidity risk, the Program Administrator considers, as relevant, a variety of factors, including: (1) the Fund’s investment strategy and liquidity of portfolio investments during both normal and reasonably foreseeable stressed conditions; (2) short-term and long-term cash flow projections for the Fund during both normal and reasonably foreseeable stressed conditions; and (3) the Fund’s holdings of cash and cash equivalents and any borrowing arrangements. Classification of the Fund’s portfolio holdings in the four liquidity categories is based on the number of days it is reasonably expected to take to convert the investment to cash (for Highly Liquid and Moderately Liquid holdings) or to sell or dispose of the investment (for Less Liquid and Illiquid investments), in current market conditions without significantly changing the investment’s market value. The Fund primarily holds assets that are classified as Highly Liquid, and therefore is not required to establish an HLIM.
At a meeting of the Board held on May 25-27, 2021, the Program Administrator provided a written report to the Board addressing the Program’s operation and assessing the adequacy and effectiveness of its implementation for the period from April 1, 2020 through March 31, 2021. The report concluded that the Program is appropriately designed and effectively implemented and that it meets the requirements of Rule 22e-4 and the Fund’s liquidity needs. The Fund’s HLIM is set at an appropriate level and the Fund complied with its HLIM at all times during the reporting period.
40
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 October 31, 2021, the Fund reports distributions paid during the year as follows:
| (A) Ordinary Income Distributions (Tax Basis)* | 100.00 | % | |
| Total Distributions (Tax Basis) | 100.00 | % | |
| (B) Qualifying Dividends1 | 100.00 | % |
| (A) is based on a percentage of the Fund’s total distributions. | |
| (B) is based on the Fund’s ordinary income distributions. | |
| 1 | Qualified dividends represent dividends which qualify for the corporate dividends received deduction. |
| * | For the fiscal year ended October 31, 2021, 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 100%. Complete information will be computed and reported in conjunction with your 2021 Form 1099-DIV. |
Board consideration of Investment Advisory and Sub-Advisory Agreements for Delaware Mid Cap Value Fund at a meeting held August 10-12, 2021
At a meeting held on August 10-12, 2021 (the “Annual Meeting”), the Board of Trustees (the “Board”), including a majority of disinterested or independent Trustees, approved the renewal of the Investment Advisory and Sub-Advisory Agreements for Delaware Mid Cap Value Fund (the “Fund”). In making its decision, the Board considered information furnished at regular quarterly Board meetings, including reports detailing Fund performance, investment strategies, and expenses, as well as information prepared specifically in connection with the renewal of the investment advisory 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 the Sub-Advisory Agreements with Macquarie Funds Management Hong Kong Limited (“MFMHK”) and Macquarie Investment Management Global Limited (“MIMGL”) (the “Sub-Advisers”), included materials provided by DMC and its affiliates (collectively, “Macquarie Asset 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
41
Other Fund information (Unaudited)
Delaware Mid Cap Value Fund
Board consideration of Investment Advisory and Sub-Advisory Agreements for Delaware Mid Cap Value Fund at a meeting held August 10-12, 2021 (continued)
Meeting, materials were provided to the Trustees in May 2021, 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 and sub-advisory agreements, as applicable, the Independent Trustees received assistance and advice from and met separately with independent legal counsel to the Independent Trustees and also received assistance and advice from an experienced and knowledgeable independent fund consultant, JDL Consultants, LLC (“JDL”). Although the Board gave attention to all information furnished, the following discussion identifies, under separate headings, the primary factors taken into account by the Board during its contract renewal considerations.
Nature, extent, and quality of services. The Board considered the services provided by DMC to the Fund and its shareholders. In reviewing the nature, extent, and quality of services, the Board considered reports furnished to it throughout the year, which covered matters such as the relative performance of the Fund; compliance of portfolio managers with the investment policies, strategies, and restrictions for the Fund; compliance by DMC and Delaware Distributors, L.P. (together, “Management”) personnel with the Code of Ethics adopted throughout the Delaware Funds by Macquarie® (“Delaware Funds”); and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of DMC and the emphasis placed on research in the investment process. The Board recognized DMC’s receipt of certain favorable industry distinctions during the past several years. The Board gave favorable consideration to DMC’s efforts to control expenses while maintaining service levels committed to Fund matters. The Board also noted the benefits provided to Fund shareholders through (a) each shareholder’s ability to: (i) exchange an investment in one Delaware Fund for the same class of shares in another Delaware Fund without a sales charge, or (ii) reinvest Fund dividends into additional shares of the Fund or into additional shares of other Delaware Funds, and (b) the privilege to combine holdings in other Delaware Funds to obtain a reduced sales charge. The Board was satisfied with the nature, extent, and quality of the overall services provided by DMC.
Nature, extent, and quality of services. The Board considered the services provided by each Sub-Adviser to the Fund. 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 Sub-Adviser personnel with its Code of Ethics; and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the
42
current staffing of the Sub-Advisers 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 the Sub-Advisers.
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 Fund’s investment performance in comparison to a group of similar funds (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 December 31, 2020. 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 mid-cap value 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- and 10-year periods was in the third quartile of its Performance Universe and the Fund’s total return for the 5-year period was in the second 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 (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 and, for comparative consistency, included 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 highest expenses of its Expense Group. The Board gave favorable consideration to the Fund’s management fee but noted that the Fund’s total expenses were not in line with the Board’s objective. In evaluating total
43
Other Fund information (Unaudited)
Delaware Mid Cap Value Fund
Board consideration of Investment Advisory and Sub-Advisory Agreements for Delaware Mid Cap Value Fund at a meeting held August 10-12, 2021 (continued)
expenses, the Board considered fee waivers in place through March 2022 and various initiatives implemented by Management, such as the negotiation of lower fees for fund accounting, fund accounting oversight, and custody services, which had created an opportunity for a further reduction in expenses. The Board was satisfied with Management’s efforts to improve the Fund’s total expense ratio and to bring it in line with the Board’s objective.
Management profitability. The Board considered the level of profits realized by DMC in connection with the operation of the Fund. In this respect, the Board reviewed the Investment Management Profitability Analysis that addressed the overall profitability of DMC’s business in providing management and other services to each of the individual funds and the Delaware Funds as a whole. Specific attention was given to the methodology used by DMC in allocating costs for the purpose of determining profitability. Management stated that the level of profits of DMC, to a certain extent, reflects recent operational cost savings and efficiencies initiated by DMC. The Board considered DMC’s efforts to improve services provided to Fund shareholders and to meet additional regulatory and compliance requirements resulting from recent industry-wide Securities and Exchange Commission initiatives. The Board also considered the extent to which DMC might derive ancillary benefits from fund operations, including the potential for procuring additional business as a result of the prestige and visibility associated with its role as service provider to the Delaware Funds and the benefits from allocation of fund brokerage to improve trading efficiencies. As part of its work, the Board also reviewed a report prepared by JDL regarding MIMBT profitability as compared to certain peer fund complexes and the Independent Trustees discussed with JDL personnel regarding DMC’s profitability in such context. The Board found that the management fees were reasonable in light of the services rendered and the level of profitability of DMC.
Management profitability. Trustees were also given available information on profits being realized by each of the Sub-Advisers in relation to the services being provided to the Fund and in relation to each Sub-Adviser’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 the Sub-Advisers in connection with their relationship to the Fund, such as reputational enhancement, soft dollar arrangements, or commissions paid to affiliated broker/dealers, as applicable.
Economies of scale. The Trustees considered whether economies of scale are realized by DMC as the Fund’s assets increase and the extent to which any economies of scale are reflected in the level of management fees charged. The Trustees reviewed the Fund’s advisory fee pricing and structure, approved by the Board and shareholders, which includes breakpoints, and which applies to most funds in the Delaware Funds complex. Breakpoints in the advisory fee occur when the advisory fee rate is reduced on assets in excess of specified levels. Breakpoints result in a lower advisory fee than would otherwise be the case in the absence of breakpoints, when the asset levels specified in the breakpoints are exceeded. Although, as of March 31, 2021, 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.
44
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 for shareholder interests. Each trustee has served in that capacity since he or she was elected to or appointed to the Board of Trustees, and will continue to serve until his or her retirement or the election of a new trustee in his or her place. The following is a list of the Trustees and Officers with certain background and related information.
| Number of | Other | |||||||||
| Principal | Portfolios in Fund | Directorships | ||||||||
| Name, | Position(s) | Occupation(s) | Complex Overseen | Held by | ||||||
| Address, | Held with | Length of Time | During the | by Trustee | Trustee | |||||
| and Birth Date | Fund(s) | Served | Past Five Years | or Officer | or Officer | |||||
| Interested Trustee | ||||||||||
| Shawn K. Lytle1 | President, | President and | Global Head of Macquarie | 150 | Trustee — UBS Relationship | |||||
| 610 Market Street | Chief Executive | Chief Executive | Investment Management2 | Funds, SMA Relationship Trust, | ||||||
| Philadelphia, PA | Officer, | Officer | (January 2019–Present) | and UBS Funds | ||||||
| 19106-2354 | and Trustee | since August 2015 | Head of Americas of | (May 2010–April 2015) | ||||||
| February 1970 | Trustee since | Macquarie Group | ||||||||
| September 2015 | (December 2017–Present) | |||||||||
| Deputy Global Head of | ||||||||||
| Macquarie Investment | ||||||||||
| Management | ||||||||||
| (2017–2019) | ||||||||||
| Head of Macquarie Investment | ||||||||||
| Management Americas | ||||||||||
| (2015–2017) | ||||||||||
45
Board of trustees / directors and officers addendum
Delaware Funds by Macquarie®
| Number of | Other | |||||||||
| Principal | Portfolios in Fund | Directorships | ||||||||
| Name, | Position(s) | Occupation(s) | Complex Overseen | Held by | ||||||
| Address, | Held with | Length of Time | During the | by Trustee | Trustee | |||||
| and Birth Date | Fund(s) | Served | Past Five Years | or Officer | or Officer | |||||
| Independent Trustees | ||||||||||
| Jerome D. | Trustee | Since January 2019 | Managing Member, Stonebrook | 150 | None | |||||
| Abernathy | Capital Management, LLC | |||||||||
| 610 Market Street | (financial technology: macro | |||||||||
| Philadelphia, PA | factors and databases) | |||||||||
| 19106-2354 | (January 1993-Present) | |||||||||
| July 1959 | ||||||||||
| Thomas L. Bennett | Chair and Trustee | Trustee since March | Private Investor | 150 | None | |||||
| 610 Market Street | 2005 | (March 2004–Present) | ||||||||
| Philadelphia, PA | Chair since March | |||||||||
| 19106-2354 | 2015 | |||||||||
| October 1947 | ||||||||||
| Ann D. Borowiec | Trustee | Since March 2015 | Chief Executive Officer, Private | 150 | Director — Banco Santander | |||||
| 610 Market Street | Wealth Management | International | ||||||||
| Philadelphia, PA | (2011–2013) and Market | (October 2016–December 2019) | ||||||||
| 19106-2354 | Manager, New Jersey Private | Director — Santander Bank, N.A. | ||||||||
| November 1958 | Bank (2005–2011) — J.P. | (December 2016–December | ||||||||
| Morgan Chase & Co. | 2019) | |||||||||
46
| Number of | Other | |||||||||
| Principal | Portfolios in Fund | Directorships | ||||||||
| Name, | Position(s) | Occupation(s) | Complex Overseen | Held by | ||||||
| Address, | Held with | Length of Time | During the | by Trustee | Trustee | |||||
| and Birth Date | Fund(s) | Served | Past Five Years | or Officer | or Officer | |||||
| Joseph W. Chow | Trustee | Since January 2013 | Private Investor | 150 | Director and Audit Committee | |||||
| 610 Market Street | (April 2011–Present) | Member — Hercules Technology | ||||||||
| Philadelphia, PA | Growth Capital, Inc. | |||||||||
| 19106-2354 | (July 2004–July 2014) | |||||||||
| January 1953 | ||||||||||
| John A. Fry | Trustee | Since January 2001 | President — Drexel University | 150 | Director; Compensation | |||||
| 610 Market Street | (August 2010–Present) | Committee and Governance | ||||||||
| Philadelphia, PA | President — Franklin & Marshall | Committee Member — | ||||||||
| 19106-2354 | College | Community Health Systems | ||||||||
| May 1960 | (July 2002–June 2010) | (May 2004–Present) | ||||||||
| Director — Drexel Morgan & Co. | ||||||||||
| (2015–2019) | ||||||||||
| Director, Audit and | ||||||||||
| Compensation Committee | ||||||||||
| Member — vTv Therapeutics Inc. | ||||||||||
| (2017–Present) | ||||||||||
| Director and Audit Committee | ||||||||||
| Member — FS Credit Real Estate | ||||||||||
| Income Trust, Inc. | ||||||||||
| (2018–Present) | ||||||||||
| Director — Federal Reserve | ||||||||||
| Bank of Philadelphia | ||||||||||
| (January 2020–Present) | ||||||||||
47
Board of trustees / directors and officers addendum
Delaware Funds by Macquarie®
| Number of | Other | |||||||||
| Principal | Portfolios in Fund | Directorships | ||||||||
| Name, | Position(s) | Occupation(s) | Complex Overseen | Held by | ||||||
| Address, | Held with | Length of Time | During the | by Trustee | Trustee | |||||
| and Birth Date | Fund(s) | Served | Past Five Years | or Officer | or Officer | |||||
| Frances A. | Trustee | Since September | Private Investor | 150 | Trust Manager and Audit | |||||
| Sevilla-Sacasa | 2011 | (January 2017–Present) | Committee Chair — Camden | |||||||
| 610 Market Street | Chief Executive Officer — Banco | Property Trust | ||||||||
| Philadelphia, PA | Itaú International | (August 2011–Present) | ||||||||
| 19106-2354 | (April 2012–December 2016) | Director; Audit | ||||||||
| January 1956 | Executive Advisor to Dean | and Compensation | ||||||||
| (August 2011–March 2012) and | Committee Member — | |||||||||
| Interim Dean | Callon Petroleum Company | |||||||||
| (January 2011–July 2011) — | (December 2019–Present) | |||||||||
| University of Miami School of | Director — New Senior | |||||||||
| Business Administration | Investment Group Inc. | |||||||||
| President — U.S. Trust, Bank of | (January 2021–September 2021) | |||||||||
| America Private Wealth | Director; Audit Committee | |||||||||
| Management (Private Banking) | Member — Carrizo Oil & Gas, | |||||||||
| (July 2007-December 2008) | Inc. (March 2018–December | |||||||||
| 2019) | ||||||||||
48
| Number of | Other | |||||||||
| Principal | Portfolios in Fund | Directorships | ||||||||
| Name, | Position(s) | Occupation(s) | Complex Overseen | Held by | ||||||
| Address, | Held with | Length of Time | During the | by Trustee | Trustee | |||||
| and Birth Date | Fund(s) | Served | Past Five Years | or Officer | or Officer | |||||
| Thomas K. Whitford | Trustee | Since January 2013 | Vice Chairman — PNC Financial | 150 | Director — HSBC North America | |||||
| 610 Market Street | Services Group | Holdings Inc. | ||||||||
| Philadelphia, PA | (2010–April 2013) | (December 2013–Present) | ||||||||
| 19106-2354 | Director — HSBC USA Inc. | |||||||||
| March 1956 | (July 2014–Present) | |||||||||
| Director — HSBC Bank USA, | ||||||||||
| National Association | ||||||||||
| (July 2014–March 2017) | ||||||||||
| Director — HSBC Finance | ||||||||||
| Corporation | ||||||||||
| (December 2013–April 2018) | ||||||||||
49
Board of trustees / directors and officers addendum
Delaware Funds by Macquarie®
| Number of | Other | |||||||||
| Principal | Portfolios in Fund | Directorships | ||||||||
| Name, | Position(s) | Occupation(s) | Complex Overseen | Held by | ||||||
| Address, | Held with | Length of Time | During the | by Trustee | Trustee | |||||
| and Birth Date | Fund(s) | Served | Past Five Years | or Officer | or Officer | |||||
| Christianna Wood | Trustee | Since January 2019 | Chief Executive Officer and | 150 | Director; Finance Committee and | |||||
| 610 Market Street | President — Gore Creek Capital, | Audit Committee Member — | ||||||||
| Philadelphia, PA | Ltd. (August 2009–Present) | H&R Block Corporation | ||||||||
| 19106-2354 | (July 2008–Present) | |||||||||
| August 1959 | Director; Investments | |||||||||
| Committee, Capital and Finance | ||||||||||
| Committee, and Audit | ||||||||||
| Committee Member — Grange | ||||||||||
| Insurance (2013–Present) | ||||||||||
| Trustee; Chair of Nominating and | ||||||||||
| Governance Committee and | ||||||||||
| Audit Committee Member — | ||||||||||
| The Merger Fund | ||||||||||
| (2013–October 2021), | ||||||||||
| The Merger Fund VL | ||||||||||
| (2013–October 2021); WCM | ||||||||||
| Alternatives: Event-Driven Fund | ||||||||||
| (2013–October 2021), and WCM | ||||||||||
| Alternatives: Credit Event Fund | ||||||||||
| (December 2017–October 2021) | ||||||||||
| Director; Chair of Governance | ||||||||||
| Committee and Audit Committee | ||||||||||
| Member — International | ||||||||||
| Securities Exchange (2010–2016) |
50
| Number of | Other | |||||||||
| Principal | Portfolios in Fund | Directorships | ||||||||
| Name, | Position(s) | Occupation(s) | Complex Overseen | Held by | ||||||
| Address, | Held with | Length of Time | During the | by Trustee | Trustee | |||||
| and Birth Date | Fund(s) | Served | Past Five Years | or Officer | or Officer | |||||
| Janet L. Yeomans | Trustee | Since April 1999 | Vice President and Treasurer | 150 | Director; Personnel and | |||||
| 610 Market Street | (January 2006–July 2012), Vice | Compensation Committee Chair; | ||||||||
| Philadelphia, PA | President — Mergers & | Member of Nominating, | ||||||||
| 19106-2354 | Acquisitions | Investments, and Audit | ||||||||
| July 1948 | (January 2003–January 2006), | Committees for various periods | ||||||||
| and Vice President and Treasurer | throughout directorship — | |||||||||
| (July 1995–January 2003) — 3M | Okabena Company (2009–2017) | |||||||||
| Company | ||||||||||
| Officers | ||||||||||
| David F. Connor | Senior Vice President, | Senior Vice President, | David F. Connor has served in | 150 | None3 | |||||
| 610 Market Street | General Counsel, and | since May 2013; | various capacities at different | |||||||
| Philadelphia, PA | Secretary | General Counsel | times at Macquarie Investment | |||||||
| 19106-2354 | since May 2015; | Management. | ||||||||
| December 1963 | Secretary since | |||||||||
| October 2005 | ||||||||||
| Daniel V. Geatens | Senior Vice President | Senior Vice President | Daniel V. Geatens has served in | 150 | None3 | |||||
| 610 Market Street | and Treasurer | and Treasurer since | various capacities at different | |||||||
| Philadelphia, PA | October 2007 | times at Macquarie Investment | ||||||||
| 19106-2354 | Management. | |||||||||
| October 1972 |
51
Board of trustees / directors and officers addendum
Delaware Funds by Macquarie®
| Number of | Other | |||||||||
| Principal | Portfolios in Fund | Directorships | ||||||||
| Name, | Position(s) | Occupation(s) | Complex Overseen | Held by | ||||||
| Address, | Held with | Length of Time | During the | by Trustee | Trustee | |||||
| and Birth Date | Fund(s) | Served | Past Five Years | or Officer | or Officer | |||||
| Richard Salus | Senior Vice President | Senior Vice President | Richard Salus has served in | 150 | None | |||||
| 610 Market Street | and Chief Financial | and Chief Financial | various capacities at different | |||||||
| Philadelphia, PA | Officer | Officer since | times at Macquarie Investment | |||||||
| 19106-2354 | November 2006 | Management. | ||||||||
| October 1963 |
| 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 | 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. |
| 3 | David F. Connor serves as Senior Vice President and Secretary, and Daniel V. Geatens serves as Senior Vice President, Treasurer, and Chief Financial Officer, 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. |
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.
52
| Board of trustees | ||||||
| Shawn K. Lytle President and Chief Executive Officer Delaware Funds by Macquarie® Philadelphia, PA |
Ann D. Borowiec Former Chief Executive Officer Private Wealth Management J.P. Morgan Chase & Co. New York, NY |
Frances A. Sevilla-Sacasa Former Chief Executive Officer Banco Itaú International Miami, FL |
Christianna Wood Chief Executive Officer and President Gore Creek Capital, Ltd. Golden, CO | |||
| Jerome D. Abernathy Managing Member, Stonebrook Capital Management, LLC Jersey City, NJ |
Joseph W. Chow Former Executive Vice President State Street Corporation Boston, MA |
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 | |||
| Thomas L. Bennett Chairman of the Board Delaware Funds by Macquarie Private Investor Rosemont, PA |
John A. Fry President Drexel University Philadelphia, PA |
|||||
| Affiliated officers | ||||||
| David F. Connor Senior Vice President, General Counsel, and Secretary Delaware Funds by Macquarie Philadelphia, PA |
Daniel V. Geatens Senior Vice President and Treasurer Delaware Funds by Macquarie Philadelphia, PA |
Richard Salus Senior Vice President and Chief Financial Officer Delaware Funds by Macquarie Philadelphia, PA |
This annual report is for the information of Delaware Mid Cap Value Fund shareholders, but it may be used with prospective investors when preceded or accompanied by the Delaware Fund fact sheet for the most recently completed calendar quarter. These documents are available at delawarefunds.com/literature.
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Forms N-PORT, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities, are available without charge (i) upon request, by calling 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-PORT are available without charge on the Fund’s website at delawarefunds.com/literature. The Fund’s Forms N-PORT may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C.; information on the operation of the Public Reference Room may be obtained by calling 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.
53
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:
Jerome D. Abernathy
John A. Fry
Thomas K. Whitford, Chair
Christianna Wood
Item 4. Principal Accountant Fees and Services
(a) Audit fees.
The aggregate fees billed for services provided to the registrant by its independent auditors for the audit of the registrant’s annual financial statements and for services normally provided by the independent auditors in connection with statutory and regulatory filings or engagements were $27,297 for the fiscal year ended October 31, 2021.
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 $30,330 for the fiscal year ended October 31, 2020.
(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, 2021.
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 $1,134,001 for the registrant’s fiscal year ended October 31, 2021. 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, 2020.
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 $903,282 for the registrant’s fiscal year ended October 31, 2020. 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 $4,365 for the fiscal year ended October 31, 2021. 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, 2021.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant were $4,850 for the fiscal year ended October 31, 2020. 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, 2020.
(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, 2021.
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, 2021. 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, 2020.
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, 2020. 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 $50,000 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 $9,044,000 and $5,607,000 for the registrant’s fiscal years ended October 31, 2021 and October 31, 2020, respectively.
(h) In connection with its selection of the independent auditors, the registrant’s Audit Committee has considered the independent auditors’ provision of non-audit services to the registrant’s investment adviser and other service providers under common control with the adviser that were not required to be pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X. The Audit Committee has determined that the independent auditors’ provision of these services is compatible with maintaining the auditors’ independence.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Investments
(a) Included as part of report to shareholders filed under Item 1 of this Form N-CSR.
(b) Divestment of securities in accordance with Section 13(c) of the Investment Company Act of 1940.
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 11. Controls and Procedures
The registrant’s principal executive officer and principal financial officer have evaluated the registrant’s disclosure controls and procedures within 90 days of the filing of this report and have concluded that they are effective in providing reasonable assurance that the information required to be disclosed by the registrant in its reports or statements filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.
There were no significant changes in the registrant’s internal control over financial reporting that occurred during the period covered by the report to stockholders included herein that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies
Not applicable.
Item 13. Exhibits
| (a) | (1) Code of Ethics |
| Not applicable. | |
| (2) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rule 30a-2 under the Investment Company Act of 1940 are attached hereto as Exhibit 99.CERT. | |
| (3) Written solicitations to purchase securities pursuant to Rule 23c-1 under the Securities Exchange Act of 1934. | |
| Not applicable. | |
| (b) | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are furnished herewith as Exhibit 99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf, by the undersigned, thereunto duly authorized.
DELAWARE GROUP® EQUITY FUNDS I
| /s/ SHAWN K. LYTLE | |
| By: | Shawn K. Lytle |
| Title: | President and Chief Executive Officer |
| Date: | January 5, 2022 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| /s/ SHAWN K. LYTLE | |
| By: | Shawn K. Lytle |
| Title: | President and Chief Executive Officer |
| Date: | January 5, 2022 |
| /s/ RICHARD SALUS | |
| By: | Richard Salus |
| Title: | Chief Financial Officer |
| Date: | January 5, 2022 |