Delaware Smid Cap Growth Fund*

Objective

Delaware Smid Cap Growth Fund seeks long-term capital appreciation.

Strategy

The Fund invests primarily in common stocks of growth-oriented companies that the team believes have long-term capital appreciation potential and expects to grow faster than the U.S. economy. The team particularly seeks small to mid-sized companies.

Fund information
Inception date03/27/1986
Dividends paid (if any)Annually
Capital gains paid (if any)December
Fund identifiers
NASDAQDFCIX
CUSIP245906102
Investment minimums
Initial investment$1,000
Subsequent Investments$100
Systematic withdrawal balance$5,000
Account features
CheckwritingNo
Payroll DeductionYes
IRAsYes

On Sept. 25, 2014, Class B shares of the Fund converted to Class A shares.

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.

Total returns may reflect waivers and/or expense reimbursements by the manager and/or distributor for some or all of the periods shown. Performance would have been lower without such waivers and reimbursements.

Average annual total return as of month-end (03/31/2015)
YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)5.91%13.87%13.12%18.69%10.85%13.77%03/27/1986
Max offer price-0.17%7.32%10.90%17.30%10.20%13.54%
Russell 2500 Growth Index7.44%13.83%17.91%16.97%10.64%n/a
Average annual total return as of quarter-end (03/31/2015)
QTDYTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)5.91%5.91%13.87%13.12%18.69%10.85%13.77%03/27/1986
Max offer price-0.17%-0.17%7.32%10.90%17.30%10.20%13.54%
Russell 2500 Growth Index7.44%7.44%13.83%17.91%16.97%10.64%n/a

Returns for less than one year are not annualized.

Class A shares have a maximum up-front sales charge of 5.75% and are subject to an annual distribution fee.

Expense ratio
Gross1.19%
Net1.19%
Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return
20155.91%n/an/an/an/a
2014-4.38%0.17%-2.02%9.55%2.81%
201310.34%4.01%10.53%11.02%40.84%
201216.94%-6.06%2.51%-1.98%10.38%
201114.33%3.20%-15.92%8.83%7.96%
20104.74%-1.78%14.64%14.49%35.03%
20090.52%14.84%16.90%7.07%44.49%
2008-13.93%6.15%-13.80%-25.85%-41.61%
20074.91%7.85%2.86%-3.52%12.28%
20069.03%-6.02%-3.05%5.66%4.97%
2005-3.66%3.42%5.24%4.89%9.98%
Portfolio characteristics - as of 03/31/2015
Number of holdings29
Market cap (median)$3.53 billion
Market cap (weighted average)$4.32 billion
Portfolio turnover (last fiscal year)26%
Beta - (relative to Russell 2500 Growth Index) (view definition)0.82
Annualized standard deviation, 3 years (view definition)11.69
Portfolio composition as of 03/31/2015Total may not equal 100% due to rounding.
Domestic equities91.1%
International equities & depositary receipts5.6%
Cash and cash equivalents3.3%
Top 10 holdings as of 03/31/2015
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
DineEquity Inc.5.6%
Sally Beauty Holdings Inc.5.4%
MSCI Inc.5.4%
Zebra Technologies Corp.5.3%
j2 Global Inc.5.2%
Bio-Techne Corp.5.2%
Heartland Payment Systems Inc.4.6%
Graco Inc.4.5%
Equity Commonwealth4.3%
Blackbaud Inc.4.1%
Total % Portfolio in Top 10 holdings49.6%
Top sectors as of 03/31/2015
List excludes cash and cash equivalents.
Sector% of portfolio
Consumer Discretionary24.4%
Financial Services18.9%
Technology17.6%
Producer Durables16.6%
Health Care10.4%
Utilities5.2%
Energy3.6%
Distribution history - annual distributions (Class A)1,2
Distributions ($ per share)
YearCapital gains3Net investment
income
20150.0000.000
20144.1220.000
20131.0790.000
20121.5820.000
20110.9460.000
20100.9380.205
20090.0000.000
20081.6920.000
20072.7520.000
20061.6040.000
20051.0250.000

1If a Fund makes a distribution from any source other than net income, it is required to provide shareholders with a notice disclosing the source of such distribution (each a "Notice"). The amounts and sources of distributions reported above and in each Notice are only estimates and are not provided for tax reporting purposes. Each Fund will send each shareholder a Form 1099 DIV for the calendar year that will provide definitive information on how to report the Fund's distributions for federal income tax purposes. The information in the table above will not be updated to reflect any subsequent recharacterization of dividends and distributions. Click here to see recent Notices pertaining to the Fund (if any).

2Information on return of capital distributions (if any) is only provided from June 1, 2014 onward.

3Includes both short- and long-term capital gains.

Investment manager

Delaware Management Company, a series of Delaware Management Business Trust

Sub-advisor

Jackson Square Partners, LLC


Chris Bonavico

Christopher J. Bonavico, CFA

Portfolio Manager, Equity Analyst — Jackson Square Partners, LLC

Start date on the Fund: January 2010

Years of industry experience: 27

(View bio)


Ken Broad

Kenneth F. Broad, CFA

Portfolio Manager, Equity Analyst — Jackson Square Partners, LLC

Start date on the Fund: January 2010

Years of industry experience: 20

(View bio)


You may qualify for sales-charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Delaware Investments® Funds. More information about these and other discounts is available from your financial advisor, in the Fund's prospectus under the section entitled "About your account," and in the Fund's statement of additional information (SAI) under the section entitled "Purchasing Shares."

The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.

Shareholder fees
Maximum sales charge (load) imposed on purchases as a percentage of offering price5.75%
Maximum contingent deferred sales charge (load) as a percentage of original purchase price or redemption price, whichever is lowernone
Annual fund operating expenses
Management fees0.71%
Distribution and service (12b-1) fees0.25%
Other expenses0.23%
Total annual fund operating expenses1.19%
Fee waivers and expense reimbursementsnone
Total annual fund operating expenses after fee waivers and expense reimbursements1.19%

1The Fund's Class A shares are subject to a blended rate of 0.10% on all shares acquired prior to June 1, 1992 and 0.25% on all shares acquired on or after June 1, 1992. This method of calculating Class A 12b-1 fees may be discontinued at the sole discretion of the Board of Trustees. 

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Delaware Smid Cap Growth Fund* Quarterly commentary March 31, 2015

Within the Fund

For the first quarter of 2015, Delaware Smid Cap Growth Fund (Institutional Class shares and Class A shares at net asset value) lagged its benchmark, the Russell 2500™ Growth Index. Strong relative performance in the consumer discretionary sector was unable to overcome weak relative performance in the technology and energy sectors.

ABIOMED was a strong contributor to performance during the quarter. The stock experienced several positive events which led to significant stock appreciation. The company reported strong financial results and gained positive regulatory approval for two separate heart devices (Impella RP® catheter and Impella 2.5). Regulatory approval for its heart pump device, Impella 2.5, allows for broader access to the market and lowers regulatory restrictions on the marketing of the device. We believe these developments should further enhance the company’s ability to increase shareholder value, in part, by the increased usage of its heart pump devices.

MSCI was a contributor to performance during the quarter. The stock rose, in part, as investors had an overall favorable view of ValueAct Capital (an activist hedge fund and large shareholder of MSCI) being given a board seat. ValueAct has a well-respected reputation within the industry, and we believe its involvement should help with management’s focus and urgency in unlocking additional value for shareholders. We continue to believe the company has a sustainable competitive advantage and compelling brand equity as a premier index and financial services provider.

Ellie Mae, a provider of business automation software for the mortgage industry in the United States, was also a contributor to performance during the quarter. Despite a relatively choppy mortgage market, the company reported financial results that beat consensus estimates driven, in part, by an uptick in the volume of loan applications during the quarter. While the housing market has cyclical characteristics, we believe the company has an opportunity to grow significant market share within its business segment that should offset the cyclical headwinds with higher growth in its revenues and earnings.

Heartland Payment Systems detracted from performance during the quarter. The stock experienced weakness after the company reported weaker-than-expected financial results and lowered guidance due, in part, to acquisition and R&D related costs. We feel these recent acquisitions should be accretive to shareholder value over the long term. We continue to believe the company should be well-positioned to benefit from the secular global trend of payment transactions moving from paper-based currency to electronic transactions.

Graco, a maker of industrial fluid and lubrication systems, was a detractor from performance during the quarter. While the company reported relatively solid financial results, it lowered its future guidance to reflect increasing headwinds from a strengthening dollar. While currency fluctuations may negatively affect top-line results (more than half of the company’s revenues come from outside the U.S.) we feel the company’s diverse product offering and acquisition strategy should allow the company to continue to experience strong organic growth and should help offset foreign currency headwinds.

Core Laboratories also detracted from performance during the quarter. The fall in oil and natural gas prices continued to lead to stock weakness (along with others within the oil and natural gas industry). Despite reporting better-than-expected earnings, the company lowered future guidance due to anticipated weaker North American activity. We are willing to live with a certain degree of cyclicality in the energy cycle given that this company’s solutions to site analysis seem to be valuable in various parts of the cycle. While this current industry cycle might be more volatile and challenging than in recent years, we believe its competitive position and business model should hold up better than its peer group.

Outlook

Despite positive absolute returns in the equity market during the past few years, we believe the relatively tepid market sentiment demonstrate that there are more than just fundamental factors affecting stock prices. A lack of significant bull market sentiment suggests to us that many investors appear to be struggling with accurately predicting the pace of global economic recovery and are assessing factors that threaten economic fundamentals (for example, central bank actions and fiscal policy debates across the globe). While some fundamentals in various geographies may be trending in a positive direction (from a very low base during the global financial crisis in 2008-2009), we don’t believe we are entering into a typical post-recessionary global boom cycle. Rather, we believe the lingering effects of the credit crisis years ago could lead to moderate growth, at best, for the intermediate term. In such a tenuous environment, we believe the quality of a company’s business model, competitive position, and management may prove to be of utmost importance.

Regardless of the economic outcome, we remain consistent in our long-term investment philosophy: We want to own what we view as strong secular-growth companies with solid business models and competitive positions that we believe can grow market share and have the potential to deliver shareholder value in a variety of market environments.

[14273]

The views expressed represent the Manager's assessment of the Fund and market environment as of the date indicated, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Information is as of the date indicated and subject to change.

Document must be used in its entirety.

*As of Feb. 24, 2012, Delaware Smid Cap Growth Fund is closed to new investors. Existing shareholders of the Fund; certain retirement plans and IRA transfers and rollovers from these plans; and certain advisory or fee-based programs sponsored by and/or controlled by financial intermediaries where the financial intermediary has entered into an arrangement with the Fund’s Distributor or transfer agent (mutual fund wrap accounts) may continue to purchase shares. Please read the latest prospectus and summary prospectus for more information concerning this event.

Jackson Square Partners, LLC (JSP) is the sub-advisor to the Fund. As sub-advisor, JSP is responsible for day-to-day management of the Fund’s assets. Although JSP serves as sub-advisor, the investment manager, Delaware Management Company, a series of Delaware Management Business Trust, has ultimate responsibility for all investment advisory services.

All third-party marks cited are the property of their respective owners.

Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Russell® is a trademark of Russell Investment Group.

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 clicking the prospectus link located in the right-hand sidebar or calling 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing.

Investing involves risk, including the possible loss of principal.

Investments in small and/or medium-sized companies typically exhibit greater risk and higher volatility than larger, more established companies.

Not FDIC Insured | No Bank Guarantee | May Lose Value

Fund Finder

Daily pricing (as of 04/20/2015)

Class APriceNet changeYTD
NAV$29.880.297.60%
Max offer price$31.70n/an/a

Total net assets (as of 03/31/2015)

$1.3 billion all share classes

Overall Morningstar RatingTM

Load waived

With load

Class A shares (as of 03/31/2015)

Load waivedWith loadNo. of funds
Overall44655
3 Yrs22655
5 Yrs55586
10 Yrs44436
Morningstar categoryMid-Cap Growth

(View Morningstar disclosure)

Lipper ranking (as of 03/31/2015)

YTD ranking228 / 455
1 year134 / 430
3 years305 / 376
5 years7 / 341
10 years39 / 237
Lipper classificationMid-Cap Growth Funds

(View Lipper disclosure)

Benchmark, peer group

Russell 2500 Growth Index (view definition)

Lipper Mid-Cap Growth Funds Average (view definition)

Additional information