Delaware U.S. Growth Fund

Objective

Delaware U.S. Growth Fund seeks long-term capital appreciation by investing in equity securities of companies we believe have the potential for sustainable free cash flow growth.

Strategy

The Fund invests in stocks of medium- to large-sized companies that are believed to have long-term capital appreciation potential and are expected to grow faster than the U.S. economy.

Fund information
Inception date12/03/1993
Dividends paid (if any)Annually
Capital gains paid (if any)December
Fund identifiers
NASDAQDUGAX
CUSIP245917505
Investment minimums
Initial investment$1,000
Subsequent Investments$100
Systematic withdrawal balance$5,000
Account features
CheckwritingNo
Payroll DeductionYes
IRAsYes

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 (07/31/2014)
YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)4.12%20.58%17.00%18.43%8.95%7.60%12/03/1993
Max offer price-1.84%13.64%14.72%17.04%8.31%7.30%
Russell 1000 Growth Index4.68%18.69%16.05%17.25%8.66%n/a
Average annual total return as of quarter-end (06/30/2014)
QTDYTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)5.11%5.02%27.78%17.62%20.04%8.47%7.68%12/03/1993
Max offer price-0.92%-1.00%20.43%15.31%18.64%7.83%7.37%
Russell 1000 Growth Index5.13%6.31%26.92%16.26%19.24%8.20%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.

Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.

Expense ratio
Gross1.09%
Net1.09%
Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return
2014-0.09%5.11%n/an/an/a
201310.02%0.00%9.73%10.89%33.86%
201215.80%-5.23%6.24%-0.79%15.67%
20115.89%1.67%-10.41%11.69%7.73%
20102.43%-11.52%14.81%9.56%13.99%
2009-0.12%15.50%12.71%10.74%44.00%
2008-11.08%-3.91%-15.04%-22.40%-43.67%
20070.44%4.13%7.93%0.00%12.88%
20063.86%-6.12%-1.01%5.96%2.27%
2005-4.04%4.30%9.63%3.61%13.68%
20040.62%-3.52%-4.02%10.56%3.01%
Portfolio characteristics - as of 07/31/2014
Share assets$429.6 million
Number of holdings31
Market cap (median)$34.90 billion
Market cap (weighted average)$86.44 billion
Portfolio turnover (last fiscal year)23%
Beta - (relative to Russell 1000 Growth Index) (view definition)0.98
Annualized standard deviation, 3 years (view definition)12.88
Portfolio composition as of 07/31/2014Total may not equal 100% due to rounding.
Domestic equities91.4%
International equities & depository receipts6.8%
Cash and cash equivalents1.8%
Top 10 holdings as of 07/31/2014
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Celgene Corp.5.6%
Visa Inc.5.2%
EOG Resources Inc.5.1%
Microsoft Corp.5.0%
Allergan Inc.5.0%
MasterCard Inc.4.8%
Walgreen Co.4.7%
Crown Castle International Corp.4.6%
QUALCOMM Inc.4.5%
Priceline Group Inc.4.3%
Total % Portfolio in Top 10 holdings48.8%
Top sectors as of 07/31/2014
List excludes cash and cash equivalents.
Sector% of portfolio
Technology28.8%
Financial Services20.0%
Consumer Discretionary19.8%
Health Care15.4%
Energy8.0%
Consumer Staples4.7%
Materials & Processing1.4%
Distribution history - annual distributions (Class A)1,2
Distributions ($ per share)
YearCapital gains3Net investment
income
20140.0000.000
20130.0000.000
20120.0000.000
20110.0000.000
20100.0000.000
20090.0000.000
20080.0000.000
20070.0000.000
20060.0000.000
20050.0000.000
20040.0000.000

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 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-advisors

Jackson Square Partners, LLC


Jeff VanHarte

Jeffrey S. Van Harte, CFA

Chairman, Chief Investment Officer — Jackson Square Partners, LLC

Start date on the Fund: April 2005

(View bio)


Chris Bonavico

Christopher J. Bonavico, CFA

Portfolio Manager, Equity Analyst — Jackson Square Partners, LLC

Start date on the Fund: April 2005

(View bio)


Daniel J. Prislin, CFA

Portfolio Manager, Equity Analyst — Jackson Square Partners, LLC

Start date on the Fund: April 2005

(View bio)


Chris Ericksen

Christopher M. Ericksen, CFA

Portfolio Manager, Equity Analyst — Jackson Square Partners, LLC

Start date on the Fund: September 2005

(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 under the section entitled "Purchasing Shares."

The following table 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 fees0.60%
Distribution and service (12b-1) fees0.25%
Other expenses0.24%
Total annual fund operating expenses1.09%
Fee waivers and expense reimbursementsnone
Total annual fund operating expenses after fee waivers and expense reimbursements1.09%

1The Fund's investment manager, Delaware Management Company (Manager), has contractually agreed to waive all or a portion of its investment advisory fees and/or pay/reimburse expenses (excluding any 12b-1 fees, taxes, interest, short sale and dividend interest expenses, brokerage fees, certain insurance costs, acquired fund fees and expenses, 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 0.85% of the Fund's average daily net assets from Feb. 27, 2014 through Feb. 27, 2015. These waivers and reimbursements may only be terminated by agreement of the Manager or the Distributor, as applicable, and the Fund.

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Delaware U.S. Growth Fund Quarterly commentary June 30, 2014 Class A (DUGAX)

Within the Fund

For the second quarter of 2014, Delaware U.S. Growth Fund (Class A shares at net asset value) posted a positive return but slightly underperformed its benchmark, the Russell 1000® Growth Index. Strong relative performance in the healthcare and energy sectors was partially offset by weak relative performance in the financial services and technology sectors.

Allergan was a strong contributor to the Fund’s performance during the quarter. The stock appreciated sharply as a Canadian pharmaceutical company, Valeant Pharmaceuticals International, made an offer to acquire Allergan that was rejected. Since its initial offer, Valeant has increased its bid and­ it remains to be seen how aggressively Valeant will pursue an acquisition of Allergan. Currently, our discussions are focused on both what we believe to be fair value for Allergan as a stand-alone business and the potential value of a combined Valeant-Allergan entity. 

Celgene was also a contributor to performance during the quarter. While the company reported financial results that were relatively in-line, the stock appreciated as the company affirmed forward guidance, continued to buy back shares, and had a 2-for-1 stock split during the quarter. Celgene continues to be a leading player in the treatment of blood cancers with a growing product pipeline in breast, lung, and pancreatic cancer treatments. Additionally, the company continues to benefit from large growth prospects driven by additional indications of its drugs, by increased usage of existing drugs, and by international growth opportunities. 

EOG Resources also contributed to performance during the quarter. The company reported financial results that exceeded consensus estimates driven, in part, by increased oil production in Eagle Ford Shale and complemented by solid positions in the Bakken Shale and Permian Basin.  We continue to believe that the company is well positioned to provide exposure to the North American shale oil and gas industry which, in our view, is an attractive secular growth area in energy. 

eBay was a detractor from performance during the quarter. The company reported mixed financial results and an increased sense of uncertainty surrounding its near-term capital allocation plans. The stock had appreciated in the previous quarter as high-profile activists increased pressure on the company to unlock value by spinning out the PayPal business.  Conversely, the stock gave back those gains as eBay’s management stayed the course on keeping PayPal in the current organizational structure. We are not convinced that PayPal needs to be separated from the company in order to drive the highest long-term shareholder value. We continue to own the stock as we believe the eBay app for PayPal should continue to help strengthen its competitive position as a mobile e-commerce leader that should continue to be increasingly meaningful. We are also attracted to the PayPal business, which has been a major success in online commerce and now, in our opinion, has the opportunity to grow market share in the physical commerce market.

Teradata also detracted from performance during the quarter. Despite reporting solid financial results, the stock declined as Teradata gave forward revenue guidance at the low end of its previous estimate. Additionally there are growing concerns related to increased competition and the company’s ability to further expand margins in the face of continued competitive pricing pressure. We believe the database warehousing market is large and growing, and can likely accommodate several competitors; however, the company may experience some competitor headwinds going forward. We trimmed the Fund’s position during the quarter to account for the higher risk profile.

Finally, Visa was a detractor from performance during the quarter. The stock experienced a temporary selloff after reaching multiyear highs in the previous quarter, as the company moderated forward revenue guidance mostly because of currency impacts.  Furthermore, there continues to be investor concern over possible litigation and political pressure surrounding transaction fees in the electronic payment supply chain. We believe these concerns are relatively transitory and, in our view, Visa is well positioned to continue to benefit from the secular global trend of moving from paper-based currency transactions to electronic ones.   

Outlook

Despite positive absolute returns in the equity market during the past few years, we believe the relatively tepid market sentiment demonstrates 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.

Our conversations with senior management of companies we hold in the portfolio indicate a general sense that conditions that are improving slightly but not yet strong enough to meaningfully change strategic plans for capital and investment spending. An increasing number of companies in the Fund’s portfolio are considering merger and acquisition or tax inversion strategies (or these strategies have been forced upon them in response to merger overtures by other companies). This is consistent in today’s market environment where many companies — often influenced by large or aggressive shareholders — are seeking value-creating or growth opportunities as they are not always available under current economic conditions. The Fund’s portfolio holdings are often the type of businesses that can be targets for such potential value-creating opportunities. In such an uncertain macroeconomic 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.

[12904]

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.

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 with JSP.

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.

Not FDIC Insured | No Bank Guarantee | May Lose Value

Fund Finder

Daily pricing (as of 08/29/2014)

Class APriceNet changeYTD
NAV$25.060.066.55%
Max offer price$26.59n/an/a

Total net assets (as of 07/31/2014)

$3.2 billion all share classes

Overall Morningstar RatingTM

Load waived

With load

Class A shares (as of 07/31/2014)

Load waivedWith loadNo. of funds
Overall531498
3 Yrs531498
5 Yrs541328
10 Yrs43903
Morningstar categoryLarge Growth

(View Morningstar disclosure)

Lipper ranking (as of 07/31/2014)

YTD ranking188 / 740
1 year180 / 728
3 years58 / 611
5 years31 / 545
10 years86 / 378
Lipper classificationLarge-Cap Growth Funds

(View Lipper disclosure)

Benchmark, peer group

Russell 1000® Growth Index (view)

Lipper Large-Cap Growth Funds Average (view)

Additional information