Delaware Small Cap Value Fund

Objective

Delaware Small Cap Value Fund seeks capital appreciation.

Strategy

The Fund invests primarily in investments of small companies whose stock prices appear low relative to their underlying value or future potential.

Fund information
Inception date06/24/1987
Dividends paid (if any)Annually
Capital gains paid (if any)December
Fund identifiers
NASDAQDEVLX
CUSIP246097109
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 (02/28/2015)
YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)1.70%5.57%13.34%15.13%8.13%11.63%06/24/1987
Max offer price-4.15%-0.50%11.12%13.78%7.49%11.40%
Russell 2000 Value Index0.29%3.96%15.32%13.97%7.13%n/a
Average annual total return as of quarter-end (12/31/2014)
QTDYTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)4.30%5.37%5.37%16.35%15.31%8.05%11.64%06/24/1987
Max offer price-1.71%-0.68%-0.68%14.07%13.95%7.41%11.40%
Russell 2000 Value Index9.40%4.22%4.22%18.29%14.26%6.89%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
Gross1.25%
Net1.25%
Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return
20142.89%3.67%-5.29%4.30%5.37%
201311.95%0.88%7.31%9.07%32.18%
201210.74%-4.34%3.91%2.73%13.08%
20117.18%-1.94%-19.18%16.37%-1.15%
20109.57%-7.50%12.82%14.51%30.95%
2009-13.65%16.74%22.78%6.64%31.99%
2008-4.44%1.17%-4.46%-24.77%-30.51%
20072.58%4.79%-7.16%-7.25%-7.45%
200611.39%-3.05%1.18%5.57%15.35%
2005-0.66%3.43%3.91%1.73%8.61%
Portfolio characteristics - as of 02/28/2015
Number of holdings112
Market cap (median)$2.17 billion
Market cap (weighted average)$3.07 billion
Portfolio turnover (last fiscal year)17%
Beta - (relative to Russell 2000 Value Index) (view definition)0.84
Annualized standard deviation, 3 years (view definition)11.70
Portfolio composition as of 02/28/2015Total may not equal 100% due to rounding.
Domestic equities96.5%
Cash and cash equivalents3.5%
Top 10 holdings as of 02/28/2015
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
East West Bancorp Inc.2.6%
iShares Russell 2000 Value ETF2.6%
Synopsys Inc.1.8%
ITT Corp.1.8%
Berry Plastics Group Inc.1.5%
Webster Financial Corp.1.5%
ON Semiconductor Corp.1.5%
HB Fuller Co.1.4%
Cytec Industries Inc.1.4%
Bank of Hawaii Corp.1.4%
Total % Portfolio in Top 10 holdings17.5%

Holdings are as of the date indicated and subject to change.

Top sectors as of 02/28/2015
List excludes cash and cash equivalents.
Sector% of portfolio
Financial Services22.0%
Technology14.2%
Basic Industry9.3%
Consumer Services8.6%
Capital Spending8.3%
Health Care7.0%
Reits6.9%
Energy4.8%
Consumer Cyclical4.0%
Transportation2.8%
Distribution history - annual distributions (Class A)1,2
Distributions ($ per share)
YearCapital gains3Net investment
income
20150.0000.000
20142.6160.178
20131.1010.055
20120.2540.092
20111.8060.000
20100.1400.000
20090.0000.017
20080.0000.060
20073.4180.000
20063.2730.000
20053.0530.000

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.

Chris Beck

Christopher S. Beck, CFA

Senior Vice President, Chief Investment Officer — Small-Cap Value / Mid-Cap Value Equity

Start date on the Fund: May 1997

Years of industry experience: 34

(View bio)


Steve Catricks

Steven G. Catricks, CFA

Vice President, Portfolio Manager, Equity Analyst

Start date on the Fund: July 2012

Years of industry experience: 16

(View bio)


Kent Madden

Kent P. Madden, CFA

Vice President, Portfolio Manager, Equity Analyst

Start date on the Fund: July 2012

Years of industry experience: 18

(View bio)


Kelly McKee

Kelley A. McKee, CFA

Vice President, Portfolio Manager, Equity Analyst

Start date on the Fund: July 2012

Years of industry experience: 12

(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 fees0.70%
Distribution and service (12b-1) fees0.25%
Other expenses0.30%
Total annual fund operating expenses1.25%
Fee waivers and expense reimbursementsnone
Total annual fund operating expenses after fee waivers and expense reimbursements1.25%

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Delaware Small Cap Value Fund Quarterly commentary December 31, 2014

Within the Fund

Delaware Small Cap Value Fund (Class A shares at net asset value and Institutional Class shares) underperformed its benchmark, the Russell 2000® Value Index, in the fourth quarter of 2014. Stock selection in the capital spending, energy, and technology sectors detracted the most from the Fund’s returns. On a relative basis, stock selection led the Fund to outperform in the financial services, business services, and consumer staples sectors.

Several stocks within the Fund contributed to performance in the fourth quarter. RF Micro Devices designs and develops proprietary radio frequency integrated circuits. Shares of RF Micro Devices increased 44% during the quarter as the company reported solid third quarter results driven by the use of the company’s content in the iPhone 6 and other mobile phones. The company closed its previously announced merger with TriQuint Semiconductor on Dec. 31, 2014. The merged company, which is named Qorvo, began trading under the ticker QRVO on Jan. 2, 2015. We believe the merger should yield substantial cost savings and operating synergies. We continue to like the company as we believe it may be well positioned to potentially benefit from the increased complexity of mobile phones.

Susquehanna Bancshares is a commercial bank with operations in Pennsylvania, Southern New Jersey, and Maryland. During the quarter, BB&T agreed to acquire Susquehanna Bancshares in a cash and stock transaction. The announcement contributed to the stock’s 36% gain during the quarter. We have been reducing the Fund’s position since mid-November 2014 as we do not expect a competing bid to emerge for the company.

Matson is a provider of ocean transportation services with routes servicing Hawaii, China, and the U.S. mainland. Shares of Matson gained 39% during the quarter as the company announced its intention to buy the Alaskan assets of Horizon Lines. We anticipate that the deal should be accretive to earnings. We maintained the Fund’s position in the quarter as we like the strategic merits of the acquisition.

The Fund’s performance was hampered by several energy stocks led by Whiting Petroleum. Whiting Petroleum is an exploration and production company with primary operations in the Bakken Shale formation and the Rocky Mountains. While we had reduced the Fund’s position in Whiting Petroleum during the third quarter of 2014 (after the company announced its plan to acquire Kodiak Oil & Gas) we retained a smaller position due to the relative valuation versus other oil and gas companies, and the expected growth from the acquisition. The stock fell 57% during the quarter as the price of oil had a significant decline following the decision by the Organization of the Petroleum Exporting Countries (OPEC) not to cut production. The stock suffered more than most in the sector, since oil makes up the vast majority of Whiting Petroleum’s production

MasTec is a specialty engineering and construction company operating in the oil and gas, telecommunications, and power end-markets. The stock declined 26% during the quarter upon news that MasTec’s largest telecommunication customer announced that it plans to cut its capital expenditure budget by 15% in 2015 relative to 2014. In addition, MasTec’s stock price was negatively affected by declining energy prices. We maintained the Fund’s position during the quarter — we believe the company has an attractive valuation and good free cash flow generation. Additionally, the company recently announced a share repurchase program.

Shares of Kirby Corporation, a marine transportation and diesel engine services company, declined 31% during the quarter. Kirby Corporation was hurt by lower oil prices as customers delayed orders of oilfield service equipment. We maintained the Fund’s position in Kirby Corporation during the quarter as its valuation contracted. We continue to like the company’s presence in the inland marine business, where it seems to have a strong footprint.

Outlook

As we look into 2015, we believe that the economic outlook in the United States remains favorable. Many of the economic factors that contributed to moderate growth in 2014 remain in place, and this should provide positive economic momentum in 2015. Employment trends, manufacturing data, and consumer spending levels all appear to be trending positively. In addition, we believe the decline in oil prices, which has hurt certain sectors of the economy, such as energy and capital goods, should have positive implications for the U.S. consumer. We expect this positive economic backdrop to help provide companies with the opportunity to continue on an earnings growth path in 2015, which could potentially support equity markets.

The U.S. Federal Reserve continues to strive towards its dual mandate of full employment and stable inflation. As we enter 2015, expectations of a fed funds rate increase are mounting. While the fed funds rate will not stay at 0% forever, we believe the Fed will be quite deliberate with any rate increases and will move slowly to help the economy maintain its momentum.

In the fourth quarter, the Fed ended its quantitative easing program and, as a result, monetary policy has become slightly less accommodative. In this type of environment, we believe that higher-quality companies, which we define as those with strong free cash flow and solid balance sheets, should outperform lower-quality, more speculative companies. Coming into 2015, the Fund’s positioning remains largely unchanged with overweights in basic industries, capital spending, and technology. We remain underweight traditionally defensive sectors including utilities, real estate investment trusts (REITs), and consumer staples where we do not view valuations as attractive. We will continue to identify what we view as high-quality companies that are likely to deploy their cash in shareholder-friendly ways such as dividends or share repurchases.

[13773]

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.

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.

Narrowly focused investments may exhibit higher volatility than investments in multiple industry sectors.

REIT investments are subject to many of the risks associated with direct real estate ownership, including changes in economic conditions, credit risk, and interest rate fluctuations.

Not FDIC Insured | No Bank Guarantee | May Lose Value

Fund Finder

Daily pricing (as of 03/27/2015)

Class APriceNet changeYTD
NAV$53.450.231.81%
Max offer price$56.71n/an/a

Total net assets (as of 02/28/2015)

$2.9 billion all share classes

Overall Morningstar RatingTM

Load waived

With load

Class A shares (as of 02/28/2015)

Load waivedWith loadNo. of funds
Overall43362
3 Yrs32362
5 Yrs43295
10 Yrs43201
Morningstar categorySmall Value

(View Morningstar disclosure)

Lipper ranking (as of 02/28/2015)

YTD ranking555 / 837
1 year441 / 799
3 years522 / 700
5 years302 / 617
10 years181 / 388
Lipper classificationSmall-Cap Core Funds

(View Lipper disclosure)

Benchmark, peer group

Russell 2000® Value Index (view)

Lipper Small-Cap Core Funds Average (view)

Additional information