Delaware Small Cap Core Fund


Delaware Small Cap Core Fund seeks long-term capital appreciation.


The Fund invests in stocks of small companies believed to have a combination of attractive valuations, growth prospects, and strong cash flows.

Fund information
Inception date12/29/1998
Dividends paid (if any)Annually
Capital gains paid (if any)December
Fund identifiers

Institutional Class shares are only available to certain investors. See the prospectus for more information. 

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 (12/31/2014)
YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)8.84%8.84%21.70%18.47%8.56%11.35%12/29/1998
Russell 2000 Index4.89%4.89%19.21%15.55%7.77%n/a
Average annual total return as of quarter-end (12/31/2014)
QTDYTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)9.63%8.84%8.84%21.70%18.47%8.56%11.35%12/29/1998
Russell 2000 Index9.73%4.89%4.89%19.21%15.55%7.77%n/a

Returns for less than one year are not annualized.

Prior to Aug. 1, 2005, the Fund had not engaged in a broad distribution effort of its shares and had been subject to limited redemption requests. 12b-1 fees were waived for this period. Had 12b-1 fees been applied, performance would have been lower. Expense waivers were in effect for the periods shown. Performance would have been lower if waivers did not apply.

Expense ratio
Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return

Institutional Class shares are only available to certain investors. See the prospectus for more information. 

Portfolio characteristics - as of 12/31/2014
Number of holdings133
Market cap (median)$1.73 billion
Market cap (weighted average)$2.08 billion
Portfolio turnover (last fiscal year)38%
Beta - (relative to Russell 2000 Index) (view definition)0.90
Annualized standard deviation, 3 years (view definition)12.27
Portfolio composition as of 12/31/2014Total may not equal 100% due to rounding.
Domestic equities96.0%
Cash and cash equivalents2.6%
International equities & depositary receipts1.4%
Top 10 holdings as of 12/31/2014
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Casey's General Stores Inc.1.3%
West Pharmaceutical Services Inc.1.3%
XPO Logistics Inc.1.2%
NPS Pharmaceuticals Inc.1.1%
DexCom Inc.1.1%
j2 Global Inc.1.1%
G-III Apparel Group Ltd.1.1%
LaSalle Hotel Properties1.1%
Proofpoint Inc.1.1%
Total % Portfolio in Top 10 holdings11.6%

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

Top sectors as of 12/31/2014
List excludes cash and cash equivalents.
Sector% of portfolio
Health Care14.5%
Capital Goods8.7%
Basic Materials7.0%
Business Services6.5%
Consumer Services4.7%
Consumer Discretionary3.5%
Consumer Staples2.7%
Distribution history - annual distributions (Institutional Class)1,2
Distributions ($ per share)
YearCapital gains3Net investment

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.

Institutional Class shares are only available to certain investors. See the prospectus for more information. 

Francis X. Morris

Francis X. Morris 

Senior Vice President, Chief Investment Officer – Core Equity

Start date on the Fund: November 2004

Years of industry experience: 31

(View bio)

Chris Adams

Christopher S. Adams, CFA

Vice President, Senior Portfolio Manager

Start date on the Fund: November 2004

Years of industry experience: 26

(View bio)

Mike Morris

Michael S. Morris, CFA

Vice President, Senior Portfolio Manager

Start date on the Fund: November 2004

Years of industry experience: 22

(View bio)

Donb Padilla

Donald G. Padilla, CFA

Vice President, Senior Portfolio Manager

Start date on the Fund: November 2004

Years of industry experience: 28

(View bio)

Institutional Class shares are only available to certain investors. See the prospectus for more information. 

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 pricenone
Maximum contingent deferred sales charge (load) as a percentage of original purchase price or redemption price, whichever is lowernone
Annual fund operating expenses
Management fees0.75%
Distribution and service (12b-1) feesnone
Other expenses0.31%
Total annual fund operating expenses1.06%
Fee waivers and expense reimbursementsnone
Total annual fund operating expenses after fee waivers and expense reimbursements1.06%

Institutional Class shares are only available to certain investors. See the prospectus for more information. 

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Delaware Small Cap Core Fund Quarterly commentary September 30, 2014

Within the Fund

Delaware Small Cap Core Fund (Class A and Institutional Class shares at net asset value) posted a negative return but outperformed its benchmark, the Russell 2000® Index, in the third quarter of 2014. Excess returns during the quarter were driven by stock selection in the healthcare, energy, and transportation sectors. Stock selection in the technology, communications services, and utilities sectors were the largest detractors from performance. The Fund ended the quarter overweight the finance, consumer services, and communications services sectors and underweight the consumer discretionary, utilities, and real estate investment trust (REIT) sectors.

One of the stocks that had a positive effect on the portfolio was Auxilium Pharmaceuticals, a specialty pharmaceutical company focused on the development and commercialization of therapeutics for urology and sexual health. Late in the second quarter of 2014, Auxilium entered into a favorable merger agreement with QLT, a Canadian biotechnology company. In September, Endo International delivered an unsolicited proposal to acquire Auxilium at a healthy premium, sending the stock up 49% for the quarter. Auxilium’s board, in consultation with its financial and legal advisors, unanimously determined that the Endo bid was not a superior proposal to the existing merger agreement with QLT. We continue to own the stock in the Fund as we believe there could be further upside from negotiations with Endo.

InterMune is a biotechnology company focused on the research, development, and commercialization of innovative therapies in pulmonology and fibrotic diseases. The stock has been the top contributor to portfolio performance throughout the year (gaining 401% year-to-date and 67% during the third quarter). In August, Roche announced that it had entered into a definitive merger agreement to fully acquire InterMune in an all-cash transaction. The acquisition of InterMune should allow Roche to broaden and strengthen its respiratory portfolio globally. We believe the price paid by Roche fully values the company — therefore, we have exited the position.

XPO Logistics is an asset-light, third-party logistics provider. During the quarter, the company reported a number of positive events that contributed to the stock’s 32% gain. The company announced the completion of two sizable acquisitions, in addition to securing a $700 million private investment, which should accelerate XPO’s growth strategy. We continue to own XPO as we believe the company may be well positioned to achieve strong top-line growth and margin expansion through strategic mergers and acquisitions, as well as organic opportunities.

Detractors from performance in the third quarter included cloud-based digital media company Brightcove, which fell 47%. News of a customer loss, which accounted for less than 5% of annual revenues, as well as weak sales execution during the quarter, forced the company to reduce its guidance for the year. We continue to own the stock in the Fund as we believe the current valuation is compelling despite the temporary headwinds that the company is facing.

Semiconductor company Applied Micro Circuits fell 35% during the quarter. The company reduced earnings guidance due to a faster-than-expected decline in a legacy business unit. We continue to like the stock — the company has a new product that targets the advanced RISC machine server market, which continues to ramp nicely and is our catalyst for owning the company.

Del Frisco’s Restaurant Group is the owner and developer of fine-dining restaurants. The stock was down 31% as delays in restaurant openings forced the company to lower guidance for the year. Rising beef costs have created margin compression; however, we view this as a short-term concern that does not affect our long-term outlook for the company.


We believe small-cap stocks remain the most favorable way to leverage the strength of the U.S. economy, as small-cap companies derive a higher percentage of sales from the United States than mid- or large-cap companies. The combination of improving macroeconomic data over the summer months and healthy earnings growth estimates continues to keep us optimistic on small-cap stocks. We continue to keep a close eye on economic indicators as we believe improving conditions in the U.S. could provide further tailwinds to earnings growth for small-caps.

The market pullback that occurred in the third quarter reduced the one-year forward price-to-earnings ratio on the Russell 2000 Index from 19.71 at the end of June, to 16.86 at the end of September (source: FactSet). We intend to make best use of the current environment by topping off existing positions and adding some compelling new ideas to the portfolio.

The increase in mergers-and-acquisitions activity this year has met our expectations and we anticipate that this trend should continue given the healthy levels of cash on corporate balance sheets, as well as favorable credit market conditions. Capacity utilization is ticking closer to its long-term average, which should instill business confidence and potentially lead to increased capital expenditures.

Our research continues to favor companies with what we view as having strong balance sheets and cash flow, sustainable competitive advantages, and high-quality management teams, which we believe have the potential to outperform over the cycle.

Forward price-to-earnings (P/E) ratio is a measure of the P/E using forecasted earnings for the P/E calculation.


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 800 362-7500. Investors should read the prospectus and the summary prospectus carefully before investing.

Investing involves risk, including the possible loss of principal.

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

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.

International investments entail risks not ordinarily associated with U.S. investments including fluctuation in currency values, differences in accounting principles, or economic or political instability in other nations.

Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility and lower trading volume.

The Funds are distributed by Delaware Distributors L.P., an affiliate of Delaware Management Holdings, Inc., and Macquarie Group Limited.

Not FDIC Insured | No Bank Guarantee | May Lose Value

Fund Finder

Daily pricing (as of 01/23/2015)

Institutional ClassPriceNet changeYTD
Max offer price$19.96n/an/a

Total net assets (as of 12/31/2014)

$469.5 million all share classes

Lipper ranking (as of 12/31/2014)

YTD ranking31 / 801
1 year31 / 801
3 years50 / 704
5 years23 / 622
10 years102 / 383
Lipper classificationSmall-Cap Core Funds

(View Lipper disclosure)

Benchmark, peer group

Russell 2000® Index (view)

Lipper Small-Cap Core Funds Average (view)

Additional information