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 its portfolio managers believe have long-term capital appreciation potential and expect to grow faster than the U.S. economy. The portfolio managers particularly seek small to mid-sized companies.

Fund information
Inception date11/09/1992
Dividends paid (if any)Annually
Capital gains paid (if any)November or December
Fund identifiers
NASDAQDFDIX
CUSIP245906201

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 (08/31/2015)
YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)4.24%10.81%14.70%18.72%10.18%10.27%11/09/1992
Average annual total return as of quarter-end (06/30/2015)
QTDYTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)2.23%8.30%16.42%16.61%19.94%11.03%10.53%11/09/1992
Russell 2500 Growth Index0.61%8.09%11.30%20.34%19.55%10.32%n/a

Returns for less than one year are not annualized.

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
Gross0.97%
Net0.97%
Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return
20155.94%2.23%n/an/an/a
2014-4.33%0.23%-1.94%9.62%3.09%
201310.41%4.10%10.61%11.06%41.20%
201217.00%-5.99%2.59%-1.94%10.65%
201114.41%3.26%-15.84%8.92%8.28%
20104.86%-1.73%14.72%14.57%35.43%
20090.54%14.93%17.01%7.16%44.89%
2008-13.89%6.23%-13.78%-25.76%-41.44%
20075.01%7.95%2.91%-3.40%12.68%
20069.10%-5.94%-2.94%5.68%5.25%
2005-3.59%3.50%5.35%4.96%10.33%

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

Portfolio characteristics - as of 08/31/2015
Number of holdings29
Market cap (median)$3.51 billion
Market cap (weighted average)$3.96 billion
Portfolio turnover (last fiscal year)8%
Beta, 3 years (relative to Russell 2500 Growth Index) (view definition)0.78
Annualized standard deviation, 3 years (view definition)11.07
Portfolio composition as of 08/31/2015Total may not equal 100% due to rounding.
Domestic equities92.3%
Cash and cash equivalents4.6%
International equities & depositary receipts3.0%
Top 10 holdings as of 08/31/2015
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Heartland Payment Systems Inc.6.0%
j2 Global Inc.5.5%
Sally Beauty Holdings Inc.5.3%
DineEquity Inc.5.3%
MSCI Inc.5.1%
Zebra Technologies Corp.5.0%
Blackbaud Inc.5.0%
Equity Commonwealth5.0%
Bio-Techne Corp.4.9%
Graco Inc.4.9%
Total % Portfolio in Top 10 holdings52.0%
Top sectors as of 08/31/2015
List excludes cash and cash equivalents.
Sector% of portfolio
Consumer Discretionary22.6%
Financial Services21.2%
Technology17.1%
Producer Durables14.0%
Health Care11.3%
Utilities5.5%
Energy3.6%
Distribution history - annual distributions (Institutional Class)1,2
Distributions ($ per share)
YearCapital gains3Net investment
income
20150.0000.000
20144.1220.000
20131.0790.000
20121.5820.000
20110.9460.000
20100.9380.263
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.

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

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: 27

(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 fees0.71%
Distribution and service (12b-1) feesnone
Other expenses0.26%
Total annual fund operating expenses0.97%
Fee waivers and expense reimbursementsnone
Total annual fund operating expenses after fee waivers and expense reimbursements0.97%

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

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Delaware Smid Cap Growth Fund* Quarterly commentary June 30, 2015

Within the Fund

For the second quarter of 2015, Delaware Smid Cap Growth Fund (Institutional Class shares and Class A shares at net asset value) outperformed its benchmark, the Russell 2500™ Growth Index. Strong relative performance in the producer durables and technology sectors was partially offset by weak relative performance in the consumer discretionary and healthcare sectors.

Zebra Technologies contributed to the Fund’s performance during the quarter. The company has been the market leader in barcode printers and scanners for more than 30 years and offers an assortment of products to support manufacturing and supply chain management. The stock rose as the company reported better-than-expected financial results driven, in part, by the recently acquired Motorola Solutions enterprise business. This merger was the catalyst for us to purchase the stock as the combined cost and product synergies seemed compelling to us. We continue to believe the acquired technology from this business should allow the company to offer enhanced next-generation products to fulfil today’s needs.

Blackbaud also contributed to performance during the quarter. The stock rose, in part, on the announcement that two new meaningful customers chose Blackbaud’s fundraising and relationship management platform, Luminate CRM. We feel Blackbaud has a competitive advantage as it is one of the few companies that offers products and services specifically tailored to the non-profit sector. We believe the company should see continued growth as a growing number of non-profits are turning toward its products, given the company’s ability to deliver an attractive return on investment by optimizing a non-profit’s effectiveness and efficiency.

Heartland Payment Systems was a contributor to performance during the quarter. While the company reported mixed financial results that beat consensus earnings estimates but missed on revenues relative to consensus expectations, the stock seemed to recover from weakness experienced during the first quarter of 2015. We continue to believe the company should be positioned well to benefit from the secular global trend of payment transactions moving from paper-based currency to electronic transactions.

Shutterstock detracted from the Fund’s performance during the quarter. While the company reported relatively light future financial guidance, other news included Adobe’s launch of a new stock photo service. Adobe’s entrance into the stock photo space, while no surprise, could pose a competitive threat given its potential synergies with the existing Adobe product suite (including InDesign, Photoshop, and Premier Pro). We continue to believe that Shutterstock provides an attractive alternative to traditional licensed digital image and sound providers by providing a pure-pricing model, transparent terms, and significantly lower cost compared to existing companies. As image and sound licensing has historically been very expensive and often under excessively-complex terms, we feel Shutterstock should be able to gain considerable market share. Although it is a new entrant to the market, we believe recent acquisitions should help the company further strengthen its competitive position amid competitor struggles.

Sally Beauty Holdings also detracted from performance during the second quarter after a strong stock performance in the first quarter. While the company reported financial results that were relatively in-line, the stock experienced some weakness as some sell-side analysts expressed concerns over “same store comparisons” and the expansion of the European business. We continue to believe that this beauty supply retailer is a relatively steady growth business due to aging demographics and a fairly low level of discretionary income necessary for beauty enhancement and maintenance for the target customer base.

Finally, DineEquity was a detractor from performance during the quarter. The stock declined despite the company’s reporting strong financial results that beat consensus estimates. The company also announced a new president for the IHOP brand. This role was previously held by company CEO, Julia Stewart, who served as the interim-brand president for the past three years and was instrumental in the company’s transition from a restaurant owner-operator model to a pure franchise holding company. We continue to believe this transition and future initiatives should continue to lead to additional shareholder value.

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.

[14389]

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), a U.S. registered investment advisor, 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 (DMC), 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 800 362-7500. 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.

Holding a relatively concentrated portfolio of a limited number of securities may increase risk because each investment has a greater effect on the Fund’s overall performance than would be the case for a more diversified fund.

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 09/02/2015)

Institutional ClassPriceNet changeYTD
NAV$33.960.472.85%
Max offer price$33.96n/an/a

Total net assets (as of 08/31/2015)

$1.3 billion all share classes

Overall Morningstar RatingTM

Institutional Class shares (as of 07/31/2015)
RatingNo. of funds
Overall5654
3 Yrs3654
5 Yrs5583
10 Yrs5447
Morningstar categoryMid-Cap Growth

(View Morningstar disclosure)

Lipper ranking (as of 07/31/2015)

YTD ranking119 / 570
1 year149 / 556
3 years335 / 487
5 years74 / 430
10 years18 / 306
Lipper classificationSmall-Cap Growth Funds

(View Lipper disclosure)

Benchmark, peer group

Russell 2500 Growth Index (view definition)

Lipper Small-Cap Growth Funds Average (view definition)

Additional information