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Delaware Select Growth Fund* Quarterly commentary December 31, 2014

Within the Fund

For the fourth quarter of 2014, Delaware Select Growth Fund (Class A and Institutional Class shares at net asset value) outperformed its benchmark, the Russell 3000® Growth Index. Strong relative performance in the healthcare and consumer discretionary sectors was partially offset by weak relative performance in technology and producer durables sectors.

Abiomed was a strong contributor to the Fund’s performance during the quarter. The stock rose after the company reported financial results that exceeded consensus estimates. Additionally, the market seemed to consider the impact the Republican-favored midterm elections would have on the medical-device excise tax that went into effect last year. Whether or not the excise tax is repealed, we believe the company should continue to increase shareholder value driven, in part, by the increased usage of its heart pump devices.

DineEquity was a contributor to performance during the quarter. The company recently underwent a debt restructuring that significantly reduced its interest rate and increased financial flexibility going forward. Partially as a result of this cost savings, the company approved an increase to its quarterly dividend and its stock buyback program, which the market seemed to view favorably. The company continued to show how its completed transition from a restaurant owner-operator model to a pure franchise holding company has created additional shareholder value.

Finally, Coupons.com was a contributor to performance during the quarter. The stock rose after the company reported financial results that exceeded consensus estimates. Given its established position as a key player within the space, the company continues to benefit from the secular growth trend of paper coupons moving toward mobile coupon distribution. Additionally, the secular growth of wireless technologies makes accessing its services even easier for consumers. We believe the company should see future growth as its products continue to deliver attractive favorable return on investment by increasing customer traffic for its clients.

Yelp detracted from performance during the quarter. The stock declined after the company issued future guidance lower than consensus estimates, in addition to concerns about increased competition. The stock has been somewhat volatile since its initial public offering (IPO) in 2012 as investors grappled with the valuation to place on this high growth company with a strong competitive position in local business information and advertising and an evolving business model. The ultimate level of revenue growth and profitability falls within a wide range of outcomes and often leads to a corresponding wide range of investor sentiment on the appropriate company valuation. We believe the company’s unique competitive position and growth profile could lead to shareholder value creation over a full market cycle — therefore, we are willing to hold the Fund’s position through periods of stock volatility.

Core Laboratories was a significant detractor from performance during the quarter. The stock, along with others within the oil and natural gas industry, experienced weakness amidst falling oil and natural gas prices and the Organization of the Petroleum Exporting Countries (OPEC)’s decision to not cut production. Despite reporting better than expected earnings, the company lowered future guidance, leading to increased concerns about future use of Core Laboratories services by clients in the near term. We are willing to live with a certain degree of cyclicality in the energy cycle given that this company’s solutions to site analysis are valuable in various parts of the cycle. In our view, this is a well-owned stock with little historical controversy and volatility and therefore we believe that investors may be overreacting to a potentially transitory weakness in commodity prices that is contributing to a reasonable conservative assessment of industry conditions by company management.

Finally, EOG Resources was also a detractor from performance during the quarter. Similar to Williams Companies, the stock experienced weakness resulting from falling oil and natural gas prices. 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. It's important to note that although the stock can, at times, be affected by fluctuations in the price of oil and natural gas, we don't believe that the company's long-term intrinsic business value is dependent solely on commodity prices. Rather, we believe EOG's management team has a unique capital allocation discipline relative to other energy companies that could increase the company's potential to perform and add value through a variety of commodity prices and economic environments.

Outlook

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

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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.

Performance

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.

Performance data current to the most recent month end may be obtained by calling 877 693-3546 or visiting delawareinvestments.com/performance.

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 quarter-end (12/31/2014)
Current
quarter
YTD1 year3 year5 year10 yearLifetimeInception
date
Class A (NAV)7.93%6.79%6.79%17.44%17.04%9.59%10.82%05/16/1994
Class A (at offer)1.72%0.65%0.65%15.14%15.67%8.94%10.50%
Institutional Class shares7.98%7.05%7.05%17.73%17.34%9.87%8.54%08/28/1997
Russell 3000 Growth Index5.17%12.44%12.44%20.25%15.89%8.50%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.

Russell 3000® Growth Index (view)

Expense ratio
Class A (Gross)1.25%
Class A (Net)1.25%
Institutional Class shares (Gross)1.00%
Institutional Class shares (Net)1.00%
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
Zebra Technologies Corp.5.2%
Microsoft Corp.4.7%
Celgene Corp.4.5%
Allergan Inc.3.3%
Walgreens Boots Alliance Inc.2.9%
eBay Inc.2.8%
Priceline Group Inc.2.8%
Equity Commonwealth2.7%
DineEquity Inc.2.7%
Yelp Inc.2.6%
Total % Portfolio in Top 10 holdings34.2%

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

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

*Effective after the close of business on June 8, 2012, Delaware Select Growth Fund was 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 the 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.

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 877 693-3546. 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.

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.

Not FDIC Insured | No Bank Guarantee | May Lose Value