Delaware Investments Delaware Investments Delaware Investments

Delaware Healthcare Fund

Objective

Delaware Healthcare Fund seeks maximum long-term capital growth through capital appreciation.

Strategy

The Fund typically invests in companies that develop, produce, or distribute products related to the healthcare or medical industries and derive a substantial portion of their sales from products and services in the healthcare industry. The Fund invests in U.S. and non-U.S. companies across all market capitalizations.

Fund information
Inception date09/28/2007
Dividends paid (if any)Annually
Capital gains paid (if any)November or December
Fund identifiers
NASDAQDLHAX
CUSIP24610E101
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 (12/31/2016)

as of quarter-end (12/31/2016)

YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)-4.34%-4.34%7.65%17.46%n/a15.66%09/28/2007
Max offer price-9.83%-9.83%5.55%16.08%n/a14.92%
Russell 3000 Healthcare Index-3.33%-3.33%9.10%17.25%n/a10.08%
1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)-4.68%-4.34%7.65%17.46%n/a15.66%09/28/2007
Max offer price-10.17%-9.83%5.55%16.08%n/a14.92%
Russell 3000 Healthcare Index-4.22%-3.33%9.10%17.25%n/a10.08%

Returns for less than one year are not annualized.

Benchmark lifetime returns are as of the month end after the Fund's inception date.

Class A shares have a maximum up-front sales charge of 5.75% and are subject to an annual distribution fee.

Prior to Jan. 28, 2010, the Fund had not engaged in a broad distribution effort of its shares and had been subject to limited redemption requests. The returns reflect expense limitations that were in effect during certain periods and which may have been lower than the Fund's current expenses. The returns would have been lower without expense limitations.

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
Gross1.35%
Net1.35%
Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return
2016-6.53%3.96%3.29%-4.68%-4.34%
20156.76%8.20%-12.17%9.82%11.43%
20147.38%5.27%1.13%2.39%17.04%
201317.55%8.75%9.83%7.32%50.69%
201218.59%-5.63%3.29%2.92%18.96%
20119.17%4.50%-15.99%7.24%2.78%
20107.96%-12.50%10.98%10.50%15.84%
2009-2.72%20.44%22.95%11.97%61.31%
2008-7.00%1.91%4.63%-12.08%-12.81%
2007n/an/an/a2.66%n/a
Portfolio characteristics - as of 12/31/2016Russell 3000 Healthcare Index
Number of holdings64446
Market cap (median)$3.87 billion$0.76 billion
Market cap (weighted average)$53.96 billion$97.10 billion
Portfolio turnover (last fiscal year)46%n/a
Beta (relative to Russell 3000 Healthcare Index) (view definition)0.95n/a
Annualized standard deviation, 3 years (view definition)14.85n/a
Portfolio composition as of 12/31/2016Total may not equal 100% due to rounding.Values in excess of 100% and negative values may appear as the result of certain assets and liabilities.
Domestic equities61.5%
International equities & depositary receipts39.9%
Cash and cash equivalents-1.4%
Top 10 equity holdings as of 12/31/2016
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holdings based by issuer.
Holding% of portfolio
Sanofi10.8%
Eli Lilly & Co7.0%
MorphoSys AG6.1%
Chugai Pharmaceutical Co Ltd5.0%
Amgen Inc4.8%
GlaxoSmithKline PLC4.5%
Pfizer Inc4.0%
Gilead Sciences Inc3.3%
Sohu.com Inc3.2%
Boston Scientific Corp3.1%
Total % Portfolio in Top 10 holdings51.8%

Equity sectors as of 12/31/2016

List excludes cash and cash equivalents.

SectorFundBenchmark
Blue chip medical products54.1%0.0%
Biotechnology14.4%0.0%
Small/mid-cap medical products11.3%0.0%
Healthcare services8.5%0.0%

Sector designations may be different than the sector designations presented in other Fund materials. The sector designations may represent the investment manager’s internal sector classifications, which may result in the sector designations for one fund being different than another fund's sector designations.

Distribution history - annual distributions (Class A)1,2
Distributions ($ per share)
YearCapital gains3Net investment
income
20161.2160.176
20151.3430.169
20142.0720.012
20130.4200.000
20120.0000.037
20110.7550.002
20100.6510.009
20091.2800.022
20080.3400.007
20070.3010.000
20060.0000.000

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 (if any) is only provided from June 1, 2014 onward.

3Includes both short- and long-term capital gains.

Liu-Er Chen

Liu-Er Chen, CFA

Senior Vice President, Chief Investment Officer — Emerging Markets and Healthcare

Start date on the Fund: September 2007

Years of industry experience: 21

(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 intermediary, 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 fees0.85%
Distribution and service (12b-1) fees0.25%
Other expenses0.25%
Total annual fund operating expenses1.35%
Fee waivers and expense reimbursementsnone
Total annual fund operating expenses after fee waivers and expense reimbursements1.35%

View printable commentary E-mail this page

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Delaware Healthcare Fund Quarterly commentary December 31, 2016

Within the Fund

Healthcare stocks fell during the fourth quarter of 2016. The largest driver of performance was the presidential election in the United States, which resulted in a surprise victory for Donald Trump. The early November election triggered a rise in U.S. bond yields, appreciation of the dollar, and a rally in the U.S. stock market. Healthcare stocks have languished, however, due to increasing concerns over pricing power for drugs and proposed reforms to the Affordable Care Act.

During the fourth quarter, Delaware Healthcare Fund (Institutional Class shares and Class A shares at net asset value) slightly underperformed its benchmark, the Russell 3000® Healthcare Index.

Among sectors, the Fund’s holdings in small- and mid-cap medical products contributed the most to relative performance. Both our underweight stance and stock selection were positive. The Fund’s large overweight position in MorphoSys outperformed. MorphoSys remains one of the few antibody technology platforms that has not been acquired by a large pharmaceutical company. The shares have recovered recently due to progress on the company’s pipeline of new products. Additionally, the Fund’s underweight positions in Illumina and Allergan were positive in terms of asset allocation as both of these companies underperformed in the fourth quarter.

Among stocks, the Fund’s overweight position in Sanofi contributed to performance as shares recovered after they were oversold last quarter. Additionally, the Fund’s positions in both Fannie Mae and Freddie Mac rose sharply as the market viewed Trump’s election as a positive for shareholders and increased the likelihood that both companies will be returned to private ownership.

On the negative side, the Fund’s holdings in the biotechnology and blue chip medical products sectors detracted the most from relative performance. In the biotechnology sector, shares of Neurocrine Biosciences sold off while Alder Biopharmaceuticals underperformed due to concerns over patents on its leading products.

In the blue chip medical products sector, the Fund’s overweight position in Chugai Pharmaceutical detracted from performance after the stock sold off following a strong run-up. Additionally, the Fund’s underweight positioning in Celgene and Johnson & Johnson was negative in terms of asset allocation.

Other stocks that detracted from performance included Chinese Internet companies Sohu.com and SINA. SINA succumbed to profit-taking following a strong rally. We believe the company remains well positioned for long-term growth in online advertising. Shares of Sohu.com declined after the company disclosed further losses and funding requirements in its online video business. Despite these concerns, we believe that the company’s overall portfolio of assets, particularly its search business, is undervalued.

Outlook

For global healthcare investors, there are risks that short-term legislative and judicial action may overshadow the positive long-term fundamentals of the sector and of specific companies. Nevertheless, we continue to see tremendous long-term opportunities in the global healthcare asset class. The baby-boom generation in America is aging, implying expanding demand for healthcare products and services for decades to come. At the same time, middle classes in countries with emerging economies (notably India and China) are growing rapidly, creating big appetites for Western-style medicine. We remain positive on the sector and its growth opportunities.

Looking ahead, we believe that healthcare remains one of the few growth sectors in the economy. With Trump’s presidential victory and Republicans in control of Congress, in our view, there will likely be changes to or a repeal of the Affordable Care Act at some point in the future. We believe this deregulation will be seen by the market as a positive for the healthcare sector.

We believe that the healthcare sector underperformed in 2016 due to cyclical rotation. Healthcare stocks, particularly biotechnology companies, have now corrected and repriced after enjoying a bull run that took place well before the rest of the U.S. market began to recover. We believe the correction in healthcare stocks is now largely done and we continue to see many attractive opportunities.

We continue putting a premium on disciplined, intensive research when analyzing investment opportunities for the Fund. We favor companies that exhibit such traits as:

  • Proven competitiveness
  • Seasoned management teams
  • Stock valuations that are discounted meaningfully from our estimates of intrinsic value.

These characteristics are part of our daily considerations as we follow our conservative, stock-by-stock approach to portfolio management.

[18458]

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.

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 800 523-1918. 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.

Healthcare companies are subject to extensive government regulation and their profitability can be affected by restrictions on government reimbursement for medical expenses, rising costs of medical products and services, pricing pressure, and malpractice or other litigation.

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.

Investments in small and/or medium-sized companies typically exhibit greater risk and higher volatility than larger, more established companies.

“Nondiversified” funds may allocate more of their net assets to investments in single securities than “diversified” funds. Resulting adverse effects may subject these funds to greater risks and volatility.

Not FDIC Insured | No Bank Guarantee | May Lose Value

Fund Finder

Daily pricing (as of 01/19/2017)

Class APriceNet change
NAV$17.99-0.15
Max offer price$19.09n/a

Total net assets (as of 12/31/2016)

$346.0 million all share classes

Overall Morningstar RatingTM

 
Class A shares (as of 12/31/2016)
Class ANo. of funds
Overall4125
3 Yrs3125
5 Yrs4118
Morningstar categoryHealth

(View Morningstar disclosure)

Morningstar ranking (as of 12/31/2016)

YTD ranking26 / 134
1 year26 / 134
3 years56 / 125
5 years53 / 118
10 yearsn/a
Morningstar categoryHealth

(View Morningstar disclosure)

Lipper ranking (as of 12/31/2016)

YTD ranking24 / 88
1 year24 / 88
3 years36 / 80
5 years37 / 73
10 yearsn/a
Lipper classificationHealth/Biotech Funds

(View Lipper disclosure)

Benchmark, peer group

Russell 3000® Healthcare Index (view definition)

Morningstar Health Category (view definition)

Lipper Health/Biotechnology Funds Average (view definition)

Additional information