Delaware Mid Cap Value Fund

Objective

 Delaware Mid Cap Value Fund seeks capital appreciation.

Strategy

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

Fund information
Inception date02/01/2008
Dividends paid (if any)Annually
Capital gains paid (if any)November or December
Fund identifiers
NASDAQDLMIX
CUSIP246093835

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 (06/30/2016)

as of quarter-end (06/30/2016)

YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)5.29%-0.30%9.35%8.04%n/a6.80%02/01/2008
Russell Midcap Value Index8.87%3.25%11.00%11.70%n/a8.32%
1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)3.75%-0.30%9.35%8.04%n/a6.80%02/01/2008
Russell Midcap Value Index4.77%3.25%11.00%11.70%n/a8.32%

Returns for less than one year are not annualized.

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

Prior to July 31, 2008, the Fund had not engaged in a broad distribution 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
Gross3.69%
Net1.00%

Net expense ratio reflects a contractual waiver of certain fees and/or expense reimbursements from Feb. 26, 2016 through Feb. 28, 2017. Please see the fee table in the Fund’s prospectus for more information.

Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return
20161.48%3.75%n/an/an/a
20152.57%2.70%-8.26%3.21%-0.26%
20143.23%4.44%-3.78%3.14%6.99%
201311.48%-0.28%5.92%9.87%29.37%
201211.87%-5.10%3.01%3.70%13.40%
20117.51%-1.70%-22.13%14.68%-5.62%
20109.03%-9.16%13.12%14.30%28.06%
2009-11.13%17.89%18.55%4.76%30.12%
2008n/a1.72%-10.16%-23.28%n/a

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

Portfolio characteristics - as of 06/30/2016Russell Midcap Value Index
Number of holdings86566
Market cap (median)$7.03 billion$5.96 billion
Market cap (weighted average)$12.17 billion$11.94 billion
Portfolio turnover (last fiscal year)25%n/a
Beta (relative to Russell Midcap Value Index) (view definition)1.08n/a
Annualized standard deviation, 3 years (view definition)13.23n/a
Portfolio composition as of 06/30/2016Total may not equal 100% due to rounding.
Domestic equities95.4%
Cash and cash equivalents4.6%
Top 10 equity holdings as of 06/30/2016
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
American Financial Group Inc.3.4%
East West Bancorp Inc.2.8%
Synopsys Inc.2.5%
Reinsurance Group of America Inc.2.1%
Newfield Exploration Co.2.1%
Torchmark Corp.1.9%
Raymond James Financial Inc.1.9%
Berry Plastics Group Inc.1.8%
Zimmer Biomet Holdings Inc.1.7%
Avnet Inc.1.7%
Total % Portfolio in Top 10 holdings21.9%

Equity sectors as of 06/30/2016

List excludes cash and cash equivalents.

SectorFundBenchmark
Financial services20.3%0.0%
Technology12.6%0.0%
Basic industry10.0%0.0%
Healthcare8.3%0.0%
REITs8.0%0.0%
Energy7.7%0.0%
Utilities7.5%0.0%
Capital spending5.7%0.0%
Consumer services4.9%0.0%
Consumer cyclical3.8%0.0%
Consumer staples3.7%0.0%
Transportation1.6%0.0%
Business services1.4%0.0%
Distribution history - annual distributions (Institutional Class)1,2
Distributions ($ per share)
YearCapital gains3Net investment
income
20160.0000.000
20150.2930.022
20141.2100.032
20136.2500.143
20120.2770.078
20110.0000.036
20100.0000.041
20090.0000.055
20080.0000.038
20070.0000.000
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.

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

Chris Beck

Christopher S. Beck, CFA

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

Start date on the Fund: February 2008

Years of industry experience: 35

(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: 17

(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: 19

(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: 14

(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 expenses2.94%
Total annual fund operating expenses3.69%
Fee waivers and expense reimbursements(2.69%)
Total annual fund operating expenses after fee waivers and expense reimbursements1.00%

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

1The Fund's investment manager, Delaware Management Company (Manager), has contractually agreed to waive all or a portion of its investment advisory fees and/or pay/reimburse expenses (excluding any 12b-1 fees, acquired fund fees and expenses, taxes, interest, short sale and dividend interest expenses, brokerage fees, certain insurance costs, and nonroutine expenses or costs, including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations) in order to prevent total annual fund operating expenses from exceeding 1.00% of the Fund's average daily net assets from Feb. 26, 2016 through Feb. 28, 2017. These waivers and reimbursements may only be terminated by agreement of the Manager and the Fund.

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Delaware Mid Cap Value Fund Quarterly commentary June 30, 2016

Within the Fund

Delaware Mid Cap Value Fund (Institutional Class shares and Class A shares at net asset value) underperformed its benchmark, the Russell Midcap® Value Index, for the second quarter of 2016.

While stock selection was generally strong for the quarter, it was more than offset by sector allocation, which detracted from relative performance. Within the Fund, an underweight allocation to the real estate investment trust (REIT) sector as well as stock selection detracted from performance. In addition, stock selection in the capital spending, business services, and basic industry sectors hurt the Fund’s performance.

Stock selection in the financial services sector contributed to the Fund’s performance but an overweight allocation detracted from performance. In the energy sector, stock selection contributed while an underweight allocation detracted, as the sector was the strongest in both the Fund and benchmark during the quarter.

At the stock level, shares of department store chain Nordstrom detracted from returns during the quarter. Nordstrom stock price came under pressure ’s falling 35% during the quarter’s after the company negatively revised its full year earnings guidance. The company has been affected by a slowdown in luxury spending, a lack of compelling fashion trends, and the continued shift to online retailers. We sold the Fund’s position in Nordstrom during the quarter as we looked to diversify into companies that we believe have better secular trends.

Two of the Fund’s holdings were negatively affected following the British vote to leave the European Union (Brexit). In the consumer cyclical sector, automotive supplier BorgWarner fell 23%, and in the business services sector, ManpowerGroup declined 20%. The Brexit vote led investors to fear that the U.K. exit from the European Union would cause a slowdown in economic activity. This fear placed excess pressure on the Fund’s holdings with business exposure in Europe. BorgWarner generates more than one third of its revenue in Europe, and ManpowerGroup generates approximately 65% of its revenue in Europe with about 10% from the United Kingdom. We maintained the Fund’s positions in both BorgWarner and ManpowerGroup as we believe that the risk from an economic slowdown is largely reflected in these companies’ share prices.

Adding to the Fund’s performance during the quarter was strong stock selection in the energy sector. SM Energy is an independent oil and gas exploration and production company with operations in the Permian Basin, Eagle Ford shale, and Bakken shale areas. The stock rose 44% during the quarter as the price of oil recovered from the multi-year lows seen in February. Additionally, the company has maintained disciplined capital spending as it aims to spend within cash flow. Management has stressed that the company’s only need for external capital would be if it found a large, accretive acquisition of producing properties. We maintained the Fund’s position as we believe SM Energy has a strong balance sheet and trades at an attractive valuation based on its core areas of operation.

Albemarle is a specialty chemical company that manufactures primarily refining chemicals, bromine, and lithium. Albemarle’s stock increased 25% during the quarter after a first quarter earnings beat, a continued positive outlook for the lithium business, and the announced sale of the company surface treatment business for $3 billion, which it will use to de-lever its balance sheet. We continue to maintain the Fund’s position in Albemarle as the company generates strong cash flow, exercises good capital allocation, and has improving earnings.

Life insurance company Torchmark specializes in providing life and supplemental health insurance to low- to middle-income Americans. Shares of Torchmark appreciated 14% during the quarter. Compared to other life insurance companies, Torchmark is less reliant on investment income, causing its shares to outperform its peers during the quarter as interest rates continued to decline. We trimmed the position in Torchmark in order reduce the Fund’s relative overweight exposure to the insurance industry.

Outlook

Labor markets continued to strengthen during the second quarter with the June unemployment rate reported at 4.9%. It’s important to note that the labor force participation rate has improved in 2016, which should bode well for economic growth. Consumer confidence remains healthy and, while not robust, consumer spending continues to grow.

In a reversal to recent years, value is outperforming growth this year. Headwinds to the oil and oil-related industries have begun to ease as the price of oil (WTI Crude) has appreciated by about 30% this year. The healthcare sector is underperforming this year as biotechnology stocks have sold off. In addition, the consumer services sector is underperforming. Both of these sectors have larger weightings in the growth benchmarks versus the value benchmarks. The economic environment seems to indicate that this relative style performance may continue.

The Fund remains overweight the financial services, healthcare, and technology sectors. Defensive sectors, including REITs and utilities, remain less attractive to us on a relative valuation basis. This year, investors have continued to invest in these higher-yielding sectors, which has pushed stock prices even higher and valuations further out of line. As a result, we remain underweight these sectors.

Our team’s disciplined philosophy remains unchanged. We continue to focus on finding what we view as attractively valued stocks that generate ample free cash flow, have strong balance sheets, and are likely to deploy their cash in shareholder-friendly ways such as repurchasing shares or increasing dividends. We also believe that this focus may serve us well during periods of increased market volatility and higher uncertainty, similar to what we witnessed during 2015 and the first half of 2016. If the market remains choppy, we believe that higher-quality stocks with strong balance sheets have the potential to outperform over the long term.

[17122]

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 800 362-7500. 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.

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.

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 07/22/2016)

Institutional ClassPriceNet change
NAV$5.140.03
Max offer price$5.14n/a

Total net assets (as of 06/30/2016)

$7.6 million all share classes

Overall Morningstar RatingTM

Institutional Class shares (as of 06/30/2016)
RatingNo. of funds
Overall3408
3 Yrs4408
5 Yrs2348
Morningstar categoryMid-Cap Value

(View Morningstar disclosure)

Morningstar ranking (as of 06/30/2016)

YTD ranking216 / 482
1 year153 / 470
3 years106 / 408
5 years243 / 348
10 yearsn/a
Morningstar categoryMid-Cap Value

(View Morningstar disclosure)

Lipper ranking (as of 06/30/2016)

YTD ranking153 / 445
1 year114 / 422
3 years113 / 365
5 years195 / 312
10 yearsn/a
Lipper classificationMid-Cap Core Funds

(View Lipper disclosure)

Benchmark, peer group

Russell Midcap® Value Index (view definition)

Lipper Mid-Cap Core Funds Average (view definition)

Additional information