Greek elections and the euro zone

Recent uncertainty over elections in Greece heightened the perceived probability of a breakup of the euro in the short term, which would likely have dramatic, disruptive effects on Greece, as well as the rest of the euro zone. In our opinion, a euro zone breakup would likely entail an effective devaluation across peripheral regions with a corresponding revaluation in whatever currency survived in the core and northern region, whether a newly constituted euro or reinstituted Deutsche mark. We believe the adverse currency swing for core Europe under such a scenario would significantly degrade the competitiveness of exporters domiciled there, due to higher relative costs, pricing pressure, or both.

By reducing the immediate likelihood of a breakup, the Greek elections have clearly forestalled, if not avoided, a highly disruptive outcome for that country. In maintaining the viability of the euro zone itself, however, the election's most important impact may have been in supporting the vastly larger economy in Germany.

Although the Greek elections have provided short-term relief to investors, it is clear that the euro zone has bigger problems than Greece. Shortly after the resolution of the Greek elections, markets quickly shifted their attention to Spain, where borrowing costs are now at record highs, with 10-year bonds yielding more than 7% (source: Bloomberg). It is still unknown if the 100-billion-euro bailout in June for Spain’s banks will be enough.

The peripheral countries of the euro zone have been experiencing weak growth and austerity coupled with credit market stress for the better part of a year. We believe the euro zone will continue to operate at a structural disadvantage by having monetary union without fiscal union.

Positioning

The Delaware Investments Global and International Value Equity team currently has no portfolio holdings in Spain, Portugal, Italy, Ireland, or Greece. The team continues to attempt to capitalize on opportunities where companies are being punished for being domiciled in the euro zone, even though their core business operations are located in what the team believes are stronger, more resilient regions.

The Delaware Investments Global and International Value Equity team seeks consistent long-term performance by investing in global and international companies. The team adheres to a traditional value-oriented investment philosophy and employs a rigorous analytical process to identify strong stocks. Learn more about Delaware Global Value Fund and Delaware International Value Equity Fund.

Your financial advisor can help you determine how an allocation to global and international equities could complement your overall asset mix.

The views expressed represent the Manager’s assessment of the market environment as of June 2012, 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. Views are subject to change without notice and may not reflect the Manager’s current views.

Carefully consider the Funds' investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Funds' prospectuses and their summary prospectuses, which may be obtained by visiting the fund literature page or calling 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing.

IMPORTANT RISK CONSIDERATIONS

Investing involves risk, including the possible loss of principal.

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.

Investors should not place undue reliance on forward-looking statements as a prediction of actual results. In addition, we disclaim any obligations to update any forward-looking statements to reflect events or circumstances that occur after the date of this document.

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