Delaware Global Real Estate Opportunities Fund

Objective

Delaware Global Real Estate Opportunities Fund seeks maximum long-term total return through a combination of current income and capital appreciation.

Strategy

The Fund invests primarily in securities issued by U.S. and non-U.S. real estate and real estate-related companies.

Fund information
Inception date01/10/2007
Dividends paid*Quarterly
Capital gains paid*December

*If any.

Fund identifiers
NASDAQDGRPX
CUSIP245917653
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 (06/30/2014)
YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)12.01%13.82%10.50%16.75%n/a1.58%01/10/2007
Max offer pricen/a7.26%8.36%15.36%n/a0.78%
FTSE EPRA/NAREIT Developed Index12.21%14.38%10.19%17.41%n/an/a
Average annual total return as of quarter-end (06/30/2014)
QTDYTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)7.06%12.01%13.82%10.50%16.75%n/a1.58%01/10/2007
Max offer price0.94%5.50%7.26%8.36%15.36%n/a0.78%
FTSE EPRA/NAREIT Developed Index7.88%12.21%14.38%10.19%17.41%n/an/a

Returns for less than one year are not annualized.

The Delaware Global Real Estate Opportunities Fund's performance information for periods prior to Sept. 28, 2012, reflects the performance of The Global Real Estate Securities Portfolio (the “Portfolio”) of Delaware Pooled® Trust, which merged into Delaware Global Real Estate Opportunities Fund (the “Fund”) as of that date. The performance information for Class A shares at offer has been adjusted to reflect the Fund’s current maximum sales charge. The Fund also has higher expenses than the Portfolio, including a Rule 12b-1 fee to which the Institutional Class of the Portfolio was not subject. Historical performance results at net asset value and offer prior to Sept. 28, 2012 have not been recalculated to reflect these expenses, but future results will be affected by them. The historical performance of the Portfolio would have been lower had it been subject to the Fund’s expense ratio.

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

Expense ratio
Gross1.66%
Net1.40%

Net expense ratio reflects a contractual waiver of certain fees and/or expense reimbursements from Feb. 27, 2014 through Feb. 27, 2015. Please see the fee table in the Fund's prospectus for more information.

Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return
20144.62%7.06%n/an/an/a
20136.00%-3.11%1.27%0.34%4.36%
201211.69%2.71%4.57%7.43%28.87%
20112.96%3.96%-16.78%7.63%-4.13%
20103.43%-7.42%17.93%5.72%19.39%
2009-21.32%31.78%21.75%3.31%30.40%
2008-7.74%-8.11%-8.36%-31.08%-46.46%
2007n/a-4.66%4.18%-9.08%n/a
Portfolio characteristics - as of 06/30/2014
Share assets$8.4 million
Number of holdings83
Market cap (median)$4.80 billion
Market cap (weighted average)$13.03 billion
Portfolio turnover (last fiscal year)112%
Beta (relative to FTSE EPRA/NAREIT Developed Index) (view definition)0.94
Annualized standard deviation, 3 years (view definition)15.70
Portfolio composition as of 06/30/2014Total may not equal 100% due to rounding.
Domestic equities53.5%
International equities & depository receipts43.9%
Cash and cash equivalents2.5%
Top 10 holdings as of 06/30/2014
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Simon Property Group Inc.5.3%
Sun Hung Kai Properties Ltd.3.2%
Mitsui Fudosan Co. Ltd.2.6%
UDR Inc.2.0%
AvalonBay Communities Inc.2.0%
Host Hotels & Resorts Inc.1.9%
Boston Properties Inc.1.8%
Great Portland Estates PLC1.7%
SL Green Realty Corp.1.7%
Dexus Property Group1.7%
Total % Portfolio in Top 10 holdings23.9%

Holdings are as of the date indicated and subject to change.

Top 10 countries as of 06/30/2014List excludes cash and cash equivalents.
Country% of portfolio
United States53.5%
Japan8.1%
Australia7.8%
Hong Kong6.6%
United Kingdom5.1%
Canada3.7%
France3.1%
Germany2.6%
Singapore2.5%
Sweden1.8%
Distribution history - annual distributions (Class A)1,2
Distributions ($ per share)
YearCapital gains3Net investment
income
20140.0000.048
20130.0000.190
20120.0000.146
20110.0000.212
20100.0000.489
20090.0000.362
20080.0000.000
20070.0000.315
20060.0000.000
20050.0000.000
20040.0000.000

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 is only provided from June 1, 2014 onward.

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

Bob Zenouzi

Bob Zenouzi 

Senior Vice President, Chief Investment Officer — Real Estate Securities and Income Solutions (RESIS)

Start date on the Fund: September 2012

(View bio)


Damon Andres

Damon Andres, CFA

Vice President, Senior Portfolio Manager

Start date on the Fund: September 2012

(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 advisor, in the Fund's prospectus under the section entitled "About your account," and in the Fund's statement of additional information under the section entitled "Purchasing Shares."

The following table 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 fees0.99%
Distribution and service (12b-1) fees0.25%
Other expenses0.42%
Total annual fund operating expenses1.66%
Fee waivers and expense reimbursements(0.26%)
Total annual fund operating expenses after fee waivers and expense reimbursements1.40%

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, taxes, interest, short sale and dividend interest expenses, brokerage fees, certain insurance costs, acquired fund fees and expenses, and nonroutine expenses or costs, including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations) in order to prevent annual fund operating expenses from exceeding 1.15% of the Fund's average daily net assets from Feb. 27, 2014 through Feb. 27, 2015. These waivers and reimbursements may only be terminated by agreement of the Manager and the Fund.

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Delaware Global Real Estate Opportunities Fund Quarterly commentary June 30, 2014 Class A (DGRPX)

Within the Fund

For the second quarter of 2014, Delaware Global Real Estate Opportunities Fund (Class A shares at net asset value) posted a positive return but underperformed its benchmark, the FTSE EPRA/NAREIT Developed Index.

The Fund’s underperformance was relatively mild and predominantly driven by weak stock selection. The Fund’s allocation across countries helped offset some of this bad selection.

One particular area of weakness was the Fund’s investment in Spain. The one stock represented in the index from Spain, Inmobiliaria Colonial, was up 24%. This company benefited from a recapitalization during the quarter that brought it out of bankruptcy, and also from investors aggressively trying to get exposure for a hopeful rebound in Spanish property values. Interestingly, the stock trades at a 45% premium to net asset value, as the capital raise diluted share value, but investors still bid the stock up. Unfortunately, the Fund’s one position in Spain, Lar Espana Real Estate Socimi, is not included in the index and it retreated 5% for the quarter. Lar Espana was penalized for showing slow progress investing the money from its initial public offering in the first quarter. We sold the Fund’s investment in the company during the quarter.

Another area of weakness for the Fund during the quarter was its exposure to Hong Kong real estate companies. Fundamentally, Hong Kong is more stable than China, but the Fund remains underweight because we are concerned about growth prospects and political actions that could negatively affect real estate. The Fund’s underweight hurt performance as Hong Kong returned 11% for the quarter.

The Fund’s U.S. investments offset some of the negative pressure. We favored U.S. companies that are early in their cycle in realizing benefits of a U.S. recovery. Strategic Hotels & Resorts was up 15% for the quarter. Its high-end resort hotels have seen greater demand and realized pricing power so far this year as consumers and business customers have been more willing to spend on higher-end hotels. UDR, an apartment company with high-end apartments in major urban markets, has seen similar demand and pricing strength in its assets as job growth has accelerated in many of its markets.

Stock selection in the United Kingdom helped the Fund’s relative performance in the second quarter, although the country was an underperformer. The Fund was helped by not owning Grainger or Big Yellow, which underperformed with returns of -10% and -5%, respectively. Investors were concerned about overpricing and unsustainable growth in the single-family housing market in which these two companies operate. In addition, the Fund benefited from its investment in British Land, a more-diversified landlord that has realized benefits of recent acquisitions and an accretive development pipeline.

Outlook

Global real estate securities’ heady run rate this year underscores the optimistic view that many investors have toward the current real estate environment. The apparent success of the U.S. Federal Reserve in navigating the financial crisis with quantitative easing, and its effect on real estate, has driven investor demand. Low interest rates, accessible debt capital, loan extensions, and minimal development have contributed to real estate’s rebound in the United States, and many view this as a new standard. The European Central Bank (ECB) and Bank of Japan, for example, are now following the U.S. model. Investors have been quick to catch the next wave of returns in the equity markets in response to these central banks’ actions and promises, creating demand for the real estate stocks in these regions. However, we question how successful all this intervention really is or will be in the long run. The U.S. has yet to fully unwind its quantitative easing and someday soon will be charged with reversing interest rates in an upward trend. Europe has a different set of structural issues and a greater risk of deflation, while Japan has demographic concerns working against it.

For now, we believe the glass is half full, and we are willing to participate in the positive sentiment, though we are keenly aware that the glass can also be seen as half empty. Worse yet, the glass could tip over and break. At present, we approach the Fund’s investments with a sense of skepticism until we get a better sense of how the various economic situations across the globe could play out. We do have great confidence in the investments we make. What keep us alert are the factors that are out of our control, or the management teams of the companies in which the Fund invests. As an example, the ECB’s bank stress tests are coming due in Europe this fall. Many of these banks remain loaded with bad debt and underperforming real estate assets. These assets somehow need to be cleared; when they do, the process could be problematic for the real estate sector. In every region, we choose the Fund’s investments with an eye toward minimizing downside risk should negative events develop.

We still have reservations in Europe, owing to structural issues surrounding monetary and fiscal policies, and social regimes that are not always favorable to economic (and real estate) growth. That said, European markets have stopped their decline and the ECB has taken lessons from the U.S., which leads us to believe that future change should be for the better. As we consider real estate investing across Europe, we are acutely focused on balancing risk and reward; there could be great investment opportunities, but several value traps exist. Ultimately, we believe Europe is close to a turning point, but it should be approached with caution.

[12953]

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.

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.

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.

A REIT fund's tax status as a regulated investment company could be jeopardized if it holds real estate directly, as a result of defaults, or receives rental income from real estate holdings.

“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.

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

Fund Finder

Daily pricing (as of 07/24/2014)

Class APriceNet changeYTD
NAV$7.16no chg14.09%
Max offer price$7.60n/an/a

Total net assets (as of 06/30/2014)

$51.9 million all share classes

Overall Morningstar RatingTM

Load waived

With load

Class A shares (as of 06/30/2014)

Load waivedWith loadNo. of funds
Overall43174
3 Yrs53174
5 Yrs43147
Morningstar categoryGlobal Real Estate

(View Morningstar disclosure)

Lipper ranking (as of 06/30/2014)

YTD ranking38 / 139
1 year59 / 134
3 years5 / 102
5 years30 / 88
10 yearsn/a
Lipper classificationGlobal Real Estate Funds

(View Lipper disclosure)

Benchmark

FTSE EPRA/NAREIT Developed Index (view)

Lipper Global Real Estate Funds Average (view)

Additional information