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Delaware Focus Global Growth Fund Quarterly commentary June 30, 2015

Within the Fund

For the second quarter of 2015, Delaware Focus Global Growth Fund (Institutional Class shares and Class A shares at net asset value) outperformed its benchmark, the MSCI World Index (net). Strong relative performance in the consumer discretionary and industrials sectors was partially offset by weak relative performance in the financials and healthcare sectors.

Zebra Technologies contributed to the Fund’s performance during the quarter. The company has been the market leader in barcode printers and scanners for more than 30 years and offers an assortment of products to support manufacturing and supply chain management. The stock rose as the company reported better-than-expected financial results driven, in part, by the recently acquired Motorola Solutions enterprise business. This merger was the catalyst for us to purchase the stock as the combined cost and product synergies seemed compelling to us.We continue to believe the acquired technology from this business should allow the company to offer enhanced next-generation products to fulfil today’s needs.

Experian also contributed to performance during the quarter. While the company reported financial results that were somewhat mixed relative to consensus estimates, Experian showed growth in its core credit-services product offering. Additionally, the company made progress in transitioning “freecreditreport.com” customers to the “Experian.com” brand. We believe Experian should continue to experience growth as the company adds credit and financial product offerings (either organically or through acquisition) and expands globally.

TripAdvisor, a new addition to the portfolio, also contributed to performance during the quarter. The stock rose sharply after it was announced that Marriott International, and its approximately 4,200 properties, would be added to TripAdvisor’s instant booking platform. While the company has a massive amount of user traffic that has been historically undermonetized, the company is making a strategic push to better monetize this business through an “instant booking” button that allows consumers to book directly on TripAdvisor’s site rather than losing customers to competitor sites. We feel this strategic push and recent partnerships should create meaningful growth for the company going forward.

QUALCOMM detracted from the Fund’s performance during the quarter. The stock experienced weakness amid an increasingly competitive environment within the semiconductor space. Recently there has been a wave of mergers among peers which could lead to further cost-cutting synergies and scale among rivals. In order to stay competitive, there is pressure for QUALCOMM to pursue various strategies including a potential acquisition, spin-out of the company’s chip business and patent-licensing business, or funding of aggressive share buybacks. While we are closely monitoring the company for any future developments, we believe QUALCOMM continues to benefit from its unique intellectual property and patent position in the semiconductor industry as well as its technology applications to aid in the significant growth and proliferation of wireless devices.

Wynn Resorts was a detractor from performance during the quarter. The stock reported financial results that fell below consensus estimates and also cut its dividend. The company’s Macau location continues to experience weakness and uncertainty due, in part, to China’s anti-corruption campaign, which seems to be deterring VIP visits. We feel the Macau location is especially attractive given its geographic proximity to the South China mainland and the growing middle class and underpenetration within China. We believe Wynn Resorts is the most attractive operator in the Macau market based on its product differentiation and focus on the consumer experience versus other operators. We believe we have the stock appropriately weighted in the portfolio to mitigate what we believe to be transitory weakness and the uncertainty surrounding the government’s plans for Macau.

Finally, Kakaku.com was a detractor from performance during the quarter. The stock declined amid concerns about decelerating growth rates and lower margins in kakaku.com and Tabelog, its e-commerce platform and restaurant reservation service, respectively. Our thesis for owning Kakaku.com is largely predicated on our belief that Japan is entering a multiyear e-commerce growth acceleration and the company should be a beneficiary. We are closely monitoring Tabelog’s progress and remain convinced of its growth trajectory but believe that incremental costs associated with adding new restaurants are increasing as the competitive environment has intensified. With respect to the company’s price comparison business, we believe the long-awaited release of the company’s mobile app could be a positive catalyst for business momentum.

Outlook

Despite positive absolute returns in the equity market during the past few years, we believe the relatively tepid market sentiment demonstrates 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 800 523-1918 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 (06/30/2015)
Current
quarter
YTD1 year3 year5 year10 yearLifetimeInception
date
Class A (NAV)0.95%2.08%1.29%11.48%13.58%n/a16.95%12/29/2008
Class A (at offer)-4.87%-3.78%-4.56%9.31%12.24%n/a15.89%
Institutional Class shares1.05%2.22%1.57%11.75%13.83%n/a17.15%12/29/2008
MSCI World Index (Gross)0.49%2.95%1.97%14.90%13.72%n/an/a
MSCI World Index (Net)0.31%2.63%1.43%14.27%13.10%n/an/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.

Prior to Dec. 29, 2010, 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 that may have been lower than the Fund's current expenses. The returns would have been lower without the 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.

MSCI World Index (view definition)

Expense ratio
Class A (Gross)1.40%
Class A (Net)1.40%
Institutional Class shares (Gross)1.15%
Institutional Class shares (Net)1.15%
Top 10 holdings as of 06/30/2015
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
QUALCOMM Inc.4.5%
Celgene Corp.4.4%
eBay Inc.3.7%
Novo Nordisk A/S3.6%
Zebra Technologies Corp.3.5%
Start Today Co. Ltd.3.4%
TripAdvisor Inc.3.4%
Experian PLC3.3%
Grupo Televisa SAB3.3%
MasterCard Inc.3.2%
Total % Portfolio in Top 10 holdings36.3%

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.

Jackson Square Partners, LLC (JSP), a U.S. registered investment advisor, 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 (DMC), 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 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing.

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.

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

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

Not FDIC Insured | No Bank Guarantee | May Lose Value