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Delaware Focus Global Growth Fund Quarterly commentary December 31, 2014

Within the Fund

For the fourth quarter of 2014, Delaware Focus Global Growth Fund (Class A and Institutional Class shares at net asset value) outperformed its benchmark, the MSCI World Index (net). Strong relative performance in the information technology and healthcare sectors was partially offset by weak relative performance in the consumer discretionary sector.

Celgene contributed to the Fund’s performance during the quarter. The company reported financial results that beat consensus expectations and increased future guidance. The company also reported strong phase-2 trial results for a Crohn’s disease drug that supported Celgene’s strategy of diversifying its product offerings — in this case, diseases affecting the immune system. Celgene remains a leading player in the treatment of blood cancers with a growing product pipeline in breast, lung, and pancreatic cancer treatments. Additionally, the company continues to benefit from large growth prospects driven by additional indications of its drugs, by increased usage of existing drugs, and by international growth opportunities.

Allergan was a contributor to performance during the quarter. The stock rose after it was announced that Activis, a generic and specialty drug manufacturer, would acquire Allergan at a premium to previous offers by Valeant Pharmaceuticals International. While we continue to believe Allergan operates at a high level driven by the core ophthalmology franchise as well as by the broader use of Botox in both cosmetic and in other medical indications, we are currently assessing the investment merits of a combined Activis/Allergan entity.

Visa was also a contributor to performance during the quarter. The stock rose sharply during the period as China announced it would allow foreign companies to clear electronic payments. While this is meaningful for a company like Visa, there are still several hurdles before it would be able to access China’s market. Additionally, concerns over disintermediating technologies, such as alternative mobile payment services, seem to be partially abating as Visa has taken aggressive initiatives through technology upgrades and strategic partnerships. We continue to believe the company is well positioned to benefit from the secular global trend of payment transactions moving from paper-based currency to electronic transactions.

Core Laboratories was a significant detractor from the Fund’s performance during the quarter. The stock, along with others within the oil and natural gas industry, experienced weakness amidst falling oil and natural gas prices and the Organization of the Petroleum Exporting Countries (OPEC)’s decision to not cut production. Despite reporting better than expected earnings, the company lowered future guidance, leading to increased concerns about future use of Core Laboratories services by clients in the near term. We are willing to live with a certain degree of cyclicality in the energy cycle given that this company’s solutions to site analysis are valuable in various parts of the cycle. In our view, this is a well-owned stock with little historical controversy and volatility, and we therefore believe that investors may be overreacting to a potentially transitory weakness in commodity prices that is contributing to a reasonable conservative assessment of industry conditions by company management.

Novo Nordisk detracted from performance during the quarter. The stock experienced weakness after the company lowered forward sales guidance due, in part, to lower growth expectations in China and continued pressure from generic competition. Despite the latest stock weakness, we continue to believe the company should continue to see a growing need for its products. Unfortunately, diabetes is growing globally due to rising obesity rates in developing markets and the growth of a middle class in emerging markets that tends to result in a more protein-based diet.

Finally, Intertek Group also detracted from performance during the quarter. The stock declined amid concerns about weak organic growth as well as a lack of improvement (and even a possible weakness) in margins. Despite these important but relatively transitory concerns, we believe the company continues to have solid overall fundamentals that seem to demonstrate its ability to navigate difficult economic environments as it participates in a secular growth segment of product testing and certification.

Outlook

Despite positive absolute returns in the equity market during the past few years, we believe the relatively tepid market sentiment demonstrates to us 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 (12/31/2014)
Current
quarter
YTD1 year3 year5 year10 yearLifetimeInception
date
Class A (NAV)3.26%1.99%1.99%13.93%12.08%n/a18.07%12/29/2008
Class A (at offer)-2.68%-3.87%-3.87%11.70%10.76%n/a16.90%
Institutional Class shares3.33%2.21%2.21%14.23%12.30%n/a18.26%12/29/2008
MSCI World Index (Gross)1.12%5.50%5.50%16.13%10.81%n/an/a
MSCI World Index (Net)1.01%4.94%4.94%15.47%10.20%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)

Expense ratio
Class A (Gross)1.51%
Class A (Net)1.51%
Institutional Class shares (Gross)1.26%
Institutional Class shares (Net)1.26%
Top 10 holdings as of 02/28/2015
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Celgene Corp.5.3%
Allergan Inc.3.8%
Priceline Group Inc.3.8%
Baidu Inc.3.4%
MasterCard Inc.3.4%
Visa Inc.3.3%
Experian PLC3.3%
Novo Nordisk A/S3.1%
Intercontinental Exchange Inc.3.1%
eBay Inc.3.0%
Total % Portfolio in Top 10 holdings35.5%

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) 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, 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.

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

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