Delaware International Value Equity Fund

Opportunity through adversity — international value investing at
Delaware Investments

"Buying stocks that appear risky, when in fact they are far less risky than people think” is at the heart of the Global and International Value Equity team's philosophy. Watch the team elaborate on its investment process as well as the unique chemistry that helps make the team work.

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Objective

Delaware International Value Equity Fund seeks long-term growth without undue risk to principal.

Strategy

The Fund invests primarily in equity securities that are organized, have a majority of their assets, or generate the majority of their operating income outside the United States, and that provide the potential for capital appreciation.

Fund information
Inception date10/31/1991
Dividends paid (if any)Annually
Capital gains paid (if any)December
Fund identifiers
NASDAQDEGIX
CUSIP245914106
Investment minimums
Initial investment$1,000
Subsequent Investments$100
Systematic withdrawal balance$5,000
Account features
CheckwritingNo
Payroll DeductionYes
IRAsYes

On Sept. 25, 2014, Class B shares of the Fund converted to Class A shares.

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 (11/30/2014)
YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)-5.05%-4.13%9.63%4.97%3.95%6.32%10/31/1991
Max offer price-10.52%-9.64%7.49%3.72%3.33%6.05%
MSCI EAFE Index (Gross)-1.08%0.41%12.52%6.86%5.73%n/a
MSCI EAFE Index (Net)-1.49%-0.02%12.01%6.38%5.25%n/a
Average annual total return as of quarter-end (09/30/2014)
QTDYTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)-6.68%-2.04%3.57%12.81%6.19%5.16%6.51%10/31/1991
Max offer price-12.04%n/a-2.38%10.60%4.93%4.54%6.24%
MSCI EAFE Index (Gross)-5.83%-0.99%4.70%14.16%7.04%6.80%n/a
MSCI EAFE Index (Net)-5.88%-1.38%4.26%13.65%6.56%6.32%n/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.

Expense ratio
Gross1.47%
Net1.46%

Net expense ratio reflects a contractual waiver of certain fees and/or expense reimbursements from March 28, 2014 to March 30, 2015. Please see the fee table in the Fund’s prospectus for more information.

Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return
2014-0.56%5.58%-6.68%n/an/a
20136.46%-2.39%11.37%5.72%22.33%
201211.07%-7.71%6.39%5.24%14.76%
20117.46%2.26%-25.22%4.39%-14.22%
20102.03%-13.31%17.65%5.47%9.75%
2009-11.63%22.07%20.91%4.28%36.02%
2008-8.40%-6.54%-16.81%-19.30%-42.52%
20073.92%6.80%-2.08%-3.72%4.63%
20068.02%-1.29%4.95%9.86%22.93%
20050.65%-0.18%8.81%2.30%11.84%
20041.83%1.38%2.53%13.60%20.25%
Portfolio characteristics - as of 11/30/2014
Share assets$74.1 million
Number of holdings47
Market cap (median)$20.75 billion
Market cap (weighted average)$48.97 billion
Portfolio turnover (last fiscal year)30%
Beta (relative to MSCI EAFE Index (Gross)) (view definition)0.90
Annualized standard deviation, 3 years (view definition)12.13
Portfolio composition as of 11/30/2014Total may not equal 100% due to rounding.
International equities & depository receipts98.3%
Cash and cash equivalents1.7%
Top 10 holdings as of 11/30/2014
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Teva Pharmaceutical Industries Ltd.4.7%
CGI Group Inc.4.6%
Novartis AG4.3%
AXA S.A.3.5%
Nordea Bank AB3.4%
Mitsubishi UFJ Financial Group Inc.3.4%
Toyota Motor Corp.3.3%
Sanofi3.3%
Teleperformance3.2%
ARYZTA AG3.0%
Total % Portfolio in Top 10 holdings36.7%

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

Top 10 countries as of 11/30/2014List excludes cash and cash equivalents.
Country% of portfolio
France20.0%
Japan18.3%
United Kingdom9.6%
Canada8.2%
Switzerland7.3%
Sweden5.6%
Germany5.0%
Israel4.7%
Netherlands4.6%
Hong Kong3.7%
Distribution history - annual distributions (Class A)1,2
Distributions ($ per share)
YearCapital gains3Net investment
income
20140.0000.267
20130.0000.145
20120.0000.153
20110.0000.193
20100.0000.105
20090.0000.232
20080.0000.307
20070.7190.204
20065.3370.174
20050.7250.412
20040.1450.063

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.

Ned Gray

Ned Gray, CFA

Senior Vice President, Chief Investment Officer — Global and International Value Equity

Start date on the Fund: May 2006

Years of industry experience: 28

(View bio)


Todd Bassion

Todd A. Bassion, CFA

Vice President, Portfolio Manager

Start date on the Fund: May 2006

Years of industry experience: 14

(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 (SAI) under the section entitled "Purchasing Shares."

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 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 fees0.85%
Distribution and service (12b-1) fees0.25%
Other expenses0.37%
Total annual fund operating expenses1.47%
Fee waivers and expense reimbursements(0.01%)
Total annual fund operating expenses after fee waivers and expense reimbursements1.46%

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 total annual fund operating expenses from exceeding 1.21% of the Fund’s average daily net assets from March 28, 2014 through March 30, 2015. These waivers and reimbursements may only be terminated by agreement of the Manager or the Distributor, as applicable, and the Fund.

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Delaware International Value Equity Fund Quarterly commentary September 30, 2014

Within the Fund

Delaware International Value Equity Fund (Class A and Institutional Class shares at net asset value) lagged its benchmark, the MSCI EAFE Index, for the quarter ended Sept. 30, 2014.

The Fund’s relative underperformance during the quarter was attributable primarily to adverse stock selection, partially offset by favorable currency exposures.

On a sector basis, strong stock selection in consumer discretionary, financials, and industrials was offset by weak stock selection in consumer staples, materials, and energy. Overall sector allocation was positive, with favorable overweight exposures to healthcare and information technology more than offsetting the adverse effects of an overweight exposure to consumer discretionary and an underweight position in financials.

From a regional perspective, strong stock selection in the euro zone and Japan was offset by weak stock selection in the United Kingdom, Asia Pacific ex-Japan, and Europe ex–euro zone. The positive effects of being underweight in the U.K. and Asia Pacific ex-Japan were more than offset by an adverse exposure to emerging markets (which are not in the MSCI EAFE benchmark).

Net currency effect was strong due to favorable exposures to the U.S., Canadian, and Hong Kong dollars more than offsetting the negative effect from an underweight exposure to the British pound.

General outlook

We believe that successful value investing requires both a sharp attention to developing valuation disparities across industries and regions and a clear-eyed view of the varying levels of secular growth and cyclical mean reversion that may justify those disparities. In our last quarterly update, we pointed out the attractive valuations to be found in both Europe and Japan, but with the caveats that European cyclical recovery and Japanese structural improvements would likely be needed to support the expansion of those valuation metrics. The United States, by contrast, after enjoying a longer and stronger market up-cycle, appeared among the most richly valued of the world’s major markets (source: MSCI). While this general pattern remains intact, the market’s performance in the interim has been far from uniform, and has been complicated significantly by shifts in currency exchange rates.

The euro zone’s weak overall returns in U.S. dollars mask considerable variation across the region, and though returns in the two largest markets, France and Germany, were down, local investors were spared most of the decline, and thus valuations changed little. Japan’s returns in yen put that country at the top of major market rankings for local-currency performance, up more than 5%, with a corresponding increase in underlying valuations. In the U.S., the slight index-level gain was actually outpaced by improvements in underlying fundamentals, which brought valuation levels down slightly.

For U.S. optimists, though these valuations appear well above historical median levels, they are still well below prior peaks and may reflect the greater stability and secular growth prospects this country enjoys versus many other developed as well as emerging markets. Perhaps they are right. As global stock pickers, what we find intriguing is this: In an interconnected global market, domicile does not limit opportunity. If a European multinational trades at a recessionary valuation multiple but has competitive positions in the world’s best growth markets, that company’s investors enjoy the benefits of both valuation and strong fundamentals. As global equity managers taking a contrarian approach to bottom-up stock selection, we use the uncertainty of macroeconomic and valuation cycles to bring to light exceptional opportunities at the company level, because it is there, we believe, that close analysis can potentially provide the most consistent long-term returns.

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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.

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.

Not FDIC Insured | No Bank Guarantee | May Lose Value

Fund Finder

Daily pricing (as of 12/24/2014)

Class APriceNet changeYTD
NAV$12.910.01-7.53%
Max offer price$13.70n/an/a

Total net assets (as of 11/30/2014)

$286.9 million all share classes

Lipper ranking (as of 11/30/2014)

YTD ranking128 / 158
1 year133 / 158
3 years85 / 120
5 years69 / 101
10 years41 / 61
Lipper classificationInternational Multi-Cap Value

(View Lipper disclosure)

Benchmark, peer group

MSCI EAFE (Europe, Australasia, Far East) Index (view)

Lipper International Multi-Cap Value Funds Average (view)

Additional information