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Delaware International Value Equity Fund Quarterly commentary March 31, 2014 Class A (DEGIX)

Within the Fund

For the first quarter of 2014, Delaware International Value Equity Fund (Class A shares at net asset value) posted a slightly negative return that trailed that of its benchmark, the MSCI EAFE Index.

On a regional basis, market performance was strong in Europe ex–euro zone, and to a lesser extent in Asia Pacific ex–Japan and the euro zone, which offset weak performance in Japan and the United Kingdom. On a sector basis, performance was especially strong in utilities and healthcare while performance in telecommunications, consumer discretionary, and financials was weak.

Within the Fund’s portfolio, strong stock selection in Europe ex–euro zone was offset by adverse stock selection in the U.K., Japan, and the euro zone. The effects of overall regional allocation were positive due to a favorable overweight position in Europe ex–euro zone and an underweight position in Japan, which more than offset the negative effects of exposures to emerging markets and Canada. On a sector basis, strong stock selection in financials, healthcare, and consumer staples more than offset weak stock selection in telecommunications, energy, and consumer discretionary. An adverse underweight exposure to utilities offset the positive contribution from an underweight exposure to financials. Overall currency effect was negative due to an overweight exposure to the Canadian dollar and no exposure to the Australian dollar.

General outlook

The interplay of the business and economic cycles of various regions with the policy interventions intended to moderate or ameliorate them, as the case may be, remains critical in understanding global equity market dynamics. In the United States, where recovery from the global financial crisis is now well entrenched, the Federal Reserve is in early stages of withdrawing the strongly interventionist monetary stimulus that began in 2008. Japan saw an even more dramatic approach to monetary intervention, but at a much later date than in the U.S. Japan’s policy mix, which also includes a significant fiscal component as well as structural reform, remains unproven in its longer-term efficacy. In Europe, where crisis prevailed as recently as 2011, policy makers have taken a far less draconian approach, while still signaling their readiness to step up their activism should the circumstances call for it. With growth still slow and rates declining, there is increasing speculation that such measures will be required to stave off deflation.

The trajectory of these issues is hardly transparent, and with current monetary policy interventions having no real precedent, history is of limited use as a guide. The interaction of interest rates, underlying economic metrics, and equity market valuations helps define the risk parameters within which market opportunities may be found. We believe these factors remain generally supportive of market prospects. As bottom-up (company-by-company) stock pickers focused on individual company strengths and valuations, however, we do not rely on these macro measures as the key determinants of our decisions, important as they may be.

As global equity managers taking a contrarian approach to bottom-up stock selection, we believe we have some distinct advantages in addressing the chaos of economic volatility and policy uncertainty. The first of these is that our investable universe represents a broad variety of distinct regional economies and asynchronous valuation cycles from which to choose. The second is our conviction that cyclical volatility can create opportunities for those who understand and are prepared for it.

Finally, we believe that the identification of strong, competitive companies with solid managements and compelling valuations will continue to provide a reliable way to seize the potential opportunities that unpredictable market volatility will send our way.


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.


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

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 (03/31/2014)
YTD1 year3 year5 year10 yearLifetimeInception
Class A (NAV)-0.56%-0.56%14.27%3.68%15.13%5.73%6.73%10/31/1991
Class A (at offer)-6.28%-6.28%7.73%1.65%13.77%5.10%6.45%
Institutional Class shares-0.49%-0.49%14.57%3.95%15.46%6.04%7.03%11/09/1992
MSCI EAFE Index (Gross)0.77%0.77%18.06%7.72%16.55%7.01%n/a
MSCI EAFE Index (Net)0.66%0.66%17.56%7.21%16.01%6.53%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.

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

Expense ratio
Class A (Gross)1.47%
Class A (Net)1.46%
Institutional Class shares (Gross)1.22%
Institutional Class shares (Net)1.21%

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.

Top 10 holdings as of 03/31/2014
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Teva Pharmaceutical Industries Ltd.4.0%
Toyota Motor Corp.3.9%
Nordea Bank AB3.6%
Novartis AG3.6%
AXA S.A.3.5%
CGI Group Inc.3.3%
Vinci S.A.3.3%
Mitsubishi UFJ Financial Group Inc.3.0%
Total % Portfolio in Top 10 holdings36.4%

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.

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