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Delaware International Value Equity Fund Quarterly commentary December 31, 2014

Within the Fund

For the fourth quarter of 2014, Delaware International Value Equity Fund (Class A shares at net asset value and Institutional Class shares) lagged its benchmark, the MSCI EAFE Index, primarily due to adverse stock selection.

On a sector basis, unfavorable stock selection in telecommunications, financials, energy, and consumer staples more than offset strong stock selection in information technology and industrials. Overall sector allocation was positive due to favorable overweight exposures to consumer discretionary and information technology. On a regional basis, adverse stock selection in Europe, the United Kingdom, and Japan more than offset strong stock selection in Asia Pacific ex-Japan. Overall regional allocation was negative, with adverse exposure to Russia more than offsetting the favorable effects of exposure to Canada and an underweight exposure to the U.K.

Net currency effect was positive primarily due to favorable exposure to the U.S., Canadian, and Hong Kong dollars.

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 to the varying levels of secular growth and cyclical mean reversion that may justify those disparities. In our previous two quarterly updates, we indicated 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. In the interim, neither region has seen substantial progress on these issues, and both have lagged U.S. market performance. 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).

The euro zone’s weak overall returns in U.S. dollars mask considerable variation across the region, and though overall returns were down, local investors were spared most of the decline, and thus valuations changed little. Japan’s returns in yen again put that country at the top of major market rankings for local-currency performance, up more than 6%, with a slight increase in underlying valuations (source: MSCI). In the U.S., the market gain is reflected in higher valuations.

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 that the U.S. currently 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 strongest growth markets, that company’s investors can enjoy the benefits of both valuation and strong fundamentals. As global equity managers taking a contrarian approach to bottom-up (stock-by-stock) security selection, we use the uncertainty of macroeconomic and valuation cycles to help bring to light what we view as attractive opportunities at the company level, because it is there, we believe, that close analysis can provide the best and most consistent returns.


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 (12/31/2014)
YTD1 year3 year5 year10 yearLifetimeInception
Class A (NAV)-6.92%-8.82%-8.82%8.58%3.80%3.09%6.11%10/31/1991
Class A (at offer)-12.26%-14.06%-14.06%6.47%2.58%2.48%5.84%
Institutional Class shares-6.79%-8.55%-8.55%8.89%4.09%3.39%6.93%11/09/1992
MSCI EAFE Index (Gross)-3.53%-4.48%-4.48%11.56%5.81%4.91%n/a
MSCI EAFE Index (Net)-3.57%-4.90%-4.90%11.06%5.33%4.43%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)1.42%
Class A (Net)1.42%
Institutional Class shares (Gross)1.17%
Institutional Class shares (Net)1.17%

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 02/28/2015
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Novartis AG4.4%
Teva Pharmaceutical Industries Ltd.4.1%
Mitsubishi UFJ Financial Group Inc.3.7%
Nordea Bank AB3.6%
AXA S.A.3.6%
Toyota Motor Corp.3.5%
CGI Group Inc.3.1%
Nippon Telegraph & Telephone Corp.3.0%
Total % Portfolio in Top 10 holdings35.6%

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