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Delaware International Value Equity Fund Quarterly commentary June 30, 2015

Economic Developments/Market Drivers


For the quarter ended June 30, 2015, Delaware International Value Equity Fund outperformed its benchmark, the MSCI EAFE Index (net), primarily due to strong stock selection. Regional stock selection was positive, with strength in Japan and the eurozone more than offsetting weakness in the U.K. and Europe ex-euro zone. Overall regional allocation was negative due to unfavorable exposure to Canada and emerging markets. Stock selection on a sector basis was strong in telecommunications, financials, and health care, which more than offset adverse stock selection in consumer staples. Net currency effect was negative, primarily due to an underweight exposure to the British pound and exposure to the U.S. dollar.

Prospective global market drivers and general outlook

Given the subdued and inconsistent nature of global economic growth, and the prominence and variety of reversals across risk factors, it is no great surprise that equity markets failed to sustain the broad strength that marked the first quarter of the year. We believe that prospective returns, though, will likely be shaped by the future evolution of these economic drivers as well as their interaction with market valuations.

In Europe, relative high valuations on trailing earnings continue to reflect in part the cyclical weakness that still prevails. Returns on equity remain in the lower band of the historical range, and normalization of profitability under a scenario of economic recovery could support stock prices even without further expansion of valuations. In Japan, as was the case at the end of the prior quarter, a steep valuation discount to global norms on book value suggests there is room for further gains if the corresponding lag in returns on equity continues to close. Such a transition could play out over a period of years, and though progress on this front is among the targets of the government reform plans, success is not assured.

In contrast to Europe and Japan, U.S. companies are already among the most profitable and highly valued in the world. Underlying secular growth and the security of a relatively business-friendly regulatory regime may justify some measure of a valuation premium, but these qualities could be overshadowed in the event of an accelerating cyclical recovery elsewhere. Though valuations are high relative to other alternatives, they do not deviate meaningfully from their long-term range, and if relatively benign economic conditions persist, low prevailing interest rates could justify their further expansion.

Finally, emerging markets have achieved and will likely retain a magnitude sufficient to exert a meaningful influence on all other economies and the companies that operate within them. The changes in commodity and currency markets over the past year are obvious manifestations of this influence, while others are more subtle. While some may lament the slower growth that has come to characterize developed economies, we would point out that the rapid expansion in the emerging world engenders correspondingly greater dislocations and adjustments, and along with them, economic and market volatility.

For us, these distinctive regional developments constitute the economic ecosystem within which individual companies must operate. As a guide to investment policy, we believe that prediction of the complex interaction of economic trends is a daunting enterprise, but that strength and adaptability can be recognized at the company level, and it is these qualities that will help facilitate long-term success under a variety of economic outcomes that may be difficult to envision today. Coupled with the rigor of compelling valuation, we find the identification of these companies is likely to be the surest route to success.


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 (09/30/2015)
YTD1 year3 year5 year10 yearLifetimeInception
Class A (NAV)-8.63%-2.67%-9.41%4.54%2.42%1.90%5.79%10/31/1991
Class A (at offer)-13.90%n/a-14.61%2.50%1.22%1.30%5.53%
Institutional Class shares-8.59%-2.51%-9.12%4.85%2.71%2.19%6.57%11/09/1992
MSCI EAFE Index (Gross)-10.19%-4.91%-8.27%6.08%4.45%3.44%n/a
MSCI EAFE Index (Net)-10.23%-5.28%-8.66%5.63%3.98%2.97%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 Index (view definition)

Expense ratio
Class A (Gross)1.42%
Class A (Net)1.42%
Institutional Class shares (Gross)1.17%
Institutional Class shares (Net)1.17%
Top 10 holdings as of 09/30/2015
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Teva Pharmaceutical Industries Ltd.4.1%
Mitsubishi UFJ Financial Group Inc.3.8%
AXA S.A.3.8%
Nippon Telegraph & Telephone Corp.3.7%
Novartis AG3.7%
Toyota Motor Corp.3.4%
Nordea Bank AB3.3%
Yue Yuen Industrial Holdings Ltd.3.1%
CGI Group Inc.2.9%
Total % Portfolio in Top 10 holdings35.3%

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.

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.

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

Not FDIC Insured | No Bank Guarantee | May Lose Value