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Delaware International Value Equity Fund Quarterly commentary March 31, 2016

Within the Fund

For the first quarter of 2016, Delaware International Value Equity Fund (Institutional Class shares and Class A shares at net asset value) outperformed its benchmark, the MSCI EAFE Index. Strong stock selection in information technology, consumer discretionary, materials, and industrials more than offset weak stock selection in financials, healthcare, and energy. Sector allocation was positive, with a favorable effect from an underweight position in financials and an overweight position in industrials more than offsetting the negative effect from underweight positions in consumer staples and materials. Allocation was also positive on a regional basis due to the favorable effect from positions in Canada and emerging markets, which more than offset the adverse effect from underweight positions in the United Kingdom and Asia Pacific ex Japan. Net currency effect was positive, primarily due to underexposure to the British pound and exposure to the Canadian dollar.

Prospective global market drivers and general outlook

In previous quarters, we have discussed the overwhelming significance for global equity investors of the twin poles of the United States and China. We have pointed out the significance of contending policy initiatives emanating from these two colossal markets aimed at addressing distinct national concerns, while the rest of the world faces the prospect of adapting to the ensuing result. It remains uncertain whether the U.S. recovery will be sufficient to sustain itself for an extended period and thereby create the foundation for another leg up in equity performance, just as China’s intervention to dampen the rate of its economic slowdown and bolster itself against the effects of deteriorating confidence will have results that are impossible to foresee today. The experience of the first quarter’s defied expectations illustrates how the combination of discrete factors in the global economy, each of which can be identified and reasonably well understood in isolation, can produce strongly counterintuitive results when combined with one another and with the all-important element of human perception.

It is for this reason that our approach to global equity management focuses on the more tangible elements of competitive advantage and valuation. These criteria tend to be both more objectively verifiable and, in our view, have more persistent utility through time, providing benefits that transcend the vicissitudes of short-term volatility. While relative exposures to underlying economic factors will always be important to prospective performance, we believe that identifying companies that can thrive under a variety of circumstances is essential. Currently, valuations outside the U.S. remain relatively subdued in comparison both to this country and to their own histories, and these markets are populated with a number of companies with the proven ability to succeed under challenging conditions. As bottom-up stock pickers, we appreciate that regardless of the macroeconomic winds, this strength and adaptability can be recognized at the company level, and it is these qualities that we believe have the potential to facilitate long-term success under a variety of economic outcomes that may be difficult to envision today.

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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 (03/31/2016)
Current
quarter
YTD1 year3 year5 year10 yearLifetimeInception
date
Class A (NAV)-1.90%-1.90%-6.75%1.09%0.15%1.01%5.73%10/31/1991
Class A (at offer)-7.54%-7.54%-12.10%-0.87%-1.03%0.42%5.47%
Institutional Class shares-1.82%-1.82%-6.56%1.35%0.41%1.30%6.49%11/09/1992
MSCI EAFE Index (Gross)-2.88%-2.88%-7.87%2.68%2.76%2.27%n/a
MSCI EAFE Index (Net)-3.01%-3.01%-8.27%2.23%2.29%1.80%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)1.36%
Class A (Net)1.36%
Institutional Class shares (Gross)1.11%
Institutional Class shares (Net)1.11%
Top 10 holdings as of 03/31/2016
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Nippon Telegraph & Telephone Corp.4.0%
CGI Group Inc.3.9%
Sanofi3.4%
Teva Pharmaceutical Industries Ltd.3.4%
Vinci S.A.3.2%
Toyota Motor Corp.3.1%
Teleperformance3.1%
ITOCHU Corp.3.0%
Mitsubishi UFJ Financial Group Inc.3.0%
Japan Tobacco Inc.3.0%
Total % Portfolio in Top 10 holdings33.1%

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