Delaware Investments U.S. Large Cap Value Fund

Investment objective

The investment objective of Delaware Investments U.S. Large Cap Value Fund (Fund) is to aim to achieve long-term capital appreciation. The focus of the Fund’s investments is on equity securities (shares and other similar instruments) of large U.S. companies. At least 80% of the assets of the Fund will normally be invested in such securities.

Philosophy

The Large-Cap Value team takes a classic approach to value-oriented equity investing. We believe stock prices are influenced by human emotion and crowd psychology. We seek to capitalize on discrepancies between estimated intrinsic value and price, typically buying at times of excessive pessimism and selling at times of undue optimism. We develop relatively concentrated and equally weighted portfolios that reflect our deep conviction.

Our style is to seek consistent and potentially enhanced results through the application of a disciplined investment process, identifying equities that may be undervalued relative to their earnings power or asset values. We follow a bottom-up security selection process that emphasizes fundamental research and employs a macroeconomic overlay to help determine our sector positioning. All portfolio decisions are achieved through a vote by the team's five portfolio managers, and each manager's vote counts equally.

Investment process

Step 1. Opportunity universe

The investment team uses a multifactor value screen to define its investment universe. Developed by the quantitative research team at Delaware Investments, the screen utilizes valuation and quality factors. Value factors include price to book value, dividend yield, price to cash flow, price to trailing earnings per share, and other value measures. Among the quality measures we employ are the Ford Quality Rating, return on equity, and change in working capital.

Step 2. Preliminary research

The list of investment candidates is further narrowed after the creation of a "quick look" research report. We examine a security's long-term valuation history, summarize its financial statements, and assess its potential in both bear and bull market environments.

Step 3. In-depth fundamental research

Team-driven primary research includes an in-depth review of company financial statements and direct contact with company management. We develop earnings models using our own assumptions and perform various valuation analyses to help determine estimated intrinsic value. Sell-side research is also reviewed but not for a sense of recommendation or timing. Ultimately, we set high and low price levels for each stock and incorporate a risk/return tradeoff of these levels in our investment decision.

Step 4. Macroeconomic overlay

We analyze economic and corporate trends to identify long-term themes that we believe could affect a sector's price performance. Sector valuation levels are also an important consideration. This leads to our sector overweight and underweight decisions, which are made relative to the S&P 500® Index

Step 5. Portfolio construction

Integration of the macroeconomic overlay and fundamental research occurs in a consensus-building process that leads to the selection of our target portfolio. Through this work, we consider risks at the sector and industry group levels. Primary considerations when constructing the Fund’s portfolio are having exposure across 10 economic sectors, and weighting stocks equally at inception.

Step 6. Sell disciplines

We may decide to sell holdings based on valuation, deteriorating fundamentals, sector weight changes, or position size limits. For example, we may sell because a stock met our price target, or appeared overvalued to us versus its sector or peers. A material change in company-specific or macroeconomic fundamentals could cause us to sell a position. We may also sell because we determine a more attractive long-term investment opportunity is available in another sector. And, a stock may likely be sold or trimmed if it reaches 5% of portfolio value.

Performance as of 31 March 2014

  March 1Q14 1 year 3 year 5 year Since inception(24/12/2007)
Delaware Investments U.S. Large Cap Value Fund
(Class F $ (accumulating) shares, net of fees)
2.83% 2.44% 20.56% 14.96% 18.95% 4.82%
Russell 1000® Value Index 2.39% 3.02% 21.57% 14.80% 21.75% 5.43%

The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.

The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. It is an unmanaged index and a theoretical measure of stock-market performance than an actual available instrument. You cannot invest directly in an index.

Portfolio characteristics as of 31 March 2014

Benchmark Index: Russell 1000® Value Index

  Fund Index
Weighted average P/E ratio (FY2) 13.4x 15.5x
Weighted average dividend yield 2.6% 2.3%
Number of holdings 33 664
Weighted average market capitalization (millions) $71,736 $111,990
Median market capitalization (millions) $39,957 $6,644

Sector weightings as of 31 March 2014

  Fund Index
Healthcare 18.3% 13.5%
Energy 15.2% 14.5%
Information technology 14.9% 9.0%
Consumer staples 11.9% 5.8%
Financials 11.7% 29.1%
Industrials 9.0% 10.2%
Telecommunication services 6.0% 2.5%
Consumer discretionary 6.0% 6.4%
Utilities 3.2% 6.1%
Materials 3.0% 2.9%
Cash 0.8% 0.0%

The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. It is an unmanaged index and a theoretical measure of stock-market performance than an actual available instrument. You cannot invest directly in an index.

Ty Nutt

D. Tysen Nutt Jr.

Senior Portfolio Manager, Team Leader

D. Tysen Nutt Jr. is senior portfolio manager and team leader for the firm’s Large-Cap Value team. Before joining Delaware Investments in 2004 as senior vice president and senior portfolio manager, Nutt led the U.S. Active Large-Cap Value team within Merrill Lynch Investment Managers, where he managed mutual funds and separate accounts for institutions and private clients. He departed Merrill Lynch Investment Managers as a managing director. Prior to joining Merrill Lynch Investment Managers in 1994, Nutt was with Van Deventer & Hoch where he managed large-cap value portfolios for institutions and private clients. He began his investment career at Dean Witter Reynolds, where he eventually became vice president, investments. Nutt earned his bachelor’s degree from Dartmouth College, and he is a member of the New York Society of Security Analysts and the CFA Institute.

Kristen Bartholdson

Kristen E. Bartholdson

Senior Portfolio Manager

Kristen E. Bartholdson is a senior portfolio manager for the firm’s Large-Cap Value team. Prior to joining the firm in 2006 as an associate portfolio manager, she worked at Susquehanna International Group from 2004 to 2006, where she was an equity research salesperson. From 2000 to 2004 she worked in equity research at Credit Suisse, most recently as an associate analyst in investment strategy. Bartholdson earned her bachelor’s degree in economics from Princeton University.

Nik Lalvani

Nikhil G. Lalvani, CFA

Senior Portfolio Manager

Nikhil G. Lalvani is a senior portfolio manager for the firm's Large-Cap Value team. At Delaware Investments, Lalvani has served as both a fundamental and quantitative analyst. Prior to joining the firm in 1997 as an account analyst, he was a research associate with Bloomberg. Lalvani holds a bachelor's degree in finance from The Pennsylvania State University. He is a member of the CFA Institute and the CFA Society of Philadelphia.

Anthony Lombardi

Anthony A. Lombardi, CFA

Senior Portfolio Manager

Anthony A. Lombardi is a senior portfolio manager for the firm’s Large-Cap Value team. Prior to joining the firm in 2004 in his current role, Lombardi was a director at Merrill Lynch Investment Managers. He joined Merrill Lynch Investment Managers’ Capital Management Group in 1998 and last worked as a director and portfolio manager for the U.S. Active Large-Cap Value team, managing mutual funds and separate accounts for institutions and private clients. From 1990 to 1997, he worked at Dean Witter Reynolds as a sell-side equity research analyst, last serving as a vice president. He began his career as an investment analyst with Crossland Savings. Lombardi graduated from Hofstra University, receiving a bachelor’s degree in finance and an MBA in finance with a concentration in portfolio management. He is a member of the New York Society of Security Analysts and the CFA Institute

Bob Vogel

Robert A. Vogel, Jr. CFA

Senior Portfolio Manager

Robert A. Vogel Jr. is a senior portfolio manager for the firm’s Large-Cap Value team. Prior to joining Delaware Investments in 2004 as vice president and senior portfolio manager, he worked at Merrill Lynch Investment Managers for more than seven years, where he rose to the position of director and portfolio manager within the U.S. Active Large-Cap Value team. He began his career in 1992 as a financial consultant at Merrill Lynch. Vogel graduated from Loyola University Maryland, earning both bachelor’s and master’s degrees in finance. He also earned an MBA with a concentration in finance from The Wharton School of the University of Pennsylvania. Vogel is a member of the New York Society of Security Analysts, the CFA Institute, and the CFA Society of Philadelphia.

Portfolio holdings are as of the date noted above and are subject to change at any time. Holdings may not be representative of current or future investments and may not include the entire investment portfolio. Holdings information is made available to the public 30 calendar days after the most recent month-end for monthly holdings and 30 calendar days after the most recent quarter-end for quarterly holdings.

Holdings data is for informational purposes only, and is not intended as a recommendation, offer, or solicitation for the purchase or sale of any specific security. By accessing the portfolio holdings, you agree not to reproduce, distribute or disseminate the portfolio holdings, in whole or part. In no event shall the Macquarie Collective Funds plc or its affiliates have any liability relating to the use of the portfolio holdings.

Investors should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and Key Investor Information Documents (KIIDs) contain this and other important information about the Fund and can be obtained by clicking the prospectus link located in the right-hand sidebar or calling +353-1-483-2429. Investors should read the prospectus carefully before investing or sending money.

There are risks involved with investing in the Fund, including loss of principal.

Because the Fund expects to hold a concentrated portfolio of a limited number of securities, the Fund's risk may be increased because each investment has greater effect on the Fund's overall performance. We maintain a diversified portfolio representing a number of different industries, which helps to minimise the impact that any one industry could have on the portfolio.

The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested. Current tax levels and relief may change. Depending on individual circumstances, this may affect investment returns.

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Daily pricing

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Class F$*

(Accumulating)

Currency USD
ISIN IE00B29QBC19
Sedol B29QBC1
CUSIP G2774C148
Bloomberg ID DLCVLFA

Fees and expenses

Management fee 1.35%
Expense ratio 1.80%

Literature

Prospectuses and reports

Visit our Literature page for Key Investor Information Documents (KIIDs).

* For information on other share classes, please contact Delaware Investments at +1 215 255 1505 or at delawareoffshore@delinvest.com