Delaware Investments Delaware Investments Delaware Investments

Delaware Emerging Markets Fund

Objective

Delaware Emerging Markets Fund seeks long-term capital appreciation.

Strategy

The Fund invests primarily in a broad range of equity securities of companies located in emerging market countries.

Fund information
Inception date06/10/1996
Dividends paid (if any)Annually
Capital gains paid (if any)November or December
Fund identifiers
NASDAQDEMAX
CUSIP245914841
Investment minimums
Initial investment$1,000
Subsequent Investments$100
Systematic withdrawal balance$5,000
Account features
CheckwritingNo
Payroll DeductionYes
IRAsYes

On Sept. 25, 2014, Class B shares of the Fund converted to Class A shares.

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.

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 month-end (02/28/2017)

as of quarter-end (12/31/2016)

YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)10.16%41.19%1.76%3.23%4.69%7.57%06/10/1996
Max offer price3.84%33.12%-0.23%2.02%4.07%7.26%
MSCI Emerging Markets Index (Gross)8.71%29.94%1.73%-0.02%3.20%n/a
MSCI Emerging Markets Index (Net)8.70%29.46%1.35%-0.37%2.86%n/a
1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)-4.87%17.62%-2.51%4.16%3.57%7.12%06/10/1996
Max offer price-10.32%10.82%-4.42%2.93%2.96%6.82%
MSCI Emerging Markets Index (Gross)-4.08%11.60%-2.19%1.64%2.17%n/a
MSCI Emerging Markets Index (Net)-4.16%11.19%-2.55%1.28%1.84%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.

Expense ratio
Gross1.78%
Net1.70%

Net expense ratio reflects a contractual waiver of certain fees and/or expense reimbursements from March 28, 2017 through March 28, 2018. Please see the fee table in the Fund’s prospectus for more information.

Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return
20165.49%2.60%14.24%-4.87%17.62%
2015-3.96%4.77%-21.74%9.29%-13.93%
2014-1.48%7.84%-3.43%-10.80%-8.48%
20132.09%-5.19%13.48%3.55%13.74%
201212.01%-11.80%9.46%7.61%16.37%
20113.56%-4.04%-25.52%6.98%-20.82%
20102.58%-10.48%17.88%9.50%18.53%
2009-1.05%35.10%22.74%8.51%78.05%
2008-9.71%1.74%-26.90%-26.58%-50.70%
20073.12%17.45%11.07%4.53%40.61%
Portfolio characteristics - as of 02/28/2017MSCI Emerging Markets Index (Net)
Number of holdings112640
Market cap (median)$6.35 billion$6.05 billion
Market cap (weighted average)$52.83 billion$63.29 billion
Portfolio turnover (last fiscal year)25%n/a
Beta (relative to MSCI Emerging Markets Index (Net)) (view definition)1.21n/a
Annualized standard deviation, 3 years (view definition)20.43n/a
Portfolio composition as of 02/28/2017Total may not equal 100% due to rounding.Values in excess of 100% and negative values may appear as the result of certain assets and liabilities.
International equities & depositary receipts98.6%
Domestic equities0.9%
Cash and cash equivalents0.5%
Top 10 equity holdings as of 02/28/2017
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holdings based by issuer.
Holding% of portfolio
Reliance Industries Ltd6.4%
Samsung Electronics Co Ltd4.8%
SINA Corp/China4.2%
Baidu Inc3.2%
Alibaba Group Holding Ltd3.1%
SK Telecom Co Ltd2.9%
Coca-Cola Femsa SAB de CV2.9%
Tencent Holdings Ltd2.8%
Sohu.com Inc2.7%
Itau Unibanco Holding SA2.3%
Total % Portfolio in Top 10 holdings35.3%

Top 10 countries as of 02/28/2017

List excludes cash and cash equivalents.

Country% of portfolio
China29.0%
Brazil14.5%
South Korea13.4%
Russia10.5%
India8.3%
Mexico7.3%
Taiwan4.9%
Argentina3.2%
Turkey2.7%
Canada1.3%
Distribution history - annual distributions (Class A)1,2
Distributions ($ per share)
YearCapital gains3Net investment
income
Return of
capital
20170.0000.0000.000
20160.0000.1020.000
20150.0000.0010.003
20140.3480.0650.000
20130.0000.1170.000
20120.0000.1090.000
20110.1390.1300.000
20100.0000.0850.000
20090.0000.0050.000
20080.8230.0160.000
20075.4810.2340.000

1If a Fund makes a distribution from any source other than net income, it is required to provide shareholders with a notice disclosing the source of such distribution (each a "Notice"). The amounts and sources of distributions reported above and in each Notice are only estimates and are not provided for tax reporting purposes. Each Fund will send each shareholder a Form 1099 DIV for the calendar year that will provide definitive information on how to report the Fund's distributions for federal income tax purposes. The information in the table above will not be updated to reflect any subsequent recharacterization of dividends and distributions. Click here to see recent Notices pertaining to the Fund (if any).

2Information on return of capital distributions (if any) is only provided from June 1, 2014 onward.

3Includes both short- and long-term capital gains.

Liu-Er Chen

Liu-Er Chen, CFA

Senior Vice President, Chief Investment Officer — Emerging Markets and Healthcare

Start date on the Fund: September 2006

Years of industry experience: 21

(View bio)


You may qualify for sales-charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Delaware Investments® Funds. More information about these and other discounts is available from your financial intermediary, in the Fund's Prospectus under the section entitled "About your account," and in the Fund's statement of additional information (SAI) under the section entitled "Purchasing Shares."

The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.

Shareholder fees
Maximum sales charge (load) imposed on purchases as a percentage of offering price5.75%
Maximum contingent deferred sales charge (load) as a percentage of original purchase price or redemption price, whichever is lowernone
Annual fund operating expenses
Management fees1.20%
Distribution and service (12b-1) fees0.25%
Other expenses0.33%
Total annual fund operating expenses1.78%
Fee waivers and expense reimbursements(0.08%)
Total annual fund operating expenses after fee waivers and expense reimbursements1.70%

1The Fund's investment manager, Delaware Management Company (Manager), has contractually agreed to waive all or a portion of its investment advisory fees and/or pay/reimburse expenses (excluding any 12b-1 fees, acquired fund fees and expenses, taxes, interest, short sale dividend and interest expenses, brokerage fees, certain insurance costs, and nonroutine expenses or costs, including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations) in order to prevent total annual fund operating expenses from exceeding 1.45% of the Fund's average daily net assets from March 28, 2017 through March 28, 2018 for all share classes other than Class R6, and 1.32% of the Fund's Class R6 shares' average daily net assets from March 28, 2017 through March 28, 2018. These waivers and reimbursements may only be terminated by agreement of the Manager and the Fund.

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Delaware Emerging Markets Fund Quarterly commentary — December 31, 2016

Market review

The MSCI Emerging Markets index declined 4.2% during the fourth quarter of 2016. The U.S. presidential election in November, which resulted in a surprise victory for Donald Trump, triggered a rise in U.S. bond yields and appreciation of the dollar. These in turn negatively affected emerging markets equities and currencies. Oil prices rose in the wake of an Organization of the Petroleum Exporting Countries (OPEC) agreement to cut production.

Among regions, EMEA (Europe, Middle East, and Africa) posted positive returns for the fourth quarter, although performance varied significantly across countries. Russia was the strongest performing market as rising oil prices supported the energy sector, while the financials and utilities sectors also performed well. Elsewhere, equities in Greece rose after the country received additional bailout funding from the euro zone. In contrast, South African equities declined as U.S. dollar strength pressured the mining sector. In Turkey, the lira depreciated sharply due to concerns about rising U.S. bond yields and geopolitical tensions.

In Latin America, Peru, Chile, and Brazil outperformed. In Peru, positive economic data, rising business confidence, and a rally in copper prices bolstered equities. In Chile, performance was mixed as the positive effects from rising consumer confidence were somewhat offset by currency depreciation. In Brazil, rising prices for oil and iron ore contributed to outperformance in the energy and materials sectors, although lackluster economic data weighed on the consumer sector. Mexico was the weakest performing market in the region as equities and the peso sold off following Donald Trump’s victory in the U.S. presidential election.

Asia lagged the emerging markets index during the fourth quarter. In China, currency depreciation, decreasing foreign exchange reserves, and policy tightening in the property sector dampened investor sentiment. Shares of index heavyweights including China Mobile, Tencent Holdings, and Alibaba Group Holding all declined more than 10%. Indian equities also underperformed following Prime Minister Modi’s surprise announcement to replace certain denominations of currency notes. This policy may impinge on short-term economic activity. In Korea, the currency depreciated in the wake of a scandal engulfing President Park and concerns about political tensions with China. In Southeast Asia, currency depreciation and rising U.S. bond yields weighed on equities in Malaysia and Indonesia. The Philippines was the weakest performing market in the region as the relationship between the Philippines and the United States may change somewhat under both countries’ new presidents. On the positive side, Taiwan and Thailand relatively outperformed. In Taiwan, rising U.S. bond yields supported the financials sector, while rising oil prices benefited the Thai energy sector.

Among sectors, energy and materials outperformed the most, while consumer staples, real estate, consumer discretionary, and healthcare underperformed.

Within the Fund

For the fourth quarter of 2016, Delaware Emerging Markets Fund (Institutional Class shares and Class A shares at net asset value) underperformed its benchmark, the MSCI Emerging Markets Index.

Russia was the main contributor to performance. The Fund’s overweight position was favorable, particularly in stocks such as Rosneft Oil,Transneft, and Gazprom, which rose in sympathy with oil prices. In addition, the market responded positively to the partial sale of the Russian government’s stake in Rosneft to Glencore and the Qatari government. Sberbank of Russia rallied with improving sentiment toward Russia.

In India, stock selection was favorable. The Fund’s position in Reliance Industries relatively outperformed the Indian market as the company is less affected by Prime Minister Modi’s currency-note replacement initiative. The Fund’s underweight to the financials and healthcare sectors also contributed to relative performance.

In Korea, performance was positive overall. The Fund’s underweight in cosmetics stocks supported relative performance as political tensions with China may temper demand from Chinese tourists. However, shares of telecommunications stocks including SK Telecom and LG Uplus lagged as investors rotated into cyclical sectors.

Performance in Brazil was mixed. Shares of Braskem rose as the company reached a financial settlement in a bribery scandal pertaining to the so-called Car Wash investigations. Shares of Eletrobras outperformed due to expectations for a more favorable regulatory environment. However, these gains were offset by B2W Cia Digital’s underperformance where concern about the company’s funding needs persists.

China detracted the most from performance largely due to the Fund’s overweight position in the Internet sector. In particular, SINA and Weibo succumbed to profit-taking following a strong rally. We believe that both companies remain well-positioned for long-term growth in online advertising. Shares of Sohu.com declined after the company disclosed further losses and funding requirements in its online video business. Despite these concerns, we believe that the company’s overall portfolio of assets, particularly its search business, is undervalued. Baidu underperformed as the company’s search advertising business remains subdued amid tighter regulations. We believe this slowdown is temporary, and we remain optimistic about the company’s long-term growth prospects.

In Taiwan, the Fund’s underweight position was unfavorable in terms of asset allocation. We find relatively few attractive stocks in this market. In addition, the Fund’s holding in MediaTek underperformed due to concerns about competitive pressures and margin compression. We believe that MediaTek is increasingly more competitive in smartphone communication chips and that the shares are inexpensive.

In Turkey, the Fund’s overweight position was unfavorable due to the lira’s depreciation versus the dollar. Shares of Akbank declined as the Turkish economy may face near-term headwinds from rising bond yields, political uncertainty, and higher oil prices.

Among sectors, energy and consumer staples contributed the most to performance, while technology detracted the most.

Outlook

We expect emerging markets to remain volatile, yet our long-term positive view remains intact. While economic growth may continue to face near-term headwinds, we believe that monetary and fiscal policies, coupled with government reform measures, will provide support. With respect to China, we continue to believe that the economy will muddle through, supported by structural growth in consumption, improvement in living standards, and selective policy support from the government.

Despite a challenging macroeconomic backdrop, we believe that there are pockets of opportunities for long-term stock appreciation driven by structural demographic shifts, technology adoption, implementation of government policy, improvement in corporate governance, and industry consolidation. Our investment approach remains centered on identifying individual companies that we believe possess sustainable franchises and favorable long-term growth prospects and that trade at significant discounts to their intrinsic value. We are particularly focused on companies that we expect to benefit from long-term changes in how people in emerging markets live and work. Sectors we currently favor include technology and telecom.

[18356]

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.

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.

Investments in small and/or medium-sized companies typically exhibit greater risk and higher volatility than larger, more established companies.

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

Not FDIC Insured | No Bank Guarantee | May Lose Value

Fund Finder

Daily pricing (as of 03/29/2017)

Class APriceNet change
NAV$16.650.07
Max offer price$17.67n/a

Total net assets (as of 02/28/2017)

$2.7 billion all share classes

Overall Morningstar RatingTM

 
Class A shares (as of 02/28/2017)
Class ANo. of funds
Overall4626
3 Yrs3626
5 Yrs4431
10 Yrs4173
Morningstar categoryDiversified Emerging Mkts

(View Morningstar disclosure)

Morningstar ranking (as of 02/28/2017)

YTD ranking127 / 882
1 year26 / 816
3 years188 / 626
5 years38 / 431
10 years8 / 173
Morningstar categoryDiversified Emerging Mkts

(View Morningstar disclosure)

Lipper ranking (as of 02/28/2017)

YTD ranking122 / 894
1 year31 / 836
3 years193 / 638
5 years48 / 445
10 years11 / 174
Lipper classificationEmerging Markets Funds

(View Lipper disclosure)

Benchmark, peer group

MSCI Emerging Markets Index (view definition)

Morningstar Diversified Emerging Markets Category (view definition)

Lipper Emerging Markets Funds Average (view definition)

Additional information