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
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 (04/30/2017)

as of quarter-end (03/31/2017)

YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)18.04%26.58%3.41%5.74%4.55%7.86%06/10/1996
Max offer price11.27%19.29%1.38%4.49%3.93%7.56%
MSCI Emerging Markets Index (Gross)13.95%19.58%2.16%1.85%2.81%n/a
MSCI Emerging Markets Index (Net)13.88%19.13%1.79%1.49%2.48%n/a
1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)14.38%27.53%2.46%4.60%4.65%7.73%06/10/1996
Max offer price7.82%20.17%0.46%3.37%4.03%7.42%
MSCI Emerging Markets Index (Gross)11.49%17.65%1.55%1.17%3.05%n/a
MSCI Emerging Markets Index (Net)11.44%17.21%1.18%0.81%2.72%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
201714.38%n/an/an/an/a
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 04/30/2017MSCI Emerging Markets Index (Net)
Number of holdings123639
Market cap (median)$7.04 billion$6.27 billion
Market cap (weighted average)$54.83 billion$67.55 billion
Portfolio turnover (last fiscal year)25%n/a
Beta (relative to MSCI Emerging Markets Index (Net)) (view definition)1.22n/a
Annualized standard deviation, 3 years (view definition)20.58n/a
Portfolio composition as of 04/30/2017Total 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 receipts100.9%
Domestic equities0.8%
Cash and cash equivalents-1.7%
Top 10 equity holdings as of 04/30/2017
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 Ltd7.0%
Samsung Electronics Co Ltd4.8%
SINA Corp/China4.3%
SK Telecom Co Ltd3.5%
Coca-Cola Femsa SAB de CV3.2%
Alibaba Group Holding Ltd3.1%
Tencent Holdings Ltd2.8%
Baidu Inc2.5%
Sohu.com Inc2.3%
Taiwan Semiconductor Manufactu2.1%
Total % Portfolio in Top 10 holdings35.6%

Top 10 countries as of 04/30/2017

List excludes cash and cash equivalents.

Country% of portfolio
China27.1%
South Korea17.8%
Brazil13.4%
Russia9.8%
India8.9%
Mexico8.0%
Taiwan4.8%
Argentina3.3%
Turkey2.6%
Canada1.2%
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 Funds by Macquarie. 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 March 31, 2017

Market review

The MSCI Emerging Markets Index rose 11.4% during the first quarter of 2017, significantly outpacing developed market returns. Fund flows into emerging markets were strong, supported by stabilizing economic data, rising earnings expectations, modest US dollar weakness, and easing concerns about the Trump administration’s policy agenda. Among regions, Asia outperformed the most, followed closely by Latin America. The EMEA (Europe, Middle East, and Africa) region lagged.

In Asia, India posted the highest quarterly returns. Both India’s equity market and currency have rebounded strongly from the November selloff that was triggered by the government’s surprise demonetization of high-value currency notes. After an initial disruption caused by this move, business activity appeared to have stabilized. In March, the Bharatiya Janata Party (BJP) resoundingly won state elections in Uttar Pradesh. The BJP’s victory appeared to signify popular support for Prime Minister Modi’s reform agenda and seemed to bode well for his re-election prospects in 2019. Sectors geared toward domestic investment performed particularly well, including materials, financials, and industrials.

South Korea nearly matched India’s returns in US dollar terms. Equities rallied in March as the Constitutional Court upheld the impeachment of President Park Geun-hye, averting a prolonged leadership void and setting the stage for presidential elections in May. In addition, robust earnings from Samsung Electronics drove gains in the technology sector.

In China, outperformance was driven by improving economic data and corporate free cash flow, diminished concern about currency depreciation, and strong capital inflows from mainland China into the Hong Kong stock market. Cyclical sectors generally outperformed, including consumer discretionary and materials, while defensive sectors such as consumer staples and telecommunications lagged.

Taiwan performed in line with the broader emerging markets index, aided by currency appreciation against the US dollar. The technology sector outperformed due to growing optimism for Apple’s iPhone 8, expected to be launched later this year. Markets in Southeast Asia posted positive returns, but were relative laggards within Asia.

In Latin America, Mexico led the region’s performance. Equities broadly rebounded as initial fear stemming from Trump’s presidency subsided, while the peso recovered to pre-Trump levels. Chile also outperformed due to optimism surrounding the presidential election in November and rising copper prices. In Brazil, interest rate cuts and currency appreciation drove positive equity returns. The industrials, telecommunications, and financials sectors performed well, while energy underperformed due to muted oil prices. Peru and Colombia lagged. In Peru, corruption scandals related to infrastructure projects weighed on investor sentiment. In Colombia, soft economic data provided a headwind to equities.

EMEA significantly trailed broader emerging markets this quarter. Russian equities declined by 4.6% as oil prices retreated in response to inventory data, adversely affecting energy stocks. Furthermore, ongoing tension between the United States and Russia suggests that economic sanctions are unlikely to be lifted in the near term. In South Africa, an equity rally was derailed when President Jacob Zuma dismissed several cabinet members, reviving political concerns and triggering steep depreciation of the rand. On the positive side, Poland was among the best-performing emerging markets, the result of positive gross domestic product (GDP) data and currency appreciation. Turkish stocks staged a strong rally in January, although further depreciation of the lira blunted these gains.

Among sectors, technology and industrials outperformed the most, while energy and healthcare underperformed.

Within the Fund

China was the main contributor to the Fund’s performance during the quarter, driven by favorable stock selection. Shares of Chinese Internet company SINA rose as its microblogging subsidiary Weibo grew advertising revenue. Shares of Sohu.com also rose as its search subsidiary Sogou may seek an initial public offering.

In Brazil, performance was positive overall. Shares of mobile operator TIM Participacoes rose after the company reported strong fourth-quarter earnings. Shares of Gol Linhas Aereas Inteligentes outperformed due to better-than-expected earnings results. Shares of e-commerce retailer B2W Cia Digital rebounded from a selloff in the fourth quarter, while shares of Itau Unibanco rallied in sympathy with the Brazilian market.

Elsewhere, in India, stock selection was favorable. The Fund’s position in Reliance Industries outperformed as the mobile telecommunications business is retaining more subscribers than expected despite the company ending its free trial offer. In Argentina, shares of Arcos Dorados rose due to robust fourth-quarter sales data and its expansion plans.

In Korea, favorable stock selection drove performance. Shares of LG Electronics rose due to optimism surrounding its latest G6 smartphone. Additionally, shares of telecommunications operators including SK Telecom and LG Uplus outperformed as they are less exposed to rising geopolitical tensions between China and Korea.

On the negative side, Russia detracted the most from performance. The Fund’s overweight position was unfavorable in terms of asset allocation. Moderating oil prices dampened investor sentiment toward the energy sector. Shares of Rosneft, Gazprom, and Transneft declined. Shares of Sberbank of Russia succumbed to profit-taking following a strong rally. In addition, stocks fell as the news and investigations related to Russia and the US election dimmed optimism that US-imposed economic sanctions would be lifted in the near term.

Among sectors, telecommunications contributed to performance due to the Fund’s holdings in TIM Participacoes, SK Telecom, and LG UPlus. In the consumer discretionary sector, the Fund’s holdings in Arcos Dorados, LG Electronics, and B2W Cia Digital boosted performance. In contrast, the Fund’s consumer staples holdings detracted the most from performance due to the Fund’s position in Brasil Foods. Shares of the company declined due to disappointing fourth-quarter results, management changes, and an investigation into meat safety in Brazil. In the utilities sector, shares of Electrobras sold off because of potential risk that a large payment would not materialize.

Outlook

Our positive long-term view on emerging markets remains intact. Despite ongoing political concerns in many parts of the world, we believe that monetary and fiscal policies, coupled with government reform measures, will provide support for emerging economies. We continue to believe that the Chinese economy will muddle through, supported by structural growth in consumption, improvement in living standards, and targeted policies from the government.

Considering the varied macroeconomic backdrop that we see across emerging markets, we believe there are selective 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. Among countries, we currently hold overweight positions in Russia, Brazil, and Mexico. Sectors we currently favor include technology, consumer staples, and telecommunications.

The MSCI Emerging Markets Index measures equity market performance across emerging market countries worldwide. Index "gross" return approximates the maximum possible dividend reinvestment. Index "net" return approximates the minimum possible dividend reinvestment, after deduction of withholding tax at the highest possible rate.

[19199]

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 US 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 05/26/2017)

Class APriceNet change
NAV$17.860.08
Max offer price$18.95n/a

Total net assets (as of 04/30/2017)

$3.1 billion all share classes

Overall Morningstar RatingTM

 
Class A shares (as of 04/30/2017)
Class ANo. of funds
Overall4626
3 Yrs3626
5 Yrs4432
10 Yrs4177
Morningstar categoryDiversified Emerging Mkts

(View Morningstar disclosure)

Morningstar ranking (as of 04/30/2017)

YTD ranking61 / 865
1 year22 / 816
3 years117 / 626
5 years19 / 432
10 years9 / 177
Morningstar categoryDiversified Emerging Mkts

(View Morningstar disclosure)

Lipper ranking (as of 04/30/2017)

YTD ranking62 / 878
1 year22 / 833
3 years132 / 637
5 years26 / 445
10 years12 / 183
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