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Delaware International Value Equity Fund Quarterly commentary March 31, 2017

Within the Fund

Despite strong stock selection in a variety of sectors, including telecommunications, industrials, and financials, the Fund’s poorly performing holdings in consumer staples and healthcare more than offset this strength. Overall sector allocation was neutral, as the favorable effect from overweight exposures to industrials and technology and an underweight exposure to real estate offset the adverse effect of overweight exposures to consumer discretionary and telecommunications and an underweight exposure to consumer staples.

On a regional basis, strong stock selection in the United Kingdom, Japan, and Asia ex Japan failed to overcome the negative impact of holdings in Europe ex euro zone. The regional allocation effect was neutral. Net currency effect was negative, primarily due to underweight exposure to the Australian dollar and overweight exposure to the Canadian dollar.

The Fund added two new names and sold two others during the quarter. Other activity included trimming positions and redeploying the proceeds at attractive valuations. This activity has involved positions across a variety of sectors and regions, but hasn’t resulted in material changes to portfolio positioning.

Prospective global market drivers and general outlook

It is comforting that the first quarter’s strong equity performance took place against a broadly improving economic backdrop, as defined by a diverse set of metrics. In examining the nuances that characterize different segments of the global market, though, one finds important differences. One may argue that the longevity and magnitude of outperformance by US equities versus their non-US peers are justified by the combination of more favorable demographics, business culture, and regulatory regimes. Even conceding a measure of truth to these arguments, though, one must come to terms with other constraints, including the increasing presence of late-cycle indicators such as rising unit labor costs, which threaten to limit the rate of US improvement, if not presage its reversal. Perhaps of greater significance within a long-term market view is the very high level of US valuations, relative to their own history and versus non-US alternatives. According to MSCI data, as of March 31 US stocks traded at a more expensive valuation on trailing earnings than in all but 13% of the months going back to 1974. By contrast, markets such as Japan and the euro zone have valuations low enough to support additional price gains before reaching historical norms, combined with cyclical recovery potential to facilitate market appreciation still further.

While the valuation of aggregate data grouped by regional markets suggests compelling opportunities outside the United States, we as managers of concentrated, active portfolios remain focused on the power of individual companies to transcend their country-specific prospects. Their success is driven not by the narrow circumstances of their home countries, but by the full range of global markets that drive their revenue growth and profitability. We believe that the qualities that drive this success can be recognized and, when accompanied by attractive valuation, can potentially lead to strong and sustained outperformance.

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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 delawarefunds.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 (06/30/2017)
Current
quarter
YTD1 year3 year5 year10 yearLifetimeInception
date
Class A (NAV)6.96%13.81%20.73%1.34%8.39%0.62%6.25%10/31/1991
Class A (at offer)0.82%7.27%13.80%-0.64%7.12%0.03%6.00%
Institutional Class shares7.01%13.92%21.02%1.59%8.67%0.90%7.01%11/09/1992
MSCI EAFE Index (Net)6.12%13.81%20.27%1.15%8.69%1.02%n/a
MSCI EAFE Index (Gross)6.37%14.23%20.83%1.61%9.18%1.50%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 (Europe, Australasia, Far East) 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%
Share class ticker symbols
Institutional ClassDEQIX
Class ADEGIX
Class CDEGCX
Class RDIVRX
Top 10 holdings as of 06/30/2017
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Mitsubishi UFJ Financial Group Inc.3.6%
Samsung Electronics Co. Ltd.3.4%
Sanofi3.4%
Nordea Bank AB3.3%
Nippon Telegraph & Telephone Corp.3.2%
ITOCHU Corp.3.2%
Vinci S.A.3.2%
Yue Yuen Industrial Holdings Ltd.3.1%
Novartis AG3.0%
AXA S.A.2.7%
Total % Portfolio in Top 10 holdings32.1%

Institutional Class shares are only available to certain investors. See the prospectus for more information. 

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.

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

Not FDIC Insured | No Bank Guarantee | May Lose Value