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    Quarterly Fund Commentary


    Delaware Ivy Global Equity Income Fund (prospectus)
    December 31, 2016


    Manager(s):
    Jens Hansen
    Klaus Petersen, CFA
    Claus Juul
    Åsa Annerstedt
    Allan Saustrup Jensen, CAIA , CFA
    Chris Gowlland, CFA

    Market Sector Update

    • Across the globe, markets performed surprisingly well considering the unexpected U.S. election outcome and lingering European political uncertainty. In U.S. dollar terms, the U.S. and Europe performed well, while the vast majority of Asia experienced declines. In local currency, global markets continued to rebound from the summer selloff stemming from the Brexit “yes” vote in mid-June.
    • The U.S. dollar gained approximately 7% versus a basket of other currencies – a dramatic increase. The Japanese yen performed particularly poor – down approximately 15% – stemming from the Bank of Japan targeting an approximate 0% yield on their 10-year Treasury.
    • The U.S. Federal Reserve (Fed) raised rates as expected and hinted at 2-3 more rate increases in 2017. Consumer and business confidence both picked up, with the U.S. economy continuing to chug on at around 1.5-2.5% growth. The European Central Bank (ECB) does not plan to lower rates further, and is instead focused on getting the banking system fit to handle any additional shocks. The ECB’s current focus is forcing more capital into weak Italian banks.
    • Global purchasing managers’ indices marginally improved during the quarter. Slower emerging-market growth has been a drag to global gross domestic product (GDP) growth as well as for multinational corporate sales and earnings growth. We believe this will improve in 2017 and will aid in less deflationary forces for the overall economy.

    Portfolio Strategy

    • The Fund outperformed the benchmark (before the effects of sales charges) for the quarter. Strong stock selection and country selection overcame poor sector selection. In particular, the Fund benefited from good stock selection in industrials, financials, information technology and consumer staples, which more than offset poorer selection in health care and energy.
    • Sector allocation detracted to performance, as the Fund was underweight the strong performing financials sector and overweight the poor performing information technology sector. Underperformance was somewhat offset by the Fund’s overweight allocation to the strong performing energy sector.
    • Currency hedges to the U.S. dollar proved very beneficial as the euro and British pound weakened. The Fund increased its currency hedges as the quarter progressed.
    • As the quarter progressed, we tilted the Fund to a more offensive allocation relative to the benchmark. We reduced exposure to consumer staples and utilities. The Fund also reduced its weighting to health care as uncertainty in the sector will likely cause market volatility. As a result, the Fund added to energy, industrials and financials.
    • The Fund’s largest sector overweights include information technology, industrials and energy where we continue to find companies we believe provide good recovery potential or growth prospects. In our view, our underweight allocations to materials, health care, utilities and telecommunication services tend to have poor relative fundamentals.

    Outlook

    • We think global economic growth will remain slow but will pick up as we move through 2017. We expect the U.S. and China to be the main engines of growth, and believe emerging-market economies will continue to recover. We feel the U.K. faces additional headwinds stemming from the Brexit vote.
    • Further U.S. dollar strengthening is a concern for growth in some emerging- market countries with large U.S. denominated debt. We believe monetary policy is likely to remain loose for the foreseeable future, but to a much lesser extent in the U.S. We think the Fed will raise interest rates in 2017, which at times, will keep the markets on edge. Uncertainty over the new Trump administration and Congress may cause market corrections due to the new policies and timing expectations.
    • We are still concerned about the recent terrorist attacks in Europe and the effects the large refugee influx will have on European politics and its impact on the upcoming elections and economy.
    • We continue to follow policies stemming from Europe, including reforms and regulation measures from foreign governments and the ECB. We believe upcoming elections in the Netherlands, France and Germany could have a meaningful impact to economic growth. We will be watching these outcomes closely as the year progresses.
    • Currently, China is accelerating local and regional infrastructure spending and has allowed housing prices to increase in larger cities. We believe this can only be sustainable for a few years as debt will pile higher and housing prices will ultimately correct.

    The opinions expressed in this commentary are those of the Fund’s manager and are current through Dec. 31, 2016. The manager's views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed. Past performance is not a guarantee of future results.

    Risk factors. The value of the Fund's shares will change, and you could lose money on your investment. Because the Fund is generally invested in a small number of stocks, the performance of any one security held by the Fund will have a greater impact that if the Fund were invested in a larger number of securities. An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. International investing involves additional risks including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These and other risks are more fully described in the fund's prospectus. Not all funds or fund classes may be offered at all broker/dealers.

    IVY INVESTMENTSSM refers to the financial services offered by Ivy Distributors, Inc., a FINRA member broker dealer and the distributor of IVY FUNDS® mutual funds, and those financial services offered by its affiliates.

    Before investing, investors should consider carefully the investment objectives, risks, charges and expenses of a mutual fund. This and other important information is contained in the prospectus and summary prospectus, which can be obtained from a financial advisor or at www.ivyinvestments.com. Read it carefully before investing.

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