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<PAGE> PAGE 2
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<PAGE> PAGE 4
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<PAGE> PAGE 5
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<PAGE> PAGE 6
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<PAGE> PAGE 7
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<PAGE> PAGE 8
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<PAGE> PAGE 9
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<PAGE> PAGE 10
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<PAGE> PAGE 11
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<PAGE> PAGE 12
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<PAGE> PAGE 13
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<PAGE> PAGE 14
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<PAGE> PAGE 15
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<PAGE> PAGE 16
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<PAGE> PAGE 17
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<PAGE> PAGE 18
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<PAGE> PAGE 19
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<PAGE> PAGE 20
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<PAGE> PAGE 21
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<PAGE> PAGE 22
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<PAGE> PAGE 23
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SIGNATURE WALLACE LAU
TITLE FINANCIAL ANALYST
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Report of Independent Auditors
To the Shareholders and Board of Trustees of
HSBC Mutual Funds Trust
In planning and performing our audit of the financial statements
of HSBC Mutual Funds Trust (comprised of the Growth & Income Fund,
New York Tax-Free Bond Fund, Fixed Income Fund and International
Equity Fund) for the year ended December 31, 1998, we considered
its internal control, including control activities for safeguarding
securities, in order to determine our auditing procedures for the
purpose of expressing our opinion on the financial statements and
to comply with the requirements of Form N-SAR, and not to provide
assurance on the internal control.
The management of HSBC Mutual Funds Trust is responsible for
establishing and maintaining internal control. In fulfilling this
responsibility, estimates and judgments by management are required
to assess the expected benefits and related costs of controls.
Generally, controls that are relevant to an audit pertain to the
entity's objective of preparing financial statements for external
purposes that are fairly presented in conformity with generally
accepted accounting principles. Those controls include the
safeguarding of assets against unauthorized acquisition, use or
disposition.
Because of inherent limitations in internal control, errors or fraud
may occur and not be detected. Also, projection of any evaluation
of internal control to future periods is subject to the risk that it
may become inadequate because of changes in conditions or that the
effectiveness of the design and operation may deteriorate.
Our consideration of internal control would not necessarily disclose
all matters in internal control that might be material weaknesses
under standards established by the American Institute of Certified
Public Accountants. A material weakness is a condition in which the
design or operation of one or more of the specific internal control
components does not reduce to a relatively low level the risk that
errors or fraud in amounts that would be material in relation to the
financial statements being audited may occur and not be detected
within a timely period by employees in the normal course of performing
their assigned functions. However, we noted no matters involving
internal control and its operation, including controls for safeguarding
securities, that we consider to be material weaknesses as defined
above at December 31, 1998.
This report is intended solely for the information and use of the
board of trustees and management of HSBC Mutual Funds Trust and
the Securities and Exchange Commission and is not intended to be and
should not be used by anyone other than these specified parties.
ERNST & YOUNG LLP
February 12, 1999
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
HSBC MUTUAL FUNDS TRUST
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[PASTE-UP LETTERHEAD HERE]
August 21, 1998
Dear Valued Shareholder:
The enclosed proxy materials relate to a Special Meeting of Shareholders
of the HSBC International Equity Fund (the "Fund"), a series of HSBC Mutual
Funds Trust, to be held on September 25, 1998 at 10:00 a.m., local time, at the
Fund's offices at 3435 Stelzer Road, Columbus, Ohio 43219 (the "Meeting").
At the Meeting, Shareholders will be asked to approve a New Sub-Advisory
Agreement (the "New Sub-Advisory Agreement") between HSBC Asset Management
Americas Inc., the current investment adviser to the Fund, and Delaware
International Advisers Ltd. ("Delaware International"). The Fund's Board of
Trustees unanimously voted to replace the Current Sub-Advisers with Delaware
International, to serve as Sub-Adviser effective September 25, 1998. The
Trustees are recommending that Shareholders approve the New Sub-Advisory
Agreement with Delaware International at the Meeting.
Shareholders will also be asked at the Meeting to approve changes to the
Fund's investment objective and eliminate three investment restrictions from the
Fund's fundamental investment policies. The Trustees are also recommending that
Shareholders approve each of these changes to the Fund's investment objective
and policies.
Although the Trustees would like very much to have you attend the
Meeting, they realize that this is not always possible. Whether or not you plan
to be present at the Meeting, YOUR VOTE IS NEEDED. PLEASE COMPLETE, SIGN AND
RETURN THE ENCLOSED PROXY CARD PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED.
Your Trustees look forward to seeing you at the Meeting or receiving
your proxy so your shares may be voted at the Meeting.
Sincerely yours,
/s/ Walter B. Grimm
---------------------------
Walter B. Grimm
President
SHAREHOLDERS ARE URGED TO SIGN AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED
ENVELOPE SO AS TO BE REPRESENTED AT THE MEETING.
Thank you for your cooperation and prompt attention to this matter.
<PAGE>
PRELIMINARY COPIES FOR USE OF THE SECURITIES
AND EXCHANGE COMMISSION ONLY
HSBC MUTUAL FUNDS TRUST : INTERNATIONAL EQUITY FUND
3435 STELZER ROAD
COLUMBUS, OHIO 43219
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 25, 1998
To the Shareholders:
Notice is hereby given that a Special Meeting of Shareholders of the HSBC
International Equity Fund (the "Fund"), a series of HSBC Mutual Funds Trust (the
"Trust"), will be held at the offices of the Fund at 3435 Stelzer Road,
Columbus, Ohio 43219 at 10:00 a.m. Eastern Daylight Time, on September 25,1998,
for the following purposes:
1. Approve a new Sub-Advisory Agreement between HSBC Asset Management
Americas Inc., the Investment Adviser to the Fund, and Delaware
International Advisers Ltd. ("Delaware International"), a new sub-
adviser for the Fund as described in the attached Proxy Statement.
2. Approve a change to the investment objective of the Fund to seek to
provide investors with long-term capital appreciation by investing,
under ordinary market conditions, at least 65% of its total assets in
equity securities (including American, European and Global Depositary
Receipts) issued by companies based outside the United States.
3. Approve a change in the investment policies of the Fund to remove the
restriction on the Fund purchasing securities of any company with a
record of less than three years' continuous operation if such purchase
would cause the Fund's investments in all such companies taken at cost
to exceed 5% of the Fund's total assets taken at market value.
4. Approve a change in the investment policies of the Fund to remove the
restriction on the Fund investing in warrants in excess of 5% of the
Fund's net assets, and to remove the restriction on the Fund investing
in warrants which are listed on the New York or American Stock
Exchanges in excess of 2% of the Fund's net assets.
5. Approve a change in the investment policies of the Fund to remove the
restriction on the Fund purchasing or retaining securities of any
company which the officers and trustees of the Trust and officers and
directors of the Adviser who individually own more than 1/2 of 1% of
the securities of that company, together own beneficially more than 5%
of such securities.
<PAGE>
6. To transact such other business as may properly come before the
meeting, or any adjournment thereof.
The Board of Trustees of the Fund has fixed the close of business on
August 6, 1998 as the record date for the determination of Shareholders
entitled to notice of and to vote at the meeting.
By Order of the Board of Trustees
/s/ Robert L. Tuch
Robert L. Tuch
Assistant Secretary
August 21, 1998
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING,
SHAREHOLDERS ARE REQUESTED TO COMPLETE, SIGN, DATE AND RETURN THE PROXY
CARD IN THE ENCLOSED ENVELOPE.
<PAGE>
PRELIMINARY COPIES FOR USE OF THE SECURITIES
AND EXCHANGE COMMISSION ONLY
HSBC MUTUAL FUNDS TRUST: INTERNATIONAL EQUITY FUND
3435 Stelzer Road
Columbus, Ohio 43219
SPECIAL MEETING OF SHAREHOLDERS
September 25, 1998
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Trustees of the HSBC Mutual Funds Trust (the "Trust")
to be voted at a Special Meeting of Shareholders ("Shareholders") of the HSBC
International Equity Fund (the "Fund"), a separate series of the Trust, to be
held on Friday, September 25, 1998, at 10:00 a.m. Eastern Daylight Time at the
offices of the Fund at 3435 Stelzer Road, Columbus, Ohio 43219, and at any
adjournments thereof (collectively, the "Meeting"). A Notice of Special
Meeting of Shareholders and proxy card accompany this Proxy Statement. This
Proxy Statement is being mailed to the Shareholders on or about August 21,
1998.
At the Meeting, Shareholders will be asked to consider and vote upon five
different proposals.
Proposal 1 relates to the selection of Delaware International Advisers Ltd.
as the investment sub-adviser to the Fund.
1. Approve a new Sub-Advisory Agreement between HSBC Asset Management
Americas Inc., the Investment Adviser to the Fund, and Delaware
International Advisers Ltd. ("Delaware International"), a new sub-
adviser for the Fund.
Proposal 2 relates to modifying the Fund's investment objective. Proposals
3 through 5 relate to updating certain fundamental investment policies of the
HSBC International Equity Fund to provide the Fund greater investment
flexibility. Approval of a change to the Fund's investment objective or to one
of the Fund's fundamental investment policies requires Shareholder approval. The
specifics of Proposals 2 through 5 are as follows:
2. Approve a change to the investment objective of the Fund to seek to
provide investors with long-term capital appreciation by investing,
under ordinary market conditions, at least 65% of its total assets in
equity securities (including American, European and Global Depositary
Receipts) issued by companies based outside of the United States.
Currently, the International Equity Fund seeks to invest at least 80%
of its total assets in equity securities (including American and
European Depositary Receipts) issued by companies based outside of the
United States.
3. Approve a change in the investment policies of the Fund to remove the
restriction on the Fund purchasing securities of any company with a
record of less than three years' continuous operation if such purchase
would cause the Fund's investments in all such companies taken at cost
to exceed 5% of the Fund's total assets taken at market value.
4. Approve a change in the investment policies of the Fund to remove the
restriction on the Fund investing in warrants in excess of 5% of the
Fund's net assets, and to remove the restriction on the Fund investing
in warrants which are listed on the New York or American Stock
Exchanges in excess of 2% of the Fund's net assets.
1
<PAGE>
5. Approve a change in the investment policies of the Fund to remove the
restriction on the Fund purchasing or retaining securities of any
company which the officers and trustees of the Trust and officers and
directors of the Adviser who individually own more than 1/2 of 1% of
the securities of that company, together own beneficially more than 5%
of such securities.
6. To transact such other business as may properly come before the
meeting, or any adjournment thereof.
Proxy solicitations will be made, beginning on or about August 21, 1998,
primarily by mail, but proxy solicitations also may be made by telephone,
facsimile or personal interviews conducted by officers and employees of the Fund
as well as by BISYS Fund Services ("BISYS"). BISYS acts as the distributor,
administrator and transfer agent of the Fund. BISYS is located at 3435 Stelzer
Road, Columbus, Ohio 43219. The costs of proxy solicitation and expenses
incurred in connection with the preparation of this Proxy Statement and its
enclosures will be paid by the Fund.
The Trust's Annual Report to Shareholders for the fiscal year ended
December 31, 1997, containing audited financial statements, may be obtained,
without charge, by calling 1-800-634-2536 or mailing your request to: HSBC
Mutual Funds Trust,c/o BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio
43219.
The HSBC International Equity Fund consists of two classes of shares, a
Service Class and an Institutional Class. Each class of shares has an unlimited
number of shares of beneficial interest in the Fund (the "Shares"), each Share
having a par value of $.001. Each Share outstanding on the record date is
entitled to one vote on all matters submitted to Shareholders at the Special
Meeting, with pro rata voting rights for any fractional shares. The tellers
appointed for the Special Meeting will count the total number of votes cast FOR
approval of the proposals for purposes of determining whether sufficient
affirmative votes have been cast.
On August 6, 1998, the record date, there were 24,246.640 Service Class
Shares outstanding and 6,031,448.345 Institutional Class Shares outstanding. The
Fund's trustees and officers beneficially own (individually and as a group) less
than 1% of the outstanding shares of the Institutional Class and less than 1% of
the outstanding shares of the Service Class as of August 6, 1998.
PROPOSAL 1: APPROVE A NEW SUB-ADVISORY AGREEMENT BETWEEN HSBC ASSET MANAGEMENT
AMERICAS INC. AND DELAWARE INTERNATIONAL ADVISERS LTD. FOR THE HSBC
INTERNATIONAL EQUITY FUND.
The Trustees recommend that the Shareholders of the HSBC International
Equity Fund approve a new sub-advisory agreement (the "New Sub-Advisory
Agreement") between HSBC Asset Management Americas Inc. (the "Adviser") and
Delaware International Advisers Ltd. ("Delaware International"). Shareholders
are asked to approve the New Sub-Advisory Agreement in accordance with the
requirements of the Investment Company Act of 1940, as amended (the "1940 Act").
The New Sub-Advisory Agreement is similar in all material respects to the
current sub-advisory agreements (collectively the "Current Sub-Advisory
Agreements"), in effect between the Adviser and HSBC Asset Management Europe
Ltd., HSBC Asset Management Hong Kong Ltd., HSBC Asset Management (Japan) KK,
HSBC Asset Management Singapore and HSBC Asset Management Australia Limited
(collectively the "Current Sub-Advisers"), except for the fee allocated to the
sub-advisers and the effective and termination dates. Actual advisory fees paid
by the Fund will be higher under the new sub-advisory arrangement because the
Adviser and Delaware International, collectively, will waive a smaller
percentage of their earned fees than the Adviser and Current Sub-Advisers have
voluntarily waived in the past. See the "Sub-Advisory Fees" section below for a
full discussion of current and pro forma fees under the New Sub-Advisory
Agreement. A copy of the New Sub-Advisory Agreement is set forth as Exhibit I
to this Proxy Statement.
2
<PAGE>
BACKGROUND
HSBC Mutual Funds Trust (the "Trust") was organized in Massachusetts on
November 1, 1989 as a Massachusetts business trust and is an open-end,
diversified management investment company with multiple investment portfolios,
including the International Equity Fund, Growth and Income Fund, Fixed Income
Fund and New York Tax Free Bond Fund. This proxy statement relates to the
International Equity Fund. HSBC Asset Management Americas Inc., the North
American investment affiliate of HSBC Holdings plc (Hong Kong and Shanghai
Banking Corporation) and Marine Midland Bank, has served as adviser to the HSBC
International Equity Fund since the Fund's inception on April 25, 1994. HSBC
Asset Management Americas Inc. is located at 140 Broadway, New York, New York
10005. As of June 1, 1998, the Adviser managed over $3.9 billion of assets of
individuals, pension plans, corporations and institutions.
The Adviser currently retains the Current Sub-Advisers to act as investment
sub-advisers to the Fund. Each of the Current Sub-Advisers is an investment
advisory affiliate of HSBC Holdings plc (Hong Kong and Shanghai Banking
Corporation). Under the Current Sub-Advisory Agreements, each of the Current
Sub-Advisers undertakes at its own expense to furnish the HSBC International
Equity Fund (the "Fund") and the Adviser with micro- and macro-economic
research, advice and recommendations, and economic and statistical data with
respect to the Fund's investments, subject to the overall review by the Adviser
and the Board of Trustees. Within their geographical regions, each of the
Current Sub-Advisers has full investment discretion for the portions of the Fund
allocated to their region by the Adviser.
Fund management has decided that a different management style is
appropriate for the Fund. Since its inception the Fund has primarily been
managed in a growth-oriented style. After careful consideration, Fund management
has decided that a value-oriented style is potentially more desirable in the
eyes of current and future shareholders. Fund management believes that hiring a
new sub-adviser with a value-oriented style for the Fund would be in the best
interest of the Fund and all of the Fund's Shareholders.
Delaware International's approach in selecting investments is primarily
oriented to individual stock selection and is value driven. In selecting stocks
for the Fund, Delaware International will identify those stocks that it believes
will provide total return over a market cycle, taking into consideration, among
other things, movements in the price of the individual security and the impact
of currency fluctuation on a United States domiciled, dollar-based investor.
Delaware International conducts fundamental research on a global basis in order
to identify securities that, in Delaware International's opinion, have the
potential for long-term total return. This research effort generally centers on
a value-oriented dividend discount methodology with respect to individual
securities and market analysis that seeks to isolate value across country
boundaries. The approach focuses on future anticipated dividends and discounts
the value of those dividends back to what they would be worth if they were
received today. In addition, the analysis typically includes a comparison of
the values and current market prices of different possible investments. Delaware
International's general management strategy tends to emphasize long-term holding
of securities.
In selecting Delaware International, the Board of Trustees considered,
among other things, the nature and quality of the services to be provided by
Delaware International, the investment performance of Delaware International in
managing other international equity funds similar to the HSBC International
Equity Fund, the experience and financial condition of Delaware International,
the methods of analysis and level of advisory fees to be paid compared to
industry averages and Delaware International's commitment to mutual fund
advisory activities. Based on this review, the Trustees voted unanimously,
with the "non-interested" Trustees voting separately, to appoint Delaware
International as the new sub-adviser to the Fund and to recommend to
Shareholders of the Fund that they approve the New Sub-Advisory Agreement.
3
<PAGE>
INFORMATION REGARDING DELAWARE INTERNATIONAL
Delaware International's principal offices are located at Third Floor, 80
Cheapside, London EC2V 6EE England.
Delaware International is a subsidiary of Delaware International Holdings
Ltd., which owns 18.9% of the voting shares of Delaware International, and DMH
Corp., which owns 81.1% of the voting shares of Delaware International.
Delaware International Holdings Ltd., with principal offices at Clarendon House,
Church Street, Hamilton, Bermuda, and DMH Corp., with principal offices at
Foulkstone Plaza, 1403 Foulk Road, Wilmington, DE 19803, are each wholly-owned
subsidiaries of Delaware Management Holdings, Inc., a Delaware corporation
("DMH"), with principal offices at One Commerce Square, 2005 Market Street,
Philadelphia, PA 19103.
DMH and its subsidiaries (collectively, "Delaware Investments") trace their
origins to an investment counseling firm founded in 1929. Delaware
International was formed in 1990 and provides investment advisory services
primarily to institutional accounts and mutual funds in the global and
international equity and fixed income markets. As of May 31, 1998, Delaware
International managed approximately $10 billion in global and foreign stock and
bond portfolios for separate account and investment company clients. As of that
date, advisory affiliates within Delaware Investments had total assets under
management of approximately $45 billion, including the assets managed by
Delaware International.
DMH is a wholly-owned subsidiary of Lincoln National Investment Companies,
Inc., with principal offices at One Commerce Square, Philadelphia, PA 19103,
which is in turn a wholly-owned subsidiary of Lincoln National Investments,
Inc., with principal offices at 200 East Berry Street, Fort Wayne, IN 46802.
Lincoln National Investments, Inc. is a wholly-owned subsidiary of Lincoln
National Corporation ("Lincoln National"). Lincoln National, a publicly held
company with headquarters at 200 East Berry Street, Fort Wayne, IN 46802, is a
financial services holding company. Its wealth accumulation and protection
businesses provide annuities, life insurance, retirement planning, life-health
reinsurance, institutional investment management and mutual funds.
DESCRIPTION OF THE ADVISORY AGREEMENT, CURRENT SUB-ADVISORY AGREEMENTS, AND THE
NEW SUB-ADVISORY AGREEMENT
ADVISORY AGREEMENT
The current advisory agreement between the Adviser and the Trust
("Advisory Agreement") was first executed on May 1, 1990 and was last approved
by the Shareholders at that time. The Advisory Agreement was last approved by
the Trustees, including the Trustees who were "non-interested", at a meeting of
the Board of Trustees on January, 27 1998.
Under the Advisory Agreement, the Adviser earns a fee calculated at an
annual rate of 0.90% of the Fund's average daily net assets. For the fiscal year
ended December 31, 1997, pursuant to its Advisory Agreement, the Adviser earned
$397,031 in investment advisory fees. The Adviser voluntarily waived $307,447 of
its fees, actually receiving only $89,584 in investment advisory fees.
For the fiscal year ended December 31, 1997, the Adviser earned $10,614 in
fees as Shareholder Servicer Assistant to the Fund and $7,960 in fees as Co-
Administrator to the Fund, all of which was waived. Under the new arrangements,
the Adviser will no longer perform these services for the Fund. Fund management
believes this will not have a material effect on the Fund.
4
<PAGE>
The Advisory Agreement also provides the Adviser with full authority to
operate the Fund, even in the absence of a sub-adviser. The Adviser has full
authority to operate the Fund without the need to secure shareholder approval in
the event the New Sub-Advisory Agreement is terminated by either party.
SUB-ADVISORY AGREEMENTS
The New Sub-Advisory Agreement is attached to this Proxy Statement as
Appendix A, and the description of the New Sub-Advisory Agreement set forth in
this Proxy Statement is qualified in its entirety by reference to Appendix
A.
The terms of the New Sub-Advisory Agreement are substantially similar in
all material respects to the terms of the Current Sub-Advisory Agreements except
for the fee allocated to the sub-adviser and the effective and termination
dates. Actual advisory fees paid by the Fund will be higher under the new sub-
advisory arrangement because the Adviser and Delaware International,
collectively, will waive a smaller percentage of their earned fees than the
Adviser and Current Sub-Advisers have voluntarily waived in the past. See the
"Sub-Advisory Fees" section below for a full discussion of current and pro forma
fees under the New Sub-Advisory Agreement.
The Current Sub-Advisory Agreements were initially approved by the Board of
Trustees as follows: agreements with HSBC Asset Management Europe Ltd. and HSBC
Asset Management Hong Kong Ltd. were approved on March 1, 1995; agreements with
HSBC Asset Management (Japan) KK and HSBC Asset Management Australia Limited
were approved on July 1, 1995; the agreement with HSBC Asset Management
Singapore was approved on April 30, 1996. Each of these Current Sub-Advisory
Agreements was initially a two-year agreement and annual continuances have been
approved by the Board of Trustees of the Trust. As required by the 1940 Act,
each of the Current Sub-Advisory Agreements was terminable without penalty on 60
days written notice by the Board of Trustees or by vote of the majority of
shareholders of the Fund. The Board of Trustees voted on May 5, 1998 to approve
the New Sub-Advisory Agreement with Delaware International, contingent upon
Shareholder approval.
The Current Sub-Advisers, in return for their fees, and subject to the
control and supervision of the Adviser as well as the Board of Trustees and in
conformance with the investment objective and policies of the Fund set forth in
the Trust's current registration statement and any other policies established by
the Board of Trustees, manage the investment and reinvestment of assets of the
Fund. In this regard, it is the responsibility of the Current Sub-Advisers to
make investment decisions for the Fund and to place the Fund's purchase and sale
orders for investment securities. In addition to making investment decisions,
the Current Sub-Advisers exercise voting rights in respect of portfolio
securities for the Fund. The Current Sub-Advisers provide at their expense all
necessary investment, management and administrative facilities, including
salaries of personnel and equipment needed to carry out their duties under the
Sub-Advisory Agreements. The Current Sub-Advisers also provide the Fund with
investment research and whatever statistical information the Fund may reasonably
request with respect to securities the Fund holds or contemplates purchasing.
Under the proposed New Sub-Advisory Agreement, Delaware International,
in return for its fees, will manage the investment and reinvestment of assets of
the Fund. As a sub-advisor, Delaware International will be subject to the
control and supervision of the Adviser as well as the Board of Trustees. It will
be the responsibility of Delaware International to make investment decisions for
the Fund and to place the Fund's purchase and sale orders for investment
securities. In addition to making investment decisions, Delaware International
will exercise voting rights in respect of portfolio securities for the Fund.
Under the proposed New Sub-
5
<PAGE>
Advisory Agreement Delaware International will provide at its expense the
personnel and equipment necessary to carry out its duties. Delaware
International will provide the Fund with quarterly reports with respect to
securities the Fund holds or markets in which the Fund has invested. The New
Sub-Advisory Agreement will provide that, in the absence of willful misfeasance,
bad faith, gross negligence, or a reckless disregard of the performance of the
duties of Delaware International to the Fund, Delaware International will not be
subject to liabilities to the Adviser, the Trust, the Fund or to any shareholder
of the Fund, for any act or omission in the course of, or connected with,
rendering services under the New Sub-Advisory Agreement or for any losses that
may be sustained in the purchase, holding or sale of any security. Delaware
International will not be liable for any loss incurred by reason of any act or
omission of the Adviser, any bank, broker, the Fund's custodian bank, any
administrator, transfer agent or distributor, or any director, officer, or
trustee of the Trust.
Delaware International selects brokers and dealers to execute transactions
for the purchase or sale of portfolio securities based upon Delaware
International's judgment of the broker's or dealer's professional capability to
provide the service. The primary consideration is whether the broker or dealer
is capable of providing best execution. Delaware International may allocate,
out of all commission business generated by all accounts under management,
brokerage business to brokers or dealers who provide brokerage and research
services to Delaware International or accounts under management. Such services
are used by Delaware International in connection with its investment decision-
making process for one or more accounts managed by Delaware International, and
may or may not be used, or used exclusively, with respect to the account
generating the brokerage. As provided in the Securities Exchange Act of 1934,
Delaware International may cause higher commissions to be paid to brokers and
dealers who provide brokerage and research services than to brokers and dealers
who do not provide such services, if such higher commissions are deemed
reasonable in relation to the value of the brokerage and research services being
provided.
The New Sub-Advisory Agreement shall remain in full force and effect for
two years from September 25, 1998 and shall continue in full force and effect
for successive periods of one year thereafter, but only so long as each such
continuance is specifically approved annually by the Board of Trustees and by
the vote of a majority of the Trustees who are not "interested persons" of the
Trust or the Adviser, or by vote of the holders of a majority of the Fund's
outstanding voting securities. The New Sub-Advisory Agreement may be terminated
at any time, without payment of any penalty, by vote of the Trustees, by vote of
a majority of the outstanding voting securities of the Fund, or by Delaware
International, in each case on 60 days' written notice. As required by the 1940
Act, the New Sub-Advisory Agreement will automatically terminate, without the
payment of any penalty, in the event of its assignment as defined in the 1940
Act.
No arrangements or understandings exist between the Trust and Delaware
International with respect to the composition of the board of directors of
Delaware International or the Board of Trustees of the Trust or with respect to
the selection or appointment of any person to any office with either of them.
Each of the Trustees of the Trust has represented that they have not purchased
or sold, for their own accounts or those of an affiliate, securities issued by
the Delaware International or its affiliates.
SUB-ADVISORY FEES
Under the Advisory Agreement the Adviser earns a fee calculated at an
annual rate of 0.90% of the Fund's average daily net assets. The Adviser then in
turn pays to the sub-adviser the fee earned by the sub-adviser. Under the
Current Sub-Advisory Agreements, the Current Sub-Advisers collectively earn a
contractual fee of 0.45% of the International Equity Fund's average daily net
assets. Under the proposed new sub-advisory relationship with Delaware
International, the Adviser will continue to earn a contractual fee of 0.90% of
the Fund's average daily net assets, but under the New Sub-Advisory Agreement
the Adviser has contracted to pay Delaware International up to 0.75% of the
Fund's average daily net assets. To the extent the Adviser and Delaware
International waive less in fees than the Adviser and the Current Sub-Advisers
have waived under the Advisory Agreement and the Current Sub-Advisory
Agreements, the Fund will incur greater advisory expenses under the New Sub-
Advisory Agreement.
For the services it provides under the New Sub-Advisory Agreement, Delaware
International will receive fees in accordance with the following table rather
than receiving a fee computed at a flat-rate of a
6
<PAGE>
percentage of the assets. The fee earned is computed daily at an annual rate
based on the average daily net assets of the Fund.
Average Daily Value Annual Fee Rate as a Percentage
of the Fund's Assets of Average Daily Value
-------------------- -------------------------------
First $20 Million 0.75%
Next $30 Million 0.50%
Next $50 Million 0.40%
Thereafter 0.35%
Subject to a minimum account size of $20 million (or fees equivalent
thereto).
Based on the Fund's net assets on June 1, 1998 of approximately
$63,106,747, the above fee schedule would result in an effective fee rate of
approximately 0.56%.
SUMMARY OF ANNUAL FUND OPERATING EXPENSES
The following information is provided to assist an understanding of the
difference in the costs and expenses that an investor in the Fund would bear
directly or indirectly under the New Advisory Arrangement compared with the
Current Advisory Arrangement. The information provided below under the "Current
Advisory Arrangement" heading is based on expenses for the Fund for the fiscal
year ended December 31, 1997, as adjusted for estimated operating expenses and
voluntary reductions of investment advisory, administration, co-administration,
shareholder servicer assistance and 12b-1fees. The information provided under
the "New Advisory Arrangement" heading is based on the total assets of the Fund
remaining at the June 1, 1998 level.
7
<PAGE>
<TABLE>
<CAPTION>
Current (Advisory Arrangement) New (Advisory Arrangement)
------------------------------ ------------------------------
Institutional Institutional
Service Shares Shares Service Shares Shares
--------------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
SHAREHOLDER
TRANSACTION
EXPENSES: 5.00% 0.00% 5.00% 0.00%
Maximum sales charge
imposed on purchase of
shares of the Funds (as a
percentage of offering Price),
ANNUAL FUND
OPERATING EXPENSES:
Management Fees* (net of 0.50% 0.50% 0.56% 0.56%
fees not imposed)
12b-1 Fees (net of fees not 0.00% 0.00% 0.00% 0.00%
imposed)**
Administrative Services 0.10% 0.10% 0.10% 0.10%
Fee***
Co-Administrative Services 0.00% 0.00% 0.00% 0.00%
Fee****
Other Operating Expenses 0.57% 0.52% 0.57% 0.52%
Total Fund Operating ---- ---- ---- ----
Expenses (net of fees and
expenses not imposed) 1.17% 1.12% 1.23% 1.18%
==== ==== ==== ====
</TABLE>
* These figures reflect advisory fees not imposed in the past (and not
expected to be imposed in the future) as a result of a voluntary waiver by
the Adviser. If these fees had been imposed in the past or will be imposed
in the future, the advisory fees would be 0.90%.
** The fee under the Fund's Distribution Plan and Agreement is calculated on
the basis of the average daily net assets of the Fund's Shares (Service
Class only) at an annual rate not to exceed 0.35%. These figures reflect
the waiver of all 12b-1 fees by the Fund's Distributor.
*** Reflects administrative fees not imposed as a voluntarily waiver by BISYS
Fund Services of 0.05% for the Fund.
**** Reflects co-administrative fees of 0.03% and shareholder servicer
assistance fees of 0.04% voluntarily waived by the Adviser. Under the New
Advisory Arrangement the Adviser will no longer perform these functions for
the Fund. The Fund's Institutional Shares are not subject to shareholder
servicing assistance fees. Investors who purchase and redeem shares of a
Fund through a customer account maintained at a Participating Organization
may be charged additional fees by such Participating Organization related
to services it provides for such Investors. The Fund may also pay fees to
Participating Organizations for handling record keeping and certain
administrative services for the customers who invest in the Fund through
accounts maintained at the Participating Organization. The payment will not
exceed 0.35% of the average daily net assets maintained by such
Participating Organization. (The Fund's Institutional Class is not subject
to these fees).
8
<PAGE>
THE FOLLOWING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. THE EXPENSES SET FORTH ABOVE AND EXAMPLE SET FORTH BELOW
REFLECT THE NON-IMPOSITION OF CERTAIN FEES AND EXPENSES. THE ACTUAL EXPENSES MAY
BE GREATER OR LESS THAN THOSE SHOWN. THE FOLLOWING EXAMPLE ASSUMES A 5% ANNUAL
RETURN; HOWEVER, THE FUNDS' ACTUAL RETURN WILL VARY AND MAY BE GREATER OR LESS
THAN 5%.
EXAMPLE: You would pay the following expenses on a $1,000 investment assuming a
5% annual return and the reinvestment of all dividends and distributions:
<TABLE>
<CAPTION>
Current Sub-Advisory Agreement New Sub-Advisory Agreement
------------------------------ --------------------------
Service Class Institutional Shares Service Class Institutional Shares
------------- -------------------- ------------- --------------------
<S> <C> <C> <C> <C>
1 year $ 61 $ 11 $ 62 $ 12
3 years $ 85 $ 36 $ 87 $ 37
5 years $111 $ 62 $114 $ 65
10 years $185 $136 $191 $143
</TABLE>
During the fiscal year ended December 31, 1997, the Adviser paid the
Current Sub-Advisers $200,014 collectively for their sub-advisory services
pursuant to the the Current Sub-Advisory Agreements. If the New Sub-Advisory
Agreement had been in effect during the last fiscal year, the New Sub-Adviser,
Delaware International, would have received $264,294 representing an increase of
$64,280, or 32.14%. The New Sub-Adviser's fee at the Fund's net assets on May 1,
1998 of approximately $63,035,171 would increase annual fees paid by the Adviser
to the Sub-Adviser from $283,658 to $352,141, an increase of $68,482 or 24.14%.
In order to counteract the increase in sub-advisory fees, the Adviser has agreed
to waive its advisory fees in entirety. However, because in recent years both
the Adviser and the Current Sub-Advisers had consistently agreed to waive
portions of the fees to which they were contractually entitled, it is expected
that under the New Sub-Advisory Agreement the total advisory fees paid by the
Fund will increase.
The Trustees believe that the fee rate provided for in the New
Sub-Advisory Agreement will provide an effective means of compensating Delaware
International for its advisory services. The new fee is believed by the Trustees
to be within the range of sub-advisory fees paid by other comparable funds for
comparable advisory services. Appendix B attached to this Proxy Statement
contains information on the type, size and advisory fees of other similar
investment company funds managed by Delaware International.
It is anticipated that the value-oriented investment style of the New
Sub-Adviser, Delaware International, may result in a higher than usual portfolio
turnover rate on a short-term basis, as the New Sub-Adviser implements its
investment style. although in the long-term, Delaware International's style
tends to emphasize longer-term holdings rather than short-term trading. The
Fund's portfolio turnover rate measures the frequency with which a Fund's
portfolio of securities is traded. Generally, the higher the portfolio turnover
rate, the higher the transaction costs to the Fund, which will generally
increase the Fund's total operating expenses. In addition, the increased
portfolio turnover may increase the likelihood of additional capital gains in
the current year for the Fund. The Fund's portfolio turnover rate for the years
ended December 31, 1997 and December 31, 1996 was 112.54% and 77.91%,
respectively.
9
<PAGE>
PRINCIPAL EXECUTIVE OFFICERS AND DIRECTORS OF DELAWARE INTERNATIONAL
The name, address and principal occupation of the New Sub-Adviser's
principal executive officer and each director or general partner is set forth
below.
<TABLE>
<CAPTION>
Current Position with Delaware
------------------------------
Name International Principal Occupation
---- ------------- --------------------
<S> <C> <C>
Wayne A. Stork* Chairman, CEO & Director Chairman/CEO & Director of
Delaware Management Holdings,
Inc. ("DMH");
Chairman/President/CEO/CIO of
Delaware Management Company, a
series of Delaware Management
Business Trust ("DMC");
Chairman/CEO/CIO of Delaware
Investment Advisers, a series of
Delaware Management Business
Trust ("DIA"); Trustee of Delaware
Management Business Trust
("DMBT"); Director of Lincoln
National Investment Companies, Inc.
("LNIC")
David G. Tilles** Managing Director/CIO/Director Managing Director/CIO/Director of
Delaware International
G. Roger H. Kitson** Vice Chairman & Director Vice Chairman & Director of
Delaware International
Ian G. Sims** Deputy Managing Director/ Deputy Managing Director/
CIO Global Fixed Income/ CIO, Global Fixed Income/Director of
Director Delaware International
Timothy W. Sanderson** CIO, Equities /Director CIO, Equities /Director of
Delaware International
John C. E. Campbell* Director Executive Vice President/ Client
Services/ Marketing of DIA
George M. Chamberlain, Jr.* Director Senior Vice President/ Secretary/
General Counsel of DMH, DMC &
DIA; Trustee of DMBT;
George E. Deming, III* Director Vice President/ Senior Portfolio
Manager of DIA
Elizabeth A. Desmond** Senior Portfolio Manager, Senior Portfolio Manager/ Director
Director of Delaware International
David K. Downes* Director Executive Vice President/Chief Operating Officer
Chief Financial Officer of DMH, DMC & DIA;
Trustee of DMBT
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Current Position with Delaware
------------------------------
Name International Principal Occupation
---- ------------- --------------------
<S> <C> <C>
John Emberson** Secretary/Finance Director/ Secretary/Finance Director/
Compliance Officer/Director Compliance Officer/Director of
Delaware International
Richard J. Flannery* Director Senior Vice President/ Corporate &
International Affairs of DMH,
DMC & DIA
Clive A. Gillmore** Senior Portfolio Senior Portfolio Manager/Director
Manager/Director of Delaware International
Nigel G. May** Senior Portfolio Manager/ Senior Portfolio Manager/Director
Director of Delaware International
Jeffrey J. Nick* Director President/CEO & Director of
LNIC; President & Director of
DMH
Hamish O. Parker** Senior Portfolio Senior Portfolio Manager/Director
Manager/Director of Delaware International
Richard G. Unruh, Jr.* Director Executive Vice President of DMH
& DMC; President of DIA; Trustee
of DMBT
</TABLE>
The addresses for the principal executive officer and directors of Delaware
International are set forth below.
* One Commerce Square ** 80 Cheapside, Third Floor
2005 Market Street London EC2V 6EE
Philadelphia, PA 19103 United Kingdom
No officer or director of the New Sub-Adviser is also a director,
officer, general partner or shareholder of the Trust.
REQUIRED VOTE AND RECOMMENDATION
As provided in the 1940 Act, approval of the New Sub-Advisory
Agreement requires the affirmative vote of a majority (defined in the
Miscellaneous section) of the outstanding voting securities of the Fund.
Abstentions have the effect of a negative vote on the proposal to approve the
New Sub-Advisory Agreement. If the Shareholders of the Fund fail to approve the
New Sub-Advisory Agreement, the Board of Trustees will consider various
alternatives for the Fund, including maintaining its relationships with the
Current Sub-Advisers until such time as the Trustees select a different sub-
adviser for the Fund.
THE BOARD OF TRUSTEES HAS APPROVED PROPOSAL 1 AND RECOMMENDS THAT
SHAREHOLDERS VOTE TO APPROVE PROPOSAL 1.
PROPOSALS 2 THROUGH 5: APPROVAL OF CHANGES
11
<PAGE>
TO THE FUND'S INVESTMENT OBJECTIVE AND CERTAIN INVESTMENT POLICIES
Proposals 2 through 5 relate to certain changes to the investment objective
and fundamental policies of the Fund. The Board of Trustees approved these
changes in order to update the Fund's investment objective and policies to
reflect changes in the law and other regulatory developments and provide the
Fund with flexibility to adapt to developments in the securities markets. The
changes to the Fund's fundamental objective and policies will become effective
immediately upon Shareholder approval. If a Proposal is not approved by a vote
of the Shareholders, the current objective or policy as applied to the Fund will
remain unchanged.
PROPOSAL 2: APPROVE A CHANGE TO THE INVESTMENT OBJECTIVE OF THE FUND TO SEEK TO
PROVIDE INVESTORS WITH LONG-TERM CAPITAL APPRECIATION BY INVESTING, UNDER
ORDINARY MARKET CONDITIONS, AT LEAST 65% OF ITS TOTAL ASSETS IN EQUITY
SECURITIES (INCLUDING AMERICAN, EUROPEAN AND GLOBAL DEPOSITARY RECEIPTS) ISSUED
BY COMPANIES BASED OUTSIDE OF THE UNITED STATES.
Currently, the International Equity Fund seeks to invest at least 80% of
its total assets in equity securities (including American and European
Depositary Receipts) issued by companies based outside of the United States
("International Equities"). If approved, this proposal will raise the percentage
of the total assets of the Fund which may be invested in
something other than International Equities, under ordinary market conditions,
from 20% to 35%. In addition, this proposal will permit the Fund to invest even
more than 35% of the Fund's total assets in something other than International
Equities in times of unordinary conditions. This proposal will permit the Fund
to invest a greater percentage of its total assets in non-equity securities as
well as equity securities issued by companies based in the United States. If
adopted, the Fund's revised investment objective will meet the requirements
established by the Securities and Exchange Commission and will be consistent
with current industry practice.
This change in investment objective will give the Fund greater flexibility
in making investment decisions. Allowing the Fund to invest a greater
percentage of its total assets in something other than International Equities
may allow the Fund to maintain a more diversified portfolio and potentially
decrease investment risk to Shareholders. Under ordinary market conditions the
Fund will continue to maintain at least 65% of its total assets invested in
equity securities (including American, European and Global Depositary Receipts)
issued by companies based outside the United States.
While this change in the investment objective of the Fund will permit the
Fund to invest a greater percentage of its total assets in securities that are
not International Equities, the Adviser and sub-adviser will exercise care,
consistent with the Fund's investment objectives and policies, in investing any
of the Fund's assets in such securities.
REQUIRED VOTE AND RECOMMENDATION
As provided in the 1940 Act, approval of a change to the Fund's
investment objective requires the affirmative vote of a majority (defined in the
Miscellaneous section) of the outstanding voting securities of the Fund.
Abstentions have the effect of a negative vote on this Proposal. If the
Shareholders of the Fund fail to approve this Proposal, the Fund's current
investment objective will be retained.
12
<PAGE>
THE BOARD OF TRUSTEES HAS APPROVED PROPOSAL 2 AND RECOMMENDS THAT
SHAREHOLDERS VOTE TO APPROVE PROPOSAL 2.
PROPOSAL 3: APPROVE A CHANGE IN THE INVESTMENT POLICIES OF THE FUND TO REMOVE
THE RESTRICTION ON THE FUND PURCHASING SECURITIES OF ANY COMPANY WITH A RECORD
OF LESS THAN THREE YEARS' CONTINUOUS OPERATION IF SUCH PURCHASE WOULD CAUSE THE
FUND'S INVESTMENTS IN ALL SUCH COMPANIES TAKEN AT COST TO EXCEED 5% OF THE TOTAL
ASSETS OF THE FUND.
Fund management recommends that Shareholders vote to remove the Fund's
fundamental investment policy which requires the Fund to limit its investments
in securities of issuers which have been in operation for less than three years
to 5% of its total assets. The Fund's current policy states that the Fund may
not purchase securities of any company with a record of less than three years'
continuous operation if such purchase would cause the Fund's investments in all
such companies taken at cost to exceed 5% of the Fund's total assets taken at
market value.
Subject to Shareholder approval, this fundamental investment policy would
be eliminated from the investment policies of the Fund.
The primary purpose of this Proposal is to update the Fund's investment
policies in light of recent changes in the law. The Fund's fundamental policies
were originally adopted to be consistent with state securities ("blue sky")
regulations, which placed limits on the amounts of certain types of securities
that a mutual fund could purchase. Recent federal legislation eliminated state
regulatory requirements including the requirement embodied in this investment
policy. If the Proposal is approved, the Fund will be able to invest more than
5% of its total assets in newly formed or "unseasoned" issuers. Eliminating this
fundamental policy will conform the Fund's investment policies to the
requirements of current federal law. In addition, eliminating this policy will
provide increased investment flexibility and may provide opportunities to
enhance the Fund's performance, but will also include the corresponding risk
which accompanies investing in newly formed issuers. While removal of the
restrictive investment policy will permit the Fund to invest an unlimited amount
of its respective assets in newly formed or "unseasoned companies," the Adviser
and sub-adviser will exercise care, consistent with the Fund's investment
objectives and policies, in investing any of a Fund's assets in such
securities.
REQUIRED VOTE AND RECOMMENDATION
As provided in the 1940 Act, approval of a change to one of the Fund's
fundamental investment policies requires the affirmative vote of a majority
(defined in the Miscellaneous section) of the outstanding voting securities of
the Fund. Abstentions have the effect of a negative vote on this Proposal. If
the Shareholders of the Fund fail to approve this Proposal, the current
investment policy will be retained.
THE BOARD OF TRUSTEES HAS APPROVED PROPOSAL 3 AND RECOMMENDS THAT
SHAREHOLDERS VOTE TO APPROVE PROPOSAL 3.
13
<PAGE>
PROPOSAL 4. APPROVE A CHANGE IN THE INVESTMENT POLICIES OF THE FUND TO REMOVE
THE RESTRICTION ON THE FUND INVESTING IN WARRANTS IN EXCESS OF 5% OF THE FUND'S
NET ASSETS, AND TO REMOVE THE RESTRICTION ON THE FUND INVESTING IN WARRANTS
WHICH ARE LISTED ON THE NEW YORK OR AMERICAN STOCK EXCHANGES IN EXCESS OF 2% OF
THE FUND'S NET ASSETS.
At the Meeting, Shareholders of the Fund will vote on removing the Fund's
fundamental investment policy which requires the Fund to limit its investments
in warrants. The Fund's current policy prohibits the Fund from investing in
warrants if as a result, more than 5% of the Fund's net assets will be invested
in warrants or if as a result more than 2% of the Fund's net assets will be
invested in warrants listed on the New York or American Stock Exchanges.
Subject to Shareholder approval, this fundamental investment policy would
be eliminated from the investment policies of the Fund.
The primary purpose of this Proposal is to update the Fund's investment
policies in light of recent changes in the law. The Fund's fundamental policies
were originally adopted to be consistent with state securities ("blue sky")
regulations, which placed limits on the amounts of certain types of securities
that a mutual fund could purchase. Recent federal legislation eliminated state
regulatory requirements including the requirement embodied in this investment
policy. If the Proposal is approved, the Fund will be able to invest more than
5% of its total assets in warrants and will be able to invest more than 2% of
its total assets in warrants listed on the New York or American Stock Exchange.
Eliminating this fundamental policy will conform the Fund's investment policies
to the requirements of current federal law. In addition, eliminating this policy
will provide increased investment flexibility and may provide opportunities to
enhance the Fund's performance, but will also include the corresponding risks
which accompany investments in warrants. While removal of the restrictive
investment policy will permit the Fund to invest an unlimited amount of its
assets in warrants, it is not presently anticipated that the Fund's investments
in warrants will regularly exceed the levels permitted under the current
investment policy.
REQUIRED VOTE AND RECOMMENDATION
As provided in the 1940 Act, approval of a change to one of the Fund's
fundamental investment policies requires the affirmative vote of a majority
(defined in the Miscellaneous section) of the outstanding voting securities of
the Fund. Abstentions have the effect of a negative vote on this Proposal. If
the Shareholders of the Fund fail to approve this Proposal, the current
investment policy will be retained.
THE BOARD OF TRUSTEES HAS APPROVED PROPOSAL 4 AND RECOMMENDS THAT
SHAREHOLDERS VOTE TO APPROVE PROPOSAL 4.
PROPOSAL 5. APPROVE A CHANGE IN THE INVESTMENT POLICIES OF THE FUND TO PERMIT
THE FUND TO PURCHASE OR RETAIN SECURITIES OF ANY COMPANY WHICH THE OFFICERS AND
TRUSTEES OF THE TRUST AND OFFICERS AND DIRECTORS OF THE ADVISER WHO INDIVIDUALLY
OWN MORE THAN 1/2 OF 1% OF THE SECURITIES
14
<PAGE>
OF THAT COMPANY TOGETHER OWN BENEFICIALLY MORE THAN 5% OF SUCH COMPANY.
At the Meeting, Shareholders of the Fund will vote on removing the Fund's
fundamental investment policy which prohibits the Fund from purchasing or
retaining securities of issuers which the Officers and Trustees of the Trust
and the Officers and Directors of the Adviser who individually own more than 1/2
of 1% of the securities of that company together own beneficially more than 5%
of such company. The Fund's current policy states that the Fund may not:
purchase or retain the securities of any company if, to the knowledge of
the Fund, Officers and Trustees of the Trust and Officers and Directors of
the Adviser who individually own more than 1/2 of 1% of the securities of
that company together own beneficially more than 5% of such
securities.
Subject to Shareholder approval, this fundamental investment policy would
be eliminated from the investment policies of the Fund.
The primary purpose of this Proposal is to update the Fund's investment
policies in light of recent changes in the law. The Fund's fundamental policies
originally adopted to be consistent with state securities ("blue sky")
regulations, which placed limits on the amounts of certain types of securities
that a mutual fund could purchase. Recent federal legislation eliminated state
regulatory requirements including the requirement embodied in this investment
policy.
This proposal will eliminate the Fund's policy of avoiding investments in
securities issued by companies whose securities are owned in certain amounts by
the Officers and Trustees of the Trust and the Officers and Directors of the
Adviser. Preventing conflicts of interest in fund management is a critically
important objective. However, Fund management believes that the Fund's Code of
Ethics is sufficient to accomplish this objective. The Fund maintains a Code of
Ethics which has been adopted in accordance with SEC rules, to restrict the
private investment activities of the Officers and Trustees of the Trust and the
Officers and Directors of the Adviser. This Code of Ethics supplements Fund
management's separate fiduciary obligation to act with the Fund's best interests
at heart. It places the burden of avoiding potential conflicts by placing limits
on the ability of the individuals in those key positions of Officer, Trustee or
Director to purchase securities the Fund is invested in. The current policy
takes the opposite approach and restricts the Fund's investments in securities
which the key personnel purchase or hold. By approving this Proposal,
Shareholders will be placing the Fund's investment priorities ahead of the
investment priorities of the Fund's key personnel.
Eliminating this fundamental policy will conform the Fund's investment
policies to the requirements of current federal law. In addition, eliminating
this policy will provide increased investment flexibility and may provide
opportunities to enhance the Fund's performance. While removal of this
investment restriction will allow the Fund to purchase securities of a company
which the Trustees and Officers of the Trust and the Officers and Directors of
the Adviser together have ownership exceeding 5% of the company, the Adviser and
sub-adviser will exercise care, consistent with the Fund's investment objectives
and policies, in investing any of a Fund's assets in such securities.
REQUIRED VOTE AND RECOMMENDATION
As provided in the 1940 Act, approval of a change to one of the Fund's
fundamental investment policies requires the affirmative vote of a majority
(defined in the Miscellaneous section) of the outstanding voting securities of
the Fund. Abstentions have the effect of a negative vote on this
15
<PAGE>
Proposal. If the Shareholders of the Fund fail to approve this Proposal, the
current investment policy will be retained.
THE BOARD OF TRUSTEES HAS APPROVED PROPOSAL 5 AND RECOMMENDS THAT
SHAREHOLDERS VOTE TO APPROVE PROPOSAL 5.
At August 8, 1998 no person owned of record or, to the knowledge of management
beneficially owned more than 5% of the outstanding shares of the Fund except as
set forth below:
Name and Address of
Holder of Record Shares Held Percent of Class
- ------------------------------- ------------------- -------------------
Service Class
- ----------------- ------------------- -------------------
DONALDSON LUFKIN JENRETTE 1,252.032 5.163
SECURITIES CORPORATION INC
P.O. BOX 2052
JERSEY CITY, NJ 07303-9998
DONALDSON LUFKIN JENRETTE 1,622.826 6.692
SECURITIES CORPORATION INC
P.O. BOX 2052
JERSEY CITY, NJ 07303-9998
MARINE MIDLAND BANK, CUSTODIAN 4,727.414 19.497
PAUL M. DUDNE
IRA
TOPHILL CROSSKEYS
SEVEN OAKS KENT ENGLAND TW13
Institutional Class
- --------------------
- ------------------------------- ------------------- -------------------
MARINE MIDLAND BANK 6,029,915.668 99.974
ATTN BRIAN HUNT 17TH FL
ONE MARINE MIDLAND CENTER
BUFFALO NY 34240
MISCELLANEOUS
DEFINITION OF MAJORITY. "Majority of the outstanding voting securities"
means the affirmative vote of the lesser of (1) more than 50% of the outstanding
shares of the Fund and (2) 67% or more of the shares of the Fund present at the
Meeting if more than 50% of the outstanding shares are present at the Meeting in
person or by proxy.
METHODS OF TABULATION. Shares represented by proxies that reflect
abstentions and "broker non-votes" (i.e., shares held by brokers or nominees as
to which (i) instructions have not been received from the beneficial owners or
the persons entitled to vote and (ii) the broker or nominee does not have the
discretionary voting power on a particular matter) will be counted as shares
that are present and entitled to vote on the matter for purposes of determining
the presence of a quorum. Votes cast by proxy or in person at the Meeting will
be counted by persons appointed as tellers for the Meeting.
The tellers will count the total number of votes cast "for" approval of
the proposal or proposals for purposes of determining whether sufficient
affirmative votes have been cast. With respect to any proposal, abstentions and
broker non-votes have the effect of a negative vote on the proposal.
Any Shareholder giving a proxy has the power to revoke it prior to its
exercise by submission of a later dated proxy, by voting in person or by letter
to the Secretary of the Fund.
In the event that a quorum is not present at the Meeting or in the event
that a quorum is present but sufficient votes to approve any of the proposals
are not received, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. Any such
adjournment will require the affirmative vote of a majority of those Shares
represented at the Meeting in person or by proxy. The persons named as proxies
will vote those proxies which they are entitled to vote FOR any such proposal in
favor of such an adjournment and will vote those proxies required to be voted
AGAINST any such proposal against any such adjournment. A Shareholder vote may
be taken on one of the proposals in this Proxy Statement prior to any such
adjournment if sufficient votes have been received for approval. Under the by-
laws of the Fund, a quorum is constituted by the presence in person or by proxy
of the holders of a majority of the outstanding shares of the Fund entitled to
vote at the Special Meeting.
BROKER COMMISSIONS. During the fiscal year ended December 31, 1997, no
commissions were paid to brokers affiliated with HSBC Americas.
OTHER BUSINESS. The Trustees know of no other business to be brought
before the Meeting. However, if any other matters properly come before the
Meeting, it is the Trustees' intention that proxies which do not contain
specific restrictions to the contrary will be voted on such matters in
accordance with the judgment of the persons named in the enclosed form of Proxy.
16
<PAGE>
DATE FOR RECEIPT OF SHAREHOLDERS' PROPOSALS FOR SUBSEQUENT MEETING OF
SHAREHOLDERS. The Trust's Agreement and Declaration of Trust does not provide
for regular annual meetings of Shareholders, and the Fund does not currently
intend to hold such meetings. Shareholder proposals for inclusion in the Fund's
proxy statement for any subsequent meeting must be received by the Trust not
less than 120 days prior to any such meeting.
17
<PAGE>
APPENDIX A
SUBADVISORY AGREEMENT
AGREEMENT made this 25th day of September, 1998 by and between HSBC
ASSET MANAGEMENT AMERICAS INC., (the "CLIENT") and DELAWARE INTERNATIONAL
ADVISERS LIMITED of Third Floor, 80 Cheapside, London EC2V 6EE England
("DELAWARE").
i. The CLIENT hereby appoints DELAWARE to manage funds in the
International Equity Fund series (the "Fund") of HSBC Mutual Funds Trust (the
"Trust") under the terms set forth below and represents that the CLIENT is duly
authorized to enter into this Agreement and to delegate discretionary investment
management with respect to the Fund to DELAWARE. DELAWARE hereby accepts such
appointment.
ii. This Agreement shall take effect when a copy of this
Agreement has been returned to DELAWARE duly signed on the CLIENT's behalf.
Following commencement, this Agreement shall replace any agreement relating to
the management of the Fund which may have been previously entered into between
DELAWARE and the CLIENT. This Agreement shall continue in effect for a period
of two years from the date of its execution and may be renewed thereafter only
so long as such renewal and continuance are specifically approved by the Board
of Trustees of the Trust or by a vote of a majority of the outstanding voting
securities of the Fund, and only if the terms and renewal hereof have been
approved by the vote of a majority of the Trustees of the Trust who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval.
iii. The CLIENT shall notify the Fund's custodian bank as to
the appointment of DELAWARE as sub-adviser of the CLIENT with respect to the
Fund. The CLIENT shall instruct the Fund's custodian bank to comply with
instructions from DELAWARE given under the terms of this Agreement.
iv. DELAWARE shall have sole discretion with respect to
investments of assets in the Fund and may purchase and sell any type of
investment in any amount or proportion and on any market, all without prior
consultation. DELAWARE shall, however, be bound by the investment policies and
restrictions of the Fund as are set forth from time to time in the Fund's
prospectus (the "Prospectus"), a copy of which shall be provided to DELAWARE by
the CLIENT initially and upon each update, supplement or amendment thereto.
Unless indicated in the Prospectus, and subject to Rule 17f-5 under the
Investment Company Act of 1940, as amended (the "1940 Act"), there shall be no
restrictions on the markets on which transactions may be made on the Fund's
behalf. DELAWARE may, but shall not be obligated to, participate on behalf of
the Fund in any class action, formal or informal reorganization or restructuring
proposal, merger, combination, indenture revision, consolidation, bankruptcy,
liquidation or similar plan, agreement or arrangement with respect to securities
in the Fund and, upon prior written notice or notice by telephone from DELAWARE
to the CLIENT of DELAWARE's intention to participate in such matters, DELAWARE
shall automatically and without further action by the CLIENT or the Fund be
appointed as the FUND's attorney-in-fact for any such purpose, including without
limitation causing the Fund to be bound to any such plan, agreement or
arrangement. Under the terms of the Investment Management Agreement between the
CLIENT and the Trust, with respect to the Fund, the Trust shall conduct its own
business and affairs and shall bear the expenses and salaries necessary and
incidental thereto.
1
<PAGE>
v. DELAWARE shall have the authority to select the brokerage
firms through which orders shall be placed. DELAWARE may combine orders for the
Fund with orders for other accounts or funds under management. DELAWARE may,
subject to its duty to secure best execution for the Fund (which for these
purposes shall disregard any benefit which might enure directly or indirectly to
the Fund as a result of the arrangement hereinafter described), effect
transactions with or through the agency of another person with whom DELAWARE has
an arrangement under which that person will from time to time provide to or
procure for DELAWARE services or other benefits the nature of which are such
that their provision results, or is designed to result, in an improvement in
DELAWARE's performance in providing services for its clients and for which
DELAWARE makes no direct payment but instead undertakes to place business with
that person. When orders are placed, DELAWARE shall issue suitable instructions
to the Fund's custodian bank with respect to deliveries and payments.
vi. DELAWARE shall under no circumstances act as custodian for
the Fund or have possession of any assets of the Fund. Accordingly,
arrangements for the registration and identification of ownership and safe
custody of documents of title must be made by the CLIENT or the Fund with a
custodian bank which is selected by the Fund.
vii. DELAWARE shall provide periodic statements to the CLIENT
at quarterly intervals. Such statements will show all investments in the Fund
and will contain details of the measure of portfolio performance. If the CLIENT
provides instructions to DELAWARE as to the format of the periodic statements,
such format may vary from the periodic statement format set forth in the rules
of IMRO (as defined below). For purposes of such reports, securities in the Fund
will normally be valued at mid-market prices as of the close of business on the
last business day of the applicable period. A representative of DELAWARE shall,
if requested, attend four (4) meetings of the Board of Trustees of the Trust per
year, two (2) of which shall be in person and two (2) of which may be by
telephonic conference.
viii. It is understood that DELAWARE may perform similar
services for other clients or funds and that the investment action taken for
each client or fund may differ.
ix. In the absence of willful misfeasance, bad faith, gross
negligence, or a reckless disregard of the performance of duties of DELAWARE to
the Fund, DELAWARE shall not be subject to liabilities to the CLIENT, the Trust,
the Fund, or to any Shareholder of the Fund, for any act or omission in the
course of, or connected with, rendering services under this Agreement or for any
losses that may be sustained in the purchase, holding or sale of any security,
or otherwise; nor shall DELAWARE be responsible for any loss incurred by reason
of any act or omission of the CLIENT, any bank, broker, the Fund's custodian
bank, any administrator, transfer agent or distributor, or any director,
officer, or trustee of the Trust, whether appointed by or on behalf of DELAWARE,
the CLIENT or the Fund. Nothing contained herein shall be deemed to waive any
liability which cannot be waived under applicable law, including applicable U.S.
state and federal securities laws and the Financial Services Act 1986 of the
United Kingdom ("FSA"), or any rules or regulations adopted under any of those
laws.
x. As compensation for its services hereunder, the CLIENT
shall pay to DELAWARE a monthly fee, within 15 business days following the end
of each month, based upon the average daily net assets of the Fund during the
month. The following annual fee rates shall apply:
2
<PAGE>
Average Daily Net Annual Fee Rate as a
Assets of the Fund Percentage of Average Daily Net Assets
------------------ --------------------------------------
First $20 Million 0.75%
Next $30 Million 0.50%
Next $50 Million 0.40%
Thereafter 0.35%
Subject to a minimum account size of $20 Million (or fees equivalent
thereto).
If this Agreement is terminated prior to the end of any calendar month, the fee
shall be prorated for the portion of any month in which this Agreement is in
effect according to the proportion which the number of calendar days during
which this Agreement is in effect bears to the number of calendar days in the
month, and shall be payable within 10 days after the date of effectiveness of
the termination.
xi. The CLIENT shall cause all proxies received by it or the
Fund or on its or the Fund's behalf by the Fund's custodian bank to be delivered
to DELAWARE on a timely basis. DELAWARE shall be authorized to vote on behalf
of the Fund proxies relating to securities held in the Fund's portfolio,
provided, however, that DELAWARE will comply with any written instructions
received from the CLIENT as to the voting of proxies.
xii. Notwithstanding Section ii hereof, this Agreement may be
terminated by the CLIENT or the Fund at any time, without the payment of a
penalty, on sixty days' written notice to DELAWARE of the CLIENT's or the Fund's
intention to do so, in the case of the Fund pursuant to action by the Board of
Trustees of the Trust or pursuant to vote of a majority of the outstanding
voting securities of the Fund. DELAWARE may terminate this Agreement at any
time, without the payment of a penalty on sixty days' written notice to the
CLIENT and the Fund of its intention to do so. Termination will be without
prejudice to the completion of transactions already initiated, which shall be
completed in accordance with DELAWARE's usual practice. Upon termination of
this Agreement, the obligations of all the parties hereunder shall cease and
terminate as of the date of effectiveness of such termination, except for the
obligation of the CLIENT to pay DELAWARE the fee provided in Section x hereof,
prorated to the date of effectiveness of the termination. This Agreement shall
automatically terminate in the event of its assignment.
xiii. DELAWARE represents that it is duly registered with the
Securities and Exchange Commission pursuant to the Investment Advisers Act of
1940, as amended. The CLIENT acknowledges receipt of a copy of Part II of
DELAWARE's current Form ADV, at least 48 hours prior to the signing of this
Agreement.
xiv. DELAWARE is a member of, and is regulated in the conduct
of its investment business by, the Investment Management Regulatory Organisation
Limited ("IMRO") and is bound by the Conduct of Business Rules of IMRO. Based
on information that the CLIENT has furnished to DELAWARE, DELAWARE believes that
the CLIENT is a "Non-Private Customer" as defined by IMRO and proposes to treat
the CLIENT as such. In accordance with IMRO's rules, DELAWARE hereby notifies
the CLIENT as follows:
3
<PAGE>
(1) Unless otherwise expressly stated in the Prospectus, DELAWARE
may advise on or effect transactions in units in collective investment schemes
which are Unregulated Collective Investment Schemes.
(2) Unless otherwise expressly stated in the Prospectus, DELAWARE
may effect transactions in derivatives (meaning options, futures, contracts for
differences) on the Fund's behalf only for the purposes of defensive currency
hedging and/or interest rate hedging transactions, whether or not those
transactions are under the rules of a Recognized or Designated Investment
Exchange and whether or not those transactions are executed using a standard
contract of such an Exchange. Such transactions may be "Contingent Liability
Transactions" (i.e., transactions under which there is a liability to make
further payments, other than charges and whether or not secured by margin, when
the transaction is due to be completed or upon the earlier closing out of the
position). The amount of funds which may be committed by way of margin may not
exceed 20% of the value of the Fund when the investment is made. In the event
that the margin required at any time exceeds 20% of the value of the Fund as a
result of further margin calls at any time, DELAWARE may at its discretion close
out the Fund's position.
(3) The CLIENT acknowledges that, solely with respect to temporary
overdrafts resulting from settlement delays, the Fund's account with its
custodian bank may be overdrawn from time to time.
(4) To the extent not prohibited by applicable law or the
Prospectus, DELAWARE shall be entitled, without prior reference to the CLIENT,
to effect transactions for the Fund in which DELAWARE has directly or indirectly
a material interest (other than an interest arising solely from its
participation in the transaction) or a relationship with another party which may
involve a conflict with its duty to the CLIENT or the Fund. Such transactions
may include, among other things, the following:
(a) Buying an investment from or selling an investment to the
Fund when acting as a principal or as an agent for an Associate of DELAWARE or a
client thereof;
(b) Acting in the same transaction as both an agent for the
Fund and also as an agent for the counterparty;
(c) Purchasing, holding or selling for the benefit of the Fund
securities issued or guaranteed by companies in which DELAWARE or an Associate
of DELAWARE, or any of their directors or employees, has an interest, through
holding or dealing in its securities, serving as a director or otherwise; and
(d) Purchasing, holding or selling for the benefit of the Fund
securities issued by an Associate of DELAWARE or by a client of DELAWARE or any
of its Associates.
(5) DELAWARE has provided the CLIENT with a list of its current Soft
Commission Agreements and the CLIENT acknowledges receipt of that list.
DELAWARE's Soft Commission policies are described in Section 5 of this Agreement
and in Part II of DELAWARE's Form ADV.
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xv. Except as expressly otherwise provided herein any notice
provided for or required hereunder shall be in writing and sent to the person
and place indicated below or to such other person or place as the respective
party may designate by notice hereunder.
xvi. Any complaint hereunder should be referred to Mr. John
Emberson, DELAWARE's Compliance Officer. If within two months after the
complaint is made it has not been resolved to the CLIENT's satisfaction the
complaint will be notified to IMRO. The CLIENT may make its complaint directly
to the office of the Investment Ombudsman appointed by IMRO. If DELAWARE is
unable to meet any liabilities to the CLIENT, the CLIENT will have such rights
to compensation as may be prescribed from time to time by the Securities and
Investments Board of the United Kingdom. A statement describing those rights is
available from Mr. John Emberson.
xvi. For purposes of this Agreement, the terms "vote of a
majority of the outstanding voting securities;" "interested person;" and
"assignment" shall have the meanings defined in the 1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed on their behalf by their duly authorized representatives as of the
date and the year first above written.
HSBC ASSET MANAGEMENT AMERICAS DELAWARE INTERNATIONAL
INC. ADVISERS LIMITED
By: By:
-------------------------------- ------------------------------------
Name: Name:
Title: Title:
Attest: Attest:
---------------------------- --------------------------------
Name: Name:
Title: Title:
Designee for Notice: Designee for Notice:
[__________________________] David G. Tilles
HSBC Asset Management Americas, Inc. Managing Director
140 Broadway Delaware International Advisers Ltd.
New York, NY 10005 Third Floor
USA 80 Cheapside
London, EC2V 6EE
England
Agreed to and accepted as of the day and year first above written:
HSBC Mutual Funds Trust,
on behalf of HSBC
International Equity Fund;
By:______________________
Attest:__________________
DELAWARE INTERNATIONAL ADVISERS LTD.'S POLICY RELATING TO SOFT COMMISSION
AGREEMENTS
i. (1) We pay commissions to brokers because we regard commissions as a
necessary incentive to secure the best performance and service
from our brokers.
(2) Our policy in relation to soft commission agreements is as
follows: we use customers' commissions to secure services such as
advice, information and research from brokers, for example,
Reuters screens and various stock exchange
5
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quotation services. It is our policy to use our customers'
commissions to secure those services, however sourced, for the
benefit of our customers.
(3) We have soft dollar agreements in place with the brokers detailed
in paragraph ii below, whereby we may use your commission in
executing agency transactions with those brokers, and those
brokers may provide to us various permitted goods or services
(such as payment of our invoices for quotation services), which
can reasonably be expected to assist us in the provision of
investment services to our customers and which are in fact used
for the benefit of our customers.
(4) From time to time, we may receive additional services from other
counterparties. We are satisfied that these investment related
services assist us in the performance of our advisory duties and
allow us to provide a cost effective service.
ii. The brokers with whom we currently have soft commission agreements
are:
Hoenig & Company Limited
Instinet Investment Services Ltd.
Brockhouse & Cooper Inc.
JB Were & Co. Ltd.
6
<PAGE>
APPENDIX B
MANAGEMENT FEES PAYABLE TO DELAWARE INTERNATIONAL
ADVISERS LTD. BY FUNDS WITH AN OBJECTIVE
SIMILAR TO HSBC INTERNATIONAL EQUITY FUND
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC. - INTERNATIONAL EQUITY FUND
Annual Fee
Average Daily Net Assets (as a % of Average Daily Net Assets)
- - ------------------------ ------------------------------------
All Assets 0.75%*
*Fees reduced to 0.74% for fiscal year ended 11/30/97 due to (i) a contractual
agreement to reduce fees by the fund's proportionate share of fees paid to
Global & International Fund's independent directors; and (ii) a voluntary fee
waiver by Delaware International.
Assets as of May 31, 1998: $272.6 Million
DELAWARE GROUP PREMIUM FUND, INC. - INTERNATIONAL EQUITY SERIES
Annual Fee
Average Daily Net Assets (as a % of Average Daily Net Assets)
- - ------------------------ ------------------------------------
All Assets 0.75%*
*Fees reduced to 0.69% for fiscal year ended 12/31/97 due to (i) a contractual
agreement to reduce fees by the fund's proportionate share of fees paid to
Premium Fund's independent directors; and (ii) a voluntary fee waiver by
Delaware International.
Assets as of May 31, 1998: $234.3 Million
DELAWARE POOLED TRUST, INC. - THE INTERNATIONAL EQUITY PORTFOLIO
Annual Fee
Average Daily Net Assets (as a % of Average Daily Net Assets)
- - ------------------------ ------------------------------------
All Assets 0.75%*
*Delaware International's contractual agreement to reduce fees by the fund's
proportionate share of fees paid to Delaware Pooled Trust's independent
directors resulted in an insignificant reduction in the management fee.
Voluntary fee waivers were not triggered.
Assets as of May 31, 1998: $594.7 Million
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DELAWARE POOLED TRUST, INC. - THE GLOBAL EQUITY PORTFOLIO
Annual Fee
Average Daily Net Assets (as a % of Average Daily Net Assets)
- - ------------------------ ------------------------------------
All Assets 0.75%*
*No fees were paid to Delaware International for the period from the
commencement of operations on 10/15/97 through the end of The Global Equity
Portfolio's fiscal year on 10/31/97 due to voluntary fee waivers by Delaware
International.
Assets as of May 31, 1998: $3.2 Million
DELAWARE GROUP ADVISER FUNDS, INC. - OVERSEAS EQUITY FUND
Annual Fee
Average Daily Net Assets (as a % of Average Daily Net Assets)
- - ------------------------ ------------------------------------
All Assets 0.80%
Assets as of May 31, 1998: $4.5 Million
LINCOLN NATIONAL INTERNATIONAL FUND, INC.
Annual Fee
Average Daily Net Assets (as a % of Average Daily Net Assets)
- - ------------------------ -------------------------------------
$0 -$200 Million 0.50%
$200 Million - $400 Million 0.40%
Thereafter 0.35%
Assets as of May 31, 1998: $512.5 Million
2
<PAGE>
HSBC MUTUAL FUNDS TRUST PROXY SOLICITED BY THE BOARD OF TRUSTEES
The undersigned hereby appoints Walter B. Grimm or Charles L. Booth, and each
of them, proxies for the undersigned, with full powers of substitution and
revocation, to represent the undersigned and to vote on behalf of the
undersigned all shares of the HSBC Mutual Funds Trust (the "Fund") which the
undersigned is entitled to vote at the Special Meeting of Shareholders of the
Fund to be held at the office of the Fund, 3435 Stelzer Road, Columbus, Ohio
43219, on September 25, 1998 at 10:00 a.m., and any adjournments thereof. The
undersigned hereby acknowledges receipt of the Notice of Special Meeting and
Proxy Statement and hereby instructs said attorneys and proxies to vote said
shares as indicated hereon. In their discretion, the proxies are authorized to
vote upon such other business as may properly come before the Meeting. A
majority of the proxies present and acting at the Meeting in person or by
substitute (or, if only one shall be so present, then that one) shall have and
may exercise all of the power and authority of said proxies hereunder. The
undersigned hereby revokes any proxy previously given.
PLEASE SIGN, DATE AND RETURN PROMPTLY
IN THE ENVELOPE PROVIDED
NOTE: Please sign exactly as your name
appears on this Proxy. If joint owners,
EITHER may sign this Proxy. When signing as
attorney, executor, administrator, trustee,
guardian or corporate officer, please give
your full title.
Date________________________________________
___________________________________________
___________________________________________
Signature(s), (Title(s), if applicable)
Please indicate your vote by an "X" in the appropriate boxes below.
This Proxy, if properly executed, will be voted in the manner directed by the
undersigned Shareholder.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSAL 1. Please refer
to the Proxy Statement for a discussion of the Proposals.
<TABLE>
<S> <C> <C> <C>
1. Approve a new Sub-Advisory Agreement between the HSBC Asset [_] [_] [_]
Management Americas Inc. and Delaware International Advisers Ltd. for the APPROVE DISAPPROVE ABSTAIN
HSBC International Equity Fund.
2. Approve a change to the investment objective of the Fund to seek to provide [_] [_] [_]
investors with long-term capital appreciation by investing under ordinary APPROVE DISAPPROVE ABSTAIN
market conditions, at least 65% of its total assets in equity securities
(including American, European and Global Depositary Receipts) issued by
companies base outside of the United States.
3. Approve a change in the investment policies of the Fund to remove the [_] [_] [_]
restriction on the Fund purchasing securities of any company with a record of APPROVE DISAPPROVE ABSTAIN
less than three years' continuous operation if such purchase would cause the
Fund's investments in all such companies taken at cost to exceed 5% of the
Fund's total assets taken at market value.
4. Approve a change in the investment policies of the Fund to remove the [_] [_] [_]
restriction on the Fund investing in warrants in excess of 5% of the Fund's net APPROVE DISAPPROVE ABSTAIN
assets, and to remove the restriction on the Fund investing in warrants which
are listed on the New York or American Stock Exchanges in excess of 2% of
the Fund's net assets.
5. Approve a change in the investment policies of the Fund to remove the [_] [_] [_]
restriction on the Fund purchasing or retaining securities of any company APPROVE DISAPPROVE ABSTAIN
which the officers and trustees of the Trust and officers and directors of the
Adviser who individually own more than 1/2 of 1% of the securities of that
company, together own beneficially more than 5% of such securities.
</TABLE>
