INTERNATIONAL SMALL CAP FUND PROSPECTUS
DECEMBER 22, 1997
A CLASS SHARES
B CLASS SHARES
C CLASS SHARES
_______________________________________________
1818 Market Street, Philadelphia, PA 19103
For Prospectus and Performance: Nationwide 800-523-4640
Information on Existing Accounts: (SHAREHOLDERS ONLY)
Nationwide 800-523-1918
Dealer Services: (BROKER/DEALERS ONLY)
Nationwide 800-362-7500
Representatives of Financial Institutions:
Nationwide 800-659-2265
This Prospectus describes shares of the International Small
Cap Series (the "Fund") of Delaware Group Global &
International Funds, Inc. ("Global Funds, Inc."), a
professionally-managed mutual fund of the series type.
The Fund s investment objective is to achieve long-term
capital appreciation. The Fund seeks to achieve its objective
by investing primarily in equity securities of small non-U.S.
companies, which may include companies located or operating in
established or emerging countries. See Investment Objective and
Strategies.
The Fund offers three retail classes of shares: "Class A
Shares," "Class B Shares" and "Class C Shares" (individually, a
"Class" and collectively, the "Classes").
This Prospectus relates only to the Classes and sets forth
information that you should read and consider before you
invest. Please retain it for future reference. The Fund s
Statement of
Additional Information ("Part B" of Global Funds, Inc.'s
registration statement), dated July 21, 1997 (as revised
December 22, 1997), as it may be amended from time to time,
contains additional information about the Fund and has been
filed with the Securities and Exchange Commission. Part B is
incorporated by reference into this Prospectus and is
available, without charge, by writing to Delaware Distributors,
L.P. at the above address or by calling the above numbers.
When the Fund commences operations, its financial statements
will appear in the Annual Report of Global Funds, Inc. and will
accompany any response to requests for Part B.
The Fund also offers an Institutional Class, which is
available for purchase only by certain investors. A prospectus
for the Fund s Institutional Class can be obtained by writing
to Delaware Distributors, L.P. at the above address or by
calling the above numbers.
TABLE OF CONTENTS
Cover Page How to Buy Shares
Synopsis Redemption and Exchange
Summary of Expenses Dividends and Distributions
Investment Objective Taxes
and Strategies Calculation of Offering
Suitability Price and Net Asset
Investment Strategy Value Per Share
Special Risk Management of the Fund
Considerations Other Investment Policies
The Delaware Difference and Risk
Considerations
Plans and Services Appendix A-Ratings
Classes of Shares
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING
INVESTMENTS. MUTUAL FUNDS CAN BE A VALUABLE PART OF YOUR
FINANCIAL PLAN; HOWEVER, SHARES OF THE FUND ARE NOT FDIC OR
NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT
UNION, ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND
INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED. SHARES OF THE FUND ARE NOT BANK OR
CREDIT UNION DEPOSITS.
SYNOPSIS
Investment Objective
The investment objective of the Fund is to achieve long-
term capital appreciation. The Fund seeks to achieve its
objective by investing primarily in equity securities of small
non-U.S. companies, which may include companies located or
operating in established or emerging countries. The Fund is an
international fund. Under normal market conditions, at least
65% of the Fund's total assets will be invested in equity
securities of companies organized or having a majority of their
assets in or deriving a majority of their operating income in
at least three different countries outside of the United
States. The current market capitalization of the companies in
which the Fund intends to invest primarily generally will be
$1.5 billion or less (at the time of purchase).
For further details, see Investment Objective and
Strategies and Other Investment Policies and Risk
Considerations.
Risk Factors and Special Considerations
Prospective investors should consider a number of factors:
1. Investing in securities of non-United States
companies which are generally denominated in foreign currencies
and the utilization of forward foreign currency exchange
contracts involve certain risk and opportunity considerations
not typically associated with investing in United States
companies. See Special Risk Considerations-Foreign Securities
Risks and Other Investment Policies and Risk Considerations.
2. The Fund has the right to engage in options and
futures transactions for hedging purposes, to counterbalance
portfolio volatility. In connection with futures transactions,
the Fund will maintain certain collateral in special accounts
established with futures commission merchants or on its behalf
in the care of The Chase Manhattan Bank (the "Custodian Bank").
While the Fund does not engage in options and futures for
speculative purposes, there are risks which result from the use
of these instruments, and an investor should carefully review
the descriptions of these risks in this Prospectus. See
Options and Futures Contracts and Options on Futures Contracts
under Other Investment Policies and Risk Considerations.
3. The prices of equity securities, especially those of
the smaller non-U.S. companies in which the Fund will primarily
invest, tend to fluctuate, particularly in the shorter term.
Investors in the Fund should be willing to accept the risks
associated with emerging and growth-oriented companies, some of
the securities of which may be speculative and subject the Fund
to additional investment risk. See Special Risk Considerations
and Other Investment Policies and Risk Considerations.
4. The Fund may invest up to 15% of its assets, in high
yield, high risk foreign fixed-income securities, including
Brady Bonds. Consequently, greater risks may be involved with
an investment in the Fund. See High Yield, High Risk
Securities under Investment Objective and Strategies.
5. The Fund may invest a portion of its assets in the
markets of certain emerging countries. Investments in
securities of companies in emerging markets present a greater
degree of risk than tends to be the case for foreign
investments in Western Europe and other developed markets.
Among other things, there is a greater possibility of
expropriation, nationalization, confiscatory taxation, income
earned or other special taxes, foreign exchange restrictions,
limitations on the repatriation of income and capital from
investments, defaults in foreign government debt, and economic,
political or social instability. In addition, in many emerging
markets, there is substantially less publicly available
information about issuers and the information that is available
tends to be of a lesser quality. Economic markets and
structures tend to be less mature and diverse and the
securities markets which are subject to less government
regulation or supervision may also be smaller, less liquid and
subject to greater price volatility. See Special Risk
Considerations-Emerging Markets Securities Risks.
Investment Manager, Sub-Adviser, Distributor and Service Agent
Delaware International Advisers Ltd. ("Delaware
International" or the "Manager") is the investment manager for
the Fund and, in that capacity, provides investment advice to
the Fund, subject to the supervision of Global Funds, Inc.'s
Board of Directors. Delaware Distributors, L.P. (the
"Distributor") is the national distributor for the Fund and for
all of the other mutual funds in the Delaware Group. Delaware
Service Company, Inc. (the "Transfer Agent") is the shareholder
servicing, dividend disbursing, accounting services and
transfer agent for the Fund and for all of the other mutual
funds in the Delaware Group. See Summary of Expenses and
Management of the Fund for further information regarding the
Manager and the fees payable under the Fund's Investment
Management Agreement.
Sales Charges
The price of Class A Shares includes a maximum front-end
sales charge of 4.75% of the offering price. The front-end
sales charge is reduced on certain transactions of at least
$100,000 but under $1,000,000. For purchases of $1,000,000 or
more, the front-end sales charge is eliminated (subject to a
CDSC of 1% if shares are redeemed within 12 months of purchase
and a dealer commission was paid in connection with such
purchase). Class A Shares are subject to annual 12b-1 Plan
expenses for the life of the investment.
The price of Class B Shares is equal to the net asset
value per share. Class B Shares are subject to a contingent
deferred sales charge ("CDSC") of: (i) 4% if shares are
redeemed within two years of purchase; (ii) 3% if shares are
redeemed during the third or fourth year following purchase;
(iii) 2% if shares are redeemed during the fifth year following
purchase; and (iv) 1% if shares are redeemed during the sixth
year following purchase. Class B Shares are subject to annual
12b-1 Plan expenses for approximately eight years after
purchase.
The price of Class C Shares is equal to the net asset
value per share. Class C Shares are subject to a CDSC of 1% if
shares are redeemed within 12 months of purchase. Class C
Shares are subject to annual 12b-1 Plan expenses for the life
of the investment.
See Classes of Shares and Distribution (12b-1) and Service
under Management of the Fund.
Purchase Amounts
Generally, the minimum initial investment in any Class is
$1,000. Subsequent investments generally must be at least
$100.
Each purchase of Class B Shares is subject to a maximum
purchase limitation of $250,000. For Class C Shares, each
purchase must be in an amount that is less than $1,000,000. An
investor may exceed these maximum purchase limitations for
Class B Shares and Class C Shares by making cumulative
purchases over a period of time. An investor should keep in
mind, however, that reduced front-end sales charges apply to
investments of $100,000 or more in Class A Shares, and that
Class A Shares are subject to lower annual 12b-1 Plan expenses
than Class B and Class C Shares and generally are not subject
to a CDSC. The minimum and maximum purchase amounts for
retirement plans may vary. See How to Buy Shares.
Redemption and Exchange
Class A Shares may be redeemed or exchanged at the net
asset value calculated after receipt of the redemption or
exchange request. Neither the Fund nor the Distributor
assesses a charge for redemptions or exchanges of Class A
Shares, except for certain redemptions of shares purchased at
net asset value, which may be subject to a CDSC if a dealer's
commission was paid in connection with such purchases. See
Front-End Sales Charge Alternative - Class A Shares under
Classes of Shares.
Class B Shares and Class C Shares may be redeemed or
exchanged at the net asset value calculated after receipt of
the redemption or exchange request subject, in the case of
redemptions, to any applicable CDSC. Neither the Fund nor the
Distributor assesses any charges other than the CDSC for
redemptions or exchanges of Class B or Class C Shares. There
are certain limitations on an investor's ability to exchange
shares between the various classes of shares that are offered.
See Redemption and Exchange.
Open-End Investment Company
Global Funds, Inc. is an open-end, registered management
investment company. The Fund operates as a diversified fund as
defined under the 1940 Act. Global Funds, Inc. was organized
as a Maryland corporation on May 30, 1991. See Shares under
Management of the Fund.
SUMMARY OF EXPENSES
A general comparison of the sales arrangements and other
expenses applicable to Class A, Class B and Class C Shares
follows. The amounts under the heading "Other Operating
Expenses" are based on estimates for the Fund's initial fiscal
year in which it commences operations.
Shareholder Class A Class B Class C
Transaction Expenses Shares Shares Shares
_______________________________________________________________
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price) 4.75% None None
Maximum Sales Charge Imposed
on Reinvested Dividends (as a
percentage of offering price) None None None
Maximum Contingent Deferred
Sales Charge (as a percentage
of original purchase price or
redemption proceeds, as
applicable) None* 4.00%* 1.00%*
Redemption Fees None** None** None**
* Class A purchases of $1 million or more may be made at net
asset value. However, if in connection with any such
purchase a dealer commission is paid to the financial
adviser through whom such purchase is effected, a CDSC of 1%
will be imposed on certain redemptions within 12 months of
purchase ("Limited CDSC"). Additional Class A purchase
options involving the imposition of a CDSC may be permitted
as described in the Prospectus from time to time. Class B
Shares are subject to a CDSC of: (i) 4% if shares are
redeemed within two years of purchase; (ii) 3% if shares are
redeemed during the third or fourth year following purchase;
(iii) 2% if shares are redeemed during the fifth year
following purchase; (iv) 1% if shares are redeemed during
the sixth year following purchase; and (v) 0% thereafter.
Class C Shares are subject to a CDSC of 1% if the shares are
redeemed within 12 months of purchase. See Contingent
Deferred Sales Charge for Certain Redemptions of Class A
Shares Purchased at Net Asset Value under Redemption and
Exchange; and Deferred Sales Charge Alternative - Class B
Shares and Level Sales Charge Alternative - Class C Shares
under Classes of Shares.
** CoreStates Bank, N.A. currently charges $7.50 per
redemption for redemptions payable by wire.
Investors utilizing the Delaware Group Asset Planner asset
allocation service also typically incur an annual maintenance
fee of $35 per Strategy. However, effective November 1, 1996,
the annual maintenance fee is waived until further notice.
Investors who utilize the Asset Planner for an Individual
Retirement Plan ("IRA") will pay an annual IRA fee of $15 per
Social Security Number. See Part B.
Annual Operating Expenses
(as a percentage of average Class A Class B Class C
daily net assets) Shares Shares Shares
_______________________________________________________________
Management Fees
(after voluntary waivers) 0.00% 0.00% 0.00%
12b-1 Plan Expenses
(including service fees)
(after voluntary waivers) 0.00%+/++ 0.00%+/++ 0.00%+/++
Other Operating Expenses
(after voluntary payments) 1.25%++ 1.25%++ 1.25%++
Total Operating Expenses
(after voluntary
waivers and payments) 1.25%++ 1.25%++ 1.25%++
+ Class A Shares, Class B Shares and Class C Shares are
subject to separate 12b-1 Plans. Long-term shareholders may
pay more than the economic equivalent of the maximum front-end
sales charges permitted by rules of the National Association of
Securities Dealers, Inc. (the "NASD"). The Distributor has
elected voluntarily to waive its right to receive 12b-1 Plan
fees (including service fees) from the commencement of the
public offering of the Classes through May 31, 1998. In the
absence of those waivers, 12b-1 Plan expenses would equal 0.30%
for Class A Shares and 1.00% for each of Class B and Class C
Shares. See Distribution (12b-1) and Service under Management
of the Fund.
++ "Total Operating Expenses" and "Other Operating Expenses"
for Class A Shares, Class B Shares and Class C Shares are
based on estimated amounts for the first full fiscal year of
the Classes, after giving effect to the voluntary expense
waiver. As noted above, the Distributor has elected to
voluntarily waive 12b-1 Plan expenses through May 31, 1998.
Also, the Manager has elected voluntarily to waive that
portion, if any, of the annual management fees payable by the
Fund and to pay certain expenses of the Fund to the extent
necessary to ensure that the Total Operating Expenses of each
Class of the Fund, excluding each such Class' 12b-1 fees, do
not exceed 1.25%, from the commencement of the public offering
of the Classes through May 31, 1998. If the voluntary expense
waivers by the Distributor and the Manager were not in effect,
it is estimated that for the first full year, the Total
Operating Expenses, as a percentage of average daily net
assets, would be 3.17%, 3.87% and 3.87%, respectively, for
Class A Shares, Class B Shares and Class C Shares, reflecting
management fees of 1.25%.
For expense information about the Fund s Institutional
Class of shares, see the separate prospectus relating to that
class.
The following example illustrates the expenses that an
investor would pay on a $1,000 investment over various time
periods, assuming (1) a 5% annual rate of return, (2)
redemption and no redemption at the end of each time period and
(3) for Class B Shares and Class C Shares, payment of a CDSC at
the time of redemption, if applicable. The following example
assumes the voluntary waiver of the management fee and/or other
payments of expenses by the Manager and of the 12b-1 Plan fees
by the Distributor as discussed in this Prospectus.
Assuming Redemption Assuming No Redemption
1 year 3 years 1 year 3 years
Class A Shares $60(1) $85 $60 $85
Class B Shares(2)$53 $70 $13 $40
Class C Shares $23 $40 $13 $40
(1) Generally, no redemption charge is assessed upon
redemption of Class A Shares. Under certain circumstances,
however, a Limited CDSC, which has not been reflected in this
calculation, may be imposed on certain redemptions within 12
months of purchase. See Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange.
(2) At the end of approximately eight years after purchase,
Class B Shares will be automatically converted into Class A
Shares. The example above does not assume conversion of Class B
Shares since it reflects figures only for one and three years.
See Automatic Conversion of Class B Shares under Classes of
Shares for a description of the automatic conversion feature.
This example should not be considered a representation of past
or future expenses or performance. Actual expenses may be
greater or less than those shown.
The purpose of the above tables is to assist the investor
in understanding the various costs and expenses that an
investor in each Class will bear directly or indirectly.
INVESTMENT OBJECTIVE AND STRATEGIES
SUITABILITY
Investors considering the Fund should have a long-term
investment time frame.
The Fund cannot assure a specific rate of return or that
principal will be protected. The value of the Fund s shares
can be expected to move up and down depending on market
conditions. Consequently, appreciation may be obtained in
periods of generally rising markets, while in declining markets
the value of the Fund's shares may decline.
Investments in foreign securities, whether equity or
fixed-income, involve special risks including those related to
currency fluctuations, as well as to political, economic and
social situations different from and potentially more volatile
than those in the United States. In addition, the accounting,
tax and financial reporting standards of foreign countries are
different from and may be less reliable or comprehensive than
those relating to U.S. securities issuers. See Special Risk
Considerations for a complete discussion of the risk factors
affecting any international investment. For these reasons, the
Fund is not suitable for short-term investors. However,
through the cautious selection and supervision of its
portfolio, the Manager will strive to achieve the Fund's
objective.
The Fund may be suitable for investors with a long-term
investment horizon (of at least three years) who are looking
for long-term growth potential from a portfolio of
international securities. The Fund will invest primarily in
equity securities of small non-U.S. companies in established or
emerging countries. Investors should be willing to accept the
risks associated with foreign investing as well as with
investments in growth-oriented or emerging issuers, some of
which may be speculative and subject the Fund to additional
investment risk.
* * *
Ownership of shares of the Fund reduces the bookkeeping
and administrative inconveniences that would be involved with
direct purchases of the securities held in the Fund's
portfolio.
Investors should not consider a purchase of shares of the
Fund as equivalent to a complete investment program. The
Delaware Group includes a family of funds, generally available
through registered investment dealers, which may be used
together to create a more complete investment program.
INVESTMENT STRATEGY
The investment objective of the Fund is to achieve long-
term capital appreciation. The Fund seeks to achieve its
objective by investing primarily in equity securities of
smaller non-U.S. companies, which may include companies located
or operating in established or emerging countries. The Fund is
an international fund. Under normal circumstances, at least
65% of the Fund's total assets will be invested in equity
securities of companies organized or having a majority of their
assets in or deriving a majority of their operating income in
at least three different countries outside of the United
States. The current market capitalization of the companies in
which the Fund intends to invest primarily generally will be
$1.5 billion or less (at the time of purchase).
The equity securities in which the Fund may invest include
common stocks, preferred stocks, rights or warrants to purchase
common stocks and securities convertible into common stocks.
The Fund may also invest in foreign companies through sponsored
or unsponsored American Depositary Receipts, European
Depositary Receipts or Global Depositary Receipts ("Depositary
Receipts"), which are receipts typically issued by a bank or
trust company evidencing ownership of underlying securities
issued by a foreign company. By focusing on smaller, non-U.S.
companies, the Fund seeks to identify equity securities of
emerging and other growth-oriented companies which in the
opinion of the Manager, are responsive to changes within their
markets, and have the fundamental characteristics to support
growth. The Manager will seek to identify changing and
dominant trends within the relevant markets, and will purchase
securities of companies which it believes will benefit from
these trends. In addition, the Manager will consider the
financial strength of the company, the nature of its
management, and any developments affecting the company or its
industry. The Manager may invest in smaller capitalization
companies that may be temporarily out of favor or overlooked by
securities analysts and whose value, therefore, may not yet be
fully recognized by the market. See Special Risk
Considerations - Small Company Investment Risks.
While the Fund may purchase securities in any foreign
country, developed and underdeveloped, or emerging market
countries, it is currently anticipated that the countries in
which the Fund may invest will include, but not be limited to,
Canada, Germany, the United Kingdom, France, the Netherlands,
Belgium, Spain, Switzerland, Japan, Australia, Hong Kong and
Singapore/Malaysia as well as Indonesia, Korea, the
Philippines, Taiwan and Thailand. With respect to certain
countries, investments by an investment company may only be
made through investments in closed-end investment companies
that in turn are authorized to invest in the securities of such
countries. See Investment Company Securities under Other
Investment Policies and Risk Considerations.
In selecting investments for the Fund, the Manager will
employ a dividend discount analysis across country boundaries
and will also use a purchasing power parity approach to
identify currencies and markets that are overvalued or
undervalued relative to the U.S. dollar. The Manager uses the
dividend discount analysis to compare the value of different
investments. Using this technique, the Manager looks at future
anticipated dividends and discounts the value of those
dividends back to what they would be worth if they were being
paid today. With a purchasing parity approach, the Manager
attempts to identify the amount of goods and services that a
dollar will buy in the United States and compare that to the
amount of a foreign currency required to buy the same amount of
goods and services in another country. Eventually, currencies
should trade at levels that should make it possible for the
dollar to buy the same amount of goods and services overseas as
in the United States. When the dollar buys less, the foreign
currency may be considered to be overvalued. When the dollar
buys more, the currency may be considered to be undervalued.
The Fund may invest in both open-end and listed or
unlisted closed-end investment companies, as well as
unregistered investment companies. See Investment Company
Securities under Other Investment Policies and Risk
Considerations. The Fund may also invest in convertible
preferred stocks that offer enhanced yield features, such as
Preferred Equity Redemption Cumulative Stock, and certain other
non-traditional equity securities.
The Fund may invest up to 15% of its net assets in fixed-
income securities issued by emerging country companies, and
foreign governments, their agencies, instrumentalities or
political subdivisions, all of which may be high yield, high
risk fixed-income securities rated lower than BBB by Standard &
Poor's Ratings Group ("S&P") and Baa by Moody's Investors
Service, Inc. ("Moody's") or, if unrated, are considered by the
Manager to be of equivalent quality and which present special
investment risks. The Fund may also invest in Brady Bonds.
See High Yield, High Risk Securities and Special Risk
Considerations.
For temporary defensive purposes, the Fund may invest all
or a substantial portion of its assets in high quality debt
instruments issued by foreign governments, their agencies,
instrumentalities or political subdivisions, the U.S.
government, its agencies or instrumentalities (and which are
backed by the full faith and credit of the U.S. government), or
issued by foreign or U.S. companies. For example, the Fund may
invest in U.S. fixed-income markets when the Manager believes
that the global equity markets are excessively volatile or
overvalued so that the Fund's objective cannot be achieved in
such markets. Any corporate debt obligations will be rated AA
or better by S&P, or Aa or better by Moody's, or if unrated,
will be determined to be of comparable quality by the Manager.
The Fund may also invest in the securities listed above pending
investment of proceeds from new sales of Fund shares and to
maintain sufficient cash to meet redemption requests.
Restricted and Illiquid Securities
The Fund may invest in restricted securities, including
securities eligible for resale without registration pursuant to
Rule 144A ("Rule 144A Securities") under the Securities Act of
1933 (the "1933 Act"). Rule 144A permits many privately placed
and legally restricted securities to be freely traded among
certain institutional buyers, such as the Fund. See Rule 144A
Securities under Other Investment Policies and Risk
Considerations. The Fund may invest up to 15% of the value of
its net assets in illiquid securities, which are securities
which may not be disposed of within seven days at the price at
which they are carried on the Fund's books. In the event the
Fund's percentage limitation is exceeded, whether due to
changes in the market value of the Fund's illiquid holdings or
because a particular security is deemed to have become
illiquid, the Manager will take steps to remedy these
circumstances in an orderly fashion.
High Yield, High Risk Securities
The Fund may invest up to 15% of its net assets in high
yield, high risk foreign fixed-income securities, including so-
called Brady Bonds. See Foreign Government Securities Risks
under Special Risk Considerations. In the past, in the opinion
of the Manager, the high yields from these bonds have more than
compensated for their higher default rates. There can be no
assurance, however, that yields will continue to offset default
rates on these bonds in the future. The Manager intends to
maintain an adequately diversified portfolio of these bonds.
While diversification can help to reduce the effect of an
individual default on the Fund, there can be no assurance that
diversification will protect the Fund from widespread bond
defaults brought about by a sustained economic downturn.
Medium- and low-grade bonds held by the Fund may be issued
as a consequence of corporate restructurings, such as leveraged
buy-outs, mergers, acquisitions, debt recapitalizations or
similar events. Also these bonds are often issued by smaller,
less creditworthy companies or by highly leveraged (indebted)
firms, which are generally less able than more financially
stable firms to make scheduled payments of interest and
principal. The risks posed by bonds issued under such
circumstances are substantial.
The economy and interest rates may affect these high
yield, high risk securities differently from other securities.
Prices have been found to be less sensitive to interest rate
changes than higher rated investments, but more sensitive to
adverse economic changes or individual corporate developments.
Also, during an economic downturn or a substantial period of
rising interest rates, highly leveraged issuers may experience
financial stress which would adversely affect their ability to
service principal and interest payment obligations, to meet
projected business goals and to obtain additional financing.
Changes by recognized rating agencies in their rating of any
security and in the ability of an issuer to make payments of
interest and principal will also ordinarily have a more
dramatic effect on the values of these investments than on the
values of higher-rated securities. Such changes in value will
not affect cash income derived from these securities, unless
the issuers fail to pay interest or dividends when due. Such
changes will, however, affect the Fund's net asset value per
share.
* * *
The Fund may invest in securities issued in any currency
and may hold foreign currency. Securities of issuers within a
given country may be denominated in the currency of another
country or in multinational currency units such as the European
Currency Unit ("ECU"). For purposes of the 1940 Act, the Fund
will operate as a diversified fund. The Fund will not
concentrate its investments in any particular industry, which
means that the Fund will not invest 25% or more of its total
assets in any one industry.
The Fund's investment objective, Global Funds, Inc.'s
designation as an open-end investment company, the Fund's
designation as a diversified fund, and the Fund's policies
concerning portfolio lending, borrowing and concentration are
"fundamental" and may not be changed unless authorized by the
vote of a majority of the Fund's outstanding voting securities.
A vote of a "majority of the outstanding voting securities" is
the vote by the holders of the lesser of a) 67% or more of the
Fund's voting securities present in person or represented by
proxy if the holders of more than 50% of the outstanding voting
securities of the Fund are present or represented by proxy; or
b) more than 50% of the outstanding voting securities. Part B
lists other more specific investment restrictions of the Funds
which may not be changed without a majority shareholder vote.
The investment policies of the Fund not identified above
as "fundamental" may be changed by the Board of Directors of
Global Funds, Inc. without a shareholder vote. See Special
Risk Considerations and Other Investment Policies and Risk
Considerations.
SPECIAL RISK CONSIDERATIONS
Shareholders should understand that all investments
involve risk and there can be no guarantee against loss
resulting from an investment in the Fund, nor can there be any
assurance that the Fund's investment objective will be
attained.
Foreign Securities Risks. The Fund has the right to
purchase securities in any developed, underdeveloped or
emerging country. Investors should consider carefully the
substantial risks involved in investing in securities issued by
companies and governments of foreign nations. These risks are
in addition to the usual risks inherent in domestic
investments. There is the possibility of expropriation,
nationalization or confiscatory taxation, taxation of income
earned in foreign nations or other taxes imposed with respect
to investments in foreign nations, foreign exchange control
(which may include suspension of the ability to transfer
currency from a given country), default in foreign government
securities, political or social instability or diplomatic
developments which could affect investments in securities of
issuers in those nations.
In addition, in many countries, there is substantially
less publicly available information about issuers than is
available in reports about companies in the United States.
Foreign companies are not subject to uniform accounting,
auditing and financial reporting standards, and auditing
practices and requirements may not be comparable to those
applicable to United States companies. In particular, the
assets and profits appearing on the financial statements of a
developing or emerging country issuer may not reflect its
financial position or results of operations in the way they
would be reflected had the financial statements been prepared
in accordance with United States generally accepted accounting
principles. Also, for an issuer that keeps accounting records
in local currency, inflation accounting rules may require for
both tax and accounting purposes, that certain assets and
liabilities be restated on the issuer's balance sheet in order
to express items in terms of currency or constant purchasing
power. Inflation accounting may indirectly generate losses or
profits. Consequently, financial data may be materially
affected by restatements for inflation and may not accurately
reflect the real condition of those issuers and securities
markets.
Further, the Fund may encounter difficulty or be unable to
pursue legal remedies and obtain judgments in foreign courts.
Commission rates on securities transactions in foreign
countries, which are sometimes fixed rather than subject to
negotiation as in the United States, are likely to be higher.
Further, the settlement period of securities transactions in
foreign markets may be longer than in domestic markets, and may
be subject to administrative uncertainties. In many foreign
countries, there is less government supervision and regulation
of business and industry practices, stock exchanges, brokers
and listed companies than in the United States, and capital
requirements for brokerage firms are generally lower. The
foreign securities markets of many of the countries in which
the Fund may invest may also be smaller, less liquid and
subject to greater price volatility than those in the United
States.
Emerging Markets Securities Risks. Compared to the United
States and other developed countries, emerging countries may
have volatile social conditions, relatively unstable
governments and political systems, economies based on only a
few industries and economic structures that are less diverse
and mature, and securities markets that trade a small number of
securities, which can result in a low or nonexistent volume of
trading. Prices in these securities markets tend to be
volatile and, in the past, securities in these countries have
offered greater potential for gain (as well as loss) than
securities of companies located in developed countries. Until
recently, there has been an absence of a capital market
structure or market-oriented economy in certain emerging
countries. Further, investments and opportunities for
investments by foreign investors are subject to a variety of
national policies and restrictions in many emerging countries.
These restrictions may take the form of prior governmental
approval, limits on the amount or type of securities held by
foreigners, limits on the types of companies in which
foreigners may invest and prohibitions on foreign investments
in issuers or industries deemed sensitive to national
interests. Additional restrictions may be imposed at any time
by these or other countries in which the Fund invests. Also,
the repatriation of both investment income and capital from
several foreign countries is restricted and controlled under
certain regulations, including, in some cases, the need for
certain governmental consents. Although these restrictions may
in the future make it undesirable to invest in emerging
countries, the Manager does not believe that any current
repatriation restrictions would affect its decision to invest
in such countries. Countries such as those in which the Fund
may invest have historically experienced and may continue to
experience, substantial, and in some periods extremely high
rates of inflation for many years, high interest rates,
exchange rate fluctuations or currency depreciation, large
amounts of external debt, balance of payments and trade
difficulties and extreme poverty and unemployment. Other
factors which may influence the ability or willingness to
service debt include, but are not limited to, a country's cash
flow situation, the availability of sufficient foreign exchange
on the date a payment is due, the relative size of its debt
service burden to the economy as a whole, its government's
policy towards the International Monetary Fund, the World Bank
and other international agencies and the political constraints
to which a government debtor may be subject.
Foreign Government Securities Risks. With respect to
investment in debt issues of foreign governments, the ability
of a foreign government or government-related issuer to make
timely and ultimate payments on its external debt obligations
will also be strongly influenced by the issuer's balance of
payments, including export performance, its access to
international credits and investments, fluctuations in interest
rates and the extent of its foreign reserves. A country whose
exports are concentrated in a few commodities or whose economy
depends on certain strategic imports could be vulnerable to
fluctuations in international prices of these commodities or
imports. To the extent that a country receives payment for its
exports in currencies other than dollars, its ability to make
debt payments denominated in dollars could be adversely
affected. If a foreign government or government-related issuer
cannot generate sufficient earnings from foreign trade to
service its external debt, it may need to depend on continuing
loans and aid from foreign governments, commercial banks and
multilateral organizations, and inflows of foreign investment.
The commitment on the part of these foreign governments,
multilateral organizations and others to make such
disbursements may be conditioned on the government's
implementation of economic reforms and/or economic performance
and the timely service of its obligations. Failure to
implement such reforms, achieve such levels of economic
performance or repay principal or interest when due may curtail
the willingness of such third parties to lend funds, which may
further impair the issuer's ability or willingness to service
its debts in a timely manner. The cost of servicing external
debt will also generally be adversely affected by rising
international interest rates because many external debt
obligations bear interest at rates which are adjusted based
upon international interest rates. The ability to service
external debt will also depend on the level of the relevant
government's international currency reserves and its access to
foreign exchange. Currency devaluations may affect the ability
of a government issuer to obtain sufficient foreign exchange to
service its external debt.
As a result of the foregoing, a foreign governmental
issuer may default on its obligations. If such a default
occurs, the Fund may have limited effective legal recourse
against the issuer and/or guarantor. Remedies must, in some
cases, be pursued in the courts of the defaulting party itself,
and the ability of the holder of foreign government and
government-related debt securities to obtain recourse may be
subject to the political climate in the relevant country. In
addition, no assurance can be given that the holders of
commercial bank debt will not contest payments to the holders
of other foreign government and government-related debt
obligations in the event of default under their commercial bank
loan agreements.
Among the foreign government and government related
issuers in which the Fund may invest are certain high-yield
securities, including so-called Brady Bonds. The issuers of
the foreign government and government-related high yield
securities, including Brady Bonds, in which the Fund expects to
invest have in the past experienced substantial difficulties in
servicing their external debt obligations, which have led to
defaults on certain obligations and the restructuring of
certain indebtedness. Restructuring arrangements have
included, among other things, reducing and rescheduling
interest and principal payments by negotiating new or amended
credit agreements or converting outstanding principal and
unpaid interest to Brady Bonds, and obtaining new credit to
finance interest payments. Holders of certain foreign
government and government-related high yield securities may be
requested to participate in the restructuring of such
obligations and to extend further loans to their issuers.
There can be no assurance that the Brady Bonds and other
foreign government and government-related high yield securities
in which the Fund may invest will not be subject to similar
defaults or restructuring arrangements which may adversely
affect the value of such investments. Furthermore, certain
participants in the secondary market for such debt may be
directly involved in negotiating the terms of these
arrangements and may therefore have access to information not
available to other market participants.
Brady Bonds are debt securities issued under the framework
of the Brady Plan, an initiative announced by former U.S.
Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for
debtor nations to restructure their outstanding external
indebtedness (generally, commercial bank debt). In
restructuring its external debt under the Brady Plan framework,
a debtor nation negotiates with its existing bank lenders as
well as multilateral institutions such as the World Bank and
the International Monetary Fund. The Brady Plan framework, as
it has developed, contemplates the exchange of commercial bank
debt for new issued bonds (Brady Bonds). The investment
advisers believe that economic reforms undertaken by countries
in connection with the issuance of Brady Bonds make the debt of
countries which have issued or have announced plans to issue
Brady Bonds an attractive opportunity for investment.
Investors, however, should recognize that the Brady Plan only
sets forth general guiding principles for economic reform and
debt reduction, emphasizing that solutions must be negotiated
on a case-by-case basis between debtor nations and their
creditors. In addition, Brady Bonds have been issued only
recently and, accordingly, do not have a long payment history.
Small Company Investment Risks. Investments in common
stocks in general are subject to market, economic and business
risks that will cause their price to fluctuate over time. The
securities of companies with smaller revenues and
capitalizations in which the Fund may invest may offer greater
opportunity for capital appreciation than larger companies, but
investment in such companies presents greater risks than
securities of larger, more established companies.
Historically, smaller capitalization stocks have been more
volatile in price than larger capitalization stocks. Among the
reasons for the greater price volatility of these securities
are the lower degree of liquidity in the markets for such
stocks, and the potentially greater sensitivity of such small
companies to changes in or failure of management, and in many
other changes in competitive, business, industry and economic
conditions, including risks associated with limited production,
markets, management depth, or financial resources. Investors
should therefore expect that the value of the Fund's shares
will be more volatile than the shares of a fund that invests in
larger capitalization stocks.
Risks Related to Additional Investment Techniques. With
respect to forward foreign currency contracts, the precise
matching of forward contract amounts and the value of the
securities involved is generally not possible since the future
value of such securities in foreign currencies will change as a
consequence of market movements in the value of those
securities between the date the forward contract is entered
into and the date it matures. The projection of short-term
currency strategy is highly uncertain.
It is impossible to forecast the market value of portfolio
securities at the expiration of the contract. Accordingly, it
may be necessary for the Fund to purchase additional foreign
currency on the spot market (and bear the expense of such
purchase) if the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver
(and if a decision is made to sell the security and make
delivery of the foreign currency). Conversely, it may be
necessary to sell on the spot market some of the foreign
currency received upon the sale of the portfolio security if
its market value exceeds the amount of foreign currency the
Fund is obligated to deliver.
The Fund may invest up to 15% of its net assets in high
yield, high risk foreign fixed-income securities. These
securities are rated lower than BBB by S&P and Baa by Moody's
or, if unrated, are considered by the Manager to be of
equivalent quality. See Investment Objective and Strategies
and High Yield, High Risk Securities. The Fund will not
purchase securities rated lower than C by S&P or Ca by Moody's,
or, if unrated, considered to be of an equivalent quality to
such ratings by the Manager. See Appendix A - Ratings to this
Prospectus for more rating information. Fixed-income
securities of this type are considered to be of poor standing
and predominantly speculative. Such securities are subject to
a substantial degree of credit risk.
For additional information about the Fund's investment
policies and certain risks associated with investments in
certain types of securities including purchasing put and call
options, futures contracts and options thereon, and options on
foreign currencies, see Other Investment Policies and Risk
Considerations. Part B provides more information concerning
the Fund's investment policies, restrictions and risk factors.
THE DELAWARE DIFFERENCE
PLANS AND SERVICES
The Delaware Difference is our commitment to provide you
with superior information and quality service on your
investments in the Delaware Group of funds.
SHAREHOLDER PHONE DIRECTORY
Investor Information Center
800-523-4640
Fund Information; Literature Price; Yield and Performance
Figures
Shareholder Service Center
800-523-1918
Information on Existing Regular Investment Accounts and
Retirement Plan Accounts; Wire Investments; Wire
Liquidations;
Telephone Liquidations and Telephone Exchanges
Delaphone
800-362-FUND
(800-362-3863)
Performance Information
You can call the Investor Information Center at any time
for current performance information. Current yield and total
return information may also be included in advertisements and
information given to shareholders. Yields are computed on an
annualized basis over a 30-day period.
Shareholder Services
During business hours, you can call the Delaware Group's
Shareholder Service Center. Our representatives can answer any
questions about your account, the Fund, various service
features and other funds in the Delaware Group.
Delaphone Service
Delaphone is an account inquiry service for investors with
Touch-Tone(R) phone service. It enables you to get information
on your account faster than the mailed statements and
confirmations. Delaphone also provides current performance
information on the Fund, as well as other funds in the Delaware
Group. Delaphone is available seven days a week, 24 hours a
day.
Dividend Payments
Dividends, capital gains and other distributions are, if
any, automatically reinvested in your account. You may also
elect to have the dividends earned in one fund automatically
invested in another Delaware Group fund with a different
investment objective, subject to certain exceptions and
limitations.
For more information, see Additional Methods of Adding to
Your Investment - Dividend Reinvestment Plan under How to Buy
Shares or call the Shareholder Service Center.
Statements and Confirmations
You will receive quarterly statements of your account
summarizing all transactions during the period. A confirmation
statement will be sent following all transactions other than
those involving a reinvestment of dividends. You should
examine statements and confirmations immediately and promptly
report any discrepancy by calling the Shareholder Service
Center.
Duplicate Confirmations
If your financial adviser or investment dealer is noted on
your investment application, we will send a duplicate
confirmation to him or her. This makes it easier for your
adviser to help you manage your investments.
Tax Information
Each year, Global Funds, Inc. will mail to you information
on the tax status of your dividends and distributions.
Retirement Planning
An investment in the Fund may be a suitable investment
option for tax-deferred retirement plans. Delaware Group
offers a full spectrum of qualified and non-qualified
retirement plans, including the popular 401(k) deferred
compensation plan, IRA, and the new Roth IRA. Please call the
Delaware Group at 800-523-1918 for more information.
Right of Accumulation
With respect to Class A Shares, the Right of Accumulation
feature allows you to combine the value of your current
holdings of Class A Shares, Class B Shares and Class C Shares
of the Fund with the dollar amount of new purchases of Class A
Shares of the Fund to qualify for a reduced front-end sales
charge on such purchases of Class A Shares. Under the Combined
Purchases Privilege, you may also include certain shares that
you own in other funds in the Delaware Group. See Classes of
Shares.
Letter of Intention
The Letter of Intention feature permits you to obtain a
reduced front-end sales charge on purchases of Class A Shares
by aggregating certain of your purchases of Delaware Group fund
shares over a 13-month period. See Classes of Shares and Part
B.
12-Month Reinvestment Privilege
The 12-Month Reinvestment Privilege permits you to
reinvest proceeds from a redemption of Class A Shares, within
one year of the date of the redemption, without paying a front-
end sales charge. See Part B.
Exchange Privilege
The Exchange Privilege permits you to exchange all or part
of your shares into shares of other mutual funds in the
Delaware Group, subject to certain exceptions and limitations.
For additional information on exchanges, see Investing by
Exchange under How to Buy Shares and Redemption and Exchange.
Wealth Builder Option
You may elect to invest in the Fund through regular
liquidations of shares in your accounts in other funds in the
Delaware Group. Investments under this feature are exchanges
and are therefore subject to the same conditions and
limitations as other exchanges of Fund shares. See Additional
Methods of Adding to Your Investment - Wealth Builder Option
and Investing by Exchange under How to Buy Shares, and
Redemption and Exchange.
Financial Information about the Fund
Each fiscal year, you will receive an audited annual
report and an unaudited semi-annual report. These reports
provide detailed information about the Fund's investments and
performance. Global Funds, Inc.'s fiscal year ends on November
30.
CLASSES OF SHARES
Alternative Purchase Arrangements
Shares may be purchased at a price equal to the next
determined net asset value per share, subject to a sales charge
which may be imposed, at the election of the purchaser, at the
time of the purchase for Class A Shares ("front-end sales
charge alternative"), or on a contingent deferred basis for
Class B Shares ("deferred sales charge alternative") or Class C
Shares ("level sales charge alternative").
Class A Shares. An investor who elects the front-end
sales charge alternative acquires Class A Shares, which incur a
sales charge when they are purchased, but generally are not
subject to any sales charge when they are redeemed. Absent any
applicable fee waiver, Class A Shares are subject to annual
12b-1 Plan expenses of up to a maximum of 0.30% of average
daily net assets of such shares. Certain purchases of Class A
Shares qualify for reduced front-end sales charges. See Front-
End Sales Charge Alternative - Class A Shares, below. See also
Contingent Deferred Sales Charge for Certain Redemptions of
Class A Shares Purchased at Net Asset Value under Redemption
and Exchange and Distribution (12b-1) and Service under
Management of the Fund.
Class B Shares. An investor who elects the deferred sales
charge alternative acquires Class B Shares, which do not incur
a front-end sales charge when they are purchased, but are
subject to a contingent deferred sales charge if they are
redeemed within six years of purchase. Absent any applicable
fee waiver, Class B Shares are subject to annual 12b-1 Plan
expenses of up to a maximum of 1% (0.25% of which are service
fees to be paid to the Distributor, dealers or others for
providing personal service and/or maintaining shareholder
accounts) of average daily net assets of such shares for
approximately eight years after purchase. Class B Shares
permit all of the investor's dollars to work from the time the
investment is made. If no waiver of 12b-1 fees is in effect,
the higher 12b-1 Plan expenses paid by Class B Shares will
cause such shares to have a higher expense ratio and to pay
lower dividends than Class A Shares. At the end of
approximately eight years after purchase, Class B Shares will
automatically be converted into Class A Shares and, thereafter,
for the remainder of the life of the investment, the annual
12b-1 Plan fee of up to 0.30% for Class A Shares will apply.
See Automatic Conversion of Class B Shares, below.
Class C Shares. An investor who elects the level sales
charge alternative acquires Class C Shares, which do not incur
a front-end sales charge when they are purchased, but are
subject to a contingent deferred sales charge if they are
redeemed within 12 months of purchase. Absent any applicable
fee waiver, Class C Shares are subject to annual 12b-1 Plan
expenses of up to a maximum of 1% (0.25% of which are service
fees to be paid to the Distributor, dealers or others for
providing personal service and/or maintaining shareholder
accounts) of average daily net assets of such shares for the
life of the investment. If no waiver of 12b-1 fees is in
effect, the higher 12b-1 Plan expenses paid by Class C Shares
will cause such shares to have a higher expense ratio and to
pay lower dividends than Class A Shares. Unlike Class B
Shares, Class C Shares do not convert to another class.
The alternative purchase arrangements described above
permit investors to choose the method of purchasing shares that
is most suitable given the amount of their purchase, the length
of time they expect to hold their shares and other relevant
circumstances. Investors should determine whether, given their
particular circumstances, it is more advantageous to purchase
Class A Shares and incur a front-end sales charge, purchase
Class B Shares and have the entire initial purchase amount
invested in the Fund with their investment being subject to a
CDSC if they redeem shares within six years of purchase, or
purchase Class C Shares and have the entire initial purchase
amount invested in the Fund with their investment being subject
to a CDSC if they redeem shares within 12 months of purchase.
In addition, investors should consider the level of annual 12b-
1 Plan expenses applicable to each Class. If no waiver of 12b-
1 fees is in effect, the higher 12b-1 Plan expenses on Class B
Shares and Class C Shares will be offset to the extent a return
is realized on the additional money initially invested upon the
purchase of such shares. However, there can be no assurance as
to the return, if any, that will be realized on such additional
money. In addition, the effect of any return earned on such
additional money will diminish over time. In comparing Class B
Shares to Class C Shares, investors should also consider the
duration of the annual 12b-1 Plan expenses to which each of the
Classes is subject and the desirability of an automatic
conversion feature, which is available only for Class B Shares.
For the distribution and related services provided to, and
the expenses borne on behalf of, the Fund, absent any
applicable fee waiver, the Distributor and others will be paid,
in the case of Class A Shares, from the proceeds of the front-
end sales charge and 12b-1 Plan fees and, in the case of Class
B Shares and Class C Shares, from the proceeds of the 12b-1
Plan fees and, if applicable, the CDSC incurred upon
redemption. Financial advisers may receive different
compensation for selling Class A, Class B and Class C Shares.
Investors should understand that the purpose and function of
the respective 12b-1 Plans and the CDSCs applicable to Class B
Shares and Class C Shares are the same as those of the 12b-1
Plan and the front-end sales charge applicable to Class A
Shares in that such fees and charges are used to finance the
distribution of the respective Classes. See Distribution (12b-
1) and Service under Management of the Fund.
Dividends, if any, paid on Class A, Class B and Class C
Shares will be calculated in the same manner, at the same time,
on the same day and will be in the same amount, except that,
when assessed, the additional amount of 12b-1 Plan expenses
relating to Class B Shares and Class C Shares will be borne
exclusively by such shares. See Calculation of Offering Price
and Net Asset Value Per Share.
The NASD has adopted certain rules relating to investment
company sales charges. Global Funds, Inc. and the Distributor
intend to operate in compliance with these rules.
Front-End Sales Charge Alternative - Class A Shares
Class A Shares may be purchased at the offering price,
which reflects a maximum front-end sales charge of 4.75%. See
Calculation of Offering Price and Net Asset Value Per Share.
Purchases of $100,000 or more carry a reduced front-end
sales charge as shown in the following table.
International Small Cap Fund A Class
_______________________________________________________________
Dealer's
Front-End Sales Commission***
Charge as % of as % of
Offering Amount Offering
Amount of Purchase Price Invested** Price
_______________________________________________________________
Less than
$100,000 4.75% 4.94% 4.00%
$100,000 but under
$250,000 3.75 3.88% 3.00
$250,000 but under
$500,000 2.50 2.59% 2.00
$500,000 but under
$1,000,000* 2.00 2.00% 1.60
_______________________________________________________________
* There is no front-end sales charge on purchases of Class A
Shares of $1 million or more but, under certain limited
circumstances, a 1% Limited CDSC may apply upon redemption
of such shares.
** Based on the initial net asset value of $8.50 per share of
International Small Cap Fund A Class.
*** Financial institutions or their affiliated brokers may
receive an agency transaction fee in the percentages set
forth above.
_______________________________________________________________
The Fund must be notified when a sale takes place which
would qualify for the reduced front-end sales charge on the
basis of previous or current purchases. The reduced front-end
sales charge will be granted upon confirmation of the
shareholder's holdings by the Fund. Such reduced front-end
sales charges are not retroactive.
From time to time, upon written notice to all of its
dealers, the Distributor may hold special promotions for
specified periods during which the Distributor may reallow to
dealers up to the full amount of the front-end sales charge
shown above. In addition, certain dealers who enter into an
agreement to provide extra training and information on Delaware
Group products and services and who increase sales of Delaware
Group funds may receive an additional commission of up to 0.15%
of the offering price. Dealers who receive 90% or more of the
sales charge may be deemed to be underwriters under the 1933
Act.
_______________________________________________________________
For initial purchases of Class A Shares of $1,000,000 or
more, a dealer's commission may be paid by the Distributor to
financial advisers through whom such purchases are made in
accordance with the following schedule:
Dealer's Commission
(as a percentage of
Amount of Purchase amount purchased)
Up to $2 million 1.00%
Next $1 million up to $3 million 0.75
Next $2 million up to $5 million 0.50
Amount over $5 million 0.25
For accounts with assets over $1 million, the dealer
commission resets annually to the highest incremental
commission rate on the anniversary of the first purchase. In
determining a financial adviser's eligibility for the dealer's
commission, purchases of Class A Shares of other Delaware Group
funds as to which a Limited CDSC applies may be aggregated with
those of the Class A Shares of the Fund. Financial advisers
also may be eligible for a dealer's commission in connection
with certain purchases made under a Letter of Intention or
pursuant to an investor's Right of Accumulation. Financial
advisers should contact the Distributor concerning the
applicability and calculation of the dealer's commission in the
case of combined purchases.
An exchange from other Delaware Group funds will not
qualify for payment of the dealer's commission, unless a
dealer's commission or similar payment has not been previously
paid on the assets being exchanged. The schedule and program
for payment of the dealer's commission are subject to change or
termination at any time by the Distributor at its discretion.
Redemptions of Class A Shares purchased at net asset value
may result in the imposition of a Limited CDSC if the dealer's
commission described above was paid in connection with the
purchase of those shares. See Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net
Asset Value under Redemption and Exchange.
Combined Purchases Privilege
By combining your holdings of Class A Shares with your
holdings of Class B Shares and/or Class C Shares of the Fund
and shares of the other funds in the Delaware Group, except as
noted below, you can reduce the front-end sales charges on any
additional purchases of Class A Shares. Shares of Delaware
Group Premium Fund, Inc. beneficially owned in connection with
ownership of variable insurance products may be combined with
other Delaware Group fund holdings. In addition, assets held
by investment advisory clients of the Manager or its affiliates
in a stable value account may be combined with other Delaware
Group fund holdings. Shares of other funds that do not carry a
front-end sales charge or CDSC may not be included unless they
were acquired through an exchange from a Delaware Group fund
that does carry a front-end sales charge or CDSC.
This privilege permits you to combine your purchases and
holdings with those of your spouse, your children under 21 and
any trust, fiduciary or retirement account for the benefit of
such family members. It also permits you to use these
combinations under a Letter of Intention. A Letter of
Intention allows you to make purchases over a 13-month period
and qualify the entire purchase for a reduction in front-end
sales charges on Class A Shares.
Combined purchases of $1,000,000 or more, including
certain purchases made at net asset value pursuant to a Right
of Accumulation or under a Letter of Intention, may result in
the payment of a dealer's commission and the applicability of a
Limited CDSC. Investors should consult their financial
advisers or the Shareholder Service Center about the operation
of these features. See Front-End Sales Charge Alternative -
Class A Shares, above.
Allied Plans
Class A Shares are available for purchase by participants
in certain 401(k) Defined Contribution Plans ("Allied Plans")
which are made available under a joint venture agreement
between the Distributor and another institution through which
mutual funds are marketed and which allow investments in Class
A Shares of designated Delaware Group funds ("eligible Delaware
Group fund shares"), as well as shares of designated classes of
non-Delaware Group funds ("eligible non-Delaware Group fund
shares"). Class B Shares and Class C Shares are not eligible
for purchase by Allied Plans.
With respect to purchases made in connection with an
Allied Plan, the value of eligible Delaware Group and eligible
non-Delaware Group fund shares held by the Allied Plan may be
combined with the dollar amount of new purchases by that Allied
Plan to obtain a reduced front-end sales charge on additional
purchases of eligible Delaware Group fund shares.
Participants in Allied Plans may exchange all or part of
their eligible Delaware Group fund shares for other eligible
Delaware Group fund shares or for eligible non-Delaware Group
fund shares at net asset value without payment of a front-end
sales charge. However, exchanges of eligible fund shares, both
Delaware Group and non-Delaware Group, which were not subject
to a front-end sales charge, will be subject to the applicable
sales charge if exchanged for eligible Delaware Group fund
shares to which a sales charge applies. No sales charge will
apply if the eligible fund shares were previously acquired
through the exchange of eligible shares on which a sales charge
was already paid or through the reinvestment of dividends. See
Investing by Exchange.
A dealer's commission may be payable on purchases of
eligible Delaware Group fund shares under an Allied Plan. In
determining a financial adviser's eligibility for a dealer's
commission on net asset value purchases of eligible Delaware
Group fund shares in connection with Allied Plans, all
participant holdings in the Allied Plan will be aggregated.
The Limited CDSC is applicable to redemptions of net asset
value purchases from an Allied Plan on which a dealer's
commission has been paid. Waivers of the Limited CDSC, as
described under Waiver of Limited Contingent Deferred Sales
Charge - Class A Shares under Redemption and Exchange, apply to
redemptions by participants in Allied Plans except in the case
of exchanges between eligible Delaware Group and non-Delaware
Group fund shares. When eligible Delaware Group fund shares
are exchanged into eligible non-Delaware Group fund shares, the
Limited CDSC will be imposed at the time of the exchange,
unless the joint venture agreement specifies that the amount of
the Limited CDSC will be paid by the financial adviser or
selling dealer. See Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange.
Buying Class A Shares at Net Asset Value
Class A Shares of the Fund may be purchased at net asset
value under the Delaware Group Dividend Reinvestment Plan and,
under certain circumstances, the Exchange Privilege and the 12-
Month Reinvestment Privilege. See The Delaware Difference and
Redemption and Exchange for additional information.
Purchases of Class A Shares may be made at net asset value
by current and former officers, directors and employees (and
members of their families) of the Manager, any affiliate, any
of the funds in the Delaware Group, certain of their agents and
registered representatives and employees of authorized
investment dealers and by employee benefit plans for such
entities. Individual purchases, including those in retirement
accounts, must be for accounts in the name of the individual or
a qualifying family member.
Purchases of Class A Shares may also be made by clients of
registered representatives of an authorized investment dealer
at net asset value within 12 months after the registered
representative changes employment, if the purchase is funded by
proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales charge has been
assessed. Purchases of Class A Shares may also be made at net
asset value by bank employees who provide services in
connection with agreements between the bank and unaffiliated
brokers or dealers concerning sales of shares of Delaware Group
funds. Officers, directors and key employees of institutional
clients of the Manager or any of its affiliates may purchase
Class A Shares at net asset value. Moreover, purchases may be
effected at net asset value for the benefit of the clients of
brokers, dealers and registered investment advisers affiliated
with a broker or dealer, if such broker, dealer or investment
adviser has entered into an agreement with the Distributor
providing specifically for the purchase of Class A Shares in
connection with special investment products, such as wrap
accounts or similar fee based programs.
Purchases of Class A Shares at net asset value may also be
made by the following: institutions investing for the account
of their trust customers if they are not eligible to purchase
shares of the Institutional Class of the Fund; and any group
retirement plan (excluding defined benefit pension plans), or
such plans of the same employer, for which plan participant
records are maintained on the Delaware Investment & Retirement
Services, Inc. ("DIRSI") proprietary record keeping system that
(i) has in excess of $500,000 of plan assets invested in Class
A Shares of Delaware Group funds and any stable value account
available to investment advisory clients of the Manager or its
affiliates, or (ii) is sponsored by an employer that has at any
point after May 1, 1997 had more than 100 employees while such
plan has held Class A Shares of a Delaware Group fund and such
employer has properly represented to DIRSI in writing that it
has the requisite number of employees and has received written
confirmation back from DIRSI. See Group Investment Plans for
information regarding the applicability of the Limited CDSC.
Investments in Class A Shares made by plan level and/or
participant retirement accounts that are for the purpose of
repaying a loan taken from such accounts will be made at net
asset value. Loan repayments made to a Delaware Group account
in connection with loans originated from accounts previously
maintained by another investment firm will also be invested at
net asset value.
Investors in Delaware-Voyageur Unit Investment Trusts may
reinvest monthly dividend checks and/or repayment of invested
capital into Class A Shares of any of the funds in the Delaware
Group at net asset value.
The Fund must be notified in advance that an investment
qualifies for purchase at net asset value.
Group Investment Plans
Group Investment Plans (e.g., SEP/IRA, SAR/SEP, SIMPLE
IRA, SIMPLE 401(k), Profit Sharing and Money Purchase Pension
Plans, 401(k) Defined Contribution Plans, and 403(b)(7) and 457
Deferred Compensation Plans) may benefit from the reduced
front-end sales charges available on Class A Shares based on
total plan assets. If a company has more than one plan
investing in the Delaware Group of funds, then the total amount
invested in all plans will be aggregated to determine the
applicable front-end sales charge reduction on each purchase,
both initial and subsequent, if, at the time of each such
purchase, the company notifies the Fund that it qualifies for
the reduction. Employees participating in such Group
Investment Plans may also combine the investments held in their
plan account to determine the front-end sales charge applicable
to purchases in non-retirement Delaware Group investment
accounts if, at the time of each such purchase, they notify the
Fund that they are eligible to combine purchase amounts held in
their plan account.
The Limited CDSC is applicable to any redemptions of net
asset value purchases made on behalf of any group retirement
plan on which a dealer's commission has been paid only if such
redemption is made pursuant to a withdrawal of the entire plan
from Delaware Group funds. See Contingent Deferred Sales
Charge for Certain Redemptions of Class A Shares Purchased at
Net Asset Value under Redemption and Exchange.
For additional information on retirement plans, including
plan forms, applications, minimum investments and any
applicable account maintenance fees, contact your investment
dealer or the Distributor.
Deferred Sales Charge Alternative - Class B Shares
Class B Shares may be purchased at net asset value without
a front-end sales charge and, as a result, the full amount of
the investor's purchase payment will be invested in Fund
shares. The Distributor currently anticipates compensating
dealers or brokers for selling Class B Shares at the time of
purchase from its own assets in an amount equal to no more than
4% of the dollar amount purchased. In addition, from time to
time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods
during which the Distributor may pay additional compensation to
dealers or brokers for selling Class B Shares at the time of
purchase. As discussed below, however, absent any applicable
fee waiver, Class B Shares are subject to annual 12b-1 Plan
expenses and, if redeemed within six years of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees, if
any, are paid to the Distributor and others for providing
distribution and related services, and bearing related
expenses, in connection with the sale of Class B Shares. These
payments support the compensation paid to dealers or brokers
for selling Class B Shares. Payments to the Distributor and
others under the Class B 12b-1 Plan may be in an amount equal
to no more than 1% annually. The combination of the CDSC and
the proceeds of the 12b-1 Plan fees makes it possible for the
Fund to sell Class B Shares without deducting a front-end sales
charge at the time of purchase.
Holders of Class B Shares who exercise the exchange
privilege described below will continue to be subject to the
CDSC schedule for the Class B Shares described in this
Prospectus, even after the exchange. Such CDSC schedule may be
higher than the CDSC schedule for the Class B Shares acquired
as a result of the exchange. See Redemption and Exchange.
Automatic Conversion of Class B Shares
Class B Shares, other than shares acquired through
reinvestment of dividends, held for eight years after purchase
are eligible for automatic conversion into Class A Shares.
Conversions of Class B Shares into Class A Shares will occur
only four times in any calendar year, on the last business day
of the second full week of March, June, September and December
(each, a "Conversion Date"). If the eighth anniversary after a
purchase of Class B Shares falls on a Conversion Date, an
investor's Class B Shares will be converted on that date. If
the eighth anniversary occurs between Conversion Dates, an
investor's Class B Shares will be converted on the next
Conversion Date after such anniversary. Consequently, if a
shareholder's eighth anniversary falls on the day after a
Conversion Date, that shareholder will have to hold Class B
Shares for as long as three additional months after the eighth
anniversary of purchase before the shares will automatically
convert into Class A Shares.
Class B Shares of a fund acquired through a reinvestment
of dividends will convert to the corresponding Class A Shares
of that fund (or, in the case of Delaware Group Cash Reserve,
Inc., the Delaware Cash Reserve Consultant Class) pro-rata with
Class B Shares of that fund not acquired through dividend
reinvestment.
All such automatic conversions of Class B Shares will
constitute tax-free exchanges for federal income tax purposes.
See Taxes.
Level Sales Charge Alternative - Class C Shares
Class C Shares may be purchased at net asset value without
a front-end sales charge and, as a result, the full amount of
the investor's purchase payment will be invested in Fund
shares. The Distributor currently anticipates compensating
dealers or brokers for selling Class C Shares at the time of
purchase from its own assets in an amount equal to no more than
1% of the dollar amount purchased. As discussed below, absent
any applicable fee waiver, Class C Shares are subject to annual
12b-1 Plan expenses and, if redeemed within 12 months of
purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees, if
any, are paid to the Distributor and others for providing
distribution and related services, and bearing related
expenses, in connection with the sale of Class C Shares. These
payments support the compensation paid to dealers or brokers
for selling Class C Shares. Payments to the Distributor and
others under the Class C 12b-1 Plan may be in an amount equal
to no more than 1% annually.
Holders of Class C Shares who exercise the exchange
privilege described below will continue to be subject to the
CDSC schedule for the Class C Shares as described in this
Prospectus. See Redemption and Exchange.
Contingent Deferred Sales Charge - Class B Shares and Class C
Shares
Class B Shares redeemed within six years of purchase may
be subject to a CDSC at the rates set forth below and Class C
Shares redeemed within 12 months of purchase may be subject to
a CDSC of 1%. CDSCs are charged as a percentage of the dollar
amount subject to the CDSC. The charge will be assessed on an
amount equal to the lesser of the net asset value at the time
of purchase of the shares being redeemed or the net asset value
of those shares at the time of redemption. No CDSC will be
imposed on increases in net asset value above the initial
purchase price, nor will a CDSC be assessed on redemptions of
shares acquired through reinvestments of dividends or capital
gains distributions.
For purposes of this formula, the "net asset value at the
time of purchase" will be the net asset value at purchase of
the Class B Shares or the Class C Shares of the Fund, even if
those shares are later exchanged for shares of another Delaware
Group fund. In the event of an exchange of the shares, the
"net asset value of such shares at the time of redemption" will
be the net asset value of the shares that were acquired in the
exchange.
The following table sets forth the rates of the CDSC for
the Class B Shares of the Fund:
Contingent Deferred
Sales Charge (as a
Percentage of
Dollar Amount
Year After Purchase Made Subject to Charge)
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
During the seventh year after purchase and, thereafter, until
converted automatically into Class A Shares, Class B Shares
will still be subject to the annual 12b-1 Plan expenses of up
to 1% of average daily net assets of those shares, absent any
applicable fee waiver. See Automatic Conversion of Class B
Shares, above. Investors are reminded that the Class A Shares
into which the Class B Shares will convert are subject to
ongoing annual 12b-1 Plan expenses of up to a maximum of 0.30%
of average daily net assets of such shares.
In determining whether a CDSC applies to a redemption of
Class B Shares, it will be assumed that shares held for more
than six years are redeemed first, followed by shares acquired
through the reinvestment of dividends or distributions, and
finally by shares held longest during the six-year period.
With respect to Class C Shares, it will be assumed that shares
held for more than 12 months are redeemed first followed by
shares acquired through the reinvestment of dividends or
distributions, and finally by shares held for 12 months or
less.
All investments made during a calendar month, regardless of
what day of the month the investment occurred, will age one
month on the last day of that month and each subsequent month.
The CDSC is waived on certain redemptions of Class B Shares
and Class C Shares. See Waiver of Contingent Deferred Sales
Charge - Class B and Class C Shares under Redemption and
Exchange.
Other Payments to Dealers -- Class A, Class B and Class C
Shares
From time to time at the discretion of the Distributor, all
registered broker/dealers whose aggregate sales of the Classes
exceed certain limits, as set by the Distributor, may receive
from the Distributor an additional payment of up to 0.25% of
the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to
dealers that sell shares of the Delaware Group of funds. In
some instances, these incentives or payments may be offered
only to certain dealers who maintain, have sold or may sell
certain amounts of shares.
Subject to pending amendments to the NASD's Conduct Rules,
in connection with the promotion of Delaware Group fund shares,
the Distributor may, from time to time, pay to participate in
dealer-sponsored seminars and conferences, reimburse dealers
for expenses incurred in connection with preapproved seminars,
conferences and advertising and may, from time to time, pay or
allow additional promotional incentives to dealers, which shall
include non-cash concessions, such as certain luxury
merchandise or a trip to or attendance at a business or
investment seminar at a luxury resort, as part of preapproved
sales contests. Payment of non-cash compensation to dealers is
currently under review by the NASD and the Securities and
Exchange Commission. It is likely that the NASD's Conduct
Rules will be amended such that the ability of the Distributor
to pay non-cash compensation as described above will be
restricted in some fashion. The Distributor intends to comply
with the NASD's Conduct Rules as they may be amended.
International Small Cap Fund Institutional Class
In addition to offering Class A, Class B and Class C
Shares, the Fund also offers the International Small Cap Fund
Institutional Class, which is described in a separate
prospectus and is available for purchase only by certain
investors. International Small Cap Fund Institutional Class
shares generally are distributed directly by the Distributor
and do not have a front-end sales charge, a CDSC or a Limited
CDSC, and are not subject to 12b-1 Plan distribution expenses.
To obtain the prospectus that describes International Small Cap
Fund Institutional Class, contact the Distributor by writing to
the address or by calling the telephone number listed on page 1
of this Prospectus.
HOW TO BUY SHARES
Purchase Amounts
Generally, the minimum initial purchase is $1,000 for Class
A Shares, Class B Shares and Class C Shares. Subsequent
purchases of shares of any Class generally must be $100 or
more. For purchases under a Uniform Gifts to Minors Act or
Uniform Transfers to Minors Act or through an Automatic
Investing Plan, there is a minimum initial purchase of $250 and
a minimum subsequent purchase of $25. Minimum purchase
requirements do not apply to retirement plans other than IRAs,
for which there is a minimum initial purchase of $250, and a
minimum subsequent purchase of $25, regardless of which Class
is selected.
There is a maximum purchase limitation of $250,000 on each
purchase of Class B Shares. For Class C Shares, each purchase
must be in an amount that is less than $1,000,000. An investor
may exceed these maximum purchase limitations by making
cumulative purchases over a period of time. In doing so, an
investor should keep in mind that reduced front-end sales
charges are available on investments of $100,000 or more in
Class A Shares, and that Class A Shares (i) are subject to
lower annual 12b-1 Plan expenses than Class B Shares and Class
C Shares and (ii) generally are not subject to a CDSC. For
retirement plans, the maximum purchase limitations apply only
to the initial purchase of Class B Shares or Class C Shares by
the plan.
Investing through Your Investment Dealer
You can make a purchase of shares of the Fund through most
investment dealers who, as part of the service they provide,
must transmit orders promptly. They may charge for this
service. If you want a dealer but do not have one, the
Delaware Group can refer you to one.
Investing by Mail
1. Initial Purchases--An Investment Application, or in the
case of a retirement account, an appropriate retirement plan
application, must be completed, signed and sent with a check
payable to International Small Cap Fund A Class, International
Small Cap Fund B Class or International Small Cap Fund C Class,
to Delaware Group at 1818 Market Street, Philadelphia, PA
19103.
2. Subsequent Purchases--Additional purchases may be made at
any time by mailing a check payable to the specific Fund and
Class selected. Your check should be identified with your
name(s) and account number. An investment slip (similar to a
deposit slip) is provided at the bottom of transaction
confirmations and dividend statements that you will receive
from Global Funds, Inc. Use of this investment slip can help
expedite processing of your check when making additional
purchases. Your investment may be delayed if you send
additional purchases by certified mail.
Investing by Wire
You may purchase shares by requesting your bank to transmit
funds by wire to CoreStates Bank, N.A., ABA #031000011, account
number 1412893401 (include your name(s) and your account number
for the Class in which you are investing).
1. Initial Purchases--Before you invest, telephone the
Shareholder Service Center to get an account number. If you do
not call first, processing of your investment may be delayed.
In addition, you must promptly send your Investment
Application, or in the case of a retirement account, an
appropriate retirement plan application, to the specific Fund
and Class selected, to Delaware Group at 1818 Market Street,
Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments
anytime by wiring funds to CoreStates Bank, N.A., as described
above. You should advise the Shareholder Service Center by
telephone of each wire you send.
If you want to wire investments to a retirement plan
account, call the Shareholder Service Center for special wiring
instructions.
Investing by Exchange
If you have an investment in another mutual fund in the
Delaware Group, you may write and authorize an exchange of part
or all of your investment into shares of the Fund. If you wish
to open an account by exchange, call the Shareholder Service
Center for more information. All exchanges are subject to the
eligibility and minimum purchase requirements set forth in each
fund's prospectus. See Redemption and Exchange for more
complete information concerning your exchange privileges.
Holders of Class A Shares may exchange all or part of their
shares for certain of the shares of other funds in the Delaware
Group, including other Class A Shares, but may not exchange
their Class A Shares for Class B Shares or Class C Shares of
the Fund or of any other fund in the Delaware Group. Holders
of Class B Shares of the Fund are permitted to exchange all or
part of their Class B Shares only into Class B Shares of other
Delaware Group funds. Similarly, holders of Class C Shares of
the Fund are permitted to exchange all or part of their Class C
Shares only into Class C Shares of other Delaware Group funds.
Class B Shares of the Fund and Class C Shares of the Fund
acquired by exchange will continue to carry the CDSC and, in
the case of Class B Shares, the automatic conversion schedule
of the fund from which the exchange is made. The holding
period of Class B Shares of the Fund acquired by exchange will
be added to that of the shares that were exchanged for purposes
of determining the time of the automatic conversion into Class
A Shares of the Fund.
Permissible exchanges into Class A Shares of the Fund will
be made without a front-end sales charge, except for exchanges
of shares that were not previously subject to a front-end sales
charge (unless such shares were acquired through the
reinvestment of dividends). Permissible exchanges into Class B
Shares or Class C Shares of the Fund will be made without the
imposition of a CDSC by the fund from which the exchange is
being made at the time of the exchange.
See Allied Plans under Classes of Shares for information on
exchanges by participants in an Allied Plan.
Additional Methods of Adding to Your Investment
Call the Shareholder Service Center for more information if
you wish to use the following services:
1. Automatic Investing Plan
The Automatic Investing Plan enables you to make regular
monthly investments without writing or mailing checks. You may
authorize Global Funds, Inc. to transfer a designated amount
monthly from your checking account to your account. Many
shareholders use this as an automatic savings plan.
Shareholders should allow a reasonable amount of time for
initial purchases and changes to these plans to become
effective.
This option is not available to participants in the
following plans: SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k),
Profit Sharing and Money Purchase Pension Plans, 401(k) Defined
Contribution Plans or 403(b)(7) or 457 Deferred Compensation
Plans.
2. Direct Deposit
You may have your employer or bank make regular investments
directly to your Fund account for you (for example: payroll
deduction, pay by phone, annuity payments). The Fund also
accepts preauthorized recurring government and private payments
by Electronic Fund Transfer, which avoids mail time and check
clearing holds on payments such as social security, federal
salaries, Railroad Retirement benefits, etc.
* * *
Should investments through an automatic investing plan or
by direct deposit be reclaimed or returned for some reason,
Global Funds, Inc. has the right to liquidate your shares to
reimburse the government or transmitting bank. If there are
insufficient funds in your account, you are obligated to
reimburse the Fund.
3. Wealth Builder Option
You can use our Wealth Builder Option to invest in the Fund
through regular liquidations of shares in your accounts in
other funds in the Delaware Group. You may also elect to
invest in other mutual funds in the Delaware Group through the
Wealth Builder Option through regular liquidations of shares in
your Fund account.
Under this automatic exchange program, you can authorize
regular monthly amounts (minimum of $100 per fund) to be
liquidated from your account in one or more funds in the
Delaware Group and invested automatically into any other
account in a Delaware Group mutual fund that you may specify.
If in connection with the election of the Wealth Builder
Option, you wish to open a new account to receive the automatic
investment, such new account must meet the minimum initial
purchase requirements described in the prospectus of the fund
that you select. All investments under this option are
exchanges and are therefore subject to the same conditions and
limitations as other exchanges noted above. You can terminate
your participation in Wealth Builder at any time by giving
written notice to the fund from which the exchanges are made.
See Redemption and Exchange.
This option is not available to participants in the
following plans: SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k),
Profit Sharing and Money Purchase Pension Plans, 401(k) Defined
Contribution Plans, 403(b)(7) or 457 Deferred Compensation
Plans.
4. Dividend Reinvestment Plan
You can elect to have your distributions (capital gains
and/or dividend income) reinvested in your Fund account or
invested in certain other funds in the Delaware Group, subject
to the exceptions noted below as well as the eligibility and
minimum purchase requirements set forth in each fund's
prospectus.
Reinvestments of distributions into Class A Shares of the
Fund or of other Delaware Group funds are made without a front-
end sales charge. Reinvestments of distributions into Class B
Shares of the Fund or of other Delaware Group funds or into
Class C Shares of the Fund or of other Delaware Group funds are
also made without any sales charge and will not be subject to
a CDSC if later redeemed. See Automatic Conversion of Class B
Shares under Classes of Shares for information concerning the
automatic conversion of Class B Shares acquired by reinvesting
dividends.
Holders of Class A Shares of the Fund may not reinvest
their distributions into Class B Shares or Class C Shares of
any fund in the Delaware Group, including the Fund. Holders of
Class B Shares of the Fund may reinvest their distributions
only into Class B Shares of the funds in the Delaware Group
which offer that class of shares. Similarly, holders of Class
C Shares of the Fund may reinvest their distributions only into
Class C Shares of the funds in the Delaware Group which offer
that class of shares. For more information about
reinvestments, call the Shareholder Service Center.
Capital gains and/or dividend distributions for
participants in the following retirement plans are
automatically reinvested into the same Delaware Group fund in
which their investments are held: SAR/SEP, SEP/IRA, SIMPLE
IRA, SIMPLE 401(k), Profit Sharing and Money Purchase Pension
Plans, 401(k) Defined Contribution Plans or 403(b)(7) or 457
Deferred Compensation Plans.
Purchase Price and Effective Date
The offering price and net asset value of Class A, Class B
and Class C Shares are determined as of the close of regular
trading on the New York Stock Exchange (ordinarily, 4 p.m.,
Eastern time) on days when the Exchange is open.
The effective date of a purchase is the date the order is
received by the Fund, its agent or designee. The effective
date of a direct purchase is the day your wire, electronic
transfer or check is received unless it is received after the
time the offering price or net asset value of shares is
determined, as noted above. Purchase orders received after
such time will be effective the next business day.
The Conditions of Your Purchase
The Fund reserves the right to reject any purchase order.
If a purchase is canceled because your check is returned
unpaid, you are responsible for any loss incurred. The Fund
can redeem shares from your account(s) to reimburse itself for
any loss, and you may be restricted from making future
purchases in any of the funds in the Delaware Group. The Fund
reserves the right to reject purchase orders paid by third-
party checks or checks that are not drawn on a domestic branch
of a United States financial institution. If a check drawn on
a foreign financial institution is accepted, you may be subject
to additional bank charges for clearance and currency
conversion.
The Fund also reserves the right, following shareholder
notification, to charge a service fee on non-retirement
accounts that, as a result of a redemption, have remained below
the minimum stated account balance for a period of three or
more consecutive months. Holders of such accounts may be
notified of their insufficient account balance and advised that
they have until the end of the current calendar quarter to
raise their balance to the stated minimum. If the account has
not reached the minimum balance requirement by that time, the
Fund will charge a $9 fee for that quarter and each subsequent
calendar quarter until the account is brought up to the minimum
balance. The service fee will be deducted from the account
during the first week of each calendar quarter for the previous
quarter, and will be used to help defray the cost of
maintaining low-balance accounts. No fees will be charged
without proper notice, and no CDSC will apply to such
assessments.
The Fund also reserves the right, upon 60 days' written
notice, to involuntarily redeem accounts that remain under the
minimum initial purchase amount as a result of redemptions. An
investor making the minimum initial investment may be subject
to involuntary redemption without the imposition of a CDSC or
Limited CDSC if he or she redeems any portion of his or her
account.
REDEMPTION AND EXCHANGE
You can redeem or exchange your shares in a number of
different ways. The exchange service is useful if your
investment requirements change and you want an easy way to
invest in other equity funds, bond funds, tax-advantaged funds
or money market funds. This service is also useful if you are
anticipating a major expenditure and want to move a portion of
your investment into a fund that has the checkwriting feature.
Exchanges are subject to the requirements of each fund and all
exchanges of shares constitute taxable events. See Taxes.
Further, in order for an exchange to be processed, shares of
the fund being acquired must be registered in the state where
the acquiring shareholder resides. You may want to consult
your financial adviser or investment dealer to discuss which
funds in the Delaware Group will best meet your changing
objectives, and the consequences of any exchange transaction.
You may also call the Delaware Group directly for fund
information.
All exchanges involve a purchase of shares of the fund into
which the exchange is made. As with any purchase, an investor
should obtain and carefully read that fund's prospectus before
buying shares in an exchange. The prospectus contains more
complete information about the fund, including charges and
expenses.
Your shares will be redeemed or exchanged at a price based
on the net asset value next determined after the Fund receives
your request in good order, subject, in the case of a
redemption, to any applicable CDSC or Limited CDSC. For
example, redemption or exchange requests received in good order
after the time the offering price and net asset value of shares
are determined will be processed on the next business day. See
Purchase Price and Effective Date under How to Buy Shares. A
shareholder submitting a redemption request may indicate that
he or she wishes to receive redemption proceeds of a specific
dollar amount. In the case of such a request, and in the case
of certain redemptions from retirement plan accounts, the Fund
will redeem the number of shares necessary to deduct the
applicable CDSC in the case of Class B and Class C Shares, and,
if applicable, the Limited CDSC in the case of Class A Shares
and tender to the shareholder the requested amount, assuming
the shareholder holds enough shares in his or her account for
the redemption to be processed in this manner. Otherwise, the
amount tendered to the shareholder upon redemption will be
reduced by the amount of the applicable CDSC or Limited CDSC.
Redemption proceeds will be distributed promptly, as described
below, but not later than seven days after receipt of a
redemption request.
Except as noted below, for a redemption request to be in
"good order," you must provide your account number, account
registration, and the total number of shares or dollar amount
of the transaction. For exchange requests, you must also
provide the name of the fund in which you want to invest the
proceeds. Exchange instructions and redemption requests must
be signed by the record owner(s) exactly as the shares are
registered. You may request a redemption or an exchange by
calling the Shareholder Service Center at 800-523-1918. The
Fund may suspend, terminate, or amend the terms of the exchange
privilege upon 60 days' written notice to shareholders.
The Fund will process written and telephone redemption
requests to the extent that the purchase orders for the shares
being redeemed have already settled. The Fund will honor
redemption requests as to shares for which a check was tendered
as payment, but the Fund will not mail or wire the proceeds
until it is reasonably satisfied that the purchase check has
cleared, which may take up to 15 days from the purchase date.
You can avoid this potential delay if you purchase shares by
wiring Federal Funds. The Fund reserves the right to reject a
written or telephone redemption request or delay payment of
redemption proceeds if there has been a recent change to the
shareholder's address of record.
There is no front-end sales charge or fee for exchanges
made between shares of funds which both carry a front-end sales
charge. Any applicable front-end sales charge will apply to
exchanges from shares of funds not subject to a front-end sales
charge, except for exchanges involving assets that were
previously invested in a fund with a front-end sales charge
and/or exchanges involving the reinvestment of dividends.
Holders of Class B Shares or Class C Shares that exchange
their shares ("Original Shares") for shares of other funds in
the Delaware Group (in each case, "New Shares") in a permitted
exchange, will not be subject to a CDSC that might otherwise be
due upon redemption of the Original Shares. However, such
shareholders will continue to be subject to the CDSC and, in
the case of Class B Shares, the automatic conversion schedule
of the Original Shares as described in this Prospectus and any
CDSC assessed upon redemption will be charged by the fund from
which the Original Shares were exchanged. In an exchange of
Class B Shares from the Fund, the Fund's CDSC schedule may be
higher than the CDSC schedule relating to the New Shares
acquired as a result of the exchange. For purposes of
computing the CDSC that may be payable upon a disposition of
the New Shares, the period of time that an investor held the
Original Shares is added to the period of time that an investor
held the New Shares. With respect to Class B Shares, the
automatic conversion schedule of the Original Shares may be
longer than that of the New Shares. Consequently, an
investment in New Shares by exchange may subject an investor,
absent any applicable fee waiver, to the higher 12b-1 fees
applicable to Class B Shares of the Fund for a longer period of
time than if the investment in New Shares were made directly.
Various redemption and exchange methods are outlined below.
Except for the CDSC applicable to certain redemptions of Class
B and Class C Shares and the Limited CDSC applicable to certain
redemptions of Class A Shares purchased at net asset value,
there is no fee charged by the Fund or the Distributor for
redeeming or exchanging your shares, but such fees could be
charged in the future. You may have your investment dealer
arrange to have your shares redeemed or exchanged. Your
investment dealer may charge for this service.
All authorizations given by shareholders, including
selection of any of the features described below, shall
continue in effect until such time as a written revocation or
modification has been received by the Fund or its agent.
Written Redemption
You can write to the Fund at 1818 Market Street,
Philadelphia, PA 19103 to redeem some or all of your shares.
The request must be signed by all owners of the account or your
investment dealer of record. For redemptions of more than
$50,000, or when the proceeds are not sent to the
shareholder(s) at the address of record, the Fund requires a
signature by all owners of the account and a signature
guarantee for each owner. Each signature guarantee must be
supplied by an eligible guarantor institution. The Fund
reserves the right to reject a signature guarantee supplied by
an eligible institution based on its creditworthiness. The
Fund may require further documentation from corporations,
executors, retirement plans, administrators, trustees or
guardians.
Payment is normally mailed the next business day after
receipt of your redemption request. If your Class A Shares are
in certificate form, the certificate(s) must accompany your
request and also be in good order. Certificates are issued for
Class A Shares only if a shareholder submits a specific
request. Certificates are not issued for Class B Shares or
Class C Shares.
Written Exchange
You may also write to the Fund (at 1818 Market Street,
Philadelphia, PA 19103) to request an exchange of any or all of
your shares into another mutual fund in the Delaware Group,
subject to the same conditions and limitations as other
exchanges noted above.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption
and exchange methods, you must have the Transfer Agent hold
your shares (without charge) for you. If you choose to have
your Class A Shares in certificate form, you may redeem or
exchange only by written request and you must return your
certificates.
The Telephone Redemption--Check to Your Address of Record
service and the Telephone Exchange service, both of which are
described below, are automatically provided unless you notify
the Fund in writing that you do not wish to have such services
available with respect to your account. The Fund reserves the
right to modify, terminate or suspend these procedures upon 60
days' written notice to shareholders. It may be difficult to
reach the Fund by telephone during periods when market or
economic conditions lead to an unusually large volume of
telephone requests.
Neither the Fund nor its Transfer Agent is responsible for
any shareholder loss incurred in acting upon written or
telephone instructions for redemption or exchange of Fund
shares which are reasonably believed to be genuine. With
respect to such telephone transactions, the Fund will follow
reasonable procedures to confirm that instructions communicated
by telephone are genuine (including verification of a form of
personal identification) as, if it does not, the Fund or the
Transfer Agent may be liable for any losses due to unauthorized
or fraudulent transactions. Instructions received by telephone
are generally tape recorded, and a written confirmation will be
provided for all purchase, exchange and redemption transactions
initiated by telephone. By exchanging shares by telephone, you
are acknowledging prior receipt of a prospectus for the fund
into which your shares are being exchanged.
Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method
to redeem shares. You or your investment dealer of record can
have redemption proceeds of $50,000 or less mailed to you at
your address of record. Checks will be payable to the
shareholder(s) of record. Payment is normally mailed the next
business day after receipt of the redemption request. This
service is only available to individual, joint and individual
fiduciary-type accounts.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to
your predesignated bank account by wire or by check. You
should authorize this service when you open your account. If
you change your predesignated bank account, you must complete
an Authorization Form and have your signature guaranteed. For
your protection, your authorization must be on file. If you
request a wire, your funds will normally be sent the next
business day. CoreStates Bank, N.A.'s fee (currently $7.50)
will be deducted from your redemption proceeds. If you ask for
a check, it will normally be mailed the next business day after
receipt of your redemption request to your predesignated bank
account. There are no separate fees for this redemption
method, but the mail time may delay getting funds into your
bank account. Simply call the Shareholder Service Center prior
to the time the offering price and net asset value are
determined, as noted above.
Telephone Exchange
The Telephone Exchange feature is a convenient and
efficient way to adjust your investment holdings as your
liquidity requirements and investment objectives change. You
or your investment dealer of record can exchange your shares
into other funds in the Delaware Group under the same
registration, subject to the same conditions and limitations as
other exchanges noted above. As with the written exchange
service, telephone exchanges are subject to the requirements of
each fund, as described above. Telephone exchanges may be
subject to limitations as to amounts or frequency.
Contingent Deferred Sales Charge for Certain Redemptions of
Class A Shares Purchased at Net Asset Value
A Limited CDSC will be imposed on certain redemptions of
Class A Shares (or shares into which such Class A Shares are
exchanged) made within 12 months of purchase, if such purchases
were made at net asset value and triggered the payment by the
Distributor of the dealer's commission previously described.
See Classes of Shares.
The Limited CDSC will be paid to the Distributor and will
be equal to the lesser of 1% of: (1) the net asset value at the
time of purchase of the Class A Shares being redeemed; or (2)
the net asset value of such Class A Shares at the time of
redemption. For purposes of this formula, the "net asset value
at the time of purchase" will be the net asset value at
purchase of the Class A Shares even if those shares are later
exchanged for shares of another Delaware Group fund and, in the
event of an exchange of Class A Shares, the "net asset value of
such shares at the time of redemption" will be the net asset
value of the shares acquired in the exchange.
Redemptions of such Class A Shares held for more than 12
months will not be subjected to the Limited CDSC and an
exchange of such Class A Shares into another Delaware Group
fund will not trigger the imposition of the Limited CDSC at the
time of such exchange. The period a shareholder owns shares
into which Class A Shares are exchanged will count towards
satisfying the 12-month holding period. The Limited CDSC is
assessed if such 12-month period is not satisfied irrespective
of whether the redemption triggering its payment is of Class A
Shares of the Fund or Class A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will
be assumed that shares not subject to the Limited CDSC are the
first redeemed followed by other shares held for the longest
period of time. The Limited CDSC will not be imposed upon
shares representing reinvested dividends or capital gains
distributions, or upon amounts representing share appreciation.
All investments made during a calendar month, regardless of
what day of the month the investment occurred, will age one
month on the last day of that month and each subsequent month.
Waiver of Limited Contingent Deferred Sales Charge - Class A
Shares
The Limited CDSC for Class A Shares on which a dealer's
commission has been paid will be waived in the following
instances: (i) redemptions that result from the Fund's right
to liquidate a shareholder's account if the aggregate net asset
value of the shares held in the account is less than the then-
effective minimum account size; (ii) distributions to
participants from a retirement plan qualified under section
401(a) or 401(k) of the Internal Revenue Code of 1986, as
amended (the "Code"), or due to death of a participant in such
a plan; (iii) redemptions pursuant to the direction of a
participant or beneficiary of a retirement plan qualified under
section 401(a) or 401(k) of the Code with respect to that
retirement plan; (iv) periodic distributions from an IRA,
SIMPLE IRA or 403(b)(7) or 457 Deferred Compensation Plan or
due to death, disability, or attainment of age 59 1/2, and IRA
distributions qualifying under Section 72(t) of the Internal
Revenue Code; (v) returns of excess contributions to an IRA;
(vi) distributions by other employee benefit plans to pay
benefits; (vii) distributions described in (ii), (iv), and (vi)
above pursuant to a systematic withdrawal plan; and (viii)
redemptions by the classes of shareholders who are permitted to
purchase shares at net asset value, regardless of the size of
the purchase (see Buying Class A Shares at Net Asset Value
under Classes of Shares).
Waiver of Contingent Deferred Sales Charge - Class B and Class
C Shares
The CDSC is waived on certain redemptions of Class B Shares
in connection with the following redemptions: (i) redemptions
that result from the Fund's right to liquidate a shareholder's
account if the aggregate net asset value of the shares held in
the account is less than the then-effective minimum account
size; (ii) returns of excess contributions to an IRA, SIMPLE
IRA, SEP/IRA, 403(b)(7) or 457 Deferred Compensation Plan;
(iii) periodic distributions from an IRA, SIMPLE IRA, SAR/SEP,
SEP/IRA, 403(b)(7) or 457 Deferred Compensation Plan due to
death, disability or attainment of age 59 1/2, and IRA
distributions qualifying under Section 72(t) of the Internal
Revenue Code; and (iv) distributions from an account if the
redemption results from the death of all registered owners of
the account (in the case of accounts established under the
Uniform Gifts to Minors or Uniform Transfers to Minors Acts or
trust accounts, the waiver applies upon the death of all
beneficial owners) or a total and permanent disability (as
defined in Section 72 of the Code) of all registered owners
occurring after the purchase of the shares being redeemed.
The CDSC on Class C Shares is waived in connection with the
following redemptions: (i) redemptions that result from the
Fund's right to liquidate a shareholder's account if the
aggregate net asset value of the shares held in the account is
less than the then-effective minimum account size; (ii) returns
of excess contributions to an IRA, SIMPLE IRA, 403(b)(7) or 457
Deferred Compensation Plan, Profit Sharing Plan, Money Purchase
Pension Plan, or 401(k) Defined Contribution Plan; (iii)
periodic distributions from a 403(b)(7) or 457 Deferred
Compensation Plan upon attainment of age 59 1/2, Profit Sharing
Plan, Money Purchase Plan, 401(k) Defined Contribution Plan
upon attainment of age 70 1/2, and IRA distributions qualifying
under Section 72(t) of the Internal Revenue Code; (iv)
distributions from a 403(b)(7) Deferred Compensation Plan, 457
Deferred Compensation Plan, Profit Sharing Plan, or 401(k)
Defined Contribution Plan, under hardship provisions of the
plan; (v) distributions from a 403(b)(7) Deferred Compensation
Plan, 457 Deferred Compensation Plan, Profit Sharing Plan,
Money Purchase Pension Plan or a 401(k) Defined Contribution
Plan upon attainment of normal retirement age under the plan or
upon separation from service; (vi) periodic distributions from
an IRA or SIMPLE IRA on or after attainment of age 59 1/2; and
(vii) distributions from an account if the redemption results
from the death of all registered owners of the account (in the
case of accounts established under the Uniform Gifts to Minors
or Uniform Transfers to Minors Acts or trust accounts, the
waiver applies upon the death of all beneficial owners) or a
total and permanent disability (as defined in Section 72 of the
Code) of all registered owners occurring after the purchase of
the shares being redeemed.
DIVIDENDS AND DISTRIBUTIONS
Global Funds, Inc. declares a dividend on each Fund to all
shareholders of record of the Classes of that Fund at the time
the offering price of shares is determined. See Purchase Price
and Effective Date under How to Buy Shares. Thus, when
redeeming shares, dividends continue to be credited up to and
including the date of redemption.
International Small Cap Fund will normally declare and make
payments from net investment income on an annual basis.
Payments from net realized securities profits of the Fund, if
any, will be made in the quarter following the close of the
fiscal year. Both dividends and distributions, if any, are
automatically reinvested in your account at net asset value.
In addition to the dividends from net investment income and
distributions from realized securities profits that the Fund
may declare and make, as noted above, in order to satisfy
certain distribution requirements of the Tax Reform Act of
1986, the Fund may declare special year-end dividend and
capital gains distributions during October, November or
December to shareholders of record on a date in such month.
Such distributions, if received by shareholders by January 31,
are deemed to have been paid by the Funds and received by
shareholders on the earlier of the date paid or December 31 of
the prior year.
Each Class of the Fund will share proportionately in the
investment income and expenses of the Fund, except that, absent
any applicable fee waiver, the per share dividends from net
investment income on Class A Shares, Class B Shares and Class C
Shares will vary due to the expenses under the 12b-1 Plan
applicable to each Class. Generally, except in the absence of
a waiver, the dividends per share on Class B Shares and Class C
Shares can be expected to be lower than the dividends per share
on Class A Shares because the expenses under the 12b-1 Plans
relating to Class B Shares and Class C Shares will be higher
than the expenses under the 12b-1 Plan relating to Class A
Shares. See Distribution (12b-1) and Service under Management
of the Fund.
Both dividends and distributions, if any, are automatically
reinvested in your account at net asset value.
TAXES
The tax discussion set forth below is included for general
information only. Investors should consult their own tax
advisers concerning the federal, state, local or foreign tax
consequences of an investment in the Fund.
On August 5, 1997, President Clinton signed into law the
Taxpayer Relief Act of 1997 (the "1997 Act"). This new law
makes sweeping changes in the Internal Revenue Code (the
"Code"). Because many of these changes are complex, and only
indirectly affect the Fund and its distributions to you, they
are discussed in Part B. Changes in the treatment of capital
gains, however, are discussed in this section.
The Fund intends to qualify as a regulated investment
company under Subchapter M of the Code. As such, the Fund will
not be subject to federal income tax, or to any excise tax, to
the extent its earnings are distributed as provided in the Code
and it satisfies certain other requirements relating to the
sources of its income and diversification of its assets.
The Fund intends to distribute substantially all of its net
investment income and net capital gains, if any. Dividends
from net investment income or net short-term capital gains will
be taxable to those investors who are subject to income taxes
as ordinary income, whether received in cash or in additional
shares. It is expected that either none or only a nominal
portion of the Fund's dividends will be eligible for the
dividends-received deductions for corporations. The portion of
dividends paid by the Fund that so qualifies will be designated
each year in a notice from the Fund to the Fund's shareholders.
Distributions paid by the Fund from long-term capital
gains, whether received in cash or in additional shares, are
taxable to those investors who are subject to income taxes as
long-term capital gains, regardless of the length of time an
investor has owned shares in the Fund. The Fund does not seek
to realize any particular amount of capital gains during a
year; rather, realized gains are a by-product of Fund
management activities. Consequently, capital gains
distributions may be expected to vary considerably from year to
year. Also, for those investors subject to tax, if purchases
of shares in the Fund are made shortly before the record date
for a dividend or capital gains distribution, a portion of the
investment will be returned as a taxable distribution.
The Treatment of Capital Gain Distributions under the Taxpayer
Relief Act of 1997
The 1997 Act creates a category of long-term capital gain
for individuals that will be taxed at new lower tax rates. For
investors who are in the 28% or higher federal income tax
brackets, these gains will be taxed at a maximum of 20%. For
investors who are in the 15% federal income tax bracket, these
gains will be taxed at a maximum of 10%. Capital gain
distributions will qualify for these new maximum tax rates,
depending on when the Fund's securities were sold and how long
they were held by the Fund before they were sold. Investors
who want more information on holding periods and other
qualifying rules relating to these new rates should review the
expanded discussion in Part B, or should contact their own tax
advisers.
Global Funds, Inc. will advise you in its annual
information reporting at calendar year end of the amount of its
capital gain distributions which will qualify for these maximum
federal tax rates.
Although dividends generally will be treated as distributed
when paid, dividends which are declared in October, November or
December to shareholders of record on a specified date in one
of those months, but which, for operational reasons, may not be
paid to the shareholder until the following January, will be
treated for tax purposes as if paid by the Fund and received by
the shareholder on December 31 of the calendar year in which
they are declared.
The sale of shares of the Fund is a taxable event and may
result in a capital gain or loss to shareholders subject to
tax. Capital gain or loss may be realized from an ordinary
redemption of shares or an exchange of shares between the Fund
any other fund in the Delaware Group. Any loss incurred on a
sale or exchange of Fund shares that had been held for six
months or less will be treated as a long-term capital loss to
the extent of capital gain dividends received with respect to
such shares. All or a portion of the sales charge incurred in
acquiring Fund shares will be excluded from the federal tax
basis of any of such shares sold or exchanged within 90 days of
their purchase (for purposes of determining gain or loss upon
the sale of such shares) if the sale proceeds are reinvested in
the Fund or in another fund in the Delaware Group of funds and
a sales charge that would otherwise apply to the reinvestment
is reduced or eliminated. Any portion of such sales charge
excluded from the tax basis of the shares sold will be added to
the tax basis of the shares acquired in the reinvestment.
The Fund may be subject to foreign withholding taxes on
income from certain of its foreign securities. If more than
50% in value of the total assets of the Fund at the end of its
fiscal year are invested in securities of foreign corporations,
the Fund may elect to pass-through to its shareholders a pro-
rata share of foreign income taxes paid by the Fund. If this
election is made, shareholders will be (i) required to include
in their gross income their pro-rata share of foreign source
income (including any foreign taxes paid by the Fund), and (ii)
entitled to either deduct (as an itemized deduction in the case
of individuals) their share of such foreign taxes in computing
their taxable income or to claim a credit for such taxes
against their U.S. income tax, subject to certain limitations
under the Code. Shareholders will be informed by the Fund at
the end of each calendar year regarding the availability of any
credits on and the amount of foreign source income to be
included in their income tax returns.
The automatic conversion of Class B Shares into Class A
Shares at the end of approximately eight years after purchase
will be tax-free for federal tax purposes. See Automatic
Conversion of Class B Shares under Classes of Shares.
In addition to the federal taxes described above,
shareholders may or may not be subject to various state and
local taxes. For example, distributions of interest income and
capital gains realized from certain types of U.S. government
securities may be exempt from state personal income taxes.
Because investors' state and local taxes may be different than
the federal taxes described above, investors should consult
their own tax advisers.
Each year, Global Funds, Inc. will mail to you information
on the tax status of the Fund's dividends and distributions.
Shareholders will also receive each year information as to the
portion of dividend income that is derived from U.S. government
securities, if any, that are exempt from state income tax. Of
course, shareholders who are not subject to tax on their income
would not be required to pay tax on amounts distributed to them
by the Fund.
Global Funds, Inc. is required to withhold 31% of taxable
dividends, capital gains distributions, and redemptions paid to
shareholders who have not complied with IRS taxpayer
identification regulations. You may avoid this withholding
requirement by certifying on your Investment Application your
proper Taxpayer Identification Number and by certifying that
you are not subject to backup withholding.
See Accounting and Tax Issues and Distributions in Part B
for additional information on tax matters relating to the Fund
and its shareholders.
CALCULATION OF OFFERING PRICE AND NET ASSET VALUE PER SHARE
The net asset value ("NAV") per share is computed by adding
the value of all securities and other assets in the Fund's
portfolio, deducting any liabilities of the Fund (expenses and
fees are accrued daily) and dividing by the number of the
Fund's shares outstanding. Portfolio securities for which
market quotations are available are priced at market value.
Debt securities are priced at fair value by an independent
pricing service using methods approved by Global Funds, Inc.'s
Board of Directors. Short-term investments having a maturity
of less than 60 days are valued at amortized cost, which
approximates market value. All other securities are valued at
their fair value as determined in good faith and in a method
approved by Global Funds, Inc.'s Board of Directors.
Class A Shares are purchased at the offering price per
share, while Class B Shares and Class C Shares are purchased at
the NAV per share. The offering price per share of Class A
Shares consists of the NAV per share next computed after the
order is received, plus any applicable front-end sales charges.
The offering price and NAV are computed as of the close of
regular trading on the New York Stock Exchange (ordinarily, 4
p.m., Eastern time) on days when the Exchange is open.
The Fund's portfolio securities, from time to time, may be
listed primarily on foreign exchanges which trade on days when
the New York Stock Exchange is closed (such as Saturday). As a
result, the net asset value of the Fund may be significantly
affected by such trading on days when shareholders have no
access to the Fund.
The net asset values of all outstanding shares of each
class of the Fund will be computed on a pro-rata basis for each
outstanding share based on the proportionate participation in
that Fund represented by the value of shares of that class.
All income earned and expenses incurred by the Fund will be
borne on a pro-rata basis by each outstanding share of a class,
based on each class' percentage in that Fund represented by the
value of shares of such classes, except that International
Small Cap Fund Institutional Class will not incur any of the
expenses under Global Funds, Inc.'s 12b-1 Plans, and Class A,
Class B and Class C Shares of the Fund alone will bear the 12b-
1 Plan expenses, if any, payable under their respective Plans.
Due to the specific distribution expenses and other costs that
will be allocable to each class, the NAV of each class of the
Fund will vary.
MANAGEMENT OF THE FUND
Directors
The business and affairs of Global Funds, Inc. are managed
under the direction of its Board of Directors. Part B contains
additional information regarding Global Funds, Inc.'s directors
and officers.
Investment Manager and Sub-Adviser
The Manager furnishes investment management services to the
Fund. The Manager has offices located at 80 Cheapside, Third
Floor, London, England EC2V 6EE.
Delaware Management Company, Inc. ("Delaware") and its
predecessors have been managing the funds in the Delaware Group
since 1938. On October 30, 1997, Delaware and its affiliates
in the Delaware Group, including the Manager, were managing in
the aggregate more than $38 billion in assets in the various
institutional or separately managed (approximately
$22,496,609,000) and investment company (approximately
$16,012,252,000) accounts.
Delaware is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. ("DMH"). The Manager is
also controlled by DMH through several subsidiaries. On April
3, 1995, a merger between DMH and a wholly owned subsidiary of
Lincoln National Corporation ("Lincoln National") was
completed. DMH, Delaware and the Manager are now indirect,
wholly owned subsidiaries, and subject to the ultimate control,
of Lincoln National. Lincoln National, with headquarters in
Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry,
including insurance and investment management.
The Manager manages the Fund's investments and for its
services, the Manager is paid an annual fee equal to 1.25% of
the average daily net assets of the Fund.
As noted below, the Distributor has temporarily elected to
voluntarily waive its right to receive 12b-1 fees. The Manager
has also elected voluntarily to waive that portion, if any, of
the annual management fees payable by International Small Cap
Fund and to pay expenses of the Fund to the extent necessary to
ensure that the Total Operating Expenses (exclusive of taxes,
interest, brokerage commissions and extraordinary expenses) of
Class A Shares, Class B Shares and Class C Shares do not exceed
1.25% through May 31, 1998.
The investment management fees paid to the Manager, while
higher than the advisory fees paid by other mutual funds in
general, are comparable to fees paid by other mutual funds with
similar objectives and policies.
Clive A. Gillmore and Timothy W. Sanderson have primary
responsibility for making day-to-day investment decisions for
the Fund and have co-managed the Fund since its inception. A
graduate of the University of Warwick and having begun his
career at Legal and General Investment Management, Mr. Gillmore
joined the Delaware Group in 1990 after eight years of
investment experience. His most recent position prior to
joining the Delaware Group was as a Pacific Basin equity
analyst and senior portfolio manager for Hill Samuel Investment
Advisers Ltd. Mr. Gillmore completed the London Business
School Investment program. Mr. Sanderson began his investment
career in 1979 with Hill Samuel Investment Management Group.
Prior to joining Delaware International Advisers Ltd. in 1990
as Senior Portfolio Manager and Director, he was an analyst and
senior portfolio manager for Hill Samuel where, since 1987, he
had responsibility for Pacific Basin research and the
management of international institutional portfolios.
In making investment decisions for the Fund, Mr. Gillmore
and Mr. Sanderson regularly consult with Fiona A. Barwick. Ms.
Barwick, a portfolio manager, joined the Delaware Group in 1993
to cover the Pacific Basin markets. Prior to this, she spent
three years at Touche Remnant & Co. in London as an assistant
portfolio manager and research analyst. She is a graduate of
University College, London.
Portfolio Trading Practices
The Fund normally will not invest for short-term trading
purposes. However, the Fund may sell securities without regard
to the length of time they have been held. The degree of
portfolio activity will affect brokerage costs of the Fund and
may affect taxes payable by the Fund's shareholders to the
extent that net capital gains are realized. Given the Fund's
investment objective, it is anticipated that the portfolio
turnover rate of the Fund will not exceed 100%.
The Manager uses its best efforts to obtain the best
available price and most favorable execution for portfolio
transactions. Orders may be placed with brokers or dealers who
provide brokerage and research services to the Manager or their
advisory clients. These services may be used by the Manager in
servicing any of their respective accounts. Subject to best
price and execution, the Manager may consider a broker/dealer's
sales of shares of funds in the Delaware Group of funds in
placing portfolio orders and may place orders with
broker/dealers that have agreed to defray certain expenses of
such funds, such as custodian fees.
Performance Information
From time to time, the Fund may quote total return
performance of its Classes in advertising and other types of
literature.
Total return will be based on a hypothetical $1,000
investment, reflecting the reinvestment of all distributions at
net asset value and: (i) in the case of Class A Shares, the
impact of the maximum front-end sales charge at the beginning
of each specified period; and (ii) in the case of Class B
Shares and Class C Shares, the deduction of any applicable CDSC
at the end of the relevant period. Each presentation will
include the average annual total return for one-, five- and
ten-year or life of fund periods, as relevant. Each Fund may
also advertise aggregate and average total return information
concerning a Class over additional periods of time. In
addition, each Fund may present total return information that
does not reflect the deduction of the maximum front-end sales
charge or any applicable CDSC. In this case, such total return
information would be more favorable than total return
information that includes deductions of the maximum front-end
sales charge or any applicable CDSC.
Because securities prices fluctuate, investment results of
the Classes will fluctuate over time. Past performance is not
considered a guarantee of future results.
Distribution (12b-1) and Service
The Distributor, Delaware Distributors, L.P., serves as the
national distributor for the Fund's shares under a Distribution
Agreement with Global Funds, Inc. dated July 21, 1997.
Global Funds, Inc. has adopted a separate distribution plan
under Rule 12b-1 for each of the Class A Shares, Class B Shares
and Class C Shares of the Fund (the "Plans"). The Plans permit
the Fund to pay the Distributor from the assets of its
respective Classes a monthly fee for the Distributor's services
and expenses in distributing and promoting sales of shares.
These expenses include, among other things, preparing and
distributing advertisements, sales literature, and prospectuses
and reports used for sales purposes, compensating sales and
marketing personnel, holding special promotions for specified
periods of time, and paying distribution and maintenance fees
to brokers, dealers and others. In connection with the
promotion of shares of the Classes, the Distributor may, from
time to time, pay to participate in dealer-sponsored seminars
and conferences, and reimburse dealers for expenses incurred in
connection with preapproved seminars, conferences, and
advertising. The Distributor may pay or allow additional
promotional incentives to dealers as part of preapproved sales
contests and/or to dealers who provide extra training and
information concerning a Class and increase sales of the Class.
In addition, the Fund may make payments from the 12b-1 Plan
fees of its respective Classes directly to others, such as
banks, who aid in the distribution of Class shares or provide
services in respect of a Class, pursuant to service agreements
with Global Funds, Inc. The Distributor has elected
voluntarily to waive its right to receive 12b-1 fees (including
service fees) from the commencement of the public offering of
the Classes through May 31, 1998.
The 12b-1 Plan expenses relating to each of the Class B
Shares and Class C Shares of the Fund are also used to pay the
Distributor for advancing the commission costs to dealers with
respect to the initial sale of such shares.
Absent any applicable fee waiver, the aggregate fees paid
by the Fund from the assets of the respective Classes to the
Distributor and others under the Plans may not exceed (i) 0.30%
of the Class A Shares' average daily net assets in any year,
and (ii) 1% (0.25% of which are service fees to be paid by the
Fund to the Distributor, dealers and others for providing
personal service and/or maintaining shareholder accounts) of
each of the Class B Shares' and Class C Shares' average daily
net assets in any year. The Fund's Class A, Class B and Class
C Shares will not incur any distribution expenses beyond these
limits, which may not be increased without shareholder
approval.
While payments, if any, pursuant to the Plans may not
exceed 0.30% annually with respect to Class A Shares, and 1%
annually with respect to each of the Class B Shares and the
Class C Shares, the Plans do not limit fees to amounts actually
expended by the Distributor. It is therefore possible that the
Distributor may realize a profit in any particular year.
However, the Distributor currently expects that distribution
expenses will likely equal or exceed payments under the Plans.
The Distributor may, however incur such additional expenses and
make additional payments to dealers from its own resources to
promote the distribution of shares of the Classes. The monthly
fees paid to the Distributor under the Plans are subject to the
review and approval of Global Funds, Inc.'s unaffiliated
directors, who may reduce the fees or terminate the Plans at
any time.
The Plans do not apply to shares of International Small Cap
Fund Institutional Class. Those shares are not included in
calculating the Plans' fees, and the Plans are not used to
assist in the distribution and marketing of shares of
International Small Cap Fund Institutional Class.
The Transfer Agent, Delaware Service Company, Inc., serves
as the shareholder servicing, dividend disbursing and transfer
agent for the Fund pursuant to an amended and restated
agreement. The Transfer Agent also provides accounting
services to the Fund pursuant to the terms of a separate Fund
Accounting Agreement. The directors of Global Funds, Inc.
annually review service fees paid to the Transfer Agent.
The Distributor and the Transfer Agent are also indirect,
wholly owned subsidiaries of DMH.
Expenses
The Fund is responsible for all of its own expenses other
than those borne by the Manager under the Investment Management
Agreement and those borne by the Distributor under the
Distribution Agreement.
Shares
Global Funds, Inc. is an open-end management investment
company. Commonly known as a mutual fund, Global Funds, Inc.
was organized as a Maryland corporation on May 30, 1991.
Global Funds, Inc. currently offers six series of shares -
International Equity Series, International Small Cap Series,
Global Bond Series, Global Assets Series, Emerging Markets
Series and Global Equity Series. Fund shares have a par value
of $.01 and when issued will be fully paid, non-assessable,
fully transferable and redeemable at the option of the holder.
The shares have no preference as to conversion, exchange,
dividends, retirement or other features and have no preemptive
rights. Each Fund will vote separately on any matter which
affects only that Fund. Shares of each Fund have a priority
over shares of any other fund of Global Funds, Inc. in the
assets and income of that Fund.
Global Funds, Inc.'s shares have noncumulative voting
rights which means that the holders of more than 50% of Global
Funds, Inc.'s shares voting for the election of directors can
elect 100% of the directors if they choose to do so. Under
Maryland law, Global Funds, Inc. is not required, and does not
intend, to hold annual meetings of shareholders unless, under
certain circumstances, it is required to do so under the 1940
Act. Shareholders of 10% or more of Global Funds, Inc.'s
outstanding shares may request that a special meeting be called
to consider the removal of a director.
International Small Cap Fund also offers International
Small Cap Fund Institutional Class of shares, as well as Class
A Shares, Class B Shares and Class C Shares. Shares of each
Class represent proportionate interests in the assets of the
Fund and have the same voting and other rights and preferences
as the other classes of the Fund, except that shares of
International Small Cap Fund Institutional Class are not
subject to, and may not vote on matters affecting, the
Distribution Plans under Rule 12b-1 relating to Class A, Class
B and Class C Shares. Similarly, as a general matter, the
shareholders of Class A Shares, Class B Shares and Class C
Shares may vote only on matters affecting the 12b-1 Plan that
relates to the class of shares that they hold. However, Class
B Shares of the Fund may vote on any proposal to increase
materially the fees to be paid by the Fund under the 12b-1 Plan
relating to Class A Shares.
It is expected that The Lincoln National Life Insurance
Company ("Lincoln") will make an investment in the Fund, which
could result in Lincoln holding up to 100% of the outstanding
shares of the Fund. Subject to certain limited exceptions,
there would be no limitation on the Lincoln's ability to redeem
its shares of the Fund and it may elect to do so at any time.
OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS
Repurchase Agreements
The Fund also may use repurchase agreements that are at
least 100% collateralized by securities in which the Fund can
invest directly, including securities issued or guaranteed by
the U.S. Government or its agencies or instrumentalities.
Repurchase agreements help the Fund to invest cash on a
temporary basis. The Fund may invest cash balances in joint
repurchase agreements with other Delaware Group funds. Under a
repurchase agreement, the Fund acquires ownership and
possession of a security, and the seller agrees to buy the
security back at a specified time and higher price. Repurchase
agreements involve the risks of loss if a seller defaults on
its obligations under the agreements. If the seller is unable
to repurchase the security, the Fund could experience delays in
liquidating the securities. To minimize this possibility, the
Manager, pursuant to direction from the Global Funds, Inc.'s
Board of Directors, considers the creditworthiness of banks and
dealers when entering into repurchase agreements.
Portfolio Loan Transactions
The Fund may loan up to 25% of its assets to qualified
broker/dealers or institutional investors for their use
relating to short sales or other security transactions.
The major risk to which the Fund would be exposed on a
loan transaction is the risk that the borrower would go
bankrupt at a time when the value of the security goes up, and
the borrower would fail to return the borrowed security.
Therefore, the Fund will only enter into loan arrangements
after a review of all pertinent facts by the Manager, subject
to overall supervision by the Board of Directors, including the
creditworthiness of the borrowing broker, dealer or institution
and then only if the consideration to be received from such
loans would justify the risk. In addition, the Fund will
require borrowers to deliver collateral to the Fund before
lending securities. Creditworthiness will be monitored on an
ongoing basis by the Manager.
Borrowings
The Fund may borrow money as a temporary measure for
extraordinary purposes or to facilitate redemptions. The Fund
will not borrow money in excess of one-third of the value of
its net assets. The Fund has no intention of increasing its
net income through borrowing. Any borrowing will be done from
a bank and, to the extent that such borrowing exceeds 5% of the
value of the Fund's net assets, asset coverage of at least 300%
is required. In the event that such asset coverage shall at
any time fall below 300%, the Fund shall, within three days
thereafter (not including Sunday or holidays) or such longer
period as the U.S. Securities and Exchange Commission may
prescribe by rules and regulations, reduce the amount of its
borrowings to such an extent that the asset coverage of such
borrowings shall be at least 300%. The Fund will not pledge
more than 10% of its net assets, or issue senior securities as
defined in the 1940 Act, except for notes to banks. Investment
securities will not be purchased while the Fund has an
outstanding borrowing.
Rule 144A Securities
While maintaining oversight, the Board of Directors of
Global Funds, Inc. has delegated to the Manager the day-to-day
functions of determining whether or not individual Rule 144A
Securities are liquid for purposes of the Fund's 15% limitation
on investments in illiquid assets. The Board has instructed
the Manager to consider the following factors in determining
the liquidity of a Rule 144A Security: (i) the frequency of
trades and trading volume for the security; (ii) whether at
least three dealers are willing to purchase or sell the
security and the number of potential purchasers; (iii) whether
at least two dealers are making a market in the security; and
(iv) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers, and the mechanics of
transfer).
If the Manager determines that a Rule 144A Security which
was previously determined to be liquid is no longer liquid and,
as a result, the Fund's holdings of illiquid securities exceed
the Fund's 15% limitation on investments in such securities,
the Manager will determine what action to take to ensure that
the Fund continues to adhere to its respective limitation.
Investment Company Securities
Any investments that the Fund makes in either closed-end or
open-end investment companies will be limited by the 1940 Act,
and would involve an indirect payment of a portion of the
expenses, including advisory fees, of such other investment
companies. Under the 1940 Act's limitations, the Fund may not
(1) own more than 3% of the voting stock of another investment
company; (2) invest more than 5% of the Fund's total assets in
the shares of any one investment company; nor (3) invest more
than 10% of the Fund's total assets in shares of other
investment companies. These percentage limitations also apply
to the Fund's investments in unregistered investment companies.
Foreign Currency Transactions
Although the Fund values its assets daily in terms of U.S.
dollars, it does not intend to convert its holdings of foreign
currencies into U.S. dollars on a daily basis. The Fund will,
however, from time to time, purchase or sell foreign currencies
and/or engage in forward foreign currency transactions in order
to expedite settlement of portfolio transactions and to
minimize currency value fluctuations. The Fund may conduct its
foreign currency exchange transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency
exchange market or through entering into contracts to purchase
or sell foreign currencies at a future date (i.e., a "forward
foreign currency" contract or "forward" contract). A forward
contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of
days from the date of the contract, agreed upon by the parties,
at a price set at the time of the contract. The Fund will
convert currency on a spot basis from time to time, and
investors should be aware of the costs of currency conversion.
The Fund may enter into forward contracts to "lock in" the
price of a security it has agreed to purchase or sell, in terms
of U.S. dollars or other currencies in which the transaction
will be consummated. By entering into a forward contract for
the purchase or sale, for a fixed amount of U.S. dollars or
foreign currency, of the amount of foreign currency involved in
the underlying security transaction, the Fund will be able to
protect itself against a possible loss resulting from an
adverse change in currency exchange rates during the period
between the date the security is purchased or sold and the date
on which payment is made or received.
When the Manager believes that the currency of a particular
country may suffer a significant decline against the U.S.
dollar or against another currency, the Fund may enter into a
forward foreign currency contract to sell, for a fixed amount
of U.S. dollars or other appropriate currency, the amount of
foreign currency approximating the value of some or all of the
Fund's securities denominated in such foreign currency.
The Fund will not enter into forward contracts or maintain
a net exposure to such contracts where the consummation of the
contracts would obligate the Fund to deliver an amount of
foreign currency in excess of the value of the Fund's
securities or other assets denominated in that currency.
At the maturity of a forward contract, the Fund may either
sell the portfolio security and make delivery of the foreign
currency, or it may retain the security and terminate its
contractual obligation to deliver the foreign currency by
purchasing an "offsetting" contract with the same currency
trader obligating it to purchase, on the same maturity date,
the same amount of the foreign currency. The Fund may realize
a gain or loss from currency transactions.
The Fund also may purchase and write put and call options
on foreign currencies (traded on U.S. and foreign exchanges or
over-the-counter) for hedging purposes to protect against
declines in the U.S. dollar cost of foreign securities held by
the Fund and against increases in the U.S. dollar cost of such
securities to be acquired. Call options on foreign currency
written by the Fund will be covered, which means that the Fund
will own the underlying foreign currency. With respect to put
options on foreign currency written by the Fund, the Fund will
establish a segregated account with its Custodian Bank
consisting of cash, U.S. government securities or other high-
grade liquid debt securities in an amount equal to the amount
the Fund will be required to pay upon exercise of the put.
As in the case of other kinds of options, the writing of an
option on foreign currency will constitute only a partial
hedge, up to the amount of the premium received, and the Fund
could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on foreign currency may constitute an
effective hedge against fluctuations in exchange rates,
although, in the event of rate movements adverse to the Fund's
position, the Fund may forfeit the entire amount of the premium
plus related transaction costs. See Special Risk
Considerations.
Options
The Manager may employ options techniques in an attempt to
protect appreciation attained and to take advantage of the
liquidity available in the options market. The Fund may
purchase call options on foreign or U.S. securities and indices
and enter into related closing transactions. The Fund may also
purchase put options on such securities and indices and enter
into related closing transactions.
A call option enables the purchaser, in return for the
premium paid, to purchase securities from the writer of the
option at an agreed price up to an agreed date. The advantage
is that the purchaser may hedge against an increase in the
price of securities it ultimately wishes to buy or take
advantage of a rise in a particular index. The Fund will only
purchase call options to the extent that premiums paid on all
outstanding call options do not exceed 2% of its total assets.
A put option enables the purchaser of the option, in return
for the premium paid, to sell the security underlying the
option to the writer at the exercise price during the option
period, and the writer of the option has the obligation to
purchase the security from the purchaser of the option. The
Fund will only purchase put options to the extent that the
premiums on all outstanding put options do not exceed 2% of its
total assets. The advantage is that the purchaser can be
protected should the market value of the security decline or
should a particular index decline.
An option on a securities index gives the purchaser of the
option, in return for the premium paid, the right to receive
from the seller cash equal to the difference between the
closing price of the index and the exercise price of the
option.
Closing transactions essentially let the Fund offset put
options or call options prior to exercise or expiration. If
the Fund cannot effect closing transactions, it may have to
hold a security it would otherwise sell or deliver a security
it might want to hold.
In purchasing put and call options, the premium paid by the
Fund plus any transaction costs will reduce any benefit
realized by the Fund upon exercise of the option.
The Fund may use both Exchange-traded and over-the-counter
options. Certain over-the-counter options may be illiquid. The
Fund will only invest in such options to the extent consistent
with its 15% limitation on investment in illiquid securities.
The Fund will comply with U.S. Securities and Exchange
Commission asset segregation and coverage requirements when
engaging in these types of transactions.
Futures Contracts and Options on Futures Contracts
The principal purpose of the purchase or sale of futures
contracts for the Fund is to protect the Fund against the
fluctuations in interest or exchange rates which otherwise
might adversely affect the value of the Fund's portfolio
securities or adversely affect the prices of securities which
the Fund intends to purchase at a later date without actually
buying or selling such securities.
The Fund may enter into contracts for the purchase or sale
for future delivery of securities or foreign currencies. A
purchase of a futures contract means the acquisition of a
contractual right to obtain delivery to the Fund of the
securities or foreign currency called for by the contract at a
specified price during a specified future month. When a
futures contract is sold, the Fund incurs a contractual
obligation to deliver the securities or foreign currency
underlying the contract at a specified price on a specified
date during a specified future month. To the extent that the
Fund invests in futures contracts and options thereon for other
than bona fide hedging purposes, the Fund will not enter into
such transactions if, immediately thereafter, the sum of the
amount of initial margin deposits and premiums paid for open
futures options would exceed 5% of the Fund's total assets,
after taking into account unrealized profits and unrealized
losses on such contracts it has entered into; provided,
however, that, in the case of an option that is in-the-money at
the time of purchase, the in-the-money amount may be excluded
in calculating the 5%.
The Fund may also purchase and write options to buy or sell
futures contracts. Options on futures are similar to options
on securities except that options on futures give the purchaser
the right, in return for the premium paid, to assume a position
in a futures contract, rather than actually to purchase or sell
the futures contract, at a specified exercise price at any time
during the period of the option. When the Fund enters into a
futures transaction, it must deliver to the futures commission
merchant selected by the Fund an amount referred to as "initial
margin." This amount is maintained by the futures commission
merchant directly or on its behalf in an account at the
Custodian Bank. Thereafter, a "variation margin" may be paid
by the Fund to, or drawn by the Fund from, such account in
accordance with controls set for such accounts, depending upon
changes in the price of the underlying securities subject to
the futures contract.
To the extent that interest or exchange rates or securities
prices move in an unexpected direction, the Fund may not
achieve the anticipated benefits of investing in futures
contracts and options thereon, or may realize a loss. To the
extent that the Fund purchases an option on a futures contract
and fails to exercise the option prior to the exercise date, it
will suffer a loss of the premium paid. Further, the possible
lack of a secondary market could prevent the Fund from closing
out its positions relating to futures.
APPENDIX A--RATINGS
General Rating Information
Bonds
Excerpts from Moody's description of its bond ratings:
Aaa--judged to be the best quality. They carry the smallest
degree of investment risk; Aa--judged to be of high quality by
all standards; A--possess favorable attributes and are
considered "upper medium" grade obligations; Baa--considered as
medium grade obligations. Interest payments and principal
security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable
over any great length of time; Ba--judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterizes bonds in this class; B--generally lack
characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other
terms of the contract over any long period of time may be
small; Caa--are of poor standing. Such issues may be in
default or there may be present elements of danger with respect
to principal or interest; Ca--represent obligations which are
speculative in a high degree. Such issues are often in default
or have other marked shortcomings; C--the lowest rated class of
bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
Excerpts from S&P's description of its bond ratings:
AAA--highest grade obligations. They possess the ultimate
degree of protection as to principal and interest; AA--also
qualify as high grade obligations, and in the majority of
instances differ from AAA issues only in a small degree; A--
strong ability to pay interest and repay principal although
more susceptible to changes in circumstances; BBB--regarded as
having an adequate capacity to pay interest and repay
principal; BB, B, CCC, CC--regarded, on balance, as
predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of
the obligation. BB indicates the lowest degree of speculation
and CC the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures
to adverse conditions; C--reserved for income bonds on which no
interest is being paid; D--in default, and payment of interest
and/or repayment of principal is in arrears.
The Delaware Group includes funds with a wide range of
investment objectives. Stock funds, income funds, national and
state-specific tax-exempt funds, money market funds, global and
international funds and closed-end funds give investors the
ability to create a portfolio that fits their personal
financial goals. For more information, contact your financial
adviser or call Delaware Group at 800-523-4640.
INVESTMENT MANAGER
Delaware International Advisers Ltd.
80 Cheapside
Third Floor
London, England EC2V 6EE
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
__________________________________
INTERNATIONAL SMALL CAP FUND
__________________________________
A CLASS
__________________________________
B CLASS
__________________________________
C CLASS
__________________________________
P R O S P E C T U S
__________________________________
DECEMBER 22, 1997
DELAWARE
GROUP
INTERNATIONAL PROSPECTUS
SMALL CAP FUND INSTITUTIONAL DECEMBER 22, 1997
__________________________________________
1818 Market Street, Philadelphia, PA 19103
For more information about International Small Cap Fund
Institutional Class
call Delaware Group at 800-828-5052
This Prospectus describes shares of the International
Small Cap Series (the "Fund") of Delaware Group Global &
International Funds, Inc. ("Global Funds, Inc."), a
professionally-managed mutual fund of the series type.
The Fund s investment objective is to achieve long-term
capital appreciation. The Fund seeks to achieve its objective
by investing primarily in equity securities of small non-U.S.
companies, which may include companies located or operating in
established or emerging countries. See Investment Objective
and Strategies.
The Fund offers an Institutional Class of shares (the
"Class"). This Prospectus relates only to the Class and sets
forth information that you should read and consider before you
invest. Please retain it for future reference. The Fund s
Statement of Additional Information ("Part B" of Global Funds,
Inc.'s registration statement), dated July 21, 1997 (as revised
December 22, 1997), as it may be amended from time to time,
contains additional information about the Fund and has been
filed with the Securities and Exchange Commission. Part B is
incorporated by reference into this Prospectus and is
available, without charge, by writing to Delaware Distributors,
L.P. at the above address or by calling the above numbers.
When the Fund commences operations, its financial statements
will appear in the Annual Report of Global Funds, Inc. and will
accompany any response to requests for Part B.
The Fund also offers Class A Shares, Class B Shares and
Class C Shares. Shares of these classes are subject to sales
charges and other expenses, which may affect their performance.
A prospectus for these classes can be obtained by writing to
Delaware Distributors, L.P. at the above address or by calling
the above number.
TABLE OF CONTENTS
Cover Page
Synopsis
Summary of Expenses
Investment Objective and
Strategies
Suitability
Investment Strategy
Special Risk
Considerations
Classes of Shares
How to Buy Shares
Redemption and Exchange
Dividends and Distributions
Taxes
Calculation of Net Asset
Value Per Share
Management of the Fund
Other Investment Policies and
Risk Considerations
Appendix A -- Ratings
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING
INVESTMENTS. MUTUAL FUNDS CAN BE A VALUABLE PART OF YOUR
FINANCIAL PLAN; HOWEVER, SHARES OF THE FUND ARE NOT FDIC OR
NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT
UNION, ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND
INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED. SHARES OF THE FUND ARE NOT BANK OR
CREDIT UNION DEPOSITS.SYNOPSIS
Investment Objective
The investment objective of the Fund is to achieve long-
term capital appreciation. The Fund seeks to achieve its
objective by investing primarily in equity securities of small
non-U.S. companies, which may include companies located or
operating in established or emerging countries. The Fund is an
international fund. Under normal market conditions, at least
65% of the Fund's total assets will be invested in equity
securities of companies organized or having a majority of their
assets in or deriving a majority of their operating income in
at least three different countries outside of the United
States. The current market capitalization of the companies in
which the Fund intends to invest primarily generally will be
$1.5 billion or less (at the time of purchase).
For further details, see Investment Objective and
Strategies and Other Investment Policies and Risk
Considerations.
Risk Factors and Special Considerations
Prospective investors should consider a number of
factors:
1. Investing in securities of non-United States
companies which are generally denominated in foreign currencies
and the utilization of forward foreign currency exchange
contracts involve certain risk and opportunity considerations
not typically associated with investing in United States
companies. See Special Risk Considerations-Foreign Securities
Risks and Other Investment Policies and Risk Considerations.
2. The Fund has the right to engage in options and
futures transactions for hedging purposes, to counterbalance
portfolio volatility. In connection with futures transactions,
the Fund will maintain certain collateral in special accounts
established with futures commission merchants or on its behalf
in the care of The Chase Manhattan Bank (the "Custodian Bank").
While the Fund does not engage in options and futures for
speculative purposes, there are risks which result from the use
of these instruments, and an investor should carefully review
the descriptions of these risks in this Prospectus. See
Options and Futures Contracts and Options on Futures Contracts
under Other Investment Policies and Risk Considerations.
3. The prices of equity securities, especially those of
the smaller non-U.S. companies in which the Fund will primarily
invest, tend to fluctuate, particularly in the shorter term.
Investors in the Fund should be willing to accept the risks
associated with emerging and growth-oriented companies, some of
the securities of which may be speculative and subject the Fund
to additional investment risk. See Special Risk Considerations
and Other Investment Policies and Risk Considerations.
4. The Fund may invest up to 15% of its assets, in high
yield, high risk foreign fixed-income securities, including
Brady Bonds. Consequently, greater risks may be involved with
an investment in the Fund. See High Yield, High Risk
Securities under Investment Objective and Strategies.
5. The Fund may invest a portion of its assets in the
markets of certain emerging countries. Investments in
securities of companies in emerging markets present a greater
degree of risk than tends to be the case for foreign
investments in Western Europe and other developed markets.
Among other things, there is a greater possibility of
expropriation, nationalization, confiscatory taxation, income
earned or other special taxes, foreign exchange restrictions,
limitations on the repatriation of income and capital from
investments, defaults in foreign government debt, and economic,
political or social instability. In addition, in many emerging
markets, there is substantially less publicly available
information about issuers and the information that is available
tends to be of a lesser quality. Economic markets and
structures tend to be less mature and diverse and the
securities markets which are subject to less government
regulation or supervision may also be smaller, less liquid and
subject to greater price volatility. See Special Risk
Considerations-Emerging Markets Securities Risks.
Investment Manager, Sub-Adviser, Distributor and Service Agent
Delaware International Advisers Ltd. ("Delaware
International" or the "Manager") is the investment manager for
the Fund and, in that capacity, provides investment advice to
the Fund, subject to the supervision of Global Funds, Inc.'s
Board of Directors. Delaware Distributors, L.P. (the
"Distributor") is the national distributor for the Fund and for
all of the other mutual funds in the Delaware Group. Delaware
Service Company, Inc. (the "Transfer Agent") is the shareholder
servicing, dividend disbursing, accounting services and
transfer agent for the Fund and for all of the other mutual
funds in the Delaware Group. See Summary of Expenses and
Management of the Fund for further information regarding the
Manager and the fees payable under the Fund's Investment
Management Agreement.
Purchase Price
Shares of the Class offered by this Prospectus are
available at net asset value, without a front-end or contingent
deferred sales charge and are not subject to distribution fees
under a Rule 12b-1 distribution plan.
Redemption and Exchange
Shares of the Class are redeemed or exchanged at the net
asset value calculated after receipt of the redemption or
exchange request. See Redemption and Exchange.
Open-End Investment Company
Global Funds, Inc. is an open-end, registered management
investment company. The Fund operates as a diversified fund as
defined under the 1940 Act. Global Funds, Inc. was organized
as a Maryland corporation on May 30, 1991. See Shares under
Management of the Fund.
SUMMARY OF EXPENSES
International
Small Cap Fund
Shareholder Transaction Expenses Institutional Class
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) None
Maximum Sales Charge Imposed on
Reinvested Dividends (as a percentage
of offering price) None
Exchange Fees None*
*Exchanges are subject to the requirements of each fund and a
front-end sales charge may apply.
Annual Operating Expenses International
(as a percentage of Small Cap Fund
average daily net assets) Institutional Class
Management Fees
(after voluntary waivers) 0.00%**
12b-1 Plan Expenses None
Other Operating Expenses
(after voluntary payments) 1.25%**
Total Operating Expenses
(after voluntary waivers
and payments) 1.25%**
_________________
** "Other Operating Expenses" and "Total Operation Expenses"
for the Class are based on estimated amounts for the first
full fiscal year of the Class, after giving effect to
voluntary fee waiver and expense payments. Delaware
International has elected voluntarily to waive that portion,
if any, of the annual management fees payable by the Fund
and to pay certain expenses of the Fund to the extent
necessary to ensure that the Total Operating Expenses of the
Class do not exceed 1.25%, from the commencement of the
public offering of the Class through May 31, 1998. Absent
the voluntary fee waiver and payments, it is estimated that
for the first full year, the Total Operating Expenses (as a
percentage of average daily net assets) would be 2.87%,
reflecting management fees of 1.25%.
For expense information about the Fund's A Class, B Class
and C Class, see the separate prospectus relating to those
classes.
The following example illustrates the expenses that an
investor would pay on a $1,000 investment over various time
periods, assuming (1) a 5% annual rate of return and (2)
redemption at the end of each time period. The following
example assumes the voluntary waiver of the management fee
and/or other payments of expenses by the Manager as discussed
in this Prospectus.
1 year 3 years
International Small Cap $13 $40
Fund Institutional Class
This example should not be considered a representation of past
or future expenses or performance. Actual expenses may be
greater or less than those shown.
The purpose of the above tables is to assist the investor
in understanding the various costs and expenses that an
investor in the Class will bear directly or indirectly.
INVESTMENT OBJECTIVE AND STRATEGIES
SUITABILITY
Investors considering the Fund should have a long-term
investment time frame.
The Fund cannot assure a specific rate of return or that
principal will be protected. The value of the Fund s shares
can be expected to move up and down depending on market
conditions. Consequently, appreciation may be obtained in
periods of generally rising markets, while in declining markets
the value of the Fund's shares may decline.
Investments in foreign securities, whether equity or
fixed-income, involve special risks including those related to
currency fluctuations, as well as to political, economic and
social situations different from and potentially more volatile
than those in the United States. In addition, the accounting,
tax and financial reporting standards of foreign countries are
different from and may be less reliable or comprehensive than
those relating to U.S. securities issuers. See Special Risk
Considerations for a complete discussion of the risk factors
affecting any international investment. For these reasons, the
Fund is not suitable for short-term investors. However,
through the cautious selection and supervision of its
portfolio, the Manager will strive to achieve the Fund's
objective.
The Fund may be suitable for investors with a long-term
investment horizon (of at least three years) who are looking
for long-term growth potential from a portfolio of
international securities. The Fund will invest primarily in
equity securities of small non-U.S. companies in established or
emerging countries. Investors should be willing to accept the
risks associated with foreign investing as well as with
investments in growth-oriented or emerging issuers, some of
which may be speculative and subject the Fund to additional
investment risk.
* * *
Ownership of shares of the Fund reduces the bookkeeping
and administrative inconveniences that would be involved with
direct purchases of the securities held in the Fund's
portfolio.
Investors should not consider a purchase of shares of the
Fund as equivalent to a complete investment program. The
Delaware Group includes a family of funds, generally available
through registered investment dealers, which may be used
together to create a more complete investment program.
INVESTMENT STRATEGY
The investment objective of the Fund is to achieve long-
term capital appreciation. The Fund seeks to achieve its
objective by investing primarily in equity securities of
smaller non-U.S. companies, which may include companies located
or operating in established or emerging countries. The Fund is
an international fund. Under normal circumstances, at least
65% of the Fund's total assets will be invested in equity
securities of companies organized or having a majority of their
assets in or deriving a majority of their operating income in
at least three different countries outside of the United
States. The current market capitalization of the companies in
which the Fund intends to invest primarily generally will be
$1.5 billion or less (at the time of purchase).
The equity securities in which the Fund may invest include
common stocks, preferred stocks, rights or warrants to purchase
common stocks and securities convertible into common stocks.
The Fund may also invest in foreign companies through sponsored
or unsponsored American Depositary Receipts, European
Depositary Receipts or Global Depositary Receipts ("Depositary
Receipts"), which are receipts typically issued by a bank or
trust company evidencing ownership of underlying securities
issued by a foreign company. By focusing on smaller, non-U.S.
companies, the Fund seeks to identify equity securities of
emerging and other growth-oriented companies which in the
opinion of the Manager, are responsive to changes within their
markets, and have the fundamental characteristics to support
growth. The Manager will seek to identify changing and
dominant trends within the relevant markets, and will purchase
securities of companies which it believes will benefit from
these trends. In addition, the Manager will consider the
financial strength of the company, the nature of its
management, and any developments affecting the company or its
industry. The Manager may invest in smaller capitalization
companies that may be temporarily out of favor or overlooked by
securities analysts and whose value, therefore, may not yet be
fully recognized by the market. See Special Risk
Considerations - Small Company Investment Risks.
While the Fund may purchase securities in any foreign
country, developed and underdeveloped, or emerging market
countries, it is currently anticipated that the countries in
which the Fund may invest will include, but not be limited to,
Canada, Germany, the United Kingdom, France, the Netherlands,
Belgium, Spain, Switzerland, Japan, Australia, Hong Kong and
Singapore/Malaysia as well as Indonesia, Korea, the
Philippines, Taiwan and Thailand. With respect to certain
countries, investments by an investment company may only be
made through investments in closed-end investment companies
that in turn are authorized to invest in the securities of such
countries. See Investment Company Securities under Other
Investment Policies and Risk Considerations.
In selecting investments for the Fund, the Manager will
employ a dividend discount analysis across country boundaries
and will also use a purchasing power parity approach to
identify currencies and markets that are overvalued or
undervalued relative to the U.S. dollar. The Manager uses the
dividend discount analysis to compare the value of different
investments. Using this technique, the Manager looks at future
anticipated dividends and discounts the value of those
dividends back to what they would be worth if they were being
paid today. With a purchasing parity approach, the Manager
attempts to identify the amount of goods and services that a
dollar will buy in the United States and compare that to the
amount of a foreign currency required to buy the same amount of
goods and services in another country. Eventually, currencies
should trade at levels that should make it possible for the
dollar to buy the same amount of goods and services overseas as
in the United States. When the dollar buys less, the foreign
currency may be considered to be overvalued. When the dollar
buys more, the currency may be considered to be undervalued.
The Fund may invest in both open-end and listed or
unlisted closed-end investment companies, as well as
unregistered investment companies. See Investment Company
Securities under Other Investment Policies and Risk
Considerations. The Fund may also invest in convertible
preferred stocks that offer enhanced yield features, such as
Preferred Equity Redemption Cumulative Stock, and certain other
non-traditional equity securities.
The Fund may invest up to 15% of its net assets in fixed-
income securities issued by emerging country companies, and
foreign governments, their agencies, instrumentalities or
political subdivisions, all of which may be high yield, high
risk fixed-income securities rated lower than BBB by Standard &
Poor's Ratings Group ("S&P") and Baa by Moody's Investors
Service, Inc. ("Moody's") or, if unrated, are considered by the
Manager to be of equivalent quality and which present special
investment risks. The Fund may also invest in Brady Bonds.
See High Yield, High Risk Securities and Special Risk
Considerations.
For temporary defensive purposes, the Fund may invest all
or a substantial portion of its assets in high quality debt
instruments issued by foreign governments, their agencies,
instrumentalities or political subdivisions, the U.S.
government, its agencies or instrumentalities (and which are
backed by the full faith and credit of the U.S. government), or
issued by foreign or U.S. companies. For example, the Fund may
invest in U.S. fixed-income markets when the Manager believes
that the global equity markets are excessively volatile or
overvalued so that the Fund's objective cannot be achieved in
such markets. Any corporate debt obligations will be rated AA
or better by S&P, or Aa or better by Moody's, or if unrated,
will be determined to be of comparable quality by the Manager.
The Fund may also invest in the securities listed above pending
investment of proceeds from new sales of Fund shares and to
maintain sufficient cash to meet redemption requests.
Restricted and Illiquid Securities
The Fund may invest in restricted securities, including
securities eligible for resale without registration pursuant to
Rule 144A ("Rule 144A Securities") under the Securities Act of
1933 (the "1933 Act"). Rule 144A permits many privately placed
and legally restricted securities to be freely traded among
certain institutional buyers, such as the Fund. See Rule 144A
Securities under Other Investment Policies and Risk
Considerations. The Fund may invest up to 15% of the value of
its net assets in illiquid securities, which are securities
which may not be disposed of within seven days at the price at
which they are carried on the Fund's books. In the event the
Fund's percentage limitation is exceeded, whether due to
changes in the market value of the Fund's illiquid holdings or
because a particular security is deemed to have become
illiquid, the Manager will take steps to remedy these
circumstances in an orderly fashion.
High Yield, High Risk Securities
The Fund may invest up to 15% of its net assets in high
yield, high risk foreign fixed-income securities, including so-
called Brady Bonds. See Foreign Government Securities Risks
under Special Risk Considerations. In the past, in the opinion
of the Manager, the high yields from these bonds have more than
compensated for their higher default rates. There can be no
assurance, however, that yields will continue to offset default
rates on these bonds in the future. The Manager intends to
maintain an adequately diversified portfolio of these bonds.
While diversification can help to reduce the effect of an
individual default on the Fund, there can be no assurance that
diversification will protect the Fund from widespread bond
defaults brought about by a sustained economic downturn.
Medium- and low-grade bonds held by the Fund may be issued
as a consequence of corporate restructurings, such as leveraged
buy-outs, mergers, acquisitions, debt recapitalizations or
similar events. Also these bonds are often issued by smaller,
less creditworthy companies or by highly leveraged (indebted)
firms, which are generally less able than more financially
stable firms to make scheduled payments of interest and
principal. The risks posed by bonds issued under such
circumstances are substantial.
The economy and interest rates may affect these high
yield, high risk securities differently from other securities.
Prices have been found to be less sensitive to interest rate
changes than higher rated investments, but more sensitive to
adverse economic changes or individual corporate developments.
Also, during an economic downturn or a substantial period of
rising interest rates, highly leveraged issuers may experience
financial stress which would adversely affect their ability to
service principal and interest payment obligations, to meet
projected business goals and to obtain additional financing.
Changes by recognized rating agencies in their rating of any
security and in the ability of an issuer to make payments of
interest and principal will also ordinarily have a more
dramatic effect on the values of these investments than on the
values of higher-rated securities. Such changes in value will
not affect cash income derived from these securities, unless
the issuers fail to pay interest or dividends when due. Such
changes will, however, affect the Fund's net asset value per
share.
* * *
The Fund may invest in securities issued in any currency
and may hold foreign currency. Securities of issuers within a
given country may be denominated in the currency of another
country or in multinational currency units such as the European
Currency Unit ("ECU"). For purposes of the 1940 Act, the Fund
will operate as a diversified fund. The Fund will not
concentrate its investments in any particular industry, which
means that the Fund will not invest 25% or more of its total
assets in any one industry.
The Fund's investment objective, Global Funds, Inc.'s
designation as an open-end investment company, the Fund's
designation as a diversified fund, and the Fund's policies
concerning portfolio lending, borrowing and concentration are
"fundamental" and may not be changed unless authorized by the
vote of a majority of the Fund's outstanding voting securities.
A vote of a "majority of the outstanding voting securities" is
the vote by the holders of the lesser of a) 67% or more of the
Fund's voting securities present in person or represented by
proxy if the holders of more than 50% of the outstanding voting
securities of the Fund are present or represented by proxy; or
b) more than 50% of the outstanding voting securities. Part B
lists other more specific investment restrictions of the Funds
which may not be changed without a majority shareholder vote.
The investment policies of the Fund not identified above
as "fundamental" may be changed by the Board of Directors of
Global Funds, Inc. without a shareholder vote. See Special
Risk Considerations and Other Investment Policies and Risk
Considerations.
SPECIAL RISK CONSIDERATIONS
Shareholders should understand that all investments
involve risk and there can be no guarantee against loss
resulting from an investment in the Fund, nor can there be any
assurance that the Fund's investment objective will be
attained.
Foreign Securities Risks. The Fund has the right to
purchase securities in any developed, underdeveloped or
emerging country. Investors should consider carefully the
substantial risks involved in investing in securities issued by
companies and governments of foreign nations. These risks are
in addition to the usual risks inherent in domestic
investments. There is the possibility of expropriation,
nationalization or confiscatory taxation, taxation of income
earned in foreign nations or other taxes imposed with respect
to investments in foreign nations, foreign exchange control
(which may include suspension of the ability to transfer
currency from a given country), default in foreign government
securities, political or social instability or diplomatic
developments which could affect investments in securities of
issuers in those nations.
In addition, in many countries, there is substantially
less publicly available information about issuers than is
available in reports about companies in the United States.
Foreign companies are not subject to uniform accounting,
auditing and financial reporting standards, and auditing
practices and requirements may not be comparable to those
applicable to United States companies. In particular, the
assets and profits appearing on the financial statements of a
developing or emerging country issuer may not reflect its
financial position or results of operations in the way they
would be reflected had the financial statements been prepared
in accordance with United States generally accepted accounting
principles. Also, for an issuer that keeps accounting records
in local currency, inflation accounting rules may require for
both tax and accounting purposes, that certain assets and
liabilities be restated on the issuer's balance sheet in order
to express items in terms of currency or constant purchasing
power. Inflation accounting may indirectly generate losses or
profits. Consequently, financial data may be materially
affected by restatements for inflation and may not accurately
reflect the real condition of those issuers and securities
markets.
Further, the Fund may encounter difficulty or be unable to
pursue legal remedies and obtain judgments in foreign courts.
Commission rates on securities transactions in foreign
countries, which are sometimes fixed rather than subject to
negotiation as in the United States, are likely to be higher.
Further, the settlement period of securities transactions in
foreign markets may be longer than in domestic markets, and may
be subject to administrative uncertainties. In many foreign
countries, there is less government supervision and regulation
of business and industry practices, stock exchanges, brokers
and listed companies than in the United States, and capital
requirements for brokerage firms are generally lower. The
foreign securities markets of many of the countries in which
the Fund may invest may also be smaller, less liquid and
subject to greater price volatility than those in the United
States.
Emerging Markets Securities Risks. Compared to the United
States and other developed countries, emerging countries may
have volatile social conditions, relatively unstable
governments and political systems, economies based on only a
few industries and economic structures that are less diverse
and mature, and securities markets that trade a small number of
securities, which can result in a low or nonexistent volume of
trading. Prices in these securities markets tend to be
volatile and, in the past, securities in these countries have
offered greater potential for gain (as well as loss) than
securities of companies located in developed countries. Until
recently, there has been an absence of a capital market
structure or market-oriented economy in certain emerging
countries. Further, investments and opportunities for
investments by foreign investors are subject to a variety of
national policies and restrictions in many emerging countries.
These restrictions may take the form of prior governmental
approval, limits on the amount or type of securities held by
foreigners, limits on the types of companies in which
foreigners may invest and prohibitions on foreign investments
in issuers or industries deemed sensitive to national
interests. Additional restrictions may be imposed at any time
by these or other countries in which the Fund invests. Also,
the repatriation of both investment income and capital from
several foreign countries is restricted and controlled under
certain regulations, including, in some cases, the need for
certain governmental consents. Although these restrictions may
in the future make it undesirable to invest in emerging
countries, the Manager does not believe that any current
repatriation restrictions would affect its decision to invest
in such countries. Countries such as those in which the Fund
may invest have historically experienced and may continue to
experience, substantial, and in some periods extremely high
rates of inflation for many years, high interest rates,
exchange rate fluctuations or currency depreciation, large
amounts of external debt, balance of payments and trade
difficulties and extreme poverty and unemployment. Other
factors which may influence the ability or willingness to
service debt include, but are not limited to, a country's cash
flow situation, the availability of sufficient foreign exchange
on the date a payment is due, the relative size of its debt
service burden to the economy as a whole, its government's
policy towards the International Monetary Fund, the World Bank
and other international agencies and the political constraints
to which a government debtor may be subject.
Foreign Government Securities Risks. With respect to
investment in debt issues of foreign governments, the ability
of a foreign government or government-related issuer to make
timely and ultimate payments on its external debt obligations
will also be strongly influenced by the issuer's balance of
payments, including export performance, its access to
international credits and investments, fluctuations in interest
rates and the extent of its foreign reserves. A country whose
exports are concentrated in a few commodities or whose economy
depends on certain strategic imports could be vulnerable to
fluctuations in international prices of these commodities or
imports. To the extent that a country receives payment for its
exports in currencies other than dollars, its ability to make
debt payments denominated in dollars could be adversely
affected. If a foreign government or government-related issuer
cannot generate sufficient earnings from foreign trade to
service its external debt, it may need to depend on continuing
loans and aid from foreign governments, commercial banks and
multilateral organizations, and inflows of foreign investment.
The commitment on the part of these foreign governments,
multilateral organizations and others to make such
disbursements may be conditioned on the government's
implementation of economic reforms and/or economic performance
and the timely service of its obligations. Failure to
implement such reforms, achieve such levels of economic
performance or repay principal or interest when due may curtail
the willingness of such third parties to lend funds, which may
further impair the issuer's ability or willingness to service
its debts in a timely manner. The cost of servicing external
debt will also generally be adversely affected by rising
international interest rates because many external debt
obligations bear interest at rates which are adjusted based
upon international interest rates. The ability to service
external debt will also depend on the level of the relevant
government's international currency reserves and its access to
foreign exchange. Currency devaluations may affect the ability
of a government issuer to obtain sufficient foreign exchange to
service its external debt.
As a result of the foregoing, a foreign governmental
issuer may default on its obligations. If such a default
occurs, the Fund may have limited effective legal recourse
against the issuer and/or guarantor. Remedies must, in some
cases, be pursued in the courts of the defaulting party itself,
and the ability of the holder of foreign government and
government-related debt securities to obtain recourse may be
subject to the political climate in the relevant country. In
addition, no assurance can be given that the holders of
commercial bank debt will not contest payments to the holders
of other foreign government and government-related debt
obligations in the event of default under their commercial bank
loan agreements.
Among the foreign government and government related
issuers in which the Fund may invest are certain high-yield
securities, including so-called Brady Bonds. The issuers of
the foreign government and government-related high yield
securities, including Brady Bonds, in which the Fund expect to
invest have in the past experienced substantial difficulties in
servicing their external debt obligations, which have led to
defaults on certain obligations and the restructuring of
certain indebtedness. Restructuring arrangements have
included, among other things, reducing and rescheduling
interest and principal payments by negotiating new or amended
credit agreements or converting outstanding principal and
unpaid interest to Brady Bonds, and obtaining new credit to
finance interest payments. Holders of certain foreign
government and government-related high yield securities may be
requested to participate in the restructuring of such
obligations and to extend further loans to their issuers.
There can be no assurance that the Brady Bonds and other
foreign government and government-related high yield securities
in which the Fund may invest will not be subject to similar
defaults or restructuring arrangements which may adversely
affect the value of such investments. Furthermore, certain
participants in the secondary market for such debt may be
directly involved in negotiating the terms of these
arrangements and may therefore have access to information not
available to other market participants.
Brady Bonds are debt securities issued under the framework
of the Brady Plan, an initiative announced by former U.S.
Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for
debtor nations to restructure their outstanding external
indebtedness (generally, commercial bank debt). In
restructuring its external debt under the Brady Plan framework,
a debtor nation negotiates with its existing bank lenders as
well as multilateral institutions such as the World Bank and
the International Monetary Fund. The Brady Plan framework, as
it has developed, contemplates the exchange of commercial bank
debt for new issued bonds (Brady Bonds). The investment
advisers believe that economic reforms undertaken by countries
in connection with the issuance of Brady Bonds make the debt of
countries which have issued or have announced plans to issue
Brady Bonds an attractive opportunity for investment.
Investors, however, should recognize that the Brady Plan only
sets forth general guiding principles for economic reform and
debt reduction, emphasizing that solutions must be negotiated
on a case-by-case basis between debtor nations and their
creditors. In addition, Brady Bonds have been issued only
recently and, accordingly, do not have a long payment history.
Small Company Investment Risks. Investments in common
stocks in general are subject to market, economic and business
risks that will cause their price to fluctuate over time. The
securities of companies with smaller revenues and
capitalizations in which the Fund may invest may offer greater
opportunity for capital appreciation than larger companies, but
investment in such companies presents greater risks than
securities of larger, more established companies.
Historically, smaller capitalization stocks have been more
volatile in price than larger capitalization stocks. Among the
reasons for the greater price volatility of these securities
are the lower degree of liquidity in the markets for such
stocks, and the potentially greater sensitivity of such small
companies to changes in or failure of management, and in many
other changes in competitive, business, industry and economic
conditions, including risks associated with limited production,
markets, management depth, or financial resources. Investors
should therefore expect that the value of the Fund's shares
will be more volatile than the shares of a fund that invests in
larger capitalization stocks.
Risks Related to Additional Investment Techniques. With
respect to forward foreign currency contracts, the precise
matching of forward contract amounts and the value of the
securities involved is generally not possible since the future
value of such securities in foreign currencies will change as a
consequence of market movements in the value of those
securities between the date the forward contract is entered
into and the date it matures. The projection of short-term
currency strategy is highly uncertain.
It is impossible to forecast the market value of portfolio
securities at the expiration of the contract. Accordingly, it
may be necessary for the Fund to purchase additional foreign
currency on the spot market (and bear the expense of such
purchase) if the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver
(and if a decision is made to sell the security and make
delivery of the foreign currency). Conversely, it may be
necessary to sell on the spot market some of the foreign
currency received upon the sale of the portfolio security if
its market value exceeds the amount of foreign currency the
Fund is obligated to deliver.
The Fund may invest up to 15% of its net assets in high
yield, high risk foreign fixed-income securities. These
securities are rated lower than BBB by S&P and Baa by Moody's
or, if unrated, are considered by the Manager to be of
equivalent quality. See Investment Objective and Strategies
and High Yield, High Risk Securities. The Fund will not
purchase securities rated lower than C by S&P or Ca by Moody's,
or, if unrated, considered to be of an equivalent quality to
such ratings by the Manager. See Appendix A - Ratings to this
Prospectus for more rating information. Fixed-income
securities of this type are considered to be of poor standing
and predominantly speculative. Such securities are subject to
a substantial degree of credit risk.
For additional information about the Fund's investment
policies and certain risks associated with investments in
certain types of securities including purchasing put and call
options, futures contracts and options thereon, and options on
foreign currencies, see Other Investment Policies and Risk
Considerations. Part B provides more information concerning
the Fund's investment policies, restrictions and risk factors.
CLASSES OF SHARES
The Distributor serves as the national distributor for the
Fund. Shares of the Class may be purchased directly by
contacting the Fund or its agent or through authorized
investment dealers. All purchases of shares of the Class are
at net asset value. There is no front-end or contingent
deferred sales charge.
Investment instructions given on behalf of participants in
an employer-sponsored retirement plan are made in accordance
with directions provided by the employer. Employees
considering purchasing shares of the Class as part of their
retirement program should contact their employer for details.
Shares of the Class are available for purchase only by:
(a) retirement plans introduced by persons not associated with
brokers or dealers that are primarily engaged in the retail
securities business and rollover individual retirement accounts
from such plans; (b) tax-exempt employee benefit plans of the
Manager or its affiliates and securities dealer firms with a
selling agreement with the Distributor; (c) institutional
advisory accounts of the Manager or its affiliates and those
having client relationships with Delaware Investment Advisers,
a division of the Manager, or its affiliates and their
corporate sponsors, as well as subsidiaries and related
employee benefit plans and rollover individual retirement
accounts from such institutional advisory accounts; (d) a
bank, trust company and similar financial institution investing
for its own account or for the account of its trust customers
for whom such financial institution is exercising investment
discretion in purchasing shares of the Class, except where the
investment is part of a program that requires payment to the
financial institution of a Rule 12b-1 Plan fee; and (e)
registered investment advisers investing on behalf of clients
that consist solely of institutions and high net-worth
individuals having at least $1,000,000 entrusted to the adviser
for investment purposes, but only if the adviser is not
affiliated or associated with a broker or dealer and derives
compensation for its services exclusively from its clients for
such advisory services.
International Small Cap Fund A Class, International Small Cap
Fund B Class and International Small Cap Fund C Class
In addition to offering International Small Cap Fund
Institutional Class, the Fund also offers International Small
Cap Fund A Class, International Small Cap Fund B Class and
International Small Cap Fund C Class, which are described in a
separate prospectus. Shares of International Small Cap Fund A
Class, International Small Cap Fund B Class and International
Small Cap Fund C Class may be purchased through authorized
investment dealers or directly by contacting the Fund or its
Distributor. The International Small Cap Fund A Class carries
a front-end sales charge and, absent any applicable fee waiver,
has annual 12b-1 expenses equal to a maximum of 0.30%. The
maximum front-end sales charge as a percentage of the offering
price is 4.75% and is reduced on certain transactions of
$100,000 or more. The International Small Cap Fund B Class and
International Small Cap Fund C Class have no front-end sales
charge but, absent any applicable fee waiver, are subject to
annual 12b-1 expenses equal to a maximum of 1%. Shares of
International Small Cap Fund B Class and International Small
Cap Fund C Class and certain shares of International Small Cap
Fund A Class may be subject to a contingent deferred sales
charge upon redemption. To obtain a prospectus relating to
such classes, contact the Distributor by writing to the address
or by calling the phone numbers listed on page 1 of this
Prospectus.
HOW TO BUY SHARES
The Fund makes it easy to invest by mail, by wire, by
exchange and by arrangement with your investment dealer. In
all instances, investors must qualify to purchase shares of the
Class.
Investing Directly by Mail
1. Initial Purchases--An Investment Application, or in the
case of a retirement account, an appropriate retirement plan
application, must be completed, signed and sent with a check
payable to International Small Cap Fund Institutional Class, to
Delaware Group at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at
any time by mailing a check payable to International Small Cap
Fund Institutional Class. Your check should be identified with
your name(s) and account number.
Investing Directly by Wire
You may purchase shares by requesting your bank to
transmit funds by wire to CoreStates Bank, N.A., ABA
#031000011, account number 1412893401 (include your name(s) and
your account number).
1. Initial Purchases--Before you invest, telephone the Fund's
Client Services Department at 800-828-5052 to get an account
number. If you do not call first, it may delay processing your
investment. In addition, you must promptly send your
Investment Application, or in the case of a retirement account,
an appropriate retirement plan application, to International
Small Cap Fund Institutional Class, to Delaware Group at 1818
Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments
anytime by wiring funds to CoreStates Bank, N.A., as described
above. You must advise your Client Services Representative by
telephone at 800-828-5052 prior to sending your wire.
Investing by Exchange
If you have an investment in another mutual fund in the
Delaware Group and you qualify to purchase shares of the Class,
you may write and authorize an exchange of part or all of your
investment into the Fund. However, shares of International
Small Cap Fund B Class and International Small Cap Fund C Class
and Class B Shares and Class C Shares of the other funds in the
Delaware Group offering such a class of shares may not be
exchanged into the Class. If you wish to open an account by
exchange, call your Client Services Representative at 800-828-
5052 for more information. See Redemption and Exchange for
more complete information concerning your exchange privileges.
Investing through Your Investment Dealer
You can make a purchase of Fund shares through most
investment dealers who, as part of the service they provide,
must transmit orders promptly. They may charge for this
service.
Purchase Price and Effective Date
The purchase price (net asset value) is determined as of
the close of regular trading on the New York Stock Exchange
(ordinarily, 4 p.m., Eastern time) on days when the Exchange is
open.
The effective date of a purchase is the date the order is
received by the Fund, its agent or designee. The effective
date of a direct purchase is the day your wire, electronic
transfer or check is received, unless it is received after the
time the share price is determined, as noted above. Purchase
orders received after such time will be effective the next
business day.
The Conditions of Your Purchase
The Fund reserves the right to reject any purchase order.
If a purchase is canceled because your check is returned
unpaid, you are responsible for any loss incurred. The Fund
can redeem shares from your account(s) to reimburse itself for
any loss, and you may be restricted from making future
purchases in any of the funds in the Delaware Group. The Fund
reserves the right to reject purchase orders paid by third-
party checks or checks that are not drawn on a domestic branch
of a United States financial institution. If a check drawn on
a foreign financial institution is accepted, you may be subject
to additional bank charges for clearance and currency
conversion.
The Fund also reserves the right, upon 60 days' written
notice, to involuntarily redeem accounts that remain under $250
as a result of redemptions.
REDEMPTION AND EXCHANGE
Redemption and exchange requests made on behalf of
participants in an employer-sponsored retirement plan are made
in accordance with directions provided by the employer.
Employees should therefore contact their employer for details.
Your shares will be redeemed or exchanged based on the net
asset value next determined after the Fund receives your
request in good order. For example, redemption or exchange
requests received in good order after the time the net asset
value of shares is determined will be processed on the next
business day. See Purchase Price and Effective Date under How
to Buy Shares. Except as otherwise noted below, for a
redemption request to be in "good order," you must provide your
account number, account registration, and the total number of
shares or dollar amount of the transaction. With regard to
exchanges, you must also provide the name of the fund in which
you want to invest the proceeds. Exchange instructions and
redemption requests must be signed by the record owner(s)
exactly as the shares are registered. You may request a
redemption or an exchange by calling the Fund at 800-828-5052.
Redemption proceeds will be distributed promptly, as described
below, but not later than seven days after receipt of a
redemption request.
All exchanges involve a purchase of shares of the fund
into which the exchange is made. As with any purchase, an
investor should obtain and carefully read that fund's
prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including
charges and expenses.
The Fund will process written and telephone redemption
requests to the extent that the purchase orders for the shares
being redeemed have already settled. The Fund will honor
redemption requests as to shares for which a check was tendered
as payment, but the Fund will not mail or wire the proceeds
until it is reasonably satisfied that the check has cleared,
which may take up to 15 days from the purchase date. You can
avoid this potential delay if you purchase shares by wiring
Federal Funds. The Fund reserves the right to reject a written
or telephone redemption request or delay payment of redemption
proceeds if there has been a recent change to the shareholder's
address of record.
Shares of the Class may be exchanged into any other
Delaware Group mutual fund, provided: (1) the investment
satisfies the eligibility and other requirements set forth in
the prospectus of the fund being acquired, including the
payment of any applicable front-end sales charge; and (2) the
shares of the fund being acquired are in a state where that
fund is registered. If exchanges are made into other shares
that are eligible for purchase only by those permitted to
purchase shares of the Class, such shares will be exchanged at
net asset value. Shares of the Class may not be exchanged into
Class B Shares or Class C Shares of the funds in the Delaware
Group. The Fund may suspend, terminate or amend the terms of
the exchange privilege upon 60 days' written notice to
shareholders.
Various redemption and exchange methods are outlined
below. No fee is charged by the Fund or the Distributor for
redeeming or exchanging your shares, although in the case of an
exchange, a sales charge may apply. You may also have your
investment dealer arrange to have your shares redeemed or
exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders, including
selection of any of the features described below, shall
continue in effect until such time as a written revocation or
modification has been received by the Fund or its agent.
Written Redemption and Exchange
You can write to the Fund at 1818 Market Street,
Philadelphia, PA 19103 to redeem some or all of your shares or
to request an exchange of any or all of your shares into
another mutual fund in the Delaware Group, subject to the same
conditions and limitations as other exchanges noted above. The
request must be signed by all owners of the account or your
investment dealer of record.
For redemptions of more than $50,000, or when the proceeds
are not sent to the shareholder(s) at the address of record,
the Fund requires a signature by all owners of the account and
may require a signature guarantee. Each signature guarantee
must be supplied by an eligible guarantor institution. The
Fund reserves the right to reject a signature guarantee
supplied by an eligible institution based on its
creditworthiness. The Fund may require further documentation
from corporations, executors, retirement plans, administrators,
trustees or guardians.
Payment is normally mailed the next business day after
receipt of your redemption request. Certificates are issued
for shares only if you submit a specific request. If your
shares are in certificate form, the certificate(s) must
accompany your request and also be in good order.
You also may submit your written request for redemption or
exchange by facsimile transmission at the following number:
215-255-8864.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption
and exchange methods, you must have the Transfer Agent hold
your shares (without charge) for you. If you choose to have
your shares in certificate form, you may redeem or exchange
only by written request and you must return your certificates.
The Telephone Redemption--Check to Your Address of Record
service and the Telephone Exchange service, both of which are
described below, are automatically provided unless you notify
the Fund in writing that you do not wish to have such services
available with respect to your account. The Fund reserves the
right to modify, terminate or suspend these procedures upon 60
days' written notice to shareholders. It may be difficult to
reach the Fund by telephone during periods when market or
economic conditions lead to an unusually large volume of
telephone requests.
Neither the Fund nor its Transfer Agent is responsible for
any shareholder loss incurred in acting upon written or
telephone instructions for redemption or exchange of Fund
shares which are reasonably believed to be genuine. With
respect to such telephone transactions, the Fund will follow
reasonable procedures to confirm that instructions communicated
by telephone are genuine (including verification of a form of
personal identification) as, if it does not, the Fund or the
Transfer Agent may be liable for any losses due to unauthorized
or fraudulent transactions. A written confirmation will be
provided for all purchase, exchange and redemption transactions
initiated by telephone. By exchanging shares by telephone, you
are acknowledging prior receipt of a prospectus for the fund
into which your shares are being exchanged.
Telephone Redemption--Check to Your Address of Record
You or your investment dealer of record can have
redemption proceeds of $50,000 or less mailed to you at your
record address. Checks will be payable to the shareholder(s)
of record. Payment is normally mailed the next business day
after receipt of the redemption request.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred
to your predesignated bank account by wire or by check. You
should authorize this service when you open your account. If
you change your predesignated bank account, you must submit a
written authorization and you may need to have your signature
guaranteed. For your protection, your authorization must be on
file. If you request a wire, your funds will normally be sent
the next business day. If you ask for a check, it will
normally be mailed the next business day after receipt of your
redemption request to your predesignated bank account. There
are no fees for this redemption method, but the mail time may
delay getting funds into your bank account. Simply call your
Client Services Representative prior to the time the net asset
value is determined, as noted above.
Telephone Exchange
You or your investment dealer of record can exchange
shares into any fund in the Delaware Group under the same
registration. As with the written exchange service, telephone
exchanges are subject to the same conditions and limitations as
other exchanges noted above. Telephone exchanges may be
subject to limitations as to amounts or frequency.
DIVIDENDS AND DISTRIBUTIONS
Global Funds, Inc. declares a dividend on each Fund to all
shareholders of record of the Class of the Fund at the time the
offering price of shares is determined. See Purchase Price and
Effective Date under How to Buy Shares. Thus, when redeeming
shares, dividends continue to be credited up to and including
the date of redemption.
The Fund will normally declare and make payments from net
investment income on an annual basis. Payments from net
realized securities profits of the Fund, if any, will be made
in the quarter following the close of the fiscal year. Both
dividends and distributions, if any, are automatically
reinvested in your account at net asset value.
In addition to the dividends from net investment income
and distributions from realized securities profits that the
Fund may declare and make, as noted above, in order to satisfy
certain distribution requirements of the Tax Reform Act of
1986, the Fund may declare special year-end dividend and
capital gains distributions during October, November or
December to shareholders of record on a date in such month.
Such distributions, if received by shareholders by January 31,
are deemed to have been paid by the Fund and received by
shareholders on the earlier of the date paid or December 31 of
the prior year.
Each class of the Fund will share proportionately in the
investment income and expenses of the Fund, except that the
Class will not incur any distribution fee under Global Funds,
Inc.'s 12b-1 Plans which apply to Class A Shares, Class B
Shares and Class C Shares.
TAXES
The tax discussion set forth below is included for general
information only. Investors should consult their own tax
advisers concerning the federal, state, local or foreign tax
consequences of an investment in the Fund.
On August 5, 1997, President Clinton signed into law the
Taxpayer Relief Act of 1997 (the "1997 Act"). This new law
makes sweeping changes in the Internal Revenue Code (the
"Code"). Because many of these changes are complex, and only
indirectly affect the Fund and its distributions to you, they
are discussed in Part B. Changes in the treatment of capital
gains, however, are discussed in this section.
The Fund intends to qualify as a regulated investment
company under Subchapter M of the Code. As such, the Fund will
not be subject to federal income tax, or to any excise tax, to
the extent its earnings are distributed as provided in the Code
and it satisfies certain other requirements relating to the
sources of its income and diversification of its assets.
The Fund intends to distribute substantially all of its
net investment income and net capital gains, if any. Dividends
from net investment income or net short-term capital gains will
be taxable to those investors who are subject to income taxes
as ordinary income, whether received in cash or in additional
shares. It is expected that either none or only a nominal
portion of the Fund's dividends will be eligible for the
dividends-received deductions for corporations. The portion of
dividends paid by the Fund that so qualifies will be designated
each year in a notice from the Fund to the Fund's shareholders.
Distributions paid by the Fund from long-term capital
gains, whether received in cash or in additional shares, are
taxable to those investors who are subject to income taxes as
long-term capital gains, regardless of the length of time an
investor has owned shares in the Fund. The Fund does not seek
to realize any particular amount of capital gains during a
year; rather, realized gains are a by-product of Fund
management activities. Consequently, capital gains
distributions may be expected to vary considerably from year to
year. Also, for those investors subject to tax, if purchases
of shares in the Fund are made shortly before the record date
for a dividend or capital gains distribution, a portion of the
investment will be returned as a taxable distribution.
The Treatment of Capital Gain Distributions under the Taxpayer
Relief Act of 1997
The 1997 Act creates a category of long-term capital gain
for individuals that will be taxed at new lower tax rates. For
investors who are in the 28% or higher federal income tax
brackets, these gains will be taxed at a maximum of 20%. For
investors who are in the 15% federal income tax bracket, these
gains will be taxed at a maximum of 10%. Capital gain
distributions will qualify for these new maximum tax rates,
depending on when the Fund's securities were sold and how long
they were held by the Fund before they were sold. Investors
who want more information on holding periods and other
qualifying rules relating to these new rates should review the
expanded discussion in Part B, or should contact their own tax
advisers.
Global Funds, Inc. will advise you in its annual
information reporting at calendar year end of the amount of its
capital gain distributions which will qualify for these maximum
federal tax rates.
Although dividends generally will be treated as
distributed when paid, dividends which are declared in October,
November or December to shareholders of record on a specified
date in one of those months, but which, for operational
reasons, may not be paid to the shareholder until the following
January, will be treated for tax purposes as if paid by the
Fund and received by the shareholder on December 31 of the
calendar year in which they are declared.
The sale of shares of the Fund is a taxable event and may
result in a capital gain or loss to shareholders subject to
tax. Capital gain or loss may be realized from an ordinary
redemption of shares or an exchange of shares between the Fund
any other fund in the Delaware Group.
The Fund may be subject to foreign withholding taxes on
income from certain of its foreign securities. If more than
50% in value of the total assets of the Fund at the end of its
fiscal year are invested in securities of foreign corporations,
the Fund may elect to pass-through to its shareholders a pro-
rata share of foreign income taxes paid by the Fund. If this
election is made, shareholders will be (i) required to include
in their gross income their pro-rata share of foreign source
income (including any foreign taxes paid by the Fund), and (ii)
entitled to either deduct (as an itemized deduction in the case
of individuals) their share of such foreign taxes in computing
their taxable income or to claim a credit for such taxes
against their U.S. income tax, subject to certain limitations
under the Code. Shareholders will be informed by the Fund at
the end of each calendar year regarding the availability of any
credits on and the amount of foreign source income to be
included in their income tax returns.
In addition to the federal taxes described above,
shareholders may or may not be subject to various state and
local taxes. For example, distributions of interest income and
capital gains realized from certain types of U.S. government
securities may be exempt from state personal income taxes.
Because investors' state and local taxes may be different than
the federal taxes described above, investors should consult
their own tax advisers.
Each year, Global Funds, Inc. will mail to you information
on the tax status of the Fund's dividends and distributions.
Shareholders will also receive each year information as to the
portion of dividend income that is derived from U.S. government
securities that are exempt from state income tax. Of course,
shareholders who are not subject to tax on their income would
not be required to pay tax on amounts distributed to them by
the Fund.
Global Funds, Inc. is required to withhold 31% of taxable
dividends, capital gains distributions, and redemptions paid to
shareholders who have not complied with IRS taxpayer
identification regulations. You may avoid this withholding
requirement by certifying on your Investment Application your
proper Taxpayer Identification Number and by certifying that
you are not subject to backup withholding.
See Accounting and Tax Issues and Taxes in Part B for
additional information on tax matters relating to the Fund and
its shareholders.
CALCULATION OF NET ASSET VALUE PER SHARE
The purchase and redemption price of Class shares is the
net asset value ("NAV") per share of Class shares next computed
after the order is received. The NAV is computed as of the
close of regular trading on the New York Stock Exchange
(ordinarily, 4 p.m., Eastern time) on days when the Exchange is
open.
The NAV per share is computed by adding the value of all
securities and other assets in the Fund's portfolio, deducting
any liabilities of the Fund (expenses and fees are accrued
daily) and dividing by the number of the Fund's shares
outstanding. Portfolio securities for which market quotations
are available are priced at market value. Debt securities are
priced at fair value by an independent pricing service using
methods approved by Global Funds, Inc.'s Board of Directors.
Short-term investments having a maturity of less than 60 days
are valued at amortized cost, which approximates market value.
All other securities are valued at their fair value as
determined in good faith and in a method approved by Global
Funds, Inc.'s Board of Directors.
The Fund's portfolio securities, from time to time, may be
listed primarily on foreign exchanges which trade on days when
the New York Stock Exchange is closed (such as Saturday). As a
result, the net asset value of the Fund may be significantly
affected by such trading on days when shareholders have no
access to the Fund.
The net asset values of all outstanding shares of each
class of the Fund will be computed on a pro-rata basis for each
outstanding share based on the proportionate participation in
the Fund represented by the value of shares of that class. All
income earned and expenses incurred by the Fund will be borne
on a pro-rata basis by each outstanding share of a class, based
on each class' percentage in the Fund represented by the value
of shares of such classes, except that the Class will not incur
any of the expenses under the Fund's 12b-1 Plans and Class A,
Class B and Class C Shares of the Fund alone will bear the 12b-
1 Plan expenses payable under their respective 12b-1 Plans.
Due to the specific distribution expenses and other costs that
will be allocable to each class, the net asset value of each
class of the Fund will vary.
MANAGEMENT OF THE FUND
Directors
The business and affairs of Global Funds, Inc. are managed
under the direction of its Board of Directors. Part B contains
additional information regarding Global Funds, Inc.'s directors
and officers.
Investment Manager and Sub-Adviser
The Manager furnishes investment management services to
the Fund. The Manager has offices located at 80 Cheapside,
Third Floor, London, England EC2V 6EE.
Delaware Management Company, Inc. ("Delaware") and its
predecessors have been managing the funds in the Delaware Group
since 1938. On October 30, 1997, Delaware and its affiliates
in the Delaware Group, including the Manager, were managing in
the aggregate more than $38 billion in assets in the various
institutional or separately managed (approximately
$22,496,609,000) and investment company (approximately
$16,012,252,000) accounts.
Delaware is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. ("DMH"). The Manager is
also controlled by DMH through several subsidiaries. On April
3, 1995, a merger between DMH and a wholly owned subsidiary of
Lincoln National Corporation ("Lincoln National") was
completed. DMH, Delaware and the Manager are now indirect,
wholly owned subsidiaries, and subject to the ultimate control,
of Lincoln National. Lincoln National, with headquarters in
Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry,
including insurance and investment management.
The Manager manages the Fund's investments and for its
services, the Manager is paid an annual fee equal to 1.25% of
the average daily net assets of the Fund.
The Manager has elected voluntarily to waive that portion,
if any, of the annual management fees payable by the and to pay
expenses of the Fund to the extent necessary to ensure that the
Total Operating Expenses (exclusive of taxes, interest,
brokerage commissions and extraordinary expenses) of Class A
Shares, Class B Shares and Class C Shares do not exceed 1.25%
through May 31, 1998.
The investment management fees paid to the Manager, while
higher than the advisory fees paid by other mutual funds in
general, are comparable to fees paid by other mutual funds with
similar objectives and policies.
Clive A. Gillmore and Timothy W. Sanderson have primary
responsibility for making day-to-day investment decisions for
the Fund and have co-managed the Fund since its inception. A
graduate of the University of Warwick and having begun his
career at Legal and General Investment Management, Mr. Gillmore
joined the Delaware Group in 1990 after eight years of
investment experience. His most recent position prior to
joining the Delaware Group was as a Pacific Basin equity
analyst and senior portfolio manager for Hill Samuel Investment
Advisers Ltd. Mr. Gillmore completed the London Business
School Investment program. Mr. Sanderson began his investment
career in 1979 with Hill Samuel Investment Management Group.
Prior to joining Delaware International Advisers Ltd. in 1990
as Senior Portfolio Manager and Director, he was an analyst and
senior portfolio manager for Hill Samuel where, since 1987, he
had responsibility for Pacific Basin research and the
management of international institutional portfolios.
In making investment decisions for the Fund, Mr. Gillmore
and Mr. Sanderson regularly consult with Fiona A. Barwick. Ms.
Barwick, a portfolio manager, joined the Delaware Group in 1993
to cover the Pacific Basin markets. Prior to this, she spent
three years at Touche Remnant & Co. in London as an assistant
portfolio manager and research analyst. She is a graduate of
University College, London.
Portfolio Trading Practices
The Fund normally will not invest for short-term trading
purposes. However, the Fund may sell securities without regard
to the length of time they have been held. The degree of
portfolio activity will affect brokerage costs of the Fund and
may affect taxes payable by the Fund's shareholders to the
extent that net capital gains are realized. Given the Fund's
investment objective, it is anticipated that the portfolio
turnover rate of the Fund will not exceed 100%.
The Manager uses its best efforts to obtain the best
available price and most favorable execution for portfolio
transactions. Orders may be placed with brokers or dealers who
provide brokerage and research services to the Manager or their
advisory clients. These services may be used by the Manager in
servicing any of their respective accounts. Subject to best
price and execution, the Manager may consider a broker/dealer's
sales of shares of funds in the Delaware Group of funds in
placing portfolio orders and may place orders with
broker/dealers that have agreed to defray certain expenses of
such funds, such as custodian fees.
Performance Information
From time to time, the Fund may quote total return
performance of the Class in advertising and other types of
literature.
Total return will be based on a hypothetical $1,000
investment, reflecting the reinvestment of all distributions at
net asset value. Each presentation will include the average
annual total return for one-, five- and ten-year (or life of
fund, if applicable) periods. The Fund may also advertise
aggregate and average total return information concerning the
Class over additional periods of time.
Because securities prices fluctuate, investment results of
the Class will fluctuate over time. Past performance is not
considered a guarantee of future results.
Statements and Confirmations
You will receive quarterly statements of your account
summarizing all transactions during the period. A confirmation
statement will be sent following all transactions other than
those involving a reinvestment of dividends. You should
examine statements and confirmations immediately and promptly
report any discrepancy by calling your Client Services
Representative.
Financial Information about the Fund
Each fiscal year, you will receive an audited annual
report and an unaudited semi-annual report. These reports
provide detailed information about the Fund's investments and
performance. Global Funds, Inc.'s fiscal year ends on
November 30.
Distribution and Service
The Distributor, Delaware Distributors, L.P., serves as
the national distributor for the Fund's shares under a
Distribution Agreement with Global Funds, Inc. dated as of July
21, 1997.
The Transfer Agent, Delaware Service Company, Inc., serves
as the shareholder servicing, dividend disbursing and transfer
agent for the Fund under an amended and restated agreement.
The Transfer Agent also provides accounting services to the
Fund pursuant to the terms of a separate Fund Accounting
Agreement. The directors annually review service fees paid to
the Transfer Agent. Certain recordkeeping services and other
shareholder services that otherwise would be performed by the
Transfer Agent may be performed by certain other entities and
the Transfer Agent may elect to enter into an agreement to pay
such other entities for those services. In addition,
participant account maintenance fees may be assessed for
certain recordkeeping services provided as part of retirement
plan and administration service packages. These fees are based
on the number of participants in the plan and the various
services selected. Fees will be quoted upon request and are
subject to change.
The Distributor and the Transfer Agent are indirect,
wholly owned subsidiaries of DMH.
Expenses
The Fund is responsible for all of its own expenses other
than those borne by the Manager under the Investment Management
Agreement and those borne by the Distributor under the
Distribution Agreement.
Shares
Global Funds, Inc. is an open-end management investment
company. Commonly known as a mutual fund, Global Funds, Inc.
was organized as a Maryland corporation on May 30, 1991.
Global Funds, Inc. currently offers six series of shares -
International Equity Series, International Small Cap Series,
Global Bond Series, Global Assets Series, Emerging Markets
Series and Global Equity Series. Fund shares have a par value
of $.01 and when issued will be fully paid, non-assessable,
fully transferable and redeemable at the option of the holder.
The shares have no preference as to conversion, exchange,
dividends, retirement or other features and have no preemptive
rights. Each Fund will vote separately on any matter which
affects only that Fund. Shares of each Fund have a priority
over shares of any other fund of Global Funds, Inc. in the
assets and income of that Fund.
Global Funds, Inc.'s shares have noncumulative voting
rights which means that the holders of more than 50% of Global
Funds, Inc.'s shares voting for the election of directors can
elect 100% of the directors if they choose to do so. Under
Maryland law, Global Funds, Inc. is not required, and does not
intend, to hold annual meetings of shareholders unless, under
certain circumstances, it is required to do so under the 1940
Act. Shareholders of 10% or more of Global Funds, Inc.'s
outstanding shares may request that a special meeting be called
to consider the removal of a director.
In addition to Institutional Class shares, the Fund also
offers International Small Cap Fund A Class, International
Small Cap Fund B Class and International Small Cap Fund C
Class. Shares of each Class represent proportionate interests
in the assets of the Fund and have the same voting and other
rights and preferences as the other classes of the Fund, except
that shares of the Classes are not subject to, and may not vote
on matters affecting, the Distribution Plans under Rule 12b-1
relating to Class A, Class B and Class C Shares.
It is expected that The Lincoln National Life Insurance
Company ("Lincoln") will make an investment in the Fund, which
could result in Lincoln holding up to 100% of the outstanding
shares of the Fund. Subject to certain limited exceptions,
there would be no limitation on the Lincoln's ability to redeem
its shares of the Fund and it may elect to do so at any time.
OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS
Repurchase Agreements
The Fund also may use repurchase agreements that are at
least 100% collateralized by securities in which the Fund can
invest directly, including securities issued or guaranteed by
the U.S. Government or its agencies or instrumentalities.
Repurchase agreements help the Fund to invest cash on a
temporary basis. The Fund may invest cash balances in joint
repurchase agreements with other Delaware Group funds. Under a
repurchase agreement, the Fund acquires ownership and
possession of a security, and the seller agrees to buy the
security back at a specified time and higher price. Repurchase
agreements involve the risks of loss if a seller defaults on
its obligations under the agreements. If the seller is unable
to repurchase the security, the Fund could experience delays in
liquidating the securities. To minimize this possibility, the
Manager, pursuant to direction from the Global Funds, Inc.'s
Board of Directors, considers the creditworthiness of banks and
dealers when entering into repurchase agreements.
Portfolio Loan Transactions
The Fund may loan up to 25% of its assets to qualified
broker/dealers or institutional investors for their use
relating to short sales or other security transactions.
The major risk to which the Fund would be exposed on a
loan transaction is the risk that the borrower would go
bankrupt at a time when the value of the security goes up, and
the borrower would fail to return the borrowed security.
Therefore, the Fund will only enter into loan arrangements
after a review of all pertinent facts by the Manager, subject
to overall supervision by the Board of Directors, including the
creditworthiness of the borrowing broker, dealer or institution
and then only if the consideration to be received from such
loans would justify the risk. In addition, the Fund will
require borrowers to deliver collateral to the Fund before
lending securities. Creditworthiness will be monitored on an
ongoing basis by the Manager.
Borrowings
The Fund may borrow money as a temporary measure for
extraordinary purposes or to facilitate redemptions. The Fund
will not borrow money in excess of one-third of the value of
its net assets. The Fund has no intention of increasing its
net income through borrowing. Any borrowing will be done from
a bank and, to the extent that such borrowing exceeds 5% of the
value of the Fund's net assets, asset coverage of at least 300%
is required. In the event that such asset coverage shall at
any time fall below 300%, the Fund shall, within three days
thereafter (not including Sunday or holidays) or such longer
period as the U.S. Securities and Exchange Commission may
prescribe by rules and regulations, reduce the amount of its
borrowings to such an extent that the asset coverage of such
borrowings shall be at least 300%. The Fund will not pledge
more than 10% of its net assets, or issue senior securities as
defined in the 1940 Act, except for notes to banks. Investment
securities will not be purchased while the Fund has an
outstanding borrowing.
Rule 144A Securities
While maintaining oversight, the Board of Directors of
Global Funds, Inc. has delegated to the Manager the day-to-day
functions of determining whether or not individual Rule 144A
Securities are liquid for purposes of the Fund's 15% limitation
on investments in illiquid assets. The Board has instructed
the Manager to consider the following factors in determining
the liquidity of a Rule 144A Security: (i) the frequency of
trades and trading volume for the security; (ii) whether at
least three dealers are willing to purchase or sell the
security and the number of potential purchasers; (iii) whether
at least two dealers are making a market in the security; and
(iv) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers, and the mechanics of
transfer).
If the Manager determines that a Rule 144A Security which
was previously determined to be liquid is no longer liquid and,
as a result, the Fund's holdings of illiquid securities exceed
the Fund's 15% limitation on investments in such securities,
the Manager will determine what action to take to ensure that
the Fund continues to adhere to its respective limitation.
Investment Company Securities
Any investments that the Fund makes in either closed-end
or open-end investment companies will be limited by the 1940
Act, and would involve an indirect payment of a portion of the
expenses, including advisory fees, of such other investment
companies. Under the 1940 Act's limitations, the Fund may not
(1) own more than 3% of the voting stock of another investment
company; (2) invest more than 5% of the Fund's total assets in
the shares of any one investment company; nor (3) invest more
than 10% of the Fund's total assets in shares of other
investment companies. These percentage limitations also apply
to the Fund's investments in unregistered investment companies.
Foreign Currency Transactions
Although the Fund values its assets daily in terms of U.S.
dollars, it does not intend to convert its holdings of foreign
currencies into U.S. dollars on a daily basis. The Fund will,
however, from time to time, purchase or sell foreign currencies
and/or engage in forward foreign currency transactions in order
to expedite settlement of portfolio transactions and to
minimize currency value fluctuations. The Fund may conduct its
foreign currency exchange transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency
exchange market or through entering into contracts to purchase
or sell foreign currencies at a future date (i.e., a "forward
foreign currency" contract or "forward" contract). A forward
contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of
days from the date of the contract, agreed upon by the parties,
at a price set at the time of the contract. The Fund will
convert currency on a spot basis from time to time, and
investors should be aware of the costs of currency conversion.
The Fund may enter into forward contracts to "lock in" the
price of a security it has agreed to purchase or sell, in terms
of U.S. dollars or other currencies in which the transaction
will be consummated. By entering into a forward contract for
the purchase or sale, for a fixed amount of U.S. dollars or
foreign currency, of the amount of foreign currency involved in
the underlying security transaction, the Fund will be able to
protect itself against a possible loss resulting from an
adverse change in currency exchange rates during the period
between the date the security is purchased or sold and the date
on which payment is made or received.
When the Manager believes that the currency of a
particular country may suffer a significant decline against the
U.S. dollar or against another currency, the Fund may enter
into a forward foreign currency contract to sell, for a fixed
amount of U.S. dollars or other appropriate currency, the
amount of foreign currency approximating the value of some or
all of the Fund's securities denominated in such foreign
currency.
The Fund will not enter into forward contracts or maintain
a net exposure to such contracts where the consummation of the
contracts would obligate the Fund to deliver an amount of
foreign currency in excess of the value of the Fund's
securities or other assets denominated in that currency.
At the maturity of a forward contract, the Fund may either
sell the portfolio security and make delivery of the foreign
currency, or it may retain the security and terminate its
contractual obligation to deliver the foreign currency by
purchasing an "offsetting" contract with the same currency
trader obligating it to purchase, on the same maturity date,
the same amount of the foreign currency. The Fund may realize
a gain or loss from currency transactions.
The Fund also may purchase and write put and call options
on foreign currencies (traded on U.S. and foreign exchanges or
over-the-counter) for hedging purposes to protect against
declines in the U.S. dollar cost of foreign securities held by
the Fund and against increases in the U.S. dollar cost of such
securities to be acquired. Call options on foreign currency
written by the Fund will be covered, which means that the Fund
will own the underlying foreign currency. With respect to put
options on foreign currency written by the Fund, the Fund will
establish a segregated account with its Custodian Bank
consisting of cash, U.S. government securities or other high-
grade liquid debt securities in an amount equal to the amount
the Fund will be required to pay upon exercise of the put.
As in the case of other kinds of options, the writing of
an option on foreign currency will constitute only a partial
hedge, up to the amount of the premium received, and the Fund
could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on foreign currency may constitute an
effective hedge against fluctuations in exchange rates,
although, in the event of rate movements adverse to the Fund's
position, the Fund may forfeit the entire amount of the premium
plus related transaction costs. See Special Risk
Considerations.
Options
The Manager may employ options techniques in an attempt to
protect appreciation attained and to take advantage of the
liquidity available in the options market. The Fund may
purchase call options on foreign or U.S. securities and indices
and enter into related closing transactions. The Fund may also
purchase put options on such securities and indices and enter
into related closing transactions.
A call option enables the purchaser, in return for the
premium paid, to purchase securities from the writer of the
option at an agreed price up to an agreed date. The advantage
is that the purchaser may hedge against an increase in the
price of securities it ultimately wishes to buy or take
advantage of a rise in a particular index. The Fund will only
purchase call options to the extent that premiums paid on all
outstanding call options do not exceed 2% of its total assets.
A put option enables the purchaser of the option, in
return for the premium paid, to sell the security underlying
the option to the writer at the exercise price during the
option period, and the writer of the option has the obligation
to purchase the security from the purchaser of the option. The
Fund will only purchase put options to the extent that the
premiums on all outstanding put options do not exceed 2% of its
total assets. The advantage is that the purchaser can be
protected should the market value of the security decline or
should a particular index decline.
An option on a securities index gives the purchaser of the
option, in return for the premium paid, the right to receive
from the seller cash equal to the difference between the
closing price of the index and the exercise price of the
option.
Closing transactions essentially let the Fund offset put
options or call options prior to exercise or expiration. If
the Fund cannot effect closing transactions, it may have to
hold a security it would otherwise sell or deliver a security
it might want to hold.
In purchasing put and call options, the premium paid by
the Fund plus any transaction costs will reduce any benefit
realized by the Fund upon exercise of the option.
The Fund may use both Exchange-traded and over-the-counter
options. Certain over-the-counter options may be illiquid. The
Fund will only invest in such options to the extent consistent
with its 15% limitation on investment in illiquid securities.
The Fund will comply with U.S. Securities and Exchange
Commission asset segregation and coverage requirements when
engaging in these types of transactions.
Futures Contracts and Options on Futures Contracts
The principal purpose of the purchase or sale of futures
contracts for the Fund is to protect the Fund against the
fluctuations in interest or exchange rates which otherwise
might adversely affect the value of the Fund's portfolio
securities or adversely affect the prices of securities which
the Fund intends to purchase at a later date without actually
buying or selling such securities.
The Fund may enter into contracts for the purchase or sale
for future delivery of securities or foreign currencies. A
purchase of a futures contract means the acquisition of a
contractual right to obtain delivery to the Fund of the
securities or foreign currency called for by the contract at a
specified price during a specified future month. When a
futures contract is sold, the Fund incurs a contractual
obligation to deliver the securities or foreign currency
underlying the contract at a specified price on a specified
date during a specified future month. To the extent that the
Fund invests in futures contracts and options thereon for other
than bona fide hedging purposes, the Fund will not enter into
such transactions if, immediately thereafter, the sum of the
amount of initial margin deposits and premiums paid for open
futures options would exceed 5% of the Fund's total assets,
after taking into account unrealized profits and unrealized
losses on such contracts it has entered into; provided,
however, that, in the case of an option that is in-the-money at
the time of purchase, the in-the-money amount may be excluded
in calculating the 5%.
The Fund may also purchase and write options to buy or
sell futures contracts. Options on futures are similar to
options on securities except that options on futures give the
purchaser the right, in return for the premium paid, to assume
a position in a futures contract, rather than actually to
purchase or sell the futures contract, at a specified exercise
price at any time during the period of the option. When the
Fund enters into a futures transaction, it must deliver to the
futures commission merchant selected by the Fund an amount
referred to as "initial margin." This amount is maintained by
the futures commission merchant directly or on its behalf in an
account at the Custodian Bank. Thereafter, a "variation
margin" may be paid by the Fund to, or drawn by the Fund from,
such account in accordance with controls set for such accounts,
depending upon changes in the price of the underlying
securities subject to the futures contract.
To the extent that interest or exchange rates or
securities prices move in an unexpected direction, the Fund may
not achieve the anticipated benefits of investing in futures
contracts and options thereon, or may realize a loss. To the
extent that the Fund purchases an option on a futures contract
and fails to exercise the option prior to the exercise date, it
will suffer a loss of the premium paid. Further, the possible
lack of a secondary market could prevent the Fund from closing
out its positions relating to futures.
APPENDIX A--RATINGS
General Rating Information
Bonds
Excerpts from Moody's description of its bond ratings:
Aaa--judged to be the best quality. They carry the smallest
degree of investment risk; Aa--judged to be of high quality by
all standards; A--possess favorable attributes and are
considered "upper medium" grade obligations; Baa--considered as
medium grade obligations. Interest payments and principal
security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable
over any great length of time; Ba--judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterizes bonds in this class; B--generally lack
characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other
terms of the contract over any long period of time may be
small; Caa--are of poor standing. Such issues may be in
default or there may be present elements of danger with respect
to principal or interest; Ca--represent obligations which are
speculative in a high degree. Such issues are often in default
or have other marked shortcomings; C--the lowest rated class of
bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
Excerpts from S&P's description of its bond ratings: AAA-
-highest grade obligations. They possess the ultimate degree
of protection as to principal and interest; AA--also qualify as
high grade obligations, and in the majority of instances differ
from AAA issues only in a small degree; A--strong ability to
pay interest and repay principal although more susceptible to
changes in circumstances; BBB--regarded as having an adequate
capacity to pay interest and repay principal; BB, B, CCC, CC--
regarded, on balance, as predominantly speculative with respect
to capacity to pay interest and repay principal in accordance
with the terms of the obligation. BB indicates the lowest
degree of speculation and CC the highest degree of speculation.
While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions; C--reserved for
income bonds on which no interest is being paid; D--in default,
and payment of interest and/or repayment of principal is in
arrears.
For more information contact the Delaware Group at 800-
828-5052.
INVESTMENT MANAGER
Delaware International Advisers Ltd.
80 Cheapside
Third Floor
London, England EC2V 6EE
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
________________________________
INTERNATIONAL SMALL CAP FUND
________________________________
INSTITUTIONAL CLASS
________________________________
P R O S P E C T U S
________________________________
DECEMBER 22, 1997
