<PAGE>
DELAWARE
INVESTMENTS
Philadelphia * London
International Equity Fund
Global Equity Fund
(formerly Global Assets Fund)
New Pacific Fund
Emerging Markets Fund
Global Bond Fund
Class A o Class B o Class C
Prospectus
March 30, 1999
International and Global Funds
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
3
<PAGE>
Table of contents
Fund profiles page 2
International Equity Fund 2
Global Equity Fund 4
New Pacific Fund 6
Emerging Markets Fund 8
Global Bond Fund 11
How we manage the Funds page 13
Our investment strategies 13
International Equity Fund 13
Global Equity Fund 13
New-Pacific Fund
Emerging Market Fund
Global Bond Fund 15
The securities we typically invest in 19
The risks of investing in the Funds 22
Who manages the Funds page 25
Investment managers and sub-advisers 25
Portfolio managers 25
Fund administration (Who's who) 28
About your account page 29
Investing in the Funds 29
Choosing a share class 29
How to reduce your sales charge 31
How to buy shares 32
Retirement plans 33
How to redeem shares 34
Account minimums 35
Special services 36
Dividends, Distributions and Taxes 37
Certain management considerations page 38
Financial information page 40
Appendix A - Bond ratings page 50
Appendix B - Additional information on page 51
investment policies and
risk considerations
4
<PAGE>
Profile: International Equity Fund
What are the Fund's goals?
The International Equity Fund seeks long-term growth without undue risk to
principal. Although the Fund will strive to achieve its goal, there is no
assurance that it will.
What are the Fund's main investment strategies?
The Fund invests primarily in equity securities that provide the potential for
capital appreciation and income. The Fund is an international fund. As such, at
least 65% of the Fund's total assets will be invested in equity securities of
issuers from at least three foreign countries. An issuer is considered to be
from the country where it is located, where the majority of its assets are or
where it generates the majority of its operating income.
In selecting investments for the Fund,
o we place emphasis on identifying companies that are undervalued in terms
of such factors as assets, earnings, dividends and growth potential.
o in order to compare the value of different investments, we consider whether
the future dividends on a stock are expected to increase faster than,
slower than, or in line with the level of inflation, and we discount the
value of future anticipated dividends back to what they would be worth if
they were being paid today.
o we attempt to determine whether a particular currency is overvalued or
undervalued by comparing the amount of goods and services that a dollar
will buy in the United States to the amount of foreign currency required to
buy the same amount of goods and services in another country. When the
dollar buys less, the foreign currency may be considered to be overvalued,
and when the dollar buys more, the foreign currency may be considered to be
undervalued. Securities in an undervalued currency may offer greater
potential returns, and may be an attractive investment for the Fund.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. This Fund
will be affected primarily by declines in stock prices, which can be caused by a
drop in foreign stock markets or poor performance in specific industries or
companies. Because the Fund invests in international securities in both
established and developing countries, it will be affected by international
investment risks related to changes in currency valuations, political
instability, economic instability, and lax accounting and regulatory
standards. For a more complete discussion of risk, please turn to page 32.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
5
<PAGE>
How has the International Equity Fund performed?
This bar chart and table can help you evaluate the risks of investing in the
Fund. We show how returns for the Fund's Class A shares have varied over the
past seven calendar years, as well as the average annual returns of all shares
for the one and five year periods and since inception. The Fund's past
performance is not necessarily an indication of how it will perform in the
future. The returns reflect voluntary expense caps, if any, in effect during the
periods. The returns would be lower without the voluntary caps. There is no
longer a voluntary expense cap in place for this Fund.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (CLASS A)]
Year-by-year total return (Class A)
1992 -1.46%
1993 28.20%
1994 1.65%
1995 11.52%
1996 20.23%
1997 4.26%
1998 9.03%
The Fund's Class A shares had a 0.63% fiscal year-to-date return as of February
28, 1999. During the periods illustrated in this bar chart, Class A's highest
return was 13.35% for the quarter ended December 31, 1998 and its lowest return
was -13.72% for the quarter ended September 30, 1998.
The maximum Class A sales charge of 5.75%, which is normally deducted when you
purchase shares, is not reflected in the total returns above. If this fee were
included, the returns would be less than those shown. The average annual returns
shown in the table on page 3 do include the sales charge.
How has the International Equity Fund performed? (continued)
Average annual returns for periods ending 12/31/98
<TABLE>
<CAPTION>
CLASS A B C Morgan Stanley Capital
International EAFE Index **
(if redeemed)* (if redeemed)*
(inception 10/31/91) (inception 9/6/94) (inception 11/29/95)
<S> <C> <C> <C> <C>
1 year 2.77% 3.21% 7.29% 20.33%
5 years 7.87% N/A N/A 9.50%
Lifetime 9.07% 7.33% 10.92% 8.97%
</TABLE>
The Fund's returns are compared to the performance of the Morgan Stanley Capital
International EAFE (Europe, Australia, Far East) Index. You should remember that
unlike the Fund, the index is unmanaged and doesn't reflect the costs of
operating a mutual fund, such as the costs of buying, selling and holding the
securities.
* If redeemed at end of period shown. If shares were not redeemed, the
returns for Class B would be 8.21% and 7.70%, respectively, for the
one-year and lifetime periods. Returns for Class C would be 8.29%, and
10.92%, respectively, for the one-year and lifetime periods.
** The Morgan Stanley Capital International EAFE Index return shown is for the
A Class lifetime period. The Index returns for Class B and Class C lifetime
periods were 9.02% and 10.46%, respectively. Maximum sales charges are
included in the Fund returns above.
6
<PAGE>
What are the International Equity Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund. The Fund may waive or reduce sales charges; please see the
Statement of Additional Information for details.
<TABLE>
<CAPTION>
- -------------------------------------------------------------- ------------ ---------- ----------
CLASS A B C
- -------------------------------------------------------------- ------------ ---------- ----------
<S> <C> <C> <C>
Maximum sales charge (load) imposed on
Purchases as a percentage of offering price 5.75% none none
- -------------------------------------------------------------- ------------ ---------- ----------
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
Redemption price, whichever is lower none(1) 5%2 1%3
- -------------------------------------------------------------- ------------ ---------- ----------
Maximum sales charge (load) imposed on
Reinvested dividends none none none
- -------------------------------------------------------------- ------------ ---------- ----------
Redemption fees none none none
- -------------------------------------------------------------- ------------ ---------- ----------
</TABLE>
Annual fund operating expenses are deducted from the Fund's assets before it
pays dividends and before its net asset value and total return are calculated.
We will not charge you separately for these expenses. These expenses are based
on amounts incurred during the Fund's most recent fiscal year.
CLASS A B C
- --------------------------------------------------------------------------------
Management fees 0.75% 0.75% 0.75%
- --------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
- --------------------------------------------------------------------------------
Other expenses 0.65% 0.65% 0.65%
- --------------------------------------------------------------------------------
Total operating expenses 1.70% 2.40% 2.40%
- --------------------------------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown. 4 This is an
example only, and does not represent future expenses, which may be greater or
less than those shown here.
CLASS(5) A B B C C
(if redeemed) (if redeemed)
- ---------------------------------------------------------------------------
1 year $738 $743 $243 $343 $243
- ---------------------------------------------------------------------------
3 years $1,080 $1,048 $748 $748 $748
- ---------------------------------------------------------------------------
5 years $1,445 $1,480 $1,280 $1,280 $1,280
- ---------------------------------------------------------------------------
10 years $2,468 $2,563 $2,563 $2,736 $2,736
- ---------------------------------------------------------------------------
1. A purchase of Class A shares of $1 million or more may be made at net
asset value. However, if you buy the shares through a financial adviser
who is paid a commission, a contingent deferred sales charge will apply
to certain redemptions. Additional Class A purchase options that
involve a contingent deferred sales charge may be permitted from time
to time and will be disclosed in the prospectus if they are available.
2. If you redeem Class B shares during the first year after you buy them,
you will pay a contingent deferred sales charge of 5%, which declines
to 4% during the second year, 3% during the third and fourth years, 2%
during the fifth year, 1% during the sixth year, and 0% thereafter.
3. Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
4. The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods
we show.
5. The Class B example reflects the conversion of Class B shares to Class
A Shares after approximately eight years. Information for the ninth and
tenth years reflects expenses of the Class A Shares.
7
<PAGE>
Profile: Global Equity Fund
What are the Fund's goals? The Global Equity Fund seeks long-term total return.
Although, the Fund will strive to achieve its goal, there is no assurance that
it will.
What are the Fund's main investment strategies?
The Fund invests primarily in U.S and foreign equity securities that provide the
potential for capital appreciation and income. Under normal circumstances, at
least 65% of the Fund's total assets will be invested in equity securities from
at least three different countries, one of which may be the United States. An
issuer is considered to be from the country where it is located, where the
majority of its assets are or where it generates the majority of its operating
income.
In selecting investments for the Fund,
o we try to identify companies that are undervalued in terms of such
factors as assets, earnings, dividends and growth potential.
o in order to compare the value of different investments, we consider whether
the future dividends on a stock are expected to increase faster than,
slower than, or in line with the level of inflation, and we discount the
value of future anticipated dividends back to what they would be worth if
they were being paid today.
o we attempt to determine whether a particular currency is overvalued or
undervalued by comparing the amount of goods and services that a dollar
will buy in the United States to the amount of foreign currency required to
buy the same amount of goods and services in another country. When the
dollar buys less, the foreign currency may be considered to be overvalued,
and when the dollar buys more, the foreign currency may be considered to be
undervalued. Securities in an undervalued currency may offer greater
potential returns, and may be an attractive investment for the Fund.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. This Fund
will be affected primarily by declines in stock prices, which can be caused by a
drop in the stock market or poor performance in specific industries or
companies. Because the Fund invests in foreign securities, it will be affected
by international investment risks related to changes in currency valuations,
political instability, economic instability and lax accounting and regulatory
standards. The Fund is considered "non-diversified" under federal laws that
regulate mutual funds. Thus, adverse effects on the Fund's investments may
affect a larger portion of its overall assets and subject the Fund to greater
risks. For a more complete discussion of risk, please turn to page 32.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
How has the Global Equity Fund performed?
8
<PAGE>
This bar chart and table can help you evaluate the risks of investing in the
Fund. We show how returns for the Fund's Class A shares have varied over the
past four calendar years, as well as the average annual returns of all shares
for the past year and since inception. The Fund's past performance is not
necessarily an indication of how it will perform in the future. On July 21,
1998, the Fund's name was changed from Global Assets Fund to Global Equity Fund
and the Fund's investment focus changed from a mix of foreign and U.S. stocks
and bonds to primarily foreign and U.S. stocks. The returns reflect voluntary
expense caps. The returns would be lower without the voluntary caps.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (CLASS A) ]
Year-by-year total return (Class A)
1995 24.73%
1996 15.50%
1997 11.04%
1998 8.54%
The Fund's Class A shares had a 0.83% fiscal year-to-date return as of February
28, 1999. During the periods illustrated in this bar chart, Class A's highest
return was 11.24% for the quarter ended December 31, 1998 and its lowest return
was -9.60% for the quarter ended September 30, 1998.
The maximum Class A sales charge of 5.75%, which is normally deducted when you
purchase shares, is not reflected in the total returns above. If this fee were
included, the returns would be less than those shown. The average annual returns
shown in the table on page 5 do include the sales charge.
How has the Global Equity Fund performed? (continued)
<TABLE>
<CAPTION>
Average annual returns for periods ending 12/31/98
CLASS A B C Morgan Stanley
Capital International
World Index**
(if redeemed)* (if redeemed)*
(Inception (Inception 12/27/94) (Inception 11/29/95)
<S> <C> <C> <C> <C>
12/27/94)
1 year 2.33% 2.75% 6.78% 24.80%
Lifetime 13.03% 13.57% 11.30% 19.01%
</TABLE>
The Fund's returns are compared to the performance of the Morgan Stanley Capital
International World Index. You should remember that unlike the Fund, the index
is unmanaged and doesn't reflect the costs of operating a mutual fund, such as
the costs of buying, selling and holding the securities. *If redeemed at end of
period shown. If shares were not redeemed, the returns for Class B would be
7.75% and 13.91%, respectively, for the one-year and lifetime periods. Returns
for Class C would be 7.78% and 11.30%, respectively, for the one-year and
lifetime periods.
** The Morgan Stanley Capital International World Index return shown is for
the Class A and Class B lifetime period. The Index return for Class C
lifetime period was 18.83%. Maximum sales charges are included in the Fund
returns above.
9
<PAGE>
What are the Global Equity Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund. The Fund may waive or reduce sales charges; please see the
Statement of Additional Information for details.
<TABLE>
<CAPTION>
- -------------------------------------------------------------- ------------ ---------- ----------
CLASS A B C
- -------------------------------------------------------------- ------------ ---------- ----------
Maximum sales charge (load) imposed on
<S> <C> <C> <C>
Purchases as a percentage of offering price 5.75% none None
- -------------------------------------------------------------- ------------ ---------- ----------
Maximum contingent deferred sales charge (load)
As a percentage of original purchase price or
Redemption price, whichever is lower none(1) 5%(2) 1%(3)
- -------------------------------------------------------------- ------------ ---------- ----------
Maximum sales charge (load) imposed on
Reinvested dividends none None none
- -------------------------------------------------------------- ------------ ---------- ----------
Redemption fees none None none
- -------------------------------------------------------------- ------------ ---------- ----------
</TABLE>
Annual fund operating expenses are deducted from the Fund's assets before it
pays dividends and before its net asset value and total return are calculated.
We will not charge you separately for these expenses. These expenses are based
on amounts incurred during the Fund's most recent fiscal year.
- --------------------------------------------------------------------------------
CLASS A B C
- --------------------------------------------------------------------------------
Management fees4 0.85% 0.85% 0.85%
- --------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
- --------------------------------------------------------------------------------
Other expenses 0.94% 0.94% 0.94%
- --------------------------------------------------------------------------------
Total operating expenses5 2.09% 2.79% 2.79%
- --------------------------------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown. 6 This is an
example only, and does not represent future expenses, which may be greater or
less than those shown here.
CLASS 7 A B B C C
(no redemption) (no redemption)
- -------------------------------------------------------------------------------
1 year $775 $782 $282 $382 $282
- -------------------------------------------------------------------------------
3 year $1,192 $1,165 $865 $865 $865
- -------------------------------------------------------------------------------
5 year $1,634 $1,674 $1,474 $1,474 $1,474
- -------------------------------------------------------------------------------
10 year $2,857 $2,952 $2,952 $3,119 $3,116
- -------------------------------------------------------------------------------
1. A purchase of Class A shares of $1 million or more may be made at net
asset value. However, if you buy the shares through a financial adviser
who is paid a commission, a contingent deferred sales charge will apply
to certain redemptions. Additional Class A purchase options that
involve a contingent deferred sales charge may be permitted from time
to time and will be disclosed in the prospectus if they are available.
2. If you redeem Class B shares during the first year after you buy them,
you will pay a contingent deferred sales charge of 5%, which declines
to 4% during the second year, 3% during the third and fourth years, 2%
during the fifth year, 1% during the sixth year, and 0% thereafter.
3. Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
4. Beginning April 1, 1999, a new management fee schedule will be in
effect. The fee table has been restated to reflect this new schedule.
5. The investment manager has agreed to waive fees and pay expenses from
June 1, 1998 through May 31,1999, in order to prevent total operating
expenses (excluding any taxes, interest, brokerage fees, extraordinary
expenses and 12b-1 fees) from exceeding 1.55% of average daily net
assets. The fees and expenses shown in the table above do not reflect
this voluntary expense cap. The manager's voluntary commitments of
waiver and payment have varied over the life of the Fund. The following
table shows actual operating expenses, reflecting the Manager's
current fee waivers and payments.
10
<PAGE>
Actual Fund expenses including voluntary expense caps
CLASS A B C
Management fees 0.61% 0.61% 0.61%
Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
Other expenses 0.94% 0.94% 0.94%
Total operating expenses 1.85% 2.55% 2.55%
6. The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods
we show. This example does not reflect the voluntary expense cap
described in footnote 4.
7. The Class B example reflects the conversion of Class B Shares to Class
A Shares after approximately eight years. Information for the ninth and
tenth years reflects expenses of the Class A Shares.
11
<PAGE>
Profile: New Pacific Fund
What are the Fund's goals?
New Pacific Fund seeks to maximize long-term capital appreciation by investing
primarily in equity securities of companies that are domiciled in or have their
principal business activities in the Pacific Basin. Although the Fund will
strive to achieve its goal, there is no assurance that it will.
What are the Fund's main investment strategies?
The Fund invests primarily in stocks of companies of all sizes that are located
in or have their principal business activities in countries located in the
Pacific Basin. These countries include, but are not limited to, Australia,
China, Hong Kong, Japan, Philippines, Singapore, Taiwan and Malaysia. The Fund
may invest in both established and developing countries. Under normal
circumstances we will invest at least 65% of the Fund's net assets in Pacific
Basin countries.
In selecting stocks for the portfolio, we look for companies that can benefit
from future economic growth in the region. We evaluate both individual countries
to determine how much of the portfolio should be allocated to companies located
there and also individual companies. When evaluating individual companies, we
consider the growth prospects for the company and its industry, the financial
strength of the company and the quality of its management, and whether the stock
appears overvalued or undervalued compared to other stocks in the market or in
its industry.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of the securities held by the
Fund may increase and decrease, sometimes rapidly and unpredictably. Therefore,
the Fund's share price could increase or decrease significantly, particularly
over the short term. Because the Fund invests in foreign securities in both
established and developing countries, it will be affected by international
investment risks related to changes in currency valuations, political
instability, economic instability or lax accounting and regulatory standards.
These risks and others are described more fully on page 32.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
12
<PAGE>
How has the New Pacific Fund performed?
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show how returns for the Fund's Class A shares have varied over
the past five calendar years, as well as average annual returns of all shares
for one and five years and since inception, if applicable. The Fund's past
performance does not necessarily indicate how it will perform in the future. The
Class' returns reflect voluntary expense caps. The returns would be lower
without the voluntary caps.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (CLASS A)]
Year-by-year total return (Class A)
1998 -22.24%
1997 -31.85%
1996 7.72%
1995 -3.75%
1994 -11.02%
The Fund's Class A shares had a -26.39% fiscal year-to-date return as of January
31, 1999. During the periods illustrated in this bar chart, Class A's highest
return was 16.01% for the quarter ended December 31, 1998 and its lowest return
was -26.10% for the quarter ended December 31, 1997.
The maximum Class A sales charge of 5.75%, which is normally deducted when you
purchase shares, is not reflected in the total returns above. If this fee were
included, the returns would be less than those shown. The average annual returns
shown in the table on page 7 do include the sales charge.
How has the New Pacific Fund performed? (continued)
<TABLE>
<CAPTION>
Average annual returns for periods ending 12/31/98
CLASS A B C Morgan Stanley
(if redeemed)* (if redeemed)* Pacific Index**
(Inception 12/3/93) (Inception 3/29/94) (Inception 7/7/94)
<S> <C> <C> <C> <C>
1 year -26.69% -26.69% -23.52% 2.69%
5 years -14.36% N/A N/A -3.95%
Lifetime** -12.81% -12.66% -13.42% -2.60%
</TABLE>
The Fund's returns are compared to the performance of the Morgan Stanley Pacific
Index. You should remember that unlike the Fund, the index is unmanaged and
doesn't reflect the costs of operating a mutual fund, such as the costs of
buying, selling and holding the securities.
* If redeemed at end of period shown. If shares were not redeemed, the
returns for Class B would be -22.83% and -12.31% for the one-year and
lifetime periods, respectively. Returns for Class C would be -22.74%
and -13.42% for the one-year and lifetime periods, respectively.
** The Morgan Stanley Pacific Index return is for Class A lifetime period.
The Index returns for Class B and Class C lifetime periods were -5.73%
and -8.07%, respectively. Maximum sales charges are included in the
Fund returns above.
13
<PAGE>
What are the New Pacific Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund. The Fund may waive or reduce sales charges; please see the
Statement of Additional Information for details.
<TABLE>
<CAPTION>
------------------------------------------------------ ----------- ---------- ----------
CLASS A B C
------------------------------------------------------ ----------- ---------- ----------
<S> <C> <C> <C>
Maximum sales charge (load) imposed on purchases as 5.75% none none
a percentage of offering price
------------------------------------------------------ ----------- ---------- ----------
Maximum contingent deferred sales charge (load) as a none1 5%2 1%3
percentage of original purchase price or redemption
price, whichever is lower
------------------------------------------------------ ----------- ---------- ----------
Maximum sales charge (load) imposed on reinvested none none none
dividends
------------------------------------------------------ ----------- ---------- ----------
Redemption fees none none none
------------------------------------------------------ ----------- ---------- ----------
</TABLE>
Annual fund operating expenses are deducted from the Fund's assets before it
pays dividends and before its net asset value and total return are calculated.
We will not charge you separately for these expenses. These expenses are based
on amounts incurred during the Fund's most recent fiscal year.
<TABLE>
------------------------------------------------------ ----------- ---------- ----------
<S> <C> <C> <C> <C>
Management fees4 0.85% 0.85% 0.85%
------------------------------------------------------ ----------- ---------- ----------
Distribution and service (12b-1) fees 0.30%5 1.00% 1.00%
------------------------------------------------------ ----------- ---------- ----------
Other expenses 2.13% 2.13% 2.13%
------------------------------------------------------ ----------- ---------- ----------
Total operating expenses6 3.28% 3.98% 3.98%
------------------------------------------------------ ----------- ---------- ----------
</TABLE>
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.7This is an
example only, and does not represent future expenses, which may be greater or
less than those shown here.
<TABLE>
<CAPTION>
-------------- -------------- ------------- ------------------- -------------- ------------------
CLASS8 A B B C C
(if redeemed) (if redeemed)
---------------- ------------ ------------- ------------------- -------------- ------------------
<S> <C> <C> <C> <C> <C>
1 year $887 $900 $400 $500 $400
---------------- ------------ ------------- ------------------- -------------- ------------------
3 years $1,527 $1,512 $1,212 $1,212 $1,212
---------------- ------------ ------------- ------------------- -------------- ------------------
5 years $2,189 $2,241 $2,041 $2,041 $2,041
---------------- ------------ ------------- ------------------- -------------- ------------------
10 years $3,946 $4,041 $4,041 $4,189 $4,189
---------------- ------------ ------------- ------------------- -------------- ------------------
</TABLE>
1. A purchase of Class A shares of $1 million or more may be made at net
asset value. However, if you buy the shares through a financial adviser
who is paid a commission, a contingent deferred sales charge will apply
to certain redemptions. Additional Class A purchase options that
involve a contingent deferred sales charge may be permitted from time
to time and will be disclosed in the prospectus if they are available.
2. If you redeem Class B shares during the first year after you buy them,
you will pay a contingent deferred sales charge of 5%, which declines
to 4% during the second year, 3% during the third and fourth years, 2%
during the fifth year, 1% during the sixth year, and 0% thereafter.
3. Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
14
<PAGE>
4. Beginning April 1, 1999, a new management fee schedule will be in
effect. The fee table has been restated to reflect this new schedule.
5. Prior to May 6, 1996, 12b-1 Plan expenses for Class A shares were
0.35%. Beginning May 6, 1996, those expenses were reduced to 0.30%. The
expense information has been restated to reflect that change.
6. The investment manager has agreed to waive fees and pay expenses from
May 1, 1998 through April 30, 1999 in order to prevent total operating
expenses (excluding any taxes, interest, brokerage fees, extraordinary
expenses and 12b-1 fees) from exceeding 1.70% of average daily net
assets. The fees and expenses shown in the table above do not reflect
this voluntary expense cap. The manager's voluntary commitments of
waiver and payment were different prior to May 1, 1998.
Actual Fund expenses including voluntary expense caps
CLASS A B C
Management fees 0.00% 0.00% 0.00%
Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
Other expenses 1.70% 1.70% 1.70%
Total operating expenses 2.00% 2.70% 2.70%
7. The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods
we show. The example does not reflect the voluntary expense limitation
discussed in footnote 6.
8. The Class B example reflects the conversion of Class B shares to Class
A shares after approximately eight years. Information for the ninth and
tenth years reflects expenses of the Class A shares.
15
<PAGE>
Profile: Emerging Markets Fund
What are the Fund's goals?
The Emerging Markets Fund seeks long-term capital appreciation. Although the
Fund will strive to achieve its goal, there is no assurance that it will.
What are the Fund's main investment strategies?
The Fund invests primarily in equity securities of issuers located or operating
in 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 issuers from at least three different countries that are
considered to be emerging or developing. An issuer is considered to be from the
country where it is located, where the majority of its assets are or where it
generates the majority of its operating income. We may invest up to 35% of the
Fund's net assets in emerging market fixed-income securities. All of these may
be high yield, high risk fixed-income securities.
In selecting investments for the Fund
o we try to identify companies that are undervalued in terms of such factors
as assets, earnings, dividends and growth potential.
o in order to compare the value of different investments, we consider whether
the future dividends on a stock are expected to increase faster than,
slower than, or in line with the level of inflation, and we discount the
value of future anticipated dividends back to what they would be worth if
they were being paid today. Because many of the countries in which the Fund
invests are emerging countries, there may be less information available for
us to use in making this analysis than is available for more developed
countries.
o we attempt to determine whether a particular currency is overvalued or
undervalued by comparing the amount of goods and services that a dollar
will buy in the United States to the amount of foreign currency required to
buy the same amount of goods and services in another country. When the
dollar buys less, the foreign currency may be considered to be overvalued,
and when the dollar buys more, the foreign currency may be considered to be
undervalued. Securities in an undervalued currency may offer greater
potential returns, and may be an attractive investment for the Fund.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. This Fund
will be affected primarily by declines in stock prices, which can be caused by a
drop in foreign stock markets or poor performance in specific industries or
companies. The value of the Fund's investments and, therefore, the price of the
Fund's shares may be more volatile than investments in more developed markets.
Because the Fund invests in international securities in developing countries as
well as established countries, it will be affected by international investment
risks related to changes in currency valuations, political instability, economic
instability, or lax accounting and regulatory standards.
The Fund may invest up to 35% of its net assets in high yield, high risk foreign
fixed-income securities, which are subject to substantial risks, particularly
during periods of economic downturns or rising interest rates.
The Fund is considered "non-diversified" under federal laws that regulate mutual
funds. Thus, adverse effects on the Fund's investments may affect a larger
portion of its overall assets and subject the Fund to greater risks. For a more
complete discussion of risk, please turn to page 32.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
16
<PAGE>
How has the Emerging Markets Fund performed?
This bar chart and table can help you evaluate the risks of investing in the
Fund. We show how returns for the Fund's Class A shares have varied over the
past two calendar years, as well as the average annual returns of all shares for
the past year end and since inception. The Fund's past performance is not
necessarily an indication of how it will perform in the future. The returns
reflect voluntary expense caps in effect during the periods. The returns would
be lower without the voluntary caps.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (CLASS A)]
Year-by-year total return (Class A)
1997 1.33%
1998 -36.40%
The Fund's Class A shares had a -43.03% fiscal year-to-date return as of
February 28, 1999. During the periods illustrated in this bar chart, Class A's
highest return was 13.25% for the quarter ended June 30, 1997 and its lowest
return was -26.03% for the quarter ended June 30, 1998.
The maximum Class A sales charge of 5.75%, which is normally deducted when you
purchase shares, is not reflected in the total returns above. If this fee were
included, the returns would be less than those shown. The average annual returns
shown in the table below include the sales charge.
How has the Emerging Markets Fund performed? (continued)
<TABLE>
<CAPTION>
Average annual returns for periods ending 12/31/98
CLASS A B C Morgan Stanley Capital International
Emerging Markets Free Index
(if redeemed)* (if redeemed)*
<S> <C> <C> <C> <C>
1 year -40.05% -39.98% -37.46% -25.34%
Since Inception -17.29% -16.86% -15.94% -16.74%
(6/10/96)
</TABLE>
The Fund's returns are compared to the performance of the Morgan Stanley Capital
International Emerging Markets Free Index. You should remember that unlike the
Fund, the index is unmanaged and doesn't reflect the costs of operating a mutual
fund, such as the costs of buying, selling and holding the securities.
*If redeemed at end of period shown. If shares were not redeemed, the returns
for Class B would be -36.82% and -15.94%, respectively, for the one-year and
lifetime periods. Returns for Class C would be -36.82% and -15.94%,
respectively, for the one-year and lifetime periods.
17
<PAGE>
What are the Emerging Market Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund. The Fund may waive or reduce sales charges; please see the
Statement of Additional Information for details.
<TABLE>
<CAPTION>
- -------------------------------------------------------------- ------------ ---------- ----------
CLASS A B C
- -------------------------------------------------------------- ------------ ---------- ----------
<S> <C> <C> <C>
Maximum sales charge (load) imposed on
purchases as a percentage of offering price 5.75% none none
- -------------------------------------------------------------- ------------ ---------- ----------
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none1 5%2 1%3
- -------------------------------------------------------------- ------------ ---------- ----------
Maximum sales charge (load) imposed on
reinvested dividends none none none
- -------------------------------------------------------------- ------------ ---------- ----------
Redemption fees none none none
- -------------------------------------------------------------- ------------ ---------- ----------
</TABLE>
Annual fund operating expenses are deducted from the Fund's assets before it
pays dividends and before its net asset value and total return are calculated.
We will not charge you separately for these expenses. These expenses are based
on amounts incurred during the Fund's most recent fiscal year.
<TABLE>
<CAPTION>
- ------------------------------------------------- ------------ ------------ -----------
CLASS A B C
- ------------------------------------------------- ------------ ------------ -----------
<S> <C> <C> <C>
Management fees 1.25% 1.25% 1.25%
- ------------------------------------------------- ------------ ------------ -----------
Distribution and service (12b-1) fees 0.30% 4 1.00% 1.00%
- ------------------------------------------------- ------------ ------------ -----------
Other expenses 2.36% 2.36% 2.36%
- ------------------------------------------------- ------------ ------------ -----------
Total operating expenses 5 3.91% 4.61% 4.61%
- ------------------------------------------------- ------------ ------------ -----------
</TABLE>
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown. 6 This is an
example only, and does not represent future expenses, which may be greater or
less than those shown here.
<TABLE>
<CAPTION>
CLASS(7) A B B C C
(if redeemed) (if redeemed)
- ----------------- ----------- ------------ -------------------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
1 year $946 $962 $462 $562 $462
- ----------------- ----------- ------------ -------------------- ----------- -------------------
3 years $1,699 $1,691 $1,391 $1,391 $1,391
- ----------------- ----------- ------------ -------------------- ----------- -------------------
5 years $2,468 $2,528 $2,328 $2,328 $2,328
- ----------------- ----------- ------------ -------------------- ----------- -------------------
10 years $4,467 $4,552 $4,552 $4,701 $4,701
- ----------------- ----------- ------------ -------------------- ----------- -------------------
</TABLE>
<PAGE>
1. A purchase of Class A shares of $1 million or more may be made at net
asset value. However, if you buy the shares through a financial adviser
who is paid a commission, a contingent deferred sales charge will apply
to certain redemptions. Additional Class A purchase options that
involve a contingent deferred sales charge may be permitted from time
to time and will be disclosed in the prospectus if they are available.
2 If you redeem Class B shares during the first year after you buy them,
you will pay a contingent deferred sales charge of 5%, which declines
to 4% during the second year, 3% during the third and fourth years, 2%
during the fifth year, 1% during the sixth year, and 0% thereafter.
3 Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
4 The distributor has agreed to waive a portion of 12b-1 fees from
February 1, 1998 through May 31, 1999 in order to prevent these fees
from exceeding 0.25% of average daily net assets.
5. The investment manager has agreed to waive fees and pay expenses from
the commencement of the Fund's operations through May 31, 1999, in
order to prevent total operating expenses (excluding any taxes,
interest, brokerage fees, extraordinary expenses and 12b-1 fees) from
exceeding 1.70% of average daily net assets. The fees and expenses
shown in the table above do not reflect this voluntary expense cap.
18
<PAGE>
Actual Fund expenses including voluntary expense caps
CLASS A B C
Management fees 0.00% 0.00% 0.00%
Distribution and service (12b-1) fees 0.25% 1.00% 1.00%
Other expenses 1.70% 1.70% 1.70%
Total operating expenses 1.95% 2.70% 2.70%
6. The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods
in this example. This example does not reflect the voluntary expenses
cap described in footnotes 4 and 5.
7. The Class B example reflects the conversion of Class B Shares to Class
A Shares after approximately eight years. Information for the ninth and
tenth years reflects expenses of the Class A Shares.
19
<PAGE>
Profile: Global Bond Fund
What are the Fund's goals?
The Global Bond Fund seeks current income consistent with preservation of
principal. Although the Fund will strive to achieve its goal, there is no
assurance that it will.
What are the Fund's main investment strategies?
The Global Bond Fund invests primarily in fixed-income securities that may also
provide the potential for capital appreciation. The Fund is a global fund.
Therefore, at least 65% of the Fund's total assets will be invested in
fixed-income securities of issuers from at least three different countries, one
of which may be the United States. An issuer is considered to be from the
country where it is located, where the majority of its assets are or where it
generates the majority of its operating income.
In selecting investments for the Fund
o we discount the value of future anticipated interest and redemption
payments, adjusted to reflect the effects of inflation, back to what they
would be worth if they were being paid today in order to compare the value
of different investments.
o we attempt to determine whether a particular currency is overvalued or
undervalued by comparing the amount of goods and services that a dollar
will buy in the United States to the amount of foreign currency required to
buy the same amount of goods and services in another country. When the
dollar buys less, the foreign currency may be considered to be overvalued,
and when the dollar buys more, the foreign currency may be considered to be
undervalued. Securities in an undervalued currency may offer greater
potential returns, and may be an attractive investment for the Fund.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. The Fund's
investments normally decrease when there are declines in bond prices, which can
be caused by a drop in the bond market, an adverse change in interest rates or
an adverse situation affecting the issuer of the bond. Because the Fund invests
in international securities in both established and developing countries, it
will be affected by international investment risks related to changes in
currency valuations, political instability, economic instability, or lax
accounting and regulatory standards. The Fund may invest in high yield, high
risk foreign fixed-income securities, which are subject to substantial risks,
particularly during periods of economic downturns or rising interest rates.
The Fund is considered "non-diversified" under federal laws that regulate mutual
funds. Thus, adverse effects on the Fund's investments may affect a larger
portion of its overall assets and subject the Fund to greater risks. For a more
complete discussion of risk, please turn to page 32.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
20
<PAGE>
How has the Global Bond Fund performed?
This bar chart and table can help you evaluate the risks of investing in the
Fund. We show how returns for the Fund's Class A shares have varied over the
four calendar years since its inception, as well as the average annual returns
of all shares for the past year and since inception. The Fund's past performance
is not necessarily an indication of how it will perform in the future. The
returns reflect voluntary expense caps. The returns would be lower without the
voluntary caps.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (CLASS A) ]
Year-by-year total return (Class A)
1995 20.87%
1996 11.87%
1997 0.67%
1998 7.30%
The Fund's Class A shares had a 3.66% fiscal year-to-date return as of February
28, 1999. During the periods illustrated in this bar chart, Class A's highest
return was 5.82% for the quarter ended October 31, 1998 and its lowest return
was -1.41% for the quarter ended July 31, 1998.
The maximum Class A sales charge of 4.75%, which is normally deducted when you
purchase shares, is not reflected in the total returns above. If this fee were
included, the returns would be less than those shown. The average annual returns
shown in the table below do include the sales charge.
How has the Global Bond Fund performed? (continued)
<TABLE>
<CAPTION>
Average annual returns for periods ending 12/31/98
CLASS A B C Salomon Smith Barney World
Government Bond Index**
(if redeemed)* (if redeemed)*
(Inception 12/27/94) (Inception 12/27/94) (Inception 11/29/95)
<S> <C> <C> <C> <C>
1 year 2.20% 2.55% 5.59% 15.31%
Lifetime 8.57% 8.76% 6.03% 9.27%
</TABLE>
The Fund's returns are compared to the performance of the Salomon Smith Barney
World Government Bond Index. You should remember that unlike the Fund, the index
is unmanaged and doesn't reflect the costs of operating a mutual fund, such as
the costs of buying, selling, and holding the securities.
* If redeemed at end of period shown. If shares were not redeemed, the
returns for Class B would be 6.55% and 9.14%, respectively, for the
one-year and lifetime periods. Returns for Class C would be 6.59% and
6.03%, respectively, for the one-year and lifetime periods.
** The Salomon Smith Barney World Government Bond Index return shown is
for the A Class and B Class lifetime period. The Index return for Class
C lifetime period was 6.38%. Maximum sales charges are included in the
Fund returns above.
21
<PAGE>
What are the Global Bond Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund. The Fund may waive or reduce sales charges; please see the
Statement of Additional Information for details.
<TABLE>
<CAPTION>
- -------------------------------------------------------------- ------------ ---------- ----------
CLASS A B B
- -------------------------------------------------------------- ------------ ---------- ----------
<S> <C> <C> <C>
Maximum sales charge (load) imposed on
Purchases as a percentage of offering price 4.75% none none
- -------------------------------------------------------------- ------------ ---------- ----------
Maximum contingent deferred sales charge (load)
As a percentage of original purchase price or
Redemption price, whichever is lower none1 4%2 1%3
- -------------------------------------------------------------- ------------ ---------- ----------
Maximum sales charge (load) imposed on
Reinvested dividends none none none
- -------------------------------------------------------------- ------------ ---------- ----------
Redemption fees none none none
- -------------------------------------------------------------- ------------ ---------- ----------
</TABLE>
Annual fund operating expenses are deducted from the Fund's assets before it
pays dividends and before its net asset value and
total return are calculated. We will not charge you separately for these
expenses. These expenses are based on amounts incurred during the Fund's most
recent fiscal year.
- ------------------------------------------------- -------- -------- -------
CLASS A B C
- ------------------------------------------------- -------- -------- -------
Management fees 0.75% 0.75% 0.75%
- ------------------------------------------------- -------- -------- -------
Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
- ------------------------------------------------- -------- -------- -------
Other expenses 0.54% 0.54% 0.54%
- ------------------------------------------------- -------- -------- -------
Total operating expenses(4) 1.59% 2.29% 2.29%
- ------------------------------------------------- -------- -------- -------
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(5) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
<TABLE>
<CAPTION>
- ----------------- ----------- ------------ -------------------- ----------- -------------------
CLASS 6 A B B C C
(if redeemed) (if redeemed)
- ----------------- ----------- ------------ -------------------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
1 year $629 $632 $232 $332 $232
- ----------------- ----------- ------------ -------------------- ----------- -------------------
3 years $953 $1,015 $715 $715 $715
- ----------------- ----------- ------------ -------------------- ----------- -------------------
5 years $1,299 $1,425 $1,225 $1,225 $1,225
- ----------------- ----------- ------------ -------------------- ----------- -------------------
10 years $2,274 $2,450 $2,450 $2,626 $2,626
- ----------------- ----------- ------------ -------------------- ----------- -------------------
</TABLE>
1. A purchase of Class A shares at $1 million or more may be made at net
asset value. However, if you buy the shares through a financial adviser
who is paid a commission, a contingent deferred sales charge will apply
to certain redemptions. Additional Class A purchase options that
involve a contingent deferred sales charge may be permitted from time
to time and will be disclosed in the prospectus if they are available.
2. If you redeem Class B shares within two years of purchase, you will pay
a contingent deferred sales charge of 4%, which declines to 3% during
the third and fourth years, 2% during the fifth year, 1% during the
sixth year, and 0% thereafter.
3. Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
4. The investment manager has agreed to waive fees and pay expenses from
December 1, 1998 through May 31, 1999, in order to prevent total
operating expenses (excluding any taxes, interest, brokerage fees,
extraordinary expenses and 12b-1 fees) from exceeding 1% of average
daily net assets. The fees and expenses shown in the table above do
not reflect this voluntary expense cap. The manager's voluntary
commitments of waiver and payment have varied over the life of the
Fund.
22
<PAGE>
Actual Fund expenses including voluntary expense caps
CLASS A B C
Management fees 0.46% 0.46% 0.46%
Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
Other expenses 0.54% 0.54% 0.54%
Total operating expenses 1.30% 2.00% 2.00%
5. The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods
we show. This example does not reflect the voluntary expense cap
described in footnote 4.
6. The Class B example reflects the conversion of Class B shares to Class
A shares after approximately eight years. Information for the ninth and
tenth years reflects expenses of the Class A shares.
23
<PAGE>
How we manage the Funds
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for a particular Fund. Following are descriptions of how the
portfolio managers pursue the Funds' investment goals.
We take a disciplined approach to investing, combining investment
strategies and risk management techniques that can help shareholders
meet their goals.
International Equity Fund
International Equity Fund seeks long-term growth without undue risk to
principal. The Fund invests primarily in securities that provide the potential
for capital appreciation and income. The Fund will invest in a broad range of
equity securities including common stocks and, to a lesser extent, preferred
stocks, convertible securities and warrants. The Fund may also invest in
sponsored or unsponsored depositary receipts.
We may purchase securities in any foreign country, developed or emerging. We
currently anticipate investing in Australia, Belgium, Canada, Finland, France,
Germany, Hong Kong, Italy, Japan, Malaysia, the Netherlands, New Zealand,
Singapore, Spain, Switzerland and the United Kingdom. This is a representative
list; the Fund may invest in countries not listed here.
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 Euro
and European Currency Unit (ECU). The Fund may enter into forward foreign
currency exchange contracts (forward contracts) to buy or sell foreign
currencies. The Fund's use of forward contracts will not eliminate fluctuations
in the underlying prices of the securities that the Fund holds or intends to
purchase. While using forward contracts tends to minimize the risk of loss from
a decline in the value of a particular currency, using forward contracts also
tends to limit any potential gain that might result from the increase in value
of such currency.
For temporary defensive purposes, the Fund may invest all or a substantial
portion of its assets in high quality U.S. and foreign governmental and
corporate debt instruments. The Fund may also hold these securities pending
investment of proceeds from new sales of Fund shares and to maintain sufficient
cash to meet redemption requests.
Global Equity Fund
Global Equity Fund seeks long-term total return. The Fund invests in U.S. and
foreign equity securities that provide the potential for capital appreciation
and income. The Fund will invest in a broad range of equity securities including
common stocks and, to a lesser extent, preferred stocks, convertible securities
and warrants. The Fund may also invest in sponsored and unsponsored depositary
receipts.
We will invest in securities traded in equity markets and denominated in
currencies that we believe offer the best relative values within the global
investment universe. We generally strive to identify undervalued securities. We
analyze the issuing company's operations, financial statements and each
company's current valuation. In the selection process, we place special emphasis
on present dividend yield and expectations for dividend growth. We may purchase
securities in any foreign country, developed and underdeveloped, or emerging
market countries.
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 Euro
and European Currency Unit (ECU). The Fund may enter into forward foreign
currency exchange contracts (forward contracts) to buy or sell foreign
currencies. The Fund's use of forward contracts will not eliminate fluctuations
in the underlying prices of the securities that the Fund holds or intends to
purchase. While using forward contracts tends to minimize the risk of loss from
a decline in the value of a particular currency, using forward contracts also
tends to limit any potential gain that might result from the increase in value
of such currency.
24
<PAGE>
The Fund may seek to achieve growth through investment of up to 35% of its
assets in income producing debt securities such as U.S. or foreign government or
corporate bonds. As a general matter, the Fund only invests in debt securities
when we believe, considering the risks, that they offer better long-term
potential returns with less risk that investments in equity securities.
For temporary defensive purposes, the Fund may invest all or a substantial
portion of its assets in high quality U.S. and foreign governmental and
corporate debt instruments. The Fund may also hold these securities pending
investment of proceeds from new sales of Fund shares and to maintain sufficient
cash to meet redemption requests.
New Pacific Fund
New Pacific Fund seeks to maximize long-term capital appreciation. It seeks to
achieve this objective by investing primarily in equity securities of companies
domiciled or having their principal business activities in countries located in
the Pacific Basin.
The Fund will invest in companies of varying size, measured by assets, sales and
capitalization. The Fund will invest in companies in one or more of the
following Pacific Basin countries: Australia, China, Hong Kong, India,
Indonesia, Japan, Malaysia, New Zealand, Pakistan, the Philippines, Singapore,
South Korea, Sri Lanka, Taiwan and Thailand.
The Fund may invest in companies located in other countries or regions in the
Pacific Basin as those economies and markets become more accessible. The Fund
will invest in other countries or regions only after the decision to do so is
disclosed in an amendment to this prospectus. Any amendment to this prospectus
containing such a material change will be delivered to investors. While the Fund
will generally have investments in companies located in at least three different
countries or regions, the Fund may from time to time have investments only in
one or a few countries or regions.
The Fund invests in common stock and may invest in other securities with equity
characteristics, consisting of trust or limited partnership interests, preferred
stock, rights, warrants, and sponsored and unsponsored Depositary Receipts. The
Fund may also invest in convertible securities, consisting of debt securities or
preferred stock that may be converted into common stock or that carry the right
to purchase common stock. The Fund may invest in securities listed on foreign or
domestic securities exchanges and securities traded in foreign and domestic
over-the-counter markets and may invest in restricted or unlisted securities.
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 Euro
and ECU. The Fund may enter into forward foreign currency exchange contracts
(forward contracts) to buy or sell foreign currencies. The Fund's use of forward
contracts will not eliminate fluctuations in the underlying prices of the
securities that the Fund holds or intends to purchase. While using forward
contracts tends to minimize the risk of loss from a decline in the value of a
particular currency, using forward contracts also tends to limit any potential
gain that might result from the increase in value of such currency.
The Fund may invest up to 35% of its assets in securities of U.S. issuers. In
addition, the Fund may invest in short-term debt instruments to meet anticipated
day-to-day operating expenses and liquidity requirements.
The Fund may invest up to 5% of its assets in the securities of issuers that
have been in continuous operation for less than three years.
Emerging Markets Fund
Emerging Markets Fund seeks long-term capital appreciation. The Fund may invest
in a broad range of equity securities, including common stocks, and to a lesser
extent, preferred stocks, convertible securities and warrants. The Fund may also
invest in sponsored and unsponsored depositary receipts.
25
<PAGE>
We consider an "emerging country" to be any country that is generally recognized
to be an emerging or developing country by the international financial
community, including the World Bank and the International Finance Corporation,
or any country that is classified by the United Nations as developing. In
addition, any country that is included in the IFC Free Index or MSCI Emerging
Market Free Index is considered to be an "emerging country." As of the date of
this prospectus, more than 130 countries met our definition of an emerging
country. Approximately 40 of them currently have stock markets. This group of
developing or emerging countries includes almost every nation in the world
except the United States, Canada, Japan, Australia, New Zealand and most nations
located in Western and Northern Europe.
In deciding whether a particular security is an emerging country security, we
evaluate publicly available information and question individual companies to
determine if the company meets one of the following criteria:
o the principal trading market for the company's securities is in a
country that is emerging, based on the guidelines described above;
o the company generates 50% or more of its annual revenue from
operations in emerging countries, even though the company's
securities are traded in an established market or a combination of
emerging and established markets;
o the company is organized under the laws of an emerging market
country or has a principal office in an emerging country.
Currently, investing in many emerging countries is not feasible, or may involve
significant political risks. We focus our investments in emerging countries
where we consider the economies to be developing strongly and where the markets
are becoming more sophisticated. We believe that investment opportunities may
result from an evolving long-term international trend favoring more
market-oriented economies, a trend that may particularly benefit certain
countries having developing markets. Local or international political, economic
or financial developments could support this trend and benefit the capital
markets in such countries.
In deciding where to invest we place particular emphasis on factors such as
economic conditions (including growth trends, inflation rates and trade
balances), regulatory and currency controls, accounting standards and political
and social conditions. The Fund may invest in Argentina, Botswana, Brazil,
Chile, China, Colombia, Czech Republic, Estonia, Ghana, Greece, Hong Kong,
Hungary, India, Indonesia, Ivory Coast, Jamaica, Jordan, Kenya, Korea, Latvia,
Lithuania, Malaysia, Mauritius, Mexico, Morocco, Nigeria, Pakistan, Peru, the
Philippines, Poland, Portugal, Russia, Slovenia, South Africa, Sri Lanka,
Taiwan, Thailand, Turkey, Venezuela and Zimbabwe. This is a representative list;
we may invest in other countries, particularly as markets in other emerging
countries develop.
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 Euro
and ECU. The Fund may enter into forward foreign currency exchange contracts
(forward contracts) to buy or sell foreign currencies. The Fund's use of forward
contracts will not eliminate fluctuations in the underlying prices of the
securities that the Fund holds or intends to purchase. While using forward
contracts tends to minimize the risk of loss from a decline in the value of a
particular currency, using forward contracts also tends to limit any potential
gain that might result from the increase in value of such currency.
For temporary defensive purposes, the Fund may invest all or a substantial
portion of its assets in high quality U.S. and foreign governmental and
corporate debt instruments. The Fund may hold these securities pending
investment of proceeds from new sales of Fund shares and to maintain sufficient
cash to meet redemption requests.
High Yield, High Risk Securities -- We may invest up to 35% of the Fund's net
assets in fixed-income securities issued by emerging country companies, and/or
foreign governments, their agents, instrumentalities or political sub-divisions,
or fixed-income securities that are denominated in the currencies of emerging
market countries, including so-called Brady Bonds. All of these may be high
yield, high risk fixed income securities.
Please see "The securities we typically invest in" and "The risks of investing
in the Funds" for additional investment strategies and risks associated with
investing in these Funds.
Global Bond Fund
26
<PAGE>
Global Bond Fund seeks current income consistent with the preservation of
investors' principal. Global Bond Fund invests primarily in fixed-income
securities that may also provide the potential for capital appreciation.
The fixed income securities in which Global Bond Fund may invest include:
o foreign and U.S. government securities
o debt obligations of foreign and U.S. companies which are generally rated A
or better by Standard & Poor's Ratings Group ("S&P") and Baa by Moody's
Investors Services, Inc. ("Moody's"), or if unrated, are deemed to be of
comparable quality by the portfolio manager.
o debt securities of supranational entities denominated in any currency. A
supranational entity is an entity established or financially supported by
the national governments of one or more countries to promote reconstruction
or development. The International Bank for Reconstruction and Development
(more commonly known as the World Bank) would be one example of a
supranational entity.
o securities of issuers in emerging markets countries, including Brady Bonds,
which tend to be of lower quality and more speculative than securities of
issuers in developed countries. Such securities may be rated lower than BBB
by S&P or Baa by Moody's, or if unrated, are considered by the manager to
be of equivalent quality. (See the section "The risks of investing in the
Funds" on page 22.)
o zero-coupon bonds denominated in any currency.
We currently anticipate that for increased safety a large percentage of Global
Bond Fund's assets will be invested in securities of supranational entities and
in U.S. and foreign government securities.
With respect to U.S. government securities, the Fund may invest only in
securities issued or guaranteed as to the payment of principal and interest by
the U.S. government, and securities of its agencies or instrumentalities which
are backed by the full faith and credit of the United States. Direct obligations
of the U.S. government which are available for purchase by the Fund include
bills, notes, bonds and other debt securities issued by the U.S. Treasury. These
obligations differ mainly in interest rates, maturities and dates of issuance.
Agencies whose obligations are backed by the full faith and credit of the United
States include the Farmers Home Administration, Federal Financing Bank and
others. With respect to securities issued by foreign governments, their
agencies, instrumentalities or political subdivisions, the Fund will generally
invest in such securities if they have been rated AAA or AA by S&P or Aaa or Aa
by Moody's or, if unrated, have been determined by the manager to be of
comparable quality. However, a portion of the Fund's assets may also be invested
in foreign governmental securities issued by emerging or developing countries,
which may be lower rated, including securities rated below investment grade.
While the Fund may purchase securities of issuers in any foreign country,
developed and emerging, we currently anticipate investing in Australia, Belgium,
Canada, France, Germany, Hong Kong, Japan, Malaysia, the Netherlands, Singapore,
Spain, Switzerland and the United Kingdom, as well as Indonesia, Korea, New
Zealand, the Philippines, South Africa, Taiwan, and Thailand This is a
representative list, and we may also invest in other countries.
Generally, the value of fixed-income securities rises when interest rates
decline and declines when interest rates rise. The value of your investment in
the Fund will be affected by changes in interest rates. We anticipate that the
average weighted maturity of the portfolio will be in the five-to-ten year
range. If we anticipate a declining interest rate environment; however, the
average weighted maturity may be extended past ten years or if we anticipate a
rising rate environment, the average weighted maturity may be shortened to less
than five years.
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 Euro
and ECU. The Fund may enter into forward foreign currency exchange contracts
(forward contracts) to buy or sell foreign currencies. The Fund's use of forward
contracts will not eliminate fluctuations in the underlying prices of the
securities that the Fund holds or intends to purchase. While using forward
contracts tends to minimize the risk of loss from a decline in the value of a
particular currency, using forward contracts also tends to limit any potential
gain that might result from the increase in value of such currency.
27
<PAGE>
The securities we typically invest in
Stocks offer investors the potential for capital appreciation, and may pay
dividends as well. Fixed-income securities offer the potential for greater
income payments than stocks, and also may provide capital appreciation. The
following chart provides a brief description of the securities that the Funds
may invest in. Please see the Statement of Additional Information for additional
descriptions of these as well as other investments.
<TABLE>
<CAPTION>
- ------------------------------------------------------ -----------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------ -----------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent Consistent with their respective investment objectives,
shares of ownership in a corporation. Stockholders International Equity Fund, Global Equity Fund, Emerging Markets Fund
participate in the corporation's profits and losses, and New Pacific Fund will invest their assets in common stocks,
proportionate to the number of shares they own. some of which will be dividend paying stocks.
- ------------------------------------------------------ -----------------------------------------------------------------------
Corporate bonds: Debt obligations issued by U.S. or Global Bond Fund may invest in corporate bonds generally rated A or
foreign corporations. better by S&P and Baa by Moody's or if unrated, determined to be of
comparable quality. Emerging Markets Fund and Global Bond Fund may
also invest in lower rated, emerging markets corporate bonds. For
temporary defensive purposes, International Equity Fund, Global Equity
Fund, and Emerging Markets Fund may invest in corporate obligations
rated AA or better by S&P and Aa or better by Moody's, or if unrated,
determined to be of comparable quality. Global Equity Fund may seek
to achieve growth by investing in such corporate bonds.
- ------------------------------------------------------ -----------------------------------------------------------------------
Foreign government securities: Debt obligations Global Bond Fund will generally invest in securities by foreign
issued by issued by a government other than the governments, their agencies, instrumentalities or political
United States or by an agency, subdivisions that are rated AAA or AA by S&P or Aaa or Aa by Moody's
instrumentality or political subdisivion of if unrated, considered to be of comparable quality by Global Bond
such governments. Fund's portfolio manager. A portion of Emerging Markets Fund's assets
and a portion of Global Bond Fund's assets may be invested in
foreign governmental securities issued by emerging or developing
countries, which may be lower rated, including securities rated below
investment grade.
For temporary defensive purposes, International Equity Fund, Global
Equity Fund and Emerging Markets Fund may invest in high quality debt
obligations of foreign governments, their agencies, instrumentalities
and political sub-divisions. Global Equity Fund may seek to
achieve growth by investing in foreign governmental debt securities.
- ------------------------------------------------------ -----------------------------------------------------------------------
U.S. government securities: Securities issued or Global Bond Fund may invest only in U.S. government obligations,
guaranteed by the U.S. government or issued by an including bills, notes and bonds that are issued or guaranteed as to
agency or instrumentality of the U.S. government. the payment of principal and interest by the U.S. government and
securities of U.S. government agencies or instrumentalities that are
backed by the full faith and credit of the United States.
- ------------------------------------------------------ -----------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------ -----------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------ -----------------------------------------------------------------------
<S> <C>
Foreign currency transactions: A forward Although the Funds value their assets daily in terms of U.S. dollars,
foreign contract involvesan obligation to currency exchange they do not intend to convert their holdings of
purchase or sell a specific currency at a future foreign currencies into U.S. dollars on a daily basis. Each Fund will,
date, which may be any fixed number however, from time to time, purchase or sell foreign currencies and/or
of days from the date of the contract, agreed upon engage in parties, at forward foreign currency exchange
by the parties, at a price set at the time of the transactions. Each Fund may a price set at the time of the conduct its
contract. foreign currency transactions on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market or through a
forward foreign currency exchange contract or forward contract. The
Funds will not use forward contracts for speculative purposes. A
Fund may use forward contracts for hedging purposes to attempt to
protect the value of the Fund's current security or currency holdings
or 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. Investors should be aware of the
costs of currency conversion.
- ------------------------------------------------------ -----------------------------------------------------------------------
American Depositary Receipts (ADRs), European Each Fund may invest in sponsored and unsponsored ADRs, EDRs and
Depositary Receipts (EDRs), and Global Depositary GDRs, generally focusing on underlying securities issued by foreign
Receipts (GDRs): ADRs are receipts issued by a U.S. issuers.
depositary (usually a U.S. bank) and EDRs and GDRs
are receipts issued by a depositary outside of the
U.S. (usually a non-U.S. bank or trust company or a
foreign branch of a U.S. bank). Depositary receipts
represent an ownership interest in an underlying
security that is held by the depositary. Generally,
the underlying security represented by an ADR is
issued by a foreign issuer and the underlying
security represented by an EDR or GDR may be issued
by a foreign or U.S. issuer. Sponsored depositary
receipts are issued jointly by the issuer of the
underlying security and the depositary, and
unsponsored depositary receipts are issued by the
depositary without the participation of the issuer
of the underlying security. Generally, the holder
of the depositary receipt is entitled to all
payments of interest, dividends or capital gains
that are made on the underlying security.
- ------------------------------------------------------ -----------------------------------------------------------------------
Repurchase agreements: An agreement between a buyer Typically, we use repurchase agreements as a short-term investment
and seller of securities in which the seller agrees for a Fund's cash position. In order to enter into these repurchase
to buy the securities back within a specified time agreements, the Fund must have collateral in excess of 100% (and
at the same price the buyer paid for them, plus an generally 102%) of the repurchase price.
amount equal to an agreed upon interest rate.
Repurchase agreements are often viewed as equivalent The collateral is usually securities issued or guaranteed by the
to cash. U.S. government or its agencies or instrumentalities, or other
securities in which the Funds may invest directly.
- ------------------------------------------------------ -----------------------------------------------------------------------
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------ -----------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------ -----------------------------------------------------------------------
<S> <C>
Restricted and illiquid securities: Restricted International Equity Fund, Global Equity Fund, New Pacific
securities are privately placed and securities whose Fund and Global Bond Fund may each invest up to 10% of the value of
resale is restricted under securities law or for its net assets in illiquid securities. Emerging Markets Fund
other reasons, such as contractual restrictions. may invest up to 15% of the value of its net assets in
Illiquid securities are those that cannot be sold or illiquid securities.
disposed of in the ordinary course of business
within seven days at approximately the price at
which the security has been valued by the Fund.
Restricted securities are generally considered to be
illiquid except that a Fund may treat Rule 144A
securities as liquid based on their trading
markets. Rule 144A securities are restricted
securities but may be freely traded among qualified
institutional buyers.
- ------------------------------------------------------ -----------------------------------------------------------------------
Zero coupon bonds: Zero coupon bonds are debt Global Bond Fund and Emerging Markets Fund may invest in zero coupon
obligations that do not entitle the holder to bonds. The market prices of zero coupon bonds are generally more
any periodic payments of interest prior to maturity volatile than the market prices of securities that pay interest
or a specified date when the securities begin paying periodically and are likely to respond to changes in interest rates
current interest and, therefore, are issued and to a greater degree than do non-zero coupon securities having similar
traded at a discount from their face amounts or par maturities and credit quality.
value.
- ------------------------------------------------------ -----------------------------------------------------------------------
Brady bonds: These are debt securities issued under Global Bond Fund and Emerging Markets Fund may invest in
the framework of the Brady Plan, an initiative Brady Bonds consistent with their respective investment
announced by the U.S. Treasury Secretary, Nicholas objectives. We believe that the economic reforms undertaken by
F. Brady in 1989, as a mechanism for debtor nations countries in connection with the issuance of Brady Bonds can make
to restructure their outstanding external the debt of countries that have issued or have announced plans to
indebtedness (generally, commercial bank debt). issue Brady Bonds an attractive opportunity for investment.
- ------------------------------------------------------ -----------------------------------------------------------------------
</TABLE>
The Funds may also invest in futures contracts, and options. Please see the
Statement of Additional Information for additional descriptions on these
securities as well as those listed in the table above.
Portfolio turnover
Each Fund (other than New Pacific Fund) anticipates that its annual portfolio
turnover will be less than 100%. A turnover rate of 100% would occur if a Fund
sold and replaced securities valued at 100% of its net assets within one year.
High turnover in the Fund could result in additional brokerage commissions to be
paid by the Fund. In addition, high portfolio turnover may also mean that a
proportionately greater amount of distributions to shareholders will be taxed as
ordinary income rather than long-term capital gains compared to investment
companies with lower portfolio turnover.
Borrowing from Banks
Each Fund may borrow money as a temporary measure for extraordinary or emergency
purposes or to facilitate redemptions. A Fund will not borrow money in excess of
one-third of the value of its net assets.
Securities Lending:
Each Fund may loan up to one-quarter (one-third, in the case of New Pacific
Fund) of its assets to qualified broker/dealers or institutional investors to
generate additional income for the Fund. All such loans will be secured by
collateral.
30
<PAGE>
The risks of investing in the Funds
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in a Fund you should
carefully evaluate the risks. An investment in the Funds typically provides the
best results when held for a number of years. The following are the chief risks
you assume when investing in the Funds. Please see the Statement of Additional
Information for further discussion of these risks and the other risks not
discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------------- ----------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------- ----------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority of the We maintain a long-term investment approach and focus on stocks we
securities in a certain market--like the stock or bond believe can appreciate over an extended time frame regardless of
market--or in a certain country or region will interim market fluctuations. In deciding what portion of a
decline in value because of factors such as economic Fund's portfolio should be invested in any individual country, we
conditions, future expectations or investor evaluate a variety of factors, including valuations relative to
confidence. other countries.
In addition, for temporary defensive purposes, each Fund (except
New Pacific 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 temporary defensive purposes New Pacific Fund may invest up to
100% of its assets in money market instruments, cash or cash
equivalents .
- ------------------------------------------------------- ----------------------------------------------------------------------
Industry and security risk is the risk that the value We hold a number of different securities in a variety of sectors and
of securities in a particular industry or the value limit the amount of each Fund's assets invested in any one
of an individual stock or bond will decline because security in order to minimize the impact that a poorly performing
of changing expectations for the performance of that security would have on a Fund.
industry or for the individual company issuing the
stock or bond.
- ------------------------------------------------------- ----------------------------------------------------------------------
Interest rate risk is the risk that securities, In an attempt to limit Global Bond Fund's interest rate risk, we
particularly bonds with longer maturities, will adjust the Fund's average weighted maturity based on our view of
decrease in value if interest rates rise. interest rates. The Fund's average weighted maturity will generally
be in the five-to-ten year range. When we anticipate that interest
rates will decline, we may extend the average maturity beyond ten
years and when we anticipate that interest rates will rise, we may
shorten the average maturity to less than five years.
International Equity Fund, Global Equity Fund, New Pacific Fund and
Emerging Markets Fund are generally less affected by interest rate
risk because they typically hold a smaller amount of fixed-income
securities than Global Bond Fund.
- ------------------------------------------------------- ----------------------------------------------------------------------
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------- ----------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------- ----------------------------------------------------------------------
<S> <C>
Currency risk is the risk that the value of a Fund's Each Fund may try to hedge its currency risk by purchasing foreign
investments may be negatively affected by changes in currency exchange contracts. By agreeing to purchase or sell
foreign currency exchange rates. Adverse changes in foreign securities at a pre-set price on a future date, the Funds
exchange rates may reduce or eliminate any gains attempt to protect the value of the stock they own from future
produced by investments that are denominated in changes in currency rates and to "lock-in" the price of securities
foreign currencies and may increase any losses. it has agreed to purchase or sell in terms of U.S. dollars
or other applicable currency. Each Fund will use forward currency
exchange contracts only for defensive or protective measures, not to
enhance portfolio returns. However, there is no assurance that such a
strategy will be successful.
- ------------------------------------------------------ ----------------------------------------------------------------------
Political risk is the risk that countries or the We evaluate the political situations in the countries where we
entire region where we invest may experience invest and take into account any potential risks before we select
political instability, which may cause greater securities for the portfolio. However, there is no way to eliminate
fluctuation in the value and liquidity of our political risk when investing internationally.
investments due to changes in currency exchange
rates, governmental seizures or nationalization of
assets.
- ------------------------------------------------------- ----------------------------------------------------------------------
Emerging markets risk is the possibility that the New Pacific Fund , Emerging Markets Fund and Global Bond Fund,
risks associated with international investing will be carefully screen securities within emerging markets and strive
greater in emerging markets than in more developed to consider material risks associated with an individual
foreign markets because, among other things, emerging company. We cannot eliminate emerging market risk and consequently
markets may have less stable political and economic encourage shareholders to invest in these Funds only if they have a
environments. long-term time horizon, over which the potential of individual
securities is more likely to be realized.
- ------------------------------------------------------- ----------------------------------------------------------------------
Inefficient market risk is the risk that foreign The Funds will attempt to reduce these risks by investing in a
markets may be less liquid, have greater price number of different countries, performing credit analysis and
volatility, less regulation and higher transaction noting trends in the economy, industries and financial markets.
costs than U.S. markets.
- ------------------------------------------------------- ----------------------------------------------------------------------
Information risk is the risk that foreign We conduct fundamental research on the companies we invest
companies may be subject to different accounting, in rather than relying solely on information available through
auditing and financial reporting standards than U.S. financial reporting. We believe this will help us to better uncover
companies. There may be less information available any potential weaknesses in individual companies.
about foreign issuers than domestic issuers.
Furthermore, regulatory oversight of foreign issuers
may be less stringent or less consistently applied
than in the United States.
- ------------------------------------------------------- ----------------------------------------------------------------------
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------- ----------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------- ----------------------------------------------------------------------
<S> <C>
Nondiversified fund risk. Non-diversified funds Global Equity Fund , Emerging Markets Fund and
are believed to be subject to greater risks because Global Bond Fund will be non-diversified funds according to the 1940
adverse effects on their individual investments Act. In a diversified fund, 75% of the portfolio must be
may affect a larger portion of their overall assets. diversified, meaning that within that portion of the portfolio, the
Fund cannot invest more than 5% of its net assets in an individual
security. When a fund is non-diversified, it does not have to limit
the percentage of assets invested in individual securities. However
Global Equity Fund, Emerging Markets Fund and Global Bond Fund do
intend to satisfy the Internal Revenue Code's diversification
requirement, which says that for 50% of the Fund's assets, no more
than 5% of net assets can be invested in any one individual security
This means that 50% of each of Global Equity Fund, Emerging Markets
Fund and Global Bond Fund must be spread among various securities,
with no more than 5% of net assets invested in any single security.
The other 50% can be more concentrated with up to 25% invested in
individual securities.
International Equity Fund and New Pacific Fund are diversified funds,
not subject to this risk.
- ------------------------------------------------------- ----------------------------------------------------------------------
Foreign Government Securities Risks relates to the Global Bond Fund attempts to reduce the risks associated
ability of a foreign government or government related with investing in foreign governments by focusing on
issuer to make timely payments on its external bonds rated within the two highest rating categories. International
debt obligations. This ability to make payments will Equity Fund and Global Equity Fund attempt to reduce this risk by
be strongly influenced by the issuer's balance of setting ratings standards and by limiting the portion of portfolio
payments, including export performance, its access to assets that may be invested in such securities. Emerging Markets
international credits and investments, fluctuations Fund attempts to reduce this risk by limiting the portion of
in interest rates and the extent of its foreign portfolio assets that may be invested in such securities. Each of
reserves. the Funds will attempt to limit this risk by performing credit
analysis on the issuer of each security purchased and, in the case
of International Equity Fund, Emerging Markets Fund and Global Equity
Fund, comparing the risk-reward potential of foreign government
securities being considered to that offered by equity securities in
determining whether to allocate assets to equity or fixed income
investments.
- ------------------------------------------------------- ----------------------------------------------------------------------
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------- ----------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------- ----------------------------------------------------------------------
<S> <C>
High Yield, High Risk Foreign Fixed-Income Securities Global Bond Fund may invest a portion of its assets in these
are those securities rated lower than BBB by S&P and securities. Emerging Markets Fund may invest up to 35% of its
Baa by Moody's. Securities of this type are net assets in these securities.
considered to be of poor standing and predominantly
speculative as to the ability to repay interest and We believe the high yields from these bonds have more than
principal . compensated for their higher default rates in the past. There can
be no assurance, however, that yields will continue to offset
Medium- and low-grade bonds may be issued as a default rates in the future. We intend to limit our investment in
consequence of corporate restructurings, such as any one lower rated bond which can help to reduce the effect of an
leveraged buy-outs, mergers, acquisitions, debt individual default on the Funds, and to limit our overall allocation
recapitalizations or similar events. Also these of Fund assets to bonds in this category. Such limitations may not
bonds are often issued by smaller, less creditworthy protect the Funds from widespread bond defaults brought about by a
companies or by highly leveraged (indebted) firms, sustained economic downturn.
which are generally less able than more financially
stable firms to make scheduled payments of interest The economy and interest rates may affect these high yield, high
and principal. The risks posed by bonds issued under risk securities differently from other securities. Prices have been
such circumstances are substantial. 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 make principal and interest payments obligations, to meet
projected business goals and to obtain additional financing.
Changes by recognized rating agencies in their rating of any such
security and in the ability of the 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. Consequently, these changes will affect the
Funds' net asset value per share.
- ------------------------------------------------------- ----------------------------------------------------------------------
</TABLE>
34
<PAGE>
Who manages the Funds
Investment managers and sub-advisers
International Equity Fund, Global Equity Fund, Emerging Markets Fund and Global
Bond Fund are managed by Delaware International Advisers Ltd. Delaware
International Advisers makes investment decisions for these Funds, manages the
Funds' business affairs and provides daily administrative services. Delaware
International Advisers is affiliated with Delaware Management Company, a series
of Delaware Management Business Trust, which is an indirect, wholly owned
subsidiary of Delaware Management Holdings, Inc.
Delaware Management Company is the sub-adviser to Global Equity Fund.
Delaware Management Company manages the U.S. securities portion of Global
Equity Fund's portfolio under the overall supervision of Delaware International
Advisers and furnishes Delaware International Advisers with investment
recommendations, asset allocation advice, research and other investment services
regarding U.S. securities.
New Pacific Fund is managed by Delaware Management Company. AIB Govett, Inc.
is New Pacific Fund's sub-adviser. As sub-adviser, AIB Govett is responsible for
day-to-day management of the Fund's assets. Delaware Management Company
administers the Fund's affairs and has ultimate responsibility for all
investment advisory services for the Fund. Delaware Management Company also
supervises the AIB Govett's performance.
For the services they provided, the manager and sub-advisers, where
applicable, were paid the following fees for the Funds' last fiscal year after
giving effect to voluntary expense caps:
Investment Management Fees
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Global Equity New Emerging Markets Global Bond Fund
International Fund Pacific Fund Fund
Equity Fund
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
As a percentage of average
daily net assets 0.75% 0.31% none none 0.41%
=== ===== ===== ==== ==== =====
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Portfolio managers
International Equity Fund
Clive A. Gillmore and Nigel G. May have primary responsibility for making
day-to-day investment decisions for International Equity Fund. In making
investment decisions for the Fund, Mr. Gillmore and Mr. May regularly
consult with a fourteen member international equity team.
Clive A. Gillmore, Senior Portfolio Manager and Director of Delaware
International Advisers, has been the senior portfolio manager for the Fund since
its inception. A graduate of the University of Warwick who began his career at
Legal and General Investment Management, Mr. Gillmore joined Delaware
International Advisers in 1990 after eight years of investment experience. His
most recent position prior to joining Delaware International Advisers was as a
Pacific Basin equity analyst and senior portfolio manager for Hill Samuel
Investment Management Ltd. Mr. Gillmore completed the London Business School
Investment program.
Nigel G. May, Senior Portfolio Manager and Director of Delaware International
Advisers, is a graduate of Sidney Sussex College, Cambridge. Mr. May joined Mr.
Gillmore as Co-Manager of the Fund on December 22, 1997. He joined Delaware
International Advisers in 1991, assuming portfolio-management responsibilities
and sharing analytical responsibilities for continental Europe. He previously
had been with Hill Samuel Investment Management Group for five years.
Global Equity Fund
Elizabeth A. Desmond has primary responsibility for making day-to-day investment
decisions for Global Equity Fund. Robert L. Arnold makes investment decisions
for the U.S. equity portion of the Fund.
35
<PAGE>
Elizabeth A. Desmond, Senior Portfolio Manager and Director of Delaware
International Advisers, has been the portfolio manager for the Fund since
July 21, 1998. Ms. Desmond is a graduate of Wellesley College and the masters
program in East Asian studies at Stanford University. After working for the
Japanese government for two years, she began her investment career as a Pacific
Basin investment manager with Shearson Lehman Global Asset Management. Prior to
joining Delaware International Advisers in the spring of 1991, she was a Pacific
Basin equity analyst and senior portfolio manager at Hill Samuel Investment
Advisers Ltd. Ms. Desmond is a CFA charterholder.
Robert L. Arnold, Vice President/Portfolio Manager of the Fund, has been
managing the U.S. equity portion of the Fund since July 21, 1998. Prior to that
time he managed other Delaware Investments mutual funds and was a financial
analyst focusing on the financial services industry including banks, thrifts,
insurance companies and consumer finance companies. Mr. Arnold holds a BS from
Carnegie Mellon University and earned an MBA from the University of Chicago. He
began his investment career as a management consultant with Arthur Young in
Philadelphia. Prior to joining Delaware Investments in March 1992, Mr. Arnold
was a planning analyst with Chemical Bank in New York.
New Pacific Fund
Jane Pickard has had primary responsibility for making day-to-day investment
decisions for the Fund since November 12, 1997. Ms. Pickard graduated in law
from Edinburgh University. She joined Barclays de Zoete Wedd Securities Limited
in 1991, where she initially worked as a specialist in structured debt products,
moving into the Pacific Rim equity division in 1992. She remained there until
1995 when she moved to IAI International where she had responsibility for
Pacific Region investments for U.S. institutional and retail funds. Ms. Pickard
joined AIB Govett Asset Management, an affiliate of AIB Govett, Inc., in 1996.
Emerging Markets Fund
Mr. Gillmore also has primary responsibility for making day-to-day investment
decisions for Emerging Markets Fund (please see International Equity Fund for a
description of Mr. Gillmore's business experience). In making investment
decisions for Emerging Markets Fund, Mr. Gillmore regularly consults with a
fourteen member international equity team, including co-managers Robert
Akester and Joshua A. Brooks.
Robert Akester, Senior Portfolio Manager of Delaware International Advisers,
joined Delaware International Advisers in 1996. Mr. Akester, who began his
investment career in 1969, was most recently a director of Hill Samuel
Investment Management Ltd., which he joined in 1985. His prior experience
included working as a senior analyst and head of the South-East Asian Research
team at James Capel, and as a fund manager at Prudential Assurance Co., Ltd. Mr.
Akester holds a BS in Statistics and Economics from University College, London
and is an associate of the Institute of Actuaries, with a certificate in Finance
and Investment.
Joshua A. Brooks, Senior Portfolio Manager of Delaware International Advisers,
holds a bachelor's degree from Yale University and has undertaken graduate
studies at The London Business School. He began his investment career with
Delaware Investments in 1991. Prior to joining the emerging markets team in
London, he was based in Philadelphia with responsibilities that included equity
market analysis and acting as liaison with Delaware International Advisers.
Global Bond Fund
Ian G. Sims and Christopher A. Moth have primary responsibility for making
day-to-day investment decisions for Global Bond Fund. In making investment
decisions for Global Bond Fund, Mr. Sims and Mr. Moth regularly consult with W.
Hywel Morgan.
Ian G. Sims, Deputy Managing Director/Chief Investment Officer, Global Fixed
Income and Director of Delaware International Advisers, has been the senior
portfolio manager for this Fund since its inception. Mr. Sims is a graduate of
the University of Newcastle-Upon-Tyne. He joined Delaware International Advisers
in 1990 as a senior international fixed-income and currency manager. Mr. Sims
began his investment career with the Standard Life Assurance Co., and
subsequently moved to the Royal Bank of Canada Investment Management
International Company, where he was an international fixed-income manager. Prior
to joining Delaware International Advisers, he was a senior fixed-income and
currency portfolio manager with Hill Samuel Investment Management Ltd.
36
<PAGE>
Christopher A Moth, Senior Portfolio Manager of Delaware International Advisers,
became co-manager of Global Bond Fund in January 1997. Mr. Moth, a graduate of
The City University London, joined Delaware International Advisers in 1992. He
previously worked at the Guardian Royal Exchange in an actuarial capacity where
he was responsible for technical analysis, quantitative models and projections.
Mr. Moth has been awarded the certificate in Finance and Investment from the
Institute of Actuaries in London.
W. Hywel Morgan, Senior Portfolio Manager of Delaware International Advisers,
was educated at the University of Wales and was subsequently an economics
lecturer at Dundee University. Prior to joining Delaware International Advisers,
he was Associate Director of the international fixed-income department and head
of the credit review committee at Hill Samuel Investment Management responsible
for over $500 million in multi-currency fixed interest accounts. His prior
experience included working as an economic adviser for Credit Suisse and the
Economic Intelligence Unit. Mr. Morgan started his business career as a
corporate economist & strategist at Ford of Europe and Esso Petroleum.
37
<PAGE>
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED
WITH MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS
FUNDS]
<TABLE>
<CAPTION>
Board of Directors
Investment Managers The Funds Custodian
<S> <C> <C>
Delaware International Advisers Ltd. The Chase Manhattan Bank
Third Floor 4 Chase Metrotech Center
80 Cheapside Brooklyn, NY 11245
London, England EC2V 6EE
Delaware Management Company
One Commerce Square
Philadelphia, PA 19103
Sub-Advisers
Delaware Management Company
AIB Govett, Inc.
250 Montgomery Street, Suite 1200
San Francisco, CA 94104
Portfolio managers Distributor Service agent
(see page 36 for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
</TABLE>
Financial advisers
Shareholders
Board of directors A mutual fund is governed by a board of directors which has
oversight responsibility for the management of the fund's business affairs.
Directors establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the board of directors must be independent of the fund's
investment manager or distributor. These independent fund directors, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Sub-adviser A sub-adviser is a company generally responsible for the management
of the fund's assets. They are selected and supervised by the investment
manager.
38
<PAGE>
Portfolio managers Portfolio managers are employed by the investment manager or
sub-adviser to make investment decisions for individual portfolios on a
day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and typically place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to
National Association of Securities Dealers, Inc. (NASD) rules governing mutual
fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Financial advisers Financial advisers provide advice to their clients--analyzing
their financial objectives and recommending appropriate funds or other
investments. Financial advisers are compensated for their services, generally
through sales commissions, and through 12b-1 and/or service fees deducted from
the fund's assets.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect directors. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
39
<PAGE>
About your account
Investing in the Funds
You can choose from a number of share classes for each Fund. Because each share
class has a different combination of sales charges, fees, and other features,
you should consult your financial adviser to determine which class best suits
your investment goals and time frame.
Choosing a share class:
Class A
o Class A shares have an up-front sales charge of up to 5.75% that you
pay when you buy the shares. The offering price for Class A shares
includes the front-end sales charge. Class A shares of Global Bond Fund
have an up-front sales charge of up to 4.75%.
o If you invest $50,000 or more ($100,000 for Global Bond Fund), your
front-end sales charge will be reduced.
o You may qualify for other reduced sales charges, as described in "How
to reduce your sales charge," and under certain circumstances the sales
charge may be waived; please see the Statement of Additional
Information.
o Class A shares are also subject to an annual 12b-1 fee no greater than
0.30% of average daily net assets, which is lower than the 12b-1 fee
for Class B and Class C shares.
o Class A shares generally are not subject to a contingent deferred sales
charge unless purchased at net asset value and redeemed within the
first two years from the date of purchase.
40
<PAGE>
Class A sales charges
Global Bond Fund
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Amount of purchase Sales charge as % of Sales charge as % of amount Dealer's commission as % of
offering price invested offering price
- -----------------------------------------------------------------------------------------------------------------------------
Global Bond
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 4.75% 5.03% 4.00%
- -----------------------------------------------------------------------------------------------------------------------------
$100,000 but under $250,000 3.75% 3.93% 3.00%
- -----------------------------------------------------------------------------------------------------------------------------
$250,000 but under $500,000 2.50% 2.56% 2.00%
- -----------------------------------------------------------------------------------------------------------------------------
$500,000 but under $1,000,000 2.00% 2.01% 1.60%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
International Equity, Global Equity, New Pacific, Emerging Markets, Class A sales charges
- -----------------------------------------------------------------------------------------------------------------------------------
Amount of purchase Sales charge Sales charge as % of amount invested Dealer's
as % of commission as %
offering price of offering
price
- -----------------------------------------------------------------------------------------------------------------------------------
Global Equity International Emerging New Pacific
Equity Markets
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Less than $50,000 5.75% 6.10% 6.13% 6.13% 6.10% 5.00%
- -----------------------------------------------------------------------------------------------------------------------------------
$50,000 but under 4.75% 5.00% 4.96% 5.05% 5.01% 4.00%
$100,000
- -----------------------------------------------------------------------------------------------------------------------------------
$100,000 but under 3.75% 3.90% 3.91% 3.83% 3.92% 3.00%
$250,000
- -----------------------------------------------------------------------------------------------------------------------------------
$250,000 but under 2.50% 2.57% 2.54% 2.60% 2.61% 2.00%
$500,000
- -----------------------------------------------------------------------------------------------------------------------------------
$500,000 but under 2.00% 2.06% 2.02% 1.99% 1.96% 1.60%
$1,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
As shown below, there is no front-end sales charge when you purchase $1 million
or more of Class A shares. However, if your financial adviser is paid a
commission on your purchase, you may have to pay a limited contingent deferred
sales charge of 1% if you redeem these shares within the first year after your
purchase and 0.50% if you redeem them within the second year.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Amount of purchase Sales charge as % of Sales charge as % of amount Dealer's commission as % of
offering price invested offering price
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$1 million up to $5 million none none 1.00%
- ------------------------------------------------------------------------------------------------------------------------------
Next $20 million
Up to $25 million none none 0.50%
- ------------------------------------------------------------------------------------------------------------------------------
Amount over $25 million none none 0.25%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
Class B
o Class B shares have no up-front sales charge, so the full amount of
your purchase is invested in the Fund. However, you will pay a
contingent deferred sales charge if you redeem your shares within six
years after you buy them.
o If you redeem Class B shares during the first year after you buy them,
the shares will be subject to a contingent deferred sales charge of 5%.
The contingent deferred sales charge is 4% during the second year, 3%
during the third and fourth years, 2% during the fifth year, 1% during
the sixth year, and 0% thereafter. For Global Bond Fund B Class,
the contingent deferred sales charge is 4% during the first two
years, 3% during the third and fourth years after your purchase, 2%
during the fifth year, 1% during the sixth year, and 0% thereafter.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o For approximately eight years after you buy your Class B shares, they
are subject to annual 12b-1 fees no greater than 1% of average daily
net assets, of which 0.25% are service fees paid to the distributor,
dealers or others for providing services and maintaining accounts.
o Because of the higher 12b-1 fees, Class B shares have higher expenses
and any dividends paid on these shares are lower than dividends on
Class A shares.
o Approximately eight years after you buy them, Class B shares
automatically convert into Class A shares with a 12b-1 fee of no more
than 0.30%. Conversion may occur as late as three months after the
eighth anniversary of purchase, during which time Class B's higher
12b-1 fees apply.
o You may purchase up to $250,000 of Class B shares at any one time. The
limitation on maximum purchases varies for retirement plans.
Class C
o Class C shares have no up-front sales charge, so the full amount of
your purchase is invested in the Fund. However, you will pay a
contingent deferred sales charge if you redeem your shares within 12
months after you buy them.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o Class C shares are subject to an annual 12b-1 fee which may not be
greater than 1% of average daily net assets, of which 0.25% are service
fees paid to the distributor, dealers or others for providing
services and maintaining shareholder accounts.
o Because of the higher 12b-1 fees, Class C shares have higher expenses
and pay lower dividends than Class A shares.
o Unlike Class B shares, Class C shares do not automatically convert into
another class.
o You may purchase any amount less than $1,000,000 of Class C shares at
any one time. The limitation on maximum purchases varies for retirement
plans.
Each share class of the Funds has adopted a separate 12b-1 plan that allows it
to pay distribution fees for the sales and distribution of its shares. Because
these fees are paid out of the Fund's assets on an ongoing basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
42
<PAGE>
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on shares.
Please refer to the Statement of Additional Information for detailed information
and eligibility requirements. You can also get additional information from your
financial adviser. You or your financial adviser must notify us at the time you
purchase shares if you are eligible for any of these programs.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Program How it works Share class
A B C
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Letter of Intent Through a Letter of Intent you X Although the Letter of
agree to invest a certain Intent and Rights of
amount in Delaware Investment Accumulation do not apply
Funds (except money market to the purchase of Class
funds with no sales charge) B and C shares, you can
over a 13-month period to combine your purchase of
qualify for reduced front-end Class A shares with your
sales charges. purchase of B and C
- -------------------------------------------------------------------------------------------------- shares to fulfill your
Rights of accumulation You can combine your holdings X Letter of Intent or
or purchases of all funds in the qualify for Rights of
Delaware Investments family Accumulation.
(except money market funds with
no sales charge) as well as the
holdings and purchases of your
spouse and children under 21 to
qualify for reduced front-end
sales charges.
- ------------------------------------------------------------------------------------------------------------------------------
Reinvestment of redeemed shares Up to 12 months after you X Not available.
redeem shares, you can reinvest
the proceeds without paying a
front-end sales charge.
- ------------------------------------------------------------------------------------------------------------------------------
SIMPLE IRA, SEP IRA, SARSEP, Prototype These investment plans may X Not available.
Profit Sharing, Pension, 401(k), SIMPLE qualify for reduced sales
401(k), 403(b)(7), and 457 Retirement charges by combining the
Plans purchases of all members of the
group. Members of these groups
may also qualify to purchase
shares without a front-end sales
charge and a waiver of any
contingent deferred sales
charges.
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
43
<PAGE>
How to buy shares
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014 12893 4013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us so we can assign you an account number.
[GRAPHIC OMITTED: ILLUSTRATION OF AN EXCHANGE SYMBOL]
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that under most circumstances you are allowed to exchange only
between like classes of shares. To open an account by exchange, call the
Shareholder Service Center at 800.523.1918.
[GRAPHIC OMITTED: ILLUSTRATION OF A KEYPAD]
Through automated shareholder services
You can purchase or exchange shares through Delaphone, our automated telephone
service, or through our web site, www.delawarefunds.com. For more information
about how to sign up for these services, call our Shareholder Service Center at
800.523.1918.
44
<PAGE>
About your account (continued)
How to buy shares (continued)
Once you have completed an application, you can open an account with an initial
investment of $1,000--and make additional investments at any time for as little
as $100. If you are buying shares in an IRA or Roth IRA, under the Uniform Gifts
to Minors Act or the Uniform Transfers to Minors Act; or through an Automatic
Investing Plan, the minimum purchase is $250, and you can make additional
investments of only $25. The minimum for an Education IRA is $500. The minimums
vary for retirement plans other than IRAs, Roth IRAs or Education IRAs.
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receives your order before the close of trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a business day,
you will pay that day's closing share price which is based on the Fund's net
asset value. If we receive your order after the close of trading, you will pay
the next business day's price. A business day is any day that the New York Stock
Exchange is open for business. Currently the Exchange is closed when the
following holidays are observed: New Year's Day, Martin Luther King, Jr.'s
Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas. We reserve the right to reject any purchase
order.
We determine the Funds' net asset value (NAV) per share at the close of trading
of the New York Stock Exchange each business day that the Exchange is open. We
calculate this value by adding the market value of all the securities and assets
in the Fund's portfolio, deducting all liabilities, and dividing the resulting
number by the number of shares outstanding. The result is the net asset value
per share. We price securities and other assets for which market quotations are
available at their market value. We price fixed-income securities on the basis
of valuations provided to us by an independent pricing service that uses methods
approved by the board of directors. Any fixed-income securities that have a
maturity of less than 60 days we price at amortized cost. We price all other
securities at their fair market value using a method approved by the board of
directors.
Retirement plans
In addition to being an appropriate investment for your Individual Retirement
Account (IRA), Roth IRA and Education IRA, shares in the Funds may be suitable
for group retirement plans. You may establish your IRA account even if you are
already a participant in an employer-sponsored retirement plan. For more
information on how shares in these Funds can play an important role in your
retirement planning or for details about group plans, please consult your
financial adviser, or call 800.523.1918.
45
<PAGE>
How to redeem shares
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of $50,000 or
more, you must include a signature guarantee for each owner. Signature
guarantees are also required when redemption proceeds are going to an address
other than the address of record on an account.
[GRAPHIC OMITTED: ILLUSTRATION OF A TELEPHONE]
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. If you request a wire deposit, the First Union Bank fee (currently
$7.50) will be deducted from your proceeds. Bank information must be on file
before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A KEYPAD]
Through automated shareholder services
You can redeem shares through Delaphone, our automated telephone service, or
through our web site, www.delawarefunds.com. For more information about how to
sign up for these services, call our Shareholder Service Center at
800-523-1918.
46
<PAGE>
About your account (continued)
How to redeem shares (continued)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares, you
will receive the net asset value as determined on the business day we receive
your request. We will deduct any applicable contingent deferred sales charges.
You may also have to pay taxes on the proceeds from your sale of shares. We will
send you a check, normally the next business day, but no later than seven days
after we receive your request to sell your shares. If you purchased your shares
by check, we will wait until your check has cleared, which can take up to 15
days, before we send your redemption proceeds.
If you are required to pay a contingent deferred sales charge when you redeem
your shares, the amount subject to the fee will be based on the shares' net
asset value when you purchased them or their net asset value when you redeem
them, whichever is less. This arrangement assures that you will not pay a
contingent deferred sales charge on any increase in the value of your shares.
You also will not pay the charge on any shares acquired by reinvesting dividends
or capital gains. If you exchange shares of one fund for shares of another, you
do not pay a contingent deferred sales charge at the time of the exchange. If
you later redeem those shares, the purchase price for purposes of the contingent
deferred sales charge formula will be the price you paid for the original
shares--not the exchange price. The redemption price for purposes of this
formula will be the NAV of the shares you are actually redeeming.
Account minimums
If you redeem shares and your account balance falls below the required account
minimum of $1,000 ($250 for IRAs, Uniform Gift to Minors Act accounts or
accounts with automatic investing plans, $500 for Education IRAs) for three or
more consecutive months, you will have until the end of the current calendar
quarter to raise the balance to the minimum. If your account is not at the
minimum by the required time, you will be charged a $9 fee for that quarter and
each quarter after that until your account reaches the minimum balance. If your
account does not reach the minimum balance, the Fund may redeem your account
after 60 days' written notice to you.
47
<PAGE>
Special services
To help make investing with us as easy as possible, and to help you build your
investments, we offer the following special services.
Automatic Investing Plan
The Automatic Investing Plan allows you to make regular monthly investments
directly from your checking account.
Direct Deposit
With Direct Deposit you can make additional investments through payroll
deductions, recurring government or private payments such as social security or
direct transfers from your bank account.
Wealth Builder Option
With the Wealth Builder Option you can arrange automatic monthly exchanges
between your shares in one or more Delaware Investments funds. Wealth Builder
exchanges are subject to the same rules as regular exchanges (see below) and
require a minimum monthly exchange of $100 per fund.
Dividend Reinvestment Plan
Through our Dividend Reinvestment Plan, you can have your distributions
reinvested in your account or the same share class in another fund in the
Delaware Investments family. The shares that you purchase through the Dividend
Reinvestment Plan are not subject to a front-end sales charge or to a contingent
deferred sales charge. Under most circumstances, you may reinvest dividends only
into like classes of shares.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund without paying a sales charge and without
paying a contingent deferred sales charge at the time of the exchange. However,
if you exchange shares from a money market fund that does not have a sales
charge you will pay any applicable sales charges on your new shares. When
exchanging Class B and Class C shares of one fund for similar shares in other
funds, your new shares will be subject to the same contingent deferred sales
charge as the shares you originally purchased. The holding period for the CDSC
will also remain the same, with the amount of time you held your original shares
being credited toward the holding period of your new shares. You don't pay sales
charges on shares that you acquired through the reinvestment of dividends. You
may have to pay taxes on your exchange. When you exchange shares, you are
purchasing shares in another fund so you should be sure to get a copy of the
fund's prospectus and read it carefully before buying shares through an
exchange.
48
<PAGE>
About your account (continued)
Special services (continued)
MoneyLineSM On Demand Service
Through our MoneyLineSM On Demand Service, you or your financial adviser may
transfer money between your Fund account and your predesignated bank account by
telephone request. This service is not available for retirement plans, except
for purchases into IRAs. MoneyLine has a minimum transfer of $25 and a maximum
transfer of $50,000.
MoneyLine Direct Deposit Service
Through our MoneyLine Direct Deposit Service you can have $25 or more in
dividends and distributions deposited directly to your bank account. Delaware
Investments does not charge a fee for this service; however, your bank may
assess one. This service is not available for retirement plans.
Systematic Withdrawal Plan
Through our Systematic Withdrawal Plan you can arrange a regular monthly or
quarterly payment from your account made to you or someone you designate. If the
value of your account is $5,000 or more, you can make withdrawals of at least
$25 monthly, or $75 quarterly. You may also have your withdrawals deposited
directly to your bank account through our MoneyLine Direct Deposit Service.
Dividends, Distributions and Taxes
Dividends, if any, for International Equity Fund, Global Equity Fund and Global
Bond Fund are paid quarterly, and for New Pacific Fund and Emerging Markets Fund
are paid annually. Any capital gains are distributed annually. We automatically
reinvest all dividends and any capital gains, unless you tell us otherwise.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from these Funds is the same whether you
reinvest your dividends or receive them in cash. Distributions from a Fund's
long-term capital gains are taxable as capital gains, while distributions from
short-term capital gains and net investment income are generally taxable as
ordinary income. Any capital gains may be taxable at different rates depending
on the length of time the Fund held the assets. In addition, you may be subject
to state and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
Distributions declared in October, November or December but paid in January are
taxable as if they were paid in December.
The Funds are required to withhold 31% of your taxable distributions and
proceeds if you do not provide your correct taxpayer identification number (TIN)
or certify that your TIN is correct, or if the IRS instructs us to do so.
49
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Funds could be adversely affected if the computer systems
used by their service providers do not properly process and calculate
date-related information from and after January 1, 2000. This is commonly known
as the "Year 2000 Problem." Each Fund is taking steps to obtain satisfactory
assurances that its major service providers are taking steps reasonably designed
to address the Year 2000 Problem on the computer systems that the service
providers use. However, there can be no assurance that these steps will be
sufficient to avoid any adverse impact on the business of the Funds. The
portfolio managers and investment professionals of each Fund consider Year 2000
compliance in the securities selection and investment process . However,
there can be no guarantee that, even with their due diligence efforts, they
will be able to predict the effect of Year 2000 on any company or the
performance of its securities.
Investments by Fund of Funds
International Equity Fund , Emerging Markets Fund and New Pacific Fund accept
investments from the series portfolios of Delaware Group Foundation Funds, a
fund of funds. From time to time, a Fund may experience large investments or
redemptions due to allocations or rebalancings by Foundation Funds. While it is
impossible to predict the overall impact of these transactions over time, there
could be adverse effects on portfolio management. For example, the Fund may be
required to sell securities or invest cash at times when it would not otherwise
do so. These transactions could also have tax consequences if sales of
securities result in gains, and could also increase transactions costs or
portfolio turnover. The manager will monitor transactions by Foundation Funds
and will attempt to minimize any adverse effects on International Equity Fund,
Emerging Markets Fund, New Pacific Fund and Foundation Funds as a result of
these transactions.
Fund Companies
The Funds are separate series of the investment companies shown below.
Delaware Group Global & International Funds, Inc.
International Equity Fund
Global Equity Fund
Emerging Markets Fund
Global Bond Fund
Delaware Group Adviser Funds, Inc.
New Pacific Fund
50
<PAGE>
Financial information
Financial highlights
The financial highlights table is intended to help you understand the Fund's
financial performance . All "per share" information reflects financial
results for a single Fund share. This information has been audited by Ernst &
Young LLP, whose report, along with the Fund's financial statements, is included
in the Fund's annual report, which is available upon request by calling
800.523.1918.
<TABLE>
<CAPTION>
Class A Shares
- -------------------------------------------------------------------------------------------------------------
International Equity Fund Year Ended 11/30/
- -------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 14.650 $14.640 $12.190 $11.920 $11.250
- -------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
- -------------------------------------------------------------------------------------------------------------
Net investment income(1) 0.273 0.220 0.490 0.297 0.140
- ----------------------------------------------------------------------------------------- -------------------
Net realized and unrealized gain (loss) on
investments and foreign currencies 0.957 0.245 2.385 0.628 0.895
- -------------------------------------------------------------------------------------------------------------
Total from investment operations 1.230 0.465 2.875 0.925 1.035
- -------------------------------------------------------------------------------------------------------------
Less dividends and distributions
- -------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.395) (0.435) (0.280) (0.185) (0.225)
- -------------------------------------------------------------------------------------------------------------
Distributions from net realized gain on
investments (0.155) (0.020) (0.145) (0.470) (0.140)
- -------------------------------------------------------------------------------------------------------------
Total dividends and distributions (0.550) (0.455) (0.425) (0.655) (0.365)
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.330 $14.650 $14.640 $12.190 $11.920
- -------------------------------------------------------------------------------------------------------------
Total return(4) 8.75% 3.27%(5) 24.22%(5) 8.17% 9.23%(5)
- -------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $122,609 $112,425 $89,177 $62,251 $53,736
- -------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets 1.70% 1.70% 1.85% 2.07% 1.56%
- -------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
prior to expense limitation 1.70% 1.71% 1.95% 2.07% 1.82%
- -------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net
assets 1.80% 1.46% 3.70% 2.57% 1.22%
- -------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net
assets prior to expense limitation 1.80% 1.45% 3.60% 2.57% 0.96%
- -------------------------------------------------------------------------------------------------------------
Portfolio turnover 5% 8% 9% 21% 27%
- -------------------------------------------------------------------------------------------------------------
Volatility 8.75% 3.27%(5) 24.22%(5) 8.17% 9.23%(5)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
Class B Shares
- -----------------------------------------------------------------------------------------------------------
International Equity Fund Year Ended 11/30/
- -----------------------------------------------------------------------------------------------------------
Period
9/6/94(2)
through
1998 1997 1996 1995 11/30/94
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.560 $14.560 $12.130 $11.900 $12.860
- -----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
- -----------------------------------------------------------------------------------------------------------
Net investment income(1) 0.168 0.114 0.398 0.278 0.036
- -----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currencies 0.962 0.246 2.377 0.567 (0.966)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations 1.130 0.360 2.775 0.845 (0.930)
- -----------------------------------------------------------------------------------------------------------
Less dividends and distributions
- -----------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.255) (0.340) (0.200) (0.145) (0.030)
- -----------------------------------------------------------------------------------------------------------
Distributions from net realized gain on
investments (0.155) (0.020) (0.145) (0.470) none
- -----------------------------------------------------------------------------------------------------------
Total dividends and distributions (0.410) (0.360) (0.345) (0.615) (0.030)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.280 $14.560 $14.560 $12.130 $11.900
- -----------------------------------------------------------------------------------------------------------
Total return(4) 8.03% 2.54%(5) 23.38%(5) 7.46% (7.24%)(5)
- -----------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -----------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $37,775 $31,914 $10,878 $3,471 $624
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets 2.40% 2.40% 2.55% 2.77% 2.26%
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
prior to expense limitation 2.40% 2.41% 2.65% 2.77% 2.52%
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net
assets 1.10% 0.76% 3.00% 1.87% 0.52%
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net
assets prior to expense limitation 1.10% 0.75% 2.90% 1.87% 0.26%
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover 5% 8% 9% 21% 27%
- -----------------------------------------------------------------------------------------------------------
Volatility 8.03% 2.54%(5) 23.38%(5) 7.46% (7.24%)(5)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
Class C Shsres
- --------------------------------------------------------------------------------------------
International Equity Fund Year Ended 11/30/
- --------------------------------------------------------------------------------------------
Period
11/29/95(3)
through
1998 1997 1996 11/30/95
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $14.540 $14.540 $12.190 $12.240
- --------------------------------------------------------------------------------------------
Income (loss) from investment operations
- --------------------------------------------------------------------------------------------
Net investment income(1) 0.167 0.114 0.400 none
- --------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currencies 0.963 0.246 2.375 (0.050)
- --------------------------------------------------------------------------------------------
Total from investment operations 1.130 0.360 2.775 (0.050)
- --------------------------------------------------------------------------------------------
Less dividends and distributions
- --------------------------------------------------------------------------------------------
Dividends from net investment income (0.255) (0.340) (0.280) none
- --------------------------------------------------------------------------------------------
Distributions from net realized gain on
investments (0.155) (0.020) (0.145) none
- --------------------------------------------------------------------------------------------
Total dividends and distributions (0.410) (0.360) (0.425) none
- --------------------------------------------------------------------------------------------
Net asset value, end of period $15.260 $14.540 $14.540 $12.190
- --------------------------------------------------------------------------------------------
Total return(4) 8.04% 2.54%(5) 23.39%(5) (6)
- --------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $14,076 $11,811 $1,909 $5
- --------------------------------------------------------------------------------------------
Ratio of expenses to average net assets 2.40% 2.40% 2.55% (6)
- --------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
prior to expense limitation 2.40% 2.41% 2.65% (6)
- --------------------------------------------------------------------------------------------
Ratio of net investment income to average net
assets 1.10% 0.76% 3.00% (6)
- --------------------------------------------------------------------------------------------
Ratio of net investment income to average net
assets prior to expense limitation 1.10% 0.75% 2.90% (6)
- --------------------------------------------------------------------------------------------
Portfolio turnover 5% 8% 9% (6)
- --------------------------------------------------------------------------------------------
Volatility 8.04% 2.54%(5) 23.39%(5)
- --------------------------------------------------------------------------------------------
</TABLE>
Volatility, as indicated by year-by-year total return(4)
Volatility chart is not part of the Financial highlights and has not been
audited by Ernst & Young LLP.
- --------------------------------------------------------------------------------
(1) Per share information for the years ended November 30, 1997 and 1998 was
based on the average shares outstanding method. (2) Date of commencement of
trading; ratios have been annualized but total return has not been
annualized.
(3) Date of commencement of trading.
(4) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(5) Total return reflects expense limitations in effect for the Fund.
(6) The ratios of expenses and net investment income to average net assets,
portfolio turnover and total return have been omitted as management believes
that such ratios and total return for this relatively short period are not
meaningful.
51
<PAGE>
The financial highlights table is intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800.523.1918.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Class A Shares
Global Equity Fund Year Ended 11/30/
- ---------------------------------------------------------------------------------------------------------
Period
12/27/94(2)
through
1998(3) 1997 1996 11/30/95
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $14.050 $13.310 $11.900 $10.000
- ---------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
- ---------------------------------------------------------------------------------------------------------
Net investment income(1) 0.289 0.437 0.493 0.301
- ---------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currencies 0.826 0.843 1.572 1.839
- ---------------------------------------------------------------------------------------------------------
Total from investment operations 1.115 1.280 2.065 2.140
- ---------------------------------------------------------------------------------------------------------
Less dividends and distributions
- ---------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.335) (0.490) (0.385) (0.240)
- ---------------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments (1.230) (0.050) (0.270) none
- ---------------------------------------------------------------------------------------------------------
Total dividends and distributions (1.565) (0.540) (0.655) (0.240)
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.600 $14.050 $13.310 $11.900
- ---------------------------------------------------------------------------------------------------------
Total return(6) 8.83% 9.91% 18.17% 21.48%
- ---------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $7,329 $6,939 $11,878 $3,122
- ---------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets 1.55% 1.25% 1.25% 1.25%
- ---------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
prior to expense limitation 1.99% 2.16% 2.72% 7.55%
- ---------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets 2.17% 3.24% 4.13% 4.75%
- ---------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net
assets prior to expense limitation 1.73% 2.33% 2.66% (1.55%)
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover 90% 74% 34% 57%
- ---------------------------------------------------------------------------------------------------------
Volatility 8.83% 9.91% 18.17% 21.48%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Class B Shares
Global Equity Fund Year Ended 11/30/
- --------------------------------------------------------------------------------------------------
Period
12/27/94(2)
through
1998(3) 1997 1996 11/30/95
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $14.040 $13.300 $11.880 $10.000
- --------------------------------------------------------------------------------------------------
Income (loss) from investment operations
- --------------------------------------------------------------------------------------------------
Net investment income(1) 0.197 0.342 0.379 0.212
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currencies 0.813 0.848 1.606 1.848
- --------------------------------------------------------------------------------------------------
Total from investment operations 1.010 1.190 1.985 2.060
- --------------------------------------------------------------------------------------------------
Less dividends and distributions
- --------------------------------------------------------------------------------------------------
Dividends from net investment income (0.220) (0.400) (0.295) (0.180)
- --------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments (1.230) (0.050) (0.270) none
- --------------------------------------------------------------------------------------------------
Total dividends and distributions (1.450) (0.450) (0.565) (0.180)
- --------------------------------------------------------------------------------------------------
Net asset value, end of period $13.600 $14.040 $13.300 $11.880
- --------------------------------------------------------------------------------------------------
Total return(6) 7.97% 9.18% 17.32% 20.73%
- --------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $5,397 $4,445 $4,796 $613
- --------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets 2.25% 1.95% 1.95% 1.95%
- --------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
prior to expense limitation 2.69% 2.86% 3.42% 8.25%
- --------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets 1.47% 2.54% 3.43% 4.05%
- --------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net
assets prior to expense limitation 1.03% 1.63% 1.96% (2.25%)
- --------------------------------------------------------------------------------------------------
Portfolio turnover 90% 74% 34% 57%
- --------------------------------------------------------------------------------------------------
Volatility 7.97% 9.18% 17.32% 20.73%
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Class C Shares
Global Equity Fund Year Ended 11/30/
- --------------------------------------------------------------------------------------------------------
Period
11/29/95(4)
through
1998(3) 1997 1996 11/30/95
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $13.990 $13.250 $11.890 $11.940
- --------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
- --------------------------------------------------------------------------------------------------------
Net investment income(1) 0.197 0.341 0.446 none
- --------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currencies 0.813 0.849 1.534 (0.050)
- --------------------------------------------------------------------------------------------------------
Total from investment operations 1.010 1.190 1.980 (0.050)
- --------------------------------------------------------------------------------------------------------
Less dividends and distributions
- --------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.220) (0.400) (0.350) none
- --------------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments (1.230) (0.050) (0.270) none
- --------------------------------------------------------------------------------------------------------
Total dividends and distributions (1.450) (0.450) (0.620) none
- --------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.550 $13.990 $13.250 $11.890
- --------------------------------------------------------------------------------------------------------
Total return(6) 8.00% 9.21% 17.33% (5)
- --------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $3,391 $3,094 $1,185 $5
- --------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets 2.25% 1.95% 1.95% (5)
- --------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
prior to expense limitation 2.69% 2.86% 3.42% (5)
- --------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets 1.47% 2.54% 3.43% (5)
- --------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net
assets prior to expense limitation 1.03% 1.63% 1.96% (5)
- --------------------------------------------------------------------------------------------------------
Portfolio turnover 90% 74% 34% (5)
- --------------------------------------------------------------------------------------------------------
Volatility 8.00% 9.21% 17.33%
- --------------------------------------------------------------------------------------------------------
</TABLE>
Volatility, as indicated by year-by-year total return(6)
Volatility chart is not part of the Financial highlights and has not been
audited by Ernst & Young LLP.
- --------------------------------------------------------------------------------
(1) Per share information for the years ended November 30, 1997 and 1998 was
based on the average shares outstanding method.
(2) Date of commencement of trading; ratios have been annualized and total
return has not been annualized.
(3) On July 21, 1997, the Fund's name was changed to Global Equity Fund
(formerly Global Assets Fund), eliminating the Fund's bond component in
favor of stocks.
(4) Date of commencement of trading.
(5) The ratios of expenses and net investment income to average net assets,
portfolio turnover and total return have been omitted as management believes
that such ratios and total return for this relatively short period are not
meaningful.
(6) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge. Total return
reflects expense limitations in effect for the Fund.
52
<PAGE>
The financial highlights table is intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. The information for the years ended October 31, 1998
and 1997 has been audited by Ernst & Young LLP, whose report, along with the
Fund's financial statements, is included in the Fund's annual report, which is
available upon request by calling 800-523-1918. The information for the fiscal
periods ended on or before October 31, 1996 has been audited by the Fund's
previous independent auditors.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Class A Shares
New Pacific Fund Year Ended 10/31/
- ------------------------------------------------------------------------------------------------------
Period
12/3/93(1)
through
1998(4) 1997(4) 1996(5) 1995 10/31/94
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $7.320 $9.420 $8.710 $10.440 $10.000
- ------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.008 (0.010) (0.050) (0.050) (0.020)
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments and foreign currencies (2.683) (1.940) 0.769 (1.390) 0.470
- ------------------------------------------------------------------------------------------------------
Total from investment operations (2.675) (1.950) 0.719 (1.440) 0.450
- ------------------------------------------------------------------------------------------------------
Less dividends and distributions
- ------------------------------------------------------------------------------------------------------
Dividends from net investment income
(loss) (0.055) (0.150) (0.009) none (0.010)
- ------------------------------------------------------------------------------------------------------
Distributions from net realized gain on
investments none none none (0.290) none
- ------------------------------------------------------------------------------------------------------
Total dividends and distributions (0.055) (0.150) (0.009) (0.290) (0.010)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.590 7.320 9.420 8.710 10.440
- ------------------------------------------------------------------------------------------------------
Total return(2) (36.85%) (21.15%) 8.26% (13.99%) 4.53%
- ------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $5,887 $7,144 $11,752 $10,353 $11,333
- ------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets 1.90% 1.80% 1.82% 1.85% 1.85%(3)
- ------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
prior to expense limitation 3.23% 1.86% 2.77% 3.73% 3.66%(3)
- ------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets 0.15% (0.08%) (0.41%) (0.60%) (0.21%)(3)
- ------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets
prior to expense limitation (1.18%) (0.14%) (1.36%) (2.48%) (2.02%)(3)
- ------------------------------------------------------------------------------------------------------
Portfolio turnover 188% 178% 163% 163% 104%
- ------------------------------------------------------------------------------------------------------
Volatility (36.85%) (21.15%) 8.26% (13.99%) 4.53%
- ------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Class B Shares
New Pacific Fund Year Ended 10/31/
- -------------------------------------------------------------------------------------------------------
Period
3/29/94(1)
through
1998(4) 1997(4) 1996(5) 1995 10/31/94
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $7.470 $9.680 $9.010 $10.860 $10.000
- -------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
- -------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.031) (0.080) (0.050) (0.100) (0.030)
- -------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments and foreign currencies (2.724) (1.980) 0.730 (1.460) 0.890
- -------------------------------------------------------------------------------------------------------
Total from investment operations (2.755) (2.060) 0.680 (1.560) 0.860
- -------------------------------------------------------------------------------------------------------
Less dividends and distributions
- -------------------------------------------------------------------------------------------------------
Dividends from net investment income
(loss) (0.055) (0.150) (0.010) none none
- -------------------------------------------------------------------------------------------------------
Distributions from net realized gain on
investments none none none (0.290) none
- -------------------------------------------------------------------------------------------------------
Total dividends and distributions (0.055) (0.150) (0.010) (0.290) (0.000)
- -------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.660 $7.470 $9.680 $9.010 $10.860
- -------------------------------------------------------------------------------------------------------
Total return(2) (37.05%) (21.72%) 7.54% (14.56%) 8.58%
- -------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $2,236 $2,534 $562 $573 $431
- -------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets 2.60% 2.50% 2.50% 2.50% 2.50%(3)
- -------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
prior to expense limitation 3.93% 2.56% 3.45% 4.38% 4.32%(3)
- -------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (0.55%) (0.77%) (1.09%) (1.20%) (0.88%)(3)
- -------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets
prior to expense limitation (1.88%) (0.83%) (2.04%) (3.08%) (2.70%)(3)
- -------------------------------------------------------------------------------------------------------
Portfolio turnover 188% 178% 163% 163% 104%
- -------------------------------------------------------------------------------------------------------
Volatility (37.05%) (21.72%) 7.54% (14.56%) 8.58%
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Class C Shares
New Pacific Fund Year Ended 10/31/
- ---------------------------------------------------------------------------------------------------
Period
7/7/94(1)
through
1998(4) 1997(4) 1996(5) 1995 10/31/94
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $7.320 $9.490 $8.830 $10.660 $10.000
- ---------------------------------------------------------------------------------------------------
Income (loss) from investment operations
- ---------------------------------------------------------------------------------------------------
Net investment income (loss) (0.029) (0.080) (0.050) (0.080) (0.020)
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments and foreign currencies (2.686) (1.940) 0.718 (1.460) 0.680
- ---------------------------------------------------------------------------------------------------
Total from investment operations (2.715) (2.020) 0.668 (1.540) 0.660
- ---------------------------------------------------------------------------------------------------
Less dividends and distributions
- ---------------------------------------------------------------------------------------------------
Dividends from net investment income
(loss) (0.055) (0.150) (0.008) none none
- ---------------------------------------------------------------------------------------------------
Distributions from net realized gain on
investments none none none (0.290) none
- ---------------------------------------------------------------------------------------------------
Total dividends and distributions (0.055) (0.150) (0.008) (0.290) none
- ---------------------------------------------------------------------------------------------------
Net asset value, end of period $4.550 $7.320 $9.490 $8.830 $10.660
- ---------------------------------------------------------------------------------------------------
Total return(2) (37.18%) (21.85%) 7.58% (14.57%) 6.55%
- ---------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $130 $129 $44 $17 $12
- ---------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets 2.60% 2.50% 2.50% 2.50% 2.50%(3)
- ---------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
prior to expense limitation 3.93% 2.56% 3.45% 4.38% 4.31%(3)
- ---------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (0.55%) (0.77%) (1.09%) (1.02%) (0.83%)(3)
- ---------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets
prior to expense limitation (1.88%) (0.83%) (2.04%) (2.90%) (2.64%)(3)
- ---------------------------------------------------------------------------------------------------
Portfolio turnover 188% 178% 163% 163% 104%
- ---------------------------------------------------------------------------------------------------
Volatility (37.18%) (21.85%) 7.58% (14.57%) 6.55%
- ---------------------------------------------------------------------------------------------------
</TABLE>
Volatility, as indicated by year-by-year total return(2)
Volatility chart is not part of the Financial highlights and has not been
audited by Ernst & Young LLP or by the Fund's previous auditors.
- --------------------------------------------------------------------------------
(1) Commencement of operations.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge. Total return
reflects expense limitations in effect for the Fund.
(3) Annualized.
(4) The average shares outstanding method has been applied for per share
information.
(5) Commencing May 3, 1996, Delaware Management Company replaced Lincoln
National Corporation as the Fund's investment manager.
53
<PAGE>
The financial highlights table is intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800-523-1918.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Class A Shares Class B Shares
- -------------------------------------------------------------------------------------------------------------------------
Emerging Markets Fund Year Ended 11/30/ Year Ended 11/30/
- -------------------------------------------------------------------------------------------------------------------------
Period Period
6/10/96(2) 6/10/96(2)
through through
1998 1997 11/30/96 1998 1997 11/30/96
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.200 $9.970 $10.000 $10.110 $9.940 $10.000
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
- -------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)(1) 0.129 0.062 0.018 0.070 (0.020) (0.051)
- -------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (3.174) 0.253 (0.048) (3.135) 0.265 (0.009)
and foreign currencies
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations (3.045) 0.315 (0.030) (3.065) 0.245 (0.060)
- -------------------------------------------------------------------------------------------------------------------------
Less dividends and distributions
- -------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (loss) (0.020) (0.010) none none none none
- -------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments (0.605) (0.075) none (0.605) (0.075) none
- -------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (0.625) (0.085) none (0.605) (0.075) none
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.530 $10.200 $9.970 $6.440 $10.110 $9.940
- -------------------------------------------------------------------------------------------------------------------------
Total return(3) (31.66%) 3.19% (0.30%) (32.11%) 2.48% (0.60%)
- -------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $5,584 $9,665 $2,518 $2,528 $3,484 $282
- -------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets 1.96% 2.00% 2.00% 2.70% 2.70% 2.70%
- -------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
prior to expense limitation 3.91% 3.02% 4.10% 4.61% 3.72% 4.80%
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net
assets 1.58% 0.52% 0.17% 0.84% (0.18%) (0.53%)
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net
assets prior to expense limitation (0.37%) (0.50%) (1.93%) (1.07%) (1.20%) (2.63%)
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 47% 65% 36% 47% 65% 36%
- -------------------------------------------------------------------------------------------------------------------------
Volatility (31.66%) 3.19% (0.30%) (32.11%) 2.48% (0.60%)
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Class C Shares
- ----------------------------------------------------------------------------------------
Emerging Markets Fund Year Ended 11/30/
- ----------------------------------------------------------------------------------------
Period
6/10/96(2)
through
1998 1997 11/30/96
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.110 $9.940 $10.000
- ----------------------------------------------------------------------------------------
Income (loss) from investment operations
- ----------------------------------------------------------------------------------------
Net investment income (loss)(1) 0.068 (0.019) (0.051)
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (3.143) 0.264 (0.009)
and foreign currencies
- ----------------------------------------------------------------------------------------
Total from investment operations (3.075) 0.245 (0.060)
- ----------------------------------------------------------------------------------------
Less dividends and distributions
- ----------------------------------------------------------------------------------------
Dividends from net investment income (loss) none none none
- ----------------------------------------------------------------------------------------
Distributions from net realized gain on investments (0.605) (0.075) none
- ----------------------------------------------------------------------------------------
Total dividends and distributions (0.605) (0.075) none
- ----------------------------------------------------------------------------------------
Net asset value, end of period $6.430 $10.110 $9.940
- ----------------------------------------------------------------------------------------
Total return(3) (32.21%) 2.48% (0.60%)
- ----------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $884 $1,519 $199
- ----------------------------------------------------------------------------------------
Ratio of expenses to average net assets 2.70% 2.70% 2.70%
- ----------------------------------------------------------------------------------------
Ratio of expenses to average net assets
prior to expense limitation 4.61% 3.72% 4.80%
- ----------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net
assets 0.84% (0.18%) (0.53%)
- ----------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net
assets prior to expense limitation (1.07%) (1.20%) (2.63%)
- ----------------------------------------------------------------------------------------
Portfolio turnover 47% 65% 36%
- ----------------------------------------------------------------------------------------
Volatility (32.21%) 2.48% (0.60%)
- ----------------------------------------------------------------------------------------
</TABLE>
Volatility, as indicated by year-by-year total return(3)
Volatility chart is not part of the Financial highlights and has not been
audited by Ernst & Young LLP.
(1) Per share information was based on the average shares outstanding method.
(2) Date of commencement of trading; ratios have been annualized but total
return has not been annualized.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge. Total return
reflects expense limitations in effect for the Fund.
54
<PAGE>
The financial highlights table is intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800-523-1918.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Class A Shares
- ------------------------------------------------------------------------------------------------
Global Bond Fund Year Ended 11/30/
- ------------------------------------------------------------------------------------------------
Period
12/27/94(2)
through
1998 1997 1996 11/30/95
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.790 $11.480 $11.230 $10.000
- ------------------------------------------------------------------------------------------------
Income (loss) from investment operations
- ------------------------------------------------------------------------------------------------
Net investment income(1) 0.595 0.625 0.755 0.659
- ------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currencies (0.015) (0.505) 0.730 1.171
- ------------------------------------------------------------------------------------------------
Total from investment operations 0.580 0.120 1.485 1.830
- ------------------------------------------------------------------------------------------------
Less dividends and distributions
- ------------------------------------------------------------------------------------------------
Dividends from net investment income (0.400) (0.770) (0.875) (0.600)
- ------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments (0.030) (0.040) (0.360) none
- ------------------------------------------------------------------------------------------------
Total dividends and distributions (0.430) (0.810) (1.235) (0.600)
- ------------------------------------------------------------------------------------------------
Net asset value, end of period(4) $10.940 $10.790 $11.480 $11.230
- ------------------------------------------------------------------------------------------------
Total return 5.47% 1.24% 14.35% 18.79%
- ------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $4,684 $4,567 $3,467 $889
- ------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets 1.25% 1.25% 1.25% 1.25%
- ------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
prior to expense limitation 1.59% 2.04% 5.00% 12.34%
- ------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets 5.58% 5.76% 6.82% 7.70%
- ------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net
assets prior to expense limitation 5.24% 4.97% 3.07% (3.39%)
- ------------------------------------------------------------------------------------------------
Portfolio turnover 93% 76% 42% 98%
- ------------------------------------------------------------------------------------------------
Volatility 5.47% 1.24% 14.35% 18.79%
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Class B Shares
- -----------------------------------------------------------------------------------------------
Global Bond Fund Year Ended 11/30/
- -----------------------------------------------------------------------------------------------
Period
12/27/94(2)
through
1998 1997 1996 11/30/95
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.790 $11.490 $11.230 $10.000
- -----------------------------------------------------------------------------------------------
Income (loss) from investment operations
- -----------------------------------------------------------------------------------------------
Net investment income(1) 0.520 0.550 0.679 0.565
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currencies (0.020) (0.511) 0.735 1.205
- -----------------------------------------------------------------------------------------------
Total from investment operations 0.500 0.039 1.414 1.770
- -----------------------------------------------------------------------------------------------
Less dividends and distributions
- -----------------------------------------------------------------------------------------------
Dividends from net investment income (0.330) (0.699) (0.794) (0.540)
- -----------------------------------------------------------------------------------------------
Distributions from net realized gain on investments (0.030) (0.040) (0.360) none
- -----------------------------------------------------------------------------------------------
Total dividends and distributions (0.360) (0.739) (1.154) (0.540)
- -----------------------------------------------------------------------------------------------
Net asset value, end of period(4) $10.930 $10.790 $11.490 $11.230
- -----------------------------------------------------------------------------------------------
Total return 4.59% 0.48% 13.51% 18.23%
- -----------------------------------------------------------------------------------------------
Ratios and supplemental data
- -----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $1,188 $1,081 $707 $115
- -----------------------------------------------------------------------------------------------
Ratio of expenses to average net assets 1.95% 1.95% 1.95% 1.95%
- -----------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
prior to expense limitation 2.29% 2.74% 5.70% 13.04%
- -----------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets 4.88% 5.06% 6.12% 7.00%
- -----------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net
assets prior to expense limitation 4.54% 4.27% 2.37% (4.09%)
- -----------------------------------------------------------------------------------------------
Portfolio turnover 93% 76% 42% 98%
- -----------------------------------------------------------------------------------------------
Volatility 4.59% 0.48% 13.51% 18.23%
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Class C Shares
- --------------------------------------------------------------------------------------------------
Global Bond Fund Year Ended 11/30/
- --------------------------------------------------------------------------------------------------
Period
11/29/95(3)
through
1998 1997 1996 11/30/95
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.740 $11.440 $11.240 $11.330
- --------------------------------------------------------------------------------------------------
Income (loss) from investment operations
- --------------------------------------------------------------------------------------------------
Net investment income(1) 0.521 0.551 0.680 none
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currencies (0.021) (0.512) 0.719 (0.036)
- --------------------------------------------------------------------------------------------------
Total from investment operations 0.500 0.039 1.399 (0.036)
- --------------------------------------------------------------------------------------------------
Less dividends and distributions
- --------------------------------------------------------------------------------------------------
Dividends from net investment income (0.330) (0.699) (0.839) (0.054)
- --------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments (0.030) (0.040) (0.360) none
- --------------------------------------------------------------------------------------------------
Total dividends and distributions (0.360) (0.739) (1.199) (0.054)
- --------------------------------------------------------------------------------------------------
Net asset value, end of period(4) $10.880 $10.740 $11.440 $11.240
- --------------------------------------------------------------------------------------------------
Total return 4.71% 0.49% 13.51% (5)
- --------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $539 $703 $118 $5
- --------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets 1.95% 1.95% 1.95% (5)
- --------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
prior to expense limitation 2.29% 2.74% 5.70% (5)
- --------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets 4.88% 5.06% 6.12% (5)
- --------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net
assets prior to expense limitation 4.54% 4.27% 2.37% (5)
- --------------------------------------------------------------------------------------------------
Portfolio turnover 93% 76% 42% (5)
- --------------------------------------------------------------------------------------------------
Volatility 4.71% 0.49% 13.51%
- --------------------------------------------------------------------------------------------------
</TABLE>
Volatility, as indicated by year-by-year total return(4)
Volatility chart is not part of the Financial highlights and has not been
audited by Ernst & Young LLP.
- --------------------------------------------------------------------------------
(1) Per share information for the years ended November 30, 1996, 1997 and 1998
was based on the average shares outstanding method.
(2) Date of commencement of trading; ratios have been annualized but total
return has not been annualized.
(3) Date of commencement of trading.
(4) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge. Total return
reflects expense limitations in effect for the Fund.
(5) The ratios of expenses and net investment income to average net assets
, portfolio turnover and total return have been omitted as management
believes that such ratios and total return for this relatively short period
are not meaningful.
55
<PAGE>
How to read the Financial highlights
Net investment income
Net investment income includes dividend and interest income earned from the
Fund's securities; it is after expenses have been deducted.
Net realized and unrealized gain (loss) on investments and foreign currencies
A realized gain on investments occurs when we sell an investment at a loss.
When an investment increases or decreases in value but we do not sell it, we
record an unrealized gain or loss. The amount of realized gain per share that
we pay to shareholders is listed under "Less dividends and distributions-
Distributions from net realized gain on investments." Realized and unrealized
gain (loss) on foreign currencies represent changes in the U.S. dollar value of
assets (including investments) and liabilities denominated in foreign currencies
as a result of changes in foreign currency exchange rates.
Net asset value (NAV)
This is the value of a mutual fund share, calculated by dividing the net assets
by the number of shares outstanding.
Total return
This represents the rate that an investor would have earned or lost on an
investment in the Fund. In calculating this figure for the financial highlights
table, we include applicable fee waivers, exclude front-end and contingent
deferred sales charges, and assume the shareholder has reinvested all dividends
and realized gains.
Net assets
Net assets represent the total value of all the assets in the Fund's portfolio,
less any liabilities, that are attributable to that class of the Fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for
operating expenses and management fees. These expenses include accounting and
administration expenses, services for shareholders, and similar expenses.
Ratio of net investment income to average net assets
We determine this ratio by dividing net investment income by average net assets.
Portfolio turnover rate
This figure tells you the amount of trading activity in a fund's portfolio. For
example, a fund with a 50% turnover has bought and sold half of the value of its
total investment portfolio during the stated period.
56
<PAGE>
[begin glossary runs along the bottom of the pages]
How to use this glossary
Words found in the glossary are printed in boldface only the first time they
appear in the prospectus. So if you would like to know the meaning of a word
that isn't in boldface, you might still find it in the glossary.
Amortized cost
Amortized cost is a method used to value a fixed income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Average maturity
An average of when the individual bonds and other debt securities held in a
portfolio will mature.
Bond
A debt security, like an IOU, issued by a company, municipality or government
agency. In return for lending money to the issuer, a bond buyer generally
receives fixed periodic interest payments and repayment of the loan amount on a
specified maturity date. A bond's price changes prior to maturity and is
inversely related to current interest rates. When interest rates rise, bond
prices fall, and when interest rates fall, bond prices rise.
Bond ratings
Independent evaluations of creditworthiness, ranging from Aaa/AAA (highest
quality) to D (lowest quality). Bonds rated Baa/BBB or better are considered
investment grade. Bonds rated Ba/BB or lower are commonly known as junk
bonds. See also Nationally recognized statistical rating organization. See
also Nationally recognized statistical rating organization.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Commission
The fee an investor pays to a financial adviser for investment advice and help
in buying or selling mutual funds, stocks, bonds or other securities.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
Contingent deferred sales charge (CDSC)
Fee charged by some mutual funds when shares are redeemed (sold back to the
fund) within a set number of years; an alternative method for investors to
compensate a financial adviser for advice and service, rather than an up-front
commission.
57
<PAGE>
Corporate bond
A debt security issued by a corporation. See "bond."
Currency exchange rates
The price at which one country's currency can be converted into another's. This
exchange rate varies almost daily according to a wide range of political,
economic and other factors.
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Duration
A measurement of a fixed-income investment's price volatility. The larger the
number, the greater the likely price change for a given change in interest
rates.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Fixed-income securities
With fixed-income securities, the money you originally invested is paid back at
a pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See Bonds.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Management fee
The amount paid by a mutual fund to the investment adviser for management
services, expressed as an annual percentage of the fund's average daily net
assets.
58
<PAGE>
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
Maturity
The length of time until a bond issuer must repay the underlying loan principal
to bondholders.
Morgan Stanley Capital International EAFE (Europe, Australia, Far East) Index
The Morgan Stanley Capital International EAFE Stock Index is an international
index including stocks traded on 16 exchanges in Europe, Australia and the Far
East, weighted by capitalization.The index is unmanaged and doesn't include the
actual costs of buying, selling, and holding securities.
59
<PAGE>
Morgan Stanley Capital International Emerging Markets Free Index
The Morgan Stanley International Emerging Markets Free Index is a U.S. dollar
dominated index composed of stocks of countries with below average per capita
GDP as defined by the World Bank, foreign ownership restrictions, a tax
regulatory environment, and greater perceived market risk than in developed
countries. Within this index, MSCI aims to capture an aggregate of 60% of local
market capitalization.
Morgan Stanley Capital International World Index
The Morgan Stanley Capital International World Index is an international index
that includes stocks traded in Europe, Australia, the Far East, plus the U.S.,
and Canada, and South Africa, weighted by capitalization.
Morgan Stanley Pacific Index
A total return index, reported in U.S. dollars, based on share prices and
reinvested gross dividends of approximately 500 companies (only those securities
deemed sufficiently liquid for trading by investors) from the following 6
countries: Australia, Hong Kong, Japan, Malaysia, New Zealand, Singapore.
National Association of Securities Dealers (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
Nationally recognized statistical rating organization (NRSRO)
A company that assesses the credit quality of bonds, commercial paper, preferred
and common stocks and municipal short-term issues, rating the probability that
the issuer of the debt will meet the scheduled interest payments and repay the
principal. Ratings are published by such companies as Moody's Investors Service
(Moody's), Standard & Poor's Corporation (S&P), Duff & Phelps, Inc. (Duff), and
Fitch IBCA, Inc. (Fitch).
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stock also often pays dividends at a fixed
rate and is sometimes convertible into common stock.
Price/earnings ratio
A measure of a stock's value calculated by dividing the current market price of
a share of stock by its annual earnings per share. A stock selling for $100 per
share with annual earnings per share of $5 has a P/E of 20.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
60
<PAGE>
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
61
<PAGE>
Sales charge
Charge on the purchase or redemption of fund shares sold through financial
advisers. May vary with the amount invested. Typically used to compensate
advisers for advice and service provided.
Salomon Smith Barney World Government Bond Index
A market-capitalization weighted benchmark that tracks the performance of the 18
government bond markets of Australia, Austria, Belgium, Canada, Denmark,
Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, Portugal,
Spain, Sweden, Switzerland, the United Kingdom, and the United States.
SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as "equities."
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
Federal and state laws that provide a simple way to transfer property to a minor
with special tax advantages.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
There are investments which are more likely to be "low volatility" and
investments which are more likely to be "high volatility" investments.
[end glossary]
62
<PAGE>
Appendix A
Bond Ratings
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.
63
<PAGE>
Appendix B
New Pacific Fund
Additional information on investment policies and risk considerations
In attempting to achieve its investment objective and policies, the New Pacific
Fund may employ, among others, one or more of the strategies set forth below.
The information in this section is specific to New Pacific Fund. Other Funds may
or may not also use these strategies, as described elsewhere in this prospectus.
Convertible Securities
The Fund may invest in securities that either have warrants or rights attached
or are otherwise convertible into other or additional securities. A convertible
security is typically a fixed-income security (a bond or preferred stock) that
may be converted at a stated price within a specified period of time into a
specified number of shares of common stock of the same or a different issuer.
Convertible securities are generally senior to common stocks in a corporation's
capital structure but are usually subordinated to similar non-convertible
securities. While providing a fixed-income stream (generally higher in yield
than the income derivable from a common stock but lower than that afforded by a
similar non-convertible security), a convertible security also affords an
investor the opportunity, through its conversion feature, to participate in
capital appreciation attendant upon a market price advance in the common stock
underlying the convertible security. In general, the market value of a
convertible security is at least the higher of its "investment value" (i.e., its
value as a fixed-income security) or its "conversion value" (i.e., its value
upon conversion into its underlying common stock). While no securities
investment is without some risk, investments in convertible securities generally
entail less risk than investments in the common stock of the same issuer.
U.S. Government Securities
The Fund may invest in securities of the U.S. government. Securities guaranteed
by the U.S. government include:
o direct obligations of the U.S. Treasury (such as Treasury bills,
notes and bonds) and
o federal agency obligations guaranteed as to principal and interest
by the U.S. Treasury (such as GNMA certificates and Federal
Housing Administration debentures).
For these securities, the payment of principal and interest is unconditionally
guaranteed by the U.S. government, and thus they are of the highest possible
credit quality. Such securities are subject to variations in market value due to
fluctuations in interest rates, but if held to maturity are deemed to be free of
credit risk for the life of the investment.
Securities issued by U.S. government instrumentalities and certain federal
agencies are neither direct obligations of, nor guaranteed by, the U.S.
Treasury. However, they generally involve federal sponsorship in one way or
another: some are backed by specific types of collateral; some are supported by
the issuer's right to borrow from the U.S. Treasury; some are supported by the
discretionary authority of the U.S. Treasury to purchase certain obligations of
the issuer; and others are supported only by the credit of the issuing
government agency or instrumentality. These agencies and instrumentalities
include, but are not limited to, Federal Land Banks, Farmers Home
Administration, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, and Federal Home Loan Banks.
Repurchase Agreements
The Fund may enter into repurchase agreements, under which the Fund buys a
security (typically a U.S. government security or other money market security)
and obtains a simultaneous commitment from the seller to repurchase the security
at a specified time and price. The seller must maintain with the Fund's
Custodian collateral equal to at least 102% of the repurchase price including
accrued interest, as monitored daily by the manager and/or sub-adviser. The Fund
only will enter into repurchase agreements involving securities in which it
could otherwise invest and with banks, brokers or dealers deemed by the board of
directors to be creditworthy. If the seller under the repurchase agreement
defaults, the Fund may incur a loss if the value of the collateral securing the
repurchase agreement has declined and may incur disposition costs in connection
with liquidating the collateral. If bankruptcy proceedings are commenced with
respect to the seller, realization upon the collateral by the Fund may be
delayed or limited.
64
<PAGE>
The funds in Delaware Investments have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the 1940 Act to allow
Delaware Investments funds jointly to invest cash balances. The Fund may invest
cash balances in a joint repurchase agreement in accordance with the terms of
the Order and subject generally to the conditions described above.
When-Issued Securities and Firm Commitment Agreements
The Fund may purchase securities on a delayed delivery or "when-issued" basis
and enter into firm commitment agreements (transactions whereby the payment
obligation and interest rate are fixed at the time of the transaction but the
settlement is delayed). The transactions may involve either corporate, municipal
or government securities. The Fund as a purchaser assumes the risk of any
decline in value of the security beginning on the date of the agreement or
purchase. The Fund may invest in when-issued securities in order to take
advantage of securities that may be especially under or over valued when trading
on a when-issued basis.
The Fund will segregate liquid assets such as cash, U.S. government securities
or other appropriate high grade debt obligations in an amount sufficient to meet
its payment obligations in these transactions. Although these transactions will
not be entered into for leveraging purposes, to the extent the Fund's aggregate
commitments under these transactions exceed its holdings of cash and securities
that do not fluctuate in value (such as money market instruments), the Fund
temporarily will be in a leveraged position (i.e., it will have an amount
greater than its net assets subject to market risk). Should market values of the
Fund's portfolio securities decline while it is in a leveraged position, greater
depreciation of its net assets would likely occur than were it not in such a
position. The Fund will not borrow money to settle these transactions and,
therefore, will liquidate other Fund securities in advance of settlement if
necessary to generate additional cash to meet their obligations thereunder.
Money Market Instruments
The Fund may invest in money market instruments without limit for temporary or
defensive purposes. These are shorter-term debt securities generally maturing in
one year or less which include:
o commercial paper (short-term notes up to 9 months issued by
corporations or governmental bodies);
o commercial bank obligations (certificates of deposit
(interest-bearing time deposits), bankers' acceptances (time
drafts on a commercial bank where the bank accepts an irrevocable
obligation to pay at maturity), and documented discount notes
(corporate promissory discount notes accompanied by a commercial
bank guarantee to pay at maturity));
o corporate bonds and notes (corporate obligations that mature,
or that may be redeemed, in one year or less);
o variable rate demand notes, short-term tax-exempt obligations; and
o savings association obligations (certificates of deposit issued by
mutual savings banks or savings and loan associations). Although
certain floating or variable rate obligations (securities which
have a coupon rate that changes at least annually and generally
more frequently) have maturities in excess of one year, they are
also considered to be short-term debt securities.
Strategic Transactions
General. The Fund may, but is not required to, utilize various other investment
strategies as described below to hedge various market risks (such as interest
rates, currency exchange rates, and broad or specific equity or fixed-income
market movements), to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio or to enhance potential gain. Such strategies
are generally accepted as modern Fund management and are regularly utilized by
many mutual funds and other institutional investors. Techniques and instruments
may change over time as new instruments and strategies are developed or
regulatory changes occur. In the course of pursuing these investment strategies,
65
<PAGE>
the Fund may purchase and sell derivative securities. In particular, the Fund
may purchase and sell exchange-listed and over-the-counter put and call options
on securities, equity and fixed-income indices and other financial instruments,
purchase and sell financial futures contracts and options thereon, enter into
various interest rate transactions such as swaps, caps, floors or collars, and
enter into various currency transactions such as currency forward contracts,
currency futures contracts, currency swaps or options on currencies or currency
futures (collectively, all the above are called "Strategic Transactions").
Strategic Transactions may be used to attempt to protect against possible
changes in the market value of securities held in or to be purchased for the
Fund resulting from securities markets or currency exchange rate fluctuations,
to protect the Fund's unrealized gains in the value of its Fund securities, to
facilitate the sale of such securities for investment purposes, to manage the
effective maturity or duration of fixed-income securities in the Fund, or to
establish a position in the derivatives markets as a temporary substitute for
purchasing or selling particular securities. Any or all of these investment
techniques may be used at any time and there is no particular strategy that
dictates the use of one technique rather than another, as use of any Strategic
Transaction is a function of numerous variables including market conditions. The
ability of the Fund to utilize these Strategic Transactions successfully will
depend on the manager's or sub-adviser's ability to predict pertinent market
movements, which cannot be assured. The Fund will comply with applicable
regulatory requirements when implementing these strategies, techniques and
instruments. Strategic Transactions involving financial futures and options
thereon will be purchased, sold or entered into only for bona fide hedging, risk
management or Fund management purposes and not for speculative purposes.
Additional information relating to certain financial instruments or strategies
is set forth below. In addition, see Special risks of strategic transactions,
below, for a discussion of certain risks.
Limitations on Futures and Options Transactions. The Fund will not enter into
any futures contract or option on a futures contract if, as a result, the sum of
initial margin deposits on futures contracts and related options and premiums
paid for options on futures contracts the Fund have purchased, after taking into
account unrealized profits and losses on such contracts, would exceed 5% of the
Fund's net asset value without reference to the definition of "bona fide hedging
transactions and positions" under the Commodity Exchange Act, as amended, or
unless the futures contract is covered by cash equivalent set-asides equal to
the total contract value.
In addition to the above limitations, the Fund will not:
o sell futures contracts, purchase put options or write call options
if, as a result, more than 25% of its total assets would be hedged
with futures and options under normal conditions;
o purchase futures contracts or write put options if, as a result,
the Fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed
25% of its total assets; or
o purchase call options if, as a result, the current value of option
premiums for call options purchased by the Fund would exceed 5% of
its total assets.
These limitations do not apply to options attached to or acquired or traded
together with their underlying securities, and do not apply to securities that
incorporate features similar to options.
The limitations on the Fund's investments in futures contracts and options, and
the Fund's policies regarding futures contracts and options discussed elsewhere
are not fundamental policies and may be changed as regulatory agencies permit.
Options Transactions. The Fund may purchase and write (i.e., sell) put and call
options on securities and currencies that are traded on national securities
exchanges or in the over-the-counter market to enhance income or to hedge its
funds. A call option gives the purchaser, in exchange for a premium paid, the
right for a specified period of time to purchase securities or currencies
subject to the option at a specified price (the exercise price or strike price).
When the Fund writes a call option, the Fund gives up the potential for gain on
the underlying securities in excess of the exercise price of the option.
66
<PAGE>
A put option gives the purchaser, in return for a premium, the right
for a specified period of time to sell the securities or currencies subject to
the option to the writer of the put at the specified exercise price. The writer
of the put option, in return for the premium, has the obligation, upon exercise
of the option, to acquire the securities underlying the option at the exercise
price. The Fund might, therefore, be obligated to purchase the underlying
securities for more than their current market price.
The Fund will write only "covered" options. An option is covered if the
Fund owns an offsetting position in the underlying security or maintains cash,
U.S. government securities or other high-grade debt obligations with a value
sufficient at all times to cover its obligations. See the Statement of
Additional Information.
Forward Foreign Currency Exchange Contracts. The Fund may enter into forward
foreign currency exchange contracts to protect the value of their funds against
future changes in the level of currency exchange rates. The Fund may enter into
such contracts on a spot (i.e., cash) basis at the rate then prevailing in the
currency exchange market or on a forward basis, by entering into a forward
contract to purchase or sell currency at a future date. The Fund's dealings in
forward contracts will be limited to hedging involving either specific
transactions or Fund positions. Transaction hedging generally arises in
connection with the purchase or sale of its Fund securities and accruals of
interest or dividends receivable and Fund expenses. Position hedging generally
arises with respect of existing Fund security or currency positions.
Futures Contracts and Options Thereon. The Fund may purchase and sell financial
futures contracts and options thereon which are exchange-listed or
over-the-counter for certain hedging, return enhancement and risk management
purposes in accordance with regulations of the CFTC. These futures contracts and
related options will be on interest-bearing securities, financial indices and
interest rate indices. A financial futures contract is an agreement to purchase
or sell an agreed amount of securities at a set price for delivery in the
future.
The Fund may not purchase or sell futures contracts and related options if
immediately thereafter the sum of the amount of initial margin deposits on the
Fund's existing futures and options on futures and premiums paid on such related
options would exceed 5% of the market value of the Fund's total assets. In
addition, the value of all futures contracts sold will not exceed the total
market value of the Fund.
Swap Agreements. The Fund may enter into interest rate swaps, currency swaps,
and other types of swap agreements such as caps, collars and floors. In an
interest rate swap, one party agrees to make regular payments of a floating rate
times a "notional" principal amount in return for payments of a fixed rate times
the same amount. Swaps may also depend on other prices or rates such as the
value of an index or mortgage prepayment rates.
Swap agreements usually involve a small investment of cash relative to the
magnitude of risk assumed. As a result, swaps can be very volatile and may
substantially impact the Fund's performance. Swap agreements are also subject to
the risk of a counterpart's ability to perform (i.e., creditworthiness). The
Fund may also suffer losses if it is unable to terminate swap agreements or
reduce exposure through offsetting transactions in a timely manner.
Special Risks of Strategic Transactions. Participation in the options or futures
markets and in currency exchange transactions involves investment risks and
transaction costs to which the Fund would not be subject absent the use of these
Strategic Transactions. If the manager's and/or sub-adviser's prediction of
movements in the direction of the securities, foreign currency and interest rate
markets are inaccurate, the adverse consequences to the Fund may leave the Fund
in a worse position than if such Strategic Transactions were not used. Risks
inherent in the use of options, foreign current and futures contracts and
options on futures contracts include:
o dependence on the manager's and/or sub-adviser's ability to
predict current movements in the direction of interest rates,
securities prices and currency markets;
o imperfect correlation between the price of options and futures
contracts and options thereon and movements in the prices of
securities being hedged;
o the fact that skills need to use these strategies are different
from those needed to select Fund securities;
67
<PAGE>
o the possible absence of a liquid secondary market for any
particular instrument at any time;
o the possible need to defer closing out certain hedged positions to
avoid adverse tax consequences; and o the possible inability of a
Fund to purchase or sell a Fund security at a time that otherwise
would be favorable for it to do so, or the possible need for a
Fund to sell a Fund security at a disadvantageous time, due to the
need for a Fund to maintain "cover" or to segregate securities in
connection with Strategic Transactions.
Although the use of futures contracts and options transactions for hedging
should tend to minimize the risk of loss due to a decline in the value of the
hedged position, at the same time they tend to limit any potential gain which
might result from an increase in value of such position. Finally, the daily
variation margin requirements for futures contracts would create a greater
ongoing potential financial risk than would purchase of options, where the
exposure is limited to the cost of the initial premium. Losses resulting from
the use of Strategic Transactions would reduce net asset value, and possibly
income, and such losses can be greater than if the Strategic Transactions had
not been utilized. The Strategic Transactions that the Fund may use and some of
their risks are described more fully in the Statement of Additional Information.
The Fund's ability to engage in Strategic Transactions is limited by the
requirements of the Internal Revenue Code for qualification as a regulated
investment company. See the Statement of Additional Information.
* * *
The Statement of Additional Information describes certain of these
investment policies and risk considerations. The Statement of Additional
Information also sets forth other investment policies, risk considerations and
more specific investment restrictions.
68
<PAGE>
[back cover]
Additional Information about the Funds
Additional information about the Funds' investments is available in the Funds'
annual and semi-annual reports to shareholders. In the Funds' shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Funds' performance during the report
period. You can find more detailed information about the Funds in the current
Statement of Additional Information, which we have filed electronically with the
Securities and Exchange Commission (SEC) and which is legally a part of this
prospectus. If you want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any questions about investing
in these funds, you can write to us at 1818 Market Street, Philadelphia, PA
19103-3682, or call toll-free 800.523.1918. You may also obtain additional
information about each of the Funds from your financial adviser.
You can find reports and other information about each Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Funds, including their
Statement of Additional Information, can be reviewed and copied at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
You can get information on the public reference room by calling the SEC at
1.800.SEC.0330.
Web site
www.delawarefunds.com
- ---------------------
E-mail
[email protected]
Shareholder Service Center
800.523.1918
Call the Shareholder Service Center Monday to Friday, 8 a.m. to 8 p.m.
Eastern time:
o For fund information; literature; price, yield and performance figures.
o For information on existing regular investment accounts and retirement plan
accounts including wire investments; wire redemptions; telephone
redemptions and telephone exchanges.
Delaphone Service
800.362.FUND (800.362.3863)
o For convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24 hours a
day, use this Touch-Tone(R) service.
Delaware Group Global & International Funds, Inc.'s Investment Company Act file
number: 811-6324 Delaware Group Adviser Funds, Inc.'s Investment Company Act
file number: 811-7972
Fund Symbols CUSIP NASDAQ
- ------------ ----- ------
International Equity Fund Class A 245914106 DEGIX
International Equity Fund Class B 245914700 DEIEX
International Equity Fund Class C 245914858 DEGCX
Global Equity Fund Class A 245914304 DEGAX
Global Equity Fund Class B 245914809 DGABX
Global Equity Fund Class C 245914874 DGACX
New Pacific Fund Class A 245917844 DENPX
New Pacific Fund Class B 245917836 DENBX
New Pacific Fund Class C 245917828 DENCX
Emerging Markets Fund Class A 245914841 DEMAX
Emerging Markets Fund Class B 245914833 DEMBX
Emerging markets Fund Class C 245914825 DEMCX
Global Bond Fund Class A 245914205 DGBAX
Global Bond Fund Class B 245914882 DGBBX
Global Bond Fund Class C 245914866 DGBCX
69
<PAGE>
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
International Equity Fund
Global Equity Fund
(formerly Global Assets Fund)
New Pacific Fund
Emerging Markets Fund
Global Bond Fund
Institutional Class
Prospectus
March 30, 1999
International and Global Funds
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
2
<PAGE>
Table of contents
Fund profiles page 2
International Equity Fund 2
Global Equity Fund 4
New Pacific Fund 6
Emerging Markets Fund 8
Global Bond Fund 10
How we manage the Funds page 12
Our investment strategies 12
International Equity Fund 12
Global Equity Fund 12
New Pacific Fund 13
Emerging Markets Fund 14
Global Bond Fund 16
The securities we typically invest in 18
The risks of investing in the Funds 21
Who manages the Funds page 24
Investment manager 24
Portfolio managers 24
Fund administration (Who's who) 27
About your account page 28
Investing in the Funds 28
How to buy shares 29
How to redeem shares 31
Account minimum 32
Exchanges 32
Dividends, distributions and taxes 32
Certain management considerations page 33
Financial information page 34
Appendix A - Bond ratings page 44
Appendix B - Additional information on
investment policies and
risk considerations page 45
3
<PAGE>
Profile: International Equity Fund
What are the Fund's goals?
The International Equity Fund seeks long-term growth without undue risk to
principal. Although the Fund will strive to achieve its goal, there is no
assurance that it will.
What are the Fund's main investment strategies?
The Fund invests primarily in equity securities that provide the potential for
capital appreciation and income. The Fund is an international fund. As such, at
least 65% of the Fund's total assets will be invested in equity securities of
issuers from at least three foreign countries. An issuer is considered to be
from the country where it is located, where the majority of its assets are or
where it generates the majority of its operating income.
In selecting investments for the Fund,
o we place emphasis on identifying companies that are undervalued in terms
of such factors as assets, earnings, dividends and growth potential.
o in order to compare the value of different investments, we consider whether
the future dividends on a stock are expected to increase faster than,
slower than, or in line with the level of inflation, and we discount the
value of future anticipated dividends back to what they would be worth if
they were being paid today.
o we attempt to determine whether a particular currency is overvalued or
undervalued by comparing the amount of goods and services that a dollar
will buy in the United States to the amount of foreign currency required to
buy the same amount of goods and services in another country. When the
dollar buys less, the foreign currency may be considered to be overvalued,
and when the dollar buys more, the foreign currency may be considered to be
undervalued. Securities in an undervalued currency may offer greater
potential returns, and may be an attractive investment for the Fund.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. This Fund
will be affected primarily by declines in stock prices, which can be caused by a
drop in foreign stock markets or poor performance in specific industries or
companies. Because the Fund invests in international securities in both
established and developing countries, it will be affected by international
investment risks related to changes in currency valuations, political
instability, economic instability, and lax accounting and regulatory standards.
For a more complete discussion of risk, please turn to page 26.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
How has the International Equity Fund performed?
4
<PAGE>
This bar chart and table can help you evaluate the risks of investing in the
Fund. We show how returns for the Fund's Institutional Class shares have varied
over the past seven calendar years, as well as the average annual returns of
these shares for the one- and five-year periods and since inception.
International Equity Fund's Institutional Class commenced operations on November
9, 1992. Total return information for the Class for the periods prior to the
time the Class commenced operations is calculated by taking the performance of
International Equity Fund A Class and eliminating all sales charges that apply
to Class A shares. However, for those periods, Class A 12b-1 payments were not
eliminated, and performance would have been affected if this adjustment had been
made. The Fund's past performance is not necessarily an indication of how it
will perform in the future. The returns reflect voluntary expense caps, if any,
in effect during the periods. The returns would be lower without the voluntary
caps. There is no longer a voluntary expense cap in place for this Fund.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (INSTITUTIONAL
CLASS)]
Year-by-year total return (Institutional Class)
1992 -1.36%
1993 24.80%
1994 2.03%
1995 11.75%
1996 20.61%
1997 4.61%
1998 9.35%
The Fund's Institutional Class shares had a 1.01% fiscal year-to-date return as
of February 28, 1999. During the periods illustrated in this bar chart,
Institutional Class' highest return was 13.53% for the quarter ended September
30, 1998 and its lowest return was -13.69% for the quarter ended December 31,
1998.
How has the International Equity Fund performed? (continued)
Average annual returns for periods ending 12/31/98
CLASS Institutional Morgan Stanley Capital
International EAFE Index
1 year 9.35% 20.33%
5 years 9.48% 9.50%
Since 10.27% 8.97%
10/31/91
The Fund's returns are compared to the performance of the Morgan Stanley Capital
International EAFE (Europe, Australia, Far East) Index. You should remember that
unlike the Fund, the index is unmanaged and doesn't reflect the costs of
operating a mutual fund, such as the costs of buying, selling, and holding the
securities.
5
<PAGE>
What are the International Equity Fund's fees and expenses?
You do not pay sales charges directly from your investments when you buy or sell
shares of the Institutional Class.
- -----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as none
a percentage of offering price
- -----------------------------------------------------------------
Maximum contingent deferred sales charge (load) as a none
percentage of original purchase price or redemption
price, whichever is lower
- -----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested none
dividends
- -----------------------------------------------------------------
Redemption fees none
- -----------------------------------------------------------------
Exchange Fees(1) none
- -----------------------------------------------------------------
Annual fund operating expenses are deducted from the Fund's assets before it
pays dividends and before its net asset value and total return are calculated.
We will not charge you separately for these expenses. These expenses are based
on amounts incurred during the Fund's most recent fiscal year.
- -------------------------------------------------------
Management fees 0.75%
- -------------------------------------------------------
Distribution and service (12b-1) fees none
- -------------------------------------------------------
Other expenses 0.65%
- -------------------------------------------------------
Total operating expenses 1.40%
- -------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown. 2 This is an
example only, and does not represent future expenses, which may be greater or
less than those shown here.
- ------------------------
1 year $143
- ------------------------
3 years $443
- ------------------------
5 years $766
- ------------------------
10 years $1,680
- ------------------------
1. Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange
your shares into a fund that has a front-end sales charge.
2. The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods
we show.
6
<PAGE>
Profile: Global Equity Fund
What are the Fund's goals?
The Global Equity Fund seeks long-term total return. Although, the Fund will
strive to achieve its goal, there is no assurance that it will.
What are the Fund's main investment strategies?
The Fund invests primarily in U.S and foreign equity securities that provide the
potential for capital appreciation and income. Under normal circumstances, at
least 65% of the Fund's total assets will be invested in equity securities from
at least three different countries, one of which may be the United States. An
issuer is considered to be from the country where it is located, where the
majority of its assets are or where it generates the majority of its operating
income.
In selecting investments for the Fund,
o we try to identify companies that are undervalued in terms of such factors
as assets, earnings, dividends and growth potential.
o in order to compare the value of different investments, we consider whether
the future dividends on a stock are expected to increase faster than,
slower than, or in line with the level of inflation, and we discount the
value of future anticipated dividends back to what they would be worth if
they were being paid today.
o we attempt to determine whether a particular currency is overvalued or
undervalued by comparing the amount of goods and services that a dollar
will buy in the United States to the amount of foreign currency required to
buy the same amount of goods and services in another country. When the
dollar buys less, the foreign currency may be considered to be overvalued,
and when the dollar buys more, the foreign currency may be considered to be
undervalued. Securities in an undervalued currency may offer greater
potential returns, and may be an attractive investment for the Fund.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. This Fund
will be affected primarily by declines in stock prices, which can be caused by a
drop in the stock market or poor performance in specific industries or
companies. Because the Fund invests in foreign securities, it will be affected
by international investment risks related to changes in currency valuations,
political instability, economic instability and lax accounting and regulatory
standards. The Fund is considered "non-diversified" under federal laws that
regulate mutual funds. Thus, adverse effects on the Fund's investments may
affect a larger portion of its overall assets and subject the Fund to greater
risks. For a more complete discussion of risk, please turn to page 26.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
7
<PAGE>
How has the Global Equity Fund performed?
This bar chart and table can help you evaluate the risks of investing in the
Fund. We show how returns for the Fund's Institutional Class shares have varied
over the past four calendar years since its inception, as well as the average
annual returns of these shares for the past year and since inception. The Fund's
past performance is not necessarily an indication of how it will perform in the
future. On July 21, 1998, the Fund's name was changed from Global Assets Fund to
Global Equity Fund and the Fund's investment focus changed from a mix of foreign
and U.S. stocks and bonds to primarily foreign and U.S. stocks. The returns
reflect voluntary expense caps. The returns would be lower without the voluntary
caps.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN
(Institutional)]
Year-by-year total return (Institutional Class)
1995 25.08%
1996 15.80%
1997 11.43%
1998 8.85%
The Fund's Institutional Class shares had a 1.14% fiscal year-to-date return as
of February 28, 1999. During the periods illustrated in this bar chart,
Institutional Class' highest return was 11.31% for the quarter ended December
31, 1998 and its lowest return was -9.52% for the quarter ended September 30,
1998.
How has the Global Equity Fund performed? (continued)
Average annual returns for periods ending 12/31/98
CLASS Institutional Morgan Stanley
Capital International
(Inception 12/27/94) World Index
1 year 8.85% 24.80%
Lifetime 15.05% 19.01%
The Fund's returns are compared to the performance of the Morgan Stanley Capital
International World Index. You should remember that unlike the Fund, the index
is unmanaged and doesn't reflect the costs of operating a mutual fund, such as
the costs of buying, selling, and holding the securities.
8
<PAGE>
What are the Global Equity Fund's fees and expenses?
You do not pay sales charges directly from your investments when you buy or sell
shares of the Institutional Class.
- -----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as none
a percentage of offering price
- -----------------------------------------------------------------
Maximum contingent deferred sales charge (load) as a none
percentage of original purchase price or redemption
price, whichever is lower
- -----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested none
dividends
- -----------------------------------------------------------------
Redemption fees none
- -----------------------------------------------------------------
Exchange Fees(1) none
- -----------------------------------------------------------------
Annual fund operating expenses are deducted from the Fund's assets before it
pays dividends and before its net asset value and total return are calculated.
We will not charge you separately for these expenses. These expenses are based
on amounts incurred during the Fund's most recent fiscal year.
- -------------------------------------------------------------
Management fees (2) 0.85%
- -------------------------------------------------------------
Distribution and service (12b-1) fees none
- -------------------------------------------------------------
Other expenses 0.94%
- -------------------------------------------------------------
Total operating expenses(3) 1.79%
- -------------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown. (4) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
- ------------------------
1 year $182
- ------------------------
3 years $563
- ------------------------
5 years $918
- ------------------------
10 years $2,105
- ------------------------
1. Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange your
shares into a fund that
2. Beginning April 1, 1999, a new management fee schedule will be in effect.
The fee table has been restated to reflect this new schedule.
3. The investment manager has agreed to waive fees and pay expenses from June
1, 1998 through May 31,1999, in order to prevent total operating expenses
(excluding any taxes, interest, brokerage fees and extraordinary expenses)
from exceeding 1.55% of average daily net assets. The fees and expenses
shown in the table above do not reflect this voluntary expense cap. The
manager's voluntary commitments of waiver and payment have varied over the
life of the Fund. The following table shows actual operating expenses
reflecting the manager's current fee waivers and payments.
Actual fund expenses including voluntary expense caps
Management fees 0.67%
Distribution and service (12b-1) fees none
Other expenses 0.94%
Total operating expenses 1.55%
4. The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show. This example does not reflect the voluntary expense cap described in
footnote(3).
9
<PAGE>
Profile: New Pacific Fund
What are the Fund's goals?
New Pacific Fund seeks to maximize long-term capital appreciation by investing
primarily in equity securities of companies that are domiciled in or have their
principal business activities in the Pacific Basin. Although the Fund will
strive to achieve its goal, there is no assurance that it will.
What are the Fund's main investment strategies?
The Fund invests primarily in stocks of companies of all sizes that are located
in or have their principal business activities in countries located in the
Pacific Basin. These countries include, but are not limited to, Australia,
China, Hong Kong, Japan, Philippines, Singapore, Taiwan and Malaysia. The Fund
may invest in both established and developing countries. Under normal
circumstances we will invest at least 65% of the Fund's net assets in Pacific
Basin countries.
In selecting stocks for the portfolio, we look for companies that can benefit
from future economic growth in the region. We evaluate both individual countries
to determine how much of the portfolio should be allocated to companies located
there and also individual companies. When evaluating individual companies, we
consider the growth prospects for the company and its industry, the financial
strength of the company and the quality of its management, and whether the stock
appears overvalued or undervalued compared to other stocks in the market or in
its industry.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of the securities held by the
Fund may increase and decrease, sometimes rapidly and unpredictably. Therefore,
the Fund's share price could increase or decrease significantly, particularly
over the short term. Because the Fund invests in foreign securities in both
established and developing countries, it will be affected by international
investment risks related to changes in currency valuations, political
instability, economic instability or lax accounting and regulatory standards.
These risks and others are described more fully on page 26.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
10
<PAGE>
How has New Pacific Fund performed?
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show how returns for the Fund's Institutional Class shares have
varied over the past four calendar years, as well as average annual returns for
the past year and since inception. The Fund's past performance does not
necessarily indicate how it will perform in the future. The Class' returns
reflect voluntary expense caps. The returns would be lower without the voluntary
caps.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (Institutional
Class)]
Year-by-year total return (Institutional Class)
1998 -21.83%
1997 -31.53%
1996 8.20%
1995 -3.21%
The Fund's Institutional Class shares had a -26.17% fiscal year-to-date return
as of January 31, 1999. During the periods illustrated in this bar chart, the
Institutional Class' highest return was 16.10% for the quarter ended December
31, 1998 and its lowest return was -25.83% for the quarter ended December 31,
1997.
Average annual returns for periods ending 12/31/98
Institutional Class Morgan Stanley
Pacific Index
1 year -21.83% 2.69%
Since inception
(2/3/94) -13.68% -6.13%
The Fund's returns are compared to the performance of the Morgan Stanley Pacific
Index. You should remember that unlike the Fund, the index is unmanaged and
doesn't reflect the costs of operating a mutual fund, such as the costs of
buying, selling and holding the securities.
11
<PAGE>
What are the New Pacific Fund's fees and expenses?
You do not pay sales charges directly from your investments when you buy or sell
shares of the Institutional Class.
- -----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as none
a percentage of offering price
- -----------------------------------------------------------------
Maximum contingent deferred sales charge (load) as a none
percentage of original purchase price or redemption
price, whichever is lower
- -----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested none
dividends
- -----------------------------------------------------------------
Redemption fees none
- -----------------------------------------------------------------
Exchange Fees(1) none
- -----------------------------------------------------------------
Annual fund operating expenses are deducted from the Fund's assets before it
pays dividends and before its net asset value and total return are calculated.
We will not charge you separately for these expenses. These expenses are based
on amounts incurred during the Fund's most recent fiscal year.
- ------------------------------------------------------------------
Management fees(2) 0.85%
- ------------------------------------------------------------------
Distribution and service (12b-1) fees none
- ------------------------------------------------------------------
Other expenses 2.13%
- ------------------------------------------------------------------
Total operating expenses(3) 2.98%
- ------------------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown. 4 This is an
example only, and does not represent future expenses, which may be greater or
less than those shown here.
- ---------------------------
1 year $301
- ---------------------------
3 years $921
- ---------------------------
5 years $1,567
- ---------------------------
10 years $3,299
- ---------------------------
1. Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange you
shares into a fund that has a front-end sales charge.
2. Beginning April 1, 1999, a new management fee schedule will be in effect.
The fee table has been restated to reflect this new schedule.
3. The investment manager has agreed to waive fees and pay expenses from May
1, 1998 through April 30,1999 in order to prevent total operating expenses
(excluding any taxes, interest, brokerage fees and extraordinary expenses)
from exceeding 1.70% of average daily net assets. The fees and expenses
shown in the table above do not reflect this voluntary expense cap. The
manager's voluntary commitments of waiver and payment were different prior
to May 1, 1998. The following table shows actual operating expenses
reflecting the manager's current fee waivers and payments.
Actual Fund expenses including voluntary expense caps
Management fees 0.00%
Distribution and service (12b-1) fees none
Other expenses 1.70%
Total operating expenses 1.70%
4. The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show. This example does not reflect the voluntary expense limitation
discussed in footnote 3.
12
<PAGE>
Profile: Emerging Markets Fund
What are the Fund's goals?
The Emerging Markets Fund seeks long-term capital appreciation. Although the
Fund will strive to achieve its goal, there is no assurance that it will.
What are the Fund's main investment strategies?
The Fund invests primarily in equity securities of issuers located or operating
in 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 issuers from at least three different countries that are
considered to be emerging or developing. An issuer is considered to be from the
country where it is located, where the majority of its assets are or where it
generates the majority of its operating income. We may invest up to 35% of the
Fund's net assets in emerging market fixed-income securities. All of these may
be high yield, high risk fixed-income securities.
In selecting investments for the Fund
o we try to identify companies that are undervalued in terms of such factors
as assets, earnings, dividends and growth potential.
o in order to compare the value of different investments, we consider whether
the future dividends on a stock are expected to increase faster than,
slower than, or in line with the level of inflation, and we discount the
value of future anticipated dividends back to what they would be worth if
they were being paid today. Because many of the countries in which the Fund
invests are emerging countries, there may be less information available for
us to use in making this analysis than is available for more developed
countries.
o we attempt to determine whether a particular currency is overvalued or
undervalued by comparing the amount of goods and services that a dollar
will buy in the United States to the amount of foreign currency required to
buy the same amount of goods and services in another country. When the
dollar buys less, the foreign currency may be considered to be overvalued,
and when the dollar buys more, the foreign currency may be considered to be
undervalued. Securities in an undervalued currency may offer greater
potential returns, and may be an attractive investment for the Fund.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. This Fund
will be affected primarily by declines in stock prices, which can be caused by a
drop in foreign stock markets or poor performance in specific industries or
companies. The value of the Fund's investments and, therefore, the price of the
Fund's shares may be more volatile than investments in more developed markets.
Because the Fund invests in international securities in developing countries as
well as established countries, it will be affected by international investment
risks related to changes in currency valuations, political instability, economic
instability, or lax accounting and regulatory standards.
The Fund may invest up to 35% of its net assets in high yield, high risk foreign
fixed-income securities, which are subject to substantial risks, particularly
during periods of economic downturns or rising interest rates.
The Fund is considered "non-diversified" under federal laws that regulate mutual
funds. Thus, adverse effects on the Fund's investments may affect a larger
portion of its overall assets and subject the Fund to greater risks. For a more
complete discussion of risk, please turn to page 26.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
13
<PAGE>
How has the Emerging Markets Fund performed?
This bar chart and table can help you evaluate the risks of investing in the
Fund. We show how returns for the Fund's Institutional Class shares have varied
over the past two calendar years, as well as the average annual returns of these
shares for the past year and since inception. The Fund's past performance
is not necessarily an indication of how it will perform in the future. The
returns reflect voluntary expense caps in effect during the periods. The returns
would be lower without the voluntary caps.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (INSTITUTIONAL
CLASS) FPO]
Year-by-year total return (Institutional Class)
1997 1.58%
1998 -36.19%
The Fund's Institutional Class shares had a -42.80% fiscal year-to-date return
as of February 28, 1999. During the periods illustrated in this bar chart,
Institutional Class's highest return was 31.40% for the quarter ended June 30,
1997 and its lowest return was -25.98% for the quarter ended June 30, 1998.
How has the Emerging Markets Fund performed? (continued)
Average annual returns for periods ending 12/31/98
CLASS Institutional Morgan Stanley Capital
International Emerging
Markets Free Index
1 year -36.19% -25.34%
Since Inception -15.08% -16.74%
(6/10/96)
The Fund's returns are compared to the performance of the Morgan Stanley Capital
International Emerging Markets Free Index. You should remember that unlike the
Fund, the index is unmanaged and doesn't reflect the costs of operating a mutual
fund, such as the costs of buying, selling and holding the securities.
14
<PAGE>
What are the Emerging Markets Fund's fees and expenses?
You do not pay sales charges directly from your investments when you buy or sell
shares of the Institutional Class.
- -----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as none
a percentage of offering price
- -----------------------------------------------------------------
Maximum contingent deferred sales charge (load) as a none
percentage of original purchase price or redemption
price, whichever is lower
- -----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested none
dividends
- -----------------------------------------------------------------
Redemption fees none
- -----------------------------------------------------------------
Exchange Fees(1) none
- -----------------------------------------------------------------
Annual fund operating expenses are deducted from the Fund's assets before it
pays dividends and before its net asset value and total return are calculated.
We will not charge you separately for these expenses. These expenses are based
on amounts incurred during the Fund's most recent fiscal year.
- -------------------------------------------------------
Management fees 1.25%
- -------------------------------------------------------
Distribution and service (12b-1) fees none
- -------------------------------------------------------
Other expenses 2.36%
- -------------------------------------------------------
Total operating expenses(2) 3.61%
- -------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown. 3 This is an
example only, and does not represent future expenses, which may be greater or
less than those shown here.
- ----------------------
1 year $364
- ----------------------
3 year $1,106
- ----------------------
5 year $1,869
- ----------------------
10 year $3,871
- ----------------------
1. Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange your
shares into a fund that has a front-end sales charge.
2. The investment manager has agreed to waive fees and pay expenses from the
commencement of the Fund's operations through May 31, 1999, in order to
prevent total operating expenses (excluding any taxes, interest, brokerage
fees and extraordinary expenses) from exceeding 1.70% of average daily net
assets. The manager's voluntary commitments of waiver and payment have
varied over the life of the Fund. The fees and expenses shown in the table
above do not reflect this voluntary expense cap. The following table shows
actual operating expenses reflecting the manager's current fee waivers and
payments.
Actual Fund expenses including voluntary expense caps
Management fees 0.00%
Distribution and service (12b-1) fees none
Other expenses 1.70%
Total operating expenses 1.70%
3. The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods in
this example. This example does not reflect the voluntary expenses cap
described in footnote(2).
15
<PAGE>
Profile: Global Bond Fund
What are the Fund's goals?
The Global Bond Fund seeks current income consistent with preservation of
principal. Although the Fund will strive to achieve its goal, there is no
assurance that it will.
What are the Fund's main investment strategies?
The Global Bond Fund invests primarily in fixed-income securities that may also
provide the potential for capital appreciation. The Fund is a global fund.
Therefore, at least 65% of the Fund's total assets will be invested in
fixed-income securities of issuers from at least three different countries, one
of which may be the United States. An issuer is considered to be from the
country where it is located, where the majority of its assets are or where it
generates the majority of its operating income.
In selecting investments for the Fund,
o we discount the value of future anticipated interest and redemption
payments, adjusted to reflect the effects of inflation, back to what they
would be worth if they were being paid today in order to compare the value
of different investments.
o we attempt to determine whether a particular currency is overvalued or
undervalued by comparing the amount of goods and services that a dollar
will buy in the United States to the amount of foreign currency required to
buy the same amount of goods and services in another country. When the
dollar buys less, the foreign currency may be considered to be overvalued,
and when the dollar buys more, the foreign currency may be considered to be
undervalued. Securities in an undervalued currency may offer greater
potential returns, and may be an attractive investment for the Fund.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. The Fund's
investments normally decrease when there are declines in bond prices, which can
be caused by a drop in the bond market, an adverse change in interest rates or
an adverse situation affecting the issuer of the bond. Because the Fund invests
in international securities in both established and developing countries, it
will be affected by international investment risks related to changes in
currency valuations, political instability, economic instability, or lax
accounting and regulatory standards. The Fund may invest in high yield, high
risk foreign fixed-income securities, which are subject to substantial risks,
particularly during periods of economic downturns or rising interest rates.
The Fund is considered "non-diversified" under federal laws that regulate mutual
funds. Thus, adverse effects on the Fund's investments may affect a larger
portion of its overall assets and subject the Fund to greater risks. For a more
complete discussion of risk, please turn to page 26.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
16
<PAGE>
How has the Global Bond Fund performed?
This bar chart and table can help you evaluate the risks of investing in the
Fund. We show how returns for the Fund's Institutional Class have varied over
the four calendar years, as well as the average annual returns of these shares
for the past year and since inception. The Fund's past performance is not
necessarily an indication of how it will perform in the future. The returns
reflect voluntary expense caps. The returns would be lower without the voluntary
caps.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (Institutional) ]
Year-by-year total return (Institutional)
1995 21.23%
1996 12.20%
1997 0.91%
1998 7.61%
The Fund's Institutional Class had a 3.96% fiscal year-to-date return as of
February 28, 1999. During the periods illustrated in this bar chart,
Institutional Class' highest return was 5.83% for the quarter ended June 30,
1995 and its lowest return was -2.86% for the quarter ended March 31, 1997.
How has the Global Bond Fund performed? (continued)
[table]
Average annual returns for periods ending 12/31/98
CLASS Institutional Salomon Smith Barney World
(Inception 12/27/94) Government Bond Index
1 year 7.61% 15.31%
Lifetime 10.21% 9.27%
The Fund's returns are compared to the performance of the Salomon Smith Barney
World Government Bond Index. You should remember that unlike the Fund, the index
is unmanaged and doesn't reflect the costs of operating a mutual fund, such as
the costs of buying, selling, and holding the securities.
17
<PAGE>
What are the Global Bond Fund's fees and expenses?
You do not pay sales charges directly from your investments when you buy or sell
shares of the Institutional Class.
- ----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as none
a percentage of offering price
- ----------------------------------------------------------------
Maximum contingent deferred sales charge (load) as a none
percentage of original purchase price or redemption
price, whichever is lower
- ----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested none
dividends
- ----------------------------------------------------------------
Redemption fees none
- ----------------------------------------------------------------
Exchange Fees(1) none
- ----------------------------------------------------------------
Annual fund operating expenses are deducted from the Fund's assets before it
pays dividends and before its net asset value and total return are calculated.
We will not charge you separately for these expenses. These expenses are based
on amounts incurred during the Fund's most recent fiscal year.
- -------------------------------------------------------
Management fees 0.75%
- -------------------------------------------------------
Distribution and service (12b-1) fees none
- -------------------------------------------------------
Other expenses 0.54%
- -------------------------------------------------------
Total operating expenses(2) 1.29%
- -------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown. 3 This is an
example only, and does not represent future expenses, which may be greater or
less than those shown here.
- ------------------------
1 year $131
- ------------------------
3 years $409
- ------------------------
5 years $708
- ------------------------
10 years $1,556
- ------------------------
1. Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange your
shares into a fund that has a front-end sales charge.
2. The investment manager has agreed to waive fees and pay expenses from
December 1, 1998 through May 31, 1999, in order to prevent total operating
expenses (excluding any taxes, interest, brokerage fees and extraordinary
expenses) from exceeding 1% of average daily net assets. The fees and
expenses shown in the table above do not reflect this voluntary expense
cap. The manager's voluntary commitments of waiver and payment have varied
over the life of the Fund. The following table shows actual operating
expenses reflecting the manager's current fee waivers and payments.
Actual Fund expenses including voluntary expense caps
Management fees 0.46%
Distribution and service (12b-1) fees none%
Other expenses 0.54%
Total operating expenses 1.00%
3. The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show. This example does not reflect the voluntary expense cap described in
footnote(2).
18
<PAGE>
How we manage the Funds
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for a particular Fund. Following are descriptions of how the
portfolio managers pursue the Funds' investment goals.
We take a disciplined approach to investing, combining investment
strategies and risk management techniques that can help shareholders
meet their goals.
International Equity Fund
International Equity Fund seeks long-term growth without undue risk to
principal. The Fund invests primarily in securities that provide the potential
for capital appreciation and income. The Fund will invest in a broad range of
equity securities including common stocks and, to a lesser extent, preferred
stocks, convertible securities and warrants. The Fund may also invest in
sponsored or unsponsored depositary receipts.
We may purchase securities in any foreign country, developed or emerging. We
currently anticipate investing in Australia, Belgium, Canada, Finland, France,
Germany, Hong Kong, Italy, Japan, Malaysia, the Netherlands, New
Zealand, Singapore, Spain, Switzerland and the United Kingdom. This is a
representative list; the Fund may invest in countries not listed here.
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 Euro
and European Currency Unit (ECU). The Fund may enter into forward foreign
currency exchange contracts (forward contracts) to buy or sell foreign
currencies. The Fund's use of forward contracts will not eliminate fluctuations
in the underlying prices of the securities that the Fund holds or intends to
purchase. While using forward contracts tends to minimize the risk of loss from
a decline in the value of a particular currency, using forward contracts also
tends to limit any potential gain that might result from the increase in value
of such currency.
For temporary defensive purposes, the Fund may invest all or a substantial
portion of its assets in high quality U.S. and foreign governmental and
corporate debt instruments. The Fund may also hold these securities pending
investment of proceeds from new sales of Fund shares and to maintain sufficient
cash to meet redemption requests.
Global Equity Fund
Global Equity Fund seeks long-term total return. The Fund invests in U.S. and
foreign equity securities that provide the potential for capital appreciation
and income. The Fund will invest in a broad range of equity securities including
common stocks and, to a lesser extent, preferred stocks, convertible securities
and warrants. The Fund may also invest in sponsored and unsponsored depositary
receipts.
We will invest in securities traded in equity markets and denominated in
currencies that we believe offer the best relative values within the global
investment universe. We generally strive to identify undervalued securities. We
analyze the issuing company's operations, financial statements and each
company's current valuation. In the selection process, we place special emphasis
on present dividend yield and expectations for dividend growth. We may purchase
securities in any foreign country, developed and underdeveloped, or emerging
market countries.
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 Euro
and ECU. The Fund may enter into forward foreign currency exchange contracts
(forward contracts) to buy or sell foreign currencies. The Fund's use of forward
contracts will not eliminate fluctuations in the underlying prices of the
securities that the Fund holds or intends to purchase. While using forward
contracts tends to minimize the risk of loss from a decline in the value of a
particular currency, using forward contracts also tends to limit any potential
gain that might result from the increase in value of such currency.
19
<PAGE>
The Fund may seek to achieve growth through investment of up to 35% of its
assets in income producing debt securities such as U.S. or foreign government or
corporate bonds. As a general matter, the Fund only invests in debt securities
when we believe, considering the risks, that they offer better long-term
potential returns than investments in equity securities.
For temporary defensive purposes, the Fund may invest all or a substantial
portion of its assets in high quality U.S. and foreign governmental and
corporate debt instruments. The Fund may also hold these securities pending
investment of proceeds from new sales of Fund shares and to maintain sufficient
cash to meet redemption requests.
New Pacific Fund
New Pacific Fund seeks to maximize long-term capital appreciation. It seeks to
achieve this objective by investing primarily in equity securities of companies
domiciled or having their principal business activities in countries located in
the Pacific Basin.
The Fund will invest in companies of varying size, measured by assets, sales and
capitalization. The Fund will invest in companies in one or more of the
following Pacific Basin countries: Australia, China, Hong Kong, India,
Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South
Korea, Sri Lanka, Taiwan and Thailand.
The Fund may invest in companies located in other countries or regions in the
Pacific Basin as those economies and markets become more accessible. The Fund
will invest in other countries or regions only after the decision to do so is
disclosed in an amendment to this prospectus. Any amendment to this prospectus
containing such a material change will be delivered to investors. While the Fund
will generally have investments in companies located in at least three different
countries or regions, the Fund may from time to time have investments only in
one or a few countries or regions.
The Fund invests in common stock and may invest in other securities with equity
characteristics, consisting of trust or limited partnership interests, preferred
stock, rights, warrants, and sponsored and unsponsored depositary receipts. The
Fund may also invest in convertible securities, consisting of debt securities or
preferred stock that may be converted into common stock or that carry the right
to purchase common stock. The Fund may invest in securities listed on foreign or
domestic securities exchanges and securities traded in foreign and domestic
over-the-counter markets and may invest in restricted or unlisted securities.
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 Euro
and ECU. The Fund may enter into forward foreign currency exchange contracts
(forward contracts) to buy or sell foreign currencies. The Fund's use of forward
contracts will not eliminate fluctuations in the underlying prices of the
securities that the Fund holds or intends to purchase. While using forward
contracts tends to minimize the risk of loss from a decline in the value of a
particular currency, using forward contracts also tends to limit any potential
gain that might result from the increase in value of such currency.
The Fund may invest up to 35% of its assets in securities of U.S. issuers. In
addition, the Fund may invest in short-term debt instruments to meet anticipated
day-to-day operating expenses and liquidity requirements.
The Fund may invest up to 5% of its assets in the securities of issuers that
have been in continuous operation for less than three years.
Emerging Markets Fund
Emerging Markets Fund seeks long-term capital appreciation. The Fund may invest
in a broad range of equity securities, including common stocks, and to a lesser
extent, preferred stocks, convertible securities and warrants. The Fund may also
invest in sponsored and unsponsored depositary receipts.
20
<PAGE>
We consider an "emerging country" to be any country that is generally recognized
to be an emerging or developing country by the international financial
community, including the World Bank and the International Finance Corporation,
or any country that is classified by the United Nations as developing. In
addition, any country that is included in the IFC Free Index or MSCI Emerging
Market Free Index is considered to be an "emerging country." As of the date of
this prospectus, more than 130 countries met our definition of an emerging
country. Approximately 40 of them currently have stock markets. This group of
developing or emerging countries includes almost every nation in the world
except the United States, Canada, Japan, Australia, New Zealand and most nations
located in Western and Northern Europe.
In deciding whether a particular security is an emerging country security, we
evaluate publicly available information and question individual companies to
determine if the company meets one of the following criteria:
o the principal trading market for the company's securities is in a country
that is emerging, based on the guidelines described above;
o the company generates 50% or more of its annual revenue from operations in
emerging countries, even though the company's securities are traded in an
established market or a combination of emerging and established markets;
o the company is organized under the laws of an emerging market country or
has a principal office in an emerging country.
Currently, investing in many emerging countries is not feasible, or may involve
significant political risks. We focus our investments in emerging countries
where we consider the economies to be developing strongly and where the markets
are becoming more sophisticated. We believe that investment opportunities may
result from an evolving long-term international trend favoring more
market-oriented economies, a trend that may particularly benefit certain
countries having developing markets. Local or international political, economic
or financial developments could support this trend and benefit the capital
markets in such countries.
In deciding where to invest we place particular emphasis on factors such as
economic conditions (including growth trends, inflation rates and trade
balances), regulatory and currency controls, accounting standards and political
and social conditions. The Fund may invest in Argentina, Botswana, Brazil,
Chile, China, Colombia, Czech Republic, Estonia, Ghana, Greece, Hong Kong,
Hungary, India, Indonesia, Ivory Coast, Jamaica, Jordan, Kenya, Korea, Latvia,
Lithuania, Malaysia, Mauritius, Mexico, Morocco, Nigeria, Pakistan, Peru, the
Philippines, Poland, Portugal, Russia, Slovenia, South Africa, Sri Lanka,
Taiwan, Thailand, Turkey, Venezuela and Zimbabwe. This is a representative list;
we may invest in other countries, particularly as markets in other emerging
countries develop.
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 Euro
and ECU. The Fund may enter into forward foreign currency exchange contracts
(forward contracts) to buy or sell foreign currencies. The Fund's use of forward
contracts will not eliminate fluctuations in the underlying prices of the
securities that the Fund holds or intends to purchase. While using forward
contracts tends to minimize the risk of loss from a decline in the value of a
particular currency, using forward contracts also tends to limit any potential
gain that might result from the increase in value of such currency.
For temporary defensive purposes, the Fund may invest all or a substantial
portion of its assets in high quality U.S. and foreign governmental and
corporate debt instruments. The Fund may hold these securities pending
investment of proceeds from new sales of Fund shares and to maintain sufficient
cash to meet redemption requests.
High Yield, High Risk Securities -- We may invest up to 35% of the Fund's net
assets in fixed-income securities issued by emerging country companies, and/or
foreign governments, their agents instrumentalities or political sub-divisions,
or fixed-income securities that are denominated in the currencies of emerging
market countries, including so-called Brady Bonds. All of these may be high
yield, high risk income securities.
Please see "The securities we typically invest in" and "The risks of investing
in the Funds" for additional investment strategies and risks associated with
investing in these Funds.
Global Bond Fund
21
<PAGE>
Global Bond Fund seeks current income consistent with the preservation of
investors' principal. Global Bond Fund invests primarily in fixed-income
securities that may also provide the potential for capital appreciation.
The fixed income securities in which Global Bond Fund may invest include:
o foreign and U.S. government securities
o debt obligations of foreign and U.S. companies which are generally rated A
or better by Standard & Poor's Ratings Group ("S&P") and Baa by Moody's
Investors Services, Inc. ("Moody's"), or if unrated, are deemed to be of
comparable quality by the portfolio manager.
o debt securities of supranational entities denominated in any currency. A
supranational entity is an entity established or financially supported by
the national governments of one or more countries to promote reconstruction
or development. The International Bank for Reconstruction and Development
(more commonly known as the World Bank) would be one example of a
supranational entity.
o securities of issuers in emerging markets countries, including Brady Bonds,
which tend to be of lower quality and more speculative than securities of
issuers in developed countries. Such securities may be rated lower than BBB
by S&P or Baa by Moody's, or if unrated, are considered by the manager to
be of equivalent quality. (See the section "The risks of investing in the
Funds on page 26.")
o zero-coupon bonds denominated in any currency.
We currently anticipate that for increased safety a large percentage of Global
Bond Fund's assets will be invested in securities of supranational entities and
in U.S. and foreign government securities.
With respect to U.S. government securities, the Fund may invest only in
securities issued or guaranteed as to the payment of principal and interest by
the U.S. government, and securities of its agencies or instrumentalities which
are backed by the full faith and credit of the United States. Direct obligations
of the U.S. government which are available for purchase by the Fund include
bills, notes, bonds and other debt securities issued by the U.S. Treasury. These
obligations differ mainly in interest rates, maturities and dates of issuance.
Agencies whose obligations are backed by the full faith and credit of the United
States include the Farmers Home Administration, Federal Financing Bank and
others. With respect to securities issued by foreign governments, their
agencies, instrumentalities or political subdivisions, the Fund will generally
invest in such securities if they have been rated AAA or AA by S&P or Aaa or Aa
by Moody's or, if unrated, have been determined by the manager to be of
comparable quality. However, a portion of the Fund's assets may also be invested
in foreign governmental securities issued by emerging or developing countries,
which may be lower rated, including securities rated below investment grade.
While the Fund may purchase securities of issuers in any foreign country,
developed and emerging, we currently anticipate investing in Australia, Belgium,
Canada, France, Germany, Hong Kong, Japan, Malaysia, the Netherlands, Singapore,
Spain, Switzerland and the United Kingdom, as well as Indonesia, Korea, New
Zealand, the Philippines, South Africa, Taiwan, and Thailand
This is a representative list, and we may also invest in other countries.
Generally, the value of fixed-income securities rises when interest rates
decline and declines when interest rates rise. The value of your investment in
the Fund will be affected by changes in interest rates. We anticipate that the
average weighted maturity of the portfolio will be in the five-to-ten year
range. If we anticipate a declining interest rate environment; however, the
average weighted maturity may be extended past ten years or if we anticipate a
rising rate environment, the average weighted maturity may be shortened to less
than five years.
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 Euro
and ECU. The Fund may enter into forward foreign currency exchange contracts
(forward contracts) to buy or sell foreign currencies. The Fund's use of forward
contracts will not eliminate fluctuations in the underlying prices of the
securities that the Fund holds or intends to purchase. While using forward
contracts tends to minimize the risk of loss from a decline in the value of a
particular currency, using forward contracts also tends to limit any potential
gain that might result from the increase in value of such currency.
22
<PAGE>
The securities we typically invest in
Stocks offer investors the potential for capital appreciation, and may pay
dividends as well. Fixed-income securities offer the potential for greater
income payments than stocks, and also may provide capital appreciation. The
following chart provides a brief description of the securities that the Funds
may invest in. Please see the Statement of Additional Information for additional
descriptions of these as well as other investments.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Common Stocks: Securities that represent shares Consistent with their respective investment
of ownership in a corporation. Stockholders objectives, International Equity Fund, Global Equity
participate in the corporation's profits and losses, Fund, Emerging Markets Fund and New Pacific Fund will
proportionate to the number of shares they own. invest their assets in common stocks, some of
- -------------------------------------------------------------------------------------------------------------------------
Corporate bonds: Debt obligations issued by U.S. or Global Bond Fund may invest in corporate bonds
foreign corporations. generally rated A or better by S&P and Baa by Moody's
or if unrated, determined to be of comparable
quality. Emerging Markets Fund and Global Bond Fund
may also invest in lower rated, emerging markets
corporate bonds. For temporary defensive purposes,
International Equity Fund, Global Equity Fund, and
Emerging Markets Fund may invest in corporate
obligations rated AA or better by S&P and Aa or
better by Moody's, or if unrated, determined to be of
comparable quality. Global Equity Fund may seek to
achieve growth by investing in such corporate bonds.
- -------------------------------------------------------------------------------------------------------------------------
Foreign government securities: Debt obligations Global Bond Fund will generally invest in securities
issued by a government other than the United States issued by foreign governments, their agencies,
or by an agency, instrumentality or political instrumentalities or political subdivisions that are
subdivision of such governments. rated AAA or AA by S&P or Aaa or Aa by Moody's or, if
unrated, considered to be of comparable quality by
Global Bond Fund's portfolio manager. A portion of
Emerging Markets Fund's assets and a portion of
Global Bond Fund's assets may be invested in
foreign governmental securities issued by emerging or
developing countries, which may be lower rated,
including securities rated below investment grade.
For temporary defensive purposes, International
Equity Fund, Global Equity Fund and Emerging Markets
Fund may invest in high quality debt obligations of
foreign governments, their agencies,
instrumentalities and political sub-divisions.
Global Equity Fund may seek to achieve growth by
investing in foreign governmental debt securities.
- -------------------------------------------------------------------------------------------------------------------------
U.S. government securities: Securities issued or Global Bond Fund may invest only in U.S. government
guaranteed by the U.S. government or issued by an obligations, including bills, notes and bonds that
agency or instrumentality of the U.S. government. are issued or guaranteed as to the payment of
principal and interest by the U.S. government and
securities of U.S. government agencies or
instrumentalities that are backed by the full faith
and credit of the United States.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Foreign currency transactions: A forward foreign Although the Funds value their assets daily in terms
currency exchange contract involves an obligation to of U.S. dollars, they do not intend to convert their
purchase or sell a specific currency at a future from holdings of foreign currencies into U.S. dollars on a
date, which may be any fixed number of days date of daily basis. Each Fund will, however, from time to
the contract, agreed upon by the parties, at a price time, purchase or sell foreign currencies and/or
set at the time of the contract. engage in forward foreign currency exchange
transactions. Each Fund may conduct its foreign
currency transactions on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign currency
exchange market or through a forward foreign currency
exchange contract or forward contract. The Funds
will not use forward contracts for speculative
purposes. A Fund may use forward contracts for
hedging purposes to attempt to protect the value of
the Fund's current security or currency holdings or
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. Investors should be aware of the costs
of currency conversion.
- -------------------------------------------------------------------------------------------------------------------------
American Depositary Receipts (ADRs), European Each Fund may invest in sponsored and unsponsored
Depositary Receipts (EDRs), and Global Depositary ADRs, EDRs and GDRs, generally focusing on underlying
Receipts (GDRs): ADRs are receipts issued by a U.S. securities issued by foreign issuers.
depositary (usually a U.S. bank) and EDRs and GDRs
are receipts issued by a depositary outside of the
U.S. (usually a non-U.S. bank or trust company or a
foreign branch of a U.S. bank). Depositary receipts
represent an ownership interest in an underlying
security that is held by the depositary. Generally,
the underlying security represented by an ADR is
issued by a foreign issuer and the underlying
security represented by an EDR or GDR may be issued
by a foreign or U.S. issuer. Sponsored depositary
receipts are issued jointly by the issuer of the
underlying security and the depositary, and
unsponsored depositary receipts are issued by the
depositary without the participation of the issuer of
the underlying security. Generally, the holder of the
depositary receipt is entitled to all payments of
interest, dividends or capital gains that are made on
the underlying security.
- -------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements: An agreement between a buyer Typically, we use repurchase agreements as a
and seller of securities in which the seller agrees short-term investment for a Fund's cash position. In
to buy the securities back within a specified time at order to enter into these repurchase agreements, the
the same price the buyer paid for them, plus an Fund must have collateral in excess of 100% (and
amount equal to an agreed upon interest rate. generally 102%) of the repurchase price.
Repurchase agreements are often viewed as equivalent
to cash. The collateral is usually securities issued or
guaranteed by the U.S. government or its agencies or
instrumentalities, or other securities in which the
Funds may invest directly.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Restricted and Illiquid Securities: Restricted International Equity Fund, Global Equity Fund,
securities are privately placed and securities whose New Pacific Fund and Global Bond Fund may each
resale is restricted under securities law or for invest up to 10% of the value of its net assets in
other reasons, such as contractual restrictions. illiquid securities. Emerging Markets Fund may
Illiquid securities are those that cannot be sold or invest up to 15% of the value of its net assets in
disposed of in the ordinary course of business within illiquid securities.
seven days at approximately the price at which the
security has been valued by the Fund. Restricted
securities are generally considered to be illiquid
except that a Fund may treat Rule 144A securities as
liquid based on their trading markets. Rule 144A
securities are restricted securities but may be
freely traded among qualified institutional buyers.
- -------------------------------------------------------------------------------------------------------------------------
Zero coupon bonds: Zero coupon bonds are debt Global Bond Fund and Emerging Markets Fund may invest
obligations that do not entitle the holder to any in zero coupon bonds. The market prices of zero
periodic payments of interest prior to maturity or a coupon bonds are generally more volatile than the
specified date when the securities begin paying market prices of securities that pay interest
current interest and, therefore, are issued and periodically and are likely to respond to changes in
traded at a discount from their face amounts or par interest rates to a greater degree than do non-zero
value. coupon securities having similar maturities and
credit quality.
- -------------------------------------------------------------------------------------------------------------------------
Brady bonds: These are debt securities issued under Global Bond Fund and Emerging Markets Fund may invest
the framework of the Brady Plan, an initiative in Brady Bonds consistent with their respective
announced by the U.S. Treasury Secretary, Nicholas F. investment objectives. We believe that the economic
Brady in 1989, as a mechanism for debtor nations to reforms undertaken by countries in connection with
restructure their outstanding external indebtedness the issuance of Brady Bonds can make the debt of
(generally, commercial bank debt). countries that have issued or have announced plans to
issue Brady Bonds an attractive opportunity for
investment.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Funds may also invest in futures contracts, and options. Please see the
Statement of Additional Information for additional descriptions on these
securities as well as those listed in the table above.
Portfolio turnover
Each Fund (other than New Pacific Fund) anticipates that its annual portfolio
turnover will be less than 100%. A turnover rate of 100% would occur if a Fund
sold and replaced securities valued at 100% of its net assets within one year.
High turnover in the Fund could result in additional brokerage commissions to be
paid by the Fund. In addition, high portfolio turnover may also mean that a
proportionately greater amount of distributions to shareholders will be taxed as
ordinary income rather than long-term capital gains compared to investment
companies with lower portfolio turnover.
Borrowing from Banks
Each Fund may borrow money as a temporary measure for extraordinary or emergency
purposes or to facilitate redemptions. A Fund will not borrow money in excess of
one-third of the value of its net assets.
Securities Lending:
Each Fund may loan up to one-quarter (one-third, in the case of New Pacific
Fund) of its assets to qualified broker/dealers or institutional investors to
generate additional income for the Fund. All such loans will be secured by
collateral.
25
<PAGE>
The risks of investing in the Funds
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in a Fund you should
carefully evaluate the risks. An investment in the Funds typically provides the
best results when held for a number of years. The following are the chief risks
you assume when investing in the Funds. Please see the Statement of Additional
Information for further discussion of these risks and the other risks not
discussed here.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Market Risk is the risk that all or a majority of the We maintain a long-term investment approach and
securities in a certain market--like the stock or focus on stocks we believe can appreciate over an
bond market--or in a certain country or region extended time frame regardless of interim market
will decline in value because of factors such as fluctuations. In deciding what portion of a
economic conditions, future expectations or investor Fund's portfolio should be invested in any
confidence. individual country, we evaluate a variety of
factors, including valuations relative to other
countries.
In addition, for temporary defensive purposes,
each Fund (except than New Pacific 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 temporary defensive purposes New Pacific Fund
may invest up to 100% of its assets in money market
instruments, cash or cash equivalents.
- -------------------------------------------------------------------------------------------------------------------------
Industry and Security Risk is the risk that the value We hold a number of different securities in a variety
of securities in a particular industry or the value of sectors and limit the amount of each Fund's
of an individual stock or bond will decline because assets invested in any one security in order to
of changing expectations for the performance of that minimize the impact that a poorly performing security
industry or for the individual company issuing the would have on a Fund.
stock or bond.
- -------------------------------------------------------------------------------------------------------------------------
Interest Rate Risk is the risk that securities, In an attempt to limit Global Bond Fund's
particularly bonds with longer maturities, will interest rate risk, we adjust the Fund's average
decrease in value if interest rates rise. weighted maturity based on our view of interest
rates. The Fund's average weighted maturity will
generally be in the five-to-ten year range. When we
anticipate that interest rates will decline, we may
extend the average maturity beyond ten years and when
we anticipate that interest rates will rise, we may
shorten the average maturity to less than five years.
International Equity Fund, Global Equity Fund, New
Pacific Fund and Emerging Markets Fund are generally
less affected by interest rate risk because they
typically hold a smaller amount of fixed-income
securities than Global Bond Fund.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Currency risk is the risk that the value of a Fund's Each Fund may try to hedge its currency risk by
investments may be negatively affected by changes in purchasing foreign currency exchange contracts. By
currency exchange rates. Adverse changes in foreign agreeing to purchase or sell foreign securities at a
exchange rates may reduce or eliminate any gains pre-set price on a future date, the Funds attempt
produced by investments that are denominated in to protect the value of the stock they own from
foreign currencies and may increase any losses. future changes in currency rates and to "lock-in" the
price of securities it has agreed to purchase or sell
in terms of U.S. dollars or other applicable
currency. Each Fund will use forward currency
exchange contracts only for defensive or protective
measures, not to enhance portfolio returns. However,
there is no assurance that such a strategy will
be successful.
- -------------------------------------------------------------------------------------------------------------------------
Political risk is the risk that countries or the We evaluate the political situations in the
entire region where we invest may experience countries where we invest and take into account any
political instability, which may cause greater potential risks before we select securities for the
fluctuation in the value and liquidity of our portfolio. However, there is no way to eliminate
investments due to changes in currency exchange political risk when investing internationally.
rates, governmental seizures or nationalization of
assets.
- -------------------------------------------------------------------------------------------------------------------------
Emerging markets risk is the possibility that the New Pacific Fund, Emerging Markets Fund and Global
risks associated with international investing will be Bond Fund, carefully screen securities within
greater in emerging markets than in more developed emerging markets and strive to consider
foreign markets because, among other things, emerging material risks associated with an individual
markets may have less stable political and economic company. We cannot eliminate emerging market risk and
environments. consequently encourage shareholders to invest in
these Funds only if they have a long-term time
horizon, over which the potential of individual
securities is more likely to be realized. International
Equity Fund and Global Equity Fund, to the limited extent
that they may invest in emerging markets are also subject
to this risk.
- -------------------------------------------------------------------------------------------------------------------------
Inefficient market risk is the risk that foreign The Funds will attempt to reduce these risks by
markets may be less liquid, have greater price investing in a number of different countries,
volatility, less regulation and higher transaction performing credit analysis and noting trends in
costs than U.S. markets. the economy, industries and financial markets.
- -------------------------------------------------------------------------------------------------------------------------
Information Risk is the risk that foreign companies We conduct fundamental research on the companies
may be subject to different accounting, auditing and we invest companies in rather than relying solely on
financial reporting standards than U.S. companies. information available through financial reporting. We
There may be less information available about foreign believe this will help us to better uncover any
issuers than domestic issuers. Furthermore, potential weaknesses in individual companies.
regulatory oversight of foreign issuers may be less
stringent or less consistently applied than in the
United States.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Non-diversified fund risk. Non-diversified funds Global Equity Fund, Emerging Markets Fund and Global
are believed to be subject to greater risks because Bond Fund will be non-diversified funds according to
adverse effects on their individual investments the 1940 Act. In a diversified fund, 75% of the
may affect a larger portion of their overall portfolio must be diversified, meaning that within
assets. that portion of the portfolio, the Fund cannot
invest more than 5% of its net assets in an
individual security. When a fund is non-diversified,
it does not have to limit the percentage of assets
invested in individual securities. However Global
Equity Fund, Emerging Markets Fund and Global Bond
Fund do intend to satisfy the Internal Revenue
Code's diversification requirement, which says that
for 50% of the Fund's assets, no more than 5% of net
assets can be invested in any one individual
security. This means that 50% of each of Global
Equity Fund, Emerging Markets Fund and Global Bond
Fund must be spread among various securities, with
no more than 5% of net assets invested in any single
security. The other 50% can be more concentrated
with up to 25% invested in individual securities.
International Equity Fund and New Pacific Fund are
diversified funds, not subject to this risk.
- -------------------------------------------------------------------------------------------------------------------------
Foreign government securities risks relates to the Global Bond Fund attempts to reduce the risks
ability of a foreign government or government related associated with investing in foreign governments by
issuer to make timely payments on its external focusing on bonds rated within the two highest
debt obligations. This ability to make payments will rating categories. International Equity Fund
be strongly influenced by the issuer's balance of and Global Equity Fund attempt to reduce this risk
payments, including export performance, its access to by setting ratings standards and by limiting the
international credits and investments, fluctuations portion of portfolio assets that may be invested in
in interest rates and the extent of its foreign such securities. Emerging Markets Fund attempts to
reserves. reduce this risk by limiting the portion of
portfolio assets that may be invested in such
securities. Each of the Funds will attempt to limit
this risk by performing credit analysis on the
issuer of each security purchased and, in the case
of International Equity Fund, Emerging Markets Fund
and Global Equity Fund, comparing the risk-reward
potential of foreign government securities being
considered to that offered by equity securities in
determining whether to allocate assets to equity or
fixed income investments.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
High Yield, High Risk Foreign Fixed-Income Securities Global Bond Fund may invest a portion of its assets
are those securities rated lower than BBB by S&P and in these securities. Emerging Markets Fund may
its Baa by Moody's. Securities of this type are invest up to 35% of net assets in these securities.
considered to be of poor standing and
predominantly speculative as to the ability to repay We believe the high yields from these bonds have more
interest and principal. than compensated for their higher default rates in
the past. There can be no assurance, however, that
Medium- and low-grade bonds may be issued as a yields will continue to offset default rates in the
consequence of corporate restructurings, such as future. We intend to limit our investment in any one
leveraged buy-outs, mergers, acquisitions, debt lower rated bond which can help to reduce the effect
recapitalizations or similar events. Also these bonds of an individual default on the Funds, and to limit
are often issued by smaller, less creditworthy our overall allocation of Fund assets to bonds in
companies or by highly leveraged (indebted) firms, this category. Such limitations may not protect the
which are generally less able than more financially Funds from widespread bond defaults brought about by
stable firms to make scheduled payments of interest a sustained economic downturn.
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 make principal and
interest payments obligations, to meet projected business
goals and to obtain additional financing. Changes by
recognized rating agencies in their rating of any such
security and in the ability of the 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. Consequently, these changes
will affect the Funds' net asset value per share.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
Who manages the Funds
Investment managers and sub-advisers
International Equity Fund, Global Equity Fund, Emerging Markets Fund and Global
Bond Fund are managed by Delaware International Advisers Ltd. Delaware
International Advisers makes investment decisions for these Funds, manages the
Funds' business affairs and provides daily administrative services. Delaware
International Advisers is affiliated with Delaware Management Company, a series
of Delaware Management Business Trust, which is an indirect, wholly owned
subsidiary of Delaware Management Holdings, Inc.
Delaware Management Company is the sub-adviser to Global Equity Fund.
Delaware Management Company manages the U.S. securities portion of Global Equity
Fund's portfolio under the overall supervision of Delaware International
Advisers and furnishes Delaware International Advisers with investment
recommendations, asset allocation advice, research and other investment services
regarding U.S. securities.
New Pacific Fund is managed by Delaware Management Company. AIB Govett, Inc. is
New Pacific Fund's sub-adviser. As sub-adviser, AIB Govett is responsible for
day-to-day management of the Fund's assets. Delaware Management Company
administers the Fund's affairs and has ultimate responsibility for all
investment advisory services for the Fund. Delaware Management Company also
supervises the AIB Govett's performance.
For the services they provided, the manager and sub-advisers, where applicable,
were paid the following fees for the Funds' last fiscal year after giving effect
to voluntary expense caps:
Investment Management Fees
<TABLE>
<CAPTION>
International Global Equity New Emerging Markets Global Bond
Equity Fund Fund Pacific Fund Fund Fund
------------- ------------- ------------ ---------------- -----------
<S> <C> <C> <C>
As a percentage of average
daily net assets 0.75% 0.31% none none 0.41%
----- ----- ---- ---- -----
</TABLE>
Portfolio managers
International Equity Fund
Clive A. Gillmore and Nigel G. May have primary responsibility for making
day-to-day investment decisions for International Equity Fund. In making
investment decisions for the Fund, Mr. Gillmore and Mr. May regularly consult
with a fourteen member international equity team.
Clive A. Gillmore, Senior Portfolio Manager and Director of Delaware
International Advisers, has been the senior portfolio manager for the Fund since
its inception. A graduate of the University of Warwick who began his career at
Legal and General Investment Management, Mr. Gillmore joined Delaware
International Advisers in 1990 after eight years of investment experience. His
most recent position prior to joining Delaware International Advisers was as a
Pacific Basin equity analyst and senior portfolio manager for Hill Samuel
Investment Management Ltd. Mr. Gillmore completed the London Business School
Investment program.
Nigel G. May, Senior Portfolio Manager and Director of Delaware International
Advisers, is a graduate of Sidney Sussex College, Cambridge. Mr. May joined Mr.
Gillmore as co-manager of the Fund on December 22, 1997. He joined Delaware
International Advisers in 1991, assuming portfolio-management responsibilities
and sharing analytical responsibilities for continental Europe. He previously
had been with Hill Samuel Investment Management Group for five years.
Global Equity Fund
Elizabeth A. Desmond has primary responsibility for making day-to-day investment
decisions for Global Equity Fund. Robert L. Arnold makes investment decisions
for the U.S. equity portion of the Fund.
30
<PAGE>
Elizabeth A. Desmond, Senior Portfolio Manager and Director of Delaware
International Advisers, has been the portfolio manager for the Fund since
July 21, 1998. Ms. Desmond is a graduate of Wellesley College and the masters
program in East Asian studies at Stanford University. After working for the
Japanese government for two years, she began her investment career as a Pacific
Basin investment manager with Shearson Lehman Global Asset Management. Prior to
joining Delaware International Advisers in the spring of 1991, she was a Pacific
Basin equity analyst and senior portfolio manager at Hill Samuel Investment
Advisers Ltd. Ms. Desmond is a CFA charterholder.
Robert L. Arnold, Vice President/Portfolio Manager of the Fund, has been
managing the U.S. equity portion of the Fund since July 21, 1998. Prior to that
time he managed other Delaware Investments mutual funds and was a financial
analyst focusing on the financial services industry including banks, thrifts,
insurance companies and consumer finance companies. Mr. Arnold holds a BS from
Carnegie Mellon University and earned an MBA from the University of Chicago. He
began his investment career as a management consultant with Arthur Young in
Philadelphia. Prior to joining Delaware Investments in March 1992, Mr. Arnold
was a planning analyst with Chemical Bank in New York.
New Pacific Fund
Jane Pickard has had primary responsibility for making day-to-day investment
decisions for the Fund since November 12, 1997. Ms. Pickard graduated in law
from Edinburgh University. She joined Barclays de Zoete Wedd Securities Limited
in 1991, where she initially worked as a specialist in structured debt products,
moving into the Pacific Rim equity division in 1992. She remained there until
1995 when she moved to IAI International where she had responsibility for
Pacific Region investments for U.S. institutional and retail funds. Ms. Pickard
joined AIB Govett Asset Management, an affiliate of AIB Govett, Inc., in 1996.
Emerging Markets Fund
Mr. Gillmore also has primary responsibility for making day-to-day investment
decisions for Emerging Markets Fund (please see International Equity Fund for a
description of Mr. Gillmore's business experience). In making investment
decisions for Emerging Markets Fund, Mr. Gillmore regularly consults with a
fourteen member international equity team, including co-managers Robert
Akester and Joshua A. Brooks.
Robert Akester, Senior Portfolio Manager of Delaware International Advisers,
joined Delaware International Advisers in 1996. Mr. Akester, who began his
investment career in 1969, was most recently a director of Hill Samuel
Investment Management Ltd., which he joined in 1985. His prior experience
included working as a senior analyst and head of the South-East Asian Research
team at James Capel, and as a fund manager at Prudential Assurance Co., Ltd. Mr.
Akester holds a BS in Statistics and Economics from University College, London
and is an associate of the Institute of Actuaries, with a certificate in Finance
and Investment.
Joshua A. Brooks, Senior Portfolio Manager of Delaware International Advisers,
holds a bachelor's degree from Yale University and has undertaken graduate
studies at The London Business School. He began his investment career with
Delaware Investments in 1991. Prior to joining the emerging markets team in
London, he was based in Philadelphia with responsibilities that included equity
market analysis and acting as liaison with Delaware International Advisers.
Global Bond Fund
Ian G. Sims and Christopher A. Moth have primary responsibility for making
day-to-day investment decisions for Global Bond Fund. In making investment
decisions for Global Bond Fund, Mr. Sims and Mr. Moth regularly consult with W.
Hywel Morgan.
Ian G. Sims, Deputy Managing Director/Chief Investment Officer, Global Fixed
Income and Director of Delaware International Advisers, has been the senior
portfolio manager for this Fund since its inception. Mr. Sims is a graduate of
the University of Newcastle-Upon-Tyne. He joined Delaware International Advisers
in 1990 as a senior international fixed-income and currency manager. Mr. Sims
began his investment career with the Standard Life Assurance Co., and
subsequently moved to the Royal Bank of Canada Investment Management
International Company, where he was an international fixed-income manager. Prior
to joining Delaware International Advisers, he was a senior fixed-income and
currency portfolio manager with Hill Samuel Investment Management Ltd.
31
<PAGE>
Christopher A Moth, Senior Portfolio Manager of Delaware International Advisers,
became co-manager of Global Bond Fund in January 1997. Mr. Moth, a graduate of
The City University London, joined Delaware International Advisers in 1992. He
previously worked at the Guardian Royal Exchange in an actuarial capacity where
he was responsible for technical analysis, quantitative models and projections.
Mr. Moth has been awarded the certificate in Finance and Investment from the
Institute of Actuaries in London.
W. Hywel Morgan, Senior Portfolio Manager of Delaware International Advisers,
was educated at the University of Wales and was subsequently an economics
lecturer at Dundee University. Prior to joining Delaware International Advisers,
he was Associate Director of the international fixed-income department and head
of the credit review committee at Hill Samuel Investment Management responsible
for over $500 million in multi-currency fixed interest accounts. His prior
experience included working as an economic adviser for Credit Suisse and the
Economic Intelligence Unit. Mr. Morgan started his business career as a
corporate economist & strategist at Ford of Europe and Esso Petroleum.
32
<PAGE>
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED
WITH MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS
FUNDS]
Board of Directors
Investment Managers The Funds Custodian
Delaware International Advisers Ltd. The Chase Manhattan Bank
Third Floor 4 Chase Metrotech Center
80 Cheapside Brooklyn, NY 11245
London, England EC2V 6EE
Delaware Management Company
One Commerce Square
Philadelphia, PA 19103
Sub-Advisers
Delaware Management Company
AIB Govett, Inc.
250 Montgomery Street, Suite 1200
San Francisco, CA 94104
Portfolio managers Distributor Services Distributor
(see page 31 for details) Delaware Service Delaware
Company, Inc. Distributors, L.P.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
Shareholders
Board of directors A mutual fund is governed by a board of directors which has
oversight responsibility for the management of the fund's business affairs.
Directors establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the board of directors must be independent of the fund's
investment manager or distributor. These independent fund directors, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Sub-adviser A sub-adviser is a company generally responsible for the management
of the fund's assets. They are selected and supervised by the investment
manager.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
33
<PAGE>
Custodian Mutual funds are legally required to protect their portfolio
securities and typically place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to
National Association of Securities Dealers, Inc. (NASD) rules governing mutual
fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect directors. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
34
<PAGE>
About your account
Investing in the Funds
o Institutional Class shares are available for purchase only by the following:
o 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
o tax-exempt employee benefit plans of the manager or its affiliates and
securities dealer firms with a selling agreement with the distributor
o institutional advisory accounts of the manager, or its affiliates and those
having client relationships with Delaware Investment Advisers, an affiliate
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
o 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
o 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
35
<PAGE>
How to buy shares
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014128934013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us at 800-510-4015 so we can assign you an
account number.
[GRAPHIC OMITTED: ILLUSTRATION OF AN EXCHANGE SYMBOL]
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that you may not exchange your shares for Class B or Class C
shares. To open an account by exchange, call your Client Services Representative
at 800-510-4015.
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
36
<PAGE>
About your account (continued)
How to buy shares (continued)
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receives your order before the close of trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a business day,
you will pay that day's closing share price which is based on the Fund's net
asset value. If we receive your order after the close of trading, you will pay
the next business day's price. A business day is any day that the New York Stock
Exchange is open for business. Currently, the Exchange is closed when the
following holidays are observed: New Year's Day, Martin Luther King, Jr.'s
Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas. We reserve the right to reject any purchase
order.
We determine the Funds' net asset value (NAV) per share at the close of trading
of the New York Stock Exchange each business day that the Exchange is open. We
calculate this value by adding the market value of all the securities and assets
in the Fund's portfolio, deducting all liabilities, and dividing the resulting
number by the number of shares outstanding. The result is the net asset value
per share. We price securities and other assets for which market quotations are
available at their market value. We price fixed-income securities on the basis
of valuations provided to us by an independent pricing service that uses methods
approved by the board of directors. Any fixed-income securities that have a
maturity of less than 60 days we price at amortized cost. We price all other
securities at their fair market value using a method approved by the board of
directors.
37
<PAGE>
How to redeem shares
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of $50,000 or
more, you must include a signature guarantee for each owner. You can also fax
your written request to 215-255-8864. Signature guarantees are also required
when redemption proceeds are going to an address other than the address of
record on an account.
[GRAPHIC OMITTED: ILLUSTRATION OF A TELEPHONE]
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. Bank information must be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
38
<PAGE>
About your account (continued)
How to redeem shares (cont.)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares, you
will receive the net asset value as determined on the business day we receive
your request. We will send you a check, normally the next business day, but no
later than seven days after we receive your request to sell your shares. If you
purchased your shares by check, we will wait until your check has cleared, which
can take up to 15 days, before we send your redemption proceeds.
Account minimum
If you redeem shares and your account balance falls below $250, the Fund may
redeem your account after 60 days' written notice to you.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund. If you exchange shares to a fund that has a
sales charge you will pay any applicable sales charges on your new shares. You
don't pay sales charges on shares that are acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before buying shares through an
exchange. You may not exchange your shares for Class B and Class C shares of the
funds in the Delaware Investments family.
Dividends, distributions and taxes
Dividends, if any, for International Equity Fund, Global Equity Fund and Global
Bond Fund are paid quarterly, and for New Pacific Fund and Emerging Markets Fund
are paid annually. Any capital gains are distributed annually. We automatically
reinvest all dividends and any capital gains.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from these Funds is the same whether you
reinvest your dividends or receive them in cash. Distributions from a Fund's
long-term capital gains are taxable as capital gains, while distributions from
short-term capital gains and net investment income are generally taxable as
ordinary income. Any capital gains may be taxable at different rates depending
on the length of time the Fund held the assets. In addition, you may be subject
to state and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
Distributions declared in October, November or December but paid in January are
taxable as if they were paid in December.
Global Funds, Inc. is required to withhold 31% of your taxable distributions and
proceeds if you do not provide your correct taxpayer identification number (TIN)
or certify that your TIN is correct, or if the IRS instructs us to do so.
39
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Funds could be adversely affected if the computer systems
used by their service providers do not properly process and calculate
date-related information from and after January 1, 2000. This is commonly known
as the "Year 2000 Problem." Each Fund is taking steps to obtain satisfactory
assurances that its major service providers are taking steps reasonably designed
to address the Year 2000 Problem on the computer systems that the service
providers use. However, there can be no assurance that these steps will be
sufficient to avoid any adverse impact on the business of the Funds. The
portfolio managers and investment professionals of each Fund consider Year 2000
compliance in the securities selection and investment process. However, there
can be no guarantee that, even with their due diligence efforts, they will be
able to predict the effect of Year 2000 on any company or the performance of its
securities.
Investments by Fund of Funds
International Equity Fund, Emerging Markets Fund and New Pacific Fund accept
investments from the series portfolios of Delaware Group Foundation Funds, a
fund of funds. From time to time, a Fund may experience large investments or
redemptions due to allocations or rebalancings by Foundation Funds. While it is
impossible to predict the overall impact of these transactions over time, there
could be adverse effects on portfolio management. For example, the Fund may be
required to sell securities or invest cash at times when it would not otherwise
do so. These transactions could also have tax consequences if sales of
securities result in gains, and could also increase transactions costs or
portfolio turnover. The manager will monitor transactions by Foundation Funds
and will attempt to minimize any adverse effects on International Equity Fund,
Emerging Markets Fund, New Pacific Fund and Foundation Funds as a result of
these transactions.
Fund Companies
The Funds are separate series of the investment companies shown below.
Delaware Group Global & International Funds, Inc.
International Equity Fund
Global Equity Fund
Emerging Markets Fund
Global Bond Fund
Delaware Group Adviser Funds, Inc.
New Pacific Fund
40
<PAGE>
Financial information
Financial highlights
The financial highlights table is intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800.523.1918.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Institutional Class
Year Ended 11/30
- ----------------------------------------------------------------------------------------------------------------------------------
International Equity Fund 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.720 $14.710 $12.240 $11.970 $11.290
Income from investment operations
Net investment income(1) 0.318 0.267 0.530 0.323 0.166
Net realized and unrealized gain on investments and foreign 0.962 0.238 2.405 0.637 0.899
------- ------- ------- ------- -------
currencies
Total from investment operations 1.280 0.505 2.935 0.960 1.065
------- ------- ------- ------- -------
Less dividends and distributions
Dividends from net investment income (0.475) (0.475) (0.320) (0.220) (0.245)
Distributions from net realized gain on investments (0.155) (0.020) (0.145) (0.470) (0.140)
------- ------- ------- ------- -------
Total dividends and distributions (0.630) (0.495) (0.465) (0.690) (0.385)
------- ------- ------- ------- -------
Net asset value, end of period $15.370 $14.720 $14.710 $12.240 $11.970
======= ======= ======= ======= =======
Total return 9.10% 3.55%(2) 24.68%(2) 8.46% 9.47%(2)
Ratios and supplemental data
Net assets, end of period (000 omitted) $164,823 $71,177 $34,194 $11,660 $7,613
Ratio of expenses to average net assets 1.40% 1.40% 1.55% 1.77% 1.26%
Ratio of expenses to average net assets
prior to expense limitation 1.40% 1.41% 1.65% 1.77% 1.52%
Ratio of net investment income to average net assets 2.10% 1.76% 4.00% 2.87% 1.52%
Ratio of net investment income to average net assets
prior to expense limitation 2.10% 1.75% 3.90% 2.87% 1.26%
Portfolio turnover 5% 8% 9% 21% 27%
- ----------------------------------------------------------------------------------------------------------------------------------
Volatility
Volatility, as indicated by year-by-year total return(2) 1998 1997 1996 1995 1994
-----------------------------------------------------
Volatility chart is not part of the Financial highlights and has 9.10% 3.55% 24.68% 8.46% 9.47%
not been audited by Ernst & Young LLP.
</TABLE>
(1) Per share information for the years ended November 30, 1996, 1997 and 1998
was based on the average shares outstanding method.
(2) Total return reflects expense limitations in effect for the Fund.
41
<PAGE>
The financial highlights table is intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800.523.1918.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Period
12/27/94(2)
Institutional Class through
Year Ended 11/30 11/30/95
-----------------------------------
Global Equity Fund 1998(4) 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $14.100 $13.340 $11.930 $10.000
Income from investment operations
Net investment income(1) 0.329 0.478 0.567 0.473
Net realized and net unrealized gain on investments and foreign
currencies 0.816 0.857 1.533 1.697
----- ----- ----- -----
Total from investment operations 1.145 1.335 2.100 2.170
----- ----- ----- -----
Less dividends and distributions
Dividends from net investment income (0.405) (0.525) (0.420) (0.240)
Distributions from net realized gain on investments (1.230) (0.050) (0.270) none
------- ------- ------- --------
Total dividends and distributions (1.635) (0.575) (0.690) (0.240)
------- ------- ------- --------
Net asset value, end of period $13.610 $14.100 $13.340 $11.930
======= ======= ======= =======
Total return(3) 9.07% 10.34% 18.38% 21.88%
Ratios and supplemental data
Net assets, end of period (000 omitted) $2,627 $2,310 $2,203 $2,191
Ratio of expenses to average net assets 1.25% 0.95% 0.95% 0.95%
Ratio of expenses to average net assets
Prior to expense limitation 1.69% 1.86% 2.42% 7.25%
Ratio of net investment income to average net assets 2.47% 3.54% 4.43% 5.05%
Ratio of net investment income (loss) to average net assets
Prior to expense limitation 2.03% 2.63% 2.96% (1.25%)
Portfolio turnover 90% 74% 34% 57%
- ----------------------------------------------------------------------------------------------------------------------------------
Volatility Period
Volatility, as indicated by year-by-year total return(3) 12/27/94(2)
through
1998 1997 1996 11/30/95
-------------------------------------
Volatility chart is not part of the Financial highlights and has 9.07% 10.34% 18.38% 21.88%
not been audited by Ernst & Young LLP.
</TABLE>
(1) Per share information for the years ended November 30, 1997 and 1998
was based on the average shares outstanding method.
(2) Date of commencement of trading; ratios have been annualized but total
return has not been annualized.
(3) Total return reflects expense limitations in effect for the Fund.
(4) On July 21, 1998, the Fund was renamed Global Equity Fund (formerly the
Global Assets Fund) and its investment focus was changed, eliminating the Fund's
bond component in favor of stocks.
42
<PAGE>
The financial highlights table is intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. The information for the years ended October 31, 1998
and 1997 has been audited by Ernst & Young LLP, whose report, along with the
Fund's financial statements, is included in the Fund's annual report, which is
available upon request by calling 800.523.1918. The information for the fiscal
periods ending on or before October 31, 1996 has been audited by the Fund's
previous independent auditors.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Institutional Class
Shares
Year Ended 10/31 Period
-------------------------------------------- 2/3/94(1)
to
New Pacific Fund 1998(4) 1997(4) 1996(5) 1995 10/31/94
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $7.440 $9.530 $8.770 $10.480 $11.140
Income (loss) from investment operations
Net investment income (loss) 0.024 0.020 (0.050) (0.010) 0.010
Net realized and unrealized gain (loss) on
investments and foreign currencies (2.719) (1.960) 0.820 (1.410) (0.670)
------- ------- ------- ------- -------
Total from investment operations (2.695) (1.940) 0.770 (1.420) (0.660)
------- ------- ------- ------- -------
Less dividends and distributions
Dividends from net investment income (0.055) (0.150) (0.010) none none
Distributions from net realized gain on investments none none none (0.290) none
------- ------- ------- ------- -------
Total dividends and distributions (0.055) (0.150) (0.010) (0.290) none
------- ------- ------- ------- -------
Net asset value, end of period $4.690 $7.440 $9.530 $8.770 $10.480
====== ====== ====== ====== =======
Total return(2) (36.39%) (20.79%) 8.77% (13.65%) (5.98%)
Ratios and supplemental data
Net assets, end of period (000 omitted) $219 $250 $119 $62 $47
Ratio of expenses to average net assets 1.60% 1.50% 1.50% 1.50% 1.50%(3)
Ratio of expenses to average net assets prior
to expense limitation 2.93% 1.56% 2.45% 3.38% 3.31%(3)
Ratio of net investment income (loss) to average
net assets 0.45% 0.22% (0.09%) (0.16%) 0.23%(3)
Ratio of net investment income (loss) to average
net assets prior to Expense limitation (0.88%) 0.16% (1.04%) (2.04%) (1.58%)(3)
Portfolio turnover 188% 178% 163% 163% 104%
Volatility
Volatility, as indicated by year-by-year total return(2) 1998 1997 1996 1995 1994
Volatility chart is not part of the Financial highlights and
has not been audited by Ernst & Young LLP or by the
Fund's previous auditors. (36.39%) (20.79%) 8.77% (13.65%) (5.98%)
</TABLE>
(1)Commencement of operations.
(2)Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions. Total return
also reflects expense limitations in effect during the period.
(3)Annualized.
(4)The average shares outstanding method has been applied for per share
information.
(5)Commencing May 3, 1996, Delaware Management Company replaced Lincoln National
Corporation as the Fund's investment manager.
43
<PAGE>
The financial highlights table is intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800.523.1918.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Institutional Class
Year Ended 11/30
----------------------------------------
Period
6/10/96(2)
through
Emerging Markets Fund 1998 1997 11/30/96
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.250 $9.990 $10.000
Income (loss) from investment operations
Net investment income(1) 0.151 0.098 0.047
Net realized and unrealized gain (loss) on investments and (3.191) 0.262 (0.057)
------- ----- -------
foreign currencies
Total from investment operations (3.040) 0.360 (0.010)
------- ----- -------
Less dividends and distributions
Dividends from net investment income (0.055) (0.025) none
Distributions from net realized gain on investments (0.605) (0.075) none
------- ----- -------
Total dividends and distributions (0.660) (0.100) none
------- ------- -------
Net asset value, end of period $6.550 $10.250 $9.990
======= ======= =======
Total return(3) (31.55%) 3.64% (0.10%)
Ratios and supplemental data
Net assets, end of period (000 omitted) $1,117 $1,916 $3,717
Ratio of expenses to average net assets 1.70% 1.70% 1.70%
Ratio of expenses to average net assets
Prior to expense limitation 3.61% 2.72% 3.80%
Ratio of net investment income to average net assets 1.84% 0.82% 0.47%
Ratio of net investment income (loss) to average net assets
Prior to expense limitation (0.07%) (0.20%) (1.63%)
Portfolio turnover 47% 65% 36%
- -------------------------------------------------------------------------------------------------------------
Volatility
Period
Volatility, as indicated by year-by-year total return(3) 6/10/96(2)
through
1998 1997 11/30/96
------ -------- ----------
Volatility chart is not part of the Financial highlights and has (31.55%) 3.64% (0.10%)
not been audited by Ernst & Young LLP.
</TABLE>
(1) Per share information was based on the average shares
outstanding method.
(2) Date of commencement of trading; ratios have been annualized
but total return has not been annualized.
(3) Total return reflects expense limitations in effect for the Fund.
44
<PAGE>
The financial highlights table is intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800.523.1918.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Institutional Class Period
Year Ended 11/30 11/27/94(2)
-------------------------------------- through
Global Bond Fund 1998 1997 1996 11/30/95
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.810 $11.520 $11.270 $10.000
Income from investment operations
Net investment income(1) 0.627 0.658 0.788 0.782
Net realized and unrealized gain (loss) on investments and foreign (0.017) (0.515) 0.732 1.088
------- ------- ------ ------
currencies
Total from investment operations 0.610 0.143 1.520 1.870
------- ------- ------ ------
Less dividends and distributions
Dividends from net investment income (0.460) (0.813) (0.910) (0.600)
Distributions from net realized gain on investments (0.030) (0.040) (0.360) none
------- ------- ------ ------
Total dividends and distributions (0.490) (0.853) (1.270) (0.600)
------- ------- ------ ------
Net asset value, end of period $10.930 $10.810 $11.520 $11.720
======= ======= ======= =======
Total return(3) 5.88% 1.45% 14.68% 19.21%
Ratios and supplemental data
Net assets, end of period (000 omitted) $12,937 $11,278 $6,707 $897
Ratio of expenses to average net assets 0.95% 0.95% 0.95% 0.95%
Ratio of expenses to average net assets
Prior to expense limitation 1.29% 1.74% 4.70% 12.04%
Ratio of net investment income to average net assets 5.88% 6.06% 7.12% 8.00%
Ratio of net investment income (loss) to average net assets
Prior to expense limitation 5.54% 5.27% 3.37% (3.09%)
Portfolio turnover 93% 76% 42% 98%
- -----------------------------------------------------------------------------------------------------------------------
Volatility Period
11/29/95(2)
Volatility, as indicated by year-by-year total return(3) through
1998 1997 1996 11/30/95
--------------------------------------------
Volatility chart is not part of the Financial highlights and has 5.88% 1.45% 14.68% 19.21%
not been audited by Ernst & Young LLP.
</TABLE>
(1) Per share information for the years ended November 30, 1996, 1997 and
1998 was based on the average shares outstanding method.
(2) Date of commencement of trading; ratios have been annualized but total
return has not been annualized.
(3) Total return reflects expense limitations in effect for the Fund.
45
<PAGE>
How to read the Financial highlights
Net investment income
Net investment income includes dividend and interest income earned from the
Fund's securities; it is after expenses have been deducted.
Net realized and unrealized gain (loss) on investments and foreign currencies
A realized gain on investments occurs when we sell an investment at a loss.
When an investment increases or decreases in value but we do not sell it, we
record an unrealized gain or loss. The amount of realized gain per share that
we pay to shareholders is listed under "Less dividends and distributions-
Distributions from net realized gain on investments." Realized and unrealized
gain (loss) on foreign currencies represent changes in the U.S. dollar value of
assets (including investments) and liabilities denominated in foreign currencies
as a result of changes in foreign currency exchange rates.
Net asset value (NAV)
This is the value of a mutual fund share, calculated by dividing the net assets
by the number of shares outstanding.
Total return
This represents the rate that an investor would have earned or lost on an
investment in the Fund. In calculating this figure for the financial highlights
table, we include fee waivers, exclude front-end and contingent deferred sales
charges, and assume the shareholder has reinvested all dividends and realized
gains.
Net assets
Net assets represent the total value of all the assets in the Fund's portfolio,
less any liabilities, that are attributable to that class of the Fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for
operating expenses and management fees. These expenses include accounting and
administration expenses, services for shareholders, and similar expenses.
Ratio of net investment income to average net assets
We determine this ratio by dividing net investment income by average net assets.
Portfolio turnover rate
This figure tells you the amount of trading activity in a fund's portfolio.
For example, a fund with a 50% turnover has bought and sold half of the value of
its total investment portfolio during the stated period.
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[begin glossary runs along the bottom of the pages]
How to use this glossary
Words found in the glossary are printed in boldface only the first time they
appear in the prospectus. So if you would like to know the meaning of a word
that isn't in boldface, you might still find it in the glossary.
Amortized cost
Amortized cost is a method used to value a fixed income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Average maturity
An average of when the individual bonds and other debt securities held in a
portfolio will mature.
Bond
A debt security, like an IOU, issued by a company, municipality or government
agency. In return for lending money to the issuer, a bond buyer generally
receives fixed periodic interest payments and repayment of the loan amount on a
specified maturity date. A bond's price changes prior to maturity and is
inversely related to current interest rates. When interest rates rise, bond
prices fall, and when interest rates fall, bond prices rise. See also Nationally
recognized statistical rating organization.
Bond ratings
Independent evaluations of creditworthiness, ranging from Aaa/AAA (highest
quality) to D (lowest quality). Bonds rated Baa/BBB or better are considered
investment grade. Bonds rated Ba/BB or lower are commonly known as junk bonds.
See also Nationally recognized statistical rating organization. See also
Nationally recognized statistical rating organization.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
Corporate bond
A debt security issued by a corporation. See bond.
Cost basis
The original purchase price of an investment, used in determining capital gains
and losses.
Currency exchange rates
The price at which one country's currency can be converted into anothers's. This
exchange rate varies almost daily according to a wide range of political,
economic and other factors.
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Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Duration
A measurement of a fixed-income investment's price volatility. The larger the
number, the greater the likely price change for a given change in interest
rates.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Fixed-income securities
With fixed-income securities, the money you originally invested is paid back at
a pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See Bonds.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Management fee
The amount paid by a mutual fund to the investment adviser for management
services, expressed as an annual percentage of the fund' s average daily net
assets.
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
Maturity
The length of time until a bond issuer must repay the underlying loan principal
to bondholders.
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Morgan Stanley Capital International EAFE (Europe, Australia, Far East) Index
The Morgan Stanley Capital International EAFE Stock Index is an international
index including stocks traded on 16 exchanges in Europe, Australia and the Far
East, weighted by capitalization.The index is unmanaged and doesn't include the
actual costs of buying, selling, and holding securities.
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Morgan Stanley Capital International Emerging Markets Free Index
The Morgan Stanley International Emerging Markets Free Index is a U.S. dollar
dominated index composed of stocks of countries with below average per capita
GDP as defined by the World Bank, foreign ownership restrictions, a tax
regulatory environment, and greater perceived market risk than in developed
countries. Within this index, MSCI aims to capture an aggregate of 60% of local
market capitalization.
Morgan Stanley Capital International World Index
The Morgan Stanley Capital International World Index is an international index
that includes stocks traded in Europe, Australia, the Far East, plus the U.S.,
and Canada, and South Africa, weighted by capitalization.
Morgan Stanley Pacific Index
A total return index, reported in U.S. dollars, based on share prices and
reinvested gross dividends of approximately 500 companies (only those securities
deemed sufficiently liquid for trading by investors) from the following 6
countries: Australia, Hong Kong, Japan, Malaysia, New Zealand, Singapore.
National Association of Securities Dealers (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
Nationally recognized statistical rating organization (NRSRO)
A company that assesses the credit quality of bonds, commercial paper, preferred
and common stocks and municipal short-term issues, rating the probability that
the issuer of the debt will meet the scheduled interest payments and repay the
principal. Ratings are published by such companies as Moody's Investors Service
(Moody's), Standard & Poor's Corporation (S&P), Duff & Phelps, Inc. (Duff), and
Fitch Investor Services, Inc. (Fitch).
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stock also often pays dividends at a fixed
rate and is sometimes convertible into common stock.
Price/earnings ratio
A measure of a stock's value calculated by dividing the current market price of
a share of stock by its annual earnings per share. A stock selling for $100 per
share with annual earnings per share of $5 has a P/E of 20.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
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Sales charge
Charge on the purchase or redemption of fund shares sold through financial
advisers. May vary with the amount invested. Typically used to compensate
advisers for advice and service provided.
SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Salomon Smith Barney World Government Bond Index
A market-capitalization weighted benchmark that tracks the performance of the 18
government bond markets of Australia, Austria, Belgium, Canada, Denmark,
Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, Portugal,
Spain, Sweden, Switzerland, the United Kingdom, and the United States.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as "equities."
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
There are investments which are more likely to be "low volatility" and
investments which are more likely to be "high volatility" investments.
[end glossary]
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Appendix A
Bond Ratings
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.
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Appendix B
New Pacific Fund
Additional information on investment policies and risk considerations
In attempting to achieve its investment objective and policies, the New Pacific
Fund may employ, among others, one or more of the strategies set forth below.
The information in this section is specific to New Pacific Fund. Other Funds may
or may not also use these strategies, as described elsewhere in this prospectus.
Convertible Securities
The Fund may invest in securities that either have warrants or rights attached
or are otherwise convertible into other or additional securities. A convertible
security is typically a fixed-income security (a bond or preferred stock) that
may be converted at a stated price within a specified period of time into a
specified number of shares of common stock of the same or a different issuer.
Convertible securities are generally senior to common stocks in a corporation's
capital structure but are usually subordinated to similar non-convertible
securities. While providing a fixed-income stream (generally higher in yield
than the income derivable from a common stock but lower than that afforded by a
similar non-convertible security), a convertible security also affords an
investor the opportunity, through its conversion feature, to participate in
capital appreciation attendant upon a market price advance in the common stock
underlying the convertible security. In general, the market value of a
convertible security is at least the higher of its "investment value" (i.e., its
value as a fixed-income security) or its "conversion value" (i.e., its value
upon conversion into its underlying common stock). While no securities
investment is without some risk, investments in convertible securities generally
entail less risk than investments in the common stock of the same issuer.
U.S. Government Securities
The Fund may invest in securities of the U.S. government. Securities guaranteed
by the U.S. government include:
o direct obligations of the U.S. Treasury (such as Treasury bills, notes
and bonds) and
o federal agency obligations guaranteed as to principal and interest by the
U.S. Treasury (such as GNMA certificates and Federal Housing
Administration debentures).
For these securities, the payment of principal and interest is unconditionally
guaranteed by the U.S. government, and thus they are of the highest possible
credit quality. Such securities are subject to variations in market value due to
fluctuations in interest rates, but if held to maturity are deemed to be free of
credit risk for the life of the investment.
Securities issued by U.S. government instrumentalities and certain federal
agencies are neither direct obligations of, nor guaranteed by, the U.S.
Treasury. However, they generally involve federal sponsorship in one way or
another: some are backed by specific types of collateral; some are supported by
the issuer's right to borrow from the U.S. Treasury; some are supported by the
discretionary authority of the U.S. Treasury to purchase certain obligations of
the issuer; and others are supported only by the credit of the issuing
government agency or instrumentality. These agencies and instrumentalities
include, but are not limited to, Federal Land Banks, Farmers Home
Administration, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, and Federal Home Loan Banks.
Repurchase Agreements
The Fund may enter into repurchase agreements, under which the Fund buys a
security (typically a U.S. government security or other money market security)
and obtains a simultaneous commitment from the seller to repurchase the security
at a specified time and price. The seller must maintain with the Fund's
Custodian collateral equal to at least 102% of the repurchase price including
accrued interest, as monitored daily by the manager and/or sub-adviser. The Fund
only will enter into repurchase agreements involving securities in which it
could otherwise invest and with banks, brokers or dealers deemed by the board of
directors to be creditworthy. If the seller under the repurchase agreement
defaults, the Fund may incur a loss if the value of the collateral securing the
repurchase agreement has declined and may incur disposition costs in connection
with liquidating the collateral. If bankruptcy proceedings are commenced with
respect to the seller, realization upon the collateral by the Fund may be
delayed or limited.
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The funds in Delaware Investments have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the 1940 Act to allow
Delaware Investments funds jointly to invest cash balances. The Fund may invest
cash balances in a joint repurchase agreement in accordance with the terms of
the Order and subject generally to the conditions described above.
When-Issued Securities and Firm Commitment Agreements
The Fund may purchase securities on a delayed delivery or "when-issued" basis
and enter into firm commitment agreements (transactions whereby the payment
obligation and interest rate are fixed at the time of the transaction but the
settlement is delayed). The transactions may involve either corporate, municipal
or government securities. The Fund as a purchaser assumes the risk of any
decline in value of the security beginning on the date of the agreement or
purchase. The Fund may invest in when-issued securities in order to take
advantage of securities that may be especially under or over valued when trading
on a when-issued basis.
The Fund will segregate liquid assets such as cash, U.S. government securities
or other appropriate high grade debt obligations in an amount sufficient to meet
its payment obligations in these transactions. Although these transactions will
not be entered into for leveraging purposes, to the extent the Fund's aggregate
commitments under these transactions exceed its holdings of cash and securities
that do not fluctuate in value (such as money market instruments), the Fund
temporarily will be in a leveraged position (i.e., it will have an amount
greater than its net assets subject to market risk). Should market values of the
Fund's portfolio securities decline while it is in a leveraged position, greater
depreciation of its net assets would likely occur than were it not in such a
position. The Fund will not borrow money to settle these transactions and,
therefore, will liquidate other Fund securities in advance of settlement if
necessary to generate additional cash to meet their obligations thereunder.
Money Market Instruments
The Fund may invest in money market instruments without limit for temporary or
defensive purposes. These are shorter-term debt securities generally maturing in
one year or less which include:
o commercial paper (short-term notes up to 9 months issued by corporations
or governmental bodies);
o commercial bank obligations (certificates of deposit (interest-bearing
time deposits), bankers' acceptances (time drafts on a commercial bank
where the bank accepts an irrevocable obligation to pay at maturity), and
documented discount notes (corporate promissory discount notes
accompanied by a commercial bank guarantee to pay at maturity));
o corporate bonds and notes (corporate obligations that mature, or that may
be redeemed, in one year or less);
o variable rate demand notes, short-term tax-exempt obligations; and
o savings association obligations (certificates of deposit issued by mutual
savings banks or savings and loan associations). Although certain
floating or variable rate obligations (securities which have a coupon
rate that changes at least annually and generally more frequently) have
maturities in excess of one year, they are also considered to be
short-term debt securities.
Strategic Transactions
General. The Fund may, but is not required to, utilize various other investment
strategies as described below to hedge various market risks (such as interest
rates, currency exchange rates, and broad or specific equity or fixed-income
market movements), to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio or to enhance potential gain. Such strategies
are generally accepted as modern Fund management and are regularly utilized by
many mutual funds and other institutional investors. Techniques and instruments
may change over time as new instruments and strategies are developed or
regulatory changes occur. In the course of pursuing these investment strategies,
the Fund may purchase and sell derivative securities. In particular, the Fund
may purchase and sell exchange-listed and over-the-counter put and call options
on securities, equity and fixed-income indices and other financial instruments,
purchase and sell financial futures contracts and options thereon, enter into
various interest rate transactions such as swaps, caps, floors or collars, and
enter into various currency transactions such as currency forward contracts,
currency futures contracts, currency swaps or options on currencies or currency
futures (collectively, all the above are called "Strategic Transactions").
Strategic Transactions may be used to attempt to protect against possible
changes in the market value of securities held in or to be purchased for the
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Fund resulting from securities markets or currency exchange rate fluctuations,
to protect the Fund's unrealized gains in the value of its Fund securities, to
facilitate the sale of such securities for investment purposes, to manage the
effective maturity or duration of fixed-income securities in the Fund, or to
establish a position in the derivatives markets as a temporary substitute for
purchasing or selling particular securities. Any or all of these investment
techniques may be used at any time and there is no particular strategy that
dictates the use of one technique rather than another, as use of any Strategic
Transaction is a function of numerous variables including market conditions. The
ability of the Fund to utilize these Strategic Transactions successfully will
depend on the manager's or sub-adviser's ability to predict pertinent market
movements, which cannot be assured. The Fund will comply with applicable
regulatory requirements when implementing these strategies, techniques and
instruments. Strategic Transactions involving financial futures and options
thereon will be purchased, sold or entered into only for bona fide hedging, risk
management or Fund management purposes and not for speculative purposes.
Additional information relating to certain financial instruments or strategies
is set forth below. In addition, see Special risks of strategic transactions,
below, for a discussion of certain risks.
Limitations on Futures and Options Transactions. The Fund will not enter into
any futures contract or option on a futures contract if, as a result, the sum of
initial margin deposits on futures contracts and related options and premiums
paid for options on futures contracts the Fund have purchased, after taking into
account unrealized profits and losses on such contracts, would exceed 5% of the
Fund's net asset value without reference to the definition of "bona fide hedging
transactions and positions" under the Commodity Exchange Act, as amended, or
unless the futures contract is covered by cash equivalent set-asides equal to
the total contract value.
In addition to the above limitations, the Fund will not:
o sell futures contracts, purchase put options or write call options
if, as a result, more than 25% of its total assets would be hedged
with futures and options under normal conditions;
o purchase futures contracts or write put options if, as a result,
the Fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed
25% of its total assets; or
o purchase call options if, as a result, the current value of option
premiums for call options purchased by the Fund would exceed 5% of
its total assets.
These limitations do not apply to options attached to or acquired or traded
together with their underlying securities, and do not apply to securities that
incorporate features similar to options.
The limitations on the Fund's investments in futures contracts and options, and
the Fund's policies regarding futures contracts and options discussed elsewhere
are not fundamental policies and may be changed as regulatory agencies permit.
Options Transactions. The Fund may purchase and write (i.e., sell) put and call
options on securities and currencies that are traded on national securities
exchanges or in the over-the-counter market to enhance income or to hedge its
funds. A call option gives the purchaser, in exchange for a premium paid, the
right for a specified period of time to purchase securities or currencies
subject to the option at a specified price (the exercise price or strike price).
When the Fund writes a call option, the Fund gives up the potential for gain on
the underlying securities in excess of the exercise price of the option.
A put option gives the purchaser, in return for a premium, the right
for a specified period of time to sell the securities or currencies subject to
the option to the writer of the put at the specified exercise price. The writer
of the put option, in return for the premium, has the obligation, upon exercise
of the option, to acquire the securities underlying the option at the exercise
price. The Fund might, therefore, be obligated to purchase the underlying
securities for more than their current market price.
The Fund will write only "covered" options. An option is covered if the
Fund owns an offsetting position in the underlying security or maintains cash,
U.S. government securities or other high-grade debt obligations with a value
sufficient at all times to cover its obligations. See the Statement of
Additional Information.
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Forward Foreign Currency Exchange Contracts. The Fund may enter into forward
foreign currency exchange contracts to protect the value of their funds against
future changes in the level of currency exchange rates. The Fund may enter into
such contracts on a spot (i.e., cash) basis at the rate then prevailing in the
currency exchange market or on a forward basis, by entering into a forward
contract to purchase or sell currency at a future date. The Fund's dealings in
forward contracts will be limited to hedging involving either specific
transactions or Fund positions. Transaction hedging generally arises in
connection with the purchase or sale of its Fund securities and accruals of
interest or dividends receivable and Fund expenses. Position hedging generally
arises with respect of existing Fund security or currency positions.
Futures Contracts and Options Thereon. The Fund may purchase and sell financial
futures contracts and options thereon which are exchange-listed or
over-the-counter for certain hedging, return enhancement and risk management
purposes in accordance with regulations of the CFTC. These futures contracts and
related options will be on interest-bearing securities, financial indices and
interest rate indices. A financial futures contract is an agreement to purchase
or sell an agreed amount of securities at a set price for delivery in the
future.
The Fund may not purchase or sell futures contracts and related options if
immediately thereafter the sum of the amount of initial margin deposits on the
Fund's existing futures and options on futures and premiums paid on such related
options would exceed 5% of the market value of the Fund's total assets. In
addition, the value of all futures contracts sold will not exceed the total
market value of the Fund.
Swap Agreements. The Fund may enter into interest rate swaps, currency swaps,
and other types of swap agreements such as caps, collars and floors. In an
interest rate swap, one party agrees to make regular payments of a floating rate
times a "notional" principal amount in return for payments of a fixed rate times
the same amount. Swaps may also depend on other prices or rates such as the
value of an index or mortgage prepayment rates.
Swap agreements usually involve a small investment of cash relative to the
magnitude of risk assumed. As a result, swaps can be very volatile and may
substantially impact the Fund's performance. Swap agreements are also subject to
the risk of a counterpart's ability to perform (i.e., creditworthiness). The
Fund may also suffer losses if it is unable to terminate swap agreements or
reduce exposure through offsetting transactions in a timely manner.
Special Risks of Strategic Transactions. Participation in the options or futures
markets and in currency exchange transactions involves investment risks and
transaction costs to which the Fund would not be subject absent the use of these
Strategic Transactions. If the manager's and/or sub-adviser's prediction of
movements in the direction of the securities, foreign currency and interest rate
markets are inaccurate, the adverse consequences to the Fund may leave the Fund
in a worse position than if such Strategic Transactions were not used. Risks
inherent in the use of options, foreign current and futures contracts and
options on futures contracts include:
o dependence on the manager's and/or sub-adviser's ability to predict
current movements in the direction of interest rates, securities prices
and currency markets;
o imperfect correlation between the price of options and futures contracts
and options thereon and movements in the prices of securities being
hedged;
o the fact that skills need to use these strategies are different from
those needed to select Fund securities;
o the possible absence of a liquid secondary market for any particular
instrument at any time;
o the possible need to defer closing out certain hedged positions to avoid
adverse tax consequences; and
o the possible inability of a Fund to purchase or sell a Fund security at a
time that otherwise would be favorable for it to do so, or the possible
need for a Fund to sell a Fund security at a disadvantageous time, due to
the need for a Fund to maintain "cover" or to segregate securities in
connection with Strategic Transactions.
Although the use of futures contracts and options transactions for hedging
should tend to minimize the risk of loss due to a decline in the value of the
hedged position, at the same time they tend to limit any potential gain which
might result from an increase in value of such position. Finally, the daily
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variation margin requirements for futures contracts would create a greater
ongoing potential financial risk than would purchase of options, where the
exposure is limited to the cost of the initial premium. Losses resulting from
the use of Strategic Transactions would reduce net asset value, and possibly
income, and such losses can be greater than if the Strategic Transactions had
not been utilized. The Strategic Transactions that the Fund may use and some of
their risks are described more fully in the Statement of Additional Information.
The Fund's ability to engage in Strategic Transactions is limited by the
requirements of the Internal Revenue Code for qualification as a regulated
investment company. See the Statement of Additional Information.
* * *
The Statement of Additional Information describes certain of these
investment policies and risk considerations. The Statement of Additional
Information also sets forth other investment policies, risk considerations and
more specific investment restrictions.
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[back cover]
Additional information about the Funds' investments is available in the Funds'
annual and semi-annual reports to shareholders. In the Funds' shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Funds' performance during the report
period. You can find more detailed information about the Funds in the current
Statement of Additional Information, which we have filed electronically with the
Securities and Exchange Commission (SEC) and which is legally a part of this
prospectus. If you want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any questions about investing
in these funds, you can write to us at 1818 Market Street, Philadelphia, PA
19103-3682, or call toll-free 800.523.1918. You may also obtain additional
information about each of the Funds from your financial adviser.
You can find reports and other information about each Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Funds, including their
Statement of Additional Information, can be reviewed and copied at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
You can get information on the public reference room by calling the SEC at
1.800.SEC.0330.
Web site
www.delawarefunds.com
E-mail
[email protected]
Client Services Representative
800.510.4015
Delaphone Service
800.362.FUND (800.362.3863)
For convenient access to account information or current performance information
on all Delaware Investments Funds seven days a week, 24 hours a day, use this
Touch-Tone service.
Delaware Group Global & International Funds, Inc.'s Investment Company Act file
number: 811-6324 Delaware Group Adviser Funds, Inc.'s Investment Company Act
file number: 811-7972
Fund Symbols CUSIP NASDAQ
- ---- ------- ----- ------
International Equity Fund Institutional Class 245914403 DEQIX
Global Equity Fund Institutional Class 245914601 DGAIX
New Pacific Fund Institutional Class 245917810 DENIX
Emerging Markets Fund Institutional Class 245914817 DEMIX
Global Bond Fund Institutional Class 245914502 DGBIX
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
58
