<PAGE>
DELAWARE
INVESTMENTS
Philadelphia * London
Global Opportunities Fund
(formerly Global Equity Fund)
International Small Cap Fund
New Europe Fund
Latin America Fund
Class A * Class B * Class C
Prospectus
March 30, 1999
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.
<PAGE>
Table of Contents
Fund Profiles
Global Opportunities Fund page
International Small Cap Fund
New Europe Fund
Latin America Fund
How we manage the Funds page
Our investment strategies
The securities we typically invest in
The risks of investing in the Funds
Who manages the Funds
Investment manager and sub-adviser
Portfolio managers
Fund administration (Who's who) page
About your account page
Investingin the Funds
Choosing a share class
How to reduce your sales charge
How to buy shares
Retirement plans
How to redeem shares
Account minimums
Special services
Dividends, Distributions and Taxes
Other investment policies and page
risk considerations
Financial highlights page
Glossary page
Appendix A - Bond ratings page
<PAGE>
Profile: Global Opportunities Fund*
What are the Fund's goals?
Global Opportunities Fund's investment goal is to achieve 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?
Global Opportunities Fund seeks to achieve its objective by investing in global
securities that provide the potential for capital appreciation and income. The
Fund's primary focus is to invest in domestic and foreign equity securities.
Under normal market conditions, the Fund will invest at least 65% of its assets
in equity securities of issuers organized or having a majority of their assets
in or deriving a majority of their operating income in at least three different
countries, one which may be the United States.
In selecting investments for the Fund,
o we place emphasis on identifying well managed companies that are
undervalued in terms of such factors as assets, earnings, dividends and
growth potential.
o 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 and bond prices that can be
caused by a drop in the stock or bond market, an adverse change in interest
rates 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, or
less regulatory standards. For a more complete discussion of risk, please turn
to page ___.
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.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors looking for a portfolio that holds equity securities
from both U.S. and foreign countries and is permitted to invest a
portion of its assets in U.S. and foreign fixed-income securities.
o Investors seeking a measure of capital growth and income.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors who are unwilling to accept risks of investing in
foreign securities.
* The Global Opportunities Fund was formerly known as Global Equity Fund. The
change in the Fund's name became effective on July 21, 1998.
<PAGE>
How has the Global Opportunities Fund performed?
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show the returns for the Fund's Class A shares for the past
calendar year, as well as the average annual returns of all shares for the one
year period 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.
Total return (Class A)
Global Opportunities Fund A Class
1998 11.05%
The Fund's Class A shares had a 2.02% fiscal year-to-date return as of February
28, 1999. During the period illustrated in this bar chart, Class A's highest
return was 12.13% for the quarter ended December 31, 1998 and its lowest return
was -10.36% 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
in the table shown on page ___ do include the sales charge.
Average annual returns for periods ending 12/31/98
---------------------------------------------------------------------
CLASS A Morgan Stanley World
Index
---------------------------------------------------------------------
1 year 4.62% 24.80%
---------------------------------------------------------------------
Since inception 2.45% 13.67%
(7/22/97)
---------------------------------------------------------------------
The Fund's returns are compared to the performance of the Morgan Stanley 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.
<PAGE>
What are the Global Opportunities 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 fees4 0.85% 0.85% 0.85%
- -----------------------------------------------------------------------------------
Distribution and service (12b-1) fees 5 0.30% 1.00% 1.00%
- -----------------------------------------------------------------------------------
Other expenses 0.45% 0.45% 0.45%
- -----------------------------------------------------------------------------------
Total operating expenses 6 1.60% 2.30% 2.30%
- -----------------------------------------------------------------------------------
</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. 7 This is an
example only, and does not represent future expenses, which may be greater or
less than those shown here.
- --------------------------------------------------------------------------------
CLASS(8) A B B C C
(no redemption) (no redemption)
- --------------------------------------------------------------------------------
1 year $728 $733 $233 $333 $233
- --------------------------------------------------------------------------------
3 years $1,051 $1,018 $718 $718 $718
- --------------------------------------------------------------------------------
5 years $1,396 $1,430 $1,230 $1,230 $1,230
- --------------------------------------------------------------------------------
10 years $2,366 $2,461 $2,461 $2,636 $2,636
- --------------------------------------------------------------------------------
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.
<PAGE>
5. The distributor has agreed to waive the 12b-1 fees for each Class
through May 31, 1999.
6 6The 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
0.80% of average daily net assets. The fees and expenses shown in the
table above do not reflect this voluntary expense cap. The following
table shows actual operating expenses which are based on the most
recently completed fiscal year and reflect the manager's and
distributor's current fee waivers and payments.
- --------------------------------------------------------------------------------
Actual Fund operating expenses including voluntary expense caps
- --------------------------------------------------------------------------------
CLASS A B C
- --------------------------------------------------------------------------------
Management fees 0.35% 0.35% 0.35%
- --------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Other expenses 0.45% 0.45% 0.45%
- --------------------------------------------------------------------------------
Total operating expenses 0.80% 0.80% 0.80%
- --------------------------------------------------------------------------------
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. This example does not reflect the voluntary expense cap
described 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.
<PAGE>
Profile: International Small Cap Fund
What are the Fund's goals?
International Small Cap 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?
International Small Cap Fund seeks to achieve its objective by investing
primarily in smaller non-U.S. companies, which may include companies located or
operating in established or emerging countries. Under normal circumstances, at
least 65% of the Fund's total assets will be invested in equity securities of
companies organized or having a majority of their assets in or deriving a
majority of their operating income in at least three different countries outside
of the United States. The current market capitalization of the companies in
which the Fund intends to invest primarily will generally be $1.5 billion or
less (at the time of purchase).
By focusing on smaller, non-U.S. companies, the Fund seeks to identify equity
securities of emerging an other growth-oriented companies which in the opinion
of the manage, are responsive to changes within their markets, and have the
fundamental characteristics to support growth. We will seek to identify changing
and dominant trends within the relevant markets, and will purchase securities of
companies which it believes will benefit from these trends. In addition, we will
consider the financial strength of the company or its industry. We may invest in
smaller capitalization companies that may be temporarily out of favor or
overlooked by securities analysts and whose value, therefore, may not be fully
recognized by the market.
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 and bond prices which can be
caused by a drop in the stock or bond market, an adverse change in interest
rates or poor performance in specific industries or companies. Investments in
foreign securities whether equity or fixed-income, involve special risks
including those related to currency fluctuations, as well as to political,
economic and social situations different from and potentially more volatile than
those in the U.S. In addition, the accounting, tax and financial reporting
standards of foreign countries are different from and may be less reliable or
comprehensive than those relating to U.S. issuers. The Fund may invest up to 15%
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. For a more complete discussion of risk,
please turn to page __.
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.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors looking for growth potential from a portfolio of foreign
securities.
o Investors willing to accept the risks associated with foreign investing
as well as investments in smaller-sized issuers, some to which may be
speculative.
Who should not invest in the Fund o Investors with short-term financial goals.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly, over the short term.
o Investors whose primary goal is income.
<PAGE>
What are the International Small Cap 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>
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A B C
- --------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as a 5.75% none none
percentage of offering price
- --------------------------------------------------------------------------------------------
Maximum contingent deferred sales charge none1 5%(2) 1%(3)
(load) as a 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>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A B C
- --------------------------------------------------------------------------------
Management fees 1.25% 1.25% 1.25%
- --------------------------------------------------------------------------------
Distribution and service (12b-1) fees (4) 0.30% 1.00% 1.00%
- --------------------------------------------------------------------------------
Other expenses 0.80% 0.80% 0.80%
- --------------------------------------------------------------------------------
Total operating expenses (5) 2.35% 3.05% 3.05%
- --------------------------------------------------------------------------------
</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
(no redemption) (no redemption)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 year $799 $808 $308 $408 $308
- ----------------------------------------------------------------------------------------
3 years $1,266 $1,242 $942 $942 $942
- ----------------------------------------------------------------------------------------
5 years $1,758 $1,801 $1,601 $1,601 $1,601
- ----------------------------------------------------------------------------------------
10 years $3,107 $3,202 $3,202 $3,365 $3,365
- ----------------------------------------------------------------------------------------
</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.
(4) The distributor has agreed to waive the 12b-1 fees through May 31,
1999.
<PAGE>
(5) The investment manager has agreed to waive fees and pay expenses
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 1.25% of average daily net assets. The
fees and expenses shown in the table above do not reflect this
voluntary expense cap. The following table shows actual operating
expenses which are based on the most recently completed fiscal year and
reflect the manager's and distributor's current fee waivers and
payments.
- --------------------------------------------------------------------------------
Actual Fund operating expenses including voluntary expense caps
- --------------------------------------------------------------------------------
CLASS A B C
- --------------------------------------------------------------------------------
Management fees 0.45% 0.45% 0.45%
- --------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Other expenses 0.80% 0.80% 0.80%
- --------------------------------------------------------------------------------
Total operating expenses 1.25% 1.25% 1.25%
- --------------------------------------------------------------------------------
(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. In addition, this example does not reflect the voluntary
expense cap described in footnote 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.
<PAGE>
Profile: New Europe Fund
What are the Fund's goals?
The New Europe 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?
We invest primarily in equity securities of European countries. Under normal
market conditions, at least 65% of New Europe's assets will be invested in
equity securities of companies organized or having a majority of their assets in
or deriving a majority of their operating income in Europe. Such countries may
have well-established economies or securities markets or emerging economies or
securities markets or smaller securities markets. Up to 30% of the Fund's assets
may be invested in fixed-income securities issued by emerging country companies
and foreign governments, their agencies, instrumentalities or political
subdivisions, all of which may be high yield, high risk fixed-income securities.
In selecting securities for the Fund:
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 and bond prices, which can be
caused by a drop in the stock or bond market, an adverse change in interest
rates or poor performance in specific industries or companies. 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 or inadequate
regulatory standards. The New Europe Fund targets a specific region of the world
for investment. Therefore, an investment in this Fund will likely be more
volatile than a more geographically diversified fund. In addition, the
performance of this Fund is closely tied to the economic and political
conditions of the region. High yield, high risk foreign fixed-income securities
are subject to substantial risks, particularly during periods of economic
downturns or rising interest rates. For a more complete discussion of risk,
please turn to page __.
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.
<PAGE>
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors looking for long-term growth potential.
o Investors willing to accept the risks associated with foreign investing
as well as investments in smaller-sized issuers, some to which may be
speculative.
Who should not invest in the Fund o Investors with short-term financial goals.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly, over the short term.
o Investors whose primary goal is income.
<PAGE>
What are the New Europe 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 5.75% none none
percentage of offering price
- --------------------------------------------------------------------------------------------
Maximum contingent deferred sales charge none1 5%(2) 1%(3)
(load) as a 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.
- -----------------------------------------------------------------------------
CLASS A B C
- -----------------------------------------------------------------------------
Management fees 1.25% 1.25% 1.25%
- -----------------------------------------------------------------------------
Distribution and service (12-1) fees (4) 0.30% 1.00% 1.00%
- -----------------------------------------------------------------------------
Other expenses (5) 0.85% 0.85% 0.85%
- -----------------------------------------------------------------------------
Total operating expenses (6) 2.40% 3.10% 3.10%
- -----------------------------------------------------------------------------
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. 7 This 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 (no redemption) C C (no redemption)
-------------- --------------- ------------ ------------------ ---------- --------------------
<S> <C> <C> <C> <C> <C>
1 year $804 $813 $313 $413 $313
------------ ----------------- ------------ ------------------ ---------- --------------------
3 years $1,280 $1,257 $957 $957 $957
------------ ----------------- ------------ ------------------ ---------- --------------------
</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.
<PAGE>
(4) The distributor has agreed to waive the 12b-1 fees through May 31,
1999.
(5) Other expenses are based on estimated amounts for the current fiscal
year.
(6) 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
1.25% of average daily net assets. The fees and expenses shown in the
table above do not reflect this voluntary expense cap. The following
table shows estimated operating expenses for the current fiscal year
reflecting the manager's and distributor's current fee waivers and
payments.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Estimated Fund operating expenses including voluntary expense caps
- ------------------------------------------------- ----------- ------------ -----------
CLASS A B C
- ------------------------------------------------- ----------- ------------ -----------
<S> <C> <C> <C>
Management fees 0.40% 0.40% 0.40%
- ------------------------------------------------- ----------- ------------ -----------
Distribution and service (12b-1) fees 0.00% 0.00% 0.00%
- ------------------------------------------------- ----------- ------------ -----------
Other expenses 0.85% 0.85% 0.85%
- ------------------------------------------------- ----------- ------------ -----------
Total operating expenses 1.25% 1.25% 1.25%
- ------------------------------------------------- ----------- ------------ -----------
</TABLE>
(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. This example does not reflect the voluntary expense cap
described in footnote 6.
(8) Class B shares automatically convert to Class A shares at the end of
the eighth year. The example does not assume this conversion since it
only reflects expenses for one and three years.
<PAGE>
Profile: Latin America Fund
What are the Fund's goals?
Latin America 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?
We invest primarily in equity securities of Latin American companies. Under
normal market conditions, at least 65% of Latin America Fund's assets will be
invested in equity securities of companies organized or having a majority of
their assets in or deriving a majority of their operating income in Latin
America. Many of the countries in which the Fund invests have emerging economies
or securities markets or smaller securities markets. Up to 30% of the Fund's
assets may be invested in fixed-income securities issued by emerging country
companies and foreign governments, their agencies, instrumentalities or
political subdivisions, all of which may be high yield, high risk fixed-income
securities.
In selecting investments for the Fund:
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 and bond prices which can be
caused by a drop in the stock or bond market, an adverse change in interest
rates or poor performance in specific industries or companies. 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 or inadequate
regulatory standards. The Latin America Fund targets a specific region of the
world for investment. Therefore, an investment in this Fund will likely be more
volatile than a more geographically diversified fund. In addition, the
performance of this Fund is tied to the economic and political conditions of
this region. High yield, high risk foreign fixed-income securities are subject
to substantial risks, particularly during periods of economic downturns or
rising interest rates. For a more complete discussion of risk, please turn to
page __.
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.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors looking for long-term growth potential.
<PAGE>
o Investors willing to accept the risks associated with foreign investing
as well as investments in smaller-sized issuers, some to which may be
speculative.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly, over the short term.
<PAGE>
What are Latin America 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 5.75% none none
percentage of offering price
- -------------------------------------------------------------------------------------------
Maximum contingent deferred sales charge none1 5%(2) 1%(3)
(load) as a 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.
- --------------------------------------------------------------------------------
CLASS A B C
- --------------------------------------------------------------------------------
Management fees 1.25% 1.25% 1.25%
- --------------------------------------------------------------------------------
Distribution and service (12-1) fees (4) 0.30% 1.00% 1.00%
- --------------------------------------------------------------------------------
Other expenses (5) 0.83% 0.83% 0.83%
- --------------------------------------------------------------------------------
Total operating expenses (6) 2.38% 3.08% 3.08%
- --------------------------------------------------------------------------------
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. 7 This 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 (no redemption) C C (no redemption)
------------------------------------------------------ ---------- --------------------
<S> <C> <C> <C> <C> <C>
1 year $802 $811 $311 $411 $311
------------------------------------------------------ ---------- --------------------
3 years $1,275 $1,251 $951 $951 $951
------------------------------------------------------ ---------- --------------------
</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.
<PAGE>
(4) The distributor has agreed to waive the 12b-1 fees through May 31,
1999.
(5) Other expenses are based on estimated amounts for the current fiscal
year.
(6) 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
1.25% of average daily net assets. The fees and expenses shown in the
table above do not reflect this voluntary expense cap. The following
table shows estimated operating expenses for the current fiscal year
reflecting the manager's and distributor's current fee waivers and
payments.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Estimated Fund operating expenses including voluntary expense caps
- ------------------------------------------------- ----------- ------------ -----------
CLASS A B C
- ------------------------------------------------- ----------- ------------ -----------
<S> <C> <C> <C>
Management fees 0.42% 0.42% 0.42%
- ------------------------------------------------- ----------- ------------ -----------
Distribution and service (12b-1) fees 0.00% 0.00% 0.00%
- ------------------------------------------------- ----------- ------------ -----------
Other expenses 0.83% 0.83% 0.83%
- ------------------------------------------------- ----------- ------------ -----------
Total operating expenses 1.25% 1.25% 1.25%
- ------------------------------------------------- ----------- ------------ -----------
</TABLE>
(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. In addition, this example does not reflect the voluntary
expense cap described in footnote 6.
(8) Class B shares automatically convert to Class A shares at the end of
the eighth year. The example does not assume this conversion since it
only reflects expenses for one and three years.
<PAGE>
How we manage the Funds
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
Our investment strategies
Global Opportunities Fund
Global Opportunities Fund's primary objective is long-term growth without undue
risk to principal. The Fund seeks to achieve its objective by investing in
global equity securities that provide the potential for capital appreciation and
income. The Fund's primary focus will be to invest in domestic and foreign
equity securities and, under normal market conditions, at least 65% of its
assets will be invested in equity securities. The Fund's investments will be
made in securities of issuers organized or having a majority of their assets in
or deriving a majority of their operating income in at least three different
countries, one of which may be the United States.
The Fund will attempt to achieve its investment objective by investing in
securities traded in equity markets and currencies that we believe offer the
best relative values within the global investment universe. Equity securities in
which the Fund may invest include convertible securities, common stocks,
preferred stocks and warrants issued in foreign countries or in the U.S.
Simultaneous with identifying the most attractive equity markets and currencies,
we will attempt to purchase undervalued securities. Individual equity securities
around the world will be selected based on an analysis of the company's
operations, financial statements and each company's currency valuation.
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.
The Fund may invest 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.
While the Fund may purchase securities in any foreign country, developed and
underdeveloped, or emerging market countries, it is currently anticipated that
the countries in which the Fund may invest will include, but are not limited to
Australia, Belgium, Canada, France, Germany, Hong Kong, Japan, Malaysia, the
Netherlands, Singapore, Spain, Switzerland and the United Kingdom, as well as
Indonesia, Korea, the Philippines, South Africa,Taiwan and Thailand. In certain
countries, investments may only be made by purchasing shares of closed-end
investment companies that in turn are authorized to invest in the securities of
such countries.
International Small Cap Fund
The Fund seeks long-term capital appreciation. The Fund seeks to achieve its
objective by investing primarily in equity securities of smaller non-U.S.
companies, which may include companies located or operating in established or
emerging countries. Under normal circumstances, at least 65% of the Fund's total
assets will be invested in equity securities of companies organized or having a
majority of their assets in or deriving a majority of their operating income in
at least three different countries outside of the United States. The current
market capitalization of the companies in which the Fund intends to invest
primarily will generally be $1.5 billion or less (at the time of purchase).
<PAGE>
The equity securities in which the Fund may invest include common stocks,
preferred stocks, rights or warrants to purchase common stocks and securities
convertible into common stocks. The Fund may also invest in foreign companies
through sponsored or unsponsored Depositary Receipts, which are receipts
typically issued by a bank or trust company evidencing ownership of underlying
securities issued by a foreign company.
In selecting investments for the Fund, the manager will employ a dividend
discount analysis across country boundaries and will also use a purchasing power
parity approach to identify currencies and markets that are overvalued or
undervalued relative to the U.S. dollar. The manager uses the dividend discount
analysis to compare the value of different investments. Using this technique,
the manager looks at future anticipated dividends and discounts the value of
those dividends back to what they would be worth if they were being paid today.
With a purchasing parity approach, the manager attempts to identify the amount
of goods and services that a dollar will buy in the United States and compare
that to the amount of a foreign currency required to buy the same amount of
goods and services in another country. Eventually, currencies should trade at
levels that should make it possible for the dollar to buy the same amount of
goods and services overseas as in the United States. When the dollar buys less,
the foreign currency may be considered to be overvalued. Conversely, when the
dollar buys more, the currency may be considered to be undervalued.
While the Fund may purchase securities in any foreign country, developed and
underdeveloped, or emerging market countries, it is currently anticipated that
the countries in which the Fund may invest will include, but not be limited to,
Australia, Belgium, Canada, France, Germany, Hong Kong, Japan, the Netherlands,
New Zealand, Singapore and Malaysia, Spain, Switzerland, the United Kingdom, as
well as Argentina, Brazil, Chile, Egypt, Greece, India, Indonesia, Korea, Peru,
the Philippines, South Africa, Taiwan, Thailand and Turkey. With respect to
certain countries, investments by an investment company may only be made through
investments in closed-end investment companies that in turn are authorized to
invest in the securities of such countries.
The Fund may also invest in convertible preferred stocks that offer enhanced
yield features, such as Preferred Equity Redemption Cumulative Stock, and
certain other non-traditional equity securities.
The Fund may invest up to 15% of its net assets in fixed-income securities
issued by emerging country companies, and foreign governments, their agencies,
instrumentalities or political subdivisions, all of which may be high yield,
high risk fixed-income securities rated lower than BBB by S&P and Baa by Moody's
or, if unrated, are considered by the manager to be of equivalent quality and
which present special investment risks. See High Yield, High Risk 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 Europe Fund
The investment objective of New Europe is to achieve long-term capital
appreciation. The Fund seeks to achieve its objective by investing primarily in
equity securities of European companies, which may include companies located or
operating in established or emerging European countries. Under normal
circumstances, at least 65% of the Fund's total assets will be invested in
equity securities of companies organized or having a majority of their assets in
or deriving a majority of their operating income in Europe. The companies in
which the Fund will invest will be of varying size.
<PAGE>
The Fund will invest primarily in common stocks and may, to a lesser extent,
invest in preferred stocks, rights or warrants to purchase common stocks and
securities convertible into common stocks. The Fund will also invest in foreign
companies through sponsored or unsponsored Depositary Receipts. The Fund may
also invest in convertible preferred stocks that offer enhanced yield features,
such as Preferred Equity Redemption Cumulative Stock, and certain other
non-traditional equity securities. The Fund's investments may be issued in any
currency and the Fund will, from time to time, hold cash in foreign currencies.
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.
The Fund may invest in securities of issuers located in any European country
where the investment manager believes that there is the potential for long-term
capital appreciation. The Fund may invest in the securities of issuers located
in European countries with well-established economies and securities markets or
in countries with emerging economies or securities markets or smaller securities
markets. In addition, if opportunities arise, the Fund may invest in securities
of issuers located in Eastern European countries.
The Fund may invest up to 30% of its net assets in fixed-income securities
issued by emerging country companies, and foreign governments, their agencies,
instrumentalities or political subdivisions, all of which may be high yield,
high risk fixed-income securities, including Brady Bonds, rated lower than BBB
by S&P and Baa by Moody's or, if unrated, considered by the investment manager
to be of equivalent quality, and which present special investment risks. See
High Yield, High Risk 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.
Latin America Fund
The investment objective of Latin America is to achieve long-term capital
appreciation. The Fund seeks to achieve its objective by investing primarily in
equity securities of companies in Latin America, most of which are emerging
market countries. Under normal circumstances, at least 65% of the Fund's total
assets will be invested in equity securities of companies organized or having a
majority of their assets in or deriving a majority of their income in Latin
America. The companies in which the Fund will invest will be of varying size.
The Fund will invest in common stocks and may, to a lesser extent, invest in
preferred stocks, rights or warrants to purchase common stocks and securities
convertible into common stocks. The Fund will also invest in foreign companies
through sponsored or unsponsored Depositary Receipts. The Funds may also invest
in convertible preferred stocks that offer enhanced yield features and certain
other non-traditional equity securities. The Fund's investments may be issued in
any currency and the Fund will, from time to time, hold cash in foreign
currencies.foreign . 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.
The Latin American countries in which the Fund may invest include Argentina,
Belize, Bolivia, Brazil, Chile, Columbia, Costa Rica, Cuba, Ecuador, El
Salvador, French Guyana, Guatemala, Guyana, Honduras, Mexico, Nicaragua, Panama,
Paraguay, Peru, Surinam, Trinidad/Tobago, Uruguay and Venezuela. This is a
representative list; the Fund may invest in countries not listed here.
In addition, the Fund may invest up to 30% of its net assets in fixed-income
securities issued by emerging country companies, and foreign governments, their
agencies, instrumentalities or political subdivisions, all of which may be high
yield, high risk fixed-income securities rated lower than BBB S&P and Baa by
Moody's or, if unrated, are considered by the investment manager to be of
equivalent quality and which present special investment risks. See High Yield,
High Risk Securities.
<PAGE>
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.
<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 potential. 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 of Consistent with their respective investment objective, certain Funds
ownership in a corporation. Stockholders will invest their assets in common stocks, as well as in dividend
participate in the corporation's profits and losses, paying stocks.
proportionate to the number of shares they own.
Foreign Currency Transactions: A forward foreign Although the Funds value their assets daily in terms of U.S. dollars,
currency exchange contract involves an obligation to they do not intend to convert their holdings of foreign currencies
purchase or sell a specific currency at a future into U.S. dollars on a daily basis. Each Fund will, however, from
date, which may be any fixed number of days from the time to time, purchase or sell foreign currencies and/or engage in
date of the contract, agreed upon by the parties, at forward foreign currency transactions in order to expedite settlement
a price set at the time of the contract. of portfolio transactions and to minimize currency value fluctuations.
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 contract or forward
contract. The Funds will convert currency on a spot basis from time to
time, and investors should be aware of the costs of currency conversion.
By entering into these transactions, the Funds attempt to protect
themselves against a possible loss resulting from an adverse change in
currency exchange rates during the period between when the security is
purchased or sold and the date on which payment is made or received.
- ------------------------------------------------------ -----------------------------------------------------------------------
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.
- ------------------------------------------------------ -----------------------------------------------------------------------
Corporate Bonds: Debt obligations issued by U.S. or The Funds may invest in corporate bonds generally rated AA or better
foreign corporations. by S&P and Aa by Moody's.
- ------------------------------------------------------ -----------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------ -----------------------------------------------------------------------
Foreign Government Securities: Debt A portion of International Small Cap Fund's, Latin America Fund's
obligations issued by a government other than assets and New Europe Fund's assets may be invested in such foreign
the United States or by an agency, governmental securities issued by emerging or developing countries,
instrumentality or political subdivision which may be lower rated, including securities rated below investment
of such governments. grade.
For temporary defensive purposes, each Fund may invest in high
quality debt obligations of foreign governments, their agencies,
instrumentalities and political sub-divisions. Global Opportunities
Fund may seek to achieve growth by investing in foreign governmental
debt securities.
- ------------------------------------------------------ -----------------------------------------------------------------------
U.S. Government Securities: Securities issued or For temporary defensive purposes, each Fund may invest in high
guaranteed by the U.S. government or issued by an quality debt instruments issued by the U.S. government, its agencies
agency or instrumentality of the U.S. government. or instrumentalities (and which are backed by the full faith and
credit of the U.S. government), or issued by U.S. companies.
Global Opportunities Fund may seek to achieve growth by investing in
foreign governmental debt securities.
- ------------------------------------------------------ -----------------------------------------------------------------------
Repurchase Agreements: An agreement between a buyer Typically, we use repurchase agreements as a short-term investment
and seller of securities in which the for a Fund's cash position. In order to enter into these repurchase
seller agrees to buy the securities back agreements, the Fund must have collateral in excess of 100% (and
within a specified time at the same price the generally 102%) of the repurchase price.
buyer paid for them, plus an amount equal to an
agreed upon interest rate. Repurchase agreements The collateral is usually securities issued or guaranteed by the U.S.
are often viewed as equivalent to cash. government or its agencies or instrumentalities, or other securities
in which the Funds may invest directly.
- ------------------------------------------------------ -----------------------------------------------------------------------
Restricted and Illiquid Securities: Restricted Each Fund may invest up to 15% of its assets in privately placed
securities are privately placed and securities whose securities that are eligible for resale only among certain
resale is restricted under securities law or for institutional buyers without registration. These are commonly known
other reasons, such as contractual restrictions. as "Rule 144A Securities."
Illiquid securities are those that cannot be sold or
disposed of in the ordinary course of business
within seven days at approximately the price at
which the security has been value 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.
- ------------------------------------------------------ -----------------------------------------------------------------------
Brady Bonds: These are debt securities International Small Cap Fund, New Europe Fund and Latin America Fund
issued under the framework of the Brady Plan, may invest in Brady Bonds consistent with their respective investment
an initiative announced by the U.S. Treasury objective. We believe that the economic reforms undertaken by
Secretary, Nicholas F. Brady in 1989, as a countries in connection with the issuance of Brady Bonds makes the
mechanism for debtor nations to restructure their debt of countries that have issued or have announced plans to issue
outstanding external indebtedness (generally, Brady Bonds an attractive opportunity for investment.
commercial bank debt).
- ------------------------------------------------------ -----------------------------------------------------------------------
</TABLE>
<PAGE>
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 anticipates that its annual portfolio turnover will be less than 100%.
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 25% 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.
<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 the Fund you should
carefully evaluate the risks. Because of the nature of the Fund, you should
consider an investment to be a long-term investment that typically provides the
best results when held for a number of years. The following are the chief risks
you assume when investing in these Funds. Please see the Statement of Additional
Information for further discussion of these risks and the other risks not
discussed here.
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------------------- ---------------------------------------------------------
Risks How we strive to manage them
- ----------------------------------------------------------- ---------------------------------------------------------
Market Risk is the risk that all or a majority of the We maintain a long-term investment approach and focus
securities in a certain market--like the stock or bond on stocks we believe can appreciate over an extended
market--or in a certain country or region will decline in time frame regardless of interim market fluctuations.
value because of factors such as economic conditions, We do not try to predict overall stock market movements
future expectations or investor confidence. and do not trade for short-term purposes.
- ----------------------------------------------------------- ---------------------------------------------------------
Industry and Security Risk is the risk that the value of We limit the amount of the Fund's assets invested in
securities in a particular industry or the value of an any one industry and in any individual security. We
individual stock or bond will decline because of changing also follow a rigorous selection process before
expectations for the performance of that industry or for choosing securities for the Fund.
the individual company issuing the stock or bond.
- ----------------------------------------------------------- ---------------------------------------------------------
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
foreign currency exchange rates. Adverse changes in agreeing to purchase or sell foreign securities at a
exchange rates may reduce or eliminate any gains produced pre-set price on a future date, the Funds attempt to
by investments that are denominated in foreign currencies protect the value of the stock they own from future
and may increase any losses. 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.
- ----------------------------------------------------------- ---------------------------------------------------------
Emerging Markets Risk is the possibility that the risks International Small Cap, New Europe and Latin America
associated with international investing will be greater Funds have the ability to invest in emerging market
in emerging markets than in more developed foreign securities. By maintaining a long-term investment
markets because, among other things, emerging markets may approach, we believe we can appreciate regardless of
have less stable political and economic environments. interim political, social or economic instabilities.
- ----------------------------------------------------------- ---------------------------------------------------------
Inefficient Market Risk is the risk that foreign markets The Funds will attempt to reduce these risks by
may be less liquid, have greater price volatility, less investing in a number of different countries,
regulation and higher transaction costs than U.S. markets. performing credit analysis and noting trends in the
economy, industries and financial markets.
- ----------------------------------------------------------- ---------------------------------------------------------
High Yield, High Risk Foreign Fixed-Income Securities are New Europe Fund and Latin America Fund may invest up to
those securities rated lower than BBB by S&P and Baa by 30% of their respective net assets in these
Moody's. Securities of this type are considered to be of securities. International Small Cap may invest up to
poor standing and predominantly speculative as to the 15% of its net assets in these securities. These Funds
ability to repay interest and principal. will not purchase securities rated lower than C by S&P
- ----------------------------------------------------------- ---------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------------------- ---------------------------------------------------------
Risks How we strive to manage them
- ----------------------------------------------------------- ---------------------------------------------------------
Medium- and low-grade bonds held by the Funds may be or Ca by Moody's or, if unrated, considered to be of an
issued as a consequence of corporate restructurings, such equivalent quality to such ratings by the Manager.
as leveraged buy-outs, mergers, acquisitions, debt
recapitalizations or similar events. Also these bonds We believe the high yields from these bonds have more
are often issued by smaller, less creditworthy companies than compensated for their higher default rates in the
or by highly leveraged (indebted) firms, which are past. There can be no assurance, however, that yields
generally less able than more financially stable firms to will continue to offset default rates in the future. We
make scheduled payments of interest and principal. The intend to limit our investment in any one lower rated
risks posed by bonds issued under such circumstances are bond which can help to reduce the effect of an individual
substantial. default on the Funds, and to limit our overall allocation
of Fund assets to bonds in this category. Such
limitations may not protect the Funds from widespread
bond defaults brought about by a sustained economic
downturn.
The economy and interest rates may affect these high
yield, high risk securities differently from other
securities. Prices have been found to be less sensitive
to interest rate changes than higher rated investments,
but more sensitive to adverse economic changes or
individual corporate developments. Also, during an
economic downturn or a substantial period of rising
interest rates, highly leveraged issuers may experience
financial stress which would adversely affect their
ability to service principal and interest payment
obligations, to meet projected business goals and to
obtain additional financing. Changes by recognized rating
agencies in their rating of any 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.
- ----------------------------------------------------------- ---------------------------------------------------------
Region Risk is the risk associated with investing a With respect to the New Europe and Latin America
Funds, majority of the Fund's assets in a specific region Funds, we maintain a long-term approach and focus on
of the world. The Fund's performance will be dependent the region we believe can appreciate over an extended
the the economic and financial strength and stability of time frame.
the region. An investment in the Fund is likely to be
more volatile than an investment in a more geographically
diverse fund.
- ----------------------------------------------------------- ---------------------------------------------------------
Political Risk is the risk that countries or the entire We evaluate the political situations in the countries
region where we invest may experience political where we invest and take into account any potential
instability, which may cause greater fluctuation in the risks before we select securities for the portfolio.
value and liquidity of our investments due to changes in However, there is no way to eliminate political risk
currency exchange rates, governmental seizures or when investing internationally.
nationalization of assets.
- ----------------------------------------------------------- ---------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------------------- ---------------------------------------------------------
Risks How we strive to manage them
- ----------------------------------------------------------- ---------------------------------------------------------
Information Risk is the risk that foreign companies may We conduct fundamental research on the companies we
be subject to different accounting, auditing and invest in rather than relying solely on information
financial reporting standards than U.S. companies. There available through financial reporting. We believe this
may be less information available about foreign issuers will help us to better uncover any potential weaknesses
than domestic issuers. Furthermore, regulatory oversight in individual companies.
of foreign issuers may be less stringent or less
consistently applied than in the United States.
- ----------------------------------------------------------- ---------------------------------------------------------
Foreign Government Securities Risks relate to the ability The Funds attempt to reduce the risks associated with
of a foreign government or government related issuer to investing in foreign governments by setting rating
make timely payments on its external debt obligations. standards and by limiting the portion of portfolio
This ability to make payments will be strongly influenced assets that may be invested in such securities.
by the issuer's balance of payments, including export
performance, its access to international credits and
investments, fluctuations in interest rates and the
extent of its foreign reserves.
- ----------------------------------------------------------- ---------------------------------------------------------
Small Company Investment Risk includes the general risks The securities of companies with small revenues and
of investing in common stocks such as market, economic capitalizations in which the Fund invests, may offer
and business risk that cause their prices to fluctuate greater opportunity for capital appreciation than larger
over time. Historically, smaller capitalization stocks companies.
have been more volatile in price than larger
capitalization stocks. Among the reasons for the greater
price volatility of these securities are the lower degree
of liquidity in the markets for such stocks, and the
potentially greater sensitivity of such small companies
to changes in or failure of management, and in many other
changes in competitive, business, industry and economic
conditions, including risks associated with limited
production, markets, management depth, or financial
resources.
- ----------------------------------------------------------- ---------------------------------------------------------
</TABLE>
For additional information about the Funds' investment policies and certain
risks associated with investments in certain types of securities including
purchasing put and call options, futures contracts and options thereon, and
options on foreign currencies, please see the Statement of Additional
Information.
<PAGE>
Who manages the Funds
Investment manager and sub-adviser
The Funds are managed by Delaware International Advisers Ltd. 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 International Advisers
makes investment decisions for these Funds, manages the Funds' business affairs
and provides daily administrative services.
Delaware Management Company is the sub-adviser to Global Opportunities Fund.
Delaware Management Company manages the U.S. securities portion of Global
Opportunities 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.
For their services to the Global Opportunites Fund, the manager and sub-adviser
were paid an aggregate fee of 0.35% of average daily net assets of the Fund for
the last fiscal year after giving effect to voluntary expense caps.
For its services to the International Small Cap Fund, the manager was paid a fee
of 0.46% of average daily net assets of the Fund for the last fiscal year after
giving effect to voluntary expense caps.
For its services to each of the New Europe Fund and Latin America Fund, the
manager is paid an annual fee equal to 1.25% on the first $500 million of
average daily net assets; 1.20% on the next $500 million; 1.15% on the next $1.5
billion; and 1.10% on the average daily net assets in excess of $2.5 billion.
Portfolio Managers
Global Opportunities Fund
Elizabeth A. Desmond has primary responsibility for making day-to-day investment
decisions for Global Opportunities Fund. Robert L. Arnold makes investment
decisions for the U.S. equity portion of the Fund.
Elizabeth A. Desmond, Senior Portfolio Manager and Director of Delaware
International Advisers, has primary responsibility for making day-to-day
investment decisions for Global Equity Fund. She 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 this
at Delaware Investments, he managed 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.
International Small Cap Fund
Clive A. Gillmore and Timothy W. Sanderson have primary responsibility for
making day-to-day investment decisions for the International Small Cap Fund, and
have co-managed the Fund since its inception.
<PAGE>
Clive A. Gillmore, Senior Portfolio Manager and Director of Delaware
International Advisers, has been senior portfolio manager for the Fund since its
inception. A graduate of the University of Warwick and having begun his career
at Legal and General Investment Management, Mr. Gillmore joined 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.
Timothy W. Sanderson, Chief Investment Officer, Equities and Director of
Delaware International Advisers, has been senior portfolio manager for the Fund
since its inception. He joined Delaware International Advisers in 1990 as Senior
Portfolio Manager and Director. Prior to that, he was an analyst and senior
portfolio manager for Hill Samuel where he had responsibility for Pacific Basin
research and the management of international institutional portfolios.
New Europe Fund
Nigel G. May, Richard Ginty and Joshua A. Brooks have primary responsibility for
making day-to-day investment decisions for New Europe Fund, and have co-managed
the Fund since its inception.
Nigel G. May, Senior Portfolio Manager and Director of Delaware International
Advisers, is a graduate of Sidney Sussex College, Cambridge. 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.
Richard Ginty, Portfolio Manager of Delaware International Advisers, is a
graduate of Sheffield University. He joined Delaware International Advisers in
1992, where his primary research focus is the European equity markets. Prior to
joining Delaware International Advisers, his business experience was with
Kleinwort Benson Securities Limited, and prior to that time, with Fiduciary
Trust International.
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 liaison with Delaware International Advisers.
Latin America Fund
Robert Akester, Mr. Gillmore, and Mr. Brooks have primary responsibility for
making day-to-day investment decisions for Latin America Fund, and have
co-managed the Fund since its inception. Please see International Small Cap Fund
for Mr. Gillmore's business experience and New Europe Fund for Mr. Brook's
business experience.
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.
<PAGE>
Who's who?
This diagram show the various organizations involved with managing,
administering and servicing the Delaware Investments funds.
<TABLE>
<CAPTION>
Board of Directors
<S> <C> <C>
Investment Manager 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
Sub-Adviser
Delaware Management Company
One Commerce Square
Philadelphia, PA 19103
Portfolio managers Distributor Service agent
(see page __ 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.
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.
<PAGE>
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.
<PAGE>
About your account
Investing in the Funds
You can choose from a number of share classes for the 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.
o If you invest $50,000 or more, 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 Absent 12b-1 fee waivers, 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.
Class A sales charges
<TABLE>
<CAPTION>
- ------------------------ ---------------- ---------------------------------------------------------------------- -----------------
Amount of purchase Sales charge Sales charge as % of amount invested Dealer's
as % of commission as %
offering price of offering
price
- ------------------------ ---------------- ----------------- ----------------- ---------------- ----------------- -----------------
Global International New Europe Latin America
Opportunities Small Cap
- ------------------------ ---------------- ----------------- ----------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Less than $50,000 5.75% 6.15% 6.11% 6.12% 6.12% 5.00%
- ------------------------ ---------------- ----------------- ----------------- ---------------- ----------------- -----------------
$50,000 but under 4.75% 4.95% 5.00% 4.94% 4.94% 4.00%
$100,000
- ------------------------ ---------------- ----------------- ----------------- ---------------- ----------------- -----------------
$100,000 but under 3.75% 3.85% 3.89% 3.88% 3.88% 3.00%
$250,000
- ------------------------ ---------------- ----------------- ----------------- ---------------- ----------------- -----------------
$250,000 but under 2.50% 2.53% 2.56% 2.59% 2.59% 2.00%
$500,000
- ------------------------ ---------------- ----------------- ----------------- ---------------- ----------------- -----------------
$500,000 but under 2.00% 2.09% 2.00% 2.00% 2.00% 1.60%
$1,000,000
- ------------------------ ---------------- ----------------- ----------------- ---------------- ----------------- -----------------
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 and 0.50% if you redeem them within the second year.
- -------------------------------- ------------------------------ ------------------------------ ------------------------------
Amount of purchase Sales charge as % of Sales charge as % of amount Dealer's commission as % of
offering price invested offering price
- -------------------------------- ------------------------------ ------------------------------ ------------------------------
$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>
<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.
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, absent 12b-1
fee waivers, 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%, which is
currently being waived. 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 Absent 12b-1 fee waivers, 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.
<PAGE>
Each share class of the Fund 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.
<PAGE>
About your account continued
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> <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>
<PAGE>
How to buy shares
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.
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.
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.
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.
Through automated shareholder services
You can purchase or exchange shares through Delaphone, our automated telephone
service. For more information about how to sign up for this service, call our
Shareholder Service Center at 800.523.1918.
<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 Fund's 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 Fund 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 the Fund 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.
<PAGE>
How to redeem shares
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.
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.
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.
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.
Through automated shareholder services
You can redeem shares through Delaphone, our automated telephone service. For
more information about how to sign up for this service, call our Shareholder
Service Center at 800.523.1918.
<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 minimum
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.
<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.
<PAGE>
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains.
Tax laws are subject to change, so we urge you to consult you tax adviser about
your particular tax situation and how it might be affected by current law. The
tax status of your dividends from the Fund is the same whether you reinvest your
dividends or receive them in cash. Distributions from the 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
proceed 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.
<PAGE>
Other investment policies and risk considerations
High yield, high risk securities
The International Small Cap Fund, New Europe Fund and the Latin America Fund may
invest in high yield, high risk foreign fixed income securities. In the past, in
the opinion of the Manager, the high yields from these bonds have more than
compensated for their higher default rates. There can be no assurance, however,
that yields will continue to offset default rates on these bonds in the future.
The Manager intends to maintain an adequately diversified portfolio of stocks
and bonds. While diversification can help to reduce the effect of an individual
default on a Fund, there can be no assurance that diversification will protect a
Fund from widespread bond defaults brought about by a sustained economic
downturn.
Medium- and low-grade bonds held by each Fund may be issued as a consequence of
corporate restructurings, such as leveraged buy-outs, mergers, acquisitions,
debt recapitalizations or similar events. Also these bonds are often issued by
smaller, less creditworthy companies or by highly leveraged (indebted) firms,
which are generally less able than more financially stable firms to make
scheduled payments of interest and principal. The risks posed by bonds issued
under such circumstances are substantial.
The economy and interest rates may affect these high yield, high risk securities
differently from other securities. Prices have been found to be less sensitive
to interest rate changes than higher rated investments, but more sensitive to
adverse economic changes or individual corporate developments. Also, during an
economic downturn or a substantial period of rising interest rates, highly
leveraged issuers may experience financial stress which would adversely affect
their ability to service principal and interest payment obligations, to meet
projected business goals and to obtain additional financing. Changes by
recognized rating agencies in their rating of any security and in the ability of
an issuer to make payments of interest and principal will also ordinarily have a
more dramatic effect on the values of these investments than on the values of
higher-rated securities. Consequently, these changes will affect a Fund's net
asset value per share.
Foreign currency transactions
Although each Fund values its assets daily in terms of U.S. dollars, it does not
intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. Each Fund will, however, from time to time, purchase or sell
foreign currencies and/or engage in forward foreign currency transactions in
order to expedite settlement of portfolio transactions and to minimize currency
value fluctuations. The Funds may conduct its foreign currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market or through entering into contracts to purchase
or sell foreign currencies at a future date (i.e., a "forward foreign currency"
contract or "forward" contract). A forward contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract, agreed upon by the parties, at a
price set at the time of the contract. The Funds will convert currency on a spot
basis from time to time, and investors should be aware of the costs of currency
conversion.
The Funds may enter into forward contracts to "lock in" the price of a security
it has agreed to purchase or sell, in terms of U.S. dollars or other currencies
in which the transaction will be consummated. By entering into a forward
contract for the purchase or sale, for a fixed amount of U.S. dollars or foreign
currency, of the amount of foreign currency involved in the underlying security
transaction, the Fund will be able to protect itself against a possible loss
resulting from an adverse change in currency exchange rates during the period
between the date the security is purchased or sold and the date on which payment
is made or received.
When the Manager believes that the currency of a particular country may suffer a
significant decline against the U.S. dollar or against another currency, the
Funds may enter into a forward foreign currency contract to sell, for a fixed
amount of U.S. dollars or other appropriate currency, the amount of foreign
currency approximating the value of some or all of the Fund's securities
denominated in such foreign currency.
<PAGE>
The Funds will not enter into forward contracts or maintain a net exposure to
such contracts where the consummation of the contracts would obligate a Fund to
deliver an amount of foreign currency in excess of the value of the Fund's
securities or other assets denominated in that currency.
At the maturity of a forward contract, the Funds may either sell the portfolio
security and make delivery of the foreign currency, or it may retain the
security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. The Funds may realize gains or losses from currency
transactions.
The Funds also may purchase and write put and call options on foreign currencies
(traded on U.S. and foreign exchanges or over-the-counter) for hedging purposes
to protect against declines in the U.S. dollar cost of foreign securities held
by the Funds and against increases in the U.S. dollar cost of such securities to
be acquired. Call options on foreign currency written by a Fund will be covered,
which means that the Fund will own the underlying foreign currency. With respect
to put options on foreign currency written by a Fund, the Fund will establish a
segregated account with its Custodian Bank consisting of cash, U.S. government
securities or other high-grade liquid debt securities in an amount equal to the
amount the Fund will be required to pay upon exercise of the put.
As in the case of other kinds of options, the writing of an option on foreign
currency will constitute only a partial hedge, up to the amount of the premium
received, and the Fund could be required to purchase or sell foreign currencies
at disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on foreign currency may constitute an effective hedge against
fluctuations in exchange rates, although, in the event of rate movements adverse
to the Fund's position, the Fund may forfeit the entire amount of the premium
plus related transaction costs.
<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 Small Cap Fund accepts investments from the series portfolios of
Delaware Group Foundation Funds, a fund of funds. From time to time, the 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 Small Cap Fund and Foundation Funds as a result
of these transactions.
<PAGE>
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.
Financial Highlights for New Europe Fund and Latin America Fund are not provided
because these funds were not operating as of the close of the fiscal year. As of
November 30, 1998, the International Small Cap Fund Class A had one share
outstanding, representing the initial seed purchase. Data for this class is
excluded because the data is not believed to be meaningful. The Class B and C
shares of Global Opportunities Fund and International Small Cap Fund were not
operating as of the close of the fiscal year.
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------- --------------------------
Class A Shares
------------- ------------
Year Period
Ended 7/22/97(1)
11/30 through
Global Opportunities Fund 1998 11/30/97
- -------------------------------------------------------------------- --------------------------
<S> <C> <C>
Net asset value, beginning of period $8.230 $8.500
Income from investment operations
Net investment income(2) 0.210 0.056
Net realized and unrealized gain (loss) on investments and foreign 0.770 (0.326)
----- -------
currency
Total from investment operations 0.980 (0.270)
----- -------
Less dividends
Dividends from net investment income (0.110) none
Total dividends (0.110) none
Net asset value, end of period $9.100 $8.230
====== ======
Total return(3) 12.07% (3.18%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $13 $6
Ratio of expenses to average net assets 0.80% 0.80%
Ratio of expenses to average net assets
prior to expense limitation 1.55% 2.16%
Ratio of net investment income to average net assets 2.40% 1.86%
Ratio of net investment income to average net assets
prior to expense limitation 1.65% 0.50%
Portfolio turnover 50% 25%
- -------------------------------------------------------------------- --------------------------
</TABLE>
(1)Date of commencement of operations; ratios have been annualized but total
return has not been annualized.
(2)Per share information was based on the average shares outstanding method.
(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 reflect the
expense limitations in effect for the Fund.
<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 profit,
while a realized loss 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.
<PAGE>
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.
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.
Corporate bond
A debt security issued by a corporation. See bond.
<PAGE>
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.
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.
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.
<PAGE>
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 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 stocks 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.
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.
<PAGE>
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.
<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.
<PAGE>
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)
oFor 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.
Investment Company Act file number: 811-6324
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
<PAGE>
DELAWARE
INVESTMENTS
Philadelphia * London
Global Opportunities Fund
(formerly Global Equity Fund)
International Small Cap Fund
New Europe Fund
Latin America Fund
Institutional Class
Prospectus
March 30, 1999
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.
<PAGE>
Table of Contents
Fund Profiles page
Global Opportunities Fund
International Small Cap Fund
New Europe Fund
Latin America Fund
How we manage the Funds page
Our investment strategy
The securities that we typically invest in
The risks of investing in the Funds
Who manages the Funds page
Investment manager and sub-adviser
strategies
Portfolio mangers
Fund administration (Who's who) page
About your account page
Investing in the Funds
How to buy shares
How to redeem shares
Account minimum
Dividends, Distributions and Taxes
Other investment policies and page
risk considerations
Financial highlights page
Glossary page
Appendix A - Bond ratings page
2
<PAGE>
Profile: Global Opportunities Fund*
What are the Fund's goals?
Global Opportunities Fund's investment goal is to achieve 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?
Global Opportunities Fund seeks to achieve its objective by investing in global
securities that provide the potential for capital appreciation and income. The
Fund's primary focus is to invest in domestic and foreign equity securities.
Under normal market conditions, the Fund will invest at least 65% of its assets
in equity securities of issuers organized or having a majority of their assets
in or deriving a majority of their operating income in at least three different
countries, one which may be the United States.
In selecting investments for the Fund,
o we place emphasis on identifying well managed companies that are
undervalued in terms of such factors asassets, earnings, dividends
and growth potential.
o 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 and bond prices that can be
caused by a drop in the stock or bond market, an adverse change in interest
rates 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, or
less regulatory standards. For a more complete discussion of risk, please turn
to page ___.
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.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors looking for a portfolio that holds equity securities from
both U.S. and foreign countries and is permitted to invest a portion
of its assets in U.S. and foreign fixed-income securities.
o Investors seeking a measure of capital growth and income.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors who are unwilling to accept risks of investing in foreign
securities.
* The Global Opportunities Fund was formerly known as Global Equity Fund. The
change in the Fund's name became effective on July 21, 1998.
3
<PAGE>
How has the Global Opportunities Fund performed?
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show the returns for the Fund's Institutional Class shares for
the past calendar year, as well as the average annual returns of all shares for
the one-year period 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.
Total return (Institutional Class)
Global Opportunities Fund Institutional Class
1998 11.05%
The Fund's Institutional Class shares had a 2.02% fiscal year-to-date return as
of February 28, 1999. During the period illustrated in this bar chart,
Institutional Class's highest return was 12.13% for the quarter ended December
31, 1998 and its lowest return was -10.36% for the quarter ended September 30,
1998.
Average annual returns for periods ending 12/31/98
-------------------------------------------------------------------------
Institutional Morgan Stanley World
Class Index
-------------------------------------------------------------------------
-------------------------------------------------------------------------
1 year 11.05% 24.80%
-------------------------------------------------------------------------
Since inception 6.73% 13.67%
(7/22/97)
-------------------------------------------------------------------------
The Fund's returns are compared to the performance of the Morgan Stanley 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.
4
<PAGE>
What are the Global Opportunities 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 0.45%
- ------------------------------------------------- -----------
Total operating expenses(3) 1.30%
- ------------------------------------------------- -----------
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 $132
- ----------------- -----------
3 years $412
- ----------------- -----------
5 years $713
- ----------------- -----------
10 years $1,568
- ----------------- -----------
(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) 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
<PAGE>
(3) 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
0.80% of average daily net assets. The fees and expenses shown in the
table above do not reflect this voluntary expense cap. The following
table shows actual operating expenses which are based on the most
recently completed fiscal year and reflect the manager's current fee
waivers and payments.
------------------------------------------------------------------
Actual Fund operating expenses including voluntary expense caps
--------------------------------------------- --------------------
Management fees 0.35%
--------------------------------------------- --------------------
Distribution and service (12b-1) fees none
--------------------------------------------- --------------------
Other expenses 0.45%
--------------------------------------------- --------------------
Total operating expenses 0.80%
--------------------------------------------- --------------------
(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.
6
<PAGE>
Profile: International Small Cap Fund
What are the Fund's goals?
International Small Cap 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?
International Small Cap Fund seeks to achieve its objective by investing
primarily in smaller non-U.S. companies, which may include companies located or
operating in established or emerging countries. Under normal circumstances, at
least 65% of the Fund's total assets will be invested in equity securities of
companies organized or having a majority of their assets in or deriving a
majority of their operating income in at least three different countries outside
of the United States. The current market capitalization of the companies in
which the Fund intends to invest primarily will generally be $1.5 billion or
less (at the time of purchase).
By focusing on smaller, non-U.S. companies, the Fund seeks to identify equity
securities of emerging an other growth-oriented companies which in the opinion
of the manage, are responsive to changes within their markets, and have the
fundamental characteristics to support growth. We will seek to identify changing
and dominant trends within the relevant markets, and will purchase securities of
companies which it believes will benefit from these trends. In addition, we will
consider the financial strength of the company or its industry. We may invest in
smaller capitalization companies that may be temporarily out of favor or
overlooked by securities analysts and whose value, therefore, may not be fully
recognized by the market.
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 and bond prices which can be
caused by a drop in the stock or bond market, an adverse change in interest
rates or poor performance in specific industries or companies. Investments in
foreign securities whether equity or fixed-income, involve special risks
including those related to currency fluctuations, as well as to political,
economic and social situations different from and potentially more volatile than
those in the U.S. In addition, the accounting, tax and financial reporting
standards of foreign countries are different from and may be less reliable or
comprehensive than those relating to U.S. issuers. The Fund may invest up to 15%
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. For a more complete discussion of risk,
please turn to page __.
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.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors looking for growth potential from a portfolio of foreign
securities.
o Investors willing to accept the risks associated with foreign investing as
well as investments in smaller-sized issuers, some to which may be
speculative.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly, over the short term.
o Investors whose primary goal is income.
7
<PAGE>
How has the International Small Cap Fund performed?
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show the returns for the Fund's Institutional Class shares for
the past calendar year, as well as the average annual returns of all shares for
the one-year period 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.
Total return (Institutional Class)
International Small Cap Fund Institutional Class
1998 5.83%
The Fund's Institutional Class shares had a -8.16% fiscal year-to-date return as
of February 28, 1999. During the period illustrated in this bar chart,
Institutional Class's highest return was 16.26% for the quarter ended April 30,
1998 and its lowest return was -11.89% for the quarter ended July 31, 1998.
Average annual returns for periods ending 12/31/98
-------------------------------------------------------------------------
Institutional Morgan Stanley World
Class Index
-------------------------------------------------------------------------
-------------------------------------------------------------------------
1 year 5.83% 24.80%
-------------------------------------------------------------------------
Since inception 6.58% 24.80%
(12/19/97)
-------------------------------------------------------------------------
The Fund's returns are compared to the performance of the Morgan Stanley EAFE
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 International Small Cap 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 0.80%
- ------------------------------------------------- -----------
- ------------------------------------------------- -----------
Total operating expenses(2) 2.05%
- ------------------------------------------------- -----------
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 $208
- ----------------- -----------
3 years $643
- ----------------- -----------
5 years $1,103
- ----------------- -----------
10 years $2,379
- ----------------- -----------
(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 operations through May 31,1999, in order to prevent
total operating expenses (excluding any taxes, interest, brokerage fees
and extraordinary expenses) from exceeding 1.25% of average daily net
assets. . The fees and expenses shown in the table above do not reflect
this voluntary expense cap. The following table shows actual operating
expenses which are based on the most recently completed fiscal year and
reflect the manager's current fee waivers and payments.
<PAGE>
------------------------------------------------------------------
Actual Fund operating expenses including voluntary expense caps
--------------------------------------------- --------------------
Management fees 0.45%
--------------------------------------------- --------------------
Distribution and service (12b-1) fees none
--------------------------------------------- --------------------
Other expenses 0.80%
--------------------------------------------- --------------------
Total operating expenses 1.25%
--------------------------------------------- --------------------
(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.
10
<PAGE>
Profile: New Europe Fund
What are the Fund's goals?
The New Europe 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?
We invest primarily in equity securities of European countries. Under normal
market conditions, at least 65% of New Europe's assets will be invested in
equity securities of companies organized or having a majority of their assets in
or deriving a majority of their operating income in Europe. Such countries may
have well-established economies or securities markets or emerging economies or
securities markets or smaller securities markets. Up to 30% of the Fund's assets
may be invested in fixed-income securities issued by emerging country companies
and foreign governments, their agencies, instrumentalities or political
subdivisions, all of which may be high yield, high risk fixed-income securities.
In selecting investments for the Fund:
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 and bond prices, which can be
caused by a drop in the stock or bond market, an adverse change in interest
rates or poor performance in specific industries or companies. 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 or inadequate
regulatory standards. The New Europe Fund targets a specific region of the world
for investment. Therefore, an investment in this Fund will likely be more
volatile than a more geographically diversified fund. In addition, the
performance of this Fund is closely tied to the economic and political
conditions of the region. High yield, high risk foreign fixed-income securities
are subject to substantial risks, particularly during periods of economic
downturns or rising interest rates.
For a more complete discussion of risk, please turn to page __.
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.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors looking for long-term growth potential.
o Investors willing to accept the risks associated with foreign
investing as well as investments in smaller-sized issuers, some to
which may be speculative.
11
<PAGE>
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors who are unwilling to accept share prices that may
fluctuate, sometimes significantly, over the short term.
o Investors whose primary goal is income.
12
<PAGE>
What are the New Europe 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.
- ------------------------------------------------- -----------
Management fees 1.25%
- ------------------------------------------------- -----------
Distribution and service (12b-1) fees none
- ------------------------------------------------- -----------
Other expenses(2) 0.85%
- ------------------------------------------------- -----------
Total operating expenses(3) 2.10%
- ------------------------------------------------- -----------
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 $213
- ----------------- -----------
3 years $658
- ----------------- -----------
(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) Other expenses are based on estimated amounts for the current fiscal
year.
(3) The investment manager has agreed to waive fees and pay expenses
through May 31,1999, in order to prevent total operating expenses
(excluding any taxes, interest, brokerage fees and extraordinary
expenses) from exceeding 1.25% of average daily net assets. . The fees
and expenses shown in the table above do not reflect this voluntary
expense cap. The following table shows estimated operating expenses for
the current fiscal year reflecting the manager's current fee waivers
and payments.
------------------------------------------------------------------
Estimated Fund operating expenses including voluntary expense
--------------------------------------------- --------------------
Management fees 0.40%
--------------------------------------------- --------------------
Distribution and service (12b-1) fees none
--------------------------------------------- --------------------
Other expenses 0.85%
--------------------------------------------- --------------------
Total operating expenses 1.25%
--------------------------------------------- --------------------
13
<PAGE>
(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.
14
<PAGE>
Profile: Latin America Fund
What are the Fund's goals?
Latin America 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?
We invest primarily in equity securities of Latin American companies. Under
normal market conditions, at least 65% of Latin America Fund's assets will be
invested in equity securities of companies organized or having a majority of
their assets in or deriving a majority of their operating income in Latin
America. Many of the countries in which the Fund invests have emerging economies
or securities markets or smaller securities markets. Up to 30% of the Fund's
assets may be invested in fixed-income securities issued by emerging country
companies and foreign governments, their agencies, instrumentalities or
political subdivisions, all of which may be high yield, high risk fixed-income
securities.
In selecting investments for the Fund:
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 and bond prices which can be
caused by a drop in the stock or bond market, an adverse change in interest
rates or poor performance in specific industries or companies. 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 or inadequate
regulatory standards. The Latin America Fund targets a specific region of the
world for investment. Therefore, an investment in this Fund will likely be more
volatile than a more geographically diversified fund. In addition, the
performance of this Fund is tied to the economic and political conditions of
this region. High yield, high risk foreign fixed-income securities are subject
to substantial risks, particularly during periods of economic downturns or
rising interest rates.
For a more complete discussion of risk, please turn to page __.
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.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors looking for long-term growth potential.
o Investors willing to accept the risks associated with foreign
investing as well as investments in smaller-sized issuers, some to
which may be speculative.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is income.
o Investors who are unwilling to accept share prices that may
fluctuate, sometimes significantly, over the short term.
15
What are the Latin America 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.
- ------------------------------------------------- -----------
Management fees 1.25%
- ------------------------------------------------- -----------
Distribution and service (12b-1) fees none
- ------------------------------------------------- -----------
Other expenses(2) 0.83%
- ------------------------------------------------- -----------
Total operating expenses(3) 2.08%
- ------------------------------------------------- -----------
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 $211
- ----------------- -----------
3 years $652
- ----------------- -----------
(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) Other expenses are based on estimated amounts for the current fiscal
year.
(3) The investment manager has agreed to waive fees and pay expenses from
the commencement of operations through May 31,1999, in order to prevent
total operating expenses (excluding any taxes, interest, brokerage fees
and extraordinary expenses) from exceeding 1.25% of average daily net
assets. The fees and expenses shown in the table above do not reflect
this voluntary expense cap. The following table shows estimated
operating expenses for the current fiscal year reflecting the manager's
current fee waivers and payments.
------------------------------------------------------------------
Estimated Fund operating expenses including voluntary expense
--------------------------------------------- --------------------
Management fees 0.42%
--------------------------------------------- --------------------
Distribution and service (12b-1) fees none
--------------------------------------------- --------------------
Other expenses 0.83%
--------------------------------------------- --------------------
Total operating expenses 1.25%
--------------------------------------------- --------------------
16
<PAGE>
(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. In addition, this example does not reflect the voluntary
expense cap described in footnote 3.
17
<PAGE>
How we manage the Funds
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
Our investment strategies
Global Opportunities Fund
Global Opportunities Fund's primary objective is long-term growth without undue
risk to principal. The Fund seeks to achieve its objective by investing in
global equity securities that provide the potential for capital appreciation and
income. The Fund's primary focus will be to invest in domestic and foreign
equity securities and, under normal market conditions, at least 65% of its
assets will be invested in equity securities. The Fund's investments will be
made in securities of issuers organized or having a majority of their assets in
or deriving a majority of their operating income in at least three different
countries, one of which may be the United States.
The Fund will attempt to achieve its investment objective by investing in
securities traded in equity markets and currencies that we believe offer the
best relative values within the global investment universe. Equity securities in
which the Fund may invest include convertible securities, common stocks,
preferred stocks and warrants issued in foreign countries or in the U.S.
Simultaneous with identifying the most attractive equity markets and currencies,
we will attempt to purchase undervalued securities. Individual equity securities
around the world will be selected based on an analysis of the company's
operations, financial statements and each company's currency valuation.
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.
The Fund may invest 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.
While the Fund may purchase securities in any foreign country, developed and
underdeveloped, or emerging market countries, it is currently anticipated that
the countries in which the Fund may invest will include, but are not limited to
Australia, Belgium, Canada, France, Germany, Hong Kong, Japan, Malaysia, the
Netherlands, Singapore, Spain, Switzerland and the United Kingdom, as well as
Indonesia, Korea, the Philippines, South Africa, Taiwan and Thailand. In certain
countries, investments may only be made by purchasing shares of closed-end
investment companies that in turn are authorized to invest in the securities of
such countries.
International Small Cap Fund
The Fund seeks long-term capital appreciation. The Fund seeks to achieve its
objective by investing primarily in equity securities of smaller non-U.S.
companies, which may include companies located or operating in established or
emerging countries. Under normal circumstances, at least 65% of the Fund's total
assets will be invested in equity securities of companies organized or having a
majority of their assets in or deriving a majority of their operating income in
at least three different countries outside of the United States. The current
market capitalization of the companies in which the Fund intends to invest
primarily will generally be $1.5 billion or less (at the time of purchase).
18
<PAGE>
The equity securities in which the Fund may invest include common stocks,
preferred stocks, rights or warrants to purchase common stocks and securities
convertible into common stocks. The Fund may also invest in foreign companies
through sponsored or unsponsored Depositary Receipts, which are receipts
typically issued by a bank or trust company evidencing ownership of underlying
securities issued by a foreign company.
In selecting investments for the Fund, the manager will employ a dividend
discount analysis across country boundaries and will also use a purchasing power
parity approach to identify currencies and markets that are overvalued or
undervalued relative to the U.S. dollar. The manager uses the dividend discount
analysis to compare the value of different investments. Using this technique,
the manager looks at future anticipated dividends and discounts the value of
those dividends back to what they would be worth if they were being paid today.
With a purchasing parity approach, the manager attempts to identify the amount
of goods and services that a dollar will buy in the United States and compare
that to the amount of a foreign currency required to buy the same amount of
goods and services in another country. Eventually, currencies should trade at
levels that should make it possible for the dollar to buy the same amount of
goods and services overseas as in the United States. When the dollar buys less,
the foreign currency may be considered to be overvalued. Conversely, when the
dollar buys more, the currency may be considered to be undervalued.
While the Fund may purchase securities in any foreign country, developed and
underdeveloped, or emerging market countries, it is currently anticipated that
the countries in which the Fund may invest will include, but not be limited to,
Australia, Belgium, Canada, France, Germany, Hong Kong, Japan, the Netherlands,
New Zealand, Singapore and Malaysia, Spain, Switzerland, the United Kingdom, as
well as Argentina, Brazil, Chile, Egypt, Greece, India, Indonesia, Korea, Peru,
the Philippines, South Africa, Taiwan, Thailand and Turkey. With respect to
certain countries, investments by an investment company may only be made through
investments in closed-end investment companies that in turn are authorized to
invest in the securities of such countries.
The Fund may also invest in convertible preferred stocks that offer enhanced
yield features, such as Preferred Equity Redemption Cumulative Stock, and
certain other non-traditional equity securities.
The Fund may invest up to 15% of its net assets in fixed-income securities
issued by emerging country companies, and foreign governments, their agencies,
instrumentalities or political subdivisions, all of which may be high yield,
high risk fixed-income securities rated lower than BBB by S&P and Baa by Moody's
or, if unrated, are considered by the manager to be of equivalent quality and
which present special investment risks. See High Yield, High Risk 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 Europe Fund
The investment objective of New Europe is to achieve long-term capital
appreciation. The Fund seeks to achieve its objective by investing primarily in
equity securities of European companies, which may include companies located or
operating in established or emerging European countries. Under normal
circumstances, at least 65% of the Fund's total assets will be invested in
equity securities of companies organized or having a majority of their assets in
or deriving a majority of their operating income in Europe. The companies in
which the Fund will invest will be of varying size.
The Fund will invest primarily in common stocks and may, to a lesser extent,
invest in preferred stocks, rights or warrants to purchase common stocks and
securities convertible into common stocks. The Fund will also invest in foreign
companies through sponsored or unsponsored Depositary Receipts. The Fund may
also invest in convertible preferred stocks that offer enhanced yield features,
such as Preferred Equity Redemption Cumulative Stock, and certain other
non-traditional equity securities. The Fund's investments may be issued in any
currency and the Fund will, from time to time, hold cash in foreign currencies.
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.
The Fund may invest in securities of issuers located in any European country
where the investment manager believes that there is the potential for long-term
capital appreciation. The Fund may invest in the securities of issuers located
in European countries with well-established economies and securities markets or
in countries with emerging economies or securities markets or smaller securities
markets. In addition, if opportunities arise, the Fund may invest in securities
of issuers located in Eastern European countries.
19
<PAGE>
The Fund may invest up to 30% of its net assets in fixed-income securities
issued by emerging country companies, and foreign governments, their agencies,
instrumentalities or political subdivisions, all of which may be high yield,
high risk fixed-income securities, including Brady Bonds, rated lower than BBB
by S&P and Baa by Moody's or, if unrated, considered by the investment manager
to be of equivalent quality, and which present special investment risks. See
High Yield, High Risk 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.
Latin America Fund
The investment objective of Latin America is to achieve long-term capital
appreciation. The Fund seeks to achieve its objective by investing primarily in
equity securities of companies in Latin America, most of which are emerging
market countries. Under normal circumstances, at least 65% of the Fund's total
assets will be invested in equity securities of companies organized or having a
majority of their assets in or deriving a majority of their income in Latin
America.
The companies in which the Fund will invest will be of varying size.
The Fund will invest in common stocks and may, to a lesser extent, invest in
preferred stocks, rights or warrants to purchase common stocks and securities
convertible into common stocks. The Fund will also invest in foreign companies
through sponsored or unsponsored Depositary Receipts. The Fund may also invest
in convertible preferred stocks that offer enhanced yield features and certain
other non-traditional equity securities. The Fund's investments may be issued in
any currency and the Fund will, from time to time, hold cash in foreign
currencies. 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.
The Latin American countries in which the Fund may invest include Argentina,
Belize, Bolivia, Brazil, Chile, Columbia, Costa Rica, Cuba, Ecuador, El
Salvador, French Guyana, Guatemala, Guyana, Honduras, Mexico, Nicaragua, Panama,
Paraguay, Peru, Surinam, Trinidad/Tobago, Uruguay and Venezuela. This is a
representative list; the Fund may invest in countries not listed here.
In addition, the Fund may invest up to 30% of its net assets in fixed-income
securities issued by emerging country companies, and foreign governments, their
agencies, instrumentalities or political subdivisions, all of which may be high
yield, high risk fixed-income securities rated lower than BBB S&P and Baa by
Moody's or, if unrated, are considered by the investment manager to be of
equivalent quality and which present special investment risks. See High Yield,
High Risk 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.
20
<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
potential. 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>
<S> <C>
- ------------------------------------------------------ -----------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------ -----------------------------------------------------------------------
Common Stocks: Securities that represent shares of Consistent with their respective investment objective, certain Funds
ownership in a corporation. Stockholders will invest their assets in common stocks, as well as in dividend
participate in the corporation's profits and losses, paying stocks.
proportionate to the number of shares they own.
- ------------------------------------------------------ -----------------------------------------------------------------------
Foreign Currency Transactions: A forward foreign Although the Funds value their assets daily in terms of U.S. dollars,
currency exchange contract involves an obligation to they do not intend to convert their holdings of foreign currencies
purchase or sell a specific currency at a future into U.S. dollars on a daily basis. Each Fund will, however, from
date, which may be any fixed number of days from the time to time, purchase or sell foreign currencies and/or engage in
date of the contract, agreed upon by the parties, at forward foreign currency transactions in order to expedite settlement a
contract. price set at the time of the of portfolio transactions and to minimize
currency value fluctuations. 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 contract or forward contract. The Funds will convert currency
on a spot basis from time to time, and investors should be aware of the
costs of currency conversion. By entering into these transactions, the
Funds attempt to protect themselves against a possible loss resulting
from an adverse change in currency exchange rates during the period
between when the security is purchased or sold and the date on which
payment is made or received.
- ------------------------------------------------------ -----------------------------------------------------------------------
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------ -----------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------ -----------------------------------------------------------------------
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.
- ------------------------------------------------------ -----------------------------------------------------------------------
Corporate Bonds: Debt obligations issued by U.S. or The Funds may invest in corporate bonds generally rated AA or better
foreign corporations. by S&P and Aa by Moody's.
- ------------------------------------------------------ -----------------------------------------------------------------------
Foreign Government Securities: Debt obligations A portion of International Small Cap Fund's, Latin America Fund's
issued by a government other than the United States assets and New Europe Fund's assets may be invested in such foreign
or by an agency, instrumentality or political governmental securities issued by emerging or developing countries,
subdivision of such governments. which may be lower rated, including securities rated below investment
grade.
For temporary defensive purposes, each Fund may invest in high quality
debt obligations of foreign governments, their agencies,
instrumentalities and political sub-divisions. Global Opportunities
Fund may seek to achieve growth by investing in foreign governmental
debt securities.
- ------------------------------------------------------ -----------------------------------------------------------------------
U.S. Government Securities: Securities issued or For temporary defensive purposes, each Fund may invest in high
guaranteed by the U.S. government or issued by an quality debt instruments issued by the U.S. government, its agencies
agency or instrumentality of the U.S. government. or instrumentalities (and which are backed by the full faith and
credit of the U.S. government), or issued by U.S. companies.
Global Opportunities Fund may seek to achieve growth by investing in
foreign governmental debt securities.
- ------------------------------------------------------ -----------------------------------------------------------------------
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------ -----------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------ -----------------------------------------------------------------------
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 U.S.
to cash. government or its agencies or instrumentalities, or other securities
in which the Funds may invest directly.
- ------------------------------------------------------ -----------------------------------------------------------------------
Restricted and Illiquid Securities: Restricted Each Fund may invest up to 15% of its assets in privately placed
securities are privately placed and securities whose securities that are eligible for resale only among certain
resale is restricted under securities law or for institutional buyers without registration. These are commonly known
other reasons, such as contractual restrictions. as "Rule 144A Securities."
Illiquid securities are those that cannot be sold or
disposed of in the ordinary course of business
within seven days at approximately the price at
which the security has been value 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.
- ------------------------------------------------------ -----------------------------------------------------------------------
Brady Bonds: These are debt securities issued under International Small Cap Fund, New Europe Fund and Latin America Fund
the framework of the Brady Plan, an initiative may invest in Brady Bonds consistent with their respective investment
announced by the U.S. Treasury Secretary, Nicholas objective. 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 makes the
to restructure their outstanding external debt of countries that have issued or have announced plans to issue
indebtedness (generally, commercial bank debt). 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 anticipates that its annual portfolio turnover will be less than 100%.
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 25% 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.
23
<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 the Fund you should
carefully evaluate the risks. Because of the nature of the Fund, you should
consider an investment to be a long-term investment that typically provides the
best results when held for a number of years. The following are the chief risks
you assume when investing in these Funds. Please see the Statement of Additional
Information for further discussion of these risks and the other risks not
discussed here.
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------------------- ---------------------------------------------------------
Risks How we strive to manage them
- ----------------------------------------------------------- ---------------------------------------------------------
Market Risk is the risk that all or a majority of the We maintain a long-term investment approach and focus
securities in a certain market--like the stock or bond on stocks we believe can appreciate over an extended
market--or in a certain country or region will decline in time frame regardless of interim market fluctuations.
value because of factors such as economic conditions, We do not try to predict overall stock market movements
future expectations or investor confidence. and do not trade for short-term purposes.
- ----------------------------------------------------------- ---------------------------------------------------------
Industry and Security Risk is the risk that the value of We limit the amount of the Fund's assets invested in
securities in a particular industry or the value of an any one industry and in any individual security. We
individual stock or bond will decline because of changing also follow a rigorous selection process before
expectations for the performance of that industry or for choosing securities for the Fund.
the individual company issuing the stock or bond.
- ----------------------------------------------------------- ---------------------------------------------------------
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
foreign currency exchange rates. Adverse changes in agreeing to purchase or sell foreign securities at a
exchange rates may reduce or eliminate any gains produced pre-set price on a future date, the Funds attempt to
by investments that are denominated in foreign currencies protect the value of the stock they own from future
and may increase any losses. 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.
- ----------------------------------------------------------- ---------------------------------------------------------
Emerging Markets Risk is the possibility that the risks International Small Cap, New Europe and Latin America
associated with international investing will be greater Funds have the ability to invest in emerging market
in emerging markets than in more developed foreign securities. By maintaining a long-term investment
markets because, among other things, emerging markets may approach, we believe we can appreciate regardless of
have less stable political and economic environments. interim political, social or economic instabilities.
- ----------------------------------------------------------- ---------------------------------------------------------
Inefficient Market Risk is the risk that foreign markets The Funds will attempt to reduce these risks by
may be less liquid, have greater price volatility, less investing in a number of different countries,
regulation and higher transaction costs than U.S. markets. performing credit analysis and noting trends in the
economy, industries and financial markets.
- ----------------------------------------------------------- ---------------------------------------------------------
High Yield, High Risk Foreign Fixed-Income Securities are New Europe Fund and Latin America Fund may invest up to
those securities rated lower than BBB by S&P and Baa by 30% of their respective net assets in these
Moody's. Securities of this type are considered to be of securities. International Small Cap may invest up to
poor standing and predominantly speculative as to the 15% of its net assets in these securities. These Funds
ability to repay interest and principal. will not purchase securities rated lower than C by S&P
or Ca by Moody's or, if unrated, considered to be of an
equivalent quality to such ratings by the Manager.
- ------------------------------------------------------ -----------------------------------------------------------------------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
<S>
<C>
- ------------------------------------------------------ -----------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------ -----------------------------------------------------------------------
Medium- and low-grade bonds held by the Funds may be We believe the high yields from these bonds have more
issued as a consequence of corporate restructurings, such than compensated for their higher default rates in the
as leveraged buy-outs, mergers, acquisitions, debt past. There can be no assurance, however, that yields
recapitalizations or similar events. Also these bonds will continue to offset default rates in the future.
are often issued by smaller, less creditworthy companies We intend to limit our investment in any one lower
or by highly leveraged (indebted) firms, which are rated bond which can help to reduce the effect of an
generally less able than more financially stable firms to individual default on the Funds, and to limit our
make scheduled payments of interest and principal. The overall allocation of Fund assets to bonds in this
risks posed by bonds issued under such circumstances are category. Such limitations may not protect the Funds from
substantial. widespread bond defaults brought about by a sustained
economic downturn.
The economy and interest rates may affect these high
yield, high risk securities differently from other
securities. Prices have been found to be less sensitive
to interest rate changes than higher rated investments,
but more sensitive to adverse economic changes or
individual corporate developments. Also, during an
economic downturn or a substantial period of rising
interest rates, highly leveraged issuers may experience
financial stress which would adversely affect their
ability to service principal and interest payment
obligations, to meet projected business goals and to
obtain additional financing. Changes by recognized rating
agencies in their rating of any 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.
- ----------------------------------------------------------- ---------------------------------------------------------
Region Risk is the risk associated with investing a With respect to the New Europe and Latin America Funds,
majority of the Fund's assets in a specific region of the we maintain a long-term approach and focus on stocks in
world. The Fund's performance will be dependent upon the the region we believe can appreciate over an extended
economic and financial strength and stability of the time frame.
region. An investment in the Fund is likely to be more
volatile than an investment in a more geographically
diverse fund.
- ----------------------------------------------------------- ---------------------------------------------------------
Political Risk is the risk that countries or the entire We evaluate the political situations in the countries
region where we invest may experience political where we invest and take into account any potential
instability, which may cause greater fluctuation in the risks before we select securities for the portfolio.
value and liquidity of our investments due to changes in However, there is no way to eliminate political risk
currency exchange rates, governmental seizures or when investing internationally.
nationalization of assets.
- ----------------------------------------------------------- ---------------------------------------------------------
Information Risk is the risk that foreign companies may We conduct fundamental research on the companies we
be subject to different accounting, auditing and invest in rather than relying solely on information
financial reporting standards than U.S. companies. There available through financial reporting. We believe this
may be less information available about foreign issuers will help us to better uncover any potential weaknesses
than domestic issuers. Furthermore, regulatory oversight in individual companies.
of foreign issuers may be less stringent or less
consistently applied than in the United States.
- ----------------------------------------------------------- ---------------------------------------------------------
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------------------- ----------------------------------------------------------
Risks How we strive to manage them
- ----------------------------------------------------------- ----------------------------------------------------------
Foreign Government Securities Risks relate to the ability The Funds attempt to reduce the risks associated with
of a foreign government or government related issuer to investing in foreign governments by setting rating
make timely payments on its external debt obligations. standards and by limiting the portion of portfolio
This ability to make payments will be strongly influenced assets that may be invested in such securities.
by the issuer's balance of payments, including export
performance, its access to international credits and
investments, fluctuations in interest rates and the
extent of its foreign reserves.
- ----------------------------------------------------------- ---------------------------------------------------------
Small Company Investment Risk includes the general risks The securities of companies with small revenues and
of investing in common stocks such as market, economic capitalizations in which the Fund invests, may offer
and business risk that cause their prices to fluctuate greater opportunity for capital appreciation than larger
over time. Historically, smaller capitalization stocks companies.
have been more volatile in price than larger
capitalization stocks. Among the reasons for the greater
price volatility of these securities are the lower degree
of liquidity in the markets for such stocks, and the
potentially greater sensitivity of such small companies
to changes in or failure of management, and in many other
changes in competitive, business, industry and economic
conditions, including risks associated with limited
production, markets, management depth, or financial
resources.
- ----------------------------------------------------------- ---------------------------------------------------------
</TABLE>
For additional information about the Funds' investment policies and certain
risks associated with investments in certain types of securities including
purchasing put and call options, futures contracts and options thereon, and
options on foreign currencies, please see the Statement of Additional
Information.
26
<PAGE>
Who manages the Funds
Investment manager and sub-adviser
The Funds are managed by Delaware International Advisers Ltd. 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 International Advisers
makes investment decisions for these Funds, manages the Funds' business affairs
and provides daily administrative services.
Delaware Management Company is the sub-adviser to Global Opportunities Fund.
Delaware Management Company manages the U.S. securities portion of Global
Opportunities 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.
For their services to the Global Opportunites Fund, the manager and sub-adviser
were paid an aggregate fee of 0.35% of average daily net assets of the Fund for
the last fiscal year after giving effect to voluntary expense caps.
For its services to the International Small Cap Fund, the manager was paid a fee
of 0.46% of average daily net assets of the Fund for the last fiscal year after
giving effect to voluntary expense caps.
For its services to each of the New Europe Fund and Latin America Fund, the
manager is paid an annual fee equal to 1.25% on the first $500 million of
average daily net assets; 1.20% on the next $500 million; 1.15% on the next $1.5
billion; and 1.10% on the average daily net assets in excess of $2.5 billion.
Portfolio Managers
Global Opportunities Fund
Elizabeth A. Desmond has primary responsibility for making day-to-day investment
decisions for Global Opportunities Fund. Robert L. Arnold makes investment
decisions for the U.S. equity portion of the Fund.
Elizabeth A. Desmond, Senior Portfolio Manager and Director of Delaware
International Advisers, has primary responsibility for making day-to-day
investment decisions for Global Equity Fund. She 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 this
at Delaware Investments, he managed 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.
International Small Cap Fund
Clive A. Gillmore and Timothy W. Sanderson have primary responsibility for
making day-to-day investment decisions for the International Small Cap Fund, and
have co-managed the Fund since its inception.
Clive A. Gillmore, Senior Portfolio Manager and Director of Delaware
International Advisers, has been senior portfolio manager for the Fund since its
inception. A graduate of the University of Warwick and having begun his career
at Legal and General Investment Management, Mr. Gillmore joined 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.
27
<PAGE>
Timothy W. Sanderson, Chief Investment Officer, Equities and Director of
Delaware International Advisers, has been senior portfolio manager for the Fund
since its inception. He joined Delaware International Advisers in 1990 as Senior
Portfolio Manager and Director. Prior to that, he was an analyst and senior
portfolio manager for Hill Samuel where he had responsibility for Pacific Basin
research and the management of international institutional portfolios.
New Europe Fund
Nigel G. May, Richard Ginty and Joshua A. Brooks have primary responsibility for
making day-to-day investment decisions for New Europe Fund, and have co-managed
the Fund since its inception.
Nigel G. May, Senior Portfolio Manager and Director of Delaware International
Advisers, is a graduate of Sidney Sussex College, Cambridge. 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.
Richard Ginty, Portfolio Manager of Delaware International Advisers, is a
graduate of Sheffield University. He joined Delaware International Advisers in
1992, where his primary research focus is the European equity markets. Prior to
joining Delaware International Advisers, his business experience was with
Kleinwort Benson Securities Limited, and prior to that time, with Fiduciary
Trust International.
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 liaison with Delaware International Advisers.
Latin America Fund
Robert Akester, Mr. Gillmore, and Mr. Brooks have primary responsibility for
making day-to-day investment decisions for Latin America Fund, and have
co-managed the Fund since its inception. Please see International Small Cap Fund
for Mr. Gillmore's business experience and New Europe Fund for Mr. Brook's
business experience.
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.
28
<PAGE>
Who's who?
This diagram show the various organizations involved with managing,
administering and servicing the Delaware Investments funds.
<TABLE>
<CAPTION>
Board of Directors
<S> <C> <C>
Investment Manager 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
Sub-Adviser
Delaware Management Company
One Commerce Square
Philadelphia, PA 19103
Portfolio managers Distributor Service agent
(see page __ for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
Shareholders
</TABLE>
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 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.
29
<PAGE>
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.
30
<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
31
<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.
32
<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.
33
<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.
34
<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.
35
<PAGE>
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains.
Tax laws are subject to change, so we urge you to consult you tax adviser about
your particular tax situation and how it might be affected by current law. The
tax status of your dividends from the Fund is the same whether you reinvest your
dividends or receive them in cash. Distributions from the 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
proceed 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.
36
<PAGE>
Other investment policies and risk considerations
High yield, high risk securities
The International Small Cap Fund, New Europe Fund and the Latin America Fund may
invest in high yield, high risk foreign fixed income securities. In the past, in
the opinion of the Manager, the high yields from these bonds have more than
compensated for their higher default rates. There can be no assurance, however,
that yields will continue to offset default rates on these bonds in the future.
The Manager intends to maintain an adequately diversified portfolio of stocks
and bonds. While diversification can help to reduce the effect of an individual
default on a Fund, there can be no assurance that diversification will protect a
Fund from widespread bond defaults brought about by a sustained economic
downturn.
Medium- and low-grade bonds held by each Fund may be issued as a consequence of
corporate restructurings, such as leveraged buy-outs, mergers, acquisitions,
debt recapitalizations or similar events. Also these bonds are often issued by
smaller, less creditworthy companies or by highly leveraged (indebted) firms,
which are generally less able than more financially stable firms to make
scheduled payments of interest and principal. The risks posed by bonds issued
under such circumstances are substantial.
The economy and interest rates may affect these high yield, high risk securities
differently from other securities. Prices have been found to be less sensitive
to interest rate changes than higher rated investments, but more sensitive to
adverse economic changes or individual corporate developments. Also, during an
economic downturn or a substantial period of rising interest rates, highly
leveraged issuers may experience financial stress which would adversely affect
their ability to service principal and interest payment obligations, to meet
projected business goals and to obtain additional financing. Changes by
recognized rating agencies in their rating of any security and in the ability of
an issuer to make payments of interest and principal will also ordinarily have a
more dramatic effect on the values of these investments than on the values of
higher-rated securities. Consequently, these changes will affect a Fund's net
asset value per share.
Foreign currency transactions
Although each Fund values its assets daily in terms of U.S. dollars, it does not
intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. Each Fund will, however, from time to time, purchase or sell
foreign currencies and/or engage in forward foreign currency transactions in
order to expedite settlement of portfolio transactions and to minimize currency
value fluctuations. The Funds may conduct its foreign currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market or through entering into contracts to purchase
or sell foreign currencies at a future date (i.e., a "forward foreign currency"
contract or "forward" contract). A forward contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract, agreed upon by the parties, at a
price set at the time of the contract. The Funds will convert currency on a spot
basis from time to time, and investors should be aware of the costs of currency
conversion.
The Funds may enter into forward contracts to "lock in" the price of a security
it has agreed to purchase or sell, in terms of U.S. dollars or other currencies
in which the transaction will be consummated. By entering into a forward
contract for the purchase or sale, for a fixed amount of U.S. dollars or foreign
currency, of the amount of foreign currency involved in the underlying security
transaction, the Fund will be able to protect itself against a possible loss
resulting from an adverse change in currency exchange rates during the period
between the date the security is purchased or sold and the date on which payment
is made or received.
When the Manager believes that the currency of a particular country may suffer a
significant decline against the U.S. dollar or against another currency, the
Funds may enter into a forward foreign currency contract to sell, for a fixed
amount of U.S. dollars or other appropriate currency, the amount of foreign
currency approximating the value of some or all of the Fund's securities
denominated in such foreign currency.
The Funds will not enter into forward contracts or maintain a net exposure to
such contracts where the consummation of the contracts would obligate a Fund to
deliver an amount of foreign currency in excess of the value of the Fund's
securities or other assets denominated in that currency.
37
<PAGE>
At the maturity of a forward contract, the Funds may either sell the portfolio
security and make delivery of the foreign currency, or it may retain the
security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. The Funds may realize gains or losses from currency
transactions.
The Funds also may purchase and write put and call options on foreign currencies
(traded on U.S. and foreign exchanges or over-the-counter) for hedging purposes
to protect against declines in the U.S. dollar cost of foreign securities held
by the Funds and against increases in the U.S. dollar cost of such securities to
be acquired. Call options on foreign currency written by a Fund will be covered,
which means that the Fund will own the underlying foreign currency. With respect
to put options on foreign currency written by a Fund, the Fund will establish a
segregated account with its Custodian Bank consisting of cash, U.S. government
securities or other high-grade liquid debt securities in an amount equal to the
amount the Fund will be required to pay upon exercise of the put.
As in the case of other kinds of options, the writing of an option on foreign
currency will constitute only a partial hedge, up to the amount of the premium
received, and the Fund could be required to purchase or sell foreign currencies
at disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on foreign currency may constitute an effective hedge against
fluctuations in exchange rates, although, in the event of rate movements adverse
to the Fund's position, the Fund may forfeit the entire amount of the premium
plus related transaction costs.
38
<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 Small Cap Fund accepts investments from the series portfolios of
Delaware Group Foundation Funds, a fund of funds. From time to time, the 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 Small Cap Fund and Foundation Funds as a result
of these transactions.
39
<PAGE>
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 800o523o1918.
Financial Highlights for New Europe Fund and Latin America Fund are not provided
because these funds were not operating as of the close of the fiscal year.
40
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------- --------------------------
Institutional Class
--------------------------
Year Period
Ended 7/22/97(1)
11/30 through
Global Opportunities Fund 1998 11/30/97
- -------------------------------------------------------------------- --------------------------
<S> <C> <C>
Net asset value, beginning of period $8.230 $8.500
Income from investment operations
Net investment income(2) 0.210 0.056
Net realized and unrealized gain (loss) on investments and foreign 0.760 (0.326)
----- -------
currencies
Total from investment operations 0.970 (0.270)
----- -------
Less dividends
Dividends from net investment income (0.110) none
Total dividends (0.110) none
Net asset value, end of period $9.090 $8.230
====== ======
Total return(3) 11.95% (3.18%)
Ratios and supplemental data
Net assets, end of period (000 omitted) $3,253 $2,903
Ratio of expenses to average net assets 0.80% 0.80%
Ratio of expenses to average net assets
prior to expense limitation 1.25% 1.86%
Ratio of net investment income to average net assets 2.40% 1.86%
Ratio of net investment income to average net assets
prior to expense limitation 1.95% 0.80%
Portfolio turnover 50% 25%
- -------------------------------------------------------------------- --------------------------
</TABLE>
(1) Date of commencement of operations; ratios have been annualized but total
return has not been annualized.
(2) Per share information was based on the average shares outstanding method.
(3) Total return reflect expense limitations in effect for the Fund.
41
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------- --------------------
Institutional Class
Year Ended 11/30
--------------------
International Small Cap Fund Period
12/19/97(1)
through
11/30/98
- ------------------------------------------------------------------- --------------------
<S> <C>
Net asset value, beginning of period $8.500
Income from investment operations
Net investment income(2) 0.191
Net realized and unrealized gain (loss) on investments and foreign 0.309
-----
currencies
Total from investment operations 0.500
Net asset value, end of period $9.000
======
Total return(3) 5.88%
Ratios and supplemental data
Net assets, end of period (000 omitted) $3,175
Ratio of expenses to average net assets 1.25%
Ratio of expenses to average net assets
prior to expense limitation 2.05%
Ratio of net investment income to average net assets 2.25%
Ratio of net investment income to average net assets
prior to expense limitation 1.45%
Portfolio turnover 4%
- ------------------------------------------------------------------- --------------------
</TABLE>
(1) Date of commencement of operations; ratios have been annualized but total
return has not been annualized.
(2) Per share information was based on the average shares outstanding method.
(3) Total return reflect expense limitations in effect for the Fund.
42
<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 profit,
while a realized loss 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 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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<PAGE>
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 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.
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<PAGE>
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.
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 IBCAI, Inc. (Fitch).
45
<PAGE>
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 stocks 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.
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.
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.
46
<PAGE>
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.
Appendix A - Bonds 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.
47
<PAGE>
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 800o523o1918. 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
1o800oSECo0330.
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.
Investment Company Act file number: 811- 6324
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
48
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MARCH 30, 1999
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
Global Bond Fund
International Equity Fund
Emerging Markets Fund
Global Equity Fund
(formerly Global Assets Fund)
Global Opportunities Fund
(formerly Global Equity Fund)
International Small Cap Fund
New Europe Fund
Latin America Fund
1818 Market Street
Philadelphia, PA 19103
For more information about the
Institutional Classes:
800-510-4015
For Prospectus, Performance and Information
on Existing Accounts of Class A Shares,
Class B Shares and Class C Shares:
Nationwide 800-523-1918
Dealer Services:
(BROKER/DEALERS ONLY) Nationwide 800-362-7500
This Statement of Additional Information ("Part B") describes shares of
the funds listed above (individually a "Fund" and collectively the "Funds") of
Delaware Group Global & International Funds, Inc. ("Global Funds, Inc."). Global
Funds, Inc. is a registered, open-end management investment companies.
Each Fund offers Class A Shares, Class B Shares and Class C Shares
(together referred to as the "Fund Classes"). Each Fund also offers an
Institutional Class (together referred to the "Institutional Classes"). All
references to "shares" in this Part B refer to all Classes of shares, except
where noted.
This Part B should be read in conjunction with the Prospectuses for the
Funds dated March 30, 1999, as they may be amended from time to time. The
Prospectuses may be obtained by writing or calling your investment dealer or by
calling the Funds at 800-523-1918 or by contacting the Funds' national
distributor, Delaware Distributors, L.P., 1818 Market Street, Philadelphia, PA
19103. Part B is not itself a prospectus but is, in its entirety, incorporated
by reference into each Class' Prospectus. The Funds' financial statements, the
notes relating thereto, the financial highlights and the report of independent
auditors are incorporated by reference from the Annual Reports into this Part B.
The Annual Reports will accompany any request for Part B. The Annual Reports can
be obtained, without charge, by calling 800-523-1918.
2
<PAGE>
TABLE OF CONTENTS
Investment Policies and Portfolio Techniques
Accounting and Tax Issues
Performance Information
Trading Practices and Brokerage
Purchasing Shares
Investment Plans
Determining Offering Price and Net Asset Value
Redemption and Exchange
Distributions and Taxes
Investment Management Agreements and Sub-Advisory Agreements
Officers and Directors
Exchange Privilege
General Information
Financial Statements
Appendix A - Investment Objectives of the Other Funds in the Delaware
Investments Family
3
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INVESTMENT POLICIES AND PORTFOLIO TECHNIQUES
Investment Restrictions
Global Funds, Inc. has adopted the following restrictions for each Fund
(except where otherwise noted) which, along with its investment objective,
cannot be changed without approval by the holders of a "majority" of the
respective Fund's outstanding shares, which is a vote by the holders of the
lesser of a) 67% or more of the voting securities present in person or by proxy
at a meeting, if the holders of more than 50% of the outstanding voting
securities are present or represented by proxy; or b) more than 50% of the
outstanding voting securities. The percentage limitations contained in the
restrictions and policies set forth herein apply at the time of purchase of
securities.
Each Fund shall not:
1. Make investments that will result in the concentration (as
that term may be defined in the 1940 Act, any rule or other
thereunder, or U.S. Securities and Exchange Commission ("SEC")
staff interpretation thereof) of its investments in the
securities of issuers primarily engaged in the same industry,
provided that this restriction does not limit the Fund from
investing in obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities, or in
certificates of deposit.
2. Borrow money or issue senior securities, except as the 1940
Act, any rule or order thereunder, or SEC staff interpretation
thereof, may permit.
3. Underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition,
disposition or resale of its portfolio securities, under
circumstances where it may be considered to be an underwriter
under the Securities Act of 1933.
4. Purchase or sell real estate, unless acquired as a result of
ownership of securities or other instruments and provided that
this restriction does not prevent the Fund from investing in
issuers which invest, deal or otherwise engage in transactions
in real estate or interests therein, or investing in
securities that are secured by real estate or interests
therein.
5. Purchase or sell physical commodities, unless acquired as a
result of ownership of securities or other instruments and
provided that this restriction does not prevent the Fund from
engaging in transactions involving futures contracts and
options thereon or investing in securities that are secured by
physical commodities.
6. Make loans, provided that this restriction does not prevent
the Fund from purchasing debt obligations, entering into
repurchase agreements, loaning its assets to broker/dealers or
institutional investors and investing in loans, including
assignments and participation interests.
In addition to the fundamental policies and investment restrictions
described above, and the various general investment policies described in the
prospectus, each Fund will be subject to the following investment restrictions,
which are considered non-fundamental and may be changed by the Board of
Directors without shareholder approval.
1. The Fund is permitted to invest in other investment companies,
including open-end, closed-end or unregistered investment
companies, either within the percentage limits set forth in
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the 1940 Act, any rule or order thereunder, or SEC staff
interpretation thereof, or without regard to percentage limits
in connection with a merger, reorganization, consolidation or
other similar transaction. However, the Fund may not operate
as a "fund of funds" which invests primarily in the shares of
other investment companies as permitted by Section 12(d)(1)(F)
or (G) of the 1940 Act, if its own shares are utilized as
investments by such a "fund of funds."
2. The Fund may not invest more than 15% of its net assets in
securities which it cannot sell or dispose of in the ordinary
course of business within seven days at approximately the
value at which the Fund has valued the investment.
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INVESTMENTS
Foreign Securities
Investors should recognize that investing in foreign issuers involves
certain considerations, including those set forth in the Funds' Prospectuses,
which are not typically associated with investing in United States issuers.
Since the stocks of foreign companies are frequently denominated in foreign
currencies, and since a Fund may temporarily hold uninvested reserves in bank
deposits in foreign currencies, a Fund will be affected favorably or unfavorably
by changes in currency rates and in exchange control regulations, and may incur
costs in connection with conversions between various currencies. The investment
policies of each Fund permit it to enter into forward foreign currency exchange
contracts in order to hedge each Fund's holdings and commitments against changes
in the level of future currency rates. Such contracts involve an obligation to
purchase or sell a specific currency at a future date at a price set at the time
of the contract.
There has been in the past, and there may be again in the future, an
interest equalization tax levied by the United States in connection with the
purchase of foreign securities such as those purchased by a Fund. Payment of
such interest equalization tax, if imposed, would reduce a Fund's rate of return
on its investment. Dividends paid by foreign issuers may be subject to
withholding and other foreign taxes which may decrease the net return on such
investments as compared to dividends paid to a Fund by United States
corporations. Special rules govern the federal income tax treatment of certain
transactions denominated in terms of a currency other than the U.S. dollar or
determined by reference to the value of one or more currencies other than the
U.S. dollar. The types of transactions covered by the special rules generally
include the following: (i) the acquisition of, or becoming the obligor under, a
bond or other debt instrument (including, to the extent provided in Treasury
Regulations, preferred stock); (ii) the accruing of certain trade receivables
and payables; and (iii) the entering into or acquisition of any forward
contract, futures contract, option and similar financial instruments other than
any "regulated futures contract" or "nonequity option" marked to market. The
disposition of a currency other than the U.S. dollar by a U.S. taxpayer is also
treated as a transaction subject to the special currency rules. However, foreign
currency-related regulated futures contracts and nonequity options are generally
not subject to the special currency rules, if they are or would be treated as
sold for their fair market value at year-end under the marking to market rules
applicable to other futures contracts, unless an election is made to have such
currency rules apply. With respect to transactions covered by the special rules,
foreign currency gain or loss is calculated separately from any gain or loss on
the underlying transaction and is normally taxable as ordinary gain or loss. A
taxpayer may elect to treat as capital gain or loss foreign currency gain or
loss arising from certain identified forward contracts, futures contracts and
options that are capital assets in the hands of the taxpayer and which are not
part of a straddle. Certain transactions subject to the special currency rules
that are part of a "section 988 hedging transaction" (as defined in the Internal
Revenue Code of 1986, as amended (the "Code"), and the Treasury Regulations)
will be integrated and treated as a single transaction or otherwise treated
consistently for purposes of the Code. The income tax effects of integrating and
treating a transaction as a single transaction are generally to create a
synthetic debt instrument that is subject to the original discount provisions.
It is anticipated that some of the non-U.S. dollar denominated investments and
foreign currency contracts each Fund may make or enter into will be subject to
the special currency rules described above.
Repurchase Agreements
While each Fund is permitted to do so, it normally does not invest in
repurchase agreements, except to invest cash balances.
The funds in the Delaware Investments family have obtained an exemption
from the joint-transaction prohibitions of Section 17(d) of the 1940 Act to
allow the Delaware Investments funds jointly to invest cash balances. Each 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 below.
A repurchase agreement is a short-term investment by which the
purchaser acquires ownership of a debt security and the seller agrees to
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repurchase the obligation at a future time and set price, thereby determining
the yield during the purchaser's holding period. Should an issuer of a
repurchase agreement fail to repurchase the underlying security, the loss to a
Fund, if any, would be the difference between the repurchase price and the
market value of the security. Each Fund will limit its investments in repurchase
agreements to those which Delaware International Advisers Ltd. (the "Manager"),
under the guidelines of the Board of Directors, determines to present minimal
credit risks and which are of high quality. In addition, a Fund must have
collateral of at least 102% of the repurchase price, including the portion
representing a Fund's yield under such agreements which is monitored on a daily
basis.
Portfolio Loan Transactions
Each Fund may loan up to 25% of its assets to qualified broker/dealers
or institutional investors for their use relating to short sales or other
security transactions.
It is the understanding of the Manager that the staff of the SEC
permits portfolio lending by registered investment companies if certain
conditions are met. These conditions are as follows: 1) each transaction must
have 100% collateral in the form of cash, short-term U.S. government securities,
or irrevocable letters of credit payable by banks acceptable to Global Funds,
Inc. from the borrower; 2) this collateral must be valued daily and should the
market value of the loaned securities increase, the borrower must furnish
additional collateral to the Fund; 3) the Fund must be able to terminate the
loan after notice, at any time; 4) the Fund must receive reasonable interest on
any loan, and any dividends, interest or other distributions on the lent
securities, and any increase in the market value of such securities; 5) the Fund
may pay reasonable custodian fees in connection with the loan; and 6) the voting
rights on the lent securities may pass to the borrower; however, if the
directors of Global Funds, Inc. know that a material event will occur affecting
an investment loan, they must either terminate the loan in order to vote the
proxy or enter into an alternative arrangement with the borrower to enable the
directors to vote the proxy.
The major risk to which a Fund would be exposed on a portfolio loan
transaction is the risk that the borrower would go bankrupt at a time when the
value of the security goes up. Therefore, each Fund will only enter into loan
arrangements after a review of all pertinent facts by the Manager, under the
supervision of the Board of Directors, including the creditworthiness of the
borrowing broker, dealer or institution and then only if the consideration to be
received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the Manager.
Foreign Currency Transactions
Although the Funds value their assets daily in terms of U.S. dollars,
they do not intend to convert their holdings of foreign currencies into U.S.
dollars on a daily basis. Each Fund will, however, from time to time, purchase
or sell foreign currencies and/or engage in forward foreign currency
transactions in order to expedite settlement of portfolio transactions and to
minimize currency value fluctuations. Each Fund may conduct its foreign currency
exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing
in the foreign currency exchange market or through entering into contracts to
purchase or sell foreign currencies at a future date (i.e., a "forward foreign
currency" contract or "forward" contract). A forward contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract, agreed upon by the
parties, at a price set at the time of the contract. The Funds will convert
currency on a spot basis from time to time, and investors should be aware of the
costs of currency conversion.
A Fund may enter into forward contracts to "lock in" the price of a
security it has agreed to purchase or sell, in terms of U.S. dollars or other
currencies in which the transaction will be consummated. By entering into a
forward contract for the purchase or sale, for a fixed amount of U.S. dollars or
foreign currency, of the amount of foreign currency involved in the underlying
security transaction, the Fund will be able to protect itself against a possible
loss resulting from an adverse change in currency exchange rates during the
period between the date the security is purchased or sold and the date on which
payment is made or received.
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A Fund may purchase or sell currencies and/or engage in forward foreign
currency transactions in order to expedite settlement of portfolio transactions
and to minimize currency value fluctuations.
Forward foreign currency contracts are traded in the interbank market
conducted directly between currency traders (usually large commercial banks) and
their customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades. A Fund will account for forward
contracts by marking to market each day at daily exchange rates.
When a Fund enters into a forward contract to sell, for a fixed amount
of U.S. dollars or other appropriate currency, the amount of foreign currency
approximating the value of some or all of a Fund's assets denominated in such
foreign currency, the Fund's Custodian Bank or subcustodian will place cash or
liquid high grade debt securities in a separate account of the Fund in an amount
not less than the value of the Fund's total assets committed to the consummation
of such forward contracts. If the additional cash or securities placed in the
separate account declines, additional cash or securities will be placed in the
account on a daily basis so that the value of the account will equal the amount
of a Fund's commitments with respect to such contracts.
A Fund will not enter into forward contracts or maintain a net exposure
to such contracts where the consummation of the contracts would obligate the
Fund to deliver an amount of foreign currency in excess of the value of the
Fund's securities or other assets denominated in that currency.
At the maturity of a forward contract, a Fund may either sell the
portfolio security and make delivery of the foreign currency, or it may retain
the security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. The Fund may realize a gain or loss from currency
transactions.
A Fund also may purchase and write put and call options on foreign
currencies (traded on U.S. and foreign exchanges or over-the-counter) for
hedging purposes to protect against declines in the U.S. dollar cost of foreign
securities held by the Fund and against increases in the U.S. dollar cost of
such securities to be acquired. Call options on foreign currency written by a
Fund will be covered, which means that the Fund will own the underlying foreign
currency. With respect to put options on foreign currency written by a Fund, the
Fund will establish a segregated account with its Custodian Bank consisting of
cash, U.S. government securities or other high-grade liquid debt securities in
an amount equal to the amount the Fund will be required to pay upon exercise of
the put.
Options
Each Fund may purchase call options or purchase put options and will
not engage in option strategies for speculative purposes.
Each Fund may invest in options that are either listed on U.S. or
recognized foreign exchanges or traded over-the-counter. Certain
over-the-counter options may be illiquid. Thus, it may not be possible to close
options positions and this may have an adverse impact on a Fund's ability to
effectively hedge its securities. A Fund will not, however, invest more than 15%
(or, in the case of Global Bond, International Equity and Global Equity Funds,
10%) of its assets in illiquid securities.
Purchasing Call Options--Each Fund may purchase call options to the
extent that premiums paid by the Fund do not aggregate more than 2% of the
Fund's total assets. When a Fund purchases a call option, in return for a
premium paid by a Fund to the writer of the option, the Fund obtains the right
to buy the security underlying the option at a specified exercise price at any
time during the term of the option. The writer of the call option, who receives
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the premium upon writing the option, has the obligation, upon exercise of the
option, to deliver the underlying security against payment of the exercise
price. The advantage of purchasing call options is that a Fund may alter
portfolio characteristics and modify portfolio maturities without incurring the
cost associated with portfolio transactions.
A Fund may, following the purchase of a call option, liquidate its
position by effecting a closing sale transaction. This is accomplished by
selling an option of the same series as the option previously purchased. A Fund
will realize a profit from a closing sale transaction if the price received on
the transaction is more than the premium paid to purchase the original call
option; a Fund will realize a loss from a closing sale transaction if the price
received on the transaction is less than the premium paid to purchase the
original call option.
Although a Fund will generally purchase only those call options for
which there appears to be an active secondary market, there is no assurance that
a liquid secondary market on an Exchange will exist for any particular option,
or at any particular time, and for some options no secondary market on an
Exchange may exist. In such event, it may not be possible to effect closing
transactions in particular options, with the result that a Fund would have to
exercise its options in order to realize any profit and would incur brokerage
commissions upon the exercise of such options and upon the subsequent
disposition of the underlying securities acquired through the exercise of such
options. Further, unless the price of the underlying security changes
sufficiently, a call option purchased by a Fund may expire without any value to
the Fund.
Purchasing Put Options--Each Fund may invest up to 2% of its total
assets in the purchase of put options. A Fund will, at all times during which it
holds a put option, own the security covered by such option.
A put option purchased by a Fund gives it the right to sell one of its
securities for an agreed price up to an agreed date. A Fund intends to purchase
put options in order to protect against a decline in the market value of the
underlying security below the exercise price less the premium paid for the
option ("protective puts"). The ability to purchase put options will allow a
Fund to protect unrealized gain in an appreciated security in its portfolio
without actually selling the security. If the security does not drop in value, a
Fund will lose the value of the premium paid. A Fund may sell a put option which
it has previously purchased prior to the sale of the securities underlying such
option. Such sale will result in a net gain or loss depending on whether the
amount received on the sale is more or less than the premium and other
transaction costs paid on the put option which is sold.
A Fund may sell a put option purchased on individual portfolio
securities. Additionally, a Fund may enter into closing sale transactions. A
closing sale transaction is one in which a Fund, when it is the holder of an
outstanding option, liquidates its position by selling an option of the same
series as the option previously purchased.
Futures
Each Fund may enter into contracts for the purchase or sale for future
delivery of securities or foreign currencies. While futures contracts provide
for the delivery of securities, deliveries usually do not occur. Contracts are
generally terminated by entering into an offsetting transaction. When a Fund
enters into a futures transaction, it must deliver to the futures commission
merchant selected by the Fund an amount referred to as "initial margin." This
amount is maintained by the futures commission merchant in an account at the
Fund's Custodian Bank. Thereafter, a "variation margin" may be paid by a Fund
to, or drawn by the Fund from, such account in accordance with controls set for
such accounts, depending upon changes in the price of the underlying securities
subject to the futures contract.
In addition, when a Fund engages in futures transactions, to the extent
required by the SEC, it will maintain with its Custodian Bank, assets in a
segregated account to cover its obligations with respect to such contracts,
which assets will consist of cash, cash equivalents or high quality debt
securities from its portfolio in an amount equal to the difference between the
fluctuating market value of such futures contracts and the aggregate value of
the margin payments made by a Fund with respect to such futures contracts.
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Each Fund may enter into such futures contracts to protect against the
adverse affects of fluctuations in interest or foreign exchange rates without
actually buying or selling the securities or foreign currency. For example, if
interest rates are expected to increase, a Fund might enter into futures
contracts for the sale of debt securities. Such a sale would have much the same
effect as selling an equivalent value of the debt securities owned by a Fund. If
interest rates did increase, the value of the debt securities in the portfolio
would decline, but the value of the futures contracts to a Fund would increase
at approximately the same rate, thereby keeping the net asset value of the Fund
from declining as much as it otherwise would have. Similarly, when it is
expected that interest rates may decline, futures contracts may be purchased to
hedge in anticipation of subsequent purchases of securities at higher prices.
Since the fluctuations in the value of futures contracts should be similar to
those of debt securities, a Fund could take advantage of the anticipated rise in
value of debt securities without actually buying them until the market had
stabilized. At that time, the futures contracts could be liquidated and the Fund
could then buy debt securities on the cash market.
With respect to options on futures contracts, when a Fund is not fully
invested, it may purchase a call option on a futures contract to hedge against a
market advance due to declining interest rates. The purchase of a call option on
a futures contract is similar in some respects to the purchase of a call option
on an individual security. Depending on the pricing of the option compared to
either the price of the futures contract upon which it is based, or the price of
the underlying debt securities, it may or may not be less risky than ownership
of the futures contract or underlying debt securities. As with the purchase of
futures contracts, when a Fund is not fully invested, it may purchase a call
option on a futures contract to hedge against a market advance due to declining
interest rates.
The writing of a call option on a futures contract constitutes a
partial hedge against the declining price of the security or foreign currency
which is deliverable upon exercise of the futures contract. If the futures price
at the expiration of the option is below the exercise price, a Fund will retain
the full amount of the option premium which provides a partial hedge against any
decline that may have occurred in the Fund's portfolio holdings. The writing of
a put option on a futures contract constitutes a partial hedge against the
increasing price of the security or foreign currency which is deliverable upon
exercise of the futures contract. If the futures price at the expiration of the
option is higher than the exercise price, the Fund will retain the full amount
of the option premium which provides a partial hedge against any increase in the
price of securities which the Fund intends to purchase.
If a put or call option a Fund has written is exercised, the Fund will
incur a loss which will be reduced by the amount of the premium it receives.
Depending on the degree of correlation between changes in the value of its
portfolio securities and changes in the value of its futures positions, a Fund's
losses from existing options on futures may, to some extent, be reduced or
increased by changes in the value of portfolio securities. The purchase of a put
option on a futures contract is similar in some respects to the purchase of
protective puts on portfolio securities. For example, a Fund will purchase a put
option on a futures contract to hedge the Fund's portfolio against the risk of
rising interest rates.
To the extent that interest rates move in an unexpected direction, a
Fund may not achieve the anticipated benefits of futures contracts or options on
futures contracts or may realize a loss. For example, if a Fund is hedged
against the possibility of an increase in interest rates which would adversely
affect the price of securities held in its portfolio and interest rates decrease
instead, the Fund will lose part or all of the benefit of the increased value of
its securities which it has because it will have offsetting losses in its
futures position. In addition, in such situations, if the Fund had insufficient
cash, it may be required to sell securities from its portfolio to meet daily
variation margin requirements. Such sales of securities may, but will not
necessarily, be at increased prices which reflect the rising market. A Fund may
be required to sell securities at a time when it may be disadvantageous to do
so.
Further, with respect to options on futures contracts, a Fund may seek
to close out an option position by writing or buying an offsetting position
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covering the same securities or contracts and have the same exercise price and
expiration date. The ability to establish and close out positions on options
will be subject to the maintenance of a liquid secondary market, which cannot be
assured.
Options on Foreign Currencies
Each Fund may purchase and write options on foreign currencies for
hedging purposes in a manner similar to that in which futures contracts on
foreign currencies, or forward contracts, will be utilized. For example, a
decline in the dollar value of a foreign currency in which portfolio securities
are denominated will reduce the dollar value of such securities, even if their
value in the foreign currency remains constant. In order to protect against such
diminutions in the value of portfolio securities, a Fund may purchase put
options on the foreign currency. If the value of the currency does decline, a
Fund will have the right to sell such currency for a fixed amount in dollars and
will thereby offset, in whole or in part, the adverse effect on its portfolio
which otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, a Fund may purchase call options thereon. The purchase
of such options could offset, at least partially, the effects of the adverse
movement in exchange rates. As in the case of other types of options, however,
the benefit to a Fund deriving from purchases of foreign currency options will
be reduced by the amount of the premium and related transaction costs. In
addition, where currency exchange rates do not move in the direction or to the
extent anticipated, a Fund could sustain losses on transactions in foreign
currency options which would require it to forego a portion or all of the
benefits of advantageous changes in such rates.
A Fund may write options on foreign currencies for the same types of
hedging purposes. For example, where a Fund anticipates a decline in the dollar
value of foreign currency denominated securities due to adverse fluctuations in
exchange rates, it could, instead of purchasing a put option, write a call
option on the relevant currency. If the expected decline occurs, the option will
most likely not be exercised, and the diminution in the value of portfolio
securities will be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, a Fund
could write a put option on the relevant currency which, if rates move in the
manner projected, will expire unexercised and allow a Fund to hedge such
increased cost up to the amount of the premium. As in the case of other types of
options, however, the writing of a foreign currency option will constitute only
a partial hedge up to the amount of the premium, and only if rates move in the
expected direction. If this does not occur, the option may be exercised and the
Fund would be required to purchase or sell the underlying currency at a loss
which may not be offset by the amount of the premium. Through the writing of
options on foreign currencies, a Fund also may be required to forego all or a
portion of the benefit which might otherwise have been obtained from favorable
movements in exchange rates.
Each Fund intends to write covered call options on foreign currencies.
A call option written on a foreign currency by a Fund is "covered" if the Fund
owns the underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a segregated account
by the Custodian Bank) upon conversion or exchange of other foreign currency
held in its portfolio. A call option is also covered if the Fund has a call on
the same foreign currency and in the same principal amount as the call written
where the exercise price of the call held (a) is equal to or less than the
exercise price of the call written, or (b) is greater than the exercise price of
the call written if the difference is maintained by the Fund in cash, U.S.
government securities or other high-grade liquid debt securities in a segregated
account with its Custodian Bank.
With respect to writing put options, at the time the put is written, a
Fund will establish a segregated account with its Custodian Bank consisting of
cash, U.S. government securities or other high-grade liquid debt securities in
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an amount equal in value to the amount the Fund will be required to pay upon
exercise of the put. The account will be maintained until the put is exercised,
has expired, or the Fund has purchased a closing put of the same series as the
one previously written.
In order to comply with the securities laws of one state, a Fund will
not write put or call options if the aggregate value of the securities
underlying the calls or obligations underlying the puts determined as of the
date the options are sold exceed 25% of the Fund's net assets. Should state laws
change or Global Funds, Inc. receive a waiver of their application for a Fund,
the Funds reserve the right to increase this percentage.
Options on Stock Indices
A stock index assigns relative values to the common stocks included in
the index with the index fluctuating with changes in the market values of the
underlying common stock.
Options on stock indices are similar to options on stocks but have
different delivery requirements. Stock options provide the right to take or make
delivery of the underlying stock at a specified price. A stock index option
gives the holder the right to receive a cash "exercise settlement amount" equal
to (i) the amount by which the fixed exercise price of the option exceeds (in
the case of a put) or is less than (in the case of a call) the closing value of
the underlying index on the date of exercise, multiplied by (ii) a fixed "index
multiplier." Receipt of this cash amount will depend upon the closing level of
the stock index upon which the option is based being greater than (in the case
of a call) or less than (in the case of a put) the exercise price of the option.
The amount of cash received will be equal to such difference between the closing
price of the index and exercise price of the option expressed in dollars times a
specified multiple. The writer of the option is obligated, in return for the
premium received, to make delivery of this amount. Gain or loss to a Fund on
transactions in stock index options will depend on price movements in the stock
market generally (or in a particular industry or segment of the market) rather
than price movements of individual securities.
As with stock options, a Fund may offset its position in stock index
options prior to expiration by entering into a closing transaction on an
Exchange or it may let the option expire unexercised.
A stock index fluctuates with changes in the market values of the stock
so included. Some stock index options are based on a broad market index such as
the Standard and Poor's 500 (R) Composite Stock Price Index ("S&P 500") or the
New York Stock Exchange Composite Index, or a narrower market index such as the
Standard & Poor's 100 Index ("S&P 100"). Indices are also based on an industry
or market segment such as the AMEX Oil and Gas Index or the Computer and
Business Equipment Index. Options on stock indices are currently traded on
domestic exchanges such as: The Chicago Board Options Exchange, the New York
Stock Exchange and American Stock Exchange as well as on foreign exchanges.
A Fund's ability to hedge effectively all or a portion of its
securities through transactions in options on stock indices depends on the
degree to which price movements in the underlying index correlate with price
movements in the Fund's portfolio securities. Since a Fund's portfolio will not
duplicate the components of an index, the correlation will not be exact.
Consequently, a Fund bears the risk that the prices of the securities being
hedged will not move in the same amount as the hedging instrument. It is also
possible that there may be a negative correlation between the index or other
securities which would result in a loss on both such securities and the hedging
instrument.
Positions in stock index options may be closed out only on an Exchange
which provides a secondary market. There can be no assurance that a liquid
secondary market will exist for any particular stock index option. Thus, it may
not be possible to close such an option. The inability to close options
positions could have an adverse impact on a Fund's ability effectively to hedge
its securities. A Fund will enter into an option position only if there appears
to be a liquid secondary market for such options.
A Fund will not engage in transactions in options on stock indices for
speculative purposes but only to protect appreciation attained and to take
advantage of the liquidity available in the option markets.
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Depositary Receipts
The Funds may invest in sponsored and unsponsored American Depositary
Receipts ("ADRs"), European Depositary Receipts ("EDRs") and Global Depositary
Receipts ("GDRs") that are actively traded in the United States. ADRs are
receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. EDRs and
GDRs are receipts issued by non-U.S. Banks or trust companies and foreign
branches of U.S. banks that evidence ownership of the underlying foreign or U.S.
securities. "Sponsored" ADRs, EDRs or GDRs are issued jointly by the issuer of
the underlying security and a Depositary, and "unsponsored" ADRs, EDRs or GDRs
are issued without the participation of the issuer of the deposited security.
Holders of unsponsored ADRs, EDRs or GDRs generally bear all the costs of such
facilities and the Depositary of an unsponsored ADR, EDR or GDR facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited security or to pass through voting
rights to the holders of such receipts in respect of the deposited securities.
Therefore, there may not be a correlation between information concerning the
issuer of the security and the market value of an unsponsored ADR, EDR or GDR.
ADRs may be listed on a national securities exchange or may be traded in the
over-the-counter market. EDRs and GDRs traded in the over-the-counter market
which do not have an active or substantial secondary market will be considered
illiquid and therefore will be subject to a Portfolio's limitation with respect
to such securities. ADR prices are denominated in U.S. dollars although the
underlying securities are denominated in a foreign currency. Investments in
ADRs, EDRs and GDRs involve risks similar to those accompanying direct
investments in foreign securities.
Rule 144A Securities
A Fund may invest in restricted securities, including unregistered
securities eligible for resale without registration pursuant to Rule 144A ("Rule
144A Securities") under the 1933 Act. Rule 144A Securities may be freely traded
among qualified institutional investors without registration under the 1933 Act.
Investing in Rule 144A Securities could have the effect of increasing
the level of a Fund's illiquidity to the extent that qualified institutional
buyers become, for a time, uninterested in purchasing these securities. After
the purchase of a Rule 144A Security, however, the Board of Directors and the
Manager will continue to monitor the liquidity of that security to ensure that a
Fund has no more than 15% (or, in the case of Global Bond, International Equity
and Global Equity Funds, 10%) of its net assets in illiquid securities.
Non-Traditional Equity Securities
Emerging Markets Fund, International Small Cap Fund, New Europe and
Latin America may each invest in convertible preferred stocks that offer
enhanced yield features, such as Preferred Equity Redemption Cumulative Stock
("PERCS"), which provide an investor, such as the Funds, with the opportunity to
earn higher dividend income than is available on a company's common stock. A
PERCS is a preferred stock which generally features a mandatory conversion date,
as well as a capital appreciation limit which is usually expressed in terms of a
stated price. Upon the conversion date, most PERCS convert into common stock of
the issuer (PERCS are generally not convertible into cash at maturity). Under a
typical arrangement, if after a predetermined number of years the issuer's
common stock is trading at a price below that set by the capital appreciation
limit, each PERCS would convert to one share of common stock. If, however, the
issuer's common stock is trading at a price above that set by the capital
appreciation limit, the holder of the PERCS would receive less than one full
share of common stock. The amount of that fractional share of common stock
received by the PERCS holder is determined by dividing the price set by the
capital appreciation limit of the PERCS by the market price of the issuer's
common stock. PERCS can be called at any time prior to maturity, and hence do
not provide call protection. However, if called early, the issuer may pay a call
premium over the market price to the investor. This call premium declines at a
preset rate daily, up to the maturity date of the PERCS.
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The Funds may also invest in other enhanced convertible securities.
These include but are not limited to ACES (Automatically Convertible Equity
Securities), PEPS (Participating Equity Preferred Stock), PRIDES (Preferred
Redeemable Increased Dividend Equity Securities), SAILS (Stock Appreciation
Income Linked Securities), TECONS (Term Convertible Notes), QICS (Quarterly
Income Cumulative Securities) and DECS (Dividend Enhanced Convertible
Securities). ACES, PEPS, PRIDES, SAILS, TECONS, QICS, and DECS all have the
following features: they are company-issued convertible preferred stock; unlike
PERCS, they do not have capital appreciation limits; they seek to provide the
investor with high current income, with some prospect of future capital
appreciation; they are typically issued with three to four-year maturities; they
typically have some built-in call protection for the first two to three years;
investors have the right to convert them into shares of common stock at a preset
conversion ratio or hold them until maturity; and upon maturity, they will
automatically convert to either cash or a specified number of shares of common
stock.
Zero-Coupon Securities
Global Bond Fund, Global Equity Fund and Emerging Markets Fund Fund may
also invest in zero-coupon bonds. The market prices of zero-coupon securities
are generally more volatile than the market prices of securities that pay
interest periodically and are likely to respond to changes in interest rates to
a greater degree than do non-zero-coupon securities having similar maturities
and credit quality. Current federal income tax law requires that a holder of a
taxable zero-coupon security report as income each year the portion of the
original issue discount of such security that accrues that year, even though the
holder receives no cash payments of interest during the year. The Fund has
qualified as a regulated investment company under the Code. Accordingly, during
periods when a Fund receives no interest payments on its zero-coupon securities,
it will be required, in order to maintain its desired tax treatment, to
distribute cash approximating the income attributable to such securities. Such
distribution may require the sale of portfolio securities to meet the
distribution requirements and such sales may be subject to the risk factor
discussed above.
Interest Rate Swaps
In order to attempt to protect Global Bond Fund's investments from
interest rate fluctuations, the Fund may engage in interest rate swaps. The Fund
intends to use interest rate swaps as a hedge and not as a speculative
investment. Interest rate swaps involve the exchange by the Fund with another
party of their respective rights to receive interest, (e.g., an exchange of
fixed rate payments for floating rate payments). For example, if the Fund holds
an interest-paying security whose interest rate is reset once a year, it may
swap the right to receive interest at this fixed rate for the right to receive
interest at a rate that is reset daily. Such a swap position would offset
changes in the value of the underlying security because of subsequent changes in
interest rates. This would protect the Fund from a decline in the value of the
underlying security due to rising rates, but would also limit its ability to
benefit from falling interest rates.
The Fund may enter into interest rate swaps on either an asset-based or
liability-based basis, depending upon whether it is hedging its assets or its
liabilities, and will usually enter into interest rate swaps on a net basis
(i.e., the two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments). Inasmuch
as these hedging transactions are entered into for non-speculative purposes and
not for the purpose of leveraging the Fund's investments, the Managers and the
Fund believe such obligations do not constitute senior securities and,
accordingly, will not treat them as being subject to its borrowing restrictions.
The net amount of the excess, if any, of the Fund's obligations over its
entitlement with respect to each interest rate swap will be accrued on a daily
basis and an amount of cash or high-quality liquid securities having an
aggregate net asset value at least equal to the accrued excess will be
maintained in a segregated account by the Custodian Bank. If the Fund enters
into an interest rate swap on other than a net basis, it would maintain a
segregated account in the full amount accrued on a daily basis of the Fund's
obligations with respect to the swap.
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The use of interest rate swaps by the Fund involves investment
techniques and risks different from those associated with ordinary portfolio
securities transactions. If a manager is incorrect in its forecasts of market
values, interest rates and other applicable factors, the investment performance
of the Fund will be less favorable than it would have been if this investment
technique were never used. Interest rate swaps do not involve the delivery of
securities or other underlying assets or principal. Thus, if the other party to
an interest rate swap defaults, the Fund's risk of loss consists of the net
amount of interest payments that the Fund is contractually entitled to receive.
Risks Relating to Russian Securities
The New Europe Fund may invest to a limited degree in Russian
Securities. Investing in Russian companies involves a high degree of risk and
special considerations not typically associated with investing in the U.S.
securities markets, and should be considered highly speculative. Such risks
include: (1) delays in settling portfolio transactions and risk of loss arising
out of Russia's system of share registration and custody; (2) the risk that it
may be impossible or more difficult than in other countries to obtain and/or
enforce a judgment; (3) pervasiveness of corruption and crime in the Russian
economic system; (4) currency exchange rate volatility and the lack of available
currency hedging instruments; (5) higher rates of inflation (including the risk
of social unrest associated with periods of hyper-inflation); (6) controls on
foreign investment and local practices disfavoring foreign investors and
limitations on repatriation of invested capital, profits and dividends, and on
the New Europe Fund's ability to exchange local currencies for U.S. dollars; (7)
the risk that the government of Russia or other executive or legislative bodies
may decide not to continue to support the economic reform programs implemented
since the dissolution of the Soviet Union and could follow radically different
political and/or economic policies to the detriment of investors, including
non-market-oriented policies such as the support of certain industries at the
expense of other sectors or investors, or a return to the centrally planned
economy that existed prior to the dissolution of the Soviet Union; (8) the
financial condition of Russian companies, including large amounts of
inter-company debt which may create a payments crisis on a national scale; (9)
dependency on exports and the corresponding importance of international trade;
(10) the risk that the Russian tax system will not be reformed to prevent
inconsistent, retroactive and/or exorbitant taxation; and (11) possible
difficulty in identifying a purchaser of securities held by the New Europe Fund
due to the underdeveloped nature of the securities markets.
There is little historical data on Russian securities markets because
they are relatively new and a substantial proportion of securities transactions
in Russia are privately negotiated outside of stock exchanges. Because of the
recent formation of the securities markets as well as the underdeveloped state
of the banking and telecommunications systems, settlement, clearing and
registration of securities transactions are subject to significant risks.
Ownership of shares (except where shares are held through depositories that meet
the requirements of the 1940 Act) is defined according to entries in the
company's share register and normally evidenced by extracts from the register or
by formal share certificates. However, there is no central registration system
for shareholders and these services are carried out by the companies themselves
or by registrars located throughout Russia. These registrars are not necessarily
subject to effective state supervision and it is possible for the New Europe
Fund to lose its registration through fraud, negligence or even mere oversight.
In addition, while applicable Russian regulations impose liability on registrars
for losses resulting from their errors, it may be difficult for the Fund to
enforce any rights it may have against the registrar or issuer of the securities
in the event of loss of share registration. Furthermore, although a Russian
public enterprise with more than 1,000 shareholders is required by law to
contract out the maintenance of its shareholder register to an independent
entity that meets certain criteria, in practice this regulation has not always
been strictly enforced. Because of this lack of independence, management of a
company may be able to exert considerable influence over who can purchase and
sell the company's shares by illegally instructing the registrar to refuse to
record transactions in the share register. This practice may prevent the New
Europe Fund from investing in the securities of certain Russian companies deemed
suitable by the Investment Manager. Further, this also could cause a delay in
the sale of Russian company securities by the Fund if a potential purchaser is
deemed unsuitable, which may expose the Fund to potential loss on the
investment.
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Investment Company Securities
Any investments that a Fund makes in either closed-end or open-end
investment companies will be limited by the 1940 Act, and would involve an
indirect payment of a portion of the expenses, including advisory fees, of such
other investment companies. Under the 1940 Act's limitations, the Fund may not
(1) own more than 3% of the voting stock of another investment company; (2)
invest more than 5% of the Fund's total assets in the shares of any one
investment company; nor (3) invest more than 10% of the Fund's total assets in
shares of other investment companies. These percentage limitations also apply to
the Fund's investments in unregistered investment companies.
Diversification
While Global Bond Fund, Emerging Markets Fund and Global Equity Fund
each intend to seek to qualify as a "diversified" investment company under
provisions of Subchapter M of the Code, none of these Funds will be diversified
under the 1940 Act. Thus, while at least 50% of each such Fund's total assets
will be represented by cash, cash items, U.S. government securities and other
securities limited in respect of any one issuer to an amount not greater than 5%
of the Fund's total assets, it will not satisfy the 1940 Act requirement in this
respect, which applies that test to 75% of the Fund's assets. A nondiversified
portfolio is believed to be subject to greater risk because adverse effects on
the portfolio's security holdings may affect a larger portion of the overall
assets.
Concentration
In applying the Funds' fundamental policy concerning concentration that
is described above, it is a matter of non-fundamental policy that: (i) utility
companies will be divided according to their services, for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry; (ii) financial service companies will be classified according to the
end users of their services, for example, automobile finance, bank finance and
diversified finance will each be considered a separate industry; and (iii) asset
backed securities will be classified according to the underlying assets securing
such securities.
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SPECIAL RISK CONSIDERATIONS
Foreign Securities Risks. Each Fund has the right to purchase securities
in any developed, underdeveloped or emerging country. Investors should consider
carefully the substantial risks involved in investing in securities issued by
companies and governments of foreign nations. These risks are in addition to the
usual risks inherent in domestic investments. There is the possibility of
expropriation, nationalization or confiscatory taxation, taxation of income
earned in foreign nations or other taxes imposed with respect to investments in
foreign nations, foreign exchange control (which may include suspension of the
ability to transfer currency from a given country), default in foreign
government securities, political or social instability or diplomatic
developments which could affect investments in securities of issuers in those
nations.
In addition, in many countries, there is substantially less publicly
available information about issuers than is available in reports about companies
in the United States. Foreign companies are not subject to uniform accounting,
auditing and financial reporting standards, and auditing practices and
requirements may not be comparable to those applicable to United States
companies. In particular, the assets and profits appearing on the financial
statements of a developing or emerging country issuer may not reflect its
financial position or results of operations in the way they would be reflected
had the financial statements been prepared in accordance with the United States'
generally accepted accounting principles. Also, for an issuer that keeps
accounting records in local currency, inflation accounting rules may require for
both tax and accounting purposes, that certain assets and liabilities be
restated on the issuer's balance sheet in order to express items in terms of
currency or constant purchasing power. Inflation accounting may indirectly
generate losses or profits. Consequently, financial data may be materially
affected by restatements for inflation and may not accurately reflect the real
condition of those issuers and securities markets.
Further, a Fund may encounter difficulty or be unable to pursue legal
remedies and obtain judgments in foreign courts. Commission rates on securities
transactions in foreign countries, which are sometimes fixed rather than subject
to negotiation as in the United States, are likely to be higher. Further, the
settlement period of securities transactions in foreign markets may be longer
than in domestic markets, and may be subject to administrative uncertainties. In
many foreign countries, there is less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
than in the United States, and capital requirements for brokerage firms are
generally lower. The foreign securities markets of many of the countries in
which a Fund may invest may also be smaller, less liquid and subject to greater
price volatility than those in the United States.
Emerging Markets Securities Risks. Compared to the United States and
other developed countries, emerging countries may have volatile social
conditions, relatively unstable governments and political systems, economies
based on only a few industries and economic structures that are less diverse and
mature, and securities markets that trade a small number of securities, which
can result in a low or nonexistent volume of trading. Prices in these securities
markets tend to be volatile and, in the past, securities in these countries have
offered greater potential for gain (as well as loss) than securities of
companies located in developed countries. Until recently, there has been an
absence of a capital market structure or market-oriented economy in certain
emerging countries. Further, investments and opportunities for investments by
foreign investors are subject to a variety of national policies and restrictions
in many emerging countries. These restrictions may take the form of prior
governmental approval, limits on the amount or type of securities held by
foreigners, limits on the types of companies in which foreigners may invest and
prohibitions on foreign investments in issuers or industries deemed sensitive to
national interests. Additional restrictions may be imposed at any time by these
or other countries in which a Fund invests. Also, the repatriation of both
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investment income and capital from several foreign countries is restricted and
controlled under certain regulations, including, in some cases, the need for
certain governmental consents. Although these restrictions may in the future
make it undesirable to invest in emerging countries, the Manager does not
believe that any current repatriation restrictions would affect its decision to
invest in such countries. Countries such as those in which a Fund may invest,
and in which Emerging Markets Fund will primarily invest, have historically
experienced and may continue to experience, substantial, and in some periods
extremely high rates of inflation for many years, high interest rates, exchange
rate fluctuations or currency depreciation, large amounts of external debt,
balance of payments and trade difficulties and extreme poverty and unemployment.
Other factors which may influence the ability or willingness to service debt
include, but are not limited to, a country's cash flow situation, the
availability of sufficient foreign exchange on the date a payment is due, the
relative size of its debt service burden to the economy as a whole, its
government's policy towards the International Monetary Fund, the World Bank and
other international agencies and the political constraints to which a government
debtor may be subject.
Foreign Government Securities Risks. With respect to investment in debt
issues of foreign governments, the ability of a foreign government or
government-related issuer to make timely and ultimate payments on its external
debt obligations will also be strongly influenced by the issuer's balance of
payments, including export performance, its access to international credits and
investments, fluctuations in interest rates and the extent of its foreign
reserves. A country whose exports are concentrated in a few commodities or whose
economy depends on certain strategic imports could be vulnerable to fluctuations
in international prices of these commodities or imports. To the extent that a
country receives payment for its exports in currencies other than dollars, its
ability to make debt payments denominated in dollars could be adversely
affected. If a foreign government or government-related issuer cannot generate
sufficient earnings from foreign trade to service its external debt, it may need
to depend on continuing loans and aid from foreign governments, commercial banks
and multilateral organizations, and inflows of foreign investment. The
commitment on the part of these foreign governments, multilateral organizations
and others to make such disbursements may be conditioned on the government's
implementation of economic reforms and/or economic performance and the timely
service of its obligations. Failure to implement such reforms, achieve such
levels of economic performance or repay principal or interest when due may
curtail the willingness of such third parties to lend funds, which may further
impair the issuer's ability or willingness to service its debts in a timely
manner. The cost of servicing external debt will also generally be adversely
affected by rising international interest rates because many external debt
obligations bear interest at rates which are adjusted based upon international
interest rates. The ability to service external debt will also depend on the
level of the relevant government's international currency reserves and its
access to foreign exchange. Currency devaluations may affect the ability of a
government issuer to obtain sufficient foreign exchange to service its external
debt.
As a result of the foregoing, a foreign governmental issuer may default
on its obligations. If such a default occurs, a Fund may have limited effective
legal recourse against the issuer and/or guarantor. Remedies must, in some
cases, be pursued in the courts of the defaulting party itself, and the ability
of the holder of foreign government and government-related debt securities to
obtain recourse may be subject to the political climate in the relevant country.
In addition, no assurance can be given that the holders of commercial bank debt
will not contest payments to the holders of other foreign government and
government-related debt obligations in the event of default under their
commercial bank loan agreements.
Among the foreign government and government related issuers in which
Emerging Markets Fund may invest are certain high-yield securities, including
so-called Brady Bonds. The issuers of the foreign government and
government-related high yield securities, including Brady Bonds, in which
Emerging Markets Fund expect to invest have in the past experienced substantial
difficulties in servicing their external debt obligations, which have led to
defaults on certain obligations and the restructuring of certain indebtedness.
Restructuring arrangements have included, among other things, reducing and
rescheduling interest and principal payments by negotiating new or amended
credit agreements or converting outstanding principal and unpaid interest to
Brady Bonds, and obtaining new credit to finance interest payments. Holders of
certain foreign government and government-related high yield securities may be
requested to participate in the restructuring of such obligations and to extend
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further loans to their issuers. There can be no assurance that the Brady Bonds
and other foreign government and government-related high yield securities in
which the Emerging Markets Fund may invest will not be subject to similar
defaults or restructuring arrangements which may adversely affect the value of
such investments. Furthermore, certain participants in the secondary market for
such debt may be directly involved in negotiating the terms of these
arrangements and may therefore have access to information not available to other
market participants.
Brady Bonds are debt securities issued under the framework of the Brady
Plan, an initiative announced by former U.S. Treasury Secretary Nicholas F.
Brady in 1989 as a mechanism for debtor nations to restructure their outstanding
external indebtedness (generally, commercial bank debt). In restructuring its
external debt under the Brady Plan framework, a debtor nation negotiates with
its existing bank lenders as well as multilateral institutions such as the World
Bank and the International Monetary Fund. The Brady Plan framework, as it has
developed, contemplates the exchange of commercial bank debt for new issued
bonds (Brady Bonds). The investment advisers believe that economic reforms
undertaken by countries in connection with the issuance of Brady Bonds make the
debt of countries which have issued or have announced plans to issue Brady Bonds
an attractive opportunity for investment. Investors, however, should recognize
that the Brady Plan only sets forth general guiding principles for economic
reform and debt reduction, emphasizing that solutions must be negotiated on a
case-by-case basis between debtor nations and their creditors. In addition,
Brady Bonds have been issued only recently and, accordingly, do not have a long
payment history.
Risks Related to Additional Investment Techniques. With respect to
forward foreign currency contracts, the precise matching of forward contract
amounts and the value of the securities involved is generally not possible since
the future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities between the
date the forward contract is entered into and the date it matures. The
projection of short-term currency strategy is highly uncertain.
It is impossible to forecast the market value of portfolio securities at
the expiration of the contract. Accordingly, it may be necessary for a Fund to
purchase additional foreign currency on the spot market (and bear the expense of
such purchase) if the market value of the security is less than the amount of
foreign currency the Fund is obligated to deliver (and if a decision is made to
sell the security and make delivery of the foreign currency). Conversely, it may
be necessary to sell on the spot market some of the foreign currency received
upon the sale of the portfolio security if its market value exceeds the amount
of foreign currency the Fund is obligated to deliver.
Emerging Markets Fund may invest up to 35% of its net assets, in high
yield, high risk foreign fixed-income securities. These securities are rated
lower than BBB by S&P and Baa by Moody's or, if unrated, are considered by
Delaware International to be of equivalent quality. No Fund will purchase
securities rated lower than C by S&P or Ca by Moody's, or, if unrated,
considered to be of an equivalent quality to such ratings by the Investment
Manager. Fixed-income securities of this type are considered to be of poor
standing and predominantly speculative. Such securities are subject to a
substantial degree of credit risk.
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ACCOUNTING AND TAX ISSUES
When a Fund writes a call, or purchases a put option, an amount equal
to the premium received or paid by it is included in the Fund's assets and
liabilities as an asset and as an equivalent liability.
In writing a call, the amount of the liability is subsequently "marked
to market" to reflect the current market value of the option written. The
current market value of a written option is the last sale price on the principal
Exchange on which such option is traded or, in the absence of a sale, the mean
between the last bid and asked prices. If an option which a Fund has written
expires on its stipulated expiration date, the Fund recognizes a capital gain.
If a Fund enters into a closing purchase transaction with respect to an option
which the Fund has written, the Fund realizes a gain (or loss if the cost of the
closing transaction exceeds the premium received when the option was sold)
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is extinguished. If a call option which a
Fund has written is exercised, the Fund realizes a capital gain or loss from the
sale of the underlying security and the proceeds from such sale are increased by
the premium originally received.
The premium paid by a Fund for the purchase of a put option is recorded
in the Fund's assets and liabilities as an investment and subsequently adjusted
daily to the current market value of the option. For example, if the current
market value of the option exceeds the premium paid, the excess would be
unrealized appreciation and, conversely, if the premium exceeds the current
market value, such excess would be unrealized depreciation. The current market
value of a purchased option is the last sale price on the principal Exchange on
which such option is traded or, in the absence of a sale, the mean between the
last bid and asked prices. If an option which a Fund has purchased expires on
the stipulated expiration date, the Fund realizes a short-term or long-term
capital loss for federal income tax purposes in the amount of the cost of the
option. If a Fund exercises a put option, it realizes a capital gain or loss
(long-term or short-term, depending on the holding period of the underlying
security) from the sale of the underlying security and the proceeds from such
sale will be decreased by the premium originally paid.
Options on Certain Stock Indices
Accounting for options on certain stock indices will be in accordance
with generally accepted accounting principles. The amount of any realized gain
or loss on closing out such a position will result in a realized gain or loss
for tax purposes. Such options held by a Fund at the end of each fiscal year on
a broad-based stock index will be required to be "marked to market" for federal
income tax purposes. Generally, 60% of any net gain or loss recognized on such
deemed sales or on any actual sales will be treated as long-term capital gain or
loss, and the remainder will be treated as short-term capital gain or loss.
Other Tax Requirements
Each Fund has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Code. As such, a Fund
will not be subject to federal income tax, or to any excise tax, to the extent
its earnings are distributed as provided in the Code and it satisfies other
requirements relating to the sources of its income and diversification of its
assets. See Diversification under Investment Policies and Portfolio Techniques.
In order to qualify as a regulated investment company for federal
income tax purposes, each Fund must meet certain specific requirements,
including:
(i) A Fund must maintain a diversified portfolio of securities, wherein
no security (other than U.S. government securities and securities of other
regulated investment companies) can exceed 25% of that Fund's total assets, and,
with respect to 50% of that Fund's total assets, no investment (other than cash
and cash items, U.S. government securities and securities of other regulated
investment companies) can exceed 5% of that Fund's total assets;
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(ii) A Fund must derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or disposition of stock and securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities, or currencies;
(iii) A Fund must distribute to its shareholders at least 90% of its
investment company taxable income and net tax-exempt income for each of its
fiscal years, and
(iv) A Fund must realize less than 30% of its gross income for each
fiscal year from gains from the sale of securities and certain other assets that
have been held by the Fund for less than three months ("short-short income").
The Taxpayer Relief Act of 1997 (the "1997 Act") repealed the 30% short-short
income test for tax years of regulated investment companies beginning after
August 5, 1997; however, this rule may have continuing effect in some states for
purposes of classifying the Fund as a regulated investment company.
The Code requires a Fund to distribute at least 98% of its taxable
ordinary income earned during the calendar year and 98% of its capital gain net
income earned during the 12 month period ending October 31 (in addition to
amounts from the prior year that were neither distributed nor taxed to such
Fund) to shareholders by December 31 of each year in order to avoid federal
excise taxes. The Funds intend as a matter of policy to declare and pay
sufficient dividends in December or January (which are treated by shareholders
as received in December) but does not guarantee and can give no assurances that
its distributions will be sufficient to eliminate all such taxes.
The straddle rules of Section 1092 may apply. Generally, the straddle
provisions require the deferral of losses to the extent of unrecognized gains
related to the offsetting positions in the straddle. Excess losses, if any, can
be recognized in the year of loss. Deferred losses will be carried forward and
recognized in the year that unrealized losses exceed unrealized gains.
The federal income tax rules governing the taxation of interest rate
swaps are not entirely clear and may require Global Bond Fund to treat payments
received under such arrangements as ordinary income and to amortize such
payments under certain circumstances. Global Bond Fund will limit its activity
in this regard in order to maintain its qualification as a regulated investment
company.
The 1997 Act has also added new provisions for dealing with
transactions that are generally called "Constructive Sale Transactions." Under
these rules, the Fund must recognize gain (but not loss) on any constructive
sale of an appreciated financial position in stock, a partnership interest or
certain debt instruments. The Fund will generally be treated as making a
constructive sale when it: 1) enters into a short sale on the same or
substantially identical property; 2) enters into an offsetting notional
principal contract; or 3) enters into a futures or forward contract to deliver
the same or substantially identical property. Other transactions (including
certain financial instruments called collars) will be treated as constructive
sales as provided in Treasury regulations to be published. There are also
certain exceptions that apply for transactions that are closed before the end of
the 30th day after the close of the taxable year.
Investment in Foreign Currencies and Foreign Securities--The Funds are
authorized to invest certain limited amounts in foreign securities. Such
investments, if made, will have the following additional tax consequences to
each Fund:
Under the Code, gains or losses attributable to fluctuations in foreign
currency exchange rates which occur between the time a Fund accrues income
(including dividends), or accrues expenses which are denominated in a foreign
currency, and the time a Fund actually collects such income or pays such
expenses generally are treated as ordinary income or loss. Similarly, on the
disposition of debt securities denominated in a foreign currency and on the
disposition of certain options, futures, forward contracts, gain or loss
21
<PAGE>
attributable to fluctuations in the value of foreign currency between the date
of acquisition of the security or contract and the date of its disposition are
also treated as ordinary gain or loss. These gains or losses, referred to under
the Code as "Section 988" gains or losses, may increase or decrease the amount
of a Fund's net investment company taxable income, which, in turn, will affect
the amount of income to be distributed to you by a Fund.
If a Fund's Section 988 losses exceed a Fund's other investment company
taxable income during a taxable year, a Fund generally will not be able to make
ordinary dividend distributions to you for that year, or distributions made
before the losses were realized will be recharacterized as return of capital
distributions for federal income tax purposes, rather than as an ordinary
dividend or capital gain distribution. If a distribution is treated as a return
of capital, your tax basis in your Fund shares will be reduced by a like amount
(to the extent of such basis), and any excess of the distribution over your tax
basis in your Fund shares will be treated as capital gain to you.
The 1997 Act generally requires that foreign income be translated into
U.S. dollars at the average exchange rate for the tax year in which the
transactions are conducted. Certain exceptions apply to taxes paid more than two
years after the taxable year to which they relate. This new law may require a
Fund to track and record adjustments to foreign taxes paid on foreign securities
in which it invests. Under a Fund's current reporting procedure, foreign
security transactions are recorded generally at the time of each transaction
using the foreign currency spot rate available for the date of each transaction.
Under the new law, a Fund will be required to record at fiscal year end (and at
calendar year end for excise tax purposes) an adjustment that reflects the
difference between the spot rates recorded for each transaction and the year-end
average exchange rate for all of a Fund's foreign securities transactions. There
is a possibility that the mutual fund industry will be given relief from this
new provision, in which case no year-end adjustments will be required.
The Funds may be subject to foreign withholding taxes on income from
certain of its foreign securities. If more than 50% of the total assets of a
Fund at the end of its fiscal year are invested in securities of foreign
corporations, a Fund may elect to pass-through to you your pro rata share of
foreign taxes paid by a Fund. If this election is made, you will be: (i)
required to include in your gross income your pro rata share of foreign source
income (including any foreign taxes paid by a Fund); and (ii) entitled to either
deduct your share of such foreign taxes in computing your taxable income or to
claim a credit for such taxes against your U.S. income tax, subject to certain
limitations under the Code. You will be informed by a Fund at the end of each
calendar year regarding the availability of any such foreign tax credits and the
amount of foreign source income (including any foreign taxes paid by a Fund). If
a Fund elects to pass-through to you the foreign income taxes that it has paid,
you will be informed at the end of the calendar year of the amount of foreign
taxes paid and foreign source income that must be included on your federal
income tax return. If a Fund invests 50% or less of its total assets in
securities of foreign corporations, it will not be entitled to pass-through to
you your pro-rata shares of foreign taxes paid by a Fund. In this case, these
taxes will be taken as a deduction by a Fund, and the income reported to you
will be the net amount after these deductions. The 1997 Act also simplifies the
procedures by which investors in funds that invest in foreign securities can
claim tax credits on their individual income tax returns for the foreign taxes
paid by a Fund. These provisions will allow investors who pay foreign taxes of
$300 or less on a single return or $600 or less on a joint return during any
year (all of which must be reported on IRS Form 1099-DIV from a Fund to the
investor) to claim a tax credit against their U.S. federal income tax for the
amount of foreign taxes paid by a Fund. This process will allow you, if you
qualify, to bypass the burdensome and detailed reporting requirements on the
foreign tax credit schedule (Form 1116) and report your foreign taxes paid
directly on page 2 of Form 1040. You should note that this simplified procedure
will not be available until calendar year 1998.
Investment in Passive Foreign Investment Company securities--The Funds
may invest in shares of foreign corporations which may be classified under the
Code as passive foreign investment companies ("PFICs"). In general, a foreign
corporation is classified as a PFIC if at least one-half of its assets
constitute investment-type assets or 75% or more of its gross income is
investment-type income. If a Fund receives an "excess distribution" with respect
to PFIC stock, the Fund itself may be subject to U.S. federal income tax on a
22
<PAGE>
portion of the distribution, whether or not the corresponding income is
distributed by a Fund to you. In general, under the PFIC rules, an excess
distribution is treated as having been realized ratably over the period during
which a Fund held the PFIC shares. A Fund itself will be subject to tax on the
portion, if any, of an excess distribution that is so allocated to prior Fund
taxable years, and an interest factor will be added to the tax, as if the tax
had been payable in such prior taxable years. In this case, you would not be
permitted to claim a credit on your own tax return for the tax paid by a Fund.
Certain distributions from a PFIC as well as gain from the sale of PFIC shares
are treated as excess distributions. Excess distributions are characterized as
ordinary income even though, absent application of the PFIC rules, certain
distribution might have been classified as capital gain. This may have the
effect of increasing Fund distributions to you that are treated as ordinary
dividends rather than long-term capital gain dividends.
A Fund may be eligible to elect alternative tax treatment with respect
to PFIC shares. Under an election that currently is available in some
circumstances, a Fund generally would be required to include in its gross income
its share of the earnings of a PFIC on a current basis, regardless of whether
distributions are received from the PFIC during such period. If this election
were made, the special rules, discussed above, relating to the taxation of
excess distributions, would not apply. In addition, the 1997 Act provides for
another election that would involve marking-to-market the Fund's PFIC shares at
the end of each taxable year (and on certain other dates as prescribed in the
Code), with the result that unrealized gains would be treated as though they
were realized. The Fund would also be allowed an ordinary deduction for the
excess, if any, of the adjusted basis of its investment in the PFIC stock over
its fair market value at the end of the taxable year. This deduction would be
limited to the amount of any net mark-to-market gains previously included with
respect to that particular PFIC security. If a Fund were to make this second
PFIC election, tax at the Fund level under the PFIC rules would generally be
eliminated.
The application of the PFIC rules may affect, among other things, the
amount of tax payable by a Fund (if any), the amounts distributable to you by a
Fund, the time at which these distributions must be made, and whether these
distributions will be classified as ordinary income or capital gain
distributions to you.
You should be aware that it is not always possible at the time shares
of a foreign corporation are acquired to ascertain that the foreign corporation
is a PFIC, and that there is always a possibility that a foreign corporation
will become a PFIC after a Fund acquires shares in that corporation. While a
Fund will generally seek to avoid investing in PFIC shares to avoid the tax
consequences detailed above, there are no guarantees that it will do so and it
reserves the right to make such investments as a matter of its fundamental
investment policy.
Most foreign exchange gains are classified as ordinary income which
will be taxable to you as such when distributed. Similarly, you should be aware
that any foreign exchange losses realized by a Fund, including any losses
realized on the sale of foreign debt securities, are generally treated as
ordinary losses for federal income tax purposes. This treatment could increase
or reduce a Fund's income available for distribution to you, and may cause some
or all of a Fund's previously distributed income to be classified as a return of
capital.
23
<PAGE>
PERFORMANCE INFORMATION
From time to time, each Fund may state its Classes' total return and
yield in advertisements and other types of literature. Any statement of total
return performance data for a Class will be accompanied by information on the
average annual compounded rate of return for that Class over, as relevant, the
most recent one-, five- and ten-year, or life-of-fund periods, as applicable.
Each Fund may also advertise aggregate and average total return information for
its Classes over additional periods of time. In addition, each Fund may include
illustrations showing the power of compounding in advertisements and other types
of literature.
In presenting performance information for Class A Shares, the Limited
CDSC or other CDSC, applicable only to certain redemptions of those shares, will
not be deducted from any computation of total return. All references to a
CDSC in this Performance Information section will apply to Class B Shares or
Class C Shares.
The average annual total rate of return for each Class is based on a
hypothetical $1,000 investment that includes capital appreciation and
depreciation during the stated periods. The following formula will be used for
the actual computations:
n
P(1 + T) = ERV
Where: P = a hypothetical initial purchase order of $1,000 from which, in
the case of only Class A Shares, the maximum front-end sales
charge is deducted;
T = average annual total return;
n = number of years;
ERV = redeemable value of the hypothetical $1,000 purchase at
the end of the period after the deduction of the applicable
CDSC, if any, with respect to Class B Shares and Class C
Shares.
Aggregate or cumulative total return is calculated in a similar manner,
except that the results are not annualized. Each calculation assumes the maximum
front-end sales charge, if any, is deducted from the initial $1,000 investment
at the time it is made with respect to Class A Shares and that all distributions
are reinvested at net asset value, and, with respect to Class B Shares and Class
C Shares, reflects the deduction of the CDSC that would be applicable upon
complete redemption of such shares. In addition, each Fund may present total
return information that does not reflect the deduction of the maximum front-end
sales charge or any applicable CDSC.
Each Fund may also state total return performance for its Classes in
the form of an average annual return. This average annual return figure will be
computed by taking the sum of a Class' annual returns, then dividing that figure
by the number of years in the overall period indicated. The computation will
reflect the impact of the maximum front-end sales charge or CDSC, if any, paid
on the illustrated investment amount against the first year's return. From time
to time, each Fund may quote actual total return performance for its Classes in
advertising and other types of literature compared to indices or averages of
alternative financial products available to prospective investors. For example,
the performance comparisons may include the average return of various bank
instruments, some of which may carry certain return guarantees offered by
leading banks and thrifts as monitored by Bank Rate Monitor, and those of
generally-accepted corporate bond and government security price indices of
various durations prepared by Lehman Brothers and Salomon Brothers, Inc. These
indices are not managed for any investment goal.
Below is the average annual total return performance of each Fund,
other than New Europe and Latin America Funds, through November 30, 1998. The
24
<PAGE>
total return for Class A Shares at offer reflects the maximum front-end sales
charge of 5.75% (4.75% for the Global Bond Fund) paid on the purchase of shares.
The total return for Class A Shares at net asset value (NAV) does not reflect
the payment of any front-end sales charge. The total return for Class B Shares
and Class C Shares including deferred sales charge reflects the deduction of the
applicable CDSC that would be paid if the shares were redeemed on November 30,
1998. The total return for Class B Shares and Class C Shares excluding deferred
sales charge assumes the shares were not redeemed on November 30, 1998 and,
therefore, does not reflect the deduction of a CDSC. Pursuant to applicable
regulation, total return shown for International Equity Fund Institutional Class
for the periods prior to the commencement of operations of such Class is
calculated by taking the performance of International Equity Fund A Class and
adjusting it to reflect the elimination of all front-end sales charges. However,
for those periods, no adjustment has been made to eliminate the impact of 12b-1
plan expenses, and performance would have been affected had such an adjustment
been made.
Performance information for the Class B and C Shares of Global
Opportunities Fund and International Small Cap Fund and performance for all
shares of New Europe and Latin America Funds is not provided because these
shares have not commenced operations as the close of Global Funds, Inc.'s fiscal
year.
Prior to July 21, 1998, the Global Equity Fund was named Global Assets
Fund and its investment focus changed from a mix of foreign and U.S. fixed
income stocks and bonds to primarily foreign and U.S. stocks.
Securities prices fluctuated during the periods covered and the past
results should not be considered as representative of future performance.
Average Annual Total Return(1)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1 year ended 11/30/98 3 years ended 11/30/98 5 years ended 11/30/98 Life of Fund(4)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Global Bond Fund A Class 5.47% 6.88% N/A 9.93%
(at NAV)
- -----------------------------------------------------------------------------------------------------------------------------------
Global Bond Fund A Class 0.45% 5.16% N/A 8.57%
(at Offer)
- -----------------------------------------------------------------------------------------------------------------------------------
Global Bond Fund B Class 0.59% 5.19% N/A 8.55%
(including CDSC)
- -----------------------------------------------------------------------------------------------------------------------------------
Global Bond Fund B Class 4.59% 6.06% N/A 9.15%
(excluding CDSC)
- -----------------------------------------------------------------------------------------------------------------------------------
Global Bond Fund C Class 3.71% 6.10% N/A 5.93%
(including CDSC)
- -----------------------------------------------------------------------------------------------------------------------------------
Global Bond Fund C Class 4.71% 6.10% 5.98%
(excluding CDSC)
- -----------------------------------------------------------------------------------------------------------------------------------
Global Bond Fund Institutional Class 5.88% 7.19% N/A 10.27%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
International Equity Fund A Class 8.75% 11.73% 10.51% 9.91%
(at NAV)
- -----------------------------------------------------------------------------------------------------------------------------------
International Equity Fund A Class 2.52% 9.56% 9.20% 9.00%
(at Offer)(2)
- -----------------------------------------------------------------------------------------------------------------------------------
International Equity Fund B Class 3.03% 10.16% N/A 7.20%
(including CDSC)(3)
- -----------------------------------------------------------------------------------------------------------------------------------
International Equity Fund B Class 8.03% 10.97% N/A 7.57%
(excluding CDSC)
- -----------------------------------------------------------------------------------------------------------------------------------
International Equity Fund C Class 7.04% 10.98% N/A 10.81%
(including CDSC)
- -----------------------------------------------------------------------------------------------------------------------------------
International Equity Fund C Class 8.04% 10.98% N/A 10.81%
(excluding CDSC)
- -----------------------------------------------------------------------------------------------------------------------------------
International Equity Fund Institutional 9.10% 12.09% 10.83% 10.20%
Class
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1 year ended 11/30/98 3 years ended 11/30/98 5 years ended 11/30/98 Life of Fund(4)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Emerging Markets Fund A Class -31.66% N/A N/A -13.27%
(at NAV)(5)
- -----------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Fund A Class -35.58% N/A N/A -15.32%
(at Offer)(2)(5)
- -----------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Fund B Class -35.29% N/A N/A -14.82%
(including CDSC)(3)
- -----------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Fund B Class -32.11% N/A N/A -13.84%
(excluding CDSC)
- -----------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Fund C Class -32.85% N/A N/A -13.89%
(including CDSC)
- -----------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Fund C Class -32.21% N/A N/A -13.89%
(excluding CDSC)
- -----------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Fund Institutional -31.55% N/A N/A -12.98%
Class
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Global Equity Fund A Class 8.83% 12.23% N/A 14.75%
(at NAV)
- -----------------------------------------------------------------------------------------------------------------------------------
Global Equity Fund A Class 2.55% 10.02% N/A 13.04%
(at Offer)(2)
- -----------------------------------------------------------------------------------------------------------------------------------
Global Equity Fund B Class 3.13% 10.60% N/A 13.41%
(including CDSC)(3)
- -----------------------------------------------------------------------------------------------------------------------------------
Global Equity Fund B Class 7.97% 11.41% N/A 13.94%
(excluding CDSC)
- -----------------------------------------------------------------------------------------------------------------------------------
Global Equity Fund C Class 7.03% 11.44% N/A 11.26%
(including CDSC)
- -----------------------------------------------------------------------------------------------------------------------------------
Global Equity Fund C Class 8.00% 11.44% N/A 11.26%
(excluding CDSC)
- -----------------------------------------------------------------------------------------------------------------------------------
Global Equity Fund Institutional Class 9.07% 12.52% N/A 15.08%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Global Opportunities Fund A Class 12.07% N/A N/A 6.17%
(at NAV)(6)
- -----------------------------------------------------------------------------------------------------------------------------------
Global Opportunities Fund A Class 5.63% N/A N/A 1.65%
(at Offer)(2)(6)
- -----------------------------------------------------------------------------------------------------------------------------------
Global Opportunities Fund 11.95% N/A N/A 6.08%
Institutional Class
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
International Small Cap Fund A Class 5.88% N/A N/A 5.88%
(at NAV)(6)
- -----------------------------------------------------------------------------------------------------------------------------------
International Small Cap Fund A Class (0.22%) N/A N/A (0.22%)
(at Offer)(2)(6)
- -----------------------------------------------------------------------------------------------------------------------------------
International Small Cap Fund 5.88% N/A N/A 5.88%
Institutional Class
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(1) The Manager voluntarily agreed to waive its management fee and pay
expenses to limit total operating expenses to certain limits during
the periods shown. Without such waiver and payment performance would
have been affected negatively. See Investment Management Agreements
and Sub-Advisory Agreement for information.
(2) Prior to November 2, 1998, the maximum front-end sales charge was
4.75%. Effective November 2, 1998, the maximum front-end sales charge
was increased to 5.75% and the above performance numbers are
calculated using 5.75% as the applicable sales charge.
(3) Effective November 2, 1998, the CDSC schedule for Class B Shares
increased as follows: (i) 5% if shares are redeemed within one year
of purchase (ii) 4% if shares are redeemed with two years of
purchase; (iii) 3% if shares are redeemed during the third or fourth
year following purchase; (iv) 2% if shares are redeemed during the
fifth year following purchase; (v) 1% if shares are redeemed during
the sixth year following purchase; and (v) 0% thereafter. The above
figures have been calculated using this new schedule.
(4) The Fund's commencement of operations were as follows:
26
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Global Bond Fund A Class 12/27/94 International Equity Fund A Class 10/31/91
Global Bond Fund B Class 12/27/94 International Equity Fund B Class 9/6/94
Global Bond Fund C Class 11/29/95 International Equity Fund C Class 11/29/95
Global Bond Fund Institutional Class 12/27/94 International Equity Fund Institutional Class 11/9/92
Emerging Markets Fund A Class 6/10/96 Global Equity Fund A Class 12/27/94
Emerging Markets Fund B Class 6/10/96 Global Equity Fund B Class 12/27/94
Emerging Markets Fund C Class 6/10/96 Global Equity Fund C Class 11/29/95
Emerging Markets Fund Institutional Class 6/10/96 Global Equity Fund Institutional Class 12/27/94
Global Opportunities Fund A Class 7/22/97 International Small Cap Fund A Class 12/19/97
Global Opportunities Fund Institutional Class 7/22/97 International Small Cap Fund
Institutional Class 12/19/97
</TABLE>
(5) For the period from February 1, 1998 through May 31, 1999, the
Distributor elected voluntarily to waive 0.05% of the Emerging
Markets Fund A Class' 12b-1 fee in order to limit 12b-1 Plan expenses
to 0.25%. In the absence of such voluntary waiver, performance would
have been affected negatively.
(6) For the period from the commencement of operations through May 31,
1999, the Distributor elected voluntarily to waive its entire 12b-1
fee with respect to Class A Shares.
Total return performance for a Class will be computed by adding all
reinvested income and realized securities profits distributions plus the change
in net asset value during a specific period and dividing by the offering price
at the beginning of the period. It will also reflect, as applicable, the maximum
front-end sales charge or CDSC paid with respect to the illustrated investment
amount, but not any income taxes payable by shareholders on the reinvested
distributions included in the calculation. Because securities prices fluctuate,
past performance should not be considered as a representation of the results
which may be realized from an investment in a Fund in the future.
From time to time, each Fund may also quote its Classes' actual total
return performance, dividend results and other performance information in
advertising and other types of literature. This information may be compared to
that of other mutual funds with similar investment objectives and to stock, bond
and other relevant indices or to rankings prepared by independent services or
other financial or industry publications that monitor the performance of mutual
funds. For example, the performance of a Fund (of Fund Class) may be compared to
data prepared by Lipper Analytical Services, Inc., Morningstar, Inc., or to the
S&P 500 Index, the Dow Jones Industrial Average, the Morgan Stanley Capital
International (MSCI), Europe, Australia and Far East (EAFE) Index, the MSCI
Emerging Markets Free Index, MSCI Emerging Markets Free Latin America Index, the
MSCI Europe Index or the Salomon Brothers World Government Bond Index.
Lipper Analytical Services, Inc. maintains statistical performance
databases, as reported by a diverse universe of independently-managed mutual
funds. Morningstar, Inc. is a mutual fund rating service that rates mutual funds
on the basis of risk-adjusted performance. Rankings that compare a Fund's
performance to another fund in appropriate categories over specific time periods
also may be quoted in advertising and other types of literature. The S&P 500 and
the Dow Jones Industrial Average are industry-accepted unmanaged indices of
generally conservative securities used for measuring general market performance.
Similarly, the MSCI EAFE Index, the MSCI Emerging Markets Free Index, and the
Salomon Brothers World Government Bond Index are industry-accepted unmanaged
indices of equity securities in developed countries and global debt securities,
respectively, used for measuring general market performance. The total return
performance reported for these indices will reflect the reinvestment of all
distributions on a quarterly basis and market price fluctuations. The indices do
not take into account any sales charges or other fees. A direct investment in an
unmanaged index is not possible.
As stated in the Prospectuses, Global Bond Fund may also quote the
current yield of each of its Classes in advertisements and investor
communications.
27
<PAGE>
The yield computation is determined by dividing the net investment
income per share earned during the period by the maximum offering price per
share on the last day of the period and annualizing the resulting figure,
according to the following formula.
a-b 6
YIELD = 2[( ---- + 1) - 1]
cd
Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends;
d = the maximum offering price per share on the last day
of the period.
The above formula will be used in calculating quotations of yield,
based on specific 30-day periods identified in advertising by Global Bond Fund.
Yield assumes the maximum front-end sales charge, if any, and does not reflect
the deduction of any CDSC or Limited CDSC. The yields of Global Bond Fund A
Class, Global Bond Fund B Class, Global Bond Fund C Class and Global Bond Fund
Institutional Class for the 30-day period ended November 30, 1998 were 3.77%,
3.27%, 3.28% and 4.27%, respectively, reflecting the voluntary waiver of fees
and payment of expenses by the Manager. Actual yield may be affected by
variations in sales charges on investments.
Past performance, such as reflected in quoted yields, should not be
considered as representative of the results which may be realized from an
investment in a Fund in the future. Investors should note that the income earned
and dividends paid by Global Bond Fund will vary with the fluctuation of
interest rates and performance of the portfolio to the extent of a Fund's
investments in debt securities. The net asset value of any Fund may change.
Unlike money market funds, the Funds invest in longer-term securities that
fluctuate in value and do so in a manner inversely correlated with changing
interest rates. A Fund's net asset value will tend to rise when interest rates
fall. Conversely, a Fund's net asset value will tend to fall as interest rates
rise. Normally, fluctuations in interest rates have a greater effect on the
prices of longer-term bonds. The value of the securities held in a Fund will
vary from day to day and investors should consider the volatility of a Fund's
net asset value as well as its yield before making a decision to invest.
Comparative information on the Consumer Price Index may also be
included in advertisements or other literature. The Consumer Price Index, as
prepared by the U.S. Bureau of Labor Statistics, is the most commonly used
measure of inflation. It indicates the cost fluctuations of a representative
group of consumer goods. It does not represent a return from an investment.
Current interest rate and yield information on government debt
obligations of various durations, as reported weekly by the Federal Reserve
(Bulletin H.15), may also be used. As well, current industry rate and yield
information on all industry available fixed-income securities, as reported
weekly by The Bond Buyer, may also be used in preparing comparative
illustrations.
Each Fund may also promote its Classes' yield and/or total return
performance and use comparative performance information computed by and
available from certain industry and general market research and publications,
such as Lipper Analytical Services, Inc., IBC/Donoghue's Money Market Report and
Morningstar, Inc.
28
<PAGE>
The performance of multiple indices compiled and maintained by
statistical research firms, such as Morgan Stanley, Salomon Brothers and Lehman
Brothers, may be combined to create a blended performance result for comparative
purposes. Generally, the indices selected will be representative of the types of
securities in which the Funds may invest and the assumptions that were used in
calculating the blended performance will be described.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides
historical returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury bills,
the U.S. rate of inflation (based on the Consumer Price Index), and combinations
of various capital markets. The performance of these capital markets is based on
the returns of different indices. The Funds may use the performance of these
capital markets in order to demonstrate general risk-versus-reward investment
scenarios. Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with the
security types in any capital market may or may not correspond directly to those
of the Funds. The Funds may also compare performance to that of other
compilations or indices that may be developed and made available in the future.
The Funds may include discussions or illustrations of the potential
investment goals of a prospective investor (including materials that describe
general principles of investing, such as asset allocation, diversification, risk
tolerance, and goal setting, questionnaires designed to help create a personal
financial profile, worksheets used to project savings needs based on assumed
rates of inflation and hypothetical rates of return and action plans offering
investment alternatives), investment management techniques, policies or
investment suitability of a Fund (such as value investing, market timing, dollar
cost averaging, asset allocation, constant ratio transfer, automatic account
rebalancing, the advantages and disadvantages of investing in tax-deferred and
taxable investments or global or international investments), economic and
political conditions, the relationship between sectors of the economy and the
economy as a whole, the effects of inflation and historical performance of
various asset classes, including but not limited to, stocks, bonds and Treasury
bills. From time to time advertisements, sales literature, communications to
shareholders or other materials may summarize the substance of information
contained in shareholder reports (including the investment composition of a
Fund), as well as the views as to current market, economic, trade and interest
rate trends, legislative, regulatory and monetary developments, investment
strategies and related matters believed to be of relevance to a Fund. In
addition, selected indices may be used to illustrate historic performance of
selected asset classes. The Funds may also include in advertisements, sales
literature, communications to shareholders or other materials, charts, graphs or
drawings which illustrate the potential risks and rewards of investment in
various investment vehicles, including but not limited to, domestic and
international stocks, and/or bonds, treasury bills and shares of a Fund. In
addition, advertisements, sales literature, communications to shareholders or
other materials may include a discussion of certain attributes or benefits to be
derived by an investment in a Fund and/or other mutual funds, shareholder
profiles and hypothetical investor scenarios, timely information on financial
management, tax and retirement planning (such as information on Roth IRAs and
Educational IRAs) and investment alternatives to certificates of deposit and
other financial instruments. Such sales literature, communications to
shareholders or other materials may include symbols, headlines or other material
which highlight or summarize the information discussed in more detail therein.
Materials may refer to the CUSIP numbers of the Funds and may
illustrate how to find the listings of the Funds in newspapers and periodicals.
Materials may also include discussions of other Funds, products, and services.
The Funds may quote various measures of volatility and benchmark
correlation in advertising. In addition, the Funds may compare these measures to
those of other funds. Measures of volatility seek to compare the historical
share price fluctuations or total returns to those of a benchmark. Measures of
benchmark correlation indicate how valid a comparative benchmark may be.
29
<PAGE>
Measures of volatility and correlation may be calculated using averages of
historical data. A Fund may advertise its current interest rate sensitivity,
duration, weighted average maturity or similar maturity characteristics.
Advertisements and sales materials relating to a Fund may include information
regarding the background and experience of its portfolio managers.
The following tables present examples, for purposes of illustration
only, of cumulative total return performance for each Class of each Fund through
November 30, 1998. The calculations assume the reinvestment of any realized
securities profits, distributions and income dividends paid during the indicated
periods. The performance also reflects maximum sales charges, if any, but not
any income taxes payable by shareholders on the reinvested distributions
included in the calculations. The performance of Class A Shares reflects the
maximum front-end sales charge paid on purchases of shares but may also be shown
without reflecting the impact of any front-end sales charge. The performance of
Class B Shares and Class C Shares is calculated both with the applicable CDSC
included and excluded. The net asset value of a class fluctuates so shares, when
redeemed, may be worth more or less than the original investment, and a Class'
results should not be considered as representative of future performance.
Cumulative Total Return(1)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
3 months 6 months 9 months 1 year 3 years 5 years
ended ended ended ended ended ended Life of
11/30/98 11/30/98 11/30/98 11/30/98 11/30/98 11/30/98 Fund(4)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Global Bond Fund A 7.84% 4.89% 4.59% 5.47% 22.10% N/A 45.05%
Class
(at NAV)
- -------------------------------------------------------------------------------------------------------------------------
Global Bond Fund A 2.73% (0.08%) (0.38%) 0.45% 16.30% N/A 38.14%
Class
(at Offer)
- -------------------------------------------------------------------------------------------------------------------------
Global Bond Fund B 3.55% 0.40% (0.09%) 0.59% 16.38% N/A 38.04%
Class
(including CDSC)
- -------------------------------------------------------------------------------------------------------------------------
Global Bond Fund B 7.55% 4.40% 3.91% 4.59% 19.29% N/A 41.04%
Class
(excluding CDSC)
- -------------------------------------------------------------------------------------------------------------------------
Global Bond Fund C 6.69% 3.62% 3.03% 3.71% 19.44% N/A 19.06%
Class
(including CDSC)
- -------------------------------------------------------------------------------------------------------------------------
Global Bond Fund C 7.69% 4.62% 4.03% 4.71% 19.44% N/A 19.06%
Class
(excluding CDSC)
- -------------------------------------------------------------------------------------------------------------------------
Global Bond Fund 8.05% 5.19% 4.89% 5.88% 23.17% N/A 46.83%
Institutional Class
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
International 11.33% (3.98%) 1.20% 8.75% 39.49% 64.81% 95.46%
Equity Fund A Class
(at NAV)
- -------------------------------------------------------------------------------------------------------------------------
International 4.94% (9.52%) (4.64%) 2.52% 31.51% 55.29% 84.23%
Equity Fund A Class
(at Offer)(2)
- -------------------------------------------------------------------------------------------------------------------------
International 6.21% (9.05%) (4.27%) 3.03% 33.67% N/A 34.24%
Equity Fund B Class
(including CDSC)(3)
- -------------------------------------------------------------------------------------------------------------------------
International 11.21% (4.26%) 0.73% 8.03% 36.67% N/A 36.24%
Equity Fund B Class
(excluding CDSC)
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
3 months 6 months 9 months 1 year 3 years 5 years
ended ended ended ended ended ended Life of
11/30/98 11/30/98 11/30/98 11/30/98 11/30/98 11/30/98 Fund(4)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
International 10.14% (5.22%) (0.34%) 7.04% 36.70% N/A 36.14%
Equity Fund C Class
(including CDSC)
- -------------------------------------------------------------------------------------------------------------------------
International 11.14% -4.27% 0.66% 8.04% 36.70% N/A 36.14%
Equity Fund C Class
(excluding CDSC)
- -------------------------------------------------------------------------------------------------------------------------
International 11.46% -3.84% 1.46% 9.10% 40.85% 67.23% 99.03%
Equity Fund
Institutional Class
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Emerging Markets 20.70% -26.22% -34.70% -31.66% N/A N/A -29.69%
Fund A Class
(at NAV)(5)
- -------------------------------------------------------------------------------------------------------------------------
Emerging Markets 13.76% -30.46% -38.45% -35.58% N/A N/A -33.74%
Fund A Class
(at Offer)(2)(5)
- -------------------------------------------------------------------------------------------------------------------------
Emerging Markets 15.60% -30.16% -38.26% -35.29% N/A N/A -32.77%
Fund B Class
(including CDSC)(3)
- -------------------------------------------------------------------------------------------------------------------------
Emerging Markets 20.60% -26.48% -35.02% -32.11 N/A N/A -30.84%
Fund B Class
(excluding CDSC)
- -------------------------------------------------------------------------------------------------------------------------
Emerging Markets 19.41% -27.33% -35.77% -32.85% N/A N/A -30.95%
Fund C Class
(including CDSC)
- -------------------------------------------------------------------------------------------------------------------------
Emerging Markets 20.41% -26.60% -35.12% -32.21% N/A N/A -30.95%
Fund C Class
(excluding CDSC)
- -------------------------------------------------------------------------------------------------------------------------
Emerging Markets 20.85% -26.16% -34.57% -31.55% N/A N/A -29.13%
Fund
Institutional
Class
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Global Equity Fund 13.22% -0.30% 1.45% 8.83% 41.35% N/A 71.70%
A Class
(at NAV)
- -------------------------------------------------------------------------------------------------------------------------
Global Equity Fund 6.69% -6.03% -4.38% 2.55% 33.17% N/A 61.84%
A Class
(at Offer)(2)
- -------------------------------------------------------------------------------------------------------------------------
Global Equity Fund 7.99% -5.62% -4.12% 3.13% 35.30% N/A 63.96%
B Class
(including CDSC)(3)
- -------------------------------------------------------------------------------------------------------------------------
Global Equity Fund 12.99% -0.69% 0.88% 7.97% 38.30% N/A 66.96%
B Class
(excluding CDSC)
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
3 months 6 months 9 months 1 year 3 years 5 years
ended ended ended ended ended ended Life of
11/30/98 11/30/98 11/30/98 11/30/98 11/30/98 11/30/98 Fund(4)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Global Equity Fund 11.95% -1.68% -0.12% 7.03% 38.39% N/A 37.81%
C Class
(including CDSC)
- -------------------------------------------------------------------------------------------------------------------------
Global Equity Fund 12.95% -0.69% 0.88% 8.00% 38.39% N/A 37.81%
C Class
(excluding CDSC)
- -------------------------------------------------------------------------------------------------------------------------
Global Equity Fund 13.21% -0.22% 1.60% 9.07% 42.46% N/A 73.63%
Institutional Class
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Global 14.32% -0.66% 3.06% 12.07% N/A N/A 8.51%
Opportunities
Fund A Class
(at NAV)(6)
- -------------------------------------------------------------------------------------------------------------------------
Global 7.69% -6.38% -2.88% 5.65% N/A N/A 2.26%
Opportunities
Fund A Class
(at Offer)(2)(6)
- -------------------------------------------------------------------------------------------------------------------------
Global 14.20% -0.76% 2.94% 11.95% N/A N/A 8.39%
Opportunities
Fund Institutional
Class
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
International 17.65% -7.88% -6.64% 5.88% N/A N/A 5.88%
Small Cap Fund A
Class
(at NAV)(6)
- -------------------------------------------------------------------------------------------------------------------------
International 10.84% 13.21% -12.02% -0.22% N/A N/A -0.22%
Small Cap Fund A
Class
(at Offer)(2)(6)
- -------------------------------------------------------------------------------------------------------------------------
International 17.65% -7.88% -6.64% 5.88% N/A N/A 5.88%
Small Cap Fund
Institutional
Class
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Manager voluntarily agreed to waive its management fee and pay
expenses to limit total operating expenses to certain limits during
the periods shown. Without such waiver and payment performance would
have been affected negatively. See Investment Management Agreements
and Sub-Advisory Agreement for information.
(2) Prior to November 2, 1998, the maximum front-end sales charge was
4.75%. Effective November 2, 1998, the maximum front-end sales charge
was increased to 5.75% and the above performance numbers are
calculated using 5.75% as the applicable sales charge.
(3) Effective November 2, 1998, the CDSC schedule for Class B Shares
increased as follows: (i) 5% if shares are redeemed within one year
of purchase (ii) 4% if shares are redeemed with two years of
purchase; (iii) 3% if shares are redeemed during the third or fourth
year following purchase; (iv) 2% if shares are redeemed during the
fifth year following purchase; (v) 1% if shares are redeemed during
the sixth year following purchase; and (v) 0% thereafter. The above
figures have been calculated using this new schedule.
(4) The Fund's commencement of operations were as follows:
<TABLE>
<CAPTION>
<S> <C>
Global Bond Fund A Class 12/27/94 International Equity Fund A Class 10/31/91
Global Bond Fund B Class 12/27/94 International Equity Fund B Class 9/6/94
Global Bond Fund C Class 11/29/95 International Equity Fund C Class 11/29/95
Global Bond Fund Institutional Class 12/27/94 International Equity Fund Institutional Class 11/9/92
Emerging Markets Fund A Class 6/10/96 Global Equity Fund A Class 12/27/94
Emerging Markets Fund B Class 6/10/96 Global Equity Fund B Class 12/27/94
Emerging Markets Fund C Class 6/10/96 Global Equity Fund C Class 11/29/95
Emerging Markets Fund Institutional Class 6/10/96 Global Equity Fund Institutional Class 12/27/94
Global Opportunities Fund A Class 7/22/97 International Small Cap Fund A Class 12/19/97
Global Opportunities Fund Institutional Class 7/22/97 International Small Cap Fund
Institutional Class 12/19/97
</TABLE>
32
<PAGE>
(5) For the period from February 1, 1998 through May 31, 1999, the
Distributor elected voluntarily to waive 0.05% of the Emerging
Markets Fund A Class' 12b-1 fee in order to limit 12b-1 Plan expenses
to 0.25%. In the absence of such voluntary waiver, performance would
have been affected negatively.
(6) For the period from the commencement of operations through May 31,
1999, the Distributor elected voluntarily to waive its entire 12b-1
fee with respect to Class A Shares.
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for Global Funds, Inc. and other Delaware
Investments mutual funds, will provide general information about investment
alternatives and scenarios that will allow investors to assess their personal
goals. This information will include general material about investing as well as
materials reinforcing various industry-accepted principles of prudent and
responsible personal financial planning. One typical way of addressing these
issues is to compare an individual's goals and the length of time the individual
has to attain these goals to his or her risk threshold. In addition, the
Distributor may also provide information that discusses the overriding
investment philosophy of Delaware Management Company ("Delaware"), or Delaware
Investment Advisers ("DIA"), both series of Delaware Management Business Trust,
and the Manager, an affiliate of Delaware, and how that philosophy impacts Fund
investment disciplines and strategies employed in seeking each Fund's
objectives. The Distributor may also from time to time cite general or specific
information about the institutional clients of Delaware or DIA or the Manager,
including the number of such clients serviced by Delaware, DIA and/or the
Manager.
Dollar-Cost Averaging
For many people, deciding when to invest can be a difficult decision.
Security prices tend to move up and down over various market cycles and logic
says to invest when prices are low. However, even experts can't always pick the
highs and the lows. By using a strategy known as dollar-cost averaging, you
schedule your investments ahead of time. If you invest a set amount on a regular
basis, that money will always buy more shares when the price is low and fewer
when the price is high. You can choose to invest at any regular interval--for
example, monthly or quarterly - as long as you stick to your regular schedule.
Dollar-cost averaging looks simple and it is, but there are important things to
remember.
Dollar-cost averaging works best over longer time periods, and it
doesn't guarantee a profit or protect against losses in declining markets. If
you need to sell your investment when prices are low, you may not realize a
profit no matter what investment strategy you utilize. That's why dollar-cost
averaging can make sense for long-term goals. Since the potential success of a
dollar-cost averaging program depends on continuous investing, even through
periods of fluctuating prices, you should consider your dollar-cost averaging
program a long-term commitment and invest an amount you can afford and probably
won't need to withdraw. You also should consider your financial ability to
continue to purchase shares during periods of high fund share prices. Delaware
Investments offers three services -- Automatic Investing Program, Direct Deposit
Program and the Wealth Builder Option -- that can help to keep your regular
investment program on track. See Investing by Electronic Fund Transfer - Direct
Deposit Purchase Plan and Automatic Investing Plan under Investment Plans and
Wealth Builder Option under Investment Plans for a complete description of these
services, including restrictions or limitations.
The example below illustrates how dollar-cost averaging can work. In a
fluctuating market, the average cost per share over a period of time will be
lower than the average price per share for the same time period.
33
<PAGE>
Number
Investment Price Per of Shares
Amount Share Purchased
Month 1 $100 $10.00 10
Month 2 $100 $12.50 8
Month 3 $100 $ 5.00 20
Month 4 $100 $10.00 10
---------------------------------------------------------------
$400 $37.50 48
Total Amount Invested: $400
Total Number of Shares Purchased: 48
Average Price Per Share: $9.38 ($37.50/4)
Average Cost Per Share: $8.33 ($400/48 shares)
This example is for illustration purposes only. It is not intended
to represent the actual performance of any stock or bond fund in the Delaware
Investments family of funds.
The Power of Compounding
When you opt to reinvest your current income for additional Fund
shares, your investment is given yet another opportunity to grow. It's called
the Power of Compounding. Each Fund may include illustrations showing the power
of compounding in advertisements and other types of literature.
34
<PAGE>
TRADING PRACTICES AND BROKERAGE
The Manager selects brokers or dealers to execute transactions on
behalf of each Fund for the purchase or sale of portfolio securities on the
basis of its judgment of their professional capability to provide the service.
The Sub-Adviser performs this function with respect to transactions on behalf of
Global Equity Fund and Global Opportunities Fund for the purchase and sale of
U.S. securities. The primary consideration is to have brokers or dealers execute
transactions at best price and execution. Best price and execution refers to
many factors, including the price paid or received for a security, the
commission charged, the promptness and reliability of execution, the
confidentiality and placement accorded the order and other factors affecting the
overall benefit obtained by the account on the transaction. A number of trades
are made on a net basis where a Fund either buys securities directly from the
dealer or sells them to the dealer. In these instances, there is no direct
commission charged but there is a spread (the difference between the buy and
sell price) which is the equivalent of a commission. When a commission is paid,
the Fund involved pays reasonably competitive brokerage commission rates based
upon the professional knowledge of the Manager or the Sub-Adviser as to rates
paid and charged for similar transactions throughout the securities industry. In
some instances, the Fund may pay a minimal share transaction cost when the
transaction presents no difficulty.
During the past three fiscal years, the aggregate dollar amounts of
brokerage commissions paid by International Equity Fund, Emerging Markets Fund
and Global Equity Fund were as follows:
<TABLE>
<CAPTION>
November 30,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
International Equity Fund $300,844 $318,619 $142,445
Emerging Markets Fund (1) 52,507 91,510 28,013
Global Equity Fund 19,911 1,541 N/A
Global Opportunities Fund(2) 798 none N/A
International Small Cap Fund(3) 12,965 N/A N/A
</TABLE>
(1) Date of initial public offering of Emerging Markets Fund was June 10, 1996.
(2) Date of initial public offering of Global Opportunities Fund was July 22,
1997.
(3) Date of initial public offering of International Small Cap Fund was December
19, 1997.
The Manager or the Sub-Adviser may allocate out of all commission
business generated by all of the funds and accounts under its management,
brokerage business to brokers or dealers who provide brokerage and research
services. These services include advice, either directly or through publications
or writings, as to the value of securities, the advisability of investing in,
purchasing or selling securities, and the availability of securities or
purchasers or sellers of securities; furnishing of analyses and reports
concerning issuers, securities or industries; providing information on economic
factors and trends; assisting in determining portfolio strategy; providing
computer software and hardware used in security analyses; and providing
portfolio performance evaluation and technical market analyses. Such services
are used by the Manager or the Sub-Adviser in connection with its investment
decision-making process with respect to one or more funds and accounts managed
by it, and may not be used, or used exclusively, with respect to the fund or
account generating the brokerage.
35
<PAGE>
During the fiscal year ended November 30, 1998, portfolio transactions
of the following Funds, in the amounts listed below, resulting in brokerage
commissions in the amounts listed below, were directed to brokers for brokerage
and research services provided:
<TABLE>
<CAPTION>
Portfolio Brokerage
Transactions Commissions
Amounts Amounts
------- -------
<S> <C> <C>
International Equity Fund $19,572,955 $43,742
Emerging Markets none none
Global Equity Fund 96,593 191
Global Opportunities Fund 2,641 7
International Small Cap Fund none none
</TABLE>
As provided in the Securities Exchange Act of 1934 (the "1934 Act") and
each Fund's Investment Management Agreement, higher commissions are permitted to
be paid to broker/dealers who provide brokerage and research services than to
broker/dealers who do not provide such services if such higher commissions are
deemed reasonable in relation to the value of the brokerage and research
services provided. Although transactions are directed to broker/dealers who
provide such brokerage and research services, the Funds believe that the
commissions paid to such broker/dealers are not, in general, higher than
commissions that would be paid to broker/dealers not providing such services and
that such commissions are reasonable in relation to the value of the brokerage
and research services provided. In some instances, services may be provided to
the Manager or the Sub-Adviser which constitute in some part brokerage and
research services used by the Manager or the Sub-Adviser in connection with its
investment decision-making process and constitute in some part services used by
the Manager or the Sub-Adviser in connection with administrative or other
functions not related to its investment decision-making process. In such cases,
the Manager or the Sub-Adviser will make a good faith allocation of brokerage
and research services and will pay out of its own resources for services used by
the Manager or the Sub-Adviser in connection with administrative or other
functions not related to its investment decision-making process. In addition, so
long as no fund is disadvantaged, portfolio transactions which generate
commissions or their equivalent are allocated to broker/dealers who provide
daily portfolio pricing services to a Fund and to other funds in the Delaware
Group. Subject to best price and execution, commissions allocated to brokers
providing such pricing services may or may not be generated by the funds
receiving the pricing service.
The Manager or the Sub-Adviser may place a combined order for two or
more accounts or funds engaged in the purchase or sale of the same security if,
in its judgment, joint execution is in the best interest of each participant and
will result in best price and execution. Transactions involving commingled
orders are allocated in a manner deemed equitable to each account or fund. When
a combined order is executed in a series of transactions at different prices,
each account participating in the order may be allocated an average price
obtained from the executing broker. It is believed that the ability of the
accounts to participate in volume transactions will generally be beneficial to
the accounts and funds. Although it is recognized that, in some cases, the joint
execution of orders could adversely affect the price or volume of the security
that a particular account or fund may obtain, it is the opinion of the Manager,
the Sub-Adviser and Global Funds, Inc.'s Board of Directors that the advantages
of combined orders outweigh the possible disadvantages of separate transactions.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc. (the "NASD"), and subject to seeking best price and
execution, a Fund may place orders with broker/dealers that have agreed to
defray certain expenses of the funds in the Delaware Investments family of funds
such as custodian fees, and may, at the request of the Distributor, give
consideration to sales of shares of such funds as a factor in the selection of
brokers and dealers to execute Fund portfolio transactions.
36
<PAGE>
Portfolio Turnover
A Fund is free to dispose of portfolio securities at any time, subject
to complying with the Code and the 1940 Act, when changes in circumstances or
conditions make such a move desirable in light of its investment objective. A
Fund will not attempt to achieve or be limited to a predetermined rate of
portfolio turnover, such a turnover always being incidental to transactions
undertaken with a view to achieving a Fund's investment objective.
The degree of portfolio activity may affect brokerage costs of a Fund
and taxes payable by a Fund's shareholders. A turnover rate of 100% would occur,
for example, if all the investments in the Fund's portfolio at the beginning of
the year were replaced by the end of the year. In investing for capital
appreciation, a Fund may hold securities for any period of time. Portfolio
turnover will also be increased if a Fund writes a large number of call options
which are subsequently exercised. To the extent a Fund realizes gains on
securities held for less than twelve months, such gains are taxable to the
shareholder or to the Fund at ordinary income tax rates. The turnover rate also
may be affected by cash requirements from redemptions and repurchases of Fund
shares. Total brokerage costs generally increase with higher portfolio turnover
rates.
Under certain market conditions, a Fund may experience a rate of
portfolio turnover which could exceed 100%. Each Fund's portfolio turnover rate
is calculated by dividing the lesser of purchases or sales of portfolio
securities for the particular fiscal year by the monthly average of the value of
the portfolio securities owned by the Fund during the particular fiscal year,
exclusive of securities whose maturities at the time of acquisition are one year
or less.
During the past two fiscal years, the portfolio turnover rates of the
Funds were as follows:
November 30,
1998 1997
---- ----
International Equity Fund 5% 8%
Global Bond Fund 93% 76%
Emerging Markets Fund (1) 47% 65%*
Global Equity Fund 90% 74%
Global Opportunities Fund(2) 50% 25%*
International Small Cap Fund (3) 4%* N/A
(1) Date of initial public offering of Emerging Markets Fund was June 10, 1996.
(2) Date of initial pubic offering of Global Opportunities Fund was July 22,
1997.
(3) Date of initial public offering of International Small Cap Fund was December
19, 1997.
* Annualized
37
<PAGE>
PURCHASING SHARES
The Distributor serves as the national distributor for each Fund's
shares and has agreed to use its best efforts to sell shares of each Fund. See
the Prospectuses for additional information on how to invest. Shares of each
Fund are offered on a continuous basis and may be purchased through authorized
investment dealers or directly by contacting Global Funds, Inc. or the
Distributor.
The minimum initial investment generally is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases of such Classes
generally must be at least $100. The initial and subsequent investment minimums
for Class A Shares will be waived for purchases by officers, directors and
employees of any Delaware Investments fund, the Manager or the Sub-Adviser or
any of their affiliates if the purchases are made pursuant to a payroll
deduction program. Shares purchased pursuant to the Uniform Gifts to Minors Act
or Uniform Transfers to Minors Act and shares purchased in connection with an
Automatic Investing Plan are subject to a minimum initial purchase of $250 and a
minimum subsequent purchase of $25. Accounts opened under the Asset Planner
service are subject to a minimum initial investment of $2,000 per Asset Planner
Strategy selected. There are no minimum purchase requirements for the
Institutional Classes, but certain eligibility requirements must be satisfied.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that is less than $1,000,000. See Investment Plans for purchase limitations
applicable to retirement plans. Global Funds, Inc. will reject any purchase
order for more than $250,000 of Class B Shares and $1,000,000 or more of Class C
Shares. An investor may exceed these limitations by making cumulative purchases
over a period of time. In doing so, an investor should keep in mind, however,
that reduced front-end sales charges apply to investments of $50,000 or more in
Class A Shares ($100,000 or more in the case of the Global Bond Fund A Class),
and that Class A Shares are subject to lower annual 12b-1 Plan expenses than
Class B Shares and Class C Shares and generally are not subject to a CDSC.
Selling dealers are responsible for transmitting orders promptly.
Global Funds, Inc. reserves the right to reject any order for the purchase of
its shares of either Fund if in the opinion of management such rejection is in
such Fund's best interest. If a purchase is canceled because your check is
returned unpaid, you are responsible for any loss incurred. A Fund can redeem
shares from your account(s) to reimburse itself for any loss, and you may be
restricted from making future purchases in any of the funds in the Delaware
Investments family. Each Fund reserves the right to reject purchase orders paid
by third-party checks or checks that are not drawn on a domestic branch of a
United States financial institution. If a check drawn on a foreign financial
institution is accepted, you may be subject to additional bank charges for
clearance and currency conversion.
Each Fund also reserves the right, following shareholder notification,
to charge a service fee on non-retirement accounts that, as a result of
redemption, have remained below the minimum stated account balance for a period
of three or more consecutive months. Holders of such accounts may be notified of
their insufficient account balance and advised that they have until the end of
the current calendar quarter to raise their balance to the stated minimum. If
the account has not reached the minimum balance requirement by that time, the
Fund will charge a $9 fee for that quarter and each subsequent calendar quarter
until the account is brought up to the minimum balance. The service fee will be
deducted from the account during the first week of each calendar quarter for the
previous quarter, and will be used to help defray the cost of maintaining
low-balance accounts. No fees will be charged without proper notice, and no CDSC
will apply to such assessments.
Each Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under the minimum initial purchase
amount as a result of redemptions. An investor making the minimum initial
investment may be subject to involuntary redemption without the imposition of a
CDSC or Limited CDSC if he or she redeems any portion of his or her account.
38
<PAGE>
The NASD has adopted amendments to its Conduct Rules, as amended,
relating to investment company sales charges. Global Funds, Inc. and the
Distributor intend to operate in compliance with these rules.
Class A Shares are purchased at the offering price which reflects a
maximum front-end sales charge of 5.75% (4.75% in the case of Global Bond Fund);
however, lower front-end sales charges apply for larger purchases. See the table
in the Fund Classes' Prospectuses. Absent applicable fee waivers, Class A Shares
are also subject to annual 12b-1 Plan expenses for the life of the investment.
Class B Shares of Global Bond Fund are purchased at net asset value and
are subject to a CDSC of: (i) 4% if shares are redeemed within two years of
purchase; (ii) 3% if shares are redeemed during the third or fourth year
following purchase; (iii) 2% if shares are redeemed during the fifth year
following purchase; and (iv) 1% if shares are redeemed during the sixth year
following purchase. Class B Shares of the other Funds are purchased at net asset
value and are subject to a CDSC of: (i) 5% if shares are redeemed within one
year of purchase; (ii) 4% if shares are redeemed during the second year of
purchase; (iii) 3% if shares are redeemed during the third or fourth year
following purchase; (iv) 2% if shares are redeemed during the fifth year
following purchase; and (v) 1% if shares are redeemed during the sixth year
following purchase. Absent applicable fee waivers ,Class B Shares are also
subject to annual 12b-1 Plan expenses which are higher than those to which Class
A Shares are subject and are assessed against Class B Shares for approximately
eight years after purchase. See Automatic Conversion of Class B Shares, below.
Class C Shares are purchased at net asset value and are subject to a
CDSC of 1% if shares are redeemed within 12 months following purchase. Absent
applicable fee waivers, Class C Shares are also subject to annual 12b-1 Plan
expenses for the life of the investment which are equal to those to which Class
B Shares are subject.
Institutional Class shares are purchased at the net asset value per
share without the imposition of a front-end or contingent deferred sales charge
or 12b-1 Plan expenses. See Plans Under Rule 12b-1 for the Fund Classes under
Purchasing Shares, and Determining Offering Price and Net Asset Value in this
Part B.
Class A Shares, Class B Shares, Class C Shares and Institutional Class
shares represent a proportionate interest in a Fund's assets and will receive a
proportionate interest in that Fund's income, before application, as to Class A,
Class B and Class C Shares, of any expenses under that Fund's 12b-1 Plans.
The Distributor has voluntarily elected to waive 0.05% of the payment
of 12b-1 Plan expenses by Emerging Markets Fund A Class beginning February 1,
1998 through May 31, 1999.
The Distributor has voluntarily elected to waive the payment of 12b-1
Plan expenses by Global Opportunities Fund, International Small Cap Fund, New
Europe Fund and Latin America Fund from the commencement of the public offering
through May 31, 1999.
Certificates representing shares purchased are not ordinarily issued
unless, in the case of Class A Shares or Institutional Class shares, a
shareholder submits a specific request. Certificates are not issued in the case
of Class B Shares or Class C Shares or in the case of any retirement plan
account including self-directed IRAs. However, purchases not involving the
issuance of certificates are confirmed to the investor and credited to the
shareholder's account on the books maintained by Delaware Service Company, Inc.
(the "Transfer Agent"). The investor will have the same rights of ownership with
respect to such shares as if certificates had been issued. An investor that is
permitted to obtain a certificate may receive a certificate representing full
share denominations purchased by sending a letter signed by each owner of the
account to the Transfer Agent requesting the certificate. No charge is assessed
by Global Funds, Inc. for any certificate issued. A shareholder may be subject
to fees for replacement of a lost or stolen certificate, under certain
conditions, including the cost of obtaining a bond covering the lost or stolen
certificate. Please contact a Fund for further information. Investors who hold
certificates representing any of their shares may only redeem those shares by
written request. The investor's certificate(s) must accompany such request.
39
<PAGE>
Alternative Purchase Arrangements
The alternative purchase arrangements of Class A Shares, Class B Shares
and Class C Shares permit investors to choose the method of purchasing shares
that is most suitable for their needs given the amount of their purchase, the
length of time they expect to hold their shares and other relevant
circumstances. Investors should determine whether, given their particular
circumstances, it is more advantageous to purchase Class A Shares and incur a
front-end sales charge and annual 12b-1 Plan expenses of up to a maximum of
0.30% of the average daily net assets of Class A Shares, or to purchase either
Class B or Class C Shares and have the entire initial purchase amount invested
in the Fund with the investment thereafter subject to a CDSC and annual 12b-1
Plan expenses. Class B Shares are subject to a CDSC if the shares are redeemed
within six years of purchase, and Class C Shares are subject to a CDSC if the
shares are redeemed within 12 months of purchase. Class B and Class C Shares are
each subject to annual 12b-1 Plan expenses of up to a maximum of 1% (0.25% of
which are service fees to be paid to the Distributor, dealers or others for
providing personal service and/or maintaining shareholder accounts) of average
daily net assets of the respective Class. Class B Shares will automatically
convert to Class A Shares at the end of approximately eight years after purchase
and, thereafter, be subject to annual 12b-1 Plan expenses of up to a maximum of
0.30% of average daily net assets of such shares. Unlike Class B Shares, Class C
Shares do not convert to another Class.
The higher 12b-1 Plan expenses on Class B Shares and Class C Shares
will be offset to the extent a return is realized on the additional money
initially invested upon the purchase of such shares. However, there can be no
assurance as to the return, if any, that will be realized on such additional
money. In addition, the effect of any return earned on such additional money
will diminish over time. In comparing Class B Shares to Class C Shares,
investors should also consider the duration of the annual 12b-1 Plan expenses to
which each of the classes is subject and the desirability of an automatic
conversion feature, which is available only for Class B Shares.
For the distribution and related services provided to, and the expenses
borne on behalf of, the Funds, the Distributor and others will be paid, in the
case of Class A Shares, from the proceeds of the front-end sales charge and
12b-1 Plan fees and, in the case of Class B Shares and Class C Shares, from the
proceeds of the 12b-1 Plan fees and, if applicable, the CDSC incurred upon
redemption. Financial advisers may receive different compensation for selling
Class A Shares, Class B Shares and Class C Shares. Investors should understand
that the purpose and function of the respective 12b-1 Plans and the CDSCs
applicable to Class B Shares and Class C Shares are the same as those of the
12b-1 Plan and the front-end sales charge applicable to Class A Shares in that
such fees and charges are used to finance the distribution of the respective
Classes. See Plans Under Rule 12b-1 for the Fund Classes.
Dividends, if any, paid on Class A Shares, Class B Shares and Class C
Shares will be calculated in the same manner, at the same time and on the same
day and will be in the same amount, except that the additional amount of 12b-1
Plan expenses relating to Class B Shares and Class C Shares will be borne
exclusively by such shares. See Determining Offering Price and Net Asset Value.
Class A Shares
Purchases of $50,000 or $100,000 or more of Class A Shares at the
offering price carry reduced front-end sales charges as shown in the table in
the Fund Classes' Prospectuses, and may include a series of purchases over a
13-month period under a Letter of Intention signed by the purchaser. See Special
Purchase Features - Class A Shares, below for more information on ways in which
investors can avail themselves of reduced front-end sales charges and other
purchase features.
From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during which the
Distributor may reallow to dealers up to the full amount of the front-end sales.
In addition, certain dealers who enter into an agreement to provide extra
40
<PAGE>
training and information on Delaware Investments products and services and who
increase sales of Delaware Investments funds may receive an additional
commission of up to 0.15% of the offering price in connection with sales of
Class A Shares. Such dealers must meet certain requirements in terms of
organization and distribution capabilities and their ability to increase sales.
The Distributor should be contacted for further information on these
requirements as well as the basis and circumstances upon which the additional
commission will be paid. Participating dealers may be deemed to have additional
responsibilities under the securities laws. Dealers who receive 90% or more of
the sales charge may be deemed to be underwriters under the 1933 Act.
Dealer's Commission
As described in the Prospectuses, for initial purchases of Class A
Shares of $1,000,000 or more, a dealer's commission may be paid by the
Distributor to financial advisers through whom such purchases are effected.
For accounts with assets over $1 million, the dealer commission resets
annually to the highest incremental commission rate on the anniversary of the
first purchase. In determining a financial adviser's eligibility for the
dealer's commission, purchases of Class A Shares of other Delaware Investments
funds as to which a Limited CDSC applies (see Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange) may be aggregated with those of the Class A Shares of a
Fund. Financial advisers also may be eligible for a dealer's commission in
connection with certain purchases made under a Letter of Intention or pursuant
to an investor's Right of Accumulation. Financial advisers should contact the
Distributor concerning the applicability and calculation of the dealer's
commission in the case of combined purchases.
An exchange from other Delaware Investments funds will not qualify for
payment of the dealer's commission, unless a dealer's commission or similar
payment has not been previously paid on the assets being exchanged. The schedule
and program for payment of the dealer's commission are subject to change or
termination at any time by the Distributor at its discretion.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B Shares and Class C Shares are purchased without a front-end
sales charge. Class B Shares redeemed within six years of purchase may be
subject to a CDSC at the rates set forth above, and Class C Shares redeemed
within 12 months of purchase may be subject to a CDSC of 1%. CDSCs are charged
as a percentage of the dollar amount subject to the CDSC. The charge will be
assessed on an amount equal to the lesser of the net asset value at the time of
purchase of the shares being redeemed or the net asset value of those shares at
the time of redemption. No CDSC will be imposed on increases in net asset value
above the initial purchase price, nor will a CDSC be assessed on redemptions of
shares acquired through reinvestment of dividends or capital gains
distributions. For purposes of this formula, the "net asset value at the time of
purchase" will be the net asset value at purchase of Class B Shares or Class C
Shares of a Fund, even if those shares are later exchanged for shares of another
Delaware Investments fund. In the event of an exchange of the shares, the "net
asset value of such shares at the time of redemption" will be the net asset
value of the shares that were acquired in the exchange. See Waiver of Contingent
Deferred Sales Charge--Class B Shares and Class C Shares under Redemption and
Exchange for the Fund Classes for a list of the instances in which the CDSC is
waived.
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. At the end of approximately eight years after purchase, the investor's
Class B Shares will be automatically converted into Class A Shares of the same
Fund. See Automatic Conversion of Class B Shares below. Such conversion will
constitute a tax-free exchange for federal income tax purposes. See Taxes.
Investors are reminded that the Class A Shares into which Class B Shares will
convert are subject to ongoing annual 12b-1 Plan expenses of up to a maximum of
0.30% of average daily net assets of such shares.
In determining whether a CDSC applies to a redemption of Class B
Shares, it will be assumed that shares held for more than six years are redeemed
41
<PAGE>
first, followed by shares acquired through the reinvestment of dividends or
distributions, and finally by shares held longest during the six-year period.
With respect to Class C Shares, it will be assumed that shares held for more
than 12 months are redeemed first followed by shares acquired through the
reinvestment of dividends or distributions, and finally by shares held for 12
months or less.
All investments made during a calendar month, regardless of what day of
the month the investment occurred, will age one month on the last day of that
month and each subsequent month.
Deferred Sales Charge Alternative - Class B Shares
Class B Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently compensates
dealers or brokers for selling Class B Shares at the time of purchase from its
own assets in an amount equal to no more than 5% (4% in the case of Global Bond
Fund) of the dollar amount purchased. In addition, from time to time, upon
written notice to all of its dealers, the Distributor may hold special
promotions for specified periods during which the Distributor may pay additional
compensation to dealers or brokers for selling Class B Shares at the time of
purchase. As discussed below, however, Class B Shares are subject to annual
12b-1 Plan expenses and, if redeemed within six years of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class B Shares. These
payments support the compensation paid to dealers or brokers for selling Class B
Shares. Payments to the Distributor and others under the Class B 12b-1 Plan may
be in an amount equal to no more than 1% annually. The combination of the CDSC
and the proceeds of the 12b-1 Plan fees makes it possible for a Fund to sell
Class B Shares without deducting a front-end sales charge at the time of
purchase.
Holders of Class B Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class B Shares
described in this Part B, even after the exchange. Such CDSC schedule may be
higher than the CDSC schedule for Class B Shares acquired as a result of the
exchange. See Redemption and Exchange.
Automatic Conversion of Class B Shares
Class B Shares, other than shares acquired through reinvestment of
dividends, held for eight years after purchase are eligible for automatic
conversion into Class A Shares. Conversions of Class B Shares into Class A
Shares will occur only four times in any calendar year, on the last business day
of the second full week of March, June, September and December (each, a
"Conversion Date"). If the eighth anniversary after a purchase of Class B Shares
falls on a Conversion Date, an investor's Class B Shares will be converted on
that date. If the eighth anniversary occurs between Conversion Dates, an
investor's Class B Shares will be converted on the next Conversion Date after
such anniversary. Consequently, if a shareholder's eighth anniversary falls on
the day after a Conversion Date, that shareholder will have to hold Class B
Shares for as long as three additional months after the eighth anniversary of
purchase before the shares will automatically convert into Class A Shares.
Class B Shares of a fund acquired through a reinvestment of dividends
will convert to the corresponding Class A Shares of that fund (or, in the case
of Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Consultant
Class) pro-rata with Class B Shares of that fund not acquired through dividend
reinvestment.
All such automatic conversions of Class B Shares will constitute
tax-free exchanges for federal income tax purposes. See Taxes.
Level Sales Charge Alternative - Class C Shares
Class C Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently compensates
42
<PAGE>
dealers or brokers for selling Class C Shares at the time of purchase from its
own assets in an amount equal to no more than 1% of the dollar amount purchased.
As discussed below, Class C Shares are subject to annual 12b-1 Plan expenses
and, if redeemed within 12 months of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class C Shares. These
payments support the compensation paid to dealers or brokers for selling Class C
Shares. Payments to the Distributor and others under the Class C 12b-1 Plan may
be in an amount equal to no more than 1% annually.
Holders of Class C Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class C Shares as
described in this Part B. See Redemption and Exchange.
Plans Under Rule 12b-1 for the Fund Classes
Pursuant to Rule 12b-1 under the 1940 Act, Global Funds, Inc. has
adopted a separate plan for each of the Class A Shares, the Class B Shares and
the Class C Shares of a Fund (the "Plans"). Each Plan permits the relevant Fund
to pay for certain distribution, promotional and related expenses involved in
the marketing of only the Classes of shares to which the Plan applies. The Plans
do not apply to Institutional Classes of shares. Such shares are not included in
calculating the Plans' fees, and the Plans are not used to assist in the
distribution and marketing of shares of the Institutional Classes. Shareholders
of the Institutional Classes may not vote on matters affecting the Plans.
The Plans permit a Fund, pursuant to its Distribution Agreement, to pay
out of the assets of the Class A Shares, Class B Shares and Class C Shares
monthly fees to the Distributor for its services and expenses in distributing
and promoting sales of shares of such classes. These expenses include, among
other things, preparing and distributing advertisements, sales literature and
prospectuses and reports used for sales purposes, compensating sales and
marketing personnel, and paying distribution and maintenance fees to securities
brokers and dealers who enter into dealer's agreements with the Distributor. The
Plan expenses relating to Class B Shares and Class C Shares are also used to pay
the Distributor for advancing the commission costs to dealers with respect to
the initial sale of such shares.
In addition, absent any applicable fee waiver, each Fund may make
payments out of the assets of the Class A Shares, Class B Shares and Class C
Shares directly to other unaffiliated parties, such as banks, who either aid in
the distribution of shares of, or provide services to, such classes.
The maximum aggregate fee payable by a Fund under its Plans and a
Fund's Distribution Agreement, is on an annual basis, up to 0.30% of average
daily net assets of Class A Shares, and up to 1% (0.25% of which are service
fees to be paid to the Distributor, dealers and others for providing personal
service and/or maintaining shareholder accounts) of Class B Shares' and Class C
Shares' average daily net assets for the year. Global Funds, Inc.'s Board of
Directors may reduce these amounts at any time.
All of the distribution expenses incurred by the Distributor and
others, such as broker/dealers, in excess of the amount paid on behalf of Class
A Shares, Class B Shares and Class C Shares would be borne by such persons
without any reimbursement from such classes. Subject to seeking best price and
execution, a Fund may, from time to time, buy or sell portfolio securities from
or to firms which receive payments under the Plans.
From time to time, the Distributor may pay additional amounts from its
own resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plans and the Distribution Agreements, as amended, have all been
approved by the Board of Directors of Global Funds, Inc., including a majority
of the directors who are not "interested persons" (as defined in the 1940 Act)
43
<PAGE>
of Global Funds, Inc. and who have no direct or indirect financial interest in
the Plans, by vote cast in person at a meeting duly called for the purpose of
voting on the Plans and such Agreements. Continuation of the Plans and the
Distribution Agreements, as amended, must be approved annually by the Board of
Directors in the same manner as specified above.
Each year, the directors must determine whether continuation of the
Plans is in the best interest of shareholders of, respectively, Class A Shares,
Class B Shares and Class C Shares of each Fund and that there is a reasonable
likelihood of the Plan relating to a Class providing a benefit to that Class.
The Plans and the Distribution Agreements, as amended, may be terminated at any
time without penalty by a majority of those directors who are not "interested
persons" or by a majority vote of the relevant Class' outstanding voting
securities. Any amendment materially increasing the percentage payable under the
Plans must likewise be approved by a majority vote of the relevant Class'
outstanding voting securities, as well as by a majority vote of those directors
who are not "interested persons." With respect to each Class A Shares' Plan any
material increase in the maximum percentage payable thereunder must also be
approved by a majority of the outstanding voting securities of the respective
Fund's B Class. Also, any other material amendment to the Plans must be approved
by a majority vote of the directors including a majority of the noninterested
directors of Global Funds, Inc. having no interest in the Plans. In addition, in
order for the Plans to remain effective, the selection and nomination of
directors who are not "interested persons" of Global Funds, Inc. must be
effected by the directors who themselves are not "interested persons" and who
have no direct or indirect financial interest in the Plans. Persons authorized
to make payments under the Plans must provide written reports at least quarterly
to the Board of Directors for its review.
For the fiscal year ended November 30, 1998, payments from Class A
Shares, Class B Shares and Class C Shares of International Equity Fund amounted
to $360,823, $361,236 and $128,933, respectively. Such amounts were used for the
following purposes:
<TABLE>
<CAPTION>
International International International
Equity Fund Equity Fund Equity Fund
A Class B Class C Class
------- ------- -------
<S> <C> <C> <C>
Advertising $7,886 --- ---
Annual/Semi-Annual Reports $15,893 --- ---
Broker Trails $295,174 $90,146 $33,622
Broker Sales Charges --- $146,785 $52,234
Dealer Service Expenses --- --- ----
Interest on Broker Sales Charges --- $106,082 $3,249
Commissions to Wholesalers $17,013 $17,252 $31,714
Promotional-Broker Meetings $2,341 $971 $586
Promotional-Other $5,980 --- ---
Prospectus Printing $15,152 --- ---
Telephone $139 --- ---
Wholesaler Expenses $1,245 --- $7,528
Other --- --- ---
</TABLE>
For the fiscal year ended November 30, 1998, payments from Class A
Shares, Class B Shares and Class C Shares of Global Bond Fund amounted to
$13,090, $10,784 and $6,355, respectively. Such amounts were used for the
following purposes:
44
<PAGE>
<TABLE>
<CAPTION>
Global Bond Fund Global Bond Fund Global Bond Fund
A Class B Class C Class
------- ------- -------
<S> <C> <C> <C>
Advertising $298 --- ---
Annual/Semi-Annual Reports $359 --- ---
Broker Trails $10,585 $2,715 $4,408
Broker Sales Charges --- $4,217 $1,385
Dealer Service Expenses --- --- ---
Interest on Broker Sales Charges --- $3,330 $48
Commissions to Wholesalers $81 $479 $303
Promotional-Broker Meetings $71 --- $45
Promotional-Other $846 --- ---
Prospectus Printing $850 --- ---
Telephone --- $43 ---
Wholesaler Expenses --- --- $166
Other --- --- ---
</TABLE>
For the fiscal year ended November 30, 1998, payments from Class A
Shares, Class B Shares and Class C Shares of Global Equity Fund amounted to
$21,001, $49,653 and $33,388, respectively. Such amounts were used for the
following purposes:
<TABLE>
<CAPTION>
Global Global Global
Equity Fund Equity Fund Equity Fund
A Class B Class C Class
------- ------- -------
<S> <C> <C> <C>
Advertising $112 --- ---
Annual/Semi-Annual Reports $364 --- ---
Broker Trails $16,470 $12,397 $17,769
Broker Sales Charges --- $15,413 $9,641
Dealer Service Expenses --- --- $29
Interest on Broker Sales Charges --- $19,344 $262
Commissions to Wholesalers $1,106 $2,480 $5,457
Promotional-Broker Meetings $135 $19 $170
Promotional-Other 1,684 --- ---
Prospectus Printing $1,130 --- ---
Telephone --- --- ---
Wholesaler Expenses --- --- $60
Other --- --- ---
</TABLE>
45
<PAGE>
For the fiscal year ended November 30, 1998, payments from Class A
Shares, Class B Shares and Class C Shares of Emerging Markets Fund amounted to
$21,501, $36,444 and $14,948, respectively. Such amounts were used for the
following purposes:
<TABLE>
<CAPTION>
Emerging Emerging Emerging
Markets Fund Markets Fund Markets Fund
A Class B Class C Class
------- ------- -------
<S> <C> <C> <C>
Advertising $285 --- ---
Annual/Semi-Annual Reports $259 --- ---
Broker Trails $18,761 $7,784 $3,212
Broker Sales Charges --- $10,608 $8,142
Dealer Service Expenses --- --- $129
Interest on Broker Sales Charges --- $14,903 $290
Commissions to Wholesalers $910 $3,134 $2,187
Promotional-Broker Meetings --- $15 $110
Promotional-Other $1,004 --- $25
Prospectus Printing $282 --- ---
Telephone --- --- $44
Wholesaler Expenses --- --- $809
Other --- --- ---
</TABLE>
Other Payments to Dealers - Class A Shares, Class B Shares and Class C Shares
From time to time, at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of Fund Classes exceed certain limits as
set by the Distributor, may receive from the Distributor an additional payment
of up to 0.25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Investments family of funds. In some instances, these
incentives or payments may be offered only to certain dealers who maintain, have
sold or may sell certain amounts of shares. The Distributor may also pay a
portion of the expense of preapproved dealer advertisements promoting the sale
of Delaware Investments fund shares.
Subject to pending amendments to the NASD's Conduct Rules, in
connection with the promotion of Delaware Investments fund shares, the
Distributor may, from time to time, pay to participate in dealer-sponsored
seminars and conferences, reimburse dealers for expenses incurred in connection
with preapproved seminars, conferences and advertising and may, from time to
time, pay or allow additional promotional incentives to dealers, which shall
include non-cash concessions, such as certain luxury merchandise or a trip to or
attendance at a business or investment seminar at a luxury resort, as part of
preapproved sales contests. Payment of non-cash compensation to dealers is
currently under review by the NASD and the Securities and Exchange Commission.
It is likely that the NASD's Conduct Rules will be amended such that the ability
of the Distributor to pay non-cash compensation as described above will be
restricted in some fashion. The Distributor intends to comply with the NASD's
Conduct Rules as they may be amended.
Special Purchase Features - Class A Shares
Buying Class A Shares at Net Asset Value
Class A Shares of the Fund may be purchased at net asset value under
the Delaware Investments Dividend Reinvestment Plan and, under certain
circumstances, the Exchange Privilege and the 12-Month Reinvestment Privilege.
Purchases of Class A Shares may be made at net asset value by current
and former officers, directors and employees (and members of their families) of
the Manager, any affiliate, any of the funds in the Delaware Investments family,
certain of their agents and registered representatives and employees of
authorized investment dealers and by employee benefit plans for such entities.
Individual purchases, including those in retirement accounts, must be for
accounts in the name of the individual or a qualifying family member. Class A
Shares may also be purchased at net asset value by current and former officers,
directors and employees (and members of their families) of the Dougherty
Financial Group LLC.
46
<PAGE>
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within 12
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales charge has been assessed.
Purchases of Class A Shares may also be made at net asset value by bank
employees who provide services in connection with agreements between the bank
and unaffiliated brokers or dealers concerning sales of shares of funds in the
Delaware Investments family. Officers, directors and key employees of
institutional clients of the Manager or any of its affiliates may purchase Class
A Shares at net asset value. Moreover, purchases may be effected at net asset
value for the benefit of the clients of brokers, dealers and registered
investment advisers affiliated with a broker or dealer, if such broker, dealer
or investment adviser has entered into an agreement with the Distributor
providing specifically for the purchase of Class A Shares in connection with
special investment products, such as wrap accounts or similar fee based
programs. Investors may be charged a fee when effecting transactions in Class A
Shares through a broker or agent that offers these special investment products.
Purchases of Class A Shares at net asset value may also be made by the
following: financial institutions investing for the account of their trust
customers if they are not eligible to purchase shares of the Institutional Class
of a Fund; any group retirement plan (excluding defined benefit pension plans),
or such plans of the same employer, for which plan participant records are
maintained on the Retirement Financial Services, Inc. (formerly known as
Delaware Investment & Retirement Services, Inc.) proprietary record keeping
system that (i) has in excess of $500,000 of plan assets invested in Class A
Shares of funds in the Delaware Investments family and any stable value account
available to investment advisory clients of the Manager or its affiliates; or
(ii) is sponsored by an employer that has at any point after May 1, 1997 had
more than 100 employees while such plan has held Class A Shares of a fund in the
Delaware Investments family and such employer has properly represented to, and
received written confirmation back from, Retirement Financial Services, Inc. in
writing that it has the requisite number of employees. See Group Investment
Plans for information regarding the applicability of the Limited CDSC.
Purchases of Class A Shares at net asset value may also be made by bank
sponsored retirement plans that are no longer eligible to purchase Institutional
Class Shares or purchase interests in a collective trust as a result of a change
in distribution arrangements.
Investors in Delaware Investments Unit Investment Trusts may reinvest
monthly dividend checks and/or repayment of invested capital into Class A Shares
of any of the funds in the Delaware Investments family at net asset value.
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from such
accounts will be made at net asset value. Loan repayments made to a fund account
in connection with loans originated from accounts previously maintained by
another investment firm will also be invested at net asset value.
Global Funds, Inc. must be notified in advance that the trade qualifies
for purchase at net asset value.
Allied Plans
Class A Shares are available for purchase by participants in certain
401(k) Defined Contribution Plans ("Allied Plans") which are made available
under a joint venture agreement between the Distributor and another institution
through which mutual funds are marketed and which allow investments in Class A
Shares of designated Delaware Investments funds ("eligible Delaware Investments
fund shares"), as well as shares of designated classes of non-Delaware
Investments funds ("eligible non-Delaware Investments fund shares"). Class B
Shares and Class C Shares are not eligible for purchase by Allied Plans.
47
<PAGE>
With respect to purchases made in connection with an Allied Plan, the
value of eligible Delaware Investments and eligible non-Delaware Investments
fund shares held by the Allied Plan may be combined with the dollar amount of
new purchases by that Allied Plan to obtain a reduced front-end sales charge on
additional purchases of eligible Delaware Investments fund shares. See Combined
Purchases Privilege, below.
Participants in Allied Plans may exchange all or part of their eligible
Delaware Investments fund shares for other eligible Delaware Investments fund
shares or for eligible non-Delaware Investments fund shares at net asset value
without payment of a front-end sales charge. However, exchanges of eligible fund
shares, both Delaware Investments and non-Delaware Investments, which were not
subject to a front end sales charge, will be subject to the applicable sales
charge if exchanged for eligible Delaware Investments fund shares to which a
sales charge applies. No sales charge will apply if the eligible fund shares
were previously acquired through the exchange of eligible shares on which a
sales charge was already paid or through the reinvestment of dividends. See
Investing by Exchange.
A dealer's commission may be payable on purchases of eligible Delaware
Investments fund shares under an Allied Plan. In determining a financial
adviser's eligibility for a dealer's commission on net asset value purchases of
eligible Delaware Investments fund shares in connection with Allied Plans, all
participant holdings in the Allied Plan will be aggregated. See Class A Shares.
The Limited CDSC is applicable to redemptions of net asset value
purchases from an Allied Plan on which a dealer's commission has been paid.
Waivers of the Limited CDSC, as described under Waiver of Limited Contingent
Deferred Sales Charge Class A Shares under Redemption and Exchange, apply to
redemptions by participants in Allied Plans except in the case of exchanges
between eligible Delaware Investments and non-Delaware Investments fund shares.
When eligible Delaware Investments fund shares are exchanged into eligible
non-Delaware Investments fund shares, the Limited CDSC will be imposed at the
time of the exchange, unless the joint venture agreement specifies that the
amount of the Limited CDSC will be paid by the financial adviser or selling
dealer. See Contingent Deferred Sales Charge for Certain Redemptions of Class A
Shares Purchased at Net Asset Value under Redemption and Exchange.
Letter of Intention
The reduced front-end sales charges described above with respect to
Class A Shares are also applicable to the aggregate amount of purchases made
within a 13-month period pursuant to a written Letter of Intention provided by
the Distributor and signed by the purchaser, and not legally binding on the
signer or Global Funds, Inc. which provides for the holding in escrow by the
Transfer Agent, of 5% of the total amount of Class A Shares intended to be
purchased until such purchase is completed within the 13-month period. A Letter
of Intention may be dated to include shares purchased up to 90 days prior to the
date the Letter is signed. The 13-month period begins on the date of the
earliest purchase. If the intended investment is not completed, except as noted
below, the purchaser will be asked to pay an amount equal to the difference
between the front-end sales charge on Class A Shares purchased at the reduced
rate and the front-end sales charge otherwise applicable to the total shares
purchased. If such payment is not made within 20 days following the expiration
of the 13-month period, the Transfer Agent will surrender an appropriate number
of the escrowed shares for redemption in order to realize the difference. Such
purchasers may include the value (at offering price at the level designated in
their Letter of Intention) of all their shares of the Funds and of any class of
any of the other mutual funds in Delaware Investments (except shares of any
Delaware Investments fund which do not carry a front-end sales charge, CDSC or
Limited CDSC other than shares of Delaware Group Premium Fund, Inc. beneficially
owned in connection with the ownership of variable insurance products, unless
they were acquired through an exchange from a Delaware Investments fund which
carried a front-end sales charge, CDSC or Limited CDSC) previously purchased and
still held as of the date of their Letter of Intention toward the completion of
such Letter.
Employers offering a Delaware Investments retirement plan may also
complete a Letter of Intention to obtain a reduced front-end sales charge on
investments of Class A Shares made by the plan. The aggregate investment level
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of the Letter of Intention will be determined and accepted by the Transfer Agent
at the point of plan establishment. The level and any reduction in front-end
sales charge will be based on actual plan participation and the projected
investments in Delaware Investments funds that are offered with a front-end
sales charge, CDSC or Limited CDSC for a 13-month period. The Transfer Agent
reserves the right to adjust the signed Letter of Intention based on this
acceptance criteria. The 13-month period will begin on the date this Letter of
Intention is accepted by the Transfer Agent. If actual investments exceed the
anticipated level and equal an amount that would qualify the plan for further
discounts, any front-end sales charges will be automatically adjusted. In the
event this Letter of Intention is not fulfilled within the 13-month period, the
plan level will be adjusted (without completing another Letter of Intention) and
the employer will be billed for the difference in front-end sales charges due,
based on the plan's assets under management at that time. Employers may also
include the value (at offering price at the level designated in their Letter of
Intention) of all their shares intended for purchase that are offered with a
front-end sales charge, CDSC or Limited CDSC of any class. Class B Shares and
Class C Shares of a Fund and other Delaware Investments funds which offer
corresponding classes of shares may also be aggregated for this purpose.
Combined Purchases Privilege
In determining the availability of the reduced front-end sales charge
previously set forth with respect to Class A Shares, purchasers may combine the
total amount of any combination of Class A Shares, Class B Shares and/or Class C
Shares of the Funds, as well as shares of any other class of any of the other
Delaware Investments funds (except shares of any Delaware Investments fund which
do not carry a front-end sales charge, CDSC or Limited CDSC, other than shares
of Delaware Group Premium Fund, Inc. beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through an
exchange from a Delaware Investments fund which carried a front-end sales
charge, CDSC or Limited CDSC). In addition, assets held by investment advisory
clients of the Manager or its affiliates in a stable value account may be
combined with other Delaware Investments fund holdings.
The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under 21; or
a trustee or other fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee benefit programs).
Right of Accumulation
In determining the availability of the reduced front-end sales charge
with respect to the Class A Shares, purchasers may also combine any subsequent
purchases of Class A Shares, Class B Shares and Class C Shares of a Fund, as
well as shares of any other class of any of the other Delaware Investments funds
which offer such classes (except shares of any Delaware Investments fund which
do not carry a front-end sales charge, CDSC or Limited CDSC, other than shares
of Delaware Group Premium Fund, Inc. beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through an
exchange from a Delaware Investments fund which carried a front-end sales
charge, CDSC or Limited CDSC). If, for example, any such purchaser has
previously purchased and still holds Class A Shares of International Equity Fund
and/or shares of any other of the classes described in the previous sentence
with a value of $40,000 and subsequently purchases $10,000 at offering price of
additional shares of Class A Shares, the charge applicable to the $10,000
purchase would currently be 4.75%. For the purpose of this calculation, the
shares presently held shall be valued at the public offering price that would
have been in effect were the shares purchased simultaneously with the current
purchase. Investors should refer to the table of sales charges for Class A
Shares to determine the applicability of the Right of Accumulation to their
particular circumstances.
12-Month Reinvestment Privilege
Holders of Class A Shares of a Fund (and of Institutional Classes
holding shares which were acquired through an exchange from one of the other
mutual funds in Delaware Investments offered with a front-end sales charge) who
redeem such shares have one year from the date of redemption to reinvest all or
part of their redemption proceeds in Class A Shares of that Fund or in Class A
Shares of any of the other funds in the Delaware Investments family, subject to
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applicable eligibility and minimum purchase requirements, in states where shares
of such other funds may be sold, at net asset value without the payment of a
front-end sales charge. This privilege does not extend to Class A Shares where
the redemption of the shares triggered the payment of a Limited CDSC. Persons
investing redemption proceeds from direct investments in mutual funds in the
Delaware Investments family offered without a front-end sales charge will be
required to pay the applicable sales charge when purchasing Class A Shares. The
reinvestment privilege does not extend to a redemption of either Class B Shares
or Class C Shares.
Any such reinvestment cannot exceed the redemption proceeds (plus any
amount necessary to purchase a full share). The reinvestment will be made at the
net asset value next determined after receipt of remittance. A redemption and
reinvestment could have income tax consequences. It is recommended that a tax
adviser be consulted with respect to such transactions. Any reinvestment
directed to a fund in which the investor does not then have an account will be
treated like all other initial purchases of a fund's shares. Consequently, an
investor should obtain and read carefully the prospectus for the fund in which
the investment is intended to be made before investing or sending money. The
prospectus contains more complete information about the fund, including charges
and expenses.
Investors should consult their financial advisers or the Transfer
Agent, which also serves as the Funds' shareholder servicing agent, about the
applicability of the Limited CDSC (see Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange) in connection with the features described above.
Group Investment Plans
Group Investment Plans which are not eligible to purchase shares of the
Institutional Classes may also benefit from the reduced front-end sales charges
for investments in Class A Shares, based on total plan assets. If a company has
more than one plan investing in the Delaware Investments family of funds, then
the total amount invested in all plans would be used in determining the
applicable front-end sales charge reduction upon each purchase, both initial and
subsequent, upon notification to the Fund in which the investment is being made
at the time of each such purchase. Employees participating in such Group
Investment Plans may also combine the investments made in their plan account
when determining the applicable front-end sales charge on purchases to
non-retirement Delaware Investments investment accounts if they so notify the
Fund in which they are investing in connection with each purchase. See
Retirement Plans for the Fund Classes under Investment Plans for information
about Retirement Plans.
The Limited CDSC is applicable to any redemptions of net asset value
purchases made on behalf of any group retirement plan on which a dealer's
commission has been paid only if such redemption is made pursuant to a
withdrawal of the entire plan from a fund in the Delaware Investments family.
See Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value under Redemption and Exchange.
Institutional Classes
The Institutional Class of each Fund is available for purchase only by:
(a) retirement plans introduced by persons not associated with brokers or
dealers that are primarily engaged in the retail securities business and
rollover individual retirement accounts from such plans; (b) tax-exempt employee
benefit plans of the Manager or its affiliates and securities dealer firms with
a selling agreement with the Distributor; (c) institutional advisory accounts of
the Manager or its affiliates and those having client relationships with
Delaware Investment Advisers, an affiliate of the Manager, or its other
affiliates and their corporate sponsors, as well as subsidiaries and related
employee benefit plans and rollover individual retirement accounts from such
institutional advisory accounts; (d) a bank, trust company and similar financial
institution investing for its own account or for the account of its trust
customers for whom such financial institution is exercising investment
discretion in purchasing shares of the Class, except where the investment is
part of a program that requires payment of the financial institution of a Rule
12b-1 Plan fee; and (e) registered investment advisers investing on behalf of
clients that consist solely of institutions and high net-worth individuals
having at least $1,000,000 entrusted to the adviser for investment purposes, but
only if the adviser is not affiliated or associated with a broker or dealer and
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derives compensation for its services exclusively from its clients for such
advisory services.
Shares of Institutional Classes are available for purchase at net asset
value, without the imposition of a front-end or contingent deferred sales charge
and are not subject to Rule 12b-1 expenses.
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INVESTMENT PLANS
Reinvestment Plan/Open Account
Unless otherwise designated by shareholders in writing, dividends from
net investment income and distributions from realized securities profits, if
any, will be automatically reinvested in additional shares of the respective
Fund Class in which an investor has an account (based on the net asset value in
effect on the reinvestment date) and will be credited to the shareholder's
account on that date. All dividends and distributions of Global Opportunities
Fund, International Small Cap Fund New Europe Fund and Latin America Fund and
the Institutional Classes of each Fund are reinvested in the accounts of the
holders of such shares (based on the net asset value in effect on the
reinvestment date). A confirmation of each dividend payment from net investment
income will be mailed to shareholders quarterly. A confirmation of any
distributions from realized securities profits will be mailed to shareholders in
the first quarter of the fiscal year.
Under the Reinvestment Plan/Open Account, shareholders may purchase and
add full and fractional shares to their plan accounts at any time either through
their investment dealers or by sending a check or money order to the specific
Fund and Class in which shares are being purchased. Such purchases, which must
meet the minimum subsequent purchase requirements set forth in the Prospectuses
and this Part B, are made for Class A Shares at the public offering price, and
for Class B Shares, Class C Shares and Institutional Classes at the net asset
value, at the end of the day of receipt. A reinvestment plan may be terminated
at any time. This plan does not assure a profit nor protect against depreciation
in a declining market.
Reinvestment of Dividends in Other Delaware Investments Family of Funds
Subject to applicable eligibility and minimum initial purchase
requirements and the limitations set forth below, holders of Class A Shares,
Class B Shares and Class C Shares may automatically reinvest dividends and/or
distributions in any of the mutual funds in the Delaware Investments, including
the Funds, in states where their shares may be sold. Such investments will be at
net asset value at the close of business on the reinvestment date without any
front-end sales charge or service fee. The shareholder must notify the Transfer
Agent in writing and must have established an account in the fund into which the
dividends and/or distributions are to be invested. Any reinvestment directed to
a fund in which the investor does not then have an account will be treated like
all other initial purchases of a fund's shares. Consequently, an investor should
obtain and read carefully the prospectus for the fund in which the investment is
intended to be made before investing or sending money. The prospectus contains
more complete information about the fund, including charges and expenses.
Subject to the following limitations, dividends and/or distributions
from other funds in Delaware Investments may be invested in shares of the Funds,
provided an account has been established. Dividends from Class A Shares may not
be directed to Class B Shares or Class C Shares. Dividends from Class B Shares
may only be directed to other Class B Shares and dividends from Class C Shares
may only be directed to other Class C Shares.
Capital gains and/or dividend distributions for participants in the
following retirement plans are automatically reinvested into the same Delaware
Investments fund in which their investments are held: SAR/SEP, SEP/IRA, SIMPLE
IRA, SIMPLE 401(k), Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, or 403(b)(7) or 457 Deferred Compensation Plans.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware
Investments family, you may write and authorize an exchange of part or all of
your investment into shares of a Fund. If you wish to open an account by
exchange, call the Shareholder Service Center for more information. All
exchanges are subject to the eligibility and minimum purchase requirements set
forth in each fund's prospectus. See Redemption and Exchange for more complete
information concerning your exchange privileges.
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Holders of Class A Shares of a Fund may exchange all or part of their
shares for certain of the shares of other funds in the Delaware Investments
family, including other Class A Shares, but may not exchange their Class A
Shares for Class B Shares or Class C Shares of the Fund or of any other fund in
the Delaware Investments family. Holders of Class B Shares of a Fund are
permitted to exchange all or part of their Class B Shares only into Class B
Shares of other Delaware Investments funds. Similarly, holders of Class C Shares
of a Fund are permitted to exchange all or part of their Class C Shares only
into Class C Shares of other Delaware Investments funds. Class B Shares of a
Fund and Class C Shares of a Fund acquired by exchange will continue to carry
the CDSC and, in the case of Class B Shares, the automatic conversion schedule
of the fund from which the exchange is made. The holding period of Class B
Shares of a Fund acquired by exchange will be added to that of the shares that
were exchanged for purposes of determining the time of the automatic conversion
into Class A Shares of that Fund.
Permissible exchanges into Class A Shares of a Fund will be made
without a front-end sales charge, except for exchanges of shares that were not
previously subject to a front-end sales charge (unless such shares were acquired
through the reinvestment of dividends). Permissible exchanges into Class B
Shares or Class C Shares of a Fund will be made without the imposition of a CDSC
by the fund from which the exchange is being made at the time of the exchange.
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for either Fund to
accept for investment in Class A Shares, Class B Shares or Class C Shares,
through an agent bank, preauthorized government or private recurring payments.
This method of investment assures the timely credit to the shareholder's account
of payments such as social security, veterans' pension or compensation benefits,
federal salaries, Railroad Retirement benefits, private payroll checks,
dividends, and disability or pension fund benefits. It also eliminates lost,
stolen and delayed checks.
Automatic Investing Plan--Shareholders of Class A Shares, Class B
Shares and Class C Shares may make automatic investments by authorizing, in
advance, monthly payments directly from their checking account for deposit into
their Fund account. This type of investment will be handled in either of the
following ways. (1) If the shareholder's bank is a member of the National
Automated Clearing House Association ("NACHA"), the amount of the investment
will be electronically deducted from his or her account by Electronic Fund
Transfer ("EFT"). The shareholder's checking account will reflect a debit each
month at a specified date although no check is required to initiate the
transaction. (2) If the shareholder's bank is not a member of NACHA, deductions
will be made by preauthorized checks, known as Depository Transfer Checks.
Should the shareholder's bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans.
* * *
Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent investments
under such plans must be for $25 or more. An investor wishing to take advantage
of either service must complete an authorization form. Either service can be
discontinued by the shareholder at any time without penalty by giving written
notice.
Payments to a Fund from the federal government or its agencies on
behalf of a shareholder may be credited to the shareholder's account after such
payments should have been terminated by reason of death or otherwise. Any such
payments are subject to reclamation by the federal government or its agencies.
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Similarly, under certain circumstances, investments from private sources may be
subject to reclamation by the transmitting bank. In the event of a reclamation,
a Fund may liquidate sufficient shares from a shareholder's account to reimburse
the government or the private source. In the event there are insufficient shares
in the shareholder's account, the shareholder is expected to reimburse the Fund.
Direct Deposit Purchases by Mail
Shareholders may authorize a third party, such as a bank or employer,
to make investments directly to their Fund accounts. Either Fund will accept
these investments, such as bank-by-phone, annuity payments and payroll
allotments, by mail directly from the third party. Investors should contact
their employers or financial institutions who in turn should contact Global
Funds, Inc. for proper instructions.
MoneyLine (SM) On Demand
You or your investment dealer may request purchases of Fund shares by
phone using MoneyLine (SM) On Demand. When you authorize a Fund to accept such
requests from you or your investment dealer, funds will be withdrawn from (for
share purchases) your predesignated bank account. Your request will be processed
the same day if you call prior to 4 p.m., Eastern time. There is a $25 minimum
and $50,000 maximum limit for MoneyLine (SM) On Demand transactions.
It may take up to four business days for the transactions to be
completed. You can initiate this service by completing an Account Services form.
If your name and address are not identical to the name and address on your Fund
account, you must have your signature guaranteed. The Funds do not charge a fee
for this service; however, your bank may charge a fee.
Wealth Builder Option
Shareholders can use the Wealth Builder Option to invest in the Fund
Classes through regular liquidations of shares in their accounts in other mutual
funds in the Delaware Investments family. Shareholders of the Fund Classes may
elect to invest in one or more of the other mutual funds in Delaware Investments
family through the Wealth Builder Option. If in connection with the election of
the Wealth Builder Option, you wish to open a new account to receive the
automatic investment, such new account must meet the minimum initial purchase
requirements described in the prospectus of the fund that you select. All
investments under this option are exchanges and are therefore subject to the
same conditions and limitations as other exchanges noted above.
Under this automatic exchange program, shareholders can authorize
regular monthly investments (minimum of $100 per fund) to be liquidated from
their account and invested automatically into other mutual funds in the Delaware
Investments family, subject to the conditions and limitations set forth in the
Fund Classes' Prospectus. The investment will be made on the 20th day of each
month (or, if the fund selected is not open that day, the next business day) at
the public offering price or net asset value, as applicable, of the fund
selected on the date of investment. No investment will be made for any month if
the value of the shareholder's account is less than the amount specified for
investment.
Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the fund
into which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
in the program through periods of low fund share prices. This program involves
automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. See Exchange Privilege for a brief summary of the tax consequences of
exchanges. Shareholders can terminate their participation in Wealth Builder at
any time by giving written notice to the fund from which exchanges are made.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans. This option also is not available to shareholders of the
Institutional Classes.
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Asset Planner
To invest in Delaware Investments funds using the Asset Planner asset
allocation service, you should complete an Asset Planner Account Registration
Form, which is available only from a financial adviser or investment dealer.
Effective September 1, 1997, the Asset Planner Service is only available to
financial advisers or investment dealers who have previously used this service.
The Asset Planner service offers a choice of four predesigned asset allocation
strategies (each with a different risk/reward profile) in predetermined
percentages in Delaware Investments funds. With the help of a financial adviser,
you may also design a customized asset allocation strategy.
The sales charge on an investment through the Asset Planner service is
determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. Exchanges from existing Delaware
Investments accounts into the Asset Planner service may be made at net asset
value under the circumstances described under Investing by Exchange. Also see
Buying Class A Shares at Net Asset Value. The minimum initial investment per
Strategy is $2,000; subsequent investments must be at least $100. Individual
fund minimums do not apply to investments made using the Asset Planner service.
Class A, Class B and Class C Shares are available through the Asset Planner
service. Generally, only shares within the same class may be used within the
same Strategy. However, Class A Shares of a Fund and of other funds in the
Delaware Investments family may be used in the same Strategy with consultant
class shares that are offered by certain other Delaware Investments funds.
An annual maintenance fee, currently $35 per Strategy, is due at the
time of initial investment and by September 30 of each subsequent year. The fee,
payable to Delaware Service Company, Inc. to defray extra costs associated with
administering the Asset Planner service, will be deducted automatically from one
of the funds within your Asset Planner account if not paid by September 30.
However, effective November 1, 1996, the annual maintenance fee is waived until
further notice. Investors who utilize the Asset Planner for an IRA will continue
to pay an annual IRA fee of $15 per Social Security number. Investors will
receive a customized quarterly Strategy Report summarizing all Asset Planner
investment performance and account activity during the prior period.
Confirmation statements will be sent following all transactions other than those
involving a reinvestment of distributions.
Certain shareholder services are not available to investors using the
Asset Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two years.
Retirement Plans for the Fund Classes
An investment in the Funds may be suitable for tax-deferred retirement
plans. Delaware Investments offers a full spectrum of retirement plans,
including the 401(k) Defined Contribution Plan, Individual Retirement Account
("IRA") and the new Roth IRA and Education IRA.
Among the retirement plans that Delaware Investments offers, Class B
Shares are available only by Individual Retirement Accounts, SIMPLE IRAs, Roth
IRAs, Education IRAs, Simplified Employee Pension Plans, Salary Reduction
Simplified Employee Pension Plans, and 403(b)(7) and 457 Deferred Compensation
Plans. The CDSC may be waived on certain redemptions of Class B Shares and Class
C Shares. See Waiver of Contingent Deferred Sales Charge - Class B Shares and
Class C Shares under Redemption and Exchange for a list of the instances in
which the CDSC is waived.
Purchases of Class B Shares are subject to a maximum purchase
limitation of $250,000 for retirement plans. Purchases of Class C Shares must be
in an amount that is less than $1,000,000 for such plans. The maximum purchase
limitations apply only to the initial purchase of shares by the retirement plan.
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Minimum investment limitations generally applicable to other investors
do not apply to retirement plans other than Individual Retirement Accounts, for
which there is a minimum initial purchase of $250 and a minimum subsequent
purchase of $25, regardless of which Class is selected. Retirement plans may be
subject to plan establishment fees, annual maintenance fees and/or other
administrative or trustee fees. Fees are based upon the number of participants
in the plan as well as the services selected. Additional information about fees
is included in retirement plan materials. Fees are quoted upon request. Annual
maintenance fees may be shared by Delaware Management Trust Company, the
Transfer Agent, other affiliates of the Manager and others that provide services
to such Plans.
Certain shareholder investment services available to non-retirement
plan shareholders may not be available to retirement plan shareholders. Certain
retirement plans may qualify to purchase shares of the Institutional Class
shares. See Institutional Classes, above. For additional information on any of
the plans and Delaware's retirement services, call the Shareholder Service
Center telephone number.
It is advisable for an investor considering any one of the retirement
plans described below to consult with an attorney, accountant or a qualified
retirement plan consultant. For further details, including applications for any
of these plans, contact your investment dealer or the Distributor.
Taxable distributions from the retirement plans described below may be
subject to withholding.
Please contact your investment dealer or the Distributor for the
special application forms required for the Plans described below.
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed individuals,
partnerships, corporations and other eligible forms of organizations. These
plans can be maintained as Section 401(k), profit sharing or money purchase
pension plans. Contributions may be invested only in Class A Shares and Class C
Shares.
Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an IRA
and make contributions which may be tax-deductible, even if the individual is
already participating in an employer-sponsored retirement plan. Even if
contributions are not deductible for tax purposes, as indicated below, earnings
will be tax-deferred. In addition, an individual may make contributions on
behalf of a spouse who has no compensation for the year; however, participation
may be restricted based on certain income limits.
IRA Disclosures
The Taxpayer Relief Act of 1997 provides new opportunities for
investors. Individuals have five types of tax-favored IRA accounts that can be
utilized depending on the individual's circumstances. A new Roth IRA and
Education IRA are available in addition to the existing deductible IRA and
non-deductible IRA.
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Deductible and Non-deductible IRAs
An individual can contribute up to $2,000 in his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayer's
adjusted gross income ("AGI") and whether the taxpayer is an active participant
in an employer sponsored retirement plan. Even if a taxpayer is an active
participant in an employer sponsored retirement plan, the full $2,000 is still
available if the taxpayer's AGI is below $30,000 ($50,000 for taxpayers filing
joint returns) for years beginning after December 31, 1997. A partial deduction
is allowed for married couples with income between $50,000 and $60,000, and for
single individuals with incomes between $30,000 and $40,000. These income
phase-out limits reach $80,000-$100,000 in 2007 for joint filers and
$50,000-$60,000 in 2005 for single filers. No deductions are available for
contributions to IRAs by taxpayers whose AGI after IRA deductions exceeds the
maximum income limit established for each year and who are active participants
in an employer sponsored retirement plan.
Taxpayers who are not allowed deductions on IRA contributions still can
make non-deductible IRA contributions of as much as $2,000 for each working
spouse and defer taxes on interest or other earnings from the IRAs.
Under the new law, a married individual is not considered an active
participant in an employer sponsored retirement plan merely because the
individual's spouse is an active participant if the couple's combined AGI is
below $150,000. The maximum deductible IRA contribution for a married individual
who is not an active participant, but whose spouse is, is phased out for
combined AGI between $150,000 and $160,000.
Conduit (Rollover) IRAs
Certain individuals who have received or are about to receive eligible
rollover distributions from an employer-sponsored retirement plan or another IRA
may rollover the distribution tax-free to a Conduit IRA. The rollover of the
eligible distribution must be completed by the 60th day after receipt of the
distribution; however, if the rollover is in the form of a direct
trustee-to-trustee transfer without going through the distributee's hand, the
60-day limit does not apply.
A distribution qualifies as an "eligible rollover distribution" if it
is made from a qualified retirement plan, a 403(b) plan or another IRA and does
not constitute one of the following:
(1) Substantially equal periodic payments over the employee's life or
life expectancy or the joint lives or life expectancies of the employee and
his/her designated beneficiary;
(2) Substantially equal installment payments for a period certain of 10
or more years;
(3) A distribution, all of which represents a required minimum
distribution after attaining age 70 1/2;
(4) A distribution due to a Qualified Domestic Relations Order to an
alternate payee who is not the spouse (or former spouse) of the employee; and
(5) A distribution of after-tax contributions which is not includable
in income.
Roth IRAs
For taxable years beginning after December 31, 1997, non-deductible
contributions of up to $2,000 per year can be made to a new Roth IRA. As a
result of the Internal Revenue Service Restructuring and Reform Act of 1998 (the
"1998 Act"), the $2,000 annual limit will not be reduced by any contributions to
a deductible or nondeductible IRA for the same year. The maximum contribution
that can be made to a Roth IRA is phased out for single filers with AGI between
$95,000 and $110,000, and for couples filing jointly with AGI between $150,000
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and $160,000. Qualified distributions from a Roth IRA would be exempt from
federal taxes. Qualified distributions are distributions (1) made after the
five-taxable year period beginning with the first taxable year for which a
contribution was made to a Roth IRA and (2) that are (a) made on or after the
date on which the individual attains age 59 1/2, (b) made to a beneficiary on or
after the death of the individual, (c) attributed to the individual being
disabled, or (d) for a qualified special purpose (e.g., first time homebuyer
expenses).
Distributions that are not qualified distributions would always be
tax-free if the taxpayer is withdrawing contributions, not accumulated earnings.
Taxpayers with AGI of $100,000 or less are eligible to convert an
existing IRA (deductible, nondeductible and conduit) to a Roth IRA. Earnings and
contributions from a deductible IRA are subject to a tax upon conversion;
however, no 10% excise tax for early withdrawal would apply. If the conversion
is done prior to January 1, 1999, then the income from the conversion can be
included in income ratably over a four-year period beginning with the year of
conversion.
Education IRAs
For taxable years beginning after December 31, 1997, an Education IRA
has been created exclusively for the purpose of paying qualified higher
education expenses. Taxpayers can make non-deductible contributions up to $500
per year per beneficiary. The $500 annual limit is in addition to the $2,000
annual contribution limit applicable to IRAs and Roth IRAs. Eligible
contributions must be in cash and made prior to the date the beneficiary reaches
age 18. Similar to the Roth IRA, earnings would accumulate tax-free. There is no
requirement that the contributor be related to the beneficiary, and there is no
limit on the number of beneficiaries for whom one contributor can establish
Education IRAs. In addition, multiple Education IRAs can be created for the same
beneficiaries, however, the contribution limit of all contributions for a single
beneficiary cannot exceed $500 annually.
This $500 annual contribution limit for Education IRAs is phased out
ratably for single contributors with modified AGI between $95,000 and $110,000,
and for couples filing jointly with modified AGI of between $150,000 and
$160,000. Individuals with modified AGI above the phase-out range are not
allowed to make contributions to an Education IRA established on behalf of any
other individual.
Distributions from an Education IRA are excludable from gross income to
the extent that the distribution does not exceed qualified higher education
expenses incurred by the beneficiary during the year the distribution is made
regardless of whether the beneficiary is enrolled at an eligible educational
institution on a full-time, half-time, or less than half-time basis.
Any balance remaining in an Education IRA at the time a beneficiary
becomes 30 years old must be distributed, and the earnings portion of such a
distribution will be includable in gross income of the beneficiary and subject
to an additional 10% penalty tax if the distribution is not for qualified higher
education expenses. Tax-free (and penalty-free) transfers and rollovers of
account balances from one Education IRA benefiting one beneficiary to another
Education IRA benefiting a different beneficiary (as well as redesignations of
the named beneficiary) is permitted, provided that the new beneficiary is a
member of the family of the old beneficiary and that the transfer or rollover is
made before the time the old beneficiary reaches age 30 and the new beneficiary
reaches age 18.
A company or association may establish a Group IRA or Group Roth IRA
for employees or members who want to purchase shares of the Fund.
Investments generally must be held in the IRA until age 59 1/2 in order
to avoid premature distribution penalties, but distributions generally must
commence no later than April 1 of the calendar year following the year in which
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the participant reaches age 70 1/2. Individuals are entitled to revoke the
account, for any reason and without penalty, by mailing written notice of
revocation to Delaware Management Trust Company within seven days after the
receipt of the IRA Disclosure Statement or within seven days after the
establishment of the IRA, except, if the IRA is established more than seven days
after receipt of the IRA Disclosure Statement, the account may not be revoked.
Distributions from the account (except for the pro-rata portion of any
nondeductible contributions) are fully taxable as ordinary income in the year
received. Excess contributions removed after the tax-filing deadline, plus
extensions, for the year in which the excess contributions were made are subject
to a 6% excise tax on the amount of excess. Premature distributions
(distributions made before age 59 1/2, except for death, disability and certain
other limited circumstances) will be subject to a 10% excise tax on the amount
prematurely distributed, in addition to the income tax resulting from the
distribution. For information concerning the applicability of a CDSC upon
redemption of Class B Shares and Class C Shares, see Contingent Deferred Sales
Charge - Class B Shares and Class C Shares.
Effective January 1, 1997, the 10% premature distribution penalty will
not apply to distributions from an IRA that are used to pay medical expenses in
excess of 7.5% of adjusted gross income or to pay health insurance premiums by
an individual who has received unemployment compensation for 12 consecutive
weeks. In addition, effective January 1, 1998, the new law allows for premature
distribution without a 10% penalty if (i) the amounts are used to pay qualified
higher education expenses (including graduate level courses) of the taxpayer,
the taxpayer's spouse or any child or grandchild of the taxpayer or the
taxpayer's spouse, or (ii) used to pay acquisition costs of a principle
residence for the purchase of a first-time home by the taxpayer, taxpayer's
spouse or any child or grandchild of the taxpayer or the taxpayer's spouse. A
qualified first-time homebuyer is someone who has had no ownership interest in a
residence during the past two years. The aggregate amount of distribution for
first-time home purchases cannot exceed a lifetime cap of $10,000.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Classes is available for investment by a
SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Although new SAR/SEP plans may not be established after December 31,
1996, existing plans may continue to be maintained by employers having 25 or
fewer employees. An employer may elect to make additional contributions to such
existing plans.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified
plans based on salary deferral contributions. Effective January 1, 1997,
non-governmental tax-exempt organizations may establish 401(k) plans. Plan
documents are available to enable employers to establish a plan. An employer may
also elect to make profit sharing contributions and/or matching contributions
with investments in only Class A Shares and Class C Shares or certain other
funds in the Delaware Investments family. Purchases under the Plan may be
combined for purposes of computing the reduced front-end sales charge applicable
to Class A Shares as set forth in the table the Prospectuses for the Fund
Classes.
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Deferred Compensation Plan for Public Schools and Non-Profit Organizations
("403(b)(7)")
Section 403(b)(7) of the Code permits public school systems and certain
non-profit organizations to use mutual fund shares held in a custodial account
to fund deferred compensation arrangements for their employees. A custodial
account agreement is available for those employers who wish to purchase shares
of any of the Classes in conjunction with such an arrangement. Purchases under
the Plan may be combined for purposes of computing the reduced front-end sales
charge applicable to Class A Shares as set forth in the table the Prospectuses
for the Fund Classes.
Deferred Compensation Plan for State and Local Government Employees ("457")
Section 457 of the Code permits state and local governments, their
agencies and certain other entities to establish a deferred compensation plan
for their employees who wish to participate. This enables employees to defer a
portion of their salaries and any federal (and possibly state) taxes thereon.
Such plans may invest in shares of the Fund. Although investors may use their
own plan, there is available a Delaware Investments 457 Deferred Compensation
Plan. Interested investors should contact the Distributor or their investment
dealers to obtain further information. Purchases under the Plan may be combined
for purposes of computing the reduced front-end sales charge applicable to Class
A Shares as set forth in the table in the Prospectuses for the Fund Classes.
SIMPLE IRA
A SIMPLE IRA combines many of the features of an IRA and a 401(k) Plan
but is easier to administer than a typical 401(k) Plan. It requires employers to
make contributions on behalf of their employees and also has a salary deferral
feature that permits employees to defer a portion of their salary into the plan
on a pre-tax basis. A SIMPLE IRA is available only to plan sponsors with 100 or
fewer employees.
SIMPLE 401(k)
A SIMPLE 401(k) is like a regular 401(k) except that it is available
only to plan sponsors 100 or fewer employees and, in exchange for mandatory plan
sponsor contributions, discrimination testing is no longer required. Class B
Shares are not available for purchase by such plans.
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DETERMINING OFFERING PRICE AND NET ASSET VALUE
Orders for purchases of Class A Shares are effected at the offering
price next calculated by the Fund in which shares are being purchased after
receipt of the order by the Fund or its agent. Orders for purchases of Class B
Shares, Class C Shares and the Institutional Classes are effected at the net
asset value per share next calculated after receipt of the order by the Fund in
which shares are being purchased or its agent. See Distribution and Service
under Investment Management Agreement. Selling dealers have the responsibility
of transmitting orders promptly.
The offering price for Class A Shares consists of the net asset value
per share plus any applicable sales charges. Offering price and net asset value
are computed as of the close of regular trading on the New York Stock Exchange
(ordinarily, 4 p.m., Eastern time) on days when the Exchange is open. The New
York Stock Exchange is scheduled to be open Monday through Friday throughout the
year except for days 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. When the New York Stock
Exchange is closed, the Funds will generally be closed, pricing calculations
will not be made and purchase and redemption orders will not be processed.
An example showing how to calculate the net asset value per share and,
in the case of Class A Shares, the offering price per share, is included in a
Fund's financial statements which are incorporated by reference into this Part
B.
Each Fund's net asset value per share is computed by adding the value
of all the securities and other assets in the Fund's portfolio, deducting any
liabilities of the Fund, and dividing by the number of Fund shares outstanding.
Expenses and fees are accrued daily. In determining a Fund's total net assets,
portfolio securities primarily listed or traded on a national or foreign
securities exchange, except for bonds, are valued at the last sale price on that
exchange. Exchange traded options are valued at the last reported sale price or,
if no sales are reported, at the mean between bid and asked prices. Non-exchange
traded options are valued at fair value using a mathematical model. Futures
contracts are valued at their daily quoted settlement price. For valuation
purposes, foreign currencies and foreign securities denominated in foreign
currency values will be converted into U.S. dollar values at the mean between
the bid and offered quotations of such currencies against U.S. dollars based on
rates in effect that day. Securities not traded on a particular day,
over-the-counter securities, and government and agency securities are valued at
the mean value between bid and asked prices. Money market instruments having a
maturity of less than 60 days are valued at amortized cost. Debt securities
(other than short-term obligations) are valued on the basis of valuations
provided by a pricing service when such prices are believed to reflect the fair
value of such securities. Foreign securities and the prices of foreign
securities denominated in foreign currencies are translated to U.S. dollars
based on rates in effect as of 12 p.m., Eastern time. Use of a pricing service
has been approved by the Board of Directors. Prices provided by a pricing
service take into account appropriate factors such as institutional trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics and other market data. Subject to the foregoing,
securities for which market quotations are not readily available and other
assets are valued at fair value as determined in good faith and in a method
approved by the Board of Directors.
Each Class of a Fund will bear, pro-rata, all of the common expenses of
that Fund. The net asset values of all outstanding shares of each Class of a
Fund will be computed on a pro-rata basis for each outstanding share based on
the proportionate participation in that Fund represented by the value of shares
of that Class. All income earned and expenses incurred by a Fund, will be borne
on a pro-rata basis by each outstanding share of a Class, based on each Class'
percentage in that Fund represented by the value of shares of such Classes,
except that Institutional Classes will not incur any of the expenses under
Global Funds, Inc.'s 12b-1 Plans and Class A Shares, Class B Shares and Class C
Shares alone will bear the 12b-1 Plan expenses payable under their respective
Plans. Due to the specific distribution expenses and other costs that will be
allocable to each Class, the net asset value of each Class of a Fund will vary.
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REDEMPTION AND EXCHANGE
You can redeem or exchange your shares in a number of different ways.
The exchange service is useful if your investment requirements change and you
want an easy way to invest in other equity funds, tax-advantaged funds, bond
funds or money market funds. This service is also useful if you are anticipating
a major expenditure and want to move a portion of your investment into a fund
that has the checkwriting feature. Exchanges are subject to the requirements of
each fund and all exchanges of shares constitute taxable events. Further, in
order for an exchange to be processed, shares of the fund being acquired must be
registered in the state where the acquiring shareholder resides. You may want to
consult your financial adviser or investment dealer to discuss which funds in
Delaware Investments will best meet your changing objectives, and the
consequences of any exchange transaction. You may also call the Delaware
Investments directly for fund information.
Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after a Fund receives your request in good order,
subject, in the case of a redemption, to any applicable CDSC or Limited CDSC.
For example, redemption or exchange requests received in good order after the
time the offering price and net asset value of shares are determined will be
processed on the next business day. See the Prospectuses. A shareholder
submitting a redemption request may indicate that he or she wishes to receive
redemption proceeds of a specific dollar amount. In the case of such a request,
and in the case of certain redemptions from retirement plan accounts, a Fund
will redeem the number of shares necessary to deduct the applicable CDSC in the
case of Class B Shares and Class C Shares, and, if applicable, the Limited CDSC
in the case of Class A Shares and tender to the shareholder the requested
amount, assuming the shareholder holds enough shares in his or her account for
the redemption to be processed in this manner. Otherwise, the amount tendered to
the shareholder upon redemption will be reduced by the amount of the applicable
CDSC or Limited CDSC. Redemption proceeds will be distributed promptly, as
described below, but not later than seven days after receipt of a redemption
request.
Except as noted below, for a redemption request to be in "good order,"
you must provide your account number, account registration, and the total number
of shares or dollar amount of the transaction. For exchange requests, you must
also provide the name of the fund in which you want to invest the proceeds.
Exchange instructions and redemption requests must be signed by the record
owner(s) exactly as the shares are registered. You may request a redemption or
an exchange by calling the Shareholder Service Center at 800-523-1918. Each Fund
may suspend, terminate, or amend the terms of the exchange privilege upon 60
days' written notice to shareholders.
In addition to redemption of Fund shares, the Distributor, acting as
agent of the Funds, offers to repurchase Fund shares from broker/dealers acting
on behalf of shareholders. The redemption or repurchase price, which may be more
or less than the shareholder's cost, is the net asset value per share next
determined after receipt of the request in good order by the respective Fund,
its agent, or certain authorized persons, subject to applicable CDSC or Limited
CDSC. This is computed and effective at the time the offering price and net
asset value are determined. See Determining Offering Price and Net Asset Value.
The Funds and the Distributor end their business days at 5 p.m., Eastern time.
This offer is discretionary and may be completely withdrawn without further
notice by the Distributor.
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Orders for the repurchase of Fund shares which are submitted to the
Distributor prior to the close of its business day will be executed at the net
asset value per share computed that day (subject to the applicable CDSC or
Limited CDSC), if the repurchase order was received by the broker/dealer from
the shareholder prior to the time the offering price and net asset value are
determined on such day. The selling dealer has the responsibility of
transmitting orders to the Distributor promptly. Such repurchase is then settled
as an ordinary transaction with the broker/dealer (who may make a charge to the
shareholder for this service) delivering the shares repurchased.
Payment for shares redeemed will ordinarily be mailed the next business
day, but in no case later than seven days, after receipt of a redemption request
in good order by the Fund or certain other authorized persons (see Distribution
and Service under Investment Management Agreements); provided, however, that
each commitment to mail or wire redemption proceeds by a certain time, as
described below, is modified by the qualifications described in the next
paragraph.
Each Fund will process written and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. Each Fund will honor redemption requests as to shares for which a check
was tendered as payment, but a Fund will not mail or wire the proceeds until it
is reasonably satisfied that the purchase check has cleared, which may take up
to 15 days from the purchase date. You can avoid this potential delay if you
purchase shares by wiring Federal Funds. Each Fund reserves the right to reject
a written or telephone redemption request or delay payment of redemption
proceeds if there has been a recent change to the shareholder's address of
record.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason, the
Fund involved will automatically redeem from the shareholder's account the
shares purchased by the check plus any dividends earned thereon. Shareholders
may be responsible for any losses to a Fund or to the Distributor.
In case of a suspension of the determination of the net asset value
because the New York Stock Exchange is closed for other than weekends or
holidays, or trading thereon is restricted or an emergency exists as a result of
which disposal by a Fund of securities owned by it is not reasonably practical,
or it is not reasonably practical for a Fund fairly to value its assets, or in
the event that the SEC has provided for such suspension for the protection of
shareholders, a Fund may postpone payment or suspend the right of redemption or
repurchase. In such case, the shareholder may withdraw the request for
redemption or leave it standing as a request for redemption at the net asset
value next determined after the suspension has been terminated.
Payment for shares redeemed or repurchased may be made either in cash
or kind, or partly in cash and partly in kind. Any portfolio securities paid or
distributed in kind would be valued as described in Determining Offering Price
and Net Asset Value. Subsequent sale by an investor receiving a distribution in
kind could result in the payment of brokerage commissions. However, Global
Funds, Inc. has elected to be governed by Rule 18f-1 under the 1940 Act pursuant
to which each Fund is obligated to redeem shares solely in cash up to the lesser
of $250,000 or 1% of the net asset value of such Fund during any 90-day period
for any one shareholder.
The value of a Fund's investments is subject to changing market prices.
Thus, a shareholder reselling shares to a Fund may sustain either a gain or
loss, depending upon the price paid and the price received for such shares.
Certain redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC. See Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value, below.
Class B Shares of Global Bond Fund are subject to a CDSC of: (i) 4% if shares
are redeemed during the first or second year after purchase (ii) 3% if shares
are redeemed during the third or fourth year following purchase; (iii) 2% if
shares are redeemed during the fifth year following purchase; and (iv) 1% if
shares are redeemed during the sixth year following purchase. Class B Shares of
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the other Funds are subject to a CDSC of (i) 5% if shares are redeemed within
one year of purchase; (ii) 4% if shares are redeemed during the second year
after purchase (iii) 3% if shares are redeemed during the third or fourth year
following purchase; (iv) 2% if shares are redeemed during the fifth year
following purchase; and (v) 1% if shares are redeemed during the sixth year
following purchase. Class C Shares are subject to a CDSC of 1% if shares are
redeemed within 12 months following purchase. See Contingent Deferred Sales
Charge - Class B Shares and Class C Shares under Purchasing Shares. Except for
the applicable CDSC or Limited CDSC and, with respect to the expedited payment
by wire described below for which, in the case of the Fund Classes, there is
currently a $7.50 bank wiring cost, neither the Funds nor the Distributor
charges a fee for redemptions or repurchases, but such fees could be charged at
any time in the future.
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for shares of other funds in the Delaware Investments (in
each case, "New Shares") in a permitted exchange, will not be subject to a CDSC
that might otherwise be due upon redemption of the Original Shares. However,
such shareholders will continue to be subject to the CDSC and, in the case of
Class B Shares, the automatic conversion schedule of the Original Shares as
described in this Part B and any CDSC assessed upon redemption will be charged
by the fund from which the Original Shares were exchanged. In an exchange of
Class B Shares from a Fund, the Fund's CDSC schedule may be higher than the CDSC
schedule relating to the New Shares acquired as a result of the exchange. For
purposes of computing the CDSC that may be payable upon a disposition of the New
Shares, the period of time that an investor held the Original Shares is added to
the period of time that an investor held the New Shares. With respect to Class B
Shares, the automatic conversion schedule of the Original Shares may be longer
than that of the New Shares. Consequently, an investment in New Shares by
exchange may subject an investor to the higher 12b-1 fees applicable to Class B
Shares of a Fund for a longer period of time than if the investment in New
Shares were made directly.
Written Redemption
You can write to each Fund at 1818 Market Street, Philadelphia, PA
19103 to redeem some or all of your shares. The request must be signed by all
owners of the account or your investment dealer of record. For redemptions of
more than $50,000, or when the proceeds are not sent to the shareholder(s) at
the address of record, the Funds require a signature by all owners of the
account and a signature guarantee for each owner. A signature guarantee can be
obtained from a commercial bank, a trust company or a member of a Securities
Transfer Association Medallion Program ("STAMP"). Each Fund reserves the right
to reject a signature guarantee supplied by an eligible institution based on its
creditworthiness. The Funds may require further documentation from corporations,
executors, retirement plans, administrators, trustees or guardians.
Payment is normally mailed the next business day after receipt of your
redemption request. If your Class A Shares are in certificate form, the
certificate(s) must accompany your request and also be in good order.
Certificates are issued for Class A Shares only if a shareholder submits a
specific request. Certificates are not issued for Class B Shares or Class C
Shares.
Written Exchange
You may also write to each Fund (at 1818 Market Street, Philadelphia,
PA 19103) to request an exchange of any or all of your shares into another
mutual fund in Delaware Investments, subject to the same conditions and
limitations as other exchanges noted above.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your Class A Shares in certificate form, you may
redeem or exchange only by written request and you must return your
certificates.
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The Telephone Redemption - Check to Your Address of Record service and
the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in which you have your account
in writing that you do not wish to have such services available with respect to
your account. Each Fund reserves the right to modify, terminate or suspend these
procedures upon 60 days' written notice to shareholders. It may be difficult to
reach the Funds by telephone during periods when market or economic conditions
lead to an unusually large volume of telephone requests.
Neither the Funds nor their Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, each Fund will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, such Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Telephone instructions received by the
Fund Classes are generally tape recorded, and a written confirmation will be
provided for all purchase, exchange and redemption transactions initiated by
telephone. By exchanging shares by telephone, you are acknowledging prior
receipt of a prospectus for the fund into which your shares are being exchanged.
Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day after receipt of the redemption request. This service is only available to
individual, joint and individual fiduciary-type accounts.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must complete an Authorization Form and have your signature
guaranteed. For your protection, your authorization must be on file. If you
request a wire, your funds will normally be sent the next business day. If the
proceeds are wired to the shareholder's account at a bank which is not a member
of the Federal Reserve System, there could be a delay in the crediting of the
funds to the shareholder's bank account. First Union National Bank's fee
(currently $7.50) will be deducted from Fund Class redemption proceeds. If you
ask for a check, it will normally be mailed the next business day after receipt
of your redemption request to your predesignated bank account. There are no
separate fees for this redemption method, but the mail time may delay getting
funds into your bank account. Simply call the Shareholder Service Center prior
to the time the offering price and net asset value are determined, as noted
above.
Telephone Exchange
The Telephone Exchange feature is a convenient and efficient way to
adjust your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
shares into other funds in Delaware Investments under the same registration,
subject to the same conditions and limitations as other exchanges noted above.
As with the written exchange service, telephone exchanges are subject to the
requirements of each fund, as described above. Telephone exchanges may be
subject to limitations as to amounts or frequency.
The telephone exchange privilege is intended as a convenience to
shareholders and is not intended to be a vehicle to speculate on short-term
swings in the securities market through frequent transactions in and out of the
funds in the Delaware Investments family. Telephone exchanges may be subject to
limitations as to amounts or frequency. The Transfer Agent and each Fund reserve
the right to record exchange instructions received by telephone and to reject
exchange requests at any time in the future.
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MoneyLine (SM) On Demand
You or your investment dealer may request redemptions of Fund shares by
phone using MoneyLine (SM) On Demand. When you authorize a Fund to accept such
requests from you or your investment dealer, funds will be deposited to (for
share redemptions) your predesignated bank account. Your request will be
processed the same day if you call prior to 4 p.m., Eastern time. There is a $25
minimum and $50,000 maximum limit for MoneyLine (SM) On Demand transactions. See
MoneyLine (SM) On Demand under Investment Plans.
Right to Refuse Timing Accounts
With regard to accounts that are administered by market timing services
("Timing Firms") to purchase or redeem shares based on changing economic and
market conditions ("Timing Accounts"), the Funds will refuse any new timing
arrangements, as well as any new purchases (as opposed to exchanges) in Delaware
Investments funds from Timing Firms. A Fund reserves the right to temporarily or
permanently terminate the exchange privilege or reject any specific purchase
order for any person whose transactions seem to follow a timing pattern who: (i)
makes an exchange request out of the Fund within two weeks of an earlier
exchange request out of the Fund, or (ii) makes more than two exchanges out of
the Fund per calendar quarter, or (iii) exchanges shares equal in value to at
least $5 million, or more than 1/4 of 1% of the Fund's net assets. Accounts
under common ownership or control, including accounts administered so as to
redeem or purchase shares based upon certain predetermined market indicators,
will be aggregated for purposes of the exchange limits.
Restrictions on Timed Exchanges
Timing Accounts operating under existing timing agreements may only
execute exchanges between the following eight Delaware Investments funds: (1)
Decatur Income Fund, (2) Decatur Total Return Fund, (3) Small Cap Value Fund,
(4) Limited-Term Government Fund, (5) USA Fund, (6) Delaware Cash Reserve, (7)
Delchester Fund and (8) Tax-Free Pennsylvania Fund. No other Delaware
Investments funds are available for timed exchanges. Assets redeemed or
exchanged out of Timing Accounts in Delaware Investments funds not listed above
may not be reinvested back into that Timing Account. Each Fund reserves the
right to apply these same restrictions to the account(s) of any person whose
transactions seem to follow a time pattern (as described above).
Each Fund also reserves the right to refuse the purchase side of an
exchange request by any Timing Account, person, or group if, in the Manager's
judgment, the Fund would be unable to invest effectively in accordance with its
investment objectives and policies, or would otherwise potentially be adversely
affected. A shareholder's purchase exchanges may be restricted or refused if a
Fund receives or anticipates simultaneous orders affecting significant portions
of the Fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to a Fund and therefore may be
refused.
Except as noted above, only shareholders and their authorized brokers
of record will be permitted to make exchanges or redemptions.
Systematic Withdrawal Plans
Shareholders of Class A Shares, Class B Shares and Class C Shares who
own or purchase $5,000 or more of shares at the offering price, or net asset
value, as applicable, for which certificates have not been issued may establish
a Systematic Withdrawal Plan for monthly withdrawals of $25 or more, or
quarterly withdrawals of $75 or more, although the Funds do not recommend any
specific amount of withdrawal. This is particularly useful to shareholders
living on fixed incomes, since it can provide them with a stable supplemental
amount. This $5,000 minimum does not apply for a Fund's prototype retirement
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plans. Shares purchased with the initial investment and through reinvestment of
cash dividends and realized securities profits distributions will be credited to
the shareholder's account and sufficient full and fractional shares will be
redeemed at the net asset value calculated on the third business day preceding
the mailing date.
Checks are dated either the 1st or the 15th of the month, as selected
by the shareholder (unless such date falls on a holiday or a weekend), and are
normally mailed within two business days. Both ordinary income dividends and
realized securities profits distributions will be automatically reinvested in
additional shares of the Class at net asset value. This plan is not recommended
for all investors and should be started only after careful consideration of its
operation and effect upon the investor's savings and investment program. To the
extent that withdrawal payments from the plan exceed any dividends and/or
realized securities profits distributions paid on shares held under the plan,
the withdrawal payments will represent a return of capital, and the share
balance may in time be depleted, particularly in a declining market.
Shareholders should not purchase additional shares while participating in a
Systematic Withdrawal Plan.
The sale of shares for withdrawal payments constitutes a taxable event
and a shareholder may incur a capital gain or loss for federal income tax
purposes. This gain or loss may be long-term or short-term depending on the
holding period for the specific shares liquidated. Premature withdrawals from
retirement plans may have adverse tax consequences.
Withdrawals under this plan made concurrently with the purchases of
additional shares may be disadvantageous to the shareholder. Purchases of Class
A Shares through a periodic investment program in a fund managed by the Manager
must be terminated before a Systematic Withdrawal Plan with respect to such
shares can take effect, except if the shareholder is a participant in one of our
retirement plans or is investing in Delaware Investments funds which do not
carry a sales charge. Redemptions of Class A Shares pursuant to a Systematic
Withdrawal Plan may be subject to a Limited CDSC if the purchase was made at net
asset value and a dealer's commission has been paid on that purchase. The
applicable CDSC for Class B Shares and Class C Shares redeemed via a Systematic
Withdrawal Plan will be waived if, on the date that the Plan is established, the
annual amount selected to be withdrawn is less than 12% of the account balance.
If the annual amount selected to be withdrawn exceeds 12% of the account balance
on the date that the Systematic Withdrawal Plan is established, all redemptions
under the Plan will be subject to the applicable CDSC. Whether a waiver of the
CDSC is available or not, the first shares to be redeemed for each Systematic
Withdrawal Plan payment will be those not subject to a CDSC because they have
either satisfied the required holding period or were acquired through the
reinvestment of distributions. The 12% annual limit will be reset on the date
that any Systematic Withdrawal Plan is modified (for example, a change in the
amount selected to be withdrawn or the frequency or date of withdrawals), based
on the balance in the account on that date. See Waiver of Contingent Deferred
Sales Charge - Class B Shares and Class C Shares, below.
An investor wishing to start a Systematic Withdrawal Plan must complete
an authorization form. If the recipient of Systematic Withdrawal Plan payments
is other than the registered shareholder, the shareholder's signature on this
authorization must be guaranteed. Each signature guarantee must be supplied by
an eligible guarantor institution. The Funds reserve the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. This plan may be terminated by the shareholder or the Transfer
Agent at any time by giving written notice.
Systematic Withdrawal Plan payments are normally made by check. In the
alternative, you may elect to have your payments transferred from your Fund
account to your predesignated bank account through the MoneyLine (SM) Direct
Deposit Service. Your funds will normally be credited to your bank account up to
four business days after the payment date. There are no separate fees for this
redemption method. It may take up to four business days for the transactions to
be completed. You can initiate this service by completing an Account Services
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form. If your name and address are not identical to the name and address on your
Fund account, you must have your signature guaranteed. The Funds do not charge a
fee for any this service; however, your bank may charge a fee. This service is
not available for retirement plans.
The Systematic Withdrawal Plan is not available for Small Cap
Contrarian Fund, Mid-Cap Value Fund or Retirement Income Fund or Small Cap Value
Fund Institutional Class. Shareholders should consult with their financial
advisers to determine whether a Systematic Withdrawal Plan would be suitable for
them.
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value
For purchases of $1,000,000 or more made on or after July 1, 1998, a
Limited CDSC will be imposed on certain redemptions of Class A Shares (or shares
into which such Class A Shares are exchanged) according to the following
schedule: (1) 1.00% if shares are redeemed during the first year after the
purchase; and (2) 0.50% if such shares are redeemed during the second year after
the purchase, if such purchases were made at net asset value and triggered the
payment by the Distributor of the dealer's commission described above.
The Limited CDSC will be paid to the Distributor and will be assessed
on an amount equal to the lesser of : (1) the net asset value at the time of
purchase of the Class A Shares being redeemed or (2) the net asset value of such
Class A Shares at the time of redemption. For purposes of this formula, the "net
asset value at the time of purchase" will be the net asset value at purchase of
the Class A Shares even if those shares are later exchanged for shares of
another Delaware Investments fund and, in the event of an exchange of Class A
Shares, the "net asset value of such shares at the time of redemption" will be
the net asset value of the shares acquired in the exchange.
Redemptions of such Class A Shares held for more than two years will
not be subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Investments fund will not trigger the imposition of the Limited
CDSC at the time of such exchange. The period a shareholder owns shares into
which Class A Shares are exchanged will count towards satisfying the two-year
holding period. The Limited CDSC is assessed if such two year period is not
satisfied irrespective of whether the redemption triggering its payment is of
Class A Shares of a Fund or Class A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed
that shares not subject to the Limited CDSC are the first redeemed followed by
other shares held for the longest period of time. The Limited CDSC will not be
imposed upon shares representing reinvested dividends or capital gains
distributions, or upon amounts representing share appreciation. All investments
made during a calendar month, regardless of what day of the month the investment
occurred, will age one month on the last day of that month and each subsequent
month.
Waiver of Limited Contingent Deferred Sales Charge - Class A Shares
The Limited CDSC for Class A Shares on which a dealer's commission has
been paid will be waived in the following instances: (i) redemptions that result
from a Fund's right to liquidate a shareholder's account if the aggregate net
asset value of the shares held in the account is less than the then-effective
minimum account size; (ii) distributions to participants from a retirement plan
qualified under section 401(a) or 401(k) of the Internal Revenue Code of 1986,
as amended (the "Code"), or due to death of a participant in such a plan; (iii)
redemptions pursuant to the direction of a participant or beneficiary of a
retirement plan qualified under section 401(a) or 401(k) of the Code with
respect to that retirement plan; (iv) periodic distributions from an IRA, SIMPLE
IRA, or 403(b)(7) or 457 Deferred Compensation Plan due to death, disability, or
attainment of age 59 1/2, and IRA distributions qualifying under Section 72(t)
of the Internal Revenue Code; (v) returns of excess contributions to an IRA;
(vi) distributions by other employee benefit plans to pay benefits; (vii)
distributions described in (ii), (iv), and (vi) above pursuant to a systematic
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withdrawal plan; and (viii) redemptions by the classes of shareholders who are
permitted to purchase shares at net asset value, regardless of the size of the
purchase (see Buying Class A Shares at Net Asset Value under Purchasing Shares).
Waiver of Contingent Deferred Sales Charge - Class B Shares and Class C Shares
The CDSC is waived on certain redemptions of Class B Shares in
connection with the following redemptions: (i) redemptions that result from a
Fund's right to liquidate a shareholder's account if the aggregate net asset
value of the shares held in the account is less than the then-effective minimum
account size; (ii) returns of excess contributions to an IRA, SIMPLE IRA,
SEP/IRA, or 403(b)(7) or 457 Deferred Compensation Plan; (iii) periodic
distributions from an IRA, SIMPLE IRA, SAR/SEP, SEP/IRA, or 403(b)(7) or 457
Deferred Compensation Plan due to death, disability or attainment of age 59 1/2,
and IRA distributions qualifying under Section 72(t) of the Internal Revenue
Code; and (iv) distributions from an account if the redemption results from the
death of all registered owners of the account (in the case of accounts
established under the Uniform Gifts to Minors or Uniform Transfers to Minors
Acts or trust accounts, the waiver applies upon the death of all beneficial
owners) or a total and permanent disability (as defined in Section 72 of the
Code) of all registered owners occurring after the purchase of the shares being
redeemed.
The CDSC on Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from a Fund's right to liquidate a
shareholder's account if the aggregate net asset value of the shares held in the
account is less than the then-effective minimum account size; (ii) returns of
excess contributions to an IRA, SIMPLE IRA, 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan, or 401(k)
Defined Contribution plan; (iii) periodic distributions from a 403(b)(7) or 457
Deferred Compensation Plan upon attainment of age 59 1/2, Profit Sharing Plan,
Money Purchase Plan, 401(k) Defined Contribution Plan upon attainment of age 70
1/2, and IRA distributions qualifying under Section 72(t) of the Internal
Revenue Code; (iv) distributions from a 403(b)(7) or 457 Deferred Compensation
Plan, Profit Sharing Plan, or 401(k) Defined Contribution Plan, under hardship
provisions of the plan; (v) distributions from a 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan or a 401(k)
Defined Contribution Plan upon attainment of normal retirement age under the
plan or upon separation from service; (vi) periodic distributions from an IRA or
SIMPLE IRA on or after attainment of age 59 1/2; and (vii) distributions from an
account if the redemption results from the death of all registered owners of the
account (in the case of accounts established under the Uniform Gifts to Minors
or Uniform Transfers to Minors Acts or trust accounts, the waiver applies upon
the death of all beneficial owners) or a total and permanent disability (as
defined in Section 72 of the Code) of all registered owners occurring after the
purchase of the shares being redeemed.
In addition, the CDSC will be waived on Class B Shares and Class C
Shares redeemed in accordance with a Systematic Withdrawal Plan if the annual
amount selected to be withdrawn under the Plan does not exceed 12% of the value
of the account on the date that the Systematic Withdrawal Plan was established
or modified.
DISTRIBUTIONS AND TAXES
International Equity Fund will normally declare and make payments from
net investment income on a quarterly basis. Global Bond Fund will normally
declare and make payments from net investment income on a monthly basis.
Emerging Markets and Global Equity Funds each will normally declare and make
payments from net investment income on an annual basis.
Payments from net realized securities profits of a Fund, if any, will
be distributed annually in the quarter following the close of the fiscal year.
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Dividend payments of $1.00 or less will be automatically reinvested,
notwithstanding a shareholder's election to receive dividends in cash. If such a
shareholder's dividends increase to greater than $1.00, the shareholder would
have to file a new election in order to begin receiving dividends in cash again.
Any check in payment of dividends or other distributions which cannot be
delivered by the United States Post Office or which remains uncashed for a
period of more than one year may be reinvested in the shareholder's account at
the then-current net asset value and the dividend option may be changed from
cash to reinvest. A Fund may deduct from a shareholder's account the costs of
the Fund's effort to locate a shareholder if a shareholder's mail is returned by
the U.S. Post Office or the Fund is otherwise unable to locate the shareholder
or verify the shareholder's mailing address. These costs may include a
percentage of the account when a search company charges a percentage fee in
exchange for their location services.
Each class of shares of a Fund will share proportionately in the
investment income and expenses of such Fund, except that, absent any applicable
fee waiver, Class A Shares, Class B Shares and Class C Shares alone will incur
distribution fees under their respective 12b-1 Plans.
Under the 1997 Act, as revised by the 1998 Act and the Omnibus
Consolidated and Emergency Supplemental Appropriations Act, a Fund is required
to track its sales of portfolio securities and to report its capital gain
distributions to you according to the following categories of holding periods:
"Mid-term capital gains" or "28 percent rate gain": securities sold
by a Fund after July 28, 1997 that were held more than one year but not
more than 18 months. These gains will be taxable to individual investors
at a maximum rate of 28%. This category of gains applied only to gains and
distributions in 1997.
"1997 Act long-term capital gains" or "20 percent rate gain": securities
sold between May 7, 1997 and July 28, 1997 that were held for more than 12
months, and securities sold by the Fund after July 28, 1997 that were held
for more than 18 months. As revised by the 1998 Act, this rate applies to
securities held for more than 12 months and sold in tax years beginning
after December 1, 1997. These gains will be taxable to individual
investors at a maximum rate of 20% for investors in the 28% or higher
federal income tax brackets, and at a maximum rate of 10% for investors in
the 15% federal income tax bracket. The Omnibus Consolidated and Emergency
Supplemental Appropriations Act passed in October of 1998 included
technical corrections to the 1998 Act. The effect of this correction is
that essentially all capital gain distributions paid to shareholders
during 1998 will be taxed at a maximum rate of 20%.
"Qualified 5-year gains": For individuals in the 15% bracket, qualified
five-year gains are net gains on securities held for more than 5 years
which are sold after December 31, 2000. For individual who are subject to
tax at higher rate brackets, qualified five-year gains are net gains on
securities which are purchased after December 31, 2000 and are held for
more than five years. Taxpayers subject to tax at a higher rate brackets
may also make an election for shares held on January 1, 2001 to recognize
gain on their shares in order to qualify such shares as qualified
five-year property. These gains will be taxable to individual investors at
a maximum rate of 18% for investors in the 28% or higher federal income
tax brackets, and at a maximum rate of 8% for investors in the 15% federal
income tax bracket when sold after the five-year holding period.
Because of each Fund's investment policy, it is expected that either
none or only a nominal portion of a Fund's dividends will be eligible for the
dividends-received deduction for corporations. The portion of dividends paid by
a Fund that so qualifies will be designated each year in a notice mailed to the
Fund's shareholders, and cannot exceed the gross amount of dividends received by
a Fund from domestic (U.S.) corporations that would have qualified for the
dividends-received deduction in the hands of a Fund if the Fund was a regular
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<PAGE>
corporation. The availability of the dividends-received deduction is subject to
certain holding period and debt financing restrictions imposed under the Code on
the corporation claiming the deduction. Under the 1997 Act, the amount that a
Fund may designate as eligible for the dividends-received deduction will be
reduced or eliminated if the shares on which the dividends earned by the Fund
were debt-financed or held by the Fund for less than a 46-day period during a
90-day period beginning 45 days before the ex-dividend date and ending 45 days
after the ex-dividend date. Similarly, if your Fund shares are debt-financed or
held by you for less than a 46-day period during a 90-day period beginning 45
days before the ex-dividend date and ending 45 days after the ex-dividend date,
then the dividends-received deduction for Fund dividends on your shares may also
be reduced or eliminated. Even if designated as dividends eligible for the
dividends-received deduction, all dividends (including any deducted portion)
must be included in your alternative minimum taxable income calculation.
Shareholders will be notified annually by Global Funds, Inc. as to
the federal income tax status of dividends and distributions paid by their Fund.
In addition to the federal taxes described above, shareholders may or
may not be subject to various state and local taxes. Because shareholders' state
and local taxes may be different than the federal taxes described above,
shareholders should consult their own tax advisers.
See also Other Tax Requirements under Accounting and Tax Issues in this
Part B.
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INVESTMENT MANAGEMENT AGREEMENTS AND SUB-ADVISORY AGREEMENTS
Delaware International Advisers Ltd. ("Delaware International" or the
"Manager"), located at Third Floor, 80 Cheapside, London, England EC2V 6EE,
furnishes investment management services to each Fund subject to the supervision
and direction of Global Funds, Inc.'s Board of Directors. Delaware International
is affiliated with Delaware Management Company ("Delaware"). Delaware
International has entered into separate Sub-Advisory Agreements with Delaware
for Global Equity Fund and Global Opportunities Fund.
Delaware Management Company, Inc. ("Delaware") and its predecessors
have been managing the funds in Delaware Investments since 1938. On November 30,
1998, Delaware and its affiliates within the Delaware Group, including the
Manager, were managing in the aggregate more than $44 billion in assets in the
various institutional or separately managed approximately $25,968,120,000 and
investment company approximately $18,438,870,000 accounts.
The Investment Management Agreement for each Fund are dated as follows:
- ---------------------------- ------------------------- -------------------------
Fund Date Approved by shareholders
- ---------------------------- ------------------------- -------------------------
Global Bond April 1, 1999 March 17, 1999
- ---------------------------- ------------------------- -------------------------
International Equity April 3, 1995 March 29, 1995
- ---------------------------- ------------------------- -------------------------
Emerging Markets April 1, 1999 March 17, 1999
- ---------------------------- ------------------------- -------------------------
Global Equity April 1, 1999 March 17, 1999
- ---------------------------- ------------------------- -------------------------
Global Opportunities April 1, 1999 March 17, 1999
- ---------------------------- ------------------------- -------------------------
International Small Cap April 1, 1999 March 17, 1999
- ---------------------------- ------------------------- -------------------------
New Europe December 23, 1998 December 28, 1998*
- ---------------------------- ------------------------- -------------------------
Latin America December 23, 1998 December 28, 1998*
- ---------------------------- ------------------------- -------------------------
*Approved by the initial shareholder.
The Agreements have an initial term of two years and may be further
renewed after their initial terms only so long as such renewal and continuance
are specifically approved at least annually by the Board of Directors or by vote
of a majority of the outstanding voting securities of the Fund to which the
Agreement relates, and only if the terms of the renewal thereof have been
approved by the vote of a majority of the directors of Global Funds, Inc. who
are not parties thereto or interested persons of any such party, cast in person
at a meeting called for the purpose of voting on such approval. The Agreements
are terminable without penalty on 60 days' notice by the directors of Global
Funds, Inc. or by the Manager. The Agreements will terminate automatically in
the event of their assignment.
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<PAGE>
The Manager manages each Fund's investments. The compensation payable
by each Fund for investment management services is equal to (on an annual basis)
as follows:
------------------------------- --------------------------------------
Fund Fee
------------------------------- --------------------------------------
Global Bond 0.75% on the first
$500 million of average daily
net assets; 0.70% on the next
$500 million; 0.65% on the
next $1.5 billion; 0.60% on
the average daily net assets
in excess of $2.5 billion**
---------------------------- -----------------------------------------
International Equity 0.75%*
---------------------------- -----------------------------------------
Emerging Markets 1.25% on the first
$500 million of average daily
net assets; 1.20% on the next
$500 million; 1.15% on the
next $1.5 billion; and 1.10%
on the average daily net
assets in excess of $2.5
billion**
---------------------------- -----------------------------------------
Global Equity 0.85% on the first $500 million of
average daily net assets, 0.80% on the
next $500 million; 0.75% on the next $1.5
billion; 0.70% on the average daily net
assets in excess of $2.5 billion**
---------------------------- -----------------------------------------
Global Opportunities 0.85% on the first $500 million of
average daily net assets, 0.80% on the
next $500 million; 0.75% on the next $1.5
billion; 0.70% on the average daily net
assets in excess of $2.5 billion**
---------------------------- -----------------------------------------
International Small Cap 1.25% on the first $500 million of
average daily net assets; 1.20% on the
next $500 million; 1.15% on the next $1.5
billion; and 1.10% on the average daily
net assets in excess of $2.5 billion**
---------------------------- -----------------------------------------
New Europe 1.25% on the first $500
million of average daily net
assets; 1.20% on the next $500
million; 1.15% on the next
$1.5 billion; and 1.10% on the
average daily net assets in
excess of $2.5 billion.
---------------------------- -----------------------------------------
Latin America 1.25% on the first
$500 million of average daily
net assets; 1.20% on the next
$500 million; 1.15% on the
next $1.5 billion; and 1.10%
on the average daily net
assets in excess of $2.5
billion.
---------------------------- -----------------------------------------
*Less fees paid to directors.
**At a meeting held on March 17, 1999, shareholders approved a new
investment management agreement for the Fund. Under the new agreement,
beginning April 1, 1999, the Fund will pay the Manager the fees set forth
in the table.
The fees payable to Delaware International, while higher than the
advisory fees paid to other mutual funds in general, are comparable to fees paid
by other mutual funds with similar objectives and policies.
Under the separate Sub-Advisory Agreement for Global Opportunities
Fund, Delaware manages the Funds' investments in U.S. securities. For the
services provided to the Manager, the Manager pays the Sub-Adviser a monthly fee
equal to 50% of the fee paid to the Manager under the terms of the Investment
Management Agreement.
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<PAGE>
Under the Sub-Advisory Agreement Global Equity Fund, Delaware manages
the Funds' investments in U.S. securities. Delaware will receive from the
Manager 25% of the investment management fees under the Investment Management
Agreement for Global Equity Fund.
On November 30, 1998, the total net assets of the Funds were as
follows:
International Equity Fund $339,282,731
Global Bond Fund $19,347,506
Emerging Markets Fund $10,113,093
Global Equity Fund $18,743,722
Global Opportunities Fund $3,265,434
International Small Cap Fund $3,174,788
Delaware International has elected to waive that portion, if any, of
the annual management fees payable by a Fund and to pay a Fund's expenses to the
extent necessary to ensure that the Total Operating Expenses for a Fund do not
exceed the following percentages of average daily net assets (exclusive of
applicable 12b-1 payments, taxes, interest, brokerage commissions and
extraordinary expenses) through May 31, 1999.
--------------------------------- ------------------------
Global Bond(1) 1.00%
--------------------------------- ------------------------
Emerging Markets(2) 1.70%
--------------------------------- ------------------------
Global Equity(3) 1.55%
--------------------------------- ------------------------
Global Opportunities(2) 0.80%
--------------------------------- ------------------------
International Small Cap(2) 1.25%
--------------------------------- ------------------------
New Europe(2) 1.25%
--------------------------------- ------------------------
Latin America(2) 1.25%
--------------------------------- ------------------------
(1) This expense cap is in place from December 1, 1998 through May 31, 1999.
From the commencement of operations through November 30, 1998, Delaware
International elected to voluntarily waive that portion, if any, of the annual
management fees payable by the Global Bond Fund and to pay certain expenses of
the Fund to the extent necessary to ensure that the Fund's total operating
expenses (exclusive of applicable 12b-1 plan expenses, taxes, interest,
brokerage commissions and extraordinary expenses) did not exceed on an
annualized basis 0.95% of average daily net assets.
(2) This expense cap has been in place from the commencement of the Fund's
operations.
(3) This expense cap is in place from June 1, 1998 through May 31, 1999. From
the commencement of operations through May 31, 1998, Delaware International
elected to voluntarily waive that portion, if any, of the annual management fees
payable by the Global Equity Fund and to pay certain expenses of the Fund to the
extent necessary to ensure that the Fund's total operating expenses (exclusive
of applicable 12b-1 plan expenses, taxes, interest, brokerage commissions and
extraordinary expenses) did not exceed on an annualized basis 0.95% of average
daily net assets.
For the International Equity Fund, Delaware International elected
voluntarily to waive that portion, if any, of the annual management fees payable
by International Equity Fund and to reimburse the Fund's expenses to the extent
necessary to ensure that the Total Operating Expenses (exclusive of applicable
12b-1 plan expenses, taxes, interest, brokerage commissions, extraordinary
expenses) did not exceed 0.95% from the commencement of operations through May
31, 1994. Such commitment from June 1, 1994 through November 30, 1994 was 1.50%
of average daily net assets and from December 1, 1995 through November 30, 1998
was 1.55% of average daily net assets.
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<PAGE>
Investment management fees incurred for the last three fiscal years
with respect to each Fund at the end of the last fiscal year were as follows:
<TABLE>
<CAPTION>
Fund November 30, 1998 November 30, 1997 November 30, 1996
- ---- ----------------- ----------------- -----------------
<S> <C> <C> <C>
International Equity Fund $2,084,553 earned $1,412,913 $792,625 earned
$2,084,553 paid $1,400,095 $683,170 paid
$-0- waived $12,818 waived $109,455 waived
Global Bond Fund (1) $137,275 earned $111,059 earned $29,065 earned
$74,025 paid $-0- paid -$0- paid
$63,250 waived $111,059 waived $29,065 waived
Emerging Markets Fund (2) $172,141 earned $185,509 earned $35,197 earned
$-0- paid $34,313 paid -$0- paid
$172,141 waived $151,196 waived $35,197 waived
Global Equity Fund (3) $132,982 earned $126,579 earned $95,908 paid
$55,228 paid $-0- paid -$0- paid
$77,754 waived $126,579 waived $95,908 waived
Global Opportunities Fund(4) $25,114 $8,529 earned N/A
$10,877 $-0- paid N/A
$14,237 $8,529 waived N/A
International Small Cap
Fund(5) $37,005 N/A N/A
$13,454 N/A N/A
$23,551 N/A N/A
</TABLE>
(1) Date of initial public offering was December 27, 1994.
(2) Date of initial public offering was June 10, 1996.
(3) Date of initial public offering was December 27, 1994.
(4) Commenced operations on July 22, 1997.
(5) Commenced operations on December 19, 1997.
Delaware International and Delaware are controlled and indirectly,
wholly owned by Delaware Management Holdings, Inc.
Except for those expenses borne by the Manager under the Investment
Management Agreements and the Distributor under the Distribution Agreements,
each Fund is responsible for all of its own expenses. Among others, these
include each Fund's proportionate share of rent and certain other administrative
expenses; the investment management fees; transfer and dividend disbursing agent
fees and costs; custodian expenses; federal and state securities registration
fees; proxy costs; and the costs of preparing prospectuses and reports sent to
shareholders.
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<PAGE>
Distribution and Service
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), located at 1818 Market Street, serves
as the national distributor of the shares of each Fund under separate agreements
dated as follows:
------------------------------ ------------------------------------------
Global Bond April 3, 1995, as amended on November 29, 1995
-------------------------- ----------------------------------------------
International Equity April 3, 1995, as amended on November 29, 1995
-------------------------- ----------------------------------------------
Emerging Markets May 1, 1996
-------------------------- ----------------------------------------------
Global Equity April 3, 1995, as amended on November 29, 1995
-------------------------- ----------------------------------------------
Global Opportunities July 21, 1997
-------------------------- ----------------------------------------------
International Small Cap July 21, 1997
-------------------------- ----------------------------------------------
New Europe December 23, 1998
-------------------------- ----------------------------------------------
Latin America December 23, 1998
-------------------------- ----------------------------------------------
The Distributor is an affiliate of the Manager and bears all of the
costs of promotion and distribution, except for payments by each Fund on behalf
of its respective Class A Shares, Class B Shares and Class C Shares under the
12b-1 Plan for each class. Commencing February 1, 1998, the Distributor has
elected voluntarily to waive 0.05% of the 0.30% 12b-1 plan expenses otherwise
payable by Emerging Markets Fund A Class through May 31, 1999. The Distributor
elected to voluntarily waive payments under the 12b-1 Plan for Global
Opportunities Fund's, International Small Cap Fund's, New Europe Fund's and
Latin America Fund's Class A Shares, Class B Shares and Class C Shares during
the commencement of the public offering of the Fund through May 31, 1999.
The Transfer Agent, Delaware Service Company, Inc., another affiliate
of the Manager located at 1818 Market Street, Philadelphia, PA 19103, serves as
the shareholder servicing, dividend disbursing and transfer agent for each Fund
under an amended and restated agreement dated December 23, 1998. The Transfer
Agent provides accounting services to the Funds pursuant to the terms of a
separate Fund Accounting Agreement. The Transfer Agent is also an indirect,
wholly owned subsidiary of Delaware Management Holdings, Inc.
The Fund has authorized one or more brokers to accept on its behalf
purchase and redemption orders in addition to the Transfer Agent. Such brokers
are authorized to designate other intermediaries to accept purchase and
redemption orders on the behalf of the Funds. For purposes of pricing, the Funds
will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order.
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<PAGE>
OFFICERS AND DIRECTORS
The business and affairs of Global Funds, Inc. are managed under the
direction of its Board of Directors.
Certain officers and directors of Global Funds, Inc. hold identical
positions in each of the other funds in the Delaware Group. As of February 28,
1999, the officers and directors of Global Funds, Inc., as a group, owned less
than 1% of the outstanding shares of Class A Shares, Class B Shares, Class C
Shares and Institutional Class Shares of each Fund.
As of February 28, 1999, management believes the following accounts
held 5% or more of a Class of shares of a Fund:
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C>
International Equity Merrill Lynch, Pierce, Fenner & Smith 390,289.340 15.95%
Fund B Class For the Sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246-6484
International Equity Merrill Lynch, Pierce, Fenner & Smith 305,161.520 33.08%
Fund C Class For the Sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246-6484
International Equity Norwest Bank Colorado NA TTEE 3,724,181.290 32.81%
Fund Institutional County of Los Angeles Def Comp
Class and Thrift Plan
c/o Great West Life and Annuity
8515 East Orchard Rd #2T2
Englewood, CO 80111-5002
Bankers Trust as Trustee for 3,428,385.840 30.21%
Coopers and Lybrand Map Savings Plan
100 Plaza One Mail Stop 3048
Jersey City, NJ 07311-3999
Northern Telecom, Inc. 1,565,646.820 13.79%
Long Term Investment Plan
c/o BTNY Service
Attn: Gina Anzalone
34 Exchange Place Mail Stop 3064
Jersey City, NJ 07302-3885
</TABLE>
-77-
<PAGE>
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
International RS 401(k) Plan 1,186,115.520 10.45%
Equity Fund PriceWaterhouseCoopers LLP
Institutional Class Savings Plan
c/o Delpac 16th Floor
1818 Market Street
Philadelphia, PA 19103-3638
Global Equity Fund RS DMTC 401(k) Plan 31,599.370 5.48%
A Class Pacific Detroit Diesel-Allison
401(k) Plan
Attn: Retirement Plans
1818 Market St. 16th Floor
Philadelphia, PA 19103
Global Equity Fund Merrill Lynch, Pierce, Fenner & Smith 118,902.090 30.76%
B Class For the Sole Benefit of its Customers
SEC#97F14
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246-6484
Global Equity Fund Merrill Lynch, Pierce, Fenner & Smith 150,700.280 63.41%
C Class For the Sole Benefit of its Customers
SEC#97F14
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246-6484
Global Equity Fund RS DMC Employee Profit Sharing Plan 53,704.730 56.94%
Institutional Class Delaware Management Company
Employee Profit Sharing Trust
c/o Rick Seidel
1818 Market St.
Philadelphia, PA 19103-3682
RS DMTC P/S Plan 20,479.540 21.71%
Columbia Diagnostics, Inc. P/S
Attn: Retirement Plans
1818 Market St.
Philadelphia, PA 19103-3638
Global Bond Fund Bruce A. Baker 11,216.390 6.28%
B Class and Claire B. Baker
5 Shaftsbury Villa Allen St.
United Kingdom Kensington
London W86UZ
</TABLE>
-78-
<PAGE>
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
Global Bond Donaldson Lufkin Jenrette 10,055.240 5.63%
Fund B Class Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Global Bond Fund NFSC/FEBO #BQD-951714 23,401.950 36.51%
C Class NFSC/FMTC IRA Rollover
FBO Lester C. Gilman Jr.
1485 Kathleen Pl.
Englewood, FL 34223-4321
NFSC/FEBO #BQ5-903701 7,747.710 12.09%
NFSC/FMTC IRA
FBO Myra S. Holladay
P.O. Box 52071
Albany, GA 31703-2071
Global Bond Fund NFSC/FEBO #BT9-238031 3,217.930 5.02%
C Class John S. McNally
Charlotte McNally
457 Glenview Dr.
Lower Burrell, PA 15068-3020
Global Bond Fund Lincoln National Life Insurance Co. 509,586.660 43.58%
Institutional Class Attn: Karen Gerke 4C01
1300 S. Clinton St.
Fort Wayne, IN 46802-3518
RS DMC Employee Profit Sharing Plan 86,681.160 7.41%
Delaware Management Company
Employee Profit Sharing Trust
c/o Rick Seidel
1818 Market St.
Philadelphia, PA 19103-3682
NFSC/FEBO #179-367451 71,489.640 6.11%
Benson Rev Dec of Trust
Roger S. Benson TTEE
U/A 10/18/85
7550 Hillside Dr.
La Jolla, CA 92037-3940
</TABLE>
-79-
<PAGE>
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
Emerging Markets Merrill Lynch, Pierce, Fenner & Smith 22,814.830 6.03%
Fund B Class For the Sole Benefit of its Customers
SEC#97KB3
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246-6484
Emerging Markets RS DMC Employee Profit Sharing Plan 109,172.710 36.43%
Fund Institutional Delaware Management Company
Class Employee Profit Sharing Trust
C/o Rick Seidel
1818 Market Street
Philadelphia, PA 19103-3682
Chase Manhattan Bank C/F 78,852.660 26.31%
Delaware Group Foundation Funds
Balanced Portfolio
Attn: Marisol Gordon
Global Investment Services
3 Metrotech Center 8th Floor
Brooklyn, NY 11201-3800
Emerging Markets Chase Manhattan Bank C/F 76,230.130 25.43%
Fund Institutional Delaware Group Foundation Funds
Class Growth Portfolio
Attn: Marisol Gordon
Global Investment Services
3 Metrotech Center 8th Floor
Brooklyn, NY 11201-3800
International Small Delaware Management Business Trust-DIA 1.030 100.00%
Cap Fund A Class Attn: Joseph H. Hastings
1818 Market Street 17th Floor
Philadelphia, PA 19103-3638
Global Opportunities Kandiah Balendran and 417.150 28.66%
Fund A Class Radhika Balendran JT WROS
1 Bromley Ct
Voorhees, NJ 08043-3922
DMTC Custodian for the Rollover IRA of 369.090 25.35%
Arber Lee Hayes
8558 Black Kite Dr.
Elk Grove, CA 95624-1222
</TABLE>
-80-
<PAGE>
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
DMTC Custodian for the IRA of 253.280 17.40%
Caralyn B. Ballou
45 Glenwood Ave.
Northfield, MA 01360-1125
DMTC Custodian for the Roth IRA of 229.910 15.79%
Becky L. Hammer
1036 S 2800 W
Ogden, UT 84404-9596
DMTC Custodian for 184.980 12.70%
Christopher A. McGinnis
28 Gerry Ln.
Sicklerville, NJ 08081-4472
Global Opportunities Lincoln National Life Insurance, Co. 373,399.420 99.99%
Fund Institutional c/o Lincoln Investment Management, Inc.
Class Attn: Carol A. Schmidt - Mgr. Sec. Adm. 3R
200 East Berry St.
Fort Wayne, IN 46802-2706
New Europe Fund David F. Frank 18.380 94.83%
A Class 801 W. Park Ave. Apt. 30D
Lindenwold, NJ 08021-3643
New Europe Fund Lincoln National Life Insurance Co. 294,117.650 99.97%
Institutional Class 1300 S. Clinton St.
Fort Wayne, IN 46802-3518
Latin America Fund Alfio Leone IV 38.820 97.50%
A Class 209 Crickett Ave.
Ardmore, PA 19003-2120
Latin America Fund Lincoln National Life Insurance Co. 294,117.650 99.99%
Institutional Class 1300 S. Clinton St.
Fort Wayne, IN 46802-3518
</TABLE>
DMH Corp., Delvoy, Inc., Delaware Management Business Trust, Delaware
Management Company (a series of Delaware Management Business Trust), Delaware
Management Company, Inc., Delaware Investment Advisers (a series of Delaware
Management Business Trust), Delaware Distributors, L.P., Delaware Distributors,
Inc., Delaware Service Company, Inc., Delaware Management Trust Company,
Delaware International Holdings Ltd., Founders Holdings, Inc., Delaware
International Advisers Ltd., Delaware Capital Management, Inc. and Retirement
Financial Services, Inc. are direct or indirect, wholly owned subsidiaries of
Delaware Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between
DMH and a wholly owned subsidiary of Lincoln National Corporation ("Lincoln
National") was completed. DMH and the Manager are now indirect, wholly owned
subsidiaries, and subject to the ultimate control, of Lincoln National. Lincoln
National, with headquarters in Fort Wayne, Indiana, is a diversified
organization with operations in many aspects of the financial services industry,
including insurance and investment management.
Certain officers and directors of Global Funds, Inc. hold identical
positions in each of the other funds in the Delaware Group. Directors and
principal officers of Global Funds, Inc. are noted below along with their ages
and their business experience for the past five years. Unless otherwise noted,
the address of each officer and director is One Commerce Square, Philadelphia,
PA 19103.
-81-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------- ------------------------------------------------------------------------------------------
Director/Officer Business Experience
- -------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
*Jeffrey J. Nick (46) Chairman of the Board, President, Chief Executive Officer and Director and/or Trustee of
Global Funds, Inc., each of the other 33 investment companies in the Delaware
Investments family, Delaware Management Business Trust, Delvoy, Inc., DMH Corp.
and Founders Holdings, Inc.
Chairman of the Board, Chief Executive Officer and Director of Delaware Management
Company, Inc., Delaware Distributors, Inc., Delaware International Holdings Ltd.,
Delaware International Advisers Ltd.
Chairman of the Board and Chief Executive Officer of Delaware Management Company (a
series of Delaware Management Business Trust)
Chairman of the Board and Director of Delaware Capital Management, Inc.
Chairman of Delaware Investment Advisers (a series of Delaware Management Business Trust)
and Delaware Distributors, L.P.
President, Chief Executive Officer and Director of Delaware Management Holdings, Inc.
Director of Delaware Service Company, Inc. and Retirement Financial Services, Inc.
From 1992 to 1996, Mr. Nick was Managing Director of Lincoln National UK plc and from 1989
to 1992, he was Senior Vice President responsible for corporate planning and development
for Lincoln National Corporation.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------
* Director affiliated with the Fund's investment manager and considered an
"interested person" as defined in the 1940 Act.
- --------------------------------------------------------------------------------
-82-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------ --------------------------------------------------------------------------------------
<S> <C> <C>
*Wayne A. Stork (61) Director and/or Trustee of Global Funds, Inc. and each of the other 33 investment
companies in the Delaware Investments family.
Chairman and Director of Delaware Management Holdings, Inc.
Prior to January 1, 1999, Mr. Stork was Chairman and Director and/or Trustee of
Global Funds, Inc. and each of the other 33 investment companies in the Delaware
Investments family and Delaware Capital Management, Inc.; Chairman, President,
Chief Executive Officer and Director of DMH Corp., Delaware Distributors, Inc.
and Founders Holdings, Inc.; Chairman, President, Chief Executive Officer, Chief
Investment Officer and Director/Trustee of Delaware Management Company, Inc. and
Delaware Management Business Trust; Chairman, President, Chief Executive Officer
and Chief Investment Officer of Delaware Management Company (a series of Delaware
Management Business Trust); Chairman, Chief Executive Officer and Chief
Investment Officer of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Chairman, Chief Executive Officer and Director of
Delaware International Advisers Ltd., Delaware International Holdings Ltd. and
Delaware Management Holdings, Inc.; President and Chief Executive Officer of
Delvoy, Inc.; Chairman of Delaware Distributors, L.P.; Director of Delaware
Service Company, Inc. and Retirement Financial Services, Inc.
In addition, during the five years prior to January 1, 1999, Mr. Stork has served
in various executive capacities at different times within the Delaware
organization.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------
* Director affiliated with the Fund's investment manager and considered an
"interested person" as defined in the 1940 Act.
- --------------------------------------------------------------------------------
-83-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------ --------------------------------------------------------------------------------------
<S> <C>
Richard G. Unruh, Jr. (59) Executive Vice President and Chief Investment Officer, Equities of Global Funds,
Inc., each of the other 33 investment companies in the Delaware Investments family
and Delaware Management Company (a series of Delaware Management Business Trust)
Executive Vice President and Director of Delaware Management Business Trust
Executive Vice President of Delaware Management Holdings, Inc. and Delaware Capital
Management, Inc.
Executive Vice President/Chief Investment Officer, Equities and Director of Delaware
Management Company, Inc.
Chief Executive Officer/Chief Investment Officer, Equities of Delaware Investment
Advisers (a series of Delaware Management Business Trust);
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive capacities at
different times within the Delaware organization.
- ------------------------------------ --------------------------------------------------------------------------------------
</TABLE>
-84-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------ --------------------------------------------------------------------------------------
<S> <C>
David K. Downes (59) Executive Vice President, Chief Operating Officer and Chief Financial Officer of
=== Global Funds, Inc. and each of the other 33 investment companies in the Delaware
Investments family, Delaware Management Holdings, Inc., Founders CBO Corporation,
Delaware Investment Advisers (a series of Delaware Management Business Trust)
and Delaware Distributors, L.P.
Executive Vice President, Chief Operating Officer, Chief Financial Officer and
Director of DMH Corp, Delaware Distributors, Inc., Founders Holdings, Inc. and
Delvoy, Inc.
Executive Vice President, Chief Financial Officer, Chief Administrative Officer and
Trustee of Delaware Management Business Trust
President, Chief Executive Officer, Chairman and Director of Delaware Service
Company, Inc.
President, Chief Operating Officer, Chief Financial Officer and Director of Delaware
International Holdings Ltd.
President and Director of Delaware Management Company, Inc.
President of Delaware Management Company (a Series of Delaware Management Business
Trust).
President, Chief Executive Officer and Director of Delaware Capital Management, Inc.
Chairman, and Director of Retirement Financial Services, Inc.
Chairman and Director of Delaware Management Trust Company
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Downes has served in various executive capacities at
different times within the Delaware organization.
- ------------------------------------ --------------------------------------------------------------------------------------
</TABLE>
-85-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------ --------------------------------------------------------------------------------------
<S> <C> <C>
Richard J. Flannery (41) Executive Vice President of Global Funds, Inc. and each of the other 33 investment
companies in the Delaware Investments family
Executive Vice President and General Counsel of Delaware Management Holdings, Inc.,
Delaware Distributors, L.P., Delaware Capital Management, Inc., Delaware Service
Company, Inc., Delaware Management Company (a series of Delaware Management
Business Trust), Delaware Investment Advisers (a series of Delaware Management
Business Trust) and Founders CBO Corporation
Executive Vice President/General Counsel and Director of DMH Corp., Delaware
Management Company, Inc., Delaware Management Business Trust, Delaware
Distributors, Inc., Delaware Service Company, Inc., Delaware International Holdings
Ltd., Founders Holdings, Inc., Delvoy, Inc. Retirement Financial Services, Inc.,
Delaware Capital Management, Inc. Delaware Management Trust Company
Director of Delaware International Advisers Ltd.
Director, HYPPCO Finance Company Ltd.
During the past five years, Mr. Flannery has served in various executive
capacities at different times within the Delaware organization.
- ------------------------------------ --------------------------------------------------------------------------------------
Walter P. Babich (71) Director and/or Trustee of Global Funds, Inc. and each of the other 33 investment
companies in the Delaware Investments family
460 North Gulph Road, King of Prussia, PA 19406
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and from 1988 to
1991, he was a partner of I&L Investors.
- ------------------------------------ --------------------------------------------------------------------------------------
John H. Durham (61) Director and/or Trustee of Global Funds, Inc. and 18 other investment companies in
the Delaware Investments family.
Partner, Complete Care Services.
120 Gibraltar Road, Horsham, PA 19044.
Mr. Durham served as Chairman of the Board of each fund in the Delaware
Investments family from 1986 to 1991; President of each fund from 1977 to 1990;
and Chief Executive Officer of each fund from 1984 to 1990. Prior to 1992, with
respect to Delaware Management Holdings, Inc., Delaware Management Company,
Delaware Distributors, Inc. and Delaware Service Company, Inc., Mr. Durham served
as a director and in various executive capacities at different times.
</TABLE>
-86-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------ -------------------------------------------
<S> <C> <C>
Anthony D. Knerr (60) Director and/or Trustee of Global Funds, Inc. and each of the 33 other investment
companies in the Delaware Investments family
500 Fifth Avenue, New York, NY 10110
Founder and Managing Director, Anthony Knerr & Associates
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance and Treasurer of
Columbia University, New York. From 1987 to 1989, he was also a lecturer in English
at the University. In addition, Mr. Knerr was Chairman of The Publishing Group,
Inc., New York, from 1988 to 1990. Mr. Knerr founded The Publishing Group, Inc. in
1988.
- ------------------------------------ -------------------------------------------
Ann R. Leven (58) Director and/or Trustee of Global Funds, Inc. and each of the other 33 other
investment companies in the Delaware Investments family
785 Park Avenue, New York, NY 10021
Treasurer, National Gallery of Art
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal Officer of the
Smithsonian Institution, Washington, DC, and from 1975 to 1992, she was Adjunct
Professor of Columbia Business School.
- ------------------------------------ -------------------------------------------
Thomas F. Madison (63) Director and/or Trustee of Global Funds, Inc. and each of the other 33 investment
companies in the Delaware Investments family
200 South Fifth Street, Suite 2100, Minneapolis, Minnesota 55402
President and Chief Executive Officer, MLM Partners, Inc.
Mr. Madison has also been Chairman of the Board of Communications Holdings, Inc.
since 1996. From February to September 1994, Mr. Madison served as Vice
Chairman--Office of the CEO of The Minnesota Mutual Life Insurance Company and from
1988 to 1993, he was President of U.S. WEST Communications--Markets.
- ------------------------------------ --------------------------------------------------------------------------------------
Charles E. Peck (73) Director and/or Trustee of Global Funds, Inc. and each of the other 33 investment
companies in the Delaware Investments family
P.O. Box 1102, Columbia, MD 21044
Secretary/Treasurer, Enterprise Homes, Inc. From 1981 to 1990, Mr. Peck was
Chairman and Chief Executive Officer of The Ryland Group, Inc., Columbia, MD.
- ------------------------------------ --------------------------------------------------------------------------------------
Jan L. Yeomans (50) Director and/or Trustee of Global & International Funds, Inc.
and 25 other investment companies in the Delaware Investments family
Building 220-13W-37, St. Paul, MN 55144
Vice President and Treasurer, 3M Corporation. From 1987-1994, Ms. Yeomans was
Director of Benefit Funds and Financial Markets for the 3M Corporation; Manager of
Benefit Fund Investments for the 3M Corporation, 1985-1987; Manager of Pension
Funds for the 3M Corporation, 1983-1985; Consultant--Investment Technology Group of
Chase Econometrics, 1982-1983; Consultant for Data Resources, 1980-1982; Programmer
for the Federal Reserve Bank of Chicago, 1970-1974.
- ------------------------------------ --------------------------------------------------------------------------------------
George M. Chamberlain, Jr. (52) Senior Vice President, Secretary and General Counsel of Global Funds, Inc. and each
of the other 33 investment companies in the Delaware Investments family
</TABLE>
-87-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------ --------------------------------------------------------------------------------------
<S> <C>
Senior Vice President and Secretary of Delaware Distributors, L.P., Delaware
Management Company (a series of Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware Management Business Trust), Delaware
Management Holdings, Inc., DMH Corp., Delaware Management Company, Inc., Delaware
Distributors, Inc., Delaware Service Company, Inc., Retirement Financial Services,
Inc., Delaware Capital Management, Inc., Delvoy, Inc. and Delaware Management
Business Trust
Senior Vice President, Secretary and Director of Founders Holdings, Inc.
Executive Vice President, Secretary and Director of Delaware Management Trust Company
Senior Vice President of Delaware International Holdings Ltd.
During the past five years, Mr. Chamberlain has served in various executive
capacities at different times within the Delaware organization.
- ------------------------------------ --------------------------------------------------------------------------------------
Joseph H. Hastings (49) Senior Vice President/Corporate Controller of Global Funds, Inc. and each of the
other 33 investment companies in the Delaware Investments family
Senior Vice President/Corporate Controller and Treasurer of Delaware Management
Holdings, Inc., DMH Corp., Delaware Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business Trust), Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware Capital
Management, Inc., Founders Holdings, Inc., Delaware International Holdings Ltd.,
Retirement Financial Services, Inc., Delvoy, Inc. and Delaware Management Business
Trust.
Executive Vice President/Chief Financial Officer/Treasurer of Delaware Management
Trust Company
Senior Vice President/Assistant Treasurer of Founders CBO Corporation
During the past five years, Mr. Hastings has served in various executive
capacities at different times within the Delaware organization.
- ------------------------------------ --------------------------------------------------------------------------------------
</TABLE>
-88-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------ --------------------------------------------------------------------------------------
<S> <C> <C>
Michael P. Bishof (36) Senior Vice President and Treasurer of Global Funds, Inc. and each of the other 33
investment companies in the Delaware Investments family
Senior Vice President/Investment Accounting of Delaware Management Company, Inc.,
and Delaware Service Company, Inc.
Senior Vice President and Treasurer/Manager, Investment Accounting of Delaware
Distributors, L.P., Delaware Management Company (a series of Delaware Management
Business Trust), Delaware Capital Management, Inc., Founders Holdings, Inc. and
Delaware Investment Advisers (a series of Delaware Management Business Trust)
Senior Vice President and Assistant Treasurer of Founders CBO Corporation
Senior Vice President and Manager of Investment Accounting of Delaware International
Holdings Ltd.
Before joining Delaware Investments in 1995, Mr. Bishof was a Vice President for
Bankers Trust, New York, NY from 1994 to 1995, a Vice President for CS First
Boston Investment Management, New York, NY from 1993 to 1994 and an Assistant
Vice President for Equitable Capital Management Corporation, New York, NY from
1987 to 1993.
- ------------------------------------ --------------------------------------------------------------------------------------
Robert L. Arnold (34) Vice President/Portfolio Manager of Global Funds, Inc., 33 other investment
companies in the Delaware Investments family, Delaware Management Company, Delaware
Investment Advisors and Delaware Capital Management, Inc.
During the past five years, Mr. Arnold has served in various capacities at
different times within the Delaware organization.
- ------------------------------------ --------------------------------------------------------------------------------------
</TABLE>
-89-
<PAGE>
The following is a compensation table listing for each director
entitled to receive compensation, the aggregate compensation received from the
Fund and the total compensation received from all investment companies in the
Delaware Investments family for which he or she serves as a director or trustee
for the fiscal year ended November 30, 1998 and an estimate of annual benefits
to be received upon retirement under the Delaware Investments Retirement Plan
for Directors/Trustees as of November 30, 1998. Only the independent directors
of the Fund receive compensation from the Fund.
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits Total
Accrued Estimated Compensation
Aggregate as Part of Annual from
Compensation Global Benefits Delaware
from Global Funds, Funds, Inc. Upon Investments
Name Inc. Expenses Retirement(1) Companies(2)
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C>
Walter P. Babich $1,418 None $38,500 $65,424
John H. Durham(3) $ 933 None $31,180 $30,394
Anthony D. Knerr $1,418 None $38,500 $65,424
Ann R. Leven $1,435 None $38,500 $66,538
W. Thacher Longstreth $1,332 None $38,500 $60,423
Thomas F. Madison $1,374 None $38,500 $62,924
Charles E. Peck $1,332 None $38,500 $60,423
</TABLE>
(1) Under the terms of the Delaware Investments Retirement Plan for
Directors/Trustees, each disinterested director/trustee who, at the
time of his or her retirement from the Board, has attained the age of
70 and served on the Board for at least five continuous years, is
entitled to receive payments from each investment company in the
Delaware Investments family for which he or she serves as a director or
trustee for a period equal to the lesser of the number of years that
such person served as a director or trustee or the remainder of such
person's life. The amount of such payments will be equal, on an annual
basis, to the amount of the annual retainer that is paid to
directors/trustees of each investment company at the time of such
person's retirement. If an eligible director/trustee retired as of
November 30, 1998 he or she would be entitled to annual payments
totaling the amount noted above, in the aggregate, from all of the
investment companies in the Delaware Investments family for which he or
she served as director or trustee, based on the number of investment
companies in the Delaware Investments family as of that date.
(2) Each independent director/trustee (other than John H. Durham) currently
receives a total annual retainer fee of $38,500 for serving as a
director or trustee for all 34 investment companies in Delaware
Investments, plus $3,145 for each Board Meeting attended. John H.
Durham currently receives a total annual retainer fee of $31,180
for serving as a director or trustee for 19 investment companies in
Delaware Investments, plus $1,810 for each Board Meeting attended.
Ann R. Leven, Walter P. Babich, Anthony D. Knerr and Thomas F. Madison
serve on the Fund's audit committee; Ms. Leven is the chairperson.
Members of the audit committee currently receive additional annual
compensation of $5,000 from all investment companies, in the aggregate,
with the exception of the chairperson, who receives $6,000.
(3) John H. Durham joined the Board of Directors of Global Funds, Inc. and
18 other investment companies in Delaware Investments on
April 16, 1998.
-90-
<PAGE>
GENERAL INFORMATION
Global Funds, Inc. is an open-end management investment company,
commonly known as a mutual fund. Global Funds, Inc. was organized as a Maryland
corporation on May 30, 1991.
Delaware International is the investment manager of each Fund of Global
Funds, Inc. and Delaware is the sub-adviser to Global Equity Fund. Delaware
International, or its affiliate Delaware, also manages the other funds in the
Delaware Group. Delaware, through a separate division, also manages private
investment accounts. While investment decisions of each Fund are made
independently from those of the other funds and accounts, investment decisions
for such other funds and accounts may be made at the same time as investment
decisions for a Fund.
Delaware International, or its affiliate Delaware also manages the
investment options for Delaware Medallion(SM) III Variable Annuity. Medallion is
issued by Allmerica Financial Life Insurance and Annuity Company (First
Allmerica Financial Life Insurance Company in New York and Hawaii). Delaware
Medallion offers variety of investment series ranging from domestic equity
funds, international equity and bond funds and domestic fixed income funds. Each
investment series available through Medallion utilizes an investment strategy
and discipline the same as or similar to one of the Delaware Investments mutual
funds available outside the annuity. See Delaware Group Premium Fund, Inc.,
above.
Access persons and advisory persons of the Delaware Investments family
of funds, as those terms are defined in SEC Rule 17j-1 under the 1940 Act, who
provide services to Delaware, Delaware International or their affiliates, are
permitted to engage in personal securities transactions subject to the
exceptions set forth in Rule 17j-1 and the following general restrictions and
procedures: (1) certain blackout periods apply to personal securities
transactions of those persons; (2) transactions must receive advance clearance
and must be completed on the same day as the clearance is received; (3) certain
persons are prohibited from investing in initial public offerings of securities
and other restrictions apply to investments in private placements of securities;
(4) opening positions may only be closed-out at a profit after a 60-day holding
period has elapsed; and (5) the Compliance Officer must be informed periodically
of all securities transactions and duplicate copies of brokerage confirmations
and account statements must be supplied to the Compliance Officer.
The Distributor acts as national distributor for each of the Funds and
for the other mutual funds in the Delaware Group. The Distributor ("DDLP")
received net commissions from each Fund on behalf of Class A Shares, after
reallowances to dealers, as follows:
International Equity Fund
Class A Shares
Total
Amount of
Fiscal Under- Amounts Net
Year writing Reallowed Commission
Ended Commissions to Dealers to DDLP/DDI
----- ----------- ---------- -----------
11/30/98 $396,347 $327,390 $68,957
11/30/97 637,741 528,999 108,742
11/30/96 279,857 231,351 48,506
-91-
<PAGE>
Global Bond Fund
Class A Shares
Total
Amount of
Fiscal Under- Amounts Net
Year writing Reallowed Commission
Ended Commissions to Dealers to DDLP/DDI
----- ----------- ---------- -----------
11/30/98 $14,425 $11,667 $2,758
11/30/97 $36,196 $28,643 $7,553
11/30/96 22,383 18,968 3,415
Emerging Markets Fund
Class A Shares
Total
Fiscal Amount of Amounts Net
Year Underwriting Reallowed Commission
Ended Commissions to Dealers to Distributor
----- ----------- ---------- --------------
11/30/98 $42,873 $35,289 $7,584
11/30/97 281,015 266,705 14,310
11/30/96(1) 21,927 18,174 3,753
(1) Date of initial public offering was June 10, 1996.
Global Equity Fund
Class A Shares
Total
Fiscal Amount of Amounts Net
Year Underwriting Reallowed Commission
Ended Commissions to Dealers to Distributor
----- ----------- ---------- --------------
11/30/98 $42,465 $35,927 $6,538
11/30/96 76,066 63,246 12,820
11/30/95(1) 27,931 24,095 3,836
(1) Date of initial public offering was December 27, 1994.
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Global Opportunities Fund
Class A Shares
Total
Amount of
Fiscal Under- Amounts Net
Year writing Reallowed Commission
Ended Commissions to Dealers to DDLP/DDI
----- ----------- ---------- -----------
11/30/98
11/30/97(1) none none none
(1) Date of initial public offering was July 22, 1997.
International Small Cap Fund
Class A Shares
Total
Amount of
Fiscal Under- Amounts Net
Year writing Reallowed Commission
Ended Commissions to Dealers to DDLP/DDI
----- ----------- ---------- -----------
11/30/98(1) none none none
(1) Date of initial public offering was December 19, 1997.
The Distributor received in the aggregate Limited CDSC payments with
respect to Class A Shares of each Fund as follows:
<TABLE>
<CAPTION>
Limited CDSC Payments
Fiscal International Global Bond Emerging Markets Global Equity Global Opportunities International
Year Equity Fund Fund A Fund A Fund A Fund A Small Cap
Ended A Class Class Class (1) Class Class(1) Fund A Class(1)
----- ------- ----- --------- ----------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
11/30/98 4,706 --- --- --- --- ---
11/30/97 --- --- --- --- --- N/A
11/30/96 --- --- --- --- N/A N/A
</TABLE>
(1) Date of initial public offering of Emerging Markets Fund A Class was
June 10, 1996. Date of initial public offering of Global Opportunities
Fund was July 22, 1997 and International Small Cap Fund was December
19, 1997.
The Distributor received in the aggregate CDSC payments with respect to
Class B Shares of each Fund as follows:
<TABLE>
<CAPTION>
CDSC Payments
Fiscal International Global Bond Emerging Markets Global Equity Global Opportunities International
Year Equity Fund Fund B Fund B Fund B Fund B Small Cap
Ended B Class Class Class (1) Class Class(1) Fund B Class(1)
----- ------- ----- --------- ----- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/98 $99,962 $7,957 $6,091 $8,550 none none
11/30/97 56,080 3,667 4,249 9,391 none N/A
11/30/96 6,825 931 --- 8,335 N/A N/A
</TABLE>
(1) Date of initial public offering of Emerging Markets Fund A Class was
June 10, 1996. Date of initial public offering of Global Opportunities
Fund was July 22, 1997 and International Small Cap Fund was December
19, 1997.
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<PAGE>
The Distributor received in the aggregate CDSC payments with respect to
Class C Shares of each Fund as follows:
<TABLE>
<CAPTION>
CDSC Payments
Fiscal International Global Bond Emerging Markets Global Equity Global Opportunities International
Year Equity Fund Fund C Fund C Fund C Fund C Small Cap
Ended C Class Class Class (1) Class Class(1) Fund C Class(1)
----- ------- ----- --------- ----- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
11/30/98 $12,696 $298 $1,265 $1,011 none none
11/30/97 5,271 65 678 1,088 none N/A
11/30/96 127 --- --- 580 N/A N/A
</TABLE>
(1) Date of initial public offering of Emerging Markets Fund A Class was
June 10, 1996. Date of initial public offering of Global Opportunities
Fund was July 22, 1997 and International Small Cap Fund was December
19, 1997.
The Transfer Agent, an affiliate of Delaware International and
Delaware, acts as shareholder servicing, dividend disbursing and transfer agent
for each Fund and for the other mutual funds in the Delaware Group. The Transfer
Agent is paid a fee by each Fund for providing these services consisting of an
annual per account charge of $5.50 for each Fund plus transaction charges for
particular services according to a schedule. Compensation is fixed each year and
approved by the Board of Directors, including a majority of the unaffiliated
directors. The Transfer Agent also provides accounting services to each Fund.
Those services include performing all functions related to calculating each
Fund's net asset value and providing all financial reporting services,
regulatory compliance testing and the related accounting services. For its
services, the Transfer Agent is paid a fee based on total assets of all funds in
the Delaware Investments family for which it provides such accounting services.
Such fee is equal to 0.25% multiplied by the total amount of assets in the
complex for which the Transfer Agent furnishes accounting services, where such
aggregate complex assets are $10 billion or less, and 0.20% of assets if such
aggregate complex assets exceed $10 billion. The fees are charged to each fund,
including each Fund, on an aggregate pro-rata basis. The asset-based fee payable
to the Transfer Agent is subject to a minimum fee calculated by determining the
total number of investment portfolios and associated classes.
Delaware and its affiliates own the name "Delaware Group." Under
certain circumstances, including the termination of Global Funds, Inc.'s
advisory relationship with Delaware International and Delaware or its
distribution relationship with the Distributor, Delaware and its affiliates
could cause Global Funds, Inc. to delete the words "Delaware Group" from Global
Funds, Inc.'s name.
The Chase Manhattan Bank ("Chase"), 4 Chase Metrotech Center, Brooklyn,
NY 11245, is custodian of each Fund's securities and cash. As custodian for the
Fund, Chase maintains a separate account or accounts for each Fund; receives,
holds and releases portfolio securities on account of each Fund; receives and
disburses money on behalf of each Fund; and collects and receives income and
other payments and distributions on account of each Fund's portfolio securities.
Capitalization
Global Funds, Inc. has a present authorized capitalization of one
billion four hundred million shares of capital stock with a $0.01 par value per
share. Each Fund currently offers four classes of shares. Global Funds, Inc.
currently offers eight series of shares - International Equity Series, Global
Bond Series, Global Equity Series, Emerging Markets Series, Global Opportunities
Series, International Small Cap Series, New Europe Series and Latin America
Series.
The Board of Directors has allocated fifty million shares to each of
the Fund's Class A Shares and Institutional Class, and has allocated twenty-five
million shares to each of the Fund's Class B Shares and Class C Shares.
While shares of Global Funds, Inc. have equal voting rights, except as
noted below, on matters affecting the Funds, each Fund would vote separately on
any matter it is directly affected by, such as any change in its fundamental
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<PAGE>
investment policies and as otherwise prescribed by the 1940 Act. Shares of each
Fund have a priority in that Fund's assets, and in gains on and income from the
portfolio of that Fund. All shares have no preemptive rights, are fully
transferable and, when issued, are fully paid and nonassessable.
Each Class of each Fund represents a proportionate interest in the
assets of such Fund and has the same voting and other rights and preferences as
the other classes of that Fund, except that shares of a Fund's Institutional
Class may not vote on any matter affecting the Fund Classes' Plans under Rule
12b-1. Similarly, as a general matter, shareholders of Class A Shares, Class B
Shares and Class C Shares of a Fund may vote only on matters affecting the 12b-1
Plan that relates to the class of shares that they hold. However, Class B Shares
of a Fund may vote on any proposal to increase materially the fees to be paid by
a Fund under the 12b-1 Plan relating to its Class A Shares. General expenses of
a Fund will be allocated on a pro-rata basis to the respective classes according
to asset size, except that expenses of the 12b-1 Plans of each Fund's Class A
Shares, Class B Shares and Class C Shares will be allocated solely to those
Classes.
The Registration Statements of the Funds and Classes of Global Funds,
Inc. became effective on the following dates:
<TABLE>
<CAPTION>
<S> <C> <C>
International Equity Fund October 30, 1991
International Equity Fund A Class October 30, 1991
International Equity Fund B Class September 6, 1994
International Equity Fund C Class November 29, 1995
International Equity Fund Institutional Class November 9, 1992
Global Bond Fund October 30, 1991
Global Bond Fund A Class October 30, 1991
Global Bond Fund B Class December 27, 1994
Global Bond Fund C Class November 29, 1995
Global Bond Fund Institutional Class November 9, 1992
Emerging Markets Fund
Emerging Markets Fund A Class May 1, 1996
Emerging Markets Fund B Class May 1, 1996
Emerging Markets Fund C Class May 1, 1996
Emerging Markets Fund Institutional Class May 1, 1996
Global Equity Fund October 30, 1991
Global Equity Fund A Class October 30, 1991
Global Equity Fund B Class December 27, 1994
Global Equity Fund C Class November 29, 1995
Global Equity Fund Institutional Class November 9, 1992
Global Opportunities Fund July 21, 1997
Global Opportunities Fund A Class July 21, 1997
Global Opportunities Fund B Class July 21, 1997
Global Opportunities Fund C Class July 21, 1997
Global Opportunities Fund
Institutional Class July 21, 1997
International Small Cap Fund
International Small Cap Fund A Class July 21, 1997
International Small Cap Fund B Class July 21, 1997
International Small Cap Fund C Class July 21, 1997
International Small Cap Fund Institutional Class July 21, 1997
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
New Europe Fund
New Europe Fund A Class December 23, 1998
New Europe Fund B Class December 23, 1998
New Europe Fund C Class December 23, 1998
New Europe Fund Institutional Class December 23, 1998
Latin America Fund
Latin America Fund A Class December 23, 1998
Latin America Fund B Class December 23, 1998
Latin America Fund C Class December 23, 1998
Latin America Fund Institutional Class December 23, 1998
</TABLE>
Prior to September 6, 1994, International Equity Fund A Class was known
as International Equity Fund class and International Equity Fund Institutional
Class was known as International Equity Fund (Institutional) class. Prior to
July 21, 1998, Global Equity Fund and its respective classes were known as
Global Assets Fund. Prior to July 21, 1998, Global Opportunities Fund and its
respective classes were known as Global Equity Fund.
All shares have noncumulative voting rights which means that the
holders of more than 50% of Global Funds, Inc.'s shares voting for the election
of directors can elect 100% of the directors if they choose to do so. Under
Maryland law, Global Funds, Inc. is not required, and does not intend, to hold
annual meetings of shareholders unless, under certain circumstances, it is
required to do so under the 1940 Act. Shareholders of 10% or more of Global
Funds, Inc.'s outstanding shares may request that a special meeting be called to
consider the removal of a director.
EURO Several European countries are participating in the European
Economic and Monetary Union, which established a common European currency for
participating countries. This currency is commonly known as the "Euro." Each
participating country replaced its previous currency with the Euro on January 1,
1999. Additional European countries may elect to participate after that date. In
addition, full implementation of the Euro will extend over a period of several
years. Initial implementation of the Euro occurred on January 1, 1999 without
disruption of services provided to each Fund. Each Fund's service providers
cooperated over the implementation weekend and following weeks to reconcile
their records and procedures. Going forward, if a Fund is invested in securities
of participating countries or countries that elect to participate at a later
date, it could be adversely affected if the computer systems used by its
applicable service providers are not properly prepared to handle the
implementation of this single currency through completion of the process or the
adoption of the Euro by additional countries in the future.
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<PAGE>
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for Delaware Group
Global & International Funds, Inc. and, in its capacity as such, audits the
annual financial statements of the Funds. International Equity Fund's, Global
Bond Fund's, Emerging Markets Fund's, Global Equity Fund's, Global Opportunities
Fund's and International Small Cap Fund's Statements of Net Assets, Statements
of Operations, Statements of Changes in Net Assets, Financial Highlights and
Notes to Financial Statements, as well as the reports of Ernst & Young LLP,
independent auditors, for the fiscal year ended November 30, 1998 are included
in Delaware Group Global & International Funds, Inc.'s Annual Reports to
shareholders. The financial statements and financial highlights, the notes
relating thereto and the reports of Ernst & Young LLP listed above are
incorporated by reference from the Annual Reports into this Part B. New Europe
Fund and Latin America Fund did not commence operations as of the close of
Global Funds, Inc.'s fiscal year.
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<PAGE>
APPENDIX A--INVESTMENT OBJECTIVES OF THE OTHER FUNDS IN THE DELAWARE
INVESTMENTS FAMILY
Following is a summary of the investment objectives of the funds in the
Delaware Investments family:
Delaware Balanced Fund seeks long-term growth by a balance of capital
appreciation, income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. Devon Fund
seeks current income and capital appreciation by investing primarily in
income-producing common stocks, with a focus on common stocks the Manager
believes have the potential for above average dividend increases over time.
Trend Fund seeks long-term growth by investing in common stocks issued
by emerging growth companies exhibiting strong capital appreciation potential.
Small Cap Value Fund seeks capital appreciation by investing primarily
in common stocks whose market values appear low relative to their underlying
value or future potential.
DelCap Fund seeks long-term capital growth by investing in common
stocks and securities convertible into common stocks of companies that have a
demonstrated history of growth and have the potential to support continued
growth.
Decatur Equity Income Fund seeks the highest possible current income by
investing primarily in common stocks that provide the potential for income and
capital appreciation without undue risk to principal. Growth and Income Fund
seeks long-term growth by investing primarily in securities that provide the
potential for income and capital appreciation without undue risk to principal.
Blue Chip Fund seeks to achieve long-term capital appreciation. Current income
is a secondary objective. It seeks to achieve these objectives by investing
primarily in equity securities and any securities that are convertible into
equity securities. Social Awareness Fund seeks to achieve long-term capital
appreciation. It seeks to achieve this objective by investing primarily in
equity securities of medium- to large-sized companies expected to grow over time
that meet the Fund's "Social Criteria" strategy.
Delchester Fund seeks as high a current income as possible by investing
principally in high yield, high risk corporate bonds, and also in U.S.
government securities and commercial paper. Strategic Income Fund seeks to
provide investors with high current income and total return by using a
multi-sector investment approach, investing principally in three sectors of the
fixed-income securities markets: high yield, higher risk securities, investment
grade fixed-income securities and foreign government and other foreign
fixed-income securities. High-Yield Opportunities Fund seeks to provide
investors with total return and, as a secondary objective, high current income.
Corporate Bond Fund seeks to provide investors with total return by investing
primarily in corporate bonds. Extended Duration Bond Fund seeks to provide
investors with total return by investing primarily in corporate bonds
U.S. Government Fund seeks high current income by investing primarily
in long-term debt obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities.
Limited-Term Government Fund seeks high, stable income by investing
primarily in a portfolio of short- and intermediate-term securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities and
instruments secured by such securities.
Delaware Cash Reserve seeks the highest level of income consistent with
the preservation of capital and liquidity through investments in short-term
money market instruments, while maintaining a stable net asset value.
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<PAGE>
REIT Fund seeks to achieve maximum long-term total return with capital
appreciation as a secondary objective. It seeks to achieve its objectives by
investing in securities of companies primarily engaged in the real estate
industry.
Tax-Free Money Fund seeks high current income, exempt from federal
income tax, by investing in short-term municipal obligations, while maintaining
a stable net asset value.
Tax-Free USA Fund seeks high current income exempt from federal income
tax by investing in municipal bonds of geographically diverse issuers. Tax-Free
Insured Fund invests in these same types of securities but with an emphasis on
municipal bonds protected by insurance guaranteeing principal and interest are
paid when due. Tax-Free USA Intermediate Fund seeks a high level of current
interest income exempt from federal income tax, consistent with the preservation
of capital by investing primarily in municipal bonds.
Tax-Free Pennsylvania Fund seeks a high level of current interest
income exempt from federal and, to the extent possible, certain Pennsylvania
state and local taxes, consistent with the preservation of capital. Tax-Free New
Jersey Fund seeks a high level of current interest income exempt from federal
income tax and New Jersey state and local taxes, consistent with preservation of
capital. Tax-Free Ohio Fund seeks a high level of current interest income exempt
from federal income tax and Ohio state and local taxes, consistent with
preservation of capital.
Foundation Funds are "fund of funds" which invest in other funds in the
Delaware Investments family (referred to as "Underlying Funds"). Foundation
Funds Income Portfolio seeks a combination of current income and preservation of
capital with capital appreciation by investing primarily in a mix of fixed
income and domestic equity securities, including fixed income and domestic
equity Underlying Funds. Foundation Funds Balanced Portfolio seeks capital
appreciation with current income as a secondary objective by investing primarily
in domestic equity and fixed income securities, including domestic equity and
fixed income Underlying Funds. Foundation Funds Growth Portfolio seeks long-term
capital growth by investing primarily in equity securities, including equity
Underlying Funds, and, to a lesser extent, in fixed income securities, including
fixed-income Underlying Funds.
International Equity Fund seeks to achieve long-term growth without
undue risk to principal by investing primarily in international securities that
provide the potential for capital appreciation and income. Global Bond Fund
seeks to achieve current income consistent with the preservation of principal by
investing primarily in global fixed-income securities that may also provide the
potential for capital appreciation. Global Equity Fund seeks to achieve
long-term total return by investing in global securities that provide the
potential for capital appreciation and income. Emerging Markets Fund seeks
long-term capital appreciation by investing primarily in equity securities of
issuers located or operating in emerging countries.
U.S. Growth Fund seeks to maximize capital appreciation by investing
in companies of all sizes which have low dividend yields, strong balance sheets
and high expected earnings growth rates relative to their industry. Overseas
Equity Fund seeks to maximize total return (capital appreciation and income),
principally through investments in an internationally diversified portfolio of
equity securities. New Pacific Fund seeks long-term capital appreciation by
investing primarily in companies which are domiciled in or have their principal
business activities in the Pacific Basin.
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<PAGE>
Delaware Group Premium Fund, Inc. offers the following funds available
exclusively as funding vehicles for certain insurance company separate accounts.
Decatur Total Return Series seeks the highest possible total rate of return by
selecting issues that exhibit the potential for capital appreciation while
providing higher than average dividend income. Delchester Series seeks as high a
current income as possible by investing in rated and unrated corporate bonds,
U.S. government securities and commercial paper. Capital Reserves Series seeks a
high stable level of current income while minimizing fluctuations in principal
by investing in a diversified portfolio of short- and intermediate-term
securities. Cash Reserve Series seeks the highest level of income consistent
with preservation of capital and liquidity through investments in short-term
money market instruments. DelCap Series seeks long-term capital appreciation by
investing its assets in a diversified portfolio of securities exhibiting the
potential for significant growth. Delaware Series seeks a balance of capital
appreciation, income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. International
Equity Series seeks long-term growth without undue risk to principal by
investing primarily in equity securities of foreign issuers that provide the
potential for capital appreciation and income. Small Cap Value Series seeks
capital appreciation by investing primarily in small-cap common stocks whose
market values appear low relative to their underlying value or future earnings
and growth potential. Emphasis will also be placed on securities of companies
that may be temporarily out of favor or whose value is not yet recognized by the
market. Trend Series seeks long-term capital appreciation by investing primarily
in small-cap common stocks and convertible securities of emerging and other
growth-oriented companies. These securities will have been judged to be
responsive to changes in the market place and to have fundamental
characteristics to support growth. Income is not an objective. Global Bond
Series seeks to achieve current income consistent with the preservation of
principal by investing primarily in global fixed-income securities that may also
provide the potential for capital appreciation. Strategic Income Series seeks
high current income and total return by using a multi-sector investment
approach, investing primarily in three sectors of the fixed-income securities
markets: high-yield, higher risk securities; investment grade fixed-income
securities; and foreign government and other foreign fixed-income securities.
Devon Series seeks current income and capital appreciation by investing
primarily in income-producing common stocks, with a focus on common stocks that
the investment manager believes have the potential for above-average dividend
increases over time. Emerging Markets Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of issuers located or
operating in emerging countries. Convertible Securities Series seeks a high
level of total return on its assets through a combination of capital
appreciation and current income by investing primarily in convertible
securities. Social Awareness Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of medium to
large-sized companies expected to grow over time that meet the Series' "Social
Criteria" strategy. REIT Series seeks to achieve maximum long-term total return,
with capital appreciation as a secondary objective, by investing in securities
of companies primarily engaged in the real estate industry.
Delaware-Voyageur US Government Securities Fund seeks to provide a high
level of current income consistent with the prudent investment risk by investing
in U.S. Treasury bills, notes, bonds, and other obligations issued or
unconditionally guaranteed by the full faith and credit of the U.S. Treasury,
and repurchase agreements fully secured by such obligations.
Delaware-Voyageur Tax-Free Arizona Insured Fund seeks to provide a high
level of current income exempt from federal income tax and the Arizona personal
income tax, consistent with the preservation of capital. Delaware-Voyageur
Minnesota Insured Fund seeks to provide a high level of current income exempt
from federal income tax and the Minnesota personal income tax, consistent with
the preservation of capital.
Delaware-Voyageur Tax-Free Minnesota Intermediate Fund seeks to provide
a high level of current income exempt from federal income tax and the Minnesota
personal income tax, consistent with preservation of capital. The Fund seeks to
reduce market risk by maintaining an average weighted maturity from five to ten
years.
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<PAGE>
Delaware-Voyageur Tax-Free California Insured Fund seeks to provide a
high level of current income exempt from federal income tax and the California
personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Florida Insured Fund seeks to provide a high level of
current income exempt from federal income tax, consistent with the preservation
of capital. The Fund will seek to select investments that will enable its shares
to be exempt from the Florida intangible personal property tax.
Delaware-Voyageur Tax-Free Florida Fund seeks to provide a high level of current
income exempt from federal income tax, consistent with the preservation of
capital. The Fund will seek to select investments that will enable its shares to
be exempt from the Florida intangible personal property tax. Delaware-Voyageur
Tax-Free Kansas Fund seeks to provide a high level of current income exempt from
federal income tax, the Kansas personal income tax and the Kansas intangible
personal property tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Missouri Insured Fund seeks to provide a high level
of current income exempt from federal income tax and the Missouri personal
income tax, consistent with the preservation of capital. Delaware-Voyageur
Tax-Free New Mexico Fund seeks to provide a high level of current income exempt
from federal income tax and the New Mexico personal income tax, consistent with
the preservation of capital. Delaware-Voyageur Tax-Free Oregon Insured Fund
seeks to provide a high level of current income exempt from federal income tax
and the Oregon personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Utah Fund seeks to provide a high level of current
income exempt from federal income tax, consistent with the preservation of
capital. Delaware-Voyageur Tax-Free Washington Insured Fund seeks to provide a
high level of current income exempt from federal income tax, consistent with the
preservation of capital.
Delaware-Voyageur Tax-Free Arizona Fund seeks to provide a high level
of current income exempt from federal income tax and the Arizona personal income
tax, consistent with the preservation of capital. Delaware-Voyageur Tax-Free
California Fund seeks to provide a high level of current income exempt from
federal income tax and the California personal income tax, consistent with the
preservation of capital. Delaware-Voyageur Tax-Free Iowa Fund seeks to provide a
high level of current income exempt from federal income tax and the Iowa
personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Idaho Fund seeks to provide a high level of current
income exempt from federal income tax and the Idaho personal income tax,
consistent with the preservation of capital. Delaware-Voyageur Minnesota High
Yield Municipal Bond Fund seeks to provide a high level of current income exempt
from federal income tax and the Minnesota personal income tax primarily through
investment in medium and lower grade municipal obligations. National High Yield
Municipal Fund seeks to provide a high level of income exempt from federal
income tax, primarily through investment in medium and lower grade municipal
obligations. Delaware-Voyageur Tax-Free New York Fund seeks to provide a high
level of current income exempt from federal income tax and the personal income
tax of the state of New York and the city of New York, consistent with the
preservation of capital. Delaware-Voyageur Tax-Free Wisconsin Fund seeks to
provide a high level of current income exempt from federal income tax and the
Wisconsin personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Colorado Fund seeks to provide a high level
of current income exempt from federal income tax and the Colorado personal
income tax, consistent with the preservation of capital.
Aggressive Growth Fund seeks long-term capital appreciation, which the
Fund attempts to achieve by investing primarily in equity securities believed to
have the potential for high earnings growth. Although the Fund, in seeking its
objective, may receive current income from dividends and interest, income is
only an incidental consideration in the selection of the Fund's investments.
Growth Stock Fund has an objective of long-term capital appreciation. The Fund
seeks to achieve its objective from equity securities diversified among
individual companies and industries. Tax-Efficient Equity Fund seeks to obtain
for taxable investors a high total return on an after-tax basis. The Fund will
attempt to achieve this objective by seeking to provide a high long-term
after-tax total return through managing its portfolio in a manner that will
defer the realization of accrued capital gains and minimize dividend income.
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Delaware-Voyageur Tax-Free Minnesota Fund seeks to provide a high level
of current income exempt from federal income tax and the Minnesota personal
income tax, consistent with the preservation of capital. Delaware-Voyageur
Tax-Free North Dakota Fund seeks to provide a high level of current income
exempt from federal income tax and the North Dakota personal income tax,
consistent with the preservation of capital.
For more complete information about any of the funds in the Delaware
Investments family, including charges and expenses, you can obtain a prospectus
from the Distributor. Read it carefully before you invest or forward funds.
Each of the summaries above is qualified in its entirety by the
information contained in each fund's prospectus(es).
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