<PAGE>
DELAWARE(SM)
INVESTMENTS
------------
Delaware International Small Cap Fund
-------------------------------------
2000 Semi-Annual Report
July 10, 2000
Dear Shareholder:
Following is the 2000 semi-annual report for Delaware International Small Cap
Fund.
Economic Overview
Over the last six-month period, many stock markets around the world were
characterized by striking parallels in performance. Many international stock
indices demonstrated the same volatility seen in both the S&P 500 Index and the
Nasdaq Composite.
As the end of 1999 approached, U.S. stock markets as measured by the Dow Jones
Composite Index experienced a strong rally led by shares of growth stocks in
general, and technology companies in particular. The bull-run persisted through
the month of February, before investor sentiment did an about-face and the
market gave up most of its gains during the second half of the Fund's six-month
period, ended May 31, 2000.
In Europe, corporate profits were generally on the rise as the new year came and
went. Technology, and wireless stocks in particular, were leading a charge
similar to that seen in the U.S. Europe also witnessed the pullback beginning in
March, however. European wireless stocks, feeling the pressure of licensing, in
many cases gave up most or all of their recent gains. Although the euro has
confounded forecasters by continuing to weaken, the overall economic outlook in
Europe is encouraging, and the Morgan Stanley Capital International (MSCI)
Europe Index finished the six-month period up 8.43% (Source: MSCI).
The sharp downturn in domestic stock markets this past spring may have
consequentially tempered momentum in Southeast Asia, where economies such as
those in Singapore and Indonesia had shown strong moves toward full recovery at
the start of the year. We believe international investors can be encouraged,
however, by the continued rapid growth seen in Hong Kong, as well as in China,
which was aided in part by the prospect of its entry into the World Trade
Organization.
Investment Strategy
Delaware International Small Cap Fund delivered a return of -9.40% for the
six-month period (Institutional shares at net asset value with distributions
reinvested), trailing the MSCI Europe, Asia and Far East Index as well as the
average return for the universe of funds with similar objectives that is tracked
by Lipper Analytical Services. Lipper's International Small Cap universe
returned an average of +7.92 for the period, while the MSCI EAFE Index rose
0.73%.
<PAGE>
In Conclusion
The Fund invests in the stocks of companies whose market capitalizations are
generally less than $1.5 billion. While its investments in emerging markets in
part caused the Fund to lag during the period, we believe the portfolio is
well-positioned, and we look forward to the second half of 2000. Investors in
the Fund should be aware that risks associated with investments in small cap
stocks often outweigh those in large caps, and that international investing
likewise involves greater risk than investing in U.S. stocks. We believe that
many opportunities lie ahead, and that our disciplined strategies for global
investing provide both a sound long-term approach and valuable portfolio
diversification. Thank you for your continued confidence in Delaware
Investments.
Sincerely,
/s/ Wayne A. Stork
-----------------------------------
Wayne A. Stork
Chairman,
Delaware Investments Family of Funds
/s/ David K. Downes
-----------------------------------
David K. Downes
President and Chief Executive Officer
Delaware Investments Family of Funds
<PAGE>
Performance Summary
Delaware International Small Cap Fund
Cumulative/Average Annual Total Returns Through May 31, 2000
Lifetime One Year Six Months
Delaware International Small Cap Fund
Institutional Class (Est. 12/19/97) +6.89% +1.26% -9.40%
Morgan Stanley EAFE Index +12.72% +17.43% +0.73%
Lipper International Small Cap Class
(82 Funds) +19.66% +52.00% +7.92%
All performance shown above assumes reinvestment of distributions. As of the
date of this report, one share of Class A is outstanding. Therefore, performance
for Class A can be expected to vary due to different charges and expenses. No
front-end sales charge of 12b-1 fees were actually imposed on A class shares for
the period and no B or C class shares were offered. Return and share value
fluctuate so that shares, when redeemed, may be worth more or less than their
original cost.
Institutional Class shares are available without sales or asset-based
distribution charges only to certain eligible institutional accounts. Management
fees were waived during the reporting period, and without this waiver
performance would have been reduced.
International stocks involve greater risk than investing in U.S. stocks. In
addition, many small cap stocks involve greater risk than investments in large
cap stocks. Past performance does not guarantee future results.
<PAGE>
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS
DELAWARE INTERNATIONAL SMALL CAP FUND
Statement of Net Assets
May 31, 2000
(Unaudited)
Market
Number Value
of Shares (U.S. $)
--------- ---------
COMMON STOCK - 97.28%
Australia - 1.00%
* Simeon Wines 23,600 $ 35,037
--------
35,037
--------
Canada - 0.75%
* Magellan Aerospace 8,000 26,700
--------
26,700
--------
Denmark - 2.19%
* Bang & Olufsen Holding Class B 2,133 77,328
--------
77,328
--------
Finland - 0.78%
Huhtamaki Van Leer Oyj 600 18,926
Talentum 1,200 8,791
--------
27,717
--------
France - 12.60%
* Boiron 600 32,701
* Carbone Lorraine 700 33,121
* Financiere Marc de Lacharriere 300 43,676
IMV Technologies 1,600 29,849
* Manitou 1,000 86,792
* Mecatherm 1,150 37,993
* Norbert Dentressangle 1,560 26,759
* Remy Cointreau 1,810 39,358
Royal Canin 700 66,373
* Walter 430 48,758
--------
445,380
--------
Germany - 11.39%
* AGIV 2,420 43,363
Babcock Borsig 850 32,920
Boewe Systec 1,870 45,200
* Cewe Color Holding 2,500 57,162
Escada 450 42,416
* FAG Kugelfischer Georg Schaefer 9,560 71,375
* KSB 350 32,239
Ludwig Beck 6,103 77,745
--------
402,420
--------
Hong Kong - 4.71%
Cafe De Coral Holdings 110,000 40,232
Chen Hsong Holdings 280,000 42,042
Hung Hing Printing Group 104,000 38,371
South China Morning Post (Holdings) 64,000 45,994
--------
166,639
--------
Page 1
<PAGE>
Statement of Net Assets (continued)
Market
Number Value
of Shares (U.S. $)
--------- --------
Italy - 1.68%
* Carraro 8,000 $ 24,638
La Doria 15,000 34,647
--------
59,285
--------
Japan - 14.53%
Arc Land Sakamoto 4,000 52,754
Aronkasei 15,000 53,636
Daitec 3,000 40,958
Getz Brothers 10,000 49,132
Kayaba Industry 29,000 52,522
Miyachi Technos 5,000 51,546
Nagawa 8,000 53,868
Takara Printing 6,000 83,032
Ube-Nitto Kasei 14,000 35,887
Zuiko 3,000 39,565
--------
512,900
--------
Netherlands - 7.24%
Ahrend 2,000 24,638
Draka Holding 1,000 59,075
ICT Automatisering 1,500 51,445
Stork 2,100 27,830
Unique International 1,500 38,287
Van Melle 2,000 54,688
--------
255,963
--------
New Zealand - 1.07%
The Warehouse Group 19,200 37,784
--------
37,784
--------
Norway - 2.74%
Nera 24,359 96,830
--------
96,830
--------
Singapore - 2.63%
Asia Pacific Breweries 13,000 27,303
Courts (Singapore) Limited 65,000 22,127
* DBS Land 7,000 7,997
Overseas Union Bank 10,392 35,677
--------
93,104
--------
Spain - 0.69%
Portland Valderrivas 1,200 24,414
--------
24,414
--------
Sweden - 0.97%
IRO 3,700 34,158
--------
34,158
--------
Switzerland - 3.08%
Lindt & Spruengli Class B 20 108,931
--------
108,931
--------
Taiwan - 0.15%
* Yageo - GDR 616 5,390
--------
5,390
--------
Page 2
<PAGE>
Statement of Net Assets (continued)
<TABLE>
<CAPTION>
Market
Number Value
of Shares (U.S. $)
--------- -----------
<S> <C> <C>
United Kingdom - 29.08%
Arriva 10,580 $ 36,991
* Body Shop International 43,469 81,686
Bovis Homes Group 10,700 47,905
* Bradstock Group 66,800 19,004
* Bristol Water Holdings 2,550 30,546
* Bulmer (H.P.) Holdings 9,059 61,040
* Cobham 2,449 33,773
* Dairy Crest Group 30,000 77,263
Fuller Smith & Turner Class A 6,100 39,275
Glynwed International 14,400 50,778
Harvey Nichols 26,600 54,766
Hewden Stuart 27,000 30,119
IMI 13,400 53,698
Laird Group 18,200 59,545
Northern Foods 55,300 95,431
* Pendragon 17,896 35,371
Persimmon 14,100 40,325
Rexam 23,620 84,130
TT Group 24,200 45,295
Wilshaw 70,800 50,886
----------
1,027,827
----------
Total Common Stock (cost $3,810,759) 3,437,807
----------
Principal
Amount
---------
REPURCHASE AGREEMENTS - 2.86%
With Chase Manhattan 6.33% 6/1/00
(dated 5/31/00, collateralized by $35,000
U.S. Treasury Notes 5.875% due 11/15/04,
market value $33,786). $ 33,000 33,000
With J.P. Morgan Securities 6.33% 6/1/00
(dated 5/31/00, collateralized by $13,000
U.S.Treasury Notes 6.50% due 5/31/01,
market value $13,051 and $9,000 U.S.
Treasury Notes 6.625% due 6/30/01, market
value $9,398, and $2,000 U.S. Treasury
Notes 6.50% due 8/31/01, market value $2,065,
and $10,000 U.S. Treasury Notes 6.375%
due 9/30/01, market value $10,217). 34,000 34,000
With PaineWebber 6.33% 6/1/00
(dated 5/31/00, collateralized by $13,000
U.S. Treasury Notes 5.00% due 4/30/01,
market value $12,941 and $8,000 U.S.
Treasury Notes 6.25% due 1/31/02, market
value $8,428 and $13,000 U.S. Treasury
Notes 7.25% due 5/15/04, market value $13,393). 34,000 34,000
-----------
Total Repurchase Agreements (cost $101,000) 101,000
-----------
TOTAL MARKET VALUE OF SECURITIES - 100.14%
(cost $3,911,759) $ 3,538,807
LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS - (0.14%) (4,819)
-----------
NET ASSETS APPLICABLE TO 442,624 SHARES OUTSTANDING - 100.00% $ 3,533,988
===========
</TABLE>
Page 3
<PAGE>
Statement of Net Assets (continued)
<TABLE>
<CAPTION>
<S> <C>
NET ASSET VALUE - DELAWARE INTERNATIONAL SMALL CAP FUND A CLASS
($11.77 / 1.475 shares) $ 7.98
======
NET ASSET VALUE - DELAWARE INTERNATIONAL SMALL CAP FUND INSTITUTIONAL CLASS
($3,533,976 / 442,623 shares) $ 7.98
======
COMPONENTS OF NET ASSETS AT MAY 31, 2000:
Shares of Beneficial Interest (unlimited authorization - no par) $ 3,770,045
Undistributed net investment income** 34,783
Accumulated net realized gain on investments 102,622
Net unrealized depreciation of investments and foreign currencies (373,462)
-----------
Total net assets $ 3,533,988
===========
----------------------------------------------------------------------------------------
* Non-income producing security for the period ended May 31, 2000.
** Undistributed net investment income includes net realized gains (losses) on foreign
currencies. Net realized gains (losses) on foreign currencies are treated as net
investment income in accordance with provisions of the Internal Revenue Code.
GDR - Global Depository Receipt
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
DELAWARE INTERNATIONAL SMALL CAP FUND
Net asset value A Class (A) $ 7.98
Sales charge (5.75% of offering price or 6.14% of the amount invested
per share)(B) 0.49
------
Offering price $ 8.47
======
----------------------------------------------------------------------------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See current prospectus for purchases of $50,000 or more.
</TABLE>
See accompanying notes
Page 4
<PAGE>
DELAWARE INTERNATIONAL SMALL CAP FUND
STATEMENT OF OPERATIONS
Six Months Ended
5/31/00
(Unaudited)
------------
INVESTMENT INCOME:
Dividends $ 61,073
Interest 5,077
Foreign tax withheld (6,168)
---------
59,982
---------
EXPENSES:
Management fees 23,306
Custodian fees 1,075
Professional fees 900
Reports and statements to shareholders 900
Accounting and administration 755
Dividend disbursing and transfer agent fees and expenses 553
Trustees' fees 268
Registration fees 150
Taxes (other than taxes on income) 172
Other 2
---------
28,081
Less expenses absorbed or waived (4,678)
Less expenses paid indirectly (158)
---------
Total expenses 23,245
---------
NET INVESTMENT INCOME 36,737
---------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on:
Investments 102,440
Foreign currencies (88)
---------
Net realized gain 102,352
Net change in unrealized appreciation /
depreciation of investments and foreign currencies (504,860)
---------
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS AND FOREIGN CURRENCIES (402,508)
---------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS $(365,771)
=========
See accompanying notes
Page 5
<PAGE>
DELAWARE INTERNATIONAL SMALL CAP FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended
5/31/00 Year ended
(Unaudited) 11/30/99
-----------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 36,737 $ 60,820
Net realized gain on investments and foreign currencies 102,352 618,585
Net change in unrealized appreciation / depreciation of
investments and foreign currencies (504,860) 45,562
-----------------------------------------
Net increase (decrease) in net assets resulting from operations (365,771) 724,967
-----------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class - -
Institutional Class (50,869) (63,530)
Net realized gain on investments:
A Class (2) -
Institutional Class (629,317) (26,471)
-----------------------------------------
(680,188) (90,001)
-----------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class 2 -
Institutional Class 2 -
Net asset value of shares issued upon reinvestment
of distributions from net investment income and net
realized gain on investments:
A Class 2 -
Institutional Class 680,186 90,001
-----------------------------------------
680,192 90,001
-----------------------------------------
Cost of shares repurchased:
A Class - -
Institutional Class - -
-----------------------------------------
- -
-----------------------------------------
Increase in net assets derived from capital
share transactions 680,192 90,001
-----------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS (365,767) 724,967
NET ASSETS:
Beginning of period 3,899,755 3,174,788
-----------------------------------------
End of period $ 3,533,988 $ 3,899,755
=========================================
</TABLE>
See accompanying notes
Page 6
<PAGE>
DELAWARE INTERNATIONAL SMALL CAP FUND
FINANCIAL HIGHLIGHTS
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
Institutional Class (5)
----------------------------------------------
Six Months Ended Year 12/19/97 (2)
05/31/00 (1) Ended To
(Unaudited) 11/30/99 11/30/98
----------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.730 $9.000 $8.500
Income (loss) from investment operations:
Net investment income (3) 0.085 0.168 0.191
Net realized and unrealized gain (loss) on investments and foreign currencies (0.963) 1.817 0.309
----------------------------------------------
Total from investment operations (0.878) 1.985 0.500
----------------------------------------------
Less dividends and distributions:
Dividends from net investment income (0.140) (0.180) -
Distributions from net realized gain on investments (1.732) (0.075) -
----------------------------------------------
Total dividends (1.872) (0.255) -
----------------------------------------------
Net asset value, end of period $7.980 $10.730 $9.000
==============================================
Total return (4) (9.40%) 22.74% 5.88%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $3,534 $3,900 $3,175
Ratio of expenses to average net assets 1.25% 1.25% 1.25%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.51% 1.57% 2.05%
Ratio of net investment income to average net assets 1.97% 1.71% 2.25%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly 1.71% 1.39% 1.45%
Portfolio turnover 20% 96% 4%
</TABLE>
---------------------------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.
(3) Per share information was based on the average shares outstanding method.
(4) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
(5) Shares of the Delaware International Small Cap Fund A Class were initially
offered on December 19, 1997. Between January 16, 1998 and July 15, 1998,
the A Class sold shares which were subsequently repurchased, leaving a
balance of one share, representing the initial seed purchase, as of May
31, 2000. This shareholder data is not being disclosed because the data is
not believed to be meaningful.
See accompanying notes
Page 7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2000
(Unaudited)
Delaware Group Global & International Funds (the "Company") is organized as a
Delaware business trust and offers five funds: the Delaware International Equity
Fund, the Delaware Global Equity Fund, the Delaware Global Bond Fund, the
Delaware Emerging Markets Fund and the Delaware International Small Cap Fund.
These financial statements and related notes pertain to the Delaware
International Small Cap Fund (the "Fund"). The Fund is registered as a
diversified open-end investment company under the Investment Company Act of
1940, as amended. The Fund offers four classes of shares. The A Class carries a
maximum front-end sales charge of 5.75%, the B Class carries a back-end
contingent deferred sales charge, the C Class carries a level load sales charge
and the Institutional Class has no sales charge. As of May 31, 2000, only the A
and Institutional Classes have commenced operations.
The investment objective of the Fund is to seek long-term capital appreciation
by investing primarily in equity securities of smaller non-U.S. companies which
may include companies located or operating in established or emerging countries.
1. Significant Accounting Policies
The following accounting policies are in accordance with accounting principles
generally accepted in the United States and are consistently followed by the
Fund.
Security Valuation- All domestic equity securities are valued at the last quoted
sales price as of the regular close of the New York Stock Exchange (NYSE) on the
valuation date. If on a particular day an equity security does not trade, then
the mean between the bid and asked prices will be used. Securities not traded or
securities not listed on an exchange are valued at the mean of the last quoted
bid and asked prices. Securities listed on a foreign exchange are valued at the
last quoted sales price before the Fund is valued. Money market instruments
having less than 60 days to maturity are valued at amortized cost, which
approximates market value. Other securities and assets for which market
quotations are not readily available are valued at fair value as determined in
good faith by or under the direction of the Fund's Board of Trustees.
Federal Income Taxes- The Fund intends to continue to qualify as a regulated
investment company and make the requisite distributions to shareholders.
Accordingly, no provision for federal income taxes has been made in the
financial statements. Income and capital gains distributions are determined in
accordance with federal income tax regulations, which may differ from accounting
principles generally accepted in the United States.
Class Accounting- Investment income, common expenses and realized and unrealized
gain (loss) on investments are allocated to the various classes of the Fund on
the basis of daily net
Page 8
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
assets of each class. Distribution expenses relating to a specific class are
charged directly to that class.
Repurchase Agreements- The Fund may invest in a pooled cash account along with
other members of the Delaware Investments Family of Funds. The aggregate daily
balance of the pooled cash account is invested in repurchase agreements secured
by obligations of the U.S. government. The respective collateral is held by the
Fund's custodian bank until the maturity of the respective repurchase
agreements. Each repurchase agreement is at least 102% collateralized. However,
in the event of default or bankruptcy by the counterparty to the agreement,
realization of the collateral may be subject to legal proceedings.
Foreign Currency Transactions- Transactions denominated in foreign currencies
are recorded at the current prevailing exchange rates on the valuation date. The
value of all assets and liabilities denominated in foreign currencies are
translated into U.S. dollars at the exchange rate of such currencies against the
U.S. dollar daily. Transaction gains or losses resulting from changes in
exchange rates during the reporting period or upon settlement of the foreign
currency transaction are reported in operations for the current period. It is
not practical to isolate that portion of both realized and unrealized gains and
losses on investments in equity securities in the Statement of Operations that
result from fluctuations in foreign currency exchange rates. The Fund reports
certain foreign currency related transactions as components of realized gains
for financial reporting purposes, whereas such components are treated as
ordinary income (loss) for federal income tax purposes.
Use of Estimates- The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Other- Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. Foreign dividends are also recorded on the
ex-dividend date or as soon after the ex-dividend date that the Fund is aware of
such dividends, net of all non-rebatable tax withholdings. Withholding taxes on
foreign dividends have been provided for in accordance with the Fund's
understanding of the applicable country's tax rules and rates. The Fund declares
and pays dividends from net investment income and capital gains, if any,
annually.
Certain expenses of the Fund are paid through commission arrangements with
brokers. These transactions are done subject to best execution. The amount of
Page 9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
these expenses was approximately $43 for the six months ended May 31, 2000. In
addition, the Fund may receive earnings credits from its custodian when positive
cash balances are maintained which are used to offset custody fees. These
credits were $115 for the six months ended May 31, 2000. The expenses paid under
the above agreement are included in their respective expense captions on the
Statement of Operations with the corresponding offset shown as "expenses paid
indirectly".
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware International Advisers Ltd. (DIAL), the Investment Manager of the
Fund, an annual fee which is calculated daily at the rate of 1.25% on the first
$500 million of average daily net assets of the Fund, 1.20% on the next $500
million, 1.15% on the next $1,500 million and 1.10% on the average daily net
assets in excess $2,500 million. At May 31, 2000 the Fund had a liability for
expenses payable to DIAL of $2,950.
DIAL has elected to waive its fees and reimburse the Fund to the extent that
annual operating expenses, exclusive of taxes, interest, brokerage commission,
extraordinary expenses and distribution fees, 1.25% of the average daily net
assets of the Fund through January 31, 2001.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of
Delaware Management Company (DMC), to provide dividend disbursing, transfer
agent and accounting services. The Fund pays DSC a monthly fee based on the
number of shareholder accounts, shareholder transactions and average net assets,
subject to certain minimums.
Pursuant to the Distribution Agreement, the Fund pays Delaware Distributors,
L.P. (DDLP), the Distributor and an affiliate of DMC, an annual fee not to
exceed 0.30% of the average daily net assets of the A Class and 1.00% of the
average daily net assets of the B and C Classes. DDLP has elected voluntarily to
waive such fees. At May 31, 2000 the Fund had a liability for expenses payable
to DMC and affiliates of $839.
Certain officers of DIAL, DMC, DSC and DDLP are officers, trustees and/or
employees of the Fund. These officers, trustees and employees are paid no
compensation by the Fund.
3. Investments
During the six months ended May 31, 2000, the Fund made purchases of $463,696
and sales of $351,037 of investment securities other than U.S. government
securities and temporary cash investments.
The cost of investments for federal income tax purposes approximates cost for
book purposes. At May 31, 2000, the aggregate cost of securities was $3,911,759.
Page 10
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
At May 31, 2000, net unrealized depreciation was $372,952 of which $292,842
related to unrealized appreciation of securities and $665,794 related to
unrealized depreciation of securities.
4. Capital Shares
Transactions in capital shares were as follows:
Six
Months Year
Ended Ended
5/31/00 11/30/99
-------------------------
Shares sold:
A class -- --
Institutional class -- --
Shares issued upon
reinvestment of
distributions from net
investment income and
net realized gain on
investments:
A class -- --
Institutional class 79,276 10,405
-------------------------
79,276 10,405
-------------------------
Shares repurchased:
A class -- --
Institutional class -- --
-------------------------
-- --
-------------------------
Net increase 79,276 10,405
=========================
5. Lines Of Credit
The Fund, along with certain other funds in the Delaware Investments Family of
Funds (the "Participants), participate in a $683,500,000 revolving line of
credit facility to be used for temporary or emergency purposes as an additional
source of liquidity to fund redemptions of investor shares. The Participants are
charged an annual commitment fee, which is allocated across the Participants on
the basis of the fund's allocation of the entire facility. The Participants may
borrow up to a maximum of one third of their net assets under the agreement. The
Fund had no amounts outstanding at May 31, 2000, or at any time during the
fiscal year.
Page 11
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
6. Foreign Exchange Contracts
The Fund will generally enter into forward foreign exchange currency contracts
as a way of managing foreign exchange rate risk. The Fund may enter into these
contracts to fix the U.S. dollar value of a security that it has agreed to buy
or sell for the period between the date the trade was entered into and the date
the security is delivered and paid for. The Fund may also use these contracts to
hedge the U.S. dollar value of securities it already owns denominated in foreign
currencies.
Forward foreign currency exchange contracts are valued at the mean between the
bid and asked prices of the contracts and are marked-to-market daily.
Interpolated values are derived when the settlement date of the contract is an
interim date for which quotations are not available. The change in market value
is recorded as an unrealized gain or loss. When the contract is closed, a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed is recorded.
The use of forward foreign currency exchange contracts does not eliminate
fluctuations in the underlying prices of the securities, but does establish a
rate of exchange that can be achieved in the future. Although forward foreign
currency exchange contracts limit the risk of loss due to a decline in the value
of the hedged currency, they also limit any potential gain that might result
should the value of the currency increase. In addition, the Fund could be
exposed to risks if the counterparties to the contracts are unable to meet the
terms of their contracts.
No forward currency exchange contracts were outstanding at May 31, 2000.
7. Market and Credit Risks
Some countries in which the Fund may invest require governmental approval for
the repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if there is deterioration in a
country's balance of payments or for other reasons, a country may impose
temporary restrictions on foreign capital remittances abroad.
The securities exchanges of certain foreign markets are substantially smaller,
less liquid and more volatile than the major securities markets in the United
States. Consequently, acquisition and disposition of securities by the Fund may
be inhibited. In addition, a significant proportion of the aggregate market
value of equity securities listed on the major securities exchanges in emerging
markets are held by a smaller number of investors. This may limit the number of
shares available for acquisition or disposition by the Fund.
The Fund may invest up to 15% of its total assets in illiquid securities which
may include securities with contractual restrictions on resale and other
securities which may not be readily marketable. Securities exempt from
registration pursuant to Rule 144A under the Securities Act of 1933, as amended,
maybe determined to be liquid or illiquid based on factors set by the Board of
Trustees. The relative illiquidity of some of these securities may adversely
affect the Fund's ability to dispose of such securities in a timely manner and
at a fair price when it is necessary to liquidate such securities.
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