<PAGE>
DELAWARE GROUP
U.S. Growth Fund
Overseas Equity Fund
New Pacific Fund
service and guidance
professional management
1997
Annual Report
goals
[five photos on front cover - glasses and keyboard, keyboard, family at beach
three people meeting, and man standing]
DELAWARE
GROUP
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<PAGE>
A Commitment
To Our
Investors
The Delaware Group investing tradition dates back to 1929. We have a
distinguished history of helping individuals and institutions - including
some of the world's largest public and private pension funds - reach their
financial goals.
Headquartered in Philadelphia, Delaware Group's first mutual fund was
established in 1938. Delaware International Advisers Ltd., our international
affiliate, was established in 1990 and is headquartered in London, a global
finance center for more than three centuries.
Today Delaware Group offers a full range of domestic and
international investments. We also manage annuity investments, closed-end
funds, and offer retirement plan services for individuals and global
organizations.
Delaware manages $40 billion in mutual fund assets and institutional
advisory accounts, including $7 billion in international investments such as
Overseas Equity Fund. We're part of a global financial services and
investment management business owned by Lincoln National Corp., whose family
of companies manage more than $120 billion in assets, with operations in
Europe, Latin America and the Far East.
ABOUT OUR SUBADVISERS
U.S. Growth Fund is managed by a portfolio team headed by Edward Petner at
Lynch & Mayer in New York. Lynch & Mayer is a part of Lincoln National that
manages more than $6.7 billion for individuals and institutions using growth
style investment strategies.
New Pacific Fund is managed by Jane Pickard at AIB Govett Asset
Management Ltd., a London-based firm with a 77-year overseas investment track
record and $3 billion in assets under management. The firm has offices in
several Asian countries.
[Photo of glasses and keyboard]
A TRADITION OF SOUND INVESTING
Funds' Objectives
U.S. GROWTH FUND
Seeks to maximize capital appreciation by investing in companies with low
dividend yields, strong balance sheets and high expected earnings growth
relative to their industry.
OVERSEAS EQUITY FUND
Seeks to maximize total return by investing in an internationally diversified
mix of stocks. The fund may invest up to 40% of its net assets in emerging
market securities.
NEW PACIFIC FUND
Seeks long-term capital appreciation by investing primarily in companies that
are located in or have their principal business in the Pacific Basin.
commitment
<PAGE>
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NOVEMBER 10, 1997
Dear Shareholder:
FISCAL 1997 WAS A YEAR OF CHANGE: SOME OF IT exceptionally rewarding. Market
conditions, although at times unsettling, illustrated the importance of prudent
country and stock selection.
On September 19, 1997, Delaware's Board of Directors voted to
liquidate three funds formerly included in this report - Enterprise Fund,
Federal Bond Fund and Corporate Income Fund. We did this to eliminate product
overlap and best serve all our shareholders.
In addition, on September 15, Delaware International Advisers, Ltd.
became the new subadviser of the former World Growth Fund, which was renamed
Overseas Equity Fund. We did this to give the Fund increased flexibility to
seek a wider range of international investment opportunities.
Growth was certainly the watchword for U.S. investors in fiscal 1997.
Despite increased market volatility, many stocks of domestic companies
provided robust returns for the 12 months ended October 31, 1997. Established
and emerging stock markets in Europe also generally did well even after
factoring in currency fluctuations and inflation. U.S. Growth Fund and
Overseas Equity Fund benefited from these respective trends.
For the 12 months ended October 31, 1997, the unmanaged Standard &
Poor's 500 Index provided an exceptional total return of +32.20% (with
dividends reinvested) while the unmanaged Morgan Stanley Europe Australia Far
East (EAFE) Index rose +3.04% (with dividends reinvested). The main culprit
for weak EAFE returns was Japan, whose benchmark Nikkei Index plummeted
18.93% for the period.
DESPITE INCREASED MARKET VOLATILITY, MANY STOCKS OF DOMESTIC COMPANIES
PROVIDED ROBUST RETURNS FOR THE 12 MONTHS ENDED OCTOBER 31, 1997. ESTABLISHED
AND EMERGING STOCK MARKETS IN EUROPE ALSO GENERALLY DID WELL.
1997 annual report
1
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Beginning in the summer of 1997, several emerging markets along the
Pacific Rim faced currency crises that depressed nearly all of the region's
equity markets. The Morgan Stanley Pacific Index dropped 20.53% for the 12
months ended October 31, 1997. New Pacific Fund's results reflected this
substantial setback.
As an investor, one of the best ways you can approach turbulent times
is with a diversified investment plan. Although October's worldwide market
correction showed that global and domestic stocks can move in tandem in the
short run, over the long term history has shown that different regions of the
world have different market cycles.
With the help of a financial adviser, you can select a variety of
funds that, taken together, have the potential to reduce overall portfolio
volatility risk. As you strive to meet your long-term investment goals, we
encourage you to read the portfolio manager discussions that follow, review
your investments and meet with a financial adviser to discuss your objectives
and risk profile.
Sincerely,
/s/ Wayne A. Stork
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Wayne A. Stork
Chairman
/s/ Jeffrey J. Nick
- ----------------------
Jeffrey J. Nick
President and Chief Executive Officer
discipline
New President and CEO
ON OCTOBER 14, 1997, JEFFREY J. NICK WAS NAMED President and Chief Executive
Officer of the Delaware Group of Funds. Mr. Nick has been CEO of Lincoln
National Investment Companies, Delaware's indirect parent since October 1996.
He joined Lincoln National in April 1990, and from 1992 to 1996 he managed
Lincoln's operations in the United Kingdom. Mr. Nick holds an MBA from the
University of Chicago and a bachelor's degree from Princeton University.
1997 annual report
2
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Portfolio Managers' Review
U.S. GROWTH FUND
We are pleased to report that U.S. Growth Fund generated a total return of
+33.18% (capital change plus income for A Class shares at net asset value) for
the 12 months ended October 31, 1997. This was greater than the return of the
unmanaged S&P 500 Index and higher than the average of the Fund's peers, as
shown on the next page.
During most of fiscal 1997, large-cap stocks performed exceptionally
well despite increased market volatility. We attribute your Fund's success to
a focus on companies exhibiting signs of fundamental change and strong
long-term business prospects.
In selecting stocks, we look for positive developments in four
possible categories:
* an acceleration of earnings and sales growth;
* an improving industry environment;
* a restructuring of corporate assets; and/or,
* a profit turnaround.
As many stock prices Rose to record levels in 1997, your Fund sold its
holdings of large, multinational companies that had become overvalued, such as
Coca-Cola and Gillette. Although this generated a large amount of taxable
gains, we believe our strategy preserved capital during periods of market
weakness and repositioned the portfolio with what we believe is a more
attractively priced group of medium-to-large size companies. In fact, between
July and October 1997, stocks of mid-size companies (as measured by the
unmanaged S&P Midcap 400 Index) outperformed their larger brethren (the S&P
500) by more than 800 basis points (8.0%).
Compared with a year ago, your Fund has a more concentrated portfolio
- - 42 stocks as opposed to 47 in October 1996. We believe we have assembled a
diverse mix of companies we can closely monitor in a rapidly changing market
environment.
Within the Fund, selected holdings in the health care and energy
sectors such as Eli Lilly & Co., a pharmaceutical company, and Schlumberger
Ltd., which provides oil companies with computer-assisted drilling services,
contributed to our robust 1997 results. Many of our financial and some of our
technology stock selections also did well. However, the technology
Portfolio Highlights
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October 31, 1997
Median Market Capitalization $30.6 billion
Number of Stocks 42
Average Stock Price-to-Earnings Ratio 25.1x
Largest Holding - Eli Lilly & Co. 5.8%
Top Sector - Technology 23.1%
Beta** 1.15
P/E based on analysts' earnings estimates for 1998 as reported to First Call.
**A measure of risk relative to the S&P 500 Index. A number less than 1.0
means less historical price volatility than the index. A number higher than
1.0 means more historical volatility.
1997 annual report
3
<PAGE>
sector was an area where we generally underperformed our benchmark during
fiscal 1997 amid short-term disappointments from large company stocks such as
Motorola.
Overall, we believe that a modest slowdown in corporate earnings
growth has begun to bring growth style investing into favor. A combination of
steady expansion and low inflation has provided a highly favorable backdrop
for financial assets in the 1990s, and we see few clouds on the horizon to
alter this long-term trend.
Relative to the S&P 500 Index, we remain overweighted in technology
and underweighted in capital goods, a sector where earnings growth has become
uncertain. We continue to emphasize energy services because we feel that
energy services may become more valuable. Our research shows world energy
consumption is increasing while readily accessible production capacity is
limited.
[Insert Bar Chart]
(BAR CHART A) (do as a small bar chart with labels on top)
COMPARATIVE RETURNS
FOR THE 12 MONTHS
ENDED OCTOBER 31, 1997
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U.S. Growth Fund A Class +33.18%
Standard & Poor's 500 Index +32.20%
Lipper Growth Fund Average (799 funds) +27.28%
Returns are at net asset value with distributions reinvested. Past
performance does not guarantee future results. Performance of other Fund
classes varies due to different charges and expenses. See page 5 for
performance for all classes.
In our opinion, several large financial services companies also
remain well-positioned to benefit from mergers and internal change. We
believe that the marketing muscle, cost reductions and economies of scale
achieved by this activity have the potential to push these companies earnings
higher than Wall Street expectations.
By focusing on companies with better-than-average earnings prospects,
we believe we have positioned U.S. Growth Fund well for fiscal 1998. Analysts
anticipate that companies in your Fund's portfolio have earnings growth
potential averaging more than 20% through 1998, nearly three times the
projected growth rate of the average company in the S&P 500 Index.
We feel the absence of inflation as well as October's 10% market
correction create a positive environment for stocks in the coming months. As
of early November 1997, stocks of larger companies were generally selling at
more attractive prices than they were during the summer, and we see this as
an opportunity to selectively add stocks of high-quality businesses to your
Fund's portfolio.
Lynch & Mayer
November 10, 1997
[Callout]
BY SELLING HOLDINGS OF LARGE, MULTINATIONAL COMPANIES THAT BECAME OVERVALUED
AND REPOSITIONING THE FUND'S PORTFOLIO, WE PRESERVED CAPITAL DURING PERIODS
OF MARKET WEAKNESS AND OUTPERFORMED THE UNMANAGED S&P 500 INDEX.
1997 annual report
4
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U.S. GROWTH FUND'S LIFETIME PERFORMANCE
GROWTH OF A $10,000 INVESTMENTS
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DECEMBER 3, 1993 TO OCTOBER 31, 1997
U.S. Growth S&P 500 Index Lipper Growth Fund
Fund A Class Average (399 funds)
Dec. '93 $ 9,524 $10,000 $10,000
Jan. '94 $ 9,934 $10,465 $10,616
Feb. '94 $ 9,734 $10,182 $10,450
Mar. '94 $ 9,181 $ 9,739 $ 9,965
Apr. '94 $ 9,114 $ 9,863 $10,004
May. '94 $ 9,285 $10,024 $10,053
Jun. '94 $ 9,837 $ 9,778 $ 9,715
Jul. '94 $ 9,114 $10,099 $ 9,968
Aug. '94 $ 9,629 $10,512 $10,443
Sep. '94 $ 9,438 $10,256 $10,251
Oct. '94 $ 9,734 $10,485 $10,420
Nov. '94 $ 9,219 $10,104 $10,030
Dec. '95 $ 9,238 $10,253 $10,121
Jan. '95 $ 9,247 $10,519 $10,192
Feb. '95 $ 9,448 $10,928 $10,575
Mar. '95 $ 9,753 $11,250 $10,869
Apr. '95 $ 9,657 $11,581 $11,099
May. '95 $10,105 $12,043 $11,435
Jun. '95 $10,811 $12,323 $11,926
Jul. '95 $11,326 $12,731 $12,496
Aug. '95 $11,402 $12,762 $12,591
Sep. '95 $11,964 $13,301 $12,951
Oct. '95 $11,850 $13,253 $12,762
Nov. '95 $11,898 $13,834 $13,222
Dec. '95 $11,449 $14,101 $13,259
Jan. '96 $11,755 $14,580 $13,554
Feb. '96 $12,069 $14,716 $13,870
Mar. '96 $12,031 $14,857 $13,985
Apr. '96 $12,384 $15,075 $14,438
May. '96 $12,813 $15,463 $14,815
Jun. '96 $12,803 $15,521 $14,622
Jul. '96 $11,964 $14,835 $13,765
Aug. '96 $12,307 $15,148 $14,236
Sep. '96 $13,042 $16,000 $15,055
Oct. '96 $13,175 $16,441 $15,181
Nov. '96 $14,033 $17,683 $16,107
Dec. '96 $13,689 $17,333 $15,864
Jan. '97 $14,638 $18,414 $16,674
Feb. '97 $14,258 $18,560 $16,446
Mar. '97 $13,626 $17,799 $15,678
Apr. '97 $14,343 $18,859 $16,275
May. '97 $15,354 $20,012 $17,468
Jun. '97 $16,113 $20,902 $18,153
Jul. '97 $17,841 $22,564 $19,669
Aug. '97 $17,156 $21,300 $19,016
Sep. '97 $18,200 $22,466 $20,073
Oct. '97 $17,546 $21,478 $19,312
Chart assumes $10,000 invested on December 3, 1993 and includes the effect of
a 4.75% front-end sales charge and reinvestment of all distributions.
Performance of other Fund classes varies due to different charges and
expenses. Past performance does not guarantee future results.
<PAGE>
U.S. GROWTH FUND PERFORMANCE
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AVERAGE ANNUAL RETURN THROUGH OCTOBER 31, 1997
Lifetime One Year
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Class A (Est. 12/3/93)
Excluding Sales Charge +16.90% +33.18%
Including Sales Charge +15.46% +26.85%
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Class B (Est. 3/29/94)
Excluding Sales Charge +17.77% +32.30%
Including Sales Charge +17.23% +28.30%
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Class C (Est. 5/23/94)
Excluding Sales Charge +20.03% +32.26%
Including Sales Charge +20.03% +31.26%
All performance includes reinvestment of distributions and applicable sales
charges as described below. Return and share value will fluctuate so that
shares when redeemed may be worth more or less than the original cost. Past
performance is not a guarantee of future results. Performance for Class B and
C shares excluding sales charge assumes contingent sales charges either did
not apply or the investment was not redeemed.
Class A shares have a 4.75% maximum front-end sales charge and a 12b-1 fee.
Class B shares do not carry a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a deferred sales
charge of up to 4% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If shares are
redeemed within 12 months, a 1% contingent deferred sales charge applies.
The average annual total returns for the lifetime and one-year periods ended
October 31, 1997 for U.S Growth Fund's Institutional Class were +16.48% and
+33.57%. This class was initially offered February 3, 1994 and is available
without sales or asset-based distribution charges only to institutional
accounts.
1997 annual report
5
<PAGE>
OVERSEAS EQUITY FUND
OVERSEAS EQUITY FUND PROVIDED a total return of +7.74% (capital change plus
income based on A Class shares at net asset value) for the 12 months ended
October 31, 1997. This was more than double the +3.04% return of the unmanaged
Morgan Stanley Europe Australia Far East (EAFE) Index for the period.
In order to offer shareholders broader investment options, the Fund's
Board changed its investment strategy to permit portfolio managers to invest
up to 40% of the Fund's net assets in emerging market securities. We also
changed the name of the Fund (from World Growth Fund) to more closely reflect
its overseas focus. Among some mutual fund families, the word "world" is
intended to imply that a fund may invest a substantial portion of assets in
the U.S., and Overseas Equity does not.
For nearly all of fiscal 1997, the Fund was managed by Walter Scott &
Partners in Scotland. While Delaware was pleased with Walter
COUNTRY ALLOCATION
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(October 31, 1997)
Japan 39.9%
Germany 16.8%
Netherlands 4.2%
France 1.7%
Norway 6.1%
United Kingdom 8.9%
South Africa 2.3%
Singapore/Malaysia 5.0%
Sweden and Denmark 4.9%
Chile 2.0%
Australia 3.2%
Cash and Currency Contracts 5.0%
Scott's nearly four-year stewardship, your Fund's Board of Directors
determined that Delaware International Advisers, Ltd. in London had
significantly more experience to manage the Fund's increased emphasis in
emerging markets and therefore chose it to manage the Fund beginning
September 15, 1997.
As of October 31, 1997, your Fund had invested the largest percentage
of its portfolio in Japanese stocks. This reflected the former subadviser's
belief that economic weakness in Japan was temporary. This portion of the
portfolio was positioned to benefit from both a possible recovery in Japan's
domestic economy and from depreciation of the yen.
We are pleased to report the Fund's Japanese stocks generally outpaced
the Nikkei Index for the 12 months ended October 31, 1997. Defensive hedging
through currency options and a focus on export-oriented companies helped us
preserve capital to a greater degree than the Nikkei, which dropped 18.93%
during fiscal 1997. Nevertheless, our relatively heavy weighting in Japan
(39.9% of net assets at year's end) was a major reason why the Fund
underperformed its peers for the year.
Your Fund's overall results were augmented by holdings in Europe,
particularly Scandinavian countries such as Norway and Sweden, as well as
Germany. As of year-end, some of the Fund's largest holdings were some of the
former subadviser's more successful investments -
1997 annual report
6
<PAGE>
Petroleum GEO Services, a Norwegian oil company, and Adidas, the German
athletic shoe maker.
Overseas Equity's new subadviser - Delaware International has a team
of 20 professionals with an average of 15 years of investment experience. Our
London affiliate invests using a value discipline, which differs from Walter
Scott's growth management style.
Before buying any stock in either established or emerging markets,
Delaware International rigorously scrutinizes company balance sheets and
examines a stock's current dividend and cash flow. They project the company's
future dividend and cash flow growth, which is then
discounted to its present value and adjusted for local inflation and currency
fluctuations.
Stocks that are selling below what Delaware International considers
"true value" become candidates for the Fund's portfolio since they are believed
to offer superior income and capital appreciation potential. In addition,
Delaware International will attempt to mitigate the special risks of
international investing by analyzing political and economic trends that might
affect your Fund's investments.
In the coming months, we expect to reduce the Fund's weighting in
Japan, which Delaware International believes is still an overvalued market,
and increase its holdings in emerging markets such as Latin America and
Eastern Europe. While this may increase your Fund's risk profile and
portfolio turnover rate, this strategy can, in our opinion, significantly
increase the Fund's total return potential.
Delaware International believes the Fund's increased focus on
emerging markets comes at a fortuitous time. In October, currency
devaluations along the Pacific Rim led to price declines in many markets in
other parts of the world that remain relatively unaffected by Asian economic
problems. We believe this has created compelling values for savvy global
investors, and we are prepared to seek out these opportunities.
/s/ Clive Gillmore and Robert Akester
- --------------------------------------
CLIVE GILLMORE
AND ROBERT AKESTER,
Delaware International
November 10, 1997
DELAWARE INTERNATIONAL RIGOROUSLY SCRUTINIZES BALANCE SHEETS TO PROJECT
A COMPANY'S INFLATION-ADJUSTED DIVIDEND GROWTH AND EARNINGS POTENTIAL.
COMPARATIVE RETURNS FOR THE 12 MONTHS ENDED OCTOBER 31, 1997
- ------------------------------------------------------------
Overseas Equity Fund A Class +7.74%
Morgan Stanley Europe Australia Far East Index +3.04%
Lipper International Fund Average (406 funds) +10.39%
At net asset value with distributions reinvested. Past performance does not
guarantee future results. Performance of other Fund classes varies due to
different charges and expenses. See page 8 for performance for all classes.
1997 annual report
7
<PAGE>
OVERSEAS EQUITY FUND'S LIFETIME PERFORMANCE
GROWTH OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
December 3, 1993 to October 31, 1997
Overseas Equity Morgan Stanley Lipper International
Fund A Class EAFE Index Fund Average (154 Funds)
Dec. '93 $ 9,524 $10,000 $10,000
Jan. '94 $ 9,910 $11,629 $11,596
Feb. '94 $10,215 $11,596 $11,341
Mar. '94 $10,005 $11,097 $10,835
Apr. '94 $10,091 $11,568 $11,105
May '94 $10,024 $11,501 $11,071
Jun. '94 $10,291 $11,664 $10,954
Jul. '94 $10,391 $11,776 $11,225
Aug. '94 $10,572 $12,055 $11,584
Sep. '94 $10,429 $11,675 $11,297
Oct. '94 $10,496 $12,064 $11,515
Nov. '94 $ 9,671 $11,484 $10,949
Dec. '94 $ 9,850 $11,556 $10,845
Jan. '95 $ 9,392 $11,112 $10,309
Feb. '95 $ 9,564 $11,080 $10,326
Mar. '95 $10,013 $11,771 $10,663
Apr. '95 $10,204 $12,214 $11,005
May '95 $10,233 $12,068 $11,101
Jun. '95 $10,380 $11,857 $11,101
Jul. '95 $10,772 $12,595 $11,692
Aug. '95 $10,992 $12,114 $11,472
Sep. '95 $11,202 $11,351 $11,640
Oct. '95 $10,896 $12,019 $11,407
Nov. '95 $10,791 $12,353 $11,531
Dec. '95 $10,944 $12,851 $11,879
Jan. '96 $11,167 $12,904 $12,145
Feb. '96 $11,272 $12,948 $12,194
Mar. '96 $11,435 $13,222 $12,404
Apr. '96 $11,895 $13,607 $12,801
May '96 $11,818 $13,356 $12,768
Jun. '96 $12,038 $13,432 $12,853
Jul. '96 $11,761 $13,039 $12,382
Aug. '96 $11,588 $13,068 $12,520
Sep. '96 $11,904 $13,415 $12,791
Oct. '96 $11,866 $13,278 $12,706
Nov. '96 $11,924 $13,806 $13,253
Dec. '96 $11,988 $13,628 $13,298
Jan. '97 $12,049 $13,151 $13,257
Feb. '97 $12,171 $13,366 $13,440
Mar. '97 $12,406 $13,415 $13,469
Apr. '97 $12,263 $13,489 $13,501
May '97 $13,305 $14,370 $14,303
Jun. '97 $13,805 $15,166 $14,969
Jul. '97 $14,122 $15,394 $15,388
Aug. '97 $13,080 $14,227 $14,272
Sep. '97 $13,570 $15,069 $15,155
Oct. '97 $12,784 $12,977 $14,013
Chart assumes $10,000 invested on December 3, 1993, and includes the effect
of a 4.75% front-end sales charge and reinvestment of distributions.
Performance of other Fund classes will vary due to differing charges and
expenses. Past performance does not guarantee future results.
<PAGE>
OVERSEAS EQUITY FUND PERFORMANCE
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURN THROUGH OCTOBER 31, 1997
Lifetime One Year
- --------------------------------------------------------------------------------
Class A (Est. 12/3/93)
Excluding Sales Charge +7.82% +7.74%
Including Sales Charge +6.48% +2.60%
- --------------------------------------------------------------------------------
Class B (Est. 3/29/94)
Excluding Sales Charge +6.27% +6.95%
Including Sales Charge +5.56% +2.96%
- --------------------------------------------------------------------------------
Class C (Est. 5/23/94)
Excluding Sales Charge +6.50% +6.85%
Including Sales Charge +6.50% +5.85%
All performance includes reinvestment of distributions and applicable sales
charges as described below. Return and share value will fluctuate so that
shares when redeemed may be worth more or less than the original cost. Past
performance is not a guarantee of future results. Performance for Class B and
C shares excluding sales charge assumes contingent sales charges either did
not apply or the investment was not redeemed.
Class A shares have a 4.75% maximum front-end sales charge and a 12b-1 fee.
Class B shares do not carry a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a deferred
sales charge of up to 4% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If shares are
redeemed within 12 months, a 1% contingent deferred sales charge applies.
The average annual total returns for the lifetime and one-year periods ended
October 31, 1997 for Overseas Equity Fund's Institutional Class were +6.78%
and +8.04%. This class was initially offered February 3, 1994 and is
available without sales or asset-based distribution charges only to
institutional accounts.
1997 annual report
8
<PAGE>
NEW PACIFIC FUND
OUR RESULTS SHOW THAT FISCAL 1997 was an exceptionally ugly year in Asia.
New Pacific Fund's net asset value declined 21.15% (for A Class
shares with distributions reinvested) for the 12 months ended October 31,
1997.
Pacific Rim investors expressed a loss of confidence in the
currencies of several emerging market countries, including Thailand,
Malaysia, Indonesia and the Philippines. In addition, Japan and South Korea
were in the midst of economic slumps. The real estate market corrected after
a euphoric rise ahead of the transition to Communist rule.
Although your Fund's returns outpaced both its peers and its benchmark
for the first six months of fiscal 1997, during the second half we did not.
Among the factors affecting our results was that even well-managed businesses
saw their share prices marked down amid a period of extreme volatility. We also
had a greater-than-average exposure to Japan compared to some of our peers.
To help preserve capital, we raised the Fund's cash position to 19.9%
of net assets as of October 31, 1997 from 12.1% as of April 30, 1997. To
attempt to protect your portfolio's value from currency fluctuations, we took
defensive hedging positions in the Japanese yen and Malaysian ringgit.
At year's end, China/Hong Kong and Japan were our largest country
weightings. Our China holdings are primarily "Red Chip" companies operating
on the mainland whose growth prospects are tied to surging domestic demand,
which so far appears to be relatively unaffected by currency turmoil
elsewhere in Asia. These Chinese companies trade on the Hong Kong exchange.
For example, we have a position in a Chinese computer software company - Found
er - that is affiliated with the University of Beijing. The company translates
programs from Korean and Japanese and represented 2.3% of net assets at
year's end.
In Japan, we've focused on what we see as well-capitalized,
export-oriented companies that we believe are
Photo of Jane Pickard
JANE PICKARD HAS MORE THAN FIVE YEARS OF INVESTMENT EXPERIENCE IN PACIFIC RIM
SECURITIES. SHE JOINED AIB GOVETT IN 1996 AFTER WORKING AT AT IAI
INTERNATIONAL, WHERE SHE MANAGED PACIFIC REGION INVESTMENTS FOR INSTITUTIONAL
ACCOUNTS AND RETAIL MUTUAL FUNDS. MS. PICKARD HAS A LAW DEGREE FROM EDINBURGH
UNIVERSITY IN SCOTLAND.
COUNTRY ALLOCATION
- --------------------------------------------------------------------------------
(October 31, 1997)
Japan 17.1%
China/Hong Kong 17.5%
India/Pakistan 8.5%
Singapore/Malaysia 14.6%
Thailand 6.4%
Taiwan 4.0%
Philippines 2.5%
Indonesia 3.7%
Australia 4.0%
Cash and Currency Hedges 21.7%
1997 annual report
9
<PAGE>
likely to benefit from the falling value of the yen, which may make Japanese
goods cheaper for foreigners to buy. Unfortunately, for some Japanese
exporters, the emerging markets of the Pacific Rim are just as important a
market for Japanese goods as the U.S. Therefore, a slowdown in regional Asian
growth may negatively affect these Japanese companies' earnings.
Your Fund seeks to find value by analyzing the earnings potential of
a company relative to its current stock price and historical prices. In our
opinion, this past autumn's stock price declines in many Asian markets have
created pockets of opportunity that we hope to exploit in the coming months.
EVEN WELL-MANAGED PACIFIC RIM BUSINESSES SAW THEIR SHARE PRICES MARKED DOWN
AMID A PERIOD OF EXTREME VOLATILITY DURING FISCAL 1997.
COMPARATIVE RETURNS FOR THE 12 MONTHS ENDED OCTOBER 31, 1997
- ------------------------------------------------------------
New Pacific Fund A Class -21.15%
Morgan Stanley Pacific Index -20.73%
Lipper Pacific Region Fund Average (41 funds) -18.52%
At net asset value with distributions reinvested. Past performance does not
guarantee future results. Performance of other Fund classes varies due to
different charges and expenses. See page 11 for performance for all classes.
For taxable shareholders, a potential advantage of increasing one's
position in the Fund at these depressed levels is that the payment of any
taxable capital gains may be less likely in the year ahead than for other
mutual funds. As of October 31, stocks in the Fund's portfolio sold at an
average of 77% what the Fund paid for them, indicating a substantial amount
of accrued losses, which, if realized, we could use to offset future realized
gains, if any. Keep in mind, however, that the Fund does not consider U.S.
taxes when making investment decisions.
Investing in emerging markets is a long-term commitment that involves
special risks. Recent turmoil illustrates what can happen to equity markets
when governments and currencies are less stable than that of the U.S. and
when accounting standards differ. Nevertheless, we believe investors who are
willing to accept the region's growing pains can potentially reap substantial
rewards over a period of seven to 10 years.
In our opinion, the Fund's weak results since inception reflect that
the 1993-1994 period was probably a cyclical economic peak for many Pacific
Rim countries. We believe the region has "hit bottom" and is beginning a
restructuring process that could lead to renewed and more stable economic
growth.
/s/ Jane Pickard
- --------------------
JANE PICKARD
AIB Govett
Asset Management Ltd.
November 10, 1997
Photo of Globes
1997 annual report
10
<PAGE>
NEW PACIFIC FUND'S
LIFETIME PERFORMANCE
DECEMBER 3, 1993 TO OCTOBER 31, 1997
- --------------------------------------------------------------------------------
New Pacific Fund Morgan Stanley Lipper Pacific
A Class Pacific Index Region Funds (17 funds)
Dec. '93 $ 9,524 $10,000 $10,000
Jan. '94 $10,534 $11,637 $11,939
Feb. '94 $10,238 $11,595 $12,248
Mar. '94 $ 9,037 $10,794 $11,573
Apr. '94 $ 9,552 $11,109 $12,076
May. '94 $ 9,628 $11,301 $12,364
Jun. '94 $ 9,304 $11,153 $12,771
Jul. '94 $ 9,514 $11,307 $12,499
Aug. '94 $10,152 $11,775 $12,718
Sep. '94 $10,238 $11,606 $12,401
Oct. '94 $ 9,952 $11,641 $12,716
Nov. '94 $ 9,199 $10,782 $12,008
Dec. '94 $ 9,169 $10,736 $12,091
Jan. '95 $ 8,058 $ 9,767 $11,329
Feb. '95 $ 8,186 $ 9,944 $11,050
Mar. '95 $ 8,393 $10,247 $11,901
Apr. '95 $ 8,363 $10,348 $12,409
May. '95 $ 8,727 $10,632 $11,915
Jun. '95 $ 8,668 $10,492 $11,413
Jul. '95 $ 8,963 $10,976 $12,238
Aug. '95 $ 8,825 $10,782 $11,779
Sep. '95 $ 8,825 $10,849 $11,889
Oct. '95 $ 8,560 $10,587 $11,313
Nov. '95 $ 8,461 $10,577 $11,871
Dec. '95 $ 8,825 $10,972 $12,452
Jan. '96 $ 9,503 $11,532 $12,475
Feb. '96 $ 9,453 $11,410 $12,336
Mar. '96 $ 9,434 $11,557 $12,716
Apr. '96 $ 9,916 $12,043 $12,789
May. '96 $ 9,699 $11,813 $12,794
Jun. '96 $ 9,650 $11,755 $12,208
Jul. '96 $ 9,257 $11,158 $11,888
Aug. '96 $ 9,375 $11,235 $12,278
Sep. '96 $ 9,621 $11,491 $11,709
Oct. '96 $ 9,267 $11,171 $12,029
Nov. '96 $ 9,621 $11,633 $12,029
Dec. '96 $ 9,506 $11,489 $11,406
Jan. '97 $ 9,776 $11,383 $10,448
Feb. '97 $10,036 $11,539 $10,667
Mar. '97 $ 9,716 $11,120 $10,278
Apr. '97 $ 9,646 $11,169 $10,494
May. '97 $10,146 $12,035 $11,522
Jun. '97 $10,425 $12,367 $12,238
Jul. '97 $10,455 $12,454 $11,946
Aug. '97 $ 9,156 $10,797 $10,764
Sep. '97 $ 8,766 $10,805 $10,724
Oct. '97 $ 7,307 $ 9,095 $ 9,423
Chart assumes $10,000 invested on December 3, 1993, and includes the effect
of a 4.75% front-end sales charge and the reinvestment of all distributions.
Performance of other Fund classes will vary due to differing charges and
expenses. Past performance does not guarantee future results.
<PAGE>
NEW PACIFIC FUND PERFORMANCE
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURN THROUGH OCTOBER 31, 1997
Lifetime One Year
- --------------------------------------------------------------------------------
Class A (Est. 12/3/93)
Excluding Sales Charge -6.55% -21.15%
Including Sales Charge -7.71% -24.90%
- --------------------------------------------------------------------------------
Class B (Est. 3/29/94)
Excluding Sales Charge -6.64% -21.72%
Including Sales Charge -7.40% -24.81%
- --------------------------------------------------------------------------------
Class C ( Est. 7/7/94)
Excluding Sales Charge -7.75% -21.85%
Including Sales Charge -7.75% -22.61%
All performance includes reinvestment of distributions and applicable sales
charges as described below. Return and share value will fluctuate so that
shares when redeemed may be worth more or less than the original cost. Past
performance is not a guarantee of future results. Performance for Class B and
C shares excluding sales charge assumes contingent sales charges either did
not apply or the investment was not redeemed.
Class A shares have a 4.75% maximum front-end sales charge and a 12b-1 fee.
Class B shares do not carry a front-end sales charge, but are subject to a 1%
annual distribution and service fee.They are also subject to a deferred sales
charge of up to 4% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If shares are
redeemed within 12 months, a 1% contingent deferred sales charge applies.
The average annual total returns for the lifetime and one-year periods ended
October 31, 1997 for New Pacific Fund's Institutional Class were -9.12% and
- -20.79%. This class was initially offered February 3, 1994 and is available
without sales or asset-based distribution charges only to institutional
accounts.
1997 annual report
11
<PAGE>
Financial Statements
DELAWARE GROUP ADVISER FUNDS, INC.
U.S. GROWTH FUND
STATEMENT OF NET ASSETS
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
Number Market
of Shares Value
--------- -----
COMMON STOCK - 97.42%
Banking, Finance & Insurance - 15.79%
American Express ................................... 19,900 $1,552,200
Chase Manhattan .................................... 10,400 1,199,900
Citicorp ........................................... 2,000 250,125
Morgan Stanley Dean Witter Discover ................ 15,100 739,900
Washington Mutual .................................. 8,300 567,772
----------
4,309,897
----------
Cable, Media & Publishing - 5.17%
*Chancellor Media Class A ........................... 6,700 367,663
Time Warner ........................................ 18,100 1,044,144
----------
1,411,807
----------
Chemicals - 1.22%
Monsanto ........................................... 7,800 333,450
----------
333,450
----------
Computers & Technology - 11.15%
*America Online ..................................... 4,500 346,500
Autodesk Inc. ...................................... 6,700 247,481
*Bay Networks ....................................... 15,000 474,375
First Data ......................................... 1 29
Hewlett-Packard .................................... 15,900 980,831
*Microsoft .......................................... 2,000 259,875
*PeopleSoft ......................................... 2,700 169,594
Xerox .............................................. 7,100 563,119
----------
3,041,804
----------
Consumer Products - 1.30%
Avon Products ...................................... 5,400 353,700
----------
353,700
----------
Electronics & Electrical - 19.96%
*Altera ............................................. 8,600 381,356
Motorola ........................................... 19,100 1,179,425
Nokia - Sponsored ADR A ............................ 7,300 644,225
Schlumberger Ltd. .................................. 16,600 1,452,500
Texas Instruments .................................. 10,400 1,109,550
Westinghouse Electric .............................. 25,700 679,444
----------
5,446,500
----------
Energy - .81%
Anadarko Petroleum ................................. 3,000 219,750
----------
219,750
----------
Food, Beverage & Tobacco - 6.09%
PepsiCo ............................................ 27,100 997,619
Wrigley ............................................ 9,200 665,850
----------
1,663,469
----------
<PAGE>
Number Market
of Shares Value
--------- -----
COMMON STOCK (Continued)
Healthcare & Pharmaceuticals - 20.15%
*Boston Scientific ................................... 5,400 $ 245,700
*Centocor ............................................ 4,100 180,144
Eli Lilly & Co. ..................................... 23,800 1,591,625
*Forest Laboratories ................................. 16,900 781,625
Medtronic ........................................... 21,400 930,900
Pfizer .............................................. 6,800 481,100
Warner-Lambert ...................................... 9,000 1,288,687
----------
5,499,781
----------
Industrial Machinery - .25%
*Falcon Drilling ..................................... 1,900 69,112
----------
69,112
----------
Leisure, Lodging & Entertainment - 2.05%
Walt Disney ......................................... 6,800 559,300
----------
559,300
----------
Paper & Forest Products - 2.86%
Fort James Corp. .................................... 19,700 781,844
----------
781,844
----------
Retail - 6.05%
Home Depot Inc. ..................................... 18,400 1,023,500
Kroger .............................................. 12,800 417,600
*Safeway ............................................. 3,600 209,250
----------
1,650,350
----------
Telecommunications - 3.57%
*Qualcomm ............................................ 2,500 141,328
WorldCom ............................................ 24,800 833,125
----------
974,453
----------
Utilities - 1.00%
*AES ................................................. 6,900 273,412
----------
273,412
----------
Total Common Stock (cost of $23,705,112 ) ........... 26,588,629
----------
Principal
Amount
REPURCHASE AGREEMENTS - .24%
With Paine Webber 5.65% 11/03/97
(dated 10/31/97, to be repurchased at
$22,003 collateralized by $21,526 U.S.
Treasury Notes 5.125% due 02/28/98
market value $22,302) ............................. $22,000 22,000
- ------------------
Top 10 holdings, representing 45.45% of net assets, are in boldface.
1997 annual report
12
<PAGE>
U.S. GROWTH FUND
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
------ -----
REPURCHASE AGREEMENTS (Continued)
With Chase 5.65% 11/03/97
(dated 10/31/97, to be repurchased at
$23,004 collateralized by $22,949 U.S.
Treasury Notes 5.75% due 10/31/00
market value $23,408) .......................... $ 23,000 $ 23,000
With Prudential 5.65% 11/03/97
(dated 10/31/97, to be repurchased at
$21,003 collateralized by $21,526 U.S.
Treasury Notes 5.875% due 2/28/99
market value $21,689) .......................... 21,000 21,000
-----------
Total Repurchase Agreements
(cost $66,000) ................................. 66,000
-----------
TOTAL MARKET VALUE OF SECURITIES - 97.66%
(cost $23,771,112) ............................ 26,654,629
RECEIVABLES AND OTHER ASSETS NET OF
LIABILITIES - 2.34% ............................ 639,185
-----------
NET ASSETS APPLICABLE T0 1,627,345 SHARES
$.01 PAR VALUE)
OUTSTANDING - 100.00% ......................... $27,293,814
===========
NET ASSET VALUE - U.S. GROWTH FUND A CLASS
($6,933,484/416,442 shares) .................... $ 16.65
===========
NET ASSET VALUE - U.S. GROWTH FUND B CLASS
($1,653,169 /101,669 shares) ................... $ 16.26
===========
NET ASSET VALUE - U.S. GROWTH FUND C CLASS
($252,461/14,835 shares) ....................... $ 17.02
===========
NET ASSET VALUE - U.S. GROWTH FUND
INSTITUTIONAL CLASS
($18,454,700 /1,094,399 shares) ................ $ 16.86
===========
Market
Value
------
COMPONENTS OF NET ASSETS AT OCTOBER 31,1997:
Common stock $.01 par value, 70,000,000
shares authorized with 20,000,000 shares
allocated to the U.S. Growth Fund A Class,
20,000,000 shares allocated to the U.S. .....
Growth Fund B Class, 15,000,000 shares
allocated to the U.S. Growth Fund C Class
and 15,000,000 shares allocated to the
U.S. Growth Fund
Institutional Class ........................ $13,653,580
Accumulated net realized gain on investments 10,756,717
Net unrealized appreciation of investments .. 2,883,517
-----------
Total Net Assets ............................ $27,293,814
===========
- ------------------
*Non-income producing security
ADR - American Depository Receipt
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
U.S. GROWTH FUND A CLASS - OCTOBER 31, 1997
Net asset value A Class (A) ................. $ 16.65
Sales Charge (4.75% of offering price or
4.98% of the amount invested per share) (B).. 0.83
-----------
Offering price ............................... $ 17.48
===========
- -----------------------
(A) Net asset value per share, as illustrated, is the estimated amount
which would be paid upon redemption or repurchase of shares.
(B) See Buying Shares in the current Prospectus for purchases of
$100,000 or more.
See accompanying notes
1997 annual report
13
<PAGE>
DELAWARE GROUP ADVISER FUNDS, INC.
OVERSEAS EQUITY FUND
STATEMENT OF NET ASSETS
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
Number Market
of Shares Value
--------- -----
COMMON STOCK - 94.84%
Australia - 3.22%
Woodside Petroleum, Ltd. ................... 48,000 $ 404,401
----------
404,401
----------
Chile - 1.97%
Embotelladora Andina-A, ADR ................ 10,300 247,200
----------
247,200
----------
Denmark - 2.40%
Sophus Berendsen, Class B .................. 2,000 301,241
----------
301,241
----------
France - 1.73%
Brioche Pasquier SA ........................ 2,000 217,354
----------
217,354
----------
Germany - 16.77%
Adidas AG .................................. 2,500 363,873
Bien-Haus AG ............................... 600 208,756
Dyckerhoff Preferred Shares ................ 500 153,668
Gea ........................................ 790 258,829
Heidelberger Zement AG ..................... 3,630 301,009
Kampa ...................................... 6,570 200,395
Moebel Walther ............................. 5,250 213,105
Spar Handels ............................... 15,000 231,371
Westag and Getalit ......................... 750 172,224
----------
2,103,230
----------
Japan - 39.85%
Canon Electronics .......................... 11,000 267,221
Chain Store Okuwa .......................... 13,000 110,316
Daifuko .................................... 22,000 165,092
FCC CO LTD ................................. 13,000 205,491
Familymart ................................. 6,000 264,060
Fanuc Company .............................. 7,000 283,027
Fuji Machine Manufacturing ................. 10,000 290,350
Fujimi ..................................... 5,000 275,374
Futaba Industrial .......................... 18,000 239,601
Ito-Yokado, Ltd. ........................... 6,000 298,503
Kyocera .................................... 4,000 229,285
Misumi ..................................... 9,900 161,431
Nippon Kanzai .............................. 9,640 154,785
Nippon Telegraph & Telephone ............... 30 254,575
Promise .................................... 5,500 322,130
Rohm ....................................... 3,000 297,005
Sankyo ..................................... 9,900 326,980
Secom ...................................... 4,000 258,902
Shimanchu .................................. 8,000 170,383
Shimano .................................... 8,000 163,062
Tokio Marine & Fire Insurance .............. 26,000 259,567
----------
4,997,140
----------
<PAGE>
Number Market
of Shares Value
--------- -----
COMMON STOCK (Continued)
Netherlands - 4.22%
IHC Caland ................................... 4,000 $ 245,112
Koninklijke Ahold ............................ 11,110 283,381
----------
528,493
----------
Norway - 6.11%
*Petroleum Geo-Services ASA ................... 6,000 412,139
Saga Petroleum ASA ........................... 18,000 352,160
----------
764,299
----------
Singapore/Malaysia - 4.96%
Carlsberg Brewery Malaysia ................... 50,000 178,864
Clipsal Industries ........................... 100,000 259,000
R.J. Reynolds Berhad ......................... 120,000 184,230
----------
622,094
----------
South Africa - 2.31%
Sasol Ltd. ................................... 24,000 289,035
----------
289,035
----------
Sweden - 2.45%
Ericsson (LM) Telephone ...................... 7,000 307,754
----------
307,754
----------
United Kingdom - 8.85%
Cable & Wireless PLC ......................... 32,000 253,819
RMC Group .................................... 16,000 242,830
Redland ...................................... 55,000 313,253
Vodafone Group PLC ........................... 55,000 299,433
----------
1,109,335
----------
Total Common Stock (cost $10,712,969)......... 11,891,576
----------
CURRENCY PUT OPTIONS - 2.08%
German Deutsche Marks 04/09/98 ............... 2,300,000 57,960
Japanese Yen 01/28/98 ....................... 1,500,000 80,850
Japanese Yen 04/09/98 ....................... 1,200,000 10,800
Japanese Yen 06/03/98 ....................... 2,000,000 86,000
Japanese Yen 07/30/98 ....................... 700,000 25,130
----------
Total Currency Put Options (cost $206,650) ... 260,740
----------
1997 annual report
14
<PAGE>
OVERSEAS EQUITY FUND
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
------ -----
REPURCHASE AGREEMENTS - 2.86%
With Paine Webber 5.65% 11/03/97
(dated 10/31/97, to be repurchased at
$117,018 collateralized by $116,760 U.S.
Treasury Notes 5.125% due 02/28/98
market value $118,360) ....................... $ 117,000 $ 117,000
With Chase 5.65% 11/03/97
(dated 10/31/97, to be repurchased at
$125,020 collateralized by $124,482 U.S.
Treasury Notes 5.75% due 10/31/00
market value $126,973) ....................... 125,000 125,000
With Prudential 5.65% 11/03/97
(dated 10/31/97, to be repurchased at
$116,018 collateralized by $116,759 U.S.
Treasury Notes 5.875% due 2/28/99
market value $117,646) ....................... 116,000 116,000
-----------
Total Repurchase Agreements
(cost $358,000 ) ............................. 358,000
-----------
TOTAL MARKET VALUE OF SECURITIES - 99.78%
(cost $11,277,619 ) ................................. 12,510,316
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - .22% 27,685
-----------
NET ASSETS APPLICABLE TO 1,012,711 SHARES
($.01 PAR VALUE) OUTSTANDING - 100.00% ............... $12,538,001
===========
NET ASSET VALUE - OVERSEAS EQUITY FUND A CLASS
($10,868,180/ 868,395 SHARES) ....................... $ 12.52
===========
NET ASSET VALUE - OVERSEAS EQUITY FUND B CLASS
($1,450,365/ 125,707 SHARES) ........................ $ 11.54
===========
NET ASSET VALUE-OVERSEAS EQUITY FUND C CLASS
($159,444/ 13,799 SHARES) ........................... $ 11.55
===========
NET ASSET VALUE OVERSEAS EQUITY FUND
INSTITUTIONAL CLASS ($60,012 / 4,810 SHARES) ......... $ 12.48
===========
<PAGE>
Market
Value
-----
COMPONENTS OF NET ASSETS AT OCTOBER 31, 1997
Common stock $.01 par value 70,000,000 shares
authorized with 20,000,000 shares allocated
to the Overseas Equity Fund A Class,
20,000,000 shares allocated to the Overseas
Equity Fund B Class, 15,000,000 shares
allocated to the Overseas Equity Fund
C Class and 15,000,000 shares allocated
to the Overseas Equity Fund
Institutional Class ................................ $ 9,101,449
**Undistributed net investment income ................. 530,298
Net realized gain on investments and
foreign currencies ................................. 1,673,548
Net unrealized appreciation of investments
and foreign currencies ............................. 1,232,706
-----------
Total Net Assets .................................... $12,538,001
===========
- ------------------
* Non-income producing security
**Undistributed net investment income includes net realized gain on foreign
currencies. Net realized gains on foreign currencies are distributed as
net investment income in accordance with provisions of the Internal
Revenue Code.
ADR - American Depository Receipt
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
OVERSEAS EQUITY A CLASS - October 31, 1997
Net asset value A Class (A) ............................ $ 12.52
Sales Charge (4.75% of offering price or 4.95%
of the amount invested per share) (B) ................. 0.62
---------
Offering price .......................................... $ 13.14
=========
- -------------------------
(A) Net asset value per share, as illustrated, is the estimated amount
which would be paid upon redemption or repurchase of shares.
(B) See Buying Shares in the current Prospectus for purchases of
$100,000 or more.
See accompanying notes
1997 annual report
15
<PAGE>
DELAWARE GROUP ADVISER FUNDS, INC.
NEW PACIFIC FUND
STATEMENT OF NET ASSETS
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
Number Market
of Shares Value
--------- -----
COMMON STOCK - 75.08%
Australia - 3.95%
West Australian Newspapers ........ 20,400 $ 90,872
WMC Ltd. .......................... 22,836 80,898
Woolworths ........................ 41,000 132,015
Amcor Ltd. ........................ 20,000 94,113
----------
397,898
----------
China - 6.47%
*Guangshen Railway ................. 734,000 227,891
*Inner Mongolia Yital Coal ......... 404,000 180,992
*Zhejiang Southeast Electric Power . 408,000 131,376
*Huaneng Power International, ADR .. 5,000 110,000
----------
650,259
----------
Hong Kong - 10.96%
Aeon Credit Service ............... 542,000 136,727
Asia Securities International ..... 624,000 135,617
*China Telecom ..................... 66,000 105,446
First Tractor ..................... 321,000 249,159
Founder Hong Kong Ltd. ............ 290,200 229,007
*Hutchison Whampoa ................. 20,000 138,422
Mingly ............................ 556,000 107,891
----------
1,102,269
----------
India - 7.59%
*Hindalco Ind ...................... 4,660 134,674
*Industrial Credit & Investment, GDR 6,000 89,100
Larsen & Toubro, GDR .............. 15,250 161,269
*Reliance Industries, ADR .......... 12,090 253,890
Tata Engineering & Locomotive ..... 12,000 124,800
----------
763,733
----------
Indonesia - 3.69%
PT Bimantara Citra ................ 90,000 82,501
PT Bank PAN Indonesia ............. 330,250 73,390
PT Indofood Sukses Makmur ......... 91,500 91,501
PT Medco Energi ................... 104,000 123,501
----------
370,893
----------
Japan - 17.13%
Acom .............................. 2,900 159,235
Aderans ........................... 3,600 97,038
Bank of Tokyo-Mitsubishi .......... 3,000 39,185
Fuji Photo Film ................... 5,000 181,365
Hitachi Ltd. ...................... 21,000 161,606
Mitsui Fudosan .................... 17,000 192,346
Nichiei ........................... 900 98,835
NIFCO ............................. 800 5,897
Nippon Shokubai ................... 23,000 141,406
Nippon Telegraph & Telephone....... 13 110,316
Ricoh ............................. 13,000 167,637
<PAGE>
Number Market
of Shares Value
--------- -----
COMMON STOCK (CONTINUED)
JAPAN (CONTINUED)
Seven Eleven Japan ......................... 2,000 $ 149,751
Softbank ................................... 1,600 51,514
Sony ....................................... 2,000 166,223
----------
1,722,354
----------
Pakistan - 0.87%
*Pakistan Telecommunications, GDR ........... 1,068 87,009
----------
87,009
----------
Phillipines - 2.47%
*Belle ...................................... 390,000 35,354
First Philippine Holdings .................. 158,000 132,040
La Tondena Distillers ...................... 127,000 77,351
*Picop Resources ............................ 137,500 3,506
----------
248,251
----------
Singapore/Malaysia - 14.42%
ACMA ....................................... 48,800 41,842
Comfort Group Ltd. ......................... 260,000 131,280
Development Bank of Singapore .............. 24,000 224,071
Malakoff Bhd ............................... 55,000 131,167
Multi-Purpose Holdings ..................... 192,000 100,164
Nalsteel Electronics ....................... 90,000 132,042
*Overseas Chinese Banking ................... 28,800 160,051
Sembawang .................................. 50,000 153,700
Tanjong PLC ................................ 71,000 124,877
Technology Resources Industries Berhad ..... 170,000 164,197
Van Der Hors ............................... 64,000 56,094
*Want Want Holdings ......................... 16,000 31,040
----------
1,450,525
----------
Taiwan - 1.15%
*Want Want Holdings ......................... 58,000 116,000
----------
116,000
----------
Thailand - 6.38%
BEC World Public ........................... 24,000 125,062
Banpu Public ............................... 12,400 86,769
IFTCT Finance & Securities, PLC ............ 60,000 9,975
Italian-Thai Development ................... 51,000 55,682
Jasmine International Public ............... 198,000 110,546
Robinson Department Store .................. 110,000 7,916
Robinson Department Store Public - Local ... 37,000 3,764
Shinawatra Computer Public - Foreign ....... 28,000 111,861
Thai Farmers Bank Public ................... 47,700 130,199
----------
641,774
----------
Total Common Stock (cost $9,840,328) ....... 7,550,965
----------
- ----------------------
Top 10 holdings, representing 21.79% of net assets, are in boldface.
1997 annual report
16
<PAGE>
NEW PACIFIC FUND
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
Number Market
of Shares Value
--------- -----
INVESTMENT COMPANIES - 2.84%
*Taipei Fund .............................. 33 $285,450
--------
Total Investment Companies (cost $273,859) 285,450
--------
Warrants/
Rights
WARRANTS & RIGHTS - 0.16%
*ACMA Warrants .......................... 7,200 1,189
*Belle Warrants ......................... 98,000 12
*Far East Bank & Trust Rights ........... 498 8,005
*Nankai Warrants ........................ 25 1,250
*Optec Warrants ......................... 20 1,000
*Oriental Press Group Warrants .......... 44,200 1,315
*PT Bank PAN Indonesia Warrants ......... 50,892 1,272
*Rashid Hussain Berhad Warrants ......... 5,571 2,391
--------
Total Warrants & Rights (cost $56,613) . 16,434
--------
Principal
Amount
CONVERTIBLE BONDS - 0.14%
*Multi Purpose Holdings ............... $112,000 13,522
--------
Total Convertible Bonds (cost $45,098) 13,522
--------
REPURCHASE AGREEMENTS - 14.49%
With Paine Webber 5.65% 11/03/97
(dated 10/31/97, to be repurchased at
$475,088 collateralized by $475,191 U.S.
Treasury Notes 5.125% due 02/28/98
market value $481,702) ................ 475,000 475,000
With Chase 5.65% 11/03/97
(dated 10/31/97, to be repurchased at
$507,206 collateralized by $505,718 U.S.
Treasury Notes 5.75% due 10/31/00
market value $516,756) ................ 507,000 507,000
With Prudential 5.65% 11/03/97
(dated 10/31/97, to be repurchased at
$475,088 collateralized by $475,191 U.S.
Treasury Notes 5.875% due 2/28/99
market value $478,799) ................ 475,000 475,000
---------
Total Repurchase Agreements
(cost $1,457,000) ..................... 1,457,000
---------
TOTAL MARKET VALUE OF SECURITIES - 92.71%
(cost $11,672,898) ................................... 9,323,371
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 7.29% 733,291
-----------
NET ASSETS APPLICABLE TO 1,366,549 SHARES
$.01 PAR VALUE) OUTSTANDING - 100% ................... $10,056,662
===========
<PAGE>
Market
Value
-----
NET ASSET VALUE - NEW PACIFIC FUND A CLASS
($7,143,529 / 975,985 shares) .......................... $ 7.32
========
NET ASSET VALUE - NEW PACIFIC FUND B CLASS
($2,533,998 / 339,318 shares) .......................... $ 7.47
========
NET ASSET VALUE - NEW PACIFIC FUND C CLASS
($129,028 / 17,635 shares) ............................. $ 7.32
========
NET ASSET VALUE - NEW PACIFIC FUND INSTITUTIONAL CLASS
($250,107 / 33,611 shares) ............................. $ 7.44
========
COMPONENTS OF NET ASSETS AT OCTOBER 31, 1997
Common Stock $.01 par value, 70,000,0000 shares
with 20,000,000 shares allocated to the New
Pacific Fund A Class, 20,000,000 shares
allocated to the New Pacific Fund B Class,
15,000,000 shares allocated to the New Pacific
Fund C Class and 15,000,000 shares allocated
to the New Pacific Fund
Institutional Class .................................. $ 13,520,859
**Undistributed net investment income .................... 31,125
Accumulated net realized loss on investments ........... (1,137,834)
Net unrealized depreciation of investments
and foreign currencies ............................... (2,357,488)
------------
Total Net Assets ....................................... $ 10,056,662
============
- ---------------------
* Non-income producing security
**Undistributed net investment income includes net realized gain on foreign
currencies. Net Realized gains on foreign currencies are distributed as
net investment income in accordance with provisions of the Internal
Revenue Code.
ADR - American Depository Receipt
GDR - Global Depository Receipt
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
NEW PACIFIC FUND A CLASS - OCTOBER 31, 1997
Net asset value A Class (A) .................................. $ 7.32
Sales Charge (4.75% of offering price or 5.05%, of the amount
invested per share)(B) ...................................... 0.37
--------
Offering price ................................................ $ 7.69
========
- ----------------------
(A) Net asset value per share , as illustrated , is the estimated amount
which would be paid upon redemption or repurchase of shares.
(B) See Buying Shares in the current prospectus for purchases of
$100,000 or more.
See accompanying notes
1997 annual report
17
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
DELAWARE GROUP ADVISER FUNDS, INC.
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Growth Overseas Equity New Pacific
Fund Fund Fund
----------- ----------- -----------
ASSETS:
<S> <C> <C> <C>
Investments at market ..................................... $26,654,629 $12,510,316 $ 9,323,371
Cash and foreign currencies ............................... 10,062 2,161 543,175
Dividends and interest receivable ......................... 13,351 47,140 59,856
Subscriptions receivable .................................. 69,124 695 189,501
Receivable for securities sold ............................ 1,068,036 -- 19,771
Other assets .............................................. 8,221 47,227 53,861
----------- ----------- -----------
Total assets .......................................... 27,823,423 12,607,539 10,189,535
=========== =========== ===========
LIABILITIES:
Liquidations payable ...................................... 88,000 4,259 12,672
Payable for securities purchased .......................... 343,374 -- 85,474
Other accounts payable and accrued expenses ............... 98,235 65,279 34,727
----------- ----------- -----------
Total liabilities ......................................... 529,609 69,538 132,873
----------- ----------- -----------
TOTAL NET ASSETS .......................................... $27,293,814 $12,538,001 $10,056,662
=========== =========== ===========
Investments at cost ....................................... $23,771,112 $11,277,619 $11,672,898
=========== =========== ===========
</TABLE>
See accompanying notes
DELAWARE GROUP ADVISER FUNDS, INC.
STATEMENTS OF OPERATIONS
YEAR ENDED OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Growth Overseas Equity New Pacific
Fund Fund Fund
------------- -------------- ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest ................................................................ $ 92,008 $ 36,511 $ 38,946
Dividends (net of foreign withholding
taxes of $0, $26,142 and $22,184, respectively) ........................ 257,988 187,417 214,688
---------- --------- ----------
349,996 223,928 253,634
---------- --------- ----------
EXPENSES:
Management fees ......................................................... 230,497 176,619 118,010
Custodian fees .......................................................... 4,700 5,600 38,500
Dividend disbursing and transfer agent
fees and expenses ...................................................... 41,863 24,969 30,292
Distribution expense .................................................... 65,320 58,532 52,824
Federal and state registration fees ..................................... 36,900 30,900 27,200
Reports and statements to shareholders .................................. 13,715 1,125 4,075
Professional fees ....................................................... 22,500 5,500 4,000
Directors' fees ......................................................... 1,200 1,275 450
Taxes (other than taxes on income) ..................................... 2,900 1,150 250
Amortization of organization expenses ................................... 1,597 1,993 1,882
Other ................................................................... 20,672 1,097 5,300
---------- --------- ----------
441,864 308,760 282,783
Less expenses absorbed by the adviser ................................... 0 0 (8,999)
---------- --------- ----------
441,864 308,760 273,784
---------- --------- ----------
NET INVESTMENT LOSS ..................................................... (91,868) (84,832) (20,150)
---------- --------- ----------
<PAGE>
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCIES:
Net realized gain (loss) on:
Investment transactions ............................................. 10,854,607 1,672,817 (1,117,944)
Foreign currencies .................................................. 0 618,503 125,068
---------- --------- ----------
Net realized gain (loss) ........................................... 10,854,607 2,291,320 (992,876)
Net change in unrealized appreciation (depreciation) of
investments and foreign currencies during the year .................. (830,970) (584,515) (1,602,579)
---------- --------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCIES ............................................................. 10,023,637 1,706,805 (2,595,455)
---------- --------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ......... $ 9,931,769 $ 1,621,973 $ (2,615,605)
============ ============ ============
</TABLE>
See accompanying notes
1997 annual report
18
<PAGE>
DELAWARE GROUP ADVISER FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U. S. GROWTH FUND OVERSEAS EQUITY FUND
--------------------------------------------------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
1997 1996 1997 1996
--------------------------------------------------------------------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment loss ....................... $ (91,868) $ (153,617) $ (84,832) $ (73,483)
Net realized gain (loss) on investments
and foreign currencies ................... 10,854,607 3,956,760 2,291,320 1,306,556
Net change in unrealized appreciation
(depreciation) on investments and
foreign currencies ....................... (830,970) (1,322,583) (584,515) 34,912
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations ................ 9,931,769 2,480,560 1,621,973 1,267,985
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class .................................. -- -- (522,689) (26,689)
B Class .................................. -- -- (46,161) (2,249)
C Class .................................. -- -- (4,286) (93)
Institutional Class ...................... -- -- (803) (10)
Net realized gain from
investment transactions:
A Class .................................. (1,626,328) -- (396,523) --
B Class .................................. (85,057) -- (35,183) --
C Class .................................. (5,841) -- (3,252) --
Institutional Class ...................... (1,003,161) -- (610) --
------------ ------------ ------------ ------------
(2,720,387) 0 (1,009,507) (29,041)
------------ ------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class .................................. 10,781,745 1,369,974 2,484,892 1,232,465
B Class .................................. 797,219 366,669 382,413 255,022
C Class .................................. 221,107 41,965 96,743 75,221
Institutional Class ...................... 7,357,639 5,978,904 104,137 422,003
Net asset value of shares issued
upon reinvestment of dividends
from net investment income and net
realized gain on investment transactions:
A Class .................................. 1,622,653 0 913,591 26,515
B Class .................................. 84,600 0 74,801 2,156
C Class .................................. 5,683 0 7,537 93
Institutional Class ...................... 1,003,161 0 1,413 10
------------ ------------ ------------ ------------
21,873,807 7,757,512 4,065,527 2,013,485
------------ ------------ ------------ ------------
Cost of shares repurchased:
A Class .................................. (25,598,341) (405,142) (8,030,552) (544,997)
B Class .................................. (241,326) (199,197) (214,003) (313,741)
C Class .................................. (52,050) (19,270) (55,031) (9,744)
Institutional Class ...................... (2,884,902) (1,616,507) (330,279) (298,223)
------------ ------------ ------------ ------------
(28,776,619) (2,240,116) (8,629,865) (1,166,705)
------------ ------------ ------------ ------------
Increase (decrease) in net assets
derived from capital share transactions ... (6,902,812) 5,517,396 (4,564,338) 846,780
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS ...... 308,570 7,997,956 (3,951,872) 2,085,724
NET ASSETS:
Beginning of period ........................ 26,985,244 18,987,288 16,489,873 14,404,149
------------ ------------ ------------ ------------
End of period .............................. $ 27,293,814 $ 26,985,244 $ 12,538,001 $ 16,489,873
============ ============ ============ ============
</TABLE>
<PAGE>
[RESTUBBED CHART]
<TABLE>
<CAPTION>
NEW PACIFIC FUND
------------------------------
YEAR ENDED OCTOBER 31,
1997 1996
------------------------------
OPERATIONS:
<S> <C> <C>
Net investment loss ....................... $ (20,150) $ (54,248)
Net realized gain (loss) on investments
and foreign currencies ................... (992,876) 689,810
Net change in unrealized appreciation
(depreciation) on investments and
foreign currencies ....................... (1,602,579) 269,109
------------ ------------
Net increase (decrease) in net assets
resulting from operations ................ (2,615,605) 904,671
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class .................................. (190,598) (11,516)
B Class .................................. (8,912) (518)
C Class .................................. (761) (16)
Institutional Class ...................... (370) (5)
Net realized gain from
investment transactions:
A Class .................................. -- --
B Class .................................. -- --
C Class .................................. -- --
Institutional Class ...................... -- --
------------ ------------
(200,641) (12,055)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class .................................. 9,268,516 1,193,031
B Class .................................. 2,799,014 159,517
C Class .................................. 152,523 31,250
Institutional Class ...................... 996,240 226,105
Net asset value of shares issued
upon reinvestment of dividends
from net investment income and net
realized gain on investment transactions:
A Class .................................. 189,818 11,472
B Class .................................. 8,437 495
C Class .................................. 761 16
Institutional Class ...................... 371 5
------------ ------------
13,415,680 1,621,891
------------ ------------
Cost of shares repurchased:
A Class .................................. (1,746,630) (668,487)
B Class .................................. (383,325) (203,256)
C Class .................................. (27,334) (4,910)
Institutional Class ...................... (863,361) (166,392)
------------ ------------
(13,020,650) (1,043,045)
------------ ------------
Increase (decrease) in net assets
derived from capital share transactions ... 395,030 578,846
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS ...... (2,421,216) 1,471,462
NET ASSETS:
Beginning of period ........................ 12,477,878 11,006,416
------------ ------------
End of period .............................. $ 10,056,662 $ 12,477,878
============ ============
</TABLE>
See accompanying notes
1997 annual report
19
<PAGE>
DELAWARE GROUP ADVISER FUNDS, INC.
FINANCIAL HIGHLIGHTS
U.S. GROWTH FUND
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each
period were as follows:
<TABLE>
<CAPTION>
U.S. Growth Fund A Class
---------------------------------------------------------------
Period
Year Ended October 31, 12/3/94(1) to
1997 1996 1995 10/31/94
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................ $ 13.82 $ 12.43 $ 10.21 $ 10.00
Income from investment operations:
Net investment loss ............................. (0.06)(4) (0.09) (0.09) (0.04)
Net realized and unrealized gain from investments 4.25 1.48 2.31 0.26
Total net assets from investment operations ..... 4.19 1.39 2.22 0.22
Less dividends and distributions:
Dividends from net investment income ............ -- -- -- (0.01)
Distributions from net realized gain
on investment transactions ..................... (1.36) -- -- --
--------- --------- --------- ----------
Total dividends and distributions ............... (1.36) 0.00 0.00 (0.01)
--------- --------- --------- ----------
Net asset value, end of period ...................... $ 16.65 $ 13.82 $ 12.43 $ 10.21
======== ========= ========= ==========
Total return(2)...................................... 33.18% 11.18% 21.74% 2.18%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ......... $ 6,933 $ 16,118 $ 13,574 $ 10,669
Ratio of expenses to average net assets ......... 1.44% 1.80% 1.85% 1.85%
Ratio of expenses to average net assets
prior to expense limitation ..................... N/A 1.88% 2.18% 2.94%
Ratio of net investment loss to average
net assets ...................................... (0.38%) (0.77%) (0.88%) (0.51%)
Ratio of net investment loss to average
net assets prior to expense limitation .......... N/A (0.85%) (1.21%) (1.60%)
Portfolio turnover rate ......................... 144% 131% 58% 66%
Average commission rate paid(3).................. $ 0.0575 $ 0.0519 N/A N/A
</TABLE>
<PAGE>
RESTUBBED TABLE
<TABLE>
<CAPTION>
U.S. Growth Fund B Class
-------------------------------------------------------
Period
Year Ended October 31, 3/29/94(1) to
1997 1996 1995 10/31/94
-------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................ $ 13.61 $ 12.33 $ 10.19 $ 10.00
Income from investment operations:
Net investment loss ............................. (0.16)(4) (0.17) (0.14) (0.03)
Net realized and unrealized gain from investments 4.17 1.45 2.28 0.22
Total net assets from investment operations ..... 4.01 1.28 2.14 0.19
Less dividends and distributions:
Dividends from net investment income ............ -- -- -- --
Distributions from net realized gain
on investment transactions ..................... (1.36) -- -- --
-------------- ------------ ---------- ----------
Total dividends and distributions ............... (1.36) 0.00 0.00 0.00
-------------- ------------ ---------- ----------
Net asset value, end of period ...................... $ 16.26 $ 13.61 $ 12.33 $ 10.19
============== ============ ========== ==========
Total return(2) ..................................... 32.30% 10.38% 21.00% 1.90%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ......... $ 1,653 $ 809 $ 567 $ 204
Ratio of expenses to average net assets ......... 2.14% 2.48% 2.50% 2.50%
Ratio of expenses to average net assets
prior to expense limitation ..................... N/A 2.56% 2.83% 3.60%
Ratio of net investment loss to average
net assets ..................................... (1.08%) (1.45) (1.57%) (1.26%)
Ratio of net investment loss to average
net assets prior to expense limitation ......... N/A (1.53%) (1.90%) (2.36%)
Portfolio turnover rate ......................... 144% 131% 58% 66%
Average commission rate paid(3).................. $ 0.0575 $ 0.0519 N/A N/A
</TABLE>
- ----------------------
(1) Date of initial public offering; ratios have been annualized.
(2) Does not include maximum sales charge of 4.75% or the 1% limited contingent
deferred sales charge that would apply in the event of certain redemptions
within 12 months of purchase of A Class shares. Does not include contingent
deferred sales charge which varies from 1-4% depending upon the holding
period for B Class and C Class shares.
(3) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was a
commission charged.
(4) The average shares outstanding method has been applied for per share
information.
20
1997 annual report
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
U.S. GROWTH FUND (CONTINUED)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each
period were as follows:
<TABLE>
<CAPTION>
U.S. Growth Fund C Class
---------------------------------------------------------------
Period
Year Ended October 31, 5/23/94(1) to
1997 1996 1995 10/31/94
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $14.18 $12.85 $10.62 $10.00
Income from investment operations:
Net investment loss....................................... (0.17)(4) (0.16) (0.10) (0.03)
Net realized and unrealized gain (loss)
from investments ........................................ 4.37 1.49 2.33 0.65
------ ------ ------ ------
Total from investment operations.......................... 4.20 1.33 2.23 0.62
------ ------ ------ ------
Less dividends and distributions:
Dividends from net investment income...................... -- -- -- --
Distributions from net realized gain on
investment transactions.................................. (1.36) -- -- --
------ ------ ------ ------
Total dividends and distributions.......................... (1.36) 0.00 0.00 0.00
------ ------ ------ ------
Net asset value, end of period............................. $17.02 $14.18 $12.85 $10.62
====== ====== ====== ======
Total return(2)............................................ 32.26% 10.35% 21.00% 6.17%
Ratios and supplemental data:
Net assets, end of period (000 omitted)................... $252 $55 $27 $5
Ratio of expenses to average net assets................... 2.14% 2.48% 2.50% 2.50%
Ratio of expenses to average net assets prior to
expense limitation ...................................... N/A 2.56% 2.82% 3.54%
Ratio of net investment loss to average net assets........ (1.08%) (1.45%) (1.61%) (1.09%)
Ratio of net investment loss to average
net assets prior to expense limitation................... N/A (1.53%) (1.93%) (2.13%)
Portfolio turnover rate................................... 144% 131% 58% 66%
Average commission rate paid(3)........................... $0.0575 $0.0519 N/A N/A
</TABLE>
<PAGE>
RESTUBBED TABLE
<TABLE>
<CAPTION>
U.S. Growth Fund Institutional Class
------------------------------------------------------
Period
Year Ended October 31, 2/3/94(1) to
1997 1996 1995 10/31/94
------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $13.94 $12.50 $10.23 $10.52
Income from investment operations:
Net investment loss....................................... (0.01)(4) (0.05) (0.05) (0.01)
Net realized and unrealized gain (loss)
from investments ........................................ 4.29 1.49 2.32 (0.28)
------ ------ ------ ------
Total from investment operations.......................... 4.28 1.44 2.27 (0.29)
------ ------ ------ ------
Less dividends and distributions:
Dividends from net investment income...................... -- -- -- --
Distributions from net realized gain on
investment transactions.................................. (1.36) -- -- --
------ ------ ------ ------
Total dividends and distributions......................... (1.36) 0.00 0.00 0.00
------ ------ ------ ------
Net asset value, end of period............................. $16.86 $13.94 $12.50 $10.23
====== ====== ====== ======
Total return(2)............................................ 33.57% 11.52% 22.19% (2.78%)
Ratios and supplemental data:
Net assets, end of period (000 omitted)................... $18,455 $10,003 $4,819 $1,630
Ratio of expenses to average net assets................... 1.14% 1.48% 1.50% 1.50%
Ratio of expenses to average net assets prior to
expense limitation ...................................... N/A 1.56% 1.83% 2.60%
Ratio of net investment loss to average net assets........ (0.08%) (0.45%) (0.59%) (0.27%)
Ratio of net investment loss to average
net assets prior to expense limitation................... N/A (0.53%) (0.92%) (1.37%)
Portfolio turnover rate................................... 144% 131% 58% 66%
Average commission rate paid(3)........................... $0.0575 $0.0519 N/A N/A
</TABLE>
- ---------------------
(1) Date of initial public offering; ratios have been annualized.
(2) Does not include maximum sales charge of 4.75% or the 1% limited contingent
deferred sales charge that would apply in the event of certain redemptions
within 12 months of purchase of A Class shares. Does not include contingent
deferred sales charge which varies from 1-4% depending upon the holding
period for B Class and C Class shares.
(3) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was a
commission charged.
(4) The average shares outstanding method has been applied for per share
information.
21
1997 annual report
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
OVERSEAS EQUITY FUND
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
Overseas Equity Fund A Class
----------------------------------------------------------------
Period
Year Ended October 31, 12/3/94(1) to
1997 1996 1995 10/31/94
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period....................... $12.39 $11.40 $11.00 $10.00
Income from investment operations:
Net investment income (loss).............................. (0.06)(4) (0.06) 0.01 0.02
Net realized and unrealized gain from investments
and foreign currencies................................... 0.96 1.07 0.40 1.01
------ ------ ------ ------
Total from investment operations.......................... 0.90 1.01 0.41 1.03
------ ------ ------ ------
Less dividends and distributions:
Dividends from net investment income..................... (0.44) (0.02) (0.01) (0.03)
Distributions from net realized gain
on investment transactions ............................. (0.33) -- -- --
------ ------ ------ ------
Total dividends and distributions........................ (0.77) (0.02) (0.01) (0.03)
------ ------ ------ ------
Net asset value, end of period............................. $12.52 $12.39 $11.40 $11.00
====== ====== ====== ======
Total return(2)............................................ 7.74% 8.90% 3.81% 10.25%
Ratios and supplemental data:
Net assets, end of period (000 omitted)................... $10,868 $14,886 $13,018 $11,721
Ratio of expenses to average net assets................... 1.80% 1.82% 1.85% 1.85%
Ratio of expenses to average net assets prior to
expense limitation....................................... N/A 2.60% 2.96% 3.56%
Ratio of net investment income to average net assets ..... (0.45%) (0.51%) 0.00% 0.25%
Ratio of net investment income to average net
assets prior to expense limitation ...................... N/A (1.29%) (1.11%) (1.96%)
Portfolio turnover rate................................... 18% 21% 9% 6%
Average commission rate paid(3)........................... $0.0529 $0.0448 N/A N/A
</TABLE>
<PAGE>
RESTUBBED TABLE
<TABLE>
<CAPTION>
Overseas Equity Fund B Class
-------------------------------------------------------
Period
Year Ended October 31, 3/29/94(1) to
1997 1996 1995 10/31/94
-------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period....................... $11.56 $10.71 $10.40 $10.00
Income from investment operations:
Net investment income (loss).............................. (0.14)(4) (0.06) (0.02) --
Net realized and unrealized gain from investments
and foreign currencies................................... 0.89 0.93 0.35 0.43
------ ------ ------ ------
Total from investment operations.......................... 0.75 0.87 0.33 0.43
------ ------ ------ ------
Less dividends and distributions:
Dividends from net investment income..................... (0.44) (0.02) (0.02) (0.03)
Distributions from net realized gain
on investment transactions ............................. (0.33) -- -- --
------ ------ ------ ------
Total dividends and distributions......................... (0.77) (0.02) (0.02) (0.03)
------ ------ ------ ------
Net asset value, end of period............................. $11.54 $11.56 $10.71 $10.40
====== ====== ====== ======
Total return(2)............................................ 6.95% 8.16% 3.19% 4.28%
Ratios and supplemental data:
Net assets, end of period (000 omitted)................... $1,450 $1,208 $1,183 $523
Ratio of expenses to average net assets................... 2.50% 2.50% 2.50% 2.50%
Ratio of expenses to average net assets prior to
expense limitation....................................... N/A 3.28% 3.61% 4.22%
Ratio of net investment income to average net assets ..... (1.16%) (1.19%) (0.57%) (0.37%)
Ratio of net investment income to average net
assets prior to expense limitation ...................... N/A (1.97%) (1.68%) (2.09%)
Portfolio turnover rate................................... 18% 21% 9% 6%
Average commission rate paid(3)........................... $0.0529 $0.0448 N/A N/A
</TABLE>
- ----------------------
(1) Date of initial public offering: ratios have been annualized.
(2) Does not include maximum sales charge of 4.75% or the 1% limited contingent
deferred sales charge that would apply in the event of certain redemptions
within 12 months of purchase of A Class shares. Does not include contingent
deferred sales charge which varies from 1-4% depending upon the holding
period for B Class and C Class shares.
(3) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was a
commission charged.
(4) The average shares outstanding method has been applied for per share
information.
22
1997 annual report
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
OVERSEAS EQUITY FUND
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
Overseas Equity Fund C Class
-------------------------------------------------------------
Period
Year Ended October 31, 5/10/94(1) to
1997 1996 1995 10/31/94
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ....................... $11.58 $10.73 $10.43 $10.00
Income from investment operations:
Net investment income (loss)............................... (0.14)(4) (0.06) (0.06) 0.01
Net realized and unrealized gain from investments
and foreign currencies.................................... 0.88 0.93 0.39 0.44
------ ------ ------ ------
Total from investment operations .......................... 0.74 0.87 0.33 0.45
------ ------ ------ ------
Less dividends and distributions:
Dividends from net investment income....................... (0.44) (0.02) (0.03) (0.02)
Distributions from net realized gain on
investment transactions................................... (0.33) -- -- --
------ ------ ------ ------
Total dividends and distributions.......................... (0.77) (0.02) (0.03) (0.02)
------ ------ ------ ------
Net asset value, end of period.............................. $11.55 $11.58 $10.73 $10.43
====== ====== ====== ======
Total return(2)............................................. 6.85% 8.15% 3.16% 4.45%
Ratios and supplemental data:
Net assets, end of period (000 omitted).................... $159 $112 $43 $38
Ratio of expenses to average net assets.................... 2.50% 2.50% 2.50% 2.50%
Ratio of expenses to average net assets prior to
expense limitation........................................ N/A 3.28% 3.61% 4.23%
Ratio of net investment income to average net assets (1.16%) (1.19%) (0.62%) 0.16%
Ratio of net investment income to average net assets prior
to expense limitation.................................... N/A (1.97%) (1.73%) (1.57%)
Portfolio turnover rate.................................... 18% 21% 9% 6%
Average commission rate paid(3)............................ $0.0529 $0.0448 N/A N/A
</TABLE>
<PAGE>
RESTUBBED TABLE
<TABLE>
<CAPTION>
Overseas Equity Fund
-------------------------------------------------------
Period
Year Ended October 31, 2/3/94(1) to
1997 1996 1995 10/31/94
-------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ....................... $12.32 $11.44 $11.02 $10.50
Income from investment operations:
Net investment income (loss)............................... (0.02)(4) (0.06) 0.04 0.04
Net realized and unrealized gain from investments
and foreign currencies.................................... 0.95 0.96 0.41 0.52
------ ------ ------ ------
Total from investment operations ........................... 0.93 0.90 0.45 0.56
------ ------ ------ ------
Less dividends and distributions:
Dividends from net investment income....................... (0.44) (0.02) (0.03) (0.04)
Distributions from net realized gain on
investment transactions................................... (0.33) -- -- --
------ ------ ------ ------
Total dividends and distributions.......................... (0.77) (0.02) (0.03) (0.04)
------ ------ ------ ------
Net asset value, end of period.............................. $12.48 $12.32 $11.44 $11.02
====== ====== ====== ======
Total return(2)............................................. 8.04% 7.91% 4.22% 5.26%
Ratios and supplemental data:
Net assets, end of period (000 omitted).................... $60 $284 $161 $63
Ratio of expenses to average net assets.................... 1.50% 1.50% 1.50% 1.50%
Ratio of expenses to average net assets prior to
expense limitation........................................ N/A 2.28% 2.61% 3.21%
Ratio of net investment income to average net assets (0.15%) (0.19%) 0.40% 0.76%
Ratio of net investment income to average net assets prior
to expense limitation.................................... N/A (0.97%) (0.71%) (0.95%)
Portfolio turnover rate.................................... 18% 21% 9% 6%
Average commission rate paid(3)............................ $0.0529 $0.0448 N/A N/A
</TABLE>
- ---------------------
(1) Date of initial public offering: ratios have been annualized.
(2) Does not include maximum sales charge of 4.75% or the 1% limited contingent
deferred sales charge that would apply in the event of certain redemptions
within 12 months of purchase of A Class shares. Does not include contingent
deferred sales charge which varies from 1-4% depending upon the holding
period for B Class and C Class shares.
(3) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was a
commission charged.
(4) The average shares outstanding method has been applied for per share
information.
23
1997 annual report
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) NEW PACIFIC FUND
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
New Pacific Fund A Class
----------------------------------------------------------------
Period
Year Ended October 31, 12/3/93(1) to
1997 1996 1995 10/31/94
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ....................... $9.42 $8.71 $10.44 $10.00
Income from investment operations:
Net investment income (loss)............................... (0.01)4 (0.05) (0.05) (0.02)
Net realized and unrealized gain
(loss) from investments and foreign currencies (1.94) 0.77 (1.39) 0.47
----- ----- ----- ------
Total from investment operations........................... (1.95) 0.72 (1.44) 0.45
----- ----- ----- ------
Less dividends and distributions:
Dividends from net investment income....................... (0.15) (0.01) -- (0.01)
Distributions from net realized gain on
investment transactions................................... -- -- (0.29) --
----- ----- ----- ------
Total dividends and distributions.......................... (0.15) (0.01) (0.29) (0.01)
----- ----- ----- ------
Net asset value, end of period.............................. $7.32 $9.42 $8.71 $10.44
===== ===== ===== ======
Total return2............................................... (21.15%) 8.26% (13.99%) 4.53%
Ratios and supplemental data:
Net assets, end of period (000 omitted)................... $7,144 $11,752 $10,353 $11,333
Ratio of expenses to average net assets................... 1.80% 1.82% 1.85% 1.85%
Ratio of expenses to average net assets prior to
expense limitation....................................... 1.86% 2.77% 3.73% 3.66%
Ratio of net investment income (loss)
to average net assets ................................... (0.08%) (0.41%) (0.60%) (0.21%)
Ratio of net investment income (loss) to average net
assets prior to expense limitation....................... (0.14%) (1.36%) (2.48%) (2.02%)
Portfolio turnover rate................................... 178% 163% 163% 104%
Average commission rate paid3 ............................. $0.0079 $0.0118 N/A N/A
</TABLE>
<PAGE>
RESTUBBED TABLE
<TABLE>
<CAPTION>
New Pacific Fund B Class
--------------------------------------------------------
Period
Year Ended October 31, 3/29/94(1) to
1997 1996 1995 10/31/94
--------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ....................... $9.68 $9.01 $10.86 $10.00
Income from investment operations:
Net investment income (loss)............................... (0.08)4 (0.05) (0.10) (0.03)
Net realized and unrealized gain
(loss) from investments and foreign currencies (1.98) 0.73 (1.46) 0.89
----- ----- ----- ------
Total from investment operations........................... (2.06) 0.68 (1.56) 0.86
----- ----- ----- ------
Less dividends and distributions:
Dividends from net investment income....................... (0.15) (0.01) -- --
Distributions from net realized gain on
investment transactions................................... -- -- (0.29) --
----- ----- ----- ------
Total dividends and distributions.......................... (0.15) (0.01) (0.29) 0.00
----- ----- ----- ------
Net asset value, end of period.............................. $7.47 $9.68 $9.01 $10.86
===== ===== ===== ======
Total return2............................................... (21.72%) 7.54% (14.56%) 8.58%
Ratios and supplemental data:
Net assets, end of period (000 omitted)................... $2,534 $562 $573 $431
Ratio of expenses to average net assets................... 2.50% 2.50% 2.50% 2.50%
Ratio of expenses to average net assets prior to
expense limitation....................................... 2.56% 3.45% 4.38% 4.32%
Ratio of net investment income (loss)
to average net assets ................................... (0.77%) (1.09%) (1.20%) (0.88%)
Ratio of net investment income (loss) to average net
assets prior to expense limitation....................... (0.83%) (2.04%) (3.08%) (2.70%)
Portfolio turnover rate................................... 178% 163% 163% 104%
Average commission rate paid3 .............................. $0.0079 $0.0118 N/A N/A
</TABLE>
- --------------------
(1) Date of initial public offering; ratios have been annualized.
(2) Does not include maximum sales charge of 4.75% or the 1% limited contingent
deferred sales charge that would apply in the event of certain redemptions
within 12 months of purchase of A Class shares. Does not include contingent
deferred sales charge which varies from 1-4% depending upon the holding
period for B Class and C Class shares.
(3) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was a
commission charged.
(4) The average shares outstanding method has been applied for per share
information.
(5) The net investment income (loss) ratios have been adjusted to reflect
current year presentation.
24
1997 annual report
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) NEW PACIFIC FUND (CONTINUED)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
New Pacific Fund C Class
-----------------------------------------------------------------
Period
Year Ended October 31, 7/7/94(1) To
1997 1996 1995 10/31/94
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ......................... $9.49 $8.83 $10.66 $10.00
Income from investment operations:
Net investment income (loss)................................. (0.08)4 (0.05) (0.08) (0.02)
Net realized and unrealized gain (loss)
from investments and foreign currencies..................... (1.94) 0.72 (1.46) 0.68
----- ----- ----- ------
Total from investment operations............................. (2.02) 0.67 (1.54) 0.66
----- ----- ----- ------
Less dividends and distributions:
Dividends from net investment income......................... (0.15) (0.01) -- --
Distributions from net realized gain on
investment transactions .................................... -- -- (0.29) --
----- ----- ----- ------
Total dividends and distributions ........................... (0.15) (0.01) (0.29) 0.00
----- ----- ----- ------
Net asset value, end of period................................ $7.32 $9.49 $8.83 $10.66
===== ===== ===== ======
Total return(2)............................................... (21.85%) 7.58% (14.57%) 6.55%
Ratios and supplemental data:
Net assets, end of period (000 omitted)...................... $129 $44 $17 $12
Ratio of expenses to average net assets...................... 2.50% 2.50% 2.50% 2.50%
Ratio of expenses to average net assets
prior to expense limitation................................. 2.56% 3.45% 4.38% 4.31%
Ratio of net investment income (loss) to average
net assets ................................................. (0.77%) (1.09%) (1.02%) (0.83%)
Ratio of net investment income (loss) to average net assets
prior to expense limitation................................. (0.83%) (2.04%) (2.90%) (2.64%)
Portfolio turnover rate...................................... 178% 163% 163% 104%
Average commission rate paid(3).............................. $0.0079 $0.0118 N/A N/A
</TABLE>
<PAGE>
RESTUBBED TABLE
<TABLE>
<CAPTION>
New Pacific Fund Institutional Class
-------------------------------------------------------
Period
Year Ended October 31, 2/3/94(1) to
1997 1996 1995 10/31/94
-------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ......................... $9.53 $8.77 $10.48 $11.14
Income from investment operations:
Net investment income (loss)................................. 0.02(4) (0.05) (0.01) 0.01
Net realized and unrealized gain (loss)
from investments and foreign currencies..................... (1.96) 0.82 (1.41) (0.67)
----- ----- ----- ------
Total from investment operations............................. (1.94) 0.77 (1.42) (0.66)
----- ----- ----- ------
Less dividends and distributions:
Dividends from net investment income......................... (0.15) (0.01) -- --
Distributions from net realized gain on
investment transactions .................................... -- -- (0.29) --
----- ----- ----- ------
Total dividends and distributions ........................... (0.15) (0.01) (0.29) 0.00
----- ----- ----- ------
Net asset value, end of period................................ $7.44 $9.53 $8.77 $10.48
===== ===== ===== ======
Total return(2)............................................... (20.79%) 8.77% (13.65%) (5.98%)
Ratios and supplemental data:
Net assets, end of period (000 omitted)...................... $250 $119 $62 $47
Ratio of expenses to average net assets...................... 1.50% 1.50% 1.50% 1.50%
Ratio of expenses to average net assets
prior to expense limitation................................. 1.56% 2.45% 3.38% 3.31%
Ratio of net investment income (loss) to average
net assets ................................................. 0.22% (0.09%) (0.16%) 0.23%
Ratio of net investment income (loss) to average net assets
prior to expense limitation................................. 0.16% (1.04%) (2.04%) (1.58%)
Portfolio turnover rate...................................... 178% 163% 163% 104%
Average commission rate paid(3).............................. $0.0079 $0.0118 N/A N/A
</TABLE>
- -------------------
(1) Date of initial public offering; ratios have been annualized.
(2) Does not include maximum sales charge of 4.75% or the 1% limited contingent
deferred sales charge that would apply in the event of certain redemptions
within 12 months of purchase of A Class shares. Does not include contingent
deferred sales charge which varies from 1-4% depending upon the holding
period for B Class and C Class shares.
(3) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was a
commission charged.
(4) The average shares outstanding method has been applied for per share
information.
(5) The net income (loss) ratios have been adjusted to reflect current year
presentation.
25
1997 annual report
<PAGE>
DELAWARE GROUP ADVISER FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997
------------------------------------------------------------------------------
Delaware Group Adviser Funds, Inc. ("The Company") is registered as a
diversified open-end investment company under the Investment Company Act of
1940, as amended. The Company is organized as a Maryland Corporation. The
Company currently issues three separate series of shares (each referred to
as a "Fund" or collectively as the "Funds"); the U.S. Growth Fund, the
Overseas Equity Fund (formerly known as the World Growth Fund) and the New
Pacific Fund. Each fund offers four classes of shares. The A Class carries
a front-end sales charge of 4.75%. The B Class carries a back-end deferred
sales charge. The C Class carries a level load deferred sales charge, and
the Institutional Class has no sales charge.
The U.S. Growth Fund seeks to maximize capital appreciation. The Overseas
Equity Fund seeks to maximize total return by investing in an
internationally diversified mix of stocks. The New Pacific Fund seeks long
term capital appreciation by investing in Pacific Basin countries.
1. Significant Accounting Policies
The following accounting policies are in accordance with generally
accepted accounting principles and are consistently followed by the Funds.
Security Valuation - Securities listed on an exchange are valued at the
last quoted sales price as of the close of the NYSE on the valuation date.
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. Long-term debt securities are valued by an independent pricing
service and such prices are believed to reflect the fair value of such
securities. 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 Company's Board of Directors.
Federal Income Taxes - Each 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 gain distributions are
determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles.
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 assets of each class. Distribution
expenses relating to a specific class are charged directly to that class.
Repurchase Agreements - Each Fund may invest in a pooled cash account
along with other members of the Delaware Group 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
100% 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. 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 as of 3:00 PM EST. 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
<PAGE>
fluctuations in foreign currency exchange rates. Each Fund isolates that
portion of gains and losses on investments in debt securities which are due
to changes in the foreign exchange rate from that which are due to changes
in market prices of debt securities. The Funds report 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.
Other - Expenses common to all Funds within the Delaware Group 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 Funds are aware of such dividends, net of all non-rebatable tax
withholdings. Original issue discounts are accreted to interest income over
the lives of the respective securities. 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 Funds
declare and pay dividends from net investment income and capital gains
annually.
Certain Fund expenses are paid through "soft dollar" arrangements with
brokers. The amount of these expenses is less than 0.01% of each Fund's
average daily net assets.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles 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.
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the
Fund pays Delaware Management Company, Inc., (DMC) the "Investment Manager"
of each Fund, a monthly fee based upon each Fund's average daily net assets
at the following annual rates:
U.S. Growth Fund................................................ .70%
Overseas Equity Fund............................................ 1.00%
New Pacific Fund................................................ .80%
DMC has entered into sub-advisory agreements with Lynch & Mayer Inc. with
respect to the management of the U.S. Growth Fund, with Delaware Investment
Advisors Limited, as of September 15, 1997, with respect to the Overseas
Equity Fund, both affiliates of DMC, and with John Govett & Company Limited
with respect to the management of the New Pacific Fund. The sub-advisers
receive sub-advisory fees from the Investment Manager for there services
calculated in accordance with the schedule set forth below. The Funds do
not pay any fees to the sub-advisers:
U.S. Growth Fund.................................................. .40%
Overseas Equity Fund.............................................. .80%
New Pacific Fund.................................................. .50%
DMC has elected to waive that portion, if any, of the management fee and
reimburse the Funds to the extent that annual operating expenses, exclusive
of taxes, distribution expenses, interest, brokerage commissions and
extraordinary expenses, exceed 1.50% of average daily net assets of each
Fund through October 31, 1997. Total expenses absorbed by DMC for the New
Pacific Fund for the year ended October 31, 1997 were $8,999. At October
31, 1997, the U.S. Growth Fund, Overseas Equity Fund, and the New Pacific
Fund had liabilities for investment management fees and other expenses
payable to DMC for $18,557, $11,657 and $7,953, respectively.
26
1997 annual report
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------------------------------
2. Investment Management and Other Transactions with Affiliates
(Continued)
The Funds have engaged Delaware Service Company, Inc. (DSC), an affiliate
of DMC, to serve as dividend disbursing and transfer agent, and to provide
accounting services for the Funds. For the year ended October 31, 1997, the
amount expensed for dividend disbursing and transfer agent services for the
U.S.Growth Fund , Overseas Equity Fund, and New Pacific Fund were $41,863,
$24,969 and $30,292, respectively, and $3,900, $1,375, and $1,750,
respectively, for accounting services. At October 31, 1997 the U. S. Growth
Fund , Overseas Equity Fund and New Pacific Fund had liabilities for such
fees and other expenses payable to DSC of $6,270, $3,187 and $8,861,
respectively.
Pursuant to the Distribution Agreement, the Funds pay 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 Class. For
the year ended October 31, 1997; $65,320, $58,532, and $52,824 was expensed
for the U.S. Growth Fund, Overseas Equity Fund and New Pacific Fund,
respectively. For the year ended October 31, 1997 DDLP earned $6,484,
$2,967 and $4,754 for commissions on sales of the Fund A Class shares for
the U.S. Growth Fund, Overseas Equity Fund and New Pacific Fund,
respectively.
Certain officers of DMC, DSC and DDLP are officers, directors and/or
employees of the Funds. These officers, directors and employees are paid no
compensation by the Funds.
3. Investments
During the year ended October 31, 1997, each Fund made purchases and
sales of investment securities other than U.S. government securities and
temporary cash investments as follows:
Purchases Sales
---------- -------------
U.S. Growth Fund..................... $44,184,638 $53,284,721
Overseas Equity Fund................. 2,790,248 7,228,299
New Pacific Fund..................... 23,390,578 24,530,498
At October 31, 1997, the aggregate cost of securities and unrealized
appreciation (depreciation) for federal income tax purposes for each fund
were as follows:
<TABLE>
<CAPTION>
U.S. Growth Overseas Equity New Pacific
Fund Fund Fund
------------ ------------- -------------
<S> <C> <C> <C>
Cost of Investments ....... $ 23,771,488 $ 11,277,619 $ 11,748,773
Aggregated unrealized
appreciation ............. $ 3,571,381 $ 2,557,021 $ 560,771
------------ ------------ ------------
Aggregated unrealized
depreciation ............. (688,240) (1,324,324) (2,984,675)
------------ ------------ ------------
Net unrealized appreciation
(depreciation) ........... $ 2,883,141 $ 1,232,697 $ (2,425,402)
============ ============ ============
</TABLE>
For federal income tax purposes, the New Pacific Fund had a capital loss
carryforward at October 31, 1997 of $1,075,818 which may be carried forward
and applied against future capital gains. The capital loss carryforward
expires in 2004.
<PAGE>
4. Capital Stock
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
U.S. Growth Fund Overseas Equity Fund New Pacific Fund
-----------------------------------------------------------------------------
Year Ended Year Ended Year Ended
October 31, October 31, October 31,
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
Shares sold:
<S> <C> <C> <C> <C> <C> <C>
A Class................................... 708,527 105,330 196,269 102,429 1,056,867 126,895
B Class................................... 52,772 29,115 32,677 22,652 319,098 16,203
C Class................................... 13,752 3,225 8,181 6,554 16,227 3,204
Institutional Class....................... 492,699 458,645 8,181 34,323 119,458 23,242
Share issued upon reinvestment of dividends
from net investment income and net realized gains
from investment transactions:
A Class................................... 125,787 -- 79,030 2,274 20,129 1,188
B Class................................... 6,677 -- 6,991 197 872 50
C Class................................... 429 -- 702 9 80 2
Institutional Class....................... 76,989 -- 123 1 39 1
--------- ------- ------- ------- --------- -------
1,477,632 596,315 332,154 168,439 1,532,770 170,785
--------- ------- ------- ------- --------- -------
Shares Repurchased:
A Class................................... (1,584,408) (30,815) (607,946) (45,169) (1,348,426) (69,123)
B Class................................... (17,225) (15,662) (18,445) (28,774) (38,756) (21,797)
C Class................................... (3,236) (1,448) (4,765) (881) (3,309) (549)
Institutional Class....................... (193,024) (126,549) (26,488) (25,402) (98,419) (17,836)
--------- ------- ------- ------- --------- -------
(1,797,893) (174,474) (657,644) (100,226) (1,488,910) (109,305)
--------- ------- ------- ------- --------- -------
Net Increase (Decrease)......................... (320,261) 421,841 (325,490) 68,213 43,860 61,480
======== ======= ======== ====== ====== ======
</TABLE>
27
1997 annual report
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------------------------------
5. Foreign Exchange Contracts
The Overseas Equity and New Pacific Funds will generally enter into
forward foreign currency contracts as a way of managing foreign exchange
rate risk. A 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. A 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 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 by the Fund as an unrealized gain or loss. When
the contract is closed, the Fund records 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.
The use of forward foreign currency contracts does not eliminate
fluctuations in the underlying prices of the Fund's securities, but it does
establish a rate of exchange that can be achieved in the future. Although
forward foreign currency 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.
The following forward foreign currency contract was outstanding for the
New Pacific Fund at October 31, 1997:
Contracts to In Exchange Settlement Unrealized
Deliver For Date Appreciation
------------ ----------- ---------- ------------
1,028,100 $300,000 11/28/97 $5,680
Malaysian Ringgit
6. Concentrations of Credit Risk
Some countries in which the Overseas Equity Fund and the New Pacific 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 a 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 Overseas Equity Fund and the New Pacific 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 Funds.
7. Lines of Credit
The committed lines of credit are $1,000,000, $1,000,000 and $800,000 for
the U.S. Growth Fund, Overseas Equity Fund and New Pacific Fund,
respectively. No amounts were outstanding at October 31, 1997, or at any
time during the fiscal year.
<PAGE>
DELAWARE GROUP ADVISER FUNDS, INC.
REPORT OF INDEPENDENT AUDITORS
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To the Shareholders and Board of Directors
Delaware Group Adviser Funds, Inc.
We have audited the accompanying statements of net assets and the
statements of assets and liabilities of Delaware Group Adviser Funds, Inc.
(comprised of the U.S. Growth Fund, the Overseas Equity Fund, and the New
Pacific Fund) (the "Funds") as of October 31, 1997, and the related
statements of operations, statements of changes in net assets, and
financial highlights for the year then ended. These financial statements
and financial highlights are the responsibility of the Funds' management.
Our responsibility is to express an opinion on these financial statements
and financial highlights based on our audits. The statements of changes in
net assets for the year ended October 31, 1996 and the financial highlights
for the periods ended October 31, 1994 through October 31, 1996 were
audited by other auditors whose report dated December 20, 1996, expressed
an unqualified opinion on those statements and financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements and financial highlights. Our procedures
included confirmation of securities owned as of October 31, 1997, by corresp
ondence with the Funds' custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the 1997 financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of each of the respective portfolios constituting the Delaware
Group Adviser Funds, Inc. at October 31, 1997, the results of their
operations, changes in their net assets, and their financial highlights for
the year then ended, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
December 5, 1997
28
1997 annual report
<PAGE>
THIS ANNUAL REPORT IS FOR THE INFORMATION OF DELAWARE GROUP ADVISER FUNDS
SHAREHOLDERS, but it may be used with prospective investors when preceded or
accompanied by a current Prospectus for Adviser Funds, which sets forth
details about charges, expenses, investment objectives and operating policies
of the Fund. You should read the prospectus carefully before you invest.
Summary investment results are documented in the Fund's current Statement of
Additional Information. The figures in this report represent past results
which are not a guarantee of future results. The return and principal value
of an investment in the Fund will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost.
Board of Directors
WAYNE A. STORK
Chairman
Delaware Group of Funds
Philadelphia, PA
JEFFREY J. NICK
President and Chief Executive Officer
Delaware Group of Funds
Philadelphia, PA
WALTER P. BABICH
Board Chairman, Citadel Constructors, Inc.
King of Prussia, PA
ANTHONY D. KNERR
Consultant, Anthony Knerr & Associates
New York, NY
ANN R. LEVEN
Treasurer, National Gallery of Art
Washington, DC
W. THACHER LONGSTRETH
City Councilman
Philadelphia, PA
THOMAS F. MADISON
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
CHARLES E. PECK
Secretary/Treasurer, Enterprise Homes, Inc.
Fredericksburg, VA
Affiliated Officers
DAVID K. DOWNES
Executive Vice President, Chief Financial Officer
and Chief Operating Officer
Delaware Group of Funds
Philadelphia, PA
GEORGE M. CHAMBERLAIN, JR.
Senior Vice President, Secretary
and General Counsel
Delaware Group of Funds
Philadelphia, PA
BRUCE D. BARTON
President and Chief Executive Officer
Delaware Distributors, L.P.
Philadelphia, PA
(PHOTO OF GLOBES)
<PAGE>
directors & officers
INVESTMENT MANAGER
Delaware Management Company, Inc.
Philadelphia, Pennsylvania
INTERNATIONAL AFFILIATE
Delaware International Advisers Ltd.
London, England
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
Philadelphia, Pennsylvania
SUBADVISERS
Lynch & Mayer
New York, New York
AIB Govett Asset Management, Ltd.
London, England
<PAGE>
This report must be preceded or accompanied by a current Delaware Group
Adviser Funds prospectus and the Delaware Group Fund Performance Update for
the most recently completed calendar quarter. International investing has
special risks that include less stable economies and governments, currency
fluctuations and different accounting standards. For a prospectus of any
other Delaware Group fund, contact your financial adviser or Delaware Group.
(INSERT PHOTO OF GLOBES)
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
Philadelphia, Pennsylvania
1818 Market Street
Philadelphia, PA 19103-3682
FOR SHAREHOLDERS
1.800.523.1918
FOR SECURITIES DEALERS
1.800.362.7500
FOR FINANCIAL INSTITUTIONS REPRESENTATIVES ONLY
1.800.659.2265
DELAWARE
GROUP
- --------
Be sure to consult your financial adviser when making investments. Mutual
funds can be a valuable part of your financial plan; however, shares of the
Fund are not FDIC or NCUSIF insured, are not guaranteed by any bank or any
credit union, and involve investment risk, including the possible loss of the
principal amount invested. Shares of the Fund are not bank or credit union
deposits.
Copy Rights Delaware Distributors, L.P.
Printed in the USA on
recycled paper
(373)
AR-DAF [10/97]TKO12/97