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FOR INTERNATIONAL DIVERSIFICATION
U.S. Growth Fund
Overseas Equity Fund
New Pacific Fund
(various photos demonstrating service and guidance, professional
management and goals)
service and guidance
professional management
goals
1998
Annual
Report
DELAWARE
INVESTMENTS
=====================
Philadelphia o London
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A TRADITION OF SOUND INVESTING
commitment
international
diversification
tradition
A Commitment
To Our Investors
(photo of globes)
(photo of illustration from international diversification brochure)
Delaware Investments has a money management tradition that dates back to
1929. We have a long and distinguished history of helping individuals reach
their financial goals through a full range of investment opportunities that
include equity mutual funds.
Headquartered in Philadelphia with an international affiliate in London, the
Delaware organization has managed domestic stock portfolios since 1938 and
international investments since 1990.
Delaware Investments manages more than $42 billion in mutual fund assets and
institutional advisory accounts. We offer a wide variety of equity and
fixed-income investments, retirement plan accounts, IRAs, investment accounts
for variable annuities and closed-end funds.
Complete information on any fund offered by Delaware Investments can be found in
each fund's current prospectus. Prospectuses for all funds offered by Delaware
Investments are available from your financial adviser. Please read the
prospectus carefully before you invest or send money.
Fund Objectives
U.S. GROWTH FUND
To maximize capital appreciation by investing in companies of all sizes which
have low dividend yields, strong balance sheets and high expected earnings
growth relative to their industry.
OVERSEAS EQUITY FUND
To maximize total return, principally through investments in an internationally
diversified portfolio of equity securities.
NEW PACIFIC FUND
To seek long-term capital appreciation by investing primarily in companies which
are domiciled in or have their principal business activities in the Pacific
Basin.
Table of Contents
LETTER TO SHAREHOLDERS Page 1
PORTFOLIO MANAGERS' REVIEW
U.S. GROWTH FUND Page 3
OVERSEAS EQUITY FUND Page 6
NEW PACIFIC FUND Page 9
STATEMENTS OF NET ASSETS Page 12
FINANCIAL HIGHLIGHTS Page 21
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November 9, 1998
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Dear Shareholder:
FISCAL YEAR 1998 WAS THE PRODUCT OF two very different time periods in the U.S.
and world stock markets. What began as a sequel to the capital appreciation
explosion of the 1990s ended in a harsh lesson on investment and currency risks.
Between October 1997 and July 1998, U.S. and European markets continued to
hit record levels fueled by low inflation, declining interest rates and record
low unemployment. The unmanaged Standard & Poor's 500 Index rose +23.3% between
January and July 17, and the Morgan Stanley Capital International Europe,
Australia, Far East (EAFE) Index had posted a comparable gain of +21.3%. Asian
markets still moved in the opposite direction, burdened by financial woes in the
Far East.
By August, Asia's troubles were no longer isolated. Russia jumped on the
economically challenged bandwagon, making news with its own fiscal deficits and
loan defaults. Similar problems erupted in Latin America. Spooked by this
seemingly contagious affliction, U.S. and European investors grew concerned
about the effect of global economic weakness.
The U.S. Federal Reserve responded with two cuts in its target for short-term
interest rates. The Fed's September and October rate cuts, totaling 50 basis
points (0.50%), were intended to sustain U.S. economic growth. Several European
central banks followed suit, and their stocks slowly began to rebound.
During this period of mixed emotion and disjointed performance, U.S. Growth
Fund, on a relative basis, fell behind its benchmark index, but outperformed the
WE BELIEVE THAT RECENT VOLATILITY HAS SIGNALED A RESUMPTION OF RETURNS MORE
CONSISTENT WITH LONG-TERM HISTORICAL TRENDS.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
12 Months Ended
October 31, 1998
- --------------------------------------------------------------------------------
U.S. Growth Fund A Class +10.52%
Standard & Poor's 500 Index +22.01%
Lipper Growth Fund Average (940 Funds) +9.62%
- --------------------------------------------------------------------------------
Overseas Equity Fund A Class -12.95%
Morgan Stanley EAFE Index +9.95%
Lipper International Fund Average (491 Funds) +4.07%
- --------------------------------------------------------------------------------
New Pacific Fund A Class -36.85%
Morgan Stanley Pacific Index -13.70%
Lipper Pacific Fund Average (48 Funds) -21.64%
- --------------------------------------------------------------------------------
All performance shown above is based on net asset value without effect of sales
charges and assumes reinvestment of distributions. See pages 5, 8 and 11 for
portfolio performance for all Classes. Performance of other Fund classes varies
due to different expenses. The Standard & Poor's 500 Index is an unmanaged
measure of large capitalization domestic stocks. The Morgan Stanley EAFE Index
is an unmanaged measure of international stocks in established markets. The
Morgan Stanley Pacific Index is an unmanaged measure of international stocks in
established and emerging markets along the Pacific Rim. All returns are stated
in U.S. dollars. Past performance is not a guarantee of future results.
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average of its growth-oriented peers. U.S. Growth Fund's subadvisory management
team at Lynch & Mayer discusses the Fund's performance and positioning beginning
on page 3.
Overseas Equity Fund, which invests in both developed and emerging markets,
reported disappointing performance for fiscal 1998. Delaware International
Advisers Ltd., the Fund's subadviser, believes that economies in established
markets may slow and that recent turmoil has created very attractive values in
emerging market countries. As a result, Fund management has adjusted the
portfolio by reducing exposure in certain developed markets, and increasing
exposure in emerging markets where it believes there are opportunities for
rebounding growth.
By far, New Pacific Fund faced the most difficult challenges of fiscal 1998.
Asia has been a source of underperformance for most of the year. As a defensive
measure to manage capital losses, the Fund's subadviser, AIB Govett, Inc.,
temporarily raised the portfolio's cash position to 18%. This may be reduced in
the months ahead.
Riding out these turbulent times has been difficult. When stocks of emerging
markets are included in a portfolio, this adds another level of challenge to
international investing - such as increased currency and political risks. Your
financial adviser can be a valuable resource in helping you understand and
manage these added risks.
As for U.S. stocks, we believe that recent volatility has signaled a
resumption of returns more consistent with long-term historical trends. Since
the 1920s, U.S. stocks have provided average annual returns of approximately 10%
per year, according to Ibbotson Associates. Compared to other asset classes, we
believe stocks here and overseas offer investors attractive return potential
over the long term.
We thank you for your continued investment and patience, and we look forward
to reporting to you again next spring.
Sincerely,
/s/ Wayne A. Stork
- --------------------------------------
Wayne A. Stork
Chairman
/s/ Jeffrey J. Nick
- --------------------------------------
Jeffrey J. Nick
President and Chief Executive Officer
YOUR FINANCIAL ADVISER CAN BE A VALUABLE RESOURCE IN HELPING YOU UNDERSTAND AND
MANAGE THE ADDED RISKS OF INTERNATIONAL INVESTING.
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Portfolio Managers' Review
U.S. GROWTH FUND
U.S. Growth Fund provided a total return of +10.52% (capital change plus
distributions reinvested for A Class shares at net asset value) for the 12
months ended October 31, 1998. The Fund's return outpaced the average growth
fund but fell short of its benchmark, the unmanaged S&P 500 Index.
In 1998, large company growth stocks have raced ahead of smaller company
stocks. For the first six months of the year, the S&P 500 posted a +17.7% gain,
versus +8.62% for the unmanaged S&P Midcap 400 Index.
Large-cap stocks were derailed in the third quarter, as equity investors grew
increasingly concerned about lower than expected corporate profits and the
threat of global economic weakness. The S&P 500 returned -9.95% for the quarter.
Still, the disparity between large- and mid-cap performance widened, as the S&P
400 returned -14.46% for the third quarter.
This duality has been a source of frustration in managing U.S. Growth Fund.
In our opinion, many large company growth stocks have been trading at prices
far in excess of their growth rates. As a result, we have not been able to
justify buying big names like Gillette or Coca-Cola, which are currently trading
at two to three times their growth rates. Not owning some of these higher
multiple stocks has prevented us from keeping pace with the S&P 500.
U.S. Growth Fund remains invested primarily in large companies; however, we
have been investing in companies with slightly smaller median market
capitalizations (around $4 billion) whose prices we believe are more compelling
given their expected growth rates. The overall average market capitalization of
the portfolio was less than the average market capitalization of stocks in the
S&P 500.
Another factor in our underperformance was our belief that the energy
sector's dynamic earnings growth and favorable pricing would propel energy
stocks. Unfortunately, due to reduced demand for commodities, the energy sector
has languished since the spring. Our energy allocation, though relatively small
(4.25% as of October 31), had a negative impact on U.S. Growth Fund's
performance.
review
U.S. GROWTH FUND
PORTFOLIO HIGHLIGHTS
OCTOBER 31, 1998
- -------------------------------------------------------------------------------
Median Market Capitalization $21 billion
Number of Stocks 51
Average Price-to-Earnings Ratio 27.5x
Beta 1.15
- -------------------------------------------------------------------------------
Price/earnings ratio based on analysts' earnings estimates for calendar 1998.
Beta is 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.
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The paper and packaging sector, in which we held a 5.3% position in April,
was also affected by lower demand for commodities. We sold James River, a tissue
manufacturer, because events around the globe have reduced demand for paper and
the company was forced to shut down several factories, thus affecting its
growth.
Since April, we have reduced the Fund's position in banking, finance and
insurance stocks from 6.7% to 5.1%, due to what we believe are excessively high
stock prices in this sector, as well as heightened concerns about consumer debt
and the overseas restructuring of several banking systems. We sold American
Express, but maintained our largest sector holding, Morgan Stanley Dean Witter,
because we remain confident about its long-term growth prospects.
U.S. Growth Fund's investments in healthcare stocks performed exceptionally
well. Leading the pack was Medtronic, a medical technology company specializing
in therapies using implants, and Guidant Corporation, a maker of therapeutic
heart and surgical devices.
Investors anticipate the Food and Drug Administration will approve a new line
of anti-inflammatory drugs to treat rheumatoid arthritis. We believe the new
drugs, expected on the market in January 1999, will boost earnings prospects for
companies such as Pfizer, Inc.
During fiscal 1998, U.S. Growth Fund stocked up on shares of grocery store
chains such as Safeway and Kroger. We believe that in the event of an economic
slowdown in the U.S., consumer staple stocks such as these may continue to do
well.
As we begin U.S. Growth Fund's new fiscal year, we are wary of the high
valuations in the stock market in general. The P/E multiple on the S&P 500
remains well in excess of historic levels and therefore, we will continue to
look at companies with slightly smaller market capitalizations for more
attractive buying opportunities. As always, we will focus on stocks that
demonstrate signs of positive fundamental change, accelerating earnings and
strong long-term growth prospects.
LYNCH & MAYER
November 9, 1998
U.S. GROWTH FUND
SECTOR ALLOCATION
- --------------------------------------------------------------------------------
OCTOBER 31, 1998
Finance 5.1%
Chemicals/Energy 8.6%
Environmental Services 2.0%
Consumer Products 4.9%
Telecommunications 9.6%
Cash 2.7%
Retail 11.3%
Food, Beverage & Tobacco 7.5%
Health Care 16.2%
Technology 20.0%
Media 12.1%
u.s.
growth
(photo of couple consulting with financial advisor)
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U.S. GROWTH FUND'S LIFETIME PERFORMANCE
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GROWTH OF A $10,000 INVESTMENT
DECEMBER 3, 1993 THROUGH OCTOBER 31, 1998
U.S. Growth S & P 500
Period End Fund A Class Index
12/3/93 $ 9,425 $10,000
10/31/94 $ 9,633 $10,361
10/31/95 $11,727 $13,101
10/31/96 $13,038 $16,258
10/31/97 $17,364 $21,478
10/31/98 $19,186 $24,230
Chart assumes $10,000 invested on the inception date of December 3, 1993 through
October 31, 1998, and includes the effect of a 5.75% maximum front-end sales
charge and the reinvestment of all distributions. Performance of other classes
of the Fund will vary due to differing charges and expenses. Past performance
does not guarantee future results. Effective November 2, 1998, the maximum sales
charge on A Class shares was raised from 4.75% to 5.75% for investments of less
than $50,000.
U.S. GROWTH FUND PERFORMANCE
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS THROUGH OCTOBER 31, 1998
Lifetime One Year
- --------------------------------------------------------------------------------
Class A (Est. 12/3/93)
Excluding Sales Charge +15.58% +10.52%
Including Sales Charge +14.19% +4.14%
- --------------------------------------------------------------------------------
Class B (Est. 3/29/94)
Excluding Sales Charge +15.95% +9.62%
Including Sales Charge +15.69% +6.25%
- --------------------------------------------------------------------------------
Class C (Est. 5/23/94)
Excluding Sales Charge +17.71% +10.04%
Including Sales Charge +17.71% +9.35%
- --------------------------------------------------------------------------------
Institutional Class* (Est. 2/3/94) +15.26% +10.80%
Returns reflect reinvestment of distributions and any applicable sales charges
as noted below. Return and share value will fluctuate so that shares, when
redeemed, may be worth more or less than the original cost. B and C Class
results excluding sales charge assume either that contingent sales charges did
not apply or the investment was not redeemed. Past performance is not a
guarantee of future results. Expense limitations were in effect for the periods
shown. Performance would have been lower if the limitations were not in effect.
Class A shares have a 5.75% 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 subject to a deferred sales charge
of up to 5% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If redeemed within
12 months, a 1% contingent deferred sales charge applies.
*Available without sales charge or asset-based distribution charges only to
certain eligible institutional accounts.
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OVERSEAS EQUITY FUND
During Overseas Equity Fund's 1998 fiscal year, global markets faced economic
and financial turmoil. Problems that plagued Asia since 1997 appeared to spread
to other emerging markets. Russia devalued its currency and defaulted on debt
obligations during the summer months, while an outflow of capital from Brazil
brought fears that the country would devalue its currency. Simultaneously,
Japan's procrastination with financial reform gave investors reason to worry.
In developed markets such as the United Kingdom, investors sold stocks of
strong companies this past summer in a panic over negative global events and
increasing market volatility. This paralleled what happened in U.S. equity
markets.
For the 12 months ended October 31, 1998, Overseas Equity Fund had a total
return of -12.95% (for A Class shares with distributions reinvested at net asset
value). This return was much less than the +9.95% return of the unmanaged Morgan
Stanley EAFE Index.
The main reason for your Fund's weak performance results was Overseas Equity
Fund's increased exposure to emerging market stocks that are not in the EAFE
Index. The return for the unmanaged Morgan Stanley Capital International
Emerging Markets Free Index was -30.99% for the 12 months ended October 31,
1998. As of October 31, 1998, about 25% of the Fund's net assets were invested
in developing countries, an increase since the end of our last fiscal year.
During the past 12 months, we concentrated the Fund's investment selection on
what we believe are healthy, undervalued companies. Sometimes, we find these
stocks in countries and regions whose economies are troubled. In Brazil, for
example, we have taken a different stance from many international mutual funds.
Despite negative news about the Brazilian government defaulting on loans and
its prospects of currency devaluation, the positive news is that stock prices
are low with company fundamentals generally strong. For example, defensive
utility stocks with strong balance sheets, like Companhia Energetica de Minas
Gerais, are selling at half of book value. With the bad news already universally
known and
overseas
equity
OVERSEAS EQUITY FUND
COUNTRY/REGION ALLOCATION
- --------------------------------------------------------------------------------
OCTOBER 31, 1998
Latin America 8.5%
Australia & New Zealand 10.5%
Other Pacific Rim 5.2%
Germany 7.2%
China & Hong Kong 4.8%
Cash 11.3%
France 4.8%
Spain 4.1%
Japan 9.2%
Turkey/Egypt/South Africa 4.8%
United Kingdom 20.9%
Netherlands & Belgium 5.9%
Eastern Europe & Russia 2.8%
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valuations as low as these, it seems likely to us that Brazil's markets are now
close to base levels, with strong rebound potential over the next few years.
As of October 31, Hong Kong accounted for 2.95% of portfolio assets. We
invested in companies that we believed offered good growth potential at bargain
prices.
In fiscal 1998, Guangshen Railway, a Chinese-owned railroad company listed on
Hong Kong's stock exchange, was a positive contributor to Fund performance. With
strong balance sheets, Guangshen Railway has rebounded quite strongly in recent
months; however, it continues to trade at what we think is a low valuation.
In our view, a slowdown in the world's established economies is likely in the
year ahead. Though we believe further sharp market declines are unlikely, there
are negative pressures on corporate profits, especially from rising labor costs
and financial market excesses. This could affect underlying economies,
particularly in the U.S. or U.K. We maintained the Fund's large positions in
Australia and New Zealand because their currencies are undervalued and their
stock prices remain attractive.
We remain cautious about Japan which represented 9.2% of net assets as of
October 31. In our view, its stock market is overvalued and its economy is still
considerably compromised. Even though Japan's parliament approved a 60 trillion
yen ($509 billion) bank bailout package in mid-October, the nation's economy
will require time to recover.
We will watch with interest as the European Community introduces a new single
currency - the "Euro" - on January 4, 1999. The Euro is expected to enhance
trade in Europe and reduce concern for currency fluctuations. We see this as a
positive development, particularly since the dynamics of many participating
nations are so different.
ROBERT AKESTER AND
CLIVE GILLMORE
Delaware International Advisers Ltd.
November 9, 1998
overview
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OVERSEAS EQUITY FUND'S LIFETIME PERFORMANCE
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GROWTH OF A $10,000 INVESTMENT
DECEMBER 3, 1993 THROUGH OCTOBER 31, 1998
Overseas Equity Morgan Stanley
Period End Fund A Class EAFE Index
12/3/93 $ 9,425 $10,000
10/31/94 $10,387 $11,276
10/31/95 $10,783 $11,268
10/31/96 $11,743 $12,485
10/31/97 $12,652 $13,099
10/31/98 $11,017 $13,040
Chart assumes $10,000 invested on the inception date of December 3, 1993 through
October 31, 1998, and includes the effect of a 5.75% maximum front-end sales
charge and the reinvestment of all distributions. Performance of other classes
of the Fund will vary due to differing charges and expenses. Past performance
does not guarantee future results. Effective November 2, 1998, the maximum sales
charge on A Class shares was raised from 4.75% to 5.75% for investments of less
than $50,000.
OVERSEAS EQUITY FUND PERFORMANCE
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS THROUGH OCTOBER 31, 1998
Lifetime One Year
- --------------------------------------------------------------------------------
Class A (Est. 12/3/93)
Excluding Sales Charge +3.22% -12.95%
Including Sales Charge +1.98% -17.93%
- --------------------------------------------------------------------------------
Class B (Est. 3/29/94)
Excluding Sales Charge +1.58% -13.66%
Including Sales Charge +1.24% -17.14%
- --------------------------------------------------------------------------------
Class C (Est. 5/10/94)
Excluding Sales Charge +1.63% -13.67%
Including Sales Charge +1.63% -14.36%
- --------------------------------------------------------------------------------
Institutional Class* (Est. 2/3/94) +2.31% -12.82%
Returns reflect reinvestment of distributions and any applicable sales charges
as noted below. Return and share value will fluctuate so that shares, when
redeemed, may be worth more or less than the original cost. B and C Class
results excluding sales charge assume either that contingent sales charges did
not apply or the investment was not redeemed. Past performance is not a
guarantee of future results. Expense limitations were in effect for the periods
shown. Performance would have been lower if the limitations were not in effect.
Class A shares have a 5.75% 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 subject to a deferred sales charge
of up to 5% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If redeemed within
12 months, a 1% contingent deferred sales charge applies.
*Available without sales charge or asset-based distribution charges only to
certain eligible institutional accounts.
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NEW PACIFIC FUND
The past year has been the worst of times for emerging markets in the Pacific
Rim. Following the failure of Japan's banking system in 1997, many of Asia's
markets followed suit in 1998, wallowing in financial and political upheaval for
much of the year. This made for an environment that exceeded any challenges
investors have had to deal with in more than a decade.
New Pacific Fund shared those challenges. For the 12 months ended October 31,
1998, the Fund had a total return of -36.85% (for A Class shares with
distributions reinvested at net asset value). This was nearly three times the
loss reported by the Morgan Stanley Pacific Index. Our disappointing results are
largely the result of heavy weightings in markets such as China, Singapore and
Hong Kong that were more severely affected by economic and political turmoil
than other countries.
Your Fund remains significantly underweighted in Japanese stocks relative to
the Index (29% of your Fund's net assets versus 70% for the Index as of October
31), and more heavily weighted in countries such as Hong Kong, China and
Singapore.
In an effort to preserve capital during fiscal 1998, we increased the Fund's
cash position from 1.6% of net assets in April to 16.5%.
Since last spring, Japan has made several attempts to speed up its bank
reform. The country devised and approved a bank bailout package that would use
taxpayers' money to help recapitalize failed banks. Over the past six months, we
also saw the yen react negatively to currency speculation. After losing ground,
the yen bounced back in October.
In China, there were rumblings of possible currency devaluation as a means to
improve the country's export growth. We did not believe that China would devalue
its currency, and it never did. But the harmful effects of speculation hit stock
prices hard. We have since reduced our weighting in China.
new
pacific
NEW PACIFIC FUND
COUNTRY/REGION ALLOCATION
- --------------------------------------------------------------------------------
OCTOBER 31, 1998
Australia 11.7%
China & Hong Kong 17.9%
India 4.8%
Japan 29.3%
Cash & Other 17.2%
Philippines 1.7%
Singapore 6.1%
South Korea 3.6%
Taiwan & Thailand 7.7%
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Our investments in Singapore have improved somewhat since April. One of the
more resilient economies in the Pacific Rim, Singapore has recently benefited
from renewed investor confidence in the region. During October, the Fund's
position in Overseas Union Bank (OUB) has rebounded. Trading at 1 times its book
value, it still appears to offer capital appreciation potential. OUB represented
1.5% of net assets as of fiscal year end. OUB may possibly merge with another
bank to become a more prominent regional bank.
Malaysia was a disappointment. By August, the political environment had
deteriorated so much that we liquidated all of the Fund's holdings there. We
reinvested the proceeds in stocks in neighboring Singapore, a relatively more
stable established market. This move proved fortuitous since the Malaysian
government subsequently imposed capital controls.
Looking ahead, we believe that emerging markets that have underperformed in
1998 are poised to be strong performers in 1999. For us, there was never a
question as to whether there was value in the Pacific Rim, but rather, if there
was enough confidence to drive growth. As we've seen confidence returning to
Asia, we believe this will lend much needed and long overdue support to the
region.
Based upon our outlook for a resumption of growth in the Pacific Rim for the
coming year, we expect to reduce the Fund's cash position as new investment
prospects arise. We know it has been difficult to stay the course with your Fund
over the past year. However, we think there are considerable long-term
opportunities that may mitigate the many special risks involved in investing in
emerging markets. We believe the storm is beginning to break.
JANE PICKARD
AIB Govett, Inc.
November 9, 1998
WE BELIEVE THAT EMERGING MARKETS THAT HAVE UNDERPERFORMED IN 1998 ARE POISED TO
BE STRONG PERFORMERS IN 1999.
NEW PACIFIC FUND
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
OCTOBER 31, 1998
Number of Stocks 50
Number of Countries 10
Portfolio Turnover 188%
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NEW PACIFIC FUND'S LIFETIME PERFORMANCE
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PERFORMANCE OF A $10,000 INVESTMENT
DECEMBER 3, 1993 TO OCTOBER 31, 1998
Morgan Stanley Pacific Index
New Pacific Fund A Class
New Pacific Fund A Class Morgan Stanley Pacific Index
------------------------ ----------------------------
12/3/93 $9,425 $10,000
10/31/94 $9,101 $11,885
10/31/95 $7,827 $10,574
10/31/96 $8,473 $10,944
10/31/97 $6,681 $ 8,807
10/31/98 $4,568 $ 7,600
Chart assumes $10,000 invested on the inception date of December 3, 1993 through
October 31, 1998, and includes the effect of a 5.75% maximum front-end sales
charge and the reinvestment of all distributions. Performance of other classes
of the Fund will vary due to differing charges and expenses. Past performance
does not guarantee future results. Effective November 2, 1998, the maximum sales
charge on A Class shares was raised from 4.75% to 5.75% for investments of less
than $50,000.
NEW PACIFIC FUND PERFORMANCE
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS THROUGH OCTOBER 31, 1998
Lifetime One Year
- --------------------------------------------------------------------------------
Class A (Est. 12/3/93)
Excluding Sales Charge -13.71% -36.85%
Including Sales Charge -14.75% -40.51%
- --------------------------------------------------------------------------------
Class B (Est. 3/29/94)
Excluding Sales Charge -14.32% -37.05%
Including Sales Charge -14.67% -40.17%
- --------------------------------------------------------------------------------
Class C (Est. 7/7/94)
Excluding Sales Charge -15.60% -37.18%
Including Sales Charge -15.60% -37.80%
- --------------------------------------------------------------------------------
Institutional Class* (Est. 2/3/94) -15.70% -36.39%
Returns reflect reinvestment of distributions and any applicable sales charges
as noted below. Return and share value will fluctuate so that shares, when
redeemed, may be worth more or less than the original cost. B and C Class
results excluding sales charge assume either that contingent sales charges did
not apply or the investment was not redeemed. Past performance is not a
guarantee of future results. Expense limitations were in effect for the periods
shown. Performance would have been lower if the limitations were not in effect.
Class A shares have a 5.75% 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 subject to a deferred sales charge
of up to 5% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If redeemed within
12 months, a 1% contingent deferred sales charge applies.
*Available without sales charge or asset-based distribution charges only to
certain eligible institutional accounts.
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Financial Statements
Delaware Group Adviser Funds, Inc.
U.S. Growth Fund
Statement of Net Assets
October 31, 1998
- -------------------------------------------------------------------------------
Number of Market
Shares Value
----------------------
COMMON STOCK - 97.24%
Banking, Finance & Insurance - 5.13%
Federal Home Loan Mortgage .................... 13,800 $ 793,500
MGIC Investment ............................... 28,400 1,107,600
Morgan Stanley Dean Witter .................... 10,100 653,975
----------
2,555,075
----------
Cable, Media & Publishing - 12.08%
*Chancellor Media Class A ...................... 45,600 1,751,324
*Jacor Communications .......................... 20,000 1,101,250
The News Corporation .......................... 52,800 1,442,100
Time Warner ................................... 15,000 1,392,188
*Viacom Class B ................................ 5,500 329,313
----------
6,016,175
----------
Chemicals - 4.35%
Dial .......................................... 42,600 1,174,163
*ITT Educational Services ...................... 15,800 469,063
Monsanto ...................................... 12,900 524,063
----------
2,167,289
----------
Computers & Technology - 15.65%
*Cisco Systems ................................. 19,300 1,217,708
*Compuware ..................................... 17,800 963,981
*Dell Computer ................................. 15,300 1,002,628
*EMC ........................................... 21,100 1,358,312
First Data .................................... 1 27
*Microsoft ..................................... 17,800 1,885,130
Pitney Bowes .................................. 24,800 1,365,550
----------
7,793,336
----------
Consumer Products - 4.89%
Clorox ........................................ 9,500 1,037,875
Estee Lauder Class A .......................... 6,600 432,713
Gillette ...................................... 21,500 966,156
----------
2,436,744
----------
Electronics & Electrical - 4.36%
Intel ......................................... 11,500 1,026,016
Schlumberger Ltd. ............................. 8,700 456,750
Xerox ......................................... 7,100 687,813
----------
2,170,579
----------
Energy - 4.25%
Anadarko Petroleum ............................ 34,500 1,168,688
Enron ......................................... 18,000 949,500
----------
2,118,188
----------
Environmental Services - 1.96%
Waste Management .............................. 21,600 974,700
----------
974,700
----------
<PAGE>
Number of Market
Shares Value
- -------------------------------------------------------------------------------
COMMON STOCK (Continued)
Food, Beverage & Tobacco - 7.51%
Coca Cola ..................................... 6,800 $ 459,850
DEKALB Genetics ............................... 4,800 439,800
PepsiCo ....................................... 28,400 958,500
Philip Morris ................................. 18,900 966,263
Whitman ....................................... 42,700 915,381
----------
3,739,794
----------
Healthcare & Pharmaceuticals - 16.16%
Baxter International .......................... 15,400 923,038
*Forest Laboratories ........................... 25,700 1,074,581
Guidant ....................................... 17,500 1,338,750
Medtronic ..................................... 15,400 1,001,000
Mylan Laboratories ............................ 14,200 489,013
Pfizer ........................................ 6,800 729,725
Schering-Plough ............................... 9,000 925,875
*Sepracor ...................................... 7,300 502,331
Warner-Lambert ................................ 13,600 1,065,900
----------
8,050,213
----------
Retail - 11.33%
Family Dollar Stores .......................... 52,700 955,188
Home Depot .................................... 25,300 1,100,550
*Kroger ........................................ 21,600 1,198,800
*Safeway ....................................... 33,200 1,587,374
Tandy ......................................... 16,200 802,913
----------
5,644,825
----------
Telecommunications - 9.57%
AT&T .......................................... 8,045 500,801
Comcast - Special Class A ..................... 10,700 528,647
MCI Worldcom .................................. 42,700 2,360,508
*Qwest Communications International ............ 12,593 493,095
SBC Communications ............................ 19,100 884,569
----------
4,767,620
----------
Total Common Stock (cost $40,385,899) .......... 48,434,538
----------
Principal
Amount
-------------
REPURCHASE AGREEMENTS - 2.64%
With Chase Manhattan 5.30% 11/2/98 (dated
10/30/98, collateralized by $437,000 U.S.
Treasury Notes 5.75% due 10/31/02,
market value $471,822) ...................... $462,000 462,000
- -------------------------------
Top 10 holdings, representing 31.52% of net assets, are in boldface.
<PAGE>
for international diversification 13
U.S. Growth Fund
Statement of Net Assets (Continued)
Principal Market
Amount Value
-----------------------
REPURCHASE AGREEMENTS (Continued)
With J.P. Morgan Securities 5.25% 11/2/98
(dated 10/30/98, collateralized by
$146,000 U.S. Treasury Notes 5.25%
due 1/31/01, market value $151,106 and
$114,000 U.S. Treasury Notes 5.50% due
2/28/03, market value $119,805 and
$15,000 U.S. Treasury Notes 5.625% due
11/30/00, market value $16,028 and
$134,000 U.S. Treasury Notes 6.25% due
1/31/02, market value $143,809).................... $422,000 $ 422,000
With PaineWebber 5.30% 11/2/98 (dated
10/30/98, collateralized by $162,000 U.S.
Treasury Notes 5.625% due 5/15/01, market
value $172,215 and $140,000 U.S.
Treasury Notes 6.50% due 8/31/01, market
value $149,492 and $105,000 U.S.
Treasury Notes 7.50% due 5/15/02, market
value $119,092) .................................... 432,000 432,000
-----------
Total Repurchase Agreements (cost $1,316,000).......... 1,316,000
-----------
TOTAL MARKET VALUE OF SECURITIES - 99.88%
(cost $41,701,899) ................................. $49,750,538
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 0.12% 60,544
-----------
NET ASSETS APPLICABLE TO 4,298,618 SHARES
($.01 PAR VALUE) OUTSTANDING - 100.00% ............. $49,811,082
============
NET ASSET VALUE - U.S. GROWTH FUND A CLASS
($14,129,686 / 1,229,861 SHARES).................... $11.49
======
NET ASSET VALUE - U.S. GROWTH FUND B CLASS
($5,418,195 / 494,420 SHARES)....................... $10.96
======
NET ASSET VALUE - U.S. GROWTH FUND C CLASS
($1,657,359 / 140,144 SHARES) ...................... $11.83
======
NET ASSET VALUE - U.S. GROWTH FUND INSTITUTIONAL CLASS
($28,605,842 / 2,434,193 SHARES).................... $11.75
======
COMPONENTS OF NET ASSETS AT OCTOBER 31, 1998:
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 ............................ $44,417,087
Accumulated net realized loss on investments ................... (2,654,644)
Net unrealized appreciation of investments ..................... 8,048,639
------------
Total Net Assets ............................................... $49,811,082
============
- ----------------------
* Non-income producing security
<PAGE>
- --------------------------------------------------------------------------------
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
U.S. GROWTH FUND A CLASS
Net asset value A Class (A) .................................... $11.49
Sales charge (4.75% of offering price or 4.96% of the amount
invested per share) (B) ..................................... 0.57
------
Offering price ................................................. $12.06
======
- ----------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See How to Buy Shares in the current Prospectus for purchases of $100,000 or
more for U.S. Growth Fund A Class. See Notes to Financial Statements for
change in front-end sales charge effective November 2, 1998.
See accompanying notes
Delaware Group Adviser Funds, Inc.
Overseas Equity Fund
Statement of Net Assets
October 31, 1998
Number of Market
Shares Value
---------------------
Common Stock - 87.55%
Argentina - 0.98%
Central Puerto SA, Class B ......................... 8,000 $ 19,606
YPF Sociedad Anonima, ADR .......................... 500 14,469
--------
34,075
--------
Australia - 7.94%
Amcor .............................................. 14,000 58,352
CSR ................................................ 27,000 61,659
Foster's Brewing Group ............................. 24,000 58,851
National Australia Bank ............................ 4,400 58,202
Orica .............................................. 6,500 35,779
--------
272,843
--------
Belgium - 0.84%
Electrabel SA ...................................... 78 28,728
--------
28,728
--------
Brazil - 4.03%
Aracruz Celulose SA, ADR ........................... 2,400 20,100
Companhia Energetica de Minas Gerais, ADR .......... 917 17,835
Companhia Paranaense de Energia-Copel, ADR ......... 3,600 27,900
Telecommunicacoes Brasileiras SA, ADR .............. 420 31,894
Unibanco, GDR ...................................... 1,320 23,100
Usinas Siderurg Minas, ADR ......................... 5,600 17,651
--------
138,480
--------
Chile - 1.43%
Administradora de Fondos de Pensiones
Provida SA, ADR ................................. 1,400 19,863
Banco BHIF, ADR .................................... 1,400 15,400
Empresa Nacional Electricidad SA, ADR .............. 1,400 13,913
--------
49,176
--------
<PAGE>
14 for international diversification
Overseas Equity Fund
Statement of Net Assets (Continued)
Number of Market
Shares Value
------------------------
COMMON STOCK (Continued)
China - 1.89%
Guangdong Kelon Electrical Holding ............ 30,000 $ 25,567
Guangshen Railway ............................. 100,000 15,495
Shenzhen Expressway ........................... 106,000 23,952
--------
65,014
--------
Croatia - 0.37%
*Zagrebacka Banka, GDR ......................... 1,200 12,900
--------
12,900
--------
Czech Republic - 0.18%
*Komercni Banka I.F ............................ 400 6,332
--------
6,332
--------
Egypt - 0.80%
Paints and Chemical, GDR ...................... 3,000 27,375
--------
27,375
--------
Estonia - 0.37%
*EESTI Uhispank, ADR ........................... 2,490 12,637
--------
12,637
--------
France - 4.77%
Compagnie de Saint Gobain ..................... 432 64,026
Elf Aquitaine ................................. 520 60,286
Societe Generale .............................. 300 39,757
--------
164,069
--------
Germany - 7.21%
Bayer ......................................... 1,600 64,571
Bayerische Hypo-und Vereinsbank ............... 840 67,037
Rheinisch Westfaelisches Elektric ............. 860 46,276
Siemens ....................................... 1,150 69,946
--------
247,830
--------
Greece - 0.49%
Attica Enterprises SA ......................... 1,200 8,793
Hellenic Bottling Company SA .................. 335 8,163
--------
16,956
--------
Hong Kong - 2.95%
First Tractor ................................. 42,000 13,287
Hong Kong Electric ............................ 24,000 88,011
--------
101,298
--------
India - 0.94%
Larsen & Toubro, GDR .......................... 2,500 16,875
Mahanagar Telephone Nigam, GDR ................ 1,400 15,365
--------
32,240
--------
Japan - 9.20%
Eisai ......................................... 5,000 78,691
Hitachi ....................................... 12,000 61,266
Koito Manufacturing ........................... 9,000 36,806
Matsushita Electric Industrial ................ 4,000 58,924
West Japan Railway ............................ 18 80,585
--------
316,272
--------
Malaysia - 1.17%
Petronas Dagangan Berhad ...................... 30,000 13,550
Resorts World Berhad .......................... 18,000 11,503
<PAGE>
Number of Market
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK (Continued)
Malaysia (Continued)
Sime Darby Berhad ................................... 28,000 $ 15,243
--------
40,296
--------
Mexico - 1.41%
Alfa SA de CV, Class A .............................. 5,400 14,339
Cemex SA, Class B ................................... 7,500 20,512
Vitro SA, ADR ....................................... 3,000 13,500
--------
48,351
--------
Netherlands - 5.04%
Elsevier-CVA ........................................ 4,500 63,401
Koninklijke Van Ommeren ............................. 1,300 42,133
Royal Dutch Petroleum ............................... 1,400 67,649
--------
173,183
--------
New Zealand - 2.57%
Carter Holt Harvey .................................. 28,000 22,826
Telecom Corporation of New Zealand .................. 16,000 65,639
--------
88,465
--------
Peru - 0.70%
Creditcorp Ltd., ADR ................................ 2,420 16,335
Telefonica del Peru SA, ADR ......................... 600 7,800
--------
24,135
--------
Romania - 0.21%
*Banco Turco Romana SA, GDR .......................... 1,550 7,091
--------
7,091
--------
Russia - 0.68%
Gazprom, ADR ........................................ 1,000 9,325
Lukoil Holding, ADR ................................. 300 4,662
*Mosenergo, ADR ...................................... 1,950 4,029
Rossi Residential, GDR .............................. 6,000 5,281
--------
23,297
--------
South Africa - 3.49%
Anglo American Coal ................................. 300 17,526
AngloAmerican Corporation of South Africa Limited ... 760 24,869
Edgars Stores ....................................... 816 3,694
Iscor ............................................... 85,500 21,757
*Sappi Limited ....................................... 5,000 25,088
Sasol Limited ....................................... 5,500 27,055
--------
119,989
--------
South Korea - 0.52%
Pohang Iron & Steel, ADR ............................ 1,000 18,000
--------
18,000
--------
Spain - 4.05%
Iberdrola S.A ....................................... 4,300 69,527
Telefonica de Espana ................................ 1,540 69,612
--------
139,139
--------
Taiwan - 1.14%
Asia Cement, GDR .................................... 2,188 20,241
*Yageo, GDR .......................................... 2,800 18,900
--------
39,141
--------
<PAGE>
for international diversification 15
Overseas Equity Fund
Statement of Net Assets (Continued)
- --------------------------------------------------------------------------------
Number of Market
Shares Value
----------------------
COMMON STOCK (Continued)
Thailand - 0.72%
*Hana Microelectronics ........................... 8,000 $ 21,413
*K.R. Precision .................................. 6,600 3,497
---------
24,910
---------
Turkey - 0.59%
*Efes Sinai Yatirim, ADR ......................... 9,999 7,749
Koc Holdings A.S ................................ 134,600 12,377
---------
20,126
---------
United Kingdom - 20.87%
Bass ............................................ 5,357 64,964
Blue Circle Industry ............................ 15,000 81,970
Boots ........................................... 5,800 87,629
British Airways ................................. 9,600 70,270
GKN ............................................. 7,300 87,732
Glaxo Wellcome .................................. 3,000 93,113
PowerGen ........................................ 6,900 98,007
Rio Tinto ....................................... 7,200 87,737
Taylor Woodrow .................................. 16,000 45,828
---------
717,250
---------
Total Common Stock (cost $3,481,324) ............ 3,009,598
---------
Investment Companies - 1.18%
*India Fund, (The) ............................... 4,000 24,750
Restitucni Investment Fund ...................... 500 15,901
---------
Total Investment Companies (cost $39,244) ....... 40,651
---------
Principal
Amount
---------
Repurchase Agreements - 9.92%
With Chase Manhattan 5.30% 11/2/98 (dated
10/30/98, collateralized by $113,000 U.S.
Treasury Notes 5.75% due 10/31/02, market
value $122,258) ............................... $120,000 120,000
With J.P. Morgan Securities 5.25% 11/2/98
(dated 10/30/98, collateralized by $38,000
U.S. Treasury Notes 5.25% due 1/31/01,
market value $39,154 and $29,000 U.S.
Treasury Notes 5.50% due 2/28/03, market
value $31,044 and $4,000 U.S. Treasury
Notes 5.625% due 11/30/00, market value
$4,153 and $35,000 U.S. Treasury Notes
6.25% due 1/31/02, market value $37,263) ...... 109,000 109,000
With PaineWebber 5.30% 11/2/98 (dated
10/30/98, collateralized by $42,000 U.S.
Treasury Notes 5.625% due 5/15/01,
market value $44,624 and $36,000 U.S.
Treasury Notes 6.50% due 8/31/01, market
value $38,736 and $27,000 U.S.
Treasury Notes 7.50% due 5/15/02, market
value $30,859) ................................ 112,000 112,000
--------
Total Repurchase Agreements (cost $341,000) ...... 341,000
--------
<PAGE>
- --------------------------------------------------------------------------------
TOTAL MARKET VALUE OF SECURITIES - 98.65%
(COST $3,861,568) .......................................... $3,391,249
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 1.35% ....... 46,272
-------------
NET ASSETS APPLICABLE TO 401,432 SHARES
($.01 PAR VALUE) OUTSTANDING - 100.00% ..................... $3,437,521
=============
NET ASSET VALUE - OVERSEAS EQUITY FUND A CLASS
($2,034,186 / 227,402 SHARES) .............................. $8.95
=====
NET ASSET VALUE - OVERSEAS EQUITY FUND B CLASS
($1,165,743 / 145,216 SHARES) .............................. $8.03
=====
NET ASSET VALUE - OVERSEAS EQUITY FUND C CLASS
($178,702 / 22,220 SHARES) ................................. $8.04
=====
NET ASSET VALUE - OVERSEAS EQUITY FUND INSTITUTIONAL CLASS
($58,890 / 6,594 SHARES) ................................... $8.93
=====
COMPONENTS OF NET ASSETS AT OCTOBER 31, 1998:
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 ............................................ $3,066,414
**Undistributed net investment income ............................. 273,217
Accumulated net realized gain on investments .................... 566,354
Net unrealized depreciation of investments and foreign currencies (468,464)
------------
Total Net Assets ................................................ $3,437,521
============
- ----------------------
*Non-income producing security
**Undistributed net investment income includes net realized gains (losses) on
foreign currencies. Net realized gains (losses) on foreign currencies are
treated as net investment income in accordance with provisions of the
Internal Revenue Code.
ADR - American Depository Receipt
GDR - Global Depository Receipt
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
OVERSEAS EQUITY FUND A CLASS
Net asset value A Class (A) ..................................... $8.95
Sales charge (4.75% of offering price or 5.03% of the amount
invested per share) (B)....................................... 0.45
-----
Offering Price................................................... $9.40
=====
- ----------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See How to Buy Shares in the current Prospectus for purchases of $100,000 or
more for Overseas Equity Fund A Class. See Notes to Financial Statements for
change in front-end sales charge effective November 2, 1998.
See accompanying notes
<PAGE>
16 for international diversification
Delaware Group Adviser Funds, Inc.
New Pacific Fund
Statement of Net Assets
October 31, 1998
Number of Market
Shares Value
-----------------------
COMMON STOCK - 78.50%
Australia - 11.74%
Australia & New Zealand Banking Group ......... 30,000 $ 171,274
Broken Hill Proprietary ....................... 19,000 161,229
Goodman Fielder ............................... 59,400 78,313
News Corporation .............................. 21,000 143,215
Pacific Dunlop ................................ 99,200 178,260
Pasminco ...................................... 113,300 92,609
Qantas Airways ................................ 100,000 169,714
----------
994,614
----------
China - 3.11%
Guangdong Kelon Electrical Holding ............ 309,000 263,335
----------
263,335
----------
Hong Kong - 14.77%
Cheung Kong Infrastructure .................... 33,000 83,943
CLP Holdings .................................. 30,000 168,507
Dah Sing Financial ............................ 96,000 168,584
HSBC Holdings ................................. 5,600 128,349
Hutchison Whampoa ............................. 11,000 78,830
Johnson Electric .............................. 58,000 134,805
*New World Infrastructure ...................... 108,000 154,096
Sun Hung Kai Properties ....................... 48,000 334,690
----------
1,251,804
----------
India - 4.76%
BSES, GDR ..................................... 3,950 48,585
Mahanagar Telephone Nigam, GDR ................ 12,500 137,188
Ranbaxy Laboratories, GDR ..................... 2,733 38,672
Reliance Industries, ADR ...................... 24,180 122,714
State Bank of India, GDR ...................... 6,950 56,121
----------
403,280
----------
Japan - 29.26%
Asatsu ........................................ 7,700 143,194
Fuji Photo Film ............................... 6,000 220,578
Fujitsu ....................................... 17,000 181,490
Ito-Yokado .................................... 4,000 234,180
Kirin Brewery ................................. 22,000 240,552
NIFCO ......................................... 800 5,889
Nippon Telegraph & Telephone .................. 13 102,075
Nippon Television Network ..................... 200 62,592
NTT Mobile Communications ..................... 4 144,985
Omron ......................................... 11,000 107,964
ORIX Finance-Leasing .......................... 3,400 244,425
Ricoh ......................................... 13,000 110,245
Sekisui Chemical .............................. 35,000 191,347
Shohkoh Fund .................................. 600 183,125
Sony .......................................... 1,200 76,453
Yamanouchi Pharmaceutical ..................... 8,000 230,048
----------
2,479,142
----------
<PAGE>
Number of Market
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK (Continued)
Philippines - 1.74%
Far East Bank & Trust ............................. 3,479 $ 3,449
Philippine Long Distance, ADR ..................... 5,900 143,813
---------
147,262
---------
Singapore - 6.13%
DBS Land .......................................... 144,000 163,203
Development Bank of Singapore ..................... 10,800 67,853
Overseas Union Bank ............................... 47,000 127,958
Sembcorp Industries ............................... 26 26
Singapore Airlines ................................ 26,000 160,148
---------
519,188
---------
South Korea - 3.61%
L.G. Chemical ..................................... 5,600 43,501
L.G. Information & Communication .................. 2,000 45,926
Pohang Iron & Steel ............................... 3,190 175,274
Samsung Electronics ............................... 1,000 40,924
---------
305,625
---------
Thailand - 3.38%
Bangkok Expressway Public ......................... 176,200 138,853
BEC World Public .................................. 24,200 147,304
---------
286,157
---------
Total Common Stock (cost $6,681,532) .............. 6,650,407
---------
Investment Companies - 4.34%
*Taipei Fund ....................................... 43 367,650
---------
Total Investment Companies (cost $419,903) ........ 367,650
---------
Warrants - 0.02%
*Belle ............................................. 98,000 194
*OPTEC ............................................. 20 625
*Rashid Hussain .................................... 5,571 703
---------
Total Warrants (cost $24,077) ..................... 1,522
---------
Principal
Amount
-------------
Repurchase Agreements - 16.39%
With Chase Manhattan 5.30% 11/2/98 (dated
10/30/98, collateralized by $461,000 U.S.
Treasury Notes 5.75% due 10/31/02, market
value $497,994) ................................... $488,000 488,000
With J.P. Morgan Securities 5.25% 11/2/98 (dated
10/30/98, collateralized by $154,000 U.S.
Treasury Notes 5.25% due 1/31/01, market
value $159,489 and $120,000 U.S. Treasury
Notes 5.50% due 2/28/03, market value
$126,450 and $16,000 U.S. Treasury Notes
5.625% due 11/30/00, market value $16,917
and $141,000 U.S. Treasury Notes 6.25%
due 1/31/02, market value $151,786) ............... 445,000 445,000
<PAGE>
for international diversification 17
New Pacific Fund
Statement of Net Assets (Continued)
Principal Market
Amount Value
----------------------
REPURCHASE AGREEMENTS (Continued)
With PaineWebber 5.30% 11/2/98 (dated
10/30/98, collateralized by $171,000 U.S.
Treasury Notes 5.625% due 5/15/01, market
value $181,768 and $147,000 U.S. Treasury
Notes 6.50% due 8/31/01, market value
$157,785 and $111,000 U.S. Treasury Notes
7.50% due 5/15/02, market
value $125,698) ............................... $ 456,000 $ 456,000
----------
Total Repurchase Agreements
(cost $1,389,000) ............................. 1,389,000
----------
TOTAL MARKET VALUE OF SECURITIES - 99.25%
(COST $8,514,512) .......................................... $8,408,579
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 0.75% ....... 63,355
----------
NET ASSETS APPLICABLE TO 1,838,730 SHARES ($.01 PAR VALUE)
OUTSTANDING - 100.00% ...................................... $8,471,934
==========
NET ASSET VALUE - NEW PACIFIC FUND A CLASS
($5,887,073 / 1,283,482 SHARES) ............................ $4.59
=====
NET ASSET VALUE - NEW PACIFIC FUND B CLASS
($2,236,033 / 480,027 SHARES) .............................. $4.66
=====
NET ASSET VALUE - NEW PACIFIC FUND C CLASS
($130,027 / 28,570 SHARES) ................................. $4.55
=====
NET ASSET VALUE - NEW PACIFIC FUND INSTITUTIONAL CLASS
($218,801 / 46,651 SHARES) ................................. $4.69
=====
COMPONENTS OF NET ASSETS AT OCTOBER 31, 1998:
Common Stock, $.01 par value, 70,000,000 shares authorized 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 ............................................ $15,733,247
Accumulated net realized loss on investments ...................... (7,090,301)
Net unrealized depreciation of investments and foreign currencies.. (171,012)
------------
Total Net Assets .................................................. $8,471,934
============
- ----------------------
* Non-income producing security
ADR - American Depository Receipt
GDR - Global Depository Receipt
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
NEW PACIFIC FUND A CLASS
Net asset value A Class (A) ......................................... $ 4.59
Sales charge (4.75% of offering price or 5.01% of the amount
invested per share) (B) .......................................... 0.23
-----
Offering price ...................................................... $ 4.82
=====
- -------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See How to Buy Shares in the current Prospectus for purchases of $100,000 or
more for New Pacific Fund Class A. See Notes to Financial Statements for
change in front-end sales charge effective November 2, 1998.
See accompanying notes
<PAGE>
18 for international diversification
Delaware Group Adviser Funds, Inc.
Statements of Assets and Liabilities
October 31, 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
U.S. Overseas New
Growth Equity Pacific
Fund Fund Fund
----------- ---------- ----------
<S> <C> <C> <C>
ASSETS:
Investments at market ................................. $49,750,538 $3,391,249 $8,408,579
Cash and foreign currencies ........................... -- -- 64,219
Dividends and interest receivable ..................... 16,942 20,086 70,944
Subscriptions receivable .............................. 307,511 3,363 59,482
Receivable for securities sold ........................ -- -- 238,934
Other assets .......................................... 4,737 18,036 58,388
----------- ---------- ----------
Total assets ....................................... 50,079,728 3,432,734 8,900,546
----------- ---------- ----------
LIABILITIES:
Liquidations payable .................................. 152,358 4,857 15
Payable for securities purchased ...................... 173,967 -- 348,310
Payable for foreign exchange contracts, net ........... -- -- 51,742
Other accounts payable and accrued expenses ........... (57,679) (9,644) 28,545
----------- ---------- ----------
Total liabilities .................................. 268,646 (4,787) 428,612
----------- ---------- ----------
TOTAL NET ASSETS ...................................... $49,811,082 $3,437,521 $8,471,934
=========== ========== ==========
Investments at cost ................................... $41,701,899 $3,861,568 $8,514,512
=========== ========== ==========
</TABLE>
See accompanying notes
<PAGE>
for international diversification 19
Delaware Group Adviser Funds, Inc.
Statements of Operations
Year Ended October 31, 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
U.S. Overseas New
Growth Equity Pacific
Fund Fund Fund
----------- ---------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest ............................................... $ 151,943 $ 25,969 $ 36,485
Dividends .............................................. 221,574 120,937 151,023
Foreign tax withheld ................................... -- (7,354) (5,551)
---------- ---------- -----------
373,517 139,552 181,957
---------- ---------- -----------
EXPENSES:
Management fees ........................................ 277,028 46,051 50,696
Custodian fees and expenses ............................ 3,900 18,991 71,900
Dividend disbursing and transfer agent fees and expenses 88,136 33,153 65,740
Distribution expense ................................... 73,862 25,803 43,071
Registration fees ...................................... 29,717 39,061 31,151
Reports and statements to shareholders ................. 13,461 10,760 6,608
Professional fees ...................................... 20,500 7,000 12,000
Accounting and administration .......................... 16,708 3,209 3,660
Taxes (other than taxes on income) ..................... 5,236 2,420 2,002
Amortization of organization expenses .................. 1,578 1,982 1,877
Directors' fees ........................................ 1,050 448 800
Other .................................................. 3,179 11,505 14,813
---------- ---------- -----------
534,355 200,383 304,318
Less expenses absorbed or waived by
Delaware Management Company ......................... (667) (97,446) (119,003)
---------- ---------- -----------
Total expenses ......................................... 533,688 102,937 185,315
---------- ---------- -----------
NET INVESTMENT INCOME (LOSS) ........................... (160,171) 36,615 (3,358)
---------- ---------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on:
Investments ............................................ (2,654,644) 563,512 (5,921,619)
Foreign currencies ..................................... -- 236,032 (474,332)
---------- ---------- -----------
Net realized gain (loss) ............................... (2,654,644) 799,544 (6,395,951)
Net change in unrealized appreciation/depreciation of
investments and foreign currencies .................. 5,165,122 (1,701,170) 2,186,476
---------- ---------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES .................. 2,510,478 (901,626) (4,209,475)
---------- ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ........................... $2,350,307 ($865,011) ($4,212,833)
========== ========== ===========
</TABLE>
See accompanying notes
<PAGE>
20 for international diversification
Delaware Group Adviser Funds, Inc.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
U. S. Growth Fund Overseas Equity Fund New Pacific Fund
---------------------- ---------------------- ----------------------
Year Ended October 31, Year Ended October 31, Year Ended October 31,
1998 1997 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ (160,171) $ (91,868) $ 36,615 $ (84,832) $ (3,358) $ (20,150)
Net realized gain (loss) on investments and
foreign currencies (2,654,644) 10,854,607 799,544 2,291,320 (6,395,951) (992,876)
Net change in unrealized appreciation/depreciation
of investments and foreign currencies 5,165,122 (830,970) (1,701,170) (584,515) 2,186,476 (1,602,579)
----------- ----------- ---------- ----------- ---------- -----------
Net increase (decrease) in net assets resulting
from operations 2,350,307 9,931,769 (865,011) 1,621,973 (4,212,833) (2,615,605)
----------- ----------- ---------- ----------- ---------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class -- -- (454,027) (522,689) (55,976) (190,598)
B Class -- -- (65,715) (46,161) (19,082) (8,912)
C Class -- -- (7,303) (4,286) (1,015) (761)
Institutional Class -- -- (2,683) (803) (2,018) (370)
Net realized gain on investments:
A Class (2,703,511) (1,626,328) (1,431,918) (396,523) -- --
B Class (722,725) (85,057) (207,294) (35,183) -- --
C Class (110,828) (5,841) (23,031) (3,252) -- --
Institutional Class (7,317,726) (1,003,161) (8,463) (610) -- --
----------- ----------- ---------- ----------- ---------- -----------
(10,854,790) (2,720,387) (2,200,434) (1,009,507) (78,091) (200,641)
----------- ----------- ---------- ----------- ---------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class 12,827,868 10,781,745 498,572 2,484,892 4,005,717 9,268,516
B Class 4,264,169 797,219 140,999 382,413 1,715,579 2,799,014
C Class 1,702,784 221,107 117,386 96,743 107,657 152,523
Institutional Class 15,808,803 7,357,639 23,006 104,137 738,249 996,240
Net asset value of shares issued upon reinvestment
of distributions from net investment income and
net realized gain on investments:
A Class 2,613,993 1,622,653 1,867,982 913,591 55,567 189,818
B Class 591,336 84,600 264,050 74,801 18,639 8,437
C Class 109,009 5,683 29,819 7,537 1,013 761
Institutional Class 7,317,726 1,003,161 11,146 1,413 2,018 371
----------- ----------- ---------- ----------- ---------- -----------
45,235,688 21,873,807 2,952,960 4,065,527 6,644,439 13,415,680
----------- ----------- ---------- ----------- ---------- -----------
Cost of shares repurchased:
A Class (6,104,829) (25,598,341) (8,677,065) (8,030,552) (2,239,821) (11,746,630)
B Class (377,480) (241,326) (219,839) (214,003) (938,555) (383,325)
C Class (261,212) (52,050) (76,715) (55,031) (49,819) (27,334)
Institutional Class (7,470,416) (2,884,902) (14,376) (330,279) (710,048) (863,361)
----------- ----------- ---------- ----------- ---------- -----------
(14,213,937) (28,776,619) (8,987,995) (8,629,865) (3,938,243) (13,020,650)
----------- ----------- ---------- ----------- ---------- -----------
Increase (decrease) in net assets derived from
capital share transactions 31,021,751 (6,902,812) (6,035,035) (4,564,338) 2,706,196 395,030
----------- ----------- ---------- ----------- ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS 22,517,268 308,750 (9,100,480) (3,951,872) (1,584,728) (2,421,216)
NET ASSETS:
Beginning of year 27,293,814 26,985,244 12,538,001 16,489,873 10,056,662 12,477,878
----------- ----------- ---------- ----------- ---------- -----------
End of year $49,811,082 $27,293,814 $3,437,521 $12,538,001 $8,471,934 $10,056,662
=========== =========== ========== =========== ========== ===========
</TABLE>
See accompanying notes
<PAGE>
for international diversification 21
Delaware Group Adviser Funds, Inc.
Financial Highlights
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were as follows:
U.S. Growth Fund A Class
---------------------------------------------------------------
Period
Year Ended October 31, 12/3/93(1) to
1998(4) 1997(4) 1996(5) 1995 10/31/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................. $16.650 $13.820 $12.430 $10.210 $10.000
Income from investment operations:
Net investment loss ................................ (0.062) (0.060) (0.090) (0.090) (0.040)
Net realized and unrealized gain on investments .... 1.272 4.250 1.480 2.310 0.260
------- ------- ------- ------- ------
Total from investment operations ................... 1.210 4.190 1.390 2.220 0.220
------- ------- ------- ------- ------
Less dividends and distributions:
Dividends from net investment income ............... -- -- -- -- (0.010)
Distributions from net realized gain on investments. (6.370) (1.360) -- -- --
------- ------- ------- ------- ------
Total dividends and distributions .................. (6.370) (1.360) -- -- (0.010)
------- ------- ------- ------- ------
Net asset value, end of period ........................ $11.490 $16.650 $13.820 $12.430 $10.210
======= ======= ======= ======= =======
Total return(2) ....................................... 10.52% 33.18% 11.18% 21.74% 2.18%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ............ $14,130 $6,933 $16,118 $13,574 $10,669
Ratio of expenses to average net assets ............ 1.49% 1.44% 1.80% 1.85% 1.85%(3)
Ratio of expenses to average net assets prior
to expense limitation ............................ 1.49% N/A 1.88% 2.18% 2.94%(3)
Ratio of net investment loss to average net assets . (0.52%) (0.38%) (0.77)% (0.88%) (0.51%)(3)
Ratio of net investment loss to average net assets
prior to expense limitation ...................... (0.52%) N/A (0.85)% (1.21%) (1.60%)(3)
Portfolio turnover rate ............................ 135% 144% 131% 58% 66%
- ----------------------
(1) Commencement of operations.
(2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment
of distributions at net asset value and does not reflect the impact of a sales charge.
(3) Annualized.
(4) The average shares outstanding method has been applied for per share information.
(5) Commencing May 3, 1996, Delaware Management Company replaced Lincoln National Corporation as the Fund's investment manager.
</TABLE>
See accompanying notes
<PAGE>
22 for international diversification
Financial Highlights (Continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were as follows:
U.S. Growth Fund B Class
---------------------------------------------------------------
Period
Year Ended October 31, 3/29/94(1) to
1998(4) 1997(4) 1996(5) 1995 10/31/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $16.260 $13.610 $12.330 $10.190 $10.000
Income from investment operations:
Net investment loss (0.140) (0.160) (0.170) (0.140) (0.030)
Net realized and unrealized gain on investments 1.210 4.170 1.450 2.280 0.220
------- ------- ------- ------- ------
Total from investment operations 1.070 4.010 1.280 2.140 0.190
------- ------- ------- ------- ------
Less dividends and distributions:
Dividends from net investment income -- -- -- -- --
Distributions from net realized gain on investments (6.370) (1.360) -- -- --
------- ------- ------- ------- ------
Total dividends and distributions (6.370) (1.360) -- -- --
------- ------- ------- ------- ------
Net asset value, end of period $10.960 $16.260 $13.610 $12.330 $10.190
======= ======= ======= ======= =======
Total return(2) 9.62% 32.30% 10.38% 21.00% 1.90%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $5,418 $1,653 $809 $567 $204
Ratio of expenses to average net assets 2.19% 2.14% 2.48% 2.50% 2.50%(3)
Ratio of expenses to average net assets prior
to expense limitation 2.19% N/A 2.56% 2.83% 3.60%(3)
Ratio of net investment loss to average net assets (1.22%) (1.08%) (1.45%) (1.57%) (1.26%)(3)
Ratio of net investment loss to average net assets
prior to expense limitation (1.22%) N/A (1.53%) (1.90%) (2.36%)(3)
Portfolio turnover rate 135% 144% 131% 58% 66%
- ----------------------
(1) Commencement of operations.
(2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment
of distributions at net asset value and does not reflect the impact of a sales charge.
(3) Annualized.
(4) The average shares outstanding method has been applied for per share information.
(5) Commencing May 3, 1996, Delaware Management Company replaced Lincoln National Corporation as the Fund's investment manager.
</TABLE>
See accompanying notes
<PAGE>
for international diversification 23
Financial Highlights (Continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were as follows:
U.S. Growth Fund C Class
---------------------------------------------------------------
Period
Year Ended October 31, 5/23/94(1) to
1998(4) 1997(4) 1996(5) 1995 10/31/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $17.020 $14.180 $12.850 $10.620 $10.000
Income from investment operations:
Net investment loss .................................... (0.148) (0.170) (0.160) (0.100) (0.030)
Net realized and unrealized gain on investments ........ 1.328 4.370 1.490 2.330 0.650
--------- -------- -------- ------- -------
Total from investment operations ....................... 1.180 4.200 1.330 2.230 0.620
--------- -------- -------- ------- -------
Less dividends and distributions:
Dividends from net investment income ................... -- -- -- -- --
Distributions from net realized gain on investments .... (6.370) (1.360) -- -- --
--------- -------- -------- ------- -------
Total dividends and distributions ...................... (6.370) (1.360) -- -- --
--------- -------- -------- ------- -------
Net asset value, end of period ............................ $11.830 $17.020 $14.180 $12.850 $10.620
========= ======== ======== ======= =======
Total return(2) ........................................... 10.04% 32.26% 10.35% 21.00% 6.17%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $1,657 $252 $55 $27 $5
Ratio of expenses to average net assets ................ 2.19% 2.14% 2.48% 2.50% 2.50%(3)
Ratio of expenses to average net assets prior to expense
limitation ............................................ 2.19% N/A 2.56% 2.82% 3.54%(3)
Ratio of net investment loss to average net assets ..... (1.22%) (1.08%) (1.45%) (1.61%) (1.09%)(3)
Ratio of net investment loss to average net assets prior
to expense limitation ................................. (1.22%) N/A (1.53%) (1.93%) (2.13%)(3)
Portfolio turnover rate ................................ 135% 144% 131% 58% 66%
</TABLE>
- ----------------------
(1) Commencement of operations.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
(3) Annualized.
(4) The average shares outstanding method has been applied for per share
information.
(5) Commencing May 3, 1996, Delaware Management Company replaced Lincoln
National Corporation as the Fund's investment manager.
See accompanying notes
<PAGE>
24 for international diversification
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
U.S. Growth Fund Institutional Class
-----------------------------------------------------------
Period
Year Ended October 31, 2/3/94(1) to
1998(4) 1997(4) 1996(5) 1995 10/31/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........................ $16.860 $13.940 $12.500 $10.230 $10.520
Income (loss) from investment operations:
Net investment loss ...................................... (0.027) (0.010) (0.050) (0.050) (0.010)
Net realized and unrealized gain (loss) on investments ... 1.287 4.290 1.490 2.320 (0.280)
------- ------- ------- ------- -------
Total from investment operations ......................... 1.260 4.280 1.440 2.270 (0.290)
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ..................... -- -- -- -- --
Distributions from net realized gain on investments ...... (6.370) (1.360) -- -- --
------- ------- ------- ------- -------
Total dividends and distributions ........................ (6.370) (1.360) -- -- --
------- ------- ------- ------- -------
Net asset value, end of period .............................. $11.750 $16.860 $13.940 $12.500 $10.230
======= ======= ======= ======= =======
Total return(2) ............................................. 10.80% 33.57% 11.52% 22.19% (2.78%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $28,606 $18,455 $10,003 $4,819 $1,630
Ratio of expenses to average net assets .................. 1.19% 1.14% 1.48% 1.50% 1.50%(3)
Ratio of expenses to average net assets prior to expense
limitation .............................................. 1.19% N/A 1.56% 1.83% 2.60%(3)
Ratio of net investment loss to average net assets ....... (0.22%) (0.08%) (0.45%) (0.59%) (0.27%)(3)
Ratio of net investment loss to average net assets prior
to expense limitation .................................. (0.22%) N/A (0.53%) (0.92%) (1.37%)(3)
Portfolio turnover rate ................................. 135% 144% 131% 58% 66%
</TABLE>
- ----------------------
(1) Commencement of operations.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions.
(3) Annualized.
(4) The average shares outstanding method has been applied for per share
information.
(5) Commencing May 3, 1996, Delaware Management Company replaced Lincoln
National Corporation as the Fund's investment manager.
See accompanying notes
<PAGE>
for international diversification 25
Financial Highlights (Continued)
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, 12/3/93(1) to
1998(4) 1997(4) 1996(5) 1995 10/31/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....................... $12.520 $12.390 $11.400 $11.000 $10.000
Income (loss) from investment operations:
Net investment income (loss) ............................ 0.091 (0.060) (0.060) 0.010 0.020
Net realized and unrealized gain (loss) on investments
and foreign currencies ................................. (1.501) 0.960 1.073 0.400 1.010
------- ------- ------- ------- -------
Total from investment operations ........................ (1.410) 0.900 1.013 0.410 1.030
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income .................... (0.520) (0.440) (0.023) (0.010) (0.030)
Distributions from net realized gain on investments ..... (1.640) (0.330) -- -- --
------- ------- ------- ------- -------
Total dividends and distributions ....................... (2.160) (0.770) (0.023) (0.010) (0.030)
------- ------- ------- ------- -------
Net asset value, end of period ............................. $8.950 $12.520 $12.390 $11.400 $11.000
======= ======= ======= ======= =======
Total return(2) ............................................ (12.95%) 7.74% 8.90% 3.81% 10.25%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $2,034 $10,868 $14,886 $13,018 $11,721
Ratio of expenses to average net assets ................. 1.83% 1.80% 1.82% 1.85% 1.85%(3)
Ratio of expenses to average net assets prior to expense
limitation ............................................. 3.75% N/A 2.60% 2.96% 3.56%(3)
Ratio of net investment income (loss) to average net assets 0.93% (0.45%) (0.51%) 0.00% 0.25%(3)
Ratio of net investment loss to average net assets prior
to expense limitation .................................... (0.99%) N/A (1.29%) (1.11%) (1.96%)(3)
Portfolio turnover rate ................................... 87% 18% 21% 9% 6%
</TABLE>
- ----------------------
(1) Commencement of operations.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
(3) Annualized.
(4) The average shares outstanding method has been applied for per share
information.
(5) Commencing May 3, 1996, Delaware Management Company replaced Lincoln
National Corporation as the Fund's investment manager.
See accompanying notes
<PAGE>
26 for international diversification
Financial Highlights (Continued)
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
Overseas Equity Fund B Class
------------------------------------------------------------
Period
Year Ended October 31, 3/29/94(1) to
1998(4) 1997(4) 1996(5) 1995 10/31/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....................... $11.540 $11.560 $10.710 $10.400 $10.000
Income (loss) from investment operations:
Net investment income (loss) ............................ 0.033 (0.140) (0.060) (0.020) --
Net realized and unrealized gain (loss) on investments
and foreign currencies ................................. (1.383) 0.890 0.930 0.350 0.430
------- ------- ------- ------- -------
Total from investment operations ........................ (1.350) 0.750 0.870 0.330 0.430
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income .................... (0.520) (0.440) (0.020) (0.020) (0.030)
Distributions from net realized gain on investments ..... (1.640) (0.330) -- -- --
------- ------- ------- ------- -------
Total dividends and distributions ....................... (2.160) (0.770) (0.020) (0.020) (0.030)
------- ------- ------- ------- -------
Net asset value, end of period ............................. $8.030 $11.540 $11.560 $10.710 $10.400
======= ======= ======= ======= =======
Total return(2) ............................................ (13.66%) 6.95% 8.16% 3.19% 4.28%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $1,166 $1,450 $1,208 $1,183 $523
Ratio of expenses to average net assets ................. 2.53% 2.50% 2.50% 2.50% 2.50%(3)
Ratio of expenses to average net assets prior to expense
limitation ............................................. 4.45% N/A 3.28% 3.61% 4.22%(3)
Ratio of net investment income (loss) to average net assets 0.23% (1.16%) (1.19%) (0.57%) (0.37%)(3)
Ratio of net investment loss to average net assets prior
to expense limitation ................................... (1.69%) N/A (1.97%) (1.68%) (2.09%)(3)
Portfolio turnover rate .................................. 87% 18% 21% 9% 6%
</TABLE>
- ----------------------
(1) Commencement of operations.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
(3) Annualized.
(4) The average shares outstanding method has been applied for per share
information.
(5) Commencing May 3, 1996, Delaware Management Company replaced Lincoln
National Corporation as the Fund's investment manager.
See accompanying notes
<PAGE>
for international diversification 27
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
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
1998(4) 1997(4) 1996(5) 1995 10/31/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....................... $11.550 $11.580 $10.730 $10.430 $10.000
Income (loss) from investment operations:
Net investment income (loss) ............................ 0.033 (0.140) (0.060) (0.060) 0.010
Net realized and unrealized gain (loss) on investments
and foreign currencies ................................. (1.383) 0.880 0.930 0.390 0.440
------- -------- -------- -------- --------
Total from investment operations ........................ (1.350) 0.740 0.870 0.330 0.450
------- -------- -------- -------- --------
Less dividends and distributions:
Dividends from net investment income .................... (0.520) (0.440) (0.020) (0.030) (0.020)
Distributions from net realized gain on investments ..... (1.640) (0.330) -- -- --
------- -------- -------- -------- --------
Total dividends and distributions ....................... (2.160) (0.770) (0.020) (0.030) (0.020)
------- -------- -------- -------- --------
Net asset value, end of period ............................. $ 8.040 $11.550 $11.580 $10.730 $10.430
======= ======== ======== ======== ========
Total return(2) ............................................ (13.67%) 6.85% 8.15% 3.16% 4.45%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $179 $159 $112 $43 $38
Ratio of expenses to average net assets ................. 2.53% 2.50% 2.50% 2.50% 2.50%(3)
Ratio of expenses to average net assets prior to expense
limitation ............................................. 4.45% N/A 3.28% 3.61% 4.23%(3)
Ratio of net investment income (loss) to average net assets 0.23% (1.16%) (1.19%) (0.62%) 0.16%(3)
Ratio of net investment loss to average net assets prior
to expense limitation .................................. (1.69%) N/A (1.97%) (1.73%) (1.57%)(3)
Portfolio turnover rate ................................. 87% 18% 21% 9% 6%
</TABLE>
- ----------------------
(1) Commencement of operations.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
(3) Annualized.
(4) The average shares outstanding method has been applied for per share
information.
(5) Commencing May 3, 1996, Delaware Management Company replaced Lincoln
National Corporation as the Fund's investment manager.
See accompanying notes
<PAGE>
28 for international diversification
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
Overseas Equity Fund Institutional Class
-------------------------------------------------------------
Period
Year Ended October 31, 2/3/94(1) to
1998(4) 1997(4) 1996(5) 1995 10/31/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....................... $12.480 $12.320 $11.440 $11.020 $10.500
Income (loss) from investment operations:
Net investment income (loss) ............................ 0.123 (0.020) (0.060) 0.040 0.040
Net realized and unrealized gain (loss) on investments
and foreign currencies ................................. (1.513) 0.950 0.963 0.410 0.520
-------- -------- -------- -------- --------
Total from investment operations ........................ (1.390) 0.930 0.903 0.450 0.560
-------- -------- -------- -------- --------
Less dividends and distributions:
Dividends from net investment income .................... (0.520) (0.440) (0.023) (0.030) (0.040)
Distributions from net realized gain on investments ..... (1.640) (0.330) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions ....................... (2.160) (0.770) (0.023) (0.030) (0.040)
-------- -------- -------- -------- --------
Net asset value, end of period ............................. $ 8.930 $12.480 $12.320 $11.440 $11.020
======== ======== ======== ======== ========
Total return(2) ............................................ (12.82%) 8.04% 7.91% 4.22% 5.26%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $59 $60 $284 $161 $63
Ratio of expenses to average net assets ................. 1.53% 1.50% 1.50% 1.50% 1.50%(3)
Ratio of expenses to average net assets prior
to expense limitation .................................. 3.45% N/A 2.28% 2.61% 3.21%(3)
Ratio of net investment income (loss) to average
net assets ............................................. 1.23% (0.15%) (0.19%) 0.40% 0.76%(3)
Ratio of net investment loss to average net assets prior
to expense limitation .................................. (0.69%) N/A (0.97%) (0.71%) (0.95%)(3)
Portfolio turnover rate ................................. 87% 18% 21% 9% 6%
</TABLE>
- ----------------------
(1) Commencement of operations.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions.
(3) Annualized.
(4) The average shares outstanding method has been applied for per share
information.
(5) Commencing May 3, 1996, Delaware Management Company replaced Lincoln
National Corporation as the Fund's investment manager.
See accompanying notes
<PAGE>
for international diversification 29
Financial Highlights (Continued)
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
1998(4) 1997(4) 1996(5) 1995 10/31/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........................ $7.320 $9.420 $8.710 $10.440 $10.000
Income (loss) from investment operations:
Net investment income (loss) ............................. 0.008 (0.010) (0.050) (0.050) (0.020)
Net realized and unrealized gain (loss) on investments
and foreign currencies .................................. (2.683) (1.940) 0.769 (1.390) 0.470
------- ------- ------- ------- -------
Total from investment operations ......................... (2.675) (1.950) 0.719 (1.440) 0.450
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ..................... (0.055) (0.150) (0.009) -- (0.010)
Distributions from net realized gain on investments ...... -- -- -- (0.290) --
------- ------- ------- ------- -------
Total dividends and distributions ........................ (0.055) (0.150) (0.009) (0.290) (0.010)
------- ------- ------- ------- -------
Net asset value, end of period .............................. $4.590 $7.320 $9.420 $8.710 $10.440
======= ======= ======= ======= =======
Total return(2) ............................................. (36.85%) (21.15%) 8.26% (13.99%) 4.53%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $5,887 $7,144 $11,752 $10,353 $11,333
Ratio of expenses to average net assets .................. 1.90% 1.80% 1.82% 1.85% 1.85%(3)
Ratio of expenses to average net assets prior to
expense limitation ...................................... 3.23% 1.86% 2.77% 3.73% 3.66%(3)
Ratio of net investment income (loss) to average
net assets .............................................. 0.15% (0.08%) (0.41%) (0.60%) (0.21%)(3)
Ratio of net investment loss to average net assets prior
to expense limitation ................................... (1.18%) (0.14%) (1.36%) (2.48%) (2.02%)(3)
Portfolio turnover rate .................................. 188% 178% 163% 163% 104%
</TABLE>
- ----------------------
(1) Commencement of operations.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
(3) Annualized.
(4) The average shares outstanding method has been applied for per share
information.
(5) Commencing May 3, 1996, Delaware Management Company replaced Lincoln
National Corporation as the Fund's investment manager.
See accompanying notes
<PAGE>
30 for international diversification
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
New Pacific Fund B Class
-------------------------------------------------------------
Period
Year Ended October 31, 3/29/94(1) to
1998(4) 1997(4) 1996(5) 1995 10/31/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........................ $7.470 $9.680 $9.010 $10.860 $10.000
Income (loss) from investment operations:
Net investment loss ...................................... (0.031) (0.080) (0.050) (0.100) (0.030)
Net realized and unrealized gain (loss) on investments
and foreign currencies .................................. (2.724) (1.980) 0.730 (1.460) 0.890
------- -------- ------- ------- --------
Total from investment operations ......................... (2.755) (2.060) 0.680 (1.560) 0.860
------- -------- ------- ------- --------
Less dividends and distributions:
Dividends from net investment income ..................... (0.055) (0.150) (0.010) -- --
Distributions from net realized gain on investments ...... -- -- -- (0.290) --
------- -------- ------- ------- --------
Total dividends and distributions ........................ (0.055) (0.150) (0.010) (0.290) 0.000
------- -------- ------- ------- --------
Net asset value, end of period .............................. $4.660 $7.470 $9.680 $9.010 $10.860
======= ======== ======= ======= ========
Total return(2) ............................................. (37.05%) (21.72%) 7.54% (14.56%) 8.58%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $2,236 $2,534 $562 $573 $431
Ratio of expenses to average net assets .................. 2.60% 2.50% 2.50% 2.50% 2.50%(3)
Ratio of expenses to average net assets prior to
expense limitation ...................................... 3.93% 2.56% 3.45% 4.38% 4.32%(3)
Ratio of net investment loss to average net assets ....... (0.55%) (0.77%) (1.09%) (1.20%) (0.88%)(3)
Ratio of net investment loss to average net assets prior
to expense limitation ................................... (1.88%) (0.83%) (2.04%) (3.08%) (2.70%)(3)
Portfolio turnover rate .................................. 188% 178% 163% 163% 104%
</TABLE>
- ----------------------
(1) Commencement of operations.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
(3) Annualized.
(4) The average shares outstanding method has been applied for per share
information.
(5) Commencing May 3, 1996, Delaware Management Company replaced Lincoln
National Corporation as the Fund's investment manager.
See accompanying notes
<PAGE>
for international diversification 31
Financial Highlights (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
1998(4) 1997(4) 1996(5) 1995 10/31/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......................... $7.320 $9.490 $8.830 $10.660 $10.000
Income (loss) from investment operations:
Net investment loss ....................................... (0.029) (0.080) (0.050) (0.080) (0.020)
Net realized and unrealized gain (loss) on investments
and foreign currencies ................................... (2.686) (1.940) 0.718 (1.460) 0.680
------ ------- ------ ------- -------
Total from investment operations .......................... (2.715) (2.020) 0.668 (1.540) 0.660
------ ------- ------ ------- -------
Less dividends and distributions:
Dividends from net investment income ...................... (0.055) (0.150) (0.008) -- --
Distributions from net realized gain on investments ....... -- -- -- (0.290) --
------ ------- ------ ------- -------
Total dividends and distributions ......................... (0.055) (0.150) (0.008) (0.290) --
------ ------- ------ ------- -------
Net asset value, end of period ............................... $4.550 $7.320 $9.490 $ 8.830 $10.660
====== ======= ====== ======= =======
Total return(2) ..............................................(37.18%) (21.85%) 7.58% (14.57%) 6.55%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................... $130 $129 $44 $17 $12
Ratio of expenses to average net assets ................... 2.60% 2.50% 2.50% 2.50% 2.50%(3)
Ratio of expenses to average net assets prior
to expense limitation .................................... 3.93% 2.56% 3.45% 4.38% 4.31%(3)
Ratio of net investment loss to average net assets ........ (0.55%) (0.77%) (1.09%) (1.02%) (0.83%)(3)
Ratio of net investment loss to average net assets prior
to expense limitation .................................... (1.88%) (0.83%) (2.04%) (2.90%) (2.64%)(3)
Portfolio turnover rate ................................... 188% 178% 163% 163% 104%
</TABLE>
- ----------------------
(1) Commencement of operations.
(2) Total investment return is based on the change in net asset value of a share
value during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
(3) Annualized.
(4) The average shares outstanding method has been applied for per share
information.
(5) Commencing May 3, 1996, Delaware Management Company replaced Lincoln
National Corporation as the Fund's investment manager.
See accompanying notes
<PAGE>
32 for international diversification
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
New Pacific Fund Institutional Class
------------------------------------------------------------
Period
Year Ended October 31, 2/3/94(1) to
1998(4) 1997(4) 1996(5) 1995 10/31/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....................... $7.440 $9.530 $8.770 $10.480 $11.140
Income (loss) from investment operations:
Net investment income (loss) ............................. 0.024 0.020 (0.050) (0.010) 0.010
Net realized and unrealized gain (loss) on investments
and foreign currencies .................................. (2.719) (1.960) 0.820 (1.410) (0.670)
------- ------- ------- ------- -------
Total from investment operations ......................... (2.695) (1.940) 0.770 (1.420) (0.660)
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ..................... (0.055) (0.150) (0.010) -- --
Distributions from net realized gain on investments ...... -- -- -- (0.290) --
------- ------- ------- ------- -------
Total dividends and distributions ........................ (0.055) (0.150) (0.010) (0.290) --
------- ------- ------- ------- -------
Net asset value, end of period .............................. $4.690 $7.440 $9.530 $ 8.770 $10.480
======= ======= ======= ======= =======
Total return(2) ............................................. (36.39%) (20.79%) 8.77% (13.65%) (5.98%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $219 $250 $119 $62 $47
Ratio of expenses to average net assets .................. 1.60% 1.50% 1.50% 1.50% 1.50%(3)
Ratio of expenses to average net assets prior to
expense limitation ...................................... 2.93% 1.56% 2.45% 3.38% 3.31%(3)
Ratio of net investment income (loss) to average net
assets .................................................. 0.45% 0.22% (0.09%) (0.16%) 0.23%(3)
Ratio of net investment income (loss) to average net
assets prior to expense limitation ...................... (0.88%) 0.16% (1.04%) (2.04%) (1.58%)(3)
Portfolio turnover rate .................................. 188% 178% 163% 163% 104%
</TABLE>
- ----------------------
(1) Commencement of operations.
(2) Total investment return is based on the change in net asset value of
a share during the period and assumes reinvestment of distributions.
(3) Annualized.
(4) The average shares outstanding method has been applied for per share
information.
(5) Commencing May 3, 1996, Delaware Management Company replaced Lincoln
National Corporation as the Fund's investment manager.
See accompanying notes
<PAGE>
for international diversification 33
DELAWARE GROUP ADVISER FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
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 and the New Pacific Fund. Each Fund offers four classes of shares.
The A Class carries a front-end sales charge, which was raised from 4.75% to
5.75% effective November 2, 1998. 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 Investments Family of Funds. The aggregate daily
balance of the pooled cash account is invested in repurchase agreements secured
by obligations of the U.S. Government. The respective collateral is held by the
Fund's custodian bank until the maturity of the respective repurchase
agreements. Each repurchase agreement is at least 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 prevailing exchange rates on the valuation date. The value
of all assets and liabilities denominated in foreign currencies are translated
into U.S. dollars at the exchange rate of such currencies against the U.S.
dollar 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
<PAGE>
result from 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.
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.
Other - Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. Foreign dividends are also recorded on the
ex-dividend date or as soon after the ex-dividend date that the 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.
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Funds
currently pay Delaware Management Company (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. OVERSEAS NEW
GROWTH EQUITY PACIFIC
FUND FUND FUND
-------- -------- --------
Management fee as a percentage
of average daily net assets
(per annum) ............................. 0.70% 1.00% 0.80%
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
Advisers Ltd., as of September 15, 1997, with respect to the management of the
Overseas Equity Fund, both affiliates of DMC, and with AIB Govett, Inc. with
respect to the management of the New Pacific Fund. The sub-advisers receive
sub-advisory fees from the Investment Manager for their services calculated in
accordance with the schedule set forth below. The Funds do not pay any fees to
the sub-advisers:
U.S. OVERSEAS NEW
GROWTH EQUITY PACIFIC
FUND FUND FUND
-------- -------- --------
Sub-advisory fee as a percentage
of average daily net assets
(per annum) ............................. 0.40% 0.80% 0.50%
<PAGE>
34 for international diversification
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
2. Investment Management and Other Transactions with Affiliates (Continued)
DMC has elected to waive its fees and reimburse each Fund to the extent that
annual operating expenses, exclusive of taxes, interest, brokerage commissions,
distribution fees and extraordinary expenses, exceed 1.55% for each class of the
Overseas Equity Fund and 1.70% for each class of the New Pacific Fund, of the
average daily net assets for each Fund through April 30, 1999. The waiver for
U.S. Growth Fund, which was 1.50% of the average daily net assets for each
class, has been removed starting November 1, 1998.
The Funds have engaged Delaware Service Company, Inc. (DSC), an affiliate of
DMC, to provide dividend disbursing, transfer agent, accounting and
administration services. Each Fund pays DSC a monthly fee based on the number of
shareholder accounts, shareholder transactions and average net assets, subject
to certain minimums.
On October 31, 1998, the Funds had payables to affiliates as follows:
U.S. OVERSEAS NEW
GROWTH EQUITY PACIFIC
FUND FUND FUND
-------- -------- --------
Investment management fee and
other expenses payable to DMC
and affiliates .......................... $ 1,849 $ -- $ --
Dividend disbursing, transfer agent
fees, accounting and
administration fees and
other expenses payable
to DSC .................................. $19,758 $3,379 $5,121
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 Classes.
DDLP earned commissions on sales of the Fund A Class shares as follows:
U.S. OVERSEAS NEW
GROWTH EQUITY PACIFIC
FUND FUND FUND
-------- -------- --------
For the year ended
October 31, 1998 ........................ $19,696 $1,255 $8,612
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, 1998, each Fund made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:
U.S. OVERSEAS NEW
GROWTH EQUITY PACIFIC
FUND FUND FUND
-------- -------- --------
Purchases ................... $68,138,655 $ 4,310,004 $17,785,304
Sales ....................... $48,803,224 $12,520,758 $14,951,281
At October 31, 1998, the aggregate cost of securities and unrealized
appreciation (depreciation) for federal income tax purposes are as follows:
U.S. OVERSEAS NEW
GROWTH EQUITY PACIFIC
FUND FUND FUND
-------- -------- --------
Cost of investments ......... $41,702,276 $3,861,568 $8,573,626
=========== ========== ==========
Aggregated unrealized
appreciation ............. 8,399,459 177,959 627,173
Aggregated unrealized
depreciation. ............ (351,197) (648,278) (792,220)
----------- ---------- ----------
Net unrealized appreciation
(depreciation) ........... $8,048,262 $(470,319) $(165,047)
========== ========= =========
<PAGE>
For federal income tax purposes, the New Pacific Fund had a capital loss
carryforward at October 31, 1998, of $7,029,825 which may be carried forward and
applied against future capital gains. The capital loss carryforward expires as
follows: 2004 - $19,090, 2005 - $1,056,728 and 2006 - $5,954,007. The U.S.
Growth Fund had a capital loss carryforward at October 31, 1998, of $2,654,644
which may be carried forward and applied against future capital gains. The
capital loss carryforward expires in 2006.
4. Capital Stock
Transactions in capital stock shares were as follows:
U.S. GROWTH FUND
----------------------
YEAR ENDED OCTOBER 31,
1998 1997
Shares sold:
A Class .......................................... 1,076,710 708,527
B Class .......................................... 369,583 52,772
C Class .......................................... 138,063 13,752
Institutional Class .............................. 1,291,956 492,699
Shares issued upon reinvestment of
distributions from net investment income and
net realized gain on investments:
A Class .......................................... 246,836 125,787
B Class .......................................... 58,145 6,677
C Class .......................................... 9,964 429
Institutional Class .............................. 677,567 76,989
---------- ----------
3,868,824 1,477,632
---------- ----------
Shares repurchased:
A Class .......................................... (510,127) (1,584,408)
B Class .......................................... (34,977) (17,225)
C Class .......................................... (22,718) (3,236)
Institutional Class .............................. (629,729) (193,024)
---------- ----------
(1,197,551) (1,797,893)
---------- ----------
Net Increase (Decrease) ............................. 2,671,273 (320,261)
========= ========
OVERSEAS EQUITY FUND
----------------------
YEAR ENDED OCTOBER 31,
1998 1997
Shares sold:
A Class .......................................... 49,042 196,269
B Class .......................................... 15,653 32,677
C Class .......................................... 13,815 8,181
Institutional Class .............................. 2,121 8,181
Shares issued upon reinvestment of
distributions from net investment income and
net realized gain on investments:
A Class .......................................... 188,305 79,030
B Class .......................................... 29,437 6,991
C Class .......................................... 3,317 702
Institutional Class .............................. 1,127 123
---------- ----------
302,817 332,154
---------- ----------
Shares repurchased:
A Class .......................................... (878,340) (607,946)
B Class .......................................... (25,581) (18,445)
C Class .......................................... (8,711) (4,765)
Institutional Class .............................. (1,464) (26,488)
---------- ----------
(914,096) (657,644)
---------- ----------
Net Decrease ........................................ (611,279) (325,490)
======== ========
<PAGE>
for international diversification 35
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
4. Capital Stock (Continued)
NEW PACIFIC FUND
----------------------
YEAR ENDED OCTOBER 31,
1998 1997
Shares sold:
A Class ................................... 703,209 1,056,867
B Class ................................... 303,076 319,098
C Class ................................... 19,220 16,227
Institutional Class ....................... 130,843 119,458
Shares issued upon reinvestment of
distributions from net investment income and
net realized gain on investments:
A Class ................................... 8,030 20,129
B Class ................................... 2,640 872
C Class ................................... 146 80
Institutional Class ....................... 286 39
---------- ----------
1,167,450 1,532,770
---------- ----------
Shares repurchased:
A Class ................................... (403,742) (1,348,426)
B Class ................................... (165,007) (38,756)
C Class ................................... (8,431) (3,309)
Institutional Class ....................... (118,089) (98,419)
---------- ----------
(695,269) (1,488,910)
---------- ----------
Net Increase ................................. 472,181 43,860
======= ======
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.
<PAGE>
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 contracts were outstanding for the New
Pacific Fund at October 31, 1998:
CONTRACTS IN EXCHANGE SETTLEMENT UNREALIZED
TO RECEIVE FOR DATE APPRECIATION
- ----------------- ------------- ------------ --------------
7,586,404 $65,064 11/2/98 $262
Japanese Yen
11,469,476 $98,282 11/2/98 $465
Japanese Yen
329,081 $42,487 11/2/98 $5
Hong Kong Dollars
CONTRACTS IN EXCHANGE SETTLEMENT UNREALIZED
TO RECEIVE FOR DATE APPRECIATION
- ----------------- ------------- ------------ --------------
261,336,000 $2,226,031 1/21/99 ($52,474)
Japanese Yen
6. Credit and Market Risk
Some countries in which the Overseas Equity and New Pacific Funds 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, $500,000 and $800,000 for the U.S.
Growth Fund, Overseas Equity Fund and New Pacific Fund, respectively. No amounts
were outstanding at October 31, 1998, or at any time during the fiscal year.
<PAGE>
36 for international diversification
DELAWARE GROUP ADVISER FUNDS, INC.
REPORT OF INDEPENDENT AUDITORS
- -------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
DELAWARE GROUP ADVISER FUNDS, INC.
We have audited the accompanying statements of net assets and 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, 1998, and the related statements of operations for
the year then ended and the statements of changes in net assets and the
financial highlights for each of the two years in the period 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 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 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, 1998, by correspondence 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 financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Funds constituting the Delaware Group Adviser Funds, Inc. at
October 31, 1998, and the results of their operations for the year then ended
and the changes in their net assets and their financial highlights for each of
the two years in the period then ended, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young
----------------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
December 4, 1998
<PAGE>
THIS ANNUAL REPORT IS FOR THE INFORMATION OF U.S. GROWTH FUND, OVERSEAS EQUITY
FUND, AND New Pacific Fund shareholders, but it may be used with prospective
investors when preceded or accompanied by a current Prospectus for U.S. Growth
Fund, Overseas Equity Fund, and New Pacific Fund, which sets forth details about
charges, expenses, investment objectives and operating policies of each Fund.
You should read the prospectus carefully before you invest. Summary investment
results are documented in each 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
each 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 Investments Family of Funds
Philadelphia, PA
JEFFREY J. NICK
President and Chief Executive Officer
Delaware Investments Family of Funds
Philadelphia, PA
WALTER P. BABICH
Board Chairman, Citadel Constructors, Inc.
King of Prussia, PA
JOHN H. DURHAM
Partner, Complete Care Services
Horsham, 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 Investments Family of Funds
Philadelphia, PA
GEORGE M. CHAMBERLAIN, JR.
Senior Vice President, Secretary
and General Counsel
Delaware Investments Family of Funds
Philadelphia, PA
BRUCE D. BARTON
President and Chief Executive Officer
Delaware Distributors, L.P.
Philadelphia, PA
directors
& officers
(photo of globes)
<PAGE>
INVESTMENT MANAGER
Delaware Management Company
Philadelphia, Pennsylvania
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
Philadelphia, Pennsylvania
SUBADVISERS
Delaware International Advisers Ltd.
London, England
Lynch & Mayer, Inc.
New York, New York
AIB Govett, Inc.
San Francisco, CA
and London, England
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
Philadelphia, Pennsylvania
1818 Market Street
Philadelphia, PA 19103-3682
<PAGE>
When used with prospective investors, this report must be preceded or
accompanied by a current U.S. Growth Fund, Overseas Equity Fund and New Pacific
Fund Prospectus and the Delaware Investments Performance Update for the most
recently completed calendar quarter. For a prospectus of any other mutual fund
from Delaware Investments, contact your financial adviser or Delaware
Investments.
(photo of globes)
For Shareholders
1.800.523.1918
For Securities Dealers
1.800.362.7500
For Financial Institutions
Representatives Only
1.800.659.2265
www.delawarefunds.com
International investing has special risks that include less stable economies and
governments, currency fluctuations and different accounting standards.
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 Funds 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 Funds are not bank or credit union deposits.
DELAWARE(SM)
INVESTMENTS
- ---------------------
Philadelphia o London
(C) Delaware Distributors, L.P.
Printed in the USA
on recycled paper
(1280)
AR-101[10/98]TKO12/98
