<PAGE>
DELAWARE(SM)
INVESTMENTS
------------
Delaware Overseas Equity Fund
International Diversification
2000 ANNUAL REPORT
{International Diversification Artwork}
<PAGE>
TABLE OF CONTENTS
-----------------
Letter to Shareholders 1
Portfolio Management
Review 3
Performance Summary 6
Financial Statements
Statement of Net Assets 7
Statement of Operations 10
Statements of Changes in
Net Assets 11
Financial Highlights 12
Notes to Financial
Statements 16
Report of Independent
Auditors 19
A TRADITION OF SOUND INVESTING SINCE 1929
-----------------------------------------
A Commitment To Our Investors
Experienced
o Our seasoned investment professionals average 11 years' experience.
o We began managing investments in 1929 and opened our first mutual fund in
1938. Over the past 70 years, we have weathered a full range of economic and
market environments.
Disciplined
o We follow strict investment policies and clear buy/sell guidelines.
o We strive to balance risk and reward in order to provide sound investment
alternatives within any given asset class.
Consistent
o We clearly articulate our investment policies and follow them consistently.
o Our commitment to consistency has earned us the confidence of discriminating
institutional and individual investors to manage more than $44 billion in
assets as of September 30, 2000.
Comprehensive
o We offer more than 70 mutual funds in these asset classes.
o Large-cap equity o High-yield bonds
o Mid-cap equity o Investment grade bonds
o Small-cap equity o Municipal bonds
o International equity (single-state and national funds)
o Balanced o International fixed-income
o Our funds are available through financial advisers who can offer you
individualized attention and valuable investment advice.
Funds are not FDIC insured and are not guaranteed. It is possible to lose the
principal amount invested.
(C)Delaware Distributors, L.P.
<PAGE>
Dear Shareholder
"MUCH OF THE
CAUTIONARY SENTIMENT
AT HOME MAY HAVE
TRICKLED DOWN TO
MANY EMERGING
MARKETS AS WELL."
--------------------------------------------------------------------------------
December 4, 2000
Recap of Events -- The pace of global economic growth slowed this past year as
tightening financial conditions, combined with the high price of oil, generally
presented a challenge to businesses worldwide. During the year, the U.S. Federal
Reserve Board, the European Central Bank, and, for the first time since 1990,
even the Bank of Japan raised interest rates.
This tighter monetary environment has contributed to the generally weak
performance of global equity markets. In a poor environment for stocks, returns
in many overseas markets have been lackluster, while major U.S. equity indexes
such as the Dow Jones Industrial Average and the S&P 500 Index are in negative
territory year-to-date as of October 31, 2000. Much of the cautionary sentiment
at home may have trickled down to many emerging markets as well. As a result,
the year was generally challenging for investors looking to those areas of the
world.
Delaware Overseas Equity Fund, which invests internationally in both developed
and emerging markets, returned +1.13% (Class A shares at net asset value with
distributions reinvested) for the fiscal year ended October 31, 2000. During the
same year, the MSCI Europe, Australasia, Far East (EAFE) Index -- a broad stock
index that is your Fund's benchmark, and which generally tracks global markets
-- fell by 2.66%. The Lipper International Funds Average rose 2.70% for the year
ended October 31, 2000.
Despite a difficult year for equity investors, the slowing of U.S. economic
growth has many analysts hopeful for a "soft landing" for the domestic economy.
This optimistic view points to continued U.S. economic expansion and better
times ahead for U.S. stocks, both of which would likely bode well for other
global markets. International investors can find other reasons to be encouraged,
too, including healthy euro zone employment growth, China's entry into the World
Trade Organization, and occasional signs of hope in Japan for eventual economic
recovery, despite that country's struggling banking system.
Total Returns
For the Period Ended October 31, 2000 One Year
------------------------------------------------------------------------
Delaware Overseas Equity Fund Class A +1.13%
------------------------------------------------------------------------
MSCI EAFE Index -2.66%
Lipper International Funds Average (711 funds) +2.70%
------------------------------------------------------------------------
All performance shown above is at net asset value without the effect of sales
charges and assumes reinvestment of all distributions. Performance information
for all Fund classes can be found on page 6. The MSCI EAFE Index is an unmanaged
composite of international stocks in established markets. The Lipper
International Funds Average represents the average returns of a peer group of
international mutual funds tracked by Lipper (Source: Lipper Inc.). You cannot
invest directly in an index. Past performance does not guarantee future results.
Foreign investments are subject to risks not ordinarily associated with domestic
investments (i.e., currency, economic and political risks).
1
<PAGE>
{International Diversification Artwork}
--------------------------------------------------------------------------------
In addition, many emerging market countries around the globe are busy adopting
pro-business policy changes. Developed markets, meanwhile, become more
interdependent each year. The increasing globalization of financial markets and
businesses is a very real trend that should encourage international investors
who maintain a long-term perspective.
Outlook -- We believe that the damage done in international equity markets by
oil prices, rising rates, and a strong dollar is excessive. We think good values
remain available in both emerging and developed international markets; however,
investors will need to remain focused on companies that can produce sustained
profitability.
Investing in overseas markets adds important diversification to your portfolio.
Investments in non-U.S. stocks provide opportunity for capital appreciation, but
they also come with increased risks and volatility that make it especially
important to keep a long investment time horizon. We commend you for remaining
steadfast with your international investments.
Thank you for your continued confidence and your commitment to Delaware
Investments.
Sincerely,
<TABLE>
<S> <C>
/s/ Wayne A. Stork /s/ David K. Downes
------------------------------------ --------------------------------------
Wayne A. Stork David K. Downes
Chairman, President and Chief Executive Officer,
Delaware Investments Family of Funds Delaware Investments Family of Funds
</TABLE>
2
<PAGE>
Clive Gillmore
Senior Portfolio Manager
& Director
Delaware International Advisers Ltd.
Robert Akester
Senior Portfolio Manager
Delaware International Advisers Ltd.
December 4, 2000
--------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT REVIEW
---------------------------
The Fund's Results
Our fiscal year brought its share of challenges for equity investors. The U.S.
economy's influence on the rest of the world seems to be increasing, and
uncertainty about its direction may have been part of the reason we saw lukewarm
returns in many regions of the world. After respectable gains in the first half
the fiscal year, Delaware Overseas Equity Fund lost some ground over the second
half and finished the year ended October 31, 2000 with an overall return of
+1.13% (Class A shares at net asset value with distributions reinvested). The
Fund outperformed its benchmark index, the Morgan Stanley Capital International
(MSCI) Europe, Australasia, Far East (EAFE) Index. We attribute the
outperformance versus the index partially to our lesser weighting, relative to
the benchmark, in Japan, as well as to generally strong stock selection.
Your Fund is managed using an approach that seeks to identify undervalued
countries and stocks by forecasting long-term real returns, coupled with a focus
on "purchasing power" when analyzing global currency values. Based on this
analysis, we select our ratio of emerging markets to developed markets, as well
as our country allocation, using a "top-down" view. Once a country allocation is
in place, we then select individual stocks. We look for stocks that may be
undervalued based on projections for dividend growth, assets, and earnings.
Portfolio Highlights
While sector analysis is not the major focus of our investment process, our
focus on value leads us into sectors whose potential has been ignored in the
recent mania for technology-based growth stocks, which were being bought almost
regardless of price. As of October 31, 2000, your Fund held significant
investments in capital goods, following by banks, and energy stocks.
During the fiscal year, our analysis also led us to conclude that emerging
markets, in which the Fund may invest up to 40% of its net assets, were offering
greater value than markets in developed nations. As a result, we had allocated
approximately 35% of the Fund's net assets to emerging market stocks as of
October 31, 2000.
Our heaviest emerging market allocation was to Brazil. A strong final two months
of 1999 allowed Brazilian market indexes to record positive overall performance
during our fiscal year -- despite the fact that they have trended downward since
January 2000. Our Brazilian holdings, a number of which are held in American
Depository Receipts, contributed positively as a whole to the Fund's performance
during the fiscal year. However, if investors "re-discover" Brazil, and the
market there clearly reverses its current downward trend, it may eventually
become prudent to look elsewhere for undervalued stocks.
3
<PAGE>
Delaware Overseas Fund
Country Allocation
As of October 31, 2000
United Kingdom 20.1%
Japan 9.9%
France 6.8%
Germany 6.7%
{Graphic Omitted}
Other 27.4%
Spain 3.6%
South Africa 4.2%
Hong Kong 4.6%
Brazil 4.7%
Netherlands 5.9%
Australia 6.1%
(International Diversification Artwork)
--------------------------------------------------------------------------------
During the year we held a smaller percentage of holdings in Japanese companies
than did the EAFE Index. Despite signs of economic growth, we believe that the
Japanese economy is still displaying evidence of structural problems, and that
Japan is currently not the best market for our value focus. As of October 31,
2000, Japanese investments comprised 9.94% of the portfolio. However, we are
pleased to report that our largest two Japanese holdings -- Canon and Matsushita
-- posted decent gains over the fiscal year.
Despite the generally cheap valuations in emerging markets that have led to
their substantial weight in the portfolio, many of these markets performed
poorly during the past year. This included many markets in Asia and the Pacific
Rim, including Korea and Taiwan. Our underexposure to these markets followed
from analysis which suggested that they were overvalued in view of the still
formidable structural problems they had to overcome. We believe that our
holdings in these countries still represent good value, and that greater realism
by investors may present further opportunities there going forward.
In Australia, the local dollar's decline against the U.S. dollar through much of
2000 has made many investors take notice of the investment opportunities being
created there. As of the end of our fiscal year, the Australian dollar cost a
little more than fifty cents in U.S. currency. We feel that this rate of
exchange adds to the attractiveness of the Australian equity market, especially
considering Australia's sound economy. As of October 31, 2000, Delaware Overseas
Equity Fund had 6.14% of its net assets invested in Australia. Holdings there
included National Australia Bank and Foster's Brewing Group. Another investment
we hope to see benefit from the relatively cheap Australian dollar is Rio Tinto,
a U.K.-based global mining company that owns and operates more than 50% of the
Argyle mine in western Australia -- the world's largest diamond mine.
As always, a number of the Fund's top holdings are European stocks. During the
fiscal year, the Euro zone economy was generally bolstered by employment growth
and activity in corporate mergers and acquisitions, but suffered the same
inflation concerns and slowed earnings that were seen in the U.S. As of fiscal
year end, we had a smaller percentage of European holdings than did the
benchmark, although we held more than the benchmark in the United Kingdom. Major
U.K. holdings included a diverse collection of companies, such as global energy
distributor Powergen, as well as British Airways, and Bass, an operator of
resort hotels and restaurants.
4
<PAGE>
Delaware Overseas Equity Fund
Portfolio Characteristics
October 31, 2000
----------------------------------------------------------------------
Beta* 0.71
----------------------------------------------------------------------
Average Price-to-Earnings Ratio** 10.32
Median Market
Capitalization $5.14 billion
----------------------------------------------------------------------
*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.
**P/E is based on analysts' forward earnings estimates as reported by First
Call/ Thomson Financial.
In France, our most recognizable holding is likely to be telecommunications
provider Alcatel, a positive performer during the fiscal year. Other large
European positions included German pharmaceutical manufacturer Bayer and Dutch
investment bank ING Groep, the Fund's second largest holding.
Outlook
In recent years, the U.S. economy has been the main driver of global economic
growth. A hard landing in the U.S. would therefore undoubtedly hurt sentiment in
other world markets, even from today's relatively depressed levels. We will
therefore need to continue to monitor the U.S. economy and the actions of the
U.S. Federal Reserve Board for a more clear sign of direction. Until the global
economic forecast is seen to be more comforting, the equities markets are likely
to remain subdued.
However, we believe that the volatility seen across global equity markets has
created many opportunities for value-oriented investors. International investing
remains an excellent way to diversify your portfolio, and we believe that the
future for many non-U.S. markets -- both emerging and developed -- is quite
bright. We believe that our value-oriented, dividend-driven investment approach,
used to select a diverse portfolio of international stocks, is an excellent way
to seek total return over the long term.
Delaware Overseas Equity Fund
Top 10 Holdings
October 31, 2000
Company Country Percentage of Net Assets
--------------------------------------------------------------------------------
PowerGen United Kingdom 2.2%
--------------------------------------------------------------------------------
ING Groep Netherlands 2.2%
--------------------------------------------------------------------------------
National Australia Bank Australia 2.2%
--------------------------------------------------------------------------------
Matsushita Electric Industrial Japan 2.1%
--------------------------------------------------------------------------------
Canon Japan 2.0%
--------------------------------------------------------------------------------
Bayer Germany 2.0%
--------------------------------------------------------------------------------
Bass United Kingdom 2.0%
--------------------------------------------------------------------------------
Great Universal Stores United Kingdom 1.9%
--------------------------------------------------------------------------------
Royal Dutch Petroleum Netherlands 1.9%
--------------------------------------------------------------------------------
Societe Generale France 1.9%
--------------------------------------------------------------------------------
5
<PAGE>
FUND BASICS
-----------
Fund Objectives
The Fund seeks to maximize total return. It does so primarily through
investments in an internationally diversified portfolio of equity securities.
Total Fund Assets
As of October 31, 2000
$9.75 million
Number of Holdings
110
Fund Start Date
December 3, 1993
Your Fund Managers
Clive Gillmore is a graduate of the University of Warwick. Mr. Gillmore joined
Delaware in 1990 after serving in the investment management field for eight
years. He previously was Senior Portfolio Manager at Hill Samuel Investment
Advisers Ltd.
Robert Akester is a graduate of University College, London. Mr. Akester joined
Delaware in 1996 and has more than 25 years of investment experience.
Nasdaq Symbols
Class A DEWGX
Class B DEWBX
Class C DEWCX
{International Diversification Artwork}
--------------------------------------------------------------------------------
DELAWARE OVERSEAS EQUITY FUND PERFORMANCE
-----------------------------------------
Growth of a $10,000 Investment
December 3, 1993 (Fund Inception) through October 31, 2000
Delaware Overseas MSCI EAFE
Equity Fund Equity Index
Dec '93 $9,425 $10,000
Apr '94 $9,986 $10,798
Oct '94 $10,387 $11,276
Apr '95 $10,098 $11,433
Oct '95 $10,738 $11,268
Apr '96 $11,771 $12,776
Oct '96 $11,743 $12,485
Apr '97 $12,136 $12,700
Oct '97 $12,652 $13,099
Apr '98 $13,105 $15,142
Oct '98 $11,013 $14,403
Apr '99 $12,668 $16,627
Oct '99 $12,540 $17,769
Apr '00 $13,354 $18,983
Oct '00 $12,681 $17,295
Chart assumes $10,000 invested on December 3, 1993 and includes the effect of a
5.75% maximum front-end sales charge and the reinvestment of all distributions.
Performance of other Fund classes will vary due to differing charges and
expenses. Returns plotted on the chart were as of the last day of each April and
October. You can not invest directly in an index.
Average Annual Total Returns
Through October 31, 2000 Lifetime Five Years One Year
--------------------------------------------------------------------------------
Class A (Est. 12/3/93)
Excluding Sales Charge +4.39% +3.29% +1.13%
Including Sales Charge +3.50% +2.07% -4.72%
--------------------------------------------------------------------------------
Class B (Est. 3/29/94)
Excluding Sales Charge +3.06% +2.55% +0.51%
Including Sales Charge +3.06% +2.32% -4.40%
--------------------------------------------------------------------------------
Class C (Est. 5/10/94)
Excluding Sales Charge +3.14% +2.54% +0.51%
Including Sales Charge +3.14% +2.54% -0.47%
--------------------------------------------------------------------------------
<PAGE>
Returns reflect reinvestment of distributions and any applicable sales charges
as noted below. Returns and share values will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Class B and C
share results, excluding sales charges, assume either that contingent deferred
sales charges did not apply or the investment was not redeemed.
Past performance is not a guarantee of future results.
Class A shares have a 5.75% maximum front-end sales charge and a 12b-1 fee.
Class B shares do not have a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a contingent
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.
The average annual total returns for the lifetime, five-year and one-year
periods ended October 31, 2000 for Delaware Overseas Equity Fund Institutional
Class were +3.85%, +3.30% and +1.25%, respectively. The Institutional Class was
originally made available without sales charges or asset-based distribution
charges only to certain eligible institutional accounts on February 3, 1994.
An expense limitation was in effect for all classes of Delaware Overseas Equity
Fund during the periods shown. Performance would have been lower if the expense
limitation was not in effect.
6
<PAGE>
Statement of Net Assets
DELAWARE OVERSEAS EQUITY FUND
-----------------------------
Market
Number of Value
October 31, 2000 Shares (U.S.$)
--------------------------------------------------------------------------------
Common Stock - 91.49%
Argentina - 0.59%
Central Puerto SA, Class B .......................... 21,142 $ 23,261
Transportadora De Gas Series B ...................... 20,300 34,517
--------
57,778
--------
Australia - 6.14%
Amcor ............................................... 39,100 108,410
CSR ................................................. 27,000 55,285
Foster's Brewing Group .............................. 70,000 158,533
National Australia Bank ............................. 15,200 211,114
Orica ............................................... 14,400 43,284
Paperlinx ........................................... 13,033 22,289
--------
598,915
--------
Belgium - 0.62%
Electrabel SA ....................................... 278 60,373
--------
60,373
--------
Brazil - 4.70%
Aracruz Celulose SA, ADR ............................ 4,400 66,000
*Centrais Electric Series B, GDR ..................... 400 13,834
Companhia Energetica de Minas Gerais, ADR ........... 2,517 38,222
Companhia Paranaense de
Energia-Copel, ADR .................................. 11,586 104,998
Gerdau, ADR ......................................... 7,612 78,975
Petroleo Brasileiro ................................. 1,794 47,576
Rossi Residencial, GDR .............................. 16,600 21,746
Siderurgicas de Minas Gerais SA, Usiminas ........... 8,000 41,082
Telecomunicacoes Brasileiras ........................ 500,000 8
Unibanco, GDR 1,800 45,450
--------
457,891
--------
Chile - 0.84%
Administradora de Fondos de Pensiones
Provida SA, ADR ..................................... 3,400 72,250
Empresa Nacional Electricidad SA, ADR ............... 931 9,776
--------
82,026
--------
China - 1.18%
Guangdong Kelon Electric Holding .................... 85,000 15,803
Guangshen Railway ................................... 404,000 49,211
Shenzhen Expressway ................................. 436,000 50,314
--------
115,328
--------
Croatia - 0.63%
Zagrebacka Banka 144A, GDR .......................... 3,913 61,630
--------
61,630
--------
Egypt - 0.48%
*Mobinil - Egyptian Mobile Services .................. 1,264 24,793
*Paints & Chemical 144A, GDR ......................... 12,000 22,500
--------
47,293
--------
Estonia - 0.19%
EESTI Telekom 144A, GDR ............................. 1,211 18,771
--------
18,771
--------
<PAGE>
Market
Number of Value
Shares (U.S.$)
--------------------------------------------------------------------------------
Common Stock (continued)
France - 6.81%
Alcatel .............................................. 2,500 $ 152,545
Compagnie de Saint Gobain ............................ 1,132 149,769
Societe Generale ..................................... 3,200 181,679
Total Fina ........................................... 1,260 180,284
---------
664,277
---------
Finland - 0.46%
Upm-Kymmene Oyj ...................................... 1,574 44,548
---------
44,548
---------
Germany - 6.72%
Bayer ................................................ 4,600 196,946
Bayerische Hypo-und Vereinsbank ...................... 2,740 148,819
Continental .......................................... 3,100 46,697
Rheinisch Westfaelisches Elektric .................... 3,860 154,617
Siemens .............................................. 850 108,203
---------
655,282
---------
Greece - 0.63%
Hellenic Telecommunications 144A, ADR ................ 6,980 61,075
---------
61,075
---------
Hong Kong - 4.55%
Beijing Capital International Airport ................ 324,000 74,779
Hengan International ................................. 234,000 56,107
Hong Kong Electric ................................... 32,000 105,655
Jardine Matheson ..................................... 15,200 84,360
Wharf Holdings ....................................... 60,000 122,323
---------
443,224
---------
Hungary - 0.54%
Gedeon Richter 144A, GDR ............................. 1,088 52,496
---------
52,496
---------
India - 1.71%
Gas Authority of India 144A, GDR ..................... 9,519 48,785
ICICI, ADR ........................................... 3,394 32,031
Larsen & Toubro, GDR ................................. 700 4,410
Mahanager Telephone Nigam 144A, GDR .................. 4,800 28,320
Videsh Sanchar Nigam, GDR ............................ 5,803 42,797
Videsh Sanchar Nigam 144A, GDR ....................... 1,372 10,359
---------
166,702
---------
Israel - 1.01%
Bank Hapoalim ........................................ 22,081 55,856
ECI Telecommunications ............................... 1,801 42,549
---------
98,405
---------
Japan - 9.94%
Canon ................................................ 5,000 198,387
Eisai ................................................ 5,000 153,945
Hitachi .............................................. 15,000 160,817
Matsushita Electric Industrial ....................... 7,000 203,335
Nichido Fire & Marine ................................ 14,000 72,354
West Japan Railway ................................... 44 180,629
---------
969,467
---------
7
<PAGE>
Statement of Net Assets (continued)
Market
Number of Value
Delaware Overseas Equity Fund Shares (U.S.$)
--------------------------------------------------------------------------------
Common Stock (continued)
Malaysia - 1.55%
Petronas Dagangan Berhad ............................. 56,000 $ 50,401
Resorts World Berhad ................................. 18,000 31,500
Sime Darby Berhad .................................... 55,000 68,896
--------
150,797
--------
Mexico - 1.89%
Alfa SA de CV, Class A ............................... 43,400 85,874
Cemex SA - CPO ....................................... 21,396 89,952
Vitro SA, ADR ........................................ 3,500 8,750
--------
184,576
--------
Netherlands - 5.93%
Elsevier - CVA ....................................... 11,600 148,157
ING Groep ............................................ 3,100 212,886
Royal Dutch Petroleum ................................ 3,100 183,868
Vopak ................................................ 1,742 33,263
--------
578,174
--------
New Zealand - 0.82%
Carter Holt Harvey ................................... 28,000 18,545
Telecom Corporation of New Zealand ................... 27,800 61,522
--------
80,067
--------
Peru - 0.18%
Creditcorp, ADR ...................................... 2,420 17,696
--------
17,696
--------
Russia - 0.98%
Gazprom, ADR ......................................... 5,526 44,070
Lukoil Holding, ADR .................................. 960 51,264
--------
95,334
--------
Singapore - 0.65%
Overseas Chinese Banking ............................. 10,000 63,770
--------
63,770
--------
South Africa - 4.22%
Amalgamated Banks of South Africa .................... 18,073 61,425
Iscor ................................................ 42,936 68,137
Network Healthcare ................................... 265,617 28,101
Sanlam ............................................... 74,300 77,133
Sappi ................................................ 11,400 78,094
Sasol ................................................ 12,900 98,775
--------
411,665
--------
South Korea - 0.75%
Pohang Iron & Steel, ADR ............................. 4,600 72,738
--------
72,738
--------
Spain - 3.57%
Banco Santander Central Hispano ...................... 10,100 97,885
Iberdrola SA ......................................... 8,300 101,501
Telefonica ........................................... 7,799 148,720
--------
348,106
--------
<PAGE>
Market
Number of Value
Shares (U.S.$)
--------------------------------------------------------------------------------
Common Stock (continued)
Taiwan - 1.38%
China Steel, GDR .................................... 6,735 $ 78,295
Yageo, GDR .......................................... 5,874 22,762
Yageo 144A, GDR ..................................... 8,750 33,906
---------
134,963
---------
Thailand - 1.53%
Bangkok Bank ........................................ 30,000 25,562
Electricity Generating Public Company ............... 79,000 74,943
Hana Microelectronics ............................... 20,000 48,625
---------
149,130
---------
Turkey - 0.20%
*Efes Sinai Yatirim Holding .......................... 467,740 5,157
*Efes Sinai Yatirim, ADR ............................. 649 13,954
---------
19,111
---------
United Kingdom - 20.10%
Bass ................................................ 19,557 191,714
BG Group ............................................ 29,051 116,885
Blue Circle Industry ................................ 15,000 91,970
Boots ............................................... 20,300 161,585
British Airways ..................................... 32,000 143,262
Cable & Wireless .................................... 11,100 157,539
GKN ................................................. 15,100 174,428
Glaxo Wellcome ...................................... 5,100 146,616
Great Universal Stores .............................. 27,400 189,271
Halifax ............................................. 17,000 133,837
*Lattice ............................................. 29,051 61,867
PowerGen ............................................ 27,700 214,860
Rio Tinto ........................................... 8,300 134,663
Taylor Woodrow ...................................... 16,000 41,911
---------
1,960,408
---------
Total Common Stock
(cost $9,695,509) 8,922,016
---------
Investment Companies - 1.03%
India Fund, (The) ................................... 9,400 100,463
---------
Total Investment Companies
(cost $128,743) .................................... 100,463
---------
Preferred Stock - 0.38%
Telecomunicacoes Brasileiras,
ADR Preferred Block ................................. 500 36,625
---------
Total Preferred Stock
(cost $23,652) ..................................... 36,625
---------
8
<PAGE>
Repurchase Agreements - 5.00%
With Chase Manhattan 6.55% 11/1/00
(dated 10/31/00, collateralized by $172,000
U.S. Treasury Notes 4.75% due 2/15/04,
market value $168,197) ............................. $164,000 $ 164,000
With J.P. Morgan Securities 6.52% 11/1/00
(dated 10/31/00, collateralized by
$68,000 U.S. Treasury Notes 6.25%
due 2/15/03, market value $69,470,
$46,000 U.S. Treasury Notes 5.25% due 8/15/03,
market value $46,041 and $46,000
U.S. Treasury Notes 7.25% due 5/15/04,
market value $49,832) .............................. 162,000 162,000
With PaineWebber 6.54% 11/1/00
(dated (10/31/00, collateralized by $161,000
U.S. Treasury Notes 5.875% due
11/15/05, market value $165,490) ................... 162,000 162,000
----------
Total Repurchase Agreements
(cost $488,000) .................................... 488,000
----------
Total Market Value of Securities - 97.90%
(cost $10,335,904) ................................. 9,547,104
Receivables and Other Assets Net
of Liabilities - 2.10% ............................. 204,543
----------
Net Assets Applicable to 1,341,788 Shares
Outstanding - 100.00% .............................. $9,751,647
==========
Net Asset Value - Delaware Overseas Equity Fund
A Class ($5,783,695 / 748,832 shares) .............. $7.72
-----
Net Asset Value - Delaware Overseas Equity Fund
B Class ($3,406,822 / 511,072 shares) .............. $6.67
-----
Net Asset Value - Delaware Overseas Equity Fund
C Class ($458,235 / 68,503 shares) ................. $6.69
-----
Net Asset Value - Delaware Overseas Equity Fund
Institutional Class ($102,895 / 13,381 shares) ..... $7.69
-----
<PAGE>
Components of Net Assets at October 31, 2000:
Shares of beneficial interest (unlimited
authorization - no par) ............................... $10,358,885
**Undistributed net investment income ..................... 36,858
Accumulated net realized gain on investments ............ 145,589
Net unrealized depreciation of investments and
foreign currencies .................................... (789,685)
----------
Total net assets ........................................ $9,751,647
==========
*Non-income producing security for the year ended October 31, 2000.
**Undistributed net investment income includes net realized gains (losses) on
foreign currencies. Net realized gains (losses) on foreign currencies are
treated as net investment income in accordance with provisions of the Internal
Revenue Code.
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
Net Asset Value and Offering Price per Share -
Delaware Overseas Equity Fund
Net asset value A Class (A) .................................... $7.72
Sales charge (5.75% of offering price or 6.09% of the
amount invested per share) (B) ............................... 0.47
-----
Offering price ................................................. $8.19
=====
----------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon the redemption or repurchase of shares.
(B) See the current prospectus for purchases of $50,000 or more.
See accompanying notes
9
<PAGE>
Statement of Operations
Year Ended October 31, 2000 Delaware Overseas Equity Fund
--------------------------------------------------------------------------------
Investment Income:
Dividends ................................................ $221,272
Interest ................................................. 36,309
Foreign tax withheld ..................................... (15,405) $ 242,176
-------- ---------
Expenses:
Management fees .......................................... 67,731
Registration fees ........................................ 60,611
Dividend disbursing and transfer agent fees and expenses . 54,954
Distribution expense ..................................... 43,839
Reports and statements to shareholders ................... 13,325
Professional fees ........................................ 3,520
Accounting and administration ............................ 2,839
Trustees' fees ........................................... 1,850
Custodian fees and expenses .............................. 17
Other .................................................... 215 248,901
--------
Less expenses absorbed or waived ......................... (71,096)
Less expenses paid indirectly ............................ (182)
---------
Total expenses ........................................... 177,623
---------
Net Investment Income .................................... 64,553
---------
Net Realized and Unrealized Gain (Loss) on Investments
and Foreign Currencies:
Net realized gain (loss) on:
Investments ........................................... 156,688
Foreign currencies .................................... (13,545)
---------
Net realized gain 143,143
Net change in unrealized appreciation/depreciation of
investments and foreign currencies .................... (697,653)
---------
Net Realized and Unrealized Loss on Investments and
Foreign Currencies .................................... (554,510)
---------
Net Decrease in Net Assets Resulting From Operations ..... $(489,957)
=========
See accompanying notes
10
<PAGE>
Statements of Changes in Net Assets
Delaware Overseas Equity Fund
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
10/31/00 10/31/99
<S> <C> <C>
Increase (Decrease) in Net Assets from Operations:
Net investment income .................................... $ 64,553 $ 25,166
Net realized gain on investments and foreign currencies .. 143,143 56,291
Net change in unrealized appreciation/depreciation of
investments and foreign currencies ..................... (697,653) 376,432
-----------------------
Net increase (decrease) in net assets resulting from
operations ............................................. (489,957) 457,889
-----------------------
Distributions to Shareholders from:
Net investment income:
A Class .............................................. (32,767) (158,267)
B Class .............................................. (8,959) (93,220)
C Class .............................................. (1,591) (21,225)
Institutional Class .................................. (1,217) (4,757)
Net realized gain on investments:
A Class .............................................. (36,044) (311,979)
B Class .............................................. (17,917) (199,549)
C Class .............................................. (3,182) (45,435)
Institutional Class .................................. (1,116) (9,052)
-----------------------
(102,793) (843,484)
-----------------------
Capital Share Transactions:
Proceeds from shares sold:
A Class .............................................. 6,773,472 583,522
B Class .............................................. 3,357,926 155,355
C Class .............................................. 348,343 157,634
Institutional Class .................................. 173,452 481,026
Net asset value of shares issued upon reinvestment
of distributions:
A Class .............................................. 65,213 464,682
B Class .............................................. 26,272 284,170
C Class .............................................. 4,677 46,619
Institutional Class .................................. 2,333 13,809
-----------------------
10,751,688 2,186,817
-----------------------
Cost of shares repurchased:
A Class .............................................. (2,997,774) (610,554)
B Class .............................................. (763,336) (429,624)
C Class .............................................. (88,944) (136,429)
Institutional Class .................................. (138,426) (480,947)
-----------------------
(3,988,480) (1,657,554)
-----------------------
Increase in net assets derived from capital share
transactions .......................................... 6,763,208 529,263
-----------------------
Net Increase in Net Assets ............................... 6,170,458 143,668
-----------------------
Net Assets:
Beginning of period ...................................... 3,581,189 3,437,521
-----------------------
End of period ............................................ $ 9,751,647 $3,581,189
=======================
</TABLE>
See accompanying notes
11
<PAGE>
Financial Highlights
Selected data for each share of the Fund outstanding
throughout each period were as follows:
<TABLE>
<CAPTION>
Delaware Overseas Equity Fund A Class
--------------------------------------------------------------------------------------------------------------------------
Year Ended
10/31/00(2) 10/31/99(2) 10/31/98(2) 10/31/97(2,4) 10/31/96(3)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $7.830 $8.950 $12.520 $12.390 $11.400
Income (loss) from investment operations:
Net investment income (loss) ........................... 0.082 0.075 0.091 (0.060) (0.060)
Net realized and unrealized gain (loss) on investments
and foreign currencies ............................... 0.018 0.870 (1.501) 0.960 1.073
--------------------------------------------------------
Total from investment operations ....................... 0.100 0.945 (1.410) 0.900 1.013
--------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ................... (0.100) (0.695) (0.520) (0.440) (0.023)
Distributions from net realized gain on investments .... (0.110) (1.370) (1.640) (0.330) --
--------------------------------------------------------
Total dividends and distributions ...................... (0.210) (2.065) (2.160) (0.770) (0.023)
--------------------------------------------------------
Net asset value, end of period ........................... $7.720 $7.830 $ 8.950 $12.520 $12.390
========================================================
Total return(1) 1.13% 13.86% (12.95%) 7.74% 8.90%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $5,784 $2,285 $2,034 $10,868 $14,886
Ratio of expenses to average net assets ................ 2.00% 1.85% 1.83% 1.80% 1.82%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ...... 2.90% 5.31% 3.75% N/A 2.60%
Ratio of net investment income (loss) to average
net assets ........................................... 1.07% 0.95% 0.93% (0.45%) (0.51%)
Ratio of net investment income (loss) to average
net assets prior to expense limitation and expenses
paid indirectly ...................................... 0.17% (2.51%) (0.99%) N/A (1.29%)
Portfolio turnover ..................................... 11% 7% 87% 18% 21%
</TABLE>
------------------
(1) 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.
(2) The average shares outstanding method has been applied for per share
information.
(3) Commencing May 3, 1996, Delaware Management Company replaced Lincoln
Investment Management, Inc. as the Fund's investment manager.
(4) Commencing September 15, 1997, Delaware International Advisers Limited
entered into a sub-adviser agreement to manage the Fund.
See accompanying notes
12
<PAGE>
Financial Highlights (continued)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
<TABLE>
<CAPTION>
Delaware Overseas Equity Fund B Class
-------------------------------------------------------------------------------------------------------------------------------
Year Ended
10/31/00(2) 10/31/99(2) 10/31/98(2) 10/31/97(2,4) 10/31/96(3)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $6.790 $8.030 $11.540 $11.560 $10.710
Income (loss) from investment operations:
Net investment income (loss) ........................... 0.035 0.017 0.033 (0.140) (0.060)
Net realized and unrealized gain (loss) on investments
and foreign currencies ............................... 0.010 0.753 (1.383) 0.890 0.930
--------------------------------------------------------
Total from investment operations ....................... 0.045 0.770 (1.350) 0.750 0.870
--------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ................... (0.055) (0.640) (0.520) (0.440) (0.020)
Distributions from net realized gain on investments .... (0.110) (1.370) (1.640) (0.330) --
--------------------------------------------------------
Total dividends and distributions ...................... (0.165) (2.010) (2.160) (0.770) (0.020)
--------------------------------------------------------
Net asset value, end of period ........................... $6.670 $6.790 $ 8.030 $11.540 $11.560
========================================================
Total return(1) .......................................... 0.51% 12.98% (13.66%) 6.95% 8.16%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $3,407 $1,018 $1,166 $1,450 $1,208
Ratio of expenses to average net assets ................ 2.70% 2.55% 2.53% 2.50% 2.50%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ...... 3.60% 6.01% 4.45% N/A 3.28%
Ratio of net investment income (loss) to average
net assets ......................................... 0.37% 0.25% 0.23% (1.16%) (1.19%)
Ratio of net investment income (loss) to average
net assets prior to expense limitation and expenses
paid indirectly .................................... (0.53%) (3.21%) (1.69%) N/A (1.97%)
Portfolio turnover ..................................... 11% 7% 87% 18% 21%
</TABLE>
----------------------------
(1) 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.
(2) The average shares outstanding method has been applied for per share
information.
(3) Commencing May 3, 1996, Delaware Management Company replaced Lincoln
Investment Management, Inc. as the Fund's investment manager.
(4) Commencing September 15, 1997, Delaware International Advisers Limited
entered into a sub-adviser agreement to manage the Fund.
See accompanying notes
13
<PAGE>
Financial Highlights (continued)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
<TABLE>
<CAPTION>
Delaware Overseas Equity Fund C Class
----------------------------------------------------------------------------------------------------------------------------
Year Ended
10/31/00(2) 10/31/99(2) 10/31/98(2) 10/31/97(2,4) 10/31/96(3)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $6.810 $8.040 $11.550 $11.580 $10.730
Income (loss) from investment operations:
Net investment income (loss) ............................ 0.035 0.017 0.033 (0.140) (0.060)
Net realized and unrealized gain (loss) on investments
and foreign currencies ................................ 0.010 0.763 (1.383) 0.880 0.930
--------------------------------------------------------
Total from investment operations ........................ 0.045 0.780 (1.350) 0.740 0.870
--------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income .................... (0.055) (0.640) (0.520) (0.440) (0.020)
Distributions from net realized gain on investments ..... (0.110) (1.370) (1.640) (0.330) --
--------------------------------------------------------
Total dividends and distributions ....................... (0.165) (2.010) (2.160) (0.770) (0.020)
--------------------------------------------------------
Net asset value, end of period ............................ $6.690 $6.810 $ 8.040 $11.550 $11.580
========================================================
Total return(1) ........................................... 0.51% 13.08% (13.67%) 6.85% 8.15%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $458 $209 $179 $159 $112
Ratio of expenses to average net assets ................. 2.70% 2.55% 2.53% 2.50% 2.50%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ....... 3.60% 6.01% 4.45% N/A 3.28%
Ratio of net investment income (loss) to average
net assets ........................................... 0.37% 0.25% 0.23% (1.16%) (1.19%)
Ratio of net investment loss to average net assets
prior to expense limitation and expenses paid
indirectly ............................................ (0.53%) (3.21%) (1.69%) N/A (1.97%)
Portfolio turnover ...................................... 11% 7% 87% 18% 21%
</TABLE>
----------------------------
(1) 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.
(2) The average shares outstanding method has been applied for per share
information.
(3) Commencing May 3, 1996, Delaware Management Company replaced Lincoln
Investment Management, Inc. as the Fund's investment manager.
(4) Commencing September 15, 1997, Delaware International Advisers Limited
entered into a sub-adviser agreement to manage the Fund.
See accompanying notes
14
<PAGE>
Financial Highlights (continued)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
<TABLE>
<CAPTION>
Delaware Overseas Equity Fund Institutional Class
---------------------------------------------------------------------------------------------------------------------------
Year Ended
10/31/00(2) 10/31/99(2) 10/31/98(2) 10/31/97(2,4) 10/31/96(3)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $7.810 $8.930 $12.480 $12.320 $11.440
Income (loss) from investment operations:
Net investment income (loss) ............................ 0.106 0.098 0.123 (0.020) (0.060)
Net realized and unrealized gain (loss) on investments
and foreign currencies ................................. 0.004 0.872 (1.513) 0.950 0.963
Total from investment operations ........................ 0.110 0.970 (1.390) 0.930 0.903
Less dividends and distributions:
Dividends from net investment income .................... (0.120) (0.720) (0.520) (0.440) (0.023)
Distributions from net realized gain on investments ..... (0.110) (1.370) (1.640) (0.330) --
Total dividends and distributions ....................... (0.230) (2.090) (2.160) (0.770) (0.023)
Net asset value, end of period ............................ $7.690 $7.810 $8.930 $12.480 $12.320
Total return(1) ........................................... 1.25% 14.30% (12.82%) 8.04% 7.91%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $103 $69 $59 $60 $284
Ratio of expenses to average net assets ................. 1.70% 1.55% 1.53% 1.50% 1.50%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ....... 2.60% 5.01% 3.45% N/A 2.28%
Ratio of net investment income (loss) to average
net assets ............................................ 1.37% 1.25% 1.23% (0.15%) (0.19%)
Ratio of net investment income (loss) to average
net assets prior to expense limitation and expenses
paid indirectly ....................................... 0.47% (2.21%) (0.69%) N/A (0.97%)
Portfolio turnover ...................................... 11% 7% 87% 18% 21%
</TABLE>
----------------------------
(1) 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.
(2) The average shares outstanding method has been applied for per share
information.
(3) Commencing May 3, 1996, Delaware Management Company replaced Lincoln
Investment Management, Inc. as the Fund's investment manager.
(4) Commencing September 15, 1997, Delaware International Advisers Limited
entered into a sub-adviser agreement to manage the Fund.
See accompanying notes
15
<PAGE>
Notes to Financial Statements
October 31, 2000
--------------------------------------------------------------------------------
Delaware Group Adviser Funds (the "Trust") is organized as a Delaware business
trust and offers three series: the Delaware U.S. Growth Fund, the Delaware New
Pacific Fund and the Delaware Overseas Equity Fund. These financial statements
and the related notes pertain to the Delaware Overseas Equity Fund (the "Fund").
The Fund is a diversified open-end investment company under the Investment
Company Act of 1940, as amended. The Fund offers four classes of shares. The A
Class carries a maximum front-end sales charge of 5.75%. The B Class carries a
back-end deferred sales charge. The C Class carries a level load deferred sales
charge. The Institutional Class has no sales charge.
The investment objective of the Fund is to seek maximize total return (capital
appreciation and income) principally through investments in an internationally
diversified portfolio of equity securities.
1. Significant Accounting Policies The following accounting policies are in
accordance with accounting principles generally accepted in the United States
and are consistently followed by the Fund.
Security Valuation -- All equity securities are valued at the last quoted sales
price as of the close of the New York Stock Exchange on the valuation date. If
on a particular day an equity security does not trade, then the mean between the
bid and asked prices will be used. Securities listed on a foreign exchange are
valued at the last quoted sales price before the Fund is valued. Money market
instruments having less than 60 days to maturity are valued at amortized cost,
which approximates market value. Other securities and assets for which market
quotations are not readily available are valued at fair value as determined in
good faith under the direction of the Fund's Board of Trustees.
Federal Income Taxes -- The Fund intends to continue to qualify as a regulated
investment company and make the requisite distributions to shareholders.
Accordingly, no provision for federal income taxes has been made in the
financial statements. Income and capital gain distributions are determined in
accordance with federal income tax regulations, which may differ from accounting
principles generally accepted in the United States.
Class Accounting -- Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various classes of
the Fund on the basis of daily net assets of each class. Distribution expenses
relating to a specific class are charged directly to that class.
Repurchase Agreements -- The Fund may invest in a pooled cash account along with
other members of the Delaware Investments Family of Funds. The aggregate daily
balance of the pooled cash account is invested in repurchase agreements secured
by obligations of the U.S. Government. The respective collateral is held by the
Fund's custodian bank until the maturity of the respective repurchase
agreements. Each repurchase agreement is 102% collateralized. However, in the
event of default or bankruptcy by the counterparty to the agreement, realization
of the collateral may be subject to legal proceedings.
<PAGE>
Foreign Currency Transactions -- Transactions denominated in foreign currencies
are recorded at the current prevailing exchange rates on the valuation date. The
value of all assets and liabilities denominated in foreign currencies are
translated into U.S. dollars at the exchange rate of such currencies against the
U.S. dollar daily. Transaction gains or losses resulting from changes in
exchange rates during the reporting period or upon settlement of the foreign
currency transaction are reported in operations for the current period. It is
not practical to isolate that portion of both realized and unrealized gains and
losses on investments in equity securities that result from fluctuations in
foreign currency exchange rates in the Statement of Operations. The Fund reports
certain foreign currency related transactions as components of realized gains
(losses) for financial reporting purposes, where such components are treated as
ordinary income (loss) for federal income tax purposes.
Use of Estimates -- The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Other -- Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. Foreign dividends are also recorded on the
ex-dividend date or as soon after the ex-dividend date that the Fund is aware of
such dividends, net of all non-rebatable tax withholdings. Withholding taxes on
foreign dividends have been provided for in accordance with the Fund's
understanding of the applicable country's tax rules and rates. The Fund declares
and pays dividends from net investment income and net capital gains, if any,
annually.
Certain expenses of the Fund are paid through commission arrangements with
brokers. These transactions are done subject to best execution. The amount of
these expenses was approximately $182 for the year ended October 31, 2000. The
expenses paid under the above arrangements are included in their respective
expense captions on the Statement of Operations with the corresponding expense
offset shown as "Expenses paid indirectly".
2. Investment Management and Other Transactions with Affiliates In accordance
with the terms of the Investment Management Agreement, the Fund pays Delaware
Management Company (DMC), a series of Delaware Management Business Trust and the
Investment Manager of the Fund, an annual fee which is calculated daily at the
rate of 0.85% on the first $500 million of net assets, 0.80% on the next $500
million, 0.75% on the next $1.5 billion and 0.70% on net assets in excess of
$2.5 billion.
16
<PAGE>
Notes to Financial Statements (continued)
2. Investment Management and Other Transactions with Affiliates
(continued)
DMC has entered into sub-advisory agreement with Delaware International Advisers
Limited (DIAL), an affiliate of DMC, with respect to the management of the Fund.
For the services provided, DMC pays the sub-adviser an annual fee which is
calculated at a rate of 0.80% of average daily net assets of the Fund. The Fund
does not pay any fees directly to the sub-adviser.
DMC has elected to waive its management fee and reimburse the Fund to the extent
necessary to ensure that annual operating expenses, exclusive of taxes,
interest, brokerage commissions and extraordinary expenses, does not exceed
1.70% of average daily net assets of the Fund through October 31, 2000.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of DMC,
to provide dividend disbursing, transfer agent and accounting and administration
services. The Fund pays DSC a monthly fee based on the number of shareholder
accounts, shareholder transactions and average net assets, subject to certain
minimums. At October 31, 2000, the Fund had liabilities for such fees and other
expenses payable to DSC of $6,635.
Pursuant to the Distribution Agreement, the Fund pays Delaware Distributors,
L.P. (DDLP), the Distributor and an affiliate of DMC, an annual fee not to
exceed 0.30% of the average daily net assets of the A Class and 1.00% of the
average daily net assets of the B and C Classes. At October 31, 2000, the Fund
had a liability for such fees and other expenses payable to DDLP of $5,973.
For the year ended October 31, 2000, DDLP earned $3,696 for commissions on sales
of the Fund A Class shares. Certain officers of DMC, DSC and DDLP are officers,
trustees and/or employees of the Fund. These officers, trustees and employees
are paid no compensation by the Fund.
3. Investments
For the year ended October 31, 2000, the Fund made purchases of $7,094,843 and
sales of $762,730 of investment securities other than U.S. government securities
and temporary cash investments.
The cost of investments for federal income tax purposes approximates cost for
book purposes. As of October 31, 2000, the net unrealized depreciation for
federal income tax purposes aggregated $788,800 of which $616,918 related to
unrealized appreciation of securities and $1,405,718 related to unrealized
depreciation of securities. At October 31, 2000, the aggregate cost of
securities was $10,335,904.
<PAGE>
4. Capital Stock
Transactions in capital stock were as follows:
Year Ended
10/31/00 10/31/99
Shares sold:
A Class ........................................... 825,759 75,438
B Class ........................................... 464,852 22,753
C Class ........................................... 49,602 20,523
Institutional Class ............................... 21,019 60,595
Shares issued upon reinvestment of
distributions:
A Class ........................................... 7,972 67,837
B Class ........................................... 3,695 47,520
C Class ........................................... 655 7,770
Institutional Class ............................... 287 2,028
--------- --------
1,373,841 304,464
--------- --------
Shares repurchased:
A Class ........................................... (376,878) (78,698)
B Class ........................................... (107,310) (65,654)
C Class ........................................... (12,451) (19,816)
Institutional Class ............................... (16,753) (60,389)
--------- --------
(513,392) (224,557)
--------- --------
Net increase ........................................ 860,449 79,907
========= ========
17
<PAGE>
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
5. Foreign Exchange Contracts
The Fund will generally enter into forward foreign currency contracts as a way
of managing foreign exchange rate risk. The Fund may enter into these contracts
to fix the U.S. dollar value of a security that it has agreed to buy or sell for
the period between the date the trade was entered into and the date the security
is delivered and paid for. The Fund may also use these contracts to hedge the
U.S. dollar value of securities it already owns denominated in foreign
currencies.
Forward foreign currency contracts are valued at the mean between the bid and
asked prices of the contracts and are marked-to-market daily. Interpolated
values are derived when the settlement date of the contract is an interim date
for which quotations are not available. The change in market value is recorded
by the Fund as an unrealized gain or loss. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
The use of forward foreign currency contracts does not eliminate fluctuations in
the underlying prices of the Fund's securities, but it does establish a rate of
exchange that can be achieved in the future. Although forward foreign currency
contracts limit the risk of loss due to a decline in the value of the hedged
currency, they also limit any potential gain that might result should the value
of the currency increase. In addition, the Fund could be exposed to risks if the
counterparties to the contracts are unable to meet the terms of their contracts.
The Fund had no forward foreign currency contracts outstanding at October 31,
2000.
6. Credit and Market Risk
Some countries in which the Fund may invest in require governmental approval for
the repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if there is deterioration in a
country's balance of payments or for other reasons, a country may impose
temporary restrictions on foreign capital remittances abroad.
The securities exchanges of certain foreign markets are substantially smaller,
less liquid and more volatile than the major securities markets in the United
States. Consequently, acquisition and disposition of securities by the Fund may
be inhibited. In addition, a significant proportion of the aggregate market
value of equity securities listed on the major securities exchanges in emerging
markets are held by a smaller number of investors. This may limit the number of
shares available for acquisition or disposition by the Fund.
<PAGE>
7. Lines of Credit
The Fund, along with certain other funds in the Delaware Investments Family of
Funds (the "Participants"), participates in a $375,400,000 revolving line of
credit facility to be used for temporary or emergency purposes as an additional
source of liquidity to fund redemptions of investor shares. The Participants are
charged an annual commitment fee, which is allocated across the Participants on
the basis of each fund's allocation of the entire facility. The Participants may
borrow up to a maximum of one-third of their net assets under the agreement. The
Fund had no amount outstanding at October 31, 2000, or at any time during the
fiscal year.
8. Tax Information (Unaudited)
The information set forth below is for the Fund's fiscal year as required by
federal laws. Shareholders, however, must report distributions on a calendar
basis for income tax purposes, which may include distributions for portions of
two fiscal years of a fund. Accordingly, the information needed by shareholders
for income tax purposes will be sent to them in early 2001. Please consult your
tax advisor for proper treatment of this information.
For the fiscal year ended October 31, 2000, the Fund designates distributions
paid during the year as follows:
(A)
Long-Term (B) (C)
Capital Gains Ordinary Total
Distributions Income Distributions
(Tax Basis) Distributions (Tax Basis)
------------- ------------- -------------
57% 43% 100%
18
<PAGE>
Report of Independent Auditors
--------------------------------------------------------------------------------
To the Shareholders and Board of Trustees
Delaware Group Adviser Funds - Delaware Overseas Equity Fund
We have audited the accompanying statement of net assets of Delaware Overseas
Equity Fund (the "Fund") as of October 31, 2000, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the four years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights for the
period ended 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 auditing standards generally accepted
in the United States. 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, 2000, by correspondence with
the 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
Delaware Overseas Equity Fund at October 31, 2000, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and its financial highlights for each of the four
years in the period then ended, in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
December 8, 2000
19
<PAGE>
DELAWARE INVESTMENTS FAMILY OF FUNDS
------------------------------------
More 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.
{Graphic Omitted}
o Growth of Capital
o Technology and Innovation
Fund
o Select Growth Fund
o Trend Fund
o Growth Opportunities Fund*
o Small Cap Value Fund
o U.S. Growth Fund
o Tax-Efficient Equity Fund
o Social Awareness Fund
o Total Return
o Blue Chip Fund
o Devon Fund
o Growth and Income Fund
o Decatur Equity Income Fund
o REIT Fund
o Balanced Fund
o International and Global
o Emerging Markets Fund
o New Pacific Fund
o Overseas Equity Fund
o International Equity Fund
o Global Equity Fund
o Global Bond Fund
o Current Income
o Delchester Fund
o High-Yield
Opportunities Fund
o Strategic Income Fund
o Corporate Bond Fund
o Extended Duration
Bond Fund
o American Government
Bond Fund
o U.S. Government
Securities Fund
o Limited-Term
Government Fund
o Tax-Exempt Income
o National High-Yield
Municipal Bond Fund
o Tax-Free USA Fund
o Tax-Free Insured Fund
o Tax-Free USA
Intermediate Fund
o State Tax-Free Funds**
o Stability of Principal
o Cash Reserve
o Tax-Free Money Fund
o Asset Allocation
o Foundation Funds
Growth Portfolio
Balanced Portfolio
Income Portfolio
* Formerly known as DelCap Fund.
** Available for the following states: Arizona, California, Colorado, Florida,
Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, North Dakota, New Jersey,
New Mexico, New York, Oregon, Pennsylvania and Wisconsin. Insured and
intermediate bond funds are available in selected states.
(C)Delaware Distributors, L.P.
<PAGE>
DELAWARE(SM)
INVESTMENTS
-----------
Philadelphia o London
For Shareholders
1.800.523.1918
For Securities Dealers
1.800.362.7500
For Financial Institutions
Representatives Only
1.800.659.2265
www.delawareinvestments.com
This annual report is for the information of Delaware Overseas Equity Fund
shareholders, but it may be used with prospective investors when preceded or
accompanied by a current prospectus for Delaware Overseas Equity Fund and the
Delaware Investments Performance Update for the most recently completed calendar
quarter. The prospectus sets forth details about charges, expenses, investment
objectives and operating policies of the Fund. You should read the prospectus
carefully before you invest. The figures in this report represent past results
which are not a guarantee of future results. The return and principal value of
an investment in the Fund will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost.
--------------------------------------------------------------------------------
BOARD OF TRUSTEES
Wayne A. Stork
Chairman
Delaware Investments Family of Funds
Philadelphia, PA
Walter P. Babich
Board Chairman
Citadel Constructors, Inc.
King of Prussia, PA
David K. Downes
President and Chief Executive Officer
Delaware Investments Family of Funds
Philadelphia, PA
John H. Durham
Private Investor
Horsham, PA
Anthony D. Knerr
Consultant, Anthony Knerr & Associates
New York, NY
Ann R. Leven
Former Treasurer, National Gallery of Art
Washington, DC
Thomas F. Madison
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
Charles E. Peck
Retired
Fredericksburg, VA
Janet L. Yeomans
Vice President and Treasurer
3M Corporation
St. Paul, MN
AFFILIATED OFFICERS
Charles E. Haldeman, Jr.
President and Chief Executive Officer
Delaware Management Holdings, Inc.
Philadelphia, PA
Richard J. Flannery
Executive Vice President
and General Counsel
Delaware Investments Family of Funds
Philadelphia, PA
Bruce D. Barton
President and Chief Executive Officer
Delaware Distributors, L.P.
Philadelphia, PA
<PAGE>
Investment Manager
Delaware Management Company
Philadelphia, PA
International Affiliate
Delaware International Advisers Ltd.
London, England
National Distributor
Delaware Distributors, L.P.
Philadelphia, PA
Shareholder Servicing, Dividend
Disbursing and Transfer Agent
Delaware Service Company, Inc.
Philadelphia, PA
2005 Market Street
Philadelphia, PA 19103-3682
(4090) Printed in the USA
AR-109 [10/00] PPL 12/00 (J6571)
