<PAGE>
DELAWARE(SM)
INVESTMENTS
---------------------
Philadelphia o London
Delaware International Equity Fund
Delaware Global Equity Fund
Delaware Overseas Equity Fund
Delaware Emerging Markets Fund
Delaware New Pacific Fund
Delaware Global Bond Fund
Class A o Class B o Class C
Prospectus February 1, 2000
International and Global Funds
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
<PAGE>
Table of contents
.................................................................
Fund profiles page 2
Delaware International Equity Fund 2
Delaware Global Equity Fund 4
Delaware Overseas Equity Fund 7
Delaware Emerging Markets Fund 9
Delaware New Pacific Fund 12
Delaware Global Bond Fund 14
.................................................................
How we manage the Funds page 16
Our investment strategies 16
The securities we typically invest in 21
The risks of investing in the Funds 28
.................................................................
Who manages the Funds page 32
Investment managers and sub-advisers 32
Portfolio managers 32
Fund administration (Who's who) 35
.................................................................
About your account page 36
Investing in the Funds 36
Choosing a share class 36
How to reduce your sales charge 38
How to buy shares 39
Retirement plans 40
How to redeem shares 41
Account minimums 42
Special services 42
Dividends, distributions and taxes 44
.................................................................
Certain management considerations page 45
.................................................................
Financial highlights page 46
1
<PAGE>
Profile: Delaware International Equity Fund
What is the Fund's goal?
Delaware International Equity Fund seeks long-term growth without undue risk
to principal. Although the Fund will strive to achieve its goal, there is no
assurance that it will.
What are the Fund's main investment strategies? The Fund invests primarily in
foreign equity securities that provide the potential for capital appreciation
and income. At least 65% of the Fund's total assets will be invested in equity
securities of issuers from at least three foreign countries. An issuer is
considered to be from the country where it is located, where the majority of its
assets are located or where it generates the majority of its operating income.
In selecting investments for the Fund,
o We strive to identify well managed companies that are undervalued based on
such factors as assets, earnings, dividends or growth potential.
o In order to compare the value of different stocks, we consider whether the
future dividends on a stock are expected to increase faster than, slower than,
or in line with the level of inflation. We then estimate what we think the
value of those anticipated future dividends would be worth if they were being
paid today. We believe this gives us an estimate of the stock's true value.
o We generally prefer to purchase securities in countries where the currency is
undervalued or fair-valued compared to other countries because these
securities may offer greater return potential. We attempt to determine whether
a particular currency is overvalued or undervalued by comparing the amount of
goods and services that a dollar will buy in the United States to the amount
of foreign currency required to buy the same amount of goods and services in
another country. When the dollar buys less, the foreign currency may be
overvalued, and when the dollar buys more, the foreign currency may be
undervalued.
What are the main risks of investing in the Fund? Investing in any mutual fund
involves risk, including the risk that you may lose part or all of the money you
invest. The price of Fund shares will increase and decrease according to changes
in the value of the Fund's investments. This Fund will be affected primarily by
declines in stock prices, which can be caused by a drop in foreign stock markets
or poor performance in specific industries or companies. Because the Fund
invests in international securities in both established and developing
countries, it will be affected by international investment risks related to
currency valuations, political instability, economic instability, and lax
accounting and regulatory standards. For a more complete discussion of risk,
please turn to page 28.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
How has Delaware International Equity Fund performed?
- --------------------------------------------------------------------------------
Year-by-year total return (Class A)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10.74% 17.83% 6.57% 11.27% -5.54% 19.92% 2.19% 9.17% 8.01% -2.81%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
</TABLE>
This bar chart and table can help you evaluate the risks of investing in the
Fund. We show how returns for the Fund's Class A shares have varied over the
past eight calendar years, as well as the average annual returns of all shares
for the one- and five-year periods and since inception, if applicable. The
Fund's past performance is not necessarily an indication of how it will perform
in the future. The returns reflect voluntary expense caps, if any, in effect
during the periods. The returns would be lower without the voluntary caps. There
is no longer a cap in place for this Fund.
During the periods illustrated in this bar chart, Class A's highest quarterly
return was 13.35% for the quarter ended December 31, 1998 and its lowest
quarterly return was -13.72% for the quarter ended September 30, 1998.
The maximum Class A sales charge of 5.75%, which is normally deducted when you
purchase shares, is not reflected in the total returns above or in the bar
chart. If this fee were included, the returns would be less than those shown.
The average annual returns shown in the table on page 3 do include the sales
charge.
2
<PAGE>
How has Delaware International Equity Fund performed? (continued)
- --------------------------------------------------------------------------------
Average annual returns for periods ending 12/31/99
<TABLE>
<CAPTION>
CLASS A B C Morgan Stanley
Capital International
(Inception 10/31/91) (Inception 9/6/94) (Inception 11/29/95) (if redeemed)* EAFE Index
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
1 year 7.21% 7.98% 11.92% 27.30%
5 years 10.33% 10.59% N/A 13.15%
Lifetime** 9.64% 8.54% 11.41% 11.06%
</TABLE>
The Fund's returns are compared to the performance of the Morgan Stanley
Capital International EAFE (Europe, Australia, Far East) Index. You should
remember that unlike the Fund, the index is unmanaged and doesn't reflect the
costs of operating a mutual fund, such as the costs of buying, selling and
holding the securities.
*If shares were not redeemed, the returns for Class B would be 12.98%, 10.86%
and 8.67%, respectively, for the one-year, five-year and lifetime periods.
Returns for Class C would be 12.92% and 11.41% respectively, for the one-year
and lifetime periods.
**The Morgan Stanley Capital International EAFE Index return shown is for the A
Class lifetime period. The Index returns for Class B and Class C lifetime
periods were 12.28% and 14.38% respectively. Maximum sales charges are
included in the Fund returns above.
<TABLE>
<CAPTION>
What are Delaware International Equity
Fund's fees and expenses? CLASS A B C
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales charges are fees paid directly Maximum sales charge (load) imposed on
from your investments when you buy or sell purchases as a percentage of offering price 5.75% none none
shares of the Fund.
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none(1) 2%(2) 1%(3)
Maximum sales charge (load) imposed on
reinvested dividends none none none
Redemption fees none none none
- ------------------------------------------------------------------------------------------------------------------------------------
Annual fund operating expenses are Management fees(4) 0.85% 0.85% 0.85%
deducted from the Fund's assets.
Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
Other expenses 0.75% 0.75% 0.75%
Total operating expenses 1.90% 2.60% 2.60%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CLASS(6) A B B C C
(if redeemed) (if redeemed)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
This example is intended to help you
compare the cost of investing in the 1 year $757 $263 $763 $263 $363
Fund to the cost of investing in other
mutual funds with similar investment 3 years $1,138 $808 $1,108 $808 $808
objectives. We show the cumulative
amount of Fund expenses on a 5 years $1,542 $1,380 $1,580 $1,380 $1,380
hypothetical investment of $10,000
with an annual 5% return over the 10 years $2,669 $2,764 $2,764 $2,934 $2,934
time shown.(5) This is an example
only, and does not represent future
expenses, which may be greater or
less than those shown here.
</TABLE>
(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial adviser who is
paid a commission, a contingent deferred sales charge will be imposed on
redemptions made within two years of purchase. Additional Class A purchase
options that involve a contingent deferred sales charge may be permitted
from time to time and will be disclosed in the Prospectus if they are
available.
(2) If you redeem Class B shares during the first year after you buy them, you
will pay a contingent deferred sales charge of 5%, which declines to 4%
during the second year, 3% during the third and fourth years, 2% during the
fifth year, 1% during the sixth year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) Reflects a new management fee which became effective on April 15, 1999.
(5) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show.
(6) The Class B example reflects the conversion of Class B shares to Class A
shares after approximately eight years. Information for the ninth and tenth
years reflects expenses of the Class A shares.
3
<PAGE>
Profile: Delaware Global Equity Fund
What is the Fund's goal?
Delaware Global Equity Fund seeks long-term total return. Although the Fund
will strive to achieve its goal, there is no assurance that it will.
What are the Fund's main investment strategies?
The Fund invests primarily in U.S. and foreign equity securities that provide
the potential for capital appreciation and income. Under normal circumstances,
we will invest at least 65% of the Fund's total assets in equity securities from
at least three different countries, one of which may be the United States. An
issuer is considered to be from the country where it is located, where the
majority of its assets are located or where it generates the majority of its
operating income.
To determine how much of the Fund's assets to allocate to international stocks
and how much to U.S. stocks, we compare the potential total return of each asset
class in the context of our expectations for inflation, economic growth and
political stability in various regions.
In selecting investments for the Fund,
o We strive to identify well managed companies that are undervalued based on
such factors as assets, earnings, dividends or growth potential.
o In order to compare the value of different stocks, we consider whether the
future dividends on a stock are expected to increase faster than, slower than,
or in line with the level of inflation. We then estimate what we think the
value of those anticipated future dividends would be worth if they were being
paid today. We believe this gives us an estimate of the stock's true value.
o We generally prefer to purchase securities in countries where the currency is
undervalued or fair-valued compared to other countries because these
securities may offer greater return potential. We attempt to determine whether
a particular currency is overvalued or undervalued by comparing the amount of
goods and services that a dollar will buy in the United States to the amount
of foreign currency required to buy the same amount of goods and services in
another country. When the dollar buys less, the foreign currency may be
overvalued, and when the dollar buys more, the foreign currency may be
undervalued.
What are the main risks of investing in the Fund? Investing in any mutual fund
involves risk, including the risk that you may lose part or all of the money you
invest. The price of Fund shares will increase and decrease according to changes
in the value of the Fund's investments. This Fund will be affected primarily by
declines in stock prices, which can be caused by a drop in the stock market or
poor performance in specific industries or companies. Because the Fund invests
in foreign securities, it will be affected by international investment risks
related to currency valuations, political instability, economic instability and
lax accounting and regulatory standards.
The Fund is considered "non-diversified" under federal laws that regulate mutual
funds. That means the Fund may allocate more of its net assets to investments in
single securities than a "diversified" fund. Thus, adverse effects on the Fund's
investments may affect a larger portion of its overall assets and subject the
Fund to greater risks. For a more complete discussion of risk, please turn to
page 28.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
4
<PAGE>
How has Delaware Global Equity Fund performed?
- --------------------------------------------------------------------------------
Year-by-year total return (Class A)
24.73% 15.50% 11.04% 8.54% 5.91%
1995 1996 1997 1998 1999
This bar chart and table can help you evaluate the risks of investing in the
Fund. We show how returns for the Fund's Class A shares have varied over the
past five calendar years, as well as the average annual returns of all shares
for the one-and five-year periods and since inception, if applicable. The Fund's
past performance is not necessarily an indication of how it will perform in the
future. The returns reflect voluntary expense caps. The returns would be lower
without the voluntary caps. On July 21, 1998, the Fund's name was changed from
Global Assets Fund to Global Equity Fund and the Fund's investment focus changed
from a mix of foreign and U.S. stocks and bonds to primarily foreign and U.S.
stocks.
During the periods illustrated in this bar chart, Class A's highest quarterly
return was 11.24%% for the quarter ended December 31, 1998 and its lowest
quarterly return was -9.60% for the quarter ended September 30, 1998.
The maximum Class A sales charge of 5.75%, which is normally deducted when you
purchase shares, is not reflected in the total returns above or in the bar
chart. If this fee were included, the returns would be less than those shown.
The average annual returns in the table shown below do include the sales charge.
Average annual returns for periods ending 12/31/99
<TABLE>
<CAPTION>
CLASS A B C Morgan Stanley
Capital International
(if redeemed)* (if redeemed)* World Index
(Inception 12/27/94) (Inception 12/27/94) (Inception 11/29/95)
<S> <C> <C> <C> <C>
1 year -0.21% 0.20% 4.14% 25.34%
5 years 11.62% 11.92% N/A 20.25%
Lifetime** 11.57% 11.99% 9.76% 20.25%
</TABLE>
The Fund's returns are compared to the performance of the Morgan Stanley
Capital International World Index. You should remember that unlike the Fund, the
index is unmanaged and doesn't reflect the costs of operating a mutual fund,
such as the costs of buying, selling and holding the securities.
*If shares were not redeemed, the returns for Class B would be 5.20%, 12.17%
and 12.12%, respectively, for the one-year, five-year and lifetime periods.
Returns for Class C would be 5.14% and 9.76% respectively, for the one-year
and lifetime periods.
**The Morgan Stanley Capital International World Index return shown is for the
Class A and Class B lifetime period. The Index return for Class C lifetime
period was 20.41%. Maximum sales charges are included in the Fund returns in
the table.
5
<PAGE>
<TABLE>
<CAPTION>
What are Delaware Global Equity Fund's
fees and expenses? CLASS A B C
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales charges are fees paid directly from Maximum sales charge (load) imposed on
your investments when you buy or sell shares purchases as a percentage of offering price 5.75% none none
of the Fund.
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none(1) 5%(2) 1%(3)
Maximum sales charge (load) imposed on
reinvested dividends none none none
Redemption fees none none none
- ------------------------------------------------------------------------------------------------------------------------------------
Annual fund operating expenses are deducted Management fees(4) 0.85% 0.85% 0.85%
from the Fund's assets.
Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
Other expenses 1.21% 1.21% 1.21%
Total annual fund operating expenses 2.36% 3.06% 3.06%
Fee waivers and payments(5) (0.51%) (0.51%) (0.51%)
Net expenses 1.85% 2.55% 2.55%
</TABLE>
<TABLE>
<CAPTION>
CLASS(7) A B B C C
(if redeemed) (if redeemed)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
This example is intended to help you compare 1 year $752 $258 $758 $258 $358
the cost of investing in the Fund to the cost 3 years $1,223 $897 $1,197 $897 $897
of investing in other mutual funds with similar 5 years $1,719 $1,562 $1,762 $1,562 $1,562
investment objectives. We show the cumulative 10 years $3,079 $3,175 $3,175 $3,338 $3,338
amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return
over the time shown.(6) This is an example only,
and does not represent future expenses, which
may be greater or less than those shown here.
</TABLE>
(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial adviser who is
paid a commission, a contingent deferred sales charge will be imposed on
redemptions made within two years of purchase. Additional Class A purchase
options that involve a contingent deferred sales charge may be permitted
from time to time and will be disclosed in the Prospectus if they are
available.
(2) If you redeem Class B shares during the first year after you buy them, you
will pay a contingent deferred sales charge of 5%, which declines to 4%
during the second year, 3% during the third and fourth years, 2% during the
fifth year, 1% during the sixth year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) Reflects a new management fee which became effective April 1, 1999.
(5) The investment manager has contracted to waive fees and pay expenses through
January 31, 2001 in order to prevent total operating expenses (excluding any
taxes, interest, brokerage fees, extraordinary expenses and 12b-1 fees) from
exceeding 1.55% of average daily net assets.
(6) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. This example reflects the net operating
expenses with expense waivers for the one-year period and the total
operating expenses without expense waivers for years two through 10.
(7) The Class B example reflects the conversion of Class B shares to Class A
shares after approximately eight years. Information for the ninth and tenth
years reflects expenses of the Class A shares.
6
<PAGE>
Profile: Delaware Overseas Equity Fund
What is the Fund's goal?
Delaware Overseas Equity Fund seeks to maximize total return (capital
appreciation and income). Although the Fund will strive to achieve its
goal, there is no assurance that it will.
What are the Fund's main investment strategies? We invest primarily in foreign
equity securities which we believe offer capital appreciation potential. We may
invest in companies that are located in established or developing countries;
however we limit our investments in companies located in developing countries.
In determining what portion of Delaware Overseas Equity Fund's assets should be
allocated to a particular country, we consider: how weak or strong the country's
currency is, the country's prospects for economic growth compared to other
countries, expected levels of inflation, political environment and the range of
investment opportunities available in the country.
In selecting investments for the Fund,
o We strive to identify well managed companies that are undervalued based on
such factors as assets, earnings, dividends or growth potential.
o In order to compare the value of different stocks, we consider whether the
future dividends on a stock are expected to increase faster than, slower than,
or in line with the level of inflation. We then estimate what we think the
value of those anticipated future dividends would be worth if they were being
paid today. We believe this gives us an estimate of the stock's true value.
o We generally prefer to purchase securities in countries where the currency is
undervalued or fair-valued compared to other countries because these
securities may offer greater return potential. We attempt to determine whether
a particular currency is overvalued or undervalued by comparing the amount of
goods and services that a dollar will buy in the United States to the amount
of foreign currency required to buy the same amount of goods and services in
another country. When the dollar buys less, the foreign currency may be
overvalued, and when the dollar buys more, the foreign currency may be
undervalued.
What are the main risks of investing in the Fund? Investing in any mutual fund
involves risk, including the risk that you may lose part or all of the money you
invest. The price of Fund shares will increase and decrease, sometimes rapidly
and unpredictably, according to changes in the value of the Fund's investments.
These fluctuations can be even more pronounced for funds like Delaware Overseas
Equity Fund, which invests in developing countries. This Fund will be affected
primarily by declines in stock prices, which can be caused by a drop in foreign
stock markets or poor performance in specific industries or companies. Because
the Fund invests in international securities in both established and developing
countries, it will be affected by international investment risks related to
changes in currency valuations, political instability, economic instability, and
lax accounting and regulatory standards. For a more complete discussion of risk,
please turn to page 28.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
<PAGE>
This bar chart and table can help you evaluate the risks of investing in the
Fund. We show how returns for the Fund's Class A shares have varied over the
past six calendar years, as well as average annual returns of all shares for the
one- and five-years and since inception. The Fund's past performance does not
necessarily indicate how it will perform in the future. The returns reflect
voluntary expense caps. The returns would be lower without the voluntary caps.
During the periods illustrated in this bar chart, Class A's highest quarterly
return was 11.93% for the quarter ended December 31, 1999 and its lowest
quarterly return was -13.70% for the quarter ended September 30, 1999.
The maximum Class A sales charge of 5.75%, which is normally deducted when you
purchase shares, is not reflected in the total returns above or in the bar
chart. If this fee were included, the returns would be less than those shown.
The average annual returns in the table shown on page 8 do include the sales
charge.
How has Delaware Overseas Equity Fund performed?
- --------------------------------------------------------------------------------
Year-by-year total return (Class A)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
4.21% 11.10% 9.53% 1.76% -6.74% 25.62%
1994 1995 1996 1997 1998 1999
</TABLE>
7
-----
<PAGE>
<TABLE>
<CAPTION>
How has Delaware Overseas Equity Fund performed? (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Average annual returns for periods ending 12/31/99
CLASS A B C Morgan Stanley
Capital International
(if redeemed)* (if redeemed)* EAFE Index
(Inception 12/3/93) (Inception 3/29/94) (Inception 5/10/94)
<S> <C> <C> <C> <C>
1 year 18.38% 19.65% 23.77% 27.30%
5 years 6.46% 6.73% 6.94% 13.15%
Lifetime** 5.87% 5.49% 5.73% 12.29%
</TABLE>
The Fund's returns are compared to the performance of the Morgan Stanley
Capital International EAFE Index. You should remember that unlike the Fund,
the index is unmanaged and doesn't reflect the actual costs of operating a
mutual fund, such as the costs of buying, selling and holding the securities.
*If shares were not redeemed, the returns for Class B would be 24.65%, 6.96%
and 5.59%, respectively, for the one-year, five-year and lifetime periods,
respectively. Returns for Class C would be 24.77%, 6.94%, and 5.73% for the
one-year, five-year and lifetime periods, respectively.
**Morgan Stanley Capital International EAFE Index returns are for Class A
lifetime. Index returns for Class B and Class C lifetimes were 12.17% and
11.81%, respectively. Maximum sales charges are included in the Fund returns
above.
<TABLE>
<CAPTION>
What are Delaware Overseas Equity Fund's
fees and expenses?
CLASS A B C
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales charges are fees paid directly from Maximum sales charge (load) imposed on
your investments when you buy or sell shares purchases as a percentage of offering price 5.75% none none
of the Fund.
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none(1) 5%(2) 1%(3)
Maximum sales charge (load) imposed on
reinvested dividends none none none
Redemption fees none none none
- ------------------------------------------------------------------------------------------------------------------------------------
Annual fund operating expenses are deducted Management fees(4) 0.85% 0.85% 0.85%
from the Fund's assets. Distribution and service (12b-1) fees 0.30%(5) 1.00% 1.00%
Other expenses 4.12% 4.12% 4.12%
Total operating expenses(6) 5.27% 5.97% 5.97%
</TABLE>
<TABLE>
<CAPTION>
CLASS(8) A B B C C
(if redeemed) (if redeemed)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
This example is intended to help you compare 1 year $1,071 $594 $1,094 $594 $694
the cost of investing in the Fund to the 3 years $2,059 $1,765 $2,065 $1,765 $1,765
cost of investing in other mutual funds with 5 years $3,042 $2,913 $3,113 $2,913 $2,913
similar investment objectives. We show the 10 years $5,475 $5,567 $5,567 $5,688 $5,688
cumulative amount of Fund expenses on a
hypothetical investment of $10,000 with an
annual 5% return over the time shown.(7) This
is an example only, and does not represent
future expenses, which may be greater or
less than those shown here.
</TABLE>
<PAGE>
(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial adviser who is
paid a commission, a contingent deferred sales charge will be imposed on
redemptions made within two years of purchase. Additional Class A purchase
options that involve a contingent deferred sales charge may be permitted
from time to time and will be disclosed in the Prospectus if they are
available.
(2) If you redeem Class B shares during the first year after you buy them, you
will pay a contingent deferred sales charge of 5%, which declines to 4%
during the second year, 3% during the third and fourth years, 2% during the
fifth year, 1% during the sixth year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) Reflects a new management fee which became effective on April 1, 1999.
(5) Prior to May 6, 1996, 12b-1 Plan expenses for Class A shares were 0.35%.
Beginning May 6, 1996, those expenses were reduced to 0.30%.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(6) The investment manager has agreed to Fund expenses including voluntary expense caps in effect through October
waive fees and pay expenses through 31, 2000
October 31, 2000 in order to prevent
total operating expenses (excluding any CLASS A B C
taxes, interest, brokerage fees,
extraordinary expenses and 12b-1 fees) Management fees 0.00% 0.00% 0.00%
from exceeding 1.70% of average daily
net assets. The fees and expenses shown Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
in the table above do not reflect this
voluntary expense cap. The table to the Other expenses 1.70% 1.70% 1.70%
right shows operating expenses,
reflecting the manager's current fee Total operating expenses 2.00% 2.70% 2.70%
waivers and payments.
</TABLE>
(7) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show. In addition, the example does not assume the voluntary expense
limitation discussed in footnote 6.
(8) The Class B example reflects the conversion of Class B shares to Class A
shares after approximately eight years. Information for the ninth and tenth
years reflects expenses of the Class A shares.
8
- -----
<PAGE>
Profile: Delaware Emerging Markets Fund
What is the Fund's goal?
Delaware Emerging Markets Fund seeks long-term capital appreciation.
Although the Fund will strive to achieve its goal, there is no
assurance that it will.
What are the Fund's main investment strategies? The Fund invests primarily in
equity securities of issuers from emerging foreign countries. Under normal
market conditions, at least 65% of the Fund's total assets will be invested in
equity securities of issuers from at least three different countries whose
economies are considered to be emerging or developing.
We may invest up to 35% of the Fund's net assets in fixed-income securities
issued by companies in emerging countries or by foreign governments, their
agents, instrumentalities or political sub-divisions. We may invest in
fixed-income securities that are denominated in the currencies of emerging
market countries. All of these may be high-yield, high risk fixed-income
securities.
In selecting investments for the Fund,
o We strive to identify well managed companies that are undervalued based on
such factors as assets, earnings, dividends or growth potential.
o In order to compare the value of different stocks, we consider whether the
future dividends on a stock are expected to increase faster than, slower than,
or in line with the level of inflation. We then estimate what we think the
value of those anticipated future dividends would be worth if they were being
paid today. We believe this gives us an estimate of the stock's true value.
Because many of the countries in which the Fund invests are emerging
countries, there may be less information available for us to use in making
this analysis than is available for more developed countries.
o We generally prefer to purchase securities in countries where the currency is
undervalued or fair-valued compared to other countries because these
securities may offer greater return potential. We attempt to determine whether
a particular currency is overvalued or undervalued by comparing the amount of
goods and services that a dollar will buy in the United States to the amount
of foreign currency required to buy the same amount of goods and services in
another country. When the dollar buys less, the foreign currency may be
overvalued, and when the dollar buys more, the foreign currency may be
undervalued.
What are the main risks of investing in the Fund? Investing in any mutual fund
involves risk, including the risk that you may lose part or all of the money you
invest. The price of Fund shares will increase and decrease, sometimes rapidly
and unpredictably, according to changes in the value of the Fund's investments.
These fluctuations can be even more pronounced for funds like Delaware Emerging
Markets Fund, which invests in emerging countries. This Fund will be affected
primarily by declines in stock prices, which can be caused by a drop in foreign
stock markets or poor performance in specific industries or companies. The value
of the Fund's investments and, therefore, the price of the Fund's shares may be
more volatile than investments in more developed markets. Because the Fund
invests in international securities in developing countries as well as
established countries, it will be affected by international investment risks
related to currency valuations, political instability, economic instability, or
lax accounting and regulatory standards.
The Fund may invest up to 35% of its net assets in high-yield, high risk foreign
fixed-income securities, which are subject to substantial risks, particularly
during periods of economic downturns or rising interest rates.
The Fund is considered "non-diversified" under federal laws that regulate mutual
funds. This means the Fund may allocate more of its net assets to investments in
single securities than a "diversified" fund. Thus, adverse effects on the Fund's
investments may affect a larger portion of its overall assets and subject the
Fund to greater risks. For a more complete discussion of risk, please turn to
page 28.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
9
-----
<PAGE>
How has Delaware Emerging Markets Fund performed?
- --------------------------------------------------------------------------------
Year-by-year total return (Class A)
1.33% -36.40% 54.48%
1997 1998 1999
This bar chart and table can help you evaluate the risks of investing in the
Fund. We show how returns for the Fund's Class A shares have varied over the
past three calendar years, as well as the average annual returns of all shares
for the one-year period and since inception. The Fund's past performance is not
necessarily an indication of how it will perform in the future. The returns
reflect voluntary expense caps in effect during the periods. The returns would
be lower without the voluntary caps.
During the periods illustrated in this bar chart, Class A's highest quarterly
return was 25.52% for the quarter ended June 30, 1999 and its lowest quarterly
return was -26.03% for the quarter ended June 30, 1998.
The maximum Class A sales charge of 5.75%, which is normally deducted when you
purchase shares, is not reflected in the total returns above or in the chart. If
this fee were included, the returns would be less than those shown. The average
annual returns in the table shown below do include the sales charge.
Average annual returns for periods ending 12/31/99
<TABLE>
<CAPTION>
CLASS A B C Morgan Stanley
Capital International
Emerging Markets
(if redeemed)* (if redeemed)* Free Index
<S> <C> <C> <C> <C>
1 year 45.50% 48.56% 52.39% 66.41%
Lifetime -1.43% -1.22% -0.47% 1.47%
(Inception 6/10/96)
</TABLE>
The Fund's returns are compared to the performance of the Morgan Stanley Capital
International Emerging Markets Free Index. You should remember that unlike the
Fund, the index is unmanaged and doesn't reflect the costs of operating a mutual
fund, such as the costs of buying, selling and holding the securities.
*If shares were not redeemed, the returns for Class B would be 53.56% and
-0.44%, respectively, for the one-year and lifetime periods. Returns for Class
C would be 53.39% and -0.47%, respectively, for the one-year and lifetime
periods.
10
- -----
<PAGE>
<TABLE>
<CAPTION>
What are Delaware Emerging Markets
Fund's fees and expenses? CLASS A B C
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales charges are fees paid directly from Maximum sales charge (load) imposed on
your investments when you buy or sell purchases as a percentage of offering price 5.75% none none
shares of the Fund.
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none(1) 5%(2) 1%(3)
Maximum sales charge (load) imposed on
reinvested dividends none none none
Redemption fees none none none
- ------------------------------------------------------------------------------------------------------------------------------------
Annual fund operating expenses are Management fees 1.25% 1.25% 1.25%
deducted from the Fund's assets.
Distribution and service (12b-1) fees 0.30%(4) 1.00% 1.00%
Other expenses 1.44% 1.44% 1.44%
Total operating expenses 2.99% 3.69% 3.69%
Fee waivers and payments(5) (0.99%) (0.99%) (0.99%)
Net expenses 2.00% 2.70% 2.70%
</TABLE>
<TABLE>
<CAPTION>
CLASS(7) A B B C C
(if redeemed) (if redeemed)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
This example is intended to help you 1 year $766 $273 $773 $273 $373
compare the cost of investing in the Fund 3 years $1,359 $1,038 $1,338 $1,038 $1,038
to the cost of investing in other mutual 5 years $1,975 $1,823 $2,023 $1,823 $1,823
funds with similar investment 10 years $3,627 $3,723 $3,723 $3,878 $3,878
objectives. We show the cumulative amount
of Fund expenses on a hypothetical
investment of $10,000 with an annual 5%
return over the time shown.(6) This is an
example only, and does not represent future
expenses, which may be greater or less than
those shown here.
</TABLE>
(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial adviser who is
paid a commission, a contingent deferred sales charge will be imposed on
redemptions made within two years of purchase. Additional Class A purchase
options that involve a contingent deferred sales charge may be permitted
from time to time and will be disclosed in the Prospectus if they are
available.
(2) If you redeem Class B shares during the first year after you buy them, you
will pay a contingent deferred sales charge of 5%, which declines to 4%
during the second year, 3% during the third and fourth years, 2% during the
fifth year, 1% during the sixth year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) The distributor has agreed to waive a portion of 12b-1 fees from February 1,
1998 through May 31, 2000 in order to prevent these fees from exceeding
0.25% of average daily net assets.
(5) The investment manager has contracted to waive fees and pay expenses through
January 31, 2001 in order to prevent total operating expenses (excluding any
taxes, interest, brokerage fees, extraordinary expenses and 12b-1 fees) from
exceeding 1.70% of average daily net assets.
(6) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. This example reflects the net operating
expenses with expense waivers for the one-year period and the total
operating expenses without expense waivers for years two through 10.
(7) The Class B example reflects the conversion of Class B shares to Class A
shares after approximately eight years. Information for the ninth and tenth
years reflects expenses of the Class A shares.
11
-----
<PAGE>
Profile: Delaware New Pacific Fund
What is the Fund's goal?
Delaware New Pacific Fund seeks to maximize long-term capital
appreciation. Although the Fund will strive to achieve its goal, there
is no assurance that it will.
What are the Fund's main investment strategies? The Fund invests primarily in
stocks of companies of all sizes that are located in or have their principal
business activities in countries located in the Pacific Basin, such as
Australia, China, Hong Kong, Japan, Korea, Malaysia, Philippines, Singapore and
Taiwan. The Fund may invest in both established and developing countries. Under
normal circumstances we will invest at least 65% of the Fund's net assets in
Pacific Basin countries.
In selecting stocks for the portfolio, we look for companies that can benefit
from future economic growth in the region. We evaluate both individual companies
and individual countries to determine how much of the portfolio should be
allocated to companies located there. When evaluating individual companies, we
consider the growth prospects for the company and its industry, the financial
strength of the company and the quality of its management. We also consider
whether the stock appears overvalued or undervalued compared to other stocks in
the market or in its industry.
What are the main risks of investing in the Fund? Investing in any mutual fund
involves risk, including the risk that you may lose part or all of the money you
invest. The price of Fund shares will increase and decrease, sometimes rapidly
and unpredictably, according to changes in the value of the Fund's investments.
These fluctuations can be even more pronounced for funds like Delaware New
Pacific Fund that invests in developing countries. This Fund will be affected
primarily by declines in stock prices, which can be caused by a drop in foreign
stock markets or poor performance in specific industries or companies. Because
the Fund invests in international securities in both established and developing
countries, it will be affected by international investment risks related to
changes in currency valuations, political instability, economic instability, and
lax accounting and regulatory standards. For a more complete discussion of risk,
please turn to page 28.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
<PAGE>
How has Delaware New Pacific Fund performed?
- --------------------------------------------------------------------------------
This bar chart and table can help you evaluate the risks of investing in the
Fund. We show how returns for the Fund's Class A shares have varied over the
past six calendar years, as well as average annual returns of all shares for the
one- and five-year periods and since inception. The Fund's past performance does
not necessarily indicate how it will perform in the future. The returns reflect
voluntary expense caps. The returns would be lower without the voluntary caps.
During the periods illustrated in this bar chart, Class A's highest quarterly
return was 26.98% for the quarter ended December 31, 1999 and its lowest
quarterly return was -26.10% for the quarter ended December 31, 1997.
The maximum Class A sales charge of 5.75%, which is normally deducted when you
purchase shares, is not reflected in the total returns above or in the bar
chart. If this fee were included, the returns would be less than those shown.
The average annual returns shown in the table on page 13 do include the sales
charge.
How has Delaware New Pacific Fund performed?
- --------------------------------------------------------------------------------
Year-by-year total return (Class A)
- -11.02% -3.75% 7.72% -31.85% -22.24% 74.47%
1994 1995 1996 1997 1998 1999
12
- -----
<PAGE>
How has Delaware New Pacific Fund performed? (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Average annual returns for periods ending 12/31/99
CLASS A B C Morgan Stanley
(if redeemed)* (if redeemed)* Pacific Index
(Inception 12/3/93) (Inception 3/29/94) (Inception 5/10/94)
<S> <C> <C> <C> <C>
1 year 64.29% 68.29% 72.10% 57.96%
5 years -2.01% -1.87% -1.54% 2.70%
Lifetime** -2.27% -1.47% -1.77% 4.35%
</TABLE>
The Fund's returns are compared to the performance of the Morgan Stanley
Pacific Index. You should remember that unlike the Fund, the index is unmanaged
and doesn't reflect the costs of operating a mutual fund, such as the costs of
buying, selling and holding the securities.
*If shares were not redeemed, the returns for Class B would be 73.29%,-1.48%,
-1.31%, for the one-year, five-year and lifetime periods, respectively.
Returns for Class C would be 73.10%, -1.54% and -1.77% for the one-year
five-year and lifetime periods, respectively.
**The Morgan Stanley Pacific Index return is for Class A lifetime period. The
Index returns for Class B and Class C lifetime periods were 3.13% and 2.00%,
respectively. Maximum sales charges are included in the Fund returns above.
What are Delaware New Pacific Fund's fees
and expenses?
<TABLE>
<CAPTION>
CLASS A B C
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales charges are fees paid directly from Maximum sales charge (load) imposed on
your investments when you buy or sell purchases as a percentage of offering price 5.75% none none
shares of the Fund.
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none(1) 5%(2) 1%(3)
Maximum sales charge (load) imposed on
reinvested dividends none none none
Redemption fees none none none
- ------------------------------------------------------------------------------------------------------------------------------------
Annual fund operating expenses are Management fees(4) 0.85% 0.85% 0.85%
deducted from the Fund's assets.
Distribution and service (12b-1) fees 0.30%(5) 1.00% 1.00%
Other expenses 1.44% 1.44% 1.44%
Total operating expenses(6) 2.59% 3.29% 3.29%
</TABLE>
<TABLE>
<CAPTION>
CLASS(8) A B B C C
(if redeemed) (if redeemed)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
This example is intended to help you 1 year $822 $332 $832 $332 $432
compare the cost of investing in the Fund
to the cost of investing in other mutual 3 years $1,334 $1,013 $1,313 $1,013 $1,013
funds with similar investment objectives.
We show the cumulative amount of Fund 5 years $1,871 $1,717 $1,917 $1,717 $1,717
expenses on a hypothetical investment of
$10,000 with an annual 5% return over the 10 years $3,331 $3,427 $3,427 $3,585 $3,585
time shown.(7) This is an example only, and
does not represent future expenses, which
may be greater or less than those shown
here.
</TABLE>
<PAGE>
(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial adviser who is
paid a commission, a contingent deferred sales charge will be imposed on
redemptions made within two years of purchase. Additional Class A purchase
options that involve a contingent deferred sales charge may be permitted
from time to time and will be disclosed in the Prospectus if they are
available.
(2) If you redeem Class B shares during the first year after you buy them, you
will pay a contingent deferred sales charge of 5%, which declines to 4%
during the second year, 3% during the third and fourth years, 2% during the
fifth year, 1% during the sixth year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) Reflects a new management fee which became effective on April 1, 1999.
(5) Prior to May 6, 1996, 12b-1 Plan expenses for Class A shares were 0.35%.
Beginning May 6, 1996, those expenses were reduced to 0.30%.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(6) The investment manager has agreed to Fund expenses including voluntary expense caps in effect through October 31, 2000
waive fees and pay expenses through CLASS A B C
October 31, 2000 in order to prevent
total operating expenses (excluding Management fees 0.56% 0.56% 0.56%
any taxes, interest, brokerage fees,
extraordinary expenses and 12b-1 Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
fees) from exceeding 2.00% of average
daily net assets. The fees and Other expenses 1.44% 1.44% 1.44%
expenses shown in the table do not
reflect this voluntary expense cap. Total operating expenses 2.30% 3.00% 3.00%
The table to the right shows
operating expenses, reflecting the
manager's current fee waivers and
payments.
</TABLE>
(7) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show. The example does not reflect the voluntary expense cap discussed in
footnote 5.
(8) The Class B example reflects the conversion of Class B shares to Class A
shares after approximately eight years. Information for the ninth and tenth
years reflects expenses of the Class A shares.
13
-----
<PAGE>
Profile: Delaware Global Bond Fund
What is the Fund's goal?
Delaware Global Bond Fund seeks to achieve current income consistent with
preservation of principal. Although the Fund will strive to achieve its goal,
there is no assurance that it will.
What are the Fund's main investment strategies? Delaware Global Bond Fund
invests primarily in fixed-income securities that may also provide the potential
for capital appreciation. The Fund is a global fund. Therefore, at least 65% of
the Fund's total assets will be invested in fixed-income securities of issuers
from at least three different countries, one of which may be the United States.
An issuer is considered to be from the country where it is located, where the
majority of its assets are or where it generates the majority of its operating
income.
In selecting investments for the Fund,
o We strive to identify fixed-income securities that provide high income
potential.
o In order to compare the value of different fixed-income securities, even those
issued in different countries, we look at the value of anticipated future
interest and principal payments, taking into consideration what we think the
inflation rate in that country will be. We then estimate what we think the
value of those anticipated future payments would be worth if they were being
paid today. We believe this gives us an estimate of a bond's true value.
o We generally prefer to purchase securities in countries where the currency is
undervalued or fair-valued compared to other countries because these
securities may offer greater return potential. We attempt to determine whether
a particular currency is overvalued or undervalued by comparing the amount of
goods and services that a dollar will buy in the United States to the amount
of foreign currency required to buy the same amount of goods and services in
another country. When the dollar buys less, the foreign currency may be
overvalued, and when the dollar buys more, the foreign currency may be
undervalued.
What are the main risks of investing in the Fund? Investing in any mutual fund
involves risk, including the risk that you may lose part or all of the money you
invest. The price of Fund shares will increase and decrease according to changes
in the value of the Fund's investments. These fluctuations can be even more
pronounced for funds like Delaware Global Bond Fund, which invests in developing
countries. The Fund's investments normally decrease when there are declines in
bond prices, which can be caused by a drop in the bond market, an adverse change
in interest rates or an adverse situation affecting the issuer of the bond.
Because the Fund invests in international securities in both established and
developing countries, it will be affected by international investment risks
related to currency valuations, political instability, economic instability, or
lax accounting and regulatory standards. The Fund may invest in high-yield, high
risk foreign fixed-income securities, which are subject to substantial risks,
particularly during periods of economic downturns or rising interest rates.
The Fund is considered "non-diversified" under federal laws that regulate mutual
funds. This means the Fund may allocate more of its net assets to investments in
single securities than a "diversified" fund. Thus, adverse effects on the Fund's
investments may affect a larger portion of its overall assets and subject the
Fund to greater risks. For a more complete discussion of risk, please turn to
page 28.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
<PAGE>
How has Delaware Global Bond Fund performed?
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
This bar chart and table can help you Year-by-year total return (Class A)
evaluate the risks of investing in the
Fund. We show how returns for the
Fund's Class A shares have varied over
the past five calendar years, as well
as the average annual returns of all
shares for the one-and five-year
periods, and since inception, if
applicable. The Fund's past
performance is not necessarily an
indication of how it will perform in
the future. The returns reflect
voluntary expense caps. The returns
would be lower without the voluntary
caps.
During the periods illustrated in this
bar chart, Class A's highest quarterly
return was 5.82% for the quarter ended
September 30, 1995 and its lowest
quarterly return was -2.95% for the
quarter ended March 31, 1997.
The maximum Class A sales charge of
4.75%, which is normally deducted when
you purchase shares, is not reflected
in the total returns above or in the 20.87% 11.87% 0.67% 7.30% -3.82%
bar chart. If this fee were included, 1995 1996 1997 1998 1999
the returns would be less than those
shown. The average annual returns in
the table shown on page 15 do include
the sales charge.
</TABLE>
14
<PAGE>
How has Delaware Global Bond Fund performed? (continued)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Average annual returns for periods ending 12/31/99
CLASS A B C Salomon Smith Barney
(if redeemed)* (if redeemed)* World Government
Bond Index
- ---------------------------------------------------------------------------------------------------------------------------
(Inception 12/27/94) (Inception 12/27/94) (Inception 11/29/95)
<S> <C> <C> <C> <C>
1 year -8.41% -8.12% -5.46% -5.07%
5 years 5.99% 6.00% N/A 5.90%
Lifetime** 5.98% 6.14% 3.34% 6.08%
</TABLE>
The Fund's returns are compared to the performance of the Salomon Smith
Barney World Government Bond Index. You should remember that unlike the Fund,
the index is unmanaged and doesn't reflect the costs of operating a mutual fund,
such as the costs of buying, selling and holding the securities.
*If shares were not redeemed, the returns for Class B would be -4.42%%, 6.31%%
and 6.29% respectively, for the one-year, five-year and lifetime periods.
Returns for Class C would be -4.54% and 3.34%, respectively, for the one-year
and lifetime periods.
**The Salomon Smith Barney World Government Bond Index return shown is for Class
A and Class B lifetime period. The Index return for Class C lifetime period
was 2.68%. Maximum sales charges are included in the Fund returns above.
<TABLE>
<CAPTION>
What are Delaware Global Bond Fund's
fees and expenses? CLASS A B C
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales charges are fees paid Maximum sales charge (load) imposed on
directly from your investments purchases as a percentage of offering price 4.75% none none
when you buy or sell shares
of the Fund. Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none(1) 4%(2) 1%(3)
Maximum sales charge (load) imposed on
reinvested dividends none none none
Redemption fees none none none
- ----------------------------------------------------------------------------------------------------------------------------------
Annual fund operating expenses Management fees 0.75% 0.75% 0.75%
are deducted from the
Fund's assets. Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
Other expenses 0.49% 0.49% 0.49%
Total annual fund operating expenses 1.54% 2.24% 2.24%
Fee waivers and payments(4) (0.24%) (0.24%) (0.24%)
Net expenses 1.30% 2.00% 2.00%
</TABLE>
<TABLE>
<CAPTION>
CLASS(6) A B B C C
(if redeemed) (if redeemed)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
This example is intended to help you 1 year $601 $203 $603 $203 $303
compare the cost of investing in the
Fund to the cost of investing in other 3 years $916 $677 $977 $677 $677
mutual funds with similar investment
objectives. We show the cumulative 5 years $1,253 $1,178 $1,378 $1,178 $1,178
amount of Fund expenses on a
hypothetical investment of $10,000 10 years $2,203 $2,380 $2,380 $2,556 $2,556
with an annual 5% return over the time
shown.(5) This is an example only, and
does not represent future expenses,
which may be greater or less than
those shown here.
</TABLE>
<PAGE>
(1) A purchase of Class A shares at $1 million or more may be made at net asset
value. However, if you buy the shares through a financial adviser who is
paid a commission, a contingent deferred sales charge will be imposed on
redemptions made within two years of purchase. Additional Class A purchase
options that involve a contingent deferred sales charge may be permitted
from time to time and will be disclosed in the Prospectus if they are
available.
(2) If you redeem Class B shares within two years of purchase, you will pay a
contingent deferred sales charge of 4%, which declines to 3% during the
third and fourth years, 2% during the fifth year, 1% during the sixth year,
and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) The investment manager has contracted to waive fees and pay expenses through
January 31, 2001 in order to prevent total operating expenses (excluding any
taxes, interest, brokerage fees, extraordinary expenses and 12b-1 fees) from
exceeding 1% of average daily net assets.
(5) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. This example reflects the net operating
expenses with expense waivers for the one-year period and the total
operating expenses without expense waivers for years two through 10.
(6) The Class B example reflects the conversion of Class B shares to Class A
shares after approximately eight years. Information for the ninth and tenth
years reflects expenses of the Class A shares.
15
<PAGE>
How we manage the Funds
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for a particular Fund. Following are descriptions of how the
portfolio managers pursue the Funds' investment goals.
The investment objective of each Fund described in this Prospectus is
non-fundamental. This means the Board of Trustees may change the objective
without obtaining shareholder approval. If an objective were changed, we would
notify shareholders before the change became effective.
Delaware International Equity Fund
Delaware International Equity Fund seeks long-term growth without undue risk to
principal. We invest primarily in equity securities, including common stocks,
which provide the potential for capital appreciation and income. Our strategy
would commonly be described as a value strategy. That is, we strive to purchase
stocks that are selling for less than their true value. In order to estimate
what a security's true value is, we evaluate its future income potential, taking
into account the impact both currency fluctuations and inflation might have on
that income stream. We then determine what that income would be worth if paid
today. That helps us decide what we think the security is worth today. We then
compare our estimate of the security's value to its current price to determine
if it is a good value.
We use income as an indicator of value because we believe it allows us to
compare securities across different sectors and different countries--all using
one measurement standard. We can even use this analysis to compare stocks to
bonds.
We may purchase securities in any foreign country, developed or emerging;
however, we currently anticipate investing in Australia, Belgium, Canada,
Finland, France, Germany, Hong Kong, Italy, Japan, Malaysia, the Netherlands,
New Zealand, Singapore, Spain, Switzerland and the United Kingdom. This is a
representative list; the Fund may also invest in countries not listed here. We
may invest more than 25% of the Fund's total assets in the securities of issuers
located in the same country.
We generally maintain a long-term focus in the Fund, seeking companies that we
believe will perform well over the next three to five years.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
How to use
this glossary
This glossary includes definitions of investment terms used throughout the
Prospectus. If you would like to know the meaning of an investment term that is
not explained in the text please check the glossary.
<TABLE>
<CAPTION>
Glossary A-C | Amortized cost Average maturity
| ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Amortized cost is a method used to value a An average of when the individual bonds and
fixed-income security that starts with the other debt securities held in a portfolio
face value of the security and then adds or will mature.
subtracts from that value depending on
whether the purchase price was greater or
less than the value of the security at
maturity. The amount greater or less than the
par value is divided equally over the time
remaining until maturity.
</TABLE>
16
<PAGE>
Delaware Global Equity Fund
Delaware Global Equity Fund seeks long-term total return. We invest in U.S. and
foreign equity securities, including common stocks, that provide the potential
for capital appreciation and income. We invest primarily in developed markets;
however, we may purchase securities in emerging markets. We may invest more than
25% of the Fund's total assets in the securities of issuers located in the same
country.
To determine how much of the Fund's assets to allocate to international stocks
and how much to U.S. stocks, we compare the potential total return of each asset
class in the context of our expectations for inflation, economic growth and
political stability in various regions.
In selecting foreign stocks for the Fund, we follow the same investment strategy
as Delaware International Equity Fund. We generally look for securities that are
undervalued based on our analysis of their future income stream.
The Fund may also seek to achieve growth by investing up to 35% of its assets in
income producing debt securities such as U.S. or foreign government bonds or
corporate bonds. As a general policy, the Fund only invests in debt securities
when we believe they offer better long-term potential returns with less risk
than investments in equity securities. We apply our analysis of future income
potential to both stocks and bonds in order to decide whether any portion of the
portfolio should be allocated to bonds.
Delaware Overseas Equity Fund
Delaware Overseas Equity Fund seeks to maximize total return. Under normal
circumstances, we will invest at least 65% of the value of Delaware Overseas
Equity Fund's total assets in securities of issuers located in at least three
foreign countries. However, we may invest more than 25% of the Fund's total
assets in the securities of issuers located in the same country.
The Fund will emphasize established companies, although it may invest in
companies of varying sizes as measured by assets, sales and market
capitalization. The Fund may invest in securities of issuers located in a
variety of different foreign countries including: Australia, Austria, Belgium,
Brazil, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, India,
Ireland, Italy, Japan, Luxembourg, Malaysia, Mexico, the Netherlands, New
Zealand, Norway, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland,
Thailand and the United Kingdom. This is a representative list; the Fund may
also invest in countries not listed here.
Our strategy for Delaware Overseas Equity Fund can best be described as a value
strategy. We use the same income-oriented evaluation process to identify
attractive undervalued stocks in a variety of countries and regions. To increase
the Fund's return potential and also add further diversification opportunities,
we may invest up to 40% of the Fund's assets in securities of companies located
in emerging market countries or in government securities of emerging market
countries.
<TABLE>
<CAPTION>
Bond Bond ratings Capital
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
A debt security, like an IOU, issued Independent evaluations of The amount of
by a company, municipality or creditworthiness, ranging from Aaa/AAA money you invest.
government agency. In return for (highest quality) to D (lowest
lending money to the issuer, a bond quality). Bonds rated Baa/BBB or
buyer generally receives fixed better are considered investment
periodic interest payments and grade. Bonds rated Ba/BB or lower are
repayment of the loan amount on a commonly known as junk bonds. See also
specified maturity date. A bond's Nationally recognized statistical
price changes prior to maturity and is rating organization.
inversely related to current interest
rates. When interest rates rise, bond
prices fall, and when interest rates
fall, bond prices rise.
</TABLE>
17
<PAGE>
How we manage the Funds (continued)
In deciding how much of the portfolio to allocate to emerging markets, we
consider both the total return potential of those markets and the expected level
of risk.
We may invest up to 5% of the Fund's assets in securities of issuers that have
been in continuous operation for less than three years.
Delaware Emerging Markets Fund
Delaware Emerging Markets Fund seeks long-term capital appreciation. The Fund
may invest in a broad range of equity securities, including common stocks. Our
primary emphasis will be on the stocks of companies located in or having their
principal business in an emerging country.
We consider an "emerging country" to be any country that is:
o generally recognized to be an emerging or developing country by the
international financial community, including the World Bank and the
International Finance Corporation;
o classified by the United Nations as developing; or
o included in the International Finance Corporation Free Index or the Morgan
Stanley Capital International Emerging Markets Free Index.
Developing or emerging countries include almost every nation in the world except
the United States, Canada, Japan, Australia, New Zealand and most nations
located in Western and Northern Europe. A representative list of the countries
where we may invest includes: Argentina, Botswana, Brazil, Chile, China,
Colombia, Czech Republic, Estonia, Ghana, Greece, Hong Kong, Hungary, India,
Indonesia, Ivory Coast, Jamaica, Jordan, Kenya, Korea, Latvia, Lithuania,
Malaysia, Mauritius, Mexico, Morocco, Nigeria, Pakistan, Peru, the Philippines,
Poland, Portugal, Russia, Slovenia, South Africa, Sri Lanka, Taiwan, Thailand,
Turkey, Venezuela and Zimbabwe. We may invest in other countries, particularly
as markets in other emerging countries develop. We may invest more than 25% of
the Fund's total assets in the securities of issuers located in the same
country.
In deciding whether a company is from an emerging country, we evaluate publicly
available information and question individual companies to determine if the
company meets one of the following criteria:
o the principal trading market for the company's securities is in a country
that is emerging;
o the company generates 50% or more of its annual revenue from operations in
emerging countries, even though the company's securities are traded in an
established market or in a combination of emerging and established markets;
o the company is organized under the laws of an emerging market country and has
a principal office in an emerging country.
<TABLE>
<CAPTION>
C-C | Capital appreciation Capital gains distributions Commission Compounding
| ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An increase in the value Payments to mutual fund shareholders The fee an investor pays to a Earnings on an
of an investment. of profits (realized gains) from the financial adviser for investment's
sale of a fund's portfolio securities. investment advice and help in previous earnings.
Usually paid once a year; may be buying or selling mutual
either short-term gains or long-term funds, stocks, bonds or other
gains. securities.
</TABLE>
18
<PAGE>
Currently, investing in many emerging countries is not feasible or may involve
significant political risks. We focus our investments in emerging countries
where we consider the economies to be developing strongly and where the markets
are becoming more sophisticated. In deciding where to invest we place particular
emphasis on factors such as economic conditions (including growth trends,
inflation rates and trade balances), regulatory and currency controls,
accounting standards and political and social conditions. We believe investment
opportunities may result from an evolving long-term trend favoring
market-oriented economies, a trend that may particularly benefit countries
having developing markets.
When we evaluate individual companies we strive to apply a value-oriented
selection process, similar to what we use for Delaware International Equity
Fund, Delaware Global Equity Fund and Delaware Overseas Equity Fund. However, in
emerging markets, more of the return is expected to come from capital
appreciation rather than income. Thus, there is greater emphasis on the
manager's assessment of the company's future growth potential.
The Fund may invest up to 35% of its net assets in high-yield, high risk foreign
fixed-income securities. This typically includes so-called Brady Bonds.
Delaware New Pacific Fund
Delaware New Pacific Fund seeks to maximize long-term capital appreciation.
It invests primarily in equity securities of companies domiciled or having their
principal business activities in countries located in the Pacific Basin.
The Fund will invest in companies of varying sizes, measured by assets, sales
and market capitalization. When we evaluate individual companies, we consider
the growth prospects for the company and its industry, the financial strength of
the company and the quality of its management. We also look at whether the stock
appears overvalued or undervalued compared to other stocks in the market or its
industry.
While the Fund will generally have investments in companies located in at least
three different countries or regions, the Fund may from time to time have
investments in only one or a few countries or regions. We may invest more than
25% of the Fund's total assets in the securities of issuers located in the same
country.
The Fund may invest up to 35% of its assets in securities of U.S. issuers. In
addition, the Fund may invest in short-term debt instruments to meet anticipated
day-to-day operating expenses and liquidity requirements.
The Fund may invest up to 5% of its assets in the securities of issuers that
have been in continuous operation for less than three years.
<TABLE>
<CAPTION>
Consumer Price Index (CPI) Contingent deferred sales charge (CDSC) Corporate bond Currency exchange rates
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Measurement of U.S. inflation; Fee charged by some mutual A debt security issued The price at which one
represents the price of a funds when shares are redeemed by a corporation. country's currency can
basket of commonly purchased (sold back to the fund) within See Bond. be converted into
goods. a set number of years; an another's. This exchange
alternative method for rate varies almost daily
investors to compensate a according to a wide
financial adviser for advice range of political,
and service, rather than an economic, and other
up-front commission. factors.
</TABLE>
19
<PAGE>
How we manage the Funds (continued)
Delaware Global Bond Fund
Delaware Global Bond Fund seeks current income consistent with the preservation
of principal. We invest primarily in fixed-income securities that may also
provide the potential for capital appreciation.
We may invest in:
o foreign and U.S. government securities;
o debt obligations of foreign and U.S. companies;
o debt securities of supranational entities;
o securities of issuers in emerging market countries, including Brady Bonds,
which tend to be of lower quality and more speculative than securities of
developed country issuers; and
o zero-coupon bonds.
At the time this Prospectus was prepared we anticipated that for increased
safety, a large percentage of Global Bond Fund's assets would be invested in
securities of supranational entities and in U.S. and foreign government
securities.
While the Fund may purchase securities of issuers in any foreign country,
developed or emerging, we currently anticipate investing in Australia, Belgium,
Canada, France, Germany, Hong Kong, Japan, Malaysia, the Netherlands, Singapore,
Spain, Switzerland and the United Kingdom, as well as Indonesia, Korea, New
Zealand, the Philippines, South Africa, Taiwan and Thailand. This is a
representative list; we may also invest in other countries. More than 25% of the
Fund's total assets may be invested in the securities of issuers located in the
same country.
Generally, the value of fixed-income securities rises when interest rates
decline and declines when interest rates rise. The value of your investment in
the Fund will be affected by changes in interest rates. We generally keep the
average weighted maturity of the portfolio in the five-to-ten year range.
However, if we anticipate a declining interest rate environment, we may extend
the average weighted maturity past ten years or if we anticipate a rising rate
environment, we may shorten the average weighted maturity to less than five
years.
<TABLE>
<CAPTION>
D-F | Depreciation Diversification Dividend distribution Duration
| -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A decline in an The process of spreading Payments to mutual fund A measurement of a
investment's value. investments among a shareholders of fixed-income
number of different dividends passed along investment's price
securities, asset from the fund's volatility. The larger
classes or investment portfolio of securities. the number, the greater
styles to reduce the the likely price change
risks of investing. for a given change in
interest rates.
</TABLE>
20
<PAGE>
The securities we typically invest in
Stocks offer investors the potential for capital appreciation, and may pay
dividends as well. Fixed-income securities offer the potential for greater
income payments than stocks, and also may provide capital appreciation. The
following chart provides a brief description of the securities that the Funds
may invest in. The Funds can hold securities denominated in any currency. Please
see the Statement of Additional Information for additional descriptions of these
as well as other investments.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Delaware Delaware Delaware Delaware Delaware
International Global Overseas Emerging New Pacific Global Bond
Equity Fund Equity Fund Equity Fund Markets Fund Fund Fund
------------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C>
Common stocks: Delaware International Equity Fund, Delaware Global Equity Fund, Delaware Overseas Equity Delaware Global
Securities that Fund, Delaware Emerging Markets Fund and Delaware New Pacific Fund will invest their Bond Fund
represent shares assets in common stocks, some of which will be dividend-paying stocks. typically does
of ownership in not invest in
a corporation. common stocks.
Stockholders
participate in
the corporation's
profits and
losses,
proportionate to
the number of
shares they own.
Corporate bonds: Although not a principal Delaware Overseas Delaware Emerging Delaware New Delaware Global
Debt obligations strategy of the Funds, for Equity Fund may Markets Fund may Pacific Fund Bond Fund may
issued by U.S. or temporary defensive purposes, invest up to 40% of invest in corporate generally does invest in
foreign Delaware International Equity its assets in obligations issued not invest in corporate bonds,
corporations. Fund and Delaware Global developing country by emerging country corporate generally those
Equity Fund may invest all or corporate and companies. These bonds. rated A or
a substantial portion of their government bonds bonds may be high better by S&P
respective assets in corporate although it risk, fixed-income or Moody's or if
obligations. generally does not securities. unrated,
intend to do so. See determined
All corporate debt will be "Foreign government Although not a to be of
rated AA or better by S&P and securities" on principal strategy comparable
Aa or better by Moody's, or if page 22. of the Fund, for quality. The
unrated, determined to be of temporary defensive Fund
comparable quality. purposes, the Fund may also invest
may invest all or a in high-yield,
substantial portion high risk
of its assets in emerging markets
corporate corporate bonds.
obligations rated AA
or better by S&P and
Aa or better by
Moody's, or if
unrated, determined
to be of comparable
quality.
Delaware Global
Equity Fund may
seek to achieve
growth by
investing up to
35% of its assets
in debt
securities,
including
corporate bonds.
Generally, Delaware
Global Equity
Fund will invest
in debt securities
when we believe
they offer better
long-term potential
returns with less
risk than equity
investments.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Expense ratio Financial adviser Fixed-income securities
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
A mutual fund's total Financial professional (e.g., With fixed-income securities,
operating expenses, expressed broker, banker, accountant, the money you originally
as a percentage of its total planner or insurance agent) invested is paid back at a
net assets. Operating expenses who analyzes clients' finances pre-specified maturity date.
are the costs of running a and prepares personalized These securities, which
mutual fund, including programs to meet objectives. include government, corporate
management fees, offices, or municipal bonds, as well as
staff, equipment and expenses money market securities,
related to maintaining the typically pay a fixed rate of
fund's portfolio of securities return (often referred to as
and distributing its shares. interest). See Bond.
They are paid from the fund's
assets before any earnings are
distributed to shareholders.
</TABLE>
21
<PAGE>
How we manage the Funds (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Delaware Delaware Delaware Delaware Delaware
International Global Overseas Emerging New Pacific Global Bond
Equity Fund Equity Fund Equity Fund Markets Fund Fund Fund
------------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C>
Foreign government Although not a principal Delaware Overseas We may invest a Delaware New Delaware Global Bond
securities: Debt strategy of the Funds, for Equity Fund may portion of Delaware Pacific Fund Fund will generally
obligations issued temporary defensive purposes, invest up to 40% of Emerging Markets generally does invest in securities
by a government Delaware International Equity its assets in Fund's assets in not invest in issued by foreign
other than the Fund and Delaware Global developing country foreign governmental foreign governments, their
United States or by Equity Fund may invest all or corporate and securities issued by government agencies,
an agency, a substantial portion of their government bonds emerging or securities. instrumentalities or
instrumentality or respective assets in high combined although it developing political
political quality debt obligations of generally does not countries, which may subdivisions that
subdivision of such foreign governments, their intend to do so. be lower rated, are rated AAA or AA
governments. agencies, instrumentalities including securities by S&P or Aaa or Aa
and political sub-divisions. rated below by Moody's or, if
investment grade. unrated, considered
Delaware Global to be of comparable
Equity Fund may seek Although not a quality. We may
to achieve growth by principal strategy invest a portion of
investing up to 35% of the Fund, for the Fund's assets in
of its assets in temporary defensive foreign governmental
foreign governmental purposes, the Fund securities issued by
debt securities. may invest in high emerging countries,
Generally, Delaware quality debt which may be lower
Global Equity Fund obligations of rated, including
will invest in debt foreign governments, securities rated
securities when we their agencies, below investment
believe they offer instrumentalities grade.
better long-term and political
potential returns sub-divisions.
with less risk than
equity investments.
U.S. government Although not a principal strategy of the Funds, for temporary Delaware New Delaware Global Bond
securities: defensive purposes Delaware International Equity Fund, Delaware Global Pacific Fund Fund may invest a
Securities issued or Equity Fund, Delaware Overseas Equity Fund and Delaware Emerging generally does significant portion
guaranteed by the Markets Fund may invest in U.S. government securities. not invest in of its assets in
U.S. government or U.S. government U.S. government
issued by an agency securities. securities. It will
or instrumentality invest only in U.S.
of the U.S. government
government. obligations,
including bills,
notes and bonds that
are issued or
guaranteed as to the
payment of principal
and interest by the
U.S. government and
securities of U.S.
government agencies
or instrumentalities
that are backed by
the full faith and
credit of the United
States.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Inflation Investment goal Management fee Market capitalization
I-M --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The increase in the The objective, such The amount paid by a The value of a
cost of goods and as long-term capital mutual fund to the corporation
services over time. growth or high investment adviser determined by
U.S. inflation is current income, that for management multiplying the
frequently measured a mutual fund services, expressed current market price
by changes in the pursues. as an annual of a share of common
Consumer Price Index percentage of the stock by the number
(CPI). fund's average daily of shares held by
net assets. shareholders. A
corporation with one
million shares
outstanding and the
market price per
share of $10 has a
market
capitalization of
$10 million.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Delaware Delaware Delaware Delaware Delaware
International Global Overseas Emerging New Pacific Global Bond
Equity Fund Equity Fund Equity Fund Markets Fund Fund Fund
------------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C>
Investment company Each Fund may hold investment Delaware Overseas Delaware Emerging Delaware New Delaware Global
securities: In some company securities if we Equity Fund may not Markets Fund may Pacific Fund Bond Fund may hold
countries, believe the country offers hold investment hold open-end and may not hold closed-end
investments by U.S. good investment opportunities. company securities. closed-end investment investment company
mutual funds are Both Funds would generally investment company company securities.
generally made by hold closed-end investment securities. Please securities.
purchasing shares of companies, but Delaware Global see Delaware
investment companies Equity Fund may also hold International Equity
that in turn invest open-end investment companies. Fund and Delaware
in the securities of These investments involve an Global Equity Fund
such countries. indirect payment of a portion for a complete
of the expenses of the other explanation.
investment companies,
including their advisory fees.
Foreign currency Although the Funds value their assets daily in U.S. dollars, they do not intend to convert their
transactions: A holdings of foreign currencies into U.S. dollars on a daily basis. Each Fund will, however, from
forward foreign time to time, purchase or sell foreign currencies and/or engage in forward foreign currency exchange
currency exchange transactions. Each Fund may conduct its foreign currency transactions on a cash basis at the rate
contract involves an prevailing in the foreign currency exchange market or through a forward foreign currency exchange
obligation to contract or forward contract.
purchase or sell a
specific currency on A Fund may use forward contracts for defensive hedging purposes to attempt to protect the value of
a fixed future date the Fund's current security or currency holdings. It may also use forward contracts if it has agreed
at a price that is to sell a security and wants to "lock-in" the price of that security, in terms of U.S. dollars.
set at the time of Investors should be aware of the costs of currency conversion. The Funds will not use forward
the contract. contracts for speculative purposes.
The future date may
be any number of
days from the date
of the contract as
agreed by the
parties involved.
American Depositary Each Fund may invest in sponsored and unsponsored ADRs, EDRs and GDRs, generally This is not a
Receipts (ADRs), focusing on those whose underlying securities are issued by foreign entities. principal strategy
European Depositary for Delaware
Receipts (EDRs), and To determine whether to purchase a security in a foreign market or through Global Bond Fund.
Global Depositary depositary receipts, we evaluate the price levels, the transaction costs, taxes
Receipts (GDRs): and administrative costs involved with each security to identify the most
ADRs are receipts efficient choice.
issued by a U.S.
depositary (usually
a U.S. bank) and
EDRs and GDRs are
receipts issued by a
depositary outside
of the U.S. (usually
a non-U.S. bank or
trust company or a
foreign branch of a
U.S. bank).
Depositary receipts
represent an
ownership interest
in an underlying
security that is
held by the
depositary.
Generally, the
holder of the
depositary receipt
is entitled to all
payments of
interest, dividends
or capital gains
that are made on the
underlying security.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Maturity Morgan Stanley Capital International EAFE Morgan Stanley Capital International
(Europe, Australia, Far East) Index Emerging Markets Free Index
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
The length of time until a The Morgan Stanley Capital The Morgan Stanley
bond issuer must repay the International EAFE Index is an International Emerging Markets
underlying loan principal to international index including Free Index is a U.S. dollar
bondholders. stocks traded on 16 exchanges denominated index comprised of
in Europe, Australia and the stocks of countries with below
Far East, weighted by average per capita GDP as
capitalization. defined by the World Bank,
foreign ownership
restrictions, a tax regulatory
environment, and greater
perceived market risk than in
the developed countries.
Within this index, MSCI aims
to capture an aggregate of 60%
of local market
capitalization.
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Delaware Delaware Delaware Delaware Delaware
International Global Overseas Emerging New Pacific Global Bond
Equity Fund Equity Fund Equity Fund Markets Fund Fund Fund
------------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C>
Supranational The Funds do not invest in these entities. We anticipate
entities: Debt investing a large
securities of percentage of
supranational Delaware Global
entities may be Bond Fund's assets
denominated in any in debt securities
currency. These of supranational
securities are entities.
typically of
high-grade quality.
A supranational
entity is an entity
established or
financially
supported by the
national governments
of one or more
countries to promote
reconstruction or
development. The
International Bank
for Reconstruction
and Development
(more commonly known
as the World Bank)
would be one example
of a supranational
entity.
Zero coupon bonds: Delaware Delaware Global Equity Fund Delaware Emerging Delaware New Delaware Global
Zero coupon bonds International Equity and Delaware Overseas Equity Markets Fund may Pacific Fund Bond Fund may
are debt obligations Fund typically does Fund do not invest in these invest in zero does not invest invest in zero
that do not entitle not invest in these securities. coupon bonds. in these coupon bonds.
the holder to any securities. securities.
periodic payments of
interest before
maturity or a
specified date when
the securities begin
paying current
interest. Therefore,
they are issued and
traded at a discount
from their face
amounts or par
value. The market
prices of zero
coupon bonds are
generally more
volatile than the
market prices of
securities that pay
interest
periodically and are
likely to respond to
changes in interest
rates to a greater
degree than do
non-zero coupon
securities having
similar maturities
and credit quality.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Morgan Stanley Capital Morgan Stanley
International World Index Pacific Index NASD Regulation, Inc. (NASD)
M-P ----------------------------------------------------------------------------------
<S> <C> <C> <C>
The Morgan Stanley A total return A self-regulating
Capital index, reported in organization,
International World U.S. dollars, based consisting of
Index is an on share prices and brokerage firms
international index reinvested gross (including
that includes stocks dividends of distributors of
traded in Europe, approximately 500 mutual funds), that
Australia, the Far companies (only is responsible for
East, plus the U.S., those securities overseeing the
Canada and South deemed sufficiently actions of its
Africa, weighted by liquid for trading members.
capitalization. by investors) from
the following 6
countries:
Australia, Hong
Kong, Japan,
Malaysia, New
Zealand and
Singapore.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Delaware Delaware Delaware Delaware Delaware
International Global Overseas Emerging New Pacific Global Bond
Equity Fund Equity Fund Equity Fund Markets Fund Fund Fund
------------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C>
Brady Bonds: These Delaware International Equity Fund, Delaware Emerging Delaware New Pacific Delaware Global
are debt securities Delaware Global Equity Fund and Delaware Markets Fund may Fund does not invest Bond Fund may
issued under the Overseas Equity Fund do not invest in invest in Brady in Brady Bonds. Brady Bonds.
framework of the these securities. Bonds. We believe Please see
Brady Plan, an that the economic Delaware Emerging
initiative for reforms undertaken Markets Fund to
debtor nations to by countries in the left for a
restructure their connection with the complete
outstanding external issuance of Brady explanation.
indebtedness Bonds can make the
(generally, debt of countries
commercial bank that have issued or
debt). Brady Bonds have announced plans
tend to be of lower to issue these bonds
quality and more a viable opportunity
speculative than for investment.
securities of
developed country
issuers.
High-yield, high Delaware International Equity Fund, Delaware Emerging Delaware New Pacific Delaware Global
risk fixed-income Delaware Global Equity Fund and Delaware Markets Fund may Fund does not invest Bond Fund may
securities: Overseas Equity Fund do not invest in invest up to 35% of in these securities. invest a portion
Securities that are these securities. its net assets, in of its assets in
rated lower than BBB high-yield, high these securities.
by S&P or Baa by risk foreign
Moody's, or if fixed-income
unrated, of equal securities.
quality. These
securities may be
issued by companies
or governments of
emerging or
developing
countries, which may
be less
creditworthy. The
risk that these
companies or
governments may not
be able to make
interest or
principal payments
is substantial.
Restricted We may invest in privately placed securities that are eligible for resale only among certain institutional
securities: buyer swithout registration, including Rule 144A Securities.
Privately placed
securities whose
resale is restricted
under securities
law.
Illiquid securities: Delaware International Equity Fund, Delaware Emerging Delaware New Pacific Fund and
Securities that Delaware Global Equity Fund and Delaware Markets Fund may Delaware Global Bond Fund may
cannot be sold or Overseas Equity Fund may invest up to invest up to 15% of invest up to 10% of net assets
disposed of in the 10% of net assets in illiquid net assets in in illiquid securities.
ordinary course of securities. illiquid securities.
business, within
seven days, at
approximately the
price at which a
fund has valued
them.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nationally recognized statistical rating
organization (NRSRO) Net asset value (NAV) Preferred stock
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
A company that assesses the credit quality The daily dollar value of one Preferred stock has preference
of bonds, commercial paper, preferred mutual fund share. Equal to a over common stock in the
and common stocks and municipal short-term fund's net assets divided by payment of dividends and
issues, rating the probability that the the number of shares liquidation of assets.
issuer of the debt will meet the scheduled outstanding. Preferred stocks also often
interest payments and repay the principal. pay dividends at a fixed rate
Ratings are published by such companies as and are sometimes convertible
Moody's Investors Service, Inc. (Moody's), into common stock.
Standard & Poor's Ratings Group (S&P),
Duff & Phelps, Inc. (Duff), and Fitch IBCA,
Inc. (Fitch).
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Delaware Delaware Delaware Delaware Delaware
International Global Overseas Emerging New Pacific Global Bond
Equity Fund Equity Fund Equity Fund Markets Fund Fund Fund
------------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C>
Repurchase Typically, we use repurchase agreements as a short-term investment for a Fund's cash position. In
agreements: An order to enter into these repurchase agreements, a Fund must have collateral of at least 102% of the
agreement between a repurchase price. The Funds will only enter into repurchase agreements in which the collateral is
buyer, such as a composed of U.S. government securities.
fund, and a seller
of securities in
which the seller
agrees to buy the
securities back
within a specified
time at the same
price the buyer paid
for them, plus an
amount equal to an
agreed upon interest
rate. Repurchase
agreements are often
viewed as equivalent
to cash.
Other securities: Delaware Delaware Global Delaware Overseas Delaware Delaware New Delaware Global
Each Fund is International Equity Fund may Equity Fund may Emerging Pacific Fund Bond Fund may
permitted to invest Equity Fund invest in invest in all types Markets Fund may invest in invest in futures
in other securities may invest in preferred of securities with may invest all types of and options. The
that are listed preferred stocks, stocks, equity in preferred securities Fund may also
here. More convertible convertible characteristics, stocks, with equity invest in interest
information about securities, securities, including trust or securities, characteristics, rate swaps.
these securities can warrants, warrants, limited partnership warrants, including trust
be found in the futures and futures and interests, preferred convertible or limited
Statement of options. options. stocks, rights, futures and partnership
Additional warrants and options. interests,
Information. convertible preferred stocks,
securities. The Fund rights and
may hold futures and warrants and
options. The Fund convertible
may also invest in securities. The
swaps. Fund may hold
futures and
options. The
Fund may also
invest in swaps.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Price-to-earnings
ratio Principal Prospectus Redeem
P-S --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A measure of a Amount of money you The official To cash in your
stock's value invest (also called offering document shares by selling
calculated by capital). Also that describes a them back to the
dividing the current refers to a bond's mutual fund, mutual fund.
market price of a original face value, containing
share of stock by due to be repaid at information required
its annual earnings maturity. by the SEC, such as
per share. A stock investment
selling for $100 per objectives,
share with annual policies, services
earnings per share and fees.
of $5 has a P/E of
20.
</TABLE>
26
<PAGE>
Portfolio turnover Each Fund (other than Delaware New Pacific Fund) anticipates
that its annual portfolio turnover will be less than 100%. A turnover rate of
100% would occur if a Fund sold and replaced securities valued at 100% of its
net assets within one year. High turnover in a Fund could result in additional
brokerage commissions to be paid by the Fund and higher tax liability for the
Fund.
Borrowing from banks Each Fund may borrow money as a temporary measure for
extraordinary or emergency purposes or to facilitate redemptions. A Fund will
not borrow money in excess of one-third of the value of its net assets.
Securities lending Each Fund may loan up to one-quarter (one-third, in the case
of Delaware New Pacific Fund and Delaware Overseas Equity Fund) of its assets to
qualified broker/dealers or institutional investors to generate additional
income for the Fund. All such loans will be secured by collateral.
Purchasing securities on a when-issued or delayed delivery basis Delaware New
Pacific Fund and Delaware Overseas Equity Fund may buy or sell securities on a
when-issued or delayed delivery basis; that is, paying for securities before
delivery or taking delivery at a later date. Each Fund will designate cash or
securities in amounts sufficient to cover its obligations, and will value the
designated assets daily.
Temporary defensive positions For temporary defensive purposes, Delaware
International Equity Fund, Delaware Global Equity Fund and Delaware Emerging
Markets Fund may each invest all or a substantial portion of their assets in
high quality debt instruments of foreign governments, the U.S. government, or
foreign or U.S. companies. Also, for temporary defensive purposes, Delaware
Overseas Equity Fund may invest a substantial portion of its assets in cash or
cash equivalent investments or in U.S. securities, and Delaware New Pacific Fund
may invest up to 100% of its assets in money market instruments, cash or cash
equivalents. To the extent that a Fund does so, the Fund may be unable to meet
its investment objective.
<TABLE>
<CAPTION>
Salomon Smith Barney World Government SEC (Securities and
Risk Sales charge Bond Index Exchange Commission)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Generally defined as Charge on the purchase or The World Government Bond Index Federal agency established
variability of value; also redemption of fund shares sold is a market-capitalization by Congress to administer
credit risk, inflation risk, through financial advisers. weighted benchmark that tracks the laws governing the
currency and interest rate May vary with the amount the performance of the 18 securities industry,
risk. Different investments invested. Typically used to Government bond markets of including mutual fund
involve different types and compensate advisers for advice Australia, Austria, Belgium, companies.
degrees of risk. and service provided. Canada, Denmark, Finland,
France, Germany, Ireland, Italy,
Japan, the Netherlands,
Portugal, Spain, Sweden,
Switzerland, the United Kingdom
and the United States.
</TABLE>
27
<PAGE>
How we manage the Funds (continued)
The risks of investing in the Funds
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in a Fund you should
carefully evaluate the risks. An investment in the Funds typically provides the
best results when held for a number of years. The following are the chief risks
you assume when investing in the Funds. Please see the Statement of Additional
Information for further discussion of these risks and other risks not discussed
here.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Delaware Delaware Delaware Delaware Delaware
International Global Overseas Emerging New Pacific Global Bond
Equity Fund Equity Fund Equity Fund Markets Fund Fund Fund
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Market risk is the We maintain a long-term investment approach and focus on stocks we believe can appreciate over an extended
risk that all or a time frame regardless of interim market fluctuations. In deciding what portion of a Fund's portfolio should
majority of the be invested in any individual country, we evaluate a variety of factors, including opportunities and risks
securities in a relative to other countries.
certain market--like
the stock or bond In addition, for For temporary Same as for For temporary As part of Delaware
market--or in a temporary defensive defensive purposes Delaware defensive Global Bond Fund's
certain country or purposes, the Funds may Delaware Overseas International purposes, principal investment
region will decline in invest all or a Equity Fund may Equity Fund Delaware New strategy, the Fund
value because of substantial portion of invest a substantial and Delaware Pacific Fund may invest in
factors such as their assets in high portion of its Global Equity may invest securities that
economic conditions, quality debt assets in cash or Fund as up to 100% of generally have
future expectations or instruments of foreign cash equivalent explained its assets in relatively less
investor confidence. governments, the U.S. investments or in to the left. money market market risk.
government, (including U.S. securities. instruments,
their agencies and cash or cash
instrumentalities) or equivalents.
foreign or U.S.
companies.
Industry and security We typically hold a number of different securities in a variety of sectors in order to minimize the impact
risk is the risk that that a poorly performing security would have on a Fund. This risk is more significant for Delaware Global
the value of Equity Fund, Delaware Emerging Markets Fund and Delaware Global Bond Fund, which are non-diversified funds.
securities in a
particular industry or
the value of an
individual stock or
bond will decline
because of changing
expectations for the
performance of that
industry or for the
individual company
issuing the stock or
bond.
Interest rate risk is Delaware International Equity Fund, Delaware Global Equity Fund, Delaware Overseas Interest rate risk
the risk that Equity Fund, Delaware New Pacific Fund and Delaware Emerging Markets Fund are is a significant
securities, generally less affected by interest rate risk because they typically hold a smaller risk for Delaware
particularly bonds amount of fixed-income securities than Delaware Global Bond Fund. Global Bond Fund. In
with longer an attempt to manage
maturities, will interest rate risk,
decrease in value if we adjust the Fund's
interest rates rise. average weighted
maturity based on
our view of interest
rates. The Fund's
average weighted
maturity will
generally be in the
five-to-ten year
range. When we
anticipate that
interest rates will
decline, we may
extend the average
maturity beyond ten
years and when we
anticipate that
interest rates will
rise, we may shorten
the average maturity
to less than five
years.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Additional
S-V Share classes Signature guarantee Standard deviation Information (SAI)
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Different classifications Certification by a bank, A measure of an The document serving as
of shares; mutual fund brokerage firm or other investment's volatility; "Part B" of a fund's
share classes offer a financial institution for mutual funds, measures prospectus that
variety of sales charge that a customer's how much a fund's total provides more detailed
choices. signature is valid; return has typically information about the
signature guarantees can varied from its historical fund's organization,
be provided by members average. investments, policies
of the STAMP program. and risks.
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Delaware Delaware Delaware Delaware Delaware
International Global Overseas Emerging New Pacific Global Bond
Equity Fund Equity Fund Equity Fund Markets Fund Fund Fund
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Currency risk is the Each Fund may try to hedge its currency risk by purchasing foreign currency exchange contracts. If a Fund
risk that the value agrees to purchase or sell foreign securities at a pre-set price on a future date, the Fund attempts to
of a fund's protect the value of a security it owns from future changes in currency rates. If a Fund has agreed to
investments may be purchase or sell a security, it may also use foreign currency exchange contracts to "lock-in" the security's
negatively affected price in terms of U.S. dollars or another applicable currency. Each Fund may use forward currency exchange
by changes in contracts only for defensive or protective measures, not to enhance portfolio returns. However, there is no
foreign currency assurance that such a strategy will be successful.
exchange rates.
Adverse changes in
exchange rates may
reduce or eliminate
any gains produced by
investments that are
denominated in foreign
currencies and may
increase any losses.
Small company risk is These Funds typically These Funds may invest in small companies and would be Delaware Global Bond
the risk that prices focus their investment subject to this risk. We typically hold a number of Fund does not invest
of smaller companies in larger companies. different stocks in order to reduce the impact that one in small companies.
may be more volatile small company stock would have on the Funds. This risk
than larger companies is more significant for Delaware Emerging Markets Fund,
because of limited which is a non-diversified fund.
financial resources or
dependence on narrow
product lines.
Political risk is the We evaluate the political situations in the countries where we invest and take into account any potential
risk that countries or risks before we select securities for the portfolio. However, there is no way to eliminate political risk
the entire region when investing internationally.
where we invest may
experience political
instability. This may
cause greater
fluctuation in the
value and liquidity of
our investments due to
changes in currency
exchange rates,
governmental seizures
or nationalization of
assets.
Emerging market risk Delaware International Delaware Overseas Equity Fund, Delaware Emerging Markets Fund, Delaware New
is the possibility Equity Fund and Pacific Fund and Delaware Global Bond Fund are subject to this risk. Striving to
that the risks Delaware Global Equity manage this risk, the portfolio managers carefully screen securities within
associated with Fund, to the limited emerging markets and attempt to consider material risks associated with an
international extent that they individual company or bond issuer. We cannot eliminate emerging market risk and
investing will be invest in emerging consequently encourage shareholders to invest in these Funds only if they have a
greater in emerging markets, are subject long-term time horizon, over which the potential of individual securities is
markets than in more to this risk. more likely to be realized.
developed foreign
markets because, among
other things, emerging
markets may have less
stable political and
economic environments.
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Uniform Gift to Minors Act and
Stock Total return Uniform Transfers to Minors Act Volatility
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
An investment that An investment performance Federal and state laws The tendency of an investment to go up or down in
represents a share measurement, expressed as that provide a simple way value by different magnitudes. Investments that
of ownership a percentage, based on to transfer property to a generally go up or down in value in relatively
(equity) in a the combined earnings minor with special tax small amounts are considered "low volatility"
corporation. Stocks from dividends, capital advantages. investments, whereas those investments that
are often referred gains and change in price generally go up or down in value in relatively
to as "equities." over a given period. large amounts are considered "high volatility"
investments.
</TABLE>
29
<PAGE>
How we manage the Funds (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Delaware Delaware Delaware Delaware Delaware
International Global Overseas Emerging New Pacific Global Bond
Equity Fund Equity Fund Equity Fund Markets Fund Fund Fund
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Inefficient market The Funds will attempt to reduce these risks by investing in a number of different countries, and noting
risk is the risk that trends in the economy, industries and financial markets.
foreign markets may Delaware Global Bond
be less liquid, have Fund will also
greater price perform credit
volatility, less analysis in an
regulation and higher attempt to reduce
transaction costs these risks.
than U.S. markets.
Information risk is We conduct fundamental research on the companies we invest in rather than relying solely on information
the risk that foreign available through financial reporting. We believe this will help us to better uncover any potential
companies may be weaknesses in individual companies.
subject to different
accounting, auditing
and financial
reporting standards
than U.S. companies.
There may be less
information available
about foreign issuers
than domestic issuers.
Furthermore,
regulatory oversight
of foreign issuers may
be less stringent or
less consistently
applied than in the
United States.
Non-diversified fund Delaware Delaware Global Delaware Delaware Emerging Delaware New Delaware Global Bond
risk is the risk that International Equity Fund will Overseas Equity Markets Fund is a Pacific Fund Fund is a
non-diversified Equity Fund not be Fund is a non-diversified is a non-diversified
funds are believed to is a diversified diversified fund, fund, the same as diversified fund, the same as
be subject to greater diversified under the 1940 and is not Delaware Global fund, and is Delaware Global
risks because adverse fund, and is Act. subject to this Equity Fund. Please not subject Equity Fund. Please
effects on their not subject Non-diversified risk. see the full to this risk. see the full
security holdings may to this risk. investment explanation to the explanation under
affect a larger companies left under Delaware Delaware Global
portion of their have the Global Equity Fund. Equity Fund to the
overall assets. flexibility to left.
invest as much
as 50% of their
assets in as
few as two issuer
with no single
issuer accounting
for more than
25% of the
portfolio. The
remaining 50%
of the
portfolio must
be diversified
so that no more
than 5% of a
fund's assets is
invested in the
securities of a
single issuer.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Delaware Delaware Delaware Delaware Delaware
International Global Overseas Emerging New Pacific Global Bond
Equity Fund Equity Fund Equity Fund Markets Fund Fund Fund
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Foreign government and This is not a significant risk for Delaware Delaware Emerging This is not a The Fund is subject
supranational International Equity Fund, Delaware Global Markets Fund is significant to this risk and
securities risks Equity Fund or Delaware Overseas Equity Fund. subject to this risk risk for will attempt to
relate to the ability and will attempt to Delaware New limit this risk by
of a foreign limit this risk by Pacific Fund. performing credit
government or performing credit analysis on the
government related analysis on the issuer of each
issuer to make timely issuer of each security purchased.
payments on its security purchased. The Fund attempts to
external debt The Fund attempts to reduce the risks
obligations. reduce this risk by associated with
limiting the portion investing in foreign
of net assets that governments by
may be invested in focusing on bonds
these securities. rated within the two
The Fund also highest rating
compares the categories.
risk-reward
potential of foreign
government
securities being
considered to that
offered by equity
securities to
determine whether to
allocate assets to
equity or
fixed-income
investments.
Credit risk of This is not a significant risk for Delaware Delaware Emerging This is not a Delaware Global Bond
high-yield, high risk International Equity Fund, Delaware Global Markets Fund may significant Fund may invest a
fixed-income securities Equity Fund or Delaware Overseas Equity Fund. invest up to 35% of risk for portion of its
relates to securities its net assets in Delaware New assets in these
rated lower than BBB high-yield, high Pacific Fund. securities. Please
by S&P and Baa by risk foreign see the complete
Moody's are considered fixed-income explanation under
to be of poor standing securities. We Delaware Emerging
and predominantly intend to limit our Markets Fund to the
speculative as to the investment in any left.
issuer's ability to single lower rated
repay interest and bond, which can help
principal. These bonds to reduce the effect
are often issued by of an individual
less creditworthy default on the Fund.
companies or by highly We also intend to
leveraged (indebted) limit our overall
firms, which are holdings of bonds in
generally less able this category. Such
than more financially limitations may not
stable firms to make protect the Fund
scheduled payments of from widespread bond
interest and defaults brought
principal. The risks about by a sustained
posed by bonds issued economic downturn or
under such from price declines
circumstances are that might result
substantial. from changes in the
quality ratings of
individual bonds.
Transaction costs Each of the Funds is subject to this risk. We strive to monitor transaction costs and to choose an
risk relates to the efficient trading strategy for the Funds.
costs of buying,
selling and holding
foreign securities,
including brokerage,
tax and custody costs,
may be higher than
those involved in
domestic transactions
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
Who manages the Funds
Investment managers
and sub-advisers
Delaware International Advisers Ltd. makes investment decisions for Delaware
International Equity Fund, Delaware Global Equity Fund, Delaware Emerging
Markets Fund and Delaware Global Bond Fund, manages the Funds' business affairs
and provides daily administrative services. Delaware International Advisers Ltd.
is affiliated with Delaware Management Company, a series of Delaware Management
Business Trust, which is an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc.
Delaware Management Company is the sub-adviser to Delaware Global Equity Fund.
Delaware Management Company manages the U.S. securities portion of Delaware
Global Equity Fund's portfolio under the overall supervision of Delaware
International Advisers Ltd. and furnishes Delaware International Advisers with
investment recommendations, asset allocation advice, research and other
investment services regarding U.S. securities.
Delaware Overseas Equity Fund and Delaware New Pacific Fund are managed by
Delaware Management Company. Delaware International Advisers Ltd. is Delaware
Overseas Equity Fund's sub-adviser and AIB Govett, Inc. is Delaware New Pacific
Fund's sub-adviser. The sub-advisers are responsible for day-to-day management
of the Fund's assets. Delaware Management Company administers the Funds' affairs
and has ultimate responsibility for all investment advisory services for the
Funds. Delaware Management Company also supervises the sub-adviser's
performance.
For the services they provided, the manager and sub-advisers, where applicable,
were paid an aggregate fee by each Fund for the last fiscal year as follows:
<TABLE>
<CAPTION>
Investment management fees
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Delaware Delaware Delaware Delaware Delaware
International Global Overseas Emerging New Pacific Global Bond
Equity Fund Equity Fund Equity Fund Markets Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As a percentage of
average daily net assets 0.81% 0.34%* none* 0.28%* 0.22%* 0.51%*
</TABLE>
*Reflects a waiver of fees by the manager.
Portfolio
managers
Delaware International Equity Fund
Clive A. Gillmore and Nigel G. May have primary responsibility for making
day-to-day investment decisions for Delaware International Equity Fund. In
making investment decisions for the Fund, Mr. Gillmore and Mr. May regularly
consult with a fourteen member international equity team.
Clive A. Gillmore, Deputy Managing Director, Senior Portfolio Manager and
Director of Delaware International Advisers Ltd., has been the senior portfolio
manager for Delaware International Equity Fund since its inception. A graduate
f the University of Warwick and having begun his career at Legal and General
Investment Management, Mr. Gillmore joined Delaware International in 1990 after
eight years of investment experience. His most recent position prior to joining
Delaware International was as a Pacific Basin equity analyst and senior
portfolio manager for Hill Samuel Investment Management Ltd. Mr. Gillmore
completed the London Business School Investment program.
32
<PAGE>
Nigel G. May, Senior Portfolio Manager and Director of Delaware International
Advisers Ltd., is a graduate of Sidney Sussex College, Cambridge. Mr. May joined
Mr. Gillmore as Co-Manager of the Fund on December 22, 1997. He joined Delaware
International in 1991, assuming portfolio-management responsibilities and
sharing analytical responsibilities for continental Europe. He previously had
been with Hill Samuel Investment Management Ltd. for five years.
Delaware Global Equity Fund
Elizabeth A. Desmond has primary responsibility for making day-to-day investment
decisions for Delaware Global Equity Fund. Robert L. Arnold makes investment
decisions for the U.S. equity portion of the Fund.
Elizabeth A. Desmond, Senior Portfolio Manager and Director of Delaware
International Advisers Ltd., has been the portfolio manager for the Fund since
July 21, 1998. Ms. Desmond is a graduate of Wellesley College and the masters
program in East Asian studies at Stanford University. After working for the
Japanese government for two years, she began her investment career as a Pacific
Basin investment manager with Shearson Lehman Global Asset Management. Prior to
joining Delaware International in the spring of 1991, she was a Pacific Basin
equity analyst and senior portfolio manager at Hill Samuel Investment Management
Ltd. Ms. Desmond is a CFA charterholder.
Robert L. Arnold, Vice President/Senior Portfolio Manager of the Fund, has been
managing the U.S. equity portion of the Fund since July 21, 1998. Prior to that
time he managed other Delaware Investments mutual funds and was a financial
analyst focusing on the financial services industry including banks, thrifts,
insurance companies and consumer finance companies. Mr. Arnold holds a BS from
Carnegie Mellon University and earned an MBA from the University of Chicago. He
began his investment career as a management consultant with Arthur Young in
Philadelphia. Prior to joining Delaware Investments in March 1992, Mr. Arnold
was a planning analyst with Chemical Bank in New York.
Delaware Overseas Equity Fund
Clive Gillmore and Robert Akester have had primary responsibility for making
day-to-day investment decisions for Delaware Overseas Equity Fund since
September 15, 1997. Please see Delaware International Equity Fund for a
description of Mr. Gillmore's business experience.
Robert Akester, Senior Portfolio Manager of Delaware International Advisers
Ltd., joined Delaware International Advisers Ltd. in 1996. Mr. Akester, who
began his investment career in 1969, was most recently a Director of Hill Samuel
Investment Management Ltd., which he joined in 1985. His prior experience
included working as a Senior Analyst and head of the Southeast Asian Research
team at James Capel, and as a Fund Manager at Prudential Assurance Co., Ltd. Mr.
Akester holds a BS in Statistics and Economics from University College, London
and is an associate of the Institute of Actuaries, with a certificate in Finance
and Investment.
33
<PAGE>
Who manages the Funds (continued)
Delaware Emerging Markets Fund
Clive Gillmore also has primary responsibility for making day-to-day investment
decisions for Emerging Markets Fund (please see Delaware International Equity
Fund for a description of Mr. Gillmore's business experience). In making
investment decisions for Delaware Emerging Markets Fund, Mr. Gillmore regularly
consults with a fourteen member international equity team, including co-managers
Robert Akester and Joshua H. Brooks. (Please see Delaware Overseas Equity Fund
for a description of Mr. Akester's business experience). Mr. Gillmore has been
managing the Fund since its inception.
Joshua H. Brooks, Senior Portfolio Manager of Delaware International Advisers
Ltd., holds a bachelor's degree from Yale University and an MBA from The London
Business School. He began his investment career with Delaware Investments in
1991. Prior to joining the investment team in London, he was based in
Philadelphia with responsibilities that included equity market analysis and
acting as liaison with Delaware International.
Delaware New Pacific Fund
Jane Pickard has had primary responsibility for making day-to-day investment
decisions for the Fund since November 12, 1997. Ms. Pickard graduated in law
from Edinburgh University. She joined Barclays de Zoete Wedd Securities Limited
in 1991, where she initially worked as a specialist in structured debt products,
moving into the Pacific Rim equity division in 1992. She remained there until
1995 when she moved to IAI International where she had responsibility for
Pacific Region investment for U.S. institutional and retail funds. Ms. Pickard
joined AIB Govett Asset Management, an affiliate of AIB Govett, Inc., in 1996.
Delaware Global Bond Fund
Christopher A. Moth and Joanna Bates have primary responsibility for making
day-to-day investment decisions for Delaware Global Bond Fund. In making
investment decisions for Delaware Global Bond Fund, Mr. Moth and Ms. Bates
regularly consult with David G. Tilles.
Christopher A. Moth, Senior Portfolio Manager, Director and Head of Investment
Strategy of Delaware International Advisers Ltd., is a graduate of The City
University, London. He joined Delaware International in 1992. He previously
worked at the Guardian Royal Exchange where he was responsible for technical
analysis, quantitative models and projections. Mr. Moth has been awarded the
certificate in Finance and Investment from the Institute of Actuaries in London.
Mr. Moth became Co-Manager of the Fund in January 1997.
Joanna Bates, Senior Portfolio Manager, Credit and Emerging Markets of Delaware
International Advisers Ltd., is a graduate of London University. She joined the
Fixed Income team at Delaware International in June 1997. Prior to that she was
Associate Director, Fixed Interest at Hill Samuel Investment Management Ltd.
which she joined in 1990. She had previously worked at Fidelity International
and Save & Prosper as a fund manager and analyst for global bond markets. Ms.
Bates is an associate of the Institute of Investment Management and Research.
Ms. Bates became Co-Manager of the Fund in July 1999.
David G. Tilles, Managing Director and Chief Investment Officer of Delaware
International Advisers Ltd., was educated at the Sorbonne, Warwick University
and Heidelberg University. Prior to joining Delaware International in 1990 as
Managing Director and Chief Investment Officer, he spent 16 years with Hill
Samuel Investment Management Ltd. in London, serving in a number of investment
capacities. His most recent position prior to joining Delaware International was
Chief Investment Officer of Hill Samuel Investment Management Ltd.
34
<PAGE>
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Board of Trustees
Investment managers The Funds Custodian
Delaware International Advisers Ltd. The Chase Manhattan Bank
Third Floor 80 Cheapside 4 Chase Metrotech Center
London, England EC2V 6EE Brooklyn, NY 11245
Delaware Management Company Distributor Service agent
One Commerce Square Delaware Distributors, L.P. Delaware Service Company, Inc.
Philadelphia, PA 19103 1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
Sub-advisers
Delaware Management Company Financial advisers
Delaware International Advisers Ltd. Shareholders
AIB Govett, Inc.
250 Montgomery St., Suite 1200
San Francisco, CA 94104
Portfolio managers
(see page 32 for details)
</TABLE>
Board of Trustees A mutual fund is governed by a Board of Trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the Board of Trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Sub-adviser A sub-adviser is a company generally responsible for the management
of the fund's assets. They are selected and supervised by the investment
manager.
Portfolio managers Portfolio managers are employed by the
investment manager or sub-adviser to make investment decisions for individual
portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to NASD
Regulation, Inc. (NASD) rules governing mutual fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Financial advisers Financial advisers provide advice to their clients--analyzing
their financial objectives and recommending appropriate funds or other
investments. Financial advisers are compensated for their services, generally
through sales commissions, and through 12b-1 and/or service fees deducted from
the fund's assets.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect trustees. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
35
<PAGE>
About your account
Investing in
the Funds
You can choose from a number of share classes for each Fund. Because each share
class has a different combination of sales charges, fees, and other features,
you should consult your financial adviser to determine which class best suits
your investment goals and time frame.
Choosing a share class
Class
A
o Class A shares have an up-front sales charge of up to 5.75% that you pay
when you buy the shares. Class A shares of Delaware Global Bond Fund have
an up-front sales charge of up to 4.75%. The offering price for Class A
shares includes the front-end sales charge.
o If you invest $50,000 or more ($100,000 or more for Delaware Global Bond
Fund), your front-end sales charge will be reduced.
o You may qualify for other reduced sales charges, as described in "How to
reduce your sales charge," and under certain circumstances the sales charge
may be waived; please see the Statement of Additional Information.
o Class A shares are also subject to an annual 12b-1 fee no greater than
0.30% (0.35% for Delaware New Pacific Fund) of average daily net assets,
which is lower than the 12b-1 fee for Class B and Class C shares.
o Class A shares generally are not subject to a contingent deferred sales
charge except in the limited circumstances described in the table below.
Class A sales charges
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware International Equity, Delaware Global |
Equity, Delaware Overseas Equity, Delaware | Delaware Global Bond
Emerging Markets, Delaware New Pacific |
- ------------------------------------------------------------------------------------------------------------------------------------
Sales charge Sales charge Dealer's | Sales charge Sales charge Dealer's
as % of as % of commission | as % of as % of commission as
Amount of offering amount as % of | offering price amount % of offering
purchase price invested offering price | invested price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> | <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00% | 4.75% 4.99% 4.00%
|
$50,000 but |
under $100,000 4.75% 4.99% 4.00% | 4.75% 4.99% 4.00%
|
$100,000 but |
under $250,000 3.75% 3.90% 3.00% | 3.75% 3.90% 3.00%
|
$250,000 but |
under $500,000 2.50% 2.56% 2.00% | 2.50% 2.56% 2.00%
|
$500,000 but |
under $1,000,000 2.00% 2.04% 1.60% | 2.00% 2.04% 1.60%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
As shown below, there is no front-end sales charge when you purchase $1 million
or more of Class A shares. However, if your financial adviser is paid a
commission on your purchase, you will have to pay a limited contingent deferred
sales charge of 1% if you redeem these shares within the first year after your
purchase and 0.50% if you redeem them within the second year unless a specific
waiver of the charge applies.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Sales charge as Sales charge as Dealer's commission as
Amount of purchase % of offering price % of amount invested % of offering price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$1 million up to $5 million none none 1.00%
Next $20 million
Up to $25 million none none 0.50%
Amount over $25 million none none 0.25%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
Class
B
o Class B shares have no up-front sales charge, so the full amount of your
purchase is invested in a Fund. However, you will pay a contingent deferred
sales charge if you redeem your shares within six years after you buy them.
o If you redeem Class B shares during the first year after you buy them, the
shares will be subject to a contingent deferred sales charge of 5%. The
contingent deferred sales charge is 4% during the second year, 3% during
the third and fourth years, 2% during the fifth year, 1% during the sixth
year, and 0% thereafter. For Delaware Global Bond Fund Class B, the
contingent deferred sales charge is 4% during the first two years, 3%
during the third and fourth years after your purchase, 2% during the fifth
year, 1% during the sixth year, and 0% thereafter.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o For approximately eight years after you buy your Class B shares, they are
subject to annual 12b-1 fees no greater than 1% of average daily net
assets, of which 0.25% are service fees paid to the distributor, dealers or
others for providing services and maintaining accounts.
o Because of the higher 12b-1 fees, Class B shares have higher expenses and
any dividends paid on these shares are lower than dividends on Class A
shares.
o Approximately eight years after you buy them, Class B shares automatically
convert into Class A shares with a 12b-1 fee of no more than 0.30% (0.35%
for Delaware New Pacific Fund). Conversion may occur as late as three
months after the eighth anniversary of purchase, during which time Class
B's higher 12b-1 fees apply.
o You may purchase up to $250,000 of Class B shares at any one time. The
limitation on maximum purchases varies for retirement plans.
Class
C
o Class C shares have no up-front sales charge, so the full amount of your
purchase is invested in a Fund. However, you will pay a contingent deferred
sales charge of 1% if you redeem your shares within 12 months after you buy
them.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o Class C shares are subject to an annual 12b-1 fee which may not be greater
than 1% of average daily net assets, of which 0.25% are service fees paid
to the distributor, dealers or others for providing services and
maintaining shareholder accounts.
o Because of the higher 12b-1 fees, Class C shares have higher expenses and
pay lower dividends than Class A shares.
o Unlike Class B shares, Class C shares do not automatically convert into
another class.
o You may purchase any amount less than $1,000,000 of Class C shares at any
one time. The limitation on maximum purchases varies for retirement plans.
Each share class of the Funds has adopted a separate 12b-1 plan that allows it
to pay distribution fees for the sales and distribution of its shares. Because
these fees are paid out of a Fund's assets on an ongoing basis, over time these
fees will increase the cost of your investment and may cost you more than paying
other types of sales charges.
37
<PAGE>
About your account (continued)
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on shares.
Please refer to the Statement of Additional Information for detailed information
and eligibility requirements. You can also get additional information from your
financial adviser. You or your financial adviser must notify us at the time you
purchase shares if you are eligible for any of these programs.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Share class
Program How it works A B C
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Letter of Intent Through a Letter of X Although the Letter of Intent and Rights of
Intent you agree to Accumulation do not apply to the purchase of Class
invest a certain amount B and C shares, you can combine your purchase of
in Delaware Investments Class A shares with your purchase of Class B and C
Funds (except money shares to fulfill your Letter of Intent or qualify
market funds with no for Rights of Accumulation.
sales charge) over a
13-month period to
qualify for reduced
front-end sales charges.
Rights of You can combine your X
Accumulation holdings or purchases of
all funds in the
Delaware Investments
family (except money
market funds with no
sales charge) as well as
the holdings and
purchases of your spouse
and children under 21 to
qualify for reduced
front-end sales charges.
Reinvestment of Up to 12 months after For Class A, you For Class B, your Not available
redeemed shares you redeem shares, you will not have to account will be
can reinvest the pay an additional credited with the
proceeds with no front-end sales contingent deferred
additional sales charge. charge. sales charge you
previously paid on
the amount you are
reinvesting. Your
schedule for
contingent deferred
sales charges and
conversion to Class
A will not start
over again; it will
pick up from the
point at which you
redeemed your
shares.
Simple IRA, SEP These investment plans X There is no reduction in sales charges for Class B
IRA, SARSEP, may qualify for reduced or Class C shares for group purchases by
Prototype Profit sales charges by retirement plans.
Sharing, Pension, combining the purchases
401(k), SIMPLE of all members of the
401(k), 403(b)(7), group. Members of these
and 457 Retirement groups may also qualify
Plans to purchase shares
without a front-end
sales charge and may
qualify for a waiver of
any contingent deferred
sales charges.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
How to buy shares
(GRAPHIC SYMBOL OF ADVISER OMITTED)
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
(GRAPHIC SYMBOL OF ENVELOPE OMITTED)
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
(GRAPHIC SYMBOL OF WIRE OMITTED)
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014 12893 4013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us so we can assign you an account number.
(GRAPHIC SYMBOL OF EXCHANGE OMITTED)
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that under most circumstances you are allowed to exchange only
between like classes of shares. To open an account by exchange, call the
Shareholder Service Center at 800.523.1918.
(GRAPHIC SYMBOL OF DELAPHONE OMITTED)
Through automated shareholder services
You can purchase or exchange shares through Delaphone, our automated telephone
service, or through our web site, www.delawareinvestments.com. For more
information about how to sign up for these services, call our Shareholder
Service Center at 800.523.1918.
39
<PAGE>
About your account (continued)
How to buy shares (continued)
Once you have completed an application, you can open an account with an initial
investment of $1,000 and make additional investments at any time for as little
as $100. If you are buying shares in an IRA or Roth IRA, under the Uniform Gifts
to Minors Act or the Uniform Transfers to Minors Act, or through an Automatic
Investing Plan, the minimum purchase is $250, and you can make additional
investments of only $25. The minimum for an Education IRA is $500. The minimums
vary for retirement plans other than IRAs, Roth IRAs or Education IRAs.
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a
business day, you will pay that day's closing share price which is based on a
Fund's net asset value. If we receive your order after the close of regular
trading, you will pay the next business day's price. A business day is any day
that the New York Stock Exchange is open for business. We reserve the right to
reject any purchase order.
We determine each Fund's net asset value (NAV) per share at the close of regular
trading of the New York Stock Exchange each business day that the Exchange is
open. We calculate this value by adding the market value of all the securities
and assets in a Fund's portfolio, deducting all liabilities, and dividing the
resulting number by the number of shares outstanding. The result is the net
asset value per share. Foreign securities, currencies and other assets
denominated in foreign currencies are translated into U.S. dollars at the
exchange rate of these currencies against the U.S. dollar, as provided by an
independent pricing service. We price securities and other assets for which
market quotations are available at their market value. We price fixed-income
securities on the basis of valuations provided to us by an independent pricing
service that uses methods approved by the Board of Trustees. Any fixed-income
securities that have a maturity of less than 60 days we price at amortized cost.
For all other securities, we use methods approved by the Board of Trustees that
are designed to price securities at their fair market value.
Retirement plans
In addition to being an appropriate investment for your Individual Retirement
Account (IRA), Roth IRA and Education IRA, shares in the Funds may be suitable
for group retirement plans. You may establish your IRA account even if you are
already a participant in an employer-sponsored retirement plan. For more
information on how shares in these Funds can play an important role in your
retirement planning or for details about group plans, please consult your
financial adviser, or call 800.523.1918.
40
<PAGE>
How to redeem shares
(GRAPHIC SYMBOL OF ADVISER OMITTED)
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
(GRAPHIC SYMBOL OF ENVELOPE OMITTED)
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000, you must include a signature guarantee for each owner. Signature
guarantees are also required when redemption proceeds are going to an address
other than the address of record on an account.
(GRAPHIC SYMBOL OF TELEPHONE OMITTED)
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
(GRAPHIC SYMBOL OF WIRE OMITTED)
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. If you request a wire deposit, a bank wire fee may be deducted from
your proceeds. Bank information must be on file before you request a wire
redemption.
(GRAPHIC SYMBOL OF DELAPHONE OMITTED)
Through automated shareholder services
You can redeem shares through Delaphone, our automated telephone service, or
through our web site, www.delawareinvestments.com. For more information about
how to sign up for these services, call our Shareholder Service Center at
800.523.1918.
41
<PAGE>
About your account (continued)
How to redeem shares
(continued)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares,
before the close of regular trading on the New York Stock Exchange (normally
4:00 p.m. Eastern Time) you will receive the net asset value as determined on
the business day we receive your request. We will deduct any applicable
contingent deferred sales charges. You may also have to pay taxes on the
proceeds from your sale of shares. We will send you a check, normally the next
business day, but no later than seven days after we receive your request to sell
your shares. If you purchased your shares by check, we will wait until your
check has cleared, which can take up to 15 days, before we send your redemption
proceeds.
If you are required to pay a contingent deferred sales charge when you redeem
your shares, the amount subject to the fee will be based on the shares' net
asset value when you purchased them or their net asset value when you redeem
them, whichever is less. This arrangement assures that you will not pay a
contingent deferred sales charge on any increase in the value of your shares.
You also will not pay the charge on any shares acquired by reinvesting dividends
or capital gains. If you exchange shares of one fund for shares of another, you
do not pay a contingent deferred sales charge at the time of the exchange. If
you later redeem those shares, the purchase price for purposes of the contingent
deferred sales charge formula will be the price you paid for the original
shares--not the exchange price. The redemption price for purposes of this
formula will be the NAV of the shares you are actually redeeming.
Account minimum
If you redeem shares and your account balance falls below the required account
minimum of $1,000 ($250 for IRAs, Uniform Gift to Minors Act accounts or
accounts with automatic investing plans, $500 for Education IRAs) for three or
more consecutive months, you will have until the end of the current calendar
quarter to raise the balance to the minimum. If your account is not at the
minimum by the required time, you will be charged a $9 fee for that quarter and
each quarter after that until your account reaches the minimum balance. If your
account does not reach the minimum balance, your Fund may redeem your account
after 60 days' written notice to you.
Special services
To help make investing with us as easy as possible, and to help you build your
investments, we offer the following special services.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
<S> <C>
Automatic The Automatic Investing Plan allows you to make regular
Investing Plan monthly or quarterly investments directly from your checking
account.
Direct Deposit With Direct Deposit you can make additional investments
through payroll deductions, recurring government or private
payments such as social security or direct transfers from
your bank account.
Wealth Builder Option With the Wealth Builder Option you can arrange automatic
monthly exchanges between your shares in one or more
Delaware Investments funds. Wealth Builder exchanges are
subject to the same rules as regular exchanges (see below)
and require a minimum monthly exchange of $100 per fund.
</TABLE>
42
<PAGE>
Special services
(continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
<S> <C>
Dividend Through our Dividend Reinvestment Plan, you can have your
Reinvestment Plan distributions reinvested in your account or the same share
class in another fund in the Delaware Investments family.
The shares that you purchase through the Dividend
Reinvestment Plan are not subject to a front-end sales
charge or to a contingent deferred sales charge. Under most
circumstances, you may reinvest dividends only into like
classes of shares.
Exchanges You can exchange all or part of your shares for shares of
the same class in another Delaware Investments fund without
paying a sales charge and without paying a contingent
deferred sales charge at the time of the exchange. However,
if you exchange shares from a money market fund that does
not have a sales charge you will pay any applicable sales
charges on your new shares. When exchanging Class B and
Class C shares of one fund for similar shares in other
funds, your new shares will be subject to the same
contingent deferred sales charge as the shares you
originally purchased. The holding period for the CDSC will
also remain the same, with the amount of time you held your
original shares being credited toward the holding period of
your new shares. You don't pay sales charges on shares that
you acquired through the reinvestment of dividends. You may
have to pay taxes on your exchange. When you exchange
shares, you are purchasing shares in another fund so you
should be sure to get a copy of the fund's prospectus and
read it carefully before buying shares through an exchange.
MoneyLine(SM) Through our MoneyLine(SM) On Demand Service, you or your
On Demand Service financial adviser may transfer money between your Fund
account and your predesignated bank account by telephone
request. This service is not available for retirement plans,
except for purchases into IRAs. MoneyLine has a minimum
transfer of $25 and a maximum transfer of $50,000. Delaware
Investments does not charge a fee for this service; however,
your bank may assess one.
MoneyLine(SM) Through our MoneyLine(SM) Direct Deposit Service you can have
Direct Deposit $25 or more in dividends and distributions deposited
Service directly to your bank account. Delaware Investments does not
charge a fee for this service; however, your bank may assess
one. This service is not available for retirement plans.
Systematic Through our Systematic Withdrawal Plan you can arrange a
Withdrawal Plan regular monthly or quarterly payment from your account made
to you or someone you designate. If the value of your
account is $5,000 or more, you can make withdrawals of at
least $25 monthly, or $75 quarterly. You may also have your
withdrawals deposited directly to your bank account through
our MoneyLine Direct Deposit Service.
</TABLE>
43
<PAGE>
About your account (continued)
Dividends, distributions
and taxes
Dividends, if any, are paid quarterly for Delaware International Equity Fund,
Delaware Global Equity Fund and Delaware Global Bond Fund and annually for
Delaware Overseas Equity Fund, Delaware New Pacific Fund and Delaware Emerging
Markets Fund. Any capital gains are distributed annually. We automatically
reinvest all dividends and any capital gains, unless you tell us otherwise.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from these Funds is the same whether you
reinvest your dividends or receive them in cash. Distributions from a Fund's
long-term capital gains are taxable as capital gains, while distributions from
short-term capital gains and net investment income are generally taxable as
ordinary income. Any capital gains may be taxable at different rates depending
on the length of time the Fund held the assets. In addition, you may be subject
to state and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
44
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Funds could be adversely affected if the computer systems
used by their service providers do not properly process and calculate
date-related information from and after January 1, 2000. This is commonly known
as the "Year 2000 Problem." Each Fund has taken steps to obtain satisfactory
assurances that its major service providers have taken steps reasonably designed
to address the Year 2000 Problem on the computer systems that the service
providers use. However, there can be no assurance that these steps will be
sufficient to avoid any adverse impact on the business of the Funds. The
portfolio managers and investment professionals of the Funds consider Year 2000
compliance (including, but not limited to, any or all of the following: impact
on business, cost of compliance plan review and contingency planning, and vendor
compliance) in the securities selection and investment process. However, there
can be no guarantees that, even with their due diligence efforts, they will be
able to predict the effect of Year 2000 on any company or the performance of its
securities.
Investments by fund of funds
Delaware International Equity Fund, Delaware Emerging Markets Fund, Delaware New
Pacific Fund and Delaware Global Bond Fund accept investments from the series
portfolios of Delaware Group Foundation Funds, a fund of funds. From time to
time, a Fund may experience large investments or redemptions due to allocations
or rebalancings by Foundation Funds. While it is impossible to predict the
overall impact of these transactions over time, there could be adverse effects
on portfolio management. For example, the Fund may be required to sell
securities or invest cash at times when it would not otherwise do so. These
transactions could also have tax consequences if sales of securities result in
gains, and could also increase transactions costs or portfolio turnover. The
manager will monitor transactions by Foundation Funds and will attempt to
minimize any adverse effects on each Fund and Foundation Funds as a result of
these transactions.
Fund companies
The Funds are separate series of the investment companies shown below.
Delaware Group Global & International Funds
Delaware International Equity Fund
Delaware Global Equity Fund
Delaware Emerging Markets Fund
Delaware Global Bond Fund
Delaware Group Adviser Funds
Delaware Overseas Equity Fund
Delaware New Pacific Fund
45
-----
<PAGE>
Financial Highlights
Class A
- --------------------------------------------------------------------------------
The Financial highlights tables are intended to help you understand a Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with each Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800.523.1918.
Information for Delaware Overseas Equity Fund and Delaware New Pacific Fund for
the fiscal periods ended on or before October 31, 1996 has been audited by the
Funds' previous independent auditors.
<TABLE>
<CAPTION>
Year Ended
Delaware International 11/30
Equity Fund 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $15.330 $14.650 $14.640 $12.190 $11.920
Income (loss) from investment operations:
Net investment income(2) 0.174 0.273 0.220 0.490 0.297
Net realized and unrealized gain (loss) on
investments and foreign currencies 0.881 0.957 0.245 2.385 0.628
------- ------- ------- ------- -------
Total from investment operations 1.055 1.230 0.465 2.875 0.925
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income (0.235) (0.395) (0.435) (0.280) (0.185)
Distributions from net realized gain
on investments none (0.155) (0.020) (0.145) (0.470)
------- ------- ------- ------- -------
Total dividends and distributions (0.235) (0.550) (0.455) (0.425) (0.655)
------- ------- ------- ------- -------
Net asset value, end of period $16.150 $15.330 $14.650 $14.640 $12.190
======= ======= ======= ======= =======
Total return(3) 6.97% 8.75% 3.27%(5) 24.22%(5) 8.17%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $99,671 $122,609 $112,425 $89,177 $62,251
Ratio of expenses to average net assets 1.86% 1.70% 1.70% 1.85% 2.07%
Ratio of expenses to average net assets
prior to expense limitation and
expenses paid indirectly 1.86% 1.70% 1.71% 1.95% 2.07%
Ratio of net investment income to
average net assets 1.10% 1.80% 1.46% 3.70% 2.57%
Ratio of net investment income to
average net assets prior to expense
limitation and expenses paid indirectly 1.10% 1.80% 1.45% 3.60% 2.57%
Portfolio turnover 3% 5% 8% 9% 21%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Date of commencement of trading; ratios have been annualized but total
return has not been annualized.
(2) Per share information for the years ended November 30, 1996, 1997, 1998 and
1999 was based on the average shares outstanding method.
(3) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
(4) The ratios of expenses and net investment income to average net assets,
portfolio turnover and total return have been omitted as management
believes that such ratios and total return for this relatively short period
are not meaningful.
(5) Total return reflects expense limitations in effect during the period.
<TABLE>
<CAPTION>
How to read the Net realized and unrealized gain (loss) on investments
Financial highlights Net investment income and foreign currencies
--------------------------------------------------------------------------------
<S> <C> <C>
Net investment A realized gain on investments occurs when we sell an
income includes investment at a profit, while a realized loss on
dividend and investments occurs when we sell an investment at a
interest income loss. When an investment increases or decreases in
earned from a fund's value but we do not sell it, we record an unrealized
securities; it is gain or loss. The amount of realized gain per share
after expenses have that we pay to shareholders is listed under "Less
been deducted. dividends and distributions-Distributions from net
realized gain on investments." Realized and unrealized
gain (loss) on foreign currencies represent changes in
the U.S. dollar value of assets (including investments)
and liabilities denominated in foreign currencies as a
result of changes in foreign currency exchange rates.
</TABLE>
46
- -----
<PAGE>
<TABLE>
<CAPTION>
Class B Class C
- ----------------------------------------------------------------------------------------------------------------------------------
Period
Year ended Year Ended 11/29/95(1)
11/30 11/30 through
1999 1998 1997 1996 1995 1999 1998 1997 1996 11/30/95
- ------------------------------------------------------------------- -------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 15.280 $ 14.560 $ 14.560 $12.130 $ 11.900 $15.260 $14.540 $14.540 $12.190 $12.240
0.063 0.168 0.114 0.398 0.278 0.063 0.167 0.114 0.400 none
0.877 0.962 0.246 2.377 0.567 0.877 0.963 0.246 2.375 (0.050)
- -------- -------- -------- ------- -------- ------- ------- ------- ------- -------
0.940 1.130 0.360 2.775 0.845 0.940 1.130 0.360 2.775 (0.050)
- -------- -------- -------- ------- -------- ------- ------- ------- ------- -------
(0.130) (0.255) (0.340) (0.200) (0.145) (0.130) (0.255) (0.340) (0.280) none
none (0.155) (0.020) (0.145) (0.470) none (0.155) (0.020) (0.145) none
- -------- -------- -------- ------- -------- ------- ------- ------- ------- -------
(0.130) (0.410) (0.360) (0.345) (0.615) (0.130) (0.410) (0.360) (0.425) none
- -------- -------- -------- ------- -------- ------- ------- ------- ------- -------
$ 16.090 $ 15.280 $ 14.560 $14.560 $ 12.130 $16.070 $15.260 $14.540 $14.540 $12.190
======== ======== ======== ======= ======== ======= ======= ======= ======= =======
6.21% 8.03% 2.54%(5) 23.38%(5) 7.46% 6.22% 8.04% 2.54%(5) 23.39%(5) (4)
$ 36,997 $ 37,775 $ 31,914 $10,878 $ 3,471 $14,369 $14,076 $11,811 $ 1,909 $ 5
2.56% 2.40% 2.40% 2.55% 2.77% 2.56% 2.40% 2.40% 2.55% (4)
2.56% 2.40% 2.41% 2.65% 2.77% 2.56% 2.40% 2.41% 2.65% (4)
0.40% 1.10% 0.76% 3.00% 1.87% 0.40% 1.10% 0.76% 3.00% (4)
0.40% 1.10% 0.75% 2.90% 1.87% 0.40% 1.10% 0.75% 2.90% (4)
3% 5% 8% 9% 21% 3% 5% 8% 9% (4)
Ratio of expenses to
Net asset value (NAV) Total return Net assets average net assets
- ---------------------------------------------------------------------------------------------
This is the value of This represents the Net assets represent The expense ratio is
a mutual fund share, rate that an the total value of the percentage of
calculated by investor would have all the assets in a net assets that a
dividing the net earned or lost on an fund's portfolio, fund pays annually
assets by the number investment in a less any for operating
of shares fund. In calculating liabilities, that expenses and
outstanding. this figure for the are attributable to management fees.
financial highlights that class of the These expenses
table, we include fund. include accounting
applicable fee and administration
waivers, exclude expenses, services
front-end and for shareholders,
contingent deferred and similar
sales charges, and expenses.
assume the
shareholder has
reinvested all
dividends and
realized gains.
</TABLE>
47
-----
<PAGE>
Financial highlights (continued)
<TABLE>
<CAPTION>
Class A
- --------------------------------------------------------------------------------------------------------------------
Period
12/27/94(1)
through
Delaware Global Equity Fund 1999 1998 1997 1996 11/30/95
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.600 $ 14.050 $ 13.310 $ 11.900 $ 10.000
Income (loss) from investment operations:
Net investment income(3) 0.130 0.289 0.437 0.493 0.301
Net realized and unrealized gain (loss) on
investments and foreign currencies 0.290 0.826 0.843 1.572 1.839
------- ---------- ---------- ----------- ----------
Total from investment operations 0.420 1.115 1.280 2.065 2.140
------- ---------- ---------- ----------- ----------
Less dividends and distributions:
Dividends from net investment income (0.120) (0.335) (0.490) (0.385) (0.240)
Distributions from net realized gain
on investments (0.680) (1.230) (0.050) (0.270) none
------- ---------- ---------- ----------- ----------
Total dividends and distributions (0.800) (1.565) (0.540) (0.655) (0.240)
------- ---------- ---------- ----------- ----------
Net asset value, end of period $13.220 $ 13.600 $ 14.050 $ 13.310 $ 11.900
======= ========== ========== =========== ==========
Total return(4) 3.17% 8.83% 9.91% 18.17% 21.48%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 7,386 $ 7,329 $ 6,939 $ 11,878 $ 3,122
Ratio of expenses to average net assets 1.85% 1.55% 1.25% 1.25% 1.25%
Ratio of expenses to average net assets
prior to expense limitation and
expenses paid indirectly 2.32% 1.99% 2.16% 2.72% 7.55%
Ratio of net investment income to
average net assets 0.97% 2.17% 3.24% 4.13% 4.75%
Ratio of net investment income (loss) to
average net assets prior to expense
limitation and expenses paid indirectly 0.50% 1.73% 2.33% 2.66% (1.55%)
Portfolio turnover 29% 90% 74% 34% 57%
</TABLE>
(1) Date of commencement of trading; ratios and total return have been
annualized.
(2) Date of commencement of trading.
(3) Per share information for the years ended November 30, 1997, 1998 and 1999
was based on the average shares outstanding method.
(4) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge. Total return
also reflects expense limitations in effect during the period.
(5) The ratios of expenses and net investment income to average net assets,
portfolio turnover and total return have been omitted as management
believes that such ratios and total return for this relatively short period
are not meaningful.
<TABLE>
<CAPTION>
How to read the Ratio of net investment income to
Financial highlights average net assets Portfolio turnover rate
(continued) ---------------------------------------------------------------------------
<S> <C> <C>
We determine this ratio by dividing net This figure tells you the
investment income by average net assets. amount of trading activity in
a fund's portfolio. For
example, a fund with a 50%
turnover has bought and sold
half of the value of its total
investment portfolio during
the stated period.
</TABLE>
48
- -----
<PAGE>
<TABLE>
<CAPTION>
Class B Class C
Period Period
12/27/94(1) Year Ended 11/29/95(2)
through 11/30 through
1999 1998 1997 1996 11/30/95 1999 1998 1997 1996 11/30/95
- -------------------------------------------------------------------- --------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$13.600 $14.040 $13.300 $ 11.880 $10.000 $13.550 $13.990 $13.250 $11.890 $11.940
0.036 0.197 0.342 0.379 0.212 0.036 0.197 0.341 0.446 none
0.294 0.813 0.848 1.606 1.848 0.294 0.813 0.849 1.534 (0.050)
- ------- ------- ------- -------- ------- ------- ------- ------- ------- -------
0.330 1.010 1.190 1.985 2.060 0.330 1.010 1.190 1.980 (0.050)
- ------- ------- ------- -------- ------- ------- ------- ------- ------- -------
(0.060) (0.220) (0.400) (0.295) (0.180) (0.060) (0.220) (0.400) (0.350) none
(0.680) (1.230) (0.050) (0.270) none (0.680) (1.230) (0.050) (0.270) none
- ------- ------- ------- -------- ------- ------- ------- ------- ------- -------
(0.740) (1.450) (0.450) (0.565) (0.180) (0.740) (1.450) (0.450) (0.620) none
- ------- ------- ------- -------- ------- ------- ------- ------- ------- -------
$13.190 $13.600 $14.040 $ 13.300 $11.880 $13.140 $13.550 $13.990 $13.250 $11.890
======= ======= ======= ======== ======= ======= ======= ======= ======= =======
2.56% 7.97% 9.18% 17.32% 20.73% 2.57% 8.00% 9.21% 17.33% (5)
$ 5,044 $ 5,397 $ 4,445 $ 4,796 $ 613 $ 2,614 $ 3,391 $ 3,094 $ 1,185 $ 5
2.55% 2.25% 1.95% 1.95% 1.95% 2.55% 2.25% 1.95% 1.95% (5)
3.02% 2.69% 2.86% 3.42% 8.25% 3.02% 2.69% 2.86% 3.42% (5)
0.27% 1.47% 2.54% 3.43% 4.05% 0.27% 1.47% 2.54% 3.43% (5)
(0.20%) 1.03% 1.63% 1.96% (2.25%) (0.20%) 1.03% 1.63% 1.96% (5)
29% 90% 74% 34% 57% 29% 90% 74% 34% (5)
</TABLE>
49
-----
<PAGE>
Financial highlights (continued)
<TABLE>
<CAPTION>
Class A
- -----------------------------------------------------------------------------------------------------------------------
Year Ended
10/31
Delaware Overseas Equity Fund 1999(1) 1998(1) 1997(1) 1996(2) 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.950 $12.520 $12.390 $11.400 $11.000
Income (loss) from investment operations:
Net investment income (loss) 0.075 0.091 (0.060) (0.060) 0.010
Net realized and unrealized gain (loss) on
investments and foreign currencies 0.870 (1.501) 0.960 1.073 0.400
------ ------ ------- ------- -------
Total from investment operations 0.945 (1.410) 0.900 1.013 0.410
------ ------ ------- ------- -------
Less dividends and distributions:
Dividends from net investment income (0.695) (0.520) (0.440) (0.023) (0.010)
Distributions from net realized gain
on investments (1.370) (1.640) (0.330) none none
------ ------ ------- ------- -------
Total dividends and distributions (2.065) (2.160) (0.770) (0.023) (0.010)
------ ------ ------- ------- -------
Net asset value, end of period $7.830 $8.950 $12.520 $12.390 $11.400
====== ====== ======= ======= =======
Total return(3) 13.86%(4) (12.95%)(4) 7.74% 8.90%4 3.81%4
Ratios and supplemental data:
Net assets, end of period (000 omitted) $2,285 $2,034 $10,868 $14,886 $13,018
Ratio of expenses to average net assets 1.85% 1.83% 1.80% 1.82% 1.85%
Ratio of expenses to average net assets
prior to expense limitation and
expenses paid indirectly 5.31% 3.75% N/A 2.60% 2.96%
Ratio of net investment income (loss)
to average net assets 0.95% 0.93% (0.45%) (0.51%) 0.00%
Ratio of net investment loss to average
net assets prior to expense limitation
and expenses paid indirectly (2.51%) (0.99%) N/A (1.29%) (1.11%)
Portfolio turnover 7% 87% 18% 21% 9%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The average shares outstanding method has been applied for per share
information.
(2) Commencing May 3, 1996, Delaware Management Company replaced Lincoln
National Corporation as the Fund's investment manager.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(4) Total return reflects expense limitations in effect during the period.
50
- -----
<PAGE>
<TABLE>
<CAPTION>
Class B Class C
Year Ended Year Ended
10/31 10/31
1999(1) 1998(1) 1997(1) 1996(2) 1995 1999(1) 1998(1) 1997(1) 1996(2) 1995
- ----------------------------------------------------------------- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$8.030 $11.540 $11.560 $10.710 $10.400 $ 8.040 $ 11.550 $11.580 $10.730 $10.430
0.017 0.033 (0.140) (0.060) (0.020) 0.017 0.033 (0.140) (0.060) (0.060)
0.753 (1.383) 0.890 0.930 0.350 0.763 (1.383) 0.880 0.930 0.390
- ------ -------- ------- ------- ------- -------- -------- ------ ------- ------
0.770 (1.350) 0.750 0.870 0.330 0.780 (1.350) 0.740 0.870 0.330
- ------ -------- ------- ------- ------- -------- -------- ------ ------- ------
(0.640) (0.520) (0.440) (0.020) (0.020) (0.640) (0.520) (0.440) (0.020) (0.030)
(1.370) (1.640) (0.330) none none (1.370) (1.640) (0.330) none none
- ------ -------- ------- ------- ------- -------- -------- ------ ------- ------
(2.010) (2.160) (0.770) (0.020) (0.020) (2.010) (2.160) (0.770) (0.020) (0.030)
- ------ -------- ------- ------- ------- -------- -------- ------ ------- ------
$6.790 $ 8.030 $11.540 $11.560 $10.710 $ 6.810 $ 8.040 $11.550 $11.580 $10.730
====== ======== ======= ======= ======= ======= ======== ======= ======= =======
12.98%(4) (13.66%)(4) 6.95% 8.16%(4) 3.19%(4) 13.08%(4) (13.67%)(4) 6.85% 8.15%(4) 3.16%(4)
$1,018 $1,166 $1,450 $1,208 $ 1,183 $209 $179 $159 $112 $43
2.55% 2.53% 2.50% 2.50% 2.50% 2.55% 2.53% 2.50% 2.50% 2.50%
6.01% 4.45% N/A 3.28% 3.61% 6.01% 4.45% N/A 3.28% 3.61%
0.25% 0.23% (1.16%) (1.19%) (0.57%) 0.25% 0.23% (1.16%) (1.19%) (0.62%)
(3.21%) (1.69%) N/A (1.97%) (1.68%) (3.21%) (1.69%) N/A (1.97%) (1.73%)
7% 87% 18% 21% 9% 7% 87% 18% 21% 9%
- ----------------------------------------------------------------- -------------------------------------------------------------
</TABLE>
51
-----
<PAGE>
Financial highlights (continued)
<TABLE>
<CAPTION>
Class A
- ----------------------------------------------------------------------------------------------------------
Period
Year Ended 6/10/96(1)
11/30 through
Delaware Emerging Markets Fund 1999 1998 1997 11/30/96
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $6.530 $10.200 $9.970 $10.000
Income (loss) from investment operations:
Net investment income (loss)(2) 0.081 0.129 0.062 0.018
Net realized and unrealized gain (loss)
on investments and foreign currencies 1.509 (3.174) 0.253 (0.048)
------ ------ ------- ------
Total from investment operations 1.590 (3.045) 0.315 (0.030)
------ ------ ------- ------
Less dividends and distributions:
Dividends from net investment income (loss) (0.070) (0.020) (0.010) none
Distributions from net realized gain
on investments none (0.605) (0.075) none
------ ------ ------- ------
Total dividends and distributions (0.070) (0.625) (0.085) none
------ ------ ------- ------
Net asset value, end of period $8.050 $6.530 $10.200 $9.970
====== ====== ======= ======
Total return(3) 24.74% (31.66%) 3.19% (0.30%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $7,815 $5,584 $9,665 $2,518
Ratio of expenses to average net assets 1.95% 1.96% 2.00% 2.00%
Ratio of expenses to average net assets
prior to expense limitation and
expenses paid indirectly 2.99% 3.91% 3.02% 4.10%
Ratio of net investment income (loss)
to average net assets 1.15% 1.58% 0.52% 0.17%
Ratio of net investment income (loss)
to average net assets prior to expense
limitation and expenses paid indirectly 0.11% (0.37%) (0.50%) (1.93%)
Portfolio turnover 17% 47% 65% 36%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Date of commencement of trading; ratios have been annualized but total
return has not been annualized.
(2) Per share information was based on the average shares outstanding method
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge. Total return
reflects expense limitations in effect during the period.
52
- -----
<PAGE>
<TABLE>
<CAPTION>
Class B Class C
Period Period
Year Ended 6/10/96(1) Year Ended 6/10/96(1)
11/30 through 11/30 through
1999 1998 1997 11/30/96 1999 1998 1997 11/30/96
- -------------------------------------------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$6.440 $10.110 $ 9.940 $10.000 $6.430 $10.110 $ 9.940 $10.000
0.029 0.070 (0.020) (0.051) 0.029 0.068 (0.019) (0.051)
1.501 (3.135) 0.265 (0.009) 1.501 (3.143) 0.264 (0.009)
- ------ -------- ------- --------- ------ -------- ------- --------
1.530 (3.065) 0.245 (0.060) 1.530 (3.075) 0.245 (0.060)
- ------ -------- ------- --------- ------ -------- ------- --------
0.010 none none none (0.010) none none none
none (0.605) (0.075) none none (0.605) (0.075) none
- ------ -------- ------- --------- ------ -------- ------- --------
0.010 (0.605) (0.075) none (0.010) (0.605) (0.075) none
- ------ -------- ------- --------- ------ -------- ------- --------
$7.960 $ 6.440 $10.110 $ 9.940 $7.950 $ 6.430 $10.110 $ 9.940
====== ======== ======= ========= ====== ======== ======= ========
23.81% (32.11%) 2.48% (0.60%) 23.85% (32.21%) 2.48% (0.60%)
$3,671 $2,528 $3,484 $282 $1,565 $884 $1,519 $199
2.70% 2.70% 2.70% 2.70% 2.70% 2.70% 2.70% 2.70%
3.69% 4.61% 3.72% 4.80% 3.69% 4.61% 3.72% 4.80%
0.40% 0.84% (0.18%) (0.53%) 0.40% 0.84% (0.18%) (0.53%)
(0.59%) (1.07%) (1.20%) (2.63%) (0.59%) (1.07%) (1.20%) (2.63%)
17% 47% 65% 36% 17% 47% 65% 36%
- -------------------------------------------------- ---------------------------------------------
</TABLE>
53
-----
<PAGE>
Financial highlights (continued)
<TABLE>
<CAPTION>
Class A
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended
10/31
Delaware New Pacific Fund 1999(1) 1998(1) 1997(1) 1996(2) 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $4.590 $7.320 $9.420 $8.710 $10.440
Income (loss) from investment operations:
Net investment income (loss) (0.039) 0.008 (0.010) (0.050) (0.050)
Net realized and unrealized gain (loss) on
investments and foreign currencies 2.709 (2.683) (1.940) 0.769 (1.390)
------- ------- ------- ------- -------
Total from investment operations 2.670 (2.675) (1.950) 0.719 (1.440)
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income (loss) none (0.055) (0.150) (0.009) none
Distributions from net realized gain
on investments none none none none (0.290)
------- ------- ------- ------- -------
Total dividends and distributions none (0.055) (0.150) (0.009) (0.290)
------- ------- ------- ------- -------
Net asset value, end of year $7.260 $4.590 $7.320 $9.420 $ 8.710
======= ======= ======= ======= =======
Total return(3) 58.52% (36.85%) (21.15%) 8.26% (13.99%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $12,113 $5,887 $7,144% $11,752 $10,353
Ratio of expenses to average net assets 1.96% 1.90% 1.80% 1.82% 1.85%
Ratio of expenses to average net assets
prior to expense limitation and
expenses paid indirectly 2.57% 3.23% 1.86% 2.77% 3.73%
Ratio of net investment income (loss)
to average net assets (0.65%) 0.15% (0.08%) (0.41%) (0.60%)
Ratio of net investment loss to average
net assets prior to expense limitation
and expenses paid indirectly (1.26%) (1.18%) (0.14%) (1.36%) (2.48%)
Portfolio turnover 90% 188% 178% 163% 163%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The average shares outstanding method has been applied for per share
information.
(2) Commencing May 3, 1996, Delaware Management Company replaced Lincoln
National Corporation as the Fund's investment manager.
(3) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge. Total return
also reflects expense limitations in effect during the period.
54
<PAGE>
<TABLE>
<CAPTION>
Class B Class C
- -------------------------------------------------------------------- -----------------------------------------------------------
Year Ended Year Ended
10/31 10/31
1999(1) 1998(1) 1997(1) 1996(2) 1995 1999(1) 1998(1) 1997(1) 1996(2) 1995
- -------------------------------------------------------------------- -----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$4.660 $7.470 $9.680 $9.010 $10.860 $4.550 $7.320 $9.490 $8.830 $10.660
(0.081) (0.031) (0.080) (0.050) (0.100) (0.082) (0.029) (0.080) (0.050) (0.080)
2.741 (2.724) (1.980) 0.730 (1.460) 2.682 (2.686) (1.940) 0.718 (1.460)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
2.660 (2.755) (2.060) 0.680 (1.560) 2.600 (2.715) (2.020) 0.668 (1.540)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
none (0.055) (0.150) (0.010) none none (0.055) (0.150) (0.008) none
none none none none (0.290) none none none none (0.290)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
none (0.055) (0.150) (0.010) (0.290) none (0.055) (0.150) (0.008) (0.290)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
$7.320 $4.660 $7.470 $9.680 $ 9.010 $7.150 $4.550 $7.320 $9.490 $8.830
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
57.08% (37.05%) (21.72%) 7.54% (14.56%) 57.14% (37.18%) (21.85%) 7.58% (14.57%)
$5,654 $2,236 $2,534 $562 $573 $1,093 $130 $129 $44 $17
2.66% 2.60% 2.50% 2.50% 2.50% 2.66% 2.60% 2.50% 2.50% 2.50%
3.27% 3.93% 2.56% 3.45% 4.38% 3.27% 3.93% 2.56% 3.45% 4.38%
(1.35%) (0.55%) (0.77%) (1.09%) (1.20%) (1.35%) (0.55%) (0.77%) (1.09%) (1.02%)
(1.96%) (1.88%) (0.83%) (2.04%) (3.08%) (1.96%) (1.88%) (0.83%) (2.04%) (2.90%)
90% 188% 178% 163% 163% 90% 188% 178% 163% 163%
- -------------------------------------------------------------------- -----------------------------------------------------------
</TABLE>
55
<PAGE>
Financial highlights (continued)
<TABLE>
<CAPTION>
Class A
- ------------------------------------------------------------------------------------------------------------------------------------
Period
Year Ended 12/27/94(1)
11/30 through
Delaware Global Bond Fund 1999 1998 1997 1996 11/30/95
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.940 $10.790 $11.480 $11.230 $10.000
Income (loss) from investment operations:
Net investment income(2) 0.560 0.595 0.625 0.755 0.659
Net realized and unrealized gain (loss) on
investments and foreign currencies (0.935) (0.015) (0.505) 0.730 1.171
------- ------- ------- ------- -------
Total from investment operations (0.375) 0.580 0.120 1.485 1.830
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income (0.460) (0.400) (0.770) (0.875) (0.600)
Distributions from net realized gain
on investments (0.105) (0.030) (0.040) (0.360) none
------- ------- ------- ------- -------
Total dividends and distributions (0.565) (0.430) (0.810) (1.235) (0.600)
------- ------- ------- ------- -------
Net asset value, end of period $10.000 $10.940 $10.790 $11.480 $11.230
======= ======= ======= ======= =======
Total return(3) (3.50%) 5.47% 1.24% 14.35% 18.79%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $3,944 $4,684 $4,567 $3,467 $889
Ratio of expenses to average net assets 1.30% 1.25% 1.25% 1.25% 1.25%
Ratio of expenses to average net assets
prior to expense limitation and
expenses paid indirectly 1.54% 1.59% 2.04% 5.00% 12.34%
Ratio of net investment income (loss)
to average net assets 5.34% 5.58% 5.76% 6.82% 7.70%
Ratio of net investment income loss to average
net assets prior to expense limitation
and expenses paid indirectly 5.10% 5.24% 4.97% 3.07% (3.39%)
Portfolio turnover 90% 93% 76% 42% 98%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Date of commencement of trading.
(2) Per share information for the years ended November 30, 1996, 1997, 1998 and
1999 was based on the average shares outstanding method.
(3) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge. Total return
also reflects expense limitations in effect during the period.
(4) The ratios of expenses and net investment income to average net assets,
portfolio turnover and total return have been omitted as management
believes that such ratios and total return for this relatively short period
are not meaningful.
56
<PAGE>
<TABLE>
<CAPTION>
Class B Class C
- -------------------------------------------------------------------- -----------------------------------------------------------
Period Period
Year Ended 12/27/94(1) Year Ended 1 1/29/95(1)
11/30 through 11/30 through
1999 1998 1997 1996 11/30/95 1999 1998 1997 1996 11/30/95
- -------------------------------------------------------------------- -----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$10.930 $10.790 $11.490 $11.230 $10.000 $10.880 $10.740 $11.440 $11.240 $11.330
0.487 0.520 0.550 0.679 0.565 0.487 0.521 0.551 0.680 none
(0.927) (0.020) (0.511) 0.735 1.205 (0.937) (0.021) (0.512) 0.719 (0.036)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(0.440) 0.500 0.039 1.414 1.770 (0.450) 0.500 0.039 1.399 (0.036)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(0.385) (0.330) (0.699) (0.794) (0.540) (0.385) (0.330) (0.699) (0.839) (0.054)
(0.105) (0.030) (0.040) (0.360) none (0.105) (0.030) (0.040) (0.360) none
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(0.490) (0.360) (0.739) (1.154) (0.540) (0.490) (0.360) (0.739) (1.199) (0.054)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
$10.000 $10.930 $10.790 $11.490 $11.230 $ 9.940 $10.880 $10.740 $11.440 $11.240
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
(4.01%) 4.59% 0.48% 13.51% 18.23% (4.21%) 4.71% 0.49% 13.51% (4)
$1,646 $1,188 $1,081 $707 $115 $681 $539 $703 $118 $ 5
2.00% 1.95% 1.95% 1.95% 1.95% 2.00% 1.95% 1.95% 1.95% (4)
2.24% 2.29% 2.74% 5.70% 13.04% 2.24% 2.29% 2.74% 5.70% (4)
4.64% 4.88% 5.06% 6.12% 7.00% 4.64% 4.88% 5.06% 6.12% (4)
4.40% 4.54% 4.27% 2.37% (4.09%) 4.40% 4.54% 4.27% 2.37% (4)
90% 93% 76% 42% 98% 90% 93% 76% 42% (4)
- -------------------------------------------------------------------- -----------------------------------------------------------
</TABLE>
57
<PAGE>
Additional information about the Funds' investments is available in the Funds'
annual and semi-annual reports to shareholders. In the Funds' shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Funds' performance during the report
period. You can find more detailed information about the Funds in the current
Statements of Additional Information, which we have filed electronically with
the Securities and Exchange Commission (SEC) and which is legally a part of this
Prospectus. If you want a free copy of a Statement of Additional Information,
the annual or semi-annual report, or if you have any questions about investing
in these funds, you can write to us at 1818 Market Street, Philadelphia, PA
19103-3682, or call toll-free 800.523.1918. You may also obtain additional
information about each of the Funds from your financial adviser.
You can find reports and other information about each Fund EDGAR database on the
on the SEC web site (http://www.sec.gov), or you can get copies of this
information, after payment of a duplicating fee, by e-mailing the SEC at
[email protected] or by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-0102. Information about the Funds, including their
Statement of Additional Information, can be reviewed and copied at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
You can get information on the public reference room by calling the SEC at
202.942.8090.
Web site
www.delawareinvestments.com
E-mail
[email protected]
Shareholder Service Center
800.523.1918
Call the Shareholder Service Center:
Monday to Friday, 8 a.m. to 8 p.m. Eastern time:
oFor fund information; literature; price, yield and performance figures.
oFor information on existing regular investment accounts and retirement plan
accounts including wire investments; wire redemptions;
telephone redemptions and telephone exchanges.
Delaphone Service
800.362.FUND (800.362.3863)
oFor convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24 hours a
day, use this Touch-Tone(R) service.
Delaware Group Global & International Funds
Investment Company Act file number: 811-6324
Delaware Group Adviser Funds
Investment Company Act file number: 811-7972
DELAWARE(SM)
INVESTMENTS
- -----------
Philadelphia o London
P-034 [--] PP 02/00
<PAGE>
Delaware International
Equity Fund
Delaware Global
Equity Fund
Delaware Overseas
Equity Fund
Delaware New
Pacific Fund
Delaware Emerging
Markets Fund
Delaware Global
Bond Fund
Fund Symbols
CUSIP NASDAQ
----- ------
Delaware International Equity Fund
- ----------------------------------
Class A 245914106 DEGIX
Class B 245914700 DEIEX
Class C 245914858 DEGCX
Delaware Global Equity Fund
- ---------------------------
Class A 245914304 DEGAX
Class B 245914809 DGABX
Class C 245914874 DGACX
Delaware Overseas Equity Fund
- -----------------------------
Class A 245917885 DEWGX
Class B 245917877 DEWBX
Class C 245917869 DEWCX
Delaware New Pacific Fund
- -------------------------
Class A 245917844 DENPX
Class B 245917836 DENBX
Class C 245917828 DENCX
Delaware Emerging Markets Fund
- ------------------------------
Class A 245914841 DEMAX
Class B 245914833 DEMBX
Class C 245914825 DEMCX
Delaware Global Bond Fund
- -------------------------
Class A 245914205 DGBAX
Class B 245914882 DGBBX
Class C 245914866 DCBCX
<PAGE>
GRAPHIC OMITTED
International and Global Funds
DELAWARE(SM)
INVESTMENTS
- ---------------------
Philadelphia o London
Delaware International
Equity Fund
Delaware Global
Equity Fund
Delaware Overseas
Equity Fund
Delaware Emerging
Markets Fund
Delaware New
Pacific Fund
Delaware Global
Bond Fund
Institutional Class
Prospectus February 1, 2000
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this Prospectus, and any
representation to the contrary is a criminal offense.
<PAGE>
Table of contents
.................................................................
Fund profiles page 2
Delaware International Equity Fund 2
Delaware Global Equity Fund 4
Delaware Overseas Equity Fund 6
Delaware Emerging Markets Fund 8
Delaware New Pacific Fund 10
Delaware Global Bond Fund 12
.................................................................
How we manage the Funds page 14
Our investment strategies 14
The securities we typically invest in 19
The risks of investing in the Funds 26
.................................................................
Who manages the Funds page 30
Investment managers and subadvisers 30
Portfolio managers 30
Fund administration (Who's who) 33
.................................................................
About your account page 34
Investing in the Funds 34
How to buy shares 35
How to redeem shares 37
Account minimum 38
Exchanges 38
Dividends, distributions and taxes 38
.................................................................
Certain management considerations page 39
.................................................................
Financial highlights page 40
1
<PAGE>
Profile: Delaware International Equity Fund
What is the Fund's goal?
Delaware International Equity Fund seeks long-term growth without undue risk
to principal. Although the Fund will strive to achieve its goal, there is no
assurance that it will.
What are the Fund's main investment strategies? The Fund invests primarily in
foreign equity securities that provide the potential for capital appreciation
and income. At least 65% of the Fund's total assets will be invested in equity
securities of issuers from at least three foreign countries. An issuer is
considered to be from the country where it is located, where the majority of its
assets are located or where it generates the majority of its operating income.
In selecting investments for the Fund,
o We strive to identify well managed companies that are undervalued based on
such factors as assets, earnings, dividends or growth potential.
o In order to compare the value of different stocks, we consider whether the
future dividends on a stock are expected to increase faster than, slower than,
or in line with the level of inflation. We then estimate what we think the
value of those anticipated future dividends would be worth if they were being
paid today. We believe this gives us an estimate of the stock's true value.
o We generally prefer to purchase securities in countries where the currency is
undervalued or fair-valued compared to other countries because these
securities may offer greater return potential. We attempt to determine whether
a particular currency is overvalued or undervalued by comparing the amount of
goods and services that a dollar will buy in the United States to the amount
of foreign currency required to buy the same amount of goods and services in
another country. When the dollar buys less, the foreign currency may be
overvalued, and when the dollar buys more, the foreign currency may be
undervalued.
What are the main risks of investing in the Fund? Investing in any mutual fund
involves risk, including the risk that you may lose part or all of the money you
invest. The price of Fund shares will increase and decrease according to changes
in the value of the Fund's investments. This Fund will be affected primarily by
declines in stock prices, which can be caused by a drop in foreign stock markets
or poor performance in specific industries or companies. Because the Fund
invests in international securities in both established and developing
countries, it will be affected by international investment risks related to
currency valuations, political instability, economic instability, and lax
accounting and regulatory standards. For a more complete discussion of risk,
please turn to page 26.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
2
<PAGE>
How has Delaware International Equity Fund performed?
- --------------------------------------------------------------------------------
Year-by-year total return (Institutional Class)
-1.36% 24.80% 2.03% 11.75% 20.61% 4.61% 9.35% 14.04%
1992 1993 1994 1995 1996 1997 1998 1999
This bar chart and table can help you evaluate the risks of investing in the
Fund. We show how returns for the Fund's Institutional Class shares have varied
over the past eight calendar years, as well as the average annual returns of
these shares for the one- and five-year periods and since inception. The Fund's
Institutional Class commenced operations on November 9, 1992. Return information
for the Class for the periods prior to the time the Class commenced operations
is calculated by taking the performance of The Fund's Class A and eliminating
all sales charges that apply to Class A shares. However, for those periods,
Class A 12b-1 payments were not eliminated, and performance would have been
affected if this adjustment had been made. The returns reflect voluntary expense
caps, if any, in effect during the periods. The returns would be lower without
the voluntary caps. There is no longer a cap in place for this Fund. The Fund's
past performance is not necessarily an indication of how it will perform in the
future.
During the periods illustrated in the bar chart, the Institutional Class'
highest quarterly return was 13.53% for the quarter ended December 31, 1998 and
its lowest quarterly return was -13.69% for the quarter ended September 30,
1998.
<TABLE>
<CAPTION>
Average annual returns for periods ending 12/31/99
- --------------------------------------------------------------------------------------------------------------
Institutional Morgan Stanley
Class Capital International
EAFE Index
- --------------------------------------------------------------------------------------------------------------
(Inception 10/31/91)
<S> <C> <C>
1 year 14.04% 27.30%
5 years 11.94% 13.15%
Lifetime 10.72% 14.94%
</TABLE>
The Fund's returns are compared to the performance of the Morgan Stanley Capital
International EAFE (Europe, Australia, Far East) Index. You should remember that
unlike the Fund, the index is unmanaged and doesn't reflect the costs of
operating a mutual fund, such as the costs of buying, selling and holding the
securities.
<PAGE>
What are Delaware International Equity
Fund's fees and expenses?
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
You do not pay sales charges directly Maximum sales charge (load) imposed on
from your investments when you buy or purchases as a percentage of offering price none
sell shares of the Institutional Class.
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none
Maximum sales charge (load) imposed on
reinvested dividends none
Redemption fees none
Exchange fees(1) none
- --------------------------------------------------------------------------------------------------------------
Annual fund operating expenses are Management fees(2) 0.85%
deducted from the Fund's assets.
Distribution and service (12b-1) fees none
Other expenses 0.75%
Total operating expenses 1.60%
- --------------------------------------------------------------------------------------------------------------
This example is intended to help you 1 year $163
compare the cost of investing in the
Fund to the cost of investing in other 3 years $505
mutual funds with similar investment
objectives. We show the cumulative 5 years $891
amount of Fund expenses on a
hypothetical investment of $10,000 with 10 years $1,900
an annual 5% return over the time
shown.(3) This is an example only, and
does not represent future expenses,
which may be greater or less than those
shown here.
</TABLE>
(1) Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange your
shares into a fund that has a front-end sales charge.
(2) Reflects a newmanagement fee which became effective on April 15, 1999.
(3) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show.
3
<PAGE>
Profile: Delaware Global Equity Fund
What is the Fund's goal?
Delaware Global Equity Fund seeks long-term total return. Although the Fund
will strive to achieve its goal, there is no assurance that it will.
What are the Fund's main investment strategies? The Fund invests primarily in
U.S. and foreign equity securities that provide the potential for capital
appreciation and income. Under normal circumstances, we will invest at least 65%
of the Fund's total assets in equity securities from at least three different
countries, one of which may be the United States. An issuer is considered to be
from the country where it is located, where the majority of its assets are
located or where it generates the majority of its operating income.
To determine how much of the Fund's assets to allocate to international stocks
and how much to U.S. stocks, we compare the potential total return of each asset
class in the context of our expectations for inflation, economic growth and
political stability in various regions.
In selecting investments for the Fund,
o We strive to identify well managed companies that are undervalued based on
such factors as assets, earnings, dividends or growth potential.
o In order to compare the value of different stocks, we consider whether the
future dividends on a stock are expected to increase faster than, slower than,
or in line with the level of inflation. We then estimate what we think the
value of those anticipated future dividends would be worth if they were being
paid today. We believe this gives us an estimate of the stock's true value.
o We generally prefer to purchase securities in countries where the currency is
undervalued or fair-valued compared to other countries because these
securities may offer greater return potential. We attempt to determine whether
a particular currency is overvalued or undervalued by comparing the amount of
goods and services that a dollar will buy in the United States to the amount
of foreign currency required to buy the same amount of goods and services in
another country. When the dollar buys less, the foreign currency may be
overvalued, and when the dollar buys more, the foreign currency may be
undervalued.
What are the main risks of investing in the Fund? Investing in any mutual fund
involves risk, including the risk that you may lose part or all of the money you
invest. The price of Fund shares will increase and decrease according to changes
in the value of the Fund's investments. This Fund will be affected primarily by
declines in stock prices, which can be caused by a drop in the stock market or
poor performance in specific industries or companies. Because the Fund invests
in foreign securities, it will be affected by international investment risks
related to currency valuations, political instability, economic instability and
lax accounting and regulatory standards.
The Fund is considered "non-diversified" under federal laws that regulate mutual
funds. That means the Fund may allocate more of its net assets to investments in
single securities than a "diversified" fund. Thus, adverse effects on the Fund's
investments may affect a larger portion of its overall assets and subject the
Fund to greater risks. For a more complete discussion of risk, please turn to
page 26.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
4
<PAGE>
How has Delaware Global Equity Fund performed?
- --------------------------------------------------------------------------------
Year-by-year total return (Institutional Class)
25.08% 15.80% 11.43% 8.85% 6.29%
1995 1996 1997 1998 1999
This bar chart and table can help you evaluate the risks of investing in the
Fund. We show how returns for the Fund's Institutional Class shares have varied
over the past five calendar years, as well as the average annual returns of
these shares for the one-year and five-year periods and since inception. The
Fund's past performance is not necessarily an indication of how it will perform
in the future. The returns reflect voluntary expense caps. The returns would be
lower without the voluntary caps. On July 21, 1998, the Fund's name was changed
from Global Assets Fund to Global Equity Fund and the Fund's investment focus
changed from a mix of foreign and U.S. stocks and bonds to primarily foreign and
U.S. stocks.
During the periods illustrated in this bar chart, the Institutional Class'
highest quarterly return was 11.31% for the quarter ended December 31, 1998 and
its lowest quarterly return was -9.52% for the quarter ended September 30, 1998.
<TABLE>
<CAPTION>
Average annual returns for periods ending 12/31/99
- ------------------------------------------------------------------------------------------------------------------------
Institutional Morgan Stanley
Class Capital International
World Index
- ------------------------------------------------------------------------------------------------------------------------
(Inception 12/27/94)
<S> <C> <C>
1 year 6.29% 25.34%
5 years 13.31% 20.25%
Lifetime 13.24% 20.25%
</TABLE>
The Fund's returns are compared to the performance of the Morgan Stanley Capital
International World Index. You should remember that unlike the Fund, the index
is unmanaged and doesn't reflect the costs of operating a mutual fund, such as
the costs of buying, selling and holding the securities.
<PAGE>
What are Delaware Global Equity Fund's
fees and expenses?
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
You do not pay sales charges directly Maximum sales charge (load) imposed on
from your investments when you buy or purchases as a percentage of offering price none
sell shares of the Institutional Class.
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none
Maximum sales charge (load) imposed on
reinvested dividends none
Redemption fees none
Exchange fees(1) none
- ---------------------------------------------------------------------------------------------------------------
Annual fund operating expenses are Management fees(2) 0.85%
deducted from the Fund's assets.
Distribution and service (12b-1) fees none
Other expenses 1.21%
Total annual fund operating expenses 2.06%
Fee waivers and payments(3) (0.51%)
Net expenses 1.55%
- ---------------------------------------------------------------------------------------------------------------
This example is intended to help you 1 year $158
compare the cost of investing in the
Fund to the cost of investing in other 3 years $597
mutual funds with similar investment
objectives. We show the cumulative 5 years $1,062
amount of Fund expenses on a
hypothetical investment of $10,000 with 10 years $2,349
an annual 5% return over the time
shown(4). This is an example only, and
does not represent future expenses,
which may be greater or less than those
shown here.
</TABLE>
(1) Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange your
shares into a fund that has a front-end sales charge.
(2) Reflects a new management fee which became effective on April 1, 1999.
(3) The investment manager has contracted to waive fees and pay expenses through
January 31, 2001 in order to prevent total operating expenses (excluding any
taxes, interest, brokerage fees and extraordinary expenses) from exceeding
1.55% of average daily net assets.
(4) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. This example reflects the net operating
expenses with expense waivers for the one-year period and the total
operating expenses without expense waivers for years two through 10.
5
<PAGE>
Profile: Delaware Overseas Equity Fund
What is the Fund's goal?
Delaware Overseas Equity Fund seeks to maximize total return (capital
appreciation and income). Although the Fund will strive to achieve its
goal, there is no assurance that it will.
What are the Fund's main investment strategies? We invest primarily in foreign
equity securities which we believe offer capital appreciation potential. We may
invest in companies that are located in established or developing countries;
however we limit our investments in companies located in developing countries.
In determining what portion of Delaware Overseas Equity Fund's assets should be
allocated to a particular country, we consider: how weak or strong the country's
currency is, the country's prospects for economic growth compared to other
countries, expected levels of inflation, political environment and the range of
investment opportunities available in the country.
In selecting investments for the Fund,
o We strive to identify well managed companies that are undervalued based on
such factors as assets, earnings, dividends or growth potential.
o In order to compare the value of different stocks, we consider whether the
future dividends on a stock are expected to increase faster than, slower
than, or in line with the level of inflation. We then estimate what we
think the value of those anticipated future dividends would be worth if
they were being paid today. We believe this gives us an estimate of the
stock's true value.
o We generally prefer to purchase securities in countries where the currency
is undervalued or fair-valued compared to other countries because these
securities may offer greater return potential. We attempt to determine
whether a particular currency is overvalued or undervalued by comparing the
amount of goods and services that a dollar will buy in the United States to
the amount of foreign currency required to buy the same amount of goods and
services in another country. When the dollar buys less, the foreign
currency may be overvalued, and when the dollar buys more, the foreign
currency may be undervalued.
What are the main risks of investing in the Fund? Investing in any mutual fund
involves risk, including the risk that you may lose part or all of the money you
invest. The price of Fund shares will increase and decrease, sometimes rapidly
and unpredictably, according to changes in the value of the Fund's investments.
These fluctuations can be even more pronounced for funds like Delaware Overseas
Equity Fund, which invests in developing countries. This Fund will be affected
primarily by declines in stock prices, which can be caused by a drop in foreign
stock markets or poor performance in specific industries or companies. Because
the Fund invests in international securities in both established and developing
countries, it will be affected by international investment risks related to
changes in currency valuations, political instability, economic instability, and
lax accounting and regulatory standards. For a more complete discussion of risk,
please turn to page 26.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
<PAGE>
How has Delaware Overseas Equity Fund performed?
- --------------------------------------------------------------------------------
This bar chart and table can help you evaluate the risks of investing in the
Fund. We show how returns for the Fund's Institutional Class shares have varied
over the past five calendar years, as well as average annual returns for the
one-year and five-year period since inception. The Fund's past performance does
not necessarily indicate how it will perform in the future. The returns reflect
voluntary expense caps. The returns would be lower without the voluntary caps.
During the periods illustrated in this bar chart, the Institutional Class'
highest quarterly return was 11.84% for the quarter ended December 31, 1999 and
its lowest quarterly return was -13.73% for the quarter ended September 30,
1998.
Year-by-year total return (Institutional Class)
10.19% 9.88% 2.02% -6.59% 25.92%
1995 1996 1997 1998 1999
Average annual returns for periods ending 12/31/99
Morgan Stanley
Capital International
Institutional Class EAFE Index
- --------------------------------------------------------------------------------
(Inception 2/3/94)
1 year 25.92% 27.30%
5 years 7.76% 13.15%
Lifetime 6.31% 11.13%
The Fund's returns are compared to the performance of the Morgan Stanley Capital
International EAFE Index. You should remember that unlike the Fund, the index is
unmanaged and doesn't reflect the actual costs of operating a mutual fund, such
as the costs of buying, selling and holding the securities.
What are Delaware Overseas Equity Fund's
fees and expenses?
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
You do not pay sales charges Maximum sales charge (load) imposed on
directly from your investments purchases as a percentage of offering price none
when you buy or sell shares of Maximum contingent deferred sales charge (load)
the Institutional Class. as a percentage of original purchase price or
redemption price, whichever is lower none
Maximum sales charge (load) imposed on
reinvested dividends none
Redemption fees none
Exchange fees(1) none
- ----------------------------------------------------------------------------------------------------------
Annual fund operating expenses Management fees(2) 0.85%
are deducted from the Fund's assets. Distribution and service (12b-1) fees none
Other expenses 4.12%
Total operating expenses(3) 4.97%
- ----------------------------------------------------------------------------------------------------------
This example is intended to help 1 year $497
you compare the cost of investing 3 years $1,492
in the Fund to the cost of 5 years $2,487
investing in other mutual funds 10 years $4,977
with similar investment objectives.
We show the cumulative amount of
Fund expenses on a hypothetical
investment of $10,000 with an
annual 5% return over the time
shown.(4) This is an example only,
and does not represent future
expenses, which may be greater or
less than those shown here.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(1) Exchanges are subject to the requirements of each fund in the Delaware Investments family. A front-end sales
charge may apply if you exchange your shares into a fund that has a front-end sales charge.
(2) Reflects a new management fee which became effective on April 1, 1999.
(3) The investment manager has agreed to waive fees and pay expenses through October 31, 2000 in order to prevent
total operating expenses (excluding any taxes, interest, brokerage fees and extraordinary expenses) from
exceeding 1.70% of average daily net assets. The fees and expenses shown in the table above do not reflect this
voluntary expense cap. The table to the right shows operating expenses, reflecting the manager's current fee
waivers and payments.
(4) The Fund's actual rate of return may Fund expenses including voluntary expense caps in effect through
be greater or less than the hypothetical October 31, 2000
5% return we use here. Also, this Management fees 0.00%
example assumes that the Fund's total Distribution and service (12b-1) fees none
operating expenses remain unchanged in Other expenses 1.70%
each of the periods we show. Total operating expenses 1.70%
In addition, the example does not assume
the voluntary expense limitation discussed
in footnote (3).
</TABLE>
7
<PAGE>
Profile: Delaware Emerging Markets Fund
What is the Fund's goal?
Delaware Emerging Markets Fund seeks long-term capital appreciation. Although
the Fund will strive to achieve its goal, there is no assurance that it will.
What are the Fund's main investment strategies? The Fund invests primarily in
equity securities of issuers from emerging foreign countries. Under normal
market conditions, at least 65% of the Fund's total assets will be invested in
equity securities of issuers from at least three different countries whose
economies are considered to be emerging or developing.
We may invest up to 35% of the Fund's net assets in fixed-income securities
issued by companies in emerging countries or by foreign governments, their
agents, instrumentalities or political sub-divisions. We may invest in
fixed-income securities that are denominated in the currencies of emerging
market countries. All of these may be high-yield, high risk fixed-income
securities.
In selecting investments for the Fund,
o We strive to identify well managed companies that are undervalued based on
such factors as assets, earnings, dividends or growth potential.
o In order to compare the value of different stocks, we consider whether the
future dividends on a stock are expected to increase faster than, slower
than, or in line with the level of inflation. We then estimate what we
think the value of those anticipated future dividends would be worth if
they were being paid today. We believe this gives us an estimate of the
stock's true value. Because many of the countries in which the Fund invests
are emerging countries, there may be less information available for us to
use in making this analysis than is available for more developed countries.
o We generally prefer to purchase securities in countries where the currency
is undervalued or fair-valued compared to other countries because these
securities may offer greater return potential. We attempt to determine
whether a particular currency is overvalued or undervalued by comparing the
amount of goods and services that a dollar will buy in the United States to
the amount of foreign currency required to buy the same amount of goods and
services in another country. When the dollar buys less, the foreign
currency may be overvalued, and when the dollar buys more, the foreign
currency may be undervalued.
What are the main risks of investing in the Fund? Investing in any mutual fund
involves risk, including the risk that you may lose part or all of the money you
invest. The price of Fund shares will increase and decrease, sometimes rapidly
and unpredictably, according to changes in the value of the Fund's investments.
These fluctuations can be even more pronounced for funds like Delaware Emerging
Markets Fund, which invests in emerging countries. This Fund will be affected
primarily by declines in stock prices, which can be caused by a drop in foreign
stock markets or poor performance in specific industries or companies. The value
of the Fund's investments and, therefore, the price of the Fund's shares may be
more volatile than investments in more developed markets. Because the Fund
invests in international securities in developing countries as well as
established countries, it will be affected by international investment risks
related to currency valuations, political instability, economic instability, or
lax accounting and regulatory standards.
The Fund may invest up to 35% of its net assets in high-yield, high risk foreign
fixed-income securities, which are subject to substantial risks, particularly
during periods of economic downturns or rising interest rates.
The Fund is considered "non-diversified" under federal laws that regulate mutual
funds. This means the Fund may allocate more of its net assets to investments in
single securities than a "diversified" fund. Thus, adverse effects on the Fund's
investments may affect a larger portion of its overall assets and subject the
Fund to greater risks. For a more complete discussion of risk, please turn to
page 26.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
8
<PAGE>
How has Delaware Emerging Markets Fund performed?
- --------------------------------------------------------------------------------
Year-by-year total return (Institutional Class)
1.58% -36.19% 55.16%
1997 1998 1999
This bar chart and table can help you evaluate the risks of investing in the
Fund. We show how returns for the Fund's Institutional Class shares have varied
over the past three calendar years, as well as the average annual returns of
these shares for the one-year period and since inception. The Fund's past
performance is not necessarily an indication of how it will perform in the
future. The returns reflect voluntary expense caps in effect during the periods.
The returns would be lower without the voluntary caps.
During the periods illustrated in this bar chart, the Institutional Class'
highest quarterly return was 25.48% for the quarter ended June 30, 1999 and its
lowest quarterly return was -25.98% for the quarter ended June 30, 1998.
Average annual returns for periods ending 12/31/99
Morgan Stanley Capital
Institutional International Emerging
Class Markets Free Index
1 year 55.16% 66.41%
Lifetime 0.58% 1.47%
(Inception 6/10/96)
The Fund's returns are compared to the performance of the Morgan Stanley Capital
International Emerging Markets Free Index. You should remember that unlike the
Fund, the index is unmanaged and doesn't reflect the costs of operating a mutual
fund, such as the costs of buying, selling and holding the securities.
What are Delaware Emerging Markets
Fund's fees and expenses?
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
You do not pay sales charges directly Maximum sales charge (load) imposed on
from your investments when you buy or purchases as a percentage of offering price none
sell shares of the Institutional Class. Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none
Maximum sales charge (load) imposed on
reinvested dividends none
Redemption fees none
Exchange fees(1) none
- -------------------------------------------------------------------------------------------------------------------
Annual fund operating expenses are Management fees 1.25%
deducted from the Fund's assets. Distribution and service (12b-1) fees none
Other expenses 1.44%
Total annual fund operating expenses 2.69%
Fee waivers and payments(2) (0.99%)
Net expenses 1.70%
- -------------------------------------------------------------------------------------------------------------------
This example is intended to help you 1 year $173
compare the cost of investing in the 3 years $741
Fund to the cost of investing in other 5 years $1,337
mutual funds with similar investment 10 years $2,949
objectives. We show the cumulative
amount of Fund expenses on a
hypothetical investment of $10,000 with
an annual 5% return over the time shown.(3)
This is an example only, and does not
represent future expenses, which may be
greater or less than those shown here.
</TABLE>
(1) Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange your
shares into a fund that has a front-end sales charge.
(2) The investment manager has contracted to waive fees and pay expenses
through January 31, 2001 in order to prevent total operating expenses
(excluding any taxes, interest, brokerage fees and extraordinary expenses)
from exceeding 1.70% of average daily net assets.
(3) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. This example reflects the net operating
expenses with expense waivers for the one-year period and the total
operating expenses without expense waivers for years two through 10.
9
<PAGE>
Profile: Delaware New Pacific Fund
- --------------------------------------------------------------------------------
What is the Fund's goal?
Delaware New Pacific Fund seeks to maximize long-term capital appreciation.
Although the Fund will strive to achieve its goal, there is no assurance
that it will.
What are the Fund's main investment strategies? The Fund invests primarily in
stocks of companies of all sizes that are located in or have their principal
business activities in countries located in the Pacific Basin, such as
Australia, China, Hong Kong, Japan, Korea, Malaysia, Philippines, Singapore and
Taiwan. The Fund may invest in both established and developing countries. Under
normal circumstances we will invest at least 65% of the Fund's net assets in
Pacific Basin countries.
In selecting stocks for the portfolio, we look for companies that can benefit
from future economic growth in the region. We evaluate both individual companies
and individual countries to determine how much of the portfolio should be
allocated to companies located there. When evaluating individual companies, we
consider the growth prospects for the company and its industry, the financial
strength of the company and the quality of its management. We also consider
whether the stock appears overvalued or undervalued compared to other stocks in
the market or in its industry.
What are the main risks of investing in the Fund? Investing in any mutual fund
involves risk, including the risk that you may lose part or all of the money you
invest. The price of Fund shares will increase and decrease, sometimes rapidly
and unpredictably, according to changes in the value of the Fund's investments.
These fluctuations can be even more pronounced for funds like Delaware New
Pacific Fund that invests in developing countries. This Fund will be affected
primarily by declines in stock prices, which can be caused by a drop in foreign
stock markets or poor performance in specific industries or companies. Because
the Fund invests in international securities in both established and developing
countries, it will be affected by international investment risks related to
changes in currency valuations, political instability, economic instability, and
lax accounting and regulatory standards. For a more complete discussion of risk,
please turn to page 26.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
How has Delaware New Pacific Fund performed?
- --------------------------------------------------------------------------------
This bar chart and table can help you evaluate the risks of investing in the
Fund. We show how returns for the Fund's Institutional Class shares have varied
over the past five calendar years, as well as average annual returns for
one-year and five-year periods and since inception. The Fund's past performance
does not necessarily indicate how it will perform in the future. The
Institutional Class' returns reflect voluntary expense caps. The returns would
be lower without the voluntary caps.
During the periods illustrated in this bar chart, the Institutional Class'
highest quarterly return was 27.05% for the quarter ended December 31, 1999 and
its lowest quarterly return was -25.83% for the quarter ended December 31, 1997.
Year-by-year total return (Institutional Class)
-3.21% 8.20% -31.53% -21.83% 75.18%
1995 1996 1997 1998 1999
10
<PAGE>
How has Delaware New Pacific Fund performed? (continued)
- --------------------------------------------------------------------------------
Average annual returns for periods ending 12/31/99
Morgan
Stanley
Institutional Class Pacific Index
(Inception 2/3/94)
1 year 75.18% 57.96%
5 year -0.36% 2.70%
Lifetime -2.70% 2.08%
The Fund's returns are compared to the performance of the Morgan Stanley Pacific
Index. You should remember that unlike the Fund, the index is unmanaged and
doesn't reflect the costs of operating a mutual fund, such as the costs of
buying, selling and holding the securities.
What are Delaware New Pacific
Fund's fees and expenses?
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
You do not pay sales charges directly Maximum sales charge (load) imposed on
from your investments when you buy or purchases as a percentage of offering price none
sell shares of the Institutional Class. Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none
Maximum sales charge (load) imposed on
reinvested dividends none
Redemption fees none
Exchange fees(1) none
- ------------------------------------------------------------------------------------------------------------------
Annual fund operating expenses are Management fees(2) 0.85%
deducted from the Fund's assets. Distribution and service (12b-1) fees none
Other expenses 1.44%
Total operating expenses(3) 2.29%
- ------------------------------------------------------------------------------------------------------------------
This example is intended to help you 1 year $232
compare the cost of investing in the 3 years $715
Fund to the cost of investing in other 5 years $1,225
mutual funds with similar investment 10 years $2,625
objectives. We show the cumulative
amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5%
return over the time shown.(4) This is an
example only, and does not represent
future expenses, which may be greater or
less than those shown here.
</TABLE>
<TABLE>
<S> <C>
(1) Exchanges are subject to the requirements of each fund in the Delaware Investments family. A front-end sales
charge may apply if you exchange your shares into a fund that has a front-end sales charge.
(2) Reflects a new management fee which became effective on April 1, 1999.
(3) The investment manager has agreed to waive fees and pay expenses through October 31, 2000 in order to prevent
total operating expenses (excluding any taxes, interest, brokerage fees and extraordinary expenses) from
exceeding 2.00% of average daily net assets. The fees and expenses shown in the table do not reflect this
voluntary expense cap. The table to the right shows operating expenses, reflecting the manager's current fee
waivers and payments.
(4) The Fund's actual rate of return may
be greater or less than the hypothetical Fund expenses including voluntary expense caps in effect through
5% return we use here. Also, this October 31, 2000
example assumes that the Fund's total ----------------------------------------------------------------
operating expenses remain unchanged in Management fees 0.56%
each of the periods we show. This example Distribution and service (12b-1) fees none
does not reflect the voluntary expense Other expenses 1.44%
limitation discussed in footnote 3. Total operating expenses 2.00%
</TABLE>
11
<PAGE>
Profile: Delaware Global Bond Fund
What is the Fund's goal?
Delaware Global Bond Fund seeks to achieve current income consistent with
preservation of principal. Although the Fund will strive to achieve its
goal, there is no assurance that it will.
What are the Fund's main investment strategies? Delaware Global Bond Fund
invests primarily in fixed-income securities that may also provide the potential
for capital appreciation. The Fund is a global fund. Therefore, at least 65% of
the Fund's total assets will be invested in fixed-income securities of issuers
from at least three different countries, one of which may be the United States.
An issuer is considered to be from the country where it is located, where the
majority of its assets are or where it generates the majority of its operating
income.
In selecting investments for the Fund,
o We strive to identify fixed-income securities that provide high income
potential.
o In order to compare the value of different fixed-income securities, even those
issued in different countries, we look at the value of anticipated future
interest and principal payments, taking into consideration what we think the
inflation rate in that country will be. We then estimate what we think the
value of those anticipated future payments would be worth if they were being
paid today. We believe this gives us an estimate of a bond's true value.
o We generally prefer to purchase securities in countries where the currency is
undervalued or fair-valued compared to other countries because these
securities may offer greater return potential. We attempt to determine whether
a particular currency is overvalued or undervalued by comparing the amount of
goods and services that a dollar will buy in the United States to the amount
of foreign currency required to buy the same amount of goods and services in
another country. When the dollar buys less, the foreign currency may be
overvalued, and when the dollar buys more, the foreign currency may be
undervalued.
What are the main risks of investing in the Fund? Investing in any mutual fund
involves risk, including the risk that you may lose part or all of the money you
invest. The price of Fund shares will increase and decrease according to changes
in the value of the Fund's investments. These fluctuations can be even more
pronounced for funds like Delaware Global Bond Fund, which invests in developing
countries. The Fund's investments normally decrease when there are declines in
bond prices, which can be caused by a drop in the bond market, an adverse change
in interest rates or an adverse situation affecting the issuer of the bond.
Because the Fund invests in international securities in both established and
developing countries, it will be affected by international investment risks
related to currency valuations, political instability, economic instability, or
lax accounting and regulatory standards. The Fund may invest in high-yield, high
risk foreign fixed-income securities, which are subject to substantial risks,
particularly during periods of economic downturns or rising interest rates.
The Fund is considered "non-diversified" under federal laws that regulate mutual
funds. This means the Fund may allocate more of its net assets to investments in
single securities than a "diversified" fund. Thus, adverse effects on the Fund's
investments may affect a larger portion of its overall assets and subject the
Fund to greater risks. For a more complete discussion of risk, please turn to
page 26.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
12
- -----
<PAGE>
How has Delaware Global Bond Fund performed?
Year-by-year total return (Institutional Class)
1995 21.23%
1996 12.20%
1997 0.91%
1998 7.61%
1999 -3.46%
This bar chart and table can help you evaluate the risks of investing in the
Fund. We show how returns for the Fund's Institutional Class have varied over
the five calendar years, as well as the average annual returns of these shares
for the one-year and five-year periods and since inception. The Fund's past
performance is not necessarily an indication of how it will perform in the
future. The returns reflect voluntary expense caps. The returns would be lower
without the voluntary caps.
During the periods illustrated in this bar chart, the Institutional Class'
highest quarterly return was 5.83% for the quarter ended June 30, 1995 and its
lowest quarterly return was -2.86% for the quarter ended March 31, 1997.
Average annual returns for periods ending 12/31/99
Institutional Salomon Smith Barney
Class World Government
Bond Index
(Inception 12/27/94)
1 year -3.46% -5.07%
5 year 7.36% 5.90%
Lifetime 7.34% 6.08%
The Fund's returns are compared to the performance of the Salomon Smith Barney
World Government Bond Index. You should remember that unlike the Fund, the index
is unmanaged and doesn't reflect the costs of operating a mutual fund, such as
the costs of buying, selling and holding the securities.
What are Delaware Global Bond Fund's
fees and expenses?
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
You do not pay sales charges directly from your investments Maximum sales charge (load) imposed on
when you buy or sell shares of the Institutional Class. purchases as a percentage of offering price none
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none
Maximum sales charge (load) imposed on
reinvested dividends none
Redemption fees none
Exchange fees(1) none
- ------------------------------------------------------------------------------------------------------------------------------------
Annual fund operating expenses are deducted from the Management fees 0.75%
Fund's assets. Distribution and service (12b-1) fees none
Other expenses 0.49%
Total annual fund operating expenses 1.24%
Fee waivers and payments(2) (0.24%)
Net expenses 1.00%
- ------------------------------------------------------------------------------------------------------------------------------------
This example is intended to help you compare the 1 year $102
cost of investing in the Fund to the cost of 3 years $370
investing in other mutual funds with similar 5 years $658
investment objectives. We show the cumulative 10 years $1,479
amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return
over the time shown.(3) This is an example only,
and does not represent future expenses, which may
be greater or less than those shown here.
</TABLE>
(1) Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange your
shares into a fund that has a front-end sales charge.
(2) The investment manager has contracted to waive fees and pay expenses through
January 31, 2001 in order to prevent total operating expenses (excluding any
taxes, interest, brokerage fees and extraordinary expenses) from exceeding
1.00% of average daily net assets.
(3) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. This example reflects the net operating
expenses with expense waivers for the one-year period and the total
operating expenses without expense waivers for years two through 10.
13
-----
<PAGE>
How we manage the Funds
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for a particular Fund. Following are descriptions of how the
portfolio managers pursue the Funds' investment goals.
The investment objective of each Fund described in this Prospectus is
non-fundamental. This means the Board of Trustees may change the objective
without obtaining shareholder approval. If an objective were changed, we would
notify shareholders before the change became effective.
Delaware International Equity Fund
Delaware International Equity Fund seeks long-term growth without undue risk to
principal. We invest primarily in equity securities, including common stocks,
which provide the potential for capital appreciation and income. Our strategy
would commonly be described as a value strategy. That is, we strive to purchase
stocks that are selling for less than their true value. In order to estimate
what a security's true value is, we evaluate its future income potential, taking
into account the impact both currency fluctuations and inflation might have on
that income stream. We then determine what that income would be worth if paid
today. That helps us decide what we think the security is worth today. We then
compare our estimate of the security's value to its current price to determine
if it is a good value.
We use income as an indicator of value because we believe it allows us to
compare securities across different sectors and different countries--all using
one measurement standard. We can even use this analysis to compare stocks to
bonds.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
<TABLE>
<CAPTION>
How to use
this glossary
<S> <C> <C> <C>
The glossary includes
definitions of Glossary A-C Amortized cost Average maturity
investment terms used --------------------------------------------------------------------------------------
throughout the Amortized cost is a method used to value a fixed-income An average of when
Prospectus. If you security that starts with the face value of the security and the individual bonds
would like to know then adds or subtracts from that value depending on whether and other debt
the meaning of an the purchase price was greater or less than the value of the securities held in a
investment term that security at maturity. The amount greater or less than the portfolio will
is not explained in par value is divided equally over the time remaining until mature.
the text please check maturity.
the glossary.
</TABLE>
14
- -----
<PAGE>
We may purchase securities in any foreign country, developed or emerging;
however, we currently anticipate investing in Australia, Belgium, Canada,
Finland, France, Germany, Hong Kong, Italy, Japan, Malaysia, the Netherlands,
New Zealand, Singapore, Spain, Switzerland and the United Kingdom. This is a
representative list; the Fund may also invest in countries not listed here. We
may invest more than 25% of the Fund's total assets in the securities of issuers
located in the same country.
We generally maintain a long-term focus in the Fund, seeking companies that we
believe will perform well over the next three to five years.
Delaware Global Equity Fund
Delaware Global Equity Fund seeks long-term total return. We invest in U.S. and
foreign equity securities, including common stocks, that provide the potential
for capital appreciation and income. We invest primarily in developed markets;
however, we may purchase securities in emerging markets. We may invest more than
25% of the Fund's total assets in the securities of issuers located in the same
country.
To determine how much of the Fund's assets to allocate to international stocks
and how much to U.S. stocks, we compare the potential total return of each asset
class in the context of our expectations for inflation, economic growth, and
political stability in various regions.
In selecting foreign stocks for the Fund, we follow the same investment strategy
as Delaware International Equity Fund. We generally look for securities that are
undervalued based on our analysis of their future income stream.
The Fund may also seek to achieve growth by investing up to 35% of its assets in
income producing debt securities such as U.S. or foreign government bonds or
corporate bonds. As a general policy, the Fund only invests in debt securities
when we believe they offer better long-term potential returns with less risk
than investments in equity securities. We apply our analysis of future income
potential to both stocks and bonds in order to decide whether any portion of the
portfolio should be allocated to bonds.
Delaware Overseas Equity Fund
Delaware Overseas Equity Fund seeks to maximize total return. Under normal
circumstances, we will invest at least 65% of the value of Delaware Overseas
Equity Fund's total assets in securities of issuers located in at least three
foreign countries. However, we may invest more than 25% of the Fund's total
assets in the securities of issuers located in the same country.
The Fund will emphasize established companies, although it may invest in
companies of varying sizes as measured by assets, sales and market
capitalization. The Fund may invest in securities of issuers located in a
variety of different foreign countries including: Australia, Austria, Belgium,
Brazil, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, India,
Ireland, Italy, Japan, Luxembourg, Malaysia, Mexico, the Netherlands, New
Zealand, Norway, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland,
Thailand and the United Kingdom. This is a representative list; the Fund may
also invest in countries not listed here.
<TABLE>
<CAPTION>
Bond ` Bond ratings Capital
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
A debt security, like an IOU, issued by a company, Independent evaluations of The amount of
municipality or government agency. In return for creditworthiness, ranging from money you invest.
lending money to the issuer, a bond buyer Aaa/AAA (highest quality) to D
generally receives fixed periodic interest (lowest quality). Bonds rated
payments and repayment of the loan amount on a Baa/BBB or better are considered
specified maturity date. A bond's price changes investment grade. Bonds rated Ba/BB
prior to maturity and is inversely related to or lower are commonly known as junk
current interest rates. When interest rates rise, bonds. See also Nationally
bond prices fall, and when interest rates fall, recognized statistical rating
bond prices rise. organization.
</TABLE>
15
-----
<PAGE>
How we manage the Funds (continued)
Our strategy for Delaware Overseas Equity Fund can best be described as a value
strategy. We use the same income-oriented evaluation process to identify
attractive undervalued stocks in a variety of countries and regions. To increase
the Fund's return potential and also add further diversification opportunities,
we may invest up to 40% of the Fund's assets in securities of companies located
in emerging market countries or in government securities of emerging market
countries.
In deciding how much of the portfolio to allocate to emerging markets, we
consider both the total return potential of those markets and the expected level
of risk.
We may invest up to 5% of the Fund's assets in securities of issuers that have
been in continuous operation for less than three years.
Delaware Emerging Markets Fund
Delaware Emerging Markets Fund seeks long-term capital appreciation. The Fund
may invest in a broad range of equity securities, including common stocks. Our
primary emphasis will be on the stocks of companies located in or having their
principal business in an emerging country.
We consider an "emerging country" to be any country that is:
o generally recognized to be an emerging or developing country by the
international financial community, including the World Bank and the
International Finance Corporation;
o classified by the United Nations as developing; or
o included in the International Finance Corporation Free Index or the Morgan
Stanley Capital International Emerging Markets Free Index.
Developing or emerging countries include almost every nation in the world except
the United States, Canada, Japan, Australia, New Zealand and most nations
located in Western and Northern Europe. A representative list of the countries
where we may invest includes: Argentina, Botswana, Brazil, Chile, China,
Colombia, Czech Republic, Estonia, Ghana, Greece, Hong Kong, Hungary, India,
Indonesia, Ivory Coast, Jamaica, Jordan, Kenya, Korea, Latvia, Lithuania,
Malaysia, Mauritius, Mexico, Morocco, Nigeria, Pakistan, Peru, the Philippines,
Poland, Portugal, Russia, Slovenia, South Africa, Sri Lanka, Taiwan, Thailand,
Turkey, Venezuela and Zimbabwe. We may invest in other countries, particularly
as markets in other emerging countries develop. We may invest more than 25% of
the Fund's total assets in the securities of issuers located in the same
country.
In deciding whether a company is from an emerging country, we evaluate publicly
available information and question individual companies to determine if the
company meets one of the following criteria:
o the principal trading market for the company's securities is in a country that
is emerging;
<TABLE>
<CAPTION>
C-D Capital appreciation Capital gains distributions Commission Compounding
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An increase in the value Payments to mutual fund The fee an investor pays to a Earnings on an
of an investment. shareholders of profits (realized financial adviser for investment investment's previous
gains) from the sale of a fund's advice and help in buying or earnings.
portfolio securities. Usually paid selling mutual funds, stocks, bonds
once a year; may be either or other securities.
short-term gains or long-term
gains.
</TABLE>
16
- -----
<PAGE>
o the company generates 50% or more of its annual revenue from operations in
emerging countries, even though the company's securities are traded in an
established market or in a combination of emerging and established markets; or
o the company is organized under the laws of an emerging market country and has
a principal office in an emerging country.
Currently, investing in many emerging countries is not feasible or may involve
significant political risks. We focus our investments in emerging countries
where we consider the economies to be developing strongly and where the markets
are becoming more sophisticated. In deciding where to invest we place particular
emphasis on factors such as economic conditions (including growth trends,
inflation rates and trade balances), regulatory and currency controls,
accounting standards and political and social conditions. We believe investment
opportunities may result from an evolving long-term trend favoring
market-oriented economies, a trend that may particularly benefit countries
having developing markets.
When we evaluate individual companies we strive to apply a value-oriented
selection process, similar to what we use for Delaware International Equity
Fund, Delaware Global Equity Fund and Delaware Overseas Equity Fund. However, in
emerging markets, more of the return is expected to come from capital
appreciation rather than income. Thus, there is greater emphasis on the
manager's assessment of the company's future growth potential.
The Fund may invest up to 35% of its net assets in high-yield, high risk foreign
fixed-income securities. This typically includes so-called Brady Bonds.
Delaware New Pacific Fund
Delaware New Pacific Fund seeks to maximize long-term capital appreciation. It
invests primarily in equity securities of companies domiciled or having their
principal business activities in countries located in the Pacific Basin.
The Fund will invest in companies of varying sizes, measured by assets, sales
and market capitalization. When we evaluate individual companies, we consider
the growth prospects for the company and its industry, the financial strength of
the company and the quality of its management. We also look at whether the stock
appears overvalued or undervalued compared to other stocks in the market or its
industry.
While the Fund will generally have investments in companies located in at least
three different countries or regions, the Fund may from time to time have
investments in only one or a few countries or regions. We may invest more than
25% of the Fund's total assets in the securities of issuers located in the same
country.
The Fund may invest up to 35% of its assets in securities of U.S. issuers. In
addition, the Fund may invest in short-term debt instruments to meet anticipated
day-to-day operating expenses and liquidity requirements. The Fund may invest up
to 5% of its assets in the securities of issuers that have been in continuous
operation for less than three years.
<TABLE>
<CAPTION>
Consumer Price
Index (CPI) Contingent deferred sales charge (CDSC) Corporate bond Currency exchange rates Depreciation
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Measurement of Fee charged by some mutual funds A debt security The price at which one A decline in an
U.S. inflation; when shares are redeemed (sold back issued by a country's currency can be investment's
represents the to the fund) within a set number of corporation. See converted into another's. value.
price of a basket years; an alternative method for Bond. This exchange rate varies
of commonly investors to compensate a financial almost daily according to
purchased goods. adviser for advice and service, a wide range of political,
rather than an up-front commission. economic, and other factors.
</TABLE>
17
-----
<PAGE>
How we manage the Funds (continued)
Delaware Global Bond Fund
Delaware Global Bond Fund seeks current income consistent with the preservation
of principal. We invest primarily in fixed-income securities that may also
provide the potential for capital appreciation.
We may invest in:
o foreign and U.S. government securities;
o debt obligations of foreign and U.S. companies;
o debt securities of supranational entities;
o securities of issuers in emerging market countries, including Brady Bonds,
which tend to be of lower quality and more speculative than securities of
developed country issuers; and
o zero-coupon bonds.
At the time this Prospectus was prepared we anticipated that for increased
safety, a large percentage of Delaware Global Bond Fund's assets would be
invested in securities of supranational entities and in U.S. and foreign
government securities.
While the Fund may purchase securities of issuers in any foreign country,
developed or emerging, we currently anticipate investing in Australia, Belgium,
Canada, France, Germany, Hong Kong, Japan, Malaysia, the Netherlands, Singapore,
Spain, Switzerland and the United Kingdom, as well as Indonesia, Korea, New
Zealand, the Philippines, South Africa, Taiwan and Thailand. This is a
representative list; we may also invest in other countries. More than 25% of the
Fund's total assets may be invested in the securities of issuers located in the
same country.
Generally, the value of fixed-income securities rises when interest rates
decline and declines when interest rates rise. The value of your investment in
the Fund will be affected by changes in interest rates. We generally keep the
average weighted maturity of the portfolio in the five-to-ten year range.
However, if we anticipate a declining interest rate environment, we may extend
the average weighted maturity past ten years or if we anticipate a rising rate
environment, we may shorten the average weighted maturity to less than five
years.
<TABLE>
<CAPTION>
Dividend
D-M Diversification distribution Duration Expense ratio
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The process of Payments to mutual A measurement of a A mutual fund's total operating expenses,
spreading fund shareholders of fixed-income expressed as a percentage of its total net assets.
investments among a dividends passed investment's price Operating expenses are the costs of running a
number of different along from the volatility. The mutual fund, including management fees, offices,
securities, asset fund's portfolio of larger the number, staff, equipment and expenses related to
classes or securities. the greater the maintaining the fund's portfolio of securities and
investment styles to likely price change distributing its shares. They are paid from the
reduce the risks of for a given change fund's assets before any earnings are distributed
investing. in interest rates. to shareholders.
</TABLE>
18
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<PAGE>
The securities we typically invest in
Stocks offer investors the potential for capital appreciation, and may pay
dividends as well. Fixed-income securities offer the potential for greater
income payments than stocks, and also may provide capital appreciation. The
following chart provides a brief description of the securities that the Funds
may invest in. The Funds can hold securities denominated in any currency. Please
see the Statement of Additional Information for additional descriptions of these
as well as other investments.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Delaware Delaware Delaware Delaware Delaware
International Global Overseas Emerging New Pacific Global Bond
Equity Fund Equity Fund Equity Fund Markets Fund Fund Fund
------------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C>
Common stocks: Delaware International Equity Fund, Delaware Global Equity Fund, Delaware Overseas Equity Delaware Global Bond
Securities that Fund, Delaware Emerging Markets Fund and Delaware New Pacific Fund will invest their Fund typically does
represent assets in common stocks, some of which will be dividend-paying stocks. not invest in common
shares of stocks.
ownership in a
corporation.
Stockholders
participate in
the corporation's
profits and
losses,
proportionate to
the number of
shares they own.
Corporate bonds: Although not a principal Delaware Overseas Delaware Emerging Delaware New Delaware Global Bond
Debt obligations strategy of the Fund, for Equity Fund may Markets Fund may Pacific Fund Fund may invest in
issued by U.S. or temporary defensive purposes, invest up to 40% of invest in corporate generally does corporate bonds,
foreign the Fund may invest all or a its assets in obligations issued not invest in generally those
corporations. substantial portion of its developing country by emerging country corporate bonds. rated A or better by
assets in corporate obligations corporate and companies. These S&P or Moody's or if
rated AA or better by S&P and Aa government bonds bonds may be high unrated, determined
or better by Moody's, or if although it risk, fixed-income to be of comparable
unrated, determined to be of generally does not securities. quality. The Fund
comparable quality. intend to do so. See may also invest in
"Foreign government Although not a high-yield, high
All corporate debt will be rated securities" on page principal strategy risk emerging
AA or better by S&P and Aa or 20. of the Funds, for markets corporate
better by Moody's, or if temporary defensive bonds.
unrated, determined to be of purposes, the Fund
comparable quality. may invest all or a
substantial portion
Delaware Global of their respective
Equity Fund may seek assets in corporate
to achieve growth by obligations rated AA
investing up to 35% or better by S&P and
of its assets in Aa or better by
debt securities, Moody's, or if unrated,
including corporate determined to be of
bonds. Generally, comparable quality.
Delaware Global
Equity Fund will
invest in debt
securities when we
believe they offer
better long-term
potential returns
with less risk than
equity investments.
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
Financial adviser Fixed-income securities Inflation Investment goal Management fee
- ------------------------------------------------------------------------------------------------------------------------
Financial With fixed-income The increase in the The objective, such The amount paid by a
professional (e.g., securities, the cost of goods and as long-term capital mutual fund to the
broker, banker, money you originally services over time. growth or high investment adviser
accountant, planner invested is paid U.S. inflation is current income, that for management
or insurance agent) back at a frequently measured a mutual fund services, expressed
who analyzes pre-specified by changes in the pursues. as an annual
clients' finances maturity date. These Consumer Price Index percentage of the
and prepares securities, which (CPI). fund's average daily
personalized include government, net assets.
programs to meet corporate or
objectives. municipal bonds, as
well as money market
securities,
typically pay a
fixed rate of return
(often referred to
as interest). See
Bond.
</TABLE>
19
<PAGE>
How we manage the Funds (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Delaware Delaware Delaware Delaware Delaware
International Global Overseas Emerging New Pacific Global Bond
Equity Fund Equity Fund Equity Fund Markets Fund Fund Fund
------------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C>
Foreign government Delaware Global Delaware We may invest a Delaware New Delaware Global Bond
securities: Debt Equity Fund may seek Overseas portion of Delaware Pacific Fund Fund will generally
obligations issued to achieve growth by Equity Fund Emerging Markets generally does invest in agencies,
by a government investing up to 35% may invest Fund's assets in not invest in securities issued by
other than the of its assets in up to 40% foreign governmental foreign foreign governments,
United States or by foreign governmental of its securities issued by government their
an agency, debt securities. assets in emerging or securities. instrumentalities or
instrumentality or Generally, Delaware developing developing political
political Global Equity Fund country countries, which may subdivisions that
subdivision of such will invest in debt corporate be lower rated, are rated AAA or AA
governments. securities when we and government including securities by S&P or Aaa or Aa
believe they offer bonds combined rated below by Moody's or, if
better long-term although it investment grade. unrated, considered
potential returns generally does to be of comparable
with less risk than not intend to Although not a quality. We may
equity investments. do so. principal strategy invest a portion of
of the Fund, for the Fund's assets in
temporary defensive foreign governmental
Although not a principal purposes, the Fund securities issued by
strategy of the Funds, for may invest in high emerging countries,
temporary defensive purposes, quality debt which may be lower
Delaware International Equity obligations of rated, including
Fund and Delaware Global foreign governments, securities rated
Equity Fund may invest all or their agencies, below investment
a substantial portion of their instrumentalities grade.
respective assets in high and political
quality debt obligations of sub-divisions.
foreign governments, their
agencies, instrumentalities
and political sub-divisions.
U.S. government Although not a principal strategy of the Funds, for temporary Delaware New Delaware Global Bond
securities: defensive purposes Delaware International Equity Fund, Delaware Pacific Fund Fund may invest a
Securities issued Global Equity Fund, Delaware Overseas Equity Fund and Delaware generally does significant portion
or guaranteed by Emerging Markets Fund may invest in U.S. government securities. not invest in of its assets in
the U.S. U.S. government U.S. government
government or securities. securities. It will
issued by an invest only in U.S.
agency or government
instrumentality obligations,
of the U.S. including bills,
government. notes and bonds that
are issued or
guaranteed as to the
payment of principal
and interest by the
U.S. government and
securities of U.S.
government agencies
or instrumentalities
that are backed by
the full faith and
credit of the United
States.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
M-M
Morgan Stanley
Capital
International EAFE
(Europe, Australia,
Market capitalization Maturity Far East) Index
- --------------------------------------------------------------------------------
The value of a The length of time The Morgan Stanley
corporation until a bond issuer Capital
determined by must repay the International EAFE
multiplying the underlying loan Index is an
current market price principal to international index
of a share of common bondholders. including stocks
stock by the number traded on 16
of shares held by exchanges in Europe,
shareholders. A Australia and the
corporation with one Far East, weighted
million shares by capitalization.
outstanding and the The index is
market price per unmanaged and
share of $10 has a doesn't include the
market actual costs of
capitalization of buying, selling, and
$10 million. holding securities.
20
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Delaware Delaware Delaware Delaware Delaware
International Global Overseas Emerging New Pacific Global Bond
Equity Fund Equity Fund Equity Fund Markets Fund Fund Fund
------------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C>
Investment company Each Fund may hold investment Delaware Overseas Delaware Emerging Delaware New Delaware Global
securities: In some company securities if we Equity Fund may not Markets Fund may Pacific Fund Bond Fund may hold
countries, believe the country offers hold investment hold open-end and may not hold closed-end
investments by U.S. good investment opportunities. company securities. closed-end investment investment company
mutual funds are Both Funds would generally investment company company securities.
generally made by hold closed-end investment securities. Please securities.
purchasing shares of companies, but Delaware Global see Delaware
investment companies Equity Fund may also hold International Equity
that in turn invest open-end investment companies. Fund and Delaware
in the securities of These investments involve an Global Equity Fund
such countries. indirect payment of a portion for a complete
of the expenses of the other explanation.
investment companies,
including their advisory fees.
Foreign currency Although the Funds value their assets daily in U.S. dollars, they do not intend to convert their holdings of
transactions: A foreign currencies into U.S. dollars on a daily basis. Each Fund will, however, from time to time, purchase or
forward foreign sell foreign currencies and/or engage in forward foreign currency exchange transactions. Each Fund may conduct
currency exchange its foreign currency transactions on a cash basis at the rate prevailing in the foreign currency exchange
contract involves an market or through a forward foreign currency exchange contract or forward contract.
obligation to
purchase or sell a A Fund may use forward contracts for defensive hedging purposes to attempt to protect the value of the Fund's
specific currency on current security or currency holdings. It may also use forward contracts if it has agreed to sell a security
a fixed future date and wants to "lock-in" the price of that security, in terms of U.S. dollars. Investors should be aware of the
at a price that is costs of currency conversion. The Funds will not use forward contracts for speculative purposes.
set at the time of
the contract. The
future date may be
any number of days
from the date of the
contract as agreed
by the parties
involved.
American Depositary Each Fund may invest in sponsored and unsponsored ADRs, EDRs and GDRs, generally This is not a
Receipts (ADRs), focusing on those whose underlying securities are issued by foreign entities. principal strategy
European Depositary for Delaware Global
Receipts (EDRs), and To determine whether to purchase a security in a foreign market or through an Bond Fund.
Global Depositary ADR, we evaluate the price levels, the transaction costs, taxes and
Receipts (GDRs): administrative costs involved with each security to identify the most efficient
ADRs are receipts choice.
issued by a U.S.
depositary (usually
a U.S. bank) and
EDRs and GDRs are
receipts issued by a
depositary outside
of the U.S. (usually
a non-U.S. bank or
trust company or a
foreign branch of a
U.S. bank).
Depositary receipts
represent an
ownership interest
in an underlying
security that is
held by the
depositary.
Generally, the
holder of the
depositary receipt
is entitled to all
payments of
interest, dividends
or capital gains
that are made on the
underlying security.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Morgan Stanley
Capital Morgan Stanley
International Capital
Emerging Markets International World Morgan Stanley
Free Index Index Pacific Index
- --------------------------------------------------------------------------------
The Morgan Stanley The Morgan Stanley A total return
International Capital index, reported in
Emerging Markets International World U.S. dollars, based
Free Index is a U.S. Index is an on share prices and
dollar denominated international index reinvested gross
index comprised of that includes stocks dividends of
stocks of countries traded in Europe, approximately 500
with below average Australia, the Far companies (only
per capita GDP as East, plus the U.S., those securities
defined by the World Canada and South deemed sufficiently
Bank, foreign Africa, weighted by liquid for trading
ownership capitalization. by investors) from
restrictions, a tax the following 6
regulatory countries:
environment, and Australia, Hong
greater perceived Kong, Japan,
market risk than in Malaysia, New
the developed Zealand and
countries. Within Singapore.
this index, MSCI
aims to capture an
aggregate of 60% of
local market
capitalization.
21
<PAGE>
How we manage the Funds (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Delaware Delaware Delaware Delaware Delaware
International Global Overseas Emerging New Pacific Global Bond
Equity Fund Equity Fund Equity Fund Markets Fund Fund Fund
------------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C>
Supranational The Funds do not invest in these entities. We anticipate
entities: Debt investing a large
securities of percentage of
supranational Delaware Global
entities may be Bond Fund's assets
denominated in any in debt securities
currency. These of supranational
securities are entities.
typically of
high-grade quality.
A supranational
entity is an entity
established or
financially
supported by the
national governments
of one or more
countries to promote
reconstruction or
development. The
International Bank
for Reconstruction
and Development
(more commonly known
as the World Bank)
would be one example
of a supranational
entity.
Zero coupon bonds: Delaware Delaware Global Equity Fund Delaware Emerging Delaware New Pacific Delaware Global
Zero coupon bonds International and Delaware Overseas Equity Markets Fund may Fund does not invest Bond Fund may
are debt obligations Equity Fund Fund do not invest in these invest in zero in these securities. invest in zero
that do not entitle typically does securities. coupon bonds. coupon bonds.
the holder to any not invest in
periodic payments of these
interest before securities.
maturity or a
specified date when
the securities begin
paying current
interest. Therefore,
they are issued and
traded at a discount
from their face
amounts or par
value. The market
prices of zero
coupon bonds are
generally more
volatile than the
market prices of
securities that pay
interest
periodically and are
likely to respond to
changes in interest
rates to a greater
degree than do
non-zero coupon
securities having
similar maturities
and credit quality.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
N-R
NASD Regulation, Inc. Nationally recognized statistical Net asset value
(NASD) rating organization (NRSRO) (NAV)
A self-regulating A company that The daily dollar
organization, assesses the credit value of one mutual
consisting of quality of bonds, fund share. Equal to
brokerage firms commercial paper, a fund's net assets
(including preferred and common divided by the
distributors of stocks and municipal number of shares
mutual funds), that short-term issues, outstanding.
is responsible for rating the
overseeing the probability that the
actions of its issuer of the debt
members. will meet the
scheduled interest
payments and repay
the principal.
Ratings are
published by such
companies as Moody's
Investors Service,
Inc. (Moody's),
Standard & Poor's
Ratings Group (S&P),
Duff & Phelps, Inc.
(Duff), and Fitch
IBCA, Inc. (Fitch).
22
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Delaware Delaware Delaware Delaware Delaware
International Global Overseas Emerging New Pacific Global Bond
Equity Fund Equity Fund Equity Fund Markets Fund Fund Fund
------------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C>
Brady Bonds: These Delaware International Equity Fund, Delaware Emerging Delaware New Delaware Global Bond
are debt securities Delaware Global Equity Fund and Delaware Markets Fund may Pacific Fund Fund may invest in
issued under the Overseas Equity Fund do not invest in invest in Brady does not invest Brady Bonds. Please
framework of the these securities. Bonds. We believe in Brady Bonds. see Delaware
Brady Plan, an that the economic Emerging Markets
initiative for reforms undertaken Fund to the left for
debtor nations to by countries in a complete
restructure their connection with the explanation.
outstanding external issuance of Brady
indebtedness Bonds can make the
(generally, debt of countries
commercial bank that have issued or
debt). Brady Bonds have announced plans
tend to be of lower to issue these bonds
quality and more a viable opportunity
speculative than for investment.
securities of
developed country
issuers.
High-yield, high Delaware International Equity Fund, Delaware Emerging Delaware New Delaware Global Bond
risk fixed-income Delaware Global Equity Fund and Delaware Markets Fund may Pacific Fund Fund may invest a
securities: Overseas Equity Fund do not invest in invest up to 35% of does not invest portion of its
Securities that are these securities. its net assets, in in these assets in these
rated lower than high-yield, high securities. securities.
BBB by S&P or Baa risk foreign
by Moody's, or if fixed-income
unrated, of equal securities.
quality. These
securities may be
issued by companies
or governments of
emerging or
developing
countries, which may
be less
creditworthy. The
risk that these
companies or
governments may not
be able to make
interest or
principal payments
is substantial.
Restricted We may invest in privately placed securities that are eligible for resale only among certain institutional
securities: buyers without registration, including Rule 144A Securities.
Privately placed
securities whose
resale is restricted
under securities
law.
<PAGE>
Illiquid securities: Delaware International Equity Fund, Delaware Emerging Delaware New Pacific Fund and Delaware
Securities that Delaware Global Equity Fund and Delaware Markets Fund may Global Bond Fund may invest up to 10% of
cannot be sold or Overseas Equity Fund may invest up to invest up to 15% of net assets in illiquid securities.
disposed of in the 10% of net assets in illiquid net assets in
ordinary course of securities. illiquid securities.
business, within
seven days, at
approximately the
price at which a
fund has valued
them.
- ------------------------------------------------------------------------------------------------------------------------------------
Preferred stock Price-to-earnings ratio Principal Prospectus Redeem
Preferred stock has A measure of a Amount of money you The official To cash in your
preference over stock's value invest (also called offering document shares by selling
common stock in the calculated by capital). Also that describes a them back to the
payment of dividends dividing the current refers to a bond's mutual fund, mutual fund.
and liquidation of market price of a original face value, containing
assets. Preferred share of stock by due to be repaid at information required
stocks also often its annual earnings maturity. by the SEC, such as
pay dividends at a per share. A stock investment
fixed rate and are selling for $100 per objectives,
sometimes share with annual policies, services
convertible into earnings per share and fees.
common stock. of $5 has a P/E of
20.
</TABLE>
23
<PAGE>
How we manage the Funds (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Delaware Delaware Delaware Delaware Delaware
International Global Overseas Emerging New Pacific Global Bond
Equity Fund Equity Fund Equity Fund Markets Fund Fund Fund
------------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C>
Repurchase Typically, we use repurchase agreements as a short-term investment for a Fund's cash position. In order to
agreements: An enter into these repurchase agreements, a Fund must have collateral of at least 102% of the repurchase price.
agreement between a The Funds will only enter into repurchase agreements in which the collateral is composed of U.S. government
buyer, such as a securities.
fund, and a seller
of securities in
which the seller
agrees to buy the
securities back
within a specified
time at the same
price the buyer paid
for them, plus an
amount equal to an
agreed upon interest
rate. Repurchase
agreements are often
viewed as equivalent
to cash.
Other securities: Delaware Delaware Global Delaware Overseas Delaware Delaware New Delaware
Each Fund is International Equity Fund may Equity Fund may Emerging Pacific Fund Global Bond
permitted to invest Equity Fund may invest in preferred invest in all types Markets Fund may invest in Fund may
in other securities invest in stocks, convertible of securities with may invest in all types of invest in
that are listed preferred stocks, securities, equity preferred stocks, securities with futures and
here. More convertible warrants, futures characteristics, convertible equity options. The
information about securities, and options. including trust or securities, characteristics, Fund may also
these securities warrants, limited partnership warrants, futures including trust invest in
can be found in futures and interests, preferred and options. or limited interest rate
the Statement of options. stocks, rights, partnership swaps.
Additional warrants and interests,
Information. convertible preferred stocks,
securities. The Fund rights and warrants
may hold futures and and convertible
options. The Fund securities. The
may also invest in Fund may also hold
swaps. futures and options.
The Fund may also
invest in swaps.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
R-S
Salomon Smith Barney World
Risk Sales charge Government Bond Index
- --------------------------------------------------------------------------------
Generally defined as Charge on the The World Government
variability of purchase or Bond Index is a
value; also credit redemption of fund market-capitalization
risk, inflation shares sold through weighted benchmark
risk, currency and financial advisers. that tracks the
interest rate risk. May vary with the performance of the
Different amount invested. 18 Government bond
investments involve Typically used to markets of
different types and compensate advisers Australia, Austria,
degrees of risk. for advice and Belgium, Canada,
service provided. Denmark, Finland,
France, Germany,
Ireland, Italy,
Japan, the
Netherlands,
Portugal, Spain,
Sweden, Switzerland,
the United Kingdom
and the United
States.
24
<PAGE>
Portfolio turnover Each Fund (other than Delaware New Pacific Fund) anticipates
that its annual portfolio turnover will be less than 100%. A turnover rate of
100% would occur if a Fund sold and replaced securities valued at 100% of its
net assets within one year. High turnover in a Fund could result in additional
brokerage commissions to be paid by the Fund and higher tax liability for the
Fund.
Borrowing from banks Each Fund may borrow money as a temporary measure for
extraordinary or emergency purposes or to facilitate redemptions. A Fund will
not borrow money in excess of one-third of the value of its net assets.
Securities lending Each Fund may loan up to one-quarter (one-third, in the case
of Delaware New Pacific Fund and Delaware Overseas Equity Fund) of its assets to
qualified broker/dealers or institutional investors to generate additional
income for the Fund. All such loans will be secured by collateral.
Purchasing securities on a when-issued or delayed delivery basis Delaware New
Pacific Fund and Delaware Overseas Equity Fund may buy or sell securities on a
when-issued or delayed delivery basis; that is, paying for securities before
delivery or taking delivery at a later date. Each Fund will designate cash or
securities in amounts sufficient to cover its obligations, and will value the
designated assets daily.
Temporary defensive positions For temporary defensive purposes, Delaware
International Equity Fund, Delaware Global Equity Fund and Delaware Emerging
Markets Fund may each invest all or a substantial portion of their assets in
high quality debt instruments of foreign governments, the U.S. government, or
foreign or U.S. companies. Also, for temporary defensive purposes, Delaware
Overseas Equity Fund may invest a substantial portion of its assets in cash or
cash equivalent investments or in U.S. securities, and Delaware New Pacific Fund
may invest up to 100% of its assets in money market instruments, cash or cash
equivalents. To the extent that a Fund does so, the Fund may be unable to meet
its investment objective.
<TABLE>
<CAPTION>
SEC (Securities Additional
and Exchange Signature Standard Information
Commission) Share classes guarantee deviation (SAI) Stock
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Federal agency Different Certification by A measure of an The document An investment
established by classifications a bank, investment's serving as that represents
Congress to of shares; brokerage firm volatility; for "Part B" of a a share of
administer the mutual fund or other mutual funds, fund's prospectus ownership
laws governing share classes financial measures how that provides (equity) in a
the securities offer a variety institution much a fund's more detailed corporation.
industry, of sales charge that a total return has information Stocks are often
including mutual choices. customer's typically varied about the fund's referred to as
fund companies. signature is from its organization, "equities."
valid; signature historical investments,
guarantees can average. policies and
be provided by risks.
members of the
STAMP program.
</TABLE>
25
-----
<PAGE>
How we manage the Funds (continued)
The risks of investing
in the Funds
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in a Fund you should
carefully evaluate the risks. An investment in the Funds typically provides the
best results when held for a number of years. The following are the chief risks
you assume when investing in the Funds. Please see the Statement of Additional
Information for further discussion of these risks and other risks not discussed
here.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Delaware Delaware
Inter- Global Overseas Delaware Delaware Delaware
national Equity Equity Emerging New Pacific Global Bond
Equity Fund Fund Fund MarketsFund Fund Fund
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Market risk is the We maintain a long-term investment approach and focus on stocks we believe can appreciate over an extended
risk that all or a time frame regardless of interim market fluctuations. In deciding what portion of a Fund's portfolio
majority of the should be invested in any individual country, we evaluate a variety of factors, including opportunities
securities in a and risks relative to other countries.
certain market--
like the stock or In addition, for For temporary Same as for For temporary As part of the
bond market--or in temporary defensive defensive purposes, Delaware defensive Delaware Global
a certain country purposes, the Funds Delaware International purposes, Bond Fund's
or region will may invest all or a Overseas Equity Equity Fund and Delaware New principal investment
decline in value substantial portion Fund may invest a Delaware Global Pacific Fund may strategy, the Fund
because of factors of their assets in substantial portion Equity Fund as invest up to may invest in
such as economic high quality debt of its assets in cash explained to 100% of its assets securities that
conditions, future instruments of or cash equivalent the left. in money market generally have
expectations or foreign governments, investments or in instruments, cash relatively less
investor confidence. the U.S. government, U.S. securities. or cash market risk.
(including their equivalents.
agencies and
instrumentalities)
or foreign or U.S.
companies.
Industry and We typically hold a number of different securities in a variety of sectors in order to minimize the impact
security risk is the that a poorly performing security would have on a Fund. This risk is more significant for Delaware Global
risk that the value Equity Fund, Delaware Emerging Markets Fund and Delaware Global Bond Fund, which are non-diversified funds.
of securities in a
particular industry
or the value of an
individual stock or
bond will decline
because of changing
expectations for the
performance of that
industry or for the
individual company
issuing the stock
or bond.
Interest rate risk Delaware International Equity Fund, Delaware Global Equity Fund, Delaware Overseas Interest rate risk
is the risk that Equity Fund, Delaware New Pacific Fund and Delaware Emerging Markets und are is a significant
securities, generally less affected by interest rate risk because they typically hold a smaller risk for Delaware
particularly bonds amount of fixed-income securities than Delaware Global Bond Fund. Global Bond Fund. In
with longer maturities, an attempt to manage
will decrease in value interest rate risk,
if interest rates rise. we adjust the Fund's
average weighted
maturity based on
our view of interest
rates. The Fund's
average weighted
maturity will
generally be in the
five- to-ten year
range. When we
anticipate that
interest rates will
decline, we may
extend the average
maturity beyond
tenyears and when we
anticipate that
interest rates will
rise, we may shorten
the average maturity
to less than five
years.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Uniform Gift to Minors Act and
T-V Total return Uniform Transfers to Minors Act Volatility
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
An investment Federal and state laws that provide The tendency of an investment to go up or down in
performance measurement, a simple way to transfer property to value by different magnitudes. Investments that
expressed as a percentage, a minor with special tax generally go up or down in value in relatively small
based on the combined advantages. amounts are considered "low volatility" investments,
earnings from dividends, whereas those investments that generally go up or
capital gains and change in down in value in relatively large amounts are
price over a given period. considered "high volatility" investments.
</TABLE>
26
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<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Delaware Delaware
Inter- Global Overseas Delaware Delaware Delaware
national Equity Equity Emerging New Pacific Global Bond
Equity Fund Fund Fund MarketsFund Fund Fund
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Currency risk is the Each Fund may try to hedge its currency risk by purchasing foreign currency exchange contracts. If a Fund
risk that the value agrees to purchase or sell foreign securities at a pre-set price on a future date, the Fund attempts to
of a fund's protect the value of a security it owns from future changes in currency rates. If a Fund has agreed to
investments may be purchase or sell a security, it may also use foreign currency exchange contracts to "lock-in" the
negatively affected security's price in terms of U.S. dollars or another applicable currency. Each Fund may use forward
by changes in currency exchange contracts only for defensive or protective measures, not to enhance portfolio returns.
foreign currency However, there is no assurance that such a strategy will be successful.
exchange rates.
Adverse changes in
exchange rates may
reduce or eliminate
any gains produced
by investments that
are denominated in
foreign currencies
and may increase any
losses.
Small company risk is These Funds typically These Funds may invest in small companies and would Delaware Global
the risk that prices focus their investment be subject to this risk. We typically hold a number Bond Fund does not
of smaller companies in larger companies. of different stocks in order to reduce the impact that invest in small
may be more volatile one small company stock would have on the Funds. This companies.
than larger companies risk is more significant for Delaware Emerging
because of limited Markets Fund, which is a non-diversified Fund.
financial resources or
dependence on narrow
product lines.
Political risk is the We evaluate the political situations in the countries where we invest and take into account any potential
risk that countries or risks before we select securities for the portfolio. However, there is no way to eliminate political
the entire region risk when investing internationally.
where we invest may
experience political
instability. This may
cause greater
fluctuation in the
value and liquidity of
our investments due to
changes in currency
exchange rates,
governmental seizures
or nationalization of
assets.
Emerging market risk Delaware International Delaware Overseas Equity Fund, Delaware Emerging Markets Fund, Delaware New
is the possibility Equity Fund and Pacific Fund and Delaware Global Bond Fund are subject to this risk. Striving to
that the risks Delaware Global Equity manage this risk, the portfolio managers carefully screen securities within
associated with Fund, to the limited emerging markets and attempt to consider material risks associated with an
international extent that they invest individual company or bond issuer. We cannot eliminate emerging market risk and
investing will be in emerging markets, consequently encourage shareholders to invest in these Funds only if they have a
greater in emerging are subject to this long-term time horizon, over which the potential of individual securities is
markets than in more risk. more likely to be realized.
developed foreign
markets because, among
other things, emerging
markets may have less
stable political and
economic environments.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
-----
<PAGE>
How we manage the Funds (continued)
How we strive to manage them
Risks
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Delaware Delaware
Inter- Global Overseas Delaware Delaware Delaware
national Equity Equity Emerging New Pacific Global Bond
Equity Fund Fund Fund MarketsFund Fund Fund
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Inefficient market The Funds will attempt to reduce these risks by investing in a number of different countries, and
risk is the risk noting trends in the economy, industries and financial markets.
that foreign markets Delaware Global
may be less liquid, Bond Fund will
have greater price also perform
volatility, less credit analysis
regulation and in an attempt
higher transaction to reduce
costs than U.S. these risks.
markets.
Information risk is We conduct fundamental research on the companies we invest in rather than relying solely on information
the risk that available through financial reporting. We believe this will help us to better uncover any potential
foreign companies weaknesses in individual companies.
may be subject to
different
accounting, auditing
and financial
reporting standards
than U.S. companies.
There may be less
information
available about
foreign issuers than
domestic issuers.
Furthermore,
regulatory oversight
of foreign issuers
may be less
stringent or less
consistently applied
than in the United
States.
Non-diversified fund Delaware Delaware Global Delaware Delaware Delaware New Delaware
risk is the risk that International Equity Fund will Overseas Emerging Pacific Fund is Global
non-diversified Equity Fund is not be diversified Equity Fund Markets Fund a diversified Bond Fund
funds are believed a diversified under the 1940 Act. is a is a non- fund, and is is a non-
to be subject to fund, and is Non-diversified diversified diversified not subject diversified
greater risks not subject investment fund, and is fund, the to this risk. fund, the same
because adverse to this risk. companies have the not subject same as as Delaware
effects on their flexibility to to this risk. Delaware Global Equity
security holdings invest as much as Global Equity Fund. Please
may affect a larger 50% of their Fund. Please see the full
portion of their assets in as few see the full explanation
overall assets. as two issuers explanation to under Delaware
with no single the left under Global Equity
issuer accounting Delaware Fund to
for more than 25% Global Equity the left.
of the portfolio. Fund.
\ The remaining 50%
of the portfolio
must be diversified
so that no more than
5% of a fund's
assets is invested
in the securities
of a single issuer.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
- -----
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Delaware Delaware
Inter- Global Overseas Delaware Delaware Delaware
national Equity Equity Emerging New Pacific Global Bond
Equity Fund Fund Fund Markets Fund Fund Fund
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Foreign government and This is not a significant Delaware Emerging Markets This is not a The Fund is
supranational securities risk for Delaware Fund is subject to this risk significant subject to this
risks relate to the ability of International Equity and will attempt to limit risk for Delaware risk and will
a foreign government or Fund, Delaware this risk by performing New Pacific Fund. attempt to limit
government related issuer Global Equity Fund credit analysis on the issuer this risk by
to make timely payments or Delaware Overseas of each security purchased. performing
on its external debt Equity Fund. credit analysis
obligations. The Fund attempts to on the issuer of
reduce this risk by limiting each security
the portion of net assets purchased.The
that may be invested in Fund attempts
these securities. to reduce the
risks associated
The Fund also compares with investing in
the risk-reward potential foreign
of foreign government governments by
securities being focusing on
considered to that offered bonds rated
by equity securities to within the two
determine whether to highest rating
allocate assets to equity categories.
or fixed-income
investments.
Credit risk of high-yield, This is not a Delaware Emerging This is not a Delaware
high risk fixed-income significant risk for Markets Fund may invest significant risk Global Bond
securities relates to Delaware up to 35% of its net assets for Delaware Fund may
securities rated lower than International Equity in high-yield, high risk New Pacific invest a
BBB by S&P and Baa by Moody's Fund, Delaware foreign fixed-income Fund. portion of its
are considered to be of poor Global Equity Fund securities. assets in these
standing and predominantly or Delaware Overseas We intend to limit our securities.
speculative as to the Equity Fund. investment in any single Please see
issuer's ability to repay lower rated bond, which the complete
interest and principal. can help to reduce the explanation
These bonds are often effect of an individual under
issued by less creditworthy default on the Fund. We Delaware
companies or by highly also intend to limit our Emerging
leveraged (indebted) firms, overall holdings of bonds Markets Fund
which are generally less in this category. Such to the left.
able than more financially limitations may not protect
stable firms to make the Fund from widespread
scheduled payments of bond defaults brought
interest and principal. The about by a sustained
risks posed by bonds issued economic downturn or
under such circumstances from price declines that
are substantial. might result from changes
in the quality ratings of
individual bonds.
Transaction costs risk relates Each of the Funds is subject to this risk. We strive to monitor transaction costs and to choose
to the costs of buying, selling an efficient trading strategy for the Funds.
and holding foreign securities,
including brokerage, tax
and custody costs, may be
higher than those involved
in domestic transactions
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
-----
<PAGE>
Who manages the Funds
Investment managers and sub-advisers
Delaware International Advisers Ltd. makes investment decisions for Delaware
International Equity Fund, Delaware Global Equity Fund, Delaware Emerging
Markets Fund and Delaware Global Bond Fund, manages the Funds' business affairs
and provides daily administrative services. Delaware International Advisers Ltd.
is affiliated with Delaware Management Company, a series of Delaware Management
Business Trust, which is an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc.
Delaware Management Company is the sub-adviser to Delaware Global Equity Fund.
Delaware Management Company manages the U.S. securities portion of Delaware
Global Equity Fund's portfolio under the overall supervision of Delaware
International Advisers Ltd. and furnishes Delaware International Advisers Ltd.
with investment recommendations, asset allocation advice, research and other
investment services regarding U.S. securities.
Delaware Overseas Equity Fund and Delaware New Pacific Fund are managed by
Delaware Management Company. Delaware International Advisers Ltd. is Delaware
Overseas Equity Fund's sub-adviser and AIB Govett, Inc. is Delaware New Pacific
Fund's sub-adviser. The sub-advisers are responsible for day-to-day management
of the Fund's assets. Delaware Management Company administers the Funds' affairs
and has ultimate responsibility for all investment advisory services for the
Funds. Delaware Management Company also supervises the sub-adviser's
performance.
For the services they provided, the manager and sub-advisers, where applicable,
were paid an aggregate fee by each Fund for the last fiscal year as follows:
Investment management fees
<TABLE>
<CAPTION>
Delaware Delaware Delaware Delaware Delaware Delaware
International Global Overseas Emerging New Pacific Global Bond
Equity Fund Equity Fund Equity Fund Markets Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As a percentage of
average daily net assets 0.81% 0.34%* none* 0.28%* 0.22%* 0.51%*
</TABLE>
*Reflects a waiver of fees by the manager.
Portfolio managers
Delaware International Equity Fund
Clive A. Gillmore and Nigel G. May have primary responsibility for making
day-to-day investment decisions for Delaware International Equity Fund. In
making investment decisions for the Fund, Mr. Gillmore and Mr. May regularly
consult with a fourteen member international equity team.
Clive A. Gillmore, Deputy Managing Director, Senior Portfolio Manager and
Director of Delaware International Advisers Ltd., has been the senior portfolio
manager for Delaware International Equity Fund since its inception. A graduate
of the University of Warwick and having begun his career at Legal and General
Investment Management, Mr. Gillmore joined Delaware International Advisers in
1990 after eight years of investment experience. His most recent position prior
to joining Delaware International Advisers was as a Pacific Basin equity analyst
and senior portfolio manager for Hill Samuel Investment Management Ltd. Mr.
Gillmore completed the London Business School Investment program.
30
<PAGE>
Nigel G. May, Senior Portfolio Manager and Director of Delaware International
Advisers Ltd., is a graduate of Sidney Sussex College, Cambridge. Mr. May joined
Mr. Gillmore as Co-Manager of the Fund on December 22, 1997. He joined Delaware
International Advisers in 1991, assuming portfolio-management responsibilities
and sharing analytical responsibilities for continental Europe. He previously
had been with Hill Samuel Investment Management Ltd. for five years.
Delaware Global Equity Fund
Elizabeth A. Desmond has primary responsibility for making day-to-day investment
decisions for Delaware Global Equity Fund. Robert L. Arnold makes investment
decisions for the U.S. equity portion of the Fund.
Elizabeth A. Desmond, Senior Portfolio Manager and Director of Delaware
International Advisers Ltd., has been the portfolio manager for the Fund since
July 21, 1998. Ms. Desmond is a graduate of Wellesley College and the masters
program in East Asian studies at Stanford University. After working for the
Japanese government for two years, she began her investment career as a Pacific
Basin investment manager with Shearson Lehman Global Asset Management. Prior to
joining Delaware International in the spring of 1991, she was a Pacific Basin
equity analyst and senior portfolio manager at Hill Samuel Investment
Management, Ltd. Ms. Desmond is a CFA charterholder.
Robert L. Arnold, Vice President/Senior Portfolio Manager of the Fund, has been
managing the U.S. equity portion of the Fund since July 21, 1998. Prior to that
time he managed other Delaware Investments mutual funds and was a financial
analyst focusing on the financial services industry including banks, thrifts,
insurance companies and consumer finance companies. Mr. Arnold holds a BS from
Carnegie Mellon University and earned an MBA from the University of Chicago. He
began his investment career as a management consultant with Arthur Young in
Philadelphia. Prior to joining Delaware Investments in March 1992, Mr. Arnold
was a planning analyst with Chemical Bank in New York.
Delaware Overseas Equity Fund
Clive Gillmore and Robert Akester have had primary responsibility for making
day-to-day investment decisions for Delaware Overseas Equity Fund since
September 15, 1997. Please see Delaware International Equity Fund for a
description of Mr. Gillmore's business experience.
Robert Akester, Senior Portfolio Manager of Delaware International Advisers
Ltd., joined Delaware International Advisers Ltd. in 1996. Mr. Akester, who
began his investment career in 1969, was most recently a Director of Hill Samuel
Investment Management Ltd., which he joined in 1985. His prior experience
included working as a Senior Analyst and head of the Southeast Asian Research
team at James Capel, and as a Fund Manager at Prudential Assurance Co., Ltd. Mr.
Akester holds a BS in Statistics and Economics from University College, London
and is an associate of the Institute of Actuaries, with a certificate in Finance
and Investment.
Delaware Emerging Markets Fund
Clive Gillmore also has primary responsibility for making day-to-day investment
decisions for Delaware Emerging Markets Fund (please see Delaware International
Equity Fund for a description of Mr. Gillmore's business experience). In making
investment decisions for Delaware Emerging Markets Fund, Mr. Gillmore regularly
consults with a fourteen member international equity team, including co-managers
Robert Akester and Joshua H. Brooks. (Please see Delaware Overseas Equity Fund
for a description of Mr. Akester's business experience). Mr. Gillmore has been
managing the Fund since its inception.
31
<PAGE>
Who manages the Funds (continued)
Joshua H. Brooks, Senior Portfolio Manager of Delaware International Advisers
Ltd., holds a bachelor's degree from Yale University and an MBA from The London
Business School. He began his investment career with Delaware Investments in
1991. Prior to joining the investment team in London, he was based in
Philadelphia with responsibilities that included equity market analysis and
acting as liaison with Delaware International.
Delaware New Pacific Fund
Jane Pickard has had primary responsibility for making day-to-day investment
decisions for the Fund since November 12, 1997. Ms. Pickard graduated in law
from Edinburgh University. She joined Barclays de Zoete Wedd Securities Limited
in 1991, where she initially worked as a specialist in structured debt products,
moving into the Pacific Rim equity division in 1992. She remained there until
1995 when she moved to IAI International where she had responsibility for
Pacific Region investment for U.S. institutional and retail funds. Ms. Pickard
joined AIB Govett Asset Management, an affiliate of AIB Govett, Inc., in 1996.
Delaware Global Bond Fund
Christopher A. Moth and Joanna Bates have primary responsibility for making
day-to-day investment decisions for Delaware Global Bond Fund. In making
investment decisions for Delaware Global Bond Fund, Mr. Moth and Ms. Bates
regularly consult with David G. Tilles.
Christopher A. Moth, Senior Portfolio Manager, Director and Head of Investment
Strategy of Delaware International Advisers Ltd., is a graduate of The City
University, London. He joined Delaware International in 1992. He previously
worked at the Guardian Royal Exchange where he was responsible for technical
analysis, quantitative models and projections. Mr. Moth has been awarded the
certificate in Finance and Investment from the Institute of Actuaries in London.
Mr. Moth became Co-Manager of the Fund in January 1997.
Joanna Bates, Senior Portfolio Manager, Credit and Emerging Markets of Delaware
International Advisers Ltd., is a graduate of London University. She joined the
Fixed Income team at Delaware International in June 1997. Prior to that she was
Associate Director, Fixed Interest at Hill Samuel Investment Management Ltd.
which she joined in 1990. She had previously worked at Fidelity International
and Save & Prosper as a fund manager and analyst for global bond markets. Ms.
Bates is an associate of the Institute of Investment Management and Research.
Ms. Bates became Co-Manager of the Fund in July 1999.
David G. Tilles, Managing Director and Chief Investment Officer of Delaware
International Advisers Ltd., was educated at the Sorbonne, Warwick University
and Heidelberg University. Prior to joining Delaware International in 1990 as
Managing Director and Chief Investment Officer, he spent 16 years with Hill
Samuel Investment Management Ltd. in London, serving in a number of investment
capacities. His most recent position prior to joining Delaware International was
Chief Investment Officer of Hill Samuel Investment Management Ltd.
32
<PAGE>
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
<TABLE>
<CAPTION>
Board of Trustees
<S> <C> <C>
Investment managers The Funds Custodian
Delaware International Advisers Ltd. The Chase Manhattan Bank
Third Floor, 80 Cheapside 4 Chase Metrotech Center
London, England EC2V 6EE Brooklyn, NY 11245
Delaware Management Company Distributor Service agent
One Commerce Square Delaware Distributors, L.P. Delaware Service Company, Inc.
Philadelphia, PA 19103 1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
Sub-advisers
Delaware Management Company Shareholders
Delaware International Advisers Ltd.
AIB Govett, Inc.
250 Montgomery St., Suite 1200
San Francisco, CA 94104
Portfolio managers
(see page 30 for details)
</TABLE>
Board of Trustees A mutual fund is governed by a Board of Trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the Board of Trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's Prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Sub-adviser A sub-adviser is a company generally responsible for the management
of the fund's assets. They are selected and supervised by the investment
manager.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
<PAGE>
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to NASD
Regulation, Inc. (NASD) rules governing mutual fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect trustees. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
33
<PAGE>
About your account
Investing in the Funds
Institutional Class shares are available for purchase only by the following:
o retirement plans introduced by persons not associated with brokers or dealers
that are primarily engaged in the retail securities business and rollover
individual retirement accounts from such plans;
o tax-exempt employee benefit plans of the manager or its affiliates and
securities dealer firms with a selling agreement with the distributor;
o institutional advisory accounts of the manager, or its affiliates and those
having client relationships with Delaware Investment Advisers, an affiliate of
the manager, or its affiliates and their corporate sponsors, as well as
subsidiaries and related employee benefit plans and rollover individual
retirement accounts from such institutional advisory accounts;
o a bank, trust company and similar financial institution investing for its own
account or for the account of its trust customers for whom such financial
institution is exercising investment discretion in purchasing shares of the
Class, except where the investment is part of a program that requires payment
to the financial institution of a Rule 12b-1 Plan fee; and
o registered investment advisers investing on behalf of clients that consist
solely of institutions and high net-worth individuals having at least
$1,000,000 entrusted to the adviser for investment purposes, but only if the
adviser is not affiliated or associated with a broker or dealer and derives
compensation for its services exclusively from its clients for such advisory
services.
34
<PAGE>
How to buy shares
[GRAPHIC OMITTED]
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
[GRAPHIC OMITTED]
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014128934013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us at 800.510.4015 so we can assign you an
account number.
[GRAPHIC OMITTED]
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that you may not exchange your shares for Class B or Class C
shares. To open an account by exchange, call your Client Services Representative
at 800.510.4015.
[GRAPHIC OMITTED]
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
35
<PAGE>
About your account (continued)
How to buy shares (continued)
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a
business day, you will pay that day's closing share price which is based on the
Fund's net asset value. If we receive your order after the close of regular
trading, you will pay the next business day's price. A business day is any day
that the New York Stock Exchange is open for business. We reserve the right to
reject any purchase order.
We determine each Fund's net asset value (NAV) per share at the close of regular
trading of the New York Stock Exchange each business day that the Exchange is
open. We calculate this value by adding the market value of all the securities
and assets in a Fund's portfolio, deducting all liabilities, and dividing the
resulting number by the number of shares outstanding. The result is the net
asset value per share. We price securities and other assets for which market
quotations are available at their market value. We price fixed-income securities
on the basis of valuations provided to us by an independent pricing service that
uses methods approved by the Board of Trustees. Any fixed-income securities that
have a maturity of less than 60 days we price at amortized cost. For all other
securities, we use methods approved by the Board of Trustees that are designed
to price securities at their fair market value.
36
<PAGE>
How to redeem shares
[GRAPHIC OMITTED]
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000, you must include a signature guarantee for each owner. You can also fax
your written request to 215.255.8864. Signature guarantees are also required
when redemption proceeds are going to an address other than the address of
record on an account.
[GRAPHIC OMITTED]
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
[GRAPHIC OMITTED]
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. Bank information must be on file before you request a wire redemption.
[GRAPHIC OMITTED]
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
37
<PAGE>
About your account (continued)
How to redeem shares
(continued)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares
before the close of regular trading on the New York Stock Exchange (normally
4:00 p.m. Eastern Time), you will receive the net asset value as determined on
the business day we receive your request. You may have to pay taxes on the
proceeds from your sale of shares. We will send you a check, normally the next
business day, but no later than seven days after we receive your request to sell
your shares. If you purchased your shares by check, we will wait until your
check has cleared, which can take up to 15 days, before we send your redemption
proceeds.
Account minimum
If you redeem shares and your account balance falls below $250, your Fund may
redeem your account after 60 days' written notice to you.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund. If you exchange shares to a fund that has a
sales charge you will pay any applicable sales charges on your new shares. You
don't pay sales charges on shares that are acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's Prospectus and read it carefully before buying shares through an
exchange. You may not exchange your shares for Class B and Class C shares of the
funds in the Delaware Investments family.
Dividends, distributions
and taxes
Dividends, if any, are paid quarterly for Delaware International Equity Fund,
Delaware Global Equity Fund and Delaware Global Bond Fund and annually for
Delaware Overseas Equity Fund Delaware New Pacific Fund and Delaware Emerging
Markets Fund. Any capital gains are distributed annually. We automatically
reinvest all dividends and any capital gains.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from these Funds is the same whether you
reinvest your dividends or receive them in cash. Distributions from a Fund's
long-term capital gains are taxable as capital gains, while distributions from
short-term capital gains and net investment income are generally taxable as
ordinary income. Any capital gains may be taxable at different rates depending
on the length of time the Fund held the assets. In addition, you may be subject
to state and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
38
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Funds could be adversely affected if the computer systems
used by their service providers do not properly process and calculate
date-related information from and after January 1, 2000. This is commonly known
as the "Year 2000 Problem." Each Fund has taken steps to obtain satisfactory
assurances that its major service providers have taken steps reasonably designed
to address the Year 2000 Problem on the computer systems that the service
providers use. However, there can be no assurance that these steps will be
sufficient to avoid any adverse impact on the business of the Funds. The
portfolio managers and investment professionals of the Funds consider Year 2000
compliance (including, but not limited to, any or all of the following: impact
on business, cost of compliance plan review and contingency planning, and vendor
compliance) in the securities selection and investment process. However, there
can be no guarantees that, even with their due diligence efforts, they will able
to predict the affect of Year 2000 on any company or the performance of its
securities.
Investment by
fund of funds
Delaware International Equity Fund, Delaware Emerging Markets Fund, Delaware New
Pacific Fund and Delaware Global Bond Fund accept investments from the series
portfolios of Delaware Group Foundation Funds, a fund of funds. From time to
time, a Fund may experience large investments or redemptions due to allocations
or rebalancings by Foundation Funds. While it is impossible to predict the
overall impact of these transactions over time, there could be adverse effects
on portfolio management. For example, the Fund may be required to sell
securities or invest cash at times when it would not otherwise do so. These
transactions could also have tax consequences if sales of securities result in
gains, and could also increase transactions costs or portfolio turnover. The
manager will monitor transactions by Foundation Funds and will attempt to
minimize any adverse effects on each Fund and Foundation Funds as a result of
these transactions.
Fund companies
The Funds are separate series of the investment companies shown below.
Delaware Group Global & International Funds
Delaware International Equity Fund
Delaware Global Equity Fund
Delaware Emerging Markets Fund
Delaware Global Bond Fund
Delaware Group Adviser Funds
Delaware Overseas Equity Fund
Delaware New Pacific Fund
39
<PAGE>
Financial highlights
The Financial
highlights tables
are intended to help you understand a Fund's financial performance. All "per
share" information reflects financial results for a single Fund share. This
information has been audited by Ernst & Young LLP, whose report, along with each
Fund's financial statements, is included in the Fund's annual report, which is
available upon request by calling 800.523.1918. Information for Delaware
Overseas Equity Fund and Delaware New Pacific Fund for the fiscal periods ended
on or before October 31, 1996 has been audited by the Fund's previous auditors.
<TABLE>
<CAPTION>
Institutional Class
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended
Delaware International 11/30
Equity Fund 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $15.370 $14.720 $14.710 $12.240 $11.970
Income from investment operations:
Net investment income1 0.222 0.318 0.267 0.530 0.323
Net realized and unrealized gain on
investments and foreign currencies 0.880 0.962 0.238 2.405 0.637
------- ------- ------- ------- -------
Total from investment operations 1.102 1.280 0.505 2.935 0.960
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income (0.282) (0.475) (0.475) (0.320) (0.220)
Distributions from net realized gain
on investments none (0.155) (0.020) (0.145) (0.470)
------- ------- ------- ------- -------
Total dividends and distributions (0.282) (0.630) (0.495) (0.465) (0.690)
------- ------- ------- ------- -------
Net asset value, end of period $16.190 $15.370 $14.720 $14.710 $12.240
======= ======= ======= ======= =======
Total return(2) 7.26% 9.10% 3.55%(3) 24.68%(3) 8.46%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $115,009 $164,823 $71,177 $34,194 $11,660
Ratio of expenses to average net assets 1.56% 1.40% 1.40% 1.55% 1.77%
Ratio of expenses to average net assets
prior to expense limitation and
expenses paid indirectly 1.56% 1.40% 1.41% 1.65% 1.77%
Ratio of net investment income to
average net assets 1.40% 2.10% 1.76% 4.00% 2.87%
Ratio of net investment income to
average net assets prior to
expense limitation and
expenses paid indirectly 1.40% 2.10% 1.75% 3.90% 2.87%
Portfolio turnover 3% 5% 8% 9% 21%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share information for the years ended November 30, 1996, 1997, 1998 and
1999 was based on the average shares outstanding method.
(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.
(3) Total return reflects expense limitations in effect during the period.
<TABLE>
<CAPTION>
How to read the Net investment Net realized and unrealized gain (loss) on investments and Net asset value
Financial highlights income foreign currencies (NAV)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment A realized gain on investments occurs when we sell an investment This is the value
income includes at a profit, while a realized loss on investments occurs when we of a mutual fund
dividend and sell an investment at a loss. When an investment increases or share, calculated
interest income decreases in value but we do not sell it, we record an unrealized by dividing the
earned from a gain or loss. The amount of realized gain per share that we pay net assets by the
fund's securities; to shareholders is listed under "Less dividends and number of shares
it is after expenses distributions-Distributions from net realized gain on outstanding.
have been deducted. investments." Realized and unrealized gain (loss) on foreign
currencies represent changes in the U.S. dollar value of assets
(including investments) and liabilities denominated in foreign
currencies as a result of changes in foreign currency exchange rates.
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
Institutional Class
- ------------------------------------------------------------------------------------------------------------------------------------
Period
Year Ended 12/27/94(1)
11/30 through
Delaware Global Equity Fund 1999 1998(4) 1997 1996 11/30/95
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.610 $14.100 $13.340 $11.930 $10.000
Income from investment operations:
Net investment income(2) 0.170 0.329 0.478 0.567 0.473
Net realized and unrealized gain on
investments and foreign currencies 0.300 0.816 0.857 1.533 1.697
Total from investment operations 0.470 1.145 1.335 2.100 2.170
Less dividends and distributions:
Dividends from net investment income (0.150) (0.405) (0.525) (0.420) (0.240)
Distributions from net realized gain
on investments (0.680) (1.230) (0.050) (0.270) none
Total dividends and distributions (0.830) (1.635) (0.575) (0.690) (0.240)
Net asset value, end of period $13.250 $13.610 $14.100 $13.340 $11.930
Total return(3) 3.63% 9.07% 10.34% 18.38% 21.88%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $1,229 $2,627 $2,310 $2,203 $2,191
Ratio of expenses to average net assets 1.55% 1.25% 0.95% 0.95% 0.95%
Ratio of expenses to average net assets
prior to expense limitation and
expenses paid indirectly 2.02% 1.69% 1.86% 2.24% 7.25%
Ratio of net investment income to
average net assets 1.27% 2.47% 3.54% 4.43% 5.05%
Ratio of net investment income to
average net assets prior to
expense limitation and
expenses paid indirectly 0.80% 2.03% 2.63% 2.96% (1.25%)
Portfolio turnover 29% 90% 74% 34% 57%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Date of commencement of trading; ratios have been annualized but total
return has not been annualized.
(2) Per share information for the years ended November 30, 1997, 1998 and 1999
was based on the average shares outstanding method.
(3) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value. Total return also reflects expense limitations in effect
during the period.
<TABLE>
<CAPTION>
Ratio of net investment
Ratio of expenses to income to average Portfolio
Total return Net assets average net assets net assets turnover rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
This represents the rate that an Net assets represent The expense ratio is the We determine this ratio This figure tells
investor would have earned or lost the total value of percentage of net assets by dividing net you the amount of
on an investment in a fund. In all the assets in a that a fund pays annually for investment income by trading activity
calculating this figure for the fund's portfolio, operating expenses and average net assets. in a fund's
financial highlights table, we less any liabilities, management fees. These portfolio. For
include applicable fee waivers, that are attributable expenses include accounting example, a fund
exclude front-end and contingent to that class and administration with a 50%
deferred sales charges, and assume of the fund. expenses, services for turnover has
the shareholder has reinvested all shareholders, and similar bought and sold
dividends and realized gains. expenses. half of the value
of its total
investment
portfolio during
the stated
period.
</TABLE>
41
<PAGE>
Financial highlights (continued)
<TABLE>
<CAPTION>
Institutional Class
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Overseas Year Ended
Equity Fund 10/31
19992 1998(2) 1997(2) 1996(1) 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.930 $12.480 $12.320 $11.440 $11.020
Income (loss) from investment operations:
Net investment income (loss) 0.098 0.123 (0.020) (0.060) 0.040
Net realized and unrealized gain (loss) on
investments and foreign currencies 0.872 (1.513) (0.950) 0.963 0.410
------- ------- ------- ------- ------
Total from investment operations 0.970 (1.390) 0.930 0.903 0.450
------- ------- ------- ------- ------
Less dividends and distributions:
Dividends from net investment income (0.720) (0.520) (0.440) (0.023) (0.030)
Distributions from net realized gain
on investments (1.370) (1.640) (0.330) none none
------- ------- ------- ------- ------
Total dividends and distributions (2.090) (2.160) (0.770) (0.023) (0.030)
Net asset value, end of period $7.810 $8.930 $12.480 $12.320 $11.440
Total return3 14.30%(4) (12.82%)(4) 8.04% 7.91%(4) 4.22%(4)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $69 $59 $60 $284 $161
Ratio of expenses to average net assets 1.55% 1.53% 1.50% 1.50% 1.50%
Ratio of expenses to average net assets
prior to expense limitation and
expenses paid indirectly 5.01% 3.45% N/A 2.28% 2.61%
Ratio of net investment income to
average net assets 1.25% 1.23% (0.15%) (0.19%) 0.40%
Ratio of net investment income to
average net assets prior to
expense limitation and
expenses paid indirectly (2.21%) (0.69%) N/A (0.97%) (0.71%)
Portfolio turnover 7% 87% 18% 21% 9%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Commencing May 3, 1996, Delaware Management Company replaced Lincoln
National Corporation as the Fund's investment manager.
(2) The average shares outstanding method has been applied for per share
information.
(3) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(4) Total return reflects expense limitations in effect during the period.
42
<PAGE>
<TABLE>
<CAPTION>
Institutional Class
- ------------------------------------------------------------------------------------------------------------------------------------
Period
6/10/961
Delaware Emerging through
Markets Fund 1999 1998 1997 11/30/96
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $6.550 $10.250 $9.990 $10.000
Income (loss) from investment operations:
Net investment income2 0.099 0.151 0.098 0.047
Net realized and unrealized gain (loss) on
investments and foreign currencies 1.521 (3.191) 0.262 (0.057)
------- ------- ------- -------
Total from investment operations 1.620 (3.040) 0.360 (0.010)
------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income (0.090) (0.055) (0.025) none
Distributions from net realized gain
on investments none (0.605) (0.075) none
------- ------- ------- -------
Total dividends and distributions (0.090) (0.660) (0.100) none
------- ------- ------- -------
Net asset value, end of period $8.080 $6.550 $10.250 $9.990
======= ======= ======= =======
Total return3 25.24% (31.55%) 3.64% (0.10%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $2,791 $1,117 $1,916 $3,717
Ratio of expenses to average net assets 1.70% 1.70% 1.70% 1.70%
Ratio of expenses to average net assets
prior to expense limitation and
expenses paid indirectly 2.69% 3.61% 2.72% 3.80%
Ratio of net investment income to
average net assets 1.40% 1.84% 0.82% 0.47%
Ratio of net investment income (loss) to
average net assets prior to
expense limitation and
expenses paid indirectly 0.41% (0.07%) (0.20%) (1.63%)
Portfolio turnover 17% 47% 65% 36%
</TABLE>
(1) Date of commencement of trading; ratios have been annualized but total
return has not been annualized.
(2) Per share information was based on the average shares outstanding method.
(3) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value. Total return also reflects expense limitations in effect
during the period.
43
<PAGE>
Financial highlights (continued)
<TABLE>
<CAPTION>
Institutional Class
- -------------------------------------------------------------------------------------------------------------------------
Year Ended
11/30
Delaware New Pacific Fund 1999(1) 1998(1) 1997(1) 1996(2) 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $4.690 $7.440 $9.530 $8.770 $10.480
Income (loss) from investment operations:
Net investment income (loss) (0.020) 0.024 0.020 (0.050) (0.010)
Net realized and unrealized gain on
investments and foreign currencies 2.790 (2.719) (1.960) 0.820 (1.410)
------ ------ ------ ------ -------
Total from investment operations 2.770 (2.695) (1.940) 0.770 (1.420)
------ ------ ------ ------ -------
Less dividends and distributions:
Dividends from net investment income none (0.055) (0.150) (0.010) none
Distributions from net realized gain
on investments none none none (0.010) none
------ ------ ------ ------ -------
Total dividends and distributions none (0.055) (0.150) (0.010) (0.290)
------ ------ ------ ------ -------
Net asset value, end of period $7.460 $4.690 $7.440 $9.530 $8.770
====== ====== ====== ====== =======
Total return(3) 59.06% (36.39%) (20.79%) 8.77% (13.65%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $1,204 $219 $250 $119 $62
Ratio of expenses to average net assets 1.66% 1.60% 1.50% 1.50% 1.50%
Ratio of expenses to average net assets
prior to expense limitation and
expenses paid indirectly 2.27% 2.93% 1.56% 2.45% 3.38%
Ratio of net investment income (loss) to
average net assets (0.35%) 0.45% 0.22% (0.09%) (0.16%)
Ratio of net investment income (loss) to
average net assets prior to expense limitation
and expenses paid indirectly (0.96%) (0.88%) 0.16% (1.04%) (2.04%)
Portfolio turnover 90% 188% 178% 163% 163%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The average shares outstanding method has been applied for per share
information.
(2) Commencing May 3, 1996, Delaware Management Company replaced Lincoln
National Corporation as the Fund's investment manager.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value. Total return also reflects expense limitations in effect during the
period.
44
<PAGE>
<TABLE>
<CAPTION>
Institutional Class
- -------------------------------------------------------------------------------------------------------------------------
Period
Year Ended 12/27/94(1)
11/30 through
Delaware Global Bond Fund 1999 1998 1997 1996 11/30/95
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.930 10.810 $11.520 $11.270 $10.000
Income from investment operations:
Net investment income(2) 0.592 0.627 0.658 0.788 0.782
Net realized and unrealized gain (loss) on
investments and foreign currencies (0.937) (0.017) (0.515) 0.732 1.088
------- ------- ------- ------- -------
Total from investment operations (0.345) 0.610 0.143 1.520 1.870
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income (0.490) (0.460) (0.813) (0.910) (0.600)
Distributions from net realized gain
on investments (0.105) (0.030) (0.040) (0.360) none
------- ------- ------- ------- -------
Total dividends and distributions (0.595) (0.490) (0.853) (1.270) (0.600)
------- ------- ------- ------- -------
Net asset value, end of period $9.990 $10.930 $10.810 $11.520 $11.720
======= ======= ======= ======= =======
Total return(3) (3.31%) 5.88% 1.45% 14.68% 19.21%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $11,668 $12,937 $11,278 $6,707 $897
Ratio of expenses to average net assets 1.00% 0.95% 0.95% 0.95% 0.95%
Ratio of expenses to average net assets
prior to expense limitation and
expenses paid indirectly 1.24% 1.29% 1.74% 4.70% 12.04%
Ratio of net investment income to
average net assets 5.64% 5.88% 6.06% 7.12% 8.00%
Ratio of net investment income (loss) to
average net assets prior to
expense limitation and
expenses paid indirectly 5.40% 5.54% 5.27% 3.37% (3.09%)
Portfolio turnover 90% 93% 76% 42% 98%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Date of commencement of trading; ratios have been annualized but total
return has not been annualized.
(2) Per share information for the years ended November 30, 1996, 1997, 1998 and
1999 was based on the average shares outstanding method.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value. Total return also reflects expense limitations in effect during the
period.
45
<PAGE>
Delaware International
Equity Fund
Delaware Global Equity
Fund
Delaware Overseas
Equity Fund
Delaware Emerging
Markets Fund
Delaware New
Pacific Fund
Delaware Global
Bond Fund
Additional information about the Funds' investments is available in the Funds'
annual and semi-annual reports to shareholders. In the Funds' shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Funds' performance during the report
period. You can find more detailed information about the Funds in the current
Statements of Additional Information, which we have filed electronically with
the Securities and Exchange Commission (SEC) and which is legally a part of this
Prospectus. If you want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any questions about investing
in these Funds, you can write to us at 1818 Market Street, Philadelphia, PA
19103-3682, or call toll-free 800.523.1918. You may also obtain additional
information about the Funds from your financial adviser.
You can find reports and other information about the Funds on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Funds, including their
Statement of Additional Information, can be reviewed and copied at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
You can get information on the public reference room by calling the SEC at
1.800.SEC.0330.
<PAGE>
Web site
www.delawareinvestments.com
E-mail
[email protected]
Client Services Representative
800.510.4015
Delaphone Service
800.362.FUND (800.362.3863)
oFor convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24 hours a
day, use this Touch-Tone(R) service.
Delaware Group Global & International Funds
Investment Company Act file number: 811-6324
Delaware Group Adviser Funds
Investment Company Act file number: 811-7972
Delaware Fund Symbols CUSIP NASDAQ
----- ------
Delaware International Equity Fund
----------------------------------
Institutional Class 245914403 DEQIX
Delaware Global Equity Fund
---------------------------
Institutional Class 245914601 DGAIX
Delaware Overseas Equity Fund
-----------------------------
Institutional Class 245917851 DEWIX
Delaware Emerging Markets Fund
------------------------------
Institutional Class 245914817 DEMIX
Delaware New Pacific Fund
-------------------------
Institutional Class 245917810 DENIX
Delaware Global Bond Fund
-------------------------
Institutional Class 245914502 DGBIX
DELAWARE(SM)
INVESTMENTS
- ---------------------
Philadelphia o London
P-048 [--] PP 02/00
<PAGE>
DELAWARE GROUP ADVISER FUNDS
Delaware New Pacific Fund
Delaware Overseas Equity Fund
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
INSTITUTIONAL CLASS
PART B
STATEMENT OF
ADDITIONAL INFORMATION
February 1, 2000
- ----------------------------------------------
DELAWARE(SM)
INVESTMENTS
- ----------------------------------------------
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
February 1, 2000
DELAWARE GROUP ADVISER FUNDS
Delaware New Pacific Fund
Delaware Overseas Equity Fund
1818 Market Street
Philadelphia, PA 19103
For more information about the Institutional Classes:
800-510-4015
For Prospectus, Performance and Information on Existing Accounts of
Class A Shares, Class B Shares and Class C Shares:
Nationwide 800-523-1918
Dealer Services:
(BROKER/DEALERS ONLY) Nationwide 800-362-7500
This Statement of Additional Information ("Part B") describes shares of
the funds listed above (individually a "Fund" and collectively the "Funds") for
Delaware Group Adviser Funds ("Adviser Funds"). Adviser Funds is registered,
open-end management investment company.
Each Fund offers Class A Shares, Class B Shares and Class C Shares
(together referred to as the "Fund Classes"). Each Fund also offers an
Institutional Class (together referred to the "Institutional Classes"). All
references to "shares" in this Part B refer to all Classes of shares, except
where noted.
This Part B should be read in conjunction with the Prospectuses for the
Funds dated February 1, 2000, as they may be amended from time to time. The
Prospectuses may be obtained by writing or calling your investment dealer or by
calling the Funds at 800-523-1918 or by contacting the Funds' national
distributor, Delaware Distributors, L.P., 1818 Market Street, Philadelphia, PA
19103. Part B is not itself a prospectus but is, in its entirety, incorporated
by reference into each Class' Prospectus. The Funds' financial statements, the
notes relating thereto, the financial highlights and the report of independent
auditors are incorporated by reference from the Annual Report into this Part B.
The Annual Report will accompany any request for Part B. The Annual Report can
be obtained, without charge, by calling 800-523-1918.
2
<PAGE>
TABLE OF CONTENTS
Investment Policies and Portfolio Techniques
Performance Information
Trading Practices and Brokerage
Purchasing Shares
Investment Plans
Determining Offering Price and Net Asset Value
Redemption and Exchange
Dividends, Distributions and Taxes
Investment Management Agreement and Sub-Advisory Agreements
Officers and Trustees
General Information
Financial Statements
Appendix A - Investment Objectives of the Funds in the Delaware Investments
Family
3
<PAGE>
INVESTMENT POLICIES AND PORTFOLIO TECHNIQUES
Investment Restrictions
Fundamental Investment Restrictions -- Adviser Fund has adopted the
following restrictions for each Fund, as applicable (except where otherwise
noted) which cannot be changed without approval by the holders of a "majority"
of the respective Fund's outstanding shares, which is a vote by the holders of
the lesser of a) 67% or more of the voting securities present in person or by
proxy at a meeting, if the holders of more than 50% of the outstanding voting
securities are present or represented by proxy; or b) more than 50% of the
outstanding voting securities. The percentage limitations contained in the
restrictions and policies set forth herein apply at the time of purchase of
securities.
Each Fund shall not:
1. Make investments that will result in the concentration (as that term
may be defined in the Investment Company Act of 1940 (the "1940 Act"), any rule
or other thereunder, or U.S. Securities and Exchange Commission ("SEC") staff
interpretation thereof) of its investments in the securities of issuers
primarily engaged in the same industry, provided that this restriction does not
limit the Fund from investing in obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities, or in tax-exempt obligations or
certificates of deposit.
2. Borrow money or issue senior securities, except as the 1940 Act, any
rule or order thereunder, or SEC staff interpretation thereof, may permit.
3. Underwrite the securities of other issuers, except that the Fund may
engage in transactions involving the acquisition, disposition or resale of its
portfolio securities, under circumstances where it may be considered to be an
underwriter under the Securities Act of 1933 (the "1933 Act").
4. Purchase or sell real estate, unless acquired as a result of
ownership of securities or other instruments and provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
5. Purchase or sell physical commodities, unless acquired as a result
of ownership of securities or other instruments and provided that this
restriction does not prevent the Fund from engaging in transactions involving
futures contracts and options thereon or investing in securities that are
secured by physical commodities.
6. Make loans, provided that this restriction does not prevent the Fund
from purchasing debt obligations, entering into repurchase agreements, loaning
its assets to broker/dealers or institutional investors and investing in loans,
including assignments and participation interests.
Non-Fundamental Investment Restrictions -- In addition to the
fundamental policies and investment restrictions described above, and the
various general investment policies described in the prospectus, each Fund will
be subject to the following investment restrictions, which are considered
non-fundamental and may be changed by the Board of Trustees without shareholder
approval.
1. The Fund is permitted to invest in other investment companies,
including open-end, closed-end or unregistered investment companies, either
within the percentage limits set forth in the 1940 Act, any rule or order
thereunder, or SEC staff interpretation thereof, or without regard to percentage
limits in connection with a merger, reorganization, consolidation or other
similar transaction. However, the Fund may not operate as a "fund of funds"
which invests primarily in the shares of other investment companies as permitted
by Section 12(d)(1)(F) or (G) of the 1940 Act, if its own shares are utilized as
investments by such a "fund of funds."
2. The Fund may not invest more than 15% of its net assets in
securities which it cannot sell or dispose of in the ordinary course of business
within seven days at approximately the value at which the Fund has valued the
investment.
4
<PAGE>
In addition the Funds shall not:
1. Purchase any security (other than obligations of the U.S.
government, its agencies or instrumentalities) if as a result, with respect to
75% of the Fund's total assets, more than 5% of the Fund's assets (determined at
the time of investment) would then be invested in securities of a single issuer;
2. Purchase any securities (other than obligations of the U.S.
government, its agencies and instrumentalities) if as a result 25% or more of
the value of the Fund's total assets (determined at the time of investment)
would be invested in the securities of one or more issuers conducting their
principal business activities in the same industry, provided that there is no
limitation with respect to money market instruments of domestic banks, U.S.
branches of foreign banks that are subject to the same regulations as U.S. banks
and foreign branches of domestic banks (provided that the domestic bank is
unconditionally liable in the event of the failure of the foreign branch to make
payment on its instruments for any reason). Foreign governments, including
agencies and instrumentalities thereof, and each of the electric utility,
natural gas distribution, natural gas pipeline, combined electric and natural
gas utility, and telephone industries shall be considered as a separate industry
for this purpose;
3. Buy or sell real estate, interests in real estate or commodities or
commodity contracts; however, each Fund may invest in debt securities secured by
real estate or interests therein, or issued by companies which invest in real
estate or interests therein, including real estate investment trusts, and may
purchase or sell currencies (including forward currency contracts) and financial
futures contracts and options thereon;
4. Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may technically
cause Adviser Funds to be considered an underwriter as that term is defined
under the 1933 Act, as amended;
5. Make loans in an aggregate amount in excess of one-third of a Fund's
total assets, taken at the time any loan is made, provided that entering into
certain repurchase agreements and purchasing debt securities shall not be deemed
loans for the purposes of this restriction;
6. Make short sales of securities or maintain a short position if, when
added together, more than 25% of the value of the Fund's net assets would be (i)
deposited as collateral for the obligation to replace securities borrowed to
effect short sales and (ii) allocated to segregated accounts in connection with
short sales;
7. Borrow money, except from banks for temporary or emergency purposes
not in excess of one-third of the value of a Fund's assets, and except that
Funds may enter into reverse repurchase agreements and engage in "roll"
transactions, provided that reverse repurchase agreements, "roll" transactions
and any other transactions constituting borrowing by a Fund may not exceed
one-third of the Fund's total assets;
8. Invest in securities of other investment companies except as may be
acquired as part of a merger, consolidation, reorganization or acquisition of
assets and except that each of the Funds may invest up to 5% of its total assets
in the securities of any one investment company, but may not own more than 3% of
the securities of any investment company or invest more than 10% of its total
assets in the securities of other investment companies;
9. Make investments for the purpose of exercising control or
management;
10. Invest in securities of any issuer if, to the knowledge of Adviser
Funds, any officer or director of the Adviser Funds or the Manager or any
sub-adviser owns more than 1/2 of 1% of the outstanding securities of such
issuer, and such officers and directors who own more than 1/2 of 1% own in the
aggregate more than 5% of the outstanding securities of such issuer;
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11. Purchase any security if as a result a Fund would then have more
than 5% of its total assets (determined at the time of investment) invested in
securities of companies (including predecessors) less than three years old; or
12. Purchase illiquid securities or other securities that are not
readily marketable if more than 10% of the total assets of the Fund would be
invested in such securities.
In order to comply with certain state "blue sky" restrictions, Delaware
New Pacific Fund and Delaware Overseas Equity Fund will not as a matter of
operating policy:
1. Invest in oil, gas and mineral leases or programs;
2. Purchase warrants if as a result the Fund would then have more than
5% of its net assets (determined at the time of investment) invested in
warrants. Warrants will be valued at the lower of cost or market and investment
in warrants which are not listed on the New York Stock Exchange or American
Stock Exchange will be limited to 2% of the net assets of Adviser Funds
(determined at the time of investment). For the purpose of this limitation,
warrants acquired in units or attached to securities are deemed to be without
value;
3. In connection with investment restriction number eight above, invest
in securities issued by other investment companies without waiving the advisory
fee on that portion of its assets invested in such securities; or
4. Purchase puts, calls, straddles, spreads, and any combination
thereof if by reason thereof the value of its aggregate investment in such
classes of securities will exceed 5% of its total assets.
INVESTMENTS
The Prospectuses discuss the Funds' investment objectives and the
policies followed to achieve those objectives. The following discussion
supplements the description of the Funds' investment objectives and policies in
the Prospectuses.
Mortgage-Backed Securities
Each Fund may invest in mortgage-related securities including those
representing an undivided ownership interest in a pool of mortgages.
U.S. Government Securities
The Funds may invest in securities of the U.S. government. Securities
guranteed by the U.S. government include: (1) direct obligations of the U.S.
Treasury (such as Treasury bills, notes and bonds) and (2) federal agency
obligations guranteed as to principal and interest by the U.S. Treasury (such as
GNMA certificates and Federal Housing Administration debentures). For these
securities, the payment of principal and interest is unconditionally guaranteed
by the U.S. government, and thus they are of the highest possible credit
quality. Such securities are subject to variations in market value due to
fluctuations in interest rates, but if held to maturity are deemed to be free of
credit risk for the life of the investment.
Securities issued by U.S. government instrumentalities and certain
federal agencies are neither direct obligations of, nor guaranteed by, the U.S.
Treasury. However, they generally involve federal sponsorship in one way or
another: some are backed by specific types of collateral; some are supported by
the issuer's right to borrow from the U.S. Tresury; some are supported by the
discretionary authority of the U.S. Treasury to purchase certain obligations of
the issuer; and others are supported only by the credit of the issuing
government agency or instrumentality. These agencies and instrumentalities
include, but are not limited to, Federal Land Banks, Farmers Home
Administration, Cental Bank for Cooperatives, Federal Intermediate Credit Banks,
and Federal Home Loan Banks.
Government National Mortgage Association Certificates. Certificates
issued by the Government National Mortgage Association ("GNMA") are
mortgage-backed securities representing part ownership of a pool of mortgage
loans, which are issued by lenders such as mortgage bankers, commercial banks
and savings and loan associations, and are either insured by the Federal Housing
Administration or guaranteed by the Veterans Administration. A pool of these
mortgages is assembled and, after being approved by GNMA, is offered to
investors through securities dealers. The timely payment of interest and
principal on each mortgage is guaranteed by GNMA and backed by the full faith
and credit of the U.S. government.
Principal is paid back monthly by the borrower over the term of the
loan. Investment of prepayments may occur at higher or lower rates than the
anticipated yield on the certificates. Due to the prepayment feature and the
need to reinvest prepayments of principal at current market rates, GNMA
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certificates can be less effective than typical bonds of similar maturities at
"locking in" yields during periods of declining interest rates. GNMA
certificates typically appreciate or decline in market value during periods of
declining or rising interest rates, respectively. Due to the regular repayment
of principal and the prepayment feature, the effective maturities of mortgage
pass-through securities are shorter than stated maturities, will vary based on
market conditions and cannot be predicted in advance. The effective maturities
of newly-issued GNMA certificates backed by relatively new loans at or near the
prevailing interest rates are generally assumed to range between approximately
nine and 12 years.
FNMA and FHLMC Mortgage-Backed Obligations. The Federal National
Mortgage Association ("FNMA"), a federally chartered and privately-owned
corporation, issues pass-through securities representing interests in a pool of
conventional mortgage loans. FNMA guarantees the timely payment of principal and
interest but this guarantee is not backed by the full faith and credit of the
U.S. government. The Federal Home Loan Mortgage Corporation ("FHLMC"), a
corporate instrumentality of the U.S. government, issues participation
certificates which represent an interest in a pool of conventional mortgage
loans. FHLMC guarantees the timely payment of interest and the ultimate
collection of principal, and maintains reserves to protect holders against
losses due to default, but the certificates are not backed by the full faith and
credit of the U.S. government.
As is the case with GNMA certificates, the actual maturity of and
realized yield on particular FNMA and FHLMC pass-through securities will vary
based on the prepayments of the underlying pool of mortgages and cannot be
predicted.
Foreign Investments
Delaware Overseas Equity Fund and Delaware New Pacific Fund may invest
substantially all of their assets in foreign investments. Foreign investments
can involve significant risks in addition to the risks inherent in U.S.
investments. The value of securities denominated in or indexed to foreign
currencies, and of dividends and interest from such securities, can change
significantly when foreign currencies strengthen or weaken relative to the U.S.
dollar. Foreign securities markets generally have less trading volume and less
liquidity than U.S. markets, and prices on some foreign markets can be highly
volatile. Many foreign countries lack uniform accounting and disclosure
standards comparable to those applicable to U.S. companies, and it may be more
difficult to obtain reliable information regarding an issuer's financial
condition and operations. In addition, the costs of foreign investing, including
withholding taxes, brokerage commissions, and custodial costs, are generally
higher than for U.S. investments.
Foreign markets may offer less protection to investors than U.S.
markets. Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may involve increased
risks in the event of a failed trade or the insolvency of a broker-dealer, and
may involve substantial delays. It may also be difficult to enforce legal rights
in foreign countries.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments adverse to
the interests of U.S. investors, including the possibility of expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. There may be a greater possibility of
default by foreign governments or foreign government-sponsored enterprises.
Investments in foreign countries also involve a risk of local political,
economic, or social instability, military action or unrest, or adverse
diplomatic developments. There is no assurance that the Manager or sub-adviser
will be able to anticipate or counter these potential events.
The considerations noted above generally are intensified for
investments in developing countries. Developing countries may have relatively
unstable governments, economies based on only a few industries, and securities
markets that trade a small number of securities.
The Funds may invest in foreign securities that impose restrictions on
transfer within the United States or to U.S. persons. Although securities
subject to transfer restrictions may be marketable abroad, they may be less
liquid than foreign securities of the same class that are not subject to such
restrictions.
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American Depositary Receipts and European Depositary Receipts ("ADRs"
and "EDRs") are certificates evidencing ownership of shares of a foreign-based
issuer held in trust by a bank or similar financial institution. Designed for
use in U.S. and European securities markets, respectively, ADRs and EDRs are
alternatives to the purchase of the underlying securities in their national
markets and currencies.
Mortgage Dollar Rolls
Each Fund may enter into mortgage "dollar rolls" in which the Fund
sells mortgage-backed securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar (same type, coupon
and maturity) securities on a specified future date. Dollar roll transactions
consist of the sale by a Fund of mortgage-backed securities, together with a
commitment to purchase similar, but not necessarily identical, securities at a
future date. Any difference between the sale price and the purchase price is
netted against the interest income foregone on the securities to arrive at an
implied borrowing (reverse repurchase) rate. Alternatively, the sale and
purchase transactions which constitute the dollar roll can be executed at the
same price, with the Fund being paid a fee as consideration for entering into
the commitment to purchase. Dollar rolls may be renewed prior to cash settlement
and initially may involve only a firm commitment agreement by the Fund to buy a
security. If the broker/dealer to whom the Fund sells the security becomes
insolvent, the Fund's right to purchase or repurchase the security may be
restricted; the value of the security may change adversely over the term of the
dollar roll; the security that the Fund is required to repurchase may be worth
less than the security that the Fund originally held, and the return earned by
the Fund with the proceeds of a dollar roll may not exceed transaction costs.
The Fund will place U.S. government or other liquid, high quality assets in a
segregated account in an amount sufficient to cover its repurchase obligation.
Options on Foreign and U.S. Currencies and Securities
The Funds may purchase and sell (write) put and call options on
securities, although the present intent is to write only covered call options.
These covered call options must remain covered so long as a Fund is obligated as
a writer. A call option written by a Fund is "covered" if the Fund owns the
security underlying the option or has an absolute and immediate right to acquire
that security without additional cash consideration (or for additional cash
consideration held in a segregated account by the Fund's Custodian) upon
conversion or exchange of other securities held in its fund. A call option is
also covered if a Fund holds on a share-for-share basis a call on the same
security as the call written where the exercise price of the call held is equal
to or less than the exercise price of the call written or greater than the
exercise price of the call written if the difference is maintained by the Fund
in cash, treasury bills or other high grade, short-term debt obligations in a
segregated account with the Custodian. The premium paid by the purchaser of an
option will reflect, among other things, the relationship of the exercise price
to the market price and volatility of the underlying security, the remaining
term of the option, supply and demand and interest rates.
If the writer of an option wishes to terminate the obligation, he or
she may effect a "closing purchase transaction." This is accomplished by buying
an option of the same series as the option previously written. The effect of the
purchase is that the writer's position will be canceled by the clearing
corporation. However, a writer may not effect a closing purchase transaction
after he or she has been notified of the exercise of an option. Similarly, an
investor who is the holder of an option may liquidate his or her position by
effecting a "closing sale transaction." This is accomplished by selling an
option of the same series as the option previously purchased. There is no
guarantee that either a closing purchase or a closing sale transaction can be
effected. To secure the obligation to deliver the underlying security in the
case of a call option, the writer of the option (whether an exchange-traded
option or a NASDAQ option) is required to pledge for the benefit of the broker
the underlying security or other assets in accordance with the rules of The
Options Clearing Corporation (OCC), the Chicago Board of Trade and the Chicago
Mercantile Exchange, institutions which interpose themselves between buyers and
sellers of options. Technically, each of these institutions assumes the other
side of every purchase and sale transaction on an exchange and, by doing so,
guarantees the transaction.
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An option position may be closed out only on an exchange, board of
trade or other trading facility which provides a secondary market for an option
of the same series. Although a Fund will generally purchase or write only those
options for which there appears to be an active secondary market, there is no
assurance that a liquid secondary market on an exchange or other trading
facility will exist for any particular option, or at any particular time, and
for some options no secondary market on an exchange or otherwise may exist. In
such event it might not be possible to effect closing transactions in particular
options, with the result that the Fund would have to exercise its options in
order to realize any profit and would incur brokerage commissions upon the
exercise of call options and upon the subsequent disposition of underlying
securities acquired through the exercise of call options or upon the purchase of
underlying securities for the exercise of put options. If a Fund as a covered
call option writer is unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying security until the
option expires or it delivers the underlying security upon exercise.
Reasons for the absence of a liquid secondary market on an exchange
include the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the facilities of an exchange or
a clearing corporation may not at all times be adequate to handle current
trading volume; or (vi) one or more exchanges could, for economic or other
reasons, decide or be compelled at some future date to discontinue the trading
of options (or a particular class or series of options), in which event the
secondary market on that exchange (or in the class or series of options) would
cease to exist, although outstanding options on that exchange that had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms. There is no assurance
that higher than anticipated trading activity or other unforeseen events might
not, at times, render certain of the facilities of any of the clearing
corporations inadequate, and thereby result in the institution by an exchange of
special procedures which may interfere with the timely execution of customers'
orders. However, the OCC, based on forecasts provided by the U.S. exchanges,
believes that its facilities are adequate to handle the volume of reasonably
anticipated options transactions, and such exchanges have advised such clearing
corporation that they believe their facilities will also be adequate to handle
reasonably anticipated volume.
Options on Stock Indices
Options on stock indices are similar to options on stock except that,
rather than the right to take or make delivery of stock at a specified price, an
option on a stock index gives the holder the right to receive, upon exercise of
the option, an amount of cash if the closing level of the stock index upon which
the option is based is greater than, in the case of a call, or less than, in the
case of a put, the exercise price of the option. This amount of cash is equal to
such difference between the closing price of the index and the exercise price of
the option expressed in dollars times a specified multiple (the "multiplier").
The writer of the option is obligated, in return for the premium received, to
make delivery of this amount. Unlike stock options, all settlements are in cash.
The multiplier for an index option performs a function similar to the
unit of trading for a stock option. It determines the total dollar value per
contract of each point in the difference between the exercise price of an option
and the current level of the underlying index. A multiplier of 100 means that a
one-point difference will yield $100. Options on different indices may have
different multipliers.
Except as described below, a Fund will write call options on indices
only if on such date it holds a portfolio of securities at least equal to the
value of the index times the multiplier times the number of contracts. When a
Fund writes a call option on a broadly-based stock market index, the Fund will
segregate or put into escrow with the Custodian, or pledge to a broker as
collateral for the option, cash, cash equivalents or at least one "qualified
security" with a market value at the time the option is written of not less than
100% of the current index value times the multiplier times the number of
contracts. A Fund will write call options on broadly-based stock market indices
only if at the time of writing it holds a diversified portfolio of stocks.
If a Fund has written an option on an industry or market segment index,
it will so segregate or put into escrow with the Custodian, or pledge to a
broker as collateral for the option, at least ten "qualified securities," which
are stocks of an issuer in such industry or market segment, with a market value
at the time the option is written of not less than 100% of the current index
value times the multiplier times the number of contracts. Such stocks will
include stocks which represent at least 50% of the Fund's holdings in that
industry or market segment. No individual security will represent more than 15%
of the amount so segregated, pledged or escrowed in the case of broadly-based
stock market index options or 25% of such amount in the case of industry or
market segment index options.
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If at the close of business, the market value of such qualified
securities so segregated, escrowed or pledged falls below 100% of the current
index value times the multiplier times the number of contracts, a Fund will
segregate, escrow or pledge an amount in cash, Treasury bills or other high
grade short-term debt obligations equal in value to the difference. In addition,
when a Fund writes a call on an index which is in-the-money at the time the call
is written, the Fund will segregate with the Custodian or pledge to the broker
as collateral, cash, U.S. government or other high grade short-term debt
obligations equal in value to the amount by which the call is in-the-money times
the multiplier times the number of contracts. Any amount segregated pursuant to
the foregoing sentence may be applied to the Fund's obligation to segregate
additional amounts in the event that the market value of the qualified
securities falls below 100% of the current index value times the multiplier
times the number of contracts. However, if a Fund holds a call on the same index
as the call written where the exercise price of the call held is equal to or
less than the exercise price of the call written or greater than the exercise
price of the call written if the difference is maintained by the Fund in cash,
Treasury bills or other high grade short-term debt obligations in a segregated
account with the Custodian, it will not be subject to the requirements described
in this paragraph.
Risks of Options on Stock Indices. Index prices may be distorted if
trading of certain securities included in the index is interrupted. Trading in
the index options also may be interrupted in certain circumstances, such as if
trading were halted in a substantial number of securities included in the index.
If this occurred, a Fund would not be able to close out options which it had
purchased or written and, if restrictions on exercise were imposed, may be
unable to exercise an option it holds, which could result in substantial losses
to the Fund. It is the Funds' policy to purchase or write options only on
indices which include a number of securities sufficient to minimize the
likelihood of a trading halt in the index.
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Special Risks of Writing Calls on Stock Indices. Unless a Fund has
other liquid assets which are sufficient to satisfy the exercise of a call, the
Fund would be required to liquidate portfolio securities in order to satisfy the
exercise. Because an exercise must be settled within hours after receiving the
notice of exercise, if a Fund fails to anticipate an exercise it may have to
borrow from a bank (in amounts not exceeding 20% of the value of the Fund's
total assets) pending settlement of the sale of securities in its portfolio and
would incur interest charges thereon.
When a Fund has written a call, there is also a risk that the market
may decline between the time the Fund has a call exercised against it, at a
price which is fixed as of the closing level of the index on the date of
exercise, and the time the Fund is able to sell securities in its portfolio. As
with stock options, a Fund will not learn that an index option has been
exercised until the day following the exercise date. Unlike a call on stock
where the Fund would be able to deliver the underlying securities in settlement,
the Fund may have to sell part of its portfolio in order to make settlement in
cash, and the price of such securities might decline before they can be sold.
This timing risk makes certain strategies involving more than one option
substantially more risky with index options than with stock options. For
example, even if an index call which a Fund has written is "covered" by an index
call held by the Fund with the same strike price, the Fund will bear the risk
that the level of the index may decline between the close of trading on the date
the exercise notice is filed with the clearing corporation and the close of
trading on the date the Fund exercises the call it holds or the time the Fund
sells the call, which in either case would occur no earlier than the day
following the day the exercise notice was filed.
Over-the-Counter Options and Illiquid Securities. Each Fund may deal in
over-the-counter ("OTC") options. The Funds understand the position of the staff
of the Securities and Exchange Commission ("SEC") to be that purchased OTC
options and the assets used as "cover" for written OTC options are illiquid
securities. The Funds, the Manager, and the sub-advisers disagree with this
position and have found the dealers with which they engage in OTC options
transactions generally agreeable to and capable of entering into closing
transactions. As also indicated in the Prospectuses, the Funds have adopted
procedures for engaging in OTC options for the purpose of reducing any potential
adverse impact of such transactions upon the liquidity of each Fund's portfolio.
As part of these procedures the Funds will engage in OTC options
transactions only with primary dealers that have been specifically approved by
the Board of Trustees of Adviser Funds and the Manager and/or sub-advisers
believe that the approved dealers should be agreeable and able to enter into
closing transactions if necessary and, therefore, present minimal credit risks
to the Funds. The Funds anticipate entering into written agreements with those
dealers to whom the Funds may sell OTC options, pursuant to which the Funds
would have the absolute right to repurchase the OTC options from such dealers at
any time at a price determined pursuant to a formula set forth in certain no
action letters published by the SEC staff. A Fund will not engage in OTC options
transactions if the amount invested by the Fund in OTC options plus, with
respect to OTC options written by the Fund, the amounts required to be treated
as illiquid pursuant to the terms of such letters (and the value of the assets
used as cover with respect to OTC option sales which are not within the scope of
such letters), plus the amount invested by the Fund in illiquid securities,
would exceed 15% of the Fund's total assets. OTC options on securities other
than U.S. government securities may not be within the scope of such letters and,
accordingly, the amount invested by a Fund in OTC options on such other
securities and the value of the assets used as cover with respect to OTC option
sales regarding such non-U.S. government securities will be treated as illiquid
and subject to the 10% limitation on the Fund's net assets that may be invested
in illiquid securities. See Illiquid Securities, below.
Futures Contracts and Options Thereon
A futures contract is an agreement in which the writer (or seller) of
the contract agrees to deliver to the buyer an amount of cash or securities
equal to a specific dollar amount times the difference between the value of a
specific fixed-income security or index at the close of the last trading day of
the contract and the price at which the agreement is made. No physical delivery
of the underlying securities is made. When the futures contract is entered into,
each party deposits with a broker or in a segregated custodial account
approximately 5% of the contract amount, called the "initial margin." Subsequent
payments to and from the broker, called "variation margin," will be made on a
daily basis as the price of the underlying security or index fluctuates, making
the long and short positions in the futures contracts more or less valuable, a
process known as "marking to market." In the case of options on futures
contracts, the holder of the option pays a premium and receives the right, upon
exercise of the option at a specified price during the option period, to assume
a position in the futures contract (a long position if the option is a call and
a short position if the option is a put). If the option is exercised by the
holder before the last trading day during the option period, the option writer
delivers the futures position, as well as any balance in the writer's futures
margin account. If it is exercised on the last trading day, the option writer
delivers to the option holder cash in an amount equal to the difference between
the option exercise price and the closing level of the relevant security or
index on the date the option expires.
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Each Fund intends to engage in futures contracts and options thereon as
a hedge against changes, resulting from market conditions, in the value of
securities which are held by the Fund or which the Fund intends to purchase, in
accordance with the rules and regulations of the Commodity Futures Trading
Commission ("CFTC"). Additionally, the Funds may write options on futures
contracts to realize through the receipt of premium income a greater return than
would be realized in a Fund's portfolio securities alone.
Risks of Transactions in Futures Contracts. There are several risks in
connection with the use of futures contracts as a hedging device. Successful use
of futures contracts by a Fund is subject to the ability of the Fund's Manager
or sub-adviser to correctly predict movements in the direction of interest rates
or changes in market conditions. These predictions involve skills and techniques
that may be different from those involved in the management of the portfolio
being hedged. In addition, there can be no assurance that there will be a
correlation between movements in the price of the underlying index or securities
and movements in the price of the securities which are the subject of the hedge.
A decision of whether, when and how to hedge involves the exercise of skill and
judgment, and even a well-conceived hedge may be unsuccessful to some degree
because of market behavior or unexpected trends in interest rates.
Although the Funds will purchase or sell futures contracts only on
exchanges where there appears to be an adequate secondary market, there is no
assurance that a liquid secondary market on an exchange will exist for any
particular contract or at any particular time. Accordingly, there can be no
assurance that it will be possible, at any particular time, to close a futures
position. In the event a Fund could not close a futures position and the value
of such position declined, the Fund would be required to continue to make daily
cash payments of variation margin. However, in the event futures contracts have
been used to hedge portfolio securities, such securities will not be sold until
the futures contract can be terminated. In such circumstances, an increase in
the price of the securities, if any, may partially or completely offset losses
on the futures contract. However, there is no guarantee that the price movements
of the securities will, in fact, correlate with the price movements in the
futures contract and thus provide an offset to losses on a futures contract.
The hours of trading of futures contracts may not conform to the hours
during which a Fund may trade the underlying securities. To the extent that the
futures markets close before the securities markets, significant price and rate
movements can take place in the securities markets that cannot be reflected in
the futures market.
Foreign Currency Transactions. The Funds may hold foreign currency
deposits from time to time and may convert dollars and foreign currencies in the
foreign exchange markets. Currency conversion involves dealer spreads and other
costs, although commissions usually are not charged. Currencies may be exchanged
on a spot (i.e., cash) basis, or by entering into forward contracts to purchase
or sell foreign currencies at a future date and price. Forward contracts
generally are traded in an interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. The parties to a
forward contract may agree to offset or terminate the contract before its
maturity, or may hold the contract to maturity and complete the contemplated
currency exchange.
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Forward Foreign Currency Exchange Contracts
The Funds' dealings in forward contracts will be limited to hedging
involving either specific transactions or portfolio positions. Transaction
hedging is the purchase or sale of forward contracts with respect to specific
receivables or payables of a Fund generally arising in connection with the
purchase or sale of its portfolio securities and accruals of interest or
dividends receivable and Fund expenses. Position hedging is the sale of a
foreign currency with respect to portfolio security positions denominated or
quoted in that currency. A Fund may not position hedge with respect to a
particular currency for an amount greater than the aggregate market value
(determined at the time of making any sale of a forward contract) of securities
held in its portfolio denominated or quoted in, or currently convertible into,
such currency.
When a Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when a Fund anticipates the
receipt in a foreign currency of dividends or interest payments on a security
which it holds, the Fund may desire to "lock in" the U.S. dollar price of the
security or the U.S. dollar equivalent of such dividend or interest payment as
the case may be. By entering into a forward contract for a fixed amount of
dollars for the purchase or sale of the amount of foreign currency involved in
the underlying transactions, a Fund will be able to protect itself against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the subject foreign currency during the period between the date
on which the security is purchased or sold, or on which the dividend or interest
payment is declared, and the date on which such payments are made or received.
Additionally, when the Manager and/or applicable sub-adviser believes
that the currency of a particular foreign country may suffer a substantial
decline against the U.S. dollar, a Fund may enter into a forward contract for a
fixed amount of dollars, to sell the amount of foreign currency approximating
the value of some or all of the securities of the Fund denominated in such
foreign currency.
The Funds may use currency forward contracts to manage currency risks
and to facilitate transactions in foreign securities. The following discussion
summarizes the principal currency management strategies involving forward
contracts that could be used by these Funds.
In connection with purchases and sales of securities denominated in
foreign currencies, a Fund may enter into currency forward contracts to fix a
definite price for the purchase or sale in advance of the trade's settlement
date. This technique is sometimes referred to as a "settlement hedge" or
"transaction hedge." The Manager and/or sub-advisers expect to enter into
settlement hedges in the normal course of managing the Funds' foreign
investments. The Funds could also enter into forward contracts to purchase or
sell a foreign currency in anticipation of future purchases or sales of
securities denominated in foreign currency, even if the specific investments
have not yet been selected by the Manager and/or sub-adviser.
The Funds may also use forward contracts to hedge against a decline in
the value of existing investments denominated in foreign currency. For example,
if a Fund owned securities denominated in pounds sterling, it could enter into a
forward contract to sell pounds sterling in return for U.S. dollars to hedge
against possible declines in the pound's value. Such a hedge (sometimes referred
to as a "position hedge") would tend to offset both positive and negative
currency fluctuations, but would not offset changes in security values caused by
other factors. The Fund could also hedge the position by selling another
currency expected to perform similarly to the pound sterling -- for example, by
entering into a forward contract to sell Deutschemarks or European Currency
Units in return for U.S. dollars. This type of hedge, sometimes referred to as a
"proxy hedge," could offer advantages in terms of cost, yield, or efficiency,
but generally will not hedge currency exposure as effectively as a simple hedge
into U.S. dollars. Proxy hedges may result in losses if the currency used to
hedge does not perform similarly to the currency in which the hedged securities
are denominated.
13
<PAGE>
Under certain conditions, SEC guidelines require mutual funds to set
aside cash and appropriate liquid assets in a segregated custodian account to
cover currency forward contracts. As required by SEC guidelines, the Funds will
segregate assets to cover currency forward contracts, if any, whose purpose is
essentially speculative. The Funds will not segregate assets to cover forward
contracts, including settlement hedges, position hedges, and proxy hedges.
Successful use of forward currency contracts will depend on the Manager's and/or
sub-advisers' skill in analyzing and predicting currency values. Forward
contracts may substantially change the Funds' investment exposure to changes in
currency exchange rates, and could result in losses to the Funds if currencies
do not perform as the Manager and/or sub-advisers anticipate. For example, if a
currency's value rose at a time when the Manager and/or applicable sub-adviser
had hedged a Fund by selling that currency in exchange for dollars, the Fund
would be unable to participate in the currency's appreciation. If the Manager
and/or applicable sub-adviser hedges currency exposure through proxy hedges, a
Fund could realize currency losses from the hedge and the security position at
the same time if the two currencies do not move in tandem. Similarly, if the
Manager and/or sub-adviser increases a Fund's exposure to a foreign currency,
and that currency's value declines, the Fund will realize a loss. There is no
assurance that the Manager's and/or sub-advisers' use of forward currency
contracts will be advantageous to the Funds or that it will hedge at an
appropriate time.
Foreign Currency Options
The Funds may purchase U.S. exchange-listed call and put options on
foreign currencies. Such options on foreign currencies operate similarly to
options on securities. Options on foreign currencies are affected by all of
those factors which influence foreign exchange rates and investments generally.
The value of a foreign currency option is dependent upon the value of
the foreign currency and the U.S. dollar, and may have no relationship to the
investment merits of a foreign security. Because foreign currency transactions
occurring in the interbank market involve substantially larger amounts than
those that may be involved in the use of foreign currency options, investors may
be disadvantaged by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million) for the underlying foreign currencies at
prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies and there is no regulatory requirement that quotations available
through dealer or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively smaller
transactions (less than $1 million) where rates may be less favorable. The
interbank market in foreign currencies is a global, around-the-clock market. To
the extent that the U.S. options markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the options market.
Foreign Currency Conversion
Although foreign exchange dealers do not charge a fee for currency
conversion, they do realize a profit based on the difference (the "spread")
between prices at which they are buying and selling various currencies. Thus, a
dealer may offer to sell a foreign currency to a Fund at one rate, while
offering a lesser rate of exchange should those Funds desire to resell that
currency to the dealer.
Combined Transactions
Each Fund may enter into multiple transactions, including multiple
options transactions, multiple futures transactions, multiple currency
transactions (including forward currency contracts) and multiple interest rate
transactions and any combination of futures, options, currency and interest rate
transactions ("component" transactions), instead of a single transaction, as
part of a single or combined strategy when, in the opinion of the Manager and/or
sub-adviser, it is in the best interests of the Fund to do so. A combined
transaction will usually contain elements of risk that are present in each of
its component transactions. Although combined transactions are normally entered
into based on the Manager's and/or sub-adviser's judgment that the combined
strategies will reduce risk or otherwise more effectively achieve the desired
portfolio management goal, it is possible that the combination will instead
increase such risks or hinder achievement of the portfolio management objective.
14
<PAGE>
Swaps, Caps, Floors and Collars
Each Fund may enter into interest rate, currency and index swaps and
the purchase or sale of related caps, floors and collars. The Funds expect to
enter into these transactions primarily to preserve a return or spread on a
particular investment or portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. The Funds intend to use these transactions as hedges and not speculative
investments and will not sell interest rate caps or floors where it does not own
securities or other instruments providing the income stream the Fund may be
obligated to pay. Interest rate swaps involve the exchange by the Fund with
another party of their respective commitments to pay or receive interest, e.g.,
an exchange of floating rate payments for fixed rate payments with respect to a
nominal amount of principal. A currency swap is an agreement to exchange cash
flows on a notional amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash flows on
a notional amount based on changes in the values of the reference indices. The
purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling such cap to the extent that a specified
index exceeds a predetermined interest rate or amount. The purchase of a floor
entitles the purchaser to receive payments on a notional principal amount from
the party selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or values.
A Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as these swaps, caps,
floors and collars are entered into for good faith hedging purposes, the
investment manager and the Fund believe such obligations do not constitute
senior securities under the Investment Company Act of 1940 (the "1940 Act") and,
accordingly, will not treat them as being subject to its borrowing restrictions.
A Fund will not enter into any swap, cap, floor or collar transaction unless, at
the time of entering into such transaction, the unsecured long-term debt of the
counterparty, combined with any credit enhancements, is rated at least A by S&P
or Moody's or is determined to be of equivalent credit quality by the Manager
and/or sub-adviser. If there is a default by the counterparty, the Fund may have
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agent utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.
Eurodollar Instruments
The Funds may make investments in Eurodollar instruments. Eurodollar
instruments are U.S. dollar-denominated futures contracts or options thereon
which are linked to the London Interbank Offered Rate ("LIBOR"), although
foreign currency-denominated instruments are available from time to time.
Eurodollar futures contracts enable purchasers to obtain a fixed rate for the
lending of funds and sellers to obtain a fixed rate for borrowings. A Fund might
use Eurodollar futures contracts and options thereon to hedge against changes in
LIBOR, to which many interest rate swaps and fixed-income instruments are
linked.
Lending of Portfolio Securities
Each Fund has the ability to lend securities from its portfolio to
brokers, dealers and other financial organizations. Such loans, if and when
made, may not exceed one-third of a Fund's total assets. A Fund may not lend its
portfolio securities to Lincoln National Corporation or its affiliates unless it
has applied for and received specific authority from the SEC. Loans of
securities by the Funds will be collateralized by cash, letters of credit or
U.S. government securities, which will be maintained at all times in an amount
equal to at least 100% of the current market value of the loaned securities.
From time to time, a Fund may return a part of the interest earned from the
investment of collateral received for securities loaned to the borrower and/or a
third party, which is unaffiliated with the Fund or with Lincoln National
Corporation, and which is acting as a "finder."
In lending its portfolio securities, a Fund can increase its income by
continuing to receive interest on the loaned securities as well as by either
investing the cash collateral in short-term instruments or obtaining yield in
the form of interest paid by the borrower when government securities are used as
collateral. Requirements of the SEC, which may be subject to future
modifications, currently provide that the following conditions must be met
whenever portfolio securities are loaned: (a) the Fund must receive at least
102% cash collateral or equivalent securities from the borrower; (b) the
15
<PAGE>
borrower must increase such collateral whenever the market value of the loaned
securities rises above the level of such collateral; (c) the Fund must be able
to terminate the loan at any time; (d) the Fund must receive reasonable interest
on the loan, as well as an amount equal to any dividends, interest or other
distributions on the loaned securities, and any increase in market value; (e)
the Fund may pay only reasonable custodian fees in connection with the loan; and
(f) voting rights on the loaned securities may pass to the borrower; however, if
a material event adversely affecting the investment occurs, the Fund's Board of
Trustees must terminate the loan and regain the right to vote the securities.
The risks in lending portfolio securities, as with other extensions of secured
credit, consist of possible delay in receiving additional collateral or in the
recovery of the securities or possible loss of rights in the collateral should
the borrower fail financially.
When-Issued Securities
The Funds may purchase securities on a "when-issued" basis. When a Fund
agrees to purchase securities, the Custodian will set aside cash or liquid
portfolio securities equal to the amount of the commitment in a separate
account. The Fund will designate cash or securities in amounts sufficient to
cover its obligations, and will value the designated assets daily. It may be
expected that a Fund's net assets will fluctuate to a greater degree when it
sets aside portfolio securities to cover such purchase commitments than when it
sets aside cash. No Fund intends to purchase "when-issued" securities for
speculative purposes but only in furtherance of its investment objective.
Because a Fund will set aside cash or liquid portfolio securities to satisfy its
purchase commitments in the manner described, the Fund's liquidity and the
ability of the Manager or sub-adviser to manage the Fund might be affected in
the event its commitments to purchase when-issued securities ever exceeded 25%
of the value of its assets.
When a Fund engages in "when-issued" transactions, it relies on the
seller to consummate the trade. Failure of the seller to do so may result in the
Fund's incurring a loss or missing the opportunity to obtain a price considered
to be advantageous.
Money Market Instruments
Each Fund may invest for defensive purposes in corporate government
bonds and notes and money market instruments. Money market instruments in which
the Funds may invest include U.S. government securities; certificates of
deposit, time deposits and bankers' acceptances issued by domestic banks
(including their branches located outside the U.S. and subsidiaries located in
Canada), domestic branches of foreign banks, savings and loan associations and
similar institutions; high grade commercial paper; and repurchase agreements
with respect to the foregoing types of instruments. The following is a more
detailed description of such money market instruments.
Bank Obligations
Certificates of deposit ("CDs") are short-term negotiable obligations
of commercial banks; time deposits ("TDs") are non-negotiable deposits
maintained in banking institutions for specified periods of time at stated
interest rates; and bankers' acceptances are time drafts drawn on commercial
banks by borrowers usually in connection with international transactions.
Obligations of foreign branches of domestic banks, such as CDs and TDs,
may be general obligations of the parent bank in addition to the issuing branch,
or may be limited by the terms of a specific obligation and government
regulation. Such obligations are subject to different risks than are those of
domestic banks or domestic branches of foreign banks. These risks include
foreign economic and political developments, foreign governmental restrictions
that may adversely affect payment of principal and interest on the obligations,
foreign exchange controls and foreign withholding and other taxes on interest
income. Foreign branches of domestic banks are not necessarily subject to the
same or similar regulatory requirements that apply to domestic banks, such as
mandatory reserve requirements, loan limitations, and accounting, auditing and
financial recordkeeping requirements. In addition, less information may be
publicly available about a foreign branch of a domestic bank than about a
domestic bank. CDs issued by wholly owned Canadian subsidiaries of domestic
banks are guaranteed as to repayment of principal and interest (but not as to
sovereign risk) by the domestic parent bank.
16
<PAGE>
Obligations of domestic branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by governmental regulation as
well as governmental action in the country in which the foreign bank has its
head office. A domestic branch of a foreign bank with assets in excess of $1
billion may or may not be subject to reserve requirements imposed by the Federal
Reserve System or by the state in which the branch is located if the branch is
licensed in that state. In addition, branches licensed by the Comptroller of the
Currency and branches licensed by certain states ("State Branches") may or may
not be required to: (a) pledge to the regulator by depositing assets with a
designated bank within the state, an amount of its assets equal to 5% of its
total liabilities; and (b) maintain assets within the state in an amount equal
to a specified percentage of the aggregate amount of liabilities of the foreign
bank payable at or through all of its agencies or branches within the state. The
deposits of state branches may not necessarily be insured by the FDIC. In
addition, there may be less publicly available information about a domestic
branch of a foreign bank than about a domestic bank.
In view of the foregoing factors associated with the purchase of CDs
and TDs issued by foreign branches of domestic banks or by domestic branches of
foreign banks, the Manager and/or sub-advisers will carefully evaluate such
investments on a case-by-case basis.
Savings and loan associations whose CDs may be purchased by the Funds
are supervised by the Office of Thrift Supervision and are insured by the
Savings Association Insurance Fund, which is administered by the FDIC and is
backed by the full faith and credit of the U.S. government. As a result, such
savings and loan associations are subject to regulation and examination.
Reverse Repurchase Agreements
Each Fund is authorized to enter into reverse repurchase agreements. A
reverse repurchase agreement is the sale of a security by a Fund and its
agreement to repurchase the security at a specified time and price. A Fund will
maintain in a segregated account with the Custodian cash, cash equivalents or
U.S. government securities in an amount sufficient to cover its obligations
under reverse repurchase agreements with broker/dealers (but no collateral is
required on reverse repurchase agreements with banks). Under the 1940 Act,
reverse repurchase agreements may be considered borrowings by a Fund;
accordingly, each Fund will limit its investments in reverse repurchase
agreements, together with any other borrowings, to no more than one-third of its
total assets. The use of reverse repurchase agreements by a Fund creates
leverage which increases the Fund's investment risk. If the income and gains on
securities purchased with the proceeds of reverse repurchase agreements exceed
the costs of the agreements, a Fund's earnings or net asset value will increase
faster than otherwise would be the case; conversely, if the income and gains
fail to exceed the costs, earnings or net asset value would decline faster than
otherwise would be the case.
"Roll" Transactions
Each Fund may engage in "roll" transactions. A "roll" transaction is
the sale of securities together with a commitment (for which a Fund may receive
a fee) to purchase similar, but not identical, securities at a future date.
Under the 1940 Act, these transactions may be considered borrowings by the
Funds; accordingly, each Fund will limit its use of these transactions, together
with any other borrowings, to no more than one-third of its total assets. The
Funds will segregate liquid assets such as cash, U.S. government securities or
other high grade debt obligations in an amount sufficient to meet their payment
obligations in these transactions. Although these transactions will not be
entered into for leveraging purposes, to the extent a Fund's aggregate
commitments under these transactions exceed its holdings of cash and securities
that do not fluctuate in value (such as short-term money market instruments),
the Fund temporarily will be in a leveraged position (i.e., it will have an
amount greater than its net assets subject to market risk). Should the market
value of a Fund's portfolio securities decline while the Fund is in a leveraged
position, greater depreciation of its net assets would likely occur than were it
not in such a position. As a Fund's aggregate commitments under these
transactions increase, the opportunity for leverage similarly increases.
17
<PAGE>
Repurchase Agreements
While the Funds are permitted to do so, they normally do not invest in
repurchase agreements, except to invest cash balances.
The funds available from Delaware Investments have obtained an
exemption (the "Order") from the joint-transaction prohibitions of Section 17(d)
of the 1940 Act to allow Delaware Investments funds jointly to invest cash
balances. The Funds may invest cash balances in a joint repurchase agreement in
accordance with the terms of the Order and subject generally to the conditions
described below.
A repurchase agreement is a short-term investment by which the
purchaser acquires ownership of a debt security and the seller agrees to
repurchase the obligation at a future time and set price, thereby determining
the yield during the purchaser's holding period. Should an issuer of a
repurchase agreement fail to repurchase the underlying security, the loss to the
Funds, if any, would be the difference between the repurchase price and the
market value of the security. A Fund will limit its investments in repurchase
agreements to those which the Manager and/or sub-adviser, under the guidelines
of the Board of Trustees, determines to present minimal credit risks and which
are of high quality. In addition, a Fund must have collateral of at least 102%
of the repurchase price, including the portion representing the Fund's yield
under such agreements, which is monitored on a daily basis.
Illiquid Securities
Each Fund may invest no more than 10% of the value of its net assets in
illiquid securities.
Each Fund may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A ("Rule 144A
Securities") under the Securities Act of 1933 (the "1933 Act"). Rule 144A
permits many privately placed and legally restricted securities to be freely
traded among certain institutional buyers such as the Funds.
While maintaining oversight, the Board of Trustees has delegated to the
Manager the day-to-day function of determining whether or not individual Rule
144A Securities are liquid for purposes of a Fund's 10% limitation on
investments in illiquid assets. The Board has instructed the Manager to consider
the following factors in determining the liquidity of a Rule 144A Security: (i)
the frequency of trades and trading volume for the security; (ii) whether at
least three dealers are willing to purchase or sell the security and the number
of potential purchasers; (iii) whether at least two dealers are making a market
in the security; and (iv) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers, and the mechanics of transfer).
If the Manager determines that a Rule 144A Security that was previously
determined to be liquid is no longer liquid and, as a result, a Fund's holdings
of illiquid securities exceed the Fund's 10% limit on investment in such
securities, the Manager will determine what action to take to ensure that the
Fund continues to adhere to such limitation.
Variable and Floating Rate Notes
Variable rate master demand notes, in which the Funds may invest, are
unsecured demand notes that permit the indebtedness thereunder to vary and
provide for periodic adjustments in the interest rate according to the terms of
the instrument. A Fund will not invest over 5% of its assets in variable rate
master demand notes. Because master demand notes are direct lending arrangements
between a Fund and the issuer, they are not normally traded. Although there is
no secondary market in the notes, a Fund may demand payment of principal and
accrued interest at any time. While the notes are not typically rated by credit
rating agencies, issuers of variable amount master demand notes (which are
normally manufacturing, retail, financial, and other business concerns) must
satisfy the same criteria as set forth above for commercial paper. In
determining average weighted portfolio maturity, a variable amount master demand
note will be deemed to have a maturity equal to the period of time remaining
until the principal amount can be recovered from the issuer through demand.
18
<PAGE>
A variable rate note is one whose terms provide for the adjustment of
its interest rate on set dates and which, upon such adjustment, can reasonably
be expected to have a market value that approximates its par value. A floating
rate note is one whose terms provide for the adjustment of its interest rate
whenever a specified interest rate changes and which, at any time, can
reasonably be expected to have a market value that approximates its par value.
Such notes are frequently not rated by credit rating agencies; however, unrated
variable and floating rate notes purchased by a Fund will be determined by the
Fund's Manager and/or sub-adviser under guidelines established by the Fund's
Board of Trustees to be of comparable quality at the time of purchase to rated
instruments eligible for purchase under the Fund's investment policies. In
making such determinations, the Manager and/or sub-adviser, if any, will
consider the earning power, cash flow and other liquidity ratios of the issuers
of such notes (such issuers include financial, merchandising, bank holding and
other companies) and will continuously monitor their financial condition.
Although there may be no active secondary market with respect to a particular
variable or floating rate note purchased by a Fund, the Fund may re-sell the
note at any time to a third party. The absence of such an active secondary
market, however, could make it difficult for the Fund to dispose of the variable
or floating rate note involved in the event the issuer of the note defaulted on
its payment obligations, and the Fund could, for this or other reasons, suffer a
loss to the extent of the default. Variable or floating rate notes may be
secured by bank letters of credit.
Variable and floating rate notes for which no readily available market
exists will be purchased in an amount which, together with securities with legal
or contractual restrictions on resale or for which no readily available market
exists (including repurchase agreements providing for settlement more than seven
days after notice), exceed 10% of the Fund's total assets only if such notes are
subject to a demand feature that will permit the Fund to demand payment of the
Principal within seven days after demand by the Fund. If not rated, such
instruments must be found by the Fund's Manager and/or sub-adviser under
guidelines established by the Fund's Board of Trustees, to be of comparable
quality to instruments that are rated high quality. A rating may be relied upon
only if it is provided by a nationally recognized statistical rating
organization that is not affiliated with the issuer or guarantor of the
instruments. For a description of the rating symbols of S&P and Moody's used in
this paragraph, see the Prospectuses. The Fund may also invest in Canadian
Commercial Paper, which is commercial paper issued by a Canadian corporation or
a Canadian counterpart of a U.S. corporation, and in Europaper which is U.S.
dollar denominated commercial paper of a foreign issuer.
Municipal Securities
Municipal Securities are issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities such
as bridges, highways, roads, schools, water and sewer works, and other
utilities. Other public purposes for which Municipal Securities may be issued
include refunding outstanding obligations, obtaining funds for general operating
expenses and obtaining funds to lend to other public institutions and
facilities. In addition, certain debt obligations known as "private activity
bonds" may be issued by or on behalf of municipalities and public authorities to
obtain funds to provide certain water, sewage and solid waste facilities,
qualified residential rental projects, certain local electric, gas and other
heating or cooling facilities, qualified hazardous waste facilities, high-speed
intercity rail facilities, governmentally-owned airports, docks and wharves and
mass commuting facilities, certain qualified mortgages, student loan and
redevelopment bonds and bonds used for certain organizations exempt from federal
income taxation. Certain debt obligations known as "industrial development
bonds" under prior federal tax law may have been issued by or on behalf of
public authorities to obtain funds to provide certain privately-operated housing
facilities, sports facilities, industrial parks, convention or trade show
facilities, airport, mass transit, port or parking facilities, air or water
pollution control facilities, sewage or solid waste disposal facilities, and
certain facilities for water supply. Other private activity bonds and industrial
development bonds issued to finance the construction, improvement, equipment or
repair of privately-operated industrial, distribution, research, or commercial
facilities may also be Municipal Securities, but the size of such issues is
limited under current and prior federal tax law.
Information about the financial condition of issuers of Municipal
Securities may be less available than about corporations with a class of
securities registered under the Securities Exchange Act of 1934 (the "1934
Act").
19
<PAGE>
Convertible Securities
The Funds may invest in securities that either have warrants or rights
attached or are otherwise convertible into other or additional securities. A
convertible security is typically a fixed-income security (a bond or preferred
stock) that may be converted at a stated price within a specified period of time
into a specified number of shares of common stock of the same or a different
issuer. Convertible securities are generally senior to common stocks in a
corporation's capital structure but are usually subordinated to similar
non-convertible securities. While providing a fixed-income stream (generally
higher in yield than the income derivable from a common stock but lower than
that afforded by a similar non-convertible security), a convertible security
also affords an investor the opportunity, through its conversion feature, to
participate in capital appreciation attendant upon a market price advance in the
common stock underlying the convertible security. In general, the market value
of a convertible security is at least the higher of its "investment value"
(i.e., its value as a fixec-income security) or its "conversion value" (i.e.,
its value upon conversion into its underlying common stock). While no securities
investment is without some risk, investments in convertible securities generally
entail less risk than investments in the common stock of the same issuer.
Concentration
In applying the Funds' fundamental policy concerning concentration that
is described above, it is a matter of non-fundamental policy that: (i) utility
companies will be divided according to their services, for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry; (ii) financial service companies will be classified according to the
end users of their services, for example, automobile finance, bank finance and
diversified finance will each be considered a separate industry; and (iii) asset
backed securities will be classified according to the underlying assets securing
such securities.
20
<PAGE>
PERFORMANCE INFORMATION
From time to time, each Fund may state its Classes' total return and
yield in advertisements and other types of literature. Any statement of total
return performance data for a Class will be accompanied by information on the
average annual compounded rate of return for that Class over, as relevant, the
most recent one-, five- and ten-year, or life-of-fund periods, as applicable.
Each Fund may also advertise aggregate and average total return information for
its Classes over additional periods of time.
In presenting performance information for Class A Shares, the Limited
CDSC or other CDSC, applicable only to certain redemptions of those shares, will
not be deducted from any computation of total return. All references to a CDSC
in this Performance Information section will apply to Class B Shares or Class C
Shares.
The average annual total rate of return for each Class is based on a
hypothetical $1,000 investment that includes capital appreciation and
depreciation during the stated periods. The following formula will be used for
the actual computations:
n
P (1 + T) = ERV
Where: P = a hypothetical initial purchase order of $1,000 from
which, in the case of only Class A Shares, the maximum
front-end sales charge is deducted;
T = average annual total return;
n = number of years;
ERV = redeemable value of the hypothetical $1,000 purchase at
the end of the period after the deduction of the
applicable CDSC, if any, with respect to Class B Shares
and Class C Shares.
Aggregate or cumulative total return is calculated in a similar manner,
except that the results are not annualized. Each calculation assumes the maximum
front-end sales charge, if any, is deducted from the initial $1,000 investment
at the time it is made with respect to Class A Shares and that all distributions
are reinvested at net asset value, and, with respect to Class B Shares and Class
C Shares, reflects the deduction of the CDSC that would be applicable upon
complete redemption of such shares. In addition, each Fund may present total
return information that does not reflect the deduction of the maximum front-end
sales charge or any applicable CDSC.
Each Fund may also state total return performance for its Classes in
the form of an average annual return. This average annual return figure will be
computed by taking the sum of a Class' annual returns, then dividing that figure
by the number of years in the overall period indicated. The computation will
reflect the impact of the maximum front-end sales charge or CDSC, if any, paid
on the illustrated investment amount against the first year's return. From time
to time, each Fund may quote actual total return performance for its Classes in
advertising and other types of literature compared to indices or averages of
alternative financial products available to prospective investors. For example,
the performance comparisons may include the average return of various bank
instruments, some of which may carry certain return guarantees offered by
leading banks and thrifts as monitored by Bank Rate Monitor, and those of
generally-accepted corporate bond and government security price indices of
various durations prepared by Lehman Brothers and Salomon Brothers, Inc. These
indices are not managed for any investment goal.
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<PAGE>
Below is the average annual total return performance of each Fund
through October 31, 1999. The total return for Class A Shares at offer reflects
the maximum front-end sales charge of 5.75% paid on the purchase of shares. The
total return for Class A Shares at net asset value (NAV) does not reflect the
payment of any front-end sales charge. The total return for Class B Shares and
Class C Shares including deferred sales charge reflects the deduction of the
applicable CDSC that would be paid if the shares were redeemed at the end of the
period. The total return for Class B Shares and Class C Shares excluding
deferred sales charge assumes the shares were not redeemed at the end of the
period and, therefore, does not reflect the deduction of a CDSC.
Securities prices fluctuated during the periods covered and the past
results should not be considered as representative of future performance.
Average Annual Total Return(1)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
1 year 3 years 5 years Life of
ended ended ended Fund
10/31/99 10/31/99 10/31/99
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------- ------------- -------------- -------------- ----------
Delaware New Pacific Fund A Class (at NAV)(2) 58.52% -7.58% -5.97% -4.37%
- --------------------------------------------------------------------- ------------- -------------- -------------- ----------
Delaware New Pacific Fund A Class (at Offer)(2)(3) 49.38% -9.37% -7.08% -5.32%
- --------------------------------------------------------------------- ------------- -------------- -------------- ----------
Delaware New Pacific Fund B Class (including CDSC) 52.08% -9.09% -6.95% -4.68%
- --------------------------------------------------------------------- ------------- -------------- -------------- ----------
Delaware New Pacific Fund B Class (excluding CDSC)(4) 57.08% -8.18% -6.59% -4.51%
- --------------------------------------------------------------------- ------------- -------------- -------------- ----------
Delaware New Pacific Fund C Class (including CDSC) 56.14% -8.28% -6.64% -5.14%
- --------------------------------------------------------------------- ------------- -------------- -------------- ----------
Delaware New Pacific Fund C Class (excluding CDSC) 57.14% -8.28% -6.64% -5.14%
- --------------------------------------------------------------------- ------------- -------------- -------------- ----------
Delaware New Pacific Fund Institutional Class 59.06% -7.11% -5.52% -5.85%
- --------------------------------------------------------------------- ------------- -------------- -------------- ----------
- --------------------------------------------------------------------- ------------- -------------- -------------- ----------
Delaware Overseas Equity Fund A Class (at NAV)(2) 13.86% 2.21% 3.84% 4.95%
- --------------------------------------------------------------------- ------------- -------------- -------------- ----------
Delaware Overseas Equity Fund A Class (at Offer)(2)(3) 7.27% 0.20% 2.62% 3.90%
- --------------------------------------------------------------------- ------------- -------------- -------------- ----------
Delaware Overseas Equity Fund B Class (including CDSC)(4) 8.15% 0.85% 2.86% 3.42%
- --------------------------------------------------------------------- ------------- -------------- -------------- ----------
Delaware Overseas Equity Fund B Class (excluding CDSC) 12.98% 1.42% 3.09% 3.53%
- --------------------------------------------------------------------- ------------- -------------- -------------- ----------
Delaware Overseas Equity Fund C Class (including CDSC) 12.23% 1.42% 3.08% 3.63%
- --------------------------------------------------------------------- ------------- -------------- -------------- ----------
Delaware Overseas Equity Fund C Class (excluding CDSC) 13.08% 1.42% 3.08% 3.63%
- --------------------------------------------------------------------- ------------- -------------- -------------- ----------
Delaware Overseas Equity Fund Institutional Class 14.30% 2.49% 3.90% 4.31%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Manager has committed to waive a portion of its annual compensation or
pay expenses to limit the operating expenses of the Funds. See Investment
Management Agreement and Sub-Advisory Agreements. In the absence of such
waivers or payments, performance would have been affected negatively.
(2) The 12b-1 fees payable by each Fund for Class A Shares were at a rate equal
to 0.35% of the average daily net assets. Beginning May 6, 1996, the
payments were set at 0.30%. Performance calculations for periods after May
6, 1996 reflect the lower 12b-1 fee rate.
(3) Effective November 2, 1998, the maximum front-end sales charge was increased
from 4.75% to 5.75%. The above performance figures are calculated using
5.75% as the applicable sales charge for all time periods.
(4) Effective November 2, 1998, the CDSC schedule for Class B Shares is as
follows: (i) 5% if shares are redeemed within one year of purchase (ii) 4%
if shares are redeemed during the second year of purchase; (iii) 3% if
shares are redeemed during the third or fourth year following purchase; (iv)
2% if shares are redeemed during the fifth year following purchase; (v) 1%
if shares are redeemed during the sixth year following purchase; and (vi) 0%
thereafter. The above performance figures are calculated using the new
applicable CDSC schedule.
<PAGE>
Total return performance for a Class will be computed by adding all
reinvested income and realized securities profits distributions plus the change
in net asset value during a specific period and dividing by the offering price
at the beginning of the period. It will also reflect, as applicable, the maximum
front-end sales charge or CDSC paid with respect to the illustrated investment
amount, but not any income taxes payable by shareholders on the reinvested
distributions included in the calculation. Because securities prices fluctuate,
past performance should not be considered as a representation of the results
which may be realized from an investment in a Fund in the future.
From time to time, each Fund may also quote its Classes' actual total
return performance, dividend results and other performance information in
advertising and other types of literature. This information may be compared to
that of other mutual funds with similar investment objectives and to stock, bond
and other relevant indices or to rankings prepared by independent services or
other financial or industry publications that monitor the performance of mutual
funds. For example, the performance of a Fund (of Fund Class) may be compared to
22
<PAGE>
data prepared by Lipper Analytical Services, Inc., Morningstar, Inc., or to the
S&P 500 Index, the Dow Jones Industrial Average, the Morgan Stanley Capital
International (MSCI), Europe, Australia and Far East (EAFE) Index, the MSCI
Emerging Markets Free Index, MSCI Emerging Markets Free Latin America Index, the
MSCI Europe Index or the Salomon Brothers World Government Bond Index.
Lipper Analytical Services, Inc. maintains statistical performance
databases, as reported by a diverse universe of independently-managed mutual
funds. Morningstar, Inc. is a mutual fund rating service that rates mutual funds
on the basis of risk-adjusted performance. Rankings that compare a Fund's
performance to another fund in appropriate categories over specific time periods
also may be quoted in advertising and other types of literature. The S&P 500 and
the Dow Jones Industrial Average are industry-accepted unmanaged indices of
generally conservative securities used for measuring general market performance.
Similarly, the MSCI EAFE Index, the MSCI Emerging Markets Free Index, and the
Salomon Brothers World Government Bond Index are industry-accepted unmanaged
indices of equity securities in developed countries and global debt securities,
respectively, used for measuring general market performance. The total return
performance reported for these indices will reflect the reinvestment of all
distributions on a quarterly basis and market price fluctuations. The indices do
not take into account any sales charges or other fees. A direct investment in an
unmanaged index is not possible.
Comparative information on the Consumer Price Index may also be
included in advertisements or other literature. The Consumer Price Index, as
prepared by the U.S. Bureau of Labor Statistics, is the most commonly used
measure of inflation. It indicates the cost fluctuations of a representative
group of consumer goods. It does not represent a return from an investment.
Current interest rate and yield information on government debt
obligations of various durations, as reported weekly by the Federal Reserve
(Bulletin H.15), may also be used. As well, current industry rate and yield
information on all industry available fixed-income securities, as reported
weekly by The Bond Buyer, may also be used in preparing comparative
illustrations.
Each Fund may also promote its Classes' yield and/or total return
performance and use comparative performance information computed by and
available from certain industry and general market research and publications,
such as Lipper Analytical Services, Inc., IBC/Donoghue's Money Market Report and
Morningstar, Inc.
The performance of multiple indices compiled and maintained by
statistical research firms, such as Morgan Stanley, Salomon Brothers and Lehman
Brothers, may be combined to create a blended performance result for comparative
purposes. Generally, the indices selected will be representative of the types of
securities in which the Funds may invest and the assumptions that were used in
calculating the blended performance will be described.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides
historical returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury bills,
the U.S. rate of inflation (based on the Consumer Price Index), and combinations
of various capital markets. The performance of these capital markets is based on
the returns of different indices. The Funds may use the performance of these
capital markets in order to demonstrate general risk-versus-reward investment
scenarios. Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with the
security types in any capital market may or may not correspond directly to those
of the Funds. The Funds may also compare performance to that of other
compilations or indices that may be developed and made available in the future.
The Funds may include discussions or illustrations of the potential
investment goals of a prospective investor (including materials that describe
general principles of investing, such as asset allocation, diversification, risk
tolerance, and goal setting, questionnaires designed to help create a personal
financial profile, worksheets used to project savings needs based on assumed
rates of inflation and hypothetical rates of
23
<PAGE>
return and action plans offering investment alternatives), investment management
techniques, policies or investment suitability of a Fund (such as value
investing, market timing, dollar cost averaging, asset allocation, constant
ratio transfer, automatic account rebalancing, the advantages and disadvantages
of investing in tax-deferred and taxable investments or global or international
investments), economic and political conditions, the relationship between
sectors of the economy and the economy as a whole, the effects of inflation and
historical performance of various asset classes, including but not limited to,
stocks, bonds and Treasury bills. From time to time advertisements, sales
literature, communications to shareholders or other materials may summarize the
substance of information contained in shareholder reports (including the
investment composition of a Fund), as well as the views as to current market,
economic, trade and interest rate trends, legislative, regulatory and monetary
developments, investment strategies and related matters believed to be of
relevance to a Fund. In addition, selected indices may be used to illustrate
historic performance of selected asset classes. The Funds may also include in
advertisements, sales literature, communications to shareholders or other
materials, charts, graphs or drawings which illustrate the potential risks and
rewards of investment in various investment vehicles, including but not limited
to, domestic and international stocks, and/or bonds, treasury bills and shares
of a Fund. In addition, advertisements, sales literature, communications to
shareholders or other materials may include a discussion of certain attributes
or benefits to be derived by an investment in a Fund and/or other mutual funds,
shareholder profiles and hypothetical investor scenarios, timely information on
financial management, tax and retirement planning (such as information on Roth
IRAs and Educational IRAs) and investment alternatives to certificates of
deposit and other financial instruments. Such sales literature, communications
to shareholders or other materials may include symbols, headlines or other
material which highlight or summarize the information discussed in more detail
therein.
Materials may refer to the CUSIP numbers of the Funds and may
illustrate how to find the listings of the Funds in newspapers and periodicals.
Materials may also include discussions of other Funds, products, and services.
The Funds may quote various measures of volatility and benchmark
correlation in advertising. In addition, the Funds may compare these measures to
those of other funds. Measures of volatility seek to compare the historical
share price fluctuations or total returns to those of a benchmark. Measures of
benchmark correlation indicate how valid a comparative benchmark may be.
Measures of volatility and correlation may be calculated using averages of
historical data. A Fund may advertise its current interest rate sensitivity,
duration, weighted average maturity or similar maturity characteristics.
Advertisements and sales materials relating to a Fund may include information
regarding the background and experience of its portfolio managers.
The following tables present examples, for purposes of illustration
only, of cumulative total return performance for each Class of each Fund through
October 31, 1999. The calculations assume the reinvestment of any realized
securities profits, distributions and income dividends paid during the indicated
periods. The performance also reflects maximum sales charges, if any, but not
any income taxes payable by shareholders on the reinvested distributions
included in the calculations. The performance of Class A Shares reflects the
maximum front-end sales charge paid on purchases of shares but may also be shown
without reflecting the impact of any front-end sales charge. The performance of
Class B Shares and Class C Shares is calculated both with the applicable CDSC
included and excluded. The net asset value of a class fluctuates so shares, when
redeemed, may be worth more or less than the original investment, and a Class'
results should not be considered as representative of future performance.
24
<PAGE>
Cumulative Total Return(1)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
3 months 6 months 9 months 1 year 3 years 5 years Life of
ended ended ended ended ended ended Fund
10/31/99 10/31/99 10/31/99 10/31/99 10/31/99 10/31/99
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------- ----------- ----------- ----------- ----------- ----------- ---------- ----------
Delaware New Pacific Fund A Class (at NAV)(2) 5.52% 22.84% 48.47% 58.52% -21.07% -26.50% -23.20%
- -------------------------------------------------- ----------- ----------- ----------- ----------- ----------- ---------- ----------
Delaware New Pacific Fund A Class (at
Offer)(2)(3) -0.55% 15.79% 39.88% 49.38% -25.57% -30.75% -27.61%
- -------------------------------------------------- ----------- ----------- ----------- ----------- ----------- ---------- ----------
Delaware New Pacific Fund B Class (including
CDSC) 0.32% 17.41% 42.58% 52.08% -24.86% -30.23% -23.50%
- -------------------------------------------------- ----------- ----------- ----------- ----------- ----------- ---------- ----------
Delaware New Pacific Fund B Class (excluding
CDSC)(4) 5.32% 22.84% 48.47% 51.08% -22.60% -28.88% -22.77%
- -------------------------------------------------- ----------- ----------- ----------- ----------- ----------- ---------- ----------
Delaware New Pacific Fund C Class (including
CDSC) 4.30% 21.43% 46.42% 56.14% -22.84% -29.09% -24.48%
- -------------------------------------------------- ----------- ----------- ----------- ----------- ----------- ---------- ----------
Delaware New Pacific Fund C Class (excluding
CDSC) 5.30% 22.43% 47.42% 57.14% -22.84% -29.09% -24.48%
- -------------------------------------------------- ----------- ----------- ----------- ----------- ----------- ---------- ----------
Delaware New Pacific Fund Institutional Class 5.67% 23.31% 48.90% 59.06% -19.85% -24.73% -29.26%
- -------------------------------------------------- ----------- ----------- ----------- ----------- ----------- ---------- ----------
- -------------------------------------------------- ----------- ----------- ----------- ----------- ----------- ---------- ----------
Delaware New Pacific Fund A Class (at NAV)(2) 2.61% -1.01% 14.98% 13.86% 6.78% 20.72% 33.05%
- -------------------------------------------------- ----------- ----------- ----------- ----------- ----------- ---------- ----------
Delaware Overseas Equity Fund A Class (at Offer)
(2)(3) -8.21% -6.67% 8.30% 7.27% 0.61% 13.78% 25.40%
- -------------------------------------------------- ----------- ----------- ----------- ----------- ----------- ---------- ----------
Delaware Overseas Equity Fund B Class (including
CDSC)(4) -7.72% -6.38% 9.31% 8.75% 2.56% 15.14% 20.72%
- -------------------------------------------------- ----------- ----------- ----------- ----------- ----------- ---------- ----------
Delaware Overseas Equity Fund B Class (excluding
CDSC) -2.86% -1.45% 14.31% 12.98% 4.33% 16.45% 21.40%
- -------------------------------------------------- ----------- ----------- ----------- ----------- ----------- ---------- ----------
Delaware Overseas Equity Fund C Class (including
CDSC) -3.82% -2.43% 13.45% 12.23% 4.31% 16.38% 21.55%
- -------------------------------------------------- ----------- ----------- ----------- ----------- ----------- ---------- ----------
Delaware Overseas Equity Fund C Class (excluding
CDSC) -2.85% -1.45% 14.45% 13.08% 4.31% 16.38% 21.55%
- -------------------------------------------------- ----------- ----------- ----------- ----------- ----------- ---------- ----------
Delaware Overseas Equity Fund Institutional Class -2.50% -0.89% 15.36% 14.30% 7.66% 21.08% 27.39%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Manager has committed to waive a portion of its annual compensation or
pay expenses to limit the operating expenses of the Funds. See Investment
Management Agreement and Sub-Advisory Agreements. In the absence of such
waivers or payments, performance would have been affected negatively.
(2) The 12b-1 fees payable by each Fund for Class A Shares were at a rate equal
to 0.35% of the average daily net assets. Beginning May 6, 1996, the
payments were set at 0.30%. Performance calculations for periods after May
6, 1996 reflect the lower 12b-1 fee rate.
(3) Effective November 2, 1998, the maximum front-end sales charge was increased
from 4.75% to 5.75%. The above performance figures are calculated using
5.75% as the applicable sales charge for all time periods.
(4) Effective November 2, 1998, the CDSC schedule for Class B Shares is as
follows: (i) 5% if shares are redeemed within one year of purchase (ii) 4%
if shares are redeemed during the second year of purchase; (iii) 3% if
shares are redeemed during the third or fourth year following purchase; (iv)
2% if shares are redeemed during the fifth year following purchase; (v) 1%
if shares are redeemed during the sixth year following purchase; and (vi) 0%
thereafter. The above performance figures are calculated using the new
applicable CDSC schedule.
<PAGE>
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for the Funds and other mutual funds available from
Delaware Investments, will provide general information about investment
alternatives and scenarios that will allow investors to assess their personal
goals. This information will include general material about investing as well as
materials reinforcing various industry-accepted principles of prudent and
responsible personal financial planning. One typical way of addressing these
issues is to compare an individual's goals and the length of time the individual
has to attain these goals to his or her risk threshold. In addition, the
Distributor will provide information that discusses the Manager's and
Sub-Adviser's overriding investment philosophy and how that philosophy impacts
the Funds', and other Delaware Investments funds', investment disciplines
employed in seeking their objectives. The Distributor may also from time to time
cite general or specific information about the institutional clients of
affiliates of the Manager, including the number of such clients serviced by such
affiliates.
25
<PAGE>
Dollar-Cost Averaging
For many people, deciding when to invest can be a difficult decision.
Security prices tend to move up and down over various market cycles and logic
says to invest when prices are low. However, even experts can't always pick the
highs and the lows. By using a strategy known as dollar-cost averaging, you
schedule your investments ahead of time. If you invest a set amount on a regular
basis, that money will always buy more shares when the price is low and fewer
when the price is high. You can choose to invest at any regular interval--for
example, monthly or quarterly - as long as you stick to your regular schedule.
Dollar-cost averaging looks simple and it is, but there are important things to
remember.
Dollar-cost averaging works best over longer time periods, and it
doesn't guarantee a profit or protect against losses in declining markets. If
you need to sell your investment when prices are low, you may not realize a
profit no matter what investment strategy you utilize. That's why dollar-cost
averaging can make sense for long-term goals. Since the potential success of a
dollar-cost averaging program depends on continuous investing, even through
periods of fluctuating prices, you should consider your dollar-cost averaging
program a long-term commitment and invest an amount you can afford and probably
won't need to withdraw. You also should consider your financial ability to
continue to purchase shares during periods of high fund share prices. Delaware
Investments offers three services -- Automatic Investing Program, Direct Deposit
Program and the Wealth Builder Option -- that can help to keep your regular
investment program on track. See Investing by Electronic Fund Transfer - Direct
Deposit Purchase Plan and Automatic Investing Plan under Investment Plans and
Wealth Builder Option under Investment Plans for a complete description of these
services, including restrictions or limitations.
The example below illustrates how dollar-cost averaging can work. In a
fluctuating market, the average cost per share over a period of time will be
lower than the average price per share for the same time period.
Number
Investment Price Per of Shares
Amount Share Purchased
Month 1 $100 $10.00 10
Month 2 $100 $12.50 8
Month 3 $100 $5.00 20
Month 4 $100 $10.00 10
----------------------------------------------------------------
$400 $37.50 48
Total Amount Invested: $400
Total Number of Shares Purchased: 48
Average Price Per Share: $9.38 ($37.50/4)
Average Cost Per Share: $8.33 ($400/48 shares)
This example is for illustration purposes only. It is not intended to
represent the actual performance of any stock or bond fund in the Delaware
Investments family of funds.
The Power of Compounding
When you opt to reinvest your current income for additional Fund
shares, your investment is given yet another opportunity to grow. It's called
the Power of Compounding. Each Fund may include illustrations showing the power
of compounding in advertisements and other types of literature.
26
<PAGE>
TRADING PRACTICES AND BROKERAGE
Fund transactions are executed by the Manager or sub-advisers
(collectively referred to in this section as the "Manager") on behalf of the
Fund in accordance with the standards described below.
Brokers, dealers, banks and others are selected to execute transactions
for the purchase or sale of portfolio securities or other instruments on the
basis of the Manager's judgment of their professional capability to provide the
service. The primary consideration is to have brokers, dealers or banks execute
securities transactions at best price and execution. Best execution refers to
many factors, including the price paid or received for a security, the
commission charged, the promptness and reliability of execution, the
confidentiality and placement accorded the order and other factors affecting the
overall benefit obtained by the account on the transaction. Trades are generally
made on a net basis where securities are either bought or sold directly from or
to a broker, dealer or bank or others. In these instances, there is no direct
commission charged, but there is a spread (the difference between the buy and
sell price) which is the equivalent of a commission. When a commission is paid,
the Funds pay reasonably competitive brokerage commission rates based upon the
professional knowledge of the Manager's trading department as to rates paid and
charged for similar transactions throughout the securities industry. In some
instances, the Funds pay a minimal share transaction cost when the transaction
presents no difficulty.
During the past three fiscal years, the aggregate dollar amounts of
brokerage commissions paid by were paid by the following Funds:
- --------------------------------------------------------------------------------
October 31,
- --------------------------------------------------------------------------------
1999 1998 1997
---- ---- ----
- --------------------------------------------------------------------------------
Delaware New Pacific Fund $115,546 $155,362 $264,369
Delaware Overseas Equity Fund $1,212 $58,354 $30,918
- --------------------------------------------------------------------------------
The Manager or the Sub-Adviser may allocate out of all commission
business generated by all of the funds and accounts under its management,
brokerage business to brokers or dealers who provide brokerage and research
services. These services include advice, either directly or through publications
or writings, as to the value of securities, the advisability of investing in,
purchasing or selling securities, and the availability of securities or
purchasers or sellers of securities; furnishing of analyses and reports
concerning issuers, securities or industries; providing information on economic
factors and trends; assisting in determining portfolio strategy; providing
computer software and hardware used in security analyses; and providing
portfolio performance evaluation and technical market analyses. Such services
are used by the Manager or the Sub-Adviser in connection with its investment
decision-making process with respect to one or more funds and accounts managed
by it, and may not be used, or used exclusively, with respect to the fund or
account generating the brokerage.
During the fiscal year ended October 31, 1999, portfolio
transactions of Delaware New Pacific Fund in the amount of $1,479,018, resulting
in brokerage commissions of $8,346 were directed to brokers for brokerage and
research services provided. There were no such transactions for Delaware
Overseas Equity Fund .
As provided in the Securities Exchange Act of 1934 (the "1934 Act") and
each Fund's Investment Management Agreement, higher commissions are permitted to
be paid to broker/dealers who provide brokerage and research services than to
broker/dealers who do not provide such services if such higher commissions are
deemed reasonable in relation to the value of the brokerage and research
services provided. Although transactions are directed to broker/dealers who
provide such brokerage and research services, the Funds believe that the
commissions paid to such broker/dealers are not, in general, higher than
commissions that would be paid to broker/dealers not providing such services and
that such commissions are reasonable in relation to the value of the brokerage
and research services provided. In some instances, services may be provided to
the Manager or the Sub-Adviser which constitute in some part brokerage and
27
<PAGE>
research services used by the Manager or the Sub-Adviser in connection with its
investment decision-making process and constitute in some part services used by
the Manager or the Sub-Adviser in connection with administrative or other
functions not related to its investment decision-making process. In such cases,
the Manager or the Sub-Adviser will make a good faith allocation of brokerage
and research services and will pay out of its own resources for services used by
the Manager or the Sub-Adviser in connection with administrative or other
functions not related to its investment decision-making process. In addition, so
long as no fund is disadvantaged, portfolio transactions which generate
commissions or their equivalent are allocated to broker/dealers who provide
daily portfolio pricing services to a Fund and to other funds in the Delaware
Group. Subject to best execution, commissions allocated to brokers providing
such pricing services may or may not be generated by the funds receiving the
pricing service.
The Manager or the Sub-Adviser may place a combined order for two or
more accounts or funds engaged in the purchase or sale of the same security if,
in its judgment, joint execution is in the best interest of each participant and
will result in best execution. Transactions involving commingled orders are
allocated in a manner deemed equitable to each account or fund. When a combined
order is executed in a series of transactions at different prices, each account
participating in the order may be allocated an average price obtained from the
executing broker. It is believed that the ability of the accounts to participate
in volume transactions will generally be beneficial to the accounts and funds.
Although it is recognized that, in some cases, the joint execution of orders
could adversely affect the price or volume of the security that a particular
account or fund may obtain, it is the opinion of the Manager, the Sub-Adviser
and the Funds' Board of Trustees that the advantages of combined orders outweigh
the possible disadvantages of separate transactions.
Consistent with the Conduct Rules of NASD Regulation, Inc. (the
"NASD"), and subject to seeking best execution, a Fund may place orders with
broker/dealers that have agreed to defray certain expenses of the funds in the
Delaware Investments family of funds such as custodian fees, and may, at the
request of the Distributor, give consideration to sales of shares of such funds
as a factor in the selection of brokers and dealers to execute Fund portfolio
transactions.
Portfolio Turnover
A Fund is free to dispose of portfolio securities at any time, subject
to complying with the Code and the 1940 Act, when changes in circumstances or
conditions make such a move desirable in light of its investment objective. A
Fund will not attempt to achieve or be limited to a predetermined rate of
portfolio turnover, such a turnover always being incidental to transactions
undertaken with a view to achieving a Fund's investment objective.
The degree of portfolio activity may affect brokerage costs of a Fund
and taxes payable by a Fund's shareholders. A turnover rate of 100% would occur,
for example, if all the investments in the Fund's portfolio at the beginning of
the year were replaced by the end of the year. In investing for capital
appreciation, a Fund may hold securities for any period of time. Portfolio
turnover will also be increased if a Fund writes a large number of call options
which are subsequently exercised. To the extent a Fund realizes gains on
securities held for less than twelve months, such gains are taxable to the
shareholder or to the Fund at ordinary income tax rates. The turnover rate also
may be affected by cash requirements from redemptions and repurchases of Fund
shares. Total brokerage costs generally increase with higher portfolio turnover
rates.
Under certain market conditions, a Fund may experience a rate of
portfolio turnover which could exceed 100%. Each Fund's portfolio turnover rate
is calculated by dividing the lesser of purchases or sales of portfolio
securities for the particular fiscal year by the monthly average of the value of
the portfolio securities owned by the Fund during the particular fiscal year,
exclusive of securities whose maturities at the time of acquisition are one year
or less.
28
<PAGE>
During the past two fiscal years, the portfolio turnover rates of the
Funds were as follows:
- --------------------------------------------------------------------------------
1999 1998
---- ----
- --------------------------------------------------------------------------------
Delaware New Pacific Fund 90% 188%
Delaware Overseas Equity Fund 7% 87%
- --------------------------------------------------------------------------------
29
<PAGE>
PURCHASING SHARES
The Distributor serves as the national distributor for each Fund's shares
and has agreed to use its best efforts to sell shares of each Fund. See the
Prospectuses for information on how to invest. Shares of each Fund are offered
on a continuous basis and may be purchased through authorized investment dealers
or directly by contacting Adviser Funds or the Distributor.
The minimum initial investment generally is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases of such Classes
generally must be at least $100. The initial and subsequent investment minimums
for Class A Shares will be waived for purchases by officers, trustees and
employees of any Delaware Investments fund, the Manager or any of the Manager's
affiliates if the purchases are made pursuant to a payroll deduction program.
Shares purchased pursuant to the Uniform Gifts to Minors Act or Uniform
Transfers to Minors Act and shares purchased in connection with an Automatic
Investing Plan are subject to a minimum initial purchase of $250 and a minimum
subsequent purchase of $25. Accounts opened under the Delaware Investments Asset
Planner service are subject to a minimum initial investment of $2,000 per Asset
Planner Strategy selected. There are no minimum purchase requirements for the
Institutional Classes, but certain eligibility requirements must be satisfied.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that is less than $1,000,000. See Investment Plans for purchase limitations
applicable to retirement plans. Adviser Funds will reject any purchase order for
more than $250,000 of Class B Shares and $1,000,000 or more of Class C Shares.
An investor may exceed these limitations by making cumulative purchases over a
period of time. In doing so, an investor should keep in mind, however, that
reduced front-end sales charges apply to investments of $50,000 or more in Class
A Shares, and that Class A Shares are subject to lower annual 12b-1 Plan
expenses than Class B Shares and Class C Shares and generally are not subject to
a CDSC.
Selling dealers are responsible for transmitting orders promptly. Adviser
Funds reserves the right to reject any order for the purchase of its shares of
either Fund if in the opinion of management such rejection is in such Fund's
best interest. If a purchase is canceled because your check is returned unpaid,
you are responsible for any loss incurred. A Fund can redeem shares from your
account(s) to reimburse itself for any loss, and you may be restricted from
making future purchases in any of the funds in the Delaware Investments family.
Each Fund reserves the right to reject purchase orders paid by third-party
checks or checks that are not drawn on a domestic branch of a United States
financial institution. If a check drawn on a foreign financial institution is
accepted, you may be subject to additional bank charges for clearance and
currency conversion.
Each Fund also reserves the right, following shareholder notification, to
charge a service fee on non-retirement accounts that, as a result of redemption,
have remained below the minimum stated account balance for a period of three or
more consecutive months. Holders of such accounts may be notified of their
insufficient account balance and advised that they have until the end of the
current calendar quarter to raise their balance to the stated minimum. If the
account has not reached the minimum balance requirement by that time, the Fund
will charge a $9 fee for that quarter and each subsequent calendar quarter until
the account is brought up to the minimum balance. The service fee will be
deducted from the account during the first week of each calendar quarter for the
previous quarter, and will be used to help defray the cost of maintaining
low-balance accounts. No fees will be charged without proper notice, and no CDSC
will apply to such assessments.
Each Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under the minimum initial purchase
amount as a result of redemptions. An investor making the minimum initial
investment may be subject to involuntary redemption without the imposition of a
CDSC or Limited CDSC if he or she redeems any portion of his or her account.
The NASD has adopted amendments to its Conduct Rules relating to
investment company sales charges. Adviser Funds and the Distributor intend to
operate in compliance with these rules.
30
<PAGE>
Class A Shares are purchased at the offering price which reflects a
maximum front-end sales charge of 5.75%; however, lower front-end sales charges
apply for larger purchases. See the table in the Fund Classes' Prospectus. Class
A Shares are also subject to annual 12b-1 Plan expenses for the life of the
investment.
Class B Shares are purchased at net asset value and are subject to a CDSC
of: (i) 5% if shares are redeemed within one year of purchase; (ii) 4% if shares
are redeemed during the second year of purchase; (iii) 3% if shares are redeemed
during the third or fourth year following purchase; (iv) 2% if shares are
redeemed during the fifth year following purchase; and (v) 1% if shares are
redeemed during the sixth year following purchase. Class B Shares are also
subject to annual 12b-1 Plan expenses which are higher than those to which Class
A Shares are subject and are assessed against Class B Shares for approximately
eight years after purchase. See Automatic Conversion of Class B Shares, below.
Class C Shares are purchased at net asset value and are subject to a CDSC
of 1% if shares are redeemed within 12 months following purchase. Class C Shares
are also subject to annual 12b-1 Plan expenses for the life of the investment
which are equal to those to which Class B Shares are subject.
Institutional Class shares are purchased at the net asset value per share
without the imposition of a front-end or contingent deferred sales charge or
12b-1 Plan expenses. See Plans Under Rule 12b-1 for the Fund Classes under
Purchasing Shares, and Determining Offering Price and Net Asset Value in this
Part B.
Class A Shares, Class B Shares, Class C Shares and Institutional Class
shares represent a proportionate interest in a Fund's assets and will receive a
proportionate interest in that Fund's income, before application, as to Class A,
Class B and Class C Shares, of any expenses under that Fund's 12b-1 Plans.
Certificates representing shares purchased are not ordinarily issued
unless, in the case of Class A Shares or Institutional Class shares, a
shareholder submits a specific request. Certificates are not issued in the case
of Class B Shares or Class C Shares or in the case of any retirement plan
account including self-directed IRAs. However, purchases not involving the
issuance of certificates are confirmed to the investor and credited to the
shareholder's account on the books maintained by Delaware Service Company, Inc.
(the "Transfer Agent"). The investor will have the same rights of ownership with
respect to such shares as if certificates had been issued. An investor that is
permitted to obtain a certificate may receive a certificate representing full
share denominations purchased by sending a letter signed by each owner of the
account to the Transfer Agent requesting the certificate. No charge is assessed
by Adviser Funds for any certificate issued. A shareholder may be subject to
fees for replacement of a lost or stolen certificate, under certain conditions,
including the cost of obtaining a bond covering the lost or stolen certificate.
Please contact a Fund for further information. Investors who hold certificates
representing any of their shares may only redeem those shares by written
request. The investor's certificate(s) must accompany such request.
Alternative Purchase Arrangements - Class A, Class B and Class C
The alternative purchase arrangements of Class A Shares, Class B Shares
and Class C Shares permit investors to choose the method of purchasing shares
that is most suitable for their needs given the amount of their purchase, the
length of time they expect to hold their shares and other relevant
circumstances. Investors should determine whether, given their particular
circumstances, it is more advantageous to purchase Class A Shares and incur a
front-end sales charge and annual 12b-1 Plan expenses of up to a maximum of
0.35% (currently no more than 0.30%) of the average daily net assets of Class A
Shares, or to purchase either Class B or Class C Shares and have the entire
initial purchase amount invested in the Fund with the investment thereafter
subject to a CDSC and annual 12b-1 Plan expenses. Class B Shares are subject to
a CDSC if the shares are redeemed within six years of purchase, and Class C
Shares are subject to a CDSC if the shares are redeemed within 12 months of
purchase. Class B and Class C Shares are each subject to annual 12b-1 Plan
expenses of up to a maximum of 1% (0.25% of which are service fees to be paid to
the Distributor, dealers or others for providing personal service and/or
maintaining shareholder accounts) of average daily net assets of the respective
Class. Class B Shares will automatically convert to Class A Shares at the end of
approximately eight years after purchase and, thereafter, be subject to annual
12b-1 Plan expenses of up to a maximum of 0.35% (currently no more than 0.30%)
31
<PAGE>
of average daily net assets of such shares. Unlike Class B Shares, Class C
Shares do not convert to another Class.
The higher 12b-1 Plan expenses on Class B Shares and Class C Shares will
be offset to the extent a return is realized on the additional money initially
invested upon the purchase of such shares. However, there can be no assurance as
to the return, if any, that will be realized on such additional money. In
addition, the effect of any return earned on such additional money will diminish
over time. In comparing Class B Shares to Class C Shares, investors should also
consider the duration of the annual 12b-1 Plan expenses to which each of the
classes is subject and the desirability of an automatic conversion feature,
which is available only for Class B Shares.
For the distribution and related services provided to, and the expenses
borne on behalf of, the Funds, the Distributor and others will be paid, in the
case of Class A Shares, from the proceeds of the front-end sales charge and
12b-1 Plan fees and, in the case of Class B Shares and Class C Shares, from the
proceeds of the 12b-1 Plan fees and, if applicable, the CDSC incurred upon
redemption. Financial advisers may receive different compensation for selling
Class A Shares, Class B Shares and Class C Shares. Investors should understand
that the purpose and function of the respective 12b-1 Plans and the CDSCs
applicable to Class B Shares and Class C Shares are the same as those of the
12b-1 Plan and the front-end sales charge applicable to Class A Shares in that
such fees and charges are used to finance the distribution of the respective
Classes. See Plans Under Rule 12b-1 for the Fund Classes.
Dividends, if any, paid on Class A Shares, Class B Shares, Class C
Shares and Institutional Class Shares will be calculated in the same manner, at
the same time and on the same day and will be in the same amount, except that
the amounts of 12b-1 Plan expenses relating to Class A Shares, Class B Shares
and Class C Shares will be borne exclusively by such shares. See Determining
Offering Price and Net Asset Value.
Class A Shares
Purchases of $50,000 or more of Class A Shares at the offering price
carry reduced front-end sales charges as shown in the table in the Fund Classes'
Prospectuses, and may include a series of purchases over a 13-month period under
a Letter of Intention signed by the purchaser. See Special Purchase Features -
Class A Shares, below for more information on ways in which investors can avail
themselves of reduced front-end sales charges and other purchase features.
From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during which the
Distributor may reallow to dealers up to the full amount of the front-end sales.
In addition, certain dealers who enter into an agreement to provide extra
training and information on Delaware Investments products and services and who
increase sales of Delaware Investments funds may receive an additional
commission of up to 0.15% of the offering price in connection with sales of
Class A Shares. Such dealers must meet certain requirements in terms of
organization and distribution capabilities and their ability to increase sales.
The Distributor should be contacted for further information on these
requirements as well as the basis and circumstances upon which the additional
commission will be paid. Participating dealers may be deemed to have additional
responsibilities under the securities laws. Dealers who receive 90% or more of
the sales charge may be deemed to be underwriters under the 1933 Act.
Dealer's Commission
As described in the Prospectus, for initial purchases of Class A Shares
of $1,000,000 or more, a dealer's commission may be paid by the Distributor to
financial advisers through whom such purchases are effected.
For accounts with assets over $1 million, the dealer commission resets
annually to the highest incremental commission rate on the anniversary of the
first purchase. In determining a financial adviser's eligibility for the
dealer's commission, purchases of Class A Shares of other Delaware Investments
funds as to which a Limited CDSC applies (see Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange) may be aggregated with those of the Class A Shares of a
Fund. Financial advisers also may be eligible for a dealer's commission in
connection with certain purchases made under a Letter of Intention or pursuant
32
<PAGE>
to an investor's Right of Accumulation. Financial advisers should contact the
Distributor concerning the applicability and calculation of the dealer's
commission in the case of combined purchases.
An exchange from other Delaware Investments funds will not qualify for
payment of the dealer's commission, unless a dealer's commission or similar
payment has not been previously paid on the assets being exchanged. The schedule
and program for payment of the dealer's commission are subject to change or
termination at any time by the Distributor at its discretion.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B Shares and Class C Shares are purchased without a front-end
sales charge. Class B Shares redeemed within six years of purchase may be
subject to a CDSC at the rates set forth above, and Class C Shares redeemed
within 12 months of purchase may be subject to a CDSC of 1%. CDSCs are charged
as a percentage of the dollar amount subject to the CDSC. The charge will be
assessed on an amount equal to the lesser of the net asset value at the time of
purchase of the shares being redeemed or the net asset value of those shares at
the time of redemption. No CDSC will be imposed on increases in net asset value
above the initial purchase price, nor will a CDSC be assessed on redemptions of
shares acquired through reinvestment of dividends or capital gains
distributions. For purposes of this formula, the "net asset value at the time of
purchase" will be the net asset value at purchase of Class B Shares or Class C
Shares of a Fund, even if those shares are later exchanged for shares of another
Delaware Investments fund. In the event of an exchange of the shares, the "net
asset value of such shares at the time of redemption" will be the net asset
value of the shares that were acquired in the exchange. See Waiver of Contingent
Deferred Sales Charge--Class B Shares and Class C Shares under Redemption and
Exchange for a list of the instances in which the CDSC is waived.
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. At the end of approximately eight years after purchase, the investor's
Class B Shares will be automatically converted into Class A Shares of the same
Fund. See Automatic Conversion of Class B Shares below. Such conversion will
constitute a tax-free exchange for federal income tax purposes. Investors are
reminded that the Class A Shares into which Class B Shares will convert are
subject to ongoing annual 12b-1 Plan expenses of up to a maximum of 0.35%
(currently no more than 0.30%) of average daily net assets of such shares.
33
<PAGE>
In determining whether a CDSC applies to a redemption of Class B
Shares, it will be assumed that shares held for more than six years are redeemed
first, followed by shares acquired through the reinvestment of dividends or
distributions, and finally by shares held longest during the six-year period.
With respect to Class C Shares, it will be assumed that shares held for more
than 12 months are redeemed first followed by shares acquired through the
reinvestment of dividends or distributions, and finally by shares held for 12
months or less.
All investments made during a calendar month, regardless of what day of
the month the investment occurred, will age one month on the last day of that
month and each subsequent month.
Deferred Sales Charge Alternative - Class B Shares
Class B Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently compensates
dealers or brokers for selling Class B Shares at the time of purchase from its
own assets in an amount equal to no more than 5% of the dollar amount purchased.
In addition, from time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during which the
Distributor may pay additional compensation to dealers or brokers for selling
Class B Shares at the time of purchase. As discussed below, however, Class B
Shares are subject to annual 12b-1 Plan expenses and, if redeemed within six
years of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class B Shares. These
payments support the compensation paid to dealers or brokers for selling Class B
Shares. Payments to the Distributor and others under the Class B 12b-1 Plan may
be in an amount equal to no more than 1% annually. The combination of the CDSC
and the proceeds of the 12b-1 Plan fees makes it possible for a Fund to sell
Class B Shares without deducting a front-end sales charge at the time of
purchase.
Holders of Class B Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class B Shares
described in this Part B, even after the exchange. Such CDSC schedule may be
higher than the CDSC schedule for Class B Shares acquired as a result of the
exchange. See Redemption and Exchange.
Automatic Conversion of Class B Shares
Class B Shares, other than shares acquired through reinvestment of
dividends, held for eight years after purchase are eligible for automatic
conversion into Class A Shares. Conversions of Class B Shares into Class A
Shares will occur only four times in any calendar year, on the 18th day or next
business day of March, June, September and December (each, a "Conversion Date").
If the eighth anniversary after a purchase of Class B Shares falls on a
Conversion Date, an investor's Class B Shares will be converted on that date. If
the eighth anniversary occurs between Conversion Dates, an investor's Class B
Shares will be converted on the next Conversion Date after such anniversary.
Consequently, if a shareholder's eighth anniversary falls on the day after a
Conversion Date, that shareholder will have to hold Class B Shares for as long
as three additional months after the eighth anniversary of purchase before the
shares will automatically convert into Class A Shares.
Class B Shares of a fund acquired through a reinvestment of dividends
will convert to the corresponding Class A Shares of that fund (or, in the case
of Delaware Group Cash Reserve, the Delaware Cash Reserve Fund Consultant
Class) pro-rata with Class B Shares of that fund not acquired through dividend
reinvestment.
All such automatic conversions of Class B Shares will constitute
tax-free exchanges for federal income tax purposes.
Level Sales Charge Alternative - Class C Shares
Class C Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently compensates
34
<PAGE>
dealers or brokers for selling Class C Shares at the time of purchase from its
own assets in an amount equal to no more than 1% of the dollar amount purchased.
As discussed below, Class C Shares are subject to annual 12b-1 Plan expenses
and, if redeemed within 12 months of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class C Shares. These
payments support the compensation paid to dealers or brokers for selling Class C
Shares. Payments to the Distributor and others under the Class C 12b-1 Plan may
be in an amount equal to no more than 1% annually.
Holders of Class C Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class C Shares as
described in this Part B. See Redemption and Exchange.
Plans Under Rule 12b-1 for the Fund Classes
Pursuant to Rule 12b-1 under the 1940 Act, Adviser Funds has adopted a
separate plan for each of the Class A Shares, Class B Shares and Class C Shares
of each Fund (the "Plans"). Each Plan permits the particular Fund to pay for
certain distribution, promotional and related expenses involved in the marketing
of only the Classes of shares to which the Plan applies. The Plans do not apply
to the Institutional Classes of shares. Such shares are not included in
calculating the Plans' fees, and the Plans are not used to assist in the
distribution and marketing of shares of the Institutional Classes. Shareholders
of the Institutional Classes may not vote on matters affecting the Plans.
The Plans permit the Funds, pursuant to the Distribution Agreements, to
pay out of the assets of Class A Shares, Class B Shares and Class C Shares
monthly fees to the Distributor for its services and expenses in distributing
and promoting sales of shares of such classes. These expenses include, among
other things, preparing and distributing advertisements, sales literature and
prospectuses and reports used for sales purposes, compensating sales and
marketing personnel, and paying distribution and maintenance fees to securities
brokers and dealers who enter into agreements with the Distributor. The Plan
expenses relating to Class B Shares and Class C Shares are also used to pay the
Distributor for advancing the commission costs to dealers with respect to the
initial sale of such shares.
In addition, the Funds may make payments out of the assets of Class A
Shares, Class B Shares and Class C Shares directly to other unaffiliated
parties, such as banks, who either aid in the distribution of shares of, or
provide services to, such classes.
The maximum aggregate fee payable by the Funds under the Plans, and the
Funds' Distribution Agreements, is on an annual basis up to 0.35% of average
daily net assets of Class A Shares, and up to 1% (0.25% of which are service
fees to be paid to the Distributor, dealers and others for providing personal
service and/or maintaining shareholder accounts) of each of Class B Shares' and
Class C Shares' average daily net assets for the year. Adviser Funds' Board of
Trustees may reduce these amounts at any time. The Distributor has agreed to
waive these distribution fees to the extent such fees for any day exceeds the
net investment income realized by the Fund Classes for such day.
Effective at the close of business on May 3, 1996, the annual fee
payable on a monthly basis under Class A Shares' Plan is equal to 0.30% of
average daily net assets.
All of the distribution expenses incurred by the Distributor and
others, such as broker/dealers, in excess of the amount paid on behalf of Class
A Shares, Class B Shares and Class C Shares would be borne by such persons
without any payment from such classes. Subject to seeking best price and
execution, the Fund may, from time to time, buy or sell portfolio securities
from or to firms which receive payments under the Plans. From time to time, the
Distributor may pay additional amounts from its own resources to dealers for aid
in distribution or for aid in providing administrative services to shareholders.
The Plans and the Distribution Agreement, as amended, have been
approved by the Board of Trustees of Adviser Funds, including a majority of the
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<PAGE>
trustees who are not "interested persons" (as defined in the 1940 Act) of
Adviser Funds and who have no direct or indirect financial interest in the
Plans, by vote cast in person at a meeting duly called for the purpose of voting
on the Plans and such Distribution Agreement. Continuation of the Plans and the
Distribution Agreement, as amended, must be approved annually by the Board of
Trustees in the same manner as specified above.
Each year, the trustees must determine whether continuation of the
Plans is in the best interest of shareholders of, respectively, Class A Shares,
Class B Shares and Class C Shares of each Fund and that there is a reasonable
likelihood of the Plan relating to a Fund Class providing a benefit to the
relevant shareholders of that Class. The Plans and the Distribution Agreement,
as amended, may be terminated at any time without penalty by a majority of those
trustees who are not "interested persons" or by a majority vote of the relevant
Class' outstanding voting securities. Any amendment materially increasing the
percentage payable under the Plans must likewise be approved by a majority vote
of the relevant Class' outstanding voting securities, as well as by a majority
vote of those trustees who are not "interested persons." With respect to the
Class A Shares' Plan, any material increase in the maximum percentage payable
thereunder must also be approved by a majority of the outstanding voting
securities of the respective Fund's B Class. Also, any other material amendment
to the Plans must be approved by a majority vote of the trustees, including a
majority of the trustees who are not "interested persons" of Adviser Funds
having no interest in the Plans. In addition, in order for the Plans to remain
effective, the selection and nomination of trustees who are not "interested
persons" of Adviser Funds must be effected by the trustees who themselves are
not "interested persons" and who have no direct or indirect financial interest
in the Plans. Persons authorized to make payments under the Plans must provide
written reports at least quarterly to the Board of Trustees for their review.
The amount and purpose of 12b-1 plan payments from each Class were as
follows for their last fiscal year.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Delaware New Pacific Fund Delaware Overseas Equity Fund
- --------------------------------------------------------------------------------------------------------------------------------
Class A Class B Class C Class A Class B Class C
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Advertising -- -- -- $13 -- --
- --------------------------------------------------------------------------------------------------------------------------------
Annual/Semi-Annual Reports $127 -- -- $630 -- --
- --------------------------------------------------------------------------------------------------------------------------------
Broker Trails $21,648 $10,504 $1,786 $4,506 $2,503 $887
- --------------------------------------------------------------------------------------------------------------------------------
Broker Sales Charges -- $17,152 $2,893 -- $1,896 $953
- --------------------------------------------------------------------------------------------------------------------------------
Dealer Service Expenses -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Interest on Broker Sales Charges $8,922 $158 -- $5,572 $456
- --------------------------------------------------------------------------------------------------------------------------------
Commissions to Wholesalers $4,632 $1,734 $117 $1,286 $330 $121
- --------------------------------------------------------------------------------------------------------------------------------
Promotional-Broker Meetings -- -- -- -- $30 $8
- --------------------------------------------------------------------------------------------------------------------------------
Promotional-Other -- -- -- $8 -- --
- --------------------------------------------------------------------------------------------------------------------------------
Prospectus Printing $69 -- -- $128 -- --
- --------------------------------------------------------------------------------------------------------------------------------
Telephone -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Wholesaler Expenses $78 -- -- $70 $182 $72
- --------------------------------------------------------------------------------------------------------------------------------
Other -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Total $26,554 $38,312 $4,954 $6,641 $10,513 $2,497
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Other Payments to Dealers - Class A Shares, Class B Shares and Class C Shares
From time to time, at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of Fund Classes exceed certain limits as
set by the Distributor, may receive from the Distributor an additional payment
of up to 0.25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Investments family of funds. In some instances, these
incentives or payments may be offered only to certain dealers who maintain, have
sold or may sell certain amounts of shares. The Distributor may also pay a
portion of the expense of preapproved dealer advertisements promoting the sale
of Delaware Investments fund shares.
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<PAGE>
Special Purchase Features - Class A Shares
Buying Class A Shares at Net Asset Value
Class A Shares of the Fund may be purchased at net asset value under
the Delaware Investments Dividend Reinvestment Plan and, under certain
circumstances, the Exchange Privilege and the 12-Month Reinvestment Privilege.
Purchases of Class A Shares may be made at net asset value by current
and former officers, trustees and employees (and members of their families) of
the Manager, any affiliate, any of the funds in the Delaware Investments family,
certain of their agents and registered representatives and employees of
authorized investment dealers and by employee benefit plans for such entities.
Individual purchases, including those in retirement accounts, must be for
accounts in the name of the individual or a qualifying family member. Class A
Shares may also be purchased at net asset value by current and former officers,
trustees and employees (and members of their families) of the Dougherty
Financial Group LLC.
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within 12
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales charge has been assessed.
Purchases of Class A Shares may also be made at net asset value by bank
employees who provide services in connection with agreements between the bank
and unaffiliated brokers or dealers concerning sales of shares of funds in the
Delaware Investments family. Officers, trustees and key employees of
institutional clients of the Manager or any of its affiliates may purchase Class
A Shares at net asset value. Moreover, purchases may be effected at net asset
value for the benefit of the clients of brokers, dealers and registered
investment advisers affiliated with a broker or dealer, if such broker, dealer
or investment adviser has entered into an agreement with the Distributor
providing specifically for the purchase of Class A Shares in connection with
special investment products, such as wrap accounts or similar fee based
programs. Investors may be charged a fee when effecting transactions in Class A
Shares through a broker or agent that offers these special investment products.
Purchases of Class A Shares at net asset value may also be made by the
following: financial institutions investing for the account of their trust
customers if they are not eligible to purchase shares of the Institutional Class
of a Fund; any group retirement plan (excluding defined benefit pension plans),
or such plans of the same employer, for which plan participant records are
maintained on the Retirement Financial Services, Inc. (formerly known as
Delaware Investment & Retirement Services, Inc.) proprietary record keeping
system that (i) has in excess of $500,000 of plan assets invested in Class A
Shares of funds in the Delaware Investments family and any stable value account
available to investment advisory clients of the Manager or its affiliates; or
(ii) is sponsored by an employer that has at any point after May 1, 1997 had
more than 100 employees while such plan has held Class A Shares of a fund in the
Delaware Investments family and such employer has properly represented to, and
received written confirmation back from, Retirement Financial Services, Inc. in
writing that it has the requisite number of employees. See Group Investment
Plans for information regarding the applicability of the Limited CDSC.
Purchases of Class A Shares at net asset value may also be made by bank
sponsored retirement plans that are no longer eligible to purchase Institutional
Class Shares or purchase interests in a collective trust as a result of a change
in distribution arrangements.
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from such
accounts will be made at net asset value. Loan repayments made to a fund account
in connection with loans originated from accounts previously maintained by
another investment firm will also be invested at net asset value.
Adviser Funds must be notified in advance that the trade qualifies for
purchase at net asset value.
Allied Plans
Class A Shares are available for purchase by participants in certain
401(k) Defined Contribution Plans ("Allied Plans") which are made available
under a joint venture agreement between the Distributor and another institution
through which mutual funds are marketed and which allow investments in Class A
37
<PAGE>
Shares of designated Delaware Investments funds ("eligible Delaware Investments
fund shares"), as well as shares of designated classes of non-Delaware
Investments funds ("eligible non-Delaware Investments fund shares"). Class B
Shares and Class C Shares are not eligible for purchase by Allied Plans.
With respect to purchases made in connection with an Allied Plan, the
value of eligible Delaware Investments and eligible non-Delaware Investments
fund shares held by the Allied Plan may be combined with the dollar amount of
new purchases by that Allied Plan to obtain a reduced front-end sales charge on
additional purchases of eligible Delaware Investments fund shares. See Combined
Purchases Privilege, below.
Participants in Allied Plans may exchange all or part of their eligible
Delaware Investments fund shares for other eligible Delaware Investments fund
shares or for eligible non-Delaware Investments fund shares at net asset value
without payment of a front-end sales charge. However, exchanges of eligible fund
shares, both Delaware Investments and non-Delaware Investments, which were not
subject to a front end sales charge, will be subject to the applicable sales
charge if exchanged for eligible Delaware Investments fund shares to which a
sales charge applies. No sales charge will apply if the eligible fund shares
were previously acquired through the exchange of eligible shares on which a
sales charge was already paid or through the reinvestment of dividends. See
Investing by Exchange.
A dealer's commission may be payable on purchases of eligible Delaware
Investments fund shares under an Allied Plan. In determining a financial
adviser's eligibility for a dealer's commission on net asset value purchases of
eligible Delaware Investments fund shares in connection with Allied Plans, all
participant holdings in the Allied Plan will be aggregated. See Class A Shares.
The Limited CDSC is applicable to redemptions of net asset value
purchases from an Allied Plan on which a dealer's commission has been paid.
Waivers of the Limited CDSC, as described under Waiver of Limited Contingent
Deferred Sales Charge - Class A Shares under Redemption and Exchange, apply to
redemptions by participants in Allied Plans except in the case of exchanges
between eligible Delaware Investments and non-Delaware Investments fund shares.
When eligible Delaware Investments fund shares are exchanged into eligible
non-Delaware Investments fund shares, the Limited CDSC will be imposed at the
time of the exchange, unless the joint venture agreement specifies that the
amount of the Limited CDSC will be paid by the financial adviser or selling
dealer. See Contingent Deferred Sales Charge for Certain Redemptions of Class A
Shares Purchased at Net Asset Value under Redemption and Exchange.
Letter of Intention
The reduced front-end sales charges described above with respect to
Class A Shares are also applicable to the aggregate amount of purchases made
within a 13-month period pursuant to a written Letter of Intention provided by
the Distributor and signed by the purchaser, and not legally binding on the
signer or Adviser Funds which provides for the holding in escrow by the Transfer
Agent, of 5% of the total amount of Class A Shares intended to be purchased
until such purchase is completed within the 13-month period. A Letter of
Intention may be dated to include shares purchased up to 90 days prior to the
date the Letter is signed. The 13-month period begins on the date of the
earliest purchase. If the intended investment is not completed, except as noted
below, the purchaser will be asked to pay an amount equal to the difference
between the front-end sales charge on Class A Shares purchased at the reduced
rate and the front-end sales charge otherwise applicable to the total shares
purchased. If such payment is not made within 20 days following the expiration
of the 13-month period, the Transfer Agent will surrender an appropriate number
of the escrowed shares for redemption in order to realize the difference. Such
purchasers may include the value (at offering price at the level designated in
their Letter of Intention) of all their shares of the Funds and of any class of
any of the other mutual funds in Delaware Investments (except shares of any
Delaware Investments fund which do not carry a front-end sales charge, CDSC or
Limited CDSC other than shares of Delaware Group Premium Fund beneficially owned
in connection with the ownership of variable insurance products, unless they
were acquired through an exchange from a Delaware Investments fund which carried
a front-end sales charge, CDSC or Limited CDSC) previously purchased and still
held as of the date of their Letter of Intention toward the completion of such
Letter.
Employers offering a Delaware Investments retirement plan may also
complete a Letter of Intention to obtain a reduced front-end sales charge on
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investments of Class A Shares made by the plan. The aggregate investment level
of the Letter of Intention will be determined and accepted by the Transfer Agent
at the point of plan establishment. The level and any reduction in front-end
sales charge will be based on actual plan participation and the projected
investments in Delaware Investments funds that are offered with a front-end
sales charge, CDSC or Limited CDSC for a 13-month period. The Transfer Agent
reserves the right to adjust the signed Letter of Intention based on this
acceptance criteria. The 13-month period will begin on the date this Letter of
Intention is accepted by the Transfer Agent. If actual investments exceed the
anticipated level and equal an amount that would qualify the plan for further
discounts, any front-end sales charges will be automatically adjusted. In the
event this Letter of Intention is not fulfilled within the 13-month period, the
plan level will be adjusted (without completing another Letter of Intention) and
the employer will be billed for the difference in front-end sales charges due,
based on the plan's assets under management at that time. Employers may also
include the value (at offering price at the level designated in their Letter of
Intention) of all their shares intended for purchase that are offered with a
front-end sales charge, CDSC or Limited CDSC of any class. Class B Shares and
Class C Shares of a Fund and other Delaware Investments funds which offer
corresponding classes of shares may also be aggregated for this purpose.
Combined Purchases Privilege
In determining the availability of the reduced front-end sales charge
previously set forth with respect to Class A Shares, purchasers may combine the
total amount of any combination of Class A Shares, Class B Shares and/or Class C
Shares of the Funds, as well as shares of any other class of any of the other
Delaware Investments funds (except shares of any Delaware Investments fund which
do not carry a front-end sales charge, CDSC or Limited CDSC, other than shares
of Delaware Group Premium Fund beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through an
exchange from a Delaware Investments fund which carried a front-end sales
charge, CDSC or Limited CDSC). In addition, assets held by investment advisory
clients of the Manager or its affiliates in a stable value account may be
combined with other Delaware Investments fund holdings.
The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under 21; or
a trustee or other fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee benefit programs).
Right of Accumulation
In determining the availability of the reduced front-end sales charge
with respect to the Class A Shares, purchasers may also combine any subsequent
purchases of Class A Shares, Class B Shares and Class C Shares of a Fund, as
well as shares of any other class of any of the other Delaware Investments funds
which offer such classes (except shares of any Delaware Investments fund which
do not carry a front-end sales charge, CDSC or Limited CDSC, other than shares
of Delaware Group Premium Fund beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through an
exchange from a Delaware Investments fund which carried a front-end sales
charge, CDSC or Limited CDSC). If, for example, any such purchaser has
previously purchased and still holds Class A Shares of a Fund and/or shares of
any other of the classes described in the previous sentence with a value of
$40,000 and subsequently purchases $10,000 at offering price of additional
shares of Class A Shares, the charge applicable to the $10,000 purchase would
currently be 4.75%. For the purpose of this calculation, the shares presently
held shall be valued at the public offering price that would have been in effect
were the shares purchased simultaneously with the current purchase. Investors
should refer to the table of sales charges for Class A Shares to determine the
applicability of the Right of Accumulation to their particular circumstances.
12-Month Reinvestment Privilege
Holders of Class A Shares and Class B Shares of a Fund (and of the
Institutional Class holding shares which were acquired through an exchange from
one of the other mutual funds in the Delaware Investments family offered with a
front-end sales charge) who redeem such shares have one year from the date of
redemption to reinvest all or part of their redemption proceeds in the same
Class of the Fund or in the same Class of any of the other funds in the Delaware
Investments family. In the case of Class A Shares, the reinvestment will not be
assessed a front-end sales charge and in the case of Class B Shares, the amount
of the CDSC previously charged on the redemption will be reimbursed by the
Distributor. The reinvestment will be subject to applicable eligibility and
minimum purchase requirements and must be in states where shares of such other
funds may be sold. This reinvestment privilege does not extend to Class A Shares
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where the redemption of the shares triggered the payment of a Limited CDSC.
Persons investing redemption proceeds from direct investments in mutual funds in
the Delaware Investments family, offered without a front-end sales charge will
be required to pay the applicable sales charge when purchasing Class A Shares.
The reinvestment privilege does not extend to a redemption of Class C Shares.
Any such reinvestment cannot exceed the redemption proceeds (plus any
amount necessary to purchase a full share). The reinvestment will be made at the
net asset value next determined after receipt of remittance. In the case of
Class B Shares, the time that the previous investment was held will be included
in determining any applicable CDSC due upon redemptions as well as the automatic
conversion into Class A Shares.
A redemption and reinvestment of Class B Shares could have income tax
consequences. Shareholders will receive from the Distributor the amount of the
CDSC paid at the time of redemption as part of the reinvested shares, which may
be treated as a capital gain to the shareholder for tax purposes. It is
recommended that a tax adviser be consulted with respect to such transactions.
Any reinvestment directed to a fund in which the investor does not then
have an account will be treated like all other initial purchases of the fund's
shares. Consequently, an investor should obtain and read carefully the
prospectus for the fund in which the investment is intended to be made before
investing or sending money.
The prospectus contains more complete information about the fund,
including charges and expenses.
Investors should consult their financial advisers or the Transfer
Agent, which also serves as the Fund's shareholder servicing agent, about the
applicability of the Class A Limited CDSC in connection with the features
described above.
Group Investment Plans
Group Investment Plans which are not eligible to purchase shares of the
Institutional Classes may also benefit from the reduced front-end sales charges
for investments in Class A Shares, based on total plan assets. If a company has
more than one plan investing in the Delaware Investments family of funds, then
the total amount invested in all plans would be used in determining the
applicable front-end sales charge reduction upon each purchase, both initial and
subsequent, upon notification to the Fund in which the investment is being made
at the time of each such purchase. Employees participating in such Group
Investment Plans may also combine the investments made in their plan account
when determining the applicable front-end sales charge on purchases to
non-retirement Delaware Investments investment accounts if they so notify the
Fund in which they are investing in connection with each purchase. See
Retirement Plans for the Fund Classes under Investment Plans for information
about Retirement Plans.
The Limited CDSC is applicable to any redemptions of net asset value
purchases made on behalf of any group retirement plan on which a dealer's
commission has been paid only if such redemption is made pursuant to a
withdrawal of the entire plan from a fund in the Delaware Investments family.
See Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value under Redemption and Exchange.
Institutional Classes
The Institutional Class of each Fund is available for purchase only by:
(a) retirement plans introduced by persons not associated with brokers or
dealers that are primarily engaged in the retail securities business and
rollover individual retirement accounts from such plans; (b) tax-exempt employee
benefit plans of the Manager or its affiliates and securities dealer firms with
a selling agreement with the Distributor; (c) institutional advisory accounts of
the Manager or its affiliates and those having client relationships with
Delaware Investment Advisers, an affiliate of the Manager, or its other
affiliates and their corporate sponsors, as well as subsidiaries and related
employee benefit plans and rollover individual retirement accounts from such
institutional advisory accounts; (d) a bank, trust company and similar financial
institution investing for its own account or for the account of its trust
customers for whom such financial institution is exercising investment
discretion in purchasing shares of the Class, except where the investment is
part of a program that requires payment of the financial institution of a Rule
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12b-1 Plan fee; and (e) registered investment advisers investing on behalf of
clients that consist solely of institutions and high net-worth individuals
having at least $1,000,000 entrusted to the adviser for investment purposes, but
only if the adviser is not affiliated or associated with a broker or dealer and
derives compensation for its services exclusively from its clients for such
advisory services.
Shares of Institutional Classes are available for purchase at net asset
value, without the imposition of a front-end or contingent deferred sales charge
and are not subject to Rule 12b-1 expenses.
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INVESTMENT PLANS
Reinvestment Plan/Open Account
Unless otherwise designated by shareholders in writing, dividends from
net investment income and distributions from realized securities profits, if
any, will be automatically reinvested in additional shares of the respective
Fund Class in which an investor has an account (based on the net asset value in
effect on the reinvestment date) and will be credited to the shareholder's
account on that date. All dividends and distributions of the Institutional
Classes of each Fund are reinvested in the accounts of the holders of such
shares (based on the net asset value in effect on the reinvestment date). A
confirmation of each dividend payment from net investment income will be mailed
to shareholders quarterly. A confirmation of any distributions from realized
securities profits will be mailed to shareholders in the first quarter of the
fiscal year.
Under the Reinvestment Plan/Open Account, shareholders may purchase and
add full and fractional shares to their plan accounts at any time either through
their investment dealers or by sending a check or money order to the specific
Fund and Class in which shares are being purchased. Such purchases, which must
meet the minimum subsequent purchase requirements set forth in the Prospectuses
and this Part B, are made for Class A Shares at the public offering price, and
for Class B Shares, Class C Shares and Institutional Classes at the net asset
value, at the end of the day of receipt. A reinvestment plan may be terminated
at any time. This plan does not assure a profit nor protect against depreciation
in a declining market.
Reinvestment of Dividends in Other Delaware Investments Family of Funds
Subject to applicable eligibility and minimum initial purchase
requirements and the limitations set forth below, holders of Class A Shares,
Class B Shares and Class C Shares may automatically reinvest dividends and/or
distributions in any of the mutual funds in the Delaware Investments, including
the Funds, in states where their shares may be sold. Such investments will be at
net asset value at the close of business on the reinvestment date without any
front-end sales charge or service fee. The shareholder must notify the Transfer
Agent in writing and must have established an account in the fund into which the
dividends and/or distributions are to be invested. Any reinvestment directed to
a fund in which the investor does not then have an account will be treated like
all other initial purchases of a fund's shares. Consequently, an investor should
obtain and read carefully the prospectus for the fund in which the investment is
intended to be made before investing or sending money. The prospectus contains
more complete information about the fund, including charges and expenses.
Subject to the following limitations, dividends and/or distributions
from other funds in Delaware Investments may be invested in shares of the Funds,
provided an account has been established. Dividends from Class A Shares may not
be directed to Class B Shares or Class C Shares. Dividends from Class B Shares
may only be directed to other Class B Shares and dividends from Class C Shares
may only be directed to other Class C Shares.
Capital gains and/or dividend distributions for participants in the
following retirement plans are automatically reinvested into the same Delaware
Investments fund in which their investments are held: SAR/SEP, SEP/IRA, SIMPLE
IRA, SIMPLE 401(k), Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, or 403(b)(7) or 457 Deferred Compensation Plans.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware
Investments family, you may write and authorize an exchange of part or all of
your investment into shares of a Fund. If you wish to open an account by
exchange, call the Shareholder Service Center for more information. All
exchanges are subject to the eligibility and minimum purchase requirements set
forth in each fund's prospectus. See Redemption and Exchange for more complete
information concerning your exchange privileges.
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Holders of Class A Shares of a Fund may exchange all or part of their
shares for certain of the shares of other funds in the Delaware Investments
family, including other Class A Shares, but may not exchange their Class A
Shares for Class B Shares or Class C Shares of the Fund or of any other fund in
the Delaware Investments family. Holders of Class B Shares of a Fund are
permitted to exchange all or part of their Class B Shares only into Class B
Shares of other Delaware Investments funds. Similarly, holders of Class C Shares
of a Fund are permitted to exchange all or part of their Class C Shares only
into Class C Shares of other Delaware Investments funds. Class B Shares of a
Fund and Class C Shares of a Fund acquired by exchange will continue to carry
the CDSC and, in the case of Class B Shares, the automatic conversion schedule
of the fund from which the exchange is made. The holding period of Class B
Shares of a Fund acquired by exchange will be added to that of the shares that
were exchanged for purposes of determining the time of the automatic conversion
into Class A Shares of that Fund.
Permissible exchanges into Class A Shares of a Fund will be made
without a front-end sales charge, except for exchanges of shares that were not
previously subject to a front-end sales charge (unless such shares were acquired
through the reinvestment of dividends). Permissible exchanges into Class B
Shares or Class C Shares of a Fund will be made without the imposition of a CDSC
by the fund from which the exchange is being made at the time of the exchange.
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for either Fund to
accept for investment in Class A Shares, Class B Shares or Class C Shares,
through an agent bank, preauthorized government or private recurring payments.
This method of investment assures the timely credit to the shareholder's account
of payments such as social security, veterans' pension or compensation benefits,
federal salaries, Railroad Retirement benefits, private payroll checks,
dividends, and disability or pension fund benefits. It also eliminates lost,
stolen and delayed checks.
Automatic Investing Plan--Shareholders of Class A Shares, Class B
Shares and Class C Shares may make automatic investments by authorizing, in
advance, monthly or quarterly payments directly from their checking account for
deposit into their Fund account. This type of investment will be handled in
either of the following ways. (1) If the shareholder's bank is a member of the
National Automated Clearing House Association ("NACHA"), the amount of the
investment will be electronically deducted from his or her account by Electronic
Fund Transfer ("EFT"). The shareholder's checking account will reflect a debit
each month at a specified date although no check is required to initiate the
transaction. (2) If the shareholder's bank is not a member of NACHA, deductions
will be made by preauthorized checks, known as Depository Transfer Checks.
Should the shareholder's bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans.
* * *
Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent investments
under such plans must be for $25 or more. An investor wishing to take advantage
of either service must complete an authorization form. Either service can be
discontinued by the shareholder at any time without penalty by giving written
notice.
Payments to a Fund from the federal government or its agencies on
behalf of a shareholder may be credited to the shareholder's account after such
payments should have been terminated by reason of death or otherwise. Any such
payments are subject to reclamation by the federal government or its agencies.
Similarly, under certain circumstances, investments from private sources may be
subject to reclamation by the transmitting bank. In the event of a reclamation,
a Fund may liquidate sufficient shares from a shareholder's account to reimburse
the government or the private source. In the event there are insufficient shares
in the shareholder's account, the shareholder is expected to reimburse the Fund.
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Direct Deposit Purchases by Mail
Shareholders may authorize a third party, such as a bank or employer,
to make investments directly to their Fund accounts. Either Fund will accept
these investments, such as bank-by-phone, annuity payments and payroll
allotments, by mail directly from the third party. Investors should contact
their employers or financial institutions who in turn should contact Adviser
Funds for proper instructions.
MoneyLine (SM) On Demand
You or your investment dealer may request purchases of Fund shares by
phone using MoneyLine (SM) On Demand. When you authorize a Fund to accept such
requests from you or your investment dealer, funds will be withdrawn from (for
share purchases) your predesignated bank account. Your request will be processed
the same day if you call prior to 4 p.m., Eastern time. There is a $25 minimum
and $50,000 maximum limit for MoneyLine (SM) On Demand transactions.
It may take up to four business days for the transactions to be
completed. You can initiate this service by completing an Account Services form.
If your name and address are not identical to the name and address on your Fund
account, you must have your signature guaranteed. The Funds do not charge a fee
for this service; however, your bank may charge a fee.
Wealth Builder Option
Shareholders can use the Wealth Builder Option to invest in the Fund
Classes through regular liquidations of shares in their accounts in other mutual
funds in the Delaware Investments family. Shareholders of the Fund Classes may
elect to invest in one or more of the other mutual funds in Delaware Investments
family through the Wealth Builder Option. If in connection with the election of
the Wealth Builder Option, you wish to open a new account to receive the
automatic investment, such new account must meet the minimum initial purchase
requirements described in the prospectus of the fund that you select. All
investments under this option are exchanges and are therefore subject to the
same conditions and limitations as other exchanges noted above.
Under this automatic exchange program, shareholders can authorize
regular monthly investments (minimum of $100 per fund) to be liquidated from
their account and invested automatically into other mutual funds in the Delaware
Investments family, subject to the conditions and limitations set forth in the
Fund Classes' Prospectus. The investment will be made on the 20th day of each
month (or, if the fund selected is not open that day, the next business day) at
the public offering price or net asset value, as applicable, of the fund
selected on the date of investment. No investment will be made for any month if
the value of the shareholder's account is less than the amount specified for
investment.
Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the fund
into which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
in the program through periods of low fund share prices. This program involves
automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. Shareholders can terminate their participation in Wealth Builder at any
time by giving written notice to the fund from which exchanges are made.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans. This option also is not available to shareholders of the
Institutional Classes.
Asset Planner
To invest in Delaware Investments funds using the Asset Planner asset
allocation service, you should complete an Asset Planner Account Registration
Form, which is available only from a financial adviser or investment dealer.
Effective September 1, 1997, the Asset Planner Service is only available to
financial advisers or investment dealers who have previously used this service.
The Asset Planner service offers a choice of four predesigned asset allocation
strategies (each with a different risk/reward profile) in predetermined
percentages in Delaware Investments funds. With the help of a financial adviser,
you may also design a customized asset allocation strategy.
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The sales charge on an investment through the Asset Planner service is
determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. Exchanges from existing Delaware
Investments accounts into the Asset Planner service may be made at net asset
value under the circumstances described under Investing by Exchange. Also see
Buying Class A Shares at Net Asset Value. The minimum initial investment per
Strategy is $2,000; subsequent investments must be at least $100. Individual
fund minimums do not apply to investments made using the Asset Planner service.
Class A, Class B and Class C Shares are available through the Asset Planner
service. Generally, only shares within the same class may be used within the
same Strategy. However, Class A Shares of a Fund and of other funds in the
Delaware Investments family may be used in the same Strategy with consultant
class shares that are offered by certain other Delaware Investments funds.
An annual maintenance fee, currently $35 per Strategy, is due at the
time of initial investment and by September 30 of each subsequent year. The fee,
payable to Delaware Service Company, Inc. to defray extra costs associated with
administering the Asset Planner service, will be deducted automatically from one
of the funds within your Asset Planner account if not paid by September 30.
However, effective November 1, 1996, the annual maintenance fee is waived until
further notice. Investors who utilize the Asset Planner for an IRA will continue
to pay an annual IRA fee of $15 per Social Security number. Investors will
receive a customized quarterly Strategy Report summarizing all Asset Planner
investment performance and account activity during the prior period.
Confirmation statements will be sent following all transactions other than those
involving a reinvestment of distributions.
Certain shareholder services are not available to investors using the
Asset Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two years.
Retirement Plans for the Fund Classes
An investment in the Funds may be suitable for tax-deferred retirement
plans. Delaware Investments offers a full spectrum of retirement plans,
including the 401(k) Defined Contribution Plan, Individual Retirement Account
("IRA") and the new Roth IRA and Education IRA.
Among the retirement plans that Delaware Investments offers, Class B
Shares are available only by Individual Retirement Accounts, SIMPLE IRAs, Roth
IRAs, Education IRAs, Simplified Employee Pension Plans, Salary Reduction
Simplified Employee Pension Plans, and 403(b)(7) and 457 Deferred Compensation
Plans. The CDSC may be waived on certain redemptions of Class B Shares and Class
C Shares. See Waiver of Contingent Deferred Sales Charge - Class B Shares and
Class C Shares under Redemption and Exchange for a list of the instances in
which the CDSC is waived.
Purchases of Class B Shares are subject to a maximum purchase
limitation of $250,000 for retirement plans. Purchases of Class C Shares must be
in an amount that is less than $1,000,000 for such plans. The maximum purchase
limitations apply only to the initial purchase of shares by the retirement plan.
Minimum investment limitations generally applicable to other investors
do not apply to retirement plans other than Individual Retirement Accounts, for
which there is a minimum initial purchase of $250 and a minimum subsequent
purchase of $25, regardless of which Class is selected. Retirement plans may be
subject to plan establishment fees, annual maintenance fees and/or other
administrative or trustee fees. Fees are based upon the number of participants
in the plan as well as the services selected. Additional information about fees
is included in retirement plan materials. Fees are quoted upon request. Annual
maintenance fees may be shared by Delaware Management Trust Company, the
Transfer Agent, other affiliates of the Manager and others that provide services
to such Plans.
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Certain shareholder investment services available to non-retirement
plan shareholders may not be available to retirement plan shareholders. Certain
retirement plans may qualify to purchase shares of the Institutional Class
shares. See Institutional Classes, above. For additional information on any of
the plans and Delaware's retirement services, call the Shareholder Service
Center telephone number.
It is advisable for an investor considering any one of the retirement
plans described below to consult with an attorney, accountant or a qualified
retirement plan consultant. For further details, including applications for any
of these plans, contact your investment dealer or the Distributor.
Taxable distributions from the retirement plans described below may be
subject to withholding.
Please contact your investment dealer or the Distributor for the
special application forms required for the Plans described below.
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed individuals,
partnerships, corporations and other eligible forms of organizations. These
plans can be maintained as Section 401(k), profit sharing or money purchase
pension plans. Contributions may be invested only in Class A Shares and Class C
Shares.
Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an IRA
and make contributions which may be tax-deductible, even if the individual is
already participating in an employer-sponsored retirement plan. Even if
contributions are not deductible for tax purposes, as indicated below, earnings
will be tax-deferred. In addition, an individual may make contributions on
behalf of a spouse who has no compensation for the year; however, participation
may be restricted based on certain income limits.
IRA Disclosures
The Taxpayer Relief Act of 1997 provides new opportunities for
investors. Individuals have five types of tax-favored IRA accounts that can be
utilized depending on the individual's circumstances. A new Roth IRA and
Education IRA are available in addition to the existing deductible IRA and
non-deductible IRA.
Deductible and Non-deductible IRAs
An individual can contribute up to $2,000 in his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayer's
adjusted gross income ("AGI") and whether the taxpayer is an active participant
in an employer sponsored retirement plan. Even if a taxpayer is an active
participant in an employer sponsored retirement plan, the full $2,000 is still
available if the taxpayer's AGI is below $30,000 ($50,000 for taxpayers filing
joint returns) for years beginning after December 31, 1997. A partial deduction
is allowed for married couples with income between $50,000 and $60,000, and for
single individuals with incomes between $30,000 and $40,000. These income
phase-out limits reach $80,000-$100,000 in 2007 for joint filers and
$50,000-$60,000 in 2005 for single filers. No deductions are available for
contributions to IRAs by taxpayers whose AGI after IRA deductions exceeds the
maximum income limit established for each year and who are active participants
in an employer sponsored retirement plan.
Taxpayers who are not allowed deductions on IRA contributions still can
make non-deductible IRA contributions of as much as $2,000 for each working
spouse and defer taxes on interest or other earnings from the IRAs.
Under the new law, a married individual is not considered an active
participant in an employer sponsored retirement plan merely because the
individual's spouse is an active participant if the couple's combined AGI is
below $150,000. The maximum deductible IRA contribution for a married individual
who is not an active participant, but whose spouse is, is phased out for
combined AGI between $150,000 and $160,000.
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Conduit (Rollover) IRAs
Certain individuals who have received or are about to receive eligible
rollover distributions from an employer-sponsored retirement plan or another IRA
may rollover the distribution tax-free to a Conduit IRA. The rollover of the
eligible distribution must be completed by the 60th day after receipt of the
distribution; however, if the rollover is in the form of a direct
trustee-to-trustee transfer without going through the distributee's hand, the
60-day limit does not apply.
A distribution qualifies as an "eligible rollover distribution" if it
is made from a qualified retirement plan, a 403(b) plan or another IRA and does
not constitute one of the following:
(1) Substantially equal periodic payments over the employee's life or
life expectancy or the joint lives or life expectancies of the employee and
his/her designated beneficiary;
(2) Substantially equal installment payments for a period certain of 10
or more years;
(3) A distribution, all of which represents a required minimum
distribution after attaining age 70 1/2;
(4) A distribution due to a Qualified Domestic Relations Order to an
alternate payee who is not the spouse (or former spouse) of the employee; and
(5) A distribution of after-tax contributions which is not includable
in income.
Roth IRAs
For taxable years beginning after December 31, 1997, non-deductible
contributions of up to $2,000 per year can be made to a new Roth IRA. As a
result of the Internal Revenue Service Restructuring and Reform Act of 1998 (the
"1998 Act"), the $2,000 annual limit will not be reduced by any contributions to
a deductible or nondeductible IRA for the same year. The maximum contribution
that can be made to a Roth IRA is phased out for single filers with AGI between
$95,000 and $110,000, and for couples filing jointly with AGI between $150,000
and $160,000. Qualified distributions from a Roth IRA would be exempt from
federal taxes. Qualified distributions are distributions (1) made after the
five-taxable year period beginning with the first taxable year for which a
contribution was made to a Roth IRA and (2) that are (a) made on or after the
date on which the individual attains age 59 1/2, (b) made to a beneficiary on or
after the death of the individual, (c) attributed to the individual being
disabled, or (d) for a qualified special purpose (e.g., first time homebuyer
expenses).
Distributions that are not qualified distributions would always be
tax-free if the taxpayer is withdrawing contributions, not accumulated earnings.
Taxpayers with AGI of $100,000 or less are eligible to convert an
existing IRA (deductible, nondeductible and conduit) to a Roth IRA. Earnings and
contributions from a deductible IRA are subject to a tax upon conversion;
however, no 10% excise tax for early withdrawal would apply. If the conversion
is done prior to January 1, 1999, then the income from the conversion can be
included in income ratably over a four-year period beginning with the year of
conversion.
Education IRAs
For taxable years beginning after December 31, 1997, an Education IRA
has been created exclusively for the purpose of paying qualified higher
education expenses. Taxpayers can make non-deductible contributions up to $500
per year per beneficiary. The $500 annual limit is in addition to the $2,000
annual contribution limit applicable to IRAs and Roth IRAs. Eligible
contributions must be in cash and made prior to the date the beneficiary reaches
age 18. Similar to the Roth IRA, earnings would accumulate tax-free. There is no
requirement that the contributor be related to the beneficiary, and there is no
limit on the number of beneficiaries for whom one contributor can establish
Education IRAs. In addition, multiple Education IRAs can be created for the same
beneficiaries, however, the contribution limit of all contributions for a single
beneficiary cannot exceed $500 annually.
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This $500 annual contribution limit for Education IRAs is phased out
ratably for single contributors with modified AGI between $95,000 and $110,000,
and for couples filing jointly with modified AGI of between $150,000 and
$160,000. Individuals with modified AGI above the phase-out range are not
allowed to make contributions to an Education IRA established on behalf of any
other individual.
Distributions from an Education IRA are excludable from gross income to
the extent that the distribution does not exceed qualified higher education
expenses incurred by the beneficiary during the year the distribution is made
regardless of whether the beneficiary is enrolled at an eligible educational
institution on a full-time, half-time, or less than half-time basis.
Any balance remaining in an Education IRA at the time a beneficiary
becomes 30 years old must be distributed, and the earnings portion of such a
distribution will be includable in gross income of the beneficiary and subject
to an additional 10% penalty tax if the distribution is not for qualified higher
education expenses. Tax-free (and penalty-free) transfers and rollovers of
account balances from one Education IRA benefiting one beneficiary to another
Education IRA benefiting a different beneficiary (as well as redesignations of
the named beneficiary) is permitted, provided that the new beneficiary is a
member of the family of the old beneficiary and that the transfer or rollover is
made before the time the old beneficiary reaches age 30 and the new beneficiary
reaches age 18.
A company or association may establish a Group IRA or Group Roth IRA
for employees or members who want to purchase shares of the Fund.
Investments generally must be held in the IRA until age 59 1/2 in order
to avoid premature distribution penalties, but distributions generally must
commence no later than April 1 of the calendar year following the year in which
the participant reaches age 70 1/2. Individuals are entitled to revoke the
account, for any reason and without penalty, by mailing written notice of
revocation to Delaware Management Trust Company within seven days after the
receipt of the IRA Disclosure Statement or within seven days after the
establishment of the IRA, except, if the IRA is established more than seven days
after receipt of the IRA Disclosure Statement, the account may not be revoked.
Distributions from the account (except for the pro-rata portion of any
nondeductible contributions) are fully taxable as ordinary income in the year
received. Excess contributions removed after the tax-filing deadline, plus
extensions, for the year in which the excess contributions were made are subject
to a 6% excise tax on the amount of excess. Premature distributions
(distributions made before age 59 1/2, except for death, disability and certain
other limited circumstances) will be subject to a 10% excise tax on the amount
prematurely distributed, in addition to the income tax resulting from the
distribution. For information concerning the applicability of a CDSC upon
redemption of Class B Shares and Class C Shares, see Contingent Deferred Sales
Charge - Class B Shares and Class C Shares.
Effective January 1, 1997, the 10% premature distribution penalty will
not apply to distributions from an IRA that are used to pay medical expenses in
excess of 7.5% of adjusted gross income or to pay health insurance premiums by
an individual who has received unemployment compensation for 12 consecutive
weeks. In addition, effective January 1, 1998, the new law allows for premature
distribution without a 10% penalty if (i) the amounts are used to pay qualified
higher education expenses (including graduate level courses) of the taxpayer,
the taxpayer's spouse or any child or grandchild of the taxpayer or the
taxpayer's spouse, or (ii) used to pay acquisition costs of a principle
residence for the purchase of a first-time home by the taxpayer, taxpayer's
spouse or any child or grandchild of the taxpayer or the taxpayer's spouse. A
qualified first-time homebuyer is someone who has had no ownership interest in a
residence during the past two years. The aggregate amount of distribution for
first-time home purchases cannot exceed a lifetime cap of $10,000.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Classes is available for investment by a
SEP/IRA.
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Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Although new SAR/SEP plans may not be established after December 31,
1996, existing plans may continue to be maintained by employers having 25 or
fewer employees. An employer may elect to make additional contributions to such
existing plans.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified
plans based on salary deferral contributions. Effective January 1, 1997,
non-governmental tax-exempt organizations may establish 401(k) plans. Plan
documents are available to enable employers to establish a plan. An employer may
also elect to make profit sharing contributions and/or matching contributions
with investments in only Class A Shares and Class C Shares or certain other
funds in the Delaware Investments family. Purchases under the Plan may be
combined for purposes of computing the reduced front-end sales charge applicable
to Class A Shares as set forth in the table the Prospectuses for the Fund
Classes.
Deferred Compensation Plan for Public Schools and Non-Profit
Organizations ("403(b)(7)")
Section 403(b)(7) of the Code permits public school systems and certain
non-profit organizations to use mutual fund shares held in a custodial account
to fund deferred compensation arrangements for their employees. A custodial
account agreement is available for those employers who wish to purchase shares
of any of the Classes in conjunction with such an arrangement. Purchases under
the Plan may be combined for purposes of computing the reduced front-end sales
charge applicable to Class A Shares as set forth in the table the Prospectuses
for the Fund Classes.
Deferred Compensation Plan for State and Local Government Employees ("457")
Section 457 of the Code permits state and local governments, their
agencies and certain other entities to establish a deferred compensation plan
for their employees who wish to participate. This enables employees to defer a
portion of their salaries and any federal (and possibly state) taxes thereon.
Such plans may invest in shares of the Fund. Although investors may use their
own plan, there is available a Delaware Investments 457 Deferred Compensation
Plan. Interested investors should contact the Distributor or their investment
dealers to obtain further information. Purchases under the Plan may be combined
for purposes of computing the reduced front-end sales charge applicable to Class
A Shares as set forth in the table in the Prospectuses for the Fund Classes.
SIMPLE IRA
A SIMPLE IRA combines many of the features of an IRA and a 401(k) Plan
but is easier to administer than a typical 401(k) Plan. It requires employers to
make contributions on behalf of their employees and also has a salary deferral
feature that permits employees to defer a portion of their salary into the plan
on a pre-tax basis. A SIMPLE IRA is available only to plan sponsors with 100 or
fewer employees.
SIMPLE 401(k)
A SIMPLE 401(k) is like a regular 401(k) except that it is available
only to plan sponsors 100 or fewer employees and, in exchange for mandatory plan
sponsor contributions, discrimination testing is no longer required. Class B
Shares are not available for purchase by such plans.
DETERMINING OFFERING PRICE AND NET ASSET VALUE
Orders for purchases of Class A Shares are effected at the offering
price next calculated by the Fund in which shares are being purchased after
receipt of the order by the Fund or its agent. Orders for purchases of Class B
Shares, Class C Shares and the Institutional Classes are effected at the net
asset value per share next calculated after receipt of the order by the Fund in
which shares are being purchased or its agent. See Distribution and Service
under Investment Management Agreement and Sub-Advisory Agreements. Selling
dealers have the responsibility of transmitting orders promptly.
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The offering price for Class A Shares consists of the net asset value
per share plus any applicable sales charges. Offering price and net asset value
are computed as of the close of regular trading on the New York Stock Exchange
(ordinarily, 4 p.m., Eastern time) on days when the Exchange is open. The New
York Stock Exchange is scheduled to be open Monday through Friday throughout the
year except for days when the following holidays are observed: New Year's Day,
Martin Luther King, Jr.'s Birthday, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas. When the New York Stock
Exchange is closed, the Funds will generally be closed, pricing calculations
will not be made and purchase and redemption orders will not be processed.
An example showing how to calculate the net asset value per share and,
in the case of Class A Shares, the offering price per share, is included in a
Fund's financial statements which are incorporated by reference into this Part
B.
Each Fund's net asset value per share is computed by adding the value
of all the securities and other assets in the Fund's portfolio, deducting any
liabilities of the Fund, and dividing by the number of Fund shares outstanding.
Expenses and fees are accrued daily. In determining a Fund's total net assets,
portfolio securities primarily listed or traded on a national or foreign
securities exchange, except for bonds, are valued at the last sale price on that
exchange. Exchange traded options are valued at the last reported sale price or,
if no sales are reported, at the mean between bid and asked prices. Non-exchange
traded options are valued at fair value using a mathematical model. Futures
contracts are valued at their daily quoted settlement price. For valuation
purposes, foreign currencies and foreign securities denominated in foreign
currency values will be converted into U.S. dollar values at the mean between
the bid and offered quotations of such currencies against U.S. dollars based on
rates in effect that day. Securities not traded on a particular day,
over-the-counter securities, and government and agency securities are valued at
the mean value between bid and asked prices. Money market instruments having a
maturity of less than 60 days are valued at amortized cost. Debt securities
(other than short-term obligations) are valued on the basis of valuations
provided by a pricing service when such prices are believed to reflect the fair
value of such securities. Foreign securities currencies and other assets
denominated in foreign currencies are translated into U.S. dollars at the
exchange rate of such currencies against the U.S. dollar, as provided by
independent pricing service. Use of a pricing service has been approved by the
Board of Trustees. Prices provided by a pricing service take into account
appropriate factors such as institutional trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data. Subject to the foregoing, for securities
for which market quotations are not readily available and other assets the
Manager uses methods approved by the Board of Trustees that are designed to
price securities at their fair market value.
Each Class of a Fund will bear, pro-rata, all of the common expenses of
that Fund. The net asset values of all outstanding shares of each Class of a
Fund will be computed on a pro-rata basis for each outstanding share based on
the proportionate participation in that Fund represented by the value of shares
of that Class. All income earned and expenses incurred by a Fund, will be borne
on a pro-rata basis by each outstanding share of a Class, based on each Class'
percentage in that Fund represented by the value of shares of such Classes,
except that Institutional Classes will not incur any of the expenses under
Adviser Funds 12b-1 Plans and Class A Shares, Class B Shares and Class C Shares
alone will bear the 12b-1 Plan expenses payable under their respective Plans.
Due to the specific distribution expenses and other costs that will be allocable
to each Class, the net asset value of each Class of a Fund will vary.
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REDEMPTION AND EXCHANGE
You can redeem or exchange your shares in a number of different ways.
The exchange service is useful if your investment requirements change and you
want an easy way to invest in other equity funds, tax-advantaged funds, bond
funds or money market funds. This service is also useful if you are anticipating
a major expenditure and want to move a portion of your investment into a fund
that has the checkwriting feature. Exchanges are subject to the requirements of
each fund and all exchanges of shares constitute taxable events. Further, in
order for an exchange to be processed, shares of the fund being acquired must be
registered in the state where the acquiring shareholder resides. You may want to
consult your financial adviser or investment dealer to discuss which funds in
Delaware Investments will best meet your changing objectives, and the
consequences of any exchange transaction. You may also call the Delaware
Investments directly for fund information.
Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after a Fund receives your request in good order,
subject, in the case of a redemption, to any applicable CDSC or Limited CDSC.
For example, redemption or exchange requests received in good order after the
time the offering price and net asset value of shares are determined will be
processed on the next business day. See the Prospectuses. A shareholder
submitting a redemption request may indicate that he or she wishes to receive
redemption proceeds of a specific dollar amount. In the case of such a request,
and in the case of certain redemptions from retirement plan accounts, a Fund
will redeem the number of shares necessary to deduct the applicable CDSC in the
case of Class B Shares and Class C Shares, and, if applicable, the Limited CDSC
in the case of Class A Shares and tender to the shareholder the requested
amount, assuming the shareholder holds enough shares in his or her account for
the redemption to be processed in this manner. Otherwise, the amount tendered to
the shareholder upon redemption will be reduced by the amount of the applicable
CDSC or Limited CDSC. Redemption proceeds will be distributed promptly, as
described below, but not later than seven days after receipt of a redemption
request.
Except as noted below, for a redemption request to be in "good order,"
you must provide your account number, account registration, and the total number
of shares or dollar amount of the transaction. For exchange requests, you must
also provide the name of the fund in which you want to invest the proceeds.
Exchange instructions and redemption requests must be signed by the record
owner(s) exactly as the shares are registered. You may request a redemption or
an exchange by calling the Shareholder Service Center at 800-523-1918. Each Fund
may suspend, terminate, or amend the terms of the exchange privilege upon 60
days' written notice to shareholders.
In addition to redemption of Fund shares, the Distributor, acting as
agent of the Funds, offers to repurchase Fund shares from broker/dealers acting
on behalf of shareholders. The redemption or repurchase price, which may be more
or less than the shareholder's cost, is the net asset value per share next
determined after receipt of the request in good order by the respective Fund,
its agent, or certain authorized persons, subject to applicable CDSC or Limited
CDSC. This is computed and effective at the time the offering price and net
asset value are determined. See Determining Offering Price and Net Asset Value.
The Funds and the Distributor end their business days at 5 p.m., Eastern time.
This offer is discretionary and may be completely withdrawn without further
notice by the Distributor.
Orders for the repurchase of Fund shares which are submitted to the
Distributor prior to the close of its business day will be executed at the net
asset value per share computed that day (subject to the applicable CDSC or
Limited CDSC), if the repurchase order was received by the broker/dealer from
the shareholder prior to the time the offering price and net asset value are
determined on such day. The selling dealer has the responsibility of
transmitting orders to the Distributor promptly. Such repurchase is then settled
as an ordinary transaction with the broker/dealer (who may make a charge to the
shareholder for this service) delivering the shares repurchased.
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Payment for shares redeemed will ordinarily be mailed the next business
day, but in no case later than seven days, after receipt of a redemption request
in good order by the Fund or certain other authorized persons (see Distribution
and Service under Investment Management Agreement and Sub-Advisory Agreements);
provided, however, that each commitment to mail or wire redemption proceeds by a
certain time, as described below, is modified by the qualifications described in
the next paragraph.
Each Fund will process written and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. Each Fund will honor redemption requests as to shares for which a check
was tendered as payment, but a Fund will not mail or wire the proceeds until it
is reasonably satisfied that the purchase check has cleared, which may take up
to 15 days from the purchase date. You can avoid this potential delay if you
purchase shares by wiring Federal Funds. Each Fund reserves the right to reject
a written or telephone redemption request or delay payment of redemption
proceeds if there has been a recent change to the shareholder's address of
record.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason, the
Fund involved will automatically redeem from the shareholder's account the
shares purchased by the check plus any dividends earned thereon. Shareholders
may be responsible for any losses to a Fund or to the Distributor.
In case of a suspension of the determination of the net asset value
because the New York Stock Exchange is closed for other than weekends or
holidays, or trading thereon is restricted or an emergency exists as a result of
which disposal by a Fund of securities owned by it is not reasonably practical,
or it is not reasonably practical for a Fund fairly to value its assets, or in
the event that the SEC has provided for such suspension for the protection of
shareholders, a Fund may postpone payment or suspend the right of redemption or
repurchase. In such case, the shareholder may withdraw the request for
redemption or leave it standing as a request for redemption at the net asset
value next determined after the suspension has been terminated.
Payment for shares redeemed or repurchased may be made either in cash
or kind, or partly in cash and partly in kind. Any portfolio securities paid or
distributed in kind would be valued as described in Determining Offering Price
and Net Asset Value. Subsequent sale by an investor receiving a distribution in
kind could result in the payment of brokerage commissions. However, Adviser
Funds has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to
which each Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net asset value of such Fund during any 90-day period for
any one shareholder.
The value of a Fund's investments is subject to changing market prices.
Thus, a shareholder reselling shares to a Fund may sustain either a gain or
loss, depending upon the price paid and the price received for such shares.
Certain redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC. See Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value, below.
Class B Shares of the Funds are subject to a CDSC of (i) 5% if shares are
redeemed within one year of purchase; (ii) 4% if shares are redeemed during the
second year after purchase (iii) 3% if shares are redeemed during the third or
fourth year following purchase; (iv) 2% if shares are redeemed during the fifth
year following purchase; and (v) 1% if shares are redeemed during the sixth year
following purchase. Class C Shares are subject to a CDSC of 1% if shares are
redeemed within 12 months following purchase. See Contingent Deferred Sales
Charge - Class B Shares and Class C Shares under Purchasing Shares. Except for
the applicable CDSC or Limited CDSC and, with respect to the expedited payment
by wire described below for which, in the case of the Fund Classes, there may be
a bank wiring cost, neither the Funds nor the Distributor charges a fee
for redemptions or repurchases, but such fees could be charged at any time in
the future.
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Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for shares of other funds in the Delaware Investments (in
each case, "New Shares") in a permitted exchange, will not be subject to a CDSC
that might otherwise be due upon redemption of the Original Shares. However,
such shareholders will continue to be subject to the CDSC and, in the case of
Class B Shares, the automatic conversion schedule of the Original Shares as
described in this Part B and any CDSC assessed upon redemption will be charged
by the fund from which the Original Shares were exchanged. In an exchange of
Class B Shares from a Fund, the Fund's CDSC schedule may be higher than the CDSC
schedule relating to the New Shares acquired as a result of the exchange. For
purposes of computing the CDSC that may be payable upon a disposition of the New
Shares, the period of time that an investor held the Original Shares is added to
the period of time that an investor held the New Shares. With respect to Class B
Shares, the automatic conversion schedule of the Original Shares may be longer
than that of the New Shares. Consequently, an investment in New Shares by
exchange may subject an investor to the higher 12b-1 fees applicable to Class B
Shares of a Fund for a longer period of time than if the investment in New
Shares were made directly.
Written Redemption
You can write to each Fund at 1818 Market Street, Philadelphia, PA
19103 to redeem some or all of your shares. The request must be signed by all
owners of the account or your investment dealer of record. For redemptions of
more than $50,000, or when the proceeds are not sent to the shareholder(s) at
the address of record, the Funds require a signature by all owners of the
account and a signature guarantee for each owner. A signature guarantee can be
obtained from a commercial bank, a trust company or a member of a Securities
Transfer Association Medallion Program ("STAMP"). Each Fund reserves the right
to reject a signature guarantee supplied by an eligible institution based on its
creditworthiness. The Funds may require further documentation from corporations,
executors, retirement plans, administrators, trustees or guardians.
Payment is normally mailed the next business day after receipt of your
redemption request. If your Class A Shares or Institutional class shares are in
certificate form, the certificate(s) must accompany your request and also be in
good order. Certificates are issued for Class A Shares and Institutional Class
Shares only if a shareholder submits a specific request. Certificates are not
issued for Class B Shares or Class C Shares.
Written Exchange
You may also write to each Fund (at 1818 Market Street, Philadelphia,
PA 19103) to request an exchange of any or all of your shares into another
mutual fund in Delaware Investments, subject to the same conditions and
limitations as other exchanges noted above.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your Class A Shares or Institutional class shares in
certificate form, you may redeem or exchange only by written request and you
must return your certificates.
The Telephone Redemption - Check to Your Address of Record service and
the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in which you have your account
in writing that you do not wish to have such services available with respect to
your account. Each Fund reserves the right to modify, terminate or suspend these
procedures upon 60 days' written notice to shareholders. It may be difficult to
reach the Funds by telephone during periods when market or economic conditions
lead to an unusually large volume of telephone requests.
Neither the Funds nor their Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, each Fund will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, such Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Telephone instructions received by the
Fund Classes are generally tape recorded, and a written confirmation will be
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provided for all purchase, exchange and redemption transactions initiated by
telephone. By exchanging shares by telephone, you are acknowledging prior
receipt of a prospectus for the fund into which your shares are being exchanged.
Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day after receipt of the redemption request. This service is only available to
individual, joint and individual fiduciary-type accounts.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must complete an Authorization Form and have your signature
guaranteed. For your protection, your authorization must be on file. If you
request a wire, your funds will normally be sent the next business day. If the
proceeds are wired to the shareholder's account at a bank which is not a member
of the Federal Reserve System, there could be a delay in the crediting of the
funds to the shareholder's bank account. A bank wiring fee be deducted from Fund
Class redemption proceeds. If you ask for a check, it will normally be mailed
the next business day after receipt of your redemption request to your
predesignated bank account. There are no separate fees for this redemption
method, but the mail time may delay getting funds into your bank account. Simply
call the Shareholder Service Center prior to the time the offering price and net
asset value are determined, as noted above.
Telephone Exchange
The Telephone Exchange feature is a convenient and efficient way to
adjust your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
shares into other funds in Delaware Investments under the same registration,
subject to the same conditions and limitations as other exchanges noted above.
As with the written exchange service, telephone exchanges are subject to the
requirements of each fund, as described above. Telephone exchanges may be
subject to limitations as to amounts or frequency.
The telephone exchange privilege is intended as a convenience to
shareholders and is not intended to be a vehicle to speculate on short-term
swings in the securities market through frequent transactions in and out of the
funds in the Delaware Investments family. Telephone exchanges may be subject to
limitations as to amounts or frequency. The Transfer Agent and each Fund reserve
the right to record exchange instructions received by telephone and to reject
exchange requests at any time in the future.
MoneyLine(SM) On Demand
You or your investment dealer may request redemptions of Fund shares by
phone using MoneyLine(SM) On Demand. When you authorize a Fund to accept such
requests from you or your investment dealer, funds will be deposited to (for
share redemptions) your predesignated bank account. Your request will be
processed the same day if you call prior to 4 p.m., Eastern time. There is a $25
minimum and $50,000 maximum limit for MoneyLine (SM) On Demand transactions. See
MoneyLine(SM) On Demand under Investment Plans.
Right to Refuse Timing Accounts
With regard to accounts that are administered by market timing services
("Timing Firms") to purchase or redeem shares based on changing economic and
market conditions ("Timing Accounts"), the Funds will refuse any new timing
arrangements, as well as any new purchases (as opposed to exchanges) in Delaware
Investments funds from Timing Firms. A Fund reserves the right to temporarily or
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permanently terminate the exchange privilege or reject any specific purchase
order for any person whose transactions seem to follow a timing pattern who: (i)
makes an exchange request out of the Fund within two weeks of an earlier
exchange request out of the Fund, or (ii) makes more than two exchanges out of
the Fund per calendar quarter, or (iii) exchanges shares equal in value to at
least $5 million, or more than 1/4 of 1% of the Fund's net assets. Accounts
under common ownership or control, including accounts administered so as to
redeem or purchase shares based upon certain predetermined market indicators,
will be aggregated for purposes of the exchange limits.
Restrictions on Timed Exchanges
Timing Accounts operating under existing timing agreements may only
execute exchanges between the following eight Delaware Investments funds: (1)
Delaware Decatur Equity Income Fund, (2) Delaware Growth and Income Fund, (3)
Delaware Balanced Fund, (4) Delaware Limited-Term Government Fund, (5) Delaware
Tax-Free USA Fund, (6) Delaware Cash Reserve Fund, (7) Delaware Delchester Fund
and (8) Delaware Tax-Free Pennsylvania Fund. No other Delaware Investments funds
are available for timed exchanges. Assets redeemed or exchanged out of Timing
Accounts in Delaware Investments funds not listed above may not be reinvested
back into that Timing Account. Each Fund reserves the right to apply these same
restrictions to the account(s) of any person whose transactions seem to follow a
time pattern (as described above).
Each Fund also reserves the right to refuse the purchase side of an
exchange request by any Timing Account, person, or group if, in the Manager's
judgment, the Fund would be unable to invest effectively in accordance with its
investment objectives and policies, or would otherwise potentially be adversely
affected. A shareholder's purchase exchanges may be restricted or refused if a
Fund receives or anticipates simultaneous orders affecting significant portions
of the Fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to a Fund and therefore may be
refused.
Except as noted above, only shareholders and their authorized brokers
of record will be permitted to make exchanges or redemptions.
Systematic Withdrawal Plans
Shareholders of Class A Shares, Class B Shares and Class C Shares who
own or purchase $5,000 or more of shares at the offering price, or net asset
value, as applicable, for which certificates have not been issued may establish
a Systematic Withdrawal Plan for monthly withdrawals of $25 or more, or
quarterly withdrawals of $75 or more, although the Funds do not recommend any
specific amount of withdrawal. This is particularly useful to shareholders
living on fixed incomes, since it can provide them with a stable supplemental
amount. This $5,000 minimum does not apply for a Fund's prototype retirement
plans. Shares purchased with the initial investment and through reinvestment of
cash dividends and realized securities profits distributions will be credited to
the shareholder's account and sufficient full and fractional shares will be
redeemed at the net asset value calculated on the third business day preceding
the mailing date.
Checks are dated either the 1st or the 15th of the month, as selected
by the shareholder (unless such date falls on a holiday or a weekend), and are
normally mailed within two business days. Both ordinary income dividends and
realized securities profits distributions will be automatically reinvested in
additional shares of the Class at net asset value. This plan is not recommended
for all investors and should be started only after careful consideration of its
operation and effect upon the investor's savings and investment program. To the
extent that withdrawal payments from the plan exceed any dividends and/or
realized securities profits distributions paid on shares held under the plan,
the withdrawal payments will represent a return of capital, and the share
balance may in time be depleted, particularly in a declining market.
Shareholders should not purchase additional shares while participating in a
Systematic Withdrawal Plan.
The sale of shares for withdrawal payments constitutes a taxable event
and a shareholder may incur a capital gain or loss for federal income tax
purposes. This gain or loss may be long-term or short-term depending on the
holding period for the specific shares liquidated. Premature withdrawals from
retirement plans may have adverse tax consequences.
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Withdrawals under this plan made concurrently with the purchases of additional
shares may be disadvantageous to the shareholder. Purchases of Class A Shares
through a periodic investment program in a fund managed by the Manager must be
terminated before a Systematic Withdrawal Plan with respect to such shares can
take effect, except if the shareholder is Delaware Investments funds which do
not carry a sales charge. Redemptions of Class A Shares pursuant to a Systematic
Withdrawal Plan may be subject to a Limited CDSC if the purchase was made at net
asset value and a dealer's commission has been paid on that purchase. The
applicable Limited CDSC for Class A Shares and CDSC for Class B and C Shares
redeemed via a Systematic Withdrawal Plan will be waived if the annual amount
withdrawn in each year is less than 12% of the account balance on the date that
the Plan is established. If the annual amount withdrawn in any year exceeds 12%
of the account balance on the date that the Systematic Withdrawal Plan is
established, all redemptions under the Plan will be subjected to the applicable
contingent deferred sales charge, including an assessment for previously
redeemed amounts under the Plan. Whether a waiver of the contingent deferred
sales charge is available or not, the first shares to be redeemed for each
Systematic Withdrawal Plan payment will be those not subject to a contingent
deferred sales charge because they have either satisfied the required holding
period or were acquired through the reinvestment of distributions.
An investor wishing to start a Systematic Withdrawal Plan must complete
an authorization form. If the recipient of Systematic Withdrawal Plan payments
is other than the registered shareholder, the shareholder's signature on this
authorization must be guaranteed. Each signature guarantee must be supplied by
an eligible guarantor institution. The Funds reserve the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. This plan may be terminated by the shareholder or the Transfer
Agent at any time by giving written notice.
Systematic Withdrawal Plan payments are normally made by check. In the
alternative, you may elect to have your payments transferred from your Fund
account to your predesignated bank account through the MoneyLine (SM) Direct
Deposit Service. Your funds will normally be credited to your bank account up to
four business days after the payment date. There are no separate fees for this
redemption method. It may take up to four business days for the transactions to
be completed. You can initiate this service by completing an Account Services
form. If your name and address are not identical to the name and address on your
Fund account, you must have your signature guaranteed. The Funds do not charge a
fee for any this service; however, your bank may charge a fee. This service is
not available for retirement plans.
The Systematic Withdrawal Plan is not available for the Institutional
Class of each Fund. Shareholders should consult with their financial advisers to
determine whether a Systematic Withdrawal Plan would be suitable for them.
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value
For purchases of $1,000,000 or more made on or after July 1, 1998, a
Limited CDSC will be imposed on certain redemptions of Class A Shares (or shares
into which such Class A Shares are exchanged) according to the following
schedule: (1) 1.00% if shares are redeemed during the first year after the
purchase; and (2) 0.50% if such shares are redeemed during the second year after
the purchase, if such purchases were made at net asset value and triggered the
payment by the Distributor of the dealer's commission described above.
The Limited CDSC will be paid to the Distributor and will be assessed
on an amount equal to the lesser of : (1) the net asset value at the time of
purchase of the Class A Shares being redeemed or (2) the net asset value of such
Class A Shares at the time of redemption. For purposes of this formula, the "net
asset value at the time of purchase" will be the net asset value at purchase of
the Class A Shares even if those shares are later exchanged for shares of
another Delaware Investments fund and, in the event of an exchange of Class A
Shares, the "net asset value of such shares at the time of redemption" will be
the net asset value of the shares acquired in the exchange.
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Redemptions of such Class A Shares held for more than two years will
not be subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Investments fund will not trigger the imposition of the Limited
CDSC at the time of such exchange. The period a shareholder owns shares into
which Class A Shares are exchanged will count towards satisfying the two-year
holding period. The Limited CDSC is assessed if such two year period is not
satisfied irrespective of whether the redemption triggering its payment is of
Class A Shares of a Fund or Class A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed
that shares not subject to the Limited CDSC are the first redeemed followed by
other shares held for the longest period of time. The Limited CDSC will not be
imposed upon shares representing reinvested dividends or capital gains
distributions, or upon amounts representing share appreciation. All investments
made during a calendar month, regardless of what day of the month the investment
occurred, will age one month on the last day of that month and each subsequent
month.
Waiver of Limited Contingent Deferred Sales Charge - Class A Shares
The Limited CDSC for Class A Shares on which a dealer's commission has
been paid will be waived in the following instances: (i) redemptions that result
from a Fund's right to liquidate a shareholder's account if the aggregate net
asset value of the shares held in the account is less than the then-effective
minimum account size; (ii) distributions to participants from a retirement plan
qualified under section 401(a) or 401(k) of the Internal Revenue Code of 1986,
as amended (the "Code"), or due to death of a participant in such a plan; (iii)
redemptions pursuant to the direction of a participant or beneficiary of a
retirement plan qualified under section 401(a) or 401(k) of the Code with
respect to that retirement plan; (iv) periodic distributions from an IRA, SIMPLE
IRA, or 403(b)(7) or 457 Deferred Compensation Plan due to death, disability, or
attainment of age 59 1/2, and IRA distributions qualifying under Section 72(t)
of the Internal Revenue Code; (v) returns of excess contributions to an IRA;
(vi) distributions by other employee benefit plans to pay benefits; (vii)
distributions described in (ii), (iv), and (vi) above pursuant to a systematic
withdrawal plan; (viii) distributions form an account if the redemption results
from a death of a registered owner, or a registered joint owner, of the account
(in the case of accounts established under the Uniform Gifts to Minors or
Uniform transfers to Minors Acts or trust accounts, the waiver applies upon the
death of all beneficial owners) or a total disability (as defined in Section 72
of the Code) of all registered owners occurring after the purchase of the shares
being redeemed; and (ix) redemptions by the classes of shareholders who are
permitted to purchase shares at net asset value, regardless of the size of the
purchase (see Buying Class A Shares at Net Asset Value under Purchasing Shares).
Waiver of Contingent Deferred Sales Charge - Class B Shares
The CDSC is waived on certain redemptions of Class B Shares in
connection with the following redemptions: (i) redemptions that result from a
Fund's right to liquidate a shareholder's account if the aggregate net asset
value of the shares held in the account is less than the then-effective minimum
account size; (ii) returns of excess contributions to an IRA, SIMPLE IRA,
SEP/IRA, or 403(b)(7) or 457 Deferred Compensation Plan; (iii) periodic
distributions from an IRA, SIMPLE IRA, SAR/SEP, SEP/IRA, or 403(b)(7) or 457
Deferred Compensation Plan due to death, disability or attainment of age 59 1/2,
and IRA distributions qualifying under Section 72(t) of the Internal Revenue
Code; and (iv) distributions from an account if the redemption results from the
death of a registered owner, or a registered joint owner, of the account (in the
case of accounts established under the Uniform Gifts to Minors or Uniform
Transfers to Minors Acts or trust accounts, the waiver applies upon the death of
all beneficial owners) or a total and permanent disability (as defined in
Section 72 of the Code) of all registered owners occurring after the purchase of
the shares being redeemed.
Waiver of Contingent Deferred Sales Charge -Class C Shares
The CDSC on Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from the Fund's right to liquidate a
shareholder's account if the aggregate net asset value of the shares held in the
account is less than the then-effective minimum account size; (ii) returns of
excess contributions to an IRA, SIMPLE IRA, 403(b)(7) or 457 Deferred
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Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan, or 401(k)
Defined Contribution plan; (iii) periodic distributions from a 403(b)(7) or 457
Deferred Compensation Plan upon attainment of age 59 1/2, Profit Sharing Plan,
Money Purchase Plan, 401(k) Defined Contribution Plan upon attainment of age 70
1/2, and IRA distributions qualifying under Section 72(t) of the Internal
Revenue Code; (iv) distributions from a 403(b)(7) or 457 Deferred Compensation
Plan, Profit Sharing Plan, or 401(k) Defined Contribution Plan, under hardship
provisions of the plan; (v) distributions from a 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan or a 401(k)
Defined Contribution Plan upon attainment of normal retirement age under the
plan or upon separation from service; (vi) periodic distributions from an IRA or
SIMPLE IRA on or after attainment of age 59 1/2; and (vii) distributions from an
account if the redemption results from the death of a registered owner, or a
registered joint owner, of the account (in the case of accounts established
under the Uniform Gifts to Minors or Uniform Transfers to Minors Acts or trust
accounts, the waiver applies upon the death of all beneficial owners) or a total
and permanent disability (as defined in Section 72 of the Code) of all
registered owners occurring after the purchase of the shares being redeemed.
* * *
In addition, the CDSC will be waived on Class A Shares, Class B Shares
and Class C Shares redeemed in accordance with a Systematic Withdrawal Plan if
the annual amount selected to be withdrawn under the Plan does not exceed 12% of
the value of the account on the date that the Systematic Withdrawal Plan was
established or modified.
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DIVIDENDS, DISTRIBUTIONS AND TAXES
The following supplements the information in each Prospectus under the
heading Dividends, Distributions and Taxes.
Under the Taxpayer Relief Act of 1997 (the "1997 Act"), as revised by
the Internal Revenue Service Restructuring and Reform Act of 1998 (the "1998
Act") and the Omnibus Consolidated and Emergency Supplemental Appropriations
Act, a Fund is required to track its sales of portfolio securities and to report
its capital gain distributions to you according to the following categories:
"Long-term capital gains": gains on securities sold after December 31,
1997 and held for more than 12 months as capital assets in the hands of
the holder are taxed at the 20% rate when distributed to shareholders
(10% for individual investors in the 15% bracket).
"Short-term capital gains": Gains on securities sold by a Fund that do
not meet the long-term holdings period are considered short term
capital gains and are taxable as ordinary income.
"Qualified 5-year gains": For individuals in the 15% bracket, qualified
five-year gains are net gains on securities held for more than 5 years
which are sold after December 31, 2000. For individuals who are subject
to tax at higher rate brackets, qualified five-year gains are net gains
on securities which are purchased after December 31, 2000 and are held
for more than five years. Taxpayers subject to tax at a higher rate
brackets may also make an election for shares held on January 1, 2001
to recognize gain on their shares in order to qualify such shares as
qualified five-year property. These gains will be taxable to individual
investors at a maximum rate of 18% for investors in the 28% or higher
federal income tax brackets, and at a maximum rate of 8% for investors
in the 15% federal income tax bracket when sold after the five-year
holding period.
Any loss incurred on the redemption or exchange of shares held for six
months or less will be disallowed to the extent of any exempt-interest dividends
distributed to you with respect to your Fund shares and any remaining loss will
be treated as a long-term capital loss to the extent of any long-term capital
gains distributed to you by the Fund on those shares.
All or a portion of any loss that you realize upon the redemption of
your Fund shares will be disallowed to the extent that you buy other shares in
the Fund (through reinvestment of dividends or otherwise) within 30 days before
or after your share redemption. Any loss disallowed under these rules will be
added to your tax basis in the new shares you buy.
If you redeem some or all of yours shares in a Fund, and then reinvest
the sales proceeds in such Fund or in another Delaware Investments fund within
90 days of buying the original shares, the sales charge that would otherwise
apply to your reinvestment may be reduced or eliminated. The IRS will require
you to report gain or loss on the redemption of your original shares in a Fund.
In doing so, all or a portion of the sales charge that you paid for your
original shares in a Fund will be excluded from your tax basis in the shares
sold (for the purpose of determining gain or loss upon the sale of such shares).
The portion of the sales charge excluded will equal the amount that the sales
charge is reduced on your reinvestment. Any portion of the sales charge excluded
from your tax basis in the shares sold will be added to the tax basis of the
shares you acquire from your reinvestment.
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Tax Information Concerning Each Fund
Each Fund has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Code. As such, a Fund
will not be subject to federal income tax, or to any excise tax, to the extent
its earnings are distributed as provided in the Code and it satisfies other
requirements relating to the sources of its income and diversification of its
assets. In order to qualify as a regulated investment company for federal income
tax purposes, each Fund must meet certain specific requirements, including:
(i) A Fund must maintain a diversified portfolio of securities, wherein
no security (other than U.S. government securities and securities of other
regulated investment companies) can exceed 25% of that Fund's total assets, and,
with respect to 50% of that Fund's total assets, no investment (other than cash
and cash items, U.S. government securities and securities of other regulated
investment companies) can exceed 5% of that Fund's total assets;
(ii) A Fund must derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or disposition of stock and securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities, or currencies;
(iii) A Fund must distribute to its shareholders at least 90% of its
investment company taxable income and net tax-exempt income for each of its
fiscal years, and
(iv) A Fund must realize less than 30% of its gross income for each
fiscal year from gains from the sale of securities and certain other assets that
have been held by the Fund for less than three months ("short-short income").
The "1997 Act" repealed the 30% short-short income test for tax years of
regulated investment companies beginning after August 5, 1997; however, this
rule may have continuing effect in some states for purposes of classifying the
Fund as a regulated investment company.
The Code requires a Fund to distribute at least 98% of its taxable
ordinary income earned during the calendar year and 98% of its capital gain net
income earned during the 12 month period ending October 31 (in addition to
amounts from the prior year that were neither distributed nor taxed to such
Fund) to shareholders by December 31 of each year in order to avoid federal
excise taxes. The Funds intend as a matter of policy to declare and pay
sufficient dividends in December or January (which are treated by shareholders
as received in December) but does not guarantee and can give no assurances that
its distributions will be sufficient to eliminate all such taxes.
The straddle rules of Section 1092 may apply. Generally, the straddle
provisions require the deferral of losses to the extent of unrecognized gains
related to the offsetting positions in the straddle. Excess losses, if any, can
be recognized in the year of loss. Deferred losses will be carried forward and
recognized in the year that unrealized losses exceed unrealized gains.
The 1997 Act has also added new provisions for dealing with
transactions that are generally called "Constructive Sale Transactions." Under
these rules, the Fund must recognize gain (but not loss) on any constructive
sale of an appreciated financial position in stock, a partnership interest or
certain debt instruments. The Fund will generally be treated as making a
constructive sale when it: 1) enters into a short sale on the same or
substantially identical property; 2) enters into an offsetting notional
principal contract; or 3) enters into a futures or forward contract to deliver
the same or substantially identical property. Other transactions (including
certain financial instruments called collars) will be treated as constructive
sales as provided in Treasury regulations to be published. There are also
certain exceptions that apply for transactions that are closed before the end of
the 30th day after the close of the taxable year.
Investment in Foreign Currencies and Foreign Securities--The Funds are
authorized to invest certain limited amounts in foreign securities. Such
investments, if made, will have the following additional tax consequences to
each Fund:
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Under the Code, gains or losses attributable to fluctuations in foreign
currency exchange rates which occur between the time a Fund accrues income
(including dividends), or accrues expenses which are denominated in a foreign
currency, and the time a Fund actually collects such income or pays such
expenses generally are treated as ordinary income or loss. Similarly, on the
disposition of debt securities denominated in a foreign currency and on the
disposition of certain options, futures, forward contracts, gain or loss
attributable to fluctuations in the value of foreign currency between the date
of acquisition of the security or contract and the date of its disposition are
also treated as ordinary gain or loss. These gains or losses, referred to under
the Code as "Section 988" gains or losses, may increase or decrease the amount
of a Fund's net investment company taxable income, which, in turn, will affect
the amount of income to be distributed to you by a Fund.
If a Fund's Section 988 losses exceed a Fund's other investment company
taxable income during a taxable year, a Fund generally will not be able to make
ordinary dividend distributions to you for that year, or distributions made
before the losses were realized will be recharacterized as return of capital
distributions for federal income tax purposes, rather than as an ordinary
dividend or capital gain distribution. If a distribution is treated as a return
of capital, your tax basis in your Fund shares will be reduced by a like amount
(to the extent of such basis), and any excess of the distribution over your tax
basis in your Fund shares will be treated as capital gain to you.
The 1997 Act generally requires that foreign income be translated into
U.S. dollars at the average exchange rate for the tax year in which the
transactions are conducted. Certain exceptions apply to taxes paid more than two
years after the taxable year to which they relate. This new law may require a
Fund to track and record adjustments to foreign taxes paid on foreign securities
in which it invests. Under a Fund's current reporting procedure, foreign
security transactions are recorded generally at the time of each transaction
using the foreign currency spot rate available for the date of each transaction.
Under the new law, a Fund will be required to record at fiscal year end (and at
calendar year end for excise tax purposes) an adjustment that reflects the
difference between the spot rates recorded for each transaction and the year-end
average exchange rate for all of a Fund's foreign securities transactions. There
is a possibility that the mutual fund industry will be given relief from this
new provision, in which case no year-end adjustments will be required.
The Funds may be subject to foreign withholding taxes on income from
certain of its foreign securities. If more than 50% of the total assets of a
Fund at the end of its fiscal year are invested in securities of foreign
corporations, a Fund may elect to pass-through to you your pro rata share of
foreign taxes paid by a Fund. If this election is made, you will be: (i)
required to include in your gross income your pro rata share of foreign source
income (including any foreign taxes paid by a Fund); and (ii) entitled to either
deduct your share of such foreign taxes in computing your taxable income or to
claim a credit for such taxes against your U.S. income tax, subject to certain
limitations under the Code. You will be informed by a Fund at the end of each
calendar year regarding the availability of any such foreign tax credits and the
amount of foreign source income (including any foreign taxes paid by a Fund). If
a Fund elects to pass-through to you the foreign income taxes that it has paid,
you will be informed at the end of the calendar year of the amount of foreign
taxes paid and foreign source income that must be included on your federal
income tax return. If a Fund invests 50% or less of its total assets in
securities of foreign corporations, it will not be entitled to pass-through to
you your pro-rata shares of foreign taxes paid by a Fund. In this case, these
taxes will be taken as a deduction by a Fund, and the income reported to you
will be the net amount after these deductions. The 1997 Act also simplifies the
procedures by which investors in funds that invest in foreign securities can
claim tax credits on their individual income tax returns for the foreign taxes
paid by a Fund. These provisions will allow investors who pay foreign taxes of
$300 or less on a single return or $600 or less on a joint return during any
year (all of which must be reported on IRS Form 1099-DIV from a Fund to the
investor) to claim a tax credit against their U.S. federal income tax for the
amount of foreign taxes paid by a Fund. This process will allow you, if you
qualify, to bypass the burdensome and detailed reporting requirements on the
foreign tax credit schedule (Form 1116) and report your foreign taxes paid
directly on page 2 of Form 1040. This simplified procedure was not available
until calendar year 1998.
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Investment in Passive Foreign Investment Company securities--The Funds
may invest in shares of foreign corporations which may be classified under the
Code as passive foreign investment companies ("PFICs"). In general, a foreign
corporation is classified as a PFIC if at least one-half of its assets
constitute investment-type assets or 75% or more of its gross income is
investment-type income. If a Fund receives an "excess distribution" with respect
to PFIC stock, the Fund itself may be subject to U.S. federal income tax on a
portion of the distribution, whether or not the corresponding income is
distributed by a Fund to you. In general, under the PFIC rules, an excess
distribution is treated as having been realized ratably over the period during
which a Fund held the PFIC shares. A Fund itself will be subject to tax on the
portion, if any, of an excess distribution that is so allocated to prior Fund
taxable years, and an interest factor will be added to the tax, as if the tax
had been payable in such prior taxable years. In this case, you would not be
permitted to claim a credit on your own tax return for the tax paid by a Fund.
Certain distributions from a PFIC as well as gain from the sale of PFIC shares
are treated as excess distributions. Excess distributions are characterized as
ordinary income even though, absent application of the PFIC rules, certain
distribution might have been classified as capital gain. This may have the
effect of increasing Fund distributions to you that are treated as ordinary
dividends rather than long-term capital gain dividends.
A Fund may be eligible to elect alternative tax treatment with respect
to PFIC shares. Under an election that currently is available in some
circumstances, a Fund generally would be required to include in its gross income
its share of the earnings of a PFIC on a current basis, regardless of whether
distributions are received from the PFIC during such period. If this election
were made, the special rules, discussed above, relating to the taxation of
excess distributions, would not apply. In addition, the 1997 Act provides for
another election that would involve marking-to-market the Fund's PFIC shares at
the end of each taxable year (and on certain other dates as prescribed in the
Code), with the result that unrealized gains would be treated as though they
were realized. The Fund would also be allowed an ordinary deduction for the
excess, if any, of the adjusted basis of its investment in the PFIC stock over
its fair market value at the end of the taxable year. This deduction would be
limited to the amount of any net mark-to-market gains previously included with
respect to that particular PFIC security. If a Fund were to make this second
PFIC election, tax at the Fund level under the PFIC rules would generally be
eliminated.
The application of the PFIC rules may affect, among other things, the
amount of tax payable by a Fund (if any), the amounts distributable to you by a
Fund, the time at which these distributions must be made, and whether these
distributions will be classified as ordinary income or capital gain
distributions to you.
You should be aware that it is not always possible at the time shares
of a foreign corporation are acquired to ascertain that the foreign corporation
is a PFIC, and that there is always a possibility that a foreign corporation
will become a PFIC after a Fund acquires shares in that corporation. While a
Fund will generally seek to avoid investing in PFIC shares to avoid the tax
consequences detailed above, there are no guarantees that it will do so and it
reserves the right to make such investments as a matter of its fundamental
investment policy.
Most foreign exchange gains are classified as ordinary income which
will be taxable to you as such when distributed. Similarly, you should be aware
that any foreign exchange losses realized by a Fund, including any losses
realized on the sale of foreign debt securities, are generally treated as
ordinary losses for federal income tax purposes. This treatment could increase
or reduce a Fund's income available for distribution to you, and may cause some
or all of a Fund's previously distributed income to be classified as a return of
capital.
Taxation of Shareholders
Dividends of net investment income and distributions of net realized
short-term capital gains will be taxable to shareholders as ordinary income for
federal income tax purposes, whether received in cash or reinvested in
additional shares. Dividends received by corporate shareholders will qualify for
the dividends-received deduction only to the extent that each Fund designates
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the amount distributed as a dividend and the amount so designated does not
exceed the aggregate amount of dividends received by the Funds from domestic
corporations for the taxable year. The federal dividends-received deduction for
corporate shareholders may be further reduced or disallowed if the shares with
respect to which dividends are received are treated as debt-financed or are
deemed to have been held for less than 46 days.
Foreign countries may impose withholding and other taxes on dividends
and interest paid to the Funds with respect to investments in foreign
securities. However, certain foreign countries have entered into tax conventions
with the U.S. to reduce or eliminate such taxes.
Distributions of long-term capital gains will be taxable to
shareholders as such, whether paid in cash or reinvested in additional shares
and regardless of the length of time that the shareholder has held his or her
interest in one of the Funds. If a shareholder receives a distribution taxable
as long-term capital gain with respect to his or her investment in a Fund and
redeems or exchanges the shares before he or she has held them for more than six
months, any loss on the redemption or exchange that is less than or equal to the
amount of the distribution will be treated as a long-term capital loss.
Investors considering buying shares of a Fund just prior to a record
date for a taxable dividend or capital gain distribution should be aware that,
regardless of whether the price of the Fund shares to be purchased reflects the
amount of the forthcoming dividend or distribution payment, any such payment
will be a taxable dividend or distribution payment. This is of particular
concern for investors in the Equity Funds since these Funds may make
distributions on an annual basis.
Each Fund will be required in certain cases to withhold and remit to
the United States Treasury 31% of taxable dividends or of gross proceeds from
redemptions paid to any shareholder who has provided either an incorrect tax
identification number or no number at all, or who is subject to withholding by
the Internal Revenue Service for failure to properly include on his tax return
payments of interest or dividends. This withholding, known as backup
withholding, is not an additional tax, and any amounts withheld may be credited
against the shareholder's ultimate U.S. tax liability.
Certain investments and hedging activities of the Funds, including
transactions in options, futures contracts, hedging transactions, forward
contracts, straddles, foreign currencies, and foreign securities will be subject
to special tax rules. See Option Transactions, Straddles and Wash Sales, below.
In a given case, these rules may accelerate income to a Fund, defer losses to a
Fund, cause adjustments in the holding periods of a Fund's securities, convert
short-term capital losses into long-term capital losses, or otherwise affect the
character of a Fund's income. These rules could therefore affect the amount,
timing and character of distributions to shareholders. Each Fund will endeavor
to make any available elections pertaining to such transactions in a manner
believed to be in the best interest of a Fund.
Certain securities purchased by the Funds (such as STRIPS, CUBES, TRs,
TIGRs and CATS), are sold at original issue discount and do not make periodic
cash interest payments. A Fund will be required to include as part of its
current income the imputed interest on such obligations even though a Fund has
not received any interest payments on such obligations during that period.
Because a Fund distributes all of its net investment income to its shareholders
(including such imputed interest), a Fund may have to sell securities in order
to generate the cash necessary for the required distributions. Such sales may
occur at a time when the Manager or sub-adviser would not have chosen to sell
such securities and which may result in a taxable gain or loss.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting purchasers of shares of each Fund of Adviser
Funds Further tax information regarding Overseas Equity and Delaware New Pacific
Funds are included in following sections of this Part B. No attempt is made to
present a detailed explanation of the federal income tax treatment of each Fund
or its shareholders, and this discussion is not intended as a substitute for
careful tax planning. Accordingly, prospective purchasers of shares of a Fund
are urged to consult their tax advisors with specific reference to their own tax
situation, including the potential application of state and local taxes.
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Options Transactions
When a Fund writes a call option, an amount equal to the premium
received by it is included in the Fund's assets and liabilities as an asset and
as an equivalent liability. The amount of the liability is subsequently "marked
to market" to reflect the current market value of the option written. The
current market value of a written option is the last sale price on the principal
Exchange on which such option is traded or, in the absence of a sale, the mean
between the last bid and asked prices. If an option which a Fund has written
expires on its stipulated expiration date, or if a Fund enters into a closing
purchase transaction, the Fund realizes a gain (or loss if the cost of the
closing transaction exceeds the premium received when the option was sold)
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is extinguished. Any such gain or loss is a
short-term capital gain or loss for federal income tax purposes. If a call
option which a Fund has written is exercised, the Fund realizes a capital gain
or loss (long-term or short-term, depending on the holding period of the
underlying security) from the sale of the underlying security, and the proceeds
from such sale are increased by the premium originally received.
The premium paid by a Fund for the purchase of a put option is recorded
in the section of the Fund's assets and liabilities as an investment and
subsequently adjusted daily to the current market value of the option. For
example, if the current market value of the option exceeds the premium paid, the
excess would be unrealized appreciation and, conversely, if the premium exceeds
the current market value, such excess would be unrealized depreciation. If a put
option which a Fund has purchased expires on the stipulated expiration date,
that Fund realizes a long- or short-term capital loss for federal income tax
purposes in the amount of the cost of the option. If the Fund sells the put
option, it realizes a long- or short-term capital gain or loss, depending on
whether the proceeds from the sale are greater or less than the cost of the
option. If the Fund exercises a put option, it realizes a capital gain or loss
(long-term or short-term, depending on the holding period of the underlying
security) from the sale of the underlying security and the proceeds from such
sale will be decreased by the premium originally paid. However, since the
purchase of a put option is treated as a short sale for federal income tax
purposes, the holding period of the underlying security will be affected by such
a purchase.
Futures Contracts
The initial margin deposits made when entering into futures contracts
are recognized as assets due from the broker. During the period the futures
contract is open, changes in the value of the contract will be reflected at the
end of each day.
64
<PAGE>
Regulated futures contracts held by the Fund at the end of each fiscal
year will be required to be "marked to market" for federal income tax purposes.
Any unrealized gain or loss on futures contracts will therefore be recognized
and deemed to consist of 60% long-term capital gain or loss and 40% short-term
capital gain or loss. Therefore, adjustments are made to the tax basis in the
futures contract to reflect the gain or loss recognized at year end.
Straddles
The Code contains rules applicable to "straddles," that is, "offsetting
positions in actively traded personal property." Such personal property includes
offsetting puts of the same class, section 1256 contracts or other investment
contracts. Where applicable, the straddle rules generally override the other
provisions of the Code. In general, investment positions will be offsetting if
there is a substantial diminution in the risk of loss from holding one position
by reason of holding one or more other positions (although certain covered call
options would not be treated as part of a straddle). The Funds are authorized to
enter into covered call and covered put positions. Depending on what other
investments are held by a Fund, at the time it enters into one of the above
transactions, the Fund may create a straddle for purposes of the Code.
Wash Sales
"Wash sale" rules will apply to prevent the recognition of loss with
respect to a position where an identical or substantially identical position has
been acquired 30 days prior to or 30 days after the date of the loss.
The foregoing is only a summary of certain federal tax considerations
generally affecting the Funds and their shareholders and is not intended as a
substitute for careful tax planning. Shareholders are urged to consult their tax
advisers with specific reference to their own tax situations, including their
state and local tax liabilities.
65
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT AND SUB-ADVISORY AGREEMENTS
Delaware Management Company ("Delaware Management") located at One
Commerce Square, Philadelphia, PA 19103, furnishes investment management
services to Delaware New Pacific Fund and Delaware Overseas Equity Fund.
Delaware Management and its predecessors have been managing the funds
in Delaware Investments since 1938. On November 30, 1999, Delaware Management,
Delaware International and their affiliates within Delaware Investments were
managing in the aggregate more than $45 billion in assets in the various
institutional or separately managed approximately $26,625,560,000 and investment
company approximately $18,776,030,000 accounts.
The Investment Management Agreement for each Fund is dated November 23,
1999 and was approved by the initial shareholder on that date. The Agreement has
an initial term of two years and may be further renewed after their initial
terms only so long as such renewal and continuance are specifically approved at
least annually by the Board of Trustees or by vote of a majority of the
outstanding voting securities of the Fund to which the Agreement relates, and
only if the terms of the renewal thereof have been approved by the vote of a
majority of the trustees of Adviser Funds who are not parties thereto or
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval. The Agreement is terminable without penalty
on 60 days' notice by the trustees of Adviser Funds or by the Manager. The
Agreement will terminate automatically in the event of its assignment.
The Manager manages each Fund's investments. The compensation payable
by each Fund for investment management services is equal to (on an annual basis)
as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
Fund Fee
<S> <C>
--------------------------------------------------------------------------------------------------------
Delaware New Pacific Fund 0.85% on the first $500 million of average daily net
assets, 0.80% on the next $500 million; 0.75% on the next $1.5
billion; 0.70% on the average daily net assets in excess of $2.5
billion
-------------------------------- -----------------------------------------------------------------------
Delaware Overseas Equity Fund 0.85% on the first $500 million of average daily net assets, 0.80% on
the next $500 million; 0.75% on the next $1.5 billion; 0.70% on the
average daily net assets in excess of $2.5 billion
--------------------------------------------------------------------------------------------------------
</TABLE>
On October 31, 1999, the total net assets of the Funds were as follows:
-66-
<PAGE>
Delaware New Pacific Fund $20,064,297
-------------------------------------------------
Delaware Overseas Equity Fund $ 3,581,189
Investment management fees were paid by the Funds for the last three
fiscal years as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
October 31, 1999 October 31, 1998 October 31, 1997
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware New Pacific Fund $110,931 earned $50,696 earned $118,010 earned
$28,667 paid $-0- paid $109,011 paid
$82,264 waived $50,696 waived $8,999 waived
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Overseas Equity Fund $3,890 earned $46,051 earned $176,619 earned
$ -0- paid $-0- paid $176,619 paid
$31,890 waived $46,051 waived -$0- waived
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Beginning May 1, 1998, the Manager elected voluntarily to waive that
portion, if any, of the annual management fees payable by each Fund and to pay a
Fund for its expenses to the extent necessary to ensure that the total operating
expenses of the Fund do not exceed on an annualized basis 1.55% for Delaware
Overseas Equity Fund and 1.70% for Delaware New Pacific Fund, in each case as a
percentage of average net assets (exclusive of 12b-1 Plan expenses, taxes,
interest, brokerage commissions and extraordinary expenses) through October 31,
1998. These voluntary waivers and payments of expenses have been extended
through November 8, 1999 for each Fund. Beginning November 9 1999, the Manager
elected voluntarily to limit such expenses for the Funds in order to present
total operating expenses (including any 12b-1 fees, taxes, interest, brokerage
fees and extraordinary expenses) from exceeding 1.70% of average daily net
assets in the case of Delaware Overseas Equity Fund and 2.00% of average daily
net assets in the case of Delaware New Pacific Fund. These voluntary waivers
will be in effect through October 31, 2000.
The Manager had voluntarily committed to waive its fees or pay expenses
for the Funds beginning as of the close of business May 3, 1996 through April
30, 1998 to the extent necessary to ensure that the total operating expenses of
the Fund do not exceed on an annualized basis 1.50%. The cap for each Fund was
lowered from that maintained by the previous investment manager by 0.05%,
reflecting the reduction from 0.35% to 0.30% of the 12b-1 fees payable by the
Funds with respect to Class A Shares. The expense waivers and/or payments will
be reevaluated by the Manager periodically.
Sub-Advisers
The following registered investment advisers serve as sub-advisers to
the Funds: Delaware International Advisers Ltd. serves as sub-adviser of
Delaware Overseas Equity Fund; and AIB Govett, Inc. serves as sub-adviser of
Delaware New Pacific Fund.
During the past three fiscal years, the Sub-Advisers received fees from
the Manager in the following amounts:
<TABLE>
<CAPTION>
October 31
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Delaware International Advisers Ltd. $28,814 $36,840 $132,730
AIB Govett, Inc. 67,275 31,685 73,483
</TABLE>
Delaware International Adviser Ltd. was established in 1990 and began
serving as Sub-Adviser to Delaware Overseas Equity Fund on September 15, 1997.
Delaware International Advisers Ltd. provides investment advisory services to
certain other funds available from Delaware Investments and to institutional
clients. As of October 31, 1998, Delaware International Advisers Ltd. had total
assets under management in excess of $8 billion. Under the Sub-Advisory
Agreement, Delaware Management pays Delaware International Advisers Ltd.
receives 80% of the fees it receive under its Investment Management Agreement
with Delaware Overseas Equity Fund.
AIB Govett, Inc. is a unit of AIB Asset Management Holdings Limited, a
majority owned subsidiary of Allied Irish Bank plc ("AIB"), Ireland's largest
bank. AIB Govett, Inc. coordinates with its offices and affiliates worldwide,
including AIB Govett Asset Management Limited in London to provide asset
management, client service, marketing and business development for AIB's North
American asset management business. AIB Govett, Inc. has been an investment
adviser to clients such as investment trusts, investment companies, mutual funds
and pension funds since its inception in the 1920s. As of November 30, 1999, AIB
Govett, Inc. had assets
-67-
<PAGE>
under management in excess of $16.8 billion. Under the Sub-Advisory Agreement,
AIB Govett, Inc. receives on an annual basis 0.50% of the average daily net
assets of the Fund.
Delaware International and Delaware are controlled and indirectly,
wholly owned by Delaware Management Holdings, Inc.
Except for those expenses borne by the Manager under the Investment
Management Agreement and the Distributor under the Distribution Agreements, each
Fund is responsible for all of its own expenses. Among others, these include
each Fund's proportionate share of rent and certain other administrative
expenses; the investment management fees; transfer and dividend disbursing agent
fees and costs; custodian expenses; federal and state securities registration
fees; proxy costs; and the costs of preparing prospectuses and reports sent to
shareholders.
Distribution and Service
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), located at 1818 Market Street, serves
as the national distributor of the shares of each Fund under separate agreements
dated as of November 23, 1999. The Distributor is an affiliate of the Manager
and bears all of the costs of promotion and distribution, except for payments by
each Fund on behalf of its respective Class A Shares, Class B Shares and Class C
Shares under the 12b-1 Plan for each class.
The Transfer Agent, Delaware Service Company, Inc., another affiliate
of the Manager located at 1818 Market Street, Philadelphia, PA 19103, serves as
the shareholder servicing, dividend disbursing and transfer agent for each Fund
under an agreement dated November 23, 1998. The Transfer Agent provides
accounting services to the Funds pursuant to the terms of a separate Fund
Accounting Agreement. The Transfer Agent is also an indirect, wholly owned
subsidiary of Delaware Management Holdings, Inc.
The Fund has authorized one or more brokers to accept on its behalf
purchase and redemption orders in addition to the Transfer Agent. Such brokers
are authorized to designate other intermediaries to accept purchase and
redemption orders on the behalf of the Funds. For purposes of pricing, the Funds
will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order.
-68-
<PAGE>
OFFICERS AND TRUSTEES
The business and affairs of Adviser Funds are managed under the
direction of its Board of Trustees.
Certain officers and trustees of Adviser Funds hold identical positions
in each of the other funds in the Delaware Investments family. As of December
31, 1999, the officers and trustees of Adviser Funds, as a group, owned less
than 1% of the outstanding shares of Class A Shares, Class B Shares, Class C
Shares and Institutional Class Shares of each Fund.
As of December 31, 1999, management believes the following accounts
held 5% or more of a Class of shares of a Fund:
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
Delaware Overseas RS Money Purchase Pension Plan 17,904.880 6.06%
Equity Fund A Class Windermere Retirement Plan
c/o Delpac 16th Floor
1818 Market Street
Philadelphia, PA 19103-3638
Delaware Overseas Merrill Lynch, Pierce, Fenner & Smith 11,448.450 7.24%
Equity Fund B Class For the Sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
DMTC C/F The Rollover IRA of 9,195.000 5.82%
Carl W. Niederwimmer
301 NW 73rd Terrace
Gladstone, MO 64118-1675
Delaware Overseas NFSC FEBO #BW1-437271 5,896.470 19.38%
Equity Fund C Class Haus Geborgenheit Ltd.
A Partnership
2305 Versailles Ct
Heath, TX 75032-7670
RS Tri-Country Air Conditioning & Heating Inc. 2,110.000 6.93%
401(k) Plan
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
Merrill Lynch, Pierce, Fenner & Smith 2,076.890 6.82%
For the Sole Benefit of its Customers
Attn: Fund Administration #97JY8
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
</TABLE>
-69-
<PAGE>
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
Delaware Overseas NFSC 1,694.260 5.57%
Equity Fund C Class FBO Chester M. Boltwood
and Karen A. Boltwood
BNW-302864
828 Cobblestone Cir.
Modesto, CA 95355-4501
Delaware Overseas RS DMC Employee Profit Sharing Plan 9,921.780 81.21%
Equity Fund Delaware Management Co.
Institutional Class Employee Profit Sharing Trust
c/o Rick Seidel
1818 Market Street
Philadelphia, PA 19103-3682
Light and Company 1,547.830 12.66%
C/o Allfirst Trust Company NA
Security Processing 109-911
P.O. Box 1596
Baltimore, MD 21203-1596
Lincoln National Investment Management 747.680 6.11%
Attn: David Humes 3RO3
200 East Berry Street
Fort Wayne, IN 46802-2706
Delaware New Pacific Merrill Lynch, Pierce, Fenner & Smith 51,510.360 34.04%
Fund C Class For the Sole Benefit of its Customers
Attn: Fund Administration SEC #97JY9
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
NFSC FEBO #BTK-945137 16,801.730 11.10%
NFSC/FMTC IRA Rollover
FBO Susan J. Chokel
826 Hanover Rd.
Gates Mills, OH 44040-9602
NFSC FEBO #BTK-329550 14,726.510 9.73%
Susan J. Chokel TTEE
Susan J. Chokel Trust
U/A 12/8/97
826 Hanover Rd.
Gates Mills, OH 44040-9602
</TABLE>
-70-
<PAGE>
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
<S> <C> <C> <C>
Delaware New Pacific NFSC FEBO #BNX-040185 8,517.890 5.62%
Fund C Class Jack B. Smyth
517 Clermont Ave.
Dallas, TX 75223-1207
NFSC FEBO #BNX-043591 7,595.380 5.01%
Bette Smyth TTEE
Bette Smyth Trust
U/A 7/12/98
517 Clermont Ave.
Dallas, TX 75223-1207
Delaware New Pacific RS DMC Employee Profit Sharing Plan 143,482.310 98.35%
Fund Institutional Delaware Management Co.
Class Employee Profit Sharing Trust
c/o Rick Seidel
1818 Market Street
Philadelphia, PA 19103-3682
</TABLE>
DMH Corp., Delvoy, Inc., Delaware Management Business Trust, Delaware
Management Company (a series of Delaware Management Business Trust), Delaware
Management Company, Inc., Delaware Investment Advisers (a series of Delaware
Management Business Trust), Delaware Distributors, L.P., Delaware Distributors,
Inc., Delaware Service Company, Inc., Delaware Management Trust Company,
Delaware International Holdings Ltd., Founders Holdings, Inc., Delaware
International Advisers Ltd., Delaware Capital Management, Inc. and Retirement
Financial Services, Inc. are direct or indirect, wholly owned subsidiaries of
Delaware Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between
DMH and a wholly owned subsidiary of Lincoln National Corporation ("Lincoln
National") was completed. DMH and the Manager are now indirect, wholly owned
subsidiaries, and subject to the ultimate control, of Lincoln National. Lincoln
National, with headquarters in Fort Wayne, Indiana, is a diversified
organization with operations in many aspects of the financial services industry,
including insurance and investment management.
-71-
<PAGE>
Trustees and principal officers of Adviser Funds are noted below along
with their ages and their business experience for the past five years. Unless
otherwise noted, the address of each officer and trustee is One Commerce Square,
Philadelphia, PA 19103.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Trustee and Officer Business Experience
<S> <C>
- ------------------------------------------- -------------------------------------------------------------------------------
*Wayne A. Stork (62) Chairman, Trustee/Director of Adviser Funds and each of the other 32
investment companies in the Delaware Investments family.
Prior to January 1, 1999, Mr. Stork was Director of Delaware Capital
Management, Inc.; Chairman, President and Chief Executive Officer and
Director/Trustee of DMH Corp., Delaware Distributors, Inc. and Founders
Holdings, Inc.; Chairman, President, Chief Executive Officer, Chief
Investment Officer and Director/Trustee of Delaware Management Company, Inc.
and Delaware Management Business Trust; Chairman, President, Chief Executive
Officer and Chief Investment Officer of Delaware Management Company (a series
of Delaware Management Business Trust); Chairman, Chief Executive Officer and
Chief Investment Officer of Delaware Investment Advisers (a series of
Delaware Management Business Trust); Chairman and Chief Executive Officer of
Delaware International Advisers Ltd.; Chairman, Chief Executive Officer and
Director of Delaware International Holdings Ltd.; Chief Executive Officer of
Delaware Management Holdings, Inc.; President and Chief Executive Officer of
Delvoy, Inc.; Chairman of Delaware Distributors, L.P.; Director of Delaware
Service Company, Inc. and Retirement Financial Services, Inc. Prior to
January 1, 2000, Mr. Stork was Chairman and Director of Delaware Management
Holdings, Inc. and Director of Delaware International Advisers Ltd.
In addition, during the five years prior to January 1, 2000, Mr. Stork has
served in various executive capacities at different times within the
Delaware organization.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------
* Trustee affiliated with Adviser Funds' investment manager and considered an
"interested person" as defined in the 1940 Act.
- --------------------------------------------------------------------------------
-72-
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Trustee and Officer Business Experience
<S> <C>
- ------------------------------------------- -------------------------------------------------------------------------------
*David K. Downes (60) President, Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer and Trustee/Director of Adviser Funds and each of the other 32
investment companies in the Delaware Investments family.
President and Director of Delaware Management Company, Inc.
President of Delaware Management Company (a series of Delaware Management
Business Trust)
President, Chief Executive Officer and Director of Delaware Capital
Management, Inc.
Chairman, President, Chief Executive Officer and Director of Delaware
Service Company, Inc.
President, Chief Operating Officer, Chief Financial Officer and Director of
Delaware International Holdings Ltd.
Chairman and Director of Delaware Management Trust Company and Retirement
Financial Services, Inc.
Executive Vice President, Chief Operating Officer, Chief Financial Officer
of Delaware Management Holdings, Inc., Founders CBO Corporation, Delaware
Investment Advisers (a series of Delaware Management Business Trust) and
Delaware Distributors, L.P.
Executive Vice President, Chief Operating Officer, Chief Financial Officer
and Director of DMH Corp., Delaware Distributors, Inc., Founders Holdings,
Inc. and Delvoy, Inc.
Executive Vice President and Trustee of Delaware Management Business Trust
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Downes has served in various executive
capacities at different times within the Delaware organization.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------
* Trustee affiliated with Adviser Funds' investment manager and considered an
"interested person" as defined in the 1940 Act.
- --------------------------------------------------------------------------------
-73-
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Trustee Business Experience
<S> <C>
- ------------------------------------------- -------------------------------------------------------------------------------
Walter P. Babich (72) Trustee/Director Adviser Funds and each of the other 32 investment companies
in the Delaware Investments family
460 North Gulph Road, King of Prussia, PA 19406
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and from
1988 to 1991, he was a partner of I&L Investors.
- ------------------------------------------- ------------------------------------------------------------------------------
John H. Durham (62) Trustee/Director of Adviser Funds and 18 other investment companies in the
Delaware Investments family
Private Investor.
P.O. Box 819, Gwynedd Valley, PA 19437
Mr. Durham served as Chairman of the Board of each fund in the Delaware
Investments family from 1986 to 1991; President of each fund from 1977 to
1990; and Chief Executive Officer of each fund from 1984 to 1990. Prior to
1992, with respect to Delaware Management Holdings, Inc., Delaware
Management Company, Delaware Distributors, Inc. and Delaware Service
Company, Inc., Mr. Durham served as a director and in various executive
capacities at different times. He was also a Partner of Complete Care
Services from 1995 to 1999.
- ------------------------------------------- -------------------------------------------------------------------------------
Anthony D. Knerr (61) Trustee/Director of Adviser Funds and each of the 32 other investment
companies in the Delaware Investments family.
500 Fifth Avenue, New York, NY 10110
Founder and Managing Director, Anthony Knerr & Associates
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance and
Treasurer of Columbia University, New York. From 1987 to 1989, he was also a
lecturer in English at the University. In addition, Mr. Knerr was Chairman
of The Publishing Group, Inc., New York, from 1988 to 1990. Mr. Knerr
founded The Publishing Group, Inc. in 1988.
- ------------------------------------------- -------------------------------------------------------------------------------
Ann R. Leven (59) Trustee/Director of Adviser Funds and each of the other 32 other investment
companies in the Delaware Investments family
785 Park Avenue, New York, NY 10021
Retired Treasurer, National Gallery of Art
From 1994 to 1999, Ms. Leven was the Treasurer of the National Gallery of
Art and from 1990 to 1994, Ms. Leven was Deputy Treasurer of the National
Gallery of Art. In addition, from 1984 to 1990, Ms. Leven was Treasurer and
Chief Fiscal Officer of the Smithsonian Institution, Washington, DC, and
from 1975 to 1992, she was Adjunct Professor of Columbia Business School.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
-74-
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Trustee Business Experience
<S> <C>
- ------------------------------------------- -------------------------------------------------------------------------------
Thomas F. Madison (63) Trustee/Director of Adviser Funds and each of the other 32 investment
companies in the Delaware Investments family
200 South Fifth Street, Suite 2100, Minneapolis, Minnesota 55402
President and Chief Executive Officer, MLM Partners, Inc.
Mr. Madison has also been Chairman of the Board of Communications Holdings,
Inc. since 1996. From February to September 1994, Mr. Madison served as Vice
Chairman--Office of the CEO of The Minnesota Mutual Life Insurance Company and
from 1988 to 1993, he was President of U.S. WEST Communications--Markets.
- ------------------------------------------- -------------------------------------------------------------------------------
Charles E. Peck (74) Trustee/Director of Adviser Funds and each of the other 32 investment
companies in the Delaware Investments family
P.O. Box 1102, Columbia, MD 21044
Secretary/Treasurer, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and Chief Executive Officer of The
Ryland Group, Inc., Columbia, MD.
- ------------------------------------------- -------------------------------------------------------------------------------
Janet L. Yeomans (51) Trustee/Director of Adviser Funds and 32 other investment companies in the
Delaware Investments family.
Building 220-13W-37, St. Paul, MN 55144
Vice President and Treasurer, 3M Corporation.
From 1987-1994, Ms. Yeomans was Director of Benefit Funds and Financial
Markets for the 3M Corporation; Manager of Benefit Fund Investments for the
3M Corporation, 1985-1987; Manager of Pension Funds for the 3M Corporation,
1983-1985; Consultant--Investment Technology Group of Chase Econometrics,
1982-1983; Consultant for Data Resources, 1980-1982; Programmer for the
Federal Reserve Bank of Chicago, 1970-1974.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
-75-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Officer Business Experience
<S> <C>
- -------------------------------- ---------------------------------------------------------------------------------------------------
Richard G. Unruh, Jr. (60) Executive Vice President and Chief Investment Officer, Equity of Adviser Funds, each of
the other 32 investment companies in the Delaware Investments family
Chief Executive Officer/Chief Investment Officer of Delaware Investment Advisers (a
series of Delaware Management Business Trust)
Executive Vice President of Delaware Management Holdings, Inc. and Delaware Capital
Management, Inc.
Executive Vice President/Chief Investment Officer of Delaware Management Company (a
series of Delaware Management Business Trust)
Executive Vice President and Trustee of Delaware Management Business Trust
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive capacities at
different times within the Delaware organization.
- -------------------------------- ---------------------------------------------------------------------------------------------------
H. Thomas McMeekin (46) Executive Vice President and Chief Investment Officer, Fixed Income of Adviser Funds
and each of the other 32 investment companies in the Delaware Investments family.
Director of Delaware Management Holdings, Inc. and Founders CBO Corporation.
Executive Vice President/Chief Investment Officer, DMC-Fixed Income of Delaware
Management Company (a series of Delaware Management Business Trust)
Executive Vice President/Chief Investment Officer, DIA-Fixed Income of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
Executive Vice President and Director of Founders Holdings, Inc.
Executive Vice President of Delaware Management Business Trust and Delaware Capital
Management, Inc.
Mr. McMeekin joined Delaware Investments in 1999. During the past five years, he has
also served in various executive capacities for Lincoln National Corporation.
- -------------------------------- ---------------------------------------------------------------------------------------------------
Richard J. Flannery (42) Executive Vice President/General Counsel of Adviser Funds and each of the other 32
investment companies in the Delaware Investments family, Delaware Management Holdings,
Inc., Delaware Distributors, L.P., Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Investment Advisers (a series of Delaware
Management Business Trust) and Founders CBO Corporation.
Executive Vice President/General Counsel and Director of Delaware International
Holdings Ltd., Founders Holdings, Inc., Delvoy, Inc., DMH Corp., Delaware Management
Company, Inc., Delaware Service Company, Inc., Delaware Capital Management, Inc.,
Retirement Financial Services, Inc., Delaware Distributors, Inc. and Delaware
Management Trust Company.
Executive Vice President and Trustee of Delaware Management Business Trust.
Director of Delaware International Advisers Ltd.
Director of HYPPCO Finance Company Ltd.
During the past five years, Mr. Flannery has served in various executive capacities at
different times within the Delaware organization.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-76-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Officer Business Experience
<S> <C>
- ---------------------------------- -------------------------------------------------------------------------------------------------
Eric E. Miller (46) Senior Vice President/Deputy General Counsel and Secretary of Adviser Funds and each of the
other 32 investment companies in Delaware Investments.
Senior Vice President/Deputy General Counsel and Assistant Secretary of Delaware Management
Holdings, Inc., DMH Corp., Delvoy, Inc., Delaware Management Company, Inc., Delaware Management
Business Trust, Delaware Management Company (a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware Management Business Trust), Delaware Service
Company, Inc., Delaware Capital Management, Inc., Retirement Financial Services, Inc., Delaware
Distributors, Inc., Delaware Distributors, L.P. and Founders Holdings, Inc.
During the past five years, Mr. Miller has served in various executive capacities at different
times within Delaware Investments.
- ---------------------------------- -------------------------------------------------------------------------------------------------
Joseph H. Hastings (50) Senior Vice President/Corporate Controller of Adviser Funds and each of the other 32 investment
companies in the Delaware Investments family and Delaware Investment Advisers (a series of
Delaware Management Business Trust)
Senior Vice President/Corporate Controller and Treasurer of Delaware Management Holdings, Inc.,
DMH Corp., Delvoy , Inc., Delaware Management Company, Inc., Delaware Management Business Trust,
Delaware Management Company (a series of Delaware Management Business Trust), Delaware
Distributors, L.P., Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware Capital
Management, Inc., Delaware International Holdings Ltd., Founders Holdings, Inc. and Delaware
Management Business Trust
Executive Vice President/Chief Financial Officer/Treasurer of Delaware Management Trust Company
Senior Vice President/Assistant Treasurer of Founders CBO Corporation
Chief Financial Officer of Retirement Financial Services, Inc.
During the past five years, Mr. Hastings has served in various executive capacities at different
times within the Delaware organization.
- ---------------------------------- -------------------------------------------------------------------------------------------------
Michael P. Bishof (37) Senior Vice President and Treasurer of Adviser Funds and each of the other 32 investment
companies in the Delaware Investments family.
Senior Vice President/Investment Accounting of Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Service Company, Inc. and Delaware Capital Management, Inc.
and Founders Holdings, Inc.
Senior Vice President and Treasurer/ Investment Accounting of Delaware Distributors, L.P. and
Delaware Investment Advisers (a series of Delaware Management Business Trust)
Senior Vice President/Manager of Investment Accounting of Delaware International Holdings, Inc.
Senior Vice President and Assistant Treasurer of Founders CBO Corporation
Before joining Delaware Investments in 1995, Mr. Bishof was a Vice President for Bankers Trust,
New York, NY from 1994 to 1995, a Vice President for CS First Boston Investment Management, New
York, NY from 1993 to 1994 and an Assistant Vice President for Equitable Capital Management
Corporation, New York, NY from 1987 to 1993.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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The following is a compensation table listing for each trustee entitled
to receive compensation, the aggregate compensation received from Adviser Funds
and the total compensation received from all investment companies in the
Delaware Investments family for which he or she serves as a director or trustee
for the fiscal year ended October 31, 1999 and an estimate of annual benefits to
be received upon retirement under the Delaware Group Retirement Plan for
Directors/Trustees as of October 31, 1999. Only the independent trustees of
Adviser Funds receive compensation from the Funds.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Pension or
Retirement
Benefits Total
Accrued Estimated Compensation
Aggregate as Part of Annual from
Compensation Adviser Benefits Delaware
from Adviser Funds Upon Investments
Name(3) Funds Expenses Retirement(1) Companies(2)
<S> <C> <C> <C> <C>
- ---------------------------------- --------------------- ------------------- -------------------- ---------------------------
Walter P. Babich $739 none $38,000 $42,975
- ---------------------------------- --------------------- ------------------- -------------------- ---------------------------
John H. Durham $734 none $32,180 $42,975
- ---------------------------------- --------------------- ------------------- -------------------- ---------------------------
Anthony D. Knerr $849 none $38,000 $49,012
- ---------------------------------- --------------------- ------------------- -------------------- ---------------------------
Ann R. Leven $854 none $38,000 $49,858
- ---------------------------------- --------------------- ------------------- -------------------- ---------------------------
Thomas F. Madison $850 none $38,000 $49,012
- ---------------------------------- --------------------- ------------------- -------------------- ---------------------------
Charles E. Peck $843 none $38,000 $47,607
- ---------------------------------- --------------------- ------------------- -------------------- ---------------------------
Janet L. Yeomans(4) $574 none $38,000 $27,820
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Under the terms of the Delaware Group Retirement Plan for
Directors/Trustees, each disinterested director/trustee who, at the time of
his or her retirement from the Board, has attained the age of 70 and served
on the Board for at least five continuous years, is entitled to receive
payments from each investment company in the Delaware Investments family for
which he or she serves as a director or trustee for a period equal to the
lesser of the number of years that such person served as a director or
trustee or the remainder of such person's life. The amount of such payments
will be equal, on an annual basis, to the amount of the annual retainer that
is paid to directors/trustees of each investment company at the time of such
person's retirement. If an eligible director/trustee retired as of October
31, 1999, he or she would be entitled to annual payments totaling the amount
noted above, in the aggregate, from all of the investment companies in the
Delaware Investments family for which he or she served as director or
trustee, based on the number of investment companies in the Delaware
Investments family as of that date.
(2) Each independent director/trustee (other than John H. Durham) currently
receives a total annual retainer fee of $38,000 for serving as a director or
trustee for all 33 investment companies in Delaware Investments, plus $3,143
for each Board Meeting attended. John H. Durham currently receives a total
annual retainer fee of $32,180 for serving as a director or trustee for 19
investment companies in Delaware Investments, plus $1,810 for each Board
Meeting attended. Ann R. Leven, Charles E. Peck, Anthony D. Knerr and Thomas
F. Madison serve on the Fund's audit committee; Ms. Leven is the
chairperson. Members of the audit committee currently receive additional
annual compensation of $5,000 from all investment companies, in the
aggregate, with the exception of the chairperson, who receives $6,000.
(3) W. Thacher Longstreth served as an independent trustee of Adviser Funds
during its last fiscal year for the period November 1, 1998 through March
17, 1999, the date on which he retired. For this period, Mr. Longstreth
received $350 from Adviser Funds and $14,314 for all investment companies in
the Delaware Investments family.
(4) Janet L Yeomans joined the Boards of all investment companies in the
Delaware Investments family in March 1999 for some funds and in April 1999
for other funds.
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GENERAL INFORMATION
Adviser Funds is an open-end management investment company. The Fund's
portfolio of assets is diversified as defined by the 1940 Act. Adviser Funds was
organized as a Maryland corporation on August 10, 1993 and reorganized as a
Delaware business trust on November 23, 1999.
The Manager is the investment manager of the Funds. The Manager also
provides investment management services to certain of the other funds in the
Delaware Investments family. An affiliate of the Manager also manages private
investment accounts. While investment decisions of the Funds are made
independently from those of the other funds and accounts, investment decisions
for such other funds and accounts may be made at the same time as investment
decisions for the Funds.
The Manager or Delaware International Advisers Ltd. also manages the
investment options for Delaware-Lincoln Choice Plus and Delaware Medallion (SM)
III Variable Annuities. Choice Plus is issued and distributed by Lincoln
National Life Insurance Company. Choice Plus offers a variety of different
investment styles managed by leading money managers. Medallion is issued by
Allmerica Financial Life Insurance and Annuity Company (First Allmerica
Financial Life Insurance Company in New York and Hawaii). Delaware Medallion
offers various investment series ranging from domestic equity funds,
international equity and bond funds and domestic fixed income funds. Each
investment series available through Choice Plus and Medallion utilizes an
investment strategy and discipline the same as or similar to one of the Delaware
Investments mutual funds available outside the annuity. See Delaware Group
Premium Fund in Appendix A.
Access persons and advisory persons of the Delaware Investments family
of funds, as those terms are defined in SEC Rule 17j-1 under the 1940 Act, who
provide services to the Manager, Delaware International or their affiliates, are
permitted to engage in personal securities transactions subject to the
exceptions set forth in Rule 17j-1 and the following general restrictions and
procedures: (1) certain blackout periods apply to personal securities
transactions of those persons; (2) transactions must receive advance clearance
and must be completed on the same day as the clearance is received; (3) certain
persons are prohibited from investing in initial public offerings of securities
and other restrictions apply to investments in private placements of securities;
(4) opening positions by certain covered persons in certain securities may only
be closed-out at a profit after a 60-day holding period has elapsed; and (5) the
Compliance Officer must be informed periodically of all securities transactions
and duplicate copies of brokerage confirmations and account statements must be
supplied to the Compliance Officer.
The Distributor acts as national distributor for each of the Funds and
for the other mutual funds in the Delaware Investments family. The Distributor
("DDLP") received net commissions from each Fund on behalf of Class A Shares,
after reallowances to dealers, as follows:
Delaware Overseas Equity Fund
Class A Shares
Total
Fiscal Amount of Amounts Net
Year Underwriting Reallowed Commission
Ended Commissions to Dealers to DDLP
----- ----------- ---------- -------
10/31/99 $8,397 $7,203 $1,194
10/31/98 8,093 6,838 1,255
10/31/97 15,657 3,194 12,463
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Delaware New Pacific Fund
Class A Shares
Total
Fiscal Amount of AmountsNet
Year Underwriting Reallowed Commission
Ended Commissions to Dealers to DDLP
----- ----------- ---------- -------
10/31/99 $57,720 $49,254 $8,466
10/31/98 53,408 44,672 8,736
10/31/97 28,375 5,847 22,528
The Distributor received in the aggregate Limited CDSC payments with
respect to Class A Shares of each Fund as follows:
Limited CDSC Payments
Fiscal
Year Delaware Overseas Equity Delaware New Pacific
Ended Fund A Class Fund A Class
----- ------------- ------------
10/31/99 none none
10/31/98 none none
10/31/97 none none
The Distributor received in the aggregate CDSC payments with respect to
Class B Shares of each Fund as follows:
CDSC Payments
Fiscal
Year Delaware Overseas Equity Delaware New Pacific
Ended Fund B Class Fund B Class
----- ------------- ------------
10/31/99 $5,834 $7,565
10/31/98 1,541 4,704
10/31/97 2,815 4,476
The Distributor received in the aggregate CDSC payments with respect to
Class C Shares of each Fund as follows:
CDSC Payments
Fiscal
Year elaware Overseas Equity Delaware New Pacific
Ended Fund C Class Fund C Class
----- ------------- ------------
10/31/99 $678 $607
10/31/98 60 325
10/31/97 24 33
The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for each Fund and for the
other mutual funds in the Delaware Investments family. The Transfer Agent is
paid a fee by each Fund for providing these services consisting of an annual per
account charge of $5.50 for each Fund plus transaction charges for particular
services according to a schedule. Compensation is fixed each year and approved
by the Board of Trustees, including a majority of the unaffiliated trustees. The
Transfer Agent also provides accounting services to each Fund. Those services
include performing all functions related to calculating each Fund's net asset
value and providing all financial reporting services, regulatory compliance
testing and the related accounting services. For its services, the Transfer
Agent is paid a fee based on total assets of all funds in the Delaware
Investments family for which it provides such accounting services. Such fee is
equal to 0.25% multiplied by the total amount of assets in the complex for which
the Transfer Agent furnishes accounting services, where such aggregate complex
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assets are $10 billion or less, and 0.20% of assets if such aggregate complex
assets exceed $10 billion. The fees are charged to each fund, including each
Fund, on an aggregate pro-rata basis. The asset-based fee payable to the
Transfer Agent is subject to a minimum fee calculated by determining the total
number of investment portfolios and associated classes.
The Manager and its affiliates own the name "Delaware Group." Under
certain circumstances, including the termination of Adviser Funds' advisory
relationship with the Manager or its distribution relationship with the
Distributor, the Manager and its affiliates could cause Adviser Funds to delete
the words "Delaware Group" from Adviser Funds' name.
The Chase Manhattan Bank ("Chase"), 4 Chase Metrotech Center, Brooklyn,
NY 11245, is custodian of each Fund's securities and cash. As custodian for the
Fund, Chase maintains a separate account or accounts for each Fund; receives,
holds and releases portfolio securities on account of each Fund; receives and
disburses money on behalf of each Fund; and collects and receives income and
other payments and distributions on account of each Fund's portfolio securities.
Capitalization
Adviser Funds has a present unlimited authorized number of shares of
beneficial interest with no par value allocated to each Class. Adviser Funds
also offers Delaware U.S. Growth Fund through a separate Prospectus and
Statement of Additional Information. Each Class represents a proportionate
interest in the assets of the Fund, and each has the same voting and other
rights and preferences as the other classes of the Fund, except that shares of
the Institutional Class may not vote on any matter that affects the Fund
Classes' Distribution Plans under Rule 12b-1. Similarly, as a general matter,
shareholders of Class A Shares, Class B Shares and Class C Shares may vote only
on matters affecting the 12b-1 Plan that relates to the class of shares that
they hold. However, Class B Shares may vote on any proposal to increase
materially the fees to be paid by the Fund under the Rule 12b-1 Plan relating to
Class A Shares. General expenses of the Fund will be allocated on a pro-rata
basis to the classes according to asset size, except that expenses of the Plans
of Class A Shares, Class B Shares and Class C Shares will be allocated solely to
those classes.
All shares have no preemptive rights, are fully transferable and, when
issued, are fully paid and nonassessable and, except as described above, have
equal voting rights.
On November 29, 1993, the name Lincoln Renaissance Funds, Inc. was
changed to Lincoln Advisor Funds, Inc.
As of the close of business on May 3, 1996, the changes of the names of
the funds were as follows: Lincoln U.S. Growth Portfolio to U.S. Growth Fund;
Lincoln World Growth Portfolio to World Growth Fund; and Lincoln New Pacific
Portfolio to New Pacific Fund. In addition, as of the close of business May 3,
1996, the name of Lincoln Advisor Funds, Inc. was changed to Delaware Group
Adviser Funds As of December 18, 1997, the name of Word Growth Fund changed to
Overseas Equity Fund. As of August 16, 1999, the names of U.S. Growth Fund,
Overseas Equity Fund and New Pacific Fund changed to Delaware U.S. Growth Fund,
Delaware Overseas Equity Fund and Delaware New Pacific Fund. Corresponding
changes were also made to the names of each fund's classes on that date.
Effective November 23, 1999, the name of Delaware Group Adviser Funds, Inc. was
changed to Delaware Group Adviser Funds.
EURO
Several European countries are participating in the European Economic
and Monetary Union, which established a common European currency for
participating countries. This currency is commonly known as the "Euro." Each
participating country replaced its previous currency with the Euro on January 1,
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1999. Additional European countries may elect to participate after that date. In
addition, full implementation of the Euro will extend over a period of several
years. Initial implementation of the Euro occurred on January 1, 1999 without
disruption of services provided to each Fund. Each Fund's service providers
cooperated over the implementation weekend and following weeks to reconcile
their records and procedures. Going forward, if a Fund is invested in securities
of participating countries or countries that elect to participate at a later
date, it could be adversely affected if the computer systems used by its
applicable service providers are not properly prepared to handle the
implementation of this single currency through completion of the process or the
adoption of the Euro by additional countries in the future.
Restructuring of Adviser Funds
Until April 26, 1996, Adviser Funds consisted of nine series of shares
(U.S. Growth Fund, World Growth Fund (now named Delaware Overseas Equity Fund)
and New Pacific Fund, as well as six other funds) and was named Lincoln Advisor
Funds, Inc. ("LAF"). On February 23, 1996, LAF's Board of Directors approved a
restructuring to integrate fully LAF into the Delaware Investments family of
funds. The restructuring provided, among other things, for the liquidation of
three funds; the appointment of Delaware Management Company, Inc. as the
investment manager of each of the funds; the appointment of certain
sub-advisers; changes in certain names, including: Lincoln U.S. Growth Portfolio
to U.S. Growth Fund; Lincoln World Growth Portfolio to World Growth Fund; and
Lincoln New Pacific Portfolio to New Pacific Fund; and the change of the LAF to
Delaware Group Adviser Funds. The liquidations were completed on April 26, 1996
and following required shareholder approval of the investment management and
sub-advisory arrangements at a meeting of shareholders held on May 3, 1996, the
restructuring was consummated.
In accordance with the restructuring, beginning May 6, 1996, the former
Class D shares have been redesignated as the Institutional Class shares.
On July 17, 1997, the Board of Trustees approved the liquidations of
three additional funds. These liquidations were completed on September 19, 1997.
Effective September 15, 1997, the name of World Growth Fund changed to Overseas
Equity Fund.
In accordance with the restructuring, the front-end sales charges for
and 12b-1 Plan distribution fees assessable against Class A Shares and the
contingent deferred sales charge schedule for Class B Shares, as well as its
feature for conversion to Class A Shares, have been modified to be made
consistent with the charges, fees and features that generally apply to all other
Delaware Investments funds. The charges and fees previously applicable to the
Class C Shares have not been changed.
Beginning May 6, 1996, the charges, fees and features described in this
Part B have been applied to the respective shares, except for Class B Shares
purchased before that date. Class B Shares purchased prior to May 6, 1996
continue to be subject to the following contingent deferred sales charge
schedule if redemptions are made during the time periods described: within the
first year after purchase (5.0%); within the second year after purchase (4.0%);
within the third year after purchase (4.0%); within the fourth year after
purchase (3.0%); within the fifth year after purchase (2.0%); within the sixth
year after purchase (1.0%); and thereafter, none. In addition, Class B Shares
purchased prior to May 6, 1996 still will convert to Class A Shares after the
expiration of approximately six years after purchase. Class B Shares purchased
with reinvested dividends, whether effected before or after May 6, 1996, will be
aggregated and converted pro-rata with other Class B Shares.
Noncumulative Voting
Adviser Funds' shares have noncumulative voting rights which means that
the holders of more than 50% of the shares of Adviser Funds voting for the
election of trustees can elect all the trustees if they choose to do so, and, in
such event, the holders of the remaining shares will not be able to elect any
trustees.
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This Part B does not include all of the information contained in the
Registration Statement which is on file with the SEC.
-83-
<PAGE>
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for Delaware
Group Adviser Funds and, in its capacity as such, audits the financial
statements of the Funds. Each Fund's Statement of Net Assets, Statement of
Operations, Statement of Changes in Net Assets, Financial Highlights and Notes
to Financial Statements, as well as the report of Ernst & Young LLP, for the
fiscal year ended October 31, 1999 are included in each Fund's Annual Report to
shareholders. The financial statements and financial highlights, the notes
relating thereto and the report of Ernst & Young LLP are incorporated by
reference from the Annual Report into this Part B. The Funds' previous auditors
audited the financial highlights of the Funds for the fiscal periods ending on
or before October 31, 1996.
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APPENDIX A--INVESTMENT OBJECTIVES OF THE FUNDS IN THE DELAWARE INVESTMENTS
FAMILY
Following is a summary of the investment objectives of the other funds
in the Delaware Investments family:
Following is a summary of the investment objectives of the funds in the Delaware
Investments family:
Delaware Balanced Fund seeks long-term growth by a balance of capital
appreciation, income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. Delaware Devon
Fund seeks current income and capital appreciation by investing primarily in
income-producing common stocks, with a focus on common stocks the Manager
believes have the potential for above average dividend increases over time.
Delaware Trend Fund seeks long-term growth by investing in common
stocks issued by emerging growth companies exhibiting strong capital
appreciation potential.
Delaware Small Cap Value Fund seeks capital appreciation by investing
primarily in common stocks whose market values appear low relative to their
underlying value or future potential.
Delaware DelCap Fund seeks long-term capital growth by investing in
common stocks and securities convertible into common stocks of companies that
have a demonstrated history of growth and have the potential to support
continued growth.
Delaware Decatur Equity Income Fund seeks the highest possible current
income by investing primarily in common stocks that provide the potential for
income and capital appreciation without undue risk to principal. Delaware Growth
and Income Fund seeks long-term growth by investing primarily in securities that
provide the potential for income and capital appreciation without undue risk to
principal. Delaware Blue Chip Fund seeks to achieve long-term capital
appreciation. Current income is a secondary objective. It seeks to achieve these
objectives by investing primarily in equity securities and any securities that
are convertible into equity securities. Delaware Social Awareness Fund seeks to
achieve long-term capital appreciation. It seeks to achieve this objective by
investing primarily in equity securities of medium- to large-sized companies
expected to grow over time that meet the Fund's "Social Criteria" strategy.
Delaware Delchester Fund seeks as high a current income as possible by
investing principally in high yield, high risk corporate bonds, and also in U.S.
government securities and commercial paper. Delaware Strategic Income Fund seeks
to provide investors with high current income and total return by using a
multi-sector investment approach, investing principally in three sectors of the
fixed-income securities markets: high yield, higher risk securities, investment
grade fixed-income securities and foreign government and other foreign
fixed-income securities. Delaware High-Yield Opportunities Fund seeks to provide
investors with total return and, as a secondary objective, high current income.
Delaware Corporate Bond Fund seeks to provide investors with total return by
investing primarily in corporate bonds. Delaware Extended Duration Bond Fund
seeks to provide investors with total return by investing primarily in corporate
bonds.
Delaware Limited-Term Government Fund seeks high, stable income by
investing primarily in a portfolio of short- and intermediate-term securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities
and instruments secured by such securities.
Delaware American Government Bond Fund seeks high current income by
investing primarily in long-term debt obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities.
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<PAGE>
Delaware Cash Reserve Fund seeks the highest level of income consistent
with the preservation of capital and liquidity through investments in short-term
money market instruments, while maintaining a stable net asset value.
REIT Fund seeks to achieve maximum long-term total return with capital
appreciation as a secondary objective. It seeks to achieve its objectives by
investing in securities of companies primarily engaged in the real estate
industry.
Delaware Tax-Free USA Fund seeks high current income exempt from
federal income tax by investing in municipal bonds of geographically-diverse
issuers. Delaware Tax-Free Insured Fund invests in these same types of
securities but with an emphasis on municipal bonds protected by insurance
guaranteeing principal and interest are paid when due. Delaware Tax-Free USA
Intermediate Fund seeks a high level of current interest income exempt from
federal income tax, consistent with the preservation of capital by investing
primarily in municipal bonds.
Delaware Tax-Free Money Fund seeks high current income, exempt from
federal income tax, by investing in short-term municipal obligations, while
maintaining a stable net asset value.
Delaware Tax-Free New Jersey Fund seeks a high level of current
interest income exempt from federal income tax and New Jersey state and local
taxes, consistent with preservation of capital. Delaware Tax-Free Ohio Fund
seeks a high level of current interest income exempt from federal income tax and
Ohio state and local taxes, consistent with preservation of capital. Delaware
Tax-Free Pennsylvania Fund seeks a high level of current interest income exempt
from federal income tax and Pennsylvania state and local taxes, consistent with
the preservation of capital.
Foundation Funds are "fund of funds" which invest in other funds in the
Delaware Investments family (referred to as "Underlying Funds"). Foundation
Funds Delaware Income Portfolio seeks a combination of current income and
preservation of capital with capital appreciation by investing primarily in a
mix of fixed income and domestic equity securities, including fixed income and
domestic equity Underlying Funds. Foundation Funds Delaware Balanced Portfolio
seeks capital appreciation with current income as a secondary objective by
investing primarily in domestic equity and fixed income securities, including
domestic equity and fixed income Underlying Funds. Foundation Funds Delaware
Growth Portfolio seeks long term capital growth by investing primarily in equity
securities, including equity Underlying Funds, and, to a lesser extent, in fixed
income securities, including fixed-income Underlying Funds.
Delaware International Equity Fund seeks to achieve long-term growth
without undue risk to principal by investing primarily in international
securities that provide the potential for capital appreciation and income.
Delaware Global Bond Fund seeks to achieve current income consistent with the
preservation of principal by investing primarily in global fixed-income
securities that may also provide the potential for capital appreciation.
Delaware Global Equity Fund seeks to achieve long-term total return by investing
in global securities that provide the potential for capital appreciation and
income. Delaware Emerging Markets Fund seeks long-term capital appreciation by
investing primarily in equity securities of issuers located or operating in
emerging countries.
Delaware U.S. Growth Fund seeks to maximize capital appreciation by
investing in companies of all sizes which have low dividend yields, strong
balance sheets and high expected earnings growth rates relative to their
industry. Delaware Overseas Equity Fund seeks to maximize total return (capital
appreciation and income), principally through investments in an internationally
diversified portfolio of equity securities. Delaware New Pacific Fund seeks
long-term capital appreciation by investing primarily in companies which are
domiciled in or have their principal business activities in the Pacific Basin.
Delaware Group Premium Fund offers various funds available exclusively
as funding vehicles for certain insurance company separate accounts. Growth and
Income Series seeks the highest possible total rate of return by selecting
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issues that exhibit the potential for capital appreciation while providing
higher than average dividend income. Delchester Series seeks as high a current
income as possible by investing in rated and unrated corporate bonds, U.S.
government securities and commercial paper. Capital Reserves Series seeks a high
stable level of current income while minimizing fluctuations in principal by
investing in a diversified portfolio of short- and intermediate-term securities.
Cash Reserve Series seeks the highest level of income consistent with
preservation of capital and liquidity through investments in short-term money
market instruments. DelCap Series seeks long-term capital appreciation by
investing its assets in a diversified portfolio of securities exhibiting the
potential for significant growth. Delaware Balanced Series seeks a balance of
capital appreciation, income and preservation of capital. It uses a
dividend-oriented valuation strategy to select securities issued by established
companies that are believed to demonstrate potential for income and capital
growth. International Equity Series seeks long-term growth without undue risk to
principal by investing primarily in equity securities of foreign issuers that
provide the potential for capital appreciation and income. Small Cap Value
Series seeks capital appreciation by investing primarily in small-cap common
stocks whose market values appear low relative to their underlying value or
future earnings and growth potential. Emphasis will also be placed on securities
of companies that may be temporarily out of favor or whose value is not yet
recognized by the market. Trend Series seeks long-term capital appreciation by
investing primarily in small-cap common stocks and convertible securities of
emerging and other growth-oriented companies. These securities will have been
judged to be responsive to changes in the market place and to have fundamental
characteristics to support growth. Income is not an objective. Global Bond
Series seeks to achieve current income consistent with the preservation of
principal by investing primarily in global fixed-income securities that may also
provide the potential for capital appreciation. Strategic Income Series seeks
high current income and total return by using a multi-sector investment
approach, investing primarily in three sectors of the fixed-income securities
markets: high-yield, higher risk securities; investment grade fixed-income
securities; and foreign government and other foreign fixed-income securities.
Devon Series seeks current income and capital appreciation by investing
primarily in income-producing common stocks, with a focus on common stocks that
the investment manager believes have the potential for above-average dividend
increases over time. Emerging Markets Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of issuers located or
operating in emerging countries. Convertible Securities Series seeks a high
level of total return on its assets through a combination of capital
appreciation and current income by investing primarily in convertible
securities. Social Awareness Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of medium to
large-sized companies expected to grow over time that meet the Series' "Social
Criteria" strategy. REIT Series seeks to achieve maximum long-term total return,
with capital appreciation as a secondary objective, by investing in securities
of companies primarily engaged in the real estate industry. Aggressive Growth
Series seeks long-term capital appreciation. The Series attempts to achieve its
investment objective by investing primarily in equity securities of companies
which the manager believes have the potential for high earnings growth. U.S.
Growth Series seeks to maximize capital appreciation. The Series seeks to
achieve its investment objective by investing in companies of all sizes which
have low dividend yields, strong balance sheets and high expected earnings
growth rates relative to their industry.
Delaware U.S. Government Securities Fund seeks to provide a high level
of current income consistent with the prudent investment risk by investing in
U.S. Treasury bills, notes, bonds, and other obligations issued or
unconditionally guaranteed by the full faith and credit of the U.S. Treasury,
and repurchase agreements fully secured by such obligations.
Delaware Tax-Free Arizona Insured Fund seeks to provide a high level of
current income exempt from federal income tax and the Arizona personal income
tax, consistent with the preservation of capital. Delaware Minnesota Insured
Fund seeks to provide a high level of current income exempt from federal income
tax and the Minnesota personal income tax, consistent with the preservation of
capital.
Delaware Tax-Free Minnesota Intermediate Fund seeks to provide a high
level of current income exempt from federal income tax and the Minnesota
personal income tax, consistent with preservation of capital. The Fund seeks to
reduce market risk by maintaining an average weighted maturity from five to ten
years.
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Delaware Tax-Free California Insured Fund seeks to provide a high level
of current income exempt from federal income tax and the California personal
income tax, consistent with the preservation of capital. Delaware Tax-Free
Florida Insured Fund seeks to provide a high level of current income exempt from
federal income tax, consistent with the preservation of capital. The Fund will
seek to select investments that will enable its shares to be exempt from the
Florida intangible personal property tax. Delaware Tax-Free Florida Fund seeks
to provide a high level of current income exempt from federal income tax,
consistent with the preservation of capital. The Fund will seek to select
investments that will enable its shares to be exempt from the Florida intangible
personal property tax. Delaware Tax-Free Kansas Fund seeks to provide a high
level of current income exempt from federal income tax, the Kansas personal
income tax and the Kansas intangible personal property tax, consistent with the
preservation of capital. Delaware Tax-Free Missouri Insured Fund seeks to
provide a high level of current income exempt from federal income tax and the
Missouri personal income tax, consistent with the preservation of capital.
Delaware Tax-Free New Mexico Fund seeks to provide a high level of current
income exempt from federal income tax and the New Mexico personal income tax,
consistent with the preservation of capital. Delaware Tax-Free Oregon Insured
Fund seeks to provide a high level of current income exempt from federal income
tax and the Oregon personal income tax, consistent with the preservation of
capital.
Delaware Tax-Free Arizona Fund seeks to provide a high level of current
income exempt from federal income tax and the Arizona personal income tax,
consistent with the preservation of capital. Delaware Tax-Free California Fund
seeks to provide a high level of current income exempt from federal income tax
and the California personal income tax, consistent with the preservation of
capital. Delaware Tax-Free Iowa Fund seeks to provide a high level of current
income exempt from federal income tax and the Iowa personal income tax,
consistent with the preservation of capital. Delaware Tax-Free Idaho Fund seeks
to provide a high level of current income exempt from federal income tax and the
Idaho personal income tax, consistent with the preservation of capital. Delaware
Minnesota High-Yield Municipal Bond Fund seeks to provide a high level of
current income exempt from federal income tax and the Minnesota personal income
tax primarily through investment in medium and lower grade municipal
obligations. Delaware National High-Yield Municipal Fund seeks to provide a high
level of income exempt from federal income tax, primarily through investment in
medium and lower grade municipal obligations. Delaware Tax-Free New York Fund
seeks to provide a high level of current income exempt from federal income tax
and the personal income tax of the state of New York and the city of New York,
consistent with the preservation of capital. Delaware Tax-Free Wisconsin Fund
seeks to provide a high level of current income exempt from federal income tax
and the Wisconsin personal income tax, consistent with the preservation of
capital. Delaware Montana Municipal Bond Fund seek as high a level of current
income exempt from federal income tax and from the Montana personal income tax,
as is consistent with preservation of capital.
Delaware Tax-Free Colorado Fund seeks to provide a high level of
current income exempt from federal income tax and the Colorado personal income
tax, consistent with the preservation of capital.
Delaware Tax-Free Minnesota Fund seeks to provide a high level of
current income exempt from federal income tax and the Minnesota personal income
tax, consistent with the preservation of capital. Delaware Tax-Free North Dakota
Fund seeks to provide a high level of current income exempt from federal income
tax and the North Dakota personal income tax, consistent with the preservation
of capital.
Delaware Select Growth Fund seeks long-term capital appreciation, which
the Fund attempts to achieve by investing primarily in equity securities
believed to have the potential for high earnings growth. Although the Fund, in
seeking its objective, may receive current income from dividends and interest,
income is only an incidental consideration in the selection of the Fund's
investments. Delaware Growth Stock Fund has an objective of long-term capital
appreciation. The Fund seeks to achieve its objective from equity securities
diversified among individual companies and industries. Delaware Tax-Efficient
Equity Fund seeks to obtain for taxable investors a high total return on an
after-tax basis. The Fund will attempt to achieve this objective by seeking to
provide a high long-term after-tax total return through managing its portfolio
in a manner that will defer the realization of accrued capital gains and
minimize dividend income.
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For more complete information about any of the funds in the Delaware
Investments family, including charges and expenses, you can obtain a prospectus
from the Distributor. Read it carefully before you invest or forward funds.
Each of the summaries above is qualified in its entirety by the
information contained in each fund's prospectus(es).
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