<PAGE>
DELAWARE GROUP
Devon Fund
(various photos demonstrating services and guidance,
professional management and goals)
service and guidance
professional management
1997
Annual Report
goals
DELAWARE
GROUP
- --------
<PAGE>
A Commitment
To Our
Investors
(insert photo of glasses, pen and keyboard)
Delaware Group's investment tradition dates back to 1929. We have a long and
distinguished history of helping individuals and institutions -- including some
of America's largest pension funds -- reach their financial goals.
Headquartered in Philadelphia, a block from the nation's oldest stock
exchange, Delaware Group's first mutual fund was established in 1938. Delaware
International Advisers Ltd., our international affiliate, was established in
1990 and is headquartered in London.
Delaware Group offers a full range of mutual funds. We also manage
variable annuity investments, unit investment trusts and closed-end funds, and
offer retirement plan services for individuals and businesses.
Delaware manages $40 billion in mutual fund assets and institutional
advisory accounts for more than half-a-million investors. We're part of a global
financial service and investment management business owned by Lincoln National
Corporation, whose subsidiaries manage more than $120 billion in assets.
A TRADITION OF SOUND INVESTING
for total return
(insert photo of illustration from total return brochures)
Devon Fund's Objective
To seek current income and capital appreciation.
commitment
<PAGE>
November 7, 1997
Dear Shareholder:
Devon Fund achieved a robust +32.11% total return (capital change plus income
based on net asset value for Class A shares) for the 12 months ended October 31,
1997, a time when many stocks enjoyed substantial levels of capital
appreciation.
For the fourth consecutive fiscal year, your Fund outpaced the
average of its peers in the increasingly competitive Lipper Growth and Income
Fund category.
We are especially pleased with Devon Fund's short-term results during
the second half of fiscal 1997, a period of sharply higher market volatility.
From April through October, your Fund outdistanced the unmanaged S&P 500 Index
by nearly 300 basis points (3%) and provided a total return that was more than
double that of the Dow Jones Industrial Average, as shown on page 2.
During the year, our pharmaceutical, financial and capital goods stock
selections performed particularly well. This past summer we reallocated more of
your Fund's assets into stocks of mid-size companies we believed were
undervalued. This helped Devon weather the stock market's correction in late
October and, in our opinion, leaves the Fund well-positioned for fiscal 1998.
In the 1990s, the U.S. has enjoyed steady economic growth, the
unemployment rate has fallen below 5% and inflation is half what it was a
generation ago. Our federal budget deficit has declined to levels not seen
since the Nixon administration in the early 1970s. We believe these long-term
trends remain intact and will continue to have a positive effect on U.S.
financial markets.
Still, we see reason for caution as we approach the end of the
millennium, especially after three years of exceptionally ebullient stock
market returns. We believe short-term stock price fluctuations of 10% or more
are likely to occur more frequently in the coming years, and that such times
will present opportunities for patient and savvy investors.
This past summer we reallocated more of your Fund's assets into stocks of
medium-size companies that we believed were undervalued. This helped Devon
weather the stock market's correction in late October.
1997 annual report
1
<PAGE>
CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
Six Months Ended 12 Months Ended
October 31, 1997 October 31, 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Devon Fund A Class +18.11% +32.11%
- -------------------------------------------------------------------------------------------
Lipper Growth & Income Fund Average +16.12% (670 funds) +28.12% (589 funds)
Dow Jones Industrial Average +7.11% +25.82%
Standard & Poor's 500 Index +15.16% +32.20%
- -------------------------------------------------------------------------------------------
</TABLE>
All performance shown above is based on net asset value without effect of
sales charges and assumes reinvestment of distributions. Performance
information for all Fund classes can be found on page 8. Past performance
does not guarantee future results.
research & discipline
In fiscal 1997, a few of Devon's larger holdings - notably in health
care - were buffeted by regulatory issues, as well as concerns that stock
prices relative to earnings had risen well beyond historical norms. However,
by following a strict sell discipline, the Fund's portfolio manager - George
H. Burwell - disposed of most of these stocks at either a profit or with only
modest losses.
Mr. Burwell strives to select stocks with a blend of growth and value
characteristics while efficiently pruning the portfolio of companies that
become overvalued or fail to live up to expectations. We believe this
approach can be especially useful for investors given today's rapidly
changing stock market environment.
All equity mutual funds are affected by short-term market
fluctuations. Nevertheless, we believe Devon has the potential to reduce
exposure to market risks and provide superior long-term total return.
- --------------------------------------------------------------------------------
New President and CEO
On October 13, 1997,Jeffrey J. Nick was named President and Chief Executive
Officer of the Delaware Group of Funds. Mr. Nick has been CEO of Lincoln
National Investment Companies, Delaware's indirect parent, since October 1996.
He joined Lincoln National in April 1990, and from 1992 to 1996 he managed
Lincoln's operations in the United Kingdom. Mr. Nick holds an MBA from the
University of Chicago and a bachelor's degree from Princeton University.
- --------------------------------------------------------------------------------
1997 annual report
2
<PAGE>
As Devon Fund enters its fifth year of operation, we wish to extend
our sincere appreciation to the many new investors who have expressed
confidence in the Fund and the Delaware family. During fiscal 1997, Devon
Fund's assets tripled while the number of shareholders more than doubled.
We look forward to reporting to you again in the spring. Please
accept our best wishes for a new year of prosperity and happiness.
Sincerely,
/s/ Wayne A. Stork
- --------------------
Wayne A. Stork
Chairman
/s/ Jeffrey J. Nick
- --------------------
Jeffrey J. Nick
President and Chief Executive Officer
Portfolio Manager's Review
Despite volatile market conditions, fiscal 1997 was a rewarding period for
investors who could uncover undervalued stocks and make them the cornerstones of
a growth and income-oriented portfolio.
In 1997, the Federal Reserve Board's monetary policy effectively
tamed consumer inflation despite an economy that has enjoyed robust growth.
Although the rate of joblessness in America was the lowest in a generation,
the U.S. Consumer Price Index rose just 2.2% for the 12 months ended October
31, 1997, the smallest increase in years. This climate generally benefited
stocks.
For much of the period, stocks of large, high profile companies
tended to outperform the rest of the equity market, as investors focused on
businesses with consistent earnings and stocks offering dividend growth
potential. Your Fund successfully rode a wave of investor enthusiasm that
lifted the prices of many pharmaceutical, banking, insurance and capital
goods companies.
But we also applied a strict value discipline that forced us to sell
or reduce some of our positions in large multinational consumer growth
companies, such as Proctor & Gamble and SmithKline Beecham, well before the
wave broke in late October. By redeploying assets to stocks that met our
value criteria, we preserved capital to a greater degree than our peers
between August, when the stock market peaked, and the fiscal year's end.
1997 annual report
3
<PAGE>
(photo of keyboard)
Devon Fund enjoyed positive cash flow from many new investors and
this gave your Fund's management the flexibility and resources to buy
companies with consistent earnings and dividend growth potential at
attractive prices. We generally sold stocks that had appreciated to the point
where the Fund's sell discipline was triggered. This happens when a stock's
price relative to its earnings (P/E ratio) exceeds that of the overall market
by more than 20%.
In recent months, our research has led to what we believe are
overlooked and misunderstood companies such as Rite Aid Corp., the drug store
chain, W.R. Grace, which makes plastic food wrapping and Ralston-Purina, the
pet food company. We are attracted to companies where we believe an effective
restructuring is underway that could increase the company's stock price
relative to earnings (P/E ratio). Often we find value in industries that are
consolidating or where competition is limited.
Strategic Positioning
Over time, investors tend to pay more for companies whose earnings and
dividends are likely to grow at a steady rate. When we select stocks, we look
for:
* Value - attractive growth at discount prices;
* Consistency - steady growth in a relatively stable industry;
* Cash flow - substantial resources to reinvest in the business or raise
dividends;
* Catalysts - improving operations or expansion through acquisition; and,
* Undiscovered potential - the company's potential hasn't been recognized
yet by the market.
We are attracted to companies where we believe an effective restructuring is
underway. Often we find value in industries that are consolidating or where
competition is limited.
Portfolio Highlights
- --------------------------------------------------------------------------------
October 31, 1997 October 31, 1996
- --------------------------------------------------------------------------------
Median Market Capitalization $5.7 billion $4.1 billion
Number of Stocks 61 51
Average Stock Price-to-Earnings Ratio 17.0x 15.1x
Top Sector Capital Goods Consumer Growth
Current 30-Day SEC Yield 0.58% 1.10%
Beta* 0.96 0.94
- --------------------------------------------------------------------------------
P/Es are based on analysts' earnings estimates as reported by First Call. *A
measure of risk relative to the S&P 500 Index. A number less than 1.0 means
less historical price volatility than the index. A number higher than 1.0
means more historical volatility. As of October 31, 1997, B and C Class
shares did not have a yield as measured by Securities and Exchange Commission
guidelines.
4
1997 annual report
<PAGE>
o Undiscovered potential -- the company's potential hasn't been recognized yet
by the market.
Compared to October 31, 1996, we've slightly increased our weighting
in mid-cap companies, adding niche service companies such as Ecolab Inc.,
which provides sanitary services to the hospitality industry, and Masco Corp.,
a building supplies and faucet maker.
During the year, we reduced our weighting in health care stocks. Most
performed well, with one important exception - Columbia/HCA Healthcare, the
nation's largest hospital chain.
The threat of antitrust or other legal actions can have a temporary
negative effect on a stock that may present Devon Fund's management with a
buying opportunity. Unfortunately, regulatory problems can occasionally
become so substantial for a company that they overwhelm other considerations.
Such was the case with Columbia, whose billing practices were the subject of
a federal probe in 1997. The company had been a top 10 holding as of
mid-year, but when Columbia's shares briefly rebounded during the second
half, we sold our entire position at a modest loss.
Outlook
Despite volatile market conditions, we are still finding attractive values in
stocks, especially among mid-size companies. Our stock selections have
generally benefited from a migration away from expensive "branded" growth
stocks. As investors seek consistent earnings growth at reasonable prices,
our leading positions look increasingly attractive. An added benefit is that
most of the Fund's stocks have only a modest exposure to the effects of a
dollar that has been strengthening in value relative to other currencies, a
trend that may reduce earnings of multinational companies.
Your Fund's Performance Amid Short-Term Market Volatility
May 1, 1997, to October 31, 1997
CHART A
Dow Jones Industrial
Devon Fund A Class S&P 500 Index Average Total Return
April '97 .00% .00% .00%
May '97 5.53% 6.08% 4.86%
June '97 10.73% 10.83% 9.87%
July '97 19.84% 19.65% 17.83%
Aug. '97 15.48% 12.95% 9.50%
Sept. '97 21.85% 19.14% 14.29%
Oct. '97 18.11% 15.16% 7.11%
Devon Fund outpaced both the S&P 500 Index and the Dow Jones Industrial
Average for the six months ended October 31, 1997. We were able to achieve
this by focusing on mid-cap stocks that appeared to offer lower risk and
higher growth potential than stocks of larger companies.
Past performance does not guarantee future results. Performance of other
classes will differ due to different charges and expenses. See page 8 for
SEC-mandated performance information.
strategy
5
1997 annual report
<PAGE>
How Devon Blends Value and Growth
- --------------------------------------------------------------------------------
October 31, 1997
<TABLE>
<CAPTION>
Allocation Price/
Percent of Change From Earnings Median Market
Broad Sectors Fund's Net Assets October 31, 1996 Ratio* Capitalization (billions)
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Capital Goods 19.6% +3.0% 18.2x $2.2
Consumer Growth 14.6 -8.0 18.8 4.7
Finance 16.3 +2.0 15.6 6.2
Consumer Staples 10.0 -4.0 17.8 9.3
Consumer Cyclicals 6.8 +1.5 17.4 7.1
Technology 6.1 Unchanged 17.2 28.3
Utilities 2.8 +2.0 14.6 6.8
Energy 4.2 Unchanged 17.1 26.0
REITs 4.1 +1.5 11.4 1.0
- ---------------------------------------------------------------------------------------------------------------
Total 17.3 5.7
S&P 500 Index 20.5
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
* Weighted average among Devon Fund holdings based on 1998 earnings estimates
as reported by First Call.
+ Market capitalization is a company's share price times the number of shares
outstanding. The figure shown in the chart is the median of Devon Fund
holdings in each sector.
Your Fund's holdings generally have lower P/E ratios and are generally of a
smaller size than the average company in the S&P 500 Index, a sign of our
efforts to create a portfolio with both growth and value characteristics.
outlook
Several of our leading positions are companies which have excellent
core business franchises but still trade at what we believe are modest prices
because of diversification mistakes made several years back. In fiscal 1998,
we are looking for these stocks to have higher stock prices relative to
corporate earnings as investors come to realize that old problems have been
corrected.
At the end of October 1997, the S&P 500 Index was about 10% below its
all-time high. Who would have thought the trigger event for an autumn U.S.
market correction would be a currency crisis thousands of miles away in
Thailand that spread to other parts of Southeast Asia?
We believe the U.S. market's short-term decline may have been a good
thing because it helped restore relative value to stocks and reduced
speculative excesses in some sectors, notably high technology, an area where
Devon has consistently been underweighted relative to the S&P 500. In our
opinion, the pre-Halloween stock market scare will not materially affect
domestic U.S. economic growth or business confidence. We view market
volatility as an opportunity to purchase undervalued and misunderstood
companies.
George H. Burwell
Vice President and
Senior Portfolio Manager
November 7, 1997
6
1997 annual report
<PAGE>
- --------------------------------------------------------------------------------
A Prescription for Potential Success
Devon Fund's Buy/Sell Discipline At Work
Schering Plough Corp.
In the spring of 1995, Schering Plough Corp.'s earnings and stock price were
affected by negative perceptions about the New Jersey-based pharmaceutical
company's earnings prospects. Analysts were unsure about how well Schering's
newly launched drugs would do and concerned about a possible slowdown in
sales of a key product.
The company also recorded a $156.2 million loss on the sale of its
contact lens business that year, resulting in overall earnings that were
lower than a year earlier.
For Devon Fund, this uncertainty presented a buying opportunity.
During the Fund's 1995 fiscal year, Schering's share price had fallen to an
attractive level of 14 to 16 times expected future earnings, lower than other
drug companies. Meanwhile, our analysis of the company's operations suggested
it was a well-managed business whose board had a consistent record of raising
annual cash dividends by about 15% a year.
To many short-term investors at the time, Schering's outlook was
cloudy. It lacked so-called "blockbuster" drugs - products that could
generate a $1 billion or more in annual sales. Nevertheless, we saw a company
with several promising new cancer treatments and allergy relief drugs that
had the potential to become catalysts for future earnings growth.
So we began buying shares. By the end of fiscal 1996, Schering had
become one of Devon Fund's top 10 holdings.
By the summer of 1997, Schering was enjoying renewed earnings growth
and Wall Street took notice. Sales of its Claritin prescription antihistamine
were exceeding expectations while its Intron A drug was winning wide
acceptance as a treatment for hepatitis and leukemia. The stock's P/E ratio
rose to a level more than 20% above that of the overall market, peaking at 30
times earnings in July. This triggered Devon Fund's sell discipline, so we
sold our entire position, realizing a substantial profit.
<PAGE>
Schering Plough Corp.
Stock Price and Relative Value 1995-1997
Stock Price Price/Earnings Ratio
High Low
Apr '93 17 13
May '93 17 16
Jun '93 17 15
Jul '93 17 15
Aug '93 15 14
Sep '93 16 14
Oct '93 17 16
Nov '93 17 16
Dec '93 17 15
Jan '94 17 15
Feb '94 15 14
Mar '94 15 13
Apr '94 15 13
May '94 16 15
Jun '94 16 15
Jul '94 16 15
Aug '94 17 15
Sep '94 17 16
Oct '94 18 17
Nov '94 18 17
Dec '94 18 18
Jan '95 19 17
Feb '95 19 18
Mar '95 19 18
Apr '95 19 18
May '95 19 18
Jun '95 22 19
Jul '95 23 21
Aug '95 23 22
Sep '95 26 22
Oct '95 27 25
Nov '95 28 26
Dec '95 30 26
Jan '96 27 25
Feb '96 29 27
Mar '96 31 28
Apr '96 31 27
May '96 29 26
Jun '96 31 29
Jul '96 31 26
Aug '96 29 27
Sep '96 30 27
Oct '96 33 30
Nov '96 36 31
Dec '96 35 31
Jan '97 38 31
Feb '97 40 35
Mar '97 41 36
Apr '97 41 34
May '97 45 39
Jun '97 49 43
Jul '97 54 47
Aug '97 54 47
Sep '97 52 47
Oct '97 61 50
<PAGE>
Jan. '95 16.286
Feb. '95 16.260
Mar. '95 14.728
Apr. '95 14.926
May '95 15.594
Jun. '95 16.588
Jul. '95 17.481
Aug. '95 17.528
Sep. '95 18.682
Oct. '95 19.500
Nov. '95 20.864
Dec. '95 19.211
Jan. '96 19.035
Feb. '96 19.693
Mar. '96 19.571
Apr. '96 19.318
May '96 19.739
Jun. '96 20.307
Jul. '96 17.799
Aug. '96 18.083
Sep. '96 19.180
Oct. '96 20.000
Nov. '96 22.266
Dec. '96 19.621
Jan. '97 22.917
Feb. '97 23.144
Mar. '97 21.148
Apr. '97 23.183
May '97 26.381
Jun. '97 26.597
Jul. '97 30.313
Aug. '97 26.667
Sep. '97 27.321
Oct. '97 29.741
Devon Sells
Jun '97 26.597
Jul '97 H30.313
Devon Buys
Mar '95 14.728
Apr '95 14.926
7
1997 annual report
<PAGE>
Fund Performance
Devon Fund Performance
Growth of a $10,000 Investment
December 29, 1993, to October 31, 1997
With Reinvestment of Capital Gains & Dividends
Devon Fund A Class $21,456
S&P 500 Index $20,818
Lipper Growth & Income Fund Average (311 funds) $19,188
Devon Lipper Growth & Income Fund Average S&P 500
Devon Lipper Growth & Income Fund Average S&P 500
Index
Dec '93 $ 9524 $ 10000 $ 10000
Jan ' 94 $ 9876 $ 10317 $ 10340
Feb '94 $ 9886 $ 10112 $ 10060
Mar ' 94 $ 9552 $ 9696 $ 9622
Apr '94 $ 9896 $ 9799 $ 9745
May '94 $ 10020 $ 9896 $ 9904
Jun '94 $ 9829 $ 9674 $ 9662
Jul '94 $ 10117 $ 9944 $ 9978
Aug '94 $ 10490 $ 10320 $ 10387
Sep '94 $ 10318 $ 10084 $ 10133
Oct '94 $ 10404 $ 10196 $ 10360
Nov '94 $ 9866 $ 9818 $ 9983
Dec '94 $ 10100 $ 9925 $ 10131
Jan '95 $ 10110 $ 10080 $ 10393
Feb '95 $ 10650 $ 10465 $ 10797
Mar '95 $ 11021 $ 10734 $ 11116
Apr '95 $ 11181 $ 10990 $ 11443
May '95 $ 11483 $ 11352 $ 11899
Jun '95 $ 11704 $ 11595 $ 12175
Jul '95 $ 12147 $ 11987 $ 12578
Aug '95 $ 12188 $ 12072 $ 12610
Sep '95 $ 12722 $ 12442 $ 13142
Oct '95 $ 12692 $ 12281 $ 13095
Nov '95 $ 13167 $ 12824 $ 13668
Dec '95 $ 13679 $ 13038 $ 13932
Jan '96 $ 13957 $ 13405 $ 14406
Feb '96 $ 14032 $ 13603 $ 14540
Mar '96 $ 14010 $ 13796 $ 14679
Apr '96 $ 14214 $ 14034 $ 14895
May '96 $ 14525 $ 14304 $ 15278
Jun '96 $ 14954 $ 14256 $ 15336
Jul '96 $ 14266 $ 13643 $ 14658
Aug '96 $ 14663 $ 14030 $ 14967
Sep '96 $ 15443 $ 14673 $ 15809
Oct '96 $ 15755 $ 14960 $ 16245
Nov '96 $ 16834 $ 15940 $ 17471
Dec '96 $ 16812 $ 15779 $ 17125
Jan '97 $ 17402 $ 16458 $ 18194
Feb '97 $ 17795 $ 16545 $ 18338
Mar '97 $ 17043 $ 15959 $ 17586
Apr '97 $ 17623 $ 16529 $ 18634
May '97 $ 18598 $ 17562 $ 19773
Jun '97 $ 19468 $ 18236 $ 20652
Jul '97 $ 21119 $ 19579 $ 22294
Aug '97 $ 20352 $ 18927 $ 21046
Sep '97 $ 21491 $ 19886 $ 22197
Oct '97 $ 20818 $ 19188 $ 21456
<PAGE>
By focusing on undervalued companies with earnings and dividend growth
potential, your Fund has consistently provided results that have ranked among
the top 20% of mutual funds with similar objectives, as measured by Lipper
Analytical Services.*
Chart assumes $10,000 invested on December 29, 1993, and includes the effect
of a 4.75% front-end sales charge and the reinvestment of all distributions.
Performance of other classes of Devon Fund will vary due to differing charges
and expenses.
*Within Lipper's Growth & Income Fund Average, Devon Fund ranked 7th out of
311, 76th out of 382 and 117th out of 589 funds, respectively, for the
lifetime, three year and one year periods ended October 31, 1997.
Devon Fund Performance
- --------------------------------------------------------------------------------
Average Annual Return Through October 31, 1997
Lifetime One Year
- --------------------------------------------------------------------------------
Class A (Est. 12/29/93)
Excluding Sales Charge +22.58% +32.11%
Including Sales Charge +21.03% +25.83%
- --------------------------------------------------------------------------------
Class B (Est. 9/6/94)
Excluding Sales Charge +23.61% +31.21%
Including Sales Charge +23.01% +27.21%
- --------------------------------------------------------------------------------
Class C (Est. 11/29/95)
Excluding Sales Charge +26.05% +31.24%
Including Sales Charge +26.05% +30.24%
Devon Fund's return and share value fluctuate so that shares, when redeemed, may
be worth more or less than their original cost. Past performance is not a
guarantee of future results. Returns reflect reinvestment of distributions and
sales charges as noted below. Performance excluding sales charge for B and C
Classes assumes contingent sales charges either did not apply or the investment
was not redeemed.
Class A shares have a 4.75% maximum front-end sales charge and a 12b-1 fee of
up to 0.30%.
Class B shares do not carry a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are subject to a deferred sales
charge of up to 4% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee and a 1%
contingent deferred sales charge if redeemed within 12 months.
Voluntary fee limitations equal to 1.25% of net assets for A and
Institutional Class shares and 1.95% for B and C Class shares were in effect
as of October 31, 1997. Returns would have been lower without the
limitations.
The average annual total returns for Devon Fund's Institutional Class, which
is available without sales or asset-based distribution charges only to
certain eligible institutional accounts, were +22.95% and +32.57%,
respectively, for the lifetime and one-year periods ended October 31, 1997.
8
1997 annual report
<PAGE>
Financial Statements
Delaware Group Equity Funds I, Inc. -
Devon Fund
Statement of Net Assets
October 31, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Number of Market
Shares Value
-------------------------------------------
<S> <C> <C>
COMMON STOCK - 98.20%
Aerospace and Defense - 1.43%
GenCorp ................................... 24,800 $ 606,050
Lockheed Martin ........................... 7,100 674,944
-----------
1,280,994
-----------
Automobiles & Auto Parts - 2.08%
Danaher ................................... 34,000 1,863,625
-----------
1,863,625
-----------
Banking, Finance & Insurance - 16.28%
American International Group 13,600 1,388,050
BB&T ...................................... 19,500 1,061,531
Chubb ..................................... 13,800 914,250
Equifax ................................... 70,400 2,186,800
Federal National Mortgage ................. 47,400 2,295,938
Nationwide Financial Services Class A ..... 36,000 1,095,750
PMI Group ................................. 14,500 876,344
Provident ................................. 53,600 1,788,900
SAFECO .................................... 29,700 1,413,534
Unum ...................................... 32,300 1,574,625
-----------
14,595,722
-----------
Buildings and Materials - 6.26%
Foster Wheeler ............................ 44,100 1,447,031
Masco ..................................... 95,000 4,168,125
-----------
5,615,156
-----------
Cable, Media & Publishing - 5.30%
Banta ..................................... 27,400 714,112
Reynolds & Reynolds Class A ............... 39,400 674,725
Wallace Computer Services ................. 87,400 3,359,438
-----------
4,748,275
-----------
Chemicals - 5.90%
Fuller (HB) .............................. 24,500 1,156,094
Grace (W.R.) ............................. 36,000 2,448,000
Valspar ................................... 57,100 1,684,450
-----------
5,288,544
-----------
Computers - 1.75%
Hewlett-Packard ........................... 25,500 1,573,031
-----------
1,573,031
-----------
Electronics & Electrical - 4.35%
Intel ..................................... 16,300 1,255,609
Motorola .................................. 20,100 1,241,175
Rockwell International .................... 12,500 612,500
Teleflex .................................. 21,100 785,975
-----------
3,895,259
-----------
Top 10 equity holdings, representing 35.44% are in bold face.
</TABLE>
<PAGE>
Financial Statements
Delaware Group Equity Funds I, Inc. -
Devon Fund
Statement of Net Assets
October 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Number of Market
Shares Value
----------------------------------------
<S> <C> <C>
COMMON STOCK (Continued)
Energy - 4.22%
Kerr-McGee ............................. 23,300 $1,574,206
Royal Dutch Petroleum-ADR .............. 22,300 1,173,538
Total S A-ADR .......................... 18,700 1,037,850
----------
3,785,594
----------
Food, Beverage & Tobacco - 10.55%
ConAgra ................................ 92,200 2,777,525
Hershey Foods .......................... 19,300 1,066,325
Philip Morris .......................... 57,900 2,294,288
Ralston-Purina Group ................... 26,000 2,333,500
Universal Foods ........................ 24,900 981,994
----------
9,453,632
----------
Healthcare & Pharmaceuticals - 5.30%
American Home Products ................. 36,900 2,735,212
Baxter International ................... 7,300 337,625
Johnson & Johnson ...................... 29,300 1,681,087
----------
4,753,924
----------
Packaging & Containers - 1.04%
TriMas ................................. 31,800 930,150
----------
930,150
----------
Real Estate - 4.10%
D.R. Horton ............................ 59,200 888,000
Developers Diversified Realty .......... 11,300 446,350
Highwoods Properties ................... 24,500 845,250
Nationwide Health Properties ........... 29,100 656,569
Storage USA ............................ 11,400 432,487
Sun Communities ........................ 11,600 404,550
----------
3,673,206
----------
Retail - 8.09%
May Department Stores .................. 16,600 894,325
Rite Aid ............................... 75,900 4,506,563
Sherwin-Williams ....................... 66,600 1,848,150
----------
7,249,038
----------
Telecommunications - 2.92%
ALLTEL ................................. 29,100 1,029,412
SBC Communications ..................... 24,900 1,584,263
----------
2,613,675
----------
Textiles, Apparel & Furniture - 7.73%
Ecolab ................................. 73,800 3,510,113
Hillenbrand Industries ................. 22,400 957,600
HON Industries ......................... 35,200 1,817,200
Miller (Herman) ....................... 13,100 641,900
----------
6,926,813
----------
</TABLE>
1997 annual report
9
<PAGE>
Devon Fund (Continued)
Statement of Net Assets (Continued)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Number of Market
Shares Value
-------------------------------------------
<S> <C> <C>
COMMON STOCK (Continued)
Utilities - 2.83%
CMS Energy .................................................... 27,300 $ 996,450
Edison International .......................................... 25,400 650,875
PacifiCorp .................................................... 41,100 891,356
-----------
2,538,681
-----------
Miscellaneous - 8.07%
Pentair ....................................................... 40,200 1,552,725
Service International ......................................... 50,700 1,543,181
Tompkins plc-ADR .............................................. 24,400 503,250
Tyco International ............................................ 96,400 3,639,100
-----------
7,238,256
-----------
Total Common Stock
(cost $78,614,990) .......................................... $88,023,575
-----------
CONVERTIBLE PREFERRED
STOCKS - 0.56%
Freeport-McMoRan Copper & Gold
7.00% pfd cv ................................................. 19,900 502,475
-----------
Total Convertible Preferred Stock
(cost $540,180) ............................................ $ 502,475
-----------
Principal
Amount
REPURCHASE AGREEMENTS - 1.14%
With Chase 5.65% 11/3/97 (dated 10/31/97,
collateralized by $364,000 U.S. Treasury
Notes 5.75% due 10/31/00, market value
$363,992) .................................................. 357,000 357,000
With Paine Webber 5.65% 11/3/97
(dated 10/31/97, collateralized by
$339,000 U.S. Treasury Notes 5.125%
due 2/28/98, market value $341,381) ......................... 334,000 334,000
With Prudential Securities 5.65% 11/3/97
(dated 10/31/97, collateralized by $337,000
U.S. Treasury Notes 5.88% due 2/28/99,
market value $341,275) ..................................... 334,000 334,000
-----------
Total Repurchase Agreements
(cost $1,025,000) .......................................... $ 1,025,000
-----------
</TABLE>
<PAGE>
Devon Fund (Continued)
Statement of Net Assets (Continued)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Market
Value
-------------------------------------------
<S> <C>
TOTAL MARKET VALUE OF SECURITIES OWNED
(cost $80,180,170) - 99.90% ................................ $89,551,050
RECEIVABLES AND OTHER ASSETS NET
OF LIABILITIES - 0.10% ..................................... 92,736
-----------
NET ASSETS APPLICABLE TO 5,024,343 SHARES
($1 PAR VALUE) OUTSTANDING - 100.00% ........................ $89,643,786
===========
NET ASSET VALUE - DEVON FUND A CLASS
($49,261,907 / 2,757,834 shares) ........................... $ 17.86
===========
NET ASSET VALUE - DEVON FUND B CLASS
($28,757,111 / 1,615,428 shares) ........................... $ 17.80
===========
NET ASSET VALUE - DEVON FUND C CLASS
($5,875,898 / 330,385 shares) .............................. $ 17.79
===========
NET ASSET VALUE - DEVON FUND INSTITUTIONAL CLASS
($5,748,870 / 320,696 shares) .............................. $ 17.93
===========
- ------------------
ADR - American Depository Receipt
COMPONENTS OF NET ASSETS AT OCTOBER 31, 1997:
Common stock, $1 par value, 125,000,000 shares
authorized to the Devon Fund ................................ $74,471,329
Undistributed net investment income ........................... 59,952
Accumulated net realized gain on investments .................. 5,741,625
Net unrealized appreciation of investments .................... 9,370,880
-----------
Total net assets .............................................. $89,643,786
===========
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
DEVON FUND A CLASS
Net asset value A Class (A) .................................. $ 17.86
Sales charge (4.75% of offering price, or 4.98%
of amount invested per share) (B) ........................... 0.89
-----------
Offering price ................................................ $ 18.75
===========
</TABLE>
- -----------------
(A) Net asset value per share, as illustrated, is the estimated amount
which would be paid upon redemption or repurchase of shares.
(B) See Buying Shares in the current Prospectus for purchases of
$100,000 or more.
See accompanying notes
10 1997 annual report
<PAGE>
Delaware Group Equity Funds I, Inc. -
Devon Fund
Statement of Operations
Year Ended October 31, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends .................................... $ 1,033,970
Interest ..................................... 199,844 $ 1,233,814
------------
EXPENSES:
Management fees .............................. 310,229
Distribution expense ......................... 250,941
Dividend disbursing and transfer agent fees
and expenses ............................... 186,586
Accounting fees and salaries ................. 24,313
Registration fees ............................ 20,194
Reports and statements to shareholders ....... 13,030
Taxes other than taxes on income ............. 10,100
Professional fees ............................ 8,000
Directors' fees .............................. 5,818
Custodian fees ............................... 2,950
Other ........................................ 4,389 836,550
------------ ------------
Less expenses absorbed by Delaware
Management Company, Inc. ................... (90,857)
------------
Total expenses ............................... 745,693
------------
NET INVESTMENT INCOME ........................ 488,121
------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain from investment transactions 5,746,895
Net change in unrealized appreciation on
investments during the period .............. 6,227,315
------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS ........................ 11,974,210
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ............................ $ 12,462,331
------------
</TABLE>
See accompanying notes
<PAGE>
Delaware Group Equity Funds I, Inc. -
Devon Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Year Ended Year Ended
1997 1996
---------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income ......................................... $ 488,121 $ 277,292
Net realized gain from investment transactions ................ 5,746,895 1,659,549
Net change in unrealized appreciation
on investments during the period ............................. 6,227,315 1,747,047
------------ ------------
Net increase in net assets resulting from operations .......... 12,462,331 3,683,888
------------ ------------
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income:
Devon Fund A Class ........................................... (362,273) (174,416)
Devon Fund B Class ........................................... (55,613) (16,956)
Devon Fund C Class ........................................... (11,501) (3,999)
Devon Fund Institutional Class ............................... (70,878) (56,556)
Net realized gain from investment transactions:
Devon Fund A Class ........................................... (1,104,351) (463,434)
Devon Fund B Class ........................................... (264,305) (50,076)
Devon Fund C Class ........................................... (82,511) (367)
Devon Fund Institutional Class ............................... (216,937) (151,603)
------------ ------------
(2,168,369) (917,407)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
Devon Fund A Class ........................................... 38,641,388 6,421,733
Devon Fund B Class ........................................... 22,994,757 2,265,272
Devon Fund C Class ........................................... 4,650,415 1,597,020
Devon Fund Institutional Class ............................... 3,219,483 842,297
Net asset value of shares issued upon reinvestment
of dividends from net investment income and
net realized gain on investment transactions:
Devon Fund A Class ........................................... 1,427,106 621,810
Devon Fund B Class ........................................... 309,109 64,045
Devon Fund C Class ........................................... 90,323 4,344
Devon Fund Institutional Class ............................... 287,815 208,178
------------ ------------
71,620,396 12,024,699
------------ ------------
Cost of shares repurchased:
Devon Fund A Class ........................................... (11,875,438) (2,868,651)
Devon Fund B Class ........................................... (689,717) (105,456)
Devon Fund C Class ........................................... (354,298) (647,436)
Devon Fund Institutional Class ............................... (2,002,961) (1,096,984)
------------ ------------
(14,922,414) (4,718,527)
------------ ------------
Increase in net assets derived from
capital share transactions ................................... 56,697,982 7,306,172
------------ ------------
NET INCREASE IN NET ASSETS: ................................... 66,991,944 10,072,653
NET ASSETS:
Beginning of year ............................................. 22,651,842 12,579,189
------------ ------------
End of year ................................................... $ 89,643,786 $ 22,651,842
============ ============
</TABLE>
See accompanying notes
11
1997 annual report
<PAGE>
Delaware Group Equity Funds I, Inc. -
Devon Fund
Financial Highlights
October 31, 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were as follows:
Devon Fund A Class
-----------------------------------------------------
Year Ended 12/29/93(1)
October 31, to
1997 1996 1995 10/31/94
<S> <C> <C> <C> <C>
Net asset value, beginning of period .................................... $14.610 $12.550 $10.830 $10.000
Income from investment operations:
Net investment income ........................................... 0.182 0.216 0.207(2) 0.136
Net realized and unrealized gain from security transactions ..... 4.243 2.689 2.053 0.784
------- ------- ------- -------
Total from investment operations ................................ 4.425 2.905 2.260 0.920
------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ............................ (0.210) (0.205) (0.220) (0.090)
Distributions from net realized gain on security transactions ... (0.965) (0.640) (0.320) --
------- ------- ------- -------
Total dividends and distributions ............................... (1.175) (0.845) (0.540) (0.090)
------- ------- ------- -------
Net asset value, end of period .......................................... $17.860 $14.610 $12.550 $10.830
======= ======= ======= =======
Total return(3) ......................................................... 32.11% 24.14% 21.98% 11.09%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ......................... $49,262 $14,907 $8,846 $4,600
Ratio of expenses to average net assets ......................... 1.25%(4) 1.25%(4) 1.25%(4) 1.25%(4)
Ratio of net investment income to average net assets ............ 1.14%(5) 1.67%(5) 1.82%(5) 1.96%(5)
Portfolio turnover .............................................. 64% 80% 99% 180%
Average commission rate paid(6) ................................. $0.0600 $0.0600 N/A N/A
- ------------
(1) Date of initial public offering, ratios and total return have been annualized.
(2) 1995 per share information was based on the average shares outstanding method.
(3) Does not include maximum sales charge nor the 1% limited contingent deferred sales charge that would apply in the
event of certain redemptions within 12 months of purchase.
(4) Ratio of expenses to average net assets prior to expense limitation was 1.42% for the year ended October 31, 1997,
1.84% for year ended October 31, 1996, 2.29% for the year ended October 31, 1995 and 3.26% for the period ended
October 31, 1994.
(5) Ratio of net investment income (loss) to average net assets prior to expense limitation was 0.97% for the year ended
October 31, 1997, 1.08% for the year ended October 31, 1996, 0.78% for the year ended October 31, 1995 and (0.05%)
for the period ended October 31, 1994.
(6) Computed by dividing the total amount of commissions paid by the total number of shares purchased and sold during the
period for which there was a commission charged.
</TABLE>
12
1997 annual report
<PAGE>
Financial Highlights (Continued)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were as follows:
Devon Fund B Class Devon Fund C Class
-------------------------------------------- --------------------
Year Ended 09/06/94(1) Year 11/29/95(1)
October 31, to Ended to
1997 1996 1995 10/31/94 1997 10/31/96
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $14.540 $12.500 $10.820 $10.900 $14.530 $13.020
Income from investment operations:
Net investment income ................................ 0.081 0.136 0.127(2) 0.027 0.071 0.188
Net realized and unrealized gain (loss) from
security transactions ............................... 4.219 2.664 2.053 (0.077) 4.229 2.157
------- ------- ------- ------- ------- -------
Total from investment operations ..................... 4.300 2.800 2.180 (0.050) 4.300 2.345
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ................. (0.075) (0.120) (0.180) (0.030) (0.075) (0.195)
Distributions from net realized gain on
security transactions ............................... (0.965) (0.640) (0.320) -- (0.965) (0.640)
------- ------- ------- ------- ------- -------
Total dividends and distributions .................... (1.040) (0.760) (0.500) (0.030) (1.040) (0.835)
------- ------- ------- ------- ------- -------
Net asset value, end of period ........................... $17.800 $14.540 $12.500 $10.820 $17.790 $14.530
======= ======= ======= ======= ======= =======
Total return(3) .......................................... 31.21% 23.38% 21.09% (0.46%) 31.24% 18.94%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .............. $28,757 $3,399 $ 863 $ 115 $ 5,876 $1,056
Ratio of expenses to average net assets .............. 1.95%(4) 1.95%(4) 1.95%(4) 1.95%(4) 1.95%(6) 1.95%(6)
Ratio of net investment income to average net assets . 0.44%(5) 0.97%(5) 1.12%(5) 1.26%(5) 0.44%(7) 0.97%(7)
Portfolio turnover ................................... 64% 80% 99% 180% 64% 80%
Average commission rate paid(8) ...................... $0.0600 $0.0600 N/A N/A $0.0600 $0.0600
- ---------------
(1) Date of initial public offering; ratios have been annualized and total return has not been annualized.
(2) 1995 per share information was based on the average shares outstanding method.
(3) Does not include contingent deferred sales charge which varies from 1%-4% depending upon the holding period for
Delaware Fund B Class and C Class.
(4) Ratio of expenses to average net assets prior to expense limitation was 2.12% for the year ended October 31, 1997, 2.54% for
year ended October 31, 1996, 2.99% for the year ended October 31, 1995 and 3.96% for the period ended October 31, 1994.
(5) Ratio of net investment income (loss) to average net assets prior to expense limitation was 0.27% for the year ended
October 31, 1997, 0.38% for the year ended October 31, 1996, 0.08% for the year ended October 31, 1995 and (0.75%) for the
period ended October 31, 1994.
(6) Ratio of expenses to average net assets prior to expense limitation was 2.12% for the year ended October 31,1997 and
2.54% for the period ended October 31, 1996.
(7) Ratio of net investment income to average net assets prior to expense limitation was 0.27% for the year ended October 31, 1997
and 0.38% for the period ended October 31, 1996.
(8) Computed by dividing the total amount of commissions paid by the total number of shares purchased and sold during the
period for which there was a commission charged.
</TABLE>
13
1997 annual report
<PAGE>
Financial Highlights (Continued)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were as follows:
Devon Fund Institutional Class
------------------------------------------------------
Year Ended 12/29/93(1)
October 31, to
1997 1996 1995 10/31/94
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................................ $14.670 $12.590 $10.860 $10.000
Income from investment operations:
Net investment income ........................................... 0.211 0.267 0.241(2) 0.201
Net realized and unrealized gain from security transactions ..... 4.284 2.693 2.049 0.749
------- ------- ------- -------
Total from investment operations ................................ 4.495 2.960 2.290 0.950
------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ............................ (0.270) (0.240) (0.240) (0.090)
Distributions from net realized gain on
security transactions .......................................... (0.965) (0.640) (0.320) --
------- ------- ------- -------
Total dividends and distributions ............................... (1.235) (0.880) (0.560) (0.090)
------- ------- ------- -------
Net asset value, end of period ...................................... $17.930 $14.670 $12.590 $10.860
======= ======= ======= =======
Total return ........................................................ 32.57% 24.56% 22.26% 11.45%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ......................... $5,749 $3,290 $ 2,870 $ 2,516
Ratio of expenses to average net assets ......................... 0.95%(3) 0.95%(3) 0.95%(3) 0.95%(3)
Ratio of net investment income to average net assets ............ 1.44%(4) 1.97%(4) 2.12%(4) 2.26%(4)
Portfolio turnover .............................................. 64% 80% 99% 180%
Average commission rate paid(5) ................................. $0.0600 $0.0600 N/A N/A
- ----------------
(1) Date of initial public offering; ratios and total return have been annualized.
(2) 1995 per share information was based on the average shares outstanding method.
(3) Ratio of expenses to average net assets prior to expense limitation was 1.12% for the year ended October 31, 1997, 1.54%
for year ended October 31, 1996, 1.99% for the year ended October 31, 1995 and 2.96% for the period ended October 31, 1994.
(4) Ratio of net investment income to average net assets prior to expense limitation was 1.27% for the year ended October 31, 1997,
1.38% for the year ended October 31, 1996, 1.08% for the year ended October 31, 1995 and 0.25% for the period ended
October 31, 1994.
(5) Computed by dividing the total amount of commissions paid by the total number of shares purchased and sold during the period
for which there was a commission charged.
</TABLE>
14
1997 annual report
<PAGE>
Delaware Group Equity 1, Inc. -
Devon Fund
Notes to Financial Statements
October 31, 1997
- --------------------------------------------------------------------------------
Delaware Group Equity Funds I, Inc. - formerly known as Delaware Group Delaware
Fund, Inc., is registered as a diversified open-end investment company under the
Investment Company Act of 1940, as amended. The Delaware Group Equity Funds I
currently offers two Series, Delaware Fund and Devon Fund (the "Fund"). The Fund
is organized as a Maryland Corporation and offers four classes of shares. The
Devon Fund A Class carries a front-end sales charge of 4.75%. The Devon Fund B
Class carries a back-end sales charge. The Devon Fund C Class carries a level
load deferred sales charge and Devon Fund Institutional Class has no sales
charge. The Fund's objective is to seek current income and capital appreciation.
1. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Fund.
Security Valuation - Securities listed on an exchange are valued at the last
quoted sales price as of the close of the NYSE on the valuation date. Securities
not traded or securities not listed on an exchange are valued at the mean of the
last quoted bid and asked prices. Money market instruments having less than 60
days to maturity are valued at amortized cost which approximates market value.
Federal Income Taxes - The Fund intends to continue to qualify as a regulated
investment company and make the requisite distributions to shareholders.
Accordingly, no provision for federal income taxes has been made in the
financial statements. Income and capital gain distributions are determined in
accordance with federal income tax regulations which may differ from generally
accepted accounting principles.
Class Accounting - Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various classes of
the Fund on the basis of daily net assets of each class. Distribution expenses
relating to a specific class are charged directly to that class.
Repurchase Agreements - The Fund may invest in a pooled cash account along with
other members of the Delaware Group of Funds. The aggregate daily balance of the
pooled cash account is invested in repurchase agreements secured by obligations
of the U.S. government. The respective collateral is held by the Fund's
custodian bank until the maturity of the respective repurchase agreements. Each
repurchase agreement is at least 100% collateralized. However, in the event of
default or bankruptcy by the counterparty to the agreement, realization of the
collateral may be subject to legal proceedings.
Other - Expenses common to all Funds within the Delaware Group of Funds are
allocated amongst the funds on the basis of average net assets. Security
transactions are recorded on the date the securities are purchased or sold
(trade date). Costs used in calculating realized gains and losses on the sale of
investment securities are those of the specific securities sold. Dividend income
is recorded on the ex-dividend date and interest income is recorded on the
accrual basis.
Certain Fund expenses are paid through "soft dollar" arrangements with brokers.
The amount of these expenses is less than 0.01% of the Fund's average daily net
assets.
<PAGE>
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware Management Company, Inc. (DMC), the Investment Manager of the
Fund, an annual fee which is calculated daily at the rate of 0.60% on the first
$500 million of average daily net assets of the Fund and 0.50% on the average
daily net assets over $500 million. At October 31, 1997, the Fund had a
liability for Investment Management fees and other expenses payable to DMC of
$237,456.
DMC has elected to waive its fee and reimburse the Fund to the extent that
annual operating expenses exclusive of taxes, interest, distribution fees,
brokerage commissions and extraordinary expenses, exceed 0.95% of average daily
net assets of the Fund through October 31, 1997. Total expenses absorbed by DMC
for the year ended October 31, 1997 were $90,857.
The Fund has engaged Delaware Service Company, Inc. (DSC) and Delaware
Investment & Retirement Services, Inc. (DIRSI), affiliates of DMC, to provide as
dividend disbursing, transfer agent and accounting services to the Fund. For the
year ended October 31, 1997, the Fund expensed $186,586 for dividend disbursing
and transfer agent services and $18,091 for accounting services. At October 31,
1997, the Fund had a liability for such fees and other expenses payable to DSC
and DIRSI of $38,539.
Pursuant to the Distribution Agreement, the Fund pays Delaware Distributors,
L.P. (DDLP), the Distributor and an affiliate of DMC, an annual fee not to
exceed 0.30% of the average daily net assets of the A Class and 1.00% of the
average daily net assets of the B and C Class. No distribution expenses are paid
by the Institutional Class. At October 31, 1997, the Fund had a liability for
distribution fees and other expenses payable to DDLP of $16,850. For the year
ended October 31, 1997, DDLP earned $90,538 for commissions on sales of the Fund
A Class shares.
Certain officers of DMC, DSC and DDLP are officers, directors and/or employees
of the Fund. These officers, directors and employees are paid no compensation by
the Fund.
3. Investments
During the year ended October 31, 1997, the Fund made purchases of $86,938,556
and sales of $31,106,057 of investment securities other than U.S. government
securities and temporary cash investments.
At October 31, 1997, net unrealized appreciation for federal income tax purposes
aggregated $9,360,778 of which $10,447,709 related to unrealized appreciation of
securities and $1,086,931 related to unrealized depreciation of securities. At
October 31, 1997, the aggregate cost of securities for federal tax purposes was
$80,190,272.
15
1997 annual report
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
4. Capital Stock
Transactions in capital stock shares were as follows:
Year Ended Year Ended
1997 1996
---------- ----------
Shares sold:
Devon Fund A Class ........................... 2,349,807 481,037
Devon Fund B Class ........................... 1,401,315 167,538
Devon Fund C Class ........................... 272,642 117,220
Devon Fund Institutional Clas ................ 197,224 63,036
Shares issued upon reinvestment of dividends
from net investment income and net realized
gains from security transactions:
Devon Fund A Class ........................... 96,188 48,285
Devon Fund B Class ........................... 20,945 4,965
Devon Fund C Class ........................... 6,167 312
Devon Fund Institutional Class ............... 19,481 16,198
--------- ---------
4,363,769 898,591
--------- ---------
Year Ended Year Ended
1997 1996
---------- ----------
Shares repurchased:
Devon Fund A Class ........................... (708,508) (213,978)
Devon Fund B Class ........................... (40,605) (7,814)
Devon Fund C Class ........................... (21,081) (44,875)
Devon Fund Institutional Class ............... (120,222) (82,931)
--------- ---------
(890,416) (349,598)
--------- ---------
Net Increase .................................. 3,473,353 548,993
--------- ---------
5. Lines of Credit
The Fund has a committed line of credit of $800,000. No amount was outstanding
at October 31, 1997, or at any time during the fiscal year.
<PAGE>
Delaware Group Equity Funds I, Inc. -
Devon Fund
Report of Independent Auditors
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors
Delaware Group Equity Funds I, Inc. -
Devon Fund
We have audited the accompanying statement of net assets of Delaware Group
Equity Funds I, Inc. - Devon Fund as of October 31, 1997, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated therein. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of October 31, 1997 by correspo ndence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Group Equity Funds I, Inc. - Devon Fund at October 31, 1997, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and its financial highlights
for each of the periods indicated therein, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
-----------------------
Philadelphia, Pennsylvania
December 4, 1997
16
1997 annual report
<PAGE>
This annual report is for the information of Devon Fund shareholders, but it
may be used with prospective investors when preceded or accompanied by a
current Prospectus for Devon Fund, which sets forth details about charges,
expenses, investment objectives and operating policies of the Fund. You
should read the prospectus carefully before you invest. Summary investment
results are documented in the Fund's current Statement of Additional
Information. The figures in this report represent past results which are not
a guarantee of future results. The return and principal value of an
investment in the Fund will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost.
Board of Directors
Wayne A. Stork
Chairman
Delaware Group of Funds
Philadelphia, PA
Jeffrey J. Nick
President and Chief Executive Officer
Delaware Group of Funds
Philadelphia, PA
Walter P. Babich
Board Chairman, Citadel Constructors, Inc.
King of Prussia, PA
Anthony D. Knerr
Consultant, Anthony Knerr & Associates
New York, NY
Ann R. Leven
Treasurer, National Gallery of Art
Washington, DC
W. Thacher Longstreth
City Councilman
Philadelphia, PA
Thomas F. Madison
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
Charles E. Peck
Secretary/Treasurer, Enterprise Homes, Inc.
Fredericksburg, VA
<PAGE>
Affiliated Officers
David K. Downes
Executive Vice President, Chief Financial Officer
and Chief Operating Officer
Delaware Group of Funds
Philadelphia, PA
George M. Chamberlain, Jr.
Senior Vice President, Secretary
and General Counsel
Delaware Group of Funds
Philadelphia, PA
Bruce D. Barton
President and Chief Executive Officer
Delaware Distributors, L.P.
Philadelphia, PA
directors & officers
Investment Manager
Delaware Management Company, Inc.
Philadelphia, Pennsylvania
International Affiliate
Delaware International Advisers Ltd.
London, England
National Distributor
Delaware Distributors, L.P.
Philadelphia, Pennsylvania
Shareholder Servicing,
Dividend Disbursing
and Transfer Agent
Delaware Service Company, Inc.
Philadelphia, Pennsylvania
1818 Market Street
Philadelphia, PA 19103-3682
(insert photo of Globes)
<PAGE>
This report must be preceded or accompanied by a current Devon Fund
prospectus and the Delaware Group Fund Performance Update for the most
recently completed calendar quarter. For a prospectus of any other Delaware
Group fund, contact your financial adviser or Delaware Group.
For Shareholders
1.800.523.1918
For Securities Dealers
1.800.362.7500
For Financial Institutions Representatives Only
1.800.659.2265
Be sure to consult your financial adviser when making investments. Mutual
funds can be a valuable part of your financial plan; however, shares of the
Fund are not FDIC or NCUSIF insured, are not guaranteed by any bank or any
credit union, and involve investment risk, including the possible loss of the
principal amount invested. Shares of the Fund are not bank or credit union
deposits.
Copy Rights Delaware Distributors, L.P.
Printed in the USA on
recycled paper
(359)
AR-039[10/97]TKO12/97
For Total Return
DELAWARE
GROUP
- --------
PHILADELPHIA o LONDON
Copyright Delaware Distributors, L.P.
