<PAGE>
For Total Return
DELAWARE GROUP
Delaware Fund
1997
Semi-Annual
Report
professional management
service and guidance
goals
DELAWARE
GROUP
- -------
<PAGE>
MAY 8, 1997
Dear Shareholder:
Despite volatile market conditions, Delaware Fund provided a positive,
above-average total return of +7.33% (capital change plus income based on net
asset value for A Class shares) for the six months ended April 30, 1997.
Your Fund, which invests in a mix of stocks and bonds, achieved superior
results compared to many balanced funds. The Fund's pharmaceutical and capital
goods stocks performed well, even as bond prices were weak amid persistent
concern about inflation.
After seeing signs of strong U.S. economic growth, the Federal Reserve Board
raised its target for short-term U.S. interest rates by 25 basis points (0.25%)
to 5.5% on March 13, and the U.S. stock market subsequently suffered its first
full-fledged correction in seven years. Bond prices also slumped, with yields on
30-year U.S. Treasury securities rising to 7.18%.
Callout: MANY OF DELAWARE FUND'S PHARMACEUTICAL AND CAPITAL GOODS STOCKS
PERFORMED WELL, EVEN AS BOND PRICES WERE WEAK AMID PERSISTENT CONCERN ABOUT
INFLATION.
Yet, in just a few weeks, the markets reversed course. In May, the
stock market not only recovered but was setting new highs while bond prices
rallied. Such change may leave investors wondering what's next?
Since 1938, we've managed Delaware Fund through market cycles with far greater
levels of uncertainty than today. In the 1990s, the U.S. has enjoyed steady
economic growth, the unemployment rate has fallen below 5% and inflation is at
much more modest levels than a generation ago. We believe these long-term trends
remain intact.
Your Fund aims to provide a balance of current income, capital
appreciation and principal preservation, and as such is more conservative
than funds that invest solely in equities. Our bond strategy focuses
primarily on income while the Fund's management selects stocks of companies
with consistent earnings and strong dividend growth potential. We believe
this approach can reduce risk to a greater degree than an investment strategy
that does not consider fundamental measures of value.
2 1997 SEMI-ANNUAL REPORT
<PAGE>
<TABLE>
<CAPTION>
TOTAL RETURN
- --------------------------------------------------------------------------------------------------------------
AGGREGATE TOTAL RETURN AVERAGE ANNUAL TOTAL RETURN
SIX MONTHS ENDED FIVE YEARS ENDED
April 30, 1997 April 30, 1997
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Delaware Fund A Class +7.33% +11.75%
- --------------------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index +1.70% +7.36%
Standard & Poor's 500 Index +14.72% +17.08%
Lipper Balanced Fund Average +6.22% (295 funds) +11.30% (83 funds)
- --------------------------------------------------------------------------------------------------------------
DELAWARE FUND PERFORMANCE AND THAT OF LIPPER BALANCED FUND AVERAGE IS BASED ON NET ASSET VALUE WITHOUT EFFECT OF
SALES CHARGE. PERFORMANCE FOR ALL FUND CLASSES CAN BE FOUND ON PAGE 8.
</TABLE>
Your Fund is guided by George H. Burwell, who is responsible for stock
selection and asset allocation, and Gary A. Reed, who selects bonds. In the
pages that follow, both managers discuss your Fund's performance and provide an
outlook for the balance of fiscal 1997.
I appreciate your continuing confidence in Delaware Fund and I look forward to
reporting to you again this autumn.
Sincerely,
/s/ Wayne A. Stork
- ----------------------
Wayne A. Stork
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
KEEPING YOUR BALANCE MAKES SENSE
A Balanced Mix of Stocks and Bonds vs. Small Aggressive Growth Stocks
Relative Performance April 1982 to April 1997
$100,000 Investment
Blend: 60% S&P 500 Index and 40% Wilshire
Lehman Brothers Aggregate Bond Index Small Cap Growth Index
------------------------------------ ----------------------
Apr-82 $100,000 $100,000
Apr-83 $142,148 $159,601
Apr-84 $144,903 $141,745
Apr-85 $172,100 $156,739
Apr-86 $227,973 $213,478
Apr-87 $268,944 $240,526
Apr-88 $269,041 $214,221
Apr-89 $314,029 $248,893
Apr-90 $345,674 $246,035
Apr-91 $404,169 $273,915
Apr-92 $456,663 $320,243
Apr-93 $506,408 $364,404
Apr-94 $524,278 $428,449
Apr-95 $594,066 $486,214
Apr-96 $719,436 $681,503
Apr-97 $846,559 $631,988
Since the spring of 1982, a balanced mix of stocks and bonds would have
increased in value more than eight-fold. An investment solely in rapidly
growing small companies would have grown only six-fold, with a much higher
level of price volatility.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THIS ILLUSTRATION IS NOT
INTENDED TO REPRESENT THE PERFORMANCE OF ANY DELAWARE GROUP FUND. SOURCE:
CDA/WEISENBERGER.
balance
1997 SEMI-ANNUAL REPORT 3
<PAGE>
Portfolio Manager's Review
The first half of fiscal 1997 was a period that demanded exceptional
patience, levelheaded stock picking and careful attention to interest rate
risk.
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. Stock of medium-size
and small companies suffered, with many non-dividend paying, aggressive growth
stocks falling 20% in value.
Bond investors faced an equally challenging environment amid
constantly changing views about U.S. economic growth and consumer prices.
Despite a post-federal election rally in the fall of 1996, bond prices as of
April 30, 1997 were generally lower than six months earlier.
Fortunately, the market's adverse reaction to the Fed's effort to
inoculate the U.S. economy against inflation proved brief. Investors who rode
out the market's short-lived winter flu by concentrating on dividend-paying,
consumer and capital goods companies emerged with robust returns.
Short-term volatility will always be a facet of equity investing, and
to a lesser extent bond investing. However, during the past 15 years a
balanced mix of stocks and bonds has outperformed small aggressive
growth stocks, as shown on page 3.
PORTFOLIO MIX
April 30, 1997
Consumer Growth Stocks 16.7%
Consumer Staple Stocks 7.0%
Utility stocks/REITS 6.5%
Other Stocks 8.6%
Mortgage Backed Securities 15.9%
Capital Goods Stocks 11.5%
Bank/Insurance Stocks 11.1%
Energy Stocks 3.3%
Corporate Bonds 9.7%
Treasuries/Other Bonds 3.6%
Asset Backed Bonds 5.3%
ASSET ALLOCATION
October 31, 1996 April 30, 1997
- -------------------------------------------------
Stocks 58.9% 65.5%
Bonds 34.4% 32.8%
Cash 6.7% 1.7%
- -------------------------------------------------
Beta* 0.66 0.65
Yield** 3.03% 2.97%
- -------------------------------------------------
*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.
**THIRTY-DAY CURRENT YIELD FOR A CLASS SHARES MEASURED ACCORDING TO
SECURITIES AND EXCHANGE COMMISSION GUIDELINES. YIELDS FOR B, C AND
INSTITUTIONAL CLASS SHARES WERE, RESPECTIVELY, 2.19%, 2.19% AND 3.15% AS OF
APRIL 30, 1997.
4 1997 SEMI-ANNUAL REPORT
<PAGE>
Strategic Positioning
During the first half of fiscal 1997, we used stock market weakness as an
opportunity to boost the equity component of Delaware Fund from 58.9% to
65.5% of your Fund's net assets. We also substantially reduced the Fund's
cash position.
Your Fund's management was fortunate to have the flexibility and
resources to buy companies with consistent earnings and dividend growth
potential at attractive prices. We also sold some stocks in the consumer
growth sector such as PROCTER & GAMBLE that had appreciated to the point
where the Fund's sell discipline was triggered. This happens when a stock's
price relative to earnings exceeds that of the overall market by more
than 20%.
OUR STOCK FOCUS
In our opinion, investors will pay more for strong companies that are likely
to increase cash dividends at an above average rate. When we select stocks,
we also look for several other indicators of capital appreciation potential,
including:
*VALUE - attractive earnings growth at discount prices;
*CONSISTENCY - steady growth in a relative stable industry;
*CASH FLOW - substantial resources to reinvest in the business or
raise dividends;
*CATALYSTS - improving operations or growth by acquisition; and
*UNDER-RESEARCHED - the company's potential hasn't yet been discovered by the
market.
Delaware Fund's value orientation led us to add a few consumer growth
companies such as HERSHEY FOODS during the first half of fiscal 1997. We
were attracted to the long-term potential of the Pennsylvania chocolate
maker's acquisition of Leaf Inc.'s candy business this past winter.
Leaf's brands include Jolly Rancher and Good & Plenty.
STOCK PORTFOLIO HIGHLIGHTS
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April 30, 1997
- ---------------------------------------------------------------------------
Median Market Capitalization $4.1 billion
Number of Stocks 53
Average Stock Price-to-Earnings Ratio 16.9x
Average 1996 Dividend Increase +12.8%
Top Sector - Consumer Growth 16.7%
STOCK PORTFOLIO SIX-MONTH AGGREGATE RETURN +11.53%*
*FOR CLASS A SHARES WITH DIVIDENDS REINVESTED. P/E RATIO BASED ON ANALYSTS'
EARNINGS ESTIMATES. FOR COMPLETE FUND PERFORMANCE, SEE PAGE 8.
We retained our drug stock holdings, which also did very well during the first
few months
1997 SEMI-ANNUAL REPORT 5
<PAGE>
of calendar 1997, because we believe this consumer growth industry has more
potential.
Compared to October 31, 1996, we've slightly increased our weighting
in mid-cap companies, adding capital goods and niche service companies such
as ECOLAB INC., which provides sanitary services to the hospitality industry.
Callout: INVESTORS WHO RODE OUT THE MARKET'S WINTER FLU BY FOCUSING ON
DIVIDEND-PAYING COMPANIES EMERGED WITH ROBUST RETURNS.
On any tree, not all fruit ripens at the same time, and your Fund has had its
share of disappointments since autumn. The most significant of these was
COLUMBIA/HCA HEALTHCARE, which was a top 10 holding as of April 30. The
company's share price suffered after Columbia, the nation's largest hospital
chain, became a target of federal regulators who question the company's billing
practices. We've retained our position because we believe the company's business
is fundamentally sound and that a settlement can be reached.
OUR BOND FOCUS
During the first half of your Fund's fiscal year, your Fund matched the duration
of the Lehman Brothers Aggregate Bond Index, a broad and unmanaged benchmark of
intermediate and long-term government, corporate and mortgage securities.
Duration measures a bond's sensitivity to interest rates and indicates the
likely change in a bond's price given a 1% movement in interest rates. A longer
duration increases the chance an investment can appreciate in value when
interest rates fall as well as the possibility of principal loss when rates
rise.
When the bond market temporarily slumped in March after the Federal
Reserve Board raised short-term interest rates by 25 basis points (0.25%),
our primary focus on mortgage-related bonds helped preserve principal because
prices of these bonds did not decline as much as Treasuries. Conversely, in
April, when interest rates fell, your Fund's bond portfolio experienced more
modest price appreciation.
Given bond market volatility since late 1993, we believe it is important to
attempt to reduce risk. We invest in bonds primarily for their income potential,
and refrain from making short-term asset allocation bets based on where we think
interest rates are headed.
We also believe a strategy that provides you with high current income from
bonds can help offset potential negative effects of stock market volatility on
the Fund's equity portfolio. As of April 30, the bond portion of your Fund's
discipline
6 1997 SEMI-ANNUAL REPORT
<PAGE>
BOND PORTFOLIO HIGHLIGHTS
- ---------------------------------------------------------------------------
April 30, 1997
- ---------------------------------------------------------------------------
Average Effective Duration 4.7 years
Average Maturity 8.2 years
Average Quality AA2
Yield (before expenses)** 7.36%
Largest Sector Focus Mortgages
BOND PORTFOLIO SIX-MONTH AGGREGATE RETURN +1.91%*
*BASED ON CLASS A SHARES AT NET ASSET VALUE WITH INCOME REINVESTED. FOR
COMPLETE FUND PERFORMANCE, SEE PAGE 8.
**SEE PAGE 4 FOR SEC YIELDS.
portfolio had a greater percentage of mortgage-related securities than the
Lehman Aggregate Index because these securities offered higher income potential
than U.S. Treasuries.
OUTLOOK
The S&P 500 Index has doubled in value in the past four years. Interest
rates, while volatile, have been moving downward in the 1990s, boosting bond
prices. Meanwhile, the U.S. economy has enjoyed a rather lengthy expansion.
Nevertheless, we are still finding attractive values in stocks,
especially among mid-size industrial and service businesses, and to a lesser
extent, bonds.
We believe lingering uncertainty about possible Federal Reserve Board
action regarding short-term interest rates in the coming months will create
opportunity for value-oriented stock and bond investors. At the same time, we
remain very mindful of economic and interest rate risks.
In general, we expect to avoid stocks and bonds we believe are likely to be
negatively affected by consumer credit problems.
Within the financial services sector, we plan to focus on mortgage
bonds and the stocks of consistently profitable, stable businesses such as
the FEDERAL NATIONAL MORTGAGE ASSOCIATION (Fannie Mae).
A volatile market can be one where investors can't easily separate
the wheat from the chaff. Your Fund's strategy of focusing on fundamental
analysis of both stocks and bonds helps us harvest growth and income
opportunities while attempting to provide a mechanism that we believe can
help manage risk in turbulent times.
George H. Burwell
VICE PRESIDENT AND
SENIOR PORTFOLIO MANAGER
EQUITIES
Gary A. Reed
VICE PRESIDENT AND
SENIOR PORTFOLIO MANAGER
FIXED-INCOME
May 8, 1997
outlook
1997 SEMI-ANNUAL REPORT 7
<PAGE>
DELAWARE FUND: A BETTER-THAN-AVERAGE BALANCE
Average Annual Returns Through April 30, 1997
- ----------------------------------------------------------------------------
Insert Chart Here:
Six Months One Year Five Years
+7.33% +15.46% +11.75%
+6.22% +12.71% +11.30%
Your Fund has outperformed many of its peers since 1992, a period of
exceptional strength in stocks and high volatility in bond prices.
*AGGREGATE RETURN.
ALL PERFORMANCE SHOWN ABOVE ASSUMES REINVESTMENT OF DIVIDENDS AND DOES NOT
INCLUDE SALES CHARGES. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
THERE WERE 328, 295 AND 83 FUNDS IN THE LIPPER BALANCED FUND AVERAGE FOR THE
SIX MONTH, ONE-YEAR AND FIVE-YEAR PERIODS ENDED APRIL 30, 1997.
DELAWARE FUND PERFORMANCE
Average Annual Return through April 30, 1997
- ----------------------------------------------------------------------------
Lifetime Ten Years Five Years One Year
- ----------------------------------------------------------------------------
Class A (Est. 4/25/38)
Excluding Sales Charge +11.22% +9.98% +11.75% +15.46%
Including Sales Charge +11.13% +9.45% +10.66% +9.97%
- ----------------------------------------------------------------------------
Class B (Est. 9/6/94)
Excluding Sales Charge +13.67% +14.55%
Including Sales Charge +12.75% +10.55%
- ----------------------------------------------------------------------------
Class C (Est. 11/29/95)
Excluding Sales Charge +13.57% +14.53%
Including Sales Charge +13.57% +13.53%
DELAWARE 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 ANY DISTRIBUTIONS
AND ANY APPLICABLE SALES CHARGES AS NOTED BELOW. B AND C CLASS RESULTS
EXCLUDING SALES CHARGE ASSUMED INVESTMENT WAS NOT REDEEMED.
CLASS A RETURNS REFLECT THE EFFECT OF THE 4.75% MAXIMUM FRONT-END SALES
CHARGE.
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 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 OF PURCHASE.
THE AVERAGE ANNUAL TOTAL RETURNS FOR THE LIFETIME, 10-YEAR, FIVE-YEAR AND
ONE-YEAR PERIODS AND AGGREGATE SIX-MONTH RETURN FOR THE PERIOD ENDED APRIL
30, 1997 FOR DELAWARE FUND'S INSTITUTIONAL CLASS, WERE +11.23%, +10.06%,
+11.91%, +15.66% AND +7.42%, RESPECTIVELY. THE INSTITUTIONAL CLASS WAS
INITIALLY MADE AVAILABLE ON NOVEMBER 9, 1992 AND IS AVAILABLE WITHOUT SALES
OR ASSET-BASED DISTRIBUTION CHARGES ONLY TO CERTAIN ELIGIBLE INSTITUTIONAL
ACCOUNTS.
8 1997 SEMI-ANNUAL REPORT
<PAGE>
Financial Statements
DELAWARE GROUP EQUITY FUNDS I, INC. --
DELAWARE FUND
STATEMENT OF NET ASSETS
APRIL 30, 1997
(UNAUDITED)
- -----------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
-------------------------------
COMMON STOCK - 65.07%
AEROSPACE & DEFENSE - 1.95%
GenCorp ........................................ 300,000 $ 5,625,000
Lockheed Martin ................................ 77,300 6,918,350
-----------
12,543,350
-----------
AUTOMOBILES & AUTOMOTIVE PARTS - 2.14%
Danaher ........................................ 304,200 13,727,025
-----------
13,727,025
-----------
BANKING, FINANCE, & INSURANCE - 11.06%
American International Group ................... 176,000 22,616,000
Chubb .......................................... 140,200 8,096,550
Federal National Mortgage ...................... 245,600 10,100,300
Nationwide Financial Services Class A .......... 125,500 3,325,750
Penncorp Financial Group ....................... 135,600 4,661,250
Southern National .............................. 112,900 4,431,325
State Street Bank .............................. 128,000 10,080,000
UNUM ........................................... 100,500 7,738,500
-----------
71,049,675
-----------
BUILDINGS & MATERIALS - 2.16%
Chicago Bridge and Iron ........................ 164,700 2,799,900
Foster Wheeler ................................. 287,000 11,085,375
-----------
13,885,275
-----------
CABLE, MEDIA, & PUBLISHING - 4.27%
Banta .......................................... 197,200 5,003,950
Reynolds & Reynolds Class A .................... 333,600 6,922,200
Wallace Computer Services ...................... 578,600 15,477,550
-----------
27,403,700
-----------
COMPUTERS & TECHNOLOGY - 0.93%
Hewlett-Packard ................................ 113,700 5,969,250
-----------
5,969,250
-----------
CONSUMER PRODUCTS - 2.27%
General Electric ............................... 52,200 5,787,675
Masco .......................................... 233,400 8,810,850
-----------
14,598,525
-----------
ELECTRONICS & ELECTRICAL - 1.78%
Raychem ........................................ 66,300 4,276,350
Teleflex ....................................... 124,300 7,178,325
-----------
11,454,675
-----------
ENERGY - 3.24%
Compagnie Francaise de Petroleum
Total SA. ADR .................................. 147,223 6,128,157
Kerr-McGee ..................................... 165,000 9,961,875
Royal Dutch Petroleum ADR ...................... 26,300 4,740,575
-----------
20,830,607
-----------
Top 10 holdings, representing 27.31% of net assets, are in bold face.
<PAGE>
NUMBER MARKET
OF SHARES VALUE
-------------------------------
COMMON STOCK (CONTINUED)
FOOD, BEVERAGE & TOBACCO - 7.05%
ConAgra ........................................ 362,000 $20,860,250
Hershey Foods .................................. 75,800 4,112,150
Philip Morris .................................. 516,000 20,317,500
-----------
45,289,900
-----------
HEALTHCARE & PHARMACEUTICALS - 9.96%
Baxter International ........................... 112,000 5,362,000
Columbia/HCA Healthcare ........................ 388,700 13,604,500
Johnson & Johnson .............................. 150,500 9,218,125
Schering-Plough ................................ 218,700 17,496,000
SmithKline Beecham ............................. 227,400 18,334,125
-----------
64,014,750
-----------
INDUSTRIAL MACHINERY - 0.84%
Pentair ........................................ 180,600 5,395,425
-----------
5,395,425
-----------
REAL ESTATE - 3.77%
Associated Estates Realty ...................... 122,400 2,692,800
Developers Diversified Realty .................. 121,100 4,465,563
D.R. Horton .................................... 164,000 1,599,000
Health Care Property Investors ................. 116,300 3,852,438
Nationwide Health Properties ................... 229,800 4,596,000
Storage Trust Realty ........................... 45,200 1,084,800
Storage USA .................................... 54,000 2,031,750
Sun Communities ................................ 121,700 3,894,400
-----------
24,216,751
-----------
RETAIL - 3.26%
May Department Stores .......................... 129,200 5,975,500
Rite Aid ....................................... 324,900 14,945,400
-----------
20,920,900
-----------
TELECOMMUNICATIONS - 1.59%
ALLTEL ......................................... 325,200 10,243,800
-----------
10,243,800
-----------
TEXTILES, APPAREL, & FURNITURE - 2.52%
Ecolab ......................................... 232,900 9,490,675
Hillenbrand Industries ......................... 151,000 6,493,000
Valspar ........................................ 8,400 239,400
-----------
16,223,075
-----------
UTILITIES - 2.71%
CMS Energy ..................................... 305,000 9,683,750
Edison International ........................... 160,000 3,360,000
Illinova ....................................... 193,500 4,353,750
-----------
17,397,500
-----------
MISCELLANEOUS - 3.57%
Tompkins plc-ADR ............................... 270,000 4,860,000
Tyco International ............................. 296,500 18,086,500
-----------
22,946,500
-----------
Total Common Stock (cost $332,361,989) ......... 418,110,683
-----------
1997 SEMI-ANNUAL REPORT 9
<PAGE>
DELAWARE GROUP EQUITY FUNDS I, INC.
STATEMENT OF NET ASSETS (CONTINUED)
- -----------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
--------------------------
CONVERTIBLE PREFERRED STOCKS - 0.43%
Freeport-McMoRan Copper & Gold
5.00% pfd cv ...................................... 103,400 $ 2,791,800
-----------
Total Convertible Preferred Stock
(cost $2,299,511) ................................ 2,791,800
-----------
PRINCIPAL
AMOUNT
CORPORATE BONDS - 9.70%
Barrick Gold 7.50% 05/01/07 ........................ $ 3,900,000 3,900,000
Celulosa Araurco 7.25% 06/11/98 .................... 1,750,000 1,756,563
Compania Telecom Chile 7.625% 07/15/06 ............. 3,000,000 3,015,000
Credit Foncier de France 8.00% 01/14/02 2,415,000 .. 2,475,375
Federal Express 7.85% 01/30/15 ..................... 4,188,146 4,235,263
Firstar Capital 8.32% 12/15/26 ..................... 2,300,000 2,279,875
Great Western Financial 8.206% 02/01/27 4,000,000 .. 3,930,000
HF Ahmanson 6.35% 09/01/98 ......................... 3,735,000 3,739,706
Kohls 6.70% 02/01/06 .............................. 2,900,000 2,773,125
Lehman Brothers Holdings
6.84% 09/25/98 ................................... 3,865,000 3,885,368
Liberty Mutual 7.875% 10/15/26 ..................... 2,900,000 2,809,375
Lockheed Martin 6.75% 03/15/03 ..................... 2,445,000 2,411,381
Lockheed Martin 7.65% 05/01/16 ..................... 3,700,000 3,704,625
May Department Stores 7.50% 06/01/15 ............... 4,000,000 3,955,000
MBNA 6.00% 12/26/00 ............................... 1,840,000 1,787,100
News America Holdings 9.125% 10/15/99 .............. 2,785,000 2,941,656
Pep Boys 7.00% 06/01/05 ........................... 2,940,000 2,866,500
Santander Financial Issuances
6.80% 07/15/05 ................................... 3,000,000 2,910,000
Summit Bancorp Capital 8.40% 03/15/27 .............. 2,000,000 1,982,500
Time Warner 8.18% 08/15/07 ......................... 1,625,000 1,663,594
Trenwick Capital 8.82% 02/01/37 .................... 2,000,000 1,975,000
Ultramar Credit 8.625% 07/01/02 .................... 1,265,000 1,342,481
-----------
Total Corporate Bonds
(cost $62,756,422) ............................... 62,339,487
-----------
MUNICIPAL BONDS - 0.55%
New York State Dorm Authority Revenue
(Taxable Pension Obligation)
6.23% 10/01/98 ................................... 3,500,000 3,500,000
-----------
Total Municipal Bonds
(cost $3,500,000) ................................ 3,500,000
-----------
ASSET-BACKED SECURITIES - 5.28%
ADVANTA 5.95% 05/25/09 ............................ 916,319 882,524
American Finance Home Equity
Series 94-2 A1 6.95% 06/25/24 ..................... 1,464,435 1,462,562
Series 92-5 A 7.20% 02/15/08 ...................... 435,274 434,665
Series 92-1 A 7.50% 03/15/07 ...................... 514,978 517,202
Series 91-1 A 8.00% 07/25/06 ...................... 387,056 393,094
Case Equipment Loan Trust
Series 95-B A3 6.15% 09/15/02 ..................... 4,186,551 4,183,461
Countrywide Home Equity Loan Trust
Series 97-1 A4 6.95% 05/25/21 ..................... 3,475,000 3,400,613
First Union Residential Securitization Tax
Series 96-2 A2 6.46% 09/25/11 ..................... 4,855,000 4,785,968
<PAGE>
PRINCIPAL MARKET
AMOUNT VALUE
----------------------------
ASSET-BACKED SECURITIES (CONTINUED)
Green Tree Home Improvement Loan Trust
Series 96-F A3 6.90% 01/15/28 ................. $ 4,570,000 $ 4,519,302
NationsCredit Grantor Trust
Series 96-1 A 5.85% 09/15/11 .................. 1,789,645 1,743,083
Neiman Marcus Group Credit Card
Master Trust Series 95-1 A
7.60% 06/15/03 ............................... 960,000 984,457
The Money Store Home Equity Trust
Series 97-A A9 7.235% 04/15/27 ................ 3,150,000 3,155,906
UCFC Home Equity Loan 96-B1 A3
Series 96-D1 A3 6.54% 11/15/13 ................ 1,800,000 1,782,508
Series 96-B1 A3 7.30% 04/15/14 ................ 3,835,000 3,861,848
World Omni Automobile Lease
Securitization Trust
Series 95-A A 6.05% 11/25/01 .................. 1,813,463 1,797,504
-----------
Total Asset-Backed Securities
(cost $34,157,454) ............................ 33,904,697
-----------
COLLATERILIZED MORTGAGE
OBLIGATIONS - 10.15%
Asset Securitization Corporation
Series 96-D2 A1 6.92% 02/14/29 ................ 3,573,955 3,518,112
Series 96-D3 A1B 7.21% 10/13/26 ............... 3,060,000 3,072,909
Series 97-D4 A1A 7.35% 04/14/29 ............... 6,215,324 6,316,323
Chase Commercial Mortgage
Securities Corporation
Series 96-2 C 6.90% 11/19/06 .................. 2,273,625 2,177,706
Morgan Stanley Capital Trust
Series 97-C1 A1B 7.46% 02/15/20 ............... 2,750,000 2,797,266
Mortgage Capital Funding
Series 96-MD2 A1 6.758% 12/21/26 .............. 4,576,820 4,523,185
Series 96-MC2 C 7.224% 09/20/06 ............... 2,137,777 2,108,633
Series 96-MC1 D 7.80% 04/15/06 ................ 2,690,000 2,721,692
Norwest Asset Securities Corporation
Series 97-1 A8 7.25% 02/25/12 ................. 3,854,017 3,826,316
Nomura Asset Securities Corporation
Series 93-1 A1 6.68% 12/15/01 ................. 1,980,249 1,959,209
Series 96-MD5 A3 7.918% 04/13/36 .............. 3,300,000 3,362,391
Prudential Home Mortgage Securities
Series 93-61 A3 6.50% 12/25/08 ................ 3,485,000 3,418,356
Residential Accredit Loans
Series 97-QS1 A5 6.75% 02/25/27 ............... 3,218,000 3,176,769
Series 97-QS1 A8 6.75% 02/25/27 ............... 2,355,589 2,259,157
Series 96-QS2 A3 7.05% 03/25/19 ............... 3,785,000 3,777,312
Series 96-QS3 AI3 7.29% 06/25/26 .............. 1,770,000 1,773,319
Series 95-QS1 A3 7.30% 06/25/21 ............... 1,540,000 1,541,444
Series 96-QS2 A6 7.45% 04/25/23 ............... 3,345,000 3,315,731
Series 97-QS3 A3 7.50% 04/25/27 ............... 5,265,000 5,233,739
Residential Funding Mortgage
Securities Corporation
Series 96-S9 A10 7.25% 04/25/26 ............... 3,198,090 3,129,625
Travelers Mortgage Securities Corporation
Series 1-Z1 12.00% 03/01/14 ................... 1,085,743 1,236,390
-----------
Total Collaterilized Mortgage Obligations
(cost $65,380,410) ............................ 65,245,584
-----------
10 1997 SEMI-ANNUAL REPORT
<PAGE>
DELAWARE GROUP EQUITY FUNDS I, INC.
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
--------------------------
MORTGAGE-BACKED SECURITIES - 5.79%
Federal Home Loan Mortgage Corporation
6.00% 02/01/11 .................................. $ 2,362,206 $ 2,254,430
Federal Home Loan Mortgage Corporation
7.00% 07/01/11 .................................. 1,328,853 1,317,641
Federal Home Loan Mortgage Corporation
8.50% 04/01/09 to 06/01/14 ...................... 2,157,318 2,235,266
Federal National Mortgage Association
7.00% 07/01/17 .................................. 2,311,149 2,267,093
Federal National Mortgage Association
8.00% 12/01/09 to 09/01/16 ...................... 3,789,608 3,882,927
Federal National Mortgage Association
8.50% 11/01/09 .................................. 1,709,160 1,767,913
Federal National Mortgage Association
9.50% 02/01/17 to 02/01/25 ...................... 5,619,366 6,058,158
Government National Mortgage
Association 7.00% 01/15/23 ...................... 2,981,100 2,900,983
Government National Mortgage
Association 7.50% 02/15/23 to 05/15/23 .......... 3,872,588 3,842,432
Government National Mortgage
Association 9.00% 01/15/20 to 11/15/21 .......... 9,414,763 10,020,457
Government National Mortgage
Association 9.50% 01/15/20 ...................... 295,493 320,610
Government National Mortgage
Association 10.00% 11/15/16 to 05/15/19 ......... 254,110 280,474
Government National Mortgage
Association 12.50% 12/15/10 ..................... 46,204 53,596
-----------
Total Mortgage-Backed Securities
(cost $36,805,927) ............................... 37,201,980
-----------
U.S. TREASURY OBLIGATIONS - 1.82%
U.S. Treasury Notes 5.875% 02/15/04 .............. 2,000,000 1,914,060
U.S. Treasury Bond 6.25% 08/15/23 ................ 4,950,000 4,483,957
U.S. Treasury Notes 6.375% 01/15/00 ............. 2,400,000 2,402,928
U.S. Treasury Notes 6.50% 05/15/05 ............... 1,350,000 1,331,723
U.S. Treasury Bond 6.625% 02/15/27 ............... 1,600,000 1,532,800
-----------
Total U.S. Treasury Obligations
(cost $11,675,113) ............................... 11,665,468
-----------
REPURCHASE AGREEMENT - 1.66%
With J.P. Morgan Securities 5.40% 05/01/97
(dated 04/30/97, collateralized by $1,102,000
U.S. Treasury Notes 5.125% due 04/30/98,
market value $1,093,142 and $2,320,000
U.S. Treasury Notes 8.625% due 08/15/97,
market value $2,380,799) ........................ 3,387,000 3,387,000
With PaineWebber 5.40% 05/01/97
(dated 04/30/97, collateralized by $1,059,000
U.S. Treasury Notes 6.00% due 11/30/97,
market value $1,086,341 and $2,329,000
U.S. Treasury Notes 6.875% due 03/31/00,
market value $2,369,962) ........................ 3,387,000 3,387,000
<PAGE>
PRINCIPAL MARKET
AMOUNT VALUE
---------------------
REPURCHASE AGREEMENT (CONTINUED)
With Prudential Securities 5.40% 05/01/97
(dated 04/30/97, collateralized by
$3,890,000 U.S. Treasury Notes 6.125%
due 05/31/97, market value $3,989,794) $3,905,000 ......... $ 3,905,000
-------------
Total Repurchase Agreements
(cost $10,679,000) ....................................... 10,679,000
-------------
TOTAL MARKET VALUE OF SECURITIES OWNED
(cost $559,615,826) - 100.45% ............................ $ 645,438,699
LIABILITIES NET OF RECEIVABLES
AND OTHER ASSETS - (0.45%) ............................... (2,862,945)
NET ASSETS APPLICABLE TO 31,414,006
SHARES ($ 1 PAR VALUE) OUTSTANDING - 100.00% .............. $ 642,575,754
=============
NET ASSET VALUE - DELAWARE FUND A CLASS
($494,165,378 / 24,163,504 shares) ........................ $ 20.45
=============
NET ASSET VALUE - DELAWARE FUND B CLASS
($9,979,757 / 488,798 shares) ............................ $ 20.42
=============
NET ASSET VALUE - DELAWARE FUND C CLASS
($4,169,537 / 204,343 shares) ............................ $ 20.40
=============
NET ASSET VALUE - DELAWARE FUND INSTITUTIONAL CLASS
($134,261,082 / 6,557,361 shares) ........................ $ 20.47
=============
COMPONENTS OF NET ASSETS AT APRIL 30, 1997
Common stock, $1 par value, 200,000,000 shares
authorized to the Delaware Fund ........................... $ 532,019,290
Accumulated undistributed:
Net investment income ..................................... 2,855,466
Net realized gain on investments .......................... 21,878,125
Net unrealized appreciation of investments ................ 85,822,873
-------------
Total net assets .......................................... $ 642,575,754
=============
ADR - American Depository Receipt
See accompanying notes
1997 SEMI-ANNUAL REPORT 11
<PAGE>
Delaware Group Equity Funds I, Inc. -
Delaware Fund
Statement Of Operations
Six Months Ended April 30, 1997
(Unaudited)
- -------------------------------------------------------------------
INVESTMENT INCOME:
Interest ......................................... $ 8,259,852
Dividends ........................................ 4,483,204 $12,743,056
-----------
EXPENSES:
Management fees ($1,659,991) and
directors' fees ($9,351) ....................... 1,669,342
Distribution expense ............................. 569,754
Dividend disbursing and transfer agent
fees and expenses ............................... 475,252
Salaries ......................................... 120,769
Reports and statements to shareholders ........... 38,250
Federal and state registration fees .............. 34,300
Professional fees ................................ 19,413
Custodian fees ................................... 7,700
Taxes other than taxes on income ................. 3,000
Other ............................................ 12 2,937,792
----------- -----------
NETINVESTMENTINCOME .............................. 9,805,264
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain from security transactions ..... 22,806,929
Net unrealized appreciation
of investments during period .................... 13,192,494
-----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS: ........................... 35,999,423
-----------
NET INCREASE IN NET
ASSETS RESULTING FROM OPERATIONS ................ $45,804,687
===========
See accompanying notes
<PAGE>
Delaware Group Equity Funds I, Inc. -
Delaware Fund
Statement of Changes In Net Assets
Six Months Ended April 30, 1997
- ---------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
4/30/97 1996
(UNAUDITED)
-------------------------------
OPERATIONS:
Net investment income ........................ $ 9,805,264 $ 21,015,505
Net realized gain from
security transactions ....................... 22,806,929 56,652,521
Net appreciation during
the period .................................. 13,192,494 14,064,318
------------- -------------
Net increase in net assets
resulting from operations .................... 45,804,687 91,732,344
------------- -------------
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income:
Delaware Fund A Class ....................... (9,079,971) (15,676,617)
Delaware Fund B Class ....................... (114,511) (124,247)
Delaware Fund C Class ....................... (37,566) (23,243)
Delaware Fund Institutional Class ........... (2,597,513) (4,004,834)
Net realized gain from
Security Transactions:
Delaware Fund A Class ....................... (44,815,558) (26,400,790)
Delaware Fund B Class ....................... (710,891) (191,178)
Delaware Fund C Class ....................... (217,176) (270)
Delaware Fund Institutional Class ........... (11,402,169) (6,170,061)
------------- -------------
(68,975,355) (52,591,240)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
Delaware Fund A Class ....................... 20,211,907 21,859,484
Delaware Fund B Class ....................... 4,074,451 4,091,428
Delaware Fund C Class ....................... 2,335,711 2,098,384
Delaware Fund Institutional Class ........... 13,247,214 32,320,993
Net asset value of shares issued upon
reinvestment of dividends from net
investment income and net realized
gain on security transactions:
Delaware Fund A Class ....................... 42,235,422 32,527,346
Delaware Fund B Class ....................... 774,611 302,927
Delaware Fund C Class ....................... 246,091 21,730
Delaware Fund Institutional Class ........... 13,975,339 10,157,754
------------- -------------
97,100,746 103,380,046
------------- -------------
Cost of shares repurchased:
Delaware Fund A Class ....................... (40,304,751) (88,614,808)
Delaware Fund B Class ....................... (1,443,279) (1,269,060)
Delaware Fund C Class ....................... (325,858) (217,457)
Delaware Fund Institutional Class ........... (14,043,292) (33,029,784)
------------- -------------
(56,117,180) (123,131,109)
------------- -------------
Increase (decrease) in net assets
derived from capital share transactions ...... 40,983,566 (19,751,063)
------------- -------------
NET INCREASE IN NET ASSETS ................... 17,812,898 19,390,041
NET ASSETS:
Beginning of period .......................... 624,762,856 605,372,815
------------- -------------
End of period ................................ $ 642,575,754 $ 624,762,856
============= =============
See accompanying notes
12 1997 SEMI-ANNUAL REPORT
<PAGE>
Delaware Group Equity Funds I, Inc. -
DELAWARE FUND
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
Delaware Fund A Class
--------------------------------------------------------------------
Six Months Year
Ended Ended
04/30/97(1) 10/31/96 10/31/95 10/31/94 10/31/93 10/31/92
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $21.260 $19.940 $18.000 $19.430 $18.720 $18.810
------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income. . . . . . . . . 0.309 0.706 0.664 0.615 0.631 0.660
Net realized and unrealized gain
(loss) from security transactions 1.181 2.349 2.156 (0.285) 1.509 1.490
------- ------- ------- ------- ------- -------
Total from investment operations 1.490 3.055 2.820 0.330 2.140 2.150
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income (0.380) (0.655) (0.630) (0.600) (0.660) (0.700)
Distributions from net realized gain
on security transactions (1.920) (1.080) (0.250) (1.160) (0.770) (1.540)
------- ------- ------- ------- ------- -------
Total distributions. . . . . . . . . . . (2.300) (1.735) (0.880) (1.760) (1.430) (2.240)
------- ------- ------- ------- ------- -------
Net asset value, end of period. . . . .. $20.450 $21.260 $19.940 $18.000 $19.430 $18.720
======= ======= ======= ======= ======= =======
Total Return(2). . . . . . . . . . . . . 7.33% 16.07% 16.26% 1.80% 11.91% 12.37%
Ratios and supplemental data:
Net assets, end of period
(000 omitted) $494,165 $490,150 $493,243 $456,074 $507,528 $487,343
Ratio of expenses to average
net assets 0.93% 0.99% 0.97% 0.97% 0.89% 0.79%(3)
Ratio of net investment income to
average net assets 3.00% 3.39% 3.55% 3.31% 3.27% 3.64%
Portfolio turnover . . . . . . . . . . 78% 92% 94% 142% 160% 144%
Average commission rate paid. . . . .. $0.0600 $0.0600 N/A N/A N/A N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Delaware Fund
Delaware Fund B Class C Class
------------------------------------------------------------------------
Six Months Year 9/6/94(4) Six Months 11/29/95(4)
Ended Ended to Ended to
04/30/97(1) 10/31/96 10/31/95 10/31/94 04/30/971 10/31/96
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $21.200 $19.900 $17.980 $18.340 $21.180 $20.500
Income from investment operations:
Net investment income. . . . . . . . . 0.233 0.525 0.567 0.070 0.252 0.583
Net realized and unrealized gain
(loss) from security transactions 1.177 2.350 2.113 (0.280) 1.153 1.757
------- ------- ------- ------- ------- -------
Total from investment operations. 1.410 2.875 2.680 (0.210) 1.405 2.340
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income (0.270) (0.495) (0.510) (0.150) (0.265) (0.580)
Distributions from net realized gain
on security transactions (1.920) (1.080) (0.250) none (1.920) (1.080)
------- ------- ------- ------- ------- -------
Total distributions. . . . . . . . . . (2.190) (1.575) (0.760) (0.150) (2.185) (1.660)
------- ------- ------- ------- ------- -------
Net asset value, end of period. . . . .. $20.420 $21.200 $19.900 $17.980 $20.400 $21.180
======= ======= ======= ======= ======= =======
Total Return(5). . . . . . . . . . . . . 6.93% 15.15% 15.36% (1.14%) 6.86% 12.13%
Ratios and supplemental data:
Net assets, end of period
(000 omitted) $9,980 $6,872 $3,383 $568 $4,170 $1,990
Ratio of expenses to average
net assets 1.74% 1.80% 1.79% 1.81% 1.74% 1.80%
Ratio of net investment income to
average net assets 2.19% 2.58% 2.73% 2.47% 2.19% 2.58%
Portfolio turnover. . . . . . . . . . . 78% 92% 94% 142% 78% 92%
Average commission rate paid. $0.0600 $0.0600 N/A N/A $0.0600 $0.0600
</TABLE>
- ------------------
(1) Ratios have been annualized and total return has not been annualized
(2) Does not reflect any maximum sales charges that were in effect nor the 1%
limited contingent deferred sales charges that were in effect that would
apply in the event of certain redemptions within 12 months of purchase of
Delaware Fund A Class.
(3) Includes 12b-1 distribution expenses effective June 1, 1992.
(4) Date of intial public offering; ratios have been annualized and total
return has not been annualized.
(5) Does not include contingent deferred sales charge which varies from 1% to
4% depending upon the holding period for Delaware Fund B Class and C Class
1997 SEMI-ANNUAL REPORT 13
<PAGE>
Financial Highlights (Continued)
- ---------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
Delaware Fund Institutional Class
--------------------------------------------------------
Six Months Year 11/9/199(2)
Ended Ended to
04/30/97(1) 10/31/96 10/31/95 10/31/94 10/31/93
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $21.300 $19.980 $18.030 $19.460 $18.820
Income from investment operations:
Net investment income . . . . . . . . 0.338 0.727 0.694 0.653 0.632
Net realized and unrealized gain
(loss) from security transactions 1.172 2.363 2.166 (0.293) 1.438
------- ------- -------- ------- -------
Total from investment operations. 1.510 3.090 2.860 0.360 2.070
------- ------- -------- ------- -------
Less dividends and distributions:
Dividends from net investment income (0.420) (0.690) (0.660) (0.630) (0.660)
Distributions from net realized
gain on security transactions (1.920) (1.080) (0.250) (1.160) (0.770)
------- ------- -------- ------- -------
Total distributions. . . . . . . . .. (2.340) (1.770) (0.910) (1.790) (1.430)
------- ------- -------- ------- -------
Net asset value, end of period. $20.470 $21.300 $19.980 $18.030 $19.460
======= ======= ======== ======= =======
Total Return. . . . . . . . . . . . . 7.42% 16.25% 16.50% 1.96% 11.76%
Ratios and supplemental data:
Net assets, end of period
(000 omitted). $134,261 $125,751 $108,747 $93,990 $72,052
Ratio of expenses to average
net assets 0.74% 0.80% 0.79% 0.81% 0.77%
Ratio of net investment income to
average net assets 3.19% 3.58% 3.73% 3.47% 3.39%
Portfolio turnover . . . . . . . . .. 78% 92% 94% 142% 160%
Average commission rate paid $0.0600 $0.0600 N/A N/A N/A
</TABLE>
- -------------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of initial public offering; ratios and total return have been
annualized.
14 1997 SEMI-ANNUAL REPORT
<PAGE>
DELAWARE GROUP EQUITY FUNDS I, INC.- DELAWARE FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
Delaware Group Equity Funds I, Inc. - Delaware Fund ("the Company"), 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 Company currently offers two Series, Delaware Fund (the "Fund")
and Devon Fund. The Company is organized as a Maryland corporation. The
Fund offers four classes of shares.
The investment objective of the Fund is to seek a balance of capital
appreciation, income and preservation of capital.
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 4:00 pm EST on the valuation date. Securities not
traded or securities not listed on an exchange are valued at the last mean of
the quoted bid and asked prices. Long-term debt securities are valued by an
independent pricing service when such prices are believed to reflect the fair
value of such securities. Money market instruments having less than 60 days
to maturity are valued at amortized cost.
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 is required in the
financial statements. Income and capital gain distributions are determined
in accordance with federal income tax requlations which may differ from
generally accepted accounting principles.
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 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.
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.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Other - Expenses common to all Funds within the Delaware 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 an accrual basis. Original issue discounts are accreted to
interest income over the lives of the respective securities.
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, a fee which is calculated daily at the annual rate of 0.60% on the
first $100 million of average daily net assets of the Fund, 0.525% on the
next $150 million, 0.50% on the next $250 million and 0.475% on the average
daily net assets over $500 million, less fees paid to the Independent
Directors. At April 30, 1997, the Fund had a liability for Investment
Management fees and other expenses payable to DMC for $108,264.
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 A Class and 1.00% of the
average daily net assets of B Class and C Class. No distribution expenses
are paid by the Institutional class. At April 30, 1997, the Fund had a
liability for distribution fees and other expenses payable to DDLP for
$17,385. For the six months ended April 30, 1997, DDLP earned $55,847 for
commissions on sales of Delaware Fund A Class shares.
<PAGE>
The Fund has engaged Delaware Service Company, Inc. (DSC) and Delaware
Investment & Retirement Services, Inc. (DIRSI), affiliates of DMC, to serve
as dividend disbursing and transfer agents for the Fund. For the six months
ended April 30, 1997, the Fund has expensed $475,252 for these services. The
Fund also engaged DSC to provide accounting services for the Fund. For the
six months ended April 30, 1997, the Fund has expensed $93,603 for these
services. Previously fund personnel provided this service and the related
costs were recorded in salaries and other expense categories in the Statement
of Operations. At April 30, 1997, the Fund had a liability for dividend
disbursing, transfer agent, and accounting service fees and other expenses
payable to DSC and DIRSI for $31,819.
Certain officers of DMC 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 six months ended April 30, 1997, the Fund made purchases of
$194,719,924 and sales of $163,389,362 of investment securities other than
U.S. government securities and temporary cash investments.
At April 30, 1997, unrealized appreciation for federal income tax purposes
aggregated $85,804,700 of which $91,424,654 related to unrealized
appreciation of securities and $5,619,954 related to unrealized depreciation
of securities. At April 30, 1997, the aggregrate cost of securities for
federal tax purposed was $559,633,998.
4. Capital Stock
SIX MONTHS YEAR
ENDED ENDED
4/30/97 10/31/96
---------- --------
Shares sold:
Delaware Fund A Class ............ 953,040 1,080,212
Delaware Fund B Class ............ 196,173 201,616
Delaware Fund C Class ............ 113,766 103,606
Delaware Fund Institutional Class 638,264 1,580,497
Shares issued upon reinvestment
of dividends from net
investment income and net realized
gain on security transactions:
Delaware Fund A Class ............ 2,111,395 1,633,576
Delaware Fund B Class ............ 38,746 15,187
Delaware Fund C Class ............ 12,316 1,060
Delaware Fund Institutional Class 698,289 509,546
---------- ----------
4,761,989 5,125,300
---------- ----------
Shares repurchased:
Delaware Fund A Class ............ (1,959,160) (4,386,405)
Delaware Fund B Class ............ (70,302) (62,659)
Delaware Fund C Class ............ (15,663) (10,742)
Delaware Fund Institutional Class (683,205) (1,629,980)
---------- ----------
(2,728,330) (6,089,786)
---------- ----------
Net increase (decrease) ........... 2,033,659 (964,486)
---------- ----------
5. Lines of Credit
The Fund has a committed line of credit for $10,000,000. No amount was
outstanding at April 30, 1997, or at any time during the last fiscal period.
6. Concentration of Credit Risk
The Fund invests in securities whose value is derived from an underlying pool
of mortgages or consumer loans. Prepayment of these loans may shorten the
stated maturity of the respective obligation and may result in a loss of
premium, if any has been paid.
The Fund may invest up to 10% of its total assets in illiquid securities
which include securities with contractual restrictions on resale, securities
exempt from registration under Rule 144A of the Securities Act of 1933, as
amended, and other securities which may not be readily marketable. The
relative illiquidity of some of these securities may adversely affect the
Fund's ability to dispose of such securities in a timely manner and at a fair
price when it is necessary to liquidate such securities.
1997 SEMI-ANNUAL REPORT 15
<PAGE>
THIS SEMI-ANNUAL REPORT IS FOR THE INFORMATION OF DELAWARE FUND SHAREHOLDERS,
BUT IT MAY BE USED WITH PROSPECTIVE INVESTORS WHEN PRECEDED OR ACCOMPANIED BY
A CURRENT PROSPECTUS FOR DELAWARE 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.
INVESTMENT MANAGER
Delaware Management Company, Inc.
Philadelphia
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
Philadelphia
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING AND
TRANSFER AGENT
Delaware Service Company, Inc.
Philadelphia
1818 Market Street
Philadelphia, PA 19103-3682
FOR SHAREHOLDERS
1.800.523.1918
FOR SECURITIES DEALERS
1.800.362.7500
FOR FINANCIAL INSTITUTIONS
REPRESENTATIVES
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.
DELAWARE
GROUP
- ---------------------
Philadelphia o London
Printed in the USA on
recycled paper
SA-002 [4/97] PP6/97
(E-133)
