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(DF/DVN-IC)
DELAWARE FUND PROSPECTUS
INSTITUTIONAL CLASS SHARES DECEMBER 30, 1996
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1818 Market Street, Philadelphia, PA 19103
For more information about the Delaware Fund Institutional Class
call Delaware Group at 800-828-5052.
This Prospectus describes the shares of the Delaware Fund series
(the "Fund") (formerly Common Stock series) of Delaware Group Equity Funds I,
Inc. ("Equity Funds I, Inc.") (formerly Delaware Group Delaware Fund, Inc.), a
professionally-managed mutual fund of the series type. The Fund's objective is
to seek a balance of capital appreciation, income and preservation of capital.
The Fund offers Delaware Fund Institutional Class (the "Class"). This
Prospectus relates only to the Class and sets forth information that you
should read and consider before you invest. Please retain it for future
reference. The Fund's Statement of Additional Information ("Part B" of Equity
Funds I, Inc.'s registration statement), dated December 30, 1996, as it may be
amended from time to time, contains additional information about the Fund and
has been filed with the Securities and Exchange Commission. Part B is
incorporated by reference into this Prospectus and is available, without
charge, by writing to Delaware Distributors, L.P. at the above address or by
calling the above number. The Fund's financial statements appear in its Annual
Report, which will accompany any response to requests for Part B.
The Fund also offers Delaware Fund A Class, Delaware Fund B Class
and Delaware Fund C Class. Shares of these classes are subject to sales
charges and other expenses, which may affect their performance. A prospectus
for these classes can be obtained by writing to Delaware Distributors, L.P. at
the above address or by calling 800-523-4640.
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TABLE OF CONTENTS
Cover Page How to Buy Shares
Synopsis Redemption and Exchange
Summary of Expenses Dividends and Distributions
Financial Highlights Taxes
Investment Objective and Policies Calculation of Net Asset Value Per Share
Suitability Management of the Fund
Investment Strategy Other Investment Policies and
Classes of Shares Risk Considerations
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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, ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SHARES OF THE FUND
ARE NOT BANK OR CREDIT UNION DEPOSITS.
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SYNOPSIS
Investment Objective
The investment objective of the Fund is to seek a balance of capital
appreciation, income and preservation of capital. For further details, see
Investment Objective and Policies and Other Investment Policies and Risk
Considerations.
Risk Factors and Special Considerations
The Fund typically invests a portion of its assets in
mortgaged-backed and asset-backed securities (commonly considered to be
"derivative securities"), which may present greater risks than other types of
portfolio securities, and the investor should review the descriptions of these
risks in this Prospectus. See Mortgaged-Backed Securities and Asset-Backed
Securities under Other Investment Policies and Risk Considerations.
Investment Manager, Distributor and Service Agent
Delaware Management Company, Inc. (the "Manager") furnishes
investment management services to the Fund, subject to the supervision and
direction of Equity Funds I, Inc.'s Board of Directors. The Manager also
provides investment management services to certain other funds in the Delaware
Group. Delaware Distributors, L.P. (the "Distributor") is the national
distributor for the Fund and for all of the other mutual funds in the Delaware
Group. Delaware Service Company, Inc. (the "Transfer Agent") is the
shareholder servicing, dividend disbursing, accounting services and transfer
agent for the Fund and for all of the other mutual funds in the Delaware
Group. See Summary of Expenses and Management of the Fund for further
information regarding the Manager and the fees payable under the Fund's
Investment Management Agreement.
Purchase Price
Shares of the Class offered by this Prospectus are available at net
asset value, without a front-end or contingent deferred sales charge and are
not subject to distribution fees under a Rule 12b-1 distribution plan.
See Classes of Shares.
Redemption and Exchange
Shares of the Class are redeemed or exchanged at the net asset value
calculated after receipt of the redemption or exchange request. See Redemption
and Exchange.
Open-End Investment Company
Equity Funds I, Inc. which was organized as a Maryland corporation on
March 4, 1983 is an open-end management investment company. The Fund's
portfolio of assets is diversified as defined by the Investment Company Act of
1940 (the "1940 Act"). Equity Funds I, Inc. was previously organized as a
Delaware corporation in 1937. See Shares under Management of the Fund.
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SUMMARY OF EXPENSES
Shareholder Transaction Expenses
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Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).................... None
Maximum Sales Charge Imposed
on Reinvested Dividends
(as a percentage of offering price).................... None
Exchange Fees.......................................... None*
* Exchanges are subject to the requirements of each fund and a front-end
sales charge may apply.
Annual Operating Expenses
(as a percentage of average daily net assets)
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Management Fees......................................... 0.52%
12b-1 Fees.............................................. None
Other Operating Expenses................................ 0.28%
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Total Operating Expenses........................... 0.80%
=====
For expense information about Delaware Fund A Class, Delaware Fund B
Class and Delaware Fund C Class, see the separate prospectus relating to those
classes.
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The following example illustrates the expenses that an investor would
pay on a $1,000 investment over various time periods, assuming (1) a 5% annual
rate of return, and (2) redemption at the end of each time period. As noted in
the tables above, Equity Funds I, Inc. charges no redemption fees.
1 year 3 years 5 years 10 years
------ ------- ------- --------
$8 $26 $44 $99
The purpose of the above tables is to assist the investor in understanding the
various costs and expenses that an investor in the Class will bear directly or
indirectly.
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
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FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements
of Delaware Fund of Delaware Group Equity Funds I, Inc. (formerly known as
Delaware Group Delaware Fund, Inc.) and have been audited by Ernst & Young
LLP, independent auditors. The data should be read in conjunction with the
financial statements, related notes, and the reports of Ernst & Young LLP
covering such financial information and highlights, all of which are
incorporated by reference into Part B. Further information about the Fund's
performance is contained in its Annual Report to shareholders. A copy of the
Fund's Annual Report (including the report of Ernst & Young LLP) may be
obtained from Equity Funds I, Inc. upon request at no charge.
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DF-IC-CHT
<TABLE>
<CAPTION>
Delaware Fund Institutional Class
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Period
11/9/92(2)
Year Ended through
10/31/96(2) 10/31/95(2) 10/31/94(2) 10/31/93 10/31/93(1) 10/31/92(1)
----------- ----------- ----------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.. $19.980 $18.030 $19.460 $18.820 $18.720 $18.810
Income From Investment Operations
Net Investment Income................. 0.727 0.694 0.653 0.632 0.631 0.660
Net Gains (Losses) on Securities
(both realized and unrealized). 2.363 2.166 (0.293) 1.438 1.509 1.490
------- ------- ------- ------- ------- -------
Total From Investment Operations... 3.090 2.860 0.360 2.070 2.140 2.150
------- ------- ------- ------- ------- -------
Less Distributions
Dividends (from net investment income) (0.690) (0.660) (0.630) (0.660) (0.660) (0.700)
Distributions (from capital gains).... (1.080) (0.250) (1.160) (0.770) (0.770) (1.540)
Returns of Capital.................... none none none none none none
------- ------- ------- ------- ------- -------
Total Distributions................ (1.770) (0.910) (1.790) (1.430) (1.430) (2.240)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period....... $21.300 $19.980 $18.030 $19.460 $19.430 $18.720
======= ======= ======= ======= ======= =======
Total Return.......................... 16.25% 16.50% 1.96% 11.76% 11.91%(3) 12.37%(3)
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Ratios/Supplemental Data
Net Assets, End of Period (000's omitted) $125,751 $108,747 $93,990 $72,052 $507,528 $487,343
Ratio of Expenses to Average Daily Net Assets 0.80% 0.79% 0.81% 0.77% 0.89% 0.79%
Ratio of Net Investment Income to
Average Daily Net Assets........... 3.58% 3.73% 3.47% 3.39% 3.27% 3.64%
Portfolio Turnover Rate............... 92% 94% 142% 160% 160% 144%
Average Commission Rate Paid.......... $0.060 N/A N/A N/A N/A N/A
</TABLE>
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<TABLE>
<CAPTION>
Delaware Fund Institutional Class
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Year Ended
10/31/91(1) 10/31/90(1) 10/31/89(1) 10/31/88(1) 10/31/87(1)
----------- ----------------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.. $16.190 $17.480 $15.250 $16.850 $23.200
Income From Investment Operations
Net Investment Income................. 0.757 0.856 0.796 0.551 0.331
Net Gains (Losses) on Securities
(both realized and unrealized). 3.033 (1.366) 2.384 2.259 (1.971)
------- ------- ------- ------- -------
Total From Investment Operations... 3.790 (0.510) 3.180 2.810 (1.640)
------- ------- ------- ------- -------
Less Distributions
Dividends (from net investment income) (0.880) (0.780) (0.950) (0.320) (0.400)
Distributions (from capital gains).... (0.290) none none (4.090) (4.310)
Returns of Capital.................... none none none none none
------- ------- ------- ------- -------
Total Distributions................ (1.170) (0.780) (0.950) (4.410) (4.710)
------- ------- ------- ------- -------
Net Asset Value, End of Period....... $18.810 $16.190 $17.480 $15.250 $16.850
======= ======= ======= ======= =======
Total Return.......................... 24.32%(3) (3.17%)(3) 21.66%(3) 22.03%(3) (9.14%)(3)
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Ratios/Supplemental Data
Net Assets, End of Period (000's omitted) $453,449 $349,873 $361,625 $328,650 $320,854
Ratio of Expenses to Average Daily Net Assets 0.71% 0.75% 0.76% 0.77% 0.73%
Ratio of Net Investment Income to
Average Daily Net Assets........... 4.29% 4.99% 4.73% 4.01% 1.64%
Portfolio Turnover Rate............... 212% 147% 129% 180% 205%
Average Commission Rate Paid.......... N/A N/A N/A N/A N/A
</TABLE>
(1) Data are derived from data of Delaware Fund A Class which was subject to
12b-1 distribution expenses effective June 1, 1992.
(2) Data are derived from Delaware Fund Institutional Class shares, which
commenced operations on November 9, 1992. Ratios and total return have
been annualized.
(3) Does not reflect the maximum sales charge that is or was in effect nor
the 1% limited contingent deferred sales charge that would apply in the
event of certain redemptions within 12 months of purchase for Delaware
Fund A Class.
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INVESTMENT OBJECTIVE AND POLICIES
The objective of the Fund is to seek a balance of capital
appreciation, income and preservation of capital.
Although the Fund will constantly strive to attain its objective,
there can be no assurance that it will be obtained. The objective of the Fund
cannot be changed without shareholder approval.
SUITABILITY
The Fund may be suitable for investors interested in long-term
capital appreciation. The Fund may also be suitable for investors wishing to
expose a portion of their assets to fixed-income securities. Investors in the
Fund should be willing to accept the risks associated with investments in
equity securities as well as the risks associated with investments in
fixed-income securities. Net asset values may fluctuate in response to market
conditions and, as a result, the Fund is not appropriate for a short-term
investor.
Investors should not consider a purchase of Fund shares as equivalent
to a complete investment program. The Delaware Group includes a family of
funds, generally available through registered investment dealers, which may be
used together to create a more complete investment program.
Ownership of Fund shares can reduce the bookkeeping and
administrative inconveniences that would be connected with direct purchases of
the type of securities in which the Fund invest.
INVESTMENT STRATEGY
As a "balanced" fund, the Fund will generally invest at least 25% of
its assets in fixed-income securities, including U.S. government securities
and corporate bonds. The remainder of the Fund will be allocated to equity
securities principally, including convertible securities, and also to cash and
cash equivalents. A portion of the Fund's investment in certain convertible
securities may be deemed fixed-income in nature for purposes of this 25%
fixed-income allocation. The Fund may also invest in foreign securities.
The Fund uses a dividend-oriented valuation strategy to select
individual securities in which it will invest. In seeking capital
appreciation, the Fund invests primarily in common stocks of established
companies believed to have a potential for long-term capital growth. In
seeking current income and preservation of capital, in addition to capital
appreciation, the Fund invests in various types of fixed-income securities,
including U.S. government and government agency securities and corporate
bonds. The Fund generally invests in bonds that are rated in the top four
grades by a nationally-recognized rating agency (e.g., Moody's Investors
Service, Inc. ("Moody's") or Standard & Poor's Ratings Group ("S&P")) at the
time of purchase, or, if unrated, are determined to be equivalent to the top
four grades in the judgment of the Manager. The fourth grade is considered
medium grade and may have some speculative characteristics. Typically, the
maturity of the bonds will range between five and 30 years. The Fund may
invest not more than 5% of its assets in convertible debentures rated below
investment grade.
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The Fund will analyze existing and expected economic and market
conditions and seek to identify those market sectors or individual securities
that are expected to benefit from those conditions. Its appraisal of these
economic conditions will determine the types of securities it will hold and
the degree of investment emphasis placed upon capital appreciation and income.
* * *
For additional information about the Fund's investment policies and
certain risks associated with investments in certain types of securities, see
Other Investment Policies and Risk Considerations.
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CLASSES OF SHARES
The Distributor serves as the national distributor for the Fund.
Shares of the Class may be purchased directly by contacting the Fund or its
agent or through authorized investment dealers. All purchases of shares of the
Class are at net asset value. There is no front-end or contingent deferred
sales charge.
Investment instructions given on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees considering purchasing shares of the Class
as part of their retirement program should contact their employer for details.
Shares of the Class are available for purchase only by: (a)
retirement plans introduced by persons not associated with brokers or dealers
that are primarily engaged in the retail securities business and rollover
individual retirement accounts from such plans; (b) tax-exempt employee
benefit plans of the Manager, or its affiliates and securities dealer firms
with a selling agreement with the Distributor; (c) institutional advisory
accounts of the Manager, or its affiliates and those having client
relationships with Delaware Investment Advisers, a division of the Manager, or
its affiliates and their corporate sponsors, as well as subsidiaries and
related employee benefit plans and rollover individual retirement accounts
from such institutional advisory accounts; (d) a bank, trust company and
similar financial institution investing for its own account or for the account
of its trust customers for whom such financial institution is exercising
investment discretion in purchasing shares of the Class, except where the
investment is part of a program that requires payment to the financial
institution of a Rule 12b-1 Plan fee; and (e) registered investment advisers
investing on behalf of clients that consist solely of institutions and high
net-worth individuals having at least $1,000,000 entrusted to the adviser for
investment purposes, but only if the adviser is not affiliated or associated
with a broker or dealer and derives compensation for its services exclusively
from its clients for such advisory services.
Delaware Fund A Class, Delaware Fund B Class and Delaware Fund C Class
In addition to offering Delaware Fund Institutional Class, the Fund
also offers Delaware Fund A Class, Delaware Fund B Class and Delaware Fund C
Class, which are described in a separate prospectus. Shares of the Delaware
Fund A Class, Delaware Fund B Class and Delaware Fund C Class may be purchased
through authorized investment dealers or directly by contacting the Fund or
its Distributor. Delaware Fund A Class carries a front-end sales charge and
has annual 12b-1 expenses equal to a maximum of 0.30%. The maximum front-end
sales charge as a percentage of the offering price is 4.75% and is reduced on
certain transactions of $100,000 or more. Delaware Fund B Class and Delaware
Fund C Class have no front-end sales charge, but are subject to annual 12b-1
expenses equal to a maximum of 1%. Shares of Delaware Fund B Class and
Delaware Fund C Class and certain shares of Delaware Fund A Class, may be
subject to a contingent deferred sales charge upon redemption. To obtain a
prospectus relating to such classes contact the Distributor by writing to the
address or by calling the phone numbers listed on the cover of this
Prospectus.
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HOW TO BUY SHARES
The Fund makes it easy to invest by mail, by wire, by exchange and by
arrangement with your investment dealer. In all instances, investors must
qualify to purchase the shares of the Class.
Investing Directly by Mail
1. Initial Purchases--An Investment Application or, in the case of a
retirement plan account, an appropriate retirement plan application, must be
completed, signed and sent with a check payable to the specific Fund and Class
selected, to Delaware Group at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by
mailing a check payable to the specific Fund and Class selected. Your check
should be identified with your name(s) and account number.
Investing Directly by Wire
You may purchase shares by requesting your bank to transmit funds by
wire to CoreStates Bank, N.A., ABA #031000011, account number 1412893401
(include your name(s) and your account number for the Fund and Class in which
you are investing).
1. Initial Purchases--Before you invest, telephone the Client Services
Department at 800-828-5052 to get an account number. If you do not call first,
it may delay processing your investment. In addition, you must promptly send
your Investment Application or, in the case of a retirement plan account, an
appropriate retirement plan application, to the Fund and Class selected by
you, to Delaware Group at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You must advise your
Client Services Representative by telephone at 800-828- 5052 prior to sending
your wire.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware
Group and you qualify to purchase shares of the Class, you may write and
authorize an exchange of part or all of your investment into the Fund.
However, shares of Delaware Fund B Class, Delaware Fund C Class and Class B
Shares and Class C Shares of the other funds in the Delaware Group offering
such a class of shares may not be exchanged into the Class. If you wish to
open an account by exchange, call your Client Services Representative at
800-828-5052 for more information.
Investing through Your Investment Dealer
You can make a purchase of Fund shares through most investment
dealers who, as part of the service they provide, must transmit orders
promptly to the Fund. They may charge for this service.
Purchase Price and Effective Date
The purchase price (net asset value) of the Class is determined as of
the close of regular trading on the New York Stock Exchange (ordinarily, 4
p.m., Eastern time) on days when the Exchange is open.
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The effective date of a purchase made through an investment dealer is
the date the order is received by the Fund. The effective date of a direct
purchase is the day your wire, electronic transfer or check is received,
unless it is received after the time the share price is determined, as noted
above. Purchase orders received after such time will be effective the next
business day.
The Conditions of Your Purchase
The Fund reserves the right to reject any purchase order. If a
purchase is canceled because your check is returned unpaid, you are
responsible for any loss incurred. The Fund can redeem shares from your
account(s) to reimburse itself for any loss, and you may be restricted from
making future purchases in any of the funds in the Delaware Group. The Fund
reserves the right to reject purchase orders paid by third-party checks or
checks that are not drawn on a domestic branch of a United States financial
institution. If a check drawn on a foreign financial institution is accepted,
you may be subject to additional bank charges for clearance and currency
conversion.
The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under $250 as a result of
redemptions.
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REDEMPTION AND EXCHANGE
Redemption and exchange requests made on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees should therefore contact their employer
for details.
Your shares will be redeemed or exchanged based on the net asset
value next determined after the Fund receives your request in good order.
Redemption and exchange requests received in good order after the time the net
asset value of shares is determined, as noted above, will be processed on the
next business day. See Purchase Price and Effective Date under How to Buy
Shares. Except as otherwise noted below, for a redemption request to be in
"good order," you must provide your account number, account registration, and
the total number of shares or dollar amount of the transaction. With regard to
exchanges, you must also provide the name of the fund you want to receive the
proceeds. Exchange instructions and redemption requests must be signed by the
record owner(s) exactly as the shares are registered. You may request a
redemption or an exchange by calling the Fund at 800-828-5052. Redemption
proceeds will be distributed promptly, as described below, but not later than
seven days after receipt of a redemption request.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and
carefully read that fund's prospectus before buying shares in an exchange. The
prospectus contains more complete information about the fund, including
charges and expenses.
The Fund will process written and telephone redemption requests to
the extent that the purchase orders for the shares being redeemed have already
settled. The Fund will honor written redemption requests as to shares for
which a check was tendered as payment, but the Fund will not mail or wire the
proceeds until it is reasonably satisfied that the check has cleared, which
may take up to 15 days from the purchase date. You can avoid this potential
delay if you purchase shares by wiring Federal Funds. The Fund reserves the
right to reject a written or telephone redemption request or delay payment of
redemption proceeds if there has been a recent change to the shareholder's
address of record.
Shares of the Class may be exchanged into any other Delaware Group
mutual fund provided: (1) the investment satisfies the eligibility and other
requirements set forth in the prospectus of the fund being acquired, including
the payment of any applicable front-end sales charge; and (2) the shares of
the fund being acquired are in a state where that fund is registered. If
exchanges are made into other shares that are eligible for purchase only by
those permitted to purchase shares of the Class, such exchange will be
exchanged at net asset value. Shares of the Class may not be exchanged into
Class B Shares or Class C Shares of any of the funds in the Delaware Group.
The Fund may suspend, terminate, or amend the terms of the exchange privilege
upon 60 days' written notice to shareholders.
Various redemption and exchange methods are outlined below. No fee is
charged by the Fund or the Distributor for redeeming or exchanging your
shares. You may also have your investment dealer arrange to have your shares
redeemed or exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders, including selection of any
of the features described below, shall continue in effect until such time as a
written revocation or modification has been received by the Fund or its agent.
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Written Redemption and Exchange
You can write to the Fund at 1818 Market Street, Philadelphia, PA
19103 to redeem some or all of your shares or to request an exchange of any or
all your shares into another mutual fund in the Delaware Group, subject to the
same conditions and limitations as other exchanges noted above. The request
must be signed by all owners of the account or your investment dealer of
record.
For redemptions of more than $50,000, or when the proceeds are not
sent to the shareholder(s) at the address of record, the Fund requires a
signature by all owners of the account and may require a signature guarantee.
Each signature guarantee must be supplied by an eligible guarantor
institution. The Fund reserves the right to reject a signature guarantee
supplied by an eligible institution based on its creditworthiness. The Fund
may require further documentation from corporations, executors, retirement
plans, administrators, trustees or guardians.
Payment is normally mailed the next business day after receipt of
your redemption request. Certificates are issued for shares only if you submit
a specific request. If your shares are in certificate form, the certificate
must accompany your request and also be in good order.
You also may submit your written request for redemption or exchange
by facsimile transmission at the following number: 215-255-8864.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge)
for you. If you choose to have your shares in certificate form, you may redeem
or exchange only by written request and you must return your certificates.
The Telephone Redemption - Check to Your Address of Record service
and the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in writing that you do not
wish to have such services available with respect to your account. The Fund
reserves the right to modify, terminate or suspend these procedures upon 60
days' written notice to shareholders. It may be difficult to reach the Fund by
telephone during periods when market or economic conditions lead to an
unusually large volume of telephone requests.
Neither the Fund nor its Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, the Fund will follow
reasonable procedures to confirm that instructions communicated by telephone
are genuine (including verification of a form of personal identification) as,
if it does not, the Fund or the Transfer Agent may be liable for any losses
due to unauthorized or fraudulent transactions. A written confirmation will be
provided for all purchase, exchange and redemption transactions initiated by
telephone. By exchanging shares by telephone, you are acknowledging prior
receipt of a prospectus for the fund into which your shares are being
exchanged.
Telephone Redemption-Check to Your Address of Record
You or your investment dealer of record can have redemption proceeds
of $50,000 or less mailed to you at your address of record. Checks will be
payable to the shareholder(s) of record. Payment is normally mailed the next
business day after receipt of the redemption request.
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Telephone Redemption-Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must submit a written authorization and you may need to have your
signature guaranteed. For your protection, your authorization must be on file.
If you request a wire, your fund will normally be sent the next business day.
If you ask for a check, it will normally be mailed the next business day after
receipt of your redemption request to your predesignated bank account. There
are no fees for this redemption method, but the mail time may delay getting
funds into your bank account. Simply call your Client Services Representative
prior to the time the net asset value is determined, as noted above.
Telephone Exchange
You or your investment dealer of record can exchange shares into any
fund in the Delaware Group under the same registration. As with the written
exchange service, telephone exchanges are subject to the same conditions and
limitations as other exchanges noted above. Telephone exchanges may be subject
to limitations as to amounts or frequency.
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DIVIDENDS AND DISTRIBUTIONS
The Fund will normally make payments from net investment income on a
quarterly basis. Payments from net realized securities profits of the Fund, if
any, will be distributed annually in the quarter following the close of the
fiscal year. Both dividends and distributions, if any, are automatically
reinvested in your account at net asset value.
Each class of the Fund will share proportionately in the investment
income and expenses of the Fund, except that the Class will not incur any
distribution fees under the 12b-1 Plans which apply to Delaware Fund A Class,
Delaware Fund B Class and Delaware Fund C Class.
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(DF/DVN-IC)
TAXES
The tax discussion set forth below is included for general
information only. Investors should consult their own tax advisers concerning
the federal, state, local or foreign tax consequences of an investment in the
Fund.
The Fund has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Internal Revenue Code
(the "Code"). As such, the Fund will not be subject to federal income tax, or
to any excise tax, to the extent its earnings are distributed as provided in
the Code.
The Fund intends to distribute substantially all of its net
investment income and net capital gains, if any. Dividends from net investment
income or net short-term capital gains will be taxable to those investors who
are subject to income taxes as ordinary income, even though received in
additional shares. For corporate investors, dividends from net investment
income will generally qualify in part for the corporate dividends-received
deduction. The portion of dividends paid by the Fund that so qualifies will be
designated each year in a notice from Equity Funds I, Inc. to the Fund's
shareholders. For the fiscal year ended October 31, 1996, 32% of the Fund's
dividends from net investment income qualified for the corporate
dividends-received deduction.
Distributions paid by the Fund from long-term capital gains, received
in additional shares, are taxable to those investors who are subject to income
taxes as long-term capital gains, regardless of the length of time an investor
has owned shares in the Fund. The Fund does not seek to realize any particular
amount of capital gains during a year; rather, realized gains are a by-product
of Fund management activities. Consequently, capital gains distributions may
be expected to vary considerably from year to year. Also, for those investors
subject to tax, if purchases of shares in the Fund are made shortly before the
record date for a dividend or capital gains distribution, a portion of the
investment will be returned as a taxable distribution.
Although dividends generally will be treated as distributed when
paid, dividends which are declared in October, November, or December to
shareholders of record on a specified date in one of those months, but which,
for operational reasons, may not be paid to the shareholder until the
following January, will be treated for tax purposes as if paid by the Fund and
received by the shareholder on December 31 of the year declared.
The sale of shares of the Fund is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may
be realized from an ordinary redemption of shares or an exchange of shares
between the Fund and any other fund in the Delaware Group. Any loss incurred
on a sale or exchange of Fund shares that had been held for six months or less
will be treated as a long-term capital loss to the extent of capital gain
dividends received with respect to such shares.
In addition to federal taxes, shareholders may be subject to state
and local taxes on distributions. Distributions of interest income and capital
gains realized from certain types of U.S. government securities may be exempt
from state personal income taxes. Shares of the Fund are exempt from
Pennsylvania county personal property taxes.
Each year, Equity Funds I, Inc. will mail you information on the tax
status of the Fund's dividends and distributions. Shareholders will also
receive each year information as to the portion of dividend income, if any,
that is derived from U.S. government securities that are exempt from state
income tax. Of course, shareholders who are not subject to tax on their income
would not be required to pay tax on amounts distributed to them by the Fund.
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The Fund is required to withhold 31% of taxable dividends, capital
gains distributions, and redemptions paid to shareholders who have not
complied with IRS taxpayer identification regulations. You may avoid this
withholding requirement by certifying on your Investment Application your
proper Taxpayer Identification Number and by certifying that you are not
subject to backup withholding.
See Taxes in Part B for additional information on tax matters
relating to the Fund and its shareholders.
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CALCULATION OF NET ASSET VALUE PER SHARE
The purchase and redemption price of the Class is the net asset value
("NAV") per share of Class shares next computed after the order is received.
The NAV is computed as of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is open.
The NAV per share is computed by adding the value of all securities
and other assets in the portfolio, deducting any liabilities (expenses and
fees are accrued daily) and dividing by the number of shares outstanding.
Portfolio securities for which market quotations are available are priced at
market value. Debt securities are priced at fair value by an independent
pricing service using methods approved by Equity Funds I, Inc.'s Board of
Directors. Short-term investments having a maturity of less than 60 days are
valued at amortized cost, which approximates market value. All other
securities are valued at their fair value as determined in good faith and in a
method approved by Equity Funds I, Inc.'s Board of Directors.
The net asset values of all outstanding shares of each class of the
Fund will be computed on a pro-rata basis for each outstanding share based on
the proportionate participation in the Fund represented by the value of shares
of that class. All income earned and expenses incurred by the Fund will be
borne on a pro-rata basis by each outstanding share of a class, based on each
class' percentage in the Fund represented by the value of shares of such
classes, except that the Class will not incur any of the expenses under the
Fund's 12b-1 Plans and Delaware Fund A, B and C Classes alone will bear the
12b-1 Plan fees payable under their respective Plans. Due to the specific
distribution expenses and other costs that will be allocable to each class,
the net asset value of and dividends paid to each class of the Fund will vary.
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MANAGEMENT OF THE FUND
Directors
The business and affairs of Equity Funds I, Inc. are managed under
the direction of its Board of Directors. Part B contains additional
information regarding Equity Funds I, Inc.'s directors and officers.
Investment Manager
The Manager furnishes investment management services to the Fund.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On October 31, 1996, the Manager and its affiliates
within the Delaware Group, including Delaware International Advisers Ltd.,
were managing in the aggregate more than $30 billion in assets in the various
institutional or separately managed (approximately $19,214,690,000) and
investment company (approximately $11,539,873,000) accounts.
The Manager is an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and
a wholly owned subsidiary of Lincoln National Corporation ("Lincoln National")
was completed. DMH and the Manager are now indirect, wholly owned
subsidiaries, and subject to the ultimate control, of Lincoln National.
Lincoln National, with headquarters in Fort Wayne, Indiana, is a diversified
organization with operations in many aspects of the financial services
industry, including insurance and investment management. In connection with
the merger, a new Investment Management Agreement between Equity Funds I, Inc.
on behalf of the Fund and the Manager was executed following shareholder
approval.
The Manager manages the Fund's portfolio and makes investment
decisions for the Fund which are implemented by the Fund's Trading Department.
The Manager also administers Equity Funds I, Inc.'s affairs and pays the
salaries of all the directors, officers and employees of Equity Funds I, Inc.
who are affiliated with the Manager. For these services, the Manager is paid
an annual fee equal to 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 in excess of $500 million,
less the Fund's proportionate share of all directors' fees paid to the
unaffiliated directors of Equity Funds I, Inc. Investment management fees paid
by the Fund for the fiscal year ended October 31, 1996 were 0.52% of average
daily net assets.
George H. Burwell and Gary A. Reed have primary responsibility for
making day-to-day investment decisions for the Fund. Mr. Burwell, who has been
Equity Funds I, Inc.'s Senior Portfolio Manager for equities since 1992, holds
a BA from the University of Virginia. Prior to joining the Delaware Group in
1992, Mr. Burwell was a portfolio manager for Midlantic Bank in Edison, New
Jersey, where he managed an equity mutual fund and three commingled funds. Mr.
Burwell is a CFA charterholder.
Mr. Reed has been the Fund's Senior Portfolio Manager for
fixed-income since April 1995. He holds an AB in Economics from the University
of Chicago and an MA in Economics from Columbia University. He began his
career in 1978 with the Equitable Life Assurance Company in New York City,
where he specialized in credit analysis. Prior to joining the Delaware Group
in 1989, Mr. Reed was Vice President and Manager of the fixed-income
department at Irving Trust Company in New York.
In making investment decisions for the Fund, Mr. Burwell and Mr. Reed
regularly consult with Wayne A. Stork, Richard G. Unruh, Jr. and Paul E.
Suckow. Mr. Stork, Chairman of the Manager and Equity Funds I,
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Inc.'s Board of Directors, is a graduate of Brown University and attended New
York University's Graduate School of Business Administration. Mr. Stork joined
the Delaware Group in 1962 and has served in various executive capacities at
different times within the Delaware organization. A graduate of Brown
University, Mr. Unruh received his MBA from the University of Pennsylvania's
Wharton School and joined the Delaware Group in 1982 after 19 years of
investment management experience with Kidder, Peabody & Co. Inc. Mr. Unruh was
named an Executive Vice President of Equity Funds I, Inc. in 1994. He is also
a member of the Board of the Manager and was named an Executive Vice President
of the Manager in 1994. He is on the Board of Directors of Keystone Insurance
Company and AAA Mid-Atlantic and is a former president and current member of
the Advisory Council of the Bond Club of Philadelphia. Mr. Suckow is
Delaware's Chief Investment Officer for fixed-income. He is a CFA
charterholder and a graduate of Bradley University with an MBA from Western
Illinois University. Mr. Suckow was a fixed-income portfolio manager at the
Delaware Group from 1981 to 1985. He returned to the Delaware Group in 1993
after eight years with Oppenheimer Management Corporation, where he served as
Executive Vice President and Director of Fixed Income.
Portfolio Trading Practices
The Fund normally will not invest for short-term trading purposes.
However, the Fund may sell securities without regard to the length of time
they have been held. The degree of portfolio activity will affect brokerage
costs of the Fund and may affect taxes payable by the Fund's shareholders to
the extent of any net realized capital gains. A turnover rate of 100% would
occur, for example, if all the investments in the Fund's portfolio at the
beginning of the year were replaced by the end of the year. For the past two
fiscal years, the Fund's portfolio turnover rates were 94% for 1995 and 92%
for 1996.
The Fund uses its best efforts to obtain the best available price and
most favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the Manager
or its advisory clients. These services may be used by the Manager in
servicing any of its accounts. Subject to best price and execution, the Fund
may consider a broker/dealer's sales of Fund shares in placing portfolio
orders and may place orders with broker/dealers that have agreed to defray
certain Fund expenses such as custodian fees.
Performance Information
From time to time, the Fund may quote total return performance for
the Class in advertising and other types of literature.
Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions at net asset value. Each
presentation will include the average annual total return for one-, five- and
ten-year or life-of-fund periods, as relevant. The Fund may also advertise
aggregate and average total return information concerning the Class over
additional periods of time.
Because securities prices fluctuate, investment results of the Class
will fluctuate over time and past performance should not be considered as a
guarantee of future results.
Statements and Confirmations
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent
following all transactions other than those involving a reinvestment of
distributions. You should examine statements and confirmations immediately and
promptly report any discrepancy by calling your Client Services
Representative.
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Financial Information about Fund
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information about
the Fund's investments and performance. Equity Funds I, Inc.'s fiscal year
ends on October 31.
Distribution and Service
The Distributor, Delaware Distributors, L.P. serves as the national
distributor of the Fund's shares under a Distribution Agreement with Equity
Funds I, Inc. dated April 3, 1995, as amended on November 29, 1995. The
Distributor bears all of the costs of promotion and distribution.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for the Fund
under an Agreement dated June 29, 1988. The Transfer Agent also provides
accounting services to the Fund pursuant to the terms of a separate Fund
Accounting Agreement. The directors annually review service fees paid to the
Transfer Agent. Certain recordkeeping and other shareholder services that
otherwise would be performed by the Transfer Agent may be performed by certain
other entities and the Transfer Agent may elect to enter into an agreement to
pay such other entities for those services. In addition, participant account
maintenance fees may be assessed for certain recordkeeping services provided
as part of retirement plan and administration service packages. These fees are
based on the number of participants in the plan and the various services
selected. Fees will be quoted upon request and are subject to change.
The Distributor and the Transfer Agent are indirect, wholly owned
subsidiaries of DMH.
Expenses
The Fund is responsible for all of its own expenses other than those
borne by the Manager under the Investment Management Agreement and those borne
by the Distributor under the Distribution Agreement. For the fiscal year ended
October 31, 1996, the ratio of operating expenses to average daily net assets
for the Class was 0.80%.
Shares
Equity Funds I, Inc. is an open-end management investment company.
The Fund's portfolio of assets is diversified as defined by the 1940 Act.
Commonly known as a mutual fund, Equity Funds I, Inc. was organized as a
Maryland corporation on March 4, 1983. Equity Funds I, Inc. was previously
organized as a Delaware corporation in 1937.
Equity Funds I, Inc. currently offers two series of shares - Delaware
Fund series and Devon Fund series. Fund shares have a par value of $1.00,
equal voting rights, except as noted below, and are equal in all other
respects. The Fund will vote separately on any matter which affects only this
Fund. Shares of the Fund have a priority over shares of any other fund of
Equity Funds I, Inc.
Equity Funds I, Inc.'s shares have noncumulative voting rights which
means that the holders of more than 50% of Equity Funds I, Inc.'s shares
voting for the election of directors can elect 100% of the directors if they
choose to do so. Under Maryland law, Equity Funds I, Inc. is not required, and
does not intend, to hold annual meetings of shareholders unless, under certain
circumstances, it is required to do so under the 1940 Act. Shareholders of 10%
or more of Equity Funds I, Inc.'s outstanding shares may request that a
special meeting be called to consider the removal of a director.
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In addition to this Class, the Fund also offers Delaware Fund A
Class, Delaware Fund B Class and Delaware Fund C Class. Shares of each class
represent proportionate interests in the assets of the Fund and have the same
voting and other rights and preferences as the Class, except that shares of
the Class are not subject to, and may not vote on matters affecting, the
Distribution Plans under Rule 12b-1 relating to Delaware Fund A Class,
Delaware Fund B Class and Delaware Fund C Class.
Effective as of the close of business December 27, 1996, the name of
Delaware Group Delaware Fund, Inc. was changed to Delaware Group Equity Funds
I, Inc. Also effective as of the close of business December 27, 1996, the name
of Common Stock series was changed to Delaware Fund series.
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OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS
Mortgage-Backed Securities--The Fund may invest in mortgage-backed
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities or government sponsored corporations. The Fund also may
invest in securities issued by certain private, non-government corporations,
such as financial institutions, if the securities are fully collateralized at
the time of issuance by securities or certificates issued or guaranteed by the
U.S. government, its agencies or instrumentalities. Two principal types of
mortgage-backed securities are collateralized mortgage obligations (CMOs) and
real estate mortgage investment conduits (REMICs).
CMOs are debt securities issued by U.S. government agencies or by
financial institutions and other mortgage lenders and collateralized by a pool
of mortgages held under an indenture. CMOs are issued in a number of classes
or series with different maturities. The classes or series are retired in
sequence as the underlying mortgages are repaid. Prepayment may shorten the
stated maturity of the obligation and can result in a loss of premium, if any
has been paid. Certain of these securities may have variable or floating
interest rates and others may be stripped (securities which provide only the
principal or interest feature of the underlying security).
REMICs, which were authorized under the Tax Reform Act of 1986, are
private entities formed for the purpose of holding a fixed pool of mortgages
secured by an interest in real property. REMICs are similar to CMOs in that
they issue multiple classes of securities. For further discussion concerning
the risk of investing in such asset-backed securities, see Part B.
CMOs and REMICs issued by private entities are not government
securities and are not directly guaranteed by any government agency. They are
secured by the underlying collateral of the private issuer. Certain of these
private-backed securities are 100% collateralized at the time of issuance by
securities issued or guaranteed by the U.S. government, its agencies, or
instrumentalities.
The Fund may invest its assets in CMOs and REMICs issued by private
entities whether or not the securities are 100% collateralized at the time of
issuance by securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities (securities that are not so collateralized are
called "non-agency mortgage-backed securities"). Non-agency mortgage-backed
securities may comprise up to 20% of the Fund's assets, but all of these
securities must (i) be rated at the time of purchase in the four top rating
categories by a nationally-recognized statistical rating organization and (ii)
represent interests in whole-loan mortgages, multi-family mortgages,
commercial mortgages or other mortgage collateral supported by a first
mortgage lien on real estate. Non-agency mortgage-backed securities are
subject to the interest rate and prepayment risks to which other CMOs and
REMICs issued by private issuers are subject. Non-agency mortgage-backed
securities may also be subject to a greater risk of loss of interest and
principal because they are not collateralized by securities issued or
guaranteed by the U.S. government. In addition, timely information concerning
the loans underlying these securities may not be as readily available and the
market for these securities may be less liquid than the market for other CMOs
and REMICs.
Asset-Backed Securities--The Fund may invest in securities which are
backed by assets such as receivables on home equity and credit loans,
receivables regarding automobile, mobile home and recreational vehicle loans,
wholesale dealer floor plans and leases or other loans or financial
receivables currently available or which may be developed in the future. All
such securities must be rated in one of the four highest rating categories by
a reputable rating agency (e.g., BBB or better by S&P or Baa or better by
Moody's).
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Such receivables are securitized in either a pass-through or a
pay-through structure. Pass-through securities provide investors with an
income stream consisting of both principal and interest payments in respect of
the receivables in the underlying pool. Pay-through asset-backed securities
are debt obligations issued usually by a special purpose entity, which are
collateralized by the various receivables and in which the payments on the
underlying receivables provide the funds to pay the debt service on the debt
obligations issued.
The rate of principal payment on asset-backed securities generally
depends on the rate of principal payments received on the underlying assets.
Such rate of payments may be affected by economic and various other factors
such as changes in interest rates or the concentration of collateral in a
particular geographic area. Therefore, the yield may be difficult to predict
and actual yield to maturity may be more or less than the anticipated yield to
maturity. Due to the shorter maturity of the collateral backing such
securities, there tends to be less of a risk of substantial prepayment than
with mortgage-backed securities but the risk of such a prepayment does exist.
Such asset-backed securities do, however, involve certain risks not associated
with mortgage-backed securities, including the risk that security interests
cannot be adequately or in many cases ever established, and other risks which
may be peculiar to particular classes of collateral. For example, with respect
to credit card receivables, a number of state and federal consumer credit laws
give debtors the right to set off certain amounts owed on the credit cards,
thereby reducing the outstanding balance. In the case of automobile
receivables, there is a risk that the holders may not have either a proper or
first security interest in all of the obligations backing such receivables due
to the large number of vehicles involved in a typical issuance and technical
requirements under state laws. Therefore, recoveries on repossessed collateral
may not always be available to support payments on the securities.
Real Estate Investment Trusts--The Fund may invest in shares or
convertible bonds issued by real estate investment trusts ("REITS"). REITS
invest primarily in income producing real estate as well as real estate
related loans or interests. A REIT is not taxed on income distributed to
shareholders if it complies with several requirements relating to its
organization, ownership, assets and income, and a requirement that it
distribute to its shareholders at least 95% of its taxable income (other than
net capital gains) for each taxable year. The Fund anticipates investing only
in REITS that invest the majority of their assets directly in real property
and derive their income primarily from rents, which are known as "equity
REITS." Equity REITS can also realize capital gains by selling properties that
have appreciated in value.
Restricted and Illiquid Securities--The Fund may purchase privately
placed securities the resale of which is restricted under applicable
securities laws. Most of the privately placed securities acquired by the Fund
will be eligible for resale by the Fund without registration pursuant to Rule
144A ("Rule 144A Securities") under the Securities Act of 1933. Rule 144A
permits many privately placed and legally restricted securities to be freely
traded among certain institutional buyers. The Fund may invest not more than
10% of its assets in illiquid securities. While maintaining oversight, the
Board of Directors of Equity Funds I, Inc. has delegated to the Manager the
day-to-day function of determining whether individual Rule 144A Securities are
liquid for purposes of the Fund's 10% limitation on investments in illiquid
securities.
The Board has instructed the Manager to consider the following
factors in determining the liquidity of a Rule 144A Security: (i) the
frequency of trades and trading volume for the security; (ii) whether at least
three dealers are willing to purchase or sell the security and the number of
potential purchasers; (iii) whether at least two dealers are making a market
in the security; (iv) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the
method of soliciting offers, and the mechanics of transfer).
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If the Manager determines that a Rule 144A Security which was
previously determined to be liquid is no longer liquid and, as a result, the
Fund's holdings of illiquid securities exceed the Fund's limit noted above on
investments in such securities, the Manager will determine what action to take
to ensure that the Fund continues to adhere to such limitation.
Convertible Securities--The Fund may invest in convertible
securities, including corporate debentures, bonds, notes and preferred stocks
that may be converted into or exchanged for common stock. These securities are
generally convertible either at a stated price or a stated rate (that is, for
a specific number of shares of common stock or other security). As with other
fixed-income securities, the price of a convertible security to some extent
varies inversely with interest rates. While providing a fixed-income stream, a
convertible security also affords the investor an opportunity, through its
conversion feature, to participate in the capital appreciation of the common
stock into which it is convertible. The Fund may invest not more than 5% of
its assets in convertible debentures that are rated below investment grade or
are unrated but are determined by the Manager to be of comparable quality. For
a discussion concerning the risks of investing in such securities, see Part B.
Foreign Securities and ADRs--The Fund may invest up to 5% of its
assets in foreign securities. The Fund may also invest without limitation in
sponsored and unsponsored American Depositary Receipts ("ADRs") that are
actively traded in the United States. ADRs are receipts typically issued by a
U.S. bank or trust company which evidence ownership of underlying securities
issued by a foreign corporation. "Sponsored" ADRs are issued jointly by the
issuer of the underlying security and a depository, and "unsponsored" ADRs are
issued without the participation of the issuer of the deposited security.
Holders of unsponsored ADRs generally bear all the costs of such facilities
and the depository of an unsponsored ADR facility frequently is under no
obligation to distribute shareholder communications received from the issuer
of the deposited security or to pass through voting rights to the holders of
such receipts in respect of the deposited securities. Therefore, there may not
be a correlation between information concerning the issuer of the security and
the market value of an unsponsored ADR.
Foreign markets may be more volatile than U.S. markets, and
investments in foreign securities involve sovereign risks in addition to the
normal risks associated with U.S. securities. These risks include political
risks, foreign taxes and exchange controls and currency fluctuations. For
example, foreign portfolio investments may fluctuate in value due to changes
in currency rates (i.e., the value of foreign investments would increase with
a fall in the value of the dollar) and control regulations apart from market
fluctuations. The Fund may also experience delays in foreign securities
settlement.
The Fund will, from time to time, conduct foreign currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market or through entering into contracts to
purchase or sell foreign currencies at a future date (i.e., a "forward foreign
currency" contract or "forward" contract). Investors should be aware that
there are costs and risks associated with such currency transactions.
Equity Funds I, Inc.'s Custodian for its foreign securities is The
Chase Manhattan Bank, 4 Chase Metrotech Center, Brooklyn, NY 11245.
Repurchase Agreements--In order to invest its short-term cash
reserves or when in a temporary defensive posture, the Fund may enter into
repurchase agreements with banks or broker/dealers deemed to be creditworthy
by the Manager, under guidelines approved by the Board of Directors. A
repurchase agreement is a short-term investment in which the purchaser (i.e.,
the Fund) acquires ownership of a debt security and the seller agrees to
repurchase the obligation at a future time and set price, thereby determining
the yield during the
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purchaser's holding period. Generally, repurchase agreements are of short
duration, often less than one week, but on occasion for longer periods. Not
more than 10% of the Fund's assets may be invested in repurchase agreements of
over seven-days' maturity or other illiquid assets. Should an issuer of a
repurchase agreement fail to repurchase the underlying security, the loss to
the Fund, if any, would be the difference between the repurchase price and the
market value of the security. The Fund will limit its investments in
repurchase agreements to those which the Manager under the guidelines of the
Board of Directors determines to present minimal credit risks and which are of
high quality. In addition, the Fund must have collateral of at least 100% of
the repurchase price, including the portion representing such Fund's yield
under such agreements which is monitored on a daily basis. Such collateral is
held by the Custodian in book entry form. Such agreements may be considered
loans under the 1940 Act, but the Fund considers repurchase agreements
contracts for the purchase and sale of securities, and seeks to perfect a
security interest in the collateral securities so that it has the right to
keep and dispose of the underlying collateral in the event of default.
The funds in the Delaware Group have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the 1940 Act to allow the
Delaware Group funds jointly to invest cash balances. The Fund may invest cash
balances in a joint repurchase agreement in accordance with the terms of the
Order and subject generally to the conditions described above.
Portfolio Loan Transactions--The Fund may loan up to 25% of its
assets to qualified broker/dealers or institutional investors for their use
relating to short sales or other security transactions.
The major risk to which the Fund would be exposed on a loan
transaction is the risk that the borrower would go bankrupt at a time when the
value of the security goes up. Therefore, the Fund will only enter into loan
arrangements after a review of all pertinent facts by the Manager, subject to
overall supervision by the Board of Directors, including the creditworthiness
of the borrowing broker, dealer or institution and then only if the
consideration to be received from such loans would justify the risk.
Creditworthiness will be monitored on an ongoing basis by the Manager.
Other Investment Policies--The Fund may not concentrate investments
in any industry, which means that the Fund may generally not invest more than
25% of its assets in any one industry.
In pursuing its investment objective, the Fund may hold securities
for any period of time. For temporary, defensive purposes, the Fund may hold a
substantial portion of its assets in cash, cash equivalents or short-term
obligations, including repurchase agreements. The Fund may also enter into
repurchase agreements to invest excess cash balances.
While the Fund is permitted under certain circumstances to borrow
money, the Fund does not normally do so. The Fund will not purchase investment
securities while it has any borrowings outstanding.
The Fund may purchase securities on a when-issued or delayed delivery
basis. It is the current intention of the Fund not to enter into when-issued
commitments exceeding in the aggregate 5% of the market value of the Fund's
total assets less liabilities other than obligations created by these
commitments.
* * *
Part B provides more information on the Fund's investment
restrictions and policies, and includes Appendix A which describes security
ratings.
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For more information contact Delaware Group at 800-828-5052.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
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DELAWARE FUND INSTITUTIONAL
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P R O S P E C T U S
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DECEMBER 30, 1996
DELAWARE
GROUP
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