<PAGE>
Delaware Group
Delaware Fund
[Various photos demonstrating service and guidance, professional management
and goals]
1997 Annual Report
For Total Return
DELAWARE
GROUP
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<PAGE>
A Commitment To Our Investors
Delaware Group's investment tradition dates back to 1929. We have a long and
distinguished history of helping individuals and institutions - including
some of America's largest pension funds - reach their financial goals.
Headquartered in Philadelphia, a block from the nation's oldest stock
exchange, Delaware Group's first mutual fund was established in 1938.
Delaware International Advisers Ltd., our international affiliate, was
established in 1990 and is headquartered in London.
Delaware Group offers a full range of mutual funds. We also manage
variable annuity investments, unit investment trusts and closed-end funds,
and offer retirement plan services for individuals and businesses.
Delaware manages $40 billion in mutual fund assets and institutional
advisory accounts for more than half-a-million investors. We're part of a
global financial service and investment management business owned by Lincoln
National Corporation, whose subsidiaries manage more than $120 billion in
assets.
A TRADITION OF SOUND INVESTING
[Photo of glasses, pen and keyboard]
total return
Delaware Fund's Objective
To seek a balance of capital appreciation, income and preservation of
capital.
commitment
[Photo of illustration from Total Return Brochures]
<PAGE>
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November 5, 1997
Dear Shareholder:
Stock and bond markets both provided strong total returns during fiscal 1997,
a year in which Delaware Fund outperformed its peers in the Lipper Balanced
Fund Average.
Delaware's oldest fund provided an above-average total return of
+22.05% (capital change plus income based on net asset value for Class A
shares) for the fiscal year ended October 31, 1997. This was nearly 300 basis
points (3.0%) more than the average balanced fund.
Your Fund holdings are a mix of stocks and bonds. We achieved
compelling results with a stock portfolio of established companies that had
superior earnings and dividend growth potential. This was complemented by
holdings of U.S. government bonds, mortgage-related securities and
high-quality corporate bonds.
Delaware Fund's fiscal 1997 total return was more than 300 basis points (3%)
higher than the average balanced fund (for Class A shares at net asset value
with distributions reinvested).
During the year, our pharmaceutical and financial stock selections
did particularly well. Rising bond prices and a focus on bond sectors with
above-average income potential also helped augment the Fund's total return.
History shows that a balanced approach to investing has provided
strong total returns with a relatively low level of volatility. In fact, for
the 15 years ended October 31, 1997 - one of the strongest periods of stock
performance in the 20th Century - the returns provided by a 60% - 40% mix of
large company stocks and bonds outpaced the returns available from stocks of
small, rapidly growing companies, as illustrated on page 8.
Delaware Fund boasts a record of longevity that spans nearly 60
years. During that time,we've witnessed many positive, long-term domestic and
international developments that have paved the way for the ebullient returns
enjoyed by many U.S. stock and bond market investors in the 1980s and 1990s.
1997 Annual Report 1
<PAGE>
Average Annual Total Return
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Average Annual
Aggregate Total Return Total Return
12 Months Ended 10 Years Ended
October 31, 1997 October 31, 1997
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Delaware Fund A Class +22.05% +14.19%
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Lehman Brothers Aggregate
Bond Index +8.89% +9.25%
Standard & Poor's 500 Index +32.20% +17.15%
Lipper Balanced Fund Average +19.51% (343 funds) +12.66% (44 funds)
- ------------------------------------------------------------------------------
Delaware Fund performance and that of Lipper Balanced Fund Average is based
on net asset value without effect of a sales charge. Performance for all Fund
classes can be found on page 9. The S&P 500 Index is an unmanaged benchmark
of large company stocks while the Lehman Brothers Aggregate Bond Index is an
unmanaged benchmark of investment grade U.S. fixed-income securities.
Consider that when Delaware Fund first began operations in the spring
of 1938, Japan was waging war in northern China and most countries in
Southeast Asia were European colonies or feudal kingdoms. Back then the Dow
Jones Industrial Average stood at less than 70 points, compared to 7442.08 on
October 31, 1997.
In the 1990s, the U.S. has enjoyed steady economic growth, the
unemployment rate has fallen below 5% and inflation is half what it was a
generation ago. Our federal government's budget deficit has declined to levels
not seen since the late President Nixon was in office. We believe these
long-term trends remain intact and will continue to have a positive effect on
U.S. financial markets.
Still, we see reason for caution as we approach the end of the
millennium, especially after three years of exceptionally robust stock market
returns. During fiscal 1997, stock market volatility returned to historical
norms. In April and October, stock prices briefly dropped more than 10%,
unnerving some short-term oriented investors. We believe such price
fluctuations are likely to grow more numerous in the coming years, and that
such times will present opportunities for patient and savvy investors.
research and discipline
2 1997 Annual Report
<PAGE>
Delaware 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. The Fund is guided by two
portfolio managers: George H. Burwell, who is responsible for stock selection
and asset allocation, and Gary A. Reed, whose bond selection strategy tends
to emphasize high quality corporate and mortgage-backed bonds.
On the pages that follow, your Fund's management team describes the
successes and pitfalls of the past year and provides an outlook for fiscal
1998. We look forward to reporting to you again in the spring, when Delaware
Fund will mark its 60th anniversary.
Sincerely,
/s/ Wayne A. Stork
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Wayne A. Stork
Chairman
/s/ Jeffrey J. Nick
- -------------------------------------
Jeffrey J. Nick
President and Chief Executive Officer
a nearly 60-year record
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New President and CEO
On October 13, 1997, Jeffrey J. Nick was named President and Chief Executive
Officer of the Delaware Group of Funds. Mr. Nick has been CEO of Lincoln
National Investment Companies, Delaware's indirect parent, since October 1996.
He joined Lincoln National in April 1990, and from 1992 to 1996 he managed
Lincoln's operations in the United Kingdom. Mr. Nick holds an MBA from the
University of Chicago and a bachelor's degree from Princeton University.
- ------------------------------------------------------------------------------
1997 annual report 3
<PAGE>
[Photo of glasses, pen and keyboard]
Portfolio Managers' Review
Despite volatile market conditions, fiscal 1997 was a rewarding period for
investors who could uncover undervalued stocks and make them the cornerstones
of a growth and income-oriented portfolio.
For much of the period, stocks of large, high profile companies
tended to outperform the rest of the equity market, as investors focused on
businesses with consistent earnings and stocks offering dividend growth
potential. Your Fund successfully rode a wave of investor enthusiasm that
lifted the prices of many pharmaceutical, banking, insurance and capital
goods companies.
But we also applied a strict value discipline that forced us to sell
or reduce some of our positions in large multinational consumer companies
such as Proctor & Gamble and SmithKline Beecham well before the wave broke in
late October. By redeploying assets to stocks that met our value criteria, we
preserved capital to a greater degree than our peers between August, when the
stock market peaked, and the fiscal year's end.
Bond investors faced a challenging environment amid shifting views
about U.S. economic growth and consumer prices. On balance, however, fiscal
1997 was a good year for fixed-income securities. Bond prices generally rose
and as of October 31, 1997, yields on intermediate-term U.S. Treasury
securities were 30 to 40 basis points (0.30% to 0.40%) lower than a year
earlier.
In 1997, the Federal Reserve Board's monetary policy effectively
tamed consumer inflation despite an economy that has enjoyed robust growth.
Although the rate of joblessness in America was the lowest in a generation,
the U.S. Consumer Price Index rose just 2.2% for the 12 months ended October
31, 1997, the smallest increase in years.
PORTFOLIO MIX
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October 31, 1997
Consumer Growth Stocks 11.3%
Corporate Bonds 8.2%
Technology Stocks 6.4%
Utility Stocks/REITS 4.9%
Asset Backed Bonds 4.5%
Treasuries/Other Bonds/Cash 4.0%
CMOs/Mortgage-Backed Bonds 16.0%
Energy Stocks 3.2%
Capital Goods Stocks 17.7%
Consumer Staples Stocks 12.2%
Banks/Insurance Stocks 11.6%
Asset Allocation
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October 31, 1997 October 31, 1996
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Stocks 66.8% 58.9%
Bonds 32.2% 34.4%
Cash 1.09% 6.7%
- ------------------------------------------------------------------------------
Beta* 0.65 0.66
SEC Yield** 2.38% 3.03%
*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, 1.68%, 1.68% and 2.69% as of October 31, 1997.
4 1997 Annual Report
<PAGE>
Strategic Positioning
During fiscal 1997, we used stock market weakness as an opportunity to boost
the equity component of Delaware Fund from 58.9% to 66.8% of your Fund's net
assets as of October 31, 1997. We also substantially reduced the Fund's cash
position and bought companies with consistent earnings and dividend growth
potential at what we considered attractive prices.
We are attracted to companies where we believe an effective restructuring is
underway. Often we find value in industries that are consolidating and where
competition is limited.
We generally sold stocks that had appreciated to the point where the
Fund's sell discipline was triggered. This happens when a stock's price
relative to its earnings exceeds that of the overall market by more than 20%.
In recent months, our research has led to what we believe are
overlooked and misunderstood companies such as Rite Aid Corp., the drug store
chain, W.R. Grace, which makes plastic food wrapping and Ralston-Purina, the
pet food company. We are attracted to companies where we believe an effective
restructuring is underway. Often we find value in industries that are
consolidating and where competition is limited.
Delaware Fund's weighting in bonds as of October 31, 1997, was
slightly lower than a year earlier. We reduced our weighting in asset-backed
securities and maintained an above-average position in mortgages. In the
coming months, we may add to our weighting of so-called Yankee bonds - U.S.
dollar bonds issued by established foreign companies, because we believe
these bonds offer additional income potential and may be attractively priced
amid increased international market volatility.
Delaware Fund's Stock Focus
Over time, investors tend to pay more for companies whose earnings and
dividends are likely to grow at a steady rate, in our opinion. When we select
stocks, we look for:
* Value - attractive growth at discount prices;
* Consistency - steady growth in a relatively stable industry;
* Cash flow - substantial resources to reinvest in the business or
raise dividends;
* Catalysts - improving operations or expansion through acquisition; and,
strategy
STOCK PORTFOLIO HIGHLIGHTS
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October 31, 1997 October 31, 1996
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Median Market Capitalization $5.7 billion $4.1 billion
Number of Stocks 56 53
Average Stock Price-to-Earnings Ratio 16.9x 15.1x
Top Sector Capital Goods Consumer Growth
Stock Portfolio Annual Return +29.91%* +12.96%*
* For A Class shares with dividends and capital gains reinvested. P/E ratio
based on analysts' earnings estimates as reported by First Call. For complete
Fund performance, see page 9.
1997 Annual Report 5
<PAGE>
* Undiscovered potential - the company's potential hasn't been recognized
yet by the market.
Compared to October 31, 1996, we've slightly increased our weighting
in mid-cap companies, adding niche service companies such as Ecolab Inc.,
which provides sanitary services to the hospitality industry, and Masco
Corp., a building supplies and faucet maker.
During the year, we also reduced our weighting in health care stocks.
Most performed well, with one important exception - Columbia/HCA Healthcare,
the nation's largest hospital chain.
The threat of antitrust or other legal actions can have a temporary
negative effect on a stock that may present Delaware Fund's management with a
buying opportunity. Unfortunately, regulatory problems can occasionally
become so substantial for a company that they overwhelm other considerations.
Such was the case with Columbia, whose billing practices were the subject of
a federal probe in 1997. The company had been a top 10 holding as of
mid-year, but as of year end was no longer in the Fund's portfolio. When
Columbia's shares briefly rebounded during the second half, we sold our
position at a modest loss.
Delaware Fund's Bond Focus
In fiscal 1997, Delaware Fund's bond component generally 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, our primary focus on
mortgage-related bonds helped preserve principal
opportunities
BOND PORTFOLIO HIGHLIGHTS
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October 31, 1997 October 31, 1996
- ------------------------------------------------------------------------------
Average Effective Duration 4.7 years 4.5 years
Average Effective Maturity 8.2 years 7.8 years
Average Quality AA2 AA1
Yield (Before Expenses)** 7.36% 7.19%
Largest Sector Focus Mortgages Mortgages
Bond Portfolio Annual Return +8.49%* +3.03%
*Based on Class A shares at net asset value with income and capital gains
reinvested. For complete Fund performance, see page 9.
**See page 4 for SEC yields.
6 1997 Annual report
<PAGE>
because prices of these bonds did not decline as much as Treasuries. Conversely,
during the second half of fiscal 1997, when interest rates fell, your Fund's
bond portfolio experienced more modest price appreciation.
A strategy that provides high current income from bonds can help offset
volatility in the Fund's equity portfolio.
Given bond market volatility in the 1990s, we believe that reducing
risk is of paramount importance. We generally refrain from making short-term
asset allocation bets based on where we think interest rates are headed. In
our opinion, a strategy that provides high current income from bonds can help
offset stock market volatility on the Fund's equity portfolio.
As of October 31, we had a greater percentage of mortgage-related
securities than the Lehman Aggregate Index because these securities offered
higher income potential than U.S. Treasuries. However, investing in mortgages
carries the risk that homeowners will prepay their obligations if interest
rates drop sharply.
Your Fund's management seeks to mitigate refinancing risk by
investing in older, more seasoned mortgages, mortgages issued when rates were
lower and pools of mortgages with low loan balances. These tend to have a
more attractive risk/reward profile than other mortgages. The table below
shows how refinancing risk rises as interest rates fall.
Outlook
Despite volatile market conditions, we are still finding attractive values in
stocks, especially among mid-size companies, and to a lesser extent, bonds.
Our stock selections have generally benefited from a migration away from
expensive "branded" growth stocks. As investors seek consistent earnings
growth at reasonable prices, our leading positions look increasingly
attractive. An added benefit is that most of the Fund's stocks have only a
modest exposure to the effects of a dollar that has been strengthening in
value relative to other currencies, a trend that may reduce earnings of
multinational companies.
Several of our leading positions are companies which have excellent
core business franchises but still
outlook
HOW INTEREST RATES AFFECT MORTGAGE PREPAYMENT RISK
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If 10-Year U.S. Treasury notes yield... 6.75% 6.15% 5.95% 5.60% 5.25%
Mortgage rates are likely to be........ 7.95% 7.45% 7.25% 6.95% 6.65%
- ------------------------------------------------------------------------------
Percentage of homeowners who may
find mortgage refinancing attractive... 16% 34% 41% 60% 70%
- ------------------------------------------------------------------------------
Mortgage rates shown above are an estimate of Federal Home Loan Mortgage
Corp. average commitment rates for conventional 30-year fixed-rate First
mortgages for a single-family home. Refinancing estimates are as of October
1997. As of October 31, 1997, a 10-year U.S. Treasury note yielded 5.87%.
Source: Bear Stearns
If bond yields fall substantially, refinancing of mortgages becomes
attractive for many homeowners. The following chart shows the percentage of
the mortgage securities market at risk of refinancing given various yield
levels.
1997 Annual Report 7
<PAGE>
[Photo of keyboard]
trade at what we believe are modest prices because of diversification mistakes
made several years back. In fiscal 1998, we believe prices of these stocks
relative to earnings can rise as investors come to realize that old problems
have been corrected.
In our opinion, if inflation remains low and demand for Treasury secur
ities from both U.S. and overseas remains strong, long-term interest rates
have the potential to decline in the months ahead, benefiting both stocks and
bonds. However, we believe long-term rates will not fall significantly below
6% because:
* the U.S. economy remains too strong; and,
* the Federal Reserve is more likely than not to raise short-term rates if
inflation concerns warrant monetary restraint.
Short-term interest rate and stock price fluctuations will always be a
facet of bond and equity investing. However, we believe that it is worth
noting that during the past 15 years a mix of established stocks and bonds
has outperformed small aggressive growth stocks.
Volatility can often brew in markets where investors don't pay
attention to risk or securities prices relative to fundamental measures of
value. In the year ahead, we will constantly keep our eyes on the stove as we
strive to achieve a smoother blend of income and capital appreciation with a
balanced portfolio of stocks and bonds.
George H. Burwell
Vice President and
Senior Portfolio Manager
Equities
Gary A. Reed
Vice President and
Senior Portfolio Manager
Fixed-Income
November 5, 1997
KEEPING YOUR BALANCE MAKES SENSE
A BALANCED MIX OF STOCKS AND BONDS VS. SMALL AGGRESSIVE GROWTH STOCKS
- ------------------------------------------------------------------------------
PERFORMANCE OCTOBER 1982 TO OCTOBER 1997
60% S&P 500 Index/
40% Lehman Brothers Wilshire Small Cap
Aggregate Bond Index Growth Index
Nov. 1 '82 $100,000 $100,000
Oct. 31 '83 $120,616 $130,266
Oct. 31 '84 $131,689 $123,347
Oct. 31 '85 $157,390 $135,821
Oct. 31 '86 $201,302 $173,834
Oct. 31 '87 $213,427 $149,316
Oct. 31 '88 $242,631 $184,220
Oct. 31 '89 $292,597 $219,545
Oct. 31 '90 $286,873 $149,439
Oct. 31 '91 $362,357 $281,693
Oct. 31 '92 $398,831 $280,248
Oct. 29 '93 $453,719 $364,611
Oct. 31 '94 $457,522 $382,386
Oct. 31 '95 $558,549 $478,762
Oct. 31 '96 $651,045 $546,622
Oct. 31 '97 $798,240 $691,690
Past performance does not guarantee future results.
Source: CDA/Weisenberger
Since the fall of 1982, a balanced mix of stocks and bonds would have
increased in value eight-fold, more than an investment in rapidly growing
small companies.
8 1997 annual report
<PAGE>
DELAWARE FUND'S 10-YEAR PERFORMANCE
GROWTH OF A $10,000 INVESTMENT
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NOVEMBER 1, 1987, TO OCTOBER 31, 1997
Delaware Fund A Class
$35,889
S&P 500 Index
$48,661
Lehman Brothers Aggregate Bond Index
$24,228
Lipper Balanced Fund Average (44 funds)
$32,225
<TABLE>
<CAPTION>
Delaware Fund S & P 500 Lipper Balanced Lehman Brothers
A Class Index Fund Average (44 Funds) Aggregate Bond Index
Index
<S> <C> <C> <C> <C>
Oct. 31 '87 $ 9,527 $10,000 $10,000 $10,000
Oct. 31 '88 $11,531 $11,480 $11,368 $11,146
Oct. 31 '89 $14,029 $14,522 $13,262 $12,472
Oct. 31 '90 $13,584 $13,425 $12,672 $13,256
Oct. 31 '91 $16,887 $17,922 $16,122 $15,352
Oct. 31 '92 $18,976 $19,707 $17,611 $16,863
Oct. 29 '93 $21,235 $22,651 $20,222 $18,885
Oct. 31 '94 $21,616 $23,527 $20,080 $18,171
Oct. 31 '95 $25,131 $29,748 $23,713 $21,016
Oct. 31 '96 $29,171 $36,916 $27,206 $22,241
Oct. 31 '97 $35,889 $48,661 $32,510 $24,228
</TABLE>
Chart assumes $10,000 invested on October 31, 1987, and includes the effect
of a 4.75% front-end sales charge and the reinvestment of all distributions.
Performance of other classes of Delaware Fund will vary due to differing
charges and expenses. Past performance does not guarantee future results.
Delaware Fund Performance
Average Annual Return Through October 31, 1997
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Lifetime Ten Years Five Years One Year
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Class A (Est. 4/25/38)
Excluding Sales Charge +11.36% +14.19% +13.41% +22.05%
Including Sales Charge +11.27% +13.63% +12.32% +16.25%
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Class B (Est. 9/6/94)
Excluding Sales Charge +15.85% +21.09%
Including Sales Charge +15.15% +17.09%
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Class C (Est. 11/29/95)
Excluding Sales Charge +17.22% +21.07%
Including Sales Charge +17.22% +20.07%
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. Performance excluding sales charge for B and C Classes assumes
contingent sales charges either did not apply or the investment was not
redeemed.
Class A shares have a 4.75% maximum front-end sales charge and a 12b-1 fee of
0.30%.
Class B shares do not carry a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are subject to a deferred sales
charge of up to 4% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee and a 1%
contingent deferred sales charge if redeemed within 12 months of purchase.
The average annual total returns for the lifetime, 10-year, five-year and
one-year periods ended October 31, 1997, for Delaware Fund's Institutional
Class, were +11.37%, +14.28%, +13.61%, and +22.29%, 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. Performance for the Institutional Class for
periods prior to this date are based on Class A performance, adjusted to
eliminate the sales charge, but not the asset-based distribution charge.
1997 annual report 9
<PAGE>
DELAWARE FUND -
A Nearly 60 Year Track Record
With Above-Average Performance Since 1987
Growth of a $10,000 Investment 1938-1997
(highlight points)
1938 = Hitler takes over Czechoslovakia
1948 = Russia develops nuclear bombs
1958 = First Electronic Transistors
1962 = Cuban Missile Crisis
1968 = Martin Luther King assassinated
1978 = Inflation begins 3-year upward spiral
1988 = Savings & loan crisis begins
1997 = Currency woes along Pacific Rim
Delaware Fund U.S. Consumer
A Class Price Index (Inflation)
May '38 $ 9,524 $ 10,000
Oct. '38 $ 10,634 $ 9,949
Oct. '39 $ 11,191 $ 9,949
Oct. '40 $ 11,256 $ 9,949
Oct. '41 $ 11,731 $ 10,852
Oct. '42 $ 12,383 $ 11,819
Oct. '43 $ 16,359 $ 12,366
Oct. '44 $ 17,532 $ 12,583
Oct. '45 $ 24,368 $ 12,811
Oct. '46 $ 22,574 $ 14,784
Oct. '47 $ 23,194 $ 16,323
Oct. '48 $ 24,355 $ 17,316
Oct. '49 $ 24,222 $ 18,845
Oct. '50 $ 29,411 $ 17,443
Oct. '51 $ 35,366 $ 18,626
Oct. '52 $ 37,328 $ 18,982
Oct. '53 $ 38,786 $ 19,173
Oct. '54 $ 50,706 $ 18,995
Oct. '55 $ 62,613 $ 19,071
Oct. '56 $ 69,642 $ 19,542
Oct. '57 $ 64,270 $ 20,114
Oct. '58 $ 86,380 $ 20,547
Oct. '59 $ 99,962 $ 20,852
Oct. '60 $ 93,755 $ 21,132
Oct. '61 $ 125,282 $ 21,300
Oct. '62 $ 99,018 $ 21,584
Oct. '63 $ 130,363 $ 21,845
Oct. '64 $ 155,517 $ 22,105
Oct. '65 $ 191,593 $ 22,485
Oct. '66 $ 197,441 $ 23,338
Oct. '67 $ 271,930 $ 23,930
Oct. '68 $ 318,404 $ 25,044
Delaware Fund: A Better-Than-Average Balance
Average Annual Returns Through October 31, 1997
- ------------------------------------------------------------------------------
One Three Five Ten
Year Years Years Years
- ------------------------------------------------------------------------------
Delaware Fund A Class +22.05% +18.10% +13.41% +14.19%
Lipper Balanced Fund Average +19.51% +17.63% +13.27% +12.66%
10 1997 Annual Report
<PAGE>
With Distributions Reinvested = $5,749,418
Dividends = $2,298,969
Capital Gains and Principal = $3,450,448
Delaware Fund U.S. Consumer
A Class Price Index (Inflation)
Oct. '69 $ 285,179 $ 26,441
Oct. '70 $ 248,321 $ 27,981
Oct. '71 $ 300,417 $ 29,000
Oct. '72 $ 330,323 $ 29,995
Oct. '73 $ 284,533 $ 32,365
Oct. '74 $ 224,774 $ 36,297
Oct. '75 $ 287,953 $ 38,999
Oct. '76 $ 363,716 $ 41,060
Oct. '77 $ 360,552 $ 43,714
Oct. '78 $ 376,737 $ 47,800
Oct. '79 $ 438,732 $ 53,405
Oct. '80 $ 592,037 $ 60,157
Oct. '81 $ 640,000 $ 66,317
Oct. '82 $ 905,737 $ 69,681
Oct. '83 $ 1,069,337 $ 71,696
Oct. '84 $ 1,098,993 $ 74,704
Oct. '85 $ 1,323,952 $ 77,121
Oct. '86 $ 1,679,391 $ 78,306
Oct. '87 $ 1,525,882 $ 81,813
Oct. '88 $ 1,862,054 $ 85,290
Oct. '89 $ 2,265,456 $ 89,122
Oct. '90 $ 2,193,640 $ 94,728
Oct. '91 $ 2,727,087 $ 97,495
Oct. '92 $ 3,064,345 $ 100,617
Oct. '93 $ 3,429,205 $ 103,386
Oct. '94 $ 3,490,790 $ 106,081
Oct. '95 $ 4,058,461 $ 109,061
Oct. '96 $ 4,710,773 $ 112,325
Oct. '97 $ 5,749,418 $ 114,668
It takes nearly $11.50 to buy what a dollar bought on the eve of World War II.
A dollar invested in the Delaware Fund would have grown to nearly $575 during
the same time.
All performance shown assumes reinvestment of distributions. Performance
shown above includes sales charges while the chart to the left does not.
There were 343, 217, 99 and 44 funds shown in the Lipper Balanced Fund
Average for the one, three, five and 10-year periods ended October 31, 1997.
In June 1998, Delaware Fund's prospectus was modified to reflect its current
objective. Prior to that, the Fund generally sought but was not required to
seek a balance of capital appreciation, income and preservation of capital.
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 does not guarantee future results.
See page 9 for Fund performance for all classes with sales charges.
Performance of other classes of Delaware Fund differ from the above due to
differing charges and expenses.
1997 annual report 11
<PAGE>
Financial Statements
Delaware Group Equity Funds I, Inc. -
Delaware Fund
Statement of Net Assets
October 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Number Market
of Shares Value
------------------------------------
<S> <C> <C>
COMMON STOCK - 66.83%
Aerospace and Defense - 1.43%
GenCorp .................................... 180,600 $ 4,413,413
Lockheed Martin ............................ 63,400 6,026,963
-----------
10,440,376
-----------
Automobiles & Auto Parts - 1.86%
Danaher .................................... 249,000 13,648,313
-----------
13,648,313
-----------
Banking, Finance & Insurance - 11.57%
American International Group ............... 77,950 7,955,772
*BB&T ....................................... 112,900 6,145,994
Chubb ...................................... 88,700 5,876,375
*Equifax .................................... 356,700 11,079,994
Federal National Mortgage .................. 245,600 11,896,250
Nationwide Financial Services Class A ...... 193,200 5,880,525
PMI Group .................................. 85,000 5,137,188
Provident .................................. 353,000 11,781,375
*SAFECO ..................................... 170,800 8,129,012
*UNUM ....................................... 221,900 10,817,625
-----------
84,700,110
-----------
Buildings & Materials - 4.99%
Chicago Bridge and Iron .................... 181,000 3,201,438
Foster Wheeler ............................. 287,000 9,417,188
*Masco ...................................... 545,200 23,920,650
-----------
36,539,276
-----------
Cable, Media & Publishing - 4.48%
*Banta ...................................... 197,200 5,139,525
Reynolds & Reynolds Class A ................ 315,700 5,406,363
*Wallace Computer Services .................. 578,600 22,239,938
-----------
32,785,826
-----------
Chemicals - 2.19%
Fuller (H.B.) ............................. 68,400 3,227,625
Grace (W.R.) .............................. 188,600 12,824,800
-----------
16,052,425
-----------
Computers & Technology - 1.42%
Hewlett-Packard ............................ 168,400 10,388,175
-----------
10,388,175
-----------
Electronics & Electrical - 2.80%
Intel ...................................... 93,900 7,233,234
Rockwell International ..................... 82,100 4,022,900
*Teleflex ................................... 248,600 9,260,350
-----------
20,516,484
-----------
Energy - 3.19%
*Kerr-McGee ................................. 165,000 11,147,813
Royal Dutch Petroleum-ADR .................. 105,200 5,536,150
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Number Market
of Shares Value
---------------------------------
<S> <C> <C>
COMMON STOCK (Continued)
ENERGY (Continued)
*Total S A-ADR ........................... 120,523 $ 6,689,027
-----------
23,372,990
-----------
Food, Beverage & Tobacco - 6.48%
ConAgra ................................. 622,400 18,749,800
Philip Morris ........................... 360,800 14,296,700
Ralston Purina Group .................... 134,600 12,080,350
Universal Foods ......................... 60,000 2,366,250
-----------
47,493,100
-----------
Healthcare & Pharmaceuticals - 4.29%
American Home Products .................. 207,600 15,388,350
Baxter International .................... 89,300 4,130,125
Johnson & Johnson ....................... 207,300 11,893,838
-----------
31,412,313
-----------
Real Estate - 3.35%
D.R. Horton ............................. 46,700 700,500
Developers Diversified Realty ........... 121,100 4,783,450
*Health Care Property Investors .......... 116,300 4,463,013
*Nationwide Health Properties ............ 229,800 5,184,863
Sun Communities ......................... 121,700 4,244,288
Storage Trust Realty .................... 83,900 2,144,694
Storage USA ............................. 78,900 2,993,269
-----------
24,514,077
-----------
Retail - 5.74%
May Department Stores ................... 129,200 6,960,650
Rite Aid ................................ 426,300 25,311,563
Sherwin-Williams ........................ 353,100 9,798,525
-----------
42,070,738
-----------
Telecommunications - 2.21%
ALLTEL .................................. 224,600 7,945,225
SBC Communications ...................... 129,300 8,226,713
-----------
16,171,938
-----------
Textiles, Apparel & Furniture - 3.72%
Ecolab .................................. 437,500 20,808,594
Hillenbrand Industries .................. 151,000 6,455,250
-----------
27,263,844
-----------
Utilities - 1.56%
CMS Energy .............................. 200,900 7,332,850
*Edison International .................... 160,000 4,100,000
-----------
11,432,850
-----------
Miscellaneous - 5.55%
Pentair ................................. 185,200 7,153,350
Service International ................... 246,600 7,505,888
</TABLE>
- ---------------------
Top 10 holdings, representing 25.88% of the net assets are in boldface.
12 1997 Annual Report
<PAGE>
Statement of Net Assets (Continued)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Number Market
of Shares Value
------------------------------------
<S> <C> <C>
COMMON STOCK (Continued)
MISCELLANEOUS (Continued)
Tompkins plc-ADR ....................................... 174,000 $ 3,588,750
*Tyco International ..................................... 593,000 22,385,750
------------
40,633,738
------------
Total Common Stock (cost $391,403,415) ................. 489,436,573
------------
CONVERTIBLE PREFERRED STOCKS - 0.49%
Freeport-McMoRan Copper & Gold 7.00% pfd cv ............ 141,500 3,572,875
------------
Total Convertible Preferred Stocks
(cost $3,349,547) .................................... 3,572,875
------------
Principal
Amount
ASSET-BACKED SECURITIES - 4.53%
ADVANTA Series 93-1 A2 5.95% 5/25/09 ................... $ 805,171 785,847
American Finance Home Equity
Series 94-2A1 6.95% 6/25/24 ........................... 1,201,350 1,205,554
Series 92-5 A 7.20% 2/15/08 ........................... 357,435 361,510
Series 92-1A 7.50% 3/15/07 ............................ 435,899 439,255
Series 91-1A 8.00% 7/25/06 ............................ 307,564 313,715
Case Equipment Loan Trust
Series 95-B A3 6.15% 9/15/02 .......................... 3,016,453 3,026,709
Countrywide Home Equity Loan
Series 97-1 A4 6.95% 5/25/21 .......................... 3,475,000 3,524,410
First Union Residential
Securitization Trust
Series 96-2 A2 6.46% 2/18/04 .......................... 4,855,000 4,871,689
MetLife Capital Equipment Loan
Trust Series
97-A A 6.85% 5/20/08 ................................. 2,865,000 2,932,327
NationsCredit Grantor Trust
Series 96-1 A 5.85% 9/15/11 ........................... 1,508,439 1,493,052
Series 97-2 A1 6.35% 10/15/01 ......................... 1,785,000 1,789,463
Neiman Marcus Group Credit Card
Master Trust
Series 95-1A 7.60% 6/15/03 ............................ 960,000 996,783
Oakwood Mortgage Investors
Series 97-C A3 6.65% 11/15/27 ......................... 2,180,000 2,191,241
The Money Store Home Equity Trust
Series 97-A A9 7.235% 4/15/27 ......................... 3,150,000 3,250,406
Series 97-C AH5 6.59% 2/15/15 ......................... 2,115,000 2,122,270
UCFC Home Equity Loan
Series 96-B1 A3 7.30% 4/15/14 ......................... 3,835,000 3,891,375
------------
Total Asset-Backed Securities
(cost $32,859,659) ................................... 33,195,606
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 10.67%
Asset Securitization Corporation
Series 96-D2 A1 6.92% 2/14/29 ......................... 3,541,729 3,653,515
Series 96-D3 A1B 7.21% 10/13/26 ....................... 3,060,000 3,195,309
Series 97-D4 A1A 7.35% 4/14/29 ........................ 3,045,806 3,148,126
Series 97-D5 A3 6.86% 2/14/41 ......................... 3,215,000 3,246,647
Chase Commercial Mortgage Securities
Corporation
Series 96-2 C 6.90% 11/19/06 .......................... 2,273,625 2,318,653
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Principal Market
Amount Value
----------------------------------
<S> <C> <C>
COLLATERALIZED MORTGAGE
OBLIGATIONS (Continued
Federal Home Loan Mortgage Corporation - GNMA
Series 21 H 5.85% 1/25/19 .................... $ 1,700,000 $ 1,680,188
First Union-Lehman Brothers Commercial Mortgage
Series 97-C1 A1 7.15% 2/18/04 ................ 2,483,555 2,561,845
GE Capital Mortgage Services
Series 94-2 A3 5.40% 1/25/09 ................. 2,359,239 2,347,651
Lehman Large Loan
Series 97-LLI A1 6.75% 6/12/04 ............... 3,300,000 3,377,344
Merrill Lynch Mortgage Investors
Series 97-C1 A1 6.95% 6/18/29 ................ 2,069,840 2,121,263
Mortgage Capital Funding
Series 96-MD2 A1 6.758% 12/21/26 ............. 2,145,093 2,172,577
Series 96-MC2-C 7.224% 9/20/06 ............... 2,137,777 2,199,906
Series 96-MC1 D 7.80% 4/15/06 ................ 2,690,000 2,858,125
Nomura Asset Securities
Series 93-1 A1 6.68% 12/15/01 ................ 3,600,208 3,650,273
Series 96-MD5 A3 7.6369% 4/13/36 ............. 3,300,000 3,536,156
Norwest Asset Securities
Series 97-1 A8 7.25% 2/25/12 ................. 3,779,117 3,895,656
Prudential Home Mortgage
Series 93-61 A3 6.50% 12/25/08 ............... 3,485,000 3,511,976
Residential Accredit Loans
Series 97-QS1 A5 6.75% 2/25/27 ............... 3,218,000 3,232,079
Series 97-QS1 A8 6.75% 2/25/27 ............... 2,355,589 2,343,995
Series 97-QS4 A3 7.25% 5/25/27 ............... 2,925,000 2,963,391
Series 96-QS3 A13 7.29% 6/25/26 .............. 1,770,000 1,792,125
Series 95-QS1 A3 7.30% 6/25/21 ............... 1,540,000 1,560,453
Series 96-QS2 A6 7.45% 4/25/23 ............... 3,345,000 3,411,377
Series 97-QS6 A5 7.50% 6/25/12 ............... 4,521,308 4,726,180
Series 97-QS3 A3 7.50% 4/25/27 ............... 5,265,000 5,356,315
Residential Funding Mortgage Securities
Series 96-S9 A10 7.25% 4/25/26 ............... 3,176,297 3,269,549
-----------
Total Collateralized Mortgage Obligations
(cost $76,191,309) .......................... 78,130,674
-----------
CORPORATE BONDS - 8.21%
American General Institute 144A 7.57% 12/1/46 . 2,900,000 2,878,250
Banco Santiago S.A. 7.00% 7/18/07 ............. 1,855,000 1,790,075
Barrick Gold 7.50% 5/1/07 ..................... 3,900,000 4,124,250
Celulosa Arauco 7.25% 6/11/98 ................. 1,750,000 1,754,375
Continental Airlines 6.80% 1/2/09 ............. 1,940,000 1,954,317
Credit Foncier de France 8.00% 1/14/02 ........ 2,415,000 2,541,788
Embotelladora Andina 7.00% 10/1/07 ............ 3,000,000 2,910,000
Federal Express 7.65% 1/15/14 ................. 4,210,000 4,462,600
Firstar Capital 8.32% 12/15/26 ................ 2,300,000 2,469,625
*Great Western Financial 8.206% 2/1/27 ......... 4,000,000 4,205,000
*Hutchison Whampoa Finance 6.95% 8/1/07 ........ 1,900,000 1,762,250
Kohls 6.70% 2/1/06 ........................... 2,900,000 2,900,000
Lehman Brothers Holdings 6.89% 10/10/00 ....... 3,865,000 3,927,806
Lockheed Martin 6.75% 3/15/03 ................. 2,445,000 2,487,787
Lockheed Martin 7.65% 5/1/16 .................. 3,700,000 4,000,625
May Department Stores 7.50% 6/1/15 ............ 4,000,000 4,225,000
Norfolk Southern 6.70% 5/1/00 ................. 3,600,000 3,649,500
</TABLE>
1997 Annual Report 13
<PAGE>
Statement of Net Assets (Continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Market
Amount Value
--------------------------------
<S> <C> <C>
CORPORATE BONDS (Continued)
Petrozuata Finance 144A 8.22% 4/1/17 ... $ 1,000,000 $ 1,046,250
Summit Capital Trust 8.40% 3/15/27 ..... 2,000,000 2,147,500
Transwestern Pipeline 144A 7.55% 1/15/00 1,200,000 1,236,000
Turner Broadcasting 8.375% 7/1/13 ...... 3,350,000 3,672,437
-----------
Total Corporate Bonds
(cost $58,592,398) ................... 60,145,435
-----------
MORTGAGE-BACKED SECURITIES - 5.34%
Federal Home Loan Mortgage Corporation
6.00% 2/1/11 ......................... 2,259,391 2,233,972
Federal Home Loan Mortgage Corporation
8.50% 9/1/08 to 6/14/14 .............. 1,962,040 2,044,560
Federal National Mortgage Association
7.00% 7/1/17 ......................... 2,257,429 2,289,880
Federal National Mortgage Association
7.50% 2/1/27 ......................... 3,055,282 3,124,026
Federal National Mortgage Association
8.00% 12/1/09 to 9/1/16 .............. 3,404,783 3,498,664
Federal National Mortgage Association
8.50% 11/1/09 ........................ 1,617,219 1,682,413
Federal National Mortgage Association
9.50% 8/1/21 to 2/1/25 ............... 4,847,039 5,270,803
Government National Mortgage Association
6.50% 12/15/23 to11/1/27 .............. 5,608,467 5,557,778
Government National Mortgage Association
7.50% 5/15/23 ........................ 3,791,413 3,879,089
Government National Mortgage Association
9.00% 1/15/20 to 11/15/21 ............. 8,275,419 8,945,581
Government National Mortgage Association
9.50% 1/15/20 ........................ 278,043 303,240
Government National Mortgage Association
10.00% 11/15/16 to 5/15/19 ............ 216,368 238,411
Government National Mortgage Association
12.50% 12/15/10 ...................... 45,537 53,307
-----------
Total Mortgage-Backed Securities
(cost $38,205,078) ................... 39,121,724
-----------
MUNICIPAL BONDS - 0.89%
New York State Dorm Authority Revenue
(Taxable Pension Obligations)
6.23% 10/1/98 ........................ 3,500,000 3,500,000
Philadelphia, Pennsylvania Authority
For Industrial Development
Series 97 A 6.488% 6/18/04 ............ 2,983,488 3,004,698
-----------
Total Municipal Bonds (cost $6,483,488) 6,504,698
-----------
U.S. TREASURY OBLIGATIONS - 2.06%
*U.S. Treasury Bond 6.25% 8/15/23 ....... 3,450,000 3,458,384
*U.S. Treasury Bond 6.625% 2/15/27 ...... 1,600,000 1,695,616
*U.S. Treasury Notes
6.625% 3/31/02 to 5/15/07 ............. 5,900,000 6,145,469
U.S. Treasury Notes 6.375% 1/15/00 ..... 3,200,000 3,248,992
U.S. Treasury Notes 6.50% 5/15/05 ...... 510,000 528,691
-----------
Total U.S. Treasury Obligations
(cost $14,471,281) ................... 15,077,152
-----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Principal Market
Amount Value
--------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS - 0.99%
With Chase Manhattan 5.65% 11/3/97
(dated 10/31/97, collateralized by
$2,574,000 U.S. Treasury Notes
5.75% due 10/31/00, market
value $2,577,064) ..................................... $ 2,523,000 $ 2,523,000
With PaineWebber 5.65% 11/3/97
(dated 10/31/97, collateralized by
$2,399,000 U.S. Notes 5.125%
due 2/28/98, market
value $2,416,978) ..................................... 2,367,000 2,367,000
With Prudential Securities 5.65% 11/3/97
(dated 10/31/97, collateralized by
$2,385,000 U.S. Treasury Notes 5.875%
due 2/28/99, market
value $2,416,227) ..................................... 2,367,000 2,367,000
-------------
Total Repurchase Agreements
(cost $7,257,000) .................................... 7,257,000
-------------
TOTAL MARKET VALUE OF SECURITIES OWNED
(cost $628,813,175) - 100.01% ........................ $ 732,441,737
LIABILITIES NET OF RECEIVABLES AND
OTHER ASSETS - (0.01%) ................................ (68,533)
NET ASSETS APPLICABLE TO 31,895,404 SHARES
($1 PAR VALUE) OUTSTANDING - 100.00% .................. $ 732,373,204
=============
NET ASSET VALUE - DELAWARE FUND A CLASS
($554,448,340 / 24,154,955 SHARES) ................... $22.95
======
NET ASSET VALUE - DELAWARE FUND B CLASS
($16,658,926 / 728,001 SHARES) ....................... $22.88
======
NET ASSET VALUE - DELAWARE FUND C CLASS
($8,090,196 / 353,768 SHARES) ........................ $22.87
======
NET ASSET VALUE - DELAWARE FUND INSTITUTIONAL CLASS
($153,175,742 / 6,658,680 SHARES) .................... $23.00
======
- ----------------
ADR - American Depository Receipt
*Securities on loan
COMPONENTS OF NET ASSETS AT OCTOBER 31, 1997:
Common stock, $1 par value, 200,000,000
shares authorized to the Delaware Fund ................ $ 543,312,073
Undistributed net investment income .................... 2,991,674
Accumulated net realized gain on investments ........... 82,440,895
Net unrealized appreciation of investments ............. 103,628,562
-------------
Total net assets ....................................... $ 732,373,204
=============
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
DELAWARE FUND A CLASS
Net asset value A Class (A) ........................... $22.95
Sales charge (4.75% of offering price, or 4.97%
of amount invested per share) (B) .................... 1.14
------
Offering price ......................................... $24.09
======
</TABLE>
- -------------
(A)Net asset value per share, as illustrated, is the estimated amount
which would be paid upon redemption or repurchase of shares.
(B)See Buying Shares in the current Prospectus for purchases of
$100,000 or more.
See accompanying notes
14 1997 Annual Report
<PAGE>
Delaware Group Equity Funds I, Inc. -
Delaware Fund
Statement of Operations
Year Ended October 31, 1997
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Interest ..................................... $ 16,658,635
Dividends .................................... 9,154,195 $ 25,812,830
------------
EXPENSES:
Management fees .............................. 3,492,255
Distribution expense ......................... 1,220,984
Dividend disbursing and transfer agent fees
and expenses ................................ 1,150,387
Accounting fees and salaries.................. 296,277
Reports and statements to shareholders ....... 103,525
Registration fees ............................ 73,346
Professional fees ............................ 43,917
Directors' fees .............................. 17,236
Custodian fees ............................... 10,500
Taxes other than taxes on income ............. 3,500
Other ........................................ 54,348 6,466,275
------------ ------------
NET INVESTMENT INCOME ........................ 19,346,555
------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain from investment transactions 83,369,699
Net change in unrealized appreciation
on investments during the period ............ 30,998,183
------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS ......................... 114,367,882
------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................... $133,714,437
============
</TABLE>
See accompanying notes
<PAGE>
Delaware Group Equity Funds I, Inc. -
Delaware Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Year Ended Year Ended
1997 1996
---------------------------------------
OPERATIONS:
<S> <C> <C>
Net investment income ....................... $ 19,346,555 $ 21,015,505
Net realized gain from investments
transactions ............................... 83,369,699 56,652,521
Net change in unrealized appreciation on
investments during the period .............. 30,998,183 14,064,318
------------- -------------
Net increase in net assets resulting
from operations ............................ 133,714,437 91,732,344
------------- -------------
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income:
Delaware Fund A Class ...................... (16,272,302) (15,676,617)
Delaware Fund B Class ...................... (261,292) (124,247)
Delaware Fund C Class ...................... (110,135) (23,243)
Delaware Fund Institutional Class .......... (4,590,915) (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)
------------- -------------
(78,380,438) (52,591,240)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
Delaware Fund A Class ...................... 41,923,741 21,859,484
Delaware Fund B Class ...................... 10,047,187 4,091,428
Delaware Fund C Class ...................... 6,084,168 2,098,384
Delaware Fund Institutional Class .......... 29,047,615 32,320,993
Net asset value of shares issued
upon reinvestment of dividends
from net investment income and net
realized gain on investment
transactions:
Delaware Fund A Class ...................... 47,456,233 32,527,346
Delaware Fund B Class ...................... 910,380 302,927
Delaware Fund C Class ...................... 315,208 21,730
Delaware Fund Institutional Class .......... 15,968,541 10,157,754
------------- -------------
151,753,073 103,380,046
------------- -------------
Cost of shares repurchased:
Delaware Fund A Class ...................... (67,004,197) (88,614,808)
Delaware Fund B Class ...................... (2,119,134) (1,269,060)
Delaware Fund C Class ...................... (811,843) (217,457)
Delaware Fund Institutional Class .......... (29,541,550) (33,029,784)
------------- -------------
(99,476,724) (123,131,109)
------------- -------------
Increase (decrease) in net assets
derived from capital
share transactions ......................... 52,276,349 (19,751,063)
------------- -------------
NET INCREASE IN NET ASSETS .................. 107,610,348 19,390,041
NET ASSETS:
Beginning of year ........................... 624,762,856 605,372,815
------------- -------------
End of year ................................. $ 732,373,204 $ 624,762,856
============= =============
</TABLE>
See accompanying notes
1997 Annual Report 15
<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
-----------------------------------------------------------
Year Ended October 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................................ $21.260 $19.940 $18.000 $19.430 $18.720
Income from investment operations:
Net investment income .............................................. 0.610 0.706 0.664 0.615 0.631
Net realized and unrealized gain (loss) from investments ........... 3.680 2.349 2.156 (0.285) 1.509
------- ------- ------- ------- -------
Total from investment operations .................................... 4.290 3.055 2.820 0.330 2.140
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ............................... (0.680) (0.655) (0.630) (0.600) (0.660)
Distributions from net realized gain on investment transactions .... (1.920) (1.080) (0.250) (1.160) (0.770)
------- ------- ------- ------- -------
Total dividends and distributions ................................... (2.600) (1.735) (0.880) (1.760) (1.430)
------- ------- ------- ------- -------
Net asset value, end of period ...................................... $22.950 $21.260 $19.940 $18.000 $19.430
======= ======= ======= ======= =======
Total return(1) ..................................................... 22.05% 16.07% 16.26% 1.80% 11.91%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ............................. $554,448 $490,150 $493,243 $456,074 $507,528
Ratio of expenses to average net assets ............................. 0.97% 0.99% 0.97% 0.97% 0.89%
Ratio of net investment income to average net assets ................ 2.83% 3.39% 3.55% 3.31% 3.27%
Portfolio turnover .................................................. 81% 92% 94% 142% 160%
Average commission rate paid(2) ..................................... $ 0.0600 $ 0.0600 N/A N/A N/A
1 Does not include maximum sales charge nor the 1% limited contingent deferred sales charge that would apply in the
event of certain redemptions within 12 months of purchase.
2 Computed by dividing the total amount of commissions paid by the total number of shares purchased and sold during the
period for which there was a commission charged.
</TABLE>
16 1997 Annual Report
<PAGE>
Financial Highlights (Continued)
- ------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each
period were as follows:
<TABLE>
<CAPTION>
Delaware Fund B Class Delaware Fund C Class
-------------------------------- --------------------------------
Year Ended 9/6/94(1) Year 11/29/95(1)
October 31, to Ended to
1997 1996 1995 10/31/94 10/31/97 10/31/96
<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 ...................................... 0.452 0.525 0.567 0.070 0.460 0.583
Net realized and unrealized gain (loss)
from investments ........................................... 3.658 2.350 2.113 (0.280) 3.655 1.757
------- ------- ------- ------- ------- -------
Total from investment operations ........................... 4.110 2.875 2.680 (0.210) 4.115 2.340
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ....................... (0.510) (0.495) (0.510) (0.150) (0.505) (0.580)
Distributions from net realized gain on
investment transactions .................................... (1.920) (1.080) (0.250) none (1.920) (1.080)
------- ------- ------- ------- ------- -------
Total dividends and distributions .......................... (2.430) (1.575) (0.760) (0.150) (2.425) (1.660)
------- ------- ------- ------- ------- -------
Net asset value, end of period .............................. $22.880 $21.200 $19.900 $17.980 $22.870 $21.180
======= ======= ======= ======= ======= =======
Total return(2) ............................................. 21.09% 15.15% 15.36% (1.14%) 21.07% 12.13%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .................... $16,659 $6,872 $3,383 $568 $8,090 $1,990
Ratio of expenses to average net assets .................... 1.78% 1.80% 1.79% 1.81% 1.78% 1.80%
Ratio of net investment income to average net assets ....... 2.00% 2.58% 2.73% 2.47% 2.00% 2.58%
Portfolio turnover ......................................... 81% 92% 94% 142% 81% 92%
Average commission rate paid(3) ............................ $0.0600 $0.0600 N/A N/A $0.0600 $0.0600
- -------------------
1 Date of initial public offering; ratios have been annualized and total return has not been annualized.
2 Does not include contingent deferred sales charge which varies from 1%-4% depending upon the holding period for
Delaware Fund B Class and C Class.
3 Computed by dividing the total amount of commissions paid by the total number of shares purchased and sold during the
period for which there was a commission charged.
</TABLE>
1997 Annual Report 17
<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
-------------------------------------------------------
Year Ended 11/9/92(1)
October 31, to
1997 1996 1995 1994 10/31/93
<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 ................................................. 0.659 0.727 0.694 0.653 0.632
Net realized and unrealized gain (loss) from investments .............. 3.681 2.363 2.166 (0.293) 1.438
------- ------- ------- ------- -------
Total from investment operations ...................................... 4.340 3.090 2.860 0.360 2.070
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income .................................. (0.720) (0.690) (0.660) (0.630) (0.660)
Distributions from net realized gain on investment transactions ....... (1.920) (1.080) (0.250) (1.160) (0.770)
------- ------- ------- ------- -------
Total dividends and distributions ..................................... (2.640) (1.770) (0.910) (1.790) (1.430)
------- ------- ------- ------- -------
Net asset value, end of period ......................................... $23.000 $21.300 $19.980 $18.030 $19.460
======= ======= ======= ======= =======
Total return ........................................................... 22.29% 16.25% 16.50% 1.96% 11.76%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ............................... $153,176 $125,751 $108,747 $93,990 $72,052
Ratio of expenses to average net assets ............................... 0.78% 0.80% 0.79% 0.81% 0.77%
Ratio of net investment income to average net assets .................. 3.00% 3.58% 3.73% 3.47% 3.39%
Portfolio turnover .................................................... 81% 92% 94% 142% 160%
Average commission rate paid(2) ....................................... $ 0.0600 $ 0.0600 N/A N/A N/A
- ------------------
1 Date of initial public offering; ratios and total return have been annualized.
2 Computed by dividing the total amount of commissions paid by the total number of shares purchased and sold during the
period for which there was a commission charged.
</TABLE>
1997 Annual Report 18
<PAGE>
Delaware Group Equity Funds I, Inc.-
Delaware Fund
Notes to Financial Statements
October 31, 1997
- ------------------------------------------------------------------------------
Delaware Group Equity Funds I, Inc. - formerly known as Delaware Group
Delaware Fund, Inc., is registered as a diversified open-end investment
company under the Investment Company Act of 1940, as amended. The Delaware
Group Equity Funds I currently offers two Series, Delaware Fund (the
"Fund") and Devon Fund. The Fund is organized as a Maryland Corporation and
offers four classes of shares. The Delaware Fund A Class carries a
front-end sales charge of 4.75%. The Delaware Fund B Class carries a
back-end sales charge. The Delaware Fund C Class carries a level load
deferred sales charge and Delaware Fund Institutional Class has no sales
charge. The Fund's objective 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 the close of the NYSE on the valuation date.
Securities not traded or securities not listed on an exchange are valued at
the mean of the last quoted bid and asked prices. Long-term debt securities
are valued by an independent pricing service and 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 which
approximates market value.
Federal Income Taxes - The Fund intends to continue to qualify as a
regulated investment company and make the requisite distributions to
shareholders. Accordingly, no provision for federal income taxes has been
made in the financial statements. Income and capital gain distributions are
determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles.
Class Accounting - Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various classes
of the Fund on the basis of daily net assets of each class. Distribution
expenses relating to a specific class are charged directly to that class.
Repurchase Agreements - The Fund may invest in a pooled cash account
along with other members of the Delaware Group of Funds. The aggregate
daily balance of the pooled cash account is invested in repurchase
agreements secured by obligations of the U.S. government. The respective
collateral is held by the Fund's custodian bank until the maturity of the
respective repurchase agreements. Each repurchase agreement is at least
100% collateralized. However, in the event of default or bankruptcy by the
counterparty to the agreement, realization of the collateral may be subject
to legal proceedings.
Other - Expenses common to all Funds within the Delaware Group of Funds
are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased
or sold (trade date). Costs used in calculating realized gains and losses
on the sale of investment securities are those of the specific securities
sold. Dividend income is recorded on the ex-dividend date and interest
income is recorded on the accrual basis. Original issue discounts are
accreted to interest income over the lives of the respective securities.
<PAGE>
Certain Fund expenses are paid through "soft dollar" arrangements with
brokers. The amount of these expenses is less than 0.01% of the Fund's
average daily net assets.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the
Fund pays Delaware Management Company, Inc. (DMC), the Investment Manager
of the Fund, an annual fee which is calculated daily at the rate of 0.60%
on the first $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 October 31, 1997, The Fund had a liability for
Investment Management fees and other expenses payable to DMC for $108,213.
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 agent for the Fund. The Fund also
engaged DSC to provide accounting services for the Fund. For the year ended
October 31, 1997, the Fund expensed $1,150,387 for dividend disbursing and
transfer agent services and $204,027 for accounting services.
Pursuant to the Distribution Agreement, the Fund pays Delaware
Distributors, L.P. (DDLP), the Distributor and an affiliate of DMC, an
annual fee not to exceed 0.30% of the average daily net assets of the A
Class and 1.00% of the average daily net assets of the B and C Class. No
distribution expenses are paid by the Institutional Class. For the year
ended October 31, 1997, DDLP earned $94,082 for commissions on sales of the
Fund A Class shares.
Certain officers of DMC, DSC and DDLP are officers, directors and/or
employees of the Fund. These officers, directors and employees are paid no
compensation by the Fund.
3. Investments
During the year ended October 31, 1997, the Fund made purchases of
$456,756,100 and sales of $415,524,007 of investment securities other than
U.S. government securities and temporary cash investments. During the year
ended October 31, 1997, the Fund made purchases of $15,024,281 and sales of
$16,249,484 of long term U.S. government securities.
At October 31, 1997, net unrealized appreciation for federal income tax
purposes aggregated $103,624,812 of which $107,943,282 related to
unrealized appreciation of securities and $4,318,470 related to unrealized
depreciation of securities. At October 31, 1997 the aggregate cost of
securities for federal income tax purposes was $628,816,925.
1997 Annual Report 19
<PAGE>
Notes to Financial Statements (Continued)
4. Capital Stock
Transactions in capital stock shares were as follows:
Year Ended Year Ended
1997 1996
---------- ----------
Shares sold:
Delaware Fund A Class ..................... 1,903,961 1,080,212
Delaware Fund B Class ..................... 459,520 201,616
Delaware Fund C Class ..................... 281,577 103,606
Delaware Fund Institutional Class ......... 1,328,118 1,580,497
Shares issued upon reinvestment of dividends
from net investment income and net realized
gains from security transactions:
Delaware Fund A Class ..................... 2,341,619 1,633,576
Delaware Fund B Class ..................... 44,725 15,187
Delaware Fund C Class ..................... 15,366 1,060
Delaware Fund Institutional Class ......... 786,052 509,546
---------- ----------
7,160,938 5,125,300
---------- ----------
Shares repurchased:
Delaware Fund A Class ..................... (3,148,854) (4,386,405)
Delaware Fund B Class ..................... (100,425) (62,659)
Delaware Fund C Class ..................... (37,099) (10,742)
Delaware Fund Institutional Class ......... (1,359,503) (1,629,980)
---------- ----------
(4,645,881) (6,089,786)
Net Increase (decrease) ................... 2,515,057 (964,486)
========== ==========
5. Lines of Credit
The Fund has a committed line of credit for $24,300,000. No amount was
outstanding at October 31, 1997, or at any time during the fiscal year.
6. Concentrations of Credit Risk
The Fund may invest 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
may 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.
7. Securities Lending
Security loans are required at all times to be secured by collateral at least
equal to 102% of the market value of the securities on loan. However, in the
event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral may be subject to legal
proceedings. In the event that the borrower fails to return loaned securities,
and cash collateral being maintained by the borrower is insufficient to cover
the value of loaned securities and provided such collateral insufficiency is
not the result of investment losses, the lending agent has agreed to pay the
amount of the shortfall to the Fund or, at the option of the lending agent,
replace the loaned securities. The market value of securities on loan to
brokers and the related cash collateral received at October 31, 1997, was
$50,047,320 and $51,249,038, respectively.
<PAGE>
Delaware Group Equity Funds I, Inc.-
Delaware Fund
Report of Independent Auditors
- ------------------------------------------------------------------------------
To the Shareholders and Board of Directors
Delaware Group Equity Funds I, Inc. -
Delaware Fund
We have audited the accompanying statement of net assets of Delaware Group
Equity Funds I, Inc. - Delaware Fund as of October 31, 1997, and the related
statement of operations for the year then ended, the statement of changes in
net assets for each of the two years in the period then ended, and the
financial highlights for each of the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of October 31, 1997, by corresp ondence
with the Fund's custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Group Equity Funds I, Inc. - Delaware Fund at October 31, 1997, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and its financial
highlights for each of the periods indicated therein, in conformity with
generally accepted accounting principles.
Ernst & Young LLP
Philadelphia, Pennsylvania
December 4, 1997
20 1997 annual report
<PAGE>
This 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.
Board of Directors
Wayne A. Stork
Chairman
Delaware Group of Funds
Philadelphia, PA
Jeffrey J. Nick
President and Chief Executive Officer
Delaware Group of Funds
Philadelphia, PA
Walter P. Babich
Board Chairman, Citadel Constructors, Inc.
King of Prussia, PA
Anthony D. Knerr
Consultant, Anthony Knerr & Associates
New York, NY
Ann R. Leven
Treasurer, National Gallery of Art
Washington, DC
W. Thacher Longstreth
City Councilman
Philadelphia, PA
Thomas F. Madison
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
Charles E. Peck
Secretary/Treasurer, Enterprise Homes, Inc.
Fredericksburg, VA
<PAGE>
Affiliated Officers
David K. Downes
Executive Vice President, Chief Financial Officer and Chief Operating Officer
Delaware Group of Funds
Philadelphia, PA
George M. Chamberlain, Jr.
Senior Vice President, Secretary
and General Counsel
Delaware Group of Funds
Philadelphia, PA
Bruce D. Barton
President and Chief Executive Officer
Delaware Distributors, L.P.
Philadelphia, PA
directors & officers
(insert Photo of Globes)
Investment Manager
Delaware Management Company, Inc.
Philadelphia, Pennsylvania
International Affiliate
Delaware International Advisers Ltd.
London, England
National Distributor
Delaware Distributors, L.P.
Philadelphia, Pennsylvania
Shareholder Servicing,
Dividend Disbursing
and Transfer Agent
Delaware Service Company, Inc.
Philadelphia, Pennsylvania
1818 Market Street
Philadelphia, PA 19103-3682
<PAGE>
This report must be preceded or accompanied by a current Delaware Fund
prospectus and the Delaware Group Fund Performance Update for the most
recently completed calendar quarter. For a prospectus of any other Delaware
Group fund, contact your financial adviser or Delaware Group.
For Shareholders
1.800.523.1918
For Securities Dealers
1.800.362.7500
For Financial Institutions Representatives Only
1.800.659.2265
Be sure to consult your financial adviser when making investments. Mutual
funds can be a valuable part of your financial plan; however, shares of the
Fund are not FDIC or NCUSIF insured, are not guaranteed by any bank or any
credit union, and involve investment risk, including the possible loss of the
principal amount invested. Shares of the Fund are not bank or credit union
deposits.
Copy Rights Delaware Distributors, L.P.
Printed in the USA on
recycled paper
(360)
AR-002[10/97]TKO12/97
For Total Return
DELAWARE
GROUP
- --------
(photo of globes)
