<PAGE>
(Various photos demonstrating service and guidance,
professional management and goals)
For Total Return
Devon Fund
service and guidance
professional management
1998
Annual
Report
goals
DELAWARE
INVESTMENTS
- --------------------
Philadelphia o London
<PAGE>
A TRADITION OF SOUND INVESTING
commitment
A Commitment
To Our Investors
Delaware Investments has a money management tradition that dates back to 1929.
We have a long and distinguished history of helping individuals reach their
financial goals through a full range of investment opportunities that include
equity mutual funds.
Headquartered in Philadelphia with an international affiliate in London,
the Delaware organization has managed growth & income stock portfolios since
1938.
Delaware Investments manages more than $42 billion in mutual fund assets
and institutional advisory accounts. We offer a wide variety of equity and
fixed-income investments, retirement plan accounts, IRAs, investment accounts
for variable annuities and closed-end funds.
Complete information on any fund offered by Delaware Investments can be found in
each fund's current prospectus. Prospectuses for all funds offered by Delaware
Investments are available from your financial adviser. Please read the
prospectus carefully before you invest or send money.
Devon Fund Objective
To seek current income and capital appreciation.
Table of Contents
Letter to Shareholders Page 1
Portfolio Highlights Page 2
Portfolio Manager's Review Page 3
Top 10 Holdings Page 3
Lifetime Performance Page 8
Statement of Net Assets Page 9
Financial Highlights Page 12
total
return
About Your Fund's
Portfolio Manager
o George H. Burwell manages more than $1.2 billion in equity mutual fund assets
at Delaware Investments and has 14 years of professional investment
experience. Prior to joining the company in 1992, Mr. Burwell was an equity
portfolio manager for Midlantic Bank in Edison, NJ. He is a Chartered
Financial Analyst and holds a Bachelor of Arts degree in political science
from the University of Virginia. Mr. Burwell is also a Portfolio Manager for
Delaware Investments' Delaware Fund, a stock and bond fund with a 60-year
track record, and Tax-Efficient Equity Fund, designed for investors seeking
to reduce the potential tax liabilities associated with stock fund
investments.
tradition
<PAGE>
November 9, 1998
for total
return
1
Dear Shareholder:
Devon Fund provided strong results in fiscal 1998 despite difficult market
conditions. For the 12 months ended October 31, 1998, the Fund's total return
was a robust +19.60% (capital change plus reinvestment of distributions at net
asset value for A Class shares).
We are pleased to say that on the eve of your Fund's fifth birthday, Devon
Fund's performance over its lifetime (December 29, 1993 to October 31, 1998)
significantly outpaced the average of 726 growth and income mutual funds as
shown below.
During fiscal 1998, a growth and value selection process led your Fund's
portfolio manager - George H. Burwell - to stocks of large and mid-size
companies that performed well. Devon's holdings of pharmaceutical stocks,
specialty service and capital goods stocks and non-bank financial stocks
provided robust returns. Retail stocks were strong early in the year but faded
during the second half.
Your Fund focuses on what we call transition stocks - companies whose
stocks currently meet value investment parameters but at the same time have the
potential to become strongly performing growth stocks. Mr. Burwell also looks
for equities likely to move from a midcap market capitalization - generally $2
billion to $10 billion - to large-cap status. Market capitalization is a stock's
price times the number of shares outstanding.
In evaluating a stock's total return prospects, Mr. Burwell seeks five
indicators of potential success; that is, five pillars to support the stock's
performance. He seeks businesses:
o With attractive stock prices compared to the rest of the market;
o With a history of stable earnings growth;
o With substantial positive cash flow;
o That show significant fundamental change; and
Devon's lifetime performance as of October 31, 1998 significantly
outperformed the average of the increasingly competitive growth & income
category of funds.
Average Annual total Returns
- --------------------------------------------------------------------------------
12 Months Ended December 29, 1993
October 31, 1998 To October 31, 1998
- --------------------------------------------------------------------------------
Devon Fund A Class +19.60% +21.96%
- --------------------------------------------------------------------------------
Lipper Growth & Income Fund Average +9.88% (726 funds +16.83% (310 funds)
Standard & Poor's 500 Index +21.99% +22.06%
Dow Jones Industrial Average +17.58% +21.37%
- --------------------------------------------------------------------------------
All performance shown above is based on net asset value without effect of sales
charges and assumes reinvestment of distributions. Performance information for
all Fund classes can be found on page 8. Past performance does not guarantee
future results. Fee limitations were in effect for the periods shown. Returns
would have been lower without the limitations.
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for total
return
2
o That are not widely followed or are misunderstood by Wall Street analysts.
This past summer the stock market suffered its biggest short-term setback
since the October 1987 crash. Worries about lower corporate earnings, especially
from overseas operations, eclipsed the benefits of lower long-term interest
rates, low inflation and relatively strong consumer confidence.
By using a strict buy and sell discipline, we believe Devon's investment
approach has reduced exposure to market risks during the past year and provided
attractive long-term total returns, especially when compared with more
aggressive equity strategies.
We are delighted to report that Devon Fund enjoyed strong positive cash
flow from thousands of new shareholders during fiscal 1998. The Fund's net
assets more than doubled to $234 million. Still, the Fund remains small enough
so that Mr. Burwell can quickly respond to market changes and new opportunities.
Now is an appropriate time to meet with your financial adviser to discuss
the role both equity and fixed-income mutual funds should be playing in your
overall investment portfolio. Through attractive, innovative opportunities such
as Devon Fund, we at Delaware Investments stand ready to help you meet your
goals.
Sincerely,
/s/ Wayne A. Stork
- ------------------------------------------
Wayne A. Stork
Chairman
/s/ Jeffrey J. Nick
- -------------------------------------------
Jeffrey J. Nick
President and Chief Executive Officer
Portfolio Highlights
- --------------------------------------------------------------------------------
October 31, 1998 October 31, 1997
- --------------------------------------------------------------------------------
Median Market Capitalization $5.8 billion $5.7 billion
Number of Stocks 60 61
Average Stock Price-to-Earnings Ratio 19.1x 17.0x
Top Sector Consumer Growth Capital Goods
Annual Portfolio Turnover Rate 39% 64%
Beta* 0.94 0.96
- --------------------------------------------------------------------------------
P/Es are based on analysts' earnings estimates as reported to First Call.
* A measure of risk relative to the S&P 500 Index. A number less than 1.0 means
less historical price volatility than the index. A number higher than 1.0 means
more historical volatility than the index.
Devon Fund's portfolio turnover rate of 39% during fiscal 1998 was much lower
than the 59% average turnover rate of the 442 funds categorized by Morningstar
as large-cap blend funds. Blend funds have both growth and value oriented
characteristics.
<PAGE>
for total
return
3
Portfolio Manager's Review
By George H. Burwell
Vice President/Senior Portfolio Manager
November 9, 1998
Fiscal 1998 was a year that saw the highest level of stock market volatility in
a decade. Investors grew cautious about domestic stocks as corporate earnings
growth ground to a halt. Banks were hit by overseas lending problems.
Manufacturers battled a wave of cheap imports and saw export demand from Asia
dry up. Service firms faced higher U.S. labor costs and weakness in consumer
spending.
We still found many opportunities to exploit stock market inefficiency and
turmoil using a methodical growth and value stock selection discipline. Devon
Fund also preserved capital to a greater degree than average growth and income
funds during this past summer's sharp market decline, based on data from Lipper
Analytical Services, Inc.
We achieved above-average results by focusing on dividend-paying stocks and
by avoiding companies whose stock prices relative to earnings (P/E ratio) were
more than 20% higher than the average stock in the unmanaged Standard & Poor's
500 Index. As shown in the chart on page 2, the average P/E of the Fund's
holdings (19.1x expected 1999 earnings) was lower than the average P/E of the
S&P 500 Index (23.4x).
By not paying through the nose for growth stocks with high P/Es, or buying
companies with a high degree of economic risk, we avoided a bloody nose this
summer, when many stocks fell significantly from their highs.
We preserved capital to a greater degree than most growth and income funds
during this past summer's sharp market decline.
Top 10 Holdings
October 31, 1998
Percent of
Company Net Assets Dividend Growth Rate P/E Ratio
- -------------------------------------------------------------------------------
Federal Home Loan
Mortgage (Freddie Mac) 5.3% 14.3% 20.2x
Rite Aid 4.4 6.5 22.8
Hewlett-Packard 3.8 18.2 17.2
Tyco International 3.6 14.3 22.7
Ecolab 3.6 -- 22.0
Equifax 3.6 4.5 21.7
Masco 3.5 5.2 17.6
American Home Products 3.1 6.1 25.2
Stewart Enterprises 2.7 21.3 20.5
Symbol Technologies 2.6 * 25.6
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S&P 500 Index -- 5.0 23.4
- --------------------------------------------------------------------------------
Dividend growth rate represents the percentage increase in quarterly dividends
for the 12 months ended 10/31/98. P/E ratios based on analysts' estimates as
reported to First Call for 1999. *Began paying a semi-annual dividend on 4/1/97.
Source: Bloomberg Business News.
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return
4
Additional investments from thousands of new and existing Devon Fund
shareholders in fiscal 1998 gave us the flexibility and resources to buy
companies with consistent earnings and dividend growth potential at attractive
prices without having to trade in stocks we thought still had potential.
Strategic Positioning
Since October 1997, we achieved success with non-bank financial firms such
as Fannie Mae and Freddie Mac (Federal Home Loan Mortgage Corp). These stocks
benefited from lower interest rates, a relatively strong housing market and
brisk mortgage refinancing activity. Unlike banks, these companies were
unaffected by sour overseas loans and imprudent lending.
(Photo of couple talking with financial advisor)
Devon Fund's holdings of companies making or distributing pharmaceuticals
such as American Home Products, Eli Lilly & Co. and Rite Aid Corp. also provided
strong returns for the year. Our selections in this area were generally
companies with either a new array of products or where management was retooling
the business to generate higher growth.
Many Devon holdings are midsize companies in niche businesses in
transition. For example, the Fund's best performing stock in fiscal 1998 was
Symbol Technologies, a midcap company that has developed new uses for bar code
scanners (see page 7). We believe investors can reap substantial capital
appreciation potential from stocks that are making a positive transition from
being undervalued (compared to their industry group) to being highly prized by
growth-oriented investors. As of year's end, 33 of Devon's 60 equity
Your Fund increased its position in consumer growth and technology companies and
reduced its holdings in capital goods companies during fiscal 1998.
Devon's Positioning Compared to the S&P 500 Index
- --------------------------------------------------------------------------------
October 31, 1998
Allocation
Percent of Change From Percent of
Broad Sectors Fund's Net Assets October 31, 1997 S&P 500 Index
- --------------------------------------------------------------------------------
Consumer Growth 18.9% +4.4% 19.9%
Capital Goods 14.8 -5.0 15.5
Finance 15.6 +2.1 14.2
Technology 14.1 +7.9 10.6
Consumer Cyclicals 10.0 +2.7 10.5
Consumer Staples 6.7 -3.3 7.1
Utilities 1.4 -4.3 5.8
Energy 2.7 -1.5 3.4
REITs 1.7 -2.5 2.9
- --------------------------------------------------------------------------------
Cash (8.6%) and miscellaneous stocks (5.5%) made up the balance of Devon Fund's
portfolio as of 10/31/98.
<PAGE>
for total
return
5
holdings were what we call transition stocks that were not in the unmanaged
Standard & Poor's 500 Index.
Two areas of disappointment this past year were retail and food. Investor
concern about soft consumer demand and negative pricing trends hurt stocks such
as Intimate Brands, operator of Victoria's Secret and Bath & Body Works stores,
and ConAgra, a major meat processor. We de-emphasized these stocks during the
second half of fiscal 1998. Until 1998, ConAgra had provided several years of
strong returns for the Fund.
Overall, we reallocated some of your Fund's assets to focus on companies
whose growth is not dependent on the ups and downs of the U.S. or world
economies. For example, we increased our position in Service Corp.
International, the world's largest funeral home operator. The stock had been a
major holding two years ago. When Service Corp.'s stock price reached a level
that met Devon's value and earnings growth criteria this past summer, we began
purchasing it again.
Outlook
Given the uncertain earnings outlook for many American corporations, we are
focusing on companies that appear well-positioned to generate earnings growth of
at least 10% per year even if the U.S. economy slows in 1999.
By purchasing and holding stocks with P/E ratios that are reasonable
compared to the S&P 500 Index, we believe your Fund's portfolio can benefit from
any decision by the Federal Reserve Board to further reduce interest rates in
the year ahead. While we do not think a recession is likely in fiscal
We are focusing on companies that appear well-positioned to generate earnings
growth of at least 10% per year even if the U.S. economy slows in 1999.
outlook
Q.
What are transition stocks? What opportunities do they offer?
A.
We define transition stocks as stocks that offer superior capital
appreciation potential because they are likely to move from being undervalued
compared to their peers to being prized by growth-oriented investors. As more
investors recognize that a large or midcap company has successfully transformed
its business, its market value is likely to grow.
<PAGE>
for total
return
6
1999, we think business profits and overall economic conditions will continue to
soften as the effects of global economic turmoil reach our shores. We believe
the Fed may cut its short-term interest rate target below the current 5%
sometime in the next year.
Companies with relatively low P/Es typically benefit the most from interest
rate cuts. Also, companies that can consistently raise cash dividends in a
falling interest rate environment become increasingly attractive to investors
seeking a balance of growth and income from equities. The average holding in
Devon Fund's portfolio increased its cash dividend by 8.4% in the past year,
about twice as much as the average company in the S&P 500 Index.
To maximize the efficiency of our research efforts, we will continue to
maintain a relatively concentrated portfolio. Our target for the year ahead is
to have the Fund's top 10 holdings represent about 35% of Devon Fund's net
assets and the top 20 stocks to represent slightly more than half of net assets.
Overall, we're comfortable with a portfolio of 50 to 70 stocks.
Many of the hundreds of growth and income mutual funds available to
investors today have a portfolio that is a clone of the S&P 500 Index, or a
barbell combination of growth and value stocks. A growth stock generally sells
at a high price (relative to earnings), reflecting high investor expectations. A
value stock sells at a lower price, reflecting lower expectations.
We strive to make Devon Fund different by trolling the waters between
growth and value investment styles. Many of the "fish" in our net are growing
into large fish while the rest are already big fish that others seem to
overlook. By exercising a consistent discipline and patience, we think we have
assembled a well-stocked portfolio that can benefit shareholders in stormy stock
market conditions.
(Photo of family on beach)
Devon Fund's
Stock Selection Strategy
Five Pillars of Growth and Value
o Strong Valuation: attractive earnings growth at discount prices
o Stability of Earnings: simple businesses/stable industries that may perform
well in a variety of market conditions
o Positive Cash Flow: substantial resources to reinvest in the business
o Dynamic Change: company expansion or acquisition
o Under-Researched: company not followed by many analysts, potential not yet
recognized by the market
<PAGE>
for total
return
7
A Symbol of Success
How Devon Fund Scanned For Growth and Value
Since the 1980s, bar codes have become ubiquitous in supermarkets and most other
retail markets. They reduce data entry errors at the cash register and
mislabeling in store aisles.
Symbol Technologies makes machines that scan bar codes. A couple of years ago
the New York company began making hand-held computers connected to networks and
databases. Today, these sophisticated systems track individual trades on the New
York Stock Exchange, monitor package deliveries and collect data from factory
floors.
In the winter of 1997, we thought Symbol Technologies had unappreciated
potential. Wall Street analysts valued the medium-size company as a cyclical
technology stock, an unfair label in our view. The company's stock sold at a
price/earnings ratio (P/E) that, at the time, was 10% less than the average of
stocks in the Standard & Poor's 500 Index (21x).
A Transition To
Higher Growth
But after evaluating Symbol's operations, we concluded that new opportunities -
such as a contract with the U.S. Postal Service to provide hand-held computers
for each letter carrier - would be a catalyst for strong earnings growth. We
also liked Symbol's growing list of partnerships with software and data
transmission companies.
The company had a market capitalization of about $1.4 billion, making it a
midcap stock. Symbol also had a beta - or historical stock price volatility -
that was 30% less than the S&P 500, unusual considering it is a technology
company, a sector that tends to be more volatile than other industries.
We believed the company's shares merited a price/earnings ratio higher than
the average P/E of stocks in the S&P 500, and began buying shares in early
January. Since then Symbol has reported sharply higher earnings and completed a
three-for-two stock split. As of late August, the company's P/E had climbed to a
20% premium compared to the S&P 500, which triggered our sell discipline, so we
began reducing our position. Its market capitalization had grown to $2.7
billion.
As you can see in the chart on page 3, Symbol was one of Devon Fund's top 10
holdings as of fiscal year's end. We still believe the company has further
potential even though the company's shares have appreciated more than 70% from
the Fund's average purchase price. As with all the Fund's holdings, we
continuously monitor Symbol's progress and share price to ascertain if the
company's stock still meets our investment parameters.
In the winter of 1997, we thought Symbol Technologies had unappreciated
potential.
Symbol Technologies Inc. (insert chart)
Stock Price and Price/Earnings Ratio 1997-1998
Stock Price Stock Price
High Low P/E
Jun. 97 $22.750 $21.172 24.455
Jul. 97 $23.328 $20.703 23.500
Aug. 97 $25.078 $20.078 26.909
Sep. 97 $29.828 $24.672 26.629
Oct. 97 $29.953 $24.422 24.091
Nov. 97 $26.953 $24.750 23.674
Dec. 97 $27.172 $24.000 21.328 Devon Fund Buys
Jan. 98 $30.172 $24.453 25.035
Feb. 98 $34.625 $29.250 28.849
Mar. 98 $35.078 $32.172 26.233
Apr. 98 $39.875 $32.500 30.800
May 98 $39.625 $33.969 28.150
Jun. 98 $38.125 $33.250 27.355
Jul. 98 $43.000 $35.500 29.982
Aug. 98 $51.688 $40.000 29.710
Sep. 98 $52.000 $39.500 34.208 Devon Fund Begins to Sell
Oct. 98 $50.250 $37.750 29.833
<PAGE>
for total
return
8
Performance Summary
Devon Fund's Long-Term Performance
Growth of a $10,000 Investment
December 29, 1993 to October 31, 1998
Devon Standard & Poor's Lipper Growth and Income
Fund A Class 500 Index Fund Average (310 funds)
- --------------------------------------------------------------------------------
Dec. 93 $ 9,425 $10,000 $10,000
Oct. 94 $10,297 $10,361 $10,196
Oct. 95 $12,560 $13,101 $12,281
Oct. 96 $15,592 $16,258 $14,960
Oct. 97 $20,600 $21,478 $19,188
Oct. 98 $24,638 $26,201 $20,974
Chart assumes $10,000 invested on December 29, 1993, and includes the effect of
the maximum 5.75% front-end sales charge and the reinvestment of all
distributions. Performance of other classes of Devon Fund will vary due to
differing charges and expenses. Effective November 2, 1998, the maximum sales
charge was raised from 4.75% to 5.75% for investments of less than $50,000. Past
performance does not guarantee future results.
Devon Fund Performance
- ------------------------------------------------------------------------------
Average Annual Total Returns Through October 31, 1998
Lifetime Three Years One Year
- ------------------------------------------------------------------------------
Class A (Est. 12/29/93)
Excluding Sales Charge +21.96% +25.18% +19.60%
Including Sales Charge +20.47% +22.72% +12.73%
- ------------------------------------------------------------------------------
Class B (Est. 9/6/94)
Excluding Sales Charge +22.43% +24.34% +18.76%
Including Sales Charge +22.17% +23.69% +13.76%
- ------------------------------------------------------------------------------
Class C (Est. 11/29/95)
Excluding Sales Charge +23.49% +18.71%
Including Sales Charge +23.49% +17.71%
Return and share value fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Past performance is not a guarantee of
future results. Returns reflect reinvestment of distributions and sales charges
as noted below. Lifetime performance excluding sales charge for B and C Classes
assumes either the investment was not redeemed or contingent sales charges did
not apply. Voluntary fee limitations were in effect for the time periods shown.
Returns would have been lower without the limitations.
Class A shares have a 5.75% maximum front-end sales charge and a 12b-1 fee.
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 5% 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.
Average annual total returns for Devon Fund's Institutional Class, available
without sales or asset-based distribution charges only to certain eligible
institutional accounts, were +22.32%, +25.57% and +19.89% for the lifetime,
three-year and one-year periods ended October 31, 1998, respectively.
<PAGE>
for total return 9
Financial Statements
Delaware Group Equity Funds I, Inc. -
Devon Fund
Statement of Net Assets
October 31, 1998
- --------------------------------------------------------------------------------
Number of Market
Shares Value
---------------------------
COMMON STOCK - 90.41%
AEROSPACE & DEFENSE - 0.45%
GenCorp ........................................... 47,100 $ 1,042,088
-----------
1,042,088
-----------
AUTOMOBILES & AUTO PARTS - 1.74%
Danaher ........................................... 101,900 4,069,631
-----------
4,069,631
-----------
BANKING, FINANCE & INSURANCE - 15.56%
American International Group ...................... 44,950 3,831,988
Chubb ............................................. 23,100 1,420,650
Equifax ........................................... 215,600 8,341,025
Federal Home Loan Mortgage ........................ 214,600 12,339,500
Federal National Mortgage Association ............. 41,400 2,931,638
Mercury General ................................... 41,800 1,776,500
Nationwide Financial Services-A ................... 42,700 1,772,050
*Unum .............................................. 90,400 4,017,150
-----------
36,430,501
-----------
BUILDINGS & MATERIALS - 4.20%
*Masco ............................................. 287,800 8,112,363
Premark International ............................. 54,000 1,711,125
-----------
9,823,488
-----------
CABLE, MEDIA & PUBLISHING - 0.85%
Wallace Computer Services ......................... 90,700 1,984,063
-----------
1,984,063
-----------
CHEMICALS - 6.08%
Crompton & Knowles ................................ 88,600 1,423,138
Ecolab ............................................ 280,200 8,370,975
Hercules .......................................... 33,700 1,122,631
*Valspar ........................................... 117,900 3,308,568
-----------
14,225,312
-----------
COMPUTERS & TECHNOLOGY - 4.88%
Hewlett-Packard ................................... 146,700 8,829,506
SunGard Data Systems .............................. 77,100 2,602,125
-----------
11,431,631
-----------
ELECTRONICS & ELECTRICAL - 5.12%
Intel ............................................. 38,400 3,426,000
Symbol Technologies ............................... 138,600 6,202,350
Teleflex .......................................... 61,200 2,367,675
-----------
11,996,025
-----------
ENERGY - 2.65%
Amoco ............................................. 59,500 3,339,438
Compagnie Francaise de Petroleum .................. 48,900 2,860,650
-----------
6,200,088
-----------
<PAGE>
for total return 9
- --------------------------------------------------------------------------------
Number of Market
Shares Value
---------------------------
COMMON STOCK (Continued)
FOOD, BEVERAGE & TOBACCO - 7.53%
Campbell Soup ..................................... 53,600 $2,857,550
*ConAgra ........................................... 83,800 2,550,663
Hannaford Brothers ................................ 51,400 2,251,963
Philip Morris ..................................... 96,400 4,928,450
Ralston-Purina Group .............................. 64,700 2,159,363
*Universal Foods ................................... 132,900 2,882,268
-----------
17,630,257
-----------
HEALTHCARE & PHARMACEUTICALS - 13.22%
AFLAC ............................................. 159,200 6,069,500
American Home Products ............................ 150,900 7,356,375
Johnson & Johnson ................................. 51,400 4,189,100
*Mylan Laboratories ................................ 83,300 2,868,643
Tyco International ................................ 135,500 8,392,531
Zeneca Group ...................................... 52,800 2,059,200
-----------
30,935,349
-----------
REAL ESTATE - 1.73%
CarrAmerica Realty ................................ 29,500 663,750
*Developers Diversified Realty ..................... 43,400 819,175
Nationwide Health Properties ...................... 39,300 906,356
*Storage USA ....................................... 24,100 733,543
Sun Communities ................................... 27,400 916,188
-----------
4,039,012
-----------
RETAIL - 7.89%
Food Lion-Class A ................................. 165,000 1,809,844
*Intimate Brands ................................... 218,700 4,893,413
May Department Stores ............................. 22,900 1,396,900
*Rite Aid .......................................... 261,000 10,358,437
-----------
18,458,594
-----------
TELECOMMUNICATIONS - 4.08%
ALLTEL ............................................ 49,100 2,298,494
Ericsson (LM) Telefonaktiebolaget ................. 82,300 1,864,609
SBC Communications ................................ 116,400 5,390,775
-----------
9,553,878
-----------
TEXTILES, APPAREL & FURNITURE - 4.63%
HON Industries .................................... 162,400 3,440,850
Hillenbrand Industries ............................ 71,600 4,237,825
Miller (Herman) ................................... 54,300 1,199,690
*Newell ............................................ 44,700 1,966,800
-----------
10,845,165
-----------
UTILITIES - 1.43%
CMS Energy ........................................ 31,200 1,374,750
Edison International .............................. 32,400 854,550
PacifiCorp ........................................ 58,500 1,115,156
-----------
3,344,456
-----------
<PAGE>
for total return 10
Statement of Net Assets (Continued)
- --------------------------------------------------------------------------------
Number of Market
Shares Value
---------------------------
COMMON STOCK (Continued)
MISCELLANEOUS - 8.37%
Federal Signal .................................... 233,000 $5,606,563
Pentair ........................................... 40,200 1,512,525
Service Corp. International ....................... 171,000 6,091,875
*Stewart Enterprises ............................... 277,100 6,381,959
-----------
19,592,922
-----------
Total Common Stock (cost $185,018,204) 211,602,460
-----------
CONVERTIBLE PREFERRED STOCKS - 1.22%
Freeport-McMoRan Copper & Gold .................... 45,400 675,325
Sealed Air ........................................ 54,685 2,180,564
-----------
Total Convertible Preferred Stocks
(cost $3,297,354) ............................... 2,855,889
-----------
Principal
Amount
---------
REPURCHASE AGREEMENTS - 8.54%
With Chase Manhattan 5.30% 11/2/98 (dated
10/30/98, collateralized by $6,642,000
U.S. Treasury Notes 5.75% due 10/31/02,
market value $7,171,975) ........................ $7,024,000 7,024,000
With J.P. Morgan 5.25% 11/2/98 (dated
10/30/98, collateralized by $2,221,000
U.S. Treasury Notes 5.25% due 1/31/01,
market value $2,296,911 and $1,727,000
U.S. Treasury Notes 5.50% due 2/28/03,
market value $1,821,102 and $232,000
U.S. Treasury Notes 5.625% due 11/30/00,
market value $243,632 and $2,035,000
U.S. Treasury Notes 6.25% due 1/31/02,
market value $2,185,977) ........................ 6,416,000 6,416,000
With PaineWebber 5.30% 11/2/98 (dated 10/30/98,
collateralized by $2,468,000
U.S. Treasury Notes 5.625% due 5/15/01,
market value $2,617,770 and $2,122,000
U.S. Treasury Notes 6.50% due 8/31/01,
market value $2,272,372 and $1,592,000
U.S. Treasury Notes 7.50% due 5/5/02,
market value $1,819,267) ........................ 6,564,000 6,564,000
-----------
Total Repurchase Agreements
(cost $20,004,000) .............................. 20,004,000
-----------
<PAGE>
- --------------------------------------------------------------------------------
TOTAL MARKET VALUE OF SECURITIES OWNED
(cost $208,319,558) - 100.17% .............................. $234,462,349
LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS - (0.17%) ..... (406,836)
------------
NET ASSETS APPLICABLE TO 11,679,281 SHARES ($1 PAR VALUE)
OUTSTANDING - 100.00% ...................................... $234,055,513
============
NET ASSET VALUE - DEVON FUND A CLASS
($120,506,379 / 5,998,714 SHARES) .......................... $20.09
======
NET ASSET VALUE - DEVON FUND B CLASS
($82,927,066 / 4,151,088 SHARES) ........................... $19.98
======
NET ASSET VALUE - DEVON FUND C CLASS
($20,140,558 / 1,009,093 SHARES) ........................... $19.96
======
NET ASSET VALUE - DEVON FUND INSTITUTIONAL CLASS
($10,481,510 / 520,386 SHARES) ............................. $20.14
======
- ------------------
*Security on loan.
COMPONENTS OF NET ASSETS AT OCTOBER 31, 1998:
Common stock, $1 par value, 125,000,000 shares
authorized to the Devon Fund ............................... $205,330,155
Undistributed net investment income ........................... 95,710
Accumulated net realized gain on investments .................. 2,486,857
Net unrealized appreciation of investments .................... 26,142,791
------------
Total net assets .............................................. $234,055,513
============
NET ASSET VALUE AND OFFERING PRICE PER SHARE - DEVON FUND A CLASS
Net Asset value per share (A) ................................. $20.09
Sales charge (4.75% of offering price or 4.98% of the amount
invested per share) (B) .................................... 1.00
------
Offering price $21.09
======
- -----------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See How to Buy Shares in the current Prospectus for purchases of $50,000 or
more. See Notes to Financial Statements for change in front-end sales charge
effective November 2, 1998.
See accompanying notes
<PAGE>
Delaware Group Equity Funds I, Inc. -
Devon Fund
Statement of Operations
Year ended October 31, 1998
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $2,420,599
Interest 640,387 $ 3,060,986
----------
Expenses:
Management fees ..................................... 951,036
Distribution expense ................................ 925,200
Dividend disbursing and transfer agent fees
and expenses ..................................... 641,319
Accounting and administration ....................... 62,347
Registration fees ................................... 50,350
Reports and statements to shareholders .............. 17,622
Professional fees ................................... 15,699
Directors' fees ..................................... 5,470
Taxes (other than taxes on income) .................. 2,270
Custodian fees ...................................... 1,307
Other ............................................... 3,559 2,676,179
---------- -----------
Less expenses absorbed by Delaware
Management Company ............................... (178,141)
------------
Total Expenses ...................................... 2,498,038
------------
NET INVESTMENT INCOME ............................... 562,948
------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments .................... 3,276,905
Net change in unrealized appreciation/depreciation
of investments ................................... 16,771,911
------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS .............................. 20,048,816
------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ........................ $20,611,764
===========
See accompanying notes
<PAGE>
for total return 11
Delaware Group Equity Funds I, Inc. -
Devon Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
Year ended Year ended
10/31/98 10/31/97
--------------------------
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income .............................. $ 562,948 $ 488,121
Net realized gain on investments ................... 3,276,905 5,746,895
Net change in unrealized appreciation/depreciation
of investments .................................. 16,771,911 6,227,315
----------- -----------
Net increase in net assets resulting
from operations ................................. 20,611,764 12,462,331
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class ......................................... (433,936) (362,273)
B Class ......................................... (17,778) (55,613)
C Class ......................................... (3,847) (11,501)
Institutional Class ............................. (71,629) (70,878)
Net realized gain on investments:
A Class ......................................... (3,129,258) (1,104,351)
B Class ......................................... (1,831,176) (264,305)
C Class ......................................... (396,243) (82,511)
Institutional Class ............................. (354,447) (216,937)
----------- -----------
(6,238,314) (2,168,369)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class ......................................... 82,073,340 38,641,388
B Class ......................................... 54,410,257 22,994,757
C Class ......................................... 15,601,378 4,650,415
Institutional Class ............................. 9,761,534 3,219,483
Net asset value of shares issued upon
reinvestment of distributions from net investment
income and net realized gain on investments:
A Class ......................................... 3,453,528 1,427,106
B Class ......................................... 1,765,306 309,109
C Class ......................................... 390,720 90,323
Institutional Class ............................. 426,047 287,815
----------- -----------
167,882,110 71,620,396
----------- -----------
Cost of shares repurchased:
A Class ......................................... (22,386,795) (11,875,438)
B Class ......................................... (6,501,980) (689,717)
C Class ......................................... (2,650,180) (354,298)
Institutional Class ............................. (6,304,878) (2,002,961)
----------- -----------
(37,843,833) (14,922,414)
----------- -----------
Increase in net assets derived from capital
share transactions .............................. 130,038,277 56,697,982
----------- -----------
NET INCREASE IN NET ASSETS ......................... 144,411,727 66,991,944
NET ASSETS:
Beginning of year .................................. 89,643,786 22,651,842
----------- -----------
End of year ........................................ $234,055,513 $89,643,786
============ ===========
See accompanying notes
<PAGE>
for total return 12
Delaware Group Equity Funds I, Inc. -
Devon Fund
Financial Highlights
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were as follows:
Devon Fund A Class
-------------------------------------------------------------------
Year Year Year Year 12/29/93(1)
ended ended ended Ended to
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....................... $17.860 $14.610 $12.550 $10.830 $10.000
Income from investment operations:
Net investment income ................................... 0.121 0.182 0.216 0.207(2) 0.136
Net realized and unrealized gain on investments ......... 3.249 4.243 2.689 2.053 0.784
-------- ------- ------- ------- -------
Total from investment operations ........................ 3.370 4.425 2.905 2.260 0.920
-------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income .................... (0.110) (0.210) (0.205) (0.220) (0.090)
Distributions from net realized gain on investments ..... (1.030) (0.965) (0.640) (0.320) --
-------- ------- ------- ------- -------
Total dividends and distributions ....................... (1.140) (1.175) (0.845) (0.540) (0.090)
-------- ------- ------- ------- -------
Net asset value, end of period ............................. $20.090 $17.860 $14.610 $12.550 $10.830
======== ======= ======= ======= =======
Total return(3)............................................. 19.60% 32.11% 24.14% 21.98% 11.09%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $120,506 $49,262 $14,907 $ 8,846 $ 4,600
Ratio of expenses to average net assets ................. 1.30% 1.25% 1.25% 1.25% 1.25%
Ratio of expenses to average net assets prior to expense
limitation ............................................ 1.40% 1.42% 1.84% 2.29% 3.26%
Ratio of net investment income to average net assets .... 0.64% 1.14% 1.67% 1.82% 1.96%
Ratio of net investment income (loss) to average net
assets prior to expense limitation .................... 0.54% 0.97% 1.08% 0.78% (0.05%)
Portfolio turnover ...................................... 39% 64% 80% 99% 180%
- -------------------------
(1) Date of initial public offering; ratios and total return have been annualized.
(2) 1995 per share information was based on the average shares outstanding method.
(3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of
distributions at net asset value and does not reflect the impact of a sales charge.
</TABLE>
See accompanying notes
<PAGE>
for total return 13
Financial Highlights (Continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were as follows:
Devon Fund B Class
----------------------------------------------------------------
Year Year Year Year 9/6/94(1)
ended ended ended ended to
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......................... $17.800 $14.540 $12.500 $10.820 $10.900
Income from investment operations:
Net investment income (loss) .............................. (0.003) 0.081 0.136 0.127(2) 0.027
Net realized and unrealized gain (loss) on investments .... 3.223 4.219 2.664 2.053 (0.077)
------- ------- ------- ------- -------
Total from investment operations .......................... 3.220 4.300 2.800 2.180 (0.050)
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ...................... (0.010) (0.075) (0.120) (0.180) (0.030)
Distributions from net realized gain on investments ....... (1.030) (0.965) (0.640) (0.320) --
------- ------- ------- ------- -------
Total dividends and distributions ......................... (1.040) (1.040) (0.760) (0.500) (0.030)
------- ------- ------- ------- -------
Net asset value, end of period ............................... $19.980 $17.800 $14.540 $12.500 $10.820
======= ======= ======= ======= =======
Total return(3) .............................................. 18.76% 31.21% 23.38% 21.09% (0.46%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................... $82,927 $28,757 $3,399 $863 $115
Ratio of expenses to average net assets ................... 2.00% 1.95% 1.95% 1.95% 1.95%
Ratio of expenses to average net assets
prior to expense limitation ............................ 2.10% 2.12% 2.54% 2.99% 3.96%
Ratio of net investment income (loss) to average net assets (0.06%) 0.44% 0.97% 1.12% 1.26%
Ratio of net investment income (loss) to average net assets
prior to expense limitation ............................ (0.16%) 0.27% 0.38% 0.08% (0.75%)
Portfolio turnover ........................................ 39% 64% 80% 99% 180%
</TABLE>
STUB
<TABLE>
<CAPTION>
Devon Fund C Class
---------------------------------------
Year Year 11/29/95(1)
ended ended to
10/31/98 10/31/97 10/31/96
<S> <C> <C> <C>
Net asset value, beginning of period ......................... $17.790 $14.530 $13.020
Income from investment operations:
Net investment income (loss) .............................. 0.002 0.071 0.188
Net realized and unrealized gain (loss) on investments .... 3.208 4.229 2.157
------- ------- -------
Total from investment operations .......................... 3.210 4.300 2.345
------- ------- -------
Less dividends and distributions:
Dividends from net investment income ...................... (0.010) (0.075) (0.195)
Distributions from net realized gain on investments ....... (1.030) (0.965) (0.640)
------- ------- -------
Total dividends and distributions ......................... (1.040) (1.040) (0.835)
------- ------- -------
Net asset value, end of period ............................... $19.960 $17.790 $14.530
======= ======= =======
Total return(3) .............................................. 18.71% 31.24% 18.94%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................... $20,141 $5,876 $1,056
Ratio of expenses to average net assets ................... 2.00% 1.95% 1.95%
Ratio of expenses to average net assets prior to
expense limitation ..................................... 2.10% 2.12% 2.54%
Ratio of net investment income (loss) to average net assets (0.06%) 0.44% 0.97%
Ratio of net investment income (loss) to average net assets
prior to expense limitation ............................ (0.16%) 0.27% 0.38%
Portfolio turnover ........................................ 39% 64% 80%
- -------------------------
(1) Date of initial public offering; ratios have been annualized and total return has not been annualized.
(2) 1995 per share information was based on the average shares outstanding method.
(3) Total investment return is based on the change in net asset value of a share during the period and assumes
reinvestment of distributions at net asset value and does not reflect the impact of a sales charge.
</TABLE>
See accompanying notes
<PAGE>
for total return 14
Financial Highlights (Continued)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were as follows:
Devon Fund Institutional Class
--------------------------------------------------------------
Year Year Year Year 12/29/93(1)
ended ended ended ended to
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $17.930 $14.670 $12.590 $10.860 $10.000
Income from investment operations:
Net investment income .................................. 0.134 0.211 0.267 0.241(2) 0.201
Net realized and unrealized gain on investments ........ 3.281 4.284 2.693 2.049 0.749
------- ------- ------- ------- -------
Total from investment operations ....................... 3.415 4.495 2.960 2.290 0.950
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ................... (0.175) (0.270) (0.240) (0.240) (0.090)
Distributions from net realized gain on investments .... (1.030) (0.965) (0.640) (0.320) --
------- ------- ------- ------- -------
Total dividends and distributions ...................... (1.205) (1.235) (0.880) (0.560) (0.090)
------- ------- ------- ------- -------
Net asset value, end of period ............................ $20.140 $17.930 $14.670 $12.590 $10.860
======= ======= ======= ======= =======
Total return .............................................. 19.89% 32.57% 24.56% 22.26% 11.45%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $10,482 $5,749 $3,290 $2,870 $2,516
Ratio of expenses to average net assets ................ 1.00% 0.95% 0.95% 0.95% 0.95%
Ratio of expenses to average net assets prior to expense
limitation ........................................... 1.10% 1.12% 1.54% 1.99% 2.96%
Ratio of net investment income to average net assets ... 0.94% 1.44% 1.97% 2.12% 2.26%
Ratio of net investment income to average net assets
prior to expense limitation .......................... 0.84% 1.27% 1.38% 1.08% 0.25%
Portfolio turnover ..................................... 39% 64% 80% 99% 180%
- -------------------------
(1) Date of initial public offering; ratios and total return have been annualized.
(2) 1995 per share information was based on the average shares outstanding method.
</TABLE>
See accompanying notes
<PAGE>
Delaware Group Equity Funds I, Inc. -
Devon Fund
Notes to Financial Statements
October 31, 1998
- --------------------------------------------------------------------------------
Delaware Group Equity Funds I, Inc. - Devon Fund (the "Fund") is registered as a
diversified open-end investment company under the Investment Company Act of
1940, as amended. The Fund is organized as a Maryland Corporation and offers
four classes of shares. The Devon Fund A Class carries a front-end sales charge,
which was raised from 4.75% to 5.75% effective November 2, 1998. The Devon Fund
B Class carries a back-end sales charge. The Devon Fund C Class carries a level
load deferred sales charge and Devon Fund Institutional Class has no sales
charge. The Fund's objective is to seek capital appreciation and current income.
1. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Fund.
Security Valuation - Securities listed on an exchange are valued at the last
quoted sales price as of the close of the NYSE on the valuation date. Securities
not traded or securities not listed on an exchange are valued at the mean of the
last quoted bid and asked prices. Money market instruments having less than 60
days to maturity are valued at amortized cost, which approximates market value.
Other securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Fund's Board of Directors.
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 Investments Family 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.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Other - Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are
<PAGE>
for total return 15
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. The Fund declares and pays dividends from net investment income
quarterly, and from capital gains, if any, annually.
Certain expenses of the Fund 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.
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware Management Company (DMC), the Investment Manager of the Fund, an
annual fee which is calculated daily at the rate of 0.60% on the first $500
million of average daily net assets of the Fund and 0.50% on the average daily
net assets over $500 million. At October 31, 1998, the Fund had a liability for
Investment Management fees and other expenses payable to DMC of $47,754.
DMC has elected to waive the portion, if any, of the management fee and
reimburse the Fund to the extent that annual operating expenses, exclusive of
taxes, interest, brokerage commissions, distribution fees, and extraordinary
expenses, exceed 1.00% of average daily net assets of the Fund through December
31, 1998.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of DMC,
to provide dividend disbursing, transfer agent and accounting and administration
services. The Fund pays DSC a monthly fee based on the number of shareholder
accounts, shareholder transactions and average net assets, subject to certain
minimums. At October 31, 1998, the Fund had a liability for such fees and other
expenses payable to DSC of $81,725.
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 Classes. No distribution expenses are
paid by the Institutional Class.
For the year ended October 31, 1998, DDLP earned $208,898 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, 1998, the Fund made purchases of $163,518,968
and sales of $57,635,170 of investment securities other than U.S. government
securities and temporary cash investments.
At October 31, 1998, unrealized appreciation for federal income tax purposes
aggregated $26,132,689 of which $30,808,466 related to unrealized appreciation
of securities and $4,675,777 related to unrealized depreciation of securities.
At October 31, 1998, the aggregate cost of securities for federal income tax
purposes was $208,329,660.
<PAGE>
for total return 16
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
4. Capital Stock
Transactions in capital stock shares were as follows:
Year Ended Year Ended
10/31/98 10/31/97
---------- ----------
Shares sold:
A Class 4,207,557 2,349,807
B Class 2,771,835 1,401,315
C Class 795,063 272,642
Institutional Class 497,905 197,224
Shares issued upon reinvestment of distributions
from net investment income and net realized
gain on investments:
A Class 190,783 96,188
B Class 98,407 20,945
C Class 21,804 6,167
Institutional Class 23,450 19,481
--------- ---------
8,606,804 4,363,769
--------- ---------
Shares repurchased:
A Class (1,157,460) (708,508)
B Class (334,582) (40,605)
C Class (138,159) (21,081)
Institutional Class (321,665) (120,222)
--------- ---------
(1,951,866) (890,416)
--------- ---------
Net Increase 6,654,938 3,473,353
========= =========
5. Lines of Credit
The Fund has a committed line of credit for $3.3 million. No amount was
outstanding at October 31, 1998, or at any time during the fiscal year.
6. Securities Lending
Security loans for the Fund are required at all times to be secured by U.S.
Treasury obligations and/or cash 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 the 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, 1998 were $24,601,055 and $25,093,076, respectively.
<PAGE>
- --------------------------------------------------------------------------------
Delaware Group Equity Funds I, Inc. - Devon Fund
Report of Independent Auditors
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors
Delaware Group Equity Funds I, Inc. - Devon Fund
We have audited the accompanying statement of net assets of Delaware Group
Equity Funds I, Inc. - Devon Fund (the "Fund") as of October 31, 1998, and the
related statement of operations for the year then ended, the statements 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, 1998, by correspondence 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. - Devon Fund at October 31, 1998, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and its financial highlights
for each of the periods indicated therein, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
-----------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
December 4, 1998
<PAGE>
This annual report is for the information of Devon Fund shareholders, but it may
be used with prospective investors when preceded or accompanied by a current
Prospectus for Devon Fund, which sets forth details about charges, expenses,
investment objectives and operating policies of the Fund. You should read the
prospectus carefully before you invest or send money. 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 Affiliated Officers
WAYNE A. STORK David K. Downes
Chairman Executive Vice President,
Delaware Investments Family of Funds Chief Financial Officer
Philadelphia, PA and Chief Operating Officer
Delaware Investments Family of Funds
JEFFREY J. NICK Philadelphia, PA
President and Chief Executive Officer
Delaware Investments Family of Funds George M. Chamberlain, Jr.
Philadelphia, PA Senior Vice President, Secretary
and General Counsel
WALTER P. BABICH Delaware Investments Family of Funds
Board Chairman, Citadel Constructors, Inc. Philadelphia, PA
King of Prussia, PA
Bruce D. Barton
JOHN H. DURHAM President and Chief Executive Officer
Partner, Complete Care Services Delaware Distributors, L.P.
Horsham, PA Philadelphia, PA
ANTHONY D. KNERR
Consultant, Anthony Knerr & Associates
New York, NY [Photo of globes]
ANN R. LEVEN
Treasurer, National Gallery of Art
Washington, DC directors
& officers
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
INVESTMENT MANAGER
Delaware Management Company
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>
(photo of globes)
When used with prospective investors, this report must be preceded or
accompanied by a current Devon Fund Prospectus and the Delaware Investments
Performance Update for the most recently completed calendar quarter. For a
prospectus of any other mutual fund from Delaware Investments, contact your
financial adviser or Delaware Investments.
For Shareholders
1.800.523.1918
For Securities Dealers
1.800.362.7500
For Financial Institutions
Representatives Only
1.800.659.2265
www.delawarefunds.com
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.
(C) Delaware Distributors, L.P.
Printed in the USA
on recycled paper
(1251)
AR-039[10/98]TKO12/98
DELAWARE
INVESTMENTS
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Philadelphia * London
