DELAWARE FUND PROSPECTUS
INSTITUTIONAL CLASS SHARES DECEMBER 30, 1997
1818 Market Street, Philadelphia, PA 19103
For more information about the Delaware Fund Institutional Class
call Delaware Group at 800-828-5052.
This Prospectus describes shares of the Delaware Fund series
(the"Fund") of Delaware Group Equity Funds I, Inc. ("Equity Funds I,
Inc."), a professionally-managed mutual fund of the series type. The
Fund's investment objective is to seek a balance of capital
appreciation, income and preservation of capital.
The Fund currently offers one institutional class: Delaware Fund
Institutional Class (the "Class").
This Prospectus relates only to the Class and sets forth
information that you should read and consider before you invest.
Please retain it for future reference. The Fund's Statement of
Additional Information ("Part B" of Equity Funds I, Inc.'s
registration statement), dated December 30, 1997, as it may be
amended from time to time, contains additional information about the
Fund and has been filed with the Securities and Exchange Commission
(the "SEC"). Part B is incorporated by reference into this Prospectus
and is available, without charge, by writing to Delaware
Distributors, L.P. at the above address or by calling the above
number. The Fund's financial statements appear in its Annual Report,
which will accompany any response to requests for Part B. The SEC
also maintains a Web site (http://www.sec.gov) that contains Part B,
material we incorporated by reference, and other information
regarding registrants that electronically file with the SEC.
The Fund also offers Delaware Fund A Class, Delaware Fund B
Class and Delaware Fund C Class. Shares of these classes are subject
to sales charges and other expenses, which may affect their
performance. A prospectus for these classes can be obtained by
writing to Delaware Distributors, L.P. at the above address or by
calling 800-523-4640.
TABLE OF CONTENTS
Cover Page
Synopsis
Summary of Expenses
Financial Highlights
Investment Objective and
Policies
Suitability
Investment Strategy
Classes of Shares
How to Buy Shares
Redemption and Exchange
Dividends and Distributions
Taxes
Calculation of Net Asset Value Per Share
Management of the Fund
Other Investment Policies and
Risk Considerations
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS.
MUTUAL FUNDS CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN;
HOWEVER, SHARES OF THE FUND ARE NOT FDIC OR NCUSIF INSURED, ARE NOT
GUARANTEED BY ANY BANK OR ANY CREDIT UNION, ARE NOT OBLIGATIONS OF
ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. SHARES
OF THE FUND ARE NOT BANK OR CREDIT UNION DEPOSITS.
SYNOPSIS
Investment Objective
The investment objective of the Fund is to seek a balance of
capital appreciation, income and preservation of capital. For
further details, see Investment Objective and Policies and Other
Investment Policies and Risk Considerations.
Risk Factors and Special Considerations
The Fund typically invests a portion of its assets in mortgaged-
backed and asset-backed securities (commonly considered to be
"derivative securities"), which may present greater risks than other
types of portfolio securities, and the investor should review the
descriptions of these risks in this Prospectus. See Mortgaged-Backed
Securities and Asset-Backed Securities under Other Investment Policies and
Risk Considerations.
Investment Manager, Distributor and Service Agent
Delaware Management Company, Inc. (the "Manager") furnishes
investment management services to the Fund, subject to the
supervision and direction of Equity Funds I, Inc.'s Board of
Directors. The Manager also provides investment management services
to certain other funds in the Delaware Group. Delaware Distributors,
L.P. (the "Distributor") is the national distributor for the Fund and
for all of the other mutual funds in the Delaware Group. Delaware
Service Company, Inc. (the "Transfer Agent") is the shareholder
servicing, dividend disbursing, accounting services and transfer
agent for the Fund and for all of the other mutual funds in the
Delaware Group. See Summary of Expenses and Management of the Fund for
further information regarding the Manager and the fees payable under
the Fund's Investment Management Agreement.
Purchase Price
Shares of the Class offered by this Prospectus are available at
net asset value, without a front-end or contingent deferred sales
charge and are not subject to distribution fees under a Rule 12b-1
distribution plan. See Classes of Shares.
Redemption and Exchange
Shares of the Class are redeemed or exchanged at the net asset
value calculated after receipt of the redemption or exchange request.
See Redemption and Exchange.
Open-End Investment Company
Equity Funds I, Inc. is an open-end management investment
company. The Fund's portfolio of assets is diversified as defined by
the Investment Company Act of 1940 (the "1940 Act"). Equity Funds I,
Inc. was first organized as a Delaware corporation in 1937 and
subsequently reorganized as a Maryland corporation on March 4, 1983.
See Shares under Management of the Fund.
SUMMARY OF EXPENSES
Shareholder Transaction Expenses
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) . . . . . . . . . . . . .None
Maximum Sales Charge Imposed
on Reinvested Dividends
(as a percentage of offering price) . . . . . . . . . . . . . None
Exchange Fees. . . . . . . . . . . . . . . . . . . . . . . . None*
*Exchanges are subject to the requirements of each fund and
a front-end sales charge may apply.
Annual Operating Expenses
(as a percentage of average daily net assets)
Management Fees. . . . . . . . . . . . 0.51%
12b-1 Fees . . . . . . . . . . . . . . None
Other Operating Expenses . . . . . . . 0.27%
Total Operating Expenses. . . . . 0.78%
For expense information about Delaware Fund A Class, Delaware
Fund B Class and Delaware Fund C Class, see the separate prospectus
relating to those classes.
The following example illustrates the expenses that an investor
would pay on a $1,000 investment over various time periods, assuming
(1) a 5% annual rate of return, and (2) redemption at the end of each
time period. As noted in the tables above, Equity Funds I, Inc.
charges no redemption fees.
1 year 3 years 5 years 10 years
$8 $25 $43 $97
This example should not be considered a representation of past or
future expenses or performance. Actual expenses may be greater or
less than those shown.
The purpose of the above tables is to assist the investor in
understanding the various costs and expenses that an investor in the
Class will bear directly or indirectly.
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial
statements of Delaware Fund of Delaware Group Equity Funds I, Inc.
and have been audited by Ernst & Young LLP, independent auditors.
The data should be read in conjunction with the financial statements,
related notes, and the reports of Ernst & Young LLP covering such
financial information and highlights, all of which are incorporated
by reference into Part B. Further information about the Fund's
performance is contained in its Annual Report to shareholders. A copy
of the Fund's Annual Report (including the report of Ernst & Young
LLP) may be obtained from Equity Funds I, Inc. upon request at no
charge.
DF-IC-CHT
Delaware Fund Institutional Class
Period
11/9/92(2)
Year Ended through
10/31/97(2) 10/31/96(2) 10/31/95(2) 10/31/94(2) 10/31/93
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 Gains (Losses) on
Securities (both
realized and
unrealized)......... 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 Distributions
Dividends (from net
investment income)... (0.720) (0.690) (0.660) (0.630) (0.660)
Distributions (from
capital gains)....... (1.920) (1.080) (0.250) (1.160) (0.770)
Total 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%
_____________
Period
11/9/92(2)
Year Ended through
10/31/97(2) 10/31/96(2) 10/31/95(2) 10/31/94(2) 10/31/93
Ratios/Supplemental Data
Net Assets,End of Period
(000's omitted)..... $153,176 $125,751 $108,747 $93,990 $72,052
Ratio of Expenses to
Average Daily
Net Assets......... 0.78% 0.80% 0.79% 0.81% 0.77%
Ratio of Net Investment
Income to Average Daily
Net Assets......... 3.00% 3.58% 3.73% 3.47% 3.39%
Portfolio Turnover
Rate................ 81% 92% 94% 142% 160%
Average Commission
Rate Paid(4)...... $0.060 $0.060 N/A N/A N/A
Year Ended
10/31/93(1) 10/31/92(1) 10/31/91(1) 10/31/90(1) 10/31/89(1) 10/31/88(1)
Net Asset Value,
Beginning of Period..$18.720 $18.810 $16.190 $17.480 $15.250 $16.850
Income from Investment
Operations
Net Investment Income..0.631 0.660 0.757 0.856 0.796 0.551
Net Gains (Losses) on
Securities (both
realized and
unrealized)......... 1.509 1.490 3.033 (1.366) 2.384 2.259
Total From Investment
Operations...........2.140 2.150 3.790 (0.510) 3.180 2.810
Less Distributions
Dividends (from net
investment income)...(0.660) (0.700) (0.880) (0.780) (0.950) (0.320)
Distributions (from
capital gains)...... (0.770) (1.540) (0.290) none none (4.090)
Total Distributions... (1.430) (2.240) (1.170) (0.780) (0.950) (4.410)
Net Asset Value,
End of Period........ $19.430 $18.720 $18.810 $16.190 $17.480 $15.250
_____________
Total Return.......11.91%(3) 12.37%(3) 24.32%(3) (3.17%)(3) 21.66%(3) 22.03%(3)
_____________
Ratios/Supplemental Data
Net Assets, End of Period
(000s omitted).... $507,528 $487,343 $453,449 $349,873 $361,625 $328,650
Year Ended
10/31/93(1) 10/31/92(1) 10/31/91(1) 10/31/90(1) 10/31/89(1) 10/31/88(1)
Ratio of Expenses to
Average Daily
Net Assets...... 0.89% 0.79% 0.71% 0.75% 0.76% 0.77%
Ratio of Net Investment
Income to Average
Daily Net Assets..3.27% 3.64% 4.29% 4.99% 4.73% 4.01%
Portfolio Turnover
Rate............. 160% 144% 212% 147% 129% 180%
Average Commission
Rate Paid(4).......N/A N/A N/A N/A N/A N/A
(1) Data are derived from data of Delaware Fund A Class which was subject to
12b-1 distribution expenses effective June 1, 1992.
(2) Data are derived from Delaware Fund Institutional Class shares, which
commenced operations on November 9, 1992. Ratios and total return have been
annualized.
(3) Does not reflect the maximum sales charge that is or was in effect nor
the 1% limited contingent deferred sales charge that would apply in the
event of certain redemptions within 12 months of purchase for Delaware Fund
A Class.
(4) 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.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek a balance of capital
appreciation, income and preservation of capital.
Although the Fund will constantly strive to attain its investment objective,
there can be no assurance that it will be obtained. The objective of each Fund
cannot be changed without shareholder approval.
SUITABILITY
The Fund may be suitable for investors interested in long-term capital
appreciation. The Fund may also be suitable for investors wishing to expose a
portion of their assets to fixed-income securities. Investors in the Fund
should be willing to accept the risks associated with investments in equity
securities as well as the risks associated with investments in fixed-income
securities. Net asset values may fluctuate in response to market conditions
and, as a result, the Fund is not appropriate for a short-term investor.
Ownership of Fund shares can reduce the bookkeeping and administrative
inconvenience that is typically connected with direct purchases of the type of
securities in which the Fund invests.
An investor should not consider a purchase of Fund shares as equivalent to a
complete investment program. The Delaware Group includes a family of funds,
generally available through registered investment dealers, which may be used
together to create a more complete investment program.
INVESTMENT STRATEGY
As a "balanced" fund, the Fund will generally invest at least 25% of its
assets in fixed-income securities, including U.S. government securities and
corporate bonds. The remainder of the Fund will be allocated to equity
securities principally, including convertible securities, and also to cash and
cash equivalents. A portion of the Fund's investment in certain convertible
securities may be deemed fixed-income in nature for purposes of this 25% fixed-
income allocation. The Fund may also invest in foreign securities.
The Fund uses a dividend-oriented valuation strategy to select individual
securities in which it will invest. In seeking capital appreciation, the Fund
invests primarily in common stocks of established companies believed to have a
potential for long-term capital growth. In seeking current income and
preservation of capital, in addition to capital appreciation, the Fund invests
in various types of fixed-income securities, including U.S. government and
government agency securities and corporate bonds. The Fund generally invests
in bonds that are rated in the top four grades by a nationally-recognized
rating agency (e.g., Moody's Investors Service, Inc. ("Moody's") or Standard &
Poor's Ratings Group ("S&P")) at the time of purchase, or, if unrated, are
determined to be equivalent to the top four grades in the judgment of the
Manager. The fourth grade is considered medium grade and may have some
speculative characteristics. Typically, the maturity of the bonds will range
between five and 30 years. The Fund may invest not more than 5% of its assets
in convertible debentures rated below investment grade.
The Fund will analyze existing and expected economic and market conditions
and seek to identify those market sectors or individual securities that are
expected to benefit from those conditions. The Fund's appraisal of these
economic conditions will determine the types of securities it will hold and the
degree of investment emphasis placed upon capital appreciation and income.
* * *
For additional information about the Fund's investment policies and
certain risks associated with investments in certain types of securities, see
Other Investment Policies and Risk Considerations in this Prospectus. Part B
sets forth other investment restrictions.
CLASSES OF SHARES
The Distributor serves as the national distributor for the Fund. Shares
of the Class may be purchased directly by contacting the Fund or its agent or
through authorized investment dealers. All purchases of shares of the Class
are at net asset value. There is no front-end or contingent deferred sales
charge.
Investment instructions given on behalf of participants in an employer-
sponsored retirement plan are made in accordance with directions provided by
the employer. Employees considering purchasing shares of the Class as part of
their retirement program should contact their employer for details.
Shares of the Class are available for purchase only by: (a) retirement
plans introduced by persons not associated with brokers or dealers that are
primarily engaged in the retail securities business and rollover individual
retirement accounts from such plans; (b) tax-exempt employee benefit plans of
the Manager, or its affiliates and securities dealer firms with a selling
agreement with the Distributor; (c) institutional advisory accounts of the
Manager, or its affiliates and those having client relationships with Delaware
Investment Advisers, a division of the Manager, or its affiliates and their
corporate sponsors, as well as subsidiaries and related employee benefit plans
and rollover individual retirement accounts from such institutional advisory
accounts; (d) a bank, trust company and similar financial institution investing
for its own account or for the account of its trust customers for whom such
financial institution is exercising investment discretion in purchasing shares
of the Class, except where the investment is part of a program that requires
payment to the financial institution of a Rule 12b-1 Plan fee; and (e)
registered investment advisers investing on behalf of clients that consist
solely of institutions and high net-worth individuals having at least
$1,000,000 entrusted to the adviser for investment purposes, but only if the
adviser is not affiliated or associated with a broker or dealer and derives
compensation for its services exclusively from its clients for such advisory
services.
Delaware Fund A Class, Delaware Fund B Class and Delaware Fund C Class
In addition to offering Delaware Fund Institutional Class, the Fund also
offers Delaware Fund A Class, Delaware Fund B Class and Delaware Fund C Class,
which are described in a separate prospectus. Shares of the Delaware Fund A
Class, Delaware Fund B Class and Delaware Fund C Class may be purchased through
authorized investment dealers or directly by contacting the Fund or its
Distributor. Delaware Fund A Class carries a front-end sales charge and has
annual 12b-1 expenses equal to a maximum of 0.30%. The maximum front-end sales
charge as a percentage of the offering price is 4.75% and is reduced on certain
transactions of $100,000 or more. Delaware Fund B Class and Delaware Fund C
Class have no front-end sales charge, but are subject to annual 12b-1 expenses
equal to a maximum of 1%. Shares of Delaware Fund B Class and Delaware Fund C
Class and certain shares of Delaware Fund A Class may be subject to a
contingent deferred sales charge upon redemption. To obtain a prospectus
relating to such classes contact the Distributor by writing to the address or
by calling the phone numbers listed on the back cover of this Prospectus.
HOW TO BUY SHARES
The Fund makes it easy to invest by mail, by wire, by exchange and by
arrangement with your investment dealer. In all instances, investors must
qualify to purchase the shares of the Class.
Investing Directly by Mail
1. Initial Purchases--An Investment Application or, in the case of a
retirement plan account, an appropriate retirement plan application, must be
completed, signed and sent with a check payable to the specific Fund and Class
selected, to Delaware Group at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by
mailing a check payable to the specific Fund and Class selected. Your check
should be identified with your name(s) and account number.
Investing Directly by Wire
You may purchase shares by requesting your bank to transmit funds by wire
to CoreStates Bank, N.A., ABA #031000011, account number 1412893401 (include
your name(s) and your account number for the Fund and Class in which you are
investing).
1. Initial Purchases--Before you invest, telephone the Client Services
Department at 800-828-5052 to get an account number. If you do not call first,
it may delay processing your investment. In addition, you must promptly send
your Investment Application or, in the case of a retirement plan account, an
appropriate retirement plan application, for the Fund and Class selected, to
Delaware Group at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You must advise your Client
Services Representative by telephone at 800-828-5052 prior to sending your
wire.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware Group and
you qualify to purchase shares of the Class, you may write and authorize an
exchange of part or all of your investment into the Fund. However, shares of
Delaware Fund B Class, Delaware Fund C Class and Class B Shares and Class C
Shares of the other funds in the Delaware Group offering such a class of shares
may not be exchanged into the Class. If you wish to open an account by
exchange, call your Client Services Representative at 800-828-5052 for more
information. See Redemption and Exchange for more complete information
concerning your exchange privileges.
Investing through Your Investment Dealer
You can make a purchase of Fund shares through most investment dealers
who, as part of the service they provide, must transmit orders promptly to the
Fund. They may charge for this service.
Purchase Price and Effective Date
The purchase price (net asset value) of the Class is determined as of the
close of regular trading on the New York Stock Exchange (ordinarily, 4 p.m.,
Eastern time) on days when the Exchange is open.
The effective date of a purchase made through an investment dealer is the
date the order is received by the Fund, its agent or designee. The effective
date of a direct purchase is the day your wire, electronic transfer or check is
received, unless it is received after the time the share price is determined,
as noted above. Purchase orders received after such time will be effective the
next business day.
The Conditions of Your Purchase
The Fund reserves the right to reject any purchase order. If a purchase
is canceled because your check is returned unpaid, you are responsible for any
loss incurred. The Fund can redeem shares from your account(s) to reimburse
itself for any loss, and you may be restricted from making future purchases in
any of the funds in the Delaware Group. The Fund reserves the right to reject
purchase orders paid by third-party checks or checks that are not drawn on a
domestic branch of a United States financial institution. If a check drawn on
a foreign financial institution is accepted, you may be subject to additional
bank charges for clearance and currency conversion.
The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under $250 as a result of
redemptions.
REDEMPTION AND EXCHANGE
Redemption and exchange requests made on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees should therefore contact their employer
for details.
Your shares will be redeemed or exchanged based on the net asset value
next determined after the Fund receives your request in good order. For
example, redemption and exchange requests received in good order after the time
the net asset value of shares is determined will be processed on the next
business day. See Purchase Price and Effective Date under How to Buy Shares.
Except as otherwise noted below, for a redemption request to be in "good order,"
you must provide your account number, account registration, and the total number
of shares or dollar amount of the transaction. With regard to exchanges, you
must also provide the name of the fund in which you want to invest the
proceeds. Exchange instructions and redemption requests must be signed by the
record owner(s) exactly as the shares are registered. You may request a
redemption or an exchange by calling the Fund at 800-828-5052. Redemption
proceeds will be distributed promptly, as described below, but not later than
seven days after receipt of a redemption request.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and
carefully read that fund's prospectus before buying shares in an exchange. The
prospectus contains more complete information about the fund, including charges
and expenses.
The Fund will process written and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. The Fund will honor written redemption requests as to shares for
which a check was tendered as payment, but the Fund will not mail or wire the
proceeds until it is reasonably satisfied that the check has cleared, which may
take up to 15 days from the purchase date. You can avoid this potential delay
if you purchase shares by wiring Federal Funds. The Fund reserves the right to
reject a written or telephone redemption request or delay payment of redemption
proceeds if there has been a recent change to the shareholder's address of
record.
Shares of the Class may be exchanged into any other Delaware Group mutual
fund provided: (1) the investment satisfies the eligibility and other
requirements set forth in the prospectus of the fund being acquired, including
the payment of any applicable front-end sales charge; and (2) the shares of the
fund being acquired are in a state where that fund is registered. If exchanges
are made into other shares that are eligible for purchase only by those
permitted to purchase shares of the Class, such exchange will be exchanged at
net asset value. Shares of the Class may not be exchanged into Class B Shares
or Class C Shares of any of the funds in the Delaware Group. The Fund may
suspend, terminate, or amend the terms of the exchange privilege upon 60 days'
written notice to shareholders.
Various redemption and exchange methods are outlined below. No fee is
charged by the Fund or the Distributor for redeeming or exchanging your shares
although, in the case of an exchange, a sales charge may apply. You may also
have your investment dealer arrange to have your shares redeemed or exchanged.
Your investment dealer may charge for this service.
All authorizations given by shareholders, including selection of any of
the features described below, shall continue in effect until such time as a
written revocation or modification has been received by the Fund or its agent.
Written Redemption and Exchange
You can write to the Fund at 1818 Market Street, Philadelphia, PA 19103 to
redeem some or all of your shares or to request an exchange of any or all your
shares into another mutual fund in the Delaware Group, subject to the same
conditions and limitations as other exchanges noted above. The request must be
signed by all owners of the account or your investment dealer of record.
For redemptions of more than $50,000, or when the proceeds are not sent to
the shareholder(s) at the address of record, the Fund requires a signature by
all owners of the account and may require a signature guarantee. Each
signature guarantee must be supplied by an eligible guarantor institution. The
Fund reserves the right to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness. The Fund may require further
documentation from corporations, executors, retirement plans, administrators,
trustees or guardians.
Payment is normally mailed the next business day after receipt of your
redemption request. Certificates are issued for shares only if you submit a
specific request. If your shares are in certificate form, the certificate(s)
must accompany your request and also be in good order.
You also may submit your written request for redemption or exchange by
facsimile transmission at the following number: 215-255-8864.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your shares in certificate form, you may redeem or
exchange only by written request and you must return your certificates.
The Telephone Redemption - Check to Your Address of Record service and the
Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in writing that you do not
wish to have such services available with respect to your account. The Fund
reserves the right to modify, terminate or suspend these procedures upon 60
days' written notice to shareholders. It may be difficult to reach the Fund by
telephone during periods when market or economic conditions lead to an
unusually large volume of telephone requests.
Neither the Fund nor its Transfer Agent is responsible for any shareholder
loss incurred in acting upon written or telephone instructions for redemption
or exchange of Fund shares which are reasonably believed to be genuine. With
respect to such telephone transactions, the Fund will follow reasonable
procedures to confirm that instructions communicated by telephone are genuine
(including verification of a form of personal identification) as, if it does
not, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. A written confirmation will be
provided for all purchase, exchange and redemption transactions initiated by
telephone. By exchanging shares by telephone, you are acknowledging prior
receipt of a prospectus for the fund into which your shares are being
exchanged.
Telephone Redemption-Check to Your Address of Record
You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be
payable to the shareholder(s) of record. Payment is normally mailed the next
business day after receipt of the redemption request.
Telephone Redemption-Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must submit a written authorization and you may need to have your
signature guaranteed. For your protection, your authorization must be on file.
If you request a wire, your fund will normally be sent the next business day.
If you ask for a check, it will normally be mailed the next business day after
receipt of your redemption request to your predesignated bank account. There
are no fees for this redemption method, but the mail time may delay getting
funds into your bank account. Simply call your Client Services Representative
prior to the time the net asset value is determined, as noted above.
Telephone Exchange
You or your investment dealer of record can exchange shares into any fund
in the Delaware Group under the same registration. As with the written
exchange service, telephone exchanges are subject to the same conditions and
limitations as other exchanges noted above. Telephone exchanges may be subject
to limitations as to amounts or frequency.
DIVIDENDS AND DISTRIBUTIONS
The Fund will normally make payments from net investment income on a
quarterly basis. Payments from net realized securities profits of the Fund, if
any, will be distributed annually in the quarter following the close of the
fiscal year. Both dividends and distributions, if any, are automatically
reinvested in your account at net asset value.
Each class of the Fund will share proportionately in the investment income
and expenses of the Fund, except that the Class will not incur any distribution
fees under the 12b-1 Plans which apply to Delaware Fund A Class, Delaware Fund
B Class and Delaware Fund C Class.
TAXES
The tax discussion set forth below is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in the Fund.
On August 5, 1997, President Clinton signed into law the Taxpayer Relief
Act of 1997 (the "1997 Act"). This new law makes sweeping changes in the
Internal Revenue Code (the "Code"). Because many of these changes are complex,
and only indirectly affect the Funds and their distributions to you, they are
discussed in Part B. Changes in the treatment of capital gains, however, are
discussed in this section.
The Fund has qualified, and intends to continue to qualify, as a regulated
investment company under Subchapter M of the Code. As such, the Fund will not
be subject to federal income tax, or to any excise tax, to the extent its
earnings are distributed as provided in the Code and it satisfies certain other
requirements relating to the sources of its income and diversification of its
assets.
The Fund intends to distribute substantially all of its net investment
income and net capital gains, if any. Dividends from net investment income or
net short-term capital gains will be taxable to those investors who are subject
to income taxes as ordinary income, even though received in additional shares.
For corporate investors, dividends from net investment income will generally
qualify in part for the corporate dividends-received deduction. The portion of
dividends paid by the Fund that so qualifies will be designated each year in a
notice from Equity Funds I, Inc. to the Fund's shareholders. For the fiscal
year ended October 31, 1997, 27% of the Fund's dividends from net investment
income qualified for the corporate dividends-received deduction.
Distributions paid by the Fund from long-term capital gains, received in
additional shares, are taxable to those investors who are subject to income
taxes as long-term capital gains, regardless of the length of time an investor
has owned shares in the Fund. The Fund does not seek to realize any particular
amount of capital gains during a year; rather, realized gains are a by-product
of Fund management activities. Consequently, capital gains distributions may
be expected to vary considerably from year to year. Also, for those investors
subject to tax, if purchases of shares in the Fund are made shortly before the
record date for a dividend or capital gains distribution, a portion of the
investment will be returned as a taxable distribution.
The Treatment of Capital Gain Distributions under the Taxpayer Relief Act of
1997
The 1997 Act creates a category of long-term capital gain for individuals
that will be taxed at new lower tax rates. For investors who are in the 28% or
higher federal income tax brackets, these gains will be taxed at a minimum of
20%. For investors who are in the 15% federal income tax bracket, these gains
will be taxed at a maximum of 10%. Capital gain distributions will qualify for
these new maximum tax rates, depending on when a Fund's securities were sold
and how long they were held by that Fund before they were sold. Investors who
want more information on holding periods and other qualifying rules relating to
these new rates should review the expanded discussion in Part B, or should
contact their own tax advisers.
Equity Funds I, Inc. will advise you in its annual information reporting
at calendar year end of the amount of its capital gain distributions which will
qualify for these maximum federal tax rates.
Although dividends generally will be treated as distributed when paid,
dividends which are declared in October, November, or December to shareholders
of record on a specified date in one of those months, but which, for
operational reasons, may not be paid to the shareholder until the following
January, will be treated for tax purposes as if paid by the Fund and received
by the shareholder on December 31 of the year declared.
The sale of shares of the Fund is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may
be realized from an ordinary redemption of shares or an exchange of shares
between the Fund and any other fund in the Delaware Group. Any loss incurred
on a sale or exchange of Fund shares that had been held for six months or less
will be treated as a long-term capital loss to the extent of capital gain
dividends received with respect to such shares.
In addition to the federal taxes described above, shareholders may or may
not be subject to various state and local taxes. For example, distributions of
interest income and capital gains realized from certain types of U.S.
government securities may be exempt from state personal income taxes. Because
investors' state and local taxes may be different than the federal taxes
described above, investors should consult their own tax advisors.
Each year, Equity Funds I, Inc. will mail you information on the tax
status of the Fund's dividends and distributions. Shareholders will also
receive each year information as to the portion of dividend income, if any,
that is derived from U.S. government securities that are exempt from state
income tax. Of course, shareholders who are not subject to tax on their income
would not be required to pay tax on amounts distributed to them by the Fund.
Equity Funds I, Inc. is required to withhold 31% of taxable dividends,
capital gains distributions, and redemptions paid to shareholders who have not
complied with IRS taxpayer identification regulations. You may avoid this
withholding requirement by certifying on your Investment Application your
proper Taxpayer Identification Number and by certifying that you are not
subject to backup withholding.
See Taxes in Part B for additional information on tax matters relating to
the Fund and its shareholders.
CALCULATION OF NET ASSET VALUE PER SHARE
The purchase and redemption price of the Class is the net asset value
("NAV") per share of Class shares next computed after the order is received.
The NAV is computed as of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is open.
The NAV per share is computed by adding the value of all securities and
other assets in the portfolio, deducting any liabilities (expenses and fees are
accrued daily) and dividing by the number of shares outstanding. Portfolio
securities for which market quotations are available are priced at market
value. Debt securities are priced at fair value by an independent pricing
service using methods approved by Equity Funds I, Inc.'s Board of Directors.
Short-term investments having a maturity of less than 60 days are valued at
amortized cost, which approximates market value. All other securities are
valued at their fair value as determined in good faith and in a method approved
by Equity Funds I, Inc.'s Board of Directors.
The net asset values of all outstanding shares of each class of the Fund
will be computed on a pro-rata basis for each outstanding share based on the
proportionate participation in the Fund represented by the value of shares of
that class. All income earned and expenses incurred by the Fund will be borne
on a pro-rata basis by each outstanding share of a class, based on each class'
percentage in the Fund represented by the value of shares of such classes,
except that the Class will not incur any of the expenses under the Fund's 12b-1
Plans and Delaware Fund A, B and C Classes alone will bear the 12b-1 Plan fees
payable under their respective 12b-1 Plans. Due to the specific distribution
expenses and other costs that will be allocable to each class, the net asset
value of and dividends paid to each class of the Fund will vary.
MANAGEMENT OF THE FUND
Directors
The business and affairs of Equity Funds I, Inc. are managed under the
direction of its Board of Directors. Part B contains additional information
regarding Equity Funds I, Inc.'s directors and officers.
Investment Manager
The Manager furnishes investment management services to the Fund.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On October 31, 1997, the Manager and its affiliates
within the Delaware Group, including Delaware International Advisers Ltd., were
managing in the aggregate more than $38 billion in assets in the various
institutional or separately managed (approximately $22,496,609,000) and
investment company (approximately $16,012,252,000) accounts.
The Manager is an indirect, wholly owned subsidiary of Delaware Management
Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a wholly
owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. DMH and the Manager are now indirect, wholly owned subsidiaries,
and subject to the ultimate control, of Lincoln National. Lincoln National,
with headquarters in Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry, including
insurance and investment management. In connection with the merger, a new
Investment Management Agreement between Equity Funds I, Inc. on behalf of the
Fund and the Manager was executed following shareholder approval.
The Manager manages the Fund's portfolio and makes investment decisions
which are implemented by Equity Funds I, Inc.'s Trading Department. The
Manager also administers Equity Funds I, Inc.'s affairs and pays the salaries
of all the directors, officers and employees of Equity Funds I, Inc. who are
affiliated with the Manager. For these services, the Manager is paid an annual
fee equal to 0.60% on the first $100 million of average daily net assets of the
Fund, 0.525% on the next $150 million, 0.50% on the next $250 million and
0.475% on the average daily net assets in excess of $500 million, less the
Fund's proportionate share of all directors' fees paid to the unaffiliated
directors of Equity Funds I, Inc. The directors annually review fees paid to
the Manager. Investment management fees paid by the Fund for the fiscal year
ended October 31, 1997 were 0.51% of average daily net assets.
George H. Burwell and Gary A. Reed have primary responsibility for making
day-to-day investment decisions for the Fund. Mr. Burwell, who has been Equity
Funds I, Inc.'s Senior Portfolio Manager for equities since 1992, holds a BA
from the University of Virginia. Prior to joining the Delaware Group in 1992,
Mr. Burwell was a portfolio manager for Midlantic Bank in Edison, New Jersey,
where he managed an equity mutual fund and three commingled funds. Mr. Burwell
is a CFA charterholder.
Mr. Reed has been the Fund's Senior Portfolio Manager for fixed-income
since April 1995. He holds an AB in Economics from the University of Chicago
and an MA in Economics from Columbia University. He began his career in 1978
with the Equitable Life Assurance Company in New York City, where he
specialized in credit analysis. Prior to joining the Delaware Group in 1989,
Mr. Reed was Vice President and Manager of the fixed-income department at
Irving Trust Company in New York.
In making investment decisions for the Fund, Mr. Burwell and Mr. Reed
regularly consult with Wayne A. Stork, Richard G. Unruh, Jr. and Paul E.
Suckow. Mr. Stork, Chairman of the Manager and Equity Funds I, Inc.'s Board of
Directors, is a graduate of Brown University and attended New York University's
Graduate School of Business Administration. Mr. Stork joined the Delaware
Group in 1962 and has served in various executive capacities at different times
within the Delaware organization. A graduate of Brown University, Mr. Unruh
received his MBA from the University of Pennsylvania's Wharton School and
joined the Delaware Group in 1982 after 19 years of investment management
experience with Kidder, Peabody & Co. Inc. Mr. Unruh was named an Executive
Vice President of Equity Funds I, Inc. in 1994. He is also a member of the
Board of the Manager and was named an Executive Vice President of the Manager
in 1994. He is on the Board of Directors of Keystone Insurance Company and AAA
Mid-Atlantic and is a former president and current member of the Advisory
Council of the Bond Club of Philadelphia. Mr. Suckow is Delaware's Chief
Investment Officer for fixed-income. He is a CFA charterholder and a graduate
of Bradley University with an MBA from Western Illinois University. Mr. Suckow
was a fixed-income portfolio manager at the Delaware Group from 1981 to 1985.
He returned to the Delaware Group in 1993 after eight years with Oppenheimer
Management Corporation, where he served as Executive Vice President and
Director of Fixed Income.
Portfolio Trading Practices
The Fund normally will not invest for short-term trading purposes.
However, the Fund may sell securities without regard to the length of time they
have been held. The degree of portfolio activity will affect brokerage costs
of the Fund and may affect taxes payable by the Fund's shareholders to the
extent of any net realized capital gains. A turnover rate of 100% would occur,
for example, if all the investments in the Fund's portfolio at the beginning of
the year were replaced by the end of the year.
The Fund uses its best efforts to obtain the best available price and most
favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the Manager
or its advisory clients. These services may be used by the Manager in
servicing any of its accounts. Subject to best price and execution, the Fund
may consider a broker/dealer's sales of shares of funds in the Delaware Group
of funds in placing portfolio orders and may place orders with broker/dealers
that have agreed to defray certain expenses of such funds, such as custodian
fees.
Performance Information
From time to time, the Fund may quote total return performance for the
Class in advertising and other types of literature.
Total return will be based on a hypothetical $1,000 investment, reflecting
the reinvestment of all distributions at net asset value. Each presentation
will include the average annual total return for one-, five- and ten-year or
life-of-fund periods, as applicable. The Fund may also advertise aggregate and
average total return information concerning the Class over additional periods
of time.
Because securities prices fluctuate, investment results of the Class will
fluctuate over time and past performance should not be considered as a
guarantee of future results.
Statements and Confirmations
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of distributions.
You should examine statements and confirmations immediately and promptly report
any discrepancy by calling your Client Services Representative.
Financial Information about Fund
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information about
the Fund's investments and performance. Equity Funds I, Inc.'s fiscal year
ends on October 31.
Distribution and Service
The Distributor, Delaware Distributors, L.P. serves as the national
distributor of the Fund's shares under a Distribution Agreement with Equity
Funds I, Inc. dated April 3, 1995, as amended on November 29, 1995. The
Distributor bears all of the costs of promotion and distribution.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for the Fund
under an Agreement dated June 29, 1988. The Transfer Agent also provides
accounting services to the Fund pursuant to the terms of a separate Fund
Accounting Agreement. Certain recordkeeping and other shareholder services
that otherwise would be performed by the Transfer Agent may be performed by
certain other entities and the Transfer Agent may elect to enter into an
agreement to pay such other entities for those services. In addition,
participant account maintenance fees may be assessed for certain recordkeeping
services provided as part of retirement plan and administration service
packages. These fees are based on the number of participants in the plan and
the various services selected. Fees will be quoted upon request and are
subject to change.
The directors annually review fees paid to the Distributor and the
Transfer Agent. The Distributor and the Transfer Agent are indirect, wholly
owned subsidiaries of DMH.
Expenses
The Fund is responsible for all of its own expenses other than those borne
by the Manager under the Investment Management Agreement and those borne by the
Distributor under the Distribution Agreement. For the fiscal year ended
October 31, 1997, the ratio of operating expenses to average daily net assets
for the Class was 0.78%.
Shares
Equity Funds I, Inc. is an open-end management investment company. The
Fund's portfolio of assets is diversified as defined by the 1940 Act. Commonly
known as a mutual fund, Equity Funds I, Inc. was first organized as a Delaware
corporation in 1937 and subsequently reorganized as a Maryland corporation on
March 4, 1983.
Equity Funds I, Inc. currently offers two series of shares - Delaware Fund
series and Devon Fund series. Fund shares have a par value of $1.00, equal
voting rights, except as noted below, and are equal in all other respects. The
Fund will vote separately on any matter which affects only this Fund. Shares
of the Fund have a priority over shares of any other fund of Equity Funds I,
Inc.
All shares have noncumulative voting rights which means that the holders
of more than 50% of Equity Funds I, Inc.'s shares voting for the election of
directors can elect 100% of the directors if they choose to do so. Under
Maryland law, Equity Funds I, Inc. is not required, and does not intend, to
hold annual meetings of shareholders unless, under certain circumstances, it is
required to do so under the 1940 Act. Shareholders of 10% or more of Equity
Funds I, Inc.'s outstanding shares may request that a special meeting be called
to consider the removal of a director.
In addition to this Class, the Fund also offers Delaware Fund A Class,
Delaware Fund B Class and Delaware Fund C Class. Shares of each class
represent proportionate interests in the assets of the Fund and have the same
voting and other rights and preferences as the Class, except that shares of the
Class are not subject to, and may not vote on matters affecting, the
Distribution Plans under Rule 12b-1 relating to Delaware Fund A Class, Delaware
Fund B Class and Delaware Fund C Class.
Effective as of the close of business December 27, 1996, the name of
Delaware Group Delaware Fund, Inc. was changed to Delaware Group Equity Funds
I, Inc. Also effective as of the close of business December 27, 1996, the name
of Common Stock series was changed to Delaware Fund series.
OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS
Mortgage-Backed Securities--The Fund may invest in mortgage-backed
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities or government sponsored corporations. The Fund also may
invest in securities issued by certain private, non-government corporations,
such as financial institutions, if the securities are fully collateralized at
the time of issuance by securities or certificates issued or guaranteed by the
U.S. government, its agencies or instrumentalities. Two principal types of
mortgage-backed securities are collateralized mortgage obligations (CMOs) and
real estate mortgage investment conduits (REMICs).
CMOs are debt securities issued by U.S. government agencies or by
financial institutions and other mortgage lenders and collateralized by a pool
of mortgages held under an indenture. CMOs are issued in a number of classes
or series with different maturities. The classes or series are retired in
sequence as the underlying mortgages are repaid. Prepayment may shorten the
stated maturity of the obligation and can result in a loss of premium, if any
has been paid. Certain of these securities may have variable or floating
interest rates and others may be stripped (securities which provide only the
principal or interest feature of the underlying security).
REMICs, which were authorized under the Tax Reform Act of 1986, are
private entities formed for the purpose of holding a fixed pool of mortgages
secured by an interest in real property. REMICs are similar to CMOs in that
they issue multiple classes of securities. For further discussion concerning
the risk of investing in such asset-backed securities, see Part B.
CMOs and REMICs issued by private entities are not government securities
and are not directly guaranteed by any government agency. They are secured by
the underlying collateral of the private issuer. Certain of these private-
backed securities are 100% collateralized at the time of issuance by securities
issued or guaranteed by the U.S. government, its agencies, or
instrumentalities.
The Fund may invest its assets in CMOs and REMICs issued by private
entities whether or not the securities are 100% collateralized at the time of
issuance by securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities (securities that are not so collateralized are
called "non-agency mortgage-backed securities"). Non-agency mortgage-backed
securities may comprise up to 20% of the Fund's assets, but all of these
securities must (i) be rated at the time of purchase in the four top rating
categories by a nationally-recognized statistical rating organization and (ii)
represent interests in whole-loan mortgages, multi-family mortgages, commercial
mortgages or other mortgage collateral supported by a first mortgage lien on
real estate. Non-agency mortgage-backed securities are subject to the interest
rate and prepayment risks to which other CMOs and REMICs issued by private
issuers are subject. Non-agency mortgage-backed securities may also be subject
to a greater risk of loss of interest and principal because they are not
collateralized by securities issued or guaranteed by the U.S. government. In
addition, timely information concerning the loans underlying these securities
may not be as readily available and the market for these securities may be less
liquid than the market for other CMOs and REMICs.
Asset-Backed Securities--The Fund may invest in securities which are
backed by assets such as receivables on home equity and credit loans,
receivables regarding automobile, mobile home and recreational vehicle loans,
wholesale dealer floor plans and leases or other loans or financial receivables
currently available or which may be developed in the future. All such
securities must be rated in one of the four highest rating categories by a
reputable rating agency (e.g., BBB or better by S&P or Baa or better by
Moody's).
Such receivables are securitized in either a pass-through or a pay-through
structure. Pass-through securities provide investors with an income stream
consisting of both principal and interest payments in respect of the
receivables in the underlying pool. Pay-through asset-backed securities are
debt obligations issued usually by a special purpose entity, which are
collateralized by the various receivables and in which the payments on the
underlying receivables provide the funds to pay the debt service on the debt
obligations issued.
The rate of principal payment on asset-backed securities generally depends
on the rate of principal payments received on the underlying assets. Such rate
of payments may be affected by economic and various other factors such as
changes in interest rates or the concentration of collateral in a particular
geographic area. Therefore, the yield may be difficult to predict and actual
yield to maturity may be more or less than the anticipated yield to maturity.
Due to the shorter maturity of the collateral backing such securities, there
tends to be less of a risk of substantial prepayment than with mortgage-backed
securities but the risk of such a prepayment does exist. Such asset-backed
securities do, however, involve certain risks not associated with mortgage-
backed securities, including the risk that security interests cannot be
adequately or in many cases ever established, and other risks which may be
peculiar to particular classes of collateral. For example, with respect to
credit card receivables, a number of state and federal consumer credit laws
give debtors the right to set off certain amounts owed on the credit cards,
thereby reducing the outstanding balance. In the case of automobile
receivables, there is a risk that the holders may not have either a proper or
first security interest in all of the obligations backing such receivables due
to the large number of vehicles involved in a typical issuance and technical
requirements under state laws. Therefore, recoveries on repossessed collateral
