<PAGE>
For Total Return
Devon Fund
(Photo of illustration from
Total Return Brochure)
service and guidance
professional management
goals
1998
Semi-Annual
Report
DELAWARE
INVESTMENTS(SM)
- -----------
Philadelphia * London
<PAGE>
2
for total return
May 11, 1998
Dear Shareholder:
Devon Fund provided a strong +21.38% total return (capital change plus income
based on net asset value for A Class shares) for the six months ended April
30, 1998. The Fund's results ranked among the top 15% of growth & income stock
funds for the period, as shown below.
Our value-oriented selection process led us to stocks of large and
mid-size companies that performed well amid a strong domestic economy with low
inflation. Devon's holdings of pharmaceutical companies, retailers, specialty
chemical businesses and selected capital goods companies provided robust
returns.
Your Fund will mark its fifth anniversary in December 1998. We are
pleased to report that Devon's lifetime performance as of April 30, 1998
placed it in the top 2% of the increasingly competitive growth & income
category of funds, as shown below.
The Fund's portfolio manager - George H. Burwell - strives to select
stocks with a blend of growth and value characteristics while efficiently
pruning the portfolio of companies that become overvalued or fail to live up
to expectations. We believe this approach can be useful in today's volatile
stock market environment.
Since autumn, investors have faced a schizophrenic market. In October,
we saw the biggest one-day point drop in history amid concerns about recession
along the Pacific Rim. Then in the first calendar quarter of 1998, the S&P 500
rebounded nearly 14% to close over the 1000 level
Devon's lifetime performance as of April 30, 1998 placed it in the top 2% of
the increasingly competitive growth & income category of funds.
CUMULATIVE/AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Six Months Ended December 29, 1993
April 30, 1998 to April 30, 1998
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Devon Fund A Class +21.38% +25.23%
- -------------------------------------------------------------------------------------------------------------
Lipper Growth & Income Fund Average +17.38% (708 funds) +20.67% (320 funds)
Ranking* Top 15% Top 2%
Standard & Poor's 500 Index +22.47% +25.00%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
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.
*Total returns of Devon Fund's A class shares ranked 7 of 320 funds, 41st out
of 431 funds, 69th out of 657 funds and 99th of 708 funds for the lifetime,
three-year, one-year and six-month periods ended April 30, 1998 by Lipper
Analytical Services. Rankings are based on total return at net asset value.
Fee limitations were in effect for the periods shown. Returns would have been
lower without the limitations.
<PAGE>
3
for total return
for the first time. It marked the 13th consecutive three-month period of
rising stock prices and provided among the best first quarter returns since
1928, according to Ibbotson Associates.
The level of risk in the overall stock market has increased. Profit
growth is slowing and some investors are concerned that the Federal Reserve
Board may raise interest rates modestly later this year. Still, even at
current prices, Devon's portfolio manager is finding attractive values,
especially among mid-size companies.
By using a strict buy and sell discipline, we believe Devon's
investment approach has the potential to reduce exposure to market risks while
providing attractive long-term total returns, especially when compared with
more aggressive equity strategies.
We are delighted to see that Devon's popularity with investors is
rising. During the first half of fiscal 1998, the Fund's shareholder base grew
between 10% and 20% per month. As of April 30, 1998, the Fund's net assets
stood at $167 million, a more than 60% increase since October. Still, we think
the Fund's relatively modest size enables Mr. Burwell to quickly respond to
and anticipate market change.
Thank you for your confidence in Delaware Investments.
Sincerely,
/s/ Wayne A. Stork
- ------------------
Wayne A. Stork
Chairman
/s/ Jeffrey J. Nick
- -------------------
Jeffrey J. Nick
President and Chief Executive Officer
PORTFOLIO HIGHLIGHTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
April 30, 1998 October 31, 1997
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Median Market Capitalization $5.5 billion $5.7 billion
Number of Stocks 64 54
Average Stock Price-to-Earnings Ratio 21.3x 17.0x
Top Sector Consumer Growth Capital Goods
Annual Portfolio Turnover Rate 51% 64%
Beta* 0.88 0.96
- ---------------------------------------------------------------------------------------------------------
</TABLE>
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.
<PAGE>
4
for total return
Portfolio Manager's Review
The U.S. stock market has soared to extraordinary new heights since the summer
of 1997 despite the advent of a major recession in Asia and robust domestic
economic growth. Merger activity in several industries and falling interest
rates boosted share prices of large and mid-size companies.
Annual consumer inflation was just 1.4% as of April 30, 1998, the
lowest level in 12 years. With the aid of stock buybacks, cost-cutting and
increased marketing, many domestic-oriented companies have reported earnings
gains. However, some areas such as technology and basic industry face lower
profits in the months ahead due to increased competition from inexpensive
exports and weakened product demand from Pacific Rim customers.
Devon Fund's positive cash flow from new investors gave your Fund's
management 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 have potential. We generally sold stocks
that had appreciated to the point where the Fund's sell discipline was
triggered. This happens when a stock's price relative to earnings (P/E ratio)
exceeds that of the overall market by more than 20%.
Since autumn, we achieved success with high-profile companies making
or distributing pharmaceuticals such as Eli Lilly & Co. and Rite-Aid Corp.
Nationwide retailers such as Lowe's Companies, a hardware chain, and Intimate
Brands Inc., operator of Victoria's Secret and Bath & Body Works' stores, also
helped lift your Fund's returns.
As in fiscal 1997, our holdings of niche service and capital goods
businesses delivered solid results. These included Ecolab Inc., which provides
sanitary
Merger activity in several industries and falling interest rates boosted share
prices of large and mid-size companies.
TOP 10 HOLDINGS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
April 30, 1998
Company Percent of Net Assets Dividend Growth Rate Price/Earnings Ratio
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rite Aid Corp. 4.5% 10.1% 21.3x
Ecolab Inc. 4.0 14.3 27.4
Masco Corp. 4.0 5.2 21.5
American Home Products 4.0 6.1 25.4
Intimate Brands 3.0 300.0 19.0
Federal Home Loan Marketing Corp. 2.9 14.3 20.5
Symbol Technologies 2.8 * 27.6
Equifax Inc. 2.7 4.5 26.3
AFLAC Inc. 2.3 15.0 21.1
Johnson & Johnson 2.2 15.6 26.5
</TABLE>
Dividend growth rate represents the percentage increase in quarterly
dividends for the 12 months ended 4/30/98. P/E ratios based
on analysts' estimates as reported to First Call for 1998. *Began paying a
semi-annual dividend on 4/1/97.
Source: Bloomberg Business News.
<PAGE>
5
for total return
services to the hospitality industry, and Symbol Technologies, which makes
machines that scan bar codes.
A few of our stock selections such as BetzDearborn, a chemical company
specializing in water treatment systems, and Motorola, which makes pagers,
cellular telephones and semi-conductors, did not meet our expectations. Both
were sold at a loss during the first half.
Over time, we think investors will pay more for companies with
consistent earnings and dividend growth. When we select stocks, we look for:
* Value - attractive growth at discount prices;
* Consistency - steady growth
in a relatively stable industry;
* Cash flow - substantial resources to
reinvest in the business or raise
dividends;
* Catalysts - improving operations or
expansion through acquisition; and
* Undiscovered potential - the
company's potential hasn't been
recognized yet by the market.
OUTLOOK
Compared to the end of calendar year 1997, investor confidence is much
greater, and that has helped push stock prices higher. Investors seem willing
to pay more for consistent growth, and in the case of some pharmaceutical and
technology stocks, relative value is being ignored. Some companies' shares
trade at 40 times next year's projected profits.
Risks associated with owning equities have increased, in our view,
especially if earnings should disappoint investors. Profits of companies in
the S&P 500 Index grew by only 3% in the first calendar quarter of 1998, the
smallest increase in nearly seven years. Stock prices have continued to rise
because most analysts believe corporate earnings could surge later this year.
Your Fund reduced its position in capital goods companies since autumn and
modestly increased its position in consumer firms selling at what appear to be
reasonable prices.
DEVON'S POSITIONING COMPARED TO THE S&P 500 INDEX
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
April 30, 1998
Percent of Allocation Change From Percent of
Broad Sectors Fund's Net Assets October 31, 1997 S&P 500 Index
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Finance 15.7% +2.5% 17.6%
Capital Goods 13.9 -6.0 9.3
Consumer Growth 13.5 -1.0 15.8
Consumer Cyclicals 10.7 +3.4 9.0
Technology 8.6 +2.4 15.2
Consumer Staples 7.6 -2.4 10.4
Energy 3.3 -0.9 6.9
Utilities 2.7 -3.0 9.9
REITs 2.7 -1.4 0.0
</TABLE>
<PAGE>
6
for total return
LARGEST NEW PURCHASES/SALES
October 31, 1997 to April 30, 1998
- ------------------------------------------------------
Purchases Sales
- ------------------------------------------------------
Intimate Brands Tyco International
Symbol Technologies SmithKline Beecham
AFLAC Inc. WR Grace & Co.
To help reduce risk, we are sticking with Devon's strict growth with
value discipline. What we mean is we won't pay more than a 20% premium for any
stock (compared to the price-earnings ratio of the S&P 500). We prefer to buy
stocks whose P/E ratio is lower than the overall market.
For the balance of fiscal 1998, we think certain consumer oriented
companies exhibiting dividend and earnings growth are likely to provide
superior returns. We have positioned Devon's portfolio to benefit from
well-managed businesses in the clothing, home remodeling, paint, life
insurance and retail sectors, among others.
We generally prefer to buy stocks whose P/E ratio is lower than the overall
market.
While there are some signs of slowing in American exports, U.S.
consumer spending has remained strong. The domestic economy is being propelled
by relatively low interest rates, mortgage refinancing, the lowest
unemployment rate in a generation and inexpensive fuel prices. In a climate of
increased stock market volatility and exuberance for some large multinational
corporations, we believe prudent investors are likely to assign higher P/Es to
domestic-oriented, medium size, stable growth companies.
George H. Burwell
Vice President and
Senior Portfolio Manager
May 11, 1998
(photo of family on beach)
Q. WITH YIELDS AT AN ALL-TIME LOW, DOES DIVIDEND GROWTH STILL MATTER?
A. Definitely yes. It can point the way to capital appreciation potential.
<PAGE>
7
for total return
A Signal Of Opportunity
Devon Fund's Buy/Sell Discipline At Work
Tyco International has been a successful holding since Devon Fund's inception.
The company is best known for making and servicing fire detection equipment
such as smoke alarms.
When we purchased shares, we saw an undiscovered medium-size company
with a solid business strategy. Over the past four years, Tyco has grown
significantly through mergers and acquisitions. Its stock has outperformed the
S&P 500 Index for three consecutive years. Its share price has risen more than
five-fold from when we first began accumulating a position.
Tyco's strategy has been to buy companies at prices that immediately
increase earnings per share. In the past year, it has spent more than $10.5
billion for businesses such as American Home Products Corp.'s medical supplies
unit. Each acquisition has fit one of Tyco's four main businesses: disposable
medical products, security systems, electronics or valves.
For example, Tyco paid $1.77 billion in cash to add American Home's
catheter, needle and syringe business to its own Kendall Co. operation, which
makes products for wound care, incontinence and anesthetic care.
We were fortunate to recognize Tyco's growth potential early on. In
1994 and 1995, we increased our position so that by fiscal 1996, and for much
of fiscal 1997, the company was the Fund's largest stock holding. Investor
recognition grew as Tyco grew.
As of October 31, 1997, Tyco was our third largest holding (4.1% of
net assets). Over the next few months, with the completion of the American
Home deal, Tyco gained even more favor with investors.
During the first half of fiscal 1998, we substantially reduced our
position as investors began to assign Tyco a higher-than-market price/earnings
(P/E) ratio of 28 times projected fiscal 1998 earnings.
As of this writing, we still believe Tyco has capital appreciation
potential, but it was no longer among our top 10 as of April 30 and
represented just 1.8% of net assets. Through such prudent pruning, we believe
we can help reduce risk and maintain a diversified portfolio.
Tyco International Stock Price 1993-1998
Dollars per Share
High Low
Dec-93 $12.938 $10.375
Mar-94 $13.813 $12.219
Jun-94 $12.531 $11.000
Sep-94 $12.094 $10.625
Dec-94 $12.531 $10.906
Mar-95 $13.406 $11.625
Jun-95 $14.563 $12.750
Sep-95 $15.813 $13.344
Dec-95 $17.813 $14.750
Mar-96 $19.625 $16.188
Jun-96 $20.688 $17.563
Sep-96 $22.438 $17.750
Dec-96 $28.000 $21.438
Mar-97 $31.000 $25.875
Jun-97 $35.938 $27.000
Sep-97 $43.000 $34.938
Dec-97 $45.500 $34.000
Mar-98 $57.438 $42.375
<PAGE>
8
for total return
DEVON FUND'S LIFETIME PERFORMANCE
GROWTH OF A $10,000 INVESTMENT
DECEMBER 29, 1993 TO APRIL 30, 1998
Lipper Growth &
Income Fund Average
Devon Fund A Class S&P 500 Index (320 funds)
12/29/93 $9,524 $10,000 $10,000
4/30/94 $9,896 $9,744 $9,896
4/30/95 $11,181 $11,446 $11,352
4/30/96 $14,214 $14,904 $14,304
4/30/97 $17,623 $18,650 $17,562
4/30/98 $25,168 $26,295 $22,278
Chart assumes $10,000 invested on December 29, 1993, and includes the effect
of a 4.75% front-end sales charge and reinvestment of all distributions.
Performance of other classes of Devon Fund will vary due to differing charges
and expenses.
DEVON FUND PERFORMANCE
- ------------------------------------------------------------------------------
Average Annual Returns Through April 30, 1998
Lifetime One Year
- ------------------------------------------------------------------------------
Class A (Est. 12/29/93)
Excluding Sales Charge +25.23% +43.37%
Including Sales Charge +23.83% +36.53%
- ------------------------------------------------------------------------------
Class B (Est. 9/6/94)
Excluding Sales Charge +26.53% +42.35%
Including Sales Charge +26.09% +38.35%
- ------------------------------------------------------------------------------
Class C (Est. 11/29/95)
Excluding Sales Charge +30.00% +42.41%
Including Sales Charge +30.00% +41.41%
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 4.75% 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 4% if redeemed before the end of the sixth year. Class C
shares have a 1% annual distribution and service fee and a 1% contingent
deferred sales charge if redeemed within 12 months.
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 +25.60% and +43.79%, respectively, for the
lifetime and one-year periods ended April 30, 1998. The six-month cumulative
total return for Institutional Class shares was +21.51%.
<PAGE>
for total return 9
Financial Statements
Delaware Group Equity Funds I, Inc.
Devon Fund
Statement of Net Assets
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Number Market
of Shares Value
- --------------------------------------------------------------------------------
Common Stock - 90.02%
Aerospace and Defense - 0.86%
GenCorp+ ....................................... 47,100 $ 1,433,606
-----------
1,433,606
-----------
Automobiles & Auto Parts - 1.77%
Danaher+ ....................................... 41,100 2,954,063
-----------
2,954,063
-----------
Banking, Finance & Insurance - 15.65%
American International Group+ .................. 13,600 1,789,250
Chubb+ ......................................... 17,500 1,381,406
Equifax ........................................ 116,400 4,503,225
Federal Home Loan .............................. 103,100 4,774,819
Federal National Mortgage ...................... 41,400 2,478,825
Nationwide Financial Services-A ................ 42,700 1,852,113
PMI Group ...................................... 41,300 3,355,625
Provident+ ..................................... 34,500 1,347,656
SAFECO ......................................... 36,300 1,811,597
Unum+ .......................................... 53,400 2,870,250
-----------
26,164,766
-----------
Buildings and Materials - 4.70%
Foster Wheeler ................................. 44,100 1,221,019
Masco+ ......................................... 114,600 6,646,800
-----------
7,867,819
-----------
Cable, Media & Publishing - 1.95%
Wallace Computer Services+ ..................... 90,700 3,270,869
-----------
3,270,869
-----------
Chemicals - 7.63%
Ecolab ......................................... 213,300 6,758,944
Fuller (HB) ................................... 29,900 1,866,881
Grace(W.R.)+ .................................. 32,600 662,188
Valspar ........................................ 87,100 3,473,113
-----------
12,761,126
-----------
Computers & Technology - 1.91%
Hewlett-Packard+ ............................... 42,400 3,193,250
-----------
3,193,250
-----------
Electronics & Electrical - 4.74%
Intel .......................................... 21,800 1,762,394
Symbol Technologies ............................ 122,900 4,731,650
Teleflex ....................................... 33,600 1,428,000
-----------
7,922,044
-----------
Energy - 3.27%
*Compagnie Francaise de Petroleum Total+ ........ 33,400 1,962,250
Kerr-McGee ..................................... 23,300 1,537,800
*Royal Dutch Petroleum+ ......................... 34,900 1,974,031
-----------
5,474,081
-----------
- ---------
Top 10 equity holdings, representing 32.33% of net assets, are in boldface.
<PAGE>
- --------------------------------------------------------------------------------
Number Market
of Shares Value
- --------------------------------------------------------------------------------
Common Stock (Continued)
Food, Beverage & Tobacco - 7.62%
ConAgra+ ....................................... 83,800 $ 2,445,913
Hannaford Brothers ............................. 41,000 1,821,938
Hershey Foods .................................. 19,300 1,413,725
Philip Morris .................................. 81,400 3,037,238
Ralston-Purina Group+ .......................... 14,600 1,547,600
Universal Foods ................................ 48,900 2,472,506
-----------
12,738,920
-----------
Healthcare & Pharmaceuticals - 10.07%
AFLAC .......................................... 60,300 3,919,500
American Home Products ......................... 71,000 6,611,875
Johnson & Johnson .............................. 51,400 3,668,675
Tyco International ............................. 48,300 2,632,350
-----------
16,832,400
-----------
Packaging & Containers - 0.66%
*Sealed Air+ .................................... 17,474 1,095,376
-----------
1,095,376
-----------
Real Estate - 2.68%
Developers Diversified Realty .................. 21,700 861,219
Highwoods Properties ........................... 24,500 833,000
Storage USA+ ................................... 24,100 912,788
Nationwide Health Properties ................... 39,300 923,550
Sun Communities ................................ 27,400 959,000
-----------
4,489,557
-----------
Retail - 10.51%
Intimate Brands+ ............................... 170,400 4,941,600
Lowe's Companies ............................... 15,000 1,049,063
May Department Stores+ ......................... 22,900 1,412,644
Rite Aid+ ...................................... 233,600 7,504,400
Sherwin-Williams ............................... 74,800 2,664,750
-----------
17,572,457
-----------
Telecommunications - 3.42%
ALLTEL+ ........................................ 36,300 1,551,825
Ericsson (LM) Tel 'B' ADS ...................... 31,900 1,638,863
SBC Communications+ ............................ 60,800 2,519,400
-----------
5,710,088
-----------
Textiles, Apparel & Furniture - 3.90%
HON Industries ................................. 101,900 3,248,063
Hillenbrand Industries ......................... 35,800 2,233,025
Miller (Herman) ............................... 34,800 1,049,438
-----------
6,530,526
-----------
Utilities - 2.67%
CMS Energy ..................................... 31,200 1,363,050
Edison International+ .......................... 25,400 757,238
PacifiCorp ..................................... 58,500 1,360,125
CIA Telecom Chile S.A .......................... 39,000 977,431
-----------
4,457,844
-----------
<PAGE>
10 for total return
Devon Fund
Statement of Net Assets (Continued)
- --------------------------------------------------------------------------------
Number Market
of Shares Value
- --------------------------------------------------------------------------------
Common Stock (Continued)
Miscellaneous - 6.01%
Federal Signal ................................... 101,600 $ 2,178,050
Pentair .......................................... 40,200 1,738,650
Service International ............................ 55,400 2,285,250
ServiceMaster+ ................................... 53,400 1,525,238
Stewart Enterprises+ ............................. 89,600 2,315,600
-----------
10,042,788
-----------
Total Common Stock (cost $124,734,275 ) 150,511,580
-----------
Convertible Preferred Stocks - 0.62%
Freeport-McMoRan Copper & Gold.................... 45,400 1,044,200
-----------
Total Convertible Preferred Stocks
(cost $1,089,960) ............................... 1,044,200
-----------
Warrants - 0.57%
Sealed Air ....................................... 15,485 953,295
-----------
Total Warrants (cost $690,975) 953,295
-----------
Principal
Amount
---------
Repurchase Agreements - 9.26%
With Chase Manhattan Bank 5.48% 05/01/98
(dated 04/30/98, collateralized by $5,040,157
U.S. Treasury Notes 6.625% due 06/30/01,
market value $5,286,300) ....................... $ 5,176,000 5,176,000
With JP Morgan 5.50% 05/01/98 (dated
04/30/98, collateralized by $5,219,966
U.S. Treasury Notes 6.375% due 04/30/99,
market value $5,259,931) ....................... 5,149,000 5,149,000
With PaineWebber 5.50% 05/01/98 (dated
04/30/98, collateralized by $2,605,045
U.S. Treasury Notes 5.125% due 12/31/98,
market value $2,643,604 and collateralized
by $2,527,197 U.S. Treasury Notes 6.75%
due 06/30/99, market value $2,616,519) ......... 5,150,000 5,150,000
-----------
Total Repurchase Agreements
(cost $15,475,000) ............................ 15,475,000
-----------
<PAGE>
Total Market Value of Securities Owned
(cost $141,990,210) - 100.47% ............................. $ 167,984,075
Liabilities net of receivables
and other assets - (0.47%) ................................ (781,551)
-------------
Net assets applicable to 8,197,067 shares
($1 par value) outstanding - 100.00% ....................... $ 167,202,524
=============
Net Asset Value - Devon Fund A Class
($87,527,014 / 4,283,844 shares) .......................... $20.43
======
Net Asset Value - Devon Fund B Class
($57,319,555 / 2,816,774 shares) .......................... $20.35
======
Net Asset Value - Devon Fund C Class
($13,499,108 / 664,008 shares) ............................ $20.33
======
Net Asset Value - Devon Fund Institutional Class
($8,856,847 / 432,441 shares) ............................. $20.48
======
Components of Net Assets at April 30, 1998:
Common Stock, $1 par value, 125,000,000 shares
authorized to the Devon Fund ............................... $ 135,799,696
Undistributed net investment income .......................... 45,679
Accumulated net realized gain on investments ................. 5,363,284
Net unrealized appreciation of investments ................... 25,993,865
-------------
Total net assets ............................................. $ 167,202,524
=============
- ---------
*Non-income producing security
+Security out on loan
Net Asset Value and Offering Price Per Share -
Devon Fund A Class
Net asset value A Class (A) ..................................... $20.43
Sales charge (4.75% of offering price, or 4.99% of
amount invested per share) (B) ................................ 1.02
------
Offering price ................................................... $21.45
======
- ---------
(A) Net Asset Value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See Buying Shares in the current Prospectus for purchases of $100,000
or more.
See accompanying notes
<PAGE>
for total return 11
Delaware Group Equity Funds I, Inc. -
Devon Fund
Statement of Operations
Six Months Ended April 30, 1998
(Unaudited)
- --------------------------------------------------------------------------------
Investment Income:
Dividends ................................... $995,093
Interest .................................... 224,559 $ 1,219,652
--------
Expenses:
Management fees ............................. 369,273
Distribution expense ........................ 342,737
Dividend disbursing and transfer agent
fees and expenses ......................... 180,823
Accounting and administration ............... 29,514
Registration fees ........................... 26,500
Reports and statements to shareholders ...... 19,142
Professional fees ........................... 11,698
Taxes (other than taxes on income) .......... 3,420
Directors' fees ............................. 2,798
Custodian fees .............................. 2,100
Other ....................................... 4,527 992,532
-------- ------------
Less expenses absorbed by Delaware
Management Company ........................ (50,979)
------------
Total Expenses .............................. 941,553
------------
Net Investment Income ....................... 278,099
------------
Net Realized and Unrealized Gain
on Investments:
Net realized gain on investments ............ 5,332,786
Net change in unrealized appreciation
on investments ............................ 16,622,985
------------
Net Realized and Unrealized Gain
on Investments ............................ 21,955,771
------------
Net Increase in Net Assets Resulting
from Operations ........................... $ 22,233,870
============
See accompanying notes
<PAGE>
Delaware Group Equity Funds I, Inc. -
Devon Fund
Statement of Changes in Net Assets
- -----------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year
Ended 4/30/98 Ended
(Unaudited) 10/31/97
- -----------------------------------------------------------------------------------
Operations:
<S> <C> <C>
Net investment income ............................ $ 278,099 $ 488,121
Net realized gain on investments ................. 5,332,786 5,746,895
Net change in unrealized appreciation
on investments ................................. 16,622,985 6,227,315
------------- ------------
Net increase in net assets resulting
from operations ................................ 22,233,870 12,462,331
------------- ------------
Distributions to shareholders from:
Net investment income:
A Class ........................................ (229,439) (362,273)
B Class ........................................ (17,778) (55,613)
C Class ........................................ (3,847) (11,501)
Institutional Class ............................ (41,307) (70,878)
Net realized gain from security transactions:
A Class ........................................ (3,129,259) (1,104,351)
B Class ........................................ (1,831,176) (264,305)
C Class ........................................ (396,243) (82,511)
Institutional Class ............................ (354,447) (216,937)
------------- ------------
(6,003,496) (2,168,369)
------------- ------------
Capital Share Transactions:
Proceeds from shares sold:
A Class ........................................ 37,636,287 38,641,388
B Class ........................................ 23,698,694 22,994,757
C Class ........................................ 6,504,547 4,650,415
Institutional Class ............................ 3,971,133 3,219,483
Net asset value of shares issued upon reinvestment
of dividends from net investment income and
net realized gain on security transactions:
A Class ........................................ 3,255,913 1,427,106
B Class ........................................ 1,765,196 309,109
C Class ........................................ 390,720 90,323
Institutional Class ............................ 395,728 287,815
------------- ------------
77,618,218 71,620,396
------------- ------------
Cost of shares repurchased:
A Class ........................................ (11,511,857) (11,875,438)
B Class ........................................ (2,237,120) (689,717)
C Class ........................................ (467,364) (354,298)
Institutional Class ............................ (2,073,513) (2,002,961)
------------- ------------
(16,289,854) (14,922,414)
------------- ------------
Increase in net assets derived from capital
share transactions ............................. 61,328,364 56,697,982
------------- ------------
Net Increase in Net Assets ....................... 77,558,738 66,991,944
Net Assets:
Beginning of period .............................. 89,643,786 22,651,842
------------- ------------
End of period .................................... $ 167,202,524 $ 89,643,786
============= =============
</TABLE>
See accompanying notes
<PAGE>
12 for total return
Delaware Group Equity Funds I, Inc. - Devon Fund
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each
period are as follows:
<TABLE>
<CAPTION>
Devon Fund A Class
---------------------------------------------------------------------
Six Months Year Ended October 31, 12/29/93\1
Ended to
April 30, 1998 1997 1996 1995 10/31/94
(Unaudited)
<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 .......................... 0.070 0.182 0.216 0.207\2 0.136
Net realized and unrealized gain from
security transactions ....................... 3.600 4.243 2.689 2.053 0.784
------- ------- ------- ------- -------
Total from investment operations ............... 3.670 4.425 2.905 2.260 0.920
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ........... (0.070) (0.210) (0.205) (0.220) (0.090)
Distributions from net realized gain on
security transactions ....................... (1.030) (0.965) (0.640) (0.320) --
------- ------- ------- ------- -------
Total dividends and distributions .............. (1.100) (1.175) (0.845) (0.540) (0.090)
------- ------- ------- ------- -------
Net asset value, end of period ..................... $20.430 $17.860 $14.610 $12.550 $10.830
======= ======= ======= ======= =======
Total return\3 .................................... 21.38% 32.11% 24.14% 21.98% 11.09%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ........ $87,527 $49,262 $14,907 $8,846 $4,600
Ratio of expenses to average net assets ........ 1.28% 1.25% 1.25% 1.25% 1.25%
Ratio of expenses to average net assets prior to
expense limitation .......................... 1.36% 1.43% 1.84% 2.29% 3.26%
Ratio of net investment income to average
net assets .................................. 0.72% 1.14% 1.67% 1.82% 1.96%
Ratio of net investment income (loss) to average
net assets prior to expense limitation ...... 0.64% 0.97% 1.08% 0.78% (0.05%)
Portfolio turnover ............................. 51% 64% 80% 99% 180%
Average commission rate paid\4 ................. $0.0600 $0.0600 $0.0600 N/A N/A
</TABLE>
- ---------
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\Does not include maximum sales charge of 4.75%.
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.
<PAGE>
for total return 13
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each
period are as follows:
<TABLE>
<CAPTION>
Devon Fund B Class
--------------------------------------------------------------------
Six Months Year Ended October 31, 9/6/94\1
Ended to
April 30, 1998 1997 1996 1995 10/31/94
(Unaudited)
<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 ................. 0.010 0.081 0.136 0.127\2 0.027
Net realized and unrealized gain (loss)
from security transactions .......... 3.580 4.219 2.664 2.053 (0.077)
------- ------- ------- ------- -------
Total from investment operations ...... 3.590 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
security transactions ............... (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 ............ $20.350 $17.800 $14.540 $12.500 $10.820
======= ======= ======= ======= =======
Total return\3 ........................... 20.95% 31.21% 23.38% 21.09% (0.46%)
Ratios and supplemental data:
Net assets, end of period
(000 omitted) ....................... $57,320 $28,757 $3,399 $863 $115
Ratio of expenses to average
net assets .......................... 1.98% 1.95% 1.95% 1.95% 1.95%
Ratio of expenses to average net assets
prior to expense limitation ......... 2.06% 2.12% 2.54% 2.99% 3.96%
Ratio of net investment income to
average net assets .................. 0.02% 0.44% 0.97% 1.12% 1.26%
Ratio of net investment income (loss)
to average net assets prior to
expense limitation .................. (0.06%) 0.26% 0.38% 0.08% (0.75%)
Portfolio turnover .................... 51% 64% 80% 99% 180%
Average commission rate paid\4 ........ $0.0600 $0.0600 $0.0600 N/A N/A
</TABLE>
<PAGE>
[RESTUBBED FROM TABLE ABOVE]
<TABLE>
<CAPTION>
Devon Fund C Class
--------------------------------------------
Six Months Year Ended 11/29/95\1
Ended October 31, to
April 30, 1998 1997 10/31/96
(Unaudited)
<S> <C> <C> <C>
Net asset value, beginning of period ...... $17.790 $14.530 $13.020
Income from investment operations:
Net investment income ................. 0.010 0.071 0.188
Net realized and unrealized gain (loss)
from security transactions .......... 3.570 4.229 2.157
------- ------- -------
Total from investment operations ...... 3.580 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
security transactions ............... (1.030) (0.965) (0.640)
------- ------- -------
Total dividends and distributions ..... (1.040) (1.040) (0.835)
------- ------- -------
Net asset value, end of period ............ $20.330 $17.790 $14.530
======= ======= =======
Total return\3 ........................... 20.91% 31.24% 18.94%
Ratios and supplemental data:
Net assets, end of period
(000 omitted) ....................... $13,499 $5,876 $1,056
Ratio of expenses to average
net assets .......................... 1.98% 1.95% 1.95%
Ratio of expenses to average net assets
prior to expense limitation ......... 2.06% 2.12% 2.54%
Ratio of net investment income to
average net assets .................. 0.02% 0.44% 0.97%
Ratio of net investment income (loss)
to average net assets prior to
expense limitation .................. (0.06%) 0.26% 0.38%
Portfolio turnover .................... 51% 64% 80%
Average commission rate paid\4 ........ $0.0600 $0.0600 $0.0600
</TABLE>
- ---------
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\Does not include contingent deferred sales charge which varies from
1%-4% depending upon the holding period for Devon Fund B Class and C 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.
<PAGE>
14 for total return
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each
period are as follows:
<TABLE>
<CAPTION>
Devon Fund Institutional Class
--------------------------------------------------------------------
Six Months Year Ended October 31, 12/29/93\1
Ended to
April 30, 1998 1997 1996 1995 10/31/94
(Unaudited)
<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 .............................. 0.123 0.211 0.267 0.241\2 0.201
Net realized and unrealized gain
from security transactions ....................... 3.580 4.284 2.693 2.049 0.749
------- ------- ------- ------- -------
Total from investment operations ................... 3.703 4.495 2.960 2.290 0.950
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ............... (0.123) (0.270) (0.240) (0.240) (0.090)
Distributions from net realized gain on
security transactions ............................ (1.030) (0.965) (0.640) (0.320) --
------- ------- ------- ------- -------
Total dividends and distributions .................. (1.153) (1.235) (0.880) (0.560) (0.090)
------- ------- ------- ------- -------
Net asset value, end of period ......................... $20.480 $17.930 $14.670 $12.590 $10.860
======= ======= ======= ======= =======
Total return ........................................... 21.51% 32.57% 24.56% 22.26% 11.45%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ............ $8,857 $5,749 $3,290 $2,870 $2,516
Ratio of expenses to average net assets ............ 0.98% 0.95% 0.95% 0.95% 0.95%
Ratio of expenses to average net assets prior to
expense limitation ............................... 1.06% 1.12% 1.54% 1.99% 2.96%
Ratio of net investment income to average
net assets ....................................... 1.04% 1.44% 1.97% 2.12% 2.26%
Ratio of net investment income to average net assets
prior to expense limitation ...................... 0.96% 1.27% 1.38% 1.08% 0.25%
Portfolio turnover ................................. 51% 64% 80% 99% 180%
Average commission rate paid (3) ................... $0.0600 $0.0600 $0.0600 N/A N/A
</TABLE>
- ---------
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\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.
<PAGE>
Delaware Group Equity I, Inc. - Devon Fund
Notes to Financial Statements
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Delaware Group Equity Funds I, Inc.- formerly known as Delaware Group Delaware
Fund, Inc., is registered as a diversified open-end investment company under
the Investment Company Act of 1940, as amended. The Delaware Group Equity
Funds I is registered as a Maryland Corporation and currently offers two
Series, Delaware Fund and Devon Fund. These financial statements and related
notes pertain to Devon Fund (the "Fund"). The Fund offers four classes of
shares. The Devon Fund A Class carries a front end sales charge of 4.75%. 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 current income and
capital appreciation.
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.
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.
<PAGE>
for total return 15
Delaware Fund
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
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 Mutual Funds. The
aggregate daily balance of the pooled cash account is invested in repurchase
agreements secured by obligations of the U.S. government. The respective
collateral is held by the Fund's custodian bank until the maturity of the
respective repurchase agreements. Each repurchase agreement is at least 100%
collateralized. However, in the event of default or bankruptcy by the
counterparty to the agreement, realization of the collateral may be subject to
legal proceedings.
Other - Expenses common to all Funds within the Delaware Investments Family of
Mutual Funds are allocated amongst the funds on the basis of average net
assets. Security transactions are recorded on the date the securities are
purchased or sold (trade date). Costs used in calculating realized gains and
losses on the sale of investment securities are those of the specific
securities sold. Dividend income is recorded on the ex-dividend date and
interest income is recorded on the accrual basis.
Certain Fund expenses are paid through "soft dollar" arrangements with
brokers. The amount of these expenses is less than 0.01% of the Fund's average
daily net assets.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
2. Investment Management and Other Transactions with Affiliates In accordance
with the terms of the Investment Management Agreement, the Fund pays Delaware
Management Company (DMC), the Investment Manager of the Fund, an annual fee
which is calculated daily at the rate of .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 April 30, 1998, the Fund had a liability for Investment
Management fees and other expenses payable to DMC for $191,613.
DMC has elected to waive its 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 April 30, 1998. Total expenses absorbed by DMC
for the six-month period ended April 30, 1998 were $50,979.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of
DMC, to provide dividend disbursing, transfer agency and accounting services
for the Fund. For the six-month period ended April 30, 1998, the Fund expensed
$180,823 for dividend disbursing and transfer agency services and $29,514 for
accounting services. At April 30, 1998, the Fund had a liability for such fees
and other expenses payable to DSC for $51,175.
Pursuant to the Distribution Agreement, the Fund pays Delaware Distributors,
L.P. (DDLP), the Distributor and an affiliate of DMC, an annual fee not to
exceed 0.30% of the average daily net assets of the A Class and 1.00% of the
average daily net assets of the B and C Class. No distribution expenses are
paid by the Institutional Class. At April 30, 1998, the Fund had a liability
for distribution fees and other expenses payable to DDLP for $74,515.
For the six-month period ended April 30, 1998, DDLP earned $97,268 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 six-month period ended April 30, 1998, the Fund made purchases of
$71,185,950 and sales of $29,171,596 of investment securities other than U.S.
government securities and temporary cash investments.
At April 30, 1998, net unrealized appreciation for federal income tax purposes
aggregated $25,983,763 of which $26,927,792 related to unrealized appreciation
of securities and $944,029 related to unrealized depreciation of securities.
At April 30, 1998, the aggregate cost of securities for federal tax purposes
was $142,000,312.
<PAGE>
4. Capital Stock
Transactions in capital stock shares were as follows:
Six Months Year
Ended 4/30/98 Ended
(Unaudited) 10/31/97
------------- --------
Shares sold:
A Class ..................................... 1,949,213 2,349,807
B Class ..................................... 1,218,033 1,401,315
C Class ..................................... 335,701 272,642
Institutional Class ......................... 199,398 197,224
Shares issued upon reinvestment of dividends from
net investment income and net realized gains
from security transactions:
A Class ..................................... 180,600 96,188
B Class ..................................... 98,401 20,945
C Class ..................................... 21,804 6,167
Institutional Class ......................... 21,892 19,481
---------- ----------
4,025,042 4,363,769
---------- ----------
Shares repurchased:
A Class ..................................... (603,803) (708,508)
B Class ..................................... (115,088) (40,605)
C Class ..................................... (23,882) (21,081)
Institutional Class ......................... (109,545) (120,222)
---------- ----------
(852,318) (890,416)
---------- ----------
Net Increase .................................... 3,172,724 3,473,353
========== ==========
5. Lines of Credit
The Fund has a committed line of credit for $3,300,000. No amount was
outstanding at April 30, 1998, or at any time during the fiscal year.
6. Securities Lending
Securities on loan are required at all times to be secured by collateral at
least equal to 102% of the market value of the securities on loan. However, in
the event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral may be subject to legal
proceedings. In the event that the borrower fails to return loaned securities,
and cash collateral being maintained by the borrower is insufficient to cover
the value of loaned securities and provided such collateral insufficiency is
not the result of investment losses, the lending agent has agreed to pay the
amount of the shortfall to the Fund or, at the option of the lending agent,
replace the loaned securities. The market value of securities on loan to
brokers and the related cash collateral received at April 30, 1998 was
$34,137,932 and $34,820,691, respectively.
<PAGE>
This Semi-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. Summary investment results
are documented in the Fund's current Statement of Additional Information. The
figures in this report represent past results which are not a guarantee of
future results. The return and principal value of an investment in the Fund
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
- ------------------------------------------------------------------------------
INVESTMENT MANAGER
Delaware Management Company
Philadelphia, Pennsylvania
INTERNATIONAL AFFILIATE
Delaware Investment 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
(photo of globes)
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.
Copy Right Delaware Distributors, L.P.
Printed in the USA
on recycled paper
SA-039 [4/98] PP6/98
(743)
