<PAGE>
FOR TOTAL RETURN
Delaware Balanced Fund
[Various photos demonstrating service, guidance,
professional management and goals]
service and guidance
professional management
goals
1998
Annual
Report
DELAWARE
INVESTMENTS
- ---------------------
Philadelphia o London
<PAGE>
A TRADITION OF SOUND INVESTING
commitment
A Commitment
To Our Investors
Delaware Investments has a money management tradition that dates back to
1929. We have a long and distinguished history of helping individuals reach
their financial goals through a full range of investment opportunities that
include equity mutual funds.
Headquartered in Philadelphia with an international affiliate in London,
the Delaware organization has managed stock and bond portfolios since 1938.
Delaware Investments manages more than $42 billion in mutual fund assets
and institutional advisory accounts. We offer a wide variety of equity and
fixed-income investments, retirement plan accounts, IRAs, investment accounts
for variable annuities and closed-end funds.
Complete information on any fund offered by Delaware Investments can be found in
each fund's current prospectus. Prospectuses for all funds offered by Delaware
Investments are available from your financial adviser. Please read the
prospectus carefully before you invest or send money.
Delaware Balanced Fund Objective
To seek a balance of capital appreciation, income and preservation of capital.
Table of Contents
LETTER TO SHAREHOLDERS Page 1
Asset Mix Page 2
PORTFOLIO MANAGERS' REVIEW Page 3
Stock Portfolio Highlights Page 5
Bond Portfolio Highlights Page 6
MORE THAN 60 YEARS OF GROWTH Page 10
STATEMENT OF NET ASSETS Page 12
FINANCIAL HIGHLIGHTS Page 16
total
return
About Your Fund's Portfolio Managers
o GEORGE H. BURWELL MANAGES MORE THAN $1.2 BILLION IN EQUITY MUTUAL FUND ASSETS
AT DELAWARE INVESTMENTS AND HAS 14 YEARS OF PROFESSIONAL INVESTMENT
EXPERIENCE. PRIOR TO JOINING THE COMPANY IN 1992, MR. BURWELL WAS AN EQUITY
PORTFOLIO MANAGER FOR MIDLANTIC BANK IN EDISON, NJ. HE IS A CHARTERED
FINANCIAL ANALYST AND HOLDS A BACHELOR OF ARTS DEGREE IN POLITICAL SCIENCE
FROM THE UNIVERSITY OF VIRGINIA. MR. BURWELL ALSO MANAGES DELAWARE
INVESTMENTS' DEVON FUND AND TAX-EFFICIENT EQUITY FUND.
o GARY A. REED HAS MANAGED FIXED-INCOME INVESTMENTS AT DELAWARE INVESTMENTS
SINCE 1989. HE HAS 20 YEARS OF PROFESSIONAL INVESTMENT EXPERIENCE AND WAS A
PORTFOLIO MANAGER AT IRVING TRUST IN NEW YORK PRIOR TO JOINING DELAWARE
INVESTMENTS. MR. REED HOLDS A MASTER'S DEGREE IN ECONOMICS FROM COLUMBIA
UNIVERSITY AND A BACHELOR'S DEGREE IN ECONOMICS FROM THE UNIVERSITY OF
CHICAGO.
tradition
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for total
return
1
November 9, 1998
Dear Shareholder:
DELAWARE BALANCED FUND HAD A banner year.
As stock market volatility increased, your Fund's balanced mix of stocks
and bonds outperformed the average of its peers and provided higher returns than
many all-equity fund categories for fiscal 1998.
We are also pleased to report that Delaware Balanced Fund enjoyed the best
growth in net assets of any year in its more than 60-year history. New
investments from retail and institutional investors and market appreciation
helped lift net assets in fiscal 1998 by nearly $230 million to $962.6 million.
This was more than any other Delaware Investments mutual fund.
Your Fund provided a +14.80% return (for A Class shares with distributions
reinvested at net asset value) for the 12 months ended October 31, 1998. These
one-year results placed in the top 11% of balanced funds according to Lipper
Analytical Services, Inc., and even outpaced the average returns of more
aggressive equity fund categories such as growth and small company funds.
Such strong returns underscore the historical fact that a balanced mix of
stocks and bonds has provided attractive results with a more moderate level of
risk than putting one's nest egg completely in stocks. For the past generation
(see chart below and on page 7), your Fund also outperformed:
o a portfolio representing a 60%/40% blend of the unmanaged Standard & Poor's
500 Index with the unmanaged Lehman Brothers Aggregate Bond Index; and,
o the average balanced fund by 1.8 percentage points.
We achieved robust results in 1998 with a stock portfolio of large and
mid-size companies that had superior earnings
DELAWARE BALANCED FUND'S RESULTS FOR FISCAL 1998 PLACED IN THE TOP 11% OF
BALANCED FUNDS AND OUTPACED THE AVERAGE TOTAL RETURN OF MANY AGGRESSIVE GROWTH
FUND CATEGORIES.
<TABLE>
<CAPTION>
Average Annual Returns
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12 Months Ended 20 Years Ended
October 31, 1998 October 31, 1998
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<S> <C> <C>
Delaware Balanced Fund A Class +14.80% +15.39%
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Lehman Brothers Aggregate Bond Index +9.34% +10.14%
Standard & Poor's 500 Index +22.01% +17.30%
Lipper Balanced Fund Average +9.13% (395 funds) +13.59% (28 funds)
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</TABLE>
Delaware Balanced Fund performance and that of Lipper Balanced Fund Average is
based on net asset value and reinvestment of distributions. Performance for all
Fund classes can be found on page 9. A direct investment in a balanced mix of
the unmanaged indexes shown above is not possible. Past performance is not a
guarantee of future results.
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for total
return
2
and dividend growth potential. This was complemented by holdings of U.S.
Treasuries, mortgage-related securities, and high-quality corporate bonds. Our
pharmaceutical and capital goods stock selections did particularly well. Rising
bond prices helped augment the Fund's total return.
Delaware Balanced Fund is guided by two portfolio managers: George H.
Burwell, who is responsible for stock selection and asset allocation, and Gary
A. Reed, whose bond selection strategy tends to emphasize high quality corporate
and mortgage-backed bonds. On the pages that follow, they discuss how your Fund
performed this past year.
The founder of Delaware Investments - Rear Admiral W. Linton Nelson - was
an accomplished U.S. naval aviator who adhered to a consistent investment
strategy. Today Delaware Balanced Fund's managers remain loyal to that
disciplined tradition. We are proud that Delaware Balanced Fund has been a firm
anchor for many investors' mutual fund portfolios for six decades.
Given the amount of market turbulence this past summer, we recommend you
meet with your adviser to review your financial commitments. In our view, an
adviser can be an effective co-pilot as you strive to reach your investment
goals.
Sincerely,
/s/ Wayne A. Stork
-------------------------------------
WAYNE A. STORK
Chairman
/s/ Jeffrey J. Nick
-------------------------------------
JEFFREY J. NICK
President and Chief Executive Officer
our
60th year
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Delaware Fund Adds "Balanced" to its Name
Since its inception over 60 years ago, Delaware Fund has generally invested at
least a portion of its assets in fixed-income securities. In 1988, the Fund's
shareholders voted to make investing in both stocks and bonds the Fund's
official strategy by approving a change in the Fund's objective to make it a
balanced fund. Now, in order to more clearly communicate the Fund's objective
and strategy to shareholders and especially to prospective investors, we have
decided to add the word "Balanced" to the Fund's name. Beginning December 31,
1998, the Fund will be known as the Delaware Balanced Fund. This change does not
affect the Fund's investment objective or strategy in any way.
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for total
return
3
Portfolio Managers' Review
BY GEORGE H. BURWELL AND GARY A. REED
Vice Presidents/Senior Portfolio Managers
November 9, 1998
EQUITIES: VOLATILITY RETURNS
Fiscal 1998 was a year that saw the highest level of stock market volatility in
a decade. Investors grew cautious about domestic stocks as corporate earnings
growth ground to a halt. Banks were hit by overseas lending problems.
Manufacturers battled a wave of cheap imports and saw export demand from Asia
dry up. Service firms faced higher U.S. labor costs and weakness in consumer
spending.
We still found many opportunities to exploit stock market inefficiency and
turmoil using a methodical growth and value stock selection discipline. Delaware
Balanced Fund also preserved capital to a greater degree than most balanced
funds during this past summer's sharp market decline, according to data from
Lipper Analytical Services, Inc.
We achieved above-average results for the equity portion of the portfolio
by focusing on dividend-paying stocks and by avoiding companies whose stock
prices relative to earnings (P/E ratio) were more than 20% higher than the
average stock in the unmanaged Standard & Poor's 500 Index. As shown on the
chart on page 5, the average P/E of most of the Fund's equity holdings (18.9x
expected 1999 earnings) was lower than the average 23.4 P/E of the S&P 500
Index.
By not paying through the nose for growth stocks with high P/Es, or buying
companies with a high degree of economic risk, we avoided a bloody nose this
summer, when most stocks fell significantly from their highs.
Additional investments from new Delaware Balanced Fund shareholders in
fiscal 1998 gave us the flexibility and resources to buy companies with
consistent earnings and dividend growth potential at attractive prices without
having to trade-in stocks we thought still had potential. More
WE PRESERVED CAPITAL TO A GREATER DEGREE THAN MOST BALANCED FUNDS DURING THIS
PAST SUMMER'S SHARP MARKET DECLINE.
PORTFOLIO COMPOSITION
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OCTOBER 31, 1998
Utility/Energy Stocks 3.7%
Credit Sensitive Stocks 20.0%
Consumer Staples Stocks 4.9%
Capital Goods/Basic Industry Stocks 12.4%
Consumer Growth Stocks 9.4%
Cash 2.8%
Consumer Cyclical Stocks 13.2%
Investment Grade Corporate Bonds 8.2%
Mortgage Backed Securities 16.7%
Treasuries/Other High Quality Bonds 4.3%
Other Common/Preferred Stocks 4.4%
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for total
return
4
[photo of couple talking to financial advisor]
than half of your Fund's top 10 equity holdings as of October 31, 1998 were
among Delaware Balanced Fund's top 10 holdings six months earlier, before the
market's summer slide.
BONDS: RECORD PRICES,
A FLIGHT TO QUALITY
Fiscal 1998 was an excellent year for U.S. government bonds. Yields on 30-year
U.S. Treasuries fell to record lows. Government economic statistics offered more
evidence of deflation - falling consumer and wholesale prices - rather than
inflation. Washington balanced the federal budget for the first time since 1969.
This past autumn the Federal Reserve Board reduced its interest rate target
to maintain domestic growth as the global economy began to weaken. Corporate
bonds were negatively affected by problems in the Pacific Rim this past year,
particularly Yankee bonds (dollar-denominated emerging market securities). Bond
market analysts have been forced to reevaluate credit risks of manufacturers and
financial firms tied to Asia, Eastern Europe and Latin America.
Returns from selected mortgage securities were weak in fiscal 1998 as
refinancing activity was brisk. A wave of mortgage prepayments generated by the
sharp decline in interest rates in 1997 worked its way through the bond market.
Prices of seasoned low-loan balance mortgages held up modestly better than other
types of mortgages.
STRATEGIC POSITIONING
As of October 31, 1998, the equity component of Delaware Balanced Fund was
modestly higher than a year ago. This primarily reflects market appreciation
rather than a strategic decision. We believe an asset mix of roughly two-thirds
of net assets in stocks and slightly less than a third in bonds has attractive
risk/reward potential given current market conditions.
The stock market's decline this past summer enhanced the earnings yield of
stocks (earnings per share divided by stock price), making stocks generally more
attractive than fixed-income investments in our view. We reduced our weighting
in corporate bonds and maintained an above-average position in mortgages because
of their superior income potential. However, our underweighting of Treasuries in
fiscal 1998 reduced the Fund's total return from bonds.
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ASSET MIX
October 31, 1998 October 31, 1997 October 31, 1996
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Stocks 68.0% 66.8% 58.9%
Bonds 29.0% 32.2% 34.4%
Cash 2.8% 1.1% 6.7%
Beta* 0.59 0.65 0.66
SEC Yield** 1.90% 2.38% 3.03%
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* A measure of risk relative to the Standard & Poor's 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.
** 30-day current yield for A Class shares measured according to Securities
and Exchange Commission guidelines. Yields for B, C and Institutional Class
shares were, respectively, 1.27%, 1.28% and 2.22% as of October 31, 1998.
<PAGE>
for total
return
5
DELAWARE BALANCED FUND'S STOCK FOCUS
Since October 1997, we achieved success with non-bank financial firms such as
Fannie Mae and Freddie Mac (Federal Home Loan Mortgage Corp). These stocks
benefited from lower interest rates, a relatively strong housing market and
brisk mortgage refinancing activity. Unlike banks, these companies were
unaffected by sour overseas loans and imprudent lending.
Delaware Balanced Fund's holdings of companies making or distributing
pharmaceuticals, such as American Home Products and Rite Aid Corp., also
provided strong returns for the year. Our selections in this area were generally
companies with either a new array of products or where management was retooling
the business to generate higher growth.
Many of our holdings are midsize companies in niche businesses in
transition. For example, the Fund's best performing stock in fiscal 1998 was
Symbol Technologies, a midcap company that has developed new uses for bar code
scanners. We believe investors can reap substantial capital appreciation
potential from stocks that are making a positive transition from being
undervalued (compared to their industry group) to being highly prized by
growth-oriented investors. As of year's end, half of Delaware Balanced Fund's
equity holdings were what we call transition stocks not in the unmanaged
Standard & Poor's 500 Index.
Two areas of disappointment this past year were retail and food. Investor
concern about soft consumer demand and negative pricing trends hurt stocks such
as Intimate Brands, operator of Victoria's Secret and Bath & Body Works stores,
and ConAgra, a major meat processor. We de-emphasized these stocks during the
second half of fiscal 1998. Until 1998, ConAgra had provided several years of
strong returns for the Fund.
Overall, we reallocated some of your Fund's assets to focus on companies
whose growth is not dependent on the ups and downs of the U.S. or world
economies. For example, we increased our position in Service Corp.
International, the world's largest funeral home operator. The stock had been a
major holding two years ago. When Service Corp.'s stock price reached a level
that met Delaware Balanced Fund's value and earnings growth criteria this past
summer, we began purchasing it again.
stock
focus
STOCK PORTFOLIO HIGHLIGHTS
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October 31, 1998 October 31, 1997
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Median Market Capitalization $5.8 billion $5.7 billion
Number of Stocks 60 53
Average Stock Price-to-Earnings Ratio 18.9x* 16.9x*
Top Sector Credit Sensitive Capital Goods
Stock Portfolio Annual Return +19.58% +29.91%
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* P/E ratio based on analysts' earnings estimates as reported by First Call. For
complete Fund performance, see page 9.
<PAGE>
for total
return
6
DELAWARE BALANCED FUND'S BOND FOCUS
Fiscal 1998 rewarded fixed-income investors who followed aggressive total return
strategies using U.S. Treasury securities. The 20-Year Plus Lehman Brothers
Treasury Index - a measure of the longest term part of the government bond
market rose an unusually high +17.26% for the 12 months ended October 31, 1998.
We do not focus exclusively on U.S. Treasuries because we believe that reducing
risk from interest rate fluctuations and diversification are of paramount
importance when investing in fixed income securities. In our view, investors are
best served over the long term by a strategy that provides high current income
from several types of investment grade bonds with intermediate and long-term
maturities.
THE DIFFERENCE IN YIELD BETWEEN TREASURIES AND INVESTMENT GRADE CORPORATE BONDS
AND MORTGAGES WIDENED DURING FISCAL 1998, INCREASING YOUR FUND'S INCOME
POTENTIAL.
Since October, Delaware Balanced Fund's bond component generally matched
the duration of the Lehman Brothers Aggregate Bond Index, a broad and unmanaged
benchmark of intermediate and long-term government, corporate and mortgage
securities.
Duration measures a bond's sensitivity to interest rates and indicates the
likely change in a bond's price given a 1% movement in interest rates. A longer
duration increases the chance an investment can appreciate in value when
interest rates fall, as well as the possibility of principal loss when rates
rise.
We had a greater percentage of mortgage-related securities as of October
31, 1998 than the Fund's bond benchmark - Lehman Brothers Aggregate Bond Index
because we believed these securities offered higher income potential than U.S.
Treasuries. Our strategy of investing in pools of mortgages with low loan
balances helped preserve the Fund's income potential because these securities
did not experience as high a level of refinancing activity as other mortgages.
A major development in the non-Treasury bond market during the past year
was that spreads - the average difference in yield between Treasuries and other
types of AAA-rated bonds - widened considerably.
bond
focus
BOND PORTFOLIO HIGHLIGHTS
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October 31, 1998 October 31, 1997
- --------------------------------------------------------------------------------
Average Duration 4.6 years 4.7 years
Average Maturity 8.0 years 8.2 years
Average Quality AA2 AA2
Yield (before expenses)* 6.48% 7.36%
Largest Sector Focus Mortgages Mortgages
Bond portfolio annual return +8.75% +8.49%
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* See page 4 for SEC yields. For complete Fund performance, see page 9.
<PAGE>
for total
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7
This occurred because investors who were worried about international market
volatility reallocated money to Treasuries as a safe haven.
After Russia defaulted on its debt this past summer and before the Fed
reduced its short-term interest rate target, the average difference in yield
between a AAA-rated corporate bond and a Treasury bond of comparable maturity
widened by 50 basis points (0.50%) to 1.27%. We believe that as international
market conditions stabilize and the Treasury market reaches equilibrium in 1999,
high quality corporate and mortgage securities could outperform other
fixed-income investments.
SUMMARY OUTLOOK
Given the uncertain earnings outlook for many American corporations, we are
focusing on companies that appear well-positioned to generate earnings growth of
at least 10% per year even if the U.S. economy slows in 1999.
By purchasing and holding stocks with P/E ratios that are reasonable
compared to the S&P 500 Index, we believe your Fund's portfolio can benefit from
any decision by the Federal Reserve Board to further reduce interest rates in
the year ahead. While we do not think a recession is likely in fiscal 1999, we
think business profits and overall economic conditions will continue to soften
as the effects of global economic turmoil reach our shores.
WE ARE FOCUSING ON COMPANIES THAT APPEAR WELL-POSITIONED TO GENERATE EARNINGS
GROWTH OF AT LEAST 10% PER YEAR EVEN IF THE U.S. ECONOMY SLOWS IN 1999.
We believe the Fed may cut its short-term interest rate target again
sometime in the next year. This should benefit bond prices, including investment
grade corporate bonds and selected U.S. government securities. We plan to
maintain a relatively high weighting in mortgage-related securities because of
the additional income potential these bonds can provide.
outlook
20 YEARS OF ATTRACTIVE RESULTS
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GROWTH OF A $100,000 INVESTMENT
NOVEMBER 1, 1978 TO OCTOBER 31, 1998
An unmanaged mix of 60%
S&P 500 Index and 40%
Delaware Balanced Lehman Brothers Aggregate
Fund A Class Bond Index
----------------- ------------------
10/31/78 $ 96,207 $ 100,000
10/31/79 $ 112,039 $ 108,528
10/31/80 $ 151,188 $ 130,567
10/31/81 $ 163,436 $ 133,571
10/31/82 $ 231,298 $ 165,081
10/31/83 $ 273,076 $ 199,111
10/31/84 $ 280,649 $ 217,392
10/31/85 $ 338,097 $ 259,817
10/31/86 $ 428,865 $ 332,303
10/31/87 $ 389,664 $ 352,327
10/31/88 $ 475,512 $ 400,535
10/31/89 $ 578,528 $ 483,020
10/31/90 $ 560,189 $ 473,566
10/31/91 $ 696,415 $ 598,174
10/31/92 $ 782,540 $ 658,388
10/31/93 $ 875,714 $ 748,995
10/31/94 $ 891,441 $ 755,268
10/31/95 $1,036,407 $ 922,048
10/31/96 $1,202,988 $1,074,737
10/31/97 $1,468,226 $1,317,747
10/31/98 $1,685,565 $1,547,543
Chart assumes $100,000 invested on November 1, 1978 and includes the effect of a
3.75% front-end sales charge and reinvestment of all distributions. Performance
of other Fund classes will vary due to differing charges and expenses. Past
performance does not guarantee future results. The maximum sales charge of 5.75%
is incrementally reduced on investments of more than $50,000. Delaware Balanced
Fund has maintained a position in fixed-income securities since its inception.
It officially became a balanced fund in 1988.
<PAGE>
for total
return
8
Companies with relatively low P/Es typically benefit the most from interest
rate cuts. Also, companies that can consistently raise cash dividends in a
falling interest rate environment become increasingly attractive to investors
seeking a balance of growth and income from equities. The average holding in
Delaware Balanced Fund's equity portfolio increased its cash dividend by 8.4% in
the past year, about twice as much as the average company in the S&P 500 Index.
MANY OF THE EQUITY "FISH" IN OUR NET ARE GROWING INTO LARGE FISH WHILE THE REST
ARE ALREADY BIG FISH THAT OTHERS SEEM TO OVERLOOK.
To maximize the efficiency of our research efforts, we will continue to
maintain a relatively concentrated equity portfolio. Overall, we're comfortable
with a portfolio of approximately 50 to 70 stocks.
Many of the hundreds of growth and income mutual funds available to
investors today have a portfolio that is a clone of the S&P 500 Index, or a
barbell combination of growth and value stocks. A growth stock generally sells
at a high price (relative to earnings), reflecting high investor expectations. A
value stock sells at a lower price, reflecting lower expectations.
We strive to make Delaware Balanced Fund different by trolling the waters
between growth and value investment styles. Many of the equity "fish" in our net
are growing into large fish while the rest are already big fish that others seem
to overlook. The bond component of the Fund, meanwhile, acts as a ballast that
can potentially reduce the effects of market volatility. By exercising a
consistent discipline and patience, we think we have assembled a well-stocked,
well-balanced portfolio that can benefit shareholders in stormy stock market
conditions.
[photo of glasses, pen and keyboard]
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Delaware Balanced Fund's
Stock Selection Strategy
FIVE PILLARS OF GROWTH AND VALUE
o Strong Valuation: attractive earnings growth at discount prices
o Stability of Earnings: simple businesses/stable industries that may perform
well in a variety of market conditions
o Positive Cash Flow: substantial resources to reinvest in the business
o Dynamic Change: company expansion or acquisition
o Under-Researched: company not followed by many analysts, potential not yet
recognized by the market
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for total
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9
Performance Summary
DELAWARE BALANCED FUND'S 10-YEAR PERFORMANCE
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GROWTH OF A $10,000 INVESTMENT
NOVEMBER 1, 1988 TO OCTOBER 31, 1998
Standard & Poor's Delaware Balanced Lehman Brothers
500 Index Fund A Class Aggregate Bond Index
----------------- ----------------- --------------------
11/01/88 $10,000 $ 9,425 $10,000
10/31/89 $12,640 $11,467 $11,190
10/31/90 $11,694 $11,104 $11,896
10/31/91 $15,612 $13,804 $13,777
10/31/92 $17,166 $15,511 $15,132
10/31/93 $19,731 $17,358 $16,928
10/31/94 $20,494 $17,669 $16,307
10/31/95 $25,913 $20,543 $18,859
10/31/96 $32,156 $23,845 $19,962
10/31/97 $42,483 $29,102 $21,742
10/31/98 $51,825 $33,408 $23,765
Chart assumes $10,000 invested on November 1, 1988 and includes the effect of a
5.75% maximum front-end sales charge and reinvestment of all distributions.
Performance of other Fund classes will vary due to differing charges and
expenses. Past performance does not guarantee future results. The maximum sales
charge was raised from 4.75% to 5.75% effective November 2, 1998 for investments
of less than $50,000.
DELAWARE BALANCED FUND PERFORMANCE
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH OCTOBER 31, 1998
Lifetime Ten Years Five Years One Year
- --------------------------------------------------------------------------------
Class A (Est. 4/25/38)
Excluding Sales Charge +11.41% +13.49% +13.99% +14.80%
Including Sales Charge +11.30% +12.82% +12.65% +8.20%
- --------------------------------------------------------------------------------
Class B (Est. 9/6/94)
Excluding Sales Charge +15.37% +13.90%
Including Sales Charge +15.06% +8.90%
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Class C (Est. 11/29/95)
Excluding Sales Charge +16.06% +13.85%
Including Sales Charge +16.06% +12.85%
Delaware Balanced Fund's return and share value fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Past performance
is not a guarantee of future results. Returns reflect reinvestment of any
distributions and any applicable sales charges as noted below. B and C Class
results excluding sales charge assumes either the investment was not redeemed or
contingent sales charges did not apply.
Class A shares have a 5.75% maximum front-end sales charge and a 12b-1 fee.
Class B shares do not carry a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are subject to a deferred sales charge
of up to 5% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee and a 1% contingent
deferred sales charge if redeemed within 12 months of purchase.
The average annual returns for the lifetime, 10-year, five-year and one-year
periods ended October 31, 1998 for Delaware Balanced Fund's Institutional Class,
were +11.43%, +13.81%, +14.20%, and +15.03%, respectively. The Institutional
Class was initially made available on November 9, 1992 and is available without
sales or asset-based distribution charges only to certain eligible institutional
accounts. Performance for the Institutional Class for periods prior to this date
is based on Class A performance, adjusted to eliminate the sales charge, but not
the asset-based distribution charge.
<PAGE>
DELAWARE BALANCED FUND - MORE THAN 60 YEARS OF GROWTH
A LIFETIME OF INFLATION PROTECTION THROUGH BALANCED INVESTING
GROWTH OF A $10,000 INVESTMENT 1938-1998
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Delaware Balanced Fund
A Class with U.S. Consumer Price
Period End Distributions Reinvested Index (Inflation)
- ---------- ------------------------ -------------------
05/02/38 $ 9,428 $ 10,000 -- Average Hourly
10/31/38 $ 10,527 $ 9,949 Wage $0.70
10/31/39 $ 11,078 $ 9,949
10/31/40 $ 11,142 $ 9,949
10/31/41 $ 11,613 $ 10,852
10/31/42 $ 12,258 $ 11,819
10/31/43 $ 16,194 $ 12,366
10/31/44 $ 17,355 $ 12,583
10/31/45 $ 24,122 $ 12,811
10/31/46 $ 22,347 $ 14,784
10/31/47 $ 22,961 $ 16,323
10/31/48 $ 24,110 $ 17,316 -- Berlin Airlift
10/31/49 $ 23,979 $ 16,845
10/31/50 $ 29,115 $ 17,443
10/31/51 $ 35,010 $ 18,626
10/31/52 $ 36,952 $ 18,982
10/31/53 $ 38,396 $ 19,173
10/31/54 $ 50,196 $ 18,995
10/31/55 $ 61,983 $ 19,071
10/31/56 $ 68,942 $ 19,542
10/31/57 $ 63,623 $ 20,114
10/31/58 $ 85,511 $ 20,547 -- First Electronic
10/31/59 $ 98,956 $ 20,852 Transistors
10/31/60 $ 92,812 $ 21,132
10/31/61 $ 124,022 $ 21,300
10/31/62 $ 98,021 $ 21,584
10/31/63 $ 129,051 $ 21,845
10/31/64 $ 153,952 $ 22,105
10/31/65 $ 189,665 $ 22,485
10/31/66 $ 195,454 $ 23,338
10/31/67 $ 269,193 $ 23,930
10/31/68 $ 315,200 $ 25,044 -- Global Urban
10/31/69 $ 282,309 $ 26,441 Social Unrest
10/31/70 $ 245,822 $ 27,981
10/31/71 $ 297,394 $ 29,000
10/31/72 $ 326,999 $ 29,995
10/31/73 $ 281,670 $ 32,365
10/31/74 $ 222,512 $ 36,297
10/31/75 $ 285,055 $ 38,999
10/31/76 $ 360,055 $ 41,060
10/31/77 $ 356,924 $ 43,714
10/31/78 $ 372,946 $ 47,600 -- Inflation Begins
10/31/79 $ 434,318 $ 53,405 Three-Year
10/31/80 $ 586,079 $ 60,157 Upward Spiral
10/31/81 $ 633,559 $ 66,317
10/31/82 $ 896,623 $ 69,681
10/31/83 $1,058,577 $ 71,696
10/31/84 $1,087,934 $ 74,704
10/31/85 $1,310,629 $ 77,121
10/31/86 $1,662,491 $ 78,306
10/31/87 $1,510,528 $ 81,813
10/31/88 $1,843,316 $ 85,290 -- Japanese Stock
10/31/89 $2,242,659 $ 89,122 Market Soars
10/31/90 $2,171,566 $ 94,728
10/31/91 $2,699,645 $ 97,495
10/31/92 $3,033,509 $100,617
10/31/93 $3,394,697 $103,385
10/31/94 $3,455,662 $106,081
10/31/95 $4,017,621 $109,061
10/31/96 $4,663,368 $112,325
10/31/97 $5,691,562 $114,667
10/31/98 $6,505,182 $116,098 -- European
Monetary Union
- -- Dividends = $2,420,674
Capital Gains + Principal = $4,084,508
BETTER-THAN-AVERAGE BALANCE FOR GENERATIONS
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH OCTOBER 31, 1998
<PAGE>
<TABLE>
<CAPTION>
One Year Five Years 10 Years 20 Years 30 Years
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Delaware Fund A Class +14.80% +13.99% +13.49% +15.39% +10.63%
Lipper Balanced Fund Average + 9.13% +12.32% +12.21% +13.59% +10.21%
(395 funds) (150 funds) (56 funds) (28 funds) (21 funds)
</TABLE>
Delaware Balanced Fund's return and share value fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
All performance shown is at net asset value and includes reinvestment of capital
gains and dividends. Performance of other classes of Delaware Balanced Fund will
vary due to differing charges and expenses. Past performance does not guarantee
future results. Delaware Balanced Fund became a balanced fund in 1988. Data for
Lipper Balanced Fund Average is available only since 1959. See page 9 for Fund
performance for all classes with sales charges.
<PAGE>
12 for total return
Financial Statements
DELAWARE GROUP EQUITY FUNDS I, INC. -
DELAWARE FUND+
STATEMENT OF NET ASSETS
OCTOBER 31, 1998
NUMBER OF MARKET
SHARES VALUE
--------- -------
COMMON STOCK - 68.05%
AEROSPACE & DEFENSE - 0.42%
GenCorp ......................................... 180,600 $ 3,995,775
------------
3,995,775
------------
AUTOMOBILES & AUTO PARTS - 3.19%
Danaher ......................................... 378,600 15,120,338
Federal Signal .................................. 648,600 15,606,938
------------
30,727,276
------------
BANKING, FINANCE & INSURANCE - 12.85%
AFLAC ........................................... 446,900 17,038,063
American International Group .................... 118,350 10,089,338
Chubb ........................................... 79,000 4,858,500
Equifax ......................................... 669,300 25,893,544
Federal Home Loan Mortgage ...................... 629,900 36,219,250
Federal National Mortgage Association ........... 115,500 8,178,844
Nationwide Financial Services Class A ........... 195,900 8,129,850
Unum ............................................ 299,900 13,326,806
------------
123,734,195
------------
BUILDINGS & MATERIALS - 3.34%
Masco ........................................... 962,200 27,122,013
Premark International ........................... 160,100 5,073,169
------------
32,195,182
------------
CABLE, MEDIA & PUBLISHING - 0.71%
Wallace Computer Services ....................... 314,100 6,870,938
------------
6,870,938
------------
CHEMICALS - 1.07%
Crompton & Knowles .............................. 261,700 4,203,556
Hercules ........................................ 99,700 3,321,256
Valspar ......................................... 97,200 2,727,675
------------
10,252,487
------------
COMPUTERS & TECHNOLOGY - 3.40%
Hewlett-Packard ................................. 438,400 26,386,200
SunGuard Data Systems ........................... 186,700 6,301,125
------------
32,687,325
------------
ELECTRONICS & ELECTRICAL - 4.04%
Intel ........................................... 125,700 11,214,797
Symbol Technologies ............................. 403,650 18,063,338
Teleflex ........................................ 248,600 9,617,713
------------
38,895,848
------------
ENERGY - 2.34%
Amoco ........................................... 124,500 6,987,563
Compagnie Francaise de Petroleum ................ 160,423 9,384,746
Royal Dutch Petroleum ........................... 124,900 6,151,325
------------
22,523,634
------------
<PAGE>
Number of Market
Shares Value
--------- -------
COMMON STOCK (Continued)
ENVIRONMENTAL SERVICES - 2.72%
Ecolab ......................................... 875,000 $26,140,625
------------
26,140,625
------------
FOOD, BEVERAGE & TOBACCO - 4.91%
Campbell Soup .................................. 103,200 5,501,850
*ConAgra ........................................ 322,300 9,810,006
Philip Morris .................................. 318,800 16,298,650
Ralston Purina Group ........................... 214,100 7,145,588
Universal Foods ................................ 392,500 8,512,344
------------
47,268,438
------------
HEALTHCARE & PHARMACEUTICALS - 5.30%
American Home Products .......................... 459,600 22,405,500
Johnson & Johnson ............................... 171,500 13,977,250
Mylan Laboratories .............................. 242,600 8,354,538
Zeneca Group .................................... 159,900 6,236,100
------------
50,973,388
------------
REAL ESTATE - 2.00%
Developers Diversified Realty ................... 242,200 4,571,525
*Health Care Property Investors .................. 86,800 2,918,650
Nationwide Health Properties .................... 229,800 5,299,763
*Storage USA ..................................... 78,900 2,401,519
Sun Communities ................................. 121,700 4,069,344
------------
19,260,801
------------
RETAIL - 7.43%
Food Lion - Class A ............................. 461,600 5,063,175
Hannaford Brothers .............................. 136,600 5,984,788
*Intimate Brands ................................. 620,500 13,883,688
May Department Stores ........................... 87,200 5,319,200
Rite Aid Corp. .................................. 816,600 32,408,813
Sherwin-Williams ................................ 353,100 8,893,706
------------
71,553,370
------------
TELECOMMUNICATIONS - 3.36%
ALLTEL .......................................... 126,700 5,931,144
Ericsson (LM) Tel 'B' ........................... 251,600 5,700,313
SBC Communications .............................. 448,000 20,748,000
------------
32,379,457
------------
TEXTILES, APPAREL & FURNITURE - 2.56%
HON Industries .................................. 294,800 6,246,075
Hillenbrand Industries .......................... 212,600 12,583,263
Newell .......................................... 133,200 5,860,800
------------
24,690,138
------------
UTILITIES - 1.36%
CMS Energy ...................................... 200,900 8,852,156
Edison International ............................ 160,000 4,220,000
------------
13,072,156
------------
- ----------
Top 10 equity holdings, representing 27.06% of net assets, are in bold.
+ Effective December 29, 1998, Delaware Fund became known as Delaware Balanced
Fund.
<PAGE>
for total return 13
STATEMENT OF NET ASSETS (CONTINUED)
NUMBER OF MARKET
SHARES VALUE
--------- ------
COMMON STOCK (Continued)
MISCELLANEOUS - 7.05%
Pentair ......................................... 185,200 $ 6,968,150
Service Corp. International ..................... 519,400 18,503,623
Stewart Enterprises ............................. 771,600 17,770,913
Tyco International .............................. 397,600 24,626,350
------------
67,869,036
------------
Total Common Stock (cost $518,450,046) .......... 655,090,069
-------------
CONVERTIBLE PREFERRED STOCKS - 0.92%
Freeport-McMoRan Copper & Gold 7.00% ............ 157,700 2,345,788
Sealed Air ...................................... 162,340 6,473,308
------------
Total Convertible Preferred Stocks
(cost $10,380,836) ........................... 8,819,096
------------
PRINCIPAL
AMOUNT
----------
ASSET-BACKED SECURITIES - 3.62%
American Finance Home Equity
Series 94-2 A1 6.95% 6/25/24 ................. $ 529,441 529,335
Series 92-5 A 7.20% 2/15/08 .................. 231,678 233,184
Series 92-1 A 7.50% 3/15/07 .................. 286,616 286,458
Series 91-1 A 8.00% 7/25/06 .................. 191,676 198,162
CIT RV Series 98-A A5 6.12% 7/15/14 ............. 3,355,000 3,400,628
California Infrastructure PG and E
Series 97-1 A4 6.16% 6/25/03 ................. 1,500,000 1,516,050
Countrywide Home Equity Loan
Series 97-1 A4 6.95% 5/25/21 ................. 3,475,000 3,533,728
EQCC Home Equity Loan Trust
Series 98-2 Class A3F 6.229% 3/15/13 ......... 3,300,000 3,302,063
First USA Credit Card Master Trust
Series 97-10 A 5.468% 2/18/04 ................ 5,000,000 4,981,075
MetLife Capital Equipment Loan Trust
Series 97-A 6.85% 5/20/08 .................... 2,865,000 2,973,326
NationsCredit Grantor Trust
Series 96-1 A 5.85% 9/15/11 .................. 1,355,490 1,358,038
Series 97-2 A1 6.35% 4/15/14 ................. 1,301,681 1,328,529
Neiman Marcus Group Credit Card Master Trust
Series 95-1A 7.60% 6/15/03 ................... 430,000 443,975
The Money Store Home Equity Trust
Series 97-A A9 7.235% 5/15/28 ................ 3,150,000 3,236,940
UCFC Home Equity Loan
Series 96-B1 A3 7.30% 4/15/14 ................ 3,835,000 3,842,287
World Omni Automobile Lease Securitization
Series 97-B A4 6.20% 11/25/03 ................ 3,603,000 3,654,163
------------
Total Asset-Backed Securities
(cost $34,412,802) ........................... 34,817,941
------------
COLLATERALIZED MORTGAGE
OBLIGATIONS - 6.15%
Asset Securitization Corporation
Series 97-D5 A2 6.815% 2/14/41 ............... 3,920,000 3,911,425
Series 97-D5 A3 6.865% 2/14/41 ............... 3,215,000 3,150,198
Series 96-D3 A1B 7.21% 10/13/26 .............. 3,060,000 3,227,822
Series 97-D4 A1A 7.35% 4/14/29 ............... 2,640,210 2,738,393
CASC Series 98-D7 A1B 6.26% 9/16/30 ............. 3,745,000 3,727,445
<PAGE>
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
COLLATERALIZED MORTGAGE
OBLIGATIONS (Continued)
Chase Commercial Mortgage Securities Corporation
Series 96-2 C 6.90% 11/19/06 ................. $2,273,625 $ 2,270,783
Conti Series 96-MCI- 7.80% 4/15/06 ............ 2,890,000 2,996,569
FannieMae Whole Loan
Series 98-W3 A2 6.50% 7/25/28 ................ 3,440,000 3,496,975
Federal Home Loan Mortgage Corporation Structured
Pass Through Securities ......................
Series T-11 A5 6.50% 1/25/15 ................. 4,605,000 4,616,872
Lehman Large Loan
Series 97-LLI A1 6.79% 6/12/04 ............... 3,226,103 3,342,041
Mortgage Capital Funding
96-MC2-C 7.224% 9/20/06 ...................... 2,137,777 2,208,591
Nomura Asset Securities
Series 93-1 A1 6.68% 12/15/01 ................ 3,385,461 3,457,931
Series 96-MD5 A3 7.637% 4/13/36 .............. 3,300,000 3,477,375
Residential Accredit Loans
Series 98-QS9 A3 6.75% 7/25/28 ............... 3,375,000 3,404,531
Series 96-QS3 A13 7.29% 6/25/26 .............. 265,086 265,086
Series 97-QS3 A3 7.50% 4/25/27 ............... 5,265,000 5,327,127
Residential Funding Mortgage Securities
Series 98-S6 A6 6.75% 3/25/28 ................ 4,135,000 4,101,403
Residential Funding Mortgage Securities
Series 96-S9 A10 7.25% 4/25/26 ............... 3,325,591 3,450,301
-----------
Total Collateralized Mortgage Obligations
(cost $58,519,750) ........................... 59,170,868
-----------
CORPORATE BONDS - 8.20%
American General Institute 144A 7.57% 12/1/46 .. 2,900,000 2,939,875
Banco Santander 6.50% 11/1/05 .................. 2,305,000 2,278,308
Banco Santiago S.A. 7.00% 7/18/07 .............. 1,855,000 1,458,494
*Cardinal Health 6.25% 7/15/08 .................. 2,095,000 2,147,375
CIT Group Holdings 5.625% 10/15/03 ............. 5,125,000 5,125,000
Continental Airlines 6.80% 1/2/09 .............. 1,940,000 1,923,025
Cox Communications 6.15% 8/1/03 ................ 3,070,000 3,146,750
Credit Foncier de France 8.00% 1/14/02 ......... 2,415,000 2,614,238
Federal Express 7.65% 1/15/14 .................. 4,148,451 4,319,575
Firstar Capital 8.32% 12/15/26 ................. 2,300,000 2,417,875
General Electric Capital 5.89% 5/11/01 ......... 4,000,000 4,095,000
Great Western Financial 8.206% 2/1/27 .......... 4,000,000 4,110,000
HRPT Properties Trust 6.75% 12/18/02 ........... 2,900,000 3,016,000
Kohls 6.70% 2/1/06 ............................. 2,900,000 3,052,250
May Department Stores 7.50% 6/1/15 ............. 4,000,000 4,315,000
MCI Communications 6.125% 4/15/02 .............. 2,500,000 2,543,750
MCI Worldcom 7.55% 4/1/04 ...................... 4,525,000 4,932,250
Philip Morris 7.20% 2/1/07 ..................... 4,870,000 5,210,900
RAYCHEM 7.20% 10/15/08 ......................... 3,500,000 3,495,625
Raytheon 5.95% 3/15/01 ......................... 3,600,000 3,649,500
Southern Investments 6.375% 11/15/01 ........... 700,000 714,000
Summit Capital Trust 8.40% 3/15/27 ............. 2,000,000 2,097,500
Transwestern Pipeline 7.55% 1/15/00 ............ 1,200,000 1,228,500
Turner Broadcasting 8.375% 7/1/13 .............. 3,350,000 3,865,063
USA Waste Services 6.125% 7/15/01 .............. 2,225,000 2,236,125
U.S. Filter 6.375% 5/15/01 ..................... 2,000,000 2,020,000
-----------
Total Corporate Bonds (cost $77,586,692) ....... 78,951,978
-----------
<PAGE>
14 for total return
STATEMENT OF NET ASSETS (CONTINUED)
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
MORTGAGE-BACKED SECURITIES - 6.94%
Federal Home Loan Mortgage Corp.
6.00% 2/1/11 ................................. $ 2,030,216 $ 2,050,518
Federal Home Loan Mortgage Corp.
8.50% 4/1/09 ................................. 364 386
*Federal National Mortgage Association
5.625% 3/15/01 ............................... 2,950,000 3,015,640
*Federal National Mortgage Association
5.75% 4/15/03 ................................ 3,715,000 3,862,423
*Federal National Mortgage Association
6.00% 5/15/08-11/1/28 ........................ 32,659,189 32,443,125
Federal National Mortgage Association
6.50% 5/1/13 ................................. 4,855,886 4,928,724
Federal National Mortgage Association
7.00% 7/1/17-8/1/28 .......................... 13,458,703 13,779,201
Federal National Mortgage Association
8.00% 12/1/09 ................................ 350,304 361,361
Federal National Mortgage Association
8.50% 11/1/09 ................................ 1,101,604 1,147,045
Federal National Mortgage Association
9.50% 2/1/17-2/1/25 .......................... 2,972,085 3,192,836
Government National Mortgage Association
6.50% 12/15/23-1/15/24 ....................... 1,971,878 2,006,386
-----------
Total Mortgage-Backed Securities
(cost $66,299,486) ........................... 66,787,645
------------
MUNICIPAL BONDS - 0.29%
Philadelphia, Pennsylvania Authority for Industrial
Development Series 97 A 6.488% 6/15/04 ....... 2,819,897 2,805,797
------------
Total Municipal Bonds (cost $2,819,897) ........ 2,805,797
-----------
U.S. TREASURY OBLIGATIONS - 3.77%
*U.S. Treasury Bond 6.125% 11/15/27 ............. 13,800,000 15,566,454
*U.S. Treasury Notes 5.25% 8/15/03 .............. 1,210,000 1,262,882
*U.S. Treasury Notes 5.375% 2/15/01 ............. 9,345,000 9,564,890
U.S. Treasury Notes 5.50% 2/15/08 .............. 2,000,000 2,137,752
U.S. Treasury Notes 5.50% 3/31/03 .............. 4,280,000 4,484,117
*U.S. Treasury Notes 5.625% 5/15/08 ............. 2,640,000 2,844,820
*U.S. Treasury Notes 6.375% 1/15/00 ............. 450,000 460,887
-----------
Total U.S. Treasury Obligations
(cost $35,624,675) ........................... 36,321,802
-----------
Repurchase Agreements - 2.84%
With Chase Manhattan 5.30% 11/2/98 (dated
10/30/98, collateralized by $9,064,000
U.S. Treasury Notes 5.75% due 10/31/02,
market value $9,788,147) ..................... 9,586,000 9,586,000
With J.P. Morgan 5.25% 11/2/98 (dated
10/30/98, collateralized by $3,031,000
U.S. Treasury Notes 5.25% due 1/31/01,
market value $3,134,771 and $2,777,000
U.S. Treasury Notes 6.25% due 1/31/02,
market value $2,983,371 and $2,357,000
U.S. Treasury Notes 5.50% due 2/28/03,
market value $2,485,398 and $317,000
U.S. Treasury Notes 5.625% due 11/30/00,
market value $332,504) ....................... 8,756,000 8,756,000
<PAGE>
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
REPURCHASE AGREEMENTS (Continued)
With PaineWebber 5.30% 11/2/98
(dated 10/30/98, collateralized by $3,368,000
U.S. Treasury Notes 5.625% due 5/15/01,
market value $3,572,673 and $2,896,000
U.S. Treasury Notes 6.50% due 8/31/01,
market value $3,101,282 and $2,172,000
U.S. Treasury Notes 7.50% due 5/15/02,
market value $2,470,611) ..................... $8,959,000 $ 8,959,000
------------
Total Repurchase Agreements
(cost $27,301,000) ........................... 2,7301,000
------------
TOTAL MARKET VALUE OF SECURITIES - 100.78%
(cost $831,395,184) .......................... $970,066,196
LIABILITIES NET OF RECEIVABLES AND OTHER
ASSETS - (0.78%) (7,464,273)
------------
NET ASSETS APPLICABLE TO 41,898,044 SHARES
($1 PAR VALUE) OUTSTANDING - 100.00% ......... $962,601,923
============
NET ASSET VALUE - DELAWARE FUND A CLASS
($610,331,929 / 26,576,078 SHARES) ........... $22.97
============
NET ASSET VALUE - DELAWARE FUND B CLASS
($33,883,666 / 1,476,374 SHARES) ............. $22.95
============
NET ASSET VALUE - DELAWARE FUND C CLASS
($17,729,860 / 773,091 SHARES) ............... $22.93
============
NET ASSET VALUE - DELAWARE FUND INSTITUTIONAL CLASS
($300,656,468 / 13,072,501 SHARES) ........... $23.00
============
- ----------
* Security on loan.
COMPONENTS OF NET ASSETS AT OCTOBER 31, 1998:
Common stock, $1 par value, 200,000,000 shares authorized
to the Delaware Fund....................................... $777,001,551
Undistributed net investment income .......................... 3,464,063
Accumulated net realized gain on investments.................. 43,465,297
Net unrealized appreciation of investments.................... 138,671,012
------------
Total net assets.............................................. $962,601,923
============
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
DELAWARE FUND A CLass
Net Asset Value A Class (A) .................................. $22.97
Sales Charge (4.75% of offering price or 5.01% of the amount
invested per share) (B).................................... 1.15
------------
Offering price................................................ $24.12
============
- ----------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See How to Buy Shares
in the current Prospectus for purchases of $50,000 or more. See Notes to
Financial Statements for change in front-end sales charge effective
November 2, 1998.
See accompanying notes
<PAGE>
for total return 15
Delaware Group Equity Funds I, Inc. -
Delaware Fund
Statement of Operations
Year ended October 31, 1998
INVESTMENT INCOME:
Interest........................................... $17,049,334
Dividends.......................................... 9,765,610 $26,814,944
------------ ------------
EXPENSES:
Management fees.................................... 4,178,981
Distribution expense............................... 1,638,522
Dividend disbursing and transfer agent fees
and expenses.................................... 1,440,023
Accounting and administration...................... 348,395
Registration fees.................................. 107,054
Reports and statements to shareholders............. 81,108
Taxes (other than taxes on income)................. 53,991
Professional fees.................................. 46,127
Directors' fees.................................... 15,117
Custodian fees..................................... 10,300
Other 80,784 8,000,402
------------ ------------
NET INVESTMENT INCOME.............................. 18,814,542
------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments................... 54,958,953
Net change in unrealized appreciation/depreciation
of investments.................................. 35,042,450
------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS............................. 90,001,403
------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....................... $108,815,945
============
See accompanying notes
<PAGE>
Delaware Group Equity Funds I, Inc. -
Delaware Fund
Statements of Changes in Net Assets
YEAR ENDED YEAR ENDED
10/31/98 10/31/97
------------- -------------
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income ............................ $ 18,814,542 $ 19,346,555
Net realized gain on investments ................. 54,958,953 83,369,699
Net change in unrealized appreciation/depreciation
of investments ................................ 35,042,450 30,998,183
------------- -------------
Net increase in net assets resulting
from operations ............................... 108,815,945 133,714,437
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class ...................................... (13,013,538) (16,272,302)
B Class ...................................... (305,673) (261,292)
C Class ...................................... (154,291) (110,135)
Institutional Class .......................... (4,868,650) (4,590,915)
Net realized gain on investments:
A Class ...................................... (62,397,362) (44,815,558)
B Class ...................................... (1,962,519) (710,891)
C Class ...................................... (985,860) (217,176)
Institutional Class .......................... (17,376,598) (11,402,169)
------------- -------------
(101,064,491) (78,380,438)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class ...................................... 56,962,202 41,923,741
B Class ...................................... 19,010,246 10,047,187
C Class ...................................... 10,054,204 6,084,168
Institutional Class .......................... 161,610,921 29,047,615
Ne asset value of shares issued upon reinvestment
of distributions from net investment income
and net realized gain on investments:
A Class ...................................... 59,528,177 47,456,233
B Class ...................................... 2,170,092 910,380
C Class ...................................... 1,085,874 315,208
Institutional Class .......................... 22,245,115 15,968,541
------------- -------------
332,666,831 151,753,073
------------- -------------
Cost of shares repurchased:
A Class ...................................... (65,404,693) (67,004,197)
B Class ...................................... (4,424,506) (2,119,134)
C Class ...................................... (1,700,256) (811,843)
Institutional Class .......................... (38,660,111) (29,541,550)
------------- -------------
(110,189,566) (99,476,724)
------------- -------------
Increase in net assets derived from capital
share transactions ........................... 222,477,265 52,276,349
------------- -------------
NET INCREASE IN NET ASSETS ...................... 230,228,719 107,610,348
NET ASSETS:
Beginning of year ............................... 732,373,204 624,762,856
------------- -------------
End of year ..................................... $ 962,601,923 $ 732,373,204
============= =============
See accompanying notes
<PAGE>
16 for total return
Delaware Group Equity Funds I, Inc. -
Delaware Fund
Financial Highlights
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
Delaware Fund A Class
-----------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $22.950 $21.260 $19.940 $18.000 $19.430
Income from investment operations:
Net investment income ................................. 0.510 0.610 0.706 0.664 0.615
Net realized and unrealized gain (loss) on investments 2.620 3.680 2.349 2.156 (0.285)
-------- -------- -------- -------- --------
Total from investment operations ...................... 3.130 4.290 3.055 2.820 0.330
-------- -------- -------- -------- --------
Less dividends and distributions:
Dividends from net investment income .................. (0.510) (0.680) (0.655) (0.630) (0.600)
Distributions from net realized gain on investments ... (2.600) (1.920) (1.080) (0.250) (1.160)
-------- -------- -------- -------- --------
Total dividends and distributions ..................... (3.110) (2.600) (1.735) (0.880) (1.760)
-------- -------- -------- -------- --------
Net asset value, end of period ........................... $22.970 $22.950 $21.260 $19.940 $18.000
======== ======== ======== ======== ========
Total return(1) .......................................... 14.80% 22.05% 16.07% 16.26% 1.80%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ............... $610,332 $554,448 $490,150 $493,243 $456,074
Ratio of expenses to average net assets ............... 0.98% 0.97% 0.99% 0.97% 0.97%
Ratio of net investment income to average net assets .. 2.25% 2.83% 3.39% 3.55% 3.31%
Portfolio turnover .................................... 86% 81% 92% 94% 142%
</TABLE>
- ----------------------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
See accompanying notes
<PAGE>
for total return 17
Financial Highlights (Continued)
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
Delaware Fund B Class
----------------------------------------------------------
Year Year Year Year 9/6/94(1)
Ended Ended Ended Ended to
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $22.880 $21.200 $19.900 $17.980 $18.340
Income from investment operations:
Net investment income ................................. 0.337 0.452 0.525 0.567 0.070
Net realized and unrealized gain (loss) on investments 2.608 3.658 2.350 2.113 (0.280)
-------- -------- -------- -------- --------
Total from investment operations ...................... 2.945 4.110 2.875 2.680 (0.210)
-------- -------- -------- -------- --------
Less dividends and distributions:
Dividends from net investment income .................. (0.275) (0.510) (0.495) (0.510) (0.150)
Distributions from net realized gain on investments ... (2.600) (1.920) (1.080) (0.250) none
-------- -------- -------- -------- --------
Total dividends and distributions ..................... (2.875) (2.430) (1.575) (0.760) (0.150)
-------- -------- -------- -------- --------
Net asset value, end of period ........................... $22.950 $22.880 $21.200 $19.900 $17.980
======== ======== ======== ======== ========
Total return(2) .......................................... 13.90% 21.09% 15.15% 15.36% (1.14%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) ............... $33,884 $16,659 $6,872 $3,383 $568
Ratio of expenses to average net assets ............... 1.77% 1.78% 1.80% 1.79% 1.81%
Ratio of net investment income to average net assets .. 1.46% 2.00% 2.58% 2.73% 2.47%
Portfolio turnover .................................... 86% 81% 92% 94% 142%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Delaware Fund C Class
-----------------------------------
Year Year 11/29/95(1)
Ended Ended to
10/31/98 10/31/97 10/31/96
<S> <C> <C> <C>
Net asset value, beginning of period ..................... $22.870 $21.180 $20.500
Income from investment operations:
Net investment income ................................. 0.335 0.460 0.583
Net realized and unrealized gain (loss) on investments 2.600 3.655 1.757
-------- -------- --------
Total from investment operations ...................... 2.935 4.115 2.340
-------- -------- --------
Less dividends and distributions:
Dividends from net investment income .................. (0.275) (0.505) (0.580)
Distributions from net realized gain on investments ... (2.600) (1.920) (1.080)
-------- -------- --------
Total dividends and distributions ..................... (2.875) (2.425) (1.660)
-------- -------- --------
Net asset value, end of period ........................... $22.930 $22.870 $21.180
======== ======== ========
Total return(2) .......................................... 13.85% 21.07% 12.13%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ............... $17,730 $8,090 $1,990
Ratio of expenses to average net assets ............... 1.77% 1.78% 1.80%
Ratio of net investment income to average net assets .. 1.46% 2.00% 2.58%
Portfolio turnover .................................... 86% 81% 92%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Delaware Fund Institutional Class
-----------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $23.000 $21.300 $19.980 $18.030 $19.460
Income from investment operations:
Net investment income 0.585 0.659 0.727 0.694 0.653
Net realized and unrealized gain (loss) on investments 2.595 3.681 2.363 2.166 (0.293)
-------- -------- -------- -------- --------
Total from investment operations 3.180 4.340 3.090 2.860 0.360
-------- -------- -------- -------- --------
Less dividends and distributions:
Dividends from net investment income (0.580) (0.720) (0.690) (0.660) (0.630)
Distributions from net realized gain on investments (2.600) (1.920) (1.080) (0.250) (1.160)
-------- -------- -------- -------- --------
Total dividends and distributions (3.180) (2.640) (1.770) (0.910) (1.790)
-------- -------- -------- -------- --------
Net asset value, end of period $23.000 $23.000 $21.300 $19.980 $18.030
======== ======== ======== ======== ========
Total return 15.03% 22.29% 16.25% 16.50% 1.96%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $300,656 $153,176 $125,751 $108,747 $93,990
Ratio of expenses to average net assets 0.77% 0.78% 0.80% 0.79% 0.81%
Ratio of net investment income to average net assets 2.46% 3.00% 3.58% 3.73% 3.47%
Portfolio turnover 86% 81% 92% 94% 142%
</TABLE>
- ----------------------
(1) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
See accompanying notes
<PAGE>
18 for total return
DELAWARE GROUP EQUITY FUNDS I, INC. -
DELAWARE FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998
Delaware Group Equity Funds I, Inc. - Delaware Fund (the "Fund") is registered
as a diversified open-end investment company under the Investment Company Act of
1940, as amended. The Fund is organized as a Maryland Corporation and offers
four classes of shares. The Delaware Fund A Class carries a front-end sales
charge, which was raised from 4.75% to 5.75% effective November 2, 1998. The
Delaware Fund B Class carries a back-end sales charge. The Delaware Fund C Class
carries a level load deferred sales charge and Delaware Fund Institutional Class
has no sales charge. The Fund's objective is to seek a balance of capital
appreciation, income and preservation of capital.
1. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Fund.
Security Valuation - Securities listed on an exchange are valued at the last
quoted sales price as of the close of the NYSE on the valuation date. Securities
not traded or securities not listed on an exchange are valued at the mean of the
last quoted bid and asked prices. Long-term debt securities are valued by an
independent pricing service and such prices are believed to reflect the fair
value of such securities. Money market instruments having less than 60 days to
maturity are valued at amortized cost, which approximates market value. Other
securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Fund's Board of Directors.
Federal Income Taxes - The Fund intends to continue to qualify as a regulated
investment company and make the requisite distributions to shareholders.
Accordingly, no provision for federal income taxes has been made in the
financial statements. Income and capital gain distributions are determined in
accordance with federal income tax regulations, which may differ from generally
accepted accounting principles.
Class Accounting - Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various classes of
the Fund on the basis of daily net assets of each class. Distribution expenses
relating to a specific class are charged directly to that class.
Repurchase Agreements - The Fund may invest in a pooled cash account along with
other members of the Delaware Investments Family of Funds. The aggregate daily
balance of the pooled cash account is invested in repurchase agreements secured
by obligations of the U.S. government. The respective collateral is held by the
Fund's custodian bank until the maturity of the respective repurchase
agreements. Each repurchase agreement is at least 100% collateralized. However,
in the event of default or bankruptcy by the counterparty to the agreement,
realization of the collateral may be subject to legal proceedings.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Other - Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are
<PAGE>
recorded on the date the securities are purchased or sold (trade date). Costs
used in calculating realized gains and losses on the sale of investment
securities are those of the specific securities sold. Dividend income is
recorded on the ex-dividend date and interest income is recorded on the accrual
basis. Original issue discounts are accreted to interest income over the lives
of the respective securities. The Fund declares and pays dividends from net
investment income quarterly and from capital gains, if any, annually.
Certain expenses of the Fund are paid through "soft dollar" arrangements with
brokers. The amount of these expenses is less than 0.01% of the Fund's average
daily net assets.
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware Management Company (DMC), the Investment Manager of the Fund, an
annual fee which is calculated daily at the rate of 0.60% on the first $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 net assets over $500
million, less fees paid to the unaffiliated directors. For the year ended
October 31, 1998, the Fund had a liability for Investment Management fees and
other expenses payable to DMC of $149,482.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of DMC,
to provide dividend disbursing, transfer agent and accounting services. The Fund
pays DSC a monthly fee based on the number of shareholder accounts, shareholder
transactions and average net assets, subject to certain minimums. At October 31,
1998, the Fund had a liability for such fees and other expenses payable to DSC
of $115,370.
Pursuant to the Distribution Agreement, the Fund pays Delaware Distributors,
L.P. (DDLP), the Distributor and an affiliate of DMC, an annual fee not to
exceed 0.30% of the average daily net assets of the A Class and 1.00% of the
average daily net assets of the B and C Classes. For the year ended October 31,
1998, the Fund had a liability for such fees and other expenses payable to DDLP
of $2,402.
For the year ended October 31, 1998, DDLP earned $113,780 for commissions on
sales of the Fund A Class shares.
Certain officers of DMC, DSC and DDLP are officers, directors and/or employees
of the Fund. These officers, directors and employees are paid no compensation by
the Fund.
3. Investments
During the year ended October 31, 1998, the Fund made purchases of $586,411,761
and sales of $479,668,026 of investment securities other than U.S. government
securities and temporary cash investments. During the year ended October 31,
1998, the Fund made purchases of $234,759,489 and sales of $213,951,421 of U.S.
government securities.
At October 31, 1998, net unrealized appreciation for federal income tax purposes
aggregated $138,663,857 of which $153,527,666 related to unrealized appreciation
of securities and $14,863,809 related to unrealized depreciation of securities.
At October 31, 1998, the aggregate cost of securities for federal income tax
purposes was $831,402,339.
<PAGE>
for total return 19
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
4. Capital Stock
Transactions in capital stock shares were as follows:
Year Ended Year Ended
10/31/98 10/31/97
---------- ----------
Shares sold:
A Class ................................ 2,527,314 1,903,961
B Class ................................ 840,492 459,520
C Class ................................ 444,310 281,577
Institutional Class .................... 7,092,142 1,328,118
Shares issued upon reinvestment of
distributions from net investment income
and net realized gain on investments:
A Class ................................ 2,773,200 2,341,619
B Class ................................ 101,142 44,725
C Class ................................ 50,636 15,366
Institutional Class .................... 1,033,264 786,052
----------- -----------
14,862,500 7,160,938
----------- -----------
Shares repurchased:
A Class ................................ (2,879,391)
B Class ................................ (193,261) (100,425)
C Class ................................ (75,623) (37,099)
Institutional Class .................... (1,711,585)
----------- -----------
(4,859,860) (4,645,881)
----------- -----------
Net increase .............................. 10,002,640 2,515,057
=========== ===========
<PAGE>
5. Lines of Credit
The Fund has a committed line of credit for $24.3 million. No amount was
outstanding at October 31, 1998, or at any time during the fiscal year.
6. Market and Credit Risk
The Fund may invest in securities whose value is derived from an underlying pool
of mortgages or consumer loans. Prepayment of these loans may shorten the stated
maturity of the respective obligation and may result in a loss of premium, if
any has been paid.
The Fund may invest up to 10% of its total assets in illiquid securities which
may include securities with contractual restrictions on resale, securities
exempt from registration under Rule 144A of the Securities Act of 1933, as
amended, and other securities which may not be readily marketable. The relative
illiquidity of some of these securities may adversely affect the Fund's ability
to dispose of such securities in a timely manner and at a fair price when it is
necessary to liquidate such securities.
7. Securities Lending
Security loans for the Fund are required at all times to be secured by U.S.
Treasury obligations and/or cash collateral at least equal to 102% of the market
value of the securities on loan. However, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings. In the event that the borrower
fails to return loaned securities, and the collateral being maintained by the
borrower is insufficient to cover the value of loaned securities and provided
such collateral insufficiency is not the result of investment losses, the
lending agent has agreed to pay the amount of the shortfall to the Fund or, at
the option of the lending agent, replace the loaned securities. The market value
of securities on loan to brokers and the related collateral received at October
31, 1998 were $53,274,318 and $54,905,667, respectively.
<PAGE>
20 for total return
Delaware Group Equity Funds I, Inc. -
Delaware Fund
Report of Independent Auditors
To the Shareholders and Board of Directors
Delaware Group Equity Funds I, Inc. - Delaware Fund
We have audited the accompanying statement of net assets of Delaware Group
Equity Funds I, Inc. - Delaware Fund (the "Fund") as of October 31, 1998, and
the related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of October 31, 1998, by correspondence with the Fund's
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Group Equity Funds I, Inc. - Delaware Fund at October 31, 1998, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and its financial highlights
for each of the periods indicated therein, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
----------------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
December 4, 1998
<PAGE>
THIS ANNUAL REPORT IS FOR THE INFORMATION OF DELAWARE BALANCED FUND
SHAREHOLDERS, but it may be used with prospective investors when preceded or
accompanied by a current Prospectus for Delaware Balanced Fund, which sets forth
details about charges, expenses, investment objectives and operating policies of
the Fund. You should read the prospectus carefully before you invest or send
money. Summary investment results are documented in the Fund's current Statement
of Additional Information. The figures in this report represent past results
which are not a guarantee of future results. The return and principal value of
an investment in the Fund will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost.
BOARD OF DIRECTORS
WAYNE A. STORK
Chairman
Delaware Investments Family of Funds
Philadelphia, PA
JEFFREY J. NICK
President and Chief Executive Officer
Delaware Investments Family of Funds
Philadelphia, PA
WALTER P. BABICH
Board Chairman, Citadel Constructors, Inc.
King of Prussia, PA
JOHN H. DURHAM
Partner, Complete Care Services
Horsham, PA
ANTHONY D. KNERR
Consultant, Anthony Knerr & Associates
New York, NY
ANN R. LEVEN
Treasurer, National Gallery of Art
Washington, DC
W. THACHER LONGSTRETH
City Councilman
Philadelphia, PA
THOMAS F. MADISON
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
CHARLES E. PECK
Secretary/Treasurer, Enterprise Homes, Inc.
Fredericksburg, VA
- --------------------------------------------------------------------------------
<PAGE>
AFFILIATED OFFICERS
DAVID K. DOWNES
Executive Vice President, Chief Financial Officer
and Chief Operating Officer
Delaware Investments Family of Funds
Philadelphia, PA
GEORGE M. CHAMBERLAIN, JR.
Senior Vice President, Secretary
and General Counsel
Delaware Investments Family of Funds (Photo of Globes)
Philadelphia, PA
BRUCE D. BARTON
President and Chief Executive Officer
Delaware Distributors, L.P.
Philadelphia, PA
INVESTMENT MANAGER directors
Delaware Management Company & officers
Philadelphia, Pennsylvania
INTERNATIONAL AFFILIATE
Delaware International Advisers Ltd.
London, England
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
Philadelphia, Pennsylvania
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
Philadelphia, Pennsylvania
1818 Market Street
Philadelphia, PA 19103-3682
<PAGE>
When used with prospective investors, this report must be preceded or
accompanied by a current Delaware Balanced Fund Prospectus and the Delaware
Investments Performance Update for the most recently completed calendar quarter.
For a prospectus of any other mutual fund from Delaware Investments, contact
your financial adviser or Delaware Investments.
For Shareholders
1.800.523.1918
For Securities Dealers
1.800.362.7500
For Financial Institutions
Representatives Only
1.800.659.2265
www.delawarefunds.com
DELAWARE(SM)
INVESTMENTS
- ---------------------
Philadelphia o London
Be sure to consult your financial adviser when making investments. Mutual funds
can be a valuable part of your financial plan; however, shares of the Fund are
not FDIC or NCUSIF insured, are not guaranteed by any bank or any credit union,
and involve investment risk, including the possible loss of the principal amount
invested. Shares of the Fund are not bank or credit union deposits.
(C) Delaware Distributors, L.P.
Printed in the USA
on recycled paper
(Photo of Globes)
(1261)
AR-002[10/98]TKO 12/98
