<PAGE>
Delaware Fund
For Total Return
[Photo of PECO Energy Corp. Building]
service and guidance
professional management
goals
1998
Semi-Annual
Report
DELAWARE(SM)
INVESTMENTS
- -----------
Philadelphia o London
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2
May 15, 1998
Dear Shareholder:
Looking back, 1938 was an inauspicious time to launch an equity mutual fund.
Sixty years ago Hitler seized Austria and Czechoslovakia. Stalin
purged millions and collectivized 90% of Russia's farms. The Pacific Rim faced
a crisis - Japan was invading China, destroying city after city.
Here in the U.S., the economy was in trouble. The nation's
unemployment rate stood at 19%. Franklin Roosevelt's New Deal lifted spirits
but did little to boost the country's anemic growth rate. Hollywood was
planning a new movie - Gone With the Wind.
Delaware Fund's founders foresaw better times ahead. For the past 60
years, the Fund's investment strategies have helped build financial security
for thousands of people.
Through 11 Presidential administrations, four wars and two oil
shortages, Delaware Fund has offered a lifetime of inflation protection. In
fact, over the last generation the Fund's results have outpaced the returns of
an unmanaged, balanced mix of stocks and bonds (as shown on page 9).
We are pleased to report that we upheld our tradition of sound
investing during the first half of fiscal 1998 as Delaware Fund marked its
60th Anniversary. The Fund provided a +14.92% total return (for Class A shares
at net asset value with distributions reinvested) for the six months ended
April 30, 1998. Delaware Fund's returns for the period outpaced the average of
its peers by almost 350 basis points (3.5%) and ranked among the top 5% of all
balanced funds as shown below.*
We achieved robust results with a stock portfolio of large and
mid-size companies that had superior earnings
OVER THE LAST GENERATION THE FUND'S RESULTS HAVE OUTPACED THE RETURNS OF AN
UNMANAGED, BALANCED MIX OF STOCKS AND BONDS.
<TABLE>
<CAPTION>
CUMULATIVE AND AVERAGE ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------------------------------------
Six Months Ended 10 Years Ended
April 30, 1998 October 31, 1997
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<S> <C> <C>
Delaware Fund A Class +14.92% +14.76%
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Lehman Brothers Aggregate Bond Index +3.59% +9.05%
Standard & Poor's 500 Index +22.49% +18.89%
Lipper Balanced Fund Average +11.46% (389 funds) +13.14% (52 funds)
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Delaware 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.
*Total returns of Delaware Fund's A class shares ranked 19 of 389 funds, 38th
out of 365 funds, 41st out of 249 funds, 35th out of 123 funds and 8th of 52
funds for the six-month, one-year, three-year, five-year and 10-year periods
ended April 30, 1998 by Lipper Analytical Services. Rankings are based on
total return at net asset value.
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3
and dividend growth potential. This was complemented by holdings of U.S.
government bonds, 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 Fund aims to provide a balance of current income, capital
appreciation and principal preservation, and as such is more conservative than
funds that invest solely in equities. It 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.
In 1938, the Dow Jones Industrial Average stood at less than 70
points, compared to 9063 on April 30, 1998. For most Americans, simply finding
a steady job 60 years ago was a challenge while developments overseas
represented threats rather than investment opportunities.
We owe a debt of gratitude to the generation whose sacrifices and
faith in freedom and free markets paved the way for the prosperity the U.S. is
enjoying in the final years of the 20th Century. As we prepare for a new
millennium, the economic and social issues of the day are far less brutal but
equally challenging.
Among the questions people ask today is whether the Social Security
program that FDR established in the 1930s will be solvent when Delaware Fund
celebrates its 100th anniversary in 2038. We can't predict the future, but we
do believe, as the founders of Delaware Fund did so many years ago, that
governments and companies can prosper over the long term only when citizens
and customers are treated with respect. Where free choice flourishes, the
potential for investors is limitless.
Sincerely,
/s/ Wayne A. Stork
- -------------------------------------
Wayne A. Stork
Chairman
/s/ Jeffrey J. Nick
- -------------------------------------
Jeffrey J. Nick
President and Chief Executive Officer
Our 60th Year
____________________________________________________________________________
Delaware Fund:
The Power Of Balanced Investing
Our report cover features a time-lapse composite photograph of an electronic
message marking Delaware Fund's 60th Anniversary on April 25, 1998. It ran
atop the PECO Energy Corp. tower in Center City Philadelphia. In the
background to the left is One Commerce Square, home of Delaware Investments.
_____________________________________________________________________________
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4
Portfolio Managers' Review
EQUITIES:
MERGERS AND OTHER CATALYSTS
The U.S. stock market has soared to extraordinary new heights since the summer
of 1997 despite 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.
YOUR FUND HAD 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.
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.
As your Fund's net assets reached record levels, it had 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%.
BONDS: TREADING WATER
During the first half of fiscal 1998, bond market uncertainty remained high
even as yields on 30-year U.S. Treasury bonds fell to record lows in January.
Government economic statistics offered little evidence that the Asian
recession could slow the U.S. economy. Since October, high quality bonds have
generally earned their coupon, but nothing more.
PORTFOLIO MIX
- --------------------------------------------------------------------------
April 30, 1998
Consumer Growth Stocks 12.9%
Capital Goods Stocks 10.7%
Consumer Staples Stocks 5.5%
Financial Stocks 12.8%
Utility/Energy Stocks 5.2%
Cash 2.1%
Treasuries/Other Bonds 3.5%
Consumer Cyclical Stocks 6.6%
Asset-Backed Securities/Corporate Bonds 10.2%
Mortgage-Backed Securities 13.8%
Telecommunications/Technology 9.0%
Raw Materials 7.7%
ASSET ALLOCATION
- ------------------------------------------------------
April 30, 1998 October 31, 1997
- ------------------------------------------------------
Stocks 70.4% 66.8%
Bonds 27.5% 32.2%
Cash 2.1% 1.1%
- ------------------------------------------------------
Beta* 0.63 0.65
Yield** 1.92% 2.38%
- ------------------------------------------------------
* A measure of risk relative to the S&P 500 Index. A number less than 1.0
means less historical price volatility than the index. A number higher
than 1.0 means more historical volatility.
** Thirty-day current yield for A Class shares measured according to
Securities and Exchange Commission guidelines. Yields for B, C and
Institutional Class shares were, respectively, 1.24%, 1.24% and 2.22% as
of April 30, 1998.
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Most Federal Reserve Board members appear to favor either standing pat
or a modest increase in the Fed's interest rate target. The consensus seems to
be that the U.S. economy can achieve higher growth rates without triggering
inflation because business has been increasing productivity by adding new
technology.
Since autumn many corporate bonds have been negatively affected by
problems in the Pacific Rim. Bond market analysts have been forced to
reevaluate credit risks of manufacturers and financial firms tied to the
region. Some domestic-oriented corporate bonds performed well, however, as a
mild winter fueled consumer spending. Returns from selected mortgage
securities were more attractive than corporate bonds during the first half of
fiscal 1998 despite brisk refinancing activity. In our view, a wave of mortgage
prepayments generated by 1997's sharp interest rate decline is still working
its way through the bond market. Still, in the first calendar quarter of 1998,
amid record residential and commercial refinancing activity, mortgages on
average provided a +1.64% return.
STRATEGIC POSITIONING
Continued stock market appreciation since autumn helped boost the equity
component of Delaware Fund from 66.8% to 70.4% of your Fund's net assets as of
April 30, 1998. Cash flow from new investors also improved, providing us with
greater flexibility to choose new stocks.
Delaware Fund's weighting in bonds as of April 30, 1998, was lower
than six months earlier and the lowest weighting in several years. This
reflects our belief that the earnings yield of stocks (earnings per share
divided by stock price) is likely to be modestly superior than bond yields in
the months ahead. We reduced our weighting in corporate bonds and maintained
an above-average position in mortgages because of their superior income
potential.
DELAWARE FUND'S STOCK FOCUS
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.
STOCK PORTFOLIO HIGHLIGHTS
- ------------------------------------------------------------------------------
April 30, 1998 October 31, 1997
- ------------------------------------------------------------------------------
Median Market Capitalization $5.5 billion $5.7 billion
Number of Stocks 60 53
Average Stock Price-to-Earnings Ratio 19.6x 16.9x
Top Sector Financial Stocks Capital Goods
Stock Portfolio Six-Month Return +19.77%* +29.91%**
- ------------------------------------------------------------------------------
* For A Class shares with dividends reinvested at net asset value without
effect of sales charges or expenses. P/E ratio based on analysts' earnings
estimates as reported by First Call. For complete Fund performance, see
page 9. ** Fiscal 1997 return.
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6
& 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 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:
o Value - attractive growth at discount prices;
o Consistency - steady growth in a relatively stable industry;
o Cash flow - substantial resources to reinvest in the business or raise
dividends;
o Catalysts - improving operations or expansion through acquisition; and
o Undiscovered potential - the company's potential hasn't been recognized yet
by the market.
DELAWARE FUND'S BOND FOCUS
Given bond market volatility in the 1990s, we believe that reducing risk is of
paramount importance. A strategy that provides high current income from bonds
can help offset stock market volatility on the Fund's equity portfolio.
Since October, Delaware Fund's bond component generally matched the
duration of the Lehman Brothers Aggregate Bond Index, a broad and unmanaged
benchmark of intermediate and long-term government, corporate and mortgage
securities.
Duration measures a bond's sensitivity to interest rates and indicates
the likely change in a bond's price given a 1% movement in interest rates. A
longer duration increases the chance an investment can appreciate in value
when interest rates fall, as well as the possibility of principal loss when
rates rise.
We had a greater percentage of mortgage-related securities as of April
30 than the Lehman Aggregate Index because we believed these securities
offered higher income potential than U.S. Treasuries. However, investing in
mortgages carries the risk that homeowners will prepay debt if interest rates
drop sharply. Your Fund's management seeks to reduce refinancing
BOND PORTFOLIO HIGHLIGHTS
- ------------------------------------------------------------------------------
April 30, 1998 October 31, 1997
- ------------------------------------------------------------------------------
Average Effective Duration 4.5 years 4.7 years
Average Effective Maturity 7.9 years 8.2 years
Average Quality AA2 AA2
Yield (Before Expenses) 7.10% 7.36%
Largest Sector Focus Mortgages Mortgages
Bond Portfolio Six-Month Return +3.59%* +8.49%**
- ------------------------------------------------------------------------------
* Based on Class A shares at net asset value with income reinvested without
effect of sales charges or expenses. For complete Fund performance, see page
9. See page 4 for SEC yields.
** Fiscal 1997 return.
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7
risk by investing in discount mortgages and pools of mortgages with low loan
balances. These tend to have a more attractive risk/reward profile.
A STRATEGY THAT PROVIDES HIGH CURRENT INCOME FROM BONDS CAN HELP OFFSET
VOLATILITY IN THE FUND'S EQUITY PORTFOLIO.
SUMMARY OUTLOOK
Compared to the end of calendar year 1997, investor confidence in stocks is
much greater, and that has helped push 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.
To help reduce risk, we are sticking with Delaware Fund'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 Delaware Fund's stock portfolio to
benefit from well-managed businesses in the clothing, home remodeling, paint,
life insurance and retail sectors, among others.
Compared to Treasuries, corporate and mortgage bonds appear modestly
undervalued. We believe fixed-income investors can benefit from investments in
these sectors while taking precautions against a fall in bond prices. In our
view, the Fed will not allow inflationary risks to accelerate and barring any
further deterioration in Asia, or a stock market correction, will be quick to
raise rates if domestic growth accelerates.
While there are some signs of slowing in American exports, U.S.
consumer spending is strong. The domestic economy is propelled by relatively
low interest rates, mortgage refinancing, the lowest unemployment rate in a
generation and low oil prices. Amid exuberance for a narrow range of domestic
equities, we think a balanced mix of stocks and high-quality fixed-income
securities can be a sensible alternative to more aggressive strategies.
GEORGE H. BURWELL
Vice President/Senior Portfolio Manager
Equities
GARY A. REED
Vice President/Senior Portfolio Manager
Fixed-Income
May 15, 1998
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8
MATURING WITH GRACE
OUR EQUITY BUY/SELL DISCIPLINE: THEN AND NOW
In the 1960s, conglomerates were thought to be the wave of the future.
Executives believed that owning many different businesses would produce steady
profits and make corporations less dependent on the ebb and flow of the U.S.
economy.
A colorful example was WR Grace & Co. under J. Peter Grace, one of
America's longest reigning chief executives. In Delaware Fund's Silver
Anniversary year, WR Grace's stock was the Fund's third largest holding of a
112-stock portfolio. WR Grace's stock generally performed well during the
1960s as demand for the company's Cryovac food packaging products and
specialty chemicals expanded. Over the years, Grace would build a diverse mix
of businesses that included water treatment chemicals, cocoa processing for
chocolate, construction products, the Channel Home Center hardware chain and
kidney dialysis service centers.
Grace's shares have moved in and out of Delaware Fund's portfolio over the
years, reflecting the company's earnings prospects and market conditions.
During the deep U.S. recession of the early 1980s, for example, the company
fell on hard times. Dividend growth ground to a halt and Delaware Fund
generally didn't own the stock. Grace's expansion into the energy business a
generation ago didn't work out when oil prices fell sharply.
By the 1990s, conglomerates were out of favor. Securities analysts found
them difficult to analyze and a "stick to your core strengths" theme emerged
across industrial America. J. Peter Grace's successors sold the company's
energy, medical care and cocoa businesses, among others.
YOUR FUND'S LARGEST HOLDINGS A GENERATION AGO REFLECTED AMERICA'S INDUSTRIAL
MIGHT - OIL, CHEMICALS, AVIATION AND RAILS. TODAY'S TOP HOLDINGS MIRROR AN
ECONOMY DOMINATED BY SERVICES, TECHNOLOGY, HEALTH CARE AND RETAILING.
At the end of fiscal 1997, Grace had again become one of Delaware Fund's
top 10 equity holdings. We thought the company, then selling for $55 a share,
was really worth about $85 share. At the time of purchase, Grace's
price-earnings P/E ratio was just 13 times earnings, about 30% less than
overall market.
During the first half of fiscal 1998, the market recognized much of
WR Grace's potential when the company agreed to merge its Cryovac business into
Sealed Air Corp. Delaware Fund then reduced its position in WR Grace to reduce
risk. We owned shares in both companies as of April 30. As with all our
holdings, we are carefully monitoring each company's earnings and dividend
growth potential, and our positioning is subject to change.
DELAWARE FUND - TOP 10 EQUITY HOLDINGS
- -----------------------------------------------------------
35 Years Ago April 30, 1998
- -----------------------------------------------------------
Collins & Aikman Masco Corp.
Texaco Ecolab Inc.
WR Grace Rite Aid Corp.
Air Products American Home Products
Bayuk Cigars Wallace Computer Services
McDonnell Aircraft Equifax Inc.
E. I. duPont Symbol Technologies
Southern Railway Co. Hewlett-Packard
Celanese Corp. of America Johnson & Johnson
Standard Oil (Indiana) Intimate Brands
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9
A SOUND CHOICE FOR ALL AGES - A GENERATION OF SUPERIOR RESULTS
- --------------------------------------------------------------
GROWTH OF A $100,000 INVESTMENT
APRIL 30, 1978 TO APRIL 30, 1998
An Unmanaged
Balanced Mix;
60% S&P 500
Delaware 40% Lehman Brothers
Fund Aggregate
A Class Bond Index
4/30/78 $ 96,277 $ 100,000
4/30/79 $ 102,833 $ 107,796
4/30/80 $ 110,841 $ 115,345
4/30/81 $ 161,349 $ 135,167
4/30/82 $ 166,962 $ 137,752
4/30/83 $ 269,240 $ 195,834
4/30/84 $ 239,609 $ 199,759
4/30/85 $ 285,458 $ 237,359
4/30/86 $ 406,323 $ 314,469
4/30/87 $ 463,723 $ 371,077
4/30/88 $ 396,005 $ 370,930
4/30/89 $ 486,833 $ 433,253
4/30/90 $ 536,112 $ 477,128
4/30/91 $ 606,897 $ 557,998
4/30/92 $ 689,031 $ 630,635
4/30/93 $ 775,281 $ 699,352
4/30/94 $ 817,807 $ 724,167
4/30/95 $ 875,716 $ 820,970
4/30/96 $1,039,820 $ 995,000
4/30/97 $1,200,559 $1,171,939
4/30/98 $1.57 million $1.50 million
Your Fund outperformed an unmanaged balanced mix of stocks and bonds for the
20-year period ended April 30, 1998.
Chart assumes $100,00 invested on April 30, 1978 and includes the effect of a
3.75% front-end sales charge and reinvestment of all distributions.
Performance of other Classes of Delaware Fund will vary due to differing
charges and expenses. Past performance does not guarantee future results.
<TABLE>
<CAPTION>
DELAWARE FUND PERFORMANCE
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AVERAGE ANNUAL TOTAL RETURNS THROUGH APRIL 30, 1998
Lifetime Ten Years Five Years One Year
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (Est. 4/25/38)
Excluding Sales Charge +11.52% +14.76% +15.14% +30.68%
Including Sales Charge +11.43% +14.20% +14.02% +24.47%
- -----------------------------------------------------------------------------------------------------
Class B (Est. 9/6/94)
Excluding Sales Charge +17.84% +29.63%
Including Sales Charge +17.30% +25.63%
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Class C (Est. 11/29/95)
Excluding Sales Charge +19.95% +29.65%
Including Sales Charge +19.95% +28.65%
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</TABLE>
Delaware Fund's return and share value fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Past performance
is not a guarantee of future results. Returns reflect reinvestment of any
distributions and any applicable sales charges as noted below. B and C Class
results excluding sales charge assume either the investment was not redeemed
or contingent sales charges did not apply.
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 of purchase.
The average annual total returns for the lifetime, 10-year, five-year and
one-year periods and cumulative return for the six months ended April 30, 1998
for Delaware Fund's Institutional Class, were +11.53%, +14.87%, +15.34%,
+30.98% and +15.04%, respectively. The Institutional Class was initially made
available on November 9, 1992 and is available without sales or asset-based
distribution charges only to certain eligible institutional accounts.
Performance for the Institutional Class for periods prior to this date are
based on Class A performance, adjusted to eliminate the sales charge, but not
the asset-based distribution charge.
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for total
return
10
DELAWARE FUND - 60 YEARS OF GROWTH
A Lifetime of Inflation Protection Through Balanced Investing
Growth of a $10,000 Investment 1938-1997
DIVIDENDS = $2,402,965
CAPITAL GAINS & PRINCIPAL = $4,204,057
Delaware
Fund
A Class with U.S. Consumer
Distributions Price Index
Reinvested (Inflation)
5/2/38 $ 9,524 $10,000 5/2/38 Average Hourly Wage $0.70
4/30/39 $ 9,593 $ 9,809 4/30/39
4/30/40 $ 11,868 $ 9,923 4/30/40
4/30/41 $ 11,200 $10,140 4/30/41
4/30/42 $ 10,303 $11,425 4/30/42
4/30/43 $ 15,400 $12,341 4/30/43
4/30/44 $ 16,358 $12,392 4/30/44
4/30/45 $ 21,156 $12,633 4/30/45
4/30/46 $ 28,428 $13,028 4/30/46
4/30/47 $ 21,900 $15,559 4/30/47
4/30/48 $ 23,863 $16,870 4/30/48 Berlin Airlift
4/30/49 $ 22,025 $16,934 4/30/49
4/30/50 $ 27,556 $16,756 4/30/50
4/30/51 $ 34,557 $18,333 4/30/51
4/30/52 $ 35,596 $18,741 4/30/52
4/30/53 $ 39,259 $18,880 4/30/53
4/30/54 $ 45,273 $19,020 4/30/54
4/30/55 $ 61,107 $18,982 4/30/55
4/30/56 $ 70,514 $19,071 4/30/56
4/30/57 $ 73,035 $19,809 4/30/57
4/30/58 $ 71,313 $20,522 4/30/58 First Electronic Transistors
4/30/59 $100,161 $20,560 4/30/59
4/30/60 $ 94,550 $20,967 4/30/60
4/30/61 $121,705 $21,158 4/30/61
4/30/62 $116,865 $21,442 4/30/62
4/30/63 $123,041 $21,631 4/30/63
4/30/64 $141,538 $21,963 4/30/64
4/30/65 $173,782 $22,271 4/30/65
4/30/66 $240,095 $22,911 4/30/66
4/30/67 $261,460 $23,480 4/30/67
4/30/68 $286,339 $24,428 4/30/68 Global Urban Social Unrest
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return
11
4/30/69 $ 306,083 $ 25,755 4/30/69
4/30/70 $ 239,310 $ 27,294 4/30/70
4/30/71 $ 332,874 $ 28,479 4/30/71
4/30/72 $ 355,078 $ 29,451 4/30/72
4/30/73 $ 280,685 $ 30,967 4/30/73
4/30/74 $ 253,223 $ 34,118 4/30/74
4/30/75 $ 266,104 $ 37,578 4/30/75
4/30/76 $ 342,991 $ 39,852 4/30/76
4/30/77 $ 381,288 $ 42,553 4/30/77
Inflation Begins
4/30/78 $ 405,458 $ 45,372 4/30/78 Three-Year Upward Spiral
4/30/79 $ 433,066 $ 50,111 4/30/79
4/30/80 $ 466,789 $ 57,456 4/30/80
4/30/81 $ 679,495 $ 63,214 4/30/81
4/30/82 $ 703,136 $ 67,360 4/30/82
4/30/83 $1,133,864 $ 70,013 4/30/83
4/30/84 $1,009,077 $ 73,165 4/30/84
4/30/85 $1,202,163 $ 75,842 4/30/85
4/30/86 $1,711,166 $ 77,074 4/30/86
4/30/87 $1,952,898 $ 80,012 4/30/87
4/30/88 $1,667,715 $ 83,091 4/30/88 Japanese Stock Market Soars
4/30/89 $2,050,223 $ 87,348 4/30/89
4/30/90 $2,257,751 $ 91,463 4/30/90
4/30/91 $2,555,855 $ 95,934 4/30/91
4/30/92 $2,901,746 $ 98,985 4/30/92
4/30/93 $3,264,976 $102,178 4/30/93
4/30/94 $3,444,067 $104,590 4/30/94
4/30/95 $3,687,940 $107,783 4/30/95
4/30/96 $4,379,042 $110,817 4/30/96
4/30/97 $5,055,970 $113,673 4/30/97
4/30/98 $6,601,336 $115,093 4/30/98 European Monetary Union
Pending
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A BETTER-THAN-AVERAGE BALANCE FOR GENERATIONS
- --------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH APRIL 30, 1998
Six One Five Ten Twenty Thirty
Months* Year Years Years Years Years
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Delaware Fund A Class +14.92% +30.68% +15.14% +14.76% +14.98% +11.03%
Lipper Balanced Fund Average +11.46% +25.51% +14.26% +13.14% +13.84% +10.89%
(389 funds) (365 funds) (123 funds) (52 funds) (27 funds) (20 funds)
- --------------------------------------------------------------------------------------------------------------
</TABLE>
* Cumulative total return. All performance shown is at net asset value and
includes reinvestment of capital gains and dividends. Performance of other
classes of Delaware Fund will vary due to differing charges and expenses.
Past performance does not guarantee future results.
Delaware Fund's return and share value fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Past performance
does not guarantee future results. See page 9 for Fund performance for all
classes with sales charges. Performance of other classes of Delaware Fund
differ from the above due to differing charges and expenses.
<PAGE>
12 for total return
Financial Statements
DELAWARE GROUP EQUITY FUNDS I, INC. -
DELAWARE FUND
STATEMENT OF NET ASSETS
APRIL 30, 1998 (UNAUDITED)
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<CAPTION>
- ------------------------------------------------------------------------------------
NUMBER OF MARKET
SHARES VALUE
- ------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK - 69.49%
Aerospace & Defense - 0.66%
GenCorp .............................. 180,600 $ 5,497,013
------------
5,497,013
------------
AUTOMOBILES & AUTO PARTS - 2.47%
*Danaher .............................. 189,300 13,605,938
Federal Signal ....................... 318,600 6,829,988
------------
20,435,926
------------
BANKING, FINANCE & INSURANCE - 12.82%
American International Group ......... 77,950 10,255,297
Chubb ................................ 88,700 7,001,756
*Equifax .............................. 465,900 18,024,506
Federal Home Loan .................... 275,300 12,749,831
Federal National Mortgage ............ 194,600 11,651,675
Nationwide Financial Services-A ...... 195,900 8,497,163
*PMI Group ............................ 139,200 11,310,000
*Provident ............................ 157,900 6,167,969
SAFECO ............................... 170,800 8,523,987
Unum ................................. 221,900 11,927,125
------------
106,109,309
------------
BUILDING & MATERIALS - 4.32%
Chicago Bridge and Iron .............. 181,000 2,941,250
Foster Wheeler ....................... 176,500 4,886,844
*Masco ................................ 481,100 27,903,800
------------
35,731,894
------------
CABLE, MEDIA & PUBLISHING - 2.50%
Wallace Computer Services ............ 572,800 20,656,600
------------
20,656,600
------------
CHEMICALS - 1.11%
*Fuller (HB) .......................... 100,900 6,299,944
Grace(W.R.) .......................... 142,400 2,892,500
------------
9,192,444
------------
COMPUTERS & TECHNOLOGY - 1.80%
Hewlett-Packard ...................... 198,300 14,934,469
------------
14,934,469
------------
ELECTRONICS & ELECTRICAL - 4.45%
Intel ................................ 111,500 9,014,078
Symbol Technologies .................. 448,050 17,249,925
Teleflex ............................. 248,600 10,565,500
------------
36,829,503
------------
ENERGY - 3.17%
Compagnie Francaise de Petroleum Total 160,423 9,424,850
Kerr-McGee ........................... 165,000 10,890,000
Royal Dutch Petroleum ................ 105,200 5,950,375
------------
26,265,225
------------
ENVIROMENTAL SERVICES - 3.35%
Ecolab ............................... 875,000 27,726,563
------------
27,726,563
------------
</TABLE>
- -----------------
Top 10 equity holdings, representing 24.45% of net assets are in bold face.
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
NUMBER OF MARKET
SHARES VALUE
- ---------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
FOOD, BEVERAGE & TOBACCO - 5.50%
ConAgra .............................. 426,800 $12,457,225
Hannaford Brothers ................... 136,600 6,070,163
Philip Morris ........................ 318,800 11,895,225
Ralston-Purina Group ................. 63,000 6,678,000
Universal Foods ...................... 165,800 8,383,263
-----------
45,483,876
-----------
HEALTHCARE & PHARMACEUTICALS - 5.64%
AFLAC ................................ 144,200 9,373,000
American Home Products ............... 241,400 22,480,375
Johnson & Johnson .................... 207,300 14,796,037
-----------
46,649,412
-----------
PACKAGING & CONTAINERS - 0.58%
Sealed Air ........................... 76,326 4,784,711
-----------
4,784,711
-----------
REAL ESTATE - 3.69%
Developers Diversified Realty ........ 121,100 4,806,155
*Health Care Property Investors ....... 116,300 3,925,125
Nationwide Health Properties ......... 229,800 5,400,300
Stewart Enterprises .................. 273,400 7,065,681
Storage Trust Realty ................. 87,800 2,129,150
Storage USA .......................... 78,900 2,988,338
Sun Communities ...................... 121,700 4,259,500
-----------
30,574,249
-----------
RETAIL - 7.14%
*Intimate Brands ...................... 500,400 14,511,600
May Department Stores ................ 129,200 7,970,025
Rite Aid ............................. 749,500 24,077,688
Sherwin-Williams ..................... 353,100 12,579,187
-----------
59,138,500
-----------
TELECOMMUNICATIONS - 2.73%
*ALLTEL ............................... 126,700 5,416,425
Ericsson (LM) Tel 'B' ADS ............ 125,800 6,462,975
SBC Communications ................... 258,600 10,715,738
-----------
22,595,138
-----------
TEXTILES, APPAREL & FURNITURE - 1.32%
Hillenbrand Industries ............... 174,900 10,909,388
-----------
10,909,388
-----------
UTILITIES - 1.99%
*CIA Telecom Chile S.A ................ 115,400 2,892,213
CMS Energy ........................... 200,900 8,776,819
Edison International ................. 160,000 4,770,000
-----------
16,439,032
-----------
MISCELLANEOUS - 4.25%
Pentair .............................. 185,200 8,009,900
Service International ................ 246,600 10,172,250
*ServiceMaster ........................ 211,500 6,040,969
Tyco International ................... 201,300 10,970,850
-----------
35,193,969
-----------
Total Common Stock (cost $425,290,517) 575,147,221
-----------
</TABLE>
<PAGE>
for total return 13
DELAWARE FUND
STATEMENT OF NET ASSETS (CONTINUED)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
NUMBER OF MARKET
SHARES VALUE
- ---------------------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS - 0.94%
Freeport-McMoRan Copper & Gold
7.00% pfd cv ..................................... 157,700 $ 3,627,100
Sealed Air $2.00 pfd cv ........................... 67,640 4,164,087
-----------
Total Convertible Preferred Stocks
(cost $6,717,344) ................................ 7,791,187
-----------
PRINCIPAL
AMOUNT
ASSET-BACKED SECURITIES - 4.14%
ADVANTA Series 93-1 A2 5.95% 5/25/09 ............. $ 691,695 678,276
American Finance Home Equity
Series 94-2A1 6.95% 6/25/24 ..................... 926,111 929,259
Series 92-5 A 7.20% 2/15/08 ..................... 300,858 305,010
Series 92-1A 7.50% 3/15/07 ...................... 360,293 362,095
Series 91-1A 8.00% 7/25/06 ...................... 246,488 249,101
California Infrastructure PG and E
Series 97-1 A4 6.16% 6/25/03 .................... 1,500,000 1,508,850
Countrywide Home Equity Loan
Series 97-1 A4 6.95% 5/25/21 .................... 3,475,000 3,509,750
First Union Residential Securitization Trust
Series 96-2 A2 6.46% 9/25/11 .................... 4,855,000 4,857,428
MetLife Capital Equipment Loan Trust
Series 6.85% 5/20/08 ............................ 2,865,000 2,947,512
NationsCredit Grantor Trust
Series 96-1 A 5.85% 9/15/11 ..................... 1,313,573 1,302,408
Series 97-2 A 6.35% 4/15/14 ..................... 1,556,416 1,565,171
Neiman Marcus Group Credit Card Master Trust
Series 95-1A 7.60% 6/15/03 ...................... 960,000 992,254
Oakwood Mortgage Investors
Series 97-C A3 6.65% 11/15/27 ................... 2,180,000 2,193,738
The Money Store Home Equity Trust
Series 97-C AH5 6.59% 2/15/15 ................... 2,115,000 2,127,056
Series 97-A A9 7.235% 4/15/27 ................... 3,150,000 3,234,282
UCFC Home Equity Loan
Series 96-B1 A3 7.30% 4/15/14 ................... 3,835,000 3,867,978
World Omni Automobile Lease Securitization
Series 97-B A4 6.20% 11/25/03 ................... 3,603,000 3,617,052
-----------
Total Asset-Backed Securities
(cost $33,943,970) .............................. 34,247,220
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS - 9.28%
Asset Securitization Corporation
Series 97-D5 A2 6.321% 2/14/41 .................. 3,920,000 3,961,650
Series 97-D5 A3 6.371% 2/14/41 .................. 3,215,000 3,235,094
Series 96-D2 A1 6.92% 2/14/29 ................... 3,507,428 3,619,775
Series 96-D3 A1B 7.21% 10/13/26 ................. 3,060,000 3,199,134
Series 97-D4 A1A 7.35% 4/14/29 .................. 2,844,182 2,933,507
Chase Commercial Mortgage Securities Corporation
Series 96-2 C 6.90% 11/19/06 .................... 2,273,625 2,286,414
CIT RV Trust Series 97-A A5 6.25% 11/17/08 ....... 4,185,000 4,204,250
*First USA Credit Card Master Trust
Series 97-10 A 5.778% 9/17/03 ................... 1,030,000 1,030,523
GE Capital Mortgage Services
Series 94-2 A3 5.40% 1/25/09 .................... 926,003 922,743
LBCMT Series 98-C1 C 6.68% 9/18/08 ............... 3,435,000 3,406,017
</TABLE>
<PAGE>
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- ---------------------------------------------------------------------------------------
<S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS (Continued)
Lehman Large Loan
Series 97-LLI 6.79% 6/12/04 ............ $ 3,263,775 $ 3,344,350
Mortgage Capital Funding
Series 96-MC2 C 7.224% 9/20/06 ......... 2,137,777 2,200,240
Series 96-MC1 D 7.80% 4/15/06 .......... 2,690,000 2,898,895
Nomura Asset Securities
Series 93-1 A1 6.68% 12/15/01 .......... 3,494,668 3,558,008
Series 96-MD5 A3 7.905% 4/13/36 ........ 3,300,000 3,527,905
Residential Accredit Loans
Series 97-QS1 A5 6.75% 2/25/27 ......... 3,218,000 3,220,011
Series 97-QS1 A8 6.75% 2/25/27 ......... 2,355,589 2,331,665
Series 97-QS4 A3 7.25% 5/25/27 ......... 2,925,000 2,951,507
Series 96-QS3 A13 7.29% 6/25/26 ........ 1,770,000 1,776,361
Series 95-QS1 A3 7.30% 6/25/21 ......... 1,540,000 1,552,272
Series 96-QS2 A6 7.45% 4/25/23 ......... 3,345,000 3,403,015
Series 97-QS3 A3 7.50% 4/25/27 ......... 5,265,000 5,339,862
Series 97-QS6 A5 7.50% 6/25/12 ......... 4,436,497 4,586,055
Residental Fund Mortgage Securities
Series 98-S6 A6 6.75% 3/25/28 .......... 4,135,000 4,093,004
Series 96-S9 A10 7.25% 4/25/26 ......... 3,147,240 3,239,821
----------
Total Collateralized Mortgage Obligations
(cost $75,453,462) .................... 76,822,078
----------
CORPORATE BONDS - 5.97%
American General Institute 7.57% 12/1/46 2,900,000 3,023,250
Banco Santiago S.A. 7.00% 7/18/07 ....... 1,855,000 1,822,538
Celulosa Arauco 7.25% 6/11/98 ........... 1,750,000 1,752,187
Continental Airlines 6.80% 1/2/09 ....... 1,940,000 1,956,975
Credit Foncier de France 8.00% 1/14/02 .. 2,415,000 2,553,863
Embotelladora Andina 7.00% 10/1/07 ...... 3,000,000 2,940,000
Federal Express 7.65% 1/15/14 ........... 4,210,000 4,478,387
Firstar Capital 8.32% 12/15/26 .......... 2,300,000 2,507,000
Great Western Financial 8.206% 2/1/27 ... 4,000,000 4,265,000
Health and Retirement Properties
6.75% 12/18/02 ........................ 2,900,000 2,900,000
Kohls 6.70% 2/1/06 ..................... 2,900,000 2,925,375
May Department Stores 7.50% 6/1/15 ...... 4,000,000 4,295,000
MCI Communications 6.125% 4/15/02 ....... 2,500,000 2,490,625
Raytheon 5.95% 3/15/01 ................. 3,600,000 3,591,000
Southern Investments U.K. 6.375% 11/15/01 700,000 700,875
Summit Capital Trust 8.40% 3/15/27 ...... 2,000,000 2,165,000
Transwestern Pipeline 7.55% 1/15/00 ..... 1,200,000 1,230,000
Turner Broadcasting 8.375% 7/1/13 ....... 3,350,000 3,785,500
----------
Total Corporate Bonds (cost $47,847,987) 49,382,575
----------
MORTGAGE-BACKED SECURITIES - 4.55%
Federal Home Loan Mortgage Corporation
6.00% 2/1/11 .......................... 2,167,204 2,150,950
Federal Home Loan Mortgage Corporation
6.50% 1/25/15 ......................... 4,605,000 4,633,781
Federal Home Loan Mortgage Corporation
8.50% 4/1/09 .......................... 379 403
Federal National Mortgage Association
6.00% 3/1/13-5/1/28 ................... 6,908,749 6,738,314
</TABLE>
<PAGE>
14 for total return
DELAWARE FUND
STATEMENT OF NET ASSETS (CONTINUED)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
MORTGAGE-BACKED SECURITIES (Continued)
Federal National Mortgage Association
6.50% 5/1/12 ................................... $ 5,000,000 $ 5,020,312
Federal National Mortgage Association
7.00% 7/1/17 ................................... 1,967,219 2,011,481
Federal National Mortgage Association
8.00% 1/1/10-12/1/09 ........................... 1,300,892 1,342,359
Federal National Mortgage Association
8.50% 11/1/09 .................................. 1,329,309 1,384,143
Federal National Mortgage Association
9.50% 2/1/17-2/1/25 ............................ 4,090,429 4,425,009
Government National Mortgage Association
6.50% 12/15/23-1/15/24 ......................... 2,098,908 2,099,564
Government National Mortgage Association
9.00% 1/15/20-11/15/21 ......................... 7,006,065 7,568,505
Government National Mortgage Association
9.50% 1/15/20 .................................. 244,150 266,505
-----------
Total Mortgage-Backed Securities
(cost $37,046,653) ............................. 37,641,326
-----------
MUNICIPAL BONDS - 0.34%
Philadelphia, Pennsylvania Authority For Industrial
Development Series 97 A 6.488% 6/15/04 .......... 2,873,766 2,845,028
Total Municipal Bonds (cost $2,873,766) ........... 2,845,028
U.S. TREASURY OBLIGATIONS - 3.19%
*U.S. Treasury Notes 5.375% 2/15/01 ................ 2,900,000 2,883,093
*U.S. Treasury Notes 5.50% 1/31/03 ................. 1,500,000 1,490,145
U.S. Treasury Notes 5.50% 2/15/08 ................. 7,375,000 7,281,043
U.S. Treasury Notes 5.75% 8/15/03 ................. 3,605,000 3,619,276
*U.S. Treasury Notes 5.875% 11/30/01 ............... 3,870,000 3,897,631
U.S. Treasury Notes 6.375% 1/15/00 ................ 2,000,000 2,026,280
*U.S. Treasury Notes 6.375% 8/15/27 ................ 4,950,000 5,225,268
-----------
Total U.S. Treasury Obligations
(cost $26,428,736) .............................. 26,422,736
-----------
REPURCHASE AGREEMENTS - 1.92%
With Chase Manhattan 5.48% 5/1/98 (dated
4/30/98, collateralized by $5,190,000
U.S. Treasury Notes 6.625% due 6/30/01,
market value $5,443,779) ........................ 5,330,000 5,330,000
With J.P. Morgan 5.50% 5/1/98 (dated
4/30/98, collateralized by $5,375,000
U.S. Treasury Notes 6.375% due 4/30/99,
market value $5,416,625) ........................ 5,303,000 5,303,000
With PaineWebber 5.50% 5/1/98 (dated
4/30/98, collateralized by $2,683,000
U.S. Treasury Notes 5.125% due 12/31/98,
market value $2,722,357 and $2,602,000
U.S. Treasury Notes 6.75% due 6/30/99,
market value $2,694,465) ........................ 5,303,000 5,303,000
-----------
Total Repurchase Agreements
(cost $15,936,000) ............................. 15,936,000
-----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Market
Value
- ---------------------------------------------------------------------------------------
<S> <C>
TOTAL MARKET VALUE OF SECURITIES OWNED
(cost $671,538,435) - 99.82% ......................... $826,235,371
RECEIVABLES AND OTHER ASSETS NET OF
LIABILITIES - 0.18% .................................. 1,450,992
------------
NET ASSET APPLICABLE TO 35,610,572 SHARES
($1 PAR VALUE) OUTSTANDING - 100.00% .................. $827,686,363
============
NET ASSET VALUE - DELAWARE FUND A CLASS
($613,164,006 / 26,386,538 SHARES) .................... $ 23.24
============
NET ASSET VALUE - DELAWARE FUND B CLASS
($25,508,214 / 1,098,725 SHARES) ..................... $ 23.22
============
NET ASSET VALUE - DELAWARE FUND C CLASS
($12,430,233 / 535,700 SHARES) ....................... $ 23.20
============
NET ASSET VALUE - DELAWARE FUND INSTITUTIONAL CLASS
($176,583,910 / 7,589,609 SHARES) ..................... $ 23.27
============
- -----------
*Securities on loan
COMPONENTS OF NET ASSETS AT APRIL 30, 1998:
Common stock, $1 par value, 200,000,000 shares authorized
to the Delaware Fund .................................. $622,886,581
Undistributed net investment income ..................... 2,725,309
Accumulated net realized gain on investments ............ 47,377,537
Net unrealized appreciation of investments .............. 154,696,936
------------
Total net assets ........................................ $827,686,363
============
NET ASSET VALUE AND OFFERING PRICE PER
SHARE - DELAWARE FUND A CLASS
Net asset value A Class (A) ............................ $ 23.24
Sales charge (4.75% of offering price or 4.99%
of the amount invested per share) (B) ................. 1.16
------------
Offering price .......................................... $ 24.40
============
</TABLE>
- -----------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See How to Purchase Shares in the current Prospectus for purchases of
$100,000 or more.
See accompanying notes
<PAGE>
for total return 15
DELAWARE GROUP EQUITY FUNDS I, INC. -
DELAWARE FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C> <C>
Interest ..................................... $ 8,163,409
Dividends .................................... 4,560,568 $ 12,723,977
------------
EXPENSES:
Management fees .............................. 1,983,800
Distribution expense ......................... 760,165
Dividend disbursing and transfer agent fees
and expenses .............................. 676,739
Accounting and administration ................ 190,596
Registration fees ............................ 63,254
Reports and statements to shareholders ....... 63,251
Taxes other than taxes on income ............. 50,991
Directors' fees .............................. 6,690
Professional fees ............................ 2,627
Other ........................................ 10,272 3,808,385
------------ -------------
NET INVESTMENT INCOME ........................ 8,915,592
-------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain from investment transactions 47,632,082
Net change in unrealized appreciation
on investments ............................ 51,068,374
-------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS ............................ 98,700,457
-------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ........................... $107,616,048
=============
</TABLE>
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS I, INC. -
DELAWARE FUND
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR
4/30/98 ENDED
(UNAUDITED) 1997
- ---------------------------------------------------------------------------------------------------
OPERATIONS:
<S> <C> <C>
Net investment income ............................ $ 8,915,592 $ 19,346,555
Net realized gain on investments ................. 47,632,082 83,369,699
Net change in unrealized appreciation ............ 51,068,374 30,998,183
------------- -------------
Net increase in net assets resulting
from operations ................................ 107,616,048 133,714,437
------------- -------------
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income:
Delaware Fund A Class .......................... (6,761,558) (16,272,302)
Delaware Fund B Class .......................... (115,672) (261,292)
Delaware Fund C Class .......................... (55,321) (110,135)
Delaware Fund Institutional Class .............. (2,249,406) (4,590,915)
Net realized gain from security transactions:
Delaware Fund A Class .......................... (62,370,465) (44,815,558)
Delaware Fund B Class .......................... (1,962,519) (710,891)
Delaware Fund C Class .......................... (985,860) (217,176)
Delaware Fund Institutional Class .............. (17,376,596) (11,402,169)
------------- -------------
(91,877,397) (78,380,438)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
Delaware Fund A Class .......................... 22,877,746 41,923,741
Delaware Fund B Class .......................... 8,229,852 10,047,187
Delaware Fund C Class .......................... 3,746,915 6,084,168
Delaware Fund Institutional Class .............. 16,509,477 29,047,615
Net asset value of shares issued upon reinvestment
of dividends from net investment income and
realized gain on security transactions:
Delaware Fund A Class .......................... 54,964,012 47,456,233
Delaware Fund B Class .......................... 1,999,236 910,380
Delaware Fund C Class .......................... 995,610 315,208
Delaware Fund Institutional Class .............. 19,626,040 15,968,541
------------- -------------
128,948,888 151,753,073
------------- -------------
Cost of shares repurchased:
Delaware Fund A Class .......................... (30,606,901) (67,004,197)
Delaware Fund B Class .......................... (1,999,480) (2,119,134)
Delaware Fund C Class .......................... (674,138) (811,843)
Delaware Fund Institutional Class .............. (16,093,861) (29,541,550)
------------- -------------
(49,374,380) (99,476,724)
------------- -------------
Increase in net assets derived from capital
share transactions ............................. 79,574,508 52,276,349
------------- -------------
NET INCREASE IN NET ASSETS ....................... 95,313,159 107,610,348
NET ASSETS:
Beginning of period .............................. 732,373,204 624,762,856
------------- -------------
End of period .................................... $ 827,686,363 $ 732,373,204
============= =============
</TABLE>
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
-----------------------------------------------------------------------------------
SIX MONTHS YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
4/30/98(1) 10/31/97 10/31/96 10/31/95 10/31/94 10/31/93
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...... $22.950 $21.260 $19.940 $18.000 $19.430 $18.720
Income from investment operations:
Net investment income ................... 0.255 0.610 0.706 0.664 0.615 0.631
Net realized and unrealized gain (loss)
on investments ........................ 2.905 3.680 2.349 2.156 (0.285) 1.509
------- ------- ------- ------- ------- -------
Total from investment operations ........ 3.160 4.290 3.055 2.820 0.330 2.140
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income .... (0.270) (0.680) (0.655) (0.630) (0.600) (0.660)
Distributions from net realized gain on
investment transactions ............... (2.600) (1.920) (1.080) (0.250) (1.160) (0.770)
------- ------- ------- ------- ------- -------
Total dividends and distributions ....... (2.870) (2.600) (1.735) (0.880) (1.760) (1.430)
------- ------- ------- ------- ------- -------
Net asset value, end of period ............ $23.240 $22.950 $21.260 $19.940 $18.000 $19.430
======= ======= ======= ======= ======= =======
Total return(2)............................ 14.92% 22.05% 16.07% 16.26% 1.80% 11.91%
Ratios and supplemental data:
Net assets, end of period (000 omitted) . $613,164 $554,448 $490,150 $493,243 $456,074 $507,528
Ratio of expenses to average net assets . 0.99% 0.97% 0.99% 0.97% 0.97% 0.89%
Ratio of net investment income to average
net assets ............................ 2.29% 2.83% 3.39% 3.55% 3.31% 3.27%
Portfolio turnover ...................... 92% 81% 92% 94% 142% 160%
Average commission rate paid(3).......... $0.0600 $0.0600 $0.0600 N/A N/A N/A
</TABLE>
(1) Ratios have been annualized and total return has not been annualized.
(2) Does not include maximum sales charge nor the 1% limited contingent
deferred sales charge that would apply in the event of certain redemptions
within 12 months of purchase.
(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.
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 DELAWARE FUND C CLASS
------------------------------------------------- ----------------------------------
SIX MONTHS YEAR YEAR YEAR 9/6/94(2) SIX MONTHS YEAR 11/29/95(2)
ENDED ENDED ENDED ENDED TO ENDED ENDED TO
4/30/98(1) 10/31/97 10/31/96 10/31/95 10/31/94 4/30/98(1) 10/31/97 10/31/96
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......... $22.880 $21.200 $19.900 $17.980 $18.340 $22.870 $21.180 $20.500
Income from investment operations:
Net investment income..................... 0.175 0.452 0.525 0.567 0.070 0.175 0.460 0.583
Net realized and unrealized gain (loss)
from investments ....................... 2.890 3.658 2.350 2.113 (0.280) 2.880 3.655 1.757
------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease) in net assets from
investment operations .................. 3.065 4.110 2.875 2.680 (0.210) 3.055 4.115 2.340
------- ------- ------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ..... (0.125) (0.510) (0.495) (0.510) (0.150) (0.125) (0.505) (0.580)
Distributions from net realized gain on
investment transactions ................ (2.600) (1.920) (1.080) (0.250) none (2.600) (1.920) (1.080)
------- ------- ------- ------- ------- ------- ------- -------
Total dividends and distributions ...... (2.725) (2.430) (1.575) (0.760) (0.150) (2.725) (2.425) (1.660)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of period ............... $23.220 $22.880 $21.200 $19.900 $17.980 $23.200 $22.870 $21.180
======= ======= ======= ======= ======= ======= ======= =======
Total return(3)............................... 14.47% 21.09% 15.15% 15.36% (1.14%) 14.43% 21.07% 12.13%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .. $25,508 $16,659 $6,872 $3,383 $568 $12,430 $8,090 $1,990
Ratio of expenses to average net assets .. 1.79% 1.78% 1.80% 1.79% 1.81% 1.79% 1.78% 1.80%
Ratio of net investment income to
average net assets ..................... 1.49% 2.00% 2.58% 2.73% 2.47% 1.49% 2.00% 2.58%
Portfolio turnover ....................... 92% 81% 92% 94% 142% 92% 81% 92%
Average commission rate paid(4)........... $0.0600 $0.0600 $0.0600 N/A N/A $0.0600 $0.0600 $0.0600
</TABLE>
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(3) Does not include contingent deferred sales charge which varies from
1%-4% depending upon the holding period for Delaware Fund B Class and C
Class.
(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.
See accompanying notes
<PAGE>
18 for total return
FINANCIAL HIGHLIGHTS (CONTINUED)
- ------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
DELAWARE FUND INSTITUTIONAL CLASS
------------------------------------------------------------------------------------
SIX MONTHS YEAR YEAR YEAR YEAR 11/9/92(2)
ENDED ENDED ENDED ENDED ENDED TO
4/30/98(1) 10/31/97 10/31/96 10/31/95 10/31/94 10/31/93
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...... $23.000 $21.300 $19.980 $18.030 $19.460 $18.820
Income from investment operations:
Net investment income ................. 0.293 0.659 0.727 0.694 0.653 0.632
Net realized and unrealized gain (loss)
from investments .................... 2.897 3.681 2.363 2.166 (0.293) 1.438
------- ------- ------- ------- ------- -------
Net increase in net assets from
investment operations ............... 3.190 4.340 3.090 2.860 0.360 2.070
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income .. (0.320) (0.720) (0.690) (0.660) (0.630) (0.660)
Distributions from net realized gain on
investment transactions ............. (2.600) (1.920) (1.080) (0.250) (1.160) (0.770)
------- ------- ------- ------- ------- -------
Total dividends and distributions ..... (2.920) (2.640) (1.770) (0.910) (1.790) (1.430)
------- ------- ------- ------- ------- -------
Net asset value, end of period ............ $23.270 $23.000 $21.300 $19.980 $18.030 $19.460
======= ======= ======= ======= ======= =======
Total return .............................. 15.04% 22.29% 16.25% 16.50% 1.96% 11.76%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $176,584 $153,176 $125,751 $108,747 $93,990 $72,052
Ratio of expenses to average net assets 0.79% 0.78% 0.80% 0.79% 0.81% 0.77%
Ratio of net investment income to
average net assets .................. 2.49% 3.00% 3.58% 3.73% 3.47% 3.39%
Portfolio turnover .................... 92% 81% 92% 94% 142% 160%
Average commission rate paid(3)........ $0.0600 $0.0600 $0.0600 N/A N/A N/A
</TABLE>
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of initial pulbic offering; ratios and total return have been
annualized.
(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.
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS I, INC. - DELAWARE 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 currently offers two Series, Delaware Fund and Devon Fund. These
financial statements and related notes pertain to Delaware Fund (the "Fund").
The Fund is organized as a Maryland Corporation and offers four classes of
shares. The Delaware Fund A Class carries a front-end load of 4.75%. The
Delaware Fund B Class carries a back-end 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.
<PAGE>
for total return 19
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 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
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. Original issue discounts are accreted to
interest income over the lives of the respective securities.
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 0.60% on the first $100
million of 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 six months ended April 30,
1998, the Fund had a liability for Investment Management fees and other
expenses payable to DMC for $150,528.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of
DMC, to provide dividend disbursing, transfer agent and accounting services
for the Fund. For the six months ended April 30, 1998, the Fund expensed
$676,739 for dividend disbursing and transfer agent services and $166,909 for
accounting services. At April 30, 1998, the Fund had a liability for such fees
and other expenses payable to DSC for $49,979.
Pursuant to the Distribution Agreement, the Fund pays Delaware Distributors,
L.P. (DDLP), the Distributor and an affiliate of DMC, an annual fee not to
exceed 0.30% of the average daily net assets of the A Class and 1.00% of the
average daily net assets of the B and C Class. No distribution expenses are
paid by the Institutional Class.
For the six months ended April 30, 1998, DDLP earned $55,886 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 months ended April 30, 1998, the Fund made purchases of
$233,539,995 and sales of $258,246,233 of investment securities other than
U.S. government securities and temporary cash investments. During the six
months ended April 30, 1998, the Fund made purchase of $118,765,480 and sales
of $107,634,276 of U.S. government securities.
<PAGE>
At April 30, 1998, unrealized appreciation for federal income tax purposes
aggregated $154,574,552 of which $158,372,062 related to unrealized
appreciation of securities and $3,797,510 related to unrealized depreciation
of securities. At April 30, 1998 the aggregate cost of securities for federal
income tax purposes was $671,660,819.
4. Capital Stock
Transactions in capital stock shares were as follows:
SIX MONTHS YEAR
ENDED ENDED
4/30/98 10/31/97
Shares sold:
Delaware Fund A Class ..................... 1,015,130 1,903,960
Delaware Fund B Class ..................... 363,797 459,520
Delaware Fund C Class ..................... 165,301 281,578
Delaware Fund Institutional Class ......... 724,716 1,328,119
Shares issued upon reinvestment of
dividends from net investment income and net
realized gains from security transactions:
Delaware Fund A Class ..................... 2,569,236 2,341,619
Delaware Fund B Class ..................... 93,506 44,725
Delaware Fund C Class ..................... 46,595 15,366
Delaware Fund Institutional Class 915,930 786,052
--------- ---------
5,894,211 7,160,939
--------- ---------
Shares repurchased:
Delaware Fund A Class ..................... (1,352,783) (3,148,854)
Delaware Fund B Class ..................... (86,579) (100,425)
Delaware Fund C Class ..................... (29,964) (37,099)
Delaware Fund Institutional Class ......... (709,717) (1,359,503)
--------- ---------
(2,179,043) (4,645,881)
--------- ---------
Net Increase .................................. 3,715,168 2,515,058
========= =========
5. Lines of Credit
The Fund has a committed line of credit for $24,300,000. No amount was
outstanding at April 30, 1998, or at any time during the fiscal year.
6. Credit and Market Risk
The Fund may invest in securities whose value is derived from an underlying
pool of mortgages or consumer loans. Prepayment of these loans may shorten the
stated maturity of the respective obligation and may result in a loss of
premium, if any has been paid.
The Fund may invest up to 10% of its total assets in illiquid securities which
may include securities with contractual restrictions on resale, securities
exempt from registration under Rule 144A of the Securities Act of 1933, as
amended, and other securities which may not be readily marketable. The
relative illiquidity of some of these securities may adversely affect the
Fund's ability to dispose of such securities in a timely manner and at a fair
price when it is necessary to liquidate such securities.
7. Securities Lending
Security loans are required at all times to be secured by collateral at least
equal to 102% of the market value of the securities on loan. However, in the
event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral may be subject to legal
proceedings. In the event that the borrower fails to return loaned securities,
and cash collateral being maintained by the borrower is insufficient to cover
the value of loaned securities and provided such collateral insufficiency is
not the result of investment losses, the lending agent has agreed to pay the
amount of the shortfall to the Fund or, at the opinion 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
$63,574,396 and $64,845,883, respectively.
<PAGE>
This Semi-annual report is for the information of Delaware Fund shareholders,
but it may be used with prospective investors when preceded or accompanied by
a current Prospectus for Delaware Fund, which sets forth details about
charges, expenses, investment objectives and operating policies of the Fund.
You should read the prospectus carefully before you invest. Summary investment
results are documented in the Fund's current Statement of Additional
Information. The figures in this report represent past results which are not a
guarantee of future results. The return and principal value of an investment
in the Fund will fluctuate so that shares, when redeemed, may be worth more or
less than their original cost.
- ------------------------------------------------------------------------------
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.
DELAWARE(SM)
INVESTMENTS
- -----------
Philadelphia o London
Printed in the USA
on recycled paper
Copy Right Delaware Distributors, L.P.
SA-002 [4/98] PP6/98
(739)
