<PAGE>
Delaware Balanced Fund
(formerly Delaware Fund)
(photo of illustration from Total Return brochure)
service and guidance
professional management
goals
1999
Semi-Annual
Report
DELAWARE INVESTMENTS
======================
Philadelphia o London
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for total
return
2
June 18, 1999
Dear Shareholder:
The seeds of three Federal Reserve Board interest rate cuts in the fall of 1998
produced abundant fruit in the first four months of 1999. Higher U.S. corporate
earnings and renewed economic expansion provided a springboard for an equity
market rally that continued throughout the first six months of your Fund's
fiscal period.
The large company stocks tracked by the unmanaged Standard & Poor's 500 Index
enjoyed a sustained rally, providing a +22.31% gain for the six months ended
April 30, 1999. This advance, however, was essentially driven by selected
technology companies and a few very large, growth-oriented companies.
Delaware Balanced Fund provided a +7.37% total return for the six months
ended April 30, 1999 (Class A shares with distributions reinvested at net asset
value). This was less than the average return of its peers in the Lipper
Balanced Fund category. As the chart below shows, however, for the twenty-year
period ended April 30, 1999, your Fund exceeded the average annual returns of
other balanced funds and a hypothetical 60%/40% blend of the Standard & Poor's
500 Index with the unmanaged Lehman Brothers Aggregate Bond Index.*
Many stocks in the Delaware Balanced Fund portfolio are mid-size companies.
During the first quarter of 1999, the performance of larger companies
overshadowed the companies we held. As a result, Delaware Balanced Fund's equity
portfolio was unable to keep pace with the S&P 500.
Delaware Balanced Fund also suffered from the significant underperformance
of three Fund holdings, Service Corp. International, Stewart Enterprises and
Rite Aid. Prices for Service Corp. International and Rite Aid stock fell in 1999
after they failed to reach their earnings projections. The disappointing
WE ARE CONFIDENT THAT DELAWARE BALANCED FUND IS WELL-POSITIONED TO BENEFIT IF
INVESTOR ATTENTION CONTINUES TO SHIFT FROM THE LARGEST GROWTH-ORIENTED COMPANIES
TO A MORE DIVERSIFIED STOCK UNIVERSE INCLUDING ATTRACTIVELY PRICED MID-SIZE
COMPANIES.
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
6 Months Ended 20 Years Ended
April 30, 1999 April 30, 1999
- -------------------------------------------------------------------------------
Delaware Balanced Fund A Class +7.37% +15.00%
- -------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index +0.69% +10.05%
Standard & Poor's 500 Index +22.31% +17.82%
Lipper Balanced Fund Average +11.67% (438 funds) +13.68% (28 funds)
- -------------------------------------------------------------------------------
All performance shown above is at net asset value without the effect of sales
charges and assumes reinvestment of dividends and capital gains. Performance
information for all Fund classes can be found on page 10. Past performance does
not guarantee future results. Fee limitations were in effect for the periods
shown. Returns would have been lower without the limitations. The S&P 500 Index
is an unmanaged composite of large company stocks.
* A direct investment in these indexes is not possible.
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3
performance of Service Corp. had a negative impact on Stewart Enterprises. Both
are funeral services companies. Please refer to the Portfolio Managers' Review
for a more detailed discussion of these companies and how we have addressed
their performance.
We remain positive about the prospects for Delaware Balanced Fund in 1999. In
April, a much broader array of companies began to share in the stock market's
gains. We are confident that Delaware Balanced Fund is well positioned to
benefit if investor attention continues to shift from the largest
growth-oriented companies to a more diversified stock universe including
attractively priced mid-size companies.
On March 19, 1999, Francis X. Morris took over the leadership of the Delaware
Balanced Fund management team. Mr. Morris and his team will continue to
implement the Fund's disciplined investment strategy, focusing on what we call
transition stocks. These are stocks that are currently priced below their
underlying value, but have the potential, in our opinion, to become strongly
performing growth stocks in the future.
Delaware Balanced Fund's equity portfolio is complemented by holdings of U.S.
Treasury Bonds, mortgage-related securities and high-quality corporate bonds. As
of April 30, 1999, approximately 27% of the Fund's assets were allocated to
fixed-income investments. We believe that an allocation of approximately
two-thirds of net assets in stocks and one-third of net assets in bonds produces
an attractive risk/reward profile.
In 1999, brisk economic growth, low inflation and lower interest rates made
U.S. corporate bonds more appealing than U.S. government debt. Our significant
allocation to corporate bonds helped boost the performance of the Fund's
fixed-income component.
In the pages that follow, Mr. Morris and Gary A. Reed, who is responsible for
the Fund's bond selection, explain Delaware Balanced Fund's recent performance
and provide an outlook for the future. We believe Delaware Balanced Fund's mix
of stocks and bonds can provide attractive returns and diversification that
helps reduce investment risk. Thank you for your continued confidence in
Delaware Investments.
Sincerely,
/s/ Wayne A. Stork
- ---------------------------------------
WAYNE A. STORK
Chairman,
Delaware Investments Family of Funds
/s/ David K. Downes
- ---------------------------------------
DAVID K. DOWNES
President and Chief Executive Officer,
Delaware Investments Family of Funds
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4
Portfolio Managers' Review
BY FRANCIS X. MORRIS AND
GARY A. REED
Vice Presidents/Senior Portfolio Managers
May 15, 1999
EQUITIES: LARGE COMPANY
STOCKS DOMINATE GAINS
Since last November, the stock market, as measured by the S&P 500 and the Dow
Jones Industrial Average, began a dramatic upward climb. Lower interest rates
paved the way, making it less expensive for businesses to operate and helping to
stimulate corporate growth and profitability.
Key stock indexes rose sharply; however, the beneficiaries were largely
limited to a very narrow segment of the market. In the first quarter of 1999,
the top 20, or "Nifty 20" stocks in the S&P 500 accounted for more than 100% of
the Index's gains.* As a result, the stock prices of these companies relative to
their earnings (P/E ratios) soared to unprecedented levels. P/E ratios are a
commonly used measurement of a stock's value.
In selecting stocks for the equity portion of Delaware Balanced Fund, we look
for transition stocks, stocks which in our opinion are currently selling below
their true value, but have strong prospects for future growth.
Our focus on transition stocks precluded us from investing in the largest
companies in the S&P 500, the ones responsible for the Index's eye-catching
returns. This strategy reduced the Fund's six-month returns. However, over
longer periods of time, we think Delaware Balanced Fund's focus on less
expensive stocks helps reduce investment risk and provide attractive
opportunities for capital appreciation.
SINCE LAST NOVEMBER, THE STOCK MARKET, AS MEASURED BY THE S&P 500 AND THE DOW
JONES INDUSTRIAL AVERAGE, BEGAN A DRAMATIC UPWARD CLIMB.
STOCK PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
April 30, 1999 October 31, 1998
- --------------------------------------------------------------------------------
Median Market Capitalization $6.0 billion $5.8 billion
Number of Stocks 56 60
Average Stock Price-to-Earnings Ratio 23.7x 18.9x
Top Sector Credit Sensitive Credit Sensitive
Annual Portfolio Turnover Rate 69% 86%
P/Es are based on analysts earnings estimates as reported to First Call.
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5
EQUITY PORTFOLIO STRATEGIC
POSITIONING
To a large extent, the disappointing six-month return provided by Delaware
Balanced Fund can be traced to our holdings of Service Corp. International,
Stewart Enterprises and Rite Aid.
Last summer, as global economies became more volatile, we increased our
position in Service Corp. International, the world's largest funeral home
operator. We wanted to focus more of the Fund's assets on companies whose growth
was not directly tied to ups and downs in the U.S. economy. Given demographic
trends in the U.S. we were also optimistic about the long-term outlook for the
funeral services industry. We believed that Service Corp. was priced at a level
consistent with Delaware Balanced Fund's standards for value and earnings
growth.
In January, after the management of Service Corp. announced that earnings
would fall significantly below expectations, the stock price dropped sharply.
Upon reviewing the financial situation of Service Corp., we determined that the
company's earnings growth was not likely to recover in the near term and we sold
our position. Service Corp. International had been a Delaware Balanced Fund
holding for some time and despite the first-quarter downturn, the stock had a
positive impact on Delaware Balanced Fund's performance over the last three
years.
The problems at Service Corp. International seemed to create doubts about the
growth potential in funeral services, which we believe had a negative impact on
the performance of Stewart Enterprises, one of the Fund's top 10 holdings.
Stewart Enterprises, however, has continued to meet earnings expectations and
demonstrates above average growth prospects. Based on our positive outlook for
Stewart Enterprises and the funeral services industry, we viewed the recent
setback as temporary and took advantage of lower prices to increase our holdings
in the company.
Rite Aid was Delaware Balanced Fund's second largest holding as of October
31, 1998, representing nearly 4% of the Fund's total net assets. Rite Aid stock
fell substantially in March, when the promotional expense of an aggressive store
opening strategy caused the company to fall short of
STRONG CONSUMER SPENDING AND CONFIDENCE IN THE U.S. ECONOMY BOOSTED THE
PERFORMANCE OF CONSUMER CYCLICAL STOCKS, WHICH HELPED INTIMATE BRANDS PROVIDE AN
EXCEPTIONAL RETURN FOR THE FUND OVER THE PAST SIX MONTHS.
ASSET MIX
- ---------------------------------------------------------------
April 30, 1999 October 31, 1998
- ---------------------------------------------------------------
Stocks 70.8% 68.0%
Bonds 27.1% 29.0%
Cash 2.1% 2.8%
Beta* 0.61 0.59
SEC Yield** +1.59% +1.90%
* 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, +0.95%, +0.95% and +1.91% as of April 30, 1999.
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6
earnings projections. Our strategy is to reduce our position in any stock that
has declined 20% more than the market. Consistent with this strategy, we looked
for opportunities to sell our holdings in Rite Aid when prices were highest.
Delaware Balanced Fund's holdings of Intimate Brands, operator of the
Victoria's Secret and Bath & Body Works stores, were a bright spot for the Fund.
Strong consumer spending and confidence in the U.S. economy helped Intimate
Brands provide an exceptional return for the Fund over the past six months.
A recovery in the U.S manufacturing sector supported the performance of our
holdings of Danaher Corporation, a diversified industrial company. Danaher,
which manufactures specialty and industrial tools and environmental control
products, provided strong returns for Delaware Balanced Fund during the previous
six-month period. Your Fund also benefited from the performance of one of its
top 10 holdings, Ecolab Inc., a provider of sanitary services to the hospitality
industry.
The Portfolio Management Team of
Delaware Balanced Fund
Francis X. Morris
Vice President/Senior Portfolio Manager
Francis X. Morris began his investment career as a securities analyst with PNC
Asset Management in 1983. Later, he became a portfolio manager there and was
named Director of Equity Research in 1995. Since 1997, Mr. Morris has managed
approximately $1 billion in institutional accounts for Delaware Investments
institutional asset management group. Mr. Morris graduated from Providence
College in Rhode Island with a Bachelor's degree in Finance and received an MBA
from Widener University in Pennsylvania.
Gary A. Reed
Vice President/Senior Portfolio Manager
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.
Andrea Giles
Assistant Vice President/Research Analyst
Andrea Giles holds a BSAD from the Massachusetts Institute of Technology and an
MBA in Finance from Columbia University. She previously served as an account
officer in the leverage capital group with Citibank.
Christopher Driver, CFA
Assistant Vice President/Research Analyst
Christopher Driver has a BS in Finance from the University of Delaware.
Previously he served as a research analyst in the equity value group at
Blackrock, Inc. and as a partner at Cashman Farrell & Associates. Mr. Driver is
a CFA charterholder.
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7
BONDS: CORPORATE BONDS RISE
AS FLIGHT TO QUALITY SLOWS.
Late in the summer of 1998, U.S. Treasury bonds became a universally accepted
safe haven from the volatility of economic crises in Asia and other parts of the
world. Performance during this period was exceptional.
Treasury bonds began to lose their appeal toward the end of 1998 due to
stronger economic growth and higher corporate earnings. Supported by an
abundance of jobs and rising incomes, consumer spending grew rapidly over the
last six months. Demand for government bonds declined as consumers became more
confident about ongoing economic expansion.
The outstanding performance of equity investments since November further
reduced the appeal of Treasuries and most other fixed-income investments. Bond
investors looked to higher yielding, higher risk debt including corporate bonds,
asset-backed securities and mortgage-related securities. Within these
categories, higher rated, investment-grade bonds outperformed lower quality
bonds.
At the mid-point of Delaware Balanced Fund's fiscal year, 14% of the Fund's
bond component was invested in U.S. Treasury bonds, significantly less than the
37.6% Treasury allocation in the Fund's unmanaged fixed-income benchmark, the
Lehman Brothers Aggregate Bond Index. We limited our investments in Treasury
bonds in order to take advantage of the higher yield and total return potential
available from less conservative types of bonds.
Delaware Balanced Fund attempted to provide high current income from a mix of
investment-grade bonds with intermediate and long-term maturities, including
corporate bonds, mortgage-related bonds and asset-backed securities. Toward the
end of 1998, we took advantage of lower prices for investment grade corporate
bonds and increased our position to nearly 40% of the Fund's fixed-income
allocation. This allowed us to benefit as stronger U.S. economic growth spurred
investor demand for the higher total return potential of investment-grade
corporate bond issues.
TOWARD THE END OF 1998, WE TOOK ADVANTAGE OF LOWER PRICES FOR INVESTMENT-GRADE
CORPORATE BONDS AND INCREASED OUR POSITION TO NEARLY 40% OF THE FUND'S
FIXED-INCOME ALLOCATION.
PORTFOLIO COMPOSITION
- -----------------------------------------------------
APRIL 30, 1999
- -----------------------------------------------------
Credit Sensitive Stocks 20.1%
Capital Goods/Basic Industry Stocks 17.1%
Mortgage-Backed Securities 14.2%
Consumer Growth Stocks 13.7%
Investment-Grade Bonds 8.8%
Consumer Cyclical Stocks 8.7%
Other Common/Preferred Stocks 7.5%
Treasuries/Other High Quality Bonds 3.9%
Utility/Energy Stocks 3.6%
Cash 2.4%
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8
At the end of Delaware Balanced Fund's fiscal period, 14.2% of the Fund's net
assets were allocated to mortgage-related securities, slightly less than the
Lehman Brothers Index. Although mortgage-related securities offered attractive
income potential, we were concerned about the possibility of increased mortgage
prepayments due to lower interest rates.
When interest rates fall, homeowners often prepay their mortgages. Mortgage
prepayments can have a negative impact on performance by forcing investors to
reinvest the loaned money, often at a lower rate of return. We attempted to
mitigate the risk of mortgage prepayments by investing in low coupon mortgages,
commercial mortgages and pools of mortgages with low loan balances. In general,
these types of mortgages are less likely to be paid off early.
Over the last six months, the duration of Delaware Balanced Fund's bond
component remained close to the Lehman Brothers Aggregate Bond Index. Duration
measures a bond's sensitivity to fluctuations in interest rates and helps
indicate the potential change of a bond's price given a 1% movement in interest
rates. A longer duration increases the likelihood that an investment will
appreciate in value if interest rates rise, as well as the possibility that
principal may be lost if interest rates fall. While extending the Fund's average
duration could increase short-term returns, in our opinion, given the still
uncertain state of some world economies, a conservative approach is prudent.
BOND PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
April 30, 1999 October 31, 1998
- --------------------------------------------------------------------------------
Average Duration 4.6 years 4.6 years
Average Maturity 15.8 years 8.0 years
Average Quality AA1 AA2
Yield (before expenses)* +6.53% +6.48%
Largest Sector Focus Mortgages Mortgages
Bond Portfolio Return +1.21% (six-month period) +8.75% (one-year period)
*See page 5 for SEC yields. For complete Fund performance, see page 10.
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9
OUTLOOK
Over the last six months, stock indexes have been moving higher and higher. Yet
many stocks - particularly small and mid-size stocks, as well as value stocks of
all sizes - weren't experiencing such dramatic gains. In April, that began to
change. Equity market gains extended to a broader base of companies, both in
terms of size and industry sector.
Consumer cyclical sectors, such as automobiles, paper and housing, as well as
the energy and raw materials sectors, all performed well during the month. With
very large growth stocks already at such expensive levels, investors began to
take an interest in attractively valued small- and mid-size companies with
growth potential.
If investor demand for stocks continues to reach beyond just the large growth
companies, we believe the environment would be very positive for Delaware
Balanced Fund. Delaware Balanced Fund's focus on transition companies that
appear to be selling for less than their true value should allow the Fund to
take advantage of renewed investor interest in a broad spectrum of less
expensive stocks. The Fund's diversification across industries should also help
us to benefit if investor interest shifts to undervalued sectors of the market.
Inflation remained remarkably benign during the first quarter of 1999,
despite vigorous economic growth, rising consumer spending and a tight labor
supply. Reduced demand for U.S. products abroad and the increased productivity
of U.S. workers helped to counterbalance these inflationary pressures.
Nevertheless, we anticipate short-term interest rates to modestly increase in
coming months as global conditions continue to improve. Higher interest rates
generally reduce the performance of fixed-income investments. If interest rates
go up, we may increase our allocation to mortgage-related bonds.
Mortgage-related securities can often provide additional
IF INVESTOR DEMAND FOR STOCKS CONTINUES TO REACH BEYOND JUST THE LARGE GROWTH
COMPANIES, WE BELIEVE THE ENVIRONMENT WOULD BE VERY POSITIVE FOR DELAWARE
BALANCED FUND
Delaware Balanced Fund's Disciplined
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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10
income potential. Higher interest rates should help to reduce the prepayment
risk associated with these securities.
Of the many balanced funds available to investors, we strive to make Delaware
Balanced Fund different. While some of these funds invest in a mix of less
expensive value companies and higher priced growth companies, Delaware Balanced
Fund looks for transition companies that fall between the traditional growth and
value investment styles. The Fund's bond component provides our shareholders
with a cushion that can help provide a layer of protection from equity market
volatility. Together, Delaware Balanced Fund's mix of equities and bonds offers
investors an innovative investment style and unique opportunities for total
return.
DELAWARE BALANCED FUND PERFORMANCE
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AVERAGE ANNUAL RETURNS THROUGH APRIL 30, 1999
Lifetime Ten Years Five Years One Year
- -------------------------------------------------------------------------------
Class A (est. 4/25/38)
Excluding Sales Charge +11.45% +13.20% +15.53% +7.26%
Including Sales Charge +11.34% +12.53% +14.17% +1.09%
- -------------------------------------------------------------------------------
Class B (est. 9/6/94)
Excluding Sales Charge +15.29% +6.46%
Including Sales Charge +15.03% +1.46%
- -------------------------------------------------------------------------------
Class C (est. 11/29/95)
Excluding Sales Charge +15.85% +6.47%
Including Sales Charge +15.85% +5.47%
Returns reflect reinvestment of distributions and any applicable sales charges
as noted below. Return and share value will fluctuate so that shares when
redeemed may be worth more or less than the original share price. Past
performance does not guarantee future results. Performance excluding sales
charges for B and C Classes assumes contingent sales charges did not apply or
the investment was not redeemed.
Class A shares have a front-end maximum sales charge of 5.75% 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, and 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 service fee. If shares are redeemed within 12 months, a 1%
contingent deferred sales charge applies.
The average annual total returns for Delaware Balanced Fund's Institutional
Class, available without sales or asset-based distribution charges only to
certain eligible institutional accounts, were +11.47%, +13.34%, +15.75 and +7.53
for the lifetime, ten-year, five-year and one-year periods ended April 30, 1999.
<PAGE>
Financial Statements
DELAWARE GROUP EQUITY FUNDS I, INC. -
DELAWARE BALANCED FUND
STATEMENT OF NET ASSETS
APRIL 30, 1999 (UNAUDITED)
- -----------------------------------------------------------------------------
NUMBER OF MARKET
SHARES VALUE
----------------------------
COMMON STOCK - 69.74%
Automobiles & Auto Parts - 4.05%
*Danaher ........................................ 348,600 $ 23,160,113
Federal Signal ................................. 802,700 19,866,825
------------
43,026,938
------------
Banking, Finance & Insurance - 10.48%
AFLAC .......................................... 302,400 16,405,200
American International Group ................... 118,350 13,898,728
Bank One ....................................... 190,400 11,233,600
*Chubb .......................................... 8,800 521,400
*Equifax ........................................ 573,800 20,620,938
Freddie Mac .................................... 380,700 23,888,925
*Nationwide Financial Services .................. 204,400 9,479,050
Unionbancal Corporation ........................ 181,400 6,224,288
Unum ........................................... 165,200 9,024,050
------------
111,296,179
------------
Buildings & Materials - 3.39%
Masco .......................................... 962,200 28,264,625
Premark International .......................... 208,300 7,668,044
------------
35,932,669
------------
Cable, Media & Publishing - 0.68%
Wallace Computer Services ...................... 314,100 7,243,931
------------
7,243,931
------------
Chemicals - 3.06%
Crompton & Knowles ............................. 398,900 8,077,725
*Dial ........................................... 607,700 20,661,800
*Valspar ........................................ 109,500 3,791,437
------------
32,530,962
------------
Computers & Technology - 5.14%
Computer Associates International .............. 319,900 13,655,731
Hewlett-Packard ................................ 283,100 22,329,513
International Business Machines ................ 47,800 9,999,162
*SunGard Data Systems ........................... 268,900 8,587,994
------------
54,572,400
------------
Electronics & Electrical - 6.30%
Honeywell ...................................... 95,600 9,058,100
Intel .......................................... 251,400 15,374,681
Schlumberger Limited ........................... 144,500 9,229,937
Symbol Technologies ............................ 470,150 22,449,663
Teleflex ....................................... 248,600 10,829,637
------------
66,942,018
------------
Energy - 2.77%
*BP Amoco ....................................... 105,177 11,904,722
Total ADS ...................................... 257,323 17,497,964
------------
29,402,686
------------
Environmental Services - 2.87%
Ecolab ......................................... 725,300 30,417,269
------------
30,417,269
------------
Food, Beverage & Tobacco - 0.94%
Universal Foods ................................ 475,700 9,989,700
------------
9,989,700
------------
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for total return 11
NUMBER OF MARKET
SHARES VALUE
----------------------------
COMMON STOCK (Continued)
Healthcare & Pharmaceuticals - 9.66%
American Home Products ......................... 509,100 $ 31,055,100
*AstraZeneca .................................... 159,900 6,276,075
Biomet ......................................... 262,100 10,746,100
Johnson & Johnson .............................. 137,600 13,416,000
*Mylan Laboratories ............................. 1,154,500 26,192,719
Nationwide Health Properties ................... 229,800 4,667,812
*Watson Pharmaceutical .......................... 252,900 10,242,450
------------
102,596,256
------------
Real Estate - 0.97%
CarrAmerica Realty ............................. 91,500 2,264,625
Developers Diversified Realty .................. 242,200 3,829,788
*Sun Communities ................................ 121,700 4,259,500
------------
10,353,913
------------
Retail - 4.32%
Food Lion ...................................... 685,900 7,051,909
*Intimate Brands ................................ 286,500 14,325,000
Rite Aid Corp. ................................. 521,100 12,148,144
Sherwin-Williams ............................... 314,000 9,773,250
*Storage USA .................................... 78,900 2,534,663
------------
45,832,966
------------
Telecommunications - 4.50%
ALLTEL ......................................... 162,600 10,965,338
GTE ............................................ 118,100 7,905,319
Nortel Networks ................................ 55,200 3,763,950
SBC Communications ............................. 448,000 25,088,000
------------
47,722,607
------------
Textiles, Apparel & Furniture - 3.40%
HON Industries ................................. 339,600 9,169,200
*Hillenbrand Industries ......................... 255,400 11,987,838
Newell Rubbermaid .............................. 316,200 14,999,737
------------
36,156,775
------------
Utilities - 0.83%
CMS Energy ..................................... 200,900 8,839,600
------------
8,839,600
------------
Miscellaneous - 6.38%
*Pentair ........................................ 185,200 8,704,400
*Stewart Enterprises ............................ 1,317,200 26,014,700
Tyco International ............................. 407,200 33,085,000
------------
67,804,100
------------
Total Common Stock
(cost $579,977,477) ........................... 740,660,969
------------
CONVERTIBLE PREFERRED STOCKS - 1.16%
Freeport-McMoRan Copper & Gold 7.00% ........... 157,700 2,779,463
Sealed Air $2.00 4/1/18 Series A ............... 162,340 9,537,475
------------
Total Convertible Preferred Stocks
(cost $10,380,836) ............................ 12,316,938
------------
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12 for total return
Statement of Net Assets (Continued)
- -------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
---------------------------
ASSET-BACKED SECURITIES - 3.34%
American Finance Home Equity
Series 94-2 A1 6.95% 6/25/24 ................. $ 236,778 $ 236,631
Series 92-1 A 7.50% 3/15/07 .................. 247,347 247,115
Series 91-1 A 8.00% 7/25/06 .................. 152,154 155,668
CIT RV Series 98-A A5 6.12% 7/15/14 ............. 3,355,000 3,357,013
California Infrastructure PG and E
Series 97-1 A4 6.16% 6/25/03 ................. 1,580,000 1,595,168
Countrywide Home Equity Loan
Series 97-1 A4 6.95% 5/25/21 ................. 3,475,000 3,501,758
Discover Card Master Trust
Series 99-2 A 5.90% 10/15/04 ................. 4,950,000 4,957,539
EQCC Home Equity Loan Trust
Series 98-2 A3F 6.229% 3/15/13 ............... 3,300,000 3,313,406
Series 96-4 A6 6.88% 7/15/14 ................. 3,835,000 3,902,496
First USA Credit Card Master Trust
Series 97-10 A 4.9962% 2/18/04 ............... 5,000,000 4,998,225
MetLife Capital Equipment Loan Trust
Series 97-A 6.85% 5/20/08 .................... 2,865,000 2,937,771
NationsCredit Grantor Trust
Series 96-1 A 5.85% 9/15/11 .................. 1,151,599 1,146,647
Neiman Marcus Group Credit Card Master Trust
Series 95-1A 7.60% 6/15/03 ................... 430,000 439,675
PECO Energy Transition Trust
Series 99-A A4 5.80% 3/1/07 .................. 4,720,000 4,684,600
-----------
Total Asset-Backed Securities
(cost $35,374,112) ........................... 35,473,712
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS - 5.59%
Asset Securitization Corporation
Series 97-D5 A2 7.069% 2/14/41 ............... 3,920,000 3,848,337
Series 97-D5 A3 7.119% 2/14/41 ............... 3,215,000 3,093,935
Series 96-D3 A1B 7.21% 10/13/26 .............. 3,060,000 3,193,875
Series 97-D4 A1A 7.35% 4/14/29 ............... 2,419,762 2,493,489
CASC Series 98-D7 A1B 6.26% 9/16/30 ............. 3,745,000 3,675,952
Chase Commercial Mortgage Securities Corporation
Series 96-2 C 6.90% 11/19/06 ................. 2,273,625 2,294,230
Conti Series 96-MCI-D 7.80% 4/15/06 ............. 2,890,000 3,006,503
Federal Home Loan Mortgage Corporation
Series 2091 PD 6.00% 4/15/21 ................. 5,350,000 5,335,020
Fanniemae Whole Loan
Series 98-W3 A2 6.50% 7/25/28 ................ 3,440,000 3,464,188
Federal Home Loan Mortgage Corporation
Structured Pass Through Securities
Series T-11 A5 6.50% 1/25/15 ................. 4,605,000 4,610,756
Lehman Large Loan
Series 97-LLI A1 6.79% 6/12/04 ............... 3,186,926 3,264,608
Mortgage Capital Funding
96-MC2-C 7.224% 9/20/06 ...................... 2,757,777 2,840,079
Nomura Asset Securities
Series 93-1 A1 6.68% 12/15/01 ................ 3,272,460 3,312,343
Series 96-MD5 A3 7.9183% 4/13/36 ............. 3,300,000 3,413,953
<PAGE>
PRINCIPAL MARKET
AMOUNT VALUE
---------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (Continued)
Residential Accredit Loans
Series 98-QS9 A3 6.75% 7/25/28 ............... $ 3,375,000 $ 3,385,679
Series 97-QS3 A3 7.50% 4/25/27 ............... 4,037,983 4,037,182
Residential Funding Mortgage Securities
Series 98-S6 A6 6.75% 3/25/28 ................ 4,135,000 4,079,436
-----------
Total Collateralized Mortgage Obligations
(cost $59,377,846) ............................ 59,349,565
-----------
CORPORATE BONDS - 8.80%
American Financial Group 7.125% 4/15/09 ........ 2,030,000 1,976,712
Banco Santander 6.50% 11/1/05 .................. 2,305,000 2,299,237
Banco Santiago S.A. 7.00% 7/18/07 .............. 1,855,000 1,713,556
CIT Group Holdings 5.625% 10/15/03 ............. 5,125,000 5,048,125
Cox Communications 6.15% 8/1/03 ................ 3,400,000 3,391,500
Credit Foncier de France 8.00% 1/14/02 ......... 2,415,000 2,523,675
Equistar Chemicals 144A 8.75% 2/15/09 .......... 2,700,000 2,808,000
Fairfax Financial 144A 7.375% 3/15/06 .......... 940,000 938,825
General Electric Capital 5.89% 5/11/01 ......... 4,000,000 4,030,000
Great Western Financial 8.206% 2/1/27 .......... 4,000,000 4,190,000
Household Finance 6.50% 11/15/08 ............... 1,275,000 1,275,000
Kohls 6.70% 2/1/06 ............................. 2,900,000 2,918,125
Lehman Brothers 6.625% 2/5/06 .................. 4,625,000 4,607,656
May Department Stores 7.50% 6/1/15 ............. 4,000,000 4,300,000
MCI Communications 6.125% 4/15/02 .............. 2,500,000 2,512,500
MCI Worldcom 7.55% 4/1/04 ...................... 4,525,000 4,790,844
*Meritor Automotive 6.80% 2/15/09 ............... 3,400,000 3,349,000
*Penzoil-Quaker State 6.75% 4/1/09 .............. 1,800,000 1,788,750
Pemex Finance 8.02% 5/15/07 .................... 3,500,000 3,447,500
Popular North America 6.625% 1/15/04 ........... 3,950,000 3,930,250
RAYCHEM 7.20% 10/15/08 ......................... 3,500,000 3,486,875
Raytheon 5.95% 3/15/01 ......................... 3,600,000 3,609,000
Republic of Korea 8.875% 4/15/08 ............... 3,000,000 3,262,500
SAKS 8.25% 11/15/08 ............................ 4,475,000 4,844,187
Southern Investments 6.375% 11/15/01 ........... 700,000 704,375
Summit Capital Trust 8.40% 3/15/27 ............. 2,000,000 2,117,500
*Tommy Hilfiger USA 6.85% 6/1/08 ................ 2,135,000 2,092,300
Transwestern Pipeline 7.55% 1/15/00 ............ 1,200,000 1,210,500
Turner Broadcasting 8.375% 7/1/13 .............. 3,350,000 3,839,938
United Health Care 6.60% 12/1/03 ............... 4,280,000 4,242,550
USA Waste Services 6.125% 7/15/01 .............. 2,225,000 2,236,125
-----------
Total Corporate Bonds
(cost $92,651,323) ............................ 93,485,105
-----------
MORTGAGE-BACKED SECURITIES - 5.26%
Federal Home Loan Mortgage Corp.
6.00% 2/1/11 .................................. 1,851,428 1,847,378
Federal Home Loan Mortgage Corp.
7.00% 4/1/29 .................................. 5,355,666 5,437,675
Federal Home Loan Mortgage Corp.
8.50% 4/1/09 .................................. 347 372
<PAGE>
STATEMENT OF NET ASSETS (CONTINUED)
- -------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
---------------------------
MORTGAGE-BACKED SECURITIES (Continued)
Federal National Mortgage Association
6.00% 3/1/13-10/1/28 .......................... $13,089,219 $12,857,511
Federal National Mortgage Association
6.50% 4/1/29 .................................. 17,000,000 16,893,750
Federal National Mortgage Association
7.00% 7/1/17-8/1/28 ........................... 12,931,548 13,138,486
Federal National Mortgage Association
8.00% 12/1/09 ................................. 263,071 272,196
Federal National Mortgage Association
8.50% 11/1/09 ................................. 755,707 786,880
Government National Mortgage Association
6.50% 12/15/23-3/15/29 ........................ 4,653,743 4,632,137
-----------
Total Mortgage-Backed Securities
(cost $55,880,079) ............................ 55,866,385
-----------
MUNICIPAL BONDS - 0.26%
Philadelphia, Pennsylvania Authority For
Industrial Development Series 97 A
6.488% 6/15/04 ................................. 2,772,220 2,744,497
-----------
Total Municipal Bonds (cost $2,772,220) 2,744,497
-----------
U.S. TREASURY OBLIGATIONS - 3.88%
*U.S. Treasury Bond 6.125% 11/15/27 ............. 5,950,000 6,158,710
*U.S. Treasury Notes 4.50% 1/31/01 .............. 1,700,000 1,684,162
*U.S. Treasury Notes 4.75% 11/15/08 ............. 4,390,000 4,195,205
U.S. Treasury Notes 5.50% 3/31/03 .............. 870,000 877,553
*U.S. Treasury Notes 5.50% 2/15/08 .............. 7,355,000 7,405,266
U.S. Treasury Notes 5.375% 2/15/01 ............. 7,445,000 7,483,988
U.S. Treasury Notes 6.375% 1/15/00 ............. 4,585,000 4,631,615
*U.S. Treasury Notes 6.375% 8/15/27 ............. 8,150,000 8,701,996
-----------
Total U.S. Treasury Obligations
(cost $42,036,477) ........................... 41,138,495
-----------
REPURCHASE AGREEMENTS - 1.80%
With Chase Manhattan 4.85% 5/3/99
(dated 4/30/99, collateralized by $1,176,000
U.S. Treasury Notes 5.75% due 8/15/03,
market value $1,214,550 and $5,202,000
U.S. Treasury Notes 5.50% due 12/31/00,
market value 5,334,657) ...................... 6,418,000 6,418,000
With J.P. Morgan 4.85% 5/3/99
(dated 4/30/99, collateralized by $1,630,000
U.S. Treasury Notes 6.375% due 7/15/99,
market value $1,665,835 and $2,428,000
U.S. Treasury Notes 4.00% due 10/31/00,
market value $2,392,514 and $2,370,000
U.S. Treasury Notes 6.25% due 10/31/01,
market value $2,432,942) ..................... 6,358,000 6,358,000
<PAGE>
for total return 13
PRINCIPAL MARKET
AMOUNT VALUE
---------------------------
REPURCHASE AGREEMENTS (Continued)
With PaineWebber 4.85% 5/3/99
(dated 4/30/99, collateralized by $2,890,000
U.S. Treasury Notes 5.75% due 10/31/02,
market value $2,942,164 and $1,792,000
U.S. Treasury Notes 5.50% due 5/31/03,
market value $1,851,307 and $1,363,000
U.S. Treasury Notes 11.125% due 8/15/03,
market value $1,695,524) ..................... $6,359,000 $ 6,359,000
--------------
Total Repurchase Agreements
(cost $19,135,000) ........................... 19,135,000
--------------
TOTAL MARKET VALUE OF SECURITIES - 99.83%
(cost $897,585,370) ........................................ $1,060,170,666
RECEIVABLES AND OTHER ASSETS NET OF
LIABILITIES - 0.17% .......................................... 1,805,481
--------------
NET ASSETS APPLICABLE TO 45,474,970 SHARES
($1 PAR VALUE) OUTSTANDING - 100.00% ....................... $1,061,976,147
==============
NET ASSET VALUE - DELAWARE BALANCED FUND A CLASS
($641,806,824 / 27,492,913 SHARES) ......................... $23.34
======
NET ASSET VALUE - DELAWARE BALANCED FUND B CLASS
($60,598,780 / 2,597,471 SHARES) ........................... $23.33
======
NET ASSET VALUE - DELAWARE BALANCED FUND C CLASS
($24,855,698 / 1,066,239 SHARES) ........................... $23.31
======
NET ASSET VALUE - DELAWARE BALANCED FUND INSTITUTIONAL CLASS
($334,714,845 / 14,318,347 SHARES) ......................... $23.38
======
- ---------------------------
*Security on loan.
Top 10 equity holdings, representing 25.39% of net assets, are in bold face.
COMPONENTS OF NET ASSETS AT APRIL 30, 1999:
Common stock, $1 par value, 200,000,000
shares authorized to the Delaware Balanced Fund ............ $ 859,418,290
Undistributed net investment income ........................... 2,180,164
Accumulated net realized gain on investments .................. 37,792,397
Net unrealized appreciation of investments .................... 162,585,296
--------------
Total net assets .............................................. $1,061,976,147
==============
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
DELAWARE BALANCED FUND
Net asset value A Class (A) ................................... $23.34
Sales charge (5.75% of offering price or 6.08% of the amount
invested per share) (B) .................................... 1.42
------
Offering price ................................................ $24.76
======
- -----------------
(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 puchases of $50,000 or
more.
See accompanying notes
<PAGE>
14 for total return
DELAWARE GROUP EQUITY FUNDS I, INC. -
DELAWARE BALANCED FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1999
(UNAUDITED)
- -------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest ........................................ $9,762,314
Dividends ....................................... 4,987,875 $14,750,189
----------
EXPENSES:
Management fees ................................. 2,650,526
Distribution expense ............................ 1,028,091
Dividend disbursing and transfer agent
fees and expenses ............................ 888,500
Accounting and administration ................... 199,175
Professional fees ............................... 11,025
Directors' fees ................................. 8,297
Custodian fees .................................. 6,171
Registration fees ............................... 5,000
Other ........................................... 11,726 4,808,511
----------
Less expenses paid indirectly ................... (13,771)
-----------
Total expenses .................................. 4,794,740
NET INVESTMENT INCOME ........................... 9,955,449
-----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain on investments ................ 38,214,564
Net change in unrealized appreciation/
depreciation of investments .................. 23,914,284
-----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS .......................... 62,128,848
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .................... $72,084,297
===========
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS I, INC. -
DELAWARE BALANCED FUND
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
SIX MONTHS ENDED
4/30/99 YEAR ENDED
(UNAUDITED) 10/31/98
-------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income ....................... $ 9,955,449 $ 18,814,542
Net realized gain on investments ............ 38,214,564 54,958,953
Net change in unrealized appreciation/
depreciation of investments .............. 23,914,284 35,042,450
-------------- ------------
Net increase in net assets resulting
from operations .......................... 72,084,297 108,815,945
-------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class .................................. (6,862,205) (13,013,538)
B Class .................................. (333,345) (305,673)
C Class .................................. (149,886) (154,291)
Institutional Class ...................... (3,893,912) (4,868,650)
Net realized gain on investments:
A Class .................................. (27,586,794) (62,397,362)
B Class .................................. (1,771,950) (1,962,519)
C Class .................................. (833,383) (985,860)
Institutional Class ...................... (13,695,337) (17,376,598)
-------------- ------------
(55,126,812) (101,064,491)
-------------- ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class .................................. 38,617,723 56,962,202
B Class .................................. 28,507,962 19,010,246
C Class .................................. 8,268,967 10,054,204
Institutional Class ...................... 49,341,009 161,610,921
Net asset value of shares issued upon
reinvestment of distributions from net
investment income and net realized gain
on investments:
A Class .................................. 27,515,442 59,528,177
B Class .................................. 2,006,334 2,170,092
C Class .................................. 952,868 1,085,874
Institutional Class ...................... 17,589,130 22,245,115
-------------- ------------
172,799,436 332,666,831
-------------- ------------
Cost of shares repurchased:
A Class .................................. (44,846,848) (65,404,693)
B Class .................................. (4,601,716) (4,424,506)
C Class .................................. (2,465,896) (1,700,256)
Institutional Class ...................... (38,468,237) (38,660,111)
-------------- ------------
(90,382,697) (110,189,566)
-------------- ------------
Increase in net assets derived from capital
share transactions ....................... 82,416,739 222,477,265
-------------- ------------
NET INCREASE IN NET ASSETS .................. 99,374,224 230,228,719
NET ASSETS:
Beginning of period ......................... 962,601,923 732,373,204
-------------- ------------
End of period ............................... $1,061,976,147 $962,601,923
============== ============
See accompanying notes
<PAGE>
for total return 15
Delaware Group Equity Funds I, Inc. -
Delaware Balanced Fund
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
Delaware Balanced Fund A Class
-----------------------------------------------------------------------
Six Months Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
4/30/99 10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $22.970 $22.950 $21.260 $19.940 $18.000 $19.430
Income from investment operations:
Net investment income .................................. 0.223 0.510 0.610 0.706 0.664 0.615
Net realized and unrealized gain (loss)
on investments ........................................ 1.442 2.620 3.680 2.349 2.156 (0.285)
------- ------- -------- -------- -------- --------
Total from investment operations ....................... 1.665 3.130 4.290 3.055 2.820 0.330
------- ------- -------- -------- -------- --------
Less dividends and distributions:
Dividends from net investment income ................... (0.255) (0.510) (0.680) (0.655) (0.630) (0.600)
Distributions from net realized gain
on investments ........................................ (1.040) (2.600) (1.920) (1.080) (0.250) (1.160)
------- ------- -------- -------- -------- --------
Total dividends and distributions ...................... (1.295) (3.110) (2.600) (1.735) (0.880) (1.760)
------- ------- -------- -------- -------- --------
Net asset value, end of period ......................... $23.340 $22.970 $22.950 $21.260 $19.940 $18.000
======= ======= ======== ======== ======== ========
Total return(1) ........................................... 7.37% 14.80% 22.05% 16.07% 16.26% 1.80%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $641,807 $610,332 $554,448 $490,150 $493,243 $456,074
Ratio of expenses to average net assets ................ 0.97% 0.98% 0.97% 0.99% 0.97% 0.97%
Ratio of net investment income to average
net assets ............................................ 1.95% 2.25% 2.83% 3.39% 3.55% 3.31%
Portfolio turnover ..................................... 69% 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>
16 for total return
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
Delaware Balanced Fund B Class
-------------------------------------------------------------------------
Six Months Year Year Year Year
Ended Ended Ended Ended Ended 9/6/94(1) to
4/30/99 10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................... $22.950 $22.880 $21.200 $19.900 $17.980 $18.340
Income from investment operations:
Net investment income ................................ 0.137 0.337 0.452 0.525 0.567 0.070
Net realized and unrealized gain (loss)
on investments ...................................... 1.358 2.608 3.658 2.350 2.113 (0.280)
------- ------- ------- ------- ------- -------
Total from investment operations ..................... 1.495 2.945 4.110 2.875 2.680 (0.210)
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ................. (0.075) (0.275) (0.510) (0.495) (0.510) (0.150)
Distributions from net realized gain
on investments ...................................... (1.040) (2.600) (1.920) (1.080) (0.250) none
------- ------- ------- ------- ------- -------
Total dividends and distributions .................... (1.115) (2.875) (2.430) (1.575) (0.760) (0.150)
------- ------- ------- ------- ------- -------
Net asset value, end of period ....................... $23.330 $22.950 $22.880 $21.200 $19.900 $17.980
======= ======= ======= ======= ======= =======
Total return(2) ......................................... 6.46% 13.90% 21.09% 15.15% 15.36% (1.14%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) .............. $60,599 $33,884 $16,659 $6,872 $3,383 $568
Ratio of expenses to average net assets .............. 1.74% 1.77% 1.78% 1.80% 1.79% 1.81%
Ratio of net investment income to average
net assets .......................................... 1.18% 1.46% 2.00% 2.58% 2.73% 2.47%
Portfolio turnover ................................... 69% 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>
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 Balanced Fund C Class
----------------------------------------------------
Six Months Year Year
Ended Ended Ended 11/29/95(1) to
4/30/99 10/31/98 10/31/97 10/31/96
(Unaudited)
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................................. $22.930 $22.870 $21.180 $20.500
Income from investment operations:
Net investment income ............................................. 0.137 0.335 0.460 0.583
Net realized and unrealized gain on investments ................... 1.358 2.600 3.655 1.757
------ ------- ------- -------
Total from investment operations .................................. 1.495 2.935 4.115 2.340
------ ------- ------- -------
Less dividends and distributions:
Dividends from net investment income .............................. (0.075) (0.275) (0.505) (0.580)
Distributions from net realized gain on investments ............... (1.040) (2.600) (1.920) (1.080)
------ ------- ------- -------
Total dividends and distributions ................................. (1.115) (2.875) (2.425) (1.660)
------ ------- ------- -------
Net asset value, end of period .................................... $23.310 $22.930 $22.870 $21.180
====== ======= ======= =======
Total return(2)....................................................... 6.47% 13.85% 21.07% 12.13%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ........................... $24,855 $17,730 $8,090 $1,990
Ratio of expenses to average net assets ........................... 1.74% 1.77% 1.78% 1.80%
Ratio of net investment income to average net assets .............. 1.18% 1.46% 2.00% 2.58%
Portfolio turnover ................................................ 69% 86% 81% 92%
</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
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
Delaware Balanced Fund Institutional Class
------------------------------------------------------------------------
Six Months Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
4/30/99 10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $23.000 $23.000 $21.300 $19.980 $18.030 $19.460
Income from investment operations:
Net investment income ................................. 0.254 0.585 0.659 0.727 0.694 0.653
Net realized and unrealized gain (loss)
on investments ....................................... 1.451 2.595 3.681 2.363 2.166 (0.293)
------- ------- ------- ------- ------- -------
Total from investment operations ...................... 1.705 3.180 4.340 3.090 2.860 0.360
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income .................. (0.285) (0.580) (0.720) (0.690) (0.660) (0.630)
Distributions from net realized gain
on investments ....................................... (1.040) (2.600) (1.920) (1.080) (0.250) (1.160)
------- ------- ------- ------- ------- -------
Total dividends and distributions ..................... (1.325) (3.180) (2.640) (1.770) (0.910) (1.790)
------- ------- ------- ------- ------- -------
Net asset value, end of period ........................ $23.380 $23.000 $23.000 $21.300 $19.980 $18.030
======= ======= ======= ======= ======= =======
Total return .......................................... 7.53% 15.03% 22.29% 16.25% 16.50% 1.96%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ............... $334,715 $300,656 $153,176 $125,751 $108,747 $93,990
Ratio of expenses to average net assets ............... 0.74% 0.77% 0.78% 0.80% 0.79% 0.81%
Ratio of net investment income to average
net assets ........................................... 2.18% 2.46% 3.00% 3.58% 3.73% 3.47%
Portfolio turnover .................................... 69% 86% 81% 92% 94% 142%
</TABLE>
See accompanying notes
<PAGE>
for total return 19
Delaware Group Equity Funds I, Inc. -
Delaware Balanced Fund
Notes to Financial Statements
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Delaware Group Equity Funds I, Inc. - Delaware Balanced 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 Balanced Fund A Class carries a
front-end sales charge, which was raised from 4.75% to 5.75% effective November
2, 1998. The Delaware Balanced Fund B Class carries a back-end sales charge. The
Delaware Balanced Fund C Class carries a level load deferred sales charge and
Delaware Balanced 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 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
<PAGE>
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. These transactions are done subject to best price and execution. The
amount of these expenses was approximately $11,726 for the period ended April
30, 1999. The Fund may receive earnings credit used to offset custody fees when
positive balances are maintained at the custodian. These credits were $2,045 for
the period ended April 30, 1999. The "soft dollar" reimbursement and the
earnings credit are combined as expenses paid indirectly in the Statement of
Operations.
2. Investment Management and Other Transactions with Affiliates In accordance
with the terms of the Investment Management Agreement, effective
April 1, 1999, the Fund pays Delaware Management Company (DMC), the Investment
Manager of the Fund, an annual fee which is calculated daily at the rate of
0.65% on the first $500 million, 0.60% on the next $500 million, 0.55% on the
next $1.5 billion and 0.50% on the average daily net assets in excess of $2.5
billion. Prior to this, the annual fee was calculated 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 period
ended April 30, 1999, the Fund had a liability for Investment Management fees
and other expenses payable to DMC of $534,850.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of DMC,
to provide dividend disbursing, transfer agent, accounting and administration
services. The Fund pays DSC a monthly fee based on the number of shareholder
accounts, shareholder transactions and average net assets, subject to certain
minimums. At April 30, 1999, the Fund had a liability for such fees and other
expenses payable to DSC of $52,700.
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 period ended April 30,
1999, the Fund had a liability for such fees and other expenses payable to DDLP
of $194,442.
For the period ended April 30, 1999, DDLP earned $94,278 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 period ended April 30, 1999, the Fund made purchases of $323,044,950
and sales of $293,494,189 of investment securities other than U.S. government
securities and temporary cash investments. During the period ended April 30,
1999, the Fund made purchases of $61,776,267 and sales of $55,261,012 of U.S.
government securities. At April 30, 1999, unrealized appreciation for federal
income tax purposes aggregated $162,538,625 of which $185,826,372 related to
unrealized appreciation of securities and $23,287,747 related to unrealized
depreciation of securities. At April 30, 1999, the aggregate cost of securities
for federal income tax purposes was $897,632,041.
<PAGE>
20 for total return
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
4. Capital Stock
Transactions in capital stock shares were as follows:
Six Months
Ended Year
4/30/99 Ended
(Unaudited) 10/31/98
---------- ----------
Shares sold:
A Class ...................................... 1,667,977 2,527,314
B Class ...................................... 1,235,179 840,492
C Class ...................................... 358,054 444,310
Institutional Class .......................... 2,133,095 7,092,142
Shares issued upon reinvestment of
distributions from net investment income
and net realized gain on investments:
A Class ...................................... 1,197,547 2,773,200
B Class ...................................... 87,317 101,142
C Class ...................................... 41,498 50,636
Institutional Class .......................... 765,345 1,033,264
---------- ----------
7,486,012 14,862,500
---------- ----------
Shares repurchased:
A Class ...................................... (1,948,689) (2,879,391)
B Class ...................................... (201,399) (193,261)
C Class ...................................... (106,404) (75,623)
Institutional Class .......................... (1,652,594) (1,711,585)
---------- ----------
(3,909,086) (4,859,860)
---------- ----------
Net increase .................................... 3,576,926 10,002,640
========== ==========
5. Lines of Credit
The Fund has a committed line of credit for $24.3 million. No amount was
outstanding at April 30, 1999, 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
The Fund may participate, along with other funds in the Delaware Investments
Family of Funds, in a Securities Lending Agreement ("Lending Agreement").
Security loans made pursuant to the Lending Agreement are required at all times
to be secured by U.S. Treasury obligations and/or cash collateral at least equal
to 100% of the market value of securities issued. Cash collateral received is
invested in fixed income securities, with a weighted average maturity not to
exceed 90 days, rated in one of the top two tiers by Standard & Poor's Ratings
Group or Moody's Investors Service, Inc. or repurchase agreements collateralized
by such securities. However, in the event of default or bankruptcy by the
lending agent, 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 received is insufficient to cover the value of the
loaned securities and provided such collateral is not the result of investment
losses, the lending agent has agreed to pay the amount of the shortfall to the
Series, or at the discretion of the lending agent, replace the loaned
securities. The market value of securities on loan to brokers and the related
collateral received at April 30, 1999 were $137,542,992 and $139,899,789
respectively.
Year 2000 (Unaudited)
- --------------------------------------------------------------------------------
Like other investment companies, financial and business organizations and
individuals around the world, the Fund could be adversely affected if computer
systems used by the Investment Manager and other service providers do not
properly process and calculate date-related information and data on and after
January 1, 2000. The Fund is taking steps to obtain satisfactory assurances that
the Investment Manager and other major service providers are taking steps
reasonably designed to address the Year 2000 issue with respect to the computer
systems that such service providers use. At this time, however, there can be no
assurance that these steps will be sufficient to avoid any adverse impact to the
Fund.
<PAGE>
Proxy Results
(Unaudited)
- --------------------------------------------------------------------------------
For the six months ended March 31, 1999, The Delaware Group Equity Funds I, Inc.
shareholders voted on the following proposals at the annual meeting of
shareholders on March 17, 1999 or as adjourned. The description of each proposal
and number of shares voted are as follows:
1. To elect the Delaware Group Equity Funds I, Inc. Board of Directors.
Shares Shares Voted
Voted Withheld
For Authority
---------- ---------
Jeffrey J. Nick ........................... 36,860,198 1,929,964
Walter P. Babich .......................... 36,896,115 1,894,047
John H. Durham ............................ 36,918,321 1,871,841
Anthony D. Knerr .......................... 36,924,746 1,865,416
Ann R. Leven .............................. 36,926,544 1,863,618
Thomas F. Madison ......................... 36,931,218 1,858,944
Charles E. Peck ........................... 36,940,624 1,849,538
Wayne A. Stork ............................ 36,945,623 1,844,539
Jan L. Yeomans ............................ 36,944,895 1,845,267
2. To approve the redesignation of the Fund's Investment objective from
fundamental to non-fundamental.
For Against Abstain
--- ------- -------
26,773,011 1,059,980 1,023,461
3. To approve standardized fundamental investment restrictions for the Delaware
Balanced Fund (proposal involves separate votes on seven sub-proposals
3A-3G).
3A. To adopt a new fundamental investment restriction concerning concentration
of the investments in the same industry.
For Against Abstain
--- ------- -------
26,923,134 830,548 1,102,770
3B. To adopt a new fundamental investment restriction concerning borrowing money
and issuing senior securities.
For Against Abstain
--- ------- -------
26,857,195 879,945 1,119,312
3C. To adopt a new fundamental investment restriction concerning underwriting.
For Against Abstain
--- ------- -------
27,015,248 711,757 1,129,447
<PAGE>
for total return 21
3D. To adopt a new fundamental investment restriction concerning investments in
real estate.
For Against Abstain
--- ------- -------
26,938,814 833,610 1,084,028
3E. To adopt a new fundamental investment restriction concerning investments in
commodities.
For Against Abstain
--- ------- -------
26,869,659 904,420 1,082,373
3F. To adopt a new fundamental investment restriction concerning lending by the
Fund.
For Against Abstain
--- ------- -------
26,909,691 877,191 1,069,570
3G. To reclassify all current fundamental investment restrictions as
non-fundamental.
For Against Abstain
--- ------- -------
26,689,136 984,289 1,183,761
4. To approve a new investment management agreement with Delaware Management
Company for the Delaware Balanced Fund.
For Against Abstain
--- ------- -------
26,601,944 1,156,814 1,097,694
5. To ratify the selection of Ernst & Young LLP, as the independent auditors
for Delaware Group Equity Funds I, Inc.
For Against Abstain
--- ------- -------
31,599,129 289,354 6,901,677
6. To approve the restructuring of the Delaware Group Equity Funds I, Inc. from
a Maryland Corporation into a Delaware Business Trust.
For Against Abstain
--- ------- -------
32,476,130 903,920 1,600,502
<PAGE>
D E L A W A R E I N V E S T M E N T S F A M I L Y O F F U N D S
For Growth of Capital
Aggressive Growth Fund
Trend Fund
DelCap Fund
Small Cap Value Fund
U.S. Growth Fund
Growth Stock Fund
Tax-Efficient Equity Fund
Social Awareness Fund
For Total Return
Blue Chip Fund
Devon Fund
Decatur Equity Income Fund
Growth and Income Fund
REIT Fund
Delaware Balanced Fund
For International Diversification
Emerging Markets Fund
New Pacific Fund
Overseas Equity Fund
International Equity Fund
Global Equity Fund
Global Bond Fund
For Current Income
Delchester Fund
High-Yield Opportunities Fund
Extended Duration Bond Fund
Strategic Income Fund
Corporate Bond Fund
U.S. Government Fund
U.S. Government Securities Fund
Limited-Term Government Fund
For Tax-Exempt Income
National High Yield Municipal Bond Fund
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
State Tax-Free Funds*
Money Market Funds
Delaware Cash Reserve
Tax-Free Money Fund
Asset Allocation Funds
Foundation Funds
Growth Portfolio
Balanced Portfolio
Income Portfolio
* Available for the following states: Arizona, California, Colorado, Florida,
Idaho, Iowa, Kansas, Minnesota, Missouri, North Dakota, New Jersey, New
Mexico, New York, Ohio, Oregon, Pennsylvania, Utah, Washington, Wisconsin.
Insured and intermediate bond funds are available in selected states.
funds
[photo of computer keyboard]
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.
<PAGE>
This Semi-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 and the Delaware
Investments Performance Update for the most recently completed calendar quarter.
The prospectus 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 each 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 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
For Shareholders
1.800.523.1918
For Securities Dealers
1.800.362.7500
For Financial Institutions
Representatives Only
1.800.659.2265
www.delawareinvestments.com
Be sure to consult your financial adviser when making investments. Mutual funds
can be a valuable part of your financial plan; however, shares of the Fund are
not FDIC or NCUSIF insured, are not guaranteed by any bank or any credit union,
and involve investment risk, including the possible loss of the principal amount
invested. Shares of the Fund are not bank or credit union deposits.
(C) Delaware Distributors, L.P.
DELAWARE
INVESTMENTS
- -----------
Philadelphia o London
Printed in the USA
on recycled paper
SA-002 [4/99] PP6/99
(1800)
