<PAGE>
Delaware Balanced Fund
[various photos demonstrating service and
guidance, professional management and goals]
service and guidance
professional management
goals
1999
Annual
Report
DELAWARE(SM)
INVESTMENTS
- ---------------------
Philadelphia o London
<PAGE>
A TRADITION OF SOUND INVESTING
commitment
A Commitment
To Our Investors
Delaware Investments has a tradition of money management that dates back to
1929. We have a long and distinguished history of helping individuals and
institutions - including some of America's largest pension funds - reach their
financial goals.
Headquartered in Philadelphia, a block from the nation's oldest stock
exchange, the Delaware organization established its first mutual fund in 1938.
Delaware International Advisers Ltd., our international affiliate, was
established in 1990 and is headquartered in London.
Delaware Investments offers a full range of mutual funds. We also manage
investments for variable annuities and closed-end funds as well as offer a wide
range of retirement plan services for individuals and businesses.
Delaware Investments has approximately $45 billion in mutual fund assets and
institutional advisory accounts under management for more than half-a-million
investors.
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.
[photo of computer
keyboard]
[photo of illustration
from Total Return
Brochure]
Delaware Balanced Fund
Objective
Seeks a balance of capital appreciation, income and preservation of capital.
Table of Contents
Letter to Shareholders Page 1
Portfolio Managers' Review Page 4
Performance Summary Page 9
Statement of Net Assets Page 10
Financial Highlights Page 14
total
return
tradition
<PAGE>
November 17, 1999
for total
return
1
Dear Shareholder:
INVESTORS KEPT A WATCHFUL EYE ON THE policymaking decisions of the Federal
Reserve Board over the past 12 months. This translated into unpredictable mood
swings in both the U.S. stock and bond markets.
At the start of our fiscal period last November, the Federal Reserve was on
the verge of reducing its target for short-term interest rates a third time to
increase liquidity in the investment markets and calm fears of a U.S. recession
that had arisen in the wake of worldwide economic strife. Lower interest rates
helped restore investor confidence in the U.S. economy and led to substantial
price appreciation in stocks of all market capitalizations.
In early 1999, concerns about continued economic growth and the future growth
of corporate profits crept back into the picture. Investors generally narrowed
their stock selection to the largest companies. Apparently, they believed these
companies would be able to sustain earnings growth if the economy stalled. The
Dow Jones Industrial Average skyrocketed above 10,000 for the first time in late
March, led by a select group of large company growth stocks.
The Dow topped 11,000 in early May after the release of strong economic data
boosted investors' expectations for a broader selection of stocks, particularly
those selling at attractive prices relative to company earnings.
Delaware Balanced Fund's equity holdings generally thrived during the months
of April, May and June as a broad array of stocks participated in the market's
price gains. The Fund's emphasis on consistent growth at reasonable prices left
it well-positioned to benefit from a broad advance in the
THE FUND'S EMPHASIS ON CONSISTENT GROWTH AT REASONABLE PRICES LEFT IT
WELL-POSITIONED TO BENEFIT FROM A BROAD ADVANCE IN THE STOCK MARKET.
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR PERIODS ENDED OCTOBER 31, 1999
12 Months Ended 20 Years Ended
October 31, 1999 October 31, 1999
- --------------------------------------------------------------------------------
Delaware Balanced Fund A Class +0.44% +14.54%
- --------------------------------------------------------------------------------
Lipper Balanced Fund Average +11.30% (431 funds) +13.51% (28 funds)
- --------------------------------------------------------------------------------
Standard & Poor's 500 Index +24.05% +13.85%
Lehman Brother's Aggregate Bond Index +0.54% +10.24%
- --------------------------------------------------------------------------------
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 9. The Lipper category
represents the average returns of balanced funds tracked by Lipper Analytical.
The Standard & Poor's 500 is an unmanaged composite of mostly
large-capitalization U.S. companies. The Lehman Brother's Aggregate Bond Index
is composed of investment grade and non-investment grade U.S. bonds. You cannot
invest directly in an index. Past performance does not guarantee future results
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2
stock market. Our strong performance in late spring helped offset weak
performance of three of the Fund's top holdings that occurred early in the
fiscal year.
We were optimistic that the market's performance during the spring was the
beginning of a trend in which stock market performance would be driven by a
wider number of stocks. But, we also recognized that there might be a tug-of-war
between the very large growth stocks that had been leading the market and the
many other stocks that had been out-of-favor. This proved to be the case. As
summer heated up, the Fed moved to a more restrictive monetary policy, concerned
that the U.S. economy might overheat, leading to higher inflation. Between June
and November, the Fed raised short-term interest rates three times. Against this
backdrop, a very narrow group of stocks once again led the market as investors
focused almost exclusively on high-priced large company stocks.
The narrow market weighed heavily on Delaware Balanced Fund's performance as
we concluded fiscal 1999. For the 12 months ended October 31, 1999, Delaware
Balanced Fund provided a total return of +0.44% (for A Class shares at net asset
value with distributions reinvested). Our results lagged the average return of
similar funds in the Lipper Balanced Fund category.
During fiscal 1999, Delaware Balanced Fund held roughly a 70%/30% mix of
stocks and bonds. Stocks of mid-size companies--those with market
capitalizations between $2 billion and $10 billion--comprised roughly one-third
of the stock portfolio. These stocks generally performed poorly at the start and
end of our reporting period as investors favored companies with the largest
capitalizations. As a result, Delaware Balanced Fund's equity portfolio was
unable to keep pace with the S&P 500 Index.
In addition, by adhering to our focus on consistent earnings growth at
reasonable prices, we had minimal holdings of technology and cyclical
stocks--sectors that delivered the strongest returns between June and September.
Cyclical companies, in general, do not have consistent earnings and therefore,
we typically do not invest in them. Many technology stocks currently have very
high price-to-earnings ratios. Thus, they have not met our standard for
"reasonable prices."
The bond portion of your Fund's portfolio performed well relative to the
WE WERE OPTIMISTIC THAT THE MARKET'S PERFORMANCE DURING THE SPRING WAS THE
BEGINNING OF A TREND IN WHICH STOCK MARKET PERFORMANCE WOULD BE DRIVEN BY A
WIDER NUMBER OF STOCKS.
discipline
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3
Lehman Brothers Aggregate Bond Index. We attribute this to our holdings in
mortgage-related securities and corporate bonds, which performed well coming out
of the global financial crisis last fall. Despite our strong relative
performance, the Fund's bond component struggled to deliver solid results due to
the negative impact rising interest rates had on bond prices. We've recently
been taking advantage of lower prices for investment-grade bonds by shifting a
portion of the Fund's assets out of stocks and into fixed income securities. As
of October 31, 1999, the Fund had approximately a 65%/35% mix of stocks and
bonds.
On the pages that follow, Francis X. Morris, who manages Delaware Balanced
Fund's stock portfolio, and Gary A. Reed, who is responsible for the Fund's
fixed income component, review performance in the U.S. stock and bond markets
over the past 12 months, as well as the Fund's equity and fixed income
positioning. They also share their outlook for fiscal 2000.
We understand that the past year has been a difficult one for Delaware
Balanced Fund and we appreciate your willingness to maintain a long-term
perspective and stay committed to your investment with us. We believe that
demand for fixed income securities will continue to be light as long as
investors think that the Fed is going to raise interest rates. Until demand
returns to more normal levels, we will continue to take advantage of lower bond
prices. While we can't predict when the stock market's fixation with the narrow
group of large company growth stocks will end, we do believe that eventually,
the opportunities available from the many other exceptional U.S. companies will
capture the market's attention. We are confident that our disciplined investment
style has positioned Delaware Balanced Fund to benefit when a broadening occurs,
just as it did earlier this year.
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
WE'VE RECENTLY BEEN TAKING ADVANTAGE OF LOWER PRICES FOR INVESTMENT-GRADE BONDS
BY SHIFTING A PORTION OF THE FUND'S ASSETS OUT OF STOCKS AND INTO FIXED INCOME
SECURITIES.
[photo of glasses, pen and keyboard]
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for total
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4
Portfolio Managers' Review
BY FRANCIS X. MORRIS AND
GARY A. REED
Vice Presidents/Senior Portfolio Managers
November 17, 1999
U.S. STOCK MARKET: A HANDFUL OF WINNERS DOMINATE RETURNS
Early in our fiscal year, U.S. stocks of all sizes staged a strong rally after
the Federal Reserve reduced the federal funds rate--the interest rate charged
between banks for overnight loans--to help sustain U.S. economic growth. Still,
large-cap growth stocks produced the best returns of any market segment for all
of 1998, reflecting investors' fixation on the biggest, most successful stocks.
During the first few months of 1999, the stock market's gains continued to be
fueled by a select group of large-cap growth stocks. As a result,
price-to-earnings ratios, or P/Es, on some stocks within the Standard & Poor's
500 Index reached what we consider exaggerated levels. P/E is an indicator of
how much investors are willing to pay for a company's earning power, generally
the higher the P/E, the more they are paying; the lower the P/E, the less they
are paying.
In our view, with the exception of the top 20 stocks in the S&P 500, the
majority of stocks in the index were relatively inexpensive compared to
earnings. We believe this was also true of small and mid-size companies, which
had become significantly undervalued compared to large-cap issues.
[photo of couple talking
to financial advisor]
Investors Expand Their Stock Selection
With the release of strong economic data in the spring, investors began to
reallocate their money to relatively undervalued areas of the market where
strong earnings growth potential could be bought at more reasonable prices.
Suddenly, a broad array of stocks was posting measurable gains. Delaware
Balanced Fund benefited from this broader playing field.
Though we believed this marked the beginning of a trend in which a wider
number of stocks would participate in the market's performance, we knew there
was likely to be some resistance from large-cap stocks. Such was the case.
Between June and November, the Federal Reserve raised its target for short-term
interest rates three times. Investors began selling stocks of all
STOCK PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
AS OF OCTOBER 31, 1999
Median Market Capitalization $8.8 billion
Number of Stocks 58
Average Stock Price-to-Earnings Ratio* 20.2x
Top Sector Consumer Growth
Annual Portfolio Turnover Rate 87%
Beta** 0.61
- --------------------------------------------------------------------------------
* P/Es are based on analysts' year 2000 forward earnings estimates as
reported to First Call as of October 31, 1999.
** Beta is 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 than the index.
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5
market capitalizations, apparently fearful of future rate increases. Once again,
they narrowed their focus to the largest growth companies, with a particular
emphasis on a few big technology companies.
U.S. BONDS: REDUCED DEMAND HURTS PRICES
Investor demand for U.S. investment-grade bonds was weak during much of fiscal
1999. As we started the period in November, Treasury bonds began to lose their
appeal due to stronger economic growth and higher corporate earnings. Investors
had flocked to the safety of Treasuries during the summer of 1998 amid
uncertainty in global markets.
The Federal Reserve's three interest rate reductions late in 1998 restored
much needed liquidity to the bond market. In response, many investors quickly
shifted out of Treasuries into higher yielding corporate bonds, asset-backed
securities and mortgage-related securities. As a result, these areas of the
market outperformed U.S. Treasuries through early 1999.
The bond market's progress was halted in May when the Fed announced a shift
in its interest rate policy from a neutral to probable tightening. New money
being invested in the market began to dwindle. When the Fed followed through and
raised short-term interest rates in June and August, the same sectors that had
rallied against Treasuries fell back into rocky territory. There was little
improvement in investor demand through the end of October given continued
concerns over the potential for further interest rate increases.
EQUITY PORTFOLIO STRATEGIC POSITIONING
Delaware Balanced Fund adheres to a disciplined investment strategy that focuses
on what we call "transition stocks"--that is, stocks we believe are currently
selling below their true value with strong prospects for future growth. Our
expectation is that these stocks will be reasonably priced when we purchase them
and then appreciate in price as they "transition" from mid-size to large-size in
terms of market capitalization, or from being value stocks to being growth
stocks of either larger or mid-market capitalizations. Because our strategy is
to capture growth as stocks move through these transitions, we tend to own
stocks for relatively long time periods.
During fiscal 1999, our strategy precluded us from investing in the top tier
performers in the S&P 500, given that most of those stocks--including technology
stocks--had high P/E ratios, an indication that they were too expensive relative
to their future earnings potential. This is the primary reason why the Fund did
not keep pace with the S&P 500 or mutual funds that hold the stocks that led the
S&P 500.
Traditionally, technology is an area where we have had less exposure than the
S&P 500. In fiscal 1999, this was due to exceptionally high prices that did not
meet our value-conscious investment criteria (see our stock selection checklist
on page 6). As of October 31, the Fund's holdings in technology-related
companies were less than half the weighting of the S&P 500. Our holdings
included a mix of mid-size companies, such as Symbol Technologies, BMC Software
and Computer Associates
equity
portfolio
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6
International, and large companies, such as IBM, Hewlett-Packard and Intel.
Our strategy also typically steers us away from investing heavily in cyclical
industries--including paper and chemicals--given that these areas have
historically had earnings spurts rather than the consistent growth we look for.
Whenever we do find cyclical stocks that meet our consistent growth discipline,
we try to add them to our holdings since we think these stocks may benefit from
the economic recovery that is underway in world markets.
Since spring, we have made some changes in the portfolio--reducing and, in
some cases, selling, many of the Fund's oldest and largest holdings because we
believed they had completed their transition from mid- to large-cap, and from
being undervalued to being fairly valued. For example, we reduced the Fund's
weighting in Ecolabs from about 3.75% to 1.0% of net assets between April 30 and
October 31. We sold Rite Aid, Stewart Enterprises and Mylan Laboratories, three
of our top 10 holdings in April, as well as Service Corp. International.
While these stocks generally had a positive impact on the fund during the
overall time that we held them, in the recent past they had suffered due to
earnings disappointments and were sold under our sell discipline.
As we reduced and sold several names in the portfolio, we added stocks of
companies that we believe offer more attractive opportunities for capital
appreciation. These companies span a number of different industries, including
newspaper publishing and discount retailing. We also added selectively to our
financial holdings, with an emphasis on bank stocks where prices currently look
very attractive to us relative to the companies' future earnings growth
potential.
While health care stocks generally have relatively high P/Es, the recent
market correction brought a number of health care companies into our buying
universe. We recently added new positions in selected drug manufacturers and a
Delaware Balanced Fund's
Stock Selection Checklist
When we consider a stock for the portfolio, we ask ourselves the following
questions. Our goal is to select stocks from a broad spectrum of industries
where we can answer such questions positively.
o Is the stock selling at an attractive price relative to its potential earnings
growth?
o Has the company demonstrated that it can grow earnings consistently through a
variety of economic environments?
o Is the company generating excess cash flow that can be reinvested in the
business?
o Is there a company-specific event (i.e., an expansion or acquisition) that can
push earnings beyond expectations or support earnings if business conditions
in the industry weaken?
o Is the company under-researched by Wall Street stock analysts, so that the
market does not seem to be recognizing its potential?
[photo of computer
keyboard]
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7
maker of reconstructive hip, knee and joint replacements, all of which sell
products aimed at the needs of America's aging population.
Capital goods companies (such as electronics and electrical equipment
companies) became an increasingly attractive area for us to invest in over the
past 12 months. There are two reasons for this. First, P/Es on capital goods
companies, in general, have been depressed due, in part, to the narrowness of
the U.S. stock market. Second, we believe these companies will benefit from the
recent pick up in worldwide economic growth, particularly in Asia and Europe.
BOND PORTFOLIO STRATEGIC POSITIONING
In order to maintain an attractive yield profile and to take advantage of lower
prices for investment grade corporate bonds, we continued to invest modestly in
U.S. Treasuries--roughly 10% of the bond portfolio as of October 31. Corporate
bonds, mortgage-related securities and asset-backed securities made up the
majority of our holdings. This positioning served us well during the first half
of our fiscal year. But as interest rates rose in the latter half, our holdings
declined in value, as did most fixed income securities.
As a result of the fluctuating interest rate environment, we made changes to
the Fund's average duration during fiscal 1999. At the beginning of the period,
we lengthened our duration, making it longer than that of our unmanaged
fixed-income benchmark--the Lehman Brothers Aggregate Bond Index. At the time,
we felt that the Fed's moves to lower interest rates would help support the
performance of fixed income securities. When the Fed pushed interest rates
higher, we reduced our duration so that it was in line with that of the Index.
This helped us protect the gains we made in the first fiscal half.
Given the recent increase in interest rates and our concerns about increasing
pressures arising from the higher costs of borrowing money, we have been
reevaluating the Fund's exposure to banks and other financial companies. We
currently have a moderate amount of our bond portfolio allocated to debt
securities of these companies, and we want to be sure that the companies whose
bonds we hold will not suffer in a higher rate environment.
bond
portfolio
ASSET MIX
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October 31, 1999 October 31, 1998
- --------------------------------------------------------------------------------
Stocks 64.6% 68.0%
Bonds 31.2% 29.0%
Cash 2.5% 2.8%
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SEC Yield* +1.78% +1.90%
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* 30-day current yield for A Class shares measured according to Securities and
Exchange Commission guidelines. Yields for B, C and Institutional Class shares
were, respectively, +1.16%, +1.16% and +2.12% as of October 31, 1999.
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8
OUTLOOK
We expect generally stronger worldwide economic growth in the months ahead.
Given that outlook, we are trying to position the portfolio to benefit from such
anticipated growth. We are concentrating on capital goods, energy and selected
financial stocks which, based on our research, appear to have strong future
earnings potential and yet, are selling at relatively attractive prices.
Currently, the anticipated average earnings growth for stocks in the Delaware
Balanced Fund is estimated to exceed 20% for fiscal 2000, versus 12% for the
average of companies in the S&P 500. We are excited about the growth potential
for these securities.
Our outlook for corporate profits in fiscal 2000 is a cautious one. If the
economy overheats and greater cost pressures result from rising commodity prices
or higher wages, we think reduced corporate profitability is possible. But
that's not to say that corporate profits are likely to experience a substantial
decline. We still have a very healthy domestic economy underpinning corporate
America.
[photo of family
on beach]
We also think that because the economy is growing faster than was
anticipated, there is a strong likelihood that the Fed will raise short-term
interest rates again. Until there's a better sense of what the Fed's next move
will be, we believe it's unlikely that investor demand for fixed income
securities will improve. On the other hand, if there is increased volatility in
the stock market, there is a good chance that investors will reallocate some of
their stock holdings to bonds.
Over the long term, Delaware Balanced Fund has consistently generated returns
that are competitive with the average balanced fund as measured by Lipper
Analytical Services, Inc. We attribute this to our commitment to invest in
companies that are growing their earnings consistently, over time. Certainly,
there will be times, such as the recent past, that our strategy will be out of
favor. But we think our disciplined approach--and our adherence to that approach
throughout favorable and unfavorable market cycles--will prove very beneficial
to our shareholders over the long term.
outlook
PORTFOLIO COMPOSITION
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OCTOBER 31, 1999
Percent of
Net Assets
- --------------------------------------------------------------------------------
Credit Sensitive Stocks 12.0%
Capital Goods/Basic Industry Stocks 8.3%
Consumer Growth Stocks 27.0%
Consumer Cyclical Stocks 11.0%
Other Common/Preferred Stocks 1.2%
Utility/Energy Stocks 6.0%
Mortgage-Backed Securities 17.1%
Investment-Grade Bonds 10.4%
Treasuries/Other High Quality Bonds 4.0%
Cash 3.0%
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9
Performance Summary
DELAWARE BALANCED FUND
PERFORMANCE OF A $10,000 INVESTMENT
TEN YEARS ENDED OCTOBER 31, 1999
S&P 500 Index
Delaware Balanced Fund Class A
Lehman Brothers Aggregate Bond Index
Delaware Balanced Lehman Brothers
S&P 500 Index Fund Class A Aggregate Bond Index
------------- ----------------- --------------------
Oct. '89 $10,000 $9,426 $10,000
Oct. '90 8,932 9,126 10,631
Oct. '91 11,530 11,346 12,312
Oct. '92 12,301 12,749 13,523
Oct. '93 13,745 14,267 15,128
Oct. '94 13,878 14,523 14,573
Oct. '95 17,085 16,884 16,853
Oct. '96 20,721 19,598 17,839
Oct. '97 26,872 23,919 19,430
Oct. '98 32,280 27,460 21,238
Oct. '99 $40,044 $27,580 $21,351
Chart assumes $10,000 invested on October 31, 1989. Fund performance includes
the effect of a 5.75% maximum front-end sales charge and the reinvestment of all
distributions. Performance of other Fund classes will vary due to differing
charges and expenses. Past performance does not guarantee future results.
DELAWARE BALANCED FUND PERFORMANCE
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH OCTOBER 31, 1999
Lifetime Ten Years Five Years One Year
- --------------------------------------------------------------------------------
Class A (Est. 4/25/38)
Excluding Sales Charge +11.23% +11.33% +13.69% +0.44%
Including Sales Charge +11.12% +10.68% +12.34% -5.33%
- --------------------------------------------------------------------------------
Class B (Est. 9/6/94)
Excluding Sales Charge +12.15% +12.80% -0.31%
Including Sales Charge +12.03% +12.55% -5.01%
- --------------------------------------------------------------------------------
Class C (Est. 11/29/95)
Excluding Sales Charge +11.65% -0.31%
Including Sales Charge +11.65% -1.25%
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 their original cost. Class B and C
results excluding sales charge assume either that contingent sales charges did
not apply or the investment was not redeemed. Past performance is not a
guarantee of future results.
Class A shares have a 5.75% maximum front-end sales charge and a 12b-1 fee.
Class B shares do not have a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are subject to a deferred sales charge
of up to 5% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If redeemed within
12 months, a 1% contingent deferred sales charge applies.
Average Annual Institutional Class Returns Through October 31, 1999
Lifetime Ten Years Five Years One Year
Delaware Balanced Fund
Institutional Class (Est. 11/9/92) +11.25 +11.48 +13.92 +0.70
The Institutional Class was initially made available on November 9, 1992 and is
available without sales or asset-based distribution charges only to certain
eligible institutional accounts. Performance for the Institutional class for
periods prior to this date is based on Class A performance adjusted to eliminate
the sales charge, but not the asset-based distribution charge.
<PAGE>
10 for total return
Financial Statements
DELAWARE GROUP EQUITY FUNDS I, INC. -
DELAWARE BALANCED FUND
STATEMENT OF NET ASSETS
OCTOBER 31, 1999
- --------------------------------------------------------------------------------
NUMBER OF MARKET
SHARES VALUE
-------------------------
COMMON STOCK - 63.45%
AEROSPACE & DEFENSE - 0.70%
United Technologies ............................ 84,800 $ 5,130,400
-----------
5,130,400
-----------
AUTOMOBILES & AUTO PARTS - 1.65%
Danaher ........................................ 149,900 7,242,044
Federal Signal ................................. 257,800 4,849,863
-----------
12,091,907
-----------
BANKING, FINANCE & INSURANCE - 12.03%
AFLAC .......................................... 209,500 10,710,688
American International Group ................... 67,587 6,957,237
Citigroup ...................................... 206,400 11,171,400
Fleet Boston ................................... 42,500 1,854,063
Federal Home Loan Mortgage ..................... 310,800 16,802,625
MBNA ........................................... 375,800 10,381,475
Nationwide Financial Services Class A .......... 271,400 10,279,275
Unionbancal .................................... 113,600 4,934,500
Washington Mutual .............................. 423,800 15,230,313
-----------
88,321,576
-----------
BUILDINGS & MATERIALS - 3.31%
Masco .......................................... 509,100 15,527,550
Premark International .......................... 160,800 8,803,800
-----------
24,331,350
-----------
CABLE, MEDIA & PUBLISHING - 3.30%
Gannett ........................................ 137,100 10,573,838
+Knight-Ridder .................................. 214,700 13,633,450
-----------
24,207,288
-----------
CHEMICALS - 1.08%
Avery Dennison ................................. 119,500 7,468,750
+Valspar ........................................ 14,800 446,775
-----------
7,915,525
-----------
COMPUTERS & TECHNOLOGY - 3.28%
*BMC Software ................................... 81,300 5,215,903
Computer Associates International .............. 123,900 7,000,350
Hewlett-Packard ................................ 46,800 3,466,125
International Business Machines ................ 85,700 8,430,738
-----------
24,113,116
-----------
CONSUMER PRODUCTS - 1.82%
Dial ........................................... 570,900 13,344,788
-----------
13,344,788
-----------
ELECTRONICS & ELECTRICAL - 6.89%
Honeywell ...................................... 140,700 14,835,056
Intel .......................................... 106,600 8,251,506
Symbol Technologies ............................ 544,425 21,640,894
Teleflex ....................................... 173,400 5,906,438
-----------
50,633,894
-----------
<PAGE>
NUMBER OF MARKET
SHARES VALUE
-------------------------
COMMON STOCK (CONTINUED)
ENERGY - 5.56%
Anadarko Petroleum ............................ 118,800 $ 3,660,525
BP AMOCO ...................................... 136,354 7,874,444
Coastal ....................................... 195,800 8,248,075
Schlumberger Limited .......................... 153,400 9,290,288
Tosco ......................................... 209,400 5,300,438
Unocal ........................................ 187,900 6,482,550
-----------
40,856,320
-----------
ENVIRONMENTAL SERVICES - 0.96%
Ecolab ........................................ 208,100 7,036,381
-----------
7,036,381
-----------
FOOD, BEVERAGE & TOBACCO - 1.82%
Bestfoods ..................................... 98,300 5,775,125
*+Suiza Foods ................................... 167,500 6,040,469
Universal Foods ............................... 80,900 1,547,213
-----------
13,362,807
-----------
HEALTHCARE & PHARMACEUTICALS - 6.06%
American Home Products ........................ 260,700 13,621,575
BIOMET ........................................ 218,100 6,563,447
Johnson & Johnson ............................. 106,200 11,124,450
Schering-Plough ............................... 150,100 7,429,950
*Watson Pharmaceutical ......................... 182,000 5,778,500
-----------
44,517,922
-----------
INDUSTRIAL MACHINERY - 1.47%
Black & Decker ................................ 102,500 4,407,500
Pentair ....................................... 169,100 6,362,388
-----------
10,769,888
-----------
LEISURE, LODGING & ENTERTAINMENT - 2.24%
CarrAmerica Realty ............................ 188,300 4,189,675
Sun Communities ............................... 128,300 4,089,563
Viad .......................................... 332,500 8,167,031
-----------
16,446,269
-----------
RETAIL - 4.80%
*Blockbuster Class A ........................... 376,200 4,561,425
Developers Diversified Realty ................. 280,200 3,992,850
+Intimate Brands ............................... 349,125 14,314,125
TJX ........................................... 457,700 12,415,113
-----------
35,283,513
-----------
TELECOMMUNICATIONS - 6.18%
Alltel ........................................ 144,000 11,988,000
GTE ........................................... 123,800 9,285,000
*MCI Worldcom .................................. 122,200 10,482,469
SBC Communications ............................ 266,900 13,595,219
-----------
45,350,688
-----------
<PAGE>
for total return 11
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
NUMBER OF MARKET
SHARES VALUE
-------------------------
COMMON STOCK (CONTINUED)
TEXTILES, APPAREL & FURNITURE - 0.30%
HON Industries ...................................... 111,400 $ 2,186,225
------------
2,186,225
------------
Total Common Stock (cost $402,494,254) .............. 465,899,857
------------
CONVERTIBLE PREFERRED STOCKS - 1.19%
Freeport-McMoRan Copper & Gold 7.00% ................ 121,700 1,954,806
Sealed Air $2.00 4/1/18 Series A .................... 125,340 6,768,360
------------
Total Convertible Preferred Stocks
(cost $7,713,990) ................................ 8,723,166
------------
PRINCIPAL
AMOUNT
----------
ASSET-BACKED SECURITIES - 3.67%
CIT RV Series 98-A A5 6.12% 7/15/14 ................. $2,595,000 2,539,986
California Infrastructure PG and E
Series 97-1 A4 6.16% 6/25/03 ..................... 1,220,000 1,216,771
Countrywide Home Equity Loan
Series 97-1A4 6.95% 5/25/21 ...................... 2,685,000 2,677,001
Discover Card Master Trust
Series 99-2 A 5.90% 10/15/04 ..................... 3,820,000 3,748,413
EQCC Home Equity Loan Trust
Series 98-2 A3F 6.229% 3/15/13 ................... 2,550,000 2,524,898
First USA Credit Card Master Trust
Series 98-3 A 5.4675% 2/18/04 .................... 3,860,000 3,858,707
Honda Auto Lease Trust 6.45% 09/16/02 ............... 3,810,000 3,803,452
NationsCredit Grantor Trust
Series 96-1 A 5.85% 9/15/11 ...................... 739,335 722,478
Neiman Marcus Group Credit Card Master Trust
Series 95-1A 7.60% 6/15/03 ....................... 330,000 331,650
PECO Energy Transition Trust
Series 99-A A4 5.80% 3/1/07 ...................... 3,640,000 3,480,750
Philadelphia, Pennsylvania Authority For Industrial
Development Series 97 A 6.488% 6/15/04 ........... 2,125,163 2,006,619
------------
Total Asset-Backed Securities
(cost $27,377,126) ............................... 26,910,725
------------
COLLATERALIZED MORTGAGE
OBLIGATIONS - 2.87%
Asset Securitization Corporation
Series 97-D5 A2 6.816% 2/14/41 ...................... 3,030,000 2,788,547
Series 97-D5 A3 6.866% 2/14/41 ...................... 2,485,000 2,246,984
Series 96-D3 A1B 7.21% 10/13/26 ..................... 2,360,000 2,375,119
FannieMae Whole Loan
Series 98-W3 A2 6.50% 7/25/28 .................... 2,598,596 2,582,761
Federal Home Loan Mortgage Corporation
Structured Pass Through Securities Series T-11
A5 6.50% 1/25/15 ................................. 3,555,000 3,507,230
GNR 1998-9 B 6.85% 12/20/25 ......................... 4,900,000 4,729,606
Residential Accredit Loans
Series 98-QS9 A3 6.75% 7/25/28 ................... 2,550,000 2,525,297
Series 97-QS3 A3 7.50% 4/25/27 ................... 338,663 338,663
------------
Total Collateralized Mortgage Obligations
(cost $21,980,445) ............................... 21,094,207
------------
<PAGE>
PRINCIPAL MARKET
AMOUNT VALUE
-------------------------
COMMERCIAL MORTGAGE-BACKED
SECURITIES - 2.91%
Chase Commercial Mortgage Securities Corporation
Series 96-2 C 6.90% 11/19/06 ................ $ 1,753,625 $ 1,671,972
DLJ Commercial 6.46% 1/10/09 ................... 3,730,000 3,526,016
FUNCM 1999-C2 A2 6.645% 4/15/09 ................ 4,660,000 4,477,969
Lehman Large Loan
Series 97-LLI A1 6.79% 6/12/04 .............. 2,431,103 2,423,886
MetLife Capital Equipment Loan Trust
Series 97-A 6.85% 5/20/08 ................... 2,215,000 2,216,108
Mortgage Capital Funding
96-MC2-C 7.224% 9/20/06 ..................... 2,127,777 2,078,572
Nomura Asset Securities
Series 93-1 A1 6.68% 12/15/01 ............... 2,436,365 2,415,808
Series 96-MD5 A3 7.9183% 4/13/36 ............ 2,550,000 2,536,852
-----------
Total Commercial Mortgage-Backed Securities
(cost $21,822,094) .......................... 21,347,183
-----------
CORPORATE BONDS - 10.40%
American Financial Group 7.125% 4/15/09 ........ 1,570,000 1,440,475
Banco Santiago S.A. 7.00% 7/18/07 .............. 1,435,000 1,273,563
Banco Santander-Chile notes 6.50% 11/1/05 ...... 1,775,000 1,692,906
Bank One 6.40% 8/1/02 .......................... 3,090,000 3,062,963
Conseco 9.00% 10/15/06 ......................... 2,975,000 2,989,875
Cox Communications 6.15% 8/1/03 ................ 2,620,000 2,528,300
Credit Foncier de France 8.00% 1/14/02 ......... 1,865,000 1,909,294
Daimler Chrysler 6.90% 9/1/04 .................. 2,500,000 2,506,250
DUPONT EI NEMOUR 6.75% 10/15/04 ................ 1,160,000 1,162,900
Equistar Chemicals 8.75% 2/15/09 ............... 2,080,000 2,038,400
Fairfax Financial 7.375% 3/15/06 ............... 730,000 667,038
Great Western Financial 8.206% 2/1/27 .......... 3,090,000 2,985,713
Household Finance 6.50% 11/15/08 ............... 985,000 927,131
Kohls 6.70% 2/1/06 ............................. 2,240,000 2,161,600
Lehman Brothers 6.625% 2/5/06 .................. 3,575,000 3,449,875
Liberty Media 144A 8.50% 7/15/29 ............... 1,000,000 1,011,250
May Department Stores 7.50% 6/1/15 ............. 3,090,000 3,082,275
MCI Communications 6.125% 4/15/02 .............. 1,930,000 1,898,638
MCI Worldcom 7.55% 4/1/04 ...................... 3,495,000 3,582,375
Meritor Automotive 6.80% 2/15/09 ............... 2,620,000 2,436,600
Osprey Trust 144A 8.31% 1/15/03 ................ 3,250,000 3,254,063
Pemex Finance 9.69% 8/15/09 .................... 3,000,000 2,981,250
Popular North America 6.625% 1/15/04 ........... 3,050,000 2,958,500
Republic of Korea 8.875% 4/15/08 ............... 2,320,000 2,424,400
+Republic of South Africa 9.125% 5/19/09 ........ 2,320,000 2,343,200
Safeway Inc 7.00% 9/15/02 ...................... 2,720,000 2,713,200
+SAKS 8.25% 11/15/08 ............................ 3,455,000 3,325,438
Summit Capital Trust 8.40% 3/15/27 ............. 1,540,000 1,522,675
Sun Microsystems 7.65% 8/15/09 ................. 2,060,000 2,101,200
Tommy Hilfiger USA 6.85% 6/1/08 ................ 1,645,000 1,513,400
Transwestern Pipeline 7.55% 1/15/00 ............ 930,000 931,163
United Health Care 6.60% 12/1/03 ............... 3,300,000 3,122,625
United News and Media 7.750% 7/1/09 ............ 2,820,000 2,735,400
USA Waste Services 6.125% 7/15/01 .............. 1,715,000 1,637,825
-----------
Total Corporate Bonds (cost $78,341,637) ....... 76,371,760
-----------
<PAGE>
12 for total return
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
-------------------------
MORTGAGE-BACKED SECURITIES - 7.68%
Federal Home Loan Mortgage Corp.
6.00% 2/1/11 ................................. $1,320,272 $ 1,283,140
6.50% 5/1/29 ................................. 12,420,315 11,907,961
7.00% 4/1/29 ................................. 4,054,479 3,979,724
7.50% 10/1/29 ................................ 23,158,586 23,216,483
8.50% 4/1/09 ................................. 297 314
Federal National Mortgage Association
6.00% 3/1/13 ................................. 2,138,762 2,059,227
6.00% 10/1/28 ................................ 4,276,164 3,987,523
7.00% 7/1/17 ................................. 954,487 947,030
7.00% 7/1/28 ................................. 6,434,768 6,314,116
7.00% 8/1/28 ................................. 2,008,542 1,970,882
8.00% 12/1/09 ................................ 168,805 173,078
8.50% 11/1/09 ................................ 561,023 581,886
-----------
Total Mortgage-Backed Securities
(cost $57,773,696) ........................... 56,421,364
-----------
U.S. TREASURY OBLIGATIONS - 3.69%
U.S. Treasury Bond 6.125% 11/15/27 ............. 1,940,000 1,873,272
US Treasury Inflation Index Note 3.625%
7/15/02 ...................................... 3,958,650 3,937,828
U.S. Treasury Notes
+5.25% 5/15/04 ............................... 3,750,000 3,643,936
+5.25% 2/15/29 ............................... 3,500,000 3,031,993
+5.50% 8/31/01 ............................... 3,750,000 3,730,404
+5.50% 5/15/09 ............................... 3,850,000 3,692,741
+6.375% 8/15/27 .............................. 5,790,000 5,763,151
+U.S. Treasury Strips 0.00% 5/15/27 ............. 8,000,000 1,445,766
-----------
Total U.S. Treasury Obligations
(cost $27,142,632) ........................... 27,119,091
-----------
REPURCHASE AGREEMENTS - 2.46%
With Chase Manhattan 5.20% 11/1/99 (dated
10/29/99, collateralized by $5,856,000 U.S.
Treasury Notes 6.125% due 12/31/01,
market value $6,005,063) ..................... 5,856,000 5,856,000
With J.P. Morgan 5.20%11/1/99 (dated
10/29/99, collateralized by $4,214,000
U.S. Treasury Notes 5.625% due
5/15/01, market value $4,301,655
and $1,882,000 U.S. Treasury Notes 6.50%
due 8/31/01, market value $1,920,551) ........ 6,096,000 6,096,000
With PaineWebber 5.20% 11/1/99 (dated
10/29/99, collateralized by $2,140,000
U.S. Treasury Notes 6.25% due 10/31/01,
market value $2,183,823 and
$3,956,000 U.S. Treasury Notes 6.25% due
2/15/03, market value $4,039,675) ............ 6,096,000 6,096,000
-----------
Total Repurchase Agreements
(cost $18,048,000) ........................... 18,048,000
-----------
<PAGE>
TOTAL MARKET VALUE OF SECURITIES - 98.32%
(COST $662,693,874) ......................................... $721,935,353
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 1.68% ........ 12,363,805
------------
NET ASSETS APPLICABLE TO 33,994,092 SHARES
($1 PAR VALUE) OUTSTANDING - 100.00% ........................ $734,299,158
============
NET ASSET VALUE - DELAWARE BALANCED FUND A CLASS
($562,975,242 / 26,065,331 SHARES) .......................... $21.60
======
NET ASSET VALUE - DELAWARE BALANCED FUND B CLASS
($67,089,831 / 3,107,751 SHARES) ............................ $21.59
======
NET ASSET VALUE - DELAWARE BALANCED FUND C CLASS
($21,191,671 / 982,475 SHARES) .............................. $21.57
======
NET ASSET VALUE - DELAWARE BALANCED FUND INSTITUTIONAL CLASS
($83,042,414 / 3,838,535 SHARES) ............................ $21.63
======
- ----------------------
+ Security on loan.
* Non-income producing security for the year ended October 31, 1999.
Top ten equity holdings, representing 20.77% of net assets, are in bold face.
COMPONENTS OF NET ASSETS AT OCTOBER 31, 1999:
Common stock, $1 par value, 200,000,000 shares authorized
to the Delaware Balanced Fund ............................... $591,841,206
Accumulated net realized gain on investments ................... 83,216,473
Net unrealized appreciation of investments ..................... 59,241,479
------------
Total net assets ............................................... $734,299,158
============
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
DELAWARE BALANCED FUND
Net asset value A Class (A) .................................... $21.60
Sales charge (5.75% of offering price or 6.11% of the amount
invested per share) (B) ..................................... 1.32
------
Offering price ................................................. $22.92
======
- ----------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon the redemption or repurchase of shares.
(B) See the current Prospectus for purchases of $50,000 or more.
See accompanying notes
<PAGE>
for total return 13
DELAWARE GROUP EQUITY FUNDS I, INC. -
DELAWARE BALANCED FUND
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $18,592,691
Dividends 9,316,273 $27,908,964
----------- -----------
EXPENSES:
Management fees .................................. 5,368,105
Distribution expense ............................. 2,208,886
Dividend disbursing and transfer agent fees
and expenses .................................. 2,067,691
Accounting and administration .................... 380,911
Reports and statements to shareholders ........... 179,991
Professional fees ................................ 75,484
Taxes (other than taxes on income) ............... 45,568
Registration fees ................................ 45,247
Custodian fees ................................... 18,339
Directors' fees .................................. 18,107
Other ............................................ 182,732 10,591,061
-----------
Less expenses paid indirectly .................... (22,867)
-----------
Total expenses ................................... 10,568,194
-----------
NET INVESTMENT INCOME ............................ 17,340,770
-----------
NET REALIZED AND UNREALIZED GAIN/LOSS
ON INVESTMENTS:
Net realized gain on investments ................. 83,578,653
Net change in unrealized appreciation/depreciation
of investments ................................ (79,429,533)
-----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS ........................... 4,149,120
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ..................... $21,489,890
===========
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS I, INC. -
DELAWARE BALANCED FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
10/31/99 10/31/98
------------ ------------
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income ........................... $ 17,340,770 $ 18,814,542
Net realized gain on investments ................ 83,578,653 54,958,953
Net change in unrealized appreciation/
depreciation of investments .................. (79,429,533) 35,042,450
------------ ------------
Net increase in net assets resulting
from operations .............................. 21,489,890 108,815,945
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class ...................................... (13,300,317) (13,013,538)
B Class ...................................... (771,082) (305,673)
C Class ...................................... (311,819) (154,291)
Institutional Class .......................... (6,247,007) (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)
------------ ------------
(64,517,689) (101,064,491)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class ...................................... 57,112,267 56,962,202
B Class ...................................... 47,869,090 19,010,246
C Class ...................................... 12,722,007 10,054,204
Institutional Class .......................... 64,951,308 161,610,921
Net asset value of shares issued upon
reinvestment of distributions from net
investment income and net realized gain
on investments:
A Class ...................................... 32,315,339 59,528,177
B Class ...................................... 2,415,413 2,170,092
C Class ...................................... 1,107,652 1,085,874
Institutional Class .......................... 19,941,662 22,245,115
------------ ------------
238,434,738 332,666,831
------------ ------------
Cost of shares repurchased:
A Class ...................................... (99,907,451) (65,404,693)
B Class ...................................... (12,727,442) (4,424,506)
C Class ...................................... (8,757,677) (1,700,256)
Institutional Class .......................... (302,317,134) (38,660,111)
------------ ------------
(423,709,704) (110,189,566)
------------ ------------
Increase (decrease) in net assets derived from
capital share transactions ................... (185,274,966) 222,477,265
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS ........... (228,302,765) 230,228,719
NET ASSETS:
Beginning of year ............................... 962,601,923 732,373,204
------------ ------------
End of year ..................................... $734,299,158 $962,601,923
============ ============
See accompanying notes
<PAGE>
14 for total return
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
-------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
10/31/99 10/31/98 10/31/97 10/31/96 10/31/95
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........................ $22.970 $22.950 $21.260 $19.940 $18.000
Income (loss) from investment operations:
Net investment income .................................... 0.422(1) 0.510 0.610 0.706 0.664
Net realized and unrealized gain (loss) on investments ... (0.257) 2.620 3.680 2.349 2.156
-------- -------- -------- -------- --------
Total from investment operations ......................... 0.165 3.130 4.290 3.055 2.820
-------- -------- -------- -------- --------
Less dividends and distributions:
Dividends from net investment income ..................... (0.495) (0.510) (0.680) (0.655) (0.630)
Distributions from net realized gain on investments ...... (1.040) (2.600) (1.920) (1.080) (0.250)
-------- -------- -------- -------- --------
Total dividends and distributions ........................ (1.535) (3.110) (2.600) (1.735) (0.880)
-------- -------- -------- -------- --------
Net asset value, end of period .............................. $21.600 $22.970 $22.950 $21.260 $19.940
======== ======== ======== ======== ========
Total return(2) ............................................. 0.44% 14.80% 22.05% 16.07% 16.26%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ..................$562,975 $610,332 $554,448 $490,150 $493,243
Ratio of expenses to average net assets .................. 1.12% 0.98% 0.97% 0.99% 0.97%
Ratio of net investment income to average net assets ..... 1.85% 2.25% 2.83% 3.39% 3.55%
Portfolio turnover ....................................... 87% 86% 81% 92% 94%
</TABLE>
- ---------------
(1) Per share information was based on the average shares outstanding method.
(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 15
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
-------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
10/31/99 10/31/98 10/31/97 10/31/96 10/31/95
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................... $22.950 $22.880 $21.200 $19.900 $17.980
Income (loss) from investment operations:
Net investment income ................................ 0.246(2) 0.337 0.452 0.525 0.567
Net realized and unrealized gain (loss)
on investments...................................... (0.251) 2.608 3.658 2.350 2.113
------- ------- ------- ------- -------
Total from investment operations ..................... (0.005) 2.945 4.110 2.875 2.680
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ................. (0.315) (0.275) (0.510) (0.495) (0.510)
Distributions from net realized gain
on investments...................................... (1.040) (2.600) (1.920) (1.080) (0.250)
------- ------- ------- ------- -------
Total dividends and distributions .................... (1.355) (2.875) (2.430) (1.575) (0.760)
------- ------- ------- ------- -------
Net asset value, end of period .......................... $21.590 $22.950 $22.880 $21.200 $19.900
======= ======= ======= ======= =======
Total return(3) ......................................... (0.31%) 13.90% 21.09% 15.15% 15.36%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .............. $67,090 $33,884 $16,659 $6,872 $3,383
Ratio of expenses to average net assets .............. 1.89% 1.77% 1.78% 1.80% 1.79%
Ratio of net investment income to average
net assets.......................................... 1.08% 1.46% 2.00% 2.58% 2.73%
Portfolio turnover ................................... 87% 86% 81% 92% 94%
</TABLE>
- ----------------------
(1) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(2) Per share information was based on the average shares outstanding method.
(3) 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>
<TABLE>
<CAPTION>
DELAWARE BALANCED FUND C CLASS
-------------------------------------------------
YEAR YEAR YEAR 11/29/95(1)
ENDED ENDED ENDED TO
10/31/99 10/31/98 10/31/97 10/31/96
<S> <C> <C> <C> <C>
Net asset value, beginning of period .................... $22.930 $22.870 $21.180 $20.500
Income (loss) from investment operations:
Net investment income ................................ 0.246(2) 0.335 0.460 0.583
Net realized and unrealized gain (loss)
on investments...................................... (0.251) 2.600 3.655 1.757
------- ------- ------- -------
Total from investment operations ..................... (0.005) 2.935 4.115 2.340
------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ................. (0.315) (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 .................... (1.355) (2.875) (2.425) (1.660)
------- ------- ------- -------
Net asset value, end of period .......................... $21.570 $22.930 $22.870 $21.180
======= ======= ======= =======
Total return(3).......................................... (0.31%) 13.85% 21.07% 12.13%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .............. $21,192 $17,730 $8,090 $1,990
Ratio of expenses to average net assets .............. 1.89% 1.77% 1.78% 1.80%
Ratio of net investment income to average
net assets.......................................... 1.08% 1.46% 2.00% 2.58%
Portfolio turnover ................................... 87% 86% 81% 92%
</TABLE>
<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 INSTITUTIONAL CLASS
-------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
10/31/99 10/31/98 10/31/97 10/31/96 10/31/95
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $23.000 $23.000 $21.300 $19.980 $18.030
Income (loss) from investment operations:
Net investment income .................................. 0.480(1) 0.585 0.659 0.727 0.694
Net realized and unrealized gain (loss) on investments.. (0.265) 2.595 3.681 2.363 2.166
------- ------- ------- ------- -------
Total from investment operations ....................... 0.215 3.180 4.340 3.090 2.860
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ................... (0.545) (0.580) (0.720) (0.690) (0.660)
Distributions from net realized gain on investments .... (1.040) (2.600) (1.920) (1.080) (0.250)
------- ------- ------- ------- -------
Total dividends and distributions ...................... (1.585) (3.180) (2.640) (1.770) (0.910)
------- ------- ------- ------- -------
Net asset value, end of period ............................ $21.630 $23.000 $23.000 $21.300 $19.980
======= ======= ======= ======= =======
Total return .............................................. 0.70% 15.03% 22.29% 16.25% 16.50%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $83,042 $300,656 $153,176 $125,751 $108,747
Ratio of expenses to average net assets ................ 0.89% 0.77% 0.78% 0.80% 0.79%
Ratio of net investment income to average net assets ... 2.08% 2.46% 3.00% 3.58% 3.73%
Portfolio turnover ..................................... 87% 86% 81% 92% 94%
</TABLE>
- ----------------------
(1) Per share information was based on the average shares outstanding method.
See accompanying notes
<PAGE>
for total return 17
DELAWARE GROUP EQUITY FUNDS I, INC. -
DELAWARE BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999
- --------------------------------------------------------------------------------
Delaware Group Equity Funds I, Inc. (the "Company") is registered as a
diversified open-end investment company under the Investment Company Act of
1940, as amended. The Company is organized as a Maryland Corporation and offers
two series: the Delaware Balanced Fund and the Delaware Devon Fund. These
financial statements and notes pertain to the Delaware Balanced Fund (the
"Fund"). The Fund offers four classes of shares. The A Class carries a front-end
sales charge of 5.75%. The B Class carries a back-end sales charge. The C Class
carries a level load deferred sales charge and 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 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.
<PAGE>
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 $21,654 for the year ended October
31, 1999. In addition, the Fund receives earnings credits from its custodian
when positive cash balances are maintained, which are used to offset custody
fees. These credits were $1,213 for the year ended October 31, 1999. The
expenses paid under the above arrangements are included in their respective
expense captions on the statement of operations with the corresponding expense
offset shown as "Expenses paid indirectly".
2. Investment Management and Other Transactions with Affiliates
Effective April 1, 1999 and 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 0.65% 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 April 1, 1999, 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 year ended October 31, 1999, the Fund had a liability for Investment
Management fees and other expenses payable to DMC of $427,563.
The Fund has engaged Delaware Service Company, Inc. ("DSC"), an affiliate of
DMC, to provide dividend disbursing, transfer agent and accounting services. The
Fund pays DSC a monthly fee based on the number of shareholder accounts,
shareholder transactions and average net assets, subject to certain minimums. At
October 31, 1999, the Fund had a liability for such fees and other expenses
payable to DSC of $45,263.
Pursuant to the Distribution Agreement, the Fund pays Delaware Distributors,
L.P. ("DDLP"), the Distributor and an affiliate of DMC, an annual fee not to
exceed 0.30% of the average daily net assets of the A Class and 1.00% of the
average daily net assets of the B and C Classes. For the year ended October 31,
1999, the Fund had a liability for such fees and other expenses payable to DDLP
of $25,306.
For the year ended October 31, 1999, DDLP earned $147,167 for commissions on
sales of the Fund A Class shares.
Certain officers of DMC, DSC and DDLP are officers, directors and/or employees
of the Fund. These officers, directors and employees are paid no compensation by
the Fund.
3. Investments
During the year ended October 31, 1999, the Fund made purchases of $688,597,056
and sales of $921,049,848 of investment securities other than U.S. government
securities and temporary cash investments. During the year ended October 31,
1999, the Fund made purchases of $122,305,076 and sales of $132,528,108 U.S.
government securities.
At October 31, 1999, unrealized appreciation for federal income tax purposes
aggregated $57,768,946 of which $82,594,503 related to unrealized appreciation
of securities and $24,825,557 related to unrealized depreciation of securities.
At October 31, 1999, the aggregate cost of securities for federal income tax
purposes was $664,166,407.
<PAGE>
18 for total return
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
4. Capital Stock
Transactions in capital stock shares were as follows:
Year Ended Year Ended
10/31/99 10/31/98
---------- ----------
Shares sold:
A Class .......................................... 2,483,043 2,527,314
B Class .......................................... 2,091,897 840,492
C Class .......................................... 552,593 444,310
Institutional Class .............................. 2,817,975 7,092,142
Shares issued upon reinvestment of distributions from
net investment income and net realized gain on
investments:
A Class .......................................... 1,410,937 2,773,200
B Class .......................................... 105,717 101,142
C Class .......................................... 48,444 50,636
Institutional Class .............................. 868,541 1,033,264
---------- ----------
10,379,147 14,862,500
---------- ----------
Shares repurchased:
A Class .......................................... (4,404,727) (2,879,391)
B Class .......................................... (566,237) (193,261)
C Class .......................................... (391,653) (75,623)
Institutional Class .............................. (12,920,482) (1,711,585)
---------- ----------
(18,283,099) (4,859,860)
---------- ----------
Net increase (decrease) ............................. (7,903,952) 10,002,640
========== ==========
5. Lines of Credit
The Fund has a committed line of credit for $26,800,000. No amount was
outstanding at October 31, 1999, or at any time during the fiscal year.
<PAGE>
6. Market and Credit Risk
The Fund may invest in securities whose value is derived from an underlying pool
of mortgages or consumer loans. Prepayment of these loans may shorten the stated
maturity of the respective obligation and may result in a loss of premium, if
any has been paid.
The Fund may invest up to 10% of its total assets in illiquid securities which
may include securities with contractual restrictions on resale, securities
exempt from registration under Rule 144A of the Securities Act of 1933, as
amended, and other securities which may not be readily marketable. The relative
illiquidity of some of these securities may adversely affect the Fund's ability
to dispose of such securities in a timely manner and at a fair price when it is
necessary to liquidate such securities.
7. Securities Lending
Security loans for the Fund are required at all times to be secured by U.S.
Treasury obligations and/or cash collateral at least equal to 100% of the market
value of the securities on loan. However, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings. In the event that the borrower
fails to return loaned securities, and the collateral being maintained by the
borrower is insufficient to cover the value of loaned securities and provided
such collateral insufficiency is not the result of investment losses, the
lending agent has agreed to pay the amount of the shortfall to the Fund or, at
the option of the lending agent, replace the loaned securities. The market value
of securities on loan to brokers and the related collateral received at October
31, 1999 were $50,027,881 and $50,345,055, respectively. Net income from
securities lending was $274,199 and is included in interest income on the
Statement of Operations.
8. Tax Information (Unaudited)
The information set forth below is for the Fund's fiscal year as required by
federal laws. Shareholder's, however, must report distributions on a calendar
year basis for income tax purposes, which may include distributions for portions
of two fiscal years of a fund. Accordingly, the information needed by
shareholders for income tax purposes will be sent to them in early 2000. Please
consult your tax advisor for proper treatment of this information. For the
fiscal year ended October 31, 1999, the Fund designates as long-term capital
gains and ordinary income distributions paid during the year as follows:
(A) (B)
Long-Term Capital Ordinary Income (C) (D)
Gains Distributions Distributions Total Distributions Qualifying
(Tax Basis) (Tax Basis) (Tax Basis) Dividends(1)
------------------- --------------- ------------------- ------------
30% 70% 100% 54%
(A) and (B) are based on a percentage of the Fund's total distributions.
(D) is based on a percentage of ordinary income of the Fund.
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
<PAGE>
for total return 19
DELAWARE GROUP EQUITY FUNDS I, INC. -
DELAWARE BALANCED FUND
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
DELAWARE GROUP EQUITY FUNDS I, INC. - DELAWARE BALANCED FUND
We have audited the accompanying statement of net assets of Delaware Balanced
Fund (the "Fund") as of October 31, 1999, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of October 31, 1999, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Balanced Fund at October 31, 1999, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and its financial highlights for each of the periods
indicated therein, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
------------------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
December 3, 1999
<PAGE>
DELAWARE INVESTMENTS FAMILY OF FUNDS
FOR GROWTH OF CAPITAL
Delaware Select Growth Fund
Delaware Trend Fund
Delaware DelCap Fund
Delaware Small Cap Value Fund
Delaware U.S. Growth Fund
Delaware Growth Stock Fund
Delaware Tax-Efficient Equity Fund
Delaware Social Awareness Fund
FOR TOTAL RETURN
Delaware Blue Chip Fund
Delaware Devon Fund
Delaware Growth and Income Fund
Delaware Decatur Equity Income Fund
Delaware REIT Fund
Delaware Balanced Fund
FOR INTERNATIONAL DIVERSIFICATION
Delaware Emerging Markets Fund
Delaware New Pacific Fund
Delaware Overseas Equity Fund
Delaware International Equity Fund
Delaware Global Equity Fund
Delaware Global Bond Fund
FOR CURRENT INCOME
Delaware Delchester Fund
Delaware High-Yield Opportunities Fund
Delaware Strategic Income Fund
Delaware Corporate Bond Fund
Delaware Extended Duration Bond Fund
Delaware American Government Bond Fund
Delaware U.S. Government Securities Fund
Delaware Limited-Term Government Fund
FOR TAX-EXEMPT INCOME
Delaware National High-Yield Municipal Bond Fund
Delaware Tax-Free USA Fund
Delaware Tax-Free Insured Fund
Delaware Tax-Free USA Intermediate Fund
Delaware State Tax-Free Funds*
MONEY MARKET FUNDS
Delaware Cash Reserve
Delaware Tax-Free Money Fund
ASSET ALLOCATION FUNDS
Delaware Foundation Funds
Growth Portfolio
Balanced Portfolio
Income Portfolio
* Available for the following states: Arizona, California, Colorado, Florida,
Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, North Dakota, New Jersey,
New Mexico, New York, Ohio, Oregon, Pennsylvania, 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 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 objective
and operating policies of the Fund. You should read the prospectus carefully
before you invest or send money. The figures in this report represent past
results which are not a guarantee of future results. The return and principal
value of an investment in the Fund will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost.
Board of Directors
WAYNE A. STORK
Chairman
Delaware Investments Family of Funds
Philadelphia, PA
WALTER P. BABICH
Board Chairman, Citadel Constructors, Inc.
King of Prussia, PA
DAVID K. DOWNES
President and Chief Executive Officer
Delaware Investments Family of Funds
Philadelphia, PA
JOHN H. DURHAM
Private Investor
Horsham, PA
ANTHONY D. KNERR
Consultant, Anthony Knerr & Associates
New York, NY
ANN R. LEVEN
Former Treasurer, National Gallery of Art
Washington, DC
THOMAS F. MADISON
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
CHARLES E. PECK
Retired
Fredericksburg, VA
JAN L. YEOMANS
Vice President and Treasurer
3M Corporation
St. Paul, Minnesota
Affiliated Officers
RICHARD J. FLANNERY
Executive Vice President and General Counsel
Delaware Investments Family of Funds
Philadelphia, PA
BRUCE D. BARTON
President and Chief Executive Officer
Delaware Distributors, L.P.
Philadelphia, PA
ERIC E. MILLER
Senior Vice President, Secretary
and Deputy General Counsel
Delaware Investments Family of Funds
Philadelphia, PA
<PAGE>
[photo of globes]
directors
& officers
- -------------------------------------------------------------------------------
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
<PAGE>
When used with prospective investors, this report must be preceded or
accompanied by a current Delaware Balanced Fund Prospectus and the Delaware
Investments Performance Update for the most recently completed calendar quarter.
For a prospectus of any other mutual fund from Delaware Investments, contact
your financial adviser or Delaware Investments.
[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.delawareinvestments.com
DELAWARE(SM)
INVESTMENTS
- ---------------------
Philadelphia o London
Be sure to consult your financial adviser when making investments. Mutual funds
can be a valuable part of your financial plan; however, shares of the Fund are
not FDIC or NCUSIF insured, are not guaranteed by any bank or any credit union,
and involve investment risk, including the possible loss of the principal amount
invested. Shares of the Fund are not bank or credit union deposits.
(C) Delaware Distributors, L.P.
Printed in the USA
on recycled paper
(2397)
AR-002[10/99]PPL12/99
