<PAGE>
FOR TOTAL RETURN
DEVON FUND
service and guidance
professional management
goals
(photo of illustration from
Total Return brochure)
1999
Semi-Annual
Report
DELAWARE(SM)
INVESTMENTS
- ---------------------
PHILADELPHIA o LONDON
<PAGE>
FOR TOTAL
RETURN
2
JUNE 18, 1999
DEAR SHAREHOLDER:
OVER THE LAST SIX MONTHS, THE U.S. stock market provided substantial gains,
after benefiting from the powerful influence of Federal Reserve Board monetary
policy.
At the start of our fiscal period, many investors were concerned about
economic and fiscal problems in Asia, Russia and Brazil, and their potential
impact on U.S. corporations. These investors avoided all but the safest
investments, U.S. Treasury bonds. As the U.S. economy faced the most serious
obstacle to expansion in more than seven years, the Federal Reserve intervened
and cut short-term interest rates three times.
Lower interest rates were a potent tonic for equity markets. By November,
corporate earnings began to improve, the U.S. economy regained its remarkable
momentum, and the stock market began a climb that continued throughout the
fiscal period.
The Standard and Poor's 500 Index made impressive gains during the period,
rising by nearly 23%. This advance, however, was essentially driven by selected
technology companies and a few very large, growth-oriented companies.
Devon Fund returned +8.85% for the six months ended 4/30/99 (Class A shares
at net asset value with distributions reinvested). Many stocks in the Devon
portfolio are mid-size companies, with market capitalizations between $2 billion
and $10 billion. Market capitalization is a stock's price times the number of
shares outstanding. In our opinion, these companies have the potential to become
large cap companies. However, during the first quarter of 1999, the companies we
held were overshadowed by larger companies. As a result, Devon was unable to
keep pace with the S&P 500.
Devon Fund also suffered from significant underperformance of three Fund
holdings: SERVICE CORP. INTERNATIONAL, STEWART ENTERPRISES and RITE AID. Prices
for Service Corp. and Rite Aid stock fell in 1999 after they failed to reach
their earnings projections. We believe that the disappointing performance of
Service Corp. had a negative impact on Stewart Enterprises,
WE ARE CONFIDENT THAT DEVON 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.
CUMULATIVE/AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED AVERAGE ANNUAL
APRIL 30, 1999 LIFETIME
- --------------------------------------------------------------------------------
DEVON FUND CLASS A +8.85% +21.65%
- --------------------------------------------------------------------------------
Lipper Growth and Income Fund Average +18.39% (869 funds) +18.73% (304 funds)
Standard & Poor's 500 Index +22.31% +24.41%
- --------------------------------------------------------------------------------
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. 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 is an
unmanaged composite of large company stocks.
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3
another funeral services holding in the Fund. Please refer to the Portfolio
Manager's review for a more detailed discussion of these companies and how we
have addressed their underperformance.
We remain positive about the prospects for Devon Fund in 1999. In April, a
much broader array of companies began to share in the stock market's gains. We
are confident that Devon 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 Devon
portfolio management team. Mr. Morris and his team will continue to implement
Devon Fund's disciplined investment strategy, focusing on what we call
transition stocks. These are companies whose stocks we believe are currently
priced below their underlying value, but have the potential to become strongly
performing growth stocks in the future.
In the pages that follow, Mr. Morris explains Devon Fund's recent performance
and provides an outlook for the future. We believe Devon Fund's unique focus on
transition stocks can play an important role in long-term investment plans. As
the chart on page 2 shows, Devon Fund has provided an impressive lifetime total
return, outpacing the average return of other growth and income funds and nearly
matching the performance of the unmanaged S&P 500 index.
In general, most equity funds either seek the value of bargain-priced
securities or the growth potential of more expensive stocks with high earnings
expectations. What separates Devon from these funds is our focus on the
overlooked companies between these extremes and our ability to take advantage of
changing equity market conditions.
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
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
APRIL 30, 1999 OCTOBER 31, 1998
- --------------------------------------------------------------------------------
Median Market Capitalization $5.4 billion $5.8 billion
Number of Stocks 62 60
Average Stock Price-to-Earnings Ratio 23.0x 19.1x
- --------------------------------------------------------------------------------
Top Sector Consumer Growth Consumer Growth
Annual Portfolio Turnover Rate 51% 39%
Beta* 0.82 0.94
P/Es are based on analysts' earnings estimates as reported to First Call.
* A measure of risk relative to the S&P 500 Index. A number less than 1.0 means
less historical price volatility than the index. A number higher than 1.0
means more historical volatility than the index.
<PAGE>
FOR TOTAL
RETURN
4
PORTFOLIO MANAGER'S REVIEW
BY FRANCIS X. MORRIS
Vice President/Senior Portfolio Manager
May 15, 1999
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.
Rising consumer confidence also boosted the performance of many equity
investments. Supported by an abundance of jobs and rising incomes, consumer
spending in 1998 grew at its fastest pace in more than 14 years.* It continued
to accelerate during the first quarter of 1999.
Brisk consumer spending helped sustain U.S. economic growth despite the
tempering effects of weaker overseas demand for U.S. imports. Our economy grew
at a faster-than-expected 4.5% rate during the first quarter of 1999.
In the midst of these positive economic conditions, key stock indexes
continued to rise; 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
SUPPORTED BY AN ABUNDANCE OF JOBS AND RISING INCOMES, CONSUMER SPENDING IN 1998
GREW AT ITS FASTEST PACE IN MORE THAN 14 YEARS.* IT CONTINUED TO ACCELERATE
DURING THE FIRST QUARTER OF 1999.
THE DEVON FUND PORTFOLIO MANAGEMENT TEAM
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.
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.
* Source: Bloomberg Business News.
** Source: Merrill Lynch and Morgan Stanley as of March 31, 1999.
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5
relative to their earnings (P/E ratios) soared to unprecedented levels. P/E
ratios are a commonly used measurement of a stock's value.
Devon Fund focuses on transition stocks, stocks we believe are currently
selling below their true value with strong prospects for future growth. This
approach precluded us from investing in the largest companies in the Standard
and Poor's 500 Index - the ones responsible for the index's eye-catching return.
This strategy reduced the Fund's six-month return relative to the S&P 500.
However, over longer periods of time, we believe Devon's focus on less expensive
stocks may help reduce investment risk and provide attractive opportunities for
capital appreciation.
Over the last six months, Devon Fund maintained a relatively small portfolio
of 50-70 stocks. As of April 30, 1999, the Fund held 62 individual securities.
Our top 10 holdings represented more than 33% of the Fund's assets. On occasion
this strategy may lead to short-term underperformance. Over a longer horizon,
however, we believe Devon Fund's commitment to carefully researched stocks will
provide attractive returns to help our shareholders achieve their financial
goals.
STRATEGIC POSITIONING
To a large extent, Devon Fund's disappointing six-month return 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 Devon'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 fell sharply.
TOP 10 HOLDINGS
- --------------------------------------------------------------------------------
APRIL 30, 1999
PERCENT OF P/E
COMPANY NET ASSETS RATIO
- --------------------------------------------------------------------------------
SBC Communications 3.97% 21.73%
Tyco International 3.83% 29.65%
Ecolab 3.75% 33.56%
Stewart Enterprises 3.43% 16.24%
American Home Products 3.38% 28.61%
DIAL Corp. 3.23% 26.95%
Masco 3.19% 18.47%
Mylan Laboratories 3.09% 17.30%
Symbol Technologies 2.94% 27.92%
Federal Home Loan Mortgage 2.70% 20.39%
- --------------------------------------------------------------------------------
S&P 500 33.90%
- --------------------------------------------------------------------------------
P/E ratios are based on analysts' estimates as reported to First Call for 1999.
<PAGE>
FOR TOTAL
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6
After 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 Devon Fund holding for some
time and despite the first quarter downturn, the stock had a positive impact on
Devon Fund's performance over the last three years.
The problems at Service Corp. International seemed to create doubts about the
growth potential of funeral services companies, 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 Devon Fund's second largest holding as of October 31, 1998,
representing nearly 5% of the Fund's total net assets. Rite Aid stock prices
fell sharply in March, when the promotional expense of an aggressive store
opening strategy caused the company to fall short of earnings projections. Our
strategy is to substantially 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. We
continue to maintain a small position in Rite Aid and monitor its progress based
on our belief that the majority of the company's problems are behind them.
Devon Fund's holdings of INTIMATE BRANDS, operator of the Victoria's Secret
and Bath & Body Works stores, was a bright spot for the Fund. Strong consumer
spending and confidence in the U.S. economy helped Intimate Brands provide
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.
DEVON FUND'S POSITIONING COMPARED TO THE S&P 500 INDEX
- --------------------------------------------------------------------------------
APRIL 30, 1999
PERCENT OF ALLOCATION CHANGE PERCENT OF
BROAD SECTORS FUND'S NET ASSETS* FROM OCTOBER 31, 1998 S&P 500 INDEX
- --------------------------------------------------------------------------------
Consumer Growth 25.3% +7.3% 15.6%
Finance 13.6% -2.0% 16.4%
Consumer Cyclicals 6.2% -3.8% 9.8%
Capital Goods 15.2% +0.4% 7.8%
Technology 10.7% -4.1% 20.5%
Energy 3.5% +0.8% 5.6%
Consumer Staples 6.1% -0.6% 8.3%
REITs 2.3% +0.6% 0.0%
Utilities 7.3% +5.9% 11.2%
Raw Materials 9.8% +1.1% 3.8%
Transportation -- -- 1.0%
* Excluding cash
<PAGE>
FOR TOTAL
RETURN
7
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 Devon 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.
OUTLOOK
Over the last six months, key 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 companies, such as automobiles, paper and housing, as well
as the energy and raw materials sectors, all performed well in April. With very
large growth stocks at such expensive levels, investors began to take an
interest in attractively valued small and mid-size companies with solid
fundamentals.
If investor demand for stocks continues to reach beyond large growth
companies, we believe the environment could be very positive for Devon Fund.
Devon 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 moves to undervalued sectors of the market.
During the first quarter of 1999, we experienced vigorous economic growth,
rising consumer spending and a tight labor supply. On the other hand, reduced
IF INVESTOR DEMAND FOR STOCKS CONTINUES TO REACH BEYOND THE LARGE GROWTH
COMPANIES, WE BELIEVE THE ENVIRONMENT COULD BE VERY POSITIVE FOR DEVON FUND.
DEVON 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
<PAGE>
FOR TOTAL
RETURN
8
demand for U.S. products abroad and the increased productivity of U.S. workers
helped to counterbalance these inflationary pressures. As a result, inflation
remained remarkably benign.
Nevertheless, we anticipate short-term interest rates to modestly increase as
global conditions continue to improve and higher wages begin to affect the
profitability of domestic companies. Higher interest rates may cool economic
growth and lead to more moderate gains in the equity market during the balance
of 1999.
Of the many growth and income funds available to investors, we strive to make
Devon Fund different. While some funds select a mix of less expensive value
companies and higher priced growth companies, Devon looks specifically for
transition companies that fall between the traditional growth and value
investment styles. We believe Devon Fund's innovative and disciplined investment
style may provide shareholders with unique total return opportunities in coming
months.
outlook
Q. WHAT ARE TRANSITION STOCKS? WHAT OPPORTUNITIES DO THEY OFFER?
A. WE DEFINE TRANSITION STOCKS AS STOCKS THAT OFFER SUPERIOR CAPITAL
APPRECIATION POTENTIAL BECAUSE THEY ARE LIKELY TO MOVE FROM BEING UNDERVALUED
COMPARED TO THEIR PEERS TO BEING PRIZED BY GROWTH-ORIENTED INVESTORS. AS MORE
INVESTORS RECOGNIZE THAT A LARGE OR MIDCAP COMPANY HAS SUCCESSFULLY
TRANSFORMED ITS BUSINESS, ITS MARKET VALUE IS LIKELY TO GROW.
(photo of couple talking to financial advisor)
(photo of computer keyboard)
<PAGE>
FOR TOTAL RETURN 9
PERFORMANCE SUMMARY
DEVON FUND PERFORMANCE
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH APRIL 30, 1999
LIFETIME FIVE YEARS ONE YEAR
- --------------------------------------------------------------------------------
Class A (est. 12/29/93)
Excluding Sales Charge +21.65% +22.32% +7.26%
Including Sales Charge +20.30% +20.89% +1.07%
- --------------------------------------------------------------------------------
Class B (est. 9/6/94)
Excluding Sales Charge +21.93% +6.50%
Including Sales Charge +21.72% +1.50%
- --------------------------------------------------------------------------------
Class C (est. 11/29/95)
Excluding Sales Charge +22.64% +6.51%
Including Sales Charge +22.64% +5.51%
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. VOLUNTARY FEE LIMITATIONS WERE IN EFFECT FOR
THE TIME PERIODS SHOWN. RETURNS WOULD HAVE BEEN LOWER WITHOUT THE LIMITATIONS.
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 Devon Fund's Institutional Class, available
without sales or asset-based distribution charges only to certain eligible
institutional accounts, were +22.01%, +22.69% and +7.59 for the lifetime,
five-year and one-year periods ended April 30, 1999.
Chart assumes $10,000 invested on December 29, 1993, and includes the effect of
the maximum 5.75% front-end sales charge and the reinvestment of all
distributions. Performance of other classes of Devon Fund will vary due to
differing charges and expenses. Effective November 2, 1998, the maximum sales
charge was raised from 4.75% to 5.75% for investments of less than $50,000. Past
performance does not guarantee future results.
DEVON FUND'S LONG-TERM PERFORMANCE
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
DECEMBER 29, 1993 TO APRIL 30, 1999
Lipper Growth and Income Fund
Delaware Devon A Class Average (310 Funds)
---------------------- -----------------------------
Dec-93 $10,000 $10,000
Dec-94 $ 9,955 $ 9,730
Dec-95 $13,483 $12,781
Dec-96 $16,571 $15,459
Dec-97 $22,359 $19,787
Dec-98 $27,315 $22,997
Apr-99 $26,711 $24,711
Chart assumes $10,000 invested on December 29, 1993, and includes the effect of
the maximum 5.75% front-end sales charge and the reinvestment of all
distributions. Performance of other classes of Devon Fund will vary due to
differing charges and expenses. Effective November 2, 1998, the maximum sales
charge was raised from 4.75% to 5.75% for investments of less than $50,000. Past
performance does not guarantee future results.
<PAGE>
10 FOR TOTAL RETURN
FINANCIAL STATEMENTS
DELAWARE GROUP EQUITY FUNDS I, INC.-
DEVON FUND
STATEMENT OF NET ASSETS
APRIL 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
NUMBER OF MARKET
SHARES VALUE
------------------------
COMMON STOCK - 95.28%
AUTOMOBILES & AUTO PARTS - 2.03%
Danaher ......................................... 113,500 $ 7,540,656
-----------
7,540,656
-----------
BANKING, FINANCE & INSURANCE - 12.89%
American International Group .................... 50,050 5,877,747
Bank One ........................................ 91,600 5,404,400
Chubb ........................................... 3,500 207,375
+Equifax ......................................... 272,500 9,792,968
Federal Home Loan Mortgage ...................... 159,800 10,027,450
Nationwide Financial Services-A ................. 132,700 6,153,963
Protective Life ................................. 98,000 3,840,375
Unionbancal Corporation ......................... 89,700 3,077,831
Unum ............................................ 65,000 3,550,625
-----------
47,932,734
-----------
BUILDINGS & MATERIALS - 4.14%
+Masco ........................................... 403,400 11,849,875
Premark International ........................... 96,000 3,534,000
-----------
15,383,875
-----------
CABLE, MEDIA & PUBLISHING - 0.63%
Wallace Computer Services ....................... 101,100 2,331,619
-----------
2,331,619
-----------
CHEMICALS - 9.24%
*Crompton & Knowles .............................. 185,900 3,764,475
+Dial ............................................ 353,600 12,022,400
Ecolab .......................................... 332,900 13,960,993
Valspar ......................................... 133,200 4,612,050
-----------
34,359,918
-----------
COMPUTERS & TECHNOLOGY - 6.73%
Computer Associates International ............... 139,800 5,967,713
Hewlett-Packard ................................. 124,200 9,796,275
International Business Machines ................. 22,800 4,769,475
*SunGard Data Systems ............................ 141,000 4,503,188
-----------
25,036,651
-----------
ELECTRONICS & ELECTRICAL EQUIPMENT - 9.03%
Honeywell ....................................... 69,400 6,575,650
Intel ........................................... 85,600 5,234,975
Pittston Brink's Group .......................... 106,500 2,808,938
Schlumberger Limited ............................ 62,200 3,973,025
Symbol Technologies ............................. 228,700 10,920,425
Teleflex ........................................ 93,600 4,077,450
-----------
33,590,463
-----------
ENERGY - 3.36%
+*BP Amoco PLC - ADR .............................. 44,158 4,998,134
Compagnie Francaise de Petroleum ................ 110,100 7,486,800
-----------
12,484,934
-----------
FOOD, BEVERAGE & TOBACCO - 2.69%
+*Suiza Foods ..................................... 123,700 4,646,481
Universal Foods ................................. 254,600 5,346,600
-----------
9,993,081
-----------
<PAGE>
NUMBER OF MARKET
SHARES VALUE
------------------------
COMMON STOCK (CONTINUED)
HEALTHCARE & PHARMACEUTICALS - 17.13%
AFLAC ........................................... 132,600 $ 7,193,550
American Home Products .......................... 205,800 12,553,800
Astrazeneca - ADR ............................... 58,800 2,307,900
*Biomet .......................................... 128,400 5,264,400
Johnson & Johnson ............................... 57,200 5,577,000
+Mylan Laboratories .............................. 506,300 11,486,681
Tyco International .............................. 175,200 14,235,000
*Watson Pharmaceutical ........................... 125,000 5,062,500
-----------
63,680,831
-----------
REAL ESTATE - 2.17%
CarrAmerica Realty .............................. 77,300 1,913,175
Developers Diversified Realty ................... 163,700 2,588,506
Nationwide Health Properties .................... 43,800 889,688
Storage USA ..................................... 26,900 864,163
Sun Communities ................................. 52,100 1,823,500
-----------
8,079,032
-----------
RETAIL - 6.48%
Compass Bancshares .............................. 130,900 3,579,297
Food Lion-Class A ............................... 325,500 3,346,547
+Intimate Brands ................................. 136,800 6,840,000
Rite Aid ........................................ 235,400 5,487,762
Sherwin-Williams ................................ 155,700 4,846,163
-----------
24,099,769
-----------
TELECOMMUNICATIONS - 6.29%
ALLTEL .......................................... 71,400 4,815,037
GTE ............................................. 57,100 3,822,130
SBC Communications .............................. 263,700 14,767,200
-----------
23,404,367
-----------
TEXTILES, APPAREL & FURNITURE - 4.47%
HON Industries .................................. 198,900 5,370,300
Hillenbrand Industries .......................... 99,100 4,651,506
Newell Rubbermaid ............................... 138,700 6,579,581
-----------
16,601,387
-----------
UTILITIES - 1.22%
CMS Energy ...................................... 61,500 2,706,000
Nortel Networks ................................. 26,800 1,827,425
-----------
4,533,425
-----------
MISCELLANEOUS - 6.78%
Federal Signal .................................. 343,600 8,504,100
Pentair ......................................... 84,000 3,948,000
Stewart Enterprises ............................. 645,600 12,750,600
-----------
25,202,700
-----------
TOTAL COMMON STOCK
(COST $309,412,996) ............................. 354,255,442
-----------
CONVERTIBLE PREFERRED STOCKS - 1.20%
Freeport-McMoRan Copper & Gold .................. 50,500 890,063
Sealed Air ...................................... 60,985 3,582,869
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(COST $3,703,063) ............................... 4,472,932
-----------
<PAGE>
FOR TOTAL RETURN 11
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
----------------------------------------
REPURCHASE AGREEMENTS - 3.33%
With Chase Manhattan 4.85% 5/03/99
(dated 4/30/99, collateralized by
$3,365,000 U.S. Treasury Notes 5.50%
due 12/31/00, market value $3,450,312
and $760,000 U.S. Treasury Notes 5.75%
due 8/15/03, market value $785,538) .......... $4,151,000 $ 4,151,000
With J.P. Morgan 4.85% 5/03/99 (dated
4/30/00 collateralized by $1,159,000
U.S. Treasury Notes 5.50% due 5/31/03,
market value $1,197,375 and $1,869,000
U.S. Treasury Notes 5.75% due 10/31/02,
market value $1,902,912 and $881,310
U.S. Treasury Notes 11.125% due
8/15/03, market value $1,096,619) ............ 4,112,500 4,112,500
With PaineWebber 4.85% 5/03/99 (dated
4/30/99, collateralized by $1,570,000
U.S. Treasury Notes 4.00% due 10/31/00,
market value $1,574,414 and $1,054,000
U.S. Treasury Notes 6.375% due 7/15/99,
market value $1,077,417 and $1,533,000
U.S. Treasury Notes 6.25% due 10/31/01,
market value $1,573,561) ..................... 4,112,500 4,112,500
-----------
TOTAL REPURCHASE AGREEMENTS
(COST $12,376,000) ........................... 12,376,000
-----------
<PAGE>
TOTAL MARKET VALUE OF SECURITIES OWNED
(COST $325,492,059) - 99.81% ................................ $371,104,374
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 0.19% .................................. 698,149
------------
NET ASSETS APPLICABLE TO 17,249,612 SHARES
($1 PAR VALUE) OUTSTANDING - 100.00% ........................ $371,802,523
============
NET ASSET VALUE - DEVON FUND A CLASS
($167,675,973 / 7,752,134 SHARES) ........................... $21.63
======
NET ASSET VALUE - DEVON FUND B CLASS
($150,674,231 / 7,015,058 SHARES) ........................... $21.48
======
NET ASSET VALUE - DEVON FUND C CLASS
($36,037,815 / 1,679,415 SHARES) ............................ $21.46
======
NET ASSET VALUE - DEVON FUND INSTITUTIONAL CLASS
($17,414,504 / 803,005 SHARES) .............................. $21.69
======
- --------------------------
+Security out on loan.
*Non-income producing security for the six months ended 4/30/99.
COMPONENTS OF NET ASSETS AT APRIL 30, 1999:
Common Stock, $1 par value, 125,000,000 shares
authorized to the Devon Fund ................................ $322,978,067
Distributions in excess of net investment income ............... (79,161)
Accumulated net realized gain on investments ................... 3,291,302
Net unrealized appreciation of investments ..................... 45,612,315
------------
Total net assets ............................................... $371,802,523
============
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
DEVON FUND A CLASS
Net asset value per share (A) .................................. $21.63
Sales charge (5.75% of offering price, or 6.10% of
amount invested per share) (B) .............................. 1.32
------
Offering price ................................................. $22.95
======
- --------------------------
(A) Net Asset Value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See How to Buy Shares in the current prospectus for purchases of $50,000 or
more.
See Notes to Financial Statements for change in front-end sales charge effective
November 2, 1998.
See accompanying notes
<PAGE>
12 FOR TOTAL RETURN
DELAWARE GROUP EQUITY FUNDS I, INC. -
DEVON FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends ......................................... $1,876,315
Interest .......................................... 686,165 $2,562,480
----------
EXPENSES:
Management fees ................................... 948,213
Distribution expense .............................. 940,775
Dividend disbursing and transfer agent
fees and expenses .............................. 501,524
Accounting and administration ..................... 66,272
Registration fees ................................. 40,000
Reports and statements to shareholders ............ 17,100
Professional fees ................................. 12,200
Custodian fees .................................... 5,760
Directors' fees ................................... 5,549
Taxes (other than taxes on income) ................ 2,583
Other ............................................. 4,119 2,544,095
---------- -----------
Less expenses absorbed by Delaware
Management Company ............................. (168,298)
Less expenses paid indirectly ..................... (5,350)
-----------
Total expenses .................................... 2,370,447
-----------
NET INVESTMENT INCOME ............................. 192,033
-----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments .................. 3,295,731
Net change in unrealized
appreciation/depreciation of investments ....... 19,469,524
-----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS ............................ 22,765,255
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................................ $22,957,288
===========
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS I, INC. -
DEVON FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED 4/30/99 ENDED
(UNAUDITED) 10/31/98
-------------------------
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income ............................ $ 192,033 $ 562,948
Net realized gain on investments ................. 3,295,731 3,276,905
Net change in unrealized
appreciation/depreciation of investments ...... 19,469,524 16,771,911
------------ ------------
Net increase in net assets
resulting from operations ..................... 22,957,288 20,611,764
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class ....................................... (310,868) (433,936)
B Class ....................................... - (17,778)
C Class ....................................... - (3,847)
Institutional Class ........................... (56,036) (71,629)
Net realized gain on investments:
A Class ....................................... (1,272,835) (3,129,258)
B Class ....................................... (904,197) (1,831,176)
C Class ....................................... (213,389) (396,243)
Institutional Class ........................... (100,865) (354,447)
------------ ------------
(2,858,190) (6,238,314)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class ....................................... 65,465,101 82,073,340
B Class ....................................... 71,145,333 54,410,257
C Class ....................................... 17,365,445 15,601,378
Institutional Class ........................... 14,360,689 9,761,534
Net asset value of shares issued upon
reinvestment of distributions from net
investment income and net realized
gain on investments:
A Class ....................................... 1,543,133 3,453,528
B Class ....................................... 846,654 1,765,306
C Class ....................................... 205,097 390,720
Institutional Class ........................... 156,885 426,047
------------ ------------
171,088,337 167,882,110
------------ ------------
Cost of shares repurchased:
A Class ....................................... (29,602,768) (22,386,795)
B Class ....................................... (11,849,185) (6,501,980)
C Class ....................................... (3,517,323) (2,650,180)
Institutional Class ........................... (8,471,149) (6,304,878)
------------ ------------
(53,440,425) (37,843,833)
------------ ------------
Increase in net assets derived from capital
share transactions ............................ 117,647,912 130,038,277
------------ ------------
NET INCREASE IN NET ASSETS ....................... 137,747,010 144,411,727
NET ASSETS:
Beginning of period ........................... 234,055,513 89,643,786
------------ ------------
End of period ................................. $371,802,523 $234,055,513
============ ============
See accompanying notes
<PAGE>
FOR TOTAL RETURN 13
DELAWARE GROUP EQUITY FUNDS I, INC.-
DEVON FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
DEVON FUND A CLASS
-------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR 12/29/93(1)
4/30/99(4) ENDED ENDED ENDED ENDED TO
(UNAUDITED) 10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $20.090 $17.860 $14.610 $12.550 $10.830 $10.000
Income from investment operations:
Net investment income ................................. 0.040 0.121 0.182 0.216 0.207(2) 0.136
Net realized and unrealized gain
on investments ...................................... 1.733 3.249 4.243 2.689 2.053 0.784
------- ------- ------- ------- ------- -------
Total from investment operations ...................... 1.773 3.370 4.425 2.905 2.260 0.920
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income .................. (0.043) (0.110) (0.210) (0.205) (0.220) (0.090)
Distributions from net realized gain
on investments ...................................... (0.190) (1.030) (0.965) (0.640) (0.320) -
------- ------- ------- ------- ------- -------
Total dividends and distributions ..................... (0.233) (1.140) (1.175) (0.845) (0.540) (0.090)
------- ------- ------- ------- ------- -------
Net asset value, end of period ........................... $21.630 $20.090 $17.860 $14.610 $12.550 $10.830
======= ======= ======= ======= ======= =======
Total return(3) .......................................... 8.85% 19.60% 32.11% 24.14% 21.98% 11.09%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ............... $167,676 $120,506 $49,262 $14,907 $8,846 $4,600
Ratio of expenses to average net assets ............... 1.30% 1.30% 1.25% 1.25% 1.25% 1.25%
Ratio of expenses to average net assets
prior to expense limitation and
expenses paid indirectly ............................ 1.41% 1.40% 1.42% 1.84% 2.29% 3.26%
Ratio of net investment income
to average net assets ............................... 0.44% 0.64% 1.14% 1.67% 1.82% 1.96%
Ratio of net investment income (loss)
to average net assets prior to
expense limitation .................................. 0.33% 0.54% 0.97% 1.08% 0.78% (0.05%)
Portfolio turnover .................................... 51% 39% 64% 80% 99% 180%
</TABLE>
- --------------------------
(1) Date of initial public offering; ratios and total return have been
annualized.
(2) 1995 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 assumesreinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(4) Ratios have been annualized and total return has not been annualized.
See accompanying notes
<PAGE>
14 FOR TOTAL RETURN
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
DEVON FUND B CLASS
---------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR 9/6/94(1)
4/30/99(4) ENDED ENDED ENDED ENDED TO
(UNAUDITED) 10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............... $19.980 $17.800 $14.540 $12.500 $10.820 $10.900
Income from investment operations:
Net investment income (loss) .................... (0.017) (0.003) 0.081 0.136 0.127(2) 0.027
Net realized and unrealized gain
(loss) on investments ......................... 1.707 3.223 4.219 2.664 2.053 (0.077)
------- ------- ------- ------- ------- -------
Total from investment operations ................ 1.690 3.220 4.300 2.800 2.180 (0.050)
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income............. - (0.010) (0.075) (0.120) (0.180) (0.030)
Distributions from net realized gain
on investments ................................ (0.190) (1.030) (0.965) (0.640) (0.320) -
------- ------- ------- ------- ------- -------
Total dividends and distributions ............... (0.190) (1.040) (1.040) (0.760) (0.500) (0.030)
------- ------- ------- ------- ------- -------
Net asset value, end of period ..................... $21.480 $19.980 $17.800 $14.540 $12.500 $10.820
======= ======= ======= ======= ======= =======
Total return(3) .................................... 8.47% 18.76% 31.21% 23.38% 21.09% (0.46%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) ......... $150,674 $82,927 $28,757 $3,399 $863 $115
Ratio of expenses to average net assets ......... 2.00% 2.00% 1.95% 1.95% 1.95% 1.95%
Ratio of expenses to average net assets
prior to expense limitation and
expenses paid indirectly ..................... 2.11% 2.10% 2.12% 2.54% 2.99% 3.96%
Ratio of net investment income
(loss) to average net assets .................. (0.26%) (0.06%) 0.44% 0.97% 1.12% 1.26%
Ratio of net investment income (loss)
to average net assets prior to
expense limitation ............................ (0.37%) (0.16%) 0.27% 0.38% 0.08% (0.75%)
Portfolio turnover .............................. 51% 39% 64% 80% 99% 180%
</TABLE>
- --------------
(1) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(2) 1995 per share information was based on the average shares outstanding
method.
(3) 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.
(4) Ratios have been annualized and total return has not been annualized.
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>
DEVON FUND C CLASS
-------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR 11/29/95(1)
4/30/99(3) ENDED ENDED TO
(UNAUDITED) 10/31/98 10/31/97 10/31/96
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................... $19.960 $17.790 $14.530 $13.020
Income from investment operations:
Net investment income (loss) ......................... (0.017) 0.002 0.071 0.188
Net realized and unrealized gain on investments ...... 1.707 3.208 4.229 2.157
------- ------- ------- -------
Total from investment operations ..................... 1.690 3.210 4.300 2.345
------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ................. -- (0.010) (0.075) (0.195)
Distributions from net realized gain on investments .. (0.190) (1.030) (0.965) (0.640)
------- ------- ------- -------
Total dividends and distributions .................... (0.190) (1.040) (1.040) (0.835)
------- ------- ------- -------
Net asset value, end of period .......................... $21.460 $19.960 $17.790 $14.530
======= ======= ======= =======
Total return(2) ......................................... 8.48% 18.71% 31.24% 18.94%
Ratios and supplemental data:
Net assets, end of period (000 omitted)............... $36,038 $20,141 $5,876 $1,056
Ratio of expenses to average net assets .............. 2.00% 2.00% 1.95% 1.95%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly .... 2.11% 2.10% 2.12% 2.54%
Ratio of net investment income (loss) to average
net assets.......................................... (0.26%) (0.06%) 0.44% 0.97%
Ratio of net investment income (loss) to average
net assets prior to expense limitation ............. (0.37%) (0.16%) 0.27% 0.38%
Portfolio turnover ................................... 51% 39% 64% 80%
</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.
(3) Ratios have been annualized and total return has not been annualized.
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>
DEVON FUND INSTITUTIONAL CLASS
------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR 12/29/93(1)
4/30/99(4) ENDED ENDED ENDED ENDED TO
(UNAUDITED) 10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................... $20.140 $17.930 $14.670 $12.590 $10.860 $10.000
Income from investment operations:
Net investment income .............................. 0.054 0.134 0.211 0.267 0.241(2) 0.201
Net realized and unrealized gain
on investments..................................... 1.761 3.281 4.284 2.693 2.049 0.749
------- ------- ------- ------- ------- -------
Total from investment operations .................... 1.815 3.415 4.495 2.960 2.290 0.950
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ................ (0.075) (0.175) (0.270) (0.240) (0.240) (0.090)
Distributions from net realized gain
on investments .................................... (0.190) (1.030) (0.965) (0.640) (0.320) -
------- ------- ------- ------- ------- -------
Total dividends and distributions ...................... (0.265) (1.205) (1.235) (0.880) (0.560) (0.090)
------- ------- ------- ------- ------- -------
Net asset value, end of period ......................... $21.690 $20.140 $17.930 $14.670 $12.590 $10.860
======= ======= ======= ======= ======= =======
Total return(3) ........................................ 9.04% 19.89% 32.57% 24.56% 22.26% 11.45%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ............. $17,415 $10,482 $5,749 $3,290 $2,870 $2,516
Ratio of expenses to average net assets ............. 1.00% 1.00% 0.95% 0.95% 0.95% 0.95%
Ratio of expenses to average net assets
prior to expense limitation and
expenses paid indirectly .......................... 1.11% 1.10% 1.12% 1.54% 1.99% 2.96%
Ratio of net investment income
to average net assets ............................. 0.74% 0.94% 1.44% 1.97% 2.12% 2.26%
Ratio of net investment income
to average net assets prior
to expense limitation ............................. 0.63% 0.84% 1.27% 1.38% 1.08% 0.25%
Portfolio turnover .................................. 51% 39% 64% 80% 99% 180%
</TABLE>
- --------------
(1) Date of initial public offering; ratios and total return have been
annualized.
(2) 1995 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.
(4) Ratios have been annualized and total return has not been annualized.
See accompanying notes
<PAGE>
FOR TOTAL RETURN 17
DELAWARE GROUP EQUITY FUNDS I, INC. -
DEVON FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
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 Delaware Business Trust and
offers two series: the Devon Fund and the Delaware Balanced Fund. These
financial statements and related notes pertain to the Devon Fund (the "Fund").
The Fund offers four classes of shares. The A Class carries a front-end sales
charge, which was raised from 4.75% to 5.75% effective November 2, 1998. The B
Class carries a back-end deferred sales charge. The C Class carries a level load
deferred sales charge and the Institutional Class has no sales charge.
The investment objective of the Devon Fund is to seek capital appreciation and
current income.
The investment objective of the Delaware Balanced Fund 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. 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.
<PAGE>
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. 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 $3,590 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 $1,760 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
Commencing 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 of average daily net assets of the Fund,
.60% on the next $500 million, .55% on the next $1,500 million and 0.50% on the
average daily net assets in excess $2,500 million. Prior to April 1, 1999, the
Fund paid DMC an annual fee which was calculated at the rate of 0.60% on the
first $500 million of average daily net assets of the Fund and 0.50% on the
average daily net assets over $500 million. At April 30, 1999 the Fund had a
liability for Investment Management fees and other expenses payable to DMC of
$153,503.
DMC has elected to waive the portion, if any, of the management fee and
reimburse the Fund to the extent that annual operating expenses exclusive of
taxes, interest, brokerage commissions, distribution fees, and extraordinary
expenses, exceed 1.00% of average daily net assets of the Fund through June 30,
1999.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of DMC,
to provide dividend disbursing, transfer agent and 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 for $138,894.
<PAGE>
18 FOR TOTAL RETURN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
2. INVESTMENT MANAGEMENT AND OTHER TRANSACTIONS WITH AFFILIATES (CONTINUED)
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. No distribution expenses are
paid by the Institutional Class.
For the six months ended April 30, 1999, DDLP earned $158,362 for commissions on
sales of the Fund A Class shares.
Certain officers of DMC, DSC and DDLP are officers, directors and/or employees
of the Fund. These officers, directors and employees are paid no compensation by
the Fund.
3. INVESTMENTS
During the six months ended April 30, 1999, the Fund made purchases of
$193,111,158 and sales of $71,728,304 of investment securities other than U.S.
government securities and temporary cash investments.
At April 30, 1999, unrealized appreciation for federal income tax purposes
aggregated $45,612,315 of which $58,758,098 related to unrealized appreciation
of securities and $13,145,783 related to unrealized depreciation of securities.
At April 30, 1999, the aggregate cost of securities for federal income tax
purposes was $325,492,059.
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 ......................................... 3,104,629 4,207,557
B Class ......................................... 3,396,488 2,771,835
C Class ......................................... 830,496 795,063
Institutional Class ............................. 686,153 497,905
Shares issued upon reinvestment of
distributions from net investment income
and net realized gain on investments:
A Class ......................................... 72,964 190,783
B Class ......................................... 40,088 98,407
C Class ......................................... 9,720 21,804
Institutional Class ............................. 7,433 23,450
---------- ----------
8,147,971 8,606,804
---------- ----------
<PAGE>
4. CAPITAL STOCK (CONTINUED)
Transactions in capital stock shares were as follows:
SIX MONTHS
ENDED YEAR
4/30/99 ENDED
(UNAUDITED) 10/31/98
----------- --------
Shares repurchased:
A Class ......................................... (1,424,173) (1,157,460)
B Class ......................................... (572,606) (334,582)
C Class ......................................... (169,894) (138,159)
Institutional Class ............................. (410,967) (321,665)
---------- ----------
(2,577,640) (1,951,866)
---------- ----------
Net Increase ....................................... 5,570,331 6,654,938
========== ==========
5. LINES OF CREDIT
The Fund has a committed line of credit for $3.3 million. No amount was
outstanding at April 30, 1999, or at any time during the fiscal period.
6. SECURITIES LENDING
Security loans for the Fund are required at all times to be secured by U.S.
Treasury obligations and/or cash collateral at least equal to 102% of the market
value of the securities on loan. However, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings. In the event that the borrower
fails to return loaned securities, and the collateral being maintained by the
borrower is insufficient to cover the value of loaned securities and provided
such collateral insufficiency is not the result of investment losses, the
lending agent has agreed to pay the amount of the shortfall to the Fund or, at
the option of the lending agent, replace the loaned securities. The market value
of securities on loan to brokers and the related cash collateral received at
April 30, 1999 were $42,076,026 and $43,169,900, 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 provides 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>
FOR TOTAL RETURN 19
PROXY RESULTS
(UNAUDITED)
- --------------------------------------------------------------------------------
For the period ended April 30, 1999, Delaware Group Equity Funds I, Inc.'s -
Devon Fund shareholders voted on the following proposals at the annual meeting
of shareholders on March 17, 1999. The description of each proposal and number
of shares voted are as follows.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
------ ------- -------
1. TO ELECT THE FUND'S BOARD OF DIRECTORS:
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 RECLASSIFICATION OF THE FUND'S INVESTMENT OBJECTIVE FROM
FUNDAMENTAL TO NON-FUNDAMENTAL.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
------ ------- -------
5,393,751 292,183 438,168
3. TO APPROVE STANDARDIZED FUNDAMENTAL INVESTMENT RESTRICTIONS FOR THE FUND
(PROPOSAL INVOLVES SEPARATE VOTES ON SEVEN SUB-PROPOSALS 3A-3G).
3A. TO ADOPT A NEW FUNDAMENTAL INVESTMENT RESTRICTION CONCERNING CONCENTRATION
OF THE FUND'S INVESTMENTS IN THE SAME INDUSTRY.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
------ ------- -------
5,502,576 194,932 426,595
3B. TO ADOPT A NEW FUNDAMENTAL INVESTMENT RESTRICTION CONCERNING BORROWING MONEY
AND ISSUING SENIOR SECURITIES.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
------ ------- -------
5,461,074 225,932 437,096
3C. TO ADOPT A NEW FUNDAMENTAL INVESTMENT RESTRICTION CONCERNING UNDERWRITING.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
------ ------- -------
5,498,362 187,162 438,578
<PAGE>
3D. TO ADOPT A NEW FUNDAMENTAL INVESTMENT RESTRICTION CONCERNING INVESTMENTS IN
REAL ESTATE.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
------ ------- -------
5,479,899 197,678 446,524
3E. TO ADOPT A NEW FUNDAMENTAL INVESTMENT RESTRICTION CONCERNING INVESTMENTS IN
COMMODITIES.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
------ ------- -------
5,448,375 225,872 449,855
3F. TO ADOPT A NEW FUNDAMENTAL INVESTMENT RESTRICTION CONCERNING LENDING BY THE
FUND.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
------ ------- -------
5,456,549 221,356 446,197
3G. TO RECLASSIFY ALL CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS AS
NON-FUNDAMENTAL.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
------ ------- -------
5,360,735 288,086 475,281
4. TO APPROVE A NEW INVESTMENT MANAGEMENT AGREEMENT WITH DELAWARE MANAGEMENT
COMPANY FOR THE FUND.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
------ ------- -------
5,404,804 274,498 444,800
5. TO RATIFY THE SELECTION OF ERNST & YOUNG LLP, AS THE INDEPENDENT AUDITORS FOR
THE DELAWARE GROUP EQUITY FUNDS I, INC.
SHARES SHARES SHARES
VOTED VOTED VOTED
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.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
------ ------- -------
32,476,130 903,920 1,600,502
<PAGE>
THIS SEMI-ANNUAL REPORT IS FOR THE INFORMATION OF DEVON FUND SHAREHOLDERS, BUT
IT MAY BE USED WITH PROSPECTIVE investors when preceded or accompanied by a
current Prospectus for Devon Fund 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
(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
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(SM)
INVESTMENTS
- ---------------------
Philadelphia o London
Printed in the USA
on recycled paper
SA-039 [4/99] PP6/99
(1799)
