<PAGE>
DELAWARE(SM)
INVESTMENTS
============ Delaware Balanced Fund
Total Return
2000 SEMI-ANNUAL REPORT
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TABLE OF CONTENTS
-----------------
Letter to Shareholders 1
Portfolio Management
Review 3
Performance Summary 5
Financial Statements
Statement of Net Assets 6
Statement of Operations 9
Statements of Changes in
Net Assets 10
Financial Highlights 11
Notes to Financial
Statements 15
A TRADITION OF SOUND INVESTING SINCE 1929
-----------------------------------------
A Commitment To Our Investors
Experienced
o Our seasoned investment professionals average more than 15 years'
experience.
o We opened our first mutual fund in 1938. For over 70 years, we have managed
money in a variety of investment styles that have weathered a full range of
economic and market environments.
Disciplined
o We follow strict investment policies and clear buy/sell guidelines.
o We strive to balance risk and reward in order to provide sound investment
alternatives within any given asset class.
Consistent
o We believe consistent processes are the best way to seek consistent
investment performance.
o Our commitment to style consistency has earned us the confidence of
discriminating institutional and individual investors to manage over $46
billion in assets as of March 31, 2000.
Comprehensive
o We offer more than 70 mutual funds in these asset classes.
o Large-cap equity o High-yield bonds
o Mid-cap equity o Investment grade bonds
o Small-cap equity o Municipal bonds (23 single-state funds)
o International equity o International fixed-income
o Balanced
o Our funds are available through financial advisers who can offer you
individualized attention and valuable investment advice.
Funds are not FDIC insured and are not guaranteed. It is possible to lose the
principal amount invested.
(C)Delaware Distributors, L.P.
<PAGE>
Dear Shareholder
"GOING FORWARD, THE CONTINUED STRENGTH IN THE ECONOMY, LOW UNEMPLOYMENT AND
EARNINGS GROWTH ACROSS A WIDE SPECTRUM OF COMPANIES SHOULD WORK IN YOUR FUND'S
FAVOR."
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June 12, 2000
Recap of Events - Over the past six months, the only certainty in the U.S.
financial markets was record volatility. As has been the case for some time,
market performance was strongly momentum-driven, with technology stocks
providing the bulk of the performance (Source: Bloomberg).
Tech stock euphoria took hold in November, 1999, pushing the Nasdaq Composite
Index to a string of record high closes. In December, after the Federal Reserve
Board declined to raise interest rates, the Nasdaq topped 4000 for the first
time on December 29th - the same day the Dow Jones Industrial Average, the
Standard & Poor's 500 Index and the Russell 2000 Index all hit records.
Volatility accelerated in the first quarter of 2000 as record-loss and
record-gain days, along with two Fed interest rate hikes, rattled both the stock
and bond markets. The Nasdaq passed 5000 on March 9, 2000 and the S&P 500 Index
hit a new high on March 24. In spite of these records, for much of the time,
performance was dominated by a narrow group of stocks, with the broader market,
value investors and bonds all sitting on the sidelines. However, a technology
sell off that started during the last week of March has led to a broadening of
the market as investors began to pay attention to valuation levels (source:
Bloomberg).
In mid-April the divergence between the "old economy" stocks of the Dow
Industrial Average and the "new economy" stocks of the Nasdaq composite became
even more pronounced as the Nasdaq fell sharply while the broader market held
steady. During the last week of our fiscal period, the Dow and the Nasdaq each
surged more than 200 points, only to be ambushed by an unfavorable inflation
report and keep over the additional interest rate hike by the Fed in May.
Total Return
For Period Ended April 30, 2000 Six Months
----------------------------------------------------------------------------
Delaware Balanced Fund Class A -4.89%
----------------------------------------------------------------------------
Lipper Balanced Funds Average (463 funds) +5.47%
Lehman Brothers Aggregate Bond Index +1.42%
Standard & Poor's 500 Index +7.18%
----------------------------------------------------------------------------
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 5. The Lipper Balanced
Fund's Average represents the average returns of balanced funds tracked by
Lipper Analytical (Source: Lipper Analytical Services, Inc.). The Lehman
Brothers Aggregate Bond Index is a measure of investment grade domestic bonds.
The S&P 500 Index is an unmanaged composite of mostly large-capitalization U.S.
companies. You cannot invest directly in an index. Past performance does not
guarantee future results.
1
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Delaware Balanced Fund was severely challenged in a market that was momentum
driven and adverse to bonds. Our total return for the six-month period ended
April 30, 2000 was -4.89% (Class A shares at net asset value with distributions
reinvested), due in large part to our underweighting in the technology sector
and the market's neglect of value investments. Fixed-income investments have
taken a back seat over the past six months as stocks captured investor attention
and a larger share of their assets.
Market Outlook - We are encouraged by the broadening of the market that began in
late March, 2000. We believe there will be significant opportunity for us to
locate reasonably priced companies that are demonstrating accelerated growth
rates. Going forward, the continued strength of the economy, low unemployment
and earnings growth across a wide spectrum of companies should work in your
Fund's favor.
Sincerely,
/s/ Wayne A. Stork /s/ David K. Downes
------------------------------------ --------------------------------------
Wayne A. Stork David K. Downes
Chairman, President and Chief Executive Officer,
Delaware Investments Family of Funds Delaware Investments Family of Funds
2
<PAGE>
John B. Jares
Portfolio Manager
Paul A. Grillo
Portfolio Manager
Stephen R. Cianci
Portfolio Manager
June 12, 2000
"THE FUND CONCENTRATES ON STOCKS THAT, IN OUR OPINION, ARE REASONABLY PRICED BUT
ARE ALSO SHOWING STRONG, CONSISTENT AND PREDICTABLE EARNINGS GROWTH."
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PORTFOLIO MANAGEMENT REVIEW
---------------------------
The Fund's Results
Delaware Balanced Fund had a -4.89% total return (Class A shares at net asset
value with distributions reinvested) for the six-month period ended April 30,
2000. The disappointing performance was due primarily to the market's extremely
narrow focus on momentum-driven, high-priced technology stocks as well as the
negative effect of rising interest rates on the Fund's fixed-income securities.
For most of the period, Delaware Balanced Fund followed a value-oriented style
of investing. But, as we announced to shareholders in February of this year, we
are transitioning to a more growth-oriented style of investing. The Fund will
continue to concentrate on stocks that, in our opinion, are reasonably priced
but are also showing strong, consistent and predictable earnings growth rates.
Portfolio Highlights
While much of the "Nasdaq mania" came from growth stocks whose valuations
exceeded our investment criteria for most of this reporting period, we were able
to find some value stocks in the technology sector. One example is Integrated
Device Technologies, an undiscovered semi-conductor company that we purchased
late in 1999. We've recently begun to reduce our holdings as the stock is
reaching what we consider to be its correct price.
Near the end of our fiscal period, we began increasing our exposure to the
telecommunications industry, especially companies like Sprint and Nextel in the
cellular communications area. We expect to see rapid growth from this area over
the next three to five years as use of this technology becomes more widespread,
prices become more affordable for consumers and the range of services offered
broadens. We think this will create more opportunity for increased revenue per
customer.
Our selections in the healthcare sector have done well for us, and we intend to
increase our holdings in this area. We believe the aging of the baby boomer
population will make this a growth industry for a long time to come.
Although we avoided investing in hospitals and managed heathcare organizations,
we found attractive opportunities in pharmaceutical and bio-tech companies.
American Home Products, one of our current holdings, has done quite well for us.
The stock had been temporarily depressed because of litigation involving the
drug Phen-Fen. After intensive research to estimate the company's true earnings
growth potential, we determined the market had over-discounted the stock's price
and we have been rewarded for keeping it.
We also recently increased our holdings in the bio-tech field, purchasing Amgen.
The company delivers therapeutics based on advanced cellular and molecular
biology. Amgen is expected to introduce a new kidney dialysis product within the
3
<PAGE>
"WE HAVE A POSITIVE OUTLOOK FOR THE FUTURE. AS WE CONTINUE TO GRADUALLY SHIFT
THE PORTFOLIO TOWARD A MORE GROWTH-ORIENTED STRATEGY, WE ARE FINDING NUMEROUS
STOCKS THAT FIT OUR NEW INVESTMENT STYLE."
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next year or two that should be a significant improvement over products
currently available. While litigation on some of its other products may
temporarily push its stock price down, we expect that we will be rewarded over
the next two or three years for keeping Amgen.
Financial stocks, which lagged at the start of our period in November, 1999,
have recovered significantly. In this area, we've tended to concentrate on
companies with high earnings such as Federal Home Loan Mortgage Corporation
(Freddie Mac), MBNA, and two new holdings, Fleet Boston Financial and Bank of
New York.
We also recently bought Charles Schwab & Co., the financial services firm.
Schwab is one of the pioneers of the one-stop shopping concept in financial
services, offering everything from a way to consolidate your mutual fund
holdings to personal financial planning services and checking accounts. We
believe Schwab is well positioned to increase its market share in the financial
services industry over the next two to three years.
We increased our positions in retailers such as Best Buy and Circuit City that
are ideally situated to become leaders in selling DVD players and HDTV to the
mass markets. We expect 20%-plus earnings growth rates from these companies over
the next three to four years.
Bristol-Myers Squibb, a pharmaceutical company, proved disappointing for us. The
stock is down for the six-month period ended April 30, due to the delay of its
new drug release. In addition, the consumer staples area, including the food
industry and consumer products, also has not done well for us in this time
period. Procter & Gamble was especially unfortunate; we sold our position when
the company reported an earnings disappointment.
For the fixed-income portion of the Fund, which comprised about 40% of the
portfolio as of April 30, 2000, we have largely been in a defensive position for
much of the period. To manage the increasing volatility in the bond market, we
have switched in and out of U.S. Treasury bonds, investment grade corporate
bonds, mortgage-backed securities, asset-backed securities and agency issues.
Our objective was to remain as nimble as possible, varying the types of
securities and our portfolio duration in order to cushion shareholders as much
as possible from interest rate risk and the increasing volatility in the bond
market. Duration is a common measure of a bond or bond fund's sensitivity to
interest rates. The longer the duration, the more the bond's price will change
for a given increase or decrease in interest rates. As the period ended, we were
making slight changes in the weighting of the various types of securities and
their durations in anticipation of the further rate increase by the Fed in May.
4
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FUND BASICS
-----------
Fund Objectives
The Fund seeks a balance of capital appreciation, income and preservation of
capital.
Assets Under Management
$589.88 million
Number of Holdings
107
Fund Start Date
April 25, 1938
Your Fund Managers
John B. Jares holds a BS degree in finance and an MBA from the University of
Colorado. He came to Delaware from Berger Funds, where he served as a portfolio
manager and securities analyst specializing in the consumer and technology
sectors. Mr. Jares is a CFA charterholder.
Paul A. Grillo holds a BA in Business Management from North Carolina State
University and an MBA in Finance from Pace University. Prior to joining Delaware
in 1993, Mr. Grillo served as mortgage strategist and trader at the Dreyfus
Corporation. Mr. Grillo is a CFA charterholder.
Stephen R. Cianci joined Delaware Investments in 1992 and holds a BS and an MBA
in finance from Widener University. He is an Adjunct Professor of Finance at
Widener University and a CFA charterholder.
NASDAQ Symbols
Class A DELFX
Class B DELBX
Class C DEDCX
--------------------------------------------------------------------------------
<PAGE>
Outlook
We have a positive outlook for the future. As we continue to gradually shift the
equity portfolio toward a more growth-oriented strategy, we are finding numerous
stocks that fit our new investment style. The sell-off in technology in April
has allowed us to add many quality names at what we believe are reasonable
prices. We intend to maintain a dynamic asset allocation: increasing the
weighting in stocks when we believe there are outstanding opportunities
available, and favoring fixed-income securities when the stock market is not
favorable. As always, we will focus on individual stocks, following a
disciplined bottom-up, research-driven growth stock selection process. Our goal
is to locate companies with good management, cutting edge products and solid
financial credentials as well as the flexibility to succeed in a rapidly
changing marketplace.
DELAWARE BALANCED FUND PERFORMANCE
----------------------------------
<TABLE>
<CAPTION>
Average Total Returns
Through April 30, 2000 Lifetime 10 Years Five Years One Year
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<S> <C> <C> <C> <C>
Class A (Est. 4/25/38)
Excluding Sales Charge +11.04% +10.82% +11.32% -11.02%
Including Sales Charge +10.94% +10.16% +10.02% -16.13%
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Class B (Est. 9/6/94)
Excluding Sales Charge +9.96% +10.44% -11.75%
Including Sales Charge +9.85% +10.18% -15.59%
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Class C (Est. 11/29/95)
Excluding Sales Charge +8.93% -11.76%
Including Sales Charge +8.93% -12.53%
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</TABLE>
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 charges, 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 also subject to a contingent
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.
The average total annual returns for lifetime, ten-year, five-year and one-year
periods ended April 30, 2000 for the Delaware Balanced Fund Institutional Class
were +11.07%, +10.97%, +11.56% and -10.85%, respectively. The Institutional
Class (Est. November 9, 1992) is available without sales charges only to certain
eligible institutional accounts. Performance for the Institutional Class for
periods prior to this date is based on Class A's performance and was adjusted to
eliminate the sales charge, but not the asset-based distribution charge.
NASDAQ Symbol Institutional Class: DEICX
5
<PAGE>
Statement of Net Assets
DELAWARE BALANCED FUND
Number of Market
April 30, 2000 (Unaudited) Shares Value
--------------------------------------------------------------------------------
Common Stock - 58.44%
Aerospace & Defense - 3.13%
Honeywell International ............................. 213,912 $11,979,072
United Technologies ................................. 104,800 6,517,250
-----------
18,496,322
-----------
Banking, Finance & Insurance - 3.84%
Bank of New York .................................... 80,300 3,297,319
Capital One Financial ............................... 100,300 4,388,125
Citigroup ........................................... 162,500 9,658,594
Schwab (Charles) .................................... 119,200 5,304,400
-----------
22,648,438
-----------
Chemicals - 2.06%
Avery Dennison ...................................... 98,700 6,477,188
Pharmacia ........................................... 113,169 5,651,377
-----------
12,128,565
-----------
Computers & Technology - 13.40%
*+BEA Systems ......................................... 123,000 5,934,750
*CGS Systems International ........................... 176,900 8,159,513
Compaq Computer ..................................... 222,700 6,513,975
*Cadence Design Systems .............................. 755,200 12,696,800
Computer Associates International ................... 99,400 5,547,763
*Dell Computer ....................................... 119,300 5,979,913
*+Infineon Technologies - ADR ......................... 27,300 1,852,988
International Business Machines ..................... 62,800 7,010,050
*+J.D. Edwards ........................................ 154,900 2,826,925
+Micron Technology ................................... 106,100 14,774,425
*Microsoft ........................................... 111,100 7,749,225
-----------
79,046,327
-----------
Electronics & Electrical Equipment - 5.89%
*Integrated Device Technologies ...................... 235,000 11,294,688
Intel ............................................... 92,200 11,692,113
Symbol Technologies ................................. 32,288 1,800,028
Texas Instruments ................................... 61,100 9,951,663
-----------
34,738,492
-----------
Energy - 5.25%
+Anadarko Petroleum .................................. 118,800 5,160,375
Halliburton ......................................... 102,500 4,529,215
*Nabors Industries ................................... 119,500 4,712,780
Schlumberger ........................................ 153,400 11,744,685
Tosco ............................................... 50,100 1,606,330
Unocal .............................................. 100,100 3,234,480
-----------
30,987,865
-----------
Healthcare & Pharmaceuticals - 6.06%
American Home Products .............................. 196,500 11,040,844
Amgen ............................................... 202,700 11,351,200
Bristol-Myers Squibb ................................ 75,300 3,948,544
*+Genentech ........................................... 55,300 6,470,100
*Watson Pharmaceutical ............................... 64,700 2,907,455
-----------
35,718,143
-----------
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Number of Market
Shares Value
--------------------------------------------------------------------------------
Common Stock (continued)
Retail - 5.60%
*+Best Buy ........................................... 92,600 $ 7,477,450
Circuit City Stores ................................ 130,800 7,692,675
Lowe's Companies ................................... 92,200 4,563,900
*Safeway ............................................ 301,800 13,316,925
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33,050,950
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Telecommunications - 11.17%
AT&T ............................................... 174,200 8,132,963
*AT&T Wireless Group ................................ 72,500 2,306,406
ALLTEL ............................................. 81,700 5,443,263
*+Nextel Communications .............................. 65,700 7,190,044
Nortel Networks .................................... 111,000 12,570,750
SBC Communications ................................. 249,800 10,944,363
*+Sprint ............................................. 92,900 5,109,500
*Tellabs ............................................ 144,500 7,920,406
*+Winstar Communications ............................. 157,500 6,280,313
-----------
65,898,008
-----------
Transportation & Shipping - 2.04%
Kansas City Southern Industries .................... 167,400 12,031,875
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12,031,875
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Total Common Stock (cost $317,857,519) ............. 344,744,985
===========
Convertible Preferred Stocks - 0.96%
Sealed Air $2.00 4/1/08 Series A ................... 105,440 5,641,040
-----------
Total Convertible Preferred Stocks
(cost $4,133,920) ................................. 5,641,040
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Principal
Amount
----------
Asset-Backed Securities - 5.17%
California Infrastructure PG & E 1997-1
A4 6.16% 6/25/03 ..................................$1,220,000 1,212,704
CHAMT 1999-1 A 6.29% 9/15/06 ....................... 2,325,000 2,327,046
Countrywide Home Equity Loan
6.95% 5/25/21 ..................................... 2,685,000 2,659,493
Discover Card Master Tr 1999-2 A
5.90% 10/15/04 .................................... 3,820,000 3,716,096
First USA Credit Card Master
6.28% 10/19/06 .................................... 2,325,000 2,327,209
First USA Credit Card Master Trust
Series 98-3 A 6.19% 2/18/04 ....................... 3,860,000 3,860,946
Ford Credit Auto Owner Trust
2000-A A4 7.09% 11/17/03 .......................... 3,075,000 3,049,055
MBNA Master Credit Card Trust
6.28% 2/15/06 ..................................... 4,250,000 4,253,400
MBNAM 1996-K A 6.26% 3/15/06 ....................... 1,605,000 1,605,241
Neiman Marcus Group 7.60% 6/15/03 .................. 110,000 110,105
Peco 1999-A-A4 5.80% 3/1/07 ........................ 3,640,000 3,411,990
Philadelphia, Pennsylvania Authority
For Industrial Development Tax claim
Revenue-Class A 6.48% 6/15/04 ..................... 2,110,896 1,970,389
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Total Asset-Backed Securities
(cost $31,036,563) ................................ 30,503,674
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6
<PAGE>
Statement of Net Assets (continued)
Principal Market
Delaware Balanced Fund Amount Value
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Collateralized Mortgage Obligations - 2.18%
Fanniemae Whole Loan 6.50% 7/25/28 .................. $2,370,638 $ 2,311,372
Federal Home Loan Mortgage Corporation
Structured Pass Through Securities
6.50% 1/25/15 ..................................... 3,555,000 3,427,798
GNR 1998-9 B 6.85% 12/20/25 ......................... 4,900,000 4,619,622
Residential Accredit Loans
Series 98-QS9 A3 6.75% 7/25/28 .................... 2,550,000 2,504,678
-----------
Total Collateralized Mortgage Obligations
(cost $13,419,895) ................................ 12,863,470
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Commercial Mortgage-Backed
Securities - 2.47%
Chase Commercial Mortgage Securities
6.90% 11/19/06 .................................... 1,753,625 1,660,464
DLJ Commerical Mortgage
Series 99-CG1 A1B 6.46% 1/10/09 ................... 3,750,000 3,454,688
Lehman Large Loan Series 97-LLI A1
6.79% 6/12/04 ..................................... 2,398,362 2,357,890
Mortgage Capital Funding 96-MC2-C
7.22% 9/20/06 ..................................... 2,377,777 2,272,258
Nomura Asset Securities
6.68% 12/15/01 .................................... 2,339,638 2,288,824
7.91% 4/13/36 ..................................... 2,550,000 2,512,547
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Total Commercial Mortgage-Backed
Securities (cost $15,008,305) ..................... 14,546,671
===========
Corporate Bonds - 8.91%
Automobile & Auto Parts - 0.79%
+Daimler Chrysler 6.90% 9/1/04 ....................... 2,500,000 2,437,500
Meritor Auto 6.80% 2/15/09 .......................... 2,620,000 2,250,450
-----------
4,687,950
-----------
Banking, Finance & Insurance - 2.20%
Banco Santander-Chile 6.5% 11/1/05 .................. 1,775,000 1,693,031
+Bank of America 6.63% 6/15/04 ....................... 3,050,000 2,946,266
Fairfax Financial Holdings 7.38% 3/15/06 ............ 730,000 639,077
Pemex Finance 9.69% 8/15/09 ......................... 3,000,000 3,076,800
Summit Capital Trust 8.40% 3/15/27 .................. 1,540,000 1,472,699
United Health Care 6.60% 12/1/03 .................... 3,300,000 3,121,309
-----------
12,949,182
-----------
Cable, Media & Publishing - 0.47%
United News and Media
7.75% 7/1/09 ...................................... 2,820,000 2,745,928
-----------
2,745,928
-----------
Chemicals - 0.53%
DUPONT EI NEMOUR 6.75% 10/15/04 ..................... 1,160,000 1,133,922
Equistar Chemicals 8.75% 2/15/09 .................... 2,080,000 2,015,000
-----------
3,148,922
-----------
Computers & Technology - 0.35%
Sun Microsystems 7.65% 8/15/09 ...................... 2,060,000 2,036,817
-----------
2,036,817
-----------
<PAGE>
Principal Market
Amount Value
--------------------------------------------------------------------------------
Corporate Bonds (continued)
Environmental Services - 0.28%
USA Waste Services 6.13% 7/15/01 ................... $ 1,715,000 $ 1,648,823
-----------
1,648,823
-----------
Energy - 0.55%
Osprey Trust 144A 8.31% 1/15/03 .................... 3,250,000 3,237,007
-----------
3,237,007
-----------
Food, Beverage & Tobacco - 0.45%
Safeway 7.00% 9/15/02 .............................. 2,720,000 2,666,014
-----------
2,666,014
-----------
Retail - 0.55%
SAKS 8.25% 11/15/08 ................................ 3,455,000 3,221,308
-----------
3,221,308
-----------
Service - 0.26%
Service International 6.00% 12/15/05 ............... 2,600,000 1,547,000
-----------
1,547,000
-----------
Soverign Debt - 0.38%
+Republic of South Africa 9.13% 5/19/09 ............. 2,320,000 2,262,320
-----------
2,262,320
-----------
Telecommunications - 1.50%
Cox Communications 6.15% 8/1/03 .................... 2,620,000 2,488,463
Liberty Media 8.50% 7/15/29 ........................ 1,000,000 988,099
MCI Communications 6.13% 4/15/02 ................... 1,930,000 1,879,872
+MCI Worldcom 7.55% 4/1/04 .......................... 3,495,000 3,491,150
-----------
8,847,584
-----------
Textiles, Apparel & Furniture - 0.18%
Tommy Hilfiger 6.85% 6/1/08 ........................ 1,645,000 1,044,467
-----------
1,044,467
-----------
Transportaion - 0.42%
Stagecoach Holdings 8.63% 11/15/09 ................. 2,650,000 2,491,000
-----------
2,491,000
-----------
Total Corporate Bonds (cost $55,119,707) ........... 52,534,322
===========
Mortgage-Backed Securitites - 12.84%
Federal Home Loan Mortgage Corp.
6.00% 2/1/11 ..................................... 1,204,773 1,142,652
7.00% 4/1/29 ..................................... 3,951,457 3,782,285
8.50% 4/1/09 ..................................... 279 289
Federal National Mortgage Association
6.00% 3/1/13 ..................................... 1,983,285 1,877,304
7.00% 2/1/30 ..................................... 29,133,478 27,895,305
7.00% 7/1/17 ..................................... 857,357 828,957
7.00% 8/1/28 ..................................... 1,875,257 1,792,628
7.50% 10/1/29 .................................... 26,991,719 26,442,087
8.00% 3/1/30 ..................................... 4,412,647 4,408,511
8.00% 12/1/09 .................................... 143,172 144,738
8.50% 11/1/09 .................................... 487,388 497,592
7
<PAGE>
Statement of Net Assets (continued)
Principal Market
Delaware Balanced Fund Amount Value
--------------------------------------------------------------------------------
Mortgage Backed Securitites (continued)
General National Mortgage Association
8.00% 1/15/30 .................................... $ 4,389,562 $ 4,404,651
8.00% 4/15/30 .................................... 2,525,000 2,532,891
-----------
Total Mortgage Backed Securities
(cost of $76,996,448) ............................ 75,749,890
===========
U.S. Government Agencies - 6.46%
Federal National Mortgage Assocation
6.00% 5/15/08 .................................... 5,000,000 4,604,450
+6.50% 8/15/04 .................................... 8,520,000 8,285,436
+6.625% 4/15/02 ................................... 3,140,000 3,111,762
+6.625% 9/15/09 ................................... 10,595,000 10,110,904
+7.125% 1/15/30 ................................... 3,750,000 3,713,111
+7.25% 1/15/10 .................................... 8,300,000 8,278,802
-----------
Total U.S. Government Agencies
(cost $38,377,985) ............................... 38,104,465
===========
U.S. Treasury Obligations - 2.28%
U.S. Treasury Inflation Index Note
3.62% 7/15/02 .................................... 3,333,330 3,327,946
U.S. Treasury Notes/ Bonds
+6.00% 8/15/09 .................................... 4,685,000 4,583,532
6.37% 8/15/27 .................................... 1,500,000 1,534,162
+6.50% 5/15/10 .................................... 905,000 923,266
+U.S. Treasury Strips 0.00% 2/15/27 ................. 15,000,000 3,085,844
-----------
Total U.S. Treasury Obligations
(cost $13,078,180) ............................... 13,454,750
===========
Repurchase Agreements - 2.93%
With Chase Manhattan 5.68% 5/1/00
(dated 4/28/00, collateralized by
$5,951,000 U.S. Treasury Notes 4.75%
due 2/15/04, market value $5,647,025) ............ 5,509,000 5,509,000
With J.P. Morgan 5.70% 5/1/00
(dated 4/28/00, collateralized by
$4,091,000 U.S. Treasury Notes 5.875%
due 10/31/01, market value $4,175,767
and $1,790,000 U.S. Treasury Notes
6.25% due 10/31/01,
market value $1,826,778) ......................... 5,881,000 5,881,000
With PaineWebber 5.70% 5/1/00
(dated 4/28/00, collateralized by
$276,000 U.S.Treasury Notes 4.50%
due 1/31/01, market value $281,549 and
$3,714,000 U.S. Treasury Notes 5.50%
due 7/31/01, market value $3,792,670,
and $1,892,000 U.S. Treasury Notes
7.25% due 8/15/01,
market value $1,930,732) ......................... 5,881,000 5,881,000
-----------
Total Repurchase Agreements
(cost $17,271,000) ............................... 17,271,000
===========
<PAGE>
--------------------------------------------------------------------------------
Total Market Value of Securities -
102.63 % (cost $582,299,522) ...................... $605,414,267
Liabilities Net of Receivables and
Other Assets - (2.63%) ............................ (15,530,776)
------------
Net Assets Applicable to 32,892,276
Shares Outstanding - 100.00% ...................... $589,883,491
============
Net Asset Value - Delaware Balanced
Fund A Class ($455,859,407 /
25,420,135 shares) ................................ $17.93
------
Net Asset Value - Delaware Balanced
Fund B Class ($49,746,662 /
2,776,141 shares) ................................. $17.92
------
Net Asset Value - Delaware Balanced
Fund C Class ($11,219,033 /
626,738 shares) ................................... $17.90
------
Net Asset Value - Delaware Balanced
Fund Institutional Class
($73,058,389 / 4,069,262 shares) .................. $17.95
------
------------------
*Non income producing security for the six months ended April 30, 2000.
+Security is fully or partially on loan.
ADR - American Depository Receipt
Components of Net Assets at April 30, 2000:
Shares of beneficial interest (unlimited
authorization - no par) ........................... $571,355,644
Undistributed net investment income ................. 2,984,060
Accumulated net realized loss
on investments .................................... (7,570,958)
Net unrealized appreciation of investments .......... 23,114,745
------------
Total net assets .................................... $589,883,491
============
Net Asset Value and Offering Price
per share - Delaware Balanced Fund
Net asset value A Class (A) ......................... $17.93
Sales charge (5.75% of offering price
or 6.08% of the amount invested
per share) (B) .................................... 1.09
------
Offering price ...................................... $19.02
======
----------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $50,000 or more.
See accompanying notes
8
<PAGE>
Statement of Operations
<TABLE>
<CAPTION>
Six Months Ended April 30, 2000 (Unaudited) Delaware Balanced Fund
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income:
Interest .......................................................... $9,007,840
Dividends ......................................................... 2,550,635 $11,558,475
----------
Expenses:
Management fees ................................................... 2,080,484
Distribution expense .............................................. 1,015,809
Dividend disbursing and transfer agent fees and expenses .......... 890,612
Reports and Statements to Shareholders ............................ 157,794
Accounting and administration ..................................... 132,344
Taxes (other than taxes on income) ................................ 97,893
Registration fees ................................................. 57,945
Professional fees ................................................. 40,766
Custodian fees .................................................... 34,086
Trustees' fees .................................................... 20,555
Other ............................................................. 83,140
---------
4,611,428
Less expenses paid indirectly ..................................... (20,618)
---------
Total expenses .................................................... 4,590,810
-----------
Net Investment Income ............................................. 6,967,665
-----------
Net Realized and Unrealized Loss on Investments:
Net realized loss on investments .................................. (5,855,477)
Net change in unrealized appreciation/depreciation of investments . (36,126,734)
------------
Net Realized and Unrealized Loss on Investments ................... (41,982,211)
------------
Net Decrease in Net Assets Resulting from Operations .............. ($35,014,546)
============
</TABLE>
See accompanying notes
9
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Delaware Balanced Fund
------------------------------------------------------------------------------------------------------------------------------------
Six Months Year
Ended Ended
4/30/00 10/31/99
(Unaudited)
<S> <C> <C>
Increase (Decrease) in Net Assets from Operations:
Net investment income ...................................................................... $ 6,967,665 $ 17,340,770
Net realized gain (loss) on investments .................................................... (5,855,477) 83,578,653
Net change in unrealized appreciation/depreciation of investments .......................... (36,126,734) (79,429,533)
------------ ------------
Net increase (decrease) in net assets resulting from operations ............................ (35,014,546) 21,489,890
------------ ------------
Distributions to Shareholders from:
Net investment income:
A Class .................................................................................. (3,150,061) (13,300,317)
B Class .................................................................................. (160,625) (771,082)
C Class .................................................................................. (41,802) (311,819)
Institutional Class ...................................................................... (631,117) (6,247,007)
Net realized gain on investments:
A Class .................................................................................. (65,278,668) (27,586,794)
B Class .................................................................................. (7,495,236) (1,771,950)
C Class .................................................................................. (1,970,842) (833,383)
Institutional Class ...................................................................... (10,187,208) (13,695,337)
------------ ------------
........................................................................................... (88,915,559) (64,517,689)
------------ ------------
Capital Share Transactions:
Proceeds from shares sold:
A Class .................................................................................. 20,839,670 57,112,267
B Class .................................................................................. 6,588,232 47,869,090
C Class .................................................................................. 1,757,060 12,722,007
Institutional Class ...................................................................... 15,568,085 64,951,308
Net asset value of shares issued upon reinvestment of distributions from net investment
income and net realized gain on investments:
A Class .................................................................................. 55,084,928 32,315,339
B Class .................................................................................. 7,288,179 2,415,413
C Class .................................................................................. 1,940,246 1,107,652
Institutional Class ...................................................................... 10,370,476 19,941,662
------------ ------------
........................................................................................... 119,436,876 238,434,738
------------ ------------
Cost of shares repurchased:
A Class .................................................................................. (87,708,554) (99,907,451)
B Class .................................................................................. (20,234,445) (12,727,442)
C Class .................................................................................. (10,779,287) (8,757,677)
Institutional Class ...................................................................... (21,200,152) (302,317,134)
------------ ------------
........................................................................................... (139,922,438) (423,709,704)
------------ ------------
Decrease in net assets derived from capital share transactions ........................... (20,485,562) (185,274,966)
------------ ------------
Net Decrease in Net Assets ............................................................... (144,415,667) (228,302,765)
Net Assets:
Beginning of period ...................................................................... 734,299,158 962,601,923
------------ ------------
End of period .............................................................................. $589,883,491 $734,299,158
============ ============
</TABLE>
See accompanying notes
10
<PAGE>
Financial Highlights
Selected data for each share of the Fund outstanding
throughout each period were as follows:
<TABLE>
<CAPTION>
Delaware Balanced Fund A Class
------------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
4/30/00(1) 10/31/99 10/31/98 10/31/97 10/31/96 10/31/95
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $21.600 $22.970 $22.950 $21.260 $19.940 $18.000
Income (loss) from investment operations:
Net investment income(2) ................................ 0.207 0.422 0.510 0.610 0.706 0.664
Net realized and unrealized gain (loss) on investments .. (1.201) (0.257) 2.620 3.680 2.349 2.156
-----------------------------------------------------------------------
Total from investment operations ........................ (1.201) 0.165 3.130 4.290 3.055 2.820
-----------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income .................... (0.123) (0.495) (0.510) (0.680) (0.655) (0.630)
Distributions from net realized gain on investments ..... (2.553) (1.040) (2.600) (1.920) (1.080) (0.250)
-----------------------------------------------------------------------
Total dividends and distributions ....................... (2.676) (1.535) (3.110) (2.600) (1.735) (0.880)
-----------------------------------------------------------------------
Net asset value, end of period ............................ $17.930 $21.600 $22.970 $22.950 $21.260 $19.940
=======================================================================
Total return(3) ........................................... (4.89%) 0.44% 14.80% 22.05% 16.07% 16.26%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $455,859 $562,975 $610,332 $554,448 $490,150 $493,243
Ratio of expenses to average net asset .................. 1.37% 1.12% 0.98% 0.97% 0.99% 0.97%
Ratio of net investment income to average net assets .... 2.17% 1.85% 2.25% 2.83% 3.39% 3.55%
Portfolio turnover ...................................... 180% 87% 86% 81% 92% 94%
</TABLE>
-----------
(1) Ratios have been annualized and total return has not been annualized.
(2) Per share information for the year ended 1999 and six months ended 4/30/00
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
11
<PAGE>
Financial Highlights (continued)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
<TABLE>
<CAPTION>
Delaware Balanced Fund B Class
------------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
4/30/00(1) 10/31/99 10/31/98 10/31/97 10/31/96 10/31/95
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $21.590 $22.950 $22.880 $21.200 $19.900 $17.980
Income (loss) from investment operations:
Net investment income(2) ................................ 0.135 0.246 0.337 0.452 0.525 0.567
Net realized and unrealized gain (loss) on investments .. (1.197) (0.251) 2.608 3.658 2.350 2.113
----------------------------------------------------------------------
Total from investment operations ........................ (1.062) (0.005) 2.945 4.110 2.875 2.680
----------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income .................... (0.055) (0.315) (0.275) (0.510) (0.495) (0.510)
Distributions from net realized gain on investments ..... (2.553) (1.040) (2.600) (1.920) (1.080) (0.250)
----------------------------------------------------------------------
Total dividends and distributions ....................... (2.608) (1.355) (2.875) (2.430) (1.575) (0.760)
----------------------------------------------------------------------
Net asset value, end of period ............................ $17.920 $21.590 $22.950 $22.880 $21.200 $19.900
======================================================================
Total return(3) ........................................... (5.27%) (0.31%) 13.90% 21.09% 15.15% 15.36%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $49,747 $67,090 $33,884 $16,659 $6,872 $3,383
Ratio of expenses to average net assets ................. 2.13% 1.89% 1.77% 1.78% 1.80% 1.79%
Ratio of net investment income to average net assets .... 1.41% 1.08% 1.46% 2.00% 2.58% 2.73%
Portfolio turnover ...................................... 180% 87% 86% 81% 92% 94%
</TABLE>
--------------------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Per share information for the year ended 1999 and six months ended 4/30/00
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
12
<PAGE>
Financial Highlights (continued)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
<TABLE>
<CAPTION>
Delaware Balanced Fund C Class
------------------------------------------------------------------------------------------------------------------------------------
Period
Six Months 11/29/95(2)
Ended Year Ended to
4/30/00(1) 10/31/99 10/31/98 10/31/97 10/31/96
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........................ $21.570 $22.930 $22.870 $21.180 $20.500
Income (loss) from investment operations:
Net investment income(2) .................................. 0.127 0.246 0.335 0.460 0.583
Net realized and unrealized gain (loss) on investments .... (1.189) (0.251) 2.600 3.655 1.757
-------------------------------------------------------------------
Total from investment operations .......................... (1.062) (0.005) 2.935 4.115 2.340
-------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ...................... (0.055) (0.315) (0.275) (0.505) (0.580)
Distributions from net realized gain on investments ....... (2.553) (1.040) (2.600) (1.920) (1.080)
-------------------------------------------------------------------
Total dividends and distributions ......................... (2.608) (1.355) (2.875) (2.425) (1.660)
-------------------------------------------------------------------
Net asset value, end of period .............................. $17.900 $21.570 $22.930 $22.870 $21.180
===================================================================
Total return(4) ............................................. (5.28%) (0.31%) 13.85% 21.07% 12.13%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................... $11,219 $21,192 $17,730 $8,090 $1,990
Ratio of expenses to average net assets ................... 2.13% 1.89% 1.77% 1.78% 1.80%
Ratio of net investment income to average net assets ...... 1.41% 1.08% 1.46% 2.00% 2.58%
Portfolio turnover ........................................ 180% 87% 86% 81% 92%
</TABLE>
--------------------------------------------------------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(3) Per share information for the year ended 1999 and six months ended 4/30/00
was based on the average shares outstanding method.
(4) 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
13
<PAGE>
Financial Highlights (continued)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
<TABLE>
<CAPTION>
Delaware Balanced Fund Institutional Class
------------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
4/30/00(1) 10/31/99 10/31/98 10/31/97 10/31/96 10/31/95
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $21.630 $23.000 $23.000 $21.300 $19.980 $18.030
Income (loss) from investment operations:
Net investment income(2) ................................ 0.232 0.480 0.585 0.659 0.727 0.694
Net realized and unrealized gain (loss) on investments .. (1.201) (0.265) 2.595 3.681 2.363 2.166
-----------------------------------------------------------------------
Total from investment operations ........................ (0.969) 0.215 3.180 4.340 3.090 2.860
-----------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income .................... (0.158) (0.545) (0.580) (0.720) (0.690) (0.660)
Distributions from net realized gain on investments ..... (2.553) (1.040) (2.600) (1.920) (1.080) (0.250)
-----------------------------------------------------------------------
Total dividends and distributions ....................... (2.711) (1.585) (3.180) (2.640) (1.770) (0.910)
-----------------------------------------------------------------------
Net asset value, end of period ............................ $17.950 $21.630 $23.000 $23.000 $21.300 $19.980
-----------------------------------------------------------------------
Total return .............................................. (4.80%) 0.70% 15.03% 22.29% 16.25% 16.50%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $73,058 $83,042 $300,656 $153,176 $125,751 $108,747
Ratio of expenses to average net assets ................. 1.13% 0.89% 0.77% 0.78% 0.80% 0.79%
Ratio of net investment income to average net assets .... 2.41% 2.08% 2.46% 3.00% 3.58% 3.73%
Portfolio turnover ...................................... 180% 87% 86% 81% 92% 94%
</TABLE>
-----------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Per share information for the year ended 1999 and six months ended 4/30/00
was based on the average shares outstanding method.
See accompanying notes
14
<PAGE>
Notes to Financial Statements
April 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Delaware Group Equity Funds I (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 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 Delaware Balanced Fund A Class carries a
front-end sales charge of 5.75%. The Delaware Balanced Fund B Class carries a
back-end sales charge. The Delaware Balanced Fund C Class carries a level load
deferred sales charge and Delaware Balanced Fund Institutional Class has no
sales charge.
The Fund's objective is to seek a balance of capital appreciation, income and
preservation of capital.
1. Significant Accounting Policies
The following accounting policies are in accordance with accounting principles
generally accepted in the United States and are consistently followed by the
Fund.
Security Valuation - All equity securities are valued at the last quoted sales
price as of the close of the New York Stock Exchange (NYSE) on the valuation
date. If on a particular day an equity security does not trade, then the mean
between the bid and asked prices will be used. 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 Trustees.
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 accounting
principles generally accepted in the United States.
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.
<PAGE>
--------------------------------------------------------------------------------
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 102% 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
accounting principles generally accepted in the United States 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.
Certain expenses of the Fund are paid through commission arrangements with
brokers. These transactions are done subject to best execution. The amount of
these expenses was approximately $7,532 for the six months ended April 30, 2000.
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 $13,086 for the six months ended April 30, 2000. 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".
15
<PAGE>
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware Management Company (DMC), the Investment Manager of the Fund, an
annual fee which is calculated daily at the rate of 0.65% 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. For the six
months ended April 30, 2000, the Fund had a liability for Investment Management
fees and other expenses payable to DMC of $24,637.
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 April 30,
2000, the Fund had a liability for such fees and other expenses payable to DSC
of $38,635.
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 six months ended April
30, 2000, the Fund had a liability for such fees and other expenses payable to
DDLP of $12,391.
For the six months ended April 30, 2000, DDLP earned $21,018 for commissions on
sales of the Fund A Class shares.
Certain officers of DMC, DSC and DDLP are officers, trustees and/or employees of
the Fund. These officers, trustees and employees are paid no compensation by the
Fund.
3. Investments
For the six months ended April 30, 2000, the Fund made purchases of $500,801,965
and sales of $560,840,846 of investment securities other than U.S. government
securities and temporary cash investments.
The cost of investments for federal income tax purposes approximates the cost
for book purposes. At April 30, 2000, the aggregate cost of securities for
federal income tax purposes was $582,299,522. At April 30, 2000, net unrealized
appreciation for federal income tax purposes aggregated $23,114,745 of which
$49,187,958 related to unrealized appreciation of securities and $26,073,213
related to unrealized depreciation of securities.
<PAGE>
--------------------------------------------------------------------------------
4. Capital Shares
Transactions in capital shares were as follows:
Six Months Year
Ended Ended
4/30/00 10/31/99
Shares sold:
A Class ....................................... 1,071,700 2,483,043
B Class ....................................... 343,889 2,091,897
C Class ....................................... 93,181 552,593
Institutional Class ........................... 816,180 2,817,975
Shares issued upon reinvestment of
distributions from net investment income
and net realized gain on investments:
A Class ....................................... 2,996,028 1,410,937
B Class ....................................... 396,322 105,717
C Class ....................................... 105,623 48,444
Institutional Class ........................... 563,692 868,541
---------- -----------
6,386,615 10,379,147
---------- -----------
Shares repurchased:
A Class ....................................... (4,712,924) (4,404,727)
B Class ....................................... (1,071,821) (566,237)
C Class ....................................... (554,541) (391,653)
Institutional Class ........................... (1,149,145) (12,920,482)
---------- -----------
(7,488,431) (18,283,009)
---------- ----------
Net decrease .................................... (1,101,816) (7,903,952)
========== ==========
16
<PAGE>
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
5. Swap Agreements
During the period ended April 30, 2000, the Fund entered into total return swap
agreements in accordance with its investment objectives. A swap is an agreement
to exchange the return generated by one instrument for the return generated by
another instrument. Total return swaps involve commitments to pay interest in
exchange for a market linked return based on a notional amount. To the extent
the total return of the security, instrument or basket of instruments underlying
the transaction exceeds the offsetting interest obligation, the Fund will
receive a payment from the counterparty. To the extent the total return of the
security, instrument or basket of instruments underlying the transaction falls
short of the offsetting interest obligation, the Fund will make a payment to the
counterparty. Total return swaps are marked-to-market daily based upon the fair
valuation methodology established by the Fund's Board of Trustees. The change,
if any, is recorded as unrealized appreciation or depreciation in the Statement
of Operations. Realized gains or losses on maturity or termination of swap
agreements are presented in the Statement of Operations.
At April 30, 2000, the Fund had the following total return swap agreements
outstanding:
Notional Expiration Net Unrealized
Amount Date Description Depreciation
--------------------------------------------------------------------------------
7,000,000 10/1/2000 Agreement with Goldman Sachs, ($103,604)
dated 4/15/00, (1) to receive
(pay) the notional amount
multiplied by the return on the
Lehman Brothers Corporate Bond
Index and (2) to pay the notional
amount multiplied by an
interpolated rate between the
1 week and 1 month LIBOR rate
reduced by 30 basis points until
4/30/00 and to pay the notional
amount multiplied by the 5 month
LIBOR rate reduced by 30 basis
points from 5/1/00 until expiration.
All payments are made at expiration
of the agreement.
Risks may arise from these agreements due to the potential inability of the
counterparties to meet the terms of the agreements. Risks may also arise from
potential losses due to adverse market movements.
<PAGE>
--------------------------------------------------------------------------------
6. Lines of Credit
The Fund, along with certain other funds in the Delaware Investments Family of
Funds (the "Participants"), participate in a $683,500,000 revolving line of
credit facility to be used for temporary or emergency purposes as an additional
source of liquidity to fund redemptions of investor shares. The Participants are
charged an annual commitment fee, which is allocated across the Participants on
the basis of each Fund's allocation of the entire facility. The Participants may
borrow up to a maximum of one third of their net assets under the agreement. No
amount was outstanding at April 30, 2000, or at any time during the fiscal year.
7. 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.
8. Securities Lending
Security loans for the Fund are required at all times to be secured by U.S.
Treasury obligations and/or cash collateral at least equal to 102% of the market
value of the securities on loan. However, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings. In the event that the borrower
fails to return loaned securities, and the collateral being maintained by the
borrower is insufficient to cover the value of loaned securities and provided
such collateral insufficiency is not the result of investment losses, the
lending agent has agreed to pay the amount of the shortfall to the Fund or, at
the option of the lending agent, replace the loaned securities. The market value
of securities on loan to brokers and the related collateral received at April
30, 2000 were $78,158,437 and $80,945,857, respectively. Net income from
securities lending was $16,494 and is included in interest income on the
Statement of Operations.
17
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DELAWARE(SM) For Shareholders
INVESTMENTS 1.800.523.1918
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Philadelphia o London For Securities Dealers
1.800.362.7500
For Financial Institutions
Representatives Only
1.800.659.2265
www.delawareinvestments.com
This semi-annual report is for the information of Delaware Balanced Fund
shareholders, but it may be used with prospective investors when preceded or
accompanied by a current Prospectus for Delaware Balanced Fund and the Delaware
Investments Performance Update for the most recently completed calendar quarter.
The prospectus sets forth details about charges, expenses, investment objectives
and operating policies of the Fund. You should read the prospectus carefully
before you invest. 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.
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BOARD OF TRUSTEES Charles E. Peck Investment Manager
Retired Delaware Management Company
Wayne A. Stork Fredericksburg, VA Philadelphia, PA
Chairman
Delaware Investments Family of Funds Janet L. Yeomans International Affiliate
Philadelphia, PA Vice President and Treasurer Delaware International Advisers Ltd.
3M Corporation London, England
St. Paul, MN
Walter P. Babich National Distributor
Board Chairman Delaware Distributors, L.P.
Citadel Constructors, Inc. Philadelphia, PA
King of Prussia, PA
AFFILIATED OFFICERS
David K. Downes Charles E. Haldeman, Jr. Shareholder Servicing, Dividend
President and Chief Executive Officer President and Chief Executive Officer Disbursing and Transfer Agent
Delaware Investments Family of Funds Delaware Management Holdings, Inc. Delaware Service Company, Inc.
Philadelphia, PA Philadelphia, PA Philadelphia, PA
John H. Durham Richard J. Flannery 1818 Market Street
Private Investor Executive Vice President Philadelphia, PA 19103-3682
Horsham, PA and General Counsel
Delaware Investments Family of Funds
Anthony D. Knerr Philadelphia, PA
Consultant, Anthony Knerr & Associates
New York, NY Bruce D. Barton
President and Chief Executive Officer
Ann R. Leven Delaware Distributors, L.P.
Former Treasurer, National Gallery of Art Philadelphia, PA
Washington, DC
Thomas F. Madison
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
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(3214) Printed in the USA
SA-002 [4/00] PPL 6/00 (J5941)
