<PAGE>
January 15, 1995
Dear Policy Holder:
The year 1994 was marked by relatively strong economic growth, low inflation
and stronger earnings from American corporations. Yet turbulence in the
securities markets, both here and abroad, made this a difficult period for all
investors.
The principal cause for the uncertainty in the financial markets was the
Federal Reserves' six increases in short-term interest rates. The Fed's goal
was to slow economic growth and thereby prevent a rise in the inflation rate.
Though this effort appears to be succeeding, in the short term it had a
negative impact on the stock and bond markets.
The stock market, as measured by the unmanaged S&P 500 Stock Index, had a
slightly positive return for the year ended December 31, 1994. But at 1.36%,
this uncommonly low one-year return was less than the rate of inflation. The
bond market, as measured by the Lehman Government/Corporate Bond Index, was
affected even more, suffering a loss as a result of rising interest rates.
Investment periods such as this one--when returns from the stock and bond
markets are both far below their long-term historical averages--may discourage
investors and serve to reinforce the importance of maintaining a long-term
perspective. Periods of below-average performance have been a natural part of
market cycles and, though past performance is not a guarantee for the future,
these periods have typically been balanced by subsequent periods of stronger
performance. If you maintain a diversified portfolio, you should not focus on
annual changes in return, but rather on the long term, making adjustments as
your circumstances change.
There are several factors which make us optimistic about the outlook for
the coming year. Though the Fed may raise interest rates again, we believe
that the majority of the rate rise is behind us. The Fed's strong stance
against inflation could have a positive effect on the markets in the long
run. The passage of the General Agreement on Tariffs & Trades should increase
trade between all participant countries and benefit the U.S. economy and
stocks by making American goods easier to export. Another potential benefit
to the stock market would be a reduction in the capital gains tax, an issue
currently under consideration by the Republican majority in Congress. Such a
reduction could increase demand for stocks, thereby pushing prices higher.
Summaries of the strategy and performance for each investment series
available through Delaware MedallionSM Variable Annuity are included in the
remainder of this report. We hope you will read them with interest. Again, we
encourage you to remain focused on your long-term goals and to remember that
any earnings from your investment will compound tax-deferred until withdrawal.
Though investors faced significant challenges in 1994, we believe those
challenges also created opportunities. As always, we will strive to take
advantage of those opportunities in the coming year.
Sincerely,
Wayne A. Stork Brian F. Wruble
Chairman, Board of Directors President and Chief Executive Officer
Delaware Group Premium Fund Delaware Group Premium Fund
1
<PAGE>
Equity/Income Series
Portfolio Strategy and Performance in 1994
The Equity/Income Series' strategy has been built around the important
role of dividends in attaining strong total returns from equities; though
past performance is not a guarantee of future results, dividends have provided
nearly half of the total return from stocks since 1929.(1) For the management of
the Equity/Income Series, dividends play a critical role in selecting stocks.
To be considered for the portfolio, stocks must yield more than the average of
the S&P 500 Stock Index. If the yield falls below the average of the Index,
management will begin to sell the stock. Though we have confidence in this
strategy's ability to provide strong returns over the long term, in the
difficult environment of 1994, the Series' return for the year ended December
31, 1994 was -0.20% compared to the modest +1.31% gain for the S&P 500.
High yields are often a sign that stocks are out-of-favor with investors;
their yields are high because their prices are relatively low. By focusing on
these stocks, management is purchasing stocks that appear undervalued,
creating greater potential for appreciation should the stocks move toward
what we consider their true value. And, in the meantime, the portfolio stands
to collect dividend income from the stocks. Managers always sell a stock if
its yield falls below that of the S&P 500, which may happen because the price
has risen. Of course, they watch each stock in the portfolio carefully and if
a stock doesn't perform well, they may sell it even if it still yields more
than the S&P 500.
A Look at the Portfolio
The below-average performance of the stock market in 1994 was a direct
result of the Federal Reserve's short-term interest rate increases. In the
wake of the Fed's actions, investors fixated first on the potential for
higher inflation and later on the possibility of a Fed-induced recession.
Market activity resulting from these investor concerns had a negative effect
on the Series' performance over the course of 1994.
Our strategy had led us to economically sensitive stocks, such as
companies in the chemicals and capital goods industries, which performed well
in the second and third quarters as a result of positive earnings reports. In
November, however, the sixth increase in the federal funds rate precipitated
a sharp decline in the stock market. While many of the companies in the
Equity/Income portfolio continued to report strong earnings as our managers
had anticipated, their stock prices declined due to negative investor
sentiment. Because the decline was fueled by fear of recession, investors
shunned economically sensitive companies and turned instead to technology and
consumer growth stocks, which we did not hold in the Equity/Income Series
because their yields, in general, weren't high enough to meet our standards.
As a result, the Series' short-term performance was hindered both by the
stocks it held and those it didn't.
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Equity Income Series Objective
Seeks the highest possible total rate of return by selecting issues that
exhibit potential for capital appreciation while providing higher than
average dividend income.
-------------------------------------------------------------------------
- -----------------------
(1)Source: (Copy Right)CORRSoftware(TM), Ibbotson Associates, Chicago. All
rights reserved.
2
<PAGE>
Outlook for the Future
There are a number of factors that could positively affect the stock
market in the year to come. Continued economic growth overseas combined with
the weakness in the U.S. dollar and the passage of the General Agreement
on Trades & Tariffs could benefit U.S. companies that export goods. Because
the Series' positioning was based on our long-term outlook for stocks and our
belief that dividends will continue to play an important role in total return,
we have made no significant adjustments in the portfolio. However, we did take
advantage of the opportunity created by the price declines towards the end of
1994 to purchase stocks of some promising companies whose prices, we believed,
were unjustifiably depressed.
While we continue to believe that stock market returns in the '90s are
likely to be more in line with historical returns than the above-average
returns of the '80s, we remain convinced that stocks offer some of the best
opportunities to outpace inflation over the long term and that the
dividend-driven style of the Equity/Income Series will help its shareholders
take advantage of those opportunities.
CHART
$10,000 Initial Investment July 28, 1988 through December 31, 1994
Plot Points
Equity/Income S&P 500
Series Stock Index
------------- -----------
Dec. '88 $10,179 $10,628
Dec. '89 $11,505 $13,986
Dec. '90 $ 9,869 $13,550
Dec. '91 $12,075 $17,661
Dec. '92 $12,825 $19,004
Dec. '93 $14,807 $20,911
Dec. '94 $14,779 $21,195
Equity/Income Series
Average Annual Total Returns
----------------------------------------
Lifetime +6.80%
Five Years +5.86%
One Year -0.20%
Through December 31, 1994
Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
The chart above shows a $10,000 investment in both the Equity/Income Series
and the S&P 500 Stock Index for the period from the Series' inception on
7/28/88 through 12/31/94. All dividends and capital gains were reinvested.
The Index is unmanaged, with no set investment objective and unlike the
Series includes none of the actual expenses incurred in actively managing a
mutual fund, such as the cost of researching and buying and selling
securities. Earnings from a variable product investment compound tax free
until withdrawal, so no adjustments were made for the payment of taxes. The
impact of an expense limitation is included in the illustration. (During
fiscal 1994, the Series' expense ratio was below the cap and no waiver was
necessary.) Performance in this report does not reflect the insurance fees
related to a variable product investment nor the deferred sales charge which
would apply to certain withdrawals of investments held for less than eight
years. If the fees were reflected and the expense limitation removed, the
performance shown here would have been reduced. For more information about
fees, please see your variable product prospectus.
3
<PAGE>
High Yield Series
Portfolio Strategy and Performance in 1994
The past year has been one of the most difficult years for fixed income
securities in decades. Still, high-yield bonds were among the best performing
fixed income asset classes. The high income generated by these bonds helped
to cushion the impact of lower bond prices that resulted from higher interest
rates. In addition, strong corporate earnings had a positive impact on
corporate balance sheets and investor expectations, thereby helping to
support corporate bond prices and counter the negative effect of rising
interest rates. Nonetheless, as fast and as sharp as this year's interest
rate increases were, some impact was virtually unavoidable. For the one-year
period ended December 31, 1994, the High Yield Series had a return of -2.87%.
High-yield bonds, like all debt securities react to changes in interest
rates. When interest rates rise, bond prices fall. However, the close link
between these bonds and the companies that issue them means that bond values
are also affected by the growing economy, which can positively impact the
bond issuer. In 1994, the effect of strong corporate earnings was a key
factor in high-yield bond returns, even as interest rates rose signficantly.
A Look at the Portfolio
The High Yield Series employs a relatively conservative investment
strategy because of the credit risk inherent in the high-yield bond market.
First, the portfolio focuses investments on the higher rated portion of
non-investment grade corporate debt--primarily bonds rated BB and B. Second,
because income--and consequently, a company's ability to pay the interest
income on its bonds--is tremendously important to the Series' strategy, the
portfolio emphasizes companies with relatively stable cash flows, favoring
industries such as food and manufacturing over what we consider to be less
stable sectors such as agriculture and energy. And third, the portfolio is
well-diversified, typically holding over 115 different issues to help
minimize the effect any poorly performing holding might have.
Over the past year, 70% to 80% of the portfolio was invested in bonds with
a rating of B. These bonds offered an attractive risk/reward profile because
they generally pay higher income than better quality bonds, but have less
credit risk than bonds with lower ratings.
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High Yield Series Investment Objective
Seeks as high a current income as possible by investing in rated and
unrated corporate bonds, including higher risk non-investment grade bonds,
U.S. Government securities and commercial paper.
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4
<PAGE>
Outlook for the Future
The economy may begin to slow in 1995 as a result of the Federal Reserve's
interest rate increases. Anticipating this occurrence, two adjustments are
being made. The portfolio will be shifted toward bonds with higher credit
ratings. Specifically, the managers have begun replacing some of the Series'
B-rated bonds with those rated BB. Again, this is an effort to protect the
portfolio against impact from any potential downturns in corporate profits.
The managers are also reducing the portfolio's holdings in cyclical
companies, because they tend to be more vulnerable during economic downturn.
The managers have already begun moving out of positions in steel, chemicals
and paper companies in favor of selected health care, cable and other companies
that tend to have more stable cash flows and therefore can do well when
economic growth is flat or declining.
This defensive approach, coupled with the Series' high income orientation
should help it to perform well as the business cycle moves into a new phase.
Chart
$10,000 Initial Investment July 28, 1988 through December 31, 1994
Plot Points
High Yield Merrill Lynch
Series Index
Dec. '88 $10,208 $10,388
Dec. '89 $10,673 $10,827
Dec. '90 $ 9,916 $10,357
Dec. '91 $13,644 $13,938
Dec. '92 $15,347 $16,469
Dec. '93 $17,855 $19,299
Dec. '94 $17,346 $19,074
High Yield Series
Average Annual Total Returns
-------------------------------
Lifetime +9.30%
Five Years +10.37%
One Year -2.87%
Through December 31, 1994
Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
The chart above shows a $10,000 investment in both the High Yield Series and
the Merrill Lynch High Yield Master Index for the period from the Series'
inception on 7/28/88 through 12/31/94. All dividends and capital gains were
reinvested. The Index is unmanaged, with no set investment objective and
unlike the Series includes none of the actual expenses incurred in actively
managing a mutual fund, such as the cost of researching and buying and
selling securities. Earnings from a variable product investment compound tax
free until withdrawal, so no adjustments were made for the payment of taxes.
An expense limitation was in effect through 12/31/93 and its impact is
reflected in the illustration. Performance in this report does not reflect
the insurance fees related to a variable product investment nor the deferred
sales charge which would apply to certain withdrawals of investments held for
less than eight years. If the fees were reflected and the expense limitation
removed, the performance shown here would have been reduced. For more
information about fees, please see your variable product prospectus.
5
<PAGE>
Capital Reserves Series
Portfolio Strategy and Performance in 1994
The 1994 calendar year was the worst year since 1927 for long-term U.S.
Treasuries, based on price return. And though long-term bonds were clearly
hit hardest by rising interest rates, bonds of all maturities experienced
price declines as the Fed sought to slow economic growth and stem inflation.
Capital Reserves Series posted a total return of -2.68% for the year ended
December 31, 1994. The fact that the portfolio was able to maintain so much
of its value in a year that was so devastating for bond investors is a direct
result of its defensive strategy and intermediate positioning. The Capital
Reserves portfolio currently has an average maturity of five and one-half
years. We focus on this area of the bond market because we believe it offers
very attractive risk/reward opportunities. Investors can generally obtain a
large portion of the income available from longer maturity bonds, but with
less risk to principal in the event of rising interest rates.
A Look at the Portfolio
While its bonds are predominantly intermediate-term, Capital Reserves
holds various types of high-quality securities including Treasury bonds,
securities issued or backed by U.S. Government agencies and mortgage-backed
securities, as well as select collateralized mortgage obligations and
high-quality corporate bonds. The Series may adjust its holdings of these
securities in order to take advantage of the most attractive income
opportunities available without taking unnecessary interest rate or credit
risk.
Over the course of this past year, we have reduced the Fund's holdings of
U.S. Treasury bonds, whose prices tend to be more sensitive to interest rate
changes, and have increased our holdings of mortgages. We have seen a marked
decrease in mortgage prepayments which can limit the potential returns on
those securities. We have also increased our holdings of high-quality,
asset-backed securities, such as credit card and auto loan receivables, and
our corporate bond holdings. These three categories of bonds provide higher
income than Treasuries and, as a result, tend to be less sensitive to
interest rate increases. And because we maintain our quality focus, the
portfolio maintains an excellent average credit rating of AA+, an indication
of low credit risk.
The current average maturity of the portfolio is approximately five and
one-half years, as stated above, and reflects some shortening of the average
maturity that occurred over the course of 1994, in anticipation of the Fed's
moves.
--------------------------------------------------------------------------
Capital Reserves Series Investment Objective
Seeks a high stable level of current income while minimizing fluctuations
in principal by investing in short- and intermediate-term securities.
--------------------------------------------------------------------------
6
<PAGE>
Outlook for the Future
Because rates may continue to increase somewhat, at least in the near
term, the Capital Reserves portfolio will continue to emphasize the higher
yielding mortgages, asset-backed securities and corporate bonds over
Treasuries.
While we recognize that 1994 was a very difficult year for bond investors,
we believe that it demonstrated the value of an intermediate strategy.
Intermediate bonds did decline in price during the past year; some decline
was virtually unavoidable given the steep and rapid rise of interest rates.
However, these bonds declined far less than longer term bonds, demonstrating
their value as part of a comprehensive portfolio.
Chart
$10,000 Initial Investment July 28, 1988 through December 31, 1994
Plot Points
Capital Reserves Lehman Brothers Government/
Series Corporate Bond Index
Dec. '88 $10,193 $10,344
Dec. '89 $11,093 $11,816
Dec. '90 $12,010 $12,796
Dec. '91 $13,074 $14,860
Dec. '92 $13,926 $15,986
Dec. '93 $15,018 $17,936
Dec. '94 $14,618 $17,307
Capital Reserves Series
Average Annual Total Returns
-------------------------------
Lifetime +6.36%
Five Years +5.80%
1 Year -2.68%
Through December 31, 1994
Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
The chart above shows a $10,000 investment in both the Capital Reserves
Series and the Lehman Brothers Government/Corporate Bond Index for the period
from the Series' inception on 7/28/88 through 12/31/94. All dividends and
capital gains were reinvested. The Index is unmanaged, with no set investment
objective and unlike the Series includes none of the actual expenses incurred
in actively managing a mutual fund, such as the cost of researching and
buying and selling securities. Earnings from a variable product investment
compound tax free until withdrawal, so no adjustments were made for the
payment of taxes. An expense limitation was in effect through 12/31/93 and
its impact is reflected in the illustration. Performance in this report does
not reflect the insurance fees related to a variable product investment nor
the deferred sales charge which would apply to certain withdrawals of
investments held for less than eight years. If the fees were reflected and
the expense limitation removed, the performance shown here would have been
reduced. For more information about fees, please see your variable product
prospectus.
7
<PAGE>
Multiple Strategy Series
Portfolio Strategy and Performance in 1994
The Multiple Strategy Series invests in both stocks and bonds with a goal
of providing long-term capital growth, current income and protection of
principal. In pursuing this objective, the stock portfolio is intended to
provide growth potential and the bond portfolio is intended to contribute to
the stability of return and principal. Unfortunately, the Federal Reserve
Bank's 1994 interest rate increases had damaging effects on both stocks and
bonds. Stocks suffered as investors feared both rising inflation and the
possibility of a Fed-induced recession, and bonds lost principal value as a
direct result of rising interest rates.
The Multiple Strategy Series provided a nearly "flat" return of -0.15% for
the year ending December 31, 1994. As you can see from the average annual
returns on the opposite page, this performance is low relative to how Multiple
Strategy has done over longer periods. After a year as difficult as 1994, it's
important to keep a long-term perspective.
A Look at the Portfolio
Careful stock selection is of paramount importance in a market such as we
experienced this year. While even stocks of strong companies often decline
along with the overall market in times of great uncertainty, these companies
may be among the first to rebound when the market stabilizes.
The Multiple Strategy Series selects stocks based on several factors--
expected dividend increases, history of consistent dividend growth and a
belief that the company can sustain that growth. The portfolio, which had 59%
of net assets invested in equities as of December 31, 1994, had significant
holdings in select companies in the financial sector and in real estate
investment trusts which performed well early in the year, but were later
affected by the rising interest rates. The performance of certain consumer
companies benefited the Series, as did a lack of exposure to more cyclical
companies, whose fates are tied to economic conditions and consequently
suffered as fears of recession grew.
The fixed income portion of the portfolio, 43% of net assets on December
31, contained primarily high-quality securities--U.S. Treasuries, mortgages,
asset-backed securities and corporate bonds. The average maturity of the bond
portion of the portfolio was approximately five and one-half years, at the
low end of the intermediate range. We follow this conservative approach in the
fixed income portion of the portfolio because we believe intermediate bonds
have an attractive risk/reward profile, with most of the income potential
available from longer term bonds, but with significantly less change in
principal as interest rates change. Though some principal loss was virtually
unavoidable due to the rapid and steep rate increases this past year, the
strategy did help us to minimize those losses.
-------------------------------------------------------------------------
Multiple Strategy Series Investment Objective
Seeks a balance of capital appreciation, income and preservation of
capital by using a dividend-oriented valuation strategy to select
securities of established companies that are believed to demonstrate
potential for income and capital growth.
-------------------------------------------------------------------------
8
<PAGE>
Outlook for the Future
The Federal Reserve may increase interest rates a little further before
they are convinced that the economy has slowed to a pace that will foster a
low-to-stable inflation rate. Though low inflation is positive for both the
stock and bond markets in the long term, there may be continued short-term
uncertainty.
In stocks, however, we believe that much of the concern about a slowdown
has already been discounted from the market. And, in fact, we took advantage
of the opportunities at year-end to purchase some promising stocks at deeply
discounted prices.
As for the bond component, we believe our intermediate-term positioning
should help to minimize the effect of any future rate increases on our
portfolio. In both markets, the portfolio managers will continue to monitor
events carefully in an effort to meet the Series' long-term investment
objective.
Chart
$10,000 Initial Investment July 28, 1988 through December 31, 1994
Plot Points
Multiple Strategy S&P 500
Series Stock Index
Dec. '88 $10,182 $10,628
Dec. '89 $11,874 $13,986
Dec. '90 $11,818 $13,550
Dec. '91 $14,965 $17,661
Dec. '92 $16,988 $19,004
Dec. '93 $18,379 $20,911
Dec. '94 $18,354 $21,195
Multiple Strategy Series
Average Annual Total Returns
--------------------------------
Lifetime +9.96%
Five Years +9.22%
One Year -0.15%
Through December 31, 1994
Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
The chart above shows a $10,000 investment in both the Multiple Strategy
Series and the S&P 500 Stock Index for the period from the Series' inception
on 7/28/88 through 12/31/94. All dividends and capital gains were reinvested.
The Index is unmanaged, with no set investment objective and unlike the
Series includes none of the actual expenses incurred in actively managing a
mutual fund, such as the cost of researching and buying and selling
securities. Earnings from a variable product investment compound tax free
until withdrawal, so no adjustments were made for the payment of taxes. An
expense limitation was in effect from 1/1/92 through 12/31/93 and its impact
is reflected in the illustration. Performance in this report does not reflect
the insurance fees related to a variable product investment nor the deferred
sales charge which would apply to certain withdrawals of investments held for
less than eight years. If the fees were reflected and the expense limitation
removed, the performance shown here would have been reduced. For more
information about fees, please see your variable product prospectus.
9
<PAGE>
Money Market Series
Most investment managers agree that the single largest force impacting the
securities markets over the course of 1994 was the Federal Reserve's monetary
policy, specifically the series of six short-term interest rate increases
which began on February 4, 1994. The Fed's moves were designed to slow an
economy that they believed was growing too rapidly to permit stable-to-low
inflation. While stemming inflation should be good for the economy over the
long term, it caused a great deal of turbulence in the securities markets,
making 1994 a very difficult year for holders of long-term stock and bond
investments.
Money market funds were the only category of mutual funds to benefit
immediately from increases in short-term interest rates. For the one-year
period ended December 31, 1994, the Money Market Series provided a return of
+3.68%. Because money market funds, like the Money Market Series, seek to pay
current income while maintaining a stable share price of $1.00, they invest
in very short-term securities. When the Fed increases short-term interest
rates, the yields on these short-term securities rise. As the short-term
securities in the Series mature, the assets can be reinvested at higher
rates. This gives the Series the potential to provide a steadily improving
yield as rates rise. Though there is no guarantee that money market funds
will be able to maintain a constant share value, they have very short average
maturities and generally hold high-quality securities, so in a rising rate
environment, they may provide the benefit of more income for investors
without the declining principal value that longer term bond investments
typically experience.
------------------------------------------------------------------------
Money Market Series Investment Objective
Seeks to provide the highest level of current income consistent with
preservation of capital and liquidity and to maintain a constant share
price, though there is no guarantee that these goals will be met.
------------------------------------------------------------------------
10
<PAGE>
The Fed may continue to increase interest rates in the near term, in an
effort to curb inflation. Should this happen, we would expect the Series to
benefit further, increasing income while maintaining a portfolio of
high-quality securities. However, temporary factors such as rate increases
should not change the long-term allocation of your portfolio. Though money
market funds may make sense as a small component of a diversified long-term
portfolio such as your annuity investment, they are generally not appropriate
for long-term goals since they do not have the growth potential to outpace
inflation.
Money Market Series
Average Annual Total Returns
--------------------------------
Lifetime +5.33%
Five Years +4.49%
One Year +3.68%
Through December 31, 1994
Past performance is not a guarantee of future results. Yields will fluctuate
and are not guaranteed.
The average annual returns above reflect reinvestment of all dividends and
capital gains. Earnings from a variable product investment compound tax free
until withdrawal, so no adjustments were made for the payment of taxes.
During this period, an expense limitation was in effect and its impact is
reflected in the illustration. (During fiscal 1994, the Series' expense ratio
was below the cap and no waiver was necessary.) Performance in this report
does not reflect the insurance fees related to a variable product investment
nor the deferred sales charge which would apply to certain withdrawals of
investments held for less than eight years. If the fees were reflected and
the expense limitation removed, the performance shown here would have been
reduced. For more information about fees, please see your variable product
prospectus.
11
<PAGE>
Growth Series
Portfolio Strategy and Performance in 1994
The Growth Series is managed with the goal of providing capital
appreciation over time. In selecting investments for the portfolio, managers
search for stocks of small and mid-size companies that show a history of
consistent earnings growth, leadership within their industries, strong
balance sheets and management teams, and the potential to continue growing
rapidly.
Though smaller company stocks have provided the highest average annual
total returns since 1926,(1) they can be the most susceptible to price moves in
the short term. The stock market as a whole was affected by rising short-term
interest rates, as evidenced by the unmanaged S&P 500 Stock Index's
below-average return of 1.31%, but the higher rates had a particularly
damaging effect on the short-term performance of small and mid-size stocks
and consequently the Growth Series, which returned -3.54%.
A Look at the Portfolio
Though the small company growth sector was clearly hard hit in this year
marked by rising interest rates, inflation concerns and fear of recession,
certain areas within the sector fared better than others. The portfolio
managers were pleased with the performance of positions in both the managed
care segment of health care stocks and in selected computer and semiconductor
companies.
We were disappointed by the performance of stocks in the consumer growth
sector, a sector which had performed well for the Series in the past. While
consumer confidence hit a four-year high this summer, it never translated
into strong consumer spending and, as a result, retail companies had
disappointing earnings. Based on the spending that did occur, it seems that
people are choosing items with perceived long-term value and moving away from
extravagant or fad items. We believe this is a long-term trend that is
causing growth stock investors to refocus.
One effect of this trend is that within the growth sector, we have been
turning toward "value" retailers. In addition, management believes there is
growth potential within convenience services. Some of the companies currently
under consideration include discount retail, house and garden needs or
maintenance providers, and restaurants.
-------------------------------------------------------------------------
Growth Series Investment Objective
Seeks long-term capital appreciation by investing in securities exhibiting
the potential for significant growth.
-------------------------------------------------------------------------
- ------------------------
(1)Source: (Copy Right)CORRSoftware(TM), Ibbotson Associates, Chicago. All
rights reserved.
12
<PAGE>
Outlook for the Future
Looking forward, the Series' management has begun to shift out of the
"managed care" health care companies that had been successful over the past
year. Though these companies may continue to prosper regardless of any
legislative influences, their stocks have reached valuation levels where
management believes there is only limited potential for future price
appreciation. On the other hand, the managers still have high expectations
for technology stocks, particularly those with international exposure, which
could benefit as European economies continue to recover from recession.
Though the decline in the valuations of stocks in the growth sector had a
negative impact on short-term performance, it has created opportunities. It is
now possible to acquire stocks of promising companies at reduced prices. In
addition, growth stocks still appear "cheap" based on price-to-earnings
ratios, which remain below normal compared to the price-to-earnings ratio of
the S&P 500 Stock Index. With much of the broader "large capitalization"
market considered overpriced, investors may now return to small and mid-size
growth companies, a movement which could again push prices higher.
Chart
$10,000 Initial Investment July 2, 1991 through December 31, 1994
Plot Points
Growth NASDAQ Industrial
Series Index
Dec. '91 $11,035 $12,691
Jun. '92 $ 9,863 $11,414
Dec. '92 $11,617 $13,753
Jun. '93 $11,818 $13,840
Dec. '93 $12,962 $15,288
Jun. '94 $11,941 $13,551
Dec. '94 $12,505 $14,301
Growth Series
Average Annual Total Returns
--------------------------------
Lifetime +5.66%
One Year -3.54%
Through December 31, 1994
Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
The chart above shows a $10,000 investment in both the Growth Series and the
NASDAQ Industrial Index for the period from the Series' inception on 7/12/91
through 12/31/94. All dividends and capital gains were reinvested. The Index
is unmanaged, with no set investment objective and unlike the Series includes
none of the actual expenses incurred in actively managing a mutual fund, such
as the cost of researching and buying and selling securities. Earnings from a
variable product investment compound tax free until withdrawal, so no
adjustments were made for the payment of taxes. During this period, an
expense limitation was in effect and its impact is reflected in the
illustration. Performance in this report does not reflect the insurance fees
related to a variable product investment nor the deferred sales charge which
would apply to certain withdrawals of investments held for less than eight
years. If the fees were reflected and the expense limitation removed, the
performance shown here would have been reduced. For more information about
fees, please see your variable product prospectus.
13
<PAGE>
International Equity Series
Portfolio Strategy and Performance in 1994
During the past year, international markets, like those in the U.S., were
negatively affected by the Federal Reserve Bank's increases in short-term
interest rates and by inflation fears that were spurred by worldwide economic
growth. While the international equity market as represented by the unmanaged
Morgan Stanley EAFE Index surpassed the return of the S&P 500 Stock Index,
events and performance in the international arena demonstrated the importance
of diversifying your international holdings. While some countries such as New
Zealand had outstanding returns, many emerging markets--for example China,
Turkey and Mexico--had significant losses.
The International Equity Series provided a return of +2.57%, slightly
outperforming the S&P 500, but underperforming the EAFE Index. It is important
to note that the International Equity Series was designed as a "core"
international investment. As such, it seeks to avoid undue risk to principal
by diversifying among companies in the major developed countries, by limiting
holdings in markets believed to be overvalued or potentially risky due to
economic or political instability, and by using currency hedging as a
defensive measure to protect against currency fluctuations.
Over the past year, your Series had significant positions in companies in
the United Kingdom, Australia and Continental Europe, the latter two
contributing significantly to performance. Though the International Equity
Series was invested in Japan which had very strong performance, its holdings
were small relative to those of the EAFE Index, and that is the primary
reason that the Series underperformed the EAFE Index.
A Look at the Portfolio
Stocks with high dividend yields, a category favored by International
Equity Series, are typically sensitive to interest rate increases and
consequently were hard hit this past year. In the environment of the past
year, with our style somewhat out of favor, stock selection and country
allocation were key factors in the portfolio's performance.
As reported above, your Series had significant positions in the United
Kingdom and Australia as well as New Zealand and Germany, all of which are
experiencing growth in low inflationary environments. Although the U.K.
market was negatively affected by rising U.S. interest rates and the
uncertainty in the U.S. market, we remain optimistic about our investments
because economic growth appears strong and we continue to believe that
inflation will remain under control.
In Japan, on the other hand, continuing structural problems may mean a
slower and more limited economic recovery than has been seen there in the
past. In addition, overall valuations of the Japanese market remain
unattractive. (The recent Kobe earthquake is unlikely to have either a
significant positive or negative impact on these valuations.) Consequently,
we do not plan to increase the Fund's holdings in Japan at this time.
-------------------------------------------------------------------------
International Equity Series Investment Objective
Seeks long-term growth without undue risk to principal by investing
primarily in equity securities of foreign issuers providing the potential
for capital appreciation and income.
-------------------------------------------------------------------------
14
<PAGE>
Outlook for the Future
Going forward, the Series' managers are decreasing holdings in Canada and
beginning to invest in Indonesia, which they feel offers better relative
value. The managers continue to feel strongly about the Anglo-Saxon economies
that were solid performers for the portfolio over the past year and will
maintain relatively high weightings in those countries.
We believe continued worldwide economic growth, the passage of the General
Agreement on Tariffs and Trades and the possibility of a stabilization in
U.S. interest rates should be positive for international equity investors.
Chart
$10,000 Initial Investment October 29, 1992 through December 31, 1994
Plot Points
International EAFE
Equity Series Index
Dec. '92 $10,041 $10,114
Mar. '93 $10,102 $11,276
Jun. '93 $10,162 $12,361
Sept. '93 $10,813 $13,133
Dec. '93 $11,645 $13,198
Mar. '94 $11,683 $13,612
Jun. '94 $11,824 $14,257
Sept. '94 $12,056 $14,220
Dec. '94 $11,956 $14,022
International Equity Series
Average Annual Total Returns
------------------------------
Lifetime +8.46%
One Year +2.57%
Through December 31, 1994
Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
The chart above shows a $10,000 investment in both the International Equity
Series and the Morgan Stanley Europe, Australia and Far East Index for the
period from the Series' inception on 10/29/92 through 12/31/94. All dividends
and capital gains were reinvested. The Index is unmanaged, with no set
investment objective and unlike the Series includes none of the actual
expenses incurred in actively managing a mutual fund, such as the cost of
researching and buying and selling securities. Earnings from a variable
product investment compound tax free until withdrawal, so no adjustments were
made for the payment of taxes. During this period, an expense limitation was
in effect and its impact is reflected in the illustration. Performance in
this report does not reflect the insurance fees related to a variable product
investment nor the deferred sales charge which would apply to certain
withdrawals of investments held for less than eight years. If the fees were
reflected and the expense limitation removed, the performance shown here
would have been reduced. For more information about fees, please see your
variable product prospectus.
15
<PAGE>
The Emerging Growth Series
Portfolio Strategy and Performance in 1994
The Emerging Growth Series' first fiscal year was clouded by the Federal
Reserve's short-term interest rate increases and the subsequent turbulence in
the stock market. While small company stocks--the focus of the Emerging Growth
Series--have traditionally provided the best long-term returns, they also
entail the greatest short-term risk, in terms of price volatility. The
portfolio's return of -0.39% for the year ended December 31, 1994, resulted
from the combination of a weak market for small company stocks (as evidenced
by the -6.46% return of the unmanaged NASDAQ Industrial Index which includes
stocks similar in size to those in the Emerging Growth Series) and from the
impact of external factors on some of the companies held in the portfolio. As
you can see, the Emerging Growth Series performed significantly better than
the NASDAQ Industrial Index.
The management of the Emerging Growth Series identifies changing trends in
the American marketplace and then strives to position the portfolio in
companies that are in a position to profit from those trends. The strategy is
a "bottom-up" approach to the market, meaning that the manager evaluates each
company individually and decides whether or not to buy it based on its merits
and ability to meet changing trends rather than on broad expectations for the
economy or for the stock market.
A Look at the Portfolio
The Series' goal is to identify companies that can "stand on their own"
regardless of the market environment. However, when investor sentiment turned
negative in the wake of November's sixth interest rate increase, the market
did not discriminate. As can happen, particularly in the short term stocks of
promising companies suffered price declines along with stocks of weaker
companies, stocks of small companies along with those of large companies.
In addition, some of the stocks selected for the portfolio were affected
by events within their industries. Anticipating probable approval of helmet
legislation in several states, we invested in a bicycle supply and helmet
manufacturer. Though we still believe this is an area that has great
potential due to the sport's popularity and the pending legislation (in fact,
we've added to our holdings in the industry recently), the past year saw a
temporary setback.
On the positive side, our technology investments did well over the year,
and we expect that trend to continue as a result of economic growth overseas
and reduced restrictions on American exports.
--------------------------------------------------------------------------
Emerging Growth Series Investment Objective
Seeks long-term capital appreciation by investing primarily in small
capitalization common stocks and convertible securities of emerging and
growth-oriented companies which are believed to be responsive to changes
in the market place.
-------------------------------------------------------------------------
16
<PAGE>
Outlook for the Future
An important part of the Emerging Growth Series' strategy is intensive
hands-on research. Though the Series is just over a year old, it is based on
the strategy of Delaware Group Trend Fund, a fund with a 25-year track
record. Its management believes that company visits, interviews with customers,
competitors and suppliers, and thorough background and balance sheet analysis
will help identify companies positioned to fill a niche in the marketplace.
And while investments in small company stocks will always involve
short-term risk as prices rise and fall, over the long term, we believe that
investments such as this one have the potential for strong results. If
interest rates stabilize in the coming year, we could see more certainty in
the stock market. That combined with the possibility of a reduction in the
capital gains tax could create a more favorable environment for stock
investments.
Chart
$10,000 Initial Investment December 27, 1993 through December 31, 1994
Plot Points
Emerging Growth NASDAQ Industrial
Series Index
Dec. '93 $10,000 $10,090
Mar. '94 $ 9,668 $ 9,942
Jun. '94 $ 8,864 $ 9,676
Sept. '94 $ 9,649 $10,101
Dec. '94 $ 9,356 $10,160
Emerging Growth Series
Average Annual Total Returns
------------------------------
Lifetime +1.58%
One Year -0.39%
Through December 31, 1994
Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
The chart above shows a $10,000 investment in both the Emerging Growth Series
and the NASDAQ Industrial Index for the period from the Series' inception on
12/27/93 through 12/31/94. Please note that this is a short time period and
may not be indicative of future results. All dividends and capital gains were
reinvested. The Index is unmanaged, with no set investment objective and
unlike the Series includes none of the actual expenses incurred in actively
managing a mutual fund, such as the cost of researching and buying and
selling securities. Earnings from a variable product investment compound tax
free until withdrawal, so no adjustments were made for the payment of taxes.
During this period, an expense limitation was in effect and its impact is
reflected in the illustration. The performance in this report does not
reflect the insurance fees related to a variable product investment nor the
deferred sales charge which would apply to certain withdrawals of investments
held for less than eight years. If the fees were reflected and the expense
limitation removed, the performance shown here would have been reduced. For
more information about fees, please see your variable product prospectus.
17
<PAGE>
Value Series
Portfolio Strategy and Summary of Performance in 1994
The Value Series invests in stocks of small to medium-size companies.
While many small stock investments employ "growth" strategies, focusing
primarily on high growth rates as a measure of a stock's potential, as its
name indicates, the Value Series takes a "value" approach, selecting stocks
based on fundamental factors that indicate underlying value not fully
reflected in the stock's price. While the management of the Value Series is
also interested in growth potential, they are looking to purchase such
opportunities at a low price.
In the face of a market that was difficult for all stock investors, but
particularly for those who focus on smaller companies, the Value Series
provided a positive return of +0.78% for the 12-month period ended December
31, 1994.
Growth managers are typically attracted to the high profile sectors of the
smaller stock market, such as technology companies, and consumer growth
companies, such as restaurants and retail. Value managers, on the other hand,
tend to invest in special situations. The management of the Value Series
searches for companies that have been overlooked by the majority of Wall
Street analysts and so are somewhat "undiscovered;" companies that have faced
difficulties, but appear to be poised for a turnaround, takeover or merger;
small companies that have been spun off from larger successful ones; or
companies whose stock price is lower than what its asset base would suggest.
Because value stocks are generally perceived to be tied more closely to
the economy than are growth stocks, the Federal Reserve's money tightening
policy over the course of 1994 had a significant impact on this area of the
market.
A Look at the Portfolio
In 1994, the portfolio experienced some success with companies in the
basic materials sector. Among others, these included natural resources and
paper companies. The Value Series also had success with companies that
provide services to manufacturers and with select companies in the industrial
sector.
The credit sensitive sector of the market, which includes banks, financial
services firms and insurance companies, is normally a stronghold for value
investors. However, profits in this sector are highly sensitive to interest
rate changes, so the stocks of these companies were directly impacted when
rates increased. Companies that produce consumer durables--large ticket items,
such as automobiles and major appliances that often must be financed--also
performed poorly since higher interest rates affected consumers' willingness
to borrow money.
--------------------------------------------------------------------------
Value Series Investment Objective
Seeks capital appreciation by investing in stocks of small to medium-size
companies whose market value appears low relative to underlying value or
future earnings and growth potential. Emphasis will be placed on companies
that may be temporarily out of favor or whose value is not yet recognized
by the market.
--------------------------------------------------------------------------
18
<PAGE>
Outlook for the Future
Though performance of small company value stocks was, like the performance
of the broader stock market, generally disappointing this past year, we are
pleased that the Value Series held its own and we are optimistic several
factors suggest a more favorable environment for the Series in the future.
The declining stock prices of the past year have created selected
opportunities where management believes strong companies can be purchased at
deep discounts enhancing our ability to strengthen the portfolio. The passage
of the General Agreement on Tariffs and Trades should benefit U.S. companies
involved in exporting, as should the continued weakness of the U.S. dollar.
As the Fed intended, higher interest rates will probably slow economic growth
and when this happens, we may see increased takeover and merger activity,
which could benefit the portfolio. Should the Republican Congress pass a
capital gains tax reduction, the stock market in general would stand to
benefit.
Chart
$10,000 Initial Investment December 27, 1993 through December 31, 1994
Plot Points
Russell 2000
Value Series Index TR
Dec. '93 $10,012 $10,000
Mar. '94 $ 9,944 $ 9,734
Jun. '94 $ 9,787 $ 9,356
Sept. '94 $10,268 $10,005
Dec. '94 $10,290 $ 9,818
Value Series
Average Annual Total Returns
--------------------------------
Lifetime +2.86%
One Year +0.78%
Through December 31, 1994
Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
The chart above shows a $10,000 investment in both the Value Series and the
Russell 2000 Index for the period from the Series' inception on 12/27/93
through 12/31/94. Please note that this is a relatively short time period and
may not be indicative of future results. All dividends and capital gains were
reinvested. The Index is unmanaged, with no set investment objective and
unlike the Series includes none of the actual expenses incurred in actively
managing a mutual fund, such as the cost of researching and buying and
selling securities. Earnings from a variable product investment compound tax
free until withdrawal, so no adjustments were made for the payment of taxes.
During this period, an expense limitation was in effect and its impact is
reflected in the illustration. Performance in this report does not reflect
the insurance fees related to a variable product investment nor the deferred
sales charge which would apply to certain withdrawals of investments held for
less than eight years. If the fees were reflected and the expense limitation
removed, the performance shown here would have been reduced. For more
information about fees, please see your variable product prospectus.
19
<PAGE>
Delaware Group Premium Fund-Equity/Income Series
Statement of Net Assets
December 31, 1994
NUMBER MARKET
OF SHARES VALUE
COMMON STOCK-93.04%
BASIC INDUSTRIES-15.38%
Dow Chemical................................... 15,900 $ 1,069,275
DuPont (E.I.) deNemours........................ 22,300 1,254,375
Eastman Chemical............................... 12,900 651,450
Grace (W.R.)................................... 54,300 2,097,338
Imperial Chemical.............................. 15,400 716,100
Monsanto....................................... 24,300 1,713,150
Occidental Petroleum........................... 63,100 1,214,675
Union Camp..................................... 22,500 1,060,313
Witco.......................................... 57,300 1,411,013
-----------
11,187,689
-----------
CAPITAL GOODS-13.88%
American Express 6.25% 'DECS' '96.............. 34,300 1,462,038
Cooper Industries.............................. 23,500 801,938
Dresser Industries............................. 36,000 679,500
General Dynamics............................... 16,800 730,800
General Electric............................... 41,400 2,111,400
Lockheed....................................... 11,400 827,925
Tenneco........................................ 38,000 1,615,000
Thomas & Betts................................. 13,400 899,475
United Technologies............................ 15,400 968,275
----------
10,096,351
----------
COMMUNICATIONS-4.15%
ALLTEL......................................... 31,600 951,950
NYNEX.......................................... 38,700 1,422,225
Pacific Telesis Group.......................... 22,500 641,250
----------
3,015,425
----------
CONSUMER CYCLICAL-6.46%
Eastman Kodak.................................. 28,200 1,346,550
Genuine Parts.................................. 22,500 810,000
Penney (J.C.).................................. 29,300 1,307,513
Sears Roebuck.................................. 26,800 1,232,800
----------
4,696,863
----------
NUMBER MARKET
OF SHARES VALUE
COMMON STOCK (CONTINUED)
CONSUMER GROWTH-13.71%
Avon Products.................................. 12,700 $ 758,825
Baxter International........................... 23,000 649,750
Dun & Bradstreet............................... 13,900 764,500
Lilly (Eli).................................... 5,500 360,938
Kimberly-Clark................................. 10,600 535,300
McGraw-Hill.................................... 25,600 1,712,000
Minnesota Mining & Manufacturing .............. 29,200 1,558,550
SmithKline Beecham ADR Unit.................... 36,900 1,263,825
Times Mirror................................... 18,000 564,750
Upjohn......................................... 19,300 593,475
Warner-Lambert................................. 15,700 1,208,900
----------
9,970,813
----------
BANKS-10.04%
BankAmerica.................................... 8,700 343,650
Barnett Banks.................................. 13,700 525,738
Chemical Bank.................................. 20,500 735,438
CoreStates Financial........................... 38,500 1,001,000
First Chicago.................................. 13,000 620,750
Great Western Financial........................ 40,500 648,000
Integra Financial.............................. 10,900 448,263
Mellon Bank.................................... 32,100 983,063
Meridian Bancorp............................... 18,700 499,056
Nationsbank.................................... 9,900 446,738
Signet Banking................................. 4,600 131,675
UJB Financial.................................. 21,200 511,450
U.S. Bancorp................................... 18,200 409,500
---------
7,304,321
---------
20
<PAGE>
Equity/Income Series
Statement of Net Assets (Continued)
NUMBER MARKET
OF SHARES VALUE
COMMON STOCK (CONTINUED)
INSURANCE & OTHER-9.59%
Aetna Life & Casualty............................. 24,500 $ 1,154,563
American Express.................................. 13,600 401,200
Aon............................................... 30,250 968,000
Liberty Property Trust............................ 45,000 883,125
Lincoln National.................................. 30,100 1,053,500
Marsh & McLennan.................................. 9,000 713,250
Simon Property Group.............................. 29,700 720,225
St. Paul.......................................... 24,100 1,078,475
----------
6,972,338
----------
DEFENSIVE CONSUMER STAPLES-2.02%
General Mills..................................... 13,700 780,900
Philip Morris..................................... 12,000 690,000
----------
1,470,900
----------
ENERGY-16.75%
Amoco............................................. 20,200 1,194,325
Atlantic Richfield................................ 16,600 1,689,050
Consolidated Natural Gas.......................... 25,000 887,500
Exxon............................................. 33,400 2,029,050
Imperial Oil Ltd.................................. 23,000 759,000
McDermott International........................... 54,000 1,336,500
Royal Dutch Petroleum............................. 4,700 505,250
Sonat............................................. 23,200 649,600
Texaco............................................ 18,100 1,083,738
Ultramar.......................................... 48,400 1,234,200
USX-Marathon Group................................ 49,500 810,563
----------
12,178,776
----------
<PAGE>
NUMBER MARKET
OF SHARES VALUE
COMMON STOCK (CONTINUED)
TRANSPORTATION-1.06%
Illinois Central.................................. 25,000 $ 768,750
----------
768,750
----------
TOTAL COMMON STOCK (COST $67,797,918) ............ 67,662,226
----------
PREFERRED STOCK-5.55%
Ford Motor $4.20 pfd cv "A"....................... 8,000 736,000
Freeport McMoRan Copper & Gold 7.0% pfd cv ....... 23,000 540,500
General Motors $3.25 pfd cv "C" .................. 27,400 1,572,075
RJR Nabisco Holdings $0.6012 pfd cv .............. 198,000 1,188,000
----------
TOTAL PREFERRED STOCK (COST $4,169,754) .......... 4,036,575
----------
PRINCIPAL
AMOUNT
REPURCHASE AGREEMENTS-2.13%
With Deutsche Bank 5.50% 1/3/95
(dated 12/30/94, collateralized
by $88,000 U.S. Treasury Notes
8.00% due 1/15/97, market value
$91,737 and $712,000 U.S. Treasury
Notes 6.50% due 5/15/97,
market value $698,482).......................... $774,000 774,000
With PaineWebber 5.75% 1/3/95
(dated 12/30/94, collateralized
by $100,000 U.S. Treasury Bills
due 4/6/95, market value $98,718
and $712,000 U.S. Treasury Bills
due 6/1/95, market value
$693,180)....................................... 776,000 776,000
---------
TOTAL REPURCHASE AGREEMENTS (COST $1,550,000)................. 1,550,000
---------
TOTAL MARKET VALUE OF SECURITIES
OWNED-100.72% (COST $73,517,672)............................ 73,248,801
LIABILITIES NET OF RECEIVABLES
AND OTHER ASSETS-(0.72%).................................... (524,018)
-----------
NET ASSETS APPLICABLE TO 6,336,687
SHARES ($.01 PAR VALUE) OUTSTANDING;
EQUIVALENT TO $11.48 PER SHARE-100.00%...................... $72,724,783
===========
See accompanying notes
21
<PAGE>
Delaware Group Premium Fund-High Yield Series
Statement of Net Assets
December 31, 1994
PRINCIPAL MARKET
AMOUNT VALUE
CORPORATE BONDS-92.83%
INDUSTRIAL-23.16%
ADT Operations 9 1/4% sr sub notes 2003 ........ $ 500,000 $ 462,500
Berry Plastics 12 1/4% sr sub notes 2004 ....... 400,000 387,000
Calmar Sprays 14% sr sub disc notes 1999 ....... 450,000 456,750
Drypers 12 1/2% 2002............................ 340,000 342,975
Eletson Holdings FMBS 9 1/4% 2003 .............. 500,000 452,500
G.S. Technologies 12% sr notes 2004 ............ 1,100,000 1,091,750
Harris Chemical 10 3/4% sr sub notes 2003 ...... 400,000 374,000
Ivex Packaging 12 1/2% sr sub notes 2002 ....... 450,000 447,750
Mark IV Industries 8 3/4% sr sub notes 2003 .... 150,000 136,875
Mid-American Waste System 12 1/4% 2003 ......... 500,000 505,000
NL Industries 11 3/4% sr notes 2003 ............ 400,000 400,000
NL Industries 0%/13% sr notes 2005 ............. 600,000 375,000
Northwestern Steel & Wire 9 1/2% sr notes 2001 . 250,000 226,875
OSI Specialties 9 1/4% sr sub notes 2003 ....... 250,000 223,750
Pacific Lumber 10 1/2% sr notes 2003 ........... 200,000 185,500
* Penda Industries 10 3/4% sr notes 2004 ......... 400,000 364,000
* Polymer Group 12 1/4% sr notes 2002 ............ 625,000 603,125
Repap Wisconsin 9 7/8% sr notes 2006 ........... 500,000 440,000
S.D. Warren 12% sr sub notes 2004 .............. 400,000 411,000
Silgan Holdings 0%/12 1/4% sr debs 2002 ........ 350,000 301,000
Spreckels Industries 11 1/2% sr sec notes 2000 . 400,000 388,000
Stone Consolidated 10 1/4% sr notes 2000 ....... 250,000 244,375
Synthetic Industries 12 3/4% sr sub deb 2002 ... 150,000 132,750
Talley Ind 0%/12 1/4% sr disc deb 2005 ......... 600,000 303,000
Talley Manufacturing & Technology
10 3/4% sr notes 2003......................... 300,000 261,000
UCC Investors Holdings 0%/12%
sub notes 2005................................ 350,000 232,750
Viking Star Shipping 9 5/8% notes 2003 ......... 400,000 366,000
----------
10,115,225
----------
COMMUNICATIONS-10.23%
Adelphia Communications 12 1/2% sr notes 2002 .. 1,025,000 984,000
Aftermarket Tech. 12% sr sub notes 2004 ........ 500,000 517,500
Allbritton Communication 11 1/2% sr sub
deb 2004...................................... 150,000 150,375
*Cablevision Industries 9 1/4% notes 2008 ........ 200,000 180,000
<PAGE>
PRINCIPAL MARKET
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
COMMUNICATIONS (CONTINUED)
Century Communications 9 3/4% 2002 ............. $ 250,000 $ 240,625
* Dial Call Communications 0%/10 1/4%
sr disc notes 2005......... ................... 250,000 73,750
Falcon Holdings 0%/11% P.I.K. 2003 ............. 445,210 402,915
Infinity Broadcasting 10 3/8%
sr sub notes 2002.......... ................... 250,000 251,875
K-III Communications 10 5/8% 2002 .............. 490,000 477,750
Nextel Communications 0%/12 1/8% ...............
sr disc notes 2003......... .................. 450,000 177,750
Outlet Broadcasting 10 7/8% 2003 ............... 250,000 247,500
Rogers Cantel Mobile 11 1/8% 2002 .............. 500,000 511,250
Thrifty Payless 12 1/4% sr sub notes 2004 ...... 250,000 255,000
---------
4,470,290
---------
CONSUMER-11.79%
ARA Group 8 1/2% sub deb 2003................... 200,000 188,000
Chiquita Brands 9 5/8% 2004..................... 95,000 86,688
Coleman Holdings 0%/10 7/8% sr sec notes 1998 .. 700,000 476,000
Continental Broad 10 5/8% sr sub notes 2003 .... 250,000 253,125
DiGiorgio 12% sr notes 2003..................... 600,000 564,000
Dr. Pepper Bottling Holdings 0%/11 5/8%
sr notes 2003................................. 250,000 168,750
Fleming 8 5/8% sr notes 2001.................... 1,200,000 1,199,544
Fleming 10 5/8% sr notes 2001................... 660,000 661,650
* Hemmeter Enterprises 12% units P.I.K. 2000 ..... 15,370 8,069
* Remington Arms 10% sr sub notes 2003 ........... 350,000 292,250
Revlon Sinking Fund 10 7/8% deb 2010 ........... 200,000 187,000
Seven-Up/RC Bottling 11 1/2% sr sec notes 1999 . 500,000 440,000
* Specialty Foods 11 1/4% sr notes 2003 .......... 300,000 262,500
Westpoint Stevens 9 3/8% sr sub notes 2005 ..... 400,000 364,000
---------
5,151,576
---------
CONSTRUCTION-3.93%
Associated Materials 11 1/2%
sr sub notes 2003 ............................. 400,000 375,000
* G-I Holdings 0% sr notes 1998................... 1,200,000 739,500
NVR 11% sr notes 2003........................... 500,000 420,000
Oriole Homes 12 1/2% sr notes 2003 ............. 200,000 182,000
---------
1,716,500
---------
22
<PAGE>
High Yield Series
Statement of Net Assets (Continued)
PRINCIPAL MARKET
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
RETAIL-6.68%
Dairy Mart Store 10 1/4% sr sub notes 2004 ..... $ 750,000 $ 573,750
Eckerd 9 1/4% 2004.............................. 400,000 391,000
Ferrellgas Partners LP 10% 2001................. 250,000 247,500
General Nutrition 11 3/8% sr sub notes 2000 .... 185,000 191,475
Levitz Furniture 9 5/8% sub notes 2003 ......... 250,000 201,250
Pathmark Stores 0%/10 3/4% jr sub 2003 ......... 600,000 309,000
Penn Traffic 10.65% 2004........................ 250,000 244,375
Specialty Retail 10% sr notes 2000 ............. 450,000 414,000
Stater Brothers 11% 2001........................ 100,000 92,500
Wherehouse Entertainment 13%
sr sub notes 2002............................. 500,000 252,500
---------
2,917,350
---------
ENERGY-3.67%
Midland Funding 13 1/4% 2006.................... 750,000 760,313
TransTexas Gas 10 1/2% sr sec notes 2000 ....... 300,000 287,625
Wilrig AS 11 1/4% sr notes 2004 ................ 650,000 555,750
---------
1,603,688
---------
ENTERTAINMENT-7.85%
AMC Entertainment 12 5/8% 2002 ................. 200,000 217,000
* Bally's Grand 10 3/8% 1st Mtg 2003 ............. 400,000 348,000
Bally's Health and Tennis 13%
sr sub notes 2003.............................. 550,000 419,375
Cinemark USA 12% sr notes 2002.................. 200,000 206,500
GNF 10 5/8% notes 2003.......................... 700,000 465,500
* Kloster Cruise 13% sr sec notes 2003 ........... 950,000 869,250
MGM Grand Hotel 11 3/4% 1st mtg notes 1999 ..... 100,000 106,000
MGM Grand Hotel 12% 1st mtg 2002 ............... 150,000 162,750
Trump Plaza Funding 10 7/8% mtg notes 2001 ..... 450,000 344,250
Viacom International 10 1/4% 2001 .............. 280,000 288,400
---------
3,427,025
---------
HEALTH-0.58%
American Medical International 0%/15% 2005 ..... 140,000 255,500
---------
255,500
---------
<PAGE>
PRINCIPAL MARKET
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
MANUFACTURING-17.43%
Applied Extrusion 11 1/2% sr notes 2002 ........ $ 400,000 $ 398,000
Auburn Hills Trust 12 3/8% gtd exch ctfs 2020 .. 200,000 260,737
Domtar 11 3/4% sr notes 1999.................... 1,200,000 1,239,000
Eagle Industries 0%/10 1/2% sr sub notes 2003 .. 500,000 322,500
Exide 0%/12 1/4% sr sub deb 2004 ............... 100,000 71,500
Exide 10 3/4% sr notes 2002..................... 100,000 100,250
Fairchild 12% sub deb 2001...................... 225,000 194,625
Fort Howard 14 1/8% 2004........................ 500,000 504,375
Huntsman 10 5/8% 1st mtg notes 2001 ............ 800,000 822,000
IMO Industries 12% sr sub deb 2001 ............. 300,000 301,500
Interlake 12 1/8% sr sub deb 2002 .............. 500,000 470,000
JPS Textile 9.85% sr sub notes 1999 ............ 335,000 211,050
K&F Industries 13 3/4% sr sub debs 2001 ........ 400,000 366,000
MagneTek 10 3/4% 1998........................... 40,000 40,100
Maxxam Group 11 1/4% sr sec notes 2003 ......... 450,000 425,250
Maxxam Group 14% sr sub notes 2000 ............. 83,000 84,245
Motor Wheel 11 1/2% sr sub notes 2000 .......... 200,000 183,000
Overhead Door 12 1/4% sr notes 2000 ............ 130,000 131,950
Owens-Illinois 11% 2003......................... 500,000 520,000
Rexnord 11 7/8% sr sub deb 1999 ................ 280,000 264,600
Stone Container 11 7/8% sr notes 1998 .......... 250,000 259,063
U.S. Can 13 1/2% sr sub notes 2002 ............. 400,000 446,000
---------
7,615,745
---------
FINANCIAL-1.78%
Bankers Life Holding 13% sr sub deb 2002 ....... 200,000 228,500
Chevy Chase Savings Bank 9 1/4% sr notes 2005 .. 250,000 210,000
Life Partners 12 3/4% sr sub notes 2002 ........ 200,000 219,000
PMI Acquisition 10 1/4% sr sub notes 2003 ...... 125,000 118,750
---------
776,250
---------
SERVICES-ADVERTISING/PRINTING-2.11%
Lamar Advertising 11% sr sec notes 2003 ........ 450,000 431,438
Sullivan Graphics 15% sr sub 2000 .............. 250,000 264,375
Universal Outdoor 11% 2003...................... 250,000 225,000
---------
920,813
---------
23
<PAGE>
High Yield Series
Statement of Net Assets (Continued)
PRINCIPAL MARKET
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
TECHNOLOGY-3.62%
Anacomp 15% sr sub notes 2000 ...................... $200,000 $ 203,000
New World Holding 0% 1999........................... 975,000 502,125
Unisys 13 1/2% notes 1997........................... 250,000 271,250
Waters 12 3/4% sr sub notes 2004 ................... 600,000 606,750
----------
1,583,125
----------
TOTAL CORPORATE BONDS (COST $43,434,289) ........... 40,553,087
----------
NUMBER
OF SHARES
CONVERTIBLE PREFERRED STOCK-0.56%
Pantry Pride $14.875 pfd............................ 2,500 245,313
TOTAL CONVERTIBLE PREFERRED STOCK ----------
(COST $262,500)................................... 245,313
----------
STOCK WARRANTS-0.01%
Berry Plastic ...................................... 400 6,000
----------
TOTAL STOCK WARRANTS (COST $3,600) ................. 6,000
----------
PRINCIPAL MARKET
AMOUNT VALUE
REPURCHASE AGREEMENTS-4.21%
With Deutsche Bank 5.50% 1/3/95
(dated 12/30/94, collateralized by $104,000
U.S. Treasury Notes 8.00% due 1/15/97,
market value $108,723 and $844,000
U.S. Treasury Notes 6.50% due 5/15/97,
market value $827,814)............................ $918,000 $ 918,000
With PaineWebber 5.75% 1/3/95 (dated 12/30/94,
collateralized by $119,000 U.S. Treasury Bills
due 4/6/95, market value $116,995 and $844,000
U.S. Treasury Bills due 6/1/95, market value
$821,530)......................................... 919,000 919,000
----------
TOTAL REPURCHASE AGREEMENTS (COST $1,837,000)................. 1,837,000
----------
TOTAL MARKET VALUE OF SECURITIES
OWNED-97.61% (COST $45,537,389).............................. 42,641,400
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES-2.39%..................................... 1,044,268
----------
NET ASSETS APPLICABLE TO 5,116,064
SHARES ($.01 PAR VALUE) OUTSTANDING;
EQUIVALENT TO $8.54 PER SHARE-100.00%........................ $43,685,668
===========
- -----------------
*Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1994, these securities amounted to $3,740,444 or 8.56% of net assets.
See accompanying notes
24
<PAGE>
Delaware Group Premium Fund-Capital Reserves Series
Statement of Net Assets
December 31, 1994
PRINCIPAL MARKET
AMOUNT VALUE
CORPORATE BONDS-35.18%
AID-Israel FRN 6.53% 11/15/99....................... $ 400,000 $ 398,250
Allstate 5.875% 6/15/98............................. 385,000 356,106
American General Financial 7.00% 10/1/97 ........... 520,000 502,972
Aristar 8.125% 12/1/97.............................. 460,000 456,615
Associates N.A. 7.875% 9/30/01...................... 500,000 485,028
AVCO Financial Home Equity 5.50% 5/1/98 ............ 350,000 321,547
Bell Atlantic 5.70% 5/30/96......................... 100,000 97,239
Carter Holt Harvey Ltd. 8.875% 12/1/04 ............. 310,000 312,326
CEZ Finance BV 8.875% 12/20/99...................... 200,000 198,118
Chrysler Finance 6.625% 8/15/00 .................... 495,000 451,684
City of Prague 7.75% 5/10/99........................ 450,000 431,438
Equitable Companies 9.00% 12/15/04 ................. 440,000 439,153
Federal Express 7.53% 9/23/06....................... 325,000 303,028
First USA Bank 5.75% 1/15/99........................ 580,000 524,524
Ford Capital BV 9.00% 8/15/98....................... 120,000 122,252
Ford Motor Credit 7.25% 5/15/99 .................... 320,000 305,432
Goldman Sachs 7.875% 1/15/03........................ 450,000 423,000
Great Western Financial 6.375% 7/1/00 .............. 450,000 406,349
Lockheed 4.875% 2/15/96............................. 100,000 96,773
Ontario Province 6.125% 6/28/00..................... 325,000 294,410
Ontario Province 17.00% 11/5/11 .................... 160,000 192,950
Tennessee Valley Authority 8.25% 11/15/96 .......... 1,000,000 1,005,919
Transamerica Financial 8.08% 11/4/99 ............... 520,000 512,750
VW Credit FRN 6.45% 3/4/97.......................... 500,000 499,600
---------
TOTAL CORPORATE BONDS (COST $9,532,329) ............ 9,137,463
---------
U.S. TREASURY OBLIGATIONS-10.00%
U.S. Treasury Bonds 11.50% 11/15/95 ................ 1,175,000 1,216,492
U.S. Treasury Notes 5.875% 3/31/99 ................. 590,000 548,331
U.S. Treasury Notes 7.75% 11/30/99 ................. 355,000 353,780
U.S. Treasury Notes 8.00% 8/15/99 .................. 475,000 477,820
---------
TOTAL U.S. TREASURY OBLIGATIONS (COST $2,758,693) .. 2,596,423
---------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION OBLIGATIONS
(GNMA)-11.98%
GNMA 6.50% 2024..................................... 235,200 203,963
GNMA 8.50% 2023..................................... 699,097 687,300
GNMA 9.00% 2017..................................... 730,000 737,300
GNMA 10.00% 2020.................................... 364,474 386,357
GNMA 10.50% 2019............... .................... 351,154 375,187
<PAGE>
PRINCIPAL MARKET
AMOUNT VALUE
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION OBLIGATIONS
(GNMA) (CONTINUED)
GNMA 11.00% 2009 to 2010............................ $ 204,260 $ 222,324
GNMA 12.00% 2011 to 2013............................ 127,879 141,986
GNMA II 12.00% 2015................................. 79,174 86,325
GNMA II Jumbo 12.00% 2014 to 2016 .................. 249,890 272,458
TOTAL GOVERNMENT NATIONAL MORTGAGE ---------
ASSOCIATION OBLIGATIONS (COST $3,183,159) ........ 3,113,200
---------
MORTGAGE-BACKED SECURITIES-22.44%
Federal Home Loan Bank 5.67% 10/30/95 .............. 430,000 425,006
Federal Home Loan Mortgage Corporation
7.00% 10/1/17..................................... 284,712 270,653
Federal Home Loan Mortgage Corporation
7.50% 5/1/09...................................... 194,232 187,648
Federal Home Loan Mortgage Corporation
Gold 8.50% 6/1/14................................. 226,493 226,145
Federal Home Loan Mortgage Corporation
Global Bond 7.125% 7/21/99........................ 60,000 57,982
Federal National Mortgage Association
5.25% 6/30/95..................................... 155,000 154,114
Federal National Mortgage Association
7.00% 8/1/09...................................... 392,569 367,911
Federal National Mortgage Association
7.50% 5/1/07 to 6/1/09............................ 1,190,294 1,141,539
Federal National Mortgage Association
8.00% 7/15/07..................................... 1,105,000 1,083,246
Federal National Mortgage Association
8.50% 2/1/06...................................... 272,383 272,520
Federal National Mortgage Association
8.50% 8/1/06...................................... 340,469 340,595
Federal National Mortgage Association
8.50% 7/1/09...................................... 776,716 775,988
Federal National Mortgage Association
9.00% 10/1/06..................................... 523,358 527,119
TOTAL MORTGAGE-BACKED SECURITIES ---------
(COST $6,011,629)................................. 5,830,466
---------
25
<PAGE>
Capital Reserves Series
Statement of Net Assets (Continued)
PRINCIPAL MARKET
AMOUNT VALUE
COLLATERALIZED MORTGAGE
OBLIGATIONS-5.18%
FDIC REMIC Trust 94-C1 2A2 7.85% 9/25/25 ..... $435,000 $ 421,134
Federal Home Loan Mortgage Corporation
1666E 6.00% 12/15/19........................ 500,000 434,526
Federal Home Loan Mortgage Corporation
1474C 7.00% 10/15/22........................ 535,000 489,107
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS ---------
(COST $1,432,752)........................... 1,344,767
---------
OTHER AGENCY OBLIGATIONS-0.57%
Student Loan Marketing Association
5.315% 6/30/95.............................. 150,000 149,168
TOTAL OTHER AGENCY OBLIGATIONS ---------
(COST $150,000)............................. 149,168
---------
ASSET-BACKED SECURITIES-12.43%
Advanta 93-1A2 5.95% 5/25/09.................. 86,480 80,098
American Financial Home Equity Loan
Trust Series 94-2A1 6.95% 6/25/24 .......... 236,994 226,551
American Financial Home Equity Loan
Trust Series 91-1A 8.00% 7/25/06 ........... 79,561 77,667
Carco 7.875% 3/15/98.......................... 525,000 525,473
Discover Card Trust Series 93-BA
6.75% 2/16/02............................... 400,000 375,480
PRINCIPAL MARKET
AMOUNT VALUE
ASSET-BACKED SECURITIES (CONTINUED)
Money Store (The) Home Equity Trust
93C-AB 5.75% 10/15/22........ ..............$ 404,140 $ 375,082
Old Stone Credit 93-2 6.025% 6/15/08 ......... 252,364 235,026
Premier Auto Trust 93-2A3 4.90% 10/15/98 ..... 364,067 348,230
Premier Auto Trust 93-3A3 4.90% 12/15/98 ..... 509,997 488,271
World Omni Automobile Lease Securitization
Trust 94-BA 7.95% 1/25/01................... 500,000 496,250
---------
TOTAL ASSET-BACKED SECURITIES (COST $3,322,142) 3,228,128
---------
REPURCHASE AGREEMENTS-8.68%
With Deutsche Bank 5.50% 1/31/95
(dated 12/30/94, collateralized by $128,000
U.S. Treasury Notes 8.00% due 1/15/97,
market value $133,403 and $1,035,000
U.S. Treasury Notes 6.50% due 5/15/97,
market value $1,015,728)..... .............. 1,126,000 1,126,000
With PaineWebber 5.75% 1/3/95
(dated 12/30/94, collateralized by $146,000
U.S. Treasury Bills due 4/6/95, market
value $143,554 and $1,035,000 U.S. Treasury
Bills due 6/1/95, market value $1,008,017) . 1,128,000 1,128,000
---------
TOTAL REPURCHASE AGREEMENTS (COST $2,254,000). 2,254,000
---------
TOTAL MARKET VALUE OF SECURITIES
OWNED (COST $28,644,704)-106.46%........... 27,653,615
LIABILITIES REDUCED BY RECEIVABLES
AND OTHER ASSETS-(6.46%)................... (1,678,518)
NET ASSETS APPLICABLE TO 2,793,817 SHARES ----------
($.01 PAR VALUE) OUTSTANDING;
EQUIVALENT TO $9.30 PER SHARE-100.00%...... $25,975,097
===========
See accompanying notes
26
<PAGE>
Delaware Group Premium Fund-Multiple Strategy Series
Statement of Net Assets
December 31, 1994
NUMBER MARKET
OF SHARES VALUE
COMMON STOCK-57.92%
CHEMICAL-3.43%
Dow Chemical................................ 8,000 $ 538,000
Grace (W.R.)................................ 3,300 127,463
Kerr-McGee.................................. 12,700 584,200
Loctite..................................... 4,000 186,000
Lubrizol.................................... 6,000 203,250
-----------
1,638,913
-----------
COMMUNICATIONS-3.65%
ALLTEL...................................... 12,400 373,550
AT&T........................................ 6,000 301,500
Belo (A. H.)................................ 2,500 141,250
Sprint...................................... 4,000 110,500
*Tele Danmark A/S ADR........................ 11,300 288,150
Telecom de Argentina ADR.................... 3,000 155,250
Telefonica de Argentina ADR................. 2,400 127,200
Tribune..................................... 4,500 246,375
-----------
1,743,775
-----------
CONSUMER GROUP-20.54%
Abbott Labs................................. 7,900 257,738
American Greetings Class A.................. 10,600 285,538
American Stores............................. 11,000 295,625
Arvin Industries............................ 5,800 134,850
Bard (C.R.)................................. 10,600 286,200
ConAgra..................................... 6,600 206,250
Dial........................................ 11,800 250,750
Gap (The)................................... 10,000 305,000
General Motors Class E...................... 7,100 273,350
Genuine Parts............................... 4,000 144,000
Marriott International...................... 5,300 149,063
May Department Stores....................... 30,800 1,039,500
Pfizer...................................... 6,400 494,400
Philip Morris Companies..................... 7,900 454,250
Procter & Gamble............................ 16,000 992,000
Reynolds & Reynolds......................... 24,200 605,000
Sbarro...................................... 20,550 534,300
Service International....................... 17,000 471,750
Singer Group NV............................. 24,700 737,913
<PAGE>
NUMBER MARKET
OF SHARES VALUE
COMMON STOCK (CONTINUED)
CONSUMER GROUP (CONTINUED)
Sunbeam-Oster............................... 19,600 $ 504,700
Walgreen.................................... 3,400 148,750
Wallace Computer Services................... 17,000 493,000
Wal-Mart Stores............................. 34,700 737,375
-----------
9,801,302
-----------
ENERGY-5.36%
Dresser Industries.......................... 7,000 132,125
Illinova.................................... 7,400 160,950
Mobil....................................... 3,500 294,875
Royal Dutch Petroleum....................... 3,000 322,500
Sonat....................................... 8,100 226,800
SUN......................................... 7,800 224,250
TOTAL ADR................................... 10,958 323,261
Unocal...................................... 20,500 558,625
YPF SA ADR.................................. 2,900 61,988
Zeigler Coal Holdings....................... 21,700 254,975
-----------
2,560,349
-----------
ENTERTAINMENT-1.04%
Fleetwood Enterprises....................... 26,400 495,000
-----------
495,000
-----------
FINANCIAL & BANKING-10.71%
Bank of New York............................ 10,000 290,000
Emphesys Financial Group.................... 14,000 444,500
Federal Home Loan........................... 13,400 676,700
Federal National Mortgage................... 7,450 542,919
First Security.............................. 6,800 155,550
First USA................................... 15,100 496,413
Green Tree Financial........................ 5,600 170,100
Lancaster Colony............................ 3,600 106,425
MBNA........................................ 56,450 1,319,519
Mellon Bank................................. 5,000 153,125
Nationwide Health Properties................ 16,300 582,725
Security Capital Industrial................. 10,333 175,661
-----------
5,113,637
-----------
27
<PAGE>
Multiple Strategy Series
Statement of Net Assets (Continued)
NUMBER MARKET
OF SHARES VALUE
COMMON STOCK (CONTINUED)
INDUSTRIAL PRODUCTS & SERVICES-7.28%
Armor All Products.......................... 6,700 $ 137,350
Danaher..................................... 6,100 318,725
Diebold..................................... 6,375 262,172
Eaton....................................... 9,100 450,450
Foster Wheeler.............................. 6,900 205,275
General Electric............................ 18,000 918,000
Hewlett Packard............................. 2,900 289,638
Hubbell Class B............................. 2,700 143,775
Medusa...................................... 6,000 147,000
Rockwell International...................... 9,600 343,200
RPM......................................... 6,700 124,788
Teleflex.................................... 3,800 134,900
-----------
3,475,273
-----------
REAL ESTATE/INSURANCE-4.97%
Associated Estates Realty................... 10,200 214,200
Colonial Properties......................... 10,000 225,000
Developers Diversified Realty .............. 23,300 728,125
Equitable of Iowa........................... 5,200 146,900
Health Care Property Investors ............. 13,700 412,713
ROC Communities............................. 5,300 111,300
Storage USA................................. 4,800 132,000
Storage Trust Realty........................ 3,900 69,713
Summit Property............................. 5,500 105,875
Sun Communities............................. 10,000 225,000
-----------
2,370,826
-----------
TECHNOLOGY-0.28%
Shared Medical Systems...................... 4,000 131,750
-----------
131,750
-----------
TRANSPORTATION-0.66%
CSX......................................... 4,500 313,313
-----------
313,313
-----------
TOTAL COMMON STOCK (COST $26,849,867) 27,644,138
-----------
PREFERRED STOCK-1.04%
Freeport McMoRan 5.00%...................... 14,700 305,025
Reynolds Metals 7.00% Conv.................. 4,000 193,500
-----------
TOTAL PREFERRED STOCK (COST $546,660)....... 498,525
-----------
<PAGE>
PRINCIPAL MARKET
AMOUNT VALUE
U.S. TREASURY OBLIGATIONS-5.48%
U.S. Treasury Notes 5.125% 2/28/98 ......... $810,000 $ 749,756
U.S. Treasury Notes 5.875% 3/31/99 ......... 410,000 381,044
U.S. Treasury Notes 6.375% 6/30/97 ......... 735,000 712,261
U.S. Treasury Notes 7.25% 8/15/04 .......... 75,000 72,000
U.S. Treasury Notes 7.75% 11/30/99 ......... 210,000 209,278
U.S. Treasury Notes 8.00% 8/15/99 .......... 305,000 306,811
U.S. Treasury Notes 8.875% 11/15/97 ........ 180,000 184,894
TOTAL U.S. TREASURY OBLIGATIONS -----------
(COST $2,725,134)......................... 2,616,044
-----------
ASSET-BACKED SECURITIES-4.25%
Advanta 5.95% 5/25/09....................... 115,307 106,797
American Financial Home Equity Loan Trust
Series 94-2A1 6.95% 6/25/24 .............. 142,196 135,931
American Financial Home Equity Loan Trust
Series 92-5A 7.20% 2/15/08................ 226,665 217,168
American Financial Home Equity Loan Trust
Series 91-1A 8.00% 7/25/06................ 28,178 27,507
Carco 913-A 7.875% 3/15/98.................. 225,000 225,203
Discover Card Trust Series 93-BA
6.75% 2/16/02............................. 125,000 117,338
Money Store (The) Home Equity Trust 93-CA3
5.75% 10/15/22............................ 224,985 208,809
OSCC Home Equity Loan Trust
6.025% 6/15/08............................ 88,327 82,259
Premier Auto Trust 932-A3 4.90% 10/15/98.... 206,856 197,858
Premier Auto Trust 933-A3 4.90% 12/15/98.... 324,998 311,153
World Omni Automobile Lease
Securitization Trust 94-BA 7.95% 1/25/01 . 400,000 397,000
-----------
TOTAL ASSET-BACKED SECURITIES (COST $2,087,867) 2,027,023
-----------
COLLATERALIZED MORTGAGE
OBLIGATIONS-1.76%
FDIC REMIC Trust 94-C1 2A2
7.85% 9/25/25............................. 280,000 271,075
Federal Home Loan Mortgage Corporation 1666E
6.00% 12/15/19............................ 300,000 260,716
Federal Home Loan Mortgage Corporation 1474C
7.00% 10/15/22............................ 340,000 310,834
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS -----------
(COST $896,431)........................... 842,625
-----------
28
<PAGE>
Multiple Strategy Series
Statement of Net Assets (Continued)
PRINCIPAL MARKET
AMOUNT VALUE
MORTGAGE-BACKED SECURITIES-12.01%
Federal Home Loan Mortgage Bank
5.67% 10/30/95.......................... $ 220,000 $ 217,445
Federal Home Loan Mortgage Corporation
7.00% 10/1/17........................... 161,867 153,874
Federal Home Loan Mortgage Corporation
7.50% 5/1/09............................ 110,990 107,227
Federal Home Loan Mortgage Corporation
Gold 8.50% 6/1/14....................... 123,700 123,510
Federal National Mortgage Association
7.00% 8/1/09............................ 290,792 272,526
Federal National Mortgage Association
7.50% 5/1/07 to 6/1/09.................. 788,389 755,964
Federal National Mortgage Association
7.90% 4/10/02........................... 155,000 149,064
Federal National Mortgage Association
8.00% 7/15/07........................... 610,000 597,991
Federal National Mortgage Association
8.45% 10/21/96.......................... 480,000 485,015
Federal National Mortgage Association
8.50% 2/1/06............................ 108,954 109,008
Federal National Mortgage Association
8.50% 8/1/06............................ 453,959 454,127
Federal National Mortgage Association
8.50% 7/1/09............................ 388,360 387,996
Government National Mortgage Association
6.50% 2024.............................. 274,400 237,957
Government National Mortgage Association
8.50% 2024.............................. 403,662 396,851
Government National Mortgage Association
9.00% 2017.............................. 1,075,000 1,085,750
Government National Mortgage Association
10.00% 2018............................. 186,520 197,567
TOTAL MORTGAGE BACKED SECURITIES -----------
(COST $5,844,653)....................... 5,731,872
-----------
<PAGE>
PRINCIPAL MARKET
AMOUNT VALUE
CORPORATE BONDS-12.97%
AID-Israel FRN 6.53% 11/15/99 $350,000 $ 348,469
Allstate 5.875% 6/15/98................... 225,000 208,114
American General Financial 7.00% 10/1/97.. 340,000 328,866
Aristar 8.125% 12/1/97.................... 250,000 248,160
Associates N.A. 7.875% 9/30/01............ 350,000 339,520
AVCO Financial 5.50% 5/1/98............... 140,000 128,619
Bell Atlantic 5.70% 5/30/96............... 55,000 53,482
Carter Holt Harvey Ltd 8.875% 12/1/04..... 200,000 201,501
CEZ Finance BV 8.875% 12/20/99............ 130,000 128,777
Chrysler Finance 6.625% 8/15/00........... 90,000 82,124
City of Prague 7.75% 5/10/99.............. 285,000 273,244
Equitable Companies 9.00% 12/15/04........ 200,000 199,615
Federal Express 7.53% 9/23/06............. 175,000 163,169
First USA Bank 5.75% 1/15/99.............. 295,000 266,784
Ford Capital BV 9.00% 8/15/98............. 250,000 254,692
Ford Motor Credit 7.25% 5/15/99........... 220,000 209,985
General Motors Acceptance Corporation
8.375% 5/1/97........................... 65,000 64,886
General Motors Acceptance Corporation
medium-term notes 7.00% 6/2/97.......... 130,000 126,050
Goldman Sachs 7.875% 1/15/03.............. 250,000 235,000
Great Western Financial 6.375% 7/1/00 .... 200,000 180,600
Lockheed 4.875% 12/15/96.................. 250,000 241,933
MBNA 6.875% 10/1/99....................... 321,000 301,710
Ontario Province 17.00% 11/5/11........... 80,000 96,475
Tennessee Valley Authority 8.25% 11/15/96. 870,000 875,150
Transamerica Financial 8.08% 11/4/99...... 340,000 335,260
VW Credit FRN 6.45% 3/4/97................ 300,000 299,760
-----------
TOTAL CORPORATE BONDS (COST $6,402,898)... 6,191,945
-----------
29
<PAGE>
Multiple Strategy Series
Statement of Net Assets (Continued)
PRINCIPAL MARKET
AMOUNT VALUE
REPURCHASE AGREEMENTS-7.02%
With Deutsche Bank 5.50% 1/3/95 (dated 12/30/94,
collateralized by $190,000 U.S. Treasury Notes
8.00% due 1/15/97, market value $198,211 and
$1,537,812 U.S. Treasury Notes 6.50% due
5/15/97, market value $1,509,172) $1,673,000 $1,673,000
With PaineWebber 5.75% 1/3/95
(dated 12/30/94, collateralized by $216,000
U.S. Treasury Bills due 4/6/95, market value
$213,293 and $1,538,000 U.S. Treasury Bills
due 6/1/95, market value $1,497,715) $1,676,000 $ 1,676,000
-----------
TOTAL REPURCHASE AGREEMENTS (COST $3,349,000) 3,349,000
-----------
TOTAL MARKET VALUE OF SECURITIES
OWNED-102.45% (COST $48,702,510).............................. 48,901,172
LIABILITIES NET OF RECEIVABLES AND
OTHER ASSETS-(2.45%) ......................................... (1,170,441)
NET ASSETS APPLICABLE TO 3,765,185 -----------
SHARES ($.01 PAR VALUE) OUTSTANDING;
EQUIVALENT TO $12.68 PER SHARE-100.00%........................ $47,730,731
============
---------------
*Non-income producing security for the year ended December 31, 1994.
See accompanying notes
30
<PAGE>
Delaware Group Premium Fund-Money Market Series
Statement of Net Assets
December 31, 1994
PRINCIPAL MARKET
AMOUNT VALUE
COMMERCIAL PAPER-61.81%
FINANCIAL-27.21%
Ciesco L.P. 5.70% 1/27/95..................... $1,000,000 $ 995,883
Internationale Nederlanden U.S. Insurance
Holding Inc. 5.75% 1/19/95.................. 1,000,000 997,125
MCA Funding Corp. 5.75% 1/17/95............... 1,000,000 997,444
SAFECO Credit Co. 5.42% 1/10/95............... 500,000 499,323
Sandoz Corp. 5.83% 1/26/95.................... 1,000,000 995,951
Siemens Corp. 6.15% 3/3/95.................... 1,000,000 989,579
-----------
5,475,305
-----------
INDUSTRIAL/TECHNOLOGY-19.78%
Norfolk Southern Corp. 5.60% 2/6/95........... 1,000,000 994,400
PHH Corp. 5.98% 1/12/95....................... 1,000,000 998,173
Schering-Plough Corp. 5.85% 1/11/95........... 1,000,000 998,375
US Borax & Chemical Corp. 6.13% 3/1/95........ 1,000,000 989,954
-----------
3,980,902
-----------
MORTGAGE BANKERS AND BROKERS-14.82%
CS First Boston Inc. 6.00% 1/18/95............ 1,000,000 997,167
Goldman Sachs Group 5.95% 2/21/95............. 1,000,000 991,571
Merrill Lynch & Co. Inc. 5.75% 2/14/95........ 1,000,000 992,972
-----------
2,981,710
-----------
TOTAL COMMERCIAL PAPER........................ 12,437,917
-----------
<PAGE>
PRINCIPAL MARKET
AMOUNT VALUE
FLOATING RATE NOTES-17.39%
Federal Home Loan Bank 5.53% 10/6/95.......... $1,000,000 $ 999,704
Morgan Stanley Group Inc. 6.0781% 1/27/95..... 750,000 750,000
Student Loan Marketing Association
5.69% 1/12/95................................ 750,000 750,000
Student Loan Marketing Association
5.87% 9/23/95................................ 1,000,000 1,000,000
-----------
TOTAL FLOATING RATE NOTES..................... 3,499,704
-----------
U.S. GOVERNMENT AGENCY
OBLIGATIONS-9.84%
Federal National Mortgage Association Discount
Note 5.72% 2/21/95.......................... 1,000,000 991,897
Federal National Mortgage Association Discount
Note 6.10% 3/8/95........................... 1,000,000 988,817
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 1,980,714
-----------
REPURCHASE AGREEMENTS-10.98%
With Deutsche Bank 5.50% 1/3/95 (dated 12/30/94,
collateralized by $125,000 U.S. Treasury Notes
8.00% due 1/15/97, market value $130,799 and
$1,015,000 U.S. Treasury Notes 6.50% due
5/15/97, market value $995,901).............. 1,104,000 1,104,000
With PaineWebber 5.75% 1/3/95 (dated 12/30/94,
collateralized by $143,000 U.S Treasury Bills
due 4/6/95, market value $140,751 and
$1,015,000 U.S. Treasury Bills due 6/1/95,
market value $988,340)....................... 1,106,000 1,106,000
-----------
TOTAL REPURCHASE AGREEMENTS.................... 2,210,000
-----------
TOTAL MARKET VALUE OF SECURITIES OWNED-100.02%
(WHICH APPROXIMATES COST FOR FINANCIAL
REPORTING AND INCOME TAX PURPOSES)........................ 20,128,335
LIABILITIES NET OF RECEIVABLES AND OTHER
ASSETS-(0.02%)............................................ (3,784)
NET ASSETS APPLICABLE TO 2,012,455 SHARES -----------
($0.01 PAR VALUE) OUTSTANDING;
EQUIVALENT TO $10.00 PER SHARE-100.00%.................... $20,124,551
===========
31
<PAGE>
Delaware Group Premium Fund-Growth Series
Statement of Net Assets
December 31, 1994
NUMBER MARKET
OF SHARES VALUE
COMMON STOCK-75-01%
BASIC INDUSTRY/CAPITAL GOODS-2.61%
TriMas.................................... 29,000 $ 580,000
Wabash National........................... 11,450 446,550
-----------
TOTAL BASIC INDUSTRY/CAPITAL GOODS 1,026,550
-----------
BUSINESS SERVICES-11.00%
DISTRIBUTORS-0.27%
Intelligent Electronics .................. 13,000 104,813
-----------
104,813
-----------
ENVIRONMENTAL SERVICES-1.54%
Dames & Moore............................. 41,100 606,225
-----------
606,225
-----------
MEDIA & PUBLISHING-2.96%
*International Family Entertainment B 9,300 117,413
*King World Productions.................... 15,800 545,100
*Multimedia................................ 17,400 500,250
-----------
1,162,763
-----------
OTHER BUSINESS SERVICES-6.23%
*ADT....................................... 40,500 435,375
*BISYS Group............................... 32,300 710,600
First Financial Management................ 11,100 684,038
*Gartner Group............................. 6,200 240,250
*Isomedix.................................. 24,500 382,813
-----------
2,453,076
-----------
TOTAL BUSINESS SERVICES................... 4,326,877
-----------
CONSUMER DURABLES/CYCLICAL-1.20%
*Beazer Homes USA.......................... 3,300 38,363
*Redman Industries......................... 26,000 432,250
-----------
TOTAL CONSUMER DURABLES/CYCLICAL 470,613
-----------
<PAGE>
NUMBER MARKET
OF SHARES VALUE
COMMON STOCK (CONTINUED)
CONSUMER NON-DURABLES-8.30%
RETAIL-5.31%
*General Nutrition......................... 9,500 $ 273,125
*Musicland Stores.......................... 37,300 335,700
*Neostar Retail Group...................... 15,100 154,775
*Price/Costco.............................. 29,000 375,188
Quality Food Centers...................... 7,000 168,875
*Staples................................... 19,500 480,188
*The Sports Authority...................... 2,600 54,600
*Value City Department Stores.............. 28,300 247,625
-----------
2,090,076
-----------
OTHER-2.99%
Callaway Golf............................. 9,400 311,375
*Canandaigua Wine A........................ 14,700 562,275
Hormel (George A.)........................ 9,000 222,750
*Natures Bounty............................ 15,000 80,391
-----------
1,176,791
-----------
TOTAL CONSUMER NON-DURABLES............... 3,266,867
-----------
CONSUMER SERVICES-12.21%
ENTERTAINMENT & LEISURE-6.41%
*Circus Circus Enterprises................. 4,300 99,975
*Mirage Resorts............................ 24,200 496,100
TCA Cable TV.............................. 3,100 67,038
*Viacom Class A............................ 3,632 151,182
*Viacom Class B............................ 27,519 1,117,959
*WMS Industries............................ 31,500 590,625
-----------
2,522,879
-----------
RESTAURANTS-3.45%
*Bertucci's Holding........................ 14,550 161,869
*Brinker International..................... 20,700 375,188
*Foodmaker................................. 24,900 108,938
*Lone Star Steakhouse...................... 18,100 355,213
*Papa John's International ................ 10,000 285,000
Sbarro.................................... 2,700 70,200
-----------
1,356,408
-----------
32
<PAGE>
Growth Series
Statement of Net Assets (Continued)
NUMBER MARKET
OF SHARES VALUE
COMMON STOCK (CONTINUED)
CONSUMER SERVICES (CONTINUED)
OTHER CONSUMER SERVICES-2.35%
Barefoot.................................. 28,900 $ 393,763
Cash America International................ 27,600 272,550
*CUC International......................... 7,650 256,275
-----------
922,588
-----------
TOTAL CONSUMER SERVICES................... 4,801,875
-----------
ENERGY-1.55%
*AES....................................... 20,997 410,754
Snyder Oil................................ 13,500 200,813
-----------
TOTAL ENERGY.............................. 611,567
-----------
FINANCIAL-5.48%
INSURANCE-5.06%
AMBAC..................................... 17,100 636,975
Blanch (E.W.) Holdings.................... 27,500 567,188
CMAC Investment........................... 19,400 560,175
MBIA...................................... 4,000 224,500
-----------
1,988,838
-----------
OTHER-0.42%
SEI....................................... 9,800 166,600
-----------
166,600
-----------
TOTAL FINANCIAL........................... 2,155,438
-----------
HEALTHCARE-15.18%
DEVICES-0.73%
*Sunrise Medical........................... 10,400 287,300
-----------
287,300
-----------
PHARMACEUTICALS-0.24%
*Techne.................................... 9,400 95,175
-----------
95,175
-----------
<PAGE>
NUMBER MARKET
OF SHARES VALUE
COMMON STOCK (CONTINUED)
HEALTHCARE (CONTINUED)
SERVICES-12.85%
*Abbey Healthcare Group.................... 5,300 $ 122,231
Columbia/HCA Healthcare................... 14,317 522,571
*Health Management Class A................. 35,887 897,175
*HEALTHSOUTH Rehabilitation................ 12,300 455,100
*Homedco Group............................. 20,200 757,500
*NovaCare.................................. 21,100 152,975
*Quantum Health Resources.................. 15,500 443,688
*Quorum Health Group....................... 17,200 328,950
*Value Health.............................. 24,112 898,172
*Vivra..................................... 17,050 477,400
-----------
5,055,762
-----------
OTHER HEALTHCARE-1.36%
*FHP International......................... 10,300 262,650
United Healthcare......................... 6,000 270,750
-----------
533,400
-----------
TOTAL HEALTHCARE.......................... 5,971,637
-----------
TECHNOLOGY-16.89%
COMMUNICATIONS-1.26%
*Cabletron Systems......................... 8,750 406,875
*Shiva..................................... 2,200 87,725
-----------
494,600
-----------
HARDWARE-8.29%
*Altera.................................... 5,400 225,788
*Bay Networks.............................. 10,700 314,313
*Clinicom.................................. 25,000 275,000
*Dallas Semiconductor...................... 22,200 369,075
*Silicon Graphics.......................... 12,600 389,025
*Stratus Computer.......................... 13,200 501,600
*Xilinx.................................... 15,300 904,613
*Zilog..................................... 9,600 282,000
-----------
3,261,414
-----------
33
<PAGE>
Growth Series
Statement of Net Assets (Continued)
NUMBER MARKET
OF SHARES VALUE
COMMON STOCK (CONTINUED)
TECHNOLOGY (CONTINUED)
SOFTWARE-7.34%
Adobe Systems..................................... 5,000 $ 149,375
*Compuware......................................... 16,000 574,000
HBO & Co.......................................... 4,220 145,063
*Informix.......................................... 9,200 294,975
*Novell............................................ 37,200 634,725
Shared Medical Systems............................ 16,100 530,294
*Vmark Software.................................... 11,700 203,288
*Viewlogic Systems................................. 19,500 358,313
-----------
2,890,033
-----------
TOTAL TECHNOLOGY.................................. 6,646,047
-----------
TRANSPORTATION-0.59%
Illinois Central .............................. 7,600 233,700
-----------
TOTAL TRANSPORTATION.............................. 233,700
-----------
TOTAL COMMON STOCK (COST $27,123,169) ............ 29,511,171
-----------
STOCK RIGHTS-0.13%
*Viacom............................................ 45,400 51,075
-----------
TOTAL STOCK RIGHTS (COST $44,694) ................ 51,075
-----------
PRINCIPAL MARKET
AMOUNT VALUE
SHORT-TERM INVESTMENTS-5.07%
Federal National Mortgage Association
Discount Note 5.70% 1/12/95 ................... $2,000,000 $ 1,996,517
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $1,996,517) ... 1,996,517
-----------
REPURCHASE AGREEMENTS-20.14%
With Deutsche Bank 5.50% 1/3/95 (dated
12/30/94, collateralized by $450,000
U.S. Treasury Notes 8.00% due 1/15/97,
market value $468,983 and $3,639,000
U.S. Treasury Notes 6.50% due 5/15/97,
market value $3,570,821)........................ 3,958,000 3,958,000
With PaineWebber 5.75% 1/3/95 (dated 12/30/94,
collateralized by $512,000 U.S. Treasury Bills
due 4/6/95, market value $504,668 and
$3,639,000 U.S. Treasury Bills due 6/1/95,
market value $3,543,713)........................ 3,966,000 3,966,000
TOTAL REPURCHASE AGREEMENTS -----------
(COST $7,924,000).......................................... 7,924,000
-----------
TOTAL MARKET VALUE OF SECURITIES OWNED-100.35%
(COST $37,088,380)......................................... 39,482,763
LIABILITIES NET OF RECEIVABLES AND OTHER
ASSETS-(0.35%)............................................. (138,555)
NET ASSETS APPLICABLE TO 3,347,169 SHARES -----------
($.01 PAR VALUE) OUTSTANDING;
EQUIVALENT TO $11.75 PER SHARE-100.00%..................... $39,344,208
===========
______________
*Non-income producing security for the year ended December 31, 1994.
See accompanying notes
34
<PAGE>
Delaware Group Premium Fund-International Equity Series
Statement of Net Assets
December 31, 1994
MARKET
NUMBER VALUE
OF SHARES (U.S. $)
COMMON STOCK-89.18%
AUSTRALIA-10.50%
CSR Limited................................ 300,000 $1,035,526
National Australia Bank.................... 206,401 1,655,435
Pacific Dunlop............................. 716,926 1,907,428
Santos..................................... 539,794 1,457,092
-----------
6,055,481
-----------
BELGIUM-4.94%
Cimenteries CBR Cementbedrij .............. 460 175,589
*Cimenteries CBR Cementbedrij Put Warrants . 460 2,818
Electrabel NPV............................. 10,700 1,922,840
G.I.B. Holdings............................ 18,700 737,895
G.I.B. Holdings-VVPR....................... 170 6,601
-----------
2,845,743
-----------
CANADA-2.78%
British Columbia Telephone................. 67,800 1,160,048
Imperial Oil............................... 13,363 440,607
-----------
1,600,655
-----------
FRANCE-6.21%
Alcatel Alsthom............................ 9,564 817,191
Compagnie de Saint Gobain.................. 8,778 1,009,911
Elf Aquitaine.............................. 24,844 1,749,899
-----------
3,577,001
-----------
GERMANY-5.70%
Bayer AG................................... 6,960 1,612,026
Continental AG............................. 3,520 508,697
Siemens AG................................. 2,805 1,167,242
-----------
3,287,965
-----------
HONG KONG-3.23%
Hong Kong Electric......................... 305,000 833,753
Jardine Matherson HK Registry ............. 144,000 1,028,306
-----------
1,862,059
-----------
<PAGE>
MARKET
NUMBER VALUE
OF SHARES (U.S. $)
COMMON STOCK (CONTINUED)
ITALY-0.02%
Istituto Mobiliare Italiano................ 1,763 $ 10,835
-----------
10,835
-----------
JAPAN-13.56%
Amano...................................... 90,000 1,335,071
Eisai...................................... 85,000 1,388,694
Hitachi.................................... 120,000 1,189,536
Kinki Coca-Cola Bottling................... 84,000 1,145,034
Matsushita Electric........................ 80,000 1,315,025
Seino Transportation....................... 79,000 1,441,115
-----------
7,814,475
-----------
MALAYSIA-2.35%
Oriental Holdings Berhad................... 156,000 806,423
Sime Darby Berhad.......................... 240,000 549,834
-----------
1,356,257
-----------
NETHERLANDS-6.33%
Elsevier-CVA............................... 119,500 1,246,442
Koninkijke Van Ommeren Ceteco NV .......... 28,100 738,408
Royal Dutch Petroleum...................... 7,350 800,524
Unilever NV-CVA............................ 7,360 864,810
-----------
3,650,184
-----------
NEW ZEALAND-3.03%
Telecom Corp of New Zealand................ 535,784 1,749,135
-----------
1,749,135
-----------
SPAIN-2.77%
Acerinox SAR............................... 1,607 167,866
Banco Central Hispanoamer S.A.............. 16,949 405,602
Telefonica de Espana....................... 86,500 1,021,861
-----------
1,595,329
-----------
35
<PAGE>
International Equity Series
Statement of Net Assets (Continued)
MARKET
NUMBER VALUE
OF SHARES (U.S. $)
COMMON STOCK (CONTINUED)
UNITED KINGDOM-27.76%
Associated British Food plc................... 93,400 $ 824,118
Bass plc...................................... 173,000 1,392,498
Blue Circle Industries plc.................... 262,000 1,155,882
British Airways plc........................... 230,000 1,284,574
British Gas plc............................... 230,000 1,129,850
Dalgety plc................................... 153,000 1,007,713
GKN plc....................................... 112,000 1,030,288
Great Universal Stores plc.................... 128,500 1,087,586
IMI plc....................................... 192,000 949,186
Powergen plc.................................. 113,000 945,792
RTZ........................................... 75,100 971,647
Sears plc..................................... 634,000 1,091,051
Taylor Woodrow plc............................ 605,000 1,206,782
Unigate plc................................... 368,000 1,928,661
-----------
16,005,628
-----------
TOTAL COMMON STOCK (COST $51,917,175) ........ 51,410,747
-----------
MARKET
PRINCIPAL VALUE
AMOUNT** (U.S. $)
BONDS-0.04%
World Bank 10.625% 9/8/98..................... SP3,000,000 $ 22,307
-----------
TOTAL BONDS (COST $24,991).................... 22,307
-----------
GOVERNMENT OBLIGATIONS-4.12%
Government of Canada 7.25% 6/1/03 ............ CD750,000 477,312
Government of Canada 10.25% 3/15/14 .......... CD2,430,000 1,896,949
-----------
TOTAL GOVERNMENT OBLIGATIONS
(COST $2,578,451)........................... 2,374,261
-----------
REPURCHASE AGREEMENTS-4.60%
With PaineWebber 5.75% 1/3/95 (dated 12/30/94,
collateralized by $2,754,000 U.S. Treasury
Notes 6.75% due 5/31/97, market value
$2,708,062)................................. $2,653,000 2,653,000
TOTAL REPURCHASE AGREEMENTS -----------
(COST $2,653,000)........................... 2,653,000
-----------
TOTAL MARKET VALUE OF SECURITIES OWNED-97.94%
(COST $57,173,617)......................................... 56,460,315
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-2.06%........ 1,188,923
NET ASSETS APPLICABLE TO 4,867,075 SHARES ($.01 PAR -----------
VALUE) OUTSTANDING; EQUIVALENT TO $11.84
PER SHARE-100.00%.......................................... $57,649,238
===========
----------------
*Non-income producing security for the year ended December 31, 1994.
**Principal amount is stated in the currency in which each bond is
denominated.
See accompanying notes
36
<PAGE>
Delaware Group Premium Fund-Emerging Growth Series
Statement of Net Assets
December 31, 1994
NUMBER MARKET
OF SHARES VALUE
COMMON STOCK-48.36%
BASIC INDUSTRY/CAPITAL GOODS-2.87%
*AES China Generating Class A.................. 8,000 $ 83,500
*Central Sprinkler............................. 8,000 90,000
*Edelbrock..................................... 400 5,400
*Molecular Dynamics............................ 1,700 11,050
*Signal Technology............................. 3,000 13,125
---------
203,075
---------
BUSINESS SERVICES/DISTRIBUTORS-0.20%
*Government Technology Services ............... 1,400 14,175
---------
14,175
---------
BUSINESS SERVICES/ENVIRONMENTAL-1.90%
*Advance Ross.................................. 5,000 98,750
*Sweetwater.................................... 400 2,650
*York Research................................. 8,000 33,000
---------
134,400
---------
BUSINESS SERVICES/MEDIA & PUBLISHING-0.98%
*Central European Media Entertainment Class A 600 8,550
*Playboy Enterprises Class B non-voting 4,300 45,150
*Young Broadcasting Class A.................... 900 15,863
---------
69,563
---------
BUSINESS SERVICES/OTHER-3.19%
*Casino & Credit Services...................... 1,800 14,175
*Checkmate Electronics......................... 2,000 14,500
*Corporate Express............................. 500 9,688
*GTECH Holdings................................ 5,000 101,875
*ITI Technologies.............................. 2,700 61,256
Norrell....................................... 1,300 24,700
---------
226,194
---------
<PAGE>
NUMBER MARKET
OF SHARES VALUE
COMMON STOCK (CONTINUED)
CONSUMER DURABLES/CYCLICAL-0.55%
*ADESA......................................... 2,800 $ 38,850
---------
38,850
---------
CONSUMER NON-DURABLES/RETAIL-6.93%
*Brookstone.................................... 800 5,200
*Central Tractor Farm & Country ............... 400 5,900
*Consolidated Stores........................... 6,800 126,650
Duty Free International....................... 5,000 55,625
*Equity Marketing.............................. 9,000 43,875
*Finish Line Class A........................... 2,600 18,850
*Meyer (Fred).................................. 1,800 55,350
Pep Boys-Manny, Moe & Jack.................... 800 24,800
*Piercing Pagoda............................... 1,200 12,675
*QVC Network................................... 100 4,219
Schultz Sav-O Stores.......................... 7,000 138,250
---------
491,394
---------
CONSUMER NON-DURABLES/TEXTILES AND APPAREL-1.31%
*Hyde Athletic Industries...................... 3,600 17,775
*Quiksilver.................................... 5,000 75,313
---------
93,088
---------
CONSUMER NON-DURABLES/OTHER-3.52%
*American Recreation........................... 4,000 26,000
*Bell Sports................................... 2,600 36,400
*Bollinger Industries.......................... 6,000 85,500
Dreyer's Grand Ice Cream...................... 2,200 54,175
*Lincoln Snacks................................ 4,400 8,800
*Marker International.......................... 1,000 7,250
*Rawlings Sporting Goods....................... 2,200 31,075
---------
249,200
---------
37
<PAGE>
Emerging Growth Series
Statement of Net Assets (Continued)
NUMBER MARKET
OF SHARES VALUE
COMMON STOCK(CONTINUED)
CONSUMER SERVICES/ENTERTAINMENT & LEISURE-8.41%
*Adelphia Communications Class A ............... 2,900 $ 25,375
*All American Communications.................... 2,400 15,600
*Cinergi Pictures Entertainment................. 4,300 27,950
Comcast Class A................................ 3,800 58,900
*Comcast UK Cable Partners Class A ............. 4,000 63,750
*Graff Pay-Per-View............................. 2,000 22,125
*Mirage Resorts................................. 5,000 102,500
*Monarch Casino & Resort........................ 4,300 22,575
*Mountasia Entertainment........................ 2,100 15,750
*National Wireless Holdings..................... 1,600 14,900
*Rio Hotel & Casino............................. 4,800 57,600
*Savoy Pictures Entertainment................... 6,900 43,556
Turner Broadcasting Class A.................... 1,200 19,650
*United International Holdings Class A ......... 1,800 30,825
*WMS Industries................................. 4,000 75,000
---------
596,056
---------
CONSUMER SERVICES/RESTAURANTS-1.89%
*Hometown Buffet................................ 4,300 43,538
*Lone Star Steakhouse/Saloon.................... 2,700 52,988
*Noble Romans................................... 3,100 17,244
*Rock Bottom Restaurants........................ 1,000 20,375
---------
134,145
---------
CONSUMER SERVICES/OTHER-0.82%
Barefoot....................................... 4,000 54,500
*Prime Management Group......................... 1,100 3,163
---------
57,663
---------
ENERGY-0.71%
*American Oilfield Divers....................... 8,000 50,000
---------
50,000
---------
<PAGE>
NUMBER MARKET
OF SHARES VALUE
COMMON STOCK(CONTINUED)
HEALTHCARE/DEVICES-1.31%
*Guidant........................................ 5,800 $ 92,800
---------
92,800
---------
HEALTHCARE/PHARMACEUTICALS-1.81%
*Cephalon....................................... 3,000 24,375
*Chiran......................................... 400 32,025
*Cor Therapeutics............................... 1,600 17,400
*Ethical Holdings plc........................... 2,000 13,500
*Gilead Sciences................................ 2,000 18,750
*Vertex Pharmaceuticals......................... 1,500 22,313
---------
128,363
---------
HEALTHCARE/SERVICES-1.58%
*FPA Medical Management......................... 1,300 15,925
*Health Management.............................. 1,200 21,225
*Homedco Group.................................. 2,000 75,000
---------
112,150
---------
TECHNOLOGY/COMMUNICATIONS-1.11%
*Digital Microwave.............................. 900 18,563
*EIS International.............................. 1,700 25,925
*IntelCom Group................................. 2,600 34,450
---------
78,938
---------
TECHNOLOGY/HARDWARE-0.55%
*Concurrent Computer............................ 13,700 19,266
*Triquint Semiconductor......................... 3,100 19,569
---------
38,835
---------
38
<PAGE>
Emerging Growth Series
Statement of Net Assets (Continued)
NUMBER MARKET
OF SHARES VALUE
COMMON STOCK (CONTINUED)
TECHNOLOGY/SOFTWARE-8.72%
*Acclaim Entertainment............................ 4,600 $ 66,413
*+Activision...................................... 4,000 19,500
*Broadway & Seymour............................... 4,000 88,500
*Cadence Design Systems........................... 3,200 66,000
*CAERE............................................ 2,500 45,000
*Fulcrum Technologies............................. 2,900 33,713
HBO & Company.................................... 2,036 69,988
*IVI Publishing................................... 200 2,350
*Prophet 21....................................... 4,000 18,500
*Sierra On-Line Class A........................... 4,000 136,000
*Symantec......................................... 300 5,269
*Trinzic.......................................... 12,000 66,750
---------
617,983
---------
TOTAL COMMON STOCK (COST $3,414,054) 3,426,872
---------
PRINCIPAL MARKET
AMOUNT VALUE
FEDERAL AGENCIES NOTES-33.83%
Federal Home Loan Bank Discount Note
5.80% 1/4/95................................... $1,200,000 $1,199,420
Federal National Mortgage
Association Discount
Note 5.70% 1/12/95............................. 1,200,000 1,197,910
----------
TOTAL FEDERAL AGENCIES NOTES (COST $2,397,330)... 2,397,330
----------
REPURCHASE AGREEMENTS-20.23%
With Deutsche Bank 5.50% 1/3/95 (dated 12/30/94,
collateralized by $81,000 U.S. Treasury Notes
8.00% due 1/15/97, market value $84,871 and
$658,000 U.S. Treasury Notes 6.50% due
5/15/97, market value $646,209)................ 716,000 716,000
With PaineWebber 5.75% 1/3/95 (dated 12/30/94,
collateralized by $93,000 U.S. Treasury Bills
due 4/6/95, market value $91,329 and
$658,000 U.S. Treasury Bills due 6/1/95,
market value $641,303)......................... 718,000 718,000
----------
TOTAL REPURCHASE AGREEMENTS (COST $1,434,000).... 1,434,000
----------
TOTAL MARKET VALUE OF SECURITIES
OWNED (COST $7,245,384)-102.42%............................ 7,258,202
LIABILITIES NET OF RECEIVABLES
AND OTHER ASSETS-(2.42%)................................... (171,443)
NET ASSETS APPLICABLE TO 697,805 SHARES ----------
($0.01 PAR VALUE) OUTSTANDING;
EQUIVALENT TO $10.16 PER SHARE-100.00%..................... $7,086,759
==========
- --------------
*Non-income producing security for the year ended December 31, 1994.
+Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
39
<PAGE>
Delaware Group Premium Fund-Value Series
Statement of Net Assets
December 31, 1994
NUMBER MARKET
OF SHARES VALUE
COMMON STOCKS-30.29%
COMMODITY/BASIC MATERIALS-3.38%
*AK Steel Holding............................ 500 $ 15,375
Chesapeake.................................. 900 29,700
*Durakon Industries.......................... 400 6,950
*Geneva Steel Class A........................ 3,500 47,250
Willamette Industries....................... 2,400 113,400
--------
212,675
--------
COMMUNICATIONS-0.20%
*ALC Communications.......................... 400 12,450
--------
12,450
--------
CONSUMER-2.10%
*Canandaigua Wine class A.................... 1,600 61,200
*Custom Chrome............................... 1,000 17,063
Huffy....................................... 1,200 18,000
*Instrument Systems.......................... 1,800 15,075
*Mohawk Industries........................... 800 10,000
*Syratech.................................... 600 11,025
--------
132,363
--------
CREDIT SENSITIVE-4.52%
*AmeriCredit................................. 3,400 20,400
*Banco Wiese ADR............................. 500 9,375
*California Federal Bank..................... 3,700 40,238
Camden Property Trust....................... 800 19,900
Factory Stores of America................... 1,200 25,950
First American (Tennessee).................. 600 16,200
*Mid Ocean Ltd .............................. 1,400 38,063
Money Store (The)........................... 1,200 21,750
ROC Communities............................. 800 16,800
Washington Mutual Savings Bank-Seattle ..... 2,000 33,500
West One Bancorp............................ 1,600 42,500
-------
284,676
-------
<PAGE>
NUMBER MARKET
OF SHARES VALUE
COMMON STOCKS (CONTINUED)
ENERGY/UTILITIES-5.59%
*American Oilfield Divers.................... 5,800 $ 36,250
*Brown (Tom)................................. 3,000 33,938
Cabot Oil & Gas............................. 2,700 39,150
*Chesapeake Energy........................... 6,400 101,600
Devon Energy................................ 1,600 29,200
*Global Marine............................... 5,000 18,125
*Noble Drilling.............................. 4,050 23,794
USX-Delhi Group............................. 1,200 12,000
Western Gas Resources....................... 3,000 57,750
--------
351,807
--------
MANUFACTURING AND INDUSTRIAL SERVICES-12.07%
Arctco........................ ............. 1,000 19,375
Boise Cascade............................... 1,000 26,750
*Bush Boake Allen............................ 1,000 27,000
*Champion Enterprises........................ 400 12,200
*Cherry Class A.............................. 1,200 17,400
*Cherry Class B.............................. 1,200 17,250
Continental Homes Holdings................. 3,000 34,875
*Devon Group................................. 800 23,000
*Grupo Simec ADR............................. 1,800 27,225
*IDEX........................................ 600 25,350
*INDRESCO.................................... 3,200 45,600
*Johnstown America Industries................ 1,800 29,475
Kaufman & Broad Home........................ 1,800 23,175
*Lindsay Manufacturing....................... 600 17,925
Longview Fibre.............................. 1,200 18,900
*MagneTek.................................... 400 5,400
Manitowoc .................................. 2,000 43,250
Methode Electronics class A................. 2,400 40,200
*National Gypsum............................. 1,500 61,500
Pechiney International SA................... 1,000 29,981
Regal Beloit................................ 2,400 32,700
Reynolds & Reynolds......................... 3,200 80,000
Ryland Group................................ 1,000 15,000
Schult Homes................................ 600 7,575
Smith (A.O.)................................ 1,000 24,500
Thiokol..................................... 1,200 33,450
TriMas...................................... 1,000 20,000
--------
759,056
--------
40
<PAGE>
Value Series
Statement of Net Assets (Continued)
NUMBER MARKET
OF SHARES VALUE
COMMON STOCKS (CONTINUED)
RETAILING/DISTRIBUTION-1.11%
*Burlington Coat Factory............................. 1,200 $14,100
Horizon Outlet Centers.............................. 1,200 31,350
*Musicland Stores.................................... 1,000 9,000
Varlen.............................................. 600 15,375
--------
69,825
--------
TRANSPORTATION-1.32%
Consolidated Freightways............................ 1,200 26,850
Intertrans.......................................... 2,000 25,750
*Offshore Logistics.................................. 800 10,300
*SEACOR Holdings..................................... 1,000 19,875
----------
82,775
----------
TOTAL COMMON STOCK (COST $2,007,237) 1,905,627
----------
PRINCIPAL MARKET
AMOUNT VALUE
SHORT-TERM MONEY MARKET
INVESTMENTS-50.71%
Federal Home Loan Mortgage Corporation
Discount Note 1/25/95............................. $2,000,000 $1,992,360
Federal National Mortgage Association
5.70% 1/12/95..................................... 1,200,000 1,197,910
TOTAL SHORT-TERM MONEY MARKET INVESTMENTS ----------
(COST $3,190,270)................................. 3,190,270
----------
REPURCHASE AGREEMENTS-18.44%
With Deutsche Bank 5.50% 1/3/95 (dated 2/30/94,
collateralized by $66,000 U.S. Treasury Notes
8.00% due 1/15/97, market value $68,654 and
$533,000 U.S. Treasury Notes 6.50% due 5/15/97,
market value $522,735) ........................... 579,000 579,000
With PaineWebber 5.75% 1/3/95 (dated 12/30/94,
collateralized by $75,000 U.S. Treasury Bills due
4/6/95, market value $73,879 and $533,000
U.S. Treasury Bills due 6/1/95, market value
$518,767)......................................... 581,000 581,000
TOTAL REPURCHASE AGREEMENTS ---------
(COST $1,160,000) 1,160,000
---------
TOTAL MARKET VALUE OF SECURITIES
OWNED-99.44% (COST $6,357,507)................................ 6,255,897
RECEIVABLES AND OTHER ASSETS NET OF
LIABILITIES-0.56%............................................ 35,288
NET ASSETS APPLICABLE TO 611,390 SHARES ----------
($.01 PAR VALUE) OUTSTANDING;
EQUIVALENT TO $10.29 PER SHARE-100.00%....................... $6,291,185
==========
- -----------------
*Non-income producing security for the year ended December 31, 1994.
See accompanying notes
41
<PAGE>
Delaware Group Premium Fund, Inc.
Statement of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
EQUITY/ HIGH CAPITAL MULTIPLE
INCOME YIELD RESERVES STRATEGY
SERIES SERIES SERIES SERIES
INVESTMENT INCOME:
<S> <C> <C> <C> <C>
Interest.................. $ 60,441 $4,507,766 $1,851,866 $1,145,194
Dividends................. 3,007,757 37,188 -- 797,867
---------- ----------- ---------- ----------
3,068,198 4,544,954 1,851,866 1,943,061
---------- ----------- ---------- ----------
EXPENSES:
Management fees........... 422,361 241,993 150,708 262,703
Dividend disbursing and
transfer agent fees
and expenses............ 12,608 7,256 4,516 7,863
Custodian fees............ 16,374 6,545 7,525 5,208
Auditing.................. 4,540 5,446 3,517 3,517
Salaries.................. 18,384 10,507 6,783 11,519
Taxes other than income... 7,243 2,360 2,219 1,480
Directors' fees........... 1,349 1,349 1,349 1,349
Legal..................... 2,358 1,480 656 712
Registration fees ........ 4,082 6,587 1,621 2,104
Amortization of
organization expenses... -- -- -- --
Reports to shareholders... 5,676 4,164 3,576 3,575
Shareholders' meeting..... -- -- -- --
Other..................... 9,271 3,220 4,591 7,559
---------- ----------- --------- ---------
504,246 290,907 187,061 307,589
Less expenses absorbed
by Delaware Management
Company, Inc. or
Delaware International
Advisers Ltd............ -- -- -- --
---------- ----------- --------- ---------
504,246 290,907 187,061 307,589
---------- ----------- --------- ---------
NET INVESTMENT INCOME..... 2,563,952 4,254,047 1,664,805 1,635,472
---------- ----------- --------- ---------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss)
from security and foreign
currency transactions... 1,326,221 (1,450,110) (1,447,823) (723,778)
---------- ----------- ---------- ---------
Net unrealized appreciation
(depreciation) of
investments and foreign
currencies during
the period.............. (4,146,440) (3,933,977) (896,017) (1,112,198)
---------- ----------- --------- ---------
NET REALIZED AND UNREALIZED
LOSS ON INVESTMENTS AND
FOREIGN CURRENCIES...... (2,820,219) (5,384,087) (2,343,840) (1,835,976)
---------- ----------- --------- ---------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS............. $(256,267) $(1,130,040) $(679,035) $(200,504)
========= =========== ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
MONEY INTERNATIONAL EMERGING
MARKET GROWTH EQUITY GROWTH VALUE
SERIES SERIES SERIES* SERIES SERIES
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C>
Interest.................. $737,303 $ 84,683 $ 276,950 $ 79,380 $ 99,461
Dividends................. -- 446,879 1,385,509 2,703 18,601
-------- --------- ---------- --------- --------
737,303 531,562 1,662,459 82,083 118,062
-------- --------- ---------- --------- --------
EXPENSES:
Management fees........... 81,666 274,800 294,997 25,229 25,775
Dividend disbursing and
transfer agent fees
and expenses............ 3,016 6,557 7,035 619 618
Custodian fees............ 3,068 10,720 29,518 4,590 3,221
Auditing.................. 5,499 4,938 4,939 6,889 6,889
Salaries.................. 4,305 9,559 10,321 831 849
Taxes other than income... 1,062 2,735 4,264 298 282
Directors' fees........... 1,349 1,349 1,349 1,349 1,349
Legal..................... 240 800 508 180 150
Registration fees ........ 1,626 1,450 15,396 2,395 2,285
Amortization of
organization expenses... -- -- 3,409 -- --
Reports to shareholders... 5,097 5,407 3,305 4,400 4,400
Shareholders' meeting..... -- 2,000 22,347 2,000 2,000
Other..................... 2,849 4,788 4,229 804 685
-------- ----------- ---------- --------- --------
109,777 325,103 401,617 49,584 48,503
Less expenses absorbed
by Delaware Management
Company, Inc. or
Delaware International
Advisers Ltd............ -- (30,673) (85,379) (22,684) (21,037)
-------- ----------- ---------- --------- --------
109,777 294,430 316,238 26,900 27,466
-------- ----------- ---------- --------- --------
NET INVESTMENT INCOME..... 627,526 237,132 1,346,221 55,183 90,596
-------- ----------- ---------- --------- --------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss)
from security and foreign
currency transactions... -- 159,943 124,691 (35,082) 43,411
------- ----------- ---------- -------- --------
Net unrealized appreciation
(depreciation) of
investments and foreign
currencies during
the period.............. -- (1,816,840) (1,593,702) 9,655 (105,827)
-------- ----------- ---------- -------- --------
NET REALIZED AND UNREALIZED
LOSS ON INVESTMENTS AND
FOREIGN CURRENCIES...... -- (1,656,897) (1,469,011) (25,427) (62,416)
-------- ----------- ---------- -------- --------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS.............. $627,526 $(1,419,765) $(122,790) $ 29,756 $ 28,180
======== =========== ========== ======== ========
</TABLE>
- --------------
*The International Equity Series and the Value Series are the only series of
the Fund which engaged in foreign currency transactions during the year ended
December 31, 1994.
See accompanying notes
42
<PAGE>
Delaware Group Premium Fund, Inc.
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
EQUITY/ HIGH CAPITAL MULTIPLE
INCOME YIELD RESERVES STRATEGY
SERIES SERIES SERIES SERIES
------------ ----------- -------------- -----------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income.... $ 2,563,952 $ 4,254,047 $ 1,664,805 $ 1,635,472
Net realized gain (loss)
on investments and
foreign currencies..... 1,326,221 (1,450,110) (1,447,823) (723,778)
Net unrealized appreciation
(depreciation) of
investments and foreign
currencies during
the period............. (4,146,440) (3,933,977) (896,017) (1,112,198)
------------- ------------ ----------- -----------
Net increase (decrease)
in net assets resulting
from operations........ (256,267) (1,130,040) (679,035) (200,504)
------------- ------------ ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income.... (2,461,871) (4,254,270) (1,664,805) (1,052,342)
Net realized gain from
security transactions.. (3,167,456) -- (132,532) (855,762)
------------- ------------ ----------- -----------
(5,629,327) (4,254,270) (1,797,337) (1,908,104)
------------- ------------ ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 20,542,246 22,991,853 9,189,632 15,602,794
Net asset value of shares
issued upon reinvestment
of dividends from net
investment income...... 2,461,871 4,254,270 1,664,805 1,052,342
Net asset value of shares
issued upon reinvestment
of distributions from net
realized gain from
security transactions.. 3,167,456 -- 132,532 855,762
------------- ------------ ----------- -----------
26,171,573 27,246,123 10,986,969 17,510,898
Cost of shares repurchased (13,080,317) (13,090,790) (6,708,277) (4,906,327)
------------- ------------ ----------- -----------
Increase in net assets
derived from capital
transactions........... 13,091,256 14,155,333 4,278,692 12,604,571
------------- ------------ ----------- -----------
NET INCREASE IN NET ASSETS 7,205,662 8,771,023 1,802,320 10,495,963
NET ASSETS:
Beginning of period...... 65,519,121 34,914,645 24,172,777 37,234,768
------------- ------------ ----------- -----------
End of period............ $ 72,724,783 $ 43,685,668 $25,975,097 $47,730,731
Undistributed net ============= ============ =========== ===========
investment income...... $ 826,507 -- -- $ 1,204,959
============= ============ =========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
MONEY INTERNATIONAL EMERGING
MARKET GROWTH EQUITY GROWTH VALUE
SERIES SERIES SERIES* SERIES SERIES*
------------ ----------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income.... $ 627,526 $ 237,132 $ 1,346,221 $ 55,183 $ 90,596
Net realized gain (loss)
on investments and
foreign currencies..... -- 159,943 124,691 (35,082) 43,411
Net unrealized appreciation
(depreciation) of
investments and foreign
currencies during
the period............. -- (1,816,840) (1,593,702) 9,655 (105,827)
----------- ----------- ----------- ----------- ----------
Net increase (decrease)
in net assets resulting
from operations........ 627,526 (1,419,765) (122,790) 29,756 28,180
----------- ----------- ----------- ----------- ----------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income.... (627,526) (168,541) (117,179) -- --
Net realized gain from
security transactions.. -- -- (16,740) -- --
----------- ----------- ----------- ----------- ----------
(627,526) (168,541) (133,919) -- --
----------- ----------- ----------- ----------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 38,911,281 16,716,420 43,657,308 9,130,736 6,276,621
Net asset value of shares
issued upon reinvestment
of dividends from net
investment income...... 651,015 168,541 117,179 -- --
Net asset value of shares
issued upon reinvestment
of distributions from net
realized gain from
security transactions.. -- -- 16,740 -- --
----------- ----------- ----------- ----------- ----------
39,562,296 16,884,961 43,791,227 9,130,736 6,276,621
Cost of shares repurchased (29,683,173) (9,132,551) (2,549,135) (2,277,534) (224,105)
----------- ----------- ----------- ----------- ----------
Increase in net assets
derived from capital
transactions........... 9,879,123 7,752,410 41,242,092 6,853,202 6,052,516
----------- ----------- ----------- ----------- ----------
NET INCREASE IN NET ASSETS 9,879,123 6,164,104 40,985,383 6,882,958 6,080,696
NET ASSETS:
Beginning of period...... 10,245,428 33,180,104 16,663,855 203,801 210,489
----------- ----------- ----------- ----------- ----------
End of period............ $20,124,551 $39,344,208 $57,649,238 $ 7,086,759 $6,291,185
Undistributed net =========== =========== =========== =========== ==========
investment income...... -- $225,729 $ 1,321,383 $ 55,183 $ 90,596
=========== =========== =========== =========== ==========
</TABLE>
- ------------------
*The International Equity Series and the Value Series are the only series of
the Fund which engaged in foreign currency transactions during the year ended
December 31, 1994.
See accompanying notes
43
<PAGE>
Delaware Group Premium Fund, Inc.
Statement of Changes in Net Assets (Continued)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
EQUITY/ HIGH CAPITAL MULTIPLE MONEY
INCOME YIELD RESERVES STRATEGY MARKET
SERIES SERIES SERIES SERIES SERIES
---------- ---------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income.... $ 2,007,081 $ 2,108,392 $ 1,045,871 $ 883,859 $ 220,669
Net realized gain (loss)
on investments
and foreign currencies. 4,087,573 (18,884) 115,591 849,068 --
Net unrealized appreciation
(depreciation) of
investments and foreign
currencies during
the period............. 848,585 936,659 (81,531) 317,920 --
----------- ----------- ----------- ----------- ------------
Net increase in net
assets resulting
from operations........ 6,943,239 3,026,167 1,079,931 2,050,847 220,669
----------- ----------- ----------- ----------- ------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income.... (1,672,563) (2,108,392) (1,045,871) (658,551) (220,669)
Net realized gain from
security transactions -- -- (84,507) (925,458) --
----------- ----------- ----------- ----------- ------------
(1,672,563) (2,108,392) (1,130,378) (1,584,009) (220,669)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 28,560,777 25,558,454 16,254,888 23,442,030 25,670,864
Net asset value of shares
issued upon reinvestment
of dividends from
net investment income.. 1,672,563 2,108,392 1,045,871 658,551 215,023
Net asset value of shares
issued upon reinvestment
of distributions from
realized gain from
security transactions... -- -- 84,507 925,458 --
----------- ----------- ----------- ----------- ------------
30,233,340 27,666,846 17,385,266 25,026,039 25,885,887
Cost of shares repurchased (8,262,543) (4,981,104) (2,951,858) (3,408,243) (23,414,203)
----------- ----------- ----------- ----------- ------------
Increase in net assets
derived from
capital transactions... 21,970,797 22,685,742 14,433,408 21,617,796 2,471,684
----------- ----------- ----------- ----------- ------------
NET INCREASE IN NET ASSETS 27,241,473 23,603,517 14,382,961 22,084,634 2,471,684
NET ASSETS:
Beginning of period...... 38,277,64 11,311,128 9,789,816 15,150,134 7,773,744
----------- ----------- ----------- ----------- ------------
End of period............ $65,519,121 $34,914,645 $24,172,777 $37,234,768 $ 10,245,428
=========== =========== =========== =========== ============
Undistributed net
investment income...... $ 724,426 -- -- $ 621,829 --
=========== =========== =========== =========== ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
PERIOD
12/27/93*
TO 12/31/93
INTERNATIONAL EMERGING
GROWTH EQUITY GROWTH VALUE
SERIES SERIES** SERIES SERIES
-------- --------- ------- ------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income.... $ 158,027 $ 92,418 $ -- $ --
Net realized gain (loss)
on investments
and foreign currencies. (298,097) 5,872 -- --
Net unrealized appreciation
(depreciation) of
investments and foreign
currencies during
the period............. 3,172,262 1,066,435 3,163 4,217
---------- ---------- -------- --------
Net increase in net
assets resulting
from operations........ 3,032,192 1,164,725 3,163 4,217
---------- ---------- -------- --------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income.... (29,372) (348) -- --
Net realized gain from
security transactions (190,916) -- -- --
----------- ---------- -------- --------
(220,288) (348) -- --
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 23,870,123 15,588,562 200,638 206,272
Net asset value of shares
issued upon reinvestment
of dividends from
net investment income.. 29,372 348 -- --
Net asset value of shares
issued upon reinvestment
of distributions from
realized gain from
security transactions... 190,916 -- -- --
---------- ----------- -------- --------
24,090,411 15,588,910 200,638 206,272
Cost of shares repurchased (7,973,412) (266,621) -- --
---------- ----------- -------- --------
Increase in net assets
derived from
capital transactions... 16,116,999 15,322,289 200,638 206,272
---------- ----------- -------- --------
NET INCREASE IN NET ASSETS 18,928,903 16,486,666 203,801 210,489
NET ASSETS:
Beginning of period...... 14,251,201 177,189 -- --
---------- ----------- -------- --------
End of period............ $33,180,104 $16,663,855 $203,801 $210,489
=========== =========== ======== ========
Undistributed net
investment income...... $ 157,138 $ 92,341 -- --
=========== =========== ======== ========
</TABLE>
- ---------------------
*Date of initial public offering.
**The International Equity Series is the only series of the Fund which
engaged in foreign currency transactions during the year ended December 31,
1993.
See accompanying notes
44
<PAGE>
Delaware Group Premium Fund, Inc.
Notes to Financial Statements
December 31, 1994
1. SIGNIFICANT ACCOUNTING POLICIES
Delaware Group Premium Fund, Inc. (the "Fund") is a diversified open-end
investment company which is intended to meet a wide range of investment
objectives with its nine separate Portfolios; the Equity/Income Series, the
High Yield Series, the Capital Reserves Series, the Multiple Strategy Series,
the Money Market Series, the Growth Series, the International Equity Series,
the Emerging Growth Series and the Value Series. The Fund was organized under
the laws of Maryland and is registered under the Investment Company Act of
1940 (as amended). Each Portfolio ("Series") is in effect a separate fund
issuing its own shares. The shares of the Fund are sold only to separate
accounts of life insurance companies.
Portfolio securities listed or traded on a national securities exchange,
except for bonds, are valued at the closing price on the exchange where they
are primarily traded. Securities not traded on a particular day are valued at
the last bid price. U.S. government and agency securities and
over-the-counter securities are valued at the mean between the bid and the
asked price. Debt securities (other than short-term obligations) are valued
on the basis of valuations provided by a pricing service when such prices are
believed to reflect the fair value of such securities. Money market
investments having a maturity of less than 60 days are valued at amortized
cost. Prices provided by the pricing service take into account appropriate
factors such as quotations, institutional trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data. All assets and liabilities that are
expressed in foreign currencies are valued and translated into U.S. dollars
at the exchange rate of such currencies against the U.S. dollar as provided
by the pricing service as of 3:00 PM New York time. Forward foreign exchange
contracts are valued at the mean between the bid and asked prices of the
contracts. Interpolated values are derived when the settlement date of the
contract is on an interim date for which quotations are not available. Other
securities and those for which no quotations are available are valued at fair
value as determined in good faith and in a method approved by the Board of
Directors. No securities were valued on this basis in the accompanying
financial statements.
Security transactions are accounted for on the date the securities are
purchased or sold (trade date). Gains and losses are based upon the specific
identification method for both financial statement and federal tax purposes.
Dividend income is recorded on the ex-dividend date. Foreign dividends are
also recorded on the ex-dividend date or as soon after the ex-dividend date
that the Fund is aware of such dividends, net of all non-rebatable tax
withholdings. Interest income is recorded on the accrual basis and includes,
when applicable, the pro rata amortization of premiums and accretion of
discounts. Expenses directly attributable to a specific Series are paid by
that Series. Other common expenses are apportioned on the basis of net assets
of the respective Series.
The High Yield Series, the Capital Reserves Series and the Money Market
Series each declare a dividend of its net investment income on a daily basis
which is paid monthly on the first business day of each month, to
shareholders of record at the time of the previous calculation of the Series'
net asset value. An investor begins earning dividends when payments for
shares purchased are converted into Federal Funds and are available for
investment by the Series. The Equity/Income Series, the Multiple Strategy
Series, the Growth Series, the International Equity Series, the Emerging
Growth Series and the Value Series will make payments from net investment
income in order to comply with certain requirements of the Internal Revenue
Code.
On December 31, 1994, all Series had investments in overnight repurchase
agreements. These agreements are fully collateralized by U.S. government
securities and such collateral is held by the Fund's Custodian or in the
Federal Reserve/Treasury book-entry system. The Fund monitors its repurchase
agreements to ensure that the market value of the collateral underlying the
agreements is at least 100% of the repurchase price including the portion
representing the Fund's yield under such agreements.
No provision for federal income taxes was made since it is the intention of
the Fund to comply with the provisions of the Internal Revenue Code available
to regulated investment companies and to make requisite distributions to
shareholders.
45
<PAGE>
Notes to Financial Statements (Continued)
2. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
In accordance with the terms of the Investment Management Agreement, Delaware
Management Company, Inc., the investment manager of each Series except the
International Equity Series and Delaware International Advisers Ltd., the
investment manager of the International Equity Series will receive a fee to
be paid monthly, which is computed on the net assets of each Series as of the
close of business each day at an annual rate less all amounts paid to the
unaffiliated directors for the Equity/Income Series, the High Yield Series,
the Capital Reserves Series, the Multiple Strategy Series, the Money Market
Series, the Growth Series and the International Equity Series. The management
fee for the Emerging Growth Series and the Value Series is computed on the net
assets of each Series as of the close of business each day at an annual rate
without consideration of amounts paid to unaffiliated directors. The
management fee rates are as follows:
<TABLE>
<CAPTION>
EQUITY/ HIGH CAPITAL MULTIPLE MONEY INTERNATIONAL EMERGING
INCOME YIELD RESERVES STRATEGY MARKET GROWTH EQUITY GROWTH VALUE
SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES
------- ------- -------- -------- ------ ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees as a
percentage of average
daily net assets
(per annum)........... 0.60% 0.60% 0.60% 0.60% 0.50% 0.75% 0.75% 0.75% 0.75%
Delaware Management Company Inc. and Delaware International Advisers Ltd.
have undertaken voluntarily to waive their fees and absorb those expenses
through June 30, 1995 for each Series to the extent that the Series' annual
operating expenses exclusive of taxes, interest, brokerage commissions and
extraordinary expenses, exceed 0.80% of average daily net assets. Total
expenses absorbed are as follows:
Total expenses
absorbed by Delaware
Management Company,
Inc. or Delaware
International
Advisers Ltd......... -- -- -- -- -- $30,673 $85,379 $22,684 $21,037
</TABLE>
On December 12, 1994, Delaware Management Holdings, Inc., which indirectly
owns all of the outstanding stock of Delaware Management Company, Inc. and
Delaware International Advisers Ltd., entered into an agreement of merger
with Lincoln National Corporation. This merger will result in Delaware
Management Holdings, Inc. becoming a wholly-owned subsidiary of Lincoln
National Corporation. The transaction is subject to the receipt of all
regulatory and shareholder approvals.
Certain officers and directors of Delaware Management Company, Inc. are
officers and/or directors of the Fund. Officers, directors, and employees of
Delaware Management Company, Inc., who are also officers, directors, and
employees of the Fund, do not receive any compensation from the Fund.
Salaries of officers and employees who are exclusively employed by the
Delaware Group of Funds are apportioned on the basis of net assets of the
respective funds. In addition, Delaware Service Company, Inc., an
affiliate of Delaware Management Company, Inc. bills for providing dividend
disbursing and transfer agent services to the Fund. The amounts billed and
expensed by the Series' for the year ended December 31, 1994 are as follows:
<PAGE>
<TABLE>
<CAPTION>
EQUITY/ HIGH CAPITAL MULTIPLE MONEY INTERNATIONAL EMERGING
INCOME YIELD RESERVES STRATEGY MARKET GROWTH EQUITY GROWTH VALUE
SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES
------ -------- -------- -------- ------- ------ ------------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries.............. $18,384 $10,507 $6,783 $11,519 $4,305 $9,559 $10,321 $831 $849
Dividend disbursing
and transfer agent
fees and expenses.... 12,608 7,256 4,516 7,863 3,016 6,557 7,035 619 618
</TABLE>
On December 31, 1994, the Fund had payables to affiliates as follows:
<TABLE>
<CAPTION>
EQUITY/ HIGH CAPITAL MULTIPLE MONEY INTERNATIONAL EMERGING
INCOME YIELD RESERVES STRATEGY MARKET GROWTH EQUITY GROWTH VALUE
SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES
------ ------ --------- -------- ------ ------ ------------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment management
fee payable to
Delaware Management
Company, Inc. or
Delaware International
Advisers Ltd........... $15,509 $63,648 $38,640 $13,284 $25,773 $62,475 $80,196 $2,562 $4,759
Dividend disbursing and
transfer agent fees
and expenses payable
to Delaware Service
Company, Inc........... -- -- -- -- -- -- $200 $3,777 $3,789
Other expenses payable
to Delaware Management
Company, Inc. and its
affiliates............. $1,243 $673 $370 $764 $303 $550 $850 $1,577 $1,858
</TABLE>
46
<PAGE>
Notes to Financial Statements (Continued)
3. INVESTMENTS
Investment securities based on cost for federal income tax purposes at
December 31, 1994 are as follows:
<TABLE>
<CAPTION>
EQUITY/ HIGH CAPITAL MULTIPLE MONEY
INCOME YIELD RESERVES STRATEGY MARKET
SERIES SERIES SERIES SERIES SERIES
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Costs of investments...................... $73,705,373 $45,537,389 $28,654,336 $48,720,554 $20,128,335
Aggregate unrealized appreciation......... 2,365,741 180,435 8,846 1,753,344 --
Aggregate unrealized depreciation......... (2,822,313) (3,076,424) (1,009,567) (1,572,726) --
----------- ----------- ----------- ----------- -----------
Market value of investments............... $73,248,801 $42,641,400 $27,653,615 $48,901,172 $20,128,335
=========== =========== =========== =========== ===========
Net realized gain (loss) based on
specific certificate.................... $1,308,079 $(1,450,110) $(1,454,790) $(746,235) --
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EMERGING
GROWTH EQUITY GROWTH VALUE
SERIES SERIES SERIES SERIES
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Costs of investments...................... $37,130,272 $57,173,617 $7,252,159 $6,357,507
Aggregate unrealized appreciation......... 4,563,826 1,969,043 337,938 156,688
Aggregate unrealized depreciation......... (2,211,335) (2,682,345) (331,895) (258,298)
----------- ----------- ----------- ----------
Market value of investments............... $39,482,763 $56,460,315 $7,258,202 $6,225,897
=========== =========== =========== ==========
Net realized gain (loss) based on
specific certificate.................... $173,874 $426,728 $(28,308) $43,455
=========== =========== =========== ==========
</TABLE>
For federal income tax purposes, the Fund had accumulated capital losses at
December 31, 1994 of $1,565,429 for the High Yield Series, $107,827 for the
Growth Series, $1,454,790 for the Capital Reserves Series $746,235 and for the
Multiple Strategy Series and $28,308 for the Emerging Growth Series which may be
carried forward and applied against future capital gains. The capital loss
carryover for the High Yield Series expires as follows: 1998--$96,435,
2001--$18,884 and 2002--$1,450,110. The capital loss carryover for the Growth
Series expires in 2001 and the capital loss carryovers for the Capital Reserves
Series, the Multiple Strategy Series and the Emerging Growth Series expire in
2002.
During the year ended December 31, 1994, the Fund had purchases and sales of
investment securities, other than U.S. government securities and short-term
debt securities having maturities of one year or less totalling as follows:
<TABLE>
<CAPTION>
EQUITY/ HIGH CAPITAL MULTIPLE INTERNATIONAL EMERGING
INCOME YIELD RESERVES STRATEGY GROWTH EQUITY GROWTH VALUE
SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES
----------- ----------- ----------- ----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Purchases.......... $74,166,047 $31,275,057 $48,728,242 $63,277,626 $21,625,640 $45,025,633 $4,366,646 $2,164,929
Sales.............. 62,692,538 17,538,248 41,050,942 49,602,218 11,316,698 4,902,424 1,025,749 331,730
</TABLE>
On December 31, 1994, the Fund had receivables for securities sold and
payables for securities purchased as follows:
<TABLE>
<CAPTION>
EQUITY/ HIGH CAPITAL MULTIPLE INTERNATIONAL EMERGING
INCOME YIELD RESERVES STRATEGY GROWTH EQUITY GROWTH VALUE
SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES
----------- ------- ---------- ----------- --------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Receivable for Securities
Sold....................... $ 617,410 $51,450 $ 6,096 $ 544,822 $ 212,764 $ 239,494 $ 26,621 $47,523
Payable for Securities
Purchased.................. 1,307,690 -- 1,829,805 2,086,147 286,555 1,017,951 186,049 --
</TABLE>
47
<PAGE>
Notes to Financial Statements (Continued)
4. CAPITAL STOCK
Transactions in capital stock shares were as follows:
<TABLE>
<CAPTION>
EQUITY/ HIGH CAPITAL
INCOME YIELD RESERVES
SERIES SERIES SERIES
--------------------- --------------------- ---------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
12/31/94 12/31/93 12/31/94 12/31/93 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C> <C>
Shares sold......................... 1,740,016 2,367,979 2,489,839 2,655,008 943,459 1,571,841
Shares issued upon reinvestment of
dividends from net investment
income and distributions from net
realized gain from security
transactions...................... 473,709 142,083 470,533 218,870 186,005 109,434
---------- ---------- ---------- ---------- --------- ---------
2,213,725 2,510,062 2,960,372 2,873,878 1,129,464 1,681,275
Shares repurchased ................. (1,112,428) (686,474) (1,419,313) (516,805) (691,333) (285,176)
---------- ---------- ---------- ---------- --------- ---------
Net increase...................... 1,101,297 1,823,588 1,541,059 2,357,073 438,131 1,396,099
========== ========== ========== ========== ========= =========
</TABLE>
<TABLE>
<CAPTION>
MULTIPLE MONEY
STRATEGY MARKET GROWTH
SERIES SERIES SERIES
--------------------- --------------------- ---------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
12/31/94 12/31/93 12/31/94 12/31/93 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C> <C>
Shares sold......................... 1,207,619 1,808,385 3,891,128 2,567,087 1,387,910 2,133,420
Shares issued upon reinvestment of
dividends from net investment
income and distributions from net
realized gain from security
transactions...................... 147,148 125,878 65,101 21,502 13,581 19,846
--------- --------- ---------- ---------- ---------- ----------
1,354,767 1,934,263 3,956,229 2,588,589 1,401,491 2,153,266
Shares repurchased ................. (381,885) (260,025) (2,968,317) (2,341,420) (764,027) (725,245)
--------- --------- ---------- ---------- ---------- ----------
Net increase...................... 972,882 1,674,238 987,912 247,169 637,464 1,428,021
========= ========= ========== ========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL EMERGING
EQUITY GROWTH VALUE
SERIES SERIES SERIES
----------------------- --------------------- ---------------------
PERIOD PERIOD
YEAR YEAR YEAR 12/27/93* YEAR 12/27/93*
ENDED ENDED ENDED TO ENDED TO
12/31/94 12/31/93 12/31/94 12/31/93 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C> <C>
Shares sold......................... 3,638,259 1,440,943 793,025 19,988 612,652 20,614
Shares issued upon reinvestment of
dividends from net investment
income and distributions from net
realized gain from security
transactions...................... 11,188 35 -- -- -- --
----------- ---------- --------- --------- --------- ---------
3,649,447 1,440,978 793,025 19,988 612,652 20,614
Shares repurchased.................. (215,836) (25,173) (115,208) -- (21,876) --
----------- ---------- --------- --------- --------- ---------
Net increase...................... 3,433,611 1,415,805 677,817 19,988 590,776 20,614
=========== ========== ========= ========= ========= =========
</TABLE>
- ------------
*Date of initial public offering.
<PAGE>
Distributions from net investment income and net realized gains from security
transactions payable on January 26, 1995, to shareholders of record January
24, 1995 are as follows:
<TABLE>
<CAPTION>
EQUITY/ HIGH CAPITAL MULTIPLE MONEY
INCOME YIELD RESERVES STRATEGY MARKET
SERIES SERIES SERIES SERIES SERIES
----------- ----------- ----------- ----------- ------
<S> <C> <C> <C> <C> <C>
Distributions per share from net investment
income...................................... $0.13 -- -- $0.33 --
Distributions per share from net realized
gain from security transactions............. 0.21 -- -- -- --
</TABLE>
The ex-dividend date was January 25, 1995.
<TABLE>
<CAPTION>
INTERNATIONAL EMERGING
GROWTH EQUITY GROWTH VALUE
SERIES SERIES SERIES SERIES
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Distributions per share from net investment
income...................................... $0.07 $0.24 $0.09 $0.15
Distributions per share from net realized
gain from security transactions............. -- 0.09 -- 0.07
</TABLE>
The ex-dividend date was January 25, 1995.
48
<PAGE>
Notes to Financial Statements (Continued)
5. COMPONENTS OF NET ASSETS
<TABLE>
<CAPTION>
EQUITY/ HIGH CAPITAL MULTIPLE MONEY
INCOME YIELD RESERVES STRATEGY MARKET
SERIES SERIES SERIES SERIES SERIES
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Common stock, $.01 par value, 500,000,000
shares authorized to the Fund.............. $71,060,070 $48,147,274 $28,432,487 $47,088,056 $20,124,551
Accumulated undistributed income (loss):
Net investment income...................... 826,507 (223) -- 1,204,959 --
Net realized gain (loss) on investments
and foreign currencies................... 1,107,077 (1,565,394) (1,466,301) (760,946) --
Net unrealized appreciation (depreciation)
of investments and foreign currencies.... (268,871) (2,895,989) (991,089) 198,662 --
----------- ----------- ----------- ----------- -----------
Total net assets............................. $72,724,783 $43,685,668 $25,975,097 $47,730,731 $20,124,551
=========== =========== =========== =========== ===========
Shares outstanding........................... 6,336,687 5,116,064 2,793,817 3,765,185 2,012,455
=========== =========== =========== =========== ===========
Net asset value.............................. $11.48 $8.54 $9.30 $12.68 $10.00
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EMERGING
GROWTH EQUITY GROWTH VALUE
SERIES SERIES SERIES SERIES
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Common stock, $.01 par value, 500,000,000
shares authorized to the Fund.............. $36,880,595 $56,741,279 $7,053,840 $6,258,788
Accumulated undistributed income (loss):
Net investment income...................... 225,729 1,321,383 55,183 90,596
Net realized gain (loss) on investments
and foreign currencies................... (156,499) 113,843 (35,082) 43,411
Net unrealized appreciation (depreciation)
of investments and foreign currencies.... 2,394,383 (527,267) 12,818 (101,610)
----------- ----------- ----------- ----------
Total net assets............................. $39,344,208 $57,649,238 $7,086,759 $6,291,185
=========== =========== =========== ==========
Shares outstanding........................... 3,347,169 4,867,075 697,805 $ 611,390
=========== =========== =========== ==========
Net asset value.............................. $11.75 $11.84 $10.16 $10.29
=========== =========== =========== ==========
</TABLE>
<PAGE>
6. FORWARD FOREIGN EXCHANGE CONTRACTS
The International Equity Series will, from time to time, enter into forward
foreign exchange contracts. There are costs and risks associated with such
currency transactions. No type of foreign currency transaction will eliminate
fluctuations in the prices of the Fund's foreign securities or will prevent
loss if the prices of such securities should decline. Outstanding contracts
as of December 31, 1994 were as follows:
CONTRACT TO IN EXCHANGE SETTLEMENT UNREALIZED
DELIVER FOR DATE APPRECIATION
-------------------------- ---------- ---------- ------------
1,522,263 British Pounds $2,400,000 1/31/95 $ 24,209
2,766,720 Dutch Guilders 1,600,000 1/31/95 6,307
481,750,000 Japanese Yen 5,000,000 1/31/95 157,217
--------
$187,733
========
7. INDUSTRY DISCLOSURE
As of December 31, 1994 the portfolio diversification of the International
Equity Series was as follows:
PERCENTAGE
OF
TOTAL
SECURITIES
INDUSTRY AT VALUE
----------------------------- ---------
Energy....................... 13.29%
Consumer Growth.............. 12.62
Capital Goods................ 11.42
Consumer Cyclical............ 10.61
Defensive Consumer Staples... 9.20
Basic Industry............... 9.11
Utilities.................... 8.78
Conglomerates................ 8.30
Credit Sensitive............. 7.73
Repurchase Agreements........ 4.70
Notes and Bonds.............. 4.24
-------
Total........................ 100.00%
=======
49
<PAGE>
Notes to Financial Statements (Continued)
8. FINANCIAL HIGHLIGHTS
Selected data for each share of the Series outstanding throughout each period
was as follows:
<TABLE>
<CAPTION>
EQUITY/INCOME SERIES
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
7/28/88(1)
YEAR ENDED TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
Net asset value, beginning of period................ $12.5100 $11.2200 $10.7500 $9.2400 $11.4000 $10.1600 $10.0000
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................. 0.4121 0.4341 0.4155 0.4502 0.4489 0.2813 0.0934
Net realized and unrealized gain (loss) from
security transactions........................... (0.4221) 1.2659 0.5045 1.5498 (1.9189) 1.0337 0.0666
-------- -------- -------- -------- -------- -------- --------
Total from investment operations.................. (0.0100) 1.7000 0.9200 2.0000 (1.4700) 1.3150 0.1600
LESS DISTRIBUTIONS:
Dividends from net investment income.............. (0.4200) (0.4100) (0.4500) (0.4900) (0.5600) (0.0750) none
Distributions from net realized gain on security
transactions.................................... (0.6000) none none none (0.1300) none none
-------- -------- -------- -------- -------- -------- --------
Total distributions............................... (1.0200) (0.4100) (0.4500) (0.4900) (0.6900) (0.0750) none
Net asset value, end of period...................... $11.4800 $12.5100 $11.2200 $10.7500 $9.2400 $11.4000 $10.1600
======== ======== ======== ======== ======== ======== ========
Total return........................................ (0.20%) 15.45% 8.82% 22.32% (13.31%) 13.04% 3.77%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)......... $72,725 $65,519 $38,278 $38,840 $29,598 $12,959 $1,873
Ratio of expenses to average net assets........... 0.71% 0.75% 0.79% 0.85% 0.96% 1.31% 2.00%
Ratio of expenses to average net assets prior to
expense limitation.............................. 0.71% 0.76% 0.81% 0.85% 0.96% 1.31% 2.00%
Ratio of net investment income to average net
assets.......................................... 3.63% 3.95% 3.86% 4.46% 5.80% 5.06% 6.40%
Ratio of net investment income to average net
assets prior to expense limitation.............. 3.63% 3.94% 3.84% 4.46% 5.80% 5.06% 6.40%
Portfolio turnover rate........................... 91% 67% 72% 79% 34% 26% --
</TABLE>
- ----------------
(1)Date of initial public offering; ratios and total return have been
annualized.
50
<PAGE>
Notes to Financial Statements (Continued)
8. FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for each share of the Series outstanding throughout each period
was as follows:
<TABLE>
<CAPTION>
HIGH YIELD SERIES
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
7/28/88(1)
YEAR ENDED TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
Net asset value, beginning of period................ $9.7700 $9.2900 $9.1300 $7.4800 $9.2000 $9.8600 $10.0000
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................. 0.9621 0.9758 1.0224 1.0316 1.1135 1.0846 0.4754
Net realized and unrealized gain (loss) from
security transactions........................... (1.2300) 0.4800 0.1600 1.6500 (1.7200) (0.6350) (0.1400)
-------- -------- -------- -------- -------- -------- --------
Total from investment operations.................. (0.2679) 1.4558 1.1824 2.6816 (0.6065) 0.4496 0.3354
LESS DISTRIBUTIONS:
Dividends from net investment income.............. (0.9621) (0.9758) (1.0224) (1.0316) (1.1135) (1.0846) (0.4754)
Distributions from net realized gain on security
transactions.................................... none none none none none (0.0250) none
-------- -------- -------- -------- -------- -------- --------
Total distributions............................... (0.9621) (0.9758) (1.0224) (1.0316) (1.1135) (1.1096) (0.4754)
Net asset value, end of period...................... $8.5400 $9.7700 $9.2900 $9.1300 $7.4800 $9.2000 $ 9.8600
======== ======== ======== ======== ======== ======== ========
Total return........................................ (2.87%) 16.36% 13.44% 37.53% (7.13%) 4.62% 8.15%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)......... $43,686 $34,915 $11,311 $5,918 $5,092 $4,427 $2,425
Ratio of expenses to average net assets........... 0.72% 0.80% 0.80% 0.80% 0.80% 0.80% 0.80%
Ratio of expenses to average net assets prior to
expense limitation.............................. 0.72% 0.82% 0.94% 1.06% 1.17% 1.50% 1.21%
Ratio of net investment income to average net
assets.......................................... 10.56% 10.05% 10.93% 12.05% 13.30% 11.21% 11.00%
Ratio of net investment income to average net
assets prior to expense limitation.............. 10.56% 10.03% 10.79% 11.80% 12.93% 10.50% 10.58%
Portfolio turnover rate........................... 47% 43% 73% 70% 115% 19% 31%
</TABLE>
- ----------------
(1)Date of initial public offering; ratios and total return have been
annualized.
51
<PAGE>
Notes to Financial Statements (Continued)
8. FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for each share of the Series outstanding throughout each period
was as follows:
<TABLE>
<CAPTION>
CAPITAL RESERVES SERIES
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
7/28/88(1)
YEAR ENDED TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
Net asset value, beginning of period................... $10.2600 $10.2000 $10.2300 $10.0400 $ 9.9800 $ 9.9700 $10.0000
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................ 0.6355 0.6357 0.6474 0.6687 0.7325 0.8402 0.3293
Net realized and unrealized gain (loss) from
security transactions.............................. (0.9050) 0.1450 0.0600 0.1900 0.0600 0.0100 (0.0300)
-------- -------- -------- -------- -------- -------- --------
Total from investment operations..................... (0.2695) 0.7807 0.7074 0.8587 0.7925 0.8502 0.2993
LESS DISTRIBUTIONS:
Dividends from net investment income................. (0.6355) (0.6357) (0.6474) (0.6687) (0.7325) (0.8402) (0.3293)
Distributions from net realized gain on security
transactions....................................... (0.0550) (0.0850) (0.0900) none none none none
-------- -------- -------- -------- -------- -------- --------
Total distributions.................................. (0.6905) (0.7207) (0.7374) (0.6687) (0.7325) (0.8402) (0.3293)
Net asset value, end of period......................... $ 9.3000 $10.2600 $10.2000 $10.2300 $10.0400 $9.9800 $ 9.9700
======== ======== ======== ======== ======== ======= ========
Total return........................................... (2.68%) 7.85% 7.20% 8.85% 8.23% 8.86% 7.20%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............ $25,975 $24,173 $9,790 $4,392 $4,093 $2,575 1,784
Ratio of expenses to average net assets.............. 0.74% 0.80% 0.80% 0.80% 0.80% 0.80% 0.80%
Ratio of expenses to average net assets prior to
expense limitation................................. 0.74% 0.85% 0.98% 1.15% 1.49% 1.80% 1.26%
Ratio of net investment income to average net assets. 6.57% 6.20% 6.39% 6.62% 7.32% 8.41% 7.63%
Ratio of net investment income to average net assets
prior to expense limitation........................ 6.57% 6.15% 6.21% 6.27% 6.62% 7.41% 7.16%
Portfolio turnover rate.............................. 219% 198% 241% 95% 38% -- --
</TABLE>
- -----------------
(1)Date of initial public offering; ratios and total return have been
annualized.
(2)The ratios of expenses and net investment income to average net assets have
been omitted as management believes that such ratios are not meaningful due
to the limited assets of this Series.
52
<PAGE>
Notes to Financial Statements (Continued)
8. FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for each share of the Series outstanding throughout each period
was as follows:
<TABLE>
<CAPTION>
MULTIPLE STRATEGY SERIES
--------------------------------------------------------------------------
7/28/88(1)
YEAR ENDED TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................... $13.3300 $13.5500 $12.9800 $10.8400 $11.8000 $10.1600 $10.0000
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................ 0.4373 0.3280 0.4572 1.0824 0.3411 0.1302 0.0638
Net realized and unrealized gain (loss) from
security transactions.............................. (0.4473) 0.6920 1.2328 1.6676 (0.3911) 1.5498 0.0962
-------- -------- -------- -------- -------- -------- --------
Total from investment operations..................... (0.0100) 1.0200 1.6900 2.7500 (0.0500) 1.6800 0.1600
LESS DISTRIBUTIONS:
Dividends from net investment income................. (0.3400) (0.4600) (1.0600) (0.3500) (0.2700) (0.0400) none
Distributions from net realized gain on security
transactions....................................... (0.3000) (0.7800) (0.0600) (0.2600) (0.6400) none none
-------- -------- -------- -------- -------- -------- --------
Total distributions.................................. (0.6400) (1.2400) (1.1200) (0.6100) (0.9100) (0.0400) none
Net asset value, end of period......................... $12.6800 $13.3300 $13.5500 $12.9800 $10.8400 $11.8000 $10.1600
======== ======== ======== ======== ======== ======= ========
Total return........................................... (0.15%) 8.18% 13.85% 26.58% (0.18%) 16.60% 3.77%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............ $47,731 $37,235 $15,150 $12,138 $6,137 $3,182 $151
Ratio of expenses to average net assets.............. 0.70% 0.80% 0.86% 1.03% 1.35% 1.99% (2)
Ratio of expenses to average net assets prior to
expense limitation................................. 0.70% 0.89% 0.94% 1.03% 1.35% 1.99% --
Ratio of net investment income to average net assets. 3.71% 3.33% 3.60% 11.35% 3.84% 2.22% (2)
Ratio of net investment income to average net assets
prior to expense limitation........................ 3.71% 3.24% 3.52% 11.35% 3.84% 2.22% --
Portfolio turnover rate.............................. 140% 162% 202% 1,010% 210% 132% --
</TABLE>
- -----------------
(1)Date of initial public offering; ratios and total return have been
annualized.
(2)The ratios of expenses and net investment income to average net assets have
been omitted as management believes that such ratios are not meaningful due
to the limited assets of this Series.
53
<PAGE>
Notes to Financial Statements (Continued)
8. FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for each share of the Series outstanding throughout each period
was as follows:
<TABLE>
<CAPTION>
MONEY MARKET SERIES
--------------------------------------------------------------------------
7/28/88(1)
YEAR ENDED TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................... $10.0000 $10.0000 $10.0000 $10.0000 $10.0000 $10.0000 $10.0000
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................ 0.3614 0.2451 0.3202 0.5443 0.7306 0.8288 0.3195
Net realized and unrealized gain (loss) from
security transactions.............................. none none none none none none none
-------- -------- -------- -------- -------- -------- --------
Total from investment operations..................... 0.3614 0.2451 0.3202 0.5443 0.7306 0.8288 0.3195
LESS DISTRIBUTIONS:
Dividends from net investment income................. (0.3614) (0.2451) (0.3202) (0.5443) (0.7306) (0.8288) (0.3195)
Distributions from net realized gain on security
transactions....................................... none none none none none none none
-------- -------- -------- -------- -------- -------- --------
Total distributions.................................. (0.3614) (0.2451) (0.3202) (0.5443) (0.7306) (0.8288) (0.3195)
Net asset value, end of period......................... $10.0000 $10.0000 $10.0000 $10.0000 $10.0000 $10.0000 $10.0000
======== ======== ======== ======== ======== ======= ========
Total return........................................... 3.68% 2.48% 3.25% 5.58% 7.56% 8.61% 7.70%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............ $20,125 $10,245 $7,774 $7,768 $8,174 $2,109 $932
Ratio of expenses to average net assets.............. 0.66% 0.80% 0.80% 0.80% 0.80% 0.80% 0.80%
Ratio of expenses to average net assets prior to
expense limitation................................. 0.66% 0.86% 0.85% 0.99% 0.99% 2.01% 2.11%
Ratio of net investment income to average net assets. 3.79% 2.44% 3.21% 5.45% 7.25% 8.26% 7.50%
Ratio of net investment income to average net assets
prior to expense limitation........................ 3.79% 2.38% 3.16% 5.26% 7.05% 7.05% 6.19%
Portfolio turnover rate............................. -- -- -- -- -- -- --
</TABLE>
- -----------------
(1)Date of initial public offering; ratios and total return have been
annualized.
54
<PAGE>
Notes to Financial Statements (Continued)
8. FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for each share of the Series outstanding throughout each period
was as follows:
<TABLE>
<CAPTION>
GROWTH SERIES INTERNATIONAL EQUITY SERIES
------------------------------------------ ------------------------------
7/12/91(1) 10/29/92(1)
YEAR ENDED TO YEAR ENDED TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/94 12/31/93 12/31/92
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................... $12.2400 $11.1200 $11.0300 $10.0000 $11.6200 $10.0300 $10.0000
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................ 0.0694 0.0558 0.0225 0.0098 0.2198 0.0523 0.0153
Net realized and unrealized gain (loss) from
security transactions.............................. (0.4994) 1.2142 0.1975 1.0202 0.0802 1.5477 0.0147
-------- -------- -------- -------- -------- -------- --------
Total from investment operations..................... (0.4300) 1.2700 0.2200 1.0300 0.3000 1.6000 0.0300
LESS DISTRIBUTIONS:
Dividends from net investment income................. (0.0600) (0.2000) (0.0100) none (0.0700) (0.0100) none
Distributions from net realized gain on security
transactions....................................... none (0.1300) (0.1200) none (0.0100) none none
-------- -------- -------- -------- -------- -------- --------
Total distributions.................................. (0.0600) (0.1500) (0.1300) none (0.0800) (0.0100) none
Net asset value, end of period......................... $11.7500 $12.2400 $11.1200 $11.0300 $11.8400 $11.6200 $10.0300
======== ======== ======== ======== ======== ======= ========
Total return........................................... (3.54%) 11.56% 1.99% 21.60% 2.57% 15.97% 1.73%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............ $39,344 $33,180 $14,251 $6,950 $57,649 $16,664 $177
Ratio of expenses to average net assets.............. 0.80% 0.80% 0.98% 1.94% 0.80% 0.80% (2)
Ratio of expenses to average net assets prior to
expense limitation................................. 0.88% 1.00% 1.25% 1.94% 1.01% 1.85% --
Ratio of net investment income to average net assets. 0.64% 0.67% 0.28% 0.33% 2.63% 1.85% (2)
Ratio of net investment income to average net assets
prior to expense limitation........................ 0.56% 0.47% 0.01% 0.33% 2.42% 0.80% --
Portfolio turnover rate.............................. 43% 57% 52% 40% 13% 9% --
</TABLE>
- -----------------
(1)Date of initial public offering; ratios and total return have been
annualized.
(2)The ratios of expenses and net investment income to average net assets have
been omitted as management believes that such ratios are not meaningful due
to the limited net assets of this Series.
55
<PAGE>
Notes to Financial Statements (Continued)
8. FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for each share of the Series outstanding throughout each period
was as follows:
<TABLE>
<CAPTION>
EMERGING
GROWTH VALUE
SERIES SERIES
-------------------- --------------------
Year 12/27/93(1) Year 12/27/93(1)
Ended to Ended to
12/31/94 12/31/93 12/31/94 12/31/93
<S> <C> <C> <C> <C>
Net asset value, beginning of period.................... $10.2000 $10.0000 $10.2100 $10.0000
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................. 0.0791 none 0.1481 none
Net realized and unrealized gain (loss) from
security transactions............................... (0.1191) 0.2000 (0.0681) 0.2100
-------- -------- -------- --------
Total from investment operations...................... (0.0400) 0.2000 0.0800 0.2100
LESS DISTRIBUTIONS:
Dividends from net investment income.................. none none none none
Distributions from net realized gain on security
transactions........................................ none none none none
-------- -------- -------- --------
Total distributions................................... none none none none
Net asset value, end of period.......................... $10.1600 $10.2000 $10.2900 $10.2100
======== ======== ======== ========
Total return............................................ (0.39%) 2.00% 0.78% 2.10%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............. $7,087 $204 $6,291 $210
Ratio of expenses to average net assets............... 0.80% (2) 0.80% (2)
Ratio of expenses to average net assets prior to
expense limitation.................................. 1.47% -- 1.41% --
Ratio of net investment income to average net assets. 1.63% (2) 2.62% (2)
Ratio of net investment income to average net assets
prior to expense limitation......................... 0.96% -- 2.01% --
Portfolio turnover rate............................... 59% -- 26% --
</TABLE>
- -----------------
(1)Date of initial public offering; total return has been annualized.
(2)The ratios of expenses and net investment income to average net assets have
been omitted as management believes that such ratios are not meaningful due
to the limited net assets of this Series.
56
<PAGE>
Delaware Group Premium Fund
Report of Independent Auditors
To the Shareholders and Board of Directors
Delaware Group Premium Fund, Inc.
We have audited the accompanying statement of net assets of Delaware Group
Premium Fund, Inc. (comprised of the Equity/Income Series, the High Yield
Series, the Capital Reserves Series, the Multiple Strategy Series, the Money
Market Series, the Growth Series, the International Equity Series, the Emerging
Growth Series and the Value Series) as of December 31, 1994, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and the financial
highlights for each period from the date of initial public offering of the
respective Series through December 31, 1994. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Group Premium Fund, Inc. at December 31, 1994, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
period from the date of initial public offering of the respective series through
December 31, 1994, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
February 7, 1995
57
