August 9, 1996
DELAWARE GROUP PREMIUM FUND, INC.
Supplement to Prospectus dated May 1, 1996
The following revises information on page 1 of the
Prospectus.
The Statement of Additional Information is available,
without charge, by writing to Delaware Distributors, L.P. at 1818
Market Street, Philadelphia, PA 19103 or by calling 800-523-1918.
The following amends and supplements the information in,
respectively, the first and fourth paragraphs in the section of
the Prospectus entitled Mortgage-Backed Securities under Other
Considerations.
The Capital Reserves and Multiple Strategy Series may invest
in mortgage-backed securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities or government
sponsored corporations or those issued by certain private, non-
government corporations, such as financial institutions. Two
principal types of mortgage-backed securities are collateralized
mortgage obligations (CMOs) and real estate mortgage investment
conduits (REMICs).
CMOs and REMICs issued by private entities are not
government securities and are not directly guaranteed by any
government agency. They are secured by the underlying collateral
of the private issuer. Such private-backed securities may be
100% collateralized at the time of issuance by securities issued
or guaranteed by the U.S. Government, its agencies, or
instrumentalities (so-called "agency mortgage-backed securities")
or may not be so collateralized (so-called "non-agency mortgage-
backed securities"). The Series may invest in agency and non-
agency mortgage-backed securities. For both Series, non-agency
mortgage-backed securities may comprise up to 20% of their
respective assets, but all non-agency mortgage-backed securities
must i) be rated at the time of purchase in the four top rating
categories by a nationally-recognized statistical rating
organization (e.g., BBB or better by Standard & Poor's Ratings
Group ("S&P") or Baa or better by Moody's Investors Service,
Inc.("Moody's")) and (ii) represent interests in whole-loan
mortgages, multi-family mortgages, commercial mortgages or other
mortgage collateral supported by a first mortgage lien on real
estate. Non-agency mortgage-backed securities are subject to the
interest rate and prepayment risks to which other CMOs and REMICs
issued by private issuers are subject. Non-agency mortgage-
backed securities may also be subject to a greater risk of loss
of interest and principal because they are not collateralized by
securities issued or guaranteed by the U.S. Government. In
addition, timely information concerning the loans underlying
these securities may not be as readily available and the market
for these securities may be less liquid than the market for other
CMOs and REMICs.
The following modifies the information appearing in numbered
paragraph (6) in the section of the Prospectus entitled Quality
Restrictions under Capital Reserves Series and replaces the
information in the section of the Prospectus entitled Asset-
Backed Securities under Other Considerations.
The Capital Reserves, Multiple Strategy and Money Market
Series may invest in securities which are backed by assets such
as receivables on home equity and credit loans, receivables
regarding automobile, mobile home and recreational vehicle loans,
wholesale dealer floor plans and leases or other loans or
financial receivables currently available or which may be
developed in the future. For the Capital Reserves and Multiple
Strategy Series, all such securities must be rated in one of the
four highest rating categories by a reputable rating agency
(e.g., BBB or better by S&P or Baa or better by Moody's). It is
the Money Market Series' current policy to limit asset-backed
investments to those rated in the highest rating category by a
reputable rating agency (e.g., AAA by S&P or Aaa by Moody's) and
represented by interests in credit card receivables, wholesale
dealer floor plans, home equity loans and automobile loans.
Such receivables are securitized in either a pass-through or
a pay-through structure. Pass-through securities provide
investors with an income stream consisting of both principal and
interest payments in respect of the receivables in the underlying
pool. Pay-through asset-backed securities are debt obligations
issued usually by a special purpose entity, which are
collateralized by the various receivables and in which the
payments on the underlying receivables provide the funds to pay
the debt service on the debt obligations issued.
The rate of principal payment on asset-backed securities
generally depends on the rate of principal payments received on
the underlying assets. Such rate of payments may be affected by
economic and various other factors such as changes in interest
rates or the concentration of collateral in a particular
geographic area. Therefore, the yield may be difficult to
predict and actual yield to maturity may be more or less than the
anticipated yield to maturity. Due to the shorter maturity of
the collateral backing such securities, there tends to be less of
a risk of substantial prepayment than with mortgage-backed
securities but the risk of such a prepayment does exist. Such
asset-backed securities do, however, involve certain risks not
associated with mortgage-backed securities, including the risk
that security interests cannot be adequately or in many cases
ever established, and other risks which may be peculiar to
particular classes of collateral. For example, with respect to
credit card receivables, a number of state and federal consumer
credit laws give debtors the right to set off certain amounts
owed on the credit cards, thereby reducing the outstanding
balance. In the case of automobile receivables, there is a risk
that the holders may not have either a proper or first security
interest in all of the obligations backing such receivables due
to the large number of vehicles involved in a typical issuance
and technical requirements under state laws. Therefore,
recoveries on repossessed collateral may not always be available
to support payments on the securities.
The following amends the portfolio manager information under
Management of the Fund.
Gerald S. Frey has joined Edward N. Antoian as Vice
President/Senior Portfolio Manager and co-manager of the Growth
Series. Mr. Frey has approximately 20 years' experience in the
money management business and holds a BA in Economics from
Bloomsburg University and an MBA from Wilkes College. Prior to
joining the Delaware Group in 1996, he was a Senior Director with
Morgan Grenfell Capital Management in New York. <PAGE>
August 9, 1996
DELAWARE GROUP PREMIUM FUND, INC.
Supplement to Prospectus dated May 1, 1996
The following amends and supplements the information in,
respectively, the first and fourth paragraphs in the section of
the Prospectus entitled Mortgage-Backed Securities under Other
Considerations.
The Capital Reserves and Multiple Strategy Series may invest
in mortgage-backed securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities or government
sponsored corporations or those issued by certain private, non-
government corporations, such as financial institutions. Two
principal types of mortgage-backed securities are collateralized
mortgage obligations (CMOs) and real estate mortgage investment
conduits (REMICs).
CMOs and REMICs issued by private entities are not
government securities and are not directly guaranteed by any
government agency. They are secured by the underlying collateral
of the private issuer. Such private-backed securities may be
100% collateralized at the time of issuance by securities issued
or guaranteed by the U.S. Government, its agencies, or
instrumentalities (so-called "agency mortgage-backed securities")
or may not be so collateralized (so-called "non-agency mortgage-
backed securities"). The Series may invest in agency and non-
agency mortgage-backed securities. For both Series, non-agency
mortgage-backed securities may comprise up to 20% of their
respective assets, but all non-agency mortgage-backed securities
must i) be rated at the time of purchase in the four top rating
categories by a nationally-recognized statistical rating
organization (e.g., BBB or better by Standard & Poor's Ratings
Group ("S&P") or Baa or better by Moody's Investors Service,
Inc.("Moody's")) and (ii) represent interests in whole-loan
mortgages, multi-family mortgages, commercial mortgages or other
mortgage collateral supported by a first mortgage lien on real
estate. Non-agency mortgage-backed securities are subject to the
interest rate and prepayment risks to which other CMOs and REMICs
issued by private issuers are subject. Non-agency mortgage-
backed securities may also be subject to a greater risk of loss
of interest and principal because they are not collateralized by
securities issued or guaranteed by the U.S. Government. In
addition, timely information concerning the loans underlying
these securities may not be as readily available and the market
for these securities may be less liquid than the market for other
CMOs and REMICs.
<PAGE>
The following modifies the information appearing in numbered
paragraph (6) in the section of the Prospectus entitled Quality
Restrictions under Capital Reserves Series and replaces the
information in the section of the Prospectus entitled Asset-
Backed Securities under Other Considerations.
The Capital Reserves, Multiple Strategy and Money Market
Series may invest in securities which are backed by assets such
as receivables on home equity and credit loans, receivables
regarding automobile, mobile home and recreational vehicle loans,
wholesale dealer floor plans and leases or other loans or
financial receivables currently available or which may be
developed in the future. For the Capital Reserves and Multiple
Strategy Series, all such securities must be rated in one of the
four highest rating categories by a reputable rating agency
(e.g., BBB or better by S&P or Baa or better by Moody's). It is
the Money Market Series' current policy to limit asset-backed
investments to those rated in the highest rating category by a
reputable rating agency (e.g., AAA by S&P or Aaa by Moody's) and
represented by interests in credit card receivables, wholesale
dealer floor plans, home equity loans and automobile loans.
Such receivables are securitized in either a pass-through or
a pay-through structure. Pass-through securities provide
investors with an income stream consisting of both principal and
interest payments in respect of the receivables in the underlying
pool. Pay-through asset-backed securities are debt obligations
issued usually by a special purpose entity, which are
collateralized by the various receivables and in which the
payments on the underlying receivables provide the funds to pay
the debt service on the debt obligations issued.
The rate of principal payment on asset-backed securities
generally depends on the rate of principal payments received on
the underlying assets. Such rate of payments may be affected by
economic and various other factors such as changes in interest
rates or the concentration of collateral in a particular
geographic area. Therefore, the yield may be difficult to
predict and actual yield to maturity may be more or less than the
anticipated yield to maturity. Due to the shorter maturity of
the collateral backing such securities, there tends to be less of
a risk of substantial prepayment than with mortgage-backed
securities but the risk of such a prepayment does exist. Such
asset-backed securities do, however, involve certain risks not
associated with mortgage-backed securities, including the risk
that security interests cannot be adequately or in many cases
ever established, and other risks which may be peculiar to
particular classes of collateral. For example, with respect to
credit card receivables, a number of state and federal consumer
credit laws give debtors the right to set off certain amounts
owed on the credit cards, thereby reducing the outstanding
balance. In the case of automobile receivables, there is a risk
that the holders may not have either a proper or first security
interest in all of the obligations backing such receivables due
to the large number of vehicles involved in a typical issuance
and technical requirements under state laws. Therefore,
recoveries on repossessed collateral may not always be available
to support payments on the securities.
The following amends the portfolio manager information under
Management of the Fund.
Gerald S. Frey has joined Edward N. Antoian as Vice
President/Senior Portfolio Manager and co-manager of the Growth
and Emerging Growth Series. Mr. Frey has approximately 20 years'
experience in the money management business and holds a BA in
Economics from Bloomsburg University and an MBA from Wilkes
College. Prior to joining the Delaware Group in 1996, he was a
Senior Director with Morgan Grenfell Capital Management in New
York.
