<PAGE>
DELAWARE GROUP
-------------------------
PREMIUM FUND
-------------------------
INTERNATIONAL
-------------------------
EQUITY SERIES
-------------------------
SEMI-ANNUAL REPORT
-------------------------
JUNE 30, 1996
SML-1334SAR
<PAGE>
July 1996
Dear Policyholder:
During the first half of 1996, stronger than expected U.S. economic growth
has had a mixed effect on financial markets. Volatility in both the U.S. stock
and bond markets returned to historical norms amid concern about inflation.
Unmanaged domestic equity indexes performed well while the bond market
generally provided lackluster returns. The Standard & Poor's 500 Index provided
a total return of +10.10% (with dividends reinvested) for the six months ended
June 30, 1996.
However, some investors began to express concern that a healthy domestic job
market would generate substantially higher prices for goods and services. This
led to a general decline in U.S. stock prices in July.
The international scene has been brighter. Beyond our shores, inflation is
not a dominant issue. In Europe and Asia, governments are seeking to stimulate
growth by cutting interest rates and privatizing state-run companies. For U.S.
investors, this may provide an opportunity because an investment program that
combines foreign and domestic elements may be less volatile than either type of
investment alone.
For the six months ended June 30, the International Equity Series offered
through the Delaware Group Premium Fund* provided a positive return of 9.30%.
As of this writing, the U.S. stock market appeared to be undergoing its first
major correction since 1990. During times of increased volatility, we believe it
is important to maintain a rational and long-term perspective. Remember that
investments tend to perform in cyclical patterns, and that international stock
markets may operate on a different cycle than the U.S. market.
At Delaware Group, we firmly believe that a long-term outlook is the key to
investment success. We encourage you to read the remainder of the report, which
includes a discussion of performance through June 30. We hope to have the
opportunity to meet your financial needs for many years to come.
Sincerely,
/s/ Wayne A. Stork
- ---------------------------
Wayne A. Stork
Chairman, Board of Directors
Delaware Group Premium Fund
- ----------
*Investment Series of the Premium Fund underlie variable annuity products
issued by Allmerica Financial Life Insurance and Annuity Co. and First
Allmerica Life Insurance Co.
1
<PAGE>
Delaware Group Premium Fund, Inc.-International Equity Series
Statement of Net Assets
June 30, 1996
(Unaudited)
Market
Number Value
of Shares (U.S.$)
COMMON STOCK-90.52%
Australia-8.00%
Amcor....................... 18,952 $ 129,022
CSR Limited................. 889,966 3,144,929
National Australia Bank..... 363,113 3,357,924
Pacific Dunlop.............. 716,926 1,613,732
------------
8,245,607
------------
Belgium-3.99%
Electrabel SA............... 12,200 2,605,190
G.I.B. Holdings............. 33,700 1,512,407
------------
4,117,597
------------
Canada-2.14%
BC Telecom.................. 113,800 2,204,167
------------
2,204,167
------------
France-7.60%
Alcatel Alsthom............. 9,872 861,003
Campagnie de Saint Gobain... 19,289 2,581,558
Elf Aquitaine............... 47,259 3,475,507
Societe Television Francaise 8,000 913,735
------------
7,831,803
------------
Germany-5.98%
Bayer....................... 84,600 2,976,368
Continental................. 57,200 928,218
Siemens..................... 42,050 2,253,754
------------
6,158,340
------------
Hong Kong-3.00%
Hong Kong Electric.......... 585,000 1,783,606
Wharf Holdings Limited...... 366,000 1,309,760
------------
3,093,366
------------
Indonesia-1.52%
PT Bank Dagang Nasional..... 1,135,500 951,362
PT Semen Gresik............. 210,000 611,298
------------
1,562,660
------------
<PAGE>
Market
Number Value
of Shares (U.S.$)
COMMON STOCK (Continued)
Japan-13.73%
Amano....................... 196,000 $ 2,912,797
Eisai....................... 121,800 2,298,710
Hitachi..................... 258,000 2,399,311
Kinki Coca-Cola Bottling.... 120,000 1,816,168
Matsushita Electric......... 136,000 2,529,506
Nichido Fire & Marine....... 283,500 2,189,289
------------
14,145,781
------------
Malaysia-2.47%
Oriental Holdings Berhad.... 228,000 1,489,420
Sime Darby Berhad........... 380,000 1,050,817
------------
2,540,237
------------
Netherlands-6.03%
Elsevier-CVA................ 119,500 1,813,152
Koninklijke Van Ommeren .... 40,100 1,578,629
Royal Dutch Petroleum....... 11,350 1,752,701
Unilever NV-CVA............. 7,360 1,064,979
------------
6,209,461
------------
New Zealand-3.28%
Carter Holt Harvey Limited.. 277,800 633,743
Telecom Corp. of New Zealand 654,784 2,745,275
------------
3,379,018
------------
Philippines-1.35%
Philippine Long Distance Telephone
Company ADR............... 23,900 1,389,187
------------
1,389,187
------------
Singapore-1.04%
Jardine Matheson Holdings
Limited................... 145,622 1,070,322
------------
1,070,322
------------
Spain-5.12%
Banco Central Hispanoamer S.A. 67,449 1,373,065
Iberdrola S.A............... 132,143 1,355,330
Telefonica de Espana........ 138,500 2,549,393
------------
5,277,788
------------
2
<PAGE>
Market
Number Value
of Shares (U.S.$)
COMMON STOCK (Continued)
United Kingdom-25.27%
Bass plc.................... 173,000 $ 2,174,596
Blue Circle Industries plc.. 522,000 2,919,826
Boots plc................... 179,200 1,612,132
British Airways plc......... 345,000 2,969,702
British Gas plc............. 500,000 1,398,384
Cable & Wireless plc........ 285,000 1,886,420
Dalgety plc................. 291,250 1,601,965
GKN plc..................... 162,000 2,486,886
Great Universal Stores plc.. 206,000 2,093,288
RTZ......................... 135,100 2,000,471
Taylor Woodrow plc.......... 1,080,000 2,617,775
Unigate plc................. 368,000 2,275,699
------------
26,037,144
------------
Total Common Stock
(cost $83,361,625 )....... 93,262,478
------------
Market
Principal Value
Amount (U.S.$)
REPURCHASE
AGREEMENTS-7.69%
With Chase Manhattan 5.40% 7/1/96
(dated 6/28/96, collateralized by
$2,368,000 U.S. Treasury Notes
7.75% due 1/31/00 market
value $2,543,367)................. $2,483,000 $ 2,483,000
With J.P. Morgan Bank 5.40%
7/1/96 (dated 6/28/96,
collateralized by $2,751,000
U.S. Treasury Notes 6.25% due
8/31/00 market value
$2,786,851)...................... 2,721,000 2,721,000
With PaineWebber 5.40% 7/1/96
(dated 6/28/96, collateralized by
$1,613,000 U.S. Treasury Notes
7.875% due 4/15/98 market
value $1,687,807 and $1,100,000
U.S. Treasury Notes 5.00%
due 1/31/99 market value
$1,089,915)...................... 2,720,000 2,720,000
------------
Total Repurchase Agreements
(cost $7,924,000)................ 7,924,000
------------
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
TOTAL MARKET VALUE OF SECURITIES OWNED-98.21% (cost $91,285,625)............................ 101,186,478
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-1.79%....................................... 1,842,437
------------
NET ASSETS APPLICABLE TO 7,485,052 SHARES ($.01 par value) OUTSTANDING;
EQUIVALENT TO $13.76 PER SHARE-100.00%.................................................... $103,028,915
============
COMPONENTS OF NET ASSETS AT JUNE30, 1996
Common stock, $.01 par value, 500,000,000 shares authorized to the Fund with
50,000,000 shares allocated to the Series................................................... $ 89,897,450
Accumulated undistributed:
Net investment income..................................................................... 3,037,285
Net realized gain on investments.......................................................... (119,194)
Net unrealized appreciation on investments and foreign currencies......................... 10,213,374
------------
Total net assets............................................................................ $103,028,915
============
- -----------
*Accumulated net investment income (loss) includes net realized gain/(loss) on foreign currencies. Net realized gains on foreign
currencies are distributed as net investment income in accordance with provisions of the Internal Revenue Code.
See accompanying notes
</TABLE>
3
<PAGE>
Delaware Group Premium Fund, Inc.-International Equity Series
Statement of Operations
Six Months Ended June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax $334,303)........................................ $1,890,465
Interest................................................................................... 196,038 $2,086,503
----------
EXPENSES:
Management fees............................................................................ 346,642
Custodian fees............................................................................. 34,865
Salaries................................................................................... 11,959
Dividend disbursing, transfer agent fees and expenses...................................... 4,865
Taxes other than income.................................................................... 3,477
Registration fees.......................................................................... 3,000
Professional fees.......................................................................... 2,896
Reports to shareholders.................................................................... 2,400
Directors' fees............................................................................ 696
Other...................................................................................... 1,996
----------
412,796
Less expenses absorbed by Delaware International Advisers Ltd.............................. (47,901)
----------
364,895
---------
NET INVESTMENT INCOME...................................................................... 1,721,608
---------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain on:
Investment transactions.................................................................. (95,813)
Foreign Currencies....................................................................... 1,605,836
----------
Net realized gain.......................................................................... 1,510,023
Net unrealized appreciation of investments and foreign currencies during the period........ 4,768,145
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCIES..................... 6,278,168
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................................... $7,999,776
==========
</TABLE>
See accompanying notes
4
<PAGE>
Delaware Group Premium Fund, Inc.-International Equity Series
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months
Ended Year
6/30/96 Ended
(Unaudited) 12/31/95
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 1,721,608 $ 2,117,429
Net realized gain on investments and foreign currencies................................ 1,510,023 1,204,033
Net unrealized appreciation (depreciation) of investments
and foreign currencies during the period............................................. 4,768,145 5,972,496
------------ -----------
Net increase (decrease) in net assets resulting from operations........................ 7,999,776 9,293,958
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (2,695,399) (1,199,737)
Net realized gain from security transactions........................................... (725,191) (449,901)
------------ -----------
(3,420,590) (1,649,638)
------------ -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold.............................................................. 17,358,234 22,650,087
Net asset value of shares issued upon reinvestment of dividends from
net investment income................................................................ 2,695,399 1,199,737
Net asset value of shares issued upon reinvestment of distributions from
net realized gain from security transactions......................................... 725,191 449,901
------------ -----------
20,778,824 24,299,725
Cost of shares repurchased............................................................. (3,877,134) (8,045,244)
------------ -----------
Increase in net assets derived from capital share transactions......................... 16,901,690 16,254,481
------------ -----------
NET INCREASE IN NET ASSETS............................................................. 21,480,876 23,898,801
NET ASSETS:
Beginning of period.................................................................... 81,548,039 57,649,238
------------ -----------
End of period (including undistributed net investment income of $3,037,285 and
$2,405,240, respectively)............................................................ $103,028,915 $81,548,039
============ ===========
</TABLE>
See accompanying notes
5
<PAGE>
Delaware Group Premium Fund, Inc.-International Equity Series
Notes to Financial Statements
June 30, 1996
(Unaudited)
Delaware Group Premium Fund, Inc. (the "Fund"), is registered as a diversified
open-end investment company under the Investment Company Act of 1940. The Fund
is organized as a Maryland corporation and offers ten series: 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, the Value Series and the Global Bond
Series (the "Series"). The shares of the Fund are sold only to separate accounts
of life insurance companies.
1. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Fund:
Security Valuation-Securities listed on an exchange are valued at the last
quoted sales price as of 4:00 pm EST on the valuation date. Securities not
traded or securities not listed on an exchange are valued at the mean of the
last quoted bid and asked prices. Long-term debt securities are valued by an
independent pricing service and are believed to reflect the fair value of such
securities. Securities listed on a foreign exchange are valued at the last
quoted sale price before the time when the Fund is valued. Money market
instruments having less than 60 days to maturity are valued at amortized cost.
Federal Income Taxes-The Series intends to continue to qualify as a regulated
investment company and make the requisite distributions to shareholders.
Accordingly, no provision for federal income taxes is required in the financial
statements.
Repurchase Agreements-The Series may invest in a pooled cash account along with
other members of the Delaware Group of Funds. The aggregate daily balance of the
pooled cash account is invested in repurchase agreements secured by obligations
of the U.S. government. The respective collateral is held by the Series'
custodian bank until the maturity of the respective repurchase agreements. Each
repurchase agreement is at least 100% collateralized. However, in the event of
default or bankruptcy by the counterparty to the agreement, realization of the
collateral may be subject to legal proceedings.
Foreign Currencies-The value of all assets and liabilities denominated in
foreign currencies are translated into U.S. dollars at the exchange rate of such
currencies against the U.S. dollar as of 3:00 pm EST. Forward foreign currency
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 an interim date for which quotations are not available.
Other-Expenses common to all Funds within the Delaware Group of Funds are
allocated amongst the funds on the basis of average net assets. Security
transactions are recorded on the date the securities are purchased or sold
(trade date). Costs used in calculating realized gains and losses on the sale of
investment securities are those of the specific securities sold. Dividend income
is recorded on the ex-dividend date and interest income is recorded on an
accrual basis. Original issue discounts are accreted to interest income over the
lives of the respective securities.
Certain fund expenses are paid directly by brokers. The amount of these expenses
is less than 0.01% of the Series' average net assets.
2. Investment Management Fees and Other Transactions with Affiliates In
accordance with the terms of the Investment Management Agreement, the Series
pays Delaware International Advisers Ltd.("DIAL"), the investment manager, a fee
which is calculated at the annual rate of 0.75% of the average daily net assets
of the series less fees paid to the unaffiliated directors. At June 30, 1996,
the International Equity Series had a liability for Investment Management fees
and other expenses payable to DMC for $106,945.
DIAL has elected voluntarily to waive their fees and reimburse the Series to the
extent that annual operating expenses exclusive of taxes, interest, brokerage
commissions and extraordinary expenses, exceed 0.80% of average daily net assets
for the Series through June 30, 1996. Total expense absorbed by DIAL for the six
months ended June 30, 1996, is $47,901.
Certain officers of DMC are officers, directors and/or employees of the Fund.
These officers, directors and employees are paid no compensation by the Fund.
The Series has engaged Delaware Service Company, Inc. ("DSC"), an affiliate of
DMC to serve as dividend disbursing and transfer agent. For the six months ended
June 30, 1996, the Series expensed $4,865 for these services. At June 30, 1996,
the International Equity Series had a liability for such fees and other expenses
payable to DSC for $1,931.
6
<PAGE>
Notes to Financial Statements (Continued)
3. Investments
During the six months ended June 30 1996, the International Equity Series made
purchases of $16,065,787 and sales of $3,870,260 of investments other than U.S.
government securities and temporary cash investments.
At June 30, 1996, unrealized appreciation for federal income tax purposes
aggregated $9,900,853 of which $12,565,145 related to unrealized appreciation of
securities and $2,664,292 related to unrealized depreciation of securities.
The realized loss for federal income tax purposes was $(95,813) for the six
months ended June 30, 1996.
4. Capital Stock
Transactions in capital stock shares were as follows:
<TABLE>
<CAPTION>
Six Months
Ended
6/30/96 Year Ended
(Unaudited) 12/31/95
<S> <C> <C>
Shares sold......................................................................... 1,290,305 1,858,798
Shares issued upon reinvestment of dividends from net investment income and
distributions from
net realized gain from security transactions...................................... 265,574 146,765
--------- ---------
1,555,879 2,005,563
Shares repurchased.................................................................. (288,644) (654,821)
--------- ---------
Net increase...................................................................... 1,267,235 1,350,742
========= =========
</TABLE>
5. Foreign Exchange Contracts
The following currency forward contracts were outstanding at June 30, 1996:
Contract to In Exchange Settlement Unrealized
Deliver for Date Gain/(Loss)
----------- ----------- ---------- ------------
117,956,880 Belgian Francs $3,771,000 7/31/96 $ 650
5,739,462 Deutsche Marks 3,771,000 7/31/96 (9,285)
6,417,488 Dutch Guilders 3,771,000 7/31/96 (63)
19,410,845 French Francs 3,771,000 7/31/96 (4,836)
992,956,960 Japanese Yen 9,428,000 7/31/96 324,720
---------
$ 311,186
=========
Contract to In Exchange Settlement Unrealized
Receive for Date (Loss)
----------- ----------- ---------- ------------
4,313 British Pounds $6,702 7/1/96 $ (1)
---
$ (1)
===
7
<PAGE>
Notes to Financial Statements (Continued)
6. Financial Highlights
Selected data for each share of the Series outstanding throughout each
period were as follows:
<TABLE>
<CAPTION>
International Equity Series
------------------------------------------------------------
Six Months
Ended 10/29/92(1)
6/30/96 Year Ended to
(Unaudited) 12/31/95 12/31/94 12/31/93 12/31/92
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............................ $13.1200 $11.8400 $11.6200 $10.0300 $10.0000
Income from investment operations:
Net investment income ......................................... 0.4390 0.4194 0.2198 0.0523 0.0153
Net realized and unrealized gain from security transactions ... 0.7340 1.1906 0.0802 1.5477 0.0147
--------- --------- --------- -------- ---------
Total from investment operations............................... 1.1730 1.6100 0.3000 1.6000 0.0300
--------- --------- --------- -------- ---------
Less distributions:
Dividends from net investment income........................... (0.4200) (0.2400) (0.0700) (0.0100) none
Distributions from net realized gain from security transactions (0.1130) (0.0900) (0.0100) none none
--------- --------- --------- -------- ---------
Total distributions............................................ (0.5330) (0.3300) (0.0800) (0.0100) none
--------- --------- --------- -------- ---------
Net asset value, end of period................................... $13.7600 $13.1200 $11.8400 $11.6200 $10.0300
========= ========= ========= ======== =========
Total return .................................................... 9.30% 13.98% 2.57% 15.97% 1.73%
Ratios/supplemental data:
Net assets, end of period (000's omitted)...................... $103,029 $81,548 $57,649 $16,664 $177
Ratio of expenses to average daily net assets.................. 0.80% 0.80% 0.80% 0.80% 2
Ratio of expenses to average daily net assets prior to
expense limitation............................................ 0.89% 0.89% 1.01% 1.85% 2
Ratio of net investment income to average net assets........... 7.17% 3.69% 2.63% 1.85% 2
Ratio of net investment income to average net assets
prior to expense limitation ................................ 7.06% 3.60% 2.42% 0.80% 2
Portfolio turnover rate........................................ 9% 19% 13% 9% 2
</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 and
portfolio turnover have been omitted as management believes that such ratios
are not meaningful due to the limited net assets of this Series.
8
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
9
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
10
