<PAGE>
-----------------------------------------
DELAWARE GROUP
-----------------------------------------
PREMIUM FUND
-----------------------------------------
INTERNATIONAL
-----------------------------------------
EQUITY SERIES
-----------------------------------------
ANNUAL REPORT
-----------------------------------------
DECEMBER 31, 1995
SML-1334ANN
<PAGE>
January 31, 1996
Dear Policyholder:
The year 1995 was marked by a U.S. stock market that showed renewed
vitality, providing strong returns that contrasted sharply with the very
sluggish period faced a year earlier. With the exception of several European
countries, few overseas stock markets were as robust as the U.S., although many
established markets performed better than in 1994.
<TABLE>
<CAPTION>
1995 Total Return
<S> <C>
Morgan Stanley Europe Australia Far East (EAFE) Index +9.42%
International Equity Series +13.98%*
</TABLE>
Performance quoted above assumes reinvestment of dividends.
*Complete performance information can be found following the discussion section
of this report.
Many stock markets around the world appear to be well-positioned for the
year ahead. Although consumer spending has been weak, especially in many
established markets, lower interest rates have the potential to fuel additional
demand for goods and services. We believe the outlook for established
international equity markets is bright, particularly in Europe.
A summary of the strategies and performance for your investment series is
included in the pages that follow. Keep in mind that your annuity is designed as
a long-term investment and that any earnings compound tax-deferred until
withdrawal. This can help increase your earnings potential. We thank you for the
confidence you have expressed in Delaware Group.
Sincerely,
/s/ Wayne A. Stork
Wayne A. Stork
Chairman, President and Chief Executive Officer
<PAGE>
International Equity Series
Portfolio Strategy and Performance in 1995
While the returns available from some European countries were very strong,
few of the established international stock markets kept pace with soaring U.S.
equity prices in 1995, even after adjusting for currency fluctuations.
Still, the International Equity Series provided a total return of +13.98%*
(with capital gains and dividends reinvested) that was substantially higher than
the +9.4% total return of the benchmark Morgan Stanley Europe Australia Far East
Index. The generally weak performance of the U.S. dollar in 1995 enhanced the
Series' and the Index' return by making investments denominated in other
currencies worth more in dollars.
The Series outperformed the Index in part because it was overweighted in
the United Kingdom, whose FT-SE 100 Index rose +25.7% (the Financial Times-Stock
Exchange Index represents the market capitalization of 100 large public
companies). The Series was also underweighted in Japan, where the benchmark
Nikkei Index rose only +1.4%.
International Equity Series seeks to avoid undue risk to principal by
diversifying among companies in established markets and by limiting holdings in
markets we believe to be overvalued or particularly risky due to economic or
political instability.
We generally favor stocks with higher than average dividend yields. We
believe dividend income can help protect investors in two ways. First, this
focus leads us to stocks of relatively stable, large and mid-size companies,
while avoiding smaller, and in our opinion, riskier companies. And second,
income can help to cushion losses when stock prices fall.
A Look at the Portfolio
Many of our investments in European countries such as the United Kingdom,
the Netherlands and Belgium performed well. Investments in the U.K. represented
about 27% of net assets as of December 31, 1995 and included a major airline,
food processors, retailers and an entertainment company that operates "pubs."
Companies based in the British Commonwealth countries of Australia, New
Zealand and Canada represented another 15% of net assets and generally performed
well. These countries benefited from low inflation and/or government efforts to
reform fiscal policy.
The Series did not participate in the robust markets of Sweden and
Switzerland, Europe's best performing markets in 1995. We did not own any stocks
in these countries because they generally did not fit the Series' income-
oriented selection criteria.
Our Japanese stocks--about 14% of net assets--consisted primarily of
technology stocks whose earnings were driven by exports to countries such as the
U.S. These stocks generally outperformed the Nikkei and made a positive
contribution to the performance of the Series.
- --------------------------------------------------------------------------------
International Equity Series Investment Objective
Seeks long-term growth without undue risk to principal by investing primarily in
stocks of foreign issuers providing the potential for capital appreciation and
income.
- --------------------------------------------------------------------------------
2
<PAGE>
Investment Outlook
Overall, the Series expects to maintain a higher concentration in Europe
than the EAFE Index. This is based on our belief that European economic growth
will remain strong compared to Japan. In our opinion, European companies could
surprise securities analysts with better-than-expected profits, as U.S.
companies did early in fiscal 1995. We base this expectation on our observation
that interest rates and inflation in Europe are declining. European companies
are also reducing overhead and other costs to improve productivity.
Although the Japanese market rebounded in the later months of 1995, we
remain wary of this market. Many banks continue to have their debt ratings
downgraded by bond rating services amid continuing problems with bad loans. We
believe a "credit crunch" will continue to affect the ability of Japanese
industrial companies in Japan to expand.
In general, we believe established markets around the world stand to
benefit in the years ahead from what we see as very favorable long-term
developments in the 1990s--the disappearance of socialist regimes, the
privatization of state enterprises, the gradual breakdown of trade barriers and
the peaceful resolution of international disputes.
$10,000 Initial Investment* October 29, 1992 through December 31, 1995
<TABLE>
<CAPTION>
International Morgan Stanley Europe
Equity Asia Far East (EAFE)
Series Index
<S> <C> <C>
Dec. 31 '92 $10,030 $10,152
Mar. 31 '93 $10,090 $11,379
Jun. 30 '93 $10,150 $12,533
Sept. 30 '93 $10,801 $13,373
Dec. 31 '93 $11,632 $13,497
Mar. 31 '94 $11,669 $13,978
Jun. 30 '94 $11,810 $14,701
Sept. 30 '94 $12,042 $14,725
Dec. 31 '94 $11,931 $14,585
Mar. 31 '95 $12,323 $14,855
Jun. 30 '95 $12,499 $14,988
Sept. 30 '95 $13,225 $15,625
Dec. 31 '95 $13,609 $16,270
</TABLE>
<TABLE>
<CAPTION>
International Equity Series
Average Annual Total Returns*
- -----------------------------------------
<S> <C>
Lifetime +10.17%
One Year +13.98%
</TABLE>
Through December 31, 1995
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 $10,000 investment in both the International Equity
Series and the Morgan Stanley Europe Asia Far East (EAFE) Index for the period
from the Series' inception on October 29, 1992 through December 31, 1995. All
dividends and capital gains were reinvested. The Index is unmanaged, with no set
investment objective and does not include the "real world" costs of managing a
mutual fund. Earnings from a variable annuity investment compound tax-free until
withdrawal, so no adjustments were made for income taxes. The effect of an
expense limitation is included in the chart.
*Performance does not reflect insurance fees related to a variable product
investment nor the deferred sales charge that would apply to certain
withdrawals of investments held for less than eight years. Performance shown
here would have been reduced if such fees were included and the expense
limitation removed. For more information about fees, consult your variable
annuity prospectus.
3
<PAGE>
Delaware Group Premium Fund, Inc.-International Equity Series
Statement of Net Assets
December 31, 1995
<TABLE>
<CAPTION>
Market
Number Value
of Shares (U.S.$)
<S> <C> <C>
COMMON STOCK-91.62%
Australia-8.44%
CSR Limited............................................................... 762,966 $ 2,485,897
National Australia Bank................................................... 302,167 2,719,795
Pacific Dunlop............................................................ 716,926 1,679,920
-----------
6,885,612
-----------
Belgium-5.18%
Cimenteries CBR
Cementbedrijven......................................................... 460 185,616
*Cimenteries CBR
Cementbedrijven Put Warrants............................................ 460 2,720
Electrabel NPV............................................................ 10,700 2,545,100
G.I.B. Holdings........................................................... 33,700 1,479,502
G.I.B. Holdings-VVPR...................................................... 170 7,279
-----------
4,220,217
-----------
Canada-2.53%
BC Telecom................................................................ 113,800 2,065,222
-----------
2,065,222
-----------
France-6.84%
Alcatel Alsthom........................................................... 9,872 852,273
Campagnie de Saint Gobain................................................. 19,289 2,137,788
Elf Aquitaine............................................................. 34,259 2,527,533
Societe Television Francaise.............................................. 526 56,468
-----------
5,574,062
-----------
Germany-6.10%
Bayer..................................................................... 6,960 1,851,721
Continental............................................................... 57,200 809,264
Siemens................................................................... 4,205 2,315,056
-----------
4,976,041
-----------
Hong Kong-2.72%
Hong Kong Electric........................................................ 305,000 999,981
Wharf Holdings Limited.................................................... 366,000 1,218,911
-----------
2,218,892
-----------
Indonesia-1.37%
PT Bank Dagang Nasional................................................... 885,500 726,160
PT Semen Gresik........................................................... 140,000 391,878
-----------
1,118,038
-----------
<CAPTION>
Market
Number Value
of Shares (U.S.$)
<S> <C> <C>
COMMON STOCK (Continued)
Japan-13.93%
Amano..................................................................... 160,000 $ 2,016,448
Eisai..................................................................... 116,000 2,035,449
Hitachi................................................................... 168,000 1,693,816
Kinki Coca-Cola Bottling.................................................. 120,000 1,628,669
Matsushita Electric....................................................... 136,000 2,214,990
Nichido Fire & Marine..................................................... 220,000 1,770,208
-----------
11,359,580
-----------
Malaysia-2.07%
Oriental Holdings Berhad.................................................. 133,000 675,765
Sime Darby Berhad......................................................... 380,000 1,010,280
-----------
1,686,045
-----------
Netherlands-6.71%
Elsevier-CVA.............................................................. 119,500 1,595,321
Koninklijke Van Ommeren
Ceteco NV............................................................... 40,100 1,250,780
Royal Dutch Petroleum..................................................... 11,350 1,587,442
Unilever NV-CVA........................................................... 7,360 1,035,359
-----------
5,468,902
-----------
New Zealand-3.57%
Carter Holt Harvey Limited................................................ 277,800 599,333
Telecom Corp. of New Zealand.............................................. 535,784 2,311,829
-----------
2,911,162
-----------
Philippines-1.12%
Philippine Long Distance
Telephone Company ADR................................................... 16,900 910,487
-----------
910,487
-----------
Singapore-1.22%
Jardine Matheson
Holdings Limited........................................................ 145,622 997,511
-----------
997,511
-----------
Spain-2.98%
Banco Central Hispanoamer
S.A..................................................................... 25,449 516,045
Telefonica de Espana...................................................... 138,500 1,917,965
-----------
2,434,010
-----------
</TABLE>
4
<PAGE>
Statement of Net Assets (Continued)
<TABLE>
<CAPTION>
Market
Number Value
of Shares (U.S.$)
<S> <C> <C>
COMMON STOCK (Continued)
United Kingdom-26.84%
Bass plc.................................................................. 173,000 $ 1,931,175
Blue Circle Industries plc................................................ 342,000 1,818,584
British Airways plc....................................................... 230,000 1,664,027
British Gas plc........................................................... 500,000 1,971,744
Cable & Wireless plc...................................................... 225,000 1,606,893
Dalgety plc............................................................... 291,250 1,835,856
GKN plc................................................................... 162,000 1,959,292
Great Universal Stores plc................................................ 206,000 2,190,809
RTZ....................................................................... 105,100 1,527,303
Sears plc................................................................. 914,000 1,475,796
Taylor Woodrow plc........................................................ 855,000 1,559,734
Unigate plc............................................................... 368,000 2,348,207
-----------
21,889,420
-----------
Total Common Stock
(cost $69,878,090)...................................................... 74,715,201
-----------
<CAPTION>
Market
Principal Value
Amount** (U.S.$)
<S> <C> <C>
BONDS-0.03%
World Bank 10.625%
9/8/98.................................................................. Sp3,000,000 $ 25,780
-----------
Total Bonds (cost $25,194)................................................ 25,780
-----------
GOVERNMENT
OBLIGATIONS-1.80%
Bonos Y Obligation Del Estado
8.20% 2/28/09........................................................... Sp204,000,000 1,466,318
-----------
Total Government Obligations
(cost $1,308,092)....................................................... 1,466,318
-----------
MASTER REPURCHASE
AGREEMENTS-5.51%
With Chase Manhattan Bank
5.60% 1/2/96 (dated 12/29/95,
collateralized by $4,211,000
U.S. Treasury Notes 7.75%
due 11/30/99, market value
$4,581,998)............................................................. $4,489,000 4,489,000
-----------
Total Repurchase Agreements
(cost $4,489,000)....................................................... 4,489,000
-----------
TOTAL MARKET VALUE OF SECURITIES OWNED-98.96% (cost $75,700,376)............................. 80,696,299
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-1.04%........................................ 851,740
-----------
NET ASSETS APPLICABLE TO 6,217,817 SHARES ($.01 par value) OUTSTANDING;
EQUIVALENT TO $13.12 PER SHARE-100.00%..................................................... $81,548,039
===========
COMPONENTS OF NET ASSETS AT DECEMBER 31, 1995
Common stock, $.01 par value, 500,000,000 authorized to the Fund with
50,000,000 allocated to the Series......................................................... $72,995,760
Accumulated undistributed:
Net investment income***................................................................... 2,405,240
Net realized gain on investments***........................................................ 701,810
Net unrealized appreciation on investments and foreign currencies.......................... 5,445,229
-----------
Total net assets............................................................................. $81,548,039
===========
</TABLE>
- --------------------
*Non-income producing security for the year ended December 31, 1995.
**Principal amount is stated in the currency in which each bond is denominated.
***Accumulated net investment income includes net realized gain on foreign
currencies. During the current fiscal year, the Series reclassified $166,165
from accumulated net realized gain on investments to accumulated net
investment income.
Sp-Spanish pesetas
See accompanying notes
5
<PAGE>
Delaware Group Premium Fund, Inc.-International Equity Series
Statement of Operations
Year Ended December 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax $334,303)..................................... $2,247,629
Interest................................................................................ 430,301 $2,677,930
----------
EXPENSES:
Management fees......................................................................... 525,376
Custodian fees.......................................................................... 48,038
Salaries................................................................................ 17,309
Dividend disbursing, transfer agent fees and expenses................................... 9,204
Registration fees....................................................................... 6,098
Taxes other than income................................................................. 5,616
Reports to shareholders................................................................. 5,390
Professional fees....................................................................... 4,270
Directors' fees......................................................................... 1,624
Amortization of organization expenses................................................... 17
Other................................................................................... 5,184
----------
628,126
Less expenses absorbed by Delaware International Advisers Ltd........................... (67,625)
----------
560,501
----------
NET INVESTMENT INCOME................................................................... 2,117,429
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain on:
Investment transactions............................................................... 726,008
Foreign currencies.................................................................... 478,025
----------
Net realized gain....................................................................... 1,204,033
Net unrealized appreciation of investments and foreign currencies during the period..... 5,972,496
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCIES.................. 7,176,529
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................... $9,293,958
==========
</TABLE>
See accompanying notes
6
<PAGE>
Delaware Group Premium Fund, Inc.-International Equity Series
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Year
Ended Ended
12/31/95 12/31/94
<S> <C> <C>
OPERATIONS:
Net investment income................................................................... $ 2,117,429 $ 1,346,221
Net realized gain on investments and foreign currencies................................. 1,204,033 124,691
Net unrealized appreciation (depreciation) of investments
and foreign currencies during the period.............................................. 5,972,496 (1,593,702)
----------- -----------
Net increase (decrease) in net assets resulting from operations......................... 9,293,958 (122,790)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................................................................... (1,199,737) (117,179)
Net realized gain from security transactions............................................ (449,901) (16,740)
----------- -----------
(1,649,638) (133,919)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold............................................................... 22,650,087 43,657,308
Net asset value of shares issued upon reinvestment of dividends from
net investment income................................................................. 1,199,737 117,179
Net asset value of shares issued upon reinvestment of distributions from
net realized gain from security transactions.......................................... 449,901 16,740
----------- -----------
24,299,725 43,791,227
Cost of shares repurchased.............................................................. (8,045,244) (2,549,135)
----------- -----------
Increase in net assets derived from capital share transactions.......................... 16,254,481 41,242,092
----------- -----------
NET INCREASE IN NET ASSETS.............................................................. 23,898,801 40,985,383
NET ASSETS:
Beginning of period..................................................................... 57,649,238 16,663,855
----------- -----------
End of period (including undistributed net investment income of $2,405,240 and
$1,321,383, respectively)............................................................. $81,548,039 $57,649,238
=========== ===========
</TABLE>
See accompanying notes
7
<PAGE>
Delaware Group Premium Fund, Inc.-International Equity Series
Notes to Financial Statements
December 31, 1995
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 nine 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 and the Value 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's securities are valued. Money
market instruments having less than 60 days to maturity are valued at amortized
cost, which approximates market value.
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 values 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 the
accrual basis. Original issue discounts are accreted to interest income over the
lives of the respective securities.
Certain series 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 December
31, 1995, the International Equity Series had a liability for Investment
Management fees payable to DIAL for $42,104 and a liability for other expenses
payable to Delaware Management Company, Inc. (DMC) for $129.
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
year ended December 31, 1995 is $67,625.
Certain officers of DMC are officers, directors and/or employees of the Series.
These officers, directors and employees are paid no compensation by the Series.
The Series has engaged Delaware Service Company, Inc. ("DSC"), an affiliate of
DMC, to serve as dividend disbursing and transfer agent. For the year ended
December 31, 1995, the Series expensed $9,204 for these services. At
December 31, 1995, the International Equity Series had a liability for such fees
and other expenses payable to DSC for $120.
On April 3, 1995, Delaware Management Holdings, Inc., the indirect parent of
DMC, DIAL and DSC, through a merger transaction (the "Merger") became a wholly-
owned subsidiary of Lincoln National Corporation. Other than the resulting
change in ownership, the Merger will not materially change the manner in which
DMC, DIAL and DSC have heretofore conducted their relationships with the Series.
8
<PAGE>
Notes to Financial Statements (Continued)
3. Investments
During the year ended December 31, 1995, the International Equity Series made
purchases of $28,644,997 and sales of $12,951,634 of investments other than U.S.
Government securities and temporary cash investments.
At December 31, 1995, unrealized appreciation for federal income tax purposes
aggregated $4,995,923 of which $7,777,986 related to unrealized appreciation of
securities and $2,782,063 related to unrealized depreciation of securities.
The realized gain for federal income tax purposes was $726,008 for the year
ended December 31, 1995.
4. Capital Stock
Transactions in capital stock shares were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
12/31/95 12/31/94
<S> <C> <C>
Shares sold............................................................................ 1,858,798 3,638,259
Shares issued upon reinvestment of dividends from net investment income and
distributions from
net realized gain from security transactions......................................... 146,765 11,188
--------- ---------
2,005,563 3,649,447
Shares repurchased..................................................................... (654,821) (215,836)
--------- ---------
Net increase......................................................................... 1,350,742 3,433,611
========= =========
</TABLE>
The Series declared distributions of $0.113 per share from net realized gain
from security transactions and dividends of $0.420 per share from net investment
income, payable on January 29, 1996 to shareholders of record January 25, 1996.
The ex-dividend date was January 26, 1996.
5. Foreign Exchange Contracts
The following currency forward contracts were outstanding at December 31, 1995:
<TABLE>
<CAPTION>
Contract to In Exchange Settlement Unrealized
Deliver for Date Gain/(Loss)
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
85,920,000 Belgian Francs $3,000,000 1/31/96 $ 72,437
4,170,000 Deutsche Marks 3,000,000 1/31/96 92,658
4,671,000 Dutch Guilders 3,000,000 1/31/96 82,867
14,730,000 French Francs 3,000,000 1/31/96 (10,395)
746,745,000 Japanese Yen 7,500,000 1/31/96 209,660
--------
$447,227
========
</TABLE>
9
<PAGE>
Notes to Financial Statements (Continued)
6. Financial Highlights
Selected data for a share of the Series outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
International Equity Series
----------------------------------------------
10/29/92/1/
Year Ended to
12/31/95 12/31/94 12/31/93 12/31/92
<S> <C> <C> <C> <C>
Net asset value, beginning of period................................................ $11.8400 $11.6200 $10.0300 $10.0000
Income from investment operations:
Net investment income............................................................. 0.4194 0.2198 0.0523 0.0153
Net realized and unrealized gain from security transactions....................... 1.1906 0.0802 1.5477 0.0147
-------- -------- -------- --------
Total from investment operations.................................................. 1.6100 0.3000 1.6000 0.0300
-------- -------- -------- --------
Less distributions:
Dividends from net investment income.............................................. (0.2400) (0.0700) (0.0100) none
Distributions from net realized gain from security transactions................... (0.0900) (0.0100) none none
-------- -------- -------- --------
Total distributions............................................................... (0.3300) (0.0800) (0.0100) none
-------- -------- -------- --------
Net asset value, end of period...................................................... $13.1200 $11.8400 $11.6200 $10.0300
======== ======== ======== ========
Total return........................................................................ 13.98% 2.57% 15.97% 1.73%
Ratios/supplemental data:
Net assets, end of period (000's omitted)......................................... $81,548 $57,649 $16,664 $177
Ratio of expenses to average daily net assets..................................... 0.80% 0.80% 0.80% /2/
Ratio of expenses to average daily net assets prior to expense limitaiton......... 0.89% 1.01% 1.85% /2/
Ratio of net investment income to average net assets.............................. 3.69% 2.63% 1.85% /2/
Ratio of net investment income to average net assets prior to expense limitaiton.. 3.60% 2.42% 0.80% /2/
Portfolio turnover rate........................................................... 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.
10
<PAGE>
Delaware Group Premium Fund, Inc.-International Equity Series
Report of Independent Auditors
To the Shareholders and Board of Directors
Delaware Group Premium Fund, Inc.-International Equity Series
We have audited the accompanying statement of net assets of Delaware Group
Premium Fund, Inc.-International Equity Series as of December 31, 1995, 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 the each of the three years in the period ended
December 31, 1995 and the period from October 29, 1992 (date of initial public
offering) to December 31, 1992. These financial statements and financial
highlights are the responsibility of the Series' 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, 1995 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.-International Equity Series at December 31,
1995, 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 of the three years in the period ended December 31, 1995 and
the period from October 29, 1992 (date of initial public offering) to December
31, 1992, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Philadelphia, PA
February 9, 1996
- --------------------------------------------------------------------------------
A Report on Premium Fund's Annual Meeting
At an annual meeting of shareholders held on March 29, 1995, the following
matters were submitted for a shareholder vote: the election of directors, the
ratification of the selection of Ernst & Young LLP as independent auditors of
the Fund and the approval of a new investment management agreement. The new
investment management agreement was proposed in connection with the April 3,
1995, merger of Delaware Management Holdings, Inc. (the parent of Delaware
Management Company, Inc.) and a subsidiary of Lincoln National Corporation.
Whenever there is a change in control of an investment manager, the Investment
Company Act of 1940 requires shareholders to vote on a new investment management
agreement.
Below are the names of each director elected at the meeting as well as the
results of the other matters voted on by shareholders.
<TABLE>
<CAPTION>
Number of Votes/+/
------------------
For Against/Withheld Abstentions
<S> <C> <C> <C>
Election of Directors*:
Wayne A. Stork 28,056,542 1,129,907 --
Walter P. Babich 28,073,011 1,113,438 --
Anthony D. Knerr 28,051,129 1,135,321 --
Ann R. Leven 28,063,092 1,123,357 --
W. Thacher Longstreth 28,032,490 1,153,960 --
Charles E. Peck 28,057,779 1,128,670 --
Approval of the New Investment Management Agreement: 4,771,443 118,918 262,574
Selection of Ernst & Young LLP as Independent Auditors*: 27,692,406 232,186 1,261,857
</TABLE>
- --------------------
/+/ Please note that the results of this meeting were not audited by Ernst &
Young LLP.
* Voted upon by all shareholders of the Fund.
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