<PAGE>
OCTOBER 30, 1997
DELAWARE GROUP PREMIUM FUND, INC.
SUPPLEMENT TO PROSPECTUS DATED MAY 1, 1997
The following supplements the Prospectus.
Financial Highlights
The following unaudited financial highlights for the International
Equity Series are derived from the unaudited financial statements of the Series
for the six month period ended June 30, 1997. The data should be read in
conjunction with the financial statements and related notes which are
incorporated into the Statement of Additional Information by reference to
Delaware Group Premium Fund, Inc.'s (the "Fund") Semi-Annual Report for the six
months ended June 30, 1997. A copy of the Semi-Annual Report may be obtained
from the Fund upon request at no charge.
<PAGE>
International
Equity Series
---------------
Unaudited
1/1/97
through
6/30/97(1)
Net Asset Value, Beginning of Period.......... $15.1100
Income From Investment Operations
- ---------------------------------
Net Investment Income......................... 0.2182
Net Gains (Losses) on Securities
(both realized and unrealized)............. 1.8068
------
Total From Investment Operations........ 2.0250
------
Less Distributions
- -------------------
Dividends from Net Investment Income.......... (0.5450)
Distributions from Capital Gains.............. none
Total Distributions..................... (0.5450)
--------
Net Asset Value, End of Period................ $16.5900
========
- ------------
Total Return(2)............................... 13.95%(3)
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted) $186,527
Ratio of Expenses to Average Daily Net Assets. 0.80%
Ratio of Expenses to Average Daily Net Assets
Prior to Expense Limitation................ 0.91%
Ratio of Net Investment Income to Average
Daily Net Assets........................... 3.38%
Ratio of Net Investment Income to Average
Daily Net Assets Prior to Expense
Limitation................................. 3.27%
Portfolio Turnover Rate....................... 6%
Average Commission Rate Paid.................. $0.0190
- ----------
(1) Ratios have been annualized but total return has not been annualized.
(2) Total return does not reflect expenses that apply to the Separate Accounts
or to the related insurance policies and inclusion of these charges would
reduce total return figures for all periods shown.
(3) Total return reflects the expense limitation referenced in Expenses under
Management of the Fund.
<PAGE>
OCTOBER 30, 1997
DELAWARE GROUP PREMIUM FUND, INC.
SUPPLEMENT TO PROSPECTUS DATED MAY 1, 1997
The following supplements the Prospectus.
Financial Highlights
The following unaudited financial highlights for the Equity/Income,
Emerging Growth and Global Bond Series are derived from the unaudited financial
statements of the Series for the six month period ended June 30, 1997. The data
should be read in conjunction with the financial statements and related notes
which are incorporated into the Statement of Additional Information by reference
to Delaware Group Premium Fund, Inc.'s (the "Fund") Semi-Annual Report for the
six months ended June 30, 1997. A copy of the Semi-Annual Report may be obtained
from the Fund upon request at no charge.
<PAGE>
<TABLE>
<CAPTION>
Emerging
Equity/Income Growth Global Bond
Series Series Series
------------- ------ ------
Unaudited Unaudited Unaudited
1/1/97 1/1/97 1/1/97
through through through
6/30/97(1) 6/30/97(1) 6/30/97(1)
------------- ------ ------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period.......... $15.9800 $14.5600 $10.9600
Income From Investment Operations
- ---------------------------------
Net Investment Income......................... 0.1590 0.0053 0.3347
Net Gains (Losses) on Securities
(both realized and unrealized)............. 2.5410 0.7447 (0.3697)
------ ------ --------
Total From Investment Operations........ 2.7000 0.7500 (0.0350)
------ ------ --------
Less Distributions
- ------------------
Dividends from Net Investment Income.......... (0.1700) (0.0500) (0.2800)
Distributions from Capital Gains.............. (1.3500) (0.1800) (0.0850)
-------- -------- --------
Total Distributions..................... (1.5200) (0.2300) (0.3650)
-------- -------- --------
Net Asset Value, End of Period................ $17.1600 $15.0800 $10.5600
======== ======== ========
- ------------
Total Return(2)............................... 18.27%(3) 5.25%(3) (0.25%)(3)
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted) ..... $264,928 $77,004 $14,908
Ratio of Expenses to Average Daily Net Assets.. 0.71% 0.80% 0.80%
Ratio of Expenses to Average Daily Net Assets
Prior to Expense Limitation................ 0.71% 0.88% 1.08%
Ratio of Net Investment Income to Average
Daily Net Assets........................... 2.25% 0.10% 7.61%
Ratio of Net Investment Income to Average
Daily Net Assets Prior to Expense
Limitation................ 2.25% 0.02% 7.32%
Portfolio Turnover Rate....................... 54% 142% 107%
Average Commission Rate Paid.................. $0.0600 $0.0597 N/A
</TABLE>
(1) Ratios have been annualized but total return has not been annualized.
(2) Total return does not reflect expenses that apply to the Separate Accounts
or to the related insurance policies and inclusion of these charges would
reduce total return figures for all periods shown.
(3) Total return reflects the expense limitation referenced in Expenses under
Management of the Fund.
<PAGE>
OCTOBER 30, 1997
DELAWARE GROUP PREMIUM FUND, INC.
SUPPLEMENT TO PROSPECTUS DATED MAY 1, 1997
The following supplements the Prospectus.
Financial Highlights
The following unaudited financial highlights for the Decatur Total Return,
Delchester, Capital Reserves, Cash Reserve, DelCap and Delaware Series are
derived from the unaudited financial statements of the Series for the six month
period ended June 30, 1997. The data should be read in conjunction with the
financial statements and related notes which are incorporated into the Statement
of Additional Information by reference to Delaware Group Premium Fund, Inc.'s
(the "Fund") Semi-Annual Report for the six months ended June 30, 1997. A copy
of the Semi-Annual Report may be obtained from the Fund upon request at no
charge.
<PAGE>
<TABLE>
<CAPTION>
Decatur Total Delachester Capital Reserves
Return Series Series Series
------------- ----------- ----------------
Unaudited Unaudited Unaudited
1/1/97 1/1/97 1/1/97
through through through
6/30/97(1) 6/30/97(1) 6/30/97(1)
<S> <C> <C> <C>
Net Asset Value, Beginning of Period.......... $15.9800 $9.1700 $9.6900
Income From Investment Operations
- ---------------------------------
Net Investment Income......................... 0.1590 0.4363 0.3099
Net Gains (Losses) on Securities
(both realized and unrealized)............. 2.5410 0.1118 (0.0300)
------ ------ --------
Total From Investment Operations........ 2.7000 0.5481 0.2799
------ ------ --------
Less Distributions
- ------------------
Dividends from Net Investment Income.......... (0.1700) (0.4281) (0.3099)
Distributions from Capital Gains.............. (1.3500) none none
-------- -------- --------
Total Distributions..................... (1.5200) (0.4281) (0.3099)
-------- -------- --------
Net Asset Value, End of Period................ $17.1600 $9.2900 $9.6600
======== ======= =======
- ------------
Total Return(2)............................... 18.27%(3) 6.12% 2.94%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted) $264,928 $79,748 $27,694
Ratio of Expenses to Average Daily
Net Assets................................ 0.71% 0.70% 0.73%
Ratio of Expenses to Average Daily
Net Assets Prior to Expense
Limitation................................. 0.71% 0.70% 0.73%
Ratio of Net Investment Income to
Average Daily Net Assets................... 2.25% 9.59% 6.48%
Ratio of Net Investment Income to
Average Daily Net Assets Prior
to Expense Limitation...................... 2.25% 9.59% 6.48%
Portfolio Turnover Rate....................... 54% 104% 142%
Average Commission Rate Paid.................. $0.0600 N/A N/A
</TABLE>
<PAGE>
RESTUBBED TABLE
<TABLE>
<CAPTION>
Cash Reserves DelCap Delaware
Series Series Series
------------- --------- ---------
Unaudited Unaudited Unaudited
1/1/97 1/1/97 1/1/97
through through through
6/30/97(1) 6/30/97(1) 6/30/97(1)
<S> <C> <C> <C>
Net Asset Value, Beginning of Period.......... $10.0000 $15.8900 $16.6400
Income From Investment Operations
- ---------------------------------
Net Investment Income......................... 0.2431 0.0054 0.2277
Net Gains (Losses) on Securities
(both realized and unrealized)............. none 0.9146 1.5623
------- ------ ------
Total From Investment Operations........ 0.2431 0.9200 1.7900
------- ------ ------
Less Distributions
- -------------------
Dividends from Net Investment Income.......... (0.2431) none (0.4500)
Distributions from Capital Gains.............. none (0.8700) (1.0700)
-------- -------- --------
Total Distributions..................... (0.2431) (0.8700) (1.5200)
-------- -------- --------
Net Asset Value, End of Period................ $10.0000 $15.9400 $16.1900
======== ======== ========
- ------------
Total Return(2)............................... 2.47% 6.05%(3) 11.70%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted) $30,513 $97,029 $98,201
Ratio of Expenses to Average Daily
Net Assets................................ 0.62% 0.80% 0.66%
Ratio of Expenses to Average Daily
Net Assets Prior to Expense
Limitation................................. 0.62% 0.83% 0.66%
Ratio of Net Investment Income to
Average Daily Net Assets................... 4.94% 0.04% 3.13%
Ratio of Net Investment Income to
Average Daily Net Assets Prior
to Expense Limitation...................... 4.94% 0.01% 3.13%
Portfolio Turnover Rate....................... --- 147% 72%
Average Commission Rate Paid.................. N/A $0.0599 $0.0600
</TABLE>
(1) Ratios have been annualized but total return has not been annualized.
(2) Total return does not reflect expenses that apply to the Separate Accounts
or to the related insurance policies and inclusion of these charges would
reduce total return figures for all periods shown.
(3) Total return reflects the expense limitation referenced in Expenses under
Management of the Fund.
<PAGE>
OCTOBER 30, 1997
DELAWARE GROUP PREMIUM FUND, INC.
SUPPLEMENT TO PROSPECTUS DATED MAY 1, 1997
The following supplements the Prospectus.
Financial Highlights
The following unaudited financial highlights for the Decatur Total Return,
Delchester, Capital Reserves, Cash Reserve, DelCap, Delaware, Value, Trend,
International Equity and Global Bond Series are derived from the unaudited
financial statements of the Series for the six month period ended June 30, 1997.
The data should be read in conjunction with the financial statements and related
notes which are incorporated into the Statement of Additional Information by
reference to Delaware Group Premium Fund, Inc.'s (the "Fund") Semi-Annual Report
for the six months ended June 30, 1997. A copy of the Semi-Annual Report may be
obtained from the Fund upon request at no charge.
Unaudited financial highlights for the Strategic Income, Devon, Emerging
Markets, Convertible Securities and Quantum Series are derived from the
unaudited financial statements of the Series for the period May 1, 1997 (date of
initial public offering) through September 30, 1997 are also provided below. The
data should be read in conjunction with the financial statements and related
notes which are included with the Fund's Statement of Additional Information.
<PAGE>
<TABLE>
<CAPTION>
Decatur Total Delchester Capital Reserves Cash Reserves DelCap
Return Series Series Series Series Series
------------- --------- --------------- ------------- ---------
Unaudited Unaudited Unaudited Unaudited Unaudited
1/1/97 1/1/97 1/1/97 1/1/97 1/1/97
through through through through through
6/30/97(1) 6/30/97(1) 6/30/97(1) 6/30/97(1) 6/30/97(1)
------------- --------- --------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.. $15.9800 $9.1700 $9.6900 $10.0000 $15.8900
Income From Investment Operations
- ---------------------------------
Net Investment Income................... 0.1590 0.4363 0.3099 0.2431 0.0054
Net Gains (Losses) on Securities
(both realized and unrealized)....... 2.5410 0.1118 (0.0300) none 0.9146
--------- -------- -------- -------- --------
Total From Investment Operations 2.7000 0.5481 0.2799 0.2431 0.9200
--------- -------- -------- -------- --------
Less Distributions
- ------------------
Dividends from Net Investment Income... (0.1700) (0.4281) (0.3099) (0.2431) none
Distributions from Capital Gains........ (1.3500) none none none (0.8700)
--------- -------- -------- -------- --------
Total Distributions............... (1.5200) (0.4281) (0.3099) (0.2431) (0.8700)
--------- -------- -------- -------- --------
Net Asset Value, End of Period.......... $17.1600 $9.2900 $9.6600 $10.0000 $15.9400
========= ========= ======== ======== ========
- ------------
Total Return(2)......................... 18.27%(3) 6.12% 2.94% 2.47% 6.05%(3)
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted) $264,928 $79,748 $27,694 $30,513 $97,029
Ratio of Expenses to Average Daily
Net Assets............................. 0.71% 0.70% 0.73% 0.62% 0.80%
Ratio of Expenses to Average Daily Net
Assets Prior to Expense Limitation.... 0.71% 0.70% 0.73% 0.62% 0.83%
Ratio of Net Investment Income to Average
Daily Net Assets...................... 2.25% 9.59% 6.48% 4.94% 0.04%
Ratio of Net Investment Income to Average
Daily Net Assets Prior to Expense
Limitation............................ 2.25% 9.59% 6.48% 4.94% 0.01%
Portfolio Turnover Rate................. 54% 104% 142% --- 147%
Average Commission Rate Paid............ $0.0600 N/A N/A N/A $0.0599
</TABLE>
<PAGE>
RESTUBBED TABLE
<TABLE>
<CAPTION>
Delaware International Value Trend Global Bond
Series Equity Series Series Series Series
--------- ------------- -------- --------- ----------
Unaudited Unaudited Unaudited Unaudited Unaudited
1/1/97 1/1/97 1/1/97 1/1/97 1/1/97
through through through through through
6/30/97(1) 6/30/97(1) 6/30/97(1) 6/30/97(1) 6/30/97(1)
--------- ------------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.. $16.6400 $15.1100 $14.5000 $14.5600 $10.9600
Income From Investment Operations
- ---------------------------------
Net Investment Income................... 0.2277 0.2182 0.1145 0.0053 0.3347
Net Gains (Losses) on Securities
(both realized and unrealized)....... 1.5623 1.8068 2.1855 0.7447 (0.3697)
-------- -------- -------- -------- ---------
Total From Investment Operations 1.7900 2.0250 2.3000 0.7500 (0.0350)
-------- -------- -------- -------- ---------
Less Distributions
- ------------------
Dividends from Net Investment Income... (0.4500) (0.5450) (0.1100) (0.0500) (0.2800)
Distributions from Capital Gains........ (1.0700) none (0.9300) (0.1800) (0.0850)
-------- -------- -------- -------- ---------
Total Distributions............... (1.5200) (0.5450) (1.0400) (0.2300) (0.3650)
-------- -------- -------- -------- ---------
Net Asset Value, End of Period.......... $16.1900 $16.5900 $15.7600 $15.0800 $10.5600
======== ======== ======== ======== =========
- ------------
Total Return(2)......................... 11.70% 13.95%(3) 16.89%(3) 5.25%(3) (0.25%)(3)
- ------------
Ratios/Supplemental Data
- --------------------------
Net Assets, End of Period (000's omitted) $98,201 $186,527 $50,152 $77,004 $14,908
Ratio of Expenses to Average Daily
Net Assets............................. 0.66% 0.80% 0.80% 0.80% 0.80%
Ratio of Expenses to Average Daily Net
Assets Prior to Expense Limitation.... 0.66% 0.91% 0.93% 0.88% 1.08%
Ratio of Net Investment Income to Average
Daily Net Assets...................... 3.13% 3.38% 1.19% 0.10% 7.61%
Ratio of Net Investment Income to Average
Daily Net Assets Prior to Expense
Limitation............................ 3.13% 3.27% 1.06% 0.02% 7.32%
Portfolio Turnover Rate................. 72% 6% 58% 142% 107%
Average Commission Rate Paid............ $0.0600 $0.0190 $0.0596 $0.0597 N/A
</TABLE>
(1) Ratios have been annualized but total return has not been annualized.
(2) Total return does not reflect expenses that apply to the Separate Accounts
or to the related insurance policies and inclusion of these charges would
reduce total return figures for all periods shown.
(3) Total return reflects the expense limitation referenced in Expenses under
Management of the Fund.
<PAGE>
<TABLE>
<CAPTION>
Strategic Income Devon Emerging Convertible Quantum
Series Series Markets Series Securities Series Series
---------------- ---------- -------------- ----------------- ------
Unaudited Unaudited Unaudited Unaudited Unaudited
5/1/97(1) 5/1/97(1) 5/1/97(1) 5/1/97(1) 5/1/97(1)
through through through through through
9/30/97 9/30/97 9/30/97 9/30/97 9/30/97
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.......... $10.0000 $10.0000 $10.0000 $10.0000 $10.0000
Income From Investment Operations
- ---------------------------------
Net Investment Income......................... 0.2040 0.0821 0.0336 0.2500 0.0366
Net Gains (Losses) on Securities
(both realized and unrealized)............. 0.3660 1.9479 0.5764 1.7300 2.2534
------ ------ ------ ------ ------
Total From Investment Operations........ 0.5700 2.0300 0.6100 1.9800 2.2900
------ ------ ------ ------ ------
Less Distributions
- ------------------
Dividends from Net Investment Income.......... none none none none none
Distributions from Capital Gains.............. none none none none none
---- ---- ---- ---- ----
Total Distributions..................... none none none none none
---- ---- ---- ---- ----
Net Asset Value, End of Period................ $10.5700 $12.0300 $10.6100 $11.9800 $12.2900
======== ======== ======== ======== ========
- ------------
Total Return(2)............................... 5.70%(3) 20.30% 6.10% 19.80% 22.90%(3)
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)..... $5,893 $9,456 $5,814 $3,196 $4,586
Ratio of Expenses to Average Daily Net Assets. 0.80% 0.80% 1.50% 0.80% 0.80%
Ratio of Expenses to Average Daily Net Assets
Prior to Expense Limitation................ 1.53% 1.22% 2.74% 3.57% 1.69%
Ratio of Net Investment Income to Average
Daily Net Assets........................... 7.44% 3.25% 1.16% 6.61% 1.15%
Ratio of Net Investment Income to Average
Daily Net Assets Prior to Expense
Limitation................................ 6.71% 2.83% (0.08%) 3.84% 0.26%
Portfolio Turnover Rate....................... 86% 154% 7% 274% 96%
Average Commission Rate Paid.................. N/A $0.0600 $0.0038 $0.0600 N/A
</TABLE>
(1) Date of initial public offering; ratios have been annualized but total
return has not been annualized.
(2) Total return does not reflect expenses that apply to the Separate Accounts
or to the related insurance policies and inclusion of these charges would
reduce total return figures for all periods shown.
(3) Total return reflects the expense limitation referenced in Expenses under
Management of the Fund.
<PAGE>
OCTOBER 30, 1997
DELAWARE GROUP PREMIUM FUND, INC.
SUPPLEMENT TO STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 1997
The following provides updated information in the section of the
Statement of Additional Information entitled Performance Information.
<TABLE>
<CAPTION>
Average Annual Total Return*
Decatur
Total Capital Cash
Return Delchester Reserves Reserve Delaware DelCap
<S> <C> <C> <C> <C> <C> <C> <C>
1 year ended 1 year ended
6/30/97 33.25% 4.74% 7.33% 4.99% 22.37% 6/30/97 5.72%
3 years ended 3 years ended
6/30/97 25.14% 10.79% 7.06% 5.04% 18.24% 6/30/97 18.08%
5 years ended 5 years ended
6/30/97 18.86% 10.26% 5.88% 4.10% 14.27% 6/30/97 14.79%
Period 7/28/88** Period 7/12/91**
through 6/30/97 12.96% 10.56% 6.92% 5.29% 13.17% through 6/30/97 11.38%
International Global
Equity Value Trend Bond
1 year ended 1 year ended 1 year ended
6/30/97 25.13% 6/30/97 31.70% 1.08% 6/30/97 9.65%
3 years ended 3 years ended Period 5/2/96**
6/30/97 16.34% 6/30/97 22.30% 19.06% through 6/30/97 9.82%
Period 10/29/92** Period 12/27/93**
through 6/30/97 14.21% through 6/30/97 18.71% 15.38%
3
Aggregate Total Return
Strategic Emerging Convertible
Income Devon Markets Securities Quantum
Period 5/1/97**
through 9/30/97 5.70% 20.30% 6.10% 19.80 22.90%
</TABLE>
* The respective investment manager elected to waive voluntarily the portion
of its annual compensation under its Investment Management Agreement with
each Series to limit operating expenses of the Series to 0.80%. In the
absence of such voluntary waiver, performance would have been affected
negatively.
** Date of initial public offering.
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return*
Decatur
Total Capital Cash
Return Delchester Reserves Reserve Delaware DelCap
3 months ended 3 months ended
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/97 15.29% 4.74% 2.78% 1.26% 10.80% 6/30/97 13.94%
6 months ended 6 months ended
6/30/97 18.27% 6.12% 2.94% 2.47% 11.70% 6/30/97 6.05%
9 months ended 9 months ended
6/30/97 27.50% 2.91% 5.39% 3.72% 19.38% 6/30/97 2.07%
1 year ended 1 year ended
6/30/97 33.25% 15.74% 7.33% 4.99% 22.37% 6/30/97 5.72%
3 years ended 3 years ended
6/30/97 95.98% 35.99% 22.72% 15.88% 65.31% 6/30/97 64.65%
5 years ended 5 years ended
6/30/97 137.24% 63.00% 33.09% 22.23% 94.83% 6/30/97 99.30%
Period 7/28/88** Period 7/12/91**
through 6/30/97 196.74% 144.94% 81.64% 58.41% 201.69% through 6/30/97 90.34%
</TABLE>
* The respective investment manager elected to waive voluntarily the portion
of its annual compensation under its Investment Management Agreement with
each Series to limit operating expenses of the Series to 0.80%. In the
absence of such voluntary waiver, performance would have been affected
negatively.
** Date of initial public offering.
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return*
International Global
Equity Value Trend Bond
<S> <C> <C> <C> <C> <C> <C>
3 months ended 3 months ended 3 months ended
6/30/97 9.94% 6/30/97 15.29% 11.87% 6/30/97 2.91%
6 months ended 6 months ended 6 months ended
6/30/97 13.95% 6/30/97 16.89% 5.25% 6/30/97 (0.25%)
9 months ended 9 months ended Period 5/2/96**
6/30/97 21.86% 6/30/97 30.28% 3.05% through 6/30/97 11.51%
1 year ended 1 year ended
6/30/97 25.13% 6/30/97 31.70% 1.08%
3 years ended 3 years ended
6/30/97 57.49% 6/30/97 82.92% 68.77%
Period 10/29/92** Period 12/27/93**
through 6/30/97 85.99% through 6/30/97 82.55% 65.23%
Strategic Emerging Convertible
Income Devon Markets Securities Quantum
3 months ended
9/30/97 3.32% 10.37% (2.12%) 15.30% 13.90%
Period 5/1/97***
through 9/30/97 5.70% 20.30% 6.10% 19.80% 22.90%
</TABLE>
* The respective investment manager elected to waive voluntarily the
portion of its annual compensation under its Investment Management
Agreement with each Series to limit operating expenses of the Series to
0.80%. In the absence of such voluntary waiver, performance would have
been affected negatively.
** Date of initial public offering.
*** Date of initial public offering; total return for this short of a time
period may not be representative of longer term results.
The 30-day yield of Strategic Income Series as of September 30, 1997
was 5.59%.
<PAGE>
The following replaces the section of the Statement of Additional Information
entitled Financial Statements.
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditor for each Series of
the Fund and, in its capacity as such, audits the financial statements of each
Series contained in the Fund's Annual Report. With the exception of the
Strategic Income, Devon, Emerging Markets, Convertible Securities and Quatum
Series, each Series' Statements of Net Assets, Statements of Assets and
Liabilities, Statements of Operations, Statements of Changes in Net Assets and
Notes to Financial Statements, as well as the report of Ernst & Young LLP,
independent auditor, for the year ended December 31, 1996 are included in the
Fund's Annual Report to shareholders. The financial statements and the report of
Ernst & Young LLP listed above are incorporated by reference from the Annual
Report into this Part B. Unaudited financial statements and the notes relating
thereto for the period ended June 30, 1997 for the Decatur Total Return,
Delchester, Capital Reserves, Cash Reserve, DelCap, Delaware, Value, Trend,
International Equity and Global Bond Series are incorporated by reference from
the Semi-Annual Report into Part B. Unaudited financial information for the
period May 1, 1997 (date of initial public offering) through September 30, 1997
for the Strategic Income, Devon, Emerging Markets, Convertible Securities and
Quantum Series follows.
<PAGE>
Delaware Group Premium Funds, Inc. - Strategic Income Series
Statement of Net Assets
September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Market
Principal Value
Corporate Bonds - 43.48% Amount* (U.S. Dollars)
---------------- -----------------
<S> <C> <C> <C> <C>
Aerospace & Defense - 2.73%
Atlas Air sr notes 10.75% 08/01/05 . . . . . $ 100,000 $ 105,250
Lockheed notes 6.75% 03/15/03 . . . . . 55,000 55,481
-----------------
160,731
-----------------
Banking,Finance & Insurance - 0.45%
Credit Foncier de France sr sub notes 8.00% 01/14/02 . . . . . 25,000 26,344
-----------------
26,344
-----------------
Building & Materials - 1.32%
Reliant Building sr sub notes 10.875% 05/01/04 . . . . . 75,000 77,813
-----------------
77,813
-----------------
Cable, Media & Publishing - 2.74%
STC Broadcasting sr sub notes 11.00% 03/15/07 . . . . . 150,000 161,250
-----------------
161,250
-----------------
Chemicals - 1.76%
Harris Chemical North America sr sub notes 10.75% 10/15/03 . . . . . 75,000 77,719
Hydrochem Industrial sr sub notes 10.375% 08/01/07 . . . . . 25,000 25,781
-----------------
103,500
-----------------
Computer & Technology - 1.16%
Decisionone Corporate Notes 9.75% 08/01/07 . . . . . 25,000 26,125
Decisionone Holdings Units 0.00% 08/01/08 . . . . . 25,000 16,625
Precise Technology sr sub notes 11.125% 06/15/07 . . . . . 25,000 25,563
----------------
68,313
----------------
Electronics & Electrical Equipment - 0.44%
Insilco sr sub notes 10.25% 08/15/07 . . . . . 25,000 25,813
----------------
25,813
----------------
Energy - 3.44%
Transamerican Energy sr notes 11.50% 06/15/02 . . . . . 125,000 125,000
United Refining 10.75% 06/15/07 . . . . . 75,000 77,625
----------------
202,625
----------------
Food,Beverage & Tobacco - 3.79%
AFC Enterprises sr sub notes 10.25% 05/15/07 . . . . . 15,000 15,787
CFP Holdings sr notes 11.625% 01/15/04 . . . . . 100,000 103,000
Fleming sr sub notes 10.50% 12/01/04 . . . . . 100,000 104,750
----------------
223,537
----------------
Healthcare & Pharmaceuticals - 0.57%
Cardinal Health notes 6.00% 01/15/06 . . . . . 35,000 33,644
----------------
33,644
----------------
Industrial Machinery - 2.55%
DiGiorgio sr notes 10.00% 06/15/07 . . . . . 75,000 74,813
Embotelladora Andina notes 7.00% 10/01/07 . . . . . 50,000 49,938
Roller Bearing Company of America sr sub nts 9.625% 06/15/07 . . . . . 25,000 25,688
----------------
150,439
----------------
Leisure,Lodging & Entertainmt - 0.45%
Hollywood Theaters sr sub notes 10.625% 08/01/07 . . . . . 25,000 26,563
----------------
26,563
----------------
Metals & Mining - 4.52%
Barrick Gold deb 7.50% 05/01/07 . . . . . 25,000 26,250
Keystone Consolidated Industries sr notes 9.625% 08/01/07 . . . . . 25,000 25,688
Westmin Resources sr notes 11.00% 03/15/07 . . . . . 200,000 214,500
----------------
266,438
----------------
<PAGE>
Miscellaneous - 1.34%
Burke Industries sr notes 10.00% 08/15/07 . . . . . 25,000 25,625
Huntsman sr sub notes 9.50% 07/01/07 . . . . . 25,000 26,250
Ultramar Credit notes 8.625% 07/01/02 . . . . . 25,000 27,063
----------------
78,938
----------------
Packaging & Containers - 2.21%
Stone Container sr sub notes 12.25% 04/01/02 . . . . . 125,000 130,156
----------------
130,156
----------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Paper & Forest Products - 0.43%
Drypers sr notes 10.25% 06/15/07 . . . . . 25,000 25,188
----------------
25,188
----------------
Retail - 5.20%
Central Tractor sr notes 10.625% 04/01/07 . . . . . 50,000 53,000
Chief Auto Parts sr notes 10.50% 05/15/05 . . . . . 100,000 101,000
Leslie's Poolmart sr notes 10.375% 07/15/04 . . . . . 25,000 26,000
Wilsons The Leather Expert sr notes 11.25% 08/15/04 . . . . . 125,000 126,250
----------------
306,250
----------------
Telecommunications - 3.11%
Metrocall sr sub notes 10.375% 10/01/07 . . . . . 25,000 25,531
Paging Network sr sub notes 10.125% 08/01/07 . . . . . 150,000 157,500
----------------
183,031
----------------
Textiles & Furniture - 3.97%
Anvil Knitwear sr notes 10.875% 03/15/07 . . . . . 200,000 208,000
Riddell Sports sr notes 10.50% 07/15/07 . . . . . 25,000 26,250
----------------
234,250
----------------
Transportation & Shipping - 1.32%
Chemical Leaman sr notes 10.375% 06/15/05 . . . . . 50,000 52,313
Continental Airlines pass thru cert 7.206% 12/30/05 . . . . . 25,000 25,313
----------------
77,626
----------------
Total Corporate Bonds (cost of $2,499,987) 2,562,449
----------------
Foreign Bonds - 26.91%
Australia - 2.38%
Queensland Treasury Global 8.00% 08/14/01 . . . . . A$ $ 130,000 102,313
Toyota Finance Australia 7.00% 12/05/01 . . . . . 50,000 37,922
----------------
140,235
----------------
Canada - 2.43%
Government of Canada 10.25% 03/15/14 . . . . . C$ 100,000 103,117
Nippon Telegraph and Telephone 10.25% 10/19/99 . . . . . 50,000 39,864
----------------
142,981
----------------
Greece - 1.55%
Hellenic Republic 11.00% 11/26/99 . . . . . Grd 25,000,000 91,543
----------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Italy - 2.75%
Italian Government 9.50% 02/01/01 . . . . . Itl 250,000,000 162,317
----------------
162,317
----------------
New Zealand - 5.22%
New Zealand Government 6.50% 02/15/00 . . . . . NZ$ 40,000 25,478
New Zealand Government 10.00% 03/15/02 . . . . . 80,000 57,756
New Zealand Government 8.00% 11/15/06 . . . . . 320,000 224,562
-----------------
307,796
-----------------
South Africa - 4.35%
Electric Supply Communication 11.00% 06/01/08 . . . . . Zar 400,000 71,129
Republic of South Africa 12.50% 01/15/02 . . . . . 900,000 185,341
-----------------
256,470
-----------------
Sweden - 4.40%
Swedish Government 10.25% 05/05/00 . . . . . Swk 400,000 59,109
Swedish Government 10.25% 05/05/03 . . . . . 500,000 80,159
Swedish Government 8.00% 08/15/07 . . . . . 800,000 119,863
-----------------
259,131
-----------------
United Kingdom - 3.82%
Northumbrian Water Group 9.25% 02/01/02 . . . . . Gbp 40,000 69,597
United Kingdom Treasury 8.00% 06/10/03 . . . . . 90,000 155,820
-----------------
225,417
-----------------
Total Foreign Bonds (cost of $1,574,646) 1,585,890
-----------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Asset-Backed Securities- 1.28%
CIT Group Securitization-Series 95-2 A2 6.00% 05/15/26 . . . . . $ 25,000 $ 24,908
First Union Residential Securitization Tax 96-2 6.46% 09/25/11 . . . . . 25,000 24,977
MetLife Capital Equipment Loan Trust Series 97-AA 6.85% 05/20/08 . . . . . 25,000 25,488
-----------------
Total Asset-Backed Securities (cost of $ 74,769) 75,373
-----------------
Collateralized Mortgage Obligations -7.20%
Asset Securization Corp Series 96 - D2 A1 6.92% 02/14/29 . . . . . 24,331 24,848
First Union-Lehman Brothers Commercial
Mortgage-Series 97-C1 A1 7.15% 02/18/04 . . . . . 48,968 50,269
Merrill Lynch Mortgage Investors-C1-A1 6.95% 06/18/29 . . . . . 24,776 25,272
Morgan Stanley Capital Trust-97-C1 Class A1A 6.85% 02/15/20 . . . . . 23,586 23,841
Nomura Asset Securities - Series 95-MD3 A1A 8.17% 03/04/20 . . . . . 22,307 23,377
OAK 1997-C A3 6.65% 11/15/27 . . . . . 25,000 25,031
Residential Accredit Loans
Series 96-QS2 A6 7.45% 04/25/23 . . . . . 25,000 25,328
Series 96-QS3 AI3 7.29% 06/25/26 . . . . . 65,000 65,691
Series 97-QS6 A 7.50% 06/25/12 . . . . . 101,108 105,295
Series 1997-QS4 A3 7.25% 05/25/27 . . . . . 25,000 25,250
Residential Funding Mortgage - Series 1994-S10 6.50% 03/25/09 . . . . . 30,000 29,991
Total Collateralized Mortgage Obbligations -----------------
(cost of $418,589) 424,193
-----------------
Agency Mortgage-Backed Securities - 4.28%
Federal Home Loan Mortgage 6.00% 11/01/26 . . . . . 22,543 21,782
Federal Home Loan Mortgage 7.00% 03/01/11 . . . . . 83,157 84,482
Federal National Mortgage Association (NOV 97 TBA) 6.00% 11/01/04 . . . . . 100,000 98,469
Government National Mortgage Association 7.00% 08/15/23 . . . . . 47,807 48,076
-----------------
Total Agency-Backed Securities (cost of $ 250,066) 252,809
-----------------
<PAGE>
U.S. Treasury Obligations - 8.81%
U.S. Treasury Bond 7.88% 08/15/01 . . . . . 130,000 138,343
U.S. Treasury Bond 7.25% 08/15/04 . . . . . 130,000 138,352
U.S. Treasury Bond 6.25% 08/15/23 . . . . . 35,000 33,993
U.S. Treasury Note 6.25% 02/15/07 . . . . . 25,000 25,138
U.S. Treasury Note 6.625% 05/15/07 . . . . . 75,000 77,496
U.S. Treasury Note 6.25% 06/30/02 . . . . . 25,000 25,242
U.S. Treasury Note 7.50% 02/15/05 . . . . . 65,000 70,171
U.S. Treasury Note 6.75% 04/30/00 . . . . . 10,000 10,210
-----------------
Total Government Bonds (cost of $513,120) 518,945
-----------------
REPURCHASE AGREEMENTS - 12.49%
With J.P. Morgan Securities 6.00% 10/1/97 ( dated 9/30/97,
collateralized by $242,000 U.S. Treasury Notes 6.625%
due 6/30/01, market value $251,607) 246,000 246,000
With PaineWebber 6.00% 10/1/97 ( dated 9/30/97,
collateralized by $151,000 U.S. Treasury Notes 5.875%
due 9/30/02, market value $150,104 and $97,000
U.S. Treasury Notes 5.375% due 5/31/98, market
value $98,409) 244,000 244,000
With Prudential Bache 6.05% 10/1/97 ( dated 9/30/97,
collateralized by $147,000 U.S. Treasury Notes 5.875% due
2/28/99, market value $147,537 and $104,000 U.S. Treasury
Notes 5.875% due 3/31/99, market value $103,784) 246,000 246,000
-----------------
Total Repurchase Agreements (cost $736,000) 736,000
-----------------
TOTAL MARKET VALUE OF SECURITIES - 104.45% 6,155,659
(Cost $6,067,097)
LIABILITIES NET OF RECEIVABLES AND OTHER ASSETD - (4.45%) (262,217)
NET ASSETS APPLICABLE TO 557,313 SHARES ($.01 PAR VALUE)
-----------------
OUTSTANDING; EQUIVALENT TO $10.57 PER SHARE - 100.00% $5,893,442
=================
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
COMPONENTS OF NET ASSETS AT SEPTEMBER 30, 1997:
Common stock, $.01 par value, 500,000,000 shares
authorized to the Fund with 50,000,000 shares
allocated to the series $5,678,628
Accumulated undistributed:
Net investment income 109,270
Net realized gain on investments 16,962
Net unrealized appreciation of investments 88,582
-----------------
Total net assets $5,893,442
=================
-------------------------------------------------------------
Principal amount is stated in the currency in which each
security is denominated.
A$ - Australian Dollar
C$ - Canadian Dollar
Gbp - British Pounds
Grd - Greek Drakma
Itl - Italian Lire
NZ$ - New Zealand Dollar
Zar - South Africa Rand
Swk - Swedish Kroner
$ - U.S. Dollar
Summary of Abbreviations:
nts - notes
sr - senior
sub - subordinated
See accompanying notes
</TABLE>
<PAGE>
Delaware Group Premium Funds, Inc. - Strategic Income Series
Statement of Assets and Liabilities
September 30, 1997
(Unaudited)
ASSETS:
Investments at market (cost $6,067,097) $6,155,659
Receivable for fund shares sold 73,399
Interest receivable 110,933
Cash and foreign currencies 27,202
----------
Total assets 6,367,193
----------
LIABILITIES:
Payable for securities purchased 461,811
Other accounts payable and accrued expenses 11,940
----------
Total liabilities 473,751
----------
TOTAL NET ASSETS $5,893,442
==========
See accompanying notes
<PAGE>
Delaware Group Premium Funds, Inc. - Strategic Income Series
Statement of Operations
For the period May 1, 1997* to September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 125,758 $ 125,758
--------- ---------
EXPENSES:
Management fees 9,872
Custodian fees 4,309
Professional fees 3,207
Registration fees 2,285
Accounting fees and salaries 787
Reports and statements to shareholders 550
Taxes (other than taxes on income) 148
Directors' fees 132
Dividend disbursing and transfer agent fees and expenses 100
Other 1,770
---------
23,160
Less expenses absorbed by Delaware Management Company, Inc. (11,109) 12,051
--------- ---------
NET INVESTMENT INCOME 113,707
---------
NET REALIZED AND UNREALIZED GAIN(LOSS)
ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on:
Investment transactions 16,962
Foreign currencies (4,437)
---------
Net realized gain 12,525
Net unrealized appreciation during the period
on investments and foreign currencies 88,582
---------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS AND FOREIGN CURRENCIES 101,107
---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 214,814
- ------------------------- =========
</TABLE>
* Date of commencement of operations.
See accompanying notes
<PAGE>
Delaware Group Premium Funds, Inc. - Strategic Income Series
Statement of Changes in Net Assets
For the period May 1, 1997* to September 30, 1997
(Unaudited)
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 113,707
Net realized gain on investments
and foreign currencies 12,525
Net unrealized depreciation during the period
on investments and foreign currencies 88,582
------------
Net increase in net assets resulting
from operations 214,814
------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold: 6,285,755
Net asset value of shares issued upon reinvestment
of dividends from net investment income: -
------------
6,285,755
Cost of shares repurchased: (607,127)
------------
Increase in net assets derived from capital
share transactions 5,678,628
------------
NET INCREASE IN NET ASSETS 5,893,442
NET ASSETS:
Beginning of period -
------------
End of period $ 5,893,442
- ---------------------- ============
* Date of commencement of operations.
See accompanying notes
<PAGE>
Financial Highlights
Selected data for each share of the Fund outstanding throughout the period was
as follows:
Strategic
Income Series
Unaudited
5/1/97 (1)
to
9/30/97
--------------
Net asset value, beginning of period $ 10.0000
Income from investment operations:
Net investment income 0.2040
Net realized and unrealized gain from investments
& foreign currencies 0.3660
-----------
Total from investment operations 0.5700
-----------
Net asset value, end of period $ 10.5700
===========
Total return 5.70%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $5,893
Ratio of expenses to average net assets 0.80%
Ratio of expenses to average net assets prior to expense
limitation 1.53%
Ratio of net investment income to average net assets 7.44%
Ratio of net investment income to average net assets prior
to expense limitation 6.71%
Portfolio turnover 86%
- ---------------------------
(1) Date of commencement of trading; ratios and portfolio turnover have been
annualized and total return has not been annualized.
<PAGE>
DELAWARE GROUP PREMIUM FUND, INC. -
STRATEGIC INCOME SERIES
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
Delaware Group Premium Fund, Inc. (the "Fund") is registered as a diversified
open-end investment company under the Investment Company Act of 1940, as
amended. The Fund is organized as a Maryland Corporation and offers 15 series:
The Decatur Total Return Series, the Delchester Series, the Capital Reserves
Series, the Cash Reserves Series, the Delcap Series, the Delaware Series, the
International Equity Series, the Value Series, the Trend Series, the Global Bond
Series, the Strategic Income Series, the Devon Series, the Emerging Markets
Series, the Convertible Securities Series, and the Quantum Series (the
"Series"). The shares of the Fund are sold only to separate accounts of life
insurance companies.
The objective of the Strategic Income Series is to seek a high current income
and total return by using a multi-sector investment approach, investing
primarily in three sectors of the fixed-income securities market: high-yield,
higher-risk securities; investment grade fixed-income securities; and foreign
government and other foreign fixed-income securities. The Series may also invest
in U.S. equity securities.
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 the close of the NYSE 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. Securities listed on a foreign exchange are
valued at the last quoted sales price before the Fund is valued. Long-term debt
securities are valued by an independent pricing service and such prices are
believed to reflect the fair value of such securities. Money market instruments
having less than 60 days to maturity are valued at amortized cost which
approximates market value. Other securities and assets for which market
quotations are not readily available are valued at fair value as determined in
good faith by or under the direction of the Fund's Board of Directors.
Federal Income Taxes - The Fund intends to qualify as a regulated investment
company and make the requisite distributions to shareholders. Accordingly, no
provision for federal income taxes has been made in the financial statements.
Income and capital gain distributions are determined in accordance with federal
income tax regulations which may differ from generally accepted accounting
principles.
<PAGE>
Repurchase Agreements - The Fund 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 Fund's
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 Currency Transactions - Transactions denominated in foreign currencies
are recorded in the Fund's records at the current prevailing exchange rates. 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. Transaction gains or losses resulting from
changes in exchange rates during the reporting period or upon settlement of the
foreign currency transaction are reported in operations for the current period.
It is not practical to isolate that portion of both realized and unrealized
gains and losses on investments in equity securities in the statement of
operations that result from fluctuations in foreign currency exchange rates. The
Fund does isolate that portion of gains and losses on investments in debt
securities which are due to changes in the foreign exchange rate from that which
are due to changes in market prices of debt securities. The Fund reports certain
foreign currency related transactions as components of realized gains for
financial reporting purposes, whereas such components are treated as ordinary
income (loss) for federal income tax purposes.
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. 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. Original issue discounts are accreted to
interest income over the lives of the respective securities. Withholding taxes
on foreign interest have been provided for in accordance with the Fund's
understanding of the applicable country's tax rules and rates. The Fund declares
and pays dividends for net investment income quarterly and pay distributions
from net realized gain on investment transactions, if any, annually.
Certain Fund expenses are paid through "soft dollar" arrangements with brokers.
The amount of these expenses is less than 0.01% of the Fund's average daily net
assets.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
<PAGE>
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware Management Company, Inc. ("DMC") the Investment Manager of the
Fund, an annual fee which is calculated daily at the rate of 0.65% on the
average daily net assets.
DMC has elected to waive that portion if any of the management fee and reimburse
the Fund to the extent that annual operating expenses exclusive of taxes,
interest, brokerage commissions and extraordinary expenses, exceed 0.80% of
average daily net assets of the Fund through December 31, 1997. Total expenses
absorbed by DMC for the period ended September 30, 1997 were $11,109.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of DMC,
to serve as dividend disbursing, transfer agent and accounting service agent for
the Fund. For the period ended September 30, 1997, the Fund expensed $100 for
dividend disbursing and transfer agent services and $787 for accounting
services. At September 30, 1997, the Fund had a liability for such fees and
other expenses payable to DSC of $130.
Certain officers of DMC, DSC and DDLP are officers, directors and/or employees
of the Fund. These officers, directors and employees are paid no compensation by
the Fund.
3. Investments
During the period ended September 30, 1997, the Fund made purchases of
$6,599,438 and sales of $1,310,333 of investment securities other than U.S.
government securities and temporary cash investments.
At September 30, 1997, the aggregate cost of securities for federal income tax
purposes was $6,067,097.
At September 30, 1997, unrealized appreciation for federal income tax purposes
aggregated $88,563 of which $98,790 related to unrealized appreciation of
securities and $10,227 related to unrealized depreciation of securities.
4. Capital Stock
Transactions in capital stock shares were as follows:
5/1/97*
to
9/30/97
-------
Shares sold: 615,645
Shares issued upon reinvestment of dividends
from net investment income and distributions
of realized gains from security transactions: -0-
-------
615,645
Shares repurchased: (58,332)
-------
Net Increase ................................ 557,313
-------
<PAGE>
5. Foreign Exchange Contracts
The Fund will generally enter into forward foreign currency contracts as a way
of managing foreign exchange rate risk. A fund may enter into these contracts to
fix the U.S. dollar value of a security that it has agreed to buy or sell for
the period between the date the trade was entered into and the date the security
is delivered and paid for. A fund may also use these contracts to hedge the U.S.
dollar value of securities it already owns denominated in foreign currencies.
Forward foreign currency contracts are valued at the mean between the bid and
asked prices of the contracts and are marked-to-market daily. Interpolated
values are derived when the settlement date of the contract is an interim date
for which quotations are not available. The change in market value is recorded
by the Fund as an unrealized gain or loss. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
The use of forward foreign currency contracts does not eliminate fluctuations in
the underlying prices of the Fund's securities, but it does establish a rate of
exchange that can be achieved in the future. Although forward foreign currency
contracts limit the risk of loss due to a decline in the value of the hedged
currency, they also limit any potential gain that might result should the value
of the currency increase. In addition, the Fund could be exposed to risks if the
counterparties to the contracts are unable to meet the terms of their contracts.
At September 30, 1997 the Series had no open currency contracts.
6. Concentrations of Credit Risk
Some countries in which the Fund may invest require governmental approval for
the repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if there is a deterioration in a
country's balance of payments or for other reasons, a country may impose
temporary restrictions on foreign capital remittances abroad.
<PAGE>
The securities exchanges of certain foreign markets are substantially smaller,
less liquid and more volatile than the major securities markets in the United
States. Consequently, acquisition and disposition of securities by the Fund may
be inhibited. In addition, a significant proportion of the aggregate market
value of equity securities listed on the major securities exchanges in emerging
markets are held by a smaller number of investors. This may limit the number of
shares available for acquisition or disposition of the Fund.
The Fund may invest in high-yield fixed income securities which carry ratings of
BB or lower by S&P and/or Ba or lower by Moody's. Investments in these higher
yielding securities may be accompanied by a greater degree of credit risk than
higher rated securities. Additionally, lower rated securities may be more
susceptible to adverse economic and competitive industry conditions than
investment grade securities.
The Fund may invest in securities whose value is derived from an underlying pool
of mortgages or consumer loans. Prepayment of these loans may shorten the stated
maturity of the respective obligation and may result in a loss of premium, if
any has been paid.
The Fund may invest up to 10% of its total assets in illiquid securities which
may include securities with contractual restrictions on resale, securities
exempt from registration under Rule 144A of the Securities Act of 1933, as
amended, and other securities which may not be readily marketable. The relative
illiquidity of some of these securities may adversely affect the Fund's ability
to dispose of such securities in a timely manner and at a fair price when it is
necessary to liquidate such securities.
<PAGE>
Delaware Premium Funds, Inc. - Emerging Markets Series
Statement of Net Assets
September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Market
Number Value
of Shares (U.S. $)
<S> <C> <C>
COMMON STOCK - 83.70%
Argentina - 3.62%
Central Puerto S.A.-Class B . . . . . . . 21,000 $57,762
Transportadora de Gas del sur,S.A.-Class B . . . . . . . 21,000 47,890
YPF Sociedad Anonima . . . . . . . 1,300 47,720
YPF Sociedad Anonima - ADR . . . . . . . 1,550 57,156
-------------------
210,527
-------------------
Brazil - 10.31%
Aracruz Celulose SA -ADR . . . . . . . 4,300 88,419
Centrais Electricas de Santa Catarina SA - GDR . . . . . . . 300 41,250
Companhia Energetica de Minas Gerais SA - GDR . . . . . . . 700 38,269
Companhia Paranaense de Energia-Copel SP - ADR . . . . . . . 5,000 86,250
Gerdau Metalurgica S/A . . . . . . . 1,840,000 82,259
Lojas Renner SA . . . . . . . 870,000 40,323
* Rossi Residencial S.A. - GDR . . . . . . . 4,500 47,250
* Telecommunicacoes Brasileiras SA - ADR . . . . . . . 888 114,330
Usinas Siderurgicas de Minas Gerais SA - ADR . . . . . . . 5,600 61,040
-------------------
599,390
-------------------
Chile - 3.98%
Administradora de Fondos de Pensiones Provida S.A. - ADR . . . . . . . 2,600 50,050
Banco BHIF-ADR . . . . . . . 3,040 61,560
Cia de Telecomunicaciones de Chile S.A. - ADR . . . . . . . 1,910 61,836
Empresa Nacional Electricidade S.A. - ADR . . . . . . . 2,750 58,266
-------------------
231,712
-------------------
Czech Republic - 0.90%
* SPT Telecom . . . . . . . 300 38,028
Telekomunikacni Montaze Praha . . . . . . . 200 14,356
-------------------
52,384
-------------------
Egypt - 3.25%
Commercial International Bank - GDR . . . . . . . 3,700 89,651
Paints and Chemical-GDR . . . . . . . 2,105 24,734
* Suez Cement - GDR . . . . . . . 1,300 30,355
* Suez Cement - GDR 144A . . . . . . . 1,900 44,365
-------------------
189,105
-------------------
Greece - 3.41%
Attica Enterprises S.A. . . . . . . . 6,700 84,283
Ergo Bank S.A. . . . . . . . 650 43,675
Helenic Bottling Company S.A. . . . . . . . 1,350 70,355
-------------------
198,314
-------------------
Hong Kong - 5.10%
* First Tractor . . . . . . . 115,000 94,372
Guangdong Kelon Electric Holding . . . . . . . 69,000 69,785
Guangshen Railway . . . . . . . 182,000 61,741
Shenzhen Expressway . . . . . . . 266,000 70,470
-------------------
296,369
-------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Hungary - 1.71%
MOL Magyar Olaj-es Gazipari Rt - GDR . . . . . . . 1,550 33,751
Richter Gedeon Rt - GDR . . . . . . . 620 65,565
-------------------
99,316
-------------------
India - 3.27%
* BSES Ltd - GDR . . . . . . . 1,350 27,844
Gujarat Ambuja Cement - GDR . . . . . . . 3,400 31,875
India Fund, (The) . . . . . . . 6,200 57,350
Larsen & Toubro - GDR . . . . . . . 3,150 40,635
Tata Engineering & Locomotive Ltd. - GDR . . . . . . . 3,400 32,300
-------------------
190,004
-------------------
Indonesia - 1.26%
PT Bank Dagang Nasional . . . . . . . 171,000 33,991
PT Semen Gresik . . . . . . . 18,000 17,615
PT United Tractors . . . . . . . 15,500 21,449
-------------------
73,055
-------------------
Israel - 2.56%
Bank Hapoalim . . . . . . . 28,800 66,812
Israel Chemicals Ltd. . . . . . . . 67,000 82,219
-------------------
149,031
-------------------
Luxemburg - 2.94%
* Banque Libanaise - GDR . . . . . . . 2,700 66,083
* Banque Libanaise - GDR 144A . . . . . . . 1,000 24,475
Quilmes Industrial SA-ADR . . . . . . . 5,200 80,600
-------------------
171,158
-------------------
Malaysia - 2.83%
Leader Universal Holdings . . . . . . . 40,000 32,044
Nestle Berhad . . . . . . . 4,000 23,540
Petronas Dagangan Berhad . . . . . . . 27,000 43,260
Public Finance Berhad . . . . . . . 17,000 12,047
Resorts World Berhad . . . . . . . 16,000 35,002
Sime Darby Berhad . . . . . . . 9,000 18,718
-------------------
164,613
-------------------
Mexico - 8.86%
ALFA, S.A. de C.V. - Class A . . . . . . . 13,300 126,332
Cemex S.A. de C.V. - Class B . . . . . . . 16,000 95,141
Grupo Minsa S.A.-Class C 34,400 44,187
Grupo Minsa - ADR . . . . . . . 2,400 29,700
Telefonos De Mexico SA . . . . . . . 1,900 98,325
Vitro SA - ADR . . . . . . . 7,900 121,463
-------------------
515,148
-------------------
Peru - 3.02%
Banco de Credito del Peru . . . . . . . 32,517 40,301
Cementos Lima S.A. . . . . . . . 1,468 29,898
Credicorp Limited . . . . . . . 2,250 42,609
Telefonica del Peru, S.A. - ADR . . . . . . . 2,650 62,606
-------------------
175,414
-------------------
Philippines - 1.42%
Philippine Long Distance Telephone Company ADR . . . . . . . 3,000 82,312
-------------------
82,312
-------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Portugal - 3.07%
Electricidade De Portugual S.A. . . . . . . . 4,800 82,607
Portugal Telecom SA . . . . . . . 2,200 95,634
-------------------
178,240
-------------------
Poland - 1.68%
Elektrim Spolka Akcyjna S.A. . . . . . . . 8,700 97,530
-------------------
97,530
-------------------
Russia - 3.17%
* Gazprom - ADR Reg. S . . . . . . . 1,200 30,300
* Gazprom - ADR 144A . . . . . . . 1,900 47,025
Lukoil Holding-ADR . . . . . . . 500 48,715
Mosenergo - ADR Reg. S . . . . . . . 700 34,028
Mosenergo - ADR 144A . . . . . . . 500 24,305
-------------------
184,373
-------------------
Slovenia - 0.61%
* Blagovno Trgovinski Cent - -GDR . . . . . . . 1,925 18,384
SKB Banka GDR . . . . . . . 800 17,400
-------------------
35,784
-------------------
South Africa - 4.86%
Amalgamated Banks of South Africa . . . . . . . 4,000 27,286
Anglo American Corporation of South Africa Ltd. . . . . . . . 1,700 87,111
Sappi Ltd. . . . . . . . 8,000 63,767
Sasol Ltd. . . . . . . . 7,550 104,221
-------------------
282,385
-------------------
South Korea - 1.84%
Cho Hung Bank - GDR . . . . . . . 4,800 20,400
Korea Electric Power - ADR . . . . . . . 2,100 28,035
Pohang Iron & Steel - ADR . . . . . . . 2,280 58,710
-------------------
107,145
-------------------
Taiwan - 2.77%
* Asia Cement - Sponsored GDR 144A . . . . . . . 6,000 93,750
* Yageo - GDR . . . . . . . 3,640 67,340
-------------------
161,090
-------------------
Turkey - 1.77%
* Haci Omer Sabanci Holding AS - ADR . . . . . . . 9,500 102,695
-------------------
102,695
-------------------
Thailand - 2.14%
Ayudhya Jardine CMG Life Assurance . . . . . . . 10,500 3,080
Hana MicroElectronics Public Co Ltd. . . . . . . . 9,000 31,173
K. R. Precision Public Ltd. . . . . . . . 3,800 28,447
Ruang Khao 2 Fund . . . . . . . 231,300 43,288
Thai Reinsurance Public Co. Ltd. . . . . . . . 8,600 18,257
-------------------
124,245
-------------------
Turkey - 1.82%
Anadolu Isuzu Otomotiv Sanayi Ve Ticaret A.S. . . . . . . . 30,000 29,274
Netas-Northern Eleckrik Telekomunikayson A.S. . . . . . . . 229,200 76,305
-------------------
105,579
-------------------
Venezuela - 1.53%
Compania Anonima Nacional Telefonos de Venezuela ADR . . . . . . . 1,950 89,213
-------------------
89,213
-------------------
Total Common Stock (cost $4,819,016) 4,866,128
-------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
RIGHTS - 0.00%
* Ayudhya Jardine CMG Life Assurance Rights . . . . . . . 26,250 -
-------------------
Total Rights (cost $0) -
-------------------
WARRANTS - 0.03%
* Guangdong Investments Warrants . . . . . . . 4,600 1,813
-------------------
Total Warrants (cost $0) 1,813
-------------------
REPURCHASE AGREEMENT - 16.53%
With JP Morgan Securities 6.00% 10/1/97 (dated 9/30/97,
collateralized by $317,000 U.S. Treasury Notes
6.625% due 6/30/01 market value $328,525 321,000 321,000
With PaineWebber 6.00% 10/1/97 (dated 9/30/97,
collateralized by $126,000 U.S. Treasury Notes
5.375% due 5/31/98 market value $128,494 and
$197,000 U.S. Treasury Notes 5.875% due 9/30/02
market value $195,992) 318,000 318,000
With Prudential Bache 6.05% 10/1/97 (dated 9/30/97,
collateralized by $191,000 U.S. Treasury Notes
5.875% due 2/28/99 market value $192,640 and
$135,000 U.S. Treasury Notes 5.875% due 3/31/99
market value $135,511) 322,000 322,000
-------------------
Total Repurchase Agreement (cost $961,000) 961,000
-------------------
TOTAL MARKET VALUE OF SECURITIES - 100.26%
(cost $5,780,016) 5,828,941
LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS - (0.26%) (14,955)
NET ASSETS APPLICABLE TO 547,735 SHARES ($.01 PAR VALUE) -------------------
OUTSTANDING; EQUIVALENT TO $10.61 PER SHARE - 100.00% $5,813,986
-------------------
COMPONENTS OF NET ASSETS AT SEPTEMBER 30, 1997:
Common stock, $.01 par value, 500,000,000 shares
authorized to the Fund with 50,000,000 shares
allocated to this Portfolio $5,724,713
Accumulated undistributed income:
Net investment income 15,400
Net realized gain on investments 25,125
Net unrealized depreciation on investments and foreign currencies 48,748
-------------------
Total net assets $5,813,986
===================
</TABLE>
- ---------------------------------------------------------------
* Non-income producing security for the period ended September 30, 1997
ADR = American Depository Receipt
GDR = Global Depository Receipt
See accompanying notes
<PAGE>
Delaware Pooled Trust, Inc. - Emerging Markets Portfolio
Statement of Assets & Liabilities
September 30, 1997
(Unaudited)
ASSETS:
Investments at market (cost $5,780,016) $5,828,941
Receivable for fund shares sold 21,662
Dividends & interest receivable 4,779
Cash and foreign currencies 1,815
----------
Total assets 5,857,197
----------
LIABILITIES:
Payable for securities purchased 24,734
Other accounts payable and accrued expenses 18,477
----------
Total liabilities 43,211
----------
TOTAL NET ASSETS $5,813,986
==========
See accompanying notes
<PAGE>
Delaware Pooled Trust, Inc. - Emerging Markets Portfolio
Statement of Operations
For the period May 1, 1997* to September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 29,797
Interest 14,488
Foreign tax withheld (2,820) $ 41,465
--------------- -------------------
EXPENSES:
Management fees 19,338
Custodian fees 10,968
Professional fees 4,862
Registration fees 1,967
Reports and statements to shareholders 1,625
Accounting fees and salaries 794
Dividend disbursing and transfer agent fees and expenses 420
Directors' fees 131
Taxes (other than taxes on income) 125
Other 2,133
---------------
42,363
Less expenses absorbed by Delaware International
Advisers Ltd. (19,282) 23,081
--------------- -------------------
NET INVESTMENT INCOME 18,384
-------------------
NET REALIZED AND UNREALIZED GAIN(LOSS)
ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on:
Investment transactions 25,125
Foreign currencies (2,984)
-------------------
Net realized gain 22,141
Net unrealized appreciation during the period
on investments and foreign currencies 48,748
-------------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS AND FOREIGN CURRENCIES 70,889
-------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 89,273
- ----------------------------------------------- ===================
</TABLE>
* Date of commencement of operations.
See accompanying notes
<PAGE>
Delaware Pooled Trust, Inc. - Emerging Markets Portfolio
Statement of Changes in Net Assets
For the period May 1, 1997* to September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 18,384
Net realized gain on investments
and foreign currencies 22,141
Net unrealized depreciation during the period
on investments and foreign currencies 48,748
-------------------------
Net decrease in net assets resulting
from operations 89,273
-------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold: 5,837,160
Net asset value of shares issued upon reinvestment
of dividends from net investment income: -
-------------------------
5,837,160
Cost of shares repurchased: (112,447)
-------------------------
Increase in net assets derived from capital
share transactions 5,724,713
-------------------------
NET INCREASE IN NET ASSETS 5,813,986
NET ASSETS:
Beginning of period -
-------------------------
End of period $ 5,813,986
- ----------------------------------------------- =========================
</TABLE>
* Date of commencement of operations.
See accompanying notes
<PAGE>
Financial Highlights
Selected data for each share of the Fund outstanding throughout the period was
as follows:
<TABLE>
<CAPTION>
Emerging
Markets Series
Unaudited
5/1/97 (1)
to
9/30/97
------------------------
<S> <C>
Net asset value, beginning of period $10.0000
Income from investment operations:
Net investment income 0.0336
Net realized and unrealized gain from investments & foreign currencies 0.5764
------------------------
Total from investment operations 0.6100
------------------------
Net asset value, end of period $10.6100
========================
Total return 6.10%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $5,814
Ratio of expenses to average net assets 1.50%
Ratio of expenses to average net assets prior to expense
limitation 2.74%
Ratio of net investment income to average net assets 1.16%
Ratio of net investment income to average net assets prior
to expense limitation (0.08%)
Portfolio turnover 7%
Average commsion rate paid (2) $ 0.0038
- -------------------------------------------------------
</TABLE>
(1) Date of commencement of trading; ratios and portfolio turnover have been
annualized and total return has not been annualized.
(2) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was a
commission charged.
<PAGE>
DELAWARE GROUP PREMIUM FUND, INC. -
EMERGING MARKETS SERIES
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
Delaware Group Premium Fund, Inc. (the "Fund") is registered as a diversified
open-end investment company under the Investment Company Act of 1940, as
amended. The Fund is organized as a Maryland Corporation and offers 15 series:
The Decatur Total Return Series, the Delchester Series, the Capital Reserves
Series, the Cash Reserves Series, the Delcap Series, the Delaware Series, the
International Equity Series, the Value Series, the Trend Series, the Global Bond
Series, the Strategic Income Series, the Devon Series, the Emerging Markets
Series, the Convertible Securities Series, and the Quantum Series (the
"Series"). The shares of the Fund are sold only to separate accounts of life
insurance companies.
The objective of the Emerging Markets Income Series is to seek to achieve
long-term capital appreciation by investing primarily in equity securities of
issuers located or operating in emerging countries.
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 the close of the NYSE 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. Securities listed on a foreign exchange are
valued at the last quoted sales price before the Fund is valued. Long-term debt
securities are valued by an independent pricing service and such prices are
believed to reflect the fair value of such securities. Money market instruments
having less than 60 days to maturity are valued at amortized cost which
approximates market value. Other securities and assets for which market
quotations are not readily available are valued at fair value as determined in
good faith by or under the direction of the Fund's Board of Directors.
Federal Income Taxes - The Fund intends to qualify as a regulated investment
company and make the requisite distributions to shareholders. Accordingly, no
provision for federal income taxes has been made in the financial statements.
Income and capital gain distributions are determined in accordance with federal
income tax regulations which may differ from generally accepted accounting
principles.
Repurchase Agreements - The Fund 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
<PAGE>
U.S. government. The respective collateral is held by the Fund's
custodian bank until the maturity of the respective repurchase agreements. Each
repurchase agreement is at least 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 Currency Transactions - Transactions denominated in foreign currencies
are recorded in the Fund's records at the current prevailing exchange rates. 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. Transaction gains or losses resulting from
changes in exchange rates during the reporting period or upon settlement of the
foreign currency transaction are reported in operations for the current period.
It is not practical to isolate that portion of both realized and unrealized
gains and losses on investments in equity securities in the statement of
operations that result from fluctuations in foreign currency exchange rates. The
Fund does isolate that portion of gains and losses on investments in debt
securities which are due to changes in the foreign exchange rate from that which
are due to changes in market prices of debt securities. The Fund reports certain
foreign currency related transactions as components of realized gains for
financial reporting purposes, whereas such components are treated as ordinary
income (loss) for federal income tax purposes.
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. 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. Original issue discounts are accreted to
interest income over the lives of the respective securities. Withholding taxes
on foreign interest have been provided for in accordance with the Fund's
understanding of the applicable country's tax rules and rates. The Fund declares
and pays dividends for net investment income quarterly and pay distributions
from net realized gain on investment transactions, if any, annually.
Certain Fund expenses are paid through "soft dollar" arrangements with brokers.
The amount of these expenses is less than 0.01% of the Fund's average daily net
assets.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
<PAGE>
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware International Advisors Ltd. ("DIAL") the Investment Manager of the
Fund, an annual fee which is calculated daily at the rate of 1.25% on the
average daily net assets. At September 30, 1997 the Series had a liability to
DIAL for management fees and other expenses of $515.
DIAL has elected to waive that portion if any of the management fee and
reimburse the Fund to the extent that annual operating expenses exclusive of
taxes, interest, brokerage commissions and extraordinary expenses, exceed 1.50%
of average daily net assets of the Fund through December 31, 1997. Total
expenses absorbed by DIAL for the period ended September 30, 1997 were $19,282.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of DMC,
to serve as dividend disbursing, transfer agent and accounting service agent for
the Fund. For the period ended September 30, 1997, the Fund expensed $420 for
dividend disbursing and transfer agent services and $794 for accounting
services. At September 30, 1997, the Series had a liability for such fees and
other expenses payable to DSC of $920.
Certain officers of DMC, DSC and DDLP are officers, directors and/or employees
of the Fund. These officers, directors and employees are paid no compensation by
the Fund.
3. Investments
During the period ended September 30, 1997, the Fund made purchases of
$4,896,561 and sales of $105,379 of investment securities other than U.S.
government securities and temporary cash investments.
At September 30, 1997, the aggregate cost of securities for federal income tax
purposes was $5,780,016.
At September 30, 1997, unrealized appreciation for federal income tax purposes
aggregated $48,925 of which $486,904 related to unrealized appreciation of
securities and $437,979 related to unrealized depreciation of securities.
4. Capital Stock
Transactions in capital stock shares were as follows:
5/1/97*
to
9/30/97
-------
Shares sold: 558,351
Shares issued upon reinvestment of dividends
from net investment income and distributions
of realized gains from security transactions: -0-
-------
558,351
Shares repurchased: (10,616)
-------
Net Increase ......................................... 547,735
-------
<PAGE>
5. Foreign Exchange Contracts
The Fund will generally enter into forward foreign currency contracts as a way
of managing foreign exchange rate risk. A fund may enter into these contracts to
fix the U.S. dollar value of a security that it has agreed to buy or sell for
the period between the date the trade was entered into and the date the security
is delivered and paid for. A fund may also use these contracts to hedge the U.S.
dollar value of securities it already owns denominated in foreign currencies.
Forward foreign currency contracts are valued at the mean between the bid and
asked prices of the contracts and are marked-to-market daily. Interpolated
values are derived when the settlement date of the contract is an interim date
for which quotations are not available. The change in market value is recorded
by the Fund as an unrealized gain or loss. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
The use of forward foreign currency contracts does not eliminate fluctuations in
the underlying prices of the Fund's securities, but it does establish a rate of
exchange that can be achieved in the future. Although forward foreign currency
contracts limit the risk of loss due to a decline in the value of the hedged
currency, they also limit any potential gain that might result should the value
of the currency increase. In addition, the Fund could be exposed to risks if the
counterparties to the contracts are unable to meet the terms of their contracts.
At September 30, 1997 the Series had no open currency contracts.
6. Concentrations of Credit Risk
Some countries in which the Fund may invest require governmental approval for
the repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if there is a deterioration in a
country's balance of payments or for other reasons, a country may impose
temporary restrictions on foreign capital remittances abroad.
The securities exchanges of certain foreign markets are substantially smaller,
less liquid and more volatile than the major securities markets in the United
States. Consequently, acquisition and disposition of securities by the Fund may
be inhibited. In addition, a significant proportion of the aggregate market
value of equity securities listed on the major securities exchanges in emerging
markets are held by a smaller number of investors. This may limit the number of
shares available for acquisition or disposition of the Fund.
<PAGE>
The Fund may invest in high-yield fixed income securities which carry ratings of
BB or lower by S&P and/or Ba or lower by Moody's. Investments in these higher
yielding securities may be accompanied by a greater degree of credit risk than
higher rated securities. Additionally, lower rated securities may be more
susceptible to adverse economic and competitive industry conditions than
investment grade securities.
The Fund may invest in securities whose value is derived from an underlying pool
of mortgages or consumer loans. Prepayment of these loans may shorten the stated
maturity of the respective obligation and may result in a loss of premium, if
any has been paid.
The Fund may invest up to 10% of its total assets in illiquid securities which
may include securities with contractual restrictions on resale, securities
exempt from registration under Rule 144A of the Securities Act of 1933, as
amended, and other securities which may not be readily marketable. The relative
illiquidity of some of these securities may adversely affect the Fund's ability
to dispose of such securities in a timely manner and at a fair price when it is
necessary to liquidate such securities.
<PAGE>
Delaware Group Premium Fund, Inc. - Devon Series
Statement of Net Assets
September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Number Market
of Shares Value
<S> <C> <C> <C> <C>
COMMON STOCK - 88.44%
Aerospace & Defense - 1.56%
GenCorp ............... 2,200 $ 62,563
Lockheed Martin ............... 800 85,300
----------
147,863
----------
Automobiles & Automotive Parts - 2.02%
Danaher ............... 3,300 191,400
----------
191,400
----------
Banking, Finance & Insurance - 13.34%
American International Group ............... 1,350 139,303
BB&T ............... 1,400 74,813
Chubb ............... 1,300 92,381
Equifax ............... 5,400 169,763
Federal National Mortgage ............... 4,900 230,300
Nationwide Financial Services Class A ............... 3,300 91,988
Provident ............... 2,400 167,850
State Street Bank ............... 2,300 140,156
Unum ............... 3,400 155,125
----------
1,261,679
----------
Buildings & Materials - 5.64%
Foster Wheeler ............... 4,000 175,750
Masco ............... 7,800 357,338
----------
533,088
----------
Cable, Media, & Publishing - 4.57%
Banta ............... 2,600 72,800
Reynolds & Reynolds Class A ............... 3,700 71,919
Wallace Computer Services ............... 7,800 287,625
----------
432,344
----------
Chemicals - 5.96%
Fuller (HB) ............... 2,500 135,469
Grace (W.R.) ............... 3,300 242,963
Valspar ............... 5,900 185,113
----------
563,545
----------
Computers & Technology - 2.58%
Hewlett-Packard ............... 3,500 243,469
----------
243,469
----------
Consumer Products - 0.51%
General Electric ............... 700 47,644
----------
47,644
----------
Electronics & Electrical Equipment - 3.17%
Intel ............... 1,200 110,887
Rockwell International ............... 1,400 88,113
Teleflex ............... 2,900 100,413
----------
299,413
----------
Energy - 4.25%
Compagnie Francaise de Petroleum Total ............... 2,000 114,625
Kerr-McGee ............... 2,400 165,150
Royal Dutch Petroleum ............... 2,200 122,100
----------
401,875
----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Environmental Services - 3.39%
Ecolab ............... 6,600 320,513
----------
320,513
----------
Food, Beverage & Tobacco - 9.06%
ConAgra ............... 3,200 211,200
Hershey Foods ............... 2,200 124,300
Philip Morris ............... 4,300 178,719
Ralston-Purina Group ............... 2,600 230,100
Universal Foods ............... 2,800 112,700
----------
857,019
----------
Healthcare & Pharmaceuticals - 4.43%
Johnson & Johnson ............... 3,700 213,213
Schering-Plough ............... 4,000 206,000
----------
419,213
----------
Packaging & Containers - 1.19%
TriMas ............... 3,700 112,850
----------
112,850
----------
Real Estate - 4.48%
Colonial Properties Trust ............... 1,400 41,825
Developers Diversified Realty ............... 1,300 52,000
D.R. Horton ............... 4,600 72,450
Health Care Property Investors ............... 1,400 54,250
Kilroy Realty ............... 1,500 40,500
Nationwide Health Properties ............... 2,600 62,563
Storage USA ............... 1,300 52,813
Sun Communities ............... 1,300 46,638
----------
423,039
----------
Retail - 7.40%
May Department Stores ............... 1,600 87,200
Rite Aid ............... 6,800 376,975
Sherwin-Williams ............... 8,000 235,500
----------
699,675
----------
Telecommunications - 2.51%
Alltel ............... 2,600 89,700
SBC Communications ............... 2,400 147,300
----------
237,000
----------
Textiles, Apparel, & Furniture - 3.02%
Hillenbrand Industries ............... 2,300 103,644
HON Industries ............... 2,000 117,750
Miller (Herman) ............... 1,200 64,500
----------
285,894
----------
Utilities - 3.13%
CMS Energy ............... 3,300 122,100
Edison International ............... 2,200 55,550
PacifiCorp ............... 5,300 118,588
----------
296,238
----------
Miscellaneous - 6.23%
Pentair ............... 2,500 92,188
Service International ............... 3,800 122,313
Tompkins ADR ............... 2,400 54,300
Tyco International ............... 3,900 320,044
----------
588,845
----------
Total Common Stock (cost $7,897,799) 8,362,606
----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CONVERTIBLE PREFERRED STOCK - 0.73%
Metals & Mining - 0.73%
Freeport-McMoRan Copper & Gold 5.00% pfd cv ............... 2,500 69,219
-----------
Total Convertible Preferred Stock
(cost $67,687) 69,219
-----------
Principal
Amount
REPURCHASE AGREEMENTS - 10.88%
With Prudential Securities 6.05% 10/1/97
(dated 9/30/97, collateralized by $205,000
U.S. Treasury Notes 5.875% due 2/28/99,
market value $206,271 and $145,000 U.S.
Treasury Notes 5.875% due 3/31/99, market
value $145,099) $ 345,000 345,000
With PaineWebber 6.00% 10/1/97
(dated 9/30/97, collateralized by $135,000
U.S. Treasury Notes 5.375% due 5/31/98,
market value $137,587 and $211,000 U.S.
Treasury Notes 5.875% due 9/30/02, market
value $209,861) 340,000 340,000
With J.P. Morgan Securites 6.00% 10/1/97
(dated 9/30/97, collateralized by $339,000
U.S. Treasury Notes 6.625% due 6/30/01,
market value $351,772) 344,000 344,000
-----------
Total Repurchase Agreements (cost $1,029,000) 1,029,000
-----------
TOTAL MARKET VALUE OF SECURITIES - 100.05% 9,460,825
(cost $8,994,486)
LIABILITIES NET OF RECEIVABLES AND OTHER
ASSETS - (0.05%) (4,821)
-----------
NET ASSETS APPLICABLE TO 786,214 SHARES
($0.01 PAR VALUE) OUTSTANDING; EQUIVALENT
TO $12.03 PER SHARE - 100.00% $ 9,456,004
===========
COMPONENTS OF NET ASSETS AT SEPTEMBER 30, 1997:
Common Stock, $0.01 par value, 750,000,000 shares
authorized to the Fund with 50,000,000 shares
allocated to the Series $ 8,742,942
Accumulated undistributed:
Net investment income 64,557
Net realized gain on investments 182,166
Net unrealized appreciation of investments 466,339
-----------
Total net assets $ 9,456,004
===========
</TABLE>
- ------------------
ADR - American Depository Receipt
See accompanying notes
<PAGE>
Delaware Group Premium Fund, Inc. Devon Series
Statement of Operations
For the period May 1, 1997* to September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 66,470
Interest 15,548 $ 82,018
-------- --------
EXPENSES:
Management fees 12,125
Professional fees 4,163
Registration fees 1,808
Reports and statements to shareholders 1,563
Dividend disbursing and transfer agent fees and expenses 1,417
Accounting fees and salaries 1,005
Custodian fees 650
Directors' fees 131
Taxes (other than taxes on income) 84
Other 1,734
--------
24,681
Less expenses absorbed by Delaware International
Advisers Ltd. (7,219) 17,462
-------- --------
NET INVESTMENT INCOME 64,556
--------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on
Investment transactions: 182,166
--------
Net unrealized appreciation during the period
on investments: 466,339
--------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 648,505
--------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 713,061
- ----------------------------------------------- =========
</TABLE>
* Date of commencement of operations.
See accompanying notes
<PAGE>
Statement of Changes in Net Assets
For the period May 1, 1997* to September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 64,556
Net realized gain on investments
182,166
Net unrealized depreciation during the period
on investments and foreign currencies 466,339
----------
Net decrease in net assets resulting
from operations 713,061
----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold: 9,828,846
Net asset value of shares issued upon reinvestment
of dividends from net investment income: -
----------
9,828,846
Cost of shares repurchased: (1,085,903)
----------
Increase in net assets derived from capital
share transactions 8,742,943
----------
NET INCREASE IN NET ASSETS 9,456,004
NET ASSETS:
Beginning of period -
-----------
End of period $ 9,456,004
- ----------------------------------------------- ===========
</TABLE>
* Date of commencement of operations.
See accompanying notes
<PAGE>
Financial Highlights
Selected data for each share of the Fund outstanding throughout the period was
as follows:
<TABLE>
<CAPTION>
Devon Series
Unaudited
5/1/97 (1)
to
9/30/97
------------------------
<S> <C>
Net asset value, beginning of period $10.0000
Income from investment operations:
Net investment income 0.0821
Net realized and unrealized gain from investments 1.9479
--------
Total from investment operations 2.0300
--------
Net asset value, end of period $12.0300
========
Total return 20.30%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $9,456
Ratio of expenses to average net assets 0.80%
Ratio of expenses to average net assets prior to expense
limitation 1.22%
Ratio of net investment income to average net assets 3.25%
Ratio of net investment income to average net assets prior
to expense limitation 2.83%
Portfolio turnover 154%
Average commsion rate paid (2) $ 0.0600
- -------------------------------------------------------
</TABLE>
(1) Date of commencement of trading; ratios and portfolio turnover have been
annualized and total return has not been annualized.
(2) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was a
commission charged.
<PAGE>
DELAWARE GROUP PREMIUM FUND, INC. -
DEVON SERIES
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
Delaware Group Premium Fund, Inc. (the "Fund") is registered as a diversified
open-end investment company under the Investment Company Act of 1940, as
amended. The Fund is organized as a Maryland Corporation and offers 15 series:
The Decatur Total Return Series, the Delchester Series, the Capital Reserves
Series, the Cash Reserves Series, the Delcap Series, the Delaware Series, the
International Equity Series, the Value Series, the Trend Series, the Global Bond
Series, the Strategic Income Series, the Devon Series, the Emerging Markets
Series, the Convertible Securities Series, and the Quantum Series (the
"Series"). The shares of the Fund are sold only to separate accounts of life
insurance companies.
The objective of the Devon Series is to seek current income and capital
appreciation.
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 the close of the NYSE 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. Securities listed on a foreign exchange are
valued at the last quoted sales price before the Fund is valued. Long-term debt
securities are valued by an independent pricing service and such prices are
believed to reflect the fair value of such securities. Money market instruments
having less than 60 days to maturity are valued at amortized cost which
approximates market value. Other securities and assets for which market
quotations are not readily available are valued at fair value as determined in
good faith by or under the direction of the Fund's Board of Directors.
Federal Income Taxes- The Fund intends to qualify as a regulated investment
company and make the requisite distributions to shareholders. Accordingly, no
provision for federal income taxes has been made in the financial statements.
Income and capital gain distributions are determined in accordance with federal
income tax regulations which may differ from generally accepted accounting
principles.
Repurchase Agreements- The Fund 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 Fund's
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.
<PAGE>
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. 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. Original issue discounts are accreted to
interest income over the lives of the respective securities. Withholding taxes
on foreign interest have been provided for in accordance with the Fund's
understanding of the applicable country's tax rules and rates. The Fund declares
and pays dividends for net investment income quarterly and pay distributions
from net realized gain on investment transactions, if any, annually.
Certain Fund expenses are paid through "soft dollar" arrangements with brokers.
The amount of these expenses is less than 0.01% of the Fund's average daily net
assets.
Use of Estimates- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware Management Company, Inc. ("DMC") the Investment Manager of the
Fund, an annual fee which is calculated daily at the rate of .60% on the average
daily net assets. At September 30, 1997 the Series had a liability to DMC for
management fees and other expenses of $12,125.
DMC has elected to waive that portion if any of the management fee and reimburse
the Fund to the extent that annual operating expenses exclusive of taxes,
interest, brokerage commissions and extraordinary expenses, exceed .80% of
average daily net assets of the Fund through December 31, 1997. Total expenses
absorbed by DMC for the period ended September 30, 1997 were $7,219.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of DMC,
to serve as dividend disbursing, transfer agent and accounting service agent for
the Fund. For the period ended September 30, 1997, the Fund expensed $1,417 for
dividend disbursing and transfer agent services and $763 for accounting
services. At September 30, 1997, the Series had a liability for such fees and
other expenses payable to DSC of $1,210.
<PAGE>
Certain officers of DMC, DSC and DDLP are officers, directors and/or employees
of the Fund. These officers, directors and employees are paid no compensation by
the Fund.
3. Investments
During the period ended September 30, 1997, the Fund made purchases of
$11,599,715 and sales of $3,304,679 of investment securities other than U.S.
government securities and temporary cash investments.
At September 30, 1997, the aggregate cost of securities for federal income tax
purposes was $8,994,486.
At September 30, 1997, unrealized appreciation for federal income tax purposes
aggregated $466,339 of which $536,088 related to unrealized appreciation of
securities and $69,749 related to unrealized depreciation of securities.
4. Capital Stock
Transactions in capital stock shares were as follows:
5/1/97*
to
9/30/97
-------
Shares sold: 881,534
Shares issued upon reinvestment of dividends
from net investment income and distributions
of realized gains from security transactions: -0-
-------
881,534
Shares repurchased: (95,321)
-------
Net Increase ................................. 786,214
-------
<PAGE>
Delaware Group Premium Fund, Inc. - Convertible Securities Series
Statement of Net Assets
September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Principal Market
Amount Value
<S> <C> <C> <C> <C>
CORPORATE BONDS - 2.99%
Signature Resorts 5.75% 01/15/07 $ 80,000 $ 95,600
-----------
Total Corporate Bonds (cost $79,000) 95,600
-----------
CONVERTIBLE BONDS - 49.98%
Automobiles & Automotive Parts - 2.35%
Tower Automotive 5.00% 08/01/04....... 70,000 75,250
-----------
75,250
-----------
Computers & Technology - 12.40%
Atmel 3.25% 06/01/02....... 80,000 97,200
Cypress Semiconductor 6.00% 10/01/02....... 70,000 68,600
Integrated Process Equipment 6.25% 09/15/04....... 80,000 90,400
Unisys Corporation 8.25% 03/15/06....... 60,000 140,250
-----------
396,450
-----------
Electronics & Electrical Equipment - 2.36%
Kent Electronics 4.50% 09/01/04....... 75,000 75,563
------------
75,563
------------
Energy - 2.91%
Parker Drilling 5.50% 08/01/04....... 77,000 92,881
------------
92,881
------------
Healthcare & Pharmaceuticals - 8.41%
ARV Assisted Living 6.75% 04/01/06....... 80,000 75,700
NABI 6.50% 02/01/03....... 90,000 79,763
Sunrise Assisted Living 5.50% 06/15/02....... 95,000 113,169
------------
268,632
------------
Industrial Machinery - 2.32%
Thermo Fibertek 4.50% 07/15/04....... 70,000 74,200
------------
74,200
------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Metals & Mining - 2.12%
MascoTech 4.50% 12/15/03....... 75,000 67,875
------------
67,875
------------
Telecommunications - 6.47%
SmarTalk TeleServices 5.75% 09/15/02....... 90,000 97,875
Tel-Save Holdings 4.50% 09/15/02....... 95,000 108,775
------------
206,650
------------
Miscellaneous - 10.64%
COREStaff 2.94% 08/15/04....... 100,000 91,125
Halter Marine Group 4.50% 09/15/04....... 60,000 68,625
Personnel Group of America 5.75% 07/01/04....... 80,000 93,600
U.S. Office Products 5.50% 02/01/01....... 65,000 86,531
----------
339,881
----------
Total Convertible Bonds (cost $1,463,561) 1,597,382
----------
Number
of Shares
COMMON STOCK - 20.99%
Automobiles & Automotive Parts - 2.53%
Chrysler ....... 2,200 80,988
------------
80,988
------------
Banking, Finance & Insurance - 2.58%
Crescent Operating ....... 210 4,279
SunAmerica ....... 1,700 77,988
------------
82,267
------------
Healthcare & Pharmaceuticals - 1.81%
Medpartners "TAPS" ....... 2,700 57,881
------------
57,881
------------
Real Estate - 11.63%
Crescent Real Estate Equities ....... 2,100 84,263
Equity Residential Properties ....... 1,500 81,844
Lexington Corporate Properties ....... 5,800 90,625
Starwood Lodging Trust ....... 2,000 114,875
------------
371,607
------------
Utilities - 2.44%
Houston Industries ....... 1,500 78,000
------------
78,000
------------
Total Common Stock (cost $555,046) 670,743
------------
CONVERTIBLE PREFERRED STOCK - 20.27%
Banking, Finance & Insurance - 4.40%
American General 6.00% Series A ...... 1,000 67,250
National Australia Bank 7.875% unit ....... 2,500 73,438
------------
140,688
------------
Cable, Media & Publishing - 6.87%
Chancellor Media 6.00% ....... 1,500 106,500
MetroMedia International Group 7.25% ....... 2,200 113,163
------------
219,663
------------
Environmental Services - 1.88%
Browning-Ferris 7.25% ....... 1,700 59,925
------------
59,925
------------
Leisure, Lodging & Entertainment - 2.04%
Felcor Suite Hotels $1.95 Series A ....... 2,000 65,000
------------
65,000
------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Metals & Mining - 2.08%
Freeport-McMoRan Copper & Gold 7.00% ....... 2,400 66,450
------------
66,450
------------
Utilities - 3.00%
CalEnergy Capital Trust 6.50% ....... 2,000 96,000
------------
96,000
------------
Total Convertible Preferred Stock (cost $537,142) 647,726
------------
TOTAL MARKET VALUE OF SECURITIES - 94.23%
(cost $2,634,749) 3,011,451
RECEIVABLE AND OTHER ASSETS NET OF LIABILITIES - 5.77% 184,548
------------
NET ASSETS APPLICABLE TO 266,678 SHARES ($.01 PAR
VALUE) OUTSTANDING; EQUIVALENT TO $11.98 PER
SHARE - 100.00% $ 3,195,999
============
COMPONENTS OF NET ASSETS AT SEPTEMBER 30, 1997:
Common Stock, $.01 par value, 750,000,000 shares
authorized to the Fund with 50,000,000 shares allocated
to the Series $ 2,730,540
Accumulated undistributed:
Net investment income 66,795
Net realized gain on investments 21,962
Net unrealized appreciation of investments 376,702
------------
Total net assets $ 3,195,999
============
- ----------------------------------------------------------
"TAPS" - Threshold Appreciation Price Securities
See accompanying notes
</TABLE>
<PAGE>
Delaware Group Premium Fund, Inc. Convertible Securities
Statement of Operations
For the period May 1, 1997* to September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 40,649
Interest 34,056 $ 74,705
---------- --------
EXPENSES:
Management fees 7,522
Professional fees 4,314
Registration fees 1,643
Reports and statements to shareholders 1,528
Dividend disbursing and transfer agent fees and expenses 623
Accounting fees and salaries 525
Custodian fees 700
Directors' fees 127
Taxes (other than taxes on income) 72
Other 18,938
----------
35,992
Less expenses absorbed by Delaware International
Advisers Ltd. (28,082) 7,910
---------- --------
NET INVESTMENT INCOME 66,795
--------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on
Investment transactions: 21,962
-------
Net unrealized appreciation during the period
on investments: 376,702
--------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 398,664
--------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 465,459
- ----------------------- =========
</TABLE>
* Date of commencement of operations.
See accompanying notes
<PAGE>
Delaware Group Premium Fund, Inc. Convertible Securities
Statement of Changes in Net Assets
For the period May 1, 1997* to September 30, 1997
(Unaudited)
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 66,795
Net realized gain on investments
21,962
Net unrealized depreciation during the period
on investments and foreign currencies 376,702
------------
Net decrease in net assets resulting
from operations 465,459
------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold: 2,749,078
Net asset value of shares issued upon reinvestment
of dividends from net investment income: -
------------
2,749,078
Cost of shares repurchased: (18,538)
------------
Increase in net assets derived from capital
share transactions 2,730,540
------------
NET INCREASE IN NET ASSETS 3,195,999
NET ASSETS:
Beginning of period -
------------
End of period $ 3,195,999
- ---------------- ============
* Date of commencement of operations.
See accompanying notes
<PAGE>
Financial Highlights
Selected data for each share of the Fund outstanding throughout the period was
as follows:
<TABLE>
<CAPTION>
Convertible Securities
Series
Unaudited
5/1/97 (1)
to
9/30/97
---------
<S> <C>
Net asset value, beginning of period $ 10.000
Income from investment operations:
Net investment income 0.250
Net realized and unrealized gain from investments 1.730
------------
Total from investment operations 1.980
-----------
Net asset value, end of period $ 11.980
===========
Total return 19.80%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $3,196
Ratio of expenses to average net assets 0.80%
Ratio of expenses to average net assets prior to expense
limitation 3.57%
Ratio of net investment income to average net assets 6.61%
Ratio of net investment income to average net assets prior
to expense limitation 3.84%
Portfolio turnover 274%
Average commsion rate paid (2) $ 0.0600
- ----------------------------------
</TABLE>
(1) Date of commencement of trading; ratios and portfolio turnover have been
annualized and total return has not been annualized.
(2) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was a
commission charged.
<PAGE>
DELAWARE GROUP PREMIUM FUND, INC. -
CONVERTIBLE SECURITIES SERIES
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
Delaware Group Premium Fund, Inc. (the "Fund") is registered as a diversified
open-end investment company under the Investment Company Act of 1940, as
amended. The Fund is organized as a Maryland Corporation and offers 15 series:
The Decatur Total Return Series, the Delchester Series, the Capital Reserves
Series, the Cash Reserves Series, the Delcap Series, the Delaware Series, the
International Equity Series, the Value Series, the Trend Series, the Global Bond
Series, the Strategic Income Series, the Devon Series, the Emerging Markets
Series, the Convertible Securities Series, and the Quantum Series (the
"Series"). The shares of the Fund are sold only to separate accounts of life
insurance companies.
The objective of the Devon Series is to seek current income and capital
appreciation.
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 the close of the NYSE 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. Securities listed on a foreign exchange are
valued at the last quoted sales price before the Fund is valued. Long-term debt
securities are valued by an independent pricing service and such prices are
believed to reflect the fair value of such securities. Money market instruments
having less than 60 days to maturity are valued at amortized cost which
approximates market value. Other securities and assets for which market
quotations are not readily available are valued at fair value as determined in
good faith by or under the direction of the Fund's Board of Directors.
Federal Income Taxes- The Fund intends to qualify as a regulated investment
company and make the requisite distributions to shareholders. Accordingly, no
provision for federal income taxes has been made in the financial statements.
Income and capital gain distributions are determined in accordance with federal
income tax regulations which may differ from generally accepted accounting
principles.
Repurchase Agreements- The Fund 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 Fund's
custodian bank until the maturity of the respective repurchase agreements. Each
repurchase agreement is at least
<PAGE>
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.
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. 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. Original issue discounts are accreted to
interest income over the lives of the respective securities. Withholding taxes
on foreign interest have been provided for in accordance with the Fund's
understanding of the applicable country's tax rules and rates. The Fund declares
and pays dividends for net investment income quarterly and pay distributions
from net realized gain on investment transactions, if any, annually.
Certain Fund expenses are paid through "soft dollar" arrangements with brokers.
The amount of these expenses is less than 0.01% of the Fund's average daily net
assets.
Use of Estimates- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware Management Company, Inc. ("DMC") the Investment Manager of the
Fund, an annual fee which is calculated daily at the rate of .75% on the average
daily net assets. At September 30, 1997 the Series had a liability to DMC for
management fees and other expenses of $7,866.
DMC has elected to waive that portion if any of the management fee and reimburse
the Fund to the extent that annual operating expenses exclusive of taxes,
interest, brokerage commissions and extraordinary expenses, exceed .80% of
average daily net assets of the Fund through December 31, 1997. Total expenses
absorbed by DMC for the period ended September 30, 1997 were $28,082.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of DMC,
to serve as dividend disbursing, transfer agent and accounting service agent for
the Fund. For the period ended September 30, 1997, the Fund expensed $623 for
dividend
<PAGE>
disbursing and transfer agent services and $379 for accounting services. At
September 30, 1997, the Series had a liability for such fees and other expenses
payable to DSC of $602.
Certain officers of DMC, DSC and DDLP are officers, directors and/or employees
of the Fund. These officers, directors and employees are paid no compensation by
the Fund.
3. Investments
During the period ended September 30, 1997, the Fund made purchases of
$4,874,446 and sales of $2,261,828 of investment securities other than U.S.
government securities and temporary cash investments.
At September 30, 1997, the aggregate cost of securities for federal income tax
purposes was $2,634,749.
At September 30, 1997, unrealized appreciation for federal income tax purposes
aggregated $376,702 of which $384,188 related to unrealized appreciation of
securities and $7,486 related to unrealized depreciation of securities.
4. Capital Stock
Transactions in capital stock shares were as follows:
5/1/97*
to
9/30/97
-------
Shares sold: 268,306
Shares issued upon reinvestment of dividends
from net investment income and distributions
of realized gains from security transactions: -0-
-------
268,306
Shares repurchased: (1,628)
-------
Net Increase................................................ 266,678
-------
<PAGE>
Delaware Group Premium Funds, Inc. - Quantum Series
Statement of Net Assets
September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Number Market
of Shares Value
<S> <C> <C> <C> <C>
COMMON STOCK - 90.50%
Automobiles & Auto Parts - 0.36%
Paccar . . . . . . . . . . . . . . . 300 $ 16,725
-----------
16,725
-----------
Banking, Finance & Insurance - 31.60%
Ahmanson (H.F.) & Co. . . . . . . . . . . . . . . . 1,035 58,801
Allstate . . . . . . . . . . . . . . . 445 35,767
AmSouth Bancorporation . . . . . . . . . . . . . . . 950 46,016
Bank of Boston . . . . . . . . . . . . . . . 515 45,545
Bank of New York . . . . . . . . . . . . . . . 855 41,040
BankAmerica . . . . . . . . . . . . . . . 810 59,383
Bear Stearns . . . . . . . . . . . . . . . 1,035 45,540
CIGNA . . . . . . . . . . . . . . . 345 64,256
Chase Manhattan . . . . . . . . . . . . . . . 755 89,090
City National . . . . . . . . . . . . . . . 1,175 37,600
Comdisco . . . . . . . . . . . . . . . 1,125 36,633
Comerica . . . . . . . . . . . . . . . 650 51,309
Edwards (A.G.) . . . . . . . . . . . . . . . 810 41,614
First Chicago NBD . . . . . . . . . . . . . . . 440 33,110
First Union . . . . . . . . . . . . . . . 450 22,528
First of America Bank . . . . . . . . . . . . . . . 993 53,285
Marsh & McLennan . . . . . . . . . . . . . . . 810 62,066
Mellon Bank . . . . . . . . . . . . . . . 1,205 65,974
Mercury General . . . . . . . . . . . . . . . 305 26,688
Mid Ocean . . . . . . . . . . . . . . . 580 36,758
NationsBank . . . . . . . . . . . . . . . 850 52,594
Old Republic International . . . . . . . . . . . . . . . 870 33,930
* Oxford Health Plans . . . . . . . . . . . . . . . 675 50,562
Paine Webber Group . . . . . . . . . . . . . . . 1,230 57,272
Reliance Group Holdings . . . . . . . . . . . . . . . 2,470 33,499
Republic New York . . . . . . . . . . . . . . . 325 36,928
SLM Holding . . . . . . . . . . . . . . . 315 48,668
SunAmerica . . . . . . . . . . . . . . . 1,245 48,788
T. Rowe Price Associates . . . . . . . . . . . . . . . 600 40,275
Travelers Group . . . . . . . . . . . . . . . 1,370 93,503
-----------
1,449,022
-----------
Buildings & Materials - 0.65%
Oakwood Homes . . . . . . . . . . . . . . . 1,050 29,794
-----------
29,794
-----------
Cable, Media, & Publishing - 4.13%
Dun & Bradstreet . . . . . . . . . . . . . . . 1,200 34,050
Ennis Business Forms . . . . . . . . . . . . . . . 715 8,088
Gannett . . . . . . . . . . . . . . . 540 58,286
New York Times . . . . . . . . . . . . . . . 840 44,100
Omnicom Group . . . . . . . . . . . . . . . 615 44,741
-----------
189,265
-----------
</TABLE>
__________________________
Top 10 stock holdings, representing 18.7% of net assets, are in bold.
<PAGE>
<TABLE>
<CAPTION>
Number Market
of Shares Value
<S> <C> <C> <C> <C>
Chemicals - 0.30%
Avery Dennison . . . . . . . . . . . . . . . 235 $ 9,400
International Flavors & Fragrances . . . . . . . . . . . . . . . 85 4,165
-----------
13,565
-----------
Computers & Technology - 9.29%
* Cadence Design Systems . . . . . . . . . . . . . . . 1,010 54,035
Compaq Computer . . . . . . . . . . . . . . . 1,400 104,650
Deluxe . . . . . . . . . . . . . . . 865 29,032
* EMC . . . . . . . . . . . . . . . 325 18,972
HBO . . . . . . . . . . . . . . . 1,050 39,572
Microsoft . . . . . . . . . . . . . . . 510 67,495
* Quantum . . . . . . . . . . . . . . . 1,565 59,910
* Storage Technology . . . . . . . . . . . . . . . 320 15,300
* Western Digital . . . . . . . . . . . . . . . 930 37,258
-----------
426,224
-----------
Consumer Products - 3.25%
Avon Products . . . . . . . . . . . . . . . 635 39,370
Clorox . . . . . . . . . . . . . . . 740 54,852
Maytag . . . . . . . . . . . . . . . 625 21,328
Premark International . . . . . . . . . . . . . . . 1,050 33,600
-----------
149,150
-----------
Electronics & Electrical - 2.96%
* American Power Conversion . . . . . . . . . . . . . . . 1,525 42,938
* Anixter International . . . . . . . . . . . . . . . 4,420 75,969
Xerox . . . . . . . . . . . . . . . 200 16,838
-----------
135,745
-----------
Energy - 2.35%
* Global Marine . . . . . . . . . . . . . . . 840 27,930
Helmerich & Payne . . . . . . . . . . . . . . . 390 31,200
* Oryx Energy . . . . . . . . . . . . . . . 1,120 28,490
Union Texas Petroleum . . . . . . . . . . . . . . . 865 20,328
-----------
107,948
-----------
Food, Beverage & Tobacco - 7.39%
* Boston Chicken . . . . . . . . . . . . . . . 805 11,849
Campbell Soup . . . . . . . . . . . . . . . 640 31,360
Coca Cola . . . . . . . . . . . . . . . 870 53,016
Flowers Industries . . . . . . . . . . . . . . . 1,770 36,064
Hershey Foods . . . . . . . . . . . . . . . 810 45,765
Hormel Foods . . . . . . . . . . . . . . . 260 8,336
International Multifoods . . . . . . . . . . . . . . . 920 27,313
Interstate Bakeries . . . . . . . . . . . . . . . 835 57,250
Quaker Oats . . . . . . . . . . . . . . . 875 44,078
Ralston-Purina Group . . . . . . . . . . . . . . . 270 23,895
-----------
338,926
-----------
Healthcare & Pharmaceuticals - 5.19%
* Amgen . . . . . . . . . . . . . . . 475 22,755
* Healthsouth . . . . . . . . . . . . . . . 1,420 37,896
Johnson & Johnson . . . . . . . . . . . . . . . 1,000 57,625
* Lincare Holdings . . . . . . . . . . . . . . . 495 24,920
* Phycor . . . . . . . . . . . . . . . 475 13,820
Schering-Plough . . . . . . . . . . . . . . . 1,570 80,855
-----------
237,871
-----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number Market
of Shares Value
<S> <C> <C> <C> <C>
Industrial Machinery - 0.76%
Deere & Co. . . . . . . . . . . . . . . . 650 $ 34,938
------------
34,938
Leisure, Lodging, & Entertainmt - 0.94% ------------
Callaway Golf . . . . . . . . . . . . . . . 780 27,202
Fleetwood Enterprises . . . . . . . . . . . . . . . 130 4,363
* King World Productions . . . . . . . . . . . . . . . 265 11,461
-----------
43,026
-----------
Metals & Mining - 0.19%
Cleveland Cliffs Iron . . . . . . . . . . . . . . . 200 8,725
-----------
8,725
-----------
Packaging & Containers - 0.43%
* Sealed Air . . . . . . . . . . . . . . . 360 19,778
-----------
19,778
-----------
Retail - 8.64%
CVS Corporation . . . . . . . . . . . . . . . 925 52,609
Gap . . . . . . . . . . . . . . . 895 44,806
Jostens . . . . . . . . . . . . . . . 345 9,358
Ross Stores . . . . . . . . . . . . . . . 1,540 52,649
* Safeway . . . . . . . . . . . . . . . 830 45,131
Sears,Roebuck . . . . . . . . . . . . . . . 1,050 59,784
TJX . . . . . . . . . . . . . . . 1,880 57,457
Tiffany . . . . . . . . . . . . . . . 1,065 45,263
* Woolworth . . . . . . . . . . . . . . . 1,310 28,984
------------
396,041
------------
Telecommunications - 10.64%
AT&T . . . . . . . . . . . . . . . 2,925 129,614
Alltel . . . . . . . . . . . . . . . 2,000 69,000
Ameritech . . . . . . . . . . . . . . . 1,085 72,152
* PairGain Technologies . . . . . . . . . . . . . . . 535 15,231
SBC Communications . . . . . . . . . . . . . . . 1,195 73,343
* Tellabs . . . . . . . . . . . . . . . 1,110 57,234
U.S. West Communications Group . . . . . . . . . . . . . . . 1,850 71,225
------------
487,799
------------
Textiles, Apparel, & Furniture - 0.62%
* Tommy Hilfiger . . . . . . . . . . . . . . . 570 28,464
------------
28,464
------------
Transportation & Shipping - 0.81%
* AMR . . . . . . . . . . . . . . . 230 25,458
* UAL . . . . . . . . . . . . . . . 140 11,847
------------
37,305
------------
Total Common Stock (cost $3,790,077) 4,150,311
------------
Principal Market
Amount Value
REPURCHASE AGREEMENTS - 9.21%
With J.P. Morgan Securities 6.00%
10/1/97 (dated 9/30/97, collateralized
by $139,000 U.S. Treasury Notes 6.625%
due 6/30/01, market value $144,264) . . . . . . . . . . . . . . . $ 141,000 $ 141,000
With PaineWebber 6.00% 10/1/97 (dated
9/30/97, collateralized by $86,000
U.S. Treasury Notes 5.875% due
9/30/02, market value $86,065 and
$56,000 U.S. Treasury Notes 5.375%
due 5/31/98, market value $56,425) . . . . . . . . . . . . . . . 140,000 140,000
With Prudential-Bache 6.05% 10/1/97
(dated 9/30/97, collateralized by
$84,000 U.S. Treasury Notes 5.875%
due 2/28/99,
market value $84,593 and $59,000
U.S. Treasury Notes 5.875% due 3/31/99,
market value 59,506) . . . . . . . . . . . . . . . 141,000 141,000
------------
Total Repurchase Agreements
(cost $422,000) . . . . . . . . . . . . . . . 422,000
------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TOTAL MARKET VALUE OF SECURITIES -
(cost $4,212,077) - 99.71% . . . . . . . . . . . . . . . 4,572,311
RECEIVABLES AND OTHER ASSETS NET OF
LIABILITIES - 0.29% . . . . . . . . . . . . . . . 13,528
------------
NET ASSETS APPLICABLE TO 373,283 SHARES
($0.01 PAR VALUE) OUTSTANDING;
EQUIVALENT TO $12.29 PER SHARE - 100.00% . . . . . . . . . . . . . . . $ 4,585,839
============
COMPONENTS OF NET ASSETS AT SEPTEMBER 30, 1997:
Common Stock, $0.01 par value, 750,000,000 shares
authorized to the Fund with 50,000,000 shares
allocated to the Series . . . . . . . . . . . . . . . $ 4,079,780
Accumulated undistributed:
Net investment income . . . . . . . . . . . . . . . 13,650
Net realized gain on investments . . . . . . . . . . . . . . . 132,175
Net unrealized appreciation of investments . . . . . . . . . . . . . . . 360,234
------------
Total net assets . . . . . . . . . . . . . . . $ 4,585,839
============
</TABLE>
________________________
* Non-income producing security for the period ended September 30, 1997
See accompanying notes
<PAGE>
Delaware Group Premium Funds, Inc. - Quantum Series
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1997
(Unaudited)
ASSETS:
Investments at market (cost $4,212,077) $ 4,572,311
Subscriptions receivable 21,678
Dividends and interest receivable 4,768
Cash 921
Other assets 10,858
---------------
Total assets 4,610,536
---------------
LIABILITIES:
Payable for securities purchased 4,567
Other accounts payable and accrued expenses 20,129
---------------
Total liabilities 24,697
---------------
TOTAL NET ASSETS $ 4,585,839
===============
See accompanying notes
<PAGE>
Delaware Group Premium Funds, Inc. - Quantum Series
STATEMENT OF OPERATIONS
Period May 1, 1997* to September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 16,224
Interest 6,720 22,944
---------------
EXPENSES:
Management fees $ 8,878
Custodian fees 4,868
Professional fees 2,188
Registration fees 1,202
Dividend disbursing and transfer agent fees
and expenses 961
Accounting fees and salaries 605
Reports and statements to shareholders 370
Taxes (other than taxes on income) 153
Directors' fees 126
Other 801
---------------
20,152
Less expenses absorbed by Delaware Management
Company, Inc. or Delaware Distributors (10,858) 9,294
--------------- --------------
NET INVESTMENT INCOME 13,650
--------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain from investnment trasactions 132,175
Net change in unrealized appreciation on investments
on investments 360,234
--------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 492,409
--------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 506,059
==============
</TABLE>
(*) Date of commencement of trading
See accompanying notes
<PAGE>
Delaware Group Premium Funds, Inc. - Quantum Series
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
5/1/97*
to
9/30/97
------------------
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 13,650
Net realized gain from investment transactions 132,175
Net change in unrealized appreciation 360,234
------------------
Net increase in net assets resulting
from operations 506,059
------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold: 5,015,520
Net asset value of shares issued upon reinvestment
of dividends from net investment income and net
realized gain on security transactions: 0
------------------
5,015,520
Cost of shares repurchased: (935,740)
------------------
Increase in net assets derived from capital
share transactions 4,079,780
------------------
NET INCREASE IN NET ASSETS 4,585,839
NET ASSETS:
Beginning of period 0
------------------
End of period $ 4,585,839
==================
* Date of commencement of trading
See accompanying notes
<PAGE>
Delaware Group Premium Funds, Inc. - Quantum Series
Financial Highlights
(Unaudited)
Financial Highlights
Selected data for each share of the Fund outstanding throughout the period was
as follows:
Quantum Series
---------------
Unaudited
5/1/97(1)
To
9/30/97
---------------
Net asset value, beginning of period 10.0000
Income from investment operations:
Net investment income 0.0366
Net realized and unrealized gain from investments 2.2534
----------
Net increase in net assets from investment operations 2.2900
----------
Net asset value, end of period 12.2900
==========
Total Return 22.90%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $4,586
Ratio of expenses to average net assets 0.80%
Ratio of expenses to average net assets prior to expense
limitation 1.69%
Ratio of net investment income to average net assets 1.15%
Ratio of net investment income to average net assets prior
to expense limitation 0.26%
Portfolio turnover 96%
- ---------
(1) Date of initial public offering; ratios have been annualized but total
return has not been annualized. Total return for this short of a time period
may not be representative of longer term results.
<PAGE>
DELAWARE GROUP PREMIUM FUND, INC.-QUANTUM SERIES
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
(Unaudited)
Delaware Group Premium Fund, Inc. (The "Fund"), is registered as a diversified
open-end investment company under the Investment Company Act of 1940, as
amended. The Fund is organized as a Maryland Corporation and offers 15 series:
the Decatur Total Return Series, the Delchester Series, the Capital Reserves
Series, the Cash Reserves Series, the Delcap Series, the Delaware Series, the
International Equity Series, the Value Series, the Trend Series, the Global Bond
Series, the Strategic Income Series, the Devon Series, the Emerging Markets
Series, the Convertible Securities Series, and the Quantum 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 lasted
quoted sales price as of the close of the NYSE 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 such prices are believed to reflect the fair
value of such securities. Money market instruments having less than 60 days to
maturity are valued at amortized cost which approximates market value. Other
securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Fund's Board of Directors.
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 has been made in the
financial statements. Income and capital gain distributions are determined in
accordance with federal income tax regulations which may differ from generally
accepted accounting principles.
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 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.
<PAGE>
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.
The Series will make payments from the Series net investment income quarterly
and distributions from net realized securities profits, if any, following the
close of the fiscal year.
Certain Fund expenses are paid through "soft dollar" arrangements with brokers.
The amount of these expenses is less than 0.01% of the Fund's average daily net
assets.
Use of Estimates- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Series
pays Delaware Management Company, Inc. ("DMC"), the Investment Manager of the
Series, an annual fee which is calculated daily at the rate of 0.75% on the
average daily net assets of the Series without consideration of amounts paid to
unaffiliated directors.
DMC has elected to waive that portion if any of the management fee 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 of the Series through September 30, 1997. Total
expenses absorbed by DMC for the period ended September 30, 1997 were $10,858.
The Series has engaged Delaware Service Company, Inc. (DSC), an affiliate of
DMC, to serve as dividend disbursing and transfer agent for the Series.
Effective August 19, 1996, the Series also engaged DSC to provide accounting
services for the Series. Previously, fund personnel provided this service and
the related costs were recorded in salaries and other expense categories in the
statement of operations. For the period ended September 30, 1997, the Fund
expensed $961 for dividend disbursing and transfer agent services and $447 for
accounting services. At September 30, 1997, the Fund had a liability for such
fees and other expenses payable to DSC for $1,622.
<PAGE>
Certain officers of Delaware Management Company ("DMC"), DIAL and DSC are
officers, directors and/or employees of the Fund. These officers, directors and
employees are paid no compensation by the Fund.
3. Investments
During the period ended September 30, 1997, the Quantum Series made purchases of
$4,885,272 and sales of $1,227,369 of investment securities, other than U.S.
government securities and temporary cash investments.
At September 30, 1997, the aggregate cost of securities for federal income tax
purposes was $ 4,212,077.
At September 30, 1997, unrealized appreciation for federal income tax purposes
aggregated $360,234 of which $ 400,190 related to unrealized appreciation of
securities and $ 39,956 related to unrealized depreciation of securities.
4. Capital Stock
Transactions in capital stock were as follows:
Period
Ended
9/30/97
Shares sold: 455,980
Shares repurchased: (82,697)
-------
Net Increase..................... 373,283
=======
5. Concentrations of Credit Risk
The Series may invest up to 10 % of its total assets in illiquid securities
which may include securities with contractual restrictions on resale, securities
exempt from registration under Rule 144A of the Securities Act of 1933, as
amended, and other securities which may not be readily marketable. The relative
illiquidity of some of these securities may adversely affect the Fund's ability
to dispose of such securities in a timely manner and at a fair price when it is
necessary to liquidate such securities. These securities, if any, have been
denoted in the Statement of Net Assets.
