<PAGE>
January 31, 1997
Dear Policy Holder:
The year 1996 was marked by an ebullient U.S. stock market and
the largest inflow of personal savings into mutual funds ever. With the
exception of Japan, overseas stock markets were strong as well, especially in
Europe. Many foreign bond markets performed better during the year than the U.S.
bond market, which was dogged by a persistent, largely unfounded fear of
inflation.
1996 Total Return
Standard & Poor's 500 Index +22.95%
Russell 2000 Index +16.49%
Lehman Brothers Government Corporate Bond Index +2.91%
Morgan Stanley Europe Australia Far East Index +6.36%
Performance quoted above assumes reinvestment of dividends. It is not
intended to represent the performance of any Premium Fund Series. Complete
performance information can be found following each discussion section of
this report.
Higher corporate earnings and improved productivity at many domestic and
multinational industrial companies drove the U.S. stock market higher in 1996.
The stocks of larger companies tended to outperform midcap and smaller cap
issues, as many investors decided "bigger was better" amid an uncertain outlook
for U.S. interest rates.
In recent months, domestic consumer spending has been weak and leading U.S.
economic indicators suggest subdued growth ahead. While it is possible the U.S.
stock market, especially smaller companies with above average earnings
prospects, could turn in a strong year, we believe a more likely scenario may be
a return to historical patterns of share price volatility and total return.
The U.S. bond market remains a question mark in 1997. The rate of inflation,
although a modest 3.3% this past year, was the highest in five years. We
generally believe income is likely to be the dominant component of total return
from U.S. bonds. In our opinion, high-yield, higher risk corporate securities
are well-positioned for the year ahead because these bonds have historically
been less sensitive to modest increases in interest rates.
Beyond our shores, we have a somewhat more positive outlook for both stocks
and bonds. In Europe, several countries are taking positive steps to reform
fiscal policy in order to qualify for European Monetary Union. In addition, we
believe privatization across the Continent should encourage greater long-term
economic growth, although there are likely to be some short-term political
obstacles.
Summaries of the strategies and performance for each Delaware Group Premium
Fund* investment series are included in the pages that follow. Keep in mind that
your annuity is designed as a long-term investment and that any earnings
compound tax-deferred until withdrawal. This can help increase your earnings
potential.
Sincerely,
/s/ Wayne A. Stork
- ------------------------------
Wayne A. Stork
Chairman, President and Chief Executive Officer
Delaware Group Premium Fund
* Investment Series of the Premium Fund underlie variable annuity products
issued by AIG Life Insurance Co. of America and American International Life
Assurance Co. of New York.
<PAGE>
Equity/Income Series
Portfolio Strategy and Performance in 1996
This time a year ago it seemed unlikely that the U.S. stock market would
repeat the robust gains of 1995, but despite a minor setback in July, stocks
again provided robust double digit returns.
The Equity/Income Series, which focuses on stocks that pay above-average
dividends and offer capital appreciation potential, provided a +20.72% total
return (with dividends and capital gains reinvested) for the 12 months ended
December 31, 1996.
In 1996, a positive economic environment helped your Series' performance.
Inflation was subdued thanks to the Federal Reserve Board's effective monetary
policy. Consumer spending grew at a moderate, sustainable pace. For some
companies, federal regulatory concerns dissipated.
Since the fall of 1994, stock prices -- as measured by the unmanaged
Standard & Poor's 500 Index -- have advanced at a pace that substantially
exceeds the market's average annual historical returns, with remarkably lower
than average short-term price declines.
Any prudent, long-term investment strategy is mindful of the historical fact
that stock markets move in cycles. Periods of expansion and prosperity can be
followed by uncertain times, when an effective stock selection strategy is
especially valuable.
The Equity/Income Series relies on a consistent, value-oriented investment
discipline that we believe can be especially useful in periods of increased
market volatility. To be considered for the portfolio, stocks must yield more
than the average yield of stocks in the S&P 500 Index. The Series' management
believes above-average yields are a strong indicator that a stock is
undervalued. If the yield falls below the average of the Index, management will
begin to sell the stock. This helps us make sell decisions involving "good
companies" when a stock's capital appreciation potential becomes limited.
A Look at the Portfolio
During 1996, the Series benefited from strong performance of financial, drug,
chemical, capital goods and railroad stocks. In 1996, our dividend-driven
investment guidelines led us to a wide variety of industries. Holdings of
industrial companies such as General Electric outperformed the market. Some of
our telecommunications holdings did not meet expectations, however.
In 1996, we also purchased stocks of many globally oriented consumer growth
companies such as pharmaceutical firms. We believed these stocks had strong
earnings potential and that they were temporarily depressed as a result of the
dollar's climb.
Generally, the Series' stock selection strategy does not include an
evaluation of the likelihood a company may be acquired by another company.
However, we've found in recent years that our value orientation has led us to
companies
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Equity/Income Series Investment Objective
Seeks the highest possible total return by selecting issues that exhibit
potential for capital appreciation while providing higher-than-average
dividend income.
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<PAGE>
that, coincidentally, have become involved in mergers. This past year,
your Series benefited from having selected railroads involved in the freight
rail industry's rapid consolidation. Our dividend discipline put us on the right
track to stocks with capital appreciation potential.
Investment Outlook
The management of the Equity/Income Series is finding potential investments
among financial firms and cyclical companies whose earnings depend on the
strength of the U.S. economy. These stocks generally have above-average dividend
yields and, in our opinion, have potential for positive earnings surprises in
1997.
While it is possible that the stock market's very strong recent performance
may continue, a more likely scenario is a return to a historical performance
norm. We anticipate that 1997 could see much more normal levels of
volatility -- that is short-term fluctuations of more than 10%.
As 1997 unfolds, slower economic growth could translate into slower corporate
earnings growth, and consequently less price appreciation. In such an
environment, dividends take on a much greater role in the total return of stock
investments. In our opinion, the Series' strict adherence to a time-tested
strategy that emphasizes the compounding power of dividends should serve
policyholders well.
Medallion Equity Income Series S & P 500 Index
------------------------------- ---------------
Month End Accum. Value Accum. Value
--------- ------------ ------------
07/88 10,000 10,000
12/89 10,569 13,639
12/90 9,171 13,212
12/91 11,218 17,231
12/92 12,208 18,540
12/93 14,094 20,406
12/94 14,063 20,663
12/95 19,144 28,402
12/96 23,109 34,890
Equity/Income Series
Average Annual Total Returns
----------------------------
Lifetime +11.53%
Five Years +15.55%
Three Years +17.93%
One Year +20.72%
Through December 31, 1996
Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
* The chart above shows a $10,000 investment in both the Equity/Income Series
and the unmanaged S&P 500 Index for the period from the Series' inception on
July 28, 1988, through December 31, 1996. All dividends and capital gains were
reinvested. The Index is unmanaged, with no set investment objective and does
not include the "real world" costs of managing a mutual fund. Earnings from a
variable annuity investment compound tax-free until withdrawal, so no
adjustments were made for income taxes. The effect of an expense limitation is
included in the chart. Performance does not reflect insurance fees related to
a variable product investment nor the deferred sales charge that would apply
to certain withdrawals of investments held for less than eight years.
Performance shown here would have been reduced if such fees were included and
the expense limitation were removed. For more information about fees, consult
your variable annuity prospectus.
<PAGE>
High Yield Series
Portfolio Strategy and Performance in 1996
High-yield, higher risk bonds were among the best performing domestic fixed
income asset category during fiscal 1996. The Series provided a +12.79% total
return for the year ended December 31, 1996 (capital change plus dividends
reinvested).
There were several reasons why the $380 billion high-yield bond market did so
well. First, there was strong demand for high-yield securities from mutual funds
and institutional investors. This stemmed from the fact that low yields and
price volatility in the rest of the bond market prompted income-oriented
investors to look for alternatives. Equally significant during 1996 was that
overall credit quality remained relatively high. This past year, the high-yield
market's very modest default rate of 0.95% was the lowest since 1984.
Since 1988, the goal of the High Yield Series has remained constant to
provide an above-average income stream consistent with a defensive,
conservative approach to credit risk management. The Series emphasizes income
as the main component of total return, with capital preservation taking
precedence over capital appreciation. High-yield bonds provide higher income
because the market perceives that issuers are less able to pay interest and
repay principal than "investment-grade" companies. The tax-deferred status of
your annuity allowed you to benefit from the full value of the above-average
income generated: your investment compounds free of income taxes.
A Look at the Portfolio
The High-Yield Series was well-diversified over the past year with a
portfolio of some 125 bonds. Rather than placing bets on which industries might
perform best during a year in which conflicting economic data kept investors
guessing about the direction of the economy and interest rates, we focused on
the strengths of individual bond issues. In evaluating bonds for the portfolio,
relative value, coupon and credit were foremost. The first two measures point
the way to income potential and relative stability, and the third helps us gauge
a company's financial health.
High yield bonds with BB and B ratings offered an attractive risk/reward
profile in 1996. As of December 31, high-yield bonds yielded, on average, about
3.1 percentage points more than comparable maturity U.S. Treasury Bonds. Of
course, the principal and income of high-yield bonds are not backed by the U.S.
government like U.S. Treasury Bonds.
In 1996, the Series focused primarily on bonds rated B, which offered
somewhat higher yields than bonds rated BB. Approximately 75% of the Series'
portfolio was invested in bonds rated B at year's end, 17% was invested in BB
and the balance of the Series' assets were cash and non-rated high-yield bonds.
During the year, bonds rated B provided a total return of +14.11%, about 70
basis points (0.70%) higher than the average annual return this bond category
has provided since 1985.
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High Yield Series Investment Objective
Seeks as high a current income as possible by investing in rated and unrated
corporate bonds, including higher risk non-investment grade bonds, U.S.
government securities and commercial paper.
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<PAGE>
Investment Outlook
The U.S. economy appears to be stable, with growth continuing at what we
believe is a moderate, sustainable pace. Coupled with the improved
competitiveness of American corporations, we believe the favorable environment
for high-yield bonds will continue. Because of the capital appreciation
high-yield bonds enjoyed in 1996, however, we expect that income will be the
primary driver of returns in the coming months.
Still, with yields that are above those available in the lower risk segments
of the bond market, we believe high-yield bonds have the potential to outperform
other fixed-income investments.
Merrill Lynch
High Yield Series High Yield Bond Index
-------------------------------- ----------------------
Month End
---------
07/88 $10,000 $10,000
12/89 $10,811 $10,814
12/90 $10,043 $10,343
12/91 $13,811 $13,920
12/92 $15,668 $16,448
12/93 $18,230 $19,274
12/94 $17,707 $19,398
12/95 $20,452 $23,260
12/96 $23,063 $25,834
High Yield Series
Average Annual Total Returns
----------------------------
Lifetime +10.43%
Five Years +10.80%
Three Years +8.16%
One Year +12.79%
Through December 31, 1996
Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
* The chart above shows a $10,000 investment in both the High Yield Series and
the Merrill Lynch Index for the period from the Series' inception on July 28,
1988, through December 31, 1996. All dividends and capital gains were
reinvested. The Index is unmanaged, with no set investment objective and does
not include the "real world" costs of managing a mutual fund. Earnings from a
variable annuity investment compound tax-free until withdrawal, so no
adjustments were made for income taxes. The effect of an expense limitation is
included in the chart. Performance does not reflect insurance fees related to
a variable product investment nor the deferred sales charge that would apply
to certain withdrawals of investments held for less than eight years.
Performance shown here would have been reduced if such fees were included and
the expense limitation were removed. For more information about fees, consult
your variable annuity prospectus.
<PAGE>
Capital Reserves Series
Portfolio Strategy and Performance in 1996
Capital Reserves Series provided a total return of +4.05% (capital change
plus reinvested dividends) in 1996, a year that tested bond investors' nerves
but was not quite as disconcerting as 1994.
Interest rates rose beginning in February 1996, when the bond market
anticipated that the Federal Reserve Board would raise its target for the
Federal Funds rate -- the rate banks charge each other on overnight loans. The
bond market remained in the doldrums until late summer, when it began to appear
that the political status quo would be endorsed in November's federal elections.
By year's end, a brief post-election bond market rally -- bolstered by the
hope that Washington would act with greater fiscal policy restraint and
bipartisanship -- began to fizzle as the outlook for inflation in 1997 grew
cloudy.
At year's end, the yield on the five-year U.S. Treasury note stood at 6.20%,
an increase of 83 basis points (0.83%) from a year earlier. In 1996, Treasury
securities with a maturity of between five and ten years had the sharpest price
drop (and highest increase in yield) of any segment of the Treasury market.
The Series focuses on the intermediate segment of the bond market because,
despite short-term volatility, it has historically offered an attractive
long-term risk/reward ratio. Investors can generally obtain a large portion of
the income available from longer maturity bonds, but with less risk to principal
should interest rates rise. We believe this historical pattern has the potential
to resume in the coming months if inflation remains in check.
A Look at the Portfolio
Our holdings consisted primarily of mortgage-related securities issued by
government agencies such as the Federal National Mortgage Association and very
high quality bonds issued by large industrial corporations.
Corporate and mortgage bonds held up somewhat better than Treasuries in 1996
and the Series benefited from having a larger percentage of corporate and
mortgage bonds than the benchmark Lehman Brothers Government/Corporate Bond
Index.
Bonds in the Series' portfolio had an average quality rating of AA, an
indication of low credit risk, an average effective maturity of 5.1 years and an
average duration of 3.3 years as of December 31. This was slightly shorter than
a year ago. Duration, the most common measure of a bond's sensitivity to
interest rates, indicates the likely percentage change in a bond's price given a
1% movement in interest rates.
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Capital Reserves Series Investment Objective
Seeks a high, stable level of current income while minimizing flucuations in
principal by investing in short and intermediate-term securities.
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<PAGE>
Investment Outlook
Going forward, we believe the bond market is anticipating more U.S. economic
weakness in the months ahead than will actually occur. In this environment, the
Series will stand by a strategy of focusing on the intermediate segment of the
fixed-income market and attempting to reduce risk.
Over the past two years, even small whiffs of inflation from one or two
monthly government statistics that deviated from analysts' expectations have
caused yields to rise substantially in a single day. We believe that these
overreactions should eventually subside and that bond market volatility will
return to the historically lower norms seen before 1994.
For that to happen, however, we believe the market and the Federal Reserve
Board will need to be convinced, among other things, that Washington has taken
effective steps toward long-term fiscal policy reform.
In such an environment, we believe it more prudent to forego some income
potential in return for an added measure of safety. We will continue to position
the portfolio in a conservative way, focusing on both high income and long-term
stability rather than short-term price gains.
Lehman Brothers
DE Medallion Capital Reserves Series Govt/Corp Bond Index
------------------------------------ --------------------
Month End
---------
07/88 $10,000 $10,000
12/89 $11,209 $11,816
12/90 $12,128 $12,795
12/91 $13,199 $14,858
12/92 $14,149 $15,985
12/93 $15,260 $17,748
12/94 $14,850 $17,125
12/95 $16,941 $20,421
12/96 $17,628 $21,013
Capital Reserves Series
Average Annual Total Returns
----------------------------
Lifetime +6.97%
Five Years +5.96%
Three Years +4.92%
One Year +4.05%
Through December 31, 1996
Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
* The chart above shows a $10,000 investment in both the Capital Reserves Series
and the Lehman Brothers Index for the period from the Series' inception on
July 28, 1988, through December 31, 1996. All dividends and capital gains were
reinvested. The Index is unmanaged, with no set investment objective and does
not include the "real world" costs of managing a mutual fund. Earnings from a
variable annuity investment compound tax-free until withdrawal, so no
adjustments were made for income taxes. The effect of an expense limitation is
included in the chart. Performance does not reflect insurance fees related to
a variable product investment nor the deferred sales charge that would apply
to certain withdrawals of investments held for less than eight years.
Performance shown here would have been reduced if such fees were included and
the expense limitation were removed. For more information about fees, consult
your variable annuity prospectus.
<PAGE>
Multiple Strategy Series
Portfolio Strategy and Performance in 1996
The Multiple Strategy Series invests in both stocks and bonds with a goal of
providing long-term capital growth, current income and protection of principal.
In 1996, the U.S. stock market provided substantial rewards for many investors
while bonds turned in a mediocre performance. The Series' total return for the
fiscal year was +15.91% with dividends and capital gains reinvested.
We select stocks based on several factors -- expected dividend increases,
history of consistent dividend growth and a belief that the company can sustain
that growth. We look for companies that are increasing dividends faster than
companies in the Standard & Poor's 500 Index. Cash dividends paid by companies
in the S&P 500 Index have grown by more than 78% since 1986 while the U.S.
Consumer Price Index rose only 43% during the same 10-year period.
In 1996, stock investors valued consistency. Companies that posted consistent
earnings saw their stock prices benefit while companies whose results were
erratic or did not meet expectations suffered. A trend we've noticed in recent
months is a gradual narrowing of market leadership. Investors have tended to
favor a smaller number of high profile companies with strong track records.
In the fixed income portion of the portfolio, the Series focuses on high
quality government and corporate bonds maturing in seven to 10 years. We follow
this approach because we believe this range of maturity offers an attractive
risk/reward profile. They offer most of the income potential from 30-year
government and corporate bonds, but generally experience less change in
principal when interest rates rise and fall.
Bonds in the Series' portfolio had an average quality rating of AA, an
indication of low credit risk, an average effective maturity of 8.3 years and an
average duration of 4.8 years as of December 31. Duration, the most common
measure of a bond's sensitivity to interest rates, indicates the likely
percentage change in a bond's price given a 1% movement in interest rates.
A Look at the Portfolio
As of December 31, 1996, stocks comprised 63.7% of net assets while fixed
income securities accounted for about 32.8% of net assets. The remainder was
cash. As stock prices rose, we modestly reduced the percentage of stocks from
1995 levels to reduce potential volatility and increase the Series' income
potential.
During the year, the shares of several large stable growth companies we
bought in 1994 and 1995 appreciated substantially. In some cases, we sold or
reduced positions in these stocks. We added to our holdings of some large
consumer growth companies that we believe have further capital appreciation
potential.
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Multiple Strategy Series Investment Objective
Seeks a balance of capital appreciation, income and preservation of capital
by using an income-oriented valuation strategy to select stocks and bonds
that we believe demonstrate potential for income and capital growth.
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<PAGE>
Secondly, to the extent that the market "ignored" mid-cap companies in 1996,
it allowed the Fund to buy high quality, mid-size businesses with strong
dividend growth potential at reasonable prices. These included regional banks,
capital goods and providers of business services.
Investment Outlook
While the past five years have provided strong returns from stocks, we
believe investors should not expect double digit gains year after year.
Investors should be prepared for market fluctuations. We've learned that when
stock gains are hard to come by, dividends and the income generated by bonds
take on a greater role in generating total return.
In 1996, companies in the Standard & Poor's 500 Index raised dividends more
than twice the 3.3% rate of inflation. We believe many companies are in a strong
position to increase the cash dividends paid on their stock since, in 1996, less
than 40% of corporate profits were paid out as cash dividends.
We believe the Federal Reserve Board has effectively restrained inflation and
that increases in interest rates are likely to be modest given the slow pace of
U.S. economic growth. This outlook leads us to conclude that the high quality
bonds in the Series have the potential to perform well because of the relatively
strong income they generate.
Multiple
State Lehman Brothers
Series Govt/Corp Bond Index S&P 500 Index
----------------- -------------------- -------------
Month End Accum. Value Accum. Value
--------- ------------ ------------
07/88 $10,000 $10,000 $10,000
12/88 $10,160 $10,344 $10,365
12/89 $11,848 $11,816 $13,639
12/90 $11,825 $12,795 $13,212
12/91 $14,968 $14,858 $17,231
12/92 $17,038 $15,985 $18,540
12/93 $18,432 $17,748 $20,406
12/94 $18,405 $17,125 $20,663
12/95 $23,296 $20,421 $28,402
12/96 $27,006 $21,013 $34,890
Multiple Strategy Series
Average Annual Total Returns
----------------------------
Lifetime +12.51%
Five Years +12.53%
Three Years +13.58%
One Year +15.91%
Through December 31, 1996
Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
* The chart above shows a $10,000 investment in the Multiple Strategy Series,
the S&P 500 Index and the Lehman Brothers Government/Corporate Bond Index for
the period from the Series' inception on July 28, 1988,through December 31,
1996. All dividends and capital gains were reinvested. The Indices are
unmanaged, with no set investment objectives and do not include the "real
world" costs of managing a mutual fund. Earnings from a variable annuity
investment compound tax-free until withdrawal, so no adjustments were made for
income taxes. The effect of an expense limitation is included in the chart.
Performance does not reflect insurance fees related to a variable product
investment nor the deferred sales charge that would apply to certain
withdrawals of investments held for less than eight years. Performance shown
here would have been reduced if such fees were included and the expense
limitation were removed. For more information about fees, consult your
variable annuity prospectus.
<PAGE>
Growth Series
Portfolio Strategy and Performance in 1996
Growth Series provided a total return of +14.46% in 1996 (with capital gains
and dividends reinvested). While this represented a solid year by historical
market standards, our results were less than the +15.56% total return of the
NASDAQ Industrial Index. The index is an unmanaged portfolio of small and
mid-size companies that reflects the Series' investment focus.
The Series' stock selections in business and consumer services performed well
during fiscal 1996. However, our technology and health care selections did not
meet our expectations, especially during the latter half of the year, when these
two industry groups generally underperformed the market by a substantial margin.
We manage the Series with the goal of providing capital appreciation over
time. In selecting investments for the portfolio, we search for stocks of small
and mid-size companies that show a history of profitability, leadership within
their industries, strong balance sheets and management teams, and the potential
to continue growing rapidly.
During 1996, stocks in two slow-growing industries that generally do not meet
our investment parameters -- energy and banking -- provided very strong returns.
The Series was underweighted in these sectors relative to the NASDAQ Industrial
Index.
A Look at the Portfolio
We pick one company at a time and meet with companies' management, visit
their plants, analyze the product or service, talk to customers and review the
competition. We require a consistent track record of growth in quarterly
earnings and market share.
Overall, the Series' portfolio was broadly diversified -- with technology,
health care and consumer stocks accounting for about two-thirds of net assets.
We tend to avoid cyclical companies and take a long-term view of the market. We
focus on classic growth industry sectors that have historically provided
consistent returns.
We're currently striving for a somewhat more concentrated yet still
diversified portfolio -- that is, fewer names and somewhat larger positions in a
broad range of industries. This will allow us to spend more time keeping abreast
of what's happening at each company we own. At year's end, our top 10 holdings
amounted to 19% of net assets. No one company was more than 3% of net assets.
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Growth Series Investment Objective
Seeks long-term capital appreciation by investing in securities exhibiting
the potential for significant growth.
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<PAGE>
Investment Outlook
If the direction of interest rates remains unclear and corporate profit
growth slows, we believe there is likely to be a tug of war between investors
who think the glass is half empty and those who think it's half full. We're
somewhat cautious about 1997. We believe a modest increase in interest rates by
the Federal Reserve Board is likely, but that inflation will remain relatively
tame. Consequently, we have increased our cash position to 18% of net assets as
of December 31, 1996.
By our estimate, small and mid-cap stocks are selling at prices relative to
large cap stocks that are in the middle of a historical range, suggesting that
small and mid-cap companies are neither overvalued or undervalued. Still, we
believe some stocks could outpace the overall stock market in the year ahead,
especially if the dollar continues to strengthen in value against major world
currencies.
In our opinion, the earnings potential of certain small and mid-size,
domestically oriented companies could become more relatively attractive if large
multinational corporations suffer as a result of the dollar's appreciation. That
could happen because American goods would become more expensive for foreigners
to buy, or because the earnings of overseas subsidiaries would be "less" when
converted into dollars.
Nasdaq Ind. Index Growth Series
------------------ -------------
Month End
---------
07/91 $10,000 $10,000
12/91 $12,011 $11,031
12/92 $13,015 $11,248
12/93 $14,469 $12,549
12/94 $13,537 $12,106
12/95 $17,324 $15,679
12/96 $19,927 $17,955
Growth Series
Average Annual Total Returns
----------------------------
Lifetime +11.28%
Five Years +10.23%
Three Years +12.67%
One Year +14.46%
Through December 31, 1996
Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
* The chart above shows a $10,000 investment in both the Growth Series and the
NASDAQ Industrial Index for the period from the Series' inception on July 31,
1991, through December 31, 1996. All dividends and capital gains were
reinvested. The Index is unmanaged, with no set investment objective and does
not include the "real world" costs of managing a mutual fund. Earnings from a
variable annuity investment compound tax-free until withdrawal, so no
adjustments were made for income taxes. The effect of an expense limitation is
included in the chart. Performance does not reflect insurance fees related to
a variable product investment nor the deferred sales charge that would apply
to certain withdrawals of investments held for less than eight years.
Performance shown here would have been reduced if such fees were included and
the expense limitation were removed. For more information about fees, consult
your variable annuity prospectus.
<PAGE>
Money Market Series
The Money Market Series achieved its goals of providing relative safety and
current income this past year. Total return with distributions reinvested was
+4.93% for the year ended December 31, 1996.
The first half of 1997 was marked by modestly lower interest rates. Fear of
inflation abated amid a slowdown in U.S. economic growth. Since June, yields on
30-year U.S. government bonds declined one quarter of one percentage point
(0.25%) to 6.64%. However, some economists anticipate that the Federal Reserve
Board could increase its target for the Federal Funds rate -- the rate banks
charged on overnight loans between banks -- in the coming months.
While this would have negative implications for stocks and long-term bonds,
any rise in interest rates is good news for money market investors because it
generally boosts current income potential.
Money market investments can be appropriate places for cash intended for
future investment during periods of high market volatility. But money market
funds are not designed for long-term growth, nor is principal guaranteed. The
Series aims to maintain the highest quality holdings and maximize current income
while preserving principal and maintaining liquidity through a diversified
portfolio.
Keep in mind that your annuity investment is tax-deferred and compounds
without taxation, unlike income from a directly owned U.S. Treasury Bill or
commercial paper, which is subject to federal income tax in the year income is
received. Thus your annuity investment can let you keep more of the interest you
earn.
Yield Outlook
We believe that interest rates, especially short-term rates, are more likely
to rise than decline in the months ahead. Over the past two years, even small
whiffs of inflation from government statistics that deviated from analysts'
expectations have caused yields to rise substantially in a single day.
In our opinion, periods of short-term bond market volatility represent
overreactions that can provide opportunities for higher income from money market
investments without undue risk to principal.
Short-term investors can also take some comfort in government statistics that
show the growth rate in consumer prices was a modest 3.3% during 1996. This is
important because it means the money you've invested in this Series is not
losing ground to inflation -- a very distinct risk of short-term investments.
Money Market Series
Average Annual Total Returns
---------------------------------
Lifetime +5.30%
Five Years +3.96%
Three Years +4.69%
One Year +4.93%
Through December 31, 1996
Past performance is not a guarantee of future results. Yields will fluctuate and
are not guaranteed. The goal of a money market investment is to maintain a
constant share price of $1; however, there is no guarantee that this goal will
be met.
The average annual returns reflect reinvestment of all dividends. Earnings
from a variable annuity investment compound tax-free until withdrawal, so no
adjustments were made for income taxes. The effect of an expense limitation is
included in the chart. Performance does not reflect insurance fees related to a
variable product investment nor the deferred sales charge that would apply to
certain withdrawals of investments held for less than eight years. Performance
shown here would have been reduced if such fees and the expense limitation were
removed. For more information about fees, consult your variable annuity
prospectus.
-----------------------------------------------------------------------------
Money Market Series Investment Objective
Seeks to provide the highest level of current income consistent with
preservation of capital and liquidity and to maintain a constant share price.
-----------------------------------------------------------------------------
<PAGE>
International Equity Series
Portfolio Strategy and Performance in 1996
International Equity Series invests for long-term growth using a "value"
style. The Series' management typically buys dividend-paying stocks in
established markets with a four-to-five year investment horizon in mind. This is
evidenced by an annualized portfolio turnover of less than 20% during the fiscal
year.
Stocks are selected based on long-term capital growth and income potential
after taking into account the effects of a country's currency fluctuations,
inflation, local economy and politics.
Returns from any portfolio of international stocks are influenced by three
primary factors -- the relationship of the local currency to the investor's home
currency, in our case the U.S. dollar, specific circumstances in a particular
country's market and a fund manager's choice of stocks. The Series' 1996 results
reflected success in all three areas.
The Series' above-average investment in companies in the United Kingdom, as
well as Australia and New Zealand which use "dollar" based currencies, served
policyholders well during the past year.
London's unmanaged Financial Times-Stock Exchange (FT-SE) 100 Index, a United
Kingdom market benchmark, rose significantly more than the unmanaged Morgan
Stanley Europe Australia Far East (EAFE) Index, a benchmark of stocks in
established global markets outside the U.S.
The EAFE Index was affected by the weak performance of the Japanese stock
market during the second half of 1996, particularly during the fourth quarter.
Japan's financial sector is still grappling with the effects of the early 1990s
recession, and recent economic growth has been less than expected. The Series
benefited from the fact that it was underweighted in Japan compared to the EAFE
Index throughout 1996. As of this writing, the Series' management still believes
that the capital appreciation potential of the Japanese market is limited.
In 1996, your Series helped protect the dollar value of its holdings through
defensive currency hedging in several countries, including Japan and Germany.
When the U.S. dollar rose in value against the yen and deutschemark this year,
the rise in the value of these currency contracts more than offset the decline
in our Japanese and German stocks in U.S. dollar terms.
A Look at the Portfolio
Although Delaware International does not pick sectors, we generally favored
banking, industrial and utility companies that met the Series' dividend-oriented
investment guidelines. More than half of the portfolio was invested in Western
Europe, a region which management believes offers superior values for investors.
The Series' added to its holdings in France and Spain, where government reform,
interest rate cuts and strong underlying value may increase return potential. At
year's end, our largest holding was the National Australia Bank.
-----------------------------------------------------------------------------
International Equity Series Investment Objective
Seeks long-term growth without undue risk to principal by investing
primarily in stocks of foreign companies providing the potential for capital
appreciation and income.
----------------------------------------------------------------------------
<PAGE>
The few Japanese stocks we did own consisted primarily of technology stocks
whose earnings were driven by exports to countries such as the U.S. These stocks
generally outperformed the Nikkei and made a positive contribution to the
Series' performance.
Investment Outlook
In 1997, the Series expects to maintain a higher concentration of stocks in
selected Western European countries than the Morgan Stanley EAFE Index. We will,
however, continue to underweight Japan. In our opinion, there are no clear signs
that the Japanese economy is poised for a recovery expansion. In our opinion,
interest rates in Japan are more likely to rise than not.
In the early 1990s in the U.S., many companies restructured operations to
become more competitive and increase returns for shareholders. A similar process
is underway in several European countries, notably the United Kingdom and
Germany. Central banks in European countries, meanwhile, are reducing interest
rates making it easier for businesses to expand.
Despite the short-term negative effect that comments made by Federal Reserve
Board chairman Alan Greenspan had on some overseas markets, we believe that
international markets generally do not move "in sync" with the U.S. over the
long term. In our opinion, as U.S. profit growth slows in 1997, superior values
and capital appreciation potential could be found overseas.
International Equity Series MSCI EAFE Index
--------------------------- ---------------
Month End Accum. Value Accum. Value
--------- ------------ ------------
10/92 $10,000 $10,000
12/92 $10,030 $10,152
12/93 $11,630 $13,497
12/94 $11,930 $14,585
12/95 $13,599 $16,270
12/96 $16,323 $17,305
International Equity Series
Average Annual Total Returns
----------------------------
Lifetime +12.45%
Three Years +11.96%
One Year +20.03%
Through December 31, 1996
Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
*The chart above shows a $10,000 investment in the International Equity Series
and the Morgan Stanley EAFE Index from the Series' inception on October 29,
1992, through December 31, 1996. All dividends and capital gains were
reinvested. The Index is unmanaged, with no set investment objective and does
not include the "real world" costs of managing a mutual fund. Earnings from a
variable annuity investment compound tax-free until withdrawal, so no adjust
ments were made for income taxes. The effect of an expense limitation is
included in the chart. Performance does not reflect insurance fees related to
a variable product investment nor the deferred sales charge that would apply
to certain withdrawals of investments held for less than eight years.
Performance shown here would have been reduced if such fees were included and
the expense limitation were removed. For more information about fees, consult
your variable annuity prospectus.
<PAGE>
Emerging Growth Series
Portfolio Strategy and Performance in 1996
Fiscal 1996 was a mixed year for small cap stocks and the Emerging Growth
Series. The Series kept pace with the unmanaged NASDAQ Industrial Index
during the year's first half, but the second half was disappointing.
Generally, small cap stocks did not fully participate in the ebullient fall
rally enjoyed by stocks of large companies. For the 12 months ended December
31, 1996, the Series provided a total return of +11.00%, with distributions
reinvested.
The Series strives to identify changes in the American marketplace and
then attempts to position the portfolio in companies we believe likely to
profit from these trends. Our stock selection strategy is a "bottom up"
approach, meaning that we evaluate each company individually and decide
whether or not to buy it based on its merits and ability to meet changing
trends.
During the first half of 1996, the performance of the Series' small cap
stock selections was led by companies in the gaming, solid waste and health
care industries. Generally these companies have reported strong increases in
earnings relative to both competitors and large corporations.
In the second half, particularly the final three months of the year, the
Series did not fare as well relative to the NASDAQ benchmark and the overall
stock market. Our short-term underperformance reflected the fact that the
Series' management "stuck to its guns" and selected emerging growth
securities based on fundamental measures of growth such as corporate earnings
potential rather than short-term stock price momentum.
A Look at the Portfolio
Stocks in the Series' portfolio generally have higher price-to-earnings
ratios than other stock groups and, therefore, tend to be more sensitive to
interest rate moves. We focus on companies in the early stages of their
growth cycles. These companies tend to be smaller, with names that are not
widely recognized or researched by the investment community.
For much of 1996, several U.S. economic trends were in place that
historically have been a harbinger of strong returns for small cap stocks.
Inflation was at a comfortably low annual rate of 3.3%. Job growth remained
healthy. The U.S. dollar rose in value relative to other currencies. In the
past, this has helped small companies outshine multinational giants.
The trouble was, history didn't repeat itself. In many industries, the
Goliaths of market capitalization found favor with investors. Those who
focused on small emerging growth companies struggled to avoid being stomped
on. Our health care and technology selections tended to underperform, though
this was offset somewhat by strong returns in business services.
-----------------------------------------------------------------------------
Emerging Growth Series Investment Objective
Seeks long-term capital appreciation by investing in small capitalization
common stocks and convertible securities of emerging and growth-oriented
companies which we believe are responsive to changes in the marketplace.
-----------------------------------------------------------------------------
<PAGE>
Investment Outlook
By our estimate, prices of small cap stocks relative to large cap stocks are
in the middle of a historical range, suggesting that small companies are neither
overvalued or undervalued. Still, we believe some small cap stocks could outpace
the overall stock market in the year ahead, especially if the dollar continues
to strengthen in value against major world currencies.
In our opinion, the earnings potential of small domestically-oriented
companies could become more relatively attractive if large multinational
corporations suffer as a result of the dollar's appreciation. That could happen
because American goods may become more expensive for foreigners to buy, or
because the earnings of overseas subsidiaries would be "less" when converted
into dollars.
However, even this positive scenario for small cap stocks is tempered by
the fact that small technology businesses tend to do a lot of exporting.
Their earnings may also be hurt by a rise in the dollar.
Even with the stock market at record highs, the Series' management team is
finding companies that meet our strict investment guidelines. To properly
evaluate these opportunities for long-term capital appreciation , we believe
it is important to not "follow the crowd," and instead trust what we see and
hear first hand from individuals who actually run businesses, provide them
with credit or buy their products and services.
Emerging Growth Series NASDAQ Industrial Index
---------------------- -----------------------
Month End Accum. Value
--------- ------------
12/93 $10,000 $10,000
12/94 $10,160 $ 9,356
12/95 $14,145 $11,974
12/96 $15,701 $13,773
Emerging Growth Series
Average Annual Total Returns
----------------------------
Lifetime +16.14%
Three Years +15.46%
One Year +11.00%
Through December 31, 1996
Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
*The chart above shows a $10,000 investment in both the Emerging Growth Series
and the NASDAQ Industrial Index for the period from the Series' inception on
December 27, 1993, through December 31, 1996. All dividends and capital gains
were reinvested. The Index is unmanaged, with no set investment objective and
does not include the "real world" costs of managing a mutual fund. Earnings
from a variable annuity investment compound tax-free until withdrawal, so no
adjustments were made for income taxes. The effect of an expense limitation is
included in the chart. Performance does not reflect insurance fees related to
a variable product investment nor the deferred sales charge that would apply
to certain withdrawals of investments held for less than eight years.
Performance shown here would have been reduced if such fees and the expense
limitation were removed. For more information about fees, consult your
variable annuity prospectus.
<PAGE>
Value Series
Portfolio Strategy and Performance in 1996
The 1996 fiscal year was both rewarding and volatile for the stocks of
small companies. It was a time that tested the stock selection skills of
portfolio managers and highlighted the need for a disciplined investment
strategy. The Value Series, which focuses on small companies we believe are
undervalued, provided a +22.55% total return for the 12 months ended
December 31, 1996 (capital change plus income).
We outpaced the unmanaged Russell 2000 Index for the fiscal year and did
so with less short-term price fluctuation than the Index. Several factors
played a role in this year's strong market results. Earnings at many U.S.
companies were better than expected. Inflation remained low. Regulatory and
political threats that could have negatively affected some industries never
materialized.
After a robust advance in the spring, small growth stocks--those companies
for which the market has high expectations -- withered amid July's blistering
market correction. Value stocks -- shares of both large and small companies from
which the market expects less -- actually delivered superior results by year's
end. It was a classic story of tortoises beating hares.
Early in the year, many investors were attracted to initial public
offerings of small and medium-size technology companies. The stocks of
smaller companies in less glamorous, more cyclical businesses generally did
not attract as much speculative attention. In some instances, however, they
provided greater price appreciation.
Most small technology companies did not meet the Series' investment criteria
in 1996, and we benefited from being underweighted in this volatile area. We
positioned the Series in a diverse range of industrial, financial and service
businesses that we considered attractively priced relative to earnings, book
value and other measures.
A Look at the Portfolio
The Series generally invests in companies with a market capitalization of
between $100 million and $2 billion. We tend to be attracted to companies
whose stocks are trading near or at the low end of their historical
valuations. Our goal is to distinguish between companies that are simply
cheap and those whose management is improving shareholder value in ways
likely to be recognized by the market within a reasonable time.
During the year we made some substantial changes in your Series' portfolio
which we believe have positioned it to benefit from the more value-oriented
stock market that we see emerging in the late 1990s. We reduced the number of
our holdings, sold "winners" that no longer met our investment parameters and
strictly adhered to a discipline based on fundamental measures of value. We
had a few disappointments in the health maintenance organization area that
were more than offset by strong returns from our stock selections in finance,
energy and capital goods.
- -------------------------------------------------------------------------------
Value Series Investment Objective
Seeks capital appreciation by investing in stocks of small to mid-size companies
whose market value appears low relative to underlying value or earnings or
growth potential. Emphasis is placed on companies that may be temporarily
out-of-favor or whose value is not yet recognized by the market.
- -------------------------------------------------------------------------------
17
<PAGE>
Investment Outlook
In the coming months, large companies may find it more difficult to post
higher earnings should U.S. economic growth slow. However, we expect the U.S.
economy to generally remain healthy. That should allow smaller businesses to
expand and help cyclical industries grow.
We do not anticipate major changes in the Series' industry sector
weightings in 1997. Value Series continues to find well-managed companies
whose stocks are trading at what we believe are discount prices.
As mentioned earlier, we believe the market will broaden its focus as
investors realize that smaller, underfollowed companies may offer greater
capital appreciation potential than the stocks of larger, widely watched
companies. In investing as in life, the road less traveled can be a more
interesting and even more rewarding path.
Value Series Russell 2000 Index
- ---------------------- ------------------
Month End
- ---------
12/93 $10,000 $10,000
12/94 $10,288 $ 9,818
12/95 $12,741 $12,610
12/96 $15,614 $14,690
Cumulative
Avg Annual
Value Series
Average Annual Total Returns
----------------------------
Lifetime +15.94%
Three Years +15.22%
One Year +22.55%
Through December 31, 1996
Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may
be worth more or less than their original cost.
*The chart above shows a $10,000 investment in both the Value Series and the
Russell 2000 Index for the period from the Series' inception on December 27,
1993, through December 31, 1996. All dividends and capital gains were
reinvested. The Index is unmanaged, with no set investment objective and does
not include the "real world" costs of managing a mutual fund. Earnings from a
variable annuity investment compound tax-free until withdrawal, so no
adjustments were made for income taxes. The effect of an expense limitation is
included in the chart. Performance does not reflect insurance fees related to a
variable product investment nor the deferred sales charge that would apply to
certain withdrawals of investments held for less than eight years. Performance
shown here would have been reduced if such fees were included and the expense
limitation were removed. For more information about fees, consult your variable
annuity prospectus.
18
<PAGE>
Global Bond Series
Portfolio Strategy and Performance in 1996
Since the Global Bond Series was offered on May 1, 1996, the potential
returns available from selected overseas bond markets have been more attractive
than returns from the U.S. government bond market.
The Series relies on inflation-adjusted income potential as a key measure
of value when selecting bonds around the world. The Series' management team
focuses on long-term factors such as trends in the prices of goods and
services that can be analyzed with reasonable certainty and which are likely
to have a fundamental effect on long-term returns.
The Series' portfolio manager places great importance on quality and
selects only those bonds rated A or better by rating agencies. Generally, the
Series' holdings will have an average maturity in the four to 10-year range,
the range management believes offers attractive income potential relative to
the risk to principal from fluctuating interest rates.
There was a world of contrast between the performance of the U.S. bond
market and that of overseas bond markets in fiscal 1996. While income was the
dominant component of total return from domestic bonds, selected European
government bonds offered substantial capital appreciation potential as
Continental interest rates declined.
A Look at the Portfolio
During the year, the U.S. dollar rose in value against many currencies,
notably the Japanese yen. This had a negative effect on investment opportunities
in some countries. The Series' performance benefited from not having any
Japanese bonds during the year, and management expects to again avoid this
market in 1997. In recent months, the Series has put more emphasis on bonds in
countries such as Canada and Australia, whose basic unit of exchange is a
"dollar." Such currencies tend to be linked to the value of the U.S. dollar.
Investing in international bonds involves special risks. Currency exchange
rates fluctuate, affecting the value of bond income and principal.
Governments in some parts of the world are less stable, which has the
potential to affect the payment of interest and return of principal.
Generally, these risks can be quantified and managed.
For the seven months ended December 31, 1996, the Series provided a total
return of +11.79% with dividends reinvested. Performance for this short time,
however, should not be viewed as indicative of future results.
- ------------------------------------------------------------------------------
Global Bond Series Investment Objective
To seek current income consistent with the preservation of principal by
investing primarily in international bonds that may also provide the
potential for capital appreciation.
- ------------------------------------------------------------------------------
19
<PAGE>
Investment Outlook
As of this writing, long-term Canadian bonds offered higher yields
relative to comparable maturity U.S. Treasuries. Since Canada's inflation
rate of 1.5% during 1996 was less than half that of the U.S., we believe
there is potential real value for U.S. investors in this market in the months
ahead.
In Western Europe, the Series held bonds of countries where we believe
central bankers are making a serious effort to keep inflation in check and
reforming government fiscal policy to qualify for membership in the European
Monetary Union such as Spain.
A country's politics affect the returns of any government bond investment.
Fiscal 1996 may have been a watershed year for the U.S., given the Federal
Reserve's successful anti-inflation monetary policy and the apparent
consensus among elected leaders regarding welfare and other fiscal policies.
Nevertheless, we believe better bond values can be found abroad in 1997.
Even after factoring in overseas currency fluctuations, including the
possibility that the U.S. dollar will continue to rise in value against other
currencies, as it did in 1996, we believe overseas bonds appear attractive.
Solomon Brothers World
Global Bond Series Government Bond Index
- ------------------------ ---------------------
Month End
- ---------
05/01/96 $10,000 $10,000
06/30/96 $10,170 $10,079
07/31/96 $10,341 $10,273
08/31/96 $10,492 $10,313
09/30/96 $10,673 $10,355
10/31/96 $10,987 $10,548
11/30/96 $11,220 $10,688
12/31/96 $11,260 $10,601
Global Bond Series
Aggregate Total Return
------------------------
Lifetime +11.79%
Through December 31, 1996
Past performance is not a guarantee of future results. Return and share price
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost. Performance for the short period since the Series'
inception may not be indicative of longer term results.
*The chart above shows a $10,000 investment in both the Global Bond Series and
the Salomon Brothers World Government Bond Index for the period from the
Series' inception on May 2, 1996, through December 31, 1996. All dividends and
capital gains were reinvested. The Index is unmanaged, with no set investment
objective and does not include the "real world" costs of managing a mutual
fund. Earnings from a variable annuity investment compound tax-free until
withdrawal, so no adjustments were made for income taxes. The effect of an
expense limitation is included in the chart. Performance does not reflect
insurance fees related to a variable product investment nor the deferred sales
charge that would apply to certain withdrawals of investments held for less
than eight years. Performance shown here would have been reduced if such fees
were included and the expense limitation were removed. For more information
about fees, consult your variable annuity prospectus.
20
<PAGE>
Delaware Group Premium Fund-Equity/Income Series
Statement of Net Assets
December 31, 1996
Number Market
of Shares Value
COMMON STOCK-96.91%
Aerospace & Defense-1.46%
General Dynamics.............. 34,500 $2,432,250
----------
2,432,250
----------
Automobiles & Automotive Parts-4.86%
Ford Motor.................... 118,000 3,761,250
General Motors................ 47,400 2,642,550
ITT Industries................ 69,300 1,697,850
----------
8,101,650
----------
Banking, Finance & Insurance-21.35%
American General.............. 47,200 1,929,300
AmSouth Bancorporation........ 37,900 1,833,413
Aon........................... 59,250 3,680,906
Bank of Boston................ 33,300 2,139,525
Chase Manhattan............... 33,600 2,998,800
CIGNA......................... 16,500 2,254,313
Crestar Financial............. 35,600 2,647,750
First Chicago NBD............. 44,125 2,371,719
First Union................... 31,000 2,294,000
ITT Hartford Group............ 45,000 3,037,500
Mellon Bank................... 33,800 2,399,800
Mercantile Bancorporation..... 42,900 2,203,988
Signet Banking................ 29,900 919,425
Summit Bancorp................ 59,650 2,609,688
U.S. Bancorp.................. 50,400 2,264,850
----------
35,584,977
----------
Buildings & Materials-1.17%
Armstrong World Industries.... 17,100 1,188,450
Masco......................... 21,100 759,600
---------
1,948,050
---------
Cable, Media & Publishing-2.30%
McGraw-Hill................... 83,100 3,832,988
---------
3,832,988
---------
Chemicals-5.20%
duPont (E.I.) deNemours....... 51,700 4,879,188
Imperial Chemical ADR......... 27,100 1,409,200
Rhone-Poulenc ADR............. 35,000 1,185,625
Witco......................... 38,900 1,186,450
---------
8,660,463
---------
- ----------
Top 10 stock holdings, representing 24.7% of net assets, are in bold.
<PAGE>
Number Market
of Shares Value
COMMON STOCK (Continued)
Electronics & Electrical
Equipment-6.44%
AMP........................... 50,900 $1,953,288
Eaton......................... 31,100 2,169,225
Hubbell Class B............... 20,000 865,000
Thomas & Betts................ 59,900 2,658,063
Xerox......................... 58,600 3,083,825
----------
10,729,401
----------
Energy-9.20%
British Petroleum ADR......... 21,547 3,046,276
Mobil......................... 29,800 3,643,050
Texaco........................ 37,500 3,679,688
USX-Marathon Group............ 122,000 2,912,750
Williams...................... 54,750 2,053,125
----------
15,334,889
----------
Food, Beverage & Tobacco-7.85%
American Brands............... 26,600 1,320,025
Anheuser-Busch................ 47,200 1,888,000
Heinz (H.J.).................. 73,700 2,634,775
Philip Morris................. 29,200 3,288,650
Quaker Oats................... 48,700 1,856,688
RJR Nabisco Holdings.......... 61,540 2,092,360
----------
13,080,498
----------
Healthcare & Pharmaceuticals-14.38%
American Home Products........ 49,800 2,919,525
Baxter International.......... 96,400 3,952,400
Bristol-Myers Squibb.......... 33,200 3,610,500
Glaxo Wellcome ADR............ 54,400 1,727,200
Pharmacia & Upjohn............ 108,600 4,303,275
SmithKline Beecham ADR Unit... 71,000 4,828,000
Tambrands..................... 39,000 1,594,125
Warner-Lambert................ 13,700 1,027,500
----------
23,962,525
----------
Metals & Mining-1.81%
Freeport-McMoRan Copper & Gold
Class B..................... 68,400 2,043,450
Reynolds Metals............... 17,300 975,288
----------
3,018,738
----------
Paper & Forest Products-3.90%
Georgia-Pacific............... 17,500 1,260,000
Temple-Inland................. 40,040 2,167,165
Union Camp.................... 22,000 1,050,500
Weyerhaeuser.................. 42,600 2,018,175
----------
6,495,840
----------
<PAGE>
Number Market
of Shares Value
COMMON STOCK (Continued)
Retail-2.46%
May Department Stores......... 43,300 $2,024,275
Penney (J.C.)................. 42,600 2,076,750
----------
4,101,025
----------
Telecommunications-5.14%
ALLTEL........................ 57,700 1,810,338
BCE........................... 42,900 2,048,475
BellSouth..................... 38,500 1,554,438
Frontier...................... 139,100 3,147,138
----------
8,560,389
----------
Transportation & Shipping-4.19%
Conrail....................... 16,500 1,643,813
Norfolk Southern.............. 11,500 1,006,250
Union Pacific................. 72,200 4,341,025
----------
6,991,088
----------
Utilities-1.02%
PECO Energy................... 67,500 1,704,375
----------
1,704,375
----------
Miscellaneous-4.18%
Minnesota Mining & Manufacturing 36,000 2,983,500
Pitney Bowes.................. 73,000 3,978,500
----------
6,962,000
----------
Total Common Stock
(cost $140,172,412)........... 161,501,146
-----------
<PAGE>
Number Market
of Shares Value
CONVERTIBLE PREFERRED STOCK-0.65%
Banking, Finance & Insurance-0.65%
Salomon 7.625% pfd cv Series FSA 35,000 $1,080,625
----------
Total Convertible Preferred Stock
(cost $931,875)............. 1,080,625
----------
Principal
Amount
REPURCHASE AGREEMENTS-5.38%
With Chase Manhattan 6.50% 1/2/97 (dated
12/31/96, collateralized by $2,452,000
U.S. Treasury Notes 6.50% due 4/30/99,
market value $2,508,375 and $991,000
U.S. Treasury Notes 7.125% due 9/30/99,
market value $1,037,163)............... $3,474,000 3,474,000
With J.P. Morgan Securities 6.60% 1/2/97
(dated 12/31/96, collateralized by $2,452,000
U.S. Treasury Notes 7.75% due 1/31/00,
market value $2,652,235 and $452,000
U.S. Treasury Notes 5.50% due 4/15/00,
market value $450,018)................ 3,040,000 3,040,000
With PaineWebber 6.60% 1/2/97 (dated 12/31/96,
collateralized by $634,000 U.S. Treasury Notes
6.75% due 5/31/99, market value $649,030 and
$1,716,000 U.S. Treasury Notes 7.75% due
1/31/00, market value $1,856,770)..... 2,452,000 2,452,000
----------
Total Repurchase Agreements
(cost $8,966,000)..................... 8,966,000
----------
<TABLE>
<CAPTION>
<S> <C>
TOTAL MARKET VALUE OF SECURITIES-102.94% (cost $150,070,287)........................................... 171,547,771
LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS-(2.94%)................................................ (4,901,194)
------------
NET ASSETS APPLICABLE TO 10,426,800 SHARES ($.01 PAR VALUE) OUTSTANDING;
EQUIVALENT TO $15.98 PER SHARE-100.00%............................................................... $166,646,577
============
COMPONENTS OF NET ASSETS AT DECEMBER 31, 1996:
Common stock, $.01 par value, 500,000,000 shares authorized to the Fund with 50,000,000 shares
allocated to the Series............................................................................. $129,796,356
Accumulated undistributed:
Net investment income............................................................................... 761,574
Net realized gain on investments.................................................................... 14,611,163
Net unrealized appreciation of investments.......................................................... 21,477,484
------------
Total net assets...................................................................................... $166,646,577
============
</TABLE>
- -----------------------
ADR--American Depository Receipt
See accompanying notes
<PAGE>
Delaware Group Premium Fund, Inc.-High Yield Series
Statement of Net Assets
December 31, 1996
Principal Market
Amount Value
CORPORATE BONDS-93.53%
Aerospace & Defense-0.86%
K & F Industries sr sub debs 10.375% 9/1/04.... $ 300,000 $ 316,500
UNC sr sub nts 11.00% 6/1/06................... 250,000 267,500
-----------
584,000
-----------
Automobiles & Automotive Parts-5.10%
*CSK Auto sr sub nts 11.00% 11/1/06............. 500,000 517,500
Collins & Aikman sr sub nts 11.50% 4/15/06..... 500,000 546,250
*Delco Remy International
sr sub nts 10.625% 8/1/06.................... 250,000 264,063
Exide sr sub def debs 0.00% 12/15/04........... 700,000 644,000
Exide sr nts 10.75% 12/15/02................... 100,000 105,250
Harvard Industries sr nts 11.125% 8/1/05....... 400,000 334,000
*Motors & Gears sr nts 10.75% 11/15/06.......... 500,000 516,875
*Ryder Transportation sr sub nts 10.00% 12/1/06. 500,000 520,000
-----------
3,447,938
-----------
Banking, Finance & Insurance-2.71%
Aetna Industries sr nts 11.875% 10/1/06....... 1,500,000 1,616,250
Life Partners sr sub nts 12.75% 7/15/02....... 200,000 216,000
-----------
1,832,250
-----------
Buildings & Materials-2.68%
*Atrium sr sub nts 10.50% 11/15/06.............. 500,000 507,500
Clarks Material sr nts 10.75% 11/15/06......... 500,000 525,000
NVR sr nts 11.00% 4/15/03...................... 250,000 262,500
*Safelite Glass sr sub nts 9.875% 12/15/06...... 500,000 515,000
-----------
1,810,000
-----------
Cable, Media & Publishing-8.42%
Adelphia Communications
sr debs 12.50% 5/15/02...................... 300,000 308,250
Adelphia Communications
sr debs 11.875% 9/15/04..................... 200,000 201,250
Allbritton sr sub debs 11.50% 8/15/04......... 150,000 159,000
Cablevision Industries sr debs 9.25% 4/1/08... 200,000 213,750
Cablevision Systems sr sub nts 9.875% 5/15/06. 500,000 511,875
Galaxy Telecommunication L.P.
sr sub nts 12.375% 10/1/05.................. 500,000 531,250
Intermed Capital Partners sr nts 11.25% 8/1/06 500,000 515,000
<PAGE>
Principal Market
Amount Value
CORPORATE BONDS (Continued)
Cable, Media & Publishing (Continued)
*Katz Media sr sub nts 10.50% 1/15/07.......... $ 600,000 $ 615,000
Lamar Advertising co gtd 9.625% 12/1/06....... 500,000 516,250
Marcus Cable sr disc nts 0.00% 12/15/05....... 800,000 568,000
Rogers Cablesystems sr sec nts 10.00% 12/1/07. 440,000 464,200
Rogers Cablesystems sr sub nts 11.00% 12/1/15. 270,000 291,600
Sullivan Graphics sr sub nts 12.75% 8/1/05.... 500,000 490,000
Universal Outdoor sr sub nts 9.75% 10/15/06... 300,000 310,500
-----------
5,695,925
-----------
Chemicals-6.74%
Astor sr sub nts 10.50% 10/15/06.............. 650,000 671,125
BPC Holding sr nts 12.50% 6/15/06............. 400,000 425,000
Harris Chemical sr sub nts 10.75% 10/15/03.... 500,000 518,750
ISP Holding sr nts 9.00% 10/15/03............. 500,000 509,375
NL Industries sr sec nts 11.75% 10/15/03...... 265,000 281,563
NL Industries sr sec disc nts 0.00% 10/15/05.. 600,000 517,500
Sterling Chemicals sr sub nts 11.75% 8/15/06.. 1,000,000 1,055,000
TEXAS Petrochemical
sr sub nts 11.125% 7/1/06................... 250,000 269,375
UCC Investors Holding sub nts 0.00% 5/1/05.... 350,000 314,125
-----------
4,561,813
-----------
Computers & Technology-3.78%
ADT Operations sr sub nts 9.25% 8/01/03....... 1,000,000 1,070,000
*Statia Terminals mtg nts 11.75% 11/15/03...... 500,000 520,000
Unisys sr nts 12.00% 4/15/03.................. 750,000 799,688
Unisys nts 11.75% 10/15/04.................... 160,000 170,400
-----------
2,560,088
-----------
Consumer Products-4.07%
E & S Holdings sr sub nts 10.375% 10/1/06..... 250,000 261,875
Lifestyle Furnishings co gtd 10.875% 8/1/06... 500,000 542,500
Prime Succession Acquisition
sr sub nts 10.75% 8/15/04................... 200,000 217,000
*Rayovac sr sub nts 10.25% 11/1/06............. 250,000 258,125
Revlon Worldwide sr sec disc nts 0.00% 3/15/98 500,000 431,250
Shop Vac sr sub nts 10.625% 9/1/03............ 500,000 527,500
*William Carter sr sub nts 10.375% 12/1/06..... 500,000 513,750
-----------
2,752,000
-----------
<PAGE>
High Yield Series
Statement of Net Assets (Continued)
Principal Market
Amount Value
CORPORATE BONDS (Continued)
Electronics & Electrical Equipment-2.58%
Advanced Micor Devices sr nts 11.00% 8/1/03 .. $ 600,000 $ 651,000
Pierce Leahy sr sub nts 11.125% 7/15/06 ...... 1,000,000 1,095,000
-----------
1,746,000
-----------
Energy-4.14%
Clark USA sr nts 10.875% 12/1/05 ............. 500,000 520,000
Kelley Oil & Gas sr sub nts 10.375% 10/15/06 . 300,000 312,000
MESA Operating sr sub nts 10.625% 7/1/06 ..... 1,000,000 1,090,000
MESA Operating sr sub nts 11.625% 7/1/06 ..... 500,000 347,500
Mariner Energy sr sub nts 10.50% 8/1/06 ...... 500,000 532,500
-----------
2,802,000
-----------
Environmental Services-0.78%
*Allied Waste North America
sr sub nts 10.25% 12/1/06. ................. 500,000 527,500
-----------
527,500
Food, Beverage & Tobacco-4.23%
Carrols sr nts 11.50% 8/15/03 ................ 200,000 213,000
Core-Mark sr sub nts 11.375% 9/15/03 ......... 475,000 489,250
*Delta Beverage Group sr nts 9.75% 12/15/03 ... 825,000 845,625
International Home Foods
sr sub nts 10.375% 11/1/06 ................. 500,000 520,000
Mafco sr sub nts 11.875% 11/15/02 ............ 250,000 265,000
TLC Beatrice International Holdings
sr nts 11.50% 10/1/05....................... 500,000 531,250
-----------
2,864,125
-----------
Healthcare & Pharmaceuticals-4.02%
Dade International sr sub nts 11.125% 5/1/06 . 400,000 433,000
Dynacare sr nts 10.75% 1/15/06 ............... 500,000 506,250
General Nutrition sr sub nts 11.375% 3/1/00 .. 185,000 192,400
Imed sr sub nts 9.75% 12/1/06 ................ 500,000 511,250
Owens & Minor sr sub nts 10.875% 6/1/06 ...... 1,000,000 1,075,000
-----------
2,717,900
-----------
Principal Market
Amount Value
CORPORATE BONDS (Continued)
Industrial Machinery-4.22%
Calmar sr sub nts 11.50% 8/15/05$ ............ 500,000 $ 518,750
Foamex L.P. sr sub debs 11.875% 10/1/04 ...... 400,000 429,000
Goss Graphics System sr
sub nts 12.00% 10/15/06 .................... 500,000 511,250
*IMO Industries sr sub nts 11.75% 5/1/06 ...... 500,000 461,250
International Wire Group
sr sub nts 11.75% 6/1/05 ................... 500,000 542,500
Jordan Industries sr nts 10.375% 8/1/03 ...... 400,000 396,000
-----------
2,858,750
-----------
Leisure, Lodging & Entertainment-5.74%
AMF Group sr disc nts 0.00% 3/15/06 .......... 1,000,000 662,500
AMF Group sr sub nts 10.875% 3/15/06 ......... 500,000 528,750
Argosy Gaming mtg nts 13.25% 6/1/04 .......... 620,000 584,350
Cinemark sr nts 9.625% 8/1/08 ................ 975,000 984,750
Coleman Holdings nts 0.00% 5/27/98 ........... 500,000 416,250
Eldorado Resorts LLC sr sub nts 10.50% 8/15/06 200,000 212,000
Trump-Atlantic City mtg nts 11.25% 5/1/06 ..... 500,000 495,000
-----------
3,883,600
-----------
Metals & Mining-7.02%
AK Steel sr nts 10.75% 4/1/04 ................ 750,000 819,375
Algoma Steel mtg nts 12.375% 7/15/05 ......... 400,000 434,000
Commonwealth Aluminum
sr sub nts 10.75% 10/1/06 .................. 300,000 309,000
G.S.Technologies sr nts 12.00% 9/1/04 ........ 1,100,000 1,142,625
G.S.Technologies sr nts 12.25% 10/1/05 ....... 750,000 789,375
Interlakes sr nts 12.00% 11/15/01 ............ 400,000 431,000
NS Group units 13.50% 7/15/03 ................ 400,000 417,000
Weirton Steel sr nts 11.375% 7/1/04 .......... 400,000 408,000
-----------
4,750,375
-----------
<PAGE>
High Yield Series
Statement of Net Assets (Continued)
Principal Market
Amount Value
CORPORATE BONDS (Continued)
Packaging & Containers-4.03%
Gaylord Container sr nts 11.50% 5/15/01 ...... $ 500,000 $ 533,750
Ivex Packaging sr sub nts 12.50% 12/15/02 .... 450,000 487,125
Plastic Containers sr nts 10.00% 12/15/06 .... 500,000 517,500
Silgan Holdings sr disc debs 0.00% 12/15/02 .. 294,000 300,615
*Spinnaker Industries sr nts 10.75% 10/15/06 ... 500,000 517,500
U.S.Can sr nts 10.125% 10/15/06 .............. 350,000 368,375
-----------
2,724,865
-----------
Paper & Forest Products-10.00%
Crown Paper sr sub nts 11.00% 9/1/05 ......... 50,000 47,000
Florida Coast Paper LLC mtg nts 12.75% 6/1/03 500,000 545,000
Four M sr nts 12.00% 6/1/04 .................. $1,000,000 1,055,000
MAXXAM Group sr sec nts 11.25% 8/1/03 ........ 950,000 976,125
*MAXXAM Group sr sec nts 12.00% 8/1/03 ........ 600,000 613,500
Pacific Lumber sr nts 10.50% 3/1/03 .......... 700,000 714,000
Repap Wisconsin sr nts 9.875% 5/1/06 ......... 1,000,000 1,017,500
Riverwood International unsec
sr sub nts 10.875% 4/1/08 .................. 600,000 555,000
S.D. Warren sr sub nts 12.00% 12/15/04 ....... 175,000 189,438
Stone Container sr nts 11.50% 10/1/04 ........ 250,000 263,125
Stone Container sr nts 11.875% 12/1/98 ....... 250,000 263,750
Stone Container sr nts 11.875% 8/1/16 ........ 500,000 530,000
-----------
6,769,438
-----------
Retail-2.16%
Finlay Fine Jewelry sr nts 10.625% 5/1/03 .... 110,000 115,500
Fleming sr nts 10.625% 12/15/01 .............. 500,000 508,750
Ralph's Grocery sr sub nts 13.75% 6/15/05 .... 400,000 432,500
Specialty Paperboard sr nts 9.375% 10/15/06 .. 400,000 405,000
-----------
1,461,750
-----------
Principal Market
Amount Value
CORPORATE BONDS (Continued)
Telecommunications-4.45%
Jacor Communications co gtd 9.75% 12/15/06 ... $ 500,000 $ 515,000
Rogers Cantel Mobile Communications
sr sub nts 11.125% 7/15/02 ................. 1,200,000 1,272,000
Teleport Communications sr nts 9.875% 7/1/06 . 500,000 532,500
Teleport Communications sr disc nts
0.00% 7/1/07 ............................... 1,000,000 691,250
-----------
3,010,750
-----------
Textiles & Furniture-0.39%
Clark-Schwebel sr nts 10.50% 4/15/06 250,000 266,250
-----------
266,250
-----------
Transportation & Shipping-1.08%
Ameriking sr nts 10.75% 12/1/06 .............. 100,000 103,500
*Blue Bird Body sr sub nts 10.75% 11/15/06 .... 600,000 627,000
-----------
730,500
-----------
Utilities-2.77%
AES sr sub nts 10.25% 7/15/06 ................ 750,000 811,875
Calpine sr nts 10.50% 5/15/06 ................ 1,000,000 1,063,750
-----------
1,875,625
-----------
Miscellaneous-1.56%
Coinmach sr nts 11.75% 11/15/05 .............. 500,000 538,750
*Hawk sr nts 10.25% 12/1/03 ................... 500,000 515,000
-----------
1,053,750
-----------
Total Corporate Bonds (cost $60,770,246 ) .... 63,287,192
-----------
U.S. TREASURY OBLIGATIONS-0.58%
U.S. Treasury Notes 8.50% 4/15/97 ............ 390,000 393,498
-----------
Total U.S. Treasury Obligations
(cost $397,313 ) ........................... 393,498
-----------
<PAGE>
High Yield Series
Statement of Net Assets (Continued)
Number Market
of Shares Value
PREFERRED STOCKS-1.61%
Utilities-0.80%
El Paso Electric pik............................ 5,000 $ 540,041
Packaging & Containers-0.81%
Silgan Holdings pik ............................ 516 551,093
-----------
Total Preferred Stocks (cost $1,000,000 ) ...... 1,091,134
-----------
CONVERTIBLE PREFERRED STOCKS-0.37%
Retail-0.37%
Pantry Pride $14.875 cv pfd .................... 2,500 250,311
-----------
Total Convertible Preferred Stocks
(cost $262,500 ) ............................. 250,311
-----------
RIGHTS-0.00%
Industrial Machinery-0.00%
Terex-Appreciation Rights ...................... 800 1,600
-----------
Total Rights (cost $2,000 )... 1,600
-----------
Principal Market
Amount Value
REPURCHASE AGREEMENTS-1.52%
With Chase Manhattan 6.50% 1/2/97 (dated
12/31/96, collateralized by $113,000
U.S. Treasury Notes 7.125% due 9/30/99,
market value $118,519 and $280,000
U.S. Treasury Notes 6.50% due 4/30/99,
market value $286,756) ....................... $397,000 $ 397,000
With J.P. Morgan Securities 6.60% 1/2/97 (dated
12/31/96, collateralized by $280,000 U.S. Treasury
Notes 7.75% due 1/31/00, market value $303,230
and $52,000 U.S. Treasury Notes 5.50% due
4/15/00, market value $51,477) ............... 348,000 348,000
With PaineWebber 6.60% 1/2/97 (dated 12/31/96,
collateralized by $73,000 U.S. Treasury Notes 6.75%
due 5/31/99, market value $74,203 and $196,000
U.S. Treasury Notes 7.75% due 1/31/00,
market value $212,261) ....................... 280,000 280,000
-----------
Total Repurchase Agreements
(cost $1,025,000) ............................ 1,025,000
-----------
<TABLE>
<CAPTION>
<S> <C>
TOTAL MARKET VALUE OF SECURITIES (cost $63,457,059) -97.61% ........................................... 66,048,735
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-2.39%.................................................. 1,615,942
------------
NET ASSETS APPLICABLE TO 7,379,775 SHARES ($.01 PAR VALUE) OUTSTANDING;
EQUIVALENT TO $9.17 PER SHARE-100.00%................................................................ $67,664,677
============
COMPONENTS OF NET ASSETS AT DECEMBER 31, 1996:
Common stock, $.01 par value, 500,000,000 shares authorized to the Fund with 50,000,000 shares
allocated to the Series ............................................................................. $68,170,049
Accumulated undistributed:
Net realized loss on investments.................................................................... (3,097,048)
Net unrealized appreciation of investments.......................................................... 2,591,676
------------
Total net assets...................................................................................... $67,664,677
===========
</TABLE>
- -----------------------
*These securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers (see note 6). At
December 31, 1996, these securities amounted to $8,855,188 or 13.09% of net
assets. Of these securities, none have been determined to be illiquid.
Summary of Abbreviations:
cv-convertible mtg-mortgage sec-secured
co gtd-company guaranteed nts-notes sr-senior
debs-debentures pfd-preferred sub-subordinated
disc-discount pik-pay-in-kind unsec-unsecured
See accompanying notes
<PAGE>
Delaware Group Premium Fund, Inc.-Capital Reserves Series
Statement of Net Assets
December 31, 1996
Principal Market
Amount Value
CORPORATE BONDS-26.85%
Ahmanson (HF) & Company 6.35% 9/1/98 $ 700,000 $ 701,750
Continental 7.25% 3/1/03 ..................... 575,000 586,500
Credit Foncier de France 8.00% 1/14/0 ........ 340,000 359,975
Federal Express 7.85% 1/30/15 ............... 440,000 454,850
*Firststar 8.32% 12/15/26...................... 315,000 318,150
Ford Motor Credit 7.00% 9/25/01 .............. 850,000 865,938
Humpuss 7.72% 12/15/09........................ 300,000 294,000
Key Bank of Washington 7.125% 8/15/06 ........ 375,000 375,469
Lehman Brothers Holdings 6.84% 9/25/98 ....... 485,000 488,638
MEPC Finance 7.50% 5/1/03 .................... 520,000 533,000
News America Holdings 9.125% 10/15/99 ........ 395,000 420,675
Pep Boys 7.00% 6/1/05......................... 535,000 532,325
Transamerica Financial 8.08% 11/4/99 ......... 520,000 542,100
Travelers/Aetna Property & Casualty
6.75% 4/15/01............................... 975,000 981,094
-----------
Total Corporate Bonds (cost $7,343,117) ...... 7,454,464
-----------
U.S. TREASURY OBLIGATIONS-14.05%
U.S. Treasury Notes 5.875% 4/30/98 ........... 1,650,000 1,653,267
U.S. Treasury Notes 6.25% 7/31/98 ............ 50,000 50,347
U.S. Treasury Notes 6.375% 6/30/97 ........... 1,785,000 1,794,478
U.S. Treasury Notes 6.50% 5/15/05 ............ 400,000 402,776
-----------
Total U.S. Treasury Obligations
(cost $3,896,042) .......................... 3,900,868
-----------
MORTGAGE-BACKED SECURITIES-23.27%
Federal Home Loan Mortgage Corporation-Gold
7.00% 10/1/17............................... 181,740 180,377
Federal Home Loan Mortgage Corporation
7.50% 5/1/09................................ 120,473 121,903
Federal Home Loan Mortgage Corporation
8.50% 9/1/08................................ 149,581 155,003
Federal Home Loan Mortgage Corporation-Gold
8.50% 6/1/14................................ 148,487 154,705
<PAGE>
Principal Market
Amount Value
MORTGAGE-BACKED SECURITIES (Continued)
Federal National Mortgage Association
6.50% 4/1/11............................... $ 375,064 $ 368,383
Federal National Mortgage Association
6.50% 2/1/26............................... 488,451 466,776
Federal National Mortgage Association
7.00% 1/1/24............................... 292,019 286,908
Federal National Mortgage Association
8.00% 1/1/10............................... 447,748 460,760
Federal National Mortgage Association
8.00% 9/1/16............................... 313,115 322,117
Federal National Mortgage Association
9.00% 10/1/06.............................. 314,973 332,100
Federal National Mortgage Association
9.50% 11/1/21.............................. 264,595 286,342
Federal National Mortgage Association
9.50% 5/1/22............................... 313,670 339,450
Government National Mortgage Association
7.50% 2023................................. 520,367 520,855
Government National Mortgage Association
9.00% 2021................................. 1,370,419 1,459,610
Government National Mortgage Association
10.00% 2020................................ 262,657 289,661
Government National Mortgage Association
10.50% 2019................................ 245,985 272,044
Government National Mortgage Association
11.00% 2009 to 2010.......................... 121,047 135,196
Government National Mortgage Association
12.00% 2011 to 2013........................ 69,461 79,445
Government National Mortgage Association II
12.00% 2014 to 2016........................ 206,000 230,977
-----------
Total Mortgage-Backed Securities
(cost $6,422,720 )......................... 6,462,612
-----------
<PAGE>
Capital Reserves Series
Statement of Net Assets (Continued)
Principal Market
Amount Value
AGENCY OBLIGATIONS-0.54%
Federal Home Loan Bank 6.745% 4/17/97 ........ $150,000 $ 150,550
---------
Total Agency Obligations (cost $150,473) ..... 150,550
---------
COLLATERALIZED MORTGAGE
OBLIGATIONS-19.68%
Asset Securitization Corporation
Series 96-D2 A1 6.92% 2/14/29 .............. 493,181 492,718
Series 96-D3 A1B 7.21% 10/13/26 ............ 400,000 408,500
Conti Series 96-MCI-D 7.80% 7/1/06 ........... 360,000 371,475
Mortgage Capital Funding Series
Series 96-MD2 A1 6.758% 12/21/26 ........... 655,000 655,921
Series 96-MC2 C 7.224% 12/21/26 ............ 200,000 199,750
Nomura Asset Securities
Series 96-MD5 A3 7.6373% 4/13/36 .......... 460,000 476,388
Series 95-MD3 A1A 8.17% 3/4/20 ............. 487,576 513,022
Residential Accredit Loans
Series 96-QS2 A3 7.05% 3/25/19 ............. 680,000 681,381
Series 96-QS3 AI3 7.29% 6/25/26 ............ 225,000 226,477
Series 95-QS1 A3 7.30% 6/25/21 ............. 220,000 220,756
Series 96-QS2 A6 7.45% 4/25/23 ............. 540,000 539,747
Residential Asset Securities
Series 96-A4 A5 7.50% 9/25/26 .............. 540,000 543,375
Resolution Trust Corporation
Series 95-C1 A2B 6.55% 2/25/27 ............. 135,321 134,834
---------
Total Collaterized Mortgage Obligations
(cost $5,418,502 ).......................... 5,464,344
---------
<PAGE>
Principal Market
Amount Value
MUNICIPAL BONDS-1.91%
New York State Dorm Authority Revenue
(Taxable Pension Obligations) 6.23% 10/1/98 $530,000 $ 530,000
---------
Total Municipal Bonds (cost $530,000) 530,000
---------
ASSET-BACKED SECURITIES-14.66%
Advanta Series 93-1A2 5.95% 5/25/09 .......... 52,291 50,868
American Financial Home Equity Loan Trust
Series 94-2A 2A1 6.95% 6/25/24 ............. 263,231 264,652
Series 91-1A 8.00% 7/25/06 ................. 39,274 40,215
Case Equipment Loan Trust
Series 95-B A3 6.15% 9/15/02 ............... 550,000 549,492
Furst Series 96-2A2 6.46% 8/25/11 ............ 615,000 611,156
Green Tree Home Improvement Loan Trust
Series 96-F HEA3 6.90% 1/15/28 ............. 550,000 550,000
IMC Home Equity Loan Trust
Series 95-3 A2 6.50% 11/25/10 .............. 270,000 269,749
NationsCredit Grantor Trust
Series 96-A1 5.85% 9/15/11 ................. 272,307 267,757
Travelers Mortgage Securities
Series 1-Z2 12.00% 3/1/14 .................. 196,488 223,505
UCFC Home Equity Loan
Series 1996-D1 6.541% 11/15/13 ............. 325,000 324,591
Series 96-B A3 7.30% 4/15/14 ............... 625,000 634,371
World Omni Series 95-A A 6.05% 11/25/01 ...... 283,531 283,842
---------
Total Asset-Backed Securities
(cost $4,057,480) .......................... 4,070,198
---------
<TABLE>
<CAPTION>
<S> <C>
TOTAL MARKET VALUE OF SECURITIES (cost $27,818,334)-100.96%.......................................... 28,033,036
LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS-(0.96%).............................................. (265,423)
-----------
NET ASSETS APPLICABLE TO 2,864,716 SHARES ($.01 PAR VALUE) OUTSTANDING;
EQUIVALENT TO $9.69 PER SHARE-100.00%.............................................................. $27,767,613
===========
COMPONENTS OF NET ASSETS AT DECEMBER 31, 1996:
Common stock, $.01 par value, 500,000,000 shares authorized to the Fund with
50,000,000 shares allocated to the Series .......................................................... $29,175,162
Accumulated undistributed:
Net investment income............................................................................. 468
Net realized loss on investments.................................................................. (1,622,719)
Net unrealized appreciation of investments........................................................ 214,702
-----------
Total net assets.................................................................................... $27,767,613
===========
</TABLE>
*This security is exempt from registration under Rule 144A of the
Securities Act of 1933. This security may be resold in transactions exempt
from registration, normally to qualified institutional buyers (see note 6).
At December 31, 1996, this security amounted to $318,150 or 1.15% of net
assets.
See accompanying notes
<PAGE>
Delaware Group Premium Fund, Inc.-Multiple Strategy Series
Statement of Net Assets
December 31, 1996
Number Market
of Shares Value
COMMON STOCK-63.41%
Aerospace & Defense-2.07%
GenCorp......................................... 28,000 $ 507,500
Lockheed Martin................................. 11,500 1,052,250
-----------
1,559,750
-----------
Automobiles & Automotive Parts-1.43%
Danaher......................................... 23,100 1,077,038
-----------
1,077,038
-----------
Banking, Finance & Insurance-9.85%
American International Group ................... 22,600 2,446,450
Chubb........................................... 21,600 1,161,000
Penncorp Financial Group........................ 15,000 540,000
Southern National............................... 30,100 1,091,125
State Street Boston............................. 22,300 1,438,350
UNUM............................................ 10,400 751,400
-----------
7,428,325
Buildings & Materials-1.41%
Foster Wheeler.................................. 28,600 1,061,775
-----------
1,061,775
-----------
Cable, Media & Publishing-2.10%
Banta........................................... 27,950 634,116
Reynolds & Reynolds Class A..................... 36,500 949,000
-----------
1,583,116
-----------
Chemicals-0.58%
Witco........................................... 14,300 436,150
-----------
436,150
Computers & Technology-3.05%
Hewlett-Packard................................. 8,000 402,000
Wallace Computer Services....................... 55,000 1,897,500
-----------
2,299,500
-----------
Consumer Products-2.83%
General Electric................................ 6,000 593,250
Masco........................................... 16,000 576,000
Procter & Gamble................................ 9,000 967,500
-----------
2,136,750
-----------
- ------------------
Top 10 stock holdings representing 26.8% of net assets, are in hold.
<PAGE>
Number Market
of Shares Value
COMMON STOCK (Continued)
Electronics & Electrical-1.70%
Raychem......................................... 7,100 $ 568,888
Teleflex........................................ 13,700 714,113
-----------
1,283,001
-----------
Energy-2.83%
Compagnie Francaise de Petroleum Total.......... 12,958 521,560
Kerr-McGee...................................... 15,800 1,137,600
Royal Dutch Petroleum .......................... 2,800 478,100
-----------
2,137,260
-----------
Farming & Agriculture-2.92%
ConAgra......................................... 44,300 2,203,925
-----------
2,203,925
-----------
Food, Beverage & Tobacco-3.41%
Philip Morris................................... 22,800 2,567,850
-----------
2,567,850
-----------
Healthcare & Pharmaceuticals-10.35%
American Home Products.......................... 8,100 474,863
Baxter International ........................... 13,000 533,000
Columbia/HCA Healthcare......................... 52,800 2,151,600
Hillenbrand Industries.......................... 13,800 500,250
Pharmacia & Upjohn.............................. 12,900 511,163
Schering-Plough................................. 25,600 1,657,600
SmithKline Beecham.............................. 29,100 1,978,800
-----------
7,807,276
-----------
Industrial Machinery-1.08%
General Signal.................................. 19,000 812,250
-----------
812,250
Real Estate-2.95%
Colonial Properties Trust....................... 9,000 273,375
Developers Diversified Realty .................. 13,800 512,325
Health Care Property Investors ................. 13,700 479,500
Nationwide Health Properties ................... 22,600 548,050
Sun Communities................................. 12,000 414,000
-----------
2,227,250
-----------
<PAGE>
Mulitiple Strategy Series
Statement of Net Assets (Continued)
Number Market
of Shares Value
COMMON STOCK (Continued)
Retail-2.88%
May Department Stores........................... 15,900 $ 743,325
Rite Aid........................................ 28,700 1,140,825
Storage Trust Realty............................ 3,900 105,300
Storage USA..................................... 4,800 180,600
-----------
2,170,050
-----------
Telecommunications-1.68%
ALLTEL.......................................... 40,400 1,267,550
-----------
1,267,550
-----------
Textiles, Apparel & Furniture-2.14%
HON Industries.................................. 8,700 288,188
Miller (Herman)................................. 23,500 1,326,281
-----------
1,614,469
-----------
Utilities-2.76%
CMS Energy...................................... 32,000 1,076,000
Edison International............................ 16,000 318,000
Illinova........................................ 24,900 684,750
-----------
2,078,750
-----------
Miscellaneous-5.39%
Pentair......................................... 17,800 574,050
Service International........................... 15,800 442,400
Tompkins ADR.................................... 28,000 518,000
Tyco International.............................. 47,800 2,527,425
-----------
4,061,875
-----------
Total Common Stock (cost $37,543,098) 47,813,910
-----------
CONVERTIBLE PREFERRED STOCK-0.32%
Metals & Mining-0.32%
Freeport-McMoRan Copper & Gold
5.00% pfd cv.................................. 8,700 241,425
-----------
Total Convertible Preferred Stock
(cost $201,026 ).............................. 241,425
-----------
<PAGE>
Principal Market
Amount Value
U.S. TREASURY OBLIGATIONS-4.35%
U.S. Treasury Notes 6.375% 1/15/00............. $ 85,000 $ 85,823
U.S. Treasury Notes 6.375% 8/15/02.............. 160,000 161,221
U.S. Treasury Bond 7.50% 11/15/16.............. 650,000 704,327
U.S. Treasury Bond 7.50% 11/15/24............... 2,125,000 2,326,577
-----------
Total U.S. Treasury Obligations
(cost $3,125,636)............................. 3,277,948
-----------
ASSET-BACKED SECURITIES-5.20%
ADVANTA Series 93-1A2 5.95% 5/25/09............. 69,721 67,824
American Finance Home Equity
Series 94-2 A1 6.95% 6/25/24.................. 74,499 74,901
Series 92-5 A 7.20% 2/15/08................... 119,274 119,945
Series 91-1 A 8.00% 7/25/06................... 13,909 14,243
Case Equipment Loan Trust
Series 95-B A3 6.15% 9/15/02.................. 500,000 499,539
FURST Series 96-2 A2 6.46% 8/25/11 ............. 555,000 551,531
Green Tree Home Improvement Loan Trust
Series 96-F HEA3 6.90% 1/15/28 ............... 370,000 370,000
IMC Home Equity Loan Trust
Series 95-3 A2 6.50% 11/25/10 ................ 225,000 224,791
NationsCredit Grantor Trust
Series 96-1A 5.85% 9/15/11.................... 200,225 196,880
Neiman Marcus Group
Series 95-1A 7.60% 6/15/03 ................... 400,000 414,965
Norwest Asset Securities
Series 97-1 A8 7.25% 2/25/12 ................. 450,000 450,984
UCFC Home Equity Loan
Series 96-D1 6.541% 11/15/13 ................. 300,000 299,618
Series 96-B A3 7.30% 4/15/14 ................. 460,000 466,897
World Omni Series 95-A 6.05% 11/25/01 .......... 165,393 165,574
-----------
Total Asset-Backed Securities
(cost $3,916,050) ............................ 3,917,692
-----------
<PAGE>
Principal Market
Amount Value
COLLATERALIZED MORTGAGE
OBLIGATIONS-6.21%
Asset Securitization Corporation
Series 96-D2 A1 6.92% 2/14/29 ................ $374,817 $ 374,466
Series 96-D3 A1B 7.21% 10/13/26 .............. 360,000 367,650
Chase Commercial Mortgage Securities
Series 96-2 C 6.90% 11/19/06 ................. 250,000 244,063
Conti Series 96-MC1 D 7.80% 4/15/06 ............ 300,000 309,563
Mortgage Capital Funding
Series 96-MC2 A1 6.758% 12/21/26.............. 570,000 570,802
Series 96-MC2 C 7.224% 12/21/26 .............. 175,000 174,781
Nomura Asset Securities
Series 96-MD5 A3 7.6373% 4/13/36.............. 340,000 352,113
Series 95-MD3 A1A 8.17% 3/4/20 ............... 348,269 366,444
Residential Accredit Loans
Series 96-QS2 A3 7.05% 3/25/19 ............... 400,000 400,813
Series 96-QS3 AI3 7.29% 6/25/26 .............. 200,000 201,313
Series 95-QS1 A3 7.30% 6/25/21 ............... 180,000 180,619
Series 96-QS2 A6 7.45% 4/25/23 ............... 445,000 444,791
Residential Asset Securities
Series 96-A4 A5 7.50% 9/25/26 ................ 445,000 447,781
Resolution Trust Corporation
Series 95-C1 A2B 6.55% 2/25/27 ............... 99,235 98,879
Travelers Mortgage Securities
Series 1 Z2 12.00% 3/1/14 .................... 132,251 150,436
-----------
Total Collateralized Mortgage Obligations
(cost $4,646,450)............................. 4,684,514
-----------
MORTGAGE-BACKED SECURITIES-7.20%
Federal National Mortgage Association
6.50% 2/1/26.................................. 683,831 653,486
Federal National Mortgage Association
7.00% 1/1/24.................................. 661,909 650,326
Federal National Mortgage Association
8.00% 1/1/10.................................. 242,793 249,849
Federal National Mortgage Association
8.00% 9/1/16.................................. 210,004 216,042
Federal National Mortgage Association
9.50% 6/1/19.................................. 263,045 284,993
Federal National Mortgage Association
9.50% 5/1/22.................................. 231,396 250,414
Federal Home Loan Mortgage Corporation-Gold
6.00% 3/1/11.................................. 646,498 622,860
Federal Home Loan Mortgage Corporation
7.00% 10/1/17................................. 103,324 102,549
<PAGE>
Principal Market
Amount Value
MORTGAGE-BACKED SECURITIES
(Continued)
Federal Home Loan Mortgage Corporation
7.50% 5/1/09.................................. $ 68,841 $ 69,659
Federal Home Loan Mortgage Corporation
8.50% 9/1/08.................................. 105,174 108,986
Federal Home Loan Mortgage Corporation-Gold
8.50% 6/1/14.................................. 81,097 84,493
Government National Mortgage Association
8.50% 8/15/21 to 11/15/21..................... 652,536 681,698
Government National Mortgage Association
9.00% 6/15/21 to 11/15/21..................... 1,256,113 1,337,119
Government National Mortgage Association
10.00% 1/15/18................................ 104,827 115,604
-----------
Total Mortgage-Backed Securities
(cost $5,368,578)............................. 5,428,078
-----------
CORPORATE BONDS-9.21%
ABN-AMRO Bank NV 8.25% 8/1/09 .................. 80,000 84,700
Ahmanson (HF) & Company 6.35% 9/1/98 ........... 500,000 501,250
Chase Manhattan 6.25% 1/15/06................... 385,000 364,788
Continental 7.25% 3/1/03........................ 350,000 357,000
Credit Foncier de France 8.00% 1/14/02 ......... 275,000 291,156
Federal Express 7.85% 1/30/15 .................. 450,000 465,188
Firstar Capital Trust I 8.32% 12/15/26 ......... 260,000 262,600
Ford Motor Credit 7.00% 9/25/01 ................ 800,000 815,000
Humpuss 7.72% 12/15/09.......................... 200,000 196,000
Lehman Brothers Holdings 6.84% 9/25/98 ......... 300,000 302,250
MBNA America Bank, NA 6.00% 12/26/00 ........... 450,000 441,563
MEPC Finance 7.50% 5/1/03....................... 385,000 394,625
News America Holdings 9.125% 10/15/99 .......... 295,000 314,175
Pep Boys 7.00% 6/1/05........................... 395,000 393,025
Santander Financial Issuances 6.80% 7/15/05 .... 175,000 172,156
Transamerica Financial 8.08% 11/4/99 ........... 340,000 354,450
Travelers/Aetna Property & Casualty
6.75% 4/15/01................................. 775,000 779,844
U.S. Bancorp 8.125% 5/15/02..................... 430,000 456,875
-----------
Total Corporate Bonds (cost $6,868,803) ........ 6,946,645
-----------
AGENCY OBLIGATIONS-0.59%
Federal Home Loan Bank-Discount Note
0.00% 1/23/97............... ................. 450,000 448,529
-----------
Total Agency Obligations (cost $448,529) ....... 448,529
-----------
<PAGE>
Principal Market
Amount Value
REPURCHASE AGREEMENTS-5.25%
With Chase Manhattan 6.50% 1/2/97 (dated
12/31/96, collateralized by $437,000
U.S. Treasury Notes 7.125% due 9/30/99,
market value $457,193 and $1,081,000
U.S. Treasury Notes 6.50% due 4/30/99,
market value $1,106,180)...................... $1,532,000 $1,532,000
With J.P. Morgan Securities 6.60% 1/2/97 (dated
12/31/96, collateralized by $1,081,000
U.S. Treasury Notes 7.75% due 1/31/00,
market value $1,169,728 and $200,000
U.S. Treasury Notes 5.50% due 4/15/00,
market value $198,575)........................ 1,341,000 1,341,000
Principal Market
Amount Value
REPURCHASE AGREEMENTS (Continued)
With PaineWebber 6.60% 1/2/97 (dated
12/31/96, collateralized by $280,000
U.S. Treasury Notes 6.75% due 5/31/99,
market value $286,243 and $757,000
U.S. Treasury Notes 7.75% due 1/31/00,
market value $818,809)........................ $1,081,000 $ 1,081,000
-----------
Total Repurchase Agreements
(cost $3,954,000)............................. 3,954,000
-----------
<TABLE>
<CAPTION>
<S> <C>
TOTAL MARKET VALUE OF SECURITIES (cost $66,072,170)-101.74%............................................ 76,712,741
LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS-(1.74%)................................................ (1,310,634)
-----------
NET ASSETS APPLICABLE TO 4,532,563 SHARES ($.01 PAR VALUE) OUTSTANDING;
EQUIVALENT TO $16.64 PER SHARE-100.00%............................................................... $75,402,107
===========
COMPONENTS OF NET ASSETS AT DECEMBER 31, 1996:
Common stock, $.01 par value, 500,000,000 shares authorized to the Fund with
50,000,000 shares allocated to the Series ............................................................ $58,029,596
Accumulated undistributed:
Net investment income............................................................................... 1,854,573
Net realized gain on investments.................................................................... 4,877,367
Net unrealized appreciation of investments.......................................................... 10,640,571
-----------
Total net assets...................................................................................... $75,402,107
===========
</TABLE>
- ------------------
ADR-American Depository Receipt
See accompanying notes
<PAGE>
Delaware Group Premium Fund, Inc.-Money Market Series
Statement of Net Assets
December 31, 1996
Principal Market
Amount Value
COMMERCIAL PAPER-67.44%
Financial Services-41.57%
ABN-AMRO North American Finance
5.40% 3/6/97.................................. $1,000,000 $ 990,400
Allianz of America Finance 5.31% 2/20/97 ....... 1,000,000 992,625
Bayerische Girozentrale Landesbank
5.30% 1/27/97................................. 1,000,000 996,172
Ciesco L.P. 5.38% 2/3/97........................ 665,000 661,723
Ciesco L.P. 5.55% 2/06/97....................... 400,000 397,780
Commonwealth Bank of Australia 5.37% 2/12/97 ... 1,000,000 993,735
Metlife Funding 5.29% 2/13/97 .................. 1,000,000 993,681
Siemens Capital 5.29% 1/30/97 .................. 1,000,000 995,739
TECO Finance 5.35% 1/31/97...................... 1,000,000 995,542
Transamerica Finance 5.30% 2/3/97 .............. 1,000,000 995,142
UBS Finance 8.00% 1/2/97........................ 1,000,000 999,778
USAA Capital 5.29% 2/6/97....................... 1,000,000 994,710
-----------
Total Financial Services........................ 11,007,027
-----------
Industrial-9.04%
Golden Peanut 5.30% 1/29/97..................... 1,000,000 995,878
McCormick & Co. 5.31% 1/9/97.................... 900,000 898,938
Sandoz 5.30% 1/9/97............................. 500,000 499,411
-----------
Total Industrial................................ 2,394,227
-----------
Mortgage Bankers and Brokers-16.83%
Bear Stearns 5.30% 5/14/97...................... 1,000,000 980,419
CS First Boston Group 5.32% 1/23/97 ............ 1,000,000 996,749
Goldman Sachs Group 5.35% 4/21/97 .............. 1,000,000 983,653
Merrill Lynch & Co. 5.38% 1/30/97 .............. 500,000 497,833
Morgan Stanley Group 5.32% 1/16/97 ............. 1,000,000 997,783
-----------
Total Mortgage Bankers and Brokers ............. 4,456,437
-----------
Total Commercial Paper.......................... 17,857,691
-----------
Principal Market
Amount Value
FLOATING RATE NOTES*-14.16%
Banc One Columbus 5.25% 1/7/97 ................. $1,000,000 $ 999,506
Federal National Mortgage Association
Medium-Term Note 5.42% 1/2/97 ................ 500,000 499,632
Merrill Lynch Floating Rate Medium-Term Note
5.68% 1/2/97.................................. 500,000 500,000
Student Loan Marketing Association
5.23% 1/3/97.................................. 1,250,000 1,249,454
Student Loan Marketing Association
5.47% 1/7/97.................................. 500,000 499,813
-----------
Total Floating Rate Notes....................... 3,748,405
-----------
U.S. GOVERNMENT AGENCY
OBLIGATIONS-4.68%
Federal National Mortgage Association Discount
Note 5.36% 3/4/97............................. 1,000,000 990,769
Federal National Mortgage Association
Medium-Term Note 4.97% 3/10/97 ............... 250,000 249,490
-----------
Total U.S. Government Agency Obligations ....... 1,240,259
-----------
MISCELLANEOUS INVESTMENTS-7.55%
Bank of America, Illinois 5.70% 5/28/97 ........ 500,000 499,561
Bank of America NTSA 5.52% 11/21/97 ............ 500,000 499,741
General Electric Capital Medium-Term Note
5.10% 1/27/97................................. 1,000,000 999,731
-----------
Total Miscellaneous Investments ................ 1,999,033
-----------
<PAGE>
Principal Market
Amount Value
REPURCHASE AGREEMENTS-6.67%
With Chase Manhattan 6.50% 1/2/97 (dated
12/31/96, collateralized by $483,000
U.S. Treasury Notes 6.50% due 4/30/99,
market value $493,919 and $195,000
U.S. Treasury Notes 7.125% due 9/30/99,
market value $204,166)........................ $684,000 $684,000
With J.P. Morgan Securities 6.60% 1/2/97 (dated
12/31/96, collateralized by $89,000
U.S. Treasury Notes 5.50% due 4/15/00,
market value $88,779 and $483,000
U.S. Treasury Notes 7.75% due 1/31/00,
market value $522,487)........................ 599,000 599,000
Principal Market
Amount Value
REPURCHASE AGREEMENTS (Continued)
With PaineWebber 6.60% 1/2/97 (dated
12/31/96, collateralized by $125,000
U.S. Treasury Notes 6.75% due 5/31/99,
market value $127,561 and $338,000
U.S. Treasury Notes 7.75% due 1/31/00,
market value $366,037)........................ $483,000 $ 483,000
-----------
Total Repurchase Agreements... ................. 1,766,000
-----------
<TABLE>
<CAPTION>
<S> <C>
TOTAL MARKET VALUE OF SECURITIES -100.50% (WHICH EQUALS COST
FOR FINANCIAL REPORTING AND INCOME TAX PURPOSES).................................................... 26,611,388
LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS-(0.50%)............................................... (132,834)
------------
NET ASSETS APPLICABLE TO 2,647,855 SHARES ($0.01 PAR VALUE) OUTSTANDING;
EQUIVALENT TO $10.00 PER SHARE-100.00%.............................................................. $26,478,554
============
- ---------------------
</TABLE>
*For Floating Rate Notes, the maturity date shown is the next interest reset
date.
See accompanying notes
<PAGE>
Delaware Group Premium Fund, Inc.-Growth Series
Statement of Net Assets
December 31, 1996
Number Market
of Shares Value
COMMON STOCK-81.28%
Banking, Finance & Insurance-7.70%
AMBAC......................................... 4,900 $ 325,238
Aames Financial............................... 22,950 823,331
ADVANTA Class B............................... 11,100 453,019
Blanch (E.W.) Holdings........................ 28,500 573,563
CMAC Investment............................... 27,400 1,006,950
MBIA.......................................... 10,800 1,093,500
*Oxford Health Plans........................... 8,100 474,356
The Money Store............................... 30,950 858,863
United Healthcare............................. 12,000 540,000
-----------
6,148,820
-----------
Cable, Media & Publishing-1.56%
*HA-LO Industries.............................. 20,975 578,123
*International Family Entertainment Class B.... 10,500 162,750
Reynolds & Reynolds Class A................... 19,400 504,400
-----------
1,245,273
-----------
Computers & Technology-22.99%
*3COM........................................... 10,700 784,444
Adobe Systems................................. 20,700 774,956
*Affiliated Computer Services Class A .......... 50,800 1,492,250
*BA MERCHANT SERVICES Class A................... 14,700 262,763
*BISYS Group.................................... 37,800 1,400,963
*BMC Software................................... 33,200 1,379,875
*Cascade Communications......................... 23,400 1,292,850
Cognizant..................................... 16,800 554,400
*Compuware...................................... 7,400 370,925
*DST Systems.................................... 6,600 207,075
*Documentum..................................... 5,700 194,513
First Data.................................... 33,246 1,213,479
*Gartner Group Class A.......................... 26,200 1,020,163
*Gateway 2000................................... 4,300 230,319
HBO........................................... 21,340 1,267,063
*HCIA........................................... 19,600 679,875
- ----------
Top 10 stock holdings, representing 18.7% of net assets, are in bold.
Number Market
of Shares Value
COMMON STOCK (Continued)
Computers & Technology (Continued)
*Ingram Micro- Class A.......................... 43,600 $ 1,002,800
*Netscape Communications........................ 4,500 255,938
*Premisys Communications........................ 12,500 421,875
*Pure Atria..................................... 39,700 975,131
*Rational Software.............................. 16,000 633,000
Shared Medical Systems........................ 7,600 374,300
*Sterling Commerce.............................. 15,319 539,980
*Sterling Software.............................. 8,300 262,488
*Symbol Technologies............................ 3,700 163,725
*Tech Data...................................... 22,300 610,463
-----------
18,365,613
-----------
Electronics & Electrical-2.94%
*Applied Materials............................. 8,600 309,063
Dallas Semiconductor.......................... 17,800 409,400
*LSI Logic..................................... 20,100 537,675
*Microchip Technology.......................... 8,000 407,000
*StorMedia Class A............................. 42,350 685,541
-----------
2,348,679
-----------
Energy-0.38%
Newpark Resources............................. 8,100 301,725
-----------
301,725
-----------
Environmental Services-4.04%
*Philip Environmental.......................... 63,000 913,500
*USA Waste Services............................ 44,000 1,402,500
*United Waste Systems.......................... 26,600 912,713
-----------
3,228,713
-----------
Food, Beverage & Tobacco-0.71%
*Performance Food Group........................ 15,650 240,619
*Swisher International Group A ................ 20,800 330,200
-----------
570,819
-----------
<PAGE>
Number Market
of Shares Value
COMMON STOCK (Continued)
Healthcare & Pharmaceuticals-13.10%
*Access Health................................. 9,750 $ 438,750
*Apria Healthcare Group........................ 20,200 378,750
*ClinTrials.................................... 17,400 389,325
Dentsply International...................... 14,500 689,656
*Dura Pharmaceuticals.......................... 24,400 1,165,100
*HEALTHSOUTH................................... 42,400 1,637,700
*Health Management Associates Class A ......... 72,545 1,632,263
*MedPartners................................... 36,000 756,000
*NBTY.......................................... 16,200 306,788
*Orthodontic Centers of America ............... 45,700 719,775
*Phycor........................................ 11,200 316,400
*Quorum Health Group........................... 26,000 770,250
*Value Health.................................. 13,512 263,484
*Vitalink Pharmacy............................. 18,200 423,150
*Vivra......................................... 21,075 582,197
-----------
10,469,588
-----------
Leisure, Lodging & Entertainment-9.90%
*Boston Chicken................................ 19,500 699,563
Callaway Golf................................. 35,000 1,006,250
*Circus Circus Enterprises..................... 8,200 281,875
*Foodmaker..................................... 60,200 534,275
*HFS........................................... 29,900 1,786,525
*Interstate Hotels............................. 20,700 584,775
La Quinta Inns................................ 13,350 255,319
*Landry's Seafood Restaurants.................. 16,500 355,781
*Lone Star Steakhouse/Saloon................... 31,000 831,188
*Mirage Resorts................................ 34,500 746,063
*Outback Steakhouse............................ 19,000 505,875
*Prime Hospitality............................. 19,800 319,275
-----------
7,906,764
-----------
Number Market
of Shares Value
COMMON STOCK (Continued)
Retail-6.97%
*CompUSA....................................... 18,000 $ 371,250
*General Nutrition............................. 57,000 969,000
Home Depot.................................... 9,500 476,188
*Kohl's........................................ 22,600 887,050
*Micro Warehouse............................... 11,500 133,688
*Saks Holdings................................. 21,200 572,400
St. John Knits................................ 10,100 439,350
*Staples....................................... 53,300 962,731
Talbots....................................... 14,300 409,338
*Value City Department Stores.................. 32,800 344,400
-----------
5,565,395
-----------
Telecommunications-0.42%
*Tellabs....................................... 8,900 335,419
-----------
335,419
-----------
Textiles, Apparel & Furniture-2.92%
*Designer Holdings Ltd......................... 13,600 219,300
Gucci Group N.V............................... 7,000 447,125
*Nine West Group............................... 12,500 579,688
*Tommy Hilfiger................................ 22,700 1,089,600
-----------
2,335,713
-----------
Transportation & Shipping-0.90%
Illinois Central.............................. 22,450 718,400
-----------
718,400
-----------
Utilities-2.08%
*AES........................................... 35,797 1,664,560
-----------
1,664,560
-----------
Miscellaneous-4.67%
*ADT Limited................................... 28,200 645,075
*CUC International............................. 50,213 1,192,547
*Interim Services.............................. 16,000 568,000
*Personnel Group of America.................... 15,500 373,938
*Prime Service................................. 21,800 599,500
*Wind River Systems............................ 7,500 353,906
-----------
3,732,966
-----------
Total Common Stock (cost $51,495,902 ) ...... 64,938,447
-----------
<PAGE>
Principal Market
Amount Value
CONVERTIBLE BONDS-0.64%
Computers & Technology-0.64%
+BAAN Company NV 4.50% 12/23/01 ............... $ 500,000 $ 508,750
-----------
Total Convertible Bonds (cost $500,000) ...... 508,750
REPURCHASE AGREEMENTS-17.42%
With Chase Manhattan 6.50% 1/2/97 (dated
12/31/96, collateralized by $1,537,000
U.S. Treasury Notes 7.125% due 9/30/99,
market value $1,609,771 and $3,807,000
U.S. Treasury Notes 6.50% due 4/30/99,
market value $3,894,850).................... 5,394,000 5,394,000
Principal Market
Amount Value
REPURCHASE AGREEMENTS (Continued)
With J.P. Morgan Securities 6.60% 1/2/97 (dated
12/31/96, collateralized by $3,807,000
U.S. Treasury Notes 7.75% due 1/31/00,
market value $4,118,602 and $703,000
U.S. Treasury Notes 5.50% due 4/15/00,
market value $699,180)...................... $4,721,000 $ 4,721,000
With PaineWebber 6.60% 1/2/97 (dated
12/31/96, collateralized by $985,000
U.S. Treasury Notes 6.75% due 5/31/99,
market value $1,007,858 and $2,665,000
U.S. Treasury Notes 7.75% due 1/31/00,
market value $2,883,021).................... 3,807,000 3,807,000
-----------
Total Repurchase Agreements
(cost $13,922,000).......................... 13,922,000
-----------
<TABLE>
<CAPTION>
<S> <C>
TOTAL MARKET VALUE OF SECURITIES (cost $65,917,902)-99.34%......................................... 79,369,197
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-0.66%.............................................. 531,279
-----------
NET ASSETS APPLICABLE TO 5,029,575 SHARES ($0.01 PAR VALUE) OUTSTANDING;
EQUIVALENT TO $15.89 PER SHARE-100.00%........................................................... $79,900,476
===========
COMPONENTS OF NET ASSETS AT DECEMBER 31, 1996:
Common Stock, $0.01 par value, 500,000,000 shares authorized to the Fund with
50,000,000 shares allocated to the Series ......................................................... $61,990,971
Accumulated undistributed:
Net realized gain on investments................................................................. 4,458,210
Net unrealized appreciation of investments....................................................... 13,451,295
-----------
Total net assets................................................................................... $79,900,476
===========
</TABLE>
In accordance with Statement of Position 93-2, Determination, Disclosure and
Financial Statements Presentation of Income, Capital Gain and Return of
Capital Gain Distributions by Investment Companies, the Fund reclassified
$75,939 of permanent book and tax basis differences from accumulated net
investment loss to accumulated net realized gain on investments.
-------------------------
*Non-income producing security for the year ended December 31, 1996.
+Security exempt from registration under the Securities Act of 1933. These
securities may be resold in transactions exempt from registration, normally to
qualified institutional buyers (see note 6.) At December 31, 1996, these
securities amounted to $508,750 or 0.64% of net assets.
See accompanying notes
<PAGE>
Delaware Group Premium Fund, Inc.-International Equity Series
Statement of Net Assets
December 31, 1996
Market
Number Value
of Shares (U.S. $)
COMMON STOCK-94.20%
Australia-10.80%
Amcor Limited................................... 568,000 $ 3,652,431
CSR Limited..................................... 1,224,966 4,284,123
National Australia Bank......................... 376,906 4,433,839
Pacific Dunlop Limited.......................... 716,926 1,823,516
-----------
14,193,909
-----------
Belgium-2.74%
Electrabel S.A.................................. 15,200 3,596,302
-----------
3,596,302
-----------
Canada-1.45%
BC Telecom...................................... 88,133 1,906,360
-----------
1,906,360
-----------
France-7.53%
Alcatel Alsthom................................. 10,015 804,287
Campagnie de Saint Gobain....................... 19,708 2,787,220
Elf Aquitaine................................... 47,259 4,300,660
Societe Television Francaise.................... 21,000 2,006,936
-----------
9,899,103
-----------
Germany-6.67%
Bayer........................................... 84,600 3,428,468
Continental..................................... 117,200 2,118,118
Rheinisch Westfaelisches Kalkwerke.............. 30,408 1,270,782
Siemens......................................... 42,050 1,948,871
-----------
8,766,239
-----------
Hong Kong-2.87%
Hong Kong Electric.............................. 585,000 1,943,823
Wharf Holdings Limited.......................... 366,000 1,826,569
-----------
3,770,392
-----------
Indonesia-1.39%
PT Bank Dagang Nasional......................... 1,135,500 1,153,768
PT Semen Gresik................................. 210,000 675,699
-----------
1,829,467
-----------
- -----------------------
Top 10 stock holdings, representing 28.3% of net assets, are in hold.
<PAGE>
Market
Number Value
of Shares (U.S. $)
COMMON STOCK (Continued)
Japan-12.35%
Amano........................................... 187,000 $ 2,003,283
Eisai Co. Limited............................... 121,000 2,383,413
Hitachi Limited................................. 318,000 2,967,085
Kinki Coca-Cola Bottling........................ 131,000 1,550,497
Koito Manufacturing............................. 126,000 843,629
Matsushita Electric............................. 205,000 3,347,301
Nichido Fire & Marine........................... 343,000 1,955,767
West Japan Railway.............................. 365 1,182,506
-----------
16,233,481
-----------
Netherlands-6.36%
Elsevier-CVA.................................... 119,500 2,018,978
Koninklijke Van Ommeren NV...................... 40,100 1,809,755
Royal Dutch Petroleum........................... 11,350 1,989,189
Unilever NV-CVA................................. 14,360 2,539,152
-----------
8,357,074
-----------
New Zealand-3.45%
Carter Holt Harvey Limited...................... 527,800 1,196,640
Telecom Corp. of New Zealand.................... 654,784 3,339,062
-----------
4,535,702
-----------
Philippines-0.92%
Philippine Long Distance Telephone
Company ADR................................... 23,900 1,212,925
-----------
1,212,925
-----------
Singapore/Malaysia-3.98%
Jardine Matheson Holdings Limited............... 236,622 1,561,705
Oriental Holdings Berhad........................ 319,200 2,173,922
Sime Darby Berhad .............................. 380,000 1,497,129
-----------
5,232,756
-----------
South Korea-1.12%
Cho Hung Bank Ltd.-GDR.......................... 201,970 1,474,381
-----------
1,474,381
-----------
<PAGE>
Market
Number Value
of Shares (U.S. $)
COMMON STOCK(Continued)
Spain-6.39%
Banco Central Hispanoamerica S.A ............... 92,449 $ 2,373,680
Iberdrola S.A................................... 197,800 2,802,001
Telefonica de Espana............................ 138,500 3,214,854
-----------
8,390,535
-----------
United Kingdom-26.18%
Bass............................................ 219,000 3,079,058
Blue Circle Industries.......................... 522,000 3,173,434
Boots........................................... 286,200 2,952,958
British Airways................................. 345,000 3,577,370
British Gas..................................... 700,000 2,691,194
Cable & Wireless................................ 285,000 2,369,543
GKN............................................. 162,000 2,777,024
Glaxo Wellcome.................................. 174,470 2,838,409
Great Universal Stores.......................... 263,000 2,756,372
RTZ ............................................ 170,100 2,727,989
Taylor Woodrow.................................. 1,080,000 2,848,230
Unigate......................................... 368,000 2,618,481
-----------
34,410,062
-----------
Total Common Stock (cost $104,199,841).......... 123,808,688
-----------
Market
Principal Value
Amount (U.S. $)
REPURCHASE AGREEMENTS-5.29%
With Chase Manhattan 6.50% 1/2/97 (dated
12/31/96, collateralized by $1,901,000
U.S. Treasury Notes 6.50% due 4/30/99,
market value $1,944,042 and $767,000
U.S. Treasury Notes 7.125% due 9/30/99,
market value $803,393)........................ $2,692,000 $ 2,692,000
With J.P. Morgan Securities 6.60% 1/2/97 (dated
12/31/96, collateralized by $350,000
U.S. Treasury Notes 5.50% due 4/15/00,
market value $348,993 and $1,901,000
U.S. Treasury Notes 7.75% due 1/31/00,
market value $2,056,273)...................... 2,357,000 2,357,000
With PaineWebber 6.60% 1/2/97 (dated
12/31/96, collateralized by $492,000
U.S. Treasury Notes 6.75% due 5/31/99,
market value $503,100 and $1,331,000
U.S. Treasury Notes 7.75% due 1/31/00,
market value $1,439,610)...................... 1,901,000 1,901,000
-----------
Total Repurchase Agreements
(cost $6,950,000)............................. 6,950,000
-----------
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
TOTAL MARKET VALUE OF SECURITIES (cost $111,149,841)-99.49%......................................... 130,758,688
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-0.51%............................................... 669,029
------------
NET ASSETS APPLICABLE TO 8,696,840 SHARES ($.01 par value) OUTSTANDING;
EQUIVALENT TO $15.11 PER SHARE-100.00%............................................................ $131,427,717
============
COMPONENTS OF NET ASSETS AT DECEMBER 31, 1996:
Common stock, $.01 par value, 500,000,000 shares authorized to the Fund with
50,000,000 shares allocated to the Series........................................................... $107,304,277
Accumulated undistributed:
Net investment income*............................................................................ 4,557,033
Net realized loss on investments.................................................................. (546,213)
Net unrealized appreciation of investments and foreign currencies................................. 20,112,620
------------
Total net assets.................................................................................... $131,427,717
============
</TABLE>
--------------------
*Undistributed net investment income includes net realized gain (loss) on
foreign currencies. Net realized gains on foreign currencies are included as a
component of investment income in accordance with provisions of the Internal
Revenue Code.
ADR-American Depository Receipt
GDR-Global Depository Receipt
See accompanying notes
<PAGE>
Delaware Group Premium Fund, Inc.-Emerging Growth Series
Statement of Net Assets
December 31, 1996
Number Market
of Shares Value
COMMON STOCK-72.85%
Aerospace and Defense-1.07%
AAR........................................... 15,500 $ 468,875
*Kellstrom Industries.......................... 16,400 137,350
-----------
606,225
-----------
Automobiles & Automotive Parts-0.22%
*Boyd Wheels................................... 8,800 121,550
-----------
121,550
-----------
Banking, Finance & Insurance-1.93%
*CRW Financial................................ 16,680 142,823
*First Alliance............................... 12,300 367,463
Medallion Financial.......................... 3,900 58,988
*NAL Financial Group.......................... 11,300 109,469
*United Dental Care........................... 13,500 412,594
-----------
1,091,337
Buildings & Materials-0.24%
LSI Industries............................... 10,000 133,750
-----------
133,750
-----------
Cable, Media & Publishing-5.46%
*Central European Media Entertainment ......... 15,400 485,100
Evergreen Media Class A....................... 9,300 231,338
*Groupe AB SA-ADR.............................. 11,900 171,063
*Hollywood Entertainment....................... 7,700 143,413
*Home Shopping Network......................... 20,452 483,178
*Infinity Broadcasting Class A ................ 13,850 465,706
*Mecklermedia.................................. 11,400 227,288
*Metro Networks................................ 4,100 103,013
*Norwood Promotional Products ................. 20,600 365,650
*Univision Communications Class A ............. 3,700 136,900
*Young Broadcasting Class A.................... 9,200 270,250
-----------
3,082,899
-----------
Number Market
of Shares Value
COMMON STOCK (Continued)
Computers & Technology-12.88%
*Activision................................... 11,800 $ 148,975
*Aspect Development........................... 3,600 97,650
*Aware........................................ 7,700 79,406
*C-COR Electronics............................ 12,700 169,069
*Cadence Design Systems....................... 17,300 687,675
*Cayenne Software............................. 18,300 70,913
*Credit Management Solutions ................. 7,300 103,113
*Cypress Semiconductor........................ 5,800 81,925
*EMC.......................................... 22,100 732,063
*Elamex S.A. de C.V........................... 17,700 172,575
*Fore Systems................................. 11,700 385,369
*GTECH Holdings............................... 13,500 432,000
*Geoworks..................................... 9,600 234,000
*HPR.......................................... 24,100 328,363
*INSO......................................... 3,600 141,750
*Komag........................................ 21,900 592,669
*Maxis........................................ 23,100 280,088
*NOVA......................................... 19,700 435,863
*PLATINUM Technology.......................... 35,395 480,045
*Peerless Systems............................. 21,700 366,188
*Puma Technology.............................. 4,100 69,700
*Rogue Wave Software.......................... 7,200 115,200
*Ross Systems................................. 33,200 317,475
*Storage Technology........................... 15,700 747,713
-----------
7,269,787
-----------
Consumer Products-0.30%
*Zag Industries Ltd........................... 10,200 168,938
-----------
168,938
-----------
<PAGE>
Number Market
of Shares Value
COMMON STOCK (Continued)
Electronics & Electrical-6.92%
*Altera....................................... 3,100 $ 225,331
*American Residential Services ............... 3,500 94,938
Cable Design Technologies.................... 10,300 318,656
*ESS Technology............................... 11,000 309,375
*ITI Technologies............................. 11,500 173,219
KLA Instruments.............................. 4,200 148,838
*Kulicke & Soffa Industries................... 4,200 80,063
*P-COM........................................ 14,900 443,275
Pittston Brink's Group....................... 15,700 423,900
*Protection One............................... 21,400 212,663
*Sawtek....................................... 8,000 314,500
*Sipex........................................ 18,900 607,163
*TriQuint Semiconductor....................... 16,800 439,950
*Triumph Group................................ 4,600 109,825
-----------
3,901,696
-----------
Energy-0.48%
*Bouygues Offshore S.A........................ 21,000 270,375
-----------
270,375
-----------
Environmental Services-5.95%
*Republic Industries.......................... 90,240 2,814,361
*Superior Services............................ 26,700 540,675
-----------
3,355,036
-----------
Food, Beverage & Tobacco-1.22%
*Sonic ....................................... 19,250 486,063
*United Natural Foods......................... 11,900 204,531
-----------
690,594
-----------
Healthcare & Pharmaceuticals-6.87%
*Advanced Health.............................. 14,400 181,800
*Agouron Pharmaceuticals...................... 9,000 608,625
*Alternative Living Services ................. 14,100 204,450
*American Oncology Resources ................. 29,700 302,569
*Ascend Communications........................ 4,500 279,563
*Capstone Pharmacy............................ 34,100 383,625
*Carriage Services............................ 11,700 259,594
Number Market
of Shares Value
COMMON STOCK (Continued)
Healthcare & Pharmaceuticals (Continued)
*Columbia Laboratories........................ 12,600 $ 182,700
*DUSA Pharmaceuticals......................... 11,800 81,863
*FPA Medical Management....................... 10,200 226,313
*NeoPath...................................... 9,600 176,400
*Renal Treatment Centers...................... 19,200 489,600
*Sano......................................... 12,100 181,500
*Total Renal Care Holdings.................... 8,800 319,000
-----------
3,877,602
-----------
Industrial Machinery-1.56%
*Central Sprinkler............................ 11,900 298,988
*PRI Automation............................... 6,600 297,825
+*Spinnaker Industries......................... 14,000 281,960
-----------
878,773
-----------
Leisure, Lodging & Entertainment-7.13%
*Ascent Entertainment Group................... 21,700 341,775
*CapStar Hotel................................ 20,600 404,275
*Cinergi Pictures Entertainment .............. 11,100 22,373
*Dave & Buster's.............................. 10,900 217,319
*Equity Marketing............................. 16,200 299,700
*Extended Stay America........................ 23,900 480,988
K2.......................................... 9,500 261,250
*Mirage Resorts............................... 22,600 488,725
*Morton's Restaurant Group.................... 16,300 275,063
*Overseas Filmgroup........................... 5,100 23,906
*Rio Hotel and Casino......................... 20,500 299,813
*Studio Plus Hotels........................... 18,150 288,131
*Sun International Hotels..................... 10,800 394,200
*Teardrop Golf................................ 4,900 24,041
*Ticketmaster Group........................... 16,800 201,600
-----------
4,023,159
-----------
<PAGE>
Number Market
of Shares Value
COMMON STOCK (Continued)
Metals & Mining-1.03%
*Gibraltar Steel.............................. 14,200 $ 369,200
*Steel Dynamics............................... 11,100 210,206
-----------
579,406
-----------
Real Estate-1.00%
Security Capital Pacific Trust............... 24,800 567,300
-----------
567,300
-----------
Retail-9.09%
*Alrenco...................................... 27,700 289,119
*Aviation Sales .............................. 6,800 139,400
*Charming Shoppes............................. 14,200 71,444
*DELIA*S...................................... 1,500 29,531
Duty Free International...................... 29,600 429,200
*Eagle Hardware & Garden...................... 13,800 286,350
*Egghead...................................... 21,800 113,088
*Finish Line Class A.......................... 11,600 244,325
*General Nutrition............................ 18,600 316,200
*Hot Topic.................................... 4,600 89,700
*Meyer, (Fred)................................ 12,200 433,100
*Neiman-Marcus Group.......................... 10,700 272,850
*Petco Animal Supplies........................ 8,900 181,338
*Piercing Pagoda.............................. 10,400 249,600
Russ Berrie.................................. 30,500 549,000
Schultz Sav-O Stores......................... 14,400 208,800
*Staples...................................... 13,350 241,134
*Vons Companies............................... 6,600 395,175
*Wet Seal..................................... 27,900 591,131
-----------
5,130,485
-----------
Telcommunications-2.89%
*ICG Communications........................... 14,000 246,750
*PageMart Wireless............................ 8,700 58,181
*Telco Systems................................ 14,400 276,300
*Tele-Communications International ........... 13,800 185,438
*Teleport Communications Group ............... 16,800 512,400
*TeleSpectrum Worldwide....................... 21,200 333,900
*TresCom International........................ 2,400 18,300
-----------
1,631,269
-----------
Number Market
of Shares Value
COMMON STOCK (Continued)
Textiles, Apparel & Furniture-1.51%
*Cutter & Buck................................ 1,200 $ 14,175
*Cyrk......................................... 28,300 369,669
*Sport-Haley.................................. 8,800 111,100
Wolverine World Wide......................... 12,300 356,700
-----------
851,644
-----------
Transportation & Shipping-0.30%
*Midwest Express Holdings..................... 4,700 169,200
-----------
169,200
-----------
Utilities-1.03%
*AES China Generating Class A ................ 23,100 291,638
*York Research................................ 30,700 287,813
-----------
579,451
-----------
Miscellaneous-3.77%
*CUC International............................ 47,960 1,139,050
*NCO Group.................................... 4,700 77,844
*NFO Research................................. 12,300 276,750
*National Education........................... 21,200 323,300
Norrell...................................... 11,300 307,925
-----------
2,124,869
-----------
Total Common Stock (cost $36,958,416) ....... 41,105,345
-----------
WARRANTS-0.01%
Leisure, Lodging & Entertainment-0.01%
*Teardrop Golf................................ 3,100 3,294
-----------
Total Warrants (cost $310) 3,294
-----------
<PAGE>
Principal Market
Amount Value
REPURCHASE AGREEMENTS-26.80%
With Chase Manhattan 6.50% 1/2/97 (dated
12/31/96, collateralized by $4,136,000
U.S. Treasury Notes 6.50% due 4/30/99,
market value $4,231,404 and $1,670,000
U.S. Treasury Notes 7.125% due 9/30/99,
market value $1,748,938) ................. $5,860,000 $5,860,000
With J.P. Morgan Securities 6.60% 1/2/97
(dated 12/31/96, collateralized by $762,000
U.S. Treasury Notes 5.50% due 4/15/00,
market value $759,595 and $4,136,000
U.S. Treasury Notes 7.75% due 1/31/00,
market value $4,474,490) ................. 5,129,000 5,129,000
Principal Market
Amount Value
REPURCHASE AGREEMENTS (Continued)
With PaineWebber 6.60% 1/2/97 (dated
12/31/96, collateralized by $1,070,000
U.S. Treasury Notes 6.75% due 5/31/99,
market value $1,094,947 and $2,895,000
U.S. Treasury Notes 7.75% due 1/31/00,
market value $3,132,143) ................. $4,136,000 $ 4,136,000
-----------
Total Repurchase Agreements
(cost $15,125,000)........................ 15,125,000
-----------
<TABLE>
<CAPTION>
<S> <C>
TOTAL MARKET VALUE OF SECURITIES (cost $52,083,726)-99.66%........................................ 56,233,639
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-0.34%............................................. 189,854
-----------
NET ASSETS APPLICABLE TO 3,874,180 SHARES ($0.01 PAR VALUE) OUTSTANDING;
EQUIVALENT TO $14.56 PER SHARE-100.00%.......................................................... $56,423,493
===========
COMPONENTS OF NET ASSETS AT DECEMBER 31, 1996:
Common stock, $.01 par value, 500,000,000 shares authorized to the Fund with
50,000,000 shares allocated to the Series......................................................... $51,437,483
Accumulated undistributed:
Net investment income........................................................................... 180,621
Net realized gain on investments................................................................ 655,476
Net unrealized appreciation of investments...................................................... 4,149,913
-----------
Total net assets.................................................................................. $56,423,493
===========
</TABLE>
- ----------
*Non-income producing security for the year ended December 31, 1996.
+Restricted Securities - investment in securities not registered under the
Securities Act of 1933, as amended. These securities have contractual
restrictions on resale (see note 6). At December 31, 1996 these securities
amounted to $281,960 or 0.50% of net assets.
ADR-American Depository Receipt See accompanying notes
<PAGE>
Delaware Group Premium Fund, Inc.-Value Series
Statement of Net Assets
December 31, 1996
Number Market
of Shares Value
COMMON STOCK-91.50%
Aerospace & Defense-1.08%
Thiokol ........................... 5,700 $ 255,075
----------
255,075
----------
Automobiles & Automotive Parts-3.69%
Arvin Industries .................. 11,600 287,100
Clarcor ........................... 10,900 241,163
Exide ............................. 8,300 190,900
Titan Wheel International ......... 12,200 155,550
----------
874,713
----------
Banking, Finance & Insurance-14.83%
*Americredit ....................... 12,000 246,000
Enhance Financial Services Group... 8,600 313,900
Everest Reinsurance Holdings ...... 10,000 287,500
*Farm Family Holdings .............. 9,200 179,400
*Financial Federal ................. 14,800 247,900
First American (Tennesse) ......... 4,600 265,650
Horace Mann Educators ............. 6,800 274,550
Keystone Financial ................ 9,150 229,894
ONBANCorp ......................... 6,600 245,850
PMI Group ......................... 3,800 210,425
Penncorp Financial Group .......... 7,000 252,000
Roosevelt Financial Group ......... 12,200 254,675
Titan Holdings .................... 14,935 246,428
Union Planters .................... 6,600 257,400
----------
3,511,572
Buildings & Materials-0.89%
Continental Homes Holdings ........ 9,900 210,375
----------
210,375
----------
Cable, Media & Publishing-3.09%
Cadmus Communications ............. 13,800 211,313
*Devon Group ....................... 8,200 217,300
Standard Register ................. 9,300 302,250
----------
730,863
----------
<PAGE>
Number Market
of Shares Value
COMMON STOCK (Continued)
Chemicals-3.15%
Ferro ............................ 7,500 $ 212,813
*Scotts ........................... 13,900 276,263
*Synthetic Industries ............. 16,000 256,000
----------
745,076
----------
Electronics & Electrical-8.28%
*Burr-Brown ....................... 15,400 396,550
*Hutchinson Technology ............ 4,300 326,800
*Kemet ............................ 14,200 327,488
Kuhlman .......................... 16,100 311,938
*Micro Linear ..................... 39,100 339,681
*Rexel ............................ 16,300 258,763
----------
1,961,220
----------
Energy-9.29%
*Belco Oil & Gas .................. 9,400 257,325
*Belden & Blake ................... 4,450 114,031
Cross Timbers Oil ................ 10,600 266,325
*Energy Ventures .................. 5,500 279,813
*Offshore Logistics ............... 19,200 374,400
*Pool Energy Services ............. 20,700 320,850
*Seacor Holdings .................. 1,900 119,700
*TransTexas Gas ................... 18,100 257,925
Valero Energy .................... 7,300 208,963
----------
2,199,332
----------
Food, Beverage & Tobacco-2.54%
DiMon ............................ 11,500 265,938
Schweitzer-Mauduit International 10,600 335,225
----------
601,163
----------
Healthcare & Pharmaceuticals-4.38%
*Lincare Holdings ................. 5,900 243,375
*Marquette Medical Systems Class A 10,400 227,500
*Maxicare Health Plans ............ 9,900 222,750
Owens & Minor .................... 18,600 190,650
*Sunrise Medical .................. 9,600 152,400
----------
1,036,675
----------
- ----------
Top 10 stock holdings, representing 15.4% of net assets, are in bold.
<PAGE>
Value Series
Statement of Net Assets (Continued)
Number Market
of Shares Value
COMMON STOCK (Continued)
Industrial Machinery-11.69%
*ABC Rail Products ................. 12,000 $ 237,750
*Central Sprinkler ................. 4,800 120,600
Columbus McKinnon ................. 11,600 179,075
*Global Industrial Technology ...... 11,600 256,650
Greenfield Industries ............. 11,200 342,300
IDEX .............................. 5,900 235,263
Keystone International ............ 12,000 241,500
Regal-Beloit ...................... 12,300 241,388
*Shaw Group ........................ 11,000 257,125
TriMas ............................ 9,000 214,875
Varlen ............................ 9,764 200,772
Watts Industries .................. 10,100 241,138
----------
2,768,436
----------
Leisure, Lodging & Entertainment-1 85%
*Ascent Entertainment Group ........ 13,600 214,200
*Hollywood Park .................... 14,700 223,256
----------
437,456
----------
Metals & Mining-0.71%
Century Aluminum .................. 9,800 167,825
----------
167,825
----------
Paper & Forest Products-3.95%
Caraustar Industries .............. 7,400 245,125
Chesapeake ........................ 6,600 207,075
Glatfelter (P.H.) ................. 12,400 223,200
Rayonier .......................... 6,800 260,950
----------
936,350
----------
<PAGE>
Number Market
of Shares Value
COMMON STOCK (Continued)
Real Estate-10.21%
Cali Realty ....................... 11,000 $ 339,625
Duke Realty Investments ........... 6,700 257,950
Excel Realty Trust ................ 10,000 253,750
*Prentiss Properties Trust ......... 10,600 265,000
Public Storage .................... 10,600 328,600
Reckson Associates Realty ......... 8,000 338,000
ROC Communities ................... 8,600 238,650
Starwood Lodging Trust ............ 7,200 396,900
----------
2,418,475
----------
Retail-1.26%
*Waban ............................ 11,500 299,000
----------
299,000
----------
Textiles, Apparel & Furniture-2.84%
Kellwood .......................... 17,000 340,000
Pillowtex ......................... 18,500 333,000
----------
673,000
----------
Transportation & Shipping-5.93%
Airborne Freight .................. 9,300 217,388
*Landstar Systems .................. 9,100 209,300
*M.S. Carriers ..................... 13,400 218,588
*Mesaba Holdings ................... 29,400 433,650
USFreightways ..................... 11,900 326,506
----------
1,405,432
----------
Utilities-1.84%
Public Service Company of New Mexico 10,700 209,988
Sierra Pacific Resources .......... 7,900 227,125
----------
437,113
----------
Total Common Stock (cost $18,713,491) 21,669,151
----------
<PAGE>
Principal Market
Amount Value
REPURCHASE AGREEMENTS-8.39%
With Chase Manhattan 6.50% 1/2/97 (dated
12/31/96, collateralized by $544,000
U.S. Treasury Notes 6.50% due 4/30/99,
market value $556,169 and $219,000
U.S. Treasury Notes 7.125% due 9/30/99,
market value $229,687) ......................... $ 770,000 $ 770,000
With J.P. Morgan Securities 6.60% 1/2/97 (dated
12/31/96, collateralized by $543,000
U.S. Treasury Notes 7.75% due 1/31/00,
market value $587,798 and $100,000
U.S. Treasury Notes 5.50% due 4/15/00,
market value $100,004) ......................... 674,000 674,000
With PaineWebber 6.60% 1/2/97 (dated
12/31/96, collateralized by $141,000
U.S. Treasury Notes 6.75% due 5/31/99,
market value $143,889 and $380,000
U.S. Treasury Notes 7.75% due 1/31/00,
market value $411,476) ......................... 543,000 543,000
----------
Total Repurchase Agreements
(cost $1,987,000) .............................. 1,987,000
----------
<TABLE>
<CAPTION>
<S> <C>
TOTAL MARKET VALUE OF SECURITIES -99.89% (cost $20,700,491)........................................ 23,656,151
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-0.11%.............................................. 26,589
-----------
NET ASSETS APPLICABLE TO 1,633,487 SHARES ($.01 PAR VALUE) OUTSTANDING;
EQUIVALENT TO $14.50 PER SHARE-100.00%........................................................... $23,682,740
===========
COMPONENTS OF NET ASSETS AT DECEMBER 31, 1996:
Common stock, $.01 par value, 500,000,000 shares authorized to the Fund with 50,000,000 shares
allocated to the Series .......................................................................... $18,860,049
Accumulated undistributed:
Net investment income............................................................................ 200,162
Net realized gain on investments................................................................. 1,666,869
Net unrealized appreciation of investments....................................................... 2,955,660
-----------
Total net assets................................................................................... $23,682,740
===========
</TABLE>
- ----------
*Non-income producing security for the year ended December 31, 1996.
See accompanying notes
<PAGE>
Delaware Group Premium Fund, Inc.-Global Bond Series
Statement of Net Assets
December 31, 1996
Market
Principal Value
Amount* (U.S. $)
BONDS-87.23%
Australia-11.97%
Australian Government 6.25% 3/15/99 ........... Aus$600,000 $ 475,308
Australian Government 9.50% 8/15/03 ........... 100,000 88,972
Australian Government 10.00% 2/15/06 .......... 100,000 93,095
Banque National De Paris 9.00% 8/13/02 ........ 250,000 212,126
New South Wales International 7.00% 4/1/04 .... 150,000 116,487
Queensland Treasury-Global 8.00% 5/14/03 ...... 180,000 148,009
-----------
1,133,997
-----------
Canada-7.71%
Autobahn Schnell 8.50% 3/3/03 ................. C$ 60,000 49,270
Export-Import Bank of Japan 7.75% 10/8/02 ..... 160,000 127,084
General Electric Capital of Canada
7.125% 2/12/04 .............................. 100,000 76,600
Government of Canada 9.00% 12/1/04 ............ 100,000 85,778
Government of Canada 10.25% 3/15/14 ........... 100,000 97,401
KFW International Finance 6.50% 12/28/01 ...... 60,000 45,468
Kingdom of Norway 8.375% 1/27/03 .............. 200,000 163,141
Ontario Hydro 10.00% 3/19/01 .................. 100,000 85,674
-----------
730,416
-----------
Denmark-10.21%
Danish Government 8.00% 5/15/03 ............... Dk 800,000 150,337
Kingdom of Denmark 8.00% 11/15/01 ............. 2,950,000 555,518
Kingdom of Denmark 8.00% 3/15/06 .............. 1,400,000 261,260
-----------
967,115
-----------
Germany-12.58%
Baden Wurt L-Finance NV 6.63% 8/20/03 ......... Dem 250,000 171,966
Bundesrepblik Deutscheland 8.375% 5/21/01 ..... 350,000 260,217
Deut Pfandbriefe Hypobk Bank
5.625% 2/7/03 ............................... 500,000 329,332
European Bank Reconstruction &
Development 4.875% 2/28/01 .................. 500,000 327,060
International Bank Reconstruction &
Development 6.125% 9/27/02 .................. 150,000 102,596
-----------
1,191,171
-----------
<PAGE>
Market
Principal Value
Amount* (U.S. $)
BONDS (Continued)
New Zealand-5.83%
Government of New Zealand 8.00% 2/15/01 ....... NZ$ 250,000 $ 182,649
Government of New Zealand 8.00% 4/15/04 ....... 500,000 369,077
-----------
551,726
-----------
Spain-7.19%
DSL Finance NV Amsterdam 7.875% 2/10/04 ....... Sp 20,000,000 165,140
Spanish Government 8.30% 12/15/98 ............. 50,000,000 403,264
Spanish Government 11.30% 1/15/02 ............. 12,000,000 112,711
-----------
681,115
-----------
Sweden-5.86%
Swedish Government 9.00% 4/20/09 .............. Sk 300,000 51,550
Swedish Government 10.25% 5/5/03 .............. 2,300,000 408,949
Swedish Government 13.00% 6/15/01 ............. 500,000 94,186
-----------
554,685
-----------
United Kingdom-11.19%
Abbey National Treasury 8.00% 4/2/03 .......... Gbp 50,000 86,642
Barclays Bank 6.50% 2/16/04 ................... 30,000 47,971
Depfa Finance 7.125% 11/11/03 ................. 100,000 165,256
Glaxo Wellcome 8.75% 12/1/05 .................. 80,000 143,422
Powergen 8.50% 7/3/06 ......................... 100,000 173,605
Smithkline Beecham Nts 8.375% 12/29/00 ........ 150,000 263,297
UK Conversion S47 Stock Guilt
9.00% 3/3/00 ................................ 100,000 180,241
-----------
1,060,434
-----------
United States-14.69%
U.S. Treasury Notes 5.625% 11/30/98 ........... $400,000 398,296
U.S. Treasury Notes 6.125% 7/31/00 ............ 150,000 150,110
U.S. Treasury Notes 7.50% 11/15/01 ............ 800,000 842,703
-----------
1,391,109
-----------
Total Bonds (cost $8,008,272) ................. 8,261,768
-----------
<PAGE>
Global Bond Series
Statement of Net Assets (Continued)
Market
Principal Value
Amount* (U.S. $)
REPURCHASE AGREEMENTS-5.37%
With Chase Manhattan 6.50% 1/2/97 (dated
12/31/96, collateralized by $56,000
U.S. Treasury Notes 7.125% due 9/30/99,
market value $58,739 and $139,000
U.S. Treasury Notes 6.50% due 4/30/99,
market value $142,119) ...................... $197,000 $197,000
With J.P. Morgan Securities 6.60% 1/2/97 (dated
12/31/96, collateralized by $139,000
U.S. Treasury Notes 7.75% due 1/31/00,
market value $150,284 and $26,000
U.S. Treasury Notes 5.50% due 4/15/00,
market value $25,512) ....................... 172,000 172,000
With PaineWebber 6.60% 1/2/97 (dated
12/31/96, collateralized by $36,000
U.S. Treasury Notes 6.75% due 5/31/99,
market value $36,776 and $97,000
U.S. Treasury Notes 7.75% due 1/31/00,
market value $105,199) ...................... 139,000 139,000
--------
Total Repurchase Agreements
(cost $508,000) ............................. 508,000
--------
<TABLE>
<CAPTION>
<S> <C>
TOTAL MARKET VALUE OF SECURITIES (cost $8,516,272)-92.60%........................... 8,769,768
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-7.40%............................... 701,050
----------
NET ASSETS APPLICABLE TO 864,446 SHARES ($.01 PAR VALUE) OUTSTANDING;
EQUIVALENT TO $10.96 PER SHARE-100.00%............................................ $9,470,818
==========
COMPONENTS OF NET ASSETS AT DECEMBER 31, 1996:
Common stock, $.01 par value, 500,000,000 shares authorized to the Fund with
50,000,000 shares allocated to the Series......................................... $9,010,816
Accumulated undistributed:
Net investment income**........................................................... 111,532
Net realized gain on investments**................................................ 83,703
Net unrealized appreciation of investments and foreign currencies................. 264,767
----------
Total net assets.................................................................... $9,470,818
==========
</TABLE>
- ----------
*Principal amount is stated in the currency in which each bond is denominated.
Aus$--Australian Dollars Sp--Spanish Peseta
C$--Canadian Dollars Sk--Swedish Kroner
Dk--Danish Kroner Gbp--British Pounds
Dem--German Marks $--U.S. Dollars
NZ$--New Zealand Dollars
**Accumulated net investment income includes net realized gains on foreign
currencies. Net realized gains on foreign currencies are included as a
component of net investment income in accordance with provisions of the
Internal Revenue Code.
See accompanying notes
<PAGE>
Delaware Group Premium Fund, Inc.
Statements of Assets and Liabilities
December 31, 1996
<TABLE>
<CAPTION>
Equity/ High Capital Multiple Money
Income Yield Reserves Strategy Market
Series Series Series Series Series
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments at market .............. $171,547,771 $66,048,735 $28,033,036 $76,712,741 $26,611,388
Dividends and interest receivable .. 398,518 1,499,828 283,877 339,758 67,942
Receivable for Fund shares sold .... 73,533 257,328 74 -- --
Receivable for investment
securities sold .................. 120,033 -- 5,610 3,614 --
Cash and foreign currencies ........ 15,710 10,684 -- 7,942 244
Other assets ....................... 1,950 -- -- -- --
------------ ----------- ----------- ----------- -----------
Total assets ..................... 172,157,515 67,816,575 28,322,597 77,064,055 26,679,574
------------ ----------- ----------- ----------- -----------
LIABILITIES:
Payable for investment securities
purchased ........................ 5,355,926 104,187 326,122 1,554,286 --
Payable for Fund shares repurchased. 64,565 1,653 116,141 72,633 179,876
Other accounts payable and accrued
expenses ......................... 90,447 46,058 112,721 35,029 21,144
------------ ----------- ----------- ----------- -----------
Total liabilities ................ 5,510,938 151,898 554,984 1,661,948 201,020
------------ ----------- ----------- ----------- -----------
NET ASSETS ......................... $166,646,577 $67,664,677 $27,767,613 $75,402,107 $26,478,554
============ =========== =========== =========== ===========
Shares outstanding ................. 10,426,800 7,379,775 2,864,716 4,532,563 2,647,855
============ =========== =========== =========== ===========
Net asset value .................... $ 15.98 $ 9.17 $ 9.69 $ 16.64 $ 10.00
============ =========== =========== =========== ===========
</TABLE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
International Emerging Global
Growth Equity Growth Value Bond
Series Series Series Series Series
----------- ------------ ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments at market .............. $79,369,197 $130,758,688 $ 56,233,639 $23,656,151 $8,769,768
Dividends and interest receivable .. 17,942 642,742 5,401 30,697 228,248
Receivable for Fund shares sold .... -- -- 101,738 762 40,558
Receivable for investment
securities sold .................. 808,805 -- 272,767 10,438 --
Cash and foreign currencies ........ 164,017 1,130,427 40,993 14,511 446,952
Other assets ....................... 1,368 535,137 16 -- 11,552
----------- ------------ ------------ ----------- ----------
Total assets ..................... 80,361,329 133,066,994 56,654,554 23,712,559 9,497,078
----------- ------------ ------------ ----------- ----------
LIABILITIES:
Payable for investment securities
purchased ........................ 367,822 1,330,815 151,841 -- --
Payable for Fund shares repurchased. 34,508 196,249 20,207 345 568
Other accounts payable and accrued
expenses ......................... 58,523 112,213 59,013 29,474 25,692
----------- ------------ ------------ ----------- ----------
Total liabilities ................ 460,853 1,639,277 231,061 29,819 26,260
----------- ------------ ------------ ----------- ----------
NET ASSETS ......................... $79,900,476 $131,427,717 $ 56,423,493 $23,682,740 $9,470,818
=========== ============ ============ =========== ==========
Shares outstanding ................. 5,029,575 8,696,840 3,874,180 1,633,487 864,446
=========== ============ ============ =========== ==========
Net asset value .................... $ 15.89 $ 15.11 $ 14.56 $ 14.50 $ 10.96
=========== ============ ============ =========== ==========
</TABLE>
<PAGE>
Delaware Group Premium Fund, Inc.
Statement of Operations
<TABLE>
<CAPTION>
Year Ended 12/31/96
Equity/ High Capital Multiple Money
Income Yield Reserves Strategy Market
Series Series Series Series Series
------------ ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest (net of $767 foreign tax withheld
for the Global Bond Series) ............. $ 169,527 $5,930,021 $1,970,295 $ 1,763,714 $1,210,520
Dividends (net of $336,715 foreign tax
withheld for the International
Equity Series) .......................... 4,094,834 45,043 -- 1,087,267 --
------------ ---------- ---------- ----------- ----------
4,264,361 5,975,064 1,970,295 2,850,981 1,210,520
------------ ---------- ---------- ----------- ----------
EXPENSES:
Management fees ........................... 765,301 348,693 164,296 402,509 110,155
Dividend disbursing and transfer
agent fees and expenses ................. 12,166 4,875 2,551 4,609 1,972
Custodian fees ............................ 6,986 5,578 5,747 9,282 2,877
Professional fees ......................... 2,896 6,133 6,488 7,464 5,260
Accounting fees and salaries .............. 35,398 18,238 8,069 16,472 6,669
Taxes other than income ................... 10,995 8,002 3,639 4,741 2,277
Directors' fees ........................... 2,226 1,545 1,253 1,634 1,229
Registration fees ......................... 10,400 1,750 446 1,089 957
Reports to shareholders ................... 1,200 3,100 2,236 760 2,605
Other ..................................... 10,992 7,993 2,746 6,131 2,552
------------ ---------- ---------- ----------- ----------
858,560 405,907 197,471 454,691 136,553
Less expenses absorbed by Delaware
Management Company, Inc. or Delaware
International Advisers Ltd. ............. -- -- -- -- --
------------ ---------- ---------- ----------- ----------
858,560 405,907 197,471 454,691 136,553
------------ ---------- ---------- ----------- ----------
NET INVESTMENT INCOME (LOSS) .............. 3,405,801 5,569,157 1,772,824 2,396,290 1,073,967
------------ ---------- ---------- ----------- ----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCIES:
Net realized gain (loss) on:
Investment transactions ................. 14,743,863 684,792 (292,042) 4,893,415 --
Foreign currencies ...................... -- -- -- -- --
------------ ---------- ---------- ----------- ----------
Net realized gain (loss) .................. 14,743,863 684,792 (292,042) 4,893,415 --
------------ ---------- ---------- ----------- ----------
Net unrealized appreciation (depreciation)
of investments and foreign currencies
during the period ....................... 6,445,954 953,156 (383,633) 2,885,535 --
------------ ---------- ---------- ----------- ----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCIES .................. 21,189,817 1,637,948 (675,675) 7,778,950 --
------------ ---------- ---------- ----------- ----------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS .............................. $24,595,618 $7,207,105 $1,097,149 $10,175,240 $1,073,967
=========== ========== ========== =========== ==========
</TABLE>
<PAGE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
5/2/96+
to
Year Ended 12/31/96 12/31/96
International Emerging Global
Growth Equity Growth Value Bond
Series Series Series Series Series
---------- ------------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest (net of $767 foreign tax withheld
for the Global Bond Series) ............. $ 335,492 $ 391,569 $ 313,916 $ 69,542 $259,357
Dividends (net of $336,715 foreign tax
withheld for the International
Equity Series) .......................... 132,136 3,190,237 134,603 255,415 --
---------- ------------- ---------- ---------- --------
467,628 3,581,806 448,519 324,957 259,357
---------- ------------- ---------- ---------- --------
EXPENSES:
Management fees ........................... 505,739 768,150 247,520 117,000 26,503
Dividend disbursing and transfer
agent fees and expenses ................. 5,342 9,875 2,362 1,453 291
Custodian fees ............................ 5,401 79,065 16,949 8,343 5,950
Professional fees ......................... 5,717 9,489 5,035 9,007 4,830
Accounting fees and salaries .............. 20,034 30,564 9,920 4,640 1,067
Taxes other than income ................... 2,338 6,706 2,818 2,313 302
Directors' fees ........................... 1,654 1,999 1,339 1,145 581
Registration fees ......................... 459 10,310 11,833 2,378 1,180
Reports to shareholders ................... 1,435 4,950 3,756 5,300 920
Other ..................................... 5,606 14,926 3,347 2,167 453
---------- ------------- ---------- ---------- --------
553,725 936,034 304,879 153,746 42,077
Less expenses absorbed by Delaware
Management Company, Inc. or Delaware
International Advisers Ltd. ............. (14,335) (117,758) (42,019) (29,313) (13,906)
---------- ------------- ---------- ---------- --------
539,390 818,276 262,860 124,433 28,171
---------- ------------- ---------- ---------- --------
NET INVESTMENT INCOME (LOSS) .............. (71,762) 2,763,530 185,659 200,524 231,186
---------- ------------- ---------- ---------- --------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCIES:
Net realized gain (loss) on:
Investment transactions ................. 4,627,563 (522,832) 661,923 1,671,257 83,703
Foreign currencies ...................... -- 2,083,662 -- (14) (173)
---------- ------------- ---------- ---------- --------
Net realized gain (loss) .................. 4,627,563 1,560,830 661,923 1,671,243 83,530
---------- ------------- ---------- ---------- --------
Net unrealized appreciation (depreciation)
of investments and foreign currencies
during the period ....................... 3,704,225 14,667,391 1,635,650 1,737,511 264,767
---------- ------------- ---------- ---------- --------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCIES .................. 8,331,788 16,228,221 2,297,573 3,408,754 348,297
---------- ----------- ---------- ---------- --------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS .............................. $8,260,026 $18,991,751 $2,483,232 $3,609,278 $579,483
========== =========== ========== ========== ========
</TABLE>
_______________________________
+ Date of initial public offering.
See accompanying notes
<PAGE>
Delaware Group Premium Fund, Inc.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended 12/31/96
Equity/ High Capital Multiple Money
Income Yield Reserves Strategy Market
Series Series Series Series Series
------------- ----------- ---------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).................. $ 3,405,801 $ 5,569,157 $ 1,772,824 $ 2,396,290 $1,073,967
Net realized gain (loss) on investments
and foreign currencies...................... 14,743,863 684,792 (292,042) 4,893,415 --
Net unrealized appreciation
(depreciation) of investments and
foreign currencies during the period........ 6,445,954 953,156 (383,633) 2,885,535 --
------------- ------------ ----------- ------------ -----------
Net increase in net assets
resulting from operations................... 24,595,618 7,207,105 1,097,149 10,175,240 1,073,967
------------ ------------ ----------- ------------ -----------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income........................ (3,496,319) (5,569,157) (1,772,356) (2,087,278) (1,073,967)
Net realized gain from
security transactions...................... (8,895,014) -- -- (2,685,289) --
------------- ----------- ----------- ------------ -----------
(12,391,333) (5,569,157) (1,772,356) (4,772,567) (1,073,967)
------------- ----------- ----------- ------------ -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold..................... 52,083,570 17,364,098 5,108,430 10,105,572 57,526,653
Net asset value of shares issued upon
reinvestment of dividends from net
investment income........................... 3,496,319 5,569,157 1,772,356 2,087,278 1,073,758
Net asset value of shares issued upon
reinvestment of distributions from
net realized gain from
security transactions...................... 8,895,014 -- -- 2,685,289 --
------------- ------------ ---------- ------------ -----------
64,474,903 22,933,255 6,880,786 14,878,139 58,600,411
Cost of shares repurchased (19,036,067) (13,511,480) (6,372,705) (8,093,881) (48,460,039)
------------- ------------ ----------- ----------- -----------
Increase in net assets derived
from capital share transactions............ 45,438,836 9,421,775 508,081 6,784,258 10,140,372
------------- ------------ ----------- ----------- -----------
NET INCREASE (DECREASE) IN
NET ASSETS................................. 57,643,121 11,059,723 (167,126) 12,186,931 10,140,372
------------- ------------ ----------- ----------- -----------
NET ASSETS:
Beginning of period.......................... 109,003,456 56,604,954 27,934,739 63,215,176 16,338,182
------------- ----------- ---------- ------------ -----------
End of period................................ $166,646,577 $67,664,677 $27,767,613 $75,402,107 $26,478,554
============= ============ ============ ============ ===========
Undistributed net investment income.......... $ 761,574 -- $ 468 $ 1,854,573 --
============= ============ ============ ============ ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(RESTUBBED TABLE)
5/2/96+
to
12/31/96
International Emerging Global
Growth Equity Growth Value Bond
Series Series Series Series Series
--------- -------------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).................. $ (71,762) $ 2,763,530 $ 185,659 $ 200,524 $ 231,186
Net realized gain (loss) on investments
and foreign currencies...................... 4,627,563 1,560,830 661,923 1,671,243 83,530
Net unrealized appreciation
(depreciation) of investments and
foreign currencies during the period........ 3,704,225 14,667,391 1,635,650 1,737,511 264,767
------------- ------------ ----------- ----------- ------------
Net increase in net assets
resulting from operations................... 8,260,026 18,991,751 2,483,232 3,609,278 579,483
------------- ----------- ------------ ----------- ------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income......................... (270,847) (2,695,399) (131,779) (182,035) (119,481)
Net realized gain from
security transactions....................... (4,585,059) (725,191) (1,171,368) (455,088) --
-------------- ------------ ------------- ----------- -----------
(4,855,906) (3,420,590) (1,303,147) (637,123) (119,481)
-------------- ------------ ------------- ----------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold.................... 24,165,659 37,727,987 49,046,522 10,317,936 9,137,415
Net asset value of shares issued upon
reinvestment of dividends from net
investment income.......................... 270,847 2,695,399 131,779 182,035 119,481
Net asset value of shares issued upon
reinvestment of distributions from
net realized gain from
security transactions...................... 4,585,059 725,191 1,171,368 455,088 --
------------- ------------ -------------- ------------ ------------
29,021,565 41,148,577 50,349,669 10,955,059 9,256,896
Cost of shares repurchased................... (10,647,798) (6,840,060) (15,615,925) (2,173,784) (246,080)
------------- ------------ -------------- ------------ ------------
Increase in net assets derived
from capital share transactions............. 18,373,767 34,308,517 34,733,744 8,781,275 9,010,816
------------- ------------ -------------- ------------ -----------
NET INCREASE (DECREASE) IN
NET ASSETS................................. 21,777,887 49,879,678 35,913,829 11,753,430 9,470,818
------------- ------------ -------------- ------------ -----------
NET ASSETS:
Beginning of period.......................... 58,122,589 81,548,039 20,509,664 11,929,310 --
------------ ------------ ------------ ------------ ------------
End of period................................ $79,900,476 $131,427,717 $56,423,493 $23,682,740 $9,470,818
============ ============= ============ ============ ==============
Undistributed net investment income.......... -- $ 4,557,033 $180,621 $ 200,162 $ 111,532
============ ============= ============ ============ ==============
</TABLE>
- ------------
+ Date of initial public offering.
See accompanying notes
<PAGE>
Delaware Group Premium Fund, Inc.
Statements of Changes in Net Assets (Continued)
<TABLE>
<CAPTION>
Year Ended 12/31/95
Equity/ High Capital Multiple Money
Income Yield Reserves Strategy Market
Series Series Series Series Series
------------- ----------- ---------- ----------- ------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income ............... $ 2,891,895 $ 5,151,433 $ 1,758,878 $ 2,067,136 $ 1,019,964
Net realized gain (loss) on
investments and foreign
currencies ........................ 8,991,108 (2,216,446) 135,624 3,430,187 -
Net unrealized appreciation of
investments and foreign currencies
during the period ................. 15,300,401 4,534,509 1,589,424 7,556,374 -
------------- ------------- ------------- ------------- -------------
Net increase in net assets resulting
from operations ................... 27,183,404 7,469,496 3,483,926 13,053,697 1,019,964
------------- ------------- ------------- ------------- -------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income ............... (2,866,310) (5,151,209) (1,758,878) (1,726,534) (1,019,964)
Net realized gain from security
transactions ....................... (1,335,871) - - - -
------------- ------------- ------------- ------------- -------------
(4,202,181) (5,151,209) (1,758,878) (1,726,534) (1,019,964)
------------- ------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ........... 20,442,574 14,846,158 3,683,164 8,013,382 33,835,327
Net asset value of shares issued
upon reinvestment of dividends
from net investment income ........ 2,866,310 5,150,169 1,759,031 1,726,534 1,019,729
Net asset value of shares issued upon
reinvestment of distributions
from net realized gain from
security transactions ............. 1,335,871 - - - -
------------- ------------- ------------- ------------- -------------
24,644,755 19,996,327 5,442,195 9,739,916 34,855,056
Cost of shares repurchased .......... (11,347,305) (9,395,328) (5,207,601) (5,582,634) (38,641,425)
------------- ------------- ------------- ------------- -------------
Increase (decrease) in net assets
derived from capital share
transactions ...................... 13,297,450 10,600,999 234,594 4,157,282 (3,786,369)
------------- ------------- ------------- ------------- -------------
NET INCREASE (DECREASE) IN
NET ASSETS ........................ 36,278,673 12,919,286 1,959,642 15,484,445 (3,786,369)
NET ASSETS:
Beginning of period ................. 72,724,783 43,685,668 25,975,097 47,730,731 20,124,551
------------- ------------- ------------- ------------- -------------
End of period ....................... $ 109,003,456 $ 56,604,954 $ 27,934,739 $ 63,215,176 $ 16,338,182
============= ============= ============= ============= =============
Undistributed net investment
income ............................ $ 852,092 - - $ 1,545,561 -
============= ============= ============= ============= =============
</TABLE>
<PAGE>
TABLE RESTUBBED FROM ABOVE
<TABLE>
<CAPTION>
Year Ended 12/31/95
International Emerging
Growth Equity Growth Value
Series Series Series Series
--------- -------------- ------------ ---------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ............... $ 290,316 $ 2,117,429 $ 128,617 $ 187,274
Net realized gain (loss) on
investments and foreign
currencies ........................ 4,648,144 1,204,033 1,200,003 450,233
Net unrealized appreciation of
investments and foreign currencies
during the period ................. 7,352,687 5,972,496 2,501,445 1,319,759
------------- ------------- ------------- -------------
Net increase in net assets resulting
from operations ................... 12,291,147 9,293,958 3,830,065 1,957,266
------------- ------------- ------------- -------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income ............... (249,375) (1,199,737) (57,059) (94,859)
Net realized gain from security
transactions ....................... - (449,901) - (44,268)
------------- ------------- ------------- -------------
(249,375) (1,649,638) (57,059) (139,127)
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ........... 13,930,551 22,650,087 13,704,620 4,512,315
Net asset value of shares issued
upon reinvestment of dividends
from net investment income ........ 249,375 1,199,737 57,059 94,859
Net asset value of shares issued upon
reinvestment of distributions
from net realized gain from
security transactions ............. - 449,901 - 44,268
------------- ------------- ------------- -------------
14,179,926 24,299,725 13,761,679 4,651,442
Cost of shares repurchased .......... (7,443,317) (8,045,244) (4,111,780) (831,456)
------------- ------------- ------------- -------------
Increase (decrease) in net assets
derived from capital share
transactions ...................... 6,736,609 16,254,481 9,649,899 3,819,986
------------- ------------- ------------- -------------
NET INCREASE (DECREASE) IN
NET ASSETS ........................ 18,778,381 23,898,801 13,422,905 5,638,125
NET ASSETS:
Beginning of period ................. 39,344,208 57,649,238 7,086,759 6,291,185
------------- ------------- ------------- -------------
End of period ....................... $ 58,122,589 $ 81,548,039 $ 20,509,664 $ 11,929,310
============= ============= ============= =============
Undistributed net investment
income ............................ $ 266,670 $ 2,405,240 $ 126,741 $ 181,687
============= ============= ============= =============
</TABLE>
See accompanying notes
<PAGE>
Delaware Group Premium Fund, Inc.
Notes to Financial Statements
December 31, 1996
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
ten series: the Equity/Income Series, the High Yield Series, the Capital
Reserves Series, the Multiple Strategy Series, the Money Market Series, the
Growth Series, the International Equity Series, the Emerging Growth Series,
the Value Series and the Global Bond Series (the "Series"). The shares of the
Fund are sold only to separate accounts of life insurance companies.
1. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Fund:
Security Valuation--Securities listed on an exchange are valued at the last
quoted sales price as of 4:00 pm EST on the valuation date. Securities not
traded or securities not listed on an exchange are valued at the mean of the
last quoted bid and asked prices. Long-term debt securities are valued by an
independent pricing service and are believed to reflect the fair value of
such securities. Securities listed on a foreign exchange are valued at the
last quoted sale price before the time when the Fund is valued. 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. Money market instruments having
less than 60 days to maturity are valued at amortized cost which approximates
market value.
Federal Income Taxes--Each 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.
Repurchase Agreements--Each 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.
Foreign Currencies--The value of all assets and liabilities denominated in
foreign currencies are translated into U.S. dollars at the exchange rate of
such currencies against the U.S. dollar as of 3:00 pm EST. Forward foreign
currency contracts are valued at the mean between the bid and asked prices of
the contracts. Interpolated values are derived when the settlement date of
the contract is an interim date for which quotations are not available.
The effects of changes in foreign currency exchange rates on investments in
securities are not segregated from the effects of changes in market prices of
those securities, but are included with the net realized and unrealized gain
or loss on investment in securities. Reported net realized gains and losses
on foreign currency transactions arise from sales and maturities of forward
foreign currency contracts, gain or loss on currency held, currency gains and
losses between the trade and settlement dates on securities transactions, and
the differences between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Funds' books and the U.S. dollar equivalent
of the amounts actually received or paid. Net change in unrealized appreciatio
n or depreciation on translation of assets and liabilities in foreign
currencies arise from changes in the value of other assets and liabilities at
the end of the period resulting from changes in exchange rates.
Other--Expenses common to all "Funds" within the Delaware Group of Funds are
allocated amongst the Funds on the basis of average net assets. Security
transactions are recorded on the date the securities are purchased or sold
(trade date). Costs used in calculating realized gains and losses on the sale
of investment securities are those of the specific securities sold. Dividend
income is recorded on the ex-dividend date and interest income is recorded on an
accrual basis. Original issue discounts are accreted to interest income over the
lives of the respective securities. The High Yield Series, the Capital Reserves
Series and the Money Market Series declare dividends daily from net investment
income and pay such dividends monthly.
Certain fund expenses are paid directly by brokers. The amount of these
expenses was less than 0.01% of each Series' average net assets.
<PAGE>
Notes to Financial Statements (Continued)
2. Investment Management Fees and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware Management Company, Inc. ("DMC"), the investment manager of
each Series except the International Equity Series and the Global Bond
Series, and Delaware International Advisers Ltd. ("DIAL"), the investment
manager of the International Equity Series and the Global Bond Series, a fee
which is calculated on the average daily net assets of each Series, at an
annual rate less fees paid to the unaffiliated directors for the
Equity/Income Series, the High Yield Series, the Capital Reserves Series, the
Multiple Strategy Series, the Money Market Series, the Growth Series and the
International Equity Series. The management fee for the Emerging Growth
Series, the Value Series, and the Global Bond Series are calculated daily on
the net assets of each Series at an annual rate without consideration of
amounts paid to unaffiliated directors. The management fee rates are as
follows:
<TABLE>
<CAPTION>
Inter-
Equity/ High Capital Multiple Money national Emerging Global
Income Yield Reserves Strategy Market Growth Equity Growth Value Bond
Series Series Series Series Series Series Series Series Series Series
------ ------ ------ ------ ------ ------ ------ -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees as a percentage of
average daily net assets
(per annum)......................... 0.60% 0.60% 0.60% 0.60% 0.50% 0.75% 0.75% 0.75% 0.75% 0.75%
</TABLE>
DMC and DIAL have elected voluntarily to waive their fees and reimburse each
Series to the extent that annual operating expenses exclusive of taxes,
interest, brokerage commissions and extraordinary expenses, exceed 0.80% of
average daily net assets for each Series through June 30, 1997. Total expenses
absorbed by DMC and DIAL for the year ended December 31, 1996 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total expenses absorbed by DMC
or DIAL ........................... - - - - - $14,335 $117,758 $42,019 $29,313 $13,906
</TABLE>
Certain officers of DMC and DIAL are officers, directors and/or employees of the
Fund. These officers, directors and employees are paid no compensation by the
Fund. The Fund has engaged Delaware Service Company, Inc. ("DSC"), an affiliate
of DMC to serve as dividend disbursing and transfer agent for the Fund.
Effective August 19, 1996, the Funds also engaged DSC to provide accounting
services for the Funds. 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 year ended December 31, 1996, the amounts
expensed for each Series are as follows:
<TABLE>
<CAPTION>
Inter-
Equity/ High Capital Multiple Money national Emerging Global
Income Yield Reserves Strategy Market Growth Equity Growth Value Bond
Series Series Series Series Series Series Series Series Series Series
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dividend disbursing, transfer agent
fees and other expenses............. $12,166 $4,875 $2,551 $4,609 $1,972 $5,342 $ 9,875 $2,362 $1,453 $291
Accounting fees....................... 11,875 7,115 2,763 6,216 2,523 7,343 11,542 4,507 1,835 666
</TABLE>
On December 31, 1996, the Fund had payables to affiliates as follows:
<TABLE>
<CAPTION>
Inter-
Equity/ High Capital Multiple Money national Emerging Global
Income Yield Reserves Strategy Market Growth Equity Growth Value Bond
Series Series Series Series Series Series Series Series Series Series
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment management fee payable
to DMCor DIAL ...................... $55,988 $17,737 $13,934 $27,360 $10,165 $48,171 $61,571 $29,301 $13,825 $12,597
Dividend disbursing, transfer
agent fees, accounting fees and
other expenses payable to DSC....... 3,903 1,580 676 1,804 587 1,882 3,049 1,252 531 1,490
Other expenses payable to DMC and
its affiliates ..................... 3,385 3,975 4,204 3,908 4,211 4,024 3,588 4,506 4,271 6,451
</TABLE>
<PAGE>
Notes to Financial Statements (Continued)
3. Investments
Investment securities based on cost for federal income tax purposes at
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Equity/ High Capital Multiple Money
Income Yield Reserves Strategy Market
Series Series Series Series Series
------ ------ -------- --------- ------
<S> <C> <C> <C> <C> <C>
Costs of investments $ 150,221,873 $ 63,457,059 $ 27,818,334 $ 66,092,849 $ 26,611,388
============= ============= ============= ============= =============
Aggregate unrealized
appreciation ..... $ 22,237,996 $ 2,877,691 $ 308,226 $ 10,921,226 --
Aggregate unrealized
depreciation ..... (912,098) (286,015) (93,524) (301,334) --
------------- ------------- ------------- ------------- -------------
Net unrealized
appreciation ..... $ 21,325,898 $ 2,591,676 $ 214,702 $ 10,619,892 --
============= ============= ============= ============= =============
</TABLE>
RESTUBBED TABLE
<TABLE>
<CAPTION>
International Emerging Global
Growth Equity Growth Value Bond
Series Series Series Series Series
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Costs of investments $ 65,967,964 $ 111,149,841 $ 52,181,713 $ 20,700,491 $ 8,516,272
============= ============= ============= ============= =============
Aggregate unrealized
appreciation ..... $ 15,827,505 $ 23,301,821 $ 6,092,676 $ 3,213,538 $ 266,316
Aggregate unrealized
depreciation ..... (2,426,272) (3,692,974) (2,040,750) (257,878) (12,820)
------------- ------------- ------------- ------------- -------------
Net unrealized
appreciation ..... $ 13,401,233 $ 19,608,847 $ 4,051,926 $ 2,955,660 $ 253,496
============= ============= ============= ============= =============
</TABLE>
For federal income tax purposes, the Fund had accumulated capital losses at
December 31, 1996 of $3,097,083 for the High Yield Series, $1,620,842 for the
Capital Reserves Series and $522,832 for the International Equity Series,
which may be carried forward and applied against future capital gains. The
capital loss carryover for the High Yield Series expires as follows:
2002-$880,637 and 2003-$2,216,446. The capital loss carryover for the Capital
Reserves Series expires as follows: 2002-$1,328,634 and 2004-$292,208. The
capital loss carryover for the International Equity Series expires in 2004.
During the year ended December 31, 1996, the Fund made purchases and sales of
investment securities, other than U.S. government securities and temporary
cash investments as follows:
<TABLE>
<CAPTION>
Equity/ High Capital Multiple International Emerging Global
Income Yield Reserves Strategy Growth Equity Growth Value Bond
Series Series Series Series Series Series Series Series Series
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Purchases... $136,351,198 $63,925,288 $19,536,144 $52,696,784 $53,802,058 $40,949,377 $54,837,925 $19,847,542 $9,817,422
Sales....... 101,144,143 48,600,718 20,404,547 46,091,572 52,087,205 7,488,615 31,059,415 12,310,288 1,909,938
</TABLE>
<PAGE>
Notes to Financial Statements (Continued)
4. Capital Stock
Transactions in capital stock shares were as follows:
<TABLE>
<CAPTION>
Equity/ High Capital
Income Yield Reserves
Series Series Series
----------------------- ------------------------ ------------------------
Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/96 12/31/95 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C> <C>
Shares sold ............ 3,486,920 1,543,303 1,940,624 1,698,338 526,966 378,909
Shares issued upon
reinvestment of
dividends from net
investment income
and distributions
from net realized
gain from security
transactions .......... 899,233 345,969 621,618 583,026 182,839 181,276
---------- -------- ---------- ---------- -------- --------
4,386,153 1,889,272 2,562,242 2,281,364 709,805 560,185
Shares repurchased ..... (1,307,916) (877,396) (1,513,036) (1,066,859) (658,016) (541,075)
---------- -------- ---------- ---------- -------- --------
Net increase (decrease) 3,078,237 1,011,876 1,049,206 1,214,505 51,789 19,110
========== ======== ========== ========== ======== ========
</TABLE>
TABLE RESTUBBED
<TABLE>
<CAPTION>
Multiple Money
Strategy Market
Series Series
--------------------- -----------------------
Year Ended Year Ended
12/31/96 12/31/95 12/31/96 12/31/95
<S> <C> <C> <C> <C>
Shares sold ............ 650,944 578,964 5,752,665 3,383,533
Shares issued upon
reinvestment of
dividends from net
investment income
and distributions
from net realized
gain from security
transactions .......... 326,621 135,116 107,376 101,973
-------- -------- ---------- ----------
977,565 714,080 5,860,041 3,485,506
Shares repurchased ..... (524,572) (399,695) (4,846,004) (3,864,143)
-------- -------- ---------- ----------
Net increase (decrease) 452,993 314,385 1,014,037 (378,637)
======== ======== ========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
International
Growth Equity
Series Series
----------------------- -----------------------
Year Ended Year Ended
12/31/96 12/31/95 12/31/96 12/31/95
<S> <C> <C> <C> <C>
Shares sold ................... 1,535,822 1,057,838 2,717,039 1,858,798
Shares issued upon reinvestment
of dividends from net
investment income and
distributions from net
realized gain from security
transactions ................ 347,595 21,169 265,574 146,765
--------- ------- --------- ---------
1,883,417 1,079,007 2,982,613 2,005,563
Shares repurchased ............ (694,724) (585,294) (503,590) (654,821)
--------- ------- --------- ---------
Net increase (decrease) .... 1,188,693 493,713 2,479,023 1,350,742
========= ======= ========= =========
</TABLE>
TABLE RESTUBBED
<TABLE>
<CAPTION>
Emerging Global
Growth Value Bond
Series Series Series
----------------------- --------------------- ---------
5/2/96*
Year Ended Year Ended to
12/31/96 12/31/95 12/31/96 12/31/95 12/31/96
<S> <C> <C> <C> <C> <C>
Shares sold ................... 3,395,485 1,127,143 795,391 407,375 876,461
Shares issued upon reinvestment
of dividends from net
investment income and
distributions from net
realized gain from security
transactions ................ 101,808 5,605 54,501 13,885 11,182
---------- -------- -------- ------- -------
3,497,293 1,132,748 849,892 421,260 887,643
Shares repurchased ............ (1,086,091) (367,575) (172,909) (76,146) (23,197)
---------- -------- -------- ------- -------
Net increase (decrease) .... 2,411,202 765,173 676,983 345,114 864,446
========= ======= ======= ======= =======
</TABLE>
- ----------
*Date of initial public offering.
Dividends from net investment income and distributions from net realized gain
from security transactions payable on January 30, 1997 to shareholders of
record January 28, 1997 were as follows:
<TABLE>
<CAPTION>
Equity/ Multiple International Emerging Global
Income Strategy Growth Equity Growth Value Bond
Series Series Series Series Series Series Series
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Dividends per share from net
investment income............... $0.070 $0.410 $ - $0.545 $0.050 $0.110 $0.130
Distributions per share from net
realized gain from security
transactions ................... 1.350 1.070 0.870 - 0.180 0.930 0.085
</TABLE>
The ex-dividend date was January 29, 1997.
<PAGE>
Notes to Financial Statements (Continued)
5. Foreign Exchange Contracts
The following foreign currency forward contracts were outstanding at December
31, 1996:
International Equity Series
--------------------------------------------------------------------
Contract to In Exchange Settlement Unrealized
Deliver For Date Gain
----------- ----------- ---------- ----------
809,498 Deutsche Marks $519,808 1/3/97 $5,536
6,318,695 Japanese Yen 54,542 1/6/97 82
------
$5,618
======
Contract to In Exchange Settlement Unrealized
Receive For Date Gain
----------- ----------- ---------- ----------
72,268,250 Belgian Francs $2,335,000 1/31/97 $ 58,173
7,012,838 Deutsche Marks 4,669,000 1/31/97 108,663
7,862,596 Dutch Guilders 4,669,000 1/31/97 110,098
23,727,858 French Francs 4,669,000 1/31/97 88,528
655,766,475 Japanese Yen 5,835,000 1/31/97 143,924
--------
$509,386
========
Global Bond Series
--------------------------------------------------------------------
Contract to In Exchange Settlement Unrealized
Deliver For Date Gain
----------- ----------- ---------- ----------
1,328,567 Deutsche Marks $877,000 2/28/97 $11,552
6. Concentration of Credit Risk
The High-Yield Series 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 Capital Reserves Series and the Multiple Strategy Series 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.
Each 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 appropriate Statement of Net Assets.
<PAGE>
Notes to Financial Statements (Continued)
7. Financial Highlights
Selected data for each share of the Series outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
Equity/Income Series
-------------------------------------------------------
Year Ended December 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........$14.8300 $11.4800 $12.5100 $11.2200 $10.7500
Income (loss) from investment operations:
Net investment income............ ......... 0.3771 0.4155 0.4121 0.4341 0.4155
Net realized and unrealized gain (loss)
from security transactions ................ 2.3979 3.5745 (0.4221) 1.2659 0.5045
------- ------- ------- ------- -------
Total from investment operations. ......... 2.7750 3.9900 (0.0100) 1.7000 0.9200
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income ...... (0.4200) (0.4300) (0.4200) (0.4100) (0.4500)
Distributions from net realized gain
from security transactions ................ (1.2050) (0.2100) (0.6000) none none
------- ------- ------- ------- -------
Total distributions........................ (1.6250) (0.6400) (1.0200) (0.4100) (0.4500)
------- ------- ------- ------- -------
Net asset value, end of period...............$15.9800 $14.8300 $11.4800 $12.5100 $11.2200
======== ======== ======== ======== ========
Total return................................. 20.72% 36.12% (0.20%) 15.45% 8.82%
Ratios/supplemental data:
Net assets, end of period (000's omitted) .$166,647 $109,003 $72,725 $65,519 $38,278
Ratio of expenses to average net assets ... 0.67% 0.69% 0.71% 0.75% 0.79%
Ratio of expenses to average net assets
prior to expense limitation .............. 0.67% 0.69% 0.71% 0.76% 0.81%
Ratio of net investment income to average
net assets .............................. 2.66% 3.24% 3.63% 3.95% 3.86%
Ratio of net investment income to average
net assets prior to
expense limitation....................... 2.66% 3.24% 3.63% 3.94% 3.84%
Portfolio turnover rate.................... 81% 85% 91% 67% 72%
Average commission rate paid............... $0.06 N/A N/A N/A N/A
</TABLE>
<PAGE>
TABLE RESTUBBED
<TABLE>
<CAPTION>
High Yield Series
---------------------------------------------------------
Year Ended December 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........ $8.9400 $8.5400 $9.7700 $9.2900 $9.1300
Income (loss) from investment operations:
Net investment income............ ......... 0.8532 0.8715 0.9621 0.9758 1.0224
Net realized and unrealized gain (loss)
from security transactions ................ 0.2300 0.4000 (1.2300) 0.4800 0.1600
------- ------- ------- ------- -------
Total from investment operations. ......... 1.0832 1.2715 (0.2679) 1.4558 1.1824
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income ...... (0.8532) (0.8715) (0.9621) (0.9758) (1.0224)
Distributions from net realized gain
from security transactions ................ none none none none none
------- ------- ------- ------- -------
Total distributions........................ (0.8532) (0.8715) (0.9621) (0.9758) (1.0224)
------- ------- ------- ------- -------
Net asset value, end of period............... $9.1700 $8.9400 $8.5400 $9.7700 $9.2900
======= ======= ======= ======= =======
Total return................................. 12.79% 15.50% (2.87%) 16.36% 13.44%
Ratios/supplemental data:
Net assets, end of period (000's omitted) . $67,665 $56,605 $43,686 $34,915 $11,311
Ratio of expenses to average net assets ... 0.70% 0.69% 0.72% 0.80% 0.80%
Ratio of expenses to average net assets
prior to expense limitation .............. 0.70% 0.69% 0.72% 0.82% 0.94%
Ratio of net investment income to average
net assets .............................. 9.54% 9.87% 10.56% 10.05% 10.93%
Ratio of net investment income to average
net assets prior to
expense limitation....................... 9.54% 9.87% 10.56% 10.03% 10.79%
Portfolio turnover rate.................... 93% 74% 47% 43% 73%
Average commission rate paid............... N/A N/A N/A N/A N/A
</TABLE>
<PAGE>
Notes to Financial Statements (Continued)
7. Financial Highlights (Continued)
Selected data for each share of the Series outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
Capital Reserves Series
-----------------------------------------------------
Year Ended December 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........$9.9300 $9.3000 $10.2600 $10.2000 $10.2300
Income (loss) from investment
operations:
Net investment income...................... 0.6229 0.6431 0.6355 0.6357 0.6474
Net realized and unrealized gain
(loss) from security transactions.........(0.2400) 0.6300 (0.9050) 0.1450 0.0600
------- ------ ------- ------ ------
Total from investment operations........... 0.3829 1.2731 (0.2695) 0.7807 0.7074
------- ------ ------- ------ ------
Less distributions:
Dividends from net investment income ......(0.6229) (0.6431) (0.6355) (0.6357) (0.6474)
Distributions from net realized gain
from security transactions ............... none none (0.0550) (0.0850) (0.0900)
------- ------ ------- ------ ------
Total distributions........................(0.6229) (0.6431) (0.6905) (0.7207) (0.7374)
------- ------ ------- ------ ------
Net asset value, end of period...............$9.6900 $9.9300 $ 9.3000 $10.2600 $10.2000
======= ======= ======== ======== ========
Total return................................. 4.05% 14.08% (2.68%) 7.85% 7.20%
Ratios/supplemental data:
Net assets, end of period (000's omitted) $27,768 $27,935 $25,975 $24,173 $9,790
Ratio of expenses to average net assets ... 0.72% 0.71% 0.74% 0.80% 0.80%
Ratio of expenses to average net assets
prior to expense limitation .............. 0.72% 0.71% 0.74% 0.85% 0.98%
Ratio of net investment income to
average net assets ....................... 6.43% 6.64% 6.57% 6.20% 6.39%
Ratio of net investment income to
average net assets prior to
expense limitation....................... 6.43% 6.64% 6.57% 6.15% 6.21%
Portfolio turnover rate.................... 122% 145% 219% 198% 241%
Average commission rate paid............... N/A N/A N/A N/A N/A
</TABLE>
<PAGE>
RESTUBBED TABLE
<TABLE>
<CAPTION>
Multiple Strategy Series
-------------------------------------------------------
Year Ended December 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........ $15.5000 $12.6800 $13.3300 $13.5500 $12.9800
Income (loss) from investment
operations:
Net investment income...................... 0.5303 0.5088 0.4373 0.3280 0.4572
Net realized and unrealized gain
(loss) from security transactions......... 1.7647 2.7612 (0.4473) 0.6920 1.2328
------ ------ ------- ------ ------
Total from investment operations........... 2.2950 3.2700 (0.0100) 1.0200 1.6900
------ ------ ------- ------ ------
Less distributions:
Dividends from net investment income ...... (0.5000) (0.4500) (0.3400) (0.4600) (1.0600)
Distributions from net realized gain
from security transactions ............... (0.6550) none (0.3000) (0.7800) (0.0600)
------ ------ ------- ------ ------
Total distributions........................ (1.1550) (0.4500) (0.6400) (1.2400) (1.1200)
------ ------ ------- ------ ------
Net asset value, end of period............... $16.6400 $15.5000 $12.6800 $13.3300 $13.5500
======== ======== ======== ======== ========
Total return................................. 15.91% 26.58% (0.15%) 8.18% 13.85%
Ratios/supplemental data:
Net assets, end of period (000's omitted) $75,402 $63,215 $47,731 $37,235 $15,150
Ratio of expenses to average net assets ... 0.68% 0.69% 0.70% 0.80% 0.86%
Ratio of expenses to average net assets
prior to expense limitation .............. 0.68% 0.69% 0.70% 0.89% 0.94%
Ratio of net investment income to
average net assets ....................... 3.56% 3.75% 3.71% 3.33% 3.60%
Ratio of net investment income to
average net assets prior to
expense limitation....................... 3.56% 3.75% 3.71% 3.24% 3.52%
Portfolio turnover rate.................... 92% 106% 140% 162% 202%
Average commission rate paid............... $0.06 N/A N/A N/A N/A
</TABLE>
<PAGE>
Notes to Financial Statements (Continued)
7. Financial Highlights (Continued)
Selected data for each share of the Series outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
Money Market Series
------------------------------------------------------------
Year Ended December 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...... $10.0000 $10.0000 $10.0000 $10.0000 $10.0000
Income (loss) from investment operations:
Net investment income (loss) ............ 0.4824 0.5349 0.3614 0.2451 0.3202
Net realized and unrealized gain (loss)
from security transactions ............. none none none none none
-------- -------- -------- -------- -------
Total from investment operations ........ 0.4824 0.5349 0.3614 0.2451 0.3202
-------- -------- -------- -------- -------
Less distributions:
Dividends from net investment income .... (0.4824) (0.5349 (0.3614) (0.2451) (0.3202)
Distributions from net realized
gain from security transactions ........ none none none none none
-------- -------- -------- -------- -------
Total distributions ..................... (0.4824) (0.5349) (0.3614) (0.2451) (0.3202)
-------- -------- -------- -------- -------
Net asset value, end of period ............ $10.0000 $10.0000 $10.0000 $10.0000 10.0000
======== ======== ======== ======== =======
Total return .............................. 4.93% 5.48% 3.68% 2.48% 3.25%
Ratios/supplemental data:
Net assets, end of period (000's omitted) $26,479 $16,338 $20,125 $ 10,245 $ 7,774
Ratio of expenses to average net assets . 0.61% 0.62% 0.66% 0.80% 0.80%
Ratio of expenses to average net assets
prior to expense limitation ............ 0.61% 0.62% 0.66% 0.86% 0.85%
Ratio of net investment income (loss)
to average net assets .................. 4.82% 5.35% 3.79% 2.44% 3.21%
Ratio of net investment income (loss)
to average net assets prior to
expense limitation ..................... 4.82% 5.35% 3.79% 2.38% 3.16%
Portfolio turnover rate ................. - - - - -
Average commission rate paid ............ N/A N/A N/A N/A N/A
</TABLE>
TABLE RESTUBBED
<PAGE>
<TABLE>
<CAPTION>
Growth Series
----------------------------------------------------------
Year Ended December 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...... $15.1300 $11.7500 $12.2400 $11.1200 $11.0300
Income (loss) from investment operations:
Net investment income (loss) ............ (0.0145) 0.0720 0.0694 0.0558 0.0225
Net realized and unrealized gain (loss)
from security transactions ............. 2.0295 3.3780 (0.4994) 1.2142 0.1975
-------- -------- -------- -------- --------
Total from investment operations ........ 2.0150 3.4500 (0.4300) 1.2700 0.2200
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income .... (0.0700) (0.0700) (0.0600) (0.0200) (0.0100)
Distributions from net realized
gain from security transactions ........ (1.1850) none none (0.1300) (0.1200)
-------- -------- -------- -------- --------
Total distributions ..................... (1.2550) (0.0700) (0.0600) (0.1500) (0.1300)
-------- -------- -------- -------- --------
Net asset value, end of period ............ $15.8900 $15.1300 $11.7500 $12.2400 $11.1200
======== ======== ======== ======== ========
Total return .............................. 14.46% 29.53% (3.54) 11.56% 1.99%
Ratios/supplemental data:
Net assets, end of period (000's omitted) $ 79,900 $ 58,123 $39,344 $33,180 $ 14,251
Ratio of expenses to average net assets . 0.80% 0.80% 0.80% 0.80% 0.98%
Ratio of expenses to average net assets
prior to expense limitation ............ 0.82% 0.85% 0.88% 1.00% 1.25%
Ratio of net investment income (loss)
to average net assets .................. (0.11%) 0.61% 0.64% 0.67% 0.28%
Ratio of net investment income (loss)
to average net assets prior to
expense limitation ..................... (0.13%) 0.56% 0.56% 0.47% 0.01%
Portfolio turnover rate ................. 85% 73% 43% 57% 52%
Average commission rate paid ............ $ 0.06 N/A N/A N/A N/A
</TABLE>
<PAGE>
Notes to Financial Statements (Continued)
7. Financial Highlights (Continued)
Selected data for each share of the Series outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
International Equity Series
---------------------------------------------------------------
10/29/92(1)
Year Ended December 31, to
1996 1995 1994 1993 12/31/92
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......... $13.1200 $11.8400 $11.6200 $10.0300 $10.0000
Income (loss) from investment operations:
Net investment income............ .......... 0.5572 0.4194 0.2198 0.0523 0.0153
Net realized and unrealized gain (loss)
from security transactions ............... 1.9658 1.1906 0.0802 1.5477 0.0147
-------- -------- -------- -------- --------
Total from investment operations............ 2.5230 1.6100 0.3000 1.6000 0.0300
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income ....... (0.4200) (0.2400) (0.0700) (0.0100) none
Distributions from net realized gain
from security transactions ............... (0.1130) (0.0900) (0.0100) none none
-------- -------- -------- -------- --------
Total distributions......................... (0.5330) (0.3300) (0.0800) (0.0100) none
-------- -------- -------- -------- --------
Net asset value, end of period................ $15.1100 $13.1200 $11.8400 $11.6200 $10.0300
======== ======== ======== ======== ========
Total return.................................. 20.03% 13.98% 2.57% 15.97% 1.73%
Ratios/supplemental data:
Net assets, end of period (000's omitted) .. $131,428 $81,548 $57,649 $16,664 $177
Ratio of expenses to average net assets .... 0.80% 0.80% 0.80% 0.80% 20.80%
Ratio of expenses to average net assets
prior to expense limitation .............. 0.91% 0.89% 1.01% 1.85% (2)
Ratio of net investment income to average
net assets ................................ 4.71% 3.69% 2.63% 1.85% 20.56%
Ratio of net investment income to average
net assets prior to
expense limitation........................ 4.60% 3.60% 2.42% 0.80% (2)
Portfolio turnover rate..................... 8% 19% 13% 9% (2)
Average commission rate paid................ $0.01 N/A N/A N/A N/A
</TABLE>
RESTUBBED TABLE
<TABLE>
<CAPTION>
Emerging Growth Series
---------------------------------------------
12/27/93(1)
Year Ended December 31, to
1996 1995 1994 12/31/93
<S> <C> <C> <C> <C>
Net asset value, beginning of period ......... $14.0200 $10.1600 $10.2000 $10.0000
Income (loss) from investment operations:
Net investment income............ .......... 0.0500 0.0976 0.0791 none
Net realized and unrealized gain (loss)
from security transactions ............... 1.3800 3.8524 (0.1191) 0.2000
-------- -------- -------- --------
Total from investment operations............ 1.4300 3.9500 (0.0400) 0.2000
-------- -------- -------- --------
Less distributions:
Dividends from net investment income ....... (0.0900) (0.0900) none none
Distributions from net realized gain
from security transactions ............... (0.8000) none none none
-------- -------- -------- --------
Total distributions......................... (0.8900) (0.0900) none none
-------- -------- -------- --------
Net asset value, end of period................ $14.5600 $14.0200 $10.1600 $10.2000
======== ======== ======== ========
Total return.................................. 11.00% 39.21% (0.39%) 2.00%
Ratios/supplemental data:
Net assets, end of period (000's omitted) .. $56,423 $20,510 $7,087 $204
Ratio of expenses to average net assets .... 0.80% 0.80% 0.80% (2)
Ratio of expenses to average net assets
prior to expense limitation .............. 0.92% 0.96% 1.47% (2)
Ratio of net investment income to average
net assets ................................ 1.03% 1.63% (2) (2)
Ratio of net investment income to average
net assets prior to
expense limitation........................ 20.44% 0.87% 0.96% (2)
Portfolio turnover rate..................... 112% 76% 59% (2)
Average commission rate paid................ $0.06 N/A N/A N/A
</TABLE>
- ----------
(1) Date of initial public offering; total return has been annualized for the
International Equity Series and total return has not been annualized for
the Emerging Growth Series.
(2) The ratio of expenses and net investment income to average net assets and
portfolio turnover have been omitted as management believes that such
ratios are not meaningful due to the limited net assets of this Series.
Notes to Financial Statements (Continued)
<PAGE>
7. Financial Highlights (Continued)
Selected data for each share of the Series outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
Value Series Global Bond Series
--------------------------------------------------- ------------------
12/27/93(1) 5/2/96(2)
Year Ended December 31, to to
1996 1995 1994 12/31/93 12/31/96
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........... $12.4700 $10.2900 $10.2100 $10.0000 $10.0000
Income from investment operations:
Net investment income............ ............ 0.1120 0.1918 0.1481 none 0.3390
Net realized and unrealized gain
(loss) from security transactions ........... 2.5480 2.2082 (0.0681) 0.2100 0.8310
-------- -------- -------- ------- --------
Total from investment operations. ............ 2.6600 2.4000 0.0800 0.2100 1.1700
-------- -------- -------- ------- --------
Less distributions:
Dividends from net investment income ......... (0.1800) (0.1500) none none (0.2100)
Distributions from net realized gain
from security transactions ................. (0.4500) (0.0700) none none
-------- -------- -------- ------- --------
Total distributions........................... (0.6300) (0.2200) none none (0.2100)
-------- -------- -------- ------- --------
Net asset value, end of period.................. $14.5000 $12.4700 $10.2900 10.2100 $10.9600
======== ======== ======== ======= ========
Total return.................................... 22.55% 23.85% 0.78% 2.10% 11.79%
Ratios/supplemental data:
Net assets, end of period (000's omitted) .... $23,683 $11,929 $6,291 $210 $9,471
Ratio of expenses to average net assets ...... 0.80% 0.80% 0.80% (3) 0.80%
Ratio of expenses to average net assets
prior to expense limitation ................ 0.99% 0.96% 1.41% (3) 1.19%
Ratio of net investment income to average
net assets ................................. 1.28% 2.13% 2.62% (3) 6.51%
Ratio of net investment income to average
net assets prior to
expense limitation.......................... 1.09% 1.97% 2.01% (3) 6.12%
Portfolio turnover rate....................... 84% 71% 26% (3) 56%
Average commission rate paid.................. $0.06 N/A N/A N/A N/A
</TABLE>
- ----------
(1) Date of initial public offering; total return has not been annualized.
(2) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(3) The ratio of expenses and net investment income to average net assets and
portfolio turnover have been omitted as management believes that such
ratios are not meaningful due to the limited net assets of this Series.
<PAGE>
Delaware Group Premium Fund, Inc.
Report of Independent Auditors
To the Shareholders and Board of Directors
Delaware Group Premium Fund, Inc.
We have audited the accompanying statements of net assets and statements of
assets and liabilities of Delaware Group Premium Fund, Inc. (comprising,
respectively, the Equity/Income Series, the High Yield Series, the Capital
Reserves Series, the Multiple Strategy Series, the Money Market Series, the
Growth Series, the International Equity Series, the Emerging Growth Series,
the Value Series and the Global Bond Series) (the "Fund") as of December 31,
1996, and the related statements of operations, the statements of changes in
net assets, and the financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 1996, by correspondence
with the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
each of the respective Series of Delaware Group Premium Fund, Inc. at
December 31, 1996, the results of their operations, the changes in their net
assets, and the financial highlights for each of the periods indicated
therein, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
February 12, 1997
