DELAWARE GROUP PREMIUM FUND INC, N-30D, 1999-09-01

DELAWARE GROUP PREMIUM FUND INC
N-30D, 1999-09-01

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<PAGE>

DELAWARE GROUP
- --------------------------------------------------------------------------------
PREMIUM FUND
- --------------------------------------------------------------------------------

SEMI-ANNUAL REPORT
- --------------------------------------------------------------------------------
JUNE 30, 1999

AGGRESSIVE GROWTH SERIES
CAPITAL RESERVES SERIES
CASH RESERVE SERIES
CONVERTIBLE SECURITIES SERIES
DELAWARE BALANCED SERIES
DELCAP SERIES
DELCHESTER SERIES
DEVON SERIES
EMERGING MARKETS SERIES
GLOBAL BOND SERIES
GROWTH AND INCOME SERIES
INTERNATIONAL EQUITY SERIES
REIT SERIES
SMALL CAP VALUE SERIES
SOCIAL AWARENESS SERIES
STRATEGIC INCOME SERIES
TREND SERIES

DELAWARE(SM)
INVESTMENTS
- ---------------------
Philadelphia o London

SA-MED[6/99] PP8/99
<PAGE>

July 20, 1999

Dear Policy Holder:

During the first half of 1999, investors started paying closer attention to
less-expensive international stocks. As countries like Brazil and Japan showed
signs of turning the corner, the dominance of growth investments began to wane,
benefiting many value stocks. Regardless, international and global equity
investments delivered positive returns for the first six months of fiscal 1999.

Six-Month Returns
Ended June 30, 1999
Standard & Poor's 500 Index +12.38%
Morgan Stanley Europe, Australia, Far East (EAFE) Index +4.11%
Morgan Stanley World Index +8.69%

Performance quoted above assumes reinvestment of dividends. It is not intended
to represent the performance of any Premium Fund Series. Past performance does
not guarantee future results. The indexes are unmanaged and assume no management
fees or expenses. The Standard & Poor's 500 Index is composed of 500 large U.S.
company stocks, while the Morgan Stanley EAFE Index consists of international
equity stocks. The unmanaged Morgan Stanley World Index includes U.S. market
performance as well as international equity performance. All returns stated in
U.S. dollars. A direct investment in an unmanaged index is not possible.

The United States' Dow Jones Industrial Average closed above both the 10,000
and 11,000 marks for the first time during the first six months of our fiscal
year. While many on Wall Street heralded these milestones, it is important to
recognize that large "blue chip" companies primarily drove the run-up of these
indexes, while medium size and smaller stocks have remained on the sidelines.
Key factors, however, that led to the narrow market of the last three to four
years appeared to be changing. We believe this change has been spurred by
improved international economic growth. Anecdotal evidence and official
government statistics from virtually all corners of the globe point to economic
recovery.

Growing investor confidence in the recovery of many worldwide economies
boosted the performance of foreign commodity issues, including oil, utility and
paper companies. Rising demand from recovering world markets and the
intervention of OPEC, an intergovernmental organization working to bring
stability to the petroleum market, contributed to higher oil prices.

During the first quarter of '99, Japan's economy, the world's second largest,
grew 1.9%, reversing a trend of five consecutive quarters of contraction
(source: Bloomberg). Despite this encouraging news, we still believe the road to
economic recovery in Japan will be long and difficult. We will continue to
monitor the progress of economic recovery in Japan, while searching for select
companies that we think offer reasonably priced stocks.

In the coming months, we believe the international market will be relatively
more stable. The United Kingdom, in our opinion, offers significant promise for
investors, although we believe that the Sterling, the country's currency, is
slightly overvalued. We also continue to see value in Australia and New Zealand,
which have benefited from growing investor interest in commodity-based stocks.

After a tumultuous period like we have encountered recently, it is important
to remember that your annuity is a long-term investment that requires patience
and a long-term perspective. If your annuity is well diversified among a variety
of asset classes, you should be well positioned for whatever opportunities the
international market brings for the remainder of the year. We thank you for your
confidence in Delaware Investments.

Sincerely,

/s/ Wayne A. Stork /s/ David K. Downes
- --------------------------- ------------------------------------
Wayne A. Stork David K. Downes
Director of the Fund President and Chief Executive Officer
Chairman, Delaware Investments Delaware Investments Family of Funds
Family of Funds

<PAGE>

For the six-month period ended June 30, 1999, the Delaware Group Premium Fund
International Equity Series gained 8.30%, outperforming its benchmark, the
Morgan Stanley EAFE Index, which returned 4.11%.

Uncertain of the Euro's prospects, the managers focused on countries that did
not participate in the European Monetary Union convergence. The U.K. remained
the Series' largest country allocation. As countries like Brazil and Japan
showed signs of recovery, the dominance of growth investments began to wane,
benefiting many cyclical industries and value stocks in which the Portfolio was
invested. Throughout the first half of this year, Japan experienced a modest
economic recovery that drove stock prices higher. Although investments in less
expensive Japanese stocks benefited the Series' performance, it was difficult to
keep pace with the benchmark and its more substantial allocation to the Japanese
market.

Investor confidence in the recovery of worldwide economies boosted the
performance of commodities issues, including oil, utility, and paper companies.
Heavy investments in Australia, New Zealand and other countries whose
performance benefited from growing investor interest in commodity-based stocks
contributed to total returns.

In the coming months, we believe the Series' country allocations should
remain relatively stable. Despite recent encouraging economic growth figures,
the managers view the Japanese market as overvalued and subject to a long and
difficult recovery. For this reason, we do not currently anticipate increasing
our allocation to Japan. The U.K. appears to offer attractively valued stocks
and we believe it will continue to be the largest allocation in International
Equity Series for the near future. Should global economies continue to
demonstrate stronger growth, investors may remain focused on a broader base of
companies, including reasonably priced value stocks like those held in the
Series.

<PAGE>

Delaware Group Premium Fund, Inc.-Aggressive Growth Series
Statement of Net Assets
June 30, 1999 (Unaudited)

Number Market
of Shares Value
COMMON STOCK-43.74%
Banking, Finance & Insurance-4.35%
Capital One Financial ................................. 4,000 $ 222,750
Citigroup ............................................. 4,000 190,000
----------
412,750
----------
Cable, Media & Publishing-11.39%
*CBS ................................................... 4,000 173,750
*Chancellor Media-Class A .............................. 3,500 192,828
*Clear Channel Communications .......................... 2,500 172,344
*Consolidated Graphics ................................. 3,500 175,000
Omnicom Group ....................................... 2,500 200,000
TCA Cable TV ........................................ 3,000 166,312
----------
1,080,234
----------
Computers & Technology-9.17%
*Cisco Systems ......................................... 3,000 193,219
*Citrix Systems ........................................ 3,000 169,031
International Business Machine ...................... 1,200 155,100
*Legato Systems ........................................ 3,000 173,344
*Peregrine Systems ..................................... 7,000 179,594
----------
870,288
----------
- ----------
Top 10 stock holdings, representing 22.27% of net assets, are printed in bold.

<PAGE>

Number Market
of Shares Value
COMMON STOCK (Continued)
Consumer Products-3.86%
*Gemstar International
Group Limited ........................................ 5,600 $ 365,750
----------
365,750
----------
Electronics & Electrical Equipment-5.48%
*Micrel ................................................ 2,500 185,312
Motorola .............................................. 2,000 189,500
Texas Instruments ..................................... 1,000 145,000
----------
519,812
----------
Leisure, Lodging & Entertainment-1.86%
*Outback Steakhouse .................................... 4,500 176,484
----------
176,484
----------
Retail-2.04%
Home Depot ............................................ 3,000 193,313
----------
193,313
----------
Telecommunications-5.59%
*American Tower-Class A ................................ 7,500 180,000
*Concord Communications ................................ 4,000 178,500
*MCI Worldcom .......................................... 2,000 172,063
----------
530,563
----------
Total Common Stock
(cost $3,989,778) ..................................... 4,149,194
----------

TOTAL MARKET VALUE OF SECURITIES-43.74% (cost $3,989,778) $4,149,194

RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-56.26% 5,337,303
----------

NET ASSETS APPLICABLE TO 932,734 SHARES ($0.01 PAR VALUE)
OUTSTANDING; EQUIVALENT TO $10.17 PER SHARE-100.00% ............... $9,486,497
==========
COMPONENTS ON NET ASSETS AT JUNE 30, 1999:
Common stock, $ 0.01 par value, 1,000,000,000 shares authorized
to the Fund with 50,000,000 shares allocated to the Series ........ $9,330,006
Undistributed net investment income ................................ 31,202
Accumulated net realized loss on investments ....................... (34,127)
Net unrealized appreciation of investments ......................... 159,416
----------
Total net assets ................................................... $9,486,497
==========
- ----------
*Non-income producing security for the period ending June 30, 1999.

See accompanying notes

Aggresive Growth-1
<PAGE>
Delaware Group Premium Fund, Inc.-
Aggressive Growth Series
Statement of Operations
May 3, 1999* to June 30, 1999
(Unaudited)

ASSETS:
Investments at market .............................. $ 4,149,194
Cash ............................................... 6,328,407
Dividends and interest receivable .................. 6,074
Subscriptions receivable ........................... 184,946
Receivable for securities sold ..................... 2,102,345
-----------
Total assets ....................................... 12,770,966
-----------

LIABILITIES:
Liquidations payable ............................... 2,028
Payable for securities purchased ................... 3,273,456
Accrued expenses ................................... 8,985
-----------
Total liabilities .................................. 3,284,469
-----------

TOTAL NET ASSETS ................................... $ 9,486,497
===========

INVESTMENTS AT COST ................................ $ 3,989,778
===========
- ----------
*Date of commencement of operations.

Delaware Group Premium Fund, Inc.-
Aggressive Growth Series
Statement of Operations
May 3, 1999* to June 30, 1999
(Unaudited)

INVESTMENT INCOME:
Interest ........................................... $ 34,113
Dividends .......................................... 6,074
--------
40,187
--------

Expenses:
Management fees .................................... 7,936
Custodian fees ..................................... 953
Registration fees .................................. 469
Reports and statements to shareholders ............. 464
Accounting and administration ...................... 450
Dividend disbursing and transfer agent
fees and expenses ............................... 65
Directors' fees .................................... 52
Professional fees .................................. 40
Taxes (other than taxes on income) ................. 10
Other .............................................. 76
--------
10,515
Less expenses absorbed or waived by
Delaware Management Company ..................... (661)
Less expenses paid indirectly ...................... (869)
--------
Total expenses ..................................... 8,985
--------

NET INVESTMENT INCOME .............................. 31,202
--------

NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized (loss) on investments ................. (34,127)
Net change in unrealized appreciation /
depreciation of investments ..................... 159,416
--------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS .................................. 125,289
--------

NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $156,491
========
See accompanying notes

Aggressive Growth-2
<PAGE>

Delaware Group Premium Fund, Inc.-
Aggressive Growth Series
Statement of Changes in Net Assets
5/3/99* to
6/30/1999
(Unaudited)
-----------

INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income .............................................. $ 31,202
Net realized loss on investments ................................... (34,127)
Net change in unrealized appreciation /
depreciation of investments ....................................... 159,416
----------
Net increase in net assets resulting from operations ............... 156,491
----------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold .......................................... 9,415,219
Cost of shares repurchased ......................................... (85,213)
----------
Increase in net assets derived from capital share transactions ..... 9,330,006
----------

NET INCREASE IN NET ASSETS ......................................... 9,486,497
----------

NET ASSETS:
Beginning of period ................................................ -
----------
End of period ...................................................... $9,486,497
==========
- ----------
*Date of commencement of operations

See accompanying notes
Aggressive Growth-3
<PAGE>

Delaware Group Premium Fund, Inc.-Aggressive Growth Series
Financial Highlights

Selected data for each share of the Series outstanding throughout the period
were as follows:

5/3/99* to
6/30/99(1)
(Unaudited)
-----------

Net asset value, beginning of period ...................... $10.000

Income from investment operations:
Net investment income ..................................... 0.047
Net realized and unrealized gain on investments ........... 0.123
-------
Total from investment operations .......................... 0.170
-------

Net asset value, end of period ............................ $10.170
=======

Total return .............................................. 1.60%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................... $ 9,486
Ratio of expenses to average net assets ................... 0.85%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ........ 1.00%
Ratio of net investment income to average net assets ...... 2.96%
Ratio of net investment income to average net
assets prior to expense limitation and expenses
paid indirectly ........................................ 2.81%
Portfolio turnover ........................................ 108%

- ----------
(1)Ratios have been annualized and total return has not been annualized.
*Date of commencement of operations.

See accompanying notes

Aggressive Growth-4
<PAGE>

Delaware Group Premium Fund, Inc.-Aggressive Growth Series
Notes to Financial Statements
June 30, 1999
(Unaudited)

Delaware Group Premium Fund, Inc. (the "Fund") is registered as a diversified
open-end investment company under the Investment Company Act of 1940, as
amended. The Fund is organized as a Maryland Corporation and offers 17 series:
the Aggressive Growth Series, the Capital Reserves Series, the Cash Reserve
Series, the Convertible Securities Series, the Delaware Balanced Series
(formerly the Delaware Series), the DelCap Series, the Delchester Series, the
Devon Series, the Emerging Markets Series, the Global Bond Series, the Growth
and Income Series (formerly the Decatur Total Return Series), the International
Equity Series, the REIT Series, the Small Cap Value Series, the Social Awareness
Series, the Strategic Income Series, and the Trend Series. These financial
statements and the related notes pertain to the Aggressive Growth 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 Series.

Federal Income Taxes--The Series intends to continue to qualify as a regulated
investment company and make the requisite distributions to shareholders.
Accordingly, no provision for federal income taxes has been made in the
financial statements. Income and capital gain distributions are determined in
accordance with federal income tax regulations, which may differ from generally
accepted accounting principles.

Repurchase Agreements--The Series may invest in a pooled cash account along with
other members of the Delaware Investments Family of Funds. The aggregate daily
balance of the pooled cash account is invested in repurchase agreements secured
by obligations of the U.S. government. The respective collateral is held by the
Series' custodian bank until the maturity of the respective repurchase
agreements. Each repurchase agreement is at least 100% collateralized. However,
in the event of default or bankruptcy by the counterparty to the agreement,
realization of the collateral may be subject to legal proceedings.

Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

<PAGE>

The Aggressive Growth Series will make payments from net income and net realized
gain on investments, if any, following the close of the fiscal year.

Certain expenses of the Fund are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price and execution. The
amount of these expenses was approximately $26 for the period ended June 30,
1999. The Fund may receive earnings credits from its custodian when positive
cash balances are maintained, which are used to offset custody fees. These
credits were $843 for the period ended June 30, 1999. The expenses paid under
the above arrangements are included in their respective expense captions on the
Statement of Operations with the corresponding expense offset shown as "Expenses
paid indirectly".

DMC has elected to waive that portion, if any, of the annual management fee
payable to the extent necessary to ensure that annual operating expenses
exclusive of taxes, interest, brokerage commissions and extraordinary expenses
do not exceed 0.85% of average daily net assets of the Series through October
31, 1999.

The Series has engaged Delaware Service Company, Inc. ("DSC"), an affiliate of
DMC, to provide dividend disbursing, transfer agent and accounting services. The
Series pays DSC a monthly fee based on the number of shareholder accounts,
shareholder transactions and average net assets, subject to certain minimums.

Aggressive Growth-5
<PAGE>

Aggressive Growth Series
Notes to Financial Statements (Continued)

On June 30, 1999, the Series had liabilities payable to affiliates as follows:

Dividend disbursing
Investment transfer agent,
management accounting fees
fee payable to and other expenses
DMC payable to DSC
-------------- -------------------
$7,275 $538

Certain officers of DMC and DSC are officers, directors and/or employees of the
Fund. These officers, directors and employees are paid no compensation by the
Fund.

3. Investments
During the period ended June 30, 1999, the Series made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:

Purchases ......................................... $6,126,250
Sales ............................................. $2,102,345

The cost of investments for federal income tax purposes approximates cost for
book purposes. At June 30, 1999, the aggregate cost of securities and unrealized
appreciation (depreciation) for the Series were as follows:

Aggregate Aggregate
Cost of unrealized unrealized Net unrealized
investments appreciation depreciation appreciation
----------- ------------ ------------ --------------
$3,989,778 $192,486 ($33,070) $159,416

4. Capital Stock
Transactions in capital stock shares were as follows:

Shares Net
Shares sold repurchased increase
----------- ----------- --------
Period ended June 30, 1999 ... 941,278 (8,544) 932,734

5. Securities Lending
The Series may participate, along with other funds in the Delaware Investments
Family of Funds, in a Securities Lending Agreement ("Lending Agreement").
Security loans made pursuant to the Lending Agreement are required at all times
to be secured by U.S. Treasury obligations and/or cash collateral at least equal
to 100% of the market value of securities issued in the U.S. and 105% of the
market value of securities issued outside of the U.S. Cash collateral received
is invested in fixed-income securities, with a weighted average maturity not to
exceed 90 days, rated in one of the top two tiers by Standard & Poors Ratings
Group or Moody's Investors Service, Inc. or repurchase agreements collateralized
by such securities. However, in the event of default or bankruptcy by the
lending agent, realization and/or retention of the collateral may be subject to
legal proceedings. In the event that the borrower fails to return loaned
securities and the collateral received is insufficient to cover the value of the
loaned securities and provided such collateral is not the result of investment
losses, the lending agent has agreed to pay the amount of the shortfall to the
Series, or at the discretion of the lending agent, replace the loaned
securities. The Series was not participating in a Securities Lending Agreement
as of June 30, 1999.

Aggressive Growth-6

<PAGE>

Delaware Group Premium Fund, Inc.-Capital Reserves Series
Statement of Net Assets
June 30, 1999 (Unaudited)

Principal Market
Amount Value
ASSET-BACKED SECURITIES-9.43%
American Finance Home Equity
Series 91-1A 8.00% 7/25/06 .................. $ 11,607 $ 11,820
Series 94-2A 6.950% 6/25/24 ................. 22,046 22,048
Discover Card Master Trust Series
99-2 A 5.900% 10/15/04 ...................... 670,000 667,173
EQCC Home Equity Loan Trust
Series 96-2 A6 6.88% 7/15/14 ................ 570,000 572,850
Series 98-2 A3F 6.23% 3/15/13 ............... 535,000 532,760
MetLife Capital Equipment Loan Trust
Series 97-A A 6.85% 5/20/08 ................. 410,000 413,526
NationsCredit Grantor Trust
Series 96-1 A 5.85% 9/15/11 ................. 240,132 236,467
Series 97-1 A 6.75% 8/15/13 ................. 371,705 373,232
PECO Energy
Series 99-A 5.80% 3/1/07 .................... 650,000 627,656
Philadelphia, Pennsylvania Authority
For Industrial Development Series
97 A 6.488% 6/15/04 ......................... 351,002 347,492
----------
Total Asset-Backed Securities
(cost $3,849,137) ........................... 3,805,024
----------

COLLATERALIZED MORTGAGE OBLIGATIONS-18.09%
Asset Securitization Corporation
Series 96-D3 A1B 7.21% 10/13/26 ............. 400,000 408,188
Series 97-D4 A1 7.35% 4/14/29 ............... 288,381 293,248
Series 97-D5 A2 7.069% 2/14/41 .............. 430,000 409,105
Series 97-D5 A3 7.119% 2/14/41 .............. 320,000 299,300
California Infrastructure PG&E ................. 555,000 555,999
Series 97-1 A4 6.16% 6/25/03
CIT RV Trust
Series 98-A A5 6.12% 7/15/14 ................ 440,000 434,500
First Union Commercial Mortgage
Series 99-C2 A2 6.65% 4/15/09 ............... 900,000 882,141
Federal National Mortgage Association Whole
Loan Series 98-W3 6.5% 7/25/28 .............. 475,000 472,031
GNR Series 1998-9 B 6.85% 12/20/25 ............. 765,000 747,150
Lehman Large Loan
Series 96-MC2 C 7.224% 9/20/06 .............. 400,000 398,156
Series 97-LLI A1 6.79% 6/12/04 .............. 418,328 420,795
Nomura Asset Securities
Series 93-1 A1 6.68% 12/15/01 ............... 319,632 319,932
Series 95-MD3 A1A 8.17% 3/4/20 .............. 417,461 425,940
Series 96-MD5 A3 7.638% 4/13/36 ............. 460,000 470,853
Residential Accredit Loans
Series 97-QS3 A3 7.50% 4/25/27 .............. 261,726 261,433
Series 98-QS9 A5 6.75% 7/25/28 .............. 500,000 498,008
----------
Total Collateralized Mortgage
Obligations (cost $7,442,070) ............... 7,296,779
----------

<PAGE>
Capital Reserves Series
Statement of Net Assets (Continued)

Principal Market
Amount Value
MORTGAGE-BACKED SECURITIES-16.42%
Federal Home Loan Mortgage Corporation
7.00% 4/1/29 ............................ $ 362,676 $ 359,389
Federal National Mortgage Association
4.625% 10/15/01 ......................... 440,000 429,122
5.625% 3/15/01 .......................... 1,590,000 1,587,425
6.00% 4/1/13 ............................ 397,080 384,051
6.00% 5/1/13 ............................ 505,287 488,707
6.500% 5/1/29 ........................... 1,453,829 1,404,308
7.00% 7/1/28 ............................ 721,872 714,879
7.00% 8/1/28 ............................ 356,610 353,156
7.00% 11/1/28 ........................... 551,945 546,425
7.50% 6/1/28 ............................ 291,790 295,438
Government National Mortgage Association
12.00% 3/20/15 .......................... 17,968 20,652
12.00% 6/20/15 .......................... 26,172 29,304
12.00% 2/20/16 .......................... 11,573 13,128
-----------
Total Mortgage-Backed Securities
(cost $6,777,757) ....................... 6,625,984
-----------

CORPORATE BONDS-29.87%
American Financial Group 7.125% 4/15/09 .... 250,000 234,688
Associates Corporation NA 6.25% 11/1/08 .... 500,000 475,000
AT&T Capital 7.50% 11/15/00 ................ 735,000 728,569
Banco Santander-Chile 6.50% 11/1/05 ........ 340,000 328,100
Banco Santiago S.A. 7.00% 7/18/07 .......... 270,000 231,863
CIT Group Holdings 5.625% 10/15/03 ......... 780,000 751,725
Consumers Energy 6.375% 2/1/08 ............. 335,000 314,900
Cox Communications 6.15% 8/1/03 ............ 375,000 366,563
Credit Foncier de France 8.00% 1/14/02 ..... 340,000 350,625
Fairfx Financial Holdings 7.735% 3/15/09 ... 130,000 125,938
Ford Motor Credit 5.75% 2/23/04 ............ 615,000 594,244
General Electric Capital 5.89% 5/11/01 ..... 675,000 674,156
Great Western Financial 8.206% 2/1/27 ...... 500,000 501,875
Household Finance 6.50% 11/15/08 ........... 700,000 669,375
Lehman Brothers 6.625% 2/5/06 .............. 670,000 643,200
MCI Worldcom 7.55% 4/1/04 .................. 795,000 818,850
Meritor Auto 6.80% 2/15/09 ................. 835,000 793,250
Raytheon 5.95% 3/15/01 ..................... 570,000 568,575
Southern Investments UK
6.375% 11/15/01 ......................... 320,000 320,400
Summit Bank 6.75% 6/15/03 .................. 430,000 428,925
Tommy Hilfiger 6.85% 6/1/08 ................ 615,000 582,713
U.S. Bancorp 8.125% 5/15/02 ................ 120,000 125,400
United Health Care 6.60% 12/1/03 ........... 625,000 607,810
United News and Media
7.75% 7/1/09 ............................ 525,000 523,688
USA Waste Services 6.125% 7/15/01 .......... 295,000 293,525
-----------
Total Corporate Bonds
(cost $12,413,826) ...................... 12,053,957
-----------

Capital Reserves-1

<PAGE>

Capital Reserves Series
Statement of Net Assets (Continued)

Principal Market
Amount Value
U.S. TREASURY OBLIGATIONS-26.46%
U.S. Treasury Notes
4.50% 1/31/01 ......................... $ 1,750,000 $ 1,725,297
4.75% 2/15/04 ......................... 1,980,000 1,898,325
4.75% 11/15/08 ........................ 1,675,000 1,537,722
5.25% 5/31/01 ......................... 455,000 452,936
5.375% 2/15/01 ........................ 125,000 124,867
5.50% 3/31/03 ......................... 2,595,000 2,572,287
5.875% 9/30/02 ........................ 370,000 371,749
5.875% 11/15/05 ....................... 365,000 364,109
6.375% 1/15/00 ........................ 1,620,000 1,630,364
-----------
Total U.S. Treasury Obligations
(cost $10,833,193) .................... 10,677,656
-----------

REPURCHASE AGREEMENTS-0.40%
With Chase Manhattan 4.65% 7/1/99
(dated 6/30/99, collateralized by
$28,000 U.S. Treasury Notes 5.375%
due 2/15/01, market value $28,365
and $14,000 U.S. Treasury Notes
6.375% due 9/30/01, market value
$14,357 and $12,000 U.S. Treasury
Notes 6.125% due 12/31/01, market
value $12,555) ........................ 54,000 54,000

Principal Market
Amount Value
REPURCHASE AGREEMENTS (Continued)
With J.P. Morgan Securities 4.70%
7/1/99 (dated 6/30/99, collateralized
by $15,000 U.S. Treasury Notes
6.375% due 8/15/02, market value
$16,009 and $14,000 U.S. Treasury
Notes 6.25% due 8/31/02, market
value $14,402, and $10,000 U.S.
Treasury Notes 5.75% due 11/30/02,
market value $9,665 and $14,000
U.S. Treasury Notes 5.50% due
1/31/03, market value $14,110) ........ $53,000 $53,000
With PaineWebber 4.80% 7/1/99
(dated 6/30/99, collateralized by
$13,000 U.S. Treasury Notes 7.125%
due 2/29/00, market value $13,650
and $14,000 U.S. Treasury Notes
5.625% due 11/30/00, market value
$14,030 and $28,000 U.S. Treasury
Notes 5.75% due 11/30/02, market
value $27,450) ........................ 54,000 54,000
-----------
Total Repurchase Agreements
(cost $161,000) ....................... 161,000
-----------

TOTAL MARKET VALUE OF SECURITIES-100.67% (cost $41,476,983) ...... $40,620,400

LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS-(0.67%) .......... (269,386)
-----------

NET ASSETS APPLICABLE TO 4,226,402 SHARES ($0.01 PAR VALUE)
OUTSTANDING; EQUIVALENT TO $9.55 PER SHARE-100.00% ............ $40,351,014
===========

COMPONENTS ON NET ASSETS AT JUNE 30, 1999:
Common stock, $0.01 par value, 1,000,000,000 shares
authorized to the Fund with 50,000,000 shares
allocated to the Series ........................................ $42,592,487
Accumulated net realized loss on investments ..................... (1,384,890)
Net unrealized depreciation of investments ....................... (856,583)
-----------
Total net assets ................................................. $40,351,014
===========

See accompanying notes

Capital Reserves-2
<PAGE>

Delaware Group Premium Fund, Inc.-
Capital Reserves Series
Statement of Operations
Six Months Ended June 30, 1999
(Unaudited)

INVESTMENT INCOME:
Interest ................................................. $ 1,326,508
-----------
1,326,508
-----------

EXPENSES:
Management fees .......................................... 118,969
Professional fees ........................................ 12,035
Accounting and administration ............................ 8,552
Reports and statements to shareholders ................... 6,149
Taxes (other than taxes on income) ....................... 5,692
Registration fees ........................................ 3,507
Custodian fees ........................................... 1,950
Directors' fees .......................................... 978
Dividend disbursing and transfer agent fees
and expenses .......................................... 783
Other .................................................... 6,175
-----------
164,790
Less expenses paid indirectly ............................ (483)
-----------
Total expenses ........................................... 164,307
-----------

NET INVESTMENT INCOME .................................... 1,162,201
-----------

NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS:
Net realized loss on investments ......................... (190,609)
Net change in unrealized appreciation/
depreciation of investments ........................... (1,219,090)
-----------
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS ........................................ (1,409,699)
-----------

NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ....................................... ($ 247,498)
===========

See accompanying notes

<PAGE>

Delaware Group Premium Fund, Inc.-
Capital Reserves Series
Statements of Changes in Net Assets

Six Months Year
Ended 6/30/99 Ended
(Unaudited) 12/31/98
----------- --------

INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income ..................... $ 1,162,201 $ 1,962,601
Net realized gain (loss) on investments ... (190,609) 381,375
Net change in unrealized appreciation /
depreciation of investments ............ (1,219,090) (89,594)
------------ ------------
Net increase (decrease) in net assets
resulting from operations .............. (247,498) 2,254,382
------------ ------------

DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ..................... (1,162,201) (1,962,601)
------------ ------------
(1,162,201) (1,962,601)
------------ ------------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ................. 5,326,498 23,284,345
Net asset value of shares issued upon
reinvestment of dividends from net
investment income ...................... 1,169,105 1,906,213
------------ ------------
6,495,603 25,190,558
Cost of shares repurchased ................ (6,446,374) (12,947,687)
------------ ------------
Increase in net assets derived from capital
share transactions ..................... 49,229 12,242,871
------------ ------------

NET INCREASE (DECREASE)
IN NET ASSETS .......................... (1,360,470) 12,534,652
------------ ------------

NET ASSETS:
Beginning of period ....................... 41,711,484 29,176,832
------------ ------------
End of period ............................. $ 40,351,014 $ 41,711,484
============ ============

See accompanying notes

Capital Reserves-3

<PAGE>

Delaware Group Premium Fund, Inc.-Capital Reserves Series
Financial Highlights

Selected data for each share of the Series outstanding throughout each period
were as follows:

<TABLE>
<CAPTION>
Six Months
Ended 6/30/99 Year Ended December 31,
(Unaudited)(1) 1998 1997 1996 1995 1994
-------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................... $9.880 $9.790 $9.690 $9.930 $9.300 $10.260

Income (loss) from investment operations:
Net investment income ................................... 0.270 0.556 0.613 0.623 0.643 0.636
Net realized and unrealized gain (loss) on investments .. (0.330) 0.090 0.100 (0.240) 0.630 (0.905)
------ ------ ------ ------ ------ ------
Total from investment operations ........................ (0.060) 0.646 0.713 0.383 1.273 (0.269)
------ ------ ------ ------ ------ ------

Less dividends and distributions:
Dividends from net investment income .................... (0.270) (0.556) (0.613) (0.623) (0.643) (0.636)
Distributions from net realized gain on investments ..... none none none none none (0.055)
------ ------ ------ ------ ------ ------
Total dividends and distributions ....................... (0.270) (0.556) (0.613) (0.623) (0.643) (0.691)
------ ------ ------ ------ ------ ------
Net asset value, end of period .......................... $9.550 $9.880 $9.790 $9.690 $9.930 $9.300
====== ====== ====== ====== ====== ======

Total return ............................................ (0.63%) 6.78% 7.60% 4.05% 14.08% (2.68%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $40,351 $41,711 $29,177 $27,768 $27,935 $25,975
Ratio of expenses to average net assets ................. 0.79% 0.79% 0.75% 0.72% 0.71% 0.74%
Ratio of net investment income to average net assets .... 5.58% 5.62% 6.31% 6.43% 6.64% 6.57%
Portfolio turnover ...................................... 128% 166% 120% 122% 145% 219%
</TABLE>
- ----------
(1) Ratios have been annualized and total return has not been annualized.

See accompanying notes

Capital Reserves-4

<PAGE>

Delaware Group Premium Fund, Inc.-Capital Reserves Series
Notes to Financial Statements
June 30, 1999
(Unaudited)

Delaware Group Premium Fund, Inc. (the "Fund") is registered as a diversified
open-end investment company under the Investment Company Act of 1940, as
amended. The Fund is organized as a Maryland Corporation and offers 17 series:
the Aggressive Growth Series, the Capital Reserves Series, the Cash Reserve
Series, the Convertible Securities Series, the Delaware Balanced Series
(formerly the Delaware Series), the DelCap Series, the Delchester Series, the
Devon Series, the Emerging Markets Series, the Global Bond Series, the Growth
and Income Series (formerly the Decatur Total Return Series), the International
Equity Series, the REIT Series, the Small Cap Value Series, the Social Awareness
Series, the Strategic Income Series, and the Trend Series. These financial
statements and the related notes pertain to the Capital Reserves 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 Series.

Security Valuation--Securities listed on an exchange are valued at the last
quoted sales price as of the close of the NYSE on the valuation date. Securities
not traded or securities not listed on an exchange are valued at the mean of the
last quoted bid and asked prices. Long-term debt securities are valued by an
independent pricing service and such prices are believed to reflect the fair
value of such securities. Money market instruments having less than 60 days to
maturity are valued at amortized cost, which approximates market value. Other
securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Fund's Board of Directors.

The Capital Reserves Series declares dividends daily from net investment income
and pays such dividends monthly. Distributions from net realized gain on
investments, if any, normally will be distributed following the close of the
fiscal year.

Certain expenses of the Series are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price and execution. The
amount of these expenses was approximately $483 for the period ended June 30,
1999. In addition, the Series receives earnings credits from its custodian when
positive cash balances are maintained, which are used to offset custody fees.
There were no credits for the period ended June 30, 1999. The expenses paid
under the above arrangements are included in their respective expense captions
on the Statement of Operations with the corresponding expense offset shown as
"Expenses paid indirectly".

<PAGE>

DMC has elected to waive that portion, if any, of the annual management fee
payable to the extent necessary to ensure that annual operating expenses
exclusive of taxes, interest, brokerage commissions and extraordinary expenses
do not exceed 0.80% of average daily net assets of the Series through October
31, 1999. No reimbursement was due for the period ended June 30, 1999.

Capital Reserves-5

<PAGE>

Capital Reserves Series
Notes to Financial Statements (Continued)

On June 30, 1999, the Series had liabilities payable to affiliates as follows:

Dividend disbursing Other
Investment transfer agent, expenses
management accounting fees payable
fee payable to and other expenses to DMC
DMC payable to DSC and affiliates
-------------- ------------------- --------------
$16,839 $8 $4,174

Certain officers of DMC and DSC are officers, directors and/or employees of the
Fund. These officers, directors and employees are paid no compensation by the
Fund.

3. Investments
During the six months ended June 30, 1999, the Series made purchases and sales
of investment securities other than U.S. government securities and temporary
cash investments as follows:

Purchases ...................................... $13,469,437
Sales .......................................... $18,756,198

During the six months ended June 30, 1999, the Series made purchases and sales
of U.S. government securities as follows:

Purchases ...................................... $13,093,780
Sales .......................................... $7,505,448

The cost of investments for federal income tax purposes approximates cost for
book purposes.

At June 30, 1999, the aggregate cost of securities and unrealized appreciation
(depreciation) for the Series was as follows:

Aggregate Aggregate
Cost of unrealized unrealized Net unrealized
investments appreciation depreciation depreciation
----------- ------------ ------------ ------------
$41,506,166 $37,017 ($922,783) ($885,766)

For federal income tax purposes, the Series had accumulated capital losses at
December 31, 1998 as follows:

Year of Year of
expiration expiration
2002 2004
---------- ----------
$884,453 $292,208

4. Capital Stock
Transactions in capital stock shares were as follows:

<TABLE>
<CAPTION>
Shares issued upon
reinvestment of
dividends from net Shares Net
Shares sold investment income repurchased increase
----------- ----------------- ----------- --------
<S> <C> <C> <C> <C>
Period ended June 30, 1999 .................... 546,030 120,064 (662,579) 3,515
Year ended December 31, 1998 .................. 2,364,760 193,836 (1,315,298) 1,243,298
</TABLE>

5. Credit and Market Risk
The 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.

The Series may invest up to 10% of its total assets in illiquid securities which
may include securities with contractual restrictions on resale, securities
exempt from registration under Rule 144A of the Securities Act of 1933, as
amended, and other securities which may not be readily marketable. The relative
illiquidity of some of these securities may adversely affect the Series' ability
to dispose of such securities in a timely manner and at a fair price when it is
necessary to liquidate such securities.

Capital Reserves-6

<PAGE>
Delaware Group Premium Fund, Inc.-Capital Reserves Series
Proxy Results
(Unaudited)

For the six months ended June 30, 1999, Delaware Premium Fund, Inc. - Capital
Reserves Series shareholders voted on the following proposals at the annual
meeting of shareholders on March 17, 1999 or as adjourned. The description of
each proposal and number of shares voted are as follows:

1. To elect the Delaware Group Premium Fund, Inc. Board of Directors.

Shares Shares Voted
Voted Withheld
For Authority Abstain
--------- --------- -------
Jeffrey J. Nick ........... 4,120,263 59,752 --
Walter P. Babich .......... 4,120,928 59,087 --
John H. Durham ............ 4,133,226 46,789 --
Anthony D. Knerr .......... 4,129,800 50,215 --
Ann R. Leven .............. 4,133,226 46,789 --
Thomas F. Madison ......... 4,133,226 46,789 --
Charles E. Peck ........... 4,133,226 46,789 --
Wayne A. Stork ............ 4,128,827 51,188 --
Jan L. Yeomans ............ 4,129,800 50,215 --

2. To approve the reclassification of the investment objective from fundamental
to non-fundamental.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
3,535,628 296,119 348,268

3. To approve standardized fundamental investment restrictions (proposal
involves separate votes on seven sub-proposals 3A-3G).

3A. To adopt a new fundamental investment restriction concerning concentration
of the investments in the same industry.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
3,666,693 178,869 334,453

3B. To adopt a new fundamental investment restriction concerning borrowing money
and issuing senior securities.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
3,655,987 308,653 215,375

3C. To adopt a new fundamental investment restriction concerning underwriting.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
3,650,771 190,354 338,890

3D. To adopt a new fundamental investment restriction concerning investments in
real estate.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
3,549,872 414,768 215,375

3E. To adopt a new fundamental investment restriction concerning investments in
commodities.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
3,418,843 525,555 235,617

3F. To adopt a new fundamental investment restriction concerning lending by the
Fund.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
3,558,514 399,198 222,303

3G. To reclassify all current fundamental investment restrictions as
non-fundamental.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
3,628,743 187,434 363,838
<PAGE>

4. To approve a new investment management agreement with Delaware Management
Company.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
3,499,193 412,705 268,117

5. To ratify the selection of Ernst & Young LLP, as the independent auditors for
Delaware Group Premium Fund, Inc.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
3,626,220 6,383 547,412

6. To approve the restructuring of Delaware Group Premium Fund, Inc. from a
Maryland Corporation into a Delaware Business Trust.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
3,733,872 35,384 410,759

Capital Reserves-7

<PAGE>

Delaware Group Premium Fund, Inc.-Cash Reserve Series
Statement of Net Assets
June 30, 1999 (Unaudited)

<TABLE>
<CAPTION>
Principal Market
Amount Value
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER-88.36%
Financial Services-49.69%
ABN AMRO 4.80% 7/26/99 ..................................................... $ 2,000,000 $ 1,993,334
Allianz of America 5.08% 9/9/99 ............................................ 1,500,000 1,485,183
Associates NA 4.87% 9/22/99 ................................................ 2,000,000 1,977,544
Bank of Scotland 5.10% 9/8/99 .............................................. 2,000,000 1,980,450
BankAmerica 4.75% 7/22/99 .................................................. 1,000,000 997,229
BankAmerica 4.82% 8/16/99 .................................................. 1,000,000 993,841
CBA Finance 4.81% 7/12/99 .................................................. 2,000,000 1,997,061
Ciesco LP 4.82% 7/20/99 .................................................... 2,000,000 1,994,912
Deutsche Bank Financial
4.90% 8/10/99 ........................................................... 2,000,000 1,989,111
Fleet Funding 4.92% 7/12/99 ................................................ 2,000,000 1,996,993
Leland Stanford Jr University
4.85% 8/26/99 ........................................................... 2,000,000 1,984,911
Metlife Funding 4.87% 7/9/99 ............................................... 2,000,000 1,997,836
Prudential Finance (Jersey)
4.80% 7/15/99 ........................................................... 1,000,000 998,133
Swiss Re Financial 4.82% 7/8/99 ............................................ 1,200,000 1,198,875
UBS Finance 4.941% 10/12/99 ................................................ 2,000,000 1,971,847
----------
25,557,260
----------
Industrial-16.40%
DuPont EI Nemour 4.87% 8/12/99 ............................................. 610,000 606,534
Eastman Kodak 4.87% 9/14/99 ................................................ 1,753,000 1,735,214
Henkel Corp 4.74% 7/20/99 .................................................. 1,390,000 1,386,523
Henkel Corp 5.02% 9/2/99 ................................................... 750,000 743,411
Hershey Foods 4.83% 8/9/99 ................................................. 2,000,000 1,989,535
New York Times 5.03% 8/3/99 ................................................ 877,000 872,956
US Borax 4.82% 7/1/99 ...................................................... 1,100,000 1,100,000
----------
8,434,173
----------

Principal Market
Amount Value

COMMERCIAL PAPER (continued)
Mortgage Bankers & Brokers-22.27%
Bear Stearns 4.98% 9/8/99 .................................................. 2,000,000 1,980,910
Credit Suisse First Boston
4.80% 8/4/99 ............................................................ 1,000,000 995,467
Credit Suisse First Boston
4.81% 8/3/99 ............................................................ 1,000,000 995,591
Goldman Sachs Group 4.84% 7/29/99 .......................................... 2,000,000 1,992,471
Merril Lynch 4.79% 7/16/99 ................................................. 2,000,000 1,996,008
Morgan (J.P.) 4.85% 7/13/99 ................................................ 2,000,000 1,996,768
Morgan Stanley Dean Witter
4.83% 7/9/99 ............................................................ 1,500,000 1,498,390
----------
11,455,605
----------
Total Commercial Paper ..................................................... 45,447,038
----------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Principal Market
Amount Value
<S> <C> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT-2.92%
Yankee-2.92%
Commerzbank 5.09% 2/16/00 ............................................... $ 1,500,000 1,499,681
----------
Total Certificates of Deposit ........................................... 1,499,681
----------

*FLOATING RATE NOTES-1.94%
Racers 4.94% 6/2/00 ..................................................... 1,000,000 1,000,000
----------
Total Floating Rate Notes ............................................... 1,000,000
----------

U.S. GOVERNMENT AGENCY OBLIGATIONS-3.85%
Federal Home Loan Mortgage Corporation
Discount Note 4.90% 9/10/99 ........................................... 2,000,000 1,980,672
----------
Total U.S. Government
Agency Obligations ..................................................... 1,980,672
----------

REPURCHASE AGREEMENTS-0.42%
With Chase Manhattan 4.65% 7/1/99
(dated 06/30/99, collateralized by $38,000
U.S. Treasury Notes 5.375% due 2/15/01,
market value $38,407 and $19,000 U.S.
Treasury Notes 4.65% due 9/30/01, market
value $19,441 and $16,000 U.S. Treasury
Notes 6.125% due 12/31/01, market
value $16,323) .......................................................... 72,000 $ 72,000
With J.P. Morgan Securities 4.70% 7/1/99
(dated 06/30/99, collateralized by $21,000
U.S. Treasury Notes 6.375% due 8/15/02,
market value $21,676 and $19,000 U.S.
Treasury Notes 6.25% due 8/31/02, market
value $19,500 and $13,000 U.S. Treasury
Notes due 11/30/02, market value $13,086 and
$19,000 U.S. Treasury Notes 5.50% due
1/31/03, market value $19,105) .......................................... 72,000 72,000
With PaineWebber 4.80% 7/1/99 (dated 6/30/99, collateralized by $18,000 U.S.
Treasury Bills 7.125% due 2/29/00, market value $18,483 and $19,000 U.S.
Treasury Notes 5.625% due 11/30/00, market value $18,997 and $38,000 U.S.
Treasury Notes 5.75% due 11/30/02,
market value $37,845) ................................................... 74,000 74,000
----------
Total Repurchase Agreements
(cost $218,000) ......................................................... 218,000
----------

TOTAL MARKET VALUE OF SECURITIES-97.49% (cost $50,145,389)**.......................... $50,145,391

RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-2.51%................................. 1,291,936
-----------
NET ASSETS APPLICABLE TO 5,143,733 SHARES ($0.01 PAR VALUE) OUTSTANDING;
EQUIVALENT TO $10.00 PER SHARE-100.00%............................................. $51,437,327
===========
</TABLE>

- ----------
* Floating Rate Notes-The interest rate shown is the rate as of June 30, 1999
and the maturity shown is the longer of the next interest readjustment date
or the date the principal amount shown can be recovered through demand.
** Also the cost for federal income tax purposes.

See accompanying notes

Cash Reserve-1

<PAGE>
Delaware Group Premium Fund, Inc.-
Cash Reserve Series
Statement of Operations
Six Months Ended June 30, 1999
(Unaudited)

INVESTMENT INCOME:
Interest ............................. $1,222,180
----------
1,222,180
----------
EXPENSES:
Management fees ...................... 111,699
Accounting and administration ........ 11,250
Professional fees .................... 1,195
Taxes (other than taxes on income) ... 765
Reports and statements to shareholders 725
Registration fees .................... 595
Directors' fees ...................... 589
Dividend disbursing and transfer agent
fees and expenses ................. 505
Custodian fees ....................... 300
Other ................................ 563
----------
128,186
----------

Less expenses paid indirectly ........ 563
----------
Total expenses ....................... 127,623
----------

NET INVESTMENT INCOME ................ 1,094,557
----------

NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................... $1,094,557
==========

See accompanying notes

<PAGE>

Delaware Group Premium Fund, Inc.-
Cash Reserve Series
Statements of Changes in Net Assets

Six Months Year
Ended 6/30/99 Ended
(Unaudited) 12/31/98
------------ ------------
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income ..................... $ 1,094,557 $ 2,120,119
------------ ------------
Net increase in net assets resulting
from operations ........................ 1,094,557 2,120,119
------------ ------------

DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ..................... (1,094,557) (2,120,119)
------------ ------------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ................. 86,695,141 94,961,957
Net asset value of shares issued upon
reinvestment of dividends from net
investment income ...................... 1,095,099 2,068,676
------------ ------------
87,790,240 97,030,633
Cost of shares repurchased ................ (79,245,968) (84,848,754)
------------ ------------
Increase in net assets derived from capital
share transactions ..................... 8,544,272 12,181,879
------------ ------------

NET INCREASE IN NET ASSETS ................ 8,544,272 12,181,879
------------ ------------

NET ASSETS:
Beginning of period ....................... 42,893,055 30,711,176
------------ ------------
End of period ............................. $ 51,437,327 $ 42,893,055
============ ============

See accompanying notes

Cash Reserve-2

<PAGE>

Delaware Group Premium Fund, Inc.-Cash Reserve Series
Financial Highlights

Selected data for each share of the Series outstanding throughout each period
were as follows:

<TABLE>
<CAPTION>
Six Months
Ended 6/30/99 Year Ended December 31,
(Unaudited)(1) 1998 1997 1996 1995 1994
-------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................... $10.000 $10.000 $10.000 $10.000 $10.000 $10.000

Income from investment operations:
Net investment income.................................. 0.224 0.497 0.497 0.482 0.535 0.361
------- ------- ------- ------- ------- -------
Total from investment operations....................... 0.224 0.497 0.497 0.482 0.535 0.361
------- ------- ------- ------- ------- -------

Less dividends:
Dividends from net investment income................... (0.224) (0.497) (0.497) (0.482) (0.535) (0.361)
------- ------- ------- ------- ------- -------
Total dividends........................................ (0.224) (0.497) (0.497) (0.482) (0.535) (0.361)
------- ------- ------- ------- ------- -------

Net asset value, end of period......................... $10.000 $10.000 $10.000 $10.000 $10.000 $10.000
======= ======= ======= ======= ======= =======

Total return........................................... 2.26% 5.08% 5.10% 4.93% 5.48% 3.68%

Ratios and supplemental data:
Net assets, end of period (000 omitted)................ $51,437 $42,893 $30,711 $26,479 $16,338 $20,125
Ratio of expenses to average net assets................ 0.53% 0.59% 0.64% 0.61% 0.62% 0.66%
Ratio of net investment income to average net assets... 4.51% 4.96% 4.98% 4.82% 5.35% 3.79%

</TABLE>
- ----------
(1) Ratios have been annualized and total return has not been annualized.

See accompanying notes

Cash Reserve-3
<PAGE>

Delaware Group Premium Fund, Inc.-Cash Reserve Series
Notes to Financial Statements
June 30, 1999
(Unaudited)

Delaware Group Premium Fund, Inc. (the "Fund") is registered as a diversified
open-end investment company under the Investment Company Act of 1940, as
amended. The Fund is organized as a Maryland Corporation and offers 17 series:
the Aggressive Growth Series, the Capital Reserves Series, the Cash Reserve
Series, the Convertible Securities Series, the Delaware Balanced Series
(formerly the Delaware Series), the DelCap Series, the Delchester Series, the
Devon Series, the Emerging Markets Series, the Global Bond Series, the Growth
and Income Series (formerly the Decatur Total Return Series), the International
Equity Series, the REIT Series, the Small Cap Value Series, the Social Awareness
Series, the Strategic Income Series, and the Trend Series. These financial
statements and the related notes pertain to the Cash Reserve 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 Series.

Security Valuation--Securities are valued at amortized cost, which approximates
market value.

The Cash Reserve Series declares dividends daily from net investment income and
pays such dividends monthly. Distributions from net realized gain on
investments, if any, normally will be distributed following the close of the
fiscal year.

Certain expenses of the Series are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price and execution. The
amount of these expenses was approximately $563 for the period ended June 30,
1999. The Series may receive earnings credits from its custodian when positive
cash balances are maintained, which are used to offset custody fees. There were
no earnings credits for the period ended June 30, 1999. The expenses paid under
the above arrangements are included in their respective expense captions on the
Statement of Operations with the corresponding expense offset shown as "Expenses
paid indirectly".

<PAGE>

DMC has elected to waive that portion, if any, of the annual management fee
payable to the extent necessary to ensure that annual operating expenses
exclusive of taxes, interest, brokerage commissions and extraordinary expenses
do not exceed 0.80% of average daily net assets of the Series through October
31, 1999. No reimbursement was due for the period ended June 30, 1999.

Cash Reserve-4

<PAGE>

Delaware Group Premium Fund, Inc.-Cash Reserve Series
Notes to Financial Statements (Continued)

On June 30, 1999, the Series had liabilities payable to affiliates as follows:

Certain officers of DMC and DSC are officers, directors and/or employees of the
Fund. These officers, directors and employees are paid no compensation by the
Fund.

3. Capital Stock
Transactions in capital stock shares were as follows:
<TABLE>
<CAPTION>
Shares issued upon
reinvestment of
dividends from net Shares Net
Shares sold investment income repurchased increase
----------- ----------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Period ended June 30, 1999........ 8,669,514 109,510 (7,924,597) 854,427
Year ended December 31, 1998...... 9,496,196 206,867 (8,484,875) 1,218,188
</TABLE>

Cash Reserve-5

<PAGE>
Delaware Group Premium Fund, Inc.-Cash Reserve Series
Proxy Results
(Unaudited)

For the six months ended June 30, 1999, Delaware Premium Fund, Inc. - Cash
Reserve Series shareholders voted on the following proposals at the annual
meeting of shareholders on March 17, 1999 or as adjourned. The description of
each proposal and number of shares voted are as follows:

1. To elect the Delaware Group Premium Fund, Inc. Board of Directors.

Shares Shares Voted
Voted Withheld
For Authority Abstain
--------- --------- -------
Jeffrey J. Nick............... 4,293,756 75,117 -
Walter P. Babich.............. 4,300,770 68,103 -
John H. Durham................ 4,300,770 68,103 -
Anthony D. Knerr.............. 4,300,770 68,103 -
Ann R. Leven.................. 4,291,007 77,866 -
Thomas F. Madison............. 4,291,007 77,866 -
Charles E. Peck............... 4,300,770 68,103 -
Wayne A. Stork................ 4,300,770 68,103 -
Jan L. Yeomans................ 4,300,770 68,103 -

3. To approve standardized fundamental investment restrictions (proposal
involves separate votes on seven sub-proposals 3A-3G).

3A. To adopt a new fundamental investment restriction concerning concentration
of the investments in the same industry.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
4,072,510 42,679 253,684

3C. To adopt a new fundamental investment restriction concerning underwriting.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
4,066,971 48,218 253,684

<PAGE>

3D. T adopt a new fundamental investment restriction concerning investments in
real estate.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
4,080,560 64,629 253,684

3F. To adopt a new fundamental investment restriction concerning lending by the
Fund.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
4,055,096 80,496 233,281

3G. To reclassify all current fundamental investment restrictions as
non-fundamental.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
4,060,208 78,384 233,281

4. To approve a new investment management agreement with Delaware Management
Company.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
4,080,440 55,152 233,281

Cash Reserve-6

<PAGE>

Delaware Group Premium Fund, Inc.-Convertible Securities Series
Statement of Net Assets
June 30, 1999 (Unaudited)

Principal Market
Amount Value
CONVERTIBLE BONDS-31.34%
Automobiles & Automotive Parts-4.41%
Magna International 4.875% 2/15/05 .............. $175,000 $ 172,594
Tower Automotive 5.00% 8/1/04 ................... 200,000 226,750
----------
399,344
----------
Banking, Finance & Insurance-1.50%
Bell Atlantic Financial Services
5.75% 4/1/03 ................................. 135,000 135,506
----------
135,506
----------
Cable, Media & Publishing-2.85%
Jacor Communications 0.00% 2/9/18 ............... 300,000 162,750
World Color Press 6.00% 10/1/07 ................. 100,000 95,000
----------
257,750
----------
Computers & Technology-9.01%
Amazon.com 4.75% 1/1/09 ......................... 155,000 154,031
Mindspring Enterprises 5.00% 4/15/06 ............ 310,000 292,563
National Data 5.00% 11/1/03 ..................... 200,000 211,500
Network Associates 0.00% 2/13/18 ................ 520,000 156,650
----------
814,744
----------
Consumer Products-2.45%
Pennzenergy 4.95% 8/15/08 ....................... 215,000 221,719
----------
221,719
----------
Food, Beverage & Tobacco-1.21%
Whole Foods Market 0.00% 3/2/18 ................. 300,000 109,125
----------
109,125
----------
Healthcare & Pharmaceuticals-2.06%
OmniCare 5.00% 12/1/07 .......................... 250,000 185,938
----------
185,938
----------
Industrial Machinery-4.30%
Thermo Fibertek 4.50% 7/15/04 ................... 140,000 116,725
Mail-Well 5.00% 11/1/02 ......................... 250,000 272,188
----------
388,913
----------
Metals & Mining-2.21%
MascoTech 4.50% 12/15/03 ........................ 250,000 200,000
----------
200,000
----------
Retail-1.34%
Rite Aid 5.25% 9/15/02 .......................... 120,000 121,350
----------
121,350
----------
Total Convertible Bonds
(cost $2,914,163) ............................ 2,834,389
----------

Number
of Shares
COMMON STOCK-19.28%
Automobiles & Automotive Parts-2.71%
Delphi Automotive Systems ....................... 2,167 40,219
General Motors .................................. 3,100 204,600
----------
244,819
----------
Energy-4.43%
Exxon ........................................... 2,500 192,813
Mobil ........................................... 2,100 207,900
----------
400,713
----------
Real Estate-10.13%
Grove Property Trust ............................ 15,200 197,600
Public Storage .................................. 10,400 291,200
SL Green Realty ................................. 9,700 198,244
Starwood Hotels & Resorts Trust ................. 7,500 229,219
----------
916,263
----------

<PAGE>

Number Market
of Shares Value
COMMON STOCK (Continued)
Telecommunications-0.05%
Winstar Communications .......................... 92 $ 4,488
----------
4,488
----------
Transportation & Shipping-1.96%
Alexander & Baldwin ............................. 8,000 177,500
----------
177,500
----------
Total Common Stock
(cost $1,635,344) ............................ 1,743,783
----------

CONVERTIBLE PREFERRED STOCKS-42.87%
Banking, Finance & Insurance-7.43%
American General Series A 6.00% ................. 2,500 233,750
American Heritage Life Investment
8.50% ........................................ 4,100 271,113
National Australia Bank-Units 7.875% ............ 5,500 167,063
----------
671,926
----------
Buildings & Materials-2.92%
Kaufman and Broad Home 8.25% .................... 33,000 264,000
----------
264,000
----------
Cable, Media & Publishing-2.49%
Tribune 6.25% ................................... 8,000 225,000
----------
225,000
----------
Computers & Technology-3.39%
DECS Trust IV 7.00% ............................. 47,000 306,968
----------
306,968
----------
Consumer Products-2.72%
Newell Financial Trust I 5.25% .................. 4,400 245,850
----------
245,850
----------
Paper & Forest Products-1.46%
International Paper 5.25% ....................... 2,500 131,875
----------
131,875
----------
Real Estate-6.66%
General Growth Properties 7.25% ................. 7,400 177,600
Kimco Realty 7.50% .............................. 5,900 144,550
Reckson Associates Realty 7.625% ................ 12,300 280,594
----------
602,744
----------
Telecommunications-6.28%
Comcast 3.35% ................................... 3,500 303,625
Winstar Communications 7.00% .................... 4,600 264,500
----------
568,125
----------
Transportation-2.59%
Union Pacific Capital Trust 6.25% ............... 4,500 234,000
----------
234,000
----------
Utilities-5.57%
Houston Industries 7.00% ........................ 1,500 178,875
Texas Utilities 9.25% ........................... 5,900 324,500
----------
503,375
----------
Miscellaneous-1.36%
Central Parking Finance Trust 5.25% ............. 6,000 123,000
----------
123,000
----------
Total Convertible Preferred Stocks
(cost $3,725,331) ............................ 3,876,863
----------

Convertible Securities-1

<PAGE>

Convertible Securities Series
Statement of Net Assets (Continued)

Principal Market
Amount Value
REPURCHASE AGREEMENTS-13.21%
With Chase Manhattan 4.65%
7/1/99 (dated 6/30/99,
collateralized by $207,000
U.S. Treasury Notes 6.375% due
2/15/01, market value $210,366 and
$104,000 U.S. Treasury Notes
6.375% due 9/30/01, market value
$106,481 and $89,000 U.S. Treasury
Notes 6.125% due 12/31/01,
market value $89,403) ........................ $396,000 $396,000
With J.P. Morgan Securities 4.70%
7/1/99 (dated 6/30/99,
collateralized by $114,000
U.S. Treasury Notes 6.375% due
8/15/02, market value $118,276
and $104,000 U.S. Treasury Notes
6.25% due 08/31/02, market value
$106,807 and $72,000 U.S. Treasury
Notes 5.75% due 11/30/02, market
value $71,677 and $104,000
U.S. Treasury Notes 5.50% due
1/31/03, market value $104,642) .............. 394,000 394,000

Principal Market
Amount Value
REPURCHASE AGREEMENTS (Continued)
With PaineWebber 4.80% 7/1/99
(dated 6/30/99, collateralized by
$98,000 U.S. Treasury Notes
7.125% due 2/29/00, market value
$101,236 and $104,000
U.S. Treasury Notes 5.625% due
11/30/00, market value $104,053
and $207,000 U.S. Treasury Notes
5.75% due 11/30/02,
market value $207,286) ....................... $404,000 $ 404,000
----------

Total Repurchase Agreements
(cost $1,194,000) ............................ 1,194,000
----------

TOTAL MARKET VALUE OF SECURITIES-106.70% (cost $9,468,838) .... $9,649,035

LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS-(6.70%) ....... (605,756)
----------

NET ASSETS APPLICABLE TO 822,188 SHARES ($0.01 par value)
OUTSTANDING; EQUIVALENT TO $11.00 PER SHARE-100.00% ........ $9,043,279
==========

See accompanying notes

Convertible Securities-2

<PAGE>

Delaware Group Premium Fund, Inc.-
Convertible Securities Series
Statement of Operations
Six Months Ended June 30, 1999
(Unaudited)

INVESTMENT INCOME:
Dividends .................................................... $128,448
Interest ..................................................... 87,982
--------
216,430
--------
Expenses:
Management fees .............................................. 31,323
Accounting and administration ................................ 1,629
Registration fees ............................................ 422
Dividend disbursing and transfer agent
fees and expenses ......................................... 369
Custodian fees ............................................... 336
Directors' fees .............................................. 232
Other ........................................................ 576
--------
34,887
--------

Less expenses absorbed or waived ............................. (210)
Less expenses paid indirectly ................................ (467)
--------
Total expenses ............................................... 34,210
--------

NET INVESTMENT INCOME ........................................ 182,220
--------

NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investments ............................. 78,255
Net change in unrealized appreciation/
depreciation of investments ............................... (44,957)
--------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS ....................................... 33,298
--------

NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................................. $215,518
========

See accompanying notes

<PAGE>

Delaware Group Premium Fund, Inc.-
Convertible Securities Series
Statements of Changes in Net Assets

Six Months
Ended Year
6/30/99 Ended
(Unaudited) 12/31/98
----------- --------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income ........................... $ 182,220 $ 294,141
Net realized gain (loss) on investments ......... 78,255 (444,857)
Net change in unrealized appreciation/
depreciation of investments .................. (44,957) (26,655)
---------- ----------
Net increase (decrease) in net assets
resulting from operations .................... 215,518 (177,371)
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ........................... (292,545) (110,178)
Net realized gain on investments ................ - (25,287)
---------- ----------
(292,545) (135,465)
---------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ....................... 1,927,355 5,903,108
Net asset value of shares issued upon
reinvestment of distributions from net
investment income and net realized
gain on investments .......................... 292,545 135,465
---------- ----------
2,219,900 6,038,573
Cost of shares repurchased ...................... (1,232,547) (1,514,161)
---------- ----------
Increase in net assets derived from capital
share transactions ........................... 987,353 4,524,412
---------- ----------
NET INCREASE IN NET ASSETS ...................... 910,326 4,211,576
---------- ----------
NET ASSETS:
Beginning of period ............................. 8,132,953 3,921,377
---------- ----------
End of period ................................... $9,043,279 $8,132,953
========== ==========

See accompanying notes

Convertible Securities-3

<PAGE>

Delaware Group Premium Fund, Inc.-Convertible Securities Series
Financial Highlights

Selected data for each share of the Series outstanding throughout each period
were as follows:

Six Months Year 5/1/97(2)
Ended 6/30/99 Ended to
(Unaudited)(1) 12/31/98 12/31/97
-------------- -------- ---------
<S> <C> <C> <C>
Net asset value, beginning of period ................... $11.160 $11.660 $10.000

Income (loss) from investment operations:
Net investment income .................................. 0.231 0.386 0.318
Net realized and unrealized gain (loss) on
investments ......................................... 0.019 (0.511) 1.342
------- ------- -------
Total from investment operations ....................... 0.250 (0.125) 1.660
------- ------- -------
Less dividends and distributions:
Dividends from net investment income ................... (0.410) (0.305) none
Distributions from net realized gain on
investments ......................................... none (0.070) none
------- ------- -------
Total dividends and distributions ...................... (0.410) (0.375) none
------- ------- -------
Net asset value, end of period ......................... $11.000 $11.160 $11.660
======= ======= =======
Total return ........................................... 2.41% (1.17%) 16.60%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $9,043 $8,133 $3,921
Ratio of expenses to average net assets ................ 0.82% 0.82% 0.80%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid
indirectly .......................................... 0.84% 0.82% 2.30%
Ratio of net investment income to average net assets ... 4.40% 4.78% 5.68%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid
indirectly .......................................... 4.38% 4.78% 4.18%
Portfolio turnover ..................................... 44% 77% 209%
</TABLE>

- ----------------------
(1)Ratios have been annualized and total return has not been annualized.
(2)Date of commencement of operations; ratios have been annualized and total
return has not been annualized.

See accompanying notes

Convertible Securities-4

<PAGE>

Delaware Group Premium Fund, Inc.-Convertible Securities Series
Notes to Financial Statements
June 30, 1999
(Unaudited)

Delaware Group Premium Fund, Inc. (the "Fund") is registered as a diversified
open-end investment company under the Investment Company Act of 1940, as
amended. The Fund is organized as a Maryland Corporation and offers 17 series:
the Aggressive Growth Series, the Capital Reserves Series, the Cash Reserve
Series, the Convertible Securities Series, the Delaware Balanced Series
(formerly the Delaware Series), the DelCap Series, the Delchester Series, the
Devon Series, the Emerging Markets Series, the Global Bond Series, the Growth
and Income Series (formerly the Decatur Total Return Series), the International
Equity Series, the REIT Series, the Small Cap Value Series, the Social Awareness
Series, the Strategic Income Series, and the Trend Series. These financial
statements and the related notes pertain to the Convertible Securities 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 Series.

Security Valuation--Securities listed on an exchange are valued at the lasted
quoted sales price as of the close of the NYSE on the valuation date. Securities
not traded or securities not listed on an exchange are valued at the mean of the
last quoted bid and asked prices. Long-term debt securities are valued by an
independent pricing service and such prices are believed to reflect the fair
value of such securities. Money market instruments having less than 60 days to
maturity are valued at amortized cost, which approximates market value. Other
securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Fund's Board of Directors.

Other - Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. Original issue discounts are accreted to interest
income over the lives of the respective securities.

The Convertible Securities Series will make payments from net investment income
and net realized gain on investments, if any, following the close of the fiscal
year.

<PAGE>

Certain expenses of the Fund are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price and execution. The
amount of these expenses was approximately $96 for the period ended June 30,
1999. The Fund may receive earnings credits from its custodian when positive
cash balances are maintained, which are used to offset custody fees. These
credits were $371 for the period ended June 30, 1999. The expenses paid under
the above arrangements are included in their respective expense captions on the
Statement of Operations with the corresponding expense offset shown as "Expenses
paid indirectly".

Convertible Securities-5

<PAGE>

Convertible Securities Series
Notes to Financial Statements (Continued)

On June 30, 1999, the Series had liabilities payable to affiliates as follows:

Certain officers of DMC and DSC are officers, directors and/or employees of the
Fund. These officers, directors and employees are paid no compensation by the
Fund.

3. Investments
During the period ended June 30, 1999, the Series made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:

Purchases ..................................... $2,696,188
Sales ......................................... $1,686,476

For federal income tax purposes, the Series had accumulated capital losses at
December 31, 1998 as follows:

Year of
expiration
2006
----------
$444,857

4. Capital Stock
Transactions in capital stock shares were as follows:

<TABLE>
<CAPTION>
Shares issued upon
reinvestment of distributions
from net investment
income and net realized Shares Net
Shares sold gain on investments repurchased increase
----------- ----------------------------- ----------- --------
<S> <C> <C> <C> <C>
Period ended June 30, 1999 ................ 177,145 27,782 (111,287) 93,640
Year ended December 31, 1998 .............. 522,662 12,084 (142,453) 392,293
</TABLE>

5. Credit and Market Risk
The 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 Series may invest up to 15% 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 Series' ability
to dispose of such securities in a timely manner and at a fair price when it is
necessary to liquidate such securities.

Convertible Securities-6
<PAGE>

Delaware Group Premium Fund, Inc.-Convertible Securities Series
Proxy Results
(Unaudited)

For the six months ended June 30, 1999, Delaware Premium Fund, Inc. -
Convertible Securities Series shareholders voted on the following proposals at
the annual meeting of shareholders on March 17, 1999 or as adjourned. The
description of each proposal and number of shares voted are as follows:

1. To elect the Delaware Group Premium Fund, Inc. Board of Directors.

Shares Shares Voted
Voted Withheld
For Authority Abstain
------- ------------ -------
Jeffrey J. Nick .................... 512,249 3,501 -
Walter P. Babich ................... 512,249 3,501 -
John H. Durham ..................... 512,249 3,501 -
Anthony D. Knerr ................... 512,249 3,501 -
Ann R. Leven ....................... 512,249 3,501 -
Thomas F. Madison .................. 512,249 3,501 -
Charles E. Peck .................... 512,249 3,501 -
Wayne A. Stork ..................... 512,249 3,501 -
Jan L. Yeomans ..................... 512,249 3,501 -

3. To approve standardized fundamental investment restrictions (proposal
involves separate votes on seven sub-proposals 3A-3G).

3A. To adopt a new fundamental investment restriction concerning concentration
of the investments in the same industry.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
478,671 5,609 31,471

3B. To adopt a new fundamental investment restriction concerning borrowing money
and issuing senior securities.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
478,671 5,609 31,471

3C. To adopt a new fundamental investment restriction concerning underwriting.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
474,135 5,609 36,007

<PAGE>

3D. To adopt a new fundamental investment restriction concerning investments in
real estate.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
474,135 5,609 36,007

3E. To adopt a new fundamental investment restriction concerning investments in
commodities.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
474,135 5,609 36,007

3F. To adopt a new fundamental investment restriction concerning lending by the
Fund.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
474,135 5,609 36,007

3G. To reclassify all current fundamental investment restrictions as
non-fundamental.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
479,744 36,007

4. To approve a new investment management agreement with Delaware Management
Company.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
478,671 5,609 31,471

5. To ratify the selection of Ernst & Young LLP, as the independent auditors for
Delaware Group Premium Fund, Inc.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
490,844 24,906

6. To approve the restructuring of Delaware Group Premium Fund, Inc. from a
Maryland Corporation into a Delaware Business Trust.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
488,248 27,502

Convertible Securities-7

<PAGE>
Delaware Group Premium Fund, Inc.-Delaware Balanced Series
(formerly Delaware Series)
Statement of Net Assets
June 30, 1999 (Unaudited)
Number of Market
Shares Value
COMMON STOCK-72.62%
Automobiles & Automotive Parts-2.28%
Danaher ....................................... 31,500 $ 1,830,938
Federal Signal ................................ 136,900 2,900,569
-----------
4,731,507
-----------
Banking, Finance & Insurance-11.50%
AFLAC ......................................... 55,700 2,666,638
American International Group .................. 22,725 2,660,245
Bank One ...................................... 50,200 2,990,038
Compass Bancshares ............................ 52,800 1,440,450
Equifax ....................................... 110,700 3,950,606
Federal Home Loan Mortgage .................... 75,900 4,402,200
Nationwide Financial Services ................. 51,100 2,312,275
Unionbancal Corporation ....................... 43,200 1,560,600
*Unum .......................................... 33,500 1,834,125
-----------
23,817,177
-----------
Buildings & Materials-3.19%
Masco ......................................... 174,900 5,050,238
Premark International ......................... 41,900 1,571,250
-----------
6,621,488
-----------
Cable, Media & Publishing-0.74%
Wallace Computer Services ..................... 61,400 1,535,000
-----------
1,535,000
-----------
Chemicals-0.80%
Valspar ....................................... 43,700 1,660,600
-----------
1,660,600
-----------
Computers & Technology-6.79%
Computer Associates International ............. 57,800 3,179,000
Hewlett-Packard ............................... 58,500 5,879,250
International Business Machines ............... 24,500 3,166,625
*SunGard Data Systems .......................... 54,300 1,873,350
-----------
14,098,225
-----------
Consumer Products-2.23%
Dial .......................................... 124,700 4,637,281
-----------
4,637,281
-----------
Electronics and Electrical Equipment-5.88%
Honeywell ..................................... 19,300 2,236,388
Intel ......................................... 50,000 2,973,438
Symbol Technologies ........................... 141,900 5,232,563
Teleflex ...................................... 40,800 1,772,250
-----------
12,214,639
-----------
Energy-3.75%
Anadarko Petroleum ............................ 20,000 736,250
BP Amoco ADR .................................. 17,676 1,917,846
+Compagnie Francaise
de Petroleum Total ........................... 34,258 2,207,500
Schlumberger Limited .......................... 29,100 1,853,306
Unocal ........................................ 26,900 1,065,913
-----------
7,780,815
-----------
Environmental Services-2.87%
Ecolab ........................................ 136,600 5,959,175
-----------
5,959,175
-----------
Food, Beverage & Tobacco-2.10%
Bestfoods ..................................... 30,400 1,504,800
*Suiza Foods ................................... 20,200 845,875
Universal Foods ............................... 96,200 2,032,225
-----------
4,382,900
-----------
- ---------------
Top 10 stock holdings, representing 26.6% of net assets, are in bold.
<PAGE>

Number of Market
Shares Value
COMMON STOCK (Continued)
Funeral Services-1.85%
Stewart Enterprises ......................... 265,300 $ 3,855,141
-----------
3,855,141
-----------
Healthcare & Pharmaceuticals-9.64%
American Home Products ...................... 100,200 5,761,500
AstraZeneca ADR ............................. 31,900 1,250,081
Biomet ...................................... 52,800 2,095,500
Johnson & Johnson ........................... 26,300 2,577,400
+Mylan Laboratories .......................... 236,200 6,259,300
*Watson Pharmaceutical ....................... 59,400 2,082,713
-----------
20,026,494
-----------
Industrial Machinery-0.85%
Pentair ..................................... 38,500 1,761,375
-----------
1,761,375
-----------
Real Estate-1.62%
CarrAmerica Realty .......................... 18,400 460,000
Developers Diversified Realty ............... 85,200 1,416,450
Nationwide Health Properties ................ 33,900 646,219
Sun Communities ............................. 23,600 837,800
-----------
3,360,469
-----------
Retail-5.13%
Food Lion Class A ........................... 147,600 1,757,363
+Intimate Brands ............................. 56,280 2,666,265
Rite Aid .................................... 73,200 1,802,550
Sherwin-Williams ............................ 64,600 1,792,650
Storage USA ................................. 20,800 663,000
Viad ........................................ 63,700 1,970,719
-----------
10,652,547
-----------
Telecommunications-5.70%
ALLTEL ...................................... 30,000 2,145,000
Cincinnati Bell ............................. 68,000 1,695,750
GTE ......................................... 24,000 1,816,500
Nortel Networks ............................. 11,100 963,619
SBC Communications .......................... 89,700 5,202,600
-----------
11,823,469
-----------
Textiles, Apparel & Furniture-1.85%
Hillenbrand Industries ...................... 40,800 1,764,600
HON Industries .............................. 72,000 2,101,500
-----------
3,866,100
-----------
Utilities-0.65%
CMS Energy .................................. 32,000 1,340,000
-----------
1,340,000
-----------
Miscellaneous-3.20%
Tyco International .......................... 70,100 6,641,975
-----------
6,641,975
-----------
Total Common Stock
(cost $123,701,579) ........................ 150,766,377
-----------

CONVERTIBLE PREFERRED STOCK-1.29%
Freeport McMoRan Copper & Gold .............. 37,600 705,000
Sealed Air $2.00 4/1/08 Series A ............ 31,573 1,973,310
-----------
Total Convertible Preferred Stock
(cost $2,197,166) .......................... 2,678,310
-----------

Delaware-1
<PAGE>
Delaware Balanced Series
Statement of Net Assets (Continued)

Principal Market
Amount Value
AGENCY MORTGAGE-BACKED
SECURITIES-0.44%
Federal National Mortgage Association
5.75% 4/15/03 ................................... $ 295,000 $ 287,079
6.00% 5/15/08 ................................... 620,000 614,133
----------
Total Agency Mortgage-Backed
Securities (cost $ 962,992) ..................... 901,212
----------
ASSET-BACKED SECURITIES-2.83%
AFC Home Equity Loan Trust
6.95% 6/25/24 ................................... 6,239 6,240
American Finance Home Equity
8.00% 7/25/06 ................................... 4,111 4,186
California Infrastructure PG and E
Series 97-1 A4 6.16% 6/25/03 .................... 640,000 641,152
CITRV Series 98-A A5 6.12% 7/15/14 ............... 535,000 528,313
Discover Card Master Trust
Series 99-2 A 5.90% 10/15/04 .................... 810,000 806,583
EQCC Home Equity Loan Trust
Series 96-4 A6 6.88% 7/15/14 .................... 605,000 608,025
Series 98-2 A3F 6.229% 3/15/13 .................. 625,000 622,383
MetLife Capital Equipment Loan Trust
6.85% 5/20/08 ................................... 420,000 423,612
NationsCredit Grantor Trust
Series 96-1A 5.85% 9/15/11 ...................... 247,195 243,422
Series 97-1A 6.75% 8/15/13 ...................... 688,342 691,170
Neiman Marcus Group Series 95-1A
7.60% 6/15/03 ................................... 180,000 185,161
Peco Energy Transition Trust Series
99A A4 5.80% 3/1/07 ............................. 785,000 758,016
Philadelphia, Pennsylvania
Industrial Development Authority
Revenue Series 97 6.488% 6/15/04 ................ 360,002 356,402
----------
Total Asset-Backed Securities
(cost $5,935,858) ............................... 5,874,665
----------
COLLATERALIZED MORTGAGE-BACKED
OBLIGATIONS-3.38%
Asset Securitization
Series 96-D3 A1B 7.21% 10/13/26 ................. 360,000 367,369
Series 97-D4 A1A 7.35% 4/14/29 .................. 187,448 190,611
Series 97-D5 A2 7.069% 2/14/41 .................. 480,000 456,675
Series 97-D5 A3 7.119% 2/14/41 .................. 375,000 350,742
Series 97-MD7 A3 7.842% 1/13/30 ................. 400,000 406,500
Chase Commercial Mortgage Securities
Series 96-2 C 6.90% 11/19/06 .................... 250,000 243,750
Federal National Mortgage Association
Whole Loan 6.50% 7/25/28 ........................ 575,000 571,406
First Union Chase Commercial
Mortgage Series 99-C2 A2
6.650% 4/15/09 .................................. 1,175,000 1,151,684
Government National Mortgage Association
Series 98-9 B 6.85% 12/20/25 .................... 810,000 791,100
Lehman Large Loan Series 97-LLI A1
6.79% 6/12/04 ................................... 427,945 430,469
Mortgage Capital Funding
Series 96-MC2-C 7.224% 9/20/06 .................. 380,000 378,248

<PAGE>

Principal Market
Amount Value
COLLATERALIZED MORTGAGE-BACKED
OBLIGATIONS (Continued)
Nomura Asset Securities
Series 93-1 A1 6.68% 12/15/01 ................ $ 319,632 $ 319,932
Series 95-MD3 A1A 8.17% 3/4/20 ............... 298,187 304,244
Series 96-MD5 A3 7.638% 4/13/36 .............. 340,000 348,022
Residential Accredit Loans
Series 97-QS3 A3 7.50% 4/25/27 ............... 215,681 215,440
Series 98-QS9 A3 6.75% 7/25/28 ............... 500,000 498,008
----------
Total Collateralized Mortgage
Obligations (cost $7,187,753) ................ 7,024,200
----------
MORTGAGE-BACKED SECURITIES-3.90%
Federal Home Loan Mortgage
Corporation-Gold
6.00% 3/1/11 ................................. 169,117 164,202
7.00% 4/1/29 ................................. 1,217,201 1,206,170
Federal National Mortgage Association
6.00% 4/1/13 ................................. 644,152 623,015
6.00% 5/1/13 ................................. 339,921 328,767
6.00% 10/1/28 ................................ 493,661 464,042
6.50% 5/1/29 ................................. 2,788,165 2,693,193
7.00% 7/1/28 ................................. 890,309 881,684
7.00% 8/1/28 ................................. 431,686 427,504
7.00% 12/1/28 ................................ 785,324 777,470
7.50% 6/1/28 ................................. 374,361 379,041
9.50% 6/1/19 ................................. 143,663 154,438
----------
Total Mortgage-Backed Securities
(cost $8,319,044) ............................ 8,099,526
----------
CORPORATE BONDS-7.15%
ABN-AMRO Bank NV 8.25% 8/1/09 ................. 80,000 84,200
American Financial Group
7.125% 4/15/09 ............................... 280,000 262,850
AT&T Capital 6.75% 2/4/02 ..................... 785,000 778,131
Banco Santander 6.50% 11/1/05 ................. 360,000 347,400
Banco Santiago 7.00% 7/18/07 .................. 280,000 240,450
CIT Group Holdings 5.625% 10/15/03 ............ 710,000 684,263
Commercial Credit 6.50% 8/1/04 ................ 450,000 443,813
Consumers Energy 6.375% 2/1/08 ................ 380,000 357,200
Cox Communications 6.15% 8/1/03 ............... 455,000 444,763
Credit Foncier de France 8.00% 1/14/02 ........ 370,000 381,563
Fairfax Financial Holdings
7.375% 3/15/06 ............................... 160,000 155,000
+Fannie Mae 4.625% 10/15/01 .................... 490,000 477,886
Ford Motor Credit 5.75% 2/23/04 ............... 655,000 632,894
General Electric Capital 5.89% 5/11/01 ........ 670,000 669,163
Household Finance 6.50% 11/15/08 .............. 775,000 741,094
Lehman Brothers 6.625% 2/5/06 ................. 795,000 763,200
MCI Communications 6.125% 4/15/02 ............. 350,000 346,500
MCI Worldcom 7.55% 4/1/04 ..................... 1,050,000 1,081,500
Meritor Auto 6.80% 2/15/09 .................... 1,085,000 1,030,750
Raytheon 5.95% 3/15/01 ........................ 350,000 349,125
Southern Investments 6.375% 11/15/01 .......... 250,000 250,313
Summit Bank 6.75% 6/15/03 ..................... 320,000 319,200
Tommy Hilfiger 6.85% 6/1/08 ................... 810,000 767,475
+Travelers Property Casualty
6.75% 4/15/01 ................................ 775,000 779,844

Delaware-2
<PAGE>

Delaware Balanced Series
Statement of Net Assets (Continued)

Principal Market
Amount Value
CORPORATE BONDS (Continued)
United Health Care 6.60% 12/1/03 ........... $ 665,000 $ 646,713
United News and Media 7.75% 7/1/09 ......... 560,000 558,600
U.S. Bancorp 8.125% 5/15/02 ................ 430,000 449,350
U.S. Bank N.A. 6.50% 2/1/08 ................ 450,000 437,625
USA Waste Services 6.125% 7/15/01 .......... 360,000 358,200
----------
Total Corporate Bonds
(cost $15,231,236) ........................ 14,839,065
----------
U.S. TREASURY OBLIGATIONS-7.29%
U.S. Treasury Bond
+6.125% 11/15/27 .......................... 535,000 531,038
7.50% 11/15/16 ........................... 825,000 929,496
U.S. Treasury Notes
+4.50% 1/31/01 ............................ 405,000 399,283
4.75% 2/15/04 ............................ 1,455,000 1,394,981
+4.75% 11/15/08 ........................... 1,630,000 1,496,410
5.25% 5/31/01 ............................ 495,000 492,754
5.50% 3/31/03 ............................ 2,925,000 2,899,399
+5.50% 2/15/08 ............................ 4,650,000 4,522,271
+5.875% 9/30/02 ........................... 400,000 401,891
+5.875% 11/15/05 .......................... 300,000 299,268
6.375% 8/15/27 ........................... 875,000 896,363
6.50% 10/15/06 ........................... 850,000 877,735
----------
Total U.S. Treasury Obligations
(cost $15,753,633) ........................ 15,140,889
----------
<PAGE>

Principal Market
Amount Value
REPURCHASE AGREEMENTS-0.56%
With Chase Manhattan 4.65%
7/1/99 (dated 6/30/99,
collateralized by
$200,000 U.S. Treasury
Notes 5.375% due
2/15/01, market value
$203,312 and $100,000
U.S. Treasury Notes
6.375% due 9/30/01,
market value $102,910
and $86,000 U.S.
Treasury Notes 6.125%
due 12/31/01,
market value $86,405) .............................. $383,000 $383,000
With J.P. Morgan Securities 4.70%
7/1/99 (dated 6/30/99,
collateralized by
$111,000 U.S. Treasury
Notes 6.375% due
8/15/02, market value
$114,745 and $100,000
U.S. Treasury Notes
6.25% due 8/31/02,
market value $103,226
and $69,000 U.S.
Treasury Notes 5.75% due
11/30/02, market value
$69,274 and $100,000
U.S. Treaury Notes 5.50%
due 1/31/03, market value
$101,133) .......................................... 380,500 380,500
With PaineWebber 4.80%
7/1/99 (dated 6/30/99,
collateralized by
$95,000 U.S. Treasury
Notes 7.125% due
2/29/00, market value
$97,842 and $100,000
U.S. Treasury Notes
5.625% due 11/30/00,
market value $100,564
and $200,000 U.S.
Treasury Notes 5.75% due
11/30/02, market value
$200,336) .......................................... 390,500 390,500
----------
Total Repurchase Agreements
(cost $1,154,000)................................... $1,154,000
----------

TOTAL MARKET VALUE OF SECURITIES-99.46% (cost $180,443,261).........$206,478,244

RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-0.54% .............. 1,127,539
------------
NET ASSETS APPLICABLE TO 10,995,494 SHARES ($0.01 PAR VALUE)
OUTSTANDING; EQUIVALENT TO $18.88 PER SHARE-100.00% ...............$207,605,783
============
COMPONENTS OF NET ASSETS AT JUNE 30, 1999:
Common stock, $0.01 par value, 1,000,000,000 shares authorized to the
Fund with 50,000,000 shares allocated to the Series.................$172,540,810

Undistributed net investment income................................. 1,380,348
Accumulated net realized gain on investments ....................... 7,649,642
Net unrealized appreciation of investments ......................... 26,034,983
------------
Total net assets ...................................................$207,605,783
============
- ------------
* Non-income producing security for the period ended June 30, 1999.
+ Security is partially or fully on loan.
ADR-American Depository Receipt

See accompanying notes

Delaware-3

<PAGE>

Delaware Group Premium Fund, Inc.-
Delaware Balanced Series
Statement of Operations
Six Months Ended June 30, 1999
(Unaudited)

INVESTMENT INCOME:
Interest .................................................. $ 1,785,268
Dividends ................................................. 1,026,374
-----------
2,811,642
-----------
EXPENSES:
Management fees ........................................... 625,848
Accounting and administration ............................. 39,778
Professional fees ......................................... 14,200
Reports and statements to shareholders .................... 11,950
Registration fees ......................................... 5,050
Dividend disbursing and transfer agent
fees and expenses ...................................... 2,815
Custodian fees ............................................ 2,300
Directors' fees ........................................... 1,892
Taxes (other than taxes on income) ........................ 2,899
Other ..................................................... 10,863
-----------
717,595
-----------
Less expenses paid indirectly ............................. (2,337)
-----------
Total expenses ............................................ 715,258
-----------

NET INVESTMENT INCOME ..................................... 2,096,384
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investments .......................... 7,441,906
Net change in unrealized appreciation /
depreciation of investments ............................ (9,465,670)
-----------
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS ......................................... (2,023,764)
-----------

NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ........................................ $ 72,620
===========
See accompanying notes

<PAGE>
Delaware Group Premium Fund, Inc. -
Delaware Balanced Series
Statements of Changes in Net Assets

Six Months Year
Ended 6/30/99 Ended
(Unaudited) 12/31/98
------------- --------
INCREASE IN NET ASSETS FROM
OPERATIONS:
Net investment income ..................... $ 2,096,384 $ 3,569,141
Net realized gain on investments .......... 7,441,906 9,851,624
Net change in unrealized appreciation /
depreciation of investments ............ (9,465,670) 15,510,399
------------ ------------
Net increase in net assets
resulting from operations .............. 72,620 28,931,164
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ..................... (3,167,586) (3,221,563)
Net realized gain on investments .......... (8,349,774) (12,969,759)
------------ ------------
(11,517,360) (16,191,322)
------------ ------------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ................. 19,341,844 50,954,284
Net asset value of shares issued upon
reinvestment of distributions from
net investment income and net realized
gain on investments .................... 11,517,360 16,191,322
------------ ------------
30,859,204 67,145,606
Cost of shares repurchased ................ (13,664,205) (5,705,268)
------------ ------------
Increase in net assets derived from capital
share transactions ..................... 17,194,999 61,440,338
------------ ------------

NET INCREASE IN NET ASSETS ................ 5,750,259 74,180,180
------------ ------------

NET ASSETS:
Beginning of period ....................... 201,855,524 127,675,344
------------ ------------
End of period ............................. $207,605,783 $201,855,524
============ ============

See accompanying notes

Delaware-4

<PAGE>

Delaware Group Premium Fund, Inc.-Delaware Balanced Series
Financial Highlights

Selected data for each share of the Series outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
Six Months
Ended 6/30/99 Year Ended December 31,
(Unaudited)(1) 1998 1997 1996 1995 1994
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................. $20.040 $19.050 $16.640 $15.500 $12.680 $13.330

Income (loss) from investment operations:
Net investment income ................................. 0.182 0.349 0.435 0.530 0.509 0.437
Net realized and unrealized gain (loss)
on investments ..................................... (0.272) 2.831 3.575 1.765 2.761 (0.447)
------- ------- ------- ------- ------- -------
Total from investment operations ...................... (0.090) 3.180 4.010 2.295 3.270 (0.010)
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income .................. (0.300) (0.420) (0.530) (0.500) (0.450) (0.340)
Distributions from net realized gain
on investments ..................................... (0.770) (1.770) (1.070) (0.655) none (0.300)
------- ------- ------- ------- ------- -------
Total dividends and distributions ..................... (1.070) (2.190) (1.600) (1.155) (0.450) (0.640)
------- ------- ------- ------- ------- -------

Net asset value, end of period ........................ $18.880 $20.040 $19.050 $16.640 $15.500 $12.680
======= ======= ======= ======= ======= =======
Total return .......................................... (0.14%) 18.62% 26.40% 15.91% 26.58% (0.15%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) ............... $207,606 $201,856 $127,675 $75,402 $63,215 $47,731
Ratio of expenses to average net assets ............... 0.71% 0.70% 0.67% 0.68% 0.69% 0.70%
Ratio of net investment income to average net assets .. 2.08% 2.20% 2.85% 3.56% 3.75% 3.71%
Portfolio turnover .................................... 74% 94% 67% 92% 106% 140%
</TABLE>

- -------------
(1) Ratios have been annualized and total return has not been annualized.

See accompanying notes

Delaware-5

<PAGE>
Delaware Group Premium Fund, Inc.-Delaware Balanced Series
Notes to Financial Statements
June 30, 1999
(Unaudited)

Delaware Group Premium Fund, Inc. (the "Fund") is registered as a diversified
open-end investment company under the Investment Company Act of 1940, as
amended. The Fund is organized as a Maryland Corporation and offers 17 series:
the Aggressive Growth Series, the Capital Reserves Series, the Cash Reserve
Series, the Convertible Securities Series, the Delaware Balanced Series
(formerly the Delaware Series), the DelCap Series, the Delchester Series, the
Devon Series, the Emerging Markets Series, the Global Bond Series, the Growth
and Income Series (formerly the Decatur Total Return Series), the International
Equity Series, the REIT Series, the Small Cap Value Series, the Social Awareness
Series, the Strategic Income Series, and the Trend Series. These financial
statements and the related notes pertain to the Delaware Balanced 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 Series.

The Delaware Balanced Series will make payments from net investment income
quarterly and distributions from net realized gain on investments, if any,
following the close of the fiscal year.

<PAGE>

Certain expenses of the Series are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price and execution. The
amount of these expenses was approximately $2,337 for the period ended June 30,
1999. The Series may receive earnings credits from its custodian when positive
cash balances are maintained, which are used to offset custody fees. There were
no credits for the period ended June 30, 1999. The expenses paid under the above
arrangements are included in their respective expense captions on the Statement
of Operations with the corresponding expense offset shown as "Expenses paid
indirectly".

2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Series
pays Delaware Management Company ("DMC"), the Investment Manager of the Series,
an annual fee which is calculated at the following rates: of 0.65% on the first
$500 million of average daily net assets of the Series, 0.60% on the next $500
million, 0.55% on the next $1,500 million and 0.50% on the average daily net
assets over $2,500 million. These rates became effective May 1, 1999. The old
management fee was calculated at the rate of 0.60% on the average daily net
assets of the Series, less the fees paid to the unaffiliated directors. No
reimbursement was due for the period ended June 30, 1999.

DMC has elected to waive that portion, if any, of the annual management fee
payable to the extent necessary to ensure that annual operating expenses
exclusive of taxes, interest, brokerage commissions and extraordinary expenses
do not exceed 0.80% of average daily net assets of the Series through October
31, 1999.

Delaware-6
<PAGE>
Delaware Balanced Series
Notes to Financial Statements (Continued)

On June 30, 1999, the Series had liabilities payable to affiliates as follows:

Certain officers of DMC and DSC are officers, directors and/or employees of the
Fund. These officers, directors and employees are paid no compensation by the
Fund.

3. Investments
During the six months ended June 30, 1999, the Series made purchases and sales
of investment securities other than U.S. government securities and temporary
cash investments as follows:

Purchases ..................................... $70,312,195
Sales ......................................... $65,370,978

During the six months ended June 30, 1999, the Series made purchases and sales
of U.S. government securities as follows:

Purchases ..................................... $14,643,445
Sales ......................................... $7,549,117

The cost of investments for federal income tax purposes approximates cost for
book purposes.

At June 30, 1999, the aggregate cost of securities and unrealized appreciation
(depreciation) for the Series was as follows:

4. Capital Stock
Transactions in capital stock shares were as follows:
<TABLE>
<CAPTION>
Shares issued upon
reinvestment of distributions
from net investment
income and net realized Shares Net
Shares sold gain on investments repurchased increase
----------- ------------------------------ ----------- --------
<S> <C> <C> <C> <C>
Period ended June 30, 1999 .......... 1,028,870 629,230 (737,090) 921,010
Year ended December 31, 1998 ........ 2,757,318 928,152 (313,121) 3,372,349
</TABLE>
5. Credit and Market Risk
The Series may invest in securities whose value is derived from an underlying
pool of mortgages or consumer loans. Prepayment of these loans my shorten the
stated maturity of the respective obligation and may result in a loss of
premium, if any has been paid.

Delaware-7
<PAGE>

Delaware Balanced Series
Notes to Financial Statements (Continued)

6. Securities Lending
The Series may participate, along with other funds in the Delaware Investments
Family of Funds, in a Securities Lending Agreement ("Lending Agreement").
Security loans made pursuant to the Lending Agreement are required at all times
to be secured by U.S. Treasury obligations and/or cash collateral at least equal
to 100% of the market value of securities issued in the U.S. and 105% of the
market value of securities issued outside of the U.S. Cash collateral received
is invested in fixed-income securities, with a weighted average maturity not to
exceed 90 days, rated in one of the top two tiers by Standard & Poors Ratings
Group or Moody's Investors Service, Inc. or repurchase agreements collateralized
by such securities. However, in the event of default or bankruptcy by the
lending agent, realization and/or retention of the collateral may be subject to
legal proceedings. In the event that the borrower fails to return loaned
securities and the collateral received is insufficient to cover the value of the
loaned securities and provided such collateral is not the result of investment
losses, the lending agent has agreed to pay the amount of the shortfall to the
Series, or at the discretion of the lending agent, replace the loaned
securities. The market value of the securities on loan and the related
collateral received at June 30, 1999 were as follows:

Market value of Market value of
securities on loan collateral
------------------ ---------------
$17,506,094 $17,837,707

Net income from securities lending activities for the six months ended June 30,
1999 was $37,141 and is included in interest income on the statement of
operations.

Delaware-8

<PAGE>

Delaware Group Premium Fund, Inc.-Delaware Balanced Series
Proxy Results
(Unaudited)

For the six months ended June 30, 1999, Delaware Premium Fund, Inc. - Delaware
Balanced Series shareholders voted on the following proposals at the annual
meeting of shareholders on March 17, 1999 or as adjourned. The description of
each proposal and number of shares voted are as follows:

1. To elect the Delaware Group Premium Fund, Inc. Board of Directors.

Shares Shares Voted
Voted Withheld
For Authority Abstain
--------- ------------ -------
Jeffrey J. Nick ............... 9,878,621 93,287 -
Walter P. Babich ............... 9,874,265 97,643 -
John H. Durham ................. 9,880,041 91,867 -
Anthony D. Knerr................ 9,835,912 135,996 -
Ann R. Leven.................... 9,851,064 120,844 -
Thomas F. Madison .............. 9,780,042 91,866 -
Charles E. Peck ................ 9,870,265 97,643 -
Wayne A. Stork ................. 9,880,042 91,866 -
Jan L. Yeomans ................. 9,815,551 156,357 -

2.To approve the reclassification of the investment objective from fundamental
to non-fundamental.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
9,073,939 380,597 517,372

3.To approve standardized fundamental investment restrictions (proposal involves
separate votes on seven sub-proposals 3A-3G).

3A. To adopt a new fundamental investment restriction concerning concentration
of the investments in the same industry.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
9,291,510 203,320 477,078

3B. To adopt a new fundamental investment restriction concerning borrowing money
and issuing senior securities.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
9,238,544 246,408 486,956

3C. To adopt a new fundamental investment restriction concerning underwriting.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
9,246,972 266,958 457,978

<PAGE>

3D. To adopt a new fundamental investment restriction concerning investments in
real estate.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
9,219,225 294,705 457,978

3E. To adopt a new fundamental investment restriction concerning investments in
commodities.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
9,207,387 303,324 461,197

3F. To adopt a new fundamental investment restriction concerning lending by the
Fund.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
9,216,573 295,274 460,061

3G. To reclassify all current fundamental investment restrictions as
non-fundamental.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
9,225,571 274,534 471,803

4. To approve a new investment management agreement with Delaware Management
Company.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
9,113,445 284,667 573,796

5. To ratify the selection of Ernst & Young LLP, as the independent auditors for
Delaware Group Premium Fund, Inc.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
9,412,423 109,567 449,918

6. To approve the restructuring of Delaware Group Premium Fund, Inc. from a
Maryland Corporation into a Delaware Business Trust.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
9,130,690 233,624 607,594

Delaware-9

<PAGE>

Delaware Group Premium Fund, Inc.-DelCap Series
Statement of Net Assets
June 30, 1999 (Unaudited)

Number of Market
Shares Value
COMMON STOCK-91.27%
Banking, Finance & Insurance-12.54%
Ambac Financial Group .......................... 64,000 $3,656,000
Capital One Financial .......................... 58,800 3,274,425
Countrywide Credit ............................. 87,600 3,744,900
PaineWebber Group .............................. 106,600 4,983,550
Toronto Dominion Bank .......................... 62,800 2,857,400
----------
18,516,275
----------
Cable, Media & Publishing-4.97%
+*Chancellor Media Class A ....................... 44,600 2,457,181
*Lamar Advertising .............................. 44,700 1,828,509
+Omnicom Group .................................. 38,100 3,048,000
----------
7,333,690
----------
Computers & Technology-20.32%
*Acxiom ......................................... 89,800 2,242,194
*Ask Jeeves ..................................... 1,800 25,200
*Citrix Systems ................................. 71,400 4,022,944
*Clarent ........................................ 6,300 94,500
*EToys .......................................... 15,400 628,994
*Legato Systems ................................. 69,600 4,021,575
*Network Appliance .............................. 87,500 4,891,797
*New Era of Networks ............................ 66,600 2,924,156
*PMC-Sierra ..................................... 120,000 7,076,250
*SunGard Data Systems ........................... 50,300 1,735,350
*Stamps.com ..................................... 17,400 305,588
*Veritas Software ............................... 21,300 2,022,834
----------
29,991,382
----------
Consumer Products-7.27%
*Gemstar International
Group Limited .................................. 111,500 7,282,344
*Jones Apparel Group ............................ 34,100 1,170,056
*Tommy Hilfiger ................................. 31,000 2,276,563
----------
10,728,963
----------
Electronics & Electrical Equipment-7.94%
*Altera ......................................... 70,400 2,589,400
*CBS ............................................ 100,000 4,343,750
*CIENA .......................................... 38,500 1,169,438
*Xilinx ......................................... 63,200 3,620,175
----------
11,722,763
----------

- -------------
Top 10 stocks representing 37.54% of net assets, are in bold.

<PAGE>

Number of Market
Shares Value
COMMON STOCK (Continued)
Healthcare & Pharmaceuticals-0.03%
*Health Management Associates ................... 4,107 $ 46,204
-----------
46,204
-----------
Industrial Machinery-1.43%
*Applied Materials .............................. 28,600 2,111,931
-----------
2,111,931
-----------
Leisure, Lodging & Entertainment-12.60%
*Foodmaker ...................................... 100,000 2,837,500
*Galileo International .......................... 18,500 988,594
*Outback Steakhouse ............................. 131,000 5,137,656
*Papa John's International ...................... 65,100 2,907,122
+*Prime Hospitality .............................. 139,800 1,677,600
+Royal Caribbean Cruises ........................ 52,600 2,301,250
*Sun International Hotels ....................... 61,300 2,743,175
-----------
18,592,897
-----------
Retail-11.32%
*Bed Bath & Beyond .............................. 112,700 4,331,906
+*Intimate Brands ................................ 52,710 2,497,136
*Kohl's ......................................... 47,200 3,643,250
*Staples ........................................ 202,000 6,243,063
-----------
16,715,355
-----------
Telecommunications-9.59%
*American Tower ................................. 132,100 3,170,400
*Clear Channel Communications ................... 103,061 7,104,768
+*Global Crossing Limited ........................ 36,351 1,552,869
*Hispanic Broadcasting .......................... 30,600 2,320,819
-----------
14,148,856
-----------
Miscellaneous-3.26%
Cintas ......................................... 18,000 1,208,813
Gatx ........................................... 49,100 1,868,869
*Waters ......................................... 32,600 1,731,875
-----------
4,809,557
-----------
Total Common Stock
(cost $93,033,904) ............................ 134,717,873
-----------

DelCap-1

<PAGE>

DelCap Series
Statement of Net Assets (Continued)

Principal Market
Amount Value
REPURCHASE AGREEMENTS-7.45%
With Chase Manhattan 4.65% 7/1/99
(dated 6/30/99, collateralized by
$1,909,000 U.S. Treasury Notes
5.375% due 2/15/01, market value
$1,933,248 and $955,000 Treasury
Notes 6.375% due 9/30/01,
market value $980,977 and
$818,000 U.S. Treasury Notes
6.125% due 12/31/01, market
value $823,642) ................................. $3,650,000 $3,650,000
With J.P. Morgan Securities 4.70%
7/1/99 (dated 6/30/99, collateralized
by $1,054,000 U.S. Treasury Notes
6.375% due 8/15/02, market value
$1,093,787 and $955,000 U.S. Treasury Notes
6.250% due 8/31/02, market value
$983,985 and $660,000
U.S. Treasury Notes 5.75% due
11/30/02, market value $660,345
and $955,000 U.S Treasury Notes
5.50% due 1/31/03, market
value $964,037) ................................. 3,627,000 3,627,000
With PaineWebber 4.80% 7/1/99
(dated 6/30/99, collateralized
by $901,000 U.S. Treasury
Notes 7.125% due 2/29/00,
market value $932,664 and
$955,000 U.S. Treasury Notes
5.625% due 1/31/00, market
value $958,616 and $1,909,000
U.S. Treasury Notes 5.75%
due 11/30/02, market value
$1,909,672) ..................................... $3,723,000 $ 3,723,000
-----------
Total Repurchase Agreements
(cost $11,000,000) .............................. $11,000,000
-----------

TOTAL MARKET VALUE OF SECURITIES-98.72% (COST $104,033,904) ..... $145,717,873

RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-1.28% ........... 1,887,791
------------

NET ASSETS APPLICABLE TO 7,452,325 SHARES ($0.01 PAR VALUE)
OUTSTANDING; EQUIVALENT TO $19.81 PER SHARE-100.00% ............ $147,605,664
============

COMPONENTS OF NET ASSETS AT JUNE 30, 1999:
Common stock, $0.01 par value, 1,000,000,000 shares authorized to
the Fund with 50,000,000 shares allocated to the Series ...... $100,229,331
Accumulated net realized gain on investments .................... 5,692,364
Net unrealized appreciation of investments ...................... 41,683,969
------------
Total net assets ................................................ $147,605,664
============
- ------------
* Non-income producing security for the period ended June 30, 1999.
+ Security is partially or fully on loan.

See accompanying notes

DelCap-2

<PAGE>

Delaware Group Premium Fund, Inc.-
DelCap Series
Statement of Operations
Six Months Ended June 30, 1999
(Unaudited)

INVESTMENT INCOME:
Interest ........................................................ $ 259,259
Dividends ....................................................... 146,430
----------
405,689
----------
EXPENSES:
Management fees ................................................. 495,481
Accounting and administration ................................... 14,298
Professional fees ............................................... 3,025
Dividend disbursing and transfer agent fees
and expenses ................................................... 2,300
Taxes (other than taxes on income) .............................. 1,970
Reports and statements to shareholders .......................... 1,300
Registration fees ............................................... 1,100
Directors' fees ................................................. 820
Custodian fees .................................................. 500
Other ........................................................... 1,538
----------
522,332

Less expenses paid indirectly ................................... (1,538)
----------
Total expenses .................................................. 520,794
----------

NET INVESTMENT LOSS ............................................. (115,105)
----------

NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain on investments ................................ 6,667,062
Net change in unrealized appreciation /
depreciation of investments .................................... 10,175,085
-----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS ............................................ 16,842,147
-----------

NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................................................ $16,727,042
===========

See accompanying notes

<PAGE>

Delaware Group Premium Fund, Inc.-
DelCap Series
Statements of Changes in Net Assets

Six Months Year
Ended 6/30/99 Ended
(Unaudited) 12/31/98
------------- --------

INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment loss ............................... $ (115,105) $ (177,043)
Net realized gain on investments .................. 6,667,062 5,972,689
Net change in unrealized appreciation /
depreciation of investments .................... 10,175,085 14,448,864
------------ ------------
Net increase in net assets resulting
from operations ................................ 16,727,042 20,244,510
------------ ------------

DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments .................. (6,882,148) (9,882,425)
------------ ------------
(6,882,148) (9,882,425)
------------ ------------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ......................... 15,655,243 19,648,168
Net asset value of shares issued upon
reinvestment of distributions from
net realized gain on investments ................. 6,882,148 9,882,425
------------ ------------
22,537,391 29,530,593
------------ ------------
Cost of shares repurchased ........................ (15,324,320) (19,799,484)
------------ ------------
Increase in net assets derived from
capital share transactions ....................... 7,213,071 9,731,109
------------ ------------

NET INCREASE IN NET ASSETS ........................ 17,057,965 20,093,194
------------ ------------

NET ASSETS:
Beginning of period ............................... 130,547,699 110,454,505
------------ ------------
End of period ..................................... $147,605,664 $130,547,699
============ ============

See accompanying notes

DelCap-3

<PAGE>

Delaware Group Premium Fund, Inc.-DelCap Series
Financial Highlights

Selected data for each share of the Series outstanding throughout each period
were as follows:

<TABLE>
<CAPTION>
Six Months
Ended
6/30/99(1) Year Ended December 31,
(Unaudited) 1998 1997 1996 1995 1994
-----------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....................... $18.550 $17.270 $15.890 $15.130 $11.750 $12.240

Income (loss) from investment operations:
Net investment income (loss)2 .............................. (0.010) (0.026) (0.010) (0.015) 0.072 0.069
Net realized and unrealized gain (loss) on investments ..... 2.270 2.901 2.260 2.030 3.378 (0.499)
------- ------- ------- ------- ------- -------
Total from investment operations ........................... 2.260 2.875 2.250 2.015 3.450 (0.430)
------- ------- ------- ------- ------- -------

Less dividends and distributions:
Dividends from net investment income ....................... none none none (0.070) (0.070) (0.060)
Distributions from net realized gain on investments ........ (1.000) (1.595) (0.870) (1.185) none none
------- ------- ------- ------- ------- -------
Total dividends and distributions .......................... (1.000) (1.595) (0.870) (1.255) (0.070) (0.060)
------- ------- ------- ------- ------- -------

Net asset value, end of period ............................. $19.810 $18.550 $17.270 $15.890 $15.130 $11.750
======= ======= ======= ======= ======= =======

Total return ............................................... 13.06% 18.81% 14.90% 14.46% 29.53% (3.54%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) .................... $147,606 $130,548 $110,455 $79,900 $58,123 $39,344
Ratio of expenses to average net assets .................... 0.79% 0.80% 0.80% 0.80% 0.80% 0.80%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ......... 0.79% 0.86% 0.87% 0.82% 0.85% 0.88%
Ratio of net investment income (loss) to average
net assets .............................................. (0.17%) (0.16%) (0.06%) (0.11%) 0.61% 0.64%
Ratio of net investment income (loss) to average
net assets prior to expense limitation and
expenses paid indirectly ................................ (0.17%) (0.22%) (0.13%) (0.13%) 0.56% 0.56%
Portfolio turnover ......................................... 62% 142% 134% 85% 73% 43%
</TABLE>
- ------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Per share information for the period ended June 30, 1999 and the years ended
December 31, 1997 and 1998 were based on the average shares method.

See accompanying notes

DelCap-4

<PAGE>

Delaware Group Premium Fund, Inc.-DelCap Series
Notes to Financial Statements
June 30, 1999
(Unaudited)

Delaware Group Premium Fund, Inc. (the "Fund") is registered as a diversified
open-end investment company under the Investment Company Act of 1940, as
amended. The Fund is organized as a Maryland Corporation and offers 17 series:
the Aggressive Growth Series, the Capital Reserves Series, the Cash Reserve
Series, the Convertible Securities Series, the Delaware Balanced Series
(formerly the Delaware Series), the DelCap Series, the Delchester Series, the
Devon Series, the Emerging Markets Series, the Global Bond Series, the Growth
and Income Series (formerly the Decatur Total Return Series), the International
Equity Series, the REIT Series, the Small Cap Value Series, the Social Awareness
Series, the Strategic Income Series, and the Trend Series. These financial
statements and the related notes pertain to the Cash Reserve 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 Series.

<PAGE>

The DelCap Series will make payments from net investment income and net realized
gain on investments, if any, once a year.

Certain expenses of the Fund are paid through "soft dollar" arrangements with
brokers. The amount of these expenses is less than 0.01% of the Series' average
daily net assets. Certain expenses of the Fund are paid through "soft dollar"
arrangements with brokers. These transactions are done subject to best price and
execution. The amount of these expenses was approximately $1,538 for the period
ended June 30, 1999. The Fund may receive earnings credits from its custodian
when positive cash balances are maintained, which are used to offset custody
fees. The expenses paid under the above arrangements are included in their
respective expense captions on the Statement of Operations with the
corresponding expense offset shown as "Expenses paid indirectly".

DelCap-5
<PAGE>
DelCap Series
Notes to Financial Statements (Continued)

On June 30, 1999, the Series had liabilities payable to affiliates as follows:

Dividend disbursing
Investment transfer agent,
management accounting fees
fee payable and other expenses
to DMC payable to DSC
---------- ------------------
$86,376 $5,137

Certain officers of DMC and DSC are officers, directors and/or employees of the
Fund. These officers, directors and employees are paid no compensation by the
Fund.

3. Investments
During the six months ended June 30, 1999, the Series made purchases and sales
of investment securities other than U.S. government securities and temporary
cash investments as follows:

Purchases ......................... $77,765,532
Sales ............................. $85,636,785

At June 30, 1999, the aggregate cost of securities and unrealized appreciation
(depreciation) for federal income tax purposes for the Series were as follows:

4. Capital Stock
Transactions in capital stock shares were as follows:

<TABLE>
<CAPTION>
Shares issued upon
reinvestment of
distributions from net
investment income
and net realized gain Shares Net
Shares sold on investments repurchased increase
----------- ---------------------- ----------- --------
<S> <C> <C> <C> <C>
Six Months Ended June 30, 1999 ......... 846,900 404,119 (834,554) 416,465
Year ended December 31, 1998 ........... 1,184,490 657,513 (1,201,127) 640,876
</TABLE>
5. Credit and Market Risk
The Series may invest up to 10% of its total assets in illiquid securities which
may include securities with contractual restrictions on resale, securities
exempt from registration under Rule 144A of the Securities Act of 1933, as
amended, and other securities which may not be readily marketable. The relative
illiquidity of some of these securities may adversely affect the Series' ability
to dispose of such securities in a timely manner and at a fair price when it is
necessary to liquidate such securities.

6. Securities Lending
The Series may participate, along with other funds in the Delaware Investments
Family of Funds, in a Securities Lending Agreement ("Lending Agreement").
Security loans made pursuant to the Lending Agreement are required at all times
to be secured by U.S. Treasury obligations and/or cash collateral at least equal
to 100% of the market value of securities issued in the U.S. and 105% of the
market value of securities issued outside of the U.S. Cash collateral received
is invested in fixed income securities, with a weighted average maturity not to
exceed 90 days, rated in one of the top two tiers by Standard & Poors Ratings
Group or Moody's Investors Service, Inc. or repurchase agreements collateralized
by such securities. However, in the event of default or bankruptcy by the
lending agent, realization and/or retention of the collateral may be subject to
legal proceedings. In the event that the borrower fails to return loaned
securities and the collateral received is insufficient to cover the value of the
loaned securities and provided such collateral is not the result of investment
losses, the lending agent has agreed to pay the amount of the shortfall to the
Series, or at the discretion of the lending agent, replace the loaned
securities. The market value of the securities on loan and the related
collateral received at June 30, 1999 were as follows:

Market value of
securities on loan Collateral
------------------ ----------
$8,616,132 $8,761,265

Net income from securities lending activities for the Period ended June 30, 1999
was $48,955 and is included in interest income on the Statement of Operations.

DelCap-6

<PAGE>

Delaware Group Premium Fund, Inc.-DelCap Series
Proxy Results
(Unaudited)

For the six months ended June 30, 1999, Delaware Premium Fund, Inc.-- DelCap
Series shareholders voted on the following proposals at the annual meeting of
shareholders on March 17, 1999 or as adjourned. The description of each proposal
and number of shares voted are as follows:

1. To elect the Delaware Group Premium Fund, Inc. Board of Directors.

Shares Shares Voted
Voted Withheld
For Authority
--------- -----------
Jeffrey J. Nick ............................. 6,872,048 164,140
Walter P. Babich ............................ 6,875,633 160,556
John H. Durham .............................. 6,879,353 156,836
Anthony D. Knerr ............................ 6,874,686 161,503
Ann R. Leven ................................ 6,879,082 157,107
Thomas F. Madison ........................... 6,879,353 156,836
Charles E. Peck ............................. 6,875,295 160,894
Wayne A. Stork .............................. 6,879,014 157,174
Jan L. Yeomans .............................. 6,878,744 157,445

2. To approve the reclassification of the investment objective from fundamental
to non-fundamental.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
6,285,329 245,297 505,563

3. To approve standardized fundamental investment restrictions (proposal
involves separate votes on seven sub-proposals 3A-3G).

3A. To adopt a new fundamental investment restriction concerning concentration
of the investments in the same industry.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
6,399,422 193,222 443,545

3B. Too adopt a new fundamental investment restriction concerning borrowing
money and issuing senior securities.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
6,351,472 242,322 442,396

3C. To adopt a new fundamental investment restriction concerning underwriting.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
6,379,809 232,786 423,594

<PAGE>

3D. To adopt a new fundamental investment restriction concerning investments in
real estate.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
6,345,858 260,650 429,681

3E. To adopt a new fundamental investment restriction concerning investments in
commodities.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
6,351,810 255,171 429,208

3F. To adopt a new fundamental investment restriction concerning lending by the
Fund.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
6,357,762 256,659 421,768

3G. To reclassify all current fundamental investment restrictions as
non-fundamental.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
6,370,747 226,766 438,676

4. To approve a new investment management agreement with Delaware Management
Company.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
6,375,616 214,322 446,251

5. To ratify the selection of Ernst & Young LLP, as the independent auditors for
Delaware Group Premium Fund, Inc.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
6,616,404 51,602 368,183

6. To approve the restructuring of Delaware Group Premium Fund, Inc. from a
Maryland Corporation into a Delaware Business Trust.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
6,435,965 145,880 454,344

DelCap-7

<PAGE>

Delaware Group Premium Fund, Inc.-Delchester Series
Statement of Net Assets
June 30, 1999 (Unaudited)

Principal Market
Amount Value
CORPORATE BONDS-72.17%
Aerospace & Defense-0.44%
Federal Data sr sub nts 10.125% 8/1/05 .......... $ 550,000 $ 533,500
----------
533,500
----------
Automobiles & Automotive Parts-1.64%
ADV Accessory/AAS Capital sr sub nts
9.75% 10/1/07 ................................. 650,000 611,000
Federal Mogul nts 7.50% 1/15/09 ................. 225,000 208,406
Hayes Lemmerz International
co guarantee 8.25% 12/15/08 ................... 500,000 472,500
Stanadyne Automotive sr sub nts
10.25% 12/15/07 ............................... 800,000 696,000
----------
1,987,906
----------
Banking, Finance & Insurance-0.64%
Willis Corroon sr sub nts 9.00% 2/1/09 .......... 800,000 776,000
----------
776,000
----------
Buildings & Materials-3.83%
Clark Materials Handling unsec sr nts
10.75% 11/15/06 ............................... 500,000 445,000
Collins & Aikman Floorcovers sr sub nts
10.00% 1/15/07 ................................ 200,000 202,000
Falcon Products sr sub nts
11.375% 6/15/09 ............................... 400,000 402,000
Formica sr sub nts 10.875% 3/1/09 ............... 800,000 784,000
K Hovnanian Entrprises co guarantee
9.125% 5/1/09 ................................. 700,000 689,500
Nortek sr nts 9.25% 3/15/07 ..................... 500,000 502,500
Standard Pacific sr notes 8.50% 4/15/09 ......... 900,000 888,750
WESCO Distribution co guarantee
9.125% 6/1/08 ................................. 750,000 729,375
----------
4,643,125
----------
Cable Media & Publishing-6.28%
+21st Century Telecom Group sr disc notes
12.25% 2/15/08 .................................. 700,000 295,750
Adelphia Communications sr nts
7.875% 5/1/09 ................................. 1,000,000 930,000
Charter Communications sr nts
8.625% 4/1/09 ................................. 1,000,000 962,500
Echostar DBS sr nts 9.25% 1/2/06 ................ 925,000 943,500
Mail-Well sr sub nts 8.75% 12/15/08 ............. 1,000,000 975,000
Pegasus Communications sr nts
9.625% 10/15/05 ............................... 250,000 245,625
PREMIER GRAPHICS sr nts
11.50% 12/1/05 ................................ 400,000 390,000
+PX Escrow sr disc nts 9.625% 2/1/06 ............. 750,000 469,688
Sinclair Broadcasting Group sr sub nts
8.75% 12/15/07 ................................ 1,200,000 1,179,000
Sullivan Graphics sr sub nts
12.75% 8/1/05 ................................. 250,000 258,750
+United International Holdings sr disc nts
10.75% 2/15/08 ................................ 700,000 465,500
Young Broadcasting co guarantee
8.75% 6/15/07 ................................. 500,000 488,750
----------
7,604,063
----------

<PAGE>

Principal Market
Amount Value
CORPORATE BONDS-(Continued)
Chemicals-3.44%
Aqua Chemical sr sub nts 11.25% 7/1/08 .......... $ 800,000 $ 592,000
Brunner Mond Group sr sub nts
11.00% 7/15/08 ................................ 400,000 254,000
Geo Specialty Chemicals sr sub nts
10.125% 8/1/08 ................................ 200,000 192,000
Huntsman sr sub nts 9.50% 7/1/07 ................ 400,000 388,000
Koppers Industries unsec sr sub nts
9.875% 12/1/07 ................................ 500,000 510,625
LaRoche Industries sr sub nts
9.50% 9/15/07 ................................. 1,500,000 1,200,000
Lyondell Chemical sr sub nts
10.875% 5/1/09 ................................ 500,000 521,250
ZSC Specialty Chemicals sr nts
11.00% 7/1/09 ................................. 500,000 505,000
----------
4,162,875
----------
Computers & Technology-1.68%
+Cellnet Data Systems sr disc nts
14.00% 10/1/07 ................................ 1,000,000 420,000
PSINet sr nts 10.00% 2/15/05 .................... 1,340,000 1,343,350
Statia Terminals mtg nts
11.75% 11/15/03 ............................... 250,000 273,750
----------
2,037,100
----------
Consumer Products-5.19%
Albecca sr sub nts 10.75% 8/15/08 ............... 500,000 420,000
Derby Cycle sr unsec nts
10.00% 5/15/08 ................................ 1,300,000 1,053,000
Desa International sr sub nts
9.875% 12/15/07 ............................... 1,115,000 858,550
Drypers sr nts 10.25% 6/15/07 ................... 500,000 402,500
Home Interiors and Gifts sr sub nts
10.125% 6/1/08 ................................ 1,450,000 1,450,000
Iron Age co guarantee 9.875% 5/1/08 ............. 1,000,000 760,000
+Iron Age sr disc nts 12.125% 5/1/09 ............. 500,000 170,000
Outboard Marine co guarantee
10.75% 6/1/08 ................................. 850,000 586,500
Riddell Sports sr unsec sub nts
10.50% 7/15/07 ................................ 400,000 364,000
Spinnaker Industries sr nts
10.75% 10/15/06 ............................... 300,000 225,000
----------
6,289,550
----------
Electronics & Electrical Equipment-0.94%
Amkor Technologies sr nts 9.25% 5/1/06 .......... 1,000,000 973,750
+Electronic Retailing Systems
sr disc nts 13.25% 2/1/04 ...................... 500,000 162,500
----------
1,136,250
----------
Energy-1.38%
Michael Petroleum sr nts 11.50% 4/1/05 .......... 225,000 119,250
RBF Finance co guarantee
11.375% 3/15/09 ............................... 875,000 905,625
+Universal Compression sr disc nts
9.875% 2/15/08 ................................ 1,000,000 650,000
----------
1,674,875
----------

Delchester-1
<PAGE>

Delchester Series
Statement of Net Assets (Continued)

Principal Market
Amount Value
CORPORATE BONDS (Continued)
Food, Beverage & Tobacco-4.40%
Ameriking sr nts 10.75% 12/1/06 ............... $ 200,000 $ 212,000
Ameriserve Food sr sub nts
10.125% 7/15/07 ............................. 1,000,000 850,000
Canandaigua Brands co guarantee
8.50% 3/1/09 ................................ 1,000,000 972,500
Carrols sr sub nts 9.50% 12/1/08 .............. 800,000 766,000
CKE Restuarants sr sub nts
9.125% 5/1/09 ............................... 500,000 465,000
Core-Mark International sr sub nts
11.375% 9/15/03 ............................. 200,000 196,000
+Del Monte Foods 12.50% 12/15/07 ............... 581,000 435,750
DiGiorgio sr nts 10.00% 6/15/07 ............... 650,000 628,875
Fresh Foods co guarantee
10.75% 6/1/06 ............................... 800,000 802,000
----------
5,328,125
----------
Healthcare & Pharmaceuticals-2.87%
+Alaris Medical sr disc nts
11.125% 8/1/08 .............................. 1,435,000 789,250
Alliance Imaging sr sub nts
9.625% 12/15/05 ............................. 500,000 496,875
Dynacare sr nts 10.75% 1/15/06 ................ 300,000 306,000
Insight Health Services co guarantee
9.625% 6/15/08 .............................. 1,000,000 960,000
Kinetic Concepts sr sub nts
9.625% 11/1/07 .............................. 1,000,000 922,500
----------
3,474,625
----------
Industrial Machinery-2.12%
Burke Industries unsec sr nts
10.00% 8/15/07 .............................. 500,000 380,000
Safety Components International
sr sub nts 10.125% 7/15/07 .................. 600,000 540,000
Tokheim sr sub nts 11.375% 8/1/08 ............. 700,000 658,000
United Rentals nts 9.00% 4/1/09 ............... 1,000,000 990,000
----------
2,568,000
----------
Leisure, Lodging & Entertainment-5.37%
+Aladdin Gaming units 13.50% 3/1/10 ............ 1,250,000 575,000
Florida Panthers sr sub nts
9.875% 4/15/09 .............................. 1,250,000 1,200,000
HMH Properties sr nts 8.45% 12/1/08 ........... 825,000 783,750
Harrahs Operating co guarantee
7.875% 12/15/05 ............................. 400,000 388,000
Horseshoe Gaming sr sub nts
8.625% 5/15/09 .............................. 1,000,000 970,000
Hollywood Park 9.250% 2/15/07 ................. 400,000 396,000
Mohegan Tribal Gaming unsec
sr sub nts 8.75% 1/1/09 ..................... 750,000 742,500
Park Place Entertainment unsec
sr sub nts 7.875% 12/15/05 .................. 600,000 571,500
United Artists Theatre sr sub nts
9.75% 4/15/08 ............................... 1,175,000 881,250
----------
6,508,000
----------
<PAGE>

Principal Market
Amount Value
CORPORATE BONDS (Continued)
Metals & Mining-4.69%
AK Steel sr nts 7.875% 2/15/09 ................ $ 700,000 $ 679,000
Algoma Steel mtg nts 12.375% 7/15/05 .......... 950,000 931,000
Doe Run Resources co guarantee
11.25% 3/15/05 .............................. 1,200,000 1,092,000
Great Lakes Carbon co guarantee
10.25% 5/15/08 .............................. 750,000 765,000
Jorgensen Earle sr nts 9.50% 4/1/05 ........... 800,000 760,000
Metallurg co guarantee 11.00% 12/7/07 ......... 1,000,000 980,000
Republic Engineered Steel mtg nts
9.875% 12/15/01 ............................. 450,000 469,125
----------
5,676,125
----------
Paper & Forest Products-0.85%
Fibermark sr nts 9.375% 10/15/06 .............. 400,000 407,500
MAXXAM Group sr sec nts
12.000% 8/1/03 .............................. 600,000 621,000
----------
1,028,500
----------
Retail-3.12%
Advance Stores sr sub nts
10.25% 4/15/08 .............................. 800,000 770,000
Fleming sr sub nts 10.50% 12/1/04 ............. 500,000 475,000
Frank's Nursery & Crafts sr sub nts
10.25% 3/1/08 ............................... 800,000 799,000
Jitney-Jungle Stores unsec sr sub nts
10.375% 9/15/07 ............................. 1,300,000 598,000
Just for Feet sr sub nts 11.00% 5/1/09 ........ 500,000 330,000
Leslie's Poolmart sr nts
10.375% 7/15/04 ............................. 500,000 520,000
St John Knits sr sub nts 12.50% 7/1/09 ........ 300,000 295,848
----------
3,787,848
----------
Telecommunications-17.16%
AMSC Acquisition sr nts 12.25% 4/1/08 ......... 650,000 507,000
Arch Communications sr nts
12.75% 7/1/07 ............................... 800,000 688,000
Arch Escrow sr nts 13.75% 4/15/08 ............. 500,000 450,000
BTI Telecom sr nts 10.50% 9/15/07 ............. 600,000 540,000
+Call-Net Enterprises sr disc nts
10.80% 5/15/09 .............................. 1,250,000 693,750
Covad Communications Group sr nts
12.50% 2/15/09 .............................. 250,000 241,250
+Econophone sr disc nts 11.00% 2/15/08 ......... 1,300,000 728,000
+GST USA sr disc nts 13.875% 12/15/05 .......... 1,000,000 825,000
Hyperion Telecommunications sr nts
12.25% 9/1/04 ............................... 750,000 793,125
Intermedia Communications sr nts
9.50% 3/1/09 ................................ 800,000 776,000
+KMC Telecom Holdings sr disc nts
12.50% 2/15/08 .............................. 2,500,000 1,337,500
Level 3 Communications sr nts
9.125% 5/1/08 ............................... 1,300,000 1,283,750
McLeodUSA sr nts 8.125% 2/15/09 ............... 1,000,000 940,000
Metrocall unsec sr sub nts
10.375% 10/1/07 ............................. 1,275,000 930,750

Delchester-2
<PAGE>

Delchester Series
Statement of Net Assets (Continued)

Principal Market
Amount Value
CORPORATE BONDS (Continued)
Telecommunications (Continued)
Metromedia Fiber sr nts
10.00% 11/15/08 ............................. $ 350,000 $ 360,500
+Microcell Telecommunications
sr disc nts 14.00% 6/1/06 ................... 1,260,000 1,017,450
+NEXTEL Communications
sr disc nts 9.95% 2/15/08 ................... 2,000,000 1,385,000
Nextlink Communications
sr nts 9.625% 10/1/07 ....................... 800,000 780,000
Pathnet sr nts 12.25% 4/15/08 ................. 300,000 174,000
+RCN sr disc nts 9.80% 2/15/08 ................. 900,000 571,500
+RCN sr disc nts 11.125% 10/15/07 .............. 1,000,000 672,500
RCN sr nts 10.00% 10/15/07 .................... 200,000 202,000
+Rhythms Netconnections Units
13.50% 5/15/08 .............................. 450,000 234,000
Rhythms Netconnections
12.75% 4/15/09 .............................. 250,000 235,625
+Telecorp PCS sr disc nts
11.625% 4/15/09 ............................. 1,500,000 840,000
+Teligent sr disc nts 11.50% 3/1/08 ............ 1,750,000 1,080,625
Teligent sr nts 11.50% 12/1/07 ................ 1,300,000 1,335,750
USA Mobile Communication sr nts
14.00% 11/1/04 .............................. 500,000 485,000
+Viatel units 12.50% 4/15/08 ................... 1,050,000 674,625
-----------
20,782,700
-----------
Textiles, Apparel & Furniture-0.77%
Globe Manufacturing sr sub nts
10.00% 8/1/08 ............................... 550,000 418,000
Grove Worldwide sr sub nts
9.25% 5/1/08 ................................ 600,000 516,000
-----------
934,000
-----------
Transportation & Shipping-2.09%
ATLAS AIR sr nts 9.25% 4/15/08 ................ 750,000 721,875
Continental Airlines nts
8.00% 12/15/05 .............................. 500,000 475,000
First Wave Marine sr nts 11.00% 2/1/08 ........ 900,000 851,625
Millenium Seacarriers units
12.00% 7/15/05 .............................. 200,000 146,000
Navigator Gas Transport nts
10.50% 6/30/07 .............................. 400,000 200,000
Navigator Gas Transport units
12.00% 6/30/07 .............................. 400,000 132,000
-----------
2,526,500
-----------
Utilities-1.00%
Trench Electric & Trench co guarantee
10.25% 12/15/07 ............................. 1,250,000 1,212,500
-----------
1,212,500
-----------
<PAGE>

Principal Market
Amount Value
CORPORATE BONDS (Continued)
Miscellaneous-2.27%
Building One Services sr sub nts
10.50% 5/1/09 ............................... $ 200,000 $ 190,000
Group Maintenance sr sub nts
9.750% 1/15/09 .............................. 525,000 519,750
Indesco International sr sub nts
9.75% 4/15/08 ............................... 500,000 330,000
Lear Corp sr nts 8.11% 5/15/09 ................ 1,500,000 1,436,250
Protection One sr sub nts
8.125% 1/15/09 .............................. 200,000 190,000
+Spin Cycle units 12.75% 5/1/05 ................ 500,000 90,000
-----------
2,756,000
-----------
Total Corporate Bonds
(cost $96,403,117) .......................... 87,428,167
-----------
Number
of Shares
PREFERRED STOCK-1.12%
Dobson Communications ......................... 299 302,071
Eagle-Picher Holdings ......................... 9,000 477,000
Nebco Evans Holding pik ....................... 4,586 183,458
Pegasus Communications pik .................... 1,046 110,889
PEGASUS Communications Unit ................... 2,500 280,000
TCR Holdings Class B .......................... 3,802 228
TCR Holdings Class C .......................... 2,091 117
TCR Holdings Class D .......................... 5,512 292
TCR Holdings Class E .......................... 11,405 719
-----------
Total Preferred Stock
(cost $1,608,286) ............................. 1,354,774
-----------

CONVERTIBLE PREFERRED STOCK-0.35%
E.Spire Communications pik .................... 8,071 422,516
-----------
Total Convertible Preferred Stock
(cost $788,504) ............................. 422,516
-----------
RIGHTS & WARRANTS-0.88%
*Aladdin Gaming ................................ 12,500 13
*American Banknote ............................. 18,723 15,000
*American Mobile Satellite ..................... 3,569 38,000
*Cellnet Data Systems .......................... 13,671 10,500
*Electronic Retailing System ................... 500 63
*Gothic Energy ................................. 1,400 1,400
*KMC Telecom Holdings .......................... 1,500 37,500
*Nextel International .......................... 31 750
*Pathnet ....................................... 300 3,000
*Rhythms Netconnections ........................ 22,848 934,626
*Terex Appreciation ............................ 800 19,200
-----------
Total Rights & Warrants
(cost $113,816) ............................. 1,060,052
-----------

Delchester-3
<PAGE>

Delchester Series
Statement of Net Assets (Continued)

Principal Market
Amount Value
REPURCHASE AGREEMENTS-23.54%
With Chase Manhattan 4.65% 7/1/99
(dated 6/30/99, collateralized by
$4,950,000 U.S. Treasury Notes
5.375% due 2/15/01, market value
$5,025,019 and $2,475,000
U.S. Treasury Notes 6.375% due
9/30/01, market value $2,543,506
and $2,121,000 U.S. Treasury Notes
6.125% due 12/31/01, market
value $2,135,561) ........................... $ 9,464,000 $ 9,464,000
With J.P. Morgan Securities 4.70%
7/1/99 (dated 6/30/99, collateralized
by $2,733,000 U.S. Treasury Notes
6.375% due 8/15/02, market value
$2,836,001 and $2,475,000 U.S.
Treasury Notes 6.25% due 8/31/02,
market value $2,551,304 and
$1,712,000 U.S. Treasury Notes
5.75% due 11/30/02, market
value $1,712,162 and $2,475,000
U.S. Treaury Notes 5.50% due
1/31/03, market value $2,499,582) ........... 9,406,000 9,406,000

Principal Market
Amount Value
REPURCHASE AGREEMENTS (Continued)
With PaineWebber 4.80% 7/1/99
(dated 6/30/99, collateralized by
$2,336,000 U.S. Treasury Notes
7.125% due 2/29/00, market
value $2,418,237 and $2,475,000
U.S. Treasury Notes 5.625% due
11/30/00, market value $2,485,526
and $4,950,000 U.S. Treasury
Notes 5.75% due 11/30/02, market
value $4,951,450) ........................... $ 9,652,000 $ 9,652,000
-------------
Total Repurchase Agreements
(cost $28,522,000) .......................... 28,522,000
-------------

TOTAL MARKET VALUE OF SECURITIES-98.06% (cost $127,435,723) ...... $118,787,509

RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-1.94% ............ 2,356,130
------------
NET ASSETS APPLICABLE TO 15,016,018 SHARES ($0.01 Par Value)
OUTSTANDING; EQUIVALENT TO $8.07 PER SHARE-100.00% ............ $121,143,639
============
COMPONENTS OF NET ASSETS AT JUNE 30, 1999:
Common stock, $0.01 par value, 1,000,000,000 shares authorized
to the Fund with 50,000,000 shares allocated to the Series ..... $138,518,550
Undistributed net investment income .............................. 48,090
Accumulated net realized loss on investments ..................... (8,774,787)
Net unrealized depreciation on investments ....................... (8,648,214)
------------
Total net assets ................................................. $121,143,639
============
- ----------
* Non-income producing security for the period ended June 30, 1999
+ Zero coupon security as of June 30, 1999. The coupon shown is the step up
rate.

Summary of Abbreviations:
co guarantee - company guaranteed
disc - discount
mtg - mortgage
nts - notes
pik - pay-in-kind
sr - senior
sub - subordinated
unsec - unsecured

See accompanying notes

Delchester-4
<PAGE>

Delaware Group Premium Fund, Inc.-
Delchester Series
Statement of Operations
Six months ended June 30, 1999 (Unaudited)

INVESTMENT INCOME:
Interest ................................................... $ 6,013,251
Dividends .................................................. 138,951
-----------
6,152,202
-----------

EXPENSES:
Management fees ............................................ 380,793
Accounting and administration .............................. 27,908
Professional fees .......................................... 6,099
Taxes (other than taxes on income) ......................... 4,100
Registration fees .......................................... 1,738
Reports and statements to shareholders ..................... 1,442
Directors' fees ............................................ 1,207
Dividend disbursing and transfer agent fees
and expenses ............................................ 711
Other ...................................................... 3,991
-----------
427,989
-----------
Less expenses paid in directly ............................. (1,422)
Total expenses ............................................. 426,567
-----------

NET INVESTMENT INCOME ...................................... 5,725,635
-----------

NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized loss on investments ........................... (7,469,976)
Net change in unrealized appreciation /
depreciation of investments ............................. 2,397,026
-----------
NET REALIZED AND UNREALIZED
LOSS ON INVESTMENTS ..................................... (5,072,950)
-----------

NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 652,685
===========

See accompanying notes
<PAGE>

Delaware Group Premium Fund, Inc.-
Delchester Series
Statements of Changes in Net Assets

Six Months Year
Ended 6/30/99 Ended
(Unaudited) 12/31/98
------------- --------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income ........................ $ 5,725,635 $ 11,358,280
Net realized loss on investments ............. (7,469,976) (577,975)
Net change in unrealized appreciation /
depreciation of investments ............... 2,397,026 (13,468,140)
----------- -------------
Net increase (decrease) in net assets
resulting from operations ................. 652,685 (2,687,835)
----------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ........................ (5,795,668) (11,317,743)
Net realized gain on investments ............. (726,836) (32,038)
----------- -------------
(6,522,504) (11,349,781)
----------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold .................... 17,048,061 45,702,613
Net asset value of shares issued upon
reinvestment of distributions from net
investment income and net realized
gain on investments ....................... 6,593,911 11,048,248
----------- -------------
23,641,972 56,750,861
Cost of shares repurchased ................... (17,336,786) (20,879,855)
----------- -------------
Increase in net assets derived from
capital share transactions ................ 6,305,186 35,871,006
----------- -------------

NET INCREASE IN NET ASSETS ................... 435,367 21,833,390
----------- -------------

NET ASSETS:
Beginning of period .......................... 120,708,272 98,874,882
----------- -------------
End of period ................................ $121,143,639 $120,708,272
============ =============

See accompanying notes

Delchester-5
<PAGE>

Delaware Group Premium Fund, Inc.-Delchester Series
Financial Highlights

Income (loss) from investment operations:
Net investment income .................................... 0.386 0.906 0.863 0.853 0.872 0.962
Net realized and unrealized gain (loss) on investments ... (0.335) (1.048) 0.332 0.230 0.400 (1.230)
------ ------- ------ ------ ------ ------
Total from investment operations ......................... 0.051 (0.142) 1.195 1.083 1.272 (0.268)
------ ------- ------ ------ ------ ------
Less dividends and distributions:
Dividends from net investment income ..................... (0.391) (0.905) (0.855) (0.853) (0.872) (0.962)
Distributions from net realized gain on investments ...... (0.050) (0.003) none none none none
------ ------- ------ ------ ------ ------
Total dividends and distributions ........................ (0.441) (0.908) (0.855) (0.853) (0.872) (0.962)
------ ------- ------ ------ ------ ------

Net asset value, end of period ........................... $8.070 $8.460 $9.510 $9.170 $8.940 $8.540
====== ====== ====== ====== ====== ======
Total return ............................................. 0.57% (1.83%) 13.63% 12.79% 15.50% (2.87%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $121,144 $120,708 $98,875 $67,665 $56,605 $43,686
Ratio of expenses to average net assets .................. 0.70% 0.70% 0.70% 0.70% 0.69% 0.72%
Ratio of net investment income to average net assets ..... 9.34% 9.85% 9.24% 9.54% 9.87% 10.56%
Portfolio turnover ....................................... 92% 86% 121% 93% 74% 47%
</TABLE>
- ----------
(1)Ratios have been annualized and total return has not been annualized.

See accompanying notes

Delchester-6
<PAGE>

Delaware Group Premium Fund, Inc.-Delchester Series
Notes to Financial Statements
June 30, 1999 (Unaudited)

Delaware Group Premium Fund, Inc. (the "Fund") is registered as a diversified
open-end investment company under the Investment Company Act of 1940, as
amended. The Fund is organized as a Maryland Corporation and offers 17 series:
the Aggressive Growth Series, the Capital Reserves Series, the Cash Reserve
Series, the Convertible Securities Series, the Delaware Balanced Series
(formerly the Delaware Series), the DelCap Series, the Delchester Series, the
Devon Series, the Emerging Markets Series, the Global Bond Series, the Growth
and Income Series (formerly the Decatur Total Return Series), the International
Equity Series, the REIT Series, the Small Cap Value Series, the Social Awareness
Series, the Strategic Income Series, and the Trend Series. These financial
statements and the related notes pertain to the Delchester 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 Series.

The Delchester Series declares dividends daily from net investment income and
pays such dividends monthly. Distributions from net realized gain on
investments, if any, normally will be distributed following the close of the
fiscal year.

Certain expenses of the Series are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price and execution. The
amount of these expenses was approximately $1,422 for the period ended June 30,
1999. The Series may receive earnings credits from its custodian when positive
cash balances are maintained, which are used to offset custody fees. There were
no credits for the period ended June 30, 1999. The expenses paid under the above
arrangements are included in their respective expense captions on the Statement
of Operations with the corresponding expense offset shown as "Expenses paid
indirectly".

<PAGE>

DMC has elected to waive that portion, if any, of the annual management fee
payable to the extent necessary to ensure that annual operating expenses
exclusive of taxes, interest, brokerage commissions and extraordinary expenses
do not exceed 0.80% of average daily net assets of the Series through October
31, 1999. No reimbursement was due for the period ended June 30, 1999.

Delchester-7
<PAGE>

Delchester Series
Notes to Financial Statements (Continued)

On June 30, 1999, the Series had liabilities payable to affiliates as follows:
<TABLE>
<CAPTION>
Dividend disbursing Other
Investment transfer agent, expenses
management accounting fees payable
fee payable to and other expenses to DMC
DMC payable to DSC and affiliates
-------------- ------------------- --------------
<S> <C> <C> <C>
$51,047 $3,447 $12,073
</TABLE>
Certain officers of DMC and DSC are officers, directors and/or employees of the
Fund. These officers, directors and employees are paid no compensation by the
Fund.

3. Investments
During the six months ended June 30, 1999, the Series made purchases and sales
of investment securities other than U.S. government securities and temporary
cash investments as follows:

Purchases ..................... $45,433,225
Sales ......................... $56,598,457

The cost of investments for federal income tax purposes approximates cost for
book purposes.

At June 30, 1999, the aggregate cost of securities and unrealized appreciation
(depreciation) for the Series were as follows:
<TABLE>
<CAPTION>
Aggregate Aggregate
Cost of unrealized unrealized Net unrealized
investments appreciation depreciation depreciation
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
$127,445,974 $1,445,005 ($10,103,470) ($8,658,465)
</TABLE>
For federal income tax purposes, the Series had accumulated capital losses at
December 31, 1998 as follows:

Year of
expiration
2006
----------
$567,724

4. Capital Stock
Transactions in capital stock shares were as follows:
<TABLE>
<CAPTION>
Shares issued upon
reinvestment of
distributions from net
investment income
and net realized gain Shares Net
Shares sold on investments repurchased increase
----------- ---------------------- ----------- --------
<S> <C> <C> <C> <C>
Period ended June 30, 1999....... 2,043,285 791,313 (2,083,107) 751,491
Year ended December 31, 1998..... 4,940,859 1,206,292 (2,277,223) 3,869,928
</TABLE>
5. Credit and Market Risk
The 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.

Delchester-8

<PAGE>

Delaware Group Premium Fund, Inc.-Delchester Series
Proxy Results
(Unaudited)

For the six months ended June 30, 1999, Delaware Premium Fund, Inc. - Delchester
Series shareholders voted on the following proposals at the annual meeting of
shareholders on March 17, 1999 or as adjourned. The description of each proposal
and number of shares voted are as follows:

1. To elect the Delaware Group Premium Fund, Inc. Board of Directors.

Shares Shares Voted
Voted Withheld
For Authority
------ ------------
Jeffrey J. Nick .................................. 13,843,382 216,809
Walter P. Babich ................................. 13,843,382 216,809
John H. Durham ................................... 13,843,382 216,809
Anthony D. Knerr ................................. 13,795,552 264,638
Ann R. Leven ..................................... 13,792,268 267,923
Thomas F. Madison ................................ 13,843,382 216,809
Charles E. Peck .................................. 13,842,462 217,729
Wayne A. Stork ................................... 13,842,462 217,729
Jan L. Yeomans ................................... 13,755,213 304,978

3. To approve standardized fundamental investment restrictions (proposal
involves separate votes on seven sub-proposals 3A-3G).

3A. To adopt a new fundamental investment restriction concerning concentration
of the investments in the same industry.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
12,812,366 276,683 971,142

3B. To adopt a new fundamental investment restriction concerning borrowing money
and issuing senior securities.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
12,628,205 437,516 994,470

3C. To adopt a new fundamental investment restriction concerning underwriting.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
12,791,271 271,690 997,230
<PAGE>

3D. To adopt a new fundamental investment restriction concerning investments in
real estate.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
12,656,587 421,617 981,987

3E. To adopt a new fundamental investment restriction concerning investments in
commodities.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
12,618,875 447,765 993,551

3F. To adopt a new fundamental investment restriction concerning lending by the
Fund.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
12,675,902 384,037 1,000,252

3G. To reclassify all current fundamental investment restrictions as
non-fundamental.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
12,742,128 304,671 1,013,392

4. To approve a new investment management agreement with Delaware Management
Company.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
12,800,995 265,777 993,419

5. To ratify the selection of Ernst & Young LLP, as the independent auditors for
Delaware Group Premium Fund, Inc.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
13,247,456 51,640 761,095

6. To approve the restructuring of Delaware Group Premium Fund, Inc. from a
Maryland Corporation into a Delaware Business Trust.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
12,764,725 200,384 1,095,082

Delchester-9

<PAGE>
Delaware Group Premium Fund, Inc.-Devon Series
Statement of Net Assets
June 30, 1999 (Unaudited)

Number Market
of Shares Value
COMMON STOCK-92.94%
Automobiles & Automotive Parts-2.94%
Danaher ........................................ 19,100 $ 1,110,188
Federal Signal ................................. 77,900 1,650,506
-----------
2,760,694
-----------
Banking, Finance & Insurance-14.60%
AFLAC .......................................... 30,300 1,450,613
American International Group ................... 10,725 1,255,495
Bank One ....................................... 29,600 1,763,050
Compass Bancshares ............................. 31,100 848,447
Equifax ........................................ 67,800 2,419,613
Federal Home Loan Mortgage ..................... 36,500 2,117,000
Nationwide Financial Services-Class A .......... 31,000 1,402,750
Protective Life ................................ 22,300 735,900
Unionbancal Corporation ........................ 25,500 921,188
*Unum ........................................... 14,600 799,350
-----------
13,713,406
-----------
Buildings & Materials-4.47%
Masco .......................................... 105,600 3,049,200
Premark International .......................... 30,600 1,147,500
-----------
4,196,700
-----------
Cable, Media & Publishing-0.48%
Wallace Computer Services ...................... 18,000 450,000
-----------
450,000
-----------
Chemicals-1.18%
Valspar ........................................ 29,200 1,109,600
----------
1,109,600
----------
Computers & Technology-8.45%
Computer Associates International .............. 32,200 1,771,000
Hewlett-Packard ................................ 31,200 3,135,600
International Business Machines ................ 14,800 1,912,900
*SunGard Data Systems ........................... 32,500 1,121,250
----------
7,940,750
----------
Consumer Products-3.23%
Dial ........................................... 81,600 3,034,500
----------
3,034,500
----------
Electronics & Electrical Equipment-8.13%
Honeywell ...................................... 16,000 1,854,000
Intel .......................................... 20,400 1,213,163
Pittston Brink's Group ......................... 24,300 650,025
Symbol Technologies ............................ 81,825 3,017,297
Teleflex ....................................... 20,700 899,156
----------
7,633,641
----------
Energy-4.96%
Anadarko Petroleum ............................. 12,000 441,750
BP Amoco plc - ADR ............................. 10,118 1,097,803
*Compagnie Francaise de Petroleum ............... 20,000 1,288,750
Schlumberger Limited ........................... 14,300 910,731
Unocal ......................................... 23,100 915,338
----------
4,654,372
----------
Environmental Services-3.64%
Ecolab ......................................... 78,300 3,415,838
-----------
3,415,838
-----------
Food, Beverage & Tobacco-3.51%
Bestfoods ...................................... 17,700 876,150
Suiza Foods .................................... 28,600 1,197,625
Universal Foods ................................ 58,000 1,225,250
----------
3,299,025
----------

- ----------
Top 10 stocks representing 33.33% of net assets, are in bold

<PAGE>
Number Market
of Shares Value
COMMON STOCK (Continued)
Healthcare & Pharmaceuticals-11.06%
Astrazeneca - ADR ............................. 18,500 $ 724,969
American Home Products ........................ 49,300 2,834,750
*Biomet ........................................ 29,500 1,170,781
Johnson & Johnson ............................. 14,000 1,372,000
Mylan Laboratories ............................ 115,700 3,066,050
*Watson Pharmaceutical ......................... 34,700 1,216,669
----------
10,385,219
----------
Leisure, Lodging & Entertainment-1.25%
Viad .......................................... 38,100 1,178,719
----------
1,178,719
----------
Real Estate-1.87%
CarrAmerica Realty ............................ 17,400 435,000
Developers Diversified Realty ................. 38,300 636,738
Nationwide Health Properties .................. 12,800 244,000
Sun Communities ............................... 12,500 443,750
----------
1,759,488
----------
Retail-4.97%
Food Lion-Class A ............................. 75,500 898,922
Intimate Brands ............................... 34,125 1,616,672
Rite Aid ...................................... 37,600 925,900
Sherwin-Williams .............................. 36,000 999,000
Storage USA ................................... 7,100 226,313
----------
4,666,807
----------
Telecommunications-7.75%
Alltel ........................................ 16,500 1,179,750
Cincinnati Bell ............................... 40,000 997,500
GTE ........................................... 13,500 1,021,781
Nortel Networks ............................... 6,400 555,600
SBC Communications ............................ 60,800 3,526,400
----------
7,281,031
----------
Textiles, Apparel & Furniture-2.55%
HON Industries ................................ 48,000 1,401,000
Hillenbrand Industries ........................ 23,000 994,750
----------
2,395,750
----------
Utilities-0.63%
CMS Energy .................................... 14,200 594,647
----------
594,647
----------
Miscellaneous-7.27%
Pentair ....................................... 18,700 855,525
Stewart Enterprises ........................... 148,800 2,162,250
Tyco International ............................ 40,200 3,808,950
----------
6,826,725
----------
Total Common Stock
(cost $77,012,177) ........................... 87,296,912
----------

CONVERTIBLE PREFERRED STOCK-1.31%
Freeport McMoRan Copper & Gold ................ 21,800 408,750
Sealed Air .................................... 13,090 818,125
----------
Total Convertible Preferred Stock
(cost $1,226,875) ............................ 1,226,875
----------

Devon-1
<PAGE>

Devon Series
Statement of Net Assets (Continued)

Principal Market
Amount Value
REPURCHASE AGREEMENTS-7.22%
With Chase Manhatten 4.65% 7/1/99
(dated 6/30/99, collateralized by
$1,177,000 U.S. Treasury Notes
5.375% due 2/15/01, market value
$1,195,246 and $504,000
U.S. Treasury Notes 6.125% due
12/31/01, market value $507,962
and $589,000 U.S. Treasury Notes
6.375% due 9/30/01, market
value $604,996).................................. $2,251,000 $2,251,000
With J.P. Morgan Securities 4.70% 7/1/99
(dated 6/30/99, collateralized by
$589,000 U.S. Treasury Notes 5.50%
due 1/31/03, market value $594,548
and $407,000 U.S. Treasury Notes
5.75% due 11/30/02, market value
$407,253 and $589,000
U.S. Treasury Notes 6.25% due
8/31/02, market value $606,850 and
$650,000 U.S. Treasury Notes 6.375%
due 8/15/02, market value $674,568).............. 2,237,000 2,237,000

Principal Market
Amount Value
With PaineWebber 4.80% 7/1/99 (dated 6/30/99,
collateralized by $589,000 U.S. Treasury
Notes 5.625% due 11/30/00, market value
$591,204 and $1,177,000 U.S. Treasury
Notes 5.75% due 11/30/02, market value
$1,177,746 and $556,000 U.S. Treasury
Notes 7.125% due 2/29/00, market value
$575,199)........................................ $2,296,000 $2,296,000
----------
Total Repurchase Agreements
(cost $6,784,000)................................ 6,784,000
----------

TOTAL MARKET VALUE OF SECURITIES-101.47% (cost $85,023,052)..... $95,307,787

LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS-(1.47%)......... (1,381,206)
-----------
NET ASSETS APPLICABLE TO 6,204,313 SHARES ($.01 PAR VALUE)
OUTSTANDING; EQUIVALENT TO $15.14 PER SHARE-100.00%.......... $93,926,581
===========

COMPONENTS OF NET ASSETS AT JUNE 30, 1999:
Common stock, $.01 par value, 1,000,000,000 shares
authorized to the Fund with 50,000,000 shares
allocated to the Series...................................... $84,542,701
Undistributed net investment income............................. 368,025
Accumulated net realized loss on investments.................... (1,268,880)
Net unrealized appreciation of investments...................... 10,284,735
-----------
Total net assets................................................ $93,926,581
===========

- ----------
* Non-income producing security for the six months ended June 30, 1999.
ADR - American Depository Receipt

See accompanying notes

Devon-2
<PAGE>

Delaware Group Premium Fund, Inc.-
Devon Series
Statement of Operations
Six Months Ended June 30, 1999
(Unaudited)

INVESTMENT INCOME:
Dividends ............................. $ 514,875
Interest .............................. 179,884
-----------
694,759
-----------
EXPENSES:
Management fees ....................... 254,564
Accounting and administration ......... 15,802
Reports and statements to shareholders 10,022
Registration fees ..................... 6,786
Professional fees ..................... 6,450
Custodian fees ........................ 5,980
Dividend disbursing and transfer agent
fees and expenses .................. 3,747
Taxes (other than taxes on income) .... 2,607
Directors' fees ....................... 801
Other ................................. 4,244
-----------
311,003
-----------
Less expenses paid indirectly ......... (2,278)
-----------
Total expenses ........................ 308,725

NET INVESTMENT INCOME ................. 386,034
-----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized loss on investments ...... (1,261,275)
Net change in unrealized appreciation /
depreciation of investments ........ 1,842,702
-----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS ..................... 581,427
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .......... $ 967,461
===========

See accompanying notes

<PAGE>

Delaware Group Premium Fund, Inc.-
Devon Series
Statements of Changes in Net Assets

Six Months Year
Ended 6/30/99 Ended
(Unaudited) 12/31/98
------------ ------------
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income ................... $ 386,034 $ 476,986
Net realized gain (loss) on investments . (1,261,275) 947,836
Net change in unrealized appreciation /
depreciation of investments .......... 1,842,702 7,281,217
------------ ------------
Net increase in net assets resulting
from operations ...................... 967,461 8,706,039
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................... (490,185) (109,925)
Net realized gain on investments ........ (947,691) (281,684)
------------ ------------
(1,437,876) (391,609)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ............... 30,003,201 48,520,957
Net asset value of shares issued upon
reinvestment of distributions from net
investment income and net realized
gain on investments .................. 1,437,876 391,609
------------ ------------
31,441,077 48,912,566
Cost of shares repurchased .............. (5,758,346) (5,166,222)
------------ ------------
Increase in net assets derived from
capital share transactions ........... 25,682,731 43,746,344
------------ ------------
NET INCREASE IN NET ASSETS .............. 25,212,316 52,060,774
------------ ------------
NET ASSETS:
Beginning of period ..................... 68,714,265 16,653,491
------------ ------------
End of period ........................... $ 93,926,581 $ 68,714,265
============ ============

See accompanying notes

Devon-3

<PAGE>

Delaware Group Premium Fund, Inc.-Devon Series
Financial Highlights

Selected data for each share of the Series outstanding throughout each period
were as follows:

<TABLE>
<CAPTION>
Six Months Year 5/1/97(1)
Ended 6/30/99(2) Ended to
(Unaudited) 12/31/98 12/31/97
------------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period ...................... $15.440 $ 12.730 $ 10.000

Income (loss) from investment operations:
Net investment income ..................................... 0.043 0.106 0.080
Net realized and unrealized gain (loss)
on investments ......................................... (0.079) 2.889 2.650
------- -------- --------
Total from investment operations .......................... (0.036) 2.995 2.730
------- -------- --------
Less dividends and distributions:
Dividends from net investment income ...................... (0.090) (0.080) none
Distributions from net realized gain
on investments ......................................... (0.174) (0.205) none
------- -------- --------
Total dividends and distributions ......................... (0.264) (0.285) none
------- -------- --------
Net asset value, end of period ............................ $15.140 $ 15.440 $ 12.730
======= ======== ========

Total return .............................................. (0.10%) 24.05% 27.30%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................... $93,927 $ 68,714 $ 16,653
Ratio of expenses to average net assets ................... 0.76% 0.66% 0.80%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 0.77% 0.66% 0.91%
Ratio of net investment income to average net assets ...... 0.95% 1.30% 2.01%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 0.94% 1.30% 1.90%
Portfolio turnover ........................................ 43% 34% 80%

</TABLE>
(1) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.
(2) Ratios have been annualized and total return has not been annualized.

See accompanying notes

Devon-4

<PAGE>

Delaware Group Premium Fund, Inc.-Devon Series
Notes to Financial Statements
June 30, 1999
(Unaudited)

Delaware Group Premium Fund, Inc. (the "Fund") is registered as a diversified
open-end investment company under the Investment Company Act of 1940, as
amended. The Fund is organized as a Maryland Corporation and offers 17 series:
the Aggressive Growth Series, the Capital Reserves Series, the Cash Reserve
Series, the Convertible Securities Series, the Delaware Balanced Series
(formerly the Delaware Series), the DelCap Series, the Delchester Series, the
Devon Series, the Emerging Markets Series, the Global Bond Series, the Growth
and Income Series (formerly the Decatur Total Return Series), the International
Equity Series, the REIT Series, the Small Cap Value Series, the Social Awareness
Series, the Strategic Income Series, and the Trend Series. These financial
statements and the related notes pertain to the Devon 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 Series.

The Devon Series will make payments from net investment income and net realized
gain on investments, if any, following the close of the fiscal year.
<PAGE>

Certain expenses of the Fund are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price and execution. The
amount of these expenses was approximately $946 for the period ended June 30,
1999. In addition, the Fund may receive earnings credit from its custodian when
positive cash balances are maintained, which are used to offset custody fees.
These credits were $1,332 for the six months ended June 30, 1999. The expenses
paid under the above arrangements are included in their respective expense
captions on the Statement of Operations with the corresponding expense offset
shown as "Expenses paid indirectly".

2. Investment Management and Other Transactions with Affiliates
Commencing May 1, 1999, and in accordance with the terms of the Investment
Management Agreement, the Series pays Delaware Management Company ("DMC"), the
Investment Manager of the Series, an annual fee which is calculated at the rate
of 0.65% on the first $500 million of average daily net assets of the series,
0.60% on the next $500 million, 0.55% on the next $1,500 million and 0.50% on
the average daily net assets in excess of $2,500 million. Prior to May 1, 1999,
the Series paid DMC an annual fee which was calculated at the rate of 0.60% on
the average daily net assets of the Series.

DMC has elected to waive that portion, if any, of the annual management fee
payable to the extent necessary to ensure that annual operating expenses
exclusive of taxes, interest, brokerage commissions and extraordinary expenses
do not exceed 0.80% of average daily net assets of the Series through October
31, 1999.

The Series has engaged Delaware Service Company, Inc. ("DSC"), an affiliate of
DMC, to provide dividend disbursing, transfer agent and accounting and
administration services. The Series pays DSC a monthly fee based on the number
of shareholder accounts, shareholder transactions and average net assets,
subject to certain minimums.

Devon-5

<PAGE>

Devon Series
Notes to Financial Statements (Continued)

On June 30, 1999, the Series had liabilities payable to affiliates as follows:

Dividend disbursing
Investment transfer agent,
management accounting fees
fee payable to and other expenses
DMC payable to DSC
-------------- -------------------
$49,803 $3,236

Certain officers of DMC and DSC are officers, directors and/or employees of the
Fund. These officers, directors and employees are paid no compensation by the
Fund.

3. Investments
During the six months ended June 30, 1999, the Series made purchases and sales
of investment securities other than U.S. government securities and temporary
cash investments as follows:

Purchases............ $41,773,973
Sales................ $16,069,821

At June 30, 1999, the aggregate cost of securities and unrealized appreciation
(depreciation) for federal income tax purposes for the Series were as follows:

4. Capital Stock
Transactions in capital stock shares were as follows:

<TABLE>
<CAPTION>
Shares issued upon
reinvestment of distributions
from net investment income
and net realized Shares Net
Shares sold gain on investments repurchased increase
----------- ---------------------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Period ended June 30, 1999....... 2,054,204 102,267 (403,337) 1,753,134
Year ended December 31, 1998..... 3,519,429 31,229 (407,718) 3,142,940
</TABLE>

Devon-6

<PAGE>

Delaware Group Premium Fund Inc.-Devon Series
Proxy Results
(Unaudited)

For the six months ended June 30, 1999, Delaware Premium Fund, Inc. - Devon
Series shareholders voted on the following proposals at the annual meeting of
shareholders on March 17, 1999 or as adjourned. The description of each proposal
and number of shares voted are as follows:

1. To elect the Delaware Group Premium Fund, Inc. Board of Directors.

Shares Shares Voted
Voted Withheld
For Authority Abstain
--------- ------------ -------
Jeffrey J. Nick ................ 4,342,099 72,125 0
Walter P. Babich ............... 4,337,182 77,045 0
John H. Durham ................. 4,343,952 70,272 0
Anthony D. Knerr ............... 4,342,041 72,183 0
Ann R. Leven ................... 4,343,827 70,396 0
Thomas F. Madison ............. 4,343,952 70,272 0
Charles E. Peck ................ 4,337,054 77,169 0
Wayne A. Stork.................. 4,341,974 72,250 0
Jan L. Yeomans ................. 4,343,952 70,272 0

3. To approve standardized fundamental investment restrictions (proposal
involves separate votes on seven sub-proposals 3A-3G).

3C. To adopt a new fundamental investment restriction concerning underwriting.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
4,150,771 82,114 181,339

3E. To adopt a new fundamental investment restriction concerning lending by the
Fund.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
4,134,517 101,519 178,188

<PAGE>

3G. To reclassify all current fundamental investment restrictions as
non-fundamental.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
4,128,156 92,181 193,887

4. To approve a new investment management agreement with Delaware Management
Company.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
4,125,312 113,628 175,283

6. To approve the restructuring of Delware Group Premium Fund, Inc. from a
Maryland Corporation into a Delaware Business Trust.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
4,159,574 42,349 212,300

Devon-7

<PAGE>

Delaware Group Premium Fund, Inc.-Emerging Markets Series
Statement of Net Assets
June 30, 1999 (Unaudited)

Number Market
of Shares Value
(U.S.$)
COMMON STOCK-82.60%
Argentina-1.97%
Central Puerto Class B ..................... 41,000 $ 93,493
Transportadora de Gas del sur Class B ...... 44,500 82,781
----------
176,274
----------
Brazil-19.06%
Aracruz Celulose ........................... 8,100 178,200
Brasmotor .................................. 1,073,000 81,741
Centrais Electricas de Santa
Catarina GDR ............................ 600 22,674
Centrais Eletricas de Santa Catarina ....... 198,000 75,418
Companhia Energetica de Minas
Gerais ADR .............................. 2,700,000 56,794
Companhia Energetica de Minas
Gerais ADR .............................. 3,937 82,162
Companhia Paranaense de Energia ............ 22,092 185,021
Elevadores Atlas ........................... 7,500 107,447
Gerdau Metalurgica ......................... 8,000,000 241,046
Petroleo Brasileiro-Petrobras .............. 1,100,000 170,722
Renner Participacoes ....................... 870,000 940
Rossi Residential .......................... 4,500 5,330
Telecomunicacoes de Minas Gerais ........... 4,820,000 120,294
Telecomunicacoes do Parana ................. 900,000 160,659
Uniao de Bancos Brasileiros ................ 8,000,000 136,441
Usinas Siderurgicas de Minas Gerais ........ 20,500 69,926
Usinas Siderurgicas de Minas
Gerais ADR .............................. 3,734 12,637
----------
1,707,452
----------
Chile-3.27%
Administradora de Fondos de Pensiones
Provida ................................. 9,000 198,000
Empresa Nacional Electricidad S.A. ADR ..... 7,800 94,575
----------
292,575
----------
Croatia-1.08%
Zagrebacka Banka GDR ....................... 9,540 97,070
----------
97,070
----------
Egypt-0.93%
Paints & Chemical Industries GDR ........... 12,825 83,042
----------
83,042
----------
Estonia-1.36%
Eesti Uhispank ............................. 15,554 79,714
Eesti Telekom GDR .......................... 2,112 41,923
----------
121,637
----------
Hong Kong-7.40%
First Tractor .............................. 317,000 93,972
Guangdong Kelon Electric Holding ........... 168,000 195,961
Guangshen Railway .......................... 774,000 118,713
Hengan International Group ................. 210,000 106,236
Shenzhen Expressway ........................ 701,300 148,238
----------
663,120
----------
Hungary-1.95%
Gedeon Richter GDR ......................... 4,000 175,000
----------
175,000
----------
India-4.13%
India Fund, (The) .......................... 15,700 156,019
Larsen & Toubro GDR ........................ 7,750 119,350
Mahanagar Telephone GDR .................... 9,300 94,395
----------
369,764
----------

<PAGE>

Number Market
of Shares Value
(U.S.$)
COMMON STOCK (Continued)
Indonesia-0.08%
PT United Tractors ......................... 15,500 $ 6,863
----------
6,863
----------
Israel-3.57%
Bank Hapoalim .............................. 73,200 187,980
ECI Telecommunications ..................... 4,000 132,125
----------
320,105
----------
Malaysia-5.87%
Leader Universal Holdings .................. 139,000 58,161
Petronas Dagangan .......................... 136,000 148,884
Public Finance ............................. 17,000 17,895
Resorts World .............................. 72,000 169,579
Sime Darby ................................. 100,000 131,053
----------
525,572
----------
Mexico-5.45%
Alfa de C.V. Class A ....................... 34,800 145,201
Cemex de C.V. Class B ...................... 42,000 209,038
Grupo Minsa ADR ............................ 2,400 6,900
Grupo Minsa C Shares ....................... 103,096 31,864
Vitro ADR .................................. 18,600 95,325
----------
488,328
----------
Peru-1.28%
Banco de Credito del Peru .................. 64,101 42,330
Telefonica del Peru ADR .................... 4,800 72,600
----------
114,930
----------
Portugal-1.12%
Creditcorp Limited ......................... 9,100 100,100
----------
100,100
----------
Romania-0.41%
Banco Turco Romana GDR ..................... 6,700 36,683
----------
36,683
----------
Russia-1.82%
Gazprom ADR ................................ 1,900 21,375
Gazprom ADR ................................ 5,400 60,750
Lukoil Holding ADR ......................... 1,400 55,426
Mosenergo ADR .............................. 5,700 25,536
----------
163,087
----------
Slovenia-0.24%
Blagovno Trgovinski Center GDR ............. 1,925 12,272
SKB Banka GDR .............................. 800 9,800
----------
22,072
----------
South Africa-9.79%
Amalgamated Banks of South Africa .......... 28,479 161,656
Edgars Consolidated Stores ................. 3,778 29,452
Iscor ...................................... 699,000 219,590
Sanlam Limited ............................. 81,772 97,182
Sappi Limited .............................. 21,500 157,956
Sasol Limited .............................. 29,500 211,091
----------
876,927
----------
South Korea-2.46%
Pohang Iron & Steel ADR .................... 4,780 160,728
Pohang Iron & Steel ........................ 500 59,475
----------
220,203
----------
Taiwan-0.80%
Yageo GDR .................................. 14,760 71,955
----------
71,955
----------

Emerging Markets-1

<PAGE>

Emerging Markets Series
Statement of Net Assets (Continued)

Number Market
of Shares Value
(U.S.$)
COMMON STOCK (Continued)
Thailand-5.06%
Bangkok Bank .............................. 51,600 $ 193,264
Hana Microelectronics ..................... 48,300 145,510
Thai Reinsurance .......................... 60,000 113,991
----------
452,765
----------
Turkey-2.24%
Efes Sinai Yatirim ADR .................... 32,150 29,739
Efes Sinai Yatirim Holding ................ 10,228,660 94,544
Koc Holdings .............................. 1,211,200 76,069
----------
200,352
----------
United Kingdom-1.26%
Anglo American ............................ 2,400 112,495
----------
112,495
----------
Total Common Stock
(cost $8,783,686) ......................... 7,398,371
----------

WARRANTS
Hong Kong-0.00%
*Guangdong Investments 7/99 ................ 4,600 6
----------
Total Warrants (cost $0) .................. 6
----------

Principal Market
Amount Value

REPURCHASE AGREEMENTS-25.85%
With Chase Manhattan 4.65% 7/1/99
(dated 6/30/99, collateralized by
$172,000 U.S. Treasury Notes
5.375% due 2/15/01, market value
$173,339 and $200,000
U.S. Treasury Notes 6.375% due 9/30/01,
market value $206,882 and $401,000
U.S. Treasury Notes 6.125% due 12/31/01,
market value $407,871) ......................... $768,000 $768,000
With J.P. Morgan Securities 4.70% 7/1/99
(dated 6/30/99, collateralized by
$138,000 U.S. Treasury Notes
6.375% due 8/15/02, market value
$138,973 and $201,000 U. S. Treasury Notes
6.25% due 8/31/02, market value $202,886 and
$221,000 U.S. Treasury Notes 5.75%
due 11/30/02, market value $230,192 and
$200,000 U.S. Treasury Notes 5.50%
due 1/31/03, market value $207,084) ............ 764,000 764,000
With PaineWebber 4.80% 7/1/99
(dated 6/30/99, collateralized by
$189,000 U.S. Treasury Notes
7.125% due 2/29/00, market value
$196,283 and $201,000
U.S. Treasury Notes 5.625% due 11/30/00,
market value $201,745 and $402,000
U.S. Treasury Notes 5.75% due 11/30/02,
market value $401,899) ......................... 783,000 783,000
----------
Total Repurchase Agreements
(cost $2,315,000) .............................. $2,315,000
----------

<PAGE>

<TABLE>
<CAPTION>
<S> <C>
TOTAL MARKET VALUE OF SECURITIES-108.45% (cost $11,098,686) ................................ $ 9,713,377
-----------

LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS-(8.45%) .................................... (756,897)
-----------

NET ASSETS APPLICABLE TO 1,248,983 SHARES ($0.01 PAR VALUE) OUTSTANDING;
EQUIVALENT TO $7.17 PER SHARE-100.00% ................................................... $ 8,956,480
===========

COMPONENTS OF NET ASSETS AT JUNE 30, 1999:
Common stock, $0.01 par value, 1,000,000,000 shares authorized to the Fund with
50,000,000 shares allocated to the Series ................................................ $10,737,370
Undistributed net investment income** ...................................................... 24,895
Accumulated net realized loss on investments ............................................... (416,759)
Net unrealized depreciation of investments and foreign currencies .......................... (1,389,026)
-----------
Total net assets ............................................................... $ 8,956,480
===========
</TABLE>
- ----------------
* Non-income producing security for the period ended June 30, 1999.
** Undistributed net investment income includes net realized gains (losses) on
foreign currencies. Net realized gains (losses) on foreign currencies are
treated as net investment income in accordance with provisions.

ADR-American Depository Receipt
GDR-Global Depository Receipt

See accompanying notes

Emerging Markets-2

<PAGE>

Delaware Group Premium Fund, Inc.-
Emerging Markets Series
Statement of Operations
Six Months Ended June 30, 1999
(Unaudited)

INVESTMENT INCOME:
Dividends .................................................. $ 91,185
Interest ................................................... 27,163
Foreign tax withheld ....................................... (2,995)
-----------
115,353
-----------

Expenses:
Management fees ............................................ 39,460
Accounting and administration .............................. 1,231
Custodian fees ............................................. 4,560
Professional fees .......................................... 645
Reports and statements to shareholders ..................... 1,976
Registration fees .......................................... 800
Taxes (other than taxes on income) ......................... 128
Dividend disbursing and transfer agent
fees and expenses ....................................... 140
Directors' fees ............................................ 269
Other ...................................................... 2,291
-----------
51,500
-----------

Less expenses absorbed or waived ........................... (4,784)
Less expenses paid indirectly .............................. (85)
-----------
Total expenses ............................................. 46,631
-----------

NET INVESTMENT INCOME ...................................... 68,722
-----------

NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized loss on:
Investments transactions ................................ (189,159)
Foreign currencies ...................................... (28,143)
-----------
Net realized loss .......................................... (217,302)
-----------
Net change in unrealized appreciation /
depreciation of investments and foreign currencies ...... 1,796,236
-----------
Net realized and unrealized loss on investments
and foreign currencies .................................. 1,578,934
-----------

NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 1,647,656
===========

See accompanying notes

<PAGE>

Delaware Group Premium Fund, Inc.-
Emerging Markets Series
Statements of Changes in Net Assets

Six Months Year
Ended 6/30/99 Ended
(Unaudited) 12/31/98
----------- --------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income ...................... $ 68,722 $ 134,046
Net realized loss on investments
and foreign currencies .................. (217,302) (246,532)
Net change in unrealized appreciation /
depreciation of investments and
foreign currencies ...................... 1,796,236 (2,161,591)
----------- -----------
Net increase (decrease) in net assets
resulting from operations ............... 1,647,656 (2,274,077)
----------- -----------

DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income ...................... (127,668) (19,005)
Net realized gain (loss) on investments .... -- (139,368)
----------- -----------
(127,668) (158,373)
----------- -----------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold .................. 2,579,815 2,966,309
Net asset value of shares issued upon
reinvestment of distributions from net
investment income and net realized
gain on investments ..................... 127,668 158,373
----------- -----------
2,707,483 3,124,682
Cost of shares repurchased ................. (627,059) (1,111,948)
----------- -----------
Increase in net assets derived from capital
share transactions ...................... 2,080,424 2,012,734
----------- -----------

NET INCREASE IN NET ASSETS ................. 3,600,412 (419,716)
----------- -----------

NET ASSETS:
Beginning of period ........................ 5,356,068 5,775,784
----------- -----------
End of period .............................. $ 8,956,480 $ 5,356,068
=========== ===========

See accompanying notes

Emerging Markets-3

<PAGE>

Delaware Group Premium Fund, Inc.-Emerging Markets Series
Financial Highlights

Selected data for each share of the Series outstanding throughout each period
were as follows:

<TABLE>
<CAPTION>
Six Months Year 5/1/97(2)
Ended 6/30/99 Ended to
(Unaudited)(1) 12/31/98 12/31/97
--------------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period .................... $5.810 $8.880 $10.000

Income (loss) from investment operations:
Net investment income(3)................................. 0.066 0.171 0.060
Net realized and unrealized gain (loss)
on investments and foreign currencies ................ 1.427 (2.991) (1.180)
------ ------ ------
Total from investment operations ........................ 1.493 (2.820) (1.120)
------ ------ ------

Less dividends and distributions:
Dividends from net investment income .................... (0.133) (0.030) none
Distributions from net realized gain on investments ..... none (0.220) none
------ ------ ------
Total dividends and distributions ....................... (0.133) (0.250) none
------ ------ ------

Net asset value, end of period .......................... $7.170 $5.810 $8.880
====== ====== ======

Total return ............................................ 26.56% (32.48%) (11.20%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $8,956 $5,356 $5,776
Ratio of expenses to average net assets ................. 1.49% 1.50% 1.50%
Ratio of expenses to average net assets
prior to expense limitation .......................... 1.64% 1.67% 2.45%
Ratio of net investment income to average net assets .... 2.19% 2.34% 0.89%
Ratio of net investment income to average net
assets prior to expense limitation ................... 2.04% 2.17% (0.06%)
Portfolio turnover ...................................... 19% 38% 48%
</TABLE>
- ----------
(1)Ratios have been annualized and total return has not been annualized.
(2)Date of commencement of operations; ratios have been annualized and total
return has not been annualized.
(3)Per share information was based on the average shares outstanding method.

See accompanying notes

Emerging Markets-4

<PAGE>

Delaware Group Premium Fund, Inc.-Emerging Markets Series
Notes to Financial Statements
June 30, 1999
(Unaudited)

Delaware Group Premium Fund, Inc. (the "Fund") is registered as a diversified
open-end investment company under the Investment Company Act of 1940, as
amended. The Fund is organized as a Maryland Corporation and offers 17 series:
the Aggressive Growth Series, the Capital Reserves Series, the Cash Reserve
Series, the Convertible Securities Series, the Delaware Balanced Series
(formerly the Delaware Series), the DelCap Series, the Delchester Series, the
Devon Series, the Emerging Markets Series, the Global Bond Series, the Growth
and Income Series (formerly the Decatur Total Return Series), the International
Equity Series, the REIT Series, the Small Cap Value Series, the Social Awareness
Series, the Strategic Income Series, and the Trend Series. These financial
statements and the related notes pertain to the Emerging Markets 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 Series.

Security Valuation--Securities listed on an exchange are valued at the last
quoted sales price as of the close of the NYSE on the valuation date. Securities
not traded or securities not listed on an exchange are valued at the mean of the
last quoted bid and asked prices. Securities listed on a foreign exchange are
valued at the last quoted sales price before the Series is valued. Money market
instruments having less than 60 days to maturity are valued at amortized cost,
which approximates market value. Other securities and assets for which market
quotations are not readily available are valued at fair value as determined in
good faith by or under the direction of the Fund's Board of Directors.

Foreign Currency Transactions--Transactions denominated in foreign currencies
are recorded at the prevailing exchange rates on the valuation date. The value
of all assets and liabilities denominated in foreign currencies are translated
into U.S. dollars at the exchange rate of such currencies against the U.S.
dollar as of 3:00 PM EST. Transaction gains or losses resulting from changes in
exchange rates during the reporting period or upon settlement of the foreign
currency transaction are reported in operations for the current period. It is
not practical to isolate that portion of both realized and unrealized gains and
losses on investments in equity securities in the statement of operations that
result from fluctuations in foreign currency exchange rates. The Series reports
certain foreign currency related transactions as components of realized gains
(losses) for financial reporting purposes, whereas such components are treated
as ordinary income (loss) for federal income tax purposes.

Other--Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. Foreign dividends are also recorded on the
ex-dividend date or as soon after the ex-dividend date that the Series became
aware of such dividends, net of all non-rebatable tax withholdings. Withholding
taxes on foreign dividends have been provided for in accordance with the Series'
understanding of the applicable country's tax rules and rates.
<PAGE>

The Emerging Markets Series will make payments from net investment income and
net realized gain on investments, if any, following the close of the fiscal
year.

Certain expenses of the Fund are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price and execution. The
amount of these expenses was approximately $73 for the period ended June 30,
1999. The Fund may receive earnings credits from its custodian when positive
cash balances are maintained, which are used to offset custody fees. These
credits were $12 for the period ended June 30, 1999. The expenses paid under the
above arrangements are included in their respective expense captions on the
Statement of Operations with the corresponding expense offset shown as "Expenses
paid indirectly".

2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Series
pays Delaware International Advisers Ltd. ("DIAL"), the Investment Manager of
the Series, an annual fee which is calculated at the following rates: 1.25% on
the first $500 million of average daily net assets of the Series, 1.20% on the
next $500 million, 1.15% on the next $1,500 million and 1.10% on the average
daily net assets over $2,500 million. These rates became effective May 1, 1999.
The old management fee was calculated at the rate of 1.25% on the average daily
net assets of the Series.

DIAL has elected to waive that portion, if any, of the annual management fee
payable to the extent necessary to ensure that annual operating expenses
exclusive of taxes, interest, brokerage commissions and extraordinary expenses
do not exceed 1.50% of average daily net assets of the Series through October
31, 1999.

Emerging Markets-5

<PAGE>

Emerging Markets Series
Notes to Financial Statements (Continued)

The Series has engaged Delaware Service Company, Inc. ("DSC"), an affiliate of
Delaware Management Company ("DMC"), to provide dividend disbursing, transfer
agent and accounting services. The Series pays DSC a monthly fee based on the
number of shareholder accounts, shareholder transactions and average net assets,
subject to certain minimums.

On June 30, 1999, the Series had liabilities payable to affiliates as follows:

Dividend disbursing Other
Investment transfer agent, expenses
management accounting fees payable
fee payable to and other expenses to DMC
DIAL payable to DSC and affiliates
-------------- ------------------- --------------
$8,324 $280 $722

Certain officers of DMC, DSC and DIAL are officers, directors and/or employees
of the Fund. These officers, directors and employees are paid no compensation by
the Fund.

3. Investments
During the period ended June 30, 1999, the Series made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:

Purchases ....................................... $1,713,589
Sales ........................................... $509,021

For federal income tax purposes, the Series had accumulated capital losses at
December 31, 1998 as follows:

Year of
expiration
2006
----------
$227,600

5. Foreign Exchange Contracts
The Series will generally enter into forward foreign currency contracts as a way
of managing foreign exchange rate risk. These contracts may be entered into to
fix the U.S. dollar value of a security that it has agreed to buy or sell for
the period between the date the trade was entered into and the date the security
is delivered and paid for. They may also be used to hedge the U.S. dollar value
of securities it already owns denominated in foreign currencies.

Forward foreign currency contracts are valued at the mean between the bid and
asked prices of the contracts and are marked-to-market daily. Interpolated
values are derived when the settlement date of the contract is an interim date
for which quotations are not available. The change in market value is recorded
as an unrealized gain or loss. When the contract is closed, a realized gain or
loss is recorded equal to the difference between the value of the contract at
the time it was opened and the value at the time it was closed.

Emerging Markets-6

<PAGE>

Emerging Markets Series
Notes to Financial Statements (Continued)

The use of forward foreign currency contracts does not eliminate fluctuations in
the underlying prices of the Series' securities, but it does establish a rate of
exchange that can be achieved in the future. Although forward foreign currency
contracts limit the risk of loss due to a decline in the value of the hedged
currency, they also limit any potential gain that might result should the value
of the currency increase. In addition, a Series could be exposed to risks if the
counterparties to the contracts are unable to meet the terms of their contracts.

There were no forward foreign currency contracts outstanding at June 30, 1999.

6. Credit and Market Risk
Some countries in which the Series may invest require governmental approval for
the repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if there is a deterioration in a
country's balance of payments or for other reasons, a country may impose
temporary restrictions on foreign capital remittances abroad.

The securities exchanges of certain foreign markets are substantially smaller,
less liquid and more volatile than the major securities markets in the United
States. Consequently, acquisition and disposition of securities by the Series
may be inhibited. In addition, a significant proportion of the aggregate market
value of equity securities listed on the major securities exchanges in emerging
markets are held by a smaller number of investors. This may limit the number of
shares available for acquisition or disposition by the Series.

The Series may invest up to 10% of its total assets in illiquid securities which
may include securities with contractual restrictions on resale and other
securities which may not be readily marketable. The relative illiquidity of some
of these securities may adversely affect the Series' ability to dispose of such
securities in a timely manner and at a fair price when it is necessary to
liquidate such securities.

Emerging Markets-7

<PAGE>

Delaware Group Premium Fund, Inc.-Emerging Markets Series
Proxy Results
(Unaudited)

For the six months ended June 30, 1999, Delaware Premium Fund, Inc. - Emerging
Markets Series shareholders voted on the following proposals at the annual
meeting of shareholders on March 17, 1999 or as adjourned. The description of
each proposal and number of shares voted are as follows:

1. To elect the Delaware Group Premium Fund, Inc. Board of Directors.

Shares Shares Voted
Voted Withheld
For Authority Abstain
------- ------------- -------
Jeffrey J. Nick ............. 665,577 28,468 --
Walter P. Babich ............ 665,577 28,468 --
John H. Durham .............. 665,577 28,468 --
Anthony D. Knerr ............ 665,577 28,468 --
Ann R. Leven ................ 665,577 28,468 --
Thomas F. Madison ........... 665,577 28,468 --
Charles E. Peck ............. 665,577 28,468 --
Wayne A. Stork .............. 665,577 28,468 --
Jan L. Yeomans .............. 665,577 28,468 --

3. To approve standardized fundamental investment restrictions (proposal
involves separate votes on seven sub-proposals 3A-3G).

3C. To adopt a new fundamental investment restriction concerning underwriting.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
620,051 38,987 35,005

3D. To adopt a new fundamental investment restriction concerning investments in
real estate.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
415,856 42,842 35,347

3E. To adopt a new fundamental investment restriction concerning investments in
commodities.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
615,407 43,631 35,005

3F. To adopt a new fundamental investment restriction concerning lending by the
Fund.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
620,051 38,987 35,005

3G. To reclassify all current fundamental investment restrictions as
non-fundamental.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
621,355 37,334 35,355

4. To approve a new investment management agreement with Delaware International
Advisers Ltd.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
604,321 53,669 36,053

6. To approve the restructuring of Delware Group Premium Fund, Inc. from a
Maryland Corporation into a Delaware Business Trust.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
617,264 23,870 52,910

Emerging Markets-8

<PAGE>
Delaware Group Premium Fund, Inc.-Global Bond Series
Statement of Net Assets
June 30, 1999 (Unaudited)

Market
Principal Value
Amount* (U.S. $)
Bonds-94.97%
Australia-12.65%
Australian Government 6.75% 11/15/06 A$ 700,000 $ 482,695
Australian Republic 7.25% 5/3/07 .... Eu 500,000 309,985
Federal National Mortgage Association
5.75% 9/5/00 ..................... A$ 700,000 469,168
New South Wales Treasury
7.00% 2/1/00 ..................... 1,100,000 741,083
Queensland Treasury 8.00% 8/14/01 ... 1,150,000 803,111
-----------
2,806,042
-----------
Canada-15.67%
Abbey National Treasury Service
7.00% 12/31/99 ................... C$ 1,350,000 928,373
Export-Import Bank of Japan
7.75% 10/8/02 .................... 160,000 115,062
Government of Canada 7.50% 3/1/01 ... 350,000 247,696
Government of Canada 10.25% 3/15/14 . 600,000 600,188
Japan Highway 7.875% 9/27/02 ........ 800,000 576,977
KFW International Finance
6.50% 12/28/01 ................... 60,000 41,611
Kingdom of Norway 8.375% 1/27/03 .... 200,000 147,090
Ontario Hydro 5.60% 6/2/08 .......... 900,000 601,050
Ontario Hydro 10.00% 3/19/01 ........ 300,000 219,437
-----------
3,477,484
-----------
Germany-18.30%
Baden Wurt L-Finance 6.625% 8/20/03 . Eu 600,000 347,485
Deutsche Pfandbriefe Hypotheken Bank
5.625% 2/7/03 .................... 802,258 878,912
Deutschland Republic 6.00% 1/4/07 ... 806,775 917,261
DSL Finance NV Amsterdam
5.75% 3/19/09 .................... 400,000 224,735
DSL Finance NV Amsterdam
6.00% 2/21/06 .................... 1,400,000 800,501
Halifax 5.625% 7/23/07 .............. 1,600,000 891,955
-----------
4,060,849
-----------
Netherlands-4.32%
Netherlands Government 8.25% 9/15/07 Eu 742,852 959,527
-----------
959,527
-----------
<PAGE>

Market
Principal Value
Amount* (U.S. $)
Bonds (Continued)
New Zealand-11.62%
International Bank Reconstruction &
Development 5.50% 4/15/04 ...... NZ$ 700,000 $ 356,030
New Zealand Government
7.00% 7/15/09 .................. 200,000 109,464
New Zealand Government
8.00% 4/15/04 .................. 1,050,000 599,844
New Zealand Government
8.00% 11/15/06 ................. 1,900,000 1,100,523
New Zealand Government
10.00% 3/15/02 ................. 700,000 412,855
----------
2,578,716
----------
South Africa-4.19%
Republic of South Africa
12.50% 1/15/02 ................. Sa 3,500,000 564,523
Republic of South Africa
13.00% 8/31/10 ................. 2,500,000 365,434
----------
929,957
----------
Sweden-7.47%
Swedish Export Credit 6.50% 6/5/01 Sk 2,500,000 307,626
Swedish Government 8.00% 8/15/07 .. 2,700,000 383,280
Swedish Government 9.00% 4/20/09 .. 6,300,000 967,904
----------
1,658,810
----------
United States-20.75%
Korea Electric Power 6.375% 12/1/03 $ 100,000 93,605
U.S. Treasury Inflation Index Notes
3.375% 1/15/07 ................. 624,858 599,278
U.S. Treasury Inflation Index Notes
3.625% 7/15/02 ................. 360,588 357,207
U.S. Treasury Inflation Index Notes
3.625% 1/15/08 ................. 510,665 496,462
U.S. Treasury Notes 5.875% 2/15/04 250,000 250,932
U.S. Treasury Notes 6.25% 2/15/07 . 2,200,000 2,242,494
U.S. Treasury Notes 6.375% 8/15/27 550,000 563,428
----------
4,603,406
----------
Total Bonds (cost $21,975,082) .... 21,074,791
----------

Global Bond-1
<PAGE>
Global Bond Series
Statement of Net Assets (Continued)
Market
Principal Value
Amount* (U.S. $)
Repurchase Agreements-3.15%
With Chase Manhattan 4.65% 7/1/99
(dated 6/30/99, collateralized by
$121,000 U.S. Treasury Notes
6.375% due 2/15/01, market value
$123,154 and $61,000
U.S. Treasury Notes 6.375% due
9/30/01, market value $62,337
and $52,000 U.S. Treasury Notes
6.125% due 12/31/01
market value $52,339) ................... $232,000 $232,000
With J.P. Morgan Securities 4.70% 7/1/99
(dated 6/30/99, collateralized by
$67,000 U.S. Treasury Notes
6.375% due 8/15/02, market value
$69,505 and $61,000
U.S. Treasury Notes 6.25% due
8/31/02, market value $62,528
and $42,000 U.S. Treasury Notes 5.75%
due 11/30/02, market value $41,962
and $61,000 U.S Treasury Notes
5.50% due 1/31/03,
market value $61,260) ................... 230,000 230,000

Market
Principal Value
Amount* (U.S. $)
Repurchase Agreements (Continued)
With PaineWebber 4.80% 7/1/99
(dated 6/30/99, collateralized by
$57,000 U.S. Treasury Notes
7.125% due 2/29/00, market value
$59,267 and $61,000
U.S. Treasury Notes 5.625% due
11/30/00, market value $60,916
and $121,000 U.S. Treasury Notes
5.75% due 11/30/02,
market value $121,351)................... $237,000 $237,000
--------
Total Repurchase Agreements
(cost $699,000) ......................... $699,000
--------

TOTAL MARKET VALUE OF SECURITIES-98.12% (COST $22,674,082)..........$21,773,791

RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-1.88%............... 416,565
-----------
NET ASSETS APPLICABLE TO 2,195,905 SHARES ($0.01 PAR VALUE)
OUTSTANDING; EQUIVALENT TO $10.11 PER SHARE-100.00% .............$22,190,356
===========
COMPONENTS OF NET ASSETS AT JUNE 30, 1999:
Common stock, $0.01 par value, 1,000,000,000 shares
authorized to the Fund with 50,000,000 shares allocated to
the Series.........................................................$22,929,945
Undistributed net investment income ** ............................. 228,045
Accumulated net realized loss on investments........................ (53,242)
Net unrealized depreciation of investments and foreign
currencies......................................................... (914,392)
-----------
Total net assets....................................................$22,190,356
===========
- --------------
*Principal amount is stated in the currency in which each bond is denominated.
A$ - Australian Dollars
C$ - Canadian Dollars
Eu - Euro
NZ$ - New Zealand Dollars
Sa - South African Rand
Sk - Swedish Kroner
$ - U.S. Dollars

**Undistributed net investment income includes net realized gains (losses) on
foreign currencies. Net realized gains (losses) on foreign currencies are
treated as net investment income in accordance with provisions of the Internal
Revenue Code.

See accompanying notes
Global Bond-2
<PAGE>

Delaware Group Premium Fund, Inc.-
Global Bond Series
Statement of Assets and Liabilities
Six Months Ended June 30, 1999
(Unaudited)

ASSETS:
Investments at market ........................................... $21,773,791
Cash and Foreign Currencies ..................................... 1,228
Dividends and interest receivable ............................... 572,447
Receivable for securities sold .................................. 907,061
-----------
Total assets .................................................... 23,254,527
-----------
LIABILITIES:
Payable for securities purchased ................................ 1,027,566
Other accounts payable and accrued expenses ..................... 36,605
-----------
Total liabilities ............................................... 1,064,171
-----------

Total Net Assets ................................................ $22,190,356
===========

Investments at cost ............................................. $22,674,082
-----------

See accompanying notes

<PAGE>

Delaware Group Premium Fund, Inc.-
Global Bond Series
Statement of Operations
Six Months Ended June 30, 1999
(Unaudited)

INVESTMENT INCOME:
Interest .......................................................... $ 710,689
---------
710,689
---------
EXPENSES:
Management fees ................................................... 82,963
Accounting and administration ..................................... 4,317
Custodian fees .................................................... 1,600
Directors' fees ................................................... 434
Professional fees ................................................. 250
Registration fees ................................................. 250
Reports and statements to shareholders ............................ 250
Taxes (other than taxes on income) ................................ 90
Dividend disbursing and transfer agent
fees and expenses .............................................. 20
Other ............................................................. 2,311
---------
92,485

Less expenses paid indirectly ..................................... (254)
---------
Total expenses .................................................... 92,231
---------

NET INVESTMENT INCOME ............................................. 618,458
---------

NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on:
Investments .................................................... (43,035)
Foreign currencies ............................................. 230
---------
Net realized loss ................................................. (42,805)
Net change in unrealized appreciation / depreciation
of investments and foreign currencies .......................... (945,130)
---------
NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS AND FOREIGN CURRENCIES ............................. (987,935)
---------

NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................................................ ($369,477)
=========
See accompanying notes

Global Bond-3
<PAGE>

Delaware Group Premium Fund, Inc.-Global Bond Series
Statements of Changes in Net Assets

Six Months Year
Ended 6/30/99 Ended
(Unaudited) 12/31/98
----------- --------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income .................................. $ 618,458 $1,103,809
Net realized gain (loss) on investments and foreign
currencies............................................. (42,805) 47,334
Net change in unrealized appreciation / depreciation on
investments and foreign currencies .................... (945,130) 309,368
----------- ----------
Net increase (decrease) in net assets resulting
from operations........................................ (369,477) 1,460,511
----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .................................. (703,899) (1,059,148)
Net realized gain on investment transactions............ (128,139) (16,415)
----------- ----------
(832,038) (1,075,563)
----------- ----------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold............................... 3,054,790 6,858,379
Net asset value of shares issued upon reinvestment
of distributions from net investment income and net
realized gain on investments........................... 832,038 1,075,563
----------- ----------
3,886,828 7,933,942
Cost of shares repurchased ............................. (2,206,127) (3,483,316)
----------- ----------
Increase in net assets derived from capital share
transactions........................................... 1,680,701 4,450,626
----------- ----------

NET INCREASE IN NET ASSETS.............................. 479,186 4,835,574
----------- ----------

NET ASSETS:
Beginning of period .................................... 21,711,170 16,875,596
----------- ----------
End of period...........................................$22,190,356 $21,711,170
=========== ===========

See accompanying notes

Global Bond-4

<PAGE>

Delaware Group Premium Fund, Inc.-Global Bond Series
Financial Highlights
Selected data for each share of the Series outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
Six Months
Ended 6/30/99 Year Ended 5/2/96(2) to
(Unaudited)(1) 1998 1997 12/31/96
------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................... $10.680 $10.500 $10.960 $10.000

Income (loss) from investment operations:
Net investment income(3)................................ 0.292 0.608 0.636 0.339
Net realized and unrealized gain (loss) on
investments and foreign currencies .................. (0.466) 0.182 (0.551) 0.831
------- ------- ------- -------
Total from investment operations ....................... (0.174) 0.790 0.085 1.170
------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ................... (0.334) (0.600) (0.460) (0.210)
Distributions from net realized gain on investments .... (0.062) (0.010) (0.085) none
------- ------- ------- -------
Total dividends and distributions ...................... (0.396) (0.610) (0.545) (0.210)
------- ------- ------- -------

Net asset value, end of period ......................... $10.110 $10.680 $10.500 $10.960
======= ======= ======= =======
Total return ........................................... (1.64%) 7.82% 0.88% 11.79%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $22,190 $21,711 $16,876 $ 9,471
Ratio of expenses to average net assets ................ 0.84% 0.83% 0.80% 0.80%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly ............. 0.84% 0.92% 1.08% 1.19%
Ratio of net investment income to average net assets ... 5.64% 5.83% 6.03% 6.51%
Ratio of net investment income to average net
assets prior to expense limitation and expenses
paid indirectly ..................................... 5.64% 5.74% 5.75% 6.12%
Portfolio turnover ..................................... 106% 79% 97% 56%
</TABLE>
- -------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(3) Per share information for the period ended June 30, 1999 and the years ended
December 31, 1997 and 1998 was based on the average shares outstanding
method.

See accompanying notes

Global Bond-5
<PAGE>
Delaware Group Premium Fund, Inc.-Global Bond Series
Notes to Financial Statements
June 30, 1999
(Unaudited)

Delaware Group Premium Fund, Inc. (the "Fund") is registered as a diversified
open-end investment company under the Investment Company Act of 1940, as
amended. The Fund is organized as a Maryland Corporation and offers 17 series:
the Aggressive Growth Series, the Capital Reserves Series, the Cash Reserve
Series, the Convertible Securities Series, the Delaware Balanced Series
(formerly the Delaware Series), the DelCap Series, the Delchester Series, the
Devon Series, the Emerging Markets Series, the Global Bond Series, the Growth
and Income Series (formerly the Decatur Total Return Series), the International
Equity Series, the REIT Series, the Small Cap Value Series, the Social Awareness
Series, the Strategic Income Series, and the Trend Series. These financial
statements and the related notes pertain to 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 Series.

Security Valuation--Securities listed on an exchange are valued at the last
quoted sales price as of the close of the NYSE on the valuation date. Securities
not traded or securities not listed on an exchange are valued at the mean of the
last quoted bid and asked prices. Securities listed on a foreign exchange are
valued at the last quoted sales price before the Series is valued. Long-term
debt securities are valued by an independent pricing service and such prices are
believed to reflect the fair value of such securities. Money market instruments
having less than 60 days to maturity are valued at amortized cost, which
approximates market value. Other securities and assets for which market
quotations are not readily available are valued at fair value as determined in
good faith by or under the direction of the Fund's Board of Directors.

Foreign Currency Transactions--Transactions denominated in foreign currencies
are recorded at the prevailing exchange rates on the valuation date. The value
of all assets and liabilities denominated in foreign currencies are translated
into U.S. dollars at the exchange rate of such currencies against the U.S.
dollar as of 3:00 PM EST. Transaction gains or losses resulting from changes in
exchange rates during the reporting period or upon settlement of the foreign
currency transaction are reported in operations for the current period. The
Series does isolate that portion of gains and losses on investments in debt
securities which are due to changes in the foreign exchange rate from that which
are due to changes in market prices of debt securities. The Series reports
certain foreign currency related transactions as components of realized gains
(losses) for financial reporting purposes, whereas such components are treated
as ordinary income (loss) for federal income tax purposes.

Other--Expenses common to all funds within the Delaware Investments Family 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.
Interest income is recorded on the accrual basis. Withholding taxes on foreign
interest have been provided for in accordance with the Series' understanding of
the applicable country's tax rules and rates. Original issue discounts are
accreted to interest income over the lives of the respective securities.

<PAGE>

The Global Bond Series will make payments from net investment income quarterly
and distributions from net realized gain on investments, if any, following the
close of the fiscal year.

2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Series
pays Delaware International Advisers Ltd. ("DIAL"), the Investment Manager of
the Series, an annual fee which is calculated at the following rates: 0.75% on
the first $500 million of average daily net assets of the Series, 0.70% on the
next $500 million, 0.65% on the next $1,500 million and 0.60% on the average
daily net assets over $2,500 million. These rates became effective May 1, 1999.
Prior to May 1, 1999 the management fee was calculated at the rate of 0.75% on
the average daily net assets of the Series.

DIAL has elected to waive that portion, if any, of the annual management fee
payable to the extent necessary to ensure that annual operating expenses
exclusive of taxes, interest, brokerage commissions and extraordinary expenses
do not exceed 0.85% of average daily net assets of the Series through October
31, 1999.

Global Bond-6

<PAGE>
Global Bond Series
Notes to Financial Statements (Continued)

On June 30, 1999, the Series had liabilities payable to affiliates as follows:

Dividend disbursing Other
Investment transfer agent, expenses
Management accounting fees payable
fee payable to and other expenses to DMC
DIAL payable to DSC and affiliates
-------------- ------------------- --------------
$13,766 $1,289 $680

Certain officers of DMC, DSC and DIAL are officers, directors and/or employees
of the Fund. These officers, directors and employees are paid no compensation by
the Fund.

3. Investments
During the period ended June 30, 1999, the Series made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:

Purchases .................................... $ 9,704,988
Sales ........................................ $10,643,526

During the period ended June 30, 1999 the Series made purchases of U.S.
government securities as follows:

Purchases .................................... $ 3,077,070
Sales ........................................ $ 327,234

4. Capital Stock
Transactions in capital stock shares were as follows:
<TABLE>
<CAPTION>
Shares issued upon
reinvestment of distributions
from net investment
income and net realized Shares Net
Shares sold gain on investments repurchased increase
----------- ----------------------------- ----------- --------
<S> <C> <C> <C> <C>
Period ended June 30, 1999 ........ 291,816 81,054 (210,370) 162,500
Year ended December 31, 1998 ...... 656,617 103,550 (334,171) 425,996
</TABLE>
5. Foreign Exchange Contracts
The Series will generally enter into forward foreign currency contracts as a way
of managing foreign exchange rate risk. These contracts may be entered into to
fix the U.S. dollar value of a security that it has agreed to buy or sell for
the period between the date the trade was entered into and the date the security
is delivered and paid for. They may also be used to hedge the U.S. dollar value
of securities it already owns denominated in foreign currencies.

Global Bond-7
<PAGE>

Global Bond Series
Notes to Financial Statements (Continued)

There were no forward foreign currency contracts outstanding at June 30, 1999.

Global Bond-8

<PAGE>

Delaware Group Premium Fund, Inc.-Global Bond Series
Proxy Results
(Unaudited)

For the six months ended June 30, 1999, Delaware Premium Fund, Inc.-Global Bond
Series shareholders voted on the following proposals at the annual meeting of
shareholders on March 17, 1999 or as adjourned. The description of each proposal
and number of shares voted are as follows:

1. To elect the Delaware Group Premium Fund, Inc. Board of Directors.

Shares Shares Voted
Voted Withheld
For Authority Abstain
------ ------------ -------
Jeffrey J. Nick ........... 1,951,876 44,429
Walter P. Babich .......... 1,950,481 42,960
John H. Durham ............ 1,951,859 41,582
Anthony D. Knerr........... 1,950,891 42,549
Ann R. Leven .............. 1,950,941 42,499
Thomas F. Madison ......... 1,951,859 41,582
Charles E. Peck ........... 1,950,481 42,960
Wayne A. Stork ............ 1,951,859 41,582
Jan L. Yeomans ............ 1,951,654 41,786

2. To approve the reclassification of the investment objective from fundamental
to non-fundamental.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,765,095 81,101 150,109

3. To approve standardized fundamental investment restrictions (proposal
involves separate votes on seven sub-proposals 3A-3G).

3A. To adopt a new fundamental investment restriction concerning concentration
of the investments in the same industry.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,789,027 45,392 161,886

3B. To adopt a new fundamental investment restriction concerning borrowing money
and issuing senior securities.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,771,809 68,567 155,929

3C. To adopt a new fundamental investment restriction concerning underwriting.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,777,758 51,161 167,386

<PAGE>

3D. To adopt a new fundamental investment restriction concerning investments in
real estate.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,768,733 61,799 165,774

3E. To adopt a new fundamental investment restriction concerning investments in
commodities.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,784,585 49,625 162,096

3F. To adopt a new fundamental investment restriction concerning lending by the
Fund.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,784,184 57,376 154,746

3G. To reclassify all current fundamental investment restrictions as
non-fundamental.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,773,059 72,847 150,399

4. To approve a new investment management agreement with Delaware International
Advisers Ltd.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,795,173 54,196 146,937

5. To ratify the selection of Ernst & Young LLP, as the independent auditors for
Delaware Group Premium Fund, Inc.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,874,351 10,329 111,625

6. To approve the restructuring of Delaware Group Premium Fund, Inc. from a
Maryland Corporation into a Delaware Business Trust.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,819,748 27,574 148,983

Global Bond-9

<PAGE>

Delaware Group Premium Fund, Inc.-Growth and Income Series
(Formerly Decatur Total Return Series)
Statement of Net Assets
June 30, 1999 (Unaudited)

Number of Market
Shares Value
COMMON STOCK-97.82%
Aerospace & Defense-2.51%
+General Dynamics ................................. 117,400 $8,041,900
Lockheed Martin .................................. 191,900 7,148,275
----------
15,190,175
----------
Automobiles & Automotive Parts-6.41%
Dana ............................................. 143,500 6,609,969
Ford Motor ....................................... 138,500 7,816,594
General Motors ................................... 141,400 9,332,400
Rockwell International ........................... 126,900 7,709,175
TRW .............................................. 131,800 7,232,525
----------
38,700,663
----------
Banking, Finance & Insurance-19.27%
American General ................................. 221,500 16,695,563
Aon .............................................. 241,987 9,981,964
Bank of America .................................. 305,311 22,383,113
Bank One ......................................... 219,194 13,055,743
Chase Manhattan .................................. 94,500 8,186,063
Fannie Mae ....................................... 183,100 12,519,463
Mellon Bank ...................................... 312,000 11,349,000
Summit Bancorp ................................... 184,375 7,709,180
U.S. Bancorp ..................................... 427,400 14,531,600
----------
116,411,689
----------
Cable, Media & Publishing-3.11%
McGraw-Hill ...................................... 348,400 18,791,825
----------
18,791,825
----------
Chemicals-4.26%
Dow Chemical ..................................... 60,200 7,637,875
E.I. duPont deNemours ............................ 129,400 8,839,638
Imperial Chemical ADR ............................ 232,200 9,229,950
----------
25,707,463
----------
Computers & Technology-3.39%
Pitney Bowes ..................................... 179,000 11,500,750
Xerox ............................................ 152,400 9,001,125
----------
20,501,875
----------
Electronics & Electrical Equipment-2.39%
Emerson Electric ................................. 134,500 8,456,688
+Thomas & Betts ................................... 126,400 5,972,400
----------
14,429,088
----------
Energy-14.34%
+BP Amoco ADR ..................................... 99,142 10,756,907
Chevron .......................................... 160,400 15,268,075
Duke Energy ...................................... 134,300 7,302,563
Mobil ............................................ 137,200 13,582,800
Royal Dutch Petroleum ............................ 278,000 16,749,500
Sonat ............................................ 333,400 11,043,875
Unocal ........................................... 301,000 11,927,125
----------
86,630,845
----------
- --------------
Top 10 stock holdings, representing 28.58% of net assets, are in bold.

<PAGE>

Number of Market
Shares Value
COMMON STOCK (Continued)
Food, Beverage & Tobacco-8.36%
Bestfoods ........................................ 309,600 $15,325,200
H.J. Heinz ....................................... 151,600 7,598,950
Nabisco Group Holdings ........................... 316,000 6,181,750
PepsiCo .......................................... 216,300 8,368,106
Philip Morris .................................... 257,000 10,328,188
R.J. Reynolds Tobacco Holdings ................... 85,566 2,695,329
----------
50,497,523
----------
Healthcare & Pharmaceuticals-4.77%
AstraZenca ADR ................................... 233,500 9,150,281
Baxter International ............................. 186,300 11,294,438
Glaxo Wellcome ADR ............................... 132,900 7,525,463
Pharmacia & Upjohn ............................... 14,600 829,463
----------
28,799,645
----------
Industrial Machinery-1.99%
Baker Hughes ..................................... 30,000 1,005,000
Deere & Co. ...................................... 278,800 11,047,450
----------
12,052,450
----------
Metals & Mining-3.58%
Alcoa ............................................ 221,500 13,705,313
Alcan Aluminum ................................... 247,300 7,898,144
----------
21,603,457
----------
Paper & Forest Products-6.78%
International Paper .............................. 328,667 16,597,684
Kimberly-Clark ................................... 210,000 11,970,000
Weyerhaeuser ..................................... 180,400 12,402,500
----------
40,970,184
----------
Retail-1.60%
Albertson's ...................................... 12,600 649,688
May Department Stores ............................ 220,900 9,029,288
----------
9,678,976
----------
Telecommunications-10.33%
AT&T ............................................. 183,000 10,213,688
ALLTEL ........................................... 133,500 9,545,250
Ameritech ........................................ 251,800 18,507,300
Cable & Wireless ADR ............................. 159,100 6,304,338
GTE .............................................. 235,300 17,809,269
----------
62,379,845
----------
Transportation & Shipping-2.97%
+British Airways ADR .............................. 149,700 10,694,194
Norfolk Southern ................................. 241,100 7,263,138
----------
17,957,332
----------
Utilities-0.71%
PG&E ............................................. 132,500 4,306,250
----------
4,306,250
----------
Miscellaneous-1.05%
+H&R Block ........................................ 126,800 6,340,000
----------
6,340,000
----------
Total Common Stock
(cost $526,109,584) ............................. 590,949,285
----------

Growth and Income-1

<PAGE>

Growth and Income Series
Statement of Net Assets (Continued)

Principal Market
Amount Value
REPURCHASE AGREEMENTS-2.50%
With Chase Manhattan 4.65% 7/1/99
(dated 6/30/99, collateralized by
$2,616,000 U.S. Treasury Notes 6.375%
due 2/15/01, market value $2,655,651
and $1,308,000 U.S. Treasury Notes
6.375% due 9/30/01, market value
$1,344,207 and $1,121,000 U.S. Treasury
Notes 6.125% due 12/31/01 market
value $1,128,614) ............................. $5,002,000 $5,002,000
With J.P. Morgan Securities
4.70% 7/1/99 (dated 6/30/99,
collateralized by $1,444,000 U.S.
Treasury Notes 6.375% due 8/15/02,
market value $1,498,786 and $1,308,000
U.S. Treasury Notes 6.25% due 8/31/02,
market value $1,348,328 and $904,000
U.S. Treasury Notes 5.75% due 11/30/02,
market value $904,853 and $1,308,000
U.S Treasury Notes 5.50% due 1/31/03,
market value $1,320,993) ...................... 4,970,000 4,970,000

Principal Market
Amount Value
REPURCHASE AGREEMENTS (Continued)
With PaineWebber 4.80% 7/1/99
(dated 6/30/99, collateralized by
$1,234,000 U.S. Treasury Notes 7.125%
due 2/29/00, market value $1,278,004
and $1,308,000 U.S. Treasury Notes
5.625% due 11/30/00, market value
$1,313,565 and $2,616,000 U.S. Treasury
Notes 5.75% due 11/30/02, market
value $2,616,771) ............................. $5,101,000 $5,101,000
----------
Total Repurchase Agreements
(cost $15,073,000) ............................ 15,073,000
----------

TOTAL MARKET VALUE OF SECURITIES-100.32% (cost $541,182,584) $606,022,285

LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS-(0.32%) (1,908,683)
------------

NET ASSETS APPLICABLE TO 32,175,391 SHARES ($0.01 PAR VALUE)
OUTSTANDING; EQUIVALENT TO $18.78 PER SHARE-100.00% $604,113,602
============
COMPONENTS OF NET ASSETS AT JUNE 30, 1999:
Common stock, $0.01 par value, 1,000,000,000 shares
authorized to the Fund with 50,000,000 shares allocated
to the Series $516,463,312
Undistributed net investment income 2,162,078
Accumulated net realized gain on investments 20,648,511
Net unrealized appreciation of investments 64,839,701
------------
Total net assets $604,113,602
============
- -------------------
+Security is partially or fully on loan.
ADR-American Depository Receipt

See accompanying notes

Growth and Income-2
<PAGE>

Delaware Group Premium Fund, Inc.-
Growth and Income Series
Statement of Operations
Six Months Ended June 30, 1999
(Unaudited)

INVESTMENT INCOME:
Dividends ......................................... $ 7,153,835
Interest .......................................... 290,508
-----------
7,444,343
-----------

EXPENSES:
Management fees ................................... 1,791,213
Accounting and administration ..................... 114,747
Reports and statements to shareholders ............ 39,000
Professional fees ................................. 26,200
Registration fees ................................. 23,734
Taxes (other than taxes on income) ................ 23,500
Dividend disbursing and transfer agent
fees and expenses .............................. 9,600
Custodian fees .................................... 6,300
Directors' fees ................................... 4,775
Other ............................................. 80,522
-----------
2,119,591
Less expenses absorbed or waived .................. (28,897)
Less expenses paid indirectly ..................... (6,768)
-----------
Total expenses .................................... 2,083,926
-----------
NET INVESTMENT INCOME ............................. 5,360,417

NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments .................. 20,985,958
Net change in unrealized appreciation /
depreciation of investments .................... 6,449,822
-----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS ................................. 27,435,780
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................................ $32,796,197
===========

See accompanying notes

<PAGE>

Delaware Group Premium Fund, Inc.-
Growth and Income Series
Statements of Changes in Net Assets

Six Months Year
Ended 6/30/99 Ended
(Unaudited) 12/31/98
----------- --------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income ........................... $ 5,360,417 $ 10,116,886
Net realized gain on investments ................ 20,985,958 43,739,574
Net change in unrealized appreciation /
depreciation of investments .................. 6,449,822 (3,304,465)
------------ ------------
Net increase in net assets
resulting from operations .................... 32,796,197 50,551,995
------------ ------------

DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ........................... (5,017,208) (8,876,285)
Net realized gain on investments ................ (43,919,243) (23,162,228)
------------ ------------
(48,936,451) (32,038,513)
------------ ------------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ....................... 36,338,254 180,559,930
Net asset value of shares issued upon
reinvestment of distributions from
net investment income and net
realized gain on investments ................. 48,936,451 32,038,513
------------ ------------
85,274,705 212,598,443
Cost of shares repurchased ...................... (44,927,546) (52,607,198)
------------ ------------
Increase in net assets derived from
capital share transactions ................... 40,347,159 159,991,245
------------ ------------

NET INCREASE IN NET ASSETS ...................... 24,206,905 178,504,727
------------ ------------
NET ASSETS:
Beginning of period ............................. 579,906,697 401,401,970
------------ ------------
End of period ................................... $604,113,602 $579,906,697
============ ============

See accompanying notes

Growth and Income-3

<PAGE>

Delaware Group Premium Fund, Inc.-Growth and Income Series
Financial Highlights

Selected data for each share of the Series outstanding throughout each period
were as follows:

<TABLE>
<CAPTION>
Six Months
Ended 6/30/99 Year Ended December 31,
(Unaudited)(1) 1998 1997 1996 1995 1994
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................. $19.420 $18.800 $15.980 $14.830 $11.480 $12.510

Income (loss) from investment operations:
Net investment income ................................. 0.167 0.361 0.324 0.377 0.416 0.412
Net realized and unrealized gain (loss) on investments. 0.834 1.636 4.216 2.398 3.574 (0.422)
------- ------- ------- ------- ------- -------
Total from investment operations ...................... 1.001 1.997 4.540 2.775 3.990 (0.010)
------- ------- ------- ------- ------- -------

Less dividends and distributions:
Dividends from net investment income .................. (0.161) (0.327) (0.370) (0.420) (0.430) (0.420)
Distributions from net realized gain on investments ... (1.480) (1.050) (1.350) (1.205) (0.210) (0.600)
------- ------- ------- ------- ------- -------
Total dividends and distributions ..................... (1.641) (1.377) (1.720) (1.625) (0.640) (1.020)
------- ------- ------- ------- ------- -------

Net asset value, end of period ........................ $18.780 $19.420 $18.800 $15.980 $14.830 $11.480
======= ======= ======= ======= ======= =======

Total return .......................................... 5.79% 11.35% 31.00% 20.72% 36.12% (0.20%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) ............... $604,114 $579,907 $401,402 $166,647 $109,003 $72,725
Ratio of expenses to average net assets ............... 0.71% 0.71% 0.71% 0.67% 0.69% 0.71%
Ratio of expenses to average net assets prior to
expenses absorbed, waived or paid indirectly ....... 0.72% 0.71% 0.71% 0.67% 0.69% 0.71%
Ratio of net investment income to average net assets .. 1.84% 2.00% 2.02% 2.66% 3.24% 3.63%
Ratio of net investment income to average net assets
prior to expenses absorbed, waived or paid indirectly 1.83% 2.00% 2.02% 2.66% 3.24% 3.63%
Portfolio turnover .................................... 120% 81% 54% 81% 85% 91%
</TABLE>

- -------------------
(1) Ratios have been annualized and total return has not been annualized.

See accompanying notes

Growth and Income-4

<PAGE>

Delaware Group Premium Fund, Inc.-Growth and Income Series
Notes to Financial Statements
June 30, 1999
(Unaudited)

Delaware Group Premium Fund, Inc. (the "Fund") is registered as a diversified
open-end investment company under the Investment Company Act of 1940, as
amended. The Fund is organized as a Maryland Corporation and offers 17 series:
the Aggressive Growth Series, the Capital Reserves Series, the Cash Reserve
Series, the Convertible Securities Series, the Delaware Balanced Series
(formerly the Delaware Series), the DelCap Series, the Delchester Series, the
Devon Series, the Emerging Markets Series, the Global Bond Series, the Growth
and Income Series (formerly the Decatur Total Return Series), the International
Equity Series, the REIT Series, the Small Cap Value Series, the Social Awareness
Series, the Strategic Income Series, and the Trend Series. These financial
statements and the related notes pertain to the Growth and Income 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 Series.

<PAGE>

The Growth and Income Series will make payments from net investment income
quarterly and distributions from net realized gain on investments, if any,
following the close of the fiscal year.

Certain expenses of the Series are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price and execution. The
amount of these expenses was approximately $6,768 for the period ended June 30,
1999. The Series may receive earnings credits from its custodian when positive
cash balances are maintained, which are used to offset custody fees. These
credits were $0 for the period ended June 30, 1999. The expenses paid under the
above arrangements are included in their respective expense captions on the
Statement of Operations with the corresponding expense offset shown as "Expenses
paid indirectly".

2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Series
pays Delaware Management Company ("DMC"), the Investment Manager of the Series,
an annual fee which is calculated at the following rates: 0.65% on the first
$500 million of average daily net assets of the Series, 0.60% on the next $500
million, 0.55% on the next $1,500 million and 0.50% on the average daily net
assets over $2,500 million. These rates became effective May 1, 1999. The old
management fee was calculated at the rate of 0.60% on the average daily net
assets of the Series, less the fees paid to the unaffiliated directors. DMC has
elected to cap the management fee at 0.60% indefinitely.

DMC has elected to waive that portion, if any, of the annual management fee
payable to the extent necessary to ensure that annual operating expenses
exclusive of taxes, interest, brokerage commissions and extraordinary expenses
do not exceed 0.80% of average daily net assets of the Series through October
31, 1999.

Growth and Income-5

<PAGE>

Growth and Income Series
Notes to Financial Statements (Continued)

On June 30, 1999, the Series had liabilities payable to affiliates as follows:

Certain officers of DMC and DSC are officers, directors and/or employees of the
Fund. These officers, directors and employees are paid no compensation by the
Fund.

3. Investments
During the six months ended June 30, 1999, the Series made purchases and sales
of investment securities other than U.S. government securities and temporary
cash investments as follows:

Purchases .................................... $341,972,354
Sales ........................................ $346,497,350

The cost of investments for federal income tax purposes approximates cost for
book purposes. The aggregate cost of securities and unrealized appreciation
(depreciation) for the Series were as follows:

Aggregate Aggregate
Cost of unrealized unrealized Net unrealized
investments appreciation depreciation appreciation
- ------------ ------------ ------------ --------------
$541,182,584 $74,957,622 ($10,117,921) $64,839,701

4. Capital Stock
Transactions in capital stock shares were as follows:

5. Securities Lending
The Series may participate, along with other funds in the Delaware Investments
Family of Funds, in a Securities Lending Agreement ("Lending Agreement").
Security loans made pursuant to the Lending Agreement are required at all times
to be secured by U.S. Treasury obligations and/or cash collateral at least equal
to 100% of the market value of securities issued in the U.S. and 105% of the
market value of securities issued outside of the U.S. Cash collateral received
is invested in fixed income securities, with a weighted average maturity not to
exceed 90 days, rated in one of the top two tiers by Standard & Poors Ratings
Group or Moody's Investors Service, Inc. or repurchase agreements collateralized
by such securities. However, in the event of default or bankruptcy by the
lending agent, realization and/or retention of the collateral may be subject to
legal proceedings. In the event that the borrower fails to return loaned
securities and the collateral received is insufficient to cover the value of the
loaned securities and provided such collateral is not the result of investment
losses, the lending agent has agreed to pay the amount of the shortfall to the
Series, or at the discretion of the lending agent, replace the loaned
securities. The market value of the securities on loan and the related
collateral received at June 30, 1999 were as follows:

Market value
of securities Market value
on loan of collateral
------------- -------------
$15,813,294 $16,290,900

Net income from securities lending activities for the period ended June 30, 1999
was $14,137 and is included in interest income on the statement of operations.

Growth and Income-6

<PAGE>

Delaware Group Premium Fund Inc.-Growth and Income Series
Proxy Results
(Unaudited)

For the six months ended June 30, 1999, Delaware Premium Fund, Inc.-Growth and
Income Series shareholders voted on the following proposals at the annual
meeting of shareholders on March 17, 1999 or as adjourned. The description of
each proposal and number of shares voted are as follows:

1. To elect the Delaware Group Premium Fund, Inc. Board of Directors.

Shares Shares Voted
Voted Withheld
For Authority Abstain
---------- ------------ -------
Jeffrey J. Nick .............. 29,258,511 433,156 -
Walter P. Babich ............. 29,239,412 452,256 -
John H. Durham ............... 29,272,169 419,498 -
Anthony D. Knerr ............. 29,233,952 457,415 -
Ann R. Leven ................. 29,258,257 433,411 -
Thomas F. Madison ............ 29,273,791 417,577 -
Charles E. Peck .............. 29,247,498 444,169 -
Wayne A. Stork ............... 29,265,207 423,460 -
Jan L. Yeomans ............... 29,224,278 467,090 -

3. To approve standardized fundamental investment restrictions (proposal
involves separate votes on seven sub-proposals 3A-3G).

3A. To adopt a new fundamental investment restriction concerning concentration
of the investments in the same industry.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- ---------
27,042,308 751,387 1,897,973

3C. To adopt a new fundamental investment restriction concerning underwriting.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- ---------
26,939,607 825,401 1,926,660

<PAGE>

3F. To adopt a new fundamental investment restriction concerning lending by the
Fund.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- ---------
26,965,530 906,394 1,819,743

3G. To reclassify all current fundamental investment restrictions as
non-fundamental.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- ---------
26,589,004 1,069,458 2,033,206

4. To approve a new investment management agreement with Delaware Management
Company.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- ---------
26,949,041 947,427 1,795,199

5. To ratify the selection of Ernst & Young LLP, as the independent auditors
for Delaware Group Premium Fund, Inc.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- ---------
27,888,166 329,662 1,473,840

6. To approve the restructuring of Delware Group Premium Fund, Inc. from a
Maryland Corporation into a Delaware Business Trust.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- ---------
27,129,907 663,967 1,897,795

Growth and Income-7
<PAGE>

Delaware Group Premium Fund, Inc.-International Equity Series
Statement of Net Assets
June 30, 1999 (Unaudited)

Market
Number Value
of Shares (U.S. $)
COMMON STOCK-95.80%
Australia-11.75%
Amcor Limited ................................ 1,415,000 $ 7,905,279
CSR Limited .................................. 1,904,966 5,474,644
Foster's Brewing Group ....................... 2,411,051 6,829,626
National Australia Bank ...................... 393,757 6,548,671
Orica ........................................ 599,900 3,292,838
-----------
30,051,058
-----------
Belgium-1.66%
Electrabel ................................... 13,115 4,248,670
-----------
4,248,670
-----------
France-8.63%
Alcatel Alsthom .............................. 38,015 5,370,664
Compagnie de Saint Gobain .................... 34,299 5,484,667
Elf Aquitaine ................................ 43,583 6,418,926
+Societe Generale ............................. 27,108 4,794,904
-----------
22,069,161
-----------
Germany-10.17%
+Bayer ........................................ 134,600 5,621,199
Bayerische Hypo-und Vereinsbank .............. 60,900 3,889,044
Continental .................................. 117,200 2,814,206
Rheinisch Westfaelisches Elek ................ 146,000 6,784,839
Siemens ...................................... 89,050 6,894,073
-----------
26,003,361
-----------
Hong Kong-3.34%
Hong Kong Electric ........................... 810,000 2,609,973
Wharf (Holdings) Limited ..................... 1,900,000 5,926,250
-----------
8,536,223
-----------
Japan-15.63%
Canon ........................................ 115,000 3,307,437
+Eisai Limited ................................ 250,000 4,927,684
Hitachi ...................................... 888,000 8,329,584
+Kinki Coca-Cola Bottling ..................... 177,000 3,071,900
Koito Manufacturing .......................... 596,000 2,699,239
Matsushita Electric Industrial ............... 371,000 7,205,369
Nichido Fire & Marine ........................ 783,000 4,031,478
West Japan Railway ........................... 1,669 6,400,130
-----------
39,972,821
-----------
Malaysia-0.74%
Oriental Holdings Berhad ..................... 510,720 1,397,760
Sime Darby Berhad ............................ 380,000 498,000
-----------
1,895,760
-----------
- -----------------
Top 10 holdings, representing 29.86% of net assets, are in bold.

<PAGE>

Market
Number Value
of Shares (U.S. $)

COMMON STOCK (Continued)
Netherlands-4.42%
Elsevier ..................................... 199,500 $ 2,322,928
Koninklijke Van Ommeren ...................... 60,100 1,816,342
Royal Dutch Petroleum ........................ 63,000 3,703,644
Unilever ..................................... 51,286 3,468,825
------------
11,311,739
------------
New Zealand-2.52%
Carter Holt Harvey Limited ................... 1,187,800 1,430,934
+Telecom Corporation of New Zealand ........... 1,164,193 5,026,642
------------
6,457,576
------------
Singapore-0.66%
Jardine Matheson Holdings Limited ............ 336,622 1,683,110
------------
1,683,110
------------
Spain-7.11%
Banco Santander Central
Hispano Americano ........................... 733,492 7,667,559
+Iberdrola .................................... 197,800 3,023,759
+Telefonica de Espana ......................... 154,924 7,489,778
------------
18,181,096
------------
United Kingdom-29.17%
Bass ......................................... 436,964 6,363,729
BG ........................................... 867,647 5,318,071
Blue Circle Industry ......................... 918,236 6,121,017
Boots ........................................ 433,200 5,177,069
British Airways .............................. 889,471 6,125,857
Cable & Wireless ............................. 556,000 7,087,889
*Centrica ..................................... 630,000 1,486,899
GKN .......................................... 482,000 8,263,737
Glaxo Wellcome ............................... 214,470 5,965,846
Great Universal Stores ....................... 438,000 4,905,984
Rio Tinto .................................... 522,100 8,703,967
Taylor Woodrow ............................... 1,365,000 3,943,514
Unigate ...................................... 808,000 5,140,626
------------
74,604,205
------------
Total Common Stock
(cost $195,761,726) ......................... 245,014,780
------------

International Equity-1

<PAGE>

International Equity Series
Statement of Net Assets (Continued)

Market
Principal Value
Amount (U.S.$)
REPURCHASE AGREEMENTS-2.67%
With Chase Manhattan 4.65% 7/1/99
(dated 6/30/99, collateralized by $1,186,000
U.S. Treasury Notes 5.375% due 2/15/01,
market value $1,204,017 and
$593,000 U.S. Treasury Notes 4.65%
due 9/30/01, market value $609,435 and
$508,000 U.S. Treasury Notes 6.125%
due 12/31/01, market value $511,690) ............. $2,268,000 $2,268,000
With J.P. Morgan Securities 4.70% 7/1/99
(dated 6/30/99, collateralized by
$655,000 U.S. Treasury Notes 6.375%
due 8/15/02, market value $679,519 and
$593,000 U. S. Treasury Notes 6.25%
due 8/31/02, market value $611,304 and
$410,000 U.S. Treasury Notes 5.75%
due 11/30/02, market value $411,242 and
$593,000 U.S. Treasury Notes 5.50%
due 1/31/03, market value $598,911) .............. 2,253,000 2,253,000

Market
Principal Value
Amount (U.S.$)
REPURCHASE AGREEMENTS (Continued)
With PaineWebber 4.80% 7/1/99
(dated 6/30/99, collateralized by
$560,000 U.S. Treasury Bills 7.125%
due 2/29/00, market value $579,421 and
$593,000 U.S. Treasury Notes 5.625%
due 11/30/00, market value $595,543
and $1,186,000 U.S. Treasury Notes 5.75%
due 11/30/02, market value $1,186,390) ........... $2,313,000 $2,313,000
----------
Total Repurchase Agreements
(cost $6,834,000) ................................ $6,834,000
----------

TOTAL MARKET VALUE OF SECURITIES-98.47% (cost $202,595,726) ... $251,848,780

RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-1.53% ......... 3,908,444
------------
NET ASSETS APPLICABLE TO 14,671,606 SHARES
($0.01 PAR VALUE) OUTSTANDING;
EQUIVALENT TO $17.43 PER SHARE-100.00% ..................... $255,757,224
============
COMPONENTS OF NET ASSETS AT JUNE 30, 1999:
Common stock, $0.01 par value, 1,000,000,000 shares
authorized to the Fund with 50,000,000 shares
allocated to the Series .................................... $200,625,127
Undistributed net investment income** ......................... 4,345,343
Accumulated net realized gain on investments .................. 1,533,724
Net unrealized appreciation of investments and
foreign currencies ......................................... 49,253,030
------------
Total net assets .............................................. $255,757,224
============
- ----------------
*Non-income producing security for the period ended June 30, 1999.
**Undistributed net investment income includes net realized gains (losses) on
foreign currencies. Net realized gains (losses) on foreign currencies are
treated as net investment income in accordance with provisions of the Internal
Revenue Code.
+Security is partially or fully on loan.

See accompanying notes

International Equity-2

<PAGE>

Delaware Group Premium Fund, Inc.-
International Equity Series
Statement of Operations
Period Ended June 30, 1999
(Unaudited)

INVESTMENT INCOME:
Dividends ............................................. $ 4,738,830
Interest .............................................. 316,517
Foreign tax withheld .................................. (458,909)
-----------
4,596,438
-----------
EXPENSES:
Management fees ....................................... 968,606
Accounting fees and salaries .......................... 63,449
Reports and statements to shareholders ................ 38,440
Professional fees ..................................... 12,800
Taxes (other than taxes on income) .................... 6,060
Registration fees ..................................... 5,950
Custodian fees ........................................ 5,000
Dividend disbursing and transfer agent fees
and expenses ....................................... 3,512
Directors' fees ....................................... 2,141
Other ................................................. 6,704
-----------
1,112,662
-----------

Less expenses absorbed or waived ...................... (9,643)
Less expenses paid indirectly ......................... (2,869)
-----------
Total expenses ........................................ 1,100,150
-----------

NET INVESTMENT INCOME ................................. 3,496,288
-----------

NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain on:
Investments ........................................ 2,397,454
Foreign currencies ................................. 1,202,397
-----------
Net realized gain 3,599,851
Net change in unrealized appreciation/
depreciation of investments and foreign
currencies ......................................... 13,278,957
-----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS AND FOREIGN CURRENCIES .............. 16,878,808
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .......................... $20,375,096
===========
See accompanying notes

<PAGE>

Delaware Group Premium Fund, Inc.-
International Equity Series
Statements of Changes in Net Assets

Period Ended Year
6/30/99 Ended
(Unaudited) 12/31/98
------------ ------------
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income .......................... $ 3,496,288 $ 5,415,775
Net realized gain on investments and
foreign currencies .......................... 3,599,851 1,031,088
Net change in unrealized appreciation/
depreciation of investments and
foreign currencies .......................... 13,278,957 14,401,533
------------ ------------
Net increase in net assets resulting
from operations ............................. 20,375,096 20,848,396
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .......................... (5,284,951) (7,631,302)
Net realized gain on investments ............... (385,980) --
------------ ------------
(5,670,931) (7,631,302)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ...................... 59,671,854 66,971,858
Net asset value of shares issued upon
reinvestment of distributions from net
investment income and net realized
gain on investments ......................... 5,670,931 7,631,302
------------ ------------
65,342,785 74,603,160
Cost of shares repurchased ..................... (67,825,767) (43,147,474)
------------ ------------
Increase in net assets derived from
capital share transactions .................. (2,482,982) 31,455,686
------------ ------------

NET INCREASE IN NET ASSETS ..................... 12,221,183 44,672,780
------------ ------------
NET ASSETS:
Beginning of period ............................ 243,536,041 198,863,261
------------ ------------
End of period .................................. $255,757,224 $243,536,041
============ ============
See accompanying notes

International Equity-3

<PAGE>

Delaware Group Premium Fund, Inc.-International Equity Series
Financial Highlights

Selected data for each share of the Series outstanding throughout each period
were as follows:

Six Months
Ended 6/30/99 Year Ended December 31,
(Unaudited)(1) 1998 1997 1996 1995 1994
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $16.480 $15.520 $15.110 $13.120 $11.840 $11.620

Income from investment operations:
Net investment income(2) ................................. 0.235 0.386 0.359 0.557 0.419 0.220
Net realized and unrealized gain on investments
and foreign currencies ................................ 1.097 1.169 0.596 1.966 1.191 0.080
------- ------- ------- ------- ------- -------
Total from investment operations ......................... 1.332 1.555 0.955 2.523 1.610 0.300
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ..................... (0.356) (0.595) (0.545) (0.420) (0.240) (0.070)
Distributions from net realized gain on investments ...... (0.026) none none (0.113) (0.090) (0.010)
------- ------- ------- ------- ------- -------
Total dividends and distributions ........................ (0.382) (0.595) (0.545) (0.533) (0.330) (0.080)
------- ------- ------- ------- ------- -------
Net asset value, end of period ........................... $17.430 $16.480 $15.520 $15.110 $13.120 $11.840
======= ======= ======= ======= ======= =======
Total return ............................................. 8.30% 10.33% 6.60% 20.03% 13.98% 2.57%

Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $255,757 $243,536 $198,863 $131,428 $81,548 $57,649
Ratio of expenses to average net assets .................. 0.89% 0.87% 0.85% 0.80% 0.80% 0.80%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ....... 0.90% 0.88% 0.90% 0.91% 0.89% 1.01%
Ratio of net investment income to average net assets ..... 2.83% 2.41% 2.28% 4.71% 3.69% 2.63%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid
indirectly ........................................... 2.82% 2.40% 2.23% 4.60% 3.60% 2.42%
Portfolio turnover ....................................... 0% 5% 7% 8% 19% 13%
</TABLE>
- ------------------
(1)Ratios have been annualized and total return has not been annualized.
(2)Per share information for the years ended December 31, 1997 and 1998 and the
period ended June 30, 1999 was based on the average shares outstanding
method.

See accompanying notes

International Equity-4

<PAGE>

Delaware Group Premium Fund, Inc.-International Equity Series
Notes to Financial Statements
June 30, 1999 (Unaudited)

Delaware Group Premium Fund, Inc. (the "Fund") is registered as a diversified
open-end investment company under the Investment Company Act of 1940, as
amended. The Fund is organized as a Maryland Corporation and offers 17 series:
the Aggressive Growth Series, the Capital Reserves Series, the Cash Reserve
Series, the Convertible Securities Series, the Delaware Balanced Series
(formerly the Delaware Series), the DelCap Series, the Delchester Series, the
Devon Series, the Emerging Markets Series, the Global Bond Series, the Growth
and Income Series (formerly the Decatur Total Return Series), the International
Equity Series, the REIT Series, the Small Cap Value Series, the Social Awareness
Series, the Strategic Income Series, and the Trend Series. These financial
statements and the related notes pertain to the International Equity 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 Series.

Security Valuation--Securities listed on an exchange are valued at the last
quoted sales price as of the close of the NYSE on the valuation date. Securities
not traded or securities not listed on an exchange are valued at the mean of the
last quoted bid and asked prices. Securities listed on a foreign exchange are
valued at the last quoted sales price before the Series is valued. Money market
instruments having less than 60 days to maturity are valued at amortized cost,
which approximates market value. Other securities and assets for which market
quotations are not readily available are valued at fair value as determined in
good faith by or under the direction of the Fund's Board of Directors.

Foreign Currency Transactions--Transactions denominated in foreign currencies
are recorded at the prevailing exchange rates on the valuation date. The value
of all assets and liabilities denominated in foreign currencies is translated
into U.S. dollars at the exchange rate of such currencies against the U.S.
dollar as of 3:00 PM EST. Transaction gains or losses resulting from changes in
exchange rates during the reporting period or upon settlement of the foreign
currency transaction are reported in operations for the current period. It is
not practical to isolate that portion of both realized and unrealized gains and
losses on investments in equity securities in the statement of operations that
result from fluctuations in foreign currency exchange rates. The Series reports
certain foreign currency related transactions as components of realized gains
(losses) for financial reporting purposes, whereas such components are treated
as ordinary income (loss) for federal income tax purposes.

<PAGE>

The International Equity Series will make payments from net investment income
and net realized gain on investments, if any, following the close of the fiscal
year.

Certain expenses of the Series are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price and execution. The
amount of these expenses was approximately $2,869 for the period ended June 30,
1999. The Series may receive earnings credits from its custodian when positive
cash balances are maintained, which are used to offset custody fees. The
expenses paid under the above arrangements are included in their respective
expense captions on the Statement of Operations with the corresponding expense
offset shown as "Expenses paid indirectly".

2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Series
pays Delaware International Advisers Ltd. ("DIAL"), the Investment Manager of
the Series, an annual fee which is calculated at the following rates: 0.85% of
the first $500 million of average daily net assets of the series, 0.80% on the
next $500 million, 0.75% on the next $1,500 million and 0.70% on the average
daily net assets over $2,500 million. These rates became effective May 1, 1999.
The old management fee was calculated at the rate of 0.75% on the average daily
net assets of the Series, less the fees paid to the unaffiliated directors.

DIAL has elected to waive that portion, if any, of the annual management fee
payable to the extent necessary to ensure that annual operating expenses
exclusive of taxes, interest, brokerage commissions and extraordinary expenses
do not exceed 0.95% of average daily net assets of the Series through October
31, 1999.

International Equity-5

<PAGE>

International Equity Series
Notes to Financial Statements (Continued)

On June 30, 1999, the Series had liabilities payable to affiliates as follows:

Certain officers of DMC, DSC and DIAL are officers, directors and/or employees
of the Fund. These officers, directors and employees are paid no compensation by
the Fund.

3. Investments
During the period ended June 30, 1999, the Series made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:

Purchases ..................................... -
Sales ......................................... $6,448,355

The cost of investments for federal income tax purposes approximates the cost
for book purposes. At June 30, 1999, the aggregate cost of securities and
unrealized appreciation (depreciation) for the Series were as follows:

For federal income tax purposes, the Series had accumulated capital losses at
December 31, 1998 as follows:

Year of
expiration
2005
----------
$477,750

4. Capital Stock
Transactions in capital stock shares were as follows:

<TABLE>
<CAPTION>
Shares issued upon
reinvestment of distributions
from net investment
income and net realized Shares Net
Shares sold gain on investments repurchased increase (decrease)
----------- ------------------------------ ----------- -------------------
<S> <C> <C> <C> <C>
Period ended June 30, 1999 .................... 3,566,186 356,215 (4,031,454) (109,053)
Year ended December 31, 1998 .................. 4,191,375 498,862 (2,725,472) 1,964,765
</TABLE>

<PAGE>

There were no forward foreign currency contracts outstanding at June 30, 1999.

International Equity-6

<PAGE>

International Equity Series
Notes to Financial Statements (Continued)

The securities exchanges of certain foreign markets are substantially smaller,
less liquid and more volatile than the major securities markets in the United
States. Consequently, acquisition and disposition of securities by the Series
may be inhibited. In addition, a significant proportion of the aggregate market
value of equity securities listed on the major securities exchanges in emerging
markets is held by a smaller number of investors. This may limit the number of
shares available for acquisition or disposition by the Series.

7. Securities Lending
The Series may participate, along with other funds in the Delaware Investments
Family of Funds, in a Securities Lending Agreement ("Lending Agreement").
Security loans made pursuant to the Lending Agreement are required at all times
to be secured by U.S. Treasury obligations and/or cash collateral at least equal
to 100% of the market value of securities issued in the U.S. and 105% of the
market value of securities issued outside of the U.S. Cash collateral received
is invested in fixed-income securities, with a weighted average maturity not to
exceed 90 days, rated in one of the top two tiers by Standard & Poor's Ratings
Group or Moody's Investors Service, Inc. or repurchase agreements collateralized
by such securities. However, in the event of default or bankruptcy by the
lending agent, realization and/or retention of the collateral may be subject to
legal proceedings. In the event that the borrower fails to return loaned
securities and the collateral received is insufficient to cover the value of the
loaned securities and provided such collateral is not the result of investment
losses, the lending agent has agreed to pay the amount of the shortfall to the
Series, or at the discretion of the lending agent, replace the loaned
securities. The market value of the securities on loan and the related
collateral received at June 30, 1999 were as follows:

Market value of
securities on loan Collateral
------------------ ------------
$18,522,907 $19,227,797

Net income from securities lending activities for the period ended June 30, 1999
was $105,716 and is included in interest income on the statement of operations.

International Equity-7

<PAGE>

Delaware Group Premium Fund Inc.-International Equity Series
Proxy Results
(Unaudited)

For the six months ended June 30, 1999, Delaware Premium Fund,
Inc.-International Equity Series shareholders voted on the following proposals
at the annual meeting of shareholders on March 17, 1999 or as adjourned. The
description of each proposal and number of shares voted are as follows:

1. To elect the Delaware Group Premium Fund, Inc. Board of Directors.

Shares Shares Voted
Voted Withheld
For Authority Abstain
---------- ------------ -------
Jeffrey J. Nick ................ 13,976,052 889,202 -
Walter P. Babich ............... 13,945,188 920,065 -
John H. Durham ................. 13,979,123 886,131 -
Anthony D. Knerr ............... 13,954,354 910,899 -
Ann R. Leven ................... 13,965,031 900,222 -
Thomas F. Madison .............. 13,978,477 886,776 -
Charles E. Peck ................ 13,942,063 923,190 -
Wayne A. Stork ................. 13,969,396 895,858 -
Jan L. Yeomans ................. 13,960,563 904,690 -

2. To approve the reclassification of the investment objective from fundamental
to non-fundamental.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- -------
12,681,397 1,293,565 890,291

3. To approve standardized fundamental investment restrictions (proposal
involves separate votes on seven sub-proposals 3A-3G).

3A. To adopt a new fundamental investment restriction concerning concentration
of the investments in the same industry.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- -------
13,010,798 1,043,661 810,794

3B. To adopt a new fundamental investment restriction concerning borrowing money
and issuing senior securities.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- -------
12,894,701 1,516,842 815,588

3C. To adopt a new fundamental investment restriction concerning underwriting.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- -------
12,956,342 1,097,744 811,167

<PAGE>

3D. To adopt a new fundamental investment restriction concerning investments in
real estate.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- -------
12,868,863 1,190,868 805,522

3E. To adopt a new fundamental investment restriction concerning investments in
commodities.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- -------
12,819,061 1,506,194 812,999

3F. To adopt a new fundamental investment restriction concerning lending by the
Fund.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- -------
12,856,729 1,208,670 799,855

3G. To reclassify all current fundamental investment restrictions as
non-fundamental.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- -------
12,803,559 1,230,168 831,527

4. To approve a new investment management agreement with Delaware International
Advisers Ltd.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- -------
12,819,945 1,481,660 807,749

5. To ratify the selection of Ernst & Young LLP, as the independent auditors for
Delaware Group Premium Fund, Inc.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- -------
14,042,881 156,767 665,605

6. To approve the restructuring of Delware Group Premium Fund, Inc. from a
Maryland Corporation into a Delaware Business Trust.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- -------
13,155,415 893,575 816,263

International Equity-8

<PAGE>

Delaware Group Premium Fund, Inc.-REIT Series
Statement of Net Assets
June 30, 1999 (Unaudited)

Number of Market
Shares Value
COMMON STOCK-95.44%
Hotels/Diversified REITs-11.81%
*Catellus Development ........... 21,700 $ 336,350
Franchise Finance .............. 9,400 206,800
Glenborough Realty Trust ....... 7,000 122,500
Starwood Hotels & Resorts Trust 13,370 408,621
---------
1,074,271
---------
Mall REITs-5.29%
General Growth Properties ...... 4,350 154,425
*Macerich ....................... 3,300 86,625
Simon Property Group ........... 9,450 239,794
---------
480,844
---------
Manufactured Housing REITs-7.94%
Chateau Communities ............ 12,060 361,046
Sun Communities ................ 10,160 360,680
---------
721,726
---------
Multifamily REITs-14.93%
Apartment Investment
& Management ................. 8,410 359,527
AvalonBay Communities .......... 10,473 387,505
Essex Property Trust ........... 9,160 324,035
Grove Property Trust ........... 22,050 286,650
---------
1,357,717
---------
Office/Industrial REITs-40.77%
Alexandria Real Estate Equities 12,170 380,312
AMB Property ................... 10,990 258,265
Cabot Industrial Trust ......... 15,000 318,750

- ----------
Top 10 stock holdings, representing 40.08% of net assets, are in bold.
<PAGE>

Number of Market
Shares Value
COMMON STOCK (Continued)
Office/Industrial REITs (Continued)
CarrAmerica Realty ............. 10,280 $ 257,000
Duke Realty Investments ........ 13,500 304,594
Equity Office Properties Trust . 13,690 350,806
Liberty Property Trust ......... 8,360 207,955
Prentiss Properties Trust ...... 11,880 279,180
Reckson Associates Realty ...... 14,890 349,915
SL Green Realty ................ 16,890 345,189
Spieker Properties ............. 8,115 315,471
Trizec Hahn .................... 16,700 340,263
---------
3,707,700
---------
Retail Strip Center REITs-10.94%
First Washington Realty Trust .. 10,400 243,100
JDN Realty ..................... 12,870 287,966
Kimco Realty ................... 6,000 234,750
Pan Pacific Retail Properties .. 11,790 229,168
---------
994,984
---------
Self Storage REITs-3.76%
Public Storage ................. 12,200 341,600
---------
341,600
---------
Total Common Stock
(cost $8,407,880) .............. 346,608 8,678,842
---------

REIT-1
<PAGE>
REIT Series
Statement of Net Assets (Continued)

Principal Market
Amount Value
REPURCHASE AGREEMENTS-4.88%
With Chase Manhattan 4.65% 7/1/99
(dated 6/30/99, collateralized by $77,000
U.S. Treasury Notes 5.375% due 2/15/01,
market value $78,227 and $33,000
U.S. Treasury Notes 6.125% due 12/31/01,
market value $33,245 and $38,000
U.S. Treasury Notes 6.375% due 9/30/01,
market value $39,596)........................... $148,000 $148,000
With J.P. Morgan 4.70% 7/1/99
(dated 6/30/99 collateralized by $39,000
U.S. Treasury Notes 5.50% due 1/31/03,
market value $38,912 and $27,000
U.S. Treasury Notes 5.75% due 11/30/02,
market value $26,654 and $39,000
U.S. Treasury Notes 6.25% due 8/31/02,
market value $39,717 and $43,000
U.S. Treasury Notes 6.375% due 8/15/02,
market value $44,149)........................... 146,000 146,000

Principal Market
Amount Value
REPURCHASE AGREEMENTS (Continued)
With PaineWebber 4.80% 7/1/99
(dated 6/30/99, collateralized by $39,000
U.S. Treasury Notes 5.625% due 11/30/00,
market value $38,693 and $77,000
U.S. Treasury Notes 5.75% due 11/30/02,
market value $77,081 and $36,000
U.S. Treasury Notes 7.125% due 2/29/00,
market value $37,646)........................... $150,000 $150,000
--------
Total Repurchase Agreements
(cost $444,000)................................. 444,000
--------

TOTAL MARKET VALUE OF SECURITIES-100.32% (Cost $8,851,880)....... $9,122,842

LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS-(0.32%).......... (29,011)
--------

NET ASSETS APPLICABLE TO 970,119 SHARES ($.01 PAR VALUE)
OUTSTANDING; EQUIVALENT TO $9.37 PER SHARE-100.00%............ $9,093,831
==========

COMPONENTS OF NET ASSETS AT JUNE 30, 1999:
Common Stock, $0.01 par value, 1,000,000,000 shares
authorized to the Fund with 50,000,000 shares
allocated to the Series....................................... $8,955,019
Undistributed net investment income.............................. 173,440
Accumulated net realized loss on investments..................... (305,590)
Net unrealized appreciation of investments....................... 270,962
----------
Total net assets................................................. $9,093,831
==========

- ----------
* Non-income producing security for the six months ended June 30, 1999.
Reit - Real Estate Investment Trust

See accompanying notes

REIT-2

<PAGE>

Delaware Group Premium Fund, Inc.-
REIT Series
Statement of Operations
Six Months Ended June 30, 1999 (Unaudited)

INVESTMENT INCOME:
Dividends ............................. $ 192,659
Interest .............................. 12,045
---------
204,704
---------

EXPENSES:
Management fees ....................... 26,395
Reports and statements to shareholders 4,757
Accounting and administration ......... 1,405
Custodian fees ........................ 700
Taxes (other than taxes on income) .... 251
Dividend disbursing and transfer agent
fees and expenses .................. 202
Directors' fees ....................... 200
Registration fees ..................... 130
Professional fees ..................... 100
Other ................................. 354
---------
34,494

Less expenses absorbed or waived by
Delaware Management Company ........ (5,115)
Less expenses paid indirectly ......... (81)
---------
Total Operating Expenses .............. 29,298
---------

NET INVESTMENT INCOME ................. 175,406
---------

NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments ...... (129,579)
Net change in unrealized appreciation /
depreciation of investments ........ 374,361
---------

NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS ..................... 244,782
---------

NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .......... $ 420,188
=========

See accompanying notes

<PAGE>

Delaware Group Premium Fund, Inc.- REIT
Series Statements of Changes in Net Assets

Six Months 5/4/98*
Ended 6/30/99 to
(Unaudited) 12/31/98
----------- -----------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income ................. $ 175,406 $ 132,582
Net realized loss on investments ...... (129,579) (176,011)
Net change in unrealized appreciation/
depreciation of investments ........ 374,361 (103,399)
----------- -----------
Net increase (decrease) in net assets
resulting from operations .......... 420,188 (146,828)
----------- -----------

DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................. (134,548) --
----------- -----------
(134,548) --
----------- -----------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ............. 3,652,896 5,925,102
Net asset value of shares issued
upon reinvestment of distributions
from net investment income ......... 134,548 --
----------- -----------
3,787,444 5,925,102
----------- -----------

Cost of shares repurchased ............ (541,045) (216,482)
Increase in net assets derived from
capital share transactions ......... 3,246,399 5,708,620
----------- -----------

NET INCREASE IN NET ASSETS ............ 3,532,039 5,561,792
----------- -----------

NET ASSETS:
Beginning of period ................... 5,561,792 --
----------- -----------
End of period ......................... $ 9,093,831 $ 5,561,792
=========== ===========

- ----------
*Date of commencement of operations.

See accompanying notes

REIT-3
<PAGE>

Delaware Group Premium Fund, Inc.-REIT Series
Financial Highlights

Selected data for each share of the Series outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
Six Months
Ended 5/4/98(1)
6/30/99(2) to
(Unaudited) 12/31/98
--------- ----------
<S> <C> <C>
Net asset value, beginning of period ...................... $ 9.100 $ 10.000

Income (loss) from investment operations:
Net investment income ..................................... 0.152 0.217
Net realized and unrealized gain (loss) on investments .... 0.118 (1.117)
--------- ----------
Total from investment operations .......................... 0.270 (0.900)
--------- ----------

Net asset value, end of period ............................ $ 9.370 $ 9.100
========= ==========

Total return .............................................. 5.25% (9.00%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................... $ 9,094 $ 5,562
Ratio of expenses to average net assets ................... 0.85% 0.85%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ........ 1.00% 1.02%
Ratio of net investment income to average net assets ...... 5.02% 6.42%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 4.87% 6.25%
Portfolio turnover ........................................ 50% 39%
</TABLE>

- ----------
(1) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.
(2) Ratios have been annualized and total return has not been annualized.

See accompanying notes

REIT-4

<PAGE>

Delaware Group Premium Fund, Inc.-REIT Series
Notes to Financial Statements
June 30, 1999
(Unaudited)

Delaware Group Premium Fund, Inc. (the "Fund") is registered as a diversified
open-end investment company under the Investment Company Act of 1940, as
amended. The Fund is organized as a Maryland Corporation and offers 17 series:
the Aggressive Growth Series, the Capital Reserves Series, the Cash Reserve
Series, the Convertible Securities Series, the Delaware Balanced Series
(formerly the Delaware Series), the DelCap Series, the Delchester Series, the
Devon Series, the Emerging Markets Series, the Global Bond Series, the Growth
and Income Series (formerly the Decatur Total Return Series), the International
Equity Series, the REIT Series, the Small Cap Value Series, the Social Awareness
Series, the Strategic Income Series, and the Trend Series. These financial
statements and the related notes pertain to the REIT 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 Series.

Federal Income Taxes--The Series intends to qualify as a regulated investment
company and make the requisite distributions to shareholders. Accordingly, no
provision for federal income taxes has been made in the financial statements.
Income and capital gain distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles.

The REIT Series will make payments from net investment income and net realized
gain on investments, if any, following the close of the fiscal year.

Certain expenses of the Fund are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price and execution. The
amount of these expenses was approximately $81 for the period ended June 30,
1999. In addition, the Fund receives earnings credits from its custodian when
positive cash balances are maintained, which are used to offset custody fees.
There were no earnings credits for the six months ended June 30, 1999. The
expenses paid under the above arrangements are included in their respective
expense captions on the Statement of Operations with the corresponding expense
offset shown as "Expenses paid indirectly".

REIT-5

<PAGE>

REIT Series
Notes to Financial Statements (Continued)

At June 30,1999, the Series had liabilities payable to affiliates as follows:
Dividend disbursing Other
Investment transfer agent, expenses
management accounting fees payable
fee payable to and other expenses to DMC
DMC payable to DSC and affiliates
-------------- ------------------ --------------
$4,067 $308 $621

Certain officers of DMC and DSC are officers, directors and/or employees of the
Fund. These officers, directors and employees are paid no compensation by the
Fund.

3. Investments
During the six months ended June 30, 1999, the Series made purchases and sales
of investment securities other than U.S. government securities and temporary
cash investments as follows:

Purchases....... $4,929,851
Sales .......... $1,633,904

At June 30, 1999, the aggregate cost of securities and unrealized appreciation
(depreciation) for federal income tax purposes for the Series were as follows:

4. Capital Stock
Transactions in capital stock shares were as follows:

- ----------
**The REIT Series commenced operations on 5/4/98.

REIT-6
<PAGE>

Delaware Group Premium Fund Inc.-REIT Series
Proxy Results
(Unaudited)

For the six months ended June 30, 1999, Delaware Premium Fund, Inc. - REIT
Series shareholders voted on the following proposals at the annual meeting of
shareholders on March 17, 1999 or as adjourned. The description of each proposal
and number of shares voted are as follows:

1. To elect the Delaware Group Premium Fund, Inc. Board of Directors.

Shares Shares Voted
Voted Withheld
For Authority Abstain
------- --------- -------
Jeffrey J. Nick................ 441,885 8,883 0
Walter P. Babich............... 443,738 7,030 0
John H. Durham................. 443,738 7,030 0
Anthony D. Knerr............... 443,738 7,030 0
Ann R. Leven................... 443,738 7,030 0
Thomas F. Madison.............. 443,738 7,030 0
Charles E. Peck................ 443,738 7,030 0
Wayne A. Stork................. 441,885 8,883 0
Jan L. Yeomans................. 444,287 6,481 0

2. To approve standardized fundamental investment restrictions (proposal)
involves separate votes on seven sub-proposals 3A-3G).

2A. To adopt a new fundamental investment restriction concerning concentration
of the investments in the same industry.
Shares Shares
Voted Voted
For Against Abstain
------- ------- -------
384,388 20,790 45,590

2B. To adopt a new fundamental investment restriction concerning borrowing money
and issuing senior securities.
Shares Shares
Voted Voted
For Against Abstain
------- ------- -------
414,136 22,775 13,857

2C. To adopt a new fundamental investment restriction concerning underwriting.
Shares Shares
Voted Voted
For Against Abstain
------- ------- -------
381,475 23,344 45,949

2D. To adopt a new fundamental investment restriction concerning investments in
real estate.
Shares Shares
Voted Voted
For Against Abstain
------- ------- -------
381,898 22,956 45,915

2D. To adopt a new fundamental investment restriction concerning investments in
commodities.
Shares Shares
Voted Voted
For Against Abstain
------- ------- -------
410,855 24,809 15,105

2F. To adopt a new fundamental investment restriction concerning lending by the
Fund.
Shares Shares
Voted Voted
For Against Abstain
------- ------- -------
385,838 53,587 11,343

2G. To reclassify all current fundamental investment restrictions as
non-fundamental.
Shares Shares
Voted Voted
For Against Abstain
------- ------- -------
413,059 22,256 15,454

3. To approve a new investment management agreement with Delaware Management
Company.
Shares Shares
Voted Voted
For Against Abstain
------- ------- -------
412,199 21,855 16,715
<PAGE>

4. To approve a new Sub-Advisory Agreement.
Shares Shares
Voted Voted
For Against Abstain
------- ------- -------
419,899 20,980 9,889

5. To ratify the selection of Ernst & Young LLP, as the independent auditors for
Delaware Group Premium Fund, Inc.
Shares Shares
Voted Voted
For Against Abstain
------- ------- -------
438,772 4,010 7,986

6. To approve the restructuring of Delware Group Premium Fund, Inc. from a
Maryland Corporation into a Delaware Business Trust.
Shares Shares
Voted Voted
For Against Abstain
------- ------- -------
411,315 21,403 18,051

REIT-7

<PAGE>

Delaware Group Premium Fund, Inc.-Small Cap Value Series
Statement of Net Assets
June 30, 1999 (Unaudited)

Number Market
of Shares Value
COMMON STOCK-94.92%
Aerospace & Defense-0.66%
Cordant Technologies .................... 15,000 $ 677,812
----------
677,812
----------
Automobiles & Automotive Parts-7.93%
Arvin Industries ........................ 37,500 1,420,312
Borg-Wagner Automotive .................. 41,408 2,277,440
CLARCOR ................................. 52,750 1,012,140
Federal Signal .......................... 68,900 1,459,819
Harsco .................................. 25,300 809,600
Smith (A.O.) ............................ 43,450 1,200,306
----------
8,179,617
----------
Banking, Finance & Insurance-14.71%
*Avis Rent-A-Car ......................... 61,400 1,788,275
Enhance Financial Services Group ........ 66,200 1,307,450
Everest Re Holdings ..................... 32,400 1,057,050
*Farm Family Holdings .................... 29,300 1,001,694
*Financial Federal ....................... 49,950 1,098,900
Horace Mann Educators ................... 71,600 1,946,625
Liberty Financial Companies ............. 28,800 835,200
North Fork Bancorporation ............... 83,650 1,782,790
Peoples Heritage Financial Group ........ 100,800 1,899,450
Radian Group ............................ 18,000 878,625
Westamerica Bancorporation .............. 43,000 1,568,156
----------
15,164,215
----------
Buildings & Materials-4.16%
D.R. Horton ............................. 85,300 1,418,112
*Griffon ................................. 81,800 639,062
*Jacobs Engineering Group ................ 50,800 1,930,400
*Toll Brothers ........................... 14,200 304,413
----------
4,291,987
----------
Cable, Media & Publishing-1.22%
*World Color Press ....................... 45,900 1,262,250
----------
1,262,250
----------
Chemicals-5.46%
Crompton & Knowles ...................... 43,900 858,794
Hanna (M.A.) ............................ 60,100 987,894
OM Group ................................ 31,300 1,079,850
*Scotts .................................. 56,700 2,700,337
----------
5,626,875
----------
Computers & Technology-4.12%
*Etec Systems ............................ 33,200 1,099,750
*Metamor Worldwide ....................... 17,200 412,800
*Metro Information Services .............. 26,800 443,875
*Synopsys ................................ 41,500 2,288,984
----------
4,245,409
----------
Energy-6.97%
*BJ Services ............................. 25,600 753,600
Nicor ................................... 44,300 1,686,169
NUI ..................................... 26,900 669,138
*Ocean Energy ............................ 77,600 746,900
*Oceaneering International ............... 71,100 1,146,487

- ----------
Top 10 stock holdings, representing 22.16% of net assets, are in bold.

<PAGE>
Number Market
of Shares Value
COMMON STOCK (Continued)
Energy (Continued)
*Santa Fe Snyder ........................... 81,400 $ 620,675
Valero Energy ............................. 36,000 771,750
*Weatherford International ................. 21,500 787,437
----------
7,182,156
----------
Food, Beverage & Tobacco-4.81%
Corn Products ............................. 45,400 1,381,862
*Suiza Foods ............................... 33,200 1,390,250
Universal Foods ........................... 103,500 2,186,437
----------
4,958,549
----------
Healthcare & Pharmaceuticals-2.22%
*Trigon Healthcare ......................... 62,900 2,287,988
----------
2,287,988
----------
Industrial Machinery-6.24%
Columbus McKinnon ......................... 37,900 900,125
Hussmann International .................... 59,900 992,094
IDEX ...................................... 37,850 1,244,319
Milacron .................................. 57,700 1,067,450
Regal-Beloit .............................. 42,600 1,006,425
Varian Medical Systems .................... 48,600 1,227,150
----------
6,437,563
----------
Metals & Mining-2.91%
*Bethlehem Steel ........................... 78,900 606,544
LTV ....................................... 93,400 624,613
*Mueller Industries ........................ 33,300 1,130,119
Watts Industries .......................... 33,100 635,106
----------
2,996,382
----------
Paper & Forest Products-2.46%
Caraustar Industries ...................... 32,600 802,775
Chesapeake ................................ 16,900 632,694
Rayonier .................................. 22,200 1,105,837
----------
2,541,306
----------
Real Estate-9.26%
Cabot Industrial Trust .................... 61,100 1,298,375
Chateau Communities ....................... 24,215 724,936
Duke-Weeks Realty ......................... 47,300 1,067,206
Kilroy Realty ............................. 35,900 872,819
MeriStar Hospitality ...................... 46,345 1,039,866
New Plan Excel Realty Trust ............... 45,480 818,640
Pan Pacific Retail Properties ............. 56,700 1,102,106
Prentiss Properties Trust ................. 53,000 1,245,500
Reckson Associates Realty ................. 58,800 1,381,800
----------
9,551,248
----------
Retail-7.70%
*BJ's Wholesale Club ....................... 80,800 2,429,050
Casey's General Stores .................... 78,700 1,178,041
Pier 1 Imports ............................ 129,300 1,454,625
*Zale ...................................... 72,000 2,880,000
----------
7,941,716
----------
Telecommunications-0.70%
*Brightpoint ............................... 119,400 727,594
----------
727,594
----------

Small Cap Value-1

<PAGE>

Small Cap Value Series
Statement of Net Assets (Continued)

Number Market
of Shares Value
COMMON STOCK (Continued)
Textiles, Apparel & Furniture-6.63%
*Furniture Brands International .......... 56,900 $1,586,088
HON Industries .......................... 65,900 1,923,456
Kellwood ................................ 54,000 1,464,750
Springs Industries-Class A .............. 19,300 841,963
Wolverine World Wide .................... 72,600 1,016,400
----------
6,832,657
----------
Transportation & Shipping-4.18%
Alexander & Baldwin ..................... 34,600 767,688
*Mesaba Holdings ......................... 61,500 782,203
*M.S. Carriers ........................... 41,400 1,227,769
USFreightways ........................... 33,200 1,528,238
----------
4,305,898
----------
Utilities-1.50%
California Water Service Group .......... 23,800 621,775
Sierra Pacific Resources ................ 25,300 920,288
----------
1,542,063
----------
Miscellaneous-1.08%
*Modis Professional Services ............. 81,300 1,117,875
----------
1,117,875
----------
Total Common Stock
(cost $88,304,985) ..................... 97,871,160
----------

Principal Market
Amount Value
REPURCHASE AGREEMENTS-5.00%
With Chase Manhattan 4.65% 7/1/99
(dated 6/30/99, collateralized by $894,000
U.S. Treasury Notes 6.375% due 2/15/01,
market value $907,710 and $447,000
U.S. Treasury Notes 6.375% due 9/30/01,
market value $459,454 and $383,000
U.S. Treasury Notes 6.125% due 12/31/01
market value $385,764) ......................... $1,710,000 $1,710,000
With J.P. Morgan Securities 4.70%
7/1/99 (dated 6/30/99, collateralized
by $494,000 U.S. Treasury Notes 6.375%
due 8/15/02, market value $512,290
and $447,000 U.S. Treasury Notes
6.25% due 8/31/02, market value
$460,863 and $309,000 U.S. Treasury
Notes 5.75% due 11/30/02, market value
$309,282 and $447,000 U.S Treasury
Notes 5.50% due 1/31/03,
market value $451,520) ......................... 1,699,000 1,699,000
With PaineWebber 4.80% 7/1/99
(dated 6/30/99, collateralized by
$422,000 U.S. Treasury Notes 7.125%
due 2/29/00, market value $436,826
and $447,000 U.S. Treasury Notes
5.625% due 11/30/00, market value
$448,981 and $894,000 U.S. Treasury
Notes 5.75% due 11/30/02,
market value $894,421) ......................... 1,743,000 1,743,000
----------
Total Repurchase Agreements
(cost $5,152,000) .............................. 5,152,000
----------
<PAGE>

<TABLE>
<S> <C>
TOTAL MARKET VALUE OF SECURITIES-99.92% (cost $93,456,985) .......................... $103,023,160

RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-0.08% ............................... 78,678
------------

NET ASSETS APPLICABLE TO 6,160,046 SHARES ($0.01, PAR VALUE) OUTSTANDING;
EQUIVALENT TO $16.74 PER SHARE-100.00% ........................................... $103,101,838
============

COMPONENTS OF NET ASSETS AT JUNE 30, 1999:
Common Stock, $0.01 par value, 1,000,000,000 shares authorized to the Fund with
50,000,000 shares allocated to the Series ........................................ $ 92,856,763
Undistributed net investment income ................................................. 502,333
Accumulated net realized gain on investments ........................................ 176,567
Net unrealized appreciation of investments .......................................... 9,566,175
------------
Total net assets .................................................................... $103,101,838
============
</TABLE>

- ----------
*Non-income producing security for the period ended June 30, 1999.

See accompanying notes

Small Cap Value-2

<PAGE>

Delaware Group Premium Fund, Inc.-
Small Cap Value Series
Statement of Operations
For the Six Months Ended June 30, 1999
(Unaudited)

INVESTMENT INCOME:
Dividends ............................................... $ 789,441
Interest ................................................ 128,207
-----------
917,648
-----------
EXPENSES:
Management fees ......................................... 366,243
Accounting and administration ........................... 19,056
Professional fees ....................................... 6,050
Reports and statements to shareholders .................. 3,750
Registration fees ....................................... 2,750
Custodian fees .......................................... 2,591
Taxes (other than taxes on income) ...................... 1,980
Dividend disbursing and transfer agent
fees and expenses .................................... 1,400
Directors' fees ......................................... 1,313
Other ................................................... 7,668
-----------
412,801
Less expenses paid indirectly ........................... (1,124)
-----------
Total expenses .......................................... 411,677
-----------

NET INVESTMENT INCOME ................................... 505,971
-----------

NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain on investments ........................ 1,511,718
Net change in unrealized appreciation /
depreciation of investments .......................... 1,301,135
-----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS .................................. 2,812,853
-----------

NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............................ $ 3,318,824
===========

See accompanying notes

<PAGE>

Delaware Group Premium Fund, Inc.-
Small Cap Value Series
Statements of Changes in Net Assets

Six Months Year
Ended 6/30/99 Ended
(Unaudited) 12/31/98
----------- --------

INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income .................... $ 505,971 $ 1,245,041
Net realized gain (loss) on investments .. 1,511,718 (827,096)
Net change in unrealized appreciation /
depreciation of investments ........... 1,301,135 (5,586,278)
------------- -------------
Net increase (decrease) in net assets
resulting from operations ............. 3,318,824 (5,168,333)
------------- -------------

DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .................... (1,227,218) (638,385)
Net realized gain on investments ......... (503,474) (2,340,745)
------------- -------------
(1,730,692) (2,979,130)
------------- -------------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ................ 8,489,139 34,478,733
Net asset value of shares issued upon
reinvestment of distributions from net
investment income and net realized
gain on investments ................... 1,730,692 2,979,130
------------- -------------
10,219,831 37,457,863
Cost of shares repurchased ............... (12,695,549) (9,392,119)
------------- -------------
Increase (Decrease) in net assets derived
from capital share transactions ....... (2,475,718) 28,065,744
------------- -------------

NET INCREASE (DECREASE)
IN NET ASSETS ......................... (887,586) 19,918,281
------------- -------------

NET ASSETS:
Beginning of period ...................... 103,989,424 84,071,143
------------- -------------
End of period ............................ $ 103,101,838 $ 103,989,424
============= =============

See accompanying notes

Small Cap Value-3

<PAGE>

Delaware Group Premium Fund, Inc.-Small Cap Value Series
Financial Highlights

Selected data for each share of the Series outstanding throughout each period
were as follows:

<TABLE>
<CAPTION>
Six Months
Ended 6/30/99 Year Ended December 31,
(Unaudited)(1) 1998 1997 1996 1995 1994
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $16.450 $17.920 $14.500 $12.470 $10.290 $10.210

Income (loss) from investment operations:
Net investment income ..................................... 0.083 0.196 0.122 0.112 0.192 0.148
Net realized and unrealized gain (loss) on investments .... 0.482 (1.036) 4.338 2.548 2.208 (0.068)
------- ------- ------- ------- ------- -------
Total from investment operations .......................... 0.565 (0.840) 4.460 2.660 2.400 0.080
------- ------- ------- ------- ------- -------

Less dividends and distributions:
Dividends from net investment income ...................... (0.195) (0.135) (0.110) (0.180) (0.150) none
Distributions from net realized gain on investments ....... (0.080) (0.495) (0.930) (0.450) (0.070) none
------- ------- ------- ------- ------- -------
Total dividends and distributions ......................... (0.275) (0.630) (1.040) (0.630) (0.220) none
------- ------- ------- ------- ------- -------

Net asset value, end of period ............................ $16.740 $16.450 $17.920 $14.500 $12.470 $10.290
======= ======= ======= ======= ======= =======

Total return .............................................. 3.69% (4.79%) 32.91% 22.55% 23.85% 0.78%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................... $103,101 $103,989 $84,071 $23,683 $11,929 $6,291
Ratio of expenses to average net assets ................... 0.85% 0.83% 0.80% 0.80% 0.80% 0.80%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 0.85% 0.85% 0.90% 0.99% 0.96% 1.41%
Ratio of net investment income to average net assets ...... 1.04% 1.32% 1.24% 1.28% 2.13% 2.62%
Ratio of net investment income to average net
assets prior to expense limitation and expenses
paid indirectly ........................................ 1.04% 1.30% 1.14% 1.09% 1.97% 2.01%
Portfolio turnover ........................................ 49% 45% 41% 84% 71% 26%
</TABLE>
- ----------
(1)Ratios have been annualized and total return has not been annualized.

See accompanying notes

Small Cap Value-4

<PAGE>

Delaware Group Premium Fund, Inc.-Small Cap Value Series
Notes to Financial Statements
June 30, 1999
(Unaudited)

Delaware Group Premium Fund, Inc. (the "Fund") is registered as a diversified
open-end investment company under the Investment Company Act of 1940, as
amended. The Fund is organized as a Maryland Corporation and offers 17 series:
the Aggressive Growth Series, the Capital Reserves Series, the Cash Reserve
Series, the Convertible Securities Series, the Delaware Balanced Series
(formerly the Delaware Series), the DelCap Series, the Delchester Series, the
Devon Series, the Emerging Markets Series, the Global Bond Series, the Growth
and Income Series (formerly the Decatur Total Return Series), the International
Equity Series, the REIT Series, the Small Cap Value Series, the Social Awareness
Series, the Strategic Income Series, and the Trend Series. These financial
statements and the related notes pertain to the Small Cap Value Series (the
"Series"). The shares of the Fund are sold only to separate accounts of life
insurance companies.

1. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Series.

<PAGE>

The Small Cap Value Series will make payments from net investment income and net
realized gain on investments, if any, once a year.

Certain expenses of the Fund are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price and execution. The
amount of these expenses was approximately $1,124 for the period ended June 30,
1999. In addition, the Fund receives earnings credits from its custodian when
positive cash balances are maintained, which are used to offset custody fees.
These credits were $0 for the period ended June 30, 1999. The expenses paid
under the above arrangements are included in their respective expense captions
on the Statement of Operations with the corresponding expense offset shown as
"Expenses paid indirectly".

Small Cap Value-5

<PAGE>

Small Cap Value Series
Notes to Financial Statements (Continued)

On June 30, 1999, the Series had liabilities payable to affiliates as follows:

Dividend disbursing
Investment transfer agent,
management accounting fees
fee payable to and other expenses
DMC payable to DSC
-------------- ------------------
$72,985 $3,408

Certain officers of DMC and DSC are officers, directors and/or employees of the
Fund. These officers, directors and employees are paid no compensation by the
Fund.

3. Investments
During the period ended June 30, 1999, the Series made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:

Purchases ....................................... $22,723,729
Sales ........................................... $25,784,150

For federal income tax purposes, the Series had accumulated capital losses at
December 31, 1998 as follows:

Year of
expiration
2006
----------
$807,647

4. Capital Stock
Transactions in capital stock shares were as follows:

<TABLE>
<CAPTION>
Shares issued upon
reinvestment of distributions
from net investment
income and net realized Shares Net
Shares sold gain on investments repurchased decrease
----------- ----------------------------- ----------- --------
<S> <C> <C> <C> <C>
Period ended June 30, 1999 ...................... 543,769 118,948 (822,801) (160,084)
Year ended December 31, 1998 .................... 2,030,407 175,656 (578,317) 1,627,746
</TABLE>

Small Cap Value-6

<PAGE>

Delaware Group Premium Fund, Inc.-Small Cap Value Series
Proxy Results
(Unaudited)

For the six months ended June 30, 1999, Delaware Premium Fund, Inc. - Small Cap
Value Series shareholders voted on the following proposals at the annual meeting
of shareholders on March 17, 1999 or as adjourned. The description of each
proposal and number of shares voted are as follows:

1. To elect the Delaware Group Premium Fund, Inc. Board of Directors.

Shares Shares Voted
Voted Withheld
For Authority Abstain
--------- --------- -------
Jeffrey J. Nick .............. 6,181,225 121,968 --
Walter P. Babich ............. 6,179,529 123,665 --
John H. Durham ............... 6,182,255 120,939 --
Anthony D. Knerr ............. 6,177,651 125,543 --
Ann R. Leven ................. 6,182,982 120,212 --
Thomas F. Madison ............ 6,183,345 119,848 --
Charles E. Peck .............. 6,179,468 123,725 --
Wayne A. Stork ............... 6,183,224 119,969 --
Jan L. Yeomans ............... 6,183,345 119,848 --

3. To approve standardized fundamental investment restrictions (proposal
involves separate votes on seven sub-proposals 3A-3G).

3B. To adopt a new fundamental investment restriction concerning concentration
of the investments in the same industry.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
5,752,263 123,526 427,405

3C. To adopt a new fundamental investment restriction concerning underwriting.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
5,753,803 148,969 400,421

<PAGE>

3D. To adopt a new fundamental investment restriction concerning investments in
real estate.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
5,716,972 179,717 406,505

3F. To adopt a new fundamental investment restriction concerning lending by the
Fund.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
5,712,705 189,132 401,356

3G. To reclassify all current fundamental investment restrictions as
non-fundamental.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
5,721,522 175,476 406,196

4. To approve a new investment management agreement with Delaware Management
Company.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
5,753,541 132,979 416,674

Small Cap Value-7

<PAGE>

Delaware Group Premium Fund, Inc.-Social Awareness Series
Statement of Net Assets
June 30, 1999 (Unaudited)

Number of Market
Shares Value
COMMON STOCK-97.11%
Banking, Finance & Insurance-23.37%
A. G. Edwards ..................... 4,745 $ 153,026
Allstate .......................... 8,880 318,570
Ambac Financial Group ............. 500 28,562
American Express .................. 2,800 364,350
American International Group ...... 2,700 316,069
AmSouth Bancorporation ............ 4,455 103,300
Bank One .......................... 3,512 209,183
Chase Manhattan ................... 6,210 537,941
Citigroup ......................... 10,335 490,912
City National ..................... 4,025 150,686
Comerica .......................... 2,662 158,223
Conseco ........................... 3,700 112,619
Countrywide Credit Industries ..... 6,000 256,500
Dime Bancorp ...................... 12,800 257,600
Fannie Mae ........................ 5,600 382,900
First American Financial .......... 8,900 159,087
First Union ....................... 4,670 219,490
Freddie Mac ....................... 1,800 104,400
*FIRSTPLUS Financial Group ......... 6,800 2,125
Hibernia Class A .................. 11,500 180,406
J. P. Morgan ...................... 1,600 224,800
John Nuveen ....................... 3,000 128,063
Marsh & McLennan .................. 3,215 242,733
Mellon Bank ....................... 4,210 153,139
Metris ............................ 11,510 469,033
Morgan Stanley Dean Witter ........ 3,000 307,500
National City ..................... 3,610 236,455
Old Republic International ........ 8,090 140,058
PaineWebber Group ................. 3,870 180,923
PNC Financial Group ............... 3,800 218,975
Reliance Group Holdings ........... 8,870 65,971
SLM Holding ....................... 3,002 137,529
T. Rowe Price Associates .......... 2,200 84,356
UICI .............................. 11,000 303,875
Unionbancal Corporation ........... 8,500 307,063
Washington Mutual ................. 4,000 141,500
----------
7,847,922
----------
Buildings & Materials-1.16%
Kaufman & Broad Home .............. 8,000 199,000
Premark International ............. 5,100 191,250
----------
390,250
----------
Cable, Media & Publishing-5.69%
Dun and Bradstreet ................ 4,805 170,277
Gannett ........................... 2,070 147,746
McGraw-Hill ....................... 5,800 312,838
New York Times .................... 10,200 375,488
Omnicom Group ..................... 1,200 96,000
Reynolds & Reynolds Class A ....... 6,700 156,194
R.H. Donnelley .................... 5,361 104,875
*Snyder Communications ............. 3,700 121,175
Time Warner ....................... 2,200 158,400
*Valassis Communications ........... 5,400 197,775
*World Color Press ................. 2,500 68,750
----------
1,909,518
----------
- ----------
Top 10 stock holdings, representing 19.5% of net assets, are in bold.

<PAGE>
Number Market
of Shares Value
COMMON STOCK (Continued)
Chemicals-0.86%
Lubrizol ............................... 10,300 $ 289,044
----------
289,044
----------
Computers & Technology-18.44%
*America Online ......................... 2,200 243,100
*American Power Conversion .............. 9,850 197,923
*Apple Computer ......................... 7,700 357,087
*BMC Software ........................... 6,300 340,003
*Cisco Systems .......................... 12,200 785,756
Compaq Computer ........................ 5,000 118,437
Computer Associates International ...... 8,600 473,000
*Compuware .............................. 7,100 225,647
Comverse Technology .................... 5,000 377,187
*Dell Computer .......................... 7,500 277,266
Deluxe ................................. 3,315 129,078
*EMC .................................... 10,140 557,700
Keane .................................. 1,900 42,987
*Lexmark International Group ............ 7,200 475,650
*Microsoft .............................. 16,160 1,456,420
SunGard Data Systems ................... 4,000 138,000
----------
6,195,241
----------
Consumer Products-2.82%
Avon Products .......................... 4,060 225,330
Clorox ................................. 1,690 180,513
Corning ................................ 2,500 175,312
Gillete ................................ 3,300 135,300
United Stationers ...................... 10,400 229,125
----------
945,580
----------
Electronics & Electrical Equipment-1.41%
General Cable .......................... 9,000 144,000
*Waters ................................. 6,200 329,375
----------
473,375
----------
Energy-0.34%
Helmerich & Payne ...................... 2,980 70,961
Questar ................................ 2,300 44,563
----------
115,524
----------
Food & Beverage-3.26%
*Agribrands International ............... 27 1,068
General Mills .......................... 3,200 257,200
International Multifoods ............... 920 20,757
Interstate Bakeries .................... 1,870 41,958
Keebler Foods .......................... 9,300 282,487
Quaker Oats ............................ 3,925 260,522
*Suiza Foods ............................ 3,900 163,313
Universal Foods ........................ 3,200 67,600
----------
1,094,905
----------
Healthcare & Pharmaceuticals-8.03%
*AmeriSource Health Class A ............. 5,300 135,150
*Amgen .................................. 6,400 389,400
Bergen Brunswig Class A ................ 12,294 212,073
Boston Scientific ...................... 4,000 175,750
Cardinal Health ........................ 3,553 227,836
C.R. Bard .............................. 5,100 243,844
Eli Lilly .............................. 2,600 186,225

Social Awareness-1
<PAGE>
Social Awareness Series
Statement of Net Assets (Continued)

Principal Market
Amount Value
COMMON STOCK (Continued)
Healthcare & Pharmaceuticals (Continued)
*Health Management Associates Class A ... 12,250 $ 137,812
*Lincare Holdings ....................... 2,590 64,831
McKesson ............................... 2,941 94,480
Medtronic .............................. 5,294 412,271
Mylan Laboratories ..................... 6,200 164,300
*Rexall Sundown ......................... 12,900 156,816
Steris ................................. 5,000 96,875
----------
2,697,663
----------
Industrial Machinery-1.80%
Ingersoll-Rand ......................... 6,100 394,212
Tredegar Industries .................... 9,600 208,800
----------
603,012
----------
Leisure, Lodging & Entertainment-2.08%
*Brinker International .................. 9,800 266,437
McDonald's ............................. 6,200 256,138
Walt Disney ............................ 5,700 175,631
----------
698,206
----------
Metals & Mining-0.46%
Cleveland Cliffs Iron .................. 4,800 155,400
----------
155,400
----------
Packaging & Containers-0.10%
*Sealed Air ............................. 500 32,438
----------
32,438
----------
Retail-9.24%
Dayton Hudson .......................... 1,000 65,000
*Dollar Tree Stores ..................... 3,500 153,891
Gap .................................... 6,770 341,014
Home Depot ............................. 7,600 489,725
Jostens ................................ 7,245 152,598
Lowe's Companies ....................... 3,800 215,412
Ross Stores ............................ 5,730 288,112
*Safeway ................................ 4,460 220,770
TJX .................................... 8,520 283,823
Wal-Mart Stores ........................ 13,200 636,900
*Zale ................................... 6,400 256,000
----------
3,103,245
----------
<PAGE>

Number Market
of Shares Value
COMMON STOCK (Continued)
Telecommunications-11.50%
Alltel ............................ 4,850 $ 346,775
Ameritech ......................... 4,650 341,775
AT&T .............................. 9,892 552,097
BellSouth ......................... 12,180 570,937
Century Telecommunications
Enterprise ........................ 7,350 292,162
*MCI Worldcom ...................... 5,000 430,156
SBC Communications ................ 5,590 324,220
*Tellabs ........................... 6,400 432,600
US West Communications Group ...... 6,370 374,238
Vodafone Group .................... 1,000 197,000
----------
3,861,960
----------
Textiles, Apparel & Furniture-1.84%
*Knoll ............................. 1,300 34,612
Shaw Industries ................... 9,900 163,350
*Tommy Hilfiger .................... 3,320 243,813
Westpoint Stevens ................. 5,900 175,894
----------
617,669
----------
Transportation & Shipping-1.96%
Alaska Air Group .................. 3,000 125,250
*AMR ............................... 2,320 158,340
Tidewater ......................... 9,800 298,900
*UAL ............................... 1,180 76,700
----------
659,190
----------
Utilities-2.75%
Enron ............................. 5,400 441,450
OGE Energy ........................ 7,900 187,625
Utilcorp United ................... 12,100 294,181
----------
923,256
----------
Total Common Stock
(cost $27,458,799) ................ 32,613,398
----------

Social Awareness-2

<PAGE>
Social Awareness Series
Statement of Net Assets (Continued)

Principal Market
Amount Value
REPURCHASE AGREEMENTS-2.84%
With Chase Manhattan 4.65% 7/1/99
(dated 6/30/99, collateralized by $166,000
U.S. Treasury Notes 5.375% due 2/15/01,
market value $166,610 and $83,000
U.S. Treasury Notes 6.375% due 9/30/01,
market value $85,345 and $71,000
U.S. Treasury Notes 6.125% due 12/31/01,
market value $71,657) .................... $318,000 $318,000
With J.P. Morgan Securities 4.70% 7/1/99
(dated 6/30/99, collateralized by $92,000
U.S. Treasury Notes 6.375% due 8/15/02,
market value $95,159 and $83,000
U.S. Treasury Notes 6.25% due 8/31/02,
market value $85,607 and $57,000
U.S. Treasury Bills 5.75% due 11/30/02,
market value $57,450 and $83,000
U.S. Treasury Notes 5.50% due 1/31/03,
market value $83,871) .................... 315,000 315,000

Principal Market
Amount Value
REPURCHASE AGREEMENTS (Continued)
With PaineWebber 4.80% 7/1/99
(dated 6/30/99, collateralized by $78,000
U.S. Treasury Notes 7.125% due 2/29/00,
market value $81,142 and $83,000
U.S. Treasury Notes 5.625% due 11/30/00,
market value $83,400 and $166,000
U.S. Treasury Bills 5.75% due 11/30/02,
market value $166,141) $324,000 $324,000
--------
Total Repurchase Agreements
(cost $957,000) .......................... 957,000
--------

TOTAL MARKET VALUE OF SECURITIES-99.95% (cost $28,415,799) ........ $33,570,398

RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-0.05% ............. 17,406
-----------

NET ASSETS APPLICABLE TO 2,215,908 SHARES
($0.01 PAR VALUE) OUTSTANDING; EQUIVALENT TO $15.16
PER SHARE-100.00% ............................................... $33,587,804
===========

COMPONENTS OF NET ASSETS AT JUNE 30, 1999:
Common stock, $0.01 par value, 1,000,000,000 shares authorized
to the Fund with 50,000,000 shares allocated to the Series ........ $29,042,905
Undistributed net investment income ............................... 41,975
Accumulated net realized loss on investments ...................... (651,675)
Net unrealized appreciation of investments ........................ 5,154,599
-----------
Total net assets .................................................. $33,587,804
===========
- ----------
* Non-income producing security for the period ended June 30, 1999.

See accompanying notes

Social Awareness-3
<PAGE>

Delaware Group Premium Fund, Inc.-
Social Awareness Series
Statement of Operations
Six Months Ended June 30, 1999
(Unaudited)

INVESTMENT INCOME:
Dividends ................................. $ 147,115
Interest .................................. 27,815
----------
174,930
----------
EXPENSES:
Management fees ........................... 115,550
Reports and statements to shareholders .... 6,463
Accounting and administration ............. 4,959
Professional fees ......................... 1,950
Custodian fees ............................ 1,260
Taxes (other than taxes on income) ........ 800
Registration fees ......................... 600
Dividend disbursing and transfer agent fees
and expenses ........................... 517
Directors' fees ........................... 394
Other ..................................... 3,971
----------
136,464
----------

Less expenses absorbed or waived .......... (5,941)
Less expenses paid indirectly ............. (1,515)
----------
Total expenses ............................ 129,008
----------

Net investment income ..................... 45,922
----------

NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments .......... (73,934)
Net change in unrealized appreciation /
depreciation of investments ............ 1,465,345
----------

NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS ......................... 1,391,411
----------

NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .............. $1,437,333
==========

See accompanying notes
<PAGE>

Delaware Group Premium Fund, Inc.-
Social Awareness Series
Statements of Changes in Net Assets

DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income ..................... (123,491) (33,744)
Net realized gain on investments .......... -- (124,853)
----------- -----------
(123,491) (158,597)
----------- -----------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ................. 10,363,755 19,771,054
Net asset value of shares issued upon
reinvestment of distributions from
net investment income and net
realized gain on investments ........... 123,491 158,597
----------- -----------
10,487,246 19,929,651
Cost of shares repurchased ................ (5,175,182) (3,210,331)
----------- -----------
Increase in net assets derived from capital
share transactions ..................... 5,312,064 16,719,320
----------- -----------

NET INCREASE IN NET ASSETS ................ 6,625,906 19,161,793
----------- -----------

NET ASSETS:
Beginning of period ....................... 26,961,898 7,800,105
----------- -----------
End of period ............................. $33,587,804 $26,961,898
=========== ===========

See accompanying notes

Social Awareness-4
<PAGE>

Delaware Group Premium Fund, Inc.-Social Awareness Series
Financial Highlights

Selected data for each share of the Series outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
Six Months
Ended Year 5/1/97(2)
6/30/99(1) Ended to
(Unaudited) 12/31/98 12/31/97
-----------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period ............................................... $14.550 $12.840 $10.000

Income from investment operations:
Net investment income .............................................................. 0.014 0.065 0.051
Net realized and unrealized gain on investments .................................... 0.656 1.880 2.789
------- ------- -------
Total from investment operations ................................................... 0.670 1.945 2.840
------- ------- -------

Less dividends and distributions:
Dividends from net investment income ............................................... (0.060) (0.050) none
Distributions from net realized gain on investments ................................ - (0.185) none
------- ------- -------
Total dividends and distributions .................................................. (0.060) (0.235) none
------- ------- -------

Net asset value, end of period ..................................................... $15.160 $14.550 $12.840
======= ======= =======

Total return ....................................................................... 4.63% 15.45% 28.40%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ............................................ $33,588 $26,962 $7,800
Ratio of expenses to average net assets ............................................ 0.84% 0.83% 0.80%
Ratio of expenses to average net assets prior to expense limitation and expenses
paid indirectly ................................................................. 0.89% 0.89% 1.40%
Ratio of net investment income to average net assets ............................... 0.30% 0.80% 1.13%
Ratio of net investment income to average net assets prior to expense limitation
and expenses paid indirectly .................................................... 0.25% 0.74% 0.53%
Portfolio turnover ................................................................. 28% 30% 52%
</TABLE>
- ----------
(1)Ratios have been annualized and total return has not been
annualized.
(2)Date of commencement of operations; ratios have been annualized
and total return has not been annualized.

See accompanying notes

Social Awareness-5
<PAGE>

Delaware Group Premium Fund, Inc.-Social Awareness Series
Notes to Financial Statements
June 30, 1999
(Unaudited)

Delaware Group Premium Fund, Inc. (the "Fund") is registered as a diversified
open-end investment company under the Investment Company Act of 1940, as
amended. The Fund is organized as a Maryland Corporation and offers 17 series:
the Aggressive Growth Series, the Capital Reserves Series, the Cash Reserve
Series, the Convertible Securities Series, the Delaware Balanced Series
(formerly the Delaware Series), the DelCap Series, the Delchester Series, the
Devon Series, the Emerging Markets Series, the Global Bond Series, the Growth
and Income Series (formerly the Decatur Total Return Series), the International
Equity Series, the REIT Series, the Small Cap Value Series, the Social Awareness
Series, the Strategic Income Series, and the Trend Series. These financial
statements and the related notes pertain to the Social Awareness 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 Series.

The Social Awareness Series will make payments from net investment income and
net realized gain on investments, if any, following the close of the fiscal
year.

Certain expenses of the Series are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price and execution. The
amount of these expenses was approximately $355 for the period ended June 30,
1999. The Series may receive earnings credits from its custodian when positive
cash balances are maintained, which are used to offset custody fees. These
credits were $1,160 for the period ended June 30, 1999. The expenses paid under
the above arrangements are included in their respective expense captions on the
Statement of Operations with the corresponding expense offset shown as "Expenses
paid indirectly".

<PAGE>

2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Series
pays Delaware Management Company ("DMC"), the Investment Manager of the Series,
an annual fee which is calculated at the rate of 0.75% on the first $500 million
of average daily net assets of the Series, 0.70% on the next $500 million, 0.65%
on the next $1,500 million and 0.60% on the average daily net assets over $2,500
million. These rates became effective May 1, 1999. The old management fee was
calculated at the rate of 0.75% of the average daily net assets of the Series.
Vantage Investment Advisors, Inc., an affiliate of DMC, receives a fee equal to
0.25% of average daily net assets up to $20 million, 0.35% on average daily net
assets between $20 million and $50 million, and 0.40% of average daily net
assets over $50 million of the Series for acting as a sub-adviser to this
Series. The series does not pay any fees to the sub-adviser.

Social Awareness-6
<PAGE>

Social Awareness Series
Notes to Financial Statements (Continued)

On June 30, 1999, the Series had liabilities payable to affiliates as follows:

Investment
management
fee and other
expenses
payable to DMC
--------------
$21,878

Certain officers of DMC and DSC are officers, directors and/or employees of the
Fund. These officers, directors and employees are paid no compensation by the
Fund.

3. Investments
During the period ended June 30, 1999, the Series made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:

Purchases ....................... $9,075,807
Sales ........................... $4,127,465

The cost of investments for federal income tax purposes approximates cost for
book purposes.

At June 30, 1999, the aggregate cost of securities and unrealized appreciation
(depreciation) for the Series were as follows:
<TABLE>
<CAPTION>
Aggregate Aggregate
Cost of unrealized unrealized Net unrealized
investments appreciation depreciation appreciation
----------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
$28,415,799 $6,944,529 ($1,789,930) $5,154,599
</TABLE>
For federal income tax purposes, the Series had accumulated capital losses at
December 31, 1998 as follows:

Year of
expiration
2006
----------
$577,691

Social Awareness-7
<PAGE>

Delaware Group Premium Fund, Inc.-Social Awareness Series
Proxy Results
(Unaudited)

For the six months ended June 30, 1999, Delaware Premium Fund, Inc. - Social
Awareness Series shareholders voted on the following proposals at the annual
meeting of shareholders on March 17, 1999 or as adjourned. The description of
each proposal and number of shares voted are as follows:

1. To elect the Delaware Group Premium Fund, Inc. Board of Directors.

Shares Shares Voted
Voted Withheld
For Authority
------ ------------
Jeffrey J. Nick .................................. 1,728,317 80,236
Walter P. Babich ................................. 1,728,317 80,236
John H. Durham ................................... 1,728,317 80,236
Anthony D. Knerr ................................. 1,728,317 80,236
Ann R. Leven ..................................... 1,728,317 80,236
Thomas F. Madison ................................ 1,728,317 80,236
Charles E. Peck .................................. 1,728,317 80,236
Wayne A. Stork ................................... 1,728,317 80,236
Jan L. Yeomans ................................... 1,728,317 80,236

3. To approve standardized fundamental investment restrictions (proposal
involves separate votes on seven sub-proposals 3A-3G).

3C. To adopt a new fundamental investment restriction concerning underwriting.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,640,688 44,910 122,955

3D. To adopt a new fundamental investment restriction concerning investments in
real estate.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,628,284 47,554 123,181

<PAGE>

3E. To adopt a new fundamental investment restriction concerning investments in
commodities.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,637,000 48,598 122,955

3F. To adopt a new fundamental investment restriction concerning lending by the
Fund.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,631,887 53,711 122,955

3G. To reclassify all current fundamental investment restrictions as
non-fundamental.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,618,474 56,790 123,755

4. To approve a new investment management agreement with Delaware Management
Company.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,626,008 59,590 122,955

5. To approve a new Sub-Advisory Agreement.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,624,182 51,189 133,182

6. To ratify the selection of Ernst & Young LLP, as the independent auditors for
Delaware Group Premium Fund, Inc.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,695,251 14,420 98,882

7. To approve the restructuring of Delaware Group Premium Fund, Inc. from a
Maryland Corporation into a Delaware Business Trust.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,653,907 24,334 130,312

Social Awareness-8

<PAGE>

Delaware Group Premium Fund, Inc.-Strategic Income Series
Statement of Net Assets
June 30, 1999 (Unaudited)

Market
Principal Value
Amount* (U.S. $)
CORPORATE BONDS-43.94%
Automobiles & Automotive Parts-2.68%
Federal Mogul notes 7.50% 1/15/09 .................... $200,000 $185,250
Meritor Auto notes 6.80% 2/15/09 ..................... 150,000 142,500
Stanadyne Automotive sr sub notes
10.25% 12/15/07 ..................................... 300,000 261,000
---------
588,750
---------
Banking, Finance & Insurance-1.67%
American Financial Group sr notes
7.13% 4/15/09 ....................................... 50,000 46,938
Banco Santander-Chile notes
6.50% 11/1/05 ....................................... 50,000 48,250
Credit Foncier de France sr sub notes
8.00% 1/14/02 ....................................... 25,000 25,781
Fairfax Financial Holdings notes
7.38% 3/15/06 ....................................... 75,000 72,656
Popular North America notes
6.625% 1/15/04 ...................................... 100,000 97,500
Southern Investments United Kingdom
sr notes 6.375% 11/15/01 ............................ 75,000 75,094
---------
366,219
---------
Buildings & Materials-0.86%
American Standard sr notes
7.375% 2/1/08 ....................................... 100,000 94,250
Building One Services sr notes
10.50% 5/1/09 ....................................... 100,000 95,000
---------
189,250
---------
Cable, Media & Publishing-4.37%
Adelphia Communications sr notes
7.75% 1/15/09 ....................................... 200,000 187,500
American Lawyer Media sr notes
9.75% 12/15/07 ...................................... 100,000 103,375
American Media Operation sr notes
10.25% 5/1/09 ....................................... 200,000 200,750
Cox Communications notes
6.15% 8/1/03 ........................................ 65,000 63,538
Muzak sr sub notes 9.88% 3/15/09 ..................... 200,000 198,000
STC Broadcasting sr sub notes
11.00% 3/15/07 ...................................... 150,000 156,000
United News And Media notes
7.75% 7/1/09 ........................................ 50,000 49,875
---------
959,038
---------
Chemicals-5.52%
Equistar Chemicals sr notes
8.75% 2/15/09 ....................................... 100,000 101,250
General Chemical sr sub notes
10.63% 5/1/09 ....................................... 200,000 204,000
Huntsman sr sub notes 9.50% 7/1/07 ................... 25,000 24,250
LaRoche Industries sr sub notes
9.50% 9/15/07 ....................................... 200,000 160,000
Lyondell Chemicals sr notes
9.63% 5/1/07 ........................................ 250,000 256,875
Octel Developments sr notes
10.00% 5/1/06 ....................................... 300,000 310,500
Sterling Chemicals sr sub notes
11/75% 8/15/06 ...................................... 200,000 154,000
---------
1,210,875
---------

<PAGE>

Market
Principal Value
Amount* (U.S. $)
CORPORATE BONDS (Continued)
Computers-0.43%
Seagate Technology sr notes
7.45% 3/1/37 ........................................ $100,000 $93,250
--------
93,250
--------
Consumer Products-1.28%
Drypers sr notes 10.25% 6/15/07 ...................... 25,000 20,125
Outboard Marine sr unsec sub notes
10.75% 6/1/08 ....................................... 200,000 138,000
Precise Technology sr sub notes
11.125% 6/15/07 ..................................... 25,000 23,875
Riddell Sports sr unsec sub notes
10.50% 7/15/07 ...................................... 25,000 22,750
Spinnaker Industries sr notes
10.75% 10/15/06 ..................................... 100,000 75,000
--------
279,750
--------
Energy-1.52%
First Wave Marine sr notes
11.00% 2/1/08 ....................................... 100,000 94,625
General Electric Capital notes
8.85% 3/1/07 ........................................ 75,000 84,656
Pride International sr notes
10.00% 6/1/09 ....................................... 150,000 153,375
--------
332,656
--------
Environmental Services-0.87%
Allied Waste sr unsec notes
7.38% 1/1/04 ........................................ 200,000 190,000
--------
190,000
--------
Food, Beverage & Tobacco-2.35%
Big V Supermarkets sr sub notes
11.00% 2/15/04 ...................................... 150,000 155,438
Canadaigua Brands sr unsec sub notes
8.50% 3/1/09 ........................................ 200,000 194,500
Standard Commercial Tobacco sr notes
8.88% 8/1/05 ........................................ 200,000 164,500
--------
514,438
--------
Healthcare & Pharmaceuticals-0.88%
Pueblo Xtra International sr notes
9.50% 8/1/03 ........................................ 200,000 194,000
--------
194,000
--------
Industrial Machinery-2.26%
Alliance Laundry Systems sr sub notes
9.625% 5/1/08 ....................................... 300,000 275,250
Anthony Crane Rentals sr notes
10.375% 8/1/08 ...................................... 200,000 201,250
Burke Industries unsec sr notes
10.00% 8/15/07 ...................................... 25,000 19,000
--------
495,500
--------
Leisure, Lodging & Entertainment-5.10%
Avado Brands sr sub notes
9.75% 6/1/06 ........................................ 200,000 199,750
Aztar sr sub notes 8.88% 5/15/07 ..................... 200,000 192,000
Carmike Cinemas sr sub notes
9.375% 2/1/09 ....................................... 200,000 196,000
Hollywood Casino sr sec notes
11.25% 5/1/07 ....................................... 200,000 201,000
Trump Atlantic City 1st mtg notes
11.25% 5/1/06 ....................................... 200,000 180,500

Strategic Income-1

<PAGE>

Strategic Income Series
Statement of Net Assets (Continued)

Market
Principal Value
Amount* (U.S. $)
CORPORATE BONDS (Continued)
Leisure, Lodging & Entertainment (Continued)
United Artists Theatre sr sub notes
9.75% 4/15/08 ....................................... $200,000 $ 150,000
---------
1,119,250
---------
Metals & Mining-3.96%
AK Steel sr notes 7.88% 2/15/09 ...................... 200,000 194,000
Doe Run Resources unsec sr notes
11.25% 3/15/05 ...................................... 300,000 273,000
ISG Resources sr sub notes
10.00% 4/15/08 ...................................... 200,000 205,250
Metallurg sr notes 11.00% 12/1/07 .................... 200,000 196,000
---------
868,250
---------
Packaging & Containers-0.89%
Riverwood International sr sub notes
10.875% 4/1/08 ...................................... 200,000 194,500
---------
194,500
---------
Paper & Forest Products-0.92%
US Timberlands sr notes 9.63% 11/15/07 ............... 200,000 202,000
---------
202,000
---------
Retail-4.66%
Advance Stores sr sub notes
10.25% 4/15/08 ...................................... 300,000 288,750
Frank's Nursery and Crafts sr sub notes
10.25% 3/1/08 ....................................... 250,000 249,688
Just for Feet sr sub notes
11.00% 5/1/09 ....................................... 200,000 132,000
Leslie's Poolmart sr notes
10.375% 7/15/04 ..................................... 25,000 26,000
SAKS sr unsec notes 8.25% 11/15/08 ................... 100,000 105,250
Tommy Hilfiger unsec notes
6.85% 6/1/08 ........................................ 100,000 94,750
Wilsons The Leather Expert sr notes
11.25% 8/15/04 ...................................... 125,000 126,563
---------
1,023,001
---------
Telecommunications-0.50%
Metrocall sr sub notes 10.375% 10/1/07 ............... 150,000 109,500
---------
109,500
---------
Textiles, Apparel & Furniture-0.58%
McNaughton Apparel Group sr notes
12.50% 6/1/05 ....................................... 150,000 127,500
---------
127,500
---------
Miscellaneous-2.64%
Budget Group sr notes 9.13% 4/1/06 ................... 200,000 187,500
Caithness coso fund sr notes
9.05% 12/15/09 ...................................... 150,000 147,375
Derby Cycle/Lyon Cycle sr notes
10.00% 5/15/08 ...................................... 200,000 162,000
Republic of Colombia unsub notes
7.75% 4/23/09 ....................................... 100,000 82,500
---------
579,375
---------
Total Corporate Bonds
(cost $10,202,548) .................................. 9,637,102
---------

<PAGE>

Market
Principal Value
Amount* (U.S. $)
FOREIGN BONDS-26.68%
Australia-3.40%
Bank of Austria 10.875% 11/17/04 ................ A$ 200,000 $156,573
Commerzbank 10.25% 4/28/00 ...................... 300,000 207,229
Queensland Treasury Global
8.00% 8/14/01 .................................. 200,000 139,671
Queensland Treasury Global
8.00% 5/14/03 .................................. 150,000 106,511
Toyota Finance Australia 7.00% 12/5/01 .......... 200,000 135,871
---------
745,855
---------
Canada-4.45%
Bank Neder Gemeenten 9.125% 9/27/04 ............. C$ 300,000 232,876
General Electric Capital of Canada
7.125% 2/12/04 ................................. 150,000 106,868
Government of Canada 10.25% 3/15/14 ............. 230,000 230,072
Laidlaw 10.95% 4/16/01 .......................... 100,000 73,258
Nippon Telegraph and Telephone
10.25% 10/19/99 ................................ 150,000 103,843
Rabobank Nederland 9.75% 8/5/04 ................. 200,000 158,349
Toyota Credit Canada 8.00% 12/29/00 ............. 100,000 70,484
---------
975,750
---------
Germany-2.15%
Halifax 5.63% 7/23/07 ........................... Eu 400,000 222,989
Republic of Austria 7.25% 5/3/07 ................ 400,000 247,988
---------
470,977
---------
Greece-1.31%
Hellenic Republic 8.70% 4/8/05 .................. Grd 40,000,000 142,187
Hellenic Republic 11.00% 11/26/99 ............... 45,000,000 144,235
---------
286,422
---------
Italy-0.41%
Buoni Poliennali Del Tes 9.50% 2/1/01 ........... Eu 29,114 33,032
Toyota Motor Credit 7.50% 11/5/01 ............... 100,000,000 57,844
---------
90,876
---------
New Zealand-2.73%
International Bank of Reconstruction
& Development 5.50% 4/15/04 .................... NZ$ 200,000 101,723
New Zealand Government
8.00% 4/15/04 .................................. 70,000 39,990
New Zealand Government
8.00% 11/15/06 ................................. 620,000 359,118
Ontario Province 6.25% 12/3/08 .................. 200,000 98,881
---------
599,712
---------
South Africa-4.90%
Electric Supply Communication
11.00% 6/1/08 .................................. Sa 2,100,000 273,036
Republic of South Africa
12.50% 1/15/02 ................................. 1,900,000 306,456
Republic of South Africa
12.50% 12/21/06 ................................ 2,200,000 322,108
Transnet 16.50% 4/1/10 .......................... 1,000,000 172,960
---------
1,074,560
---------
Sweden-4.42%
Swedish Government 8.00% 8/15/07 ................ Sk 3,800,000 539,431
Swedish Government 9.00% 4/20/09 ................ 1,000,000 153,636
Swedish Government 10.25% 5/5/00 ................ 400,000 49,871
Swedish Government 10.25% 5/5/03 ................ 1,600,000 227,496
---------
970,434
---------

Strategic Income-2

<PAGE>

Strategic Income Series
Statement of Net Assets (Continued)

Market
Principal Value
Amount* (U.S. $)
FOREIGN BONDS (continued)
United Kingdom-2.91%
DeBeers Centenary 8.25% 3/31/09 Gbp ...............Gbp 50,000 $83,801
FCE Bank 9.45% 3/1/00 ................................ 80,000,000 255,045
Korea Electric Power 8.50% 4/28/07 ................... 50,000 78,367
Northumbrian Water Group
9.25% 2/1/02 ........................................ 40,000 67,433
United Kingdom Treasury
8.00% 6/10/03 ....................................... 90,000 154,373
---------
639,019
---------
Total Foreign Bonds
(cost $6,244,631) ................................. 5,853,605
---------

AGENCY MORTGAGE-BACKED SECURITIES-6.04%
Federal Home Loan Mortgage 6.00% 11/1/26 ............. 15,146 14,417
Federal Home Loan Mortgage 6.50% 1/25/15 ............. 100,000 98,766
Federal Home Loan Mortgage 6.50% 5/1/29 .............. 1,049,157 1,014,732
Federal Home Loan Mortgage 7.00% 3/1/11 .............. 48,869 49,281
Federal National Mortgage Association
6.50% 7/25/28 ....................................... 50,000 49,688
Government National Mortgage Association
6.85% 12/20/25 ...................................... 100,000 97,667
---------
Total Agency Mortgage-Backed Securities
(cost $1,353,167) ................................... 1,324,551
---------

ASSET-BACKED SECURITIES-3.49%
AFC Home Equity Loan Trust Series 92-5 A
7.20% 2/15/08 ....................................... 40,358 40,495
CISCE Series 97-1 Class A5 6.28% 9/25/05 ............. 45,000 44,798
CIT RV Trust Series 98-A A5 6.12% 7/15/14 ............ 100,000 98,750
Countrywide Home Equity Loan
Series 97-1 A4 6.95% 5/25/21 ........................ 50,000 50,295
EQCC Home Equity Loan Trust Series 98-2 A6
6.88% 7/15/14 ....................................... 100,000 100,500
EQCC Home Equity Loan Trust Series 98-2 A3F
6.229% 3/15/13 ...................................... 197,000 196,175
MetLife Capital Equipment Loan Trust
Series 97-AA 6.85% 5/20/08 .......................... 60,000 60,516
NationsCredit Grantor Trust Series 97-1A
6.75% 8/15/13 ....................................... 85,354 85,705
Philadelphia Pennsylvania Authority For
Industrial Development Tax Claim
Revenue-Class A 6.488% 6/15/04 ...................... 90,000 89,100
---------
Total Asset-Backed Securities
(cost $772,371) ..................................... 766,334
---------

COLLATERIZED MORTGAGE OBLIGATIONS-2.87%
Asset Securitzation Series 97-D5 A2
7.07% 2/14/41 ....................................... 75,000 71,355
First Union-Chase Commercial Mortgage
Series 99-C2 A2 6.65% 4/15/09 ....................... 105,000 102,916
Lehman Large Loan Series 97-LLI A1
6.79% 6/12/04 ....................................... 96,167 96,735
Mortgage Capital Funding Series 96-MC2-C
7.224% 9/20/06 ...................................... 100,000 99,539

<PAGE>

Strategic Income Series
Statement of Net Assets (Continued)

Market
Principal Value
Amount* (U.S. $)
COLLATERIZED MORTGAGE
OBLIGATIONS (Continued)
Nomura Asset Securities Series 93-1 A1
6.68% 12/15/01 .................................... $75,208 $75,278
Nomura Asset Securities Series 95-MD3 A1A
8.17% 3/4/20 ..................................... 19,879 20,283
Residential Accredit Loans Series 98-QS9 A3
6.75% 7/25/28 .................................... 63,008 62,937
Residential Accredit Loans Series 97-QS3 A3
7.50% 4/25/27 .................................... 100,000 99,602
--------
Total Collateralized Mortgage Obligations
(cost $644,795) .................................. 628,645
--------

U.S. TREASURY OBLIGATIONS-2.61%
U.S. Treasury Note 5.25% 5/15/04 ................... 75,000 73,795
U.S. Treasury Note 5.50% 5/15/09 ................... 200,000 195,817
+U.S. Treasury Note 6.50% 10/15/06 .................. 115,000 118,752
U.S. Treasury Bond 6.125% 11/15/27 ................. 120,000 119,111
U.S. Treasury Strips 0.00% 2/15/19 ................. 225,000 65,980
--------
Total U.S. Treasury Obligations
(cost $601,841) ................................. 573,455
--------

Number
of Shares
COMMON STOCK-4.97%
Real Estate-4.97%
AMB Property ....................................... 11,900 279,650
Chateau Communities ................................ 9,100 272,431
Macerich ........................................... 9,940 260,925
Pan Pacific Retail Properties ...................... 14,300 277,956
--------
Total Common Stock
(cost $1,058,877) ................................ 1,090,962
---------

PREFERRED STOCK-0.11%
Energy-0.00%
TCR Holdings Class B ............................... 219 13
TCR Holdings Class C ............................... 121 7
TCR Holdings Class D ............................... 318 17
TCR Holdings Class E ............................... 658 41
---------
78
---------
Telecommunications-0.11%
21st Century Telecommunications .................... 56 24,503
---------
24,503
---------
Total Preferred Stock
(cost $54,791) ................................... 24,581
---------

WARRANTS-0.06%
**21st Century Telecommunications .................... 438 10,000
**American Banknote Warrant .......................... 3,744 3,000
---------
Total Warrants (cost $5,761) ....................... 13,000
---------

Strategic Income-3

<PAGE>

Strategic Income Series
Statement of Net Assets (Continued)

Principal Market
Amount* Value
REPURCHASE AGREEMENTS-6.26%
With Chase Manhattan 4.65% 7/1/99
(dated 06/30/99, collateralized by $238,000
U.S. Treasury Notes 6.375% due 2/15/01,
market value $242,080 and $119,000
U.S. Treasury Notes 6.375% due 9/30/01,
market value $122,533 and $102,000
U.S. Treasury Notes 6.125% due 12/31/01
market value $102,880) ............................. $456,000 $456,000
With J.P. Morgan Securities 4.70% 7/1/99
(dated 06/30/99, collateralized by $132,000
U.S. Treasury Notes 6.375% due 8/15/02,
market value $136,624 and $119,000
U.S. Treasury Notes 6.25% due 8/31/02,
market value $122,909 and $82,000
U.S. Treasury Notes 5.75% due 11/30/02,
market value $82,483 and $119,000
U.S Treasury Notes 5.50% due 1/31/03,
market value $120,417) ............................. 453,000 453,000

Principal Market
Amount* Value
With PaineWebber 4.80% 7/1/99
(dated 06/30/99, collateralized by $112,000
U.S. Treasury Notes 7.125% due 2/29/00,
market value $116,498 and $119,000
U.S. Treasury Notes 5.625% due 11/30/00,
market value $119,740 and $238,000
U.S. Treasury Notes 5.75% due 11/30/02,
market value $238,535) ............................ $465,000 $ 465,000
----------
Total Repurchase Agreements
(cost $1,374,000) ................................. 1,374,000
----------

TOTAL MARKET VALUE OF SECURITIES-97.03% (cost $22,312,782) ........ $21,286,235

RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-2.97% ............. 652,231
-----------
NET ASSETS APPLICABLE TO 2,245,154 SHARES ($0.01 PAR VALUE)
OUTSTANDING; EQUIVALENT TO $9.77 PER SHARE-100.00% ............... $21,938,466
===========
COMPONENTS OF NET ASSETS AT JUNE 30, 1999:
Common stock, $0.01 par value 1,000,000,000 shares authorized to
the Fund with 50,000,000 shares allocated to the Series .......... $23,342,652
Undistributed net investment income *** ........................... 793,667
Accumulated net realized loss on investments ...................... (1,170,844)
Net unrealized depreciation of investments, foreign
currencies and futures contracts ................................. (1,027,009)
-----------
Total net assets .................................................. $21,938,466
===========

- ------------
*Principal amount is stated in the currency in which each bond is denominated.
A$ - Australian Dollars
C$ - Canadian Dollars
Eu - Euro
Gbp - British Pounds
Grd - Greek Drakma
NZ$ - New Zealand Dollars
Sa - South African Rand
Sk - Swedish Kroner
$ - U.S. Dollars

**Non-income producing security for the period ended June 30, 1999.

***Undistributed net investment income includes net realized gains (losses) on
foreign currencies. Net realized gains (losses) on foreign currencies are
treated as net investment income in accordance with provisions of the
Internal Revenue Code.

+Fully or partially pledged as collateral for financial futures contracts.

Summary of Abbreviations:
mtg - mortgage
sr - senior
sub - subordinated
unsec - unsecured
unsub - unsubordinated

See accompanying notes
Strategic Income-4

<PAGE>

Delaware Group Premium Fund, Inc.-
Strategic Income Series
Statement of Operations
Six Months Ended June 30, 1999
(Unaudited)

INVESTMENT INCOME:
Interest ........................................................ $890,156
Dividends ....................................................... 15,902
----------
906,058
----------

EXPENSES:
Management fees ................................................. 68,953
Accounting and administration ................................... 4,139
Custodian fees .................................................. 3,474
Professional fees ............................................... 1,230
Registration fees ............................................... 1,000
Taxes (other than taxes on income) .............................. 920
Reports and statements to shareholders .......................... 860
Dividend disbursing and transfer agent
fees and expenses ............................................ 448
Directors' fees ................................................. 401
Other ........................................................... 3,718
----------
85,143
----------

Less expenses paid indirectly ................................... (1,062)
----------
Total expenses .................................................. 84,081
----------

NET INVESTMENT INCOME ........................................... 821,977
----------

NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS, FOREIGN CURRENCIES AND
FUTURES CONTRACTS:
Net realized loss on:
Investments .................................................. (1,066,936)
Futures contracts ............................................ (16,628)
Foreign currencies ........................................... (5,053)
----------
Net realized loss (1,088,617)
Net change in unrealized appreciation / depreciation
of investments, foreign currencies and futures contracts ..... (215,941)
----------

NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS, FOREIGN CURRENCIES AND
FUTURES CONTRACTS ............................................ (1,304,558)
----------

NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS .................................... ($482,581)
==========

See accompanying notes

<PAGE>

Delaware Group Premium Fund, Inc.-
Strategic Income Series
Statements of Changes in Net Assets

Six Months Year
Ended 6/30/99 Ended
(Unaudited) 12/31/98
------------- --------

INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income .............................. $821,977 $1,235,293
Net realized loss on investments, foreign
currencies and futures contracts ................ (1,088,617) (144,029)
Net change in unrealized appreciation /
depreciation of investments, foreign
currencies and futures contracts ................ (215,941) (784,625)
----------- -----------
Net increase (decrease) in net assets
resulting from operations ....................... (482,581) 306,639
----------- -----------

DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .............................. (1,197,602) (246,632)
Net realized gain on investments - (22,836)
----------- -----------
(1,197,602) (269,468)
----------- -----------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold .......................... 4,099,533 16,915,964
Net asset value of shares issued upon
reinvestment of distributions from net
investment income and net realized gain
on investments .................................. 1,197,602 269,468
----------- -----------
5,297,135 17,185,432
Cost of shares repurchased ......................... (2,249,250) (5,258,026)
----------- -----------
Increase in net assets derived from
capital share transactions ...................... 3,047,885 11,927,406
----------- -----------

NET INCREASE IN NET ASSETS ......................... 1,367,702 11,964,577
----------- -----------

NET ASSETS:
Beginning of period ................................ 20,570,764 8,606,187
----------- -----------
End of period ...................................... $21,938,466 $20,570,764
=========== ===========

See accompanying notes

Strategic Income-5

<PAGE>

Delaware Group Premium Fund, Inc.-Strategic Income Series
Financial Highlights

Selected data for each share of the Series outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>

Six Months
Ended Year 5/1/97(2)
6/30/99(1) Ended to
(Unaudited) 12/31/98 12/31/97
----------- -------- --------

<S> <C> <C> <C>
Net asset value, beginning of period ...................... $10.600 $10.620 $10.000

Income from investment operations:
Net investment income(3) .................................. 0.393 0.832 0.523
Net realized and unrealized gain (loss) on investments,
foreign currencies and futures contracts ................. (0.613) (0.557) 0.097
------- ------- -------
Total from investment operations .......................... (0.220) 0.275 0.620
------- ------- -------
Less dividends and distributions:
Dividends from net investment income ...................... (0.610) (0.270) none
Distributions from net realized gain on investments ....... none (0.025) none
------- ------- -------
Total dividends and distributions ......................... (0.610) (0.295) none
------- ------- -------
Net asset value, end of period ............................ $9.770 $10.600 $10.620
======= ======= =======
Total return .............................................. (2.19%) 2.63% 6.20%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................... $21,938 $20,571 $8,606
Ratio of expenses to average net assets ................... 0.80% 0.80% 0.80%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly .......... 0.80% 0.81% 1.23%
Ratio of net investment income to average net assets ...... 7.81% 7.90% 7.44%
Ratio of net investment income to average net assets
prior to expense limitation and expenses
paid indirectly .......................................... 7.81% 7.89% 7.01%
Portfolio turnover ........................................ 115% 143% 70%
</TABLE>
- ------------

(1) Ratios have been annualized and total return has not been annualized.
(2) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.
(3) Per share information was based on the average shares outstanding method.

See accompanying notes

Strategic Income-6

<PAGE>

Delaware Group Premium Fund, Inc.-Strategic Income Series
Notes to Financial Statements
June 30, 1999
(Unaudited)

Delaware Group Premium Fund, Inc. (the "Fund") is registered as a diversified
open-end investment company under the Investment Company Act of 1940, as
amended. The Fund is organized as a Maryland Corporation and offers 17 series:
the Aggressive Growth Series, the Capital Reserves Series, the Cash Reserve
Series, the Convertible Securities Series, the Delaware Balanced Series
(formerly the Delaware Series), the DelCap Series, the Delchester Series, the
Devon Series, the Emerging Markets Series, the Global Bond Series, the Growth
and Income Series (formerly the Decatur Total Return Series), the International
Equity Series, the REIT Series, the Small Cap Value Series, the Social Awareness
Series, the Strategic Income Series, and the Trend Series. These financial
statements and the related notes pertain to the Strategic Income 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 Series.

Security Valuation--Securities listed on an exchange are valued at the last
quoted sales price as of the close of the NYSE on the valuation date. Securities
not traded or securities not listed on an exchange are valued at the mean of the
last quoted bid and asked prices. Securities listed on a foreign exchange are
valued at the last quoted sales price before the Series is valued. Long-term
debt securities are valued by an independent pricing service and such prices are
believed to reflect the fair value of such securities. Financial futures
contracts are valued at the settlement price established each day by the board
of trade or exchange on which they are traded. Money market instruments having
less than 60 days to maturity are valued at amortized cost, which approximates
market value. Other securities and assets for which market quotations are not
readily available are valued at fair value as determined in good faith by or
under the direction of the Fund's Board of Directors.

<PAGE>

Foreign Currency Transactions--Transactions denominated in foreign currencies
are recorded at the prevailing exchange rates on the valuation date. The value
of all assets and liabilities denominated in foreign currencies are translated
into U.S. dollars at the exchange rate of such currencies against the U.S.
dollar as of 3:00 PM EST. Transaction gains or losses resulting from changes in
exchange rates during the reporting period or upon settlement of the foreign
currency transaction are reported in operations for the current period. The
Series does isolate that portion of gains and losses on investments in debt
securities which are due to changes in the foreign exchange rate from that which
are due to changes in market prices of debt securities. The Series reports
certain foreign currency related transactions as components of realized gains
(losses) for financial reporting purposes, whereas such components are treated
as ordinary income (loss) for federal income tax purposes.

Other--Expenses common to all funds within the Delaware Investments Family 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.
Interest income is recorded on the accrual basis. Foreign dividends are also
recorded on the ex-dividend date or as soon after the ex-dividend date that the
Series is aware of such dividends, net of all non-rebatable tax withholdings.
Withholding taxes on foreign dividends have been provided for in accordance with
the Series' understanding of the applicable country's tax rules and rates.
Original issue discounts are accreted to interest income over the lives of the
respective securities.

The Strategic Income Series will make payments from net income and net realized
gain on investments, if any, following the close of the fiscal year.

Certain expenses of the Fund are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price and execution. The
amount of these expenses was approximately $488 for the period ended June 30,
1999. The Fund may receive earnings credits from its custodian when positive
cash balances are maintained, which are used to offset custody fees. These
credits were $574 for the period ended June 30, 1999. The expenses paid under
the above arrangements are included in their respective expense captions on the
Statement of Operations with the corresponding expense offset shown as "Expenses
paid indirectly".

2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Series
pays Delaware Management Company ("DMC"), the Investment Manager of the Series,
an annual fee which is calculated at the following rates: 0.65% of the first
$500 million of average daily net assets of the Series, 0.60% on the next $500
million, 0.55% on the next $1,500 million and 0.50% on the average daily net
assets over $2,500 million. These rates became effective May 1, 1999. The old
management fee was calculated at the rate of 0.65% on the average daily net
assets of the Series. Delaware International Advisers Ltd, an affiliate of DMC,
receives one third of the management fee paid to DMC for managing the foreign
bond portion of the Series.

Strategic Income-7

<PAGE>

Delaware Group Premium Fund, Inc.-Strategic Income Series
Notes to Financial Statements (Continued)

DMC has elected to waive that portion, if any, of the annual management fee
payable to the extent necessary to ensure that annual operating expenses
exclusive of taxes, interest, brokerage commissions and extraordinary expenses
do not exceed 0.80% of average daily net assets of the Series through October
31, 1999.

On June 30, 1999, the Series had liabilities payable to affiliates as follows:

Certain officers of DMC and DSC are officers, directors and/or employees of the
Fund. These officers, directors and employees are paid no compensation by the
Fund.

3. Investments
During the period ended June 30, 1999, the Series made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:
Purchases ...................................... $12,876,228
Sales .......................................... $ 8,469,103

During the period ended June 30, 1999, the Series made purchases and sales of
U.S. government securities as follows:
Purchases ...................................... $1,511,626
Sales .......................................... $1,837,274

For federal income tax purposes, the Series had accumulated capital losses at
December 31, 1998 as follows:

Year of
expiration
2006
----------
$87,180

<PAGE>

4. Capital Stock
Transactions in capital stock shares were as follows:
<TABLE>
<CAPTION>

Shares issued upon
reinvestment of distributions
from net investment
income and net realized Shares Net
Shares sold gain on investments repurchased increase
----------- ----------------------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Period ended June 30, 1999 ... 405,435 120,241 (221,792) 303,884
Year ended December 31, 1998 . 1,604,989 25,762 (500,017) 1,130,734
</TABLE>

Strategic Income-8

<PAGE>

Strategic Income Series
Notes to Financial Statements (Continued)

There were no forward foreign currency contracts outstanding at June 30, 1999.

6. Futures Contracts
The Series invests in financial futures contracts for the purpose of hedging its
existing portfolio securities against fluctuations in fair value caused by
changes in prevailing market rates. Upon entering into a futures contract, the
Series deposits cash or pledges U.S. government securities to a broker, equal to
the minimum "initial margin" requirements of the exchange on which the contract
is traded. Subsequent payments are received from or paid to the broker each day,
based on the daily fluctuation in the market value of the contract. These
receipts or payments are known as "variation margin" and are recorded daily by
the Series as unrealized gains or losses until the contracts are closed. When
the contracts are closed, the Series records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed. Risk may arise upon entering into futures
contracts from potential imperfect correlation between the futures contracts and
the underlying securities and from the possibility of an illiquid secondary
market for these instruments.

The financial futures contracts open at June 30, 1999 were as follows:
Notional
Contract Cost Amount Expiration Date Unrealized Gain
----------- --------------- ---------------
1 U.S. 5 Yr Note ...... $108,398 09/99 $602
1 U.S. 20 Yr Note ..... $115,625 09/99 $281

7. Credit and Market Risk
Some countries in which the Series may invest require governmental approval for
the repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if there is a deterioration in a
country's balance of payments or for other reasons, a country may impose
temporary restrictions on foreign capital remittances abroad.

The 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.

The 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.

Strategic Income-9

<PAGE>

Delaware Group Premium Fund, Inc.-Strategic Income Series
Proxy Results
(Unaudited)

For the six months ended June 30, 1999, Delaware Premium Fund, Inc. - Strategic
Income Series shareholders voted on the following proposals at the annual
meeting of shareholders on March 17, 1999 or as adjourned. The description of
each proposal and number of shares voted are as follows:

1. To elect the Delaware Group Premium Fund, Inc. Board of Directors.

Shares Shares Voted
Voted Withheld
For Authority Abstain
------ --------- -------
Jeffrey J. Nick ........ 1,905,210 3,585 -
Walter P. Babich ....... 1,905,210 3,585 -
John H. Durham ......... 1,905,210 3,585 -
Anthony D. Knerr ....... 1,905,210 3,585 -
Ann R. Leven ........... 1,905,210 3,585 -
Thomas F. Madison ...... 1,905,210 3,585 -
Charles E. Peck ........ 1,905,210 3,585 -
Wayne A. Stork ......... 1,905,210 3,585 -
Jan L. Yeomans ......... 1,905,210 3,585 -

2.To approve the reclassification of the investment objective from fundamental
to non-fundamental.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,764,133 60,078 84,585

3.To approve standardized fundamental investment restrictions (proposal involves
separate votes on seven sub-proposals 3A-3G).

3C. To adopt a new fundamental investment restriction concerning underwriting.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,793,558 29,303 85,934

3D. To adopt a new fundamental investment restriction concerning investments in
real estate.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,791,080 30,688 87,027

<PAGE>

3E. To adopt a new fundamental investment restriction concerning investments in
commodities.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,791,896 30,965 85,934

3F. To adopt a new fundamental investment restriction concerning lending by the
Fund.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,791,896 30,965 85,934

3G. To reclassify all current fundamental investment restrictions as
non-fundamental.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,787,201 34,845 86,750

4. To approve a new investment management agreement with Delaware Management
Company.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,801,715 46,933 60,147

5. To approve a new Sub-Advisory Agreement.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,819,413 14,982 74,400

6. To ratify the selection of Ernst & Young LLP, as the independent auditors
for Delaware Group Premium Fund, Inc.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
1,850,536 15,933 42,326

Strategic Income-11

<PAGE>

Delaware Group Premium Fund, Inc.-Trend Series
Statement of Net Assets
June 30, 1999 (Unaudited)

Number of Market
Shares Value
COMMON STOCK-94.88%
Banking, Finance & Insurance-6.74%
Ambac Financial Group ............................ 88,700 $5,066,988
*Annuity And Life ................................. 11,400 256,144
Commerce One ..................................... 1,600 33,600
*Corporate Executive Board ........................ 15,500 551,703
Doral Financial .................................. 108,300 1,864,791
Freedom Securities ............................... 21,800 373,325
*Metris ........................................... 99,000 4,034,250
Webster Financial ................................ 97,000 2,637,188
----------
14,817,989
----------
Buildings & Materials-0.70%
*+Comfort Systems USA .............................. 44,900 808,200
*National Equipment Services ...................... 61,400 736,800
----------
1,545,000
----------
Business Services-2.44%
*+Profit Recovery Group ............................ 113,700 5,375,878
----------
5,375,878
----------
Cable, Media & Publishing-10.55%
*+Chancellor Media Class A ......................... 79,900 4,401,991
*Consolidated Graphics ............................ 116,100 5,805,000
*+Emmis Broadcasting ............................... 34,500 1,698,047
*+Metro Networks ................................... 30,700 1,636,694
*Radio One ........................................ 33,900 1,572,113
TCA Cable TV ..................................... 48,000 2,661,000
*+USA Networks ..................................... 135,304 5,424,845
----------
23,199,690
----------
Chemicals-2.56%
*Mettler-Toledo International ..................... 227,300 5,639,881
----------
5,639,881
----------
Computers & Technology-14.10%
*+Bindview Development ............................. 103,700 2,459,634
*Cisco Systems .................................... 85,599 5,513,116
*Clarify .......................................... 27,900 1,151,747
*Exchange Applications ............................ 77,600 3,164,625
Henry (Jack) & Associates ........................ 99,700 3,900,763
*Legato Systems ................................... 38,300 2,213,022
*Neon Systems ..................................... 13,300 442,225
*New Era of Networks .............................. 23,100 1,014,234
*+Onyx Software .................................... 37,900 817,219
*Persistence Software ............................. 9,700 132,769
*Softworks ........................................ 93,100 1,027,009
*SunGard Data Systems ............................. 62,300 2,149,350
*Veritas Software ................................. 73,675 6,996,823
----------
30,982,536
----------
Consumer Products-5.53%
G&K Services ..................................... 33,800 1,769,219
*Gemstar International Group
Limited .......................................... 159,200 10,397,750
----------
12,166,969
----------
Electronics & Electrical Equipment-11.94%
*Applied Micro Circuits ........................... 121,800 10,117,013
*+HI/FN ............................................ 20,500 1,554,797
*+Micrel ........................................... 102,100 7,568,163
*PMC - Sierra ..................................... 59,100 3,485,053
*Teradyne ......................................... 49,300 3,537,275
----------
26,262,301
----------
<PAGE>

Number of Market
Shares Value
COMMON STOCK (Continued)
Environmental Services-1.60%
*+Waste Connections ................................ 115,500 $ 3,522,750
-----------
3,522,750
-----------
Food, Beverage & Tobacco-1.85%
*Cheesecake Factory ............................... 118,900 3,619,019
*Packaged Ice ..................................... 74,600 445,269
-----------
4,064,288
-----------
Healthcare & Pharmaceuticals-4.65%
*Brookdale Living Communities ..................... 165,900 2,472,947
*+Pharmacopeia ..................................... 38,600 427,013
*QLT Phototheraputics ............................. 17,000 933,406
*Renal Care Group ................................. 35,475 916,807
*Trigon Healthcare ................................ 57,600 2,095,200
*+United Therapeutics .............................. 50,700 602,063
*Wesley Jessen VisionCare ......................... 32,500 1,045,078
*Women First Healthcare ........................... 38,200 510,925
*Xomed Surgical Products .......................... 25,400 1,230,313
-----------
10,233,752
-----------
Industrial Machinery-0.06%
*Spinnaker Industries Common ...................... 5,800 77,575
*Spinnaker Industries Class A ..................... 4,500 57,938
-----------
135,513
-----------
Leisure, Lodging & Entertainment-6.28%
*CEC Entertainment ................................ 109,300 4,617,925
*Dave & Buster's .................................. 81,900 2,375,100
*+Extended Stay America ............................ 135,900 1,630,800
Ruby Tuesday ..................................... 48,900 929,100
*Sonic Corp. ...................................... 131,850 4,268,644
-----------
13,821,569
-----------
Retail-17.84%
*+American Eagle Outfitters ........................ 92,600 4,216,194
*Cost Plus ........................................ 142,350 6,468,028
*Dollar Tree Stores ............................... 111,100 4,884,928
*+Duane Reade ...................................... 111,800 3,423,875
*Hibbett Sporting Goods ........................... 20,600 459,638
*Linens 'n Things ................................. 106,000 4,637,500
*+O'Reilly Automotive .............................. 58,400 2,938,250
*Schultz Sav-O Stores ............................. 30,000 483,750
*Staples .......................................... 205,512 6,351,605
Talbots .......................................... 34,500 1,315,313
*+Tweeter Home Entertainment Group ................. 57,700 2,253,906
*West Marine ...................................... 67,600 986,538
*+Zany Brainy ...................................... 81,600 787,950
-----------
39,207,475
-----------
Telecommunications-7.51%
*Concord Communications ........................... 66,000 2,945,250
*Network Appliance ................................ 96,600 5,400,544
*+Nextlink Communications Class A .................. 70,100 5,211,497
*+Pinnacle Holdings ................................ 121,000 2,956,938
-----------
16,514,229
-----------
Transportation & Shipping-0.53%
*+Forward Air Corp ................................. 41,300 1,160,272
-----------
1,160,272
-----------
Total Common Stock
(cost $142,007,381) 208,650,092
.................................................... -----------

- -------------------
Top 10 stock holdings, representing 32.0% of net assets, are printed in bold.

Trend-1

<PAGE>

Trend Series
Statement of Net Assets (Continued)

Principal Market
Amount Value
REPURCHASE AGREEMENTS-9.91%
With Chase Manhattan 4.65% 7/1/99
(dated 6/30/99, collateralized by
$3,783,000 U.S. Treasury Notes 5.375%
due 2/15/01, market value $3,840,205
and $1,891,000 U.S. Treasury Notes
4.65% due 9/30/01, market value
$1,943,791 and $1,621,000
U.S. Treasury Notes 6.125% due 12/31/01,
market value $1,632,032) ....................... $7,233,000 $7,233,000
With J.P. Morgan Securities 4.70% 7/1/99
(dated 6/30/99, collateralized by
$2,089,000 U.S. Treasury Notes 6.375%
due 8/15/02, market value $2,167,320
and $1,891,000 U. S. Treasury Notes
6.25% due 8/31/02, market value
$1,949,750 and $1,308,000
U.S. Treasury Notes 5.75% due 11/30/02,
market value $1,308,464 and $1,891,000
U.S. Treasury Notes 5.50% due 1/31/03,
market value $1,910,223) ....................... 7,188,000 7,188,000

Principal Market
Amount Value
REPURCHASE AGREEMENTS (Continued)
With PaineWebber 4.80% 7/1/99
(dated 6/30/99, collateralized by
$1,785,000 U.S. Treasury Bills 7.125%
due 2/29/00, market value $1,848,058
and $1,891,000 U.S. Treasury Notes
5.625% due 11/30/00, market value
$1,899,481 and $3,783,000
U.S. Treasury Notes 5.75% due 11/30/02,
market value $3,783,983) ...................... $7,376,000 $ 7,376,000
-----------
Total Repurchase Agreements
(cost $21,797,000) ............................ $21,797,000
-----------

TOTAL MARKET VALUE OF SECURITIES-104.79% (cost $163,804,381) .. $230,447,092

LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS-(4.79%) ....... (10,539,519)
------------
NET ASSETS APPLICABLE TO 9,202,887 SHARES ($0.01 PAR VALUE)
OUTSTANDING; EQUIVALENT TO $23.90 PER SHARE-100.00% ........ $219,907,573
============

COMPONENTS OF NET ASSETS AT JUNE 30, 1999:
Common stock, $0.01 par value, 1,000,000,000 shares
authorized to the Fund with 50,000,000 shares
allocated to the Series .................................... $142,779,608
Distributions in excess of net investment income .............. (241,868)
Accumulated net realized gain on investments .................. 10,727,122
Net unrealized appreciation of investments .................... 66,642,711
------------
Total net assets .............................................. $219,907,573
============

- -------------------
* Non-income producing security for the period ending June 30, 1999.
+ Security is partially or fully on loan.

See accompanying notes

Trend-2

<PAGE>

Delaware Group Premium Fund, Inc.-
Trend Series
Statement of Operations
Six Months Ended June 30, 1999
(Unaudited)

INVESTMENT INCOME:
Interest ........................................... $368,265
Dividends .......................................... 135,567
-----------
503,832
-----------

EXPENSES:
Management fees .................................... 672,599
Accounting and administration ...................... 44,556
Professional fees .................................. 9,280
Reports and statements to shareholders ............. 8,380
Taxes (other than taxes on income) ................. 3,429
Registration fees .................................. 2,750
Dividend disbursing and transfer agent fees
and expenses .................................... 2,370
Custodian fees ..................................... 2,000
Directors' fees .................................... 1,732
Other .............................................. 6,057
-----------
753,153
Less expenses absorbed or waived ................... (9,991)
Less expenses paid indirectly ...................... 2,064
-----------
Total expenses ..................................... 741,098
-----------

NET INVESTMENT LOSS ................................ (237,266)
-----------

NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments ................... 12,079,481
Net change in unrealized appreciation /
depreciation of investments ..................... 25,421,620
-----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS .................................. 37,501,101
-----------

NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS ...................................... $37,263,835
===========

See accompanying notes

<PAGE>

Delaware Group Premium Fund, Inc.-
Trend Series
Statements of Changes in Net Assets

Period Year
Ended 6/30/99 Ended
(Unaudited) 12/31/98
------------- --------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss) ................... $ (237,266) $ 42,700
Net realized gain (loss) on investments ........ 12,079,481 (1,048,182)
Net change in unrealized appreciation /
depreciation of investments ................. 25,421,620 23,501,658
------------ ------------
Net increase in net assets resulting
from operations ............................. 37,263,835 22,496,176
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .......................... (17,149) (135,410)
Net realized gain on investments ............... -- (2,315,513)
------------ ------------
(17,149) (2,450,923)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ...................... 69,259,240 113,799,362
Net asset value of shares issued upon
reinvestment of distributions from net
investment income and net realized
gain on investments ......................... 17,149 2,450,923
------------ ------------
69,276,389 116,250,285

Cost of shares repurchased ..................... (54,866,712) (86,320,418)
------------ ------------
Increase in net assets derived from capital
share transactions .......................... 14,409,677 29,929,867
------------ ------------
NET INCREASE IN NET ASSETS ..................... 51,656,363 49,975,120
------------ ------------
NET ASSETS:
Beginning of period ............................ 168,251,210 118,276,090
------------ ------------
End of period .................................. $219,907,573 $168,251,210
============ ============

See accompanying notes

Trend-3

<PAGE>

Delaware Group Premium Fund, Inc.-Trend Series
Financial Highlights

Selected data for each share of the Series outstanding throughout each period
were as follows:

<TABLE>
<CAPTION>
Six Months
Ended 6/30/99(1) Year Ended December 31,
(Unaudited) 1998 1997 1996 1995 1994
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $19.760 $17.380 $14.560 $14.020 $10.160 $10.200

Income (loss) from investment operations:
Net investment income .................................... (0.023) 0.006 0.019 0.050 0.098 0.079
Net realized and unrealized gain (loss) on investments ... 4.165 2.736 3.031 1.380 3.852 (0.119)
------- ------- ------- ------- ------- -------
Total from investment operations ......................... 4.142 2.742 3.050 1.430 3.950 (0.040)
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ..................... (0.002) (0.020) (0.050) (0.090) (0.090) none
Distributions from net realized gain on investments ...... none (0.342) (0.180) (0.800) none none
------- ------- ------- ------- ------- -------
Total dividends and distributions ........................ (0.002) (0.362) (0.230) (0.890) (0.090) none
------- ------- ------- ------- ------- -------

Net asset value, end of period ........................... $23.900 $19.760 $17.380 $14.560 $14.020 $10.160
======= ======= ======= ======= ======= =======

Total return ............................................. 20.97% 16.04% 21.37% 11.00% 39.21% (0.39%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $219,907 $168,251 $118,276 $56,423 $20,510 $7,087
Ratio of expenses to average net assets .................. 0.83% 0.81% 0.80% 0.80% 0.80% 0.80%
Ratio of expenses to average net assets
prior to expense limitation and expenses
paid indirectly ....................................... 0.84% 0.85% 0.88% 0.92% 0.96% 1.47%
Ratio of net investment income to average net assets ..... (0.27%) 0.03% 0.16% 0.56% 1.03% 1.63%
Ratio of net investment income to average net
assets prior to expense limitation and expenses
paid indirectly ....................................... (0.28%) (0.01%) 0.08% 0.44% 0.87% 0.96%
Portfolio turnover ....................................... 104% 121% 125% 112% 76% 59%
</TABLE>

- -------------------
(1) Ratios have been annualized and total return has not been annualized.

See accompanying notes

Trend-4

<PAGE>

Delaware Group Premium Fund, Inc.-Trend Series
Notes to Financial Statements
June 30, 1999
(Unaudited)

Delaware Group Premium Fund, Inc. (the "Fund") is registered as a diversified
open-end investment company under the Investment Company Act of 1940, as
amended. The Fund is organized as a Maryland Corporation and offers 17 series:
the Aggressive Growth Series, the Capital Reserves Series, the Cash Reserve
Series, the Convertible Securities Series, the Delaware Balanced Series
(formerly the Delaware Series), the DelCap Series, the Delchester Series, the
Devon Series, the Emerging Markets Series, the Global Bond Series, the Growth
and Income Series (formerly the Decatur Total Return Series), the International
Equity Series, the REIT Series, the Small Cap Value Series, the Social Awareness
Series, the Strategic Income Series, and the Trend Series. These financial
statements and the related notes pertain to the Trend 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 Series.

<PAGE>

The Trend Series will make payments from net income and net realized gain on
investments, if any, following the close of the fiscal year.

Certain expenses of the Series are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price and execution. The
amount of these expenses was approximately $2,064 for the period ended June 30,
1999. The Series may receive earnings credits from its custodian when positive
cash balances are maintained, which are used to offset custody fees. There were
no earnings credits for the period ended June 30, 1999. The expenses paid under
the above arrangements are included in their respective expense captions on the
Statement of Operations with the corresponding expense offset shown as "Expenses
paid indirectly".

Trend-5

<PAGE>

Trend Series
Notes to Financial Statements (Continued)

On June 30, 1999, the Series had liabilities payable to affiliates as follows:

Certain officers of DMC and DSC are officers, directors and/or employees of the
Fund. These officers, directors and employees are paid no compensation by the
Fund.

3. Investments
During the period ended June 30, 1999, the Series made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:

Purchases .................................... $98,899,222
Sales ........................................ $87,552,860

Aggregate Aggregate
Cost of unrealized unrealized Net unrealized
investments appreciation depreciation appreciation
- ------------ ------------ ------------ --------------
$163,804,381 $67,695,609 ($1,052,898) $66,642,711

For federal income tax purposes, the Series had accumulated capital losses at
December 31, 1998 as follows:

Year of
expiration
2006
-----------
$916,288

<PAGE>

4. Capital Stock
Transactions in capital stock shares were as follows:

5. Securities Lending
The Series may participate, along with other funds in the Delaware Investments
Family of Funds, in a Securities Lending Agreement ("Lending Agreement").
Security loans made pursuant to the Lending Agreement are required at all times
to be secured by U.S. Treasury obligations and/or cash collateral at least equal
to 100% of the market value of securities issued in the U.S. and 105% of the
market value of securities issued outside of the U.S. Cash collateral received
is invested in fixed income securities, with a weighted average maturity not to
exceed 90 days, rated in one of the top two tiers by Standard & Poors Ratings
Group or Moody's Investors Service, Inc. or repurchase agreements collateralized
by such securities. However, in the event of default or bankruptcy by the
lending agent, realization and/or retention of the collateral may be subject to
legal proceedings. In the event that the borrower fails to return loaned
securities and the collateral received is insufficient to cover the value of the
loaned securities and provided such collateral is not the result of investment
losses, the lending agent has agreed to pay the amount of the shortfall to the
Series, or at the discretion of the lending agent, replace the loaned
securities. The market value of the securities on loan and the related
collateral received at June 30, 1999 were as follows:

Market value
of securities Market value
on loan of collateral
------------- -------------
$33,649,483 $34,032,450

Net income from securities lending activities for the period ended June 30, 1999
was $44,504 and is included in interest income on the statement of operations.

Trend-6

<PAGE>

Delaware Group Premium Fund Inc.-Trend Series
Proxy Results
(Unaudited)

For the six months ended June 30, 1999, Delaware Premium Fund, Inc. - Trend
Series shareholders voted on the following proposals at the annual meeting of
shareholders on March 17, 1999 or as adjourned. The description of each proposal
and number of shares voted are as follows:

1. To elect the Delaware Group Premium Fund, Inc. Board of Directors.

Shares Shares Voted
Voted Withheld
For Authority Abstain
---------- ------------ -------
Jeffrey J. Nick ................. 8,228,270 207,630 -
Walter P. Babich ................ 8,227,819 208,081 -
John H. Durham .................. 8,242,542 193,369 -
Anthony D. Knerr ................ 8,240,765 195,135 -
Ann R. Leven .................... 8,215,497 220,403 -
Thomas F. Madison ............... 8,241,934 193,966 -
Charles E. Peck ................. 8,227,353 208,547 -
Wayne A. Stork .................. 8,239,149 196,751 -
Jan L. Yeomans .................. 8,208,494 227,406 -

2. To approve the reclassification of the investment objective from fundamental
to non-fundamental.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- ---------
7,464,471 439,478 531,951

2. To approve standardized fundamental investment restrictions (proposal
involves separate votes on seven sub-proposals 3A-3G).

3A. To adopt a new fundamental investment restriction concerning concentration
of the investments in the same industry.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- ---------
7,645,408 287,628 502,864

3B. To adopt a new fundamental investment restriction concerning borrowing money
and issuing senior securities.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- ---------
7,613,455 308,112 523,333

3C. To adopt a new fundamental investment restriction concerning underwriting.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- ---------
7,636,398 243,008 556,495

3D. To adopt a new fundamental investment restriction concerning investments in
real estate.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- ---------
7,641,021 304,236 490,642

<PAGE>

3E. To adopt a new fundamental investment restriction concerning investments in
commodities.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- ---------
7,620,227 305,744 509,929

3F. To adopt a new fundamental investment restriction concerning lending by the
Fund.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- ---------
7,648,984 292,128 494,788

3G. To reclassify all current fundamental investment restrictions as
non-fundamental.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- ---------
7,518,084 394,994 522,823

4. To approve a new investment management agreement with Delaware Management
Company.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- ---------
7,631,543 331,007 473,350

6. To approve the restructuring of Delaware Group Premium Fund, Inc. from a
Maryland Corporation into a Delaware Business Trust.

Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- ---------
7,565,860 321,435 548,605

Trend-7