<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>
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.
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.
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. Original issue discounts are
accreted to interest income over the lives of the respective securities.
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>
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: 0.50% on the first
$500 million of average daily net assets of the Series, 0.475% on the next $500
million, 0.45% on the next $1,500 million and 0.425% 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 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.
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.
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.
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.
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. Discounts and premiums are
amortized to interest income over the lives of the respective securities.
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>
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: 0.45% of the first
$500 million of average daily net assets of the Series, 0.40% on the next $500
million, 0.35% on the next $1,500 million and 0.30% 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 0.50% on the average daily net
assets of the Series, less the fees paid to the unaffiliated directors.
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.
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.
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:
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
-------------- ------------------ --------------
$19,131 $1,521 $5,078
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 -
2. To approve the reclassification of the investment objective from fundamental
to non-fundamental.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
4,030,548 84,671 253,684
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
3B. To adopt a new fundamental investment restriction concerning borrowing money
and issuing senior securities.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
4,065,736 69,857 233,280
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
3E. To adopt a new fundamental investment restriction concerning investments in
commodities.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
4,085,660 49,932 233,821
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
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
--------- ------- -------
4,161,853 14,346 192,674
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
--------- ------- -------
4,128,738 42,081 198,054
Cash Reserve-6
<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.
Security Valuation--Securities listed on an exchange are valued at the lasted
quoted sales price as of the close of the NYSE on the valuation date. Securities
not traded or securities not listed on an exchange are valued at the mean of the
last quoted bid and asked prices. Long-term debt securities are valued by an
independent pricing service and such prices are believed to reflect the fair
value of such securities. Money market instruments having less than 60 days to
maturity are valued at amortized cost, which approximates market value. Other
securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Fund's Board of Directors.
Federal Income Taxes--The Series intends to continue to qualify as a regulated
investment company and make the requisite distributions to shareholders.
Accordingly, no provision for federal income taxes has been made in the
financial statements. Income and capital gain distributions are determined in
accordance with federal income tax regulations, which may differ from generally
accepted accounting principles.
Repurchase Agreements--The Series may invest in a pooled cash account along with
other members of the Delaware 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.
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 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.
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.
Delaware-6
<PAGE>
Delaware Balanced 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
-------------- -------------------- --------------
$101,199 None $4,168
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:
Aggregate Aggregate
Cost of unrealized unrealized Net unrealized
investments appreciation depreciation appreciation
----------- ------------ ------------ --------------
$180,443,261 $33,090,394 ($7,055,411) $26,034,983
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.
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.
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.
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. Money market instruments having less than 60
days to maturity are valued at amortized cost, which approximates market value.
Other securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Fund's Board of Directors.
Federal Income Taxes--The Series intends to continue to qualify as a regulated
investment company and make the requisite distributions to shareholders.
Accordingly, no provision for federal income taxes has been made in the
financial statements. Income and capital gain distributions are determined in
accordance with federal income tax regulations, which may differ from generally
accepted accounting principles.
Repurchase Agreements--The Series may invest in a pooled cash account along with
other members of the Delaware 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.
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.
<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".
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: 0.75% of 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% on the average daily net
assets of the Series, less the fees paid to the unaffiliated directors.
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.
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:
Aggregate Aggregate
Cost of unrealized unrealized Net unrealized
investments appreciation depreciation appreciation
----------- ------------ ------------ --------------
$104,033,904 $42,850,287 ($1,166,320) $41,683,967
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
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 ..................... $8.460 $9.510 $9.170 $8.940 $8.540 $9.770
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.
Security Valuation--Securities listed on an exchange are valued at the lasted
quoted sales price as of the close of the NYSE on the valuation date. Securities
not traded or securities not listed on an exchange are valued at the mean of the
last quoted bid and asked prices. Long-term debt securities are valued by an
independent pricing service and such prices are believed to reflect the fair
value of such securities. Money market instruments having less than 60 days to
maturity are valued at amortized cost, which approximates market value. Other
securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Fund's Board of Directors.
Federal Income Taxes--The Series intends to continue to qualify as a regulated
investment company and make the requisite distributions to shareholders.
Accordingly, no provision for federal income taxes has been made in the
financial statements. Income and capital gain distributions are determined in
accordance with federal income tax regulations, which may differ from generally
accepted accounting principles.
Repurchase Agreements--The Series may invest in a pooled cash account along with
other members of the Delaware 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.
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 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>
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 0.60% on the average daily net
assets of the Series, less the fees paid to the unaffiliated directors.
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.
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.
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.
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.
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
2. To approve the reclassification of the investment objective from fundamental
to non-fundamental.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
------ ------- -------
12,568,488 414,390 1,077,313
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.-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.
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. Money market instruments having less than 60
days to maturity are valued at amortized cost, which approximates market value.
Other securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Fund's Board of Directors.
Federal Income Taxes--The Series intends to continue to qualify as a regulated
investment company and make the requisite distributions to shareholders.
Accordingly, no provision for federal income taxes has been made in the
financial statements. Income and capital gain distributions are determined in
accordance with federal income tax regulations, which may differ from generally
accepted accounting principles.
Repurchase Agreements--The Series may invest in a pooled cash account along with
other members of the Delaware 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.
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.
<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.
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.
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:
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
-------------- ------------------- --------------
$200,306 $19,261 $57,051
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:
<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 ........ 1,920,960 2,786,378 (2,388,504) 2,318,834
Year ended December 31, 1998 .......... 9,550,511 1,783,160 (2,829,984) 8,503,687
</TABLE>
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 -
2. To approve the reclassification of the investment objective from fundamental
to non-fundamental.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- ---------
26,444,852 1,249,088 1,997,728
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
3B. To adopt a new fundamental investment restriction concerning borrowing money
and issuing senior securities.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- ---------
26,827,782 982,268 1,881,618
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
3D. To adopt a new fundamental investment restriction concerning investments in
real estate.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- ---------
26,863,808 959,130 1,868,729
<PAGE>
3E. To adopt a new fundamental investment restriction concerning investments in
commodities.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- ---------
26,781,683 1,045,070 1,864,914
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