<PAGE>
- -----------------------------------
DELAWARE GROUP
- -----------------------------------
PREMIUM FUND
- -----------------------------------
INTERNATIONAL EQUITY
- -----------------------------------
SERIES
- -----------------------------------
SEMI-ANNUAL REPORT
- ------------------
JUNE 30, 1999
DELAWARE (SM)
INVESTMENTS
=====================
Philadelphia o London
<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
1
<PAGE>
For the six-month period ended June 30, 1999, the Delaware Group Premium Fund
International Equity Series gained 8.30%, outperforming its benchmark, the
Morgan Stanley EAFE Index, which returned 4.11%.
Uncertain of the Euro's prospects, the managers focused on countries that did
not participate in the European Monetary Union convergence. The U.K. remained
the Series' largest country allocation. As countries like Brazil and Japan
showed signs of recovery, the dominance of growth investments began to wane,
benefiting many cyclical industries and value stocks in which the Portfolio was
invested. Throughout the first half of this year, Japan experienced a modest
economic recovery that drove stock prices higher. Although investments in less
expensive Japanese stocks benefited the Series' performance, it was difficult to
keep pace with the benchmark and its more substantial allocation to the Japanese
market.
Investor confidence in the recovery of worldwide economies boosted the
performance of commodities issues, including oil, utility, and paper companies.
Heavy investments in Australia, New Zealand and other countries whose
performance benefited from growing investor interest in commodity-based stocks
contributed to total returns.
In the coming months, we believe the Series' country allocations should
remain relatively stable. Despite recent encouraging economic growth figures,
the managers view the Japanese market as overvalued and subject to a long and
difficult recovery. For this reason, we do not currently anticipate increasing
our allocation to Japan. The U.K. appears to offer attractively valued stocks
and we believe it will continue to be the largest allocation in International
Equity Series for the near future. Should global economies continue to
demonstrate stronger growth, investors may remain focused on a broader base of
companies, including reasonably priced value stocks like those held in the
Series.
2
<PAGE>
Delaware Group Premium Fund, Inc.-International Equity Series
Statement of Net Assets
June 30, 1999 (Unaudited)
Market
Number Value
of Shares (U.S. $)
COMMON STOCK-95.80%
Australia-11.75%
Amcor Limited ................................ 1,415,000 $ 7,905,279
CSR Limited .................................. 1,904,966 5,474,644
Foster's Brewing Group ....................... 2,411,051 6,829,626
National Australia Bank ...................... 393,757 6,548,671
Orica ........................................ 599,900 3,292,838
-----------
30,051,058
-----------
Belgium-1.66%
Electrabel ................................... 13,115 4,248,670
-----------
4,248,670
-----------
France-8.63%
Alcatel Alsthom .............................. 38,015 5,370,664
Compagnie de Saint Gobain .................... 34,299 5,484,667
Elf Aquitaine ................................ 43,583 6,418,926
+Societe Generale ............................. 27,108 4,794,904
-----------
22,069,161
-----------
Germany-10.17%
+Bayer ........................................ 134,600 5,621,199
Bayerische Hypo-und Vereinsbank .............. 60,900 3,889,044
Continental .................................. 117,200 2,814,206
Rheinisch Westfaelisches Elek ................ 146,000 6,784,839
Siemens ...................................... 89,050 6,894,073
-----------
26,003,361
-----------
Hong Kong-3.34%
Hong Kong Electric ........................... 810,000 2,609,973
Wharf (Holdings) Limited ..................... 1,900,000 5,926,250
-----------
8,536,223
-----------
Japan-15.63%
Canon ........................................ 115,000 3,307,437
+Eisai Limited ................................ 250,000 4,927,684
Hitachi ...................................... 888,000 8,329,584
+Kinki Coca-Cola Bottling ..................... 177,000 3,071,900
Koito Manufacturing .......................... 596,000 2,699,239
Matsushita Electric Industrial ............... 371,000 7,205,369
Nichido Fire & Marine ........................ 783,000 4,031,478
West Japan Railway ........................... 1,669 6,400,130
-----------
39,972,821
-----------
Malaysia-0.74%
Oriental Holdings Berhad ..................... 510,720 1,397,760
Sime Darby Berhad ............................ 380,000 498,000
-----------
1,895,760
-----------
- -----------------
Top 10 holdings, representing 29.86% of net assets, are in bold.
<PAGE>
Market
Number Value
of Shares (U.S. $)
COMMON STOCK (Continued)
Netherlands-4.42%
Elsevier ..................................... 199,500 $ 2,322,928
Koninklijke Van Ommeren ...................... 60,100 1,816,342
Royal Dutch Petroleum ........................ 63,000 3,703,644
Unilever ..................................... 51,286 3,468,825
------------
11,311,739
------------
New Zealand-2.52%
Carter Holt Harvey Limited ................... 1,187,800 1,430,934
+Telecom Corporation of New Zealand ........... 1,164,193 5,026,642
------------
6,457,576
------------
Singapore-0.66%
Jardine Matheson Holdings Limited ............ 336,622 1,683,110
------------
1,683,110
------------
Spain-7.11%
Banco Santander Central
Hispano Americano ........................... 733,492 7,667,559
+Iberdrola .................................... 197,800 3,023,759
+Telefonica de Espana ......................... 154,924 7,489,778
------------
18,181,096
------------
United Kingdom-29.17%
Bass ......................................... 436,964 6,363,729
BG ........................................... 867,647 5,318,071
Blue Circle Industry ......................... 918,236 6,121,017
Boots ........................................ 433,200 5,177,069
British Airways .............................. 889,471 6,125,857
Cable & Wireless ............................. 556,000 7,087,889
*Centrica ..................................... 630,000 1,486,899
GKN .......................................... 482,000 8,263,737
Glaxo Wellcome ............................... 214,470 5,965,846
Great Universal Stores ....................... 438,000 4,905,984
Rio Tinto .................................... 522,100 8,703,967
Taylor Woodrow ............................... 1,365,000 3,943,514
Unigate ...................................... 808,000 5,140,626
------------
74,604,205
------------
Total Common Stock
(cost $195,761,726) ......................... 245,014,780
------------
International Equity-1
<PAGE>
International Equity Series
Statement of Net Assets (Continued)
Market
Principal Value
Amount (U.S.$)
REPURCHASE AGREEMENTS-2.67%
With Chase Manhattan 4.65% 7/1/99
(dated 6/30/99, collateralized by $1,186,000
U.S. Treasury Notes 5.375% due 2/15/01,
market value $1,204,017 and
$593,000 U.S. Treasury Notes 4.65%
due 9/30/01, market value $609,435 and
$508,000 U.S. Treasury Notes 6.125%
due 12/31/01, market value $511,690) ............. $2,268,000 $2,268,000
With J.P. Morgan Securities 4.70% 7/1/99
(dated 6/30/99, collateralized by
$655,000 U.S. Treasury Notes 6.375%
due 8/15/02, market value $679,519 and
$593,000 U. S. Treasury Notes 6.25%
due 8/31/02, market value $611,304 and
$410,000 U.S. Treasury Notes 5.75%
due 11/30/02, market value $411,242 and
$593,000 U.S. Treasury Notes 5.50%
due 1/31/03, market value $598,911) .............. 2,253,000 2,253,000
Market
Principal Value
Amount (U.S.$)
REPURCHASE AGREEMENTS (Continued)
With PaineWebber 4.80% 7/1/99
(dated 6/30/99, collateralized by
$560,000 U.S. Treasury Bills 7.125%
due 2/29/00, market value $579,421 and
$593,000 U.S. Treasury Notes 5.625%
due 11/30/00, market value $595,543
and $1,186,000 U.S. Treasury Notes 5.75%
due 11/30/02, market value $1,186,390) ........... $2,313,000 $2,313,000
----------
Total Repurchase Agreements
(cost $6,834,000) ................................ $6,834,000
----------
TOTAL MARKET VALUE OF SECURITIES-98.47% (cost $202,595,726) ... $251,848,780
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-1.53% ......... 3,908,444
------------
NET ASSETS APPLICABLE TO 14,671,606 SHARES
($0.01 PAR VALUE) OUTSTANDING;
EQUIVALENT TO $17.43 PER SHARE-100.00% ..................... $255,757,224
============
COMPONENTS OF NET ASSETS AT JUNE 30, 1999:
Common stock, $0.01 par value, 1,000,000,000 shares
authorized to the Fund with 50,000,000 shares
allocated to the Series .................................... $200,625,127
Undistributed net investment income** ......................... 4,345,343
Accumulated net realized gain on investments .................. 1,533,724
Net unrealized appreciation of investments and
foreign currencies ......................................... 49,253,030
------------
Total net assets .............................................. $255,757,224
============
- ----------------
*Non-income producing security for the period ended June 30, 1999.
**Undistributed net investment income includes net realized gains (losses) on
foreign currencies. Net realized gains (losses) on foreign currencies are
treated as net investment income in accordance with provisions of the Internal
Revenue Code.
+Security is partially or fully on loan.
See accompanying notes
International Equity-2
<PAGE>
Delaware Group Premium Fund, Inc.-
International Equity Series
Statement of Operations
Period Ended June 30, 1999
(Unaudited)
INVESTMENT INCOME:
Dividends ............................................. $ 4,738,830
Interest .............................................. 316,517
Foreign tax withheld .................................. (458,909)
-----------
4,596,438
-----------
EXPENSES:
Management fees ....................................... 968,606
Accounting fees and salaries .......................... 63,449
Reports and statements to shareholders ................ 38,440
Professional fees ..................................... 12,800
Taxes (other than taxes on income) .................... 6,060
Registration fees ..................................... 5,950
Custodian fees ........................................ 5,000
Dividend disbursing and transfer agent fees
and expenses ....................................... 3,512
Directors' fees ....................................... 2,141
Other ................................................. 6,704
-----------
1,112,662
-----------
Less expenses absorbed or waived ...................... (9,643)
Less expenses paid indirectly ......................... (2,869)
-----------
Total expenses ........................................ 1,100,150
-----------
NET INVESTMENT INCOME ................................. 3,496,288
-----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain on:
Investments ........................................ 2,397,454
Foreign currencies ................................. 1,202,397
-----------
Net realized gain 3,599,851
Net change in unrealized appreciation/
depreciation of investments and foreign
currencies ......................................... 13,278,957
-----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS AND FOREIGN CURRENCIES .............. 16,878,808
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .......................... $20,375,096
===========
See accompanying notes
<PAGE>
Delaware Group Premium Fund, Inc.-
International Equity Series
Statements of Changes in Net Assets
Period Ended Year
6/30/99 Ended
(Unaudited) 12/31/98
------------ ------------
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income .......................... $ 3,496,288 $ 5,415,775
Net realized gain on investments and
foreign currencies .......................... 3,599,851 1,031,088
Net change in unrealized appreciation/
depreciation of investments and
foreign currencies .......................... 13,278,957 14,401,533
------------ ------------
Net increase in net assets resulting
from operations ............................. 20,375,096 20,848,396
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .......................... (5,284,951) (7,631,302)
Net realized gain on investments ............... (385,980) --
------------ ------------
(5,670,931) (7,631,302)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ...................... 59,671,854 66,971,858
Net asset value of shares issued upon
reinvestment of distributions from net
investment income and net realized
gain on investments ......................... 5,670,931 7,631,302
------------ ------------
65,342,785 74,603,160
Cost of shares repurchased ..................... (67,825,767) (43,147,474)
------------ ------------
Increase in net assets derived from
capital share transactions .................. (2,482,982) 31,455,686
------------ ------------
NET INCREASE IN NET ASSETS ..................... 12,221,183 44,672,780
------------ ------------
NET ASSETS:
Beginning of period ............................ 243,536,041 198,863,261
------------ ------------
End of period .................................. $255,757,224 $243,536,041
============ ============
See accompanying notes
International Equity-3
<PAGE>
Delaware Group Premium Fund, Inc.-International Equity Series
Financial Highlights
Selected data for each share of the Series outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
Six Months
Ended 6/30/99 Year Ended December 31,
(Unaudited)(1) 1998 1997 1996 1995 1994
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $16.480 $15.520 $15.110 $13.120 $11.840 $11.620
Income from investment operations:
Net investment income(2) ................................. 0.235 0.386 0.359 0.557 0.419 0.220
Net realized and unrealized gain on investments
and foreign currencies ................................ 1.097 1.169 0.596 1.966 1.191 0.080
------- ------- ------- ------- ------- -------
Total from investment operations ......................... 1.332 1.555 0.955 2.523 1.610 0.300
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ..................... (0.356) (0.595) (0.545) (0.420) (0.240) (0.070)
Distributions from net realized gain on investments ...... (0.026) none none (0.113) (0.090) (0.010)
------- ------- ------- ------- ------- -------
Total dividends and distributions ........................ (0.382) (0.595) (0.545) (0.533) (0.330) (0.080)
------- ------- ------- ------- ------- -------
Net asset value, end of period ........................... $17.430 $16.480 $15.520 $15.110 $13.120 $11.840
======= ======= ======= ======= ======= =======
Total return ............................................. 8.30% 10.33% 6.60% 20.03% 13.98% 2.57%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $255,757 $243,536 $198,863 $131,428 $81,548 $57,649
Ratio of expenses to average net assets .................. 0.89% 0.87% 0.85% 0.80% 0.80% 0.80%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ....... 0.90% 0.88% 0.90% 0.91% 0.89% 1.01%
Ratio of net investment income to average net assets ..... 2.83% 2.41% 2.28% 4.71% 3.69% 2.63%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid
indirectly ........................................... 2.82% 2.40% 2.23% 4.60% 3.60% 2.42%
Portfolio turnover ....................................... 0% 5% 7% 8% 19% 13%
</TABLE>
- ------------------
(1)Ratios have been annualized and total return has not been annualized.
(2)Per share information for the years ended December 31, 1997 and 1998 and the
period ended June 30, 1999 was based on the average shares outstanding
method.
See accompanying notes
International Equity-4
<PAGE>
Delaware Group Premium Fund, Inc.-International Equity Series
Notes to Financial Statements
June 30, 1999 (Unaudited)
Delaware Group Premium Fund, Inc. (the "Fund") is registered as a diversified
open-end investment company under the Investment Company Act of 1940, as
amended. The Fund is organized as a Maryland Corporation and offers 17 series:
the Aggressive Growth Series, the Capital Reserves Series, the Cash Reserve
Series, the Convertible Securities Series, the Delaware Balanced Series
(formerly the Delaware Series), the DelCap Series, the Delchester Series, the
Devon Series, the Emerging Markets Series, the Global Bond Series, the Growth
and Income Series (formerly the Decatur Total Return Series), the International
Equity Series, the REIT Series, the Small Cap Value Series, the Social Awareness
Series, the Strategic Income Series, and the Trend Series. These financial
statements and the related notes pertain to the International Equity Series (the
"Series"). The shares of the Fund are sold only to separate accounts of life
insurance companies.
1. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Series.
Security Valuation--Securities listed on an exchange are valued at the last
quoted sales price as of the close of the NYSE on the valuation date. Securities
not traded or securities not listed on an exchange are valued at the mean of the
last quoted bid and asked prices. Securities listed on a foreign exchange are
valued at the last quoted sales price before the Series is valued. Money market
instruments having less than 60 days to maturity are valued at amortized cost,
which approximates market value. Other securities and assets for which market
quotations are not readily available are valued at fair value as determined in
good faith by or under the direction of the Fund's Board of Directors.
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.
Foreign Currency Transactions--Transactions denominated in foreign currencies
are recorded at the prevailing exchange rates on the valuation date. The value
of all assets and liabilities denominated in foreign currencies is translated
into U.S. dollars at the exchange rate of such currencies against the U.S.
dollar as of 3:00 PM EST. Transaction gains or losses resulting from changes in
exchange rates during the reporting period or upon settlement of the foreign
currency transaction are reported in operations for the current period. It is
not practical to isolate that portion of both realized and unrealized gains and
losses on investments in equity securities in the statement of operations that
result from fluctuations in foreign currency exchange rates. The Series reports
certain foreign currency related transactions as components of realized gains
(losses) for financial reporting purposes, whereas such components are treated
as ordinary income (loss) for federal income tax purposes.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
<PAGE>
Other--Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. Foreign dividends are also recorded on the
ex-dividend date or as soon after the ex-dividend date that the Series became
aware of such dividends, net of all non-rebatable tax withholdings. Withholding
taxes on foreign dividends have been provided for in accordance with the Series'
understanding of the applicable country's tax rules and rates.
The International Equity Series will make payments from net investment income
and net realized gain on investments, if any, following the close of the fiscal
year.
Certain expenses of the Series are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price and execution. The
amount of these expenses was approximately $2,869 for the period ended June 30,
1999. The Series may receive earnings credits from its custodian when positive
cash balances are maintained, which are used to offset custody fees. The
expenses paid under the above arrangements are included in their respective
expense captions on the Statement of Operations with the corresponding expense
offset shown as "Expenses paid indirectly".
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Series
pays Delaware International Advisers Ltd. ("DIAL"), the Investment Manager of
the Series, an annual fee which is calculated at the following rates: 0.85% of
the first $500 million of average daily net assets of the series, 0.80% on the
next $500 million, 0.75% on the next $1,500 million and 0.70% on the average
daily net assets over $2,500 million. These rates became effective May 1, 1999.
The old management fee was calculated at the rate of 0.75% on the average daily
net assets of the Series, less the fees paid to the unaffiliated directors.
DIAL has elected to waive that portion, if any, of the annual management fee
payable to the extent necessary to ensure that annual operating expenses
exclusive of taxes, interest, brokerage commissions and extraordinary expenses
do not exceed 0.95% of average daily net assets of the Series through October
31, 1999.
International Equity-5
<PAGE>
International Equity Series
Notes to Financial Statements (Continued)
The Series has engaged Delaware Service Company, Inc. ("DSC"), an affiliate of
Delaware Management Company ("DMC"), to provide dividend disbursing, transfer
agent and accounting services. The Series pays DSC a monthly fee based on the
number of shareholder accounts, shareholder transactions and average net assets,
subject to certain minimums.
On June 30, 1999, the Series had liabilities payable to affiliates as follows:
Dividend disbursing Other
Investment transfer agent, expenses
management accounting fees payable
fee payable to and other expenses to DMC
DIAL payable to DSC and affiliates
-------------- ------------------- --------------
$179,122 $6,956 $24,456
Certain officers of DMC, DSC and DIAL are officers, directors and/or employees
of the Fund. These officers, directors and employees are paid no compensation by
the Fund.
3. Investments
During the period ended June 30, 1999, the Series made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:
Purchases ..................................... -
Sales ......................................... $6,448,355
The cost of investments for federal income tax purposes approximates the cost
for book purposes. At June 30, 1999, the aggregate cost of securities and
unrealized appreciation (depreciation) for the Series were as follows:
Aggregate Aggregate
Cost of unrealized unrealized Net unrealized
investments appreciation depreciation appreciation
----------- ------------ ------------ --------------
$202,595,726 $57,495,503 ($8,242,449) $49,253,054
For federal income tax purposes, the Series had accumulated capital losses at
December 31, 1998 as follows:
Year of
expiration
2005
----------
$477,750
4. Capital Stock
Transactions in capital stock shares were as follows:
<TABLE>
<CAPTION>
Shares issued upon
reinvestment of distributions
from net investment
income and net realized Shares Net
Shares sold gain on investments repurchased increase (decrease)
----------- ------------------------------ ----------- -------------------
<S> <C> <C> <C> <C>
Period ended June 30, 1999 .................... 3,566,186 356,215 (4,031,454) (109,053)
Year ended December 31, 1998 .................. 4,191,375 498,862 (2,725,472) 1,964,765
</TABLE>
<PAGE>
5. Foreign Exchange Contracts
The Series will generally enter into forward foreign currency contracts as a way
of managing foreign exchange rate risk. These contracts may be entered into to
fix the U.S. dollar value of a security that it has agreed to buy or sell for
the period between the date the trade was entered into and the date the security
is delivered and paid for. They may also be used to hedge the U.S. dollar value
of securities it already owns denominated in foreign currencies.
Forward foreign currency contracts are valued at the mean between the bid and
asked prices of the contracts and are marked-to-market daily. Interpolated
values are derived when the settlement date of the contract is an interim date
for which quotations are not available. The change in market value is recorded
as an unrealized gain or loss. When the contract is closed, a realized gain or
loss is recorded equal to the difference between the value of the contract at
the time it was opened and the value at the time it was closed.
The use of forward foreign currency contracts does not eliminate fluctuations in
the underlying prices of the Series' securities, but it does establish a rate of
exchange that can be achieved in the future. Although forward foreign currency
contracts limit the risk of loss due to a decline in the value of the hedged
currency, they also limit any potential gain that might result should the value
of the currency increase. In addition, a Series could be exposed to risks if the
counterparties to the contracts are unable to meet the terms of their contracts.
There were no forward foreign currency contracts outstanding at June 30, 1999.
International Equity-6
<PAGE>
International Equity Series
Notes to Financial Statements (Continued)
6. Credit and Market Risk
Some countries in which the Series may invest require governmental approval for
the repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if there is a deterioration in a
country's balance of payments or for other reasons, a country may impose
temporary restrictions on foreign capital remittances abroad.
The securities exchanges of certain foreign markets are substantially smaller,
less liquid and more volatile than the major securities markets in the United
States. Consequently, acquisition and disposition of securities by the Series
may be inhibited. In addition, a significant proportion of the aggregate market
value of equity securities listed on the major securities exchanges in emerging
markets is held by a smaller number of investors. This may limit the number of
shares available for acquisition or disposition by the Series.
The Series may invest up to 10% of its total assets in illiquid securities which
may include securities with contractual restrictions on resale and other
securities which may not be readily marketable. The relative illiquidity of some
of these securities may adversely affect the Series' ability to dispose of such
securities in a timely manner and at a fair price when it is necessary to
liquidate such securities.
7. Securities Lending
The Series may participate, along with other funds in the Delaware Investments
Family of Funds, in a Securities Lending Agreement ("Lending Agreement").
Security loans made pursuant to the Lending Agreement are required at all times
to be secured by U.S. Treasury obligations and/or cash collateral at least equal
to 100% of the market value of securities issued in the U.S. and 105% of the
market value of securities issued outside of the U.S. Cash collateral received
is invested in fixed-income securities, with a weighted average maturity not to
exceed 90 days, rated in one of the top two tiers by Standard & Poor's Ratings
Group or Moody's Investors Service, Inc. or repurchase agreements collateralized
by such securities. However, in the event of default or bankruptcy by the
lending agent, realization and/or retention of the collateral may be subject to
legal proceedings. In the event that the borrower fails to return loaned
securities and the collateral received is insufficient to cover the value of the
loaned securities and provided such collateral is not the result of investment
losses, the lending agent has agreed to pay the amount of the shortfall to the
Series, or at the discretion of the lending agent, replace the loaned
securities. The market value of the securities on loan and the related
collateral received at June 30, 1999 were as follows:
Market value of
securities on loan Collateral
------------------ ------------
$18,522,907 $19,227,797
Net income from securities lending activities for the period ended June 30, 1999
was $105,716 and is included in interest income on the statement of operations.
International Equity-7
<PAGE>
Delaware Group Premium Fund Inc.-International Equity Series
Proxy Results
(Unaudited)
For the six months ended June 30, 1999, Delaware Premium Fund,
Inc.-International Equity Series shareholders voted on the following proposals
at the annual meeting of shareholders on March 17, 1999 or as adjourned. The
description of each proposal and number of shares voted are as follows:
1. To elect the Delaware Group Premium Fund, Inc. Board of Directors.
Shares Shares Voted
Voted Withheld
For Authority Abstain
---------- ------------ -------
Jeffrey J. Nick ................ 13,976,052 889,202 -
Walter P. Babich ............... 13,945,188 920,065 -
John H. Durham ................. 13,979,123 886,131 -
Anthony D. Knerr ............... 13,954,354 910,899 -
Ann R. Leven ................... 13,965,031 900,222 -
Thomas F. Madison .............. 13,978,477 886,776 -
Charles E. Peck ................ 13,942,063 923,190 -
Wayne A. Stork ................. 13,969,396 895,858 -
Jan L. Yeomans ................. 13,960,563 904,690 -
2. To approve the reclassification of the investment objective from fundamental
to non-fundamental.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- -------
12,681,397 1,293,565 890,291
3. To approve standardized fundamental investment restrictions (proposal
involves separate votes on seven sub-proposals 3A-3G).
3A. To adopt a new fundamental investment restriction concerning concentration
of the investments in the same industry.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- -------
13,010,798 1,043,661 810,794
3B. To adopt a new fundamental investment restriction concerning borrowing money
and issuing senior securities.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- -------
12,894,701 1,516,842 815,588
3C. To adopt a new fundamental investment restriction concerning underwriting.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- -------
12,956,342 1,097,744 811,167
<PAGE>
3D. To adopt a new fundamental investment restriction concerning investments in
real estate.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- -------
12,868,863 1,190,868 805,522
3E. To adopt a new fundamental investment restriction concerning investments in
commodities.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- -------
12,819,061 1,506,194 812,999
3F. To adopt a new fundamental investment restriction concerning lending by the
Fund.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- -------
12,856,729 1,208,670 799,855
3G. To reclassify all current fundamental investment restrictions as
non-fundamental.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- -------
12,803,559 1,230,168 831,527
4. To approve a new investment management agreement with Delaware International
Advisers Ltd.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- -------
12,819,945 1,481,660 807,749
5. To ratify the selection of Ernst & Young LLP, as the independent auditors for
Delaware Group Premium Fund, Inc.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- -------
14,042,881 156,767 665,605
6. To approve the restructuring of Delware Group Premium Fund, Inc. from a
Maryland Corporation into a Delaware Business Trust.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
---------- --------- -------
13,155,415 893,575 816,263
International Equity-8
