DELAWARE GROUP PREMIUM FUND INC, N-30D, 1999-09-07

DELAWARE GROUP PREMIUM FUND INC
N-30D, 1999-09-07

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<PAGE>

- ----------------------------------------
DELAWARE GROUP
- ----------------------------------------
PREMIUM FUND
- ----------------------------------------
SMALL CAP VALUE SERIES
- ----------------------------------------
DELAWARE BALANCED SERIES
- ----------------------------------------

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

DELAWARE
INVESTMENTS(SM)
===========
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

<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.-Small Cap Value Series
Statement of Net Assets
June 30, 1999 (Unaudited)

Number Market
of Shares Value
COMMON STOCK-94.92%
Aerospace & Defense-0.66%
Cordant Technologies .................... 15,000 $ 677,812
----------
677,812
----------
Automobiles & Automotive Parts-7.93%
Arvin Industries ........................ 37,500 1,420,312
Borg-Wagner Automotive .................. 41,408 2,277,440
CLARCOR ................................. 52,750 1,012,140
Federal Signal .......................... 68,900 1,459,819
Harsco .................................. 25,300 809,600
Smith (A.O.) ............................ 43,450 1,200,306
----------
8,179,617
----------
Banking, Finance & Insurance-14.71%
*Avis Rent-A-Car ......................... 61,400 1,788,275
Enhance Financial Services Group ........ 66,200 1,307,450
Everest Re Holdings ..................... 32,400 1,057,050
*Farm Family Holdings .................... 29,300 1,001,694
*Financial Federal ....................... 49,950 1,098,900
Horace Mann Educators ................... 71,600 1,946,625
Liberty Financial Companies ............. 28,800 835,200
North Fork Bancorporation ............... 83,650 1,782,790
Peoples Heritage Financial Group ........ 100,800 1,899,450
Radian Group ............................ 18,000 878,625
Westamerica Bancorporation .............. 43,000 1,568,156
----------
15,164,215
----------
Buildings & Materials-4.16%
D.R. Horton ............................. 85,300 1,418,112
*Griffon ................................. 81,800 639,062
*Jacobs Engineering Group ................ 50,800 1,930,400
*Toll Brothers ........................... 14,200 304,413
----------
4,291,987
----------
Cable, Media & Publishing-1.22%
*World Color Press ....................... 45,900 1,262,250
----------
1,262,250
----------
Chemicals-5.46%
Crompton & Knowles ...................... 43,900 858,794
Hanna (M.A.) ............................ 60,100 987,894
OM Group ................................ 31,300 1,079,850
*Scotts .................................. 56,700 2,700,337
----------
5,626,875
----------
Computers & Technology-4.12%
*Etec Systems ............................ 33,200 1,099,750
*Metamor Worldwide ....................... 17,200 412,800
*Metro Information Services .............. 26,800 443,875
*Synopsys ................................ 41,500 2,288,984
----------
4,245,409
----------
Energy-6.97%
*BJ Services ............................. 25,600 753,600
Nicor ................................... 44,300 1,686,169
NUI ..................................... 26,900 669,138
*Ocean Energy ............................ 77,600 746,900
*Oceaneering International ............... 71,100 1,146,487

- ----------
Top 10 stock holdings, representing 22.16% of net assets, are in bold.

<PAGE>
Number Market
of Shares Value
COMMON STOCK (Continued)
Energy (Continued)
*Santa Fe Snyder ........................... 81,400 $ 620,675
Valero Energy ............................. 36,000 771,750
*Weatherford International ................. 21,500 787,437
----------
7,182,156
----------
Food, Beverage & Tobacco-4.81%
Corn Products ............................. 45,400 1,381,862
*Suiza Foods ............................... 33,200 1,390,250
Universal Foods ........................... 103,500 2,186,437
----------
4,958,549
----------
Healthcare & Pharmaceuticals-2.22%
*Trigon Healthcare ......................... 62,900 2,287,988
----------
2,287,988
----------
Industrial Machinery-6.24%
Columbus McKinnon ......................... 37,900 900,125
Hussmann International .................... 59,900 992,094
IDEX ...................................... 37,850 1,244,319
Milacron .................................. 57,700 1,067,450
Regal-Beloit .............................. 42,600 1,006,425
Varian Medical Systems .................... 48,600 1,227,150
----------
6,437,563
----------
Metals & Mining-2.91%
*Bethlehem Steel ........................... 78,900 606,544
LTV ....................................... 93,400 624,613
*Mueller Industries ........................ 33,300 1,130,119
Watts Industries .......................... 33,100 635,106
----------
2,996,382
----------
Paper & Forest Products-2.46%
Caraustar Industries ...................... 32,600 802,775
Chesapeake ................................ 16,900 632,694
Rayonier .................................. 22,200 1,105,837
----------
2,541,306
----------
Real Estate-9.26%
Cabot Industrial Trust .................... 61,100 1,298,375
Chateau Communities ....................... 24,215 724,936
Duke-Weeks Realty ......................... 47,300 1,067,206
Kilroy Realty ............................. 35,900 872,819
MeriStar Hospitality ...................... 46,345 1,039,866
New Plan Excel Realty Trust ............... 45,480 818,640
Pan Pacific Retail Properties ............. 56,700 1,102,106
Prentiss Properties Trust ................. 53,000 1,245,500
Reckson Associates Realty ................. 58,800 1,381,800
----------
9,551,248
----------
Retail-7.70%
*BJ's Wholesale Club ....................... 80,800 2,429,050
Casey's General Stores .................... 78,700 1,178,041
Pier 1 Imports ............................ 129,300 1,454,625
*Zale ...................................... 72,000 2,880,000
----------
7,941,716
----------
Telecommunications-0.70%
*Brightpoint ............................... 119,400 727,594
----------
727,594
----------

Small Cap Value-1

<PAGE>

Small Cap Value Series
Statement of Net Assets (Continued)

Number Market
of Shares Value
COMMON STOCK (Continued)
Textiles, Apparel & Furniture-6.63%
*Furniture Brands International .......... 56,900 $1,586,088
HON Industries .......................... 65,900 1,923,456
Kellwood ................................ 54,000 1,464,750
Springs Industries-Class A .............. 19,300 841,963
Wolverine World Wide .................... 72,600 1,016,400
----------
6,832,657
----------
Transportation & Shipping-4.18%
Alexander & Baldwin ..................... 34,600 767,688
*Mesaba Holdings ......................... 61,500 782,203
*M.S. Carriers ........................... 41,400 1,227,769
USFreightways ........................... 33,200 1,528,238
----------
4,305,898
----------
Utilities-1.50%
California Water Service Group .......... 23,800 621,775
Sierra Pacific Resources ................ 25,300 920,288
----------
1,542,063
----------
Miscellaneous-1.08%
*Modis Professional Services ............. 81,300 1,117,875
----------
1,117,875
----------
Total Common Stock
(cost $88,304,985) ..................... 97,871,160
----------

Principal Market
Amount Value
REPURCHASE AGREEMENTS-5.00%
With Chase Manhattan 4.65% 7/1/99
(dated 6/30/99, collateralized by $894,000
U.S. Treasury Notes 6.375% due 2/15/01,
market value $907,710 and $447,000
U.S. Treasury Notes 6.375% due 9/30/01,
market value $459,454 and $383,000
U.S. Treasury Notes 6.125% due 12/31/01
market value $385,764) ......................... $1,710,000 $1,710,000
With J.P. Morgan Securities 4.70%
7/1/99 (dated 6/30/99, collateralized
by $494,000 U.S. Treasury Notes 6.375%
due 8/15/02, market value $512,290
and $447,000 U.S. Treasury Notes
6.25% due 8/31/02, market value
$460,863 and $309,000 U.S. Treasury
Notes 5.75% due 11/30/02, market value
$309,282 and $447,000 U.S Treasury
Notes 5.50% due 1/31/03,
market value $451,520) ......................... 1,699,000 1,699,000
With PaineWebber 4.80% 7/1/99
(dated 6/30/99, collateralized by
$422,000 U.S. Treasury Notes 7.125%
due 2/29/00, market value $436,826
and $447,000 U.S. Treasury Notes
5.625% due 11/30/00, market value
$448,981 and $894,000 U.S. Treasury
Notes 5.75% due 11/30/02,
market value $894,421) ......................... 1,743,000 1,743,000
----------
Total Repurchase Agreements
(cost $5,152,000) .............................. 5,152,000
----------
<PAGE>

<TABLE>
<S> <C>
TOTAL MARKET VALUE OF SECURITIES-99.92% (cost $93,456,985) .......................... $103,023,160

RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES-0.08% ............................... 78,678
------------

NET ASSETS APPLICABLE TO 6,160,046 SHARES ($0.01, PAR VALUE) OUTSTANDING;
EQUIVALENT TO $16.74 PER SHARE-100.00% ........................................... $103,101,838
============

COMPONENTS OF NET ASSETS AT JUNE 30, 1999:
Common Stock, $0.01 par value, 1,000,000,000 shares authorized to the Fund with
50,000,000 shares allocated to the Series ........................................ $ 92,856,763
Undistributed net investment income ................................................. 502,333
Accumulated net realized gain on investments ........................................ 176,567
Net unrealized appreciation of investments .......................................... 9,566,175
------------
Total net assets .................................................................... $103,101,838
============
</TABLE>

- ----------
*Non-income producing security for the period ended June 30, 1999.

See accompanying notes

Small Cap Value-2

<PAGE>

Delaware Group Premium Fund, Inc.-
Small Cap Value Series
Statement of Operations
For the Six Months Ended June 30, 1999
(Unaudited)

INVESTMENT INCOME:
Dividends ............................................... $ 789,441
Interest ................................................ 128,207
-----------
917,648
-----------
EXPENSES:
Management fees ......................................... 366,243
Accounting and administration ........................... 19,056
Professional fees ....................................... 6,050
Reports and statements to shareholders .................. 3,750
Registration fees ....................................... 2,750
Custodian fees .......................................... 2,591
Taxes (other than taxes on income) ...................... 1,980
Dividend disbursing and transfer agent
fees and expenses .................................... 1,400
Directors' fees ......................................... 1,313
Other ................................................... 7,668
-----------
412,801
Less expenses paid indirectly ........................... (1,124)
-----------
Total expenses .......................................... 411,677
-----------

NET INVESTMENT INCOME ................................... 505,971
-----------

NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain on investments ........................ 1,511,718
Net change in unrealized appreciation /
depreciation of investments .......................... 1,301,135
-----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS .................................. 2,812,853
-----------

NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............................ $ 3,318,824
===========

See accompanying notes

<PAGE>

Delaware Group Premium Fund, Inc.-
Small Cap Value Series
Statements of Changes in Net Assets

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

INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income .................... $ 505,971 $ 1,245,041
Net realized gain (loss) on investments .. 1,511,718 (827,096)
Net change in unrealized appreciation /
depreciation of investments ........... 1,301,135 (5,586,278)
------------- -------------
Net increase (decrease) in net assets
resulting from operations ............. 3,318,824 (5,168,333)
------------- -------------

DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .................... (1,227,218) (638,385)
Net realized gain on investments ......... (503,474) (2,340,745)
------------- -------------
(1,730,692) (2,979,130)
------------- -------------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ................ 8,489,139 34,478,733
Net asset value of shares issued upon
reinvestment of distributions from net
investment income and net realized
gain on investments ................... 1,730,692 2,979,130
------------- -------------
10,219,831 37,457,863
Cost of shares repurchased ............... (12,695,549) (9,392,119)
------------- -------------
Increase (Decrease) in net assets derived
from capital share transactions ....... (2,475,718) 28,065,744
------------- -------------

NET INCREASE (DECREASE)
IN NET ASSETS ......................... (887,586) 19,918,281
------------- -------------

NET ASSETS:
Beginning of period ...................... 103,989,424 84,071,143
------------- -------------
End of period ............................ $ 103,101,838 $ 103,989,424
============= =============

See accompanying notes

Small Cap Value-3

<PAGE>

Delaware Group Premium Fund, Inc.-Small Cap Value Series
Financial Highlights

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

<TABLE>
<CAPTION>
Six Months
Ended 6/30/99 Year Ended December 31,
(Unaudited)(1) 1998 1997 1996 1995 1994
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $16.450 $17.920 $14.500 $12.470 $10.290 $10.210

Income (loss) from investment operations:
Net investment income ..................................... 0.083 0.196 0.122 0.112 0.192 0.148
Net realized and unrealized gain (loss) on investments .... 0.482 (1.036) 4.338 2.548 2.208 (0.068)
------- ------- ------- ------- ------- -------
Total from investment operations .......................... 0.565 (0.840) 4.460 2.660 2.400 0.080
------- ------- ------- ------- ------- -------

Less dividends and distributions:
Dividends from net investment income ...................... (0.195) (0.135) (0.110) (0.180) (0.150) none
Distributions from net realized gain on investments ....... (0.080) (0.495) (0.930) (0.450) (0.070) none
------- ------- ------- ------- ------- -------
Total dividends and distributions ......................... (0.275) (0.630) (1.040) (0.630) (0.220) none
------- ------- ------- ------- ------- -------

Net asset value, end of period ............................ $16.740 $16.450 $17.920 $14.500 $12.470 $10.290
======= ======= ======= ======= ======= =======

Total return .............................................. 3.69% (4.79%) 32.91% 22.55% 23.85% 0.78%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................... $103,101 $103,989 $84,071 $23,683 $11,929 $6,291
Ratio of expenses to average net assets ................... 0.85% 0.83% 0.80% 0.80% 0.80% 0.80%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 0.85% 0.85% 0.90% 0.99% 0.96% 1.41%
Ratio of net investment income to average net assets ...... 1.04% 1.32% 1.24% 1.28% 2.13% 2.62%
Ratio of net investment income to average net
assets prior to expense limitation and expenses
paid indirectly ........................................ 1.04% 1.30% 1.14% 1.09% 1.97% 2.01%
Portfolio turnover ........................................ 49% 45% 41% 84% 71% 26%
</TABLE>
- ----------
(1)Ratios have been annualized and total return has not been annualized.

See accompanying notes

Small Cap Value-4

<PAGE>

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

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

1. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Series.

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.

<PAGE>

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

Certain expenses of the Fund are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price and execution. The
amount of these expenses was approximately $1,124 for the period ended June 30,
1999. In addition, the Fund receives earnings credits from its custodian when
positive cash balances are maintained, which are used to offset custody fees.
These credits were $0 for the period ended June 30, 1999. The expenses paid
under the above arrangements are included in their respective expense captions
on the Statement of Operations with the corresponding expense offset shown as
"Expenses paid indirectly".

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% on 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.

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.

Small Cap Value-5

<PAGE>

Small Cap Value Series
Notes to Financial Statements (Continued)

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

Dividend disbursing
Investment transfer agent,
management accounting fees
fee payable to and other expenses
DMC payable to DSC
-------------- ------------------
$72,985 $3,408

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

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

Purchases ....................................... $22,723,729
Sales ........................................... $25,784,150

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 federal income tax purposes for the Series were
as follows:

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

Year of
expiration
2006
----------
$807,647

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

<TABLE>
<CAPTION>
Shares issued upon
reinvestment of distributions
from net investment
income and net realized Shares Net
Shares sold gain on investments repurchased decrease
----------- ----------------------------- ----------- --------
<S> <C> <C> <C> <C>
Period ended June 30, 1999 ...................... 543,769 118,948 (822,801) (160,084)
Year ended December 31, 1998 .................... 2,030,407 175,656 (578,317) 1,627,746
</TABLE>

Small Cap Value-6

<PAGE>

Delaware Group Premium Fund, Inc.-Small Cap Value Series
Proxy Results
(Unaudited)

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

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

Shares Shares Voted
Voted Withheld
For Authority Abstain
--------- --------- -------
Jeffrey J. Nick .............. 6,181,225 121,968 --
Walter P. Babich ............. 6,179,529 123,665 --
John H. Durham ............... 6,182,255 120,939 --
Anthony D. Knerr ............. 6,177,651 125,543 --
Ann R. Leven ................. 6,182,982 120,212 --
Thomas F. Madison ............ 6,183,345 119,848 --
Charles E. Peck .............. 6,179,468 123,725 --
Wayne A. Stork ............... 6,183,224 119,969 --
Jan L. Yeomans ............... 6,183,345 119,848 --

2. To approve the reclassification of the investment objective from fundamental
to non-fundamental.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
5,631,339 219,037 452,818

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

3B. To adopt a new fundamental investment restriction concerning concentration
of the investments in the same industry.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
5,752,263 123,526 427,405

3B. To adopt a new fundamental investment restriction concerning borrowing money
and issuing senior securities.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
5,715,545 157,917 429,731

3C. To adopt a new fundamental investment restriction concerning underwriting.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
5,753,803 148,969 400,421

<PAGE>

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

Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
5,716,972 179,717 406,505

3E. To adopt a new fundamental investment restriction concerning investments in
commodities.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
5,711,415 186,303 405,475

3F. To adopt a new fundamental investment restriction concerning lending by the
Fund.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
5,712,705 189,132 401,356

3G. To reclassify all current fundamental investment restrictions as
non-fundamental.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
5,721,522 175,476 406,196

4. To approve a new investment management agreement with Delaware Management
Company.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
--------- ------- -------
5,753,541 132,979 416,674

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
--------- ------- -------
5,887,197 63,700 352,296

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
--------- ------- -------
5,750,960 120,330 431,904

Small Cap Value-7