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Delaware Group Premium Fund, Inc.
Strategic Income Series
Supplement to the current prospectus
The following supplements the section of the prospectus entitled "The securities
we typically invest in":
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Securities | How we use them
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| Strategic Income Series
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Interest rate swap and index swap agreements: In an | Interest rate swaps may be used to adjust Strategic Income
interest rate swap, a series receives payments from | Series' sensitivity to interest rates by changing its duration.
another party based on a floating interest rate in | We may also use interest rate swaps to hedge against changes in
return for making payments based on a fixed interest | interest rates. We use index swaps to gain exposure to markets
rate. An interest rate swap can also work in | that the Series invests in, such as the corporate bond market.
reverse, with a series receiving payments based on a | We may also use index swaps as a substitute for futures, options
fixed interest rate and making payments based on a | or forward contracts if such contracts are not directly
floating interest rate. In an index swap, a series | available to the Series on favorable terms.
receives gains or incurs losses based on the total |
return of an index, in exchange for making fixed or | Interest rate swaps and index swaps will be considered illiquid
floating interest rate payments to another party. | securities.
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The following supplements the section of the prospectus entitled "The risks of
investing in the Series":
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Risks | How we strive to manage them
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| Strategic Income Series
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Market risk: Index swaps are subject to the same | In evaluating the use of an index swap, we carefully consider how
market risks as the investment market or sector that | market changes could affect the swap and how that compares to us
the index represents. Depending on the actual | investing directly in the market the swap is intended to
movements of the index and how well the portfolio | represent.
manager forecasts those movements, a series could |
experience a higher or lower return than |
anticipated. |
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Interest rate risk: Swaps may be particularly | Strategic Income Series will not invest in interest rate or index
sensitive to interest rate changes. Depending on the | swaps with maturities of more than two years. Each business day
actual movements of interest rates and how well the | we will calculate the amount the Series must pay for any swaps it
portfolio manager anticipates them, a series could | holds and will segregate enough cash or other liquid securities
experience a higher or lower return than | to cover that amount.
anticipated. For example, if the series holds |
interest rate swaps and is required to make payments |
based on variable interest rates, it will have to |
make increased payments if interest rates rise, which |
will not necessarily be offset by the fixed-rate |
payments it is entitled to receive under the swap |
agreement. |
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Credit risk (see prospectus for discussion of this | When selecting dealers with whom we would make interest rate or
risk) | index swap agreements, we focus on those with high quality
| ratings and do careful credit analysis before investing.
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Liquidity risk (see prospectus for discussion of this | Swap agreements will be treated as illiquid securities, but most
risk) | swap dealers will be willing to repurchase interest rate swaps.
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